General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l'Académie internationale de droit comparé 3030486745, 9783030486747
This book explores convergences of legal doctrine despite jurisdictional, cultural and political barriers, as well as di
159 84 13MB
English Pages 709 [710] Year 2021
Avant-propos/Foreword
Contents
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
1 The Self and the External World: The Question of Understanding
2 The Genuine Meaning of the Query
3 Comparatio as a Field of Scholarly Activity and as a New, Comparison-Based Form of Legal Education
4 Centrality of Self-Image, or Our Own Place in the World
5 The Problem of Legal Families
6 Successes and Results
7 Challenge and Opportunity
References
Property Meeting the Challenge of the Commons
1 The Entrance of the Commons on the Stage of Comparative Law
1.1 Introduction
1.2 The Raise of the Commons in the Italian Legal Debate
1.3 Conceptualize the Commons
1.4 Comparative Projects on the Commons
2 Structure and Sense of the Research
2.1 The Commons as the Challenge
2.2 The Questionnaire
2.3 The Legal Systems Covered
2.4 A Comparative Discussion
3 Open Questions
3.1 Understanding the Commons
3.2 Past and Present of the Commons
3.3 Academic Debates on the Commons
3.4 Comparative Analysis
3.5 The Protection of Public Property Beyond the Law in the Books
3.6 Inalienability of Public Goods
3.7 Remedies Against Privatizations
3.8 Remedies Against Nationalization of the Commons
3.9 Comparative Remarks
3.10 Private Property and the Commons
3.11 Private Property and Constitutional Protection
3.12 Exclusion and Access in Property Law
3.13 Comparative Remarks
4 Conflicts and Cases
4.1 Introduction
4.2 Property Rights vs Other Constitutional Rights
4.2.1 Right to Home
4.2.2 Comparative Remarks
4.2.3 Right to Health
4.2.4 Right to Food
4.2.5 Culture
4.2.6 Access to Nature
4.2.7 Partial Final Remarks
4.3 Access to Water
4.3.1 Rural Context
4.3.2 Urban Context
4.4 Informal Communities and Future Generations
4.4.1 Territory
4.4.2 Climate
5 Conclusive Remarks
The UNIDROIT Principles as a Common Frame of Reference for the Uniform Interpretation of National Laws
1 Introduction
2 Foundations for Using the PICC to Interpret and Supplement Domestic Contract Law
2.1 Jurisdictions Lacking Normative Foundations for Applying the PICC to Interpret or Supplement the Domestic Law Governing th...
2.2 The Concept of ``General Principles of Law´´ as a Source of Application of the PICC
2.3 The PICC as a Codification of the Law Merchant (`lex mercatoria´)
2.4 International ``Trade Usages´´ or Customs as an Alternative Source of the PICC
2.5 Jurisdictions Where the PICC Have Been Used as a Model for Reform of the Domestic Contract Law
2.6 Choice of the PICC as a Means of Interpreting and Supplementing the Applicable Domestic Law
2.7 Use of the PICC by Arbitral Tribunals as Opposed to National Courts
2.8 Use of the PICC for the Purpose of ``Clarifying´´ and ``Adapting´´ Domestic Law to the Cross-Border Nature of the Transact...
2.9 Reference to the PICC for the Sole Purpose of Corroborating a Result Reached Under Domestic Law
2.10 Application of the PICC to Cross-Border and Domestic Contract Disputes
3 The UNIDROIT Principles as Evidence of a `General Consensus´ on the Law of Contracts
4 Counterparts of UPICC Selected Provisions in National Contract Law
5 By Way of a Conclusion: The Potential Contribution of the UPICC to the Development of an Increasingly Harmonized National Co...
References
Bilingual Study and Research: The Need and Challenges
1 Introduction
2 Bilingual Legal Education in Belgium
3 Bilingual Legal Education in Canada
4 Bilingual Legal Education in China
5 Bilingual Legal Education in Czechia
6 Bilingual Legal Education in Finland
7 Bilingual Legal Education in France
8 Bilingual Legal Education in Germany
9 Bilingual Legal Education in Italy
10 Bilingual Legal Education in Japan
11 Bilingual Legal Education in Mexico
12 Bilingual Legal Education in Romania
13 Bilingual Legal Education in Singapore
14 Bilingual Legal Education in Taiwan
15 Bilingual Legal Education in the United States
References
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
1 Introduction
2 Practices in the Subtle Art of Reporting
2.1 Opportunities and Limitations in Functionally Driven Comparisons
2.2 From Europe to the World
3 The Rights of Trans Persons in Comparative Law Literature
4 Models to Deal with Sex Mobility
4.1 Ground Zero: Non-recognition of Sex Mobility
4.2 Sex Reassignment Surgery as a Requirement for Changes in Birth Certificates
4.3 Power to Doctors: The Soft Medicalization Model
4.4 Self-determination as a Legitimate Source of Sex
4.5 Changes in Names: Not Always a Small Solution
4.6 Family Law Effects
4.7 Non-binary Sex Reporting: Dealing with Early Sex Ambiguity and Mobility
4.8 Conclusions: The Ideal Model for Sex Mobility
5 Gender Modification Interventions and Sex Mobility
5.1 Surgery as Defilement: The Need for Judicial Authorization
5.2 No Doctors Trained to Provide Gender Modification Services
5.3 Insurance Coverage Is Not Enough or Reimbursement Is Not Transparent
5.4 Influences Driving Pathologization and Transphobia
6 Anti-discrimination Et Al
7 Conclusions
References
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A Commentary on Contemporary Arrangements
1 Preliminary Remarks
2 International Law Within a Comparative Perspective
3 Patient as a Consumer of Healthcare Services
4 European Union Law Perspective
5 Dealing with Medical Malpractice
6 Compensation Schemes
7 Extra-Judicial Solutions
8 General Conclusions
References
Documents
Transparency of Information and Disinformation of Consumers
1 Introduction
2 General Characteristics of the Consumer Information Model
2.1 Economic Orientation of Consumer Models
2.2 The Consumer Concept
2.2.1 A Codified General Definition of Consumer, But No Unified Definition
Mainly Natural Persons Protected, Sometimes Also Legal Persons or Even Final Users
Acting for Private, Mixed or Business Purposes
Irrespective of the Consumer´s Level of Knowledge
2.2.2 The `Average Consumer´ Is the Benchmark for Information Duties, Unfair Commercial Practices and Unfair Terms
2.2.3 The Changing Nature of the European Average Consumer: From a Severe Obligation to Internalize Disclosed Information to A...
2.2.4 Toward a Definition of Vulnerable Consumers: The Sick, the Elder and the Young?
3 Pre-contractual Information Requirements
3.1 General Duty of Information Disclosure
3.2 Specific Transparency Requirements: Food Labelling and Beyond
3.3 Mandatory and Additional Voluntary Information
3.4 Sanctions for Failure to Provide (Correct) Mandatory Information
4 Misleading Commercial Practices
4.1 Overall Analysis
4.2 Advertising Directed Towards Children
5 Unfair Contract Terms: Bargaining Power and Transparency
5.1 Standard-Form Contracts and Individually Negotiated Terms
5.2 Exclusion of Core Contract Terms: Transparency Requirement
5.2.1 Case Law of the CJEU
5.2.2 Application of Transparency in the EU and beyond
5.2.3 Core Terms Must Be Prominent
5.3 Black or Grey List of Unfair Terms
5.4 Specific Rules Concerning the Control of Unfair Terms in B2B Relationships
6 Sector Specific Rules
6.1 Financial Consumer: Rationalisation, Yes; Simplification, Not Yet
6.2 Digital Consumer: Consent for Use Personal Data
7 Behavioural Sciences´ Impact on the Consumer Information Model
8 Conclusion
8.1 Economic Orientation of Consumer Models: Concept of Average Consumer
8.2 Pre-contractual Information: Transparent Contract Terms-Misleading Practices
8.3 Financial Consumer
8.4 Digital Consumer
8.5 Overload of Information: Behavioural Critiques-Which Way Forward?
References
Optional Choice of Court Agreements in Private International Law
1 Introduction
1.1 Scope of This Project
2 Attitudes to Jurisdictional Agreements
3 The Distinction Between Exclusive and Optional Choice of Court Agreements
3.1 Distinguishing an Exclusive from an Optional Choice of Court Agreement
3.2 Varieties of Choice of Court Agreements
4 The Positive Effects of Choice of Court Agreements
4.1 The Problem with Prorogation
5 The Negative Effects of Choice of Court Agreements
5.1 The Negative Effect of Exclusive Choice of Court Agreements
5.2 The Negative Effects of Optional Choice of Court Agreements
5.2.1 An Agreement That Changes Character When the Option Is Exercised
5.2.2 Additional Provisions
5.2.3 Implied Promises
5.2.4 Discrimination Between Options in Favour of Forum and Foreign Courts
6 Limitations on the Parties´ Choice of Court
7 Support of Optional Choice of Court Agreements
8 Weaker Parties
9 Asymmetric Choice of Court Agreements
10 Optional Choice of Court Agreements in Intra-national Cases
11 The Recognition of Foreign Judgments
12 Justifications for Enforcing Choice of Court Agreements
13 Reform
14 Conclusion
References
National Reports Cited in This Chapter
Questions de droit international privé de la responsabilité sociétale des entreprises
1 Introduction
2 Définition et sources (questions 1 à 5)
2.1 Existe-t-il une définition de la responsabilité sociétale des entreprises dans votre pays ?
2.2 L´influence des Points de contact nationaux
2.3 L´influence des Principes des Nations Unies pour les entreprises et les droits de l´Homme
2.4 Autres normes
3 Qualification (Questions 6 à 9)
3.1 Droit des sociétés
3.2 Droit des contrats
3.3 Droit de la responsabilité délictuelle ou quasi délictuelle
3.4 Ordre public
4 Modes alternatifs de règlement des différends (Questions 10 et 11)
5 Compétence juridictionnelle (Questions 12 à 14)
6 Droit applicable (questions 15 à 19)
6.1 Comment la lex societatis se détermine-t-elle ?
6.2 Comment se détermine la lex contractus ?
6.3 Comment se détermine la loi applicable en matière délictuelle ?
6.4 Vérification de la conformité à l´ordre public ou aux normes en matière de droits de l´Homme, etc
6.5 Application ou prise en considération de normes éthiques ?
7 Reconnaissance et exécution des jugements (questions 20 à 22)
Références
Control of Price Related Terms in Standard Form Contracts
1 Presentation of the Research Question
2 Presentation of the Results of the Questionnaire
3 Freedom of Contract and Justifications of Its Limitation
3.1 The Justification of Freedom of Contract
3.2 Limits to Freedom of Contract
4 Standard Contract Terms and Their Control
4.1 Rationale of Controlling Standard Contract Terms
4.2 Definition, Incorporation and Interpretation of Standard Contract Terms
4.3 Substantive Control of Standard Contract Terms
4.3.1 Ambit of Substantive Control
4.3.2 Various Techniques of Substantive Control
4.3.2.1 Indirect Substantive Control
4.3.2.2 Direct Substantive Control
4.3.3 Legal Consequences
4.4 Litigating Against Standard Contract Terms: Collective and Individual Actions Made Easy
5 Judicial Control of Price Related Standard Contract Terms
5.1 Principal Rule: Prices Are Determined Freely on the Market
5.2 Special Protection Needed if Price Terms in SCT are Not Subject to Competition
5.3 Examples of Debated Terms
5.3.1 Ancillary Price Term or Not?
5.3.1.1 Additional Fees
5.3.1.2 Terms Regarding Consequences of a Breach of Contract
5.3.1.3 Loss of Price Advantages in Case of an Early Termination
5.3.2 Transparent Main Subject Matter or Not?
5.3.2.1 Open Price Clauses
5.3.2.2 Flat Remuneration
5.3.2.3 Price Adjustment Clauses
5.3.2.4 Foreign Currency Clauses
5.3.2.5 Calculation of Interest Rates
5.3.2.6 Missing Price Breakdown
6 Special Regulatory Provisions Controlling Price Terms
7 Special Disclosure Regulations Promoting Price Transparency and Competition
8 Efficiency and the Way Forward
Annex: Questionnaire for the National Reporters
General Information on the Scope of Freedom of Contract
General Information on Control of SCT
Judicial Control of Price Terms in SCT
Special Regulatory Provisions Controlling Price Terms
Special Disclosure Regulations Promoting Price Transparency and Competition
References
Groups of Companies
1 Introduction
1.1 General Remarks
1.2 The Main Problems
1.3 National Reports
2 Elements That Define a Group of Companies
2.1 Control and the Different Purposes of Its Definitions
2.2 Organic Control Only or Also Other Sources
2.3 Parties to the Control Relationship
2.3.1 Controlling or Dominating Party. Ultimate Controlling Person
2.3.2 The Dependent Entity
2.4 Cross Shareholding
2.5 The Dynamic Element
2.6 Some Further General Comments on Groups
3 Legal Models and Approaches to Groups of Companies
3.1 Jurisdictions with Special Corporate Law Regulations on Company Groups
3.2 Reliance on General Company Law Rules
3.3 Disclosure, Accounting and Consolidated Financial Statements
3.4 Other Areas of Law
3.5 Labour Law
3.6 Tax Law
3.7 Competition and Antitrust Law
3.8 Financial Institutions and Insurance Companies
3.9 Foreign Investment Law and Investment Protection Treaties
3.10 Environmental Liabilities
3.11 Arbitration
3.12 Private International Law
4 The Role of Group Interest and the Balance Between Advantages and Disadvantages
5 Protection of Minority Shareholders
5.1 Specific Rules
5.2 Reliance on Civil Law and General Company Law Rules and Principles
5.3 Directors´ Duties as Shareholders Protection
5.4 Shareholders´ Rights and Duties
5.5 Squeeze Out, Inverse Squeeze Out and Withdrawal Rights
5.6 Rules on Intragroup Loans and Related Party Transactions
5.7 Remedies and Standing
6 The Upside-Down Perspective. Company Law Issues at the Level of the Controlling Company
7 The Protection of Creditors and Other Third Parties
7.1 General
7.2 Disregard of Legal Entity: Piercing the Corporate Veil
8 Insolvency
9 Conclusion
Reference
La régulation juridique du crowdfunding
1 Introduction
2 LE CROWDFUNDING : UN CONCEPT MULTIPLE
2.1 LE FINANCEMENT PARTICIPATIF SOUS FORME DE DON (DONATION CROWDFUNDING ou CROWDSPONSORING ou CROWDONATING)
2.1.1 Qualification du rapport entre le contributeur et le porteur de projet
2.1.2 Qualification du rapport entre le porteur de projet et l´entreprise de financement participatif
2.1.3 Qualification du rapport entre le contributeur et l´entreprise de financement participatif
2.1.4 Des dons à vocation particulière
2.2 LE FINANCEMENT PARTICIPATIF AVEC CONTREPARTIE (REWARD CROWDFUNDING, PRE-SALE CROWDFUNDING, or CROWDSUPPORTING)
2.3 LE FINANCEMENT PARTICIPATIF SOUS FORME DE PRÊT (CROWDLENDING)
2.3.1 Les hypothèses de « prêt direct »
2.3.2 Les hypothèses de prêt indirect
2.4 LE FINANCEMENT PARTICIPATIF SOUS FORME D´INVESTISSEMENT EN CAPITAL (CROWDINVESTING OU EQUITY CROWDFUNDING)
2.4.1 L´offre d´instruments financiers
2.4.2 L´encadrement des rapports de droit entre les plateformes, les porteurs de projet et les investisseurs
3 LE STATUT DES ENTREPRISES DE FINANCEMENT PAR LA FOULE
3.1 Un accès réglementé au statut d´entreprise de financement par la foule ?
3.1.1 Dans le cas du financement par la foule non-financier
3.1.2 Dans le cas du crowdlending
3.1.3 Dans le cas du crowdinvesting
3.2 La supervision de l´activité de financement par la foule
4 LA PROTECTION DE LA FOULE
4.1 La protection des donateurs (crowddonating)
4.2 La protection des contributeurs dans le cadre du reward crowdfunding ou pre-sale crowdfunding
4.3 La protection des prêteurs
4.4 La protection des investisseurs
4.4.1 Via la législation sur la protection des investisseurs.
4.4.2 Via une législation spécifique
5 L´ACTIVITÉ TRANSFRONTIÈRE DU FINANCEMENT PAR LA FOULE
5.1 Champ d´application des textes relatifs au financement par la foule
5.1.1 Critère de rattachement
5.1.2 Limitation monétaire
5.2 Loi applicable aux relations contractuelles
5.3 Les litiges transfrontières impliquant une activité de financement par la foule
5.3.1 Compétence judiciaire internationale
5.3.2 Arbitrage international
References
Security Rights in Intellectual Property
1 Introduction
1.1 Economic Importance
1.2 Main Legal and Economic Challenges
1.2.1 Secured Transactions Law Not Sufficiently Adapted to IP Rights
1.2.2 Life Cycle of an IP Right
1.2.3 The Problem of Evaluation
1.2.4 Problems Connected to Enforcement
Decreasing Value of the Collateral
Liquidity of the Market
2 The Limited Role of International Uniform Law for Security Rights in IP
2.1 Uniform Law on Intellectual Property
2.2 Soft Law on Secured Transactions
3 IP Rights as Collateral: Transferability in General
3.1 Collateralization of IP Rights Under National Law
3.1.1 General Taxonomy of Property Law
3.1.2 Specific Statutory Provisions
3.1.3 Interplay Between Secured Transactions Law and IP Law
3.1.4 Preliminary Rights
3.1.5 Exceptions to the General Transferability of IP Rights
3.2 Transferability and Collateralization of IP Rights Under Uniform Supranational Law
3.2.1 EU Trade Mark Regulation
3.2.2 Community Design Regulation
4 IP Rights as Collateral: Which Security Rights Are Available?
4.1 Jurisdictions with a Functional Approach to Security Rights
4.2 Jurisdictions Without a Functional Approach to Security Rights
4.2.1 Modernized Systems
4.2.2 Traditional Systems
4.3 Jurisdictions with Specific Statutory Provisions for Security Over IP Rights
5 Licences and Royalties as Collateral
6 Creation (``Attachment´´), Perfection, and Priority, Including Requirements as to Form, Registration, and Publicity
6.1 Functional Approach
6.1.1 Functional and Unitary Approach
6.1.2 Functional But Non-unitary Approach
6.2 Non-functional Approach
6.2.1 Modernized Systems
6.2.2 Traditional Systems
6.3 Concluding Remarks
7 Security Over IP Rights as Part of an Enterprise Charge
8 The Legal Relationship Before Default
9 Remedies of the Secured Creditor Outside Insolvency (Enforcement)
9.1 Unitary and Functional Systems
9.2 Non-unitary Systems
10 Remedies of the Secured Creditor in Insolvency
11 Practical Use of Security Rights in IP and Costs
11.1 Costs
11.2 Frequency of Transactions
12 Reform and Harmonization Projects
12.1 National Reform Proposals
12.2 International Proposals
13 Some Tentative Conclusions
References
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
1 Introduction
1.1 Background: Comparative Socio-Cultural Contexts
1.2 Legal Comparison as a Window of Understanding
2 Legal Frameworks for Collective Bargaining
2.1 Introduction
2.2 Histories of Evolution
2.3 A Fundamental Labour Rights Perspective and Constitutional Protection
2.4 National Regulatory Frameworks for Collective Bargaining
2.5 Perspectives on the Legal Nature of Collective Agreements
2.5.1 Changing Nature of Bargaining Regimes: in melius and in peius Derogations
2.5.2 Erga omnes Effect
3 Decentralization of Collective Bargaining
3.1 Introduction
3.2 European Trends in Decentralization
3.2.1 Opening Clauses: German Decentralization
3.2.2 The Impact of the European Economic Governance
3.2.3 Decentralization as a Channel of the Individualization of Collective Bargaining
3.3 Asian Approaches
3.4 North American Experience
3.5 Brazilian Evolution
3.6 Russian Experience
4 National Collective Bargaining Models and Globalization
4.1 Introduction
5 Transnational Dimension of Collective Bargaining
5.1 Introduction
5.2 European Developments: European Works Councils as a Driving Force
5.3 Global Developments: International Framework Agreements
5.4 Developing a Transnational Regulatory Framework
6 Conclusions
6.1 Transformation of Industrial Relations: A Call for Reconceptualization of Bargaining Regimes
6.2 Grouping Collective Bargaining Systems on the Basis of Developments in Decentralization
6.3 The Right to Bargain Collectively and Decollectivization of Industrial Relations
References
Legal Aspects of Cruises
1 Introduction
1.1 Kinds of Impact That Cruise Tourism Can Originate
1.2 Maritime Transport of Passengers Throughout History
1.3 Maritime Cabotage
1.4 Cruises Travel Through Waters Submitted to Different Legal Regimes
1.4.1 International Waters: Principle of Freedom of Navigation
1.4.2 High Seas
1.4.3 Internal Waters
1.4.4 Territorial Sea
1.5 Final Remarks
2 The Importance of Cruises in General and in Some Particular Areas and Countries
2.1 General Remarks
2.2 Main Cruise Destinies
2.2.1 Europe
2.2.2 Asia
2.2.3 America
2.3 Importance of Cruise Business
2.3.1 Statistics
2.3.2 Policies Favouring Cruise Business
2.3.3 Port Services Offered to Cruises
2.3.4 Ship Management Industry
2.3.5 Shipyards and Cruises
2.3.6 Relevance of Cruise Business in Labour Market
2.3.7 Flags of Convenience
2.4 Final Remarks
3 General and Specific Rules Applicable to Cruises
3.1 Cruises as an Issue To Be Approached by Several Law Matters
3.2 General Rules Applicable in the Absence or Insufficiency of Specific Rules
3.3 Sources of Law Relevant to Cruises
3.3.1 In Europe
3.3.2 In the Americas
3.3.3 In Asia
3.4 Sources of Self-regulation, Soft-Law, Lex Mercatoria
3.4.1 Medical Facilities
3.4.2 Cruise Industry Influenza Protocol (2009)
3.4.3 Ten Points Cruise Passenger Bill of Rights (2013)
3.5 Liability Issues
3.5.1 Applicable Rules: General or Specific?
3.5.2 International Rules: The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea of 1974 and P...
3.5.3 Law Applicable in Some Countries and Regions
3.6 Insurance for Carriage of Passengers by Sea and Particularly for Cruises
3.7 Final Remarks
4 Cruise Passengers as Consumers
4.1 The Importance of Consumer Law in the Protection of the Tourist, Including the Cruise Passenger
4.2 National and Regional Rules on Tourists´ Protection
4.3 Final Remarks
5 Combined Trips, Package Travels, Package Tours or Package Holidays
5.1 Concept of Combined Trips, Package Travels or Package Holidays
5.2 Retailers, Travel Agents, Tour Operators and Their Liability
5.3 Price Reductions for Lack of Conformity
5.4 Service Fees Charged Aboard
5.5 Supranational, International and National Rules on Package Travels
5.6 Final Remarks
6 Labour Rules on Cruises´ Workers
6.1 Specific Labour Rules on Cruises´ Workers
6.2 General Labour Rules That Are Applicable to Cruises´ Workers in the Absence of Specific Rules on the Matter
6.3 The 2006 Maritime Labour Convention
6.4 Final Remarks
7 Rules on Ports That Are Relevant Regarding Cruises
7.1 General and Specific Rules
7.1.1 In Europe
7.1.2 In the Americas
7.1.3 In Asia
7.2 Costs, Taxes and Rates Charged by Ports to Cruises
7.2.1 In Europe
7.2.2 In the Americas
7.2.3 In Asia
7.3 Final Remarks
8 Rules on Environmental Impact of Cruises
8.1 General Remarks
8.2 Regional and National Regulations
8.2.1 International Conventions
8.2.2 European Rules
8.2.3 South American Rules
8.2.4 Antarctic Continent
8.2.5 Federal and State Legislation in the USA
8.3 International Convention on Civil Liability for Oil Pollution Damage, Brussels, 1969
8.4 International Convention for the Prevention of Pollution from Ships, as Modified by the Protocol of 1978 (MARPOL 73/78)
8.5 Problems Regarding the Implementation of the Environmental Protection Rules
8.6 Final Remarks
9 Jurisdiction and Arbitration
9.1 Specific and General Provisions on Jurisdiction Applicable to Cruises
9.1.1 At the International Level: The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea
9.1.2 In the Americas
9.1.3 In the European Union
9.1.4 In Asia
9.1.5 Final Remarks
9.2 Forum Selection Clauses Included in General Conditions of Cruise Contracts and Consumer Protection Rules
9.2.1 In the Americas
9.2.2 In the European Union
9.2.3 In Asia
9.2.4 Final Remarks
9.3 Arbitration Clauses Included in General Conditions of Cruise Contracts
9.3.1 In the Americas
9.3.2 In the European Union
9.3.3 Final Remarks
10 Choice of Law
10.1 In the Americas
10.2 In the European Union
10.2.1 Supranational Sources on Choice of Law and Applicable Law
10.2.2 National Sources on Choice of Law and Applicable Law
10.3 In Asia
10.4 Final Remarks
11 General Conditions Used by Companies Offering Cruise Services
11.1 Preliminary Considerations
11.2 Arbitration
11.3 Jurisdiction and Applicable Law
11.4 Legal References in General Conditions
11.5 Limitation of Liability
11.6 Final Remarks
12 Sources of Law Applicable to Cruises
12.1 European Union Supranational Sources of Law: Regulations
12.2 European Union Supranational Sources of Law: Directives
12.3 International Sources of Law
12.4 National Sources of Law
12.4.1 In Europe
12.4.2 In the Americas
12.4.3 In Asia
13 Conclusions
Web Pages Visited
References
The Fight Against Poverty and the Right to Development
1 Introduction
2 Domestic Law and Remedies
2.1 General Remarks
2.2 Relationship to International Law
2.2.1 How Are ESCR in International Law Transposed into Domestic Law?
2.2.2 Overview of Ratification of Key Legal Instruments
2.3 Constitutional Protection
2.3.1 How and to What Extent Constitutions Include ESCRs
2.3.2 The Justiciability of the Constitutional Rights Framework
2.4 Remedies and Relationship to International Review Mechanism
2.4.1 Remedies Available in the Fight Against Poverty
National Remedies More Broadly
Connections with Regional and International Review Mechanisms
2.4.2 How Does National Systems Value ESCRs
3 Domestic Law Contributions in an International Context
3.1 General Remarks
3.2 Domestic Constitutional or Legal Innovations
3.2.1 Domestic Constitutional Contributions in an International Context
3.2.2 Mechanisms of a Legal or Wider Regulatory Nature Contributing Internationally
3.3 Policy Monitoring and/or Accountability Mechanisms
3.3.1 Relationship Between Development Programmes and the RtD
The Presence of RtD, the SDGs and Other Development Related Policies
Funding Levels for Development Programmes
3.3.2 Accountability and Monitoring Mechanisms for Development Programmes
3.4 Unilateral/Bilateral Initiatives or Agreements
4 Crosscutting Contemporary Themes
4.1 General Remarks
4.1.1 The Fight Against Poverty and the RtD in Post-conflict Societies
4.1.2 The Fight Against Poverty and the RtD in International Trade and Investment Law
International Trade Law
International Investment Law
4.1.3 The Fight Against Poverty and the RtD in Business and Human Rights
5 Concluding Remarks and Future Developments
Legal Documents
Miscellaneous
Websites
News Articles
References
Books and Journal Articles
Formal and Informal Constitutional Amendment
1 Constitutional Amendment
2 Constitutionalism
3 The Rule of Law
4 Liberty
5 Amendment
6 Constitutional Duties
7 Constitutional Justice
8 Argentina
9 Australia
10 Belgium
11 China
12 Cyprus
13 The Czech Republic
14 Denmark
15 Hungary
16 Italy
17 Japan
18 The Netherlands
19 Poland
20 Romania
21 Singapore
22 Slovak Republic
23 Switzerland
24 United States of America
25 Challenges
26 Principles and Techniques
27 Conclusion
References
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Global Age
1 Introduction: General Perspective
2 The Statics of the Relations Among Legal Spheres in Positive Law: Multifaceted Pluralism
2.1 Outward Pluralism: Perspectives on the Relationship Between Domestic and International, Supranational, and Transnational L...
2.2 Inward Pluralism: Perspectives on the Internal Consistency of Domestic Legal Systems
3 The Dynamics of the Relations Among Legal Spheres in Positive Law
4 The Renewal of Legal Reasoning
5 The Renewal of Legal Scholarship
6 The Ideological Dimensions of Legal Rationality
6.1 Questioning Pluralist Dialogism
6.2 Questioning Constitutionalism and Pluralism
6.3 Questioning This General Report´s Implicit Biases
References
The Right to Be Forgotten
1 Introduction
2 Balancing the Freedom of Expression Against the General Right to Privacy
2.1 The European Approach vs. the United States´ Approach
2.2 An Illustration
2.3 Variations in Latin America, South East Asia and the Far East
2.3.1 Latin America
2.3.2 Japan and Taiwan
3 The Right to Privacy´s Implications for the Right to Be Forgotten
3.1 Liberty, Dignity, Capitalism and the Right to Be Forgotten
3.2 Dignity, Balancing Free Speech and the Right to Privacy, and the Recognition of the Right to Be Forgotten
3.3 Liberty and Free Speech As Limits to the Recognition of the Right to Be Forgotten
4 The Core Justifications of the Right to Be Forgotten: Self-realization, Dignity, Personal Freedom, and Control over Informat...
4.1 General Remarks
4.2 The Multiple Facets of the Right to Be Forgotten
4.3 Expanding the Scope of the Original Right to Be Forgotten
5 The Implications of the Right to Control Information About Oneself
5.1 Individuals´ Ability to Control Their Personal Data
5.2 Obstacles to Individuals´ Control
5.3 The Role of Search Engines/Data Processors
5.4 Adjudication of Control
5.5 The Extent of Search Engines´ Liability in Disputes over Control
6 Conclusion
The Right to Be Forgotten: Questionnaire
References
Case Law
Literature
Conventions/Statutes
Deference to the Administration in Judicial Review: Comparative Perspectives
1 Introduction
2 The Role of the Courts: Setting the Scene for Discussion
3 Defining the Concept of ``Deference´´
4 Deferential Judicial Review in Operation
4.1 Deference rationae personae or rationae materiae
4.2 Deference and the Separation of Powers
4.3 Political Issues and Deference to the Political Branches of the Government
4.4 Deference to the Executive
4.5 Deference Due to the Nature of the Courts
4.6 Technical Deference
4.7 How Deference Is Manifested
5 Deference and the Rule of Law
6 Concluding Remarks
Annex: Questionnaire on ``Deferene to the Administration in Judicial Review´´
Introduction: Concept and Definition
Objectives of the Project
Proposed Structure
Main Questions/Issues
Introduction to National System
Questions Concerning Judicial Deference
Comparison and Lessons to Learn
References
Books
Articles
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
1 Introduction
2 The Attorney-Client Privilege and the Lawyer´s Duty of Confidentiality
2.1 Tensions and Competing Interests: The Role of the Defence Attorney Between the Duties Towards the Administration of Justic...
2.2 Basic Parameters of the Attorney-Client Privilege
2.3 Dealing with Client´s Untrue Testimony and Perjury
2.4 Handling of Incriminating Evidence or Revealing Its Whereabouts
2.5 Special Disclosure Rules in Relation to White Collar Crime, Money Laundering and Terrorist Financing
2.6 The ``Crime-Fraud´´ Exception to the Privilege
2.7 Duty to Reveal Information from the Client Concerning Future Crimes or Civil Wrongs
2.8 Lawyers for Corporate Clients
2.9 Sanctions for a Lawyer´s Breach of the Duty of Confidentiality
3 State Intrusion Into the Confidentiality of Attorney-Client Communications
3.1 Subpoenaing the Attorney to Testify Against the Client
3.2 Subpoenaing Documentary or Physical Evidence from an Attorney
3.3 Searches of Lawyer´s Offices
3.4 Interception of Confidential Communications Between Lawyer and Client
3.4.1 Interception of Communications by Mail
3.4.2 Use of Informants to Overhear Privileged Conversations
3.4.3 Wiretapping, Bugging, Intercepting Electronic Communications or Communications Metadata
4 Exclusionary Rules Related to Violations of the Attorney-Client Privilege and the Right to Counsel
5 Conclusion
References
Data Protection in the Internet
1 Introduction
1.1 Subject-Matter, Purpose and Scope of the Present Report
1.2 Organization of the Report
2 The General Data Protection Framework
2.1 The Applicable Rules
2.2 The Notion of Personal Data
2.3 The Supervision Authorities
2.4 The Self-Regulation Instruments
3 Specific Problems Concerning Data Protection in the Internet
3.1 Personal Data Processed by Electronic Means
3.1.1 Processing of Personal Data in the Context of Services Provided at a Distance by Electronic Means
3.1.2 Protection of Minors´ Personal Data Processed by Electronic Means
3.1.3 The Right to the Erasure of Personal Data Processed by Electronic Means
3.1.4 Protection of Employees´ Personal Data Processed by Electronic Means
3.1.5 Security Obligations and Data Breach Notifications Concerning Data Processed by Electronic Means
3.2 Data Protection in the Electronic Communications Sector
3.3 Data Protection and Digital Forensics
3.4 Data Protection and Electronic Surveillance for Security and Defense Purposes
3.5 Remedies and Sanctions
4 The International Dimension of Data Protection
4.1 The Territorial Scope of Rules on Data Protection
4.2 The Applicability of Data Protection Rules to Foreign Entities
4.3 The Specific Conditions Applicable to the Transfer of Personal Data to a Foreign Jurisdiction
4.4 The Law Applicable to Liability for Damages Caused by the Unlawful Processing of Personal Data
5 Concluding Remarks
5.1 The Basic Approaches to Regulation of Data Protection in the Internet
5.2 A General Assessment
References
Legal Aspects of Genetic Testing Regarding Insurance and Employment
1 IntroductionQuestions 1-2 of the Questionnaire.
2 Specific Rights and Obligations Regarding Genetic Testing in the Insurance and Employment Context
2.1 Justifications for and Against the Collection of Genetic Information by Employers and InsurersQuestion 19 of the Questionn...
2.2 Legal Conceptualizations of Genetic Testing and InformationQuestions 3 and 4 of the Questionnaire.
2.3 Anti-discrimination Norms Dealing Specifically with Genetic StatusQuestions 8, 9 and 11 of the Questionnaire.
2.4 Specific Rights and Obligations of Insurers and Employers in Other Types of NormsQuestions 5-6, 8 and 19-23 of the Questio...
2.4.1 The General Prohibition Model
2.4.2 Conditional Allowance to Request Information or TestingOur questionnaire (question 22) also asked what power insurers an...
2.4.3 Extraterritorial Jurisdiction
2.5 Rights and Obligations of the Insurance or Job Applicant, the Insured or Employee, and Close Family MembersQuestions 24-25...
3 Generalist Frameworks Relevant to the Regulation of Genetic TestingQuestions 8-18 of the Questionnaire.
3.1 General Non-discrimination Protection
3.2 Privacy, Confidentiality and DisclosureQuestions 7 and 13-17 of the questionnaire.
3.2.1 Confidentiality of Clinical and Research Data
3.2.2 Confidentiality of Insurer or Employer´s Data
3.2.3 Right to Access Information and the Right Not to Know
3.2.4 Family Members´ Interests
4 ConclusionQuestions 26-29 of the Questionnaire.
Appendix
Annex I Questionnaire: Legal Aspects of Genetic Testing Regarding Insurance and Employment
Introduction
Part I: Are Existing Generalist Frameworks for Regulating Genetic Testing Adequately Adapted to the Insurance and Employment C...
A. General
B. Human Rights
B.1 Non-discrimination Protection
B.2 Privacy, Confidentiality and Disclosure
B.3 Other
Part II: Do the Specific Rights and Obligations in the Insurance and Employment Contexts Effectively Reconcile Stakeholders´ I...
A. Rights and Obligations of Insurers and Employers
B. Rights and Obligations of the Insurance or Job Applicant, the Insured or Employee, and Close Family Members
Conclusion
Annex II Questionnaire: Les Aspects Jurisdiques des Tests Génétiques en Relation à l´Assurance et l´Emploi
Introduction
Partie 1: Est-ce que les cadres généralistes qui réglement ent les tests génétiques sont adaptés aux contextes de l´assurance ...
A. Général
B. Droits de la personne
B.1 Protection contre la discrimination
B.2 Vie privée, confidentialité et divulgation
B.3 Autre
Partie 2: Est-ce que les droits et obligations spécifiques dans les contextes de l´assurance et l´emploi concilient efficaceme...
A. Droits et obligations des assureurs et des employeurs
B. Droits et obligations du preneur d´assurance ou du candidat à l´emploi, de l´assuré ou de l´employé, et des proches
Conclusion
References
The Legal Services Market and Conveyancing
1 Introduction
2 The Landscape of Conveyancers, Their Role and Responsibility
3 Costs, Timeframe and Other Issues
Reference
Climate Change Litigation and the Individual: An Overview
1 Introduction
2 Climate Change and Litigation
2.1 We Really Do Not Have Much Time Left
2.2 All Hands on Deck
2.3 Beyond the Usual Suspects and Going Beyond the Literature
3 Climate Change Litigation: Standing, Grounds of Review and Remedies
3.1 Standing
3.2 Merits (Grounds of Review)
3.2.1 Breach of International Law Obligations
3.2.2 Human Rights
3.2.3 Tort Law
3.2.4 Liability
3.2.5 Judicial Review
3.2.6 Public Trust Doctrine
3.2.7 Breach of Other Environmental Obligations
3.2.8 Criminal Law Grounds
3.2.9 Anti-Competitive Grounds
3.2.10 Fiduciary Duties
3.2.11 Breach of International, National and Corporate Guidelines
3.3 Remedies
4 Climate Change Litigation: Crosscutting Matters
4.1 Causation
4.2 Science and Climate Change Litigation
4.3 Separation of Powers
5 Climate Change Litigation: Challenges Ahead
5.1 Access to Justice
5.2 Lack of Capacity (Including Lack of Specialised Courts)
5.3 Legal Culture
5.4 Lack of Climate Change Awareness
6 The Promise of Climate Change Litigation
References
Literature
Treaties, Conventions and Other International References
Case Law and Legislative Resources
Online Resources
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types of Solidarity in the...
1 Introduction: Issues and Context
1.1 `Solidarity Across Generations´ from the Perspective of Social and Family Law
1.2 Definitions of ``Generation´´ and Different Types of ``Solidarity´´
1.3 Different Issues in Different Demographic and Economic Contexts
1.4 Developed Welfare States or Countries with Limited Social Expenditure
1.5 Appearance of a New Problem: Long Term Care (LTC)
1.6 Three Main Topics of Discussion
2 Solidarity in Pension Systems
2.1 Different Types of Pensions
2.2 Old Age Pension or Retirement Pension?
2.3 Crisis of the Pension System: How Can Pensioner´s Rights be Protected? How Can the Interests of Different Generations be R...
2.3.1 Context
2.3.2 Reducing Benefits in Pay-As-You-Go Pension Systems
2.3.3 The Legislative and Political Limitations of Pension Cuts
2.3.4 Different Perspectives on the Question of Pension Cuts
3 Family Solidarity and Public SolidarityFor both Sects. 3 and 4, see Sayn (2006).
3.1 Support Duties Between Adult Members of a Family and Welfare Benefits
3.1.1 Different Types of Support Obligations
3.1.2 Reinforcing Support Duties in the Context of an Aging Society
3.2 Family Support Duties and Social Minimum Benefit
3.2.1 Principle of Subsidiarity and Family Support Duties
3.2.2 Recovery of the Cost of Social Benefits from Family Members
4 LTC: Formal and Informal Care
4.1 Taking Care of Elderly People: An Individual, Family or State Concern?
4.1.1 LTC as a Personal and Family Matter
4.1.2 LTC as a Public Matter
4.2 Rewards, Support, or Compensation for Family and Informal Carers
4.2.1 The Importance of Informal Care
4.2.2 Types of Measures for Informal Care Givers
5 Conclusion
References
Recommend Papers
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Citation preview
Rapports généraux de l'AIDC / General Reports of the IACL
Katharina Boele-Woelki Diego P. Fernández Arroyo Alexandre Senegacnik Editors
General Reports of the XXth General Congress of the International Academy of Comparative Law – Rapports généraux du XXème Congrès général de l'Académie internationale de droit comparé
Ius Comparatum - Global Studies in Comparative Law Rapports généraux de l’AIDC / General Reports of the IACL Volume 50 Series Editors Katharina Boele-Woelki, Bucerius Law School, Hamburg, Germany Diego P. Fernández Arroyo, Institut d’Études Politiques de Paris (Sciences Po), Paris, France
Ever since its foundation in 1924 the International Academy of Comparative Law has organized Congresses allowing for the exchange of ideas on general aspects of comparative law and on the application of the comparative method to specific subjects. While the Congresses were confined to European venues for the initial decades, they have also taken place on other continents in more recent times. The Congresses of Washington DC in 2010 and Vienna in 2014 were numbered as the 18th and 19th General Congresses of the Academy. The Congresses cover a wide range of subjects from all areas of the law. The topics are meant to mirror and to contribute to modern legal developments of the respective time. The main format consists in sections organized under the scholarly guidance of a General Rapporteur. The General Rapporteurs collect national reports from a large number of jurisdictions which allow them to pinpoint the major legal differences between the national laws covered and to draw conclusions concerning the ongoing legal development in the respective area. The general reports of a Congress have traditionally been collected in a single book which provides a kind of inventory of major legal themes of particular relevance at the time of the Congress.
More information about this subseries at http://www.springer.com/series/13403
Académie internationale de droit comparé International Academy of Comparative Law
Katharina Boele-Woelki • Diego P. Fernández Arroyo • Alexandre Senegacnik Editors
General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé
Editors Katharina Boele-Woelki Académie internationale de droit comparé International Academy of Comparative Law Paris, France
Diego P. Fernández Arroyo Académie internationale de droit comparé International Academy of Comparative Law Paris, France
Alexandre Senegacnik Académie internationale de droit comparé International Academy of Comparative Law Paris, France
ISSN 2214-6881 ISSN 2214-689X (electronic) Ius Comparatum - Global Studies in Comparative Law ISSN 2543-0440 Rapports généraux de l’AIDC / General Reports of the IACL ISBN 978-3-030-48674-7 ISBN 978-3-030-48675-4 (eBook) https://doi.org/10.1007/978-3-030-48675-4 # The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licenced by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Avant-propos/Foreword
Du 22 au 28 juillet 2020, l’Académie internationale de droit comparé a tenu son 20ème Congrès général à Fukuoka, au Japon. Pendant ces jours ardents de l’été japonais, plus de 800 participants se sont réunis dans la plus grande ville de l’île de Kyushu afin de discuter une variété étonnante de sujets juridiques parmi les plus importants à ce jour. Ces sujets ont été abordés à travers différents formats : rapports généraux/ spéciaux, tables rondes, leçons inaugurale/de clôture et ateliers. En outre, deux activités spécifiques ont été organisées à différents instants de la semaine : une série de tables rondes sur la technologie et le droit ainsi qu’un forum pour les jeunes chercheurs.
From 22 to 28 of July 2018, the International Academy of Comparative Law held its 20th General Congress in Fukuoka, Japan. During those torrid days of Japanese Summer, over 800 participants gathered in the biggest city of Kyushu Island in order to discuss an amazing variety of legal topics, among the most significant ones of today. These topics were approached through different formats: general/special reports, round-table debates, keynote speeches and workshops. Furthermore, two specific activities were organized during different moments of the week: a series of round tables on technology and the law as well as a forum for younger scholars.
D’un point de vue académique, le 20ème Congrès général a été un remarquable succès. Trois principaux facteurs y ont contribué. Premièrement, la pertinence des sujets a été assurée grâce à un processus de sélection à travers lequel les membres individuels et personnes morales d’une part, et les Comités nationaux d’autre part ont pu soumettre plus de 300 propositions. Après une présélection effectuée par le Bureau de l’Académie, 90 sujets sont restés en lice. Les participants à la réunion ouverte organisée à Paris en novembre 2015 ont choisi les 36 sujets spécifiques du Congrès. Deuxièmement, afin de traiter convenablement de sujets aussi difficiles, il fallait d’excellents rapporteurs et orateurs. Le Secrétaire général, avec l’aide du Bureau et de nombreux précieux conseillers, est parvenu à trouver les bonnes personnalités pour cela. Nous ne parlons pas seulement de la qualité individuelle, mais aussi de la nécessaire promotion de la diversité. Avec cet objectif en tête, nous sommes parvenus dans plusieurs cas à désigner deux rapporteurs généraux. L’effort en ce sens a été remarquable. Et troisièmement, le Secrétariat — et nommément Alexandre Senegacnik — s’est chargé de mettre en place toutes les activités qui ont mobilisé de nombreuses personnes et a réussi à surmonter de nombreux obstacles organisationnels.
From an academic point of view, the 20th General Congress was a remarkable success. Three main factors contributed to this finding. First, the relevance of the topics was ensured by a selection process through which individual and corporate members, on the one hand, and National Committees, on the other hand, submitted over 300 proposals. After a pre-selection made by the Executive Committee of the Academy, 90 topics remained in the race. The attendants of an open meeting convened in Paris in November 2015 chose the final 36 specific topics for the Congress. Second, in order to appropriately deal with such challenging topics, excellent rapporteurs and speakers were needed. The Secretary-General, with the help of the Executive Committee and many precious advisers, managed to find the right persons for this task. We are not talking only about individual quality but also about the necessity to promote diversity. With this goal in mind, in several cases we managed to appoint two general rapporteurs. The effort in this sense was remarkable. And third, the Secretariat—and in particular Alexandre Senegacnik—took care of setting up all these activities involving many people and succeeded in overcoming many organizational hurdles.
Le succès académique du Congrès de Fukuoka porte plusieurs messages. Le plus évident est celui de l’attractivité continue du droit comparé. L’intérêt des chercheurs de tous les coins du monde est encore plus significatif compte tenu de l’impact juridique notable qui résulte de la montée et prolifération de certains discours nationalistes au cours des dernières années. Un autre message, de nature plus substantielle, est que les différences sont sans conteste le carburant nécessaire au bon fonctionnement et donc au bon
The academic success of the Fukuoka Congress conveys several messages. The most evident one is the continuing attractiveness of Comparative Law. The interest of scholars from all corners of the world reaches an even higher degree of significance in light of the notable legal impact which the rise and proliferation of certain nationalist discourses have had over the last years. Another message, more substantial in nature, is that differences are undoubtedly the necessary fuel for the Academy’s
v
vi
Avant-propos/Foreword
travail de l’Académie. Les comparatistes essaient toujours de les identifier et de découvrir les raisons qui les expliquent. Dans certains cas particuliers, les comparatistes concluent que les différences peuvent être minimisées, même lorsqu’il n’y a pas de réelles différences. Dans la grande majorité des cas cependant, la clé est de trouver le moyen de faire fonctionner ensemble les systèmes juridiques sur la base du respect des différences. Par ailleurs, le fait que tant de juristes aient assisté au Congrès peut suggérer que le droit comparé est plus qu’une discipline et une méthodologie. Il représente un moyen de concevoir les relations entre les juristes et le droit. Il s’agit alors d’un état d’esprit enraciné dans l’ouverture face aux différentes manières d’organiser la coexistence sociale. Il appelle également à un certain militantisme juridique en faveur de l’acceptation de l’altérité.
proper functioning and ultimately good work. Comparatists are always trying to identify the latter and to discover the reasons which can explain these differences. In some particular cases, comparatists conclude that the differences can be minimized, even when there are no real differences. In the vast majority of cases, however, the key is to find the way to make legal systems work together on the basis of the respect for differences. Besides all that, the fact that so many jurists have attended the Congress may suggest that Comparative Law is more than a discipline and a methodology. It represents a way to conceive the relationships between the jurists and the law. It can then be an état d’esprit rooted in an openness vis-à-vis the different ways to organize the social coexistence. It further calls for some legal activism in favour of the acceptance of alterity.
Vous trouverez dans cet ouvrage 26 rapports généraux. Pour les rendre possibles, les rapporteurs généraux ont travaillé d’arrache-pied depuis leur nomination en 2016 sur la base des rapports spéciaux élaborés principalement selon une approche nationale, mais aussi des perspectives régionales et/ou institutionnelles. Pour ceux qui sont particulièrement intéressés par des sujets spécifiques, l’Académie publie dans cette même série les ouvrages thématiques contenant chaque rapport général conjointement avec les rapports spéciaux respectifs. En outre, un autre ouvrage, qui rassemble d’autres contributions présentées lors du Congrès, a déjà été publié1.
You will find in this book 26 general reports. To make them possible, the General Rapporteurs worked hard since their appointment in 2016, on the basis of the special reports, elaborated essentially under a national approach but also regional and/or institutional perspectives. For those particularly interested in specific topics, the Academy publishes in this very same series the thematic books containing each general report jointly with the respective special reports. Furthermore, another book, which gathers other contributions made during the Congress, has already been published.1
Tous les ouvrages de la série sont également disponibles en format électronique. Le nombre impressionnant de téléchargements de nos publications électroniques nous invite à être reconnaissants envers nos auteurs et fiers de la contribution de l’Académie à la recherche et à l’enseignement du droit dans le monde entier.
All the books of the series are also available in E-book. The impressive number of downloads of our electronic publications invites us to be grateful to our authors and proud of the contribution of the Academy to legal research and education worldwide.
Les activités de l’Académie ont désormais régulièrement lieu sur tous les continents, rompant ainsi avec le traditionnel et principal regard (bien que non exclusif) sur des systèmes juridiques occidentaux et des pays développés. Le dernier Congrès thématique — sur La mise en œuvre et l’effectivité du droit2— s’est tenu à Montevideo, Uruguay, en 2016, et le prochain Congrès général se tiendra à Asunción, Paraguay, en 2022. Le prochain Congrès thématique
The activities of the Academy now regularly take place on all continents breaking with the traditional main (although not exclusive) focus on Western legal systems and developed countries. The last Thematic Congress—on The Enforcement and Effectiveness of the Law2—was held in Montevideo, Uruguay, in 2016, and the next General Congress will be held in Asunción, Paraguay, in 2022. The next Thematic Congress will take place in 2021 in Pretoria, South
1 Current Issues of Comparative Law – Questions actuelles de droit comparé: General Contributions of 2018 Fukuoka Congress – Contributions générales du Congrès de Fukuoka 2018 (Katharina Boele-Woelki & Diego P. Fernández Arroyo (dirs./eds.) Springer, 2019). 2 Enforcement and Effectiveness of Consumer Law (Hans-W. Micklitz & Geneviève Saumier (dirs./eds.) Springer, 2018); Comparative Perspectives on the Enforcement and Effectiveness of Antidiscrimination Law Challenges and Innovative Tools (Marie Mercat-Bruns, David B Oppenheimer & Cady Sartorius (dirs./eds.) Springer, 2018); Enforcement and Effectiveness of the Law - La mise en oeuvre et l’effectivité du droit General Contributions of the Montevideo Thematic Congress - Contributions générales du Congrès thématique de Montevideo (Nicolás Etcheverry Estrázulas; Diego P. Fernández Arroyo, (dirs./eds.) Springer, 2018).
Avant-propos/Foreword
vii aura lieu en 2021 à Pretoria, en Afrique du Sud, et aura pour thème la diversité et pluralité en droit.
Africa, and will focus on Diversity and Plurality in Law.
En outre, l’Académie s’est engagée dans l’organisation de nombreuses activités sur des sujets spécifiques dans une perspective juridique comparative (droits humains3, arbitrage international4, droit de la famille5, droit international public, droit procédural et culture) et dans la promotion d’événements régionaux sur le droit comparé. Des programmes spéciaux pour les doctorants et les juges sont en préparation. De plus, Blogcomparatum et la présence croissante de l’Académie sur les réseaux sociaux offrent une myriade de nouvelles sur les réformes législatives, la jurisprudence, les études doctrinales et les événements universitaires. L’Académie a également lancé une série de podcast en 2020 afin de partager la réflexion sur le droit comparé avec un public plus large.6
Furthermore the Academy has engaged in the organization of numerous activities on specific topics viewed from a comparative legal perspective (Human Rights,3 International Arbitration,4 Family Law,5 Public International Law, Procedural Law and Culture) and in the promotion of regional events on Comparative Law. Special programmes for PhD candidates and for judges are under preparation. In addition, Blogcomparatum and the Academy’s increasing presence on social media offers a myriad of news on legislative reform, case law, doctrinal studies and academic events. The Academy has also launched a podcast series in 2020 in order to share the reflexions on Comparative Law with a larger audience.
La qualité des rapports rassemblés dans cet ouvrage ainsi que les multiples activités et publications mentionnées ci-dessus montrent que notre Académie est vraiment en bonne santé nonobstant son âge avancé. En effet, elle fêtera avec beaucoup de dynamisme son premier siècle — plus que prolifique — en 2024. Nous exprimons notre profonde gratitude à tous ceux qui ont contribué et contribuent toujours à rendre cela possible.
The quality of the reports gathered in this book as well as the multiple activities and publications referred to above show that our Academy is really healthy notwithstanding her advanced age. Indeed, she will celebrate with plenty of dynamism her first— more than prolific—century in 2024. We express our deepest gratitude to all who have contributed and still contribute to making this possible.
Paris, France
Katharina Boele-Woelki Diego P. Fernández Arroyo
3
Les droits humains comparés: À la recherche de l’universalité des droits humains (Niki Aloupi, Diego P. Fernández Arroyo, Caroline Kleiner, LinosAlexandre Sicilianos et Sébastien Touzé (dirs./eds.) Pedone, 2019). 4 Le premier numéro de Ius Comparatum, la nouvelle publication en libre accès de l’Académie est disponible sur le site de l’Académie aidc-iacl.org. The first issue of Ius Comparatum, the new open access publication of the Academy is now available on the website of the Academy aidc-iacl.org. 5 Il s’agit du sujet du second volume de Ius Comparatum. This is the topic of the second volume of Ius Comparatum. 6 Le podcast est disponible sur le site de l’Académie aidc-iacl.org. The podcast is available on the Academy’s website aidc-iacl.org.
Contents
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity? . . Csaba Varga
1
Property Meeting the Challenge of the Commons . . . . . . . . . . . . . . . . . . . . . . . . . Ugo Mattei and Alessandra Quarta
23
The UNIDROIT Principles as a Common Frame of Reference for the Uniform Interpretation of National Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alejandro M. Garro and José A. Moreno Rodríguez Bilingual Study and Research: The Need and Challenges . . . . . . . . . . . . . . . . . . . . Nicolás Etcheverry Estrázulas and Sofía Cairo
51 71
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons . . . . 103 Isabel C. Jaramillo Sierra Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A Commentary on Contemporary Arrangements . . . . . . . . . . . . . . . 123 Dobrochna Bach-Golecka Transparency of Information and Disinformation of Consumers . . . . . . . . . . . . . . 145 Gert Straetmans Optional Choice of Court Agreements in Private International Law . . . . . . . . . . . 197 Mary Keyes Questions de droit international privé de la responsabilité sociétale des entreprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Catherine Kessedjian Control of Price Related Terms in Standard Form Contracts . . . . . . . . . . . . . . . . 249 Yeşim M. Atamer and Pascal Pichonnaz Groups of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Rafael M. Manóvil La régulation juridique du crowdfunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Caroline Kleiner Security Rights in Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Eva-Maria Kieninger The Role of Collective Bargaining in Labour Law Regimes: A Global Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Ulla Liukkunen
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Legal Aspects of Cruises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 Cecilia Fresnedo de Aguirre The Fight Against Poverty and the Right to Development . . . . . . . . . . . . . . . . . . . 469 Mads Andenas, Jeremy Perelman, and Christian Scharling Formal and Informal Constitutional Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 493 Mortimer Newlin Stead Sellers Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Global Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 Guillaume Tusseau The Right to Be Forgotten . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 Franz Werro Deference to the Administration in Judicial Review: Comparative Perspectives . . . 577 Guobin Zhu Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings . . . 589 Stephen C. Thaman and Lorena Bachmaier Data Protection in the Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611 Dário Moura Vicente and Sofia de Vasconcelos Casimiro Legal Aspects of Genetic Testing Regarding Insurance and Employment . . . . . . . 635 Lara Khoury, Adelle Blackett, and Lukas Vanhonnaeker The Legal Services Market and Conveyancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 Andrea Fusaro Climate Change Litigation and the Individual: An Overview . . . . . . . . . . . . . . . . . 675 Francesco Sindico, Makane Moïse Mbengue, and Kathryn McKenzie Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types of Solidarity in the Context of an Aging Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693 Eri Kasagi
Contents
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity? Csaba Varga
Abstract
Our thoughts are products of our own culture, tradition, and ideal of order, so their understanding and development can only be based upon them. However, cultures, traditions and ideals vary from time to time and from people to people, as each of them has been created and developed to respond to challenges under their own conditions given. Consequently, they are both independent of each other in their genesis and also incommensurable in their historical set; they are not even classifiable but only taxonomisable in a strict sense. Each of us lives and interprets his own world; when comparing, we attempt at putting all of them in a common hat, while none of us can transcend the symbolic paradox of “I interpret your culture through my culture”. A way out, if at all, can only result from their individual parallel characterisation, when we build up some kind of abstract philosophical universality from the ideals of order concerned. In the context of the Self, on the one hand, and of You, on the other, we are expected not only to explain the Other, but also to recognise it by its own right. Accordingly, legal comparison aims at getting knowledge not only of ‘law in books’ and ‘law in action’ but about what is meant by law when it works in the mind. All in all, comparison comprises, in addition to the mere act of taking cognisance, also the acceptance of this Other by its own right, in which no entity involved is simply reduced to anything purely factual (“what is the This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. C. Varga (*) Philosophy of Law Department, Pázmány Péter Catholic University, Budapest, Hungary Hungarian Academy of Sciences, Institute for Legal Studies, Budapest, Hungary e-mail: [email protected]
law?”), but the actuality of the entire normative process leading to a legal statement (“how do we think in law?”) is considered. Getting to know any foreign law begins with the grouping of laws and, expressed in terms of belonging to legal families, by combining those which are similar and contrasting those which are dissimilar. Their interaction and mixing are part of their life, but establishing their occurrence cannot substitute to the didactic necessity and explanatory power of analysing them in term of legal families as well. When describing them, mere contrast or parallelism is to be completed by showing up the specific field and way of ingenuity each of them may have in comparison to others, as their individual contribution to the cultural production of the humanity.
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The Self and the External World: The Question of Understanding
Becoming a scholar and/or university professor presupposes professionalisation in and into a fundamentally internationalised vocational order. This is further strengthened when the non-English speaking majority of the world begins to confer—talk or write—about any subject, in English, to an unidentified audience, either now or in the future. Practically speaking, choices from the potential of language(s) are inexhaustible. From this almost infinite repository we then choose when we communicate; when we identify and name both real and virtual objects treated as thought objects; and when we, having described and analysed the world both in the shape we perceive it and as social institutionalisation, start conceptualising some of its selected parts. Apparently, we can move freely at every moment and in all respects, yet from the very start we are to encounter this world as ready-made: fully furnished and
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_1
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arranged in all its parts and as a whole. Consequently, unless we desert it or leave it to become new Robinson Crusoe’s, we can have but one option, namely, that by our own laborious work we try to make some refinement of tiny parcels of it so that it will better meet our needs. For whatever we are born into, we are in, and we grow and continue to grow there, in communication with the outer world, all of this is something given to us from the beginning. To use a more accurate expression, we are embedded in our culture, tradition, and orderly arrangement. And this all is about the outside world and our own self, in the company of all others. For it is only this all that can provide a framework for reflection on ourselves. Because in any of its actual forms of existence this is exactly our world. We live in it and we orient ourselves according to it. In its given state at any time, therefore, it assigns us a normative basis as well.1 All such cultures, traditions and orders are plural and manifold. They differ from one another because they originate from actual lives—by this we mean the nature of the orders peoples have developed and then conform to, of the challenges they face, of the experiences they have accumulated, and of the kinds of feedback offered whilst their communal actions are taken. Although encounters and communications within and outside any community result in mutual learning processes and thus some movement also towards assimilation and perhaps uniformisation, these are usually balanced by motifs that strengthen (with centrifugal effects counterchecking the centripetal ones) the particularity of the underlying culture, tradition, and order in question. Well, it is comparatio that brings them to some common ground. For by treating them as organic constituents of some, mostly hypothetical, common sets, we will necessarily compare them to each other. In doing so, however, no matter how much we may try to anonymise or depersonalise our culturally bound point of view by living at a cool distance, for want of objectivity in the process, the result of the operation will ultimately be determined—or channelled into a referential framework at least—by ourselves, that is, by the personal culture of the one who compares. So, what we tried to push out of the gate is to return through the window. And this is exactly the paradigmatic paradox inherent in any act of collective social understanding: the only thing I can do is this: “I interpret your culture through my culture.” For 1
Following the original methodological way of thinking characteristic of autopoiesis, Varga (2012a) has, in the process, analysed the connectability of society-wide and individual understandings and language use, including both official and personal association with agents of formalised normativity, including law. His approach—in Varga (1991)—has already been considered to be autopoietic by Benseler (1987).
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we are all sitting on an imaginary boat; and we represent humanity, which, we hope, should be able to give account of its own rich diversity.2 But, in addition, there is one more circumstance that, as a shortcoming, is common to such operations. “So, they have neither a neutral language, nor a point of reference which could be outside of all what they themselves are or what they can at all sense with their own culture, wanting to learn about it.” Therefore, by comparing our cultural subjects with ones of other cultures, that is, by the contrast we draw between our own and the other, nolens-volens we are in fact deepening our inner understanding of our own. Because all of our intellectual activity is always based on our own place.3 Consequently, we are supposed to make this more advanced—that is, even more differentiated in a systemic sense, in its internal delineations as well as in its responsive potential4—for that we will be able to expose and visualise any outer object (in outlook, aims, and conceptuality) with greater sensitivity and with a deeper understanding. Now, moving from here to the field of scholarship and education: am I talking about a topic, at an international forum, in the context of which I am conferring on phenomena of other cultures as well? Do I introduce my students to the variety of legal traditions, to explore the past and present worlds of law, in a mixed class community in which the concepts that I am referring to—in description, classification, correlation, and the evaluation they all inevitably express—also affect the legal culture(s) whose representative(s) may be present as my student(s) here? Well, the basic situation is not new at all. It has not changed one jot for millennia, since writing was used to record human ideas and cognitive achievements, with their distribution in an either original or translated textual form beyond the given culture as well, arriving at those whose culture is reported on. To put it briefly, it is about the gap between differing autochthon cultures—that is, ones developed to meet differing conditions with different peoples and epochs—and the chances and difficulties of its bridging. This is the problem of “I interpret your culture through my culture” again: the issue of anthropological and cultural knowledge.5 Man is typically not a divided being; he is, so to speak, at home just temporarily, in whatever place, living here or there, so he can only open his intellect and empathy to the other. He turns to the other with interest in him, trying to understand him. But 2 Cf. Varga (2012b), p. 270; referring to Cohn (1980), p. 199 and Medick (1987). 3 Sometimes it is made to seem as if recoursing to the idea of ‘legal family’ would/could equate to the “exoticization of legal cultures”. Watt (2006), p. 595. 4 As defined by Pawelzig (1970). 5 Moore and Sanders (2014).
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity? Suppose we already know everything about the past. Well, could we guarantee the original-sounding experience? Does authenticity make the piece sound as it would have sounded at the time of its composition? The answer may be sobering again. Simply, we cannot really get closer, because “what one hears depends to a large extent upon what one believes. The beliefs of contemporary listeners differ from those of the listeners of past periods.”12
despite his most devoted efforts, in relationship to the other, he cannot be but an external observer. (Perhaps the above dilemma would be more alive and our imaginative power would work even better if, in the light of a brief outlook, it is perceived in another field as well, one that is perhaps the closest to our own here, because this relates to our trial at bridging the gap between our own past and our own present. For in our example the dilemma of how to bridge this gap is more homogeneous, because we are focussing on the same area, that is, the past of our own culture, on the one hand, and its presence just lived through by us, on the other. This will be exemplified by the historicist movement, which was born out of the contemporary revival of early music.
A direct summation of today’s stance of musicology is simply that the ambition itself has ever been controversial.13 As musicologists opine, this hope is a task assumed that, ultimately, proves to be impossible to meet. Nevertheless, from an outsider’s position, however, I must note with some regret that in this almost technically sterilised abstract philosophising almost nothing is revealed; not even that moment has arrived which should have been the basis of whatever kind of anthropological approach. This is the discernment that the world view of the humans (and their community) in question alone— their beliefs, the spiritual and socialised order according to which their affairs are arranged, and their desire concerning what to attain and how to attain it, as their reason or purpose of being— can render meaning to music too: when, where, how, and for what purpose to listen to it at all, alongside the expectation of the kind of learning and enrichment that may become music’s gift to the listener. Well, in the age in question, people as a whole believed in God, and the musical pieces of Bach, expressive of all his personal life (with generations of predecessors and offspring involved), were expressly theocentric.14 Moreover, as a natural course of the time, the bulk of his works, and that of others, were not products in want of anything better, the output of carnal fashion, but just his/their artistically expressed humility before God, to be performed as the companion to liturgical occasions—at a liturgical place, in liturgical time, in liturgical environments, in a liturgical role.15 Once deprived of its natural environment and function, of the worship invoking the religious embodiment of the given transcendental being with ancient rituals and the reinstatement of texts canonised in olden times, all that notwithstanding, we may assume that, as evidenced by the growing interest in and experience of early music’s performances nowadays, something surely remains from these works’ original messages, interpretable perhaps as a sort of intellectual geometry achieved by musical perfection, but certainly not the believer’s humility before his God—although the subject itself has never been anything else but the latter’s manifestation. Consequently, no secular imitational musical-reading can be mistaken for a church performance reproducing Bach’s image of God in a liturgical context.)
Properly speaking, this movement is a reaction to the predominance of the vision, musical instruments and playing style characteristic of 19th century romanticism, which also prevailed in early musical performance: it stands for a cleansing and restorative desire to return to whatever available authenticity, that is, a wish to listen to present day performance as if it were for its former audience in its original medium.6 Well, today’s literature of musicology and performing arts tells things like this: after the old ways have gone, they can no longer be identified. The strain to faithfully evoke old music, led by the desire to achieve authenticity, is a demand as much foggily vague as airy issues in general that simply cannot be approached exhaustively.7 Accessing it is thus precluded from the very start.8 Not knowing what it might wish to answer, it would only be able to reproduce a certain imaginary ideal.9 The cornerstone of such a conclusion is based upon the assertion according to which “the artistic end-product of composing isn’t the composition, but rather its performance.”10; and, as far as performance taken in the sense of the composer’s true end-product is concerned, “we do not have “performances” but rather “performances of” pre-existing, Platonic [i.e., only imaginarily available – Cs.V.] works.”11 Here we find new unresolved queries, since the aim of modern concert tours was at its original time, as far as a genuine mass of baroque musical pieces is concerned, only a background colouring, subservient to social occasions. In the case of ecclesiastical music, as related to the gist of transcendental events, rites, and the very meaning of the deliverance of the sacrament itself, it was not necessarily more than the church architecture, its interior/decorative artfulness, the ceremonial raiment and choreography taken together, all revolving around one purpose: to prepare or condition ourselves, our soul, our whole being for that “Sursum corda! Habemus ad Dominum.”/“We lift our hearts up to the Lord.” 7 At least the complexity of its demand can be divided into authorial intentions, choices of instruments, techniques of playing, and sounds (Young 2013; Edidin 2008, p. 3), while others (e.g., Kivy 1995) see it as dependent on a whole set of criteria. 8 Kivy (1995) does not simply deny its availability but, instead, defines antithetically, on the one hand, the requirement of authenticity drawn from outside of the score, and, on the other, the performer’s congeniality, supposing that the consideration of the former results in the latter being forced into a bind. This position is criticised by Jackson (1997). 9 “Because the composer’s score under-determines the sound of a faithful performance, the authenticity of any particular performance is judged against (the appropriate member(s) of) a set of ideally faithful performances.” Davies (1987), p. 39. 10 Edidin (2008), p. 5. 11 Cook (1999), p. 244.
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The deeper the abstraction and the deeper the store of analytic instruments we devote to debating the quest of whether or not we can at all understand the other, the farther 12
Davies (1988), p. 373. But what is meant by faith is for Davies (1987) nothing but an impression of the world, one of habitudes and tastes; exemplified by, in the polarity of past and present, what sounds as dissonant/concordant, what instrument is too rustic, or what musical elaboration (in the case of many operas of the aged Händel) is “lacking in grace”. 13 Sherman (1998). 14 Kamp (2006). 15 While staging Bach as music in abstracto for a faith-free performance, Rilling (1995), p. 9, also acknowledges that the genuine context of this specific music was the church’s message mediated by services from Sunday to Sunday but newly contextualized.
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we shall have departed from the chance of an affirmative answer. Our daily experience is, however, a testimony to ourselves that in the case of interest in, empathy with and alongside ethos shared with the cause, not only can we comprehend each other but we can also mutually enrich each other. Well, how should we understand the present world congress’ topic of—as its official title holds—“Comparative Law and Multicultural Legal Classes: Challenge or Opportunity”? I beheld nothing more than various timid and prudent outlines of guidance when I had to address those who had undertaken the preparing of national reports within the wombs of, and within the organisational framework offered by, the International Academy of Comparative Law.
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The Genuine Meaning of the Query
Obviously, the topic arises from all of our professional experiences, these being more and more common in today’s world, having “multicultural legal classes” which themselves represent those various legal traditions, priorities, sensitivities, conceptualisations and options which are taught by all of us to all of them under the aegis of Comparative Law. By this I mean that, perhaps, for each of us, and relative to each other, the internalised ideal of what is understood as order by our audience and students may become confronted, by way of some external forum, with others’ differing internalisation, that is, with ours as their teachers and professors, in the same class. Within the same community, in this way—and in a position depending on one’s viewpoint—some sort of grouping separating We and You is going to come between individuals, with different beliefs, experiences and worldviews. As a challenge calling for an answer or offering an opportunity to inspire a further search for a possible common foundation, this is a new situation as compared to the past’s homogeneous (or by far more homogeneous) auditoria. That is, the progressive internationalisation of law teaching worldwide has produced multiculturalism in the womb of the institutional education’s learning process itself, generating new questions, involving new sensitivities, and time and again, the need for reconsideration and, at times, even re-substantiation of the foundations of the set of conceptualisations made hitherto in our discipline, Comparative Law, especially in various classifications (groupings and, particularly, dichotomisations) and in the grounding and explanation thereof. In principle, as a scholarly topic to be debated during an International Academy of Comparative Law World Congress, the topic’s basics do not differ from the practical cultivation of the scholarly field called Comparative Law and especially its off-spring called Comparative Legal
Cultures. Any of their partial themes and problem areas, approached and elaborated or monographed by any one of us, offering an outcome to the judgment of the world community of scholars, consisting of ““multicultural legal classes” of professionals/cultivators” engaged in comparativism themselves, will have the same perspective, which, too, can also be taken either as challenge or opportunity. In any case, the topic to be debated at the World Congress is double-faceted. On the one hand, it calls for the reconsidering of ontological and epistemological claims—ideals and reality—of and behind Comparative Law in general and Comparative Legal Cultures in particular. In which sense and how much can they be truly objective? and purely descriptive? Is there evaluation involved from the very beginning? and on behalf of and representing the underlying culture of whom? For example, in the use of characterisers/qualifiers like ‘development’, ‘progress’, ‘more accomplishment, refinement, or elaboration (etc.) in the output’ amongst many other operative key terms—in what sense should these be understood? and from what perspective, and from whose perspective? Or, is Law, as such, an embodiment of an ideal of order, autochthonous practically in all its variations, that withstands any reductive view and excludes any proper comparison which would then project and explain it as the particular of something general?16 Or, in the final analysis, what can such a generality be, if it exists or can be presumed at all?17 Or, to sum up, what is the basis of any comparison? And are we advancing, for instance, as is done in most of the cases, our own arrangement as tertium comparationis, only in order to arrive at its deeper understanding through holding it up to the mirror of others’ arrangements in the course of comparison? On the other hand, teaching is characteristically a small community-based interactive process with a relatively vast and historic archive of accumulated experience of teaching practice. I hope that the total sum of these thematic national reports—for the time being expected from Argentina, Brazil, Canada (notably Quebec), Cyprus, the Czech Republic, Germany, Great Britain, Greece, Italy, Japan, The Netherlands, Romania, Singapore, Switzerland, Taiwan, and Turkey (as collected by the International Academy of Comparative Law upon the basis of propositions communicated through the national branches affiliated with the International Academy)—will act as a think-tank about a spectrum of cases, either problematic ones, or ones advancing the mutual learning process, that may contribute to both highlighting the topic and inspiring further debate. 16 It is not nearly by chance that Rosen (2012), pp. 85–86 notes that “the dichotomy of the particular and the universal is especially harmful to comparative studies, law included.” 17 For such a philosophical use of the terms ‘general’ and ‘particular’, as well as ‘type’, see Lukács (1967) and, as applied to legal philosophising, Peschka (1989).
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
As to the teaching side of comparative law relative to the complex issue outlined above, the original (anonymous) proposal of the topic proposed and accepted for the program of the International Academy of Comparative Law was meant to address the difficulty in teaching to diverse—mixed—classes, where and when mere classification, inclusion/exclusion, dichotomisation, or just grouping, may make students feel offended or shocked, mostly due purely to their rather distinct self-perception of differences/oppositions and so on. As was evident in the topic’s outlining explanation offered to me in the letter of commission by the International Academy of Comparative Law, our teaching may cover issues such as what truly religious laws are, including Islamic law(s), and reaching as far as the intimate relationship between the laws of China, Japan, and Korea. Simultaneously, owing to today’s students’ heterogeneity as to their cultural background, such classes can easily foster new incentives to learn. At the same time, they may raise open questions calling for answer as well: how to involve students actively as witnesses of what is actually being taught to them? How to optimise the opportunity of having students from different backgrounds to make teaching more alive and involving? Is it efficient to ask someone, for instance, to take the floor in class and speak about the specific institution of his/her homeland as an example of a particular legal approach or technique within a given classification? What about having students interview their classmates and working together to prepare a presentation to be discussed by the rest of the group? And lastly, if not finally, are there strategies advisable by teachers with relevant practice to suggest anything to the rest of the comparatists also working in teaching institutions? The topic is quite complex in, concurrently, addressing comparative law as an academic subject and comparative law as a teaching subject with specific methods and techniques, that is, mostly theoretical issues, on the one hand, and mere educational (methodical) pragmatism, on the other. All in all, both elucidation of ontological and epistemological background claims and the highlighting of relevant teaching practices need solid foundation, possibly and preferably within the frame of a hoped-for—particular and, expectedly, sometime synthesised also as general—anthropology of order and ordering.
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Comparatio as a Field of Scholarly Activity and as a New, Comparison-Based Form of Legal Education
In cultural anthropology it has been a fundamental principle since the grounding work of Franz Boas that the task is not simply to theorise, but to locate within context18—knowing, at the same time, that each culture has its own ‘genius’, that
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is, an exclusively characteristic set of inventiveness, artfulness and originativeness in problem solving.19 Well, in a classical formulation, culture is neither more nor less than “a system of inherited conceptions expressed in symbolic forms by means of which men communicate, perpetuate, and develop their knowledge about and attitudes toward life.”20 Consequently, the knowledge of one’s own legal system “creates an implicit mono-epistemology”,21 that is, it “fixes the minds”22 specifically directed toward this—with a force, by the way, that can only be compared to the extent to which our mother tongue, our worldview and specific culture provide us with a stable background: both benchmark and framework. For—as is known—“Grand theories of comparative legal science or comparative legal studies do not change the prior epistemic embedding that has already taken place.”23 In all this, in spite of abstract constructions built in, so-called science itself is not something independent or absolute, but part of our being, our knowing self, and thus part of our community existence. And, in such a sense, it can be stated in the form (or, rather, quality and validity) of an “ontological” proposition that science itself is nothing other than “culture in culture [. . .which. . .] walks the royal road to making us.”24 For, the so-called form of life thematised by Wittgenstein25 is not a simple ancillary to our being, but part of it; it is a direct constitutive component of it. As a given, this is the basis of every cognition, because this form of life “is not true or false, nor is it a style of reasoning. It is what determines what is true-or-false” in a given community.26 In this same sense, therefore, cognising the other and teaching its fruits are in fact an experiment in epistemic transformation, “a hidden epistemic curriculum”, the task of which is to open our thinking and understanding abilities and skills to allow us to acquire other modes of thought as well, backed by other benchmarks and notional structures.27 18
Moore and Sanders (2014). Sapir (1924) as well as Varga (1992a). 20 Geertz (1973), p. 89. 21 Husa (2009), p. 914 and Husa (2018). Valcke (2004a), p. 171 has termed it as the ‘cognitive structure of law’. 22 Yntema (1958), p. 499. 23 Husa (2009), p. 918; cf. also Hunter-Henin (2019). 24 de Laet (2012), pp. 424–425. 25 Wittgenstein (1953). 26 Rouse (1987), p. 62, quoting Hacking (1982), pp. 48–66. 27 It is in this sense that Husa (2009), p. 921—taken from Constantinesco (1974), p. 15—quotes the sarcastic observation of Paul Koschaker, according to which, if not leading to a genuine understanding, that is, a “bad comparative law is worse than none” [“Schlechte Rechtsvergleichung ist schlimmer als keine.”]. This is what can be opined with unchanged critical power by critics saying that “comparative law’s orthodoxy [. . .] can only ever allow one to identify the foreign law in force rather than explain it in depth [. . .addressing. . .] the question “why?””. Glanert and Legrand (2017), p. 710. 19
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In principle, these differences could even be ephemeral, though gradual, but not just for legal cultures. Simply put, in terms of worldview and approach to any kind and mode of understanding, parallel to the ideals of human life and its reasonableness, one can conceive of cardinal differences the genuine exploration of which can only be unsuccessful when starting it from any side, since they do not even approach one another, since, simply, neither of them has—and, in historical formations, could not have had—any contact with the other. Therefore, in fact, we have no choice but to construct a philosophical abstraction out of all of Law’s underlying ideals as a legal-philosophical universality in which, at the most, all the varieties can be interpreted separately as examples of approximations and experiments made.28 In the two hundred year long process, during which the early nineteenth century French codification, success as a new gloire française, was able to inspire exegetical selfclosure in law29 and, as an antipode, the need to know the other and thereby also the cult of comparatio was, in the nineteenth century, able to engender—certainly not irrespectively of its biological, anatomical, anthropological, linguistic, and other uses, all of which was started under the aegis of the positivistic ideal of science—comparatio-based research aims transforming into educational ends, and this has only accelerated over the past few decades. Indeed, exactly half a century ago, as targets to be taught, thanks to the efforts made by the Faculté Internationale pour l’Enseignement du Droit Comparé, which began organising the Strasbourg and out-of-Strasbourg sessions, we, then students,30 could feel that national representations lectured by our professors, in parallel amongst them and in their own language, were certainly not supposed to form a comparative synthesis in the heads of their alleged masters, i.e., of our teachers, but instead, if at all, in the ones of their students. Well, just a few years ago, the Anglo–American Atlantic world still perceived nothing more ambitious in all sorts of legal comparison than the chance of an export of its own organisation,31 while foreign patterns were best described as mere “tangential and unimportant” exotic colouring.32
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In the meantime, enthusiastic planning as to the prospects for law and legal education in the European Economic Community have brought about surprising results exceeding the thematic level of what actually comparatio is. Accordingly, as the ambitious Maastricht colloquium demonstrated nearly three decades ago,33 whatever law we teach—ours or others’—it will serve as nothing but a field of exercise for the application of any—ours or others’—law in the given circle of cultures. Moreover, we can best prepare for the foreseeable variants or changes of any such laws, if we focus on their roots, that is, their common developmental identities, or, to be more precise, on Roman law and legal history as well as on their idealistic and effective social background, processed by and through ample legal philosophical and legal sociological investigations. Since the experiment of the past can in large measure (with the exception of shocks or coercive situations) foreshadow the essential frameworks of the probable movements in the present or near future, with their expectable conceptual connections involved.34 This lesson did not go away without experimentation,35 but ultimately it has been the pressure of globalisation, and in particular the massive advancement of students’ study trips which decided: with all disciplines involved, the number of participants in student mobility worldwide grew to 2.5 million by the end of the past millennium; and “by 2025 that is computed to increase to 7.2 million”.36 What is the result that we reach today? Noting that by now there is “decreasing importance of political geography or state normativity” attached to law,37 the break with the exclusivity of the Kelsenian type normativism—“The law counts only as positive law.”38—has become more decisive. This is a great achievement, although at the same time there has remained a kind of “religiously” inspired “hybris”39 actually permeating the utmost positivistic approach to law in both legal scholarship and education. All in all, students’ migration, on the one hand, and the comparative teaching of legal subjects (if not yet the express introduction of Comparative Law or Comparative Legal Cultures in the curriculum), on
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Northrop (1952, 1959), as well as Dorsey (1949, 1989–1993). This is exactly what was satirised by the very first comparative journal’s inauguration: “Les études législatives, condamnées par je ne sais quel pédantisme national à s’arrêter aux limites d’un code, n’avaient osé franchir cette démarcation imaginaire, et s’étendre dans des études générales; comme si les productions étrangères avaient été des conceptions barbares dont il fallût éviter le contact; et auxquelles on dût refuser la terre et l’eau. La France surtout doit se reprocher cette faute.” Foelix (1834), pp. 1–2. 30 As to personal experience, I took part in the Session de Printemps at Strasbourg in 1968, then in the Sessions d’Été courses held at Trento in 1970 and in Amsterdam in 1971. 31 Richardson (1988). 32 Brand and Wes Rist (2009). 29
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De Witte and Forder (1992) as well as Ancel (2013). According to a Serbian legal historian, founder of an Alan Watson institute, Avramovic (2010), pp. 20–21, “In reality, nothing is as practical, particularly in a time of rapid social and technological change, as a clear appreciation of the historical, moral and ethical principles that form the basis of the modern legal order. [. . .] The subject is now more oriented towards a better understanding of the roots of current legal doctrine and of the likely shape of future legal changes.” 35 Varga (2015). 36 Böhm et al. (2002), quoted by Maharg (2007), p. 6. 37 Jukier (2007), p. 1. 38 Kelsen (1934), p. 64. 39 Montoya (2010), p. 548, quoted by Parise (2018), para. I. 34
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
the other, have become more and more general all over the world. And what is the direct goal? This is to understand our own legal system and laws better, through symbolically “expanding” and “broadening” those ideas, conceptualities and institutions which the students themselves may have already learned as representatives of their home arrangement.40 And here we have arrived back at Paul Koschaker’s bitter outburst, demanding nothing but “good comparison”, just in order to reassert it.41 Because the stake is not merely a matter of factuality in taking the cognisance of the other as different, but the very intellectual—and I dare to say, transubstantiating—act of “recognizing the other [. . .] in its own right”.42 In this process, operations with “distancing/ differencing [. . .] encompass the willingness and capability to cope with preconceptions and stereotypes, biases and rationalist assumptions that fall within the analytical framework and normative matrix of one’s own (legal) education and experience.”43 In a more straightforward way, it might yet again simply mean that law is rooted in culture, and the law’s actual meaning can at any time be unfolded from its own cultural contexture exclusively. And this assessment is not only a foundation stone of legal comparativism; what is more, it provides the master key to the philosophical understanding of legal phenomenon itself, too.44 This can only mean, therefore, the observation of the other as shaped under circumstances differing from the observer’s stand, and its understanding in its specific autochthony. This is what comparative literature is used to express, with the purpose “to compare and assess the different understandings”.45 This naturally includes the processing of all the relevant cultural backgrounds and environments in order “to embed the black-letter rules within a web of beliefs, ideals, choices, desires, interests, justifications, principles, techniques, reasons, and assumptions. The hope is [. . .] to understand the legal system from within”.46 Or, arguing—alongside Varga’s example47—by contrasting Comparative Law and Comparative Legal Cultures as disciplines to one another, the latter, as opposed to the “decontextualised picture” of the former, offers “the multitextuality of the legal cultures”, so practically, the “entire contextual matrix in which the state law operates”.48 In this way, the authors just cited evoked the 40 Juergensmeyer (2016). Or, in a most simplified formulation, “to understand the familiar and move from”. Jamal (2019), section 4. 41 Cf. note 11. 42 Frankenberg (2016), p. 6. 43 Ibid., 83. 44 Varga (2012c). 45 Parise (2018), para. III/B. 46 Ewald (1994–1995), p. 1948. Or, as summarised by Valcke (2004b), p. 717, “law is more than just the sum of its facts [. . .]. Law is also [. . .] the ideas that underlie, animate, and tie these facts together”. 47 Varga (1992b).
7
law itself in its entirety, rather than as law reduced to its mere skeleton or positivistic surface. After all, as their reasoning continued—recalling the creed of their classical ancestor Montesquieu: “It is not the body of laws that I am looking for, but their soul!”49—“a living body of law is not a collection of doctrines, rules, terms and phrases. It is not a dictionary, but a culture; and it has to be approached as such.”50 Well, in order to induce that inner understanding, comparatio seems indeed to be one of the best available means in education. For, as we have seen, the bridging of the gap between epistemic self-centredness and some kind of strangeness as an outer object is referred to here again, as the paradox of “I interpret your culture through my culture”; and, “in Comparative Law, confrontation is itself a purpose.”51 In this, whatever A and its variations are, the artificially posited dichotomy between any A and non-A are firmly formulated.52 For “We know who we are only when we know who we are not and often only when we know whom we are against”.53 Of course, the problematic side of anything versus anything else can even gain a dramatic overtone, especially when it is realised that something of our own heritage and something else from a heritage pointedly contemned and repudiated by us are, on final analysis, the same—at least and last in one or another sense.54 48 Puchalska-Tych and Salter (1996), p. 181. It is to be remembered here that, for instance, in the plenary speech (Varga 1989) held at the International Association for the Philosophy of Law and Social Philosophy world congress at Edinburgh in 1989, whilst developing an ontological exposition of law, I described its Soviet-type simulacrum, called Socialist law at the time and regarded as an independent legal family, as a ‘wreck law’ from the beginning, featuring—and based upon—something of a differing ontology, since, being overtly and directly a political instrument; also in its textuality it was a lie, or a deceptive form throughout. 49 Montesquieu (1951), p. 1025: “Ce n’est point le corps des lois que je cherche, mais leur âme.” 50 Puchalska-Tych and Salter (1996), pp. 181–183. 51 Fachin (2018), Part I. 52 The separation or separability of these is certainly not clear (Legrand 2003). Especially in American literature, authors are used to calling for so-called canons as well, often narratively, without genuine definition. According to Balkin and Levinson (2000), p. 9, “Every discipline, because it is a discipline, has a canon, a set of standard texts, approaches, problems, examples, or stories that its members repeatedly employ or invoke, and which help define the discipline as a discipline.” 53 Huntington (1996), p. 21. 54 Adding to a politicising fallacy concerning what kind of quality or qualification may be the result of a comparatio manifestly to be drawn, I found a fresh example in Whitman (2017), outlining the international historical debate on the far-off effects of American racial legislation— making, in facing relevant issues at its time, the United States the leading nation in the world—in a specific relationship with the National Socialist legislation at Nuremberg, having exerted a kind of influence without any doubt and in a documentable way, which was at the same time a kind of reinforcing, one related to both the suggesting of tools and serving with the practical experience of the use of certain instruments. It was the essence of this debate that such a situation was dreaded and horrified (in the vision of a final fight between some theus and antitheus, or
8
It is to be noted, however, that the objects of such confrontation are not artificial formations, analogous to abstract geometric or mathematical forms projected or proposed, but living cultures, orderly accomplishments, that is, living and moving ordo-ideals of humans’ societies, serving as a framework for peoples’ thinking, each of them having developed differently—having come from something ingeniously different in the raw—in order to respond to differing challenges, and thus becoming endowed with different skills, sensitivities, and conceptualities within itself. Therefore, as autochthonous formations, they are not strictly commensurable to each other; consequently, they cannot even be classified in the proper (strict) sense, only taxonomised into large(r) groups.55 Considering the fact that “Comparing legal systems is like comparing different “world views”.”, we actually put different modes of thought into a kind of common hat of intellectual understanding, and, to do this, obviously—as an intermediate mediation—a “mutually shared [. . .] common language is necessary”.56 Thereby— since “The goal of legal education is summarised as “learning to think like a lawyer”.”57—one would need to imitate a most notorious act of Baron Münchhausen, the impossible act of raising oneself by oneself,58 because, at least in the spirit of understanding and the ability to demonstrate the corresponding procedure, each of the subsequent steps, at its higher and higher levels, presupposes some kind of a presumed synthesis, in which independent beings and views and institutions developed from them are incorporated. The comparatio is performed by and for us, so that we can sense and perceive all that is ours—involving ourselves— more accurately, and backlit. Thereby, at the same time, we open up learning opportunities and draw lessons in all relevant directions.59 Simultaneously, surpassing the selflimitation of positivism which can reduce law to a kind of angelus and diabolus) while rejecting even the imaginability of there having been any genuine legal effect or some near-to-borrow situation. 55 Varga (2010a). 56 Fachin (2018), part I. 57 Hunter-Henin (2018), para. 3.b. In my own use, while arguing repeatedly for the appropriate weigh to be given also to theoretical and historical legal subjects in the curriculum, this expression is clearly a confirmation of the above mentioned Maastricht Conference conclusion, notably, that priority in the educational process should be granted—instead of the changing terms of “What does the law think?”—to answering and teaching the issue of “How do you think like a lawyer?”. In international literature, however, this fine term is often updated to a lesser extent by mere propedeutics, as in case of Schauer (2009). A variation to the above is offered by Ewald (1994–1995), p. 2111, concluding with the quote: “what we need to understand is the ideas and the reasons for the behaviour. In other words, it seems that what we need to understand is neither law in books nor law in action, but law in minds.” 58 Who, among others, “saves himself from drowning by pulling on his own hair” (). 59 Heringa (2013), p. 107.
C. Varga
self-entity, we perceive again the pertinent roots and various human intellects backing the law, in a vista of incomparability characteristic of phenomena produced by culture and tradition, as if we were perhaps transcending the disciplinary borders and level of Comparative Law, in order to redirect ourselves towards Comparative Legal Cultures.60 So what is the current goal? Perhaps, it is to encourage “students [to be] able to construct their own legal understanding from various competing and overlapping sources.”61 Well, providing we take this in a technical sense, as fingerwork or exercise for the mind, then the task can certainly be expressed in this manner as well. For me personally, I find it more adequate and complete, and more faithful to what the true devotion to comparatio is, to say that this goal is no less than realising the relative and both contingent and humanely fallible character of our own solution, being one among the many concurring alternatives, when the one in question is assessed in the backlight of others’ other responses to a similar challenge.62 Or, this equates to how we can reaffirm that there are “no right or simple answers”; we may always dispose of “a multitude of formal materials [. . .] as hypotheses of appropriate legal responses to the common problems people faces.”63 “Multiculturalism—as stated rightly64—offers diversity to the classroom, while comparative law offers a forum where contrast can be perceived”. Perhaps the biggest direct advantage of this is that it promises “escape from the arid past of comparative law”65 and it offers a natural course for some tacit interaction amongst understandings,66 that is, an overall 60
Glenn (2000). Husa (2009). 62 Or, as formulated a quarter of a century ago, “The comparative study of law is not to be seen as a mere juxtaposition of discrete legal cultures. Rather it is a medium for undermining the pretensions of any tradition claiming to represent eternal verities rather than historical contingencies.” Varga (1992b), p. xx. As a practicing French lawyer—Lepaulle (1922), p. 858—thanking his complete understanding of his own law for having in the meantime studied another law, ponders the need of the “sense of relativity” after having experienced that “To see things in their true light, we must see them from a certain distance, as strangers”, because “Where one is immersed in his own law, in his own country, unable to see things from without, he has a psychologically unavoidable tendency to consider as natural, as necessary, as given by God, things which are simply due to historical accident or temporary social situations.” 63 Jukier (2007), p. 3. 64 Parise (2018), para. III. 65 Samuel (2014), p. 36. 66 Thiessen (2018), ch. B recalls antecedants of multicultural legal classes in parts of Europe, learning and developing the once ius commune from the sixteenth century onwards, revealing that “Roman law itself changed due to the input of multicultural students, who eventually became scholars, lawyers or judges themselves.” As he continues in ch. D, today a similar multipolarity in interactions characterises the countries belonging to the European Union, where its law, as a graduate study, an apparently single subject, is taught, on the one hand, but this 61
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
interplay between ‘having a meaning’ and ‘giving a meaning’.67 With such a perspective, in principle, the situation with multicultural legal classes is practically the same as the one in place with multicultural legal cases68: formal law is being no more than just a first and prime guidance, the actual direction will be channelled and/or detailed by many other factors and circumstances. This is already reflected in the language of the law. A part or branch of the general language of the given community at any given time, the language of law functions and develops as a professional variation to the language in general use. The multiple embeddedness of the language of law into the population’s general language and the law’s technicalities is hidden, to a large extent, successfully, thanks to the utmost formalism of and abstraction in terms and designations used, and, last but not least, also relative to the familiarity we feel when we use our mother tongue. At the same time, legal language is far and away not simply “a sub-system of a national language, consisting of legal terms and phrases and stable conventions for the formulation of legal texts. Moreover, as the collective memory of the lawyers of that system, storing, over many generations, the experience, habits, and world-views of the legal community in question.”69 With their styles, implied mentality, and the way they generate and give form to ideas, all languages are also unique.70 Or, the language used by law is nothing other than the visible body of the law. This is why, despite seven decades of legal cooperation, the fruits which have been reaped from the standing—legal and political—efforts at building the community of the European Union are, according to the just cited scholarly analyst, not yet a “common legal language” but represent “legal discourse” at the most, which can exclusively be considered “common” in so far as it is indeed factually “inter-lingual and cross-cultural”.71 The legal classroom itself has become a site of legal plurality through the overlap and interactions between the subject is understood in manners varying from nation to nation, on the other. This exemplification is, however, somewhat misleading. The multiculturalism it refers to is not even nearly the one meant by the present topic. At the same time, the genuine truism it sensitively covers draws us back to the basic autopoiesis backing all human commerce, i.e., exchange of meaning-and-understanding ventures, in general. As to the second example, it is specific in so far as its operation takes place in a bipolar structure from the beginning, given as the foundational setting of European law. Varga (2009). 67 Perelman (1962) as well as Varga (1973). 68 Van Rossum (2008), Foblets and Dundes Renteln (2009), Kuo (2018) and Songor (2018). 69 Kjær (2014), pp. 387–388. 70 In addition to the sanctified nature of some (e.g., Hebrew, Latin, etc.) languages, the in-built genius itself is praised by Dauzat (1943). However, this all gets lost in translation together with their own structures and ways of reasoning. Pozzo (2012), p. 102. 71 Kjær (2014), pp. 393 & 397.
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different types of legal experiences, cultures, conceptions and orders that the students bring with them. Comparative legal teaching that includes the exploration and understanding of the full spectrum of the “distinctively legal”72 with all its social implication involved, also has to offer an overview, as many demand, of the interplay among transnational relationships, the interaction with other fields, as well as the interpretation adapted to new situations to be gestated in a globalised social context, while being aware of other ways that regulate human behaviour, too.73 In short, as the author continues, it has to take on the form of law students’ preparation to become lawyers sans frontières.74 On the one hand, and owing to this, “the legal classroom itself becomes a site of legal plurality through the overlap and interactions between the different types of legal experiences, cultures, conceptions and orders that the students bring with them.”75 On the other hand, these arenas create different priorities in each of the underlying and/or relevant areas— according to “(1) religion/ethics/values; (2) socio-cultural norms and socio-economic arrangements; (3) state-centric laws of different kinds and the political arrangements sustaining them; and (4) various forms of international law and norms that claim predominance in today’s world.”76—as to exactly what of them and how is, from all of those autochthonous cultures, believed and lived as a sacred and non-profane identity core, that is, beyond mere acknowledgment, what of them and how is debatable if it may be debated at all.77 Scholarly literature, of course, goes far beyond this, and sometimes it launches global law teaching directly,78 destined to become just a preparatory “for global citizenship”.79 Or, transnationalisation of education80 serves as the means of the “globalisation of the mind”,81 taken as an instrument of 72
Selznick (1968). This global interplay may explain why, by now, all legal systems have become “both partners and competitors” to all others. Auby (2017), p. 143. 74 Parise (2018), para. I. There is a delusive nominal resemblence to the cosmopolitan movement of the Belgian-initiated Avocats Sans Frontières (1992) and the American-initiated Lawyers Without Borders (2003), pressing rule of law agendas on various elements of human rights respectively. 75 Hunter-Henin (2018), [introduction]; cf. Hunter-Henin (2019), section 2. 76 Hunter-Henin (2019), section 2.1. 77 Part of such practices is teaching, e.g., the innu legal order under the flag of “décoloniser l’enseignement”, certainly an increasingly general trend now in countries with heritage of indigeneous people(s). Fathally (2018), para. I/B/ii. 78 Ost and van Hoecke (2000); Pollock (1890), p. 108: quote by Valcke (2004a), p. 180, note 64. 79 Smits (2011). 80 Reisman (1996). 81 Blanc-Jouvan (2008), p. 1084. 73
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hegemonising efforts. Such hegemonistic attitudes (or sometimes mere longings) may span from the dangerously self-deceptive feeling of superiority over others, characteristic of any kind of “missionary approach”, to the pressure of a “geopolitical standpoint”, which latter in today’s globalising world indeed occurs, and not exceptionally.82 Inasmuch as we give trust to the characterisation according to which [W]e have moved from a perception of a palette of disparate and “sovereign” systems tangentially connected to the perception of a single underlying system or structure [. . .]. Although we still speak and think in terms of sovereignty and think primarily up-from-sovereignty, that view no longer represents a reality where the interconnections, correspondence, collaboration and so forth between systems is so intense that there is in fact only one, global system.,83
then the one above testifies to sober realism. However, discussing it would already surpass the scope of the present topic. However, it should be emphasised that comparatio has more than just a horizontal plane: i.e., a comparison of independent phenomena; but there is also a vertical plane: the comparison of different temporal states of something regarded as one single phenomenon. In addition, studying both is equally indispensable for any understanding beyond the surface and from a point of view irreducible one to the other. For we may learn from the other that ours is not necessarily the best of the possible worlds,84 that is, all human constructions do (or can) have alternatives. From the forebear of the self, however, we can learn how it was from yesterday morning to later yesterday and then to this morning; that is to say, what kind of further moves can be borne by the survival of its self-identity preserved in/through/against continued change and what kind of logic it operates. It is a 82
Hupper (2015), p. 424; Varga (2007a). In such a context, attention is also due to one of the new layers— degeneration—of today’s practice of international relations. “In international relations—holds, for instance, the publisher’s launching of Badie (2017)—some states often deny the legal status of others, stigmatising their practices or even their culture. Such acts of deliberate humiliation at the diplomatic level are common occurrences in modern diplomacy. In the period following the breakup of the famous ‘Concert of Europe’, many kinds of club-based diplomacy have been tried, all falling short of anything like inclusive multilateralism. Examples of this effort include the G7, G8, G20 and even the P5. Such ‘contact groups’ are put forward as if they were actual ruling institutions, endowed with the power to exclude and marginalise. Today, the effect of such acts of humiliation is to reveal the international system’s limits and its lack of diplomatic effectiveness. The use of humiliation as a regular diplomatic action steadily erodes the power of the international system. These actions appear to be the result of a botched mixture of a colonial past, a failed decolonisation, a mistaken vision of globalisation and a very dangerous post-bipolar reconstruction.” 83 Hiscock and Van Caenegem (2010), p. 288. 84 As, e.g., Leibniz (1710) may have arrived at such a constatation from his theological teleology: “le meilleur des mondes possibles”. Caro (2014).
sign of our over-politicised present and the overwhelming pressure by the driving forces of globalisation (alongside the latter’s unavoidable insensitivity to the natural course of organic development), if our debates continue to force the former approach in their thematisation; although solid security with some tested foundation can only be hoped for from their unity, namely, the comparative historical approach.85
4
Centrality of Self-Image, or Our Own Place in the World
It is commonplace in science that reality exists as one totality throughout; its way of being is process-like; and all that take part and are involved in it develop from and through interactions, that is, any of its particles gain their basic definition by the networking nature of the place it is positioned in within and by this totality. However, on the one hand, with its operational moves comparatio seems to transcend such a contexture, since it has—as part of the analysis of the overall totality and for the sake of comparability—to posit or hypothesise the subject of analysis as an independent existential entity, identical with an own self; moreover, it needs to be considered both in light of the law’s process-like character and the position it occupies in the total social process any time, to be seen as (as if reduced to) a reified entity. On the other hand, culture as a humanly made “second nature” is a predominantly virtual world, a product of intellectual and conceptual projections. Providing we are comparing them, the creatures of culture-holders as creators, that is, certain I and We shall be compared with the creatures of some single and plural You. This is again a motive to reassert that we resort to comparison in order to gain a functionally and relationally (contextually) deeper picture of ourselves, after we have somehow understood others through an overall confrontation. Apparently, we earlier set (in vain) that, as a scholarly activity, comparatio iuris raises in principle the same cognitive issues as the teaching of its results, since in the latter, the problematic situations that are actually emerging are less due to purely epistemic barriers than simply to the youth of the auditory element, composed of beginners, uninitiated yet into the knowledge in question86; moreover, the young people we 85 Pringsheim’s classical observation—(1961), p. 78—according to which “comparative law without the history of law is an impossible task” can be interpreted in this sense and manner as well. 86 The best approach to “initiation” is just to make students active under the teacher’s supervision in a manner such that they themselves can arrive at their own problem-solving, thanks to their own intellectual efforts, and thereby they may acquire the skill and knowledge in question with internal conviction, instead of a merely passive listening to or reading that which is taught ex cathedra to them. As to my personal endeavour, I have been working for a quarter of a century towards free-choice small group seminars on topics treated upon
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
seek to teach have not even really acquired their domestic law as a basis for comparison; for what they have already learned is rather the surface, i.e., dominant key terminology and institutions, instead of the philosophical depth of its ideals and attempts at implementation. Thus, a huge proportion of the situations to be answered will require, I guess, a purely pedagogical response,87 since the solution is presumably largely dependent on how much the tutor and the educational material and method(s) offered can be convincing and enthralling in the specific situation. As a result of worldwide internationalisation, the number and quality of educational institutions where the subject, object, and target community of education are at least partially multicultural have, in the meantime, grown to a considerable extent.88 This, however, does not change the general finding that even today’s overall panorama proves to bear witness to provincialism89; neither does challenge the fact that the interest in the other, if present at all, is mainly due to the openness typical of European continental countries towards the Common Law, a readiness of understanding which, in the opposite direction, is less common practice.90 In other words, comparatio in legal education, either looking back to historical evolution or overviewing the variety of legal systems is not yet generally widespread across today’s world map. In our worldwide internationalising community, the transition we see in the teaching agenda, for instance, is indicated by semi-solutions where only national law is taught (with neither adaptation nor teaching material available in any universal language) in a national language hardly reaching beyond the given region; moreover, under conditions where both the staff and audience are in no way familiarised with any intermediate language.91 the basis of the students’ own reading and debating a series of relevant papers from week to week. Students are only allowed to take part in these provided that they have actually studied the literature in question; one or two randomly selected students expostulate the subject in the light of their own critical or forward-looking perspectives, or with rather problem-oriented insights; and then each participant has his/her own turn to intervene in succession; and it is only then that I have my own turn, reflecting on what has been told or revisiting concepts if the students seem not to have noted them. After that, the issues are still open to debate for one and a half hours, with half a dozen or a dozen of students Q&A-ing the topic, moderated by me if necessary. It is so successful that even after decades, former participants are grateful for these intellectual and memorable experiences. Today’s literature mostly recommends small group collective presentation; cf., e.g., Jarvis (2014). 87 Cf. in depth Petersen (2020) as well as Värv (2020) in the volume, Part II. 88 Fathally (2018). 89 This is named ‘parochialism’ by Jamin and van Caenegem (2016), p. 15. 90 This one-way process is named ‘commonlawisation’ by Jamin and van Caenegem (2016), p. 19. 91 Mercescu (2018).
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(But if that is what it is, it is already a result. I remember the time when having won, with the lead of my friend, Professor Nico Roos of the Maastricht law faculty, the European Economic Community TEMPUS project in 1990,92 I visited our Western European partners in the first round. Even for me, caught on the other side of the wall erected by the Cold War and destined to ideological Gleichschaltung by alleged proletarian dictatorship for nearly half a century, it was simply shocking to realise that I could find so little English and, besides, scant foreign literature in smaller university libraries far from the capital centres of France and French-speaking countries compared to, e.g., in the Romania of Nikolae Ceauşescu, a country profoundly destroyed spiritually and financially at the time.)
A quarter of a century ago, the Maastricht conference suggested that in point of principle it does not matter what national law within continental European legal education is based on, because with all its positivistic superstructure, it will only serve as a field for exercise, and the conceivable directions and paths of further development would equally be detectable from the same body of experience gained over centuries of a common past. Well, for the teaching (with professional follow-up) of any foreign law as basic curriculum, there is hardly any practical example nowadays, except in branches of some of the biggest—mostly American— educational institutions worldwide. As an experiment, successful by the way, I elaborated and brought to fruition a program in Budapest, after Pázmány Péter Catholic University and its Law Faculty had been founded just following the fall of Communism, subject to term and final examinations as well, centred upon domestic and universal legal development with its varied background ethoses, in the form of teaching Philosophy of Law also involving legal sociological, anthropological and methodological (i.e., juristic methods) perspectives,93 and followed by Comparative Legal Cultures, planned for the first nine terms subsequently.94 A few years later when colleagues in practical lawyering expanded upon their positivistic subjects to gain more terrain, the rather fortunate encounter—or even a kind of direct merging—of Comparative Legal Cultures with the backgrounding Philosophy of Law was also to find a justification. The latter has from the beginning examined the underlying world view, the respective concept of order and the conceptual build-up of each legal system or culture examined, with the regulatory framework required by it, as 92
TEMPUS Project No. 02114/1991–1994, with a network of some twenty-five European Economic Community universities in the background. 93 Varga (2010c). 94 It was an interesting lesson for me to follow the way of, for example, Professor Marie Sandström (1989, 2004) of the University of Stockholm who, responding to new educational challenges, changed from legal history proper (centred on positivistic description of the historical sequence of institutions mainly) to tracking the historical (intellectual) evolution of legal methodology, in order to save the value of historical investigations, setting it up as a new field of educational interest.
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well as the instrumentality assigned to it, and all of this was approached from the specific (local) ingenuity and ordoideal, characteristic of both past and contemporary cultures.95 In this sense it was intended plainly to promote a truly universal philosophy of law based upon the strands of social philosophy and theory, already detached from the narrowness of legal philosophising reduced to nationally and/or culturally set boundaries, inherited as the legacy of nineteenth century positivism.96
5
The Problem of Legal Families
The primary encounter with the other, the outside, or the stranger, brings us into contact with a different legal culture97 anyhow, and this is usually referred to in the context of belonging to a given ‘legal family’, once the world’s known legal systems have been grouped or taxonomised.98 So this is what the primary terrain and source of problematising on the quest of “challenge or opportunity” can be.99 95
Varga (2010a). As noted in a previously unpublished paper by your author around 1973—Varga (2001)—, the subjects of so-called “general theory of law”—contradictio in adiecto in itself, but cultivated particularly in the once Soviet-dominated world—are usually general within the given domestic law’s panoramic view exclusively, totally ignoring the rest of the world. 97 In my friendly conversation with H. Patrick Glenn at the 2002 Brussels Conference on Epistemology and Methodology of Comparative Law, he criticised my titling of my lecture using the expression ’legal culture’, claiming this not to be seen as correct in American usage. As he explained, the very word ‘culture’ (1) is rooted in German romanticism, which has become suspect, i.e., something is inherently wrong in terms of the influence it exerted on National Socialism; (2) is divisive, because by differentiating sides that turn out to be polarised, it is disintegrative; and (3) is unnecessary, as it does not express more than one aspect of ‘legal tradition’. I could only respond here that (1) the term is known to me as Voltaire’s teaching in Candide’s end-message, rooted in cultīvāre from colere/cultus (Abdi 2014); (2) ‘legal cultures’ and ‘legal traditions’ are not synonyms but cover differing directions/contents; because (3) ‘culture’ is within the womb of that which we interpret as ourselves and our world, whereas ‘tradition’ is only one form of culture, the one in and for which the past has strong significance for the acceptance—or, obliquely, the justification—of any direction/contents taken. As to the original presentations, see Glenn (2004) and Varga (2007b). As to mere etymological formation, the English culture in “[a] figurative sense of ‘cultivation through education’ is first attested c. 1500. Meaning ‘the intellectual side of civilization’ this being from 1805; that of ‘collective customs and achievements of a people’ is from 1867.” At the same time, as transformed into English from German, kultur, as spelled then, stood, in “1914, originally, [for] ‘ideals of civilization as conceived by the Germans,’ [as] a word from the First World War and in English always at first ironic” (). 98 Dölemeyer (2010), p. 32, notes that such grouping is anyhow difficult, because both its object and taxonomisation are in a “constant flux”. Even though this is true, the root cause lies in the uncommensurability of the series of othernesses shown by the underlying phenomena of autochthonistic independence from each other. Varga (2012d) and Schenk (2013). 96
Criticism seems to be the lightest genre in today’s fiery flood of publications—especially now, when, on the one hand, based on e-literature we see on the web thanks to computerised writing technologies, it is easier to produce scholarly papers which, on the other hand, are produced en masse (thanks to IT systems required by production technologies, which, as a requirement, have been brought in by the ever increasing number of American-styled institutions of academia and universitas all over the world)—, particularly when it may also be considered that the object of criticism in the legal field may have no real object that could be defined like a physical object on a factual basis. For the object of our scholarly interest is a thought projection itself, and there is a rather large spectrum of varieties in—and according to—which the practically infinitely producible sets of such projections can be categorised almost freely. Consequently, out of all their components, there is no one that could qualify as superior or unjudgeable in relationship to any other; the benefit of each legal order or specific legal institution can only be taken as relative; and, on the ultimate analysis, for that we taxonomise some—mostly developmental—correlations and the ensuing and mostly technique-related—mostly functional—connections can be made to be observable with kinds of family resemblances, that is, in a didactic manner, more obviously and more convincingly.100 Well, it is fashionable today for a number of authors to regard categorisation according to legal families as obsolete,101 or misleading from the very start,102 perhaps claiming that, all that notwithstanding, it may have kept some didactic benefits at the most,103 which must be critically considered,104 though, for want of anything better, its use can perhaps be pro tempore continued.105 Here, too, as everywhere and anywhere in the evolution of scientific thought, at first it was those criticisms which were granted some correctional acknowledgment, which could be 99
Ferreri (2020), section 2. Varga (2010b). 101 Gordley (1993), Richard (2007), Spamann (2009), Pargendler (2012), Garoupa and Pargendler (2014), Siems (2018), p. 110. 102 Twining (2009), ch. 3, 63–87, reviewing the entire literary spectrum, evaluates the idea of Woodman (2003) on how the whole business falls to pieces at the very first moment because, he says, it is based on legal centralism, a characteristic property of one of the two hemispheres, the so-called West only. However, its reconsideration by Woodman and Bavinck (2009) makes it clear that the controversy is far from the issue of legal families; it is an effort to introduce a broad anthropological notion of law, dissolved by the proponents of legal pluralism in all-inclusive social normativity. Cf., e.g., Varga (2010d). 103 David (1964) as well as Zweigert and Kötz (1998). 104 Legrand (1996); Twining (2000), ch. 5, 163–168; Glenn (2001) and Kennedy (2003). 105 Kötz (1998). 100
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
justified as exceptions in a defendable and separable way. But as an ordinary course of the process getting slowly overwhelmed by the critical impetus, step by step, it started transforming into a self-destruction of all its original performance, mutating into something of a mass of indefinite chains of grades which once used to have some intelligible definite message. Because of the mixed origins and affinities of the legal systems, it is the acceptance of everything mixed/ mixing with the tireless furthering of the initial findings into more and more nuanced grades which is today’s clear fashion,106 about which we are by now aware that there is no— and the more we observe legal development from a distance and the more microscopic depths we perceive in it, cannot even be—exception to them. Accordingly, the criticism of criticism seems to be justified this way. Or even more so, since “The widening of the class of mixed systems, however, risks hiding or obliteration of distinctive features that help students to identify the characteristics of various traditions and determine the extent of borrowings or transplantations between systems that have occurred over time.”107 What this means to us here and now is that having arrived at the truism of stating that for want of original intrinsic arche-ancestors, everything as much as everything else would be equally mixed and mixing.108 So, alongside the desire to seek reasonability (all that notwithstanding), at the end of the path taken we have either to bring something back from the term of ‘legal families’ or we will fall into an amorphous chaos arising from how all relevant entities are both undistinguished in fact and undistinguishable in principle. Well, as a concrete educational problem raised, we may learn that, for instance, students from East Asia learning in Japan find the Davidian “4. Other systems [. . .] (2) Far East (Chinese law/Japanese law)” specimen of grouping, merging two giant historical blocks with one another, as strikingly Eurocentric and unintelligibly imprecise109; therefore, a “mixed legal migration” (instead of “legal families”) type of representation is found as more explanatory, alongside so-called “family trees” standing for loose relationships.110 Here, of course, we may even venture to presume that today’s introductory use of such a Davidian taxonomic scheme— born in the Cold War era half a century earlier, though featuring classical pioneering significance for orientation in Western Europe and the Atlantic world at its time—as offered to Far-Eastern youngsters, at that time meeting anything genuinely and strangely foreign the first time in their 106
Palmer (2001) as well as Örücü (2007, 2008). Ferreri (2020), section 2. 108 Which in itself is not the same as Alan Watson’s theory (Varga 1979). His classical work (1974) may have been foreseen by Lowie’s—(1920), p. 441—observation, stating that “cultures develop mainly through borrowings due to chance contacts”. 109 Aoki (2020), section 4.1, as well as Ferreri (2020), section 4. 110 Aoki (2020), section 4.1, with reference to David (1964). 107
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life, may have been nothing but a provocation with a straightforward pedagogical sense: a provocation of interest in making them discuss who they are and where they live on the globe.111 All the more interesting is that the local— indeed, Japanese—initiative to replace this Davidian scheme is hardly different from this; it is just a bit more articulated. I am referring here to the construction of the “East Asian legal family”, including Japan, China, Taiwan, and South Korea.112 According to its author, the common denominators are the German Civil Code as received; the geographical neighbourhood being uniquely rice fields; the effect of Confucianism; as well as the Chinese characters used in writing. However, the same author points out that “the People’s Republic of China has a radically different political regime from other countries, which requires us to be aware of the difference in the definition of the concept of “law” itself.”, and that several institutions of the last two countries on the country list above are unknown in the first two—and besides, there is little confidence in the impartiality of the judiciary in South Korea. It also may prove to be equally sensitive to teach other traditions, ones far from Western culture,113 such as India’s highly differentiated complexity, which is not at all easy to follow for any outsider, and which may be capable of causing either harm or resentment amongst any group related to them. And likewise, the same caution is needed when Jewish or Islamic sources of law are taught, with the complexity of religious sources illustrated, or when the multiple layers of, e.g., Turkish family law are analysed.114 Theoretically, this primarily implies that always finding the mean, the common denominator, is the hardest job for any grouping. The more general it is, the less it has to say; and the more specific, the more exceptions, perhaps ending eventually in the self-emptying of the framework it has once set. Personally, I have not encountered such difficulties myself. Perhaps because I have avoided discussing the many past and present legal cultures reviewed according to pedantically lined up classificatory categories or series of 111
As confirmed by Hitoshi Aoki, national reporter from Japan, professor at Hitotsubashi University in Tokyo, in his e-mail to the author on February 13, 2018. 112 Igarashi (2003). Cf. also Aoki (2020), section 4.1, as well as Dölemeyer (2010). 113 It should be noted here that not even the realm of Civil Law as a legal family is necessarily unproblematic either. E.g., Mańko (2018), relating to our region and in replacement of the defunct Socialist legal family, separately proposes two independent families, a Central European one and an Eastern European (Eurasian) one. However, I doubt that anything like that could advantageously override the longstanding dualism of Civil Law and Common Law. At the most, and meaningfully, they could perhaps serve as sub-variants within the former, obviously far from being exclusive for possible subgrouping. 114 Ferreri (2020), section 4, note 26, referring to Sen (2005), Amin (1987), and Örücü (2006).
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questions, held universal as catalogued with an abstract systemic outlook from the very start, but I tried explaining them in order to offer an opportunity for philosophising on their respective ideals of ordo and their attempts at practical realisation.115 Or, most importantly for me, the discipline of Comparative Legal Cultures has never been understood as just a series of responses to a previously codified list of questions,116 but as the ever continuing questing for building blocks or structuring components—such as intent at embodying or just exemplifying the law, its conceptuality, systemic nature and internal logic (if at all), and justification procedure and so on—all of which may specify the particularly own genuineness of any given legal culture, contra-distinguished from all others. So, no strange situation like this can occur any longer when René David, for instance, questions Common Law with the rigor in line with a system of the sources of law characteristic of Civil Law,117 nor especially when those educated in the spirit of so-called Socialist normativism have been close to presuming legal uncertainty in any place where anything which in their own local order or home culture is identified as law is not then a closed system of posited rules, drafted in abstract conceptuality.118 And if— instead of operating with taxonomic categories, generalised to each and every occurrence and thereby unavoidably denaturing the similia’s total sets—we bring ourselves close to mapping the variety of laws via differing human mentalities in how they are to secure ordo in society, that is, again from a legal-philosophical standpoint; then we will be staggered, also through making our students staggered in the realisation that: each one is something other; and moreover, each and every one of them may have the potential of promoting and securing social order effectively in its own way, and in a manner considered fair and just according to its own social arrangement. And what is most important for an all-inclusive social theorisation: we are speaking about phenomena that have their own lives within and which are factors of societies in constant change, therefore they cannot 115
Paradoxically, the original idea to develop this search from the considerations above was given to me by the same David (1969). 116 Interestingly, this is exactly what René David’s classic work has done in processing his materials, albeit, as an infinitely sympathetic starting point, he himself also confessed that “Quoi qu’il en soit, je me méfie instinctivement des systèmes, des vues de théoriciens, de la pseudo-science. Il n’y a pas pour moi de modèle qui convienne à tous et en tous les temps; je hais tous ce qui est dogmatique, l’esprit de système et le fanatisme.” David (1982), p. 10. 117 This was not only the case with René David, but this was, too, about the disfiguring of the politically motivated Soviet-type Cold War denouncement of what was then called “American Fascism”, also filtering into legal historical and theoretical approaches. E.g., Eörsi (1953) and Peschka (1965); for the criticism of their misunderstanding of the very nature of law in Common Law tradition, Varga (1970). 118 Cf. Varga (1992b, 2013).
C. Varga
be aligned into an order of succession—neither in linearity, nor in verticality. Considering that each one is born of an unmistakably different own medium,119 and—this being the most important element of an ultimate anthropological truth—none can be ranked compared to the other, because, in functionality, each one can perfectly fit its own conditions. In addition, so-called primitive (in the sense of ’primeval’)120—legal ethnography and anthropology, especially the ones dedicated to autochthon or tribal laws, have it as one of most telling messages—can, in their own way, feature just as differentiated and complex a construction as modern societies’ technical complications do.121 Therefore, the genuine assessment of individual legal cultures can properly be made primarily within their own sphere only. It does not make any difference whether I am speaking about once-upon-a-time autochthony or today’s tribal law, relevant histories of China, Japan or Korea, classical Jewish or Islamic perceptions of the law, nor about paths leading from ancient Greece to Rome and to its republican and imperial epochs, and thence to the Middle Ages and customary legal arrangement, as well as the Continental European development (including transitions like the exegetic period, the fermentation by free-law movement, then the series of codification and recodification); nor latterly about the English–American one involving the historical variations from writs to precedents alongside historical attempts at codification and substitutive forms nowadays. The panoramic view of all cases will be the unanimous praise of human ingenuity as a fascinating example of the beauty and truth of what the adage varietas delectat stands for. For, from the huge bulk of various cultures, the imaginative and functional variety of ordo-ideals becomes exemplified in the teaching I have offered, where such traits are highlighted in any instantial case and through which exactly their own ingeniousness is expressed. For a joint, interrelated discussion in the program, perhaps as influenced by my own professional interest as well, it is only the role of logic in law, on the one hand, and of language, on the other, that are now examined with particular attention, in the latter direction with words used to simply denote or used as abstract conceptual-systemic loci, surveyed especially from 119
What is going to happen if you are to have a mass of borrowing? When, after the collapse of Communism, Hungary had already overcome a number of legal impositions that had started by questioning the continuity of her own traditions, I could mention two countries as a positive example, where whatever effect through pressure by or learning from modelling countries was suffered, all of this was nevertheless adapted and assimilated into local traditions (Japan) or where it has been balanced by most of the country’s huge off-centre area, tradition having been resuscitated extensively (Turkey). Varga (1995, 2008a). 120 A derivative of the Latin prīmus/prīmitīvus [’the first/earliest of its kind’]. 121 Cf., e.g., Varga (1994a). For the striking difference between today’s position and the distinctions in the almost near past, see Bitterli (1976).
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
a Jewish and Muslim perspective, as well as Civil Law and Common Law arrangements.122 By the way, such an inquiry has a surprising, almost shocking result as to the rather particular, moreover exceptional character of our own continental heritage, realising its basic build-up as a technically formalised form embodied by a conceptual system,123 while in all the rest there are far fewer meticulously mediated and transmitted complexities also using casual searches for justice, alien to our continental (and abstractly universalising) rule-based conception in all ways. For Western law with the regimes of Civil Law and Common Laws, the most common queries I receive in the course I offer are focussed to either the use of conceptualised language which assigns a systemic locus or the use of available language that merely names loci in relevant legal dictionaries, in a manner just using certain words for want of better; that is, we are considering the pursuit of the exhaustive embodiment of the law in a systemic perspective or one which purely exemplifies something from the body of law on occasions where and when there is a need to do so; or again, a search for systemicity or by which we just gain pragmatic and even random steps forward; that is, the role of logic in the law’s operation in the form of either deduction with definitional force or possible reconstructive justification. In my own program of teaching philosophy of law, in a semester dedicated alone to contemporary trends, in the course of which, in addition to natural law, legal sociology, British analytics and American legal realism taught by my colleagues, I myself have, purporting the students’ mastering the ways of how to approach to and think in law, concentrated upon the Vienna school of normativism, Scandinavian realism, as well as Marxism. I have taken them as differing but each by each justified claims of approaching the law from the point of view of, one, its own internal connections and the systemicity inherent as reconstructible therefrom, two, the nature of its logically built linguistic construction, and three, as a kind of natural science, which was just the original inspiration, as alleged creative forces within it, i.e., socio–economic factors. My goal here is to deepen their understanding to the extent that the problematisation itself shall be acquired by students so that they can reproduce it themselves, now as produced by their own way of thinking, both in parallel and in ultimate hypotheses, simultaneously presuming and supporting each other.
122
In a pioneering work—Gu (2006)—dedicated to a similar questioning, English law is characterised by “words of authority” (with boundaries of meaning, linear reasoning, and the separation of powers); Islamic law, by “words of interpretative authority” (with fluid meaning, correlative reasoning, and diverse jurisprudence); and Chinese law, by “words of legislative authority” (with boundless meaning, multidimensional reasoning, and boundless power). 123 The central role of what is called Rechtsdogmatik is concomitant to it. Nowadays its formal doctrine of the law is not simply preoccupied with the law as prevalent, but it forms the basis of what can in any case be thought of as a law from the beginning—or, in American terms, of what legal imaginability is—and thereby it provides a compositional and classificatory framework for any improvement or development in the future. Varga (2008b).
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Well, in a multicultural student community, I have mostly perceived possible deficiencies of their home introduction to the epistemic base. For example, the clear and conceptually systematised scheme of law, which does constitute a solid notional framework for continental European law,124 may perhaps remain almost unknown to the average French student, who can only produce various uncertain occasional derivations, because he/she may have heard of but not learned in due depth about things such as Hans Kelsen’s reconstruction, at least not in the sense of the basic scheme and internal logicality of the buildup and functioning of modern continental European law. As to my next example, the average Russian or Ukrainian law student may try to understand but cannot with full credibility interpret Kelsen’s pure notional construction, because due to their postSoviet overwhelmingly American orientation and language skill, even their professors now teach the structural schemes elaborated by the Vienna school from American sources, independently (and sometimes also possibly unheard) of their roots in classical German philosophy.125 Finally, there are English–American and Central European endeavours in which we can paradoxically encounter Common Law and Civil Law ways of thinking merged into one another, just because, following a kind of post-Hartian conceptual pressure, English law, too, is schemed in term of abstracted norms.126
Finally, in addition to the complex translation problems regarding differing structures and institutions in various legal families,127 a particular branching-off of the analysis of legal families is the situation when just the multicultural discussion will reveal that the king is naked. That is, when either in its name or just instead of differentiating what the particular and what the universal in what Pierre Legrand called mentalités juridiques are, allegedly universal standards applied by the World Bank and/or the International Monetary Fund prove, in fact, to be nothing but projections and extrapolations of various American preconceptions. Thus, for instance, one of the most significant formal global ascertainments of the new millennium—“the very first of a series of reports investigating the regulations that enhance business activity and those that constrain it”128—was reacted to by the French as a simplifying falsity of the “one size fits all” American mentality, characteristic of the non-European understanding of law as a means of social engineering; and what is more— and on behalf of both financial world powers—the identification of the Rule of Law as a global standard129 by which, as reacted to by the French, a mere illusion has been drafted again. Although the use of such an operatively undefined and indefinable notion130 can freely be transformed by any
124
Varga (1994b). Tихонравов (2010). 126 Varga (2007c). 127 Ferreri (2020), section 5, as well as Chromá (2007). 128 World Bank (2003). 129 Ferreri (2020), section 4, note 24, referring to Kerhuel and Fauvarque-Cosson (2010) and Société (2006). 130 Varga (1996). 125
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C. Varga
attemptive global imperialism into an arm or tool equally usable to enable arbitrary claims or actual extortion.131 International literature is also eager to re-circulate some of the almost anecdotal details as applied to situations in which empathy would be supposed to be assumed from the beginnings by those international students who intentionally enter a (for them) initially strange culture, primarily for learning, under circumstances in which, knowing what they are to meet, they are supposed to have in advance accepted tacitly how they would encounter a host culture, taken as an accumulation of others’ historical experience, from which they may and are to learn. The preparedness of the teaching staff to the job is obviously selfevident and therefore not a specific requirement.132 But amusement can be had by observing that the method of teaching itself can turn to be problematic. For example, in some traditions, the hierarchical relation between teacher and students may prevent students’ direct intervention in class as this may be considered disrespectful133; moreover, “even direct eye contact is considered impolite”,134 too; and finally, the need for a motherly type care is sometimes also raised.135
6
Successes and Results
The final result is clear to us all: by a comparative outlook in education we may enrich our students while we are also enriched.136 At the same time, however, does it make a difference whether or not there is a safe basis of knowledge, acquired by students themselves, upon which we can build more? Returning to terms used earlier, can this “able-to-fix-themind-mono-epistemology” be shaped so that it may enable further building later on? Our question is like the personal decision about the relationship between mother language and the learning of other languages. When should we start? when the native language is already fixed? or almost in parallel? However, reflected upon the dilemma between our own law and foreign law(s), there is another circumstance to be
considered as well. Namely, “However, there is a price to pay for transnational legal education. [. . .] The fine and nice national legal doctrine, the sophisticated inner structure of a national legal system might suffer from such an open educational training, which oscillates between abstract theories and concrete problems.”137 That is, there is also something to lose in this global manifestation and self-transformative intent, which in our Western and especially European cultures, i.e., the ones of modern formal law,138 is simply the essence of law enforced in the actuality and factuality of everyday practice, as long as our law is exhaustively textualised and posited—at least as far as it reaches its self-imposed and positively postulated boundaries. On the one hand, in our wishfully imagined Utopianism, we face a future of universal humanity, in which law is already delocalised,139 and in which nothing else floats before us except “several orders without hierarchy, integrated in a coexistence of mutual reinforcement”,140 and, at the same time and on the other hand, we are to face the reality of our present as the fruit of experience accumulated for centuries, which at least for the moment may require a sober and down-to-earth reconsideration. For its message is that Law is a language of its own. Today it is a babel of dialects, where hegemonic dialects try to establish themselves as universal languages. Under these conditions law is a local phenomenon. It seems hard to imagine a world which is built according to the Kantian utopia of cosmopolitan law: too many ordered by global power, too many subversive forces triggered by the global economic system which needs differences in local governments, as each difference gives an opportunity of greater exploitation. [. . .] The law, like the world, is fragmented into many communicative networks. A supranational legal science does not exist, an overworld does not exist, nor does a superior point of view to observe law. Legal science is just one of the many communicative networks able to order; it deals with the reality of human suffering, not with the heavenly destinies of ideas; it is located in a place whose structures of power it decomposes and recomposes; it is a criterion to connect national debate on local regulatory experience with networks which have the same function in other countries. A super-science, therefore, does not exist; what exists is a continuous contamination between all the scientific networks. [. . .] [O]rder is not repetition, but an infinite production of sense ever new. Kafka has taught us to hesitate before the doors of law, in the sense of law as a statute [the lex]. Law as a whole [the ius], though, is an infinite network of doors watching each other, opening each other.141
131
Varga (2016). Ferreri (2020), para. 3 refers to Abermann and Gehrke (2016) and exemplifies, among others, by the City University of New York, which shows that faculty members themselves may be differentiated according to racial, ethnic, gender and religious orientation. Edwards et al. (2008). 133 Woo (2001), p. 452; Hoffman (2011) and Emelyanova (2017). 134 Zhao (2007). 135 “Domestic students with existing networks and forms of social support can be indifferent to the needs of international students or perceive those students as self-ghettoizing with no interest in reaching out. International students can form into nationality groups which may appear exclusive and self-contained from the outside and fail to make meaningful connections with others.” Moreover, in cases of social events “an eye to the religious or cultural differences” is pre-advised, especially as to catering and alcohol, amongst others, by Evans (2016), pp. 71 & 72. 136 “If common ground is recognized in teaching both groups of students, and if differences are simultaneously respected and cultivated, legal educators will enrich their classrooms and be enriched as teachers.” Spanbauer (2007), p. 403. 132
From this, the only conclusion that can be drawn is that “The important truths about law [. . .] are universal truths. The most important of these truths might well be that law is
137
Micklitz (2016), p. 59. Varga (1996). 139 Glenn (2013), p. 36. 140 Girardi-Fachin (2019), section 3.2. 141 Femia (2015), pp. 13, 14–15 & 16 (with lex/ius added). 138
Comparative Law and Multicultural Legal Classes: Challenge or Opportunity?
fundamentally local—but that truth is none the less universal.”142 That is, it cannot be but “irreducibly diverse”.143 Counteracting to these notions, as we have already mentioned, contemporary comparative efforts in scholarship and education alike assume the role of serving long-term political goals in accelerating and deepening globalism, and thereby also providing worthwhile opportunities for certain—sometimes worldwide, sometimes more narrow, regional or even local—hegemonic aspirations.144 Thus, it is no coincidence that, as a synonym for the comparative approach, some offer, in a plain-spoken manner, denationalisation.145 Well, it goes without saying that the transnational direction of education identifies some final convergence in transnational law as a goal. With a single example, it is entirely convincing to explain that Law is dependent on politics, and thus legal unification in the strict sense is tied up with the progress of political unification. This point seems obvious, even trivial, but the consequences are not trivial at all. In Europe today the ideal of political unification is dim, and progress has slowed down to a crawl. . . The so-called functional approach to political integration, which assumes a technological integration, has been, alas, refuted by harsh reality. If legal integration really does depend on political integration, then the chances of legal unification are slender. But does legal unification depend so utterly on politics? Is there another way? Some jurists feel that there is. They look to the legal profession and legal science as a way to promote legal unity.146
It is known that legal scholarship and education have already contributed to integration, notably in the United States of America, where, in responding to the dilemma of Union vs. States, they facilitated practical unification under the auspices of federal law, as just some of its factors. However, the desirability, purpose and prognosticable realities of such a conscious connection would be far beyond the scope of the present investigation.
7
Challenge and Opportunity
The vast topic we have overviewed in the present query has undoubtedly been inherent, though built at first using very basic building blocks, in the vast potential of the comparatio iuris movement, as it has been laid down for over one and a half centuries and, then, has been made to flourish by the efforts of a number of generations of its practitioners. And indeed, thanks to them all, we really have enriched human cognition—in our subject, that is, in both legal research and legal education. 142
Smith (2010), p. 356. Fauvarque-Cosson (2008). 144 Melkevik (2009). 145 Heuschling (2017). 146 Friedman and Teubner (1986). 143
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This also means that challenge and opportunity have encountered and overlapped each other, and the internationality of the cultivation of comparative law has by now appeared in classrooms and in the daily preoccupation of our students. My conclusion, however, encourages some modesty at the same time. Let it be said, among other things, that law is not a goal but a means; consequently, it is to be seen through the full extent of its natural surroundings, involving society living with the law and with all the latter’s components. This is why, without the understanding of the given ordo-ideal, there is no chance or sense in making any effort to be able to reveal the changing formations, case to case, of its instrumental representation. But if I conceive it and can make it conceived, then the differences between different ages’ laws and peoples’ laws will be more transparent, offering themselves to deeper understanding. By doing so, we shall be in a position to have elevated the frameworks of its interpretation to philosophical heights, and hopefully, provided that it is anthropologically and historically well-founded, it will finally turn out not to be susceptible to sensitivities, at least due to a comparative approach.
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law: Issues of history, systemicity, and methodology.] Pázmány Péter Katolikus Egyetem Jog- és Államtudományi Kar, Budapest, pp 33–39 Varga C (2010d) Theory of law – legal ethnography, or the theoretical fruits of inquiries into folkways. Sociologia del Diritto XXXVII (1):82–101 Varga C (2012a) The place of law in Lukács’ world concept, 3rd {reprint} edn with Postface. Szent István Társulat, Budapest Varga C (2012b) The paradigms of legal thinking, enlarged, 2nd edn. Szent István Társulat, Budapest Varga C (2012c) Theory of law: norm, logic, system, doctrine & technique in legal processes, with Appendix on European law. Szent István Társulat, Budapest Varga C (2012d) Comparative legal cultures: on traditions classified, their rapprochement & transfer, and the anarchy of hyperrationalism. Szent István Társulat, Budapest Varga C (2013) Contemporary legal philosophising: Schmitt, Kelsen, Lukács, Hart, & Law and literature, with Marxism’s dark legacy in Central Europe. (On teaching legal philosophy in Appendix.) Szent István Társulat, Budapest Varga C (2016) Global challenge, Rule of law, and the national interest. In: Zapesotsky AS (ed) Contemporary global challenges and national interests: The 16th International Likhachov Scientific Conference, May 19–21, 2016. St. Petersburg University of the Humanities and Social Sciences, St. Petersburg, pp 146–150 {& http://www.lihachev.ru/pic/site/files/lihcht/Sbor_full/2016_english. pdf Accessed 22 Aug 2019} Värv A (this volume) Turning challenges into opportunities: reflections on teaching comparative law in multicultural classes in Estonia (Part II). In: Varga C (ed) Comparative law and multicultural legal classes: challenge or opportunity? Springer, Cham Watson A (1974) Legal transplants: an approach to comparative law. Scottish Academic Press, Edinburgh Watt HM (2006) Globalization and comparative law. In: Reimann M, Zimmerman R (eds) The Oxford handbook of comparative law. Oxford University Press, Oxford, pp 579–607 Whitman JQ (2017) Hitler’s American model: the United States and the making of Nazi race law. Princeton University Press, Princeton Wittgenstein L (1953) Philosophische Untersuchungen / Philosophical investigations. Trans: Anscombe GEM. Basil Blackwell, Oxford Woo MYK (2001) Reflections on international legal education and exchanges. J Legal Educ 51(3):449–456 Woodman G (2003) Why there can be no map of law. In: Pradhan R (ed) Papers of the XIIIth International Congress of the Commission on Folk Law and Legal Pluralism, 7–10 April, 2002, Chiangmai, Thailand on Legal Pluralism and Unofficial Law in Social, Economic, and Political Development. Commission on Folk Law and Legal Pluralism Press, Kathmandu, pp 383–392 Woodman GR, Bavinck M (2009) Can there be maps of law? In: von Benda-Beckmann F, von Benda-Beckmann K, Griffiths A (eds) Spatializing law: an anthropological geography of law in society. Ashgate, Farnhahm, pp 195–218 [World Bank] (2003) Doing Business 2004: Understanding regulations. (September 2003.) World Bank, Washington, D.C. & Oxford University Press, Oxford Yntema EH (1958) Comparative law and humanism. Am J Comp Law 6 (4):493–499 Young JO (2013) Authenticity in performance. In: Baut G (ed) (2013) Routledge companion to aesthetics, 3rd edn. Routledge, London, pp 452–461 Zhao Y (2007) Cultural conflicts in an intercultural classroom discourse and interpretations from a cultural perspective. Intercult Commun Stud XVI(1):129–136 Zweigert K, Kötz H (1998) Introduction to comparative law, 3rd rev. edn. [(1969–1971) Einführung in die Rechtsvergleichung auf dem Gebiete des Privatrechts, vol I–II. Mohr Siebeck, Tübingen.] (trans:
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C. Varga Weir T). Clarendon Press, Oxford University Press, Oxford, New York
Csaba Varga born in 1941, is philosopher of law, professor (now emeritus) of the Pázmány Péter Catholic University and founder of its Institute for Philosophy of Law (1995–), as well as research professor (now emeritus) of the Institute for Legal Studies of the Hungarian Academy of Sciences (1965–) in Budapest; a laureate of Széchenyi Prize (2013), the highest award that can be granted for scientific achievement in Hungary. Guest as invited professor/researcher at the Lunds Universitet Sociologiska Institutionen, Freie Universität Berlin, Australian National University Research School of Social Sciences History of Ideas Unit, Waseda University Institute for Comparative Law, Yale Law School, University of Edinburgh Institute for Advanced Study in the Humanities, Università degli Studi di Trento Facoltà di Giurisprudenza, Universität Münster Lehrstuhl für Rechtssoziologie, International Institute for the Sociology of Law (Oñati), Stockholm Universitet Juridicum, and Siberian Federal University Institute of Law (Krasnoyarsk). All in all, he has published some seventy authored/edited books and some eight hundred papers, half of them in a foreign language, mostly English. On the field of comparative law, he authored, among others, Jogi elméletek, jogi kultúrák: Kritikák, ismertetések a jogfilozófia és az összehasonlító jog köréből [Legal
theories and legal cultures: Philosophy of law and comparative law criticisms and reviews] (ELTE “Összehasonlító jogi kultúrák” projektum, Budapest, 1994) as well as Comparative Legal Cultures: On Traditions Classified, their Rapprochement & Transfer, and the Anarchy of Hyper-rationalism. Szent István Társulat, Budapest, 2012) & http://mek.oszk.hu/15300/15386; and edited Comparative Legal Cultures (Dartmouth, Aldershot & The New York University Press, New York, 1992) as well as co-edited European Legal Cultures (Dartmouth, Aldershot, 1996). In addition to journals in the region, he has contributed regularly to, among others, the Archiv für Rechts- und Sozialphilosophie, Archives de Philosophie du Droit, Rivista Internazionale di Filosofia del Diritto, Rechtstheorie, Tidskrift för Rättssociologi, as well as to Comparative Law Review [Waseda/ Tokyo, in Japanese], Journal of Siberian Federal University: Humanities and Social Sciences; and also to encyclopedias like Arnaud A-J (ed) Dictionnaire encyclopédique de Théorie et de Sociologie du Droit (Librairie Générale de Droit et de Jurisprudence, Paris & E. Story– Scientia, Bruxelles 1988) & 2nd edn. (Librairie Générale de Droit et de Jurisprudence, Paris, 1993) with 2 entries; Gray CB (ed) The Philosophy of Law: An Encyclopedia (Garland Publishing, New York & London, 1999) with 4 entries; A Treatise of Legal Philosophy and General Jurisprudence vol 12, tomes 1 and 2 (Springer, Dordrecht, 2015) with 2 entries; Encyclopedia of the Philosophy of Law and Social Philosophy (Springer, in preparation) with 6 entries.
Property Meeting the Challenge of the Commons Ugo Mattei and Alessandra Quarta
Abstract
The paper analyzes the results of a comparative legal research devoted to investigate the impact of the original category of the commons on property rights. The authors have studied 15 different legal systems throughout a questionnaire that mix open questions and factual cases. The study shows the main contradictions of a paradigm of property based on the right to exclude, but at the same time shows how access and the commons can change this perspective.
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The Entrance of the Commons on the Stage of Comparative Law
1.1
Introduction
The study of property law represents a classic of comparative legal research, while the topic of the commons appears for the first time on the stage of comparative law. The interest of this field of studies for the commons can be explained by considering that in the last 10 years, the concept has become popular in social studies and political activism and in some countries domestic lawyers have shared the interest for this notion. Even if any (existing or proposed) statutory definition of the commons is still very rare, lawyers heard of the commons through the filter of property law where it has been quite discredited. In fact, approaching property law, many students of different legal traditions use to learn the origins of property rights starting from the “tragedy of the commons”, the “parable” made famous by Garrett Hardin in the late nineteen The research has been conducted jointly. Alessandra Quarta has drafted Sects. 1, 2 and 3; Ugo Mattei Sects. 4 and 5. Thanks to the national reporters and especially to Filippo Valguarnera; thanks to Saki Bailey for the first version of the questionnaire and to the IUC staff. U. Mattei (*) · A. Quarta (*) University of Turin, Department of Law, Turin, Italy e-mail: [email protected]; [email protected]
sixties. According to this widespread narrative, the impossibility to avoid the over-exploitation of those resources managed through an open-access regime determines the necessity of allocating private property rights. In this classic argument, the commons appear in a negative light: they represent the impossibility for a community to manage shared resources without concentrating all the decision-making powers in the hand of a single owner or of a central government. Moreover, they represent the wasteful inefficiency of the Feudal World, characterized by many forms of communal ownership masterfully studied by Paolo Grossi. This vision has dominated social and economic studies until 1998, when Elinor Ostrom published her famous book Governing the Ccommons offering the results of her research on resources managed by communities in different parts of the world. Ostrom, awarded with the Nobel Prize in 2009, demonstrated that the commons are not necessarily a tragedy and a place of no-law. In fact, local communities generally define principles for their government and sharing in a resilient way avoiding the tragedy to occur. Moreover, Ostrom defined a set of principles for checking if the commons are managed efficiently and can compete with both private and public arrangements for managing the resources. Ostrom’s studies represented an important challenge to the dominant ideology in economic studies: she demonstrated that market and its foundational institution, private property based on exclusion, are not the only efficient structures for managing resources. This insight, when transposed into legal studies, offered the possibility of reopening an important debate about the legitimacy of private property. In this field, the research of economists has not been the only contribution, considering the role and the studies of legal scholars in different countries and especially in the United States and in Italy with the works of Carol Rose and of the so called Rodotà Commission respectively. On both the shores of the Atlantic, the commons have produced an innovative path of
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_2
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legal development, not necessarily linked to their medieval roots. According to this innovative path, we can consider the commons as a challenge to ownership/property both private and public: this general conception means that we must investigate the impact of the commons on both public and private property law.
1.2
The Raise of the Commons in the Italian Legal Debate
In the Italian academic debate, the commons have emerged in the context of a legal reform directed to modify the articles of the Civil Code devoted to public goods (arts. 822–830). In order to achieve this objective, in 2007 the Italian Ministry of Justice created a commission and appointed the famous late property law scholar Stefano Rodotà as its chairman. The motivating factor of the Commission was the necessity of modifying the rules on public domain, a category that many legal scholars considered obsolete in its direct derivation from the Code Napoléon (1804) already at the time of codification in 1942. Because of this obsolescence and of the blurring boarders between this notion and other forms of public property, a public good can very easily pass from the public domain to alienable public property. Consequently, the normative framework appeared to be particularly inadequate to deal with the increase of privatizations of public goods and services, a political and economic trend that, due to the rise of Neoliberalism, visited upon Italy in a particularly strong way. Because public goods for a value exceeding 130 billion Euros were privatized in the first few years of the nineteen-nineties in the absence of any limiting legal principle, the Rodotà Commission proposed to introduce a notion of the commons modifying the old taxonomy and granting to the goods so classified a particularly strong protection against privatization: a rigid inalienability rule, a regime supposed to take care of the interest of future generations and a very open standing to sue in order to obtain injunctions of activities threatening the commons. Commons were defined as goods that produce utilities that are functional to the fulfillment of fundamental human rights and the free development of human beings. These mainly included natural resources and the cultural heritage. Even from this scanty description of their origins in the Italian experience, it is evident that a legal scholar associates the commons with public property and in particular with the role of the public owner. In the age of privatizations, governments as well as local authorities have failed to defend their own public property, so that in many countries public assets have been alienated without taking into consideration the concerns and resistance of the people and the interests of
future generations outside of any justiciability and due process of law. A weak legal protection of public goods has allowed this kind of political behaviors as well as an imbalance between private property (strongly protected by the judicial process) and public property that can be transferred in private hands by unchallengeable exercises of political discretion. For this reason, the first challenge of the commons concerns public property, aiming to give legal relevance to the difference between the so-called “State-community” as the aggregate of citizens, as opposed to the “State-apparatus”, as the government bureaucracy. If the State is community, then the citizens with their rights and needs represent the focus of public action. If the State is just apparatus, then the management of public goods can concern itself with its own bureaucratic organization and needs (for instance a better budget). In the Italian proposal drafted by the Rodotà Commission, the legal concept of the commons was employed to introduce a new classification of public goods, limiting what the State apparatus can do as a consequence of the delegation of power received by the people. The State cannot sell the commons in its own interest (i.e. in the interest of the apparatus) because the majority in office that decides a privatization process is just the State apparatus and therefore cannot claim to be representative of the whole State community (the common), which includes also of future generations that have an interest in the resources that are being sold. In the accompanying report to the proposed reform, however, the Commission indicated that commons could be public or private goods, thus suggesting that the notion could serve another function on top of the one that we just mentioned. This further function possibility is explained by the connection between commons and fundamental rights; its main consequence is that the models of commons governance prevail on the formal title of ownership. Concretely, the governance structure is the one that guarantees access to the commons and the right to use them. The idea of the commons as it emerged in the Italian legal debate does not aim at abolishing private property, but it denounces the effects of the unlimited accumulation of private capital made possible by the unrestrained capitalist model that has emerged after the fall of the Berlin Wall. It is easy to understand this critique by looking at the international context. The Rodotà Commission was organized in 2007, just a year before the international financial crisis of subprime; the effects of an unequal distribution of wealth could be appreciated everywhere by that time and 4 years later, the Occupy movements denounced them with the idea of the 99%. The commons as a socio-political possible path of empowerment against the abuses of the 1% suddenly became a common grammar of social movements worldwide.
Property Meeting the Challenge of the Commons
1.3
Conceptualize the Commons
Institutionally, the commons became the tool of contestation of political and economic mainstream dogmas, including the unquestionable efficiency of both market and property rights in the allocation of resources. Within this critique, the dominant paradigm of property is an ideological shield for a biased law of the wealthy because in a system where resources are finite, their exclusive distribution through property rights means deprivation of non-owners. The research of new tools for managing resources has been realized in several experimentations that generally occurs at the local and urban level: scholars and practitioners use to define these experiences as ‘urban commons’.1 To contrast the dominant vision, dubbed neoliberal, the commons aim at conceiving the proprietary relationship as qualitative rather than quantitative, based on access and inclusion rather than exclusion and deprivation. Thus, when private goods can be described as commons, access of non-owners must be protected and the right to exclude of the owners must be limited throughout a balancing mechanism that allow a redistribution of resources carried out without a procedure of expropriation. The value of the commons is enriched by participation and access. Exclusion many times in front of absentee owners (or governments) determines the decay of its object. This radically critical vision needed to be tested by the empirical reality of the different legal systems where the grammar of proprietary exclusion, as the default rule of the system, seems dominant among jurists. The commons, to that point a “constituent force” in the hands of activists, needs to penetrate the domain of positive law (something that was only superficially achieved in Italy because the proposal of the Rodotà Commission was abandoned) in a process of strong resurgence of neoliberal policy across Europe. Such a policy of proprietary exclusion has received a significant boost by the European Court of Human Rights, whose case law now has restored private property as a sort of natural right, rejecting any “social function” evolution with an astonishing zeal.
1.4
Comparative Projects on the Commons
To test this evolution, in 2013 at the 19th meeting of the Common Core of European Law Project, the group on property law chaired by Professor Antonio Gambaro has launched a project on the commons that was entrusted to the General 1 Urban commons are the object of a research project coordinated by the University of Turin funded by H2020 program (Grant Agreement n. 822766). The project Generative European Commons Living Lab aims at mapping and studying European urban commons. It is coordinate by prof. Alessandra Quarta.
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Editor of the Common Core, Ugo Mattei and to the Swedish scholar Filippo Valguarnera with the assistance of the International University College Director of Research and Goteborg PhD candidate in comparative law Saki Bailey. Three subsequent meetings of the Common Core Group were convened to develop and discuss a factual comparative law questionnaire (which is now substantially reproduced in Sect. 2 of this Report). When at the Paris Meeting of the International Academy of Comparative Law in 2016 a decision was taken to launch a project on the Commons for the Fukuoka meeting and the general editorship was offered to Ugo Mattei, the opportunity was seized to reinvigorate a project that within the common core network looked somewhat dormant (because of the difficulty to identify respondents with an approach broad enough to handle the questions in many legal systems). Thus the new Director of Research of the IUC, and commons scholar and University of Turin faculty member Alessandra Quarta joined the team replacing her predecessor, a first part of the questionnaire was introduced ex novo and circulated in both English and French.
2
Structure and Sense of the Research
2.1
The Commons as the Challenge
It must be clearly accepted that questionnaires are not neutral tools and that the question you ask do determine the answer you get. Fifty years after the establishment of the common core methodology by the late Professor Schlesinger at Cornell, and 25 years of testing his hypothesis in European Private Law allow us to be aware of this epistemological shortcoming that challenges any claim of neutrality in comparative law. Our framework in this questionnaire undoubtedly derives from the Italian experience and background of these editors, but it was thoroughly discussed with scholars of very different legal background and certainly contains elements that can be generalized and appreciated in a comparative legal study. The following must be appreciated in limine. First, the notion\category of the commons is not foreign to global legal culture. In the past, and even today in many rural parts of the world (especially in the global south), open fields, common pastures and particular sorts of customary collective uses represent a well-known institutional tradition. Moreover, the debates around the global commons in International law (Antarctica etc.) as well as the rise of creative commons in the field of intellectual property law, represent an important shared base for grasping the essential features of the commons for the more general purpose of investigating their challenge to proprietary exclusion. The main characteristic features of the commons are the following:
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1. They are both material or immaterial goods requiring collective activity to be organized and cared for. Among them, natural resources (to be preserved for future generations), the cultural patrimony and the sets of traditional knowledge are recurring examples. 2. They claim for a special legal protection and to be managed in a manner different from public or private exclusion. This feature takes into consideration not only the role of the commons in the human life (their relationship with fundamental rights) but also the life of the commons, according to an ecological sensibility and an environmental emergency. The commons deny exploitation both of humans and of nature. 3. Access to commons must be ensured and guaranteed by the law whenever exclusive forms of ownership produce distortions and inequalities. Commons require a collectivity taking care of them (community of care), whose size varies according to the nature of goods and to the concrete circumstances. Thus, global commons require global communities (which opens up special legal problems), while in other cases a local community is the best solution. Second, the global effects of neoliberal policies of the last quarter century and the diffusion of privatization as political and economic strategy to deal with the consequences of the economic and financial crisis creates a problem shared by every jurisdiction: the legal weakness of the institution of public property as opposed to private ownership. Such weakness typically emerges when we test the inalienability rule that in many countries is provided in the civil codes or fundamental principles to protect public property, against the concrete easiness through which public goods are alienated or otherwise privatized, without any consideration of citizens’ opinions and outside of any effective justiciability of the issue. The third element that can be generalized and discussed comparatively is the variable dynamic of exclusion and access in property law (both private and public). The role of the right to exclude in private property may be described in two different ways, considering the civil law and common law traditions. In the civil law tradition, the right to exclude is sufficient to convene a compact idea of mine, that describes private property as the relationship between an owner and a material object.2 In the famous metaphor of property as a tree, we can imagine that the right to exclude is the trunk (the essence of ownership), while the branches represent a different mix of the other powers of the owner that can change and be mixed according to the legal and factual characteristics of the goods. According to this image, the right to exclude is 2
It derives from both a certain interpretation of Roman Law and the subjective right theorized by German scholars.
U. Mattei and A. Quarta
always present; without it, the owner cannot exercise the other powers, so the right to exclude becomes the necessary and sufficient condition to private property. In the common law tradition, the very famous metaphor of property as a bundle of sticks, builds on the Hohfeldian fundamental legal relationships, to see ownership as a set of rights, powers, privileges and immunities (and corresponding duties and liabilities) between individuals and not between an individual and a material object. This metaphor does not give to one of the rights in the bundle a predominant position corresponding to the essence of property. The sticks are dynamic and they can be arranged in different ways and allocated to different individuals, so that in this description the right to exclude does not claim a different status than the right to use or dispose. In the last 30 years, some American scholars have called this classic presentation into question, by stressing the centrality of the right to exclude in the bundle of rights. They present it as the essential prerogative to build proprietary relationships. The rise of this theoretical position has produced a rich debate among American legal scholars.3 This academic debate, and the mentioned case law evolution of the European Court of Human Rights, demonstrates a sort of path of theoretical convergence in the field of property between the civil law and the common law traditions, both evolving to visions of property as exclusion determined to a large extent by neoliberal economics-based ideology. Thus, the limits of a paradigm of property reversed to a fundamental right to exclude others from something suggests a comparative discussion around this fundamental power and its polar opposite the fundamental right to access and to be included, i.e. the central feature in the discourse of the commons. The reader should keep in mind that this contrast between exclusion and access does not shed light on private property alone and it is quite independent from the private or public nature of the title. The exclusion can be determined as much by the ordinance of a major closing a square or a park as by a corporation closing a shopping mall or precluding certain sets of individuals to access it.
2.2
The Questionnaire
In the light of these premises, the questionnaire intended to collect and investigate the rise of the commons and their capability to challenge public and private property both in their content and in their binary claim to exhaust the horizon A group of scholars organized around “The progressive property manifesto” is hindering the centrality of the right to exclude by demonstrating how property law is a mix of different special values or how limits to the powers of the owners are essential to ensure the general welfare.
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Property Meeting the Challenge of the Commons
of legal possibilities. The commons challenge the zero-sum vision of private and public that characterizes the modern legal mind. It is not true that more public means less private and vice versa. The commons is at least a strong and vibrant, quite hidden as of today third possibility in the law: perhaps even more than that. According to the needs of making the commons emerge from legal obscurity the questionnaire is composed of a first part, which was absent in the one prepared for the Common Core of European Private Law Project, that follows the methodological guidelines of the IACL: we have composed open questions to: (a) understand the category of the commons (from Q1 to Q3); (b) check the law in the book in the field of public property and its adequacy to face privatizations (Q4–Q6); (c) identify the role of private property in national legal systems (and its degree of sanctity) and the possibilities to balance it with other constitutional rights. This should allow to define the relationship between exclusion and access (Q7–Q8). The second part of the questionnaire, follows the Schlesinger’s methodology, according to which factual cases are developed in order to formulate questions as “neutral” as possible, overcoming biases determined by the embeddedness of both the drafters and the respondents in different legal traditions. The drafting of “common-core style” questions is always quite a complex exercise and requires much back and forth between drafters and potential respondents. In the case of the questionnaire on the commons we experienced on the one hand less difficulty because the concept is almost everywhere absent as such, so that there is no embeddedness in one or other framework. On the other hand, many of those that attended our long preparatory seminars felt that because of the large scope of the issue, there was a need of very interdisciplinary legal knowledge and skills that just one respondent could not possibly handle. Moreover, it proved to be quite difficult in the domain of the commons to phrase the issues in the usual adversary manner (clearly reductionist) typical of the classic common core research. Nevertheless, we deemed crucial to maintain the second part to limit the risk of being stuck with mere black letter answers because of the vagueness of the commons as positive legal topic and its “emerging” nature. For this reason, even if fully aware of the limits due to reductionism, (especially since commoning is more of a cooperative than a competitive attitude) we strived to translate the commons into justiciable issues, conflicts between plaintiffs and defendants, in other words into the structural mold of modern law.
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Special caution was required in this field, since general hypothetical conflicts between commons and property have been identified starting from a specific Italian legal debate that followed the Rodotà Commission. Moreover, legal hypos had to be extracted from a concept that is particularly ambiguous in the international debate where it is rarely deployed by lawyers and receives several meanings according to different economic, social and political studies where it is mostly in use. The factual approach allows investigating commons as an analytic category that includes ideas of access, participation in the management, special protection for future generations and connection with fundamental human rights. In a sense it was important to throw a wide net without losing control of it. For this reason, the cases concern conflicts around housing, health care, food, water, natural resources, territory, culture and climate. The aim is to identify principles, values or rules that emerge in balancing the right to exclude with the right to be included and design a special sector of law governed by the principle of access and its consequential rules. Ultimately the case-based questionnaire was completed, translated into French by a sophisticated scholar serving as translator (Michele Spanò of Paris) and circulated among the identified respondents. The answers to these questions will be analyzed in this report in order to define the common core of legislation, doctrine and jurisprudential solutions in the field of the commons.
2.3
The Legal Systems Covered
The questionnaire was circulated to 20 different potential reporters through the world, which generated timely answers for 15 systems. In alphabetical order, we obtained questions from: Belgium, Brazil, Canada, Croatia, England and Wales, Germany, Hungary, Italy, The Netherlands, Quebec, Russia, Slovakia, South Africa, Sweden and the United States. Reports were invited from a number of independent respondents, on top of the official ones selected by the International Academy of Comparative Law. This group was mixed with the correspondent group who was already active in the Common Core of European Private Law Project and they met in Turin in July 2016 to discuss a first draft of the answers that the national reporters submitted at the beginning of June. This meeting was very important for both sharing the objectives of the survey and understanding the role of the commons in the transformation of property, even considering the different background of national reporters: private law or public law scholars. Moreover, the discussion in Turin produced the result of integrating a new question in the survey in order to investigate legal issues related to climate.
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Using a traditional taxonomy we obtained answers from the civil law (Belgium, Quebec, Germany, Italy, The Netherlands), from the common law (England and Wales, United States and Canada), from former socialist law (Croatia, Hungary, Russia, Slovakia), from Scandinavian Law (Sweden), from countries outside the Western legal tradition, Latin American (Brazil) and African (South Africa). Unfortunately, we missed significant parts of the puzzle (China, Islamic and Indian countries).
2.4
A Comparative Discussion
A comparative discussion involving 15 legal systems faces the problem to define a taxonomy to work as a compass in the jungle of legal systems covered. We opted for a simple tri-partition, defined according to the role and structure of private property. In fact, we can have a group composed by six countries that represent continental and non-continental Europe and whose legal arrangements historically were rooted in Feudalism and are presently influenced by the European Convention of Human Rights. In this group, Sweden is an exception because this country did not know feudal relationships and in that period the distribution of property was not a political battleground. A second group is composed by four countries where socialist law shaped in a very original manner property law, so that it is interesting to analyze the role of the commons in the current legal framework of private property. The last group is composed by five countries that experienced colonization. This political element is relevant because property law was imported from Europe and substituted earlier indigenous conceptions of the commons that have found a way to resist and survive until today being quite resilient. The following sections will follow the partition indicated in par 2. We will present general trends that emerge in each group of answers and few final remarks to comment the picture we can extract from comparing the answers according to the taxonomy that we have introduced above.
3
Open Questions
3.1
Understanding the Commons
This section is composed of four questions aiming to investigate the presence of the legal category of the commons or, at least, the current or past existence of concepts or rules corresponding to it. The third question inquiries on the state of an academic debate around the commons. The first question investigates the possible presence of legal categories that closely correspond to the notion of the commons as deployed in this introduction as well as in the
text that the reporters have composed for accompanying the questionnaire. In order to answer to this question, reporters have singled out some elements of the definition and have identified categories that correspond to the commons. This interpretative strategy clearly emerges in all the reports, but it is openly denounced in the report of United States, where the very useful concept of “analytic commons” has been suggested and introduced. Thus, the description provided by Professor Eppinger does not limit itself to the objective dimension, describing the commons as a particular material or immaterial resource, but it sheds light on the role of communities in the management (commoning), the position of the commons outside the realm of the market, the sets of social rules, customs and the institutional arrangements that can be introduced to govern them beyond the traditional public or private structures. These elements do not compose a legal definition, but they can be traced in different existing legal categories. The reporters from the legal systems of continental Europe generally find some characteristics of the commons in goods belonging to the state apparatuses (and lower articulations): this connection is mainly based on two elements. Firstly, the rule of inalienability established for public goods included in the public domain and, secondly, their common usage. Belgium defines territory and natural resources as “common heritage”, a concept through which it can highlight the centrality of small or large communities. In Belgium, in fact, the common heritage can benefit any kind of community, such as the inhabitants of a Region as well as the humankind as a whole. Nevertheless, no precise remedy follows this statement, so that a formal or informal community is not provided of a special action to protect common heritage. Also Germany displays attention towards a global community. Indeed, the reference to future generations in the field of protection and management of public resources has been introduced in art. 20a of the Basic Law. In Italy, the public domain shares elements with the description of the commons, but the reporter denounces the existence of contradictory indications in the Italian legal system that determine ambiguous paths. In fact, in some cases the interest of present and future generations is able to define a special regime of protection for public goods, while in other cases the exchange value of public goods obscures their use value and authorizes their transfer, by introducing an exception to the rule of inalienability. We know that the in Belgium and in Italy the codification was influenced by the experience of the Code Napoléon. For this reason, it is not surprising that the theory of public property in these countries closely follow the traditional French classification of public property. In particular, the concept of public domain, in spite of its weakness in protecting common resources from Government-determined
Property Meeting the Challenge of the Commons
privatization, continues to be intended by the interpreters as a patrimony that belongs to the citizens (State-community) and, in this sense, it is common and only managed by public entities (State-apparatuses) in the interest of them. Another legal category that Belgium and The Netherlands (but also Brazil and Russia) identify as correspondent to the idea of the commons is that of cultural heritage. This concept certainly derives from the influence of the U.N. international treaties and the mentioned European legal systems use it to define the cultural patrimony that must be preserved and maintained in the interest of future generations. Finally, Sweden identifies legal institutions that correspond to the commons in those goods managed by small communities, villages and in the Allemansrätt that knows its own special regulation. We can thus conclude that for lawyers of the continental European legal systems, public property covers the area of the commons, stressing its management in the interest of a (small or large) community and its common usage. According to this generalization, it is very interesting to link the answers to this question to the analysis of the answers to Q4 and Q5, in order to identify the correspondence between such vision of the law in the book and the concrete political choices that inspire the management of public property. An interesting profile emerges from the Belgian Report and concerns the possibility of exclusion in the management of cultural heritage. According to a decision of the Council of State, no claim of exclusivity is admitted in the management of goods that are included in this category. This clarification is very important to avoid the risk of a closed management of the commons, a hypothesis that can occur not only when property rights are distributed, but also when a specific community is involved in the management. The most interesting framework comes from England and Wales, where a legal category of the commons exists and identifies common lands, town and village greens. The Commons Act has been adopted in 2006 and it is the result of a debated issue in England and Wales that probably started with the enclosures of open and common lands in the nineteenth century. However, the definition of commons remains “nebulous”. According to the national reporter “common land can be defined as land in which rights of common may be legitimately exercised and enforced and subject to any public access rights that may be imposed by Acts of Parliament. A right of common can be defined as the legal right of one or more persons to use or take some portions of the produce of upon the land of another”. Town or village greens are not precisely defined: social centres, pastoral centres, market centres, defensive centres and post-inclosure greens. Thus, they are characterized by amenities (seats, shade trees, drinking fountains, etc.) and they can be fenced against
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grazing animals. This second category is very interesting because it can be used by inhabitants to prevent building or for its conservation. The Commons Act regulates the registration of commons: the commoners (“persons who live in a particular community or locality of common lands with rights of common over such common lands”) have to register these areas and the related right of common, shave no right of ownership. The Commons Act regulates also the management of the commons, since local authorities and commons councils are involved in the management and control of rights to common, common lands, town and village greens. The correspondence between commons and public property emerges also in the reports from Croatia, Hungary and Russia, two legal systems where few traces of the socialist tradition have resisted. In particular, in the Russian Constitution, we find only a mention to the “all people domain”, a concept that derives from the former Soviet Constitution and is now applied for indicating natural territories. The Croatian report includes some interesting remarks about the classification of public goods, but some clarifications would be necessary in order to distinguish common goods from things in public use or in common use. In the Russian report, the regulation of private things that belong to cultural heritage is very interesting for two main reasons. It introduces the idea that even private goods can be considered as commons; furthermore, this special regulation introduces special limits in order to ensure access to non-owners. In the Hungarian report, commons correspond to public goods and any legacy of the feudal age is actually alive. In particular, many forests and pastures were managed as commons and communities took care of them until they have gained legal personality. Finally, if we consider the legal institutions that correspond to the commons in post-colonial legal systems, the picture is jag. The reporters of Canada, United States and South Africa, consider as commons the legal tradition of indigenous, their solutions for managing the lands and the customs produced before the conquer of European countries. They are generally connected with past conflicts (in the report of United States, the commons are associated with the idea of the genocide) or recent disputes around the Aboriginal titles (Canada). The dominant model of public property is instead present in Brazil, where we find again the idea of the common usage, while in the report of Quebec we find the category of the choses communes (that come from the Code Napoléon and are present also in the Belgian Civil Code but not in the Italian one) defined as things that cannot be owned, like air or water. The reporters for Quebec describe the doctrine of the affectation that permits to link private and public goods to a special purpose or destination and they affirm that this legal category is opposed to the idea of appropriation, because it introduces powers over the thing and not subjective and exclusive rights.
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3.2
U. Mattei and A. Quarta
Past and Present of the Commons
The second question asked to national reporters was whether the commons exist in their current legal systems or have existed in the past; in case of affirmative answer, they were required to describe the origins of this concept (jurisprudential, doctrinal or statutory). Considering the commons as resources that cannot be object of appropriation, only Belgium and Quebec have in their civil code a similar definition, although there is only a partial correspondence to the definition provided in our introduction. As we have already said above, this definition of choses communes derive from the French civil code, but it does not appear in the Italian civil code. In Italy, at the moment there is no statutory definition of the commons, because the proposal of the Rodotà Commission failed. In the past, the idea of the commons was in some sense represented by the notion of usi civici, a legal concept retained from medieval communal traditions of access to forest resources that continue to exist, especially in Regional regulation. The Italian reporters mention the decision n. 3665/2011 of the Corte di Cassazione, where the judges applied for the first time the concept of the commons as proposed by the Rodotà Commission, in order to indicate the necessity to increase the protection to public goods that are strictly connected with constitutional values. Although this statement is only an obiter dictum in the decision, it has been widely commented and emphasized by scholars as evidence of a dialogue between doctrine and jurisprudence that stems from the inadequacy of the legal notion of public domain to protect the commons against unprincipled privatizations. In continental European legal systems, the concept of the commons is thus presently absent as a legal category, while it was generally present in the past, as collective ownership or shared rights of access to natural resources, as in the survived Italian notion of usi civici. In Germany, the ancient institution of allmende indicated lands used by local communities, a notion extended to the territory that corresponds to “the area constituting Germany”. This statement is particularly interesting because shows how the commons generally disappear because of a process of nationalization and State-building that transforms them into public property belonging to the State or divides them up and assigns to private owners. The German reporter explains that the disappearance of allmende is generally due to the evolution of agriculture, requiring land enclosure in order to facilitate a more intense cultivation, and the transformation of communities in municipalities. The process of enclosure is well known and documented at the origins of capitalism, and this resilient concept presented in the German report is similar to the Sweden allmänning, an existent but recessive model. In the report
that describes England and Wales legal tradition, commons are better understood as common lands and right to common and, as we have already said, are regulated by the Commons Act, adopted in 2006. However, common lands back to the pre-Norman era, when communal properties permitted the allocation of lands for practicing, for instance, areas of common pastures. In the feudal period, the progressive transformation of common lands in private property determined a particular evolution, according to which “the idea of common lands evolved as a different mode of having rights to particular land distinct from other types of land”. However, the massive enclosures of open fields and common lands started in the fifteenth and seventeenth centuries and then crystallized in the eighteenth and nineteenth century significantly reduced in England and Wales the total amount and the availability of common lands that survived only in agricultural villages. In these areas, common lands were used not only for economic activities but also for leisure or for assembly. Beside this historical tradition of common lands, in England and Wales the category has recently known revival thanks to the Commons Act, adopted in 2006. According to the data provided by the national reporter, “at the time the law was debated in Parliament, it was estimated that there was 550,000 hectares of common land in England and Wales”. Thus, the number of common lands and the resilience of commons rights has forced the Parliament to adopt an act for protecting common lands, towns and village greens. In the Dutch report, we do not find any reference to the commons, so we do not know if in the past, and in particular during the Feudal period, they existed. The reporter points out that a debate exists in doctrine around the nature of those goods that perform a public function and in particular about the possibility to put them extra commercium. In the former socialist legal orders, the reporters stress the element of community in the idea of the commons. According to this perspective, Croatia identifies the collective ownership existed until 1990 as ancestor of the commons, while the Russian report give us information that covers a longer historical period. While the famous mir (assembly) is widely assimilated to the notion of the usi civici and other forms of medieval communal property, in the pre-Soviet period, forms of public servitudes existed and they were called rights of common participation and consisted in legal solutions for giving public access or introducing a mandatory passage. This reference is probably provided starting from the element of access that characterizes the analytic concept of the commons. In the Soviet period, all the lands and natural resources formed the category of all-people domain: they were not privately owned, but managed and protected by the State. At the end of the Socialist experience, the all-people domain was declared public (belonging to the State assets) and open to a process of privatization. No information on this topic is provided from the reports of
Property Meeting the Challenge of the Commons
Slovakia and Hungary, even if the Hungarian reporter referred to a feudal tradition of communitarian managements of forests and pastures. United States and South Africa present a composed picture of the commons. In the latter legal order, despite the inexistence of a uniform definition of the commons, this concept is well known in different fields: (1) the Roman Dutch tradition consigns to modernity the idea of res communes; (2) in the indigenous law, land is shared and cultivated by communities and no boundary exists; (3) commonage properties indicate those things that belong to municipalities and are devoted to the free use of inhabitants for grazing or other agricultural purpose. The last point is very interesting because commonage property is certainly a form of public property but it can be shaped according to the needs of the inhabitants and in particular to the “plight of the poor”. The United States report informs us that commons were present in the culture of peoples native to the Americas: common lands and their sets of relationships and traditional knowledge were erased by the colonization and the introduction of private property. Natives were expropriated and killed, so the history of the commons in the United States corresponds to that of genocide. The conquest of America is linked with the terra nullius doctrine that was formulated in order to assume European conquerors as the original owners of lands. The conflict between commons and public/sovereignty has been recently confirmed by the political negotiations to allow indigenous people to obtain small parts of lands in which constitute their Tribal reservation and Indian Nations. No reference to the colonial period is included in the Brazilian report, nor in the Canadian one even if it is well known that colonization has followed the same pattern of land plunder supported by natural-law ideology through the Americas. On the contrary, the reporter from Quebec claims that there were no commons in the past, although France, the colonial power, knew in the Feudal period that kind of arrangement. The land of Quebec was conceived as a place of pure exploitation, so all the special rights created by indigenous people before the colonization were abolished. These rights were the result of a special relationship with land and they consisted in forms of rights to use and temporary possessions (droits d’usufruits pour l’utilisation et l’occupation). Thus, in spite of nominal differences, the pattern of free exploitation of what was deemed a terra nullius seems confirmed.
3.3
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other reports present academic debates that in some cases are directly connected with the category of the commons, in others, develop a critique to public property in accordance with the effects of privatization (Croatia, The Netherlands, Germany and Russia). In Hungary, any academic debate is present, even if researches in the field of public goods are conducted. An academic debate devoted to the commons as new legal category is present in Belgium and it was generated by the process of the revision of the civil code. The proposal of December 2017, art. 57 suggests the introduction and regulation of “res communes”. The report does not explain the relationship between this new category and the already existing rule about choses communes, but the ratio of the reform seems to be the identification of new rules through which facing the ecological crisis. In England and Wales, the debate mainly concerns the use of commons with two opposite positions: on the one side, there are those who propose an economic use of the common lands, while on the other side, their use connected with biodiversity and environment is supported. The reporter of South Africa affirms that an academic debate around commons is gaining momentum and it is direct to define a precise content of the commons considering that they are mentioned in different sources of law. Similarly, in Sweden an academic debate is starting because of the institution of allemansrätten can be connected with the idea of the commons. Moreover, the idea of creative commons is developed in the domain of intellectual property. In Germany, the academic debate among lawyers is focused on creative commons and global commons. In Brazil, the academic debate on the commons has been inspired by the Italian one and in particular by the role of this category in the political campaign of 2011 against the privatization of the water supply system. Moreover, some reflection on the commons stems from a general debate on the theory of goods that takes into consideration the AngloAmerican theory of the bundle of rights. In the United States, the academic debate around the commons follows two main strands of work. The first is dedicated to the collective action problems that commons produce. This approach remains linked with the argument of the tragedy of the commons. Another important line concerns the public trust doctrine and its development in order to be applied for the protection of natural resources. The same lines of work characterize the academic debate in Canada and they start from the statement of Macpherson about collective property and follow the arguments of Ostrom, Rose and Sax.
Academic Debates on the Commons
The last question about commons concerned the state of the academic debate about this category. Does it at all exist? Few reporters (Quebec and Slovakia) declare the complete absence of an academic debate around the commons. All the
3.4
Comparative Analysis
The answers to these questions allow highlighting some elements which are shared by the majority of the legal
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systems investigated. In absence of a precise legal definition, reporters identify public property as the most similar institution to the commons. They are generally aware of the limit of this definition and, in fact, they find new concepts to gather the deep meaning of the commons, as the cultural heritage demonstrate. Cultural heritage is characterized by a focus on future generations, but no special remedy is provided for protecting them against the infringement of their interest in the preservation of these goods. Furthermore, the other limit that emerged from the answers to Q3 is that there is a clear tension between the (official) rule of inalienability and the law in action allowing for a political and economic practice of privatizing the public wealth. All the legal systems investigated show a particular sensitivity for those goods that are connected with the fulfillment of constitutional rights, even if this link is not always made explicit. In those countries in which constitutional rights influence the legal protection of public goods, we find additional rules to allow access to non-owners and special duties of preservation and maintenance. The most interesting results about the life of the commons concern their relationship with public property: the majority of legal systems shows how the disappearance of the commons depends on the expansion of public sovereignty. In many reports, the idea that commons can be held with private titles is admitted and the conciliation between commons and private interests is ensured through special limits to the powers of the owners. We can conclude that a general sensitivity for the commons is diffused, even if it is easier for reporters to discuss the different forms that can be grouped under this category rather than attempting a fully fledged theoretical reconstruction of the notion. The challenge that the commons bring to property seems clearer in the field of public domain rather than in private property. The different patterns of the academic debates show how difficult is for legal scholars to discuss about legal institutions in absence of a regulation or a jurisprudential decision. Nevertheless, the legal debate is able to both gather the ideas given by economic, political or sociological studies and organize them in an original manner.
3.5
The Protection of Public Property Beyond the Law in the Books
This section of the questionnaire was dedicated to investigate the public property and the relationship between commons and public institutions. The first question aims at understanding how the rule of inalienability works in different legal systems. In particular, we try to explore if it is an absolute condition or a relative one. This analysis is important in order to verify the necessity to provide a stronger protection for the
commons, as suggested in the proposal of the Rodotà Commission. The second and the third questions aim at collecting answers about the privatization of the commons and their nationalization. The idea is to investigate the process through which commons are transformed into private or into public ownership. This latter profile, was introduced after the meeting of July 2016, during which Professor Ghangua Liu, a Chinese colleague, put in evidence the necessity of including also the hypothesis of nationalization for covering those situations in which goods that belong to communities are forcefully transferred to the state. This question probably did not achieve this objective, considering that all the reporters have considered nationalization equivalent to expropriation, except Germany and Italy where some elements emerge.
3.6
Inalienability of Public Goods
The answers to the question about absolute inalienability of public property allow stressing the weakness of this provision. In fact, the reports demonstrate that relative inalienability is the rule, while the absolute prohibition to sell public goods is just an exception. This is true for the majority of the interviewed reporters. Finally, a common bulk does not emerge, since the circumstances and the kind of absolute inalienability is variable across systems. Germany identifies things that are absolutely inalienable in the Constitution: according to art. 90(1) motorways and highways are included in this category as well as the enterprises that can help the Federation in their management (Art. 90(2)). This statement is valid also for railways (art. 87e(3)). The inalienability, in other words, covers the ownership of the public asset but also its management, introducing a very interesting mechanism for avoiding the inversion of the substantial and formal ownership that occurs when the public good continues to belong to a public entity, while the management is given to a private enterprise with a long-term lease or concession. In a similar situation, the possibility to control for a very long period the management of a public resource generally means the accumulation of the kind of asymmetrical information and power which makes the manager the real owner. Beyond the case of Germany, only The Netherlands among the continental European legal systems knows a hypothesis of absolute inalienability for the territorial sea and the Wadden Sea. The Swedish legal system allows the Government to dispose of public assets but when they consist in immovable properties, they cannot be alienated if they are required for the functioning of the State and their value exceed 75 million crowns. It is interesting to note that in continental European legal systems, the decision to alienate public assets can be taken by the Government in office and only in Sweden an
Property Meeting the Challenge of the Commons
authorization of the Parliament is needed to sell immovable properties of higher value. No particularly original profile can be detected in the other groups of legal systems. In Russia and Croatia, the inalienability of public goods is relative as leases and concessions to private entities can be introduced. The Croatian reporter indicates that the maritime domain is absolutely inalienable as well as public goods in common use, forests and forest lands; in Russia, the absolute inalienability covers only military assets while the market system is generally extended to public goods, sometimes giving a market-oriented interpretation to the Constitution. This is the case of Art. 72 Cost. according to which properties of common use as land, water objects and natural resources are managed and cared jointly by the Federal Powers and the Subjects of the Russian Federation. In 2014, the Supreme Commercial Court held that this statement does not imply an exemption for these goods from the possibility of being alienated as it does not establish an exclusive public status for them. In Hungary, a list of inalienable public goods is included in the Act CXVI adopted in 2011 to regulate national assets: conditions of privatizations have also been defined and those contracts of alienation that do not respect them can be declared invalid. In the post-colonial legal systems, we generally find statements of absolute inalienability. Thus, in the United States navigable waters, parks and monuments are inalienable, while other federal public assets can be the objects of leases or concessions. A special category of inalienable assets derives from the indigenous tradition: things defined cultural patrimony by Native American are not alienable as well as their sacred or funerary objects. In Canada, only the beds of the sea and the tidal waters are inalienable; an original case of inalienability concerns the right to fish that cannot be assigned in exclusive forms. In Quebec, the rule is that public assets can be alienated and no exception exists; special authorizations are required to alienate some natural goods. Finally, in Brazil, we find solutions that coincide with the models introduced by the continental European legal systems, so that the inalienability is relative and leases are admitted.
3.7
Remedies Against Privatizations
Question 5 required reporters to analyze those remedies trough which a legal reaction to privatization is possible. In this question privatization is not defined but the nature and the objective of this act have already been discussed in the introduction: it consists in the alienation of public assets to private entities or, according to a larger definition, in the transformation of a public enterprise into a private one. Privatization can be carried out at different levels of government, because every public owner (State or local authority)
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can alienate public assets. This question represents the natural continuation of Q4, because now we know that the alienation of public assets is generally admitted as a rule in the majority of the legal systems interviewed. Privatizations can be resisted in court in many legal systems; in fact, only the Canadian report excludes legal actions and considers exclusively political opposition to this kind of public decisions being possible. Reports highlight remedies in the field of public law such as special referendum to stop privatization and\or civil or administrative actions to challenge in court the decision of public authorities. Germany shows a local referendum to challenge privatizations at the Lander level, whose effects are genuinely able to protect public properties. In fact, the referendum can concern the repurchase of the privatized state property, as in the case of the gas supply system in the Land Hamburg, privatized and then repurchased by the local authority after a winning citizens’ initiative. In Italy, national referendum can be promoted to abolish national laws that have privatized public services or assets, as occurred in 2011 with the referendum against the privatization of the water supply system. This kind of democratic tool, however, is quite different from the German local initiative because the Italian one can only produce an abrogative effect, while no mandatory purposeful effect is admitted. The national reporter for England and Wales does not identify a national remedy, but suggests that challenges to State privatizations can be done though Article 1, Protocol 1 under the European Convention of Human Rights, according to the principles and the conditions provided against expropriations. If we take into consideration only an abstract discourse, the decision to privatize can be challenged in court in many countries and national reporters provide examples of possible remedies. However, the answers raise at least two problematic issues. First, the essential problem is represented by the qualification of the locus standi to challenge the privatization; second, when the remedies are admitted, they are generally individual actions, while collective actions are not foreseen. This shortcoming is again the result of a problem of standing, so that only environmental associations, who can represent an interest diffused in the collectivity, may challenge those acts which are able to produce an environmental damage. The reports highlight this procedural complication and, in fact, reporters have typically answered to this question trying to imagine the national remedy or the doctrine that could be applied to challenge privatizations; however, real cases and jurisprudential decisions are not so diffused. According to this general presentation, the Belgian reporters argue that the privatization of public goods can be challenged through two remedies. The first one consists in a legal action before an administrative court promoted by an environmental association in those cases in which privatization might (injunction) or has been able (ex post
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remedy) to produce an environmental damage. The second strategy consists in applying the standstill doctrine, according to which everyone can take a legal action against the public entity if the privatization risks diminishing the levels of protection already acquired ex art. 23 of the Constitution. In some sense, this legal itinerary is followed also by the Swedish system, where an individual action can be taken against the decisions of the Government that affect one of the fundamental rights protected by the European Convention of Human Rights or by the art. 9.2 of the Aarhus Convention. The concrete infringement must be proved in the judicial process, so that the plaintiff’s standing is again very complicated to demonstrate. In Italy and in The Netherlands as well as in Slovakia, administrative actions can be taken against the public measure that establishes the privatization through the ordinary means of judicial review. This implies that it is difficult (almost impossible) to argue against the merits of the provision, which is generally left in the discretion of the public authority. On the contrary, the administrative procedure can be challenged on the usual formal grounds (violation of law, lack of jurisdiction, excess of power). The difficulty for the plaintiff of having locus standi is described in the German report, too. Here we find an interesting case in which the infringement of an individual right caused by the decision to privatize a public asset (a local Christmas market) has been able to overwhelm the whole privatization scheme. The Federal Administrative Court held that the privatization of the Christmas market constituted a violation of the guarantee that certain municipal affairs had to be self-governed by the municipality, since the decision to privatize prohibited municipality from influencing the private organizers. Russia and Brazil present original actions to challenge privatization. In Russia, privatization can be nullified by an action taken by the Public Prosecutor or the Federal Agency in those cases in which the public decision has been adopted against the law. This is an example of reaction against privatization of public properties that are absolutely inalienable. It is a procedural control that remains within the administrative circuit. In fact, private persons cannot claim for the nullification of a privatization but they can always file their complaint to the Public Prosecutor, asking him to take the legal action described above. However, the report does not allow us to know more about this legal tool and in particular, we wonder whether the private persons must have a specific and current interest to file their complaint or, similarly, whether it is mandatory for the Public Prosecutor to take a legal action after the reception of a private complaint. In Brazil, two different remedies can be applied to challenge privatization. The report mentions a popular action that would seem to be a type of actio popularis, but unfortunately, no details are provided in the report. To the contrary, the
U. Mattei and A. Quarta
public civil suit is described and similarities emerge with the Russian tool. In fact, the Constitution assigns this action to the Public Prosecutor in order to protect public and social property, the environment and diffuse and collective interests. The action is an ex post remedy, so that he can obtain a money remedy if the privatization has caused a damage or the fulfillment of an obligation to do or not to do something in the cases in which these kind of remedies better fulfill the purpose. The report points at a decision of the Superior Court of Justice after a public civil suit of the Public Prosecution Office of the State of Rio Grande do Sul about an act of the Municipality that intends to turn a square— included in those goods for the common use of the people—into transferable public property in order to sell it to the social security entity. The object of this civil suit concerns procedural issues: in fact, the Public Prosecutor aims to know if a public civil suit against the Municipality is possible. Nevertheless, as far as we can understand from the report, the privatization has already been decided and Public Prosecutor can claim only to obtain a proper compensation for the removal of the urban green area. In an obiter dictum, the decision includes harsh words about the decision to privatize, demonstrating the ecological sensibility of the court. The public civil suit is an interesting remedy for the protection of the commons, even if it is only an ex post remedy, so it does not give any chance to stop the privatization. Moreover, the initiative is completely referred to the Public Prosecution Office and we do not know if citizens can demand his intervention. Finally, no information arrives from the report of the United States, where both the cases of privatization and nationalization are faced through the regulation of expropriation. Similarly, the legal system of Quebec does not foresee any remedy against privatization but the reporters mention those situations in which the State expropriates lands that belong to indigenous nations in order to build a pipeline. The procedure allows an opposition to the project and the organization of public debates to discuss the reasons of the resistance.
3.8
Remedies Against Nationalization of the Commons
The question n. 6 was directed to analyze remedies against the nationalization of the commons that means their transformation in public properties. All the reporters have responded to this question assuming that nationalization requires the expropriation of private properties for a public purpose. Many procedural and judicial similarities can be described: in fact, expropriation is typically characterized by the elements of the public interest and the compensation for the privation of private property.
Property Meeting the Challenge of the Commons
The decision to privatize can be challenged before administrative courts for procedural claims, while the amount of compensation before civil courts. Beside the case of full expropriation, some legal systems know expropriative measures that consist in the application of limits to property rights in order to achieve a public purpose. Thus, there is not a privation of the good (that generally is a land) and in Germany, this solution implies that compensation depends on the extension of the interference. Russia is the only legal system where expropriation assumes a punitive function: the State may acquire private properties when the owner carries out improper uses or infringes the boundaries of the zoning or other land categories. Moreover, in this former socialist legal system, expropriation can be challenged throughout a collective action. To the contrary, the United States is the only country where expropriation can be applied to achieve a public purpose that is concretely carried out by a private entity: the reference is to the famous case Kelo v. City of New London where private lands had been assigned to a private corporation after a taking procedure against small private owners. Excluding those answers in which the remedies against nationalization coincide with those provided for expropriation, Brazil, Quebec, Italy and Germany present original institutions. We have already discussed in par. 6.2 the Brazilian public civil action and the remedies through which in Quebec indigenous nations or communities can challenge the expropriation directed to the construction of pipelines. We must now take into consideration the German and the Italian answers, although the interesting profile does not concern remedies against nationalization, but a special hypothesis of nationalization. In fact, the German Constitution regulates “socialization”, that is a transfer of land, natural resources or means of production to the state; this forced transfer is followed by the payment of a compensation. Unfortunately, no socialization has ever been carried out, so we cannot understand the situations in which this institution is applied and its political consequences. Similarly, the Italian Constitution (art. 43) states that enterprises which provide essential public services, energy or are monopolist in their market sector and are able to fulfill a preeminent public and general interest, can be nationalized and transferred to the State, public entities or communities of users or workers. This rule is particularly advanced, because we find “traditional” nationalization but also a transfer to formal or informal communities. Like in Germany it provides compensation. We have only one example of nationalization ex art. 43 Const. that was the base for the famous judicial dispute of European law Costa v. Enel in 1962. The rule has never been applied to transfer productive assets to communities.
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3.9
Comparative Remarks
The analysis of these answers highlight how existing remedies and doctrines could be interpreted and applied to resist against privatizations. This is the only available solution in most legal systems since only Russia and Brazil have a special action for such litigation. Despite these specific institutions, the Brazilian public civil suit and the action promoted by the Public Prosecutor or the Federal Agency in Russia do not allow the participation of inhabitants and maintains the remedy within a public or administrative circuit. Similarly, as emerges in the Russian report (but not in the Brazilian one, where the point is not clarified) only procedural errors are relevant, while the merits are not object of the legal debate. Moreover, these actions are ex post remedies and they intervene when the privatization has been completed. In Russia, privatization can be cancelled only if the public act can be nullified for the infringement of a mandatory rule, while in Brazil the only effect of the public civil suit consists in obtaining a compensation or an obligation to do or not do something, but we do not know if it includes a duty to repurchase privatized assets. Taking now into consideration those tools, rules or doctrines that can be adapted to challenge privatizations, the Constitutional argument is the most influential one. In fact, in Belgium and Sweden (here the reference is to ECHR and the Aarhus Convention) the infringement of fundamental rights or the diminishing of the level of protection already acquired represent two important arguments; similarly, the reporters of Quebec state that art. 36 of the Loi Constitutionnelle of 1982, by introducing a legal standard for the federal government in the provision of public services, could be used to challenge privatizations, but there are not available examples. All the legal systems share the problem of the locus standi: according to the definition of legal standing, it is almost impossible to demonstrate that privatization infringes an individual subjective right or a relevant interest. Furthermore, no collective remedy allows individual inhabitants to take a legal action and only environmental associations can apply for representing a collective or diffused interest. This solution is very restrictive because it introduces a subjective limit (single private persons and informal communities are excluded) as well as an objective limit, because only environmental damages can be claimed. We could conclude that the protection of the commons is insufficient; this is true also considering that no remedy exists to claim in the interest of future generations and, again, the huge limit to this kind of approach is represented by the limitations introduced by standing to sue.
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3.10
U. Mattei and A. Quarta
Private Property and the Commons
Q7 and Q8 aim at investigating the fundamental laws concerning property rights, by considering whether private property is considered a fundamental right and which are the other subjective positions against which it can be balanced. Answers to this question are relevant because they should allow us to understand the flexibility of property rights and their capability to be modified after a proportionality test. In fact, property rights can clash with rights of housing, the protection of the environment, rights to health and others, as we will see with the factual cases in section II of the questionnaire. In these situations, there is a conflict between an owner and a non-owner/possessor or a conflict between the protection of property rights and a diffused interest. As explained in the introduction, the category of the commons is often used to signify the necessity to redistribute resources: for this reason, the flexibility of private property is essential to balance different interests. The same objective is pursued in Q8, where we have intended to analyze the role of exclusion and access, their conflicts and the concrete possibilities to balance them. The right to access and the perspective of inclusion find their first representation in the technicalities of the rules of private property: we want to arrange these elements in order to describe a complete micro-system of access to property.
3.11
Private Property and Constitutional Protection
In the continental European legal systems, private property finds different and original constitutional definitions. In these countries, art. 1 of ECHR Protocol 1 considers private possessions as a fundamental right, producing important effects mainly in jurisprudential decisions of those countries where private property does not have the high standing of a fundamental human right, as occurs in Italy and Sweden. In Germany, Belgium and The Netherlands, instead, private property is considered a fundamental right but this status (though limited by the social function clause) is explicitly declared only in Germany, while the other two derive it from the position of the rule within the Constitution. Both the Belgian and Dutch definitions, in fact, refer to expropriation and, by so doing, introduce a negative guarantee that confirm the fundamental status of this right. Nevertheless, balances are possible, even if these constitutional definitions do not include a social function of property as in Italy, Brazil and Croatia and Germany. In Belgium, in fact, through a balancing test based on a control of proportionality, the protection of environment or cultural heritage, urban law or the right to housing could defeat private property. Similarly, in The Netherlands, the right to health can limit property rights, as
a decision of the Dutch Supreme Court declared in 1991. Compensation can be provided to the owner who suffers limitations, according to the intensity of the interference. In the German Constitution, private property is a fundamental right but it is not absolute, so the balancing with other rights is always possible. In this legal system, private property is always defeated by the necessity to protect human dignity. In Italy, private property is included among social and economic rights and it is characterized by the provision of its social function and the idea of accessibility; a balancing test is admitted in particular when there is a clash between property rights and the right to health, human dignity or the environment. In the Italian legal system, the impact of the conception included in the ECHR—that is mandatory according to art. 117 par. 1 of Italian Constitution—has been significant, in particular in the field of “occupazione acquisitiva”, a special case of expropriation that occurs before the adoption of the corresponding public decree. Compensation of the sacrificed private property has been fixed at the market value after several decisions of the European Court of Human Rights that condemned Italy for the infringement of art. 1, Protocol 1 ECHR thus forcing the Constitutional Court to abandon its previous case law that accepted statutory limits to the amount of compensation as practical applications of the “social function clause”. The most original conception of private property can be found in Sweden, where a precise definition does not exist. This conception is the result of a historical evolution during which ownership and the redistribution of lands have never been the battleground of political conflicts, probably because the low density of the population, the absence of feudalism and the presence of peasants’ representatives in the Parliament since very early on. Similarly, legal scholars do not debate about the abstract idea of property: their approach has been very influenced by legal realism, so they prefer to study and analyze concrete and specific problems. According to this approach, the old Swedish Constitution—the Instrument of Government of 1809—forbade the executive branch to deprive a citizen of her property without a lawful judgement, but the element of compensation has been introduced much later, with the Instrument of Government of 1974. Since 1976, the Instrument includes private property among fundamental rights. This change, however, has not caused any interpretative innovation. The impact of the ECHR case law has been particularly problematic for the Sweden legal order, because it emboldened the political supporters of a strict definition and protection of private ownership. In fact, in 1994 a new reform modified Chapter 2 § 18 of the Instrument, introducing the limit of public interest to deprive private owners, while in 2011 a new legal reform stated that everyone—not only Swedish citizens—if expropriated can obtain a full compensation for the taking in the amount of the market value plus a standard increment. Nevertheless, in 1994 the
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allemansrätt has been introduced in the Instrument as an autonomous right, so it is not conceived as a limitation to private property. In Brazil, private property is included among inviolable rights together with the right to life, liberty, equality and security. As we have already said, the Brazilian Constitution and Civil Code contemplate its social function that allows to balance property rights and produces two additional effects: the owner cannot retake his or her private goods that are employed for activities of social interests; moreover, when so used, they are not subjects to attachment for the payment of the owner’s debts. Existential interest can always prevail in a balancing test with private property. A similar legal regime makes the law in action in South Africa and the United States, where guarantees against racial discrimination limit property rights and makes formal equality prevail in certain legal conflicts with private property. This arrangement inspires the US public accommodation doctrine, according to which the owner of a public accommodation cannot exclude people unreasonably, in an arbitrary or discriminatory manner. In Canada, private property is not a constitutional right; a balancing test seems to be admitted, but this point is not made clear by the report. In Quebec, private property is regulated in the Charte Quebecoise as a fundamental right, but limits are possible to protect environment or to introduce zoning laws. Looking to the former socialist legal systems, we can note that private property is today a constitutional right. In Croatia, it is classified among the economic, social and cultural rights and a duty to contribute to the general welfare is established for owners or users. In Russia, it represents a fundamental right and the balancing test is possible: the human right to have a place to stay always prevails in a clash with property rights. No information about this issue is provided by the Slovak report, so we only know that private property has a Constitutional definition. In the Hungarian report, any reference to a Constitutional framework is provided and the answer to this question is not clear, since the reporter just takes into consideration the guarantees provided against expropriation.
3.12
Exclusion and Access in Property Law
The limits to the right to exclude justified by a non-owner’s right to access present a homogeneous classification in the 15 legal systems analyzed. In particular, limits can be voluntary—accepted and introduced by the owner—or mandatory, established by law. The first case does not represent a true limit to the right to exclude, but only one of the ways in which the owner can exercise it. In fact, he can exclude others or he can permit
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their access. In this category, we can include voluntary servitudes that are regulated in Belgium, Germany, Italy, England and Wales (easements), Croatia, Russia, South Africa, United States and Quebec. In many countries, the right to transit on private lands for having access to a public road is generally conceived as a public servitude, so its creation is mandatory for the owner who has the right to obtain a compensation. This case is included in the second group of limits to the right to exclude: we are speaking about those situations in which the owner must suffer the access of the non-owner. In The Netherlands, Italy and Croatia, the non-owner has the right to access private property when he must carry out restorations to his own property. In this category of limits, we can include the installation of conduits (gas, water, Internet, etc.) that cannot belong to the owner of the land plot or the building on which they stand. This hypothesis is regulated in Croatia, where the owner who suffers the installation must obtain a fee when conduits are private or a compensation when conduits are public, and in Russia (conducts are defined linear objects), where conflicts between owners can break out. In Hungary, access is regulated in the civil code and it finds three different solutions: access to the neighboring land—for doing works of public interest, harnessing animals, gathering fruits, removing branches or roots, for the construction or the maintenance of a building and “for other important reasons”; access without a permission in emergency situations; and use for public purposes, category that includes acts of tolerance and easements. In Germany, Italy, The Netherlands and in some sense in South Africa, access of non-owners must be suffered by the owner when it is based on a state of necessity, an emergency situation in which interferences must be tolerated. It is very interesting to note the position of this provision: in the German BGB, it is positioned after the definition of private property, so that the relationship rule/exception (exclusion/ access) is clear. In the Italian civil code, instead, the state of necessity is regulated in the sections dedicated to tort law, because it limits the payment of compensation. In The Netherlands, the infringement of private property to have access must be tolerated when it serves a public interest of great importance, but no example is provided. In the group of limits established by law, we can include several provisions that concern access to nature. The more articulated institution is the Swedish allemansrätt, while in other countries such as Italy, Slovakia or in Canada (Nova Scotia), it represents an exceptional feature without a strong protection. Access to common lands is protected in England and Wales, since these goods are mainly private property, except in special cases. It is regulated in the Countryside and Rights of Way Act as right to way or right to roam in registered common lands and open country.
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3.13
U. Mattei and A. Quarta
Comparative Remarks
The answers to these two questions show that private property can be balanced and limited despite its nature of fundamental right. In other words, we can see that private property is not an absolute right and limits do not represent an exception but actually, its physiological functioning in a relational context. We have not, however, sufficient information to describe the way in which the balancing test is performed, whether the law leaves it openly to judicial discretion or whether it attempts to regulate it. In The Netherlands, it is based on a proportionality judgment, but except this specification, we do not know any detail. The right to health, human dignity, the right to housing or the protection of the environment can all prevail on private property in all legal systems surveyed, as the solutions to factual cases will demonstrate. Among the limits to property rights, those interferences that concern the right to exclude are quite diffused, even if access does not represent a legal notion per se. We find it in the Italian Constitution—where art. 42 provides that it is the social function of property to make it accessible to everybody—and in the South African Bill of rights, where sections are devoted to access to land or natural resources. In this quite recent Constitution, access is employed also outside the field of property law and it generally refers to the possibility of enjoying rights or public services. Access against the will of the owner is admitted only in particular situations: some of them are legal, such as access to a public road or to forests; others are generated by an unlawful act, an infringement of private property that is exceptionally admitted, such as in the state of necessity doctrine. However, combining the results of Q7 with those of Q8, we can conclude that the protection of fundamental rights can theoretically determine limits to the right to exclude: the factual questions should allow analyzing how the balancing test concretely works.
4
Conflicts and Cases
4.1
Introduction
The factual questions aim at providing a concrete description of the solutions to the following disputes: (a) A first group of cases discusses conflicts between owners and unlawful possessors who infringe property rights in order to fulfill constitutional rights. In these cases, the abandonment of property is a recurrent theme, because our objective is to understand the tension between a dynamic and (arguably) altruistic behavior
of the possessor (commoning) with an inactive rentseeking attitude of the owner. In this kind of situations, the conflict could be solved by understanding the material interest of the owner to exclude others when he has no use value, in order to balance actual uses of possessors, with possible future projects of the owner (including extraction of rent). The aim of this part of the questionnaire is to understand how the balance test can concretely work when private property clashes with right to housing (Q1), health care (Q2), right to food (Q3), access to nature (Q5) and cultural production (Q7). The results of these questions will be analyzed in the same section of this report because they all together offer a complete picture of the legal and judicial possibilities to balance property rights (b) Two questions are devoted to access to water, analyzed in rural and urban contexts (Q4a and Q4b). In the first case, a conflict between different uses of water exists and it opposes three villagers to a private corporation. The aim of this case consists in understanding the role of the principle of prior use in the management of water sources, in particular in those situations in which a subject uses them for fundamental and basic needs and the other for commercial purposes. In the second case (placed in urban context), we present a conflict between users of the water supply system and the corporation who manages the service. The dispute is generated by a large increase in the price of water. After failing to pay their third bill, users suffer the detachment of the water supply, so that they are not able to access this fundamental resource. In this case, the dispute opposes the detachment for lateness in the payments—that is generally mentioned in the water supply contracts signed by the users—and the fundamental human right to water that in an urban context can be fulfilled only throughout the access to the industrial service. (c) The last group of cases includes two questions. The first concerns the possibility to judicially challenge the development of a mine that risks polluting the territory, through collective remedies (Q6). The second concerns the protection of climate in the interest of future generations (Q8) and combines elements from both the Volkswagen’s scandal of polluting emissions and the Urgenda Case, in which an association sued the Dutch government for its insufficient engagement in the protection of the environment and of climate against activities determining its change. The solutions of these cases should allow to focus on individual and collective remedies to protect the commons in the interest of current and future generations.
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4.2
Property Rights vs Other Constitutional Rights
4.2.1 Right to Home The first case introduces a quite common situation: a private corporation suspends building activity before final completion because a public authority requires some public authorization and stops it. The unlawful possessors infringing the development’s company private property are families in need with children. They occupy the building and start to improve it, by carrying out several ameliorations. After a couple of months, the legal manager of the corporation discovers the occupations and attempts to evict the families through legal means. The main legal issues concern: (a) The solution of the conflict between an owner who is not using his building and unlawful possessors who are living a state of necessity. According to these elements, the case allows to understand the remedies that the owner can deploy and in particular the role of private law and criminal law. (b) The relevance of abandonment in the resolution of such conflicts. In this case, and in all our factual hypothesis we take into consideration, the exercise of the right not to use of an owner generates a de facto abandonment. Though the owner is not relinquishing his property through formal acts or declarations, his behavior together with the state of neglect of the building makes it clear that he is not interested in its use value. In Q1, the lack of use derives from the lack of a public authorization. (c) The right of the possessors to obtain some compensation for the ameliorations that they have carried out to improve and use the building. The solutions to the legal issue sub (a) are very similar in most the legal systems considered. In the continental and non continental European legal systems, Germany, Italy, England and Wales, The Netherlands and Sweden, the private corporation would prevail and obtain a judicial remedy to evict the families. In Germany, the owner can bring a claim relying on para. 1004 BGB—in order to stop the interference of the possessors—or para. 985 BGB to recover the building against the possessor. The state of necessity of the families cannot be opposed and it does not constitute a valid argument against their eviction: in fact, the solutions provided by public assistance are deemed sufficient to ensure alternatives to people in need. For this reason, no relevance can be assigned to the right of housing or to the protection of vulnerable children. In Italy, the owner would prevail in a civil action by claiming the recovery of possession against the possessor (art. 948 of the civil code), while he would not prevail in a criminal action because the state of necessity
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would work as a justification to the crime. In The Netherlands, the owner would obtain an eviction order against the possessors, since the families would have public assistance for their particular situation. In this country, after 2010, the occupation of vacant buildings has been considered a criminal offense: before that date, taking possession of someone else’s abandoned building was justified by the large necessity of housing determined by the disasters produced by the Second World War and squatting generally tolerated. In Sweden, the owner can successfully apply for an eviction order based on disturbance of possession. The rules about trespass cannot be applied to this case, because they are provided to protect offices, factories and areas where people generally work. In 2017, the judicial procedure to obtain an eviction order has been modified, in order to protect the owner also in those situations in which he is not able to provide the identity of the occupiers. After the reform, he can apply for eviction by demonstrating his reasonable effort to obtain that information. The reform has introduced a special protection for the occupiers: in fact, an eviction proceeding includes a proportionality test, according to which this order can be approved “insofar as the reasons to apply the measure offset the inconvenience or detriment to the defendant”. In England and Wales, the occupation of a building is unlawful if the owner of the building does not give the authorization or tolerate the occupants. The occupation is a trespass to land and it is regulated by the rules of tort if the occupied building is non-residential. On the contrary, occupation of residential buildings is considered a criminal offence and it is punishable by 6 months’ imprisonments and a 5000 fine. Eviction of squatters is specifically regulated in the Protection form Eviction Act (1977): to evict squatters, the owner has to apply for an interim possession order after 28 days of noticing their presence. This procedure is mandatory and unlawful eviction is a prosecutable offence. Welfare statutes and housing assistance exist to support people in economic difficulty, especially in those cases in which there are children: housing benefit payments to persons who have no income or social housing solutions. Local authorities are responsible to provide support and accommodation in case of homelessness. The most original and interesting solution is reached in Belgium, the only legal system among the continental European ones to let non-owners prevail in the dispute against the owner of the building. Three main factors make this solution possible: families were in state of necessity at the time of occupation; the building was not used and no plan is available to understand its future destination; the eviction of the families would have more serious consequences than the prejudice suffered by the owner. In Belgium, the occupied building is considered a domicile, so the right to housing of the squatters is protected against any interference. Until October 2017, the owner could apply for an eviction order
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only before a civil court whose reasoning would have been the one just mentioned. Last year, instead, a new federal regulation has been introduced to criminalize squatting. We do not have information on how this picture can be reconciled. With the exception of the Belgian answer, the most interesting element that emerges from the set of solutions to the issue under point (a) is that in Germany, The Netherlands and Sweden welfare state continues to be considered a valid support to people in need. The judicial solutions generally focus on civil remedies and procedures, even if, as far as we can understand by reading the reports, the occupation of immovable property is also a crime. No information is provided about the relationship between these legal fields, so we do not know if a priority exists or if, to the contrary, the owner can apply for the remedy he prefers. We can assume that in continental European legal systems, the civil remedies are generally applied. The solutions to the legal issue under (b) show that the state of neglect and the abandonment of the building is not able to influence the result of the proceeding. As we have already discussed, only Belgian judges can take it into consideration when they evaluate the effects of eviction for both the squatters and the owner; furthermore, in this legal system, some federal regulations consider the abandonment of a dwelling an administrative offense, punished with a fine. In Brussels, the Housing Code admits that special precarious occupancy agreement can be signed with the squatters in order to assign them the use of the vacant building. These agreements are valid until the owner submits a plan for the future development of the building. In Italy, the abandonment influences the decision about damages produced through the occupation. In fact, some decisions argue that squatters must compensate the owner because the occupation in re ipsa damages the owner, while other judgments state that evidence of the damage must be proved. Damages only emerge if the occupation precludes the owner from renting, selling or obtaining other returns from his building. In other words, we could say that the interest of the owner to use and to exclude is relevant and without it, the occupation does not necessarily constitute a damaging event. Finally, in continental European legal systems, the solutions to the legal issue under (c) are very different, although they share a common ground. In particular, Germany, Italy, The Netherlands admit a compensation for ameliorations in connection with the good faith or the bad faith of the possessor. In Germany, a possessor in bad faith who has committed a tort cannot obtain compensation for the works and improvements carried out; moreover, the ameliorations described in the case (painting the walls and adding a little garden) are considered useful for the possessors’ living conditions but they are not necessary for the building. The Netherlands share the same solution: the
U. Mattei and A. Quarta
possessor in bad faith can only remove the amelioration if it is possible; as an alternative, he can sue the owner for unjust enrichment, deploying a remedy that is available also in Sweden. In Italy, the possessor even in bad faith can be refunded for extraordinary works in the lesser sum between the increased value of the land and the building and the costs incurred. In post-colonial legal systems, we find different solutions to the legal issues under point (a). In fact, in Brazil and South Africa, the possessors might prevail; In Brazil, this solution depends on the preference of the system towards dynamic uses of property against the inactivity of the owner. In South Africa, the main argument for the prevalence of the possessors regards the protection of the right to housing and the presence of vulnerable people (the children); nevertheless, formally speaking, the unlawful possession of the building is still constructed as a trespass. To the contrary, in the United States, Canada and Quebec the owner would apply for an ejection or an eviction in order to recover the present possession of the building. The only limit to this action would be the successful acquisition of property through adverse possession, but in Q1 we know that the families spend only a short period in the building. The state of necessity is not relevant and in the United States an emergency is required to recognize this special condition. The right to housing is not relevant to decide this case and in Quebec it is not a justiciable right because it is not considered as fundamental but just as an economic and social right. Similarly, the examination of the legal issue under point (b) shows that abandonment can influence the judgment only in Brazil where it can work as an index to evaluate the social function of property. In South Africa, the de facto abandonment does not have any consequence, while the de jure abandonment— that would consist in a formal surrender to property rights—is not admitted, because vacant immovable cannot be res nullius and they belong to the state. The criterion to define the right to obtain compensation (legal issue under point (c)) depends once more on the good faith or the bad faith of the possessor. In Brazil and Quebec, the evicted families could apply for the reimbursement of the sum invested in the ameliorations, while in South Africa and Canada, they can sue the owner only for unjust enrichment. In the Canadian system, the possibility to fail is high, considering that occupation is an unlawful act. In the United States, the possessor has no possibility to obtain compensation not even under the unjust enrichment doctrine. In the former Socialist legal orders, the protection of property rights makes the owner prevail. In fact, in Croatia, Hungary, Slovakia and Russia he can sue in trespass, obtaining an ejection or an eviction order even through an urgent procedure. The owner can sue the possessors to recover the possession of the building and damages for the interferences caused by the occupation. Thus, analyzing the
Property Meeting the Challenge of the Commons
legal issue under (a) we can state that property rights are not generally balanced against the right of housing; in Russia, this constitutional right influences only the removal of the levy applied to the debtor’s housing property, while in Croatia, the protection of the right to housing can be claimed only against public authorities and not within private relationships. The presence of the children is not sufficient to change the solution to this case: in fact, in Hungary and Russia, a representative of the municipal guardianship body would intervene in the eviction procedure in order to take responsibility over the children and find for them an alternative housing solution. In Slovakia, the presence of vulnerable persons can sustain an argument for a possible infringement of human rights, assuming that eviction is contrary to “good morals”. The legal issue under point (b) does not present unexpected turns. In fact, the solution of the case is not influenced by the vacant condition of the building, because the de facto abandonment is not relevant if the period of time sufficient to acquire through adverse possession has not elapsed. The families can obtain compensation for the ameliorations only in Slovakia, while in Croatia and Russia they cannot sue the owner because the improvements were necessary only for their own enjoyment of the building. In these countries, a possessor in bad faith can ask a compensation only if the ameliorations were necessary and useful for the owner.
4.2.2 Comparative Remarks The answers show several common features. The first concerns a generalized impossibility to balance property rights with the right to housing, even if the building is vacant and the families are in need. The state of necessity is applied only in few countries and it generally works as a justification for criminal law only. The second shared element arises from the insignificance of de facto abandonment, so that in the legal systems investigated in this report, the right to use normally includes its negative version, i.e. the right not to use and therefore to abandon. Only in Brazil, the right not to use clashes with the social function of property and in Belgium, it can determine the application of an administrative fine. The third element is the lack—Belgium excluded— of temporary solutions to assign unused buildings in absence of a plan that describes their future development. Some points still need clarification and would need an in-depth analysis. In particular, we have not sufficient elements to understand the relationship between civil and criminal remedies. Furthermore, judicial orders to remove the squatters are described as ejections or evictions, but no information is provided about the actual intervention of public force to execute the removal of the unlawful possessors. This is true even in this cases where a precise
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regulation of evictions has been introduces, as in England and Wales. The possibility to obtain a compensation for the improvements of the building has been generally analyzed through two main categories: the good or bad faith of the possessor and the unjust enrichment doctrine. A related element taken into consideration concerns the necessity of the improvement. In order to compensate the evicted possessors or at least to reimburse their costs, the improvement must be generally necessary or useful for the owner. This criterion is incompatible with the possibility to compensate the bad faith possessor (as the squatter would be qualified), especially when the necessity of the improvement is evaluated ex post, by consulting the owner. The Italian solution from this point of view shows both originality and an objective criterion.
4.2.3 Right to Health The factual case in Q2 presents a dispute similar to Q1; the different elements are (a) property rights collide with the right to health; (b) the vulnerable people are migrants. Their position is particularly delicate if they are “irregular”. In this case, access to public health care could entail a risk for their permanence if doctors or health workers denounce their presence (which in most countries is required by law). For this reason, self-organized assistance, beyond the public service, can represent for irregular migrants the only possibility to be treated; (c) the building acquired a higher value because of the self-organized medical center. Thus, the owner takes advantage of someone else’s efforts of urban regeneration. Despite these elements, the solutions to this case do not present relevant differences compared to the answers to Q1. In continental and non continental European legal systems, the owner would prevail against the unlawful possessors and the protection of migrants’ health is not sufficient to defeat property rights in a balance test. In Italy, it could work as mitigating circumstance of the crime if the owner would decide to seek criminal prosecution of the occupiers; in The Netherlands, an emergency situation could be invoked by the occupants perhaps stressing the fundamental role of health care in the ECHR; nevertheless, according to the Dutch report, emergency would be very difficult to be demonstrated, because many alternatives are provided by public assistance, so migrants could easily have access to public health care. Still in The Netherlands, the abandonment of the building could be qualified as an abuse of rights, but this is certainly not a strong argument. In the Swedish report, the problem presented under point (b) is taken into consideration: access to public health facilities is ensured to irregular migrants and it is supported by a duty of secrecy for healthcare professionals in order to protect the migrant’s privacy. In England and Wales, the non-profit medical clinic cannot prevail against the owner, but however,
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refugees, asylum seekers and other particularly weak categories of persons are entitled to free medical treatment. Among the post-colonial legal systems, we find only one solution of the case in favor of the occupiers. According to Brazilian legal theory, the report informs us, the owner who abandons the building infringes the social function of property, while the possessors carry in out in action. Moreover, because in Brazil migrants’ access to public healthcare facilities is not ensured, the activities of the unlawful possessors are truly able to fulfill constitutional rights that otherwise would remain only on paper. In the South African report, the solution of the case needs clarification. It appears that in a conflict between property rights and right to health, the latter would prevail in the balance test. However, art. 27 of the South African Constitution protects right to health, but access to healthcare for irregular migrants, especially in ordinary situations when no emergency occurs, is not in practice guaranteed by this article. Moreover, the material effect of conceiving the eviction as “just and equitable” is not so clear. In Unites States, Canada and Quebec the owner would prevail and obtain an eviction order; we discover that in the US system, abandonment can concern only personal properties, so the vacant building of Q2 is just unoccupied. This condition does not prohibit the owner from excluding others and claiming possession. The same picture seems to emerge by studying the answers of Croatia, Hungary, Russia and Slovakia. The prevalence of property rights over the right to health is clear. In Slovakia, the abandonment of immovable property is not possible, apparently because they are registered in the cadastre; nevertheless, a debate among legal scholars exists on this issue. In Croatia, the solution of Q2 involves profiles of criminal law, since helping irregular migrants is criminally punished. The results of this analysis demonstrate that the balance test can determine a compression of property rights only if adverse possessors are defending their own rights. In fact, there is an evident distinction between the position of migrants that are beneficiaries and the role of the occupiers providing service for them. In two countries, the possessors even risk being persecuted for violation of zoning law (Germany) and for infringement of the Healthcare Protection Act (Croatia: the dwelling occupied is not adequate to organize a medical clinic).
4.2.4 Right to Food In the factual case n. 3, the balance test involves the right to food. A private vacant land is transformed by a group of individuals (commoners) into a communal garden where fruits and vegetables are produced. The following conflict between ownership and possession involves the property of fruits derived from an activity not authorized by the owner. The solution of this case probably needs a preliminary study
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about the meaning of the right to food (let alone of food as a commons) but it seems from the answers that this is not (yet?) the framework of discussion in any legal system. The ownership of fruits produced through an unauthorized and illegal activity is faced in very different ways but the results still clearly favors ownership. Generally speaking in fact, since this the conflict is not approached by the law as an issue of right to food, ownership of the land generally includes the right to keep its fruits even when the owner did not contribute any labor for their production. In continental European legal systems, the owner generally would prevail when suing the possessors claiming the surrender of the land. In Germany, the cultivation of the vacant land plot is a special type of improvement, but the possessors are in bad faith, so they cannot obtain any compensation for their work. Moreover, according to the reporter, ownership of the land plot includes that of the fruits and the vegetables, before and after their separation from the soil. The meaning of the right to food is not clarified; it could prevail on property rights in theory but in Germany a variety of public financial supports make sure that people have not access to food so it would not be relevant in this case. In Italy, the owner can apply for recovering possession of the land plot and the possessors in bad faith must return the fruits and compensate the owner for those things that they have used before the starting of the judicial proceeding. In The Netherlands, instead, possessors can acquire the ownership of the harvest transformed in food thanks to the rule of “specification” which assign property rights to someone who has manufactured a new thing with materials belonging to another person. Without this process of transformation, raw materials—fruits and vegetables—belong to the owner. In Sweden, the cultivation of private vacant land is prohibited and it is not included in the set of rights that derive from the allemansrätt: in fact, people who roam on private land can only pick a reasonable quantity of berries or mushrooms, but the decision to cultivate belongs to the owner of the land plot. This report shows how the essential role of public assistance in excluding the possibility to identify the (otherwise relevant) state of necessity, since access to food is ensured by public authorities. In England and Wales, the Commons Act could protect urban gardens against the private owner if the plot is registered as a commons and the persons who take care of it have registered their right of common to cultivate garden as food source. Otherwise, fruits, trees and plants belong to the land’s owner. The payment of a compensation for improvement to the land plot could be matter for a court, since any tenancy agreement exists in this case between the plaintiff and the defendants. The former Socialist legal systems show very different solutions to this case. In Hungary and Russia, fruits and vegetables belong to the owner who can sue the possessors on the basis of unjust enrichment, because they took
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advantage of an activity not authorized. Nevertheless, if the Court orders possessors to clean the land plot before leaving it, they can take away fruits and vegetables at that time grown. Croatia is the only legal system where the right to food would prevail on property rights, since it is essential for sustaining human life. Thus, if the cultivation of the land plot has ensured the possessors’ survival, the state of necessity justifies their violation of the right of ownership. In Slovakia, the possessors who are forced to leave the communal garden can detach fruits and vegetables that they have planted. They can apply for a compensation only if the owner seeks damages. In post-colonial legal systems, there is a general prevalence of property rights in the balance between ownership and possession, except in Brazil, where the social function doctrine would give to possessors the right to stay and use the land plot. Thus, they do not acquire property, but their dynamic use could be enhanced and protected. In South Africa, possessors have no action to obtain fruits and vegetable or to ask a compensation for their work. In this country, a special protection of the right to food does not exist, but specific public initiatives struggle against children’ malnutrition. In the United States, according to the unjust enrichment doctrine, the squatters can apply for obtaining a compensation for the cultivation, while in Canada no remedy for the unlawful possessors exist. Finally, in Quebec, the rule is very similar to the Italian one: possessors in bad faith must return fruits and vegetables to the owner, while possessors in good faith could conserve them.
4.2.5 Culture In the last factual case characterized by a conflict between (public) property rights and antagonistic possession, occupiers (commoners) use the violation of public property as a political tool to challenge the privatization of a public theater. This case comes from the Italian struggles for the commons organized after the successful referendum against the privatization of the water supply system. The best-known case is the occupation of the Valle Theater in Rome, where a group of actors (cultural commoners) occupied this ancient theater to avoid its privatization in June 2011. In this case, followed by many others through Italy, squatters organized cultural activities open to everybody in order to ensure inclusion rather than exclusion in dealing with culture as a commons. This qualitative standard, essential for the life of the commons, was achieved through an internal organization of the informal community capable of avoiding the development of a closed community excluding outsiders from participation in managing the public space. For this reason, we asked to national reporters to identify the best legal institution to organize an inclusive management of the commons should the squatters obtain permission to stay.
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The solutions to this case show that commoners cannot legally defend their occupation that can remain active only trough political means. From the legal point of view, the public owner can easily evict them. Cultural productions as well as the involvement of the citizenship through open activities is not sufficient to allow them to stay and manage the theater. Thus, as far as the final solution is concerned, no difference exist between the infringement of private or public property. However, some (weak) remedies are available to contrast the public decision to privatize. In Belgium, the decision of the municipality to privatize the theater can be challenged by the Region as supervising authority. The special protection reserved to the cultural and historical patrimony makes such an intervention likely to happen. Nevertheless, the public owner keeps the right to evict the actors, even if it is not easy to do so politically, especially when months or years pass. The occupation of the actors cannot be considered unlawful if they had the key of the building, and no break-in was committed. Culture is protected in the Belgian Constitution, so the actors could argue that their occupation is justified by the standstill doctrine. In Germany, eviction is not the result of a civil action: when the owner is a public authority, it is an administrative act, enforceable through the intervention of police units. The same legal framework is shared by the Italian legal system, where Prefects generally order eviction. Actors cannot challenge the public decision to privatize the theater because they do not have legal standing. In England and Wales, the particular nature of the immovable and the connection with right to culture—that is not specifically regulated in the United Kingdom—do not introduce original elements to evaluate the behaviors of squatters. In fact, the occupation is a trespass and the eviction has to be implemented according to the Protection from Eviction Act. Nevertheless, if the theatre is an ancient monument according to definition of the Ancient Monument and Archaeological Areas Act—section 61 (12), citizens could try of apply for an interim injuction halting their eviction, while they challenge the decision to sell the theater. The occupation of the theater is an unlawful trespass in The Netherlands, Sweden, Croatia, Hungary, Russia, and Slovakia. In all these countries, actors cannot legally defend their occupation. In Sweden, the only possibility they have is to demonstrate that eviction is an excessive measure considering that they are offering cultural services. Nevertheless, according to the national reporter, success seems unlikely. In Russia, the privatization can be challenged by the public prosecutor. Only in South Africa among post-colonial legal systems, the actors would be able to defend their occupation by stating that it has been functional to maintain the cultural production, without determining costs for the municipality. In Brazil, the case appears difficult to imagine according to the reporter
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because the function of the public building cannot be changed after the privatization. The theater could not be turned into a supermarket and so it would survive privatization. Nevertheless, the actors could defend their occupation by arguing the constitutional value of culture: this existential value prevails in the Brazilian legal system on exclusive patrimonial interests. In the United States and Quebec, the municipality can evict the actors since it has the right to possession and of discretionary exclusion. In Canada actors would prevail if they can demonstrate that the occupied theater is the only public space to organize performances and artistic activities. In this case, eviction would represent an infringement of the Charter of Rights and Freedoms and the proportionality of this measure must be demonstrated by the public authority. The answers about the legal institutions that actors can deploy for managing the theater through an inclusive and participated structure show an important convergence among different legal systems. Non-profit organizations, foundations and trusts are the most diffused models, even if no reporter analyzes the basic features of these institutions that allow participation and protection in the interest of future generations.
4.2.6 Access to Nature In this case, access to nature is analyzed not only with the aim of understanding the extent of the right to exclude, but also to investigate the role of customs and uses in the domain of the commons. Q5 introduces a family who uses to roam in a green area during the weekend; the land plot and the lake within are sold to a corporation who decides to transform the area in a country club, making access to nature impossible. This plan is challenged by an environmental group seeking to protect access to natural commons. In continental European legal systems, different legal strategies are possible to defend access to the green area, but the legal standing of the environmental group seems problematic. Although a special right to roam is regulated in Sweden and in England and Wales only, the other countries of this group present different remedies to protect access to nature. In fact, forms of access are ensured by public paths (Belgium), rights of common usage that include access to free landscape for recreational purposes (Germany), public rights to way (Italy), limited forms of right to roam (The Netherlands). In particular, in Belgium, the family (and other inhabitants of the area) rather than the environmental group can sue the corporation in front of the justice of the piece in order to limit her right to enclose the green area through fences. They must demonstrate that during the ages a public path has been consolidated, thus the plan to enclose the green area infringes
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the common heritage. Similarly, in Germany, individual members personally affected by the decision of the corporation can challenge the decision to enclose the area. They must demonstrate that the green is included in the “free landscape”, a concept that is not explained by the reporter. In Italy, public rights of way can be acquired through adverse possession. The plaintiffs suing the corporation must demonstrate a 20 years-long use of the path to cross the private area. In this case, the public rights of way work as a burden that follow the land plot, so that the new owner cannot refuse access. In The Netherlands, the right to roam on somebody else’s land is admitted only if the owners are not using the land, but fences are sufficient to indicate the interest of the owner to exclude others. Obviously, the most complete solution is given by the Swedish legal system, thanks to the allemansrätt: the corporation cannot exclude families from the green area. She can only apply for obtaining an order that prohibit them from disturbing beyond the point of tolerance. Families can claim their allemansrätt asking to the judge for ordering to the owner the open of a gate to give public access to the area. In England and Wales, the solution of this case depends on the classification of the private land: the Commons Act can protect their access if the private land has been registered as open access land and the CRW can intervene if the land has been designated as place of outstanding natural beauty. Among former Socialist legal systems, only Croatia admits special forms of right to roam. Although access to nature does not exist as a general institution, the Nature Protection Act identifies exceptions to the power to exclude by defining a set of cases and types of private property affected by such limitation. It is not clear if the situation described in Q5 corresponds to one of the hypothesis regulated in the NPA. However, the reporter states that walking and playing can support an acquisition by adverse possession of an easement that is not further defined but that is probably similar to a public path. In Russia and Slovakia access to nature is possible only in natural parks or public green areas. In the Russian legal order, families can apply for a servitude of passage because of the presence of the lake that belongs to the public domain; they can ask to the public prosecutor for intervening in the legal proceeding. In Slovakia, the right to free passage can be acquired through long time possession but possessors must be in good faith. In every legal system thus far considered, legal arguments are based on the existence of uses and customs that support public access. Thus, access to nature is indirectly ensured through legal solutions stemming from a variety of fields of private law. Similar solutions are not possible in Brazil, South Africa, the United States and Quebec. Only Canada displays remedies and legal tools similar to the continental European ones.
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In particular, in Brazil, the right of free passage can be established for ensuring access to public roads and water sources only; similarly, in South Africa access to private property is not possible and in the factual case the right to roam must be authorized (maybe implicitly tolerated) by the former owner. The corporation can legitimately revoke the consent and enclose the green area. In the United States, the acquisition through adverse possession of a right to walk cannot be demonstrated because families did not possess in an exclusive (hostile) way and the owner was not excluded from the green area. In the Canadian system, families can argue the consolidation of a public right of way, whose essential elements are: the dedication, that is the opening by the owner to the public use and the acceptance of the public. These features can derive also from a long and open use of the green area, so it is not necessary to have any formal declaration or act.
4.2.7 Partial Final Remarks These answers demonstrate that access to nature can limit the right to exclude of the owners only when supported by the development of special uses or easements. For this reason, the passing of time is fundamental, because most of the answers shows that the best solution is the acquisition through prescription or adverse possession. According to this framework, we could conclude that access to nature cannot be protected if it is a recent practice except in those legal systems that establishes special rules for the conflict between access and exclusion. Another interesting element is the role of environmental associations. Few reporters analyze its standing, because the majority of them think that persons directly affected by the transformation of the green area can directly sue the corporation. This approach is justified by the facility to demonstrate their interest in promoting the judicial proceeding while such an interest of the environmental group is less obvious. In some reports, the association can sue the corporation claiming the infringement of environmental laws, because the country club can produce a negative environmental impact. The environmental groups could also sue for violation of zoning laws or of procedural requirements to obtain building permissions.
4.3
Access to Water
Q4 (a) and Q4 (b) aim at investigating access to water in urban and rural contexts. As showed in the introduction of this report, water is a commons and the first part of the questionnaire has already showed that legal systems generally classify it as a public good or a res communis omnium. These factual cases seek to understand the material
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implications of those classifications, focusing on access to water and uses of the resource.
4.3.1 Rural Context In Q4 (a), the case presents a diversion of the river, whose waters are used by the nearby villages through local aqueducts and irrigation canals. A corporation diverts the course of the river, so water no longer flows to villages’ basic infrastructures, making cultivation and other activities impossible. The aim of the case is to investigate the legal title to use water and what kind of use prevails in the described dispute. The most problematic issues occur when both activities have been correctly authorized. In all continental European systems, both parties need a public permit to use the water of the river that belongs to the public domain. Some distinctive legal traits can however be identified. In Germany, villagers must obtain public authorization if they do not own the lands over which the water flows. Thus, we can derive from this statement that private waters exist and in this case the owner can freely use the river. The activity of the corporation can be stopped if it has caused the diversion. Thus the prior-appropriation water rights doctrine according to which the first person to take a quantity of water from a water source for beneficial uses (agricultural, industrial, household) has the right to continue to use it seems to be the law. With regards to this point, no information is provided by the Italian report who specify that both the parties need a permit to use the water of the river. If waters are not public, the judge can solve the dispute by applying art. 912 of the Italian civil code. This rule establishes a balancing test according to which the judge must conciliate the opposite interests of the parties; the riparian owner who must tolerate the compression of his right to use can obtain a compensation. In The Netherlands, water is a res communis omnium, so the dispute concerns opposite rights to use, since ownership cannot be introduced. Villagers can use water through the irrigation canal if they own the lands along the river without demanding a public permit, while this latter is necessary in case of building of an aqueduct. Villagers would prevail on the corporation because of the priority of their use. They can challenge the corporation in court to stop activity, claim compensation for the suffered damages (that the diversion has caused) and having the river flow restored. In Sweden, both the parties need a public authorization to use water, that can be granted if the disadvantages from an environmental, economic and health perspective do not outweigh the disadvantages. Thus, the prior use of the villagers matter as the disruption of the waterflow can be considered a serious disadvantage from a social and economic point of view. In England and Wales, access to water is a fundamental right and rights to access and use water are recognized in custom and common law. In particular, three categories of uses have been described in the decision Swindon
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Waterworks Co Ltd v. Wilts & Berks Canal Navigation Co Ltd (1875). A first form concerns the use of water for domestic reasons and watering livestock, while it does not cover industrial purposes like spray irrigation. Any kind of restriction can be applied to this form of use that describes a riparian right. The second form concerns extraordinary or secondary purposes and it gives raise to right. The last form is not connected with a riparian right and concerns purposes foreign to or unconnected with the riparian tenement. Beyond this riparian rights described by the common law, others have been identified and regulated in different statutes that limit the common law riparian rights. According to this legal framework, villagers can apply against the corporation for protecting their riparian rights, but statutes could limit their claim. Moreover, villagers have practiced the second type of use and even if they have a right on water, its protection is particularly difficult. The prior-appropriation water rights legal doctrine is applied also in the former Socialist legal systems, where villagers will prevail over the corporation, obtaining the restoration of the flow as well as a compensation for damages. Similarly, Russia, Croatia and Slovakia share the need of a public authorization to build an aqueduct. In particular, in Slovakia the permit is linked to special use of water, while its general use is free. In Hungary, rivers are national assets, so the diversion of their water represents a violation of the national law. In the post-colonial legal systems, the set of remedies is not original, although the type of use has a more important role in defining the dispute. In Brazil, water is a public good that is able to support multiple uses. The Brazilian civil code states that people who are not supplied with water, have a right of vicinage that give access and the right to use (arts. 1293–1294). According to this provision, the diversion can be prohibited because damages villagers’ access to water and the fulfillment of their basic necessities. From the South African report, the solution of the case is not evident: the priorappropriation water rights doctrine could be applied if the activity of the villagers is legal and this depends on the period in which they have built the irrigation canal and the local aqueduct. In fact, before 1994, running waters could be owned by private subjects, so private infrastructures to canalize it were admitted. After 1994, a reform established that water is a resource common to all, so property rights cannot be allocated. Public authorities can only authorize the private use of the resource. Thus, if the villagers have built their irrigation canal and aqueduct after this reform and without a special public permit, their activity is unlawful and it could be defeated by the corporation. In the United States, villagers can sue the corporation arguing that the diversion constitutes a private nuisance; they must demonstrate their interest in land that determines the title to use water, considering that the legal classification of this resource changes according to national jurisdictions. If the damage of the diversion has
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been suffered by the public, in general, rather than individuals, villagers can sue for public nuisance, arguing that the corporation has endangered their life, safety, health and property, obstructing the enjoyment of a right common to all. They can file a citizen action or a class action and ask for an injunction to stop the diversion, the restoration of the river flow and a compensation for the suffered damages. In Canada, the villagers can sue the corporation and obtain a permanent injunction to stop the unreasonable diversion of water carried out by the corporation. The diversion is “unreasonable” because it has reduced the flow of the river in quantitative and qualitative terms, infringing the limit that federal regulation establishes for extraordinary uses of water. In fact, the Canadian legal regime of water identifies ordinary uses, that are domestic or animal, and extraordinary uses which includes irrigation and manufacturing. If both the parties have been authorized by the public authority to use the river, the dispute would be solved according a variable criterion of priority. In particular, priority of use will be assigned to the upstream riparian owner; in some provinces this decision is influenced by the kind of use, because the domestic use of water generally prevails on agricultural or commercial purposes. Finally, villagers can stop the diversion even in Quebec, by suing according to articles 980, 981 or 982 of the civil code. Art. 980 states that the owner of a spring, a lake or a pond can use them but must preserve their quality; art. 981 concerns running water and prohibits the owner from changing in quality or quantity the regular course of the water that leaves his land. The owner is also enjoined from preventing other riparian owners from exercising the right to use water. Finally, art. 982 states that “a person having a right to use a spring, lake, sheet of water, underground stream or any running water, may prevent the water from being polluted or depleted” and requires “the destruction or modification of any works by which the water is being polluted or depleted”. The answers demonstrate strong commonalities of regime among the legal systems considered. In particular, the priorappropriation water rights doctrine seems to be the most diffused solution to reconcile opposite interests in the use of water. This kind of approach is not influenced by the legal classification of water. In fact, even where the river can be considered as a private good, the diversion is prohibited and the prior use prevails. Scant attention is reserved to the type of uses: Canada and Brazil are the only systems in which the private use of water is classified according to the typology of use and such classification can influence the solution of the case. This kind of approach could be important in those situations in which the prior use belongs to a corporation that uses water for industrial activities: in this case, in fact, villagers who divert the river to fulfill basic needs may lose against the corporation. For this reason, the best rule to govern conflicts for the use of water derives from a mix of
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criteria. The prior-appropriation water rights doctrine might be completed by a focus on the use of water, giving priority to household uses and agricultural essential activities, and by a balance test to reconcile opposite interests like in the Italian solution disciplined by art. 912 of the Civil Code. This complex mechanism would be able to give a strong protection to access to water.
4.3.2 Urban Context Access to water in urban contexts depends on the universality of the water supply system. In other words, access is connected to: (1) a material condition, that is the capability of the pipelines to distribute water everywhere, even in those areas where the costs of the distributions exceed the profit; (2) an economic standard, according to which the price of water must exclude profits and be reasonable. In Q4 (b), the water supply system is managed by a private corporation and the price of water suffers an increase of 200% in 1 year; the three users of our case fail to pay the water bill and after the third bill not paid, the corporation cuts off their access to water. Among the continental European legal systems, only in The Netherlands the users would fail in the lawsuit against the corporation. Here, only users who can demonstrate to be vulnerable people are protected by special rules against the detachment of water. Germany, Italy and Sweden exclude that the corporation can cut off access to water. In particular, in Germany and Italy, the private supplier is not completely free in fixing the price of water because public standards exist. Furthermore, German users can legitimately refuse to pay the bill and complain the unreasonableness of the price, demanding a civil court to fix a new rate. The corporation can defend the increase of the price by demonstrating that it depends on special works or investments to improve the water network. The Italian users can sue the provider before administrative court if the price is not consistent with the public standards, while they can apply for civil remedies against the cutting off. In Italy, the cutting off is possible only if the users do not pay a sum equivalent to 1 year provision of the minimum quantity of water (50 L/day). However, this quantity must be provided even if the users are not able to pay the bill, because it is the minimum quantity of water necessary to survive. The most interesting solutions comes from Sweden, where this kind of dispute seems to be only an abstract problem. In fact, the water supply system cannot be managed by a private entity and the price of water cannot exceed the costs required to arrange and run the water distribution: thus, profit is excluded from the water supply system. Similarly, the complete cutting off is not admitted. Any information about detachment is provided in the report of England and Wales, where significant social benefits are regulated to support people in need. In former Socialist legal
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systems, the detachment is limited by procedural devices only. In fact, in Croatia and in Slovakia, the provider must communicate the detachment with a notice. In Croatia, the users can prevail by demonstrating that the corporation has not sent the notice, so that the detachment is irregular. The most rapid remedy is a possessory action. After the notice, the failed payment of two bills is sufficient for regularly cutting off access to water. In this country, the public authority fixes a maximum rate to the price of water and the provider cannot exceed the 60% of this basic sum. According to the Croatian report, in the last year, disputes similar to Q4 (b) have been recurrent, because of the increase of poverty caused by the economic crisis. Nevertheless, vulnerable people who respond to precise public standards can ask for public assistance and obtain free access to water. In Slovakia, the system is more severe: in fact, after the notice, the user must pay within 30 days to avoid the detachment. The price of water cannot be challenged, if it has been approved by the Network Industries Regulation Authority. In Russia, users would fail, because cutting off access to water is admitted and legal after two payments failed; no notice is necessary and the provider can execute the detachment in 1 day. However, the price of water can be challenged before an administrative court, being fixed by public authorities. In Hungary, access to potable water is regulated in the Fundamental Law of Hungary (art. 20) and according to Act CCIX adopted in 2011, the household private use of water has a priority against industrial use in cases of scarcity. The (public or private) provider of the water supply system can cut off access to water only after 60 days of delay in the monthly payment and only after two written warnings. In postcolonial legal systems, users generally will prevail against the corporation if it has not sent the notice of detachment. In Brazil, the users can argue such procedural irregularity, while if the cutting off has followed a regular notification, they can only try to demonstrate that access to water is essential to enjoy other basic services. The detachment is not possible for schools, hospitals and health stations. In the United States, Canada, Quebec and South Africa, the absence of the notice is the only argument for the users who sues the corporation; thus, cutting off cannot be obstructed if the procedure has been followed by the provider. In South Africa, the only guarantee is a basic allowance of water that must be provided in any case (42 L/day). The national reports demonstrate that access to water in urban context finds a sufficient protection only in continental European legal systems, where the right to water has a role in the dispute against the provider, even if it is not generally applied explicitly as an argument to defend the failed payments. In the other legal systems analyzed, users are protected only by procedural formalities, so the notice ensures a sort of due process. The relationship between users and providers are governed by contract and it seems
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that constitutional rights rhetoric does not have much of an impact. One must consider that the right to water is not an autonomous constitutional right but it can be extracted from the right to life or to health.
4.4
Informal Communities and Future Generations
As we said in the introduction to this second section, the factual cases n. 6 and n. 8 aim at investigating collective remedies to defend territory and climate.
4.4.1 Territory In Q6, villagers try to stop mining operations carried out by a corporation and authorized by the government through a permission to drill for gold. The reporters were required to identify the legal actions that the villagers can promote as individuals and as community to oppose activities that seriously risk to pollute the territory and the nearby river. In continental European legal systems, the villagers’ possibilities to succeed are very limited, because of the presence of a public authorization given by the Government. In Belgium, Germany, The Netherlands and Sweden, the villagers can challenge the public permit, demonstrating irregularities in the administrative procedure or the infringement of environmental standards. Villagers can apply for individual remedies, while the community as an informal subject does not enjoy legal standing. In Belgium, Germany and Sweden, environmental associations can file a lawsuit but they must demonstrate a direct interest in the protection of the river. In the Italian report, there is an important reference to the precaution principle, according to which the villagers can apply for stopping the mining operations because of the risk of pollution. Individual citizens and associations that work in the field of environmental protection can file first before the Minister of the Environment and then, before an administrative court. The association must demonstrate to be suing representing a widespread interest. In Croatia, the villagers can discover the levels of pollution by asking for an inspection before starting the civil lawsuit. They can sue for an order to remove the risk of harm but the judge can deny protection arguing that mining operations and the corporation activities are “socially useful” (art. 1047 Obligation Act). This clause is not clear and legal scholars disagree about its content. However, in Q6 the government has authorized the activity of the corporation, so that it is quite difficult to challenge its social utility. Thus, the main legal issue arises from the risk of polluting, because if pollution was actual, the villagers could sue the corporation in private nuisance in order to enjoin future polluting activities. This remedy is residual, so the users can apply for it only if other legal tools are not available; in this case,
the plaintiffs can challenge the public permit before an administrative court. In Russia, no preventive action is admitted and an actual damage must be demonstrated to challenge the public license. This act generally establishes precise environmental standards and their infringement can determine the revocation of the license, as occurred in a real case in 2012. The villagers can sue as individuals or as co-claimants and they can ask the public prosecutor to assist them. In post-colonial legal systems, the solutions to the case are variable. In South Africa, the villagers can sue the corporation arguing a threatened breach of the National Environmental Management Act that protects against risks of polluting and of negative impact on the environment. Class action is admitted for the infringement of a constitutional right if the villagers are able to demonstrate that mining operations have violated their right to life, health or environment. In the United States and in Canada, private or public nuisance are legal action that could offer remedies to the villagers. Nevertheless, the chances of success of a public nuisance suit are quite limited, considering that the government has authorized mining. In Quebec, the mining activity cannot be stopped and the villagers can ask for an injunction only if the damage is serious and irreparable. The results of the analysis of these answers show that the endangered community has no legal action, which demonstrates a general diffidence towards collective remedies. Moreover, the risk of polluting is not sufficient to obtain protection and only in the Italian report the precaution principle is mentioned as legal base of prevention.
4.4.2 Climate This reluctant approach emerges in Q8, too. This case has been defined mixing elements from the Volkswagen emissions scandal (concerning the manipulation of computer system for the control of emission in cars) and the famous Urgenda case. The plaintiffs are 18 years old, they do not own a Popcar but they want to sue both the government and the car manufacturer in the interest of future generations, complaining the feeble sanctions inflicted by the first to the latter. The point of this case is not the amount of the sanction but what this sum symbolizes, that is a scarce engagement of the government in protecting climate, the environment and the interest of future generations. Thus, it is easy to find the weak point of the case: the legal standing of the plaintiffs. The reporters were required to explain how they can succeed in a civil lawsuit, starting from their particular condition of teenagers. In continental European legal systems, the young plaintiffs would generally fail against the car manufacturer, because they do not own a Popcar, so no legal relationship exist. The lawsuit against the government can have different solutions. In fact, in Belgium, this kind of action is possible and a similar case is actually pending. Indeed, the association
Property Meeting the Challenge of the Commons
Klimaatzak, following the model of Urgenda, has suited the State and three Belgian regions for the absence of efforts to fight against climate change. The association has argued the defendants’ fault (art. 1382), the breach of the precaution principle, the infringement of art. 23 of the Belgian Constitution and art. 743 of the Belgian Civil Code that protects res communes. The solution to this case is very interesting, because commons are directly involved. In Germany, the plaintiffs can sue the public authority responsible in the region where they live if the standards fixed in the clean air plan have been exceeded by the emissions of Popcar. However, they cannot challenge the sanction because the government can discretionary determine its amount. In Italy, instead, this kind of challenge is admitted by art. 310 of the Environmental Code: the plaintiffs demonstrating to be directly affected by the environmental damage produced by the polluting of Popcar can challenge the sanction as too feeble and not proportionate. In The Netherlands, thanks to the Urgenda precedent, the plaintiffs can sue the government arguing under tort law that the emissions of greenhouse gases and the climate change affect their life. This action is based on the idea that the protection of constitutional rights impose on the government a duty to take positive measures, so actions to prevent climate change must be adopted by public authorities. In Sweden, the plaintiffs cannot challenge the sanctions imposed to the car manufacturer, but they can complain the eventual infringement of the standards established in the environmental quality regulations. They must be able to demonstrate that they have been directly harmed by this infringement, otherwise the damage represents only a hypothetical scenario that is not sufficient to justify their legal standing. The reporter mentions a lawsuit promoted by a network of associations against the government to challenge the decision to privatize a public corporation engaged in mining operations. In that case, the plaintiff argued that privatization increased the risk of polluting, but his interest was not considered serious, because no actual harm existed. The existence of specific statutes that protect environment or the quality of air is the necessary condition for Croatian plaintiffs to sue the government. Without this kind of rules, they have no possibility to succeed. In Russia, instead, citizens can sue the government assisted by the public prosecutor, because they can defend the environment independently from an actual harm to their health or property rights. In these countries, the plaintiffs cannot sue the car manufacturer, because they do not own a Popcar and remedies of contract law cannot be applied. The Russian solution is shared by South Africa, where plaintiffs can sue for an infringement of their right to a healthy environment. Nevertheless, no precedent exists and the reporter was consequently able to define their possibilities to succeed.
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In the other post-colonial legal systems, we find the same legal issues. The plaintiffs are not consumers and they cannot sue the car manufacturer. In the United States, (Oregon case law) no legal action can be promoted because the injury complained by the young plaintiffs is not concrete, particularized, actual or imminent, thus the harm is only conjectural. In Canada, according to the reporter, the plaintiffs can argue a public nuisance against Popcar, even if the burden of proof is not too easy. Finally, in Quebec, the legal action is connected to an infringement of the standards fixed by art. 19.1 of the Loi sur la qualité de l’environment, that enlarges the locus standi. As already demonstrated in other sections of this report, the protection of the interests of future generation is particularly difficult because the notion of legal standing is very strict. The burden of proof to demonstrate a direct interest and an actual and concrete harm makes these kind of legal remedies useless, while a direct application of Constitution seems to be the best solution to force government to adopt positive strategies of protection. Moreover, another problematic point arises in the relationship between commons and contract law. In fact, in Q8 the plaintiffs have no legal remedies against the car manufacturer because they are not consumers, they do not have signed a contract of sale with Popcar. The defense of the commons ask for a paradigm shift not only in property law but also in contract law whose privity doctrine limits the protection of constitutional rights. In fact, present and future generations are affected by a damage that derives from the production and the circulation of cars that is made possible through many contracts of sale. Thus, in the current marketplace the effects of contracts are suffered also by subjects who are external to a contractual relationship.
5
Conclusive Remarks
The study of the answers included in national reports shows a complex picture. In fact, we could say that the national reporters are aware of the legal transformations implied by the rise of the commons, even if this category is not regulated or object of an academic debate. The problems included in the analytic version of the commons and summarized in the introduction are generally shared by different legal orders. Privatizations show a general weakness of the public domain in the relationship with private entities. Moreover, there is a necessity to identify inclusive strategies through which carry out a redistribution of resources. The limits of public property clearly appear in front of such challenges. The answers to the open questions dedicated to the conflicts between property rights and other constitutional rights generally admit a balance test, whose result cannot be taken for granted in favor of the private owner. The solutions
50
to the factual cases, however, clearly show the might of ownership especially if the possession derives from an unlawful act. The relationship between property and possession is therefore not so dynamic and constitutional rights struggle to find an effective protection. Nevertheless, we think that this kind of scenario is not completely negative for the rise and future of the commons, since it is still dominated by a complete trust in the welfare state that is however increasingly betrayed. This is the other contradictory result that emerges from comparing the answers to the open questions—where the role of the public domain is criticized—with the solutions to factual cases, where the infringement of property rights is generally considered not justifiable because the public assistance is assumed able to fulfill basic needs. The weaker profile of the commons concerns legal actions to protect them. All the legal systems analyzed adopt a very
U. Mattei and A. Quarta
strict notion of locus standi and prefer to assign the protection of diffused interests to environmental associations or government agencies. Individual actions are thus generally the prevailing solutions, while future generation who do not actually exist cannot find for the time being any form of protection. Ugo Mattei is Professor of Civil Law at the University of Turin, Department of Law and Professor of Comparative Law at the Hastings College of Law, California. He is research fellow at Collegio Carlo Alberto (Turin). Alessandra Quarta is Assistant Professor at the University of Turin, Department of Law and Director of Research at the International University College of Turin (IUC).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform Interpretation of National Laws Alejandro M. Garro and José A. Moreno Rodríguez
Abstract
The preamble to the UNIDROIT Principles on International Commercial Contracts (otherwise referred to as “UPICC”, “PICC”, “UNIDROIT Principles” or simply the “Principles”) suggests many potential uses. However, almost half of the known judicial decisions and arbitral awards referring to the Principles invoke them for the purpose of supporting or providing further legitimacy to a solution which is either dictated or at least suggested by some national (domestic) law of contract. This general report provides a comparative perspective on how the Principles have been used to “interpret or supplement domestic law”. While exploring the use of the Principles in domestic contract law for the sole purpose of corroborating that a similar solution may be reached under the PICC, this research study suggests how courts and arbitrators may fruitfully resort to some of the rules of the PICC either for the purpose of clarifying some ambiguities or filling same internal gaps in domestic contract law.
1
Introduction
The UNIDROIT Principles or PICC are meant to serve as many purposes as lawyers, arbitrators, judges, and different stakeholders who are aware of their existence find them useful to govern or settle cross-border This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. A. M. Garro (*) Columbia University, New York CityNew York, USA e-mail: [email protected] J. A. Moreno Rodríguez (*) Asunción, Paraguay e-mail: [email protected]
transactions.1 However, the PICC are rarely applied on their own and the first edition of the Principles, unlike its sister project, the Principles of European Contract Law (“PECL”),2 did not contemplate its potential use as a means interpret or supplement domestic (national) law. It was not until the 2004, realizing that in numerous cases the Principles were mentioned for the purpose of corroborating a decision in a dispute governed by domestic law,3 that the Working 1 The truth of the matter, however, is that still very few are aware of their content. Confronted with the question why should lawyers spend time and money researching conflicts of law rules and different solutions provided by domestic contract rules to contracts that are international, an experienced international lawyer is said to have answered in 2016: “Of course, that is true. We believe that the UNIDROIT Principles are a wonderful tool. The problem is that most people do not know them and do not take the time to read them.” Brodermann (2018), quoting a senior director of the European Legal Department of a US manufacturing company selling pulp to 30 countries around the globe. 2 See Preamble to the PECL (“These Principles may provide a solution to the issue raised where the system or rules of law applicable do not do so”). See Lando and Bale (2003), Parts I and II, Art. 1:101(4). The PICC consists of a Preamble and 211 articles divided into 11 chapters covering various aspects of general contract law and accompanied by detailed commentaries and illustrations, including general provisions (Ch. 1), formation of contracts and the authority of agents (Ch. 2), validity (CH. 3), interpretation (Ch. 4), content (Ch. 5, including third party rights and its conditions), performance (Ch. 6), non-performance (Ch. 7), set-off (Ch. 8), assignment of rights, transfer of obligations, and assignment of contracts (Ch. 9), limitation periods (Ch. 10), and plurality of obligors and obliges (Ch. 11). See Vogenauer and Kleinheisterkamp (2015). 3 A fairly accurate tough incomplete report of court decisions and arbitral awards resorting to the UPICC may be found in the data base of UNILEX (http://unilex.info), developed by the Centre for Comparative and Foreign Law of the University of Rome I, with the support of the Italian National Research Council. For a more comprehensive account of the different uses of the UPICC, see Michaels (2015), paras. 134–140. For use of the UPICC by arbitral tribunals, see Scherer M, Preamble II, paras. 46–57. See also Meyer O (referring to the cases and awards reported by UNILEX in 2016) (“Of the more than 400 decisions that to date have referred to the PICC, the cases that concern the interpretation of a domestic law constitute the largest group in purely numerical terms”).
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_3
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Group decided to include, as one of its potential uses, the “interpretation and supplementation of national law”.4 But which are the typical patterns, if any, whereby judges and arbitrators from different jurisdictions allow the Principles to be applied in order to discover the meaning of domestic contract rules? Which normative link may be resorted to in order to fill gaps and decide the unprovidedfor issue arising out of an international contract exclusively governed by domestic law? Is it appropriate resorting to such use of the Principles by referring to “general principles” of law found in some codes or statutes? Can the use of the Principles rest on the perception that the PICC somewhat embody or evidence “trade usages” or commercial “customs”? Thus, the first question addressed to the national reporters in this comparative study asks whether there is any statute, judicial decision or scholarly writings supporting reliance on the UPICC for this purpose.5 Several national reports assuredly inform that there are no judicial decisions in which the Principles have been ever cited or referred to as evidence of a “consensus on the law applicable to contracts”. In those jurisdictions lacking any explicit reference to a set of general principles or rules aimed at interpreting or supplementing the law applicable to international commercial contracts, the cases in which the Principles have been used to interpret domestic contract law are scarce or nonexistent. Other legal systems, in contrast, provide for different normative routes or doctrinal openings allowing the Principles to be used for the purpose of interpreting or 4
See para. 6 of the Preamble to the 2004 edition of the UPICC (“They may be used to interpret or supplement domestic law”). See Bonell (2005). After prescribing that the Principles “shall” be applied when the parties have agreed that their contract be governed by them, the Preamble suggests that 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”, “when the parties have not chosen any law to govern their contract”, and to “interpret or supplement international uniform law instruments”. They can also be used, and they have in fact been used many times, to “serve as a model for national and international legislators”. For a discussion of how the Principles have been used to inspire legislative reform, especially in countries with scarce jurisprudential developments on contracts involving foreign companies or those that have undergone radical socio-political changes, see Whited (2011). 5 The first question posed to the national reporters reads: Is there any legal source in your legal system allowing the use of the UPICC to interpret or supplement national contract law (either by way of explicit and specific legislation, by way of reference to “trade usages”, “general principles of law”, or based in any other source)? If so, please refer to such legal source, explaining how the court has reached such a decision (indicating, for example, whether and how the courts reached the conclusion that the UPICC represent “trade usages” or “customs” in the field of contract law). See The UNIDROIT (2018). (“Questionnaire on the UNIDROIT Principles as a Common Frame of Reference”) (http://gc.iuscomparatum.info/gc/project/the-unidroit-principles-as-acommon-frame-of-reference-for-the-uniform-interpretation-of-nationallaws-english/).
A. M. Garro and J. A. Moreno Rodríguez
supplementing (i.e., complementing or filling gaps) the domestic law of contract governing transnational disputes. Thus, some national reports mention cases in which the Principles have been referred to as evidence of a general consensus on the interpretation of treaties governing international contracts (e.g., international sales contracts governed by the CISG or international arbitration agreements governed by the New York Convention). Aside from the fact that in some jurisdictions the UNIDROIT Principles are cited by some courts while they are simply ignored in others, there is a significant weight of scholarly opinion regarding the Principles as a sort of “general consensus” of contract law shared by most Western legal systems; a sort of “common frame of reference on the law of contracts” or “global background law”6 that may substantiate or support the interpretation of the domestic law of contracts, especially with regard to issues on which most legal systems tend to agree but remain subject to different perspectives (e.g., the scope of application of open-ended principles such as “good faith”, or how serious or “fundamental” a breach of contract must be to warrant its termination, or which are the contours of the obligation to pay interest for failure to render a timely performance, etc.). This is why the second question posed to the national reporters sought trace those instances in which arbitral tribunals invoked the authority of the Principles and applied them, in the absence of the parties’ choice, as the general background contract law.7 The absence of a reference to the UNIDROIT Principles in the settlement of judicial disputes subject to domestic contract law presents a remarkable contrast with the generous hospitability given to the Principles by legal scholars from those same jurisdictions, who often rely on many provisions of the Principles as a comparative yardstick to clarify, interpret, and even “develop” their own domestic contract rules. This is probably the most extensive use of the PICC, other than in the context of judicial decisions and arbitral awards.8 Michaels (2014) (Michaels refers to “nine surprising findings concerning the actual use of the PICC”, most of which pointing their perception of “a Restatement of global contract law, and their function as that of a global background law”). 7 The second question posed to the national reporters reads: Have the UPICC been used as evidence of a general consensus on the law applicable to contracts (for example, on the existence of a duty of good faith, the obligation to pay interest, the requirement that a breach of contract must be “fundamental” in order to allow for the termination of the contract, etc.)? If so, please indicate which specific provision of the UPICC has been used in this way, referring also to the factual context of the dispute in which the UPICC have been used in this manner. 8 This is probably the answer to the third question posed to the national reporters: Assuming that the UPICC have been not been used by courts in your country for the purpose of interpreting or supplementing national or local rules on contract law, indicate whether they have been used in any other way and how. Discuss, for example, whether references to the UPICC were made as a general body of contract law 6
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
In order to assess the extent to which the PICC offer a modern and suitable response to issues of international commercial contracts which are not clearly or adequately addressed, or simply ignored, by the domestic contract law, the second and final part of the questionnaire individualizes a dozen provisions of the PICC, scattered through its different chapters (formation, interpretation, performance and nonperformance), asking the national reporters to identify a counterpart (statutory or judge-made law) in their domestic law of contracts.9 The national reporters were also asked whether there are other PiCC rules,10 not included in the given list, which may be resorted to interpret or fill gaps of their domestic law of contracts.11 Some national reports identified rules of domestic contract law functioning as clear counterparts to PICC rules and principles, though not always formulated in the same fashion. Other PICC provisions, in contrast, did not recognize any counterpart in the domestic law of contracts. The information provided in the national reports were thus able to identify the UPICC’s most innovative provisions, generally dealing with issues of particular relevance to international business transactions (e.g., conflicting languages, default rules for determining the currency of performance of monetary obligations), turning those rules quite attractive for the purpose of interpreting, filling gaps, or “developing” and ultimately stimulating and inspiring efforts towards law reform. While starting with the study of actual or potential openings for the use of the PICC in domestic contract law, this general report closes with a comparative analysis of contrasting approaches towards the Principles, speculating on possible explanations for their limited use in some or to some of its provisions in particular; whether references to the UPICC were made in combination with other instruments of uniform law such as the UN Convention on Contracts for the International Sale of Goods (“CISG”) or a more diffuse body of state laws (e.g., the so called lex mercatoria). 9 Question 5 lists selected provisions of the PICC, posing the following question: If there is a statutory or case-law rule (such as a code provision or jurisprudential line of decisions) dealing with the same or similar issue addressed by those selected provision of the UPICC, please reproduce the full text of such a provision or case-law rule, indicating any relevant difference you find between the domestic rule of contract law and the selected rule of the UPICC, also indicating whether the UPICC may be relied upon by the courts of your country as a general principle of contract law interpreting and supplementing national contract law. 10 Question 7 reads: Please include those rules of the UPICC (other than those included in the given list) which have been relied upon by courts or arbitral tribunals for the purpose interpreting a similar provision of your national contract law or in order to supplement (thus serving as a gap-filler) the national contract law in force in your jurisdiction. 11 Question 6 reads: If there is no such a rule of contract law in your jurisdiction, please indicate, with reasons, whether any of those selected provision of the UPICC may, in your view, be relied upon as a source of interpretation of the law of contracts in force in your country, or for the purpose of supplementing gaps in your national contract law.
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jurisdictions in contrast with the generous hospitability received in others. This is perhaps the most important contribution furnished by the magnificent national reports that we had the privilege of examining. The national responses that we seek to sort out, in fact, foreshadow the continuous potential of the UNIDROIT Principles to increasingly inspire and affect the development not only of the law of international commercial contracts, but also of the domestic law of contracts in general.
2
Foundations for Using the PICC to Interpret and Supplement Domestic Contract Law
Because most national legal systems have been conceived as self-sufficient, that is, as providing for themselves the method to follow while filling any gaps or lacunae, it is necessary to find a normative or doctrinal foundation within the national legal order by which the PICC may be resorted to as a means to interpret or supplement domestic contract law. In in the absence of a viable legal “route” by which the Principles can enter the legal system, it would be difficult to legitimize the application of a non-binding instrument such as the UNIDROIT Principles. The answer to the question whether the legal system provides for “any legal source” opening the door for the application of the PICC in their jurisdictions received very different answers from the national reports, suggesting that some legal systems are more amenable than others for allowing the PICC to influence the interpretation and supplementation of domestic law. Whereas some national reports pointed to the absence of any legal link between the UNIDROIT Principles and their domestic law of contract, others pointed to the reference to the “general principles of law” and “trade usages” as a potential legal foundation on which the application of the Principles may rest.
2.1
Jurisdictions Lacking Normative Foundations for Applying the PICC to Interpret or Supplement the Domestic Law Governing the Contract
Some national reports such as those from Chile, Germany, Greece, Japan, Italy, and the United States point to the absence of legislative provisions expressly admitting the use of the UNIDROIT Principles for the purpose of interpreting domestic law contract law or for filling its gaps. Not surprisingly, there have been instances in which a court’s reluctance to apply the UNIDROIT Principles to a dispute governed by domestic contract law rested on the ground that, not having been incorporated by the parties into their
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A. M. Garro and J. A. Moreno Rodríguez
contract, the PICC are not to be considered “universally recognized principles” of contract law, nor can they be legitimately applied an integral part of the national law of contracts.12 In other instances, it has been held that the PICC’s non-binding nature represents a compromise among conflicting legal solutions which are not always acceptable at the domestic level, thus rejecting their identification with trade usages common to international business transactions.13
2.2
The Concept of “General Principles of Law” as a Source of Application of the PICC
Other national reports, although failing to report the existence of an express and direct source providing legal foundations to apply the PICC to cases governed by domestic law, they nevertheless point to their potential application through alternative doctrinal foundations. This is the case of Mexico, whose due process clause prescribes the courts’ duty to follow the text of the law and, in the absence thereof, to resort to “general principles of law” or similar formulations. Failure to apply the law “correctly” may become a reversible error in amparo trials.14 The Brazilian,15 Paraguayan16 and Uruguayan17 reports, among others, also refer to the
application of the “general principles of law”, found in the Constitution as well as the Civil code, both of which supporting the potential application of the PICC.
2.3
The PICC as a Codification of the Law Merchant (‘lex mercatoria’)
Less plausible, though not theoretically inconceivable, is the opening offered to the application of the UNIDROIT Principles by way of reference to the lex mercatoria as a supplementary source of law. Although this meaning is unlikely to be attributed to the concept of “law merchant”, as used in specific contexts such as it is found in Section 1-103 of the Uniform Commercial Code of the United States (“UCC”),18 the diffuse and amorphous concept of lex mercatoria is precisely mentioned in the preamble as the meaning sought to be acquired by the PICC.19 Yet, some national reports refer to isolated cases in which a court relied on the PICC as an expression of the lex mercatoria.20 In two decisions reported by Unilex, rendered relatively recently by the Court of Appeals of Rio Grande do Sul, the PICC were referred to as a “new lex mercatoria”, which the Brazilian court conceptualized as a “group of norms gathered in principles, usages and customs, model clauses, model contracts, judicial decisions and arbitral awards, conceived
12
Russian Federal Commercial Court, Central Circuit, 19 July 2011, referred to by Meyer (2016), p. 601, n. 13. 13 Tribunale Verona (Italy), 30 June 2010, also referred to by Meyer (2016), n. 14. 14 Mexico Nat. Rep., referring to Article 14 of the Mexican Constitution, in fine (“. . .In civil actions, the final judgment must be rendered in accordance with the letter of the law or its legal interpretation and, in the absence thereof, in accordance with general principles of law”). 15 See Article 4 of the Law of Introduction to Norms of the Brazilian Law, Law No. 12376 of September 30, 2010 (“Braz. LNDB”). When the legislation is silent, the judge shall decide the case according to analogy, customs and the general principles of law (“Quando a lei for omissa, o juiz decidirá o caso de acordo com a analogia, os costumes e os princípios gerais de direito”). 16 Parag. Nat. Rep., referring to Article 6 of the Paraguayan Civil and Commercial Code of 1985 (“Parag CC”), directing judges to take into account, in addition to the letter and spirit of the statutes, analogous cases as well as the general principles of law. 17 Urug. Nat. Rep., referring to Art. 332 of the Uruguayan Constitution (“The provisions of this Constitution acknowledging individual rights as well as those conferring rights and prescribing duties of public authorities shall be applied despite the absence of applicable rules, in default of which shall be governed by the rationale of analogous statutes, the general principles of law and generally accepted scholarly doctrine.”). Reference to general principles are also found in Art. 1302 of the Urug. CC (“In civil cases that cannot be resolved by the letter or the spirit of the law on the subject matter, resort shall be made to analogous statutes and, if doubt still persists, to general principles of law and the most accepted scholarly doctrine, taking into account the circumstances of the case.”).
18 See USA Nat. Rep., referring Section 1-103 UCC and Karl Llewellyn’s idea of opening up the UCC to the “immanent law” emerging from industry’s practices. See 1-103 UCC (“Supplementary General Principles of Law Applicable. Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions”). Emphasis added. As noted by the US national reporter, the Official Comment accompanying this provision suggests that such references to the law merchant point to the common law of contracts developed courts in the United States, rather than some body of laws of a transnational nature. 19 In the words of Lord Mustill, the PiCC “represent a distillation of a large number of laws which it would often be impracticable to examine individually. . .”, quoted in Bonell, An International Restatement at 239. For a pointed criticism of the concept of “lex mercatoria”, see Czech Nat. Rep. at 3 (“Czech legal theory does not differentiate substantially from traditional theories of private international law in Europe. Lex mercatoria is a fuzzy term, and it is in our opinion impossible to accept that the rules arising from lex mercatoria could be regarded as having the nature of generally binding legal norms. As sometimes mentioned in literature, lex mercatoria is not a “lex”. Only states adopt generally binding legal norms”). 20 See, e.g., Urug. Rep. at 1, referring to an appellate court decision relying on Article 7.1.6 PICC to uphold the validity of an exemption of liability clause (Civil Court of Appeals of Montevideo, Term 1, Decision No. 152/204, 13 August 2014).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
or derived from trade transactions amongst actors of international commerce.”21
2.4
International “Trade Usages” or Customs as an Alternative Source of the PICC
Most national legal systems give binding effect to trade usages, customs and commercial practices having played, and currently playing, a most significant role as a source of domestic22 as well as international23 business transactions. Trade usages draw on unofficial practices, by and large closely related to a specific branch of trade or particular markets. Trade usages have played a significant role in international trade, providing a greater level of flexibility absent in the more formal legislative process, thus allowing market participants to react more quickly to changing circumstances and new developments. Accordingly, some decisions, including one from the High Commercial Court of Ukraine,24 and more than one arbitral award of China’s International Economic and Trade Arbitration Commission (“CIETAC”),25 have declared that the UNIDROIT Principles express international usages applicable to cross-border transactions in the absence of, and unless in conflict with, the domestic law governing the contract.26 Most national reports point to the 21 Court of Appeals of Rio Grande do Sul, 14 February 2017, Noridane Foods S.A. v. Anexo Comercial Importação e Distribuição Ltda, reported in http://www.unilex.info/principles/case/2035 See also Court of Appeals of Rio Grande do Sul, citing the Brazilian national reporter, Professor Lauro Gama Jr., for the proposition that “the use of the UNIDROIT Principles – as well the application of the CISG even if not part of the Brazilian domestic law – reaffirms a flexible, non-positivist approach to disputes as is required in the field of international commercial law”. See also, Court of Appeals of Rio Grande do Sul, 30 March 2017, Voges Metalurgia Ltda. v. Inversiones Metalmecanicas I.C.A.—IMETAL I.C.A., reported in http://www. unilex.info/principles/case/2042. 22 See, e.g., Turkish CC, Art. 1. For the ample room conferred on usages in Spanish law, see Spain Nat. Rep. (referring to the “normative” as well as “interpretative” function played by usages in the Spanish CC and ComC). See also UCC Section 1-303(c), referring to “usage of trade”. In many jurisdictions, however, trade usages or customary practices are allowed only in those cases in which the law refers to them (secuendum legem). See Parag. Nat. Rep. referring to Article 7 Parag. CC, according to which “commercial usages and customs can only apply when the law refers to them to determine the sense of words or technical phrases of commerce and to interpret acts and conventions of the same nature”. 23 See the formulation of the binding force of trade usages under Art. 9(3) CISG and Art. 1.9 UPICC. 24 Letter of the Supreme Economic Court of Ukraine, 7 April 2008, On Some Issues in the Application of the Civil and Commercial Code of Ukraine, referred to by Michaels (2014), note 27. 25 See Huang (2008), pp. 105 and 135–136. 26 Although acknowledging that the PICC was not and cannot be conceived as a restatement of commercial usages, Michaels notes that this may be one of the roles the Principles assume in order to gain legitimacy in its application (“If courts, especially in formerly socialist countries, draw on them regardless, it appears they use them as a hook
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absence of judicial decisions in which the UNIDROIT Principles have been applied as part of international trade usages.27 Although many of the national reports indicate that the UNIDROIT Principles have never been used as trade usages by the national courts,28 other reports state that as long as the PICC “represent ‘trade usages’ and ‘general principles of commercial law’, an arbitral tribunal is allowed to take them into consideration and, consequently, use them to interpret or supplement national contract law.”29 In fact, in more than one occasion Paraguayan courts have resorted to the UNIDROIT Principles in disputes governed by domestic contract law, finding that the usages and practices referred to in Article 7 of the Paraguayan Civil Code30 give rise to the kind of “implied obligations” referred to in Article 5.1.2(b) PICC.31 In a case in which a party complained to the Supreme Court because the lower court relied on Article 5.1.3 PICC for the purpose of imposing a duty to cooperate with the other contracting party, the Supreme Court of Paraguay, although revoking the lower court decision on other grounds, upheld the use of such provision of the UNIDROIT Principles stating that the duty to cooperate “complements the principle of good faith in contractual relations recognized in Paraguayan law.”32 to escape their overly restrictive domestic laws.”). See Michaels (2014), note 27. 27 See, e.g., Greek Nat. Rep. at 1, reporting “no court cases . . .where the UPICC have been invoked as representing “trade usages” or “customs” in the field of contract law and, accordingly, no relevant court decisions.”. 28 See Japanese Nat. Rep. at 1 (“The UPICC has never been explicitly used by Japanese courts in interpreting or supplementing Japanese law. There is no institutional barrier for using the UPICC for that purpose as far as the principles in the UPICC can be viewed as representing “customs” or “trade usages”. Nonetheless, that has not happened.”). 29 Guatemalan National Rep., point to Article 36(2) and (3) of the Guatemalan Arbitration Law, referring to the application of the “usages and principles of international commercial law”, “trade usages and commercial practices of general acceptance”, and “usages of the trade applicable to the particular case.” 30 Article 7 of the Paraguayan Civil Code provides customs and practices cannot create rights unless the parties refer to them. 31 Article 5.1.2(d) PICC provides that implied obligations in a contract may arise, inter alia, from “the practices established between the parties and usages”. In a dispute involving a sales commission agreement, a Paraguayan court of appeals found that that the seller’s delivery of the goods directly to the customers, instead of at the place of the seller’s premises as originally agreed, resulted from the usages and practices binding on the parties by virtue of Article 1.9 PICC, which closely follows Article 9 CISG, giving rise to the seller’s implied obligation to deliver the goods directly to the customers. See Paraguayan Nat. Rep., referring to Ofelia Valenzuela Fernandez c. Paraguay Granos y Alimentos SA, Civil and Commercial Court of Appeals of Asuncion, 6th Chamber, Acuerdo y Sentencia 66 (2016). 32 Paraguayan Nat. Rep., referring to Jorge Moises Etcheverry Ali c. Rosa Maria Ramona Etcheverry de Brizuela, decided by the Civil and Commercial Court of Appeals of Asuncion, Sixth Chamber, Acuerdo y Sentencia 62 (2015). The Paraguayan National Report refers to other cases in which Paraguayan courts of appeals consistently
56
Whether the PICC codifies international trade usages appears as a controversial route of entry for the UNIDROIT Principles to be used in the interpretation or supplementation of domestic contract law.33 Actually, it does not seem appropriate to assimilate the UNIDROIT Principles to international trade usages, as if the PICC were to codify usages and practices developed throughout the years. Whereas trade usages and customs are rooted in habitual practices, the rules embodied in the UNIDROIT Principles do not necessarily reflect nor intend to formulate predominant practices, but they rather aim at articulating the most suitable solutions for cross-border transactions. Not surprisingly, some arbitral awards have refused to put the PICC on an equal footing with trade usages.34 In some jurisdictions such as the Czech Republic, even though proven trade usages clearly preempt default rules of the otherwise applicable law,35 its national report does not find it likely that Czech courts would resort to the UNIDROIT Principles as embodying business practices.36 The national report on
resorted to Article 5.1.3 PICC, providing thus: “Each party shall cooperate with the other party when such cooperation may reasonably be expected for the performance of that party’s obligation”. See Paraguayan Nat. Rep. (“The duty of cooperation is not expressly contemplated in Paraguayan domestic laws. However, the Court of Appeals sustained that it is derived from the duty of good faith in contractual relations, which, in turn, is contemplated by Paraguayan domestic laws. The Court supported its conclusion in the UPICC, relying on its Article 5.1.3 and also referring to its explanatory notes.”). 33 Trade usages are generally regarded as born out of habitual practices, thus calling for an ascertainment of facts rather than law. See Oser (2008), pp. 80–81. On the evidentiary difficulties inherent in the finding of trade usages prevailing in relevant markets, geographic locations and branches of trade, see Bernstein (2015). 34 See, e.g., ICC Case No. 10021 (2000) (“the reference to the UNIDROIT Principles as codified trade usages is rather of persuasive rather than binding nature”); ICC Case No. 124446 (2004) (“though this arbitration tribunal does not deny that UNIDROIT Principles indicate well thought good rues, that fact does not make the UNIDROIT Principles worldwide trade customs or usages”). See also ICC No. 9029 (March 2004) (“[A]lthough the UNIDROIT Principles constitute a set of rules theoretically appropriate to prefigure the fugure lex mercatoria should they be brought into line with international commercial practice, at present there is no necessary connection between the individual Principles and the rules of the lex mercatoria, so that recourse to the Principles is not purely and simply as recourse to an actually existing international commercial usage”), cited in Meyer (2016), notes 58–61. 35 Czech National Rep., at 3, quoting Article 558(2) of the Czech Civil Code: “In legal transactions among entrepreneurs, account is taken of business usages maintained in general or in a given industry, unless excluded by an agreement between the parties or by a statute. Unless otherwise agreed, a business usage is conclusively presumed to take precedence over a non-mandatory provisions of a statute; otherwise, an entrepreneur may invoke a usage if he proves that the other party must have known a given usage and was aware that it would be followed”. 36 Czech National Rep., at 3 (“We are of the opinion that in light of the indicated approach to usages, it cannot be assumed that in the future Czech courts would use this provision to apply the UPICC. Such scenario is not likely to take place. . .”).
A. M. Garro and J. A. Moreno Rodríguez
Russia does not disclose any court judgment resorting to the UNIDROIT Principles as trade usages, yet the Principles have been applied several times as reflecting international trade usages in awards rendered by arbitration tribunals operating under International Arbitration Court and the Russian Federation Chamber of Commerce (“ICAC”).37
2.5
Jurisdictions Where the PICC Have Been Used as a Model for Reform of the Domestic Contract Law
Surveys undertaken about a decade ago showed that the PICC remained relatively unknown several years after they were originally adopted in 1994.38 Awareness of the Principles is likely to improve with the passage of time, as reflected by the reference to the PICC in academic debates about new trends in contract law and the impact it had on the drafting of regional restatements such as the PECL, OHADA,39 and more recent projects in Asia (“PACL”)40 and Latin America (“PLACL”).41 More importantly for the purpose of resorting to the UNIDROIT Principles in the interpretation of domestic contract law is the case of those jurisdictions were the Principles have been relied upon as a model for the reform of the domestic law of contract law.42 Many rules of the Principles have been relied upon as a model for modernizing the law of contracts, not only in socialist or former socialist States (People’s Republic of China, Latvia, Estonia, Lithuania, the Czech Republic, Hungary, the Russian Federation),43 but they also have been influential in law reform projects in jurisdictions with a long and influential practice and legal scholarship
37 See Russian Nat. Report at 6, referring to a series of published arbitral awards of the ICAC, including ICAC award of 5 June 1997, Case No. 229/1996, referring to the UNIDROIT Principles as “progressively acquiring the status of international customs”. 38 Surveys conducted among English and US judges, international practitioners, and legal scholars yielded disappointing results. For the UK, see Goode (2001) and Fitzgerald (2008). For the USA, see Gordon (1998). 39 For a discussion of the draft contract law adopted by the Organization for the Harmonization of Commercial Law in Africa (“OHADA”), see Michaels (2015). 40 For a discussion on the PACL see Kanaya (2010) and Han (2013). 41 For a discussion of the PLACL, see Carlos Pizarro Wilson (2012); de la Maza et al. (2007). 42 See Bonell, note 78, noting the success of the UPICC as a progressive “model contract law” or source of inspiration for law reform, especially, though not exclusively, in former socialist states. 43 For a general discussion of the use of the Principles as a model for law reform in Lithuania, Estonia, Latvia, Russia, and other jurisdictions, see Estrella Farias (2016), pp. 238 and 243–247.
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
(France,44 Germany,45 and Japan).46 In these jurisdictions the UNIDROIT Principles are expected to be increasingly taken into account when their courts are asked to interpret the newly enacted codes, especially when it is clear that the PICC influenced the drafting of the particular provision to be interpreted.47 There are also a number of jurisdictions, 44
See amendments for the modernization and simplification of the law and procedure on the field of justice and domestic affairs (Loi No. 2015-177 du 16 février 2015 relatif à la modernization et à la simplification du droit et des procedures dqns les domaines de la justice et des qffaires interieures). See Fauvarque-Cosson (2014). See also Estrella Farias (2016), pp. 262–269. The statute authorizes the Executive branch to promulgate a regulation (ordonnance) revising twelve specific areas in the field of conventional obligations governed by the Code civil. In many instances, the reform reproduces pre-existing provisions or case-law developments ( jurisprudence constante), but many other provisions mirror the PICC. This is the case, for example, on the overriding duty of r1.7 PICC); liability for breaking off negotiations in bad faith and the duty of maintain confidentiality in the course of negotiations (Art. 1112 Fr.CC and Art. 2.1.15 PICC). Also in correspondence with the approach of the Principles, the amendments to the French Civil Code eliminate the concept of cause among the essential elements of the contract (see comments to Art. 3.1.2 PICC); introduces the notion of “anticipatory breach”, also covered by Art. 71 CISG, allowing one party to suspend performance in case of a serious risk of non-performance by the other party (Art. 1220 Fr.CC and Art. 7.3.3 PICC); excludes specific performance in cases where performance would be unreasonably burdensome and expensive (Art. 1221 Fr.CC and Art. 7.2.2 (b)). Following the approach of Arts. 6.2.2 and 6.2.3 PICC, Art. 1195 Fr.CC allows either party to the contract to request renegotiations when unforeseen and drastic changes after the conclusion of the contract disrupts the equilibrium of the performances, turning excessively harsh the performance of a party that had not assumed such a risk (“Si un changement de circonstances imprévisible lors de la conclusion d’un contrat rend l’exécution excessivement onéreuse pour une partie qui n’avait pas accepté d’en assumer le risque. . .”). If the renegotiations end in failure, both parties may request the court to adapt the contract. But if both parties fail to agree on how to adjust the performances, either party may apply for a judicial revision or termination of the contract. 45 For a survey on the influence of the PICC in the modernization of the German law of obligations, passed on 27 November 2001 and entered into force in January, 2002, see Zimmermann (2005). 46 A working group set up by the Legislative Council of the Japanese Ministry of Justice have been meeting since 2009 for the purpose of revising Book III of the Japanese Civil Code of 1896, dealing with obligations and contracts. The working group submitted a draft bill to the National Diet on March 31, 2015. According to Professor Takashi Uchida, a member of the Legislative Council, the PICC has been a “a rich source of inspiration” for some of the revised rules on contract law. See Ushida (2011), pp. 697 and 710. See also Estrella Farias (2016), pp. 259–260. 47 This is case in a jurisdiction such as Lithuania, whose Civil Code replicated many provisions of the PICC. See Supreme Court of Lithuania, 19 Jan. 2005 (referring to Art. 2.1.15 PICC and its comments for the interpretation of Art. 6.163 of the Lithuanian CC dealing with liability for the braking-off contractual negotiations in bad faith); Svenska Petroleum Exploration AB, Government of the Republic of Lithuania, 4 Nov. 2005, a decision rendered by the English High Court, applying the relevant rules of contract interpretation in Arts. 6.193 to 6.195 of the Lithuanian CC, which according to a Lithuanian legal scholar “repeat Article 4.1 to 4.6 of the UNIDROIT Principles.” See Meyer (2016), notes 43–44. See also Zukas (2007), pp. 238–239.
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such as Spain48 and Scotland,49 in which the Principles are being considered as a possible source of inspiration for future reforms in the law of contracts. Another case on point on the consultation of the PICC as a source of legislative intention is the Contract Law of the People’s Republic of China (1999), whose rules applicable to contracts in general has been significantly influenced by the UNIDROIT Principles.50 The Civil Code of the Russian Federation (“CCRF”), adopted at different stages between 1994 and 2008, has largely drawn inspiration from the UNIDROIT Principles, even though its drafters not always made express reference to those instances in which a particular provision has been modeled after a rule of the UNIDROIT Principles.51 The PICC are also mentioned as a model for 48 For the influence of the PICC in the drafting of Spanish legislative projects, see Martìnez Cañellas (2007) (discussing the wisdom of using the PICC as a source of inspiration of for the revision of commercial (or mercantile) contracts regulated in the Commercial Code, preventing the Spanish Autonomous Communities from passing special laws to regulate those issues of contract law). See also Estrella Farias (2016) reporting on the influence of many provisions dealing with the formation of contracts, taken from the CISG or from the PICC (e.g., Arts. 2.1.1 and 2.1.6), noting that those provisions with no equivalent in the CISG are clearly derived from the PICC, such as those on negotiations in bad faith (Art. 2.1.15 PICC), duty not to disclose information received during the negotiations of the contract (Art. 2.1.16 PICC), modification in a particular form (Art. 2.1.18 UPICC), and writings in confirmation (Art. 2.1.12 PICC). 49 For a discussion of the impact of the UNIDROIT Principles on the reform of the Scottish reform of domestic contract law, see Orucu (2011), pp. 1002–1023. 50 Contract Law of the People’s Republic of China, President’s Order No. 15, 15 March 1999 (“Chinese Contract Law” or “ChCL”). A statistical study undertaken by the Civil Law Bureau of the Legislative Committee of the National People’s Congress, cited by Professor Zhang Shaohui, refers to the influence of foreign domestic sources, including the civil codes from Italy (31.8%), Germany (25.7%), Japan (14.3%), France (10.7%), and even the Uniform Commercial Code (3.5%). Instruments of international uniform law such as the PICC are also credited with influencing the general part of contract law (47.3%) and the CISG on specific rules on the contract of sale (50%). See Shaohui (2008). The most evident influence of the Principles on the ChCL is in the field of formation of contracts, though such influence is questionable given the similarities with those of the CISG, upon which many of the PICC rules on formation of contract were modeled after. But the rules of the ChCL on the validity of contracts (Art. 55 ChL and Art. 3.2.9 UPICC) and the consequences of breach of contract corresponds to many of the rules found in Chapters 6 (“Performance”) and 7 (“NonPerformance”) of the PICC. See Yuqing and Danhan (2000). See also Estrella Farias (2016), pp. 250–252, notes 67–69. 51 See Russian Nat. Rep., at 1 (“The travaux préparatoires to the reform stress that the UPICC were one of the main models and explicitly invoke their provisions many times. The (final version of the) Concept for the Development of Civil Legislation in the Russian Federation makes three references to the UPICC (the only reference to non-state law above that being the one to the ICC Uniform Customs and Practice for Documentary Credits (UCP 600)). The much more detailed draft Concept of the working group on obligations has built mainly upon soft law and international instruments: the ‘international principles of contract law’, generally meaning the UPICC and the like, were referred to 10 or 11 times, the UPICC specifically – 14 times (whereas the PECL – only 5 times and the DCFR – not a single time). The real
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some of the contract provisions incorporated into the Argentine Civil and Commercial Code of 2015 (“ArgCCC”).52 Even though no one questions that the Principles have been used up to acertain extent as a source of inspiration, the degree to which different States have modelled their contract rules on the PICC varies from country to country, and the level of influence of the Principles may also depend on each contract rule in particular. On the one hand we have the case of the Lithuanian Civil Code, some of whose provisions follow word for word the UNIDROIT Principles.53 On the other hand, we have other jurisdictions, such as the Civil Code of the Czech Republic (2012) and the Hungarian Civil Code (2013) in which It is not altogether clear the extent to which the UNIDROIT Principles were taken into account in the drafting of their contract rules. Both national reports indicate that their recently enacted codes have been influenced in one way or another by different provisions of the Principles, although it remains to be seen the extent to which the Czech54 and number of inspirations from the UPICC might have been higher if one suggests that there were cases where the drafters have made use of the UPICC with no specific reference to the Principles. It is worth mentioning that Alexander S. Komarov, a member of the working groups for the preparation of the first three editions of the UPICC (1994, 2004, 2010), has participated in the drafting of the original text of the Code as well as of the amendments to it during the reform.”). 52 See Argentina Nat. Rep., referring to Law No. 26.994 passed on October 1, 2014, adopting a new Civil and Commercial Code (“Arg. CCC”), replacing the Civil Code of 1869. Justice Ricardo Lorenzetti, who presided the legislative committee that drafted the new CCC, expressly referred to the influence of the PICC in the drafting of the new provisions on contracts. See Código Civil y Comercial de la Nación, Buenos Aires, Led. La Ley, preface by R. L. Lorenzetti, at XCII (¨The design of these provisions [referring to the title on contracts in general] draws heavily on the UNIDROIT Principles, which are widely accepted in today’s legal tradition (Arts. 971 et seq.). . .”). Although the Committee’s final report fails to mention specific provisions of the Principles, the Argentine national report expressly refers to the text of a draft Civil Code prepared by a committee established by Executive Decree No. 685/95, whose “1998 CC Draft” (Anteproyecto de Codigo Civil de 1998) refers to the influence of the PICC (together with the PECL and a Draft of a European Contract Code by the Academy of Pavia) on areas such as the contract of representation or agency (mandate), the formation of contracts, as well as the impact of Art. 7.4.4 PICC on foreseeability of the harm. See Argentina Nat. Rep. (“The influence of the UNIDROIT Principles as a source of the [1998 CC Draft] --and therefore a source of the CCC-- is not limited to the occasions in which it is expressly mentioned in the recitals. As in the [1998 CC Draft], the Principles have inspired many other solutions. . . .”). 53 Reportedly, Article 6.163 of the Lithuanian Civil Code follows verbatim Article 2.1.13 PICC on precontractual liability. See Meyer (2016), p. 607. 54 Czech Nat. Rep., text accompanying note 26, referring to the Civil Code of the Czech Republic that came into effect on January 1, 2014 (Law No 89/2012) (“CzCC”) and at p. 18 (“Undoubtedly, the UPICC may be regarded as an interpretation tool with regard to the provisions of the new 2012 Civil Code, as the UPICC served, together with other sources, as a model for some new provisions”). Thus, the Czech Nat. Rep. refers to the influence of some provisions of the Principles in the drafting of the new Civil Code, such as Art. 1753 on surprising terms
A. M. Garro and J. A. Moreno Rodríguez
Hungarian courts55 rely on the PICC in order to interpret ambiguities or fill gaps in the law of domestic contracts. This is also the case of the most recent reform to the Japanese Civil Code, which came into force on April 1, 2020, to which the UNIDROIT Principles served as a significant legislative model for the drafting of domestic rules on contract law. It remains to be seen, however, whether the Principles, which up to this day remains relatively unknown to most Japanese practitioners, will become an important source of consultation in the interpretation of the new contract rules or in order to fill its gaps.56
2.6
Choice of the PICC as a Means of Interpreting and Supplementing the Applicable Domestic Law
Because the PICC provides for contract “rules”, rather than “law”, much of the use of the UNIDROIT Principles, even in those cases in which the parties have expressly chosen the application of the PICC, depends on the recognition and
(Art. 2.1.20 PICC); Art. 2002(1) CzCC on the right to terminate a contract in case of fundamental breach (Art. 7.3.1(1) PICC). However, it is not the text of the PICC the one that always prevailed as a source of inspiration. See Czech Nat. Rep. at 9, referring to the rules on precontractual liability adopted in Sections 1728–1729 CzCC “(In 2012 the Czech Republic saw extensive recodification of private law resulting in the adoption of a new civil code which came into effect on 1 January 2014. In the new CC precontractual liability is expressly regulated under Sections 1728 – 1729. According to the Explanatory Report on the CC the drafters were inspired by the regulation of pre-contractual liability in Art. 6–8 Code Européen des Contrats rather than by the regulation contained in the UPICC”). 55 Hungary Nat. Rep., referring to provisions of the Hungarian Civil Code (of 2013 (“HCC”) that were inspired by the Principles, such as Art. 6:63 HCC on trade usages (Art. 9 CISG and Art. 1.9 PICC); Art. 1:3 on liability for breaking off negotiations in bad faith (Art. 2.1.15 PICC); Art. 6:78 HCC on standard terms (Art. 2.1.20 UPICC); and Art. 6:86 HCC on interpretation of a contract as a whole (Art. 4.4 UPICC). See Hungary Nat.Rep. at 2 (“During the preparation of the [Hungarian Civil Code or “HCC”] several instruments of unification of contract law were taken into account, as a source of inspiration, especially the United Nations Convention on Contracts for the International Sale of Goods (CISG), the UNIDROIT Principles of International Commercial Contracts (UPICC) and the Principles of European Contract Law (PECL). This influence and inspiration was expressly admitted by the Editorial Committee preparing the original draft of the HCC. So, it is not surprising that the sections on contracts of the HCC fairly often contain similar or compatible norms to that of the UPICC”). 56 See Japan Nat. Rep. at 4 (“The receptivity toward the UPICC, however, may have gradually changed during the course of the past few years, as it has been frequently referred to as an important legislative model in the recent amendment of the Japanese Civil Code. This may have some positive impact on the courts and arbitral tribunals, but it is still yet to be seen if the courts and arbitral tribunals in Japan are prepared to find that UPICC is a restatement of “customs” or “trade usages” in international contacts”).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
scope of the principle of party autonomy of forum.57 This is why it is always highly commendable for the parties to opt into the Principles through a dispute resolution clause, as recommended in the official footnote to the second paragraph of the Preamble. Even if the parties include a choice-of-law clause into the contract, it is the applicable conflict of law rules of the forum (be it an arbitration or a judicial forum) which will decide if and how the UNIDROIT Principles will be accepted.58 The model clauses suggested by UNIDROIT distinguish between choices that the parties may conclude in the contract itself and after the dispute has arisen, and one of the models provides for the language that may be included in a clause in which the PICC are selected as a means of interpreting and supplementing the applicable domestic law: “This contract shall be governed by the law of [the State X] interpreted and supplemented by the UNIDROIT Principles of International Commercial Contracts (2010)”. The comments point to the convenience of relying on the Principles when the applicable domestic law pertains to a legal system without much exposure and experience on cross-border transactions. The comments also indicate how important is to count on the support of the Principles when the applicable domestic law is that of a highly developed legal system. The role of the PICC in these cases may be relevant in those instances where the applicable domestic law fails to provide for a clear-cut solution to specific issues, either because scholarly opinions are sharply divided, the case-law on the matter is not altogether clear, or the issue at stake has not been addressed at all.59
2.7
Use of the PICC by Arbitral Tribunals as Opposed to National Courts
Relatively recent empirical studies indicate that the parties make little use of PICC, both in contracts whose disputes were settled by arbitrators as well as those ending up before
57
See Guatemalan Report, referring to Article 31 of the Law of the Judicial Branch, providing that “Legal acts and contracts are governed by the law chosen by the parties, unless such choice is contrary to prohibitive rules or public order”. The Guatemalan Report adds: “According to the rules of interpretation governing in Guatemala, the term “law” should be interpreted narrowly and refers only to a State law, i.e., one issued by the corresponding legislative authority of a State, and not an instrument of soft law.” 58 Although party autonomy in the determination of the applicable law to commercial contracts may be considered a principle generally accepted in most Western jurisdictions, in some Latin American jurisdictions party autonomy in choosing the law applicable to contracts is only is only accepted in disputes submitted to arbitration (e.g., Bolivia, Brazil, Colombia, and Uruguay). See Albornoz (2010), pp. 47–48. 59 See Model Clauses for Use by Parties at 20–21.
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the regular courts.60 Those same studies show that in most cases the PICC were actually resorted to and used by adjudicators even in cases in which they have not been chosen by the parties to the contract.61 In those cases in which the parties have not chosen the application of the UNIDROIT Principles, the third paragraph onwards of the Preamble suggests that the Principles may still be applied in several instances, without distinguishing those cases in which the adjudicator is a state (national) court or an arbitration tribunal. As previously noted, however, the distinction between these two types of adjudication remains relevant, as noted in most national reports. It is worth returning to this distinction, because the possibility of resorting to the PICC as a means of interpreting and supplementing the applicable domestic law also depends on whether the dispute is to be decided by an arbitral tribunal as opposed to a national court. Because the choice of law rules of most traditional legal systems still require the parties to choose a national “state” law, the choice of the PICC in combination with the choice of a judicial forum (state court) calls for an interpretation of such clause in the sense that the parties intended the Principles to be incorporated into the contract, which remains governed by the applicable state law.62 The application of the UNDROIT Principles is, at least in principle, excluded under traditional choice-of-law regimes.63 The possibility of choosing non-State law may be achieved through their incorporation into the contract.64 60 See Michaels (2014), pp. 646–647, reporting in 2014 on those figures reported by UNILEX and the ICC (“. . .UNILEX lists only 19 arbitral decisions addressing the applicability of the PICC as rules of law governing the contract in disputes before an arbitral tribunal, out of 186 arbitral decisions that mention the PICC. Out of those 19, no more than four concern matters in which the parties had chosen the PICC in their contract. . .[T]he PICC were mentioned in only 54 proceedings or 0.8 % of all proceedings. From another report, we learn that, between 2007 and 2011, the PICC were mentioned in contracts in only seven matters referred to arbitration under the ICC, as opposed to 3, 551 in which national law was chosen. . .”). 61 See Michaels (2014), p. 648, Figure 1, showing different applications of the UPICC by judges and arbitrators. By far the biggest portion of decisions were those in which the Principles were applied to interpret and supplement domestic law (221), followed by their use in the interpretation of international commercial instruments (62). In 60 cases the Principles were used in the absence of express choice of law by the parties, in 25 cases as a reflection of the “lex mercatoria” and the like, and only in 30 cases they were chosen by the parties. 62 The distinction between the application of the UNIDROIT Principles as a mere incorporation of its rules into the contract, as opposed to their application as a contract legal regime, may be relevant to determine the impact of the mandatory laws (Art. 1.4 PICC). As to the theoretical underpinnings of relying on the PICC as “applicable law”, as opposed to incorporating them into contract clauses, see Michaels (2014), n. 38. On the negligible practical differences between these different manners of choosing the UPICC, see Estrella Farias (2016), n. 12. 63 See, e.g., Art. 3(1) of the Rome I Regulations. 64 See, e.g., Council Regulation (EC) 593/2008 on the Law Applicable To Contractual Obligations (2008) OJ L 177 recital 13 (“Rome I
60
By way of exception, a few international treaties such as the 1994 Inter-American Convention on the Law Applicable to International Contracts (the “Mexican Convention”)65 and the 2015 Hague Principles on the Choice of Law in International Contracts (the “Hague Principles on Choice of Law”)66 allow a national court to choose the UNIDROIT Principles even in the absence of the parties’ choice. As noted in the Paraguayan national report, Article 5 of Law No. 5393 (2015), Paraguay is the first jurisdiction to grant formal status to a set of rules such as the UNIDROIT Principles, replicating the Hague’s Principles on Choice of Law: “In this law, a reference to law includes rules of law of a non-State origin that are generally accepted as a neutral and balanced set of rules”.67 This solution has been recently advocated for future legal reforms in the continent by the “ OAS Guide on the Law Applicable to International Commercial Contracts in the Americas”, approved by Resolution 249 of 2019 of the Inter-American Juridical Committee of the Organization of American States.68 In contrast, most modern arbitration statutes and rules increasingly allow arbitral tribunals to choose the applicable law or “rules of law”, thus allowing for the application of the UPICC69 as an alternative to domestic/ Regulation”), enabling the choice of non-state law through incorporation. See also Italian National Report, referring to Italian case law according to which the parties’ reference to the lex mercatoria and the UNIDROIT Principles do not constitute a veritable “choice of law” by the parties, but rather the incorporation of such rules into the contract, so that they bind the parties to the extent they are not in conflict with mandatory domestic law. 65 Inter-American Convention on the Law Applicable to International Contracts (1994), 33 ILM 732 (1994). In the absence of the parties’ choice of the applicable law, the first paragraph of Article 9 of the Mexican Convention (ratified to this date only by Mexico and Venezuela) provides for the application of the law with which the contract has “its closest ties”. However, in an undisputable reference to the UNIDROIT Principles, the second paragraph also allows the court to resort to “the general principles of international commercial law recognized by international organizations”. Article 10 of the Mexican Convention provides in turn that in the determination of the applicable law to the contract, the court may also take into account “the guidelines, customs, and principles of international commercial law as well as commercial usage and practices generally accepted”. 66 See Hague Principles on Choice of Law, Art. 3 (allowing a court to apply the “rules of law that are generally accepted on an international, supranational, or regional level as a neutral and balanced set of rules, unless the law of the forum provides otherwise”.). On the influence of the 1994 Mexican Convention on the 2015 Hague Principles on Choice of Law, see Moreno and Albornoz (2011), pp. 491–526. 67 See Parag. Nat. Rep. and Moreno Rodriguez (2016). (hereinafter “2 Eppur si muove”). 68 CJI/RES. 249 (XCIV-O/19). The text is available at the site http:// www.oas.org/en/sla/iajc/docs/Guide_Law_Applicable_to_Interna tional_Commercial_Contracts_in_the_Americas.pdf. 69 Unlike state choice-of-law rules, those governing international commercial arbitration, or the arbitration rules chosen by the parties, by and large do not compel arbitrators to determine the applicable law on the basis of predetermined choice of law rules. This is not always the case,
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state law.70 Not surprisingly, it is as the result of the arbitral tribunal’s own initiative that the UNIDROIT Principles have been applied most often, at times for the purpose of clarifying a rule of domestic law, and at other times for the purpose of supplementing, tempering or merely corroborating a solution resulting from the application of the domestic law applicable to the contract.71 The widest possible impact of the UNIDROIT Principles is likely to arise when the choice of the Principles is incorporated into an arbitration clause. Thus, the parties are invited to adopt the wording suggested in the official footnote to the second paragraph of the Preamble to the UNIDROIT Principles, the parties being offered to choose among eleven model clauses as most suitable to their transaction.72
2.8
Use of the PICC for the Purpose of “Clarifying” and “Adapting” Domestic Law to the Cross-Border Nature of the Transaction
Most rules of contract law found in domestic legal systems were not conceived with a cross-border dimension in mind. Therefore, the adoption of the UNIDROIT Principles in order to clarify an area of national law offering diverse solutions, or to fill a gap on an issue on which the national law remains silent, may prove positive and influential in the outcome of the dispute. A decision rendered by the Federal Court of Australia has been mentioned as one instance in which the UNIDROIT Principles were creatively resorted to for the purpose of adapting the restrictive approach toward the notion of good faith under traditional English common law, to the more flexible international standard of “good faith and fair
but many arbitration laws speak in terms of “rules of law”, thus opening the door for the application of non-state law such as the UNIDROIT Principles. 70 See, e.g., Art. 28(2) UNCITRAL Model Law on International Commercial Arbitration, providing for the arbitral tribunal to choose the applicable law throughout the application of the pertinent choice of law rules (voie indirecte) (Art. 33(1) Swiss Rules of International Arbitration), as opposed to arbitration regimes in which the arbitral tribunal may directly choose the applicable rules of law (voie directe), such as Art. 1115 French Code of Civil Procedure. See also the many institutional arbitration rules authorizing the arbitral tribunal, in the absence of the parties’ choice, to determine the “rules of law” most suitable to decide the dispute. See, e.g., ICC Rules on International Commercial Arbitration, Art. 21(1); UNCITRAL Arbitration Rules, Art. 35; London Court of International Arbitration, Art. 22(3); CEAC Hamburg Arbitration Rules, Art. 35(c). 71 See Muñoz and Geny (2016), pp. 109 and 114. 72 See UNIDROIT (2013), accessible online by googling “Unidroit Model Clauses”. See Veneziano n.d., pp. 1687–1697.
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
dealing” which Article 1.7 PICC recognizes as a veritable duty of the parties to the contract.73 Alexander S. Komarov, a member of UNIDROIT’s working groups for the first three editions of the PICC (1994, 2004, and 2010), who also had an active participation in the drafting of the Civil Code for the Russian Federation (“CCRF”) and its amendments, reported on the influential role of the UNIDROIT Principles in the interpretation of concepts introduced in the CCRF for the for the first time, such as “good faith and fair dealing” and “hardship”.74 Professor Christina Ramberg also refers to the influence of the PICC in the development by the Swedish courts of the ramifications implicated in the duty of “good faith”.75 The value of construing domestic law in light of the UNIDROIT Principles has also been also referred to for the purpose of interpreting a cross-border transaction in the context of a consumer dispute.76 A different, though admittedly very close, situation is presented when the international nature of the transaction actually calls for an interpretation of the domestic applicable law which, “pushes the envelope”, so as to make the applicable national law compatible with the international standards espoused by the Principles. Even more significant is the role the Principles may play to settle a set of practical issues which are generally not covered in domestic rules of contract law, whose choice may also be far from evident. I am referring to issues such as time-zone management (Art. 1.12 (3) PICC) and language (Art. 4.7 PICC).
73 See Hughes Aircraft Systems International v. Airservices Australia, 30 June 1997, cited by Meyer (2016), p. 606, attributing to Justice Finn, an Australian member of the PICC Working Group, favoring an expansive application of the principle of good faith more in tune with the case law and legal scholarship developed in civil law jurisdictions. Quoting from the language of the Hughes Aircraft case, Justice Finn stated that good faith, pursuant to Art. 1.7 PICC, “has been propounded as a fundamental principle to be honored in international commercial contracts”. 74 Komarov (2011), pp. 657 and 659, referring to a decision of 8 February, 2008, rendered by the International Court of Arbitration of the Chamber of Industry and Commerce of the Russian Federation, referred to in Meyer (2016), p. 604, n. 27. 75 Ramberg (2014), pp. 669 and 673, referred to in Meyer (2016), p. 604, n. 28. 76 Tribunale di Nola, 6 December 2010, in which an Italian court relied on the PICC for the purpose of deciding a dispute in which a patient sought restitution of a fee paid to a dentist, referred to in Meyer (2016), p. 604, n. 32.
2.9
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Reference to the PICC for the Sole Purpose of Corroborating a Result Reached Under Domestic Law
Mere reference to the UPICC does not tell us much whether their use is limited to an ornamental remark or whether the rule applied by the court or tribunal is actually relevant to the outcome of the dispute or the development and modernization of the law governing an issue at stake in the dispute. It is only upon a close look at what was actually decided that one may ascertain whether the solution furnished by the Principles was the same as the one provided under domestic law. Indeed, in some cases, the UPICC play an important role in actually assisting the interpreter to favor one out of several possible outcomes under domestic law, filling a veritable gap left by traditional contract law, at times providing an elegant escape from overly restrictive rules. In many other instances, reference to the PICC is meant to serve as a check on the reasonableness of the outcome reached under the otherwise applicable domestic law of contract. The use of the Principles as obiter dicta or as a sort of a check on an outcome otherwise and already provided under domestic law, rather than a source for interpreting and supplementing domestic law, or in order to fill gaps for the unprovided-for case, has not gone unnoticed in the national reports. Spanish courts, for example, have resorted to the UPICC in more than 850 cases, more than 60 of which rendered by Spain’s highest court.77 Yet, a closer look at those decisions reveal that, rather than “interpretation” or “supplementation” of Spanish contract law, the main role played by the UPICC has been one of “support”.78 Courts and arbitral tribunals decide in this cases to strengthen the conclusion that the court or arbitral tribunal made the right decision by resorting to the UPICC, adding that the same result would have been arrived at by applying the Principles.79 Similarly, it is reported that in the majority of cases where Russian courts resorted to the UNIDROIT Principles, the Spain Nat. Rep., identifying the first decision by the Spanish Supreme Court of July 4, 2006. See Bouza Vidal (2016); Perales Viscasillas (2016), p. 1619. 78 See Spain Nat. Rep., pointing that the assumption that Spanish courts would resort to the Principles in order to interpret or supplement domestic law appears “too optimistic” (“[I]n the case were the UNIDROIT Principles have been used the function of the Principles is restricted to that of supporting or ratifying the decision based on national law in international litigation or to support the interpretation of contractual clauses, i.e., as support of the ratio decidendi, or as a comparative or doctrinal reference which supports the decision of the judge or arbitrator.”). 79 See Michaels (2014), p. 652 (“The desire of judges seems to be to ascertain that a solution they find in domestic law is compatible with what is considered a global consensus. The PICC are not cited as applicable law nor are they usually the only source used, but their use is for the purpose of information and confirmation.”). 77
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reference was made for the purpose of corroborating the rationale underlying a decision reached under domestic law.80 As noted in the Argentine national report, in several instances the courts resorted to the Principles “as a confirmation that the proposed solution enjoys consensus in international commercial law”,81 providing an indication of those rules in the PICC supplying the level of persuasiveness that the otherwise applicable domestic law fails to provide. This is the case, for example, to the need for the breach to be “fundamental” in order to allow for the remedy of termination (Art. 7.3 PICC); that negotiated clauses prevail over conflicting standard clauses (Art. 2.2.1 PICC); that silence or inactivity does not amount in itself as an acceptance (Art. 2.1.6(1) PICC).
2.10
Application of the PICC to Cross-Border and Domestic Contract Disputes
It appears that the UNIDROIT Principles have been used in domestic and international settings situations in roughly similar numbers.82 Because national (domestic) contract law may govern not only national (domestic) disputes but also those connected with more than one jurisdiction, the use and potential misuse of the UNIDROIT Principles should be examined when the Principles are applied to cross-border transactions, for which they are particularly suitable, or when resorted to decide a contractual dispute of a purely domestic nature. Although the application of the Principles to purely domestic disputes has not been ruled out, the Principles have been drafted with “international commercial contracts” in mind, that is, those disputes calling for the potential application of the law of more than one jurisdiction. It is these type of disputes, arising out of an international commercial contract, when the interpretation of the domestic law governing the dispute may benefit the most from the UNIDROIT Principles.83 The application of the Principles to implement 80 See Russian Nat. Rep. at 5 (“In an overwhelming majority of cases the courts have invoked the UPICC to just additionally endorse the conclusion following from the relevant provisions of the Russian law. The courts introduce references to the UPICC with help of expressions like ‘besides, it should be noted that. . .’, “based on a similar premise”, “the normative basis. . .is not only Art. . .of the Civil Code. . .but. . .the UPICC as well. . .Cases where the court explicitly states that the UPICC were used as a gap-filler are extremely rare.”). 81 Argentine Nat. Rep., responding to Question (2). 82 Michaels (2019), p. 657 (“Contrary to their explicit international character, the PICC are used in similar intensity in domestic and international situations”). 83 See Comment 6 to the Preamble of the UPICC, stating that the Principles may be used for guidance in the interpretation of domestic law “[e]specially where the dispute relates to an international commercial contract, it may be advisable to resort to the Principles as a source of inspiration”].
or supplement “domestic contract law” serves in this type of disputes the purpose of “adjusting” the application rules meant to be applied to a domestic setting to cross-border transactions generally involving parties from different jurisdictions. Applying the Principles to disputes arising out of international commercial contracts appears more suitable to the reasonable expectations of the parties than applying them to disputes arising from domestic contracts, especially if the response provided by the UPICC is compatible with the solution provided under the domestic applicable law.84 If the solution provided by the domestic contract law is unclear or ambiguous, resorting to the Principles for the purposes of interpreting a rule of contract law presumably intended for purely domestic contracts is probably a most suitable legal methodology for arriving at a fair outcome.85 In contrast, the application of the PICC may become questionable if resorted to justify a result that clearly contradicts the domestic contract law governing a purely domestic dispute. The legitimacy of the use of the Principles would suffer if, invoking the “proper interpretation” of the applicable national law, the UNIDROIT Principles were to be used in defiance of the applicable law which the parties have agreed to follow or in violation of the domestic law applicable pursuant to the choice of law rules of the forum.86
3
The UNIDROIT Principles as Evidence of a ‘General Consensus’ on the Law of Contracts
Exploring additional and alternative ways and means by which judicial opinions and arbitral awards may resort to the Principles to interpret and supplement domestic contract law, it is important to acknowledge that the PICC reflect, up to a certain extent, concepts and rules that, by and large, are shared by most of the world’s legal systems. This is why the second question posed to the national reporters asks whether
84 See Meyer (2016), p. 604 (“If national law is the same on the decisive question as the PICC, which of course were especially formulated for international commercial contracts, this can remove any doubt as to the suitability of the national law in an international context.”). 85 See Berger (2001), pp. 877 and 879 (referring to the process of examining the application of national law in light of the PICC standards applicable to international contracts as an “international method of construction”). See also Marrella (2003) (pointing to this legal methodology for checking on the suitability of domestic law as a “transnational test”). 86 See Meyer (2016), p. 604 (“[T]his ‘ trick’ of rephrasing an interpretation contra legem into one praeter legem should only be used when very good reasons permit so as not to disappoint the legitimate expectations of the parties.”).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
the UPICC have ever been used as “evidence of a general consensus on the law applicable to contracts”.87 The statement that the UNIDROIT Principles reflect widely shared concepts and rules on contract law intends to highlight that the Principles are in a unique position to serve as an international restatement of contract law, reflecting the views of scholars from different legal traditions.88 Thus, the Principles have been used for the purpose of interpreting or even filling gaps in “international instruments of uniform law”,89 whose uniform or at least harmonic interpretation by domestic courts is highly desirable.90 This conception of the Principles as embodying a “consensus” on general rules of contract law is consistent with the trend towards economic globalization and the increase of cross-border contracts and disputes, compelling judges, lawyers and law students to think about contract law side the confines of their own legal systems. Thus, the use of the PICC as an instrument of comparative interpretation of national contract law conforms to this idea of “general consensus”. Lord Mustill has been quoted as pointing out this feature of the Principles when stating that “[T]he Principles may be of particular value here since (a) they represent a distillation of a large number of laws which it would often be impracticable to examine individually; and (b) they have the imprimatur of an international organization and numerous distinguished scholars.” (quoted in Bonell 2005, p. 239). 88 In areas where legal systems diverge, the Principles by force give preference to one solution over the other, even if the chosen formula is not found in most domestic legal systems. See Bonell (2005). See also Michaels, 662 (“The authors of the PICC admitted freely that differences between existing contract laws existed and that they frequently chose one over the other on the basis of quality”). 89 See Austria Nat. Rep., referring to cases in which the provisions on the measure of recoverable damages under the PICC embody the principle of “full compensation” underlying the CISG, hence could be legitimately resorted to for the purpose of filling the gap left under Articles 74 and 78 CISG. On the use of selective provisions of the UPICC for the purpose of interpreting some issues governed by the CISG e.g., the calculation of damages (Arts. 4.7.2 and 4.7.3 PICC; the definition of standard terms, Art. 2.1.19 PICC; the calculation of interests, Art. 4.7.9 UPICC), see Michaels, pp. 665–666. 90 But see the USA Nat. Rep., reporting a couple of decisions by the Federal District Court for the Southern District of Florida dismissing the use of the gross disparity provision in Art. 3.10 PICC of 1994 (Art. 3.2.7 of the 2010 and 2016 UPICC) and as evidencing gross disparity as an internationally-neutral defense against the enforcement of contracts. In a decision rendered in 2005, the 11th Circuit Court of Appeals held that a seaman’s right to bring a court action under the Jones Act (46 U.S.C. Section 30104) does not apply to prevent the enforcement of an arbitration agreement falling under the New York Convention. Bautista v. Star Cruises, 396 F.3rd 1289 (11th Cir. 2005). When the defendant objected to the enforceability of the arbitration agreement on the ground that it was unconscionable, the 11th Circuit referred nonetheless the parties to arbitration declaring that Art. II(3) NY Convention offers little guidance on the applicable law to the validity of the arbitration agreement. The Court refused to invalidate the agreement given the absence of universally accepted standards of enforcement of arbitration agreements, declaring that it is “doubtful that there exists a precise, universal definition of the unequal bargaining power defense that may be applied effectively across the range of countries that are parties to the [New York] Convention.” Ibid., at 1302. When plaintiffs invoked the gross-disparity provision in the Principles, the Federal District Court for the Southern District of Florida, in a decision rendered in 2007, 87
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Yet, the rules embodied in the PICC are not simply a compilation of uncontroversial rules enjoying worldwide consensus.91 In fact, US courts have expressly rejected the idea of resorting to the PICC as evidence of a global consensus on the law of contract.92 Court decisions from other jurisdictions have also refused to regard the Principles as evidencing a consensus on contract rules, either because they have no binding force unless the parties embrace them in their contract,93 reflecting a compromise not always acceptable at the domestic level between conflicting national legal solutions,94 or because the Principles allegedly reflect a legal philosophy on contract interpretation alien to that of the law applicable to the contract, (which in the case at hand happened to be English law).95 dismissed the argument on the ground that the PICC are not binding. Koda v. Carnival Corporation, 2007 WL 7757994, 7 Sep 2007 (S.D. Florida), and subsequent cases cited in USA Nat. Rep., note 40. In another decision rendered in 2013, the same court dismissed the application of the gross-disparity provision in the Principles on the ground that it cannot have status of a “universal principle” since only 63 countries have joined UNIDROIT. The Court also noted that neither Art. 3.10 UPICC (1994) nor its official comment provide a the type of “universal definition” called for by the Bautista holding of the 11th Circuit. See Singh v. Carnival Corporation, 2013 WL 12139415 (S.D. Florida). See USA Nat. Rep., criticizing these decisions on the ground that unconscionability or gross disparity amounts, as noted by Gary Born, to a “generally-applicable and internationally-neutral” defense against the enforcement of contracts that is available virtually everywhere. See Born (2014), p. 839. 91 See, e.g., Chartbrook Ltd. v. Persimmon Homes Ltd. & Ors [2009] UIHL 38 (1 July 2009) 39, in which the House of Lords rejected the view of the PICC as representing a general consensus on contract law, suggesting that Art. 4.3 UPICC does not represent English law, but rather a “French philosophy of contractual interpretation, which is altogether different from that of English law.” For a critique of this decision, see Vogenauer (2007), pp. 123 and 127–129. See also Michaels, 651, n. 37, referring to five UK decisions, two Australian decisions and three New Zealand decisions rejecting the view embodied in Art. 4 UPICC that pre-contractual negotiations can be relied upon to interpret the terms of a contract. 92 In a case in which resorting to the PICC was indeed of limited assistance, the plaintiff relied on the rules of the Principles on freedom of contract and on agency in order to assert his status as an agent of a corporation. Although reference to the Principles in this case does not seem to have been helpful or even appropriate, the court dismissed the reference to the PICC as a “somewhat nebulous discourse on the law of corporations and his view on the effect of [the UNIDROIT Principles]”. Chien v. Commonwealth Biotechnologies, Inc., 484 B.R. 659 (E.D. Virginia 2012). 93 Federal Commercial Court (Central Circuit) of the Russian Federation, 19 July 2011, holding that the PICC have no place among the sources of law listed in Article 7 Russian CC, cited by Meyer (2016), n. 13. 94 Tribunale Verona, 30 June 2010, cited by Meyer (2016), n. 14. 95 In a case reportedly decided by the New Zealand Court of Appeals, it was decided to exclude evidence of what transpired at the contractual negotiations for determining the meaning of the terms of the contract, arguably allowed under Art. 8(3) CISG and Art. 4.3 UPICC, in favor of the more restrictive approach of the English common law towards contract interpretation. Hideo Yoshimoto v. Canterbury Golf International Limited, 27 Nov. 2000, cited in Meyer (2016), n. 37. Meyer also refers to a couple of decisions in which the standards of interpretation of
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The fact that in many instances the UNIDROIT Principles adopt rules not always acceptable in domestic contract law explains why some national courts refuse to rely on the PICC to substantiate the court’s interpretation of its own domestic law of contracts.96 But the picture emerging from scholarly opinions, however, is quite different from the impression one may gather from the absence of any reference to the UNIDROIT Principles in the court reports of a given jurisdiction. The national reports from jurisdictions such as Austria, Germany, Guatemala, Japan, and the United States report that their courts rarely, if ever, resort to the application of the PICC for the purpose of interpreting and supplementing domestic contract law or for any other purpose. On the other side of the spectrum, courts form Argentina, Brazil, Paraguay, Russia, and Spain frequently refer to the PICC. This is not surprising, for it is known that the UNIDROIT Principles received a warm reception in jurisdictions undergoing a transition from socialist to free-market economies.97 From those particularly drawn to internationally oriented sources of law,98 in contrast to the contracts espoused by the CISG and the UPICC were contrasted with those of the English common law, the UK Supreme Court finally deciding that the presumably freer and more “international” standards reflected in those instruments “reflect the French philosophy of contractual interpretation, which is altogether different from that of English law.” See Meyer (2016), pp. 606–607, notes 38–39, referring to Proforce Recruit Limited v. The Rugby Group Limited (17 Feb. 2006) and Chartbook Limited v. Persimmon Homes Limited and others (1 July 2009). 96 See Denmark Nat. Rep. (“[I]t seems safe to say that no Danish court has ever cited the UPICC as evidence of a ‘consensus on the law applicable to contracts’.”). 97 See, for example, the reception accorded to the UPICC in Russian law, especially during the first years following the adoption of the new Civil Code, when the law of contract was sought to be modernized in order to catch up with the winds of transition towards a free market economy. Alexander Komarov, referring to the doctrinal developments on contract law advanced by the International Court of Arbitration of the Chamber of Industry and Commerce of the Russian Federation, in Unif. L. Rev. 657, 659 (2011). 98 See Denmark Nat. Rep., referring to the dominant influence played by the PICC in contract legal scholarship, in which the “the unwritten (judge-made) general principles of Danish domestic law as regards Contracts and Obligations will, in the long term, increasingly be inspired and affected by foreign and international rules of law.” Professor Christina Ramberg also refers to the warm reception of the UPICC in Scandinavian countries, “where it is hardly possible to analyze a contractual problem without reference to the PICC”. See Ramberg (2014), pp. 669 and 673. For the receptiveness towards the UNIDROIT Principles on part of the Paraguayan legal community, from early teaching in law schools to the training of judges, see Paraguayan Nat. Rep. (“The UPICC are part of the legal discourse of Paraguayan practice and academia. A contract law textbook which compares the UPICC with the Civil Code’s solutions is used in regular Contract Law courses in major universities. The 2010 version of the Principles were published in Asunción by Intercontinental Editora. There is a specific subject in the Judicial School (Escuela Judicial) which deals with the interpretation of the Civil Code aided by the UPICC. Teams of National and Catholic Universities of Asunción have participated in Arbitration
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tepid if not indifferent reception of the Principles in more self-centered legal systems, less opened to the reflections and borrowings prompted by comparative legal studies.99 Depending on the relative permeability of a legal system to comparative perspectives, there is a noticeably trend in some jurisdictions to look for support in rules of contract law transcending national borders.100 The PICC happens to provide a blueprint of transnational contract law in readily accessible language, available and supported by abundant legal scholarship published in different languages and venues. Thus, several national reports indicate that the absence of explicit reference to the UPICC as a formal source of contract law, or the absence of reported judicial decisions relying on the Principles, does not mean that they could not be applied for the purpose of interpreting or supplementing domestic law.101
Moot Competitions involving the application of the UPICC such as the Vis Moot, the Moot Madrid and the Moot jointly organized by the University of Buenos Aries and Rosario of Bogotá. Moreover, as stated, the UPICC are being used by courts for interpreting and supplementing national contract law.”). 99 See USA Nat. Rep., mentioning, among other reasons attempting to explain the negligible attention paid to the PICC, the “almost stereotypical internationalization of US law and US lawyers, who have more difficulty than lawyers elsewhere to think in terms and ways other than those of their own law.” See also Japanese Nat. Rep. at 4 (“Though comparative studies of foreign laws have significant influence on academic studies, and attorneys might refer to foreign laws in their memorandum, it is rare for judgments in Japanese courts to refer to foreign laws in their judgments, and the same could be said in relation to the UPICC”). 100 This seems to be the case in Russia, where its highest courts, the Supreme Court and the Supreme Commercial (Arbitrazh) Court of the Russian Federation refer to the PICC with relative frequency. See Russian Nat. Report at 3, note 5, noting that the impact of the PICC in Russia is suggested by the UNILEX database, reporting at by the end of 2018, 48 Russian judgments out of the 266 decisions in which the PICC were referred to worldwide, thus provides a strong indication of the role played by the UNIDROIT Principles in the Russian Federation. A caveat is nevertheless entered with regard to the actual relevance of the Principles in the outcome of the cases. See Russian Nat. Rep., at 2 (“The numbers of cases where the UPICC have been invoked by the court or the tribunal undoubtedly attest to a warm reception of the Principles by the Russian judges and arbitrators. However, a cautious attitude is appropriate. If is noteworthy that judges and their assistants frequently tend to borrow phrasing from previous decisions in similar cases, thus generating series of judgments with similar structures and wording. . .”). 101 See Denmark Nat. Rep., stating that Danish courts often need to determine, for example, whether a given breach of contract reaches the level of seriousness to justify termination, a determination resting almost invariably on domestic (Danish) law. The Danish National Report adds, however, that “no formal barrier would prevent a Danish Court from applying Article 7.3.1 of the UPICC to determine whether a given breach of a given contract with an international element had reached “fundamental” proportions under the Danish domestic law of contracts and sales”. See Denmark Nat. Rep. n. 4 (adding that “the opinions of Danish courts rarely include references to scholarly writing --a category which arguably might include the UPICC”.).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
The fact that the PICC have not found their place in the court reports of a given jurisdiction, or that the courts in that country seldom rely on the UNIDROIT Principles in order to interpret or supplement domestic law does not necessarily mean that the Principles are absent from academic analyses on the law of contracts. This contrast between the absence of court decisions mentioning the PICC and the development of contract law and scholarship in that same jurisdiction emerges not only from some national reports (e.g., national reports from Denmark,102 the Czech Republic,103 and Hungary104), but also from a jurisdiction like Germany, whose leading legal Kommentaren on contract law generously refer to the PICC.105 It should be borne in mind, however, that in those jurisdictions most hospitable to the use of the Principles, they are rarely used as the applicable law to the contract, to the exclusion of other national laws, but rather as one body of contract rules, together with contract rules from other foreign legal systems, among which the Principles play a prominent role due to their global, universal, or international aspiration.106 Even in those jurisdictions where it is reported that the Principles are regarded as providing modern rules on transnational contact law, such rules are relied upon “as a confirmation that the proposed solution enjoys consensus in international commercial law,”107 rather than as the law See the answers provided in the Denmark Nat. Rep. to the first three questions in the survey, the first focusing on whether the Principles have been used for the purpose of interpreting and supplementing domestic law, the second one on whether the UPICC are regarded as “evidence of a consensus on the law applicable to contracts”, and the third question whether they have been used in any other way (“(2) Turning to the next question posed by the General Reporters (and judging, once again, by the reported decisions available online in the Danish Weekly Law Reports), it seems safe to say that no Danish court has ever cited the UPICC as evidence of a ‘consensus on the law applicable to contracts’. . . .3) Turning now to Danish scholarly opinion, the situation is quite different from that set forth under heads (1) and (2) above, in that Danish legal scholars frequently refer to the UPICC, both as a general body of contract law and as regards many of its specific provisions. . .”). Emphasis added. 103 Czech Republic Nat. Rep. (“The UPICC may be regarded as an interpretation tool with regard to the provisions of the new 2012 Civil Code, as the UPICC served, together with other sources, as a model for some new provisions”) 104 Hungary Nat. Rep. (referring to the UPICC as a source relied upon for drafting the new Civil Code). 105 See Meyer (2016), p. 605. 106 See, for example, decision of the Spanish Supreme Court of 29 February 2012 (Case No. 74/2012), dealing with the interpretation of contracts, for which the Spanish legal system provides ample coverage (Arts. 1281–1289 Spanish CC; Arts. 50, 57, and 59 Spanish CoC), in which the PICC are relied upon, in a broad comparative survey on contract interpretation, together with canons of interpretation in Art. 236 Portuguese CC, Art. 1156 French CC, Art. 1362 Italian CC, and Art. 5:101 PECL, cited in Michaels (2014), p. 648. 107 See Argentina Nat. Rep., answering Question No. 2, referring to nine decisions rendered by Argentine courts in which selective provisions of the Principles are cited mostly for the purpose of confirming a result 102
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applicable to the contract pursuant to the parties’ choice or by virtue of the forum’s rules of private international law. Whether to provide clarity or fill a gap in the domestic law of contract, in most cases the application of the Principles contributes very little to the outcome of the case, irrespective of whether the dispute concerns a purely domestic contract or a cross-border transaction, and independently whether it is a state court or an arbitral tribunal adjudicating the dispute. As stated before, the Principles are rarely chosen as the applicable law by the parties and, in the absence of the parties’ choice, judges and arbitrators rarely treat them in their entirety as the applicable law, preferring instead to rely on individual provisions and in connection, as discussed earlier, with other domestic contract law.108
consistent with Argentine law or the domestic law applicable to the dispute. See., e.g., Ingeniero Nestor A. Brandolini y Asociados SRL c. Oviedo Funes, Maria Lila y otro, Cordoba Ct. App., 6th Panel, 14 March 2008 (resorting to the notion of “fundamental breach” in Art. 7.3 UPICC (2004)); Trianna Transportes SRL c. Cervercería y Maltería Quilmes S.A., Càmara Nacional en lo Commercial, Sala A (“ Nat.Com. Ct. App., Panel A”), 8 April 2008 (referring to Art. 2.2.1 UPICC for the proposition that non-standard clauses prevail over standard clauses), a rule also relied upon in subsequent cases, D.G. Belgrano SA. C. Procter & Gamble Argentina SRL, Nat.Com.Ct.App., Panel A, 28 June 2013; Nea Commerce S.A. c. Sky Arentina S.C.A., Nat.Com. Ct.App., Panel A, 13 March 2009; LV7 Radio Tucuman S.A., c. Provincia de Tucumán, 27 June 2008 (confirming the outcome reached under Art. 919 of the former Argentine CC, to the effect that silence shall not be construed as a tacit acceptance by referring to Art. 2.9.1 UPICC (2010)); Compibal SRL c. Roux Ocefa SA, Nat. Com.Ct.App., Panel D, 17 Nov. 2008 and Editorial Ver S.A. v. DYS S.A., Nat.Com.Ct.App., Panel D, 19 Aug. 2009 (alluding to Art. 5.1.8 PICC (2004) and comments to decide that a contract for an indefinite period may be terminated giving notice a reasonable time in advance; Horbath Abraya Gildeharth, Sofia Hilda c. Cabaña Solaz S.A., Nat.Com. Ct.App., Panel A, 30 Dec. 2012, resorting to Art. 5.1.3 PICC to corroborate the cooperation mutually owned by the parties to a contract, a corollary of the overriding principle of good faith consecrated by Argentine law; NSS S.A. c. Mera Latina S.A., Nat.Com.Ct.App., Panel A, 20 Dec. 2012, referring to several articles of the Principles pointing to the binding force of the course of dealing and practices observed by the parties, as well as trade usages widely known and regularly observed in the am branch of trade; Sanovo International v. Ovoprot International S.A., Nat.Com.Ct.App., Panel A, 16 Oct. 2013 (in a case governed by the CISG, the Court referred to different paragraphs of Art. 7.4 PICC for the purpose of establishing the obligor’s foreseeability of the harm as a limit of the recoverable damages, as well as resorting to Art. 7.4.6 PICC (2010) in order to determine the meaning of “current market price”; Murex Argentina S.A. c. Abbott Laboratories y otro, Nat.Com.Ct.App., Panel A, 1 Apr. 2014, affirming the court’s power to fill a gap in the contract with “a term appropriate to the circumstances”, which the court was entitled to fill pursuant to Art. 1198 of the former Argentine CC (current Art. 961 Argentine CCC) but found support in Art. 4.8 PICC; D.G. Belgrano S.A. c. Procter & Gamble Argentina S.R.L., Nat.Com.Ct.App., Panel A, 28 June 2013, finding in the concept of gross disparity under Art. 3.10 PICC. 108 See Michaels (2014).
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Counterparts of UPICC Selected Provisions in National Contract Law
Bearing in mind that most use of the Principles is to rules of particular relevance or usefulness, the national reporters were consulted on whether nine selected provisions of the UPICC (for reasons of time and space it was impracticable to cover all the provisions of the Principles) find a counterpart in the domestic law of contract of that particular jurisdiction.109 National reporters were also asked to identify the domestic rule addressing the same issue of contract law, noting the differences, if any, with the rule adopted by the Principles. In case there is no domestic counterpart to the rule of the UPICC included in the questionnaire, national reporters were consulted on whether the PICC rule may be resorted to for the purpose of supplementing that gap in the domestic law of contracts.110 Finally, the national reporters were also asked to add their own list of PICC rules (other than the nine provisions identified in the questionnaire) used in their jurisdictions, if any, for the purpose of interpreting or supplementing their national contract law.111 As expected, a considerable number of the individual provisions of the Principles listed in the questionnaire, if not most, find some counterpart in the jurisdictions represented in the national reports.112 Yet, in many of these cases the parallel drawn with the PICC rule rests on the fact 109 See Questionnaire on the UNIDROIT Principles as a Common Frame of Reference, Question (5): If there is a statutory or case-law rule (such as a code provision or jurisprudential line of decisions) dealing with the same or similar issue addressed by those selected provision of the UPICC, please reproduce the full text of such a provision or case-law rule, indicating any relevant difference you find between the domestic rule of contract law and the selected rule of the UPICC, also indicating whether the UPICC may be relied upon by the courts of your country as a general principle of contract law interpreting and supplementing national contract law. 110 See Questionnaire on the UNIDROIT Principles as a Common Frame of Reference, Question (6): If there is no such a rule of contract law in your jurisdiction, please indicate, with reasons, whether any of those selected provision of the UPICC may, in your view, be relied upon as a source of interpretation of the law of contracts in force in your country, or for the purpose of supplementing gaps in your national contract law. 111 Questionnaire on the UNIDROIT Principles as a Common Frame of Reference, Question (7): Please include those rules of the UPICC (other than those included in the given list) which have been relied upon by courts or arbitral tribunals for the purpose interpreting a similar provision of your national contract law or in order to supplement (thus serving as a gap-filler) the national contract law in force in your jurisdiction. 112 Most national reports pointed to a statutory—and occasionally jurisprudential—domestic counterpart to the UPICC rules indicated in the survey. With the exception of the provisions regarding the liability for breaking off negotiations in bad faith (Art. 2.1.5 UPICC), linguistic discrepancies (Art. 4.7 UPICC), and interest on damages (Art. 7.4.10), most national reports pointed and discussed provisions dealing with the same topic.
that it addresses the same issue or problem covered by a domestic rule of contract law. A closer examination of the domestic contract law and the relevant PICC rule is likely to reveal that, although broadly in accordance with the domestic rule, the PICC offers a more straightforward answer. In many cases, addressing the same problem but with a different focus, the PICC rule provides a more concrete solution than the more general and abstract rule in domestic contract.113 By way of exception, a few of the PICC rules listed in the questionnaire do not have a counterpart in the domestic legal system, either because the Principles provide an innovative or specific solution to a problem typically arising in international contracts. This is the case, for example, of the “choiceof-language” rule in a contract negotiated and drafted in more than one language (Art. 4.7 PICC), or whether the obligor has the right to choose the currency in which to be paid (Art. 6.1.9 PICC). Most national reports fail to identify a domestic rule addressing the issue of linguistic discrepancies,114 but some reports point to laws and regulations dealing with the currency of payment. However, there seems to be ample room 113
For example, many legal systems provide for the obligation to pay interest for failure to seasonably perform a monetary obligation, and in most cases the parties, judges, and arbitrators can rely on a statutory legal rate of interest in case the parties fail to agree on a reasonable rate. What many legal systems lack is a specific choice-of-law rule to determine the applicable rate of interest for the failure to perform timely a monetary obligation. Although the classic principle of full compensation may be relied upon in order to recover compensation for additional losses, most legal systems fail to expressly address the question whether the obligee may recover damages over and above the statutory rate of interest by establishing a greater loss. Although the national reports invariably point to a counterpart to the pertinent UPICC rule, most of domestic provisions fail to address the choice-of-law issue and other issues addressed in Art. 7.4.9 UPICC. 114 By way of exception, see Art. 125(2) of the Chinese Contract Law, pointing to the purpose of the contract (“Where a contract is concluded in two or more languages and it is agreed that all versions are equally authentic, the words and sentences in each version are construed to have the same meaning. In case of any discrepancy in the words or sentences used in the different language versions, they shall be interpreted in light of the purpose of the contract.”). Some jurisdictions address the problem of multiple language versions in consumer protection statutes. USA Nat. Rep., referring to Section 1632 (j) of the California Civil Code (“The terms of the contract or agreement that is executed in the English language determine the rights and obligations of the parties. However, the translation of the contract or the disclosures required by subdivision (e) in any of the languages specified in subdivision (b) in which the contract or agreement was negotiated shall be admissible in evidence only to show that no contract was entered into because of a substantial difference in the material terms and conditions of the contract and the translation.”). See also Ramos v. Westlake Services LLC, 242 Cal.App. 4th 674 (2015) (in a consumer contract drafted by one of the parties, where the English original includes an arbitration agreement that is missing from the Spanish translation, the agreement is void); Torres v. United Staffing Associates LLC, 2015 WL 5752583*4 (Cal. Sup.) (Trial Order) (in a consumer contract drafted in the English language but only signed in its Spanish version, the court held that the Spanish version prevails).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
for the PICC to play a significant role in interpreting or supplementing domestic laws on choice of currency. Many legal systems follow a traditional rule requiring all obligations and judgments to be paid in the national currency of the place of payment or the currency of the forum, and in most instances the obligor or judgment debtor is allowed to choose the currency of the place of payment or of the place where the judgment is rendered.115 It is only by way of exception that some legal systems specify whether the creditor or judgment creditor may choose, unless the parties had agreed otherwise, to be paid in the currency of the place of payment, or in the currency in which the loss was incurred, or the currency of the forum (assuming these are different locations with different currencies).116 Other questions, such as whether the debtor is allowed to choose the currency of the place of payment and, if so, which day should count for determining the exchange rate, (wisely addressed in Article 6.1.9 PICC), are not always addressed by domestic rules on contract law and obligations.117 115 See, e.g., Argentina Nat. Rep., referring to Art. 765 Arg.CCC, providing for the release of the debtor by paying in national currency (“Concept. When the debtor owes a certain amount of currency that is determined or determinable at the time the obligation is constituted, such an obligation shall be considered an obligation to pay a sum of money. If at the time the obligation is constituted it is stipulated to give currency that is not legal tender in Argentina, such an obligation shall be considered as an obligation to deliver a quantity of things, and the debtor may be released by giving the equivalent amount in legal tender.”). The Argentina Nat. Rep. adds that it is disputed in Argentina whether this is a mandatory or a default rule. To the same effect, see Art. 403 of the 2017 Revised Japanese Civil Code (“When the amount of the claim is specified in the currency of a foreign state, the obligor may pay in the legal currency of Japan using the foreign exchange rate current in the place of performance.”) It is unclear under those provisions which is the relevant day for determining the exchange rate between the national and foreign currency, but the Japanese Nat. Rep. points to the judicial practice in Japan of fixing the exchange rate at the time of conclusion of the oral arguments in the proceedings. For a more nuanced, though not necessarily more predictable legal framework offered by federal and state law in the United States, see USA Nat. Rep., referring to different solutions offered by federal and state caselaw, as well as the law of negotiable instruments (Section 3-107 UCC), the Restatement on Foreign Relations (Section 823 of the Restatement (3rd) on Foreign Relations), and the Uniform Foreign-Money Claims Act (“UFMCA”, Section 7(b) on Judgments and Awards in Foreign Claims and Section 1(3), defining “Conversion Date”). 116 But see Japanese Nat. Rep., referring to Article 403 of the 2017 Revised Civil Code for Japan, replicating the rule found in the 1896 Civil Code (“When the amount of the claim is specified in the currency of a foreign state, the obligor may make payment in the legal currency of Japan using the foreign exchange rate current in the place of the performance”). 117 Article 6.1.9(3) and (4) PICC provide for the applicable rate of exchange prevailing where and when payment is due, unless the payor is in default, in which case the payee may choose between the rate of exchange when payment was due or at the time of actual payment. See Japanese Nat.Rep. at 8, pointing to Japanese “court practices” relying on the exchange rate “available in Japan when the oral arguments in the proceedings are concluded.”
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The method to calculate the payment of interest is another issue which, though generally settled with reference to domestic law, would benefit greatly from the role that Article 7.4.9 PICC may play in interpreting or supplementing such domestic law. This issue was left open in Article 78 CISG, and plausible attempts have been made to fill this gap by resorting to the general principles underlying the Vienna Sales Convention, being one of those issues “governed but not expressly settled” by the CISG.118 Even though Article 7.4.9 PICC cannot be said to represent a genuine international consensus,119 this rule is likely to be more suitable to cross-border transactions than calculating the amount of interest under any domestic law.120 In many instances Article 7.4.9 may fill a gap not only when the applicable domestic law, or the choice of law rule to apply in order to determine such law is unclear, but also in the many instances in which the applicable law fails to indicate the interest rate to be applied when the judgment or award is expressed in a currency foreign to the place of payment, the seat of the arbitration, or the forum where the judgment was rendered. Be this as it may, even in those cases in which the Principles simply restate a rule that permeates most Western legal systems, such as freedom of contract (Art. 1.1 PICC), the duty of good faith and fair dealing (Art. 1.7 PICC), the definition of standard terms (Art. 2.1.19 PICC) or the calculation of damages (Arts. 7.4.2 and 7.4.3 PICC), it is the manner or way in which the rule is formulated what is likely to determine its potential usefulness to “interpret” or “supplement” domestic contract law. A mere restatement of generally accepted rules, however, is unlikely to play a role in the interpretation of domestic law as significant as those rules of the Principles supplying meaning to concepts that, though not inconsistent with the applicable domestic law, are not specifically addressed by such law.121 It is in these cases when the auxiliary role played by the PICC is likely to come into play, either to assist in the interpretation of national contract law that is unclear or by
118
See CISG Advisory Council No. 14, Interest Under Article 78 CISG, at http://www.cisgac.com/cisgac-opinion-no14-p3/. 119 For one thing, Article 7.4.9(3), following Article 78 CISG, allows the obligee to claim, in addition to interest, other damages as long such damages can be established. See Japanese Nat. Rep. at 13, referring to a decision of the Japanese Supreme Court of October 11, 1973, according to which the aggrieved party cannot recover additional damages even if it proves that its loss exceeds the interest. Contra, see Article 345 of the Greek Civil Code (obligee is entitled to recover damages in addition to interest as long as it can prove having suffered such harm). 120 See Gotanda (2009). 121 See Japanese Nat. Rep., at 16 (“. . .[T]he UPICC may have some role to play in the future in developing case law in areas where Japanese law is not settled. Among the principles discussed above, such areas include regulation of surprising terms (Art. 2.1.20 UPICC) and the solution of linguistic discrepancies in contract interpretation (Art. 4.7 UPICC).”).
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filling a gap or “supplementing” a lacunae praeter legem in the domestic law. A decision by the Swiss Federal Tribunal of 2009, while dismissing an action to set aside an arbitral award, provides good illustration of using the PICC in the interpretation of domestic contract law in those case in which such law to elaborate on the meaning of concepts or terms that are not altogether clear, or when it fails to settle an issue is specifically addressed by the Principles. The case involved dispute under a contract concluded between parties from different countries who agreed to submit their disputes to arbitration in Switzerland, choosing Swiss law as the law applicable to their contract. According to the contract, either party was entitled to terminate it in case of “material breach”, a concept which was not adopted nor elaborated under Swiss domestic law. The arbitral tribunal resorted to Art. 25 CISG and Art. 7.3.1 UPICC, relying on the concept of a “fundamental breach” in order to interpret the contract. The losing party challenged the award before the Swiss Federal Tribunal on the ground that the arbitral tribunal had exceeded its powers by applying a set of rules that the parties had excluded in favor of the application of Swiss domestic law. Switzerland’s highest court dismissed the challenge, affirming the authority of the arbitral tribunal to resort to the CISG and the UPICC for the purpose of interpreting the meaning of “material breach”. In the view of the court, the arbitral tribunal gave effect to the common intention of the parties, who could reasonably expect the application of instruments governing international commercial contracts as an auxiliary tool for the interpretation of Swiss law.122
5
By Way of a Conclusion: The Potential Contribution of the UPICC to the Development of an Increasingly Harmonized National Contract Law
The jurisdictions represented in the national reports vary greatly in the extent to which they make use of the Principles. Some national reports indicate that the case law reports at the time of this writing have never made reference (or rarely disclose) references to the UNIDROIT Principles.123 Other national reports acknowledge that courts in their countries have occasionally resorted to the Principles, though never as a tool to interpret or supplement their domestic law of contracts. Some national reports, however, cite and discuss cases in which the highest court in the jurisdiction or intermediate appellate courts have relied on specific provisions of 122
Swiss Federal Tribunal, 16 Dec. 2009. See Kleinheisterkamp (2017). See, e.g., Guatemalan National Report (“In Guatemala, there are no reported cases in which national courts have used the UPICC to interpret or supplement national laws, nor in any other way.”).
123
the PICC in both domestic as well as international disputes governed by domestic contract law. Noticeably, in most cases the Principles have rarely been used as a “rule of decision” and for the purpose of clarifying or correcting shortcomings of the applicable domestic the law. The support sought by the courts from the UNIDROIT Principles bears little or no influence at all on the outcome of those cases decided under national contract law. In those jurisdictions where the Principles are frequently cited by the courts, judges often resort to a specific rule of the PICC not necessarily for the purpose of interpreting or dispelling ambiguities and omissions in their domestic law of contracts, but rather to substantiate their own interpretation of the national contract law, as if finding support in a supposedly global consensus on the law of contract would strengthen the legitimacy of their decisions. Indeed, it is this role of the Principles as a tool to be used for adding comparative perspectives where that they are most likely to have an impact in the “development” of national contract law.124 The contribution of the Principles to the development of a modern contract law, whether to the settlement of disputes with a cross-border dimension or arising out of a purely domestic consumer contract, cannot be determined on number of cases citing the PICC, for in many cases such references amount to not much more than ornamental remarks. What actually counts measuring the significance of the Principles is the factual context in which they are used and the extent to which the application of an individual provision of the UPICC actually adds predictability and fairness to the case at hand. This type of analysis cannot be done in the abstract, requiring a closer look at the role played by the Principles in the interpretation and supplementation of national contract law that is either ambiguous, unpredictable, or simply unsuitable. The overall conclusion emerging from the national reports is that in most jurisdictions the PICC has played a minor role in the interpretation and supplementation of domestic law. In fact, the UNIDROIT Principles are rarely applied on their own in the absence of the parties’ choice and the parties rarely opt-in for the Principles as the applicable law. And when the Principles are chosen, more often than not they are not applied in totum, as a whole, to the exclusion of any other law. There are many reasons why this is the case, the fact that national contract law continues to be regarded as an expression of the sovereignty exercised by jurisdictions represented in this report being one of them. Yet, looking back at the number of arbitral awards and judicial decisions that have 124 See Michaels (2014), p. 657 (“Doctrinally, the PICC are rarely an ‘applicable law’ in the sense of private international law. Instead, they enter judicial opinion in a variety of other ways. The most important way is in the course of comparative legal argument for questions where judges do no find a clear and/or satisfying answer in their own legal system. . .”).
The UNIDROIT Principles as a Common Frame of Reference for the Uniform. . .
acknowledged the role played by the UNIDROIT Principles over time, one is left with the impression that the Principles continue to offer a comprehensive and well-balanced legal regime whose role in international commercial contracts will continue to grow steadily. In fact, even in those jurisdictions where the courts are unlikely to cite the UNIDROIT Principles, their leading commentaries on domestic contract law rarely fail to make some comparative reference to some individual provisions of the Principles while discussing issues of domestic contract law. Courts in various countries greatly differ not only on whether they refer to the Principles, but significant variations are noted on the reasons why they refer to the Principles and the legal route they choose to take in order to apply them. But in those jurisdictions where the UNIDROIT Principles are better known, regardless of the route chosen for entering into national legal systems (“general principles of law”, “trade usages”, “lex mercatoria”, or simply as an additional tool offering comparative perspectives), most national reports point to cases in which individual provisions of the Principles are cited and relied upon by arbitral tribunals and courts as a check on the reasonableness of the outcome reached under the otherwise governing law. In those jurisdictions the significance of the UNIDROIT Principles has grown with the increasing globalization of the economy and the internationalization of the law of contracts. This is not a small treat, because the contrast between the solutions provided by traditional contract rules of domestic law and those offered by the Principles provide not only a useful measure of comparison, but also an impetus for reflection and eventual law reform.
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Fitzgerald PL (2008) The International Contracting Practices Survey Project. J Law Commerce 27:1 Goode R (2001) Insularity or leadership? The role of the U.K. in the harmonisation of commercial law. Int Comp Law Q 50:751 Gordon MW (1998) Some thoughts on the receptiveness of contract rules in the CISG and the UNIDROIT principles as reflected in one state’s (Florida) experience of (1) Law School Faculty, (2) Members of the Bar with an International Practice and (3) Judges. Am J Comp Law 46(Suppl 361) Gotanda J (2009) When recessions create windfalls: the problem of using domestic law to fix interest rates under Article 78 CISG. Vindobona J Int Commercial Law Arbitr 19:229 Han S (2013) Principles of Asian contract law: an endeavour of regional harmonization of contract law in East Asia. Villanova Law Rev 58:589 Huang J (2008) Direct application of international commercial law in Chinese Courts: intellectual property, trade, and international transportation. Manchester J Int Econ Law 105 Inter-American Convention on the Law Applicable to International Contracts (1994) Kanaya N (2010) PACL –the significance and task of PACL. Jurist 1406:102 Kleinheisterkamp J (2017) The CISG and the PICC as models for convergence/or transnational will-o-the-wisps? Komarov A (2011) Reference to the UNIDROIT Principles in International Commercial Arbitration Practice in the Russian Federation. Unif Law Rev 19:657–667 Lando O, Bale H (eds) (2003) Principles of European contract law, parts I and II, art. 1:101(4) PECL. Kluwer Law International Marrella F (2003) Vanderbilt J Trans Law 36 Martìnez Cañellas A (2007) The influence of the UNIDROIT principles on the proposal of the reform of the Spanish Commercial Code. In: Cashin Ritain E, Lein E (eds) The UNIDROIT Principles 2004: their impact on contractual practice, jurisprudence and codification, p 215 Meyer O (2016) The UNIDROIT principles as a means to interpret or supplement domestic law. Unif Law Rev 21:599, 600 Michaels R (2014) The UNIDROIT principles as global background law. Unif Law Rev 19:643 Michaels R (2015) In: Vogenauer S, Kleinheisterkamp J (eds) Preamble, commentary on the UNIDROIT principles of international commercial contracts Moreno JA, Albornoz MM (2011) Reflections on the Mexico Convention in the context of the preparation of the future Hague instrument on international contracts. J Private Int Law 7 Moreno Rodriguez JA (2016) The new Paraguayan law on international contracts: back to the past. In: The age of uniform law. Essays in Honor of Michael Joachim Bonell to Celebrate his 70th Birthday, p 1146 Muñoz A, Geny D (2016) Les principes d’Unidroit dqns l’arbitrqge international RDAI/IBLJ, No. 2 Orucu E (2011) Legal culture and legal transplants: the Scottish National Report. In: Sanchez Cordero JA (ed) Legal culture and legal transplants: reports to the XVIIIth International Congress of Comparative Law. International Academy of Comparative Law Oser D (2008) The UNIDROIT principles of international commercial contracts: governing law? Perales Viscasillas P (2016) Los Principios de Unidroit en la jurisprudencia del Tribunal Supremo Español. In: Essays in Honour of Michael Joachim Bonell Pizarro Wilson C (ed) (2012) El derecho de los contratos en Latinoamérica: Bases para unos principios de derecho de los contratos, ed. Fundación Fernando Fueyo Laneri RAMBERG, Ch. (2014) The UNIDROIT Principles as a Means of Interpreting Domestic Law, Unif. L. Rev., vol. 19, pp. 669–675. Shaohui Z (2008) L’influence des Principes d’ UNIDROIT sur la réforme du droit chinois des obligations. Unif Law Rev 13(1–2):153
70 UNIDROIT (2013) Model clauses for use by parties of the UNIDROIT principles of international commercial contracts UNIDROIT (2018) Principles as a common frame of reference for the uniform interpretation of national laws, reports to the XIXth International Congress of Comparative Law. International Academy of Comparative Law Ushida T (2011) Contract law reform in Japan and the UNIDROIT principles. Unif Law Rev 16(3) Veneziano A. The model clauses for the use of the UNIDROIT principles of international commercial contracts as a tool for party autonomy and in adjudication Vogenauer S (2007) Interpretation of contract: concluding comparative observations. In: Burrows A, Peel E (eds) Contract terms Vogenauer S, Kleinheisterkamp J (eds) (2015) Commentary on the UNIDROIT principles on international commercial contracts, 2nd edn. Oxford University Press
A. M. Garro and J. A. Moreno Rodríguez Whited CM (2011) The UNIDROIT principles of international commercial contracts: an overview of their utility and the role they have played in reforming domestic contract law around the world. ILSA J Int Comp Law 18:167 Yuqing Z, Danhan H (2000) The new contract law in the People’s Republic of China and the UNIDROIT principles on international commercial contracts: a brief comparison. Unif Law Rev 5(3) Zimmermann R (2005) The new German law of obligations. OUP Zukas T (2007) Reception of the UNIDROIT principles of international commercial contracts and the principles of European contract law in Lithuania. In: Cashin Ritain E, Lein E (eds) The UNIDROIT Principles 2004: their impact on contractual practice, jurisprudence and codification
Bilingual Study and Research: The Need and Challenges Nicolás Etcheverry Estrázulas and Sofía Cairo
Abstract
This article provides general and current information concerning 14 diverse countries regarding bilingual legal education in their respective universities. The difference of cultures, customs and dialects is very clear and reflects some difficulties in the evolution of this kind of education in the recent past years.
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Introduction
To begin with, my most sincere gratitude to the extraordinary group of National Reporters that have so well responded to our requests, with dedication, commitment and excellence during the last months and throughout almost one year. It would be unfair if I would not also give a big thank you to my Uruguayan collaborator Sofia Cairo, as well as to Alexandre Segenackic for his permanent dedication towards this academic event. And finally to our moderator, Dominique Custos, who was so diligent in helping us to organize the oral session of our topic in the last weeks before the Congress. How many hours per semester should be required in legal courses so that such education may be considered and become bilingual? This is a difficult and even impossible answer to respond because it may vary significantly from country to country. Especially if you have in mind that in several of the National Reports we received, those countries or regions are already bilingual or even multilingual. If you add the amount of dialects or sub-languages that are spoken This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. N. Etcheverry Estrázulas (*) School of Law, Universidad de Montevideo, Montevideo, Uruguay e-mail: [email protected] S. Cairo Hughes & Hughes, Montevideo, Uruguay e-mail: [email protected]
in some of them, the answer is even harder. Take for example China, Italy, Finland or Belgium and we will find the huge difficulty to establish what a bilingual or multilingual legal education should be considered as such. On the other hand, it has been a significant coincidence that all the Reports agree on one issue: Learning a second or even sometimes a third language in order to be skillful as a lawyer, judge,, or whatever legal profession you may practice, is much more than simply use the correct words and pronounce them properly. Much more important than this, Bi-lingualism aims at something higher and tougher at the same time. It is supposed to achieve a fair—if not complete— understanding and comprehension of the culture you are dealing with. Consequently, the way the questions are asked, the emphasis employed in such and such sentences or phrases, or the way the questions are responded when everyday issues and problems arise, may reflect a deeper or lighter knowledge of that culture. Needless to say, it is in my opinion actually outdated and even absurd to focus the debate of bilingual legal education in terms of nationalism versus internationalism, because both need to co-habitate and complement each other in order to survive, expand and look towards the future. Donc, une veritable et profonde education juridique Bi-lingue doit se fournir d’ une nourriture assez variée, qui comprend non seule et exclusivement la langue, mais aussi l’ historie, la geographie, les coutumes, l’ ethique et meme encore la psicologhie du pays ou le juriste va travailler. Tout cela n’ est pas facile a acquerir pendant seulement quelques mois. Si le but est vraiment d’ obtenir une vraie et intégrale education juridique Bi—lingue, élèves et professeurs doivent se proposer un difícile—mais au meme temps appassionant—defi: celui de comprehendre une differente culture non seulement par sa langue, mais par sa vie, ses gens et son historie. Comme citoyens d’ un monde de plus en plus interdependant, nous avons, je crois et suis meme convaincu,
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_4
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une urgente necessité de trouver les moyens d’ accepter ce defi et d’ obtenir cette education et comprehension le plus vite et le plus largement possible. C’ est n’ est pas simplement pour des raisons académiques ou bien culturelles; c’ est sourtout pour des raisons de survivance, de justice et de fraternité que le monde entier a besoin d’ accepter ce defi et d’ obtenir ce but. C’ est serait vraiment tragique d’ oublier notre histoire et une fois de plus, renouveller la chute de la Tour de Babel. . . Nowadays it seems almost mandatory to support not only a bilingual education, but rather a trilingual education, if the circumstances allow it. Globalization and increasingly growing cultural interdependence not only require it, but they practically impose it. We refer to an education in general, which before targeting the legal field, focuses on learning and mastering more than one language, that is, one’s own language properly read, spoken and written and one or two foreign languages, if possible. In other words, perhaps quite frankly, having the possibility of learning foreign languages and not doing so by choice, out of laziness or simple disinterest, is equivalent to opting for educational atrophy, or what is more, a cultural suicide. It is clear that we are not referring to other types of circumstances that actually and objectively prevent reaching those goals. We do criticize those cases of mental fatigue, or contempt for what is foreign or different that leads to having certain persons or social groups culturally isolated, who only pay respect to what is theirs, being content with a welldefined territory, fair and small from the cultural point of view, however broad and extensive it is territorially speaking. This becomes even more serious when such indifferent or contemptuous attitude becomes clearly aggressive and combative of everything that is different to their way of life; escalating from defending to attacking and destroying any other way of thinking and believing. Therefore, thinking about the need to target, extend and strengthen bilingual and multilingual educational systems is a priority. Common sense, interdependence and shared convenience require it. If we deem that the aforementioned is important in terms of languages in general, more so it will be if we focus on legal education specifically. We do not intend to exhaust the reasons and arguments in defense of this point of view; we will simply mention a few that we consider most relevant: 1. Unless a Law Firm is managed in a very local and insular working and professional context, nowadays being proficient in a second language is “a must” for any professional seeking to join such Firm. 2. Knowing and mastering (which are not the same) one or more foreign languages broadens our way of thinking, our willingness to comprehend (which is not exactly the same as understand) different cultures and this eventually improves the chances of obtaining better remuneration for any professional work.
N. Etcheverry Estrázulas and S. Cairo
3. Learning about the origin, roots and etymology of different words or expressions allows us to learn in greater extent and depth the history, geography and culture of the countries. Consequently, the advantage of a bilingual or if possible, multilingual legal education, broadens the horizon of any professional. Not only will professionals know “more about the law”, but they will also have a better understanding of the world, of different societies in general, as well as their different ways of learning, thinking and acting in very different life circumstances. In the case of jurists, having the possibility of learning to read and speak a specific language which they usually foresee that they will be using for work, study or research reasons, is acquiring a tool or key that may open many doors. Not acquiring such tool or key when one has the possibility of doing so, is as already said, a professional and cultural atrophy. Two examples can better illustrate this point: (a) In several Latin countries it is common to find expressions that begin with a negative form such as “¿no le gustaría otro café?” (“wouldn’t you like another coffee?”); or “¿no es verdad que este paisaje es muy agradable?” (“Isn’t it true that this landscape is very nice?”); or “¿no me haría el favor de decirme la hora?” (“Wouldn’t you do me the favor of telling me what time it is?”). In different cultures those negative forms may seem shocking or contradictory, while in other places they convey courtesy. (b) Really learning a language implies understanding not only words and their meaning, but also the intonation of phrases or sentences. The same phrase or sentence can have very different meanings and interpretations according to the intonation. As an example: “¿Qué quiere insinuar con su pregunta?” (“What do you seek to imply with your question?”), or “Esto puede llevarnos por caminos insospechados. . .” (“This can take us through unsuspected paths . . .”), or “¿Qué está sucediendo aquí?” (“What is going on here?”) or “No sabes lo que te espera. . .” (“You don’t know what is waiting for you. . .”). Failure to properly perceive the intonation used can lead to misunderstandings and unrepairable flaws in the communication of the subjects involved. A final example: asking “¿Qué es la verdad?” (“What is the truth?”) can be done with the actual intention of discovering it or in an indifferent, haughty and ironic manner, without having the least interest of finding out. If Latin was once the universal tool that allowed people to approach and interact, in this twenty-first century the key has been atomized into an almost essential bunch of keys that includes English, Spanish and Chinese, but also others such as French, German, Russian and Portuguese. These are not so universal from the quantitative perspective, but do have an enormous qualitative efficiency. Being proficient in all seven is a utopia but learning and mastering three of them is an achievable goal, with discipline and dedication. Undoubtedly, having an educated ear is a great advantage which is
Bilingual Study and Research: The Need and Challenges
not achieved by everyone. Nonetheless, without a good ear, one may learn to read and speak a language, especially if there is a chance to live for some time in the country where it is spoken. The opportunity offered through the academic exchange agreements between the universities of places as distant and different as Uruguay and China, Brazil and Canada, London and Moscow, Berlin and Buenos Aires is a tremendous kick-off to start acquiring or polish those skills. Experience indicates that the intellectual and cultural enrichment of students, teachers and researchers who are part of these exchanges is invaluable. Learning and becoming proficient in a foreign language involves a lot more than knowing and being able to convey foreign words and expressions. It implies learning about the cultural context, the way of life and the idiosyncrasy underlying that language. In short, it is not only about understanding the language, but also learning it in a more comprehensive manner. I would like to recall some ideas expressed by S.I. Strong in the Review Essay – Bilingual Education in the United States—when she quotes two books written by Xabier Arzos, “Bilingual Higher Education in the Legal Context. . .” and Katia Fach Gómez, “El Derecho en Español: Terminología y Habilidades Jurídicas para un Ejercicio Legal Exitoso. . .”: In that review he says “While no one would dispute that English should be the primary language of instruction in U.S. law schools, the failure of the U.S. legal academy to consider issues relating to secondary instruction in other languages fails to take into account the significant and potentially growing number of U.S. citizens, residents and visitors who have limited proficiency in English. . . As various commentators have recognized, the shortage of U.S. lawyers with foreign-language skills increases the risk that certain segments of society will be unable to obtain useful legal advice and assistance. Shortcomings in law schools’ foreign-language offerings have also injured U.S. law students’ ability to function in a globalized world. . .”1
Further ahead she adds: Some people believe that conversational fluency, supplemented by a good bilingual legal dictionary, is all that is needed to provide legal advice across linguistic barriers. In fact, nothing could be more dangerous. Law is intimately bound up in a particular cultural and legal context, and bilingual lawyers must do more than simply acquire a specialized vocabulary. Instead, a lawyer functioning in a foreign language must be able to understand how certain concepts are interpreted and applied within a foreign legal system or by a client with limited English proficiency. Therefore, specialized coursework concerning bilingual lawyering is necessary if U.S. law students are to learn how to practice in multiple languages. (. . .) There are numerous ways to approach multilingual legal education, and the United States needs to adopt a system that is tailored to U.S. legal, historical and cultural norms. (. . .) Some readers might look at the Englishinstruction efforts of European law faculties as evidence that English is currently operating as an international lingua franca, which would subsequently suggest that there is little need for bilingual legal education in the United States. However, closer 1
Strong (2014), p. 356.
73 analysis of international legal practice indicates that lawyers working in certain regions often need to know languages other than English. . . Furthermore, U.S. law schools still need to address problems associated with domestic clients who have limited English proficiency. . .2
I fully agree with Professor Strong. Her comments reflect some of the more important issues and challenges we have for the following years in the field of bilingual education. Having made this introduction, we will now try to develop the topic of bilingual legal education in a more objective and academic framework, thanks to the generous contributions of the national reporters from different countries who have seriously and dedicatedly collaborated with us. My most sincere thanks to our colleagues Bert Demarsin, Sébastien Van Drooghenbroeck, Nicholas Léger-Riopel, Xiangshun Ding, Marcus Noorgård, Alicia Nylund, Anne BrunonErnst, Stefan Grundmann, Elena Ioriatti, Mark Fenwik, Efrén Chávez-Hernández, Ramona Popescu, Carmen Achimescu, Alan K. Koh, Andrew Jen-Guang Lin, Mathias Reimann, as well as to Sofía Cairo Duaso, my assistant during these months, who with great patience and very good humor has helped me significantly in building up this General Report.
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Bilingual Legal Education in Belgium
Belgium has three official languages: Dutch, French and German. The Kingdom’s territory is divided into four linguistic areas: the monolingual Dutch-speaking area, the monolingual French-speaking area, the monolingual German-speaking area and the bilingual area (FrenchDutch) around the nation’s capital, Brussels. About 60% of the Belgian citizens speak Dutch, slightly over 38% speak French and the remaining 1% speak German. Besides, the use of English is undoubtedly on the rise, due to Brussels’ role on the international political scene. Given the city’s role as the capital of the European Union and the home to many international institutions, Brussels is commonly referred to as World Decision Center II, after Washington DC. Considering the multilingual Belgian society, as the Reporters point out, it is hard to imagine how the legal education provided at university—both bachelor (180 credits) and master (120 credits)—could not take into account that context and remain merely monolingual. There are several reasons why the bilingualism or multilingualism is promoted in Belgium. First of all, the openness to foreign languages is essential for academic reasons. In addition, there is also a professional and cultural need for multilingualism in Belgium, as clear communication between the country’s communities should remain possible at all times. 2
Id, pp. 358–359.
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Hence, it is not surprising that languages courses (general or legal) in at least two target languages other than the program’s main language are a compulsory part of the curriculum of all bachelors in law organized at Belgian law schools. In addition, in most bachelor programs and even all master programs numerous legal courses are taught in a foreign language. However, the amount of language courses offered as part of the curriculum at Belgian law schools is subject to some important restrictions. In particular, all programs have to comply both with the maximum limits laid down by the decrees of the Communities, and the potential minimum threshold set forth in interuniversity agreements. Consequently, both the foreign language courses and the legal courses thought in a foreign language may take different forms even independent from the Erasmus system. As a result, the landscape is very heterogeneous, ranging from the inclusion of some foreign language courses in the curriculum, to the creation of master programs entirely taught in a foreign language. The National Reporters focused on the bilingual (and even trilingual) programs of two universities: Université SaintLouis – Bruxelles and KU Leuven. Belgium is a federal State composed of Communities and Regions (art. 1 of the Constitution). Belgium comprises three Communities: the Flemish, the French and the Germanspeaking Community. According to Article 127 of the Constitution, education— including university education—falls within the competence of the Communities and their decrees. The decrees of the Flemish Community apply to universities located in the unilingual Dutch-speaking area, as well as universities located in the Brussels bilingual area, which—because of their activities—are said to belong exclusively to the Flemish Community. On the other hand, the decrees of the French Community not only apply to the universities located in the unilingual French speaking area, but also to the universities located in the bilingual area which are said to belong exclusively to the French Community. There is currently no university in Belgium’s unilingual German-speaking area. According to Article 129 of the Constitution, the Communities regulate by decree the use of languages in the field of education as far as the unilingual areas are concerned. In Brussels, however, the use of languages is regulated by the federal state. The Community determines in particular whether, under what conditions, and to what extent the education provided by the francophone Brussels universities may be in a language other than French. The same goes, mutatis mutandis, for the Flemish Community as far as the Dutchspeaking universities in Brussels are concerned. The Flemish Parliament has regulated the use of language at institutions of higher education, for both administrative and educational matters.
N. Etcheverry Estrázulas and S. Cairo
According to Article II.260 Codex Hoger Onderwijs (Flemish Code on Higher Education) institutions for higher education are supposed to function in Dutch, since it is the language that should be used for administrative purposes. Article 261 of the same body requires the education itself to be in Dutch too. In this way the legislature tries to preserve Dutch as the prime language for education at universities that fall under the authority of the Flemish Community. At the same time, the Flemish authorities recognized the importance of foreign languages as a sensible and justified means of communication in certain scientific fields, as a facilitator for foreign exchanges and a boost of international professional mobility. At Flemish universities, education is supposed to be in Dutch, as a matter of principle. However, at bachelor and master level, there are four exceptions to the above principle: (1) foreign language courses should be taught in that language; (2) Visiting professors from abroad; (3) Non-Dutch courses that students at their own initiative follow at another institution of higher education; and (4) Courses can be taught in a foreign language, provided that the institution explicitly motivates why a change of language is functional for the course and beneficial. In addition, courses taught in Dutch may have some foreign language component. For example, course material may include a reader which is partly composed of English or French articles. According to Article 261, a bachelor program is Dutch-spoken as long as the number of courses taught in a foreign language is below 18.33% of the entire program. For master programs, that threshold is 50%. The Flemish Legislature obliges institutions that offer the same program to determine in close collaboration the program’s “domain-specific learning outcomes”. In the French Community, university education is organized by the decree of 7 November 2013 defining the landscape and organization of higher education. Article 75 of this decree provides that all educational institutions, without any exception have to use French for administrative purposes. However, some exceptions are possible here as well, taking into consideration if there are enrolled in undergraduate or graduate studies some number of credits can be organized in other languages. Other exceptions are made for Advances Masters and PhDs. The Université Saint-Louis – Bruxelles is active in a number of disciplines in the field of humanities and social sciences, including Law. Of the 3978 students enrolled in the university, 1712 are in the Faculty of Law: 1566 in the bachelor program, 136 in the Advanced Masters, and 10 in the PhD program. The 1566 bachelor students either signed up for the daytime program or the off-schedule program for those who are already professionally active. At the Université Saint-Louis – Bruxelles 15.52% of the law students do not have the Belgian citizenship, or have two nationalities, one of which is not Belgian.
Bilingual Study and Research: The Need and Challenges
Among the Academic staff (187 members), 10% is not Belgian. 13% of the teaching staff and the senior researchers obtained their PhD abroad. Every year, the Université SaintLouis – Bruxelles hosts about 10 foreign researchers during their sabbatical leave. KU Leuven is an institution for research and education with international appeal. It is a comprehensive university, offering top-level study programs in almost every scientific domain. Currently, KU Leuven offers some 240 programs in Dutch, 86 in English, 2 in French and 1 in Spanish. In 2017–2018, KU Leuven had a total of 57,335 students. Among them 9784 are international students. The foreign countries with the largest student populations are, in descending order, the Netherlands, China, Italy and Spain. The Law school is one of the biggest faculties at KU Leuven. Some 70 law professors work at the Faculty of law among whom 10% are foreigners. Additionally, over 50 visiting professors teach in various programs. Hence they significantly contribute to the multilingual environment at the KU Leuven law school. Currently (year 2017–2018) the Faculty of law is home to 5455 students spread over 3 campuses: Leuven, Brussels and Kortrijk. At the Brussels campus, law students can either choose for the unilingual bachelor in law (taught in Dutch) or the bilingual program set up in collaboration with the Université Saint-Louis – Bruxelles, its partner university. The advanced master in IP-ICT law is multilingual per se, as courses are taught in English, French and Dutch. Bilingual (and trilingual) bachelors in law at the Université Saint-Louis – Bruxelles and the KU Leuven – Campus Brussels Twenty-six years ago, the former Facultés Universitaires Saint-Louis (now Université Saint-Louis – Bruxelles) and the former Katholieke Universiteit Brussel (now KU Leuven – Campus Brussels) blazed a trail by creating a bilingual (French-Dutch) undergraduate program in law for their respective students. The following year, they continued along that path by setting up the bilingual French-English and the trilingual programs in French-Dutch-English. The motives underlying the creation of bi- and trilingual programs were diverse. One of the reasons was the ambition to arm students with the linguistic skills required for legal practice, in particular in a multilingual work environment such as Brussels. A report entitled “Horizon 2025” approved by both the French and German-speaking Bar Association and the Flemish Bar Association, emphasized that, at the end of curriculum any lawyer should master her/his mother tongue, but should also have studied English and the country’s other dominant official language. Another reason to implement this programs was the wish to allow students to conduct research as wide as possible, and to increase their
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ability to consult source material in a foreign language. Furthermore, the desire to promote student mobility between the undergraduate and graduate level. Finally, another reason was the ambition to promote cultural openness to the other community. Neither the students nor the teaching staff or the academic authorities opposed to the implementation of these bi-/ trilingual programs. All students get basic language training, yet the more intense bilingual (or trilingual) program is fully optional. Indeed, students are free to sign up for this language-wise more challenging type of legal education. These programs are growing in popularity from the Reporters view. In particular they attract an increasing number of students who grew up in linguistically mixed families or who passed through content and language integrated learning. Overall bilingual education tends to be quite challenging for teachers, as these programs normally require them to fully master the foreign language too. However, this problem does not arise with regard to the bilingual program co-organized by the above mentioned universities, since all teachers are native speakers. In respect with the profile of students following a bilingual program, it must be said that neither at the Université SaintLouis – Bruxelles, nor at KU Leuven, Campus Brussels enrollment in the bilingual program is dependent upon an entrance exam. The joint bilingual bachelor program of KU LeuvenCampus Brussels and Université Saint-Louis – Bruxelles is essentially based on a system of exchanged courses. Students in this program who enrolled at Université Saint-Louis will take a number of courses taught in Dutch at KU Leuven – Campus Brussels while being exempted from the corresponding courses in French (and the other way around, for the students enrolled at KU Leuven – Campus Brussels). In practice, these exchanges are very easy, as the walking distance between both universities is not even 10 min. Since both universities teach “Belgian law”, in theory all courses are eligible for exchange. Accordingly, the partner universities agreed to exchange the following courses: Introduction to Law, Constitutional Law, Law of Obligations, Property Law, Family Law, Administrative Law and the Law of Contracts & Torts. The evaluation methods used in the courses that are taught in a foreign language are quite diverse. They might consist in written exams with open questions or multiple choice questions, oral examinations, written assignments, taking part in a bilingual moot court (e.g. Moot Court in constitutional law, in which all Belgian universities participate). At the Université Saint-Louis – Bruxelles law students can also choose to sign up for the bilingual bachelor program taught in French and English. In this program, a number of
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courses that are taught in French in the standard (monolingual) program, will instead be offered in English. The program is exclusively run by the Université Saint-Louis – Bruxelles and its staff. All teachers are Saint-Louis faculty. Some of these courses concern “non-legal” topics, such as Introduction to the culture of the English speaking world, Economics or Political Science. In legal courses the language is altered to English whenever this seemed relevant. That is obviously the case for courses concerning foreign law (e.g. Introduction to the Common Law), but also for courses that are highly comparative in nature (e.g. Introduction to comparative law). At the Université Saint-Louis – Bruxelles, in both bilingual programs (French-Dutch or French-English), USL students may choose to add a third language (English or Dutch) and thus render their bachelor program truly trilingual. In this case, over 50% of their program will be taught in a foreign language. Related to the materials the Reporters pointed out that they use the course material (book, syllabus, slides, and exercises) that they developed themselves in Dutch. Documentary resources (legislation, doctrine, case law) are easily available in their language, since both Dutch and French are official languages in Belgium. Legislation is enacted in both French and Dutch; case law is produced in either French or Dutch; some court decisions are entirely and systematic translated. The command of English required to teach at university is quite high. Indeed, in article 270 Codez Hoger Onderwijs, the Flemish Community set several requirements in order to guarantee the quality of the language used for teaching. The Decree states that the teaching staff has to have a language proficiency at level ERK C1 for the language in which the course is organized. It is worth mention, that KU Leuven has an impressive list of ERASMUS destinations. From the Reporters view, it could be said that both at the Université Saint-Louis – Bruxelles and the KU Leuven, law schools undeniably promote the bi- or even trilingual curriculum. Moreover, these programs have expand and intensified over the years. This tendency towards multilingualism seems to exist at all Belgian universities, as they all have recently intensified the language training in their curriculum. Some new initiatives are the English master programs the law schools of KU Leuven (in collaboration with the University of Zurich) and the University of Antwerp which were recently set up. Without any doubt, other universities will follow these examples in the near future and will establish new kinds of bilingual programs as both students and employers cheer the above evolutions with joy. Overall, neither the students, nor the public authorities perceive the above development towards multilingualism as a threat to the cultural/national identity.
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Bilingual Legal Education in Canada
The Canadian reporter delivers a particular, specific and original vision concerning Bilingual Legal Education. His approach tends to explain the differences between two ways of understanding legal positivism; the Rule—paradigm and the realist epistemology. To better explain and understand what the main cornerstone of his essay is, here are some hints of what le Cas de L’Acadie means. To do this we rely on the work of Annette Boudreau, a member of the Université de Moncton, from which the author of this report is also a professor: Ce texte traite de la construction des représentations linguistiques en Acadie en partant de l’analyse des articles de presse publiés dans deux journaux importants, soit L’Évangéline (1887–1982) et le Moniteur Acadien (1867–1926). L’accent est placé sur trois périodes clés de l’histoire acadienne, la première s’étalant de 1880 à 1910, la deuxième de 1950 à 1967, et la troisième de 1970 à 1973, périodes choisies en fonction de leur importance à illustrer les moments forts de la construction de l’espace social acadien. L’article décrit d’abord les principales idéologies linguistiques trouvées dans les éditoriaux et les lettres d’opinions du lecteur, puis s’attarde à la période contemporaine et montre comment les discours sur les pratiques linguistiques se sont diversifiés. Les différentes stratégies mises de l’avant par les artistes sont présentées. Ceux-ci participent à la construction de nouvelles façons d’appréhender les pratiques linguistiques qu’ils voient plurielles et polivalentes. Un langue n’est jamais trop riche. Mais notre langue est assez riche de son propre fonds sans que nous soyons obligés d’aller si souvent faire des emprunts à l’étranger. Quelle nécessité y a-t-il de dire “club” au lieu de cercle, la “season” pour la saison, le “hall” qui vient de notre halle, à nous, est “lunch” et “luncher” pour collation ou goúter? (Parlons français, L’Évangeline, 29 mai 1890) Si vous êtes descendants acadiens le sang français coule encore dans vos veines, conservez le français ainsi que votre langue. N’ayez pas peur d’une langue que des génies n’ont pasée honte de parler avant vous. (Le Moniteur acadien, 20 novembre 1884) Depuis la fin de années 1970, des sociolinguistes ont souligné l’importance du recours aux représentations dans l’analyse des situations linguistiques pour expliquer le maintien, le développement ou la disparition des langues. . .
Having established this, we will go on to analyze the National Reporters essay. The Faculty of Law of the Université de Moncton “. . .is host to a variety of - sometimes unique and surprising - events that could be could considered “phenomena” of transystemism in a multilingual context of legal education. . .” The Faculty of Law, which offers a unique training of common law taught exclusively in French, was founded in 1978 in the City of Moncton, in the Province of New-Brunswick, Canada: The University of Moncton was founded by integrating three colleges: College Saint-Louis, College du Sacre-Coeur and College Saint-Joseph. Undergraduate degrees in adult education had been founded by the university in the year 1989. Students get admission in this school on the basis of their extracurricular
Bilingual Study and Research: The Need and Challenges activities, GPA, letter of reference, as well as interview questionnaire. As all the classes of this school are conducted fully in French, student who are seeking admission must have a strong command on French language. University of Moncton doesn’t require its students to take the LSAT (Law School Admission Test) as it considers the score of LSAT, if provided. University of Moncton Faculty of Law offers the basic LL.B. and also the graduate LL.M. Besides this, the university also offers degrees such as: the LLB-MEE (Masters of Environmental Studies), LLB-MAP (Masters in Public Administration) and LLB-MBA (Masters of Business). Moreover, students who have a degree of B.C.L or LL.L. (Civil law degree) from any Canadian school have the permission to enroll their names in the school for two semesters and complete a J.D. For international students who are willing to understand the common law tradition, the faculty offers a D.E.C.L (Degree in Common Law) as well.3 . . .Transsystemic teaching of law, as is also often found in multilingual contexts of legal education, can and have been celebrated as powerful remedies to the dominant paradigm of legal education, rooted in a legal positivistic (“LP”) view. . .
As the National Reporter sharply remarks this view is generally accepted4 as the dominant model of teaching, reasoning, and adjudicating legal matters.5 The limits of such a model are, perhaps incidentally, made more visible in a transsystemic or multilinguistic contexts of teaching, as those are the conditions in which they train legal minds at the Université de Moncton. In the author words “. . .may these short iterations be of use to many who face the challenges of multilingual, or multisystemic, contexts of legal education. . .” A First Dogma of Legal Positivism: The Rule-Paradigm6 The National Reporter states that the multilingual and transsystemic education, be it through the generally available mean of comparative law, unravel the deeply rooted polysemy inherent to even the most casual legal concepts to be encountered. “. . .Multiple explanations to this un-fixedness of the meaning of legal concepts are offered by the legal literature; this polysemy is perhaps one the first “terrors” to be faced by legal students. How tragic it is to be facing norms purporting to be just and universal, which are also modeled 3
See the interesting presentation offered by the Canada Law Schools resources, available online at http://www.canadalawschools.ca/atlanticcanada/new-brunswick-universities/13-university-of-moncton-facultyof-law. 4 Generally, see: Samuel (2003). 5 This is not to be understood as meaning that the notion of Legal Positivism itself is non-contentious. Many myths exist about what Legal Positivism is or is not, as a variety of authors have suggested such as Norberto Bobbio, John Gardner. For the finality of this short note, we are concentrating on myths conveyed by LP itself and not the myths about LP. 6 For Samuels, the success of Legal positivism is in part due to two fundamental assumptions: “The first is that legal knowledge consists of legal rules; the second is that these legal rules are identifiable in terms of their particular sources and independent of all other social norms arising from other, non-legal sources”. Samuel (2003).
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using that profoundly imprecise medium of language! This finding, in itself, as stemmed a whole field of legal studies gravitating around the now classic themata of the hartian open texture of the (legal) language. . .” Further on the author addresses a crucial repercussion of this issue, pointing out “. . .One of the many consequences of this relative imprecision of legal language, as most eloquently revealed to a lawyer endeavoring a transsystemic reflexion, is to reveal the relative unvavailability of the ruleparadigm as the only method of resolving legal matters. The “canonic” syllogism, as a means of resolving legal problems was developed, and possibly meant to be applied, to premises that are fixed, and objective.7 How can the syllogism as a tool retains its centrality when the major premise, the enunciation of the Rule, be it enshrined in common law judgments or in a piece of legislation, is often times irremediably mobile?. . .” The National Reporter explains that this aftermath of legal interpretation, rendered highly vibrant through the problems of transsystemism, has led some scholar to offer a variety of means to understand “. . .what is really happening when one speaks of legal method or legal reasoning. A now welldocumented8 field of legal research covers the means by which legal solutions take place, especially in the context of transsystemism. For some of these scholars, it is unavoidable to take into account the profoundly cultural dimension of legal institutions, as to avoid the risk of “faux amis”: similarly phrased concepts buttressed by different cultural context accounts for sometimes very different legal solutions or means of enforcing what seemingly may be the same notions. . .” In order to see the true nature of legal reasoning the National Reporter encourages us to engage in a multidisciplinary approach, approaching different perspectives such as law and economics, law and literature, law and society. The author establishes that “. . .As any fiction, the Rule paradigm has roots in reality and reflects the habitus and in many cases the actual practices of legal problem solving. May it be only noted that this method is relative to the complexity of the legal problems at hand, which in some case need to be addressed through a richer matrix, especially in the case of transsystemic or multilinguistic questions of law. In such circumstances, law perhaps cease to be a matter of rules, and students, lawyers and judges alike encounter law-as-a-social-fact, a living, and forever context-bound content-matter that it would be of disservice to treat only through the lens of a rule paradigm meant for much simpler matters. . . . than human ones. . .”
7 8
See: Huhn (2002), p. 813. As a seminal source, see: Teubner (1989), pp. 727–757.
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A Second Dogma of Legal Positivism: A “Realist” Epistemology The National Reporter explains that a recent field of legal methodology and legal epistemology covers a ground that remained relatively un-touched up until the recent years: that is, the role of facts in the legal reasoning, as opposed to the role of rules. Likewise to rules, facts themselves have long held a status of undisputable objectivity, but this status has often been put into question through the works of comparative law, and transsystemic contexts. . . .It may very well, according to prominent legal epistemologists such as Geoffrey Samuel, Christian Atias or Theodor Ivainer, that facts themselves are an object of construction and interpretation and: “the idea that legal science is a discourse that has its objet actual factual situation is to misunderstand, fundamentally, legal thought.”. . .9
Un important apport des travaux récents en épistémologie juridique concerne précisément l’étude des modalités particulières de traitement des faits par le droit. Il n’est pas ici question uniquement d’une étude des règles de preuve et de procédure, mais plutôt de l’adoption d’un regard apte à révéler les principes et les présupposés qui président au passage des faits à la norme, c’est-à-dire des modes par lesquels le droit construit l’intelligence de son objet.10 Le professeur Samuel reconnaît même dans l’étude du modèle par lequel le droit « construit » les faits qui sont appelés à interagir avec la normativité juridique l’objet premier de la science juridique et le thème central de son épistémologie. Pour cet auteur, soucieux de faire bénéficier aux juristes des acquis issus du champ de recherche de l’épistémologie des sciences, l’objet de l’épistémologie juridique est plus précisément la structure par laquelle le droit procède d’opérations de médiation entre la réalité empirique (les faits) et le domaine des normes : [Legal science is to be envisaged through a constructive form]. That is to say it has to be envisaged through a structure which mediates between facts and science (law), allowing the legal scientist both to make sense of the facts and to discover solutions from transformation within the structure. Such a structure is what one calls a “model”. What, then, is the basis for such a legal model? This, of course, is the fundamental question that should motivate and direct any work on legal epistemology.11
À ce titre, l’épistémologie invite à reconnaître que la factualité juridique est un construit : le juriste sélectionne des éléments de la réalité empirique, en disqualifie d’autres. Ainsi, un « point de vue » sur le fait opère une transition chez ce dernier de phénomène en objet du savoir juridique. Le fait est ainsi naturalisé12 aux besoins du savoir juridique, s’y incorpore. Astolfi ajouterait que les faits n’ont aucune 9
Samuel (2004), p. 74. L’expression est de Berthelot (2008), p. 124. 11 Samuel (2004), p. 19. 12 Thomas (1973), pp. 103–125. Voir plus généralement, Teubner, “Pour une épistémologie constructiviste du droit”. 10
existence a priori : ils ne prennent tout leur sens qu’en relation avec un système de pensée, une théorie, bref en passant par le filtre d’une vision des choses ; nous pourrions penser qu’il s’agit là de la conception juridique du monde.13 Que se passe-t-il alors? Le « fait » cesse d’être le rempart que l’on a toujours bien voulu reconnaître contre l’évolutive et changeante règle de droit. Le fait cesse de lutter contre l’arbitraire, mais est dès lors tout entier devenu lui aussi objet d’arbitration, de méditation tant par les parties que par la raison juridique, construit de part en part par le droit et ses (méta)méthodes, et non à l’extérieur de celle-ci. Or comme l’a à si juste titre posé Gilles-Gaston Granger, que Samuels trouve tout à fait applicable au droit, l’objet d’une discipline justement n’est pas le « monde » dans sa phénoménalité observable, mais plutôt : This epistemological thesis is [. . .] applicable to law since this is a discourse or « science » (intellectus) which does not operate directly on the facts (res). What the lawyer does is to construct a model of the social world and it is, arguably, this model which acts as the bridge between the social and the legal worlds. That model is both the res (object of knowledge) and the intellectus (knowing subect).14
Il est maintenant clair que le traitement des faits par le droit n’est que superficiellement15 capté par les règles de preuve et de procédures dont se dote un système juridique donné. Dans sa structure profonde, le traitement de la factualité par le droit est le produit de présupposés tacites qui échappent à l’étude des seules règles de preuve et de procédure : certains auteurs nous invitent par ailleurs à découvrir la véritable méthode d’un savoir disciplinaire par l’étude de ses paradoxes, de ses controverses, plutôt que de ses apparentes unités, réussites et succès techniques. À ce titre, comme l’a souligné l’auteure Hammer, les fictions juridiques et l’imagination juridique auxquels président ces présupposés tacites font par moment « disparaître » les faits.16 La fiction juridique et la « tendance de toute fiction 13
Astolfi and Develay (1996), p. 25. Il est possible de trouver une autre formulation de cette idée chez Hanson (1958). 14 Samuel (2003), p. 2. 15 Ce mot n’étant pas utilisé dans son sens péjoratif. Comme le souligne Dubouchet, certains problèmes simples ne requièrent que l’application du syllogisme juridique et pourraient être entièrement régis par une intelligence non nécessairement réflexive : (1) une raison formelle. Là où les problèmes deviennent plus complexes, là où les faits présentent une moins grande isomorphie avec le droit statutaire et jurisprudentiel applicable, rend nécessaire l’application de la (2) raison dialectique. Pour Dubouchet, s’appuyant sur les travaux de Carl Schmitt, certaines situations factuelles peuvent émerger qui ne soient tout simplement pas régies ou visées par le droit applicable et exigent alors l’expression de l’autorité confiée au juge, qui usera alors de raison réthorique. As cite in Nicholas Léger-Riopel, “Transsystemic and Multilingual Contexts of Legal education: le Cas de L’Acadie”, p. 4. 16 Gail Hammer, “Transparent: when legal fictions and judicial imagination make facts disappear, they enforce transphobic discrimination”. As cite in Nicholas Léger-Riopel, “Transsystemic and Multilingual Contexts of Legal education: le Cas de L’Acadie”, p. 5, note 13.
Bilingual Study and Research: The Need and Challenges
à se substituer purement et simplement à la réalité »17 devient alors par l’alchimie toute particulière de la raison juridique la seule vérité juridiquement officiellement reçue.18 La méthode d’interprétation des faits par le juge, si elle ne trouve pas son explication dans des règles juridiques muettes à ce sujet, devient dès lors un objet pressant de l’épistémologie juridique. La voie pour une épistémologie constructiviste du droit est dès lors tracée.
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Bilingual Legal Education in China
The first thing to bear in mind when it comes to this immense country, as the Chinese Reporters remind us, is that bilingual legal education in other languages in China is rare. The reason for this is that few teachers know other languages. Furthermore, due to China’s primary and secondary education system, students who understand other languages are accounted as a relatively small proportion. A second aspect to take in consideration is that China is a multi-ethnic, multilingual, multi-dialect, and multi-character country, which includes 56 ethnic groups, many of which have their own languages. Nevertheless, in the last 20 years this country has experienced enormous changes in terms of going global and taking the One Belt and one Road initiative which promotes international multidisciplinary exchanges; legal affairs and legal knowledge are not an exception. As stated by the National Reporters, Bilingual Legal Education can be divided into two kinds from the perspective of subject and object: (1) One is based on Chinese students as the object of acceptance; teachers of this type are mostly domestic teachers who have good foreign languages ability or foreign teachers invited from other countries as the subjects of teaching; (2) The other is to recruit foreign students as the object of education, such as the “Chinese Law” program. Therefore, the expression “bilingual” for Chinese students does not only focus on Chinese and one 17
Ch. Atias, précité, note 1, à la p. 21. “Competent judges should be able to prioritize facts over legal fictions. Judges should not be so distracted by difference that they fail to recognize facts. “The politics of control and domination are interrupted when we embrace our own fears and anxieties to transcend them.” Competent judges should be able to notice, recognize, acknowledge, evaluate, and then set aside their own discomfort and emotional reactions. Those reactions are a source of information, but just one of the sources of information available to judges. They are not the guiding principles. Even if courts do not love transgender people, they are tasked with working justice and, at a minimum, tolerating difference. In courts’ decisions, love, or the lack of it, should not determine whether the result is justice.” Gail Hammer, “Transparent: when legal fictions and judicial imagination make facts disappear, they enforce transphobic discrimination”, précité, note 12, à la p. 161 et suiv. As cite in Nicholas LégerRiopel, “Transsystemic and Multilingual Contexts of Legal education: le Cas de L’Acadie”, p. 5, note 14.
18
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foreign language; it may also mean Chinese and one of the ethnic minorities’ languages for those students (i.e. Mongolian). This is what offers Inner Mongolia University School of Law since 1988 in order to train its students in the acquisition of skills to deal with legal matters both in Chinese and Mongolian. Besides this, the most common form of bilingualism is the combination of Chinese and English such as the Program offered by Renmin University in Comparative Law since 2009; it has different courses such as the Comparative Law Academic Seminar, the International Business Course (that combines litigation, arbitration, contracts and corporate business planning), American Law courses mainly taught by American professors, or EU law courses mainly taught by teachers from Sweden, the Netherlands and France, focused in the EU constitution, EU trade, tort and intellectual property law. At the same time, the Comparative Law Program uses the international resources of Renmin University to hire first-rate scholars from the universities of Geneva, Tokyo University and Waseda University to teach courses such as “Comparative Contract Law”, “Comparative Trust Law between China and Japan” “Comparative Contract Law between China and Japan”. According to the National Reporters, Peking University School of Transnational Law (STL) is the only law school in the world that combines an American-style Juris Doctor degree (J.D.) with a China law Juris Master degree (J.M.) and enroll students from China and other countries in the world. STL provides an academically rigorous, bilingual fouryear program of legal education that prepares students for the mixture of common law, civil law, and Chinese legal traditions increasingly characteristic of the global economy. . .
The China-EU School of Law (ECSL) at the China University of Political Law and Science (CUPL) was co-sponsored by the Chinese government and the European Union in 2008. It is a unique institution for educating law students; for conducting and facilitating legal research and consultancy; for professional training of judges, prosecutors, lawyers, and other legal professionals; and a platform for China-EU research, teaching, legal academic and professional exchanges and collaboration. It aims at (. . .) “implementing a qualification program leading to a Chinese post-graduate qualification and/or a European post-graduate qualification (the “Master Program”), an exhaustive program of professional training (the “Professional Training”), and engaging in research and consultancy activities, including joint training for Ph.D. students (the “Research and Consultancy Activities”. The “Double Degree Program” consisting of the “Juris Master of Chinese Law” (JM) and the “European Law Master Program” (LL.M.), is the central program of ECSL. As an integrated part of the Double Degree Program which will last for 3 consecutive academic years/6 consecutive semesters, the duration of “Juris Master of Chinese Law” can be technically identified as for 3 semesters. (. . .) Upon graduation, these students receive both a graduate diploma and a master’s degree certificate from China University of Political Science and Law and a master’s
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N. Etcheverry Estrázulas and S. Cairo degree certificate from the University of Hamburg (the European partner of ECSL). Courses of the European Law Master program should be taught in English and courses of the Chinese Juris Master program should be taught in Chinese (. . .) If necessary, ECSL will provide for the translation of lectures and class materials in order to meet the audience’s needs. (. . .) ECSL has also developed a Chinese Law Program (LL.M in Chinese Law) in English teaching for foreign students. All the courses of this program are taught by Chinese professors in English, the content mainly focus on China’s laws (. . .)
The College of Comparative Law of CUPL, founded in 2009, integrates the Institute of Comparative Law, the School of Sino-German Law and the School of Sino-American Law. It is the only comparative law teaching and research institution in the Chinese higher education and research sector. The College comprises 42 staff members, including 30 academic staff. Among the academic staff, 29 of them hold doctoral degrees, accounting for 97%. The College boasts high qualifications of its academic staff and distinctive features of internationalization, as 16 academic staff have attained their degrees from world-known overseas universities, making up 53% of the total. The academic staff are proficient in the world’s major languages like English, German, Italy, Russian, French and Japanese. . .
Shanghai Jiao Tong University adopts the “three plus three years system” legal education model to break the traditional curriculum system to cultivate undergraduate and master’s law school students. It emphasizes the integration of foreign languages and law major during the curriculum. The undergraduate education finishes at the end of the third year, and as from the fourth year to diversion in order to select a few outstanding undergraduate students to accept three consecutive years of high-level legal education, and eventually receive a master’s degree. This project calls for mastery of two UN languages and mastering the knowledge of economic, financial, trade, business management and international relations. Southwest University of Political Science & Law, School of International Law has developed the “Foreign Legal Talents Education Program”. Its general object is to cultivate a host of foreign legal talents who are well-versed in international rules, competent in dealing with transnational legal affair. Through the admission process, the School of International Law will select 10 people to implement the 3 + 2 + 1 year mode: 3 semesters to learn professional knowledge that focus on case study and are supplemented by practice. They carry out the activities for legal negotiations, debates and other legal skills competitions that target at cultivating foreign legal capabilities through the course practices in addition to foreign legal expertise knowledge. After those courses, there are two semesters practice training, which includes 3 months foreign law practices or overseas short-term study and one semester graduation thesis writing (WTO cases and foreign laws practice cases) and career choosing and planning. The program is bilingual. Bilingual courses cover
one-fourth of the whole courses which focus on the WTO cases and other foreign-related cases. There are also many kinds of legal English activities like Legal English Debate Competition, Legal English Writing Competition or other forms of competition, so as to develop students’ professional English ability. Shanghai University of Finance and Economics sets up a training program for senior legal personnel in the free trade area through the integration of specialization and localization. 75% of the courses (international financial law, international trade law, international investment law) are taught in English. The project is also served as an elective course. After finishing the course, students can obtain a certificate of “Free Trade Zone Senior Legal Person Training Program” Law School of Shandong University has an original program because it uses not only the combination of Chinese and English selected by most of the colleges, but also set the “Chinese-Japanese Economic and Trade Law Class” for undergraduates. (. . .) It is the first university in China that uses Japanese as a professional foreign language for Legal undergraduate education which aims to cultivate legal professionals with a high level of Japanese proficiency and familiarity with the economic and trade laws in China and Japan. Students in this class should not only need study English and Chinese law like general undergraduate classes in law school, but also have to study most Japanese language courses and the Introduction of Japanese law, Japanese civil law, Japanese criminal law and other courses such as Comparative Law between China and Japan (. . .) The law school also sends students to law schools in Japan for exchange study. . .
The National Reporters highlight some aspects that need to be taken in consideration: (a) In China bilingual teachers are relatively weak and unevenly distributed (b) In many national famous law schools, mostly teachers have overseas exchanged experiences and most of them are Doctor returnees. (c) However, undergraduate colleges are unable to attract Doctor returnees because they are located in remote areas (d) Although in those undergraduate colleges there is no problem in their English abilities, they are still not able to realize the goal of bilingual legal education very well because of their poor understanding of professional legal knowledge. (e) The use of textbooks is relatively scarce, there are very few. One exception can be the “Introduction to Law”, edited by Jiang Dong, which makes some changes that are more suitable for Chinese students on the basis of another original textbook. It chooses ten chapters of the original twenty-four, which are more suitable for Chinese students to learn, divided into two parts—Chinese and English. The English part still uses of the original textbook, the Chinese part is added by “basic vocabulary definitions” “key words” “key legal knowledge analysis” and so on. The textbook takes into account the integrity of English textbooks and students’
Bilingual Study and Research: The Need and Challenges
English level, from a practical point of view to make it easier to promote. Concerning Bilingual Legal Education for Foreign Students, the Chinese Law Program was first launched by Tsinghua University as a Master’s Program on Chinese Law Education in 2005. Hence, it has developed to eight universities including Peking University, Renmin University of China, China University of Political Science and Law and Beijing Normal University. The Ministry of Education has no special regulations on the enrollment of Chinese law masters and the teaching methods, therefore, as the Program follows the general requirements of an LLM American Law but adapted to set up a Master’s program in Chinese Law for foreign students (LL.M Program in Chinese Law, hereinafter referred to as Master of Chinese Law Project). Teaching all in English has facilitated the study of Chinese law by foreign students and has expanded the student community with great potential for development. The Chinese Law Program takes generally 2 years. Most of the legal systems involved in these courses are similar to Anglo-American law because they transplant American laws or are based on international conventions and treaties. “They are less affected by the differences in legal cultures and traditions. . .” Besides this, and as it usually happens in other countries, obtaining the Chinese lawyer qualification requires passing the national bar examination. One of the qualifications for joining the bar examination is that students need the citizenship of the People’s Republic of China. This means that foreigners are currently unable to obtain the Chinese lawyer qualification. According to the law of our country, foreign law firms and foreign lawyers are also not allowed to engage in legal affairs in China. In many cases, the Master of Chinese Law program not only teaches Chinese language knowledge, but also Chinese culture knowledge. Law is more of a “local knowledge,” legal education, so it must be combined with China’s special national conditions, traditional culture and values to carry out. Many colleges and universities have opened “Chinese traditional law” and “Chinese society and law” or “Chinese language” courses in Chinese Laws programs. Representative examples of this tendency are the courses recently offered by Peking University, Tsinghua U., Fudan U., China University of Political Science and Law, Xiamen U., University of International Business & Economics, and Renmin University. The latter offers an LLM Program in Chinese Law fully in English (2 years) that is of special interest for students from abroad such as Hong Kong, Macau and Taiwan. As the National Reporters affirm, (. . .) The teaching faculty in the LL.M Program have extraordinary academic credentials. Most professors have experience studying and/or teaching in leading law schools in the most prestigious universities, such as Harvard, Yale, Oxford and
81 Cambridge. They all have deep understandings of both Western law and Chinese Law. At the same time, Renmin Law School offers valuable internship opportunities in top law firms and other institutions for students to achieve their career planning. . .
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Bilingual Legal Education in Czechia
It is significant to begin this summary by saying that this National Report was submitted because of the interesting contributions of other national reports and lively debate that took place during the 20th Congress of the IACL in Fukuoka—Japan. In the words of the Czech reporter, those contributions and debates “inspired his asking for an opportunity to join subsequently and deliver the report”, which was consulted in due time and authorized. In his view, the process of “Anglicisation” in Czechia has been growing steadily in the recent years, especially among the new and young generations, but at the same time some resistance has been appearing, supported by reasonable arguments. Pressures for further Anglicisation have found complications because of the protection of minorities and their own specific languages as well as the recent growth of immigration. Although monolingualism is still very strong and obvious in this country (and the Constitution of the Czech Republic did not find necessary to proclaim Czech as the national or state language) there is no doubt that English has become the complementary second language for communication with foreigners in international trade, investment, modernisation, culture and tourism. Nevertheless, the question whether this process of Anglicisation is in a point of no return or finding stronger resistances and will recede is very difficult to answer. Some politicians, entrepreneurs, journalists and officials began to question Anglicisation as a different form of “language imperialism” and even proposed a discussion about compensation or taxation to this new procedure of obtaining great benefits and profits. As shown, the tendency to use the English language more and more often is either seen with sympathy and practicality or with discomfort and disgust. Some intents to find alternative second universal languages such as Esperanto, Latin, German, French (gradually fading especially in academia), Russian (especially strong during the 1948–1968 period), Polish and Spanish have not been successful insofar. Even Slovak—which is a mutual intelligible language with Czech—is becoming less and less useful, especially because of the diversity of laws that emerged after the dissolution of Czechoslovaquia. So all in all, English remains the most accepted global lingua franca in the country. It has many academic advantages, especially for Universities and not so much for
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primary and secondary education. As the national reporter explains This dominance of English has apparent advantages. Academicians and students need not master several languages for understanding in international settings. Translations of scientific and expert literature decreased significantly. Interpretation at conferences disappeared. (. . .) Many politicians, officials, journalists, professors and students think that any international exchange and cooperation is beneficiary if not essential for excellence. Universities become mentally xenophile. Internationalisation has become slogan and mantra. Anglicisation seems to ease this internationalisation. Education in English can attract more international students than education in other languages. It also eases recruitment of professors and lecturers. Unsurprisingly, internationalisation overlaps with Anglicisation. . .
The information obtained by this General Reporter is that there are four Schools of Law in Czechia (Charles University in Prague, University of New York, Masaryk University and Cevro Institute that also has a School of Political Studies). These four offer the top LLM Programs in Czech Republic. Despite some attempts to strengthen the Anglicisation process, such as the one pursued by the Masaryk University in Brno and its Faculty of Law, not everything is in favour of this tendency, because of several reasons explained by the national reporter: as Czechia is a welfare state, public money to finance tertiary education is scarce, there are no study fees, underfinancing is chronic, governance of universities and their faculties is problematic and there is weak patriotism, (at least in what is concerned with preserving a national language and culture). On the other hand, a rising patriotism and disgust towards Anglo-American models of society, government and law could result into hostility, which is also dangerous and inefficient for the Czech population, especially if we consider legal practitioners that always find English as a pragmatic, strong and useful weapon to use and perform when international issues and problems arise. An interesting comment and advice from this national reporter is that until now, (. . .) few evaluate the quality of English in mentioned activities. Support for its enhancement is perfunctory if not absent at all (. . .) we should expect misunderstandings resulting from imperfect translations and be cautious towards eventual misuse of shortcomings. On the contrary, national administration and judiciary is rigid, it usually requires translation. . .
He reminds the readers of his report that it is not so common and easy to master both foreign law and language and also, if we consider law as a science and lawyers, ascertain legality of human behaviour (required/allowed/ prohibited) when interpreting statutes. They formulate pros and cons and rebut their opponents. Attorneys and in-house counsels argue in favour of their clients, enterprises and institutions. Officials and judges balance legal argumentation in their decisions and judgments. Legal scholars analyse law in academic treatises for education of students and information of legal practitioners.
Bluntly Said, Law Is Enacted, Interpreted and Applied in Particular National Language Therefore, meaning of words in this language is crucial. National discourse is primary in law. It has thus little sense to write and publish texts about national law in any foreign language. Even argumentation with international review is unconvincing. Respectable foreign reviewers would argue with unfamiliarity with Czech law. Ultimately, international communication of legal scholars is also specific. Comparative studies rely on national reports written by authors from particular countries, while their initiators and organisers summarize findings in general reports. Despite huge effort spent by reporters, we frequently read summary of national law and its practice together with outline of political, social and economic aspects. Necessary unifying set of questions contorts results, while selection of topics usually reflects interest of leading professors from elite countries. Ultimately, legal practice is comparable. Attorneys and in-house counsels hesitate to provide advice on foreign law, not talking about representation of their clients and employers at offices and before courts of other country even if allowed. Few master both foreign law and language. Instead it, they contact local lawyers. Many law firms establish international networks for this purpose. An example given by the national reporter is that the Masaryk University has also mandated that theses submitted within so-called habilitation shall be in English since 2020. (. . .) Habilitation consists of an evaluation of pedagogic and scientific performance of an academician. Czech academicians become docents at various ages. The procedure is lengthy, demanding, cumbersome, and its results unpredictable. Success generally enhances individual position and usually results into an indefinite labour contract (tenure). Professors are the supreme rank. Many academicians do not achieve this rank altogether. Supporters justified this requirement principally with extended pool of reviewers. . .
The national reporter finds this initiative unsatisfactory and he would be pleased if the University could be more flexible in relation to this exigence prepared for next year. The arguments that support his point of view are strong: such praising in further Anglicisation could become a short way to undermine Czech nationality, especially when it refers to core law studies that should not be de-nationalized. What we observe in this national report and his prudent comments is the following: As in any other country, the use of a second international legal language must always be considered useful and even necessary; but it should never become an abusive way of losing or forgetting the national roots of its own history and transform the specific culture and way of life of its population.
Bilingual Study and Research: The Need and Challenges
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Bilingual Legal Education in Finland
Finland has two constitutionally recognized national languages Finnish and Swedish, which means that bilingualism is a national cornerstone. Finland’s judicial system is a civil law system and the primary source of law is the codified laws and statues. The court system has two branches: courts with civil and criminal jurisdiction (District Courts—Courts of Appeal—Supreme Court) and courts with jurisdiction in administrative matters (Administrative Courts—Supreme Administrative Court). The official languages of Finland are Finnish and Swedish, which is stated in the Constitution. However on the Åland Islands which is an autonomous and demilitarized region, the official language is Swedish only. The Constitution further states that everyone has the right to use either Finnish or Swedish in communication with the national authorities. Finnish is spoken by approximately 90% of the population and Swedish by little over 5%. The Swedishspeaking Finns live mostly in the coastal areas of Finland and on the Åland Islands. Children permanently residing in Finland must attend compulsory schooling, which stars in the year the child turns seven (7 years old). Finland does not have compulsory school attendance since a child can be given instructions at home on the condition that the instructions correspond to the basic education. Basic Education is free of charge and encompasses nine years from the age of seven to sixteen years (7–16 years). Section 12 of the Basic Education Act (628/1998) states that, in keeping with the instruction language of the school, the pupils shall be taught Finnish, Swedish or Saami as a mother tongue, alternatively the Roma language, Sign language or some other language which is the pupil’s native language. The instruction in mother tongue stars in the 1st form. In schools which the instruction language is Swedish, the instruction in Finnish as the second national language normally stars in the lower forms (1st and 2nd form), while in Finnish schools the instruction in Swedish as the second national language generally stars later in the 6th or 7th form. In the Upper Secondary Education (optional after the completion of the basic education), there are also compulsory as well as optional (advanced) courses in the second national language. Since 2005, the only compulsory test is the one in the mother tongue. English is normally taught as the first foreign language in the basic education as well as in the upper secondary education. The higher education in Finland is divided into universities and polytechnics. Most of the universities have as their administrative language Finnish. These universities also do not, generally, have any of the teaching in Swedish.
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Courses given in English are nowadays, however, prevalent at all Finnish universities. Hanken School of Economics (with campuses in Helsinki and Vaasa) and Åbo Akademi University (with campuses in Turku and Vaasa) are the only two universities that are Swedish-speaking. The University of Helsinki is bilingual (Finnish/Swedish), which makes it a bit peculiar. Bilingual Legal Education in the University of Helsinki The University of Helsinki was established in 1640 and is the oldest and largest university in Finland. The total number of the students at all level is little over 32,000. The University of Helsinki is the only bilingual university in Finland. The language of instruction and examination are Finnish, Swedish or English. The University of Helsinki is the only university in Finland that offers academic education in Swedish in the fields of law, medicine, social work, social psychology, veterinary medicine, agronomy, geography and journalism. According to section 74 of the Universities Act (558/2009), there shall be at least 28 professorships with Swedish being the teaching language at the University of Helsinki. Services and student counseling are provided in Finnish, Swedish and in English. There are also education programmes and courses in English in some fields at the university. There are eleven faculties at the University of Helsinki. The Faculty of Law is the leading institute of legal education and research in Finland. The Faculty employs about 140 teachers and researchers. About 2300 students are pursuing degrees in Finnish, Swedish and in English at the Faculty of Law. In addition, the Faculty hosts on a yearly basis around 140 exchange students from all over the world. Doctoral studies can be completed in any of the three languages as well. Studying abroad for a period is also a popular choice among law students. Since 1991, there is a Master of Laws diploma programme fully taught in English at the Faculty. This particular Master’s programme is focusing on International Business Law (IBL). Including: contract law, company law, intellectual property law, competition law and commercial disputes resolution. There are separate tests and quotas for Finnish-speaking and Swedish-speaking applicants; therefore the applicants must, when applying, choose which of the two national languages will be the main language of their law degree. About 200 Finnish-speaking and 22 Swedish-speaking applicants are annually admitted to the education programme in Helsinki. The Bachelor of Laws Degree comprises 180 ECTS credits, which is equivalent to 3 years of full time studies. The Bachelor’s programme includes a variety of studies and examination in compulsory as well as optional disciplines. It
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is possible to complete the Bachelor’s degree as a bilingual degree, this implies that the student completes at least one third of the Bachelor’s programme in the national language (Finnish or Swedish), that is not the student main language of the degree. The student will then get a specific mention of the bilingualism in the degree diploma. The legal studies include courses and examinations, which generally require a lot of individual reading of textbooks. Lectures series are held annually in every compulsory discipline. And normally the lecture series end with a minor exam, an essay or a study diary. The final exams are usually in the form of book exams or take-home exams. The teaching language depends on the teacher, in some disciplines, there are parallel lectures in Finnish and in Swedish, and in other disciplines the lectures are given in one language only. Sometimes there are also lectures in English if the teacher does not speak either of the two national languages or if the subject is very international such as public international law or energy law. The students are, however, always entitled to write their exams and course work in Finnish or in Swedish regardless of the language of the lectures. In exceptional cases, though, where the teacher is foreign the students may be asked to do the lecture exam or the written assignment in English, but then the students are allowed to use dictionaries. The course material is usually in the language of the lectures or the language of the course. However, the literature relating to the specific disciplines, i.e. the exam literature, is mainly, in Finnish. There is a shortage of Swedish legal literature dealing with Finnish law, which puts the students who are pursuing a degree in Swedish at a disadvantage. There are compulsory seminars in specific disciplines, where the students train in academic legal writing and in acting as an opponent of another student’s text’; hence the seminar courses comprise of both writing and discussions. These seminars are held in Finnish, Swedish and/or English. The Vaasa Unit of Legal Studies Since 1991, the Faculty of Law at the University of Helsinki has maintained a unit of legal studies in Vaasa. The population of Vaasa is about 67,000, 70% of whom have Finnish, 23% Swedish and 7% other languages as their mother tongue. The Main Reason Behind the Establishment of a Campus in Vaasa, Was the Need for Bilingual Legal Practitioners in the Region The city has a District Court, a Court of Appeal and Administrative Court with special competence in environmental matters, a prosecutor’s office, a Regional State Administrative Agency, a Center for Economic Development, Transport and the Environment, a Tax Office and many solicitor’s officers. In addition to this, the Vaasa region is the home of the largest energy technology cluster of the Nordic Countries and many international enterprises. Due to
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this there is a growing need for multilingual legal expertise in these business fields. In the late 1980s it was felt that there was a clear shortage of lawyers competent in both national languages in the Vaasa region. Thus, the Faculty of Law at the University of Helsinki established a campus in Vaasa. The aim at the Vaasa Unit is to ensure that equal instruction proportions are given in Finnish and in Swedish. The study environment in Vaasa is truly bilingual; both students and teachers use Finnish and Swedish interchangeably. The students are not required to become fully fluent in both national languages, but they must be able to understand instruction and study materials in Finnish, Swedish and also in English to some extent. It is essential for a country with two national languages and where the citizens have the right to communicate with either one of them, that their Faculty of Law is able to educate lawyers with sufficient skills in both national languages. The language policy of the Vaasa Unit is a bit peculiar; it could be characterized as extremely liberal: everybody— teachers, students, and administrative staff—can use either Finnish or Swedish of their own choosing and the recipient must accept that choice and be prepared to understand the speaker. The discussion on bilingualism is, at least in Finland, actually more a question of multilingualism. The University of Helsinki has a great national responsibility regarding the legal education in Finland, since it is the only provider of a full law degree in both national languages. Over the years, the legal education has been permeated with an international perspective. In addition to the International Master’s programme, the Faculty of Law is involved in several international projects. Collaboration with researchers outside Finland is also very common. Furthermore, the main publication language in some of the more international fields English. Companies and thus also legal counsel work increasingly in an English-speaking environment with all communication (including contracts) being drawn up in English. Thus, legal education programmes are today in fact tri- or multilingual, albeit that officially degrees are still only mono or bilingual.
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Bilingual Legal Education in France
The national French Reporter, Anne Brunon-Ernst begins her work with argumentative considerations that are important to quote: Language has always been key to the building of nation-states in Europe, thus explaining the prevalence of monolingual States. Their promotion was justified on grounds that the territory of a State ought to be defined by common linguistic and cultural
Bilingual Study and Research: The Need and Challenges boundaries. Conversely, this gave rise to independence movements and greater demands for minority-language recognition, thus paving the way for the first bilingual higher education institutions as early as the nineteenth century. Nowadays, the preservation of national and regional language has been given supra-national legal support by France’s membership of the European Union (EU). Bilingual education thus has a longstanding history, which predates the EU integration, and which cannot be isolated from the social, political and institutional contexts of its creation and continued existence. Because of the relative decline of the nation-state models in the Post War era and globalised higher-education and employment markets, it is reasonable to assume that bilingual education is bound to be on the rise. The case of “bilingual legal education” (BLE) is unique in more ways than one. Law cannot exist outside language. Law is drafted, enforced and administered through acts of language. Moreover, legal concepts take meaning within their own legal system, thus they are highly dependent on the frame of reference set by the legal order. To a more limited extent, this can also be true of trans-national legal subjects such as EU law. Far more than in any bilingual programme involving any other discipline, BLE has always entailed more than simply using a different language as a teaching medium, as the very content of the law is system-bound. Some concepts might not have any equivalent in another legal system (e.g.: there is no translation for the English legal concept of trust in French law), or might describe a particular position in the justice system which has no equivalent in another (e.g.: there is no equivalent in the common law of the French juge d’instruction). Thus, BLE has to teach also skills which are not legal per se, but linguistic, such as, but not restricted to, the ability to translate, switch languages and design information bilingually. . .(. . .) France has one official language, French (. . .)The present report therefore considers the use of BLE as referring to the teaching of a law programme in two different languages, one of which would be French, and the other a foreign language (referred to for the purpose of the report as the target language (. . .)The report excludes from its scope any programme which might be taught exclusively in an institution outside France. It thus considers only programmes taught either in France, or part in France and part abroad . . .
Further on she adds an interesting and difficult question: Does a law programme require a minimum number of hours taught in the target language to qualify as “bilingual”? Is one module (18 to 37,5 hours of teaching per year) sufficient to fulfil the “bilingual programme” requirement, or should a more substantial proportion of the teaching be taught in the target language to meet the standard?(. . .)
The answer to this is not simple as there are no universal standards that may establish when a bilingual legal programme is considered as such. Especially when each country and each university, throughout different guidelines and controls, may have very different perspectives and commitments in terms of what may be or not considered a BLP (Bilingual Legal Programme). The French report indicates that in 2015–2016 there were around 210,000 students enrolled in law and political sciences programmes at university, with 14% of foreign students, half of them coming from the African continent. 125,000 of those students were undergraduates, 78,000
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studied postgraduate courses and around 7000 were taking PhD programmes. As she points out, There is no legal obligation to teach a foreign language at undergraduate level. Each university is free to make it a mandatory requirement for the award of a bachelor’s degree. In practice, very few programmes do not offer either optional or mandatory language classes at undergraduate level. . .(. . .) The heterogeneous audiences for which standard-track or specific-track programmes are designed might have a direct or indirect impact on which subjects are taught, how, by whom and when.
Anne Brunon-Ernst identifies four categories of BLE: (1) Exchange programmes (2) Double and joint-degrees (3) Degrees partially taught in a foreign language (4) Degrees exclusively taught in a foreign language. As it generally happens in most countries, the French public university system is fully or partially State-funded. Certification of programmes for the award of national degrees is granted exclusively by the State. The same procedure applies also to private higher education institutions which are allowed to award standard French undergraduate and post-graduate degrees (licence (LLB), master (LLM), doctorat (doctorate)) if their legal programme complies with the standards set by the French Ministry of Higher Education and Research. Although over the past decade, there has been a drive towards more autonomous management of French universities, which has not always been successful, the certification system has not evolved significantly. Thus the French State has sufficient leverage to create effective incentives for universities to comply with any education policy. However, it stands in a double-bind. On the one hand, it seeks to encourage foreign student enrolments and French student mobility, but on the other hand, it imposes French as the compulsory language of teaching. Only a certain number of exceptions to the Loi Toubon make it possible for French universities to teach their programmes in another language than French. In practice, law faculties have been able to make use of the exceptions provided in the Loi Fioraso to develop the wide range of BLE . . . Nonetheless the official language requirement might slow down the growth of BLE in the future.
Also, as in several other countries, as said by A. Tsu and J. W.Tollefson in the paper “The Centrality of Medium of Instruction Policy in Social-Political Processes”, behind the educational agenda are political, social, and economic agendas that serve to protect the interests of particular political and social groups.
The National Reporter quotes another research paper written by L. Purser that sustains (. . .) linguistic policies are “never simply an accident, but rather results of deliberate decisions involving more than simply the academic community”.
In conclusion to these reflections Anne Brunon—Ernst affirms that (. . .) among the other players which have a stake in legal education policies, students and employers have a key role in creating a demand-led market for BLE.
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This General Reporter is inclined to say that these players will have a major and increased role in the near-by future. (. . .) The increase in global business makes graduates who have bilingual legal skills extremely attractive. However, as of yet BLE does not train fully competent jurists in two legal systems (except for the notable exception of joint-degrees, which still require additional qualification). BLE skills are nonetheless adequate for most workplace tasks. BLE skills are not expert skills in another legal system but rather comparative legal and language skills which allow jurists to find their way around the institutional setting, legal rules and procedures of another legal system, translate and design information bilingually in their own system for jurists from other systems and to negotiate efficiently with target country lawyers. If French jurists want to meet employment demands in a global economy, they need to master the legal and linguistic tools of comparative communication. Only BLE trains jurists for these skills. . . ¨
The challenges still to face in BLE accordingly to the French report are multiple and complementary: skills in listening, reading, writing, in oral communication as well as in oral interaction and interpretation. Because “language is embedded in culture” those skills need to combine language and legal issues. That is why the national French Reporter mentions the importance of disciplines such as Language for Specific Purposes (LSP) as well as the use of English in a particular domain (ESP) an approach to language learning based on the needs of the learner. These kind of programmes will be more and more helpful
c’est une arme, et en me référant en ceci librement aussi à Foucault, je soutiens dans cet article que le plurilinguisme, en droit, de nos jours, est considéré surtout comme un obstacle où il devrait en vérité être entendu comme un des plus grands pouvoirs. . . (. . .) language informs or influences formation of thought and language – strongly, very strongly, perhaps even as the major factor of all (. . .) language forms thought, thought about legal and societal models. Hence, reduction to one language is completely at odds with a world of multiple legal and societal models and even more at odds with a world in which pluralism of societal models – a form of individualism – is seen as being paramount and foundational also from a normative perspective. One may point to the fact that pluralism in legal and societal models and believes is even seen as a foundational value enshrined in constitutions (at least in the Western world). One may even go so far to say that the global legal community, if it does not want to betray to some extent the foundational value of pluralism, has a moral duty to foster (much more vigorously and actively) a form of discourse that is based on a variety of languages”.
When writing his report Grundmann frankly shares some of the objections he had to face with some of his colleagues at Humboldt University who are strongly in favour of the Europeanization of private law and consequently upholding the flag of German language as an instrument to enhance the practice of law “made in Austria, Germany and Switzerland”. Additionally, he explains (. . .) Indeed, while this may not be of similar importance for small countries or less important universities, it may be paramount for leading universities in jurisdictions that really substantially have shaped and still shape legal thought – other than that in the Anglo-American world. . .
(. . .) to identify ways in which the target language is embedded in the legal and professional culture of a given community. What is the specific terminology in the field? What are the recurrent language structures student will use in the different tasks they will be asked to carry out in the workplace? How does language reflect the professional culture of the target country? Research is carried out in these fields to bring answers to these questions, and help devise programmes that are tailored to the professional needs of students . . .
Some academic adversaries at Humboldt therefore blamed him for having accepted and indeed proposed the name of ‘European Law School’ for the network he describes further on in his report and the title of ‘Juriste Européen’ for those who have successfully completed its curriculum and the Master exams in three European countries.
Finally, another tool that is more and more on request in France are the Specific English Courses (Anglais de specialité or ASP) that help its students to identify relevant features of communication (terminology, phraseology, genres, communicative situations, culture, etc.) in a specialized domain such as law.
It did not help that I insisted on the fact that this institution and curriculum is, in its essence, about multiplicity of languages (‘plurilinguism’), of styles and of models – more than any other offer and model existing before. Similarly, he will blame me for writing this account in English and perhaps not even ‘forgive’ me for the mere fact that, at the end, I add a shorter variant of this text in German (and also in French), containing all major arguments (. . .)
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Bilingual Legal Education in Germany
In a similar way, the German Report written by Stefan Grundmann points out the relevance of plurilingualism in actual times, which should be seen as a powerful tool instead of an obstacle for communication: (. . .) “reduction to one global language carries the risk to impoverish law, namely its pluralism that conveys as well the idea and the essence of a pluralism in societal models. . .” (. . .) La langue –
The German Reporter agrees with his opponents when they argue that reduction of the global discussion to one language, a lingua franca, carries the risk that a good number or even most of the ideas developed in the larger part of the world, in their native languages, is de facto excluded from the discourse or strongly reduced in importance. This risk is exacerbated by a dominant attitude in the global discussion of law to see a diversity of languages mainly as an obstacle to a common discourse and much less as a chance for richer, more nuanced, more pluralist discussion of legal and societal models. This implies that poverty in languages is seen as constituting the most efficient
Bilingual Study and Research: The Need and Challenges arrangement of discussion while it could also well be perceived as an intellectual shortcoming – reducing knowledge and diversity in the global discourse(s). (. . .)
The German report then highlights the increasing relationship between law and economics as well as how both influence on the evaluation and the development of legal solutions. This phenomena, which was for a long period of time neglected, is nowadays seriously taken into account and develops two different approaches in terms of understanding and trying to resolve economical and legal issues and problems: a more economic approach instead of the ordoliberal school approach. Both approaches differ in substance and methods at the time of finding better regulations and solutions to those issues and problems. This has—in his view—three major consequences: (1) The difference between both approaches is enormous, the law and economics approach having the main advantage of being so readily ‘applicable’, but also the main shortcoming of basing its results on assumptions that often abstract (strongly) from real world settings and often fail to have plausibility checks. One could speak in the one case of an approach more rigorously based on a formalisation and calculus, in the other of a value based approach that is more reality oriented and inspired and fuzzy. (2) Despite the importance of the difference, the latter is relatively little discussed and therefore we are relatively little aware of the comparative advantages and disadvantages of the two approaches either. We do not really discuss whether dependence on models and calculus does not exclude large parts of lawyers’ communities from the discourse to a larger extent than an approach that is more principle and value oriented. (3) This lack of discussion is by no means limited to the Anglo-American world, but would seem to be influenced by the virtual lack of a pluri-linguist global discussion platform. This lack of plurilinguist global discussion would seem to have different outcomes on both sides of the Atlantic – namely that an alternative approach is more easily neglected in the Anglo-American world, but also that, in jurisdictions such as those of continental Europe, the law and economics approach as shaped in the U.S. is either ‘followed’ or rather rebutted, not discussed, modified and transformed. . .
An interesting example of these distinctions is presented by Grundmann when he asks (. . .) If a calculus and model oriented approach to transnational economic transactions was not able to detect the flaws of a process bundling masses of sub-prime loans via securitization and outsourcing into SPVs, manufactured into CDO/CDS under the guidance of global rating agencies and then rated by them, with an investor community relying collectively and in a uniform way on the correctness of such models, might not the existence of alternative approaches in a global discourse have been helpful to cast doubt? Approaches that favour more robustness and plausibility checks instead of ‘exact’ calculus. These considerations pose the question of who has responsibilities in maintaining enough linguistic diversity, and they explain as well why (academics such as Alex Flessner) are right at least in categorical terms when insisting on German as a tool for explaining a whole legal world of thought. . .
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Cautiously, the National Reporter adds that this universal and plurilingual view of issues and problems which in one hand could diminish the personal or national navel focus of them, should by the other hand be limited to a certain amount of languages: (. . .) This plea for more diversity – in languages and hence in societal models – can remain realistic only if one admits that the circle of languages consistently participating in a global discourse will (and must) remain relatively restricted even in a global discourse community more adequately shaped than that based on English only. . .
In his opinion, English, French, German, Spanish, Chinese, Arabic and Portuguese should probably be sufficient for this purpose. Philosophically speaking he adds a defiant and interesting challenge: (. . .) If law is about fairness and social sciences discussion should be shaped such that it can most adequately further the common understanding and welfare, responsibilities for a more diversified discourse environment are probably just as much and perhaps even more with the Anglo-American world itself. This may sound counter-intuitive, but it could well be still more convincing if the impetus for a discourse rich in languages and hence in legal and societal models came as well – and very prominently from key institutions and key players in the AngloAmerican world. The role of the U.S. may even be paramount in this as it is not renowned for taking in ideas and diversity views from other parts of the world very easily (some even speak of ‘academic imperialism’). Opting for diversity, formulating a plea of diversity would seem particularly convincing if formulated based on the particular strong position of those who start from the dominant language. . .
In this General Reporter point of view, this could and should be very necessary as well as revolutionary, but it seems that we shall need some time to see it happen, especially while the actual American Presidency is governing the USA. . . After these considerations, the report presents a survey on the German Universities that offer pluri-linguist legal education. Basically there are three options: (a) Courses taught in other languages than German are often required in the German general final law exam, the so-called State’s exam (‘Staatsexamen’); these kind of foreign language courses apply to all lawyers leaving German universities with the regular law degree (close to 100%). (b) Curricula and study courses for foreign students (more accurately: requiring a law degree other than the German State Exam) leading to Master degree at German universities. These courses can be found in German, but as well in other languages, mostly English. (c) Genuine double degree programmes, with integration of genuine university leaving exams both in a German and in a foreign university. Separately, and as something that this General Reporter finds especially attractive and innovative, is the offer which goes well beyond such double degree Programmes. This is
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the European Law School network (Berlin/London/Paris/ Rome/Amsterdam). As said, many Universities in Germany have extended Programmes of Foreign Law taught in Mother Tongue; the report explains that in a good number of cases, the foreign language taught courses in foreign law are also part of the (more extended) double degree programmes—if those universities have such a scheme—i.e. are used in both contexts. Other Universities as well allow a year of specialisation to be passed abroad, but this is discretional; if so they develop a regime which allows for substitution of some requirements and courses by a parallel curriculum at a university abroad. In other cases, Universities have developed Master Programmes (L.L.M.) in German and foreign languages; large number of those curricula are on business law designed for students and practicing lawyers from Germany or abroad. The most common foreign language used is English. Other Master Programmes (L.L.M.) are focused on German Law or EU Law, as well as on Large or Targeted Subject Areas or Regional Contexts. The Double Degree Programmes is a third alternative in which many German Universities have become more and more involved. The list of the foreign Universities participating in these DDP is too long to mention them. Apart from the funding and scholarship issues that are common to most European Universities, the survey mentions some interesting aspects when it comes to the Educational and Policy considerations. As it is common in several other countries, legal education in two or more languages is absorbed between a 10 and a 15% of the graduates. The arguments that support it are similar everywhere: it develops open-mindedness, enhances professional and labour initiatives and different skills, promotes cultural exchange and integration, etc. As said before, this diversity instead of being seen as an obstacle should be considered as a powerful weapon to encourage those same arguments. Let us quote Prof. Grundmann once again: (. . .) “In law, the comparative law method would probably first come to mind when differences of language and of legal styles are at stake. It forms the natural key discipline for questions of diversity. Looking at this discipline and also comparing it to parallel strands of theoretical approach(es) in the social sciences, may not really be conclusive with respect to questions of pluralism, but still be telling to some extent. In a nutshell: German and French were the languages of comparative law. The founding fathers were writing in French and German – translated into English. . .” These remarks may not be shared by everyone, but this General Reporter strongly agrees with them. Further on he adds another shared remark: (. . .) “the endeavour of developing uniform rules or principles has completely dominated the comparative law world in Europe in the last two or three decades.
Would this not imply that diversity was rather seen as an obstacle than as richness in the European main stream discourse..?”
As a way to conclude these interrogations the National Reporter makes a final challenge: (. . .) In a comparative law approach, one trend which would perhaps come closest to such a ‘varieties’ approach could be called ‘comparative legal foundations’ approach’. Instead of looking at single solutions for concrete problems, it would focus on the interplay of the main structures and determinants of the legal architecture, for instance which role plays the constitution, namely fundamental rights, in the development of private law (direct/indirect/no application), which court develops these ideas, how do other social sciences influence the development of the legal academic discourse, how practice and which social sciences, etc. etc., and relate this to the institutional structure of this jurisdiction, including the question of who are the main law authorities. Such a comparative legal foundations’ approach acknowledges these varieties, it also does not follow an approach of—in principle—the ‘superior model’. It could even add foundations to an approach in which a pluralism of models is positively seen, at least in principle. While there is in my view no equally seminal piece in legal scholarship to the ‘varieties of capitalism’ work by Hall and Soskice yet, a prominent and parallel line of thinking could clearly be developed on this basis and this could be the basis of a broad, innovative research agenda. . .
As a good example of entailment and commitment towards this kind of legal education, the report describes the labour of the European Law School. Created in 2007, the purpose of ELS is that graduates must study and sit exams in three languages and in three countries with three major “styles” of legal thinking and practice, doing a full domestic exam in their home country and passing two LLM curricula in two other different countries, all three purposefully aligned. The first three Universities that developed this Programme were Humboldt—Berlin, King’s College—London and Paris 2—Pantheon-Assas. As from 2013, Rome, Amsterdam, Athens, Lisbon, Madrid and Warzaw joined the ELS, which means, as said by the German Reporter, a sufficient example of different legal styles and problems that may be found in actual Europe. This broad representation is strengthened by the fact that the full majority of the students that are taking these international courses and sit for the exams have better overall performances and results in comparison with the national law students. Creativity, team work, networking activities, coordinated curricula, joint summer schools, and even more fluence in their own mother tongues are some of the aspects reflected in their students after the first 10 years of the ELS. The German Reporter concludes: (. . .) The European Law School is designed to give life to a ‘narrative’ of Europe in which diversity of languages and styles is seen as opening up the realm pluralist thought, and not mainly as an obstacle to one global approach on the basis of English. . .
Bilingual Study and Research: The Need and Challenges
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Bilingual Legal Education in Italy
The Italian Reporter Prof. Elena Ioriatti describes a complex and very sui generis situation in her country. Although foreign languages and particularly English is increasing in Italy’s Academia, there are some special characteristics that need to be taken in consideration: Italy is not a monolingual State and its regional dimension offers evidence as to the presence of protected minority languages and cultures. However, even if ethno-linguistic groups have gained not only political and linguistic autonomy, but even independence in the recruitment of the key legal professions (notably lawyers and judges), legal education remains monolingual in those areas. Bilingual legal education in Italy is much more linked to a trend of favoring the spread of English as a lingua franca, facilitating mobility in the European area, as well as to become a differentiating feature for universities in a competitive context. The core of these changes lies in the academic autonomies of the Italian universities – most of them are state universities – but this trend to a more multilingual academic model as opposed to the one of linguistic homogeneity is facing some forms of resistance on the governmental level. (. . .)
Until early sixteenth century Latin was the most used language for the educated population; the development of vernacular languages such as Florentine (a type of Tuscan language) was afterwards completed with what is now referred as Italian, a recent phenomenon that spread over the last quarter of the twentieth century, mostly due to the pressure of the media and the Fascist policy of linguistic unification. From then onwards, (. . .) a very complex language system developed, in which people often tend to use the Italian language to read, write or speak for the purposes of elevated discourse, and at the same time use a local dialect when dealing with more domestic/local kinds of conversation. . . (. . .)
The Reporter explains that there are two important bilingual regions in Italy which are that are Valle d’Aosta and the South Tyrol, the first with the obligation to draft laws in Italian and French, the second to do so in Italian and German, sometimes Ladin as well. This third option is an officially recognized Romance language spoken in the provinces of Trentino, South Tyrol and a small part in the Veneto region. In Valle d’Aosta the full bilingualism is well established in primary and secondary school but is not so strong in advanced education, especially in the field of law. The main University (Aosta) does not offer a full curriculum in law and all the legal classes taught in the other curriculums are held exclusively in Italian. The other interesting region where normative bilingualism can be found is the Province of Bolzano (Bozen) that, along with Trento, is part of the autonomous Region of Trentino Alto-Alto Adige (South Tyrol). Here, the most common spoken language is German, almost a 70% of the population speaks it, 25% speak Italian and 5% Ladin.
89 (. . .) Today South Tyrol enjoys a broad administrative and legislative autonomy and is known as the territory in which the linguistic minorities have been recognized the greatest degree of protection and widest range of rights. The institutional setting of the province is specifically designed to permit the cooperation of the two main linguistics groups (German and Italian speakers), and every person has the right to use either language when relating to both the judiciary and the organs/offices of the public administration. As a consequence, documents directed to the public are also usually bilingual and the civil servants who work in the judicial and administrative fields are required to speak both languages. Furthermore, all laws and normative acts have to be drafted in both languages, and, when involving interests of the Ladin community, in this third language too (. . .) In both regions bilingual law drafting concerns institutions – and therefore concepts – of Italian law, which are applied within one single legal system, namely the Italian one, and are merely expressed both in Italian and in a second legal language which is not only Italian, but German. A special organ has been founded to address this specific set of problems: in South Tyrol the Joint Terminology Commission, composed by both Italian and German speaking experts, with the scope of creating, developing and expressing the terminology of the Italian legal systems in German. In Valle d’Aosta laws are drafted predominantly in Italian and subsequently translated by translators working within the Service de promotion de la langue française. Therefore, particularly in South – Tyrol, the legal professions – lawyers, judges, notaries – but civil servants too, even having a predominant language skill, are required to understand the translation and the correspondence of legal terminology adopted in both languages (. . .)
As for University legal education in these bilingual regions, the difficulties that arise are similar to many other countries. As said by the National Reporter, To be able to enforce law and administrative justice in the two languages, the system should be able to count on a sufficient number of legally educated bilingual legal professionals and bilingual law graduates in general (. . .)
Consequently, until now Italian is still the ruling language in tertiary education, although several courses are offered in other residual languages such as English, German or French. This characteristic also applies to post graduate legal education in those bilingual regions. Graduates who like to enter the classical legal professions such as lawyer, judge or notary are not really trained in two languages; the responsibility for this specific need relies more in the respective Law Bar Association rather than in the Universities. The Bolzano school for the legal profession ensures that postgraduate legal education complies with the requirements for access to the Bar exams, also with regards to bilingualism. Students may attend classes in either Italian or German, but not all the programs in all disciplines are available in both languages. This depends mostly on the availability of the German speaking professors more than on the subject of the lecture, even if experimental double language classes have been recently introduced. This model is based on a co-teaching method of the same legal subject by two teachers, each being bilingual, but prevalent in one of the two languages. However, these bilingual classes are part of the general program of the school the aim of which is not to train young jurists in bilingual legal terminology or legal
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N. Etcheverry Estrázulas and S. Cairo translation. As a consequence, in most case readings and pedagogical material are not available in the two languages. . .
Similarly, at the French speaking area of Valle d’Aosta, students are not especially motivated to study law in a language other than Italian. Moreover, this also is due to the fact that the regulation of legal language in Valle d’Aosta is a lot less incisive compared to South Tyrol, where all citizens have the right to use their language when dealing with legal offices and court cases. Consequently, decrees and sentences must be translated in the chosen language. On the other hand, in Valle d’Aosta, translation is foreseen only for specific legal deeds. (. . .) For the time being, the nearest universities which offer a full law curriculum in law are the University of Trento (Italy) and the University of Innsbruck (Austria); it is interesting to notice how the latter that is located in the Austrian region of Tyrol, offers an integrated curriculum in Italian law, which covers both the Austrian and Italian legal systems and in which the classes are taught in German as well as in Italian. Finally, and strange enough, the only University offering a bilingual German-Italian training course for lawyers (avvocato/ Rechtsanwalt) is the University of Florence, offering a program in which Italian students interested in the legal profession in Germany attend part of the courses in Köln (Germany) (. . .)
As for the vast majority of the cases, what concerns the degree of internationalization of high education in the legal fields depends of the State. The State is the exclusive authority to regulate the development and recognition of the legal degrees and titles to access the legal professions (lawyer, judge, notary). This is what is known as the Laurea Magistrale in Giurisprudenza obtained after a 5 year legal study program. The program is mostly mono-linguistic (Italian) due to technical, cultural and linguistic reasons rather than because of other nationalist or protective measures implemented by the State. As from 1933, Italian is the official language of teaching and of the examinations in all university structures. (. . .) Actually, the foreign language of teaching – any language other than Italian – is the only requirement which is necessary to qualify a University program as “international”. The internationalization process of legal education is a complex phenomenon that has gradually interested all the European educational systems, responding to the need of the state to be competitive in a global market, as well as with the neo-liberal idea that universities “produce” services of economic values, that have to be competitive and attractive, as all the other economic activities. Within this complexity, aspects such as competition among law schools, convergence of academic curricula, student attraction, mobility of researchers and students are the ingredients of a successful educational system in the legal fields. Like many other European educational systems, internationalization has been the “engine” of the recent development of bilingual education in Italy. It is therefore not surprising that the language of instruction in bilingual programs is English, and legal education is no exception. . .
As shown in other reports, the process of internationalization in Italy has been centered more in Europeanization, especially after the implementation of the protocol signed in Bologna in 1988. In this “Bologna Process” this country was one of the first European countries to enforce the necessary reforms in order to harmonize the university systems. This was done by introducing the 3 plus 2 system that complete and finishes the Laura Specialistica. This has shaped two different models of graduate legal training: one more traditional and cultural, the other mostly operational and variegated that aims more to the business world and the labor market; the first is more theoretical (listen and learn) the second is more practical, where students have to develop more creative and participative skills. Although not bilingual per se, the use of other languages apart from Italian is much valued (especially English, German, French and Spanish) in order to achieve better training skills and better jobs in the nearby future. The recent European economic crisis also played a significant role, especially in the last 10 years, forcing many young students to migrate, searching new labor opportunities in foreign countries. The knowledge of other languages in addition to the native one, is more and more recognized as a powerful weapon to succeed outside national frontiers. The Italian Reporter describes a recent and very relevant example of the new Bologna Process of aiming at a wider and more global vision in education, by explaining the model established at the Faculty of Law of Trento where she helds a teaching post and where she created and coordinated the Program described below: the first law bachelor entirely offered in English; a “cultural mission” with the main goal of training students in comparative and transnational law; as she relates, the Faculty of Law of Trento has always been cultivating the language skills of its students through International mobility programs, double degree projects, as well as by offering a good number of elective courses in other languages besides Italian. With the passing of time, these choices in legal education have been reinforced with the introduction in the students’ curricula of legal language courses as well as with the launch of a “Law and Language program”. Thus, it is no surprise that the very first law course entirely offered in English in Italy – and the fourth in Europe – was established in this environment. The program Comparative European and International Legal Studies (CEILS) is, at present, the only law three year English bachelor in Italy, as well as one of the very few established in Europe. This three-year school is included within an overview in which courses offered in English are developing progressively.
Afterwards, the interested students may continue and finish the post-graduate or double degree programmes offered in various languages, and mainly taught by guest visiting professors or professionals who are experts on a certain topic. As the Reporter admits,
Bilingual Study and Research: The Need and Challenges (. . .) The Faculty’s professors were involved in the difficult challenge of teaching their subjects in a new language. The Author of this report also took part in this new teaching approach and was able to directly experience the tight relation between language and teaching methodology. As regards some experimental teachings, as in the case of the Author, with a course in Comparative Legal Systems, language is not just a means to communicate comparative knowledge. This choice for bilingualism is due to the need to take steps in the direction of the Europeanisation of the law curriculum: in these terms, language is method, as “the law practitioners need to be capable of crossing national borders not only physically but also intellectually and English, as according to the Eurobarometer, at present is the most spoken foreign language in Europe (. . .) Given the positive result of this teaching experiment, the law bachelor Comparative European and International Legal Studies CEILS (three years) was launched in 2017 and it is now offered alongside the traditional program in Italian of the Faculty of Law (five years). The students enrolled in the Italian five year program have also the possibility to join the Law and language program and so attending language courses, legal language courses and other training activities in French, German, Spanish and English language.
The challenges and difficulties that lie ahead for the Italian academic international law culture are still strong. The protection policy enforced by national institutions to preserve Italian language will not diminish for the moment. To achieve the 5 year degree Laurea in Giurisprudenza or the Master degree in Law, Italian will continue to be mandatory. And this was recently confirmed in November 2017 when the Consiglio de Stato applied a principle that had already been laid down by the Constitutional Court: judgement No 42/2017 which guarantees that the overall teaching of universities must respect the primacy of the Italian language, along with the principle of equality, the right to education and academic freedom. For many Italian academics the application of this principle is a good way of preserving the Italian culture and language. For others, this is only a draw back and a way of cooling down the emergent need of legal internationalization. In between these two radical positions we may find the ones who ponder how much foreign languages, and especially English, should be reasonable and required in the legal academia in the years to come.
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Bilingual Legal Education in Japan
Japan’s situation regarding BLE is, at least in the National Reporter’s point of view, quite original because of its complexities and somehow contradictions. To begin with, two different stages must be taken into account: before and after 2004. That year was a “key” one to introduce and develop a new educational system more alike with the US-style of the law schools. In reality, Japan has experienced two different and competing institutional
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pressures in the context of BLE. (a) One pushing to a more diverse form of legal education but aiming to reinforce and enhance better Japanese lawyers inside the country, (b) the other one, with the commitment of the Ministry of Education, to internationalize Japanese universities and undergraduate law faculties in view of globalization and commerce. The results of the new plan have not been—until now— the ones expected. The reformers and builders of the first current or pressure, hoped for a significant rise in the pass rates for the bar examination in Japan and this did not occur: it still remains low, currently between 20% and 25%. Consequently, law schools and law school students actually have focused their limited study time on “core” examination subjects, leaving little time or reason to pursue more diverse and creative course offerings, including courses taught in languages other than Japanese or courses making extensive use of foreign language materials. On the other extreme, the interest of the Ministry of Education to internationalize its education has obtained some new developments, although it is still uncertain which of these two tendencies shall prevail in the nearby future. The National Report reflects some of the innovations and challenges taken by the University in which the reporter is based, that is Kyushu University, which clearly is not following the traditional educational trends, but rather a much more actualized and modern view of the issues at hand. A little bit of history: “Prior to 2004, the only pre-condition to take the national bar examination was high school graduation. A university law degree of any kind was not necessary. The bar examination was, however, notoriously difficult, with a pass rate fluctuating between 2-3%. This meant that by the year 2000, Japan had less than 30,000 lawyers for a country with a population of over 120 million.” (. . .) In order to assist candidates taking the bar examination, a network of private, specialized “cram” schools emerged independent of the universities. For those talented enough to pass, the bar examination was a gateway to, rather than the end-point of, professional legal training. A special institution run by the Supreme Court, the Legal Research and Training Institute would enroll those who had passed the bar examination and train them for a two-year period. In this way, future prosecutors, judges, and practicing lawyers would be trained together, before entering into the work force. . .” The National Reporter adds a clarifying aspect: This does mean that Japan had no university-level legal education. Quite the contrary. Rather, the vast majority of students who enrolled on an undergraduate law degree at one of the many (90 +) law faculties (hougakubu) had no intention or prospect of pursuing a career in legal practice. Rather, there was a clear separation – at least, in comparison with other jurisdictions – between university legal education and the legal profession. Instead, an undergraduate law degree was seen as providing a general education, ideally suited to a career in the public sector – as a national or local government official – or in a
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N. Etcheverry Estrázulas and S. Cairo private company. As such, a law degree from a good university was seen as a ticket to a stable career in the life-long employment system that functioned so effectively in the post-war development of Japan. (The underlying is General Reporter’s responsibility).
As a consequence, this way of understanding legal education, so separated from the finalities pursued in the legal profession, the “encyclopedian” or generalist culture provided by Universities such as the undergraduate law faculty of Tokyo had one main objective: to produce and form the elite of the Japanese—level bureaucrats as well as the new leaders in the fields of finance and commerce. In this process, academic performance at university was accorded much less weight than the particular university one attended. High school students were placed under enormous pressure to get into the best university possible (such as the mentioned above), in order to secure their future employment prospects. (. . .) As such, pre-2004 undergraduate university legal education in Japan was a high status, generalist training, rather than a specialized, graduate, or professional style of legal education. Undergraduate legal education was certainly not designed with a view to produce practicing lawyers or other legal professionals. . .
Complementary, previous to 2004 the main Universities both public or private, had graduate schools of law that offered Master’s and Doctoral level courses mainly oriented on comparative law, but again, with one main and specific target: to prepare its students for a career as university teachers and researchers (not as legal practitioners) with a certain mastery of a foreign language and the law of that country in a special field. The two main preferences in terms of language, due to historical reasons, were German or French. Hence, “pre-2004 “legal education” in Japan could be divided into several different components: (i) university legal education, comprising a generalist undergraduate program; (ii) research-oriented graduate schools with a strong focus on comparative law; (iii) a series of specialized “cram” schools which would prepare candidates to pass the bar; and, (iv) a professionalized legal education, which came after passing the Bar examination and served as the only real practical legal training one would receive before entry into the three main legal professions of lawyer, prosecutor or judge. . .”
In 2004 the Educational Japanese Authorities enhanced what was meant to be a sort of radical change in terms of Legal Education: the introduction of Law Schools with a US JD style education in a 2 or 3 years—program, depending on whether students had studied law as undergraduates. Completing law school became a pre-condition for taking the new national bar examination. Significantly, the new law school system was added “on top” of the undergraduate and graduate level legal education described before. This means that— contrary to what other countries such as Korea did a few
years later—Japan did not close down the undergraduate law faculties or the research-oriented graduate schools of law. The origin of this reform was the general dissatisfaction with the state of the legal profession by the mid 90ties: (. . .) it was often difficult to obtain legal services and much of the supposed “non-litigiousness” of the Japanese could be better explained by the difficulties and costs of finding a reliable lawyer. Most lawyers tended to be concentrated in the big cities of Tokyo and Osaka, creating an uneven geographical distribution. Many people also criticized the quality of legal professionals, as the lack of genuine competition created little incentive for legal professionals to offer a better standard of service (. . .) after the Japanese economy fell into recession, pressure emerged to reform the system. The pressure came from several sources. The Ministry of Justice and Supreme Court in Japan wanted to increase the number of prosecutors and judges. Big business began to complain about the lack of quality in the legal profession. And, as the economy declined, more disputes emerged. The trend towards de-regulation meant that government control over the economy was decreasing. The capacity of government to manage conflict was diminishing. . .
As one can observe, this is just another example of how economic issues may impose legal, social and cultural reforms; on the other hand, many legal, social and cultural changes have played a significant role and had tremendous impact in the economy of certain countries and regions. In any case, the key event in the reform of legal education was the creation of a Justice System Reform Council in June 1999. After two years of deliberations, the Council’s recommendations were released in June 2001. These recommendations were to the have a profound impact on legal education of Japan and provided the template for the new post-2004 system. The primary aim of the Council’s recommendations was to reform the justice system and increase reliance on the law as a means of social ordering. A key element of the transition towards a “law-governed society” was the call for an expansion in the number of lawyers, judges and prosecutors. . .
There was great optimism and confidence in the creation of these new law schools. The market would determine the number of the new and well prepared lawyers, which in an average of 70–80% would be admitted to the legal profession after passing the bar examination. To support the newly created law schools, it was proposed that (at least, until 2011) only those who graduated from a law school could be eligible to sit the new examination, which would still have to be passed to qualify as a lawyer, public prosecutor or judge. Two programs would be offered: a 2-year program for those who had studied law as an undergraduate and a 3-year program for those who hadn’t. The expectations were to have around 3000 lawyers graduating every year. The bet was to increase the quantity but also the quality and diversity of the new lawyers. The new law schools would move away from the narrow focus of private cram schools that had emerged to support students competing to pass the old-style bar examination. In order to accomplish this the Council recommended
Bilingual Study and Research: The Need and Challenges
recruiting law school applicants from a wide range of academic and professional backgrounds: A lawyer with a degree in medicine, for instance, would be better placed to assist a client in the context of medical malpractice suite. Or, a lawyer with experience of the creative industries would be more effective in handling a copyright dispute. . .
Another aim was to enlarge and cover the gaps of geographic diversity in order diminish the centered influence of urban cities such as Tokyo and Osaka. And finally, to frame “internationalized lawyers” experts in business and international exchange. Curiously enough, and maybe because of the pressure and resistance of the stakeholders of the traditional legal education system, the undergraduate law departments or faculties were maintained as a source of employees for government and internal business. As already mentioned, Korea did not follow the same path and many undergraduate law programs and departments were closed down when they opened the new law schools, as it happened in Seoul National University. Therefore, as from 2004 the majority of law faculties in Japan offered: (1) the traditional general undergraduate legal education; (2) a research-focused graduate school; and (3) a new professional Law School, responsible for preparing students for the bar examination. Sixty-six new law schools opened in that year and the competition to attract the best students was fierce. But the first results of launching and recruiting the new model of lawyers in the new era were not the ones expected. The number of students allowed to pass the bar examination increased much more slowly than originally envisaged. The government had to accept that instead of 3000 graduations per year, only half was reaching that goal. Not only this, but also the percentage pass rates began to drop to disappointing figures: from 48% in 2007 to around 25% in the period 2009–2015. The government’s officials tried a feeble excuse: all in all, Japan should not become a litigious society, so 1500 new lawyers per year was enough, especially to avoid unnecessary competition and also to promote quality instead of quantity. The introduction of an alternative way to pass the bar exam in 2011—a preliminary qualifying bar examination centered in six basic subjects—didn’t obtain satisfactory results and simply supposed a return to the basic and traditional roots: the new kind of lawyers were not meant to be so necessary and the new generation of students would focus again in becoming well trained administrative officers, bureaucrats or researchers. The five more distinguished Universities in producing the best pass rates have been Keio, Tokyo, Chuo, Kyoto and Waseda in that order. Another issue that has to be taken in consideration is the economic cost of attending to private law schools in relation
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to public ones. In average, it implies a 50% higher and not many students can afford that difference, especially if the light at the end of the academic tunnel seems so distant, dim, and ineffective. A logical consequence of all this is that applications to Law Schools are down from a decade ago, and some schools have been forced to merge or even close down. The persistent declining pass rate for the bar examination—25% on average—forced law school students again to focus on core examination subjects, leaving little time or incentive to pursue courses offered in other languages. A different path to reimplement the new type of internationalized lawyers in some universities has been the introduction of programs mainly or exclusively taught in English. This can be a way of considering and accepting the term “Bilingual Education” in Japan in the last 10 years. It was the path, as the National Reporter explains, to “reinvent” the graduate education by offering in some universities Master’s and Doctoral programs taught mainly or exclusively in that language. In order to better understand the trends that have been followed in Japan’s BLE the reporter separates three different kinds of programs: (a) the ones offered by professional law schools (b) undergraduate programs with general legal education (c) graduate-level programs. Finally, the reporter signals the personal experience of Kyushu University where he is based, which offers all the three programs mentioned above. (a) Law Schools: As said before, these new institutions experienced an optimistic start that collapsed a few years later. An article written by Dan Rosen—from Chuo University Law School in Tokyo—reflects both stages. From his point of view, many of the subjects taught at the beginning of the new Law Schools never appeared in the future bar exams. At first, they were accepted and chosen by the students as a way to expand their general culture and obtain some level of legal diversity. But things changed radically when the bar exams began to prove that only some core and traditional topics were frequently and persistently asked. What was required to pass the exams was memory and repetition; no need to intertwine knowledge or compare systems. The result? The students learned the lesson: forget the idea and hopes of diversity and internationalization; disregard all subjects and courses that are complementary such as law & economics or law & sociology, legal ethics, Roman or German law. Stick to the only courses and subjects required to approve the bar examination and if that is achieved, afterwards say goodbye to the law schools altogether. Dan Rosen, like many other professors are wondering how many students per year shall be attending courses that are considered a luxury and a waste of time for the new
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generation of students. As stated by the National reporter, (. . .) No matter how much the government may have emphasized the need for broadly trained lawyers, by maintaining a strict bottleneck on entrance to the profession, students are pushed into focusing on the bar-exam related subjects and away from other courses that can quickly come to be seen as a distraction from the core task. This includes courses with a strong foreign language component. . .
In view of this situation two alternatives may rise. Adopt the Korean model that limited the number of law schools but also required some universities with accredited law faculties to stop their undergraduate legal education, or increase the bet on internationalization, such as Luke Nottage’s proposition that shows the case of the University of Sydney as a good example of cooperation between Australia and China, by promoting a 3 plus 2 double degree program (see page 19 of the report). Whether any of these alternatives shall be adopted remains doubtful in the National reporter’s point of view. (b) Undergraduate Law Faculties: These institutions have been “pushed” towards a different direction, especially by several governmental Ministries: internationalization of undergraduate teaching, learning and research. A example of this tendency was the 2009 Global 30 project that offered English only undergraduate courses and programs, or the Top Global University Initiative which began in 2014 and finishes in 2023. Funded by the Japanese government that approved US$77 million to attract more foreign faculty and students in the main Japanese Universities classifying them in two categories, A and B and accordingly giving more or less funds per year to each of them. Kyushu University, rated A, receives US$4.2 million annually because of its potential to be ranked among the top 100 in world university rankings. Type B universities receive US$1.7 per year. Two main “pushers” of this initiative have been Prime Minister Shinzo Abe and several Japanese companies that need to re-shape and re-invent the new professionals in order to compete in the global race where Japan has been losing presence and markets. In 2013 the government launched Japan’s Revitalization Strategy that aims to double the number of Japanese students studying abroad by 2020 (from 60,000 to 120,000). This was complemented with the “Tobitate (Leap for Tomorrow) Study Abroad Initiative”. This scheme which hopes to make Japan a nation in which “ambitious young people are given the opportunity to go global” offers various chances for students to study abroad. A standout among these opportunities is the so-called “Young Ambassador Program”. This program provides scholarships and other aid with the help of private-sector contributions aiming to collect
20 billion yen. The goal is to help 10,000 of these young “ambassadors” by 2020. . .
It is still very soon to predict and evaluate the results of all these strategies and initiatives. At least ten more years will be needed to reap what has been sown. As already mentioned, Japanese legal education has not followed the usual standards of launching skilled and specialized professionals in such and such area of expertise. On the contrary, it has developed the encyclopedian, general approach helpful to work afterwards in different levels of the government or local companies. Hence, one can find two different and parallel trends or paths in Japanese education: (1) the scientific-research (2) the practice—oriented. Until recently, the comparative legal education was mainly or exclusively taught in Japanese, although German or French law was the target of the comparative investigation. The finality of such education was to have a better knowledge and understanding of the Western World, but mainly as a mere intellectual curiosity or search for diversity. And there were no urges from up-ward companies or administrations to receive new well practiced and skilled professionals. But something began to change since the last end of the twentieth century and beginning of the twenty-first century: (a) the realization that English would still be the lingua-franca necessary to move in commerce, business and politics (b) the realization that the Asian region (and particularly China) was beginning to acquire more and more economic and political influence in the Western world. Kyushu University was one of the first to understand these changes and began to do something about it by hiring more and more foreign academic professors. Consequently, as the National reporter explains, there has been the creation of new four-year undergraduate programs that can be described as genuinely bilingual in the narrow sense that it involves a combination of law courses that are taught in both Japanese and English with the stated aim of producing “global lawyers” or, at least, those with the necessary language and legal skills to become global lawyers. An example of this type of bilingual law program is the so-called “Global Vantage” program (GV) launched in Kyushu University in 2015. This program is only open to 10 students per year and involves a separate English-language entrance examination from the traditional undergraduate program, but students are offered a genuinely bilingual program that aims to build language skills in English, as well as legal knowledge in both Japanese and English. . .
To put this in Samuel Huntington words, in China the slogan was “Ti-Yong” (Chinese knowledge for basic principles, Western knowledge for practical skills) and in Japan the slogan was “Wakon Osey” (Japanese spirit for Western techniques). (**) Samuel Huntington—The clash of civilizations and the remaking of world order.—Ed. Paidós SAICF—1997—page 86—Spanish edition. Some of the aims of the GV program are to foster expertise in the fields of law and political science, to develop
Bilingual Study and Research: The Need and Challenges
creative and flexible problem solving, proactive leadership roles both nationally and internationally. Again it is too soon to evaluate the results of this program, especially because of the low number of students that are involved each year. Nevertheless, employers are optimistic with GV in the long term. Graduate Schools The establishment of the new law school system in 2004 reduced the number of students wishing to enter the research-oriented post-graduate law programs offered at a Master’s or Doctoral level. The reasons for this decline of interest in a more research oriented graduate level legal education may vary, but one logical one to extract is that the new students have a more practical and very “consumer” way of understanding education. If it is useful and provide skills in the short term, they will take it; if it is a long term and therefore uncertain way to obtain a future employment, they will not. This may explain why several law faculties have broadened their recruitment to bring in former lawyers, prosecutors and judges (i.e. those with practical experience) to teach as professors in the new law schools. The national reporter finds also another reason for this change of orientation: . . .Of course, this “opening up” legal academia to those with more experience of the realities of legal practice makes a lot of sense given the demands of the law school system. One of the design issues with the new law school system was that the overwhelming majority of the faculty members responsible for preparing students for the new bar examination had not passed the bar examination themselves, nor did they have any experience of legal practice. They were researchers and not practitioners. “Opening up” of faculty recruitment has been a logical response to the law school system. . .
Consequently, the role of graduate schools after the reform in 2004 remains with a big question mark. The Japan example is another of many which reflects what usually happens when reforms and new programs are designed by persons who may have great theoretical ideas that confront and clash with the practical realities that appear in the short or long term. The intermediate key that may open new doors in BLE is again internationalization. This is the big focus of Universities such as Kyushu that is more and more providing graduate programs taught either entirely, or substantially, in English at both a Master’s and Doctoral level: The such first program, the LL.M. in International Economic and Business Law (IEBL) was established in 1994. At the time, it was the only Master’s course taught entirely in English within Japan and was designed to overcome the main obstacle to studying law in Japan, namely the Japanese language. Kyushu University’s IEBL program focuses on international and comparative trade and business law. An LL.D. program allowing students to complete a doctoral dissertation in English was added in 2000. . .
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Other universities such as Keio, Kobe, Nagoya and Waseda followed the path opened by Kyushu. The bilingualism of the programs is quite peculiar, because in strict sense one cannot say they are taught both in English and Japanese; in reality Japanese is offered as an option, but in general, legal education is proposed and taken in English. The advantage of the “relative” low cost of graduate school tuition fees in Japan compared to the US, makes it attractive for Asian students to choose a Master’s law degree in English geographically situated in the Eastern region. Another initiative from Kyushu was to host a new program, the Young Leaders Program (YLP in Law). The Ministry of Education designated Kyushu to host and develop (. . .) this Master’s level graduate program (that) targets young legal professionals and government officials from designated emerging economy countries. Initially the geographical focus of the program was North East and South East Asian countries but recently a number of other countries have been added including India, South Africa and Turkey. Students on the YLP are integrated into the IEBL program where they study legal issues with a particular focus on international and comparative trade and business law. Again, these programs are taught entirely in English. . .
Kyushu University’s Bilingual Master’s (LL.M.) degree program in Law (BiP) is another attempt and innovation to offer bilingual legal education. It offers overseas graduates of Japanese language undergraduate programs or those with a legal background and a strong background in the Japanese language, the opportunity to take a Master’s degree in law in a bilingual environment: The program is designed for students who already have a solid foundation in the Japanese language. (. . .) As such, the program is principally intended for Japanologists or lawyers with strong Japanese interested in (i) Obtaining a deeper understanding of Japanese culture and society through the study of historical or contemporary issues in Japanese law & politics; or (ii) Preparing for a legal career in Japan or connected to Japan by studying Japanese and international business law. . .
As a part of the Program students have to do a Master’s thesis under the supervision of two faculty members. It can be on any legal topic and must be written in either English or Japanese. They are also expected to complete a 20 page’s summary of the thesis in the other language. Finally, students are offered the opportunity to participate in an internship of 2–4 weeks at either a Tokyo-based international law firm, company or government agency. The BiP program is still very small, with only 2–3 international students per year enrolling. The conclusion that arises after this panorama of Japanese education is somehow enigmatic: Is Japan striving for still a traditional and “core subjects” education, towards new and
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original forms of internationalization, or thirdly, to somehow a middle-road kind of legal education that remains modern and open to the Western world while keeping faithful to its own culture? The three kinds or types of students found in Japan nowadays do not give us yet a conclusive answer. As it usually happens in the Eastern World, much more time is required to see the result of these tendencies. . .
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Bilingual Legal Education in Mexico
The official languages in Mexico are Spanish (Castilian) and 68 indigenous languages called “linguistic groupings”. It is estimated that in 2015 there were 7,382,785 people aged 3 years and over who speak an indigenous language. The languages with the highest number of speakers are: Nahuatl, Maya and Tseltal. Regarding the number of people who speak English in Mexico, according to estimates from the National Institute of Statistics and Geography (INEGI), the population over 18 who speak English is approximately 9.4% of the population. The Teaching of Law In Mexico there are 1770 Higher Education Institutions (universities) that offer a degree in Law. The number of students of the law degree in 2016 was 354,753 of which 176,232 are males and 178,521 women. The main educational institution in Mexico is the National Autonomous University of Mexico (UNAM), whose enrollment of law students in 2016 was: 11,603 students. In 2017, the Law School of the UNAM has a population of 11,856 undergraduate students and 1002 postgraduate students (Masters and PhD). The Reporter addressed the proportion of foreign students to local students pointing out that in 2016, 101 foreign exchange students were received, who studied a semester at the UNAM. This indicates that the proportion of foreign students is just 1.14%. In the Postgraduate Studies, the proportion is 99.6% of national students and 0.4% of foreign students in the Master of Law; and of 95.7% of national students and 4.3% of foreign students, in the Doctorate in Law. Furthermore, it is important to underline the proportion of foreign professors to local professors. There are 40,184 academics throughout the UNAM, and in 2015, 300 foreign visiting professors were received (that means approximately 0.74%). Regarding the Faculty of Law, the proportion is similar (less than 1%). Regarding the nationalities represented in the student body, the main foreign nationalities represented in the student body are Colombians, as well as Spaniards, Peruvians, Canadians and Americans. In the School of Law of the UNAM there is no bilingual legal education program because the number of foreign students and professors is still limited.
However, in the field of Postgraduate Studies in Law, the Institute of Legal Research of the UNAM has a “Master’s Degree in American Law” which is taught in four semesters, whose content is equivalent to the Juris Doctor taught in the United States, but offered in Mexico. This program is aimed at Mexican students who want to be more than bilingual lawyers: “bi-legal” lawyers. Number of visiting professors per year. In 2006, there were 1293 visiting professors from abroad at the UNAM (3.22%). In the area of undergraduate education, no attempt was made to initiate perhaps because the number of foreign students, or nationals who are fluent in English or another foreign language, is even lower. However, in populations where there is an indigenous majority, so-called “intercultural universities” have been implemented, which teach classes in Spanish (Castilian), but incorporate some indigenous languages into the substantive functions, becoming bilingual schools. According to information from the Ministry of Public Education there are eleven intercultural universities located in eleven states of the Republic, whit 14,008 students enrolled in 2015–2016. Among them, the Intercultural Universities of Chiapas, of the State of Tabasco, of the State of Puebla and the Veracruzana Intercultural University have a degree program in Law with an intercultural approach. There is the “Master’s Degree in American Law” taught by the Institute of Legal Research of the National Autonomous University of Mexico (national public university), the Illustrious and National Bar Association of Mexico (national association of Mexican lawyers), as well as the School of Law of Sinaloa (private university of local character), a postgraduate program that is an example of bilingual legal education in Mexico. All the teachers engaged in this Master’s Degree in American Law are local and they teach the classes in both languages, but the own and specific institutions of the American common law are taught in English. There is only one American professor that is the coordinator of the Master’s Degree. The program began in 2011 as an initiative of the law doctors Hector Fix-Fierro (at the time director of the Institute of Legal Research of the UNAM) and Oscar Cruz Barney (at that time president of the illustrious ad National Bar Association of Mexico); with the idea of studying the legal system of the United States of America. The objective of the Master’s Program is to train Mexican jurists to advise companies, offices and organizations in the United States, which carry out activities in Mexico or Latin America. As the Reporter sharply pointed out there has been no resistance from students, faculty or authorities. However, it is clarified to the students that the Master’s degree does not
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accredit them to practice law in the United States, nor to present the Exam before the Bar of that country. There are many areas of law taught in a foreign language: Private Law, Commercial Law, History of Law, Constitutional Law, Administrative Law, Procedural Law, Legal Methodology, Legal Deontology, and International Commercial Law. One of the main positive effects of this Master is that the students are more competitive in the work force because they can be hired by companies, associations or other foreign institution that carry out activities in Mexico and Latin America, since the students are experts in Mexican Law (Civil Law) and United States Law (Common Law) in a globalized world. The methods for evaluating students used in the United States are followed for the students in the American Law, that is, the case method for teaching, and the evaluation through written exams, under the system of “encrypted name”. The selection of professors has been carried out among researchers from the Institute of Legal Research of the UNAM. The textbooks (casebooks) of the subjects have been purchased directly from the publishers of the United States. The same texts are used, as if they were studied in the United States, All students are Mexican, who speak and understand English language very well. From the Reporter’s perspective it can be said that there has been an improvement in the last 5 years regarding BLE in Mexico. There is a plan to teach the Master in other States of the Mexican Republic. There is coherence between BLE offered from the academic point of view and the vision of the Law Firms in Mexico, since the Master in American Law is oriented to solve the needs of the law firms, especially those that deal with foreign and international entities. The National Reporter believes that the interest in BLE will grow in the country due to the fact that more offers of education will arise. Furthermore, the Law Firms will have more interest in hiring “bi-legal” lawyers. The main language as an option for bilingual legal education is English. Once again, as we have seen throughout the report, English is the first choice since it is the most common worldwide. Other languages that could be chosen as part of bilingual legal education are French or German. The bilingual legal education is conceived as an opportunity to compete better in the international order.
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Bilingual Legal Education in Romania
Taking as leading example the Faculty of Law of the University of Bucharest, Romanian National Reporters Ramona Popescu and Carmen Achimescu, as so do other Reporters,
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mention the Constitutional duty to impart all levels of education at their respective national language, also providing the right to minorities to receive education in their own language. Therefore, it is commonplace to discover in all the submitted reports a mixture of self-preservation of the native language combined with a flexible acceptance of foreign languages either to protect minorities or to promote bi-lingual or even tri-lingual education in view of the growing demands of the students, the future employers of these students, as well as internal and external reasons linked with political, cultural or commercial needs. Recurrently, the increase of migration in several countries has played a major role in the foundation and development of Bilingual Legal Education. Apart from the traditional courses that can be found at the University of Bucharest offered to 3200 undergraduates, 600 postgraduates and 180 doctorates, the Romanian Reporters mention the original College juridique francoroumain d’etudes europeennes. It is a part of the School of Law which offers a bilingual course that may take 3–5 years with specialization on European Law. Several French Universities are entwined to offer this course together with the University of Bucharest. Among them, Paris 1 PantheonSorbonne. An average of 250 students take this course every year. The College Juridique was created in the 1990s after the fall of the Romanian communist regime and was enhanced by the strong cultural influences of the French law in Romania as from the nineteenth century. The principal purpose of its foundation was to open Romania to the Western World and to promote a new generation of young jurists with the skills to exercise the law beyond Romanian boundaries. Another project in the nearby future is a double degree course Spanish-Romanian in partnership with Universidad de Valencia, also aiming at European Law but taught in Spanish. Programs such as Erasmus have been very helpful to expand student’s international mobility not only in Europe, but throughout the different continents. Yet, in several European countries BLE courses strongly depend of the material and financial resources of each university. This occurs due to the lack of professors who are able to teach courses in other languages rather their own native one. Romanian Reporters confirm this view when they sustain that, although the need for universities to adopt a broader international scope is understood, this goal can hardly be met due to the fact that the organization of BLE courses is still very difficult since there is a shortage of technical, economic and human resources. As a result of these difficulties, only between 10% and 15% of Romanian students are actually focusing their careers with an international perspective. Another important reason for this, as the National Reporters point out, is that Law Faculties are generally less able to attract foreign students because of the specificity of their subjects, an issue that can be more easily
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overcomed in other Faculties with a more technical profile.
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Bilingual Legal Education in Singapore
Singapore is officially a multi-ethnic, multi-religious, multilanguage nation-state with four official languages (English, Mandarin Chinese, Bahasa Melayu, and Tamil) to be used in Parliament or the provision of essential government services. Although, Bahasa Melayu is a national language, as the National Reporter states, apart from the Malay ethnic community in Singapore, relatively few other citizens are conversant in Malay at any serious level. There is a government-run programme under which middle-school students who are not classified “Malay” may enroll in Malay language classes, but the take-up rate is low. Singapore citizens are classified for official purposes into four racial categories: “Chinese”, “Malay”, “Indian” and “Others”. A person classified into a particular racial category is required to be taught the language(s) (“Second Language”) corresponding to that racial category i.e. Mandarin Chinese for “Chinese”, Bahasa Melayu for “Malay”, Tamil, Hindi, or another Indian language for “Indian”, and the closest relative or a foreign language (French, German, or Japanese) for “Others”. As local university admissions—and especially for law faculties which are the most selective faculties next to medicine—generally require a good grade on the Second Language subject on school-leaving examinations/qualifications, it can be assumed that most local law students in Singapore have some working knowledge of at least their Second Language on top of high proficiency in English. However, legal proceedings must be conducted in English (with interpretation possible) and all documents not in English translated into English. There is no right, whether at civil or criminal law, to legal proceedings in any of the three official languages other than English. Hence, for legal purposes, Singapore is de facto a monolingual jurisdiction, using only the English language. For education purposes as well, save for language or language-related special subjects, all education—whether at pre-university or university level—is conducted in the English language. The National University of Singapore, Faculty of Law (NUS Law) admits approximately 220–240 students every year for its 4-year LL.B programme. Over 100 students are admitted to its LL.M programme per year, and 3–5 candidates are admitted to the Ph.D. programme each year. The vast majority of students (90–95%) enrolled in the NUS Law LL.B. programme are local students (Singapore citizens). The bulk of foreign students enrolled as undergraduates typically have received a substantial part of their pre-university education, ranging from 2 (high school)
to 6 years (middle and high school), in Singapore, and usually under an established government scholarship scheme. However the proportion is reversed for the graduate programmes. LL.M. programmes are dominated by foreign students, with only a handful of local students enrolled each year (of whom a number are on generous scholarship terms), and there have, to the best of the Reporter’s knowledge, only been 2 local students who have graduated from Ph.D. programme in the last 10 years or so. Relating to the proportion of foreign professors to local professors, as of 23 of March 2017, counting full-time (excluding emerita), tenured, tenure-track and untenured positions at the rank of lecturer of above, foreign faculty represent 47.6% (30 out of 63). This does not include a number of special contract full-time positions created primarily for locals (for which 10 out of 11 are locals). The count does not include a considerable body of research staff based at the research centers or postdoctoral fellows. As a matter of impression, NUS Law has a relatively diverse student population at the graduate level and in terms of incoming undergraduate exchange students, but official data on the composition of the student body is not available. As the National Reporter affirms, as a matter of impression, students from Malaysia, China and India are the most numerous (after local students). There is no comprehensive or systematic bilingual legal education programme NUS Law, and only 1 course is taught in a language other than English (“Chinese Legal Tradition and Legal Chinese”). This is an elective course read by thirdand fourth-year undergraduate, and is not compulsory except for students who are planning to go on students exchange at law faculties in the People’s Republic of China. From the Reporter’s personal recollection, less than ten students were enrolled in his year (AY 2012–2013). For the academic year 2017–2018, NUS Law welcomed a total of 25 visiting professors based in Canada (1), Japan (1), England (9), Australia (8), United States of America (7). This figure only includes visitors who taught at least one intensive course over 3 weeks. From the Singapore Reporter’s view it is unlikely that a comprehensive bilingual legal education programme was seriously considered for implementation at NUS Law, despite a considerable and long-standing interest on the part of Associate Professor Gary Bell, who is on the Singapore’s National Committee for IACL. However, in light of the fact that there is one course that is taught in Mandarin Chinese (and also involves an Englishlanguage component), the Reporter considers this enters in the category of a bilingual legal education programme. Historically there is no importance whatsoever attached to bilingual legal education except for the purpose of outgoing students exchange to exchange partners in the People’s Republic of China. Students participating in this programme
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are expected to read and pass the sole bilingual course above mentioned as a condition of their exchange programme. The only professor to teach courses in two languages was born in China (People’s Republic of China) and educated in China (Bachelor’s, Master’s), England (Master’s), and the United States (LL.M., J.S.D.). To the best of the Reporter’s knowledge, only two local professors can be said to teach in the Chinese language, but only in the context of students’ consultations. One professor, was involved for many years in teaching a small group (tutorial) graduates students from China enrolled in the LL. M. in Corporate & Financial Services Law programme, for whom Company Law was a required subject for their degree. Another professor is naturalized Singapore citizen, but was born and raised in the People’s Republic of China, and received her first law degree there. She taught Company Law on a special LL.M. programme co-organized with the East China University of Political Science and Law (based in Shanghai, People’s Republic of China), with classes spread over bot the NUS Law’s campus in Singapore, and ECUPL’s in Shanghai.
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Bilingual Legal Education in Taiwan
In 2016, the total number of law students at National Taiwan University College of Law was 1526 (including students in the undergraduate, master and Ph.D. programs). For the purpose of comparison, in 2016, there are 35 universities having the department, college or school of law or having a bachelor or advanced legal studies program. There were 119 legal studies programs, including 40 undergraduate programs, 66 master programs, and 13 Ph.D. programs. In 2016, the total number of law students in Taiwan was 19,662, including 13,503 students in undergraduate programs (bachelor of laws), 5845 students in master of laws programs and 314 Ph.D. students. Relating to the proportion of foreign students, a distinction must be made. There are two types of foreign students at NTU College of Law. The first type is “degree students” pursuing a degree, such as a bachelor of law degree (LL. B.), master of law degree (LL.M.) or doctoral degree (Ph.D.), who must comply with the same requirements in order to obtain the respective degree. The other type of foreign students is coming as exchange students who usually stay for one or two semesters and enroll in courses they select. As for the degree students, the number of foreign students at NTU College of Law has maintained at the range of 77 to 82 during 2007 and 2016. The proportion of foreign students to local students at NTU College of Law was 5.6 to 100 in 2016 and 6.6 to 100 in 2007. In other words,
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foreign students constitute 5.3% if the student body at NTU College of Law in 2016 and 6.19% in 2007. With regard to the Exchange students (foreign students not seeking for degrees) coming to NTU College of Law, there has been an upward trend in the number of exchange students over the last 18 years. The number was in the single digit by 2008, crossed 10 in 2009, and exceeded 100 in 2016. In relation to the proportion of foreign professors to local professors, at the College of Law, National Taiwan University, 100% of full-time faculties are the nationals of Taiwan. However, there are visiting professors who are paid to teach a course (in a regular semester or complete teaching intensively in less than a month) and visiting scholars who are unpaid and come to conduct short-term research. Many different nationalities are represented in the student’s body, there were many international students enrolled in undergraduate, master and doctoral programs at NTU College of Law during the period from Academic Year 2000–2017. The top 5 foreign countries in terms of number of degree students at NTU College of Law during that period are China, Japan, Korea, Mongolia and Thailand. The majority of courses are conducted in Mandarin at NTU College of Law. However, they do provide English courses and some conducted in German and Japanese for local and international students to enroll. In the last 10 years, there were 12 English courses offered in Academic Year 2009 (the fewest offered year), while there were 39 English courses offered in Academic Year 2015 (the most offered year). The number of visiting professors in 2016 was 344 constituting 8.2% of the faculty at NTU. The Reporter sharply addresses from his view what means bilingual legal education. What courses can be considered as bilingual legal education courses is, as mentioned by the National Reporter, an issue itself. (. . .) By the definition of bilingual education, we usually refer to courses that are conducted in the native language and another language. In Taiwan, a bilingual legal education course is a legal course that is taught in Mandarin (or Taiwanese), the native language of Taiwan, and English (or other foreign language). From personal observation, there may be very few courses that are considered to be bilingual legal education courses according the strictest definition. . .
As the National Reporter points out, the importance of bilingual legal education courses is that it provides students many benefits in learning the legal regimes. Firstly, students learn how to read foreign legal material in foreign languages, particularly in English. Secondly, they learn how a legal concept is expressed in other foreign jurisdictions. Furthermore, local students may interact with international student in the courses. Finally, students may learn the comparative approach in learning law.
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In the National Taiwan University College of Law there are professors that teach courses in both languages. English courses are offered in line with the policy of NTU to accommodate more and more international students who have not yet been able to attend the courses conducted in Taiwan’s language. Another type of English courses is designed to train the local students to learn in English environment. These courses are usually related to foreign law, AngloAmerican laws and international law. Occasionally, local professors co-teach a course with foreign professors who come for the full semester or for only a few weeks. For example, during 2008 to 2012, Professor Ming-cheng Tsai, former Dean of NTU College of Law, initiated a Comparative Law Course held in several semesters, inviting guest speakers from universities of different countries. Some of the aims for boosting bilingual legal education is to provide local students opportunities to learn directly from foreign scholars, to access to foreign legal regime, to get familiar with foreign legal materials, and partly to accommodate more and more international students, particularly exchange students, professors are encouraged to start a bilingual legal education course. The first reason to start a bilingual legal education course from the Reporter’s perspective is to correctly introduce foreign law and legal terminologies to local students. The second reason is to benefit local students to access to different sources of foreign legal materials so that they learn where to find foreign law and legal materials. The third reason is to accommodate the increasing international students who have not been able to attend courses conducted in local language. For this purpose, English courses have become the policy of several top universities to encourage professors to run English taught courses. Most English taught legal courses are in the master program and mainly in comparative legal studies in nature. From several universities’ point of view, to offer more English taught courses is in response to the trend of globalization and internationalization and to allow students to get used to the English learning environment. In practice and in reality, from the National Reporter’s perspective, there are, and I quote (. . .) several obstacles in carrying out the bilingual legal education program or in running English legal courses in Taiwan. . .
First, it takes more time to prepare an English taught legal course and there are not many incentives for local professors to conduct legal education courses in English. It is crucial to mention though, as the reporter later expressed, that he has not seen many objections or resistance against bilingual legal education directly, “these objections are mainly against university’s policy requiring faculties to offer English taught courses”. Professors offering BLE courses do not receive any additional financial concessions comparing with offering
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regular courses conducted in local language. The criticisms are mainly against the compulsory policy itself. Another obstacle is that English taught courses are not popular among local students. A course not conducted in local language is not popular if it is not a required course to be taken. The areas that they have decided to teach in a foreign language are the mentioned below. Firstly, a popular option is Comparative law or for the purpose of comparative studies. Secondly, it is also commonplace to find courses related to International Law. Thirdly, they may also offer courses to study Anglo American Laws. Furthermore, other topics of law that have caught attention of international society such as Arbitration and Intellectual Property Law, International Human Rights Law, International Disability Rights Law. The majority of students who have received bilingual legal education or attended English taught courses have been able to outperform in terms of having better chances to getting into the top law firms and more internationalized listed companies as in-house counsels. Many top law firms look for lawyers with proficiencies in foreign languages, particularly in English. Speaking of the evaluation methods, it can be agreed as the Reporter says that different professors evaluate students differently. In most bilingual or foreign language taught courses, students are evaluated by their performance in the class and the final exam or term paper. Professors teaching bilingual legal education courses usually choose the area of law they specialize. Therefore, they usually are familiar with and able to obtain the necessary resources. Textbooks in some courses are used, such as Anglo-American Contract Law. Legislative materials, statutes, case law, scholarly writing, etc. are easily accessed from online legal research services, such as Westlaw and Lexis. Once again, one has to bear in mind that different professors design their reaching and materials differently. Students enrolled in bilingual legal education courses are usually having different levels of proficiencies in the foreign language used in the courses. In order to encourage students with lower proficiency in English, it is a policy for many professors to explain, in the course description, that English is not the major element for evaluating the students. For BLE courses or English taught courses, the National Reporter states that the number has increased gradually or at least maintained the same level in the past 5 years. The number of BLE courses is related with the number of visiting professors. Most professors offer BLE courses mainly from the academic point of view. However, professors have noticed and encouraged students pointing out the advantage that BLE students have when applying for a job in comparison with the rest of students who have not enroll in a BLE course. Law
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firms, particularly those with international businesses, will recruit students having received bilingual legal education. The main language chosen as an option for bilingual legal education is, once again, English. The reason the National Reporter refers to English is because most of the literatures in the areas of law are in English. If another language had to be chosen, due to the fact that Taiwan is a civil law country, they will chose German and Japanese laws, since many areas of law are patterned after those laws. Finally, it must be underlined that from the National Reporter’s perspective Bilingual Legal Education is not perceived by students, faculty members, State authorities or Law Firms as a threat to national roots or culture.
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Bilingual Legal Education in the United States
The American Problem with English as a Global Legal Language On a global level, English is the most predominant language. Since the late twentieth century, US-American and British law firms have shaped global legal practice. For US-American lawyers, this creates a peculiar situation. On the one hand, the global predominance of legal English gives them a significant professional advantage: their native language is the lingua franca of the world today. On the other hand, it dramatically diminishes their need to master any other tongue since they can get away with English most of the time. Therefore, most Americans make little investment in acquiring even a reading knowledge of a foreign language. Efforts to train students in foreign legal languages play decidedly marginal role. The Status Quo: The Marginal Role of Foreign Language Training The status quo of foreign language teaching in US-American legal education is difficult because comprehensive data are hard to come by. This report is based on the information obtained primarily from the individual law schools and websites by the research staff of the University of Michigan Law School. Although there are two nationwide organizations the American Bar Association (ABA) and the Association of American Law School (AALS), none of them collect information on the matter since foreign language teaching is not a requirement. The picture shows that foreign language teaching in US law is currently quite rare. Nevertheless, a development has been made, since over twenty years ago Gloria Sanchez pointed out that there were no foreign languages courses at all. Today, there are a variety of curricular offerings introducing US law
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students to law in a foreign language, and a few law schools have made serious efforts in that direction. The existing offerings can be divided into three groups: dual degree programs (1); individual foreign language courses at US law schools (2); and opportunities to study or work abroad (3). More than 30 law schools claim to offer joint degree programs with foreign institutions. In most of these programs, US law students obtain the basic law degree in the respective foreign jurisdiction in addition to their home institution’s JD; in some, they spent a year abroad and receive the more limited LLM degree. The total number of these law schools looks more impressive than it really is in the context of foreign language teaching. While almost all these joint programs are with institutions in non-English speaking countries, many do not require full fluency in, and some not even significant command of, the partner country’s vernacular. In addition only a very small number of students actually pursue a joint degree with foreign language. Still, where they do require fluency, they provide significant exposure to the law of another country in the vernacular. This does not necessarily lead to full-fledged bilingualism in the sense that the students become as capable in the foreign tongue as they are in English, especially in the legal and business context. But they can be expected to reach a level of proficiency that enables them to perform professional work in at least one foreign language. Foreign language courses in US law schools have a long history. Today, of the accredited law schools in the United States, more than 40 claim on their websites to offer courses in one or more foreign languages. It is still a distinct 20% minority, also it is unclear how many of these courses advertised are actually taught on a regular basis and the number of participating students seems to be quite small. On the whole, it is fair to assume that, at the very most, a few hundred out of more than 100,000 US law students in the United States ever take a course in a foreign legal language. The design and coverage of the courses varies. Most of them focus directly on foreign (legal) language training for American lawyers. Where they introduce students also to aspects of the respective foreign legal systems, they do so more or less incidentally and in order to provide cultural context. A few courses however are designed as introductions to the basic features of foreign legal systems in a foreign language. Many US law schools run summer programs abroad, usually in attractive locations and often in non-English speaking environments, sometimes providing more touristic than educational value. A large number of American law schools also offer semester abroad programs in partnership with foreign universities, often in multiple venues, some with different requirements of fluency in the local language.
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The scope of languages covered by courses in US law schools remains somewhat Euro-centric but there is a trend towards a more global range. By far the most frequently foreign (legal) language in US law schools and programs is Spanish –a global language in its own right –. By now, Hispanics comprise nearly one fifth of the US population. Language instruction is also offered in the other two most prominent Western European languages, i.e., French and German, and sometimes in Italian. The published teaching materials fortify the primacy of Spanish in the language programs of US law schools. In recent years, three books were published for use by teachers of Spanish as a foreign legal language. The advantage that most immediately comes to mind when listing the reasons to teach law in a foreign language is directly professional; a lawyer who can work in a foreign language can better attract and communicate with non-English speaking clients. In fact, lawyers with foreign language skills appear to be in growing demand. It is especially great in international practice, as well as in immigration and other public interest work. Beyond that learning law in a foreign language is an opportunity to acquire sensitivity to foreign cultures—an important professional asset in its own right, particularly in a global environment. Moreover, there is reason to believe that studying foreign languages is generally good brain training. To begin with, bilingual persons are particularly apt at “divergent thinking”. Bilingualism opens the lawyer’s mind to multiple options and solutions. Furthermore, bilingual individuals are often better at “executive control” of information. There are strong reasons to believe that studying law in a foreign language enhances a lawyer’s “social intelligence” and “imaginative capacities” as well. Finally, American scholars have also justly pointed out that communicating with a client in his or her own (native) language creates a human connection and avoids degradation. It is a sign of “respect for the individuality of the interlocutor and an acknowledgment of her basic human dignity”. Conclusion: A Question of Commitment American law schools currently proffer very limited training in foreign (legal) languages. This is true even though such training generates multiple professional and educational benefits which are generally recognized in the literature. The potential for expanding such foreign language training is stronger than the American reputation for monolingualism intimates. Yet, a realistic assessment of the possibilities and a
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sober cost-benefit analysis suggest that courses in foreign languages neither will nor should be offered by all law schools or taken by a majority of students. Still, the current situation is deficient. The vast majority of American law schools offer virtually no opportunities to experience law in a language other than English. Not offering a class even in Spanish is difficult to justify for any major US law school today. In light of the American law schools’ virtually ubiquitous claims to promote diversity and to train students for practice in a globalized society, such disregard of the language dimension is actually somewhat embarrassing. How can American law schools move towards offering instruction in foreign languages more broadly? From the National Reporters eyes, it would probably help if the American Bar Association as their accrediting body and the Association of American Law Schools as their professional organization pushed in that direction. Ultimately, however, offering foreign language instruction on a more regular basis is a question of every law school’s institutional commitment. Such commitment needs to be based on a wider appreciation of the professional and educational advantages of studying law in a foreign tongue. In conclusion, it must be admitted that the current political climate in the United States is not so supportive of foreign language study as it was years ago. Nationalism is resurgent and hostility towards immigration and immigrants is a renewed widespread phenomenon.
References Astolfi J-P, Develay M (1996) La didactique des sciences, 4e édition. PUF, Paris, p 25 Berthelot J-M (2008) La construction de la sociologie, 6e édition. PUF, Paris, p 124 Hanson NR (1958) Patterns of discovery: an inquiry into the conceptual foundations of science. Cambridge University Press Huhn WR (2002) Use and limits of syllogistic reasoning in briefing cases. Santa Clara Law Rev 42:813 Samuel G (2003) Epistemology and method in law. Ashgate Samuel G (2004) Epistemology and comparative law. In: Van Hoecke M (Dir) Epistemology and methodology of comparative law. Hart, Bruxelles, p 74 Strong SI (2014) Review essay – bilingual education in the United States. J Leg Educ 64:356 Teubner G (1989) How the law thinks: toward a constructivist epistemology of law. Law Soc Rev 23(5):727–757. https://doi.org/10. 2307/3053760 Thomas Y (1973) La langue du droit romain. Archives de Philosophie du Droit, pp:103–125
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons Isabel C. Jaramillo Sierra
Abstract
For the last 200 years, feminists have struggled to show us that sex is a marker for discrimination, exclusion and violence. The unapologetic fierceness the modern state would deploy in policing the boundaries of sex was hard to predict, though. The high costs of the fragile promise contained in belonging to the “right side” of the male/ female binary were difficult to anticipate even for trans persons themselves. This report seeks to illuminate the map of legal responses to gender mobility, including sex and name registration, access to gender modification interventions and anti-discrimination regulation. It will show the importance of background rules in understanding the operations of law for discrimination, exclusion, and violence, as well as the stickiness of nature as a reason to introduce biology in the regulation of human relations and to justify pain and suffering.
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Introduction
For the last 200 years, feminists have struggled to show us that sex is a marker for discrimination, exclusion and violence.1 The unapologetic fierceness the modern state would Report prepared for the XVIII General Congress of the International Academy of Comparative Law. This report is based on the work of national reporters from 26 different countries. The author wishes to thank Emilio Lehoucq and Guillermo Estupiñán for their extraordinary research assistance, and the Law School and Office of the Research Provost at Universidad de los Andes for providing the necessary funding to complete the project. Most importantly, she is indebted to the national reporters, most of whom were unknown to her before starting this Project, for their great work. 1 The report systematically uses sex to refer to the principle of classification of individuals into males and females, men and women, that is based on some external/visible features related to their role in
I. C. Jaramillo Sierra (*) Universidad de los Andes, Bogotá, Colombia e-mail: [email protected]
deploy in policing the boundaries of sex was hard to predict, though. The high costs of the fragile promise contained in belonging to the “right side” of the male/female binary were difficult to anticipate even for trans persons themselves. This report seeks to illuminate the map of legal responses to gender mobility, including sex and name registration, access to gender modification interventions and anti-discrimination regulation. It will show the importance of background rules in understanding the operations of law for discrimination, exclusion, and violence, as well as the stickiness of nature as a reason to introduce biology in the regulation of human relations and to justify pain and suffering. For this, the report has been divided in six parts. The second section provides an account of the way in which the report was produced. It explains the particularities of the process of production of national reports and highlights some of the resulting biases. It proposes ways to deal with these biases and methodological insights that may influence comparative work in the future. The third section contains a review of the literature on the rights of trans persons. It reveals the importance of functionally driven analysis and the existing consensus on the model of self-determination for sex change. It emphasizes how this work includes cases not available for English and French speaking readers and problematizes the functional approach for not seeing the gap between the proposed model and lingering stigma and persecution. The fourth section engages the models of sex and name registration recounted. Here the report offers a series of indicators to classify registration as following a medical or declaratory approach to sex reproduction. Gender, on the other hand, is used to refer to the set of characteristics socially attributed to males and females because of their sex. Eventually the report might also refer to sex as the practices of gratification that are defined by their relation to intercourse. Feminism is the political position that identifies oppression along the binaries resulting from sex and gender, in particular, that advocates for women as the subject of such oppression. Please consult the note on terminology for a fuller explanation of the conceptual framework underlying the choice of words in this report.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_5
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identification, and a community or individualistic approach to naming. It evidences the “surprise” of sex mobility and the importance of the medical and religious communities in producing the “natural” and “dignified” for the effects of population control through identification. It also underscores, using the Argentinean case, the possibilities of destabilizing the power of medical and religious discourses by opposing the “real” to the “natural” as the only possible redress for the collective trauma of having been “erased” or disappeared. Section 5 presents the challenges and paradoxes faced by trans persons in accessing gender modification services. It starts by explaining the health approach to gender modification and the ways in which the dogmatic construction of the right to health has helped to elucidate what can go wrong in providing treatments for trans persons. Thereafter it foregrounds the paradox involved in using the health approach to access gender modification services and rejecting the health approach for identification. It explains that this very paradox may be crucial to showing us the limits of the health approach in general. The ensuing Sect. 6 of the report addresses the reforms of antidiscrimination statutes to include sex identity as a source of discrimination, exclusion, and violence. This section shows the excesses of transphobia and the efforts deployed to reduce it by recourse to criminal and constitutional law. Though the literature has been very skeptical about the impact of these efforts, sometimes even attributing to them heightened risks to trans persons, the reforms express a concern for the construction of sex diversity as exceptional and dangerous that are much worth attention. Here the reforms are organized with an eye to their potential to normalize sex diversity. Finally, in Sect. 6, the report concludes by summarizing the main findings concerning method and substance. It specially tackles the impact of sex on families and family law exceptionalism as the realms of identification become settled and issues of parenting, child custody and social security become the frontier for debates about the “natural” in sex. Feminists have invested a lot of energy in the struggle over representation, the written word being one of the scenarios were this battle has taken place but not the only one.2 Normalizing the use of “gender” to refer to the characteristics which are socially assigned to individuals on the basis of their “sex”, has probably been one of feminism’s most important achievements. As noted by Joan Scott in her famous article “Gender as a useful category for historical analysis”, “gender” was key to protect research units from accusations of bias and could have had as a consequence the
2 Jaramillo (2007), pp. 16–23. On the role of language in producing the world, I find MacKinnon’s (1993) and Butler’s (1990) work most appealing.
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depoliticization of research, but also allowed taking distance from arguments based on “nature” and introducing questions about the construction of males and men as correlates of females and women.3 In this fight, however, sex became stable, uncontested, and uninteresting, as “nature”, while gender was carefully scrutinized in its binary operation hoping to unmask the injustices it produced and to discover ways to redress or transform them.4 The binary nature of sex and gender was regularized in working through the oppression of women; no oppression may be described if the “sides” cannot be somehow fixed.5 The irruption of the trans question was certainly an irritation for feminists, who initially expressed little sympathy for the efforts of transwomen to “belong” to feminism. In Latin America, feminists still remember the expulsion of transwomen from the Latin American and Caribbean Feminist Encounter that took place in Brazil in 2001 as a crucial moment for feminism and the region.6 We have learned a lot
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Scott (1986). Moving away from sex, as Scott explains, was essential to stop having to answer to every claim about brain size, influence of hormones on behavior, and social behavior observed in animals. Many resisted this move within feminism. MacKinnon, for example, argued that sex was as socially constructed as gender and actually that legal categories flowed from male interest and investment in the system. She also emphasized that legal categories had to do with penetrability and therefore with sex as a practice of gratification. In this sense, sex as a practice of gratification would produce sex as a legal category and gender as a way of making sex intelligible socially. MacKinnon (1982), pp. 515–544. French feminists also have resisted the sex/gender difference arguing that all descriptions are socially constructed and therefore embracing such difference is as much as embracing an euphemism. They will argue for the expression “social relations of the sexes” to emphasize that it is about power and not aseptic knowledge of reality. Daune-Richard and Devreux (1992), pp. 7–30; Delphy (1970); article reproduced in Delphy (1998), p. 180; Devreux (1985). 5 Halley (2008). Halley proposes here a definition of feminism that takes seriously this notion and therefore holds feminism to three propositions: (1) there are women and men in the world; (2) men are winners in the social distribution of resources; (3) being a feminist is to be for women. 6 On the events surrounding the expulsion of transwomen from the Latin American and Caribbean Feminist Encounter see Restrepo and Bustamante (2009). The debate on transwomen continued at least until 2010. In the 2009 Encuentro that took place in Mexico, transwomen were invited but there still was a lot of dissatisfaction with their presence. On this matter Eli Bartra argues that transgender women were perceived as “men disguised as women” (p. 200, translation mine) and more importantly that these trans women were included in the encounter just because of their gender identity, without consideration of whether they were feminist or not. For Bartra, as long as the transwomen who participated were not feminists, they should have not participated. Bartra (2010). Bustamante, on her part, explains that the presence of transgender women in the XI encounter was considered as an unwanted influence of international organizations in the encounter’s priorities (p. 179). She also describes how rejection of transgender women was grounded on biological conceptions of what being a “woman” means (p. 180). Bustamante (2010). 4
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
from trans persons and trans studies since then.7 First, that sex, more than a fact, more than “nature”, is a legal category: it produces effects through the decisions of doctors than then become embodied in legal documents. Second, that doctors quite often have difficulties making these decisions as variation among humans exceeds the criteria usually agreed upon as definitive: shape of genitals, genetic configuration, hormonal balances, self-image, among others. Third, that notwithstanding the societal efforts to uphold sexual differentiation through a binary, people can live quite ordinary and fulfilling lives without having to settle for one of the extremes. It is not clear to me that we have been able to transform feminist theory enough to account for this conceptual turns, but I guess at least some of us are working on it. In this general report, thus, I use the word sex to refer to the legal category that builds on facts related to an individual’s external characteristics, in particular the outlook of his genitals, her genetic configuration and her hormonal production. I use sex mobility, consequently, to refer to the possibility individuals may have under certain legal regimes to “move” from an assigned sex to another sex. In contrast, I use gender to refer to the multiple attributes that we consider as related to sex. Gender mobility refers then to the intention individuals may have of changing what they perceive is the baseline given by their sex; the report uses the expression gender modification interventions to refer to surgeries commonly referred to as gender reassignment or gender confirmation surgeries, in the understanding that individuals may choose and indeed do choose to change some parts of their bodies and not others, and that some surgeries or substantial body modifications can be considered as crucial by some individuals who are not interested in gender reassignment. I use the expression trans persons rather than transsexuals or transgender persons both because most issues concern them both, and because perpetuating the rift between them only helps to minoritize a claim that, as I will point out later, could become a universal claim about the role sex and gender play in shaping our lives and the pain they produce both for those who fit in too well, men and women, and for those who do not fit in, transsexuals and transgender persons.8
7 The field of transgender studies has been acknowledged by at least one commentator as the newest of academic fields. See Raskolnikov (2010), pp. 157–164. In the introduction to her book Debates in Transgender, Queer and Feminist Theory, Elliot (2010) foregrounds the existence of the field in the 1990s. 8 On the construction of minority claims and universal claims around sex see Sedgwick (1990).
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Practices in the Subtle Art of Reporting
The production of this report has involved so far three stages. The first stage comprised the moment of appointment and the process of finding scholars interested in collecting information about their localities. The second stage included the production of a questionnaire that will allow for a conversation across national borders and making the national reports. The third stage supposed gathering the national reports and building analytical grids that would admit presenting these reports in their best light, but also contributing to existing literature. I was invited as a reporter by the Secretary General of the International Academy of Comparative Law in the spring of 2016. While I had not done research on trans persons or sexual identity, I am a well-known family law scholar in Latin America and have made significant contributions to feminist legal thinking. I received nonetheless the suggestion of finding a partner of European origin and hopefully male that would “help” me find the support of national scholars and give legitimacy to the report. I searched in vain for a partner that could contribute with her expertise to gathering information and understanding the complexities of the issue, hoping that fears about scholarly biases were largely unfounded. My intellectual allies turned out to be too busy at the time and so the project ended up being an opportunity for educating young men in the sophisticated work of comparative law and in recognizing male privilege, as both Los Andes Law School and Research Provost provided funds to hire research assistants. In the fall of 2016 we sent out roughly 133 emails to a similar number of individuals from, or with significant knowledge about, 49 countries in the world. We chose these individuals and countries based on three criteria. The first was their interest in participating in Academy’s activities related to family/civil law. Eighteen of the names and emails were provided by the Secretary General. The second criterion was to belong to a country “of interest”, either because of its legal innovations in the treatment of trans persons or because of its absolute lack of such innovations, or have written about such country. More than a hundred individuals were contacted on this basis. Finally, a few scholars wrote to me wondering whether they could write the report for their country. All of them were accepted as part of the project. The first scholars to express a clear interest in participating in the project were all women and just a total of 12, though only 38 of the individuals initially contacted were females— we attribute this sex to them based on our knowledge about names, we might be off by ten. More than half of the reports, a total of 20 out of 26, ended up being written by women or by a group including women.9 I suppose in part this had to do 9
It is important to note here that the 2015 book that attempted a similar
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with the fact that I am a woman; of course it is also part of a growing interest of women in comparative law. My national origin had little to do with the appeal of the project, as opposed to my sex, with more than half of the reports belonging to countries that are parties to the European Convention of Human Rights and only four reports belonging to Latin America. Having obtained some funding for the project in the fall of 2016, my research assistant and I started to review the available literature on law and sexual diversity. Following the indications of the Secretary General and inspired by the work of colleague and friend Macarena Sáez, we produced a set of guidelines for the production of national reports. We explicitly stated our objectives and asked reporters to go beyond the obvious constitutional and legal rules to find relevant international, administrative and judicial regulation, as well as context information that could be used to understand reports. The questions emphasized social mobilization and political constellations that could provide insights about patterns of change and diffusion, and the reporter’s informed assessment of the importance of sex in their legal systems. We asked reporters to submit their reports by June 2017. We received most reports between September 2017 and December 2017, with some additions and modifications arriving as late as February 2018. The first version of the general report was submitted to the Secretary General on May 2018.10
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Opportunities and Limitations in Functionally Driven Comparisons
Feminists have been weary of comparisons for a long time. A first sign of alert has been the almost complete absence of women among comparative legal scholars: none of the acknowledged masters of comparative law are women,11
exercise of comparison of legislation on trans persons, included also views on 26 jurisdictions but had 16 male reporters and only 10 female reporters Scherpe (2015). 10 Two clarifications are in order here regarding this general report. The first is that everytime I use “we”, I am referring to the collective formed by me and the national reporters. So far we have not had the opportunity to discuss these ideas in person to validate them, but I think it is fair to recognize that generalizations here were made possible by the collective effort. The second clarification is that information about particular jurisdictions, unless otherwise noted, comes from national reports. I have not cited each report because we do not have final versions yet, nor final page numbers. 11 Of course who are the masters of comparative law is in itself a hotly debated question. Here I refer to the list carefully built by Riles et al. (2001). Actually, even though the editor is a woman, only one more woman wrote a chapter for the book: Vivian Grosswald Curran who wrote a chapter on Hermann Kantorowicz.
few of the modern comparative law scholars are women12 and less than 10% of titular members (4 out of 47) and only 21% of titular members of the International Academy of Comparative Law are women (30 out of 144).13 The topics of interest to women, in particular family law, have also been largely excluded from the field.14 More importantly, comparisons concerning the proper treatment of women have been repeatedly used for colonial expropriation, leaving feminists with the task of confronting nationalists as they simultaneously oppose colonial expropriation and fight for women’s emancipation.15 The idea that any legal system can be interrogated for the “answers” it provides for “social problems” has also been intensely questioned. As Robert Gordon artfully explained in his 1984 article on “Critical Legal Histories”, legal scholars are not certain that “social problems” may be separated from “legal answers”.16 Rather, they have shown once and again that attempts at distinguishing these realms in order to think about possible relations among them, are incoherent or incomplete. Exporting correct legal answers, moreover, has turned out to be naïve, costly and wrong: natives not only have known about these answers all along, but are aware that they did not work in the locales of origin.17 Comparative legal scholars have particularly stressed the incommensurability of legal systems as cultural systems, and the analytical sacrifices involved in making data “speak” to questions that are alien to their own construction.18 Turning around this argument, some scholars have also shown that questions might be misleading in the understanding of the operation of legal systems either because they take too seriously doc-
Again, the question of where to find comparative legal scholars is challenging. I suggest that one indication of being a “comparative legal scholar” is being included in the handbooks published by the most important publishing houses, as precise information about the members of the International Academy of Comparative Law is not publicly available. The Oxford Handbook of Comparative Law (2006), for example, was edited by two men, Mathias Reinmann and Reinhard Zimmermann, and included work by forty-three scholars; only four women wrote chapters for a grand total of less than 10%. The Comparative Law Handbook by Hart Publishing (2007), was edited by a woman and a man, but only one other contributor is a woman. None of the main editors of the International Encyclopedia of Comparative Law is a woman. 13 See the Academy’s web page (updated to 2015): www. iuscomparatum.info. 14 Nicola (2010), pp. 777–797. 15 See, for example, Abu-Odeh (1993), pp. 26–37; and Engle (19911992), pp. 1509–1609. See also Riles (2015), pp. 124–183, suggesting that feminists have a practice of collaboration that contrasts with the discipline of comparisons. 16 Gordon (1984), pp. 57–125. 17 Trubek and Galanter (1974). 18 Abu-Odeh (2004), pp. 1043–1146. 12
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trinal compartmentalization19 or overestimate the role of legislation or precedent in the system.20 The national reports on which this general report is based reveal the extraordinary potential of international law, colonialism, and feminist collaboration for the diffusion of legal ideas. Among these ideas, the notion that there is a harm of non-recognition and a model to be followed for properly addressing this harm stand out. Almost every report expresses a criticism towards the legal treatment of this “issue” and includes some data of how poorly trans persons fare in society: their levels of unemployment and poverty are many times worse than those of the general population; they are also preferred targets of hate crimes. Because the focus of the report was not the constitutional or criminal dimensions of the remedy, the reports also highlighted the harms associated to marrying and bearing children and the impact of identity on population control. In this sense, the reports may be read as providing a rounded version of the “social problem” at hand and the “best solution” to deal with it, considering not only the expressive but also the distributive dimensions of identity.21 This version avoids the pitfalls of excessive emphasis on recognition by foregrounding administrative regulations of identity, civil law and access to the health system, as suggested by Spade.22 It also takes distance from the need of sustaining the man/woman binary and embraces sex mobility and indetermination. The solution is responsive to the difficulties of bringing about institutional change and the urgency of eliminating stigma by means different than the threat of incarceration. It is difficult to foresee from within the limitations of such a description and recipe. In an effort to be self-critical, however, I will furnish some observations for further debate. The first observation relates to the absence of strong criticisms to the biopolitical instrument of registration and the ways in which it is used to exclude not only sexually diverse individuals but women and immigrants. Actually reports show that registration is mostly in the hands of municipal authorities with police or fiscal duties that have powers to determine some basic characteristics of individuals upon which civil and political acts become possible or not. Most reports are silent about the fact that sex influences whether a person can or should be in the military, the amount and conditions for the allocation of social security benefits, and the existence of segregated facilities, schools, universities, 19 Mary Ann Glendon has crucially shown how solutions need to see legal systems as systems and not as compartments. See for example Glendon (1989). 20 An argument for the importance of administrative and procedural rules to be taken under consideration when comparing has been made, for example, by Helena Alviar. See Alviar (2011). 21 On the differences between “recognition” and “distributive” harms see Fraser (1995). 22 Spade (2009).
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among others. It would seem that for the national reports included here, fixing the sex identity issue does not necessitate a profound questioning of the premises on which sex operates, but rather helping people make the correct choice about which sex they prefer. Reports are also silent on the topic of geographical mobility that is involved and that invites so much police brutality. Both sex workers, who are subject to intense regulations about local—zoning regulations being only one type of geographical control they are subject to—and immigrants, for whom “crossing” means death so frequently but also means harassment, suffer consequences of registration that could invite revising the system beyond facilitating changes for the nationally correct and well behaved transitioning individual. The second observation speaks to access to reproduction and the yet to come debates about needed transformations of maternity and paternity regimes. Some reports mention already existing cases of trans men giving birth and their claim to be at the same time “men” and “mothers”. How can we understand that someone wants to be a man, and consistently enacts this role, at the same time that he embraces the fact that he has a uterus and is able to carry a human being into life? Is this evidence of the limitations endured by all men when it comes to reproduction, their total dependency on women and their willingness to submit their bodies to a common and life spanning project? Or rather it “simply” shows that the use of bodies for reproduction needs only to be limited by our technological restrictions and thus trans men are leading the way into male pregnancy to come? It seems proper to highlight that the emphasis on trans men’s need to appear as “mothers” could obscure the extent to which men in general are barred from autonomous reproduction, not only “biologically” but legally. Paternity and maternity regimes play an important role in this restriction by establishing different criteria for mothers and fathers and overemphasizing the “natural” even beyond biology. As most reports show, with the exception of the report for the Netherlands, paternity is still considered to be dominated by the act of insemination and maternity by the act of delivery. This supposes vaginal penetration, furthermore, it assumes recognizable patterns of engagement (marriage or a civil union) to attribute to a certain man the act of insemination. While men have the power of becoming fathers by acts of will, they can only exercise this will positively and with regards to an existing being. On the one hand, renouncing paternity is not fully regulated in most jurisdictions. On the other, men cannot impose or hire women to produce children for them. Willingly giving up on maternity is possible for women both during pregnancy and the first years of life of the child. But women have fewer possibilities of legally making other children their own: either they give birth to them through their vaginas or they adopt them. The paradoxes produced by trans persons in legal regulation of reproduction
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could actually help us understand better the restrictions under which we all live, instead of the small revisions that the best solution we will present here suggests. Finally, it is worth mentioning the fact that the reports have been created by individuals who have not experienced sex mobility in their lives (at least no one has come forward to claim this experience yet). Trans persons have been adamant in their claim for inclusion using the “nothing about us without us” slogan. I have personally been accused of not understanding the limitations that trans persons face in producing legal scholarship and therefore the privilege they should enjoy in academic settings in speaking about certain topics. As hard as these accusations are to hear for a cisgender woman from the south, that is accusations about exclusion and privilege by white transmen from the north for example, I am convinced that they are useful to underline that the academic enterprise is never “neutral” and our cisgender interests are driving our interpretations. To be sure, as I already mentioned, national reports included here are careful in expressing empathy towards the plight of trans persons and in using reports and materials elaborated by trans organizations to understand this plight. In some ways, reporters portray themselves almost as spokespersons for trans persons: taking no part in defining the “problem” and following instructions in thinking about “solutions”. But isn’t precisely this distance “part of the problem”? Aren’t we exoticizing trans persons and setting them up for exclusion when we fail to think of how we are also limited in our human possibilities when we do not take seriously sex mobility? May we at the same time recognize our cisgender privilege and find the abolition of this privilege to be in the interest of all? I hear myself suspiciously speaking as a man.
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From Europe to the World
Seventeen out of 26 reports submitted here concern countries that belong to the European Convention on Human Rights. Nineteen reports claimed to be from “civil law” countries, while six more came from “common law” countries. Canada partakes of both traditions. Europe and its legal traditions can be certainly considered to be overrepresented here; only the New Zealand report introduced descriptions of the laws that existed before European invasion and somehow survive until today. Several explanations for this tremendous bias come to mind. They are worth mentioning as we struggle to transform and energize comparative law as a field. The first explanation has to do with the European origin of the field of comparative law in general and of the International Academy in particular.23 Origin is ingrained in the way in which topics are formulated, individuals are approached and incentives for 23
See Riles (2001). The International Academy of Comparative Law
participation created. In the present case, the topic was presented as that of the “civil status” of trans persons. This is a particular notion proper of civil law systems; as the national reporter for New Zealand manifested: “There is no civil status in New Zealand”. The pool of possible reporters, as explained, is limited by available information on how to contact them and how to understand their interest in doing the work. Beyond access to information, incentives to write reports are few and tied up to prestige in Europe through publication in English and/or French in an academic press that does not circulate in most countries of the world. Secondly, one may consider silence as related to weaker academic systems that are unable to sustain academic efforts of very abstract interest. While many reporters here and many Academy members are not professional academics, that is, they do not dedicate all their available time to teaching and research, they appear to have enough resources to engage in this extra duty for little or no reward. Most definitely there are no big interests or large legal practices associated to trans persons, much less so in poorer countries. The third explanation is that non-European silence is a strategy of resistance to the civilizatory impulse animating the topic. Indeed, Europe has created several mechanisms to domesticate itself, among them, the European Court of Human Rights. This Court has rendered decisions on the regulation of the civil status of trans persons in several occasions, sparking idiosyncratic rhythms of reform. After two cases involving the United Kingdom in which the Court denied finding any violation of article 8 or article 12 in the refusal to change the applicants’ birth certificates (Rees v. United Kingdom and Cossey v. United Kingdom), in 2005 the Grand Chamber held there is indeed a violation of article 8 of the Convention in the Christine Goodwin v. United Kingdom case. The Court established that: (1) “owing to a clear and continuing international trend towards increased social acceptance of transsexuals and towards legal recognition of the new sexual identity of post-operative transsexuals” [and] (2) “Since there are no significant factors of public interest to weigh against the interest of this individual applicant in obtaining legal recognition of her gender re-assignment, the Court reaches the conclusion that the notion of fair balance inherent in the Convention now tilts decisively in favour of the applicant” (§ 93 of the judgment)24 and therefore states party to the convention are under the obligation of recognizing changes in the sex of their citizens. For states that are parties to the European Convention, thus, there already exists a path cut through for the legal recognition of trans persons. More importantly, for these states showing a was founded in 1924 by Elemer Balogh in The Hague. See http://jura. ku.dk/english/research/comparativelaw/international_academy/. 24 European Court of Human Rights, Fact Sheet—Gender Identity Issues, 2018, https://www.echr.coe.int/Documents/FS_Gender_iden tity_ENG.pdf.
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
trend in the practices towards trans persons has a clear and beneficial consequence: The Court takes these agreements in regulation as indicative of proper ways to interpret the Convention. Before this 2005 fact, and even though as the national reports show not all parties to the Convention are equally good in complying with their obligations, non-European countries that have not taken steps towards the legal recognition of trans persons might find themselves uncomfortably fit for “intervention” in the name of gender victims. Scholars in these countries might just not catch the political and intellectual space for this question unless there is a strong mobilization around these issues. Still, because most of the reports express a conviction about the existence and possibility of a “solution” to the “problems” faced by trans persons, while at the same time emphasizing that there is still a lot of work to be done, the reports do a nice job at under toning the reprimand that could derive from their acknowledgement that their countries have taken steps towards making the lives of trans persons better. Beyond the biases originating in the fact that most countries submitting reports in this case are European, the absence of reports concerning the situation of trans persons in Hong Kong, Japan, South Korea, Singapore, India, Pakistan, Bangladesh and Nepal, may be considered a significant loss for the understanding of “solutions” and ways in which they may be reached. From scholarship published in English and available in American data bases, we could establish that several of these countries have regulation recognizing the existence of a third sex or allow for changes of sex without sterilization. Our difficulties in finding primary sources in English or French that would allow us to verify this information, nonetheless, made it impossible for us to include them in this report. Interestingly these are not countries lacking strong legal academies, nor are they completely foreign to the work of the International Academy.
3
The Rights of Trans Persons in Comparative Law Literature
Our search for a conversation has revealed that the topic of the legal recognition of trans persons has been the topic of two major studies and 14 articles published in academic journals. Here we will briefly summarize their most important findings and emphasize the contribution these study makes to this corpus. The first published major study on the legal recognition of trans persons was The Legal Status of Transexual and Transgender Persons, edited by Jens M. Scherpe and published by Intersentia in 2015. As explained by the editor, the book is the result of a project and conference led by the Center for Medical Ethics and Law from the University of Hong Kong. The contributors in the book are 26, and as the editors
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explain, each country was selected because it either represented a region or a model of approaching legal recognition of gender identity. The book includes reports for Italy, Spain, Japan, Hong Kong, Singapore and Australia, in place of reports for Norway, Austria, Brazil, Chile, Greece, Israel, Serbia, Czech Republic, Rumania, and Colombia included in this study. It lacks, just us in our case, any report from an African jurisdiction. The questionnaire used to build the reports is similar in many ways to the one used here, but for the emphasis on political actors and mobilization that ours included and theirs didn’t. The only contributors that participated in both projects are Peter Dunne and Elizabeth MacDonald. In the very short introduction to the volume, the editor points out that the purpose of the study was to make visible the most recent developments away from medicalization and towards self-determination in sex, aiming at helping the law to develop without having to repeat mistakes already known to us. The book ends with a set of recommendations for policy makers regarding the importance of adopting a self-determination model for sex mobility and providing access to health treatments for all trans persons. The second study was led by International Lesbian, Gay, Bisexual, Trans and Intersex Association (ILGA) and first published in 2016 by the organization itself, with a second version released in November 2017.25 The Trans Legal Mapping Report was authored by Zhan Chiam, Sandra Duffy and Matilda Gil González and it “covers the legal situations” of 111 countries and 13 territories. It reports basic information about sex and name change in each country through a schematic chart that summarizes for each country whether name and sex changes are possible or not, which norm regulates each issue, and what are the requirements. It includes, when available, information about court decisions and administrative decisions. In its newest version it also includes an introduction to international law and the Interamerican System and to the situation of each region in the world with regards to the topics. It also includes some interviews to activists on the law “in action” or “on the ground”. The preface by Zhan Chiam points out that the compilation is intended to circulate information among activists interested in change the law and is therefore, and above all, an advocacy tool. The preface also celebrates “advancements” in several countries included and makes too politically charged assertions: (1) the document materialized the notion that all studies about trans persons should include them or consult them as experts; and (2) there is no north/south divide that is relevant, as trans persons in all countries endure barriers to legal recognition. The articles available on databases amount to 14. They were published between 2005 and 2016, more than half were 25
Available for free online at: www.ilga.org.
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published after 2010. Only the three articles from 2005 that use the United States as one of their main, or the only, case studies, engage the problem of conceptualization and criticize the effects of identity in the law.26 Lloyd and Ohle show how legal discourse produces trans persons as monsters or, alternatively, as sick to deny them basic rights. They stress the role of judicial decisions and judicial talk in sustaining these images. For Cowan, the comparison between the United States, Canada and the United Kingdom serves to interrogate the usefulness of abandoning the gender/sex difference and the impact of reforms regarding the recognition of trans persons on women. Most articles are interested in doing the functional work we have referred to previously: they use their case studies either to ask others to emulate a good example or to criticize the perversity of the solution adopted. Five articles describe cases which are examples to follow. In his study of the cases of the United States, Hong Kong and South Corea, Holning describes the decisions by the Courts in Hong Kong and South Korea to show possible reasons to change the law on same sex marriage and sex change in the United States.27 The article by Boyce and Coyle on the 2007 decision of the Supreme Court of Nepal that granted recognition to trans persons and demanded the introduction of a third sex in official documents, similarly, aims at providing activists in other countries with arguments to eventually change their laws in the way suggested by the ruling.28 The articles by Jiang and Fynes are particularly geared at changing the law in Hong Kong and Ireland, respectively. Jiang uses the cases of Singapore, Japan and the United Kingdom to show the possibility of producing an argument to allow for sex change for purposes of marriage in the law of Hong Kong.29 Fynes uses the case of the United Kingdom to argue for change in Ireland. Nonetheless, much in the vein of Scherpes, it recommends that Ireland learns from the mistakes of the United Kingdom and jumps ahead in the recognition of trans persons.30 Finally, Mrsevic, in his 2016 revision of the legislation in 14 countries around the world, aspires to deliver evidence of the existence of a tendency to accept sex mobility without a diagnosis in order to inspire legal change.31 Five more articles reflect on cases which they see as positive but still limited versions of recognition of trans persons. Three of these articles concern the case of India 26
Lloyd (2005), Ohle (2005), and Cowan (2005). Holning (2008). 28 Boyce and Coyle (2013). It is important to note that the authors do not embrace fully the reasoning used by the Court, as they believe that it relied too heavily on ideas of nature and the natural. 29 Jiang (2013). 30 Fynes (2014). 31 Mršević (2016). 27
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and two the case of the European Union. The articles concerning the case of India stress the importance of pre-European notions of gender and specially the favorable legal and cultural treatment granted to hijras.32 The most recent ones engage the Supreme Court ruling of 2014, which commanded the introduction of a third sex and the possibility of sex change.33 Both articles are interested in the fact that the same Court has refused to decriminalize same sex copulation, while admitting the existence of a third sex. The remaining two articles explain the conceptual and historical road traversed in the European Union to recognize the harm in not allowing for sex change, while at the same time being critical of the distance that has yet to be travelled.34 In conclusion, the last few years reveal a particular interest in understanding the legal recognition of trans persons and advocating for a model of self-determination. Comparative law, in these works, helps to reveal frequent mistakes, tendencies and models to follow. Political and theoretical debates are more often treated using an individual case study. This general report and the national reports that accompany it, in this sense, synthetizes the two tendencies in the literature, without being terribly innovative: it is both animated by a functional approach to comparisons and wishes to make some theoretical interventions. More importantly, this work includes reports on cases mostly unknown to the English and French speaking public and details about the way in which administrative and political apparatuses work to limit possibilities of change. It also reveals gaps in our understanding of the regulatory failures, as neither normalization nor exceptionalization seem to reduce significantly the violence endured by trans persons.
4
Models to Deal with Sex Mobility
We have found so far that countries use two mechanisms to create sex: birth certificates, either produced by the civil registry office or by some other office for the control of population, and identification cards, driving licenses and passports being the most frequently used. Birth certificates have primacy over other documents as the truth they are expected to contain is generally reproduced in other documents without further need of proof. For this same reason they have been harder to change and negotiate than driving licenses and passports, that prioritize the need for certainty in identification over granting rights on the basis of sex. I will suggest here the actual existence of four models
32
Patel (2010). Swain (2016) and Kodiyath (2015). 34 Bell (2012) and Theilen (2016). 33
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
to deal with sex mobility.35 We call the first model the model of “non recognition”. In this model, individuals may never change the sex that was assigned to them by public officials at the moment of birth. The second model we refer to as a model of “strong medicalization” because it demands medical proof of sex affirming surgery, including procedures involving sterilization, to make any annotation with regards to change in sex.36 The third model is a model of “soft medicalization” because it involves doctors in the process of authorizing and accounting changes in sex, but it leaves it to the medical community to decide the criteria it will use. The fourth model, including one third of the countries that submitted reports, is a model of “self-determination”, where individuals are entitled to make the decision about the sex they wish to see reported to others. In what follows, we describe in detail each model, including the justifications used to keep it in place, or produce the change the model represents; the focus of legal strategies intending to change the model or that led to the adoption of the present model; and remarks on the operation of the model were available. I also address in this section the issue of names and identify three ways of approaching the relationship of names to sex. The first way, adopted early on by Germany as a “solution” for the trans persons “problem”, supposes that names are gendered and therefore matter for sex mobility, but that there might be greater flexibility in the regime of names than in the regime of sex. About half the countries in this report adopted first a regime of name flexibilization and later a model of self-determination for sex mobility. The second way does not recognize a relationship between names and sex and therefore allows for name changes through custom or habit and only sets limits on changes for reasons of fraud or criminal intent. The third way deems the relationship between names and sex so strong that it only allows changes in names after changes in sex. Finally, this section reflects on the differences in regulation concerning children’s ability to engage in sex mobility and treatment of intersexual conditions. I show that according to national reports included here, the legislation of some countries recognize that forcing public officials to classify an individual as male or female upon birth may create serious problems for many persons. Some of these countries allow public officials to leave the sex box blank, others allow for sex changes as early as 6 years of age. Most countries, however, neither allow for a third sex nor for sex changes before the age of 16.
35 Scherpe (2015) also has four categories or stages that closely resembles the ones I use here. 36 For a definition of Sex Affirming Surgery see: https://hr.cornell.edu/ sites/default/files/trans%20terms.pdf.
4.1
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Ground Zero: Non-recognition of Sex Mobility
According to the national reports submitted, only four states in the United States still have legislation that prevents individuals from changing the sex they were assigned at the moment of birth: Idaho, Kansas, Ohio and Tennessee. In these states, as it infamously used to be the case in England, birth certificates cannot be changed during an individuals’ life. In England, as the national reporter explains, this model was maintained through more than 30 years of litigation in domestic and European Courts. Indeed, as early as 1971, in the Corbett v. Corbett case, the Court decided that a transwoman could not marry a man even though she had undergone complete sex reassignment surgery because she could not be considered a woman for marriage. The Court explained that not even sex reassignment surgery could change the “natural” sex a person is born with. This position was endorsed also in R v. Tan, 1983, where the Court found that a transwoman could be convicted as a pimp, even though this was a man only crime in British legislation at the time. This position was endorsed by the European Court of Human Rights in the Rees v. United Kingdom case, in which the Court acknowledged the possible violation of article 8 of the convention but found that the conduct of the United Kingdom fell within its margin of appreciation. The limits of this decision were clarified by the Court in its 1992 decision on B v. France, where it found that France violated article 8 of the Convention when refusing to register sex changes while allowing to make many other amendments in the birth certificate of its citizens and registered different sexes for the same person in different documents. Accordingly, the situation of the United Kingdom was exceptionalized as one in which what was being protected was the accuracy of a document intended to establish circumstances at birth and not to register changes suffered by individuals through life. Not surprisingly, litigation on this topic concerning the United Kingdom is abundant, with more than four cases decided by the Court without any change in the doctrine of the margin of appreciation coloring the regulation of changes in birth certificates. The difference the European Court of Human Rights was highlighting was a difference noticed by the New Zealand reporter when explaining that there is no “civil status” in New Zealand. Actually, “civil status” was a category introduced by the Napoleonic Code to account for individual characteristics that would have “weight” in assigning rights. The proof of civil status was assigned to the office of civil registry, and certificates emanating from the registry deemed definitive proof. Civil registration, as conjured by the French, nonetheless, incorporated procedures to introduce changes when confronting a mistake or a new fact. Most notable among the new facts demanding changes in the registry were those relating to paternity and marriage. With regards
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to paternity, changes in the civil registry reflected both cases in which an individual ceased to be the father of someone else, or an individual became a father. These type of changes appear exclusively in the birth registry of the individual who is the son or daughter. In relation to marriage, dissolution of a marriage by death, annulment or divorce, merits inscription in the marriage registry to signal the change from the married status to the status as single person. Changes deriving from “new facts” have been tied up to procedures as simple as a declaration before a notary public of the acknowledgement of someone as one’s son or daughter, and as complicated as a contentious judicial procedure in which the truth of paternity or marital fault are determined. As noted by national reporters in “civil law systems” (19 in total), civil registration around the world still follows these basic intuitions. This approach to the issue is foreign to other jurisdictions were control of births is in charge of municipal or fiscal authorities and birth certificates are considered only to describe a fact occurring in one moment in time: the birth of a child. From what reporters explain, these systems do not foresee the possibility of facts relating to birth changing and therefore have been slow to develop answers to requests to this regard. The most notable case of “conceptual” freeze, as noted, was the United Kingdom. This State repeatedly argued that birth certificates in so far as only declarative of a fact that could not change, “birth”, could not be amended to facilitate the exercise of rights by individuals who had in effect changed since the moment of birth in relation to one of the characteristics relevant to the exercise of rights. Denmark, Norway and Sweden, on their part, were reported as having population registration by fiscal authorities and marking sex in the social security number of individuals. This last system has proven to be the easiest to change, probably because of its little conceptual baggage: Sweden introduced a law to deal with sex changes as early as 1972, and Norway was recently recognized as the “second best” in protecting the rights of trans persons.
4.2
Sex Reassignment Surgery as a Requirement for Changes in Birth Certificates
Ten reporters described their countries as currently demanding sex reassignment surgery as a requisite to obtain changes in the sex reported in the birth certificate of an individual: Brazil, Chile, Croatia, Czech Republic, Rumania, Serbia, Poland, Taiwan, Turkey and some states in the United States (including the state of Alabama). In all of these countries it is understood that sex needs to be registered at birth and this fact may only change if the individual successfully completed sex reassignment surgery, which is the last step in a long way that individuals may walk from one sex to the
other. This way includes different stages of hormonal therapy, openly living as the other “sex” for a period of time, and finally undergoing castration or mastectomy, and reconstruction of sex organs associated to the new sex. During the stage in which the individual lives as the other “sex” he or she may use an assortment of treatments to appear more clearly as “other”: definitive depilation of face, legs and arms, voice training, hair implants, prosthetic implants, among others. Though not all stages are mandatory to obtain the sex reassignment surgery, it is crucial to note the amount of “work” that is demanded from the individual before allowing annotation of any change. It is also important to highlight variations existing among these countries with regards to access to sex reassignment surgeries and the indeterminacy attributed to the rule. Thus, in Poland and Rumania, surgeries needed to prove sex reassignment need to be authorized by a judge as they are considered to affect a “personal good” protected by the Constitution. In Poland, the requirement was introduced through a decision by the Supreme Court in 1991. In Rumania, the reporter explains that the requirement was introduced in a 1996 law that in 2008 was declared constitutional by the Constitutional Court. In Rumania, the reporters explain, to obtain a change of sex, individuals must first approach an authorized doctor, then must engage a judicial procedure to get a sex reassignment surgery, then need to start a judicial procedure to get a change in the birth certificate after the surgery has been completed, finally they need to ask for a change in name and ID number. Reporters on Brazil and Chile, on their part, explain that judges occasionally interpret that changes in sex do not demand sex reassignment surgery. Professor Lathrop from Chile, for example, points out to the importance of strategic litigation led by professor Lorena Lorca in changing precedent in 24 cases. She notes that although the requirement is included in Law 4808, The Chilean Constitutional Court interpreted Gender Identity to be protected implicitly by the Chilean Constitution and explicitly by international law binding on the Chilean State (Judgement 834 by the Chilean Constitutional Court). In Brazil, both changing name and sex in the registry demand a judicial decision, according to professor Mattos. Judges, in turn, have understood that the only appropriate evidence for them to acknowledge and authorize a change in name and sex is evidence of the realization of a sex reassignment surgery. Mattos also explains, however, that some judges have allowed name and sex changes without verifying sex reassignment surgeries. To the contrary, in the case of Turkey, it is judges that over interpret the Turkish Civil Code to mean that the only way to prove there is a just ground for name change, which precedes sex change, is proving having undergone sex reassignment surgery. Though it is not an explicit requirement for name change, regulated in 2002, the reporters note that
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
judges hardly accept any other evidence to prove there is a just ground for name change. Reporters also note that notwithstanding the existence of a 2015 case by the European Court finding that the sterilization requirement is in violation of article 8 in the Convention, the Cour de Cassation upheld the sterilization requirement in a decision following the one adopted by the European Court. In Croatia and the Czech Republic, sex reassignment surgery was introduced as a requirement for sex change through legislation in 2013 and 2008, respectively. In the case of Croatia, the law demands a certificate from one of the authorized doctors. The reporter notes that there are very few of these doctors and that there are no specialists or clinics that perform these surgeries in the country, making access to sex change very difficult. The Taiwanese 2008 Directive governing the matter of sex change is probably the one that most clearly determines the requirement: for cases of male to female transition, applicant must prove to have had penis and testicles removed; for cases of female to male transition, applicant must prove to have had breasts and uterus removed. The case of Serbia is interesting because there is no law or regulation explicitly governing changes of sex. She notes that in Belgrade and Novi municipal authorities treat sex change as a correction in the individual’s birth certificate if sex reassignment surgery has been completed. The Constitutional Court supported this interpretation in 2012, though it also stated the importance of having a special law regulate this matter. Professor Jancic explains that two attempts to legislate on this topic were unsuccessful (2012, 2013).
4.3
Power to Doctors: The Soft Medicalization Model
Five countries were reported as allowing for sex change without having to prove the completion of sex reassignment surgery but demanding a concept of a medical doctor concerning the “condition” of the individual: New Zealand (1995), England (2004), Germany (2011), Austria (2013), Israel (2014), the Netherlands (2014), and Belgium (2017). Again, there are relevant variations amongst these countries: while England submits individuals to prove they have a gender dysphoria diagnosis, have had at least 2 years of “real life experience” and have the consent of their spouse (2004 Gender Recognition Act), Belgium only brings in a psychiatrist to attest to the time the individual has been struggling with his/her transition when he/she is a minor. In Germany, Austria, Israel and the Netherlands, doctors are in charge of certifying significant changes in sex and prevented from restricting this diagnosis to cases in which sex reassignment surgery has been completed. In New Zealand, Courts have established that doctors may not certify transitions unless hormonal treatment has started already.
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Reporters for Austria and Israel, nonetheless, express their concern that doctors make it very difficult for individuals to obtain certification of sex change. Professor Bea Verschraegen, from Austria, explains that according to the 2013 law on this topic, a change in the sex initially registered demands evidence of medical changes adopted by the individual and an expert opinion that the person’s sex will not change again. She expresses not finding the anonymized statistics on sex changes that the law demands from public officials and estimates that not more than ten changes have happened per year after the enactment of the law. She mentions that there is a perceived lack of consensus among the medical community regarding sex changes. Reporters for Israel note that although the 2014 directive by the Ministry of the Interior regarding sex change establishes that sex change does not need certification of sex reassignment, the Surgery Committee in charge of giving the required certification is very “conservative and pathologizing” and usually demands more than 2 years of real life experience. The attempt by the Ministry of Health to authorize any medical doctor to certify relevant sex changes for purposes of changes in the registry has been blocked by officials arguing that this was a misunderstanding of the High Court’s ruling in the 2014 case that led the Ministry of Interior to issue the directive regarding sex change. The report for The Netherlands is careful in explaining the costs associated to sex change, mainly derived from the need to submit an expert report to have sex changed in the civil registry. These costs are not covered by the health system or private insurance and span from 60 to 300 euros, and only a few doctors are authorized as experts. Interestingly, though, these are some of the “lightest” reports as it only certifies that the person is convinced and that he/she understands the consequences of the procedure.
4.4
Self-determination as a Legitimate Source of Sex
Eight of the countries covered by this report allow for selfdetermination in establishing sex in the civil registry or population logs: Argentina (2012), Sweden (2013), Denmark (2014), Colombia and Ireland (2015), Norway (2016), Belgium and Greece (2017). The state of Oregon in the United States and Ontario and Alberta in Canada also allow for self-determination. In most cases, reform was introduced by a legislative body. The exceptions are Colombia and Canada, where judges have led the way in introducing rules regarding sex change and precedent still is the main source of law. There are also important variations as to the level of protection the model offers to trans persons. Argentina, while being the first legislation to endorse self-determination
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in sex, or auto identification, still has the legislation most concerned with facilitating self-determination of trans persons and protecting them from police brutality and persecution. Law 26743 of 2012, indeed, establishes a right to gender identity, the duty of registration officials of marking the sex indicated by the person without questions about convictions or proof of such convictions, and the right to obtain treatment to modify gender characteristics. Law 26791 of 2012 establishes the maximum penalty—life imprisonment—for individuals found guilty of killing a person because of her gender identity. Professor Saldivia, the reporter for Argentina, explains that these views about gender identity and the importance of protecting trans persons from aggression are related to the campaigns against police brutality that followed the transition to democracy in the early 1980s, the relevance of “true” identity in the memory campaigns led by the Plaza de Mayo grandmothers, and advocacy for a despathologization of mental health patients in general. In every other country some requirement in addition to free will remains in place. In Sweden and Greece, individuals wishing to change their sex have to show that they are unmarried. In Greece this requirement is related to the non-recognition of same sex marriages. Change of sex produced in this way, nonetheless are only acknowledged by administrative authorities. Only judicial decisions certifying sex changes are considered binding on all authorities. In Denmark, there is a waiting period of 6 months and a duty to appear in person before the public official twice. This is also the case in Belgium. The 2017 law on gender identity determined that to change sex in official documents, individuals should appear twice before competent authorities, wait 3–6 months, and prove being fully informed about the consequences of the procedure. The Public Prosecutor’s office also needs to be notified in case it wishes to raise an objection. In Belgium individuals may request the sex change to be reverted to avoid transphobia or because they felt happier before the change. In Norway, individuals need to contact the Directorate of Taxes for pertinent information, and send back a signed slip confirming they have received proper information. The procedure is only available for Norwegian citizens. In Ireland, similarly, individuals declare to be acting out of their own free will and to know the consequences of their decision. In Colombia, individuals need to approach a public notary and have a public deed produced for the registrar to make the change.
4.5
Changes in Names: Not Always a Small Solution
The expression “small solution” in the context of trans persons was introduced in the German doctrinal debate to
refer to the possibility of introducing flexibility in the regime of naming to allow trans persons to use their identified sex rather than their legal sex in social contexts. As in many of the countries for which we have reports, German law restricts naming practices to accomplish two objectives: to reflect the person’s sex and to prevent humiliation and ridicule in the case of children. In 1980, a law regarding the change of names and declaration of affiliation to a sex was introduced to allow trans persons to build a social identity somehow separated from their legal identity. The law uses the expression “transsexual imprint” to refer to the cases it addresses and allows individuals to petition district courts to obtain a change in their name to reflect their sex affiliation. For this change to be ordered, they need to present opinions about their case by two experts in transsexualism. Professor Sanders explains that until 1993, individuals had to be more than 25 years old to request a change of name, and until 1996, individuals could be referred to by their legal sex rather than their identified sex. Doctrine strongly advocated that change of sex demanded full sex reassignment. Only since 2011, through a decision of the German Constitutional Court, requirements for sex change became the same established in the 1980 law for name change. Belgium, as Germany, adopted this solution for trans persons quite early on: 1987. Following this law, individuals who felt they wanted to change their forename because their sex did not match the sex in the birth certificate, had to had a declaration of honor to their request and declarations from medical experts regarding the individual’s experience of sex mobility. Nowadays, though, trans persons who have had their sex changed in the certificate have a right to change their forenames at a reduced rate of 49 euros. As professors Gallus and Verschelden note, other persons interested in changing their forenames can do so if allowed by the Federal Public Service and need to pay 490 euros. In Colombia, individuals may change their name for free and at will since 1988 without having to state any reason or give justification. Although there are no restrictions in the law regarding the name that an individual may choose, in 1993 the Constitutional Court decided a case in which a public official denied a request of name change because the individual was choosing a female name while being identified as a man in the birth certificate. In decision T-594 of 1993, the Court affirmed that names were deeply connected to the right to an identity and therefore public officials could not place any restrictions on individual’s choice of name when requesting a name change. This rule covered not only trans persons but also persons wishing to adopt ridiculous or humiliating names. In decision T-168 of 2005, the Court asserted the right of an individual to bear the name of his preferred soccer team against the public official concern over trademarks and authenticity in the desire to be called in such a ridiculous way. In 2008, the Court explained that individuals
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
that had changed their name once, could change it a second time if the aim was to have their name correspond to their sexual identity. In its most recent decision on the law of name changes, C-114 of 2017, the Court clarified the general right of individuals to change their name more than once but the duty, according to the Civil Procedure Code, of obtaining judicial authorization for the change. One reason for a second name change, as the Court consistently recognized since 2008, could be a change in sex, but the Court recognized in this decision that there could be other circumstances justifying the change in name that could be pondered by judges and lead to exceptional authorizations. In Denmark, change in name was also made accessible to trans persons before adopting a model of self-determination for sex mobility. According to the Act on Names, individual names have to belong to a list of approved names for each sex. Nonetheless, since 2005, the Ministry of the Interior allowed changes for people who had been declared “transsexuals” by the Sexology Clinic in Stockholm. After 2009, the report of the Sexology Clinic was deemed unnecessary for the change in name. In Sweden, similarly, change of name was possible in order to reflect an individual’s choice of sex since 2009. For this country, however, the change in a very strict regulation was introduced in a decision by the Supreme Administrative Court that determined that choice of name could not be restricted by public officials. England had a flexibility in naming practices that somehow did not bear a relation to the rigidity of the legal system with regards to sex changes in official documents. As reported by professor Dunne, no formalities are needed to use different names in different life situations: “Under the English Common Law, persons have the right to change their name without undertaking formal legal procedure (provided there is no fraudulent or criminal intent)”. But to have a change in name acknowledged by government officials a deed poll needs to be executed. These deed polls require either a declaration signed by two witnesses that attest to the fact that the individual is known by the new name rather than by the “official” one; or a request by an organization with which an individual is interacting. Having executed a name change is considered evidence of the real life experience demanded to obtain a gender recognition certificate after 2004. The USA, according to national reporters, has a similar system for name change: individuals may request state level courts for a change of name and in general all they need to do is appear in court. In this case, nonetheless, reporters identify higher risks for trans persons given the power judges have in the common law to impede a change in name to “prevent fraud”. They also explain that certain states do not allow people in prison or on parole to change names and this significantly affects trans persons who have much higher probabilities of being in these situations.
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The same flexibility in naming is attributed to Israel by the authors of the report. They state that individuals may freely request changes in their names every 7 years. The term limits may be overcome if a special circumstance arises. Israel, on the other hand, retains a soft medicalization model with little access to sex mobility as pointed out above. Elizabeth MacDonald explains that it is also true in New Zealand that individuals may change their forenames upon request and payment of a fee. Taiwan is another example were names can easily be changed. Professor Yi-Chien Chen explains that people change names for a variety of reasons in Taiwan, including to follow recommendations from fortune tellers regarding bad luck. The idea that names could be expressive of individual choices is completely absent in some countries were names are so strictly tied to gender and strongly regulated by the state, that individuals may only change their names after undergoing sex change and then only after completing sex reassignment surgery. This is true for Poland, Rumania, Serbia, Turkey and the Czech Republic. In all of these countries, changes in name require a judicial or administrative authorization after corroboration of a “justifiable reason”. Reporters point out that judges and other public officials routinely interpret that the only justifiable reason for a man to use a woman’s name and vice versa is to have changed her sex. In these countries change of sex is only authorized after sex reassignment surgery and this surgery needs judicial authorization. In Brazil and Chile most judges interpret also that changes in name can only follow change in sex. In Brazil, change in name to adapt to sexual identity was only authorized in 2017. As pointed out above, in general, these countries also demand sex reassignment surgery before allowing sex change but judges may decide otherwise, and have done so. Norway is the only country that ties change of sex to change of name and has adopted the self-determination model for sexual identification. In this country, individuals may change their names every 10 years and individuals choosing sex mobility may choose gender neutral names before definitely changing to a name from the other sex.
4.6
Family Law Effects
Sex plays a crucial role in the regulation of marriage and parenting in most countries. With regards to marriage, the initially question was whether an individual who had undergone gender reassignment surgery could marry according to her new sex. This was the case decided in Goodwin v. United Kingdom that, in 2002, led the European Court of Human Rights to demand from England legal recognition of changes of sex in the birth certificate. As sex change started to be legally recognized, the question of the dissolution of marriage by sex change became crucial,
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with most jurisdictions establishing an ipso facto dissolution of any marriage the person that underwent gender reassignment surgery was in. As same sex marriage became sanctioned in most jurisdictions represented here, rules demanding the celibacy of trans persons, establishing the dissolution of their marriages or converting their marriages into civil partnerships, were explicitly or implicitly repealed. Only Poland, Greece and Turkey still demand celibacy for sex change among the countries included here. In England, individuals who are married need to show they have spousal consent to have their gender recognition certificate issued. Most jurisdictions represented here, on the other hand, determine that sex changes shall not affect the birth certificates of the children bore by trans persons. This rule is criticized for not representing the “truth” of the situation and potentially leading to confusion, specially as erasing traces of sex and name change becomes a standard way of protecting trans persons from transphobia. There is consensus, nonetheless, that once the parenting relationship is established, changing the name or sex cannot affect the legal bond between the parent and the child. Much more difficult to tackle has been the situation of trans men who give birth. The national report for Israel explains that in one case sex was legally changed five times to accommodate the fact that according to Israeli law only women could be mothers and children could not be registered as motherless. Several national reports explain that as sex change without sterilization becomes normal the need to address parenting rules will become more urgent. In the case of a woman who gives birth while married to a trans woman, the co-maternity arrangement adopted by Norway and a few other countries for the case of same sex couples seems to work well enough. Still, it reveals the extent to which legal solutions for lesbians and gays may not be enough for trans persons: “nature” is put to the test in quite different ways.
4.7
Non-binary Sex Reporting: Dealing with Early Sex Ambiguity and Mobility
As pointed out above, not only the experiences of trans persons have reached Courts and legislators. Individuals born with sexual ambiguity and living experiences of sex mobility at very early ages have also influenced the regulation of sex. A few of the countries in this report have regulations for this situations. In Argentina, Law 26743 of 2012, establishes that minors may request sex change with support from their parents and following rules of progressive autonomy introduced by the Convention on the Rights of the Child. In effect, a famous Argentinean case involved a 6-year-old that was allowed to change her sex. The Norwegian reform of 2016 also allows changing the sex of individuals from 0 to 6 years of age. For this age range,
however, it demands proving a medical condition. For individuals between 6 and 16 years of age, sex change is allowed with parental consent and guidance. The convenience of sex interventions at early ages was carefully discussed by the Colombian Constitutional Court in 1999 (decision SU-337 of 1999). The Court confronted the case of a 7-year-old whose mother, under advise of a medical team, considered convenient to subject her to a medical intervention to establish her sex more clearly. The medical team denied the surgery following the 1995 decision (decision T-495 of 1995) by this same Court that argued that surgical interventions on intersexual persons should not be performed until the individual himself reached the point of being able to give consent. The Court, in a decision by the plenary, determined that sex assignment surgeries are not urgent but are indeed very invasive and therefore demand the consent of the individual himself, parental consent being important as support and guidance but not enough to proceed with a surgery. The Court took into consideration multiple studies and testimonies to the effect that hormonal and surgical interventions at an early age seem to work more to satisfy societal demands of sexual determination than to help individuals to live happier lives. It carefully considered the pain and suffering reported by individuals forced to submit to many medical interventions over their first years of age who later on found either that the medical team made a mistake when assigning the sex and working to confirm it, or that in adolescence new facts arose that made initial decisions seem less adequate. Though the Court found that it could not force intersexual persons to lead societal change about sex, it also found that it could force registrars to accept leaving the sex box blank. The Colombian solution is similar to the one adopted by the 2017 directive of the Ministry of Health in Israel, which establishes that surgeries should always be consented to by individuals unless there is proof of risk to life. Sweden introduced in 2013 a restriction on medical interventions for trans individuals at 12 years of age. The only other national report mentioning this issue was the report for England. Professor Dunne explains that the Committee on the Rights of the Child has advised England to introduce regulation concerning surgeries on intersex babies. The Chilean national reporter indicates that it found at least one case in which a 5-year-old was allowed to change her name and sex in legal documents (it is not clear that she was an intersexual person). Most national reports explain that the age for engaging sex change, especially if surgery is involved, is 18 years. Some countries allow 15 year olds to start the process, with additional requirements. Interestingly, however, there is no mention of the practice regarding intersex babies. Most countries do force registrars, and doctors, to choose for M or F when drafting birth certificates. Only Germany, Austria, the province of Ontario, and the Netherlands, besides Colombia, are
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
reported as allowing for a blank, an x, or stating that sex is indeterminate in the birth certificate. Denmark and New Zealand allow for an x in passports. New Zealand also allows the driver license to state sex as indeterminate. The debate before the Colombian Constitutional Court illustrates the rift between individuals who feel that sex determination is definitive to live good lives, and therefore support a sexual binary and emphasize sex mobility, and individuals who believe that sex is/should be ambiguous, and therefore should not matter for society or for legislation. As we will show in the conclusions, most countries allowing for sex change have not transformed sexually segregated facilities and educational spaces, sexually segregated armies, differences in social security regulation, special protections for women, among other relevant consequences of the sex you have. This approach supports the first position; one that thinks that sex should matter but would like individuals to be able to choose according to their inner experience of how sex matters. The second position is closer to a feminist understanding of how the world should change.
4.8
Conclusions: The Ideal Model for Sex Mobility
The national reporter for Argentina, Professor Saldivia, correctly notes that in times of biometric identification, emphasis on security as the value safeguarded by rules on sex identification seems misplaced. Argentinian legislation allowing for choice of sex in birth certificates and other official documents, the model we have called here of selfdetermination, appears to adequately protect the right of individuals to decide on their belonging to one sex or the other without recourse to doctors, psychiatrists or other experts. This model also diminishes possibilities of humiliation and offense by public officials, as well as making decisions about bodily shape and function without proper information or just to comply with expectations about sex that constitute heavy burdens on individuals that are certain to not be adequately classified but are not certain as to the need to proceed to do dangerous and costly things to “fit in”. The question of intersexual persons becomes most relevant in the context of accepting that legal sex need not correspond to any “biological” reality. As a matter of fact, as pointed out by several national reporters, the impulse of “biological” conformity normalized sexual reassignment surgeries for intersexual babies and toddlers in countries were adults were prevented from requesting these procedures and not allowed to act as having a sex different from the one they were initially registered with. Detaching sex from “biology”, then should also help in reducing the sense of urgency with which the “problem” of intersexuality has been faced up until now. Stressing self-determination could lead, also, as
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established by the Colombian Constitutional Court, to an understanding of the importance of waiting for individuals to have enough discernment to make decisions regarding their bodies. The need to create a third box for sex or allow sex to be marked as unknown becomes irrelevant or most important, depending on the position one subscribes to concerning the relevance of sex for social life. Indeed, if sex is a matter of choice and self-determination, intersexual persons should feel at ease in deciding for one or the other knowing that they may change later on if their choice does not correspond to their actual experience. This would agree with the idea that self-determination in sex leads to the deconstruction of sex. For those who believe that the selfdetermination model is proper not because it makes sex irrelevant but because it alleviates bureaucratic burdens for trans persons, then a third sex becomes important to allow intersexual persons to be correctly represented by legal categories. Interestingly enough, countries that currently have regulation concerning a third sex or allow the sex box to not be marked, also have self-determination models for sex.
5
Gender Modification Interventions and Sex Mobility
An important element in the development of the “issue” of trans persons is the technological progress in bodily interventions and the growth of a cosmetic industry that not only embellishes but also modifies bodily shape and function, mostly feeding on women’s anxiety over their appearance and recently also catering to men. In this context, the inner experience of “belonging to another sex” or “being trapped in the wrong body” can be translated into practices of body modification with high costs and, still, high risks associated. The relevant question becomes then who should bear the costs of these practices of modification. The answer provided by most reports is that national health systems consider gender reassignment surgeries to be included in the mandatory health package. Most reporters, nonetheless, point to harsh realities even in this scheme and suggest that health systems should also cover other gender modification costs. Three reasons are implicitly articulated to justify these claims. First, the importance of the binary understanding of sex for acceptance into society and the corresponding pain and suffering of not looking the same. Second, the poverty endured by most trans persons as a consequence of their difficulties in fitting in. Third, the concern that if individuals are not provided with these treatments they may look for the cheapest possibilities available, not always bearing in mind the risks to their health and even their lives. The Danish report, nonetheless, highlights the contradictions that may derive from adopting a self-
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determination model for sex and pushing for greater coverage in the health system: once the gender dysphoria diagnostic is abandoned, what would be the justification for massive investments in the individual choices of some individuals? The Danish solution was to leave a diagnostic related to sex mobility in the medial protocols, in the understanding, however, that this is not really a medical condition but rather a life choice. Health systems with greater financial pressures might not be as easy to manipulate. Self-determination models may in fact drive societies to understand choices related to sex mobility as individual choices that should be funded by individuals. This, of course, means not taking any responsibility as a society for the desire to look the same that is at the root of the desperate search for interventions in body shape and function. Probably we would need to work on a notion of reparations to work out a scheme that would help complete the transition from strong medicalization models to selfdetermination models in sex. In what follows we describe limitations identified by national reporters in the access of trans persons to gender modification interventions. Overcoming these limitations is partially connected to the transformation of regulation on sex mobility, but other factors influence access enough to merit an independent consideration of them.
5.1
Surgery as Defilement: The Need for Judicial Authorization
The most important barrier to access gender modification services from health providers is reported to exist in Turkey, Poland and Rumania, were individuals interested in surgeries that could affect their reproductive functions need judicial authorization. This requirement derives from the idea that individuals may not dispose of their bodies freely and therefore only in extenuating circumstances can be dispensed to proceed with their intentions.
5.2
No Doctors Trained to Provide Gender Modification Services
In nine national reports, authors explain that there are no doctors trained to provide gender modification services or that there are too few to attend the number of patients requesting this services. The national reporter for Austria, for example, notes that although gender reassignment surgeries have been authorized since 1995—through a decision by the Supreme Court, there are some surgeries that cannot be performed in the country as there are no doctors trained for this (phallus reconstruction is explicitly mentioned by the report as a surgery that cannot take place in Austria). In the same vein, the national reporter for Croatia states that
there are no doctors that can perform the surgery in her country. Reporters for Brazil, Denmark and Israel point out that existing legislation establishes that only authorized providers can offer these services and there are too few providers. In Brazil there are only five clinics and they are located in the main cities; in Denmark treatment is only authorized at the Sexological Institute in Stockholm, and in Israel only one hospital has created a surgery committee needed to authorize procedures although the protocol exists since 1986. The national reporter for New Zealand, professor McDonald, explains that there are only funds for three surgeries per year and therefore waiting lists are very long. Reporters for Belgium, Ireland, Rumania and the United States also note the scarcity of doctors and specialist teams.
5.3
Insurance Coverage Is Not Enough or Reimbursement Is Not Transparent
Only two national reports clearly state that gender reassignment surgeries are not covered by their health services: Chile and Poland. In every other jurisdiction of those included here, gender reassignment surgeries are covered by the mandatory health plan as long as there is a diagnosis. In most cases the diagnosis is that of “gender dysphoria”. In Denmark and Norway, a diagnosis is necessary but it is understood that it is not an illness or mental disorder. In many countries access to gender modification services is recent, dating from 2012 or 2013, when the most relevant change regarding the recognition of sex mobility was introduced in their legislation. But in countries like Sweden and Israel, health services have been accessible on paper for much longer: 1972 and 1986, respectively. Then again, only in Norway and Sweden is it clear that all gender modification interventions deemed necessary are covered by the health system. The national reporters for Canada explain that coverage in their country is dominated by the aesthetic/medical binary and therefore only those interventions needed to safeguard the individual’s health are included. The national reporters for Israel find that it is precisely the need to negotiate across this difference one of the elements that makes it so hard for trans persons to access health services in their country. In the United States, interestingly, the team of national reporters explains that although the mandatory health package for the poorest population— Medicaid and Medicare—include gender modification interventions, most doctors in the country and specially those trained, refuse to work for those insurers, turning the guarantee nugatory. In the United States, individuals in prison may access treatment since 2011 as long as they prove having started their life process before entering prison. Since 2016 treatment is also covered for members of the military.
The Stakes in Sex: A Comparative Study of the Civil Status of Trans Persons
5.4
Influences Driving Pathologization and Transphobia
Although reports suggest that the fact that the health system in a given country does not provide gender modification services is directly connected to recognition of the rights of trans persons under the self-determination model, the case of Serbia is illustrative of the possibility of a strong medical practice that develops privately. Similarly, the national report for Israel explains that with the 1986 protocol a private practice has developed beyond the publicly funded health system. Austria would provide an example of exactly the opposite path: there are no doctors even if regulation in place since 1995 guarantees coverage. Professor Mattos, for the case of Brazil, points out to the “transphobia” that prevails in the Brazilian health system and that has been documented as a barrier in accessing services that are included in health plans since 2008.The point here is that transphobia is not only connected to regulation of the civil status of trans persons: it is neither the sole cause of transphobia nor the only step that needs to be taken to transform the current state of things. National reporters for Poland and Israel reveal how the empowerment of conservative religious authorities may be connected to unleashing a new version of “nature” as argument against self-determination in sex. Indeed, if the pathologization paradigm centered science in describing nature, a view of nature in which deviations were represented as diseases, transphobia represents a return to moral disgust and exegesis as reasons to reject certain expressions of the self. In the Christian world these reasons have organized under the banner of a rejection of “gender ideology”, where gender ideology is exposed as holding the notion that sex is not “natural” but rather socially and culturally constructed.37 Now the natural is not the result of scientific studies but driven by images of God and interpreted by theology.
6
Anti-discrimination Et Al
Concern over transphobia has animated both the introduction of criminal offenses and anti-discrimination regulation. Three countries have moved in the direction of criminalization: Argentina, Turkey and Greece. Argentina introduced in 2012 a reform in the criminal code to punish with life 37 I found Duncan Dormor’s mapping of Christian responses to the issues raised by trans persons very useful. See his chapter in Scherpe (2015): “Transgenderism and the Christian Church”, pp. 28–68. An authoritative position on the Vatican’s understanding of the stakes and actors in the confrontation may be found in the Doctrine for the Congregation of the Faith’s Letter to Bishops on the Collaboration of Men and Women in the Church and in the World (2004) available at: www. catholicnewsagency.com.
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sentence the act of killing someone for her gender identity; Greece introduced in 2013 and 2014 laws punishing discrimination and aggression based on gender identity among others. In Turkey the Constitutional Court established in 2014 that calling LGBTI persons “perverts” should be considered hate speech for all legal purposes. Roughly a third of the countries have rules on employment discrimination, prison segregation and use of public facilities that explicitly use the expression “gender identity” or “gender expression”. In the United States the national reporters argue that this protection came as early as 1989, when the Supreme Court argued in the case of Pricewater House v. Hopkins, that gender stereotyping could be understood as a form of discrimination based on sex for the application of title VII. In most countries that have introduced protections for gender identity as a different category than sexual orientation, regulation has been introduced much later. Croatia reports using the “gender diversity” category in its 2003 and 2008 antidiscrimination regulation and Belgium in 2007 established that discrimination would not be allowed in cases of gender reassignment. In Israel it wasn’t until 2015 that the Supreme Court found that discrimination based on gender identity was forbidden (Center for Technological Education v. Meshek), while in Norway the category was introduced in 2017 along with the self-determination model. Regarding public facilities, national reporters express little enthusiasm as to the advances and point to rules that enforce segregation and therefore support violence against individuals who do not seem to fit in the categories. The most pressing issue has been prison segregation for the violence, mostly sexual violence, endured by trans persons. In Canada, Israel and Colombia, reporters point to rules allowing for imprisonment in the facilities of the identified or social sex, rather than the legal sex. But both in the cases of Israel and Colombia the regulation concerning prisons do not seem to work as well on the ground. National reporters for the United States are particular in signaling the problems derived from the absence of recognition of sex mobility and denouncing the frequency with which the problem is “solved” using solitary confinement. Other uses of public facilities have been contested but there seems to be little consensus as to the “solutions”. In Denmark and Norway, for example, trans women who have not undergone gender reassignment surgery cannot use public swimming pools, dressing rooms or Spas destined for women only. In England, trans persons in general are prevented from participating professionally in sports while in New Zealand they may do so as long as they are taking hormones that correspond to the sex they want to represent. Every jurisdiction included in this compilation acknowledged that sex remained a crucial element in the organization of social life, beyond marriage and parenting. National reporters for Turkey and Ireland pointed out to specific
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ways in which these rules bread transphobia. In the case of Turkey, the legally enforced dressing code for public officials is presented as a cause for exclusion of trans persons from public service, while the fact that they are considered mentally unfit to serve in the military excludes them from private service. In Ireland, according to professor Dune, the consecration of motherhood as a public service in the Constitution translates into a felt need to segregate individuals throughout their lives making it very difficult for trans persons to operate in this environment. Every other report points to the existence of rules that treat men and women differently for social security purposes, for accommodation of motherhood in labor law, and for military drafting. Only the national reporter for the Netherlands points out to a debate about the possibility of eliminating sex as a category for identification altogether, and the national reporter for Germany pointed out that the Federal Constitutional Court, when ordering the introduction of a third sex in official documentation, explained that if this option was not acceptable, sex should be eliminated from the particular document involved.
7
Conclusions
As noted in the introduction, the main purpose of this report was to map out legal responses to the issue of legal recognition of trans persons. In line with existing literature, this report finds that law can be as extreme as rejecting the possibility of changes in sex markers, or as generous as to recognize that individuals themselves should be able to decide which sex they identify with. Countries in the later situation, though, do not feel that they have reached an ideal regulatory solution yet. National reporters show that concerns over appropriate protocols for care in the health system, discrimination and violence, persist even in the face of legislation recognizing self-determination. Independent efforts oriented to “fixing” these other systems seem to be in order: health regulations, criminal sanctions and employment protections proliferate in the search for “solutions” to the marginalization and impoverishment of trans persons. Thus a particular tension is revealed as to the role of law in the production of identity: if law is indeed so powerful in creating sex, how come undoing law is not enough to undo sex? Moreover, if stigma is the result of law’s fixation on the “natural” how come doing away with it does not reverse stigma? Part of the answer may lie with the modes of dissemination of models of regulation. In this case in particular some studies have shown that more than reaching ideological alignment or public opinion support, reforms may be the result of activist bureaucracies, legislators or judges interested in complying with standards fixed by an external
authority.38 I already mentioned in the introduction the important role of the European Court of Human Rights in producing changes in countries that are signatories to the Convention. The cases of Argentina and Colombia, however, cannot be aptly explained by theories of dissemination. The political work in these cases seems to be done by the notions of transition and the weight they give to identity, true and bodily integrity. These cases could, probably should, be compared to those of Nepal, India and South Korea to check the transition hypothesis and understand its full impact. In particular, these cases could be useful to understand the power of anti-rights groups in shaping public opinion even against clear legal mandates. The national reports also reveal the urgency of re-examining family law beyond accommodations linked to the gay and lesbian agenda. Indeed, after authorization for marriage and the elimination of celibacy requirements for sex mobility, the issue of parenting has become pressing for trans persons. Three clashing concerns have been expressed by national reporters: (1) every individual’s right to know her true identity, including her provenance; (2) the need for security in identifying the parents of an individual to demand compliance of their duties; (3) trans persons need to be secure in their new identities and avoid stigma and persecution. While the first two concerns are reasons to keep “original” names and sex markers in birth certificates of children born to trans persons, the third pushes for amending those certificates and introducing information that corresponds to the new situation. Beyond the issue of how to keep the record, however, is the question of which facts are relevant to establish parental relations. Currently, legislation assumes that individuals marked as women will contribute with their ovules and uterus to reproduction, while individuals marked as men will contribute with their sperm. We now know that this is not the only possibility. Our laws need to adjust to this knowledge. Finally, this report suggests that the trans and inter “issues” could be read as interrogating more broadly the role of sex in our current legal and cultural systems, both as justification for affirmative measures for the advancement of women, and for segregation of men and women. Feminists have been struggling for some time with the challenges posed by this question. It is unreasonable though, in light of what we know now about how sex works to produce pain and suffering, to insist on following the same strategy pursued up to today: some affirmative action plus some segregation. An extension of the notion of parity to every sphere of life could be a plausible model.39 But the search for alternatives has just begun.
38 39
Taylor et al. (2015). See Jaramillo Sierra (2017).
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Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A Commentary on Contemporary Arrangements Dobrochna Bach-Golecka
Abstract
The article deals with compensation schemes and alternative methods of dispute resolution in situations of damages resulting from medical malpractice. The topic is analysed within different perspectives. Firstly, the examination of human rights and public international law provisions is performed in order to identify the meaning of the right to health and the right to healthcare as a possible benchmark of healthcare provision in a domestic context. Moreover, this international legal approach is supplemented with European law analysis. Secondly, the relevant contemporary phenomena in the provision of healthcare are being dealt with. In this context patients are regarded as consumers of healthcare services while within the contemporary approach both parties of the medical relationship are treated as equal in their competence to make valid decisions concerning prospective treatment. Nowadays the authority of physician is based in her or his professional qualifications and the patient’s competence is rooted in the construction of informed consent procedure. Therefore the current process of providing healthcare resembles a scientific endeavour rather than a relationship with paternalistic legal element, it is not any more a dual medical contract but a situation concentrated on healthcare activities, with multilateral dimension and co-shared decision-making, alongside many lines of internal communication. Those characteristics of medical service are crucial within the process of identifying patterns of compensation arrangements and extra-judicial solutions in case of medical malpractice. The article aims at evaluating the possible This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. D. Bach-Golecka (*) University of Warsaw, Warsaw, Poland e-mail: [email protected]
and most often used methods of alternative dispute resolution in healthcare context within selected jurisdictions.
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Preliminary Remarks
The contemporary legal theory seems to stress the importance of normative power of legal provisions, “the force of law” in the words of Frederick Schauer (Schauer 2015). This binding element of law plays a crucial role in the implementation phase of legal norms. Yet within human rights provisions the force of law is limited due to the internal characteristics of public international law which is based upon the agreement of states and subject to the enforcement methods undertaken at domestic level. Hence it may be stated that human rights are noble in character but weak in respect. The above remarks may serve as a broader legal context applicable to the normative framework related to the organization of healthcare system and enjoyment of the right to health. Those provisions are broadly recognized as international standards of human rights protection still subject to the enforcement techniques designed by states. Hence the question arises about the possible sanctions for non-enforcement or wrong enforcement of the right to health and the right to healthcare? Are there valid legal provisions dealing with situations of medical malpractice on domestic and international level? And if so, what is their nature—are those penal or civil, obligatory or voluntary, mandatory or soft-law instruments? What is the effectiveness of their usage for the proper application and implementation of a substantive right to health? It seems impossible to answer properly those questions within a single article or even in series of articles hence the present volume is devoted to a specific situation of adoption of civil law instruments designed to cope with instances of damages resulting from healthcare, with a supplementary limitation to those instruments that are used in extra-judicial settings. This specification deliberately excluding court
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_6
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proceedings is arranged on purpose, in order to focus primarily on contemporary developments in those non-criminal legal procedures which are designed to encompass the interests of parties engaged in healthcare services. The choice to exclude penal instruments from the scope of national reports and to concentrate on civil arrangements may be justified by various reasons. Firstly, the topic of malpractice and criminal liability seems to be well analysed within the contemporary legal doctrine (Ferrara et al. 2013). Secondly, it seems that civil law instruments provide for different opportunities for parties engaged in a dispute resulting from medical malpractice—those arrangements may fulfil compensatory aims (also with the possible accompaniment of various administrative procedures), transparency purposes, preventive goals or psychological relief. It may therefore expand outside the basic dual structure of legal complaint, based on an interaction between the patient and health practitioner, as it may also serve the accomplishment of more general, systemic, and even scientific goals. There are different groups of stakeholders engaged in the process of coping with health damages—primarily patients (alongside families of patients) and health practitioners, and on a secondary basis those actors engaged in healthcare provision within the administrative and managerial perspective: hospitals and their managers, public authorities (government) fulfilling the fundamental responsibility of securing the appropriate level of health of a population of a particular political community. Thirdly, one may also discern the possible involvement of medical insurers. Lastly, one may focus upon the impact of various individuals actively engaged in the process of deliberation on healthcare dispute: legal and para-legal practitioners such as judges, barristers, mediators, experts or advisors. The inclusion in the analysis of those various stakeholders’ perspective seems conducive to a proper understanding of the functioning of contemporary legal compensatory regimes. The paper is divided into separate parts dealing with particular aspects of the topic of compensation schemes and extra-judicial solutions in case of medical malpractice. Firstly, a focus on international law seems to be necessary in order to establish a proper meaning of the right to health and the right to healthcare, to pinpoint the actors responsible for the implementation of those rights. Within this section a notion of “minimum core” obligations would be presented alongside the explanation of the scope of international assistance and co-operation within the accomplishment of those core obligations. Secondly, the international approach would be supplemented with a European health law analysis—in order to establish whether there are traces indicating the possible evolution towards a common standard in European healthcare provision, based on the case-law of the Court of Justice of the European Union or within the recently adopted secondary EU law provisions based on health technology
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assessment. The third section of the paper is dealing with various aspects of contemporary provision of healthcare and the modifications of a traditional healthcare relationship resulting from the advancement of modern medicine, interrelationship with consumer law, rise of individual rights and the growth of new artificial technologies. The last section of the paper is focused upon different arrangement designed to cope with instances of medical malpractice and their impact upon the legal position of the parties to the dispute as well as the overall evaluation of compensatory system. A special attention is paid to the usage of alternative dispute resolution techniques and their growing importance in coping with cases of medical malpractice. As a conclusion the final commentary remarks are made in order to help a proper assessment of various legal procedures adopted globally.
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International Law Within a Comparative Perspective
It seems that the need to provide for compensation schemes and various civil law arrangements in case of medical malpractice is firmly rooted within the international legal milieu. Therefore it should be analyzed whether there is one universal international standard of health protection or whether there are differences in health protection in particular countries due to the lack of willingness to participate in the particular international legal regime, adoption of various standards of human rights due to the civilizational and cultural characteristics or weak compliance and ineffectiveness inherent in traditional law (Gostin 2014, p. 70). Hence one may examine the topic of global health law within the boundaries of comparative international law that takes into account a specific legal situation of a particular state within the scope of obligations stemming from international human rights law, both within universal and regional perspectives.1 Traditionally, it was the task of governments and public authorities, with the assistance of various non-governmental organizations and charitable institutions, to organize healthcare facilities within the territory of the state. The evolution of the international human rights law did not 1 Within the right to health and healthcare a special focus should be given to the normative force of international documents, such as the Universal Declaration of Human Rights and the International Covenant of Economic, Social and Cultural Rights. As for the latter document, such countries as Cuba and the United States of America have signed but not ratified the treaty while Malaysia, Mozambique, Saudi Arabia, Singapore or United Arab Emirates have neither signed nor ratified the treaty. Hence, the task of comparative international law would be to evaluate the binding force of international legal instruments in order to ascertain whether those are valid or not for a particular state, irrespectively of the philosophical inquiry about the force of legal instrument as such (cf. Schauer 2015).
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
challenge this primary responsibility of national authorities for the state of health of their population. It rather reinforced their mandate as healthcare providers and organizers. Nevertheless it is possible to discern a new aspect introduced within the scope of international human rights law in its healthcare context, namely the emergence of an individual right to health and healthcare (Toebes 2009, p. 366). In particular, one may quote the constitution of the World Health Organization adopted in 1946, which in its preamble stated the definition of health and recognized an individual right to health alongside the responsibility of governments for the health of their peoples, in the following manner: Health is a state of complete physical, mental and social wellbeing and not merely the absence of disease or infirmity. The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition. The health of all peoples is fundamental to the attainment of peace and security and is dependent upon the fullest co-operation of individuals and States. The achievement of any State in the promotion and protection of health is of value to all. Unequal development in different countries in the promotion of health and control of disease, especially communicable disease, is a common danger. Healthy development of the child is of basic importance; the ability to live harmoniously in a changing total environment is essential to such development. The extension to all peoples of the benefits of medical, psychological and related knowledge is essential to the fullest attainment of health. Informed opinion and active co-operation on the part of the public are of the utmost importance in the improvement of the health of the people. Governments have a responsibility for the health of their peoples which can be fulfilled only by the provision of adequate health and social measures.
Within the above-quoted recitals of the WHO constitution it seems important to underline those aspects related to possible compensation schemes. Firstly, health which had been defined in a broad manner encompassing physical, social and mental well-being of an individual, is being regarded as a human right. Secondly, governments are responsible for the health of their peoples with the requirement to provide adequate health and social measures. Thirdly, the WHO constitution also requires co-operation among individuals and public authorities. Fourthly, right to health contains a profound international dimension—the health of all peoples is conducive to the attainment of global peace and security, and vice versa unequal development and disparities in health promotion in different countries may be regarded as a common global danger. Within this context the establishment of the World Health Organization (Treaty signature in July 1946, entry into force in April 1948) was designed as a vital action in order to promote co-operation among the
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Contracting Parties, with the aim of protecting the health of all peoples. A similar notion on health as a human right contains Universal Declaration of Human Rights adopted in 1948— art. 25 of UDHR elaborates upon health entitlements alongside other social benefits’ claims, namely: Art. 25 1. Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. 2. Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.
Universal Declaration on Human Rights was originally intended as a declaratory, legally non-binding instrument, an aspirational but not legal document (Brown 2016, pp. 34–35). Nevertheless it is claimed that nowadays the Declaration forms part of customary international law. Thus it could be used as a template for national legislation in order to provide a continuum between the international standard of human rights and protection under public and in particular constitutional law in particular countries. Moreover, it must be underlined that international human rights treaties are complemented with regional instruments—like the European Convention for the Protection of Human Rights and Fundamental Freedoms, the American Convention on Human Rights, the African Charter on Human and Peoples’ Rights. Within this regional focus on geographically identified human rights treaties, a special attention should be given to the Cairo Declaration on Human Rights in Islam adopted in 1990, which was developed more within religious and not solely geographical context. The Cairo Declaration contains provisions on a human right to medical care, namely: Art. 17 (a) Everyone shall have the right to live in a clean environment, away from vice and moral corruption, an environment that would foster his self-development and it is incumbent upon the State and society in general to afford that right. (b) Everyone shall have the right to medical and social care, and to all public amenities provided by society and the State within the limits of their available resources. (c) The State shall ensure the right of the individual to a decent living which will enable him to meet all his requirements and those of his dependents, including food, clothing, housing, education, medical care and all other basic needs.
This provision is formulated in an analogous manner to the art. 25 of the Universal Declaration on Human Rights. Therefore one may state that irrespectively on the controversies connected to the emergence of a separate Declaration on Human Rights in Islam and the possible
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differentiation between the two documents (Mwamburi and Fahm 2018, pp. 137–138) the specific right to health and healthcare are designed in a similar manner in their substantive construction and parallel in their procedural form. It seems that the emergence of the Cairo Declaration on Human Rights in Islam prompted the international community to adopt (by consensus) the Vienna Declaration and Programme of Action within the World Conference on Human Rights held in Vienna in 1993. The aim of the conference and its subsequent document was to strengthen the normative force and uniform understanding of human rights regime. Vienna Declaration emphasizes equal importance between human rights of civil, political, economic, social and cultural nature, stating explicitly in art 1, par. 5 that: All human rights are universal, indivisible and interdependent and interrelated. The international community must treat human rights globally in a fair and equal manner, on the same footing, and with the same emphasis. While the significance of national and regional particularities and various historical, cultural and religious backgrounds must be borne in mind, it is the duty of States, regardless of their political, economic and cultural systems, to promote and protect all human rights and fundamental freedoms.
Commenting on the impact and significance of the Vienna Declaration one may underline the dual consequences stemming from the above document: on the hand Declaration stresses the importance of universality and indivisibility of human rights, on the other hand it recognizes the significance and validity of cultural, historical and religious peculiarities of the states. This dual dilemma reflects the present difficulties to unite international community within a uniform human rights document embedded with a normative legal force. Moreover, it should be borne in mind that declarations in international law are understood as non-binding instruments and examples of soft law (Blutman 2010). Vienna Declaration underlined the importance of the Universal Declaration of Human Rights as a source of inspiration and a basis for the United Nations Organization in the subsequent development of international human rights instruments, in particular the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. As far as the substantive content of the right to health is concerned the relevant international law provisions contain the direct and clear requirement of national authorities to provide “the highest attainable standard of health”. It is the International Covenant on Economic, Social and Cultural Rights of 1966 that stipulate human right to health and right to healthcare in the following terms: Art. 12 1. The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.
D. Bach-Golecka 2. The steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for: (a) The provision for the reduction of the stillbirth-rate and of infant mortality and for the healthy development of the child; (b) The improvement of all aspects of environmental and industrial hygiene; (c) The prevention, treatment and control of epidemic, endemic, occupational and other diseases; (d) The creation of conditions which would assure to all medical service and medical attention in the event of sickness.
Hence, there is no uniform standard of health protection as the requirement of “highest attainable” level of health protection is by its very nature a specific standard, based on available resources within the economic and social level of development of a given country. Therefore such phenomena as waiting lists for medical treatment, deficits of quality of healthcare, limitations of access to healthcare should be viewed within a particular situation of the institutional provider of healthcare. According to the General Comment No. 14 of the United Nations Committee on Economic and Social Rights the right to health should be understood as including the characteristics of availability—functioning public health facilities, goods and services indispensable in healthcare have to be available in sufficient quantity within a given country.2 Moreover, those health facilities should be accessible—in the sense of equality of treatment (non-discrimination), physical (geographical) vicinity, economic affordability and information accessibility. Another criteria that all health facilities, goods and services should comply with are acceptability in the sense of being respectful of medical ethics and culturally appropriate, and quality in the sense of being scientifically and medically appropriate and of good quality. One may wonder whether there is no absolute or minimum content of the right to health? Is this right a purely subjective provision that is subject to diminishing evolution in its substantive part in situation of financial crisis or radical economic poverty of a state? The concepts of “minimum core” or “minimum essential levels” pertain to obligations which are of a nonderogable character, constituting presumptive legal entitlements and obligations of strict liability (Young 2008, p. 115). General Comment No. 14 stipulates minimum essential levels of the right to health, including essential primary 2 Facilities necessary for implementing the right to health are varied in their nature and include such determinants of health as safe and potable drinking water, sanitation infrastructure, hospitals and healthcare clinics, essential drugs (scientifically approved and unexpired) and trained medical personnel with domestically competitive salaries. It seems therefore that the notion of medical malpractice should be related to the possible infringements of the above-stated requirements of health availability; General Comment No. 14, para. 12.
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
health care.3 The core obligations are to be fulfilled primarily and directly by a particular state. In the human rights discourse however, an issue of extraterritorial scope of economic, social and cultural rights has been debated, focusing on the principle of responsibility and the need to provide international assistance and cooperation (Langford et al. 2013; de Mequita et al. 2010; Skogly 2006). Therefore it is possible to distinguish the category of individual and collective spheres of engagement of public authorities within the implementation methods of the right to health.4 This obligation of international cooperation seems to be of vital importance for those states with economic deficiencies as for them external assistance may prove crucial for fulfilling the obligation of providing healthcare. Therefore the category of the so-called core obligations of states within the basic obligation to ensure the highest attainable standard of health is connected to this extraterritorial perspective of mutual responsibility of the international community.5 It seems that the normative situation without such an international extraterritorial involvement in human rights issues may result in questioning the very legitimacy of human rights regime. Then one may question the effectiveness of the human rights regime as a means of combatting inequalities and providing for social and economic justice (Moyn 2018). According to human rights scholars social inequalities result also in health inequalities (Marmot 2015). The United Nations Committee on Economic and Social Rights has issued various statements concerning the recommended human rights implementation techniques (General Comment No. 3, General Comment No. 14). Hence it seems beneficial to provide certain commentary upon them. Firstly, it is vital to place implementation obligations within the broader perspective of progressive realization of those obligations acknowledging also the constrains due to the limits of available resources. Secondly, there are—nevertheless—various obligations which are of immediate effect. In relation to the right to health states are under the obligation to guarantee that the right will be exercised equally, without discrimination of any kind. Steps taken by states should be deliberate, concrete and targeted as expeditiously and effectively as possible towards the full 3
General Comment No. 14, para. 43. This conclusion is strengthened by precise statement of the art. 2 para 1. of the International Covenant: “Each State Party to the present Covenant undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislative measures.” 5 The idea is based upon the soft law document adopted in September 2011 entitled Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights (BachGolecka 2014; De Schutter et al. 2012). 4
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realization of the health right. The possibility of taking retrogressive measures is strongly limited and allowed only in situations when those measures are duly justified, after most careful consideration of all alternatives in the context of full use of maximum available resources. In relation to the right to health, state authorities should concentrate on three types of obligations: firstly, the obligation to respect requires states to refrain from interfering directly or indirectly with the enjoyment of the right to health; secondly, the obligation to protect requires states to take measures that prevent third parties from interfering with the right to health guarantees; thirdly the obligation to fulfil contains more detailed obligations to facilitate, provide and promote. This last type of obligation is the most elaborated one containing specific requirements to adopt appropriate legislative, administrative, budgetary, judicial, promotional and other measures towards the full realization of the right to health. Summarizing the above-presented remarks on the international human rights regime on healthcare provision it must be stated that the need to provide for compensation schemes and various alternatives to judicial proceedings in case of medical malpractice may be regarded as one of the factors conducive to respecting the international standard of health protection. While the right to health and right to healthcare had been enshrined in various international human rights treaties, implementation activities are reserved for national authorities. Therefore there is no uniform technique that is intended to execute the right apart from some monitoring competences of human rights agencies. Therefore, state parties to international human rights treaties are obliged to comply with those reporting procedures in order to induce a proper implementation of human rights provisions.
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Patient as a Consumer of Healthcare Services
The construction of international standard of health protection is based upon two pillars: on the one hand it is possible to discern the obligation of public authorities to organize health system and provide healthcare for the entire population of a particular country, on the other hand there is also an individual entitlement to health. The meeting point of those two perspectives: collective and individual, active and passive, provider and recipient sides—may be a healthcare service understood as an organized action aiming at health recovery and improvement of health condition of an individual patient. There are multifaceted new phenomena in the arrangement of healthcare that have a profound impact on the contemporary medical practice. Firstly, one may point to the increasing usage of new technologies in medicine (Reiser 2009), the impact of prospective involvement of artificial intelligence (Fosch Villaronga 2019) and consequences of
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processing big data in healthcare (Panesar 2019; Natarajan et al. 2017). Secondly, the current characteristics of healthcare policies may be depicted as a parallel and somehow paradoxical process of the pressing need to increase the level of financial means devoted to healthcare alongside the necessity to respect and implement financial constraints (Olsen 2009; Costa-Font et al. 2009). Thirdly, a recent phenomenon in healthcare is a new position of patients within medical environment, resulting in a modified vision of doctor-patient relationship and consequently in a changed construction of the healthcare service. The primary characteristics of the novel patient construction is her or his increased confidence and rise in healthcare knowledge (“doctor Google effect”), resulting in patients’ empowerment. The phenomenon of empowered self (Franck 1999) may be linked to the philosophical theory of individualism, based upon the principle of self-determination within the individual sphere. Self-determination means an ability, capability and willingness to create one’s identity, desire to self-construct oneself. An individually constructed identity may be connected to such legal issues as the choice of education, profession, place of residence, citizenship, name or surname, sex and sexual preferences, opinions, beliefs or religion, etc. A similar series of effects of the rise of an individual occur also within the sphere of healthcare; and the most profound of them may be described as the “democratization” of healthcare relationship connected to the demise of paternalism between physician and the patient. The contemporary evolution aims at treating both parties of the medical relationship as equal in their competence to make valid decisions concerning prospective treatment: the authority of physician is based in her or his professional qualifications, the patient’s competence is rooted in the construction of informed consent procedure. Therefore the current process of providing healthcare resembles more a scientific endeavour than solely bilateral communication, it is being performed within multilateral healthcare personnel dimension and co-shared decision-making, alongside many lines of internal communication (Malby and Anderson-Wallace 2017). Within the literature dealing with patients’ rights, elaborating in particular upon norms concerning informed consent, one may distinguish two major reasons for non-truthful disclosure of information to patients: firstly, promoting the patients’ best interests and secondly, preserving their autonomy (Cheng 2015). Nevertheless it seems that the reason connected to the protection of patients’ best interest is not regarded as a legitimate ground for non-disclosure of information or for providing misinformation, as it is argued the notion of best interest is based upon the principle of paternalism. Physician may understand best interest of a particular person in a different manner than the person himself/herself. Therefore, non-truthful disclosure of information
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should be limited solely to those situations when truthful disclosure would be conducive to limiting patients’ autonomy. On the other hand, providing for incorrect information to the patient may be regarded as a treatment error. In particular, information about errors or failures in treatment may be regarded as falling within the duty of providing all relevant information on the medical course of action. Physicians should hence adhere to self-determination education, within the meaning of fostering patients’ autonomy. In this vision patients should be treated “(. . .) as adult who are capable of understanding that medical treatment is uncertain of success and may involve risks”.6 Taking the above remarks into account one may conclude that the shift has moved from a reasonable physician standard to a reasonable patient standard—or the dual standard of reasonableness placed upon both parties to the medical treatment case. Within this context Olivier Quick indicated the transformation of the standard of professional dominance into an urge of patients’ safety (Quick 2017). This is a significant challenge that should require modified regulatory approaches to legal standards, education, training and culture conducive to improving patients’ safety, with an increased participation of patients themselves and their carers in securing their safety as the primary aim of healthcare treatment. The emphasis on safety may be embodied in designing safety management systems in hospitals, but also in collecting records on medical errors. It seems that those instances of medical malpractice must be examined and analysed in order to enhance safety in healthcare provision. The analysis of contemporary healthcare relationships show certain features that may prove crucial within the process of identifying patters of compensation arrangements and extra-judicial solutions in case of medical malpractice. The current model of healthcare seems to be based upon six main elements:7 firstly, the growing importance of medical knowledge; secondly, the need to provide appropriate level of care for patients; thirdly, the necessity to ensure efficient communication along double lines of patients and professionals. Two other elements deal with professional requirements: fourthly, the need to ensure professional standards of ethics and responsibility in the provision of healthcare and fifthly, the necessity to include practice as essential component of healthcare provision. Medical practice should be based on patterns of treatment, teaching and learning from medical records. Lastly, as a sixth point of current healthcare model one may discern a proper empathic pro-patient attitude within 6 Montgomery v Lanarkshire Health Board [2015] UKSC 1; [2015] AC 1430. 7 I am grateful to Prof. Patricia O’Sullivan, Director of Research and Development in Medical Education at San Francisco School of Medicine, University of California, for bringing my attention to those important elements of healthcare model.
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the system, advocating for them as clients, consumers and final recipients of medical services. Another possible impact of patients understood as individual consumers of healthcare services is the phenomenon of medical tourism (Glenn Cohen 2015; Hall 2013) which may also be analysed within the specific goal of healthcare— i. a. reproductive aims (Paraskou and George 2017) or suicide attempts (Sperling 2019). A specific type of medical tourism is the development of cross-border healthcare in the European Union, providing for individual mobile patients an alternative route of access to healthcare services.
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European Union Law Perspective
The right to health and right to healthcare within the European human rights framework is regulated in the provisions of the Charter of Fundamental Rights of the European Union, which stipulates in the art. 35 the entitlement of an individual within the interrelationship of domestic law and European law, namely: Art. 35 Everyone has the right of access to preventive health care and the right to benefit from medical treatment under the conditions established by national laws and practices. A high level of human health protection shall be ensured in the definition and implementation of all the Union’s policies and activities.
Moreover, the impact of European Union health law upon the subject of compensation schemes and extra-judicial solutions in case of medical malpractice may be visible upon three decisive normative frameworks. Firstly, the influence is visible within deep involvement of patients as consumers of healthcare in the formation of a European regulatory framework; secondly the impact is connected to the case-law of the Court of Justice of the European Union within the so-called “medical line of adjudication” (BachGolecka 2015), stipulating possible standards of providing healthcare; and thirdly, it is linked with the process of gradual cooperation on health technology assessment. Within the first level, focused upon patients’ involvement perspective, it has to be underlined that the emergence and integration of EU health law may be connected to the direct involvement of active, conscious and “belligerent” European citizens, convinced about their rights stemming from the internal market fundamental freedoms and prepared to fight for their proper implementation and application in domestic legal regimes (Eigmüller 2013). Moreover, increased mobility of European citizens raised the importance of providing an adequate legal framework in order to guarantee their access to the necessary medical treatment while temporarily staying outside their member state of origin. It is the impact of those individuals’ actions which initiated judicial proceedings leading to direct involvement of the European
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institutions, such as the Court of Justice of the EU, European Commission, Parliament and the Council. Those institutions had actively engaged in a legislative process resulting in the adoption of the directive 2011/24/EU of 9 March 2011 on the application of patients’ rights in cross-border healthcare (“Mobile Patients’ Directive”). Within the second perspective based on the process of a medical line of adjudication of the European court one may mention such judgments as in the joined cases C-286/82 and C-26/83 Luisi and Carbone, the case C-159/90 Grogan and the milestone verdicts, commencing the development of an affluent line of subsequent rulings of the Court, in the cases of C-120/95 Decker and C-158/96 Kohll. Those judicial proceedings were initiated by the European citizens who firmly believed in the validity and importance of the Treaty provisions on internal market fundamental freedoms while the Court insisted and consistently repeated its original decision to include medical services as services regulated by the EU norms, irrespectively of domestic arrangements concerning the functioning of healthcare systems in the member states.8 In particular, the Court of Justice of the EU stressed responsibilities of the member states for the determination of their health policy and underlined that the process of organization, functioning and delivery of medical care and health services (art. 168 par. 7 TFEU) is not immune from the influence stemming from the EU law. Hence, public authorities engaged in realizing those competencies of the member states, should take into account basic tenets of the freedom to provide services. On the other hand, according to the standpoint of the Court of Justice, specific character of healthcare provision may justify the usage of the overriding reasons of general interest. The Court had identified in this aspect such interests as planning requirements relating to the aim of ensuring sufficient and permanent access to a balanced range of high-quality healthcare treatment in the member state; the wish to control costs of healthcare and to avoid, as far as possible, any waste of financial, technical and human resources. An important statement of the Court of Justice of the EU relevant for the subject of compensation schemes and extrajudicial solutions in case of medical malpractice comes from the judgment in joined cases C-157/99 Geraets-Smits and Peerbooms. The statement concerned the possible standard of medical treatment that should be used by domestic 8
Therefore the Court developed specific rights and requirements, both for services providers and services recipients, on specific character of hospital treatment (in the case C-368/98 Vanbraekel; joined cases C-157/99 Geraets-Smits and Peerbooms; case C-8/02 Leichtle), on procedural provisions concerning prior authorization (in the joined cases C-385/99 Müller-Fauré and Van Riet; case C-56/01 Inizan; case C-145/03 Annette Keller; C-372/04 Watts) and in the most recent caselaw, on the situation of insufficient resources in the healthcare system (in the case C-173/09 Elchinov; case C-268/13 Petru).
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authorities in the process of healthcare provision. The facts of the case seems relevant here: Mr Peerbooms, a Dutch citizen, fell into a coma following a road accident, in December 1996. He was taken to the hospital in the Netherlands, and transferred in a vegetative state to the clinic in Austria in February 1997. According to judicial summary of the case, the Innsbruck clinic gave the patient special intensive therapy using neurostimulation. As a result of this treatment Mr Peerbooms came out of the coma, was able to leave the Austrian clinic in June 1997 and was transferred to the clinic in Netherlands to continue his rehabilitation. Within the administrative proceedings concerning crossborder medical treatment the Dutch healthcare authorities refused however to pay for the treatment Mr Peerbooms received in Austria stating that the neurostimulation technique should be regarded as an experimental procedure. It was used in the Netherlands only at two medical centers and solely for patients under the age of 25 years. Hence Mr Peerbooms who at the time of accident was 35 years old, was not a patient entitled to receive this treatment, and his request to refund the therapy that proved medically efficient had to be rejected. According to the explanations provided for in the files of domestic court submitted to the Court of Justice of the EU, the refusal was based on the fact that, owing to the experimental nature of therapy using neurostimulation and the absence of scientific evidence upon its effectiveness, that type of treatment should not be regarded as normal within the professional circles concerned nor, consequently, as a healthcare benefit qualifying for reimbursement. The Court provided for remarks explaining the meaning of proposed medical or surgical treatment regarded as “normal in the professional circles concerned” (par. 83–98 of the judgment). The Court underlined that it is for the legislation of each member state to organize its national social security system and to determine the conditions governing individuals’ entitlement to benefits. In particular, a member state inspired with the aim of reducing financial costs of healthcare provision, may establish a limitative list excluding certain medical products and services (including specific hospital treatment) from reimbursement under its social security scheme. According to the Court, the European Union law may not in principle have the effect of requiring a member state to extend the list of medical services available and to be paid for by the social insurance system. The influence of the Union law is of an indirect character and thus member states must not disregard the European provisions; instead they should construct domestic lists of medicinal products in accordance with objective criteria and without reference to the origin of the products. National authorities are not allowed to justify their reimbursement decisions in a discretionary manner.
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The Court underlined the conclusions from the settled case-law that national derogations from fundamental freedoms, and in particular freedom to provide services, must be based on objective, non-discriminatory criteria, which are known in advance, and should be exercised without discretion or arbitrariness. Domestic procedures must ensure that requests from private parties are dealt with objectively, impartially, within a reasonable time and refusals to those requests are capable of being challenged in judicial or quasi-judicial proceedings. The precise meaning of proposed medical or surgical treatment regarded as “normal in the professional circles concerned” should therefore be clearly determined as otherwise it could be left open to a vast array of interpretations. In this context two major lines of interpretation are possible: national vision, according to which regard should be taken to those healthcare activities which are considered normal only in the national medical circles; and international vision, according to which regard should be taken to the state of international medical science and medical standards generally accepted at international level. According to the Court of Justice of the EU the latter vision is a correct interpretation of the phrase “normal in the professional circles concerned” on the basis of which the relevant circle is international medical science. In particular, member states should take into consideration all the relevant available medical information, such as scientific literature and studies, authorised opinions of healthcare specialists. It seems that from the institutional point of analysis it was the activism of the European Court that has provoked public debate concerning the scope of interference of the EU law on the provision of healthcare in the member states and led to the subsequent codification of case-law within the adopted Mobile Patients’ Directive (Greer 2013). The first conclusions of directive’s application in the member states stress the importance of territoriality in the organization of healthcare (Vollaard 2017) and lack of profound judicialisation of healthcare policies in selected member states (Martinsen and Dias-Asensio 2017). The Mobile Patients’ Directive itself aims at securing the individual right of access to healthcare, a medical treatment that could be provided at a proper time and in a proper quality, corresponding to the needs of an individual patient. Nevertheless in the doctrine of European law there are various opinions as far as the normative force of the right of access to healthcare is concerned. Sometimes it is claimed that the individual right to healthcare in EU law may be treated as a kind of “escape route” for patients wishing to get access to medical services of better quality in the member states other than the member state of patients’ origin. Hence, EU law provides for a different option in the application of the right to health: instead of relaying and being subjected to the real conditions and deficiencies of domestic healthcare
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
system, an individual is able to use and benefit from better healthcare systems in the other member state. An individual patient plays here an active role in designing a course of medical treatment and the choice of healthcare provider, and is not limited in those actions by possible inadequacies of domestic medical system. A major drawback however seems to be the financial requirement of the regime designed for in the Mobile Patients’ Directive, requiring the patients to finance themselves their access to medical services in other member states, subject to specific refund provisions. Another opinion on the normative force of the right to healthcare in EU law underlines that the right is still in the process of emergence, in statu nascendi, hence the vital role and impact of the Mobile Patients’ Directive lies not in its substantive provisions but rather within its procedural and administrative requirements which strengthen the institutional position of an individual vis-à-vis the authorities of the member state. Within the third perspective of the possible impact of European Union health law upon the subject of compensation schemes and extra-judicial solutions in case of medical malpractice, the process of gradual cooperation on health technology assessment should be examined. It seems that the provisions of Mobile Patients’ Directive aiming at the increased co-operation of the member states, especially within the process of e-health (telemedicine), rare diseases, reference networks and prospective standardization, may serve as a platform for the future development of crossborder healthcare in the European Union. The directive stresses the importance of the phenomenon of constant progress in medical sciences and health technologies, resulting both in opportunities and challenges to the health systems of the member states. It seems that initiating a voluntary process of cooperation in the evaluation of new health technologies may bring positive financial results through economies of scale and avoidance of duplication of assessment efforts. Moreover, the Mobile Patients’ Directive stresses the importance of mutual assistance among the member states, including cooperation on standards and guidelines on quality and safety of healthcare services. In particular, it is possible to use the instrument of European reference networks between healthcare providers and centres of expertise in the member states (art. 12 of the Mobile Patients’ Directive). Those networks should facilitate cooperation in order to exploit innovations in medical sciences and health technologies, to ensure mobility of expertise (in a virtual or physical manner), to develop, share and spread information, knowledge and best practices in the process of diagnosis and treatment. A vital provision concerning European reference networks deals with their goal of encouraging the development of quality, safety benchmarks and best practices. It seems therefore that the process of gradual evolution of the possible
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standards in the provision of healthcare within the European Union may be linked to voluntary cooperation and assistance among the member states, based upon the specific provisions on reference networks and procedures on health technology assessment. Those provisions are not obligatory for the member states, hence the process would not lead to unification of the European standard of healthcare. Nevertheless the process which adopts mechanisms of soft-law (Terpan 2015; Blutman 2010) may prove conducive to the gradual identification of common European standard of healthcare.
5
Dealing with Medical Malpractice
The above reflections were focused upon the process of gradual development and identification of the standards of medical care within international human rights law and within regional European law perspective. The relevant provisions pinpoint obligations of public authorities within the provision of healthcare towards the population of a particular political community and also determine the appropriate level of available medical care. It seems that this standard of care is not completely subjective and subordinated to the specific conditions of an individual state but is rather dependent upon the universally adopted standard of medicine within international academia of healthcare sciences. Therefore it may be stated that this scope of analysis was a public one, with a primary focus on the conditions and requirements for a proper functioning of the healthcare system in a given state. One may state that the relevant standard of care of professional physicians is to be determined within domestic perspective, in accordance with inner regulations specifying the required standard. It seems that the obligation is structured as the obligation of means in order for physician to pursue appropriate course of actions, rather than to provide a specific result—to cure a patient or to deliver a requested medical outcome.9 Nevertheless one may state that the concept of inner standard of medical care is still an imprecise notion as it does not include the identification of those entities which are entitled to settle the appropriate standard: should this competence be left solely to medical professional circles or should the standard by determined by forces outside the profession, such as the government (public authorities), private health insurers or judicial system? In case of adopting the first solution and designating professional medical 9 There is a possibility to include a contractual obligation by healthcare provider to achieve certain outcome, most often in case of aesthetic medicine. In Europe, especially in German speaking countries, this type of healthcare activities is not deemed in high esteem within professional medical circles which may result in low social acceptance, with simultaneous paradoxical increase in the number of patients (Brandl and Schrader 2019).
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associations to articulate medical practice guidelines, the action could serve twofold aims (Mehlman 2012). On the one hand, guidelines would provide a positive function in order to define the appropriate standard of care within codes of good practices or codes of medical ethics, and on the other hand would define negatively the so-called “safe harbours” allowing avoidance of malpractice liability by those physicians who demonstrated that they had complied with the prescribed guidelines. It is vital to underline that both procedures which may be adopted in order to define the appropriate standard of care may possibly result in negative phenomena. In case of selecting the entities outside the professional medical circle the required standard may be provided in an economically unrealistic, technically difficult, too lax or too severe manner to be used by physicians. In case of selecting the entity responsible for defining the medical standard within the healthcare professionals, the problems with identification of a single standard emerge as well as providing the guidelines with a normative force, higher than soft law binding status. It seems that the middle option, of identifying the requested standard by physicians with the prospective collaboration of public authorities may be regarded as a means of avoidance of the above-presented drawbacks. As the standard of care is recognized as being determined with regard to the external circle of medical professional experts one may question what is the procedure for its precise identification. It seems that there is no generally accepted standard of care within the international sphere hence this process is being left to determination by public authorities of the particular state. The process of identification may be conducted with the aim of legal acts adopted by legislature, focusing on overall conditions of performing medical practice. The scope of standard of care within healthcare services may also be determined with the aid of inner professional regulations, provided for by medical professional authorities (medical self-government) and granted subsequently legal validity by public authorities of the state. One may also discern the other possible method of determination of the required standard of care, with the involvement of medical experts in judicial proceedings, and identification of the medical practice (and reversely, malpractice) by judges on caseby case basis. It should be underlined that recognition and determination of the standard of medical care identifies the sphere of required medical practice, and subsequently, malpractice. Hence one may define the notion of “medical malpractice” as an instance of a seriously relevant infringement of medical practice, determined with regard to the required standard of care. The situation of medical malpractice is ex definitione specific, rooted in a particular instance of the provision of medical services to a given patient by individual healthcare provider or a group of healthcare providers, in a determined
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medical unit, with a usage of specific medical products in order to provide an individually identified course of treatment based on previously chosen healthcare techniques. In particular, a situation of medical malpractice may result from infringement of physician’s professional duties concerning provision of appropriate medical treatment, informing and advising patients and showing care, assistance, vigilance and support. Still one must admit that an instance of medical malpractice possess a radically different dimension as it is based upon the private impact of a particular relationship between healthcare provider and healthcare recipient. Hence the examination of the subject of medical malpractice and means designed to cope with this negative phenomenon seem to vary substantially from the previous analysis, based upon the study on international human rights law and European Union legal regime. In contrast, the medical malpractice study is focused primarily upon the concrete instruments and regulations adopted within particular legal regimes, with the aim to offer retribution, compensation, or reconciliation mechanisms for damages resulting from healthcare. This remark directs the medical malpractice analysis into the realm of private law with the essential and necessary comparative perspective. Therefore it is possible to distinguish separate proceedings designed to analyse situations of medical malpractice and to cope with their negative consequences. Firstly, one may indicate criminal prosecution procedures with the aim of providing sanction for a criminal offence, resulting within the medical milieu with gross negligence manslaughter or other criminal assault. In most of the instances damage to patients’ health results from carelessness and error of the healthcare practitioner. The prospective criminal sanction is designed in order to fulfil such fundamental goals as providing retribution, determining a proportionate punishment and serving preventive function. Nevertheless, it must be stated that the use of criminal law within the medical context is sometimes questioned (Herring 2012, pp. 104–105), arguing that carelessness seems to be an insufficient basis for criminal liability. Therefore one may think in this context rather about professional disciplinary proceedings which may perform similar functions as criminal law procedure. Disciplinary proceedings vary however from the ordinary criminal law procedure with their highly specialized content, focused upon medical standards, performance and outputs. Hence those may be described as a medical procedure designed in order to provide for effects very similar in their content to those used in the ordinary criminal procedure but applied within the specialized, medical context (Healy 1999). One may state that the benefits of professional medical disciplinary proceedings are of a twofold nature: on the one hand the construction of procedure seems specialized,
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
efficient, and focused on the particular character of providing healthcare treatment, on the other hand this very same medical specialization may lead to negative phenomena connected to the ill understood professional group solidarity, resulting with possible lenient attitude of the corps entrusted with the task of providing judgments and sentences. The closed character of those groups, inner circles of medical professionals involved in the disciplinary proceedings, may lead to those negative consequences. It seems that the possible remedies are situated within the use of transparency principle, ensuring media coverage of debated cases and building of an institutional memory of disciplinary bodies. Hence this professional medical procedure may perform the attributable positive functions. The third option of dealing with instances of medical malpractice, apart from the criminal law proceedings or a procedure based upon professional medical disciplinary involvement, is connected to the broad sphere of civil law. Within this context one may discern two generally adopted procedures: firstly, traditional judicial proceedings based upon the involvement of judiciary in the resolution of the particular case of medical malpractice and damage resulting from healthcare, and secondly compensation schemes based upon the idea of substituting judicial proceedings with the involvement of other expert bodies then judiciary and using the procedures of a partly civil and partly administrative character, focused on no fault regimes of compensation. Nevertheless, it seems proper to conclude that the contemporary evolution of domestic regulations focused on the civil law procedures dealing with instances of medical practice within the above-presented two fundamental sections may, for the clarity of analysis, be formally divided into two units: one based on judicial involvement and the other situated within compensation schemes. The interrelationship between the two proceedings is a complex one as in many cases it was the inefficiencies of judiciary method of dealing with medical malpractice that led to the emergence and subsequent development of compensatory regimes. The other characteristics positioning judiciary and compensatory procedures as different regimes is the clear, private law foundation of judicial proceedings and a mixed, civil and administrative foundation of compensatory regimes. The dynamics of the contemporary process within the regulatory activities of public authorities indicate certain preference for the adoption of compensation schemes in order to cope efficiently with the growing number of cases with medical malpractice and damages resulting from healthcare. There are still some additional remarks to be done to supplement the proposed division of procedures designed to address instances of medical malpractice, namely: criminal law proceedings, professional medical disciplinary involvement, civil law judicial proceedings and compensatory regimes. Firstly, one has to mention the increased importance
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and growing usage of the alternative methods of dispute resolution in medical cases. It seems that this phenomenon may be linked to the analysed above evolution of patients as consumers of healthcare services; evolution which tends to transform the patients’ status, from a passive, non-expert and partially subordinated party of healthcare relations into an active, partially expert and equal party of healthcare relations. The consequences of this evolution are visible also within a procedural sphere connected to the determination of methods in order to deal with instances of medical malpractice. The growing adoption and usage of alternative methods of dispute resolution in medical cases seems to correspond to the newly identified and recognized needs of patients which do not fit properly into traditionally determined divisions of criminal and civil law. Those needs are based upon psychological, emotional, empathetic and spiritual dimension of medical services and hence they may be addressed within all identified procedures designed to deal with instances of medical malpractice. In this sense, those needs and alternative methods adopted to address them are cross-cutting the boundaries of traditional legal procedures and hence they may be visible within all identified procedures. The second remark to be addressed within the procedural analysis of methods designed to deal with medical malpractice is the growing importance of claims which would not concern “individual” ill performance of a professional healthcare practitioner but would rather deal with general systemic elements of healthcare system, endangering the proper functioning of the system and resulting in instances of malpractice towards particular patients. One may focus within this general approach upon the notion of institutional healthcare provider responsibility (hospital, medical units and their managerial staff), institutional medical products provider responsibility or general responsibility of public authorities to organize a properly functioning healthcare system, able to provide medical services of a proper quality at a proper time for all individual members of a political community. Within this last aspect such phenomena may be analysed as waiting lists for particular medical treatment, discriminatory differentiation in access to healthcare services and access to services of a good quality. Moreover, one may focus upon instances of infringement of monitoring functions of public authorities, in situations of exercising medical profession without necessary healthcare qualifications. There are also possible instances of maladministration, corruption or fraud in healthcare system that may be analysed within the broad concept of medical malpractice in the institutional sense. The competences of public authorities are connected to their sphere of functional autonomy as far as the design and organization of a particular healthcare system are concerned but it must be underlined that instances of malfunctioning of the system may also result in damage resulting from healthcare of a particular patient.
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It may be stated that situations of medical malpractice may also result as an effect of various interrelated factors, connected both to the particular person of healthcare provider and the medical institution of service provision. Within personal factors one may indicate such elements as professional qualifications and state of medical knowledge of a physician, choice and provision of healthcare treatment in accordance with the medical state of art, maintaining a regular and informed dialogue with patients, in accordance with informed consent requirements and provision of healthcare with due diligence and care. Within institutional factors (single healthcare unit perspective) one may indicate such elements as providing the necessary resources, healthcare equipment, drugs, medical products and other means available to a particular physician being engaged in the course of treatment. Within institutional factors (general healthcare provision perspective) one may indicate such elements as respecting planning requirements in the process of organizing healthcare system, in connection to medical schools, geographical location of hospitals and other healthcare units, appropriate distribution of human, technical and financial resources in accordance with general healthcare needs of a given population of a particular territory. There are differences between patients and physicians as far as the final outcome of medical malpractice litigation is concerned. Both players usually have heterogeneous beliefs about the final judicial resolution of the case: patients tend to be more optimistic and doctors more pessimistic when the severity of injury is higher, still the joint optimism diminishes as severity increases. Those factors may have an impact on the settlement probability and amount of total compensation granted by the court in particular medical malpractice case (Merlo and Tang 2019). The scope of analysis contained in the present volume is limited to selected aspects of procedures and methods dealing with medical malpractice. It concerns the means that are most interesting, relevant and actively used by public health authorities within the contemporary comparative perspective. Therefore the reports included in the volume, based on the examination of domestic regimes alongside the questions and topics provided for in the questionnaire, are focused primarily upon two carefully selected issues: firstly, the functioning of compensation schemes treated as alternatives to court proceedings, and secondly, the usage of alternative means of dispute resolution treated as extra-judicial solutions. Other proceedings based upon the criminal, disciplinary and civil procedures are analysed too, still the scope of examination is of a supplementary and complementary character. The choice of the main topics of comparative analysis seem to be legitimized procedurally, by the broadly recognized phenomenon of inefficiencies in judicial proceedings and substantively, by growing importance and “empowerment” of patients as active consumers of healthcare services.
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6
Compensation Schemes
The first compensation schemes were introduced in New Zealand (1974) and in Europe most consistently in Scandinavian countries. In those and other jurisdictions the introduction of compensation schemes in case of medical malpractice was motivated by various reasons still it is possible to find those factors that were common to different countries (Bączyk-Rozwadowska 2013). Within the literature dealing with medical liability a phenomenon of “malpractice crisis” was identified and linked to inefficiencies of the traditional civil law procedures based upon judicial decisionmaking competences. Those negative aspects concerned the prolongation of judicial proceedings, high financial costs of trial for patients participating in those proceedings, with the economic burden of legal representation (contingent fees) incumbent upon them, uncertainty as for the judicial result prospectively granting, restricting or even refusing compensation for victims of damages resulted from healthcare services. One could evaluate such situation as limiting access to justice for patients. In general those factors resulted in a very low number of medical judgements positively granting compensation for patients-victims of medical malpractice. In this context one may also indicate other factors contributing to the negative evaluation of judicial litigation in case of medical malpractice, such as profound cognitive problems connected to the technical and highly specialized language used widely within the texts of medical expert opinions, lack of access for potential victims of medical malpractice to the necessary records and documentation on applied treatment, or a phenomenon of solidarity of healthcare practitioners unwilling to testify to the detriment of their colleagues. Another negative phenomenon was the rise of the so-called “defensive medicine” designed and performed with the primary aim of preventing the rise and recognition of medical liability of healthcare professionals. Defensive medicine may be defined as “departing from normal medical practice as a safeguard from litigation” (Brogiene 2019, p. 37). It may take the form of performing more unnecessary tests, referring patients to consultants or to hospitalization. Many physicians take this attitude as a part of defensive professional culture. The negative consequences of defensive medicine is diminishment in the quality of care and contributing to waste of the limited resources in healthcare sector. The development of defensive medicine may be regarded as physicians’ responsive technique in order to cope with the risk of increased litigation in case of medical malpractice. Those healthcare actions that are undertaken as a means of self-protection by medical staff comprise in various additional unnecessary tests or unwillingness to adopt a particular course of treatment that may be regarded as being too risky.
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
The major negative consequence of defensive medicine is the rise in the financial cost of healthcare; moreover its usage prevents the development of medicine based upon scientific progress made also on errors. Within this context there is still another possible strategy that physicians may follow—apart from engaging in defensive medicine techniques—which is based upon the acquisition of medical malpractice insurance. This latter choice transfers the risk of litigation from physician to the insurer (Antoci et al. 2019). Nevertheless, it must be underlined that within the contemporary healthcare legal literature there is a consistent critique of defensive medicine; moreover, recent approaches to liability reform aims to discourage defensive medicine (Agarwal et al. 2019). Historically compensation schemes for damages resulting from healthcare originated alongside other systems of compensation: firstly, one can mention industrial (work) injuries compensation system, and secondly, road (communication) injuries compensations. One may state that medical malpractice compensation system was designed to complement those two others systems which were connected to most frequent situations of experiencing injuries in situations of everyday life. Hence introduction of systems that were ex definitione designed as containing simple structures and procedures, focused on fast problem-solving of an injured individual, may be regarded as a parallel process. The fundamental aim was to make it easier for a person to receive compensation without a need for him or her to engage in judicial proceedings which were experienced in most cases as being prolonged, expensive, substantively and procedurally complicated procedures and uncertain as their final outcome is concerned. Compensation schemes offered a substantial relief from those negative characteristics of judicial regime. Firstly, those schemes were designed upon the fundamental notion of no fault—and subsequently did not contain a requirement to state fault of healthcare practitioner as a necessary prerequisite to grant compensation. The new idea was to focus solely on an existence and scope of an experienced damage resulting from medical malpractice and the causal link between the damage and actions or omissions undertaken by healthcare practitioners within the course of medical treatment. Secondly, the fundamental construction of compensation schemes was to offer relief to an individual who experienced injury—in the form of compensation designed in order to cope with the damage and oriented as restoring the conditions before the accident (occurrence of damage). Procedurally medical compensation schemes were constructed upon the newly introduced commissions or other collective entities, separate from judicial bodies. The construction idea of those institutions was to include as their members representatives of the groups engaged in the medical situation: health practitioners, lawyers and patients,
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sometimes also insurers. The aim of introducing such a composition of members was to secure the legitimacy of compensation system—in order to be socially regarded as impartial and effective, in the sense of capable of reaching a compromise among the parties most interested in the solution of the case. Secondly, medical compensation schemes were designed as a cost-free, fast and effective procedures, with minimized formal requirements. The third distinctive feature of compensation schemes is its written character, based upon the desire to avoid a direct dispute between the parties involved. Hence, the procedure from patients’ (consumers) side does not require a subsequent contact with health practitioner or health provider. Such an arrangement may be evaluated on a twofold basis. On the one side, it corresponds to the basic foundations of consumer protection law providing for legal regimes oriented towards the protection of consumers’ interests as the weaker side of legal relationship (Micklitz and Saumier 2018). The written procedure and the analysis of the complaint by a collective body, external to the parties of a particular medical service resulting with a health damage, seem to secure the principle of trust between the patient and healthcare practitioner. The proceedings of the compensation commission are based upon the examination of expert opinions provided for by representative of medical profession and individuals not directly engaged in the situation giving rise to compensation complaint. This structural element inevitably is conducive to the smooth and efficient proceedings of compensation commission. On the other hand, one may pinpoint that those structural elements which were designed in order to secure the interests of patients and to enhance the effectiveness of compensation proceedings, may simultaneously be regarded by the very same patients as infringing their entitlements which arose as a result of medical malpractice. The patients may demand a more personal approach towards the issue of compensating for damages caused by healthcare, with their psychological need of securing certain actions of a non-compensatory (non-financial) character. Those actions may involve, i. a. an official statement about the facts and omissions of the case, possible explanations for the emergence of malpractice, assurance of adopting measures in order to prevent the occurrence of similar situations in the future, expression of an apology from the healthcare practitioner. Therefore one may conclude that those emotional needs of patients regarding themselves as victims of medical malpractice may not be properly and sufficiently addressed within the compensation schemes. It is there, however, were the necessity of using complementary mechanisms is clearly identifiable; those empathic instruments are adopted within extra-judicial, alternative means of medical dispute resolution. As for the negative aspects of introducing compensation schemes one may indicate in this context the compulsory
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nature of the scheme and the limitation or loss of the right to sue. As for the financial element of compensation awards, one may argue that due to the systematic reasons the average level of those awards seems to be ex definitione lower than the level of compensations granted in judicial proceedings.10 The arrangement which is commonly used within domestic compensation schemes in particular jurisdiction is based upon the inclusion of limits as for the maximum compensation award in an individual case or the minimal amount of damage under consideration. Therefore there is an intrinsic tension between the fundamental principle of full compensation for damages and the structural element limiting the amount of granted awards (damage caps). The introduction of triviality threshold may be linked to pragmatic, economic aspects of the construction of compensation schemes in order to avoid the necessity of dealing with minimal, non-significant claims. Hence this element of compensatory procedure is based upon the principles of rationality and flexibility granting certain scope of autonomy for the bodies monitoring compliance with particular substantive norms, and allowing them to abstain from dealing with minimal claims (de minimis rule). Another negative aspect of compensatory regimes may be connected to the automatic, mechanic feature of the proceedings which typically do not require direct participation of the parties of the medical relationship in the compensatory proceedings. On the patients’ side this factor results in the lack of addressing emotional and psychological needs linked to the feeling of experienced harm, as well as cognitive demands focused at the process of identification of the circumstances of malpractice. Therefore the performance of apology actions by healthcare practitioner is hindered or even impossible. It seems that those structural elements of compensatory proceedings may lead to prospective rise of parallel criminal or disciplinary claims in order to establish firmly individual active involvement of the members of healthcare staff within the occurrence of health damage. Those claims in principle could be initiated by patients. On the physicians’ side (as well as other members of the healthcare personnel) the formal and indirect character of compensation schemes impedes upon the prospective preventive aspect of compensation schemes. Once again and similarly to the approach experiences by patients, cognitive demands urging for the clarification of the circumstances of a particular damage occurrence, may not be properly and fully satisfied. The overall result is the diminishment of the preventive role of compensatory proceedings.
There is no single, uniform and universal compensation scheme for damages caused by healthcare. Particular compensation regimes vary in their foundational principles and detailed rules of functioning, similarly to the existing differentiation among domestic healthcare systems (Koch 2011). The process of emergence of compensation schemes and their subsequent development and rise in importance are mostly due to the level of inefficiency of the previously existing regimes (malpractice crisis) based upon judicial proceedings and other enforcement procedures, linked to social security systems. Therefore the differences among compensation schemes are based upon the various sets of legitimate types of damages, including relatively modest list of damages to broad catalogues encompassing also negative effects of medical experiments or of clinical drug testing.11 Moreover, it is possible to distinguish specific compensation schemes enacted in order to deal with particular types of healthcare damages, resulting from negative side-effects of vaccinations, specific types of illnesses or applying particular drugs. Specific compensation schemes may also be used by different hospitals, by their voluntary action and with the usage of their compensatory funds. The other perspective of differentiation among compensation schemes is connected to the parties eligible to take an active part in the compensation proceedings, to lodge a complaint and to receive compensation. Moreover, compensation schemes are using various types of compensation awards, based upon single lump sum or upon periodic payments. The other source of possible comparison among compensation schemes arises from the funding source of the system, which may be based within insurance-type of funds, financed from taxes, contributions from healthcare entities, or public budget money. The procedure used in the compensation schemes may resemble a public procedure (a quasi-administrative procedure, like in France), still without much of the bureaucratic burden. A certain type of nucleus of compensation scheme may be visible in the collective arrangements provided for within judicial systems, aiming at establishing a common methodology for courts to determine an appropriate (just and decent) level of compensation in cases of damages resulting from medical malpractice (pain, suffering, loss of faculties, amenities, rules on possible increase or decrease in compensation in a particular case). Such an arrangement is based on the methodology developed in the Czech Republic in 2014 by group of experts. One may question the normative force of such extra-judicial and extra-legislative arrangements still in practice the impact of such arrangements may be vital for ensuring the parallel outcome of judicial compensation
10 This argument may be evaluated on a twofold basis: within individual perspective the level of prospective compensation is usually lower than secured in judicial proceedings; within collective (general) perspective fixed compensation amounts can provide significant monetary benefits.
11 One may conclude that the there is a negative correlation between the scope of damages subject to compensatory proceedings and the financial amount of the fixed compensation claim. Hence, the broader the scope of damages’ types, the lower amount of individual compensatory award.
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judgments. Another type of partial implementation of compensation schemes within a jurisdiction (with Taiwan as example) may be based upon the introduction of specific administrative no-fault systems, connected to a particular type of damage, such as vaccine injury, accidents during childbirth or drug adverse reaction. Specific duties which may be linked to those particular compensation schemes may be connected to actions of care, assistance, report and evaluation.
7
Extra-Judicial Solutions
The need to apply various alternative methods of dispute resolution (ADR) may be connected to possible negative evaluation of judicial procedures, in particular related to the prolonged duration in time of those proceedings, the complexity of litigation and the burden of formalities connected to the need to present, determine and respond to opinions based on medical expertise. Nevertheless one should also bear in mind positive aspects of judicial procedures, most notably the high formal status and credibility of a judgment delivered by an independent and impartial judge. There are also some jurisdictions, most notably Germany, with successful judicial malpractice litigation record, due to the most rigorously trained medical experts and also due to facilitations on the burden of proof. Within other jurisdictions, like in Spain, it is claimed that no significant differences between noneconomic damages in civil and administrative appeals are to be found. Hence even in the current era of juridification and judicialization judicial litigation path should not be abandoned (Amaral-Garcia 2019). While in most cases the reason of introducing ADR is the phenomenon of overload of judicial procedures dealing with medical malpractice cases there are jurisdictions were the mutual interrelationship between judicial and alternative methods of dispute resolution is of the opposite character— there the number of suits in court is relatively low because the parties are willing to settle down the dispute within bilateral negotiations and reach an agreement without the need to initiate court proceedings. It seems that fostering the process of using alternative methods of dispute resolution is conducive to acknowledging situations of errors and offering reasonable compensation to injured parties. This process facilitates open communication, transparency and trust. Within the scope of alternative methods of dispute resolution one may indicate therefore such instruments that were designed primarily to help patients as possible victims of medical malpractice to be granted compensation or at least non-prolonged resolution of the case. In this latter instance it is possible to discern various means with the aim of providing for specific, simplified, fast-track procedures, especially while dealing
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with low value claims. Within the instruments used in connection to alternative means of dispute resolution one may discern such methods as arbitration, mediation, negotiation or conciliation procedures. In some jurisdictions a special role had been granted to the ombudsperson. It seems that the usage of ADR is most frequent in those states where patient-physician relationship is being treated as a consumer-type relationship. It should be underlined that those remarks are applicable also within the adoption of compensation schemes still both regimes address different needs of patients. Compensation regimes are focused upon the settlement of the medical dispute in a financially satisfactory manner, with the primary aim to provide for a compensation adequate to the experienced damage. Alternative means of dispute resolution aim at fulfilling different patients’ needs, correlated with the sphere of psychology, emotions and spiritual dimension. Among alternative methods of dispute resolution one may distinguish mediation which may be characterized as a structural and confidential process based upon the cooperation of the parties to the dispute, with the engagement of the neutral, independent, impartial and professional mediator. The mediator’s aim is to foster an amicable solution to the dispute, with the usage of various communication and negotiation techniques. The proposed solution is usually not binding in the sense of being solely a proposal of dispute resolution which is per se neither an obligatory nor a recommended option. It is possible to distinguish two various types of mediation, firstly, mediation recommended by the judge, in the course of judicial proceedings or within the pre-trial phase of the judiciary action and secondly, a voluntary mediation undertaken by the parties without such an active role of the judge. The mediatory proceedings are confidential and therefore do not attract publicity as in case of judicial procedure; the outcome of mediation is binding for the parties in accordance with domestic legislation. One may underline positive aspects of mediation in its possible amicable character which is difficult to maintain within litigation, with its clear lines of division and conflict. In mediation proceedings the parties are more prone to reach a peaceful settlement of the dispute as there are structural incentives to accomplish an effective solution, acceptable to both parties. In many cases the heart of the dispute discussed in mediatory proceedings is focused upon emotional needs of apology and prospective reconciliation of the participants of malpractice situation, with an urge to adopt measures in order to prevent the occurrence of similar events in the future. It seems therefore that alternative methods of dispute resolution are applied in recognition of a “human” aspect of medical malpractice situations—as patients do not require superhuman cognitive capabilities of physicians or their infallibility; they are willing to accept the possible occurrence of side-effects of the proper
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course of applied medical treatment or other unexpected events. There are different arrangement as far as the possible usage of alternative means of dispute resolution are concerned. Those limitations may concern the objects of damage, restricting access to those methods in case of grave damages, like death of the patient, serious bodily injury or sexual assault. Another category of limitation is based upon prescribed time-limits, allowing for a commencement of mediation or conciliation procedures solely within the pre-trial or pre-inquiry period. There may be two-side mediation, comprising of the patients’ and physicians’ sides, and multi-party mediation, involving other actors, like insurance companies, in the mediation process. The possible usage of ADR is connected to the contemporary health policy of public authorities; sometimes it would be possible to link the incentives to apply those means with the overall reform of health systems. Within the contemporary health systems based upon Bismarckian foundation principles one may identify the trend to introduce major reforms, especially in the period following the financial crisis. Those reforms rely on the policy learning process within actor coalitions and they also take into account such factors as ambiguity and timing. Therefore, as the study analysis reveals, major policy change may result as a learning outcome, either combined with a negotiated agreement or with a window of opportunity opening the problem stream (Bandelow et al. 2019). The application of ADR techniques may also be subject to the policy based upon flexible approach, designed in order to cope with the difficulties experienced within a particular health system. Therefore in some domestic jurisdictions increased usage of ADR may be encouraged in order to decrease the number of medical judicial proceedings in courts. In other jurisdictions ADR techniques may be used as a means not only to alleviate the courts’ caseload but rather to prevent medical dispute from being transformed into a judicial case. Another reason for recent ADR increased usage is the intention to facilitate smooth and rapid analysis of the facts of the medical case, with the involvement of professional medical experts. Therefore one may conclude that the usage of ADR techniques is not completely voluntary in the sense of being the result of a free decision of parties to the dispute but rather their factual application is being reinforced by deliberate action of public authorities, aiming at the fulfilment of particular medical malpractice resolution goals. One should not overestimate the role of public authorities in promoting the usage of ADR techniques. It seems that the adoption of relevant legal provisions enabling the parties to use ADR in order to settle medical malpractice disputes may not be a sufficiently effective method to increase the application of ADR instruments. There is a need, as the Cypriot example reveals, to supplement the legal provisions with the
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promotion activities, first providing information and secondly, advertising on positive aspects of ADR techniques in comparison to traditional judicial procedures. In other words, there is a need to transform the prevailing “litigation friendly” system of resolving cases of healthcare damage into an environment conducive to mediation solutions which seems more responsive to patients’ needs. Moreover, one may indicate another crucial factor in fostering the usage of ADR mechanisms which is based on gaining support of legal professionals and to engage in the process of convincing them on the positive aspects of the increased application of extra-judicial instruments for the resolution of healthcare disputes. It seems that representatives of bar associations may adopt different standpoints as far as the usage of ADR techniques is concerned: negative, fearing about the possible loss of income stemming from judicial litigation (as Italian example reveals) or positive, based primarily on the efficiency of dispute resolution (as indicates Japanese example). Therefore one may conclude with the need to maintain a dialogue between public regulators and representatives of legal professionals. The emotional needs to be addressed within medical malpractice mediation proceedings are not solely those of patients’ but also those of physicians’ and other members of healthcare team. As far as patients’ emotions are concerned those may be linked to feelings of grief, despair, anger, frustration, isolation, desire for revenge or confrontation with medical staff. As far as physicians’ emotions re concerned those are connected to such feelings as shame, loss of self-respect and self-confidence, frustration, fear about the possible negative consequences of medical malpractice. One may conclude that there is a certain common perspective within the emotional side of healthcare damages which is based on feelings of sadness, both of patients’ and physicians. This psychological aspect should therefore be regarded as an indicator for commencement of mediation procedures.12 Summarizing the above statements it may be concluded that the intention to introduce and use ADR techniques may produce negative standpoint within the legal professionals’ milieu as they may fear the drop or loss in revenues. It seems that such a reserved attitude may be eased with the introduction of the requirement of mandatory patient’s assistance by a legal representative. The financial cost of using ADR techniques is going inevitably to rise, still the support of lawyers to use those means would be gained. There is also a certain level of flexibility as far as the prospective usage of ADR instruments are concerned. Voluntary ADR mechanisms are typically encompassed within 12 The psychological element of mediation procedures indicate also the need to train physicians and other members of healthcare teams in effective communication skills, dialogue, and empathic sensitivity.
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
such means as negotiations, mediations and arbitration. In those jurisdictions where the ADR means is not fully provided for in the judicial system one may state that some of those techniques may be used by the parties as de facto instrument of settlement of claims stemming from medical malpractice rather than legally provided means of addressing the healthcare damage claim. As for evaluation of specific ADR instruments it may be stated that the comparison of arbitration as an alternative method of resolution of medical malpractice disputes and judicial proceedings reveals that arbitration is a faster and cheaper way of dispute settlement. Nevertheless, arbitration may be flawed with lack of necessary professional legal expertise and enforcement difficulties. The later problem may be resolved within the scheme of judicial proceedings’ involvement—in Estonia the Supreme Court declared in 2014 the requirement that all decisions of arbitral tribunals should pass the court proceedings in order to be recognized and declared subject to enforcement. Still one may argue that such an arrangement is a complex and superfluous procedure and diminishes the prospective positive aspects of arbitration method of conflict resolution. In some jurisdictions, like in Germany, ADR instruments may also be used in a pre-trial period, with prospective judicial proceedings being possible to be commenced only after a conciliation effort had been undertaken. In other jurisdictions, like in Hungary, ADR is almost unknown with no reform expected in the near future. In other jurisdictions, like South African, the aim and philosophy of ADR proceedings may be clearly visible within overall judicial litigation preponderance. Mediation option is regarded as more time-efficient (the largest number of mediations are completed within the period of one day!), financially affordable, promoting constitutional and human rights guarantee of access to justice and the principle of equality. The involvement of mediator may prove crucial for reaching a mutually amicable settlement, for combatting the factual imbalance between the parties: stronger professional physician and weaker patient victim and for proposing an individually designed win-win solution instead of win-loose result. Some jurisdictions, such as the Singapore regime, provide for a special role of ADR instruments in an attempt to modify an adversarial medical litigation paradigm—in particular through the promotion of mediation and negotiation, more active involvement of judges in court proceedings and the appointment of expert medical assessors in order to assist judges in medical malpractice trials. Similar emphasis on caring for victims of medical malpractice and their families is visible in Japan, with recent development of out-of-court dispute resolution options available to patients. In some jurisdictions, like in Taiwan, patients engage in the specific “procedure game”, commencing criminal proceedings in order to get help from prosecutors and access to expert
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opinions, and then to move to civil proceedings in order to get compensation. Still in reality it may turn out that the majority of criminal proceedings is being won by physicians, and in the result patients are less prompt to succeed in civil courts. Physicians themselves are eager to engage in defensive medicine in order to avoid emotional distress and suffering connected to long litigation processes. Hence, introduction of ADR techniques seems as a patient-friendly endeavour, with the aim of restoring certain balance and equality between the parties. In many jurisdictions, like in Slovenia, the benefits of using alternative methods of dispute resolution are clearly visible and hence much welcomed, although within the contemporary practice ADR is not very often used in practice. It seems that the minimal usage of ADR instruments is a bilateral communication procedure before a competent person at the medical unit of healthcare provider, at the earliest stage of the dispute. This initial, informal and rudimentary procedure may be used as a platform for discussing the medical malpractice claim, examine the circumstances and possibly achieve an amicable solution, with undertaken attempts of proper communication and reconciliation between the parties. This goal may be achieved through various detailed provisions and schemes, such as the inspiring and innovative projects initiated recently in the Netherlands, aiming in particular at transforming the organizational culture of dealing with medical malpractice cases from ‘blame culture’ to ‘just culture’.
8
General Conclusions
The required standard of medical care may be determined according to the duty of the health practitioner of taking actions normally evaluated as prudent and diligent within a particular set of circumstances of medical situation. Hence the personal pattern of such diligent behavior is encapsulated within a model of bonus medicis, being a professional equivalent of bonus pater familias. Moreover, one may indicate not solely the conduct of a prudent and diligent physician, but the same comparative procedure may be used in order to evaluate the actions of hospitals or other healthcare services institutional providers. The contemporary evolution of understanding of this required standard of medical care underlines the necessity of taking into account a particular type of medical specialization of a given healthcare practitioner and the need to relate to the state of medical knowledge at a precise moment of time of medical service provision. Another aspect of the contemporary provisions on liability for medical malpractice within domestic legal regimes is the phenomenon of broadening the scope of actors, both natural and institutional, participating in the liability proceedings. Hence, various members of the healthcare team may be
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held liable for medical malpractice, both assistant physicians (residents) or non-physicians such as nurses. Moreover, institutional liability of hospitals, clinics or other health suppliers should be recognized, with differentiated regimes of liability for public and private institutions. One of the tentative conclusions of the conducted research upon the topic of compensation schemes for damages caused by healthcare and alternatives to court proceedings may be the scope of possible internationalization of healthcare law, in parallel way to the process of enforcement and internationalization of consumer law (Durovic and Micklitz 2016). Should international legal documents, like the United Nations Guidelines for Consumer Protection of 2015,13 be applicable to medical services? Is the future legal development of health law to be included within the broad category of consumer law? This question is a vital one as it seems that the positive answer and inclusion of healthcare services into the broad category of different services regulated under the auspices of consumer law may well fit to the gradual evolution and recent development of consumer law (Lima Marques and Wei 2018). The starting point for this process of inclusion may be the need to ensure the proper implementation and effectiveness of the right to health and right to healthcare, recognized in international human rights law and made operative on domestic level. Hence it is to public authorities to choose from a plethora of various procedures based upon criminal, civil, disciplinary law alongside compensatory regimes with alternative means of dispute resolutions, those specific proceedings to be operationalized within domestic legal regime. It seems that the guidelines enshrined in consumer law may serve both aims: as a point of departure and as a final destination. One of the overall conclusions stemming from national reports on the topic of compensation schemes for damages caused by healthcare and alternatives to court proceedings is the recognition of vital importance of maintaining a regular, thorough and clear communication between patients and physicians (and other members of healthcare personnel). Respecting the condition of preserving efficient means of dialogue may also fulfil preventive functions, discouraging patients from initiating formal judicial proceedings. The preventive aspect is not so visible within extra-judicial proceedings, and especially within the prospective usage of the alternative means of dispute resolution. While maintaining clear, regular and efficient communication between healthcare practitioners and patients is of crucial importance for maintaining peaceful relationships 13 The Guidelines were adopted by the UN General Assembly in resolution 39/248 of 16 April 1985, later expanded by the Economic and Social Council in resolution 1999/7 of 26 July 1999, and revised and adopted by the UN General Assembly in resolution 70/186 of 22 December 2015.
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between them, with vital preventive goals but also as a means of managing situation in case of damage occurrence, it must be stated, however, that the emergence of conflicts during the communication process seems inevitable. Those communication conflicts occur more often in multi-ethnic healthcare settings as a result of societies’ increased ethnocultural diversity and are essentially related to different approaches to what constitutes ‘good care’—should it be based on a biomedical model, with structured communication and central decision-making or should care rather be inspired by a holistic lifeworld-oriented approach (Van Keer et al. 2015). As a general conclusion of the topic one may indicate the aim of domestic authorities to guarantee the members of their political communities efficient access to justice in case of medical malpractice. It seems that the rise of compensation schemes in case of damages resulting from healthcare is regarded as one of the means to accomplish the result of providing justice to every person within human rights perspective, irrespectively of his or her cognitive capability, lack of financial resources, lack of professional legal support or advice. Hence those decisions of public regulators to construct compensation schemes and to promote extra-judicial means for dealing with situations of medical malpractice should be regarded as a pragmatic solution, designed to cope with inefficiency of judicial system. The most frequent phenomena of such inefficiency may be linked to the financial barrier connected to high costs of participation in judicial proceedings and long time-duration of those proceedings, sometimes resulting from the large number of healthcare cases and hence, massive litigation in cases of medical malpractice. Decisions of public authorities may concern not solely the construction of appropriate judicial arrangements but also provision of certain instruments that would prove conducive to the prospective usage of ADR mechanisms. Therefore, public regulator may provide for prioritization of the use of private dispute prevention and resolution, before engaging public judicial procedures. One of means that public authorities may use, as the actions undertaken in Canada (Québec) reveal, is the process of organization of training of mediators and arbitrators, which is performed not solely by public institutions but also by professional organizations and associations. Hence a process of specialization and gradual involvement of lawyers in ADR proceedings occurs, with their possibility of structuring the phases of dispute resolution proceedings. One of the frequent contemporary phenomena is a significant increase in the rise of claims in medical malpractice that may result, as in Italy and South Africa, in the negative consequences within the insurance market: the rapid rise in the amount of premiums may lead to the decrease in the number of persons insured and hence, a restricted extent of the insurance coverage. The unsustainably high number of
Compensation Schemes and Extra-Judicial Solutions in Case of Medical Malpractice: A. . .
lawsuits against physicians and hospitals may have its roots in a greater awareness of patients’ rights and the risen expectations for good medical healthcare. Thus the structural response may concern the need for more effective monitoring of the quality of healthcare services, emphasis on health risk prevention, and the rise of defensive medicine (Toraldo et al. 2015). One of the general conclusions stemming from the national reports is the high level of complexity of medical malpractice cases. Therefore, this may be ground reason for the prolongation of judicial proceedings and high financial costs connected to the need to ensure expert evaluation of the particular healthcare situation. In many cases the need to ensure expert evaluation is based on more than one expert opinion, hence leading to a further degree of complication with the need to evaluate among possible concurring opinions and the requirement for the judge or collective commission to order another professional statement. Public authorities (public regulator or health insurance institution) may provide, as in Estonia, expert opinions regarding general level of medical science at the time of medical malpractice dispute or may issue statements on the appropriate level of care which could be expected on the side of healthcare provider. Those opinions may be supplemented by more general guidelines, based upon cost-effective and evidencebased standards, rooted in the local conditions of the place of treatment. Another difficulty connected to the high degree of complexity of medical malpractice cases is the issue of access to medical files, documentation concerning the treatment record which in practice may be hard to be obtained by patients. Once received, medical records are subject to expert evaluation. Those factors may lead to further delays in medical malpractice proceedings. It seems that one of the general conclusions stemming from the above general report and national reports below, on the topic of compensation schemes and extra-judicial solutions in case of medical malpractice would be to advocate the introduction and development of precisely those mechanisms: compensation schemes and ADR instruments, within various jurisdictions. The reasons for such an advocacy are twofold: firstly, it is the mysterious and complex nature of healthcare treatment which results in interrelated reasons of occurrence of medical malpractice. According to statistical reports most medical injuries relate to unavoidable human error in a context of system failure (Watson and Kottenhagen 2017) hence it is crucial to design such procedures that would be conducive to proper examination of reasons of medical malpractice. It seems that the instruments of compensation schemes and ADR mechanisms are adequate tools for the accomplishment of those goals. Therefore this feature may be regarded as a second explanation for the overall support for the global spread of no-fault
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compensation schemes and ADR instruments. It may prove conducive for guaranteeing a high level of patient safety— with such positive consequences as a relatively open physician-patient communication, possibility of reconciliation, swift and appropriate patient compensation, blame-free reporting of medical malpractice and organizational learning. The mutual relationship between liability-based judicial procedures and compensation schemes for medical injuries may also be assessed within the discerned functions of those procedures (Oliphant 2013). Judicial litigation is based upon the three functions of compensation, prevention and accountability while compensation schemes are limited solely to the first compensatory goal. Still there is no empirical evidence for the detrimental effect of this separation of procedures for patients’ safety. Therefore it seems that the proper suggestion would be to engage in further empirical research to test the efficacy of the rival approaches. There is also a need to ensure the involvement of legal academia in submitting proposals of common medical professional standards (Ferrara et al. 2013).14 The notion of access to justice within medical malpractice claims may have a multifaceted meaning, linked not solely to fair trail rules enshrined in human rights provisions but also within various factual elements such as accessibility of lawyers, legal aid, justice and law, legal text, mechanisms of judicare, social conditions of the so-called paths to justice (Winczorek 2019). Obligation of states to ensure access to court (fair trail) may also be understood as encompassing the requirement to provide legal assistance (legal aid) for those patients in financial difficulties. Therefore the examined topic of compensation schemes and alternatives to court proceedings in case of damages caused by healthcare should be focused upon not solely within theoretical legal perspective (law in books) but also within the empirical perspective of social relationships (law in action). The ultimate goal of those provisions lies within the contemporary individualistic legal approach, rise of patients’ autonomy in healthcare proceedings (Safjan 1998) and the efforts to enforce patients’ rights.
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14 As a relevant example may serve the document developed under the patronage of the European Academy of Legal Medicine, presenting European Guidelines on Medico-Legal Methods of Ascertainment and Criteria of Evaluation in Medical Responsibility and Liability.
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Documents CESCR General Comment No. 14: The Right to the Highest Attainable Standard of Health (Art. 12). Adopted at the Twenty-second Session of the Committee on Economic, Social and Cultural Rights, on 11 August 2000 (Contained in Document E/C.12/2000/4). CESCR General Comment No. 3: The Nature of States Parties’ Obligations (Art. 2, Para. 1, of the Covenant). Adopted at the Fifth Session of the Committee on Economic, Social and Cultural Rights, on 14 December 1990 (Contained in Document E/1991/23).
Transparency of Information and Disinformation of Consumers Gert Straetmans
Abstract
To combat market inefficiencies resulting from the information asymmetry that exists between businesses and consumers, an increasing number of mandated information disclosures are imposed on businesses to give consumers the means to protect their own interests by making autonomous, informed choices. Prohibiting misleading information and informing consumers with correct information lies at the core of the so-called information paradigm which resulted in consumer information models across the world. Pre-contractual information duties and labelling requirements for foodstuffs range among the earliest information obligations that have been adopted in view of protecting consumers. Together with the prohibition of misleading commercial practices and transparency requirements for contract terms these measures seek to respectively prevent and to combat the deception of consumers. The different forms such measures may take are the subject of an in-depth comparative analysis in this general report. The last decade models based on mandatory disclosures increasingly became the subject of criticism not in the least by behavioural economists. More particularly the continuous accumulation of information requirements begs the question whether the ‘inundation’ of information does not risk to dis-inform the consumer rather than inform. Furthermore the benchmark of the The text has been finalised in September 2018. This report was also published in Straetmans, G. (Ed), Information Obligations and Disinformation of Consumers, Springer Nature Switzerland 2019, 3–96. G. Straetmans (*) Economic, Consumer and Commercial Practices Law, Research Group Business and Law, University of Antwerp, Antwerp, Belgium Consumer Law Institute, University of Antwerp, Antwerp, Belgium Consumer Law Institute, University of Ghent, Ghent, Belgium Court of Appeal, Antwerp, Belgium e-mail: [email protected]
rational consumer which serves as the basis for the design of protective measures is increasingly criticised. In this general report the impact, if any, of those criticisms on the national consumer information policies in the reporting countries is examined. Finally new communication technologies pose new threats to consumers. The general report examines whether those developments cause new forms of information asymmetries.
1
Introduction
Consumers deserve legal protection on account of their inferior position. This is the well-known rationale for adopting special rules for consumers. To combat market inefficiencies resulting from the information asymmetry that exists between businesses and consumers, an increasing number of mandated information disclosures are imposed on businesses to give consumers the means to protect their own interests by making autonomous, informed choices. Prohibiting misleading information and informing consumers with correct information lies at the core of the so-called information paradigm which resulted in consumer information models across the world. In those models consumers are often perceived as benefit maximizing creatures. Information requirements allow consumers to make decisions themselves, decisions which are supposedly better than anyone else can make for them. It follows that if consumers are given full information, they will consistently make decisions that maximise their welfare.1 Pre-contractual information duties and labelling requirements for foodstuffs are well-known illustrations of 1 According to economic theory informed consumer decisions are efficient. If the information is ineffective or irrelevant, it will simply be ignored by consumers and businesses. Economic theory thus presupposes that information in general cannot have a negative impact. See also on this point Better Regulation Executive and National Consumer Council (2007), p. 9.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_7
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such mandatory information obligations. In a number of legal systems they range among the earliest information obligations that have been adopted in view of protecting consumers. Together with the prohibition of misleading commercial practices and transparency requirements for contract terms these measures seek to respectively prevent and to combat the deception of consumers. The different forms such measures may take will be the subject of further analysis in this general report. New communication technologies pose new threats to consumers and financial services are traditionally seen as complex with their inherent technicalities. Some specific rules enacted to protect respectively the digital and the financial consumer will therefore complement the analysis. The last decade models based on mandatory disclosures increasingly became the subject of criticism not in the least by behavioural economists. Without going into too much details behavioural economics scholars mark as major critiques on consumer information policies based on disclosures, the bounded rationality, planning fallacy, overconfidence and loss aversion of consumers,2 the fact that consumers often lack the time to read information,3 the absence of rules on the presentation of the information, the length of the information and the comprehensibility of information for consumers in general and for vulnerable consumers in particular.4 More particularly the continuous
accumulation of information requirements begs the question whether the ‘inundation’ of information does not risk to disinform the consumer rather than inform. In this general report the impact, if any, of those criticisms on the national consumer information policies in the reporting countries will be examined. This general report builds on the valuable contributions and national experiences of national reporters. It bundles contributions originating in founding countries of the European Union (France, Germany and Italy), in member states that at a later stage accessed to the European Union (Finland, Greece, Ireland, Poland, Romania and The Czech Republic), in the United Kingdom that initiated the process to leave the European Union, in countries of the Asian continent (China, Japan, Singapore and Taiwan), and in Brazil, Canada (Québec province) and Turkey which echo views from respectively the North- and South-American and the Euro-Asian region. The general report further benefits from the Belgian experience with consumer information rules. Thanks to the expertise of the well-recognised national scholars contributing to this book, the general report provides significant insights on different aspects of consumer law in different continents. These insights will be highlighted hereafter in accordance with the structure of the questionnaire which is annexed to this book.
See e.g. “The total capacity that is available in the human mental architecture for the processing of input information is limited” Mangold (2015), p. 142 and see A Lang on LC4MP ‘Limited Capacity model of mediated motivated message processing’ Lang (2000), pp. 46–70 and Lang (2009), pp. 193–204. A central assumption in the LC4MP-model is that processing of information needs capacity and that the total amount of capacity is limited: if one process gets more capacity for operation, other processes being executed at the same time will get less. See also Mangold (2017), pp. 75–87: “the demands of different processes for a variable level of capacity are strongly related to the kind of processing (deep and rule-governed or superficial or heuristic). Processes not receiving the capacity they would require for thorough operation will only attain superficially computed results” (p. 79). Motivation (the information relates to the consumer’s interests, needs, goals or expected gratifications) turns out to be one of the dominant factors for the allocation of capacity (p. 80). However, customers tend not to be consciously aware of their own needs. Yet, to date, it has never been shown and according to Mangold could never be shown that unconscious priming “allows the creation of new and previously non-existing needs or motivates subjects to make decisions that are contrary to their general intentions” (p. 87). Compare with Kahneman (2011), p. 477, who refers to the “planning fallacy” as one of the manifestations of our pervasive optimistic bias. Planning fallacy is our tendency to overestimate benefits and underestimate costs, and hence foolishly to take on risky projects. 3 See e.g. Bakos et al. (2014), p. 1. See recently Wagner (2017), p. 1027. 4 The lack of transparency is an important factor that impedes consumers to read disclosed information and contract terms, but also a considerable number of cognitive and social factors as well as rational and economic factors play a crucial role in here; see to that extent respectively Stark and Choplin (2009), p. 659 and also Barnes (2007), pp. 228–272 and Becher and Unger-Aviram (2010), pp. 199–210.
2
General Characteristics of the Consumer Information Model
2.1
Economic Orientation of Consumer Models
2
Consumer protection in all legal systems is a modern, twentieth century, phenomenon. In the analysed legal systems contract law starts from the assumption that contracting parties are more-or-less in an equal bargaining position and enjoy the freedom of contract.5 Freedom of contract pairs well with a free market economy based on liberal paradigms and fair competition. The thriving market economy based on fair competition also brought mass production. The standardisation of contracts resulting thereof and the introduction of new sales techniques gave rise to new market failures such as increasing information asymmetry (both quantitative and qualitative) between a trader and a consumer and marketing techniques that impact 5 Courts in common law systems are, more than in civil law systems, reluctant to intervene in the terms of the contract, nor even generally to define forms of “weakness” of one party, or “inequality” between the parties, that deserve their protection. For instance, in the United Kingdom Lord Denning’s plea in 1985 to devise a common law principle of ‘inequality of bargaining power’ was rejected. See more on this issue in the contribution of Cartwright to this book.
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the consumer’s decision making process.6 These new market circumstances made increasingly clear that consumers could no longer be considered in an equal bargaining position with traders, especially in the presence of pre-formulated contracts. These findings triggered the development of consumer protection rules, as a response to failures that occurred in the market economy.7 These rules mainly consist of information requirements as they are the least intrusive to the economy and capable of restoring the balance between traders and consumers.8 But, subsequently, also more intrusive rules like the prohibition of unfair contract terms, cooling off periods and withdrawal rights were introduced. It follows that in the European countries consumers nowadays are almost automatically perceived as weaker parties in terms of legal and economic bargaining powers. Their need for protection is based on the perception that commercial actors possess a greater negotiating power due to their economic and informational upper hand.9 However, the economic orientation of European consumer law makes it a balancing exercise between conflicting aims, namely providing the necessary protection of the weaker contract party and ensuring the proper functioning of the (internal) market.10 A similar economic orientation, albeit with different degrees of intensity, underpins consumer protection rules in the non-European countries analysed in this report. For example consumer law in Brazil aims at protecting the ‘homo economicus’ and in Singapore, which has to date less elaborated consumer protection rules than in the European Union, the consumer is also placed in the larger context of a free market economy where regulation is light-touched, and a belief in the invisible hand is prevalent.11 6
The emergence of industrial giants and correlative depersonalisation of relations between traders and consumers also contributed to these market failures. 7 Markets becoming more open almost automatically result in increased attention for the (weaker) position of consumers; see extensively on this subject, Straetmans (1998), p. 242 e.s. 8 See e.g. Baldwin et al. (2011), pp. 118–119 and Ramsay (2007), pp. 61–71 and 119 e.s. By impairing the consumer’s ability to make choices which are informed, unfair commercial practices generate a market failure. 9 See also the contribution of Hyvönen and Schinkels in this book. Schinkels further submits that the informable consumer more easily fits as an explanation for market-complementing information than as an explanation for market correction. Also Rott expressly differentiates between informed and informable consumers, whereby the latter are seen as a benchmark for consumer contract law (see in that sense Rott 2015, p. 164). 10 In this regard, Piazzon distinguishes subjective consumer law (weaker party protection) and objective consumer law (proper functioning of the internal market); see his contribution to this book. 11 Based on the responses to the questionnaire from professor G. Low, Singapore Management University, [email protected]: “The emphasis in Singapore has been on encouraging competitive processes and raising consumer awareness . . . as active competition policy is seen
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The economic orientation is also present in Turkish consumer law where the rules are gradually being adapted to bring them in line with European law as part of the accession process. Also Québec’s private law copied French contract law so that the consumer protection rules equally rely on the rationality paradigm in the free market with its inherent economic orientation to which it provides a correction to ensure real equality between traders and consumers.12
2.2
The Consumer Concept
2.2.1
A Codified General Definition of Consumer, But No Unified Definition In most of the reported countries the consumer is a creature of statute. Though normal in civil law systems, it is much more peculiar in case based, common law systems.13 In the European member states national legislative texts mainly literally transpose the definition of consumer stemming from European instruments. In those instruments the consumer is generally defined as “any natural person who is acting for purposes which are outside his trade, business, craft or profession”.14 This definition represents the common core which is equal to all reported countries. That way, it can be seen as a factor of convergence, but differences in interpretation remain to exist. For instance in all the member states of the European Union a variety of functional consumer definitions15 are used in function of the precise underlying as a more efficient way to deliver benefits . . . to end-user consumers . . . [and] business consumers”. With regard to Japan, Nakata (2016), pp. 481–482, points out that consumer law reforms in 2004 aimed at converting the existing law from a consumer that needs protection towards a consumer who is self-reliant, namely “an independent subject, acting so as to ensure its interests” (p. 482). The law reform entailed the creation of an environment tailored to a self-reliant consumer with ex post regulation based on market rules instead of ex ante controls and the promotion of information disclosure. Also these elements reflect an economic orientation of consumer law with the emphasis on deregulation and self-responsibility as marketplace principles. Also the Japanese Consumer Contract Act of 2001 reflects this idea: “The purpose of this Act is to ensure self-determination of consumers, and to provide an environment which will support it”, o.c., 487. 12 See the contribution of Arbour to this book. 13 Furthermore, it must be stressed that in common law systems individualised definitions of consumers are approached differently than in civil law systems “as there is no general expectation that legislation will be dovetailed to form a coherent, systematic whole”, see the contribution of Cartwright to this book. 14 See e.g. Article 2 (b) Unfair Commercial Practices Directive 2005/29/ EC, O.J. 2005, L 149/22. 15 In the UK for instance the parliament has defined the circumstances in which consumers should receive protection. Courts will read these statutes by reference to the normal, objective meaning of their words, and will not look behind the text to find the “intended” meaning from the travaux préparatoires to give an interpretation beyond the text itself or to provide a conceptual unity amongst discrete legislative provisions. See the contribution of Cartwright to this book.
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aims of the legislation,16 not in the least because the European legislature itself within its legislative enactments did not advance a single definition of consumer.17 The national reports of the non-European countries in this book present a similar finding. It may thus be concluded that despite the existence of a generally accepted common core definition of consumer, there is no unified definition of consumer that is to be used within the consumer protection legislation generally. Hereafter we will point to some differences in scope. Mainly Natural Persons Protected, Sometimes Also Legal Persons or Even Final Users The aforementioned common core definition limits the protection to natural persons acting for purposes which are outside their trade, business, craft or profession. Even though in most of the reported countries consumer law is limited to natural persons, member states within the European Union as well as states outside the EU have experimented with broader definitions.18 Some states straightforwardly apply a broader definition. For instance Greek consumer law extends the protective scope to legal persons and a union of persons. A consumer may be “any natural or legal person or union of persons without legal personality, for whom the goods or services offered in the market are intended and who make use of those products or services, as long as they are the final receivers of such goods or services”.19 In the same vein the Brazilian Consumer Protection Code defines the consumer as any individual or legal entity that acquires or uses a product or service as a final user.20 To be characterized as a consumer, the individual or legal entity does not need to have a contractual bond with a supplier, since the provision expressly refers in general to acquirer or user. Furthermore, the Consumer Protection Code, despite 16 The personal scope of legislation is often adapted to its particular purposes. 17 The European Commission recognizes that Member States’ approaches are different and fragmented, but also found that there is no consensus on the stakeholders on how to reduce legal uncertainty generated by the fragmentation (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, p. 109). 18 The UK for instance evolved from a broader to a narrower conception of consumer in the field of unfair contract terms where ‘consumer’ protection was initially extended to corporations as long as the transaction in question was neither an integral part of their business, nor conducted with a sufficient degree of regularity to make it part of the business. Also, Poland briefly experienced with an extension of the notion to ‘persons’ but it was quickly abandoned as it was believed that the inclusion of non-governmental organisations and micro-, smalland medium-sized undertakings would negatively affect the national traders in the internal market. See respectively the contribution of Cartwright and Namysloswka and Jablonowska to this book. 19 See the contribution of Karamptzos and Kotios to this book. 20 See Head of Article 2 of the Consumer Protection Code.
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the reference to final users, also applies specific consumer rights to ‘consumers by comparison’ in an attempt to ensure equal treatment to every person who is in a similar vulnerable position, irrespective of whether he is a final recipient.21 Some countries provide for an extension of the definition in certain subdomains of consumer law. For instance Finland provides smaller businesses in certain areas consumer-like protection.22 Thus the domain of unfair contract terms benefits from such extension if the business contracts involved are concluded by consumer-like small businesses and policy holders equal to consumers.23 Also French law has a longstanding tradition in protecting ‘non-professionals’. It follows that professionals could benefit as non-professionals from the protective rules in the domain of unfair contract terms when they find themselves in a position equal to consumers, for instance if they lack any competence in the subject matter of the contract.24 It comes as no surprise that this gave rise to divergent interpretations in case law.25 In 2016 the French legislator (tried to) cut the discussion short introducing a new definition whereby any legal person that acts for purposes that do not enter within the framework of his commercial, industrial, artisanal, liberal or agricultural activity must be regarded as a ‘non-professional’. Likewise with regard to unfair contract terms the French case law excludes natural or legal persons (non-professionals) who conclude contracts that present a direct link (interpreted broadly) with their professional activity from the protective scope. Acting for Private, Mixed or Business Purposes The second part of the common core definition refers to nonprofessional purposes. Also this part has been the subject of debate in Europe and beyond where numerous variations 21
Read more on this scholarly debate in the contribution of Donato Oliva to this book, who submits that vis-à-vis a legal entity the liability of a supplier may be limited. 22 A concrete example is the protection provided by the Insurance Contracts Act which not only protects the consumer but also a legal person who in terms of the nature and scope of its business can be compared to a consumer vis-à-vis the insurer. See more in the contribution of Hyvönen to this book. 23 However, it must be pointed out that the unfairness of a term is evaluated differently in the case of a consumer or a small business. “Consumer protection is much broader and includes the protection provided for in the national Consumer Protection Act (Sections 1–2 of Chapter 4) or the EU directives on consumer protection. In the case of a small business, unfairness is evaluated on the basis of general contract law (Section 36 of the Contracts Act)”, see the contribution of Hyvönen to this book. 24 For instance, trade unions may benefit as non-professionals from protective rules provided that the subject matter of the contracts they conclude does not present a direct link with their professional activity. See the contribution of Piazzon to this book. 25 Thus, commercial companies were generally excluded from the protection whereas case law was divergent with regard to the classification as consumers of civil companies.
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exist on how ‘acting for non-business, non-professional purposes’ must be understood. In Japanese law the consumer is defined as a natural person who does not exercise a function within a business, whereas the professional is defined as an individual who contracts for business purposes.26 Also Chinese law makes the purpose of purchase, namely to meet consumption needs in daily life, the key factor to distinguish between a consumer and a business operator, but the definition is criticised because also legal persons may have consumption needs for their daily operations. Hence legal persons would qualify as consumers whereas it is believed that legal persons are not as weak as natural persons in market transactions. Chinese legal doctrine therefore advised to exclude legal persons from consumer protection and to amend the definition so as to focus on the non-professional, non-profit and dependent on business operators characteristics of consumers. In 2013 legal persons were excluded by law from consumer protection measures but so called professional fake commodities buyers were not.27 The Québec Consumer Protection Act defines a consumer as a natural person “except a merchant who obtains goods or services for the purposes of his business”, without however defining the notion of merchant.28 Romanian law provides for another variation on the same theme. Here, the consumer is generally defined as any natural person or group of natural persons in an association who acts for purposes that exceed his commercial, industrial, producing, artisanal or liberal activity. Yet, with regard to unfair contract terms the definition is slightly different since it refers to a natural person or group of natural persons who act for purposes that do not enter within the framework of their professional activity. The latter definition can also be found in France29 and in slightly different wording in Italy.30 26
See the contribution of Nozawa to this book. Compare with Nakata (2016), p. 489, who adds that “there are situations in which consumers might appear as ‘business operators’ due to special characteristics of the transaction, or business operators are put in similar positions of those consumers” (p. 489). 27 Professional fake commodities buyers are persons who deliberately and repeatedly buy substandard commodities with the intention to obtain punitive damages since those commodities do not correspond to the national safety and quality standards. Chinese Courts tend to be receptive towards such claims initiated by fake commodities buyers. Yet recent statements in 2017 from the Supreme People’s Court will restrict the professional fake buyer’s exploitation so that more disqualifications as consumers may be expected in case law. See more extensive on this point, the contribution of Yang to this book. 28 Court practice shows that a natural person who sells his services or products obtained from professional activities in an organised fashion, is no longer a consumer. See the contribution of Arbour to this book. 29 Consumer is a natural person who acts for purposes that do not enter the framework of his commercial, industrial, artisanal, liberal or agricultural activity. See already supra. 30 In Italy the consumer is defined as any person who buys products or services from a business to satisfy his proper needs, those of his family and partially also his professional needs, provided that he acts for
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The broad wording does not exclude dual purpose (private and business) contracts from consumer protection. How far a dual purpose contract might be mixed so as not to forfeit the categorization of consumer contract, is debated in Europe. In the Consumer Rights Directive, recital 17 states broadly that “in the case of dual purpose contracts, where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is so limited as not to be predominant in the overall context of the contract, that person should also be considered as a consumer”.31 Yet, in the Gruber- case32 the European Court of Justice gave a more restrictive reading of the consumer concept holding that the notion of consumer contract must be confined to contracts wherein the element of business use is negligible. As a result, the UK legislator defined the consumer as an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession. The UK legislator preferred ‘wholly or mainly’ to extend the definition beyond the interpretation of the Court of Justice of the European Union (hereafter: CJEU) in Gruber. Also the Polish Civil Code allows courts a certain margin of discretion. It defines the consumer as a natural person who performs a legal act33 with a trader for purposes not directly related to his or her business or professional activity. It follows that courts can bring dual purpose contracts into the protective scope in accordance with the broader interpretation in the Consumer Rights Directive. Also the Belgian wording of the definition allows for such stretched reading as applied by some courts with respect to consumer sales contracts. Irrespective of the Consumer’s Level of Knowledge In most of the reported countries the actual level of (technical) knowledge of the consumer, his bargaining power, his concrete legal skills or observant or financial capacities are irrelevant for the application of abovementioned definition of consumer. A natural person who is acting for purposes outside his business or profession is considered automatically to be the weaker person vis-à-vis a trader, seller or merchant. This is however not the case in countries where a broad consumer definition is applied referring to persons acting as final users. Thus the Brazilian Superior Court of Justice extends the protective scope on the basis of a so-called ‘deepened finalism’. This interpretative method allows the application of the Consumer Protection Code in all cases purposes that do not enter the framework of his commercial, industrial, artisanal, liberal or professional activity. See the contribution of Benacchio to this book. 31 Directive 2011/83/EU of 25 October 2011 on consumer rights, OJ 2011, L 304/64. 32 CJEU 20 January2005, Johann Gruber v. Bay Wa, case C-464/01, ECLI:EU:C:2005:32. 33 The reference to legal act does not severely limit the scope of the definition, see more in the contribution of Namyslowska and Jablonowska to this book.
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were the vulnerability is established, even if from the finalist perspective the final destination is not known and the person concerned is no final user. According to the Brazilian Superior Court of Justice this vulnerability can have multiple origins: it can be of a “technical (lack of specific knowledge regarding the product or service being consumed), legal (lack of legal, accounting or economic knowledge and its reflections in the consumer relation) or even factual (situations in which the economic, physical or even psychological insufficiency of the consumer puts him in a disadvantageous position vis-à-vis the supplier) nature”.34 More recently, the vulnerability with regard to information (insufficient data about the product or service that is able to influence the buying decision-making process) has also been included.35 It has already been mentioned above that also the Greek definition of consumer refers to the broad notion of final user. The definition includes legal persons and does not limit the scope to persons acting for purposes outside their business, trade or professional activity. It follows that natural or legal persons are worthy of the law’s protection even when they obtain goods or services for professional use, as long as they can demonstrate that they acted as final recipients. The more narrow common core definition of consumer highlighted above, is in Greece only applied in cases where European law imposes to do so. A similar vulnerability-approach creeps in in Singapore’s consumer law, when the evaluation of relative bargaining positions regarding the reasonableness of otherwise onerous terms is at stake or with regard to the statutory requirement obliging businesses to take care not to take undue advantage of the peculiarities of their customers,36 and in Taiwan where the consumer is automatically approached as the weaker party, disadvantaged in terms of experience and knowledge vis-à-vis a trader.
The ‘Average Consumer’ Is the Benchmark for Information Duties, Unfair Commercial Practices and Unfair Terms The common core definition of consumer referred to above serves as the general benchmark to identify the beneficiaries 2.2.2
34
See Brazilian Superior Court of Justice, REsp 1195642/RJ, 3aT., Rel. Min. Nancy Andrighi, julg. 13.11.2012. 35 See the contribution of Donato Oliva to this book. 36 Based on the responses to the questionnaire from professor G. Low, Singapore Management University, [email protected]., who submits: “Although these requirements are aimed at ameliorating the probability of pressure sales, they also and necessarily go towards what information is shared with the consumer and how it is shared. The same may also be said regarding disclosure in financial products or services contracts, where although there is a mandatory minimum disclosure, the manner and extent of disclosure of information beyond that hinges on the assessment of the savviness of the consumer. As with much in the common law, everything turns on its facts”.
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of protective measures. Within the European Union the maximum harmonisation of the Directive on unfair commercial practices37 together with the case law of the Court of Justice of the EU had the effect of advancing the so-called ‘average consumer’ as the more concrete general benchmark for the assessment of the adequacy of information disclosures and the unfairness of commercial practices. This European standard of an ‘average consumer’ is a person who is reasonably well informed, reasonably observant and circumspect, taking into account social, cultural and linguistic factors.38 It is an somewhat idealized image of how consumers behave or should behave.39 The idea of an average or typical consumer has been used by most of the European member states’ courts as a benchmark even in cases where it is not specifically referred to in legislation. It follows that the ‘average consumer’ is also used by national courts in the member states of the EU as the general benchmark to assess the unfair character of contract terms. In Ireland for instance the average consumer is referred to as a benchmark in relation to the transparency requirement for unfair terms or in cases of passing off. Also in Greece contracts must be drafted in such a manner that the average person reading the terms is able to fully understand their meaning.40 The same applies in Poland were the average consumer gains full weight, despite the fact that consumers prior to accession to the EU were perceived as forgetful and not careful at all. The benchmark of an ‘average consumer’ applies in Poland in areas such as unfair competition, trademark law, unfair terms control, pre-contractual information and even general tort law.41 There is no reason to believe that the CJEU would deviate from the general standard of the average consumer when it comes to the assessment of contract terms.42 37
Directive 2005/29/EC, cited above. See the national reports of The Czech Republic, France, Germany, Greece, Ireland, Italy, Poland, Romania, The United Kingdom. This is also the case in Belgium. Also Finnish consumer law applies this average consumer benchmark, but concentrates on top of that also on individual measures after a conflict has arisen with a consumer; see the contribution of Hyvönen to this book. 39 It follows that the expected behaviour of the consumer is to be determined in abstracto. See more extensively on this point, Duivenvoorde (2014), pp. 63–75, more specifically on pp. 64 and 73. 40 In Greece courts tend to rely on a relatively well informed but inexperienced consumer who is not specifically careful, suspicious or observant, but who at the same time is not a gullible, completely indifferent or careless person. The average consumer is not expected to have legal expertise in contract drafting but is supposed to read the contract terms which should allow him to understand his rights and duties. See the contribution of Karampatzos and Kotios to this book. 41 See the contribution of Namyslowska and Jablonowska to this book. 42 This is all the more so since the Directive on Unfair Contract Terms states that “the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract 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 38
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Yet, this increasing adherence to the European standard of an average consumer does not rule out the national traditions in which the consumer concept is embedded.43 These traditional consumer standards continue to play an important role in the assessment of law provisions. The most prominent example in that regard is Finland where psychologically inspired assessments by the Market Court remodel the average consumer, stating for instance that the value of the giveaway should not be used to distract a consumer from the price of the main product and that reporting prices to consumers in an inconsistent way may be considered to be inappropriate or otherwise unfair conduct in marketing consumer goods.44 It brings Finnish scholars to the conclusion that the general benchmark for the Finnish national consumer legislation remains the weaker, less rational consumer.45 Also Irish courts struggle with the application of the average consumer, especially in advertising cases. “In the Aldi decision, the Court of Appeal avoided an overly paternalistic approach to the average consumer, stating that “[t]he notional consumer has common sense” and that “shoppers have to be given some credit for intelligence and appreciation all the other terms of the contract or of another contract on which it is dependent”(own emphasis), see Article 4(1), Directive 93/13/EEC, O.J. 1993, L 95/29. The overall assessment implies that also pre-contractual information and advertisements must be taken into account and their possible impact on the contract terms. Also the misleading character of those commercial practices may play a role in this assessment. It would then be odd if the average consumer used for the assessment of the misleading character of those practices would be different from the benchmark used for the unfair character of the term. Also the fact that several European law instruments impose to inform the consumer prior to the conclusion of the contract about at least some of the general conditions and clauses of the contract, strengthens this analysis. The most extensive obligation is imposed on service providers by Article 22 (1f) and 1g)) of Directive 2006/123/EC on services in the internal market, O.J. 2006, L 376/36. 43 The European Commission concludes in its Fitness Check Report that Member States rather apply the average consumer implicitly than explicitly (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, p. 109). 44 See the contribution of Hyvönen to this book. In Finland contractual liability is at stake when the content of a contract does not correspond to what the consumer expected. The consumer expectation test with regard to informational defects is based on the general level of expectations and not the consumer’s personal level of expectations, but the price of the contract is taken into account when evaluating the defect (see Finnish Supreme Court Decision 1992:86). 45 In this regard Hyvönen notes that “the Finnish (and the Nordic) average consumer is not similar to the EU consumer image. Nonetheless, when the UCPD is applicable, the EU benchmark is as well. Duty to disclose information has not played a similar role in Nordic consumer law as it has in EU consumer law. Consumer protection after the conclusion of a consumer contract, e.g. by adjusting an individual term, has been regarded as being equally as important as a company’s duty to disclose information prior to the purchase. Concentrating solely on duty to disclose has been seen as protecting the more well-off, educated consumer, and less other weaker consumer groups”, see the contribution of Hyvönen to this book.
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of common marketing practice”.46 In this case “Aldi objected to a comparative advertising campaign by the Dunnes chain of supermarkets, in which shelf-edge labels compared the Dunnes prices and Aldi prices for 262 separate products. Aldi claimed this was misleading, particularly in relation to certain products since Dunnes compared the price of their own brand tomato ketchup with Aldi’s even though Aldi’s ketchup has more tomato content, and compared its ownbrand products when the Aldi products carried quality assurance marks”.47 The Court of Appeal pointed out that “misleading should not be lightly found and that in this case the intention was comparison, not deceit”.48 It further concluded that the average consumer was well capable of understanding price comparisons of that type and would not be misled either by general slogans such as ‘lower price guarantee’ and ‘always better value’.49 However, in the McCambridge case50 the Supreme Court seems to depart from the stricter European standard in favour of perhaps a more realistic view of a consumer.51 Although Kelly reports that there was some evidence that if the consumer actually looked at the packaging and “get up” of the defendant’s soda bread they would not confuse it with that of the plaintiff, the Court held that one bakery passed off its soda bread as that of the rivalry bakery for there was potential for confusion if consumers put it into their shopping trolley without properly looking at it. The Supreme Court further emphasised “the phenomenon of fast moving consumer goods displayed on the supermarket shelf”,52 and stated that “even ordinary reasonable prudent consumers do not, in fact, frequently carry out a detailed examination of the product at the time when they take the bread from the supermarket shelf and place it in the supermarket trolley”.53 Polish courts experienced similar difficulties in advertising cases and developed a formal two-step test. First, the 46 Aldi Stores (Ireland) Limited and Aldi GMBH & Co KG v Dunnes Stores [2017] IECA 116, at paras 104 and 105. 47 See the contribution of Kelly to this book. 48 At this point Kelly rightly points out that the UCPD prohibits misleading commercial practices irrespective of the trader’s intentions to or not to mislead. Misleading conduct is a strict liability offence. 49 Kelly highlights in her contribution the Court’s reasoning: “It seems to me that no sensible person could be misled by the use of general slogans that are the commonplace stuff of most advertising. . . . I think that shoppers have to be given some credit for intelligence and appreciation of common marketing practices. A lawyer’s exegesis of the words used is wholly inappropriate and it would correctly be brushed aside as unworldly and unrealistic by any average shopper. In my view, the proposition accepted and adopted by the trial judge in this regard is, with respect, unrealistic and inconsistent with the attitude to be ascribed to a reasonably well-informed and circumspect shopper”. 50 McCambridge Ltd v Joseph Brennan Bakeries [2013] 1 ILRM 369. 51 See the contribution of Kelly to this book. It must be submitted that the case concerned a common law action for passing off. 52 [2013] 1 ILRM 369, at para.43. 53 Ibid. For more, see the contribution of Kelly to this book.
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targeted audience is determined on the basis of the characteristics of the advertised product or service and, second, the medium which is used for the advertisement is taken into account. Assessments by courts are made in that particular order and may sometimes, in contrast with the Irish evolution, lead to a lower level of protection. In a 2014 judgment concerning the on-line sales of tickets to UEFA EURO 2012 football games, the Polish Supreme Court held that a term included in the standard conditions of business, according to which, in case of a discrepancy between English and Polish language versions of the conditions, the English version should prevail, was not unlawful since they were addressed at a group of consumers who were more technology-savvy, active, well-informed, cautious, attentive and familiar with standard terms drafted in English.54 In Romania information is assessed in the light of the European average consumer but at the same time the personnel circumstances of the concerned consumer are taken into account. As a result, court practice in Romania demonstrates a vigorous application of the transparency standards in view of an increased level of consumer protection.55 In the same vein, information provided by the trader will not be taken into account in the Czech Republic when that information is communicated to consumers contrary to the requirements of comprehensibility or clarity.56 The Greek legislator adopts in function of the protective scope pursued in specific transactions a broader, ad hoc definition of consumer. The targeted audience, especially the non-professional character of the final recipient involved in the transaction triggers this ad hoc specification. As a result consumer protection rules may also apply when the person is not familiar with the specific transaction, irrespective of whether he acquired the products or services for professional or personal use.57 The lack of specific knowledge, experience and bargaining power vis-à-vis the supplier in transactions that persons do not frequently engage in, justifies the application of and the need for protective rules. Conversely, when a specialist group is targeted, for instance medical surgeons, the benchmark will be the average surgeon instead of the average medical doctor. The historical benchmark of the flüchtigen und unkritischen Durchschnittsverbraucher (the casually observing and uncritical average consumer) in Germany which under impulse of the CJEU has been replaced by the average consumer in the Orient Teppichmuster-case58 caused the 54
See the contribution of Namyslowska and Jablonowska to his book. See more extensively on this point, the contribution of Bercea and Caramidariu to this book. 56 See the contribution of Selucka, Staviková Reznicková and Loutocký to this book. 57 See already supra. 58 BGH 20 October 1999, I ZR 167/97, WRP 2000, 517 – OrientTeppichmuster. 55
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Bundesgerichtshof to conclude that the level of attention of the consumer primarily depends on the relevance or value of the products or services. If the advertising concerns lowvalue every-day products the consumer’s level of attention will be lower than his level of attention if the advertising concerns a specific offer of a product or service of considerable value.59 Despite the fact that the average consumer in some circumstances will be characterised as casually observing advertising, the BGH emphasised that, “although the consumer is not always assumed to be particularly attentive the interest of the consumer who is less attentive than the average consumer is not protected”.60 Within Europe, the UK takes a particular place. The average consumer has become the benchmark only for the law of unfair commercial practices, but traditionally courts took “a robust approach demanding consumers take a realistic interpretation to advertising even before the UCPD was adopted”.61 The UK Consumer Rights Act 2015 uses the average consumer for one additional particular point concerning unfair terms control, namely to determine whether a term specifying the main subject matter of the contract, or assessment of the price,62 is sufficiently prominent to be excluded from the Act’s assessment of fairness.63 Also Turkey has its characteristic features. In view of its accession to the European Union Turkish legislation has gradually evolved from protecting naïve consumers to the protection of average consumers who are increasingly aware of things. But, despite legislation with a stricter account of eligible persons for consumer protection Turkish courts continue to perceive the consumer as a naïve, irrational person who could be manipulated easily by marketing techniques. Although a certain legislative lip service towards the European standard of the average consumer can be detected, Turkish courts remain firmly rooted in the pre-existent image of the ‘very weak’ consumer. As for the analysed countries outside the EU, Brazil, Taiwan and Singapore seem to adhere to a more concrete analysis in function of the protective needs and expectations of the consumer concerned. For instance Brazilian law allows that information defects may simultaneously amount to 59 In this sense BGH 18 October 2001, I ZR 193/99, GRUR 2002, 550— Elternbriefe, BGH 26 September 2002, I ZR 89/00, WRP 2003, 275— Thermal Bad and BGH 2 October 2003, I ZR 252/01, GRUR 2004, 162—Mindestverzinsung. 60 See also on this point, Duivenvoorde (2014), pp. 88–94 who adds that according to the BGH the same holds true if the consumer glances through advertising leaflets or advertising in newspapers (p. 90). 61 See the contribution of Cartwright to this book. Compare with the analysis of cases prior to the transposition of the UCPD in the UK in Duivenvoorde (2014), pp. 103–128. 62 See also infra. 63 See UK Consumer Rights Act 2015: “A term is prominent if it is brought to the consumer’s attention in such a way that an average consumer would be aware of it”, S. 64(2) and see infra.
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product defects or non-conformity of the product in cases where legitimate consumer expectations are frustrated.64 The trader’s errors (information made public by mistake etc.) cannot release him from the enforced compliance with the information provided to the consumer, as it belongs to the normal commercial risks to which a trader is exposed.65 Yet, the binding effect of information provided to the consumer is not absolute; it must be interpreted in line with the objective good faith. It results that when the information provided is blatantly wrong, the trader cannot be forced to comply with it, as that type of information could not have created on behalf of the consumer the legitimate expectation that it was adequate information.66 In the same vein Japanese courts apply different typologies of consumers for the assessment of whether information duties are complied with, even despite the absence of a precise consumer definition in Japanese legislation.67 Despite initial conflicting approaches towards average consumers operated by Chinese courts the Supreme People’s Court of China gave in 2007 the following guidelines: judges must base their decisions on the general attention of the relevant public in daily life experiences taking into account the actual circumstances of each case and the facts causing the misunderstanding. It brought scholars to suggest that the average consumer standard consists of two elements: the scope of the average consumer test (the relevant public purchasing that product with a minimum of common sense) and the due attention that is paid by this average consumer (the higher the product price and thus economic risk for the consumer, the higher the average consumer’s attention will be).68 In the landmark Richard v. Time Inc case the Supreme Court of Canada in the case of a sweepstake departed from the rational and reactive consumer and held that “[. . .] the expression “average consumer” does not refer to a reasonably 64 The legislation imposes sanctions such as enforced compliance on demand of the consumer in accordance with the pre-contractual information, replacement by another product if the consumer accepts so or even the consumer’s termination of the contract with the right to be refunded and to obtain compensation for damages. See more on this topic in the contribution of Donato Oliva to this book. 65 As a result, the lower price indicated on the product prevails on the price inserted in the computer. 66 For instance when a new car would be advertised at 50 (currency) instead of 50,000 (currency), the seller is not forced to sell the car at this ridiculous price, as the consumer cannot legitimately expect that a new car would be sold at that price. 67 See the contribution of Nozawa to this book. See also on this point, Nakata (2016), pp. 479–505, who submits: “The notion ‘consumer’, which forms the core of consumer law, was firstly used in the Consumer Protection Basic Act which was promulgated and put into force in 1968, but there is no provision defining this term” (p. 481). Compare with Kano (2016), pp. 467–468 and 471–472 and see also Nakata (2009), pp. 803–815. 68 See the contribution of Yang to this book.
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prudent and diligent person, let alone a well-informed person. [Under the CPA], the courts view the average consumer as someone who is not particularly experienced at detecting the falsehoods or subtleties found in commercial representations”69 (own emphasis). It further concluded that the credulous and inexperienced consumer be the prevailing model: “The words “credulous and inexperienced” [. . .] describe the average consumer for the purposes of the C.P. A.. This description of the average consumer is consistent with the legislature’s intention to protect vulnerable persons from the dangers of certain advertising techniques. The word “credulous” reflects the fact that the average consumer is prepared to trust merchants on the basis of the general impression conveyed to him or her by their advertisements. However, it does not suggest that the average consumer is incapable of understanding the literal meaning of the words used in an advertisement if the general layout of the advertisement does not render those words unintelligible”70 (own emphasis).71 This credulous and vulnerable paradigm evidently strengthens the pre-contractual and contractual information duties towards consumers,72 but despite the Canadian Supreme Court’s adherence to this decisive test of a credulous and inexperienced consumer, the Québec’s Court of Appeal would rather set aside the vulnerable paradigm in case a contract was passed and turn to basic interpretative tools that provide for instance that doubt is always resolved in favour of the consumer.73
2.2.3
The Changing Nature of the European Average Consumer: From a Severe Obligation to Internalize Disclosed Information to Acceptance of Different Levels of Attention As was pointed out above, the average consumer benchmark is used to assess the transparency of information. Outside the European Union some countries seem to adhere to a consumer expectation test in that respect. In the European 69
Supreme Court of Canada, Richard v. Time Inc., 2012 SCC 8 [2012] 1 SCR 265 at par. 71 (emphasis added). 70 Supreme Court of Canada, Richard v. Time Inc., 2012 SCC 8 [2012] 1 SCR 265 at par. 72. 71 This new turn has been criticized by legal scholars as being too paternalistic and shirking consumer’s responsibility. See in that regard the contribution of Arbour to this book. 72 See the contribution of Arbourto this book, who further state that according to the Québec Consumer Protection Act any statement or information provided by the merchant has a binding effect among parties and is used to the advantage of the consumer. Also the contractual fitness for purpose and conformity requirement opens doors to claims based on concealment, silence or otherwise misinformation connected with pre-contractual representations. 73 Contractual parties are expected to gain more than a general impression of the agreed contractual terms. See more on this in the contribution of Arbour to this book.
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scholarly debate it has been sometimes objected that the current legislation lacks a real benchmark of reasonable consumer expectations. Especially with regard to digital content it has been submitted that the absence of such benchmark may have adverse effects on the level of protection of media users.74 According to those scholars “consumer information can shape the reasonable expectations of consumers, and thereby also the level of protection consumers can reasonably expect. In this respect, the level of protection consumers can expect (e.g. according to the rules of fairness of commercial practices or contract terms), depends to a considerable extent on the extent to which consumers have been informed. Hence, consumer information may indirectly also serve as an unfair exclusion clause”.75 On a broader account, Piazzon submits that the general pre-contractual information obligation in civil law countries distinguishes itself from the general duty to provide consumers with sufficient pre-contractual information, the former being subjective whereas the latter is standardised and abstract. The information duty originating in the French Code Civil for instance has an inherent subjective element in that its intensity may vary in accordance with the subject matter of the contract and even the capacities of the person concerned. In contrast, he argues, the European standardised general information duty has an objective and abstract character, with a detailed list of information particulars irrespective of the precise subject matter of the contract and regardless the level of knowledge of the consumer.76 Although there is a certain truth in this assessment, it seems that the divide is much less present in other EU countries since some national reporters point out that through the intermediary of good faith courts can decide on a case-bycase basis whether the information provided by the business corresponds to what an average, circumspect consumer may need to take an informed decision. Aforementioned analysis of the application of the average consumer benchmark in Sect. 2.2.2 also illustrates the existing flexibility. In that respect some Greek scholars warn that good faith may not be used in such a manner that it overburdens businesses by obliging for instance to teach or educate consumers. The Greek Supreme Court came to help and decided that the pre-contractual duty of suppliers to clarify the contractual content to the other contractual party must not extend to
74 Helberger et al. (2013), pp. 50–51. These scholars argue that instead of leaving the matter entirely at the discretion of suppliers and relying on consumer information, a certain minimum standard of usability, safety and consumer friendliness of digital content must be imposed (p. 50). 75 Helberger et al. (2013), p. 51. 76 See more extensively on this point, the contribution of Piazzon to this book.
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subject matters about which the consumer has information of its own or could have obtained information of its own.77 Although the national courts’ practices demonstrate the malleability of the European average consumer, the critique addressed to the CJEU and also voiced above by Piazzon, that this consumer standard is unrealistically high and assumes economic behaviour of persons that is far too rational did not fall on deaf ears. In that respect, some recent developments in the case law of the Court of Justice of the European Union deserve attention. In the beginning, the CJEU consistently held that the assessment whether an appellation, brand name or advertising statement may be misleading must take into account the presumed expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect.78 This benchmark of the European average consumer has its origin in the prime consideration taken from the non-binding preliminary programmes for a consumer protection and information policy that consumers should be enabled to make a choice in the market in full knowledge of the facts.79 The emergence of this European consumer image was implicitly present in misleading practices cases like GB-Inno-BM,80 Yves Rocher81 and Mars,82 and was subsequently consolidated in the Gut
77
See Greek Supreme Court Decision nr. 1435/2015, available on http:// www.areiospagos.gr, and more in the contribution of Karampatzos and Kotios to this book. 78 See in particular, CJEU 28 January 1999, Case C-303/97, Sektkellerei Kessler, ECLI:EU:C:1999:35, para. 36. Thereby, the CJEU was not particularly inspired by human information processing models taken from other disciplines. See for example the Limited Capacity Model of Mediated Message Processing and the LC4MP developed by Lang already referred to above. 79 CJEU 7 March 1990, Case C-362/88, GB-Inno-BM, ECLI:EU: C:1990:102, para. 17: “a prohibition against importing certain products into a Member State is contrary to (the provisions relating to free movement of goods) where the aim of such a prohibition may be attained by appropriate labelling of the products concerned which would provide the consumer with the information he needs and enable him to make his choice in full knowledge of the facts”(own emphasis). 80 See CJEU 7 March 1990, Case C-362/88, GB-Inno-BM, ECLI:EU: C:1990:102. The ECJ agreed with the European Commission that any normally aware consumer knows that annual sales take place only twice a year so that the ‘European’ consumers would not be misled by information on temporary price reductions. 81 CJEU 18 May 1993, Case C-126/91, Yves Rocher, ECLI:EU: C:1993:191. The Court held that the prohibition on ‘eye-catching’ advertising was disproportionate: it also prohibits correct advertising that is eye catching. 82 CJEU 6 July 1995, Case C-470/93, Mars, ECLI:EU:C:1995:224, para 24. The CJEU held that “reasonably circumspect consumers may be deemed to know that there is not necessarily a link between the size of publicity markings relating to an increase in a product’s quantity and the size of that increase”.
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Springenheide and Tusky case.83 It has been confirmed since in case law, and also more recently in legislation.84 With regard to labelling requirements, the CJEU emphasized that the rational consumer whose purchasing decisions depend also on the composition of the products will first read the list of ingredients.85 As a result the average consumer who is “reasonably well informed and reasonably observant and circumspect” is not misled by the use of a term on the label if the seemingly misleading impression the term entails is contradicted by the list of ingredients that duly indicates the presence of all the ingredients in the product.86 Hence, a comprehensive and correct list of ingredients on the packaging of a product may prevent a consumer’s misleading impression derived from a term or depiction used on the packaging of the product.87 And yet, despite the preference for an average consumer tailored to the objectives of the internal market, recent developments in the CJEU’s case law may reveal a changing approach towards the consumer’s duty to internalize disclosed information and perhaps also towards national courts’ leeway to include national preferences in the assessment. In the recent Teekanne case88 the Court had to interpret the alleged misleading character of the mentions on the packaging of a fruit tea. That packaging comprised a number of elements of various sizes, colour and font, in particular (i) depictions of raspberries and vanilla flowers, (ii) the indications ‘fruit tea with natural flavourings’ and ‘fruit tea with natural flavourings – raspberry-vanilla taste’ and (iii) a seal with the indication ‘only natural ingredients’ inside a 83
CJEU 16 July 1998, Case C-210/96, Gut Springenheide and Tusky, ECLI:EU:C:1998:369, para. 31. 84 See Directive 2005/29/EC on unfair commercial practices (UCPD) and Directive 2011/83/EU on consumer rights (CRD). 85 This list contains all the ingredients of the foodstuff in descending order of weight, see Regulation 1169/2011/EU on the provision of food information to consumers, OJ 2011, L 304/18. 86 See to that effect, e.g. CJEU 9 February 1999, Case C-383/97, Van der Laan, ECLI:EU:C:1999:64, para 37. 87 See e.g. CJEU 10 September 2009, Case C-446/07, Severi, ECLI:EU: C:2009:530, para 61 on the question whether the designation of a foodstuff, ‘Salame tipo Felino’, which is evocative of a place and which is not registered as a PDO (protected denomination of origin) or PGI (protected geographical indication) may be legitimately used by producers who use it uninterruptedly for a considerable period and in good faith, is misleading. “It is clear from the Court’s case law that, in order to assess the capacity to mislead of a description to be found on a label, the national court must in essence take account of the presumed expectations, in light of that description, of an average consumer who is reasonably well informed, and reasonably observant and circumspect, as to the origin, provenance, and quality associated with the foodstuff, the critical point being that the consumer must not be misled and must not be induced to believe, incorrectly, that the product has an origin, provenance or quality which are other than genuine.” 88 CJEU 4 June 2015, Case C-195/14, Bundesverband der Verbraucherzentralen e. a. vs. Teekanne GmbH,ECLI:EU:C:2015:361.
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golden circle. The questions referred to the Court were not so much about whether information requirements stemming from the foodstuff labelling directive89 were complied with,—the list of ingredients on the packaging correctly referred to ‘natural flavourings with a taste of vanilla’ and ‘natural flavourings with a taste of raspberry, blackberries, strawberry, blueberry, elderberry’—, but whether the depictions on the packaging of the fruit tea were of such a nature that they could mislead consumers with regard to the tea’s content. In other words, does the labelling of a foodstuff and methods used for the labelling give the consumer the impression, by means of the appearance, description or pictorial representation of a particular ingredient, that that ingredient is present, even though it is not in fact present and this is apparent solely from the list of ingredients on the foodstuff’s packaging? Having regard to the settled case-law set out above, one would have expected the CJEU to rule that the list of ingredients expresses, in a manner free from doubt, the fact that the flavourings used are not obtained from vanilla and raspberries but only taste like them, and that correct and complete information provided by the list of ingredients on packaging constitutes sufficient grounds on which to rule out the existence of any misleading of consumers. As was indicated above, consumers have the duty to internalize information which is disclosed to them in the market and on the products. At first, the Court in Teekanne confirmed that “it is apparent from the case-law that the Court has acknowledged that consumers whose purchasing decisions depend on the composition of the products in question will first read the list of ingredients, the display of which is required”.90 But then the CJEU surprisingly continued that “the list of ingredients, even though correct and comprehensive, may in some situations not be capable of correcting sufficiently the (average reasonably well informed, and reasonably observant and circumspect) consumer’s erroneous or misleading impression concerning the characteristics of a foodstuff that stems from the other items comprising its labelling”(own emphasis).91 In doing so, the CJEU for the first time recognised in the Teekanne case that correct and complete information provided by the list of ingredients on packaging in accordance with the labelling of foodstuffs directive may constitute misleading advertising. It follows that the display of the correct and comprehensive list of ingredients no longer rules
89 See Directive 2000/13/EC on the labelling, presentation and advertising of foodstuffs, OJ 2000, L 109/29. This directive is repealed by Regulation 1169/2011/EU on the provision of food information to consumers, OJ 2011, L 304/18. 90 CJEU 4 June 2015, Case C-195/14, Bundesverband der Verbraucherzentralen e. a. vs. Teekanne GmbH,ECLI:EU:C:2015:361, para 37. 91 Ibid., para 40.
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out the possibility that the labelling has the capacity to mislead consumers. These developments with respect to labelling requirements demonstrate that the CJEU is increasingly aware of national critiques on how the benchmark of the average consumer is applied in cases of deception. It reduces the consumer’s responsibility to process information as well as his duty to internalize mandated or voluntary disclosures when taking purchase decisions.92 This case law exerts an influence on how the prohibition of misleading commercial practices under the Unfair Commercial Practices Directive (hereafter: UCPD)93 is to be applied and allows national judges to mitigate to a certain extent the outcomes of the assessment in the light of the European average consumer benchmark. The recent Canal Digital94 case seems to confirm the approach taken in Teekanne. That case concerned Canal Digital’s price advertising campaign for TV subscriptions on television and on the internet. The CJEU held that when the price of a product is divided into several components, one of which is particularly emphasised in the marketing, while the other is completely omitted or is presented less conspicuously, “an assessment should be made, in particular, whether that presentation is likely to lead to a mistaken perception of the overall offer”.95 This will be the case “if the average consumer is likely to have the mistaken impression that he is offered a particularly advantageous price, due to the fact that he could believe, wrongly, that he only had to pay the emphasised component of the price”.96 An advertisement will be all the more misleading if the omitted or less visible component of the 92
Also in the domain of unfair contract terms the CJEU showed itself prepared to reduce the impact on the (un)fair character of contract clauses of even extensive pre-contractual information, see CJEU 3 April 2014, Case C-342/13, Katalin Sebestyén v Zsolt Csaba Kővári, OTP Bank Nyrt., OTP Faktoring Követeléskezelő Zrt, Raiffeisen Bank Zrt, ECLI:EU:C:2014:1857. The CJEU first confirmed the fundamental importance of pre-contractual information for the consumer’s decision to be bound by the conditions drafted in advance by the seller or supplier. But instead of connecting immediate consequences for consumers to this voluntary disclosure by the trader, the CJEU was prepared to mitigate its impact on consumers, pointing out that “even assuming that the general information the consumer receives before concluding a contract satisfies the requirement under Article 5 that it be plain and intelligible, that fact alone cannot rule out the unfairness of a clause such as that at issue (red.: arbitration clause) in the main proceedings”(own emphasis). The high level of consumer protection set forth by the Unfair Contract terms Directive must also have played a role in the ECJ’s decision. See more extensively infra in Sect. 5.2. 93 Directive 2005/29/EC concerning unfair commercial practices, O.J. 2005, L 149/22. 94 CJEU 26 October 2016, Case C-611/14, Canal Digital Danmark, ECLI:EU:C:2016:800. 95 CJEU 26 October 2016, Case C-611/14, Canal Digital Danmark, ECLI:EU:C:2016:800, para 43. 96 Ibid.; para 44.
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price represents a significant part of the total price that the consumer is required to pay. The fact that the total price was mentioned in the initial advertising or could be retrieved on the website of the advertiser does not shield the trader from the application of the prohibition of misleading actions. The CJEU stressed that offers for TV programme packages are likely to confuse consumers due to the significant asymmetry of information which results from the wide variety of proposals and combinations that are highly structured, both in terms of cost and content, and, furthermore, that the time available for the consumer to assess information provided to him in a television advertisement is limited. The objective of a high level of consumer protection set forth in the Unfair Commercial Practices Directive (UCPD) serves then as a correcting factor for literal interpretations of the Directive’s provisions with adverse effects on consumer protection.97 This objective played also a significant role in the Carrefour-judgment of the CJEU.98 In that case the Court had to assess whether the price comparison of the general price level of competitors was misleading when that extrapolation of prices is based on the prices of a range of basic consumables in the hypermarket of the advertiser (Carrefour) on the one hand with the prices of the basic consumables in the supermarket of the competitor (Intermarché) on the other hand.99 The Court seemed prepared to apply the stricter information standard and confirmed its approach in Canal Digital. It held that “with regard to advertising such as that at issue in the main proceedings, it follows from the foregoing considerations that the information on the basis of which the comparison was made between the prices charged in shops having larger sizes or formats in the advertiser’s retail chain and those displayed in shops having smaller sizes or formats in competitors’ retail chains is information in the absence of which it is highly likely that the advertising would fail to fulfil the objective comparison requirement and would be misleading. Therefore, that information must not only be provided clearly but, (. . .), be contained in the advertisement itself”(own emphasis).100 Thus, in a striking parallel with Teekanne the CJEU emphasizes in Canal Digital and Carrefour that an average consumer who is provided with correct and comprehensive information in advertisements, nevertheless may have a mistaken perception of the offer due to the presentation of that 97
See more on misleading practices, infra Sect. 3. CJEU, 8 February 2017, Carrefour Hypermarchés, Case C-562/15, ECLI:EU:C:2017:95. 99 It must be noted that Intermarché also exploited hypermarkets and that the advertising only provided additional information about the basis of the price comparison on the website of the advertiser or through the less visible reference to ‘super’ in much smaller font, at the bottom of the advertising. 100 CJEU, 8 February2017, Carrefour Hypermarchés, Case C-562/15, ECLI:EU:C:2017:95, para 38. 98
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information taken as a whole. The Court does so without renouncing that the average consumer must serve as a benchmark for the assessment of misleading practices (in labelling, in advertising, etc.). That way, the Court seems to confirm its stance developed with regard to misleading packaging of products. Despite the absence of any reference to Teekanne it may in our view be deduced from the approach taken in Canal Digital Danmark and Carrefour that a similar correction101 to the general rule applies in both subdomains of misleading practices. Doing so, the CJEU has managed to bridge the case law in both domains of unfair marketing law. It follows that even when the trader satisfies the information requirements imposed by the law, it does not automatically rule out that the information may be presented in such a manner that the average consumer remains misled, notwithstanding the correct and comprehensive information he received. This characterization must be based by the national judge on an overall assessment of the case. As the CJEU pointed out in Teekanne, Canal Digital Danmark and Carrefour, in some circumstances correct and comprehensive information may no longer be capable of correcting the consumer’s erroneous or misleading impressions based on other informational elements. This will be especially so in the case of price information provided to consumers in TVadvertising for rather complex products and in the case of advertising for or information on the package of a daily product. In those circumstances the CJEU accepts that the level of attention of consumers may be lower and hence their capability to absorb the disclosed information due to either the reduced time to internalize the information (e.g. in the case of a TV ad) or the fact that the consumer (sometimes hastily) buys a daily product (e.g. fruit tea or other products from the range of basic consumables in supermarkets).102 Interestingly Chinese law tends to a certain extent in the direction of European law where it explicitly recognizes that businesses could manipulate consumers through the use of font sizes and colour differences. If for instance the variety of valuable ingredients or the presence of one ingredient is emphasized on the product packaging the exact volume of that/those ingredients must be indicated in a clear and prominent manner.103 It is also considered to be manipulative when the packaging of foodstuffs prominently displays pictures of
101 Namely that even in the presence of complete and correct information deception of an average consumer can take place. See already on this point prior to the Canal Digital Danmark case, Straetmans (2018), pp. 102–103. 102 It must be observed that those recent developments in the case law of the CJEU offer interesting parallels with the Irish Supreme Court’s analysis in the McCambridge-case and the Bundesgerichtshof’s case law highlighted above. See more extensively on this point Straetmans (2018). 103 See the contribution of Yang to this book.
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ingredients which are not present in the product or refers to qualities that the product does not possess.
2.2.4
Toward a Definition of Vulnerable Consumers: The Sick, the Elder and the Young? The foregoing analysis has demonstrated that courts in and outside the EU devise ways to protect more vulnerable consumers than the one that would normally equate with the average consumer. On a broader account the question arises whether specific categories of vulnerable consumers deserve specific attention when assessing the unfair character of commercial practices from their perspective? Despite the overwhelming attention to the so-called ‘average consumer’ the European legislator does not rule out the protection of specific categories of vulnerable consumers. Quite on the contrary, the Unfair Commercial Practices Directive (UCPD) dictates that in case commercial practices are likely to materially distort the economic behaviour only of a clearly identifiable group of consumers who are particularly vulnerable to the practice or the underlying product because of their mental or physical infirmity, age or credulity in a way which the trader could reasonably be expected to foresee, the unfairness of the commercial transaction shall be assessed from the perspective of the average member of that group.104 The total harmonisation character of this directive brought EU member states to a literal transposition of this requirement in their national legal order. When advertising is specifically targeted to those groups or the characteristics of a product imply that such group must be the target group, a more protective interpretation is in place. This could for instance be the case if video games or products promising cure, or eliminating the symptoms of a disease are advertised for.105 A similar requirement may be deduced from 104
See Article 5 (3) UCPD, O.J. 2005, L 149/22. Article 5(2) UCPD already prescribes that if a commercial practice is specifically targeted to a particular group of consumers, the assessment of its unfair nature must be made in the light of the average member of that group. In this regard the European Commission recognizes that legal scholars increasingly criticise the appropriateness of the benchmark of the average consumer and voice concerns that the benchmark provides insufficient protection to consumers that are less capable and more careless than average. However, even though the Fitness Check Report provides arguments to basically doing away with the specific rule in Article 5(3) and integrating its content in Article 5(2)(b), the European Commission refrains from amending the UCPD in the absence of evidence of major problems in the application of the current rules (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, p. 111). 105 The annex to the UCPD contains specific prohibitions in this regard: “Including in an advertisement a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them” is an aggressive practice prohibited under all circumstances. “Falsely claiming that a product is able to cure illnesses, dysfunction or malformations” and “Claiming that products are able to facilitate winning in games of chance” are misleading commercial practices prohibited under all circumstances.
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introductory recital 34 of the Consumer Rights Directive.106 However, the impact of the reference to the specific needs of particularly vulnerable consumers is immediately cut short as the introductory recital to that directive continues that this more targeted approach “may not lead to different levels of consumer protection”. To what precise extent the assessment of the pre-contractual information or the misleading character of commercial practices becomes more restrictive when assessed from the perspective of particular groups of vulnerable consumers remains unclear.107 Since the specific assessment is only required in case a commercial practice foreseeably targets a clearly identifiable group of particularly vulnerable consumers and is likely to materially distort their economic behaviour, jurisprudential applications are rare. Yet, legal scholars detected for instance an increasing tendency in Polish administrative proceedings to pay special attention to persons belonging to a specific age group, such as elderly people, or to the sick when commercial practices are targeted to them.108 Also the Finnish case law with its stronger roots in protecting less rational consumers considers underage consumers or persons suffering from an illness to be more vulnerable calling for more protective interpretations. In the same vein persons suffering from an illness were specifically taken account off in the case law of the Supreme Administrative Court in the Czech Republic. In its judgment of 17 January 2014, the Court concluded: “The average consumer who is adequately informed, attentive and reasonable, which is generally a benchmark when assessing advertising, is not so critical that he/she would be completely immune to advertising. If the target group is the sick, consideration should be given to their lower critical thinking and greater tendency to believe the advertising that promises cure for their illness. An average consumer suffering from a certain disease is undoubtedly more prone to believe a certain claim about curing his/her disease than an average healthy consumer.”109
See introductory recital 34 of Directive 2011/83/EU: “In providing that information, the trader should take into account the specific needs of consumers who are particularly vulnerable because of their mental, physical or psychological infirmity, age or credulity in a way which the trader could reasonably be expected to foresee. However, taking into account such specific needs should not lead to different levels of consumer protection.”, O.J. 2011, L 304/64. 107 For an analysis from a behavioural perspective, see Duivenvoorde (2014), pp. 183–192, who concludes that “it is difficult in practice to identify vulnerable groups. Qualifying groups as inherently vulnerable is problematic, as vulnerability is highly dependent on the individual consumer and the specific situation” (p. 192). 108 See the contribution of Namyslowska and Jablonowska to his book. 109 See the contribution of Selucká, Staviková Reznicková and Loutocký to this book. 106
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Also the Greek legislator provided for a follow-up on the discretion left by the UCPD. In line with the UCPD elderly people, children and teenagers are considered to be vulnerable groups of consumers. Pursuant to Article 7A par. 1(a) of Law 2251/1994, suppliers in Greece are also required to place on the market “products110 that, by their purpose, use or conditions of supply do not pose risks to the mental, psychological or moral growth of minors.”111 In a similar attempt the French Consumer Code and the Penal Code sanction the abuse of the vulnerability or ignorance of persons who are not capable to understand the effects of the contracts they conclude and are not capable to discern artifices and ruses used to convince them to contract. Also the practice by which such person is given the impression of being under a constraint to contract, is sanctioned. The categories of persons envisaged by these rules are particularly vulnerable persons due to their age (such as minors) or due to sickness, pregnancy, a particular weakness, or a physical or psychological incapacity. Also persons that undergo severe physical and psychological pressure or that are the subject of, manipulative techniques’ to alter their transactional decisions are protected.112 Equally in non-European countries there is an increasing tendency to apply stricter standards for groups of particularly vulnerable consumers. For instance Japanese case law tends to protect elderly people more than others.113 Also Brazilian legislation counts among the consumers who have an aggravated vulnerability, the children,114 elderly people,115
110
The products referred to here are i.a. products that may cause fear or anxiety to minors, promote (directly or indirectly) violent behavior and use of force, insult human decency, promote behavioral models that are not in accordance with the moral or legal rules of modern society or endanger the environment, lead to distinctions based on sex, race, religion etc. or lead to hazardous addictions. In practice, the rule specifically targets suppliers of electronic entertainment products such as video games which must have affixed age labels. 111 See the contribution of Karampatzos and Kotios to this book. 112 See the contribution of Piazzon to this book. See also for a more extensive analysis of the case law concerning particularly vulnerable groups such as children, teenagers and elderly in Germany and in Italy, Duivenvoorde (2014), pp. 97–100 and 144–152. 113 See the contribution of Nozawa to this book. Compare with Nakata (2016), pp. 490–491, who refers to specific solicitation acts of elderly people that are prohibited by the Consumer Contract Act as practices that run against the principle of good faith. 114 Article 2 of Law n. 8.069/1990 (The Child and Adolescent Statute): “For the purposes of this Law, the child is considered as the person who has not yet completed twelve years of age and the adolescent as the person between twelve and eighteen years of age”. 115 Article 1 of the Law n. 10.741/2003 (Elderly’s Statute): “The Elderly’s Statute is instituted with aiming at regulating the rights ensured to someone who is 60 (sixty) years old or older”.
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persons with fragile health116 or disabled persons.117 These categories of so-called ‘hyper-vulnerable’ consumers are protected in accordance with their personal situation, allowing thus for a protection that is adequate and proportional to the real needs of the vulnerable person.118 In an even broader perspective119 the Consumer Protection Act in Québec recognizes subjective lesion. On this basis a contract was deemed null because the consumer did not have the means to acquire a leisure yacht. Subjective lesion stems out of the disproportion between the actual value and the financial capacity of the consumers. It seems to imply that sellers of luxurious goods must acquire information from their clients to assess their financial capacity and to find out whether the financial burden sustained by the consumer is not excessive. It may then be concluded from the foregoing that underage people like children and teenagers, elderly people and people suffering from a particular disease are in most of the reported countries expressly recognised as particularly vulnerable groups of consumers.
3 3.1
Pre-contractual Information Requirements General Duty of Information Disclosure
EU law imposes a general duty of information disclosure for most on premises, distance and off premises contracts.120 The trader must provide information on a number of issues 116 “The probability of the irreparable or hard to repair damage is evident, since the appealed, hyper vulnerable as he is due to his health condition, needs urgent medical care, as per the medical report filed in the records; it is certain that Article 35-C, I of Law n. 9.656/98 establishes as mandatory the coverage of treatment in those cases” (Tribunal of Justice of Rio de Janeiro, AI 0025048-97.2016.8.19.0000, 27ª CC Consu., Rel. Des. Marcos Alcino de Azevedo Torres, julg. 14.9.2016). 117 Article 2 of Law n. 13.146/2015 (Statute of Disabled Persons): “A person is considered disabled when he/she has a long-term impediment of physical, mental, intellectual or sensory nature which, when faced with one or more obstacles, can hinder his/her full and effective participation in society in equal conditions with other people”. See also Pierri (2014), p. 27. 118 For more examples see the contribution of Donato Oliva to this book. 119 In the context of whether a consumer consented to a contract. Subjective lesion allows the consumer to demand the nullity of a contract or a reduction in his obligations thereunder where the disproportion between the respective obligations of the parties is so great as to amount to exploitation of the consumer or where the obligation of the consumer is excessive, harsh or unconscionable. Where the court must determine whether a consumer consented to a contract, it shall consider the condition of the parties, the circumstances in which the contract was entered into and the benefits arising from the contract for the consumer. See in more detail, the contribution of Arbour to this book. 120 The general information duty in EU law stems from Directive 2011/ 83/EU on consumer rights, O.J. 2011, L 304/64; the directive harmonised the information duties for contracts other than distance
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(details about the trader, main characteristics, total price, duration, cancellation rights if any, delivery, . . .)121 before the consumer is bound by the contract. The information must be provided in a clear and comprehensible manner, if that information is not already apparent from the context.122 The Japanese Consumer Law Code is largely inspired by the French Consumer Code and hence contains a general precontractual information duty imposed on the trader with the aim of providing consumers with the necessary information in relation to the content of the contract prior to the conclusion.123 To that extent Japanese law also imposes transparency requirements: information about the content of the contract must be clear, without ambiguities, comprehensible and intelligible.124 The consumer’s right to information in Brazil is grounded in the objective good faith. The Brazilian Consumer Protection Code lists this right among the consumer’s basic rights which secure him the means to decide freely in an informed manner. The offer and the presentation of products must be done with correct, clear, precise and ostensive pre-contractual information125 relating to particulars such as the characteristics of the goods and services, the price, guarantee, duration, risks to health and security of consumers that goods and off premises contracts but allows the member states to adopt or maintain additional pre-contractual information requirements (see Art. 5 (4); some member states made use of this option but only to a very limited extent: see e.g. Poland, Belgium and to a larger extent France). Specific pre-contractual information requirements for distance and off-premises contracts are imposed by Article 6 of the Directive. The Directive also excludes a number of contracts from its scope, e.g. an on premises contract which involves a day-to-day transaction and which is performed immediately at the time when the contract is entered into (on-the-spot on-premises contracts). 121 The option in the Directive to include language requirements regarding the contractual information is taken up by some member states; see e.g. Poland, Italy, France (e.g. on consumer demand businesses must provide a copy of the model contract they normally conclude in French). Romania and Greece further impose specific language requirements in accordance with the European food labelling regulation. These language requirements must be reconciled with the case law of the Court of Justice that allows member states to impose specific language requirements unless full information of consumers may be achieved by other means such as pictograms, symbols, labels, figures etc. The language used by the trader often has an impact on the national judges’ assessments of transparency of contract terms, especially when the contract terms are provided to the consumer in another language than the official language of the territory where the contract is offered. However, the Unfair Contract Terms Directive (O.J. 1993, L 95/29) does not contain any clarification in this respect. Hence legal scholars argue that transparency in a cross-border context implies that consumers are provided information on contract terms in the same language as the one in which they were approached by the seller, see in particular Loos (2017), pp. 54–59. 122 Additional European rules on the form into which this information is to be provided by the trader in case of specific types of contracts will be left out of the analysis here. 123 See the contribution of Nozawa to this book. 124 If a contract term is not or insufficiently intelligible the judge will interpret the term in favour of the consumer. See also infra. 125 Brazilian law also imposes information duties during the contractual phase and after the conclusion of the contract.
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or services may present etc.. The information must also be provided in Portuguese.126 The fact that the disclosed information must enable the consumer to take transactional informed decisions in freedom implies that businesses also must clarify the effects of the contracts and the risks they pose to consumers. Furthermore the qualified consumer consent seems to imply that sellers must avoid the excess of information (puffing/excess of marketing promotion: using exaggerations that cannot be objectively verified) and must adjust the information content in function of the targeted audience and the specificities of the product or service concerned, as the consumer is usually unaware of the technical language in contracts and the precise effects resulting from it.127 In that regard the Superior Court of Justice has emphasized that information must be complete and useful, prohibiting the use of loose, redundant and useless information for consumers. Furthermore all information provided to the consumer which is sufficiently precise is binding upon the trader and prevails contractual clauses stating the opposite unless the contractual clauses are more advantageous for the consumers.128 Also Chinese law imposes a general pre-contractual information obligation the exact scope of which is inter alia determined by the uberrima fides doctrine. This general obligation is further complemented by different sets of detailed information requirements imposed by the Consumer Protection Law and the Advertisement Law.129 In absence of specific standards, information about the so called vital interests of consumers, as interpreted by courts, must be provided so that business operators are not required to provide consumers with general public information. No specific rules on how this information must be disclosed exist in China but the Consumer Protection Law requires standard terms on liability exemption and restriction to be conspicuous 126
See the contribution of Donato Oliva to this book. See more on this topic in the contribution of Donato Oliva to this book. The Civil Codes in the Member States of the European Union often contain specific rules about consumer’s consent to contract clauses. The German BGB for instance excludes so-called surprising clauses from becoming part of the contract. Surprising clauses are according to the Bundesgerichtshof terms that are unusual and which the other party to the contract cannot be expected to have been aware of (see BGH 26 February 2013 – XI ZR 417/11, NJW 2013, 1803). Thus a clause that assigned costs to a buyer of real estate although the contract was presented as an ‘all-inclusive price’-contract, was held to be surprising as well as charging for services that ordinarily were gratuitous (see respectively BGH 26 July 2012 – VII ZR 262/11, NJW RR 2012, 1261 and BGH 29 September 1983, NJW 1984, 171). However if an under normal circumstances surprising term is brought to the consumer’s attention, it would forfeit its surprising character and could no longer be sanctioned (see BGH 18 February 1992 – XI ZR 126/91, NJW 1992, 1823). See more extensively on this issue, the contribution of Schinkels to this book. 128 See more on this topic in the contribution of Donato Oliva to this book. 129 See the contribution of Yang to this book. 127
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for consumers. A variety of sanctions including in certain circumstances punitive damages (of three or ten times (if defective information affects the safety of foodstuffs) the purchase price) further strengthens the pre-contractual information obligations.130 Turkish law had no express general obligation to provide pre-contractual information to consumers, but detailed information requirements are imposed by law with regard to specific types of contract such as for instance credit contracts, mortgage contracts, distance contracts (financial services and others), off-premises contracts and time-share contracts. Under the impulse of European law and with a view to the accession to the EU a new Law on Consumer Protection was adopted in 2014. Nowadays, a general pre-contractual information duty is implicitly deduced from this Law which imposes a number of information particulars.131 In common law systems there is no general obligation on businesses to provide consumers with pre-contractual information. For instance, the common law judges in the UK did not develop any general duty of disclosure nor a particular form into which the information must fit. However, significant inroads on this rule have been made in English contract law to implement EU law. Equally, in Singapore, the law is still very much influenced by the common law doctrinal rules so that one may conclude that there is no general articulation of transparency requirements regarding disclosure of information.132 Statutory exceptions to the absence of a general duty for businesses to provide consumers with pre-contractual information are piecemeal, targeting specific types of contracts or sectors where consumers tend to contract without the requisite voluntary consent.133 Taiwanese law takes a much stricter stance as it is characterised by an ex ante control of the content of contract clauses by the consumer himself but also, and more importantly by the administrative authorities. Before the signing of the contract the Consumer Protection Act grants the 130
See the contribution of Yang to this book. See more extensively on this subject the contribution of Baysal to this book. 132 Based on the responses to the questionnaire from professor G. Low, Singapore Management University, [email protected]. 133 In time share and colportage contracts information about the contract and the consumer’s right to withdraw and how to invoke that right must be contained in a ‘consumer information notice’. This notice must be given in writing in hard or soft copy, e.g. via email. “The statutory exceptions do not specify when businesses must disclose such information, but if businesses omit to provide the consumers information about his right to withdraw the contract, the consumer may withdraw from the contract at any point in time in the life of the contract, as failure to provide such information will in principle not be seen as a defect in consent leading to recission. Consequently businesses have an incentive to disclose this information as soon as practicable”. Based on the responses to the questionnaire from professor G. Low, Singapore Management University, [email protected]. 131
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consumer a preview period which allows him to read the contract clauses. Thereto businesses must in principle send a written form of the standard contract to the consumer. Clauses which are hard to notice or recognize due to the font, printing or other causes will not be included in the contract, unless the consumer otherwise specifies so. Any clause signed during the time when consumers are deprived of the preview period will not be part of the contract, unless again the consumer indicates that the clauses must be included. Furthermore, the administrative authorities have the competence to exercise pre-contractual controls of the standard clauses included in contracts in business sectors. As a result the central authorities have investigated the contract clauses in a significant number of business domains which they select. In those sectors the authorities have issued clauses that must be included in the contract as mandatory clauses and also have prohibited the use of certain clauses. The mandatory clauses thus announced are automatically included in the contracts of that specific business domain, even if the signed contract does not stipulate them. If a contract in a certain business area contains clauses that are prohibited by the central authorities for that sector, these clauses are invalid.134 This extensive prior control by the administrative authorities is increasingly criticized in Taiwan as overly restrictive for businesses and overprotective for consumers.135
3.2
Specific Transparency Requirements: Food Labelling and Beyond
Most of the EU member states simply take over the wording of the Consumer Rights Directive without further specifying the legibility of print in consumer contracts or advertising and without specifying how clarity and comprehensibility136 is to be achieved nor the form137 into which this information is to be provided. European and national legislation often limits The administrative ex ante control resulted in more than 80 ‘model’ contracts. For reasons of consumer protection the freedom of contract and party autonomy have been replaced by mandatory and prohibited clauses imposed by the central authorities. 135 Based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected]. 136 Comprehensibility can be seen as a synonym to the wording ‘easy to understand’ which is used for information in food labelling, but it can also be regarded as a less strict demand. 137 Tangible medium or digitally. In Greece for instance the requirement of good faith imposes that consumers receive pre-contractual information which is easily accessible and which they can understand, whether this information is on the businesses’ website or provided in a hard copy. See the contribution of Karampatzos and Kotios to this book. It may indeed be assumed that pre-contractual consumer information must be provided in writing. 134
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itself to vague concepts like ‘simple and clear information’, ‘visible, readable and comprehensible’, ‘clear and precise’ information etc.138 Piazzon criticizes the lack of clarity of European and national legislation.139 He questions whether there should be any difference between clarity, intelligibility and comprehensibility other than that they all incorporate two obligations. The first relates to the form, the presentation of the information which must be easy to read in terms of print size and contrast between font size and background.140 The second refers to the content of the information and its comprehensibility. In absence of further instructions from the European legislator, national courts themselves, as pointed out above, undertake efforts to increase transparency. At some occasions the legislator comes to their help. Food for instance has been the subject of intensive regulation across the world. This regulatory context includes very detailed labelling requirements.141 This is not the place to 138
The Italian Consumer Code refers to parameters like exhaustiveness, clarity, comprehensibility, good faith and accessibility for the assessment of information. Romanian legislation seems to introduce a threefold standard of complete information (before, during and after the conclusion of the contract); transparency which refers to visibility of the information, readability and easiness to understand the information, and comprehensibility which encompasses understandability in the grammatical sense of the concept but also the obligation to inform the consumer about the real implications of the contract; and correct information. See more extensively on this standard, the contribution of Bercea and Caramidariu to this book. 139 He also submits that despite the absence of any guidance from the directive the French legislator has imposed the burden of proof on the trader to demonstrate whether he has fulfilled his information obligation. The assignment of the burden of proof has also been the subject of debate in Belgian doctrine. There is a tendency in scholarly views and case law that the burden of proof, contrary to the Civil Code rules, should rest on the trader. See in this regard Cambie and Straetmans (2016), pp. 57–58. Also Romania imposed the burden of proof on the trader, see the contribution of Bercea and Caramidariu to this book. 140 In that regard French law prescribes that if certain information provided on paper is subject to specific readability requirements, equivalent requirements apply to the digital counterpart of this information. 141 See e.g. Regulation 1169/2011 of 25 October 2011on the provision of food information to consumers, O.J. 22 November 2011, L 304/18. This regulation provides for instance for mandatory country of origin labelling (COOL) but also includes a provision that allows Member States to adopt national COOL measures. It has been argued that national COOL measures lead to a decrease in purchase of products coming from outside the concerned Member State. An American pilot study seems to confirm that American consumers are more likely to purchase meat when it is identified as a U.S. product since The COOL requirement impacts inferred attributes, such that meat products from the U.S are perceived to be safer, tastier, and fresher than meat products from Mexico. However, the study also reveals that the direct and indirect effects of the country-of-origin disclosure are attenuated by the presentation of objective information about the meat processing systems of competing countries. See Berry et al. (2015), pp. 533–542. Schmeiser also points out that the regulator’s decision to mandate a disclosure signals to consumers that an attribute is important and the intensity of the
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extensively analyse these requirements,142 nor specific legislation143 that has been adopted concerning types of products that are considered harmful to the consumer’s health like for instance tobacco products. However, an innovative information technique that is specific to food labelling is worth mentioning, namely the Multiple Traffic Light System introduced on a voluntary basis in the United Kingdom. This system shows the levels of nutrients of the food as either high, medium or low. It helps consumers in assessing the nutritional qualities of foods in a more comprehensible manner than the guideline daily amount (GDA) labelling. Although the introduction of this system was also debated in Ireland it was found to be ‘over-simplistic’ as compared to the GDA labelling.144 According to a survey by the Society for Consumption Research (Gesellschaft für Konsumforschung, GfK) executed in June 2009, 69% of all disclosure determines the strength of the signal, see Schmeiser (2014), pp. 192–200. On the basis of his model, Schmeiser concludes that “if regulators over-warn consumers about the side effect, consumers receive conflicting messages about the severity. If consumers react in accordance with the level of risk implied by the regulatory effort rather than the statistical data, it may seem as if they are over-estimating the risk from a small probability event. (. . .) Consumers might also draw inferences from information voluntarily disclosed by private firms. If consumer preferences are not malleable, then firms only devote advertising resources to attributes that consumers care about. But if a firm knows that its advertisements affect consumer preferences, then they will use this to their advantage” (p. 198). 142 Japanese law for instance introduced detailed rules relating to the print size of the mentions on the label of foodstuffs. The size of all mentions on the package of a product must be larger than 8 points, save in cases where the surface of the packaging is less than 150 cm2, in which case the print size may be reduced to 5.5 points. See the contribution of Nozawa to this book. 143 For instance Poland has a certain expertise with traders in food supplements that used manipulative techniques to assign medicinal properties to products with misleading statements like ‘cures the cough’ or ‘supports immunity’. Also the umbrella branding that some traders used for medicinal products and food supplements caused considerable consumer confusion since consumers automatically assigned medicinal properties to all products sold under the same umbrella branding. See the contribution of Namyslowka and Jablonowska to this book. Manipulative techniques of this kind used by businesses have not been the subject of specific legislation in other reporting countries. Schinkels points out that as long as the reasonably wellinformed and reasonably observant and circumspect consumer is used as a benchmark, “it is questionable whether the use of a colour for a package as such may suffice to establish a misleading product-information with regard to purely emotional connotations while there is formal correct information about ingredients and nutrition. By contrast, packaging colours may be misleading if, according to established usages, they induce the expectation that the package contains a different product”, see the contribution of Schinkels to this book. 144 See the contribution of Kelly to this book. According to Purnhagen, Van Herpen and Van Kleef, who examined the EU health claims regime, visuals may mislead consumers to a larger extent than textual claims in that they overpromise health benefits of consuming the product. Therefore, they claim that in order to effectively regulate health claims in the EU, regulation has to devote much more attention to the regulation of pictorial claims. See Purnhagen et al. (2016), pp. 197–216.
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interviewed German consumers were in favour of such a system and 77% rejected a European prohibition of the mandatory implementation of such a system by national legislators.145 In Germany, the academic board of advisors of the former Federal Ministry of Nutrition, Agriculture and Consumer Protection advocated more in general that there should be more differentiation of groups of consumers,146 whereby the distinction between trusting,147 vulnerable148 and responsible consumers149 could be helpful.150 Even beyond the context of food regulation initiatives are taken to help national courts in their decision taking. In the UK a recent study of the Competition and Markets Authority provides for guidance on information presented to consumers in digital comparison tools.151 Digital comparison tools (DCTs) are defined as “digital intermediary services used by consumers to compare and potentially to switch or purchase products or services from a range of businesses”. The report concludes that realising the benefits for consumers, such as time and effort saving and lower prices and better choices as a result of suppliers competing harder, depends on a number of things being in place: (a) consumers need sufficient trust and confidence to use DCTs in the first place, and enough understanding to choose and use them effectively; (b) DCTs need to be able to offer a relevant and accurate service and a smooth consumer journey, including information both about consumers and their requirements, and about the products being compared; (c) competition between DCTs needs to be effective, so that people can benefit from the competitive pressure DCTs bring to bear on the suppliers whose services they compare, and suppliers pay competitive prices for the services DCTs offer; and (d) regulation should support all these factors in a proportionate way, if the market 145
See the contribution of Schinkels to this book who refers to Spiegel online, 24. July 2009, Verbraucher wollen Lebensmittel-Ampel; see also https://www.foodwatch.org/de/informieren/ampelkennzeichnung/mehrzum-thema/studie-vergleich-ampel-gda/. 146 Der vertrauende, der verletzliche oder der verantwortungsvolle Verbraucher? Plädoyer für eine differenzierte Strategie in der Verbraucherpolitik Stellungnahme des Wissenschaftlichen Beirats Verbraucher- und Ernährungspolitik beim BMELV, as of December 2010, accessible via: https://www.vzbv.de/sites/default/files/ downloads/Strategie_verbraucherpolitik_Wiss_BeiratBMELV_2010. pdf. 147 Trusting consumers do not want to and cannot take the time necessary to inform themselves and to achieve the expertise to take wellgrounded decisions especially in the fields of healthcare and finance. 148 Vulnerable consumers are persons excluded from social and economic interactions because of excessive indebtedness, sickness or lacking means of access to the internet. 149 Responsible consumers are persons who actively inform themselves and others in order to optimize sustainability of consumption regarding ecological and social aspects of production and disposal of consumables. 150 See the contribution of Schinkels to this book. 151 Competition and Markets Authority United Kingdom (2017).
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does not deliver them on its own. Although consumer’s surveys give a mostly positive picture of DCTs, concerns have been raised about the transparency, accessibility for vulnerable consumers of DCTs and their use of consumers’ personal information.152 The study issued strong concerns about some types of contract between suppliers and DCTs, which prevent suppliers from offering better prices on one DCT than on another (so-called wide price parity/Most Favoured Nation clauses) and can reduce competition between DCTs.153 It also provides recommendations for improvement of DCTs in order to support consumer trust and informed choice between DCTs and between suppliers. To that aim DCTs should treat people fairly, by being Clear, Accurate, Responsible and Easy to use (CARE). This CAREprinciple is further specified in specific recommendations with regard to each of the aforementioned high-level principles.154
3.3
Mandatory and Additional Voluntary Information
In reality businesses do not limit themselves in providing consumers with mandatory information. They often insert additional voluntary information which not always contributes to a better understanding. Yet, we see that none of the reported countries has a ban on further voluntary information provided by traders. On the contrary, especially the European legislator and the national legislators in the EU member states seem rather to encourage traders to do so from the perspective to inform consumers better.155 This evolution has even brought Italian scholars to suggest that the minimum information requirements imposed by the European 152 Competition and Markets Authority United Kingdom (2017), pp. 76–79. 153 Competition and Markets Authority United Kingdom (2017), pp. 79–81. 154 Competition and Markets Authority United Kingdom (2017), p. 9, 72. Being clear implies that DCTs explain their services and how they make money; it includes for instance that they prominently provide a general explanation of how they make money and clearly explain how much of the market they cover and how they have ranked the results. Being accurate necessitate to provide information that is complete, correct, relevant, up to date and not misleading and that for instance in each result all the information consumers need, including price and main characteristics, is included. Being responsible requires to protect people’s details and be easy to deal with, e.g. when showing reviews, it requires DCTs to have processes in place to ensure users see the full picture and be clear about how reviews are collected and checked. Being easy to use implies that DCTs make information easy to find and understand, and e.g. that all key information is present in a clear, prominent and timely way. 155 In that regard it must be noted also that the model forms annexed to some European legal instruments incite businesses to make use of them as they create the assumption that the provided information meets the required standard.
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legislature must also be considered the maximum of information particulars to be disclosed to consumers.156 In any case, both mandatory and voluntary information will normally be taken into account to assess the misleading character of information.
3.4
Sanctions for Failure to Provide (Correct) Mandatory Information
The enforcement of information requirements in the reporting countries represents a considerable variety of possible sanctions. Also within countries themselves the applicable sanctions in case information is absent, imprecise, incomplete or incorrect vary considerably. This is mainly due to the fact that the legislator concerned seeks to impose a sanction in function of the level of protection pursued for consumers.157 In that respect the divergence of sanctions cannot be criticised. In some of the analysed countries the infringement of the pre-contractual information duty is as such not specifically sanctioned. This is for instance the case in Japan where the contractual remedy of culpa in contrahendo does not exist either.158 Claims based on error or deceit give rise to the 156 See the contribution of Benacchio to this book. In other countries like Greece the principle of good faith in the pre-contractual stage could be used to combat information that would confuse or perturb consumers; see for instance the contribution of Karampatzos and Kotios to this book, who refer to the Greek Supreme Civil Court Decision nr. 1028/ 2015, available on http://www.areiospagos.gr. 157 French law takes a peculiar position as it seeks to distinguish between infringements in the pre-contractual phase, which may give rise to tort liability, and in the contractual phase which may then give rise to contractual liability. However, in practice, the focus on consumer protection of the information obligations seems to blur this civil law distinction to great extent. Find more on this topic in the contribution of Piazzon to this book. With regard to the failure to provide the consumer with mandatory information, the French Court of Cassation applies a formalist approach sanctioning the absence of any mandatory information even when that particular information did not have an influence on the consumer’s consent. This overprotective approach, often leading to the nullity of contracts, is criticised by French legal scholars. In the same vein Benacchio criticizes the European legislator’s neo-formalism, in his contribution to this book. In contrast, failure to provide mandatory information requirements in Turkey does not affect the validity of the contract, but the Law on Consumer Protection requires the trader to immediately fill in the lacunae and thus to promptly comply with his information obligation (see the contribution of Baysal to this book). In Canada, and more in particular in Québec, sanctions attached to a lack of information vary in light of three factors: (a) the chronological position within the pre-contractual timeline; (b) the general or specific nature of the violation; and (c) the provincial-federal structure of the legal system. See extensively on this subject the contribution of Arbour to this book, who refer to common sanctions like the nullity of the contract, price reduction or claims for damages, and exceptionally in Québec punitive damages. The simultaneous pursuit of preventive and deterrence goals justifies also the imposition of penal sanctions. 158 See the contribution of Nozawa to this book.
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relative nullity of the contract. Also when a trader omits to provide essential information to the consumer, the latter may claim the relative nullity of the contract before a judge. Essential elements to the contract are information about the quality of the product or the service, information about the price and information concerning the terms of the contract. Furthermore, in case a trader fails to provide mandatory food information the Japanese prime minister may order the business to recall the products from the market or to suspend all or part of the activities of the business for a certain duration so as to forestall further harm to consumers.
4
Misleading Commercial Practices
In the EU member states the regulation of unfair commercial practices, including misleading (actions and omissions) and aggressive practices, is totally harmonised by Directive 2005/ 29/EC.159 The unfair commercial practices directive provides (hereafter: UCPD) a general prohibition of misleading commercial practices (actions and omissions of material information160).161 The laws of the other reported countries have similar traits to this European legislation.
4.1
Overall Analysis
The assessment of the misleading character of a commercial practice requires in all reported countries a synthetic approach. It presupposes an overall analysis taking into account the relevant features and circumstances of a commercial practice. Decisive is the general impression of the practice made on the average consumer and whether the practice affects or is likely to affect in a negative manner the transaction decision of this consumer.162 159
Directive of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market, OJ 2005, L 149/22. 160 Material information means the information which the average consumer needs, according to the context, to take an informed transactional decision, and any information requirement which applies in relation to a commercial communication as a result of an EU obligation. 161 With regard to misleading price comparisons websites, some of the reported countries have specific regulatory mechanisms. See for instance the UK Regulators Network (2016). Also the French Consumer Code developed a specific rule in that regard, but incorporated it into the general pre-contractual information duty. It requires persons whose activity consist in the exploitation of comparison websites to inform in a loyal, clear and transparent manner. In France, also specific rules exist concerning online platform and website operators; see in more detail, the contribution of Piazzon to this book. 162 In the words of the European directive (UCPD): a practice that materially distorts or is likely to materially distort the decision making process of the consumer and causes him to take a transactional decision that he in absence of the unfair commercial practice would not have taken.
It follows that also the manner in which the information is provided to the consumer may have an influence on the misleading character of the commercial practice. Thus the Finnish Supreme Court held that advertisements for events without informing the consumer in the marketing material in a manner which is clear and easy to understand of the price of the tickets constitute misleading commercial practices. In this case the price of the tickets was only given in unclear small print in the advertisements and even not verbally expressed in the corresponding television commercials, so that the Supreme Court had no difficulty in finding that the manner of marketing had not been clear or easy to understand for consumers.163 Quite in contrast Piazzon states that the readability as such of information is rarely condemned in absence of the imprecision or the ambiguity of the information.164 Nevertheless the French Court of Cassation decided in an interesting case that the use for restrictive clauses to the offer of a print size that was 12 to 25 times smaller than the other mentions in the advertising amounts to a misleading commercial practice.165 In this case the French Court of Cassation introduced a link between the medium used and the readability of the advertising, a jurisprudential direction that seems to be in line with the aforementioned Canal Digital case decided by the Court of Justice.166 Interpreting the UCPD in that case the CJEU seemed to point out that the use of small print will be more harmful for example in TV adds than in an advertisement in a journal. In the latter case the average consumer (reader) will have sufficient time to read the integral advertising whilst the time available to the consumer to assess information provided to him in a television advertisement is limited. Turkish law is largely inspired by the UCPD, which it literally transposes,167 and also the Brazilian Consumer 163
See the contribution of Hyvönen to this book. The ticket sales agent and organiser were both equally responsible for the misleading commercial practice. 164 See more in the contribution of Piazzon to this book. Also Schinkels indicates that transparency does not play an important role and can hardly be seen as a dominant factor to reject information that is correct. In his contribution to this book Schinkels points to case law of the Bundesgerichtshof wherein the court accepted the concretion in footnotes of mandatory instructions about the applicable withdrawal period ( see BGH 14 March 2017 – XI ZR 442/16, NJW RR 2017, 815). In an insurance contract case the Bundesgerichtshof even accepted that a formally correct and typographically emphasized instruction about the right of withdrawal sufficed despite the fact that it was accompanied by non-emphasized information that included a wrong (and divergent) indication of the time limit for the withdrawal (see BGH 16 December 2015 – IV ZR 71/14, BeckRS 2015, 21001. The latter approach has been confirmed by the BGH in a case of distance marketing (see BGH 10 October 2017 – XI ZR 443/16, WM 2017, 2248). 165 Cass. Crim. 13 May 2003, n 02-84.100. 166 See supra. 167 However, it is to be noted that there exist in Turkish law a certain reluctance towards comparative advertising. Although theoretically comparative advertising is permitted as long as it is not misleading,
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Protection Code comes close to the European standard.168 The latter prohibits misleading actions and omissions, even when committed in good faith.169 In line with aforementioned court judgments in Finland and France a beverage marketed under the name ‘Alpino Fast’ in a similar packaging as Alpino chocolate but with the mention in only small print that the product did not contain Alpino chocolate was proven to be misleading.170 Equally to European law the potentiality of deceiving consumers is sufficient to trigger the prohibition in Brazil. In the same vein also Chinese law considers the use of similar names or packages for different food products to be manipulative.171 A statutory requirement of fault or intention is also absent in Singaporean law. It deems unfair any action or omission that results in a consumer reasonably deceived or misled, but it will be up to the consumer to demonstrate that a commercial practice is reasonably deceiving or misleading him.172 does not constitute an unfair commercial practice and compares goods or services of the same quality meeting the same needs or intended for the same purpose, explicit comparative advertising is still categorised as an unfair commercial practice in court practice. See the contribution of Baysal to this book. 168 But it also goes beyond where it considers advertisements abusive if they disrespect values worth of being protected. Among the prohibited advertisements on that ground are discriminatory advertising, advertising that incites to violence, exploits fear or superstition, profits from the immaturity of judgment and inexperience of children, disregards environmental values, or is capable of leading consumers to behave harmfully or hazardously with respect to their health and safety. Thus, the slogan “The true black woman is recognized by her body” accompanying the beer ‘Devassa Dark’ was considered discriminatory on that basis. See for more examples, the contribution of Donata Oliva to this book. In the EU, Directive 2005/29/EC on unfair commercial practices (UCPD) does not address legal requirements related to taste and decency which vary widely among the Member States (see introductory recital 7). That type of advertising falls outside the harmonised scope of the UCPD and remains within the ambit of the member states which consequently enjoy a broad discretion in that domain. 169 Brazilian advertisements that contain sufficient precise information can have a contractually binding effect. Ads must also be immediately recognizable as such by the consumer and must be transparent about the data used therein. Furthermore, Brazilian Law permits comparative advertising provided that the comparison has as its main objective to inform the consumer on the basis of true, objective information and that it does not mislead consumers, is not abusive, does not depreciate the product or brand of the competitor and does not lead to confusion between products or brands. 170 See the contribution of Donato Oliva to this book. 171 See the contribution of Yang to this book. 172 Furthermore, the Law in Singapore contains a number of practices that are considered to be unfair under all circumstances (black list). Among those black listed practices, we find false claims about products, bait-and-switch tactics, charging prices for goods or services higher than initially agreed, exerting undue influence or duress on consumers to enter into a transaction. The foregoing is based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. Also the UCPD lists misleading and aggressive practices that are under all circumstances prohibited in Annex I to the directive.
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The Taiwanese fair transaction law requires businesses not to present any false or misleading information on products, in advertising or via other means conveyed to the public that influences the transactional decisions of consumers. Information which is capable of influencing the public is information related to for example the price, quantity, quality, content, production, production date, term of validity, instruction, usage, place of origin, manufacturer, place of manufacturing, processor, place of processing and other appealing information.173 Advertisements with a celebrity as spokesman or professionals (not exclusively public figures) or with references to renowned institutions in which consumers have trust, were given special attention in Taiwan. This socalled recommendation or demonstration-oriented advertising must comply with the principles (e.g. no false or misleading statements, reliability) developed by the Fair Trade Commission.174 The Japanese Law prohibiting unjustified offers and misleading presentations prohibits two types of commercial practices. First, advertisements that induce consumers into believing that the sold product has much better effects and qualities than in reality, e.g. if a trader states that his product is the best in the world without any proof to that extent.175 Second, advertisements that give consumers the impression that the sold product is much more advantageous than 173
Based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected]. 174 The following principles developed by the Fair Trade Commission must be observed: The advertising (1) truthfully reflects the opinion, trust, discovery or experience of the recommender and demonstrator and shall not include any false or misleading information; (2) If a public figure or a professional figure (institution) serves as the recommender and demonstrator and the advertised products or services change in content or quality, the main advertiser must assure that the recommender and demonstrator do not change the information to be conveyed in the advertising during the broadcasting; (3) If a professional figure (institution) serves as the recommender and demonstrator or the recommendeddemonstrative advertising clearly shows or implies that the recommender or demonstrator is an expert in the advertised product or service, the recommender or demonstrator must indeed have the expertise or technology and its opinion must be consistent with the result of the demonstration by others who share similar professionalism or technology; (4) if the recommender and demonstrator share experience as a consumer, the consumer must be an actual user of the recommended and demonstrated product or service; in case that the consumer is not an actual user, the audience must be informed of that fact in the advertising. What is recommended and demonstrated must be based on science or experimental evidence. The results which consumers may obtain or under what circumstances the demonstrated effects may be obtained by consumers must be set out in the advertisement; and (5) in the case that there is an unpredictable interest-based relationship between the recommender and demonstrator and the main advertiser, the relationship shall be fully disclosed in the advertising. The foregoing is based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected]. 175 Although Japanese law permits comparative advertising it is very rarely used as a marketing practice since it does not correspond to the Japanese business culture and mentality.
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products from other businesses, e.g. when the advertiser mentions ‘sale’ in the advertisements whereas the products are sold at a price which is no less than the ordinary price (unjustifiable premiums—reference price does not reflect market price).176 Chinese Law also generally prohibits misleading and confusing commercial practices. Superiority claims (e.g. using words like ‘highest level’ or ‘best’) and health claims (except for medicinal products) are not allowed, nor is comparative advertising for drugs, home-used medical machinery or health foods.177 Misleading commercial practices further include incorrect or one-sided information, the use in advertising of inconclusive views of scientists and the use of ambiguous language. The omission of vital information for consumers in advertising can also be prohibited as a misleading commercial practice. According to the Supreme People’s Court judgment of 2007, already cited above, judges must take into account the relevant factors of the case to assess the misleading character of a commercial practice thereby using the average consumer as the benchmark. In general, courts often refer to the ‘overall consumer group’ of the said product as the average consumer and only take specific sensibilities of for instance children and patients into account if a particular product is specifically targeted to those groups of consumers.178 In the case of false information courts will have no difficulty to prohibit the commercial practice as misleading. However, if the information is true but incomplete or inaccurate, the assessment must normally be based on an additional test, namely whether the commercial practice substantially impacts the consumer’s purchase behaviour. This substantial effect on the consumer’s transactional decision is presumed to be present in the case of false advertising.179 The Québec Consumer Protection Act and the Canadian federal Competition Act provide for the prohibition of representations that are false or misleading.180 Although the latter Act does not define the term “representation” many parameters are set to its evaluation. The public dimension of the representation is presumed in certain circumstances.181 176
See the contribution of Nozawa to this book. Compare with Nakata (2017), p. 288, who points out that ‘much better’-advertisements give rise to “cases where the level of exaggeration has exceeded that which is generally admitted in society” (p. 288). 177 See the contribution of Yang to this book. 178 See the contribution of Yang to this book. 179 See the contribution of Yang to this book. 180 “Persuant to art. 52 (1): “[n]o person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect”. 181 “For the purposes of this section (see previous footnote), a representation that is (a) expressed on an article offered or displayed for sale or its wrapper or container, (b) expressed on anything attached to, inserted
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Thus plaintiffs are relieved from proving “that (a) any person was deceived or misled; (b) any member of the public to whom the representation was made was within Canada; or (c) the representation was made in a place to which the public had access”.182 Furthermore, “[i]n a prosecution for a contravention(. . .), the general impression conveyed by a representation as well as its literal meaning shall be taken into account in determining whether or not the representation is false or misleading in a material respect”.183 Also false or misleading representations of prices such as false discounts and sales are prohibited, for instance when a trader increases prices a few weeks before the sales period to lower them afterwards. In the same vein year-round discounts for products that were never offered at their alleged regular price, are covered by the prohibition. The Consumer Protection Act which is mostly used in Québec seeks further to eliminate unfair and misleading practices that may distort the information available to consumers and prevent them from making informed choices. Like the European directive commercial practices are defined very broadly,184 which allows constant adequation to new marketing tools. The Consumer Protection Act thus provides that “[n]o merchant, manufacturer or advertiser may, by any means whatever, make false or misleading representations to a consumer”. In application of that rule the Court of Appeal considered that a defective locking door system of a car affected the purchase decision of a consumer. The fact that this known weakness of the car was not revealed to the consumer by the manufacturer was considered a violation of the prohibition. Apart from the general catch all prohibition a bundle of more specific misleading practices are prohibited with regard to specific forms of price indication and advertising, as well as warranty.185 The assessment of a misleading commercial practice in Québec must be exercised in accordance with the two following parameters: the general impression the practice gives and the literal meaning of the terms used therein. The latter criterion means that every word used in a representation must in or accompanying an article offered or displayed for sale, its wrapper or container, or anything on which the article is mounted for display or sale, (c) expressed on an in-store or other point-of-purchase display, (d) made in the course of in-store or door-to-door selling to a person as ultimate user, or by communicating orally by any means of telecommunication to a person as ultimate user, or (e) contained in or on anything that is sold, sent, delivered, transmitted or made available in any other manner to a member of the public, is deemed to be made to the public by and only by the person who causes the representation to be so expressed, made or contained. 182 Art. 52 (1.1), Competition Act. 183 Art. 52 (4), Competition Act. See the contribution of Arbour to this book. 184 The definition corresponds to the European definition in the UCPD. It encompasses all forms of means that may affect consumer judgment. 185 See the contribution of Arbour to this book.
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be interpreted in its ordinary sense, referring to its meaning in everyday life. The first criterion refers to an abstract test. Representation “must be analysed in the abstract, that is, without considering the personal attributes of the consumer who has instituted proceedings against the merchant”. In the Richard v. Time case, referred to above,186 about a sweepstake in Time Magazine with a leaflet congratulating the reader, whereby the consumer truly thought he had won a price, the Canadian Supreme Court developed a compromising, midway test between ‘first’ and ‘general’ impression. It first rejected the “instant impression” test anchored in the mere perception of the advertisement’s lay out, since that test would, in the end, discharge consumers from reading the actual message. According to the Court “the legislature adopted the general impression test to take account of the techniques and methods that are used in commercial advertising to exert a significant influence on consumer behaviour. This means that considerable importance must be attached not only to the text but also to the entire context, including the way the text is displayed to the consumer”.187 The Court then somewhat alleviated the consumer’s obligation to absorb information. According to the Supreme Court, courts “must not approach a written advertisement as if it were a commercial contract by reading it several times, going over every detail to make sure they understand all its subtleties. Reading over the entire text once should be sufficient to assess the general impression conveyed by a written advertisement, [. . .][. . .] In the case of false or misleading advertising, the general impression is the one a person has after an initial contact with the entire advertisement, and it relates to both the layout of the advertisement and the meaning of the words used”. It follows that the general impression test does not involve the minute dissection of the text of an advertisement to determine whether the general impression it conveys is false or misleading.188
4.2
Advertising Directed Towards Children
The fact that the average consumer serves as the general benchmark for the assessment of misleading practices does not rule out that in most of the reported countries special attention goes to advertisements directed at children.
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According to the UCPD for instance the inclusion in an advertisement of a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them, constitutes an aggressive commercial practice which is prohibited under all circumstances.189 In the same vein Finnish law emphasizes the particular vulnerable character of children. According to a decision by the Council of Ethics in Advertising businesses should be particularly careful when marketing food products to children. An advertisement promoting a multivitamin nutritional supplement was advertised on a website known for its popularity amongst young consumers. As the advertising gave the impression that the supplement could be seen as a substitute for food, the Council found the advertisement misleading and issued a warning to the company. Also the Brazilian Consumer Protection Code counts children among the hyper vulnerable consumers who can easily be persuaded by commercial practices. Hence any business conduct that exploits the immaturity, weakness or ignorance of consumers in view of their age or knowledge is considered abusive.190 The Québec Consumer Protection Act prohibits advertisements destined to children of 13 years old and under. To find out whether an advertising is targeted to children, account must be taken of the nature and intended purpose of the goods advertised, the overall presentation of the advertisement and the time and place it is shown.191 In Singapore, taking unfair advantage of a consumer who is unable to protect his own interest or who is unable to understand the transaction at hand, is deemed an unfair practice. The prohibition requires that the consumer concerned is vulnerable and that the business knew or out to have known of the vulnerable characteristics of the consumer it is dealing with.192 Thereto an objective standard is applied to assess the business’s conduct, assessing the reasonableness of the business’s actions vis-à-vis the vulnerability of the consumer and whether steps were taken to forestall or remove the unfair character. As was pointed out above Chinese courts will take the sensibilities of children into account to assess the misleading character of a practice if the advertisement specifically targets this group of consumers.193
186
See Sect. 2.2.2. See the contribution of Arbour to this book. 188 Rather the Court “exposes the steps that shall guide judges in finding misleading practices: (1) the manufacturer violates provisions; (2) consumers actually saw the deceptive representation and (3) such prohibited practice impacted upon their decision to enter into a contract, and; (4) a sufficient nexus existed between the content of the representation and the products”. In those circumstances there exist an irrebuttable presumption of prejudice, as the consumer does not have to prove that the merchant intended to mislead. 187
189
See probation nr.28 in Annex I to the UCPD. See more in the contribution of Donato Oliva to this book. 191 See more in the contribution of Arbour in this book. 192 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 193 See the contribution of Yang to this book. 190
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5
Unfair Contract Terms: Bargaining Power and Transparency
5.1
Standard-Form Contracts and Individually Negotiated Terms
The European Unfair Contract terms Directive (hereafter: UCTD)194 applies to terms in consumer contracts which have not been individually negotiated. Some member states of the European Union, for example Austria, Belgium, Denmark, Finland, France, Luxembourg and Malta extended the protective rules to individually negotiated contract terms.195 Also in the UK were unfair contract terms control was initially limited to non-negotiated terms,196 an extension to all terms, whether negotiated or not, has been realised in 2015 since, according to the legislator, that extension would only affect very few cases.197 Along the lines of the UK reform in 2015 a similar extension was proposed in Ireland, but to date not adopted. The Brazilian Consumer Protection Code applies an unfairness test to standard terms in consumer contracts and to individually negotiated unfair or unconscionable198 terms which are listed in a grey list. The unfairness test applied to standard contracts199 is stricter. In order to be binding the Consumer Protection Code requires that standard contracts are drafted in legible and ostensible characters, with a font size of no less than 12 points, contributing to an easier understanding of the consumer. Furthermore, terms that imply a limitation of consumer rights must be highlighted, allowing their prompt and easy comprehension.200 If a business infringes abovementioned requirements the clauses concerned are not binding upon the consumer. A similar sanction results from the fact that the consumer is unaware of the contract purport201 or if its wording lacks clarity.202 It 194
O.J. 1993, L 95/29. See Report of the Fitness Check of EU Consumer and Marketing Law (2017), p. 147. 196 The Unfair Contract Terms Act of 1977 introduced control over the clauses of the contract which restricted or excluded liability and applied to both consumer contracts and non-consumer contracts. 197 See the contribution of Cartwright to this book. 198 When a contract term is deemed unconscionable it must be considered null and non-binding to the consumer. 199 The fact that one or more of the terms were subject to individual negotiation does not alter the qualification of the contract as a standard contract. 200 See the contribution of Donato Oliva to this book. 201 The consumer was not given the chance of previously getting acquainted with the terms of the contract. 202 The terms are drafted in such a manner that their precise meaning and content is difficult to grasp for consumers. Thus, the Brazilian Superior Court of Justice held in the domain of insurance that the use of vague contract terms or terms which demand technical and/or legal knowledge of a level inconsistent with the reality of the insured person, is abusive. See the contribution of Donato Oliva to this book. 195
follows that in Brazil all terms in consumer contracts are subject to a double test, namely an (i) objective unfairness test of the contract terms and (ii) an assessment whether the business complied with the mandatory information disclosures set by law.203 German law differentiates between standard terms and non-negotiated individual terms in consumer contracts. “Standard contract terms are such terms that have been drafted in advance with the intention of multiple use and that are unilaterally implemented by one party. With regard to such terms, it is not relevant, whether the stipulating party is entrepreneur”.204 Contract terms that have been drafted in advance for single use are characterised non-negotiated individual terms. In contracts concluded with consumers that contain those terms businesses are deemed to have inserted previously drafted terms into the contract, unless they have been inserted by the consumer. Additionally, individually negotiated terms have priority over conflicting standard terms and surprising stipulations do not become part of the contract.205 Greek unfair contract terms control does not apply either to individually negotiated terms. It focuses on standard terms but also applies to pre-drafted terms that have not been used in multiple contracts and to all terms that were not subject to individual negotiation. Individual negotiation refers to the extent to which the consumer was capable of influencing the content of the contract. It can be the result of discussions between parties206 about the wording of terms whereby the seller/supplier accepted changes as a result from the discussion.207 In case individually negotiated terms in the contract contradict the pre-drafted terms, the individually negotiated terms will govern the contract. The Romanian Civil Code, the Polish Civil Code and The Czech Civil Code as well as the Turkish and Taiwanese rules apply to standard terms only. Although the Czech Civil Code uses broader wording, seemingly including also individually negotiated terms in the unfairness test, the intention of the Czech legislator, as expressed in the preparatory works, was clearly to limit the unfairness control to standard terms. It thus remains unclear whether Czech courts will extend the 203
Contract terms that do not comply with the requirements imposed by law or which were not sufficiently disclosed to the consumer are deemed unfair, even when they are drafted in clear wording. 204 See the contribution of Schinkels to this book. 205 See the contribution of Schinkels to this book. 206 The consumer’s ability to negotiate is assessed both objectively and subjectively. The objective capacity refers to the location, duration of negotiations, complexity of the transaction etc.., whilst the consumer’s subjective capacity refers to his experience, age, literacy,... See more in the contribution of Karampatzos and Kotios to this book. 207 Karampatzos and Kotios note that this also could lead to situations where the consumer is denied protection in case the negotiations turned out unfruitful for him.
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unfairness control inspired by the broader wording of the legislation contrary to the preparatory works.208 The unfairness control in Japan applies to contract terms in adhesion contracts with consumers. The Japanese Civil Code recently provided that terms in adhesion contracts which are contrary to good faith must be considered as nonwritten. The sanction can be avoided only if the business provides proof that the term was individually negotiated, for instance by submitting evidence that the contracts which the business concluded with other consumers do not contain the same terms.209 Furthermore, a term that restricts the rights granted by law to consumers is considered to be null of its own, irrespective of whether it was included in an adhesion contract with a consumer or individually negotiated with him. Also the Canadian Civil Code targets unfair terms in adhesion contracts.210 The legislation includes protection relating to illegible, incomprehensible, external and abusive clauses and extends protection to parties that have lost bargaining power, including parties in B2B contracts.211 A clause which is illegible or incomprehensible212 to a reasonable person is null if the consumer or the adhering party suffers injury therefrom, unless the other party proves that an adequate explanation of the nature and scope of the term was given. The illegibility of a term is to be assessed in abstracto taking an ordinary adherent who can read and is able to understand as a benchmark.213 In the case of a consumer contract the illegibility must be tested in the light of an average, lay, untrained and inexperienced consumer. A similar nullity applies to the external clauses referred to above. A term is external if at the time of formation of the contract it was not expressly214 brought to the attention of the consumer or the adhering party, unless the other party proves that the consumer or adhering party knew of it.215 Finally, 208
See the contribution of Selucká, Staviková Reznicková and Loutocký to this book. 209 See the contribution of Nozawa to this book. 210 These are contracts whereby the essential stipulations are drawn up by one of the parties and are not negotiable. 211 See the contribution of Arbour to this book. 212 The incomprehensibility refers in the first place to the grammatical accuracy but also goes beyond the meaning of the words and the grammatical formulation. 213 A clause was held illegible because it was written on a document’s back in very pale grey on a white background. See the contribution of Arbour to this book. 214 This implies an explicit reference to another document, the back of a document or another regulation. In case of distance contracts the fact of having to click for further information does not necessarily point to an external term. 215 See the contribution of Arbour to this book. The Czech Civil Code also renders standard commercial terms which the other party could not have reasonably expected ineffective, unless they were expressly accepted by that party. The aim is to reduce the surprise factor. However, the Czech Supreme Court is rather reluctant to categorize commercial terms as ‘surprising terms’. Such classification necessitates a clear
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also abusive terms in consumer or adhesion contracts are sanctioned with nullity or the reduction of the obligation. Unfair is a term which is excessively and unreasonably detrimental to the consumer or the adhering party, and is therefore contrary to the requirements of good faith. This is particularly the case if a term so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of it into an abusive clause.216 In case of doubt or ambiguity the consumer or adhesion contract must be interpreted in favour of the consumer/adhering party.217 The Singaporean Unfair Contract Terms Act applies to written standard terms,218 but does not provide guidance on how to distinguish individually negotiated terms from standard terms. Whether a term is individually negotiated turns on the facts of each case and the fact that a contract has been negotiated does not necessarily exclude the presence of standard terms and thus the application of the Unfair Contract Terms Act. However, case law provides for some guidance and points to the following determinative criteria: “(i) the degree to which the ‘standard terms’ are considered by the other party as part of the process of agreeing the terms of the contract (ii) the degree to which the ‘standard terms’ are imposed on the other party by the party putting them forward (iii) the relative bargaining position of the parties (iv) the degree to which the party putting the ‘standard terms’ is prepared to entertain negotiations with regard to the terms discrepancy between the content of the term and the expectation of the other party (it could not have been reasonably expected—subjective criterion) on the one hand and on the other hand the peculiar nature of the content of the commercial term (is the term unusual when assessed in the light of the contract as a whole—objective criterion). See the contribution of Selucká, Staviková Reznicková and Loutocký to this book. 216 In a striking parallel the CJEU defined good faith in the Aziz-case were it held that “the national court must assess for those purposes whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations” and that ‘a significant imbalance’ is to be assessed in the light of the rules of national law that would apply in the absence of an agreement by the parties in that regard. “Such a comparative analysis will enable the national court to evaluate whether and, as the case may be, to what extent, the contract places the consumer in a legal situation less favourable than that provided for by the national law in force” (see CJEU 14 March 2013, C-415/11, Aziz, ECLI:EU:C:2013:164). In Constructora Principado the CJEU added that such imbalance “can result solely from a sufficiently serious impairment of the legal situation in which the consumer, as a party to the contract in question, is placed by reason of the relevant national provisions, whether this be in the form of a restriction of the rights which, in accordance with those provisions, he enjoys under the contract, or a constraint on the exercise of those rights, or the imposition on him of an additional obligation not envisaged by the national rules” (CJEU 16 January 2014, C-226/12, Constructora Principado, ECLI:EU:C:2014:10). 217 A similar interpretation rule can be found in the European UCTD. 218 The Act applies to standard terms in consumer contracts or where a party deals on the basis of the other’s standard terms.
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of the contract generally and the ‘standard terms’ in particular”.219 Although it may be expected that the overwhelming majority of terms in consumer contracts will be considered standard terms, there exists no express presumption to that extent.220 Also Chinese Law imposes protective rules for standard terms only defined as clauses that are prepared in advance for general and repeated use by one party, and which are not negotiated with the other party when the contract is concluded.221 When standard terms are inconsistent with non-standard terms, the latter will prevail. Beside the application of the general principle of fairness also a specific obligation is imposed on the party that imposes the standard terms. This party has to explain the terms and inform the other party of the liability restrictions or exemptions in favour of the party providing the standard terms.222 A standard term will in general be invalid if the party providing the standard terms exempts itself from its liability, increases the other party’s liability or deprives the other party of its material rights guaranteed by law.223 It must be noted that Chinese law does not distinguish in this respect between B2C and B2B relationships, but Chinese Consumer Protection Law additionally imposes on businesses to remind the consumer in a conspicuous manner of the content of the terms that are vital to his interests, including terms relating to the product’s quality, quantity, price or additional costs, the contract’s duration and manner of performance, the safety precautions and risk warnings, the after sales service and the civil liability etc.224 In most jurisdictions the seller has to prove that a term had been individually negotiated.225 In Greece and Poland the 219 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 220 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 221 See the contribution of Yang to this book. 222 See the contribution of Yang to this book. 223 See the contribution of Yang to this book. 224 See the contribution of Yang to this book. 225 Proof will often not be that easy. The Romanian High Court of Cassation for instance held that a clause in the contract wherein the consumer recognizes that the whole contract had been individually negotiated cannot reverse the burden of proof. That will neither be the case if the seller accords a reflexion period to the consumer. It must be demonstrated that the consumer effectively exercised an influence on the content of the contract, e.g. on the basis of written documents or an exchange of e-mails that shows that clauses have been reviewed. In the same vein, the Italian Court of Cassation held that only in case of specific, individual, serious and effective negotiation the unfairness control of consumer contracts may be avoided. The Brazilian Consumer Protection Code is less demanding; it reverses the burden of proof in favour of the consumer when his allegation is credible or when he is in a position of hyper dependency. Hyper dependency refers to the difficulty of the consumer to provide evidence of a certain fact. Whether a consumer’s allegation is credible is assessed on the basis of a probability criterion based on the arguments advanced during the proceeding. In Germany the burden of proof regarding the characterization of contractual stipulations as standard contract terms lies in principle with the party relying on special control of such terms. With regard to consumer
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burden of proof is incumbent on the party claiming that a contract term had been individually negotiated, in most cases the seller.226 It must be submitted that European courts will indirectly take into account whether there was in fact negotiation between the parties over a term when assessing ‘good faith’ and ‘significant imbalance’ as parts of the unfairness test.227 According to the Irish High Court the requirement of good faith “mandates fair and open dealing, with the result that contractual terms must be expressed fully, clearly, and legibly by a seller/supplier, with suitable prominence being given to any disadvantageous terms, and all concealed pitfalls and traps avoided, in effect adherence to what might be described as good standards of commercial practice. (. . .) As for fair and equitable dealing, what this requires in effect is that a seller/supplier should not take advantage of, inter alia, a consumer’s necessity, indigence, inexperience, unfamiliarity with the subject-matter of a contract, or like characteristics or traits, and must take a consumer’s legitimate interests into account”.228
5.2
Exclusion of Core Contract Terms: Transparency Requirement
The European UCTD excludes terms on the main subject matter and price/quality ratio from unfairness review only if they are in plain intelligible language.229 The UCTD also
contracts the business is deemed to have implemented previously drafted terms into the contract, unless they have been inserted by the consumer. It follows that the burden of proof lies with the business. However, the German BGB indicates that it is up to the consumer to proof the drafting in advance and its causation for the consumer’s inability to influence the substance of the term. See the contribution of Schinkels to this book. 226 If consumers claim that no negotiation took place, the burden of proof shifts to the seller. An exchange of e-mails with draft terms that were reviewed by the parties or meetings of the parties in person to that extent may constitute such proof. See the contribution of Karampatzos and Kotios to this book. German courts evaluate the factual indications already given by the parties. In case of contradiction between parties’ statements, a copy of the written contract can be of help: “if it is contained in a specially printed or designed form, this prima facie indicates pre-formulation and unilateral implementation. If one clause of a form has been individually altered, this may be taken as a sign that other terms of the form were also subject to negotiation”, see the contribution of Schinkels to this book. 227 For example, according to the Polish Civil Code terms in B2Ccontracts which have not been negotiated individually are not binding on the consumers if rights and obligations are set in a way that is contrary to ‘good practice’, thereby grossly violating the consumer’s interests. See the contribution of Namyslowska and Jablonowska to this book. 228 See the contribution of Kelly to this book. 229 See Article 4(2) UCTD. This exclusion from unfairness has not been incorporated in Austrian, Danish, Greek, Latvian, Luxemburg, Slovenian, Spanish and Swedish legislation, see EC Consumer Law Compendium, 2007, 379, ec.europa.eu/consumers/archive/cons_int/safe_shop/ acquis/comp_analysis_en.pdf.
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requires that all written terms230 of a consumer contract be transparent, which means that terms must be legible and expressed in plain and intelligible language.231 If a term has different meanings, the meaning that is most favourable to the consumer is to prevail.232
5.2.1 Case Law of the CJEU The CJEU has given some very strong guidance on what is required for terms to be plain and intelligible.233 This requirement was interpreted by the CJEU in the Árpád Kásler case.234 It held that the requirement of transparency should not be restricted to mere formal and grammatical intelligibility; the consumer must be informed in such a manner that he is in a position to evaluate on the basis of clear, intelligible criteria the economic consequences for him which derive from a term. In RWE Vertrieb235 and in Naranjo236 the fundamental importance of pre-contractual information for consumers was 230
In Belgium the Unfair Contract terms Commission extended the transparency principle to oral terms, see C.O.B. 25, 19 November 2008, economie.fgov.be/nl/binaries/COB25_tcm325-74403.pdf, 6. In the Netherlands the limitation to written terms has not been inserted in the transposing legislation, see Article 6:238, section 2 C.C. 231 See Article 5 UCTD. 232 In a rare Belgian case the judge concluded that the contract terms about the price for renting a house were not transparent now that the offer for rent on the website of the seller indicated a lower price; he concluded that the lower price on the website had to be applied and discarded the contract terms. See Vred. Grâce-Hollogne 25 mei 2012, JLMB 2012/40, 1917–1925. Schinkels indicates that German courts have already ruled that it is possible to assess a standard contract term simply repeating the wording of a statute as unfair for want of transparency, see BGH, Judgment of 9. 5. 2001—IV ZR 138/99, Neue Juristische Wochenschrift (NJW) 2001, 2012. See the contribution of Schinkels to this book. 233 See more extensively on that issue Howells and Straetmans (2017), E-180-E-215. Both transparency requirements in Article 4 and 5 UCTD must be interpreted equally according to the CJEU, see to this extent Case C-26/13, Árpád Kásler, ECLI:EU:C:2014:282. 234 See Case C-26/13, ECLI:EU:C:2014:282. 235 CJEU 21 March 2013, Case C-92/11, RWE Vertrieb, ECLI:EU: C:2013:180, para 44: “Information, before concluding a contract, on the terms of the contract and the consequences of concluding it is of fundamental importance for a consumer. It is on the basis of that information in particular that he decides whether he wishes to be bound by the terms previously drawn up by the seller or supplier“. Compare para 50: “With respect, in the first place, to the information to be given to the consumer, it is clear that that obligation to make the consumer aware of the reason for and method of the variation of those charges and his right to terminate the contract is not satisfied by the mere reference, in the general terms and conditions, to a legislative or regulatory act determining the rights and obligations of the parties. It is essential that the consumer is informed by the seller or supplier of the content of the provisions concerned”. Furthermore “the lack of information on the point before the contract is concluded cannot, in principle, be compensated for by the mere fact that consumers will, during the performance of the contract, be informed in good time of a variation of the charges and of their right to terminate the contract if they do not wish to accept the variation” (para 51). 236 CJEU 21 December 2016, Joined Cases C-154/15and C-307/15, Gutiérrez Naranjo e.a., ECLI:EU:C:2016:980, paras. 48–51. The
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emphasized since consumers decide on that basis to be bound by a contract. For that reason the consumer must actually be given an opportunity to examine all the terms of the contract. Furthermore, consumers must be informed of their rights that flow from mandatory national law of which they are beneficiaries. This follows from the Invitel237 and VKI/Amazon238 judgments. In Invitel the CJEU held that “where certain aspects of the method of amendment of the fees connected with the service to be provided are specified by mandatory statutory or regulatory provisions within the meaning of Article 1(2) of the Directive, or where those provisions provide, for the consumer, the right to terminate the contract, it is essential that the consumer be informed of those provisions by the seller or supplier”. In VKI/Amazon the CJEU confirmed that the transparency requirement must be interpreted broadly, having regard to the consumer’s weak position vis-à-vis the seller or supplier with respect in particular to his level of knowledge. This implies that where the effects of a term are specified by mandatory statutory provisions, it is essential that the seller or supplier informs the consumer of those provisions. “That is the case of Article 6(2) of the Rome I Regulation, which provides that the choice of applicable law must not have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which would have been applicable in the absence of choice”.239 It follows that if a term leads the consumer into error by giving him the impression that only the law of the Member State in which the seller or supplier is established applies to the contract, without informing him that under Article 6(2) of the Rome I Regulation he also enjoys the protection of the mandatory provisions of the law that would be applicable in the absence of that term, this term must be considered as unfair.240 The need for more than mere formal and grammatical ability to understand contract terms has been subsequently
CJEU did not contradict the Spanish court’s interpretation of the requirement of transparency, referred to in Article 4(2) of the directive, as not being limited to the requirement for formal transparency of contractual clauses in relation to the plain and intelligible nature of their drafting, but as extending to their substantive transparency linked to the adequacy of the information supplied to the consumer concerning the extent, both legal and economic, of the consumer’s contractual commitment. 237 CJEU 26 April 2012, Case C-472/10, Invitel, EU:C:2012:242, para 29. 238 CJEU 28 July 2016, Case C-191/15, VKI v Amazon, ECLI:EU: C:2016:612, para 68. 239 CJEU 28 July 2016, Case C-191/15, VKI v Amazon, ECLI:EU: C:2016:612, para 69 partim. 240 It is interesting to note that the CJEU automatically connected the sanction of unfairness to a term that misleads a consumer whereby the misleading impression of the consumer is caused by the lack of information provided by the supplier or the seller.
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applied in Matei v SC Volksbank Romania SA,241 Bucura242 and Van Hove v CNP Assurances SA.243 Van Hove v CNP Assurances SA244 concerned a combined loan contract with an insurance contract intended to ensure that mortgage loan repayments are covered. The CJEU emphasized the relevance of the fact that the contract at issue forms part of a broader contractual framework. As a result the contractual framework may also have an impact on the average consumer’s level of attention. The Court said that “the consumer cannot be required, when concluding related contracts, to have the same vigilance regarding the extent of the risks covered by that insurance contract as he would if he had concluded that contract and the loan contracts separately”.245 Also in Ruxandra Paula Andriciuc246 the CJEU confirmed its broad interpretation of the transparency requirement, this time in respect of a term that placed all the exchange risk connected to a loan in foreign currency on the consumer. It held that “the requirement that a contractual term must be drafted in plain intelligible language is to be understood as requiring also that the contract should set out transparently the specific functioning of the mechanism to which the relevant term relates and the relationship between that mechanism and that provided for by other contractual terms, so that that consumer is in a position to evaluate, on the basis of clear, intelligible criteria, the economic consequences for him which derive from it”.247 More specifically, the consumer must be provided with all the information likely to have a bearing on the extent of his commitment
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so that he is enabled to estimate in particular the total cost of his contract. “First, whether the terms are drafted in plain intelligible language enabling an average consumer, that is to say a reasonably well-informed and reasonably observant and circumspect consumer to estimate such a cost and, second, the fact related to the failure to mention in the loan agreement the information regarded as being essential with regard to the nature of the goods or services which are the subject matter of that contract play a decisive role in that assessment”.248 In the same vein, the CJEU stressed the importance of the APR in consumer credit contracts in Pohotovost249 and Maria Bucura.250 Informing the consumer of the total cost of credit, in the form of an interest rate calculated according to a single mathematical formula, is of critical importance as it contributes to the transparency of the market, enables the consumer to compare offers of credit and enables him to assess the extent of his liability. Hence, “the failure to mention the APR in the credit agreement at issue, the mention of the APR being essential information in the context of Directive 87/102 (consumer credit), may be a decisive factor in the assessment by a national court of whether a term of a credit agreement concerning the cost of that credit in which no such mention is made is written in plain, intelligible language within the meaning of Article 4 of Directive 93/13”.251 Finally, providing consumers with information on contract terms in plain and intelligible language cannot be used as a defence against the non-binding character of a contract term that eventually turns out to be unfair.252
5.2.2 241
CJEU 26 February 2015, Case C-143/13, Matei, ECLI:EU: C:2015:127, paras 73–77. The reference in para 77 to “the lack of transparency, in the agreements at issue in the main proceedings, of the statement of the grounds justifying those terms” seems to suggest that apart from informing the consumer about the economic consequences of a term, also information about the economic motives of the business using those terms could be part of the transparency requirement. 242 CJEU 9 July 2015, C-348/14, Bucura, EU:C:2015:447. See also infra. 243 CJEU 23 April 2015, Case C-96/14, Jean-Claude Van Hove v. CNP Assurances SA, ECLI:EU:C:2015:262. 244 CJEU 23 April 2015, Case C-96/14, Jean-Claude Van Hove v. CNP Assurances SA, ECLI:EU:C:2015:262. 245 See para 48. A similar mitigating approach can be seen in CJEU 3 April 2014, Case C-342/13, Katalin Sebestyén, ECLI:EU:C:2014:1857, para 34, where the Court held: “even assuming that the general information the consumer receives before concluding a contract satisfies the requirement under Article 5 that it be plain and intelligible, that fact alone cannot rule out the unfairness of a clause providing for the exclusive competence of a single arbitration tribunal”. 246 CJEU 20 September 2017, Case C-186/16, Ruxandra Paula Andriciuc e.a., ECLI:EU:C:2017:703. 247 CJEU 20 September 2017, Case C-186/16, Ruxandra Paula Andriciuc e.a., ECLI:EU:C:2017:703, para 45.
Application of Transparency in the EU and beyond In line with the UCTD the exemption for core contract terms in most of the EU countries is subject to a transparency
Idem, para 48. It follows that financial institutions must provide borrowers with adequate information to enable them to take wellinformed and prudent decisions. It follows that the borrower must be clearly informed of the fact that, in entering into a loan agreement denominated in a foreign currency, he is exposing himself to a certain foreign exchange risk which will, potentially, be difficult to bear in the event of a fall in the value of the currency in which he receives his income. Furthermore the seller or supplier, in this case the bank, must be required to set out the possible variations in the exchange rate and the risks inherent in taking out a loan in a foreign currency, particularly where the consumer borrower does not receive his income in that currency (see also paras 49–50). 249 CJEU 16 November 2010, Case C-76/10, Pohotovost, ECLI:EU: C:2010:685. 250 CJEU 9 July 2015, Case C-348/14, Maria Bucura, ECLI:EU: C:2015:447. 251 CJEU 16 November 2010, Case C-76/10, Pohotovost, ECLI:EU: C:2010:685, para 71. 252 See to this extent, CJEU 3 April 2014, Case C-342/13, Katalin Sebestyén, ECLI:EU:C:2014:1857, para 34; see also supra. 248
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requirement.253 Similar rules apply in Turkey.254 The standard to be used is that of the average consumer but in practice the CJEU applied this test in a way which promoted consumer protection. To what extent the EU member states will follow suit, remains to be seen.255 In the UK for instance there are now many lower court decisions applying the Directive, sometimes in a manner that is very loyal to European law.256 However, attention has focussed on Supreme Court decisions that appear to be less consumer friendly. In fact the Supreme Court has recently considered the test to be opaque.257 It has been mentioned before that there is no or very little legislative guidance on how the transparency requirement must be applied.258 Consequently national courts when assessing the transparency of contract terms enjoy a broad discretion. The absence of sufficient legislative guidance has led to divergent interpretations of the transparency requirement, despite the gap filling case law of the CJEU referred to above. In Poland for instance the clarity requirement of core
253 Denmark, Finland, Portugal, Slovenia and Spain extend the unfairness control to core contract terms (see Report of the Fitness Check of EU consumer and marketing law, European Commission Staff Working Document, Brussels, 23 May 2017, SWD(2017) 209final, 147). 254 Turkish law is also in other aspects aligned to the UCTD and requires for instance that consumers should be given the possibility to effective take notice of the terms. In the presence of ambiguous terms, an interpretation in favour of consumers applies. See the contribution of Baysal to this book. 255 This is the result of the minimum harmonisation set forth in the UCTD which nonetheless allows member states to adopt stricter standards. It must be submitted also that the (settled) case law of the CJEU when interpreting European legislation must be applied by national courts. 256 These courts require not only that the term be comprehensible for that consumer but also that the typical consumer can understand how the term affects the rights and obligations that he and the seller have under the contract. 257 See Lords Neuberger and Sumption in Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67, 2015] 3 WLR 1373, at para 105. Lord Carnwath agreed. Yet, it must be noted that the vagueness of the requirement combined with the discretion accorded to national courts in applying the EU law as interpreted by the CJEU makes it hard to say the Supreme Court has wrongly applied the law. See more extensively on this subject, Howells and Straetmans (2017), pp. E-180–E-215. The Report of the Fitness Check of EU consumer and marketing law stated that the lack of clarity of some of the provisions of the UCTD could be addressed through specific Commission guidance (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, p. 77). 258 In its report on the fitness check of EU marketing and consumer law The European Commission recognizes that the length of standard terms and conditions is found to be a considerable obstacle for consumers in identifying unfair terms. It also indicates that it is working with all stakeholders on voluntary principles for better presentation of both standard contract terms and pre-contractual information (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, pp. 78 and 86).
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terms259 refers to the substance of the standard term concerned and is satisfied if the term allows for only one possible meaning viewed from the perspective of the average consumer. Greek case law developed three principles for the assessment of the transparency of a contract term. First, the principle that contract terms must be clear (grammatically correct and succinct, no use of obscure terms) and comprehensible (referring to the subjective ability of the consumer to realize the term’s true meaning); second, the principle of the determinable content of terms (no use of vague terms); and third, the principle of foreseeability of terms (prohibiting unexpected, unusual, surprising or misleading terms).260 Italian courts seem to apply an ex post case-by-case approach by exclusion. Clauses that obviously do not correspond to the transparency requirement are excluded, such as contradictory terms in the consumer contract, e.g. terms that are drafted in highly technical (financial) language and terms in an ambiguous, vague language.261 This a posteriori application of the transparency principle is considered quite ineffective, especially for the more vulnerable consumers for whom no specific rules are enacted.262 French case law remains quite hesitant to apply the transparency principle on core terms for historical reasons.263 Czech case law also shows that the exclusion from the unfairness test of core contract terms is not subject to an elaborated transparency requirement.264 In contrast, Romanian courts tend to take into account all the relevant circumstances of the conclusion of the contract when assessing transparency and do so to an extent that the test becomes to a certain degree concrete and subjective,
259
According to the Polish Supreme Court the lack of transparency of a standard term can in itself constitute an unfair term, irrespective of whether it contributes to a significant imbalance of the parties’ rights and obligations to the detriment of the consumer. See Judgment of the Supreme Court in case I CSK 72/15 (n 27) and more in the contribution of Namyslowska and Jablonowska to this book. 260 Businesses must secure that contract terms correspond to those three principles assessed from the point of view of an average consumer, who is assumed to be a self-aware and responsible person. Dellios (2015), pp. 118–119. 261 See more extensively, Giorgianni (2009), p. 209 e.s. Also French case law condems the use of very complex and technical terms without any further explanation in insurance contracts; see Piazzon in this book. Also the High Court in Prague stated that a contract due to its legal constructions was completely incomprehensible: “Obviously, the text of the contract is deliberately designed so that by its complex constructions it prevents a person who does not have legal education and a certain economic overview from understanding the true meaning of the contract covenant”. See the ruling of the High Court in Prague, file No. 76 Cm 876/2010, referred to in the contribution of Selucká, Staviková Reznicková and Loutocký to this book. 262 See the contribution of Benacchio to this book. 263 See Rochfeld (2004), p. 981. 264 See Rita Illdiko Sik-Simon (2017).
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especially when the consumer concerned appears to be particularly vulnerable.265 The most protective approach is to be found in Finland where core contract terms are not excluded from the unfairness test.266 A similar protection seems available in Greece, albeit that this appears not to have been a deliberate legislative choice, but rather the result of the omission to exclude contract terms from the unfairness test in the legislation.267 Also Chinese law does not differentiate between core contract terms and other terms when applying the unfairness test, although the precise scope of the unfairness test has recently been the subject of debate among scholars.268 It was already pointed out above269 that the Brazilian Consumer Protection Code requires that consumer contracts in order to be binding must be drafted in legible and ostensible characters, with a font size of no less than 12 points, and that terms that imply a limitation of consumer rights must be highlighted, allowing their prompt and easy comprehension.270 It is interesting to note in this respect that the Irish Sales Review Group recommended the introduction of regulations relating to print size. It recommended the use of a minimum ten-point font size in plain typeface against a contrasting background and also that a font size requirement should depend on the target group at which the contract is aimed. Thus a contract aimed at older age groups may need to be in a larger font size to be legible. To date no particular requirements relating to print size are adopted in Ireland.271 We can see a similar development in the Czech Republic were the Constitutional Court said that “the content of the contract is to be legible to the average consumer, clearly and logically arranged. For example, contractual arrangements must be of sufficient font size, they may not be in a significantly smaller size than the surrounding text, and they may 265
See the contribution of Bercea and Caramidariu to this book. Furthermore, the Finnish Consumer Protection Act introduces specific provisions regarding the adjustment of unfair contract terms which have been drafted without the consumer having been able to influence the contents thereof. The provisions regarding the adjustment of an individual consumer contract term applies to all terms used in a consumer contract—individually negotiated or standardised, and promotes solutions in which the contract remains in force despite the unfair term. The preference for adjustment of unfair contract terms contrasts with the nullity set forth in de UCTD and the deterrence sought by the CJEU. According to the Finnish legislator increased cancellation of contracts would not ensure the established level of consumer protection in Finland. See the contribution of Hyvönen to this book. 267 See on this point the contribution of Karampatzos and Kotios tot his book. 268 See the contribution of Yang to this book and the discussion that is taken place in China about the inclusion or exclusion of core contract terms. 269 See section 4 (a). 270 See the contribution of Donato Oliva to this book. 271 See the contribution of Kelly to this book. 266
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not be placed in sections that give the impression of an insignificant character.”272 In the same vein, the practice of the Polish UOKiK273 provides multiple examples of marketing of financial and telecommunications services that appear to be insufficiently transparent because of the size of the font used and the broadcasting time.274 Singaporean law has no transparency requirement imposing that terms in consumer contracts must be clear and comprehensible nor that the meaning and consequences of the terms must be explained to the consumer.275 Courts will exercise a control ex post applying the reasonableness test for onerous terms (restricting or excluding business’ liability) under the Unfair Contract Terms Act and the prohibition under the Consumer Protection Act of unconscionable imposing onerous terms to consumers. To assess the reasonableness of contract terms courts developed a number of interrelated criteria such as the relative bargaining position, whether the requirements could have been met by alternative means, whether the consumer received an inducement to agree to the term, and whether he could have entered into a similar contract without agreeing to that similar term. It follows that the greater the degree of imbalance the greater the probability that the term was imposed by the stronger on the weaker party.276 The Taiwanese Consumer Protection Act prohibits the insertion in consumer contracts of standard terms that are difficult to notice or to recognize due to the font size, the printing format or other factors. It follows that concealing standard terms in consumer contracts is prohibited in general.277 When standard terms are ambiguous or inconsistent with the information that the business provides the consumer prior to the conclusion of the contract, courts may interpret the standard terms in the light of the pre-contractual information stemming from advertisements. Yet, as Taiwanese law prioritizes individually negotiated terms, there is no specific rule in case advertisements contradict individually negotiated terms. 272
The decision of the Constitutional Court of the Czech Republic of 11 November 2013, file no. I. ÚS 3512/11, was based on Section 1811 (1) of the Czech Civil Code: “all communications to the consumer must be made clearly and comprehensibly by the entrepreneur in the language in which the contract is concluded.” 273 Consumer authority with the competence to carry out proceedings against practices that infringe collective consumer interests and to impose fines or even the remedy of public compensation. A breach of the obligation to provide consumers with reliable, true and complete information is considered to be an infringement of collective consumer interests. 274 See the contribution of Namyslowska and Jablonowska to this book. 275 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 276 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 277 Based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected].
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The approach in Japan is somewhat different as the black list of unfair contract terms in adhesion contracts does not include core contract terms. Nevertheless, those core contract terms remain subject to the general requirement that terms must be in conformity with the good faith principle.278 Japanese consumer contract law further requires the contract to be clear and comprehensible for consumers. If a contract term is unclear the judge will interpret the term in the light of the precontractual information which was provided by the business to the consumer. If he finds out at that stage that the disclosed information is insufficient for the consumer’s comprehension of the contract, he may interpret the contract term in favour of the consumer, and will automatically do so in the presence of ambiguous standard terms.279 The Japanese legislation does not provide in this respect for specific rules applicable to particularly vulnerable consumers.
5.2.3 Core Terms Must Be Prominent The UK Consumer Rights Act 2015 provides that the exemption of Article 4 (2) UCTD applies only if the core term is also prominent. A term is prominent if it is brought to the consumer’s attention in such a way that an average consumer would be aware of it.280 In most of the other member states of the EU there is no equivalent requirement to bring the core contract terms to the consumer’s attention in such a manner that an average consumer would be aware of them.281 Similarly to the UK, the Taiwanese Consumer Protection Act requires businesses to explicitly highlight the content of their standard terms to consumers. In case this is difficult in practice businesses must noticeably announce the standard terms. On a second level the Consumer Protection Act requires businesses to disclose important information about the precise legal content of a limited number of issues dealt with in the standard terms, irrespective of whether the term is a core contract term. This mandatory disclosure is however confined to the legal consequences and rights and obligations. The economic or other consequences (other than legal) fall outside the scope of the information obligation.282 278
See the contribution of Nozawa to this book. See the contribution of Nozawa to this book. 280 S. 64(4). The common law requirement that any particularly onerous terms are brought to a contracting party’s attention before the contract is concluded, applies only to onerous terms and requires that those terms have a prominent position in the contract and are not hidden away amongst a long list of terms and conditions. This is the so-called red hand rule which requires that in order to give consumers sufficient notice, these clauses need to be printed in red ink with a red hand pointing to it. 281 Finnish Law requires onerous and unusual terms to be specifically highlighted to the other contracting party. See the contribution of Hyvönen to this book. 282 The average consumer is the bench mark. There are no specific disclosure rules for particularly vulnerable consumers. The foregoing 279
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In the same vein Chinese law requires businesses to inform consumers in a conspicuous and reasonable manner of the content of standard terms that are vital to their interests. According to the Supreme People’s Court’s judgment of 2009 the conspicuous character of the information aims to attract the consumer’s attention. It may take different forms including special fonts, size of characters, the use of symbols, notices, declarations etc. As was indicated above, terms relating to the quality, quantity, price of products, the duration and manner of performance, the safety precautions and risk warnings and the after sales services and the civil liability are considered to be vital terms for consumers.283 In general, Chinese Courts assess whether the information is provided in a reasonable manner on the basis of the following elements. They take into account (1) whether the document with the standard terms takes the form of a contract instead of a receipt, (2) whether the provider informs the consumer individually or rather sends brochures or announcements to the public in general, (3) whether the standard terms themselves are clear and understandable for ordinary readers, (4) whether the information is provided to the consumer prior to the formation of the contract or during the formation and finally (5) whether the consumer’s (or the contracting party’s) attention was effectively attracted.284 In the Supreme People’s Court interpretation of 2013 the court ruled that unexpected terms or liability exemption terms require a higher duty to inform on the part of the seller and also that vulnerable consumers deserve a higher degree of explanation. Specifically with regard to liability exemption terms there exist an additional duty in Chinese law to explain their meaning to the contracting party.285 This duty to explain the meaning of standard terms is in consumer contracts extended to all vital terms.286 It is unclear to date how this specific duty must be interpreted in practice. The Supreme People’s Court gave a strict interpretation of this duty in insurance contracts, stipulating that the insurer must explain in writing or orally the concept, the content and the legal consequences of the liability exemption terms in such a manner that ordinary people could understand. However, to avoid arbitrary applications the Supreme People’s Court accepted the policy holder’s signature on a pre-formulated document drafted by the insurer stating that the insurer gave explanations of the terms in such a manner that the policy holder fully understands their meaning, as sufficient proof that the duty to explain was sufficiently performed.287 But, is based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected]. 283 See the contribution of Yang to this book. 284 See the contribution of Yang to this book. 285 See more extensively on this point, the contribution of Yang to this book. 286 See the contribution of Yang to this book. 287 See the contribution of Yang to this book.
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despite this leniency, the Supreme People’s Court also stated that the signature proof is not determinative and thus rebuttable. In practice the latter evidence rule is often used by Chinese Courts to deny the validity of contract terms, especially in the case of insurance contracts.288
5.3
Black or Grey List of Unfair Terms
In the UK the Consumer Rights Act contains a grey, indicative and non-exhaustive list of terms of consumer contracts that may be regarded as unfair. Unlike Belgian and Greek Law that provides for a black list, Polish law has a grey list of terms, which in case of doubt, must be considered unfair.289 Equally Brazil lists unconscionable and thus unfair terms in a grey list. German, Italian and French law combines a black list of unfair terms with a grey list.290 Japanese law blacklists a number of terms as unfair in consumer adhesion contracts.291 Also the Canadian Consumer Protection Act provides for a bundle of deemed sector-specific terms which if present in a consumer contract will be null and deemed unwritten. The black listed terms comprise liability limitation clauses, damages clauses, unilateral amendment clauses etc.292
5.4
Specific Rules Concerning the Control of Unfair Terms in B2B Relationships
An extended control over the clauses which restrict or exclude liability exists in the UK.293 As indicated above a 288
The sanction for breach of the duty to bring standard terms to the attention of the other party and to explain them is the exclusion from the contract, irrespective of whether they are core terms or not. See more on this point in the contribution of Yang to this book. 289 The European Commission points out that the use of black and grey lists of unfair terms tends to be more effective than the use of an indicative, non-exhaustive list, but that there does not appear any clear candidate for possible inclusion in a UCTD blacklist (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, p. 77). 290 In the latter case also the proof that the term was the subject of individual negotiation may forestall the unfair character of the term in Italy. See the contribution of Benacchio to this book, who points out that the so-called free negotiation between consumers and businesses offers no guarantee whatsoever that balanced contract terms will be the result. 291 See the contribution of Nozawa to this book. See also Nakata (2016), p. 491. 292 See more extensively the contribution of Arbour to this book. 293 In the same vein, the Singaporean Unfair Contract Terms Act focuses on terms which serve to restrict or exclude liability on the part of the business, and also those which make liability or the enforcement thereof subject to restrictive or onerous conditions. Clauses which purport to do so are subject to a reasonableness test. The foregoing is based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected].
comparable approach applies in China where no preliminary distinction is made between B2C and B2B relationships.294 In Finland the legislation contains an unfairness test which is applicable to both consumer and business contracts.295 General contract law also subjects the use of standard terms in B2B-contracts to limitations. Legal doctrine advocates further that unusual or onerous standard terms only become part of the contract if the drafter of the terms specifically highlights the terms to the other contracting party.296 Germany applies unfairness control to standard terms297 irrespective of whether these terms are concluded in consumer contracts or B2B contracts. The unfairness control even applies when a consumer sells something via eBay and uses a pre-formulated exclusion of liability. In that specific regard German scholars submit that “if one accepts the traditional German view that the power to unilaterally implement non-negotiated terms into a contract is the core aspect of superior bargaining power,298 one has to come to the conclusion that even a consumer can have superior bargaining power as opposed to an entrepreneur”.299 The divergent approaches within the EU resulted also in divided views across the EU on expanding the UCTD to cover B2B relationships, with more specifically business associations and public authorities opposing the idea.300
6
Sector Specific Rules
6.1
Financial Consumer: Rationalisation, Yes; Simplification, Not Yet
The European legislator has devoted considerable attention to information disclosures relating to financial services. Due to the often complex, sophisticated, highly-technical nature of those services and the inherent difficulty for consumers to fully understand financial products, the provision of information to consumers in this field is a key component of consumer protection. It thus comes as no surprise that particularly with regard to credit, investment services and insurance services the European legislator developed key information documents that streamline a reduced quantity of information to consumers with the aim of making that 294
See the contribution of Yang to this book. The Consumer Protection Act introduces an unfairness test for consumers whereas the Contracts Act holds an unfairness test for contracts in general. 296 See the contribution of Hyvönen to this book. 297 See above in point 4.1. 298 Cf. Pfeiffer in Wolf/Lindacher/Pfeiffer AGB-Recht, 6th. ed. 2013, introduction mn. 23. 299 See the contribution of Schinkels to this book. 300 Report of the Fitness Check of EU Consumer and Marketing Law (2017), p. 84. 295
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information more accessible for consumers.301 Also in the field of payment accounts there exist standardised formats like the fee information document and the statement of fees that must be not misleading and provided to consumers in clear, unambiguous and non-technical language, using characters of a readable size.302 This illustrates a real tendency towards a rationalisation of information given to consumers.303 However, as the provided information remains 301 See for instance the SECCI (Standard European Consumer Credit Information—Consumer Credit Directive 2008/48/EC, O.J. 2008, L 133/86), the ESIS (European Standardised Information Sheet—Mortgage Credit Directive 2014/17/EU, O.J. 2014, L 60/34) and the KID (Key Information Document—Regulation 1286/2014 on PRIIPs, O.J. 2014, L 352/1). This evolution is generally welcomed for it also prevents that mandatory information is mixed with commercial information for marketing purposes. But despite the advantages the lists of information particulars that have to be disclosed to consumers remains long. Furthermore it remains unclear whether consumers are effectively able to absorb and understand the prescribed information. Compare with a national survey in South-Africa executed by Ramchander (2016), pp. 67–73. The findings of the survey were that consumers have a low to very low level of understanding of the features of basic insurance products (see p. 73). For a recent study on risk disclosure in corporate annual reports (capital markets) in a number of EU Member States, see Cordazzo et al. (2017), pp. 682–714. Disclosure effectiveness remains understudied. For a research with focus on identifying how the dimensions of a disclosure influence its efficacy, examining how different methodologies should best be deployed for disclosure testing and studying the market effects of mandatory disclosures, see Johnson and Leary (2017), pp. 184–191. See also Perry and Blumenthal (2012), pp. 305–312, who point out that the literature to date lacks conclusive evidence of the effects of disclosures on decisions and outcomes, such as loan choice or performance, and also that research examining the role of disclosures in light of other social, contextual, or informational influences is scarce. They conclude that a much more thorough analysis of the effects of disclosures on decision quality must be undertaken. 302 See more extensively, De Muynck (2010), pp. 1222–1230, who points to the omission to enlighten, on a clear and concise way a vast category of borrowers (those who are not capable of being careful readers) about some of the most essential characteristics of the pursued credit (at p. 1223). See also on this subject the contribution of Kelly to this book. 303 A recent study executed by Edwards favours even an extension of the prospectus obligation to professionals in professional services markets. The prospectus has already proven effective in the securities markets. See Edwards (2017), pp. 1457–1515. According to Edwards a professional prospectus would reduce information asymmetries and improve the market for professional services through disclosure and consumer choice. It would also make professional reputation a more potent force. “Self-regulating professions and occupational licensing bodies often fail to protect consumers because they tend to act like cartels - behaving more in the interests of their members than of the public” (p. 1462 and 1489–1492). Further, “consumers often struggle to recognize low-quality professional services because professionals sell credence goods” (p. 1485). A Professional Prospectus would then complement the existing occupational licensing systems. “Tailored disclosures delivered through a Professional Prospectus would put existing public information into consumer hands, allowing the market to more efficiently price professional services. This would discipline and deter professional misconduct and reward higher-quality service providers” (p. 1515), see Edwards (2017), pp. 1457–1515, who further indicates that “the most benefits seem likely to emerge from presenting the information in a
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technical, the shift towards simplification of information disclosed to consumers has not yet gained much ground.304 In the aftermath of the financial crisis the European legislator required the financial institutions to conduct a suitability assessment to ensure that the financial product in question is suitable for the concerned consumer. It follows that a credit short, standardized, and clear format” (p. 1496). Also Baisch argues that despite the information overload the provision of information must not be condemned; this would mean throwing the baby out with the bath water. Disclosure can be used and function’s also as a nudge; thus the way information is framed matters a lot. See Baisch (2016), pp. 217–243, who also argues that education could, at least partially, compensate negative outcomes of human flaws (at p. 242). 304 See specifically on this subject, the contributions of Piazzon and Baysal to this book. Addressing the new EU mortgage credit directive 2014/17/EU, cited above, also De Muynck and Bruloot indicate that the information credit intermediaries are required to provide consumers, for instance on remuneration, are unsatisfactory, because they assume “that consumers will (1) be both able and prepared (. . .) to disentangle the knot between different financial incentives and intermediary behaviour and (2) to act upon the disclosed information”, see De Muynck and Bruloot (2017), p. 35. Thus, the real impact of such information will be doubtful, ineffective and does not constitute a sufficient protection of consumers. As a result the authors believe that they should be complemented with targeted remuneration regulation specifically addressing the most hazardous remuneration practices. Compare with Jonker et al. (2017), pp. 136–138, who point out with regard to consumer credit that “a large percentage of consumers do not understand what the information provided” (136) and conclude that “the increasing complexity hollowed out the mandatory information duties to the point of becoming useless, resulting in an information paradox: consumers can only be considered responsible if they could be brought to stomach a mass of indigestible information” (p. 138). Also V. Colaert recently came to similar conclusions, see Colaert (2017), p. 10. She furthermore points out that “even improved information obligations indeed cannot deal with certain biases, such as for instance overconfidence or herd behaviour” and that “if the PRIIPs regulation wants to achieve its goals of easily accessible information and comparability of substitute products, its scope of application is still too limited” (11). She concludes: “Legislators in the EU have come to understand that for investors to absorb and compare information, there should not be too much of it (information overload), it should be well-structured in conformity with a standardized format, and it should be attractive and accompanied by visual aids where possible. A clear trend with respect to information as a tool of investor protection is indeed a focus on presentation and a tendency towards short, standardized key information documents. At the same time the legislator has understood that the “caveat emptor” principle, underpinned and reinforced by the information paradigm, has reached its limits in the financial services sector. Behavioural biases and flawed investor decisions cannot or only partially be solved by simpler, shorter and more standardized information. Information requirements are therefore increasingly complemented with two other building blocks of investor protection: service quality rules (conduct of business) and product regulation.” (p. 28). In the same vein D. Busch concludes: “Under MiFID II, the amount of information that must be provided to investors is set to increase rather than decrease and the information will also have to be more detailed. This is despite the fact that many people doubt whether the huge volume of information provided really helps investors to make informed and well-considered decisions”, in Busch (2017), p. 380. On a broader account Sah and Loewenstein (2014), pp. 575–584, argued that mandatory and voluntary disclosure can deter advisors from accepting conflicts of interest so that they have nothing to disclose except the absence of conflicts.
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institution may not offer a credit to a (vulnerable) consumer unless the consumer has the capability to pay off the debt. Appropriate provision of information is thus complemented with careful product design and suitability assessments of consumers. In a number of the reported countries consumers are further protected by codes of practice with more specific information requirements.305 In Finland providers of intangible expert services, such as financial services, have an increased information duty and are required not only to provide correct and sufficient information but also comprehensible information, in accordance with the so-called ‘pedagogical duty’ of an expert service provider.306 Also Japanese law imposes an obligation on the professional to advise consumers on the risks of certain investment transactions.307 As a result, a financial service provider in Japan is not allowed to contract with a consumer if the financial transaction is not appropriate having regard to the knowledge, the experience and the financial capacity of the consumer.308 However, it must be stressed that this protective legislation is limited to consumers who are layman in the 305
In Ireland for instance the Consumer Protection Code 2012 requires “that all information of regulated entities provided to a consumer is clear, accurate, up to date, and written in plain English. Key information must be brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information”. Furthermore, the information must be given in a timely manner, having regard for inter alia the time necessary for the consumer to absorb and react to the information provided. Also in Poland a code of conduct for consumer credit advertisements has been drafted by the key stakeholders in 2016. Find more information in the contribution of respectively Kelly and Namyslowska and Jablonowska in this book. 306 See the contribution of Hyvönen to this book. This results for instance in the obligation as regards insurance contracts to bring the major exclusions of coverage to the attention of the consumer or in investment services to take into consideration the previous investment experience of the consumer, his age or his possible medical condition which might lead to a lowered level of comprehension of significant features of the investment-type insurance policy. With regard to investment services the Financial Supervisory Authority developed guidelines which, although non-binding as such, function as good practices. Deviating from good practices could constitute a breach of the Market Securities Act in Finland. See e.g. the Supreme Court judgment in KKO 2015:93 where the Court found a marketing brochure misleading since it did not mention that the investment product in question included a socalled issuer risk related to the possible insolvency of the issuer even though the 217 pages prospectus included information on the issuer risk and had been approved by the authorities. In its judgment the Supreme Court emphasized the legislative history of the Market Securities Act and underlined that the correctness, coverage and method of presentation of disclosed information should be evaluated from the point of view of the investor. 307 See the contribution of Nozawa to this book. Compare with the council obligation imposed on financial professionals in Québec; see more on this subject in the contribution of Arbour to this book. 308 See the contribution of Nozawa to this book. See also on this point, Nakata (2016), p. 492, who questions whether the general suitability rule in the broad sense, “according to which the business operator must conduct his solicitation and sales in a manner that suits the consumer’s
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financial sector and thus effectively lack specific knowledge in that domain. A similar suitability rule is included in the Taiwanese Financial Consumer Protection Act. According to this rule financial service suppliers, before signing a contract relating to financial products, must be fully informed about the financial capacities of their consumers to ensure that the products or services offered are suitable for them.309 The same Act also imposes fare-reaching information obligations and the duty to fully disclose the risks of a financial transaction before the contract is signed (obligation to explain the financial product).310 Equally to the Japanese rules, the protection is not available to consumers who cannot demonstrate that the financial loss of subscribing financial products is not due to their inability to fully understand the financial product or service, or due to false, misleading or incomplete risk disclosure by the financial service supplier. In Singapore information requirements vary depending on the type of financial product at hand, going from product summaries and benefit illustration tables to product highlight sheets. The aim of the latter is to summarise key information in simple and clear language. These product highlight forms may not exceed four pages, must use terms that investors can understand and must be of a font size of at least 10 Times new roman.311 “Requiring an increased amount of information duties in the domain of financial services fits in with the regulatory ethos of shifting the risk assessment to the consumer whilst educating him on how to do so. However, mandated disclosures with regard to financial contracts remain the exception to the rule”312 in Singapore. In Brazil any streamlining of information about financial products seems to be lacking despite practices are reported by knowledge, experience and fortune etc., must be laid down as a general obligation”. 309 Based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected]. 310 Also certain form requirements and requirements as to the content of the information are imposed. The foregoing is based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected], who further indicates that courts tend to formally assess the explanation obligation and the suitability test, often contenting themselves in verifying whether the consumer has personally signed the explanatory note and the risk attribution scale. Compare with the study of Yan et al. (2017), p. 53, who conclude with regard to recent health law reforms in Taiwan that “it may not be possible for outsiders to properly interpret the information provided by hospitals. Thus, when a hospital discloses information, it is necessary for the government to consider the information’s applicability. Toward improving medical expertise and information asymmetry, the government has to reduce the burden among health service consumers in dealing with this information, and it has to use the information effectively”. 311 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 312 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected].
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which consumers are misled.313 In China it has been debated until recently whether financial consumers could benefit from the protective rules of the Consumer Protection Act. In 2015 a State Council’s regulation eventually issued guidelines that protect the consumer’s right to information and imposes transparency requirements.314 Also the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the People’s Bank of China have issued guidelines in 2016 imposing financial institutions to disclose information to consumers timely and in a manner that is easy to understand.315 The idea of standardization of financial information and disclosure of information about the key features of financial products recently has gained ground in China. Also the courts’ attitude towards financial institutions’ obligation to inform consumers has changed in consequence of a Supreme People’s Court judgment of 2015 that interpreted the information duty of financial institutions. According to the Supreme People’s Court the key feature for the evaluation of this duty to inform is the financial consumer’s understanding of the risks and interests of financial products. In order to assess whether a financial institution has complied to its obligation both the objective average consumer standard must be taken into account complemented with a subjective standard which considers the risk level of the financial product concerned and the consumer’s personal situation. Thereby the burden of proof is placed on the financial institutions.316 Some national reporters indicate that the level of information disclosed to consumers in this field remains highly technical and is often no easy-read.317 In that regard, the
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Irish authorities pay increasing attention to the layering of information through the use of pop-ups and hyperlinked texts. This digitised information provision technique ensures that “the most important information for the consumer is “provided upfront, in a form of summary disclosure . . . (then) there is a nesting of information, depending on how important it is to the consumer’s decision.”318 It allows consumers to have more easily and more conveniently access to information and to retrieve a range of information.319 Also the multiple warnings which result from the codes of conduct referred to above could be seen, at least to some extent, as a reaction to the risk of information overload as they focus much more on the manner in which key information elements are communicated. “With regard to investment consulting, the dilemma of the need to give sufficient details for an informed decision about an extremely complex financial product and the limited capacities to process such information has led several German scholars to the idea of completely replacing the information model by one of legal regulation of financial products (e. g. via licensing)”.320 Other German scholars also voiced the view of more “customer tailored” information that differentiates according to different target groups.321 Although consumer education is often seen as key, not in the least by the European Commission,322 legal scholars remain sceptical. Financial education implies that consumers must be forced to absorb information that barely interests them and “retains a certain degree of paternalism which partly defeats the purpose of campaigns to improve consumer
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See the contribution of Donato Oliva to this book. A survey published in 2015 indicated that only 18.4% of the Chinese financial consumers was capable to fully understand their rights and duties after reading the terms and conditions of the financial services contracts. A survey issued by the people’s Bank of China in 2017 indicated that only 35.27% of the consumers believed that they had a good command of financial literacy. 315 See the contribution of Yang to this book. 316 See the contribution of Yang to this book. 317 See for instance the contributions of Piazzon, Benacchio and Arbour to this book who point out that information requirements have been spread over different laws and must be read together in order to find out whether the requirements are complementary or not. Arbour refers to the Canadian Supreme Court trilogy hinting at the existing limited intelligibility of information disclosures, despite the legislative efforts that have been made to that extent. Piazzon more specifically criticises the Annual Percentage Rate (APR) for credits as overly complex and incomprehensible for an average consumer. Also doubtful about the usefulness of APR, Ramsay (2005), p. 50 and Garcia Porras and Van Boom (2012), p. 28. Benacchio points to the fact that the risks of some financial transactions are insufficiently clarified to consumers and that information cannot make good for inappropriate conduct of financial professionals in the pre-contractual stage, which is difficult to document and thus to proof. As regards the APR, Benacchio seems to point out that this represents a good practice towards specific and simplified information indicators to the advantage of the consumer. In the same 314
vein O. Bar-Gill sees a well-designed APR as part of a ‘smart disclosure’-policy, see Bar-Gill (2015), pp. 75–82. Also De Muynck (2010), pp. 1225–1226, pleads referring to Bar-Gill for a single APR disclosure in advertising. Schinkels, in his contribution to this book, sees the APR as an unidimensional yet meaningful criterion for the comparison of credit offers and thus a successful example of reducing complexity. 318 See the contribution of Kelly to this book. 319 In the context of e-commerce Québec law is reluctant towards the use of hyperlinks or multiple windows as they are likely to confuse consumers. The use of hyperlinks must therefore be avoided since a consumer too informed is also an uninformed consumer; see more on this point in the contribution of Arbour to this book. 320 See the contribution of Schinkels to this book, who refers to Koch (2012), p. 485, Köndgen (2011), p. 285; Klöhn (2006), p. 80 e.s. 321 See the contribution of Schinkels to this book, who refers to Institut für Verbraucherjournalismus (ifv) GmbH an der SRH Hochschule Calw, Fasel (2018), p. 48. 322 See Article 6 of the Mortgage Credit Directive 2014/17/EU and see the Commission Communication of 12 May 2012: “A European consumer agenda – Boosting confidence and growth”, Brussels, COM (2012)225final, 9, “improving consumer knowledge is particularly important in financial services and an overall improvement of financial literacy must be achieved”, and compare with Regulation 254/2014/EU of 26 February 2014 on an multi-annual consumer programme for the years 2014–2020, O.J. 2014, L 84/42.
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protection”.323 Furthermore it remains doubtful whether consumers will effectively act more responsible and base their decisions on the improved knowledge.324
6.2
Digital Consumer: Consent for Use Personal Data
According to the European ePrivacy Directive325 the user326 must be provided clear and comprehensive information about the purposes of the storage of personal data, or access to that information. More in particular, the use of electronic communications networks to store personal data information or to gain access to that information stored in the terminal equipment of a subscriber or user is only allowed on 323 See Jonker et al. (2017), p. 137. Also Schinkels criticizes the voluntary character of laudable educational initiatives like the German Verbraucherzentrale Bundesverband e. V.’s web presentation for consumer education (www.verbraucherbildung.de) which provides specially developed educational material for use in schools in order to improve consumer skills. The materials cover topics like finance, media, nutrition, sustainable consumption and consumer law. See the contribution of Schinkels to this book. In Belgium the Flemish government decided on 17 January 2018 to make a certain level of financial literacy part of the compulsory key competences that students of secondary schools must have attained before commencing higher education; see the proposal for a Flemish Decree, to be consulted at https:// www.vlaamsparlement.be/dossiers/vernieuwing-eindtermen. 324 See Domurath (2015), p. 163. Compare with Pearson (2008), p. 20; Garcia Porras and Van Boom (2012), p. 50; Ramsay (2016), p. 174. See also Trigg (2011), p. 876 and about the huge costs of financial education: Willis (2008), p. 197 and Osovsky (2013), pp. 925–931. Also P. Bongini, L. Colombo, M. Iwanicz-Drozdowska doubt the effectiveness of financial education but nevertheless conclude: “However, the ineffectiveness of financial literacy programs for those specific individuals does not imply that all financial education initiatives are useless and that policy makers should instead concentrate their actions on consumer protection regulation and, in particular, on the design of mandatory choices, as behavioral financial economists tend to propose”, in Bongini et al. (2015), p. 7. 325 Directive 2002/58/EC of July 2002 concerning the protection of personal data and the protection of privacy in the electronic communications sector, OJ 2002, L 201/37, as amended by Directive 2009/136/EC of 25 November 2009, OJ 2009, L 337/11. This Directive builds on Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (O.J. 1995, L 281/31) and Directive 97/66/EC of the European Parliament and of the Council of 15 December 1997 concerning the processing of personal data and the protection of privacy in the telecommunications sector (O.J. 1998, L 24/1) which translated the principles set out in Directive 95/46/EC into specific rules for the telecommunications sector. See also Directive 2016/680/EU of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, O.J. 2016, L 119/89. 326 This is an individual using public electronic communication services, including also consumers.
condition that the subscriber or user concerned is provided with clear and comprehensive information, inter alia about the purposes of the processing, and is offered the right to refuse such processing by the data controller. “This shall not prevent any technical storage or access for the sole purpose of carrying out or facilitating the transmission of a communication over an electronic communications network, or as strictly necessary in order to provide an information society service explicitly requested by the subscriber or user”.327 This information obligation serves as the basis for the user’s consent in the context of electronic communications and the use of cookies. How the cookies used by the electronic communication networks work and what they are used for must be explained to the consumer in a clear and easily available way.328 The consent of the consumer (user) is to date subject to a rather low-level control. Subscribers can give their consent by amending or setting controls on the internet browser which they use or by using another application or programme to signify consent, but also by simply clicking an answer on the web page. No specific requirements exist for the form in which the information about the purposes of the storage or access must be given nor exactly what information must be given.329 However, to be valid consent must be freely given, specific and informed.330 It follows that there must be some form of positive action of the consumer, even though this positive action may be confined to ticking a box or clicking a link. Yet, consent must not be an explicit ‘opt-in’ consent.331 Also an implied consent is valid such as consent by implication preceded by the following words: “By continuing to use this site you consent to the use of cookies in accordance with our cookie policy”, with a link to the “Cookie Statement”,
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Article 5(3) ePrivacy Directive, cited above. Not all cookies are subject to consumer’s consent. User-input cookies, authentication cookies etc. are exempted from consent. See EU advisory body on data protection—WP29. 329 However, default options have been expressly prohibited by Directive 2011/83/EU of 25 October 2011 on consumer rights, OJ 2011, L 304/64. “Before the consumer is bound by the contract or offer, the trader shall seek the express consent of the consumer to any extra payment in addition to the remuneration agreed upon for the trader’s main contractual obligation”(Article 22). Also Japanese law prohibits the use of default options, see the contribution of Nozawa to this book. In the same vein the law of Québec requires traders to bring costs to the attention of consumers. If they fail to do so, the additional costs cannot be claimed. See on this subject the contribution of Arbour to this book. 330 See Van Eecke and Schellekens (2015), pp. 279–301. The user/ consumer must give his consent to the use of most types of cookies. 331 In Greece and the Czech Republic, the existing European legislation is interpreted as an opt-in system whereby users must actively accept the use of cookies on their terminal devices. In absence of such consent, users should be enabled to freely browse the webpage they are visiting. See the contribution of respectively Karampatzos and Kotios, and Selucká, Staviková Reznicková and Loutocký to this book. 328
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and a positive action on the part of the user, such as pressing a “hide” button on the notification.332 How cookies work and what they are used for is a complex phenomenon which further exacerbates the information asymmetry with the consumer. It is questionable whether the average internet user fully understands what is meant by aforementioned notices or statements concerning cookies or is fully aware of the potential consequences of the use of cookies. In theory consumers who wish to use a website will often simply agree with the proposed use of cookies, in absence of which they are prevented from having access to the website. The new European General Data Protection Regulation333 which applies in the member states from 25 May 2018 onwards requires businesses to ask users their consent for data not necessary for the performance of a contract, for compliance with a legal obligation or certain other privileged aims.334 Consent is defined in Article 4(11) as a freely given,335 specific, informed and unambiguous indication of the data subject’s wishes by which he or she, by a statement or a clear affirmative action, signifies agreement to the processing of personal data relating to him or her.336 It 332 See the contribution of Kelly to this book. Compare with consent pop-ups: a clear banner notifying the consumer about the use of cookies and a ‘learn more’-link to further information. 333 Regulation 2016/679/EU of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such date, OJ 2016, L 119/1 (General Data Protection Regulation). 334 According to Article 6 (1) GDPR processing shall be lawful only if and to the extent that at least one of the following applies: (1) the data subject has given consent to the processing of his or her personal data for one or more specific purposes; (2) processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract; (3) processing is necessary for compliance with a legal obligation to which the controller is subject; (4) processing is necessary in order to protect the vital interests of the data subject or of another natural person; (5) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller;(6) processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child. Point (6) shall not apply to processing carried out by public authorities in the performance of their tasks. 335 According to introductory recital 43 of the GDPR, the assessment whether consent was freely given has to take into account a clear imbalance between subject and controller. 336 Article 7 of the Regulation further specifies the conditions for consent. Article 7 (2) for instance states: “If the data subject’s consent is given in the context of a written declaration which also concerns other matters, the request for consent shall be presented in a manner which is clearly distinguishable from the other matters, in an intelligible and easily accessible form, using clear and plain language. Any part of such a declaration which constitutes an infringement of this Regulation shall not be binding”. It follows that a banner on a website indicating the
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follows that the Regulation imposes a stricter standard337 and requires an opt-in consent by the data subject (user/ consumer) to the processing of his or her personal data for one or more specific purposes.338 As a consequence the European ePrivacy legislation needs to be adapted to align with these new rules. Hence the proposal for a regulation concerning the respect for private life and the protection of personal data in electronic communications.339 This proposal, when adopted, will repeal the ePrivacy-Directive cited above and contains revised cookie rules.340 The GDP Regulation also deals more explicitly with the transfer to other parties of personal data. According to some reporters this could hardly be seen as an adequate solution given the speed, the frequency and the number of implied issues.341 In that regard a consumer should at least be granted the right not only to be forgotten, but also to have access to his virtual self which results from the application of diverse algorithms and to adjust or correct the characteristics or profile of his virtual self.342 In The UK the manner in which this information must be given is further specified. Businesses are advised to make sure that the language and level of detail are appropriate for their intended audience and that the information about cookies/the privacy policy cannot show consent if it is hard to find, difficult to understand or rarely read.343 If very sensitive personal data are collected, such as e.g. health details, businesses were advised to ask already before the GDPR entered into force an explicit opt-in consent from users. use of cookies with the only option to accept or acceptance as default option does not comply with these requirements (see also introductory recital 32 GDPR, which indicates that pre-ticked boxes are not sufficient to constitute consent). In absence of an option to refuse the processing of data not necessary for the service offered, the consent will not be given freely. 337 This standard is based on the following principles, further clarified in Article 5 of the Regulation: lawfulness, fairness and transparency; purpose limitation; data minimisation; accuracy; storage limitation; integrity and confidentiality; accountability. 338 See Article 6 (1) (a) GDPR. See also the five other lawful ways of processing personal data, for which no prior consent of the data subject is required, mentioned in Article 6 of the Regulation. According to introductory recital 30 of the GDPR, cookies which allow to identify an individual directly or indirectly are considered as covering personal data. 339 Proposal for a Regulation concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Regulation on Privacy and Electronic Communications), Brussels, 10 January 2017, COM(2017) 10 final. 340 The rules are said to be more user-friendly as browser settings will provide for an easy way to accept or refuse tracking cookies and other identifiers. Furthermore the proposal clarifies that no consent is needed for non-privacy intrusive cookies improving internet experience (e.g. to remember shopping cart history) or cookies used by a website to count the number of visitors. See Articles 8, 9 and 10 of the proposal. 341 See the contribution of Benacchio to this book. 342 See again the contribution of Benacchio to this book. 343 See the contribution of Cartwright to this book.
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Yet, extensive legislation on the use of personal data does not exist in all the reported countries. In Brazil for instance a draft Bill aims at regulating the issue. More specifically with regard to cookies the unlimited use of them by businesses may constitute an abusive commercial practice within the meaning of the Consumer Protection Code. However, it is reported that although consumers have technically the means to disable cookies on their personal computers, they are generally unaware of that in practice. Furthermore, if they would deactivate the cookies, they would no longer have access to most of the websites.344 In the same vein Japanese law on this subject is also in its infancy. Personal data may be used by businesses provided that the consumers are informed for which purposes they are used and provided that the use which is made from the personal data is in line with the communicated purposes pursued. There is no obligation to obtain any consent from the consumer. Furthermore, it turns out that in practice consumers would not have any choice but to accept the proposed uses by the businesses.345 Singapore has no legislation on e-commerce or distance selling. In contrast, the Personal Data Protection Act 2012 requires the consumer’s express consent for the collection, use or disclosure by businesses of the consumer’s personal information. “A consumer is deemed to have given his consent if he voluntarily provides personal data to the businesses and if it is reasonable that he would volunteer that data under the circumstances”.346 The reason for the data collection, use or disclosure must be made known to the consumer, absence of which he cannot consent.347 Although it is disputed whether opting out could constitute a means of imputing consent, the regime seems to favour an express opt-in. With regard to cookies consent can be derived from the consumer’s consent to internet activities which require cookies to be accessed. Default settings will not necessarily suffice to impute consent for cookies.348 Also Taiwan makes the collection, use and disclosure of personal data subject to the consumer’s consent.349 Consent
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will be inferred from the consumer’s absence of raising objections after being given substantial information about the use, processing and collection of personal data in accordance with the legislation. In case a business by accident uses personal data contrary to the purposes indicated to the consumer, that business will not be held liable. Chinese law operates the distinction between personal information and personal sensitive information. Whereas in the latter case the explicit consent is required, authorized consent suffices in the former case. Explicit consent requires an affirmative action of the person concerned (e.g. by clicking the button ‘agree and register’ which gives access to the relevant information directly followed by another ‘agree’-button) which demonstrates his unambiguous consent for core business functions and his separate consent for all other affiliate functions.350 In contrast, an authorized consent may be given implicitly, but only when explicit consent turns out to be impossible in the given context. Overall it must be submitted that the extensive use of new technologies by businesses as a marketing tool creates the risk of new forms of information asymmetries to the detriment of consumers, namely businesses knowing more about an individual consumer’s behaviour and preferences than the latter is aware of, and to which legislatures have not yet found the right answer.
7
Behavioural Sciences’ Impact on the Consumer Information Model
The multiple critiques sketched out above351 brought some legal scholars to the conclusion that information models based on mandatory disclosures have completely failed. The most prominent scholars who voice this view are Omri Ben-Shahar and Carl E. Schneider.352 In their view the disclosure’s failure is due to a misunderstanding of psychology: it rests on the false assumption that people actually want to make all of the significant decisions in their lives and to make them with care. They conclude that “as a regulatory
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See the contribution of Donato Oliva to this book. See the contribution of Nozawa to this book. 346 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 347 The development of a data protection or privacy policy by which the consumers may be notified of the fact of and reasons for collection, use and disclosure of their personal data is categorised as a good practice, provided that the policy is drafted in sufficient detail. The notification of such policy drafted in too vague or general terms runs the risk that the notification and consent obligations are not met in specific cases. The foregoing is based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 348 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 349 Based on the responses to the questionnaire from professor Jiin Yu Wu, National Chengchi University, Taiwan, [email protected], who 345
also seems to indicate that since information about the collection, processing, storage and use of personal data is mandatorily disclosed in standard contracts, the use of personal data in accordance with the purposes indicated therein is automatically allowed. 350 See the contribution of Yang to this book. 351 See the introduction to this contribution. See additionally on the subject of bounded rationality Hacker (2016), pp. 300–301. 352 See e.g. Ben-Shahar and Schneider (2011), pp. 647–749; Ben-Shahar and Schneider (2014), p. 240; Ben-Shahar and Schneider (2015), pp. 83–93. They claim that “although mandated disclosure addresses a real problem and rests on a plausible assumption, it chronically fails to accomplish its purpose. Even where it seems to succeed, its costs in money, effort, and time generally swamp its benefits. And mandated disclosure has intended and undesirable consequences, like driving out better regulation and hurting the people it purports to help”, see BenShahar and Schneider (2011), p. 651.
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technique, mandatory disclosure is a fundamental failure that cannot be fundamentally fixed”. Thus, “what fails should be abandoned”.353 Like Ben-Shahar and Schneider, Thaler and Sunstein attacked the economic benchmark of the information paradigm, but, instead of abandoning the information model Thaler and Sunstein argued in their best seller Nudge,354 for a new paternalism, the so-called libertarian paternalism that steers the paternalized person but preserves always his freedom of choice. In their view ‘nudgers’ could help consumers without the coerciveness inherent in traditional paternalism.355 In short, “nudge defends three main claims: one, the architecture of choice greatly influences how people make choices; two, choice architecture is unavoidable (so why not design in ways that improve wellbeing), and three, libertarian paternalism is not an oxymoron: paternalists can nudge while preserving freedom of choice”.356 In conclusion, they strongly believe that consumers can and must be manipulated by so-called savvy architects of choice. The compelling analyses of both Ben Shahar and Schneider, and Thaler and Sunstein beg the question how to move forward with an information model that is characterised by multiple drawbacks and shortcomings? The abandonment of the information paradigm, as proposed by Ben Shahar and Schneider would place us in a vacuum since they refrain from proposing a genuine alternative. They submit that there is rarely a good solution in principle: “incomplete disclosure leaves people ignorant, but complete disclosure creates crushing overload problems. Thus, a sophisticated lawmaker could recognize that ‘less is more’ but still fear that ‘less is not enough’. Furthermore, and crucially, the lawmaker’s incentives generally push it toward ever more disclosure”.357 Also the approach taken by Thaler and Sunstein can be criticised, even though it would leave the basic assumptions 353
Ben-Shahar and Schneider (2014), p. 12. Thaler and Sunstein (2009). 355 Also Sibony and Helleringer (2015), pp. 221–226 take a more paternalist approach with the focus of information disclosure shifted from content to context and directed to what matters for consumers. In line with choice architecture theories which emphasize the importance of opt-in, opt-out or required choice systems, they suggest the use of for instance opt-out systems and the use of grey lists instead of black lists (pp. 229–233). 356 See the book review of R.H. Thaler & C.R. Sunstein, Nudge: improving decisions about health, wealth, and happiness by Leonard (2008), pp. 356–360. It must be submitted that an important number of nudges echoes behaviourally informed regulation. The so-called information nudge for instance rests upon disclosure requirements, default rules and simplification. See more extensive on this point, on market failure nudges and on information-providing nudges as a natural corrective, Sunstein (2015), p. 427 and 435–438. 357 Ben-Shahar and Schneider (2011), p. 688. See also the critique of Marotta-Wurgler (2015), p. 66 and 70–73, who states that doing nothing about the failure of disclosure might not be desirable. 354
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of the information model intact. Leonard for instance is very critical about nudging, and provides a strong counterpoint to the potential success of ‘nudging’ and ‘choice architecture’. He concludes: “The irony is that behavioural economics, having attacked Homo Economicus as an empirically false description of human choice, now proposes, in the name of paternalism, to enshrine the very same fellow as the image of what people should want to be. Or, more precisely, what paternalists want people to be.358 For the consequence of dividing the self359 has been to undermine the very idea of true preferences. If true preferences don’t exist, the libertarian paternalist cannot help people get what they truly want. He can only make like an old fashioned paternalist, and give people what they should want”.360 Similarly Bubb points out that for disclosure systems that move consumer behaviour in a specific direction to be sensible, “one needs a model of ‘normative preferences’ independent of the preferences revealed through individual choice. This is because the approach’s entire premise is that individual choice in the absence of the disclosure is not a reliable indicator of what is truly in the relevant individual’s (or, in some cases, the social) interest”.361 Yet, Bubb also argues that Ben-Shahar and Schneider risk making a mistake symmetric to that of the nudge advocates with their strong believe in choice design that improves wellbeing.362 In his view 358
In the same vein Ben Shahar and Schneider argued that the autonomy rationales for mandated disclosure “assume that discloses and their circumstances, preferences, and choices are various. Given all this variety, how is a lawmaker to find language to guide each discloser to the disclosure most helpful to discloses?”, see Ben-Shahar and Schneider (2011), pp. 691 and 743. Also Schinkels, in his contribution to this book, points to German legal scholars that submitted that “where the state of being reasonably informed is not identified as status quo but as a future goal to be achieved via information obligations, there may be an opposing tendency to consumer education and the danger of paternalism” Möstel (2015), p. 908 e.s. 359 Thaler and Sunstein point out that inconsistent preferences explain why people smoke, eat and drink too much, or exercise and save too little. They illustrate inconsistent preferences via a self-model of intrapersonal conflict. This model is dichotomous with an impulsive, myopic Doer versus a farsighted, resolute Planner. 360 See the book review of R.H. Thaler & C.R. Sunstein, Nudge: improving decisions about health, wealth, and happiness by Leonard (2008), pp. 356–360. 361 See Bubb (2015), p. 1036. Also critical Hale Russell (2015), pp. 56– 84 and Avishalom (2016), pp. 3–10. Also M.D. White disputes claims that paternalism of means can be meaningfully separated from paternalism of ends, and argues that modern paternalism does not respect people’s true interests but instead adopts a perfectionist or objective conception of well-being, see White (2016), pp. 36–37. In the same vein A. D. Steffen argues that a nudge requires an ex-ante value judgment, but facts and values are almost always inextricably entangled. He argues that the inherent normative choices must be made more transparent. See Steffen (2016), pp. 85–86. According to Alli et al. (2014), pp. 342–343, ‘nudging’ must be approached as a complementary tool of consumer protection. 362 Bubb (2015), p. 1023: “The right response to the important critiques of mandatory disclosure that Ben-Shahar and Schneider raise is not a
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disclosures characterized as operating just through providing information and correcting factual misperceptions work. This type of disclosure “gives the impression that mandating disclosure is basically innocuous, and it seems to preclude any need for paternalistic judgments about what is in others’ true interests”.363 Therefore, Ben-Shahar and Schneider’s conclusion that “the quantity problem is generally unsolvable without making disclosures fatally simple-minded, incomplete, and misleading” and that “the accumulation problem would defeat mandated disclosure even if individual overload issues could be managed”,364 should not be endorsed. Taking these critiques into account, it seems that both Ben-Shahar and Schneider and Thaler and Sunstein went too far in their respective denial of and believe in the advantages of information policies and mandated disclosures. The abandonment of mandated information disclosures without replacing them comes close to the point where every legislation or policy tailored to consumers and their protection would become redundant. It is therefore submitted in line with Thaler and Sunstein that rather than abandoning information models it remains worthwhile to investigate time and research in finding ways to provide consumers simpler and better information.365 Shahar and Schneider did not substantiate that each approach to mandatory disclosure would automatically be ineffective.366 However, unlike the paternalism proposed by Thaler and Sunstein this must be done without denying the limits inherent in any information policy and without ignoring the drawbacks of mandated disclosures. In this respect Oren Bar-Gill convincingly pointed out that ‘smart disclosure’ might be endorsed. He submits that even
presumption against disclosure but rather rigorous empirical assessment of which disclosures work and which do not, with an eye toward the pitfalls the authors document. About disclosure, there is still a great deal more to know”. 363 Bubb (2015), p. 1039. See also the very critical analysis of Hansen and Jespersen (2013), pp. 9–23. Also critical pointing at the three degrees of Nudge and their compatibility with other control devices, Baldwin (2014), pp. 835–844. Even C.R. Sunstein acknowledges that the central objective of nudging to influence choices in a way that will make choosers better off, as judged by themselves, raises normative, conceptual and empirical challenges, see Sunstein (2015), pp. 430–433. 364 Ben-Shahar and Schneider (2011), p. 746. “In any event, we need to abandon the idea that people’s autonomy is bolstered by supposedly empowering them to make choices through mandated disclosures” (p. 749). 365 See also on this point, Sibony and Helleringer (2015), pp. 209–233, who favour reform instead of revolution. 366 See also on this point Bubb (2015), p. 1041: Shahar and Schneider’s “analysis strongly suggests that presumptionless cost-benefit analysis of disclosure and its alternatives would lead to substantial repeal of existing disclosure mandates. But it may also lead to useful new approaches to mandatory disclosure, including through forms of summary disclosure (. . .) that (is. . .) based on realistic models of disclose psychology”.
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Ben-Shahar and Schneider themselves do not as such reject to strive for simple information as a better tool to protect consumers. They simply don’t find it reassuring.367 Oren Bar-Gill therefore proposes to inform consumers through scores, a specific form of ‘smart disclosure’. Scores are in his view one-dimensional summaries of one or more product features.368 Of course, also Oren Bar-Gill’s approach implies “that regulators designing these score-type disclosures must ensure that the score in fact provides a useful summary of the underlying information”.369 In doing so research outcomes of psychological or interdisciplinary research must be taken into account. Scholars on a regularly basis370 emphasize the psychological aspects of disclosure pointing at new findings from research in cognitive psychology.371 Such psychological or interdisciplinary research helps to find out what information consumers effectively need for making better
“Several things impede simplification, and the cure for the ills of mandated disclosure is not merely ‘keep it simple’”, see Ben-Shahar and Schneider (2011), p. 744. They rather advocate peer ratings and expert advice (see pp. 746–747) and even for the most vulnerable consumers, to channel people’s choices by law, without mandating them. See however on this point Marotta-Wurgler (2015), pp. 71–72, who points out that individuals must also seek out ratings, rankings, scores, reviews etc., read them, understand them and act on them. They in other words suffer from the same problems and conflicts associated with disclosure. 368 The APR or annual percentage rate is for example a one-dimensional aggregator of the cost of credit. In the case of a cost score like the APR a consumer need to only understand that a lower score is better than a higher score. It also facilitates comparison-shopping among firms and products. See Bar-Gill (2015), pp. 75–82. In the same vein the results of an experiment conducted by Helleringer suggest that, from the perspective of the recipients of advice, problems of conflict of interest may not be as impossible to treat by means of mandatory disclosure as has been commonly suggested, see Helleringer (2016), pp. 153–163. 369 See Bar-Gill (2015), p. 76. Furthermore, Bar-Gill is also in favour of full disclosures, but full disclosures that are designed for consumption by sophisticated intermediaries, rather than directly by consumers. These intermediaries would then digest the disclosure and use it to provide beneficial advice for consumers (pp. 81–82). This requires another type of mandated disclosure so as to allow intermediaries to give consumers adequate advice. 370 See a.o. Trzaskowski (2016), p. 27; Purnhagen and van Herpen (2014); Duivenvoorde (2014). Also Schinkels for instance indicates that insofar as the abilities of average consumers are crucial, it is not a priori impossible to take into account empirical findings of behavioural psychology as regards systematic errors and biases in choices made by average “humans”, see the contribution of Schinkels to this book. 371 See Sibony and Helleringer (2015), p. 219: “Throwing out the ‘disclosure baby’ with the bathwater would not be a good idea”. For a plea to insert insights from neuroscience and behavioural knowledge in unfair commercial practices law, see Sibony (2013), pp. 496–501. According to the author those insights can help to produce acceptable generalisations that will allow courts to take better account of the context in which consumer decisions occur (p. 502). 367
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decisions.372 Some reporters submit with regard to the health sector (tobacco products, medicinal products and foodstuffs) that the particular knot between labelling and advertising calls a better synergy between lawyers and social sciences experts, as their interplay have often been used by businesses to misinform consumers.373 Many of the proposals to overcome some of the preceding drawbacks of information requirements and to secure that information disclosures effectively empower consumers374 point in the same direction. The key words are here: keep it short and simple,375 pay more attention to the presentation of information and standardise information so as to make information more comparable.376 Reduce the length and content of disclosures to avoid information overload. Present information in a way that consumers want to read the information377 and in a way that is meaningful for consumers and
372 More particularly with regard to warnings and information requirements in the field of product liability, reference is often made to the popular so-called C-HIP (Communication, Human Information Processing) model. This model distinguishes the four major phases of information processing, namely from (1) attention capture and maintenance, via (2) comprehension and memory, and (3) attitudes and beliefs, to (4) persuasiveness, see Wogalter et al. (1999), p. 864 and Wogalter (2006), p. 365. See extensively on this subject, Pape (2012), p. 473. See also on the LC4MP-model, Mangold (2017), pp. 75–87. 373 See on this particular point and the recent tobacco case which is pending before the Canadian Superior Court, the contribution of Arbour to this book. 374 See e.g. Better Regulation Executive and National Consumer Council (2007), p. 8, on maximising the positive impact of regulated information for consumers and markets. “Information can help consumers make decisions which work for them and enable them to take responsibility for making these choices. Regulated information can be a powerful tool in facilitating choice, especially when given to consumers at the point at which they make a transaction or decision”. 375 See on this point, Johnston et al. (2015), p. 26. The complexity and technicality of the language (official or legal-speak), the layout, the small print, dense text format and the length of the information provided impact on the comprehensibility of the information. Techniques to make information more accessible and comprehensible are the use of headings, highlighted key words, summaries, tables of contents etc. 376 See on this point, Johnston et al. (2015), p. 27. Comparative information contributes to transparency; it enables consumers to compare the legal situations and places him in a position to decide whether or not to purchase or to enter into a contract. Comparative information also has a competitive function in that it stimulates competition. Also Helberger et al. (2013), pp. 36–50, refer to the ultimate goal of consumer information which is to enable consumers to make informed choices: “To do so, consumer information regarding the different goods and services must be comparable. This again requires a certain level of standardization not only of the content but also of the form in which consumer information is supplied”. 377 If well designed, graphs and other visual representations can be beneficial in assisting comprehension. How information is formatted, its order, use of numbers, use of visual illustrations all contribute to the readability and understanding. See also Ayres and Schwartz (2014), p. 549.
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aids their decision making.378 The latter means that information is best presented in a form that people can relate to, e.g. put information in the context of everyday live so as to enhance the understandability of the information.379 In other words, consumer information should be framed and contextualised in a way that points consumers towards reallife implications.380 Further, information should be correctly timed.381 Consumers must have the information at hand for the decisions they are actually making. Consumers must be presented with the information and only the information that they need at the moment when it is relevant since well-timed information is easier to understand and more inviting to read. It may then be concluded from the foregoing that reforming the information policy and its inherent mandatory disclosure, taking the multiple critiques seriously is to be preferred and a better way forward than straightforward abandonment of the information paradigm which is inextricably linked with the underlying economic order. Building further upon these research outcomes, consumers arguably may well want to make more responsibility themselves with the help of information about core elements, such as price, characteristics of goods and services, and core consumer rights.382 Although further research should be done,383 it could be envisaged to require traders to provide consumers with standardized short and simple information about the core issues, separately from the mandated extended disclosure.384 Consumers might rationally leave the detail of standard form contracting be regulated 378
The way the information is presented can have a significant impact on how consumers perceive and react to it. 379 Context can convey meaning and enables information to be more easily processed. 380 See on this point, Johnston et al. (2015), p. 22. Mandated disclosures are most easily remembered if a consumer can place them in some kind of context or a meaningful story. See also on the problem of remembering information, Ben-Shahar and Schneider (2011), pp. 719–729. 381 See also on this point, Helberger et al. (2013), p. 36:50. 382 See more extensively on this point, Straetmans (2016), pp. 199–210. This approach has also been endorsed recently by other Belgian scholars, see Terryn (2017), pp. 68–69. 383 For instance on communication in the digital sphere where consumers even being in possession of adequate literacy skills would still not have the resources to consciously process each and every piece of communication they are confronted with. See on this issue, Siegert et al. (2017), pp. 1–10. And for more about unconscious processing of commercial information, see R. Mangold, “Human processing of commercial information in digital environments”, in Siegert et al. (2017), pp. 75–87. 384 The twist of paternalism behind this proposal seems unavoidable. If we accept that the regulator is capable of imposing mandated disclosures, we inherently accept that he knows to a certain extent better than consumers what the core information should be to make decisions and what average consumers exactly need to make decisions well. Note also that Radlin (2015), p. 61, does not view this as ‘paternalism’. “Instead it is a recognition of the value of civil society to everyone, and to everyone’s liberty”.
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by the law. That way, presumably more consumers would be informed of the core issues relating to the contract they are willing to engage in.385 Yet, the full disclosure of information must remain available for consumers in want of that additional information. Although most of the consumers are not going to read the long, detailed disclosure statements, the full disclosure remains important for those consumers who read the disclosures in a later stage but also, more importantly, for third parties or the judge who, for example when a conflict has arisen, must assess the rights of the contracting parties. So, even when full disclosure is basically useless for a large number of consumers, it remains important in the legal process, especially with regard to enforcement of e.g. consumer contracts.386 A recent behavioural study on behalf of the European Commission’s Directorate-General Justice and Consumers, produced under the Consumer programme 2014–2020, demonstrates that shorter and simpler information could have a positive impact on the consumer’s readership of contract terms and conditions.387 However, any proposal made in this context must be accompanied by a thorough cost/benefit analysis.388 The precise cost a reform entails for market participants is a convincing argument, especially since costs imposed on businesses are likely passed on to consumers in commercial relationships. Also proposals to adjust the benchmark of information rules towards more specific groups of vulnerable 385
The focus in a number of national reports on prominence of certain (core) standard clauses and avoidance of surprising clauses or clauses which limit the rights of consumers further point in that direction. 386 See more extensively on this issue, Straetmans (2016), pp. 199–210. 387 See Elshout et al. (2016). The Key findings of the study are that shortening and simplifying the terms and conditions results in improved readership of the T&Cs, a slightly better understanding of the T&Cs, and a more positive attitude towards the T&Cs. See already on the impact of simpler wordings and sentence structure on the intelligibility of a text, Masson and Waldron (1994), pp. 67–85. Also Schaub explores the question whether and how EU-information requirements can add value to consumer protection. He first recalls that information exchange is the basis of any contract, and that the general contract law imposes several information requirements (p. 32). However, these are mostly implicit, indirect and open-ended which makes it difficult for consumers to proof that the duty to inform of the offeror was violated. He consequently concludes that explicit and mandatory information requirements are capable of adding value where they are considered in relation to the general rules of contract law, which they strengthen, especially when the burden of proof with regard to the information provision is shifted to the trader. That way specific mandatory information requirements assist consumers in enforcing remedies under the general rules of contract law (p. 43). See Schaub (2017), pp. 25–44. 388 T.B. Gillis criticizes the way disclosures are tested in the financial sector. She concludes that the evaluation of the methodology of regulatory testing requires in the first place a clear understanding of how regulators view the goal of consumer financial regulation and the problem to which regulation needs to respond, see Gillis (2015), p. 40. See already on the costs of information disclosures, Hadfield et al. (1998), pp. 141–146.
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consumers must be assessed in this light. Despite all critiques based on the illiteracy, innumeracy and lack of salience of groups of consumers, one should be very careful in lowering the benchmark. When set too low, the very existence of consumer information legislation might be called into question.389 In the same vein, it seems hardly possible to avoid legal speak or legal concepts in disclosure mandates or contract terms as it would render the task of judges more difficult, forcing them to take decisions in a ‘vacuum’. This however should not refrain scholars to avoid legal speak whenever possible, especially in the core information that would be made available separately to consumers in a more standardized form. Despite the many critiques on the information model in its current form and as much suggested remedies, recent legislative developments demonstrate that the European legislator is not yet fully affected by them.390 The same can be said from the national legislators. In most of the reported countries there is no or little evidence of in depth moves to deal with the problem of information overload or risks of disinformation as a result of the manner in which the information is provided or its quantity.391 For instance, the UK Government agencies acted generally in favour of information requirements without significant critical review of the risks of information overload. Hence, there is no specific legislation in the UK that deals with the problem of disinformation as a result of an overload of information.392 In contrast, we can see an increasing awareness in Ireland of the problems associated with the European information model and with how consumers digest amounts of information. In this regard, 389 Shahar and Schneider’s adherence to peer review and expert advice seems to indicate that they too start from the idea that consumers to a certain extent are capable of processing information. European countries experimented in the seventies with consumer law that protected the consumers outside the market place. It turned to be the wrong cure for the disease; see for a critique on those consumerist models, Straetmans (1998). Recent developments in e.g. Japanese consumer law confirm that consumer policy “should not be limited to the mere protection of consumer interests but should rather aim at operating a sound market system in the context of state regulation too”, see Nakata (2016), p. 505. 390 In contrast with the Obama Administration in the US and the Behavioural Insights Team in the UK, the EU only timidly embraces behaviourally informed regulation so that as of yet behavioural insights are not formally integrated into EU policy-making. Nevertheless the Staff Working Paper on Consumer Empowerment in the EU, SEC(2011) 0469 of 22 May 2012 encourages national courts and authorities to take account of the actual state of scientific knowledge and points out that this includes the most recent findings of behavioural economics (see p. 32). 391 See e.g. the contributions of Namyslowska and Jablonowska; Selucká, Staviková Reznicková and Loutocký; Bercea and Caramidariu; Schinkels, Piazzon (with regard to financial services), Nozawa (who nevertheless refers to recent critical studies on the functioning of information models) to this book, and Yu Wu and Low based on their responses to the questionnaire (pockets of policy discussion on incorporating behavioural insights, but no impact on legislation). 392 See the contribution of Cartwright to this book.
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the Economic and Social Research Institute published an interesting study,393 emphasizing the potential benefits of independent price comparison sites and advocating that product ranges and descriptions should be kept simple. Some hesitance to address the issues relating to information overload may be due to the risk of introducing inflexible standards luring. It is reported for instance that some Polish courts are reluctant to accept empirical evidence as regards consumers’ behaviour. In their view the average consumer benchmark remains a normative model which is construed in abstracto on the basis of the judges’ own experiences.394 Especially in Singapore the risk to impose too strict information obligations on businesses with the result of overburdening them is a genuine concern. Also the enduring belief in the competitive hand of the market seems to play a very important role which hampers new regulatory solutions in this domain.395 Therefore, in Singapore the emphasis is placed on consumer education with the relevant authorities developing a variety of initiatives such as web-portals, publications of informational pamphlets informing consumers of their rights or other important factors they ought to take into consideration, and roadshows across the country.396 In the same vein the Polish public authorities and non-governmental organisations have taken a variety of initiatives (targeted campaigns addressed to specific groups of consumers, online tools, professional hotlines,397 etc.) to increase the consumers’ awareness of their rights. Also in other reported countries several initiatives are taken to improve the education and literacy of consumers,398 although their effectiveness is openly questioned.399 393
PRICE Lab: An Investigation of Consumers’ Capabilities with Complex Products, study published in May 2016. Available at https://www. esri.ie/pubs/BKMNEXT306.pdf. 394 See the contribution of Namyslowska and Jablonowska to this book. Some legal scholars in France evaluate the current focus on information disclosures as too consumerist, turning average rational consumers into non-emancipated minors. Although they recognize that a certain formalism protects consumers, whereas too much formalism oppresses and spoils them. See more on this point in the contribution of Piazzon to this book. 395 Based on the responses to the questionnaire from professor Gary Low, Singapore Management University, [email protected]. 396 Idem. 397 See also in the financial services sector, the introduction of a toll-free telephone number for consumer information and increased information on ADR to solve problems in Romania, and on this subject the contribution of Bercea and Caramidariu to this book. 398 “Rather than focussing on law, it seems that consumer confidence is more likely to be enhanced by educating consumers about being a consumer — that is to make them much more aware of how different sectors operate, what to expect, and what to look out for. Consumer education is one of the Treaty-based objectives of EU consumer policy (Article 169 TFEU) and there are important initiatives in place, but it seems that the EU focusses too much on rights and not sufficiently on practical action”, see Twigg-Flesner (2016), p. 201, who further refers to the ‘Consumer Classroom’-website: http://www.consumerclassroom.eu. 399 See e.g. the contribution of Kelly to this book. Also Bercea and Caramidariu refer to complementary educational measures in Romania,
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Despite the multiple initiatives to address problems relating to information overload and to educate consumers, it must be concluded that there is in all of the reported countries still a long way to go.400 As for some of the member states401 of the European Union there seems to exist a tendency to await further initiatives on this subject from the European legislator, especially since regulation would be required in a context which is increasingly characterised by (targeted) full harmonisation. Yet, this tendency did not withhold some of the reporters of EU member states to suggest that information overload potentially could qualify as an unfair commercial practice, under the general clause in the UCPD, or by application of the prohibition of aggressive practices (analogous to spam).402 However, most of the European reporters conclude that it will be difficult under current European legislation to consider disinformation as a result of a trader’s compliance with mandatory disclosure rules, an unlawful practice as such.403 In a number of reported countries the excessively detailed rules on advertising and information are increasingly criticised as counterproductive if they lead to constantly extended lists of information catalogues404 or to the total but there is no evidence about the effectiveness of those measures. In the same vein, Benacchio points to a number of initiatives in the financial services sector in Italy, but casts some doubt about the neutrality of those educational measures (as the financial sector seems too involved itself). He also seems in favour of shifting the debate towards the education of professionals in their relationship with consumers. Nozawa on his turn emphasizes the importance of consumer education in Japan and refers to legislative initiatives to that aim, but meanwhile also recognizes that it will be very difficult to educate young consumers via specific courses in schools. 400 In Brazil consumer protection policy is still very much focused on promoting healthy consumption among Brazilians so that information disclosure initiatives are mainly found with regard to tobacco products, alcoholic beverages, certain foodstuffs and medicinal products. See the contribution of Donato Oliva to this book. 401 See e.g. France, Poland, Italy etc. 402 See for instance the contribution of Namyslowska and Jablonowska, Bercea and Caramidariu, and Schinkels to this book. 403 See e.g. the contributions of Namyslowska and Jablonowska; Schinkels and Piazzon to this book. Also the Belgian practice points in that direction, see Straetmans (2016), pp. 199–210. The analysis may take a completely different turn if businesses mix voluntarily disclosed information with mandated disclosures and thereby deliberately confuse consumers. 404 Specifically with regard to complex contracts it is questioned whether an ever increasing amount of information would achieve a more balanced B2C-relationship. See particularly on this point, the contribution of Hyvönen to this book who refers to investment services and submits that the critique stems from a Finnish (or a Nordic) consumer law perspective where the model forms set by the EU seem quite formalistic with low influence on the consumer’s actual knowledge on the sold product or service. She further observes that in Finland, the duty to disclose is already quite vast in consumer contracts and the seller has a far-reaching responsibility regarding the comprehensibility of the information (e.g. his pedagogical duty; see already above). Karampatzos and Kotios point also to the marginal utility of excessive information (see his contribution to this book): the added value of a new information
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opposite, general image campaigns.405 However, this line of thinking is also contradicted as it would provide liberalists an too easy argument to reduce constraints imposed on businesses.406 In that regard the value of a limited set of important information particulars disclosed in the appropriate time and form deserves further investigation.407 In that respect Schinkels point to another important development in average consumer skills. He rightly states that “any consumer-targeted education approach will not help where the most fundamental skill for processing written information is missing. According to a survey performed in 2016,408 around 19 percent of the tested German fourth graders (aged around 10) did not have the reading skill to understand the general context and the storyline of a text as a whole (Kompetenzstufe III)”.409 Also in other member states of the European Union, for instance in Belgium, this competence is in decline according to the most recent surveys.410
particular diminishes when compared with the invested time and energycost to accumulate and assess the additional information. Furthermore, an intricate torrent of technical information may overwhelm the consumer who often lacks time, experience and knowledge to understand and properly evaluate the information, especially in the case of financial services. Piazzon stresses that the accumulation of the general precontractual information duty and the mandatory disclosures, absence of contradiction, lead to an overload of information; see his contribution to this book. 405 See e.g. the contributions of Hyvönen and Namyslowska and Jablonowska to this book. 406 See especially on this point, the contribution of Piazzon to this book. 407 See Straetmans (2016), pp. 199–210. See also the contribution of Karampatzos and Kotios to this book: maximum information is not equal to optimal information. See also the contribution of Benacchio who is in favour of highlighting essential information per domain. Baysal on her turn advances that the consumer is to a large extent unable to understand the multiplicity of information which is disclosed to him. Hence, he is in favour of simplified information that is made easily accessible for consumers. Piazzon argues that limited information to consumers in a pre-contractual stage and detailed information to consumers in a later stage, notably after the conclusion of a contract, may be efficient only in those circumstances were the consumer has been given a right to withdraw from the contract, see the contribution of Piazzon in this book. 408 IGLU (2016), p. 15. 409 See the contribution of Schinkels to this book. 410 The OECD PISA-study of 2015 (worldwide assessment of 15-yearold students in reading, mathematics and science) indicates that 17% of Belgian secondary school students fail to attain the basic competences, see https://www.oecd.org/pisa/pisa-2015-results-in-focus.pdf.
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8
Conclusion
8.1
Economic Orientation of Consumer Models: Concept of Average Consumer
The analysed legal systems start from the assumption that contracting parties are more-or-less in an equal bargaining position and enjoy the freedom of contract. New market circumstances (mass products, standardised contracts) made increasingly clear that consumers could no longer be considered in an equal position with traders. Consumer protection rules respond in the first place to failures that occurred in the market economy (information asymmetry) and provide a correction to restore real equality between trader and consumer. Hence, consumer protection measures follow the economic orientation of the legal system which they seek to correct for the benefit of the consumer seen as a rational, benefit-maximising creature. A fully informed consumer takes purchase decisions that are efficient. This so-called information paradigm based on that assumption has made its way into consumer protection models and is there to last. Beside increased information requirements in line with the economic pace of the market the conviction grew that consumers must be considered weaker parties in some circumstances, deserving extended protection (e.g. offpremises contracts, distance selling, e-commerce). More recently consumers are increasingly approached as the weaker party by definition which justifies more intrusive measures (withdrawal rights, nullity of unfair contract terms, consumer guarantees) enhancing consumer’s confidence. Confident consumers411 consume across borders and contribute to economic growth. It follows that consumer models in markets that become more global can no longer be reduced to pure corrections of the information asymmetry that occurs. Market fairness towards consumers is not necessarily linked to a demonstrated inferior information or even bargaining position of the consumer, but increasingly connected with the assumption that the consumer is a weaker party as such given 411 For a critical view on this concept and the greater uniformity of legal rules it would entail, see Twigg-Flesner (2016), pp. 183–202. According to his analysis the ‘European confident consumer’ has the following characteristics: “First, a confident consumer is one who wishes to take advantage of the single market and is therefore, at least in principle, a consumer interested in cross-border shopping. Moreover, a confident consumer is aware of consumer protection law, in particular of the law in their jurisdiction, and also aware of the fact that there are differences in the laws of the various Member States. Further still, the confident consumer seemingly puts a great deal of weight on the law — for (. . .), ensuring that there are no (significant) variations in the consumer laws between the various Member States will boost consumer confidence. Finally, it seems that a confident consumer is also a consumer who will benefit from information to help him make the right decision about which goods and services to purchase, where, and on what terms” (pp. 185–186).
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the economic environment in which he makes transactional decisions. Consumer models adapt to the new market circumstances but, unlike consumerist movements in the seventies that sought to protect consumers ‘outside the economic market’,412 modern consumer models retain with varying degrees of intensity their economic orientation. The consumer defined as “any natural person who is acting for purposes which are outside his trade, business, craft or profession” remains the generally accepted common core that underpins the analysed consumer models. In most of the analysed countries a normative, not empirically tested ‘average consumer’ serves as the more concrete general benchmark for the assessment of the adequacy of information disclosures and the unfairness of commercial practices. This benchmark serves the underlying economic orientation of the consumer models but seems flexible enough to accommodate protective needs.413 Courts in and outside the EU quite often devise ways to protect more vulnerable consumers than the normative rational standard that would normally equate with the average consumer. Hence, the consumer benchmark evolves from a harsh, purely rational person that is deemed to internalise all the information that is disclosed in the market to a person that in some circumstances is allowed to act less rational than the normative standard. In a way courts are forced to tailor the abstract benchmark of the rational, informed average consumer to new legislative and economic circumstances, and increasingly take empirical circumstances into account to assess the unfair character of information, marketing practices and contract clauses.414 It explains the degree of variation found in courts in and outside the EU notwithstanding the common normative benchmark. Yet, there are also common traits. In most of the reported countries underage people like children and teenagers, elderly people and people suffering from a particular disease are expressly recognised as particularly vulnerable groups of consumers that deserve specific protection. However, none of these variations so far undermines the overall economic orientation of the consumer models, nor do they lead to the rejection of the average consumer as the general benchmark. 412 They often did so in advancing an opposite normative benchmark, namely that of the gullible consumer (in all circumstances). 413 Some scholars advocate more fundamental reforms of the EU’s consumer policy; see for instance Twigg-Flesner (2017), p. 185, who criticizes the coupling of consumer protection to the internal market objectives and concludes: “The “average consumer” concept bears little resemblance to reality, and it is becoming increasingly difficult to justify it as a useful benchmark for consumer legislation. Research on consumer behaviour and psychology tells us a lot more about the factors which influence consumers, which have weakened the credibility of the average consumer benchmark” (p. 189). 414 Open legal norms like general prohibitions of misleading advertising, unfair market practices and unfair contract terms further contribute to this tailoring.
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8.2
Pre-contractual Information: Transparent Contract Terms—Misleading Practices
A grand variety of rules exists as regards pre-contractual information. In the European Union and in Japan a welldeveloped general pre-contractual information duty with an important number of information particulars exists. In other countries like for instance Brazil pre-contractual information is connected with objective good faith, whereas Turkish and Singaporean law have no general information duty but a number of information requirements in specific legislation. Taiwan opted for a consumer preview period which allows him to read the contract and an ex ante control of standard contract terms which may result in mandatory clauses automatically included in the contract. Countries with a pre-contractual information duty also impose transparency requirements. Pre-contractual information must be clear, intelligible and comprehensible. Again the average consumer, referred to above, serves as the benchmark. Transparency requirements incorporate in general two obligations. The first relates to the form and the presentation of the information which must be easy to read.415 The second refers to the content of the information and its comprehensibility. The lack of clarity of the requirements and the absence of further guidance of legislators have been criticized in the national reports. It has led national courts to undertake efforts themselves to increase transparency. At some occasions the legislator comes to their help, but the analysis shows that no overall conclusion as to readability or intelligibility of information can be deduced.416 In general it may be concluded that further guidance is needed from the legislator absence of which courts feel obliged to develop their own transparency standards based on the particular circumstances of the case.
415
This can be specified in terms of print size and contrast between font size and background of the information. For instance the French Court of cassation held that the use for restrictive clauses to the offer of a print size that was 12 to 25 times smaller than the other mentions in the advertising amounts to a misleading commercial practice. Also the medium used affects the readability of the information. Thus the Finnish Supreme Court pointed out that manner of marketing had not been clear or easy to understand when the price of the tickets was only given in unclear small print in the advertisements and even not verbally expressed in the television commercials. Recently also the CJEU seemed to conclude that the use of small print will be more harmful in TV adds than in for example an advertisement in a journal. It held that the time available to the consumer to assess information provided to him in a television advertisement is limited whilst the average consumer (reader) will have sufficient time to read the integral advertising (See Canal Digital Danemark case, cited above). See more extensively on this point Straetmans (2018). 416 The following parameters are used: exhaustiveness, accessibility, correctness and clarity of the information; the easiness to understand, the logical arrangement, the legibility (absence of technical, complex constructions) and the visibility of the information.
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With regard to the form obligation national courts sometimes refer to sufficient font size of contractual arrangements that may not be significant smaller than the surrounding texts and not be placed in sections that give the impression of an insignificant character. In Ireland the Irish Sales Review Group recommended the use of a minimum ten-point font size in plain typeface against a contrasting background and a larger font size if the target group of the information is for instance elderly people. With regard to the comprehensibility of the content of the information a remarkable evolution takes place in the European Union. The CJEU has given some very strong guidance on what is required for terms to be plain and intelligible. In doing so the CJEU strengthened the bond between pre-contractual information on the one hand and the unfairness of contract terms on the other hand, which it considers as intertwined. In its recent case law the CJEU held that the requirement of transparency should not be restricted to mere formal and grammatical intelligibility but should extend to the precise content of the terms. According to the Court, the consumer must be informed in such a manner that he is in a position to evaluate on the basis of clear, intelligible criteria the economic consequences for him which derive from a term. More specifically, the consumer must be provided with all the information likely to have a bearing on the extent of his commitment so that he is enabled to estimate in particular the total cost of his contract. Furthermore, consumers must be expressly informed of their rights that flow from mandatory national law of which they are beneficiaries, even though they are deemed to know their national legislation. Hereby the fundamental importance of pre-contractual information for consumers is emphasized once again since consumers decide on that basis to be bound by a contract. This evolution demonstrates that the CJEU seeks to provide national courts guidance for the assessment of pre-contractual information via the interpretation of the legislative transparency principle to which contract terms are subject. That way the vague concepts used by the legislator are filled in although it could be argued that legislative guidance,417 albeit in the form of an interpretative communication, would be better to streamline the broad discretion that still exists for national courts in this domain. In that regard it is worthwhile mentioning that some national legislators, irrespective of the civil law rules relating to consumer’s consent to contract In its report on the fitness check of EU marketing and consumer law The European Commission recognizes that the length of standard terms and conditions is found to be a considerable obstacle for consumers in identifying unfair terms. It also indicates that it is working with all stakeholders on voluntary principles for better presentation of both standard contract terms and pre-contractual information (see Report of the Fitness Check of EU Consumer and Marketing Law 2017, pp. 78 and 86).
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terms, require businesses to make core contract terms prominent to consumers. In the UK for instance a term is prominent if it is brought to the consumer’s attention in such a way that an average consumer would be aware of it. Also Finnish Law requires onerous and unusual terms to be specifically highlighted to the other contracting party. In Taiwan the Consumer Protection Act requires businesses to explicitly highlight the content of their standard terms to consumers and to disclose important information about the precise legal content (legal consequences and rights and obligations) of a limited number of issues dealt with in the standard terms, irrespective of whether the term is a core contract term. Also Chinese law imposes a duty on businesses to explain standard terms vital to the consumer interests. Also the misleading character of pre-contractual information may have an impact on the assessment of the unfairness of contract terms. The assessment of the misleading character of a commercial practice requires in all reported countries a synthetic, comprehensive approach. It presupposes an overall analysis taking into account the relevant features and circumstances of a commercial practice. Decisive is the general impression of the practice made on the average consumer and whether the practice affects or is likely to affect in a negative manner the transaction decision of this consumer. It follows that also the manner in which the pre-contractual information is provided to the consumer may have an influence on the misleading character of the commercial practice and consequently the unfair character of contract terms. Food (and medicinal products) has been the subject of more intensive regulation across the world. This regulatory context includes very detailed labelling requirements so that national divergence is merely reduced to the appreciation of the misleading character of information on the product label. An interesting technique to make certain information more easily digestible for consumers is the Multi Traffic Light System introduced on a voluntary basis in the UK. We further can see that in most of the reported countries case law on transparency is centred to the assessment of form elements like print size and not so much focused on the prominent character of information about core or onerous terms or their precise content, save in straightforward cases where important contract terms are hidden away or consumers deliberately deceived by complex, technical or legal constructions or contradictory information.
417
8.3
Financial Consumer
There exists a certain tendency within the European Union towards rationalisation of information about financial services that is to be given to consumers. However, as the provided information remains highly technical, the shift
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towards simplification of information has not yet gained much ground. Despite the efforts to reduce the number of information particulars, e.g. at EU-level through key information documents, legal scholars continue to criticize the amount and technicality of the information. Meanwhile, in most of the reported countries the appropriate provision of information concerning financial products is complemented with careful product design (ex antecontrols) and suitability assessments of consumers. It follows for instance that a credit institution may not offer a credit to a (vulnerable) consumer unless the consumer has the capability to pay off the debt. Furthermore consumer education is often seen as key to overcome the current informational problems, but legal scholars remain sceptical.
8.4
Digital Consumer
The new European General Data Protection Regulation imposes stricter standards to protect consumers. It requires an opt-in consent by the data subject (user/consumer) to the processing of his or her personal data for one or more specific purposes. It remains to be seen whether the regulation can live up to all the consumer’s expectations. Quite in contrast, the other reporting (non-European) countries seem to have no extensive legislation concerning personal data protection. While most of the countries dictate some rules about how consumers must be informed of the collection, use and disclosure of personal data, they most of the time do so without imposing any obligation to obtain consent from the consumer. The existing legislation in Singapore and Taiwan is the exception to that rule. In those countries the collection, use and disclosure of personal data is subject to the consumer’s consent, be it that “a consumer is deemed to have given his consent if he voluntarily provides personal data to the businesses and if it is reasonable that he would volunteer that data under the circumstances”(Singapore) or that consent is “inferred from the consumer’s absence of raising objections after being given substantial information about the use, processing and collection of personal data”(Taiwan).
8.5
Overload of Information: Behavioural Critiques—Which Way Forward?
In a number of the reported countries the excessively detailed rules on advertising and information are increasingly criticised as counterproductive if they lead to constantly extended lists of information catalogues. However, this line of thinking is also contradicted as it would provide liberalists
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an too easy argument to reduce constraints imposed on businesses. The multiple critiques and compelling analyses of behavioural scientists make it difficult to leave the existing consumer information models as they are. All the more since most of the national reporters, especially those from the EU countries, conclude that it will be difficult to consider disinformation as a result of a trader’s compliance with mandatory disclosure rules, an unlawful practice. The national legislators and the European legislator alike still seem not to be fully affected by those critiques. In most of the reported countries there is no or little evidence of in depth moves to deal with the problem of information overload or risks of disinformation as a result of the manner in which the information is provided or its quantity. Far from stating that no initiatives are taken in this respect at both national or EU-level an overall approach to address the shortcomings of the consumer information models is lacking. For instance initiatives at EU-level to rationalise information are rather piece meal and mainly focused on financial services. Despite the ‘fitness check’-evaluation of consumer protection directives at EU-level demonstrated significant problems with consumers’ understanding of standard terms and conditions, the European Commission, in response to these problems, confines itself to investigate ways to improve the presentation of mandatory information requirements and the standard terms and conditions. This could eventually lead to a set of uniform key principles if the self-regulatory approach proves unsatisfactory.418 Furthermore, as regards the simplification of rules, the European Commission’s ‘fitness check’-evaluation has established that there is limited potential for reducing some of the information requirements (sic). Further legislative guidance in and beyond the EU is often lacking and by necessity filled in by courts. As a result, the CJEU strengthened the transparency standards of information. However, legislative guidance on how to apply the rather vague principles in the existing legislation, consolidating the approach of the CJEU, could help make it easier to understand and apply the transparency requirement.419 It has been argued above that there is no reason to abandon the consumer information model as such nor is there any reason to straightforwardly abandon the normative average consumer benchmark used in those models. Conversely, proposals to adjust the normativity of the overall benchmark
418 Report of the Fitness Check of EU Consumer and Marketing Law (2017), p. 86. 419 See on this topic, Report of the Fitness Check of EU Consumer and Marketing Law (2017), p. 86.
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are generally welcomed.420 One cannot deny the economic orientation of legislation tailored to consumers and the fact that legislation is often limping behind economic developments. But rather than abondoning the model, the new economic and legislative environment in which consumers operate necessitates refinement of the information model and its benchmark. To that aim research outcomes of psychological or interdisciplinary research421 must be taken into account since they can help to find out what information consumers effectively need for making better decisions. Building further upon these research outcomes, consumers arguably may well want to make more responsibility themselves with the help of information about core elements, such as price, characteristics of goods and services, and core consumer rights. Although further research should be done, it could be envisaged to require traders to provide consumers with standardized short and simple pre-contractual information about the core issues and only the core issues,422 separately from the mandated extended disclosure where additional voluntary information could be provided. Also the merits of a limited set of information particulars disclosed in the appropriate time and form (differentiation between pre-contractual information and information after the conclusion of the contract) must be further investigated. In that regard, interesting initiatives taken at national level deserve further attention. In some of the reporting countries there exists already an obligation on businesses to make some information prominent, that is to bring certain key information to the attention of the consumer. This requirement to inform consumers about important contract (core and others) terms prominently is worthwhile pursuing. In this regard, also reasonable consumer expectations could gain weight, as emphasized in some of the national reports. With respect to food characteristics the Multi Traffic Light System is inter-
420 Proposals to adjust the benchmark of information rules towards more specific groups of vulnerable consumers must be addressed in this light. Despite all critiques based on the illiteracy, innumeracy and lack of salience of groups of consumers, one should be very careful in lowering the average benchmark (see however for a plea in that direction, Duivenvoorde (2014), pp. 213–224, who at the same time indicates that the German approach, well-known within the EU for adhering to a lower consumer benchmark, is over-protective. When set too low, the very existence of consumer information legislation might be called into question and consumerist paternalism luring. Also the precise cost a reform of this size entails for market participants is a convincing argument, especially since costs imposed on businesses are likely passed on to consumers in commercial relationships. 421 For instance linguistic studies on simplification and readability and psychological studies on human processing of commercial information in digital environments etc. 422 It must be noted that core issues and core terms of contracts are not (necessarily) the same.
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esting. Also the multiple warnings which result from the codes of conduct in some of the reported countries and which focus on the manner in which key information elements are communicated might be endorsed. Technological developments place this debate in a new context. Within the digital market contexts recent initiatives concerning layering of information with the use of pop-ups and hyperlinked texts and specific prohibitions of excessive use of hyperlinks in an effort to increase the reader-friendliness of information could be helpful. The use of pop-ups and hyperlinked texts ensures that the most important information for the consumer is provided upfront in a form of summary disclosure. It allows consumers to have more easily and more conveniently access to information and to retrieve in function of their specific needs a broader range of information. Also the application of the CARE-principle to and the development of digital comparison tools could contribute to a better insight in market developments. Enhanced comparability on the basis of essential key elements could further contribute to the effectiveness of information requirements. Furthermore, the multiple initiatives in the reported countries to educate consumers may be welcomed, but instantly urge to realism. They are often quite costly, mainly function on a purely voluntary basis and are sometimes used to stifle other initiatives to improve the effectiveness of consumer rules. Furthermore, it cannot be denied that any consumer-targeted education approach will not help where the most fundamental skill for processing written information is missing. In some of the EU countries these skills of average teenage consumers is according to recent surveys in strong decline. The foregoing analysis demonstrates that new initiatives to improve the consumers’ understanding of information disclosed in the market is complex and must take full account of the legal and economic context wherein transactions between businesses and consumers take place. Therefore the search for improved consumer information will constitute an ongoing balancing exercise between rationalisation, simplification and timing of information. An increased openness from legal scholars towards revealing insights from behavioural sciences may shed new light on the debate, especially on how consumer law and policy could be reshaped to reflect more accurately the way consumers really behave, rather than how they ought to behave on the basis of a purely rational consumer model or conversely according to third parties who know better. However, zest for action may not detract from the important cost factor. All modifications made to the existing model must therefore be subject to a careful impact assessment, including an assessment of the costs of introducing new information obligations on top or in place of the existing ones.
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194 Johnson H, Leary J (2017) Policy watch: research priorities on disclosure at the consumer financial protection bureau. J Public Policy Mark 36(1):184–191 Johnston K, Tether C, Tomlinson A (2015) Financial Product Disclosure: Insights from Behavioural Economics. Ministry of Business, Innovation & Employment, Occasional Paper 15/01, Wellington Jonker J, Milo M, Vannerom J (2017) From hapless victims of desire to responsibly choosing citizens. BMGN/LCHR 132(3):115–138 Kahneman D (2011) Thinking, fast and slow. Farrar, Straus & Giroux, New York Kano N (2016) Civil law and consumer law. In: Nakata K, Kano S (eds) Modernisation of consumer law and collective redress. Nihonhyoronsha, Tokyo, pp 461–478 Klöhn L (2006) Kapitalmarkt, Spekulation und Behavioral Finance. Eine interdisziplinäre und vergleichende Analyse zum Fluch und Segen der Spekulation und ihrer Regulierung durch Recht und Markt, Duncker&Humblot, Berlin Koch J (2012) Grenzen des informationsbasierten Anlegerschutzes - Die Gratwanderung zwischen angemessener Aufklärung und information overload. Zeitschrift für Bank- und Kapitalmarktrecht (BKR), 485–493 Köndgen J (2011) Grenzen des informationsbasierten Anlegerschutzes – also comment on BGH, Judgement of 22. 3. 2011 – Aktenzeichen XI ZR 33/10. Zeitschrift für Bank- und Kapitalmarktrecht (BKR), 283– 286 Lang A (2000) The limited capacity model of mediated message processing. J Commun 50(1):46–70 Lang A (2009) The limited capacity model of motivated mediated message processing. In: Nabi RL, Oliver MB (eds) The Sage handbook of media processes and effects. Sage, London, pp 193–204 Leonard TC (2008) Book review Richard H. Thaler, Cass R. Sunstein, Nudge: improving decisions about health, wealth, and happiness. Const Polit Econ 19(4):356–360 Loos M (2017) Double Dutch – On the role of the transparency requirement with regard to the language in which standard contract terms for B2C contracts must be drafted. J Eur Consum Mark Law 6 (2):54–59 Mangold R (2015) Informationspsychologie. Springer, Berlin Mangold R (2017) Human processing of commercial information in digital environments. In: Siegert G, Björn von Rimscha M, Grubenmann S (eds) Commercial communication in the digital age. De Gruyter, Berlin, pp 75–87 Marotta-Wurgler F (2015) Even more than you wanted to know about the failures of disclosure. Jerus Rev Legal Stud 11(1):63–74 Masson MEJ, Waldron MA (1994) Comprehension of legal contracts by non-experts: effectiveness of plain language redrafting. Appl Cogn Psychol 8(1):67–85 Möstel M (2015) Wandel des Verbraucherleitbilds? Eine Positionsbestimmung aus lebensmittelrechtlicher Perspektive. Wettbewerb in Recht und Praxis (WRP) 8:906–910 Nakata K (2009) Recent developments in Japanese consumer law. Penn State Int Law Rev 27(3–4):803–815 Nakata K (2016) Recent developments of consumer law and reform of civil code in Japan. In: Nakata K, Kano S (eds) Modernisation of consumer law and collective redress. Nihonhyoronsha, Tokyo, pp 479–505 Nakata K (2017) Advertising regulation in Japan: legal certainty and its relation to consumer law. In: Fenwick M, Siems M, Wrbka S (eds) The shifting meaning of legal certainty in comparative and transnational law. Bloomsbury, Sydney, pp 281–297 Osovsky A (2013) The misconception of the consumer as homo economicus: a behavioral-economic approach to consumer protection in the credit-reporting system. Suffolk Univ Law Rev 46 (3):881–933
G. Straetmans Pape SB (2012) Warnings and product liability. Lessons learned from cognitive psychology and ergonomics. Eleven International Publishing, The Hague Pearson G (2008) Financial literacy and the creation of financial citizens. In: Kelly-Louw M, Nehf JP, Rott P (eds) The future of consumer credit regulation. Creative approaches to emerging problems. Ashgate, London, pp 3–27 Perry VG, Blumenthal PM (2012) Understanding the fine print: the need for effective testing of mandatory mortgage loan disclosures. J Public Policy Mark 31(2):305–312 Pierri D (2014) Políticas públicas e privadas em prol dos consumidores hipervulneráveis - idosos e deficientes. Revista de direito do consumidor 23(92):221–299 Purnhagen K, van Herpen E (2014) Can bonus packs mislead consumers? An empirical assessment of the ECJ’s Mars judgment and its potential impact on EU marketing regulation. Wageningen Working Papers Series in Law and Governance 2014/07 (Wageningen University). Available via https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=2503342. Accessed 5 Sept 2018 Purnhagen K, Van Herpen E, Van Kleef E (2016) The potential use of visual packaging elements as nudges. An analysis on the example of the EU health claims regime. In: Mathis K, Avishalom T (eds) Nudging – possibilities, limitations and applications in European law and economic. Springer, Cham, pp 197–216 Radlin MJ (2015) Less than I wanted to know: the submerged issues in more than I wanted to know. Jerus Rev Legal Stud 11(1):51–62 Ramchander M (2016) Measuring consumer knowledge of life insurance products in South-Africa. S Afr J Bus Manage 47(2):67–74 Ramsay I (2005) From truth in lending to responsible lending. In: Howells G, Janssen A, Schulze R (eds) Information rights and obligations: a challenge for party autonomy and transactional fairness. Ashgate, Dartmouth, pp 47–65 Ramsay I (2007) Consumer law and policy. Hart, Oxford Ramsay I (2016) Changing policy paradigms. In: Leczykiewicz D, Weatherill S (eds) The images of the consumer in EU law. Legislation, free movement and competition law. Hart, Oxford, pp 159–182 Report of the Fitness Check of EU Consumer and Marketing Law (2017) European Commission Staff Working Document, Brussels, SWD(2017)209final Rita Illdiko Sik-Simon (2017) Study to support the Fitness Check of EU Consumer Law – Country Report Czech Republic, Prague, European Commission Staff Working Document, Brussels, 23 May 2017, SWD(2017)209final Rochfeld J (2004) Les clairs-obscurs de l’exigence de transparence appliquée aux clauses abusives. In: Liber Amicorum Jean calaisAuloy. Études de droit de la consommation, Dalloz, pp 981–995 Rott P (2015) Der “Durchschnittsverbraucher” – ein Auslaufmodell angesichts personalisierten Marketings? Verbraucher und Recht (VuR):163–167 Sah S, Loewenstein G (2014) Nothing to declare: mandatory and voluntary disclosure leads advisors to avoid conflicts of interests. Psychol Sci 25(2):575–584 Schaub M (2017) How to make the best of mandatory information requirements in consumer law. Eur Rev Priv Law 1:25–44 Schmeiser S (2014) Consumer inference and the regulation of consumer information. Int J Ind Organ 37(C):192–200 Sibony AL (2013) Comments on the Ving Sverige case of the ECJ. In: Terryn E, Straetmans G, Colaert V (eds) Landmark cases of EU consumer law. Intersentia, Cambridge, pp 471–492 Sibony AL, Helleringer G (2015) EU consumer protection and behavioural sciences: revolution or reform? In: Alemanno A, Sibony AL (eds) Nudge and the law. Hart, Oxford, pp 209–233 Siegert G, Björn von Rimscha M, Grubenmann S (eds) (2017) Commercial communication in the digital age. De Gruyter, Berlin
Transparency of Information and Disinformation of Consumers Stark D, Choplin M (2009) A license to deceive: enforcing contractual myths despite consumer psychological realities. NY J Law Bus 5:617–744 Steffen AD (2016) Nudging is judging. The inevitability of value judgments. In: Mathis K, Avishalom T (eds) Nudging – possibilities, limitations and applications in European law and economics. Springer, Cham, pp 69–89 Straetmans G (1998) Consument en markt (consumer and market). Kluwer Rechtswetenschappen, Deurne Straetmans G (2016) Misleading practices, the consumer information model and consumer protection. J Eur Consum Mark Law 5:199– 210 Straetmans G (2018) On misleading practices, the limitations of the communication medium used and the divergent levels of attention of consumers. Eur J Cons Law 2:329–342 Sunstein CR (2015) The ethics of nudging. Yale J Reg 32(2):413–450 Terryn E (2017) Transparantie en algemene voorwaarden: nood aan hervorming? TPR 1:13–80 Thaler RH, Sunstein CR (2009) Nudge: improving decisions about health, wealth, and happiness. Penguin Books, London Trigg B (2011) Financial literacy as consumer protection: the DoddFrank Act’s New Office of Financial Education and the global potential of public-private cooperation. REDC 4:863–879 Trzaskowski J (2016) Lawful distortion of consumers’ economic behaviour – collateral damage under the Unfair Commercial Practices Directive. Eur Bus Law Rev 27(1):25–49 Twigg-Flesner C (2016) The importance of law and harmonisation for the EU’s confident consumer. In: Leczykiewicz D, Weatherill S
195 (eds) The images of the consumer in EU law: legislation, free movement and competition law. Hart, Oxford, pp 183–202 Twigg-Flesner C (2017) From REFIT to a rethink: time for fundamental EU consumer law reform? J Eur Consum Mark Law 6:185–189 UK Regulators Network (2016) Final Report on Price comparison websites. Available at www.ukrn.org.uk/wp-content/uploads/2016/ 09/201609027-UKRN-PCWs-Report.pdf. Accessed 12 Sept 2018 Van Eecke P, Schellekens C (2015) E-commerce and e-communication. In: Straetmans G, Stuyck J (eds) Commercial practices. Larcier, Brussels, pp 279–301 Wagner G (2017) Zehntausende verpflichten sich zum Kloputzen (Tens of thousands commit themselves to toilet cleaning). Zeitschrift für Europäisches Privatrecht (ZEuP) 4:1027–1028 White MD (2016) The crucial importance of interests in libertarian paternalism. In: Mathis K, Avishalom T (eds) Nudging – possibilities, limitations and applications in European law and economics. Springer, Cham, pp 21–38 Willis LE (2008) Against financial-literacy education. Iowa Law Rev 94 (1):197–285 Wogalter MS (2006) Handbook of warnings. Lawrence Erlbaum Associates, Mahwah Wogalter MS, Dejoy DM, Laughery KR (1999) Warnings and risk communication. Taylor & Francis, London Yan Y, Kung CM, Fang SC, Chen Y (2017) Transparency of mandatory information disclosure and concerns of health services providers and consumers. Int J Environ Res Public Health 14(1):53–64
Optional Choice of Court Agreements in Private International Law Mary Keyes
Abstract
The law in relation to choice of court agreements has developed significantly in recent years, but most of this development has concerned exclusive choice of court agreements. Optional choice of court agreements have not been the focus of attention by lawmakers or by commentators. This chapter provides an overview of this area of the law, synthesising the national reports which comprise this collection, and drawing out the themes that emerge from those reports. It shows that the legal treatment of optional choice of courts differs substantially between legal systems, and argues that this topic warrants greater attention from scholars and lawmakers.
1
Introduction
One of the most radical recent changes in private international law internationally is the development of the law in relation to the effect of choice of court agreements. Until recently, jurisdictional litigation was less common than litigation on the issue of choice of law, and the issue of jurisdiction attracted significantly less attention than choice of law in the commentary. At the same time, it was evidently rare for the parties to include forum selection provisions in their contracts, although early cases reveal examples.1 The substantial increase in the volume of cross-border transactions has led to far more disputes about jurisdiction. At the same time, express dispute resolution terms have become common in cross-border agreements, involving non-commercial as This report was also published in Keyes (Ed), Optional Choice of Court Agreements in Private International Law, Springer Nature Switzerland 2020, 3–48. 1
E.g. Gienar v Meyer (1796) 2 H Bl 603.
M. Keyes (*) Griffith Law School, Griffith University, Brisbane, QLD, Australia e-mail: m.keyes@griffith.edu.au
well as commercial parties. Both of these factors have led to a sudden development in the law about the effect of choice of court agreements, to the point that the volume of recent laws and commentary about choice of court agreements substantially eclipses that in relation to choice of law agreements.2 International instruments have been influential in the development of regional and national laws. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), concluded in 1958,3 has influenced the development of the law relating to choice of court agreements in various ways. This influence is most clearly evident in the Hague Choice of Court Agreements Convention 2005 (“Hague Choice of Court Convention”),4 which was inspired by and modelled on the New York Convention.5 In turn, the Hague Choice of Court Convention influenced the 2012 revision of the Brussels I Regulation,6 so the New York Convention has 2 The main exceptions to this are the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations OJ L 177 (“Rome I Regulation”), and the Hague Principles on Choice of Law in International Commercial Contracts 2015, each of which has generated scholarly commentary: see, e.g. (2017) 22 issue 2 Uniform Law Review, a special issue devoted to the Hague Principles. 3 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, entered into force 7 June 1959 (“New York Convention”). 4 Convention of 30 June 2005 on Choice of Court Agreements 2005, entered into force 1 October 2015. 5 Hartley and Dogauchi (2010), p. 791, para 1; Hartley (2013), p. 19, para 1.47. 6 The Council Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast) noted that “granting priority to the chosen court to decide on its jurisdiction. . .would largely accord with the system established in the 2005 Hague Choice of Court Agreements Convention, thus ensuring a coherent approach within the Union and at international level were the Union to decide to conclude the 2005 Convention in the future.” (Brussels,
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_8
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been indirectly influential in that sense. While the influence of the New York Convention is also clear in some countries’ national laws,7 where exclusive choice of court agreements are analogised to arbitration agreements,8 in others, it evidently has had little impact.9 In many legal systems, there have been important recent changes to the law concerning choice of court agreements. Many countries have recently amended or introduced new legislation on civil procedure10 and private international law, and regional and international instruments have had a significant effect.11 Within Europe, the 2012 recast of the Brussels I Regulation,12 which gave greater protection to exclusive choice of court agreements, influenced reform to national laws in some member states.13 The European legislation also has had some influence further afield, including in Japan.14 The growth in importance of choice of court agreements in practice has also seen a substantial increase in the commentary devoted to the effect of these agreements. This 14.12.2010 COM(2010) 748 final 2010/0383/COD, pp. 5, 9). See likewise, Council Decision of 4 December 2014 on the approval, on behalf of the European Union, of the Hague Convention of 30 June 2005 on Choice of Court Agreements (2014/887/EU, OJ L 353/5 10.12.2014), which states in recital (5) that “[w]ith the adoption of Regulation (EU) No 1215/2012 the Union paved the way for the approval of the Convention, on behalf of the Union, by ensuring coherence between the rules of the Union on the choice of court in civil and commercial matters and the rules of the Convention.” 7 Oprea (2019), Section 1.1.3. 8 In South Africa, until recently, “South African courts treated foreign arbitration agreements in the same way as exclusive foreign choice of court agreements”: Schoeman (2019), Section 4, text to note 62. The situation is similar in Taiwan: Chen (2019), Section 1.3.2. In Australia, arbitration agreements and exclusive choice of court agreements are treated as “legally cognate” (Marshall 2019, text to note 45, citing Global Partners Fund Ltd v Babcock & Brown Ltd (in liquidation) [2010] NSWCA 196, para 60). 9 This includes in Greece (Panapoulos 2019, Section 1.2); Germany (Weller 2019, Section 1.2); and the People’s Republic of China (Tu and Huang 2019, Section 2 (text following note 35)). 10 For example, in Japan, amendments to the Code of Civil Procedure dealing with international jurisdiction, including choice of court agreements, came into effect in April 2012; in Switzerland, the Code of Civil Procedure was enacted in 2011. The Brussels I Recast came into effect in 2015. 11 Article 23 of the Brussels I Regulation “partially inspired” the Belgian Private International Law Act in relation to the effect of choice of court agreements: Van Calster and Poesen (2019), Section 2.1. 12 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012, OJ l 351/1 (“Brussels I Recast”). 13 The Brussels I Recast influenced the Romanian Civil Code: Oprea (2019), Section 1.1.3. On the other hand, these instruments did not influence German law: Weller (2019), Section 1.2. 14 This influence relates to the introduction of special rules for consumer contracts and individual employment relations. The Japanese rules in this respect are not identical to those found in the Brussels I Recast. Chen reports that the Hague Choice of Court Convention and the EU instruments “are highly valued and referred to by Taiwanese courts in some cases”: (2019), Section 1.3.3.
M. Keyes
commentary is dominated by consideration of the legal effects of exclusive choice of court agreements, which are also referred to as exclusive jurisdiction clauses,15 exclusive or mandatory forum selection clauses, and obligatory or binding choice of court agreements. In comparison to the amount of attention devoted to exclusive choice of court agreements, optional choice of court agreements (also referred to as non-exclusive jurisdiction clauses (sometimes abbreviated as “NEJ clauses”), non-exclusive choice of court or forum selection clauses, permissive forum selection clauses, and “imperfect” choice of court agreements) have been relatively neglected both by law makers and in the commentary.16 While some reporters note that optional choice of court agreements are often included in contracts,17 others remark that there are few18 cases concerning the effect of optional agreements. The contributions to this collection show that in some countries, the law in relation to optional choice of court agreements is undeveloped, particularly in comparison to the attention that has been given to exclusive choice of court agreements. In others, the case law is quite sophisticated. The national reports also identify a number of unresolved issues with the effect of optional choice of court agreements, and others where the law is unclear or the cases are conflicting. This collection contributes to the literature on choice of court agreements in calling attention to the importance of optional choice of court agreements, and the need for further research and legal development on this topic. Much of the law and literature on choice of court agreements assumes that the agreement—whether optional or exclusive—nominates the courts of a single country. However, some choice of court agreements are more complex than this. In particular, the controversial decision of the French Cour de Cassation in the Madame X v Société Banque Privé Edmond de Rothschild19 has drawn attention to asymmetric choice of court agreements. This refers to choice of court agreements containing both exclusive and optional components. This collection also considers the effect of such agreements internationally.
15 This is the term used in England and in some common law jurisdictions, including Australia and Singapore. 16 Yeo (2005), pp. 307–308. At the time of writing this chapter in September 2018, there were no books written in English devoted solely to optional choice of court agreements. There are a number of books, in English as well as in other languages, which deal only with choice of court agreements, but these address optional choice of court agreements in passing and focus on exclusive choice of court agreements: e.g. Hartley (2013) and Joseph (2015). 17 Van Calster and Poesen (2019), Section 5. 18 France (Mailhé 2019, text to note 7). 19 Cass civ, 1ère, 26 September 2012. This case and a number of subsequent decisions of the French Cour de Cassation are discussed in detail by Mailhé (2019), Section 3.
Optional Choice of Court Agreements in Private International Law
1.1
Scope of This Project
The national reports in this collection include a number of countries which are Member States of the European Union.20 In those countries, there are several legal sources which determine the effect of choice of court agreements. These include the Hague Choice of Court Agreements Convention 2005, which at the time of writing applies in Mexico, Montenegro, and Singapore as well as the European Union. Singapore is represented in this collection.21 In those countries which are Member States of the European Union, the Lugano II Convention22 applies; as it does also in Denmark, Iceland, Norway and Switzerland. Switzerland is represented in this collection.23 In the European Union Member States, the law on jurisdiction is dominated by the Brussels I Recast, which applies to any choice of court agreement not covered by the Hague Convention that designates the courts of a Member State. Residual national laws apply to choice of court agreements that are not covered by the Hague Convention, the Lugano II Convention, or the Brussels I Recast. In the other countries represented in this collection, the relevant laws are national laws, which are sometimes determined at the provincial level, as is the case in Canada.24
2
Attitudes to Jurisdictional Agreements
In general, the legal response to choice of court agreements has changed over time. The national reports demonstrate that, for most legal systems, much of this development has been recent, and much of it has brought about quite radical changes. Attitudes to agreements about forum tend to cluster at opposite ends of the spectrum: at one end, they are regarded as being superior to other means of allocating jurisdiction, at least in international commercial disputes. At the other end of the spectrum, they are derided as being unacceptable as either inconsistent with, or undermining, public interests in the regulation of litigation. Historically, the latter position prevailed in many legal systems. For example, in the US and in Québec, choice of court agreements were invalid as contrary to public policy.25 But there are some important exceptions. Mailhé notes that party autonomy was regarded 20 At the time this collection was written, in 2018, the UK was still a member state of the European Union, and the national report for the UK reflects this. 21 Chong (2019). 22 Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 339, 21.12.2007, entry into force 01/01/2010 (“Lugano II Convention”). 23 Haas and MacCabe (2019). 24 The Canadian civil law and common law are both covered in this collection: Guillemard and Sabourin (2019) and Saumier (2019).
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by the drafters of the French Civil Code, in 1804, as “a natural exception to the rules they proposed in its articles 14 and 15”.26 In the German Code of Civil Procedure, which entered into force in 1879, “choice of court agreements could be agreed upon without any major limitations.”27 In Taiwan, the Code of Civil Procedure has allowed the parties to designate a court to exercise jurisdiction from the time of its promulgation in 1930.28 More recently, the former view that choice of court agreements are desirable and should be respected has become popular. For example, Saumier writes that “[t]he attitude toward choice of court agreements in Canadian common law provinces is very positive”29; the other reports express similar sentiments.30 In most legal systems, the law now enables the parties to choose the forum for the resolution of disputes. In a few countries, the laws reveal historical, ongoing, and some new, hesitations about completely accepting party autonomy. Again the German national law is an exception to the general trend; in 1974, the law relating to choice of court agreements was fundamentally reformed, and significant limitations on the parties’ freedom were imposed,31 which remain in force.32 Several US states also “maintain the traditional hostility to choice of court agreements.”33 As explained below, the law in many countries now recognises that choice of court agreements involving presumptively weaker parties require different regulation to those involving commercial parties.34
25
Buxbaum (2019), Section 2; Guillemard and Sabourin (2019), Section 1, text to notes 30–32. See similarly, Tarman and Oba, referring to cases from the Turkish Cour de cassation, which establish that “a refusal of jurisdiction by the Turkish courts due to a jurisdiction agreement would indicate a mistrust of the adjudication of Turkish courts and would be contrary to public order”: (2019), Section 3.3 (text to note 31). 26 Mailhé (2019), Section 1. 27 Weller (2019), Section 1.1, text to note 3, citing the Zivilprozessordnung, section 38. 28 Chen (2019), Section 1.2.1. 29 Saumier (2019), Section 1. 30 Buxbaum states that “[i]n the vast majority of US states, choice of court agreements, both optional and exclusive, are viewed with approval.”: (2019), Section 3.1. See similarly Belgium (Van Calster and Poesen 2019, Section 2.1); Romania (Oprea 2019, Section 1.1.3); and South Africa (Schoeman 2019, Section 3.3, text to notes 34 and 35). 31 Weller (2019), Section 1.1, text to note 9, citing the Law to Change the Code of Civil Procedure of 21 March 1974, Federal Law Gazette, BGBl 1974 I 753, which came into effect on 1 April 1974. 32 Weller (2019), Section 1.1, text to note 10. 33 Buxbaum (2019), Section 3.1. 34 See below, Sect. 8.
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The Distinction Between Exclusive and Optional Choice of Court Agreements
The distinction between exclusive and optional choice of court agreements is very well established in some legal systems. In others, particularly those in which the parties’ ability to choose their forum has only recently been accepted, the distinction is less well established. For example, in China “The concept of non-exclusive choice of court agreement. . .was first formally presented in the 2005 [Supreme People’s Court] Summary”.35 In the Netherlands, all choice of court agreements are “commonly referred to as ‘forumkeuze’ (i.e. ‘choice of forum’)”.36 In South Africa, there is no reference in national law to optional choice of court agreements37; and “no clear distinction is drawn between exclusive and optional choice of court agreements”.38 Several reporters note that their national legislation makes no reference to optional choice of court agreements, and that there is very little relevant case law.39 A preliminary issue is identifying the applicable law to determine whether a choice of court is exclusive or optional. There is a diversity of views on this question. In some countries, it is well settled that this is determined by the governing law of the contract as a whole,40 or the governing law of the choice of court agreement, if that were different.41 However, even where that is the case, the courts sometimes simply state that a choice of court
35
Tu and Huang (2019), Section 2 (text to note 27). Rammeloo (2019), Section 1.1. Likewise, in Québec, the Civil Code does not distinguish between exclusive and optional choice of court agreements: Guillemard and Sabourin (2019), Section 2.2.1. 37 This is the case in South Africa: Schoeman (2019), Section 3, text to note 26. 38 Schoeman (2019), Section 6. 39 E.g. France (Mailhé 2019, text to note 7). 40 This is so in South Africa (Schoeman 2019, Section 3.1). The position may be different in China (Tu and Huang 2019, Section 3, text to note 42). In England, it is presumed that the applicable law for the choice of court agreement is the same as the applicable law for the contract as a whole: Merrett and Carruthers (2019), Section 2.1.1 (citing Mauritius Commercial Bank v Hestia [2013] EWHC 1328 (Comm)). In Shandong Jufeng Network v MGame & Tianjin Fengyun Network, the Supreme People’s Court of China “held that the choice of law agreement and the choice of court agreement are two separate legal acts and therefore different applicable laws should be applied to regulate them.”: (2009) Min San Zhong Zi No 4; Model Case No 44, Notice of the Supreme People’s Court on Issuing 10 Major Cases and 50 Model Cases on China’s Judicial Protection of the Intellectual Property Rights in 2009 [2010] Fa No 172, promulgated on 14 April 2010, cited in Tu and Huang (2019), Section 3, text to note 46. 41 Merrett and Carruthers (2019), Section 2.1.1, note 20 (citing Collins 2012, para 12-105 and Maher and Rodger 2010, para 17-17); Chong (2019), Section 2.2. 36
agreement is exclusive or optional without justifying that conclusion.42 It seems to be quite common that courts do not refer to any choice of law analysis when determining whether a choice of court agreement is exclusive or optional.43 One problem with undertaking a choice of law analysis is that it might lead to practical difficulties, given a lack of clarity under some national laws as to the distinction between exclusive and optional choice of court agreements.44 Takahashi proposes that a clear test for distinguishing exclusive from optional choice of court agreements should be developed, and that it should be applied as an overriding mandatory rule—that is, irrespective of the otherwise applicable law.45 The presumption in favour of exclusivity in the Hague Choice of Court Convention might be applied either by the nominated court, to determine whether the choice of court is exclusive within the terms of the Convention, or by a non-chosen court which has been seised and which is determining whether it is obliged to suspend or dismiss those proceedings because of an exclusive choice of court agreement in favour of the courts of another contracting state.46 When the nominated court is determining the issue, the application of the presumption should not be justified on the basis of the Hague Convention being part of the law of the exclusively chosen court, because the issue as to whether it is the exclusively chosen court has not yet been determined. That would mean that the chosen court could only be applying the presumption under the Convention on the basis that the Convention is part of the law of the forum. If the law of the forum was the governing law of the choice of court agreement, that would not be objectionable. But if the governing law of the choice of court agreement was the law of another country which was not a contracting state to the Convention, any reference to the Convention would have to be justified on the basis that the Convention was applicable as part of the law of the forum per se. As Chong points out in the context of the Singaporean legislation which gives effect to the Convention,47 this might be justified on the basis that the Convention establishes a 42 This is so, for example, in South Africa: Schoeman (2019), Section 3.1. 43 This is so in common law Canada (Saumier 2019, Section 2); France (Mailhé 2019, Section 1.1); Japan (Takahashi 2019, text to note 13); the Netherlands (Rammeloo 2019, Section 2.2). 44 Takahashi (2019), text following note 22. 45 Takahashi (2019), Section 4. 46 Hague Choice of Court Agreements Convention, Article 6. 47 Supreme Court of Judicature Act Cap 322, Rev Ed 2007, section 18F which relevantly provides that “if there is no express provision to the contrary” in the choice of court agreement, then “an agreement to submit to the jurisdiction of the Singapore International Commercial Court shall be considered to have agreed – (a) to submit to the exclusive jurisdiction of the Singapore International Commercial Court”. This provision is discussed in Chong (2019), Section 2.2.
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forum mandatory rule.48 The same reasoning might apply to the Brussels I Recast and the Lugano II Convention, although it has been suggested that the characterisation of the agreement as optional or exclusive should be governed by the law of the chosen court.49 Of course, this presents insuperable difficulties if the choice of court agreement nominates the courts of more than one country.50 As just noted, another possibility is that the law of the forum should be applied to determine whether a choice of court agreement is exclusive or optional.51 The law of Québec is applied to this question, either because the issue is one of characterisation,52 or one of procedure.53 In the Czech Republic, forum law applies because the “procedural character” of choice of court agreements, and because the “emphasis on the transfer of jurisdiction continues to prevail.”54 In some countries, there are conflicting authorities as to the choice of law rule which should be applied to determine whether a choice of court agreement is optional or exclusive. For example, whereas a majority of Chinese courts take the view that this is a procedural question which should be determined according to the law of the forum,55 a minority of Chinese courts insist that the governing law of the main contract should be applied to interpret the choice of court agreement.56
3.1
Distinguishing an Exclusive from an Optional Choice of Court Agreement
There are a number of techniques used to determine whether a particular choice of court agreement is exclusive or optional. The simplest is that used in the Hague Choice of Court Agreement Convention, which defines an exclusive choice of court agreement,57 but also deems that a choice of court agreement is exclusive “unless the parties have agreed
48
Chong (2019), Section 2.2. Panapoulos (2019), Section 2.2. 50 Van Calster and Poesen (2019), Section 3.3.2. 51 Greece (Panapoulos 2019, text to note 8); Germany (Weller 2019, Section 3.2.1); Romania (Oprea 2019, Section 2.1). 52 Under the Québec Civil Code, this is determined by the law of the court seised: art 3078. See Guillemard and Sabourin (2019), Section 2.1, text to note 74. 53 Under the Québec Civil Code, this is determined by the law of the court seised: art 3132. See Guillemard and Sabourin (2019), Section 2.1, text to note 75. 54 Rozehnalová et al. (2019), Section 2.2 (sentence before note 49). 55 Tu and Huang (2019), Section 3, text to notes 42-42. 56 Tu and Huang (2019), Section 3, text to notes 44-45. 57 Hague Choice of Court Convention, Article 3(a). The Convention also defines “non-exclusive choice of court agreement”, in Article 22(1). 49
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otherwise”.58 The solution of deeming a choice of court agreement to be exclusive was adopted in the Brussels I Recast,59 and in the Lugano II Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.60 This does not appear to have influenced the national law of most of the EU Member States, for situations falling outside the scope of the Recast, although the Romanian Civil Procedure Code provides that in the absence of contrary stipulation, the jurisdiction agreement is exclusive.61 The same presumption is found in other countries including Greece62 and Switzerland.63 In the Czech Republic, it is generally assumed that choice of court agreements are exclusive, although there is no explicit presumption to that effect.64 A suggestion made in Japan in the preparation of the reforms to the Code of Civil Procedure that foreign choice of court agreements should be deemed to be exclusive was rejected “as being contrary to international business practice”, and the issue was left to interpretation of individual agreements.65 Rather ironically, there is a tendency in Japan to characterise choice of court agreements as being exclusive.66 Under the national law of most countries, there is no explicit presumption of exclusivity.67 Rather, the distinction between exclusive and optional choice of court agreements is one of interpretation of the agreement68; determining whether a choice of court agreement is optional or exclusive is a question of the parties’ intentions.69 In some countries, the courts tend to find that agreements are exclusive.70 Attempting to identify the parties’ intentions is often very
58
Hague Choice of Court Convention, Article 3(b). Brussels I Recast Regulation, Article 25(1). The Recast does not contain a definition of non-exclusive choice of court agreements. 60 Lugano II Convention, Article 23. This Convention does not contain a definition of non-exclusive choice of court agreements. 61 Oprea (2019), note 42, citing the Romanian Civil Procedure Code, article 1068(1). 62 Greek Code of Civil Procedure, Art 44. 63 Swiss Code on Civil Procedure, Article 17(1); Swiss Private International Law Act, Article 5(1); Haas and MacCabe (2019), Section 5, text to note 53. 64 Rozehnalová et al. (2019), Sections 2.2.1, 2.8. 65 Takahashi (2019), Section 2.3, text to note 12. 66 Takahashi (2019), Section 2.3. 67 This includes Germany: Weller (2019), Section 1.2. The Scottish law is based on the Brussels Convention, and therefore does not include a presumption of exclusivity: Merrett and Carruthers (2019), Section 1.1. 68 Netherlands (Rammeloo 2019, Section 2.3); Taiwan (Chen 2019, Section 2.2.2). 69 Including China (Tu and Huang 2019, Section 3, text to note 48; although they also note that some courts, including the Supreme People’s Court, have implicitly and explicitly adopted a presumption of exclusivity in some cases) and Taiwan (Chen 2019, Section 2.2.2). 70 This is so in the Czech Republic (Rozehnalová et al. 2019, Section 2.1) and Japan (Takahashi 2019, Section 2.3), for example. 59
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difficult, and several reporters note that decisions are inconsistent.71 In common law countries, the test of whether a choice of court agreement is exclusive is whether the parties promised to commence or pursue proceedings, if at all, only in the courts of a single legal system.72 This clearly demonstrates the contractual nature of choice of court agreements in the common law. In most countries, the courts consider a range of different factors in determining whether the choice of court agreement is exclusive. However, some reporters state that the cases have not articulated any principles of interpretation.73 In some jurisdictions, the courts apply a presumption against exclusivity; this is so in some US states,74 and in Taiwan.75 In addition to the possibility that the courts of a single country may take different approaches and reach apparently inconsistent conclusions in different cases as to the character of choice of court agreements, the same agreement may be interpreted as being non-exclusive in one country, and as exclusive in another. For example, in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd, the choice of court agreement in favour of the English courts was held to be non-exclusive by the Chinese courts,76 and exclusive by the English courts.77 In another case, a choice of court agreement which nominated Australian courts was interpreted by a US court as non-exclusive, but would have been interpreted by the Australian court as exclusive.78 This suggests that courts may be inclined to interpret an ambiguous choice of court agreement as exclusive, if it nominates the forum court, and as optional, if it nominates a foreign court.79
3.2
Varieties of Choice of Court Agreements
Choice of court agreements can take many different forms, and their effect will depend in every case on what the agreement actually provides. Referring to the clause in Sabah
Shipyard (Pakistan) Ltd v Islamic Republic Of Pakistan,80 which the English Court of Appeal described as non-exclusive, Briggs argued that “[i]t denatures such a clause to call it non-exclusive, for it was more subtle, more complex, than that.”81 Briggs has argued that the distinction between exclusive and non-exclusive choice of court agreements is “unhelpful”, because some choice of court agreements do not neatly fall into one or the other category.82 In particular, while there appears to be widespread agreement about what constitutes an exclusive choice of court agreement,83 the concept of optional choice of court agreement is often defined by reference to what it is not (i.e. purely exclusive), and many different types of choice of court agreement satisfy that criterion.84 The Explanatory Report to the Hague Choice of Court Convention gives some examples of non-exclusive choice of court agreements (i.e. agreements which do not come within the Convention definition of exclusive choice of court agreements). These include agreements that impose “no restrictions on the courts before which proceedings may be brought”, giving as an example a clause which nominates the courts of one country but also states that “this shall not preclude the bringing of proceedings in any other court that has jurisdiction under the law of the State in which it is located.”85 This is contrasted with non-exclusive agreements “with limitation”; the example given is “an agreement that designates a court or the courts of two or more Contracting States to the exclusion of all others”.86 In Belgium, “scholarship distinguishes two kinds of optional choice of court agreements”, namely “non-exclusive” choice of court agreements (which confer non-exclusive jurisdiction on one or more courts), and “complex” choice of court agreements (which confer jurisdiction on multiple courts, “specifying that the parties can commence proceedings in one of these courts to the exclusion of the courts which would ordinarily have jurisdiction.”)87 Oprea identifies four different types of non-exclusive choice of court agreements: simple 80
71
For China, see Tu and Huang (2019), Section 3, text to and following note 51. 72 E.g. BNP Paribas SA v Anchorage Capital Europe LLP [2013] EWHC 3073 (Comm), para 87 and 88, cited by Merrett and Carruthers (2019), Section 2.2.1, text to note 47. 73 E.g. Takahashi (2019), Section 2.3. 74 Buxbaum (2019), Section 4. 75 Chen (2019), Section 2.2.2. 76 Zheijiang High People’s Court (2013) Zhe Xia Zhong Zi No 42, cited by Tu and Huang (2019), Section 3, note 52. 77 [2015] EWCA 401 (Civ). 78 Armacel Pty Ltd v Smurfit Stone Container Corporation [2008] FCA 592. In this case, the Australian court held that because of the US judgment, the plaintiff “was barred by an issue estoppel from contending that [the clause] was an exclusive jurisdiction clause”: para 66 and 90. 79 See likewise Tang et al. (2016), p. 65.
[2003] 2 Lloyd’s Rep 571. Briggs (2008), p. 118, para 4.21. 82 Briggs (2012), p. 118, para 4.21. See, likewise, Collins (2012), para 12–102. 83 Although it is possible that the parties can include what Merrett and Carruthers refer to as an “exclusively non-exclusive” choice of court agreement, which nominates the courts of one country as having exclusive jurisdiction if one party is claimant, and the courts of another country as having exclusive jurisdiction if the other party is claimant: (2019), Section 2.2.1, text to note 38. The choice of court agreement in Meeth v Glacetal Case 23/78 [1978] ECR 2133 was of this kind. See also Keyes and Marshall (2015), pp. 357–358. 84 See also Oprea (2019), Section 2.6; Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631, para 24. 85 Hartley and Dogauchi (2010), p. 845, para 246. 86 Hartley and Dogauchi (2010), p. 845, para 247 (emphasis original). 87 Van Calster and Poesen (2019), Section 3.1. 81
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non-exclusive choice of court agreements, hybrid choice of court agreements, multiple choice of court agreements,88 and asymmetric choice of court agreements.89
4
The Positive Effects of Choice of Court Agreements
Choice of court agreements are relevant at two different stages in a cross-border dispute. This is conventionally addressed in terms of their “positive” and “negative” effects. The first stage relates to establishing whether a chosen court is competent to hear and determine a dispute. This is referred to as prorogation, the “jurisdiction-granting” effect,90 submission to the jurisdiction, or the positive effect of a choice of court agreement. Whether an agreement has the effect of establishing the jurisdiction of a court chosen by the parties depends on the procedural law of the forum court and whether it recognises the parties’ agreement as a basis of competency. Almost all legal systems now recognise the positive effect of choice of court agreements.91 The Brussels I Recast, for example, provides in Article 25(1) that If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State (emphasis added).
In some countries, the nominated court is obliged to accept the submission to jurisdiction.92 However, in a few countries, the parties’ agreement is not sufficient; there must be another basis of jurisdiction.93 At common law, a choice of court agreement in favour of the forum is not itself a separate basis of jurisdiction because jurisdictional competence depends on service.94 This has been cured by legislation which authorises service out of 88
Oprea (2019), Section 1.2. Oprea (2019), Section 2.6, text to notes 36–38. 90 Hartley (2013), p. 5, para 1.08. 91 E.g. Brussels I Recast Regulation, Article 25(1); Lugano II Convention, Article 23(1); Greece (Greek Code of Civil Procedure, Arts 42–44); Québec (Civil Code of Québec, article 3148(4)); Singapore (Astrata (Singapore) Pte Ltd v Portcullis Escrow Pte Ltd [2011] 3 SLR 386); Switzerland (Swiss Code on Civil Procedure, Article 17), and the UK (Merrett and Carruthers 2019, Section 1.1). 92 Including the Czech Republic (Rozehnalová et al. 2019, Section 1.3) and Switzerland (Haas and MacCabe 2019, Section 6.1 (citing the Swiss Code on Civil Procedure, Article 17, and the Lugano II Convention, Article 23)). 93 This is the case in South Africa (Schoeman 2019, Section 3.5) and in some US states (Buxbaum 2019, text to note 76, referring in particular to Florida). 94 Keyes (2015), p. 225. 89
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the jurisdiction if the defendant submitted to the jurisdiction.95 Most legal systems also recognise that where the defendant participates in the proceedings in the forum without contesting jurisdiction, the forum court has jurisdiction.96 In some legal systems, this is conceptualised as an implied or tacit choice of court agreement. In others, it is understood and described as a unilateral submission to the jurisdiction by the defendant, which is normally analysed in terms of a waiver of the defendant’s right to object to the court’s jurisdiction. In quite a few countries, the law has only recently accepted the parties’ ability to prorogate jurisdiction. For example, in the Netherlands, this was only accepted by the Dutch Hoge Raad (Supreme Court) in 1985.97 In China, the parties’ ability to contract for jurisdiction was not recognised until 1991.98 Romanian law explicitly recognised the effectiveness of choice of court agreements for the first time in the Romanian Civil Procedure Code which came into effect in 2013.99 The reason that the positive effect of choice of court agreements was, historically, controversial, is that the assumption of jurisdiction in cross-border cases was justified as an aspect of sovereignty, and the parties’ ability to invoke the courts’ jurisdiction was inconsistent with territorial limitations on the exercise of sovereignty. This is reflected, for example, in the Dutch “traditional doctrine of sovereignty according to which jurisdiction could be attributed to courts by the law only (i.e. not by the autonomous will of the contracting parties).”100 Where the relevant procedural law permits prorogation, this basis of jurisdiction contrasts with the other rules establishing the courts’ jurisdiction, which rely on factual connections between the forum and the parties, such as personal connections of domicile, or connections between an aspect of the dispute and the forum, such as that the contract in dispute was to be performed in the territory of the forum court. The lack of a requirement of factual connection to the chosen court was one reason for concerns about the legitimacy of prorogation as a basis of jurisdictional competency; whereas, from the perspective of parties from 95
Marshall (2019), Section 2.3.1.1. Brussels I Recast Regulation, Article 26(1); Lugano II Convention, Article 24(1); Greek Code of Civil Procedure, Art 42 § 2; Japanese Code of Civil Procedure, Article 3-8; Taiwanese Code of Civil Procedure, Article 25. 97 Piscator, HR February 1, 1985, NJ 1985, 698 (discussed by Rammeloo 2019, Sections 1.1 and 2.5). 98 1991 Chinese Civil Procedure Law, Articles 25 and 224 (promulgated and entered into force on 9 April 1991). These provisions were replaced by Article 34 of the 2012 Chinese Civil Procedure Law (which was in turn replaced by Article 34 of the 2017 Chinese Civil Procedure Law). See Tu and Huang (2019), Section 2, text to notes 13–16. 99 Oprea (2019), Section 1.1.3, text to notes 14–15. 100 Rammeloo (2019), Section 1.1, text to note 1. 96
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different legal systems, a lack of factual connection might be desirable because it would indicate that the chosen courts would be neutral as between the parties to the contract. There is little difference between optional and exclusive choice of court agreements in terms of their positive effect.101
4.1
The Problem with Prorogation
Most courts now take a favourable attitude to choice of court agreements which nominate them. Nygh suggested that “For the prorogated forum the choice of the parties presents no challenge to State authority. Concepts of territorial sovereignty and control are not offended, but rather flattered, when foreigners submit to the jurisdiction.”102 Given the current popular view of international litigation as a product, it is hardly surprising that most legal systems welcome the parties’ contractual choice of the forum. However, this fails to recognise the effect of the prorogation in potentially exacerbating, or creating, a problem of overlapping jurisdictions. In the legal systems which allow prorogation without any requirement of connection, where the prorogation is the only basis on which a nominated court is competent, the choice of court agreement has the effect of increasing the number of competent courts in which either party could bring proceedings. If the courts of more than one legal system would have regarded themselves as competent irrespective of the agreement, prorogation exacerbates the problem of overlapping jurisdictions, by making one more court competent. If there would have only been one competent court but for the parties’ choice of court agreement (admittedly an unlikely scenario, in a cross-border dispute), prorogation creates the problem of overlapping jurisdictions. If a nominated court is otherwise competent under its other rules of jurisdictional competency, the prorogation neither creates nor adds to the competency of that court, and does not exacerbate the problem of overlapping jurisdictions, which would arise in any case.
5
The Negative Effects of Choice of Court Agreements
The second stage at which a choice of court agreement is relevant relates to its effect in controlling the possibility or the reality of parallel proceedings. At this stage, a choice of court agreement might be challenged in either the chosen, or non-chosen, courts. It will not necessarily be given the same effect in the chosen and the non-chosen courts, including because the chosen court will, as Nygh observed, be flattered by the choice, whereas the non-chosen courts may be offended, 101 102
Chen (2019), Section 2.1. Nygh (1999), p. 15.
especially if the factual connections to the non-chosen court are strong.103 This may be true of optional choice of court agreements as well as of exclusive choice of court agreements. The legal effects of choice of court agreements are regarded as a matter of procedure and for that reason subject to forum law.104 The following sections first address the negative effects of exclusive choice of court agreements; and then the negative effects of optional choice of court agreements.
5.1
The Negative Effect of Exclusive Choice of Court Agreements
Much of the law and scholarship about choice of court agreements concerns the effect of exclusive agreements in non-chosen courts.105 In this context, choice of court agreements are often said to have a negative, derogative, or “jurisdiction-depriving”106 effect on a non-chosen court which is competent, under its own rules of jurisdiction, to hear the dispute. This only necessarily follows if the choice of court agreement is exclusive, because at least in most types of optional choice of court agreements, the parties do not by their agreement foreclose the possibility of litigating in courts other than those nominated in the choice of court agreement. An exclusive choice of court agreement only has a jurisdiction-depriving effect if the non-chosen court is obliged to enforce an exclusive choice of court agreement by staying its proceedings.107 The Hague Choice of Court Convention,108 the Brussels I Recast, and the national laws of some countries109 require the non-chosen courts of the forum
103
Nygh (1999), pp. 15, 19. This is so in England and Scotland (Merrett and Carruthers 2019, Section 2.3); Germany (Weller 2019, Section 3.3); Japan (Takahashi 2019, Section 2.1); Singapore (Chong 2019, Section 2.2); Taiwan (Chen 2019, Section 2.3.1); the US (Buxbaum 2019, Section 6.1). 105 Saumier (2019), Section 3.1. 106 Hartley (2013), p. 5, para 1.08. 107 Under the common law, exclusive choice of court agreements are not strictly enforceable; the courts will generally enforce them, but this is subject to the courts’ discretion, and the courts may not enforce even an exclusive choice of court agreement if there are strong grounds, cause, or reasons for non-enforcement: Donohue v Armco [2001] UKHL 64 (UK House of Lords); Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418 (Australian High Court); ZI Pompey Industrie v ECU-Line NV 2003 SCC 27 (Supreme Court of Canada); Amerco Timbers Pte Ltd v Chatsworth Timber Corp Pte Ltd [1977-78] 2 SLR 112 (Singapore Court of Appeal). 108 Article 6. 109 Turkey (Tarman and Oba 2019, Section 3.3, text to note 33). Note, however, that the Turkish courts sometimes establish their jurisdiction on the basis of the principle of good faith, if the respondent is domiciled in Turkey. Tarman and Oba note that this “reasoning is heavily criticized in the academic commentary”: (2019), Section 3.3.2.1, text to note 43. 104
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to stay proceedings where the parties have agreed to the exclusive jurisdiction of a foreign court. The Brussels I Recast exemplifies this approach to the strict enforcement of exclusive choice of court agreements. Article 31(2) states Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement. (emphasis added)
Article 31(3) further states that “Where the court designated in the agreement has established jurisdiction in accordance with the agreement, any court of another Member State shall decline jurisdiction in favour of that court.” The introduction of article 31 is one of the most important recent developments in private international law. The Lugano II Convention has not been amended to incorporate a similar protection of exclusive choice of court agreements. The common law approach is different in principle. The line of English cases commencing with The Eleftheria110 have been very influential in England, and most common law countries apply the principle from that case that exclusive choice of court agreements, whether in favour of the forum or of a foreign court, should be enforced unless there are strong reasons for non-enforcement.111 Clearly, this gives the non-chosen court a discretion whether to enforce the agreement. Relatively speaking, the effect of an exclusive choice of court agreement which is being challenged in proceedings in the chosen court has not been the subject of much litigation or much study. Nygh’s comment, mentioned above, in relation to a prorogated court being flattered by being selected is also pertinent in terms of the attitude the court will have to a litigant challenging the nominated court’s jurisdiction. In the Hague Choice of Court Convention,112 the Brussels I Recast, and the national law of some countries,113 the court nominated in an exclusive choice of court agreement cannot 110
[1970] P 94. E.g. Australia (Marshall 2019, Section 3); Singapore (Chong 2019, Section 3). This case has also been influential in South Africa (Schoeman 2019, Section 3.4). 112 Article 5(2). 113 This is so for example in China (Tu and Huang 2019, Section 3, text to note 60); and Japan, except where the foreign court is deemed to have exclusive subject matter jurisdiction (Takahashi 2019, Section 1.1, text following note 2). Australia and New Zealand have enacted reciprocal legislation regulating jurisdiction and judgments in trans-Tasman proceedings (the Trans-Tasman Proceedings Acts 2010). Inter alia, this legislation was designed to be consistent with the Hague Choice of Court Convention, and as a result, the courts nominated in an exclusive choice of court agreement cannot stay those proceedings: Trans-Tasman Proceedings Act 2010 (Cth) s 20(1)(b). See Marshall (2019), text to note 31. 111
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decline jurisdiction in favour of a foreign court. The Civil Code of Québec goes even further, stating that the Québec authorities have no jurisdiction where the parties have chosen by agreement to submit the present or future disputes between themselves relating to a specific legal relationship to a foreign authority, or to an arbitrator.114
In other legal systems, the court nominated in an exclusive choice of court agreement has a discretion not to exercise jurisdiction. In common law systems, although an exclusive choice of court agreement should be enforced in most cases, it may not be if the party resisting its enforcement shows “strong” reasons or cause for its non-enforcement.115 The English House of Lords stayed proceedings in such a case, in Donohue v Armco Inc.116 As in the case of prorogation, the development of the law in relation to the negative effect of exclusive choice of court agreements is fairly recent in most countries. For example, before 1994, while the courts of Québec enforced choices of court in favour of the forum, they would not give effect to choice of court agreements that nominated foreign courts.117
5.2
The Negative Effects of Optional Choice of Court Agreements
Whereas the law of different legal systems has shown strong signs of convergence in relation to the positive effects of both exclusive and optional choice of court agreements, and the negative effects of exclusive choice of court agreements, there are no such indications of convergence in relation to the negative effect of optional choice of court agreements. The negative effects of optional choice of court agreements are more complicated than the negative effects of exclusive choice of court agreements, as the national reporters attest. The Hague Choice of Court Convention does not contain any direct principles in relation to the optional choice of court agreements, and the Brussels I Recast Regulation does not contain any specific principles relating to the effect of such agreements. The Hague Choice of Court Convention does not regulate optional choice of court agreements directly, but it affects them indirectly in two ways. The first is that the Convention deems choice of court agreements to be exclusive. In some legal systems, the effect of this will be that fewer choice of court agreements will be optional, than would have otherwise been the case under national laws about the distinction between optional and exclusive choice of court 114
Art 3148. Donohue v Armco Inc [2001] UKHL 64, para 24. 116 Donohue v Armco Inc [2001] UKHL 64. 117 Guillemard and Sabourin, Section 1 text to note 29 and following note 30. 115
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agreements.118 The second is that contracting states can opt to recognise the judgments given by a court of another contracting state, the jurisdiction of which court depends on the parties’ optional choice of that court. Contracting states can make a declaration under article 22, the effect of which would be that judgments rendered by the courts of other contracting states which had also made a declaration under article 22 and the jurisdiction of which derived from a non-exclusive choice of court agreement would be recognised by the contracting state making the declaration. To date, none of the contracting states has made such a declaration. While the Recast enables prorogation of jurisdiction, and protects exclusive choice of court agreements by requiring courts other than those nominated in an exclusive choice of court agreement to stay proceedings in favour of the jurisdiction of the nominated courts, it contains no specific provisions concerning the negative effects of an optional choice of court agreement. It therefore gives no priority to optional choice of court agreements, when it comes to the allocation of jurisdiction. Rather, “substantive jurisdiction as between Member State courts will still be determined by which court is first seised”,119 pursuant to Article 29. It is not clear whether, if proceedings are commenced in the courts of a Member State which is nominated in an optional choice of court agreement (pursuant to the Recast, article 25), proceedings can be stayed under national procedural rules.120 It is also unclear whether, if proceedings are commenced in the courts of a Member State pursuant to another ground of jurisdiction, those proceedings might be stayed on the basis of an optional choice of court agreement which nominated the courts of a non-Member State.121 Under the national law of most countries, optional choice of court agreements have a different, and much weaker, effect than exclusive choice of court agreements. However, in some countries, the forum court which is nominated in an optional choice of court agreement is obliged to exercise its jurisdiction. In China, although a version of forum non conveniens applies, the courts cannot decline jurisdiction in favour of a foreign court, if the parties nominated the Chinese courts in an optional choice of court agreement.122 The situation is similar in Japan. Article 3-9 of the Japanese Code of Civil Procedure enables a Japanese court to dismiss the proceedings if, taking into account the nature of the case, the burden on the defendant to answer the claim, the location of evidence and any other factors, the court finds that there are special circumstances 118
Marshall and Keyes (2017), p. 275. Joseph (2015), p. 314, para 10.56. 120 Merrett and Carruthers (2019), Section 2.3.4. 121 Merrett and Carruthers (2019), Section 2.3.4. 122 Tu and Huang (2019), Section 3, text to note 60. 119
M. Keyes by reason of which hearing and determining the case in Japan would impair fairness between the parties or hinder the proper and efficient conduct of proceedings,
and this clearly applies where there is an optional choice of court in favour of Japanese courts. However, Takahashi notes that “dismissal will be rare where Japanese courts are chosen by the parties because ‘fairness between the parties’ would usually be promoted by respecting their agreement.”123 Similarly, in Taiwan, if the parties nominated the Taiwanese courts as having jurisdiction, the court is not obliged to stay its proceedings, even if foreign proceedings were commenced first.124 The negative effects of optional choice of court agreements differ between different legal systems. This diversity was one of the reasons that optional choice of court agreements were excluded from the Hague Choice of Court Convention. The Explanatory Report to the Convention notes that if proceedings had been commenced first in a forum other than that nominated in an optional choice of court agreement, “[t]his would raise issues of lis pendens and forum non conveniens that would have been difficult to resolve in an acceptable way.”125 In those legal systems which rely on lis pendens to resolve problems of overlapping jurisdictions (assuming there are no issues of exclusive subject matter jurisdiction), the main issue is the sequence in which the respective courts’ jurisdiction was seised.126 In some countries, an optional choice of court agreement may be a factor to be considered but is not determinative.127 In those legal systems in which the courts have discretion whether to exercise jurisdiction on the basis of the appropriateness of the forum court, relative to the appropriateness of foreign countries under the doctrine of forum non conveniens, the parties may be precluded from asserting that a forum nominated as having non-exclusive jurisdiction is inappropriate. In a number of countries, including China, England and the United States, the effect of an optional choice of court agreement is that the defendant is taken to have waived their right to contest the court’s jurisdiction.128 In England, the parties may not challenge the appropriateness of the nominated court in an optional choice of court agreement—whether the forum or a foreign court—“on grounds 123 Takahashi (2019), Section 2.1, text to note 11, citing the Kyoto District Court, judgment on 29 January 2015 (2015WLJPCA01296002). 124 Chen (2019), Section 2.8.1, citing the Taiwanese Code of Civil Procedure, Article 182-2 Section 1. 125 Hartley and Dogauchi (2010), p. 801, para 48. 126 E.g. Greece (Panapoulos 2019, Sections 2.4.1 and 2.4.2). 127 E.g. Germany (Weller 2019, Section 3.5). 128 China (Tu and Huang 2019, Section 3, text to note 61); UK (Merrett and Carruthers 2019, Section 2.3.3); US (Buxbaum 2019, Section 5.2.1.2.1).
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foreseeable at the time of the agreement”.129 In S & W Berisford plc v New Hampshire Insurance Co Ltd, an influential decision in England and other common law jurisdictions, Justice Hobhouse stated that the fact that the parties have agreed in their contract that the English courts shall have jurisdiction (albeit a non-exclusive jurisdiction) creates a strong prima facie case that that jurisdiction is an appropriate one; it should in principle be a jurisdiction to which neither party to the contract can object as inappropriate; they have both implicitly agreed that it is appropriate.130
Similarly, in Highland Crusader Offshore Partners v Deutsche Bank, a decision of the English Court of Appeal, Lord Justice Toulson stated that A non-exclusive jurisdiction agreement precludes either party from later arguing that the forum identified is not an appropriate forum on grounds foreseeable at the time of the agreement, for the parties must be taken to have been aware of such matters at the time of the agreement. For that reason an application to stay on forum non conveniens grounds an action brought in England pursuant to an English non-exclusive jurisdiction clause will ordinarily fail unless the factors relied upon were unforeseeable at the time of the agreement.131
Two distinct and inconsistent lines of reasoning as to the effect of optional choice of court agreements have emerged in common law jurisdictions.132 The first is that the existence of an optional choice of court agreement, whether in favour of the forum or of a foreign court, is relevant to the normal forum non conveniens enquiry. This is how most optional choice of court agreements are treated in Australia,133 and how optional choice of courts in favour of foreign courts are treated in Singapore.134 Most state courts in the US “apply the traditional forum non conveniens analysis, but place a significant burden on the defendant who seeks to dismiss from a forum to which it previously agreed.”135 If proceedings have been commenced in the courts of two countries, then the existence of parallel proceedings will also be relevant to the forum non conveniens analysis. If one set of proceedings were commenced pursuant to an optional choice of court agreement, this is likely to be given significant weight. In one Canadian case, the fact that the foreign court was nominated in an optional choice of court agreement was a weighty consideration in the Canadian court’s decision to 129 Highland Crusader Offshore Partners LP v Deutsche Bank AG [2009] EWCA Civ 725, para 51. 130 [1990] 2 QB 631, 646. 131 [2009] EWCA Civ 725, para 50. See likewise British Aerospace Plc v Dee Howard Co [1993] 1 Lloyd’s Rep 368, 376; Ace Insurance SA-NV v Zurich Insurance Co Ltd [2001] 1 Lloyd’s Rep 618, 630. 132 Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] 2 SLR 519. 133 Marshall (2019), Section 2.3.1. 134 Chong (2019), Section 2.4. Optional choice of courts in favour of Singapore courts are dealt with quite differently: see ibid, Section 2.3.1. 135 Buxbaum (2019), Section 5.2.1.2.1.
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stay its proceedings, even though the Canadian court was the court first seised.136 The second line of reasoning, which is especially evident in the English cases and has recently been adopted in Singapore, is that the party challenging the jurisdiction of the court nominated in the optional choice of court agreement is bound by their implied promise to submit to the jurisdiction of that court, unless they can show strong cause or reasons as to why they should be allowed to litigate in a non-chosen court.137 This is the same test that is applied to exclusive choice of court agreements. Some English cases have used even stronger language. For example, in Mercury Communications v Communications Telesystems International, Justice Moore-Bick stated that particular weight should attach to the fact that the defendant has freely agreed as part of his bargain to submit to the jurisdiction. In principle he should be held to that bargain unless there are overwhelming reasons to the contrary.138
This line of reasoning has been criticised for blurring the distinction between exclusive and optional choice of court agreements.139 In some jurisdictions, there are conflicting authorities as to which of these principles should be applied to determine the effect of an optional choice of court agreement.140 In common law Canada, the effect of an optional choice of court agreement is normally determined according to the forum non conveniens principle, although Canadian courts sometimes apply the test used for exclusive choice of court agreements where the choice of court agreement is apparently optional,141 and Saumier notes that the weight of precedent [may have been] shifting to apply only the strong cause [test] whenever a party is seeking to avoid a choice of court agreement, whether it is the plaintiff or the defendant, whether it is exclusive or optional and whether the agreement designates the forum or a foreign court.142 136 Silveira v FY International Auditing & Consulting Corp 2015 ONSC 388, cited by Saumier (2019), Section 3.4. 137 Merrett and Carruthers (2019), Section 2.3.3, text to notes 72–74; Chong (2019), Section 2.3.1. The same approach is taken in Hong Kong (Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 Hong Kong LRD 631). 138 [1999] 2 All England Reports (Comm) 33 (emphasis added). In another case, Justice Gloster stated that “the general rule is that the parties will be held to their contractual choice of English jurisdiction unless there are overwhelming, or at least very strong, reasons for departing from this rule”: Antec International Ltd v Biosafety USA Inc [2006] EWHC 47 (Comm), para 7. 139 Chong (2019), Section 2.3.1, text to note 36, citing UBS AG v Telesto Investments Ltd [2011] 4 SLR 503, para 120; Merrett and Carruthers (2019), Section 2.3.3, text to notes 75 and 76, citing BP Plc v AON [2005] EWHC 2554 (Comm), para 23; Highland Crusaders Offshore Partners LP v Deutsche Bank AG [2009] EWCA 725. 140 Common law Canada (Saumier 2019, Section 3.3). 141 Saumier (2019), Section 3.4. 142 Saumier (2019), Section 3.4.
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In South Africa, while a stay could be granted in a case involving an optional choice of court agreement, it is uncertain whether this would be done by reference to forum non conveniens, or by reference to the principle relevant to exclusive choice of court agreements.143 In Abdul Rashid bin Abdul Manaf v Hii Yii Ann, Justice Woo of the Singapore High Court drew a distinction between an optional choice of court agreement which denoted “an” appropriate forum, and a “most appropriate jurisdiction” agreement which denoted “the” appropriate forum.144 In the case of a “most appropriate jurisdiction” agreement, “the evidential burden shifts to a plaintiff suing in the non-contractual jurisdiction to show strong cause as to why he should be permitted to do so”, in which case “this will bring the negotiated [optional choice of court agreement] very close to an [exclusive choice of court agreement]”.145 While the Singaporean courts until recently treated any optional choice of court agreement as one factor relevant to the forum non conveniens analysis, the Singaporean Court of Appeal recently held that “where the proper law of the contract is Singapore law and Singapore is a named forum in the optional choice of court agreement, the defendant must show ‘strong cause’ why he should not be bound to his contractual agreement to submit to the Singapore court’s jurisdiction.”146 On the other hand, the effect of an optional choice of court in favour of a foreign court continues to be determined according to the forum non conveniens analysis.147
5.2.1
An Agreement That Changes Character When the Option Is Exercised In some countries, optional choice of court agreements are regarded as changing their character when the option is exercised, at which point they become exclusive. This is so in Chinese law, but only in relation to options in favour of Chinese courts.148 In English law, it is possible that “a non-exclusive jurisdiction clause may be one which means that a contracting party is entitled to decide later that the court chosen is to have exclusive jurisdiction, but is under no compulsion to do so.”149 Some US state courts have taken the view that “an optional choice of court agreement ‘becomes mandatory’ once suit is filed in the designated forum”150; and some Belgian scholars take a 143
Schoeman (2019), Section 5.2. [2014] 4 SLR 1042, discussed in Chong (2019), Section 2.4, text to notes 58–60. 145 [2014] 4 SLR 1042, para 54, discussed in Chong (2019), Section 2.4, text to note 59. 146 Chong (2019), Section 2.3.1, following note 38, discussing Shanghai Turbo Enterprises Ltd v Liu Ming [2019] SGCA 11. 147 Chong (2019), Section 2.4. 148 Tu and Huang (2019), Section 3, text to note 62. 149 Briggs (2008), p. 115, para 4.16. 150 Buxbaum (2019), Section 5.2.1.2.1. 144
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similar view.151 In Singapore, although it is not clear whether the agreement changes character when the option is exercised, the courts will be reluctant to grant an anti-suit injunction if proceedings have not been commenced in Singapore pursuant to the optional choice of court agreement.152
5.2.2 Additional Provisions Choice of court agreements sometimes include further provisions, in addition to the nomination of a particular court or courts. These additional provisions have been important in the decisions of English courts in cases involving optional choice of court agreements. They might include the nomination of an agent who is authorised to accept service of process within the nominated forum. Some choice of court agreements also include express waivers of the right to object to the jurisdiction of the nominated court. For example, part of the jurisdiction clause in Sabah Shipyard (Pakistan) v Pakistan stated that Each Party waives any objection that it may now or hereafter have to the venue of any action or proceeding brought as consented to in this Section 1.9 [the jurisdiction clause], and specifically waives any objection that any such action or proceedings was brought in any inconvenient forum and agrees not to plead or claim the same. . .153
Express waivers of the right to challenge jurisdiction might be unilateral.154 For example, part of the Law and Jurisdiction clause in Commerzbank AG v Liquimar Tankers Management Inc provided that The guarantor irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this clause and any claim that those proceedings have been brought in an inconvenient or inappropriate court.155
In some cases decided by the courts in common law countries, the existence of an express waiver of the right to object to the nominated court seems to have led to the court imposing a higher standard on the party challenging the jurisdiction than is applied in other cases.156 Some optional choice of court agreements also include “express other jurisdiction” clauses, which “expressly 151 Van Calster and Poesen (2019), Section 3.3.3 (although they disagree with this view). 152 Chong (2019), Section 2.3.3, text to note 103, citing Morgan Stanley Asia (Singapore) Pte v Hong Leong Finance Ltd [2013] 3 SLR 409, para 71. 153 [2003] 2 Lloyd’s Rep 571, para 28. 154 E.g. Bambang Sutrisno v Bali International Finance Ltd [1999] 2 SLR(R) 632. 155 [2017] 1 WLR 3497, para 9. 156 Chong (2019), Section 2.3, text to note 32 (citing Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2010] 2 SLR 821) and Section 2.4, text to note 51 (citing Bambang Sutrisno v Bali International Finance Ltd [1999] 2 SLR(R) 632).
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contemplate the possibility of parallel proceedings”.157 For example, the clause in Highland Crusaders Offshore Partners v Deutsche Bank stated that “Nothing in this paragraph [containing the choice of court agreement] shall limit the right of any party to take proceedings in the courts of any other country of competent jurisdiction.”158 In cases in which there are express other jurisdiction provisions, it seems that the courts are likely to take a strict approach, although it has been suggested that the reasoning in these cases should not depend on such a provision because “in any optional jurisdiction agreement there is no promise not to sue in another jurisdiction, thus no agreement that [the nominated forum] is the sole forum, and accordingly there is an inherent risk of parallel proceedings.”159
5.2.3 Implied Promises In a number of English cases, the courts have held that an optional choice of court agreement might, depending on the wording of the agreement, entail implied promises that might be enforced in various ways (principally, by the grant of an anti-suit injunction).160 These include implied obligations • not to commence or continue parallel proceedings in a non-nominated forum; • not to apply for a stay of proceedings in the nominated forum; or • not to apply for an anti-suit injunction in a non-nominated forum, to prevent commencement or continuation of proceedings in a court nominated in an optional choice of court agreement.
5.2.4
Discrimination Between Options in Favour of Forum and Foreign Courts Most legal systems do not openly discriminate in favour of choice of court agreements that nominate forum courts, as opposed to those that nominate foreign courts. For example, in common law systems, optional choice of court agreements whether in favour of the forum or of a foreign court are generally regarded as being relevant to the general forum non conveniens analysis. However, in some countries, optional choice of court agreements in favour of foreign courts are treated differently to those that nominate courts of the forum.161 Tu and Huang note that “optional choice of court agreements in favour of Chinese courts on the one hand and those in favour of foreign courts on the other are not 157 Merrett and Carruthers (2019), Section 2.5.3, citing Royal Bank of Canada v Cooperative Centrale [2004] EWCA Civ 7. 158 [2009] EWCA Civ 725. 159 Merrett and Carruthers (2019), Section 2.5.3. 160 Merrett and Carruthers (2019), Section 2.5.3, citing in particular Sabah Shipyard (Pakistan) v Pakistan [2003] 2 Lloyd’s Rep 571. 161 Including Australia (Marshall 2019, Section 2.3.1.3) and Singapore (Chong 2019, Section 2.5).
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treated consistently.”162 Article 12 of the 2005 Supreme People’s Court of China Summary states that an optional choice of court agreement nominating a foreign court does not exclude the jurisdiction of the competent courts of other countries, including China,163 even if one party has exercised the option by commencing proceedings in the foreign court nominated in the optional choice of court agreement.164 This contrasts with the effect of an optional choice of court agreement in favour of the Chinese courts, which is regarded as becoming exclusive when the option is exercised.165 In Australia, an optional choice of court agreement in favour of a foreign court will have little effect.166 This is because of the idiosyncratic Australian version of forum non conveniens which requires the defendant to establish that the Australian court is clearly inappropriate, which is far more onerous on the defendant than the version of forum non conveniens developed in England and used in other common law jurisdictions which requires the defendant to show only that a foreign court is clearly more appropriate than the forum. In Australia, the fact that the parties have agreed to submit to the jurisdiction of a foreign court is regarded as merely one factor to take into account in deciding whether the Australian court is clearly inappropriate; Marshall notes that Australian courts have never stayed proceedings in a case in which the parties had nominated foreign courts in an optional choice of court agreement.167
6
Limitations on the Parties’ Choice of Court
Most jurisdictions impose few limitations on the parties’ choices of court. One of the main exceptions to this proposition relates to subject matter jurisdiction. This is not contractible, and therefore the forum’s rules of exclusive subject matter jurisdiction take priority over the parties’ agreements. Most legal systems explicitly nominate particular grounds of exclusive subject matter jurisdiction, which tend to be fairly similar, including disputes concerning immovable property,168 some intellectual property rights,169 and some matters involving companies.170 In Chinese law, a wide 162
Tu and Huang (2019), Section 3 (text in the sentence before note 68). Tu and Huang (2019), Section 3 (text to note 64). 164 Tu and Huang (2019), Section 3 (text to note 67). 165 Tu and Huang (2019), Section 3 (text to note 62). 166 Marshall (2019), Section 2.3.1.2. 167 Marshall (2019), Section 2.3.3.1. 168 In South African law, the place where land is situated is regarded as having exclusive jurisdiction to deal with questions of title to that land: Schoeman (2019), Section 3.5, text to note 53. 169 E.g. Belgium Van Calster and Poesen (2019), Section 2.2. 170 E.g. Germany (Weller 2019, Section 2.1.1); Japan (Takahashi 2019, Section 1.2, citing the Japanese Code of Civil Procedure, Article 3-10 and 3-5); Turkey (Tarman and Oba 2019, Section 3.1.2). 163
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range of subject matters belongs to the exclusive jurisdiction of Chinese courts. These include disputes concerning harbour operations, succession,171 performance of contracts within Chinese territory of Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, and Chineseforeign cooperative exploration and exploitation of natural resources.172 In some legal systems, the law identifies the place of exclusive subject matter jurisdiction generally—that is, it does not only reserve the exclusive subject matter jurisdiction of the courts of the forum. It is common to find limits on the types of relationships in which a choice of court agreement may be used; for example, many reporters state that choice of court agreements only apply to particular legal relationships,173 and some note that the parties cannot use such agreements in family matters.174 In Chinese law, the parties are only able to choose courts to deal with contractual disputes and disputes related to property interests.175 In most of the countries represented in the national reports, there is no requirement of factual connection to the foreign country the courts of which are nominated in a choice of court agreement.176 On the other hand, there is a requirement of factual connection in Chinese law. According to Article 34 of the Chinese Civil Procedure Law, Parties to a dispute over a contract or any other right or interest in a property may, without violating rules concerning jurisdiction by forum level and exclusive jurisdiction, choose the court for the place where the defendant is domiciled, or where the contract is performed or signed, or where the plaintiff is domiciled, or where the subject matter is located or any other place that has actual connection with the dispute as the court having jurisdiction over their dispute by a written agreement.177
The requirement of factual connection has been heavily criticised by Chinese scholars.178 Whereas factual connection may not be a requirement for the validity of a choice of court agreement in most legal systems, the connections to the nominated court might be taken into account when a defendant challenges the choice of court agreement. For example, the Swiss Private International Law Act gives the Swiss court the discretion to decline the submission to its jurisdiction if there is no “local or factual 171
Chinese Civil Procedure Law, Article 33. Chinese Civil Procedure Law, Article 266. 173 In Turkey, the dispute must arise from an “obligatory relationship”: Tarman and Oba (2019), Section 3.1.3. 174 E.g. Greece (Panapoulos 2019, text to note 2); Netherlands (Rammeloo 2019, Section 1.1); Turkey (Tarman and Oba 2019, Section 3.1.3). 175 Tang et al. (2016), p. 69. 176 For example, Japan (Takahashi 2019, Section 1.1). 177 Civil Procedure Law of the PRC (as amended in June 2017), Article 34, cited by Tu and Huang (2019), Section 2, text to note 6. 178 Tu and Huang (2019), Section 2 (note 11), citing Tang et al. (2016), p. 70; Tang (2012), p. 466; Liu and Zhou (2014), p. 50. 172
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proximity of the court designated by agreement.”179 The relevant connections are that either at least one party is domiciled, has its “main whereabouts”, or its place of business in the forum; or Swiss law is the governing law.180 Similarly, in countries which have a principle of forum non conveniens, factual connections may be relevant in considering whether the proceedings should be stayed or dismissed. In the Czech Republic, prorogation of a foreign court will only be recognised if there is a “legally significant” international element present.181 Under Greek law, a foreign court agreement in a contract that is purely internal to Greece is regarded as invalid on the basis of the theory of fraud à la loi.182 In some countries, some reason for the selection of the chosen court is required.183 In the 1985 decision of the Dutch Hoge Raad which established that the parties could prorogate the jurisdiction of Dutch courts, the parties’ freedom to establish jurisdiction was stated to be subject to their having “a genuine interest”.184 This does not necessarily require a factual connection; the parties would have a genuine interest if the chosen court was neutral or had relevant expertise.185 As noted, the tendency in German law has been the converse of that observed in most other legal systems. The reason for the restrictive approach to the enforcement of choice of court agreements in the 1974 reform to the Code of Civil Procedure was that these agreements were being used in “virtually all standard terms”, and their invocation in legal proceedings, particularly involving consumers, was regarded as unfair and abusive.186 German law consequently imposes a number of limitations, which are different to those found in most other legal systems. These include that choice of court agreements are only valid if they are concluded between
179
Haas and MacCabe (2019), Section 6.1 (text to note 66), citing the Swiss Private International Law Act, Article 5(3). See likewise Van Calster and Poesen (2019), Section 3.4.2.1, citing the Belgian Private International Law Act, Article 6, paragraph 2. 180 Haas and MacCabe (2019), Section 6.1, text to note 67, citing the Swiss Private International Law Act, Article 5(3). 181 Rozehnalová et al. (2019), Section 1.1, text to note 10. This requirement is not defined in Czech legislation, and is therefore determined ad hoc in each case. There is similarly a requirement in Turkish law that the dispute must involve a foreign element: Tarman and Oba (2019), Section 3.1.1. As in the case of the Czech Republic, this is not defined, and the courts apply a broad interpretation. 182 Panapoulos (2019), Section 1.1.2. 183 Buxbaum notes that in a few US states, “courts have held that the designated forum ‘must bear a reasonable relationship to the transaction’”: (2019), Section 5.1, citing KC Ravens LLC v Nima Scrap, LLC 369 P 3d 341 (Ct App Kansas 2016). She suggests that these decisions are anomalous. 184 Piscator, HR February 1, 1985, NJ 1985, 698, cited by Rammeloo (2019), Section 1.1 (text to note 2). 185 Rammeloo (2019), note 4. 186 Weller (2019), Section 1.4.
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merchants (which generally includes corporations187), legal persons under public law,188 or public trusts.189 In some countries, the parties’ ability to choose their forum is limited by the application of the forum’s internationally mandatory rules.190 This is not the case in France, where the Cour de Cassation held in 2008 that the potential application of French lois de police (imperative rules) does not prevent the parties from selecting a foreign court in a choice of court agreement.191 Most legal systems will not enforce choice of court agreements in favour of foreign courts when that would be incompatible with fundamental public policy of the forum.192 This is likely to affect exclusive rather than optional choice of court agreements. In Japan, the Supreme Court held that effect may be denied to a choice of court agreement if it is “extremely unreasonable and contrary to the law of public policy”.193 Similarly, a choice of court agreement would not be enforced by Singaporean courts if it was against the fundamental public policy of Singapore.194 In Romania, a choice of court agreement will be ineffective “if it abusively deprives one of the parties of the protection ensured by a court designated by Romanian law.”195
7
Support of Optional Choice of Court Agreements
In most legal systems, the only protection of optional choice of court agreements is the possibility of proceedings brought in a forum other than that or those nominated in the choice of court agreement being stayed or dismissed, or the court
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declining jurisdiction.196 This might be done on several bases: if the optional choice of court agreement is transformed into an exclusive choice of court agreement once the option is exercised; if the court finds itself to be forum non conveniens, taking into account the existence of the optional choice of court agreement; or if the court stays or refuses to stay proceedings on the basis of lis pendens, where the relevant court’s jurisdiction is derived from the optional choice of court agreement. Even in common law systems, there are few remedies available to support optional choice of court agreements, in comparison to the range of remedies that support exclusive choice of court agreements. It has been suggested that the “remedies to ensure the optional choice of court agreements’ efficacy are not necessarily very efficient.”197 In most countries, damages are definitely not available for breach of an optional choice of court agreement198; it is doubtful whether they are available in Romania.199 Van Calster and Poesen suggest that it may be possible that “an abusive exercise of an optional choice of court agreement in favour of the Belgian courts can give rise to an award of damages to the defendant”.200 Anti-suit and anti-enforcement injunctions are not available to support an optional choice of court agreement in most countries.201 The courts of EU Member States cannot grant anti-suit injunctions to preclude the commencement or continuation of proceedings in the courts of other Member States.202 In common law systems, in addition to staying or dismissing proceedings, and setting aside service of process, the main protection available for choice of court agreements is the anti-suit injunction.203 Whereas an anti-suit injunction will readily be issued to prevent the breach of an exclusive
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Weller (2019), Section 2.1.7. Similar limitations apply in Turkey, but only in the case of the choice of Turkish courts: Tarman and Oba (2019), Section 4.1. 189 German Code on Civil Procedure, section 38(1). 190 E.g. Australia (Marshall 2019, text to notes 13–14); Belgium (Van Calster and Poesen 2019, Section 2.2). 191 Mailhé (2019), text to note 5, citing Cass civ 1ére 22 October 2008, Monster Cable, no 07-15823, JCP G 2008, 10187, note L d’Avout. The same applies in Greece: Panapoulos (2019), text to note 18. 192 E.g. Czech Republic (Rozehnalová et al. 2019, Section 1.3, text to note 36, and Section 2.8, text to note 72); Germany (Weller 2019, Section 3.11). 193 Chisadane, Supreme Court, Judgment, November 28, 1975, 29 Minshu (1) 1554 [1975], cited in Takahashi (2019), Section 1.3. Takahashi notes that although this aspect of the judgment was not explicitly codified in the Code of Civil Procedure, it “arguably has survived the amendment of the [Code of Civil Procedure] since no statutory basis would need to be found to safeguard the fundamental legal value of Japan”: (2019), Section 1.3. 194 Chong (2019), Section 1, text to note 3, giving as an example where the parties deliberately chose a foreign court “to evade the operation of the Unfair Contract Terms Act” Cap 396, 1994 Rev Ed. 195 Oprea (2019), Section 4.4, sentence before note 81, citing the Romanian Civil Procedure Code, Article 1068. 188
196 This is possible in Québec, under the Civil Code, art 3135: see Guillemard and Sabourin (2019), Section 2.2.1, text to note 90. 197 Oprea (2019), Section 4.6. 198 Including the Czech Republic (Rozehnalová et al. 2019, Section 2.6.2); Greece (Panapoulos 2019, Section 2.6). 199 Oprea (2019), Section 4.6.2. 200 Van Calster and Poesen (2019), Section 3.4.2.2. 201 Including China (Tu and Huang 2019, Section 3 (text following note 81)), Greece (Panapoulos 2019, Section 2.6), Germany (Weller 2019, Section 3.8), Romania (Oprea 2019, Section 4.6.1), Switzerland (Haas and MacCabe 2019, Section 6.3) and Taiwan (Chen 2019, Section 2.8.3 and 2.8.4). 202 Turner v Grovit [2005] 1 AC 101. 203 This is available, in principle, in Australia (Marshall 2019, Section 2.3.3.3), common law Canada, England and Scotland (Merrett and Carruthers 2019, Section 2.5.3), and Singapore (Chong 2019, Section 2.7, text to notes 95–103). In Scotland, this is referred to as “restraint of foreign proceedings” (Merrett and Carruthers 2019, Section 2.5.3). In common law Canada, there is no case law relating to anti-suit injunctions to protect choice of court agreements in particular: Saumier (2019), Section 4.
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choice of court agreement,204 that will generally not be the basis on which an anti-suit injunction might be awarded if foreign proceedings have been commenced notwithstanding the parties’ optional choice of court agreement in favour of the forum, because this is generally not regarded as a breach of contract.205 Instead, the party applying for an anti-suit injunction will need to show that the commencement or continuation of the foreign proceedings is unconscionable, vexatious or oppressive.206 The English courts alone have in some cases granted anti-suit injunctions to restrain the commencement or continuation of foreign proceedings where the parties had agreed to the non-exclusive jurisdiction of English courts. Unfortunately, “the cases are inconsistent and the principles far from clear.”207 In Sabah Shipyard (Pakistan) Ltd v Pakistan,208 the English Court of Appeal famously upheld the decision of the primary judge to grant an anti-suit injunction to prevent the continuation of foreign proceedings which the court held were brought to frustrate the optional choice of court agreement in favour of the English courts. This was on the basis that the foreign party’s conduct was vexatious or oppressive.209 On the other hand, the English courts have in some cases refused to grant anti-suit injunctions.210 In other common law jurisdictions, an anti-suit injunction might be issued to prevent the commencement or continuation of foreign proceedings, again, if it could be shown that the foreign proceedings were vexatious or oppressive.211 In principle, common law courts can grant antienforcement injunctions, but there are no cases in which it has been argued or suggested that this remedy might be available to support an optional choice of court agreement.212 In principle, in at least some common law countries, damages are available for breach of exclusive choice of court agreements.213 It has been suggested that damages 204
In England, an anti-suit injunction might be granted to prevent commencement or continuation of proceedings in breach of the exclusive component of an asymmetric choice of court agreement: Merrett and Carruthers (2019), Section 3.5, citing Bank of New York Mellon v GV Films [2009] EWHC 2338 (Comm). 205 UBS AG v Telesto Investments Ltd [2011] 4 SLR 503, para 75. 206 Australia (Marshall (2019), Section 2.3.3.3); UK (Merrett and Carruthers 2019, Section 2.5.3). 207 Merrett and Carruthers (2019), Section 2.5.3. 208 [2003] 2 Lloyd’s Rep 571. 209 An injunction was also granted in BNP Paribas SA v Anchorage Capital Europe LLP [2015] EWHC 3077. 210 Merrett and Carruthers (2019), Section 2.5.3, text to notes 109–116, citing Royal Bank of Canada v Cooperative Centrale [2004] EWCA Civ 7; Highland Crusader Offshore Partners v Deutsche Bank AG [2009] EWCA Civ 725; and SwissMarine Corp Ltd v OW Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm). 211 Including Singapore (Chong 2019, Section 2.7). 212 Marshall (2019), Section 2.3.3.4. 213 See Marshall (2019), Section 2.3.3.2 (noting that while there is probably a right to damages for breach of an exclusive choice of court agreement in Australian law, there is no case in which an Australian
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should be available for breach of the exclusive component of an asymmetric choice of court agreement.214 In comparison, it is generally not regarded as a breach of contract for a party to commence proceedings in a court other than that nominated in an optional choice of court agreement, because such agreements are generally not regarded as imposing an obligation to refrain from litigating in courts other than that or those nominated in the optional choice of court agreement. It is highly unlikely that a court would award damages unless the choice of court agreement was more elaborate than simply nominating a court as having optional jurisdiction. In some English cases in which the courts have granted anti-suit injunctions, it has been held that an optional choice of court agreement entails implied promises, including promises not to commence or continue parallel proceedings in a forum other than that nominated; not to apply for a stay of proceedings in the forum; or not to apply for an anti-suit injunction to prevent commencement or continuation of proceedings in a court nominated in an optional choice of court agreement.215 Merrett and Carruthers suggest that if “losses have been suffered as a result of a breach of such a promise damages may be recoverable.”216 It is not clear whether damages for breach of a choice of court agreement might be available under the Brussels I Recast Regulation. Several reporters mention that the foreign judgment would give rise to an issue estoppel.217 While some regard that as precluding the possibility of damages being awarded, Merrett and Carruthers suggest that (a) it could be argued that the procedural consequences of a jurisdiction agreement under the Regulation are different from contractual questions; and (b) furthermore, the effect of Erich Gasser is now reversed by Art 31(2) which does give competence competence to the chosen court.218
They cite two English cases—The Alexandros T219 and Barclays Bank v Ente Nazionale de Presidenza220—as authority for the proposition that a claim for damages for breach of a choice of court agreement does not infringe the principle of mutual trust and confidence.221 court has awarded damages); Merrett and Carruthers (2019), Section 2.5.1 (citing Donohue v Armco Inc [2001] UKHL 64; The Alexandros T [2013] UKSC 70). In common law Canada, there is no case law on this issue in particular. 214 Merrett and Carruthers (2019), Sections 2.5.1 and 3.4 (text to notes 98 and 195), citing Barclays Bank plc v Ente Nazionale de Previdenza dei Medici degli Odontoiatra [2015] EWHC 2857 (Comm) paras 127-8. Cf Marshall (2019), Section 2.3.3.2. 215 See above, Sect. 5.2.3. 216 Merrett and Carruthers (2019), Section 2.5.1. 217 Merrett and Carruthers (2019), Section 2.5.1. 218 Merrett and Carruthers (2019), Section 2.5.1. 219 [2013] UKSC 70, paras 39 and 131-2. 220 [2015] EWHC 2857 (Comm); approved by the Court of Appeal in [2016] EWCA Civ 1261. 221 Compare Rozehnalová et al. (2019), Section 2.6.2.
Optional Choice of Court Agreements in Private International Law
8
Weaker Parties
In many legal systems, the law reveals serious concerns about the use of choice of court agreements in contracts involving weaker parties, and this is one of the major limitations on the use of choice of court agreements. Some legal systems provide protection to parties who are presumed to be weaker, including consumers and employees, specifically in terms of invalidating, or limiting the effect of, choice of court agreements. This protection may take several forms: it may be implied from the exclusion of such parties from the scope of the instrument, as is done in the Hague Choice of Court Convention,222 or it may be explicit in specific rules that apply only to choice of court agreements involving weaker parties, as in the Brussels I Recast223 and in national laws of some countries. Countries including China,224 the Czech Republic,225 Germany,226 Greece,227 Japan,228 Switzerland,229 Turkey,230 and the US231 provide specific protection for weaker parties. Specific protective rules in favour of weaker parties generally do not distinguish between exclusive and optional choice of court agreements,232 although some, such as those invalidating choice of court agreements that exclude a weaker party’s right to bring proceedings in the forum, would obviously only apply to an exclusive choice of foreign courts. In some countries, choice of court agreements involving presumptively weaker parties are completely unenforceable.233 For example, under the Civil Code of Québec, a choice of court agreement which nominates a foreign court cannot be enforced 222
Article 2(1). Sections 3 (dealing with insurance contracts), 4 (dealing with consumer contracts) and 5 (dealing with employment contracts). 224 Tu and Huang (2019), Section 3 (text to note 75), citing Article 31 of the Supreme People’s Court of China Interpretation on Chinese Civil Procedure Law. 225 Rozehnalová et al. (2019), Section 2.5, citing the Czech Private International Law Act, sections 86 and 88. 226 Weller (2019), Section 3.7. 227 Panapoulos (2019), Sections 1.1.2 and 2.5. 228 Takahashi (2019), Section 2.2, citing the Japanese Code of Civil Procedure, article 3-7. 229 Haas and MacCabe (2019), Section 10, citing the Swiss Code on Civil Procedure, article 35(1), Lugano Convention, articles 13, 17, 21, and the Swiss Private International Law Act, article 114(2). 230 Tarman and Oba (2019), Section 3.2. 231 Buxbaum (2019), Section 3.2. 232 For example, in Chinese law, a choice of court agreement in a consumer contract is invalid unless the consumer receives “proper notice” of the terms: Tu and Huang (2019), Section 3 (text to note 75). 233 This is so for most choice of court agreements involving weaker parties in German law: Weller (2019), Section 3.7. See also Panapoulos (2019), describing the unenforceability of contracts involving weaker parties under Greek law of national origin: Section 1.1.2 (referring to agreements in some employment matters, in favour of foreign courts), Section 2.5.3 (referring to consumer agreements which are “concluded or to be executed in Greece”). 223
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against a consumer or employee who is domiciled in Québec.234 It is more common that the choice of court agreement is not completely invalid; generally, it can be invoked by the weaker party, and only invoked against the weaker party in limited circumstances. For example, in the Brussels I Recast Regulation, a choice of court agreement involving insureds, consumers, and employees can be enforced if the agreement gives the weaker party a selection of courts other than those that would otherwise be available under the default rules.235 In Taiwan, the legal protection of weaker parties only enables proceedings to be transferred from the chosen Taiwanese court to another competent Taiwanese court.236 The inclusion of such protective provisions is for most legal systems a new legal development.237 Laws protecting consumers and employees are the most common, but in other legal systems they extend also to insureds. In the Swiss Code on Civil Procedure, tenants are also presumed to be weaker238; laws in US states protect a range of other parties presumed to be in a weaker bargaining position, including franchisees.239 In some countries, the primary laws make no particular provision for the protection of weaker contracting parties in the specific context of choice of court agreements.240 It is typical of common law countries that there are no specific protections for weaker parties in the principles of jurisdiction.241 Disputes about choice of court agreements involving weaker parties are, in general, resolved using the same principles as those applicable in other cases.242 A small number of cases suggest that exclusive choice of court agreements involving consumers require slightly different treatment.243 The implications of those cases for optional choice of court agreements involving consumers are not 234
Article 3149. Articles 15(2), 19(2), and 23(2). 236 Chen (2019), Section 2.7, citing Taiwanese Code of Civil Procedure, Article 28 section 2. 237 Takahashi notes that prior to the amendment of the Japanese Code of Civil Procedure which came into effect in 2012, “no special treatment was given to individual employment relations” in the context of choice of court agreements: (2019), Section 1.3. 238 Article 35, cited in Haas and MacCabe (2019), Section 10. 239 Buxbaum (2019), Section 3.2. 240 This is particularly true in common law countries. 241 This is so in Australia (Marshall 2019, Section 2.3.2); Singapore (Chong 2019, Section 2.6), the UK (Merrett and Carruthers 2019, Section 2.4); and in the US (Buxbaum 2019, Section 3.3). 242 For example, in the 2017 decision of the Canadian Supreme Court in Douez v Facebook Inc, involving an exclusive choice of court agreement between Facebook and Canadian users of Facebook services, the court used the same principles as those that are applied in commercial cases: 2017 SCC 33. See Saumier (2019), Section 3.2. 243 Most importantly, in Douez v Facebook, Inc, 2017 SCC 33 the majority of the Supreme Court of Canada took the view that the consumer context required a “differentiated application of the “strong cause” test for refusing to enforce a choice of court agreement”: Saumier (2019), Section 3.2. 235
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clear, but it stands to reason that in a choice of court agreement involving a consumer, the agreement should be given less weight.244
9
Asymmetric Choice of Court Agreements
The decision of the French Cour de Cassation in Madame X vs Société Banque Privé Edmond de Rothschild245 has attracted a great deal of attention, and stimulated controversy internationally about the effect of asymmetric choice of court agreements, sometimes called unilateral, or one-sided, choice of court agreements. While asymmetric agreements take different forms, the most common contains a combination of an exclusive choice of court agreement, which applies if one party commences proceedings, and an optional choice of court agreement, which applies if the other party commences proceedings. While asymmetric choice of court agreements are not rare, they have not been the subject of much litigation.246 Evidently, in most countries there are no specific statutory rules relating to their enforcement,247 and so, to the extent that the question of their effectiveness has arisen in practice, the principles are derived from case law. In France, choice of court agreements “in the sole interest of one party” have long been recognised: “[s]uch optional choices were discovered by interpretation: the agreement was found to allow the party the clause had been written in favour of to renounce his right and to seize an otherwise competent court.”248 In Greece, choice of court agreements “for the benefit of one of the parties, as envisaged in Art 17 §5 [of the Brussels Convention], are steadily accepted as valid in the Greek legal order under provisions of national origin”.249 The effect of asymmetric choice of court agreements under the Brussels I Recast Regulation is particularly unclear. The recent decisions of the French Cour de Cassation have in particular attracted a great deal of attention. The Cour de Cassation has now refused to enforce asymmetric choice of court agreements in four cases, including the Rothschild
244
Marshall (2019), Section 2.3.2. Cass civ, 1ère, 26 September 2012. 246 Chong notes that in Singapore “[t]here appear to be few reported cases dealing expressly with asymmetrical choice of court agreements and of those few, the optional portion of such agreements has not been at issue”: (2019), Section 4. See similarly, in relation to Belgium, Van Calster and Poesen (2019), Section 4.2. 247 This is so, for example, in Switzerland (Haas and MacCabe 2019, Section 11). 248 Mailhé (2019), text to note 13. 249 Panapoulos (2019), Section 1.3.1.3, citing the Greek Code of Civil Procedure, Art 44. 245
case.250 In another two cases, eBizcuss251 and Diemme Enologia vs Etablissements Chambon & fils252 it held an asymmetric choice of court agreement to be enforceable. In England, on the other hand, an asymmetric choice of court agreement has been held valid under the Recast.253 In Commerzbank AG v Liquimar Tankers Management Inc, Justice Cranston held that Article 31(2) of the Recast applied to the exclusive component of asymmetric choice of court agreements.254 Joseph suggested that a choice of court agreement which benefited only one party “would simply be an example of parties making specific provision other than by way of ‘exclusive jurisdiction’ binding on both parties.”255 He suggested that this is because of the respect that the Recast requires for party autonomy, and that “there is therefore no reason not to uphold such a bargain.”256 There are conflicting views as to whether asymmetric choice of court agreements come within the scope of the Hague Choice of Court Convention. One view is that the Convention does not apply to them at all. This view derives from the Explanatory Report on the Convention, which states that asymmetric agreements are “non-exclusive for the purpose of the Convention because they exclude the possibility of initiating proceedings in other courts for only one of the parties.”257 Some commentators base their view, that the Convention does not apply to asymmetric choice of court agreements, on this statement from the Explanatory Report.258 The contrary view is proposed by Justice Cranston in dicta in Commerzbank AG v Liquimar Tankers Management Inc, where he said that “there are good arguments in my view that the words of the definition in article 3(a) of the Hague Convention cover asymmetric jurisdiction clauses.”259 Merrett and Carruthers agree, suggesting that if the exclusive component is in issue, it should come within the scope of the Hague Convention.260 250
The other cases are Danne Holdings vs Crédit Suisse Cass civ 1ère, 25 March 2015, Crédit Suisse II Cass. civ. 1e., 7 February 2018 and Saint-Joseph Cass. civ. 1e., 3 October 2018, discussed by Mailhé (2019), Section 3. 251 Société eBizcuss.com vs Apple Cass. civ. 1ère, 7 October 2015, discussed by Mailhé (2019), at text to note 41. 252 Cass. civ. 1ère, 11 May 2017, discussed by Mailhé (2019), at text to notes 42–44. 253 Commerzbank AG v Liquimar Tankers Management Inc [2017] 1 WLR 3497. 254 [2017] 1 WLR 3497, para 64. 255 Joseph (2015), p. 98, para 3.79. 256 Joseph (2015), p. 73, para 3.18. 257 Hartley and Dogauchi (2010), p. 845, para 249. See also p. 811, paras 105–106. 258 Joseph (2015), p. 73, para 3.18; Chong (2019), Section 4, text to note 108–110. 259 [2017] 1 WLR 3497, para 74, cited by Merrett and Carruthers (2019), Section 3.3. 260 Merrett and Carruthers (2019), Section 3.3.
Optional Choice of Court Agreements in Private International Law
In some countries the legal effects of asymmetric choice of court agreements are unknown under national laws because their effects are not explicitly provided for in legislation and have not been tested in case law.261 Most national reporters in the remaining countries state that asymmetric agreements are regarded as valid.262 However, in the Czech Republic, scholars continue to criticise them for “lack of clarity”,263 whereas they are enforced in some cases, at least between commercial parties; and in Turkey, there are inconsistent views about the validity of asymmetric choice of court agreements.264 In those legal systems that have explicit protections for weaker parties, the effectiveness of an asymmetric agreement involving a weaker party is subject to those controls.265 Concerns about asymmetric agreements are almost always due to the fact of their being used in contracts involving weaker parties.266 Van Calster and Poesen suggest it is possible that the “Belgian courts might subject asymmetrical choice of court agreements to the requirement of good faith”.267 It is common, in those legal systems in which asymmetric agreements have been litigated, that the different components are treated separately, depending on which aspect of the agreement is in issue.268 Exclusive components are treated as simple exclusive choice of court agreements, and optional components are treated as simple optional choice of court agreements.269 In China, an asymmetric choice of court agreement was held to be valid in one case; its effect was said to depend on whether the investor or the bank commenced proceedings.270 The courts held that if the investor commenced proceedings, the nominated courts would have exclusive jurisdiction, whereas if the bank commenced proceedings, the courts would have only non-exclusive jurisdiction. In some countries, a choice of court agreement which left the choice of court entirely to the option of the plaintiff would not be enforceable.271 In Germany, it is impermissible to 261
E.g. common law Canada (Saumier 2019, Section 5), Romania (Oprea 2019, Section 5.1.3, text to note 125). 262 This is so in Germany (Weller 2019, Section 4); the Netherlands (Rammeloo 2019, Section 3.2); and the US (Buxbaum 2019, Section 3.4). 263 Rozehnalová et al. (2019), Section 3.1. 264 Tarman and Oba (2019), Section 5. 265 This is so in Taiwan: Chen (2019), Section 3.1, citing the Taiwanese Code of Civil Procedure, Article 28 Section 2. 266 Mailhé (2019), Section 2.2, text to notes 33–35. 267 Van Calster and Poesen (2019), Section 4.3.3. 268 Japan (Takahashi 2019, Section 3.1), Singapore (Chong 2019, Section 4), and the UK (Merrett and Carruthers 2019, Section 3). 269 Australia (Marshall 2019, Section 4); Japan (Takahashi 2019, Section 3.2). 270 Lai v ABN AMRO Bank NV, the Shanghai High People’s Court (2010) Hu Gao Min Wu (Shang) Zhong Zi No 49, cited by Tu and Huang (2019), Section 4, text to notes 102-3. 271 Germany (Weller 2019, Section 2.1.1, text to note 55).
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leave the choice of court entirely to the plaintiff, because this would be insufficiently precise.272 In German law, “the asymmetry raises issues of fairness and abuse”,273 and there are a range of controls to prevent this, including where one party “exploited its economic or social power” in compelling the weaker party to agree to the asymmetric agreement, and where the weaker party’s access to justice is impaired, either legally or practically, “to an intolerable extent”.274 The controls are stronger where the asymmetric agreement is contained in standard terms.275 Common law courts, particularly the English courts, and most common law commentators276 do not see any problem with asymmetric choice of court agreements. English courts have given effect to them under national law, the Brussels Convention, the Lugano Convention, and the Recast.277 The English judges have stated that the fact that such agreements give an advantage to one party is not unusual in contracts generally and is not a cause for concern.278 English commentators insist that there is nothing wrong with the parties reaching an agreement as to jurisdiction that is neither simply exclusive nor simply optional. Briggs asserted that there is no apparent reason why parties may not, if so advised, make an agreement for the resolution of disputes which is more complex, and better suited to their needs, than would be provided by a plain and simple “exclusive or non-exclusive” template.279
In those legal systems which impose general restrictions on the use of choice of court agreements involving weaker parties, those restrictions would be applied to asymmetric agreements.280 There are other substantive provisions under the national laws of some countries which might have the effect of limiting the effect of an asymmetric choice of court agreement. For example, Takahashi suggests that a new provision of the Japanese Civil Code, which came into force on 1 April 2020, which states that any contractual clause in a standard transaction “which purports to restrict the rights or add to the obligations of the other party [ie the 272
Weller (2019), Section 4, text to note 163. Weller (2019), Section 4, text to note 162. 274 Weller (2019), Section 4, text to notes 167-8. 275 Weller (2019), Section 4, text to note 171. 276 E.g. Briggs (2008), pp. 120–121, para 4.24. 277 These include Commerzbank AG v Liquimar Tankers Management Inc [2017] 1 WLR 3497; Barclays Bank plc v Ente Nazionale di Previdenza ed Assistenza dei Medici e Degli Odontoiatri [2015] 2 Lloyd’s Rep 527; Mauritius Commercial Bank Ltd v Hestia Holdings Ltd [2013] 2 All ER (Comm) 899; Lornamead Acquisitions Ltd v Kaupthing Bank HF [2013] 1 BCLC 73; and Continental Bank NA v Aeakos Cia Naviera SA [1994] 1 WLR 588. 278 Merrett and Carruthers (2019), Section 3.1.1, text to notes 144–145 (citing NB Three Shipping Ltd v Harebell Shipping Ltd [2014] EWHC 2001 and Law Debenture Trust Corporation plc v Elektrim Finance BV [2005] EWHC 1412 (Ch), para 46. 279 Briggs (2012), p. 376. 280 This includes Japan: Takahashi (2019), Section 3.2, text to notes 20–21. 273
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offeree] shall be deemed not to have been consented to if it is considered to harm the interests of that other party unilaterally” will apply to an asymmetric choice of court agreement contained in a commercial contract.281 One particularly tricky problem associated with asymmetric choice of court agreements is determining the governing law. Referring to the law of the chosen court is unhelpful because there are multiple courts chosen, which might be problematic, given that different legal systems take different views as to the validity of such agreements. Referring to the law of the forum might encourage forum shopping, given the diversity in regulation of asymmetric choice of court agreements. A possible solution would be to refer to the law governing the contract in which the choice of court agreement is contained.
10
Optional Choice of Court Agreements in Intra-national Cases
In some countries, including Canada, China and Greece, optional choice of court agreements in intra-national cases are not treated any differently to those in international cases.282 In Germany, the same principles are applied to intra-national cases and those international cases which are subject to German national law.283 In other legal systems, choice of court agreements in intranational cases are treated somewhat differently to those in international cases. In Japan, “the tendency of the courts in intra-national cases is to deem a choice of court agreement to be optional unless the contrary intent is clear”.284 This is the converse to international cases, in which the Japanese courts tend to treat choice of court agreements as exclusive. There are no special jurisdictional rules for protecting consumers and employees in the intra-national context, unlike the international context. After the amendment to the Japanese Code of Civil Procedure which inserted special provisions for protecting such weaker parties in the international context, Takahashi suggests that “if the different treatment of intranational and international cases persists, the presence and absence of special rules for protecting weaker parties may furnish an explanation”.285 In Australia, there is a significant difference between the effect of optional choice of court agreements in intranational, compared to international, cases.286 While in both cases 281 Takahashi (2019), Section 3.2, citing the Japanese Civil Code, new Article 548-2. 282 Guillemard and Sabourin (2019), Section 2.3; Tu and Huang (2019), Section 3 (text to notes 89 and 90); Panapoulos (2019), Section 2.4.3. 283 Weller (2019), Section 3.10. 284 Takahashi (2019), Section 2.4, text to note 18. 285 Takahashi (2019), Section 2.4, final para. 286 Marshall (2019), Section 2.4.
optional choice of court agreements in favour of the forum were likely to be given significant weight, optional choice of court agreements in favour of other courts were much more likely to be regarded as a “strong indication” of the parties’ intentions as to venue in intranational cases,287 whereas in international cases, Australian courts have never stayed proceedings in cases involving optional choice of court agreements in favour of foreign courts.288
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The Recognition of Foreign Judgments
In most countries, a judgment rendered by a foreign court nominated by the parties in an optional choice of court agreement would be recognised, assuming that other requirements of recognition are satisfied.289 Whereas judgments rendered by foreign courts other than that which the parties nominated as having exclusive jurisdiction would not be recognised in some countries,290 there is no such limitation on the recognition of foreign judgments rendered by courts other than those nominated in an optional choice of court agreement.291 As noted, the main practical difficulty with optional choice of court agreements is that they do very little to limit the prospect of parallel proceedings. Although this may be controlled in many cases by the principles of lis pendens, or forum non conveniens, there remains the prospect that, in a case involving an optional choice of court agreement, judgment is rendered by more than one court in the same matter, where one court’s jurisdiction was founded on the parties’ agreement. This possibility is addressed in the Hague Choice of Court Convention, which (as noted above), enables contracting states to make a declaration that they will recognise judgments of the courts of other contracting states, which were nominated by the parties as having non-exclusive jurisdiction, and which have also made a declaration under Article 22.292 Article 22(2) anticipates the possibility of multiple proceedings, and addresses this by stipulating that the judgment will only be recognised if
287
Marshall (2019), Section 2.4. Marshall (2019), Section 2.3.3.1. 289 Japan (Takahashi 2019, Section 1.1); Taiwan (Chen 2019, Section 2.8.4). 290 Although there is no such indirect protection of exclusive choice of court agreements in the Brussels I Recast. See Panapoulos (2019), Section 1.3.3.3, citing Greek Code of Civil Procedure, Article 323(2). 291 Including Australia (Marshall 2019, Section 2.3.3.5); the Czech Republic (Rozehnalová et al. 2019, Section 2.6.3); Germany (Weller 2019, Section 3.9); Romania (Oprea 2019, Section 4.6.3); Singapore (Chong 2019, Section 2.7, text following note 88); Taiwan (Chen 2019, Section 2.8.5). 292 To date, none of the contracting states has entered this reservation. 288
Optional Choice of Court Agreements in Private International Law b) there exists neither a judgment given by any other court before which proceedings could be brought in accordance with the non-exclusive choice of court agreement, nor a proceeding pending between the same parties in any other such court on the same cause of action; and c) the court of origin was the court first seised.
12
Justifications for Enforcing Choice of Court Agreements
While there has been a rapid increase in the volume of laws and commentary on choice of court agreements, there has been relatively limited discussion of the justifications for the enforcement of agreements on choice of court. It is generally assumed that the benefits of agreements speak for themselves, and that as much as party autonomy might be beneficial in other contexts, it can be assumed to be beneficial in the context of choices of court. A number of arguments are made in favour of the enforcement of agreements about dispute resolution. Most of these arguments are not specific either to the context of international dispute resolution, or to the issue of jurisdiction, and therefore many of these justifications are also found in the context of the use of agreements in domestic private law and domestic civil procedure: indeed, one argument in favour of the use of agreements in the context of international litigation is that this is consistent with the domestic law of obligations. Many of these arguments are proposed at a level of generality and abstraction, and almost all assume that the choice of court agreement is exclusive. There has been very limited discussion of the justification for the enforcement of optional choice of court agreements, in particular. The justifications include that enforcing agreements creates or enhances legal certainty and predictability.293 This has two applications. The first relates to enabling the parties to predict how any jurisdictional dispute between them would be resolved, and the second, to establishing the legal framework for the main contract. The first aspect of certainty—enabling the parties to anticipate the resolution of a jurisdictional dispute—is particularly important in relation to the selection of forum because, so the argument goes, without a choice of court agreement, it is very likely that any dispute could be heard in the courts of a number of different countries because of the expansive circumstances in which the courts of most legal systems assert jurisdictional competence. Further exacerbating this problem, disputes about the allocation of jurisdiction in the absence of any agreement are resolved according to default principles that are regarded as being problematic. The default principle of lis
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pendens is regarded as too blunt, if not liable to incentivise the hasty commencement of proceedings, and therefore disincentivise and frustrate amicable settlement of disputes. The default principle of forum non conveniens on the other hand is regarded as too unpredictable, if not unfair to foreign defendants. Both types of default principle, in conjunction with broad rules of jurisdictional competence, are also criticised for their propensity to foster forum shopping. The use of choice of court agreements therefore is promoted on the basis that it minimises the scope for opportunistic, unilateral forum shopping. It will be obvious that the foregoing argument applies best to, and indeed is usually made in the context of, exclusive choice of court agreements. In some cases, courts have commented on the value of exclusive choice of court agreements in creating certainty. For example, in Armacel v Smurfit Stone Container Corp, Justice Jacobson of the Federal Court of Australia said that the choice of court agreement had to be interpreted against the background that this was a contract made between business people negotiating at arms’ length who must be presumed to have intended some certainty as to where their disputes would be litigated. . . .It is therefore difficult to see why they would not have intended that all their disputes be resolved in New South Wales.294
The assumption that reasonable business people would not intend a multiplicity of proceedings is also relevant in the broad interpretation applied in some countries to the material scope of choice of court agreements.295 The application of arguments about certainty to optional choice of court agreements is very complicated. Optional choice of court agreements merely create an option for one party, or both, to commence proceedings in a nominated court, or several nominated courts. Because they do not necessarily affect the parties’ ability to commence proceedings in courts other than that or those nominated, they do not reduce the number of potential forums, and clearly, they do not do so to the same degree that exclusive choice of court agreements do. It is therefore questionable whether they can be defended on the basis that they create legal certainty. The second aspect of the argument that choice of court agreements create certainty is that the parties need to know the legal framework for their contract (particularly, the forum in which any disputes will be resolved) in order appropriately to draft the contract,296 and to perform their obligations under it. This argument has a much weaker application in the context of optional choice of court agreements than in the 294
293
This is referred to by the European Court of Justice in cases such as Benincasa v Dentalkit Srl [1997] ECJ Case C-269/95, para 29; and Trasporti Castelletti [1999] ECJ Case C-159/97, para 48. See also Van Calster and Poesen (2019), Section 2.1.
[2008] FCA 592, para 88. Germany (Weller 2019, Section 2.1.5, text to note 77, referring to the assumption that “reasonable business parties typically . . .want to avoid several proceedings about the same facts in different courts”). 296 Hartley (2013), p. 4, para 1.01. 295
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context of exclusive choice of court agreements, unless the parties nominate only one court. According to an economic analysis of law, the use of agreements is desirable because of consumer sovereignty: that is, the parties are better judges of what is in their interests than any third party, including a court. Economic analysts also argue that if agreements are strictly enforced, the private and public costs of dispute resolution will be reduced. Optional choice of court agreements do not lend themselves to strict enforcement in the way that exclusive choice of court agreements do. The principle of lis pendens is usually applied in a strict way; but it is not possible to predict which court will be first seised. The principle of forum non conveniens has also been criticised as making it difficult to predict whether a court will decline jurisdiction. Under either principle, there is not a strong argument that the use of optional choice of court agreements will be efficient. Enforcing agreements is also justified on the basis that the agreement generates reasonable or legitimate expectations by the parties that should be protected. This argument is circular because the expectation can only be legitimate or reasonable if it reflects the legal status of agreements. The enforcement of agreements is usually justified primarily on the basis that it promotes respect for party autonomy.297 For example, recital 19 of the Preamble to the Brussels I Recast Regulation states that The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, should be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation.
Almost all of the above referenced discussion about the justifications for enforcing choice of court agreements assumes that the choice of court agreement is exclusive. Whereas exclusive choice of court agreements are generally regarded as being highly rational (because they generate a high degree of certainty about forum), there is a perception that optional choice of court agreements are the opposite. In the influential English case Sohio Supply Co v Gatoil (USA) Inc, Lord Justice Staughton said that he could think of no reason at all why [the parties] should choose to go to the trouble of saying that the English courts should have non-exclusive jurisdiction. I can think of every reason why they should choose that some court, in this case the English court, should have exclusive jurisdiction. Then, both sides would know where all cases were to be tried.298
297 Schoeman (2019), Section 3.3, text to notes 34 and 35, citing MV Spartan-Runner v Jotun-Henry Clark Ltd 1991 (3) SA 803 (N), 806G-H and Blanchard, Krasner & French v Evans 2002 (4) SA 144 (T), para 11; and Foize Africa (Pty) Ltd v Foize Beheer BV and Others 2013 (3) SA 91 (SCA), para 28(a). 298 [1989] 1 Lloyd’s Rep 588, 591-2.
M. Keyes
Guillemard and Sabourin also question the utility of optional choice of court agreements, given that the legal certainty generated by such agreements tends to be very limited.299 Clearly, there are reasons for using optional choice of court agreements that might be quite rational. Briggs points out that Agreeing in advance that a particular court or courts would, as far as the parties are concerned, be available, would reduce the risk of jurisdictional challenges if proceedings are brought before them; but for the parties to tie their hands to litigation in a court which may become unattractive in the period between the making of the contract and the dispute arising is not always sensible.300
That is particularly so if one party is, or its assets are, mobile, in which case, the flexibility which optional choice of court agreements offer may be attractive at least to one party.301 One reason that optional choice of court agreements are regarded as irrational is that they do not eliminate or substantially reduce the prospect of parallel proceedings. Not only is this prospect problematic from the perspective of public policy, but it has also been regarded as being, in general, unlikely to reflect the intentions of rational businesspeople. Guillemard and Sabourin suggest that optional choice of court agreements encourage a race to commence proceedings.302
13
Reform
The national reports demonstrate that there are many unresolved issues associated with the effects of optional choice of court agreements. Even in those countries where the law in relation to optional choice of court agreements is relatively well developed, there remain a number of issues that have not been determined, and incompatible decisions. These issues do not appear to have attracted the attention of lawmakers, in that none of the national reports refers to current reform projects. A few national reporters take the view that there is no obvious need for reform to the law, whereas others suggest reform is required. The latter tends to be the case in those countries in which the recognition of choice of court agreements is relatively recent. But most reporters identify aspects of the law relating to the effect of optional choice of court agreements which would benefit from greater clarity and certainty. 299 Guillemard and Sabourin (2019), Introduction, text following note 17. 300 Briggs (2008), pp. 114–115, para 4.15. 301 Oprea (2019), Section 1.2, text in para above note 16. 302 Guillemard and Sabourin (2019), Introduction.
Optional Choice of Court Agreements in Private International Law
Aspects of the law which have been identified as being problematic and therefore requiring reform include a lack of certainty on the distinction between exclusive and optional choice of court agreements303; a lack of clarity on the governing law to determine whether a choice of court agreement is optional or exclusive304; a lack of consistency in the treatment of optional agreements305; a lack of consistency in the treatment of optional choice of court agreements in favour of the forum and those in favour of foreign courts306; and a lack of consistency in the treatment of optional choice of court agreements in international and intranational cases.307 It has been suggested that the general lis pendens rule may not be suitable to resolve parallel proceedings where one of the courts’ jurisdiction is derived from an optional choice of court agreement.308 The national reports also disclose some quite significant differences in the definition of and treatment of optional choice of court agreements, which means that if there are parallel proceedings, the same choice of court agreement may well be given very different effects in the different legal systems. Several reporters also suggest that greater clarity is required in terms of the effect of asymmetric choice of court agreements. Some of the national reporters include suggestions for the reform of the law. In particular, it is suggested that it would be desirable to develop statutory solutions to maximise certainty and clarity. There is a fairly high level of support for the Hague Choice of Court Convention, but those reporters who suggested that their country acceding to the convention would be an improvement do not comment on whether they also support their country making a declaration under Article 22, which indirectly addresses the treatment of optional choice of court agreements.
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party autonomy. This convergence is reflected in the Brussels instruments, particularly the Recast, which has had a strong influence within the European Union Member States,309 but also influenced the development of the law further afield.310 The Brussels I Recast was designed to integrate with the Hague Choice of Court Convention. That Convention creates the possibility of greater international coordination in the treatment of choice of court agreements, but so far has not been widely adopted beyond the European Union. In all events, the Hague Convention only deals directly with exclusive choice of court agreements, and the Brussels I Recast only modified the treatment of exclusive choice of court agreements, leaving other choice of court agreements regulated by the default principle of lis pendens. The most significant recent development in relation to optional choice of court agreements concerns the now common, although not universal, position that the parties’ agreement as to forum is effective in establishing the competence of a court to hear a dispute, notwithstanding a lack of any factual connection to the chosen court. There remain important differences between the legal treatment of optional choice of court agreements internationally. For example, the conceptualisation and treatment of optional choice of court agreements in common law jurisdictions is fairly similar, but important differences persist between the common law treatment of such agreements, and the treatment in other legal systems. This is clearly evident in the kinds of remedies available to support optional choice of court agreements. There are also significant differences in terms of the legal treatment of asymmetric agreements, and agreements involving weaker parties. As Briggs observed, though the expression ‘non-exclusive jurisdiction clause’ may suggest it describes a class of terms which is as internally coherent as that of exclusive jurisdiction clauses, it does not. . . .unlike exclusive jurisdiction clauses, non-exclusive jurisdiction is neither straightforward nor uniform.311
Conclusion
The national reports confirm that there have been significant changes in the law relating to the effect of choice of court agreements. They also show convergences in terms of the legal effect of choice of court agreements, particularly in terms of a widespread acknowledgment of the virtues of 303 E.g. Japan (Takahashi 2019, Section 4); South Africa (Schoeman 2019, Section 6). Weller notes this issue but also suggests that “this is a minor problem because it is easy for the parties to express themselves clearly in this respect.”: (2019), Section 5. 304 Van Calster and Poesen note that the parties “can minimize the risk of litigation on this issue by explicitly subjecting the optional choice of court agreement to one particular law”: (2019), Section 3.3.2 (text to note 43). 305 Common law Canada: Saumier (2019). 306 Australia (Marshall 2019, Sections 2.3.1.3 and 5); Singapore (Chong 2019, Section 5, para 3). 307 Marshall (2019), Section 2.4. 308 Oprea (2019), Section 6.
Briggs argued strongly that, because optional choice of court agreements may have different effects, depending on exactly what the agreement provides, “it would be beneficial to lay aside the unhelpful terminology of ‘non-exclusive jurisdiction agreement’, and to focus instead on precisely what obligations the parties wished to create and impose on each other.”312 The focus on the obligations entailed in the choice of court agreement is consistent with the law in some, but not all, countries represented in the national reports. 309
See, for example, Rozehnalová et al. (2019), Section 1.3. Takahashi acknowledges the influence of the Brussels I Regulation in terms of the introduction in the 2012 amendments to the Japanese Code of Civil Procedure of the protective provisions relating to consumer and individual employment contracts: (2019), Section 1. 311 Briggs (2008), p. 116, para 4.19. 312 Briggs (2008), p. 120, para 4.23. 310
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Disagreeing with Briggs’ argument, Joseph pointed out that the distinction between exclusive and non-exclusive jurisdiction agreements “was of central importance” to the Brussels I Recast, the Lugano Convention, and the Hague Choice of Court Agreements Convention.313 As Oprea notes, the distinction is important in practice for several reasons. First, the Hague Convention does not apply to optional agreements314; and second, a number of specific rules have been developed which apply only to exclusive agreements.315 In short, it seems clear that the category of optional choice of court agreements is here to stay. This collection suggests the need for further work at the international, regional, and national levels in order to improve the certainty, clarity, and consistency of the law relating to optional choice of court agreements, which is already important in practice and only likely to become more so.
References Briggs A (2008) Agreements on jurisdiction and choice of law. Oxford University Press, Oxford Briggs A (2012) The subtle variety of jurisdiction agreements. Lloyd’s Maritime Commer Law Q:364 Collins L (ed) (2012) Dicey, Morris & Collins on the conflict of laws, 15th edn. Sweet & Maxwell, London Hartley T (2013) Choice-of-court agreements under the European and international instruments. Oxford University Press, Oxford Hartley T, Dogauchi D (2010) Explanatory report on the Convention of 30 June 2005 on Choice of Court Agreements. In: Permanent Bureau of the Conference (ed) Proceedings of the twentieth session, Tome III. Intersentia, Antwerp Joseph D (2015) Jurisdiction and arbitration agreements and their enforcement, 3rd edn. Sweet & Maxwell, London Keyes M (2015) Party autonomy in dispute resolution: implied choices in the context of jurisdiction. Jpn Yearb Int Law 58:223–246 Keyes M, Marshall BA (2015) Jurisdiction agreements – exclusive, optional and asymmetrical. J Priv Int Law 11:345–378 Liu X, Zhou Q (2014) The actual connection principle and forum non conveniens in Chinese contractual jurisdiction system. Legal Sci 12:50 Maher G, Rodger B (2010) Civil jurisdiction in the Scottish Courts. W Green, Edinburgh Marshall BA, Keyes M (2017) Australia’s accession to the Hague Convention on choice of court agreements. Melb Univ Law Rev 41:246 Nygh P (1999) Autonomy in international contracts. Clarendon Press, Oxford Tang ZS (2012) Effectiveness of exclusive jurisdiction clauses in the Chinese Courts – a pragmatic study. Int Comp Law Q 61:459 Tang ZS, Xiao Y, Huo Z (2016) Conflict of laws in the People’s Republic of China. Edward Elgar, Cheltenham
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Joseph (2015), p. 102, para 4.03. Oprea (2019), Section 2, text to note 19. 315 In particular, see Brussels I Recast Regulation, Article 31(2). 314
M. Keyes Yeo TM (2005) The contractual basis of the enforcement of exclusive and non-exclusive choice of court agreements. Singapore Acad Law J 17:306
National Reports Cited in This Chapter The national reports all appear in Keyes M (ed) (2020) Optional choice of court agreements in private international law. Springer, Cham Buxbaum H (2019) United States: the interpretation and effect of permissive forum selection clauses Chen R-C (2019) Taiwan: legislation and practice on choice of court agreements in Taiwan Chong A (2019) Singapore: a mix of traditional and new rules Guillemard S, Sabourin F (2019) Canada – Civil Law (Québec): Les clauses d’élection de for facultatives en droit international privé québécois Haas E, MacCabe K (2019) Switzerland: choice of court agreements according to the code on civil procedure, the Private International Law Act and the Lugano Convention Mailhé F (2019) France: a game of asymmetries, optional and asymmetrical choice of court agreements under French Case Law Marshall B (2019) Australia: inconsistencies in the treatment of optional choice of court agreements Merrett L, Carruthers J (2019) United Kingdom: giving effect to optional choice of court agreements – interpretation, operation and enforcement Oprea EA (2019) Romania: interpretation and effects of optional jurisdiction agreements in international disputes Panapoulos G (2019) Greece: a forum favorable to optional choice of court agreements Rammeloo S (2019) Netherlands: optional choice of court agreements in a globalizing world Rozehnalová N, Mahdalová S, Zavadilová L (2019) Czech Republic: the treatment of optional and exclusive choice of court agreements Saumier G (2019) Canada – common law: choice of court agreements in common law Canada Schoeman E (2019) South Africa: Time for Reform Takahashi K (2019) Japan: quests for equilibrium and certainty Tarman ZD, Oba ME (2019) Turkey: optional choice of court agreements in Turkish Law Tu G, Huang Z (2019) China: optional choice of court agreements in the Vibrant Age Van Calster G, Poesen M (2019) Belgium: optional choice of court agreements, legal uncertainty despite a modern legal framework Weller M (2019) Germany: optional choice of court agreements – German National Report
Mary Keyes is a professor at Griffith Law School, at Griffith University, in Brisbane, Australia. Her teaching and research interests are in the areas of jurisdiction, particularly choice of court; and international family law and litigation.
Questions de droit international privé de la responsabilité sociétale des entreprises Catherine Kessedjian
Abstract
The General Report builds on the national reports and some independent research by the General Rapporteur. It aims at guiding the reader through the complexity of jurisdiction and applicable law rules for disputes arising of violations of corporate social responsibility by economic actors.
1
Introduction
Depuis de nombreuses années, la responsabilité sociétale des entreprises (RSE) tend à encadrer les activités des entreprises et les effets négatifs que ces activités peuvent avoir sur les tiers. Ce rapport général a été préparé avec l’aide du Professeur Humberto Cantú Rivera qui a notamment préparé une synthèse consolidée des rapports reçus. Nous remercions les rapporteurs qui ont préparé les rapports pour les pays suivants : Allemagne (Marc-Philippe Weller, Leonhard Hübner, Luca Kaller), Argentine (María Susana Najurieta et Florencia S.Wegher Osci), Belgique (Siel Demeyere et Geert Van Calster), Brésil (Marilda Rosado), Canada (Joost Blom), Chili (Judith Schönsteiner et Juan Ignacio Contardo), Chine (Guangjian Tu et Si Chen), Espagne (Maria Álvarez Torné et Georgina Garriga), France (A. Danis-Fatôme, K. Deckert, M.-L. Niboyet et L. Sinopoli), Italie (Angelica Bonfanti), Japon (Dai Yokomizo), Kazakhstan (Milana Karayanidi et Steven Comerford), Mexique (Humberto Cantú Rivera), Pays-Bas (Martijn Scheltema et L.F.H. (Liesbeth) Enneking), Portugal (Rui Dias), République tchèque (Monika Feigerlová et Monika Pauknerová), Royaume Uni (Veronika Ruiz Abou-Nigm et Kasey McCall-Smith), Suisse (Andrea Bonomi et Nicolas Bueno), Turquie (Zeynep Derya Tarman), Viet Nam (Ngo Quoc Chien et Tran Thi Hien). Le rapporteur pour la Roumanie a envoyé quelques informations. Le Prof. Beth Stephens, expert spécial auprès du Rapporteur général, a apporté certaines informations pour les ÉtatsUnis d’Amérique. This report was also published in Kessedjian and Cantú Rivera (Eds), Private International Law Aspects of Corporate Social Responsibility, Springer Nature Switzerland 2020. Rapport à jour de mai 2019. C. Kessedjian (*) Université Panthéon-Assas Paris II, Paris, France e-mail: [email protected]
De nombreuses difficultés s'en suivent, surtout lorsque les activités des entreprises sont internationales, ce qui est très fréquemment le cas. Les entreprises s’interrogent sur le droit applicable à leurs activités. Le droit international, pour autant qu’il ne s’adresse pas seulement aux Etats, est souvent qualifié de droit tendre ou soft law, et le droit de l’État hôte1 est, dans un grand nombre de cas, moins contraignant que le droit de l’État d’origine2. La question du droit applicable, traditionnellement étudiée en droit international privé après la compétence juridictionnelle, car chaque juge applique ses propres règles de conflit de lois, se complique dans le domaine pour deux raisons. Tout d’abord, le droit international privé n’a pas été conçu pour des normes, telles que celles du droit tendre. Il n’est donc pas certain que le droit international privé soit aujourd’hui apte à les prendre en considération si ce n’est permettre leur application3, d’où la question 19 posée aux rapporteurs nationaux. En second lieu, les entreprises doivent savoir avec une certitude et une prévisibilité raisonnables quelles sont les règles qui s’appliqueront à leurs activités. Or, si elles doivent attendre la survenance d’un contentieux avant de savoir quel sera le droit applicable, l’objectif de prévisibilité ne peut être atteint. 1 Nous entendons par État hôte, l’État dans lequel l’entreprise développe ses activités. Par hypothèse, pour une entreprise multinationale, il y a une multitude d’États qui peuvent être qualifiés d’États hôtes. 2 Nous entendons par État d’origine, l’État dans lequel l’entreprise est « installée » soit qu’elle y possède un siège réel central, soit qu’elle y développe l’essentiel de ses activités (centre principal des activités), soit qu’elle y soit enregistrée (incorporated) selon le critère retenu dans les pays de common law. Sur cette question, v. infra para. 72. 3 Le débat sur le droit tendre ou, comme le Conseil d’État français le nomme, le droit souple, n’a jamais été plus vif au moins en France. Au printemps 2018 deux ouvrages ont été publiés : Deumier and Sorel (dirs) (2018) ; Cassella et al. (dirs) (2018). Une thèse a été soutenue en mars 2017 par Yann Heyraud sur un thème proche, Le droit non-étatique dans les rapports internationaux privés – Contribution à l’étude des fonctions du droit international privé en matière commerciale et sportive, Thèse Paris I. Thème proche car toutes les normes non-étatiques ne sont pas du droit tendre et vice-versa. Cf. également notre article aux Mélanges E. Decaux, Kessedjian (2018), pp. 1323–1336.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_9
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En ce qui concerne le contentieux, de nombreux projets actuellement discutés dans divers cercles internationaux proposent le recours aux modes alternatifs de règlement des différends, si bien que nous ne pouvions pas éviter le débat. Certes, une vision étroite du droit international privé pouvait nous entraîner à ne pas aborder cette question dans cette étude. Nous avons préféré ne pas éluder la question car son implication est réelle sur le droit international privé puisqu’il devient relativement marginal en arbitrage et inopérant en médiation et dans le travail de bons offices effectué par les PCN4. Le droit international privé reprend tous ses droits lorsque, après la survenance d’un dommage, les victimes décident de poursuivre l’entreprise devant une juridiction nationale. La question de la compétence internationale d’une part, celle de la loi applicable, et celle de la reconnaissance et de l’exécution des jugements qui seront ainsi rendus, reprennent une importance fondamentale. Ayant pavé ainsi le chemin du raisonnement que l’on doit tenir lorsque l’on s’intéresse aux questions de droit international privé dans le domaine de la RSE, on doit reconnaître néanmoins que le sujet est suffisamment novateur pour nécessiter, à titre de prolégomènes, que l’on définisse le plus exactement possible ce que l’on entend par RSE. C’est pourquoi la première question posée aux rapporteurs concernait l’éventuelle admission, par les États, d’une définition plutôt qu’une autre.
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Définition et sources (questions 1 à 5)
La première question qui se pose, avant d’étudier les règles applicables, concerne la définition de ce qu’il convient d’entendre par « norme de RSE » et quel est l’encadrement juridique dans lequel elles se placent, à la fois en droit international et en droit interne. Il convenait également de s’interroger sur l’éventuelle application ou prise en considération de normes de droit tendre (soft law) ou de normes éthiques.
2.1
Existe-t-il une définition de la responsabilité sociétale des entreprises dans votre pays ?
Pour guider les rapporteurs, il leur avait été donné les définitions suivantes: Norme ISO 26000, les principes directeurs de l’OCDE, les principes directeurs des NU sur les entreprises et les droits de l’homme. Pour les besoins de ce rapport, nous y ajoutons la définition retenue par la Commission européenne tellement générale que l’on peut se demander si elle est vraiment utile. 4 Nous n’abordons pas la question de la création d’une éventuelle juridiction internationale spécialisée dans le domaine des violations des droits de l’Homme par les entreprises. Une telle proposition est faite par Steinitz (2018).
Norme ISO 26000 La RSE est la « responsabilité d'une organisation vis-à-vis des impacts de ses décisions et activités sur la société et sur l'environnement, se traduisant par un comportement éthique et transparent qui – contribue au développement durable, y compris à la santé et au bien-être de la société ; – prend en compte les attentes des parties prenantes ; – respecte les lois en vigueur tout en étant en cohérence avec les normes internationales de comportement ; – est intégré dans l'ensemble de l'organisation et mis en œuvre dans ses relations. » Les Principes Directeurs de l’OCDE Le cadre de l’OCDE pour l’investissement développe cette définition de la manière suivante : « La notion de conduite responsable des entreprises (CRE) signifie que les entreprises doivent a) apporter leur contribution au progrès économique, environnemental et social pour parvenir à un développement durable et b) éviter d’avoir, par leurs propres activités, des incidences préjudiciables et remédier à ces incidences lorsqu’elles se produisent ; et prévenir ou atténuer les conséquences négatives directement liées à leurs activités, leurs produits et leurs services du fait de l’existence d’une relation d’affaires. Processus essentiel pour déterminer, prévenir et atténuer les incidences négatives, réelles ou potentielles, la diligence raisonnable fondée sur le risque est de ce fait un aspect fondamental de la CRE. Les entreprises doivent obéir aux législations internes et respecter les droits de l’Homme quel que soit le pays dans lequel elles exercent des activités, même lorsque les moyens qui y sont mis en œuvre pour faire appliquer ces législations ou obligations sont insuffisants. Il s’agit là de leur toute première obligation. Le champ d’application de la CRE est vaste et transversal car les incidences, positives ou négatives, des activités des entreprises sur la collectivité couvrent toute une série de domaines fondamentaux (comme la communication d’informations, les droits de l’Homme, l’emploi et le travail, l’environnement, la lutte contre la corruption, les intérêts des consommateurs, les sciences et les technologies, la concurrence et la fiscalité). La responsabilité qui incombe aux entreprises d’adopter une conduite responsable s’applique à toutes les entreprises quelle que soit leur structure juridique, leur taille, leur régime de propriété ou le secteur dans lequel elles exercent leurs activités. Les attentes en matière de CRE concernent donc aussi bien les entreprises privées, publiques ou mixtes ; les entreprises multinationales ou celles qui n’opèrent que dans leur pays ; les grandes entreprises ou les petites et moyennes entreprises (PME).
Questions de droit international privé de la responsabilité sociétale des entreprises
Les Principes directeurs des Nations unies sur les entreprises et les droits de l’Homme (aussi connus sous l’appellation « Principes Ruggie »)5 Ces principes, adoptés en juin 2011 « reconnaissent le rôle dévolu aux entreprises en qualité d’organes spécialisés de la société remplissant des fonctions particulières, tenues de se conformer à toutes les lois applicables et de respecter les droits de l’Homme », tout en soulignant le rôle des États en matière de protection de ces droits et la nécessité de mettre en place des procédures pour permettre l’accès des victimes. Commission européenne - Communication du 25 octobre 20116 La responsabilité sociale des entreprises est « la responsabilité des entreprises vis-à-vis des effets qu’elles exercent sur la société ». Cette responsabilité impose [à l'entreprise] d’engager « en collaboration étroite avec [ses] parties prenantes, un processus destiné à intégrer les préoccupations en matière sociale, environnementale, éthique, de droits de l’Homme et de consommateurs dans [ses] activités commerciales et leur stratégie de base ». A cela, il convient d’ajouter également la déclaration de Principes tripartite de l’OIT sur les entreprises multinationales et la politique sociale7. Les rapports nationaux se partagent presque de manière égale entre les pays pour qui il existe une définition de la RSE8 et ceux pour lesquels il n’existerait pas une telle définition9. Toutefois, pour un pays comme le Chili, la définition des Principes Ruggie a été adoptée dans le Plan d’action national. De ce fait, elle est limitée aux questions liées à la relation entreprises et droits de l’Homme. Plusieurs remarques sont nécessaires à ce stade. On note que certains rapporteurs ont répondu selon le cadre normatif interne de leur pays alors que d’autres ont pris en considération la culture sociétale qui prévaut dans le pays ou du point de vue des normes internationales. On pourrait d’ailleurs soutenir que tous les pays pour qui les rapporteurs ont répondu par la négative, mais sont pourtant membres soit de l’OCDE, soit des NU, soit des deux, devraient avoir intégré, au moins dans leurs politiques internes, si ce n’est dans leur législation, une définition proche de celle retenue 5
On doit aussi mentionner les rapports des NU sur les questions environnementales et de changements climatiques à combiner avec les Principes Ruggie. 6 Responsabilité sociale des entreprises : une nouvelle stratégie de l’UE pour la période 2011-2014 COM (2011) 681 final. 7 https://www.ilo.org/wcmsp5/groups/public/ed_emp/emp_ent/ documents/publication/wcms_124923.pdf. 8 Allemagne, Argentine, Belgique, États-Unis d’Amérique, Italie, Japon, Pays-Bas, Portugal, République Tchèque, Royaume-Uni, Suisse. 9 Brésil, Canada, Chili, Chine, Espagne, France, Kazakhstan, Mexique, Turquie, Vietnam.
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par ces deux organisations. Cette question n’est pas discutée de manière approfondie dans les rapports nationaux et ceux qui l’ont identifiée se retranchent derrière le caractère « soft » des normes de la RSE pour en déduire que les définitions proposées ne sont pas applicables dans le pays en cause. Pour les pays ayant adopté une telle définition, nous avons demandé quelle était cette définition. Voici les réponses reçues : Allemagne “CSR refers to “a company’s responsibility for its impact on society” which includes “social, environmental and economic aspects, as for example outlined in the internationally recognised reference documents on CSR, chief among them the fundamental ILO declaration on multinational enterprises and social policy, the OECD Guidelines for Multinational enterprises, the UN Guiding Principles on Business and Human Rights, the UN Global Compact and ISO 26000.” (Federal Ministry of Labour and Social Affairs)10. Argentine “Corporate social responsibility is the commitment undertaken by a company to contribute to sustainable economic development through collaboration with its employees, their families, local community and society as a whole, with the aim of improving life quality.” (Consejo Empresario Argentino para el Desarrollo Sostenible / Argentine Business Council for Sustainable Development). Belgique “Corporate Social Responsibility is a process whereby companies strive voluntarily to make operational and social improvements by systematically incorporating economic, environmental and social considerations in an integrated and coherent way into their overall operations, in consultation with their stakeholders.” (Interministerial Commission for Sustainable Development) However, “[s]o far, there is no statutory definition of CSR.”. États-Unis “Responsible business conduct is intended to include a broad range of areas in which corporate conduct impacts society. It is well understood that responsible business conduct (RBC), sometimes referred to as corporate social responsibility or CSR, entails conduct consistent with applicable laws and internationally recognized standards. Based on the idea that you can do well while doing no harm, RBC is a broad concept that focuses on two aspects of the business-society relationship: (1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and (2) avoiding adverse impacts and addressing them when they do occur. Risk-based due diligence lies at the heart 10
Toutefois, le rapport pour l’Allemagne souligne l’absence d’une véritable définition juridique fixée.
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of avoiding and addressing adverse impacts – it is a process through which enterprises identify, prevent, and mitigate actual and potential adverse impacts, and account for how these impacts are addressed.” (National Action Plan on Responsible Business Conduct). Italie “Responsibility of businesses for their impact on society. It acknowledges that the implementation of CSR is in the interest of the corporations themselves and of society as a whole and explicitly states [that CSR] involves voluntary behavior by companies that surpasses basic respect for legal obligations.” (National Action Plan on Corporate Social Responsibility). Japon “the behaviour of enterprises assuming the responsibility for impacts of their activities in order to be in harmony with the society and the environment and to seek for the sustainable development, and the style of enterprises to obtain the confidence of a variety of stakeholders surrounding them.” (Ministry of Economy, Trade and Industry). Pays-Bas The Social and Economic Council of the Netherlands (SER) defines CSR as “taking care of the effects that the functioning of a business enterprise has on society.” This definition has been adopted by the Dutch government in its policy documents. Portugal A recent amendment to the Companies Code (Decree-Law 89/2017 of 28 July 2017) to implement Directive 2013/34/EU regarding financial and non-financial information, includes in the Preamble such a definition, as follows: Corporate social responsibility, demonstrated through the disclosure of non-financial information with regard to social and environmental areas and to corporate governance, contributes decisively towards the analysis of the undertaking’s performance and its impact on society, towards the identification of their sustainability risks and towards the strengthening of investors’ and consumers’ trust.
République Tchèque “ . . . an organisation’s commitment to ensure that its decisions and day-to-day activities take account of the needs of its clients, suppliers, customers, employees and citizens living in the place where it operates, as well as those of the environment and all other entities, to which its activities relate, either directly or indirectly.” (National Action Plan for Corporate Social Responsibility, Ministry of Industry and Trade of the Czech Republic). Royaume-Uni “the responsibility of an organisation for the impacts of its decisions on society and the environment above and beyond its legal obligations, through transparent
C. Kessedjian
and ethical behaviour.” (UK Department for Business Innovation & Skills). Suisse No legislative definition; however, the Swiss Federal Council adopted a position paper on CSR in April 2015, defining it as a notion that encompasses themes such as working conditions, human rights, the environment, corruption prevention, fair competition, consumers interests, tax policies and transparency, that companies must take into account in parallel to the interests of the company owners. Que peut-on retenir de cette liste de définitions très variées? La RSE est à la fois un processus et un but afin d’obtenir des résultats substantiels et concrets pour que les activités des entreprises incorporent toutes les avancées en matière économique, sociale et environnementale, au-delà de ce que la loi exige. Ce dernier point est fondamental et ne se retrouve de manière explicite, malheureusement, que dans la définition retenue par le Royaume-Uni, alors qu’elle est essentielle pour comprendre comment les règles éthiques et de soft law viennent compléter les obligations légales. Elle devrait être incorporée dans un futur amendement des définitions retenues au niveau international. Toutefois, on notera que l’Allemagne a supprimé de la définition que ce pays retient le caractère volontaire des standards de RSE. Si bien que le résultat est le même qu’au Royaume-Uni, sauf que cela n’apparaît pas de manière évidente. Nous avions demandé aux rapporteurs, ayant répondu négativement à la question sur l’existence d’une définition dans leur pays, d’expliquer pourquoi, à leur avis, cette absence de définition. Le fait que la RSE soit considérée comme du droit tendre (soft law) ou, en tout cas, un domaine qui contient à la fois des normes contraignantes et des normes éthiques, est une des premières raisons invoquées par les pays qui ne retiennent pas de définition de la RSE11. Toutefois, d'autres pays considèrent qu'une définition n'existe pas car il n'existe pas de législation, ou autrement de texte écrit, sur la RSE12. La RSE étant essentiellement créée par les tribunaux, il n'existe pas de définition qui puisse être dégagée de cette jurisprudence13. D'autres Rapports nationaux semblent dire que plusieurs définitions sont retenues par les tribunaux ou différentes législations sans qu'aucune de ces définitions ne soit retenue de manière convaincante14. Nous avons cherché à aller un pas plus loin en demandant aux rapporteurs qui avaient répondu par la négative s’ils 11
C'est notamment le cas du Brésil, du Mexique, du Viet Nam. C'est le cas du Canada, du Chili, même si le rapport chilien précise qu'il existe une réticence générale au Chili à l'encontre de toute régulation, particulièrement dans cette matière. La même réticence est mentionnée par le Viet Nam d'autant plus que le concept est complexe. 13 Canada, Viet Nam, notamment. 14 Chine. 12
Questions de droit international privé de la responsabilité sociétale des entreprises
pensaient qu’un tribunal pourrait, dans leur pays, appliquer ou prendre en considération l’une des définitions retenues par les organisations internationales privées ou publiques mentionnées ci-dessus (question 1.3)15. Brésil “Brazil already has a Brazilian Social Responsibility Program, which works through the certification of compliance with the ISO 26000 standard and in voluntary basis. Also, it is worth to mention that BNDES - National Bank of Development has a social clause in its contracts preventing it from financing companies that are not bound to some social requirements, specially related to human rights. . . There is a trend to adopt corporate practices aimed at social responsibility, but there is also a corporate fear of business competitiveness and survival, once internal Corporate Social Responsibility systems may represent costs. Thus, on a voluntary basis, the concept embodied in the ISO 26000, the OECD Guidelines for Multinational Enterprises, or the United Nations Guiding Principles on Business and Human Rights may be applied, and it has being applied, by companies based in Brazil.” Canada “I think that Canadian governments, when recommending or mandating corporate behaviour, could refer to any or all of these definitions. As will be mentioned below, some have done so. These sources are seen to offer authoritative guidance as to the elements of CSR. However, I do not think that any one definition would be adopted as a legal framework for developing principles of CSR.”. Chili “The Chilean Institute of National Normalization (Instituto Nacional de Normalización) has approved ISO 26000 as a Chilean Standard “NCh-ISO 26000-2010 Guía de Responsabilidad Social”. . . .the OECD definition would probably be considered favourably for local incorporation, although it is not sufficiently specific to fit legislative requirements and would need to be spelled out. On the other hand, considering the existence of a policy based on the UN Guiding Principles, there might be a certain preponderance to continue using that framework.” Chine “Currently, there is no obvious sign that the Chinese government would apply the ISO 26000 definition, or the concept embodied in the OECD Guidelines for Multinational Enterprises, or that of the United Nations Guiding Principles on Business and Human Rights.” Espagne “ . . .different Spanish companies report under the framework of the so called “Global Reporting Initiative” and participate in the UN Global Compact. Spanish enterprises
15
Il s’agit de ISO, norme 26000, l’OCDE et les NU.
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also have the opportunity to comply with the ISO 26000 standards. In Spain, as a member of the OECD, it is also foreseen that the enterprises voluntarily apply the OECD Guidelines for Multinational Enterprises.” (L’Espagne a adopté son Plan d’action national pour la mise en œuvre des Principes directeurs des Nations Unies en 2017). France « La jurisprudence française pourrait forger sa propre définition, en s’inspirant de ces différentes sources. ». Mexique “[A]s a member of the OECD, Mexico contemplates the definition used by the OECD Guidelines for Multinational Enterprises. Several companies and organizations also take into consideration the four pillars of the Global Compact as representing the basis of CSR. [In addition,] Mexico is trying to integrate in its public policies the UN Guiding Principles on Business and Human Rights (hereinafter the ‘UNGPs’), through the development and adoption of a National Action Plan on Business and Human Rights based on the three pillars of the UNGPs.” Turquie “In terms of ISO 26000 definition and the UN 2011 Guiding Principles, application is certainly possible. . . the acceptance of internationally well-established definitions of CSR would not be a difficult leap for Turkish companies who, in practice, already adhere to a simple version of these definitions, even if they may not be aware of it. This is particularly true in terms of the UN Guiding Principles on Business and Human Rights since these “Ruggie Principles” are already widely translated and known in Turkey.”
2.2
L’influence des Points de contact nationaux
Il nous a semblé utile de nous interroger sur les Points de contact nationaux (PCN) car une partie du “contentieux” passe par ce mécanisme de règlement des différends (qui mélange négociation, médiation et bons offices) si bien que cela peut affecter l'application du droit international privé de deux manières : premièrement, la mesure dans laquelle les PCN appliquent ou non le droit international privé pour leurs activités dépendent de ces règles ; en second lieu, les règles de droit international privé sont-elles aptes à fonctionner dans le cadre de mécanismes alternatifs tels que les PCN ? Le système des PCN a été ajouté aux principes OCDE en 2000 seulement16, suivant en cela l’évolution du droit international qui, à partir des années 1980, a insisté sur 16 Le dernier rapport publié est consultable en ligne, OECD (2017), Annual Report on the OECD Guidelines for Multinational Enterprises 2016. Les PCN peuvent aussi mettre en application les principes des NU sur les Entreprises et les droits de l'Homme.
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l’importance du suivi des textes internationaux et surtout de leur mise en œuvre concrète. Le PCN est donc là non seulement pour promouvoir les principes directeurs mais aussi pour recevoir des « plaintes » et les instruire afin de déterminer notamment les mesures de remédiation possibles sans, toutefois, pouvoir condamner à payer des dommages et intérêts les entreprises qui ont violé les Principes. La structure des PCN n'est pas dictée de manière précise par l'OCDE si bien que chaque PCN choisit la structure qui lui paraît la plus appropriée. De tous les pays pour lesquels un rapport a été envoyé dans le cadre de cette étude, la très grande majorité est membre de l’OCDE17 alors que cinq pays seulement n’en sont pas membres mais ont adhéré aux Principes de l’OCDE18. Parmi ces cinq pays, trois (Argentine, Brésil et Kazakhstan) ont adhéré aux Principes directeurs et ont constitué un PCN. Quant à la Chine et au Viet Nam, aucune information ne permet de penser que, à brève échéance, ces pays deviennent partie aux Principes directeurs et donc créent des PCN19. On se reportera aux différents rapports pour plus de détail sur l’organisation des PCN. Qu’il suffise de dire ici que lors de l’instruction des situations spécifiques, les PCN ne semblent pas vraiment préoccupés par des considérations de droit international privé. L’analyse des situations spécifiques qui sont soumises au PCN, ou dont ils se saisissent, est en effet très factuelle et se borne à regarder les pratiques contestées sous couvert du prisme des Principes de l’OCDE, sans avoir recours aux règles de droit des pays concernés. Les PCN publient des rapports pour chaque situation spécifique. Ces rapports peuvent être ensuite utiles pour des litiges devant les juridictions nationales ou qui font l’objet de processus alternatifs de règlement des différends en dommages et intérêts. Signalons enfin que les PCN font l’objet d’un processus de revue par les pairs qui est fort utile pour leur permettre d’améliorer leurs pratiques de travail.
C. Kessedjian
2.3
Pour compléter la toile de fond de la RSE, il était important de savoir comment les pays ont mis en œuvre l’obligation de publier un Plan d’Action national (PAN) qui résulte des Principes directeurs des Nations Unies pour les Entreprises et les droits de l’Homme (question 3).20 L’Allemagne, la Belgique, le Chili, l’Espagne, les États-Unis, la France, l’Italie, les Pays-Bas, le Royaume-Uni et la Suisse ont adopté leur PAN. Le Portugal a adopté un décret-loi qui donne force juridique aux Principes directeurs des Nations Unies ainsi qu’à d’autres normes de RSE21. Le Canada a adopté en 2014 un plan de politique générale en matière de RSE22. Le Royaume-Uni a adopté le Modern Slavery Act 201523. La France a adopté la loi sur le devoir de vigilance24. En Suisse, une initiative populaire propose d’introduire en droit suisse une obligation de diligence ou vigilance25. Quant à l’Argentine, le Japon, le Kazakhstan et le Mexique les PAN sont en cours de développement. La Chine n’a pas adopté de PAN et ne semble pas en voie de ce faire. Lorsqu’aucune action n’a encore été entreprise, les raisons pour cet état de chose sont diverses. Pour le Brésil et la Turquie, les crises politiques et sociales semblent être à l’origine de l’inaction dans le domaine de la RSE. Le Viet Nam doit équilibrer une croissance rapide et le respect de l’environnement et des droits sociaux. Il semble que le gouvernement privilégie les actions volontaires des entreprises plutôt qu’une politique publique à cet égard. Enfin, nous avons interrogé les rapporteurs sur la place de la norme ISO 26000 dans l’arsenal des normes de RSE applicables. La plupart des rapporteurs indiquent que les normes ISO sont largement appliquées par les entreprises et que la norme ISO 26000 devrait l’être de la même manière26. 20
Pour une lecture critique, cf. Cantú Rivera (2019). Décret-Loi 9/2017. 22 « Doing Business the Canadian Way : A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad », 2014. Il faut noter qu’en janvier 2018 le gouvernement canadien a annoncé la création d’un ombudsperson et d’un conseil d’orientation concernant les activités à l’étranger des entreprises minières. 23 Modern Slavery Act 2015, 2015 Chapter 30, 26th March 2015. 24 Loi n 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d'ordre, JORF n 0074 du 28 mars 2017, texte n 1. 25 A l’heure où nous écrivons, le Parlement suisse est saisi. Si une loi est adoptée, l’initiative populaire sera abandonnée. Si, en revanche, le Parlement renonce, l’initiative populaire ira au référendum. 26 Allemagne (bien qu’aucun exemple concret n’ait pu être trouvé), Argentine, Belgique, Canada (pas de cas concrets) Pays-Bas, Portugal (mais surtout pour le reporting financier et extra financier), RoyaumeUni, Suisse. La réponse de l’Italie permet de comprendre comment les normes ISO, en général, sont intégrées dans le champ juridique italien. Toutefois, aucune précision spécifiquement pour la norme ISO 26000 n’a été donnée. 21
17
Allemagne, Belgique, Canada, Chili, Espagne, États-Unis d’Amérique, France, Italie, Japon, Mexique, Pays-Bas, Portugal, République Tchèque, Royaume-Uni, Suisse, Turquie. Le rapport 2017, cité supra note 16, indique que des 46 pays qui ont adhéré aux Principes, seuls deux, l’Egypte et la Tunisie, n’ont pas créé de PCN. 18 Argentine, Brésil, Chine, Kazakhstan, Vietnam. Les pays suivants ont adhéré aux Principes de l’OCDE et ont mis en place un PCN, mais n’ont pas fait l’objet d’un rapport dans le cadre de cette étude : Colombie, Costa-Rica, Egypte, Jordanie, Lituanie, Maroc, Pérou, Roumanie, Tunisie, Ukraine. 19 On peut noter ici que le « découplage » entre les Principes directeurs de l’OCDE et la Déclaration sur l’investissement pourrait aider ces pays à adhérer aux Principes directeurs. Cette question a été discutée lors du colloque organisé pour les 40 ans des Principes directeurs. Cf. Bonucci and Kessedjian (dirs) (2018).
L’influence des Principes des Nations Unies pour les entreprises et les droits de l’Homme
Questions de droit international privé de la responsabilité sociétale des entreprises
D’autres27 indiquent que les normes ISO 20400 et 14000 sont également appliquées, y compris par les autorités gouvernementales. Le PAN de la République tchèque mentionne la norme ISO 26000 qui semble être « imposée » aux entreprises tchèques par leurs partenaires venant de pays plus développés. Il y aurait là, si cette interprétation est avérée, une véritable influence de la place de marché permettant de rendre plus contraignantes des normes essentiellement volontaires. La position du Japon est intéressante à plus d’un titre car elle permet de comprendre comment les tribunaux peuvent s’emparer d’une norme telle que la norme ISO 26000 : “There has been no case so far where the courts applied the ISO standards, thus the situation is not clear. However, the Supreme Court implied that the violation of a self-regulatory rule with regard to fair practice in security transactions for the protection of investors, established by the Securities Dealers Association (the Fair Trading Rules), can constitute a tort. . . Considering that Japanese enterprises have actively adopted the ISO 26000 . . . it is highly likely that the ISO standards will be taken into consideration for the decision of the civil responsibility in torts.”28 Le Brésil a adopté une norme nationale de RSE, NBR 16001, qui permet la certification, alors que la norme ISO 26000, par elle-même, ne la permet pas, et ces normes sont largement suivies par les entreprises privées et dans les contrats de marchés publics. L’Espagne a également adopté une norme nationale, UNE-ISO 26000:2012, accompagnée par un Guide pratique29. En revanche, pour un certain nombre de pays, les rapporteurs sont plutôt d’avis qu’un tribunal ne pourra pas appliquer ni prendre en considération la norme ISO 26000, sauf si elle a été visée clairement dans le contrat donnant lieu à un différend, renforçant ainsi le caractère volontaire de la norme30. Le cas du Viet Nam se situe un peu à part puisque les normes ISO y sont généralement appliquées, explique le rapporteur, mais la norme ISO 26000 est ignorée plus pour des raisons de réalisme économique et d’inefficacité de l’administration de contrôle.
2.4
Autres normes
Le rapport pour l’Argentine mentionne des instruments régionaux issus du Inter-American Juridical Committee lié 27
Les Pays-Bas, notamment. Rapport pour le Japon. Jugement du 14 juillet 2005 de la Cour suprême du Japon, (Fair Practice Rules), Minshū [Supreme Court of Civil Reports], Vol. 59, No. 6, p. 1323. The English text is available at “Supreme Court of Japan”, http://www.courts.go.jp/app/hanrei_en/ detail?id¼801. 29 La référence pour ce guide pratique est la suivante : http://www.en. aenor.es/aenor/normas/ediciones/fichae.asp?codigo¼9471& temporal¼busc. 30 Chili, États-Unis, France, Kazakhstan, Mexique. 28
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à l’Organisation des États américains. Il s’agit d’abord d’un rapport adopté en 2014 intitulé « Guide to Corporate Social Responsibility in the field of Human Rights and the Environment in the Americas »31. Ce rapport a été suivi par deux résolutions adoptées en 201732 sur « Conscious and Effective Regulation of enterprises in the Field of Human Rights ». En conclusion sur l’environnement juridique et extrajuridique en matière de RSE, il est possible de dire que le problème le plus prégnant est la nature de soft law de bon nombre de normes, ce qui va poser des difficultés à la fois dans la prévention des pratiques contrevenantes et dans les litiges qui pourront s’en suivre. Cela explique également la timidité que l’on constatera dans le contentieux (et, parfois, l’absence même de contentieux). Il est certain, en tout cas, que cette qualité de la norme va engendrer des difficultés pour le fonctionnement du droit international privé.
3
Qualification (Questions 6 à 9)33
Tout raisonnement de droit international privé commence par un exercice de qualification qui commande le choix de la règle de conflit de lois adéquate. Les normes de RSE sont difficiles à qualifier car elles peuvent relever de multiples domaines : droit des sociétés (pour les relations internes à la société) ; droit des contrats ; droit des relations délictuelles ou quasi délictuelles, au moins.
3.1
Droit des sociétés
Le devoir de diligence, le devoir de vigilance34, les exigences liées à l’organisation d’un département de
Résolution n 295/2014. Résolution CJI/Res.232 datée 9/3/2017 et Résolution CJI/doc.522/17 rev. 1 and rev. 2. D’une manière générale, sur le rapport droits de l’homme et sociétés transnationales, cf. Marrella (2017), pp. 33–435. 33 Le questionnaire n’a pas porté sur les questions qui pouvaient être liées au droit du travail, comme les lanceurs d’alerte, lorsque ceux-ci sont salariés ou ex-salariés de l’entreprise dont les activités sont dénoncées. Le rapport pour la France aborde cette question et rappelle le lien entre cette question et celle du secret des affaires telle que règlementée par la directive UE 2016/943 du 8 juin 2016. 34 La France a adopté une loi spécifique sur le devoir de vigilance, Loi 2017-399 du 27 mars 2017, cf. supra note 24. L’Espagne a adopté, pour les fonds d’investissement, une exigence de transparence dans les termes suivants : “the Act 1/2002, of 29 November, on pension plans and funds. . . [where] Article 14.7 establishes that the monitoring commission of pension funds will adopt a declaration specifying the guiding principles of its investment policy. In particular, regarding labor pension funds, this declaration will have to mention whether riscs are taken into consideration in taking decisions on investment, ethical, social, environmental and good governance. ». La bourse chilienne a adopté des règles de bonne gouvernance pour les investissements. 31 32
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compliance35 et les exigences similaires relèvent nécessairement du droit des sociétés36. Pour un certain nombre de pays, il n’existe pas de différence entre les règles propres à la gouvernance d’entreprise et les règles de RSE37. Pour ces pays, c’est à travers la gouvernance d’entreprise que le législateur régule les performances des entreprises à l’égard d’objectifs sociaux, environnementaux, notamment38. Pour tous les pays qui ont adopté un PAN, il devrait en résulter une exigence, à l’égard des sociétés installées sur leur territoire (selon des critères de taille qui peuvent varier), de mettre en œuvre des actions de diligence/vigilance pour prévenir les violations des droits de l’Homme et, plus généralement, des normes de RSE39. Dans certains pays, ces exigences pèsent seulement sur les sociétés publiques, c’est-à-dire les sociétés qui font appel public à l’épargne ; pour les sociétés privées, le caractère volontaire des normes de la RSE prend le dessus40. Dans certains pays41, la théorie dîte du “voile de la personnalité morale”, relève du droit des sociétés. Mais il n’existe pas de théorie générale de levée du voile de la
35 Il est convenu de retenir le terme « compliance » en français également car le terme « conformité » n’est que partiellement adéquate pour refléter la richesse du terme anglais de « compliance ». L’Italie possède une législation spécifique sur la compliance : Legislative Decree 231/2001. Le rapport italien signale plusieurs décisions de jurisprudence basées sur ce texte mais qui concernent toutes des affaires internes à l’Italie. Le Royaume-Uni inclut un devenir de diligence dans le Companies Act de 2006 alors qu’auparavant c’était considéré comme une exigence du common law. 36 Viet Nam. L’Italie signale que de nombreuses règles du droit des sociétés permettent d’exiger le respect des normes de RSE. Le Royaume-Uni a adopté le “Modern Slavery Act 2015, which aims to achieve increased transparency by requiring companies to set out what measures they have taken to ensure that no human rights violations occur throughout their global supply chain. The Modern Slavery Act 2015 only applies to England and Wales. In Scotland there is the Human Trafficking and Exploitation (Scotland) Act 2015. In Northern Ireland there is the Human Trafficking and Exploitation (Criminal Justice and Support for Victims) Act (Northern Ireland) 2015.” 37 Argentine, Belgique, Chili, Espagne, Italie, Japon, Kazakhstan. Le cas de la Chine mérite d’être noté particulièrement car l’article 5 de la loi sur les sociétés de 2006, amendé en 2013, vise « la morale sociale » et l’éthique des affaires. Il dispose : « A company shall, when engaging in business activities, abide by laws and administrative regulations, observe social moralities and business ethics, act in good faith, accept the supervision of the Government and the general public, and undertake social responsibilities ». Toutefois, le rapport pour la Chine mentionne des doutes sur la mise en œuvre effective de ces directives dans la mesure où plusieurs « scandales », notamment en matière alimentaire, ont montré l’absence d’effectivité des règles posées par le législateur. 38 V. notamment le rapport pour la France. Pour une explication très claire de ce lien entre la gouvernance d’entreprise et la responsabilité sociétale des entreprises, v. Magnier (2017). 39 République tchèque. Mais le Mexique semble faire exception. 40 Chili, Espagne. 41 Allemagne, Belgique.
C. Kessedjian
personnalité morale. Au contraire, cette règle est appliquée dans certains domaines en particulier42 et fait l’objet d’adaptation pour la RSE43. On note aussi que la loi française sur le devoir de vigilance44 permet de passer outre la question de la levée du voile de la personnalité morale puisqu’elle vise les activités des filiales, sous-traitants et fournisseurs indépendants des sociétés couvertes par la loi. Certains rapports nationaux montrent que la théorie de l’abus de droit peut aussi servir de base à la levée du voile de la personnalité morale45. Les autres bases sur lesquelles la levée du voile de la personnalité morale peut être fondée sont la fraude, la simulation, l’apparence46. On retrouvera la discussion sur la levée du voile de la personnalité morale dans la partie consacrée aux délits. Dans plusieurs pays, les directeurs de sociétés ont un devoir vis-à-vis des actionnaires et leur responsabilité peut être engagée s’ils violent les devoirs de leur charge (duty of care)47, y compris lorsqu’ils ont manqué à la mise en place de contrôles en matière de RSE (c’est rare) ou ont manqué aux règles minimales en matière de gestion de risques dans l’intérêt d’une bonne gestion de la société48 ou n’ont pas su éviter les situations de corruption49. Ce sont donc bien les intérêts de la société qui sont ici pris en considération, pas les intérêts des tiers50, même si, parfois, les intérêts des tiers peuvent être pris en considération comme un élément de 42
En Belgique, c’est essentiellement en matière d’insolvabilité que la théorie est appliquée. En France, on trouve des cas en droit de la concurrence et, depuis 2017, dans le texte de loi sur le devoir de vigilance, évitant ainsi l’application restrictive de la théorie qui avait été faite jusque-là par les tribunaux. 43 Demeyere (2015), p. 385. 44 Supra note 24. 45 Belgique. 46 V. le rapport pour la Belgique. 47 On retrouve le duty of care aussi en matière délictuelle (v. le rapport pour le Canada). 48 Allemagne, Belgique (même si c’est de manière indirecte), Canada, Italie, Portugal, République tchèque, Royaume-Uni, Viet Nam. 49 Aff. Siemens/Neubürger signalée par le rapport pour l’Allemagne. 50 Allemagne, Suisse. Le rapport allemand donne l’exemple de l’affaire Siemens en ces termes : “The duty of care of the management board as well as the supervisory board includes the duty of legality (Legalitätspflicht), i.e. the duty to comply with the applicable laws when conducting a business. 2 The recent landmark decision of Siemens/Neubürger [LG München, NZG 2014, 345] relating to a complex corruption system within the Siemens group surprised management boards, their consultants and the research community alike. It was one of the first cases in which a public civil court awarded damages to a company whose director (Vorstandsmitglied) had violated his duty to (effectively) monitor the subsidiaries’ conduct. In a nutshell, the court held the director accountable for the non-existing or at least non-functioning compliance system and missing control of the foreign (Nigerian) subsidiary. The novelty of the decision was that the duty of legality of the parent company (Siemens AG) was extended, firstly, to a separate legal entity (subsidiary) and, secondly, to a company subject to a foreign lex societatis (Nigerian Company Law)”.
Questions de droit international privé de la responsabilité sociétale des entreprises
contexte51. Parfois, ces obligations sont limitées aux normes concernant l’environnement52 et/ou le social53. Les sanctions à l’égard des directeurs de la société peuvent aller jusqu’à la démission forcée54. Toutefois, le « duty of care » dont il est question dans l’affaire Vedanta, jugée par la Cour suprême du Royaume-Uni en avril 2019, n’est pas inclus dans le droit des sociétés mais fait partie de la théorie sur les torts. Il convient de signaler ici l’enseignement très riche de l’affaire Siemens/Neubürger mentionnée par le rapport pour l’Allemagne dans la mesure où le tribunal a étendu le duty of care exigé de la société mère à ses filiales, y compris ses filiales à l’étranger, c’est-à-dire des sociétés soumises à une autre lex societatis. Nous partageons l’avis des rapporteurs pour l’Allemagne que le raisonnement de la Cour dans Siemens, bien qu’exigé par la lutte contre la corruption et les obligations liées à la recherche d’une saine concurrence, peut et doit être appliqué en matière de RSE. Tous les Etats membres de l’Union européenne sont liés par la directive 2014/95/EU du 22 octobre 2014 relative à la publication d’informations extra-financières par les entreprises. Les informations que les entreprises doivent publier en vertu de ce texte concernent non seulement les conséquences sociales et environnementales, mais aussi les mesures concernant le respect des droits de l’Homme et la lutte contre la corruption. Pour se mettre en conformité avec les exigences de cette directive, certains pays ont amendé leur législation comptable55 ou leur législation sur les sociétés56. Cette obligation de prendre en considération des éléments non financiers dans la gestion de la société pourrait entraîner, à terme, une révolution dans la conception des objectifs pour lesquels la société a été constituée57. Les informations qui doivent être incluses dans le rapport doivent être contrôlées par un organisme indépendant58 et être insérées dans le rapport de gestion59. Il est à regretter que la directive ne prévoie aucune sanction en cas de violation des obligations qu’elle organise. Ce sont donc les législateurs nationaux qui doivent prévoir ces sanctions. En Allemagne, par exemple, ce sont des sanctions pénales qui sont prévues ainsi que des sanctions civiles mises à la charge des dirigeants de la société en faveur des tiers.
51 Canada, Peoples Department Stores Inc v Wise, 2004 SCC 68, [2004] 3 SCR 461 ; Canada, BCE Inc v 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560. 52 Belgique. 53 Belgique, Chine, République tchèque (particulièrement en lien avec le PAN), Viet Nam. 54 République tchèque. 55 République tchèque. 56 Allemagne, France. 57 Allemagne. 58 France. 59 France.
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Le rapport italien signale une règle fort utile dans notre domaine en ce qui concerne les obligations de la société mère vis-à-vis des exigences de bonne gestion de ses filiales : « [Parent company duty of care:] . . .pursuant to Article 2497 of the civil code (hereinafter ‘c.c.’), parent companies have a duty of diligence (‘di corretta gestione societaria e imprenditoriale’ [of correct social and business management]) over their subsidiaries. In case of lack of compliance with it, the latter’s shareholders can bring a civil action against them. »60. Le Royaume-Uni a d’ores et déjà incorporé dans le Modern Slavery Act de 2005 une exigence de diligence dans la chaîne de valeur61. Enfin, plusieurs rapports nationaux mentionnent l’existence, en droit des sociétés, de formes de sociétés spécifiques pour l’économie sociale et solidaire, selon l’expression utilisée en France62. Le rapport italien mentionne l’inclusion désormais dans la liste des sociétés qui peuvent être formées en Italie, les sociétés dites « à caractère social » (‘imprese sociali’) ou les sociétés d’utilité publique ou à but non lucratif (« benefit corporations »)63. Le rapport français mentionne aussi ces sociétés d’un type particulier. Nous pensons que ces innovations, qui sont à l’étude dans d’autres pays, ne sont pas une bonne évolution
60
Cette règle générale est complétée par les dispositions suivantes : “Pursuant to Article 4.1 of Legislative decree 231/2001, parent companies incorporated in Italy of multinational corporations can be deemed liable for the commission of specifically listed crimes by the subsidiaries incorporated abroad. Moreover, it is aknowledged that companies of the same group can be either held jointly liable, or the parent company can be held liable for the subsidiaries’ illicits. Foreign companies can also be held liable under the Decree for crimes committed in Italy, even if their law of incorporation does not provide for it. . . [U]nder Article 6.2 of Decree No. 231/2001, the models can have the effect of excluding corporate administrative liability only if they are suitable to identify the risky activities, provide for specific protocols and decision-making processes in the covered fields, prevent the commission of illicit activities including through the investment of dedicated financial resources, and establish pertinent information duties and disciplinary sanctions. According to Article 6.3, the models can be drafted on the basis of the codes of conduct adopted by the business associations”. 61 Cf. supra note 23, et pour plus de précisions sur les dispositions très détaillées de cette loi, se reporter au rapport pour le Royaume-Uni. 62 La loi n 2014-856 du 31 juillet 2014 relative à l’économie sociale et solidaire (loi ESS). 63 [Benefit corporations:] As far as benefit corporations are concerned, their constitution is regulated by Legislative Decree No. 1882/2015. Benefit corporations are defined as corporate entities which contextually pursue economic and social objectives and perform their activities responsibly, sustainably and transparently with regard to individuals, communities, the environment, the cultural heritage, and all the other stakeholders. The objectives, specifically identified within the deed of incorporation, must be achieved by striking a balance between the shareholders’ and the stakeholders’ interests. The directors are liable in cases of failure to carry out their duties in this respect. If a benefit corporation does not pursue its social objectives, it can be considered liable for misleading advertising.
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dans la mesure où elles peuvent laisser penser que seules ces sociétés d’une forme nouvelle doivent se conformer aux règles de la RSE alors que ce sont toutes les sociétés qui doivent être obligées de le faire. Ces formes de sociétés à but « social » ou « d’intérêt public » doivent être rapprochées des obligations incorporées dans le droit des sociétés de certains pays64 selon lesquelles la société doit allouer une portion de ses bénéfices ou de son chiffre d’affaires à des activités caritatives ou des fonds au profit des salariés ou de personnes dans le besoin.
3.2
Droit des contrats
Tous les rapports qui nous ont été communiqués ont insisté sur le fait que les règles de la RSE sont « volontaires ». C’est pourquoi, l’autonomie de la volonté est appelée à jouer un rôle important dans le domaine de la RSE, sauf à ce que ces normes soient éventuellement qualifiées de normes d’ordre public65. C’est pourquoi, le droit des contrats est susceptible de jouer un rôle en la matière car les entreprises peuvent intégrer les normes de RSE au moins de deux manières différentes dans leurs relations contractuelles : (1) elles peuvent inclure une clause dites de « RSE » dans les contrats qu’elles concluent avec leurs partenaires66 ; (2) elles peuvent
64
Inde, Turquie. Cf. infra Sect. 3. Le rapport pour l’Allemagne précise qu’aucune des normes de l’OCDE en la matière ne sont considérées comme étant d’ordre public. On en déduit qu’il en va de même pour les Principes des Nations Unies. Le rapport pour le Japon indique que seules les normes de lutte contre la corruption peuvent être considérées comme d’ordre public. Le rapport pour la Chine mentionne que l’article 7 de la loi de 1999 sur les contrats dispose : « When concluding and performing contracts, the parties concerned shall abide by laws and administrative regulations, respect social ethics, and refrain from disrupting the social and economic order or undermining social and public interests. ». La référence à l’éthique et aux intérêts publics pourrait éventuellement servir de base à une responsabilité en matière de RSE. Le rapport pour le Mexique fait état d’une affaire jugée par la Cour suprême (affaire 3516/2013) selon laquelle les normes de droits de l’Homme font partie de l’ordre public du Mexique si bien que les parties ne peuvent pas s’en abstraire même en matière contractuelle. 66 Une étude de plusieurs années a été conduite par le Groupe de Travail sur les contrats internationaux (GTCI) sur les clauses RSE dans les contrats internationaux. Ces travaux ne sont pas encore publics. Toutefois, on peut conclure de ces travaux que la variété des clauses de RSE est immense et qu’elles suivent des schémas de raisonnement juridiques assez différents les unes des autres, notamment lorsque le but de ces clauses est de tenter de transférer la responsabilité de l’entreprise donneuse d’ordre à ses partenaires plus bas dans la chaîne de valeurs. Le rapport de la République tchèque mentionne cette hypothèse pour les entreprises tchèques qui appartiennent à des groupes internationaux de sociétés. Le rapport pour l’Allemagne indique que les entreprises allemandes incluent très souvent de telles clauses dans leurs contrats et exigent la plupart du temps qu’elles soient répercutées à tous les stades de la chaîne de valeur. Le rapport français donne plusieurs références doctrinales qui font état de la pratique en la matière. 65
déclarer, grâce à leurs codes de conduite, acte unilatéral, qu’elles obéissent aux exigences de la RSE. Chacune de ces références peut se faire soit de manière précise, en énumérant les conventions internationales, les textes internationaux ou les normes éthiques ou autres que l’entreprise a décidé de suivre, soit de manière plus vague en incorporant certaines des obligations ou normes, mais pas toutes. Ainsi il n’est pas rare de voir dans les codes de conduite des entreprises une référence aux conventions essentielles de l’OIT ou aux Principes des NU et/ou aux Principes de l’OCDE ou à la norme ISO 26000. En procédant de cette manière-là, les entreprises « incorporent » dans leur pratique (contractuelle ou autre) les exigences issues de ces textes, alors même que certains d’entre eux pourraient être de nature « soft » seulement. En procédant à une telle incorporation (à condition que les termes utilisés soient clairs67) l’entreprise donne une force contraignante à ce qui, autrement, pourrait être de simples aspirations68. Certains contrats prévoient des obligations liées à la RSE et en font soit des conditions résolutoires, soit des conditions suspensives, soit des clauses de fin de contrat avec ou sans indemnités69. Il est aussi possible de considérer les déclarations des entreprises comme des déclarations (representations) qui peuvent entraîner une responsabilité si elles s’avèrent erronées en pratique70, à l’image de ce que permet le droit de la consommation71. Il est également possible que des obligations de RSE découlent de la réglementation en matière de contrats de travail72. Malgré cette analyse juridique qui apparaît incontestable et nécessaire, les juges ne sont pas prêts à admettre une quelconque responsabilité contractuelle à l’encontre des entreprises qui ont procédé à une telle incorporation dès que les termes sont un tant soit peu flexibles ou peu clairs ou trop abstraits73.
67
S’agissant d’actes unilatéraux émanant des entreprises elles-mêmes, les tribunaux sont prudents avant d’en déduire des obligations juridiques. On peut appliquer en la matière les mêmes principes que ceux qui ont été appliqués en jurisprudence dans le domaine des lettres d’intention. 68 Un certain nombre de rapports mentionnent l’utilisation possible des codes de conduite dans le sens que nous mentionnons au texte : Italie, Pays-Bas. 69 Ces hypothèses ont été énoncées par le rapport pour l’Allemagne et la Belgique. 70 Italie. 71 Allemagne. 72 C’est ce que signale le rapport pour la Chine (art. 80 de la loi chinoise pour les contrats de travail). 73 Allemagne (absence totale de jurisprudence), Belgique, France (particulièrement démontré par l’affaire dite du Tramway de Jérusalem ou, en matière sociale, Soc 6 juin 2001, n 99-43929), Royaume-Uni.
Questions de droit international privé de la responsabilité sociétale des entreprises
3.3
Droit de la responsabilité délictuelle ou quasi délictuelle
Plusieurs rapports rappellent que les règles concernant les pratiques commerciales abusives peuvent servir de réceptacle à une responsabilité en matière de RSE en attendant le développement d’une responsabilité spécifique à la RSE74. Les violations des standards de RSE, lorsqu’ils ont trait à des obligations certaines, telles celles en matière d’environnement, de santé, etc. peuvent donner lieu à réparation en vertu du droit de la responsabilité délictuelle soit pour un individu en particulier qui devra démontrer le lien causal75, soit pour un groupe d’individus si l’atteinte à des droits erga omnes est caractérisée76. Si l’on considère une violation des droits de l’Homme, plusieurs difficultés se font jour qui ont été parfaitement soulignées, notamment dans le rapport pour l’Allemagne. Tout d’abord, nous vivons encore dans une époque où beaucoup croient que les droits de l’Homme n’imposent de devoirs qu’aux États et pas aux personnes privées, nonobstant le fait que le commentaire du Prof. Ruggie sur la seconde partie des Principes des Nations Unies dit clairement que le respect des droits de l’Homme par les entreprises n’est pas une option pour elles77. En second lieu, même si une responsabilité pouvait être trouvée, encore faudrait-il qu’elle puisse être déterminée à l’égard de toutes les entreprises concernées, quelle que soit leur place dans la chaîne de valeur, ce qui, pour le moment, est loin d’être le cas. La responsabilité de la société vis-à-vis des tiers est problématique dans la mesure où les normes de RSE sont considérées comme des normes de droit tendre78. Il s’avère donc que cette question récurrente pose réellement difficulté dans notre domaine et devra faire l’objet d’une étude plus approfondie pour sortir de ce dilemme. En transformant 74
Belgique, France, notamment. Toutes les affaires qui sont venues devant les tribunaux nationaux ont montré la grande difficulté pour les victimes d’établir le lien de causalité ainsi que le souligne, notamment le rapport pour la France. On peut signaler toutefois qu’en matière d’environnement la preuve du lien causal pourrait être facilitée par l’intervention du principe de précaution. 76 Le rapport pour la Chine mentionne que l’atteinte à l’environnement est qualifiée d’action délictuelle à l’article 65 de la loi sur les délits (2010). 77 Commentaire au Principe directeur 11 : « La responsabilité de respecter les droits de l’Homme est une norme de conduite générale que l’on attend de toutes les entreprises où qu’elles opèrent. Elle existe indépendamment des capacités et/ou de la détermination des États de remplir leurs propres obligations en matière de droits de l’Homme et ne restreint pas ces dernières. Elle prévaut en outre sur le respect des lois et règlements nationaux qui protègent les droits de l’Homme. » A/HRC/ 17/31 (21 mars 2011). 78 Brésil, Canada. Le rapport pour la Turquie propose une analyse créative en suggérant que le juge pourrait décider qu’il existe un vide juridique en droit turc et serait alors autorisé à créer une obligation à partir d’une analyse de droit coutumier. 75
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certaines obligations tirées des Principes de l’OCDE (vigilance) en texte législatif, la France a réglé en partie ce problème, mais uniquement dans la limite des obligations visées par la loi79. Ce qui précède explique que, pour la plupart des rapports, seules les questions de droit de l’environnement ou de droit du travail ont été visées par les réponses car, dans ces domaines, il existe des normes juridiques (hard law) qui entraînent effectivement une responsabilité, que ce soit au titre d’une mauvaise gestion des risques ou une obligation positive d’éviter un dommage80. En tout état de cause, si la responsabilité de la société vis-à-vis des tiers est possible, elle est envisagée sous l’angle de la responsabilité délictuelle81, parfois limitée aux questions de pratiques anti-concurrentielles ou déloyales82. On peut assimiler la violation par l’entreprise de son propre code de conduite à une pratique déloyale lorsque le contexte se prête à une telle qualification83. Toutefois, dans un certain nombre de pays, il ne semble pas qu’il existât une responsabilité délictuelle pour les activités de l’entreprise violant les normes de RSE, sauf dans des cas limités comme le droit du travail84. Mais même dans les pays qui admettent que les normes de RSE puissent donner lieu à une responsabilité délictuelle, celle-ci est parfois limitée aux droits les plus fondamentaux qui peuvent être considérés comme des « droits erga omnes »85. La difficultéex alorsex concerne la définition de ce qu’il convient d’entendre par « droits erga omnes ». Comme le dit le rapport pour l’Allemagne, même les droits humains ne sont pas tous, de manière évidente, inclus dans 79
Loi 2017-399 citée supra note 24. Deux décisions sont emblématiques de ce que pourrait être la future jurisprudence au titre de la loi de 2017 : Affaire de l’Erika (Cass. crim., 25 sept. 2012, no 10-82-938, Bull. crim., no 198) : la responsabilité de la société Total a été retenue pour avoir contrevenu à ses propres règles de Vetting en acceptant un pétrolier, l’Erika, en limite d’âge, en signant un contrat de d’affrètement sachant que le navire (appartenant à l’une de ses filiales) ne correspondait pas aux critères de sa mission en termes de sécurité et en ne procédant à aucune inspection physique du bâtiment. La société Total avait en effet mis en place un système de « Vetting » impliquant des contrôles techniques dont la mise la œuvre lui conférait le droit de monter à bord du pétrolier. Affaire du Distilbene (Cass. 1ère civ. 7 mars 2006 n 04-16179) : responsabilité d’une société ayant commercialisé un produit pharmaceutique, le Distilbene, alors que les risques pour les personnes exposées pendant la grossesse de leur mère à ce médicament étaient connus et identifiés sur le plan scientifique, « qu’elle n'avait pris aucune mesure, ce qu'elle aurait dû faire même en présence de résultats discordants quant aux avantages et inconvénients », et qui avait ainsi avait « manqué à son obligation de vigilance ». 80 Par ex. Espagne, Mexique, Turquie, Suisse, Viet Nam. 81 Allemagne, Argentine, Belgique, Chili, Kazakhstan, Pays-Bas, Portugal. 82 Belgique. 83 Belgique, Italie (mais uniquement pour les consommateurs). 84 Suisse. 85 C’est le cas en Allemagne (art 823 Code civil).
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cette catégorie relativement limitée et ce, d’autant plus qu’il est encore soutenu en doctrine (même après l’intervention des Principes des Nations Unies, dits Principes Ruggie) que seuls les États ont des obligations en matière de droits de l’Homme. Cette analyse s’applique d’autant plus que l’on parle de normes de RSE plus larges que les droits de l’Homme au sens strict du terme86. La question de la « levée du voile de la personnalité morale » est une question essentielle dans le cadre de la responsabilité délictuelle, surtout dans le domaine des violations des règles de RSE car, très souvent, les actes en cause sont perpétrés par une société installée sur le territoire d’un autre État que la société mère et la question se posera de savoir si la victime peut attaquer la société mère pour ces violations87. Un certain nombre de pays ne reconnaissent pas cette théorie88. Pour d’autres, les réponses apportées sont plus incertaines, notamment en raison du fait qu’elles ne sont pas abordées sous l’angle de la levée du voile de la personnalité morale, mais seulement sous l’angle de la responsabilité89, notamment grâce à la théorie de l’agence90. En tout état de cause, il apparaît que ces affaires sont extrêmement difficiles à mener à bien par les demandeurs qui se heurtent à des standards juridiques stricts, sans que l’adoption de codes de conduite en matière de RSE soit d’un quelconque secours91. Se pose aussi la question de savoir quelles victimes peuvent agir : les victimes directes seules, ou plus largement un collectif de victimes. Le Chili a admis une action large avec des dommages et intérêts moraux dans le cadre d’une violation de règles spécifiques à l’environnement92. Aux 86
Sur la question de savoir si seules les normes de droits de l’Homme au sens strict du terme sont protégées par les Principes Ruggie notamment, cf. Kessedjian (2016), pp. 309–312. 87 Plusieurs affaires sont signalées pour le Canada dans lesquelles les tribunaux ont refusé la levée du voile de la personnalité morale. Cela semble être le cas pour le Chili. 88 Allemagne, mais cette position est critiquée par le rapport qui appelle pour une modification du droit allemand à cet égard, notamment dans le sens de celui appliqué au Royaume-Uni dans l’affaire Chandler v. Cape [2010] EWCA Civ 525, [2012] 1 WLR 3111. 89 Belgique, Canada. Sur la qualification délictuelle de la demande fondée sur l’immixtion de la société mère dans la gestion de sa filiale, voir en France Civ. 1, 26 oct. 2011, n 10-17026, JDI 2013 n 2, com. 11 et pour le droit de l’UE, CJUE 18 juil. 2012, OFAB, Aff. C-147/12. On renvoie aussi à ce qui est expliqué supra pour le duty of care. 90 Canada. 91 Das v George Weston Ltd (2017, Ont SCJ) cité par le rapport pour le Canada. 92 Lizana v Municipalidad de Puente Alto [Supreme Court, Role 101562010, 7 May 2013]. In this case, the State of Chile, the municipality of Puente Alto and a real estate company were found liable for allowing a group of people to install their homes on land adjacent to a former landfill site, which was closed contravening the prevailing environmental regulations. As a consequence, the people were exposed to gas and bad smells, affecting their daily life, which was reflected in the order of compensation for the moral damage caused to the plaintiffs. This case even innovated as it granted collective moral damage, inexistent
C. Kessedjian
Pays-Bas, dans l’affaire Urgenda v. État néerlandais, les communautés affectées ont été admises comme demanderesses pour obliger l’État néerlandais à prendre des mesures préventives pour pallier les dommages potentiels que les changements climatiques peuvent entraîner93.
3.4
Ordre public
Il est bien connu que la question de l’ordre public est particulièrement importante pour le droit international privé. Si les normes de la RSE sont qualifiées de « lois de police » (ou « overriding mandatory rules » comme il est convenu désormais de les appeler dans le jargon anglais européen), le mécanisme de conflit de lois sera perverti et le droit étranger éventuellement applicable à la relation en cause ne sera même pas considéré. Si les normes de la RSE sont qualifiées de règles d’ordre public, le droit étranger sera appliqué sauf pour les règles précises qui heurteront cet ordre public. Il est donc important de savoir quelles pourraient être les normes de la RSE qui seraient qualifiées soit de lois de police soit de règles d’ordre public. Un paradoxe apparaît immédiatement. Comment les règles de la RSE pourraient-elles être des normes d’ordre public (et encore moins des lois de police) puisqu’elles sont considérées comme du droit tendre laissées à l’autonomie de la volonté des opérateurs économiques ? Ce paradoxe n’a pas échappé aux rapporteurs puisque la plupart a répondu par la négative à cette question94. Certains rapports remarquent que les normes de RSE, quand elles existent, ne sont sanctionnées par aucune mesure législative95. Pourtant, la réponse ne devrait pas être monolithique. En effet, certaines règles de RSE sont issues des droits de l’Homme96 (par exemple, les conventions de l’OIT en matière de droit du travail) ou font partie du hard law, comme les règles portant sur la protection de l’environnement ou la protection du consommateur ou les règles fiscales et comptables97 ou celles concernant la lutte previously.”. Le législateur au Chili a également reconnu, comme réparable, le dommage causé à l’environnement par une loi ultérieure. 93 Pour une traduction anglaise de cette décision, cf. https://uitspraken. rechtspraak.nl/inziendocument?id¼ECLI:NL:GHDHA:2018:2610& showbutton¼true&keyword¼Urgenda. 94 Belgique, Canada, Pays-Bas, Portugal, Suisse. 95 Allemagne, Argentine, États-Unis. 96 France. Le rapport pour le Chili indique que du fait de l’adoption du PAN, les questions liées à la relation entreprises et droits de l’Homme sont d’ordre public. Le rapport pour l’Argentine précise que les conventions de protection des droits de l’Homme ratifiées par l’Argentine ont une valeur supérieure à la loi interne du pays. Le rapport pour l’Argentine mentionne également un avis consultatif de la Cour interaméricaine des droits de l’Homme (Oc-5/85 du 13 nov. 1985) donnant une définition de l’ordre public. 97 Argentine, Espagne, France, Italie, Kazakhstan, Mexique, République Tchèque, Turquie, Viet Nam.
Questions de droit international privé de la responsabilité sociétale des entreprises
contre la corruption98. Certaines de ces normes sont nécessairement des normes d’ordre public (par exemple, l’interdiction du travail des enfants ou de l’esclavage)99. C’est ainsi que si la proposition de modification constitutionnelle en discussion en Suisse aboutit, les règles ainsi incorporées à la Constitution seront des lois de police. La qualification de loi de police ou règle d’application immédiate de la loi française sur la vigilance est discutée en doctrine en France100. Il a été suggéré que l’exigence d’un rapport extra-financier en vertu de la directive 2014/95/EU mentionnée ci-dessus, puisse être assimilée à une règle d’ordre public dans la mesure où elle touche toutes les sociétés visées, à partir du moment où elles sont établies sur le territoire de l’un des États membres de l’Union européenne quel que soit le droit applicable à ces sociétés101. De plus, si l’on dit que la RSE tend à protéger des valeurs, au-delà du droit102, ces valeurs doivent être considérées comme supérieures aux règles de droit actuellement admises afin de permettre l’évolution de la norme103. Dans le même sens, les pays qui ont adopté un PAN montrent ainsi une politique publique en faveur de la RSE qui pourrait aisément être considérée comme un ordre public à prendre en considération par les tribunaux le moment venu104.
4
Modes alternatifs de règlement des différends (Questions 10 et 11)
Les discussions se font de plus en plus vives et persistantes sur la possibilité d’organiser des modes alternatifs de règlement des différends pour régler les litiges qui naissent de violation par les entreprises des règles de la RSE en général et même, plus précisément, des règles de protection des droits de l’Homme. Plusieurs initiatives existent en ce sens. Tout d’abord, pour tous les pays qui sont membres de l’OCDE ou qui ont adhéré aux Principes directeurs105, un PCN est chargé de régler les litiges émanant de la non 98
France. Argentine, Brésil, France. 100 Le rapport se prononce pour une telle qualification, ce que nous partageons. Toutefois, il mentionne des études doctrinales qui sont plus hésitantes. 101 Allemagne. 102 Cf. supra para. 17, la définition retenue par le Royaume-Uni et que nous avons retenue pour les besoins de ce rapport et encourageons les parties prenantes à retenir. 103 C’est probablement ce qui est suggéré par le rapport pour le Japon. Cf. aussi le rapport pour le Kazakhstan et celui pour les États-Unis. 104 Le rapport pour le Chili fait un lien similaire sans aller aussi loin que ce que nous suggérons au texte. Cf. aussi le rapport pour la France. 105 C’est le cas de tous les pays pour lesquels un rapport a été préparé, sauf la Chine, le Kazakhstan, le Portugal et le Viet Nam. 99
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application des Principes ainsi que de ceux des Nations Unies. Les PCN fonctionnent selon des méthodes non harmonisées, sauf qu’aucun d’eux n’a le pouvoir de prononcer de sanctions ou d’ordonner aux parties de procéder d’une manière ou d’une autre. C’est une limite importante qui est souvent mentionnée par les ONG ou les représentants de la société civile pour expliquer leur mécontentement par rapport aux activités des PCN. Toutefois, on doit noter que les communiqués de presse que les PCN publient, lorsqu’ils ont terminé l’étude d’un cas et que les négociations (ou la médiation) a pris fin, sont souvent pris au sérieux par les parties et permettent d’améliorer le respect par l’entreprise des exigences de la RSE106. Par ailleurs, les PCN n’utilisent pas tous les mêmes techniques pour régler les «situations»107 dont ils sont saisis. Certains renvoient systématiquement à une médiation extérieure et ne gardent pas la maîtrise du processus. D’autres, au contraire, procèdent par eux-mêmes et qualifient parfois leur intervention de médiation ou de bons offices. L’une des difficultés rencontrées, non réglée par les textes applicables, concerne l’éventuelle «litispendance» entre une procédure judiciaire et une saisine d’un PCN. C’est la situation qui se présentait dans l’affaire FIFA/Qatar108 soumise au Tribunal de Zurich, dans laquelle le tribunal se prononce sans égard aux actions entreprises par le PCN suisse qui a estimé que la FIFA devait être considérée comme une entreprise au sens des Principes directeurs de l’OCDE. Ensuite, sous l’impulsion de l’OIT, on doit signaler les accords signés le 15 mai 2013 à l’issue de négociations faisant suite à l’écroulement du Rana Plaza au Bangladesh, portant sur les mesures à prendre en matière d’incendie et de sécurité des bâtiments, qui incluent une clause d’arbitrage. Deux procédures d’arbitrage ont été lancées en janvier 2016 par Industriall Global Union et UNI Global Union à l’encontre de deux marques mondiales de l’industrie textile et de la mode qui doivent rester confidentielles ainsi que l’a ordonné le tribunal arbitral dans une décision du 4 septembre 2017109. Cet arbitrage n’a pas prospéré en raison de l’intervention d’un accord transactionnel. L’arbitrage est également mentionné dans l’accord textile conclu aux Pays Bas ainsi que l’indique le rapport pour ce pays. En troisième lieu, une initiative a été prise pour créer des règles spéciales d’arbitrage pour les questions d’entreprises et de droits de l’Homme, administrées par la Cour permanente
106 L’exemple de l’affaire Michelin traité par le PCN français en est un bon exemple. 107 C’est ainsi que sont nommés les différends soumis aux PCN. 108 Handelsgericht des Kantons Zurich, HG160261-O. 109 Cf. le communiqué de presse publié par la Cour permanente d’arbitrage à la demande du tribunal arbitral le 16 octobre 2017, https://pca-cpa.org/wp-content/uploads/sites/175/2017/10/20171016Press-Release-No.-1-ENG-1.pdf.
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d’arbitrage110. Une réunion de travail a été tenue à La Haye au printemps 2018, présidée par Bruno Simma, pour commencer à rédiger ce règlement d’arbitrage. Cette initiative est soutenue par le Ministère des Affaires étrangères des Pays Bas, la ville de La Haye et l’Institute for Global Justice installé à la Haye. Elle est venue à son terme en décembre 2019 avec la publication des Hague Rules On Business and Human Rights Arbitration. Les rapporteurs qui ont répondu au questionnaire à la base du présent rapport indiquent pour la plupart que l’arbitrage est admis dans leur pays, y compris quand le litige porte sur des questions de RSE111. En revanche, un nombre non négligeable estime que la réponse à cette question n’est pas claire112 dans la mesure, notamment, où il est douteux que les questions posées par la violation de normes de RSE soient arbitrables113. Cette dernière question est certainement au centre de la discussion, même si les initiatives rappelées ci-dessus montrent qu’elle a d’ores et déjà été dépassée dans certains cas. Toutefois, on doit noter que certains rapporteurs insistent sur le caractère contractuel des litiges qui peuvent être portés à l’arbitrage114, si bien que dans les pays qui retiennent cette conception étroite de l’arbitrabilité, un arbitrage ne pourrait pas être organisé pour les litiges tels que ceux naissant de l’effondrement du Rana Plaza. Plus prosaïquement, ce sont les coûts engendrés par une procédure d’arbitrage qui peuvent être un frein à un accès effectif de la justice pour les victimes. Cet aspect des coûts a été très clairement une des préoccupations de Lord Justice Simon dans l’analyse qu’il a proposée dans l’affaire Vedanta115 alors même qu’il ne s’agissait pas d’arbitrage, mais seulement de la question de savoir s’il convenait de privilégier les juridictions britanniques ou les juridictions zambiennes. En ce qui concerne la médiation et la conciliation, les mêmes pays se retrouvent des deux côtés de la réponse, à part le rapport pour la Turquie pour qui si l’arbitrage est autorisé, il est plus douteux que la médiation le soit, et le rapport pour la Belgique qui indique que la médiation est possible mais pas la conciliation. Seul le rapport pour les Pays-Bas mentionne d’autres modes de règlement des différends : « binding advice, 110
Cette initiative est due à Claes Cronstedt, Rachel Chambers, Adrienne Margolis, David Rönnegard, Robert C. Thompson et Katherine Tyler. 111 Allemagne, Argentine, Belgique, Brésil, Canada, Chili, États-Unis, France, Italie, Japon, Kazakhstan, Mexique, Pays-Bas, Royaume-Uni, Suisse, Turquie, Vietnam. 112 Chine (mais dans ce pays, l’arbitrage et la médiation sont admis pour les litiges de travail), Espagne, Portugal, République Tchèque. 113 Portugal. 114 Brésil, Canada, Chili, notamment. 115 Nous étudions cette affaire ci-dessous dans la section sur la compétence juridictionnelle.
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dialogue-based mechanisms, or complaints with the Commission for Human Rights », ce qui confirme le caractère novateur du règlement des différends dans ce pays qui possède une vraie culture favorisant les modes alternatifs. Le rapport pour la France mentionne que des négociations entre parties prenantes ont été menées en matière de droit du travail, ce qui est vraisemblablement possible dans d’autres pays aussi. Des explications données par les rapporteurs, il apparaît clairement que lorsque l’arbitrage a été étendu à des relations asymétriques, caractéristique des litiges –au moins délictuelsen matière de RSE, les conditions de déroulement de la procédure d’arbitrage ainsi que, plus généralement, son organisation, ont été aménagés pour tenir compte de cette asymétrie. C’est d’ailleurs ce que font les Hague Rules mentionnées ci-dessus. Pour finir, doit être mentionné le travail effectué par la CNUDCI pour adopter un projet de convention et une loi modèle116 sur l’exécution transfrontière des transactions, appelées dans le texte « accords de règlement »117 obtenus à l’issue d’un processus réussi de médiation/conciliation. La difficulté de l’exercice est double. D’une part la transaction est un instrument contractuel, en cela elle peut être attaquée pour des raisons classiques en matière contractuelle, notamment les vices de consentement. D’autre part, c’est un instrument qui met fin à un différend à la suite d’un processus relativement informel organisé par un tiers. Cela a entraîné pour les négociateurs une prudence extrême et l’importation dans le texte des raisons pour lesquelles un jugement étranger ou une sentence arbitrale peuvent être remis en cause. Le texte cumule ainsi de très nombreuses raisons pour permettre à une partie mécontente du résultat de la transaction de s’opposer à son exécution transfrontière, perdant ainsi de vue l’objectif initial de l’exercice consistant à faciliter cette exécution.
5
Compétence juridictionnelle118 (Questions 12 à 14)
A titre liminaire, il convient de noter qu’un recours effectif organisé au profit des victimes d’actes illicites est garanti au moins par l’article 2.3 du Pacte international relatif aux droits 116
Cela permettra aux États de choisir l’instrument le mieux adapté pour leurs besoins. 117 Ces textes ont été adoptés par la CNUDCI en juillet 2018. Convention des NU sur les accords de règlement internationaux issus de la médiation https://undocs.org/fr/A/RES/73/198. 118 Pour d’autres études de droit comparé on pourra se référer aux deux rapports publiés par l’International Law Association (La Haye 2010 et Sofia 2012) à l’appui de la Résolution adoptée à Sofia et publiée dans le Recueil des travaux de la 75eme session. Nous n’abordons pas dans ce rapport les questions liées aux mesures provisoires et conservatoires car nous pensons que les litiges au fond sont déjà suffisamment
Questions de droit international privé de la responsabilité sociétale des entreprises
civils et politiques, l’article 13 de la Convention européenne des droits de l’Homme, l’article 25 de la Convention américaine relative aux droits de l’Homme et l’article 47 de la Charte des droits fondamentaux de l’Union européenne. Il est donc possible qu’une telle garantie puisse avoir une influence sur la manière dont les tribunaux exercent la compétence qui leur est conférée119. Par exemple, on pourrait imaginer qu’en présence de deux tribunaux ayant compétence, l’un des deux décide de ne pas exercer sa compétence s’il estime que l’autre est mieux à même d’exercer une justice effective et alors même que le pays dans lequel ce juge statue ignore la théorie du forum non conveniens120. Un certain nombre de décisions sur ce point ont déjà été recensées dans le domaine du droit de la consommation et de la protection des données. Un pareil recensement reste à faire pour les litiges liés aux violations des règles de la RSE121. Compte tenu de l’harmonisation du droit des États membres de l’Union européenne (UE) par le Règlement dit « Bruxelles I »122, nous ne citerons nommément les États membres de l’UE que lorsque leurs règles de compétence de droit commun révèlent des compétences résiduelles applicables pour des litiges qui n’entrent pas dans le champ problématiques pour que les juges soient encore plus timides à admettre des mesures provisoires. Nous n’abordons pas non plus les questions liées aux actions de groupe qui ont été beaucoup étudiées non seulement du point de vue de droit comparé mais aussi du point de vue du droit international privé. On signalera notamment la résolution de Rio de Janeiro (2008) adoptée par l’International Law Association, et les rapports préparatoires, parmi les travaux publiés. Enfin, nous n’étudierons pas l’organisation interne du système judiciaire des États objets de ce rapport qui n’intéressent que marginalement les questions que nous étudions ici. Toutefois, pour le Royaume-Uni, la compétence juridictionnelle internationale de droit commun (hors Bruxelles et Lugano) est différente selon que l’on se place en Ecosse, en Irlande du Nord ou en Angleterre et au Pays de Galles. Sauf mention particulière, les règles que nous exposons sont celles de l’Angleterre et du Pays de Galles. 119 Une étude est en cours, financée par l’Union européenne, dénommée Réjus, qui analyse les décisions rendues dans un certain nombre de pays à cet égard. Cette information nous a été communiquée par le Professeur Sandrine Clavel au cours d’une conférence donnée à la branche française de l’ILA le 12 avril 2018. Cf. www.rejus.eu. 120 Pour une analyse récente de la jurisprudence canadienne, v. Saumier (2018), p. 775. 121 On note, par ex. que la Cour européenne des droits de l’Homme, par deux requêtes de 2013 et 2015 (52 requérants d’un côté et 130 requérants de l’autre), a été saisie du droit au recours effectif des requérants dans deux affaires portant sur les rejets de dioxine d’une usine en Italie et donc des dommages à l’environnement (aff. N 54414/13 et 54264/15). Par décision unanime de chambre du 24 janvier 2019, la Cour a décidé que l’article 13 de la CEDH (droit à un recours effectif) a été violé par l’Italie (sauf pour 19 requérants) pour n’avoir pas pris toutes les mesures nécessaires pour permettre aux requérants de soulever leurs griefs devant les autorités nationales. 122 Règlement (UE) n 1215/2012 sur la compétence judiciaire, la reconnaissance et l’exécution des jugements en matière civile et commerciale, tel que modifié par le Règlement (UE) n 542/2014 et le Règlement délégué de la Commission (UE) n 2015/281.
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d’application du Règlement Bruxelles I. Il en va de même pour les États qui sont parties à la Convention de Lugano123, c’est-à-dire l’Islande, la Norvège et la Suisse. Dans pratiquement tous les pays, avec une exception notable pour les États-Unis, il existe des règles spécifiques concernant les litiges individuels pour les consommateurs et les salariés. Toutefois, ces règles doivent céder lorsque le litige n’est plus un litige individuel basé sur une relation contractuelle124, ce qui sera le cas souvent dans le domaine qui nous occupe ici. C’est pourquoi, nous n’étudierons pas spécifiquement ces règles de compétence. Pour la plupart des pays125, les chefs de compétence suivants sont ouverts aux victimes de violation des normes de RSE par les opérateurs économiques : 5.1 le for du défendeur Lorsque le défendeur est une personne physique (ce qui sera rare dans les hypothèses qui nous occupent ici), le for est déterminé par la notion de « domicile » ou de « résidence habituelle », selon des critères qui n’ont jamais été harmonisés ni en droit régional126, ni en droit international127. Lorsque le défendeur est une personne morale, le critère qui permet de déterminer le for du défendeur n’a jamais pu être harmonisé laissant subsister quatre critères qui, selon les pays, s’appliqueront à la question128. Il s’agit du lieu de l’enregistrement de la personne morale (incorporation), du siège social statutaire, du siège social réel (ou centre principal des activités économiques ou principal établissement129) et 123
Convention du 30 octobre 2007, concernant la compétence judiciaire, la reconnaissance et l’exécution des décisions en matière civile et commerciale. 124 Pour l’Union européenne, cf. CJUE 14 mai 2009, Ilsinger, aff. C-180/06 et 28 janv. 2014, Aff. C-375/13. 125 Tous les États membres de l’Union européenne et de la Convention de Lugano, la plupart des pays de l’Amérique latine, le Canada (à la fois les provinces de common law et le Québec). 126 Le droit de l’Union européenne (Règlement Bruxelles I, art. 6.1 et 6.2) prévoit que le juge du for applique son droit interne lorsqu’il est allégué que le défendeur a son domicile sur le territoire du for, et le droit du pays étranger lorsqu’il est allégué que le défendeur est domicilié dans un pays étranger. 127 La Conférence de La Haye de Droit international privé a toujours considéré que la résidence habituelle est une question factuelle laissée à l’appréciation de chaque juge. On trouve en doctrine une liste exemplative de circonstances que le juge peut prendre en considération. 128 Ce sont ces mêmes critères que l’on retrouve en droit européen et dans les conventions de La Haye. Ce morcellement des critères est plutôt favorable aux demandeurs qui pourront, éventuellement, avoir le choix entre plusieurs critères –seulement dans certains pays- et n’auront pas à souffrir des choix stratégiques effectués par la personne morale dans le démembrement de ses activités de gestion et économiques. 129 Un exemple de difficulté pour déterminer le principal établissement (en le différenciant d’un établissement secondaire) est démontré par la décision française dans une affaire impliquant Air Canada, Civ. 1, 22 février 2017, n 16-12408.
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du lieu de l’administration centrale130. Pour les États-Unis, après la décision de la Cour suprême dans l’affaire Daimler131, il est douteux qu’un tel for subsiste, en tant que garantissant une compétence générale aux demandeurs. La question qui se pose ici est celle de savoir si la notion de « groupe » peut élargir le for du défendeur aux litiges engendrés par les actions de toute société du groupe lorsque c’est la société mère (ou grand-mère) qui est poursuivie devant les tribunaux du pays dans lequel elle est domiciliée132. Rares sont les pays pour lesquels la notion de groupe sera utilisée dans ce sens. En fait, rares sont les pays dans lesquels la notion de groupe est connue pour les besoins de la compétence juridictionnelle internationale133. Pour ce qui est du Canada, la plupart des affaires soumises aux juridictions canadiennes sur la base du for du défendeur ont aussi donné lieu à des décisions en matière de forum non conveniens134. Les rapporteurs pour la France mentionnent que si la théorie du forum non conveniens n’est pas connue du droit français, d’autres techniques pourraient être considérées comme équivalentes et utilisées par le juge pour refuser d’exercer la compétence conférée par les règles de compétence juridictionnelle internationale, sauf à s’assurer qu’un
130 Au Canada, le for du défendeur pour une personne morale est constitué au lieu où elle possède « a place of business », critère encore plus large que ceux mentionnés au texte. Toutefois, au Québec, le for du défendeur est constitué au lieu de l’administration centrale de la personne morale (head office). 131 Daimler AG v. Bauman, 134 S. Ct. 746 (2014). 132 Nous utilisons le concept de « domicile » dans un sens très large sans nous prononcer sur le facteur exact qui est retenu pour déterminer ce « domicile » dans le cas d’une personne morale. 133 Le rapport pour l’Allemagne a indiqué qu’un tel concept n’est pas admis en Allemagne. Le rapport pour le Royaume-Uni explique ceci : “it is important to note that there is no group liability within corporate groups in English law. This means that a transnational parent company based in the UK is not legally liable for the tort liabilities of its subsidiaries, no matter if these are based in the UK or abroad. In the case Adams v Cape Industries plc, the Court of Appeal rejected the idea of vicarious liability of parent companies for their subsidiaries. It dismissed the idea of a single economic unit between the different companies in the group, even in case of a wholly-owned subsidiary. The consequence of this approach is that the TNC as the parent company will not be vicariously liable for the torts committed by its subsidiaries. English law strictly treats parent and subsidiary companies as separate legal entities. The parent company is therefore effectively protected from liability. The only way to make the parent company legally liable in tort law is to establish that it has itself breached a duty of care that it directly owed to the employees of its subsidiaries.”. 134 Par ex. Garcia v. Tahoe Resources Inc, 2017, BCCA 39, leave to appeal to SCC refused, 37492 (8 juin 2017) ; Araya v. Nevsun Resources Ltd, 2016 BCSC 1856 ; Das v. George Weston Ltd, 2017 Ont SCJ 4129 ; Yassin v. Green Park International Inc., 2010 QCCA 1455, aff’ng 2009 QCCS 4151, [2009] RJQ 2579 (sub nom Bil’in (Village Council) v Green Park International Inc); Recherches Internationales Québec v. Cambior Inc., No 500-06-000034-971 (14 August 1998), 1998 CanLII 9780 (Que CS).
C. Kessedjian
autre for existe pour ne pas laisser le demandeur dans une situation de déni de justice135. 5.2 Pluralité de défendeurs Le for d’un défendeur permet d’attraire dans la même procédure d’autres défendeurs qui sont liés par les mêmes faits ou la même relation136. En droit de l’Union européenne (art. 8.1. du Règlement Bruxelles I et 6.1. de la Convention de Lugano), la connexité permet d’étendre la compétence au domicile d’une partie (for du défendeur) à l’instance aux autres parties qui ont d’une manière ou d’une autre participé aux mêmes faits litigieux, à condition qu’il existe entre les demandes « un lien si étroit qu’il y a intérêt à les instruire et à les juger en même temps afin d’éviter des solutions qui pourraient être inconciliables si les causes étaient jugées séparément. ». Précisons que cette extension de compétence ne peut avoir lieu que devant le for du domicile de l’une des parties en cause et non si le chef de compétence utilisé est celui d’un autre for (for contractuel, for du délit, etc.), sauf en matière de contrat de travail au profit du seul salarié. L’exacte application dans les domaines de la RSE est difficile à envisager, sauf à admettre une présomption de connexité dans le cadre du groupe de sociétés comme cela a été proposé par la Résolution de l’ILA de 2012137. Sinon, le demandeur devra démontrer qu’il existe une connexité, ce qui, au stade de la compétence, alors que le dossier n’aura pas été encore pleinement exploré, pourra s’avérer difficile, d’autant que les éléments de preuve pourraient se situer au sein de l’une des sociétés mises en cause sans que leur communication ait encore été faite au titre de l’instruction. 135
Parmi ces techniques on doit mentionner le défaut d’intérêt à agir ou le caractère illicite de l’intérêt à agir du demandeur, d’une part, et l’abus de droit dans l’exploitation d’une règle de compétence, d’autre part. Ces outils ont été proposés en doctrine pour sanctionner dans les contentieux internationaux un comportement déloyal ou pour corriger le recours à un chef de compétence mettant la partie défenderesse dans une situation excessivement défavorable par rapport à celle du demandeur. Voir notamment Cornut (2007), p. 27, et les références citées. 136 Chili, Chine. Pour le Viet Nam, les règles de droit international privé sont silencieuses. Mais par analogie, il est probablement admis que des défendeurs supplémentaires soient agrégés au défendeur premier domicilié au Viet Nam. En France, dans les litiges relatifs au contrat de travail, la jurisprudence française a eu recours à la notion de co-employeurs pour permettre au salarié employé par une filiale étrangère d’attraire en France au sein d’une même instance la filiale étrangère (employeur direct) et la société mère française qui la contrôle (considérée comme l’employeur indirect du salarié) ou inversement la société mère étrangère aux côtés de la filiale française. . . Toutefois, les critères du co-emploi sont définis en droit français de manière très stricte : il faut soit un lien de subordination entre le salarié et la société mère soit entre la société mère et la filiale « une confusion d’intérêts, d’activités et de direction se manifestant par une immixtion de la société mère dans la gestion économique et sociale de la filiale » (Cass. soc. 6 juil 2016, n 14-27266, 14-26541 et 15-15481 ; Cass. soc. 2 juil 2014 n 13-15208). 137 Cf. supra note 118.
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Comme la règle concernant la pluralité de défendeurs incluse dans le Règlement Bruxelles I est limitée aux défendeurs domiciliés sur le territoire de l’UE, plusieurs pays européens possèdent dans leur droit commun une règle similaire pour les défendeurs domiciliés en dehors de l’Union138. Au Royaume-Uni, la règle de droit commun dispose que le tribunal peut étendre la compétence à ‘a necessary or proper party’. Encore faut-il que le demandeur démontre que : “(1) there is a real issue reasonable for the court to try; (2) there is a good arguable base that the claim falls within one of the bases of jurisdiction provided in the CPR rules; et (3) England is the appropriate forum for the dispute.”. Un exemple de ce raisonnement peut être trouvé dans la décision de la Court of Appeal dans l’affaire Dominic Liswaniso Lungowe c. Vedanta Resources plc et al.139 dans laquelle les juridictions anglaises se sont déclarées compétentes pour juger d’une affaire mettant en cause la filiale zambienne et sa société mère anglaise pour les activités extractives en Zambie dont il était allégué qu’elles avaient entraîné des dommages corporels, financiers et écologiques. Une autre affaire similaire est soumise au tribunal régional de Dortmund à l’encontre de la société KiK140 par les victimes d’un feu qui a pris dans une usine textile au Pakistan. Il est reproché à KiK de n’avoir pas usé de son influence, alors qu’elle était le plus important client de la société soustraitante, pour que les normes de sécurité soient respectées. En ce qui concerne les États-Unis, la pluralité de défendeurs n’est pas possible en tant que telle car la compétence in personam doit être établie séparément pour chacun des défendeurs. Au Canada, il est possible d’agréger d’autres défendeurs à la cause initiale, mais chaque défendeur ainsi agrégé doit présenter des liens « substantiels » avec le for. Le rapport pour la France suggère que la question visée au paragraphe précédent pourrait être analysée non pas au titre de la compétence juridictionnelle, mais au titre de la recevabilité de l’action. En effet, ce serait la qualité du défendeur contre qui l’action est engagée qui pourrait poser problème lorsqu’est poursuivie la société mère alors que les actes en cause sont ceux d’une de ses filiales à l’étranger. La question devient alors une question de droit applicable à la recevabilité : lex societatis ou lex causae sont les deux possibilités qui s’offrent au juge disent les rapporteurs pour la France. On peut imaginer cependant que dans les pays de
138
France, Italie. 13 octobre 2017, EWCA Civ. 1528. Le 10 avril 2019, la Cour suprême du Royaume-Uni a rejeté l’appel contre la décision des premiers juges ([2019] UKSC 20), si bien que l’affaire peut se poursuivre au fond devant les juridictions de ce pays. On peut constater une évolution similaire, favorable aux demandeurs, dans la décision du tribunal de district de La Haye, aux Pays-Bas, à propos de l’affaire Shell au Nigeria (1er mai 2019). 140 LG Dormunt, Az. 7 O 95/15. 139
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common law, ce sera la lex fori qui dictera la recevabilité de l’action. 5.3 le for contractuel Si le litige porte sur un contrat dans lequel apparaît une clause d’élection de for, le tribunal choisi par les parties, sauf cas exceptionnel141, sera aussi compétent pour entendre un litige portant sur les obligations de RSE d’un des partenaires au contrat. Signalons que certains pays permettent à leurs tribunaux de refuser la compétence conférée par une clause d’élection de for si le litige n’a aucun lien avec ce pays autre que le choix du juge142. Pour les pays qui acceptent la compétence au for du contrat, le critère utilisé peut différer. De nombreux pays admettent le for du contrat à son lieu d’exécution143. 5.4 le for du délit La Convention négociée au sein de la Conférence de La Haye sur la reconnaissance et l’exécution des jugements étrangers en matière civile ou commerciale privilégie la compétence au for du fait causal pour les besoins de la compétence indirecte dans le cadre de la reconnaissance et de l’exécution des jugements144. Cela peut s’expliquer par le fait que plusieurs pays, en dehors de l’Union européenne, privilégient le lieu du fait causal pour le for délictuel145 et que, s’ils admettent la compétence des tribunaux au lieu du dommage, elle est limitée aux seuls dommages physiques146 Le for du délit, en Europe (système Bruxelles I et Lugano) se partage, au choix du demandeur, entre le for du fait causal ou fait générateur et le for du dommage. La Cour de Justice de l’Union européenne a limité ce choix en exigeant notamment que la victime qui agit au for du dommage soit la victime directe et non, par exemple, la victime par ricochet. De la même manière, en cas de pluralité de dommages subis sur des territoires différents, la Cour limite la compétence du 141
On entend par « cas exceptionnel » l’hypothèse dans laquelle le champ d’application de la clause d’élection de for aurait été limité de manière drastique par les parties. 142 Belgique, Pays-Bas. Cette règle ne permet donc pas aux parties de choisir un juge « neutre ». 143 Pour la Chine, l’admission du for contractuel n’est pas claire car aucun exemple n’a été trouvé. Les auteurs du rapport précisent que si le for contractuel est admis, ce sera au lieu d’exécution de la prestation caractéristique. En Europe, le lieu d’exécution du contrat est fixé par des règles compliquées qui impliquent, notamment, la volonté des parties exprimée dans le contrat (par exemple en utilisant l’un des incoterms disponibles, ou bien la loi applicable à la prestation en cause dans le litige. Une jurisprudence abondante a été rendue par la Cour de Justice de l’Union européenne sur cette question. 144 Article 5 (j) du projet de convention sur la reconnaissance et l’exécution des jugements étrangers de novembre 2017. 145 Chine, notamment. 146 Chine, notamment.
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for du dommage au seul dommage subi sur le territoire du for saisi. Ce chef de compétence est donc très problématique pour les victimes d’activités de sociétés multinationales du fait de leurs établissements à l’étranger. En effet, il sera rare que les victimes puissent démontrer que le fait causal a eu lieu au siège de la société mère (l’activité ayant généralement été conduite sur le territoire de l’établissement ou de la filiale)147. Et le for du dommage amènera le plus souvent à donner compétence aux tribunaux de l’établissement ou de la filiale qui sera aussi le lieu du fait générateur. La jurisprudence française, toutefois, pourrait montrer la voie pour une meilleure utilisation du for délictuel, ainsi que le suggère le rapport pour la France, lorsque la demande est fondée sur l’immixtion alléguée de la société mère dans la gestion de sa filiale148. L’affaire elle-même ne mettait pas en cause des questions de RSE, mais, par analogie, il serait possible de garantir un for délictuel en France, si la société mère étrangère avait agi de manière à créer le dommage subi en France. Il conviendrait ensuite de bilatéraliser la règle. Cette jurisprudence peut compléter judicieusement le for dit des gares principales149. Dans les États membres de l’Union européenne, le for délictuel peut être actionné également pour une action préventive150. Cela semble être le cas pour un grand nombre de pays hors de l’Union européenne151. Il ne semble pas que le for du dommage existât au Mexique, sauf pour les dommages à l’environnement. Le Viet Nam ne reconnaît que le for délictuel au lieu du fait générateur. Aux États-Unis, ce for délictuel (au lieu du dommage) a été considérablement restreint par la Cour suprême qui a exigé que le défendeur ait pu prévoir que son activité puisse causer un dommage dans l’État où le dommage a été subi152. Une règle similaire est applicable au Canada. 5.5 le for dit des « gares principales » Ce for permet d’attraire un défendeur au domicile de l’un de ses établissements, à condition que le litige naisse de la 147 Sauf si la question posée est celle du duty of care dont nous avons parlé supra. 148 Civ. 1, 26 oct. 2011, n 10-17026, JDI 2013 n 2, com. 11 et CJUE 18 juil. 2012, OFAB, Aff. C-147/12. 149 Cf. infra. 150 CJCE 19 sept 1995, aff. C-364/93, Antonio Marinari et 16 juin 2009, Aff. C-189/08, Zuid Chemie BV. 151 Au 20 mai 2018, date à laquelle ce projet de rapport est finalisé, tous les rapporteurs n’ont pas répondu à la question supplémentaire posée. 152 J. McIntyre Machinery Ltd, v. Nicastro, 564 U.S. 873 (2011). En l’espèce, la machine qui a blessé Nicastro dans le New Jersey avait été produite au Royaume-Uni et la majorité de la Cour considère que le défendeur ne pouvait pas se douter qu’une de ses machines se retrouverait un jour dans cet État. Si bien que la compétence des tribunaux du New Jersey n’est pas acquise.
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gestion de l’établissement en cause. Ce chef de compétence présente l’avantage de s’appliquer quelle que soit la qualification du litige, contractuelle ou délictuelle. C’est un chef de compétence particulièrement prometteur en matière de RSE d’autant qu’il permet, compte tenu de la jurisprudence de la CJUE, de passer outre la difficulté de la levée du voile de la personnalité morale ainsi que de mettre en œuvre concrètement le concept de groupe de sociétés. La Cour de justice de l’Union européenne a récemment confirmé, dans le cadre du Règlement européen sur les marques153 et non du Règlement Bruxelles I, que cette règle s’applique y compris quand l’établissement est une société juridiquement indépendante, dès lors que la filiale est un centre d’opérations qui, dans l’État membre où elle est située, dispose d’une forme de présence réelle et stable, à partir de laquelle une activité commerciale est exercée, et qui se manifeste d’une façon durable vers l’extérieur comme le prolongement le prolongement de ladite maison mère154. On se souvient qu’une solution similaire avait déjà été retenue par la CJCE dans l’affaire Schotte, alors que c’était la société mère qui s’était immiscée dans les activités de sa filiale155. L’affaire Schotte se prononçait dans le cadre de la Convention de Bruxelles. Ce chef de compétence ressemble à ce que l’on appelle « transacting business » ou « specific jurisdiction » aux ÉtatsUnis. Toutefois, dans ce pays, l’utilisation de ce chef de compétence doit également être vérifié dans chaque cas à l’aune des critères de due process. Donc il est impossible de dire à l’avance, dans l’abstrait et de manière certaine, si dans un cas donné le tribunal saisi au titre de ce chef de compétence acceptera de se saisir du litige. Les autres chefs de compétence ci-après énumérés ne sont pas prévus par le système de Bruxelles I ou de Lugano et ne relèvent, quand ils existent, que du droit commun de chaque État. 5.6 le for de nécessité Le for de nécessité est destiné à lutter contre le déni de justice et peut être saisi quand aucun autre for n’est disponible, soit qu’il n’en existe pas d’autre (ce qui est rare), soit qu’il serait impossible (matériellement ou juridiquement) d’exiger du demandeur d’agir ailleurs que devant le for de nécessité156. Règlement (CE) du Conseil n 207/2009 du 26 févr. 2009 sur la marque communautaire. 154 Hummel Holding A/S c. Nike Inc. & Nike Retail BV, C-617/15, 18 mai 2017. 155 9 déc. 1987, C-218/86. 156 Argentine, Belgique, Espagne, France, Mexique, Québec, Suisse. Il n’est pas certain que le for de nécessité existe au Canada dans les provinces de common law bien que le CJPTA inclut une règle similaire à celle du Québec mais qui n’exige pas de lien suffisant avec la province. Pour l’Espagne, le for de nécessité ne peut être saisi que si les tribunaux 153
Questions de droit international privé de la responsabilité sociétale des entreprises
Cette condition a été appréciée dans l’affaire Anvil Mining Ltd c Association canadienne contre l’impunité157, affaire dans laquelle la Cour d’appel du Québec a refusé l’usage du for de nécessité car les victimes congolaises ne prouvaient pas qu’il leur était impossible de poursuivre Anvil en Australie. De manière très libérale, la Cour européenne des droits de l’Homme avait exigé des autorités suédoises l’accueil d’une action en diffamation alors qu’il n’était « ni raisonnable ni pratique » d’exiger du demandeur qu’il agisse devant les juridictions du Royaume-Uni (siège du fournisseur du média en cause)158. Mais la même Cour a rendu une décision désastreuse dans l’affaire Naït (15 mars 2018). Il est rare que ce for soit actionné, si bien que la jurisprudence n’est pas abondante159. Dans la plupart des pays qui connaissent cette base de compétence, il est nécessaire qu’un lien existe entre le litige et le for. Ce lien peut être ténu160. Pour certains pays il doit être « suffisant »161. Toutefois, l’appréciation du lien avec le for peut donner lieu à des difficultés comme le montre, en France, l’affaire Comilog. La Cour de cassation a, par deux décisions de 2017162, à la fois reconnu très explicitement l’existence d’une compétence fondée sur la lutte contre le déni de justice, et décidé que « la seule détention par une société française d’une partie du capital d’une société étrangère » ne constitue pas un lien de rattachement propre à enclencher l’application de la compétence fondée sur la lutte contre le déni de justice163. qui seraient normalement compétents à l’étranger ont refusé d’exercer cette compétence. Cette exigence semble difficile à remplir dans le cas de violation des droits de l’Homme, par exemple, dans tous les cas où les victimes ne peuvent pas saisir le ou les tribunaux étrangers. Lorsque l’Union européenne avait prévu d’élargir le Règlement Bruxelles I aux litiges avec les État tiers, ce qui finalement n’a pas été fait, la Commission avait inclus une règle sur le for de nécessité (article 26, du projet de refonte du Règlement Bruxelles I, COM (2010) 748/4, du 14.12.2010. 157 [2012] QCCA 117, [2012] RJQ 153, leave to appeal to SCC refused, 34733 (1 November 2012). 158 CEDH 1er mars 2016, req. n 22302/10, Arlewin c. Suède. 159 Aucune jurisprudence en Suisse ni au Mexique, par exemple. En France, on peut signaler l’affaire d’esclavage domestique jugée en 2006, Civ. 1, 10 mai 2006, JCP 2006, II, 10121, note S. Bollée, RCDIP 2006, p. 856, note E. Pataut et P. Hammje. 160 En France, par ex. il a été jugé suffisant que l’arbitrage soit organisé sous l’égide la CCI pour justifier la compétence des tribunaux français au titre du for de nécessité dans une affaire où le litige portait sur la composition du tribunal arbitral alors que les tribunaux des deux parties leurs étaient fermés Cf. aff. NIOC, Civ 1, 1er février 2005, n 01-13742 et 02-15237. 161 Argentine, Québec. On notera que c’est ce même critère qui est retenu par les Règlements européens en matière de famille (Règlements Obligation alimentaires, 4/2009, article 7, Successions, 650/2012 article 11 et Régimes matrimoniaux, 2016/1103 et 2016/1104, article 11). 162 Soc. 14 sept. 2017, n 15-26737 et 15-26738. 163 Cette décision qui n’est pas rendue par la première chambre civile qui avait rendu la décision dans l’affaire NIOC, est en net retrait par rapport à cette dernière.
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Certains pays exigent en outre que le juge, avant d’accepter sa compétence au titre du for de nécessité, évalue la possibilité que le jugement qu’il sera amené à rendre puisse être exécuté164. On le constate, l’admission du for de nécessité se heurte encore à des obstacles qu’il conviendra de lever. La Cour européenne des droits de l’Homme, en 2018165, avait reconnu qu’aucune coutume internationale ne pouvait encore être identifiée permettant de consacrer le for de nécessité166. Toutefois, elle reconnaissait « un large consensus dans la communauté internationale sur l’existence d’un droit des victimes d’actes de torture à une réparation appropriée et effective (et) le fait que les États sont encouragés à donner effet à ce droit en dotant leurs juridictions de la compétence pour connaître de telles demandes de réparation, y compris quand elles résultent de faits commis en dehors de leurs frontières géographiques. ». Elle ajoutait : « A ce titre, il convient de saluer les efforts des États tendant à rendre le plus effectif possible l’accès à un tribunal en vue d’obtenir réparation pour des actes de torture »167. Il est donc possible de voir dans cette affirmation, une nouvelle application de l’exigence d’un recours effectif comme nous le signalions ci-dessus168. Il est donc possible que, sur cette base, nous constations à l’avenir une plus grande activité sur le fondement du for de nécessité. En effet, dans toutes les hypothèses où il serait démontré qu’aucun autre for n’existe (soit juridiquement, soit matériellement) l’exigence d’offrir un recours effectif aux victimes d’actes les plus graves de violation des droits de l’Homme, et de certains aspects de la RSE, oblige les États à ouvrir leurs tribunaux au titre du for de nécessité, avec des conditions plus allégées que celles que l’on constate aujourd’hui dans certains pays. 5.7 la compétence universelle civile169 La compétence civile universelle présente l’avantage, par rapport au for de nécessité, de ne pas exiger un lien, même ténu, entre le for et le litige, permettant d’aller un peu plus loin que le for de nécessité. Toutefois, cette base de 164
Argentine. Le juge français se préoccupe aussi de savoir si sa décision sera exécutée à l’étranger sans toutefois en faire une condition sine qua non de l’application du for de nécessité. 165 CEDH, Grande Ch., 15 mars 2018, req. n 51357/07, Naït Liman c. Suisse. 166 Ibidem, para 201. La Cour précise que dans les 40 États étudiés, 28 ne reconnaissent pas le for de nécessité. Pourtant voir le tableau comparatif établi par Retornaz, Volders (2008), p. 225. 167 CEDH, Grande Ch., 15 mars 2018, req. n 51357/07, Naït Liman c. Suisse, para. 218. On note que la requête a été rejetée dans cette affaire en raison de la marge de manœuvre importante reconnue aux États compte tenu de l’état du droit international en la matière. 168 Cf. para. 67. 169 Le rapport pour les Pays-Bas indique que l’article 6(b) du Code de procédure civile des Pays-Bas peut être considéré comme l’équivalent d’une règle de compétence universelle civile.
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compétence juridictionnelle internationale n’est pas reconnue, pour le moment, de manière suffisamment large pour fonder facilement une compétence nationale pour les victimes de violations les plus graves des règles de RSE. On renverra le lecteur aux études très complètes menées par le Prof. Andreas Bucher170 et la résolution qui a été adoptée par l’Institut de droit international en 2015 sur son rapport171. La compétence accordée aux tribunaux des États-Unis par l’Alien Tort Statute (ATS) a souvent été assimilée à la compétence civile universelle. Que cette assimilation soit correcte ou non, il convient de préciser que la compétence en vertu de cette législation est qualifiée aux États-Unis de « subject matter jurisdiction ». Il s’agit donc plus d’une règle de pouvoir que de compétence juridictionnelle autorisant les tribunaux américains de se saisir d’une affaire sans régler pour autant la compétence in personam à l’égard du défendeur. Cette précision ayant été donnée, il convient de remarquer que, à l’heure où ce rapport est rédigé, il ne reste plus grand chose de cette législation après la décision de la Cour suprême dans l’affaire Kiobel172 et surtout celle rendue dans l'affaire Jesner c. Arab Bank PLC le 24 avril 2018173. Après la décision dans Jesner, il est certainement exact de dire que les personnes morales sont, pour le moment, immunisées de poursuites devant les juridictions fédérales états-uniennes. Toutefois, il est possible que des affaires puissent être portées devant les juridictions étatiques si les États fédérés adoptaient des législations semblables à l’Alien Tort Statute174. En France, et dans un certain nombre de pays européens, il est possible de former une action civile devant la juridiction pénale compétente175, si bien que l’on peut soutenir qu’une compétence civile universelle indirecte peut être utilisée à condition que l’affaire soit portée devant les tribunaux français en vertu d’une compétence universelle pénale. La compétence pénale internationale des tribunaux français est détaillée aux articles 689 à 689-10 du Code de procédure pénale. En résumé, la compétence universelle pénale des tribunaux pénaux peut être mise en œuvre uniquement si l’inculpé se trouve sur le territoire français et uniquement pour les crimes de torture ou traitements cruels, inhumains ou dégradants, de terrorisme, les infractions relatives à la protection physique des matières nucléaires, celles relatives à la 170
Bucher (2014), pp. 9–127. La compétence civile universelle en matière de réparation pour crimes internationaux, Résolution de Tallinn, disponible sur le site de l’Institut et dans l’Annuaire de l’Institut, vol. 76, pp. 1–200. 172 Kiobel v. Royal Dutch Petroleum Co., 563 U.S. ___ (2013). 173 584 U.S. __ (2018). 174 A notre connaissance, seule la Californie a adopté une telle loi, même il ne semble pas qu’elle est déjà fait l’objet d’une mise en œuvre. 175 Cette compétence qui n’existe pas dans le droit commun de tous les États européens, est autorisée par le Règlement Bruxelles I et la Convention de Lugano. 171
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sécurité de la navigation maritime et de l’aviation civile, celles relatives à la protection des intérêts financiers de l’Union européenne et à la lutte contre la corruption des fonctionnaires européens. On le constate, seul un petit nombre d’hypothèses peut nous intéresser dans le cadre de la présente étude. En Belgique, par une loi de 1993176, telle qu’amendée en 1999177, les tribunaux belges étaient compétents pour se saisir, au titre de la compétence pénale universelle, d’accusations de génocide, crimes de guerre et plus généralement de crimes internationaux. Les procès pouvaient se dérouler in absentia178. C’est en vertu de ce texte que des victimes birmanes assignèrent TotalFinaElf devant les juridictions belges en alléguant une complicité de la société avec la junte militaire birmane179. Toutefois, la loi fut abolie en 2003 si bien que la Cour de cassation décida en 2005 que les tribunaux belges n’avaient plus de pouvoir pour statuer sur une telle affaire. 5.8 Autres chefs de compétence Le Traité de Montevideo de 1899 (amendé en 1940) qui traite du droit civil international, signalé par le rapport de l’Argentine180 prévoit une compétence pour les tribunaux du pays dont le droit est applicable à un litige donné181. Pour le Royaume-Uni une règle de common law a été maintenue permettant de poursuivre un défendeur au Royaume-Uni si le litige est engendré par un contrat passé au Royaume-Uni ou par un mandataire domicilié au Royaume-Uni ou soumis au droit anglais. Le Canada a conservé dans son arsenal de compétences juridictionnelles internationales la présence du défendeur sur le territoire de la province dont les tribunaux sont saisis. Ce for, qui peut être assimilé au for du défendeur mais à partir d’un critère très ténu, a permis dans l’affaire Chevron, aux victimes équatoriennes de trouver un tribunal au Canada, pour tenter de faire reconnaître et exécuter le jugement rendu en Equateur contre Chevron182. 176 Law of 16 June 1993 concerning the punishment of serious violations of the Geneva Conventions of 12 August 1949 and on the additional protocols of 8 June 1977, BS 5 August 1993, 17751. 177 Law of 10 February 1999 concerning serious violations of international humanitarian law, BS 23 March 1999. 178 Wouters (2003–2004), p. 10. 179 Ibid., p. 12. 180 Ce traité du 12 février 1899 a été ratifié par l’Argentine, la Bolivie, le Paraguay, le Pérou, l’Uruguay. La Colombie y a accédé. 181 Une application pour l’Argentine : Cámara Federal de Apelaciones de Paraná, 06/14/2010, “Ñandubaysal SA y otros c/ Botnia SA.”. 182 L’affaire Chevron a défrayé la chronique judiciaire dans un très grand nombre de pays. La coalition de défense des citoyens équatoriens a tenté d’exécuter un jugement équatorien contre Chevron pour plusieurs milliards de dollars en raison de la pollution de la forêt primaire du fait de l’exploitation pétrolière. La Cour suprême du Canada a accepté la
Questions de droit international privé de la responsabilité sociétale des entreprises
Le Viet Nam possède un for de la nationalité/résidence du demandeur pour permettre aux personnes et entités vietnamiennes de poursuivre au Viet Nam lorsque le différend « concerne les relations civiles qui sont établies, modifiées, interrompues sur le territoire d'un pays étranger mais dont l’objet porte sur les droits et obligations des personnes physiques et des organisations vietnamiennes ou des personnes physiques et des organisations étrangères ayant leur domicile ou leur siège au Vietnam »183. La France a conservé le for de la nationalité du demandeur et du défendeur aux articles 14 et 15 du Code civil. Bien que leur application dans des affaires concrètes aient été limitée sévèrement par la Cour de cassation, on peut penser que ces chefs de compétence seront utiles lorsque le dommage ayant été subi à l’étranger alors que l’activité en cause est exercée par une entreprise étrangère, la victime est française et souhaite se prévaloir des tribunaux français. 5.9 Applications jurisprudentielles Nous avons ensuite demandé aux rapporteurs de nous signaler toutes les affaires qui avaient été soumises aux juridictions de leur pays afin de vérifier en pratique comment les différends se présentent et sur quel fondement juridictionnel ils sont retenus ou rejetés184. Le for du défendeur et la pluralité de défendeurs sont les critères utilisés dans un grand nombre d’affaires. Ainsi l’affaire ENI c. Ododo, toujours pendante devant le Tribunal de première instance de Milan185. Dans cette affaire, ENI est poursuivie devant le tribunal de son « domicile » et sa filiale nigériane, NAOC, est jointe à la procédure en qualité de codéfendeur. La compétence du for du défendeur ne posait pas de difficulté dans l’affaire FIFA/Qatar186 soumise au Tribunal de Zurich en Suisse par un travailleur du Bangladesh et des syndicats qui reprochaient à la FIFA d’avoir accordé au Qatar l’organisation de la coupe du monde 2022 malgré des abus répétés et documentés du système de la Kafala. La Cour rejette la demande par une motivation substantielle. C’est également le cas de plusieurs affaires dont les tribunaux du Royaume-Uni ont été saisis. Chaque fois, la compétence juridictionnelle internationale ne
compétence des tribunaux canadiens pour les besoins de l’exécution au Canada (décision du 4 sept. 2015, 2015 CSC 42). Toutefois, sur le fond, la Cour d’appel de la Colombie britannique a refusé l’exécution du jugement contre le patrimoine appartenant à la filiale canadienne de Chevron alors que le jugement à exécuter n’était pas dirigé contre elle. 183 Article 469-1-e du Code civil de 2015. 184 Aucune jurisprudence ne nous a été signalée pour les pays suivants : Chine, Espagne, Japon, Kazakhstan, République tchèque, Turquie, Viet Nam. 185 Le tribunal a été saisi le 4 mai 2017. 186 Handelsgericht des Kantons Zurich, HG160261-O.
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posait pas de difficulté, mais les affaires ont été rejetées par des arguments de fond187. Un exemple d’application du for de l’établissement est donné par le rapport suisse dans les termes suivants : « In the IBM(Geneva)/Germany case,188 the Swiss Supreme Court ruled on the jurisdiction of Swiss courts in a matter concerning the American company IBM’s alleged involvement with the Nazi regime in Germany between 1933 and 1945. The claimants, who were detained in concentration camps during World War II, reproached IBM for supplying technology from its European branch in Geneva to the Nazi regime. They claimed for the civil compensation of the harm that they had suffered based on Article 41 CO. A first instance judgment dismissing the claim for lack of jurisdiction was reversed by the Geneva Court of Appeal, which ruled that the Geneva courts had jurisdiction to hear the claim based on Article 129 SPILA189. The Swiss Supreme Court affirmed this judgment. Without prejudice to the decision on the merits, the Court found that the claimant’s allegation that IBM had supplied its Nazi clients with technology from its European branch in Geneva, was plausible.190 Since it could not be excluded, on one hand, that IBM was responsible of acts of complicity in a genocide and, on the other hand, that such tortious acts had been committed in Geneva, this was sufficient for establishing the jurisdiction of the Geneva courts under Article 129 SPILA.191 ». Comme il a été dit ci-dessus, en Belgique, en 2002, les tribunaux ont été saisis d’une affaire à l’encontre de la société TotalFinaElf par des réfugiés du Myanmar pour la violation des droits de l’Homme dont ils se disaient victimes lorsque la compagnie avait construit et exploité un pipeline de gaz. La base de compétence était l’ancienne loi sur le Génocide de 1993 qui fut abolie par le législateur belge en 2003, si bien que la Cour de cassation prit la décision en 2005 que l’affaire ne pouvait pas prospérer devant les tribunaux belges. Le rapport pour les Pays-Bas relate plusieurs affaires pendantes devant les juridictions néerlandaises dans les affaires Trafigura et Dutch Shell, notamment. 187 Lungowe et Al. v Vedanta Resources plc et Al. [2017] EWCA Civ 1528, confirming the first instance decision [2016] EWHC (TCC) ; Okpabi v Shell [Okpabi v Royal Dutch Shell plc [2017] EWHC 89 (TCC), [2017] Bus. L.R. 1335]. Les affaires contre Shell et Unilever ont été suspendues en attente de la décision de la Cour suprême dans l’affaire Vedanta. Elles pourront se poursuivre compte tenu de la décision rendue par la Cour suprême le 10 avril 2019. 188 Swiss Supreme Court, Decision 4C.296/2004, 22 December 2004, DFT 131 III 153. 189 L’article 129 de la loi suisse de DIP est une disposition complexe qui permet, si le litige porte sur un acte illicite, de porter l’affaire devant les tribunaux suisses si se trouve en Suisse le domicile du défendeur, un de ses établissements si l’acte est imputable à cet établissement, ou bien le fait générateur ou le dommage (résultat). 190 DFT 131 III 153 § 6.4. 191 Ibid.
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5.10 Le forum non conveniens Le forum non conveniens, théorie de common law, n’est normalement pas connu des systèmes romano-germaniques sauf au Québec et en Belgique. Par cette théorie, le juge, compétent en vertu de ses propres règles, a le droit d’évaluer cette compétence et de refuser de se saisir de l’affaire qui lui est soumise au motif qu’un autre juge est mieux placé pour statuer sur cette affaire en raison d’une plus grande proximité. La résolution de l’ILA de 2012192 recommandait de ne pas appliquer le forum non conveniens lorsque le demandeur agissait devant le for du défendeur et sur le for de la pluralité de défendeurs. L’application de cette théorie a été interdite dans le cadre du Règlement Bruxelles I, y compris et surtout lorsque son application engendrerait la possibilité pour le juge de se dessaisir au profit d’une juridiction hors du territoire de l’Union européenne193. Deux affaires canadiennes récentes sont emblématiques de l’application de cette théorie, l’affaire Tahoe194 et l’affaire Nevsun195. Dans la première, la Cour d’appel a été convaincue par les arguments des demandeurs selon lesquels il existait un risque que la faiblesse du système judiciaire du Guatemala ne leur permette pas de bénéficier d’un procès équitable selon les critères canadiens des droits fondamentaux procéduraux. Ainsi, elle retient que l’importance économique de la mine en cause et le caractère très politique du procès pouvait laisser penser que les juges seraient influencés et ne bénéficieraient pas de l’indépendance d’esprit nécessaire. Dans la seconde affaire, tant en première instance qu’en appel, les juges canadiens furent convaincus que les demandeurs ne pourraient pas bénéficier d’un procès équitable en Erythrée, notamment en raison du système de preuve en vertu du droit érythréen196.
6
Droit applicable (questions 15 à 19)
A titre préliminaire, il convient de noter que la lex fori pourrait avoir un rôle à jouer, non seulement après que la loi étrangère désignée a été considérée comme contraire à
l’ordre public du for, ou au titre de loi de police, mais d’une manière plus générale comme possédant un rôle important dans tous les pays qui, comme le Chili, appliquent une version extrême du principe de territorialité équivalent de l’application de la lex fori dans quasiment tous les cas dans lesquels les tribunaux du pays sont compétents, alors même que les liens entre le litige et le for ne sont que très ténus. Toutefois, lorsque la situation est entièrement cristallisée sur le territoire d'un autre État, le juge chilien décidera certainement que la loi étrangère s'applique. Mais comme le Chili continue d'exiger que la loi étrangère soit prouvée et que le défaut de preuve entraîne le rejet de la demande, il n'existe pas de jurisprudence qui aurait appliqué un droit étranger. Ce n’est plus le cas dans tous les pays qui ont adopté la Convention interaméricaine sur les règles générales de droit international privé du 5 août 1979197. Certains rapports suggèrent que la lex fori pourrait s’appliquer aux questions liées à la levée du voile de la personnalité morale198.
6.1
Comment la lex societatis se détermine-t-elle ?
Nous l’avons dit, certaines questions relevant de la RSE entrent dans la qualification lex societatis. Il est donc important de comprendre à partir de quels critères cette lex societatis est déterminée et comment les notions de « groupe de sociétés » ou de « levée du voile social » sont accueillies et pour quels résultats. Il n’y a guère de surprise dans les réponses apportées par les rapports nationaux. Nous retrouvons les quatre critères précédemment évoqués : siège social statutaire199, enregistrement (incorporation)200, siège social réel201 ou centre principal des activités ou principal établissement202 et administration centrale203. Le contrôle n’est évoqué par aucun rapport alors qu’il pourrait être d’une grande utilité dans le domaine qui nous occupe ici. Certains pays qui retiennent le critère de l’incorporation atténuent le caractère très libéral de ce critère, qui revient en réalité à soumettre toutes les questions régies par la lex
192
Cf. réf. supra note 119. CJCE, C-281/02, 1er mars 2005, Owusu. 194 2015 BCSC 20145 (Cour supérieure de Colombie britannique), infirmé en appel 2017 BCCA 39 (Cour d’appel de Colombie britannique), droit au pourvoi refusé par la Cour suprême du Canada 8 juin 2017. 195 2016 BCSC 1856, confirmé en appel 2017 BCCA 401, droit au pourvoi accepté par la Cour suprême du Canada 14 juin 2018. A l’heure où nous écrivons l’affaire est toujours pendante devant la Cour suprême. Toutefois, la Professeure Saumier indique que le pourvoi ne porterait pas sur la question de compétence juridictionnelle. Voir Saumier (2018), p. 784. 196 Par exemple, la non admission au titre de preuves secondaires de rapports d’organismes internationaux indispensables à la compréhension des éléments factuels du contentieux. 193
197
Entrée en vigueur en 1981. Elle est en vigueur dans les pays suivants : Argentine, Brésil, Colombie, Équateur, Guatemala, Mexico, Paraguay, Pérou, Uruguay, Venezuela. 198 Belgique. 199 France (en combinaison avec le siège social réel c’est-à-dire le siège de la direction effective de la société). 200 Allemagne (dans le cadre de l’Union européenne), Argentine, Brésil, Canada, Chine, Espagne, Italie, Japon, Kazakhstan, Mexique, République tchèque, Royaume-Uni, Suisse, Viet Nam. 201 Allemagne, France (en combinaison avec le siège social statutaire), Portugal. 202 Belgique. 203 Turquie.
Questions de droit international privé de la responsabilité sociétale des entreprises
societatis à la simple volonté des actionnaires, par une règle de réalité selon laquelle si la société enregistrée à l’étranger développe exclusivement ses activités localement, la loi locale s’applique au titre de lex societatis204. Une autre atténuation au critère de l’incorporation consiste à permettre aux tiers de se prévaloir du centre des activités principales (ou siège social réel) s’il existe une dichotomie entre ces deux facteurs205. La raison essentielle retenue par les pays qui privilégient la réalité économique ou d’administration de la société par rapport à l’autonomie de la volonté est particulièrement pertinente en matière de RSE. En effet, pour que la RSE soit efficace, un plus grand contrôle de la part des autorités publiques est nécessaire. Si les sociétés peuvent aisément changer la lex societatis pour échapper à des règles plus strictes de RSE, le but ne pourra être atteint206. C’est d’ailleurs pourquoi, lorsque des lois spéciales sont édictées, le critère de détermination de la lex societatis peut être différent. Par exemple, les règles françaises de transposition de la directive 2014/95 en matière de reporting extra-financier207 s'appliquent au rapport de gestion lorsque l'ensemble des parts sont détenues par des personnes ayant l'une des formes suivantes ou par des sociétés de droit étranger d'une forme juridique comparable : société anonyme, société en commandite par actions, société à responsabilité limitée ou société par actions simplifiée. Il s’agit plus ici de regarder seulement le siège social mais aussi le contrôle par la détention du capital208. Dans certains pays, le renvoi est possible209. La reconnaissance de la personne morale étrangère, pour autant qu’elle soit pertinente pour les besoins de la RSE, pose toujours des questions de DIP intéressantes mais qui ne seront pas étudiées plus avant ici210. Notons que, jusqu’à ce jour, l’Union européenne n’a pas réussi à harmoniser ses règles de conflit en matière de droit des sociétés. Le Groupe européen de droit international privé (GEDIP)211 a fait une proposition de règles de conflits qui libéralise intégralement la matière en ne retenant pratiquement que le critère de l’incorporation. On notera toutefois que la proposition exclut de son champ d’application toutes les relations de travail et de droits des
204
Argentine, Espagne. Chine, France, Italie. 206 En ce sens, v. le rapport pour l’Allemagne. 207 Cf. supra para. 37. 208 Cf. le rapport pour la France, pour d’autres exemples. 209 Belgique, France. 210 V. les rapports suivants qui abordent la question de la reconnaissance : Argentine. 211 www.gedip-egpil.eu. 205
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salariés. De surcroît, elle réserve la RSE en des termes que l’on aurait aimé plus comminatoires212.
6.2
Comment se détermine la lex contractus ?
Notons, à titre liminaire, que, contrairement à ce qui se passe en matière de compétence juridictionnelle internationale, et en raison du caractère dit « universel » des règles de conflits de lois incluses dans les règlements européens, les pays membres de l’Union européenne ne possèdent plus de règles de conflit de lois nationales dans tous les domaines couverts par le Règlement Rome I213, ce qui concernera l’essentiel des questions posées par la RSE à condition que le contrat soit formé après le 17 décembre 2009. Nous le savons, la lex contractus est importante en matière de RSE particulièrement lorsque ces questions se posent à l’occasion d’une relation de partenariat contractuel (production, distribution, sous-traitance, etc.) et qu’une violation des normes de RSE est alléguée par l’un des co-contractants, à quelque niveau que ce soit de la chaîne contractuelle ou de valeur. L’unanimité se fait parmi les rapporteurs pour dire que l’autonomie de la volonté est le premier critère permettant de déterminer la lex contractus214, dans les limites de l’ordre public. Dans tous les États membres de l’Union européenne, les parties au contrat peuvent être autorisées à soumettre leur contrat à des règles non étatiques, ce qui pourrait inclure les règles de la RSE215. La loi choisie par les parties va déterminer le niveau de respect exigé des co-contractants, ceux-ci pouvant parfaitement inclure des clauses contractuelles allant au-delà de ce que demande la lex contractus. La question demeure de savoir si elles peuvent inclure des clauses qui leur permettrait d’aller en deçà de ce qu’exige la lex contractus. La réponse à cette question dépendra de la qualification donnée aux normes de RSE et si elles sont ou non d’ordre public216. 212 Article 1.3 : This Regulation does not prejudice the fulfilment of the obligations deriving from social responsibility of companies (corporate social responsibility) as defined by national, European or International norms. 213 Règlement (CE) n 593/2008 du Parlement européen et du Conseil du 17 juin 2008 sur la loi applicable aux obligations contractuelles (Rome I). 214 L’autonomie de la volonté est la règle centrale en matière de loi applicable aux obligations contractuelles et admise universellement ainsi que l’affirme le commentaire des Principes adoptés par la Conférence de La Haye en 2015 disponibles à l’url suivante : https://www. hcch.net/fr/instruments/conventions/full-text/?cid¼135. 215 Contrairement à ce qui avait été prévu au départ, cette liberté conférée aux co-contractants ne fait pas l’objet d’une disposition dans le corps du Règlement. Elle est simplement évoquée par le considérant 13 du préambule. Cela montre à quel point cette hypothèse est controversée parmi les États membres. 216 Cf. supra Sect. 2.4.
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Les règles de conflit par défaut en matière contractuelle reposent, dans leur grande majorité, sur la notion d’exécution du contrat, que le lieu de l’exécution soit défini dans le contrat217 ou a posteriori en fonction d’autres règles (comme par exemple des Incoterms). Parfois, c’est le lieu de résidence de la personne qui doit exécuter la prestation caractéristique du contrat218 qui est retenu. Un petit nombre de pays conservent le critère du lieu de formation du contrat219. A défaut de lieu d’exécution dans le contrat ou qui puisse être déterminé autrement, ou à défaut de fonctionnement des différents critères prévus par les règles de conflits (par exemple dans le Règlement Rome I), la règle de conflit utilise le critère du lien le plus étroit à déterminer dans chaque cas par le juge ou l’arbitre qui statue sur le litige220. Parfois, le critère du lien le plus étroit est affirmé comme le critère principal221, le lieu d’exécution du contrat, ou la résidence de la partie qui doit exécuter la prestation caractéristique, n’étant qu’une présomption de lien le plus étroit222.
6.3
Comment se détermine la loi applicable en matière délictuelle ?
Comme pour les règles de conflit en matière contractuelle, les règles de conflits en matière délictuelle ont été harmonisées dans l’Union européenne, si bien que les États membres ne conservent plus de règles de conflits nationales dans les domaines couverts par le Règlement Rome II223. Il n'y a guère de doute que les litiges concernant la RSE et, de manière plus étroite, les litiges concernant les violations des droits de l'Homme par les entreprises, tombent dans le champ d'application du Règlement Rome II. Dans la mesure où un très grand nombre de cas de violation des normes de RSE par les entreprises, dont se plaignent des victimes extérieures au cercle contractuel des partenaires de l'entreprise accusée de violation, vont être qualifiés de « délictuels » ou quasi-délictuels » (torts), ces règles de conflits présentent une grande importance dans le domaine qui nous occupe. Notons d’abord une tendance actuelle par laquelle l’autonomie de la volonté commence à être admise dans le domaine délictuel, mais l’expression de la volonté est sévèrement encadrée224. La règle la plus généralement 217
Argentine, Chine, Mexique. Chine et tous les pays de l’Union européenne. 219 Brésil. 220 Argentine, Chine, Turquie, Viet Nam et tous les États membres de l’Union européenne. 221 Canada (provinces de common law). 222 Japon, Kazakhstan, Québec, Suisse, Turquie. 223 Règlement (CE) n 864/2007 du Parlement européen et du Conseil du 11 juillet 2007 sur la loi applicable aux obligations non contractuelles. 224 Par ex. article 14 du Règlement Rome II. 218
admise précise que le choix doit être opéré après la survenance du dommage225. Toutefois, lorsque toutes les parties au litige exercent une activité commerciale, leur choix de loi, à condition qu’il soit librement négocié, peut être opéré avant la survenance du litige. En troisième lieu, si tous les éléments de la situation sont situés dans un État alors que les parties ont choisi la loi d’un autre État, les règles impératives du premier État sont préservées. Enfin, si tous les éléments de la situation sont situés dans l’Union européenne, alors que le choix de loi a été fait pour la loi d’un État tiers, cette loi ne peut déroger aux dispositions impératives du droit de l’Union européenne telles que transposées dans le for. Les règles par défaut favorisent majoritairement la loi du pays où le dommage est subi, quel que soit le pays dans lequel le fait générateur a eu lieu226 et sans égard aux conséquences indirectes du dommage227. Quelques pays cependant retiennent la loi du fait générateur228 et ne permettent d’appliquer la loi du lieu où le dommage est subi que si ce lieu était prévisible pour l’auteur du dommage229. Quelques pays, enfin, permettent au juge d’appliquer la loi la plus favorable à la victime entre celle du lieu où survient le dommage et celle du lieu où est intervenu le fait générateur230. Toutefois, si le dommage est survenu alors que les deux parties étaient domiciliées dans le même État, c’est la loi de cet État qui doit être appliquée231. Il existe aussi une clause d’exception qui permet de revenir à la loi des liens manifestement plus étroits si les circonstances le permettent232. Toutes ces règles de conflits sont peu susceptibles de donner satisfaction dans les dossiers de violation de normes RSE par les entreprises car, la plupart du temps, elle désignera la loi de l’État dans lequel le niveau de protection des victimes est insatisfaisant, que le pays en cause soit un paradis juridique ou non. Très souvent si un dommage survient en raison de la violation d’une règle de RSE c’est que les standards adoptés dans ce pays ne sont pas suffisants. On en voit un exemple dans l’affaire Das233 jugée au Canada. 225
Chine, Turquie et tous les pays de l’Union européenne. Par contre, le Viet Nam semble admettre l’autonomie de la volonté plus largement, sauf lorsque des règles spéciales s’appliquent comme en matière d’environnement ou que l’auteur et la victime du délit sont domiciliés dans le même État. 226 Argentine, Turquie, Viet Nam et tous les pays de l’Union européenne. 227 Argentine, Mexique. 228 Canada, Kazakhstan. 229 Suisse. 230 Chine. 231 Argentine, Chine, Kazakhstan, et tous les États membres de l’Union européenne. 232 Turquie et tous les États de l’Union européenne. 233 Das v George Weston Ltd, 2017 ONSC 4129.
Questions de droit international privé de la responsabilité sociétale des entreprises
Cette affaire fait suite à l’effondrement du Rana Plaza. Des victimes poursuivaient la société canadienne Loblaws et le Bureau Veritas pour négligence et violation du duty of care pour n’avoir pas pris les mesures suffisantes pour éviter les dommages subis. La Cour décide que les actes ou omissions reprochées aux deux défendeurs sont localisés au Bengladesh si bien que c’est la loi de ce pays qui doit s’appliquer234. C’est pourquoi certains rapports insistent sur les règles spéciales contenues dans le Règlement Rome II, telle que la règle concernant les atteintes à l’environnement235. Cette règle donne le choix à la victime entre la loi du dommage et la loi du fait générateur. Plusieurs rapports sont d’avis qu’une telle règle pourrait facilement être étendue aux litiges de RSE236. Pourrait également être utile la règle de l’article 17 du Règlement Rome II237, mais par un raisonnement a contrario en quelque sorte. L’article 17 est généralement interprété comme permettant d’exonérer l’auteur du fait délictueux s’il a suivi les règles de sécurité et de comportement en vigueur au lieu et au jour de la survenance du fait générateur238. Mais, en réalité, l’article 17 est rédigé de manière neutre, si bien qu’il est tout à fait possible de l’utiliser pour améliorer le sort de la victime et exiger de l’auteur du dommage qu’il ne se comporte pas plus mal à l’étranger qu’il ne serait autorisé à le faire dans le pays dans lequel il a commis l’acte qui a entraîné la responsabilité. On peut raisonner par analogie pour le « duty of care » dû par une société mère à l’égard des activités de sa filiale à l’étranger. Dans la décision rendue dans l’affaire Vedanta par la Court of Appeal en 2017, Lord Justice Simon s’exprime de la manière suivante239 : “It seems to me that certain propositions can be derived from these cases which may be material to the question of whether a duty is owed by a parent company to those affected by the operations of a subsidiary. (1) The starting point is the three-part test of foreseeability, proximity and reasonableness. (2) A duty may be owed by a parent company to the employee of a subsidiary, or a party directly affected by the operations of that subsidiary, in certain circumstances. (3) Those circumstances may arise where the parent company (a) has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim, or (b) controls the operations which give rise to the claim.”. Le juge ne s’interroge pas sur le droit applicable à ce duty of care mais 234 Dans cette affaire, la Cour n’alla pas plus loin dans son analyse car la prescription prévue par le droit du Bangladesh était acquise. 235 Article 7 du Règlement Rome II. 236 Belgique, France, République Tchèque. 237 Suggestion faite par le rapport pour la France. 238 Une règle similaire est signalée pour le Kazakhstan mais cette exception est limitée aux normes du Kazakhstan et ne s’applique pas si le fait générateur est situé dans un autre pays. 239 Supra note 187, cf. para 83.
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l’étudie au regard du droit anglais240. Le droit anglais est applicable dans cette affaire au titre de la lex fori ou de la lex societatis, mais cela pourrait aussi être par un raisonnement similaire à celui de l’article 17 du Règlement Rome II ou au titre de la loi du fait générateur en vertu de l’article 7 du Règlement Rome II, d’autant qu’il semble que les demandeurs basaient leurs demandes sur le droit zambien et que le juge évoque aussi le droit zambien pour le duty of care. On doit noter cependant que la seule question pendante devant le juge dans cette affaire, à ce stade de la procédure, était la question de savoir si les tribunaux anglais étaient compétents. Dès lors, un raisonnement en terme de conflit de lois n’était pas nécessaire pour atteindre une conclusion sur ce point.
6.4
Vérification de la conformité à l’ordre public ou aux normes en matière de droits de l’Homme, etc
Si tous les pays sont unanimes pour dire que, quelle que soit la loi applicable en vertu des règles exposées dans les paragraphes qui précèdent, le for procèdera à une vérification de la conformité à son ordre public, des hésitations sont clairement exprimées quant à la vérification de la conformité avec les normes internationales de droits de l’Homme ou normes équivalentes, comme les huit conventions principales de l’OIT241. La difficulté ne tient donc pas au processus mais au contenu de l’ordre public. En effet, c’est là que va devenir cruciale la distinction entre les normes de la RSE qui appartiennent à l’ordre public ou qui constituent des normes impératives et celles qui n’en sont pas242. La plupart des rapports affirment que seuls les traités ratifiés par leur pays peuvent constituer le contenu de l’ordre public du pays. Aucun n’aborde la question sous l’angle de l’ordre public transnational qui permet au juge de passer outre la non ratification par le pays d’une convention internationale et d’inclure les obligations qu’elle prévoit dans cet ordre public transnational. Un exemple de ce raisonnement nous est donné par le Tribunal fédéral suisse qui, en matière de biens culturels déplacés illicitement applique la Convention Unidroit alors que la Suisse n’a pas ratifié cette convention243.
240 En réalité, le juge estime que le droit zambien est équivalent au droit anglais, d’où le raisonnement uniquement en droit anglais. 241 Brésil, Canada, Chili, Chine. 242 Pour les normes éthiques, nous avons une question séparée étudiée infra, para. 5.5. 243 Union de l’Inde c. Crédit Agricole Indosuez (Suisse) SA, Tribunal fédéral 8 suisse 2005, ATF 131 III 418. Un arrêt précédent avait également pris en considération cette Convention non ratifiée, 1er avril 1997, ATF 123 II 134.
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Il est clair que pour un pays comme la France, la loi sur la vigilance est une norme impérative, voire une loi de police, qui s’impose quelle que soit la loi applicable à la relation en cause. On pourrait peut-être aller un cran plus loin et soutenir qu’un système solide en matière de RSE constitue désormais un volet de l’État de droit (rule of law) sans lequel un pays ne pourrait pas se considérer comme appartenant au monde dit « civilisé »244. Il est clair en tout cas que l’ordre public étant évolutif, arrivera un jour où les principes et règles contenus dans des instruments tels que les Principes directeurs des Nations Unies feront partie de l’ordre public245.
6.5
Application ou prise en considération de normes éthiques ?
La question de savoir si un juge peut appliquer ou, à défaut, prendre en considération des normes éthiques lorsqu’il est saisi d’un litige en matière de RSE divise clairement les rapporteurs. Un grand nombre de rapports répond par la négative et soutient une vision clairement positiviste du droit246 alors que d’autres hésitent ou ne se prononcent pas247. Pour les États membres de l’Union européenne, sachant que le Règlement Rome I permet aux parties, en matière d’obligations contractuelles, de viser dans leur contrat des normes non étatiques, la réponse à la question de la prise en considération de normes éthiques par le juge n’est pas aussi claire que ce qui est généralement dit. C’est donc à juste titre, nous semble-t-il que le rapport pour les Pays-Bas fait une analogie entre les normes éthiques et les normes de droit tendre visées par le considérant 13 du Règlement Rome I. Ce raisonnement pourrait être conforté par la preuve d’une politique européenne forte en matière de RSE, comme le suggère le rapport pour la France qui mentionne les différentes communications et résolutions adoptées sur la question par les institutions européennes248. A notre connaissance, cette question n’a pas encore été testée devant une juridiction d’un État membre de l’Union européenne249 ni devant la Cour de justice de l’Union européenne. 244
Cet argument est suggéré par le rapport pour la Belgique. Cette dernière suggestion que nous partageons est faite par le rapport pour l’Allemagne. 246 Argentine, Belgique, Canada, Chili, Chine, Japon, Mexique, Portugal, République Tchèque. 247 Kazakhstan, Royaume Uni, Turquie. 248 Communication de la Commission « Responsabilité sociale des entreprises: une nouvelle stratégie de l'UE pour la période 2011-2014 » (COM(2011)0681) ; Livre vert de la Commission « Promouvoir un cadre européen pour la responsabilité sociale des entreprises » (COM (2001)0366) ; Résolution du Parlement européen du 25 octobre 2016 sur la responsabilité des entreprises dans les violations graves des droits de l'Homme dans les pays tiers (2015/2315)). 249 En France, toutefois, les affaires de l’Erika et du Distilbene (supra note 80) pourraient montrer la voie en ce sens. 245
En revanche, certains rapports proposent des raisonnements plus novateurs. Le rapport pour le Brésil soutient que la constitution du pays permet en pratique à un juge une discrétion très large pour décider sur des bases éthiques sous couvert de principes généraux du droit, comme le principe de dignité de la personne humaine. Le rapport suggère également qu’un tel rôle puisse être joué par les principes de proximité et d’accès à la justice. Le rapport pour l’Allemagne répond dans le même sens bien qu’il insiste sur le fait que les considérations éthiques soient « intégrées » dans le système juridique pour pouvoir être appliquées. En l’absence d’exemples clairs, il nous apparaît plus porteur de raisonner comme le fait le rapport pour le Brésil. Le rapport pour la Suisse indique que l’éthique peut être utilisée par le juge en complément de la loi applicable au litige, même s’il estime qu’il n’y a pas de jurisprudence en ce sens. On pourrait toutefois suggérer que la décision qui applique une convention non ratifiée par la Suisse250 pourrait permettre de fonder, indirectement, la réponse en droit suisse. Le rapport pour l’Italie procède par analogie et tire argument du fait que le droit italien prend en compte les standards ISO et de la possibilité pour les parties de conférer à un tribunal arbitral les pouvoirs d’amiable compositeur pour conclure que des considérations éthiques peuvent être appliquées. A notre avis, cette dernière hypothèse mériterait une réflexion plus approfondie avant de pouvoir être élargie à un raisonnement éthique en matière de RSE. Le rapport pour l’Espagne fait un lien entre les méthodes alternatives de règlement des différends et l’éthique.
7
Reconnaissance et exécution des jugements (questions 20 à 22)
Les questions liées à la reconnaissance et l’exécution des jugements étrangers n’ont pas beaucoup évolué depuis les années 1970 quand la Convention de la Haye de 1971 a reçu sa première signature251. La Covention du 2 juillet 2019 négociée au sein de la Conférence de La Haye (cf. supra), qui s’applique aux jugements rendus en matière de RSE ou de violation des droits de l’Homme par les entreprises compte tenu du fait que ces matières ne sont pas exclues, n’apporte aucune solution réellement novatrice en la matière par rapport aux travaux qui avaient été entrepris à la fin du XXème siècle ou même par rapport à la Convention de 1971. En revanche, les circonstances juridiques internationales ont changé, notamment en raison de la limitation unilatérale accomplie par la Cour suprême des États Unis en matière de compétence juridictionnelle directe. Cette juridiction a entendu les contestations qui émanaient des autres pays (et de l’Union européenne, par exemple en matière de droit 250 251
Cf. supra note 240 et le texte qui l’accompagne. La Convention et son Protocole ont été adoptés en 1966.
Questions de droit international privé de la responsabilité sociétale des entreprises
de la concurrence) et a limité sévèrement les cas dans lesquels une société étrangère peut être attraite devant les juridictions fédérales américaines. Cette limitation est susceptible d’améliorer les chances de reconnaissance et exécution des décisions états-uniennes à l’étranger. Les difficultés que le domaine de la RSE peut susciter tiennent notamment au fait que le jugement étranger est fondé sur des règles de droit tendre252 ou que la compétence du juge étranger aurait été fondé sur le for de nécessité ou sur la compétence universelle civile. Il semble d’ailleurs à cet égard que si le jugement étranger a été rendu par un juge qui a accepté sa compétence sur la base du for de nécessité ou de la compétence universelle civile, ce jugement n’est pas éligible au titre de la future convention de La Haye. Il pourrait néanmoins être reconnu et exécuté en vertu du droit national de l’État requis s’il le prévoit (art 16). Malgré l’harmonisation des règles de reconnaissance et d’exécution des jugements dans l’Union européenne grâce au Règlement Bruxelles I et avec trois États de l’AELE grâce à la Convention de Lugano, ces États conservent des règles de droit commun pour tout jugement en provenance d’un État tiers. Beaucoup d’États européens sont liés par des conventions bilatérales, notamment avec des États qui appartenaient préalablement à leurs empires coloniaux253. Les règles européennes seront évoquées brièvement car ce ne sont pas elles qui posent le plus de difficulté. En revanche, nous insisterons seulement sur les règles concernant les jugements hors des systèmes Bruxelles et Lugano. Il est indéniable que, pour les victimes de violation de la RSE, obtenir un jugement dans l’un des 28 États du système Bruxelles254 ou les trois États Lugano, c’est garantir une reconnaissance et une exécution du jugement grandement facilitées et sans grands obstacles. C’est pourquoi les règles de compétence directe sont si importantes de manière à donner compétence aux tribunaux des États européens le plus souvent possible. Quand le jugement provient d’un État tiers, c’est-à-dire un État hors des systèmes Bruxelles et Lugano, un certain nombre d’États ne peuvent reconnaître ou exécuter ce jugement si le pays duquel il provient n’est pas lié par une convention ou un accord le liant avec l’État requis255, ou par 252 Il est clair que même en l’absence de révision au fond qui empêche le juge requis de contrôler les normes appliquées sur la substance du litige par le juge de l’État d’origine, le fait que des normes de droit tendre ont été utilisées par ce juge pourrait soulever une question d’ordre public pour l’État requis. 253 France, Royaume Uni, notamment. 254 Le Danemark est inclus dans le système Bruxelles grâce aux accords qui ont été passés entre l’Union européenne et ce pays. A l’heure où nous écrivons, et tant que le Brexit n’aura pas développé ses effets, le Royaume Uni est encore soumis aux règles de Bruxelles et Lugano. 255 C’est le cas des pays du Nord de l’Europe, y compris les Pays-Bas. C’est le cas de la Chine. Notons cependant que pour les Pays-Bas, si le jugement étranger remplit les conditions posées par le droit néerlandais,
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une loi spécifique à cet effet, dénotant ainsi que l’exigence de réciprocité n’a pas disparu de la matière256. C’est d’ailleurs pourquoi les États d’Amérique latine sont, pour la plupart, liés par la Convention de Montevideo de 1979257 et les États du Mercosur sont liés par le Protocole de Las Leñas sur la coopération et l’assistance judiciaire en matière civile, commerciale, sociale et administrative258. Dans ce Protocole, le chapitre V porte sur la reconnaissance et l’exécution des jugements. En droit commun, le juge requis doit vérifier que le jugement est définitif et possède l’autorité de la chose jugée dans le pays d’origine259, qu’il a été rendu par un juge compétent, que la procédure d’origine était conforme aux standards de due process ou de fair trial (notamment que la notification de l’acte introductif d’instance était régulière)260, que la reconnaissance ou l’exécution ne sont pas contraires à l’ordre public de l’État requis261 et qu’aucun autre jugement existe qui serait inconciliable avec celui que l’on cherche à exécuter262. La vérification de la compétence du juge étranger continue à se faire en vertu de la compétence directe du pays requis263 sauf pour les pays qui ont créé une règle spéciale de compétence indirecte264 plus flexible exigeant en général un lien « suffisant » ou « substantiel » ou « caractérisé » du juge d’origine avec le litige, laissant le juge de l’exécution faire une appréciation in concreto dont le but est de favoriser la circulation des jugements. En ce qui concerne l’ordre public, le rapport pour la Belgique suggère deux hypothèses spécifiquement intéressantes pour notre domaine. Tout d’abord un jugement étranger refusant d’appliquer des normes internationalement reconnues de RSE pourrait être contraire à l’ordre public
le juge reprendra purement et simplement le contenu du jugement étranger et l’intégrera dans un jugement néerlandais. 256 Allemagne, Chili, Chine, Japon, Kazakhstan, Mexique, République Tchèque, Turquie. 257 Convención interamericana sobre eficacia extraterritorial de las sentencias y laudos arbitrales extranjeros (8 mai 1979), entrée en vigueur le 14 juin 1980, OAS Treaty Series No. 51. États parties : Argentine, Bolivie, Brésil, Colombie, Équateur, Mexique, Paraguay, Pérou, Uruguay, Venezuela. 258 Protocolo de las Leñas de cooperación y asistencia jurisdiccional en materia civil, comercial, laboral y administrativa entre los Estados parte del MERCOSUR (27 mai 1992), entrée en vigueur le 20 juillet 1999. États parties : Argentine, Brésil, Paraguay et Uruguay. 259 Brésil, Canada, Chili, Turquie. 260 Brésil, Canada, Chili, Italie, Japon, République tchèque, Turquie. 261 Au Brésil, l’ordre public comprend aussi les principes liés à la souveraineté nationale ainsi que la dignité humaine. L’ordre public peut comprendre l’interdiction de prononcer des dommages et intérêts punitifs (Italie). 262 Allemagne, France, Italie, Pays-Bas. 263 Argentine (mais avec flexibilité), Pays-Bas, Suisse. 264 Canada (avec une liste fermée pour le Québec), France.
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belge265. A l’inverse, un jugement qui appliquerait la levée du voile de la personnalité morale ou la notion de groupe de sociétés dans des conditions trop légères ou aisées pourrait être contraire à l’ordre public belge, celui-ci estimant que la personnalité morale d’une société est une norme d’ordre public. Cela ne semble pas être le cas pour d’autres pays266. La fraude est aussi parfois un obstacle à la reconnaissance et l’exécution d’un jugement étranger267. En France, la fraude s’entend uniquement du point de vue procédural. Au Canada, le moyen de défense tiré de la fraude (utilisé avec succès aux États-Unis d’Amérique dans cette même affaire) a été utilisé dans l’affaire Chevron268 pour tenter d’empêcher l’exécution du jugement en provenance des tribunaux de l’Equateur. Toutefois, parce que le tribunal de première instance a estimé que le patrimoine de la filiale canadienne de Chevron ne pouvait servir à payer un jugement rendu à l’égard de la société mère, la question de la fraude n’a pas été analysée par le juge canadien. Certains pays exigent encore que la décision étrangère soit motivée269. Un grand nombre de pays ne vérifie pas le droit qui a été appliqué par le juge étranger, pas plus qu’il ne révise le jugement étranger sur le fond270. En conséquence, peu importe les règles de droit, ou les règles non étatiques, ou les normes éthiques appliquées ou prises en considération par le juge étranger, ce choix ne devrait pas être remis en cause au stade de la reconnaissance ou de l’exécution sauf cas de contrariété à l’ordre public de l’État requis. Les règles de compétence pour permettre à celui qui a obtenu un jugement à l’étranger d’entamer une procédure de reconnaissance ou d’exécution sont plus aisées à mettre en œuvre car il suffira de démontrer que l’une des personnes en cause est domiciliée sur le territoire de l’État requis ou qu’il existe un bien sur lequel l’exécution peut être faite. L’arrêt Chevron Corp v Yaiguaje271, rendu par la Cour suprême du Canada, en est un bon exemple. La Cour admet la compétence juridictionnelle des tribunaux canadiens par la seule présence d’une filiale de la société Chevron US sur le territoire de la province dans laquelle l’exécution était envisagée. C’est ensuite que la Cour de l’Ontario a dû décider s’il y avait des biens sur lesquels l’exécution pouvait être 265 Nous déduisons la même solution des rapports pour le Kazakhstan (si les normes internationales ont été adoptées dans ce pays) et le Mexique. 266 Cette question demeure ouverte, les rapports n’ayant pas tous répondu aux questions complémentaires qui leur ont été posées. 267 Canada, France. 268 Chevron Corp v Yaiguaje, 2015 SCC 42, [2015] 3 SCR 69. 269 Argentine, Brésil, République tchèque. 270 Allemagne, Argentine, France, Italie, Japon, Pays-Bas, Portugal, Suisse et les pays du Mercosur ainsi que de la Convention de Montevideo. 271 2015 SCC 42, [2015] 3 SCR 69.
C. Kessedjian
effectuée. Elle décida par la négative refusant l’exécution sur les biens d’une sous filiale de Chevron US, refusant de lever le voile de la personnalité morale et d’appliquer la théorie de l’alter ego272.
Références Bonucci N, Kessedjian C (dirs) (2018) 40 ans des lignes directrices de l’OCDE pour les entreprises multinationales. Pedone, Paris Bucher A (2014) La compétence civile universelle. RCADI 372:9–127 Cantú Rivera H (2019) National action plans on business and human rights: progress or mirage?. Bus Human Rights J 4(2):213–237 Cassella S, Lasserre V, Lecourt B (dirs) (2018) Le droit souple démasqué - Articulation des normes privées et publiques internationales. Pedone, Paris Cornut E (2007) Forum shopping et abus du choix de for en droit international privé. JDI 1:27–55 Demeyere S (2015) Liability of a mother company for its subsidiary in French, Belgian, and English Law. Eur Rev Priv Law 23(3):385–413 Deumier P, Sorel JM (dirs) (2018) Regards croisés sur la soft law en droit interne, européen et international. LGDJ, Paris Kessedjian C (2016) Commentaire sur l’avis de la CNCDH sur les enjeux de l’application par la France des Principes Directeurs des Nations Unies du 24 oct. 2013. In: Lazerges Ch (dir) Les grands avis de la Commission nationale consultative des droits de l’Homme. Dalloz, Paris Kessedjian C (2018) Le droit tendre (soft law) est-il apte à encadrer la responsabilité des entreprises pour leurs violations des droits de l’Homme ? In: de Frouville O et al (dirs) Reciprocité et universalité : Sources et régimes du droit international des droits de l’homme. Mélanges en l’honneur du Professeur Emmanuel Decaux. Pedone, Paris, pp 1323–1336 Magnier V (2017) Comparative corporate governance – legal perspectives. Edward Elgar, Cheltenham Marrella F (2017) Protection internationale des droits de l'homme et activités des sociétés transnationales. RCADI 385:33–435 Retornaz V, Volders B (2008) Le for de nécessité : tableau comparatif et évolutif. Rev. crit. DIP 97(2):225–261 Saumier G (2018) L’ouverture récente des tribunaux canadiens aux poursuites dirigées contre les sociétés mères pour les préjudices causés par leurs filiales à l’étranger. Rev. crit. DIP 107(4):775–792 Steinitz M (2018) The case for an International Court of Civil Justice. CUP, Cambridge Wouters J (2003–2004) Tien jaar experimenteren met internationaal recht: van de Wet van 16 juni 1993 tot de Wet van 5 augustus 2003. Jura Falc. 1(5)
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Control of Price Related Terms in Standard Form Contracts Judicial Control and Other Means of Price Control Yeşim M. Atamer and Pascal Pichonnaz
caps. Besides, more effective ways of collective proceedings and redress mechanisms need to be implemented.
Abstract
Competitive market economies work with the basic assumption that the supply side cannot charge more than their cost of supply given that rational and perfectly wellinformed customers know their preferences and are responsive to any price change in the market. However, markets are never fully transparent, and findings of behavioural sciences show that especially consumers act based on imperfect rationality due to systematic biases. Pricing structures that serve to hide rather than reveal the real cost of the goods and services pose one of the main challenges to markets as they abuse biases on the demand side to the greatest extent possible. “Hiding” price related terms in standard form contracts is a prominent way of creating non-salient prices and is therefore a debated issue in many recent high court decisions of different countries. This paper conducts a comparative study on developments in 28 jurisdictions and discusses the efficiency of ex ante regulatory as well as ex post judicial intervention. The results show that controlling prices and price related terms is a multifaceted and complicated issue which entails a holistic approach, involving more transparency, smarter information to be provided to customers, but sometimes also hard paternalistic interventions such as price
This report was also published in Atamer and Pichonnaz (Eds), Control of Price Related Terms in Standard Form Contracts, Springer Nature Switzerland 2020, 3–63. Y. M. Atamer (*) University of Zurich, Zürich, Switzerland e-mail: [email protected] P. Pichonnaz (*) University of Fribourg, Faculty of Law, Fribourg, Switzerland e-mail: [email protected]
1
Presentation of the Research Question
Control of standard contract terms (SCT) in business to consumer (B2C) as well as in business to business (B2B) contracts has long been a highly debated topic in many jurisdictions. However, control of price related terms in standard contract terms is an issue of more recent concern. In competitive market economies, prices, in principle, need not to be controlled. It is conventional knowledge that in such markets the supply side cannot charge more than their cost of supply. Rational and perfectly well-informed consumers know their preferences and are responsive to any price change in the market. These utilitymaximizing consumers on the demand side and profitmaximizing producers on the supply side meet on a perfectly competitive and transparent market, which results in the best possible equilibrium price. Whenever such market conditions are existent an intervention in the price equilibrium is likely to reduce social welfare and will hurt consumers. This basic market rationale is reflected in most of the Civil Codes enacted in the nineteenth and beginning of the twentieth century, which seldom gave courts the right to intervene in a contractual equilibrium and only under very strict conditions. This very liberal policy approach has been dogmatically justified by the paramount principle of autonomy of will, as well as a restricted understanding of the laesio enormis since the natural lawyers of the seventeenth century. Natural law codifications, such as the French and the Austrian Civil codes reflect largely this approach, which allow the disadvantaged party to avoid only certain types of contracts and only if a fixed threshold of imbalance between reciprocal obligations is met. Under the influence of the German historical school and the centrality of will, the
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_10
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newer civil codes have substituted the fix limit by a more flexible system where an objective requirement (gross disparity) and subjective one (circumstances imperilling the free and rational will of one party) have to be met for the disadvantaged party to avoid the contract or ask the judge to adopt it (e.g. Dutch, German, Portuguese and Swiss civil codes). If no such exceptional circumstances are given the parties are free to set the price as they wish.1 Leaving the price formation to market forces was also the choice for example of Article 4(2) Directive 93/13/EEC on unfair contract terms2: “[a]ssessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies [sic] in exchange, on the other, in so far as these terms are in plain intelligible language”. Even if the price is ascertained in pre-formulated standard contract terms no judicial review is allowed for as long as the term is drafted in a plain and intelligible manner. The so-called ‘transparency’ requirement reflects the trust in market mechanisms: if the price term can be understood by an average consumer it is subject to competition and there is no need for a judicial control. However, this assumption of EU law is obviously far too optimistic. Especially findings of behavioural sciences show, first, that consumers act based on imperfect rationality due to systematic biases, second, that markets are never fully transparent and, finally, that even rational apathy may lead consumers not to choose the best price in the market.3 This is a widespread phenomenon and is not caused by some exceptional situation, such as undue influence or exploitation of dependence. According to the results of behavioural sciences the main biases impeding welfare enhancing decisions of consumers are as follows: First of all, consumers deal with complexity mostly by disregarding it. They simplify decisions by ignoring insignificant looking price dimensions and taking mental shortcuts. Evidence shows that when prices are complex, and in particular when they are two-dimensional rather than one-dimensional, consumers have problems choosing the right price.4 The more complex the price gets, the more consumers end up with contracts that, in hindsight, prove not to serve their interests well. Furthermore, the so called ‘optimism bias’, as pointed out by cognitive studies and 1
See for a comparative overview Grebieniow (2019), pp. 3–26. Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993, L 95/29. 3 See in detail Bar-Gill (2012); Bar-Gill (2014), pp. 465–490; Zamir and Teichman (2018), pp. 281–324. 4 See e.g. Grubb (2015), p. 310. The author uses the example of an electricity tariff including a fixed fee, an initial marginal rate, and sometimes also a threshold and subsequent marginal rate. Zamir and Teichman (2018), pp. 297–298; Atamer (2017), pp. 634–635. 5 Shepperd et al. (2015), pp. 232–237; Bar-Gill (2009), p. 1120; Faure and Luth (2011), p. 344; Mathis and Steffen (2015), p. 40; Zamir and Teichman (2018), pp. 61–64. 2
Y. M. Atamer and P. Pichonnaz
social psychology, entails that individuals tend to be overoptimistic about their future.5 Accordingly, consumers incline to be also optimistic about their future income. They often misjudge the probability of losing a job, encountering an accident, illness or divorce, which might bring about financial hardship. People systematically predict future choices wrongly and hence misjudge elements of the price vector due to overconfidence.6 Consumers tend to be myopic. They overvalue the short-term benefits of a transaction at the expense of the future. This type of bias leads for example to the choice of mortgage loan contracts with escalating payments, given the fact that myopic borrowers place excessive weight on initial low payments and insufficient weight on future high payments.7 The low introductory interest rate (the teaser rate) is a model of product design that targets exactly consumers’ imperfect rationality in this regard. The credit card scheme is another such model. Due to this myopia, consumers are also naïvely underestimating their future tendency to borrow and exercise no self-control today.8 It comes as no surprise that these types of biases are misused by sellers to exploit consumers to the greatest extent possible.9 The two most common contract designs, as put forward prominently by BAR-GILL, are increasing complexity and deferring costs.10 Using standard form contracts which include terms affecting the price is a classic way of creating such complexity. But, this is surely not the only way. Bundling prices,11 price partitioning,12 or offering credits with ‘zero introductory interest rates’ and disproportionally high rates kicking-in in the second year are all common means of 6
Bubb and Pildes (2014), pp. 1595 and 1649 ff.; Zamir and Teichman (2018), pp. 64–66. A good example is the credit-card market in Turkey. Recurring studies have revealed that Turkish consumers choose credit cards not according to the default interest rate, but by comparing different reward programs, or the option to pay the balance back in instalments. Turkish credit card users’ optimism manifests itself in the expectation of maintaining a zero-credit balance. This underestimation bias results in distorted competition and credit card interest rates well above marginal cost. Miscalculation of future borrowing shifts competition in the credit card market from the long-term price elements such as interest rates to short-term price elements such as annual fees, or other card related features. See Atamer (2017), p. 633 and Turkey Report. 7 Bar-Gill (2009), p. 1120. 8 Bubb and Pildes (2014), p. 1642. 9 See in detail on such exploitation examples the book of two Nobel laureates: Akerlof and Shiller (2015). 10 Bar-Gill (2012), pp. 17–23; Bar-Gill (2014), pp. 471–474. 11 For example, bundling the credit agreement with a payment protection insurance; or broadband internet, subscription-based television services and landline telephones; or cell phone handsets with an internet and calling plan are common practices. 12 Examples from the credit card market are e.g. charging an annual fee but in addition also a cash-advance fee, balance-transfer fee, foreign currency-conversion fees, expedited payment fee, late payment fee, over-limit fee, returned check fee, credit limit increase fee, and even a no activity fee. In a study of 2013, the Banking Authority of Turkey has found 65 different items for which banks charged fees. See on price partitioning as a means of influencing consumer decision making: Van Boom (2011), pp. 364 ff.
Control of Price Related Terms in Standard Form Contracts
obfuscating. These pricing schemes are not necessarily linked to the usage of standard terms but in most of the cases they do come along with them. In the last couple of years, a growing concern regarding such pricing schemes has become visible. Given that in most countries special provisions countervailing these practices do not exist, courts had to intervene, and they mostly did so by way of extending standard terms control also to price related contract terms. This was especially so in the European Union, which can serve as a good example to demonstrate the problem13: Even though the aforementioned Article 4(2) Directive 93/13/EEC did not give courts the right to control price terms in standard form contracts, the way to limit this exception—and therefore to open the way for judicial control— was shown by the CJEU in Van Hove as follows: “[c] ontractual terms falling within the concept of ‘the main subject-matter of the contract’, within the meaning of Article 4(2) of Directive 93/13, must be understood as being those that lay down the essential obligations of the contract and, as such, characterise it. By contrast, terms ancillary to those that define the very essence of the contractual relationship cannot fall within the concept of ‘the main subject-matter of the contract’, within the meaning of that provision”.14 For example, terms relating to the exchange rate to be applied to consumer credit contracts denominated in foreign currency (Kásler15); terms giving the right to unilaterally alter the price of the service in a natural gas supply contract (RWE Vertrieb,16 parallel Schulz and Egbringhoff17); terms where the duty of the seller to pay the municipal tax on the increase in value of urban land is transferred to the buyer (Constructora Principado18); provisions giving the bank the right to unilaterally set the default interest rate in a mortgage credit contract (Aziz19) were all found to be ‘ancillary’ and therefore open to judicial control.20 These decisions seem to be in line with the approach of the CJEU taken in Caja de Ahorros,21 where it decided that Art. 4(2) does not preclude national legislation authorizing judicial review of the adequacy of price and remuneration. 13
For further explanations see the EU Report. CJEU Judgment of 23 April 2015, Van Hove, C-96/14, EU: C:2015:262, para 33. Parallel also CJEU Judgment of 3 June 2010, Caja de Ahorros y Monte de Piedad de Madrid, C-484/08, EU: C:2010:309, para 34; CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:C:2014:28, para 49. 15 CJEU Kásler and Káslerné Rábai (n 14). 16 CJEU Judgment of 21 March 2013, RWE Vertrieb, C-92/11, EU: C:2013:180. 17 CJEU Judgment of 23 October 2014, Schulz and Egbringhoff, C-359/ 11 and C-400/11, EU:C:2014:2317. 18 CJEU Judgment of 16 January 2014, Constructora Pincipado, C-226/ 12, EU:C:2014:10. 19 CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164. 20 See also EU report and below 5.2. 21 CJEU Caja de Ahorros y Monte de Piedad de Madrid (n 14). 14
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In fact, this discussion got more and more heated in regard to price related terms in banking contracts.22 Many countries face the problem that in long-term contracts the switching costs combined with consumer inertia place banks in a very advantageous position.23 For instance, Germany has been very active in terms of judicial control of price terms in banking standard form contracts. The German Federal Court of Justice (BGH) differentiates between main and ancillary terms affecting the price, just like the CJEU does.24 All those terms, which have an indirect effect on price calculation, are subject to standard terms control. Especially terms that burden the consumer with operational costs that normally should have been carried by the bank are considered as abusive and therefore ineffective according to the national law regime.25 One of the notable examples was the May 2014 decision of the BGH in which it found terms in consumer credit contracts that allowed banks to charge ‘management fees’ for the opening of a credit to be invalid.26 German banks were obliged to pay these fees back retrospectively for 10 years.27 Stiftung Warentest, a German consumer organisation, reports that the amount to be repaid could be as high as 13 billion Euros.28 A different approach was taken by the Supreme Court of the United Kingdom in the 2009 Office of Fair Trading v Abbey National decision.29 The issue was whether overdraft charges on current accounts contracted on a ‘free-if-in-credit’ basis were price terms and would therefore be exempt from control. The England and Wales Court of Appeal had found that the terms could be controlled, given that they were not part of the essential bargain between the parties.30 By contrast, the UK Supreme Court decided that overdraft charges were exempt. It rejected the idea that price terms could be divided into those which formed the essential bargain and those which were ancillary. According to the Court, 12 million UK citizens were regularly incurring such charges. Other countries, like Israel (2008), Romania (2010), China (2014) and Turkey (2014) have preferred to give their national supervision authorities for banks the right to issue a list of services for which they can charge fees. No other payments can be requested, and all fees have to be disclosed 22
See Atamer (2017), pp. 648–657. See on the status quo bias and the endowment effect causing switching inertia in long-term contracts Zamir and Teichman (2018), pp. 48 ff.; Luth (2010), p. 52. The problem is also prominent in e.g. energy, internet, cell-phone or pay TV contracts. 24 See Germany Report. 25 See also below p. 34. 26 BGH, 13.05.2014 – XI ZR 405/12, NJW 2014, p. 2420. 27 BGH, 28.10.2014 – XI ZR 348/13, NJW 2014, p. 3713. 28 http://t1p.de/test-bearbeitungsgeb. 29 [2009] UKSC 6. For a critical appraisal of the decision see UK Report and for example Chen-Wishart (2010) and Whittaker (2011). 30 [2009] EWCA Civ 116. 23
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on the webpage of the banks. In some jurisdictions like the USA,31 Switzerland, Turkey or the EU, legislators introduced caps on some type of prices like credit card late payment fees, interest rates or roaming fees.32 In the EU33 and the UK34, special measures were taken to stimulate competition between the banks, and thereby to reduce prices by enhancing transparency and switching. All these examples show that the issue of control of price terms, especially in long-term contracts is problematic. However, whether the preferable way of control is through intervention of the legislature ex ante or the judiciary ex post, or by enhancing competition has to be ascertained carefully. Some major problems related to judicial control are caused by the sheer volume of the contracts involved, since the inter partes effect of court decisions is still a major obstacle in many countries.35 In addition, given that price terms are at stake, any decision of the courts has a potential to trigger restitution claims from millions of consumers. Besides, judgements often do not add to legal certainty given that each variation of a price term, which was already found abusive by a court, might be subject to a new legal procedure.36 Therefore, means of ex ante regulatory intervention have also to be sought.37 Especially findings of behavioural economics show that controlling deceptive pricing patterns, by either trying to subject them to the competitive forces of the 31
See e.g. Agarwal et al. (2015); Bar-Gill and Bubb (2012). Compare e.g. for the detailed EU regulations: https://europa.eu/ youreurope/citizens/consumers/internet-telecoms/mobile-roaming-costs/ index_en.htm. 33 Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features, OJ 2014, L 257/214. 34 The Competition and Markets Authority has declared its “Retail Banking Market Investigation – Final Report” on 9 August 2016 https://assets.publishing.service.gov.uk/media/ 57ac9667e5274a0f6c00007a/retail-banking-market-investigation-fullfinal-report.pdf. 35 See regarding enforcement of consumer protection rules under EU law Micklitz (2015), pp. 491 ff.; See for the developments in the EU Proposal for a Directive of the European Parliament and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/ EC of the European Parliament and of the Council, Directive 2005/29/ EC of the European Parliament and of the Council and Directive 2011/ 83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules, COM (2018) 185 final; Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee A New Deal for Consumers, COM (2018) 183 final. See for a comparative overview Micklitz and Saumier (2018). Cf. also below p. 24. 36 Atamer (2017), pp. 639–642. 37 For a detailed report in the UK see ‘Helping people get a better deal: Learning lessons about consumer facing remedies’, prepared by the Financial Conduct Authority and the Competition and Markets Authority, October 2018 (https://www.gov.uk/government/publications/ukcnconsumer-remedies-project-lessons-learned-report). 32
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market, or sometimes by limiting their application can be more effective.38 In fact, using the insights of behavioural economics seems to be a general trend today in national, international and supranational settings.39 The aim of this comparative research is to determine different approaches in the world regarding price control and particularly to discuss the efficiency of both paths, judicial and regulatory intervention. Price control and its limits are certainly some of the major questions arising in all liberal market economies, as well as in more regulated markets. It is important to set an adequate limit, which maintains the fundamental elements of a free market economy but rises also the level of protection against abusive practices regarding price related terms. The appropriate level of intervention may however vary from one legal system to the other, given the various legal and non-legal players involved.
2
Presentation of the Results of the Questionnaire
The 27 national and 1 supranational reports on which this general report is based present a scattered picture regarding how, and how far, a control of SCT in general, and of price related terms in particular is implemented. As a first impression, it can be stated that freedom of contract, and especially freedom of the parties to determine goods and services in exchange for a certain remuneration is fully granted. Whether under a socialist market economy or a fully market-oriented economy; whether in a common law, civil law or mixed jurisdiction freedom of contract, and especially freedom of the parties to decide on the goods and services in exchange for a certain remuneration is acknowledged. The main principle regarding the price remains its formation on the market. However, many of the participating countries have introduced a special legal regime for the control of SCT, mostly in B2C relations, but sometimes also in B2B contracts. Even though a SCT control excludes price control, the tendency of courts to control price related terms either by qualifying them as auxiliary terms or as intransparent price terms is existent. Besides, all of the national reports indicate that, in some way or the other, regulators are interfering in the price formation process. Price control is obviously a multifaceted and very complicated issue involving many policy 38
See in detail Bar-Gill (2012); Atamer (2017), pp. 642 ff. UK: In 2010 the Behavioural Insights Team (BIT) started life inside 10 Downing Street as the world’s first government institution dedicated to the application of behavioral sciences (https://www.bi.team/); EU: Behavioural Insight Unit at the Joint Research Centre of the European Commission (https://ec.europa.eu/jrc/en/research/crosscuttingactivities/behavioural-insights) OECD: http://www.oecd.org/gov/regu latory-policy/behavioural-insights-and-public-policy-9789264270480en.htm. The World Bank: Mind, Behavior, and Development Unit (http://www.worldbank.org/en/programs/embed#1). 39
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decisions. It happens especially in sectors where there are problems in stimulating competition, or in regard to special goods or services where public interest requires such interference, or where social concerns outweigh efficiency-based arguments. This report does not aim at discussing all these different motives of price control. Our main focus lies on price related market failures based on information asymmetries or pricing structures that serve to hide rather than reveal the real cost of goods and services and thereby abuse limitations in the cognitive competences of consumers. Our general report will follow the questionnaire that we had prepared for the national reporters.40 We will therefore begin by looking at the scope of freedom of contract and its legal foundations (3). After a presentation of the functioning of the judicial control of standard contract terms in general (4), we will present in more detail how the judiciary reacts when these standard terms incorporate price related terms (5). Next to judicial control, there are also legislative and more importantly administrative controls either for all types of contract or for specific ones regarding price terms. Chapter (6) is dedicated to give an overview regarding these control methods. As competition is based on correct information regarding the price, and SCT cause an additional information problem we have asked the national reporters to present also various measures taken to ensure a higher level of information which will be discussed in chapter (7). We will end with some proposals and conclusions (8).
These different justifications may trigger different answers when fundamental rights such as the freedom of contract versus the right to equality are conflicting and when the lawmaker needs to balance those rights.
3
Freedom of Contract and Justifications of Its Limitation
3.2
3.1
The Justification of Freedom of Contract
Freedom of contract is recognized as a fundamental principle of contract law in all the legal systems that have been reported to us. Even legal systems based on a socialist market economy, such as China, recognize this fundamental principle.41 Some reporters indicate that freedom of contract is a constitutional right,42 some consider that it is indirectly recognized by the constitution.43 Other systems may have not integrated freedom of contract on the constitutional level, or may not have a constitution at all, but do recognize it as a fundamental and even ideological principle of contract law,44
and sometimes as an on-going constitutionalization process of private law.45 The reasons underlying the recognition of such constitutional right or fundamental principle of contract law may have different but complementary reasons: • Existence of a market economy. For some legal systems, market economy may only exist if there is freedom of enterprise. Entrepreneurs may then only fully benefit from such freedom if there is a chance for them to decide freely to conclude or not to conclude a contract with given parties; to decide on the content of their contract and to choose the form in which they wish to contract. Freedom of contract is fundamental to free-market libertarianism and thus perceived more as an economic right. • Freedom to develop one’s personality. Freedom of contract is also about choices made by parties. Therefore, some legal regimes put more emphasis on the role of freedom of contract for individuals to live a dignified life,46 to further individual fulfilment and self-realization.47 Freedom of contract is thus perceived also as a personality right than purely an economic right.
Limits to Freedom of Contract
Even understood as a fundamental right, freedom of contract is never conceived as being absolute. It needs to be weighed against other fundamental rights, it can be restricted by bills, as long as the restriction is welfare enhancing, proportionate and does not impair the core of freedom of contract.48 The reasons for such limitations, also in the context of standard contract terms, can be summarized as below. These reasons are obviously not mutually exclusive but supplementary: • To ensure a proper or better functioning of the market. This is true especially when freedom of contract is taken in its economic dimension. Antitrust regulations, rules against unfair competition or consumer law are areas where interference with freedom of contract aims at correcting market failures.
40
See below p. 58 et seq. China Report. 42 Brazil Report; Turkey Report. 43 Germany Report; Israel Report. 44 Canada Common Law Report; Croatia Report; Singapore Report; UK Report. 41
45
Argentina Report. See on the issue in general Micklitz (2014). South Africa Report. 47 Germany Report; Taiwan Report. 48 Brazil Report. 46
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• To ensure procedural fairness. Rules on capacity, mistake, fraud, threat and the like can be found in all jurisdictions to ensure a so-called procedural fairness. Procedural fairness is not an aim as such, but it guarantees a higher probability of substantive fairness. Especially regarding SCT the special requirements for inclusion of such terms is a matter of procedural fairness. The customer must at least be given the chance to acknowledge the use of SCT, to read them, and bargain if he so wishes. • To ensure substantive fairness. A structural imbalance between parties due to a market failure may also cause an unfair imbalance between the parties’ rights and obligations. That usage of SCT can cause such imbalance especially in B2C contracts but also in Business to Small and Medium Size Enterprise (B2SME) contracts is a widely acknowledged fact. The justification for a legal intervention can be seen in the substantial welfare costs these imbalanced contracts impose.49 But fairness and the protection of the weaker party are also often used justifications for such intervention.50 Brazil is an interesting example in this context as Section 421 of the new Civil Code expressly regulates that every contract has a social function itself.51 A restriction on a constitutional or fundamental right needs to be proportionate to the objectives it aims at. This involves traditionally two aspects: • The measure shall be apt to achieve the objective it aims at. The regulation that restricts freedom of contract should be suitable to ensure a better functioning of the market via procedural and/or substantial fairness requirements. If it restricts the freedom of contract without being able to achieve these goals, it might be (rightly) challenged. • The measure shall not go too far vis à vis what is needed. If there is a less intrusive mechanism to restrict freedom of contract and to accomplish the same result, then that lesser measure shall be chosen. Prices for example are typically salient. If there are reasons to assume that there is an information problem regarding the price this can mostly be cured by special requirements regarding labelling, common calculation methods, like the annual percentage rate (APR), or by facilitating a better comparison shopping through specialised websites and the like. However, as the national reports show, this is not always enough to spur competition. Even in regard to very simple prices, such as
49
Bar-Gill (2012), pp. 23 ff. CJEU Judgment of 30 April 2014, Barclays Bank, C-280/13, EU: C:2014:279, para 32; see also CJEU Aziz (n 19), para 44. See also Rösler (2010). 51 See Brazil Report. 50
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the credit card interest rate52 or the default interest rate, there might be need for a judicial control or for regulatory caps if consumers are unresponsive to any information provided. Obviously, price relevant factors in SCT need to be scrutinized also from this perspective.
4
Standard Contract Terms and Their Control
4.1
Rationale of Controlling Standard Contract Terms
The rationale of controlling SCT is, although not explicitly underlined by lawmakers, that a market failure impedes competition among SCTs.53 Comparison shopping is not possible because of an information deficit on the customer side. While using SCT decreases transaction costs of the supplier to a great extent due to standardisation, efficient risk calculation and centralized handling of thousands if not millions of contracts, the transaction cost for the customer rises drastically as he is burdened with the cost of searching for the best SCT on the market. A rational customer is well advised not to do so since in most of the cases the probability of the SCT being employed is too low to justify the costs involved in searching for the best SCT.54 Due to these search costs suppliers have also no chance to make up for the information asymmetry via disclosure measures (“signalling”).55 Any information provided by a supplier at contract conclusion phase will be disregarded by a rational consumer (“rational apathy”).56 Hence no supplier has an incentive in drafting its SCT in favour of the customer or even to try to make its terms more salient. If the consumer is not going to place its limited attention on the SCT whatever the supplier does, a race to the bottom situation inevitably occurs and all suppliers end up using the worst SCT. This market failure (“lemon problem”57) arises despite competitive markets and calls for the lawmakers to intervene.58 In most of the reporting countries, we see such special control mechanism.59 52
See n 4. Korobkin (2003), pp. 1203–1295; Schäfer and Leyens (2010), pp. 97–119; Atamer (2018), pp. 35–57; Schäfer and Ott (2012), pp. 423 ff. and 449 ff. 54 Eisenberg (1995), pp. 211, 243–244; Bakos et al. (2014), pp. 1–35. 55 Schäfer and Leyens (2010), p. 104; Luth (2010), pp. 147–148; Zamir and Teichman (2018), p. 303. 56 Faure and Luth (2011), p. 342. See also UK Report. 57 Akerlof (1970). 58 Zamir and Teichman (2018), p. 320. 59 It is also worth noting that in the USA, the American Law Institute (ALI) is in the process of preparing a Restatement of the Law for Consumer Contracts that focuses on standard-form contracting (http:// www.thealiadviser.org/consumer-contracts). 53
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Given this rationale of controlling SCT it comes as no surprise that price terms even if stated in the SCT are not subject to control. Price is assumed to be subject to competition as long as it is transparently formulated, and no additional information problem exists. If for example the credit card SCT include also the yearly fee payable for the card this does not by itself make the price term intransparent. If it is ensured that prices are salient and subject to competition a disguised judicial control by way of a SCT control would disrupt the market equilibrium. However, the problem lies exactly in this presupposition: As stated above, prices are not always salient and SCT often include terms that have an indirect but significant effect on the formation of the price.60 In such cases, the same market failure argument is also valid for price clauses and justifies an intervention. In this section we briefly address the issue of definition, incorporation and interpretation of SCT (Sect. 4.2), before analysing in more details the ambit of any substantive control by the judiciary, the various techniques used for and the various consequences of such substantive control (Sect. 4.3) and finally the important issue of collective action and its efficiency (Sect. 4.4).
4.2
Definition, Incorporation and Interpretation of Standard Contract Terms
For the sake of clarity, we understand standard contract terms as being contractual terms that fulfil three requirements: • Advance formulation. SCT are formulated in advance by one party. The party using these SCT has usually drafted them, but it may also have used SCT prepared by third parties, such as professional associations. Therefore, the party supplying the SCT to the counter party will be named “the supplier of SCT”, which is more precise than the “drafter”. The party to whom they are imposed will be named as “the counter party or the customer”. • Intention to use multiple times. SCT are standardized because they are intended to be used in multiple contracts. This is also why they are generally drafted as a separate document and annexed to the main contractual document. However, the fact that these SCT have not yet been used, for instance because an administrative authority has the power to control them,61 or that they have been used only in a very limited number of contracts, or even just once, does not change their nature.62 What matters more is the 60
See also UK Report. As is the case for some sectoral SCT in e.g. Croatia. 62 See China Report. 61
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intent to use them for many contracts as a standardization mechanism of contracts.63 • Absence of negotiation. SCT keep their nature of being “standard” contract terms only if they have not been subject to negotiation. The absence of negotiation, either because the customer did not ask for, or its request to discuss one term or the other was rejected, or because it was not possible during the contracting process (e.g. distance contracting), is the key-factor to identify SCT.64 Obviously, there is some divergence among legal systems with regard to what amounts to negotiation.65 Neither the mere reading of the SCT, nor the mere fact to ask questions as to specific terms shall be considered as acts of negotiation. Indeed, the way the SCT are drafted, i.e. in a separate document that looks as unchangeable, and the fact that the customer is often told that one cannot change the SCT, add to the idea that the threshold to accept that specific SCT have been negotiated should be pretty high.66 The expectations will certainly differ according to the value of the transaction and whether or not the counter-party is a business itself. As explained above, the reason why there is a race to the bottom with SCT is the fact that the transactions costs related to searching for better terms or negotiating such terms are too high. However, the higher the transaction value the lesser the cost of such negotiation will be in relation. Therefore, in B2C contracts negotiation can seldom be presumed as the contract value is mostly low.67 Whereas in B2B contracts this possibility is rather high. To be binding for the parties, SCT need to be incorporated into the contract at stake. The incorporation formalities vary significantly from one system to the other, but also from one type of contract to the other. It is not the place to examine these incorporation requirements in all details, but we may stress two issues: • Acknowledgment of the existence of the SCT. In principle the customer has to give his consent to the inclusion of 63
See for a Swiss perspective, Pichonnaz (2017), Art. 8 LCD para 4. China Report; South Africa Report. 65 See on these elements Austria Report. 66 See furthermore the CJEU which considers that the good faith requirement implies to determine whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations: CJEU Aziz (n 19), para 69; see Belgium Report. 67 Art. 3 Directive 93/13/EEC therefore provides that a term shall always be regarded as not individually negotiated where it has been drafted in advance, particularly in the context of a pre-formulated standard contract. Even if a specific term has been negotiated the Directive applied to the rest of the contract as long as the supplier does not prove that the rest has been negotiated too. See also French Report and Art. L. 212-1 al. 6 French CConsom. 64
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standard terms at the time of conclusion of the contract.68 This acknowledgment may be done without any form, may have specific requirements, such as a signature, or even a handwritten acknowledgment that the SCT have been read and understood. This acknowledgement process is based on the requirement of some sort of consent to these terms by the other party, even if these are not effectively read, but could have been. • Reasonable availability test. Most systems do only accept a valid incorporation when the acknowledgment of the existence of the SCT is combined with the fact that those terms are reasonably available.69 Again, this test may vary significantly from one regime to the other, but also from the mode of conclusion of the contract: a contract concluded electronically may have a regime of “clickwrap” where one has to scroll-down a text and then consent to the text or “browsewrap” where a link will lead to the website including the SCT. Continuing to use the webpage is interpreted as an assent.70 Sometimes even a system of pay now, terms later is applied where the terms arrive later with the purchased items.71 In B2C contracts these methods are often not deemed as sufficient to include SCT. SCT printed on the back of the ticket,72 SCT written in too small prints for instance may also be considered as being not incorporated. One concern might be that the ability to negotiate them does not exist at all and the risk of abusive terms might therefore be very high. Some legal systems, which do not have special provisions authorizing the judge to control unfair terms, have tried to strike out such unfair clauses through a strict application of the incorporation requirements. Thus, even though the SCT had been handed over to the customer before concluding a contract, a surprising term, to which a party has not specifically drawn the attention of the other party to, is deemed not
68 But see also some US Decisions, which mention the Pay Now Terms Later system (or “shrinkwrap”), in which the parties agree on the main terms of the transaction immediately, but the SCT arrive later, when the purchase item is delivered and opened. Some courts have accepted the inclusion of the SCT, some have rejected it. See among others Hill v. Gateway 2000, 105 F.3d 1147 (7th Cir 1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996); Specht v. Nescape Communications Corporation, 306 F.3d 17 (2nd Cir. 2002). 69 For some cases see Belgium Report which mentions a Decision of the Belgian Cassation Court requiring that a hyperlink to SCT actually works and Italian Report. 70 This is typical for the US Court practice, see among others Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014); Specht v. Netscape Communications Corp., 306 F.3d 17 (2nd Cir. 2002). 71 See n 64. 72 See Italian Report, which cites at least two Supreme Court cases, Cass. 26 February 2004, n. 3863, Foro it., 2004, 1, 2132, annotated by Bitetto; Cass., 20 December 2005, n. 28232; Foro it., 2006, I 2065.
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to have been incorporated into the contract.73 One may speak about a disguised substantive control.74 Most of the legal systems have also adopted the interpretation contra proferentem rule75 which goes back to the Roman law rule of interpretation for unilateral oral contracts (stipulatio).76 Today, it aims at improving the quality and also the transparency of SCT. According to this rule, in case of doubt over the proper meaning of a term, the judge has to choose the most favourable interpretation for the customer (in dubio contra stipulatorem). The rule sets an incentive to suppliers of SCT to avoid equivocal terms as much as possible. This term might also be central for price related terms, which often are more complex and bear the risk of doubts or absence of clarity. As shown by the Canada-Common Law report, the question whether contractual interpretation is a question of fact or of law, or a mixed one,77 may also play a role regarding control of SCT. Once SCT have been validly incorporated into a contract, and their meaning determined by means of interpretation, possibly by reference to the contra proferentem rule, the judge has to move on to the substantive control of SCT. Such control may depend on the ambit of review, but also on the tools at disposal.
4.3
Substantive Control of Standard Contract Terms
4.3.1 Ambit of Substantive Control The substantive control of SCT may vary according to two factors, which we will only briefly mention here: • Control of SCT v. any non-negotiated contract term. As already mentioned, the substantive control may be restricted to formal “standard contract terms” which have become part of the contract and are then often called “adhesion contracts”. However, it is not always clear why this restriction applies; especially, one could wonder whether the control should work equally for any non-negotiated term, whether it is formally part of SCT or not. Given that the existence of the formal requirements of SCT can sometimes be subject to discussion, the Directive 93/13/EEC, for example, has chosen to extend control 73
See Switzerland Report; UK Report (red-hand rule). See below p. 18. 75 See Canada Common Law Report; China Report; South Africa Report. 76 D. 45,1,38, 18 (Ulpianus libro 49 ad Sabinum): “In stipulationibus cum quaeritur, quid actum sit, verba contra stipulatorem interpretanda sunt.” 77 See Canada Common Law Report; Sattva Capital v Creston Moly, 2014 SCC 53, para 50. 74
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to all non-negotiated terms, independent of the fact whether there is only one contract term or more, whether they were drafted in advance or not, or will be used more than once. If the argument for limiting contractual freedom is based on a structural imbalance of negotiation powers, as affirmed for instance by the Directive,78 or in some national systems,79 then a restriction to SCT does not really make sense; the aim being a more social private law and a kind of post-contractual rebalancing of powers to produce a (potential) preventive effect on further contract and SCT drafting. This argumentation can also be brought in harmony with the market failure reasoning as it does not make a difference whether the exclusion of liability clause is a stand-alone clause as seen at the entrance of e.g. a car-park, or one among a bunch of other terms favouring the supplier as e.g. in a sales contract. The customer will carry the costs of searching for better clauses on the market or rather rationally opt for concluding this contract and hope for no dispute to arise. • B2B v. B2C control. The question whether a protection against SCT should be given only in B2C relations or should also include B2B relations is raised in every report. There are only a few countries which fully exclude a SCT control for B2B contracts.80 If the argument for the control of SCT is seen in the market failure due to high transaction costs burdened by the SCT, there is little grounds to justify an a priori exclusion of B2B contracts without checking in each concrete case whether the negotiating powers were sufficiently balanced. This will often be a problem if the counter party is an SME as their financial and legal capacities are limited and they may face the same type of structural imbalanced negotiating powers as consumers.81 However, as put forward above, the higher the value of the contract the higher the expectations are on the customer to get some legal advice and/or to seek for better contract terms.
4.3.2
Various Techniques of Substantive Control
4.3.2.1 Indirect Substantive Control We have already mentioned above techniques of indirect or disguised substantive control linked with the incorporation requirement.82 These mechanisms are based on the idea that standard terms that are not reasonably available at contract 78
See EU Report. See among others Belgium Report; France Report. 80 E.g. Belgium Report; Canada Common Law Report; Israel Report (where also for B2C contracts no special SCT control is practiced). 81 See e.g. Austria Report; Croatia Report; Denmark Report; France Report; South Africa Report. 82 See p. 14 et seq. 79
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conclusion have an enhanced risk of including unfair terms.83 SCT that are not reasonably legible shall be struck down for similar reasons.84 Furthermore, some systems have dealt with surprising terms,85 which means with terms that the other party did not expect to find in the SCT and, if the party had known about them would probably not have agreed to them. In a way, these SCT are surprising also because they are unfair. However, instead of striking them down at the level of a substantive control, these terms are deemed not to have been incorporated into the contract because of lack of consent. This is why some authors have called that approach a “disguised substantive control”.86 The Canadian common law report mentions such technique, as one in which the Court does not assert its control power.87 To some extent, the interpretation of SCT may also be a technique of substantive control, especially when the interpretation deals with SCT for which the factual matrix is far less important. Some interpretations, with or without reference to the contra proferentem rule, may be more a question of law than of facts,88 and therefore have a significant precedential value. 4.3.2.2 Direct Substantive Control National reports have shown mainly two types of judicial substantive control of SCT (as well as for invasive administrative controls, when they exist): • Control by means of general (mandatory) provisions of contract law. Mandatory provisions, which the parties cannot contract out, apply in any contractual situation. However, the chance that they are applied when SCT are used is certainly higher, given either the field of application of these norms (consumer contracts, supply of common goods, transportation, energy, telecommunication), the specific contracting process, which may trigger issues of mistake,89 duress or formal unconscionability, or the typical content of SCT, such as exclusion or limitation of liability,90 which may be expressions of violations of good morals,91 sometimes concretized by institutions such as laesio enormis92 or unconscionability, in many variations. 83
See p. 16. See for instance Canada Civil Law Report. See also below p. 24. 85 See Romania Report; Switzerland Report. 86 Koller (2008), pp. 943–953; Pichonnaz (2017), para 94. 87 Canada Common Law Report. 88 See the Canada Common Law Report and Ledcor v Northbridge, 2017 SCC 7, para 24. 89 See for instance South Africa Report. 90 See for instance South Africa Report. 91 See Estonia Report. 92 See Brazil Report; Chile Report; Croatia Report; Romania Report; Switzerland Report. 84
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negotiated term as unfair if “(a) contrary to the requirement of good faith, it causes (b) a significant imbalance in the parties’ rights and obligations arising under the contract, (c) to the detriment of the consumer” (letters added). Despite the CJEU Aziz case102, the requirement of good faith is not always understood as a separate requirement,103 but it certainly underlines that the imbalance needs to be justified by objective reasons, looking at the whole contract, or even external factors. The imbalance shall be significant, which is also difficult to assess in abstract. This is the reason why the Directive 93/13/EEC has provided for a list of clauses that are presumed to be unfair, reversing the burden of proof (so-called grey list) (art. 3 para 3: “The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair”). However, since EU Member States are allowed to implement more stringent measures, some have transposed this list in dividing it into terms that are regarded as being always unfair (so-called black-list)104 and some that are only presumed to be unfair (grey-list), and sometimes have also supplemented the list to some extent.105 Moreover, the CJEU has recently considered that EU Member States were allowed to keep a public register listing the clauses that had been considered as unfair by authorities or judicial decisions, as long as it is “structured in a clear manner” and kept up to date so that “in keeping with the principle of legal certainty, terms that are no longer needed are removed promptly”.106 Authorities can rely on these lists, but professionals who would be sanctioned for using those terms shall have the possibility of challenging both, the assessment of the conduct considered to be unlawful and the amount of the fine fixed by the competent national body.107 Because of the need to assess a clause in light of all circumstances and in the ambit of a specific contract,108 one can consider these registers as a kind of administrative/judicial grey-list, since those clauses are presumed to be unfair, but a professional can
Sometimes sector-specific mandatory rules, such as rules protecting tenants against some issues dealt in SCT, might provide a remedy.93 Many reports have also rightfully underlined the importance of anti-trust rules or unfair competition regulations, as both are mandatory.94 However, as mentioned above, SCT create a special market failure which neither can be cured by the market itself nor by employing the classical restrictions of contract law. If the system cannot assure that SCT are read, commented or negotiated because of the transaction costs involved, a structural imbalance in negotiation powers is manifest. Therefore, one needs to seek for special restricting regulations.
• SCT-specific control of unfair terms. A SCT-specific content control has been implemented in almost all legal regimes.95 It has two main features. – Administrative control. An administrative control may take place either before a supplier of SCT can use them in its contracts96 or at the request of the other party,97 who complains about them and intends to have a decision that may influence a later lawsuit against their supplier. – Judicial control. In most of the reporting countries this has been the preferred choice, even if there is sometimes also an administrative control available.98 We will present briefly such judicial control below. Given that 14 of the contributing countries are EU Member States it makes sense to start by briefly describing the system introduced by the Directive 93/13/EEC. However, this Directive sets only minimum standards in harmonization (art. 899); therefore, the EU Member States are free to introduce further reaching measures to protect customers from unfair contractual terms. Some of these divergences we will discuss below, when dealing with price related unfair terms.100 There is also a specific report presenting EU law, the Directive 93/13/EEC and the relevant case law of the CJEU.101 The EU system is based on a general provision (art. 3 Directive 93/13/EEC), which regards a not individually 93
See e.g. Switzerland Report. Brazil Report. 95 Exception: Canada Common Law Report. 96 See China Report; Croatia Report; Taiwan Report. 97 See for instance Israel Report; Italy Report; Netherlands Report. 98 Croatia Report; Israel Report; Italy Report; South Africa Report. 99 “Member States may adopt or retain the most stringent provisions compatible with the Treaty in the area covered by this Directive, to ensure a maximum degree of protection for the consumer” (emphasis added). 100 See below p. 33 et seq. 101 See EU Report. 94
102
CJEU Aziz (n 19), para 69. See Belgium Report (Belgian legislator did not incorporate the requirement of good faith in the Belgian general provision on unfair terms). 104 E.g. Belgium Report; Italy Report. 105 See for instance Estonia Report; France Report. However, Denmark is an outlier as it did not transpose the Directive 93/13/EEC Annex into Danish law and supported the Swedish position in front of the CJEU by stressing that the general clause applicable would protect consumers in a parallel way. The CJEU favoured this argumentation, CJEU Judgment of 7 May 2002, Commission/Sweden, C-478/99, EU:C:2002:281. 106 CJEU Judgment of 21 December 2016, Biuro podróży Partner, C-119/15, EU:C:2016:987, paras 38 ff. 107 CJUE Biuro podróży Partner (n 106), para 40. 108 CJEU Judgment of 26 January 2017, Banco Primus, C-421/14, EU: C:2017:60, paras 59–61 with references; CJEU Aziz (n 19), paras 66–71. 103
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still challenge their unfairness in a given case. As underlined by the CJEU, unfairness can best be measured by comparing it to the specific term which in the absence of an agreement by the parties would apply, that is the otherwise applicable default rule.109 In addition to the general and special rules defining unfairness, the Directive 93/13/EEC also underlines the need for transparency in relation to substantive control. The abovementioned art. 5 and also art. 4, para 2 of this Directive provide that terms have to be drafted in a plain and intelligible language. This is, as will be seen below, especially important in regard to price terms, as not being transparent is the only justification for control of a price term under the Directive 93/13/EEC. Most of the non-EU States have followed similar paths, having either only one or several general provisions controlling unfair terms in consumer contracts110 or in any type of contract.111 Some others use in addition the device of a black list112 or a grey list.113 In all these instances, what matters really are (a) the consequences attached to the recognition of an “unfair” term (see below Sect. 4.3.3) and (b) the precedential value of any judicial decision on other SCT (see below Sect. 4.4).
and especially price clauses, is to determine whether the court could only invalidate an unfair clause as a whole, or whether it may adapt the clause/contract so as to keep it valid. In many countries, the SCT control norm provides for the invalidity of the unfair term. At the same time, Art. 6 Directive 93/13/EEC burdens the EU Member States to lay down that unfair terms used in a contract concluded with a consumer shall not be binding on the consumer, and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms. In principle, no adaptation of the unfair term is allowed.115 The rationale is that if courts could adapt the contract by supplementing the invalid SCT with a default provision or one made-up by the Court, there would be quite a strong incentive for suppliers of SCT to provide unfair terms, knowing that in any case they would get the well-balanced option of the legislator (default rule) or of the court.116 The CJEU has expressed this very clearly: “To this end, it is for the national court purely and simply to exclude the application of an unfair contractual term in order for it not to produce binding effects with regard to the consumer, without being authorised to revise its content”.117 According to Banco español de credito, this means “the contract must continue in existence, in principle, without any amendment other than that resulting from the deletion of the unfair terms, in so far as, in accordance with the rules of domestic law, such continuity of the contract is legally possible”.118 Some EU Member States have still operated until now on a slightly different basis. For instance, based on general principles of civil law, Belgian Courts have restricted unfair terms to what was acceptable, implementing thus an adaptation of unfair terms.119 Similarly, Estonian courts have the power to reduce the interest for late payment according to a specific provision (§ 113(8) LOA),
4.3.3 Legal Consequences Depending on the type of substantive control the legal consequences might differ. Especially in countries where there are no specific rules for the control of SCT, the invalidation of the unfair term might not always be the result of a substantive control. The national reports have shown mainly three issues: • Consequences of infringing mandatory rules. A mandatory rule does not always specify the consequence of its infringement. In absence of any specification, legal regimes usually consider that an interpretation of the legal norm has to consider the aim of such provision and the proportionality test to determine the specific consequence. Often, the answer will be invalidity of the specific SCT since the applicable mandatory rules aim at enforcing public policy issues (e.g. consumer protection, proper functioning of the market).114 • Invalidity of the unfair term vs. adaptation. A very important point with regard to judicial review of unfair clauses, 109 CJEU Banco Primus (n 108), para 59; see also Germany Report; Turkey Report. 110 See among others Switzerland Report; Turkey Report. 111 E.g. Turkey Report. 112 See Brazil Report; South Africa Report. 113 See South Africa Report; Turkey Report. 114 See also the EU Report for a broader discussion.
115
Austria Report; EU Report. See especially CJEU Judgment of 21 December 2017, Gutiérrez Naranjo, C-154/15, C-307/15 and C-308/15, EU:C:2016:980, para 57; CJEU Judgment of 14 June 2012, Banco Español de Crédito, C-618/10, EU:C:2012:349, para 65; CJEU Judgment of 21 January 2015, Unicaja Banco and Caixabank, C-482/ 13, C-484/13, C-485/13 and C-487/13, EU:C:2015:21, para 31. See however Belgium Report. 116 See especially CJEU Gutiérrez Naranjo (n 115), para 60 (“the national court may not revise the content of unfair terms, lest it contribute to eliminating the dissuasive effect for sellers or suppliers of the straightforward non-application with regard to the consumer of those unfair terms”); see also CJEU Unicaja Banco and Caixabank (n 115), para 31; CJEU Kásler and Káslerné Rábai (n 14), para 78; CJEU Banco Español de Crédito (n 115), para 69. CJEU Judgment of 30 Mai 2013, Asbeek Brusse and de Man Garabito, C-488/11, EU:C:2013:341, paras 57 ff. (no reduction of a penalty clause). 117 CJEU Gutiérrez Naranjo (n 115), para 57. 118 CJEU Banco Español de Crédito (n 115), para 65. 119 Belgium Report.
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but it has to be requested by one party.120 This is true also for contractual penalties.121 For non-EU States, the picture varies. Some provisions do not specifically address the issue, such as in Swiss law, for which the dominant opinion rejects any possible adaptation of unfair terms.122 Some States have however accepted the possibility for courts to adapt the contract by revising the unfair clause as to avoid any unfair result.123 One rational for allowing revision of unfair terms is to limit the deterrence effect or punitive sanction of unfair terms to situations in which parties have acted in bad faith.124 EU Law tends to recognize a larger benefit to consumers in rejecting any adaptation of unfair clauses. It aims at deterring professionals from trying to insert unfair clauses in their standard terms, knowing that in doing so they might lose more than what they would get in being reasonable from the beginning. An exceptional adaptation at the customer’s choice. If the invalid SCT is an essential part of the contract, where the contract cannot be maintained without the invalid part, then there are two options: either, the contract is void in total as a consequence of the partial invalidity of SCT; or, one can envisage that the other party might have agreed to have the default provision applied if it had known that the SCT in question would have been void. The CJEU has specifically addressed this question,125 letting the choice to the customer (potentially with a duty for the court to ask the party for its choice). 120
Estonia Report. Estonia Report; but also many other systems, see e.g. Switzerland Report. 122 Switzerland Report; Pichonnaz (2017), Art. 8 LCD para 172; regarding the approach to control surprising terms see SFT (Swiss Federal Tribunal), Decision of 18 December 2008, 4A_404/2008, reason 5.6.3.2.1. 123 See Spain Report, which mentions that an adaptation of contract is allowed for B2B contracts, this not being possible for B2C contracts according to CJEU Banco Español de Crédito (n 115), para 73. 124 For such rationale of no intervention in case of bad faith, see among other decisions, Central Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28, 37 (Tenn. 1984), in which the court noted: “We recognize the force of the objection that judicial modification could permit an employer to insert oppressive and unnecessary restrictions into a contract knowing that the courts can modify and enforce the covenant on reasonable terms. [. . .] [T]he employer may have nothing to lose by going to court, thereby provoking needless litigation. If there is credible evidence to sustain a finding that a contract is deliberately unreasonable and oppressive, then the covenant is invalid.”; see also Jenkins v. Jenkins Irrigation, Inc., 259 S.E.2d 47, 51 (Ga. 14 1979). 125 CJEU Judgment of 30 May 2013, Jőrös, C-397/11, EU:C:2013:340, para. 41 (“In this connection, the Court has stated that, where the national court considers a contractual term to be unfair, it must not apply it, except if the consumer opposes that non-application, after having been informed of it by that court. See, to that effect, CJEU Judgment of 4 June 2009, Pannon GSM, C-243/08, EU:C:2009:350, para. 35”); CJEU Unicaja Banco et Caixabank (n 115), para 33.
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• Consequences of lack of transparency. As already mentioned above, Art. 5 Directive 93/13/EEC does not state the consequences of lack of transparency. The first sentence only provides for the duty, in the case of contracts offered in writing, to draft the SCT in plain, intelligible language. One can envisage three options: (a) To consider the non-transparent term not to have been incorporated into the contract, as it is practice—at least to some extent—with legal regimes using the device of surprising terms126; (b) To consider these non-transparent terms as unfair,127 which had been suggested by the DCFR (art. II.-9:402[1]); (c) to weigh-in this non-transparency aspect in the overall assessment of the unfairness of SCT,128 which was suggested by the CESL draft (art. 83[2]). The latter seems to be the actual position of the CJEU,129 though, as rightly mentioned by the EU Report,130 some decisions seem to have taken the second option.131
4.4
Litigating Against Standard Contract Terms: Collective and Individual Actions Made Easy
When confronted with unfair SCT it is not easy for an individual (typically a consumer) to get these SCT ignored, invalidated or just to get his rights respected. Sometimes it is due to rational apathy, especially when the loss incurred is modest and the fees to litigate high; this is often the case in consumer related issues.132 Therefore, countries have developed several strategies133:
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a) Arbitration mechanisms for consumer contracts. When speaking of arbitration, it needs to be differed between arbitration terms dictated by the supplier of SCT and arbitration boards established by the state for a speedy 126
See p. 91; as well as some suggestions in France on the “inopposabilité” of those terms: Peglion-Zika (2013), pp. 199–225. 127 See EU Report; Spain Report. 128 See EU Report; German Report. 129 See CJEU Gutierrez Naranjo (n 115), paras 49 and 51; CJEU Banco Primus (n 108), para 62. 130 EU Report. 131 CJEU Judgment of 28 July 2016, Verein für Konsumenteninformation, C-191/15, EU:C:2016:612, para 71; EU Report. 132 See for EU, the Proposal for a Directive of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC, COM(2018) 184/3; presented in relation with the so-called “New Deal”, April 11, 2018: http://europa.eu/rapid/press-release_MEMO-18-2821_ en.htm; as well as for the collective redress mechanism see The New Deal for Consumers: How will the new Collective Redress Mechanism Work?: https://ec.europa.eu/info/sites/info/files/ndc_factsheet4_ redress_mechanism.pdf. 133 See for a detailed overview of 28 jurisdictions and a general report Micklitz and Saumier (2018).
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dispute resolution. Arbitration clauses in SCT are on the grey list of the Directive 93/13/EEC and therefore mostly seen as unfair in the EU Member States if the consumer loses its right to apply to state courts.134 In the USA however, most disputes with consumers are subject to arbitration,135 which renders access to case law difficult and raises the question of how far these arbitral boards are independent. Recently, the US Supreme Court has confirmed that (exclusive) arbitration clauses are valid in consumer and employment contracts.136 b) Collective actions. Many national reports have stressed the importance of collective redress mechanism or class actions.137 EU Member States had to implement the Directive 2009/22/EC on injunctions for the protection of consumers’ interests,138 which aimed at the protection of the collective interests of consumers. That Directive provided for ‘qualified entities’139 to file claims to get orders requiring the cessation or prohibition of any infringement (art. 2 let. a), and to some extent order for payments into the public purse or to any beneficiary designated in or under national legislation (art. 2 let. c). As shown by national reports, these means have not been very satisfactory, though it may play a crucial role as to price related terms.140 The new draft directive of 2018141 shall enhance the possibility to obtain damages and penalties, but also provide for a mediation mechanism that facilitates multi-sided agreements.
134
See also CJEU Judgment of 27 June 2000, Océano Grupo Editorial and Salvat Editores, C-240/98, EU:C:2000:346; CJEU Judgment of 26 October 2006, Mostaza Claro, C-168/05, EU:C:2006:675; parallel Turkey Report. 135 Council Draft No. 3, ALI Restatement of the Law Consumer Contracts (December 20, 2016), Reporters’ Introduction, p. 4. 136 US Supreme Court, 21 May 2018, Epic Systems Corp. v. Lewis, 584 US_2018 and already US Supreme Court, 20 June 2013, American Express Co. v. Italian Colors Restaurant, 570 US_2013. 137 Accepted in e.g. Austria; Belgium; Brazil; Croatia; Italy; Germany; Greece; Romania; Russia; Turkey. 138 Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests, OJ 2009, L 110/30. 139 Art. 3 Directive 2009/22/EC defines “qualified entities” as “any body or organisation which, being properly constituted according to the law of a Member State, has a legitimate interest in ensuring that the provisions referred to in Article 1 are complied with, in particular: (a) one or more independent public bodies, specifically responsible for protecting the interests referred to in Article 1, in Member States in which such bodies exist; and/or (b) organisations whose purpose is to protect the interests referred to in Article 1, in accordance with the criteria laid down by the national law”. 140 See for some CJEU cases brought by “qualified entities”, EU Report. 141 Proposal for a Directive of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC, COM (2018) 184/3.
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In many non-EU States, consumer associations are authorized to file claims on behalf of consumers. They have adopted a system more or less based on the idea of representative actions.142 Variations regarding these judicial proceedings exist in several aspects: • Type of ‘entity’ deciding on the case. In most of the countries it is the normal civil law court which decides on the validity of the questioned terms. However, some countries have also special courts/tribunals vested with the power to strike out unfair terms on the application of e.g. the Attorney General.143 • Type of ‘qualified entity’ initiating the proceedings. Some countries allow consumer organisations and associations to file claims and seek for the annulment of unfair terms144; some others couple it with official authorities which can sue in courts,145 or even leave it totally to such administrative authorities.146 • Type of possible orders sought for. Collective actions are aimed at orders recognizing the abusiveness of standard terms; injunctions preventing the further use of such unfair terms; but rarely any damage claim based on these abusive terms or restitution. Some systems have an abstract review only.147 • Fees to be paid. Efficiency of the collective claims depends also on the fees that organisations/individuals have to pay to litigate.148 Some countries have introduced either in addition to representative actions or instead of them the class action system.149 Especially in regard to possible damages and restitution claims of consumers the class action model is more promising as the customers themselves are part of the litigation and can enforce any favourable judgement immediately. The Danish report gives the example of a class action being prepared to claim payment of wrongfully charged VAT on the media license from the Danish Broadcasting Corporation. In fact, the new collective redress mechanism being discussed in the EU aims also at facilitating such damages/restitutions claims being filed by the representative institutions. c) Extending the res judicata effect of court decisions to third parties. One of the major problems related to SCT control 142
Argentina Report; Estonia Report; Israel Report; Turkey Report. Israel Report. 144 Brazil Report; Israel Report. 145 Belgium Report; Croatia Report; Israel Report (Commissioner of Consumer Protection); Switzerland Report; Turkey Report. 146 Russia Report: special governmental agency (“Federal Agency for Control in the Sphere of Consumer’s Rights Protection and Human’s Welfare”). 147 Austria Report. 148 In Turkey e.g. consumers are exempt from paying any fees when suing in specialized consumer courts. 149 Belgium Report; Denmark Report. 143
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5
Judicial Control of Price Related Standard Contract Terms
5.1
Principal Rule: Prices Are Determined Freely on the Market
is certainly the effect of a decision, which invalidates several terms as unfair, on other contracts where the same supplier has used the same SCT against third parties. One step further, the question would arise how contracts of other suppliers using similar terms in their contracts are affected by this decision. The procedural principle in most of the countries is that the decision only binds the parties of the legal dispute, no erga omnes effect is granted. This is obviously a very invidious result especially in case of unfair terms or unfair commercial practices, where sometimes millions are faced with the same clause. The whole concept of representative actions would be undermined if the decision fought out by the consumer organisation would only have an ex ante effect with no influence on the contracts in which the same SCT were used by the same supplier. In fact, the CJEU decided in Invitel150 that the declaration of invalidity in an action for injunction will extend its effect to all consumers who have a contractual relation with the same supplier and the same SCT even though they were not party to the injunction proceeding.151 In the abovementioned Biuro case the CJEU goes further, extending the effect of an unfairness declaration by the court even to other suppliers using a similar term.152 This triggers a kind of presumption of unfairness for all suppliers, but allows them to challenge the assessment of unfairness in case it is based on a former decision which they think does not reflect the specificities of their contractual relation.153 As mentioned earlier, one can consider that the Biuro case sets a kind of grey-list value for clauses that have been recognized as abusive by administrative bodies or judicial entities.154 Below we will discuss another aspect of this issue in relation to price terms: Even if the effect of the decision can be extended to third parties, this will only be regarding the invalidity of the term. However, any restitution claims regarding unnecessarily paid amounts of money will mostly have to be initiated by the individual consumer again. This is certainly one of the major obstacles to a cost and time-effective solution regarding e.g. fees paid without any legal grounds. In fact, one of the aims of the proposed new Directive on protecting collective interests of consumers155 is to remedy this situation by giving qualified entities a right to bring representative actions seeking a redress order.
The overall picture of national reports on the judicial control of price related standard terms is certainly dominated by one main feature: in all market driven economies the price is determined freely on the market relying on the interaction of supply and demand reaching an equilibrium.156 Even though the extent of regulatory intervention may vary, this fundamental principle is acknowledged by all national reports. Therefore, many legal systems are reluctant to have a direct judicial control over price related terms, since it would hamper the efficient functioning of the market. South Africa is probably the only exception among the studied jurisdictions as it explicitly prohibits in its Consumer Protection Act section 48(1)(a) ‘a supplier from entering into an agreement ‘(i) at a price that is unfair, unreasonable or unjust’. However, the courts seem to have refrained from making use of this discretion so far.157 It is common knowledge that in competitive market economies the supply side cannot charge more than their cost of supply.158 Rational and perfectly well-informed consumers know their preferences and are responsive to any price change in the market. Utility-maximizing consumers on the demand side and profit-maximizing producers on the supply side meet on a perfectly competitive market that results in the best possible equilibrium price.159 That is also the main reason why price terms even if stipulated in SCT are excluded from a SCT control. Other than SCT in general, price is a salient feature of the contract and there is, in principle, no need for a judicial intervention as long as the prerequisites for a functioning market that is competition on the supply side and information on the demand side are guaranteed. Many of the reports underline rightfully the role of antitrust and unfair competition laws to ensure a correct functioning of the market on the supply side. As we will see below, there are also widespread provisions in order to inform the demand side about the price.160 These provisions are forming the baseline of a functioning market. It is the governments’ duty to secure these prerequisites.
150 CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU: C:2012:242. 151 See for a parallel solution Croatia Report. 152 See Werro and Pichonnaz (2015), pp. 268 ff.; see also Belgium Report; EU Report. 153 CJEU Biuro podróży Partner (n 106), para 42. 154 See p. 21 and Austria Report, which considers that the decision is de facto often observed. 155 See n 141.
156 See Belgium Report; Canada Common Law Report; Chile Report; China Report; Croatia Report; Israel Report; Japan Report; Singapore Report; Taiwan Report; Turkey Report; UK Report. 157 South Africa Consumer Protection Act 68 of 2008, section 48(1)(a). 158 DeMuth (1986), p. 216. 159 See e.g., Cooter and Ulen (2012), pp. 18–29; Kirchgässner (2008), pp. 59–61. 160 See below p. 48 et seq.
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Besides, general provisions of contract law may find application whenever a specific situation occurs in which the customer has consented an imbalanced contract due to incapacity, misrepresentation, error, or a gross disparity situation.161 Also, the concepts of laesio enormis,162 unconscionable contracts,163 usurious interests164 or usury contracts165 aim at judicial correction of singular situations where the contractual equilibrium has been disturbed and an unreasonably high price has been stipulated.
5.2
Special Protection Needed if Price Terms in SCT are Not Subject to Competition
However, a competitive market and even detailed information requirements might not suffice to spur competition as the case is with SCT, and also with some types of price terms. There are for example hundreds of banks supplying credit on the EU market and they serve the consumer in a timely fashion with the SCT, but still, no market for SCT is developing. The customers are choosing their credit institution not according to the content of SCT, and this is even a rational choice due to the high transaction costs involved in searching for better terms. As long as the lawmakers do not intervene in the substance of the SCT the risk of bad deals for customers are high. The ratio legis of the exclusion in art. 4(2) Directive 93/13/EEC is based on this distinction. SCT in general are not subject to competition; therefore, they need to be controlled. However, price formation is highly competitive; here we need no intervention. But, the inevitable result of this reasoning is that terms which are price related but not subject to competition might need to be submitted to judicial control as they inherently are carrying the same risk as other SCT: the risk that a race to the bottom is leading to the worst clause possible.166 In fact, the overview in the national reports of the case law shows several recurring situations which we tried to systematize below. The Directive 93/13/EEC is probably the first piece of legislation which tried to differ between the terms subject to competition and therefore exempt from judicial control and those not subject to competition and therefore not exempt from judicial competition. According to Art. 4(2)167 of this Directive: 161
Russia Report; Switzerland Report; Turkey Report. Canada Civil Law Report; Chile Report. 163 Canada Common Law Report; China Report. 164 Canada Civil Law Report. 165 Russia Report. 166 Underlined also in the Austria Report; Germany Report; Turkey Report; UK Report. See for details, Schillig (2011), pp. 933–963. 167 Some EU Member States did not transpose such restriction and make therefore no difference between main subject matter and ancillary price162
263 Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies (sic) in exchange, on the other, in so far as these terms are in plain intelligible language.
This definition has two components: any term which is not defining the main subject matter of the contract or the ratio between price and goods or services can be assessed in regard to its unfairness (1) and any term, even if defining the subject matter of the contract, can be assessed in regard to its unfairness if it is formulated in a non-transparent manner (2). The first group consists of those terms that are not salient as they are not directly linked to the contract price and are therefore not perceived by customers. The second group of terms is perceived as price terms, but their content is misperceived as they are not transparent. 1 “Main” and “ancillary” obligations of the contract. The interpretation of the first part of Art. 4(2) by the CJEU and also in the EU Member States has not been harmonious at all. The EU report reflects the developments in detail. In brief, the CJEU was often guided by the decisions of the BGH.168 The approach of the BGH is to differentiate between the “main” and the “ancillary” obligation of the contract.169 The CJEU adopts this approach and explains it in Van Hove as follows: “[c]ontractual terms falling within the concept of ‘the main subject-matter of the contract’, within the meaning of Article 4(2) of Directive 93/13, must be understood as being those that lay down the essential obligations of the contract and, as such, characterize it. By contrast, terms ancillary to those that define the very essence of the contractual relationship cannot fall within the concept of ‘the main subject-matter of the contract’, within the meaning of that provision”.170 Price terms which can be controlled are those which have an indirect effect on the price and can be substituted by courts related terms. See EU Report for a general overview. See also Croatia Report; after the Croatian Franak case, in which credits linked to Swiss franc were unsuccessfully challenged, the Croatian High Commercial Court reversed its position on 14 June 2018 and found that a contract clause denominating credits in Swiss francs was unfair for lack of transparency of the price-related contract term; see also Danish Report; Estonia Report and the Slovenian Report, which underlines that there is no transposition of art. 4(2) Directive 93/13/EEC, but that the Supreme Court does control some price related terms. Italian law seems not to have explicitly relied upon that distinction, see Italian Report. Though influenced by EU law, Swiss law does not make a difference between main subject matter and ancillary contracts (Switzerland Report). 168 See for details the EU Report. 169 E.g. BGH, 13. 11. 2012 – XI ZR 500/11, (2013) NJW, 995; BGH, 7.6.2011 – XI ZR 388/10, (2011) BKR, 418; BGH, 7.5.1991 – XI ZR 244/90, (1991) Zeitschrift für Wirtschaftsrecht (ZIP), 857. For details see Germany Report. 170 CJEU Van Hove (n 14), para 33. Parallel also CJEU Caja de Ahorros y Monte de Piedad de Madrid (n 14), para 34; CJEU Kásler et Káslerné Rábai (n 14), para 49; CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:C:2017:703, para 35.
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as in every incomplete contract. The CJEU argues: “[. . .] it follows from the wording of Article 4(2) of Directive 93/13 that the second category of terms which cannot be examined as regards unfairness is limited in scope, for that exclusion concerns only the adequacy of the price or remuneration as against the services or goods supplied in exchange, that exclusion being explained by the fact that no legal scale or criterion exists that can provide a framework for, and guide, such a review”. The CJEU as well as the BGH are both basing their argument on the idea that prices cannot be defined in default rules. Therefore, any contractual issue where a default rule is existent or can be derived from the law by analogy cannot be a price term. In case the customer has been burdened with some additional charges e.g. the court has to inquire whether default rules regarding that specific contract type allow for such additional charge.171 If such default rule is missing, a fair distribution of rights and obligations can be derived from the very nature of the contractual relationship, or from general principles of law. However, in the OFT v Abbey National decision of 2009 the majority172 of the UK Supreme Court tended to interpret the Article 4(2) exemption more in line with a market rationale. According to the court, where the goods consist of a multiplicity of items or the services were composite, there is no “principled basis on which the court could decide that some services are more essential to the contract than others”.173 Given that the services offered by banks to their current account customers were comparable packages of services, it would be equally difficult to decide which prices are essential and which are ancillary. According to Lord Mance, the consumer’s protection under the Directive and the national regulation is the requirement of transparency. That being present, the consumer is to be assumed to be capable of reading the relevant terms and identifying whatever is objectively the price and remuneration under the contract into which he or she enters. It is interesting to see that the Austrian Supreme Court of Justice (OGH) has based its distinction between main and ancillary matters on whether the relevant standard contract term is still sufficiently exposed to competition.174 BGH, 13.05.2014 – XI ZR 405/12, (2014) Neue Juristische Wochenschrift (NJW), 2420; BGH, 28.10.2014 – XI ZR 348/13, (2014) NJW, 371. 172 OFT v Abbey National plc and others [2009] UKSC 6. The views expressed by Lord Walker and Lord Mance were endorsed by Lady Hale (para 92) and Lord Neuberger (para 119). Lord Phillips’ argumentation and final decision are essentially the same (paras 78–91), however, underlining that the discussion must be more about whether the method of pricing is fair, and not the question of whether the relevant charges form part of the price or remuneration for the package of services provided (para 80). See for details UK Report. 173 OFT v Abbey National, para 40 (Lord Walker). 174 OGH 30 March 2016 (6 Ob 13/16d) EvBl-LS 2016/119; Austria Report. 171
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Some non-EU States are also differentiating between main and ancillary price terms. Thus, section 23(1) of the Israeli Standard Contracts Law (SCL) in its 2014 version sets an exclusion from the Statute and its scrutiny for “a condition determining the monetary consideration to be paid by the customer or the supplier for the object of the transaction, provided that it is formulated in a simple and clear language.” The prevailing opinion of Israeli judges and scholars175 is that the expression shall be interpreted narrowly; thus, ancillary clauses are defined on more psychological and practical basis. When clauses are complex and less salient, as well as more open to the supplier’s manipulation, they should be defined as ancillary and made subject to an abusiveness control.176 Parallel provisions can also be found in the Argentinian177 and Turkish laws.178 Québec law is interesting since it provides for a control under objective and subjective unconscionability (“lésion objective”, “lésion subjective”) also for consumer contracts, meaning that the price itself may be subject to scrutiny. As the Report shows, some of the issues are related to ancillary terms, some others however to main terms, such as the price for representing consumers in front of administrative bodies which has been considered as unconscionable, though it is not clear from the report whether this was foreseen in standard terms.179 However, the same mechanism applies to standard terms.180 2 Transparency requirement. Even if a price related term is considered as being covered by the definition of the “main subject matter of the contract”, it is still possible to control whether this term is unfair if the term does not comply with the requirement of substantive transparency. Being transparent and therefore comparable is the most important requirement for a competitive price formation. Non-transparent prices hamper competition and have to be controlled. As underlined by the CJEU in Andriciuc, “the requirement of transparency of contractual terms [. . .] cannot be reduced merely to their being formally and grammatically intelligible, but that [it] must be understood in a broad sense”.181 This means that the transparency requirement has to be as “requiring also that the contract should set out transparently the specific functioning of the mechanism to which the relevant term relates and the relationship between that mechanism and that provided for by other contractual terms, so that that consumer is in a position to evaluate, on the basis of clear, 175
Israel Report. Israel Report. 177 Argentina Report. 178 Turkey Report. 179 Canada Civil Law Report. 180 Canada Civil Law Report. 181 CJEU Andriciuc and others (n 170), para 44; CJEU Kásler and Káslerné Rábai (n 14), paras 71 and 72; CJEU Judgment of 9 July 2015, Bucura, C-348-14, EU:C:2015:447, para 52; see also EU Report. 176
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intelligible criteria, the economic consequences for him which derive from it”.182 The transparency requirement is therefore a substantive one, which implies that the other party is able to understand the legal and economic consequences of those terms. The same approach is adopted in Israel (“simple and clear language”)183 and Turkey184 for example.
5.3
Examples of Debated Terms
It is not an easy task to systematize the huge number of clauses which have been discussed in the national reports. We tried to create a structure by first subsuming the multiple SCT under the subheadings “ancillary price terms”185 and “non-transparent price terms”. Under each of these sections there are several recurring categories. However, the reader will see that some terms are combining both features—being ancillary and non-transparent. But for the sake of simplicity we preferred not to introduce another subsection for this type of “hybrid” terms.
5.3.1
Ancillary Price Term or Not?
5.3.1.1 Additional Fees • In lease contracts a SCT stating that the tenant bears the costs for minor repair is an ancillary term186; • Renewal fee in case of renewal of a residential lease contract is considered as valid, as long as they are not too high187; • A clause burdening high consumption electricity users with an additional fee is an ancillary term, and unfair in the specific case188; • Clause burdening electricity users with so called leakage fees is an ancillary term189; • Admission fees paid in addition to tuition fees for an application to a university, were considered valid, even if not refunded in case of a rejection, unless the amount exceeds what is reasonable or would exceed an average cost190; 182 CJEU Andriciuc and others (n 170), para 45; CJEU, Kásler and Káslerné Rábai (n 14), para 75; CJEU Van Hove (n 14), para 50; also EU Report. 183 Israel Report. 184 Turkey Report. 185 See also the EU Report for the discussion on ancillary price terms and the case law analysis. 186 Germany Report. 187 Japan Report. 188 Slovenia Report. 189 Turkey Report. However, due to a regulatory intervention after the High Court decision banning the electricity distribution companies from levying such fees, they were allowed to do so again. 190 Japan Report.
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• In mobile phone contracts, the term that an additional fee has to be paid for a paper invoice was considered by German courts as an ancillary term subject to the fairness test191; it has been decided in the same way in Estonia.192 However, a SCT in a mobile phone contract including mobile-internet access stating that after the complete consumption of the data volume agreed, the supplier is entitled to make available additional data volume to the customer against an additional fee is a principal term.193 A lower German court considered on the other hand that a term that would lower the speed of the data stream if a customer would object to an automatic additional data volume against an additional fee was an ancillary term subject to control.194 • Banking charges: – An issue debated in many countries is the management/ administration fee banks are charging when extending a credit. The argument of the banks is that this fee is charged to offset the time spent while drafting the contract, checking the credibility of the consumer, and administering the collaterals. According to the BGH loan agreements are contracts which are regulated by law, and § 488 German Civil Code defines interest as the only consideration for lending money. Therefore, a loan agreement can only have a run-time dependent pricing scheme, and all possible costs incurred at contract conclusion have to be priced in the interest rate.195 Whereas in Austria, those fees have been considered as linked to the main object of the Contract. The Court argued, also taking into account the decision of the BGH, that a price partitioning makes even sense given that this will serve transparency and customers will be able to compare with other offers.196 The Turkish High Court judged the same way as the German one. However, the Banking Regulator who was later assigned with the task to limit the different types of bank charges decided that a management fee can be claimed.197 – Other banking charges which were debated were fees for deposit and withdrawal at cash machine in a giro account198; fines applied by a bank in case the money transfer request could not be executed because of 191
Germany Report. Estonia Report. 193 Germany Report. 194 Germany Report. 195 Germany Report. 196 Austria Report. 197 Turkey Report. 198 Germany Report; Slovenia Report: in Slovenia, the Agency found that the banks had formed an illegal cartel which allowed them to raise the fees for the use of cash machines. 192
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insufficient funds199; additional fee to use a credit card abroad200; blocking fees for a credit card201; express fees if the customer does not comply with certain order deadlines.202 – Maintenance charges for a savings account which were increased regularly over the years, to end up at a higher level than the interest that the bank remunerated on those saving accounts were considered void.203 Mainly because the amount would not only absorb the interest served, but also the capital; this was against the very purpose of saving accounts. – Allocating the fees incurred when notarising and registering a mortgage for a credit agreement to the consumer creates a significant imbalance in the parties’ rights and obligations arising under the contract as both expenses benefit primarily the bank, which is interested in securing its right in rem (to which end the public deed and its registration are required).204 • Service fees for e-ticketing, printing at home or sending to a mobile phone, in addition to the main price for online ticket purchase was considered as unfair, because these elements should be covered by the main price, as tickets necessarily had to be collected as part of the main obligation.205 5.3.1.2 Terms Regarding Consequences of a Breach of Contract • Terms which have the object or effect of “permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract” can be unfair (Directive 93/13/EEC Annex pt 1 let. d). • Terms which have the object or effect of “requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation” can be unfair (Directive 93/13/EEC, Annex pt 1 let. e). • Terms which have the object or effect of “[. . .] permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract;” can be unfair (Directive 93/13/EEC, Annex pt 1 let. f).
199
Germany Report. Germany Report. 201 Austria Report. 202 Austria Report. 203 Argentina Report. 204 Spain Report. 205 Austria Report. 200
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• Clauses providing for a flat fee in case of loss of a highway card, despite the fact that the actual mileage could have been proven are unfair.206 • A “non-buying” fee, which is due when the party to a car leasing contract refuses to buy the car at the end of the contractual period, is unfair and imbalanced, especially because it exceeded the actual costs.207 • Penalty clauses and interest for late payment are mostly judged to be ancillary terms that can be controlled by the courts. For example the Estonian Supreme Court has considered some very high “fees”, contractual penalties or interest on late payment sometimes as unfair.208 The Estonian Supreme Court declared as presumably unfair and thereby void standard terms providing for an interest rate for late payment exceeding three times the interest rate for late payment in the statute.209 The Spanish Supreme Court considered that default interest clauses were of ancillary nature and therefore subject to an unfairness test and decided that a contractual late payment interest of more than two percent over the statutory default interest rate for late payment was unfair.210 However, on the ground of “lésion objective”, Québec courts did not strike down any of the late payment interest rates that were subject to their scrutiny.211 On penalty clauses, the CJEU has decided that a national court can find such clauses to be unfair, however if it does so it cannot merely reduce the amount to an acceptable level (as it might be authorised by its national law) but it has to strike out the clause in its entirety with regard to the consumer.212 A parallel decision was taken regarding default interest rates which were exceeding the legal limit. The CJEU underlined the right and duty of the national courts to evaluate the unfairness of the clause and if so judged to nullify it in its entirety.213 Belgium law has stated that penalty clauses can only be valid in a B2C contract if they are reciprocal and equivalent.214 • SCT which burden the customer with all costs involved with payment requests, or collection costs were found unfair in Austria as they were not quantified and left to the discretion of the bank.215 Danish law requires costs in relation with collection of outstanding debts to be 206
China Report. Austria Report. 208 Estonia Report. 209 Estonia Report. 210 Spain Report; see also the EU Report on this. 211 Canada Civil Law Report. 212 CJEU Asbeek Brusse and de Man Garabito (n 116), paras 57 ff.; see also EU Report. 213 CJEU Unicaja Banco and Caixabank (n 115), paras 28 ff. 214 Belgium Report. 215 § 879 (3) Austrian CC; Austria Report. 207
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“reasonable and relevant”, but the legislator has also set a statutory cap on claimable fees.216 The situation in Estonia is parallel. Estonian courts consider such fees as unfair if “unreasonably high” and a cap on such fees serves for legal certainty.217 • Belgian law provides also for a certain caps limiting the amount of compensation in certain contracts, but the courts keeps the discretion to further reduce the amount.218 5.3.1.3 Loss of Price Advantages in Case of an Early Termination • Terms that retroactively cancel the reductions of the annual premium to the customer for an insurance contract in case of a dispute, or in absence of renewal of the contract by the customer is not subject to the fairness test, being a term related to the subject matter of the contract.219 • Terms that retroactively cancel a rent reduction if the landlord has to sue for the unpaid rent are not ancillary terms.220 • In case of an early termination the service provider has to return the fee for services not provided. However, the service provider has to calculate the amount it can charge and the amount it needs to return according to the discounted rate and not the regular rate.221 The Japanese Supreme Court found that the terms on restitution were similar to liquidated damages clauses that could be assessed on their fairness. • An 18 months non-termination period in exchange for a reduction of the price of a cell phone subscription was found price related and accepted by the Austrian Supreme Court of Justice; however, a 24–36 months non-termination period for a subscription to a fitness centre at a reduced price was outlawed.222
5.3.2
Transparent Main Subject Matter or Not?
5.3.2.1 Open Price Clauses • Terms which have the object or effect of “providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when 216
Denmark Report. Estonia Report. 218 Belgium Report. 219 Germany Report. 220 Germany Report. 221 Japan Report. 222 Austria Report.
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the contract was concluded” can be unfair (Directive 93/13/EEC, Annexe pt 1 let. l). • When the price shall be fixed by one party, French law states that this is valid, as long as there is a justified reason for the amount of the price (new art. 1164 French CC)223; this enables some control by the judge over the price determination. • A cost-plus formula for the calculation of remuneration for maintenance services of a commercial condominium was assessed and considered as unfair when there was no constraint on the service provider, but acceptable when limited to reasonable and customary costs.224 • In Austria, passing-on cost clauses are usually considered as unfair,225 unless the clauses refer to costs actually incurred or to a lump sum, which by and large reflects the cost incurred. 5.3.2.2 Flat Remuneration • In a waste disposal contract, the “bring-or-pay-clause” which imposes the payment of the entire remuneration irrespective of whether the party delivered or not the agreed amount of waste, is an ancillary term; the basic remuneration however is a main term.226 • A flat remuneration for an estate agent irrespective of the conclusion of the transaction with the third party is unfair.227 The court did not address the issue whether the term was related to the main subject matter, but it considered that the clause was “rather ambiguous” so that it could be void already based on the substantive transparency requirement. 5.3.2.3 Price Adjustment Clauses Almost all reports discuss how price adjustment clauses are treated under their respective national law. The issue is delicate as there are valid interests on both sides which have to be balanced. The first differentiation one has to make is between long-term contracts with recurring performances, and contracts which are performed at once even though the maturity date might be in the future. • If the contract involves only a one-time performance such as in a sales contract, a change of the price until delivery date will mostly be qualified as unfair. Given that the rule is pacta sunt servanda, both parties carry in principle the risk of negative price developments. But how should clauses in SCT be qualified if they change this rule? The Directive 93/13/EEC defines in its Annex, Art. 1, let. j that
217
223
France Report. Israel Report. 225 Austria Report. 226 Germany Report. 227 Italy Report. 224
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terms “providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price” are in principle allowed, however, to pass the unfairness test they must be “giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded”. Even though the Directive does not underline the additional requirement that the SCT must define expressly and transparently the objective reasons for a change in price before delivery (e.g. a car which has to be imported and where the taxes are yet unknown) such requirement can be deduced from Annex, Art. 1, lit. j which requests for such terms to be acceptable that they name a valid reason for the price increase. In addition, the term can pass the test only if the customer is also given the right to terminate the contract. • The need to adjust prices, and contract terms affecting the price of the goods/services is certainly more acute in longterm contracts as unexpected contingencies are frequent. In principle, it would be acceptable that the seller/service provider includes clauses to vary the contract, and especially the price term. However, just as above, the valid/ objective reason for the change needs to be stated already at contract conclusion so that the customer can control the adjustments made at a given time. Besides, the customer must be granted a reasonable time to terminate the contract if such price adjustment was done according to the contract terms but the price has become too high for the customer.228 The objective criteria requirement is especially important in cases where the customer technically has a right to terminate the contract but in practice would not be able to use it. The Milgrom Estate case decided in Israel is a good example for that. “The Supreme Court invalidated a clause that required a retirement community resident who had moved into a nursing home to pay according to the nursing home’s tariff for such services at the time of moving. The court reasoned that, in the absence of objective criteria for setting and updating the tariff, the clause was unduly disadvantageous.”229 • The requirement that the price variation has to be based on objective criteria is underlined by several reports230 and e.g. accepted if an indexation clause was stipulated.231 It is also emphasised that an objective adjustment clause must work both ways in order to be qualified as fair, i.e. price increase in favour of the business but also price reduction in favour of the customer must be possible. 228
See e.g. Belgium Report; Israel Report. See Israel Report for a decision of the special SCT Tribunal in Israel, which found a contractual term allowing the retirement home to raise the monthly payment up to 5% annually over and above the rise in the Consumer Price Index, as conferring too much discretion. 230 Brazil Report. 231 Belgium Report. 229
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• Some examples from case-law are as follows: – The Austrian Supreme Court of Justice decided that an interest rate that would increase or decrease parallel to the variations of the European Central Bank (ECB) key interest rate is unfair and void if that leads to a zero interest on a saving account, since this contradicts the mere core of a saving account.232 – The Argentinian Supreme Court considered as ineffective a clause allowing a unilateral modification of the monthly payment and benefits due under a contract between a Medical Company and its affiliates.233 – According to the Swiss reporter, price adjustment clauses in standard form contracts that have not been negotiated infringe the principle of good faith and are therefore presumed to be unfair, unless the provider proves that this has been counterbalanced by concrete and substantive advantages by other favourable terms.234 Courts have sometimes required also a meaningful right to terminate the contract.235 – Belgian courts have authorized indexation clauses based on objective criteria.236 – The same is true for Brazil albeit the indexes the parties can choose from are ascertained by some supervisory agencies.237 This solution was also preferred in Turkey regarding mortgage credit agreements. The parties can only choose between several specific indexes defined by the regulator.238 – A case of unilateral introduction of indexation that was not provided for in the contract might also be judged invalid.239 5.3.2.4 Foreign Currency Clauses Many national courts and the CJEU had to struggle with credit agreements in foreign currencies with interest to be converted or reconverted into domestic currencies.240 The CJEU has decided that these terms were related to the main subject matter of the contract,241 and that exchange rates can
232
Austria Report. Argentina Report. 234 Switzerland Report. 235 DSFT 135/2008 III 1, especially p. 10, para 2.5; Switzerland Report. 236 Belgium Report. 237 Brazil Report. 238 Turkey Report. 239 Chile Report. 240 Croatia Report; EU Report; Greece Report; Romania Report; Slovenia Report; Spain Report. 241 CJEU Andriciuc and others (n 170), para 35; CJEU Caja de Ahorros y Monte de Piedad de Madrid (n 14), para 34; CJEU Van Hove (n 14), para 33; for an analysis, see the EU Report. 233
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only be assessed under the transparency requirement.242 However, it is interesting to see that some countries have preferred to restrict the taking of consumer loans in another currency than the national one.243 5.3.2.5 Calculation of Interest Rates • Method of calculating interests has been discussed in the CJEU case Banco Primus, in which the CJEU has given concrete guidelines for checking whether a term governing the method of calculating ordinary interest on mortgage can be declared intransparent by way of comparing with the statutory interest.244 • Floor clauses (minimum percentage to be charged by a bank for a credit even if the average interest rate is lower) were considered as unlawful in B2C contracts under Spanish law as they were not transparent for the average consumer.245
But the expectations regarding transparency are high: “Article 4 (2) Directive 93/13/EEC must be interpreted as meaning that the requirement for a contractual term to be drafted in plain intelligible language requires financial institutions to provide borrowers with adequate information to enable them to take well-informed and prudent decisions. In that regard, that requirement means that a term relating to the foreign exchange risk must be understood by the consumer both at the formal and grammatical level and also in terms of its actual effects, so that the average consumer, who is reasonably well informed and reasonably observant and circumspect, would not only be aware of the possibility of a depreciation of the national currency in relation to the foreign currency in which the loan was denominated, but would also be able to assess the potentially significant economic consequences of such a term with regard to his financial obligations.” CJEU Judgment of 20 September 2018, OTP Bank and OTP Faktoring, C-51/17, EU: C:2018:750. 243 E.g. France Report; Turkey Report. 244 “[W]here the national court considers that a contractual term relating to the calculation of ordinary interest, such as that at issue in the main proceedings, is not in plain intelligible language, within the meaning of Article 4(2) of that directive, it is required to examine whether that term is unfair within the meaning of Article 3(1) of the directive. In the context of that examination, it is the duty of the referring court, inter alia, to compare the method of calculation of the rate of ordinary interest laid down in that term and the actual sum resulting from that rate with the methods of calculation generally used, the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue in the main proceedings for a loan of a comparable sum and term to those of the loan agreement under consideration.” CJEU Banco Primus (n 108), para 67. See also the EU Report. 245 Spain Report. The Spanish Court decided however, against clear rules of national law, to restrict the ex tunc consequences derived from nullifying floor clauses. The reason was that banking institutions had acted in good faith and that there was a risk of serious economic difficulties if the judgment were to be applied retroactively—given the estimated cost of restitution of €4 billion. The issue was decided by the CJEU which interpreted the Directive 93/13/EEC as precluding national case-law that temporally limits the restitutory effects connected with a finding of unfairness by a court, CJEU Gutiérrez Naranjo (n 115). 242
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• Estonian courts have considered that, unless one can invoke the rules on usurious credit contracts,246 interest clauses are exempt from fairness control247; however, the methods for determining the rate, such as a formula is subject to control.248 • Under Danish Law, interest rates are subject to the fairness test (“reasonableness standard”249); they can be reduced,250 or even set aside when they are exorbitant, which indicates that the other party was exploited.251 • Even if an act may limit the interest rate, such as in Japan, courts may be struggling with the question whether voluntary payment in excess of the limitation is valid or not.252 The Japanese Supreme Court decided that in such a case, the payment would be valid, but then tried to restrict the ambit of a “voluntary payment”.253 • Provision in the SCT stating that the bank charges a certain interest rate per annum on debit balances, however settling the interest at the end of each quarter is non-transparent.254 The court held that customers, as a result, will not regularly be aware of the compound interest effect leading to higher debit balances resulting from a quarter-end settlement in comparison to the interest rate that would have been calculated in case of a year-end settlement. 5.3.2.6 Missing Price Breakdown • Standard contract terms of an online ticket platform were found non-transparent as the platform had indicated only the total price of the ticket without breaking down the price and indicating several fees such as the agency service fee.255 • Bundled price indication of nursing agencies for a range of various services were outlawed for the same reason. The agency offered to (a) arrange a contact with and (b) select suitable nursing staff, (c) support, (d) educate, and (e) prepare the nursing staff and (f) arrange transport, as well as to (g) act as paying agent for the fees payable to the nursing staff, and (h) support the customers to apply for subsidies, etc. In its standard contract terms, the agency charged a fixed fee including the price of its own services
246
Estonia Report. Estonia Report. 248 Estonia Report. 249 Denmark Report. 250 Denmark Report, which indicates a case of a student loan, for which the interest rate had been reduced. 251 Denmark Report. 252 Japan Report. 253 Japan Report. 254 Austria Report. 255 Austria Report. 247
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as well as the price of the nursing staff, which it invoiced in its function as a paying agent.256
6
Special Regulatory Provisions Controlling Price Terms
All legal regimes that were covered by a national report have some degree of regulation intervening into price formations in specific markets and/or contractual situations. Reasons may be found in the specificity of some fields, such as the supply of public goods, energy or others that have been or still are in the hands of state-owned businesses or businesses with specific legal ties to the state. Another parallel argument is monopolistic or oligopolistic markets.257 We had underlined in our questionnaire,258 that we were more in search of examples of contracts where SCT are used widely, like long-term service contracts, insurance contracts and the like. Our focus was more on situations which arise due to special information asymmetries, or transaction cost problems, including switching costs. However, given that most of the national reports have been more comprehensive, we prefer to include also some of the recurring examples from other problem areas, which are not directly connected to the use of SCT. It is interesting to see that also in this section market economies as well as socialist market economies mostly intervene in the same areas. There are two types of intervention: (a) direct intervention in the price formation, such as caps, or ex ante administrative control of prices or the like259 and (b) intervention into price related contract terms, either by limiting their application or by banning them in total. We have been able to define the following recurring examples in the reports presented to us regarding direct interventions in the price formation:
256
Austria Report. In general, all reports rightly underline the importance of anti-trust regulations in the fight against unfair prices and collusion between actors to fix unfair price related terms. However, this report is focusing on other types of interventions, especially needed if there is a persisting market failure despite anti-trust regulation. As discussed above, standard contract terms cause such a transaction cost problem which cannot be overcome by spurring competition among the market actors. 258 See Annex-Questionnaire IV. 259 Sometimes the regulator has also a general right to intervene in the prices like in Israel, where the government can regulate the prices of goods and services in monopolistic and low-competition markets, for state-subsidized goods and services, for essential goods and services, and when goods or services are scarce due to exceptional circumstances. In Argentina, a country plagued with high inflation, the relevant authority can determine a special margin of profit for certain goods. See Argentina Report; Israel Report. 257
• Utilities (energy, gas)260: price cap261; permission needed for setting new price262; cap on several fees charged263; parts of the price are set by the regulator, parts freely by the service provider264; special calculation method defined by the regulator.265 • Railway services.266 • Some sort of intervention in the calculation formula for fuel prices; limit to the daily/weekly change in fuel prices. • Telecommunications: control of price escalations through state authorities267; Prohibition or cap of certain types of fees268; cap or ban on roaming charges269; right of special authority to control the price270; regulation for termination fees.271 • Cap on prices for postal services. • Interest rates: – Annual maximum contractual interest rate.272 – Special interest rate limits for consumer credits273; for credit card interest rate274; for overdraft account interest rate.275 – Ban on short-term teaser interest rates.276 – Limit to default interest rates277; special limit for default interest for credit agreements.278
260 Here a possible distinction which should be born in mind is that not all countries have liberalised their energy markets. 261 Israel Report; Japan Report; Romania Report; Russia Report. 262 Canada Common Law Report; South Africa Report. 263 Romania Report. 264 Croatia Report. 265 Brazil Report. 266 Austria Report; Canada Common Law Report; Croatia Report; Israel Report; Japan Report. 267 Brazil Report. 268 Canada Common Law Report. 269 Regulation (EU) 2017/920 of the European Parliament and of the Council of 17 May 2017, amending Regulation (EU) No 531/2012 as regards rules for wholesale roaming markets, OJ 2017, L 147/1; see also Austria Report; Belgium Report; Canada Common Law Report; China Report; Denmark Report; Italy Report; Japan Report; South Africa Report. 270 Croatia Report. 271 Japan Report; South Africa Report. 272 Brazil Report; Chile Report; Romania Report; Turkey Report. 273 Belgium Report; Canada Common Law Report; China Report; Estonia Report; Greece Report; Israel Report; Italy Report; Japan Report; Russia Report; Taiwan Report; Turkey Report. 274 Chile Report; Turkey Report. 275 Chile Report; Turkey Report. 276 Israel Report. 277 Canada Common Law Report; Croatia Report; Denmark Report; Israel Report; Romania Report; South Africa Report; Spain Report; Turkey Report. 278 Estonia Report; Greece Report; Russia Report.
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• Cap on fees for some special services: fees of real estate agents279 or estate management costs280; taxi fares281; notaries282; legal services provided by lawyers.283 • Banking/financial services charges: Basic banking service charge limited284 or even for free285; Payment account service charge limited/free286; Fee for switching payment accounts limited/free287; Limit to prepayment charge288; Special regulation for payday loans289; Most of the basic banking services listed and either caps or fixed by the administrator290; Some banking charges forbidden, some with cap291; Caps/bans on credit processing fees/management fees292; Cap on charges for overdraft accounts.293 • Cap on debt recovery costs/fees.294 There are also several examples of bans on clauses that have an effect on the price. Often this type of specific mandatory rule was introduced after the problem had been subject to court decision that qualified such clause as unfair. However, some countries provide for a much more general provision regarding price terms in SCT or in consumer contracts. Several of those general provisions deserve to be mentioned separately in advance. • In France the Consumer Code provides for an express rule that prior to the conclusion of a sales or services contract, the professional has to “ensure the express consent of the consumer for any additional payment in addition to the 279
Austria Report. For PRC see China Report; for caps see Russia Report. 281 Austria Report; Belgium Report; Canada Civil Law Report; Turkey Report. However, it should be underlined that through the new chances opened by the so-called sharing economies the classical protective measures in e.g. taxi markets by introducing caps are challenged. The competition through Uber shows that the regulator possibly needs to intervene in a different way by opening up this market, making sure that the market remains open and that Uber does not become dominant in the market. But this problem will certainly occupy the agenda of regulators everywhere for some time more. 282 Turkey Report. 283 Turkey Report. 284 Belgium Report. 285 Brazil Report. 286 Austria Report. 287 Austria Report; EU Report. 288 Canada Common Law Report; EU Report; Greece Report; Turkey Report. 289 Canada Common Law Report. 290 China Report. 291 Romania Report; Taiwan Report; Turkey Report. 292 Belgium Report (capped to a 500 Euro maximum. In case of early repayment only 250 Euro); Germany Report (banned if in SCT); Greece Report (banned); Turkey Report (capped to 0.5% of the capital amount). 293 Italy Report. 294 Brazil Report; Canada Common Law Report; Denmark Report; Estonia Report; South Africa Report. 280
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price of the principal object of the contract.”295 The express consent requirement is important as the provision further underlines that if contrary to the law the consent is assumed in the contract the consumer may claim restitution of all payments he made without express consent. • The Turkish Consumer Code is another example where a general provision regulates additional charges that businesses can ask for. According to Art. 4, para 3 of the Code, suppliers cannot demand additional charges from consumers in three specific instances: If the obligation in question is a legal obligation of the seller/supplier he cannot burden the consumer with the related expenses; if the consumer was rightfully expecting that the goods/ services in question would be provided within the usual scope of the primary obligation the supplier cannot ask for an additional payment. In these two instances, the consumer is the beneficiary of the service; yet the supplier has a legal obligation to serve at no charge. In the third instance, the recipient of the service is the supplier and the law, rightfully, allocates the costs of these services to the supplier. Whenever the expenses were encountered for the benefit of the supplier he may not demand any remuneration.296 • Taiwan is also an interesting example where the legislator has defined 81 specific situations related to price formation in SCT and has banned them.297 In contracts for educational services e.g. the SCT may not contain any agreement that the business could charge extra fees besides the fee agreed upon. Or for recreation and travel related contracts served in relation to a membership contract there is a ban regarding terms that the business can unilaterally raise its membership fees, or any fee agreed in the contract. In other jurisdictions there are several specific prohibitions regarding price related terms. Some of them are as follows: • A prominent example is the choice of Israel, China, Romania and Turkey of limiting the types of charges financial institutions can demand. This list is prepared by the relevant authority, and banks can only ask for a payment if one of the services on the list was provided to the customer. Thus, customers can compare the different prices much easier, especially because special websites are designed for this.
295
France Report. Turkey Report. When drafting this provision, the Turkish law maker was guided by the case law of the BGH. See Atamer (2015), pp. 7–41. 297 Taiwan Report. 296
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• Limitation of penalty clauses as a percentage rate of the debt298; limit of the penalty clause to the actual loss of the party if the amount set by the parties appears unreasonable299; ban on penalty in case of residential lease contracts300; ban on penalty in case of consumer credit301; limit of penalty to a proportioned sum (control by the court).302 • Ban of a weekly billing system.303 • Limitation of cancellation fees.304 • Prohibition of round-up clauses (e.g. parking and telecommunications sectors)305; mandatory rule to bill in car-parks on 15 minutes intervals and not hourly.306 • No additional fees for pre-paid cards.307 • Unilateral price adjustment clauses prohibited for some type of contracts,308 or limited.309 • Bundling of different goods and/or services: This is certainly a problematic case regarding price formation as the customer cannot freely choose what and which quantity to purchase, and also to which price to purchase it, as he is not given the chance to compare the prices on the market and to make an informed choice. Price bundling might conflict with transparency requirements. This type of practice is often forbidden or at least subject to scrutiny under national antitrust law. However, there are also consumer codes like the Turkish and South African310 ones, which expressly forbid such sales practice in relation to consumer contracts. Estonia has a general restriction applicable for SCT in consumer contracts.311 If a term prescribes that the consumer has to enter into another contract with the party supplying the SCT or a third party this is considered unfair, unless entry into such other contract is reasonable, taking into account the relationship between such contract and the contract with SCT. One of the often-cited examples is the payment protection insurance (PPI) bundled with the credit agreement.312 The problem is two-fold: on the one hand, such bundling of services violates competition rules as the consumers are
not free to choose another insurance company which offers better terms on the market. On the other hand, even if the consumer is free to choose a PPI from another insurance company, the question remains how the offer of the credit institute could be best framed. Should the additional charge for the PPI be stated separately, or included in the APR calculation? The best choice is probably to do both. Given that the consumer should be free to choose on the market there is a need for a clear statement regarding the cost of the PPI. This way the customer can choose the cheapest PPI with the maximum coverage. However, in order to compare the effective cost of the credit with credit offers of other institutions the consumer will also need the APR including the PPI costs. The approach adopted in Belgium seems to convince in this regard, as it differentiates between tying practices and bundling practices in consumer and mortgage credit contracts.313 As long as the consumer has the option to conclude the credit agreement also without the additional services, a lighter protection is applied: the information regarding prices has to be made available in a transparent and not misleading fashion. Tying practices however, that means that the consumer is forced to obtain the services in a bundle, are forbidden.314 For lease contracts, there are some provisions against bundling in some jurisdictions (tying agreement).315 In an Austrian case however, the lease agreement for an apartment and the furniture were deemed valid.316 Bundling of the sale of a smartphone combined with an obligation to conclude also a mobile network services contract for a certain period is another common example given.317 The problem here is that the customer often cannot judge what the real cost of the offer is. Carriers can offer the phones for free or for a lower price as they trust in the long-term revenue stream that is guaranteed by the lock-in contract.318
298
Brazil Report (10% of the debt). Denmark Report. 300 Estonia Report; Turkey Report. 301 Estonia Report. 302 EU Report and Member States; Italy Report; Japan Report; Turkey Report. 303 Italy Report. 304 Canada Civil Law Report; Japan Report. 305 Spain Report. 306 France Report. 307 Canada Civil Law Report. 308 Russia Report; Turkey Report. 309 Canada Civil Law Report. 310 South Africa Report; Turkey Report. 311 Estonia Report. 312 E.g. Austria Report; South Africa Report; Turkey Report. 299
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Belgium Report. See also Croatia Report; Turkey Report. 315 See Switzerland Report; Swiss CO Art. 254. 316 Austria Report. 317 Estonia Report; Japan Report. In Belgium once a period of 6 months has elapsed consumers are by law entitled to cancel their subscription without any cost, at least with regard to the subscription as such; however, if at the time of subscription, a device was given for free or at a reduced price, the consumer will have to pay a compensation for the device; the amount of this compensation, equalling the residual value of the device, has to be determined beforehand in the contract. The same solution is offered in Turkey after 1 year. The consumer has a free cancellation right, however, must compensate for any reduced price it profited from due to a long-term contractual promise. 318 See in detail Bar-Gill (2012), pp. 185 ff. 314
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7
Special Disclosure Regulations Promoting Price Transparency and Competition
In this section we aim at finding out about the different regulatory means applied in the participating countries in order to ensure price transparency and comparability (either in addition or as an alternative to price control). A prominent example can be given from EU law: Since 1987 creditors in a consumer credit contract are under the duty to declare the “annual percentage rate of charge (APR)” (meaning the total cost of the credit to the consumer, expressed as an annual percentage of the total amount of credit) in consumer credit agreements. This should enable and give an incentive to consumers to compare the different APR’s of different creditors and choose the cheapest one.319 Given that the APR calculation formula is standardized by the EU, consumers can simply resort to this figure to get an overview of the market. The Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers is another example of such legislation aiming at unifying price indications and thereby facilitating “informed choices on the basis of simple comparisons”.320 Recently price information has also been refined in some countries by “product-use information”. Consumers can, for example, choose the right plan for a cell-phone contract much easier if they are not only informed about the amount they have to pay in a month but also about the average usage of a consumer, and even better, about their own past usage patterns. Serving this type of information during the life span of a contract is especially important as it could motivate consumers to get additional quotes from other providers on the market and thereby make switching more attractive. The reporters were asked for any type of comparable provision aiming at simplifying and fostering comparison-shopping and thereby stimulating competition.
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prices.322 The Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market includes also several provisions relating to prices.323 Bait and switch selling,324 low-ball technics,325 or sale above the advertisement price326 for example, are banned as unfair commercial practices. Often special requirements are existent for advertisements including prices.327 Any time a credit is praised as “cheap” special information has to be provided to the consumer.328 Besides, the unfair competition rules of a country burden the competitors to abstain from misleading information regarding pricing329; • Standardizing the way information regarding prices is served gives customers a chance to compare. As long as apples and pears have to be compared no healthy competition is possible. – Art. 1 Directive 98/6/EC provides that the selling price and the price per unit of measurement of products offered by traders to consumers shall be indicated to improve consumer information and to facilitate comparison of prices. Besides, both prices must be unambiguous, easily identifiable and clearly legible (Art. 3). – As already mentioned, the requirement to inform the consumer on the APR is the most prominent and widespread example of standardization.330 The requirement in Canada331 of stating the interest rate per annum and not on a 360-year day basis is serving the same purpose, i.e. to have a comparable interest rate. This interest rate and other relevant information regarding the credit have to be conveyed to the consumer on a standardized information sheet.332 – The same is true in regard to the limitation of claimable banking charges: if all these charges are named the same and are comparable the consumer might choose the cheapest offer. Directive 2014/92/EU on the 322
• The requirement to illustrate the prices in a clear and transparent manner is provided in almost all the countries.321 It is especially underlined that the total price including all costs has to be named. • Most of the countries have introduced special regulations prohibiting misleading and fraudulent acts related to 319
Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, OJ 1987, L 42/48. Same also Art. 3(i) Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008, L 133. 320 Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers, OJ 1998, L 80/27. 321 See e.g. Directive 98/6/EC (n 320); Canada Common Law Report; Chile Report; China Report; Japan Report; Turkey Report.
China Report; Denmark Report; EU Report; South Africa Report; Turkey Report. 323 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/ EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council, OJ 2005, L 149/22. 324 Canada Common Law Report; Croatia Report. 325 Croatia Report. 326 Canada Common Law Report. 327 Japan Report; Singapore Report. 328 South Africa Report. 329 Canada Common Law Report. 330 Besides the EU Member States compare e.g. Singapore Report, Turkey Report. 331 Canada Civil Law Report and Canada Common Law Report. See also South Africa Report. 332 Art. 5 Directive 2008/48/EC.
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comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features was issued to tackle the problem of “comparability of fees related to payment accounts and payment account switching” as the name illustrates.333 Some of the policy solutions offered by the Directive are attempts to foster competition in the market. Regarding the comparability of fees connected to payment accounts Article 3 of the Directive ordered the Member States to notify the Commission and the European Banking Authority (EBA) until 18 September 2015 of a provisional list of 10 to 20 of the most representative services linked to a payment account and subject to a fee. On the basis of these lists the EBA developed the Union’s “standardized terminology” for banking services that are common to at least a majority of Member States and issued its Final Draft Technical Standards setting out the standardised terminology for services linked to a payment account, and the standardised formats and common symbol of the fee information document (FID) and the Statement of Fees (SoF) in May 2017.334 Member States will have to adjust their national terminology according to the final list, which will ensure that the most important services related to a payment account use the same nomenclature all over the EU. The Directive also asks Member States to ensure that consumers are served with a standardized “fee information document” in good time before entering into a contract. – Another area which can serve as an example is air transport. According to Art. 23 Regulation (EC) N 1008/2008 on common rules for the operation of air services335 “[t]he final price to be paid shall at all times be indicated and shall include the applicable air fare or air rate as well as all applicable taxes, and charges, surcharges and fees which are unavoidable and foreseeable at the time of publication. In addition to the indication of the final price, at least the following shall be specified: (a) air fare or air rate; (b) taxes; (c) airport charges; and (d) other charges, surcharges or fees, such as those related to security or fuel; where the items listed under (b), (c) and (d) have been added 333
Directive 2014/92/EU (n 33), para 4. https://www.eba.europa.eu/documents/10180/1837359/Final+draft+ RTS+and+ITSs+under+PAD+%28EBA-RTS-2017-04%2C%20EBAITS-2017-03%2C%20EBA-ITS-2017-04%29.pdf. As of 28.09.2017 the Commission issued the Delegated Regulation (EU) 2018/32, supplementing Directive 2014/92/EU of the European Parliament and of the Council with regard to regulatory technical standards for the Union standardised terminology for most representative services linked to a payment account, OJ 2018, L 6/3. 335 Regulation (EC) N 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community (Recast), OJ 2008, L 293/3. 334
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to the air fare or air rate. Optional price supplements shall be communicated in a clear, transparent and unambiguous way at the start of any booking process and their acceptance by the customer shall be on an ‘opt-in’ basis.” The Directive especially underlines in Art. 22 that air carriers shall freely set air fares, however, according to Recital 16 “[c]ustomers should be able to compare effectively the prices for air services of different airlines. Therefore, the final price to be paid by the customer for air services originating in the Community should at all times be indicated, inclusive of all taxes, charges and fees.” Besides, air carriers are also encouraged to indicate the final price for their air services from third countries to the Community.336 • Special warnings at contract conclusion or during the contract period regarding price relevant factors – In Denmark mortgage credit agreements must include a warning regarding the fact that possible fluctuations of the exchange rate could affect the amount payable for loans marketed in Denmark and in currencies other than Danish Kroner.337 – In Estonia the creditor or the credit intermediary is obliged to provide the consumer explanations regarding the ancillary agreement proposed in relation with a consumer credit contract relating to residential immovable property.338 – In South Africa, for electronic communications, licensees and their agents must inform the end-user (the consumer) at the point of sale and prior to the conclusion of the contract of various terms and conditions. These include: “(a) deposit; (b) the connection fee; (c) administrative fees; (d) insurance costs; (e) in and out-of-bundle rates; (f) hardware costs; (g) the possibility of tariff changes during the contract term; (h) rules for early termination of a contract prior to expiry of the contract term; (i) rules for the carryover of voice minutes and data; and (j) fair usage policies”. – In Russia the creditor is obliged by law to warn the consumer that expenses in Rubles may turn out to be higher than expected, since the applicable variable interest rate or the exchange rate in cases of foreign currency credits may rise, and that the past development of the rates may not be taken as a guarantee for future developments339; – In the UK the Competition and Markets Authority has proposed requiring banks to warn consumers of imminent unauthorized overdrafts and allowing a 336 See also CJEU Judgment of 15 January 2015, Air Berlin, C-573/13, EU:C:2015:11. 337 Denmark Report. 338 Estonia Report. 339 Russia Report.
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subsequent grace period giving consumers the chance to reduce or avoid overdrafts by adding funds.340 – If a consumer is not entitled to an overdraft in Belgium, but nevertheless an overdraft facility of at least 1.250 euro is created (and this overdraft is not reimbursed within a period of one month), the consumer must be informed on the penalties that will apply.341 – Article 11(1) of the Directive 2008/48/EC on credit agreements for consumers provides for the following: “the consumer shall be informed of any change in the borrowing rate, on paper or another durable medium, before the change enters into force. The information shall state the amount of the payments to be made after the entry into force of the new borrowing rate and, if the number or frequency of the payments changes, particulars thereof.” • Price comparison mechanisms/facilitation of comparisonshopping – Electricity and gas market.342 – Fuel prices.343 – Banking fees.344 – Products of insurance companies.345 – Air travel.346 – Car rental.347 – Telecommunication.348 • Price breakdown in special situations – Telecommunication.349 – Banking charges.350 – Electricity and gas contracts where the seller arranges also settlement of accounts for the network services provided by the network operator.351 • Cooling-off period to ensure information is understood. Taiwan has introduced an interesting measure in Art. 11 (1) of the Taiwanese Consumer Protection Act. It provides for a cooling-off period for customers to review the terms of the contract. As reflected in the Report: “Traders shall provide a reasonable period, not longer than 30 days, for consumers to review all contract clauses, before entering into a standard contract. The terms and conditions 340
UK Report. Belgium Report. 342 E.g. Austria Report; Belgium Report; France Report; Italy Report; UK Report. 343 Austria Report. 344 Belgium Report; Croatia Report; Estonia Report; Greece Report; Israel Report; Turkey Report. 345 Singapore Report. 346 EU Report; South Africa Report. 347 South Africa Report. 348 Greece Report. 349 South Africa Report. 350 Chile Report; Spanish Report. 351 Estonia Report. 341
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adopted by traders in standard contracts which make consumers waive the right provided for in the previous paragraph shall be invalid [. . .]”.352 This rather long cooling-off period is foreseen to enable a thorough analysis of all information relating to the concluded contract, and a comparison of similar contracts in order to enhance competition.
8
Efficiency and the Way Forward
The comparison of the 27 country reports plus the supranational EU report allows for some conclusions and recommendations. We are not aiming at a full-blown set of advices to the regulators, but to raise awareness for the problem of contractual pricing structures that serve to hide rather than reveal the real cost of goods and services and thereby abuse limitations in the cognitive competences of consumers. This problem seems to be universal and calls for a multi-layered approach of regulators: • All country reports underline that freedom of contract, and especially freedom of the parties to determine goods and services in exchange for a certain remuneration is fully granted. Whether under a socialist market economy or a fully market-oriented economy, whether in a common law, civil law or mixed jurisdiction, freedom of contract, and especially freedom of the parties to decide on the goods and services in exchange for a certain remuneration is acknowledged. The main principle regarding the price remains its formation on the market. • However, we see also that the issue of price related contract terms is in some way or the other causing problems in all the reported countries. There are repeating pricing patterns which call for a deeper analysis. These can be categorized as follows: – Some types of contract are prone to cause disputes: long-term service contracts such as electricity, gas, internet, telecommunication contracts; banking contracts; insurance contracts (however reported less prominently). – Some types of pricing schemes are prone to cause disputes: price adjustment clauses; bundling and price partitioning; deferred payments; clauses linking the consequences of a breach of contract to the price paid (e.g. losing price reductions in case of breach); determination of interest rates (e.g. foreign currency credits/ floor clauses). • Reactions in the reporting countries to these problematic cases have been diverse. One difference can be observed in common law countries. Without wanting to 352
See Taiwan Report.
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overgeneralise, it might be stated that these countries are more reluctant in giving courts the right to control SCT and especially any sort of price related terms. The tendency is more in seeking regulatory responses to unfair price structures.353 In civil law countries and mixed jurisdictions however, courts as well as the regulators seem more prone to intervene to fix problems. The trend being more that, at first, courts intervene and declare some price related SCT void, and then the regulator reacts to introduce a legal response. • A common regulatory reaction in all countries is promoting transparent pricing. This includes standardizing pricing (e.g. APR), banning misleading pricing, facilitating efficient price comparisons and the like. These are protection measures applicable independent of the use of SCT. The idea is that prices must be transparent and salient in order to be subject to competition. Transparency is often also a requirement for any price related term in SCT to pass the validity test. In recent years, the CJEU has underlined several times that the meaning of the transparency requirement is not purely formal but also substantive. The customer shall be able to understand the terms in their economic and legal consequences. In a specific case dealing with mortgage credit in foreign currency, this involved also understanding which risk was assumed. The CJEU stated that354:
the chance to pick the best possible deal. Given e.g. the risks involved in a foreign currency transaction, he would more likely choose one with the local currency. The same approach was also taken in price adjustment clauses. The CJEU imposed high demands for adjustment clauses to survive a transparency control.355 According to the court, the main question is [. . .] whether the contract sets out in transparent fashion the reason for and method of the variation of those charges, so that the consumer can foresee, on the basis of clear, intelligible criteria, the alterations that may be made to those charges. The lack of information on the point before the contract is concluded cannot, in principle, be compensated for by the mere fact that consumers will, during the performance of the contract, be informed in good time of a variation of the charges and of their right to terminate the contract if they do not wish to accept the variation.
However, it is very doubtful if this approach is leading to a meaningful solution of the problem. As explained above, the results of behavioural sciences show that consumer deal with complexity mostly by disregarding it. They simplify decisions by ignoring insignificant looking price dimensions and taking mental shortcuts. Evidence shows that when prices are complex, and in particular are twodimensional rather than one-dimensional, consumers have problems choosing the right price. A price adjustment clause for example cannot be written in such a simple and transparent form that a consumer could possibly look for the best alternative clause offered on the market. Furthermore, the so called optimism bias, as pointed out by cognitive studies and social psychology, entails that individuals tend to be over-optimistic about the future. People systematically predict future choices wrongly and hence misjudge elements of the price vector due to overconfidence. Any sort of foreign currency credit inherently builds on this overconfidence. Even if the consumer is informed about the possible risks of taking a foreign currency credit, he will not be in a position to judge the future correctly. In such case, the transparency requirement, which is praised so much by the CJEU, will be of little help to consumers.
[. . .] first, the borrower must be clearly informed of the fact that, in entering into a loan agreement denominated in a foreign currency, he is exposing himself to a certain foreign exchange risk which will, potentially, be difficult to bear in the event of a fall in the value of the currency in which he receives his income. Second, the seller or supplier, in this case the bank, must be required to set out the possible variations in the exchange rate and the risks inherent in taking out a loan in a foreign currency, particularly where the consumer borrower does not receive his income in that currency. Therefore, it is for the national court to check that the seller or supplier has communicated to the consumers concerned all the relevant information enabling them to assess the economic consequences of a term, such as that at issue in the main proceedings, on their financial obligations.
This approach of the CJEU reflects all the hope in a formula once introduced by the Directive 93/13/EEC in 1993: as long as price related terms are made salient and therefore subject to competition the consumer will have 353 A very good example is certainly the UK where the Financial Conduct Authority and the Competition and Markets Authority take a very active role in seeking for new remedies to address problems in consumer markets. See e.g. Helping people get a better deal: Learning lessons about consumer facing remedies, prepared by the Financial Conduct Authority and the Competition and Markets Authority, on behalf of the UK Competition Network, 2018; Digital Comparison Tools: Consumer Research Final report, prepared by Kantar Public as part of the Competition and Markets Authority’s (CMA) market study in relation to digital comparison tools, 2017. 354 CJEU Andriciuc and others (n 170), para 50.
• In many countries, courts intervene in unfair price terms also based on the argument that these are only “ancillary” terms, that is price terms which are not directly determining the price and therefore subject to a judicial control. Independent of the fact that these terms are transparent, they are put to scrutiny in order to ascertain if they cause a significant imbalance in the parties’ rights and obligations contrary to the requirement of good faith. The problem with this approach is, as with the case of transparency, that it is subject to the courts’ discretion and that the judgments 355
CJEU RWE Vertrieb (n 16), para 49.
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may often vary. A prominent example is the credit management fee charged in many countries. The German High Court qualified these fees as ancillary terms controllable by the courts and decided that they were causing a significant imbalance. The Austrian High Court however was of the exact opposite view qualifying the management fee as part of the main subject matter of the contract. In Turkey on the other hand, the High Court has joined the German one and annulled such terms. But the Turkish legislator later intervened and gave financial institutions the right to charge management fees by statute. The whole debate in Turkey lasted for more than 5 years during which banks had to pay back fees which they then were allowed to charge again from 2015 onwards. It is certainly a common phenomenon that courts decisions may vary whenever certain discretion is involved. This is nothing new. However, the problem with price related terms in SCT is that they can involve thousands if not millions of contracts where according to the decision amounts in millions have to be restituted. Controlling this type of price terms ex post via court intervention means that for every type of price adjustment clause, for any credit agreement in foreign currency, or for any management fee charged the courts will have to intervene if the customer challenges the term. However, it is an established fact that consumers often do not sue. If by any chance there is an active consumer who gets the SCT annulled, the inter partes effect of the court decision will constitute another major problem. Most of the countries report that persons or organizations having a legitimate interest under national law in protecting consumers have a right to sue against the continued use of unfair terms in consumer contracts. But, consumer organizations have seldom the financial means to follow this type of suits. Besides, the effect (individual vs. erga omnes/with the same provider vs. for any provider) of any judgment declaring a contractual term to be unfair in a case lead by an individual or by a collective entity remains controversial. Even the requirement for national courts to consider ex officio any judgment annulling a certain unfair term is not beyond doubt. And, if by a special national provision, the inter partes effect of a decision can be surmounted, the restitution claim for any sums paid based on an invalid price-term has still to be filed by every individual consumer. Unless the sum involved is high, or in exceptional cases attracts much publicity, like fees in the energy or banking sector, one can imagine that consumers will be unwilling to undertake the burden of suing the companies. Finally, for those consumers prepared to claim what they paid in excess, limitation periods regarding this type of restitution claim will be a final obstacle. Before consumers are able to inform
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themselves about the invalidity of the relevant term, a restitution claim may already have become time-barred. Obviously, businesses will not be willing to change their terms and pricing policies as long as no effective remedy is enforced. • Another related argument against an ex post judicial intervention is the lack of legal certainty. The number of judgments for example regarding price adjustment clauses or banking fees in many countries proves that the businesses are persistent in creating new clauses allowing for some sort of price modification. But the cost of adjudicating each dispute seems by far to outweigh the effect of the judgments in solving the problem. The Israeli case of Bank Leumi lasting for 25 years is a unique but good example regarding the inefficiency of court proceedings.356 With every decision a new variant of the respective price term is used by the banking or energy sector. This incurs enormous enforcement costs with often no perspective of putting an end to the legal problem. Legal certainty which is needed for a functioning market is not granted. Furthermore, when arbitration in consumer and especially SCT disputes is allowed, accessibility of such awards will not always be granted, which again causes lack of foreseeability. • All in all, the option of a regulatory intervention regarding some price terms used in millions of contracts needs further consideration. This is also in line with the principle of the separation of powers. As underlined by Lady Hale in the UK Supreme Court decision Abbey National: “[. . .] it is not clear to me whether the proper solution is to find some way of forcing the suppliers to compete with one another in the terms they offer or whether the solution is to condemn one particular model of charging for those services. Fortunately, however, that is for Parliament and not for this Court.”357 Indeed, some national regulators have chosen to intervene and to ban e.g. the taking of a consumer credit in foreign currency, or to limit the type of banking charges to certain items and to ban any other type of charges. The benefits of certainty to a legal system are obvious: increased predictability, reduced information costs, increased speed of dispute resolution, and the consequential reduction in litigation expenditures. But more important than that, effective consumer protection cannot be achieved solely by allowing or forbidding some pricing structures. Even if a court finds, for example, a price adjustment clause or an overdraft charge to be perfectly transparent and therefore fair, the need to protect consumers against behavioural market failure 356 Attorney General v. Bank Leumi, PM 5763(1) 481 (2004), see Israel Report. 357 [2009] UKSC 6, Lady Hale, para 93.
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remains.358 Regulatory interventions could in fact be designed in a tailor-made fashion taking into account the findings of cognitive sciences. Given that the major problem with price terms in SCT is that they are not subject to market forces the aim of any regulation should be to change this. If consumer awareness can be raised regarding some pricing schemes the need for judicial control would also diminish. Soft paternalistic remedies are already applied in some of the countries. Simplifying the choice environment by standardizing price information; facilitating comparison-shopping by specialized websites and intermediaries359; informing consumers of their usage data and making switching in long-term contracts easier are some prominent examples.360 A perfectly transparent price adjustment clause would probably help consumer less than a monthly prominent information about the fare applied to them and the alternative (better) prices on the market plus a right to freely change the contract. Even though consumers are sometimes aware of the unfavourable conditions of their contract, they hesitate to look for new options given its costs and unpredictable outcome. Changing the status quo entails the cost of gathering information, comparing it and finding the best offer on the market. This can be costlier than the additional benefits of the change itself. Under such circumstances the apathy of the consumer might even be rational. If this information has to be given to the consumer correctly each month by the service provider this would have a nudging effect to switch. Obviously, the inhibition threshold for suing your service provider is much higher than the one for just terminating your contract. The lawmakers would be well advised to intervene at this stage.
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• However, it is questionable whether enhancing comparison shopping or nudging to change the service provider is really enough to tackle the bounded self-control problem of present biased consumers. As Bubb and Pildes put it “[n]aïveté and overconfidence persist despite consumers’ accumulated experience of their own weakness of will. Printed words on a page are unlikely to cure what painful experience has not”.361 Whereas making prices salient and comparable, and thereby spurring competition, might work in some cases, hard paternalistic interventions will be needed in others, like the case with over-limit fees or default interests. Smart disclosure might lead consumers to the service provider with the lowest charge. Monthly or yearly statements might also show consumers that they have a self-control problem given that they are ending up paying these fees, but it might not necessarily help them to overcome the self-control problem. If there is a bias which is hard to overcome by nudging and which can be exploited very easily by suppliers, hard paternalistic interventions, especially limiting the amount of this type of charges have to be thought of. • Controlling prices and price related terms is a multifaceted and complicated issue. This report tries to seek for some alternative methods to the trend of judicial ex post control which is developing in the last decades. It is undeniable that courts often play a pioneer role in ascertaining problem areas. But it might be the time for regulators to think of more effective ex ante regulations to unburden the courts. Besides, more effective ways of collective proceedings and redress mechanisms need to be found as, obviously, businesses can also violate an ex ante regulation. The role of courts in controlling less prominent as well as less widely applicable price related terms will certainly remain.
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Policymakers certainly have to be aware of the cultural differences affecting human judgment and decision making and adjust their regulatory interventions accordingly, see Zamir and Teichman (2018), pp. 124–127. 359 See the detailed report prepared for the UK market: Digital Comparison Tools: Consumer Research Final report, prepared by Kantar Public as part of the Competition and Markets Authority’s (CMA) market study in relation to digital comparison tools, 2017. 360 See on behaviourally informed lawmaking Zamir and Teichman (2018), pp. 162 ff. and 313 ff.; see on different regulatory means to spur competition on the market for long-term services and banking contracts Atamer (2017), pp. 644–657; or on the market for creditcard, mortgage and cell-phone contracts Bar-Gill (2012), pp. 51 ff.
361
Bubb and Pildes (2014), p. 1650.
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Annex: Questionnaire for the National Reporters General Information on the Scope of Freedom of Contract In this introductory part, brief information should be provided on the acceptance of freedom of contract as a rule, and if this is the case, the provisions/court decisions guaranteeing this freedom. It is important to see whether the parties, in principle, are free to set the contractual price, whether the rules of liberal market economy are applied, and whether there is a mechanism (autonomous body or state department) to protect competition in the market.
General Information on Control of SCT This part should give an overview on judicial (and if the case might be administrative) control of standard contract terms. Especially whether control is applied only in B2C contracts or also in B2B contracts; the general norm allowing for a judicial review of standard terms; whether there is a “black” (forbidden without discretion of the judge) and/or “grey” list of unfair terms (presumed to be unfair); the effect of an “annulment” of an unfair term by courts/or an administrative body; the inter partes effect of a court decision and its exceptions; possible registers in which unfair terms are listed and their effect; whether there are means of collective action against usage of unfair terms in standard contract terms.
Judicial Control of Price Terms in SCT Are there special provisions that give the courts the right to control price terms in SCT, or forbid such control? Do courts control price terms in SCT even though there is a limitation or no express authorization? If yes based on which arguments? If there is a parallel provision to Article 4(2) Directive 93/13/ EEC do courts distinguish between main and ancillary price terms? Please also advise if an administrative body is vested with this function instead of courts. Representative examples from case law are very important in this section. The authors are free to give all kind of additional information, which they judge to be relevant.
Special Regulatory Provisions Controlling Price Terms This section should give information on different regulatory responses directly intervening into price terms. Obviously, these interventions can occur in very different sectors.
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However, given the scope of the topic the major contracts we look for are those were standard contract terms are widely used and therefore also a judicial control of price terms could occur. Insurance contracts, contracts with energy, internet, cell-phone, pay-TV providers, banking contracts, contracts with health clubs would be typical examples. However, price caps introduced by the regulatory regarding e.g. pharmaceuticals are not relevant. Examples of regulatory intervention could be: • Limiting the number of services banks can charge: examples from Israel,362 Romania363 and Turkey. • Setting price caps: – General caps regarding contractual and default interest rates364 or special caps applicable just for e.g. interest rates in credit card contracts or overdraft accounts; – Special caps regarding some charges, e.g. roaming charges365; – Caps regarding contractual penalty fees, specifically in the banking sector,366 or generally for consumer contracts; 362
http://www.boi.org.il/en/ConsumerInformation/ConsumerIssues/ Pages/AmalotReform.aspx. 363 According to the information provided in the CJEU Judgment of 12 July 2012, Volksbank România, C-602/10, EU:C:2012:443, para 14 the Romanian legislator has limited fees which can be charged in relation to credit agreements: “Article 36 EGO No 50/2010 provides: ‘For the credit granted, the creditor may levy only a charge for the processing of the application, a credit administration charge or current account administration charge, compensation in the event of early repayment, insurance costs, penalties if appropriate, and a single charge for services provided upon request by consumers.” 364 See e.g. for a comparative study Reifner et al. (2010). 365 https://ec.europa.eu/digital-single-market/en/roaming-tariffs. 366 For example, in the USA, Section 149(a) of the Truth in Lending was changed with the Credit Card Accountability, Responsibility And Disclosure Act of 2009 as follows: “The amount of any penalty fee or charge that a card issuer may impose with respect to a credit card account under an open end consumer credit plan in connection with any omission with respect to, or violation of, the cardholder agreement, including any late payment fee, over-the-limit fee, or any other penalty fee or charge, shall be reasonable and proportional to such omission or violation.” On 15 June 2010 the Federal Reserve Board of the US has announced that it “[p]rohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account’s terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations. Prohibits credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer’s violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20. Bans “inactivity” fees, such as fees based on the consumer’s failure to use the account to make new purchases. Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms. Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.”
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• Forbidding certain types of fees or penalties; • Limiting or forbidding price bundling partitioning; • Any comparable regulatory provision.
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or
price
It would also be very important to explain the interrelation of administrative provisions and judicial price control. That is, if courts can still practice price control, or do so de facto, even though a regulatory provision regarding price control is existent.
Special Disclosure Regulations Promoting Price Transparency and Competition In this section it is aimed to find out about the different regulatory means applied in the participating countries in order to ensure price transparency and comparability (either in addition or as an alternative to price control). A prominent example can be given again from EU law: Since 1987 creditors in a consumer credit contract are under the duty to declare the “annual percentage rate of charge APR” (meaning the total cost of the credit to the consumer, expressed as an annual percentage of the total amount of credit) in consumer credit agreements at the latest at time of conclusion of the contract. This should enable and give an incentive to consumers to compare the different APR’s of different creditors and choose the cheapest one.367 Given that the APR calculation formula is standardized by the EU, consumers can simply resort to this figure to get an overview of the market. The Directive 98/6/EC is another example of such legislation aiming at unifying price indications and thereby facilitating “informed choices on the basis of simple comparisons”.368 Recently price information has been refined in some countries by “product-use information”. Consumers can, for example, choose the right plan for a cell-phone contract much easier if they are not only informed about the amount they have to pay in a month but also about the average usage of a consumer, and even better, about their own past usage patterns. Especially serving this type of information during the life span of a contract is important as it could motivate consumers to get additional quotes from other providers on the market and thereby make switching more attractive. Any type of comparable provisions which aim at simplifying and fostering comparison-shopping and thereby stimulating competition is of interest in this section: • Special labelling requirements for prices,
367 368
Council Directive 87/102/EEC (n 319). See n 320.
• Comparative listing of prices by independent institutions on websites,369 • Transparency requirements which balance the effect of price-partitioning370 or price bundling.371 • Product-use information at contract conclusion and regularly during the contract performance.372 • Special information whenever a fee or penalty is going to be applied. E.g. alert systems for overdraft accounts.373 Just like under section IV, this section too should include comment on the relation of transparency/disclosure regulations to judicial price control. Whether these exclude each other or applied together is of crucial importance.
References Agarwal S, Chomsisengphet S, Mahoney N, Stroebel J (2015) Regulating consumer financial products: evidence from credit cards. Q J Econ 130:111–164 Akerlof GA (1970) The market for “lemons”: quality uncertainty and the market mechanism. Q J Econ 84:488–500 Akerlof GA, Shiller RJ (2015) Phishing for phools. The economics of manipulation and deception. Princeton University Press Atamer YM (2015) 6502 Say{l{ Tüketicinin Korunmas{ Hakk{nda Kanun Çerçevesinde Fiyat Denetimi [Price control under the new Consumer Protection Code No 6502]. In: Inceoglu M (ed) Yeni Tüketici Hukuku Konferans{ [Conference on the new Consumer Code]. XII Levha Publishers, Istanbul, pp 7–41 Atamer YM (2017) Why judicial control of price terms in consumer contracts might not always be the right answer. Insights from behavioural law and economics. Mod Law Rev 80:624–660 Atamer YM (2018) Unlauterer Wettbewerb durch Nutzung von ungültigen AGB? In: Emmenegger S et al (eds) Brücken bauen. Festschrift für Thomas Koller. Stämpfli, Bern, pp 35–57 Bakos Y, Marotta Wurgler F, Trossen DR (2014) Does anyone read the fine print? Consumer attention to standard-form contracts. J Leg Stud 43:1–35 Bar-Gill O (2009) The law, economics and psychology of subprime mortgage contracts. Cornell Law Rev 94:1073–1152 369 Directive 2014/92/EU (n 33) for example obliges EU Member States in Article 7 to “[. . .] ensure that consumers have access, free of charge, to at least one website comparing fees charged by payment service providers for at least the services included in the final list referred to in Article 3(5) at national level. Comparison websites may be operated either by a private operator or by a public authority”. 370 See n 5. Parallel to the APR regulation in consumer credits, Article 23 Regulation (EC) N 1008/2008 for example includes a special provision to countervail intransparent price information via pricepartitioning: “The final price to be paid shall at all times be indicated and shall include the applicable air fare or air rate as well as all applicable taxes, and charges, surcharges and fees which are unavoidable and foreseeable at the time of publication.” 371 See n 4. 372 According to Article 5 Directive 2014/92/EU (n 33), payment service providers have to inform consumers at least annually and free of charge with a statement of all fees incurred in that year. 373 See for such a suggestion: Provisional Decision on Remedies regarding the Retail Banking Market Investigation announced by the UK Competition & Markets Authority on 17 May 2016, pp. 175 ff.
Control of Price Related Terms in Standard Form Contracts Bar-Gill O (2012) Seduction by contract. Law, economics, and psychology in consumer markets. Oxford University Press, Oxford Bar-Gill O (2014) Consumer transactions. In: Zamir E, Teichman D (eds) The Oxford handbook of behavioral economics and the law. Oxford University Press, Oxford Bar-Gill O, Bubb R (2012) Credit card pricing. The card act and beyond. Cornell Law Rev 97:967–1018 Bubb R, Pildes RH (2014) How behavioral economics trims its sails and why. Harv Law Rev 127:1593 ff Chen-Wishart M (2010) Transparency and fairness in bank charges. Law Q Rev 126:157–162 Cooter R, Ulen T (2012) Law & economics, 6th edn. Pearson, Boston DeMuth CC (1986) The case against credit card interest rate regulation. Yale J Regul 3:201 ff Eisenberg MA (1995) The limits of cognition and the limits of contract. Stanford Law Rev 47 Faure MG, Luth HA (2011) Behavioural economics in unfair contract terms. Cautions and considerations. J Consum Policy 34:337–358 FCA, CMA (2018) Helping people get a better deal: learning lessons about consumer facing remedies. Available at https://www.gov.uk/ government/publications/ukcn-consumer-remedies-project-lessonslearned-report Grebieniow A (2019) Remedies for inequality in exchange. Comparative perspectives for the evolution of the law in the 21st century. Eur Rev Priv Law 27:3–26 Grubb M (2015) Failing to choose the best price. Theory, evidence, and policy. Rev Ind Organ 47:303–340 Kirchgässner G (2008) Homo oeconomicus. The economic model of behaviour and its applications in economics and other social sciences. Springer, New York Koller T (2008) Einmal mehr: das Bundesgericht und seine verdeckte AGB-Inhaltskontrolle. PJA/AJP 2008, pp 943–953 Korobkin R (2003) Bounded rationality, standard form contracts, and unconscionability. Chic Law Rev 70:1203–1295 Luth H (2010) Behavioral economics in consumer policy. The economic analysis of standard terms in consumer contracts revisited. Intersentia, Antwerp Mathis K, Steffen AD (2015) From rational choice to behavioural economics. Theoretical foundations, empirical findings and legal implications. In: Mathis K (ed) European perspectives on behavioural law and economics. Springer, p 31 ff Micklitz HW (ed) (2014) Constitutionalization of European private law. Oxford University Press, Oxford
281 Micklitz HW (2015) The transformation of enforcement in European private law: preliminary considerations. Eur Rev Priv Law 23:491–524 Micklitz HW, Saumier G (eds) (2018) Enforcement and effectiveness of consumer law. Ius Comparatum, Global studies in comparative law. Springer Peglion-Zika CM (2013) La notion de clause abusive au sens de l’article L. 132-1 du Code de la Consommation, thesis. Librairie générale de droit et de jurisprudence, Paris Pichonnaz P (2017) Art. 8 LCD. In: Martenet V, Pichonnaz P (eds) Commentaire romand, Loi contre la concurrence déloyale. Helbing Lichtenhahn, Basel Reifner U, Clerc-Renaud S, Knobloch M (2010) Study on interest rate restrictions in the EU. Final Report for the EU Commission DG Internal Market and Services, Project No. ETD/2009/IM/H3/87. Institut für Finanzdienstleistungen, Brussels, Hamburg, Mannheimt Rösler H (2010) Protection of the weaker party in European contract law: standardized and individual inferiority in multi-level private law. Eur Rev Priv Law 18:729–756 Schäfer HB, Leyens P (2010) Judicial control of standard terms and European private law. A law & economics perspective on the Draft Common Frame of Reference for a European private law. In: Chirico F, Larouche P (eds) Economic analysis of the DCFR. The work of the Economic Impact Group within CoPECL. Sellier European Law Publishers, Munich, pp 97–119 Schäfer HB, Ott C (2012) Lehrbuch der ökonomischen Analyse des Zivilrechts, 5th edn. Springer, Berlin, Heidelberg Schillig M (2011) Directive 93/13 and the “price term exemption”: a comparative analysis in the light of the “market for lemons” rationale. Int Comp Law Q 60:933–963 Shepperd JA, Waters E, Weinstein ND, Klein WMP (2015) A primer on unrealistic optimism. Curr Dir Psychol Sci 24:232–237 Van Boom WH (2011) Price intransparency, consumer decision making and European consumer law. J Consum Policy 34:359–376 Werro F, Pichonnaz P (2015) Un reflet de la jurisprudence récente en droit privé européen. Annuaire Suisse de Droit Européen 2018, p 268 ff Whittaker S (2011) Unfair contract terms. Unfair prices and bank charges. Mod Law Rev 74:106–122 Zamir E, Teichman D (2018) Behavioral law and economics. Oxford University Press, Oxford
Groups of Companies Rafael M. Manóvil
Abstract
This General Report provides a comparative law analysis of the phenomenon of groups of companies, through an overview and summary of the information contained in the more than twenty National Reports presented to the International Congress on Comparative Law held in Fukuoka, Japan, in 2018, which make up this book. The General Report begins by surveying the manner in which the different legislations define and describe groups of companies, then goes on to study the varied approaches and solutions found in and offered by the legal systems analysed in the book, mainly for the protection of minority shareholders and that of creditors and other third parties, also mentioning some regulations pertaining to different areas of the law (such as labour, tax and competition law). As such, it provides an overall, but altogether detailed view of the phenomenon in legislations from various parts of the world, organized around the most relevant topics surrounding groups of companies.
1
Introduction
1.1
General Remarks
‘Groups of companies’ have been a fact of economic life and business organisations for many decades. The Belgian report, for instance, refers to discussions on the topic that go back to the beginning of the twentieth century and the first known court resolution on the subject was the 1881 German Rumanian railroads Reichgericht’s decision.1 This report was also published in Manóvil (Ed), Groups of Companies – A Comparative Law Overview, Springer Nature Switzerland 2020. 1
19.12.1881, published in RGZ, 3-123. The court declared that a management agreement by which the company assigned the right to appoint R. M. Manóvil (*) University of Buenos Aires, Buenos Aires, Argentina e-mail: [email protected]
When we talk about ‘groups of companies’ we are referring to the legal instruments used to address two opposite economic realities. On the one hand, groups of companies result from the phenomenon of enterprise concentration. This explains why governments so often change their policies to ease such concentration or to make it more burdensome, be it through incentives or direct intervention. On the other hand, groups of companies are the result of enterprise growth, expansion and decentralisation, driven by activity specialisation, geographical diversity and sometimes regulatory factors. While this report concentrates primarily on company law issues, groups of companies affect various different areas of Law. Indeed, the concept of ‘groups of companies’ is not only defined differently by different local and international pieces of company law legislation, but it is also common for the concept to be defined in accordance with the purpose of other specific rules attached to it (competition law, tax law, capital markets law, labour law, insolvency law, private international law, public law regulation on banking, financial and insurance institutions, environmental law, etc.). We must also keep in mind that groups of companies not only concern the private sector: in many countries state owned or statecontrolled enterprises,2 or companies that are mixed ventures between public and private entities, are active participants in the economy. In any case, the essence of what matters with regard to groups of companies lies in the decision-making power over one or more underlying companies, rather than on the question of whether a company has property rights over others.3 Thus, the means to acquire and to be able to make use of such its directors to a Rumanian government agency was null and void, on the basis that legal entities cannot give away their legal capacity. 2 In Italy the first group of companies, established in 1931, was the IRI (Istituto per la Reconstruzione Industriale), which was a state holding. 3 The Greek report informs that authors define a group as the situation between several companies which allows the use of the powers of some or all organs of a company for the interest of another company.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_11
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power may include a wide range of instruments, such as shares with multi-voting rights, shareholder agreements, special provisions in articles of association and pyramid structures of several layers of holding companies.4 As stated in one of the national reports, the influence that is provided by that power must be such that the controlling company can enforce it upon the controlled by means of the replacement of the latter’s own will making power by the former’s. The exercise of this power may entail risks for the subordinated, controlled or dependent company, as well as for the interests attached to it: those of the shareholders, the creditors, third parties and other stakeholders. The alluded power and influence on the dependent company matters the most in relation to business decisions that are generally taken by the board of directors. This is true for all areas of law notwithstanding that, as an exception, the interests at stake may be affected by a shareholders’ meeting resolution: minority shareholders’ rights are mostly in danger by day to day business decisions; insolvency and the risks creditors are exposed to are a consequence of the company’s business; the relevant taxes are imposed on business transactions; labour law deals with relationships which are in the hands of the management; the issues related to the protection of competition are in the frame of the board’s decisions, and so on. Therefore the definition of control is directly or indirectly linked to the exercise of power over the organ responsible for the management of the company, as emerges clearly, for instance, from Germany’s regulation on domination agreements: when these agreements are made it is the board of directors of the dependent corporation that is bound by the controlling enterprise’s instructions. The same is true in countries that followed the German model. This general report, like the national reports it is based on, deals only with the so-called subordinated groups, thereby excluding the different forms of joint venture, coordination or cooperation groups. In other words, the report is intended to offer a comparative study of groups which include a dominant or controlling party (not excluding joint control by more than one entity) and one or more subordinated or controlled companies. It therefore focuses on the conflicts—both internal and vis-à-vis third parties—arising out of the lack of independence of companies that are part of a group. It also addresses a similar kind of conflicts at the level of the parent company. The first objective of group regulation has historically been, and still is, the protection of minority shareholders and creditors of the subsidiaries,5 i.e. duties and liabilities of directors and controlling shareholders. But in some countries the objective is also business minded and focuses on the need 4 The Belgium national report informs that pyramidal structures are still frequent in that country. The same is true for other European countries, like Germany or Italy. 5 What has been called the bottom-up model.
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to have a proper and orderly group management,6 whilst at the same time dealing with the organisation and power distribution within the whole group. From this perspective it is also reasonable to seek to protect members of the boards of both subsidiaries and parent companies against unreasonable burdens that may be placed upon them: what are their duties within the whole picture of the group; what are the limits of their reasonable autonomy when receiving or issuing instructions? The reality of groups varies in the light of many different factors. In some countries large corporate groups have widely spread out shareholders while in some others control is in the hands of families. Large and small groups coexist everywhere and it does not come as a surprise that case law very often refers to smaller groups rather than to the largest ones. Most countries do not have specific legislation on groups of companies’ desired or allowed operations. They instead tend to rely on general company law rules and to define control primarily, albeit not always only, for disclosure and accounting purposes. There are some countries which have special provisions for certain types of companies and different ones for others, as opposed to countries where, whatever rules are applicable, the legal form of the dependent or controlled company is irrelevant. Not much attention has been paid to the possibility to issue tracking shares, targeted stock or Spartenaktien, which is a way of looking at the problem from the reverse side: rather than independent entities bound within a group, in this case the assets of one entity are divided for investment and revenue purposes into different parts or divisions, each carrying out a certain line of business activities. Besides the normal shares, the company issues special shares linked to such specific business activities. A clear separation between the divisions and the general business of the company must exist: no subvention from one division to the rest is admissible, as is not the possibility to shift assets within any of the group’s companies (Fuchs 2003, p. 177). Arts. 2350 and 2447 bis of the Italian civil code, as reformed in 2003, foresee this kind of shares and asset separation. This topic merits deeper thoughts in the context of the subject of this report.
1.2
The Main Problems
Most countries have no general rules on groups of companies or on relationships within a group. The most common approach is therefore not a holistic one, but rather a relatively separate analysis of the various issues at stake. In Anglo-Saxon legal systems the conflicts and problems within a group of companies are very frequently defined as agency problems, essentially because managers are 6
The so called top-down perspective.
Groups of Companies
considered agents of the shareholders. Traditionally the basic conflicts that have been dealt with are those between minority or external shareholders and the controlling shareholder and those between creditors and the controlling shareholder, both with a particular focus on to the role of managers and board members of subsidiary as well as parent companies. But these are not the only problems that need to be addressed when discussing the law relating to groups of companies. The more than twenty pieces of national or supranational legislations which are compared in this report provide different approaches with regard to where our topic starts and where it finds its limits. A significant number of questions need to be answered in the light of each national legislation. For example: are the rules structured only around the idea and consequences of control or domination? Or do they (also) deal with a legal definition of groups, thus including a more intense exercise of power over the controlled companies by means of a unified direction of the group, or einheitliche Leitung, direzione unitaria, dirección unificada, or whichever way this element may be referred to in different languages and countries? Most importantly, is a so-called group management permitted or would it lead to undesired consequences? How far is it acceptable for the dependent companies’ will power to be affected by the head of the group? Are there concessions made to a group interest which would permit business decisions to take into account the synergies between the different group entities? If so, which are the conditions under which it is legitimate to impose on a subordinated company the sacrifice of its own interest? Which are the conditions and the limits for selfdealing and related party transactions within a group? Who deserves legal protection, the subsidiary, its minority shareholders and creditors, or should the focus be on facilitating group management? Is a reasonable compromise possible? One if not the most central issue is if, when and how liability can be extended to a parent company. It is extremely rare to find legislation that provides for strict liability in this regard. But there are significant differences when it comes to determining when the parent’s conduct, including its mere interference, may lead to liability. In relation to this issue, the much wider question arises as to how the lifting or piercing the corporate veil or the disregard of legal entity doctrine is accepted and applied in each country. In most of them, if at all addressed, the doctrine has been introduced by the courts. But in some jurisdictions there are specific statutory rules that admit some form of it. Its relevance can be very significant, because it may go beyond simply extending the liability of a subsidiary to a parent or to another member of the group and include the possibility of requesting specific in natura performance of contractual obligations by an entity or entities different to that which was a party to the agreement.
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As the US report puts it, the central challenges faced by corporate groups are, first, to prevent one of the companies from misappropriating the other company’s assets or earnings (a practice known as tunnelling), or to take advantage of the minority shareholders by any other means, and second to prevent the abuse of limited liability through the excessive externalisation of risks. Interestingly, in addition to the protection of the subsidiary company, its shareholders and creditors, other reports also stress the need to protect directors of both the subsidiary and the parent companies, as well as the parent company itself, against liability claims from third parties and minority shareholders. The nature of the concept of domination or control that the rules and case law of different jurisdictions and areas of law attach consequences to is also relevant for discussion and comparative purposes. What are the limits set to the concept of domination or control? In other words, does the law admit special rules to be applied only where domination is exercised by means of organic control (where the dominating entity exercises its control over the internal decision-making process of the subordinated company), or does it also include the so-called external economic control by means of a dominant or prevailing influence based on a contract, or even another kind of relationship? In Germany the clear answer is only organic control,7 whereas in Italy, Argentina and Uruguay all sorts of control are included, at least in theory.8 This report will address the numerous questions and problems posed above, to the extent possible given the current stage of development of the relevant issues around the world.
1.3
National Reports
In preparation for the 20th Congress of the International Academy of Comparative Law, to be held in Fukuoka, Japan, in 2018, National Reports were submitted by scholars from 22 countries: Argentina, Austria, Belgium, Brazil, Cyprus, Finland, France, Germany, Greece, Italy, Japan, “A controlling influence based on an economic dependency or imbalance is insufficient and does not constitute a controlling influence in the meaning of section 17 AktG” (see in this volume Mock, “National Report on Germany”, Nr. 47, citing case law from 1983 and 2011). “Consequently, contractual arrangements dealing with rights and obligations of the entity in their regular scope of business . . . do not constitute a controlling influence”. 8 The author of this report, notwithstanding his Argentine origin, is strongly against this approach: the problem of groups in company law is the influence on the organic decision-making process in the controlled or dependent company. Bilateral relationships, even as stringent as franchise or project-finance agreements can be, are of a different nature: all the problems arising out of the abuse of one party’s superior power in a contract can be solved applying the rules of common private law, as if the parties, especially the weaker one, were individuals and not companies. 7
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Netherlands, Poland, Portugal, Singapore, Slovenia, Spain, Sweden, Taiwan, Turkey, United Kingdom and United States of America. What follows is an analysis of these reports, each of which can be found in later chapters of this book. For the avoidance of doubt, the citation of any specific rule as an example of a certain legal solution does not exclude the possibility of other countries providing similar solutions.
2
Elements That Define a Group of Companies
2.1
Control and the Different Purposes of Its Definitions
It is generally accepted that the definition of a group of companies includes two elements: control or domination, which is a legal element, and unified direction or common management, which is a factual enterprise organisational characteristic. Definitions of control vary from country to country and between different fields of law. In general the definition is attached to the real or potential power to exercise over a company a dominant or prevailing influence by means of a majority shareholding or by majority voting rights (adding direct and indirect shareholdings and other means, such as multiple voting rights in countries where it is permitted), or a less than majority shareholding that de facto (because of regular shareholder’s absence) allows to permanently prevail at ordinary shareholders meetings, or to appoint or remove the majority of the members of the board. Company and capital market laws of the various jurisdictions compared in this report show differences, but there is a substantial coincidence with regard to the concept of organic control or domination: as mentioned above, all the jurisdictions refer to a direct or indirect influence on the internal decision-making process, by various means. To that end, some national laws set definitions, both in general and for specific purposes, not only of control and domination but also of concepts like subsidiary, parent, affiliated companies, linked, related companies or the like. National reports detail some more differences and similarities, which are of lesser importance for the overall picture. The most relevant differences concern three different aspects of the discussion. The first is the legal admission of domination agreements, the object of which is to grant a party a contractual right to impose mandatory instructions on the board of the other. Germany’s 1965 Aktiengesetz (AktG) is the forefather of this approach, which includes some other enterprise agreements, like profit transfer agreements and others. The same idea was followed with some variations by, among a few others, Brazil, Portugal, Slovenia, Croatia, Poland, Taiwan and Turkey. In contrast, where these
agreements are not expressly contemplated, they will be inadmissible because of their inconsistency with the applicable legal principles. The second relevant issue in relation to which national laws adopt divergent approaches refers to the scope of the concept of control or domination. In some jurisdictions the definition of control or domination for company law purposes is limited to the so called internal or organic control (i.e. the one exercised on the subordinated company’s internal decision-making process). In contrast, other national company laws include in the definition or description of control the exercise of a dominant influence by means of so-called special links, which may only be contractual links (Italy), or any other link (Argentina and Uruguay). The first group of legal systems tackle these cases with the instruments of general private law because the conflicts that can arise are not regarded as company law problems. A third set of differences relates to the persons or entities that may be parties to domination or control relationships. Control only over companies or also over other types of entities? If only companies, all types or only certain types? Which type of entity or person is to be considered the head of a group of companies, or the dominant or controlling party in the relationship? These questions are obviously relevant to the identification of who might face the risk of being exposed to certain liabilities. Having a precise definition of control matters the most in those cases where a certain effect or a specific duty are attached to it. This happens when it becomes mandatory to produce consolidated financial statements or to produce and disclose certain information about the business relation between dominant and dependent companies. That is why the origin of many of the definitions of control is found in national and supranational accounting rules, as will become evident from the examples that follow. In fact, many European countries define control in accordance with the Seventh Company Law Directive. Sweden is an example of this. The Austrian Commercial Code, also following European directives, defines the relationship of control for accounting purposes on the basis of a parent company and a subsidiary. To that end the Code refers to scenarios under which the existence of a common direction is to be presumed. These scenarios include the holding of a majority of the voting rights and the entitlement to appoint and remove the majority of the board members (even not being a majority shareholder). In contrast, for a completely different purpose, merger control is triggered in Austria if more than half of the members of the Board or of the Supervisory Board coincide in two different companies. The same criteria are included in the Polish definition of domination for competition protection purposes. On the other hand, the Polish Commercial Companies Code defines
Groups of Companies
dominant and dependent companies using the usual standards of majority voting at shareholders meetings and right to appoint or remove the majority of the board members of the dependent entity. However, it also qualifies as dominant that company which carries out a dominant influence on the activities of another company or of a cooperative on the basis of a management or profit transfer agreement, both of which are foreseen by Article 7 of the Polish Code. Dutch law, in turn, defines the concept of subsidiary rather than that of control, but the definition is still in line with the one provided by most other European jurisdictions, in the sense that in all cases a controlling relationship must exist, either by means of a majority shareholding (alone or with the support of others who are bound to vote together), or by the power to appoint or remove the majority of the members of the management board. Dutch law also defines the concept of “participating interest” as that which arises when the legal entity has provided capital to another “in support of its own activities”. There is a presumption that this is the case when one fifth of the capital is held. The law of the Netherlands introduces differences when defining the concepts of group, subsidiary and dependent company. Under Dutch law, a legal entity is dependent, amongst others, if another company has provided at least one half of the issued share capital. The definition plays a role in the so-called structure regime. If that regime is applicable to the company, it entails certain changes to the governance structure, amongst others, the appointment of the board of directors. The definition of a dependent company serves the purpose of ensuring a central management in a group structure in cases where this regime could apply. If this regime would be applicable, different rules can apply depending on whether all or part of the companies that are involved are national or foreign entities. In the UK the definition of group of undertakings includes not only companies but also unincorporated entities, and arguably also natural persons. The concept of group of companies, which excludes the exercise of a dominant influence from its scope, is defined separately. For the purpose of establishing restrictions regarding loans, quasi-loans and credit transactions between them, associated companies are defined, broadly speaking, as any members of the group. The primary purpose of Spain’s definition of control, which is laid down in Article 42 of the Commercial Code, is also to adapt the definitions of the European directives that deal with the duty to produce consolidated financial statements. This definition applies to all types of companies, but although it is considered as the main general definition of control, for tax consolidation purposes a specific legislation provides a different one. It is also for accounting purposes that Greek law 4308/ 2014 defines control as “the ability of an entity to determine the financial and operational policies of another entity in order to collect profits arising out of the latter company’s
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activities”. The notion of control is based on the concept of dominant influence, which is in turn derived from the power of determination referred to in the above definition, “without taking into account other parties’ rights or influences”. Significant influence is the influence on financial and operational decisions “without exercising control or at least joint control on this other entity”, which is presumed if someone has 20% of the voting rights of the company invested in. The obligation to produce consolidated financial statements, which applies to all kinds of control, is infrequent when the right to exercise a dominant influence is based on a minority shareholding, exclusively on a contract or on the articles of association. The Belgian Companies Code of 1999 provides definitions of both exclusive and joint control. Control under the Belgian Code is the power, in law or in fact, to exercise a decisive influence on the appointment of the majority of the members of the board or of the managers, or on the orientation of their management. Control is presumed juris et de jure under certain circumstances (majority of voting rights, right to appoint or to remove the majority of the administrators, a clause in the company’s articles of association or an agreement with the company, etc.) and the presumption is juris tantum if the shareholder exercised the majority vote at the two last shareholder meetings. Strictly for accounting purposes, the United Kingdom’s Companies Act 2006 provides a definition of ‘group of undertakings’ which is in line with the EU requirements on consolidated accounts. The Act defines ‘group of undertakings” as the parent undertaking and its subsidiaries, where the parent undertaking is one which has the majority of the voting rights in a subsidiary or otherwise the ability to direct its overall policy, or the right to appoint or remove a majority of the board of directors, or exercises a dominant influence by provision of its articles of association or by virtue of a contract,9 or has the legal or factual power to exercise dominant influence,10 or is managed together with a subsidiary on a unified basis. Nevertheless, the United Kingdom has a somehow peculiar rule in Section 4 of Schedule 7 of the Act, which refers to the exercise of a dominant influence stemming from a contract “permitted by the law under which the subsidiary undertaking is established”. This type of contract is not permitted in the UK, but in those countries where the law allows subsidiaries to be bound by them, foreign companies are generally prevented from being the dominant party.
9
Dominant influence is described in the UK as the right to give directions on the operating and financial policies of the subsidiary which are binding on its directors whether or not they are for the benefit of the subsidiary. 10 This includes the power of a shareholder who in practice prevails or may veto decisions because of the rest of shareholders’ regular absence.
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Cyprus’ company law is based on the British 1948 Companies Act and contains definitions of holding or parent and subsidiary companies which are similar to those of other European jurisdictions. But the law of Cyprus establishes a presumption that a company’s board of directors is controlled by another company when the latter has the power by itself, without the consent or concurrence of any other person, to appoint or remove all or a majority of the directors. It is debatable whether providing such a detailed definition has any advantage, or if a general principle simply referring, for instance, to the power by any means of imposing decisions and instructions on a subsidiary, serves the legal purpose better. This, of course, depends on what we seek. If it is legal certainty and the protection of those who are or may be involved in group businesses, a precise description of what is control and what is not, seems appropriate. But if what is mainly envisaged is the protection of the interests that may be affected by the exercise of controlling power, broader, more flexible principles which allow for a case by case assessment of what is reasonable may provide for a fairer system. The situation outside Europe is not very different. Singapore’s Companies Act also defines the holdingsubsidiary relationship with reference to whether the former holds more than half of the voting rights of the latter and to the alternative power to control the composition of the board of directors. As a special note, however, the Singapore definition seems to include a presumption of control also by the mere presence of a veto right. This would be rejected in most countries, where the domination power has to be a power to positively act and decide, whilst the passive obstructionist veto right is not defined as control. In Japan the accent is also on the controlling power over the management which can affect the subsidiary’s decisions with regard to its financial and business policies. The law foresees different ways of achieving this power, including by means of an agreement. The Companies Act defines subsidiary and parent companies, the former being a company “the management of which is controlled by a Company” and the latter “any entity . . . who controls the management of a Stock Company”. As in other countries, for different legal purposes the definitions are subject to variations. The Japanese report points out that, in general, it is more likely for administrative regulations than for private law rules to take into account not only control, but indeed the mere existence of a group. This is the case of the Antimonopoly Act, which defines a group of combined companies as a parent-subsidiaries relationship; the Corporation Tax Law, which allows for a consolidated tax system if a corporation has full controlling interest in other companies; and the Banking and Insurance laws, which establish financial regulations applicable throughout the whole group in the presence of subsidiary companies. Brazil offers a particularly diverse variety of definitions of control and groups, for instance under competition, social
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security and labour law, for the purpose of establishing in each case the joint and several liability of different entities which are members of the same group.11 In Taiwan, besides the usual standards of majority shareholding and voting rights, the definition of control also encompasses the direct or indirect control over the management of the personnel, or the financial or the business operations of another company. In the light of the different definitions of control, the question of what happens when more than one person or entity exercises control over another arises. To be clear, the question does not concern cases of joint control by more than one person, but of control by two different persons or entities on a different basis. This is addressed by the Finnish report, which rightly points out that, under some circumstances, a company may be under the control of two or more independent entities. The example provided is that where one shareholder holds the majority of the voting rights but another has the right to appoint or remove the majority of the members of the board. This can happen in those jurisdictions where it is admissible for board members to be appointed by third parties who are not shareholders, but also under those where the articles of association may allow different classes of shares to grant the shareholders of each class the right to appoint a certain number of management or supervisory board members.12 This may lead to a situation where a minority shareholder has the right to appoint and remove the majority of such board members, while another shareholder holds the majority of the voting power for all other purposes. No known legal system provides that in such a case one controlling party prevails over the other. From a purely logical point of view the conclusion would seem to be that only the majority shareholder should be bound to produce consolidated financial statements, while liabilities would fall on the party that in fact exercises the controlling power on the controlled company’s business decision making process in a damaging way.
2.2
Organic Control Only or Also Other Sources
It has already been stressed that the essence of the topic discussed in this report lies in the power to exercise influence over or to determine the decision-making process of a company, which only formally remains an independent entity. The generally accepted source of this power is of organic nature, meaning that the power and influence is such that 11 The same is the case in respect of consumer law, were the parents’ liability is in subsidy of the controlled company’s liability. 12 This is the case of the 1972 Argentine Company Law (Art. 262), and the 1989 Uruguayan Company Law (Art. 377).
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members of its internal bodies would not be able to decide differently. It has also been mentioned before that the organic influence that matters the most is the organic influence over the management board. This raises the need to consider the manner in which the internal organisation of companies is structured in each jurisdiction. The way in which a specific legal system organises the structure of the company’s organs and their respective powers and competences may provide tools for the exercise of domination power. In this respect it is relevant to establish whether the shareholders meeting (or equivalent governing organ of a company) may give binding instructions to the company’s management board or administrators, and also whether the fact that such instructions were given by the shareholders assembly protects the board against liabilities when the instructions caused damages or a disadvantage to the company. Germany provides an example of this. Its Konzernrecht deals with the case where a stock corporation is the dependent company, because the powers and competences of the shareholders meeting are limited and the board of directors has all the residual powers. These rules do not include the limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) because in this type of company it is foreseen that the shareholders may provide mandatory instructions to the managers. There are a variety of different solutions in comparative law on this subject. The Argentine General Company Law establishes for corporations that shareholder meeting resolutions which are in accordance with the law and the articles of association are binding for all shareholders and for the board. On the other hand, the law provides that the board of directors is in charge of the management of the corporation’s business, and directors have to fulfil their duties with loyalty and the diligence of a good businessman, under penalty of being responsible for damages if they fail to do so. Shareholders have no such professional duties or liabilities. Therefore the prevailing view in Argentina is that shareholder meeting resolutions that do not meet the standard of a diligent businessman’s decision or are not compliant with the law, do not bind the directors and, if executed by them, their liability is not waived. The same applies to limited liability companies. Similar questions are raised in other jurisdictions. Just to compare: whereas in Sweden the Companies Act establishes a hierarchic order -the board must comply with instructions from the shareholders meeting provided they are not illegal-, the Dutch Supreme Court ruled already in 1955 that the shareholders meeting does not have a higher power than the board, that each organ has powers of its own and that the other organ has to respect their limits. Therefore, in the Netherlands shareholder meetings do not have a general authority to issue binding instructions to the board on matters
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which are within the latter’s competence. In relation to private limited companies this rule has changed in more recent years: shareholders may now instruct the managers, who must follow the instructions except in the cases where these are against the interest of the company. In contrast, the Greek report informs that, if the board of a corporation acts in compliance with a decision of the general assembly, board members are not liable. As the Greek report further informs, this is the way to hold directors harmless and shift liability, if any, to the controlling shareholder. As will be discussed later on, these sorts of issues may become relevant for directors’ liabilities when following, or not, instructions from a controlling shareholder. There is, nevertheless, a common frame which contains all these differences: the means of control are organic, meaning that the control is set on the internal decision-making power mechanics and does not include the power that may be exercised from outside the company’s organization as a company law problem. This must be carefully borne in mind because some jurisdictions include in their definition of control not only the organic control referred to above, but also the exercise of a dominant or prevailing influence via special links, typically contractual. This is the case of Italy, Argentina and Uruguay, which include the notion of external economic control in the definition of control provided by their respective company law legislations. This broader definition does not refer to the German sort of domination agreements, which are not allowed except in a handful of countries, because these so-called enterprise agreements give one party the power to issue mandatory instructions to the board of the dependent company, thus establishing a clear domination on an organ of the latter. The Polish Commercial Companies Code also contemplates this type of enterprise agreements when, besides the usual standards of majority of votes at shareholders meetings and the right to appoint or remove the majority of the board members of the dependent entity, it also includes in the definition of dominant and dependent companies the case where a dominant influence on the activities of a company is carried out on the basis of a management or profit transfer agreement (Art. 7). Art. 2359 of the Italian Civil Code, in addition to defining control as the situation under which a company has the majority of the voting rights at an ordinary shareholders’ meeting or enough voting rights to exercise a dominant influence at such meetings (organic internal control), also includes in the definition of control the cases where companies are under a dominant influence of another company as a consequence of a specific contractual relationship with the latter (economic external control). Again, the contracts comprised in this definition do not include the German type domination agreements, which are not permitted except in those countries which expressly foresee them.
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The reference in the Italian Code is to ordinary bilateral contracts where one party has a strong power over the other. Some examples provided by the Italian literature of cases that could be (but not necessarily are) meant to be included, are franchise agreements, project financing agreements and the like. This model has been followed by the Argentine company law, as amended in 1983, and later by the 1989 Uruguayan company law. The wording of these two pieces of legislation is even broader than the Italian provision, in so far as it includes not only contractual links, but any other special links among the concerned entities.13 In France the definition of control for consolidation purposes includes the cases where “a dominant interest is exerted over the company by virtue of a contract or the terms and conditions of its memorandum and articles of association, when the applicable law allows this”. This formulation is unclear, and not sufficient information is available to allow us to determine whether the intention is to include the so called economic external control, as Italy, Argentina and Uruguay do. In any event, save for accounting consolidation purposes, in France the presence of control alone has no consequences. From the company law perspective it does not make much sense to give the same treatment to the situation where what is at stake is the interference of an external power in the decision making process and the consequent loss of independence of the dependent company and of its own willpower (with its inherent risks for the company and the interests attached to it) and the very different situation where pressure is exercised by means of a bilateral contract under which one party has the stronger and the other the weaker position. This is an ordinary private contract law problem and the disputes and abuses that may arise under this type of relationship need not and cannot be resolved with the tools of company law; the general contract law remedies suffice. Indeed, in the cases of organic control a reaction by the dependent company against the abuses of the dominant party is unthinkable, for the simple reason that the will power of the dependent company is no longer its own. In contrast, under a bilateral contractual relationship the weaker party can make use of its independent will to defend itself and exercise its right not to be abused. This is the reason why German case law has for a long time decided that this sort of external control is not a matter of company law, but of general contract law.14 Notwithstanding the above, and despite the fact that there is no specific provision to back it, the Greek literature tends to include long term contractual relationships such as franchise 13 Art. 33, par. 2, of the Argentine Company Law and Art. 49 of the Uruguayan Company Law. 14 BGH, Beton und Monierbau AG, BGHZ, 90-381. Case law in Italy, Argentina or Uruguay, as far as we know it, hardly ever needed to make use of the external contractual control concept to decide cases, for instance in the very frequent car dealer or franchise contractual disputes.
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agreements in the concept of control. The Turkish Commercial Code, in turn, includes in its definition the broad idea that there is control if a company is able to keep another company under its control in any other way. Such a broad definition is criticised by Turkish scholars on the basis that it opens the door for uncertainty as to whether external control is included, for instance, in cases where a bank provides substantial financing to a company. In some cases the definition of control allows a combination of more than one factor. Such is the case of Japan, where, besides a majority shareholding, control may be achieved by combining a minimum of 40% of the voting rights with other factual influences (like overlapping board members) over the company’s financial and business decisions. But de facto power alone is insufficient. I repeat that my criticisms to any broad definition of control are made from the perspective of company law, where duties such as those related with consolidated financial statements and disclosure cannot be imposed on the basis of imprecisely defined relationships, which also depend on facts like the exercise of a dominant influence, a circumstance that needs to be proven. And it is also company law that in cases of control needs to protect minority shareholders and creditors with instruments aimed at establishing an equilibrium to compensate the domination power. But when the perspective is a completely different one, like the protection of competition in the market or some tax issues, a much broader definition of control is acceptable. Just to take an example, whereas the 1976 Brazilian Corporation Law does not include such an extended notion of control, in the field of competition law a resolution by the relevant administrative authority stated that the means to exercise a relevant influence include loans, guarantees, supply agreements, etc. Polish definitions of domination also vary from one area of law to another. For competition protection purposes, for instance, Polish law adds to the traditional majority shareholding and right to appoint or remove the majority of the board members the case where more than half of the board members are also board members of another company.
2.3
Parties to the Control Relationship
There are differences with respect to what kind of persons may be defined as controlling or dominant persons or entities, and for the purpose of which laws, as well as with regard to what entities may be qualified as controlled or dependent. The issue of who may be considered a dominant person is also dependent on the specific purpose of the definition of control in each field of law. For consolidation of financial statements and accounting purposes only a legal entity can be bound to produce such statements. For capital market or competition law purposes, or for the application of rules on
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related party transactions, it does not matter which kind of person is the controlling subject. As far as liability is concerned it is an issue of legislative policy to decide how far up the ladder one should go.
2.3.1
Controlling or Dominating Party. Ultimate Controlling Person With regard to who may be considered the controlling shareholder the differences are larger than the ones concerning the dependent party, which is always a company. Some legislations stick to companies only, others exclude natural persons,15 some others, like Germany, accept that any person, whether a private company, association or foundation, a natural person and even the state or any of its entities may be the subject of group regulations and liabilities. German law sets only one condition: the controlling party must qualify as an enterprise. An enterprise is of course not a person or an entity, but § 15 of the AktG uses the expression to encompass any person, regardless of its type, whether a natural person or a legal entity, who for his own account develops a business enterprise activity or who has a relevant interest in an enterprise other than the controlled company. Any such person qualifies as a dominant party and is therefore subject to regulations on related enterprises and groups. As some German authors have explained, the difference between a private shareholder, even a majority shareholder, and a controlling party, is that the former’s main interest is aligned with that of the company, whereas if that shareholder is an “enterprise” the risk of a massive conflict of interests16 arises because the controlling party may give preference to its entrepreneurial interest outside the controlled company rather than to the interest of the latter. With the exception of consolidated financial statements, this comprehensive German type definition of controlling person has also been accepted by the case law and legal literature of other countries as the correct interpretation of their respective national laws. Such is the case of Argentina. The wider notion of controlling person is also generally adopted by national legislations dealing with other fields of law, such as Competition and Environmental Law. Different legal systems also offer different views and solutions with regard to the issue of joint control or domination. As in Germany, the 2012 Turkish Commercial Code applies to the enterprise which is on the top and controls the group, regardless of whether it is a natural person or groups of them, any type of legal entity, including public entities, or any combination of the above. But in other countries, like in Belgium and also at the European law
15 Like the Netherlands, where only a legal entity, and not a natural person, can qualify as parent. 16 The Swedish report refers to an implicit conflict of interest.
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level,17 the ultimate shareholder, meaning a natural person, is normally not subject to group law rules, with the exception of the field of banks. The Swedish Companies Law requests the parent company to be properly formed and registered for financial statement consolidation purposes, but the subsidiaries may or may not be registered, and they may be local or foreign. Singapore law defines the ultimate holding company as the one which is not itself a subsidiary of a holding company, thus seemingly excluding natural persons from the definition of controlling party. In Italy the definitions of control refer exclusively to controlling companies and the regime introduced in 2003 only refers to direction and coordination activities carried out by companies or entities, but not natural persons. Natural persons may be held liable, nevertheless, in pathological cases which are not the ones considered in this part of the amended Civil Code. The 2003 regime addresses the situation where an organised and coherent group activity pursues a unitary objective. The main liability is that of the company or entity carrying out the direction and coordination activity, but the second paragraph of Art. 2497 extends such liability jointly and severally to any person who took part in the damaging event and knowingly obtained a benefit from it. This personal liability is limited by the extent of the obtained benefit. Different Courts and commentators adopt different views when it comes to determining whether such liability is contractual, in tort or both, depending on the identity of the protected person (contractual if shareholders, in tort if creditors), with different consequences in so far as the burden of proof is concerned. This will not be discussed here. The French Commercial Code provides two slightly different definitions of control, respectively in Arts. L233-3 and L233-16. To impose the consolidation of financial statements, the latter requires the controlling party to be a company, whereas for other purposes the former accepts that any person, whether legal or natural, can be deemed to control a company when the legal requirements are met. Both definitions include the direct or indirect holding of a majority of the voting rights (which is presumed if more than 40% of those rights are held and no other shareholder holds a larger fraction), the situation where that majority is held by means of an agreement with other shareholders, and that where one has the power to appoint or to remove the majority of the directors, if this effectively determines the decisions taken at that company’s general meeting. It is interesting to mention the case of Austria, where regulations refer to particular types of companies, or even to other entities like private foundations, cooperatives or associations. The most elaborate rules are those provided for stock corporations and the differences have been further 17
At least according to the High Level Group of Company Law Experts.
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developed by the Courts. For instance, whereas common direction in all spheres of the subsidiary’s business is the key element to define control by companies, for private foundations it is enough if it provides guidance on key parts of the subsidiary’s business. Other countries’ laws allow for a broader range of persons who may be qualified as controlling parties. Such are the cases of Brazil, Argentina and Uruguay.
2.3.2 The Dependent Entity Subordinated groups are generally regarded as entrepreneurial concentration combinations in which a dominating person has the power to exercise a relevant degree of influence on the organic decision-making process of the subordinated, dependent, or controlled entity. It is therefore common ground that this phenomenon only arises when a company is in the position of the controlled or dependent entity. Indeed, it is impossible to influence a natural person’s will from the inside of its body or psyche. Legal entities other than companies are seldom mentioned in a subordinate position, although under Dutch law any legal entity, save for a foundation, may qualify as a subsidiary.18 It has been pointed out that not any type of company can be, in fact, organically controlled. This phenomenon has been described as that of control resistant types of companies. Cooperatives fall under this category in most jurisdictions, where the “one member–one vote” principle is the rule. In Finland and Poland, however, a cooperative may be a subsidiary company. Sociétés en comandite are also typically control resistant companies.
frequent in the areas of banking and insurance, where the capital requirements are of the essence of such activities. The AktG only takes a note of cross-shareholding when it exceeds 25% of the share capital, in which case it bars the vote of the shares in excess of that percentage. In a listed company the vote may not be used to elect members of the supervisory board. Croatia has adopted the same flexibility. In Italy cross-shareholding between parent and subsidiary is strictly limited (Cod. Civ., Art. 2359 bis) and setting up companies or increasing their capital through cross underwritings is completely forbidden (Cod. Civ. Arts. 2359 quinquies, and 2360). In any case, the controlled company is bared from voting its shares in the controlling company. Argentine law follows a similar system.19 In other national legislations, such as the United Kingdom,20 Brazil and Uruguay,21 cross-shareholding is completely forbidden. In Singapore a subsidiary cannot hold or vote shares in its parent company. Taiwan defines cross-shareholding differently: if two companies have one third or more of the total voting rights in each other, they are considered mutual investment companies. Their respective voting rights are restricted to one third, except if one controls the other. If two mutual companies own more than half of the voting rights in each other, they are considered part of a control relationship. A later amendment of the law barred the subsidiary from buying or accepting the pledge of shares of its controlling parent, but it is not retroactively applied.
2.5 2.4
Cross Shareholding
In countries where share capital plays a role for creditors, cross shareholding entails the risk of capital dilution in both companies. This is mentioned here because it may be the instrument to create a group or at least to establish some organic links between two entities. Besides the patrimonial issues, it may also give rise to risks of management perpetuation and lack of proper shareholders’ control. In the absence of limits, both companies might become the controlling shareholder of the other, thus allowing the management board to control both shareholder meetings. That is why in the US subsidiaries are generally not allowed to vote the shares they own in their parent corporations, thus avoiding the risk of directors’ circular voting. It is therefore surprising how flexible the German legislation and practice has been in this respect, and the fact that this phenomenon still remains 18
Besides legal persons foreseen in its national Law, the Dutch report provides further examples: a foreign company and a Dutch Societas Europaea.
The Dynamic Element
As stated before, besides the legal position of control or domination, in order to define a group of companies a second factual entrepreneurial element, a unified or common direction or a common management, or another similar dynamic factor, is required. Few national laws refer to this dynamic element: unlike the concept of control or domination, which is a legal concept, this element is economic in nature. It resides in the field of business administration and is linked to the group’s organigram. Such is the approach of the German AktG of 1965 (§§ 15/18), § 18 of which introduces the notion of einheitliche Leitung (unified direction) to state that, when it is added to a control structure, we are in the presence of a Konzern (group). How much or what fields of the business direction, in other words, what degree of unified direction is needed to meet the legal standard, is a matter that has been discussed by German as well as foreign scholars, but the details of such discussions are not relevant to the 19
Art. 32, General Companies Law. 2006 Company Act, Section 136. 21 Art. 52, Commercial Companies Law. 20
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purposes of this report. The Croatian report points out, on the other hand, that the unified direction has to be of a continuous nature, that it has to encompass all the group companies and that it must be rather comprehensive. In Austria the legal definitions of group are similar to the German ones: the key factors are that the group companies are subject to a common direction (einheitliche Leitung) or that by virtue of participations or otherwise an enterprise exerts a controlling influence (beherrschender Einfluss) over a company. Common direction by a parent company is a factual issue which, according to Austrian commentators, can be achieved by any means, including contractual relationships. Controlling influence, or the possibility to exert controlling influence, may be based on participation, personal ties, contractual arrangements, or any other way. Definitions are only relevant when consequences are attached to them. Conversely, it would not be a good law-making technique to rely on a concept such as group of companies with the aim of attaching legal consequences to it, without providing the tools needed to know what is exactly meant by it. There may perhaps be some difficulties in countries which, like Turkey, devote a considerable set of rules to groups, but do not mention the element of unified direction at all. In contrast, Argentine Insolvency Law mentions the concept of submission to a unified direction of a bankrupt company in the interest of the controlling entity or to another one under the same control, as one factor, besides an undue deviation from the company’s interest, to allow the extension of the bankruptcy to the controlling person. Dutch law provides a definition when it describes a group as an economic unit in which legal persons and partnerships are organisationally interconnected.22 A centralized management is not mentioned but it transpires that the definition does not refer to the static power to control another company, but rather to the actual exercise of such power. Not even majority shareholding is thus required in this context. As already mentioned, the Italian amendment of the Civil Code in 2003 introduced a very sophisticated system for the protection of shareholders and creditors of group companies. Unlike the classical German concept, it neither uses the word group nor the expression unified direction. Instead, both for disclosure and for duties and liability issues, the central regulation is based on the entity which carries out “companies’ direction and coordination activities” (Art. 2497), thus establishing a new definition of the activity the company law is interested in. It is also worth mentioning here that especially in Germany much attention has been paid to the question of which organs of what company have or should have the power to decide about different relevant matters throughout 22
This description was introduced at the time of the implementation of the Seventh European Directive.
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the various levels of the group entities. This was the main subject of the famous Holzmüller decision, to which we will come back later.
2.6
Some Further General Comments on Groups
Despite the existence of some academic proposals to modify the legal approach, the first of which was made over a century ago, it is important to recall that the group is not recognised as a unified business organisation, nor is it a legal entity, nor does it have its own standing before the courts of any country. This is so without prejudice to the fact that some jurisdictions recognise the existence, to some larger or more restricted degree, of a group interest. The French 1985 Rozenblum decision, to which we will come back later, is an example of this. Therefore, as stated in several national reports, there is no group liability. In principle, each individual entity is liable for its own debts and obligations: only under very specific circumstances liability may be imposed upon another group company, and in a few countries a bankruptcy declaration extended to it. There are however some situations where, for certain limited purposes, the law looks into the full group picture. An example is the German law on employees’ codetermination, which foresees that for the purpose of workers’ representation, if the established thresholds of employees are met taking into account the whole group, such representation will take place only at the supervisory board of the parent company. Similarly, in some countries (Germany, Italy, Argentina, etc.) group insolvency procedures have rules that deal with all of the group companies’ insolvency together. Also in areas such as competition law and compliance, at the European level sanctions may be imposed on the group as a whole, and not necessarily be restricted to the individual company. In Greece, while a group is not a legal entity, there is literature that refers to a “form of financial entity between affiliated businesses” and therefore underlines a divergence between the unity of the group and the multiplicity of its members.23 At a different level, in some countries there are commentators and case law that point to the attribution of knowledge (Wissenszurechnung) of facts or of juridical acts to group members other than the one who was a party to them, at least under certain circumstances of unified direction or collaboration between the different members of the group. This may be approached as a specific application of some 23 In this sense, a Supreme Court decision declared that a group was a consortium that, despite not being a legal entity, could have rights and obligations and be an employer.
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form of piercing the corporate veil, which should not only be regarded as a tool to extend liability but also, as will be explained further below, other relationships. In principle there is no legal recognition of the group as a unity, but in some aspects, especially but not only in relation to mandatory public law regulations, groups of companies are treated as if they were a single unit. This is why most national laws have no special regulations dealing with specific group of companies’ issues but instead rely on the general principles of company and insolvency law. Such is the case of Spain, Finland and most of the other countries considered in this report. This includes jurisdictions like the Netherlands where, despite referring to groups as economic units in which legal persons and partnerships are organisationally interconnected,24 for most of the issues the law relies on general company law. A specific advantage in Dutch law is that a so-called triangular merger may be arranged, allowing shareholders of a company that is merged into another to receive shares and become shareholders, not of the absorbing company, but directly of another company within the group. Finally, it is worth mentioning again that, whereas the laws of some countries differentiate the rules concerning groups according to the type of company, most countries apply the same general rules for all types of companies.
3
Legal Models and Approaches to Groups of Companies
It has already been stated, and it is common knowledge, that the peculiarities of groups of companies can be approached either by means of a special corporate group law or through the application of general company and civil law rules and principles. Both approaches are consistent with the universal existence of mandatory accounting and disclosure regulations.
3.1
Jurisdictions with Special Corporate Law Regulations on Company Groups
As expressed above, the first legislation which provided for a specific regulation on groups was the German AktG, which was meant only for Stock Corporations under the control of an enterprise. Since then, the application of these provisions by analogy to other types of companies, mainly the GmbH, or 24 The Dutch report points to the organisational interconnectedness being also structured through a combination of a minority shareholding and special voting rights in the articles of association. A contractual basis is also mentioned, albeit without specifying which types of contracts would be a part of it. It is unclear, for instance, whether joint venture or cooperation agreements between two or more entities are included or left aside.
limited liability companies, has been the object of discussion both among commentators and by the judiciary. The AktG rules also apply to a Societas Europaea registered in Germany. The main characteristic of the German approach is the admission of different forms of so-called enterprise agreements, which include a strait domination agreement and a profit transfer agreement as well as profit pool and enterprise lease agreements. The last one allows the business to be run under the company’s name but on the other party’s behalf. Under such agreements, which need to satisfy some formalities and foresee a protection for so called external minority shareholders and creditors, the board of directors—but no other organ—is bound to follow the instructions of the dominant party to the agreement. The instructions are to be followed even when they are harmful or detrimental to the dependent stock corporation,25 with some limitations,26 and provided that what has been imposed upon the dependent company against its own interest serves the interest of the dominant enterprise or that of another company under the control of the latter. This last condition or limit may be seen as the basis of the concept of group interest further developed and discussed in later years. But since entering into such enterprise agreements has not become as frequent as the legislator may have envisioned, the AktG also has set rules for the case of domination in the absence of enterprise agreements, the so-called de facto groups, which in practice outnumber the contractual groups. While the general definitions of control and groups (Konzern) apply generally to all types of companies, the rules for contractual and de facto groups apply specifically and exclusively to the cases where a stock corporation is the dependent or controlled company. Another instrument provided by the German AktG, as well as by the Croatian Commercial Companies Law, to establish the right to dominate a corporation, is the Eingliederung or incorporation (§§ 317 and ff), which allows a stock corporation which owns 95 % or more of the shares of another stock corporation to squeeze out the minority shareholders in order to become the only shareholder, thus integrating that company into it and its operation. Decades ago, some commentators referred to this as a quasi-merger. It is of course not a merger because the dependent company survives as a separate legal entity and the incorporation may be reversed. Brazil followed the German example. Its 1976 Corporation Law legalised a conventional or de jure group. The agreement, which is not a domination but a subordination agreement, must foresee a combination of resources and 25 It is important to note that under no legislation contemplating these agreements can the dominant enterprise act directly on behalf of the dependent company. 26 If the instructions are in conflict with the purpose defined in the articles of association of the dependent company and if they endanger such company’s existence.
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efforts to carry out the companies’ purpose and must be filed with the Register of Commerce (Arts. 265 and 271). Unlike the German model, however, it does not provide rules for de facto groups, other than when it defines control (which the new Civil Code also defines, alongside its definition of affiliated company). In practice, contractual groups are nearly inexistent. There seems to be more than one reason for this. One is that dissident shareholders have a withdrawal right for which the dominant entity may not want to pay. Another is that in order to conclude such an agreement it is mandatory for the dominant company to be the majority shareholder of the controlled company or companies, which alone give it sufficient domination power. A general group interest is recognised under Brazilian law, but there are no clear boundaries vis-á-vis the interest of the individual subordinated companies. This leads to uncertainty with regard to minority shareholders’ rights and protection. Instructions may be given to the dependent company’s board and have to be followed even if disadvantageous, but always limited by the frame of the subordination agreement. The companies have to carry the designation as a group. The group is not a legal entity but, curiously enough, in the Corporation Law’s Motives the group is referred to as an unincorporated company. Both Brazilian and foreign commentators have criticised this statement and the regulation as a whole. Portugal was the third country to have a comprehensive regulation of groups in its 1986 Commercial Companies Code, under a Title on Affiliate Companies. The system was basically built on the ideas of the German model with relevant improvements, some of them inspired on the French Cousté drafts of the seventies. Its structure is based on the definitions of a single shareholding relationship (10% or more shareholding of one company in another), a crossshareholding (at least 10% of each company in the other), a domination relationship (one company is able to directly or indirectly exercise a dominating influence over another, something which is presumed if it holds the majority of the capital, or of the voting rights, or of the right to appoint the majority of the management or supervisory board), a group relationship (total domination and horizontal groups, the latter not dealt with in this report) and subordination contract. Case law has recognised different examples which qualify as dominating influence mechanisms, both organisational and factual. These include contracts, personal ties, strategic market positions, etc. In a context where the exercise of the power of control and the primacy of the overall interest of the group are recognized, the protection of the subsidiary, its minority shareholders and its creditors is the outspoken specific purpose of the legal group system. As the Portuguese report states, this system serves the purpose of institutionalizing the “power of direction of the parent corporations and of the corresponding protection for
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subsidiary corporations, their minority shareholders and creditors”. Nevertheless, the Portuguese reporter criticises the imbalance that results from the fact that, whereas the law provides rules on de jure groups, it does not provide any protection for factual groups. The general company law rules apply to these and, at least in theory, the autonomous interest of the dependent company has to be respected. The rules on subordination contracts are at the core of the group system in Portugal. This system provides the parent with a legal power of direction over the management of the subsidiary. But subordination contracts are hardly ever used in practice. The most frequent group structure is, instead, the total domination, based on a hundred percent ownership by the parent, similar to the German Eingliederung regulation. Total domination may exist from the outset, or it may arise at a later stage through the exercise of a squeeze out right when the parent owns 90% or more of the equity capital of another company. When entering into a domination (or subordination) agreement, the parent company has to cover the annual losses of the subsidiary, it is directly liable for the latter’s debts, and it has the duty to acquire the minority shareholders’ shares. The agreement gives the parent company the right to issue instructions only in relation to the management of the subsidiary. Instructions to the shareholder’s meetings are not allowed. Some special statutes, or the articles of association of the subsidiary, may bar certain kinds of instructions, the contents of which cannot consist of an asset transfer without appropriate compensation. The provisions of the Portuguese Commercial Companies Code apply to stock corporations, limited liability companies and limited partnerships by shares, as long as they have their seat in Portugal. It therefore does not apply to multinational groups. This is criticised especially where the parent entities are foreign companies, which are thus not subject to the Code’s mandatory rules.27 This is different in the case of a total domination group, where the rules also apply to a foreign parent company which forms a group by initial total domination with its wholly owned Portuguese subsidiary. There are no reports from Hungary and the Czech Republic,28 countries which, as Croatia and Slovenia, also followed this model. They did so, about 30 years after the German AktG was enacted, by legalising domination agreements and the other so-called enterprise agreements. But while the German AktG is applicable to dependent corporations only,
27 In this respect it is worth mentioning the 2013 European Court ruling in the Impacto Azul case (June 20th, 2013, proc. C-186/12, Impacto Azul Lda. c. BPSA 9) where it was decided that a rule like Art. 501 of the Portuguese Commercial Companies Code which foresees the liability of a Portuguese but not of a foreign parent company for its subsidiary’s debts (an inverse discrimination) does not conflict with European freedom of establishment and non-discrimination rules. 28 Nor from Albania, who did so in 2008.
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the Slovenian Company Act covers all types of companies. Polish law also has rules inspired in the German system. Taiwan also adopted the German approach in its 1997 Company Act, which provides no rules on domination contracts but does allow the controlling company to impose unprofitable business transactions on dependent companies for the benefit of the group. Turkey’s new Commercial Code of 2012, also following the German AktG model, devotes a subsection to groups of companies. Its goals are twofold: (1) to protect the subsidiaries’ shareholders and creditors’ interests; and (2) to facilitate the management of the group by granting the parent certain rights to give instructions to the dependent companies. To qualify as a group in Turkey there must be a controlling company and at least two controlled ones. There is also a specific regulation on domination agreements, which have to be registered with the Public Register of Commerce and disclosed to the public. Such agreements allow the dominant company to give instructions to the dependent company. The Turkish report informs that these agreements have not yet been embraced in practice. As mentioned before, a different specific group regulation was introduced in Italy by legislative decree Nr. 6 of January 17 2003 (Arts. 2497/2497 septies), which amended its Civil Code. This reform departed from the German model29 and legalised group activities in a sophisticated way, under certain conditions defined in the Italian report: a firmly established group, positive action taken in the interest of the group in conformity with the group’s coherent policy and preservation of the financial balance within the group, by means of compensation of the negative consequences imposed upon subsidiaries. This interesting system was enacted without any reference whatsoever to the word group.30 It was rather built around the activity of direction and coordination of companies (Direzione e coordinamento di società), in order to establish a specific liability system applicable in the absence of payment of compensatory damages. We shall address this later on. This activity of direction and coordination of companies is not defined by the Italian legislation and is therefore dealt with as a factual concept. According to a relevant scholar cited in the Italian report, the matter of related companies is treated as a powersubjection relationship and the new rules rely on the dynamic 29 Nevertheless, Art. 2497 septies offers some doubts, since it foresees the case of an activity of direction or coordination carried out by a company which does not fall under the definition of control of Art. 2359 but is entitled to carry out such activity on the basis of an agreement or a clause in the company’s articles of association. The question of what sort of agreement is envisioned arises. Does it include domination agreements of the German type? 30 This probably resulted from the fact that, according to some Italian scholars who most likely had some influence in the law-making process, group only defines a technique to organise a single economic unity and has no legal meaning.
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notion of direction and coordination and not on control, which is a legally defined static situation.31 Notwithstanding the fact that the core of the regulation lies on a factual situation, besides improvements in some other aspects previously not provided for, the new regulation has improved transparency by imposing the need for decisions to be motivated by the interest of the group.
3.2
Reliance on General Company Law Rules
In many countries, in the absence of a specific legal regulation, domination agreements are considered illegal because of their inconsistency with different company law principles. This is mentioned in the Swedish report: no agreement or provision in the articles of association may deprive the board of its legal powers and competence to make decisions on the company’s business affairs. Domination agreements are also at odds with the basic company law principles which derive from the fact that, all shareholders being exposed to a common risk, they must also share a common interest. In addition, the protection of the company’s patrimony and the consequent protection of creditors and third parties must be provided for (i.e. a company must act according to its own interest, which in many jurisdictions is called social interest). Unless otherwise permitted by the law, management board members must fulfil their duties with loyalty vis-á-vis the company and its shareholders and act in accordance with the standard of a diligent businessman. The prohibition to assign their organic duties and responsibilities to anybody else is also almost universal. These principles would all be breached if the board were bound to follow detrimental instructions imposed from outside the company. This would be only possible if provided for by the law, alongside an adequate protection of the interests at risk.32 UK law is commonly mentioned as the prototype of legal system that when dealing with company law conflicts, does not make any distinction between independent companies and companies within a group: the same principles and remedies apply to all companies. With minor variations, most countries follow this approach. Of course, groups of companies would not exist if companies were not allowed to participate as shareholders in other companies. It is nowadays generally accepted that groups may be formed by creating or acquiring or participating in an indefinite number of legal entities. But in the US, during most of the nineteenth century, 31
Art. 2497 sexies of the Civil Code establishes as a rebuttable presumption that there is direction or coordination activity in case of control as defined in Art. 2359. Given that the presumption is rebuttable, there may be control without direction or coordination activity. 32 It is therefore somehow surprising that in Greece there are doubts around the possibility of concluding domination agreements of the German type, without a legal rule allowing that type of agreement.
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this was generally not allowed. In the United Kingdom early examples of a company holding shares of another were challenged as being ultra vires, but this was dismissed as early as 1867. In countries which allow contractual or de jure control or domination, the also existing de facto groups are subject to general company law principles, unless of course special rules are provided, as is the case in Germany with regard to corporations (§§ 311/318, AktG). France has no special rules for groups, but its courts developed the Rozenblum doctrine to mitigate, under some specific conditions, the impact of general company law principles by admitting a more flexible balance between the interests of the single company and that of the group. This is why some legal literature classifies France and some other countries which partially followed that path as a third approach between the two traditional ones. We will come back to this doctrine because there is a trend, especially in Europe33 but also elsewhere, to follow it. In its own way, the new Italian 2003 rules also follow this approach.
3.3
Disclosure, Accounting and Consolidated Financial Statements
The rules developed at the national and supranational levels concerning disclosure, accounting and financial statements are of utmost importance to the protection of all the interested parties which might be at risk as a result of the power inherent to a dominant or controlling position. These risks concern both the dominant and the dependent entity and it therefore does not matter which sort of group of companies is at stake, nor if control has been established by means of a domination agreement or de facto by holding sufficient votes to prevail over the dependent company. That is why the regulations concerning disclosure, accounting and consolidated financial statements apply to all kinds of group and domination structures. In other words, transparency about group relationships of all kinds is essential for the protection of shareholders and creditors, as well as for stakeholders in general. Disclosure rules and clear information in financial statements and ancillary documents are important not only because they allow third parties to be aware of the potential risks resulting from the existence of control or of a group, but also because they enable a distinction between those profits or losses of a company resulting from its market activity and those which were positively or negatively conditioned by the company being a group member. The variety of detailed rules provided 33
Forum Europaeum Corporate Group Law, High Level Group of Company Law Experts, Reflection Group, the Action Plan on European Company Law and Corporate Governance, and more recently The Informal Company Law Expert Group.
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for this purpose at the national and supranational levels is quite vast34 and goes beyond the scope of this report. The different national reports highlight the importance of these rules, and the fact that accounting and financial statements were the subject matter of the first company law European Directives is the best evidence of its relevance. It has been reported, for instance, that in Finland the most significant legal obligation of a parent company concerns accounting and financial statements. This is also true for all other countries, most probably with no exceptions and notwithstanding the existence of other issues, like minority shareholders’ protection or liabilities within a group, which are more visible and give rise to more interesting discussions. Importantly, where consolidated financial statements are required at the level of the parent company or the head of the whole group, a duty must be imposed on the subsidiaries to timely provide the necessary information.35 This is not always expressly provided by the laws of the different jurisdictions and, whether it is or not, raises the question about the minority shareholders’ right to be provided with the same information. The answer to this question in some of the national laws is that there is no obligation to provide the same information to other shareholders. In others the situation is not so clear because the refusal to provide that information is said to breach the principle of equality among shareholders. Not only is it relevant to disclose controlling shareholding: a substantial participation which may eventually lead to gaining control over a company is equally important. This is why under most jurisdictions the duty of information applies to the existence of links between companies, including minority participations over a certain level. For transparency purposes the 2006 Companies Act of the United Kingdom establishes the duty to disclose the interest in a company’s shares as well as the obligation of the company to keep a public record of people (only individuals) with significant control over it. Similar considerations apply to accounting rules, where consolidated financial statements are mandatory for a parent corporation, which must include the results of its subsidiaries. European countries have implemented Accounting Laws or rules in harmony with Directive 2013/34/EU, applicable to unlisted companies. The obligation to provide consolidated financial statements is imposed upon a parent company that qualifies as such according to eight different criteria, such as majority of voting rights—including rights acquired through shareholders’ agreements–, the right—as a shareholder—to appoint or revoke the majority of the members of the 34 Just as an example: Greek accounting standards provide that transactions with affiliated entities are to be disclosed in the addenda of financial statements. 35 Finland and Italy have such provisions in their national laws.
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management or supervisory board, the right to exercise a dominant or prevailing influence or the exercise of a unified direction on the basis of the articles of association or a contract. For listed companies, the International Financial Reporting Standards apply for the purpose of consolidating accounts. Another similar example is Dutch law, where there is a duty to consolidate the financial statements and ancillary information not only from subsidiaries but also from other legal entities which are deemed to be part of the group. A few jurisdictions, like Cyprus and Spain, impose the duty to consolidate financial statements but exempt small sized groups from that duty. This is quite exceptional: most countries do not make distinctions on the basis of the size of the group. In some jurisdictions, like Japan, consolidating financial statements is not mandatory but optional. There are a large variety of details to be disclosed in the different jurisdictions, some of which also provide for some sort of shareholder’s inspection rights. The most common duty refers to the disclosure of a certain level of shareholding in public corporations. The capital market laws in nearly all jurisdictions impose a reporting duty whenever there are changes at different levels of share or vote participation. Additionally, in most jurisdictions directors are subject to the duty to disclose their own individual shareholdings in the company. The German AktG establishes the obligation of a shareholder who reaches a 25% participation to report it to the company under penalty of being barred to vote its shares. The Italian 2003 amendment to the Civil Code imposes a duty on the company to mention in its acts and correspondence the entity under whose direction and coordination activity it stands, and its directors have to file the data with the Enterprise Register and provide specific information in the Annual Report (Art. 2497 bis). Shareholders’ information rights are critical to their ability to exercise other rights. In some jurisdictions shareholders have individual and direct rights to request the information, which in some cases includes information on the business of other group companies, or at least on subsidiaries. In some other jurisdictions, like the Netherlands, the right to request information is vested on the general shareholders’ meeting. As many other legal systems, the Austrian AktG imposes on the management board the duty to provide reports not only about the shareholdings but also about the business relationship of the company with its subsidiaries. What is not so common about the Austrian approach is that, whereas the parent company must produce consolidated financial statements, shareholders are entitled to request at the ordinary shareholder’s meeting information about other group entities or about the whole group (Austrian AktG, § 118). Austrian law also establishes the duty to provide additional information and reports on, for instance, future business policies of the group as a whole, and not only of the parent company.
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Another example is the United Kingdom, where companies are bound to produce a directors’ report, and in larger companies also a strategic report. For companies that have to provide consolidated financial statements, a consolidated group director’s report is also mandatory in the UK. Japanese law, in turn, prescribes that the annual Business Report must disclose related party transactions, including whether the subsidiary took measures to prevent harm to its interests. Singaporean law provides for information rights, including each shareholder’s access to inspect some registers, as a means to protect minority shareholders. Finally, Dutch law allows dissatisfied minority shareholders to request an investigation of the affairs of the company, which may include other entities in which the company is a direct shareholder.
3.4
Other Areas of Law
From a different viewpoint, groups are also regulated or at least taken into account for specific purposes in various areas of law other than those which directly involve the company, its structure, it will making process, its internal conflicts and external liability or the protection of the interests that are at risk. These are the core problems addressed in this report, but in the following sections of this chapter we shall briefly address such other special regulations, as approached in different countries.
3.5
Labour Law
Many national laws include some form of protection for employees who are successively employed by different group companies. In Brazil, for example, joint and several liability is imposed on the parent as well as on the subsidiaries if the employee of an entity is subject to the direction, control or administration of another entity, as part of an industrial commercial or other economic group activity. In Greece the law provides that consecutive employment agreements with companies of the same group are to be treated as one labour relationship with one and the same employer. Taiwan’s labour legislation foresees that within a group the service years of an employee are to be added up for the purposes of calculating compensations at the end of the employment relationship. Finland has a Law on Cooperation that recognises groups at the national and European levels as a frame for its labour law rules. Portugal, in turn, treats the group as a unity in order to allow a parent company to transfer employees among its subsidiaries, and also to hold it liable for labour debts, including salaries, of the subsidiaries. In Poland there is no such thing as a group employee: employment contracts are only with the company who is the
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formal employer. But a 2016 Supreme Court decision made an exception in a case where the employee was sent to work for a subsidiary.
3.6
Tax Law
There are a large variety of tax regulations that approach groups of companies, and especially business transactions between related companies, in different ways. The variety of approaches is particularly present in relation to cross border groups and transactions. This renders the systematisation of this topic impossible. Accordingly, only a few examples of some interesting approaches will be provided here. Several countries admit some sort of income tax consolidation for group companies. This has the advantage that it allows to carry losses from one company to another and thus compensate profits and losses. The choice of a subsidiary’s type of company may be relevant to benefit from this tax transparency. Indeed, the main purpose of using some sort of domination agreement in Germany is to be able to carry out such a consolidation: this benefit is not available for de facto groups. In Austria a so-called tax group is admitted where the parent company has more than a 50% share in the subsidiaries. United States’ federal income tax law allows affiliate corporations to file consolidated tax returns, which, as anywhere else, has no bearing on the liability of one corporation for any other’s tax debts. Poland foresees the possibility of setting a so-called tax capital group, but this has disadvantages such as the inability to profit from tax exemptions that one of the companies might otherwise have been entitled to. In the Netherlands groups receive special tax treatment with regard to VAT and corporation taxes. For VAT purposes members of a group may be treated as one single subject, and where there is a 95% shareholding by the parent in the subsidiary a tax consolidation is permitted. Brazil imposes joint and several liability for taxes to all those persons which have a common interest in the taxable event. The Supreme Court ruled that common interest exists if members of a group perform the same activity that generates the taxable event.36 Croatian law defines affiliated companies and affiliated persons on the basis of what it calls a single risk from the tax law perspective, especially in relation to transfer pricing issues. Slovenia takes the existence of a group of companies into account for the correct calculation of several taxes, and especially in so far as intra group transfer prices are 36 Of all countries that made contributions to this general report, only in the case of Brazil a separate detailed report on the Tax obligations of enterprises within corporate groups was submitted.
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concerned. This is also mentioned as the main goal in the Finnish report, where the legislation also foresees a tax-deductible group contribution under certain conditions. In Greece a group is not a subject of taxation but there are special conditions for the taxation of transactions between affiliated companies. In Portugal groups are increasingly regarded as a legal unity, and not only as an economic one, because they are treated as the single tax subject responsible for paying a group consolidated income tax. Tax Law is also a field where the disregard of legal entity doctrine may play a role. For example, in a 1998 Cyprus case37 it was decided that transactions between two sister companies with the same shareholders where fictitious for tax purposes. In Argentina the classic Supreme Court decisions in Mellor Goodwin and Parke Davies of 1973,38 disregarded the legal entity of nearly wholly owned subsidiaries in order to prevent royalties which were paid to their parent companies from being treated as expenses for the purpose of deducting them from the subsidiaries’ income tax.
3.7
Competition and Antitrust Law
As is stated in the Italian report, unlike other areas of law, competition law is interested in the enterprise as a unified organisation acting under the same decision-making power, regardless of the structure of each entity. The sole focus is on the protection of correct and fair competition. This is why, when there is a group of companies, all regulations at the European and national levels address them as a whole. The logical consequence of this approach is that the relationship between legally independent companies that are part of the same group is irrelevant to the antitrust, merger control and competition protection rules. An Italian law of 1990 reflected this when it provided that groups of enterprises are to be considered as one unity for competition law purposes. The specific purpose of competition and antitrust law also influences the definitions that are provided in this area of law. For instance, for competition law purposes Polish law defines a group with reference to the case where all the enterprises (entrepreneurs) are under the direct or indirect control of one impresario, including a single businessman or a group of them. For competition law purposes the case where more than half of the board members are also board members of another company is also part of the relevant definition. As a matter of fact, however, no specific form of control or domination matters to the application of these rules. Some countries, like Greece, foresee that transactions between businesses of the same group are not to be 37
Stereo Development Co. Ltd. v. Commissioner of Taxation. Parke Davis y Cía. de Argentina SA (Fallos 286: 97); Mellor Goodwin SA (Fallos 287: 79). 38
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considered as restricting competition. But European antitrust law in general and Germany’s law in particular do not provide a specific privilege for groups, although the group may be considered as an economic unit if the member companies have lost their autonomy for the benefit of the dominant enterprise. In such a tight relationship, sanctions for breach of competition or antitrust rules may also be imposed not only on the company that committed the wrongdoing but also on other members of the group, typically the parent company. Portugal qualifies a group as a single enterprise for competition law purposes and defines it as “a cluster of companies that, while being legally independent, form an economic unity or are connected between each other by links of interdependency or subordination”, Control, in turn, is defined as “the power of an enterprise to exert a determining influence over the activity of another enterprise”. Competition, Antitrust and Public Procurement Laws also provide cases of disregard of the legal entity. In Cyprus, for example, a 1990 ruling lifted the corporate veil of two companies in a case where they both submitted an offer at a public bid for an airport duty free shop license. In some other precedents in this field the Supreme Court of Cyprus applied the economic entity doctrine.
3.8
Financial Institutions and Insurance Companies
Companies that are in the financial business or, in general, that deal with the public’s savings, including insurance companies, give raise to a special regulatory problem when they are parents to or subsidiaries of other such entities: the risks inherent to these activities that affect one company may have an impact on all the others. The problem is dramatically increased if a national regulatory authority has no jurisdiction over the parent or subsidiary because of the different national seats of each company. In most countries there are specific rules for groups in these fields, and there are also some efforts at the regional level to address the alluded cross border problems. As in relation to labour, tax and competition law, the reference in this report to financial institutions and insurance companies will be brief and quite superficial, as the matter exceeds the report’s core purpose. That said, it is important to understand that the main issues at stake in relation to this topic are not only the identification of the final owners of the companies and the existing links between them, but also the scope of the rules on credit diversification and risk management, or of any other rules imposed by the financial authorities to generally protect the public and the economy. As an example, in Austria the law on financial institutions refers to the credit institute group (Kreditinstitutgruppe),
which includes not only one bank or financial entity participating in another, but also financial holding companies which control more than one of those entities. Cases where one entity exerts a controlling influence on another with the help of a shareholder’s agreement are also foreseen by the regulations. In Croatia, affiliation is defined as any person or persons acting in concert that want to acquire 10% or more of the capital of a financial institution, an acquisition which requires the approval of the National Bank. Further requirements must be met when the 10% threshold is exceeded. The example of Italy reveals the type of objectives behind these regulations: a 1993 legislative decree provided parent financial institutions with the right to issue binding instructions to their subsidiaries in order to implement directives from the Bank of Italy. This was followed in 1998 by the same rule with respect to financial markets in relation to directives from the Stock Exchange Commission. At the European level, the French report refers to the EU Banking Recovery and Resolution Directive of 15th May 2014, which deals in some way with the concept of group interest when it establishes rules for the cross-border financial support of financial entities. These must have the objective of preserving or restoring the financial stability of the group as a whole, or that of any of the entities of the group if doing so is in the interest of the group entity providing the support. Financial service groups of companies are treated as a unified business under the Greek regulations. The same is true for Portugal with regard to the consolidated supervision of groups controlled by credit institutions and financial companies. In Poland the banking law includes special definitions on financial holding companies. Cyprus adopted the text of the European Directive 2013/36/EU to establish a consolidated regulatory supervision on banking and financial groups.
3.9
Foreign Investment Law and Investment Protection Treaties
Both areas of law may need to provide special rules in order to establish who is really behind for the purpose of meeting the applicable legal requirements where investments in certain activities are restricted to foreign investors, as well as to concede or deny standing to investors who seek protection under a specific investment protection treaty. In both cases it may be necessary to look at the whole group, and some of the criteria that are relevant for these specific purposes may differ from those applicable under company law. An example is Austria, where the Foreign Trade Law (Außenwirtschaftsgesetz) restricts foreign investment in certain activities when such investment involves 25% or more of the voting rights, alone or collectively. Therefore, controlling
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influence in this field has a wider scope than in other areas of law. Another example in a field where many issues have been solved by arbitration awards, from the perspective of a single country: for investment protection treaties, Slovenia provides protection depending on the place of incorporation of the relevant legal entities. But in some treaties the place of the principal seat of business is taken into account, sometimes as the only criteria and sometimes in addition to the place of incorporation. In Slovenia some commentators maintain that a holding company should have no standing to claim treaty protection.
3.10 Environmental Liabilities Who is responsible for ensuring compliance with environmental regulations and, consequently, who is liable for their breach and resulting damages? Following several principles of law (rarely a specific legal rule) environmental liability may be imposed on the parent company if it has provided the instructions, procedures or technical guidance leading to the environmental damage. According to EU Directive 2004/35/ EC on environmental liability with regard to the prevention and remedying of environmental damage, the Greek and Cypriot reports, for instance, mention that a parent company can be considered to be the operator for the allocation of environmental liability. But there seems to be a trend in some jurisdictions to go further and establish a duty on parent companies to actively ensure group wide compliance by means of appropriate preventive measures and guidelines. In France a substantive new regulation came into force on March 2017 with law 2017-399, which establishes a duty of vigilance of a parent and outsourcing companies in the fields of human rights, fundamental freedoms, personal health and safety, as well as the environment. This is clearly a matter in relation to which groups are especially addressed, and since the duty is imposed from the top to the bottom, it reaches direct or indirect subsidiaries worldwide. The French report makes very interesting remarks on the extended material, subjective and territorial scope of these rules and the conflicts it may cause.
3.11 Arbitration Different national jurisdictions approach the issue of arbitration to solve disputes within a company or corporation in very divergent ways. Just to provide examples in the opposite extremes of the spectrum, it seems that German stock corporations are not allowed to include arbitration clauses in the by-laws while, in contrast, the Argentine Capital Markets Law provides that any corporation that publicly
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trades its shares or bonds at a stock exchange accepts the jurisdiction of the institutional arbitration established by the stock markets for all disputes that may arise, including those involving company law matters. Only the shareholder or the investor has the choice of filing claims before the ordinary courts of justice. The articles of association may also include arbitration clauses which are mandatory for all shareholders. The question of jurisdiction, including the possible applicability of rules on arbitration, is of course relevant to the decision of where to resolve disputes within a group of companies (i.e. minority shareholders’ claims, directors’ and shareholders’ liability claims). In some cases, contractual arbitration clauses may be abusive if imposed by the dominant shareholder or the head of a group of companies and the choice of arbitrators may not guarantee the required levels of independence. The most frequently discussed issue, nonetheless, concerns the possibility to extend an arbitration clause to a member of a group of companies other than the one who signed and is the formal party to it. There are no statutory rules in any of the laws that are compared in this report that would allow this. But arbitration panels and courts have decided such issues both in cases where the non- signatory group company tried to file a claim invoking the arbitration clause and in cases where a group company that did not sign the arbitration clause is addressed as defendant or third party in the arbitration proceedings. A leading case (Trellborg) from the State Court of Justice of Sao Paulo adopted a commonly accepted approach: a group company that did not sign the arbitration agreement is only bound by it if it actively participated in the negotiation, execution or termination of a contract containing the arbitral clause. These are also the criteria followed in the famous French Dow Chemical cases, where the non-signatory group companies were the claimants.
3.12 Private International Law Attention is seldom paid to private international law problems in the case of cross border groups of companies. But there may be several problems and perspectives. The first one concerns the determination of each company’s lex societatis. In establishing the national law applicable to a company the world is essentially divided between those countries which apply the real seat theory (mostly in continental Europe) and those which apply the place of incorporation theory (mostly Anglo-Saxon jurisdictions, but also some South American and European countries, such as Slovenia, Cyprus and the Netherlands). Based on the principle of freedom of establishment within the European Union, the European Court of Justice has decided that the
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incorporation theory applies to European companies even if the real seat is in another European country. These issues are important to determine what happens in the case of transnational groups. The principle is that the applicable national law shall govern each of the individual companies, notwithstanding that they are part of a group. Therefore, any rules protecting the controlled company or its shareholders and creditors shall be those applicable to the controlled company. This is generally accepted and specifically pointed out in some national reports, such as the Greek. The same is true for the domination agreements foreseen by a few national laws (Germany in the first place). Because rules on domination agreements are of mandatory nature, there is no possible choice of law in relation to them. Thus, for these contracts to be valid they must be acceptable under the legislation applicable to the dependent company. In Austria the Private International Law (IPR-Gesetz) refers to the law of the place of the company’s central administration. The lex societatis refers to the law of the place of the company’s central administration for each company separately. This reference includes rules protecting shareholders and creditors and the question of whether the corporate veil of one of the companies within the group is lifted. In situations such as the one addressed in the famous German Holzmüller case (i.e. a transfer of decisional power from the parent company to a subsidiary with the effect that the shareholders’ meeting of the latter affects rights and entitlements of the former’s shareholders and creditors), the applicable law would be the parent’s lex societatis. Dutch law offers a peculiarity: in the case of insolvency of a public company the rules on directors’ liabilities are extended to the directors of foreign subsidiaries that are subject to corporate tax in the Netherlands. As to Italy’s sophisticated damages compensation rules, the national report states that they apply not only to an Italian parent with regard to its foreign subsidiaries, but also to a foreign parent with respect to its Italian subsidiaries.39 Similarly, under US law, the court will apply the law of the subsidiary’s jurisdiction of incorporation to claims that the parent breached its fiduciary duty to the subsidiary, as was illustrated in the Southern Peru Copper case, where Delaware law was applied to the Mexican controlling shareholder’s sale of another subsidiary to its controlled Delaware company. But there seems to be disagreement in the US around the question of whether piercing the corporate veil is an internal matter to which the lex societatis applies, or whether it is governed by the law of the place where the underlying substantive claims arose.
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4
The Role of Group Interest and the Balance Between Advantages and Disadvantages
There is no question that being a member of a group influences the life of a company to a significant extent, as a start because it shares the group’s image. A subsidiary may benefit from its group membership in many different ways, including the access to technology, industrial and intellectual property, markets, credit, know how, the use of prestigious trademarks, etc. Admittedly, in some rather rare cases the opposite may be true: the group’s image may be negative or the subsidiary’s dependence on the group may prevent it from seizing opportunities that could improve some aspect of its business. Leaving these exceptional cases aside, the central question is to what extent, if any, can the parent company, or another company within the same group, take advantage of its power and impose charges, disadvantages or damages on the dependent subsidiary, or simply shift assets from one company to another or to itself. There are different ways of doing this, including cash pooling, but their common feature is that they are all inconsistent with the subsidiary’s own interest and may endanger the company, its shareholders and its creditors. In countries where there are no specific rules allowing such practices they are in principle considered forbidden. The US report mentions the Sea-Land Services Inc. v. Pepper Source case, where the controlling shareholder shuttled funds at will among the controlled companies and the court decided to pierce the corporate veil to hold all of them liable for the controlled company’s debts. May there be a compensation for some of these practices to be allowed? If so, when and what should be compensated? The search for an appropriate balance between burdens and benefits has not yet led to universally accepted conclusions. Three different approaches are summarised in the Belgian report. The first is the British, which only foresees the possibility to request compensation in the cases where the parent’s actions are unfairly prejudicial to the interests of the subsidiary. The second is the German and Austrian,40 which sets a compensation for any and all prejudices and disadvantages imposed by the group on the subsidiary. The third and last approach is described as the French-Belgian one, which follows the Rozenblum doctrine to which we will come back below. If, when considering the business relationship within a group and especially between a dominant entity and a dependent company, some sort of compensation is admitted at all, the criteria to balance the damages or disadvantages with the required compensation needs to be defined. This may be analysed on a business by business basis, or in view of the relationship as a whole, at least within some reasonable
39
With the exception of the rules on subordination, which depend on the law applicable to the insolvent company.
40
In Austria, in the first place, such decisions may be declared void.
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timeframe. Legal approaches to these questions differ dramatically. As will be explained, in France, following the Rozenblum doctrine, there is an overall evaluation of disadvantages or detriments against the compensatory advantages or benefits. The same is true for Japan where, when courts examine if there have been disadvantages imposed upon a subsidiary, the overall relationship is considered, including the general benefit enjoyed by the subsidiary for the mere fact of belonging to the group.41 While the principle in Austria seems to be that the analysis has to be done on a case by case basis, an overall evaluation of group transactions is not excluded. Argentine law holds shareholders and controlling parties (even if not shareholders) liable for damages imposed upon the company and expressly prevents them from setting-off those damages with profits that their activity may have generated in other transactions.42 In short: is there room for a group interest to be taken into account in the decision-making process of a company? If so, what does it mean and which are the limits and conditions for it? Apart from the provisions in paragraphs 311 and ff of the German AktG for de facto groups, the most relevant answer to these questions was provided by the French Criminal Cour de Cassation in its 1985 Rozenblum decision,43 which established an internationally known doctrine that bears its name. The Cour de Cassation held that a director of a solvent subsidiary may take the interest of the group into account when making a decision that causes an immediate disadvantage to the subsidiary provided that “the financial aid consented by the managers of the company which is part of a group in which they are directly or indirectly interested should be motivated by the common economic interest in relation with the global policy of the group, should not be devoid of counterpart and should not provoke imbalance of the mutual obligations, nor exceed the financial capacity of the solicited company”. In the case the Court considered that these conditions were not met. The French report makes detailed reference to the consequences and significance of this famous case. It states that in the first 20 years after the decision this defence was accepted only in 9 out of 75 cases. The total number of reported cases has been very small, and it therefore seems that only very critical cases go to court anyway. In view of these data the French report comes to the conclusion that in fact the concept of group interest has evolved into a concept of normality of the group, which the author sees as a positive development provided that the group is a properly structured one. 41 This sort of compensation had been denied by the Federal Court in Germany in the 1975 ITT case (BGHZ, 65, p.15). 42 General Company Law, Art. 54. 43 Cass. Crim., February 4th, 1985, JPC et G II, 1985, p. 20585.
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Four conditions were set by the Court in the Rozenblum decision to justify the directors’ conduct in an abuse of company’s assets situation: (1) the group must be firmly established; (2) there must be a group based business policy established in view of group wide objectives; (3) within this group policy a compensation of advantages and disadvantages must be foreseen; and (4) the financial capacity of the burden supporting company must not be exceeded. The Belgian approach is a soft version of the Rozenblum decision: the parent cannot impose a transaction that is totally contrary to the subsidiary’s interest, or impose charges that are out of proportion with the subsidiary’s capacity. The interest to be taken into account is the group interest, but not the sole interest of the parent. Some critics say that this approach lacks a business justification requirement, or that of an agreed framework, and is also too lax with regard to the time at which the compensation will be provided. Another open question raised in the Belgian report concerns the extent to which the parent has a duty to support its subsidiary, and also whether the parent can reasonably expect support from its subsidiaries. It seems reasonable to state, as Prof. Wymeersch does, that if the business activity of the subsidiary is deeply integrated into the group, there is a reasonable expectation that the reciprocal support will continue, and therefore a sudden disruption would entail the parent’s liability. But these lines of thoughts seem to address the external situation, i.e. the protection of creditors and third parties, rather than that of minority or external shareholders of both subsidiary and parent company. The reporter further notes that the principles of this doctrine are applied in a very flexible manner, allowing directors of the subsidiary to follow the instructions given by the parent up to the limits of the subsidiary’s solvency, and ensuring that it obtains a reasonable compensation, which may consist of a mere advantage. The Rozenblum doctrine has made its way to several national and supranational projects, as well as some case law, in countries other than France. The recommendations of the Forum Europaeum on Groups of Companies (1998) represented a turning point for the doctrine’s international acceptance. Later, other reports and recommendations followed the same line. Even more explicit was the October 2016 Report on the recognition of the interest of the group, issued by “The Informal Company Law Expert Group” which was appointed by the European Commission in 2014. This very relevant paper, which was attached to the French report, was drafted on behalf of the Group by PierreHenri Conac, our French reporter. It advocates for the recognition of the group interest from what could be called a practical business perspective, focused on solving problems such as the uncertainty which the directors of parent and subsidiary companies are exposed to when purporting to favour the interest of the group in cross-border situations, and the facilitation of intra-group financing to reduce the
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dependency on, and the costs of bank funding. The 2016 report ends up providing recommendations for the Commission to consult on different issues, including the possibility of allowing an EU wide regime of cash-pooling, the recognition of the group interest for 100% owned subsidiaries along the Rozenblum doctrine, and eventually if this could even be possible for non- wholly owned subsidiaries under a good group governance system. Also, the Italian 2003 amendment of its Civil Code, to which we shall once more come back below, sets a structure based on liability when disadvantages have not been duly compensated. Unlike the Rozenblum court ruling and its followers, however, the main addressees of the Italian regulation are not the directors of the parent or subsidiary but the entity which is in charge of the direction and coordination activity. The core of the new Italian system is that the company or entity that carries out the direction and coordination “acting in its own entrepreneurial interest or in the interest of others”, but does not do it in accordance with the “principles of correct corporate and entrepreneurial management of the companies themselves”, is liable to the shareholders of the companies that are subject to such activity “for the prejudice caused to the profitability and the value of the shareholding”. The same liability is imposed vis-à-vis the company’s creditors for the integrity of the corporate assets. But there is no liability when, “in light of the total result of the direction and coordination activity”, there is no damage, or if it has been comprehensively eliminated following specific transactions carried out for this purpose. In Argentina a 2005 project to amend the Commercial Companies Law44 also focused its approach on the head of the group. The project proposed the introduction of a new paragraph, entitled “Group policy”, to one of the articles of the Law. The proposed new paragraph stated that “when executing an enterprise policy in the interest of the group, it is admissible to set-off damages with benefits that have resulted or are foreseen to result from the application of a group policy within a reasonable timeframe, provided that the damages do not put at risk the solvency or the viability of the company. . .”.45 The paragraph goes on to require a wellsupported explanatory resolution to justify the preference of the group interest. When it comes to directors’ duties and liabilities, the project refers to the above-mentioned criteria and adds that the group policy must ensure a reasonable balance among the group’s companies. The Taiwanese report informs that the core interest of Affiliated Enterprises is the interest of the group. It is therefore admitted that some transactions may eventually be
harmful to a subsidiary, which is a way of recognising a group interest. This approach is quite exceptional: in most other countries the idea of a group interest has not been adopted and each group company is treated as an independent entity. Directors’ duties and liabilities towards their company are accordingly not excepted because of the company’s membership to a group. The United States Courts, for example, do not take into account the overall group benefit when deciding upon the fairness of parent-subsidiary dealings. This is also the case in Finland, Sweden, Argentina, Uruguay, etc. Dutch case law has recognised that a group interest may have some influence on the company’s interest, but it does not go as far as stating that the former prevails over the latter. Nonetheless, in 2003 the Court of Amsterdam decided that a company that is part of a group has to take the group interest into account and, under some circumstances, has to accept the subordination of its own interest.46 It is difficult to establish what this exactly means in practice. Something similar is reported with regard to Singapore: in determining if a decision is in the company’s best interest, a director of a company within a group may consider the interest of the group as a whole, but in doing so is not permitted to sacrifice the interests of its own company. This approach is contradictory in any situation where there is a conflict between the interests of a company and those of another company within the group, including the parent. This type of conflict cannot be solved using this sort of principles. Spanish Case law in recent years has also accepted a limited deviation from the company’s interest by giving some relevance to the group interest in line with the Rozenblum doctrine and the Italian compensatory advantages approach. The Greek report refers to a traditional opposition in its literature to the recognition of a group interest, but also to more recent commentators who take the view that a company’s transaction should not be examined in isolation but instead integrated into the group’s financial medium- and long-term strategy. Some of these Greek commentators refer to the Rozenblum doctrine, but no Greek case law does. The Brazilian practice shows a relaxation of the legal principles protecting the single company’s interest when it is a member of a non-contractual or factual group. The Brazilian report points out that this relaxation is necessary because otherwise a strict attachment to the prohibition to vote in cases of conflict of interests (Art. 115 of the Corporation Law) would make the operation of groups impossible. The limit to this relaxation is the absence of a compensation for imposed damages or losses of chances. In conclusion, it seems desirable to introduce flexibility in the rules protecting the interests of the single company and of
44 It was again proposed, but later dismissed, in 2012 in the context of the project of the new Civil and Commercial Code that came into force on August 1st. 2015. 45 Art. 54, draft of a new third paragraph.
46 In Argentina a 1983 obiter dictum of the Buenos Aires Commercial Chamber of Appeals, included a very similar statement, which was completely irrelevant to solve the case (Carabassa c. Canale, Cám. Com., Sala B, LL, 1983-B-353.).
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those who are related to it, such as minority shareholders, creditors and other stakeholders. However, the German, Brazilian or Portuguese contractual type approach has proven unsuccessful. The need for protection of the interests at risk must be balanced with the need to have clear rules for those who have to make decisions at the level of both the subsidiary and the parent companies. These decision makers need certainty and should not be charged with unexpected liabilities. Developments based on the Rozenblum doctrine like the Italian 2003 reform and the rules designed by the 2005 Argentine project, which provide for broader transparency, rules and liabilities addressed not only to directors of parent and subsidiary companies but also to the entity that exercises the power over the whole group, and limits and requirements of reasonableness in the decisions where the group interest is the prevailing driver, may give rise to new dynamics in the life of groups of companies.
5
Protection of Minority Shareholders
It goes without saying that the protection of minority shareholders, as well as that of creditors and third parties in general, is dependent on the protection of the controlled company as such. To that end some laws provide specific rules. Others, as already mentioned and as transpires from many of the national reports, rely on general company and civil law rules. What follows is a brief overview of the different approaches.
5.1
Specific Rules
Germany’s AktG, as well as the Croatian and Slovenian Commercial Company Laws, provide for a protection of external shareholders (minority shareholders that do not have a relevant interest in the dominant corporation) when enterprise agreements are concluded. Not only is it necessary for these agreements to be approved by a shareholders’ meeting resolution, which must include comprehensive written information and be registered, but the dominant enterprise has to offer a compensation to the external shareholders. This compensation can take the form of a guaranteed dividend for the duration of the agreement, of an exchange of shares enabling the external shareholders to receive shares of the controlling company, or of a straightforward offer by the latter to buy the external shareholders’ shares at an adequate price. For the cases of domination on corporations without the existence of an agreement, German law requires the management board to issue a complicated and inefficient report on the relations with affiliated companies (Abhängikteitsbericht), which has to be audited and provide information
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about how disadvantages imposed on the company have been compensated. The same rules were adopted in Croatia and Slovenia. But in the case of control of a corporation without a domination or equivalent agreement, the German AktG, as well as the Croatian and Slovenian Company Laws, provide that an external shareholder may file a direct claim against the dominant enterprise for damages suffered directly by himself. In Portugal, where somehow the German model has been followed, when entering into a domination agreement the parent has the duty to offer an adequate compensation to the external minority shareholders, either by offering to purchase their shares in cash or by guaranteeing a dividend while the agreement is in force. More interesting than minority shareholders’ protection at the time of entry into a group are the specific protection rules in the dynamic of groups of companies, which are quite infrequent. Italy is a good model to look at. Traditionally, for the protection of the subsidiary and its minority shareholders Italian law relied on the directors’ duties and liabilities. Only in rare and exceptional cases did the courts consider a parent company’s and/or its directors’ liability, or eventually ruled that a holding company could be held liable in tort to creditors of their subsidiaries. The Rozenblum doctrine never made its way in Italy, where a significant change in the groups’ legislation was passed by legislative decree Nr. 6 of 17th January 2003. This reform legitimated group activities under the conditions already mentioned above, one of which matters here: the preservation of the financial balance within the group by means of a compensation of the negative consequences imposed upon the subsidiary. Legislative decree 6/2013 also enhanced transparency by imposing the need for decisions to be motivated by the group’s interest, an approach that also protects shareholders and creditors. It has already been mentioned that this sophisticated protection system was enacted without using the word group anywhere. I have also pointed out that the system was built on the dynamic notion of direction and coordination of companies’ activities (direzione e coordinamento di società), an undefined factual concept that, according to Art. 2497 septies, may not only result from a situation of control as defined in Art. 2359, but instead be based on an agreement or a clause in the company’s articles of association. Shareholders are protected by the liability of the directing or coordinating entities, which arises when their power has been exercised “in their own entrepreneurial interest or in the interest of others” and not in accordance with the “principles of correct corporate and entrepreneurial management of the companies themselves”. The liable company or entity has to indemnify the subsidiary’s shareholders “for the prejudice caused to the profitability and the value of the shareholding”, except if, “in light of the total result of the
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direction and coordination activity”, there is no damage, or if it has been comprehensively eliminated following specific transactions carried out for that purpose. The Italian report further highlights that the profitability and market value of the shares must be determined taking the influence of the global group’s results into account. This is a concrete application of the idea of group interest, but some commentators still identify it with the parent’s own interest. Further, whenever a decision is influenced by the direction and coordination activity, it has to be analytically motivated and the reasons and interests that influenced such decision must be expressly stated (Art. 2497 ter). Directors not fulfilling such duties would be liable for damages. In conclusion, Germany, Croatia, Slovenia, France and Italy, as well as some other jurisdictions like Taiwan have, in one way or another, specific rules which rely on the parent company’s liability for detriments and damages imposed upon the dependent company, unless a proper compensation has been provided.
5.2
Reliance on Civil Law and General Company Law Rules and Principles
General company law principles, and even more general principles of law, contemplate the protection of the subsidiary company and its shareholders. The causa of a company is clearly defined in many jurisdictions. For example, the Belgian Companies Code states that a company is created “with the purpose to achieve for its shareholders a direct or indirect financial benefit”. The Argentine and the Uruguayan company laws define “company” as that entity whose shareholders all participate in the benefits and bear any losses. Some commentators take the view, which I subscribe, that this is part of the essence and nature of a company: there is a common risk to which all shareholders are bound and therefore there is an objectively recognisable common interest shared by all of them, regardless of the percentage of their participation. This is also confirmed by Art. 1833 of the French Civil Code: a company is established in the common interest of shareholders. From these legal definitions emerges the principle of equality among shareholders, which in turn gives shape to the concept of company (or social) interest, understood as the common denominator of the objective interest of all shareholders in the company. In practice this means that the majority (for our purpose, the parent) may decide what it considers to be in the company’s interest, but it may not use its power to decide in its own or somebody else’s interest, against the interest of the company and the rest of its shareholders. We have already discussed whether, in the presence of a group, it is possible to depart from these principles and, if so, under what conditions.
In the absence of express provisions ruling out the applicability of the essential principles referred to above, or in the cases where the conditions for this to occur are not met, the generally recognised remedies for shareholders’ protection are the liability of the responsible persons and, to a certain extent, the right to challenge shareholder meetings’ resolutions or, more restrictively, board of directors’ decisions. Importantly, these rules are the same as the rules that apply to independent companies. It is therefore correct to state that, with regard to the protection of minority shareholders of a dependent company, the law in most countries relies on the general rules of company law. Such is for instance the case of Japan, where there is no systematic regulation on the protection of minority shareholders. It is reported that, in spite of academic claims that special protection rules should be enacted, legislators have refused to do so. The same happens in Poland, where general rules may be efficiently used to protect minority shareholders. Examples of these general rules are the right to request a general shareholders’ meeting, the appointment of supervisory board members by groups of shareholders or classes of shares (Art. 385 of the Commercial Companies Code), a withdrawal right if there is a significant change in the company’s activity or if an international merger is decided, a tag along right and an inverse squeeze out (Art. 419 of the same code). In France, minority shareholders are protected by the concept of abuse of majority, which may apply to resolutions passed by both the shareholder meetings and the board of directors. The concept was developed by the Cour de Cassation, which held that there is such abuse if the majority shareholder’s vote is contrary to the social (the company’s) interest and is solely based on the intent to favour the majority shareholder’s interest to the detriment of the rest of the shareholders. This, however, was not written in the Commercial Companies Law of 1966. In later years the French courts have adopted a more institutional approach and included in the general notion of social interest that of the stakeholders. Some of the other national reports give examples of case law related inter alia to the failure to distribute dividends, unjustified capital increases, the abuse of corporate assets and the appropriation of business opportunities. The French reporter proposes a sell-out right of minority shareholders in the event of a majority abuse, which could of course be a better remedy than the right to challenge resolutions and be compensated for damages. In some countries Corporate Governance Codes deal with minority protection remedies, especially in relation to large public corporations. This is the case of Germany, where taking advantage of the company’s business opportunities for personal purposes, and more generally pursuing personal interests, is straightforwardly forbidden.
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5.3
Directors’ Duties as Shareholders Protection
Under any legal system Board members of both the parent and the subsidiary are bound by a duty of loyalty and must employ the care of a diligent and conscientious manager. This is so even in the few countries where imposing disadvantageous instructions to the dependent company under a domination agreement is permitted. There are some differences among legislations, as well as different approaches within some legal systems, as to the acceptance of the business judgment rule, its requirements and the extent to which it may be invoked by members of the board of management. German law provides for some cases under which members of the Board of both the controlled company and the dominant enterprise may be held jointly and severally liable if they did not act in accordance with their duties. In general, the duties of due care and loyalty, or similar standards, are universally accepted (for example Austria, § 84 AktG). But there are differences between Anglo Saxon and Continental jurisdictions. The UK, US and other common law jurisdictions base their approach on the concept of fiduciary duties, the origins of which can be traced back to the old English trust law. In Continental law jurisdictions, in turn, a professional duty of care is as important, if not more important, than the duty of loyalty. There are also differences among national laws with regard to whom these duties are owed to. In some jurisdictions it is only the company, in others also the shareholders and in some others even the creditors, at least when there is a risk of insolvency. In the US the standard duties include entire fairness, which is equivalent to the continental notions of utmost good faith and loyalty. Minority protection is based not only on substantive rules, which refer to the terms of the dealing, but also on procedural rules, which point to the decision-making process of the transaction. Some courts take the view that both issues are to be scrutinised together: a better process provides more slack on the substance of the transaction and the clear proof of a fair price can offset a failing process. All these rules are based on the judicial scrutiny of dealings within a group to which are subject to the fairness test. This test is different from the business judgment rule, which applies to decisions in which neither directors nor parties controlling directors have a conflict of interest. It must be demonstrated that the transaction was as good a deal as it would have been had it been concluded with a third independent party. The US report explains the standard in depth with reference to the Sinclair Oil v. Levien precedent, where a clear distinction was made between decisions that exclude or are taken to the detriment of the minority shareholders and decisions in which all shareholders receive the same benefits per share, in other words, where equal treatment was granted. A challenge to a dividend distribution which did not allow the company to
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expand was rejected on this basis. Further thoughts may be given to the universal fairness of such a distinction from a comparative law perspective: an abusive dividend distribution made in the interest of the controlling entity may be as detrimental to the company as permanently refusing to distribute dividends can be detrimental to minority shareholders. In the Sinclair case the large dividend distribution to allow the parent company to do some further business was not meant to take a business opportunity from the subsidiary, and this influenced the court’s decision. But in the US these rules apply to director’s decisions, not to shareholders’ votes. The US national report makes it clear that shareholders may cast their votes guided by their own personal interest. It is therefore when directors act as mere agents of controlling shareholders that the latter’s fiduciary duties arise and the challenged action involves a subsidiary’s board decision. In Sinclair the parent company dominated the subsidiary’s directors and, because the parent dictated what the board did, the court held that the parent owed fiduciary duties to the subsidiary and all its shareholders. There is a presumption that ownership of a majority of the voting stock establishes domination over the board, whereas otherwise it will depend upon the particular circumstances. US courts have found in exceptional cases that even majority shareholders lack control over most of the directors. In Delaware, the approval of the transaction with a controlling shareholder by independent directors, or by a majority of the minority shareholders vote, can result in shifting of proof on the transaction’s fairness from the controlling to the challenging shareholder, but will still subject the transaction to the fairness test instead of the business judgment rule.47 In order to be viewed as independent, board members must not only lack compromising ties with the corporation or controlling shareholder, but also, when negotiating a proposed deal with the controlling shareholder must do so aggressively and avoid generous compromises.48 In many countries director’s duties are only vis-à-vis the company they manage, and not towards shareholders, parent or subsidiary companies. Such is the case of Sweden. Similarly, in Belgium board members do not owe fiduciary duties to shareholders: they are subject, as in most continental countries, to the general duty of care expected from a diligent and responsible businessman, but the duty is owed to the company. The same is true in Singapore, where directors owe duties of loyalty and care to the company but not to its shareholders or creditors. The duty of loyalty results from the directors’ position as a fiduciary of the company and includes the duty to act in the company’s best interest, as 47 In a recent decision, however, the Delaware Supreme Court held that the combination of approval by a committee of independent directors plus a majority of the minority shareholders returns scrutiny to the deference of the business judgment rule. 48 The Southern Peru Copper case cited in the US report.
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well as the duties not to profit from their position and to act for proper purposes. Duty of care means that directors have to act with skill, care and diligence. As a common law principle, while the company is solvent the breach of any of these duties may be waived by the shareholder meeting. The Singapore courts are reluctant to substitute the directors’ opinion by their own if they are satisfied that the business judgment was an honest and reasonable one, an approach described as a weak form of business judgment rule. Japanese directors owe fiduciary duties to the company and are personally liable in the event of a breach. It is no defence for them to show that they followed instructions from the parent or that they acted in the interest of the group. In the Nissan cash pooling case the Tokyo High Court made it clear that a decision benefiting the parent directors and causing damages to the subsidiary makes the directors liable for breaching their duties of care and loyalty, although on the facts of the case such liability was denied. In Brazil there are no exceptions to the rule that board members cannot act in favour of other group companies. In the UK all directors of a company are bound by the same duties, but as the British report points out, the exercise of these duties is more challenging in corporate group scenarios because of the split loyalties that may exist between some directors and different group entities. Duties are owed by directors to their company, not to shareholders or to any other person. It is therefore only the company itself who can file claims for breach of its directors’ duties. Subsidiary directors are not allowed to act in the interest of the group or the parent company that proposed their appointment. An independent agreement between the director and the appointing parent company for the former to vote in accordance with the latter’s instructions would be invalid because it would entail an abdication of the director’s duty to exercise his independent judgement. The rule is that directors are bound by the duty to promote the success of their company for the benefit of the shareholders (Section 172 of the UK Companies Act). The British report states that, without prejudice to this rule, directors may act in ways that benefit the group or the parent at the expense of the subsidiary if such action can be shown to have long run positive consequences for the subsidiary and if the parent’s interests coincide with those of the minority shareholders. It is difficult from the outside to assess whether these criteria are in line with the continental Rozenblum doctrine. Whatever the case may be, Section 175 establishes a director’s objective duty to avoid conflicts of interest, thus protecting the subsidiary’s business opportunities, property and information.49
49 The British report mentions that approval by independent directors or by the shareholders supersedes this duty. But the parent or controlling shareholder should be barred to vote when in conflict of interests.
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In those jurisdictions where duties are owed to the company and not to shareholders, the parent company is not entitled to bring any action against directors for breach of those duties. The Singapore Court of Appeal recently (2017) decided that a parent company had no standing to claim for losses suffered by a subsidiary as a result of a breach by one of the parents’ directors. From an outsider’s perspective this decision seems at odds with the duty of the director of the parent company to exercise an overall control on the subsidiaries. One efficient way of avoiding conflicts of interest is to prohibit the vote of those, whether directors or shareholders, who have an interest contrary to, or even merely different from, that of the company. Surprisingly, many jurisdictions lack this sort of rules. It does not seem sufficient for the law to establish a duty to avoid conflicts of interest if, as is the case in Singapore, an informed approval by the shareholders’ meetings of the companies involved is all that is required to avoid the risk of such conflict. The laws of several countries only bar directors from voting when their personal interest is in conflict with that of the company. Such is the case of Spain, Sweden, Greece and many others. But in Sweden the restrictions on a director to vote in relation to decisions where he has a direct or indirect conflict of interest do not apply where they are most needed, namely, “where the party contracting with the company is an undertaking in the same group or in a group of undertakings of a corresponding nature”. In many countries there are no similar rules limiting voting rights at shareholder meetings in conflict of interest situations. Belgian law, for example, requires board members who have a conflict of interest to abstain from voting but does not extend that duty to shareholders who are not board members. Further, this restriction does not apply to decisions concerning a company in which a parent holds 95% of the shares nor between subsidiaries of the same parent. French law only bars the vote in cases of related party transactions, the definition of which is a transaction with a shareholder holding more than 10% of the voting rights. U.S. law provides a sort of halfway house on this approach. While U.S. law does not prohibit votes by conflicted directors or controlling shareholders, it will reduce the level of judicial scrutiny for transactions with controlling shareholders approved by independent directors or a majority of the minority shareholders. There are two further relevant aspects of directors’ duties which are worth mentioning. One is that board members may not compete with the company, whether directly or indirectly. Whereas this principle is universal, the rules resulting from it differ from country to country. Some jurisdictions, like Austria (§79, AktG), provide for an explicit exception if the board member participates in a competing activity through another group company. This exception leaves minority shareholders unprotected in the cases where such
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protection may be most needed. Conflicts may also arise from the duty of confidentiality. Indeed, board members who sit on both the dominant and the dependent companies’ organs may face serious conflicts. The law in some countries gives priority to the entitlement to receive information over any confidentiality duties (Austria, § 95 (2) AktG).
5.4
Shareholders’ Rights and Duties
While directors’ duties are quite similar in all jurisdictions, the duties of shareholders, if any, are approached differently by different legal systems. Especially for corporations, the general principle is that the shareholders’ main obligation is to pay in their contribution. Once that central duty is performed, shareholders essentially have rights. It is only under certain circumstances that they may also be bound by some duties. In a group structure the controlling party is generally also a shareholder of the dependent company, whether directly or indirectly. Therefore the same basic statutory rules apply to majority and minority shareholders, one being the party that needs protection, the other being the party from whom the former needs to be protected. It is worth mentioning three South American jurisdictions that have some specific rules on shareholders’ duties. Art. 54, par. I, of the Argentine Company Law establishes that “the damages suffered by the company by wilful misconduct or negligence of shareholders or non-shareholders that control the company makes them jointly and severally liable for those damages, which they cannot set-off with the profits that their activity may have generated in other transactions”. In addition, the second paragraph of Art. 54 provides that “a shareholder or controlling party that uses the company’s funds or belongings for his own or a third party’s business is obliged to bring the resulting profits to the company, with any losses being for his exclusive accounts” Whilst both these rules are of utmost importance, the second is particularly relevant in view of the fact that the local literature understands the word belongings (efectos) as including not only material or intangible property, but also the company’s business opportunities. Indeed, within a group of companies it is very frequent for such opportunities to be redirected by a parent company to itself or to another subsidiary. The 1989 Uruguayan Commercial Companies Law contains equivalent provisions in its Art. 74. But it also provides for a special duty in Art. 51: “The controlling company shall use its influence so that the subsidiary fulfils its objects and must respect the rights and interests of shareholders. It will be liable for damages caused in breach of these duties and for exercising its rights abusively. The managing board members of the controlling company shall be jointly and severally liable for the breach of this rule. Any shareholder has standing to file a
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claim for the damages suffered by himself or for those suffered by the company”. Brazil also offers some very interesting rules in this respect. Art. 116 of its Corporation Law of 1976 states that the controlling shareholder must use its power in order to make the company carry out its objects and social function, and Art. 117 provides with a list of actions that are considered abusive and may give rise to the controlling shareholder’s liability. Some of the most interesting included in this provision are to lead the company to favour another one damaging minority shareholders, to appoint a director knowing that he is morally or technically unfit, to decide a merger, spin off or liquidation of the company for his own advantage, etc. The circle is completed with Art. 246, which establishes the parent’s obligation to pay for any damages it may cause to the dependent company by violating such duties or abusing its power. Sweden provides another example of shareholder liability in Chapter 29, sec. 1, of its Companies Law, according to which “a shareholder shall compensate damage which he or she causes to the company, a shareholder or another person as a consequence of participating, intentionally or through gross negligence, in any violation of this Act, the applicable annual reports legislation or the company's articles of association”. The Anglo-Saxon concept of fiduciary duties is frequently relied on to try to impose duties and liabilities on controlling shareholders. In continental law jurisdictions very often legal literature, as well as court decisions, rely on this concept without carefully studying its meaning, its boundaries, its effects and, crucially, whether their national law provides the elements for its application. In this respect Austria’s report informs that the judiciary is very hesitant to impose such fiduciary duties on shareholders. The Supreme Court has indeed ruled that a shareholder may use its vote to pursue its own interests as long as he acts in good faith. However, other court rulings have established that, when voting, majority shareholders shall take into account the interests of other shareholders. For instance, it has been decided that the distribution of the entire company’s profits and reserves is not unlawful as long as the existence of the company is not threatened. The German report informs that, even if not explicitly stated in the law, any shareholder (whether controlling or not) is bound by a duty of loyalty (Treupflicht), which is similar but not the same as the Anglo-Saxon fiduciary duty. Such duty is described as the duty not to exercise one’s rights without considering the interest of the company and that of the other shareholders. In closed corporations this duty of loyalty is stricter than in the case of other corporations. Indeed, the intensity of the duty of loyalty of majority shareholders towards the company and minority shareholders is higher in the GmbH (closed corporation or
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limited liability partnership) than in an AG (corporation). The test is whether a manager of an independent GmbH would have taken the same actions. The standing for an action based on a breach of this duty of loyalty lies with the company, but a minority shareholder may enforce the claim by an actio pro socio, which is equivalent to a derivate action. Dutch law also relies on a general duty of behaviour according to standards of reasonableness and fairness in order to protect minority shareholders, for instance in relation to the company’s dividend policy. Some Supreme Court decisions have gone as far as recognising a company’s and its majority shareholder’s duty of care towards its minority shareholders. In Austria the protection of minority shareholders relies on the prohibition to effect any payment or other services (e.g. guarantees provided to the parent company) to the parent company without proper consideration other than by distributing the subsidiaries’ profit that prior to that had been recorded on the financial statements. Based on corporate legislation, criminal courts have found an infringement of the Austrian rules on capital preservation illegal under criminal law based on a breach of trust (Libro case, of 2014). For shareholder protection Turkish law foresees three causes of parent company’s liability: unlawful exercise of control over the management of the dependent company, unjustified subsidiary’s shareholder meeting resolutions, and breach of third parties’ trust. But if domination is based on a contract, or in cases of directly or indirectly wholly owned subsidiaries, the law allows the parent to give mandatory instructions to the subsidiary. As is the case under German law, a 90% shareholder may squeeze out the remaining minority shareholders in order to achieve full ownership of the subsidiary. In the absence of these two types of control, any damage or disadvantage imposed upon the subsidiary has to be compensated. The principle of equality among shareholders is a relevant tool for their protection. The 2006 Finish Company Act endorses this principle by establishing that no organ of a company shall make decisions or take other measures that might confer an undue benefit to a shareholder or another person at the expense of the company or another shareholder (Ch. 1, Sec. 7 of the FCA). As the Finnish report underlines, this is a protection within both the subsidiary and the parent company (for instance against transferring a business to a subsidiary). But this protection can be left aside with the consent of the minority shareholders (Ch. 5, Sec 29, FCA), unless such waiver affects creditors’ rights. This is a logical solution, but the fact that it is not always understood by practitioners and courts reaffirms the importance of expressing it in a statute. The equal treatment principle is also explicit in Swedish law: neither the board nor the shareholders’ meeting may pass any resolution or perform acts or take measures which
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may provide an undue advantage to a shareholder or to a third party to the detriment of the company or any shareholder This leads to the conclusion that a resolution that is oppressive or unfairly prejudicial to minority shareholders will be set aside by a court if challenged. In connection with this, the Swedish report mentions that a controlling shareholder has a stronger fiduciary duty vis-à-vis the other shareholders. The principle of equal treatment of shareholders is also provided for in § 53 a. of the German AktG. As mentioned before, it is somehow surprising that in several legislations there are no restrictions for a majority or controlling shareholder to vote a resolution where he has a personal interest or even an open conflict of interest. The laws of Italy, Argentina, Uruguay and other do establish restrictions in this regard, but for instance in Germany there are no such restrictions: the vote is not even barred in cases where the shareholders’ meeting vote concerns the approval of a domination agreement for the voter’s own benefit. Admittedly, a shareholders’ resolution can be challenged if the majority holding shareholder exercised its vote to attain special benefits for itself and no sufficient compensation has been provided to the challenging shareholder (§ 243 -2-1 AktG), but this ex post facto remedy may come too late to prevent damages. For the GmbH, the law establishes that the majority shareholder is barred from voting only when the resolution deals with a discharge of his liability. The same happens in the Netherlands, where a conflict of interest will only be held to exist under very specific circumstances. Brazilian law bars the exercise of voting rights in conflict of interest situations (Art. 153), but the practical reality shows that, if the company is a group member, there will be tolerance as long as damages or losses of opportunities are compensated by the controlling company. Finnish law forbids subsidiaries that have shares of the parent company to vote or even participate at the general shareholder meetings of such company. This follows the same logic as that which gives substance to the rule preventing a company from voting with its own shares. In Japan a subsidiary has no voting rights in the controlling company. But neither Finland nor Japan limit the vote of the parent in its subsidiaries when there is a conflict of interest. It could be argued that barring a shareholders’ vote on the basis that it has conflicting interests with those of the company could provide a tool for minority shareholders to abuse their own voting rights by blocking resolutions that cause no damage, i.e., imposing a minority’s opinion and displacing that of the majority. The answer is, in the first place, that in almost all continental jurisdictions the majority shareholder may rely on the abuse of rights principle to challenge an unfair minority vote. Secondly, a relevant distinction must be made between cases of converging interests between controlling shareholder and company and cases where these interests are in conflict, which is the case where the
Groups of Companies
shareholder should not be allowed to vote. In some jurisdictions where shareholder voting is barred in cases of conflict of interest, the legal literature and case law have given prevalence to the principle that no challenge to a shareholders’ meeting resolution is admissible if there has been no damage. Singapore courts, following Commonwealth doctrine, have rejected the idea of imposing duties and liabilities between shareholders. This is a very interesting line of thought, based on the idea that the structure of a company only creates links between each shareholder and the company, but this is not the place to develop it any further. It should also be mentioned that the French reporter, Prof. Conac, proposes a sell-out right of minority shareholders in case of a majority abuse. This could of course be a better remedy than the right to challenge resolutions or than a compensation for damages.
5.5
Squeeze Out, Inverse Squeeze Out and Withdrawal Rights
The problems and conflicts within a company that is under the control of another, in circumstances where the decisionmaking process is in the hands of the latter and the risk of potential massive conflicts of interest is always present, disappears when the dominant entity is, directly or indirectly, the only shareholder. In this case no objections can arise from the use of a dominant position to maximise synergies or otherwise use the subsidiary’s resources in the interest of the group or of its head. Only external issues, i.e. the protection of creditors and other third parties, require attention. That is why the legal instruments to achieve a hundred per cent domination in the hands of the controlling party are regarded as means to favour entrepreneurial efficiency and, conversely, minority shareholders’ rights to leave the company in order to avoid the risks inherent to a situation of control and group membership are also a tool for their protection. Still, minority or external shareholders may need protection at the time the group is formed or when a company enters a pre-existing group, or in cases of change of control. National laws vary in this respect. In most countries the rules on public corporations foresee mandatory public acquisition offers, but the general company law of some jurisdictions also allows dissident shareholders to leave the company by granting them withdrawal and appraisal rights. The exclusion of minority shareholders by means of a squeeze out -now contemplated by many capital market laws- was first foreseen in Germany as a means to allow the Eingliederung (incorporation) when a controlling party reaches 95% of the dependent company’s share capital. The same percentage allows a squeeze out under the German Wertpapiererwerbs und Übernahmegesetz (Takeover Law)
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of 2001 for listed corporations. The Belgian Companies’ Code also allows shareholders of an unlisted company to force other shareholders to sell their shares if there are “serious grounds” (Art. 636). Serious grounds may include an abusive or obstructive conduct by minority shareholders. It also foresees the right of minority shareholders to force majority shareholders to buy their shares under certain circumstances, such as an abuse of the majority power. For listed companies, a 95% shareholding allows the majority shareholder to squeeze out the remaining minority shareholders. While not considered a group specific instrument, since it may be used by a natural person with no qualification, squeeze out rights are also foreseen in Finnish law for a shareholding of over 90% of all shares and voting rights. In France it is only foreseen for listed companies at a threshold of 95% of the voting rights, but it is also valid to provide for it in the articles of association of other companies. Dutch law’s threshold to force the remaining minority shareholders out is 95% of the share capital for public companies and the same percentage, including voting rights, if it is a private company. There are many other examples of similar approaches. Austria has specific rules to squeeze out minority shareholders of non-listed companies (§§ 1 and 7, Austrian Shareholder Exclusion Law) if the group (the parent and its subsidiaries) owns 90% or more of the subsidiary’s nominal capital. In Japan, the 2005 Companies Law introduced a squeeze out right for the 90% shareholder majority. It also allows cash-out mergers if approved by two thirds of the votes at a shareholders meeting. Section 215 of the Singapore Companies Act allows a shareholder holding 90% of the shares to compulsorily acquire the rest after a public offering or a private acquisition. US law does not provide for the direct squeeze out of minority shareholders. But the same result is achieved through the so-called freeze-out mergers, which allow a merger of the subsidiary into the parent company, or into another parent-controlled company. This may be achieved by paying minority shareholders in cash. The courts in the relevant State of Delaware do not require proof of the merger’s business purpose, something that might give rise to valid criticisms. Some other state courts do require that proof.50 Some national laws provide for both the exclusion and the withdrawal rights (squeeze out and inverse squeeze out) at the same threshold. This is the case of Sweden, where the Companies Law allows a shareholder holding 90% or more of the shares to buy-out the remaining shares and, conversely, allows the minority shareholders to compel the majority to buy them out. The 1986 Portuguese Commercial Companies Code also gives a squeeze out right to the majority 50
For details, see the US report.
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shareholder holding 90% or more of the subsidiary’s equity capital and a right to the minority shareholder to force the dominant shareholder to buy out his shares. Portuguese rules are in some way unique, not only because all corporations, whether listed or not, and limited liability companies are included, but especially because they provide for an effective mechanism to achieve their goals: the unilateral declaration by the majority shareholder, the effect of which is the immediate transfer of the remaining shares. This leaves discussions around the shares’ valuation as an independent issue that does not interfere with the immediate effects of a squeeze out. In the Netherlands minority shareholders are protected by the rules on mandatory bids in public corporations. As a counterpart to the freeze out rules, minority shareholders can request to be bought out by the shareholder (or more acting in concert) who holds 95% or more of the share capital and voting rights, both of a public and private companies. For some limited decisions, like a merger, Japanese law also foresees an appraisal right: the company has to purchase the shares at a fair price. The Italian Civil Code foresees a withdrawal right for shareholders of a company subject to another entity’s direction and coordination activity. It does so under certain circumstances such as a change of the company’s objects, but mainly at the beginning and end of such activity if the company is not listed to trade its shares at a stock market, or if the risk conditions of the investment have been altered, or a public acquisition offer has not been launched (Art. 2497 quater). Adopting an approach that is quite infrequent in comparative law, the Swedish Companies Act provides that “where a shareholder, through abuse of his or her influence over the company, has intentionally participated in a violation of this Act, the applicable annual reports legislation or the company's articles of association, a court of general jurisdiction may, on petition by the holders of one-tenth of all shares, order that the company go into liquidation, provided that special cause exists therefor as a consequence of the long duration of the abuse or some other reason”. But the company may avoid liquidation by asking the court to issue an order “to buy-out the petitioner's shares within a prescribed period of time”. As an independent matter, the law also provides that, in case of “continued fraud on the minority and the circumstances in general, a shareholder as referred in section 3, shall also be obliged to buy-out the shares of shareholders suffering damage” (Chapter 29, section 4). Mandatory public acquisition offers are also an instrument for the protection of the minority shareholders of listed companies, as they allow them to leave the company in case of a change of control, whether such change has already occurred or is imminent. The European Takeover Directive (2004/25/EC), followed by national laws, foresees a mandatory bid for the acquirer of a controlling interest in a
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company, who must offer to buy all the outstanding shares. Just to quote a few examples, in Belgium and the Netherlands the bid is mandatory at a 30% threshold and in Croatia at 25% of the voting shares owned by one person or several acting in concert. In Japan the mail purpose of the law on mandatory tender offers is not to allow minority shareholders to exit the company, but rather to stand in the way of the private purchase of a controlling block of shares, because of its lack of transparency. The threshold is also 30%, but some practical differences are pointed out in the Japanese report.
5.6
Rules on Intragroup Loans and Related Party Transactions
The issue of appropriation of company’s assets by means of business relations between members of a group, sometimes referred to as hidden distributions, needs to be addressed, perhaps with the same intensity with which tax law addresses the issue of transfer pricing within related companies. Finnish law provides an interesting principle in this respect: transactions that reduce the assets of the company or increase its liabilities without a sound business reason are unlawful. Regulations on related party transactions generally refer to directors and officers but seldom to shareholders or controlling parties. In groups of companies such transactions may be part of the normal business among its members, as a result of which they often remain invisible to minority shareholders and out of their control. Capital market laws, but not general company law, establish some rules on the topic. For example, § 84 of the Austrian Stock Exchange Law establishes the duty to disclose any transactions with closely related subjects which may have had a material adverse influence on the company’s business. EU Directive (2017/ 828/EU) deals with the same matter, as does Belgian law. All the examples show that it is only when the related party transactions are of certain significance, for example because they exceed a certain amount and/or a percentage of the value of the company’s assets, that capital market laws establish mandatory procedures (audit committee’s or independent appraisers’ opinion) to ensure that transactions are made at market value and in arms’ length conditions. General company laws, in contrast, rarely provide special rules on related party transactions. However, the general principles of company law and on managers’ and directors’ duties, as well as the rules on shareholders’ duties, restrictions and liabilities—in those jurisdictions that foresee them-, offer sufficient protection against transactions imposed by the parent entity for its own benefit, when harmful for the subsidiary. Chapter 17 of the Swedish Companies Act defines the concept of value transfer, which includes dividends, acquisition of its own shares and any other transaction by which the company’s assets are diminished. Some
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of these value transfers are allowed. When not allowed, “the recipient shall return what he or she has received, where the company proves that he or she knew or should have realised that the value transfer was in violation of this Act”. Nevertheless, the Swedish report informs that for transactions between parent and subsidiary a small difference with third party transactions is generally accepted. Loans and other financial business transactions are types of related party transactions. They receive particular attention but, again, it is more frequent that the issue is mentioned for loans to be made to board members than to shareholders or parent companies. The matter is addressed by various different national legislations, many of them confined to very specific purposes. For Instance, § 80 of the Austrian Stock Corporation Act, which deals with loans and credits to members of the executive body, establishes that the supervisory board’s approval is required even if such loans or credits are granted to members of subsidiaries. In Finland, loans, guarantees, etc. are subject to the already mentioned principle that transactions which reduce the assets of the company or increase its liabilities without a sound business reason are unlawful, if without proper consideration. As a general rule, Singapore law restricts loans and similar arrangements to directors and companies or other entities connected to them, unless a shareholders’ meeting gives its informed consent, the interested parties having abstained from voting. In some other jurisdictions, like Cyprus (Company Law, Ch. 113), it is forbidden for the company to grant loans to its directors. Greek law Nr. 2190/1920 protects minority shareholders by prohibiting the acquisition by the company of its own shares and the granting of loans to facilitate such acquisition by third parties. The same Greek law also sets restrictions to the conclusion of transactions with connected enterprises. Cyprus has similar rules forbidding companies from providing financial assistance to third parties for the acquisition or subscription of the company’s own shares, or of the parent’s shares in the company. A leveraged buyout seems practically impossible under such rules. Rules with regard to restrictions as to financial assistance in public limited liability companies are applicable in other EU member states as well, as they originate from the so called second company law directive.51 The mentioned rules on loans and other financial business transactions invite us to pay attention to further issues that may damage the company’s assets and the minority 51 Second Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent now integrated in Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law.
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shareholders’ interest. A controlling party imposing the acquisition of the subsidiary’s own shares may do so to cover its own cash needs. Imposing limitations on a company’s attempt to buy its own shares, to accept them as a pledge to guarantee its credits or to buy shares of its parent company are necessary, as they avoid different ways of diluting the company’s assets and putting it, its creditors and other shareholders in danger. As is the case in other jurisdictions, Austrian law extends the rules on acquisition or pledge of its own shares to the parent or subsidiary company (§§ 66 and 51, AktG). Which distributions are made to shareholders, and when, is also dependent on the decision of a controlling party. In those jurisdictions where the prohibition to exercise rights abusively has been extended to voting rights, this tool can be used to prevent an oppressive failure to distribute dividends, or an insufficient dividend distribution, as well as an excess driven by the parent’s needs and interests, disregarding the stability and finances of the subsidiary. Minority shareholders must also be protected in the context of other forms of tunnelling assets or financial resources to the controlling entity or to other members of the group. Some jurisdictions have therefore established limits to board members’ fees.
5.7
Remedies and Standing
What is it that minority shareholders can do when their rights have been affected and they have suffered damages? In theory a shareholder could be given the right to challenge shareholder meetings’ resolutions and board of directors’ decisions, or to address claims to directors, the parent company or the ultimate controlling party seeking an indemnification for damages caused to the company or to himself. To that end a shareholder may need to have proper information, and in order to obtain it he may require some inspection rights or the possibility that some qualified person provides it to him. Of course, the shareholder will also need to have standing so as to file the appropriate claims and enforce his rights. Singapore law, which provides several means of minority shareholders protection, grants them information rights, including each shareholder’s right to inspect some registers, as well as the right to challenge shareholder meeting resolutions52 and require certain special investigations. The law also deals specifically with the case of change of corporate control. In Belgium, in the cases where there is a gross deviation from the company’s objectives, resolutions can be challenged under the general doctrine of abuse of rights, i.e. the abuse of the majority power. Japanese law only allows the challenge 52
The Singapore report informs that such challenges are nevertheless rarely successful.
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of shareholder meeting resolutions if a shareholder with a special interest used his vote to pass a resolution that is extremely unfair, a standard which the courts apply restrictively. But in most jurisdictions there are special rules to challenge unlawful shareholder meeting resolutions.53 The different approaches in this regard are essentially dependent on what is deemed unlawful by each legal system. In some jurisdictions only breaches of company law justify a challenge, while in others it is the breach of the law in general, meaning any law, that gives rise to the right to a challenge. Challenging board of directors’ resolutions is very seldom admitted in comparative law. While discussed in some jurisdictions in the absence of specific rules, its practical scope is extremely limited. That leaves a minority shareholder facing unlawful, improper or abusive business decisions with the only tool of bringing forward a claim for damages. In this context it is worth mentioning that in France a right to appoint a special expert is granted if there is a conflict of interest within the board, and the company is obliged to appoint an independent expert to appraise the company if the transaction is likely to cause conflicts of interest. Easy access to the courts is essential for minority shareholders to be able to enforce their rights. However, while there is no question about shareholders having standing to challenge shareholder meeting resolutions, the standing to claim damages varies from country to country. As a general principle of law, the standing to file a claim for damages lies with the subject that has suffered them. Therefore, if a controlling party damages the controlled company it is the latter that will have the right to claim an indemnification. But since the dominant company may use its power to avoid the filing of any claim, some laws allow minority shareholders to file such claims on behalf and for the benefit of the subsidiary. Just as an example, this is the case of Brazil, where, if successful, the claimant is rewarded with a percentage of what is awarded to the company. The US is particularly shareholder friendly in this respect. For instance, any minority shareholder has a standing to bring a derivative suit for the benefit of the subsidiary. Other countries are not so generous with minority shareholders. Japanese law, for example, does not allow a minority shareholder of a subsidiary to sue the parent company for damages. This action, which is an action in tort, is only open to the subsidiary itself, with no possible derivative action by a shareholder. But directors’ liability for damages caused to the subsidiary for the benefit of the parent company may be enforced by means of a derivate action by a shareholder if the company does not file the claim. It also allows a so called multiple-derivative action whereby a 1% 53
Germany, France, Italy, Argentina and many other jurisdictions provide rules for this purpose.
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shareholder of a parent may bring a derivative action to enforce the liability of directors of wholly-owned subsidiaries that represent 20% of the parent’s assets, should neither the parent nor the subsidiary file the liability claim by themselves. Singapore law provides that the company is the primary plaintiff to file claims for breach of directors’ duties. However, shareholders may file derivative actions on the company’s behalf, and exceptionally also multiple derivative actions. If the shareholder suffered a direct loss –as opposed to a reflect loss caused by its share in the company- he may claim a compensation for it. A shareholder may also file an action for oppression (section 216 of the Companies Act) seeking pro rata compensation. This is a remedy based on the notion of unfairness which is valued as a powerful protection for shareholders in corporate groups. Interestingly, shareholders in Singapore may rely on the acts and business affairs of related companies to support allegations of oppressive or unfair behaviour by the controlling shareholder. The courts have a rather wide discretion to grant the most appropriate remedy, including winding up and ordering share buy-outs. These last remedies are somehow similar to those provided by Swedish law. In Taiwan, if the controlling entity does not compensate the damages or disadvantages imposed on a subsidiary, shareholders holding 1% or more of the outstanding voting shares of the subsidiary may file a claim for the subsidiary to be indemnified, and a settlement they do not participate in cannot be held against them. In some other countries, like France, Argentina and Uruguay, individual shareholders are not only given standing to file claims to challenge a shareholders’ meeting resolution in order to have it declared null and void, but also to seek compensation for damages on behalf of the company (action sociale ut singuli). The same is true in Italy, where a derivative suit may be filed by shareholders representing at least 20% of the company’s capital. However, when liability of the entity which carries out the direction and coordination activity over a subsidiary is at stake, Italian law provides the most original approach: instead of giving standing to the dependent company, it is the minority shareholders, the creditors and, in insolvency cases, the receiver, who have standing to file claims for uncompensated damages caused by the entity which exercises the direction and coordination activity (Art. 2497 of the Civil Code) In the UK, since the directors’ duties are only owed to their company, it is solely the company that can initiate actions for breach of such duties. Only exceptionally can a shareholder sue derivatively on behalf of the subsidiary. Indeed, section 994 of the Companies Act authorises shareholder claims, both in the subsidiary and in the parent, for unfair prejudice in conducting the company’s affairs. The courts may provide the most efficient order, including
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instructing the company or other shareholders to buy out the petitioning shareholders.
6
The Upside-Down Perspective. Company Law Issues at the Level of the Controlling Company
Company law problems at the level of the controlling parties that are companies have received less attention than the risks and challenges that groups create in relation to subsidiary or controlled companies and their shareholders and creditors. It is worth remembering, to begin with, that in Anglo Saxon jurisdictions the possibility of a company holding shares of another was restricted well into the nineteenth century. Some laws, for different reasons, still impose restrictions on the participation of one company in another. For example, in order to protect the shareholders’ consent, Art. 2361 of the Italian Civil Code does not allow a company to take a stake in another if by doing so the purpose set in the company’s articles of association would be substantially modified. In addition, the acquisition of a participation in a partnership which would entail unlimited liability must be approved by a shareholders’ meeting resolution. Something similar is provided for in Taiwan, where Art. 13 of the Company Act does not allow a company to participate in a partnership as partner with unlimited liability. Argentine and Uruguayan laws54 provide for quantitative limits to protect the shareholders’ right to immediate contact with the activities they consented to invest in. But apart from these types of limitations, group dynamics may also endanger the parent’s assets, its shareholders and creditors. As we shall see, the decision-making process of the parent company may also be at stake. In Germany, like in any other country, shareholders of the parent company are protected by the general rules of company law. Specifically, there is a special three quarters majority required to approve a domination agreement. The right to receive information and to challenge shareholder meeting resolutions is granted at the level of the dominant company in the same way as in relation to the dependent one. Especially in Germany, but also in some other countries, attention has been given to the powers and competences vested in the different organs or bodies (shareholder meeting, board of management and supervisory board) of the various group member companies in relation to the decision-making process. Which are the limits to the power vested in the board of directors was the matter decided in the very notorious Holzmüller ruling of the German Federal Court of February 25th, 1982. The board had decided on its own, which was 54
Argentine General Companies Law, Art. 31, and Uruguayan Commercial Companies Law, Art. 47.
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formally correct, to transfer the company’s core business to a subsidiary. The Federal Court ruled that such a resolution needed a shareholders’ meeting approval because it impaired the shareholder’s position as if the transaction had been a de facto change of the articles of association. This approach has been followed by the German courts for decades in the cases where the transaction involved a relevant part of the company’s assets, as well as in those where the transaction involved a very substantial part of the company’s liquid means. The issue requires the acknowledgment not only of the traditional interest protection aspect of corporate group law, but also of what could be referred to as the constitutional and organizational structure of groups of companies, which requires some deep investigation and elaboration. No national report points to statutory rules on this, but in some countries there have been court decisions which have set aside the formal organic powers and competences in view of a company’s membership to a group. The Swedish report points out that, when business is carried out in the subsidiary, parent minority shareholders with a blocking right are not able to exercise it, nor do they have any tools to decide on the retention of profits in the subsidiary, as these do not flow into the parent and are therefore not even the object of discussion at the parent’s level. In other words, groups also seriously affect the parent company’s governance. The problems considered in the Holzmüller case are also recognised by the Japanese literature under the concept of a reduction of shareholders’ rights in holding companies. The 2014 amendment to the Japanese Companies Act provided some solutions to these problems. It imposed a duty on the parent company’s directors to monitor the operation of its subsidiaries and to implement a proper inclusive control system. The Japanese Commercial Code amendment of 1999 already contemplated the possibility of a parent company’s shareholder seeking authorisation from the courts to inspect the minutes of the board meetings and accounting books of the subsidiaries. The 2014 amendment further established that a shareholder meeting’s approval is necessary to transfer wholly owned subsidiaries’ shares representing more than one fifth of the parent’s assets. Similarly, the courts in the Netherlands have accepted requests from shareholders of a parent company to investigate the affairs of a subsidiary. A rule comparable to the Holzmüller doctrine, allowing shareholders of the parent company to have an influence on the sale of a participatory interest in another company, has been legally adopted for public companies. The Austrian report mentions that the prohibition of board members, or any entity with whom they have an economic identity, to vote on their own liability (§ 130 AktG) protects the shareholders of the parent company. But these are general rules that apply whether there is a group of companies or not.
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Whereas Austria does not have a general prohibition to vote in the event of a conflict of interest, it does have a rule— which applies to any person, and not only to members of the management or supervisory boards—according to which no person may vote a resolution regarding its liability, release, or the filing of a claim against it (§ 125 AktG). Again, these useful rules are general and not group specific. In Taiwan some scholars have proposed to adopt so called pass-through voting power rules, which would allow parent company shareholders to subrogate to the rights of the dependent company and file a claim against those who have caused damages to it.
7
The Protection of Creditors and Other Third Parties
7.1
General
Protection mechanisms are always based on somebody’s duties and liabilities. Creditor protection, for instance, is immediately associated with eventual parent company liabilities. In this context, the first thing that needs to be highlighted is that, notwithstanding several projects to the contrary, under no jurisdiction’s company or insolvency laws does the existence of a control relationship make the controlling person or entity, parent company or head of a group of companies strictly liable for the debts or other obligations of subsidiaries or dependent companies. Some national laws state this expressly, like Croatia, Argentina55 and Finland, in this last case in connection with parent companies and cooperatives. Liability may only arise from the dominant entity’s conduct, i.e. from the way the controlling power has been exercised or for the breach of its duties. It is also important to remember that, as a matter of logic, if a company is protected its creditors and third parties are also protected. There is no difference in this respect between independent, subsidiary and parent companies. This is why much of what has been said above, especially in relation to the duties and liabilities of directors and shareholders, is also relevant to the protection of third parties. But some additional rules and legal doctrines, specific to outside relationships of members of a group of companies, are also required. Particularly relevant are the disregard of legal entity doctrine and the insolvency rules, which will be referred to below. In Germany the protection offered by the AktG to creditors in case of enterprise agreements, including domination agreements, notwithstanding its complexity, is considered insufficient. The law essentially imposes upon the dominant entity the obligation to compensate yearly losses
while the agreement is in force. Therefore, only the nominal value of the dependent company’s net assets is protected, not the company’s potential as an on-going concern. The same is true under Croatian and Slovenian law. Except for the case of integration (Eingliederung), where only debts originated prior to the integration are covered, no general liability by the dominant party of enterprise agreements is foreseen in the German AktG. In Germany, Croatia, Slovenia and Taiwan, if there is a factual group the parent company will be liable for detriments and damages imposed upon the dependent company if it has not provided a proper compensation. In the presence of a subordination agreement, the Companies Code of Portugal imposes on the parent the duty to cover the subsidiary’s annual losses and provides that the parent shall be directly liable for the subsidiary’s debts if a creditor does not obtain satisfaction from the latter within 30 days after a written demand for payment. In Austria the supervisory board of the parent company has the duty to oversee the whole group. This also serves as protection for creditors: the breach of such duty may entail liabilities if damages are caused to third parties. The Dutch Supreme Court ruled in 1990 that the parent company has a group management duty,56 which at least comprises an oversight over the subsidiaries, especially in the presence of a tight group structure and strong financial links. Failure to comply with this group management duty could entail a breach by the parent of its general duty of care and of the fundamental principles of reasonable entrepreneurship. The Dutch Corporate Governance Code, as well as that of other countries, further emphasises the existence of these duties. A Dutch Supreme Court decision also ruled that the parent can be held liable to subsidiaries’ creditors if at the time of entering into a contract it knew, or ought to have known, that the subsidiary company would not be able to fulfil its obligations. Quite unique in comparative law is the Dutch law provision contemplating the voluntary liability of the parent company by means of a so called 403 declaration. Such declaration can be provided by the parent company in cases where the parent consolidates financial statements at the group level and requests for an exemption from the duty to publish detailed financial statements of the controlled entities. The 403 declaration entails a declaration of joint and several liability by the parent for the controlled companies’ contractual obligations, which is understood as a compensation for the lack of financial information from the subsidiaries. This voluntary liability does not apply to other obligations, such as tax duties. In Belgium the general negligence of the parent, for instance by abruptly stopping the subsidiary’s activity or This terminology seems to have been used in the first place by Hommelhof, a German author, who wrote a book with this title. 56
55
Art. 172 of the Argentine insolvency law.
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refusing to deliver what it needs to continue its production, is deemed to be sufficient cause for the parent’s liability. The same applies if there is a lack of diligence in following up the activities of the subsidiary. But this is a standard to be applied with care because, in fact, no shareholder has a duty to exercise his controlling power. The Belgian report’s conclusion is therefore that only if such power is exercised does a duty of doing so with care and diligence arise. The Dutch report points to case law where a duty of care of the parent company towards the creditors of the subsidiary has been imposed, but rightly points out that the mere fact that a company qualifies as the head of a group is insufficient for that purpose. This should be the general private law rule, but modern regulations on enterprise liability for offenses in certain fields impose preventive compliance duties on the head of group entities, which could be held liable for not implementing proper group wide rules, or for not reasonably ensuring that such rules are complied with throughout the group. Another way in which third parties can by protected by means of the imposition of liabilities on the parent or head of a group relates to the qualification of the latter as a shadow or de facto director of the subsidiary. Case law in the UK includes de facto or shadow directors as subject to duties and liabilities if they exercise a dominant influence over the subsidiary. The difference is that a de facto director is a person who acts as if he were a director despite not having been formally appointed as such, whereas a shadow director is, according to Section 251 of the Companies Act 2006, a person under whose instructions the directors are accustomed to act. This may be the case when the parent company retains control over all or most of the decisions and actions of the subsidiary, like taking full control of the finances or controlling the appointment of the senior management of the subsidiary. But this is not presumed. The UK courts have also imposed liability upon a parent on the basis of the existence of an agency relation in cases of insufficient capitalisation of the subsidiary, overlapping of directors and senior manager positions, or when a business that is carried out by the subsidiary is in fact run by the parent. This was also the object of analysis in Labour law cases, like Thompson v. Renwick Group Plc, where it was denied that the parent had knowledge in health matters regarding asbestos. Curiously enough, in Germany a parent company cannot qualify as a shadow director because the law does not allow legal entities to be directors. This seems, at least from an outsider’s perspective, an unnecessarily formalistic interpretation of the law which leads to an undesirable outcome. Dutch law, in contrast, allows legal entities to be appointed as board members. If a parent uses this possibility, it may be
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liable in bankruptcy cases. The same is applicable if the parent acts as a de facto or a shadow director. To be qualified as such in the Netherlands, a direct interference and the setting aside of the formal board is required. Both standards show that the tool must be used restrictively. The Singaporean definition of director “includes a person in accordance with whose directions or instructions the directors or the majority of the directors of a corporation are accustomed to act”. Therefore, if a shareholder or a parent company, or one of its own directors, in fact act in that way, they will qualify as directors even if not appointed as such and will therefore be bound by all director’s duties and liabilities. The Singapore report refers to court decisions from which the rule emerges that in order to apply the above definition there must be a “discernible pattern of compliance with the shadow director’s instructions or directions”. With regard to publicly traded companies, Art. 8, par. 3, of the Taiwanese Companies Act defines de facto directors and imposes liabilities on, if they impose the way to conduct the company’s business on de jure directors, except if it is the government instructing a director appointed by it. In France a controlling shareholder can be considered a de facto director if it manages or participates in the management of a subsidiary, but a very high standard must be met in this regard. The Finnish report points out that the directors of a parent company should be held liable towards the creditors of the subsidiary if they pressed the directors of such subsidiary to act against the law. In the Netherlands a liability vis-à-vis the creditors of the subsidiary is contemplated for the cases of discontinuing financial aid which was provided to it. This can for example be the case if it was clear from the outset that the subsidiary would not be able to survive without the parent company’s financial assistance and the parent company has created towards third parties the illusion that the subsidiary was viable on its own. This may mean that the board members of the parent may eventually be forced to act contrary to their duties towards the company they are in charge of. While liability for a created appearance may result from the application of general principles, such as the principles of good faith, abuse of rights or even, under certain circumstances, the lifting of the corporate veil, most national laws are reluctant to impose this sort of liability, unless it can be proven that there was in fact an apparent mandate. But in Belgium the liability for appearance is accepted in cases where a parent and a subsidiary, or two different subsidiaries, act together giving the impression that an entity other than the contracting one is also bound by a certain agreement. The Spanish report refers to one isolated Supreme Court decision which points in the same direction.
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7.2
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Disregard of Legal Entity: Piercing the Corporate Veil
A company is a legal entity that enjoys all the attributes of a person. Its patrimony, name, legal capacity, rights and obligations, as well as its qualifications, are independent from those of the shareholders and any other person. All of the company’s assets belong to the company and not to its shareholders. The debts, obligations and liabilities of the company are not the debts, obligations and liabilities of its shareholders. This is true regardless of whether the specific type of company provides limited liability to its shareholders, or not. In the cases where the applicable law makes the shareholders liable towards third parties for the company’s liabilities, the position of the shareholders is akin to that of a guarantor. Indeed, a shareholder who pays for a company’s debt has recourse against the company to recover what it has paid. Modern enterprise activity would not exist as we know it if the overwhelming majority of companies around the world were not of the type that strictly separates the rights and liabilities of the company from those of its shareholders, i.e. the principle of shareholders’ limited liability. A company that is part of a group where a dominant shareholder imposes its decision-making power, with the inherent risk of this power being exercised in the interest of another member of the group, may be in danger of not being able to meet its obligations, thus putting its creditors’ rights at risk. These risks are increased by the fact that, in principle, there is no limit to the creation of companies, thus allowing the split of any person’s or legal entity’s patrimony. This can obviously lead to an abusive use of company structures and therefore to the liability of those responsible for it. In some critical cases it may even be necessary to leave aside the general legal principle of strict separation between company and shareholder by piercing the corporate veil, disregarding the legal entity, or whichever other expression may be used to describe the phenomenon. Importantly, this is an extremely exceptional remedy, the use of which differs substantially from one jurisdiction to another. The US courts have a long history in the field of piercing the corporate veil in order to impose liability upon a shareholder for a company’s debts. The US national report refers to some grounds commonly accepted by the courts. The first one is fraud, with respect to which there is abundant case law defining its scope. The second is misappropriation of corporate assets by controlling shareholders: in order to pierce the corporate veil such misappropriation must result from a standard pattern of conduct; individual transactions are subject to the fairness test. An action for misappropriation leads to a return of the misappropriated assets, whereas piercing the corporate veil makes the parent liable for all of the subsidiary’s debts. The third ground is undercapitalization. Besides the difficulties in establishing a clear quantitative
pattern, the case law in different states adopts divergent views when it comes to piercing the corporate veil on these grounds. The fourth ground for piercing the corporate veil is based on the enterprise theory: what is in fact one business should not be allowed to be artificially divided. But this has led to a horizontal disregard of legal entities rather than to the imposition of liability on the controlling shareholder.57 As the US reporter puts it, “the question is whether to punish the wrongdoer or unwind the wrongdoing, or both”. Liability resulting from the piercing of the corporate veil must fall on a shareholder that has complete dominion over the controlled company and therefore cannot affect the passive minority shareholders of the parent. The US report seems to suggest that there are too many uncertainties around the application of this remedy. The UK’s approach to this remedy is far more restrictive than that of the US. Limited liability has been the default rule in the UK since 1855 and the courts have always been slow to depart from it if all registration formalities have been fulfilled. Only exceptionally has the House of Lords taken into account the single economic unity of a corporate group,58 but subsequently it turned back to the traditional negative rule.59 The other rare exception, a 2011 case where the corporate veil was pierced to allow the controllers of the company to be sued under the company’s contracts,60 was very much criticised and soon left aside. This occurred in 2013 with the Supreme Court decision in Prest v Petrodel Resources Ltd, where a distinction was made between concealment and evasion. According to this judgment, the first allows a court to look behind the façade in order to discover the corporate structure with no need to disregard its separate personality, whereas evasion refers to the cases where a person is under an existing duty, a liability or legal restriction which he deliberately evades, or whose enforcement he deliberately frustrates by interposing the controlled company. Only in this second scenario, because there is an abuse of the corporate legal personality, the traditional doctrine may be set aside and the corporate veil be pierced by a court as a last resource. This 57
The famous Walkovsky v. Carlton decision of the New York Court of Appeals. 58 DHN Food Distributors Ltd v. Tower Hamlets LBC (1976), where the wholly owned subsidiaries were “bound hand and foot to the parent company and must do just what the parent company says”. 59 The Albazero (1977), Woolfson v. Strathclyde Regional Council (1978), Southard & Co Ltd (1979), where the language was particularly remarkable: “If one of the subsidiary companies . . . turns to be the runt of the litter and declines into insolvency to the dismay of its creditors, the parent company and the other subsidiary companies may prosper to the joy of the shareholders without any liability for the debts of the insolvent subsidiary”. In the same line were the decisions in Adams v. Cape Industries Plc (1990), Re Polly Peck Plc (1996), Newton-Sealey v. Armor Group Services Ltd (2008) and VTB Capital Plc v. Nutritek International Corp (2013). 60 Antonio Gramsci Shipping Corp v. Stepanovs.
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2013 decision was also criticised as insufficient and because of the doubts that remain as to whether it could operate without the help of other principles, such as tort or unjustified enrichment.61 Notwithstanding the criticisms, the Supreme Court’s approach in Prest seems worth following. The national reports from most countries explain that courts only lift or pierce the corporate veil in rare occasions. Such is the case of Spain, the Netherlands62 or Finland, where there have been some relevant cases decided by the courts but the use of this instrument remains uncommon. A 2015 ruling by the Finnish Supreme Court decided that, in order to lift the corporate veil, the company form must have been intentionally misused. In Germany there has been intense academic debate and significant case law on the topic for quite some time, but it is reported that such debate has evolved into major changes in the last 20 years. For instance, the courts had developed the concept of a qualified de facto group and liabilities attached to it when damages were so intense that they could only have been imposed if a domination agreement had been in place. This was seen at the time as a way of lifting the corporate veil in order to impose liability on a parent company. A similar construction is still used in Croatia. But in more recent years (after 2002) a new doctrine has been developed in Germany, namely the liability for causing damages which endanger the existence of the dependent company (Existenzvernichtungshaftung). Standing to file a claim on this basis is only granted to the company itself and not to its creditors individually. Of course, the receiver of the company’s insolvency may advance a claim on these grounds. Another concept that had been developed in Germany, but left aside in more recent years, is that of substantive undercapitalization. In Austria the courts have accepted to lift the corporate veil of a subsidiary against a parent company or a shadow owner under certain circumstances on a case by case basis. The principle is that nobody shall use the form of a legal entity to circumvent the law or cause harm to others. This doctrine has been applied to cases of thin capitalisation, de facto management of the subsidiary by the dominant enterprise, or actions inconsistent with the duty of care. This seems to be restricted, however, to protect the company itself and not its creditors directly. In Taiwan the liability of a member of the controlling company who caused damage without compensation to a subsidiary is regarded as the first materialization of the principle of piercing the corporate veil. Some outsider 61 As a curiosity, it is worth mentioning that the courts in the UK have admitted a so-called reverse veil piercing, which has also been criticised. But within a group of companies this remedy should be as effective and necessary. 62 Case law mentions that abuses in the use of different legal entities is unacceptable, but the report states that this sort of claims hardly ever succeed.
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commentators would say that this is not at all a case of disregarding the legal entity but a straightforward application of the principle that whoever causes damages is liable to repair them. But Article 154-2 of the Taiwanese Companies Act, after introducing what until then was a common law principle, states that if a shareholder abuses the company’s status as a legal entity, and prevents the company from paying its debts, such shareholder may be held liable for those debts. This is also described as an application of the piercing the corporate veil doctrine but, again, it actually seems to be a consequence of the general rule referred to above. Greece seems to be comparatively more open to lift the corporate veil in cases of abuse of the legal entity, especially in tort cases. The Cypriot report informs that, in so far as groups of companies are concerned, case law on lifting the corporate veil is generally based on the single entity concept.63 The basic approach remains, nevertheless, that of the English Salomon & Co v. Salomon rule, strongly reaffirmed in 1980 in the Michaelides v. Gavrielides decision. But in a 1987 case, where there was a clear misuse of the subsidiary to obtain what the parent could not, the Cyprus Supreme Court lifted the veil.64 The Swedish report mentions that sometimes, in cases where the company is used for purposes other than those it was conceived for—for example if the subsidiary does not carry out its own business but that of the parent-, the courts are prepared to lift the corporate veil in order to hold the parent liable for the subsidiary’s debts. In Poland a shareholder may only be held liable for the company’s debts in case of abuse of the corporate form, which is foreseen in Art. 5 of its Civil Code. Undercapitalization and asset comingling cases are included, as well as cases where the company has been used to cause damage to creditors, even if not deliberately. In Italy the corporate veil is lifted by the courts in cases where the activity of the subsidiary is a mere instrument of the shareholders’ own activity. In practice this generally only occurs in cases of fraud. In some countries, like France, the disregard of legal entity is considered only in the context of insolvency and not as an autonomous tool. The Japanese Supreme Court decided in 1969 that the corporate veil can be pierced when a legal entity has no substance at all or is misused to avoid the application of the law. Another Supreme Court decision of 1993 ruled that the prohibition for a corporation to buy its own shares was to be extended to the subsidiary’s purchase of its parent’s shares, which is now specifically regulated by the Companies Law. However, as in most countries, this is not regarded in Japan as a case of piercing the corporate veil. 63 64
For references, see the Cyprus report. Republic v. KEM Taxi Ltd.
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Croatia has a rule according to which the exclusion of shareholder liability must be set aside in cases of abuse. It provides examples such as the use of the company for a forbidden purpose or to damage creditors, the management of the company’s assets by the shareholder as if they were its own, and the shareholder’s actions to diminish the assets of the company knowing or if he ought to have known that the company would be unable to meet its obligations (Art. 10-3). Croatian court decisions have applied these solutions restrictively. Something similar is provided for in the Slovenian Commercial Companies Act (Art. 8), but is hardly ever applied in practice. In the Netherlands, notwithstanding the reluctance of its courts to disregard the legal entity, parent companies are liable to the subsidiary’s creditors for wrongdoings, whether materialised by acts or omissions. This liability depends on the level of insight and interference of the parent in the subsidiary, as well as on whether there has been a benefit for the parent or another group company. In disregarding the corporate personality of a company, Singaporean courts have evolved from concepts such as sham or façade entity to the notion of abuse of the corporate form. This applies to the cases where a company was used to evade liabilities or to conceal the real parties to a transaction. The courts also rely on the alter ego concept, which refers to the situation where a company carries out the business of its controlling party and the latter does not make any distinction between parent and subsidiary. But the Singaporean courts have denied the single economic entity doctrine for the purpose of lifting the veil. Argentina was the first country that, after some relevant court decisions which disregarded different companies’ legal personalities for different purposes, introduced a specific rule in its Company Law dealing with the disregard of the legal entity doctrine. This happened and 1983, and was shortly and similarly followed by Uruguay in 1989.65 Both laws state that the company’s personality cannot be invoked, and can hence be disregarded, if the company is being used as a mere instrument to breach the law, public order, good faith or to frustrate third parties’ rights, or if its activity conceals non corporate purposes. In such cases, the activity is imputable to the shareholders or controlling parties that made it possible, and those responsible are jointly and severally liable for the resulting damages. These Argentine and Uruguayan rules are particularly relevant in so far as they not only contemplate the extension of liabilities beyond the limits of the company’s personality, but also the extension of other legal relationships, including for example contractual obligations to be fulfilled in kind. Brazil provides for a similar rule in Art. 50 of its new Civil Code, but it is narrower in scope because it is limited to the 65
Argentine General Company Law, Art. 54, 3rd. paragraph, and Uruguayan Commercial Companies Law, Arts. 189/191.
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extension of liability and does not serve other purposes, as its Argentine and Uruguayan counterparts do. In cases of abuse of the legal personality, a party, but also the public prosecutor, may request that an obligation be extended to the assets of administrators or shareholders of a legal entity. There must be evidence that the company was used as an instrument of fraud against third parties, or for the abuse of rights. Other areas of law, such as tax, consumer protection and labour law, have a similar provision.
8
Insolvency
The insolvency laws of not too many countries deal with group-insolvency. Germany, for instance, only introduced such rules in 2017. But it has been pointed out in the German report that nowadays the European Insolvency Regulation, which does deal with group insolvency, is of higher practical importance than national rules. The definition of a group in the new German insolvency law departs somehow from that of the AktG (“possibility to exercise a dominant or prevailing influence or under unified direction”) and, for the purpose of this law, excludes as members of the group to which it applies the natural persons and the companies in which, directly or indirectly, a natural person would be liable. The law is only aimed at organising and facilitating the procedure if so required by the party who petitions the opening of the insolvency procedure. It does not provide rules on management, other group companies’ or any other persons’ liability. Portugal’s insolvency law does not recognise a group as a subject of insolvency procedures. But in case of insolvency of a subsidiary the parent company, considered its de jure or de facto director, may be held liable to the subsidiary’s creditors in case of a “culpable” insolvency. This may also entail the subordination of the parent’s credits in the subsidiary’s bankruptcy. In Austria, where there are no procedural rules to handle a group in the event of a financial crisis, and each group member is treated separately, in the event of insolvency shareholder loans are transformed into equity if they were granted by controlling persons or holders of more than 25 % of the capital, or by persons exercising a controlling influence (§ 5, Austrian Substitute Capital Law). A few reports mention that some forbidden transactions, like asset shifting or cash pooling, may fall under the insolvency rules that allow the challenge of transactions executed within a certain time frame before the insolvency filing. That is the case of Sweden for undervalued transactions with the parent company. Singapore law foresees the right to challenge undervalued transactions within 5 years prior to the date of the winding up application, provided the company was already insolvent or became insolvent at the time of the
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transaction. This is a relatively extensive period of time, if compared with other national laws. In Taiwan a parent’s credit may not be offset against its liability for not having compensated damages, and such credit shall stand subordinated to all other credits against the subsidiary. As a consequence of the turmoil caused by a case which was relevant to the national economy, Slovenia passed a law to allow the government to appoint an associate administrator if a company in financial difficulties is of systemic relevance to the country’s economy. Transactions between dominant and dependent companies may be challenged if they caused damage to the insolvent entity. Belgium is an example of a jurisdiction where sanctions for wrongful trading are imposed on directors who continue to trade when they knew or ought to have known that insolvency was inevitable. The same liability may be extended to a controlling shareholder who in fact acted as if he were a director (de facto or shadow director), and in extreme cases bankruptcy may also be extended to the “business’ master”. But the court may limit these liabilities to only a part of the bankruptcy losses. In Singapore, like in some other jurisdictions, directors have to act in the interest of creditors when the company is on the brink of insolvency and not doing so is considered a breach of their duty to act in good faith, which may result in a claim being brought against them by the receiver, albeit not by any individual creditor. In Spain there are some (scattered) special rules that address or are applicable to groups. The parent company or the controlling shareholder may be deemed to be a de facto director under certain circumstances and as such be held liable for damages caused to the company. A special insolvency liability may also apply in some cases.66 Intragroup guarantees used to be declared null and void in Spanish insolvency procedures, but more recently they were accepted under certain conditions, mainly if a balance between burden and advantages can be proven. As some other national laws, Spain establishes the subordination of credits of a company in the same group as the insolvent company. Arts. 92 and 93 of the Spanish insolvency law provide for an automatic subordination of all such credits. It also foresees a substantive consolidation of assets if the confusion of assets and liabilities is such that it is no longer possible to separate those which belong to each company. In the Netherlands, there are also no specific rules with regard to liability in case of company groups. A parent company may however also be deemed a shadow director and therefore be liable against the creditors of the subsidiary in case of the latter’s bankruptcy. Under specific circumstances a parent company can be held liable on the basis of a tort by the creditors of the subsidiary if it can be 66
Art. 236, Ley de Sociedades de Capital, and art. 172 bis, Ley Concursal.
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established that the parent company had a duty of care towards the creditors of that subsidiary and it can be established that this duty has been violated. The existence of a group furthermore has an influence on the question of who bears the burden of proof when the receiver of a bankrupt group company files an actio pauliana based on the presumption of knowledge of the insolvency. In the UK a director responsible for damages suffered by an insolvent company may be disqualified and barred from serving as board member if, for instance, he did not give priority to the interests of the company. A shadow director may also be subject to such disqualification and to the duty to compensate the insolvent company. The same qualification can also be extended to directors of a parent company who instructed the insolvent company’s directors. Since the interests of the creditors of the insolvent company replace those of its shareholders, liability for wrongful trading and for related party undervalued transactions may arise. When it does, a duty to personally compensate those damages may be imposed upon directors and shadow directors alike. But these actions are rather unusual. The preparatory works for the 1986 UK insolvency reform, whilst acknowledging the risk of undervalue asset transfers, gratuitous guarantees, dividend payments harmful to the company, and other possible abuses of a parent company, did not want to alter the limited liability principle without a comprehensive review of group enterprise liability. Already in 1979 Italy passed insolvency law Nr. 95 “on the extraordinary administration of large enterprises in crisis”, which included some special rules for groups. It provided that, if a parent or subsidiary falls under its regulation, the proceedings will be extended to all the group member companies. But that did not have the effect of pooling all the assets together. This law was amended in 1999 and there were also some general reforms in 2005/6, which enhanced what the Italian report refers to as the rescue culture, as opposed to the bankruptcy approach. The Italian insolvency law permits preventive solutions at the group level, by means of asset transfers, allocation of shares or bonds to creditors, transfer of company’s assets, etc. Following the 2003 amendment to the Italian Civil Code, the reference in Art. 2497 quinquies to Art. 2467 means that loans made by the entity exercising the direction and coordination activity are subordinated. But nothing seems to have been as important as law 155 of 19th October 2017, which delegates on the government the task of issuing legislative decrees to reform the insolvency and pre-insolvency procedures. In so far as groups are concerned, the guidelines, which do not seem to change the prevailing conception of group insolvency, include a reference to the fact that a group must be defined on the basis of the Civil Code notion of direction and coordination activities and the related presumptions. The delegation guidelines include the
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obligation to file special consolidated group financial statements, the request of group related information, the subordination of credits among same group companies and specific procedural rules for both preventive insolvency and liquidation procedures: same court and same receiver for all the companies; group wide range of agreements with creditors; empowerment of the receiver to adopt measures even with respect to group companies that are not insolvent. If a partnership is part of a group, meaning that its partners are companies,67 the partnership’s bankruptcy is extended to the partners. This rule is group specific, since natural persons are exempted from bankruptcy extensions. The law further unifies the bankruptcy procedures before one single court for all the companies involved, but keeps each company’s patrimony separated. The US report informs about a Delaware Supreme Court decision allowing creditors to file a derivative suit for tunnelling—which is not granted to creditors in general—if the company is unable to pay its debts. Another case law remedy is the subordination of credits of the parent company in the insolvency procedures of its subsidiary, but only in the presence of “questionable dealings”. Also substantive consolidation, a species of lifting the corporate veil, is a judicial doctrine under which, in the event of insolvency, affiliated companies are put together as one. It is a remedy to be applied with caution, because it can damage legitimate interests of creditors of any of the individual companies, which might not be insolvent on their own. The Finnish case law on groups of companies is primarily related with insolvency situations, and is rather casuistic. In addition, there are some jurisdictional rules to unify the insolvency procedures of all the group companies in one court. The same applies to the appointment of insolvency administrators. The new European insolvency proceedings’ regulation is deemed directly applicable without any local legislative action being required. In France the corporate veil is lifted in the presence of asset mingling (confusion de patrimoine) among companies, but this only applies to cases of abnormal financial
67
This may be a way to be entitled to direct the partnership’s business.
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relationships, such as those involving systematic transfers without a proper compensation. But, as the French report informs, the approach of the Cour de cassation is restrictive and pragmatic: it considers that the group is the normal way of organising and doing business, and that therefore the existence of relationships within the groups according to management principles is not abnormal. Whether de jure or de facto, directors may be held liable for managerial mistakes which caused, or contributed to cause the insolvency of the company. This action is called action en responsabilité pour insuffisance d’actif, which in 2005 replaced the former action en comblement de passif. The difference is subtle and probably linked to the personal involvement of the director.
9
Conclusion
There are unfortunately no enlightening conclusions to be drawn from this report, which I shall finalise with a question: has any progress been made in the last decades to solve the many problems arising from the existence of groups of companies? Notwithstanding some new valuable approaches and many propositions at the national and international levels, there is still no general consensus on how to reasonably solve many of the issues raised by the existence of groups of companies. However, in circumstances where corporate groups are more often than not a cross-border phenomenon, discussions amongst experts from different jurisdictions allow us to deepen our knowledge and ideas in order to at least understand the different approaches that have been developed, or are in the process of being developed, on a global level. That alone is a progress which makes the effort worthwhile.
Reference Fuchs A (2003) Tracking Stock - Spartenaktien als Finanzierungsinstrument für deutsche Aktiengesellschaften. ZGR:177
La régulation juridique du crowdfunding Caroline Kleiner
Résumé
Le crowdfunding – ou financement par la foule – constitue depuis quelques années une source alternative de financement, tant pour les entreprises que les particuliers. Alternative, cette source de financement l’est puisqu’il s’agit de se passer des intermédiaires classiques de financement que sont les établissements de crédit, pour solliciter un financement collectif. Toutefois, la désintermédiation n’est – dans de nombreux pays – qu’une étape transitoire dans le développement d’un régime juridique sui generis adopté dans plusieurs ordres juridiques. Dans ces Etats, un nouveau statut – avec ses obligations corrélatives – est créé. D’autres Etats (majoritaires parmi les 19 rapports nationaux rendus sur ce sujet) n’ont fait qu’adapter des régimes existant, pour y inclure ces nouveaux « acteurs » que sont les sociétés exploitant des plateformes de mise en relation entre financés et financeurs. Ce rapport général étudie dans un premier temps les différents types de crowdfunding, en fonction des modalités de financement (prêt, don, achat de parts sociales) puis expose les différentes solutions proposées dans 19 ordres juridiques sous l’angle du régime appliqué aux entreprises de financement par la foule puis sous l’angle de la protection « de la foule », c'est-à-dire des personnes – physique ou morales – ayant contribué à un financement sollicité sur une plateforme. Enfin, puisque l’utilisation d’internet est l’outil essentiel dans ce nouveau mode de financement, il se prête plus que tout autre à un développement transfrontière. Le rapport démontre Avec la collaboration d’Emeric Prevost, avocat au barreau de Paris, doctorant à l’Université de Strasbourg. This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. C. Kleiner (*) Université de Paris, Paris, France e-mail: [email protected]
néanmoins que les Etats étudiés sont réticents au déploiement d’une activité en dehors des frontières où se situe l’entreprise de financement, même s’ils sont très souvent loin d’avoir envisagé toutes les difficultés liées à cet aspect. Abstract
Crowdfunding has been an alternative source of financing for both businesses and individuals in recent years. It is an alternative source of financing, since it discards the traditional financing intermediaries, such as credit institutions, in order to apply for a financing through the crowd. However, disintermediation is – in many countries – only a transitional stage in the development of a sui generis legal regime adopted in several legal orders. In these States, a new status – with its correlative obligations – is created. Other states (the majority of the 19 national reports on this subject) have merely adapted existing regimes to include these new "actors", namely companies operating platforms for linking financiers and funders. This general report first examines the different types of crowdfunding, depending on the financing arrangements (loan, donation, equity) and then sets out the different solutions proposed in the 19 legal systems from the point of view of the regime applied to crowdfunding companies and then from the point of view of the protection of "the crowd", i.e. the persons – natural or legal – who have contributed to the financing through a platform. Finally, since the use of the Internet is the essential tool in this new form of financing, it lends itself more than any other to cross-border development. The report nevertheless shows that the States here studied are reluctant to let the companies deploy an activity outside the borders where the financing company is located, even if they are very often far from having envisaged all the difficulties linked to this aspect.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_12
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Introduction
Définitions L’expression de financement participatif, ou financement par la foule, provient de la traduction littérale du terme anglophone crowdfunding. Le terme crowdfunding est d’ailleurs très largement passé dans la langue française. De manière préliminaire, il est proposé de définir cette expression comme un mode de financement effectué par un large nombre de personnes au moyen de plateformes sur internet. Distinction crowdfunding/crowdsourcing En anglais, le crowdfunding est distingué du crowdsourcing dont il serait un type1. La différence entre ces deux notions étant que le crowdsourcing fait appel à des contributions en nature ; le crowdfunding ne sollicite que des sommes d’argent. Seul le crowdfunding, dans cette acception, sera considéré ici, en excluant donc tout appel à contribution qui pourrait être réalisée sous une autre forme que monétaire. Relations triangulaires Le crowdfunding tel qu’entendu dans ce Rapport implique trois acteurs, dont les appellations génériques retenues dans le présent Rapport seront les suivantes : le « contributeur » apportant un financement ; le « porteur de projet » sollicitant un financement ; enfin la « plateforme de crowdfunding », mettant en relation le contributeur et le porteur de projet. Un phénomène global Le crowdfunding est un phénomène global. Aucune région du monde n’échappe à son essor. Le présent rapport général se fonde sur dix-neuf rapports nationaux, (11 rapports d’Etats membres de l’Union européenne ; 1 rapport européen (Suisse) ; 2 d’Amérique du Sud, 2 d’Amérique du Nord ; 3 rapports d’Asie ; 1 rapport d’Australie). Malheureusement, aucun rapporteur national d’un pays du continent africain n’a pu être désigné. Avec regret, cette absence ne permet pas au présent Rapport de se référer à l’état du droit de pays africains sur cette question, alors que l’activité semble y prendre de l’ampleur2. Un phénomène en croissance exponentielle Non seulement le crowdfunding peut être qualifié de phénomène global, mais il se caractérise aussi par sa croissance exponentielle. Les chiffres parlent d’eux-mêmes. Les 1
Pekmezovic and Walker (2016), pp. 347–458, spéc. p. 356. Selon une étude de Afrikstart Crowdfunding, en 2015, 57 plateformes de crowdfunding réunissant des projets pour une somme totale de 236,9 millions de dollars existeraient en Afrique. La première plateforme serait Thundafund en Afrique du Sud (créée en 2013) et Cotizi au Maroc (créée en 2014). Dossa (2016), p. 104. V. aussi une étude de la Banque mondiale de 2015 Crowdfunding in Emerging Markets : Lessons from East African Startups. 2
évaluations rétrospectives montrent que le recours au crowdfunding en tant que nouveau mode de financement a progressé dans toutes les régions du monde. Les évaluations calculant le développement du crowdfunding à l’avenir sont encore plus révélatrices de l’ampleur du phénomène. Une étude menée par la Commission européenne calculait en 2016 que le montant des transactions globales impliquées dans des opérations de financement par la foule passerait, de 203 337,5 millions USD à 686 237,8 millions USD, soit un triplement en 6 ans !3 Dans son Policy Paper publié le 27 juin 2019, le Fonds Monétaire International (« FMI ») estime aujourd’hui à 19,4 milliards USD le montant global des fonds levés par les plateformes de crowdfunding pour le financement des entreprises4. Il est également intéressant de noter que certaines statistiques évaluent le taux de croissance global moyen du montant des transactions conclues sur les plateformes de crowdfunding à 14,7% par an entre 2019 et 20235. De telles prévisions globales de développement du crowdfunding sont par ailleurs cohérentes avec les tendances nationales observées, à l’instar de la France où 1,4 milliards d’euros ont été collectés en 2018, soit une augmentation de +20% en 2018 de l’ensemble des fonds collectés par les plateformes en France6 ou aux Etats-Unis, où depuis l’entrée en vigueur le 16 mai 2016 de la loi sur le crowdfunding7, les petites entreprises ont pu levé jusqu’à 1 000 0000 USD annuellement. Origine Comme tous les services réalisés et induits par Internet, son développement a été extrêmement rapide. Il est difficile d’identifier la première plateforme ayant mis en relation un chercheur de financement avec le public internaute. De manière approximative, on peut dater les débuts du financement participatif via internet aux fins des années 1990, début des années 2000. Mais plusieurs auteurs s’accordent à dire que cette nouvelle façon de lever des fonds aurait été initialement utilisée dans le domaine musical puis artistique en général8. Ce n’est qu’ensuite que des plateformes à vocation plus générale ont ouvert leur porte à 3
Voir schéma (keynote slide 4). FMI, « Fintech: the experience so far », Policy Paper, n 19/024, 27 juin 2019, p. 10, figure 3, disponible au lien suivant: https://www.imf.org/en/ Publications/Policy-Papers/Issues/2019/06/27/Fintech-The-ExperienceSo-Far-47056. 5 Voir au lien suivant : https://www.statista.com/outlook/335/100/ crowdfunding/worldwide?currency¼eur. 6 Voir le Baromètre du crowdfunding en France 2018, établi par l’association Financement Participatif France et KPMG, disponible au lien suivant : https://financeparticipative.org/barometre-crowdfundingfrance-2018/. 7 Regulation Crowdfunding. V. le rapport du SBA (Small Business Administration): https://cdn.advocacy.sba.gov/wp-content/uploads/ 2018/03/28180000/Crowdfunding_Issue_Brief_2018.pdf. 8 V. D. M. Freedman et M. R. Nuttin, « A Brief History of Crowdfunding », 2014–2015. 4
La régulation juridique du crowdfunding
des porteurs de projet de nature extrêmement variée. En réalité, comme le fait remarquer à la fois la rapporteure brésilienne et la rapporteure des Etats-Unis, le crowdfunding trouverait sa source dans des phénomènes bien plus anciens tels que l’appel à contribution publique pour la construction du Christo le Rédempteur à Rio de Janeiro9. Mme Hemingway10 estime également que le mendiant au coin de la rue, finalement, demande aussi à la foule l’aumône. De la même façon, plusieurs auteurs estiment qu’un des premiers projets de crowdfunding concerne le financement de la Statue de la liberté du port de New York, campagne lancée en 188411. Facteurs de développement Le développement des plateformes et du nombre de projets financés par la foule s’est accéléré à partir de 2008, notamment en raison de la crise financière des années et le « credit crunsh » qui s’en est suivi. La crise financière a également entraîné, dans de nombreux pays, un flot de législations renforçant la supervision bancaire et un renforcement de fonds propres des établissements de crédit12. Ceci a pu contribuer à l’attitude très prudente des établissements de crédit dans l’allocation de financement, rendant d’autant plus nécessaire l’accroissement de financements alternatifs13. La crise n’est évidemment pas le seul facteur explicatif de la progression exponentielle du recours au crowdfunding. Il faut ajouter à la conjoncture socio-économique, le développement des technologies et la propagation des réseaux sociaux14. Caractéristique commune S’il est en effet un point commun à toutes les formes de financement participatif, c’est bien l’utilisation de plateformes via internet15. Pour certains auteurs, le crowdfunding se caractérise également par la présence de deux autres éléments : un nombre important de contributeurs et des contributions de montants assez 9
Rapport brésilien, V. aussi le rapport néerlandais. V. Rapport états-unien. 11 Pekmezovic and Walker (2016), p. 364. 12 V. l’étude publiée par l’OICV-IOSCO « Crowdfunding 2015 Survey Response Report », p. 1. 13 V. en ce sens le Rapport finlandais « Crowdfunding Act accelerating the growth of crowdfunding market in Finland », V. aussi Pekmezovic and Walker (2016), p. 355. 14 Th. Rodriguez de las Heras, « A comparative Analysis of Crowdfunding Rules in the EU and U.S. », TTLF Working paper n 28 (2017), p. 5. 15 V. en ce sens, la définition proposée par le Département fédéral suisse des finances dans son rapport explicatif sur le projet d’amendement à la loi bancaire et à l’ordonnance bancaire (FinTech) du 1er février 2017, cité par le rapporteur suisse, T. Troxler, V. également la définition proposée par J. MacLeod Heminway : « crowdfunding more commonly refers to the soliciation of funding from, and the provision of funding by, an undifferentiated, unrestricted mass of individuals funders, each contributing a small amount », du rapport pour les Etats-Unis. 10
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faibles16. L’utilisation d’internet a déjà suscité de nombreuses questions juridiques depuis son apparition. En droit de la preuve notamment, mais aussi dans le domaine de la compétence judiciaire internationale, ou évidemment, en droit de la propriété intellectuelle, les questions juridiques soulevées par l’utilisation de cette nouvelle technologie ont été nombreuses. A chaque fois, une adaptation des règles existantes a été nécessaire, soit pour incorporer de nouvelles modalités de l’écrit, soit pour tenir compte de l’ubiquité inhérente des utilisateurs d’internet. L’utilisation d’une plateforme via internet pour solliciter des fonds entraîne-telle une révolution copernicienne des concepts juridiques jusqu’ici utilisés pour régir les rapports noués entre les différents participants à un appel de fonds ? Ou bien ne s’agit-il que d’une simple (lente et douce) évolution ? Les différents types de crowdfunding Parler de crowdfunding ou financement participatif de façon générale est illusoire. Il n’existe pas un seul type de crowdfunding et s’il est un trait commun à l’ensemble des rapports nationaux reçus, c’est bien la nécessité d’opérer une distinction entre quatre grands types de financement par la foule ; le financement fondé sur des dons ; celui fondé sur une contrepartie – fût-elle modeste –; celui reposant sur un prêt ; enfin, celui impliquant un investissement dans une société17. Il existe certes d’autres types de crowdfunding assumant une fonction distincte des quatre précédemment exposées18. Mais ils sont suffisamment négligeables, ou dégagés par un trop petit nombre d’ordres juridiques pour constituer des catégories autonomes. Il est aussi possible, à l’instar du rapport irlandais, de ranger ces quatre types de crowdfunding dans deux catégories plus larges : le non-financial crowdfunding et le financial crowdfunding19. Mais ceci n’apporte pas d’éléments analytiques suffisamment pertinents pour que cette distinction puisse être retenue. Les différents rapports nationaux montrent que les différences existant entre ces quatre grands types de crowdfunding rendent impossible une étude comparative reposant sur le crowdfunding en tant que concept unique. L’approche suivie dans le présent Rapport général est donc celle de crowdfunding en tant que concept multiple. 16
Mollick (2012), p. 2; proposition reprise par Pekmezovic and Walker (2016), p. 357. 17 Cette quadrilogie est également retenue dans l’étude de l’OICVIOSCO : E. Kirby et S. Worner, « Crowd-funding : An Infant Industry Growing Fast », Staff Working Paper [SWP3/2014], disponible sur http://www.iosco.org/library/pubdocs/pdf/IOSCOPD459.pdf 18 V. à cet égard, le Rapport suisse, qui distingue 6 formes de crowdfunding : crowddonating, crowdsupporting, crowd pre-financing, crowdlending, crowdinvesting and crowd invoice trading. Le rapport irlandais mentionne également le développement du crowdfunding litigation, dont il sera question plus loin dans le rapport. Néanmoins, à notre sens, il ne s’agit que d’une sorte de financement par le don (donation based crowdfunding). 19 Rapport irlandais.
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Variété des politiques juridiques Ces quatre grands types de crowdfunding impliquent des risques (pour les contributeurs) avec des degrés de gravité variés. Dès lors, il est compréhensible que les réactions législatives à ce phénomène soient également très diverses. Plusieurs Etats dont un rapport a été ici présenté n’ont pas intégré ce nouveau phénomène dans leur législation, ou du moins pas encore. Parmi eux, la Pologne, Chypre, l’Estonie, l’Allemagne, la Grèce, l’Irlande, les Pays-Bas et la Suisse, pour l’Europe ; le Japon, Singapour, Taïwan pour l’Asie, n’ont pas adopté de législation particulière relative au crowdfunding. Cela ne signifie pas que le phénomène est ignoré, mais que les opérations de crowdfunding sont alors régies par des normes générales, non sui generis. Des ajustements ont pu être faits ici et là, à l’instar du droit suisse, mais sans créer de réel régime sui generis. D’autres ont adopté une législation propre au financement par la foule, mais parmi ces Etats, fort nombreux sont ceux n’ayant traité que d’un ou deux types de crowdfunding, comme l’illustre le tableau ci-après.
de règles standards applicables à tous les types de crowdfunding et regrettent l’application d’un « patchwork » de législations23. Une qualification adaptée à ces nouveaux types de rapport semble donc préférable. En toute hypothèse, tous les ordres juridiques interrogés considèrent les rapports créés entre d’une part le porteur de projet et le contributeur, d’autre part, l’entreprise de financement participatif et le porteur de projet, enfin entre le contributeur et l’entreprise de financement participatif comme étant de nature contractuelle.
Les différentes positions législatives des ordres juridiques étudiés sont récapitulées dans le tableau ci-dessous (Table 1). Le présent Rapport étudiera en premier lieu les différents types de crowdfunding et la multiplicité de relations engendrées. En second lieu, le statut des entreprises exploitant des plateformes de crowdfunding sera analysé, avant d’envisager, en troisième lieu, les mesures mises en place, ou nécessaires, pour protéger les financeurs de projet. Enfin, le Rapport traitera dans une quatrième partie l’activité transfrontière du financement par la foule.
2.1
2
LE CROWDFUNDING : UN CONCEPT MULTIPLE
Difficulté de qualification Faut-il adopter une qualification sui generis ? Le rapporteur allemand, T. Tröger relève que « the legal qualification of financing relationships concluded on platforms poses no idiosyncratic challenge for German private law, because, in principle, all funding relationships existed prior to digitization in the analogue world and technological innovation only facilitated their conclusion among previously unacquainted parties »20. Le rapport espagnol mentionne également que « General contractual legal categories shall apply »21. Le rapporteur néerlandais est plus nuancé, en ce qu’il explique que les contrats conclus entre les participants à une plateforme peuvent aussi être sui generis ou un mélange de plusieurs contrats types22. Les auteurs du rapport chypriote constatent l’absence d’un corps
L’hétérogénéité des formes de crowdfunding conduit à envisager les différents types de crowdfunding, en commençant par le plus altruiste – le crowddonating – puis en étudiant le crowdfdunding avec contrepartie, pour envisager ensuite des formes ressemblant davantage à l’expression d’une activité bancaire et financière, à savoir le crowdlending et le crowdinvesting.
Un mode de financement peu régulé Si le financement participatif consistant en un prêt ou un investissement a été beaucoup étudié par la doctrine et correspond actuellement aux types de crowdfunding les plus régulés, le financement reposant sur le don l’est beaucoup moins24, alors qu’il a été la première forme de financement par la foule et représente, dans certains pays du moins, une part importante de l’activité globale de « crowdfunding »25. Ce type de financement par la foule pose essentiellement des difficultés au regard de la qualification des différents rapports de droit.
2.1.1
Qualification du rapport entre le contributeur et le porteur de projet Qualification de donation Par un raccourci assez utile, la contribution offerte par des internautes à des porteurs de projet sans contrepartie aucune est qualifiée, en anglais, de donation crowdfunding. La pertinence de la qualification doit cependant être posée. Les rapports existant entre contributeur et porteur de projet correspondent-ils en effet au contrat type de « donation » ? Aucun rapport national ne souligne la nécessité d’une qualification sui generis de ce type de relation contractuelle. De fait, dans de nombreux ordres juridiques 23
20
Rapport allemand. 21 Rapport espagnol. 22 Rapport néerlandais.
LE FINANCEMENT PARTICIPATIF SOUS FORME DE DON (DONATION CROWDFUNDING ou CROWDSPONSORING ou CROWDONATING)
Rapport chypriote. Il est d’ailleurs écarté dans plusieurs rapports nationaux. 25 V. en ce sens le Rapport canadien, selon lequel le financement par le don serait le plus répandu. 24
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Table 1 Pays dans lesquels une législation spécifique relative au crowdfunding a été adoptée
Rapports nationaux reçus
Hors rapports nationaux
ALLEMAGNE ARGENTINE AUSTRALIE BELGIQUE BRESIL CANADA CHYPRE ESPAGNE ESTONIE ETATS-UNIS FINLANDE FRANCE GRECE IRELAND JAPON PAYS-BAS POLOGNE SINGAPOUR SUISSE TAIWAN INDEa ITALIEb MEXICOc PANAMAd ROUMANIEe ROYAUMEUNI
Législation existante Non Oui Oui Oui Oui Oui Non Oui Non Oui Oui Oui Non Non Non Non Non Non Non (mais projet) Non Non Oui Non Non Oui Oui
Financement sans contrepartie (don)
X
Financement avec contrepartie
X
Prêt (avec ou sans intérêts)
Investissement
X X
X X X X X
X (prêt avec intérêts)
X
X (prêt avec intérêts) X interdit
X X X
X
X X
X
a
Majumdar and Varottil (2016) Laroppe (2016, p. 31) c Ibarra Garza and Ibarra Garza (2016, p. 83) d Monteil (2016, p. 92) e Catanā and Sumandea-Simionescu (2016, p. 58) b
n’ayant pas adopté de législation spécifique à cette forme de financement participatif, la qualification de cette relation ne semble pas susciter de problème. La relation nouée entre le contributeur animé d’une intention libérale et le porteur de projet est qualifiée de donation contract en droit polonais26, de donation avec charge en droit brésilien27, de donation en droit suisse28, comme en droit allemand (Handschenkung)29, en droit polonais30 ou encore en droit argentin31. Elle est une proposition de don selon le droit chypriote (et donc, non 26
Rapport polonais. Rapport. 28 Rapport suisse, qualifié de Gift contract. 29 Rapport allemand. 30 Rapport polonais. 31 Rapport argentin. 27
susceptible d’exécution forcée)32. Pour que cette qualification soit retenue, il est en général important qu’aucune gratification ne soit offerte au contributeur, car celle tendrait alors à pervertir l’animus donandi. Donation ou fiducie en droit québecois Le rapport canadien a approfondi l’analyse de la qualification, en juxtaposant l’approche civiliste québecoise à l’approche de common law. En droit québecois, Mme Cumyn relève que « lorsque le porteur de projet sollicite des dons pour lui-même, sa relation aux contributeurs peut être qualifiée de donation »33. Toutefois, lorsque le porteur de projet n’est pas le
32 33
Rapport pour Chypre. Rapport canadien.
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donataire, « la situation se complique »34. Lorsque l’appel aux dons est lancé au nom d’un ou plusieurs bénéficiaires déterminés, la qualification de donation est préservée. En revanche, lorsque l’appel aux dons est lancé soit au nom de personnes indéterminées, soit dans un but de nature privée ou dans un but d’intérêt général, il n’est plus possible de retenir cette qualification. Dans ces trois hypothèses, Mme Cumyn propose de qualifier le rapport noué entre le porteur de projet et les contributeurs de fiducie, avec le risque toutefois que les conditions exigées par le droit québecois pour la constitution d’une fiducie ne soient pas réalisées. Qualification de donation même dans les législations régissant ce type de financement par la foule L’absence de création de figure juridique sui generis se retrouve également même dans les ordres juridiques ayant adopté un régime particulier pour le crowdfunding. En France, l’ordonnance n 2014-559 du 30 mai 2014 relative au financement participatif, mise en œuvre par le décret n 2014-1053 du 16 septembre 2014, n’a pas créé de nouveaux contrats types. De fait, le régime est le même que pour le crowdlending. L’ordonnance française organise le financement participatif sous forme de don, sans toutefois définir le don. Mais, selon plusieurs auteurs, la qualification est incertaine35. La qualification de donation avec charge a d’ailleurs été proposée par un auteur36. Obligations du donataire et du donateur37 La qualification de donation place le porteur de projet dans la même situation qu’un donataire et le contributeur dans celle de donateur. Il en découle que les différentes obligations imparties à chacune de ces parties doivent être suivies, notamment en termes de révocabilité du don ou de responsabilité du donataire. Les outils communs de droit civil peuvent être utilisés pour mettre en cause la responsabilité du donataire, par exemple l’obligation générale de ne pas porter atteinte aux objectifs du contrat prévue par l’article 241 BGB38. Les plateformes de financement participatif peuvent également prévoir, dans leurs conditions générales d’utilisation, des clauses par lesquelles les dons sont irrévocables ou qu’ils ne peuvent pas être annulés39. Pour les pays de Common law, l’appréhension du rapport entre contributeur et porteur de projet est nécessairement différente, puisqu’ « en common
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law, la donation (gift) n’est pas un contrat »40. Les obligations incombant au porteur de projet dans ces cas sont incertaines. Le plus souvent, les conditions générales d’utilisation des plateformes se contentent de renvoyer les contributeurs vers le porteur de projet, seul responsable de la bonne réalisation de son projet sans évoquer la révocabilité du don41 ou ont une politique très précise en matière de « refund »42. La clause « Tout ou rien » ou « Gardez tout » La qualification du rapport entre porteur de projet et contributeur pourrait-elle être affectée par le choix de la modalité de la contribution selon le type de clause « tout ou rien » ou « gardez tout » ? Peu de rapports ont évoqué la question. Dans les pays civilistes, on peut sans doute estimer que les dons effectués selon la première option sont faits avec la condition suspensive que l’intégralité de la somme demandée sera versée. Dans le second cas, le don est effectué sans condition. En droit mexicain, le don fait selon la modalité du « keep it all » est considérée comme une « absolute donation » (donacíon pura)43.
2.1.2
Qualification du rapport entre le porteur de projet et l’entreprise de financement participatif Contrat de représentation (agency contract) La plateforme agit en tant que simple intermédiaire entre le porteur de projet et l’investisseur. Dès lors, les relations nouées avec cette partie et le porteur de projet sont dans de nombreux ordres juridiques, qualifiées de contrat de représentation (agency contract) ou contrat de courtage (brokerage contract)44. Le contrat de société simple est également évoqué45. 2.1.3
Qualification du rapport entre le contributeur et l’entreprise de financement participatif Contrat de prestation de services Les relations nouées entre le financeur et la plateforme sont souvent passées sous silence. Sans doute, selon le rapport allemand, en raison du peu d’obligations relevées à la charge des plateformes dans cette forme de crowdfunding46. Les plateformes permettant de recueillir des dons s’exonèrent le plus souvent de toute 40
Rapport canadien. V. par exemple, les conditions d’utilisation de Kickstarter (article 4) (soumises au droit de l’Etat de Californie) https://www.kickstarter.com/ section4?ref¼faq-basics_creatoroblig 42 V. par exemple les conditions de Indiegogo : https://support. indiegogo.com/hc/en-us/articles/526876 43 Ibarra Garza and Ibarra Garza (2016), p. 88. 44 V. en droit allemand (rapport, p. 21) ; en droit suisse, (rapport p. 10). 45 Rapport suisse. 46 Rapport allemand : « In donation and reward-based crowdfunding, the platform incurs no specific duties to inform its customers beyond regular 41
34
Ibid. Callebaut (2015), p. 239 (241); Blanc (2015), p. 251. 36 Quiquerez (2016), p. 19. 37 V. les questions 4.9 et 4.10 du questionnaire. 38 V. le rapport allemand. 39 V. l’exemple cité dans le Rapport chypriote, à propos de la seule plateforme opérationnelle à Chypre (article 3. 3 des clauses générales, http://www.wehug.org/terms-conditions/. 35
La régulation juridique du crowdfunding
responsabilité contractuelle. La rapporteure pour les EtatsUnis cite par exemple les conditions générales de la plateforme « GoFundMe », lesquelles énoncent que GoFundMe facilite les donations, mais qu’elle n’est partie à aucun contrat47. Une prestation de services est cependant bel et bien fourni. L’Attorney General de Californie estime à ce titre que certains services fournis par les plateformes pourraient être qualifiées de conseil en levée de fonds (fundraising counsel), et donc soumis aux principes directeurs (guidelines) en matière de levée de fond par internet. Aux Etats-Unis, les plateformes facilitant les donations sont également soumises au champ de compétence de U.S. Federal Trade Commission pouvant agir en cas de pratiques frauduleuses48.
2.1.4 Des dons à vocation particulière Crowdlitigating Des donations faites dans l’objectif de financer un procès, ce que l’on appelle le crowdlitigating n’a été mentionné que dans un seul rapport, pour expliquer son caractère illégal en droit irlandais. En effet, ce type de donation serait qualifié de « champerty » ou « maintenance » et donc interdit et passible de sanctions pénales49. Revenue sharing crowdfunding En Espagne, des plateformes proposent également le financement visant le partage de revenus, par lequel des porteurs de projet sollicitent un financement avec la promesse de partager les revenus de l’activité financée. Ce type de crowdfunding est utilisé pour les projets immobiliers50.
2.2
LE FINANCEMENT PARTICIPATIF AVEC CONTREPARTIE (REWARD CROWDFUNDING, PRE-SALE CROWDFUNDING, or CROWDSUPPORTING51)
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en contrepartie de la livraison d’un bien ou de la prestation d’un service. Il constitue une sorte de pré-vente d’un objet ou d’un service, ou encore une vente d’un objet ou d’un service, futur52. Dans ce type de relation, le porteur de projet peut-il être qualifié de vendeur et le contributeur est-il un acheteur ? La difficulté entravant parfois la qualification des rapports juridiques créés selon ce schéma réside dans l’équivalence des prestations. Qualification selon l’équivalence des prestations En droit suisse, T. Troxler indique que la qualification variera selon la nature de la contrepartie offerte par le contributeur. Il pourra alors s’agir soit d’un contrat de vente (art. 184 et s. du Code des obligations), d’un contrat de services (art. 363 et s. CO) ou même d’un mandat (art. 394 et s. CO)53. En droit allemand, la figure du contrat de vente est également retenue pour ce type de relation, ainsi qu’en droit espagnol54, en droit chypriote55, comme en droit irlandais56. A noter que si le contributeur ne possède pas l’objet au centre du projet in fine mais que, par exemple, l’objet peut être simplement visionné ou écouté en streaming, le rapport consiste alors en une location57. La qualification semble susciter davantage de difficultés en droit brésilien car il ne semble pas exister de consensus sur la nécessité de distinguer selon le caractère proportionnel de la contrepartie par rapport au financement apporté58. Si la distinction doit être faite, la qualification oscillera entre un contrat de vente, un contrat de prestation de services, un contrat d’entreprise ou même d’un contrat atypique. En droit polonais, le degré de proportionnalité entre la contribution et la contrepartie est également susceptible d’influencer la qualification. En ce sens, si la contrepartie reçue par le contributeur est très minime par rapport à la contribution effectuée, la rapporteure polonaise propose de qualifier la relation de « inominate reciprocal contract »59. Pour les droits des pays de Common law, aucune difficulté
Approche générale Le reward based crowdfunding consiste, pour le contributeur, à verser une somme d’argent, contract law, whereas in crowdlending and crowdinvesting more far reaching obligations apply ». 47 V. le rapport pour les Etats-Unis : « GoFundMe facilitates the Donation transaction . . . , but is not a party to any agreement . . . between any user and a Charity. GoFundMe is not a broker, agent, financial institution, creditor or insurer for any user. GoFundMe has no control over the conduct of, or any information provided by . . . a Charity, and GoFundMe hereby disclaims all liability in this regard to the fullest extent permitted by applicable law » (V GoFundMe Terms & Conditions, https://www.gofundme.com/terms (site consulté le 16 oct. 2017). 48 Ibid. 49 V. le rapport irlandais. 50 V. le rapport espagnol. 51 Selon le terme du rapport suisse.
52 Mme Heminway, dans son rapport sur le droit des Etats-Unis distingue le reward-based crowdfunding du pre-sale crowdfunding. Dans le premier, la contrepartie consiste en un objet promotionnel, lié au projet financé. Mais cette différence n’a en réalité pas d’impact sur la qualification et les obligations qui découlent de la relation contractuelle créée entre les parties. 53 Rapport suisse. 54 Rapport espagnol. 55 Rapport pour Chypre. 56 Rapport irlandais. 57 Rapport allemand. 58 Rapport brésilien. 59 Rapport polonais.
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particulière de qualification ne semble se poser. Selon les rapports australien60, irlandais61, états-unien62, le régime du contrat de vente semble pouvoir s’appliquer sans difficulté. Influence des modalités « tout ou rien » ou « gardez tout » En cas de financement participatif reposant sur une pré-vente, la qualification du contrat dépend du modèle choisi par la plateforme et/ou le porteur de projet. Si la levée de fonds est organisée selon le modèle « tout ou rien », le porteur de projet ne reçoit les fonds que si l’intégralité de la somme sollicitée est levée. Pour la rapporteure brésilienne63, il s’agit bien alors d’un contrat de vente de choses futures, régi par l’article 483 du Code civil brésilien. En conséquence, si la chose future n’est finalement pas créée et livrée, le contrat est privé d’effets. Si en revanche, le modèle adopté est celui du « gardez tout » (keep it all), le contrat sera qualifié de contrat aléatoire, qui prive le contributeur de tout recours contre le porteur de projet, dès lors que celui-ci n’a pas commis de faute. Une autre qualification retenue, en droit estonien, est le contrat de vente sous condition suspensive, ou, lorsque la contrepartie est faible, en deux contrats de donation distincts64. Obligations du porteur de projet et du contributeur Dès lors que la contribution en échange d’une contrepartie a été qualifiée de contrat de vente, le porteur de projet assume les obligations d’un vendeur ; le contributeur celle d’un acheteur. Impact de la législation protégeant les consommateurs De façon très pertinente, le rapport étatsunien utilise l’expression de « Consumption Interest Crowdfunding » pour évoquer le reward-based crowdfunding. Les relations nouées entre porteur de projet et contributeur dans ce cadre soulèvent légitimement la question de l’applicabilité du droit de la consommation. Le contributeur est-il un consommateur, vis-à-vis du porteur du projet ? Le droit français, un des seuls droits recensés ici ayant adopté une législation spécifique à ce type de crowdfunding, ne se prononce pas sur cette question. Le législateur français s’est en effet focalisé sur la supervision des entreprises de financement participatif, en allégeant les régimes applicables aux plateformes par rapport aux obligations imposées aux prestataires de services financiers. Ce point n’est pas traité par les rapports, à l’exception du rapport canadien, qui explique que la loi sur la protection des 60
Rapport australien. Rapport irlandais. 62 Rapport états-unien. A noter que J. MacLeod Hemingway distingue le pre-purchase crowdfunding du reward-based crowdfunding, tous deux étant qualifiés de « Consomption Interest Crowdfunding ». 63 Rapport brésilien. 64 Rapport estonien.
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consommateurs pourrait aussi bien viser le contrat de vente ou de service intervenant entre le contributeur et le porteur de projet, dans le cas d’une « prévente »65. S’il est souvent évoqué que le droit de la consommation doit être pris en compte dans l’activité de crowdfunding, il n’est pas précisé spécifiquement à quelle relation le droit de la consommation s’applique66. La relation nouée entre le contributeur et la plateforme est la plus évidente à voir s’appliquer ce droit protecteur67. La réponse à la question dépend évidemment de la notion de consommateur retenue. L’on sait que dans certains droits, seules les personnes physiques peuvent bénéficier du régime protecteur du consommateur. Dans d’autres, les personnes morales n’agissant pas dans un but professionnel peuvent au contraire se prévaloir de ces dispositions. La qualification est évidemment importante ; au Canada par exemple, la violation de la Loi sur la protection des consommateurs peut engendrer la condamnation à des dommages-intérêts punitifs68.
2.3
LE FINANCEMENT PARTICIPATIF SOUS FORME DE PRÊT (CROWDLENDING)
2.3.1 Les hypothèses de « prêt direct » Qualification Lorsqu’une entreprise de financement par la foule permet à des contributeurs de prêter une somme d’argent à un porteur de projet, le contrat conclu entre le contributeur et le porteur de projet est indéniablement un prêt. Telle est la qualification retenue dans les ordres juridiques n’ayant pas spécifiquement réglementé cette activité, comme l’Allemagne, la Suisse, le Japon, Singapour, l’Irlande. Telle est également la qualification retenue dans les pays ayant légiféré sur cette activité. La loi espagnole, par exemple, qualifie le rapport contractuel ainsi créé de prêt. Elle précise par ailleurs que les dispositions générales relatives aux prêts s’appliquent également69. Tout type de prêt, à l’exception des prêts hypothécaires (mortgage loans), peuvent être conclus via une plateforme de financement par la foule : prêt avec ou sans intérêt, avec ou sans garantie, entre non-professionnels, entre professionnels, ou entre consommateur et professionnel. Prêt avec ou sans intérêt Les prêts peuvent être conclus avec ou sans intérêt. Le régime peut néanmoins être différent. Le droit français, par exemple, prévoit un plafond par prêteur différent, selon que le prêt est avec ou sans intérêt, respectivement de 2000 euros pour des prêts rémunérés et
61
65
Rapport canadien. Rapport australien ; rapport estonien. 67 V. le rapport brésilien. 68 Rapport canadien. 69 Rapport espagnol. 66
La régulation juridique du crowdfunding
5000 euros pour des prêts non rémunérés70, avec un plafond par projet de 2 500 000 euros. En droit belge, les prêts sont définis comme « un accord par lequel le prêteur met à la disposition de l’emprunteur une somme d’argent convenue pour un délai convenu et en vertu duquel l’emprunteur est tenu de verser au prêteur les intérêts dus à chaque échéance et rembourser ladite somme dans le délai convenu »71. Il ne peut donc s’agir que d’un prêt à titre onéreux d’une durée minimale de 4 ans et dont les intérêts doivent être « octroyés » annuellement72. Objet du prêt et affectation du prêt Certains ordres juridiques précisent que l’activité financée par l’intermédiaire d’un prêt doit être nouvelle. En effet, l’activité de crowdlending, bénéficiant d’un régime souvent dérogatoire du droit commun (pour les Etats ayant spécialement légiférer sur ce point), ne peut se justifier que si elle encourage le développement d’une nouvelle activité. Par exemple, le droit belge exclut les emprunts de refinancement, « car la loi ne prévoit nullement le cas du financement d’une activité préexistante. En effet, le législateur vise uniquement à stimuler le financement de nouvelles initiatives, non pas le simple passage en société d’activités déjà exercées en personne physique, ni le transfert d’activités par voie de réorganisations »73. Les fonds recueillis directement par l’intermédiaire de la plateforme sous forme de prêt ne peuvent être utilisés par la plateforme et doivent être directement affectés au projet pour lequel le prêt a été effectué. Le prêteur Les droits ayant réglementé l’activité de crowdlending peuvent poser certaines conditions ou limites à l’égard de la personne du prêteur. En droit français, le prêteur ne peut être qu’une personne physique74, comme en droit belge, qui précise qu’il doit s’agir de personnes physiques « qui peuvent être considérées comme des investisseurs privés indépendants »75.
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L’emprunteur L’emprunteur peut être une personne physique ou morale, dans ce cas, en droit belge, il doit « nécessairement être une petite société non cotée et débutante »76. Le prêt est conclu entre le financeur ou contributeur. Néanmoins la mise en relation entre prêteur et contributeur par la plateforme pose la question du statut de celle-ci, et notamment la possible concurrence faite aux établissements de crédit, dont le prêt d’argent est protégé par le monopole bancaire, entraînant pour les établissements de crédit le respect scrupuleux d’un statut réglementaire. C’est la raison pour laquelle, d’ailleurs, l’activité de crowdlending est interdite en Grèce77. Cette question est traitée dans la deuxième partie, relative au statut. La figure précédemment exposée semble cependant devenir de moins en moins courante. Comme le relève Mme Cumyn, « Les principales plateformes de prêt ont toutefois évolué vers une structure plus complexe, dans laquelle la plateforme joue un rôle nettement plus affirmé »78 (que celle de mise en relation entre un prêteur et un emprunteur), structure que l’on peut qualifier d’hypothèse de prêt indirect.
2.3.2 Les hypothèses de prêt indirect La plateforme peut en effet jouer un rôle beaucoup plus important que celui de la simple mise en relation. Lorsque la plateforme sélectionne les emprunteurs, leur attribue une cote de risque et détermine les taux d’intérêt des prêts, son rôle doit s’assimiler à celui d’un établissement de crédit, et donc relever, comme le relève Mme Cumyn, de la loi sur la protection des consommateurs et obtenir le permis exigé par cette loi. La plateforme, dans ce cas, selon cet auteur, devient le prêteur lui-même79. Une autre forme de crowdlending existe cependant. Dans les Etats n’ayant pas mis en place un régime spécifique, adaptée aux opérations de crowdlending, plus souple et moins lourd que celui applicable aux établissements de crédit, les sociétés faisant se rencontrer prêteurs et emprunteurs adaptent leur business model de sorte à ne pas tomber sous le régime lourd auquel sont asujettis les
76
70
Rapport français. Doc. parl. 54-1125/001, p. 66. 72 Rapport belge. 73 Rapport belge. 74 F. Barrière, le rapporteur français, critique cette solution, indiquant que « Cette interdiction applicable aux personnes morales n’est pas d’une évidence absolue, car dès lors que son objet social et son intérêt social sont respectés, une personne morale devrait pouvoir octroyer des prêts en ligne, tout comme elle peut souscrire à des obligations ». 75 Rapport belge. 71
Ibid. Rapport grec. 78 Rapport pour le Canada. 79 « Nous partageons l’avis des professeurs Lacoursière et Oulaï que c’est la plateforme qui doit être considérée comme un prêteur et non le contributeur ou l’investisseur. Dans ce cas, la plateforme, si elle s’adresse à des emprunteurs consommateurs, doit obtenir le permis exigé par la Loi sur la protection du consommateur, au Québec. En plus des dispositions déjà mentionnées, celles applicables au prêt d’argent, qui ont notamment pour but d’informer le consommateur en lui divulguant le taux d’intérêt et les frais, devraient être respectées », rapport canadien. 77
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établissements de crédit. Elles recourent à ce que le rapporteur allemand a qualifié de « indirect contracting model »80. Dans ce cas, les sociétés exploitant des plateformes interposent un établissement de crédit dans la transaction, qui conclut directement le crédit à la fois avec l’emprunteur potentiel et le financeur. D’un côté, l’emprunteur reçoit un prêt de l’établissement de crédit, (la plateforme est rémunérée dans ce cas par des honoraires, tels que ceux fixés par les courtiers) et d’un autre côté, le financeur achète la créance d’encaissement, qui est subséquemment cédée une fois que la banque a versé le montant du prêt81. D’un point de vue économique, le résultat est identique que si le financier avait directement prêté au porteur de projet. Mais d’un point de vue juridique, le régime est tout à fait différent, puisque le prêteur ne risque pas de se voir appliqué la législation en matière d’établissement de crédit. Dans cette hypothèse, c’est l’établissement de crédit, mis en relation grâce à la plateforme de crowdlending, qui doit assumer les obligations d’information à l’égard du consommateur. Ajoutons enfin que ces deux types de financement par le prêt, direct et indirect, peuvent tout à fait coexister82.
2.4
LE FINANCEMENT PARTICIPATIF SOUS FORME D’INVESTISSEMENT EN CAPITAL (CROWDINVESTING OU EQUITY CROWDFUNDING)
La notion de « crowdinvesting » fait référence à un type particulier de financement par la foule consistant à mettre en relation au moyen d’un site internet des porteurs de projets personnes morales avec des investisseurs (personnes morales ou physiques). Le rôle des plateformes et des opérateurs de celles-ci dans le contexte du crowdinvesting sont similaires à celui joué par de tels intermédiaires dans le cadre du crowddonation ou du crowd-lending : il s’agit pour les plateformes d’assurer un rôle de mise en relation, i.e. d’intermédiation dans le secteur financier. La particularité du crowdinvesting provient toutefois du fait que cette activité se développe dans un domaine très réglementé : celui des services d’investissements.
2.4.1 L’offre d’instruments financiers La palette d’instruments financiers pouvant être offerts sur les plateformes de crowdinvesting Le crowdinvesting 80
Expliqué aux pages 7 et 8 du rapport allemand. Renner (2014), cite par le rapport allemand, 82 V. J. MacLeod Hemingwat, dans le rapport pour les Etats-Unis, citant les plateformes LendingClub (https://www.lendingclub.com) et Prosper (https://www.prosper.com/plp/investor-registration-agreement/) (U.S. direct-investment consumer lending crowdfunding platforms) et Kiva (https://www.kiva.org) facilitant l’obtention de prêt par des entreprises de microcrédit. 81
(parfois également désigné simplement sous l’étiquette de « crowdequity ») suppose la mise en relation d’investisseurs et d’émetteurs (sur le marché primaire), ou d’acheteurs et de vendeurs (sur le marché secondaire), d’instruments financiers. La notion d’instruments financiers est susceptible d’englober différents types d’instruments sous des labels différents selon l’order juridique concernée : il peut s’agir tant de titres de capital (e.g. actions ou parts sociales) ou de titres de dette (en particulier des obligations), ou encore des unités ou parts de placements collectifs83. Les types d’instruments qui sont les plus communément offerts sur les plateformes de crowdfunding sont les titres de dettes. Il est en particulier intéressant de noter qu’au Japon, aux fins d’éviter les règles restrictives résultant de la législation sur le prêt d’argent (Kashikin-gyo-ho), les plateformes se structurent sous la forme de fonds de placement dont des parts ou unités sont souscrites par des investisseurs, alors que l’offre de titre de capital peine à prendre son essor malgré des modifications de la législation applicable84. Risque pour l’investisseur Un des risques majeurs pour les investisseurs souhaitant souscrire à des offres d’investissement participatif est le risque de défaut du porteur de projet. Les instruments financiers intermédiés par les plateformes de crowdfunding souffrent en effet d’un fort risque de contrepartie, étant donné que la majorité de ces instruments financiers sont des titres de dette non collateralisés (i.e. sans sûretés de la part des émetteurs/ porteurs de projet ou d’une tierce partie). En France notamment, où un régime spécifique au crowdfunding existe, les instruments financiers pouvant être offerts par le biais d’une plateforme de crowdfunding ont été limitativement définis, et incluent : des actions auxquelles est attaché un droit de vote au moins proportionnel à la quotité de capital qu’elles représentent, les titres participatifs dont le contrat d’émission prévoit qu’ils sont remboursables à l’expiration d’un délai déterminé, qui ne peut être supérieur à 10 ans, des obligations à taux fixe, et des obligations convertibles en actions85. Une tendance générale, parmi les différents cadres juridiques nationaux, à l’élargissement progressif des instruments financiers pouvant être offerts et commercialisés au moyen des plateformes de crowdfunding doit toutefois être observée. Conditions d’émission des instruments d’émission Qu’il s’agisse de titre de capital ou de titre de dette, dès lors que les possibilités d’investissement offertes par les plateformes de crowdfunding relèvent de la catégorie des instruments 83
Voir le rapport national pour le Japon, section I (Introduction). Voir notamment le rapport national pour le Japon, section II (A) et (B). 85 Voir l'article D. 547-1 du code monétaire et financier français. 84
La régulation juridique du crowdfunding
financiers, l’offre au public de tels instruments est soumise à certaines conditions et restrictions. Au sein de l’Union Européenne en particulier, l’offre au public est soumise à la publication d’un prospectus en vertu du règlement (UE) 2017/1129 du Parlement européen et du Conseil du 14 juin 2017. Aux Etats-Unis, les offres au public par le truchement d’une plateforme de crowdfunding est également soumis à enregistrement auprès des autorités compétentes86. Les obligations d’enregistrement ou de publications d’un prospectus ne s’appliquent qu’à certaines conditions de seuils. En application dudit règlement (UE) 2017/1129, les Etats membres de l’Union Européenne sont en effet libres de fixer dans leur législation nationale un certain seuil au-delà duquel l’exigence d’un prospectus s’applique. Dans les Etats qui ont adopté un cadre spécifique pour le crowdfunding, certaines exceptions ont pu être introduites dans la législation aux fins de favoriser l’essor du crowdfunding en allégeant en particulier l’exigence coûteuse de publication d’un prospectus87. Tel a été le cas en France où une exemption au régime de l’offre au public a été introduite en fixant notamment un seuil limite à 2,5 millions d’euros et une limite spécifique relative aux titres de capital pour des levées de fonds qui excéderaient 1 million d’euros88. Toutefois, la dérogation du régime de l’offre au public n’implique pas l’absence totale d’information relative aux produits d’investissement proposés, en vue de protéger les investisseurs. Certaines obligations d’information spécifiques ont pu notamment être introduites notamment dans les Etats qui ont spécifiquement légiféré au sujet du crowdfunding. Ainsi, le droit fédéral des Etats-Unis comprend certaines obligations spécifiques d’information des investisseurs89, de même qu’en droit français un ensemble spécifique de règles de bonne conduite incluant des obligations d’information et de mise en garde90. De manière similaire, le droit belge prévoit une dispense de prospectus pour les offres d’investissement participatif, pour autant qu’une note d’information succincte
86 Voir le rapport national pour les Etats Unis, section « securities (investment) crowdfunding ». 87 Voir notamment les rapports nationaux de la Finlande, de l'Allemagne, de la France. 88 Voir les articles L. 411-2 et D. 411-2 code monétaire et financier français. Voir également le rapport national pour la France, paragraphes 24 et s. 89 Voir le rapport national pour les Etats Unis, section « securities (investment) crowdfunding ». 90 Voir notamment l'article L. 547-9 du code monétaire et financier français, et les articles 325-51 à 325-56 du règlement général de l'Autorité des marchés financiers relativement aux obligations de bonne conduite incombant aux conseillers en investissement participatif. Voir également le rapport national pour la France.
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soit rédigée91. Au Canada, la réglementation des valeurs mobilières étant de la compétence des provinces, le régime réglementaire applicable est fragmenté et obéit principalement à deux régimes92, dispensant tous deux l’émetteur de la publication d’un prospectus en lui substituant un document d’information simplifié : l’un applicable dans six provinces participantes depuis le 14 mai 2015, et l’autre applicable dans cinq autres provinces participantes depuis le 30 juin 201693.
2.4.2
L’encadrement des rapports de droit entre les plateformes, les porteurs de projet et les investisseurs Difficulté de qualification Les différents droits nationaux reconnaissent de manière générale que la notion de crowdinvesting est susceptible de recouvrir différentes réalités qui amènent notamment des difficultés de qualification et de classification des rapports juridiques entre les trois segments du rapport triangulaire : investisseurs – intermédiaire – porteur de projet/émetteur94. En droit fédéral des Etats-Unis, les rapports juridiques entre un investisseur et un porteur de projet peuvent notamment être contractualisés, entre autres options, sous la forme d’un simple agreement for future equity95. L’incertitude existe aussi en droit allemand. Le rapporteur allemand explique en effet que la relation entre le porteur de projet et les « investisseurs » et les initiateurs de campagne de crowdequity peuvent être qualifiés soit de silent partnerships,96 soit de profit participation rights
91
Voir l’article 10 de la loi belge du 11 juillet 2018 relative aux offres au public d'instruments de placement et aux admissions d'instruments de placement à la négociation sur des marchés réglementés ; voir en particulier le rapport national pour la Belgique. 92 Les deux régimes applicables sont: le régime introduit depuis le 14 mai 2015 par l’avis multilatéral 45-316 (ou "petite dispense") et applicable dans six provinces participantes, et le régime établi par l’avis multilatéral 45-108 (ou "dispense de l'Ontario") introduit depuis le 25 janvier 2016 et applicable dans 5 provinces. Voir sur ces aspects le rapport pour le Canada. 93 A noter toutefois qu'il existe deux autres cadres élaborés respectivement en Alberta et en Colombie-Britannique. Il s’agit de la Rule 45-517 de l’Alberta (« Prospectus Exemption for Start-up Businesses ») et de l’Instrument 45-535 de la Colombie-Britannique (« Start-up Crowdfunding Registration and Prospectus Exemptions »). Ces cadres s’apparentent à l’avis multilatéral 45-319, qui met à jour l’avis multilatéral 45-316. L’avis multilatéral 45-109 élaboré par l’Alberta et le Nunavut en est resté à l’état de projet. 94 Voir notamment le rapport national pour l’Allemagne pour une analyse des différentes qualifications des relations contractuelles dans le contexte du « crowdinvesting ». 95 Voir notamment le rapport national pour les Etats Unis, section « securities (investment) crowdfunding ». 96 See generally Handelsgesetzbuch [HGB] [Commercial Code], May 10, 1897, RGBl. 219, §§ 230-6 HGB, translation at https://www. gesetze-im-internet.de/englisch_hgb/englisch_hgb.pdf.
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(“Genussrechte”),97 ou encore de subordinated profitparticipating loans (“partiarische Nachrangdarlehen”)98. Les juridictions allemandes adoptent une approche au cas par cas99. Un constat s’impose néanmoins sur ce point : les droits nationaux possèdent, sauf exception, les outils conceptuels et normatifs pour appréhender les rapports juridiques créés au moyen d’une plateforme de crowdfunding. Marchés primaires Il résulte néanmoins de l’ensemble des rapports nationaux recueillis dans le cadre de cette étude que les plateformes se sont développées à l’origine et se développent encore aujourd’hui majoritairement sur le marché primaire (i.e. au niveau de l’émission d’instruments financiers), tandis que le développement du marché secondaire a été délaissé. Il est toutefois intéressant de noter que la loi argentine sur le financement participatif prévoit explicitement la possibilité pour les investisseurs de revendre leurs titres sur les plateformes de crowdfunding, sous réserve de la législation spécifique applicable au marché secondaire100. A cet effet, une résolution (resolucion) de la commission nationale des valeurs mobilières (Commission nacional de valores ou « CNV ») impose aux plateformes de crowdfunding de disposer d’une rubrique sur leur site internet aux fins de permettre la négociation et la revente exclusive des instruments financiers distribués au moyen de cette même plateforme101. Une telle obligation de permettre l’échange et la revente des instruments financiers offerts sur une plateforme accroît ainsi la liquidité des produits financiers offert par les plateformes. Si l’existence d’un marché secondaire sain et règlementé assure une certaine réduction du risque de liquidité supporté par les investisseurs (permettant corrélativement une réduction des coûts pour les porteurs de projets), il ne s’agit toutefois pas encore d’une approche majoritaire au travers des différentes juridictions observées. 97 The latter have not received a special treatment neither in the German Civil nor the Commercial Code, but are anticipated in different legislative acts, like for instance Capital Investment Act [Vermögensanlagengesetz, VermAnlG], Dec. 6, 2011, BGBl. I at 2481, § 1 para. 2 Nr. 4, https:// www.gesetze-im-internet.de/vermanlg/ or AktG, § 221 paras. 3 and 4. The lack of statutory prescriptions together with the fundamental principle of freedom of contract allow for a highly flexible individual design of parties’ obligations in these profit participation rights. 98 The contract combines a regular loan with an additional stipulation of sharing in the profits or sales that flow from the investment of the borrowed funds as compensation for the lender, see for instance Schmidt (2012); Schäfer (2017); Huffer (1970). 99 Rapport allemand. 100 Voir l'article 29 de la loi n 27349 d'appui au capital entrepreneurial (Ley 27349 de Apoyo al capital emprededor). 101 Voir à cet effet les articles 52 et 53 de la Résolution de la CNV n 2350/2016 « sistemas de financiamiento colectivo » du 29 décembre 2017.
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3
LE STATUT DES ENTREPRISES DE FINANCEMENT PAR LA FOULE
3.1
Un accès réglementé au statut d’entreprise de financement par la foule ?
Faut-il réglementer l’accès à ce marché, c’est-à-dire requérir, de la part des sociétés exploitant des sites de levée de fonds, une autorisation ou un agrément ? La réponse à cette question dépend, là aussi, du type de crowdfunding.
3.1.1
Dans le cas du financement par la foule non-financier Absence de statut L’attitude la plus fréquente, dans de nombreux ordres juridiques, est le « laissez faire ». Puisque les plateformes mettant en relation des contributeurs à des porteurs de projet en recherche de financement, tendent à soutenir l’activité économique, cette activité n’est pas, en principe, vue d’un mauvais œil. Tout au plus, s’appliquent des législations protectrices des consommateurs, mais sans que l’exploitation d’une plateforme mettant en œuvre le donation crowdfunding ou reward crowdfunding requiert une autorisation particulière. L’exception française : un statut ad hoc Peu d’ordres juridiques ont adopté des normes spécifiques à cette forme de financement par la foule. En France, un nouveau statut a été créé, celui d’intermédiaire en financement participatif, régi par les articles L. 548-1 et s. du Code monétaire et financier. L’intermédiaire en financement participatif peut être une personne physique ou morale. Elle est considérée comme un professionnel et doit être enregistrée à l’ORIAS. Dans l’ordonnance de 2014, l’article L. 548-2 II du Code monétaire et financier disposait que « Les personnes qui ne proposent que des opérations de dons peuvent être intermédiaires en financement participatif. Dans ce cas, elles se soumettent aux dispositions du présent chapitre ». Le statut d’intermédiaire en financement participatif (IFP) était donc facultatif lorsque la plateforme ne proposait que des financements sous forme de dons. Cependant, l’ordonnance n 2016-1635 du 1er décembre 2016 renforçant le dispositif français de lutte contre le blanchiment et le financement du terrorisme a modifié cette disposition pour rendre obligatoire le statut de IFP à toutes les plateformes, même celles ne proposant que le don. Le statut d’IFP requiert des compétences professionnelles, fondées soit sur des études supérieures en matière bancaire, financière, en sciences économiques ou commerciales, sciences de gestion, sciences physiques, mathématiques ou droit bancaire et financier (art. R. 548-3 1 du Code monétaire et financier), soit sur une expérience professionnelle ou encore d’une formation professionnelle en matière bancaire et financière
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(art. 548-3 3 ). Les obligations auxquelles sont astreints les IFP, notamment en matière d’information à rendre disponible sur son site internet, sont détaillées aux articles suivants du Code monétaire et financier. Le statut est moins contraignant que les statuts réglementés préexistants102.
les dépôts ne sont pas couverts par le système de garantie des dépôts. Des intérêts ne peuvent être payés que par des porteurs de projet qui originellement exploitent une activité industrielle ou commerciale et qu’ils utilisent les fonds recueillis à cette fin106.
3.1.2 Dans le cas du crowdlending Violation du monopole bancaire ? L’accès à l’activité d’entreprise de financement par la foule jouant le rôle d’intermédiaire pour la conclusion de prêts, que ces prêts soient destinés à financer des activités de nature privée (P2P) ou de nature professionnelle (P2B) est assez problématique. Car le prêt d’argent est une activité très contrôlée, et ce dans de nombreux pays. Lorsque cette activité est exercée de manière professionnelle, elle est en principe réservée aux banques. Les établissements de crédit bénéficient en effet du « monopole bancaire », interdisant à toute autre personne que les établissements de crédit enregistrés comme tels de prêter de l’argent103. Le crowdlending vient donc bousculer cet état des choses. C’est pourquoi, dans de nombreux Etats dont un rapport national a été reçu, l’activité de crowdlending est, soit interdite (le cas de la Grèce104), soit spécifiquement réglementée (pour 5 Etats), soit soumise à la législation applicable aux établissements bancaires. La Suisse a précisément modifié sa législation pour appréhender ce phénomène. En effet, avant la réforme entrée en vigueur le 1er août 2017105, sans agrément bancaire, le crowdlending n’était possible que si le porteur de projet ne recevait pas des fonds du public (c'est-à-dire pas de plus de 20 prêteurs), n’agissait pas en tant que commerçant ou si l’une des exemptions par rapport au terme de « dépôt » s’appliquait. Autant de situations dans lesquelles l’activité de crowdlending entrait difficilement. La réforme a créé une nouvelle exemption au monopole bancaire et a étendu une exemption déjà existante. Les exemptions au monopole bancaire permettent que tout projet auquel participent plus de 20 prêteurs et pour lequel il est fait publicité n’est pas considéré comme une « opération bancaire » dès lors que le projet ne recueille pas plus de 1 million de francs suisses, qu’aucun intérêt n’est payé et que les dépôts ne sont pas investis ; et qu’avant de déposer leur argent, les investisseurs soient informés par écrit que le porteur de projet n’est pas contrôlé par l’Autorité suisse des Marchés financiers et que
Un statut « sur mesure » Plusieurs pays ont adopté une législation propre au crowdlending, obligeant les plateformes servant d’intermédiaire pour l’octroi de prêt à s’enregistrer auprès d’une autorité de régulation. En Espagne, il s’agit de la CNMV (Comisión Nacional del Mercado de Valores – CNMV) ; donc de la même autorité que pour l’émission de valeurs mobilières107. En dépit de la désignation de la même autorité contrôlant les marchés financiers et le crowdfunding, la loi espagnole distingue clairement les deux types d’activité, qui jouent un rôle complémentaire. En Argentine, c’est la Banque centrale qui contrôle l’accès à ce marché, comme au Brésil. En effet, dans cet Etat, les plateformes servant d’intermédiaire pour l’octroi de prêt agissent comme les correspondants de banque. Dès lors, une autorisation de la Banque centrale peut être nécessaire108.
102
V. Le rapport français. V. par ex. l’article L. 511-5 du Code monétaire et financier français. V. aussi l’article 3 of the Business of Credit Institutions Law of Cyprus, 66/1997 (Rapport chypriote, p. 3). 104 V. le rapport grec. 105 Ordonnance sur les banques et les caisses (SR 952.02 du 30 avril 2014 (en vigueur du 1er août 2017 jusqu’au 31 décembre 2018). Voir aussi https://www.admin.ch/gov/en/start/documentation/mediareleases.msg-id-67436.html. 103
Prêt avec ou sans intérêt Le caractère rémunérateur ou non du prêt peut, par ailleurs, avoir un impact sur la législation applicable aux entreprises de financement participative. Au Canada, la seule plateforme servant d’intermédiaire pour des prêts avec intérêts (Lendingloop) a obtenu une dispense temporaire, tandis que celle permettant les prêts sans intérêts n’a pas eu à demander une telle dispense109.
3.1.3 Dans le cas du crowdinvesting Afin de cerner sous quel statut les plateformes de crowdfunding dans le contexte du crowdinvesting sont amenées à opérer, il est nécessaire de chercher à appréhender les types de services que de telles plateformes sont amenées à offrir. Au sein de l’Union Européenne, les législations nationales portant sur services d’investissement sont relativement harmonisées en raison du droit européen, et en particulier de la directive 2014/65/UE du Parlement européen et du Conseil du 15 mai 2014 (« MiFID 2 ») et du règlement (UE) n 600/2014 du Parlement européen et du Conseil du 15 mai 2014 (« MiFIR ») concernant les marchés d’instruments financiers. 106 Rapport suisse. T. Toxler : « without infringing the bank monopoly private persons may now directly finance their private or commercial activities by crowdlending, as long as they do not accept more than CHF 1 million deposits from the public, they do not engage in a interest margin business, an they, prior accepting the deposits, inform investors in writing that the they are not supervised by FINMA and that the deposits are not subject to the deposit insurance scheme ». 107 CNMV is the Spanish Financial Markets Authority; Rapport espagnol, p. 7. 108 Rapport brésilien. 109 Rapport canadien.
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De prime abord, et au vu des différentes acceptions retenues en droit national (en doctrine ou, le cas échéant, dans la loi), les services que les plateformes sont susceptibles de fournir sont pluriels mais limités en raison de leur modèle d’affaires (business model). Dans la mesure où, en général, les plateformes se contentent d’agir en tant qu’intermédiaire, et n’engage pas leur propre capital, les services financiers fournis relèvent du conseil en investissement, de la réceptiontransmission d’ordre ou encore de l’exécution d’ordre. Des services tels que la négociation pour compte propre, la prise ferme ou le placement garanti ne sont ainsi donc pas fournis (ou peu susceptibles de l’être)110. Il est toutefois intéressant de noter que certains régulateurs, et en particulier la Bundesanstalt für Finanzdienstleistungsaufsicht en Allemagne, semblent considérer que même sur le marché primaire, les plateformes de crowdfunding puissent, dans certains cas, être qualifiées de système multilatéral de négociation111. Il est néanmoins certain que la qualification de système multilatéral de négociation pourrait être particulièrement pertinente dans le cadre d’un marché secondaire, qui soulèverait alors certaines problématiques réglementaires spécifiques112. Statut de fournisseur de services d’investissement Dès lors que des services d’investissement sont fournis par un opérateur d’une plateforme, celui-ci est soumis aux exigences relatives à la fourniture de services d’investissement, et en particulier à l’ensemble des obligations prudentielles, organisationnelles et de bonne conduite. En Grèce, par exemple, l’activité de financement participatif ne peut être exercée que par ceux ayant reçu l’autorisation du HCMC (Hellenic Capital Market Commission) ou de la Banque de Grèce. A droit constant, le rôle d’intermédiation des plateformes instruments financiers peut à tout le moins relever, le cas échéant, du statut d’intermédiaire (broker), à l’instar du statut relatif à l’intermédiation financière (Anlagevermittlung) en droit allemand, ou au statut de security broker en droit des Etats-Unis. Cependant, certains Etats ont introduit un régime et un statut spécifique pour les opérateurs de plateformes de crowdfunding. C’est notamment le cas de la France113, de la
110
Voir notamment le rapport national pour l'Allemagne. Voir notamment le rapport national pour l'Allemagne. 112 Etant toutefois donné le caractère encore peu développé du marché secondaire pour les titres offerts au moyen d'une plateforme de crowdfunding, les aspects réglementaires spécifiques qui y seraient relatifs ne seront pas développés dans le présent rapport général. 113 L’ordonnance n 2014-559 du 30 mai 2014 relative au financement participatif et le décret n 2014-1053 du 16 septembre 2014, comme amendés et complétés par la suite, ont notamment introduit en droit français le statut de conseiller en investissements participatifs, maintenant codifié aux articles L. 547-1 à L. 547-11, L.573-12 à L. 573-14 et D. 547-1 à D. 547-3 du code monétaire et financier. 111
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Finlande114, de la Belgique115, ou encore, outre-Atlantique, de l’Argentine116 et des Etats-Unis117. Régime sur-mesure Le cadre juridique le plus novateur, en ceci qu’un nouveau statut a été spécifiquement créé, est le régime des conseillers en investissements participatifs du droit français, introduit par l’ordonnance n 2014-559 du 30 mai 2014 relative au financement participatif et le décret n 2014-1053 du 16 septembre 2014. Dans ce contexte, et étant donné que le statut de conseiller en investissements participatifs vise à permettre aux plateformes de crowdfunding de fournir le service de conseil en investissement à titre de profession habituelle118, il est intéressant de noter qu’une dérogation spécifique au monopole des services d’investissement a dû être introduite en droit français. Il est par ailleurs intéressant de constater qu’un besoin de réglementation spécifique du crowdfunding émerge en particulier dans les juridictions (comme la France) où la conception et la mise en œuvre des monopoles sont relativement strictes. L’absence de réglementation claire est en effet source d’incertitude juridique pour les plateformes et leurs opérateurs, minant potentiellement l’essor de ce pan de l’industrie financière. Dans le même ordre d’idée que le droit français, le droit finlandais a introduit des dispositions législatives spécifiques, au moyen de la loi sur le crowdfunding n 734/2016 du 25 août 2016, visant à alléger le régime réglementaire applicable aux prestataires de services d’investissement. Parmi les mesures adoptées en droit finlandais, figurent notamment le remplacement de l’exigence d’un agrément par un simple enregistrement (à l’instar du droit français) qui est moins couteux et plus rapide, l’absence de l’exigence d’adhérer à un mécanisme de garantie des investisseurs, ou encore la baisse de l’exigence de capital initial119. Le droit belge en a fait de même en 114 Le cadre juridique initial a été introduit en droit finlandais par le « Crowdfunding Act », 734/2016, du 25 août 2016. 115 Le cadre juridique belge spécifique au crowdfunding a été institué par la loi du 18 décembre 2016, organisant la reconnaissance et l'encadrement du crowdfunding et portant des dispositions diverses en matière de finances. 116 Voir la loi n 27349 d'appui au capital entrepreneurial (Ley 27349 de Apoyo al capital emprededor), et la Résolution de la CNV n 2350/2016 « sistemas de financiamiento colectivo » du 29 décembre 2017. 117 Voir le « Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act » (« CROWDFUND Act »), 2012; voir aussi le rapport national pour les Etats-Unis. 118 L’article L. 547-1 du code monétaire et financier définit en effet les conseillers en investissement participatifs comme étant des « personnes morales exerçant à titre de profession habituelle une activité de conseil en investissement mentionnée au 5 de l'article L. 321-1 portant sur des offres de titres de capital et de titres de créance définis par décret (. . .) », lesquels pouvant toutefois exercer également, à titre connexe, des activités de conseil en haut de bilan. 119 L'exigence de capital initial a été réduit de 125,000 euros à 55,000 euros en Finlande (voir le rapport national pour le Finlande). En France,
La régulation juridique du crowdfunding
instaurant un agrément spécifique, qui est toutefois moins lourd qu’un agrément de prestataire de services d’investissement (en particulier en termes prudentiels, puisque seule une police d’assurance de responsabilité professionnelle spécifique est exigée)120. Dichotomie de régime Cette volonté de simplification des procédures réglementaires n’est toutefois pas uniforme dans les Etats qui ont pris le parti d’introduire une législation spécifique au crowdfunding. Il est ainsi remarquable de constater qu’il existe au Canada une dichotomie certaine entre les deux régimes applicables : l’un (le régime de la « petite dispense ») exemptant la plateforme de l’obligation de s’enregistrer, sauf à ce que les plateformes souhaitent fournir le service de conseil, auquel cas un enregistrement en tant que courtier est nécessaire121; tandis que l’autre (le régime de la « dispense de l’Ontario ») permet la fourniture du service de conseil mais exige en tout état de cause un enregistrement en tant que courtier122. Autorité délivrant l’agrément Dans tous les cas recensés, c’est l’autorité de contrôle et/ou de régulation des marchés financiers qui est investie du pouvoir d’autoriser l’activité sur le territoire. Ainsi, en Espagne, l’autorisation d’exercer comme intermédiaire de financement par la foule est délivrée par la Comisión Nacional del Mercado de Valores (CNMV) 123 qui administre le registre des plateformes de crowdfunding. Les conditions requises sont plus souples que celles exigées pour l’inscription comme activité de société d’investissement. Territorialité du régime spécifique Il faut toutefois noter que les régimes spécifiques qui ont pu être introduits par certains Etats restent purement des régimes nationaux. Au sein de l’Union Européenne, la fourniture de services d’investissement par des opérateurs de plateformes de crowdfunding suppose ainsi que ceux-ci demandent à être agréés en tant que prestataires de services d’investissement et demandent à être autorisés à fournir des services dans un autre Etat membre sous le régime du passeport européen défini par MiFID 2 et MiFIR. En l’absence d’un tel passeport européen, et si les exigences locales en matière de crowdfunding n’ont pas été respectées, les opérateurs de l'exigence de capital a été remplacée par une exigence de souscription à un contrat d'assurance responsabilité civile, en vertu des articles L. 547-5 et D. 547-3 du code monétaire et financier. 120 Voir notamment les articles 7 et suivants de la loi belge du 18 décembre 2016, organisant la reconnaissance et l'encadrement du crowdfunding et portant des dispositions diverses en matière de finances; voir également le rapport national pour la Belgique. 121 Voir le rapport national pour le Canada. 122 Voir le rapport national pour le Canada. 123 V. le rapport espagnol.
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plateformes qui proposent des services d’investissement de manière transnationale se heurtent aux exigences du monopole des services d’investissement de l’Etat où ces services sont fournis, et dont la violation est susceptible d’entraîner des sanctions pénales124, en sus d’éventuels litiges civils en dommages-intérêts. Régime harmonisé européen ? Néanmoins, face à une telle fragmentation et les différentes approches relatives à la réglementation du crowdfunding, la commission européenne, dans le cadre de son Fintech action plan, a adopté en mars 2018 une proposition de règlement relatif aux prestataires européens de services de financement participatif pour les entreprises, introduisant notamment une procédure de passeport européen pour la conduite transnationale au sein de l’Union Européenne d’activités de financement participatif. La proposition de règlement de la commission est toutefois au jour d’aujourd’hui encore à l’état de projet et sujet à débats. En l’absence d’harmonisation, un certain nombre d’incertitudes demeurent notamment quant au champ d’application territorial des différentes législation nationales125. La fragmentation réglementaire actuelle du marché du crowdfunding paraît ainsi engendrer une certaine incertitude juridique alors même que les opérateurs de plateformes expriment leur souhait de disposer d’un cadre juridique et règlementaire clair.
3.2
La supervision de l’activité de financement par la foule
Régime de supervision des sociétés de prestation de services d’investissement Dans plusieurs Etats ici référencés, les entreprises de financement par la foule suivant le régime des sociétés d’investissement, toutes les obligations imposées à ces sociétés par la législation en vigueur s’appliquent aux sociétés souhaitant exercer l’activité de financement par la foule. C’est le cas notamment de la Grèce,126 de l’Allemagne127. . .
124 A titre d'exemple, en vertu de l'article L. 573-1 du code monétaire et financier français, la violation du monopole français des services d'investissement est susceptible d'entraîner une condamnation pénale à des peines d'emprisonnement de 3 ans et des peines d'amende de 375,000 euros pour des personnes physiques et 1,875,000 euros pour des personnes morales. 125 Voir notamment le rapport national pour les Etats Unis, section « securities (investment) crowdfunding ». Voir également le rapport national pour les Pays-Bas, section 2 (normative framework). 126 Rapport grec. 127 Rapport allemand.
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Législation anti-blanchiment et de lutte contre le financement du terrorisme Il s’ensuit que les règles relatives à la lutte contre le blanchiment et la lutte contre le financement du terrorisme, applicables aux sociétés d’investissement, s’appliquent également aux entreprises de financement par la foule128. Dès lors que les sociétés exploitant des plateformes de crowdfunding ne sont pas régulées par les textes relatifs aux établissements de crédit ou sociétés d’investissement, les législations sur la lutte contre le blanchiment d’argent et le financement du terrorisme ne s’appliqueront pas129. Autorégulation Dans plusieurs Etats dont un rapport national a été reçu, il est fait mention d’une association professionnelle pour les entreprises de financement participatif, qui, le plus souvent, ont adopté un code d’éthique professionnelle, comme indiqué dans le tableau ci-après (Table 2).
4
LA PROTECTION DE LA FOULE
4.1
La protection des donateurs (crowddonating)
4.2
Protection via la législation protégeant les consommateurs Dès lors que la contribution fournie s’apparente à un achat, la législation sur la protection des consommateurs trouvera à s’appliquer. Tel est le cas en Argentine, en Australie, en Belgique,au Brésil, en France, en Allemagne, en Pologne, en Espagne, ou encore aux Etats-Unis133. Absence d’une protection supplémentaire Outre l’application de ces dispositions générales protégeant les consommateurs, il aurait pu être imaginé que les législateurs fixent un montant maximal de contribution par projet, voire un maximum annuel, fixé en fonction des revenus du contributeur par exemple. Or aucun des rapports nationaux reçus ne mentionne une telle limite, qui semble donc absente de la boîte à outils des législateurs en la matière. Il est vrai cependant que l’application du droit de la consommation, largement admis, constitue, déjà, en soi, une protection assez efficace.
4.3 Aucune protection spécifique ex ante De façon assez étonnante, les donateurs d’un projet dont le financement par don a été sollicité via une plateforme de crowdfunding sont peu protégés. Puisqu’ils donnent, et n’achètent pas, le droit de la consommation ne s’applique, en principe, pas130. Ainsi, aux Etats-Unis par exemple, aucune législation spécifique ne vient protéger les crowddonators. Le régime appliqué est celui des « state charitable donation laws and regulations »131. Aucun législateur dont un rapport a été reçu ne limite le montant maximal de don par contributeur et par projet. Protection ex post : loi anti-fraude La seule protection possible est celle sanctionnant la fraude, une fois celle-ci commise132.
128
V. en ce sens, le rapport irlandais. Rapport allemand. 130 V. cependant le rapport pour le Canada, mentionnant le « Mécénat participatif » auquel le crowdonating trouve sans doute à s’assimilier, et à propos duquel la Loi sur la protection du consommateur du Québec s’appliquera. V. M. Cumyn. 131 J. MacLeod Hemingway. 132 Cona and Sivak (2017). V. aussi D. Cummung, L. Hornuf, M. Karami et D. Schweizer, « Disentangling Crowdfunding from Fraudfunding”, Max Planck Institute for Innovation and Competition Research Paper No. 16-09.
La protection des contributeurs dans le cadre du reward crowdfunding ou pre-sale crowdfunding
La protection des prêteurs
Application des dispositions relatives au crédit à la consommation La protection dont bénéficient les prêteurs peut varier selon le mode d’opération du crowdlending. Dans le cas où, comme en Allemagne, les plateformes offrant des services de crowdlending, celles-ci interposent la présence d’un établissement de crédit qui conclut un contrat tant avec le potentiel emprunteur qu’avec le financeur, les obligations d’information dues en vertu de la directive 2008/48 doivent être assumées par l’établissement de crédit lui-même ; non par la société exploitant la plateforme. En Allemagne, la plateforme ne doit révéler des informations que concernant son implication et la rémunération qu’elle en retire134. La protection des contributeurs dans une opération de crowdlending se réalisera, dans tous les Etats recensés, par l’application des dispositions relatives au crédit à la consommation. Pourtant, ce genre de législation vise à protéger l’emprunteur, non le prêteur. On peut donc y voir une lacune assez partagée par l’ensemble des droits recensés.
129
Mesures de protection particulières Dans les Etats ayant adopté une législation spécifique sur le crowdlending, certaines mesures particulières ont pu être prises. La plus 133 Il faut toutefois observer que plusieurs rapports n’ont traité que du crowdfunding financier, c'est-à-dire, selon la terminologie adoptée dans ce rapport, le crowdlending et crowdequity. 134 Rapport allemand.
La régulation juridique du crowdfunding
339
Table 2 indiquant l’existence d’une auto-régulation via des associations professionnelles spécifiques mises en place et des codes d’éthique Etat ALLEMAGNE
Association professionnelle Bundesverband Crowdfunding, créée le 4 novembre 2015 et qui dispose d’un site internet au lien: http://www. bundesverband-crowdfunding.de/.
ARGENTINE
Asociación Argentina de Crowdfunding, créée le 20 août 2016. Crowd Funding Institute of Australia (« CFIA »), créée en 2014. FinTech Belgium, créée en 2015, et qui dispose d’un site internet au lien suivant : https://fintechbelgium.be. Crowdinvest (« Association Brésilienne d’Equity Crowdfunding »), créée en août 2014, et qui dispose d’un site internet au lien suivant : http://equity.org.br. National Crowdfunding & Fintech Association (« NCFA Canada »), qui dispose d’un site internet au lien suivant : https://ncfacanada.org/?s¼ethic. N.C. Asociación Española de crowdfunding - Spain Crowd Funding (« SCF »), membre de la World Crowdfunding Federation (« WCF ») Pas d’association spécifique au crowdfunding, mais il existe une organisation représentative des acteurs financiers opérant en Estonie (incluant des plateformes de crowdfunding) : FinanceEstonia, créée en 2011, disposant d’un site internet au lien suivant : http://www.financeestonia.eu/about-us/. Crowdfunding Professional Association (« CfPA »), créée en 2012. Pas d’association spécifique à la Finlande identifiée. Il existe toutefois l’association Nordic Crowdfunding Alliance, créée en mars 2014, pour les pays nordiques.a Il existe une obligation pour les conseillers en investissements participatifs (« CIP ») d’adhérer à une association professionnelle agréée par l’Autorité des marchés financiers, mais à la date de rédaction de ce rapport, aucune association de ce type ne semble encore avoir été constituée. Il existe néanmoins l’association « Financement Participatif France » (« FPF »), créée en 2012, qui regroupe des professionnels du financement participatif. N.C. Inexistant Japan Securities Dealers Association (« JSDA ») et Type II Financial Instruments Firms Association (« T2FIFA »). Nederland Crowdfunding, créée en 2014, qui dispose d’un site internet au lien suivant: https://www.geldvoorelkaar.nl/ geldvoorelkaar/startpagina.aspx. N.C. N.C. Swiss Crowdfunding Association, qui dispose d’un site internet au lien suivant : http://www.swisscrowdfundingassociation.ch Pas d’association spécifique au crowdfunding. Il existe toutefois une association professionnelle pour les securities firms : la Taiwan Securities Association, créée en 1998, et qui dispose d’un site internet au lien suivant: http:// www.csa.org.tw/
AUSTRALIE BELGIQUE BRESIL
CANADA
CHYPRE ESPAGNE
ESTONIE
ETATS-UNIS FINLANDE
FRANCE
GRECE IRELAND JAPON PAYS-BAS
POLOGNE SINGAPOUR SUISSE TAIWAN
a
Le site de l’association paraît toutefois ne plus être actualisé
Code d’éthique propre à l’activité de crowdfunding Verhaltenskodex für Crowdfunding-Plattformen im Bundesverband Crowdfunding e.V. (2018), disponible au lien suivant : http://www.bundesverband-crowdfunding.de/ verhaltenskodex-fuer-crowdfunding-plattformen-imbundesverband-crowdfunding-e-v/. N.C. N.C. N.C. Código de Ética e de Melhores Práticas para Fintechs, disponible au lien suivant : http://equity.org.br/codigo-deetica-e-conduta/. N.C.
N.C. N.C.
Crowdfunding Best Practice 2016, disponible au lien suivant: http://www.financeestonia.eu/wp-content/uploads/2016/02/ Crowdfunding-Best-Practice.pdf
N.C. Code of Ethics de l’association Nordic Crowdfunding Alliance (très sommaire), disponible au lien suivant : http:// www.nordic-crowdfunding.com/about.php#anchor3. Charte de déontologie de l’association FPF, disponible au lien suivant : https://financeparticipative.org/wp-content/uploads/ 2018/05/FPF-Charte-de-déontologie-FPF_avril-2018.pdf.
N.C. Inexistant N.C. Code of Ethics de l’association Nederland Crowdfunding.
N.C. N.C. N.C. Pas de code éthique propre au crowdfunding. Il existe toutefois un code éthique applicable aux securities firms.
340
C. Kleiner
Table 3 indiquant le montant maximal de prêt par prêteur et par projet Etat ALLEMAGNE ARGENTINE AUSTRALIE BELGIQUE BRESIL CANADA CHYPRE ESPAGNE ESTONIE ETATS-UNIS FINLANDE FRANCE
GRECE IRELAND JAPON PAYS-BAS POLOGNE SINGAPOUR SUISSE TAIWAN
Montant maximal du prêt fixé par la loi Pas de limite Pas de limite Pas de limite Pas de limite Pas de limite Pas de limitea Pas de limite Pour les prêts à titre onéreux uniquement : le montant du projet est limité à 2 millions d’euros, ou à 5 millions d’euros si le projet vise uniquement les « investisseurs accrédités ». Pas de limite Pas de limite Pas de limite • Limite fixée à 2000 euros par prêteur pour les prêts portant intérêts ; • Limite fixée à 5000 euros par prêteur pour les prêts sans intérêts ; et • Limite par projet fixée à 1 million d’euros sur une période de 12 mois. Pas de limite Pas de limite Pas de limite Pas de limite Pas de limite Pas de limite 1 million CHF par projet (non par prêteur) pour être dispensé d’agrément bancaire. (rapport suisse, p. 22 et 23). Pas de limite
a Il convient toutefois de noter que l’activité de prêt d’argent par les plateformes de crowdfunding n’est pas développée au Canada en raison de la lourdeur de la réglementation applicable aux activités de crédit ; voir le rapport national pour le Canada, paragraphe 12
efficace semble être celle de fixer une limite au montant du prêt qui peut être accordé à un projet. Le tableau ci-dessous recense ces différentes limites (Table 3).
4.4
La protection des investisseurs
Dans le contexte de la réglementation des rapports de droit entre les plateformes, les porteurs de projet et les investisseurs, la principale préoccupation des régulateurs nationaux est d’assurer une protection effective des investisseurs décidant d’investir dans des projets présentés sur les plateformes de crowdfunding. Une telle préoccupation se traduit, notamment pour les Etats ayant adopté des dispositions législatives ou réglementaires spécifiques, non seulement par l’exigence du respect de certaines obligations d’information ou de mise en garde, mais aussi par la mise en place de limites des montants investis par les investisseurs. Pour les Etats n’ayant pas adopté de législations spécifiques, la protection des investisseurs passe alors par le respect des normes protégeant les investisseurs.
Via la législation sur la protection des investisseurs. Absence de législation spécifique L’absence de réglementation spécifique des plateformes de crowdequity
est une lacune au détriment des potentiels investisseurs. Par exemple, le rapport irlandais relève que « Several measures designed to protect consumers and SMEs do not apply to crowdfunding. For example, the Central Bank Codes of Practice, such as the Consumer Protection Code, are binding on regulated financial institutions, but do not apply to crowdfunding platforms. Crowdfunding does not need to comply with client asset rules, the Deposit Guarantee Scheme or the Investor Compensation Company Ltd scheme, and complaints about crowdfunding platforms cannot be made to the Financial Services Ombudsman”135. En droit allemand, les avis sont partagés sur les obligations incombant aux sociétés exploitant des plateformes de crowdequity. Pour certains, ces plateformes seraient débitrices d’obligations d’information équivalentes à celles d’un investment broker. Pour d’autres cependant, les sociétés de plateforme ne font que diffuser les offres d’investissement, sans volonté d’être soumis aux obligations d’un prestataire de services d’investissement, et seraient donc exemptées des obligations d’information protégeant les investisseurs136. L’absence de législation spécifique tend donc bien à démontrer la nécessité de réguler cette activité.
4.4.1
135 136
Citation sans les références, cf. rapport irlandais. Rapport allemand.
La régulation juridique du crowdfunding
Obligation d’information et obligation de « vigilance » ? En dépit de l’absence de dispositions particulières, l’obligation d’information des investisseurs peut dans certains Etats être qualifiée de « renforcée ». Le rapport allemand, par exemple, relève qu’outre une obligation d’information sur les investissements proposés sur une plateforme, la société exploitant celle-ci doit en outre vérifier la plausibilité de l’information fournie par le porteur de projet137. Exigences relatives au prospectus Les sociétés exploitant des plateformes offrant des services de crowdequity peuvent tomber sous le coup des législations sur les sociétés d’investissement. L’émission de titres suppose, dans tous les droits interrogés, la publication d’un prospectus, dès lors qu’il s’agit d’une offre de souscription faite au public. L’obligation de publication incombe à l’entité émettrice des titres, donc le plus souvent au porteur de projet. Toutefois, dans la mesure où les plateformes assistent les porteurs de projet à rédiger les prospectus, elles peuvent être tenues responsables pour toute information fausse ou manquante.138 Les dispositions relatives à la publication d’un prospectus peuvent cependant être assouplies lorsque l’investissement est d’une ampleur modérée. Tel est le cas en droit allemand, où la loi sur la protection des petits investisseurs139 permet d’exempter de la publication d’un prospectus les actifs financiers offerts via une plateforme de crowdinvesting, lorsque l’offre n’excède pas 2 500 00 euros et que les limites de souscription (entre 1000 et 10 000 euros) fixées en fonction de la valeur nette et du revenu des investisseurs sont respectées.
4.4.2 Via une législation spécifique Régime sui generis Lorsque des législations spécifiques existent, les limites varient dans leurs modalités, et correspondent, selon le choix opéré dans chaque droit national, à des limites exprimées en pourcentage, proportionnellement au revenu, au montant d’un projet, etc, ou sous forme nominale (i.e. un montant chiffré et fixe), qui est déterminé par investisseur, par projet, ou encore dans la durée. Ainsi, en Grèce, des limites ont été posées, tant au niveau des porteurs de projet que des investisseurs: d’une part, les sociétés faisant un appel public au financement par la foule ne peuvent pas solliciter plus de 500 000 euros par an, montant qui s’aligne sur celui proposé par la Commission européenne en deçà
137
Rapport allemand. En droit suisse, V. T. Toxler. 139 Kleinanlegerschutzgesetz KASG 3 juillet 2015, cite par le rapport allemand. 138
341
duquel aucun prospectus n’est exigé140; et d’autre part, pour les personnes physiques uniquement141, le montant qui peut être investi par un investisseur est de l’ordre de 10% de son revenu annuel calculé sur une base de trois ans, si ce pourcentage excède 5 000 euros142. A titre de comparaison, la législation argentine limite le montant maximal que les investisseurs sont en droit d’investir dans des offres proposées par les plateformes à 20% des revenus bruts annuels calculés sur le précédent exercice fiscal, et impose en outre une limite de participation de 5% du montant total d’un projet ou, le cas échéant, à un montant maximal de 20 000 pesos, sauf à ce qu’il s’agisse d’un investisseur qualifié au sens de la réglementation applicable143. Au Canada, la fragmentation du régime applicable aux plateformes de crowdfunding implique une dualité des limitations applicables aux investissements: sous le régime dit de la « petite dispense », les souscriptions, rétractables dans un délai de 48h, sont limitées à 1 500 dollars par investisseur, pour un capital total ne dépassant pas 250 000 dollars, la durée de l’offre étant en outre limitée à 90 jours, et l’émetteur ne pouvant lancer plus de deux offres de souscription par année144; tandis que sous le régime dit de la « dispense de l’Ontario », les émetteurs sont soumis à une limite de 1 500 000 dollars par année, la durée de l’offre de souscription étant pareillement limitée à 90 jours, et les investisseurs ne pouvant investir que jusqu’à hauteur de 2 500 dollars par projet, sans dépasser 10 000 dollars par année, et dont l’engagement est rétractable dans un délai de 48h145. Obligation d’information Outre les limites relatives au montant des investissements, certaines exigences spécifiques d’information des investisseurs sont mises à la charge des plateformes de crowdfunding. En Belgique par exemple, la loi du 18 décembre 2016 impose aux plateformes de crowdfunding de fournir une information sur les risques de l’opération envisagée, un résumé des comptes annuels de l’émetteur/porteur de projet, les raisons de l’offre et les caractéristiques de l’instrument de placement offert, en outre de l’obligation de communiquer aux utilisateurs de la plateforme l’ensemble des éléments suivants: l’identité complète de la plateforme, l’autorité qui lui a délivré l’agrément, le statut de la plateforme, le coût des services, la politique choisie en cas de conflit d’intérêts, des règles applicables à la 140 Commission Staff Working Document, Crowdfunding in the EU Capital Markets Union, May 2016, page 23. 141 Rapport pour la Grèce. 142 Rapport pour la Grèce. 143 Voir les articles 55 et 56 de la Résolution de la CNV n 2350/2016 “sistemas de financiamiento colectivo” du 29 décembre 2017. 144 Voir le rapport national pour le Canada. 145 Voir le rapport national pour le Canada.
342
fourniture de service de financement alternatif, les critères de sélection des projets retenus pour financement, le montant maximal de l’avantage fiscal dont le client pourrait bénéficier146. De même, le régime juridique français du crowdfunding exige des opérateurs de plateformes qu’ils fournissent un certain nombre d’informations aux utilisateurs de la plateforme quant à leur identité (leur dénomination sociale, l’adresse de leur siège social, leur statut de conseiller en investissements participatifs et leur numéro d’immatriculation auprès du registre des intermédiaires en assurance et opérations de banque (« ORIAS »)). Cependant, les opérateurs de plateformes ont également l’obligation en droit français de s’assurer du caractère clair, exact et non trompeur des informations devant être fournies par l’émetteur à propos de l’offre de financement. Les éléments d’information relatifs à une offre de financement participatif sont détaillés par le Règlement Général de l’Autorité française des marchés financiers147, et incluent notamment une description du projet et de l’activité de l’émetteur, le niveau de participation des dirigeants de l’émetteur dans le projet, une information exhaustive de tous les droits attachées aux titres proposés, une description des risques spécifiques liés à l’activité ou au projet de l’émetteur, etc, ainsi qu’un avertissement sur les risques de perte totale ou partielle du capital, les risques d’illiquidité, les risques d’absence de valorisation et, si pertinent, les risques de défaillance. Dans le cadre juridique français, l’exigence du caractère progressif du site internet doit permettre aux conseillers en financement participatif de s’assurer du caractère approprié et adéquat de l’offre d’investissement au regard de la situation de l’investisseur148. Des obligations d’information similaires, quoique présentant quelques différences dans leur granularité, ont également pu être imposées en droit finlandais149. Dans les Etats ayant adopté un cadre juridique spécifique visant à réguler les opérateurs de plateformes dans le cadre du crowdinvesting, il faut donc noter que certaines exigences particulièrement contraignantes d’information (exigeant, comme en droit français, l’exactitude des informations relatives à une offre d’investissement donnée), de mise en garde, mais aussi, le cas échéant, les obligations de mener un test du caractère approprié et/ou adéquat des offres, sont mises à la charge des opérateurs en vue d’assurer la protection des investisseurs (Table 4).
C. Kleiner
5
Définition L’activité transfrontière du financement par la foule peut se définir de différentes façons. Dans le présent rapport, nous retiendrons la définition sans doute la plus simple : celle dans laquelle l’un des trois acteurs à l’opération est domicilié ou établi sur le territoire d’un autre Etat que l’un ou les deux autres acteurs. Nous estimons en effet que ce seul élément d’extranéité rend l’opération – dans son ensemble – internationale. Faible développement de l’activité transfrontière des opérations de crowdfunding150 De manière assez paradoxale, le développement à l’échelle globale du crowdfunding s’est produite, en grande partie, à l’intérieur des frontières nationales151. Le phénomène a grandi, mais concerne essentiellement le financement par une population locale de projets locaux. L’appétence pour le développement des activités transfrontières semble pourtant exister, mais elle est encore loin d’être la forme la plus courante, et ce, même au sein de l’Union européenne où la proximité juridique, économique et monétaire (du moins pour les pays de la zone euro) devrait encourager le développement intraeuropéen des opérations de crowdfunding152. Les questions soulevées Le développement de l’activité transfrontière du crowdfunding soulève, en théorie, trois ordres de question. Le premier concerne l’application extraterritoriale de la législation nationale sur le crowdfunding, c’est-à-dire la portée de la régulation applicable aux plateformes153. Par exemple, quelle est l’étendue du champ d’application spatiale de l’agrément, si celui-ci est nécessaire ? Quels sont les pouvoirs d’une autorité de régulation, si une telle autorité est mise en place, à l’égard de sociétés exploitant des plateformes situées à l’étranger mais s’adressant au public local ? Le second ordre de questions concerne le droit applicable aux rapports conclus entre les financeurs (la foule) et les porteurs de projet d’une part, et ceux qui sont créées en raison de l’utilisation de la plateforme. De nature contractuelle, ces questions sont des thèmes classiques de droit international privé. Enfin, se pose également la question de la détermination du juge compétent dans le cadre d’une opération de financement par la foule transfrontière. Le contentieux est encore assez faible, mais 150
V. la question 5.2. V. Rapport irlandais, V. aussi de Lambertye-Autrand et al. (2015), p. 14. 152 V. Le rapport final Identifying market and regulatory obstacles to cross-border development of crowdfunding in the EU (déc. 2017), doi: 10.2874/65957, spéc. p. 21 et s. 153 Cf. question 2.3. du questionnaire. 151
146
Voir le rapport national pour la Belgique. Voir en particulier les articles 217-1 et 325-51 et s. du Règlement Général de l’Autorité française des marchés financiers. 148 Voir en particulier le rapport national pour la France. 149 Voir notamment le rapport pour la Finlande. 147
L’ACTIVITÉ TRANSFRONTIÈRE DU FINANCEMENT PAR LA FOULE
La régulation juridique du crowdfunding
343
Table 4 indiquant le montant maximal d’investissement par investisseur et par projet Juridiction ALLEMAGNE ARGENTINE
AUSTRALIE BELGIQUE BRESIL CANADA
CHYPRE ESPAGNE ESTONIE ETATS-UNIS
FINLANDE FRANCE GRECE
IRELAND JAPON PAYS-BAS POLOGNE SINGAPOUR SUISSE TAIWAN
Montant maximal de l’investissement fixé par la loi Pas de limite. • 20% des revenus bruts annuels calculés sur le précédent exercice fiscal ; et • limite de participation de 5% du montant total d’un projet ou, le cas échéant, à un montant maximal de 20 000 pesos (sauf si investisseur qualifié au sens de la réglementation applicable). Limite de contribution des clients « retail » à hauteur de 10,000 dollars australiens pour toute offre par la même société émettrice au cours d’une période de 12 mois. Pas de limite. Pas de limite. • Régime de la « petite dispense » : les souscriptions sont limitées à 1 500 dollars par investisseur, pour un capital total ne dépassant pas 250 000 dollars, et l’émetteur ne peut lancer plus de deux offres de souscription par année ; et • Régime de la « dispense de l’Ontario » : les émetteurs sont soumis à une limite de 1 500 000 dollars par année, et les investisseurs ne peuvent investir que jusqu’à hauteur de 2 500 dollars par projet, sans dépasser 10 000 dollars par année. Pas de limite. Le montant du projet est limité à 2 millions d’euros, ou à 5 million d’euros si le projet vise uniquement les « investisseurs accrédités ». Pas de limite. • Les projets sont limités à 1 million de dollars (indexé sur l’inflation) sur une période de 12 mois ; et • Les investissements sont limités en fonction du revenu ou de la valeur d’un investisseur, avec une limite absolue fixée à 100 000 dollars par investisseur. Pas de limite. Limite fixée à 2,5 millions d’euros par projet. • Limite du montant de l’investissement par investisseur fixée à 10% du revenu annuel de l’investisseur, calculé sur une base de trois ans, si ce pourcentage excède 5 000 euros, et, en toute hypothèse, l’investissement est plafonné à 30 000 euros ; et • Limite du projet fixée à 500 000 euros par année. Pas de limite Projet limité à 100 million de yen par année. Pas de limite Pas de limite Pas de limite Pas de limite Limite pour les investisseurs non-professionnels fixée à NT$50,000 par investissement, avec un plafond fixé à NT$100,000 pour le montant agrégé des investissements sur une période de 12 mois sur une même plateforme. Une telle limite ne s’applique toutefois pas aux « institutional angels », les membres du directoire ou du conseil de surveillance, ou aux actionnaires détenant 10% ou plus de l’entreprise de crowdunding.
l’essor de l’activité, précédemment relevée154, entraînera indubitablement une augmentation du contentieux.
5.1
Champ d’application des textes relatifs au financement par la foule
5.1.1 Critère de rattachement Territorialité de la réglementation Le champ d’application des réglementations spécifiques adoptées pour encadrer le crowdfunding au niveau national est de nature territoriale. Il est en effet généralement considéré que le cadre juridique national en vigueur trouve à s’appliquer dès lors qu’il peut être considéré qu’une plateforme fournit ses services sur le territoire national de l’Etat en question. Les cadres juridiques nationaux existants diffèrent toutefois selon 154
Cf. supra.
qu’ils reconnaissent (sous conditions) que les services fournis par les plateformes puissent ou non être prestés depuis l’étranger sans implantation physique sur le territoire national. De manière générale cependant, la réglementation nationale du crowdfunding exige que le siège social de la plateforme soit localisé sur le territoire national. Ainsi, la réglementation française du crowdfunding, qui requiert des plateformes qu’elles soient enregistrées en tant que conseiller en investissements participatifs (« CIP ») ou intermédiaire en financement participatif (« IFP ») pour être autorisées à fournir des services en France, exige que le siège social soit implanté en France155. A l’instar du cadre juridique français, Voir l’article L. 547-3 du code monétaire et financier pour le statut de CIP, et les articles L. 548-2 et L. 548-3 du code monétaire et financier pour le statut d’IFP (à noter toutefois que si la condition d’établissement de la personne morale en France ne ressort par textuellement des dispositions relatives aux IFPs, une telle exigence résulte néanmoins de l’économie de la réglementation, tel notamment qu’a pu le préciser l’ORIAS dans sa note détaillée relative aux intermédiaires en
155
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la réglementation espagnole exige également que la plateforme ait son siège social en Espagne et y soit dûment autorisée à fournir ses services156. De même, la réglementation argentine exige que les plateformes de crowdfunding soient des personnes morales constituée sous forme de sociétés anonymes (sociedades anónimas), dûment autorisées, et dont la raison sociale fait expressément mention qu’il s’agit de plateformes de crowdfunding (« Plataformas de Financiamiento Colectivo » ou « PFC »)157. A titre de comparaison, il est cependant intéressant de noter, au regard du droit finlandais, que si, en principe, la prestation de services transfrontière n’est pas autorisée pour les intermédiaires de crowdfunding, le deuxième paragraphe de la section 3 de la loi finlandaise encadrant le financement participatif (Crowdfunding Act 734/2016) prévoit une dispense d’enregistrement pour les opérateurs économiques situés dans un autre Etat Partie à l’Espace Economique Européen qui intermédient temporairement des activités de crowdfunding en Finlande158. En vue de se soustraire aux exigences normatives qui s’appliqueraient en cas d’offre sur un territoire donné, certaines plateformes forment des partenariats et collectent des fonds à l’étranger via un partenaire local159. L’exception de l’initiative exclusive Il est par ailleurs intéressant de noter que la loi espagnole 5/2015 prévoit expressément, de manière similaire à l’exemption de « reverse solicitation » introduite par MiFID 2/MiFIR, une exemption à l’exigence d’enregistrement et d’autorisation auprès du régulateur dès lors qu’une plateforme dont le siège social se situe à l’étranger fournit des services régulés à un résident espagnol sur la seule et exclusive initiative (iniciativa propia) de celui-ci160. La législation espagnole précise toutefois que l’initiative exclusive (iniciativa propia) d’un résident espagnol (porteur de projet ou investisseur) ne saurait être caractérisée dès lors que161 : (i) la plateforme a son siège social en-dehors d’Espagne et sollicite activement financement participatif disponible sur son site au lien suivant : https:// www.orias.fr/cip-ifp.). Voir également le rapport national pour la France, paragraphe 37. 156 Voir l’article 47 de la loi espagnole 5/2015. Voir également le rapport national pour l’Espagne. 157 Voir spécifiquement les articles 1 et 4 de la Résolution de la CNV n 2350/2016 “sistemas de financiamiento colectivo” du 29 décembre 2017. 158 Voir la traduction anglaise du Crowdfunding Act 734/2016, disponible au lien suivant : https://www.finlex.fi/en/laki/kaannokset/ 2016/en20160734. 159 V. Le rapport final Identifying market and regulatory obstacles to cross-border development of crowdfunding in the EU (déc. 2017), doi: 10.2874/65957, spéc. 73 et s. 160 Voir l’article 47 de la loi espagnole 5/2015. Voir également le rapport national pour l’Espagne. 161 Ibid.
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(en particulier par des opérations marketing) des clients en Espagne ; ou (ii) les offres de services de la plateforme visent spécifiquement des investisseurs ou des porteurs de projet localisés en Espagne. Un passeport « national » La Belgique (seule juridiction à notre connaissance dans cette configuration), prévoit un régime particulier d’agrément et d’enregistrement sur des listes tenues par le régulateur pour les plateformes dont l’administration centrale se situerait à l’étranger et qui souhaiteraient fournir des services régulés en Belgique. En effet, tout en exigeant en principe que l’administration centrale de la plateforme soit localisée sur son territoire national, le droit belge permet aux plateformes « fixées » dans l’espace économique européen de fournir des services en Belgique pour autant qu’elles bénéficient d’un agrément spécifique (sorte de « passeport national ») octroyé par le régulateur belge, ou exige de plateformes de pays tiers l’établissement d’une succursale en Belgique162. Le droit belge a en outre introduit un « passeport sortant » pour les plateformes de crowdfunding établies en Belgique qui souhaiteraient étendre leurs activités à un autre Etat, en exigeant de ces plateformes une notification préalable au régulateur163. A défaut de cadre juridique harmonisé au niveau européen, certaines initiatives réglementaires nationales ont donc vu le jour.
5.1.2 Limitation monétaire Liberté de devises En Irlande, tous les sites, à l’exception d’un, utilise l’euro comme monnaie de référence. Seul Fundlt propose l’option d’utiliser la livre Sterling, si le porteur de projet est situé en Irlande du Nord164. Le rapporteur suisse souligne qu’en droit suisse, il n’y a pas de restrictions quant à l’utilisation de devises, voire même de crypto-monnaies, par les plateformes de crowdfunding165. A l’instar de la suisse, le droit espagnol, par exemple, n’impose pas d’interdiction d’utilisation de devises. En Australie, la plateforme Pozible s’est associée à PayPal en 2012 et accepte désormais 22 devises, ainsi que, depuis 2013, des paiements en Bitcoins166. De manière générale, dans l’ensemble des juridictions observées pour les besoins de cette étude, aucune interdiction ou restriction quant à la devise utilisée par les plateformes n’a été identifiée.
162
Voir le rapport national pour la Belgique. Voir en particulier l’article 19 de la loi Belge du 18 décembre 2016 organisant la reconnaissance et l’encadrement du crowdfunding. 164 Voir le rapport national pour l’Irlande. 165 Voir le rapport national pour la Suisse. 166 Voir le rapport national pour l’Australie. 163
La régulation juridique du crowdfunding
5.2
Loi applicable aux relations contractuelles
Choix de loi De manière générale, les relations entre les porteurs de projet, les investisseurs et les plateformes de crowdfunding étant de nature contractuelle, les parties ont généralement la possibilité de choisir la loi applicable à leurs relations, sous réserve des dispositions impératives telles que celles relatives à la protection des consommateurs. Tel est en particulier le cas des Etats Membres de l’Union Européenne qui appliquent les dispositions du règlement Rome I167, comme le soulignent notamment les rapports nationaux pour Chypre168 et pour l’Espagne169. Loi choisie : loi du siège de la plateforme Dans les faits, la loi choisie pour régir les relations entre les parties est généralement la loi du lieu du siège de la plateforme. Ainsi, la seule entreprise de financement par la foule en activité à Chypre désigne la loi chypriote comme applicable et les conditions générales d’utilisation du service contiennent également une clause d’élection de for en faveur des juridictions chypriotes170. En Suisse, les conditions générales d’utilisation et les différents contrats liant les parties contiennent généralement des clauses de choix de loi. De même, en dehors du cadre européen, les conditions générales d’utilisation contiennent généralement des clauses de choix de loi et de juridiction, comme au Brésil notamment171, ou encore au Canada172. Il est toutefois intéressant de noter que le rapporteur pour Taiwan relève qu’en pratique, dans le contexte du droit Taiwanais, aucun choix de loi ne serait possible car seul le droit de Taiwan aurait vocation à s’appliquer173. Domaine de la loi choisie La loi ainsi choisie régit les relations unissant d’une part la plateforme au porteur de projet, d’autre part à la plateforme et l’investisseur. L’utilité d’insérer une clause de choix de loi dans ce cadre tripartite est évidente : elle permet de soumettre à une seule loi l’ensemble contractuel. En effet, en l’absence de choix de loi, phénomène qui sera rare, les relations susmentionnées peuvent être soumises à des lois différentes, souvent en
167 Règlement UE n 593/2009 du 17 juin 2008 sur la loi applicable aux obligations contractuelles. Voir en particulier l’article 3 (liberté de choix) et l’article 6 (contrats de consommation). 168 Voir le rapport national pour Chypre. 169 Voir le rapport national pour l’Espagne. 170 Voir le rapport national pour Chypre. 171 Voir le rapport national pour le Brésil. 172 Voir le rapport national pour le Canada, spécifiquement pour la possibilité de choisir la loi applicable dans le cadre du don. 173 Voir le rapport national pour Taiwan.
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fonction du lieu de domicile des parties174. Les règles de conflit de lois applicables dépendront par ailleurs du type de crowdfunding : la loi applicable en matière de prêts, dons ou vente ne sont pas nécessairement identiques.
5.3
Les litiges transfrontières impliquant une activité de financement par la foule
5.3.1 Compétence judiciaire internationale Clause d’élection de for Il est généralement observé en pratique que les conditions d’utilisation et les différents contrats régissant les relations entre les parties contiennent des clauses de choix de juridiction, qui correspondent généralement aux juridictions de l’Etat dont la loi a été choisie comme applicable aux relations contractuelles. Comme remarqué précédemment, la relation tripartite des opérations de crowdfunding génère le risque d’une dispersion du contentieux. Contre ce risque, le meilleur rempart est l’insertion d’une clause d’élection de for. Juridiction choisie : juridiction du lieu du siège de la plateforme Par ailleurs, il faut relever que les juridictions habituellement choisies sont celles du lieu du siège de la plateforme, sous réserve de dispositions impératives relatives à la protection des consommateurs. Telle est en particulier la tendance observée en Espagne, sauf cas de figures minoritaires où la juridiction choisie correspond à celle du lieu du domicile du client de la plateforme (ce qui paraît être le cas d’une seule plateforme en Espagne)175. Très faible quantité de litiges Il convient de remarquer en outre que, dans l’ensemble des juridictions observées, encore très peu de décisions portant sur des litiges liés au crowdfunding ont émergé. A titre d’exemple, il est possible de relever que la cour de Rio de Janeiro au Brésil a rendu, le 27 avril 2016, une décision à propos d’un litige en lien avec le financement participatif176. Certains jugements relatifs au crowdfunding sont néanmoins antérieurs à l’entrée en vigueur d’un cadre réglementaire national spécifique visant à régir le financement participatif, à l’instar de la décision du tribunal de première instance de Rubi (Barcelone) en date du 10 décembre 2013177. Par ailleurs, il convient de mentionner, 174
Si l’on suit la règle adoptée dans le Règlement Rome I ou la règle de conflit prévue à la Convention de La Haye du 14 mars 1978 sur la loi applicable aux contrats d’intermédiaires. V. sur la loi applicable aux contrats conclus dans le cadre de financement participatif : de Lambertye-Autrand et al. (2015), p. 26 et s. 175 Voir le rapport national pour l’Espagne, qui cite la plateforme Growly, dont les conditions d’utilisation sont disponibles au lien suivant : https://www.grow.ly/es/informacion/legal. 176 Voir le rapport national pour le Brésil. 177 Voir le rapport national pour l’Espagne.
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comme le relève le rapporteur pour l’Estonie, que certains litiges se résolvent devant des organes de résolution des litiges spécifiques, en particulier en ce qui concernant les litiges portant sur le droit de la consommation178. Une caractéristique commune des litiges qui ont pu être relevés est cependant qu’il s’agit de litiges internes, sans élément d’extranéité. Class action En toute hypothèse, si, de manière générale, aucun litige d’envergure en lien avec le financement participatif n’a pu être relevé jusqu’à présent dans les juridictions considérées dans le cadre de cette étude, il n’est pas exclu que de tels litiges surviennent à l’avenir. A noter néanmoins qu’une procédure de class action a déjà pu être lancée aux Etats-Unis en mars 2017 pour des motifs de fraudes en lien avec une levée de fonds sur la plateforme Indiegogo179. Les litiges d’envergure, en particulier dans les ordres juridiques qui admettent le mécanisme de class action (e.g. le Canada180, l’Australie181, etc.) pourraient en effet avoir tendance à se multiplier et à prendre de l’ampleur à l’avenir, et peut-être, comme le note le rapporteur pour l’Estonie, lors de la prochaine récession économique182.
5.3.2 Arbitrage international Faible usage des clauses compromissoires Au regard de la pratique dans les différentes juridictions observées, les clauses compromissoires ne sont pas habituelles, en comparaison avec les clauses de choix de juridiction. Ainsi, en Espagne par exemple, mis à part les processus de réclamations internes devant être établis par les plateformes de crowdfunding, les plateformes n’ont pas recours aux clauses compromissoires183. Il en est de même (sans prétendre à l’exhaustivité) des plateformes situées aux PaysBas184, en Allemagne185 ou encore à Chypre186. Absence de procédures arbitrales en cours Cependant, il est intéressant de noter que le rapporteur pour l’Estonie a identifié une seule plateforme estonienne, Funderbeam
178
Voir le rapport national pour l’Estonie, citant l’affaire Consumer case Bondora vs X, en date du 25 août 2016, devant le Consumer Disputes Committee, qui est un organe estonien indépendant de résolution des litiges. 179 Voir le rapport national pour les Etats-Unis. 180 Voir le rapport national pour le Canada. 181 Voir le rapport national pour l’Australie. 182 Voir le rapport national pour l’Estonie. 183 Voir le rapport national pour l’Espagne. 184 Voir le rapport national pour les Pays-Bas. 185 Voir le rapport national pour l’Allemagne. 186 Voir le rapport national pour Chypre.
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Markets, dont les conditions d’utilisation contiennent une clause d’arbitrage187, toutes les autres plateformes optant pour une clause d’élection de for. Parmi les différentes juridictions observées, aucun arbitrage ne paraît néanmoins être en cours188. Le rapport canadien mentionne également que certaines conventions proposées par les plateformes contiennent une clause d’arbitrage189.
References Argyropoulou V, Jougleux Ph, Synodinou T-E. Ask and you shall receive: crowdfunding in Cyprus Bagińska E. Crowdfunding in Poland Barrière F. Le crowdfunding, ou l’adaptation du droit au service des investissements en France Blanc N (2015) Mystérieux ‘don avec contrepartie’. In: Le Fur A-V (ed) Le cadre juridique du crowdfunding Analyses prospectives. Société de législation comparée, TEE, Paris, p 251 Callebaut GC (2015) Le crowdfunding par don peut-il être qualifié de mécénat ? In: Le Fur A-V (ed) Le cadre juridique du crowdfunding Analyses prospectives, Société de législation comparée. TEE, Paris, p 239 (241) Catanā R, Sumandea-Simionescu I (2016) Study on the law applicable to crowdfunding – country report for Romania. RISF 4:58 Cona J, Sivak DW (2017) The potential perils of crowdfunding donations. N Y Law J Cumyn M. L’encadrement juridique du financement participatif au Canada de Lambertye-Autrand M-C, Kleiner C, Usunier L (2015) L’activité transfrontière des plateformes de financement participatif. In: Lefur A-V (dir. pub.) Le cadre juridique du crowdfunding, Société de législation comparée 2015, vol 11, p 14 de Miranda Valverde Terra A. Crowdfunding in Brazilian Law Dossa VM (2016) Le marché africain du crowdfunding. RISF 4:104 Harju I, Kallio A. Crowdfunding act accelerating the growth of the crowdfunding market in Finland Hernández Sainz E. Crowdfunding in Spain Hofmann C. Crowdfunding regulation in Singapore Huffer H (1970) Das partiarische Geschäft als Rechtstypus Laub G. Legal regulation of crowdfunding in Estonia Ibarra Garza R, Ibarra Garza A (2016) Crowdfunding: the Mexican context. RISF 4:83 Kato T. The legal regulation of crowdfunding in Japan Kelly C. The legal regulation of crowdfunding in Ireland Laroppe JC (2016) Le financement participatif en Italie : une réglementation, première en date, récemment modifiée. RISF 4:31 MacLeod Heminway J. The legal regulation of U.S. crowdfunding: an organically evolving patchwork Marique E, Van de Velden K, Wolff S. Le financement alternatif en droit belge Majumdar VAB, Varottil U (2016) Regulating equity crowdfunding in India: walking a tightrope. In: Vasudev PM, Watson S (eds) Global capital markets – a survey of legal and regulatory trends. Edward Elgar Matthaiou E. Legal regulation of crowdfunding in Greece Mollick E (2012) The dynamics of crowdfunding: an explanatory study. J Bus Venturing 1 29:2
187
Voir le rapport national pour l’Estonie. Voir, inter alia, le rapport national pour le Brésil. 189 Rapport canadien, n 18. 188
La régulation juridique du crowdfunding Monteil M (2016) Analyse prospective du crowdfunding au Panama. RISF 4:92 Pekmezovic VA, Walker G (2016) The global significance of crowdfunding: solving the SME funding problem and democratizing access to capital. William Mary Bus Law Rev 7:347–458 Quiquerez A (2016) Les contrats du financement participatif : quelles qualifications juridiques ? RTDF 1:19 Renner M (2014) “Banking Without Banks”? Rechtliche Rahmenbedingungen des Peer-to-Peer Lending. ZBB 26(261):262
347 Schäfer C (2017) Vor § 705 BGB para. 107. In: Säcker FJ (ed) Münchener Kommentar zum BGB, vol 6, 7th edn Schmidt K (2012) § 230 HGB para. 54. In: Schmidt K (ed) Münchener Kommentar zum HGB, vol 3, 3rd edn Tröger TH. Regulation of crowdfunding in Germany Troxler T. Crowdfunding in Switzerland Tseng W-R. Development of crowdfunding in Taiwan van Vliet L. Netherlands – national report on crowdfunding
Security Rights in Intellectual Property Eva-Maria Kieninger
Abstract
The general report gives an insight into the main legal and economic challenges for the creation and perfection of security rights in intellectual property rights. It highlights the differences among legal systems in relation to the transferability of those rights and their collateralisation. An overview of the creditor’s remedies in the event of the debtor’s default and insolvency as well as some basic information on the costs of creating security rights in IPR’s complete the comparative survey.
1
Introduction
1.1
Economic Importance
In 2002, introducing his seminal comparative work on security interests in intellectual property, Howard Knopf noted that “not long ago, intellectual property was seen as a footnote, a mere boiler plate or other afterthought aspect of most corporate transactions. Often now, it is the whole point of the most important deals taking place. [. . .] The mergers of AOL and Time-Warner, Seagram and Vivendi, and BCE and CTV are all about intellectual property.” However, he continued: “odd as it seems in the face of the staggering sums of money being paid essentially for patents, copyright and trademarks through share prices, the use of intellectual property as collateral in what should be routine exercises in corporate finance, is beset with structural uncertainty.”1 The literature that has been published since 2002 and the national reports prepared for this project2 both show that not much has This report was also published in Kieninger (Ed), Security Rights in Intellectual Property, Springer Nature Switzerland 2020. 1
Knopf (2002), pp. 1 and 3 et seq.
E.-M. Kieninger (*) Julius-Maximilians-Universität Würzburg, Würzburg, Germany e-mail: [email protected]
changed. As a conclusion to a recently published 600-page monograph, Peter Picht states that intellectual property rights are still only used as collateral reluctantly and on a small scale.3 If they are used, then this is mostly done in the context of an “all-asset” security right. On the other hand, there is unanimous support for the proposition that security rights in intellectual property (IP) rights4 could be economically valuable, if not even crucial, for SMEs.5 This is particularly true for start-ups, which are often very innovative and creative, but have limited access to corporate financing, relying instead on capital markets. Therefore, they need to focus on bank loans; however, they do not own traditional collateral such as land or equipment.6 For Germany, Maximilian Decker has noted that 60% of technology-driven SMEs finance themselves with private equity and have very limited access to bank loans, which are the traditional means of corporate financing in Germany. In over 70% of the cases in which banks refused to lend money to SMEs in the area of research and development, the reason was a lack of collateral. Decker concludes that the market for IP rights as collateral is dramatically underdeveloped.7
2 The national reports (except the report on the United States of America) will be published in Kieninger E-M (ed) (2019), Security Rights in Intellectual Property. The information on US law in the present general report relies on the unpublished report prepared for this project by Neil Cohen. 3 Picht (2018), p. 602. 4 In this contribution, the notion of intellectual property (IP) is used in a broad sense, including not only copyright (¼ intellectual property in a narrow sense), but also industrial property, such as patents, designs, and trademarks. Many jurisdictions have separate enactments for these different types of IPRs and may also use different (i.e. broader or narrower) terminology. 5 Small and medium-sized enterprises. 6 See Denoncourt (2017), pp. 1, 4 et seq. Knopf (2002), pp. 1, 5. 7 Decker (2012), pp. 2 et seq.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_13
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E.-M. Kieninger
Main Legal and Economic Challenges
The following paragraphs set out some of the main legal and economic obstacles to taking security interests in IP rights. Whereas some could be overcome or at least mitigated by law reforms and international standardization (see below, Sects. 1.2.1 and 1.2.3), others are inherent in the subject itself (Sects. 1.2.2 and 1.2.4) and are therefore hardly susceptible to reform.
1.2.1
Secured Transactions Law Not Sufficiently Adapted to IP Rights As will be shown in greater detail in Sect. 3, the question whether it is at all possible to transfer or collateralize IP rights is, in most jurisdictions, governed by IP law, which is mostly statutory law (see Sect. 3.1.2). Only in some jurisdictions do the general principles of property law or even secured transactions law also play a role (see for greater detail Sects. 3.1.1 and 3.1.3 below). On the other hand, it is mainly secured transactions law that governs the question which security rights can be created (see for details Sect. 3.2). However, in general, secured transactions law has not been specifically designed for or adapted to IP rights. In most jurisdictions, it has been developed for tangible assets and has only been extended to intangible assets like receivables. The fact that IP rights are very often registered and are limited in territorial scope to the jurisdiction for which they have been created and in which protection is sought (lex protectionis) has so far not been taken into account in the development of secured transactions law. Also, IP registration might take place at a different level of the state structure than notice filing under secured transactions law: IP registries may be organized federally or even supranationally (e.g. EU), whereas notice filing or registration as a mode of perfection under secured transactions law may have to be carried out at the level of the individual state or province. Tensions, uncertainties, and high transaction costs might be the result.8 A notable exception is Australia, whose secured transactions law is one of the most modern and advanced in the world. With respect to unregistered rights such as copyright or unregistered trademarks, registration as a means of perfecting security rights might not even be available, which is an obvious hindrance in legal systems that, as a matter of principle, require registration for the effectiveness of security
8 See Ballagh (2017) Secured Financing with Intellectual Property: Managing Uncertainties, www.ballaghedward.ca (Law Office, Hamilton, Ont.) noting: “The standard legal advice is sometimes called the ‘belts and suspenders’ approach. Where feasible, parties are advised to register their security interests on both the federal and the provincial registers in all the relevant jurisdictions [i.e. provinces],” cited in Howell (2019), Section 2.2.
rights erga omnes; see, for example, the Italian9 and Finnish reports in this project.10 An inherent difficulty lies in the fact that IP rights might prove unreliable: third parties may successfully challenge the very existence of the IP right. The grantor may prove not to be the owner and thus, given the fact that legal systems regularly do not provide for a bona fide acquisition of security rights in IP rights,11 the secured party will have acquired nothing at all. The shortcomings of unreformed and unmodern national secured transactions law may add further difficulties.12 For instance, in systems that use ownership as security, no junior security right can be created. The rules relating to pledges and usufruct are also often outdated, especially when it comes to enforcement.13 In many jurisdictions, the legal characterization of licences as either mere obligatory rights or absolute rights is unresolved, creating difficulties when it comes to the use of licences as collateral and their classification for the purposes of secured transactions law. In sum, the English reporter describes secured transactions law over IP rights as “complex and disadvantageous” due to the double registration system and to the distinction and unclear relationship between legal and equitable interests.14 The fact that IP rights have hitherto only rarely been used as collateral, resulting in a lack of case law in this area, further adds to the legal uncertainty.15
1.2.2 Life Cycle of an IP Right IP rights are time-limited rights and can lose their value rather fast, especially in the technology sector. While this is generally also true for tangible property such as inventory, security rights over inventory tend to be created over a certain class of goods (rather than specific pieces), so that more modern species of the same kind of product can be covered by a single security agreement over time. In contrast, the life cycle of a loan may easily surpass the life cycle of an IP right.16
9
See in this volume Ricolfi (2019), Section 2.2. See in this volume Juutilainen (2019), Section 4.3. 11 But see in this volume Storme and Malekzadem (2019), Section 27, on the possibilities of bona fide acquisition. 12 On the following, see in this volume Brinkmann et al. (2019), Section 5. 13 See, for example, Dorfmayr (2019), Section 7.1.1 on judicial enforcement. 14 See in this volume Bornheim (2019), Sections 9 and 10. 15 Cf. Dorfmayr (2019), Section 10; see in this volume Karjiker (2019), Section 3.1.1. 16 See in this volume Brinkmann et al. (2019), Section 1, citing Bill Gates: “Intellectual property has the shelf life of a banana.” 10
Security Rights in Intellectual Property
1.2.3 The Problem of Evaluation Another problem lies in the difficulty of evaluating IP rights and—consequently—the value of a security right over an IP right. Obviously, such an evaluation is necessary in order for the parties to assess the economic impact of a potential security right: To what extent will the sale or use of the IP right cover the advanced credit? Is the security right worth the transaction costs? Can it have any influence on the interest rate? As the national reports in this project prove once more, the problem of evaluation is central to the use of IP rights as a basis for obtaining credit. With respect to nearly all jurisdictions covered, this difficulty is mentioned as one of the main reasons why IP rights are not used more regularly as collateral. Not only is there an inherent difficulty in fixing a certain sum of money to an IP right, given the great variety of these rights, but there is also no widely recognized—let alone internationally standardized—method of evaluation. For Germany alone, Decker17 counts no less than 30 different procedures for evaluating IP rights and laments the lack of any standards. According to the Australian reporter for the present project,18 “leading practitioners, pointing to difficulties inherent in valuing intellectual property given in particular the lack of a standard market, observe that there are differing valuation methods for intellectual property, that can produce vastly different valuations.” Presently, three main approaches to evaluation can be distinguished: (i) the cost approach, which looks at the cost of creating the IP; (ii) the market approach, which, for its practical application, requires an active marketplace (which is often lacking) for the relevant kind of IP right; and (iii) the income approach, which looks at the estimated financial benefits that the IP right can produce.19 Considering the variety here, it comes as no surprise that the different methods lead to huge differences in outcome. One obvious way forward would be the development of at
17
Decker (2012), p. 486. For the following, see McCracken (2019), Section 4.4. et seq. 19 See Howell (2019), at fn. 53, citing Weston Anson, Want to Value Your Intellectual Property? Here are Three Approaches. Available at www.ipinbrief.com/three-approaches-to-value-IP/. Weston Anson is the Chairman of CONSOR, Ibid. Howell (2019), continues on to discuss the pros and cons of the different approaches and their suitability for secured transactions, citing David Ullmann (lawyer) and Sheldon Title (accountant), “How to Seize Something You Can’t Touch: A Review of Issues and Process with the Foreclosure of Intellectual Property Assets”, Annual Review of Insolvency Law 2014 ed. Janis P. Sarra, available on WestlawNext, Canada. In the same vein, see in this volume Brinkmann et al. (2019), Section 4.1; Decker (2012), pp. 490 et seq.; Argyropoulou et al. (2019), at fn. 36. The French report makes a twofold distinction between static and dynamic approaches; see in this volume Séjean and Binctin (2019), Section 3.1.2.1 and Section 3.1.2.2. See in this volume Murguía-Goebel (2019), Section 3.3, listing an “option-based method” as an additional, fourth method. 18
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least national (better: international) standardized methods of evaluation.20 An even more pressing problem involving evaluation arises when a jurisdiction adopts a very strict view on excessive collateralization or oversecurity. This used to be the case in Germany (prior to 1997, when a particular judgment of the united civil law chambers of the BGH was passed)21 and still seems to be the case in Estonia.22 If courts hold that a security agreement is void in its entirety once the collateral’s value exceeds the amount of the debt by a certain percentage, correct evaluation of the collateral becomes crucial for the whole transaction. It is not surprising if parties refrain from including a type of collateral that carries such a fatal risk in their security arrangement.
1.2.4
Problems Connected to Enforcement
Decreasing Value of the Collateral Another difficulty lies in the fact that the parties need to evaluate the collateral at the time of (or immediately prior to) the conclusion of the security agreement; however, the value may differ greatly at the time of enforcement.23 For example, if the business is insolvent, its trademark may decrease in value or even become worthless.24 With tangible property or intangibles, this difficulty may also exist (e.g. the inventory or the equipment of an insolvent company may also be worth less than that of a going concern), but generally speaking, the receivables of a company, its immovable property, and, to a certain extent, its movables are not as directly dependent on the commercial soundness of the company as a whole as its IP rights are. In sum, there is a danger that a security right in IP rights may be worth the least when it is needed the most (i.e. upon the insolvency of the grantor).25 Liquidity of the Market Another problem is the frequent lack of a liquid market for IP rights once enforcement is sought through sale or licensing.26 Often, there are very few businesses which can possibly make use of the patent, design, or trademark. Trademarks are often only of interest to the direct competitor. But, of course, more liquid markets may develop in the future.27
20 See in greater detail Decker (2012), pp. 490 et seq. See also in this volume Murguía-Goebel (2019), Section 3.3, pointing to the OECD guidelines for the valuation of intangible assets. 21 See in greater detail in this volume Brinkmann et al. (2019), Section 3.2.1. 22 See in this volume Lepik (2019), Section 9. 23 Decker (2012), pp. 497 et seq. 24 Cf. Dorfmayr (2019), Section 10. 25 See in this volume Brinkmann et al. (2019), Section 1. 26 Decker (2012), pp. 489 et seq. 27 Decker (2012), pp. 503 et seq. with examples.
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2
The Limited Role of International Uniform Law for Security Rights in IP
2.1
Uniform Law on Intellectual Property
There is a wealth of international treaties in the area of IP rights28; for patents, these include the Paris Convention for the Protection of Industrial Property of 1883 (as amended by the Stockholm Act of 1967; 195 contracting parties) and the Patent Cooperation Treaty of 1970 (last amended in 2001; 152 contracting parties); for trademarks, these include the “Madrid System,” consisting of the Madrid Agreement Concerning the International Registration of Marks of 1891 (last amended in 1979; 55 contracting parties) and the Madrid Protocol of 1989 (101 contracting parties); and for copyright, these include the Berne Convention for the Protection of Literary and Artistic Works of 1886 (last amended in 1971; 185 contracting parties).29 The effect of these treaties and of the TRIPS Agreement is that the structure of IP law, at least, is rather uniform around the world. At a regional level, the European Patent Convention has existed since 1973 (EPC),30 but so far, it has only unified the procedure leading to the granting of the European patent. Once such a patent has been created, its content, the remedies for its infringement, its transferability, etc. continue to be governed by national Member States’ laws; therefore, this type of patent only creates a so-called “bundle of national patents.” The Community Patent Convention, which would have created a uniform and autonomous European patent, is no longer on the political agenda. Instead, the European Union has created the “European unitary patent” through secondary legislation based on so-called “enhanced collaboration” (Arts. 326 ff TFEU).31 With its ratification of the Unified Patent Court Agreement, which forms part of the European Patent Package, on April 26, 2018, the UK has only very recently paved the way for the European unitary patent to become operational in the first half of 2019.32 28
See the list of administered treaties on the website of the World Intellectual Property Organization, http://www.wipo.int/treaties. Accessed May 8, 2018. 29 See on these texts Dorfmayr (2019), Section 1.2 with further references. 30 The revised texts of the Convention and its protocols, which entered into force on December 13, 2007, and the Implementing Regulations, in force since May 1, 2016, are available on the website of the European Patent Office: http://www.epo.org/law-practice/legal-texts/html/epc/ 2016/e/ma0.html. Accessed May 8, 2018. See the detailed treatment on the European Patent Convention in Dorfmayr (2019), after fn. 19. 31 Reg. (EU) No. 1257/2012 and Reg. (EU) No. 1260/2012, in force since January 20, 2013. Yet, their applicability depends on the entering into force of the Convention on a European Patent Court; see Art. 18 section 2 of the Reg. (EU) No. 1257/2012. 32 See www.epo.org/law-practice/unitary/unitary-patent/start.html. Accessed June 19, 2019.
The EU has created a number of genuinely supranational “Community” or “European Union” IP rights through regulations, most notably the European Union trademark and the Community design, which are administered by the European Union Intellectual Property Office in Alicante, Spain.33 Yet these instruments, as far as our topic is concerned, at most provide uniform substantive rules on the transferability of IP rights and formal requirements for the effectiveness of transfers (e.g. writing or registration). These issues will be examined in greater detail in Sect. 3.2 (“Transferability and Collateralization of IP Rights Under Supranational Law”). Examples are the EU Trade Mark Regulation,34 which, in its Art. 22, explicitly states that “(1) An EU trade mark may, independently of the undertaking, be given as security or be the subject of rights in rem” and “(2) At the request of one of the parties, the rights referred to in paragraph 1 or the transfer of those rights shall be entered in the Register and published”; and the Community Design Regulation (CDR), which contains an almost identical provision in Art. 29 CDR: “(1) A registered Community design may be given as security or be the subject of rights in rem. (2) On request of one of the parties, the rights mentioned in paragraph 1 shall be entered in the register and published.” Otherwise, the international instruments do not contain specific substantive rules on security rights in IP rights, which is, of course, a direct consequence of the lack of internationally uniform or harmonized secured transactions law. The only international instrument providing for a uniform international security interest, i.e. the Cape Town Convention together with its asset-specific protocols,35 does not touch upon IP rights.
2.2
Soft Law on Secured Transactions
There are many international and supranational efforts to promote the modernization and harmonization of secured transactions law; see foremost the UNCITRAL Legislative Guide on Secured Transactions, as well as the UNCITRAL Model on Secured Transactions and its supplement on security rights in IP.36 In addition, there are also regional projects, such as the Model Inter-American Law on Secured Transaction, the OHADA Uniform Act on Security Interests, and the 33 Regulation (EU) 2017/1001 of the European Parliament and of the Council of June 14, 2017 on the European Trade Mark (codification), OJ L 154, 16.6.2017, p. 1; Council Regulation (EC) No. 6/2002 of December 12, 2001 on Community Designs, OJ L 3, 5.1.2002, p. 1. 34 Regulation (EU) 2017/1001 of the European Parliament and of the Council of June 14, 2017 on the European Union Trade Mark (Codification), OJ L 154, 16.6.2017. 35 For the texts of these instruments, see www.unidroit.org. 36 See below Section 6.2, with references.
Security Rights in Intellectual Property
Model Law of the European Bank for Reconstruction and Development (EBRD) for Central and Eastern European states. Last but not least, the academic project of a Draft Common Frame of Reference (DCFR) for European private law contains draft rules on secured transactions in its Book IX. Some of these texts have been quite influential for law reform in some countries around the world,37 but they have not yet led to a harmonized approach to secured transactions law in general, or, more specifically, to the use of IP rights as collateral.
3
IP Rights as Collateral: Transferability in General
The most fundamental question is whether the different IP rights existing in each jurisdiction are at all capable of being the subject-matter of a security interest. In other words, can a party with an interest in or ownership of the IP right create a consensual right38 to secure an obligation? If yes, which type (s) of security rights are available (e.g. security interest, pledge, mortgage, security ownership, charge, lien, etc.)? The following chapters try to summarize the national answers and to highlight some peculiarities. In general, they focus on rights in patents, design rights, trademarks, and copyright. National rights are contemplated under Sect. 3.1, while genuinely supranational rights such as the EU trademark and the Community design are covered in Sect. 3.2. The types of security rights available are set out in Sect. 4.
3.1
Collateralization of IP Rights Under National Law
Whether IP rights can be used as collateral depends first on their classification as transferable property. For the most part, IP rights, especially registered rights such as patents and trademarks, are considered to be transferable or assignable and therefore are able to be collateralized.
3.1.1 General Taxonomy of Property Law The possibility of using an IP right as collateral can flow from its general classification as personal, movable, or intangible property in the sense of the general principles of property law. Thus, in Belgium, IP rights are considered to be 37 See generally Macdonald (2009), p. 745. See in this volume MurguíaGoebel (2019), Sections 2.1 and 2.3; see also in this volume Shieh and Lee (2019), Section 5 (on a bill introducing the floating charge following the recommendations in the UNCITRAL texts). For Belgium, see Dirix (2015), p. 273. 38 Meaning a right created by way of a transaction between the creditor and the debtor, as opposed to a right which arises by operation of law without any agreement between the parties, such as a statutory lien or a privilege.
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“movable and intangible assets,” and as such are capable of being the subject of those security rights that exist for movable, intangible assets.39 In Brazil, the collateralization of IP rights flows from their characterization as “movable assets.”40 In South Africa, there is a debate about whether IP rights should be classified as moveable or immoveable property, but with respect to most IP rights, statutory law explicitly characterizes them as moveable property.41 The classification as possible collateral can also rest on more specific provisions that are to be found in secured transactions law. Thus, in the Common Law provinces of Canada, the decisive definition is contained in the Personal Property Security Acts (PPSAs) of each province, typically using expressions such as “intangibles, meaning personal property other than goods” or “personal property, including choses in action, that is not goods.”42 These provisions are interpreted as including the usual IP rights, such as patents, copyright, industrial designs, and trademarks, and might even extend to domain names, but do not include trade secrets, whose proprietary nature is doubted.43 Transferability or assignability might in some jurisdictions be accorded to IP rights even though they do not fit well into the general taxonomy of property law. A notable example is English law,44 where, generally speaking, property is divided into “choses in possession” and “choses in action,” and where it must therefore be discussed how IP rights can be accommodated within this dichotomy in view of the fact that the Patent Act explicitly states that patents are not choses in action. A pragmatic approach simply adds IP rights as a third category under the name of “other incorporeal property.” In any event, it is not subject to doubt that IP rights can be collateralized under English law.45 A second example for this kind of difficulty is Cypriot law, where the category of movables under which IP rights are to be subsumed seems to be unclear.46 A third example is Austrian law, where IP rights are difficult to classify within the dichotomy of “true property rights,” which as a matter of principle can only exist in tangible goods, and “relative rights” (claims). As the Austrian reporter points out, patents are seen as being equivalent to “true property rights” but, in contrast, trademarks are considered to be mere claims.47 39
Storme and Malekzadem (2019), Section 6, at fn. 13. Lahorgue (2019), Section 2. 41 See in this volume Karjiker (2019), Section 2. 42 See Howell (2019), Section 2.1. 43 See Howell (2019), Section 2.1. 44 For the following, see in this volume Bornheim (2019), Section 2.4.1. 45 See in this volume Bornheim (2019), Section 2.4.1. 46 See Argyropoulou et al. (2019), Section 2. 47 Dorfmayr (2019), Section 2.1. See also McGuire (2008), pp. 219 et seq. McGuire’s conclusion (at p. 222) is that “the determination of the legal nature of intellectual property rights according to the dichotomy ‘property’ or ‘right’ does not solve the problem of determining the proper transfer rules.” 40
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3.1.2 Specific Statutory Provisions Mostly, however, the transferability and suitability of IP rights to be used as collateral flows from specific statutory provisions, typically to be found in respective IPR acts. This is the case for example in Australia,48 Germany,49 France,50 the United States, South Africa,51 Mexico,52 Spain,53 Taiwan,54 Japan,55 Turkey,56 Greece,57 and Finland.58 In the Netherlands,59 the general rule on transferability in Article 3:83(1) Burgerlijk Wetboek (B.W.) is limited to “ownership rights, limited property rights and claims”; this means that IP rights are only transferable pursuant to Article 3:83(3) B.W. if the law specifically provides for it. Therefore, under Dutch law, only IP rights that have a statutory basis may be transferred. Those which are only recognized by courts, such as certain rights to publicity, cannot be subject to a proprietary transaction. 3.1.3
Interplay Between Secured Transactions Law and IP Law Ideally, statutory sources on secured transactions law and on IP rights should be in harmony concerning the possibilities and different ways of using IP rights as collateral. However, in some federal states such as the US and Canada, the existence of detailed and sophisticated rules in both areas of the law, which, however, are placed on different jurisdictional levels (i.e. state/provincial and federal) can create considerable legal uncertainties and give rise to litigation. The reports on Canadian law60 give a thorough insight into these complexities. At the other end of the spectrum, Australia has successfully avoided these difficulties by enacting the Personal Property Security Act (PPSA) at the federal level. 3.1.4 Preliminary Rights Transferability is not necessarily linked to the IP right having finally come into existence (e.g. through registration). In some instances, proprietary rights may already exist when 48
McCracken (2019), Section 3.1. See in this volume Brinkmann et al. (2019), Section 2. 50 See in this volume Séjean and Binctin (2019), Section 2.1 and the references to incorporeal intellectual property. 51 See in this volume Karjiker (2019), Section 2. In addition, South African law allows the common law “cession” of IP rights; see in this volume Karjiker (2019), Section 2. 52 See in this volume Murguía-Goebel (2019), Section 3.1. 53 See in this volume Heredia Cervantes (2019), Section 2. 54 See in this volume Shieh and Lee (2019), Section 2.1.1. 55 See in this volume Hara and Haga (2019), Section 3.1. 56 See in this volume Özsunay and Özsunay (2019), Section 1.2. 57 See in this volume Kallinikou and Koriatopoulou (2019), Section 2. 58 See in this volume Juutilainen (2019), Section 3. 59 For the following, see in this volume van Engelen (2019), Section 2.1. 60 See report on Howell (2019), after fn. 26; Charpentier (2019), after fn. 32 and after fn. 56. 49
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the process leading up to the registration of the IP right has not yet fully been completed. These preliminary stages may already carry considerable value and hence may be able to be used as collateral. For example, the German Patent Act, § 6, mentions the right to the patent and the right to have the patent granted as preliminary rights which exist at least once an application has been filed with the Patent Office. These preliminary rights are hence able to be used as collateral.61 In Australia, applications for the registration of a patent or trademark are not considered property under general principles, but in practice, they are nonetheless treated as such by parties to secured transactions.62 In contrast, legislation in Taiwan explicitly prohibits the use of “the right to apply for IP protection” as collateral, since it is not certain that the application will be successful.63 Japanese law distinguishes between different types of security rights: while a patent application may be the subject of a security assignment, using the creation of a pledge in such a way is legally prohibited.64
3.1.5
Exceptions to the General Transferability of IP Rights There are a number of notable exceptions to the general proposition that classic IP rights such as patents, trademarks, and copyright are transferable and capable of being collateralized: under German law, copyright cannot be transferred according to sec. 29 subsec. 2 German Copyright Act. The same is true for Austria (pursuant to Article 23 Austrian Copyright Act),65 the Czech Republic,66 and Croatia.67 With this rule, these jurisdictions are out on a limb compared to the other jurisdictions covered in this general report.68 However, there are still various ways to use copyright as the basis for 61 See in this volume Brinkmann et al. (2019), Section 3; Decker (2012), pp. 18 et seq. In the same vein, see in this volume Heredia Cervantes (2019), Section 2; Matanovac Vučković et al. (2019), Section 2.3. 62 McCracken (2019), Section 4. 63 See in this volume Shieh and Lee (2019), Section 2.1.2.1. 64 See in this volume Hara and Haga (2019), Section 3.1(1). 65 Dorfmayr (2019), Section 2.1. 66 See in this volume Koukal and Pullmannova (2019), Section 1.1, referring to Art. 26 Czech Copyright Act. 67 Matanovac Vučković et al. (2019), at fn. 58. 68 Copyright can be assigned as “personal or moveable property” under English law—see in this volume Bornheim (2019), Section 2.4.2. Under French law: Le droit d’auteur is subject to the general rules on proprietary security; see in this volume Séjean and Binctin (2019), Section 2.1. South Africa: The Copyright Act explicitly provides that copyright is transmissible as movable property; see in this volume Karjiker (2019), Section 2.4. Japan: see in this volume Hara and Haga (2019), Section 3.2. Finland: Copyright may theoretically be used as collateral, but since Finland does not have a register for copyright and yet nevertheless requires some sort of publicity (either through registration, dispossession, or notification) for a security right to be perfected, it is argued that, consequently, copyright cannot be used as collateral; see in this volume Juutilainen (2019), Section 4.3.
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secured financing: the claims (e.g. royalties) stemming from a licence can be subjected to a security assignment69; a security right can be created in the licence of the IP right70; or a security licence can be given to the lender, who will in turn sublicense the copyright back to the borrower—see Sect. 5 below for more detail.
the relevant Member State or to its conflicts rules is subject to debate.73 Another difficulty and possible source of legal uncertainty lies in the fact that the proprietor’s seat may change.74 Therefore, this conflicts solution is regarded as being less satisfactory in comparison with uniform European rules on the transfer and collateralization of EU trademarks (which, however, do not yet exist).75
3.2
3.2.2 Community Design Regulation The Community Design Regulation (CDR)76 follows two different concepts of design protection. First, a Community design might be filed and subsequently registered with the EUIPO (“registered Community design,” Art. 1 para 2 (b) CDR).77 In this case, an examination that confirms compliance with formal requirements (Art. 45 et seq. CDR) is followed by registration in the Community design register (Art. 48 CDR) and publication in the Community design bulletin (Art. 49 CDR). On the other hand, the Community Design Regulation accords limited protection to designs that are not registered with the EUIPO and are only made available to the public within the Community (“unregistered designs,” Art. 1 para 2 (a) and Art. 11 CDR).78 Registered Community designs can be transferred and collateralized; see Art. 27 ff. Community Design Regulation (CDR). Some general issues are regulated in the CDR itself, such as the possibility of transferring a registered Community design or of creating a security right over it. For issues that are not regulated in the CDR, Art. 29 CDR provides for the applicability of the national law of the Member State in which the holder of the Community design has his seat or domicile, or, failing this, an establishment. This conflicts rule is identical to Art. 19 EU Trade Mark Regulation, discussed above at the end of Sect. 3.2.1.
Transferability and Collateralization of IP Rights Under Uniform Supranational Law
The following chapter only covers genuinely uniform supranational IP rights, such as the EU trademark. It does not cover IP rights where only some aspects are unified or harmonized, such as the European patent or copyright under the Berne Convention.
3.2.1 EU Trade Mark Regulation The European Union Trade Mark Reg.71 in part provides for uniform rules on transferability and collateralization in its Arts. 19 ff. Following subsection 1 of Art. 20, an EU trademark can be transferred separately from any transfer of the undertaking, but under subsec. 2, a transfer of the whole of the undertaking will usually include the trademark if there is no agreement to the contrary. Subsection 3 requires the assignment of the trademark to be in writing, otherwise the transfer will be void. Finally, Art. 22(1) explicitly states that an EU trademark may be given as security, independently of the undertaking. Transfers of or security rights in trademarks shall be entered in the register and published pursuant to Art. 20(5) and Art. 22(2), respectively. Third-party effects depend on registration according to Art. 27. An application for an EU trademark can already be treated as transferable property and as collateral—see Art. 28. Obviously, these rules do not cover every aspect of a transfer or grant of a security right in an EU trademark. Hence, as a fallback rule, Art. 19 EU Trade Mark Reg. contains a conflicts rule providing for the application of the national law of the Member State in which the proprietor has his seat or domicile on the relevant date, or, if he has no seat, the national law of the Member State where he has an establishment.72 Whether this rule refers to the substantive law of 69
In this case, the grantor of the security right is the holder of the IP right and the licensor. 70 See in this volume Brinkmann et al. (2019), Section 3, and, from a comparative point of view, Koziol (2011), passim. In this case, the grantor of the security right is the licensee. 71 Regulation (EU) 2017/1001 of the European Parliament and of the Council of June 14, 2017 on the European Trade Mark (codification), OJ L 154, 16.6.2017, p. 1. 72 See Art. 19 EU Trade Mark Reg.: “Unless Articles 20 to 28 provide otherwise, an EU trade mark as an object of property shall be dealt with in its entirety, and for the whole area of the Union, as a national trade mark registered in the Member State in which, according to the Register:
(a) the proprietor has his seat or his domicile on the relevant date; (b) where point (a) does not apply, the proprietor has an establishment on the relevant date. 2. In cases which are not provided for by paragraph 1, the Member State referred to in that paragraph shall be the Member State in which the seat of the Office is situated. 3. If two or more persons are mentioned in the Register of EU trade marks as joint proprietors, paragraph 1 shall apply to the joint proprietor first mentioned; failing this, it shall apply to the subsequent joint proprietors in the order in which they are mentioned. Where paragraph 1 does not apply to any of the joint proprietors, paragraph 2 shall apply.” 73 See McGuire (2008), p. 230, in whose view the rule refers to the conflicts rules at the seat. 74 McGuire (2008), p. 230. 75 McGuire (2008), pp. 230 et seq. 76 Council Regulation (EC) No. 6/2002 of December 12, 2001 on Community Designs, OJ L 3, 5.1.2002, p. 1. 77 A registered Community design may also be obtained on the grounds of an international application subject to the rules of the Hague Agreement Concerning the International Deposit of Industrial Designs, which has not been ratified by Austria, but has been ratified by the European Union; see Horn and Grünwald (2015), p. 187. 78 Dorfmayr (2019), after fn. 26.
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Given the fact that both genuinely supranational IP regulations fail to provide substantive rules on the kinds of security rights available and on the creation and perfection of these rights, instead merely calling for the application of the national law at the holder’s seat, the discussion in Sect. 4 and following will only give an overview of national secured transactions law as relating to national IP rights. Unless stated otherwise, this information also applies to European Union IP rights.
4
IP Rights as Collateral: Which Security Rights Are Available?
As stated earlier, the answer to the question which types of security interests can be taken in IP rights mainly depends on secured transactions law, which is not unified or harmonized internationally and which in most cases is not specially designed to cover IP rights. While some jurisdictions apply the rules relating to security rights over tangibles, others follow the rules on security over intangibles in general or on security over claims. A third group of states has specific provisions on security interests in IP rights in some or all of the states’ statutes on general IP law (e.g. England and Wales).79 However, the main difference lies between those jurisdictions that are based on a uniform, functional approach and employ notice filing as the most important method of perfection (Art. 9 UCC-type secured transactions law, such as in—obviously—the United States of America, Canada, and Australia), and those jurisdictions that do not follow a functional and uniform approach, but instead know different types of security rights, some of which are based on the model of a limited real right (i.e. pledge, charge, and mortgage) and some of which are based on ownership (i.e. security ownership, security assignment, and retention of title). Under the second, non-functional approach, the classification of different types of collateral is typically of greater importance when it comes to the possibility of creating a security right than it is under the functional approach.
4.1
Jurisdictions with a Functional Approach to Security Rights
In the US, there is only one type of security right available: the “security interest” as defined in state law enacting Art. 9 UCC § 1-201(b)(35). The definition is functional and covers all interests in any personal property “that secures payment or performance of an obligation,” regardless of its form. A growing number of jurisdictions around the world 79
See in this volume Bornheim (2019), Section 2.4.2.
have shaped their secured transactions law along the lines of the American model. In the course of the 1990s, the Common Law provinces and territories of Canada all enacted their PPSAs, modelled after Art. 9 UCC.80 The respective definitions of “intangibles” or “personal property” that can become the subject of a functionally defined “security interest” all include IP rights such as patents, copyright, industrial designs, trademarks, etc.81 The Australian PPSA 2009 likewise follows a functional approach and defines “security interest” as “an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation”. Therefore, any property interest having a security function is reclassified as an “in substance security interest,” regardless of whether it is treated as a charge, mortgage, conditional sale, or assignment under general law.82 Belgium has only recently seen a major reform of its secured transaction law (i.e. the Pledge Act, in force since January 1, 2018). It has been inspired by the UNCITRAL Legislative Guide on Secured Transactions and by Book IX of the DCFR, which are in turn both basically modelled on Art. 9 UCC. Yet the functional approach as pursued by the Belgian legislator is somewhat attenuated.83 Retention of title is still kept as a separate category, partly following its own rules. Likewise, the system of so-called “privileges” (a kind of statutory lien) has been retained. Therefore, there are still a variety of different security rights, each following its own rules (e.g. retention of title, termination with proprietary effect, seller’s lien, and fiduciary transfer).84 Security rights in IP rights, which were difficult to create under the old law, have now received a more favourable legal basis.
4.2
Jurisdictions Without a Functional Approach to Security Rights
Within this group, a further distinction can be made between jurisdictions that have recently undergone a major reform of secured transactions law (Sect. 4.2.1) and those that have not (Sect. 4.2.2).
4.2.1
Modernized Systems
80 See Howell (2019), at fn. 17; in Québec, the relevant provisions are to be found in the Civil Code. They are likewise inspired by Art. 9 UCC; see Charpentier (2019), after fn. 5. 81 Howell (2019), at fn. 19. 82 For details, see McCracken (2019), Section 3.2. et seq. 83 The Belgian report itself calls the new system “functional”—see Storme and Malekzadem (2019), at para 6—and so this characterization is followed here. 84 See Storme and Malekzadem (2019), para 7 et seq.
Security Rights in Intellectual Property
French law regards IP rights as intangibles (bien incorporels), but due to the fact that the Code civil only contains specific provisions on charges over claims (créances), charges over IP rights are treated as charges over tangibles.85 Since the Code de la propriéte intellectuelle declares copyright, designs, trademarks, etc. to be transferrable (transmissible), these rights are also regarded as being transferrable by way of a pledge or charge (nantissement). In addition, full ownership of an IP right can be used as security if it is either retained (réserve de propriété) or transferred as a fiduciary security (fiducie-sûreté). Thus, the full range of security devices created or reformed through the new French secured transactions laws of 2006 and 2009 is also available for IP rights. The Netherlands stands somewhat in between the groups under Sects. 4.1 and 4.2, since it has not opted for a functional approach in its general secured transactions law, but, due to the fact that Dutch courts have denied the possibility of mortgaging IP rights and due to the abolition of the security transfer of ownership in the 1992 Dutch Civil Code (Burgerlik Wetboek, B.W.), the only security right available for IP rights is in fact the pledge (Art. 3:227 B.W.).86 Thus, with respect to security rights in IP, Dutch law can be described as following at least a unitary approach. Mexico underwent a series of reforms between 2000 and 2014 that left the country with one of the most modern secured transactions registry systems. However, the substantive law has not developed into a similarly functional system. This is partly because Mexico is a federation in which large areas of private law are left to the legislative power of the 32 individual states.87 In addition, although it has adopted a notice filing system, Mexico has not opted for a functional and unitary approach; instead, it has retained the distinction between commercial pledges (possessory and non-possessory) and security trusts, with each following its own rules.88 IP rights can be the subject of either a non-possessory pledge or a security trust. In the Czech Republic, security rights over IP rights are regulated by the law on security rights in movables, which forms part of the new Civil Code that entered into force on January 1, 2014. The Civil Code has not adopted a functional/unitary approach, and it adheres to the traditional dichotomy between pledges (liens) and security transfers. In this respect, it resembles the traditional systems; however, with respect to enforcement, it is modern insofar as it allows out-of-court enforcement through the sale of the collateral.89
85
See in this volume Séjean and Binctin (2019), Section 2.1. 86 See in this volume van Engelen (2019), Section 2.2.1. 87 See in this volume Murguía-Goebel (2019), Section 2. 88 See in this volume Murguía-Goebel (2019), Section 3.1. 89 See in this volume Koukal and Pullmannova (2019), at fn. 62.
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Croatian law has undergone various reforms90 that have left it with a functional91 but non-unitary system. With the exception of copyright, IP rights can be encumbered either through a charge or by way of a security assignment; these two are treated equally as a matter of principle.
4.2.2 Traditional Systems German secured transactions law has mostly been created through court practice and academic literature. The Civil Code and the Insolvency Act only provide for a handful of rather general rules, none of which are specifically adapted to creating security rights in IP. The pledge is the only security right in movable (tangible and intangible) property that the German Civil Code regulates in detail. However, due to the fact that a pledge in corporeal movables necessitates a transfer of possession that cannot be replaced by mere constructive possession, fiduciary ownership and retention of title are used in practice. IP rights are regarded as intangibles, and thus they can be assigned as security or pledged. With general intangibles such as claims, the pledge is hardly used due to the requirement of giving notice to the account debtor. The security assignment, for which no notice is necessary, is preferred in practice. However, with respect to IP rights, it seems that both the pledge and the security assignment are used. Usufruct, which otherwise only plays a minor role in secured transactions law, is also an option with respect to IP rights. Japanese law resembles German law in that case law has come to recognize the security assignment as a second proprietary security right in addition to the pledge, which is regulated by the Civil Code.92 In Austria,93 IP rights that are transferable (which is the case for all IP rights except copyright) can be pledged or be the subject of a security transfer of ownership or a security assignment, depending on whether they are regarded as tangible or intangible movable property. Since both transactions follow the same rules, the distinction is of merely theoretical interest. In Taiwan, only the pledge (which is regulated by the Civil Code) is available.94 It is created through a simple agreement between the parties, without any further formal requirements. For its effectiveness against third parties, it needs to be registered in the relevant IP registries. The date of registration will also determine priority.
90 See the critical appraisal by Matanovac Vučković et al. (2019), at fn. 31, with further references. 91 Matanovac Vučković et al. (2019), at fn. 56. 92 See in this volume Hara and Haga (2019), Section 3.1(2). 93 See Dorfmayr (2019), Section 2.2.2. 94 See in this volume Shieh and Lee (2019), Section 3.1.1.
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In Brazil, the parties have the choice between a pledge, a fiduciary transfer, and a usufruct, each of which follow its own specific rules.95
4.3
Jurisdictions with Specific Statutory Provisions for Security Over IP Rights
Under English law, IP rights are considered to be pure intangibles; thus, only non-possessory security rights such as charges or mortgages can exist. While the Copyright, Designs and Patents Act 1988 (UK) declares such rights to be assignable, they are also regarded as “mortgageable by way of assignment.”96 However, there are also a number of statutory provisions which specifically mention the possibility of charging or mortgaging IP rights, such as the Trade Marks Act and the CDPA 1988 in relation to registered designs.97 Cypriot law resembles English law in that its enactments on IP law recognize the transferability of IP rights and that, therefore, even if their status within the different categories of property law is somewhat unclear, IP rights can in fact be used as collateral. Possible security rights include the Common Law lien (a right to retain possession), the security assignment of the IP right (which seems to be theoretically possible but is not practised because, inter alia, the Cypriot IP registries do not allow for the registration of security rights), and the charge (which in practice mostly takes the form of a floating charge). A pledge can only be constituted by granting possession, which, under Cypriot law, cannot (like in many other jurisdictions) be substituted by registration. As a result, the pledge is not a suitable security right for IP rights.98 Italian law provides an interesting example of a jurisdiction where security rights in registered IP rights are specifically provided for—see Art. 140 Italian Industrial Property Code (IIPC) (Legislative Decree No. 30 of 2005), which states that “security rights over industrial property titles may be created only as collateral for money credits.”99 However, since the rule does not specify the kind of security right that can be created (i.e. whether it is a pledge pursuant to Art. 2784 ff. Codice civile or a mortgage under Art. 2808 ff. Codice civile), it is debated which kind of security right is meant in Art. 140 IIPC.100 The question has not yet been settled by the courts as IP rights are only rarely used as 95
Lahorgue (2019), Sections 2 and 3.1. See in this volume Bornheim (2019), Section 2.4.2. 97 See in this volume Bornheim (2019), Section 2.4.2. 98 Argyropoulou et al. (2019) (after fn. 23) gives a detailed account of how this problem can be circumvented through the creation of a special purpose vehicle and a pledge of the shares. 99 See in this volume Ricolfi (2019), fn. 4, with translation into English. 100 For the detailed analysis, see in this volume Ricolfi (2019), Section 2.1. 96
security in practice outside of the special field of movie financing. Moreover, Art. 140 IIPC only relates to registered IP rights. Unregistered copyright, which can be assigned under Italian law, can nevertheless not be transferred by way of security, since this kind of transaction is generally prohibited by Art. 2744 Codice civile (the ban on the so-called pactum commissorium). Therefore, one must resort to the pledge of rights pursuant to Art. 2806 Codice civile. However, pledges of unregistered copyright or of other unregistered rights such as trademarks and designs can only take effect inter partes since no mode of perfection is available. As the Italian reporter notes, it is therefore unsurprising that “secured financing based on specific copyright protected works has not taken off in this country.” South African law is particularly complex, as there are several ways to create security rights in IP. In the first way, the respective IP statutes (relating to trademarks, patents, and designs) provide for the “hypothecation” of these rights as the result of a “pledge” in which physical transfer of possession is replaced by registration. A second manner involves a possible security cession of the IP right, which has the advantage of not requiring registration. A third method is the creation of a “notarial bond,” which does have to be registered and can be created either over specific assets (a “special bond”) or over all of the movable property of the debtor (a “general bond”).101 In Spain, the relevant IP acts explicitly state that IP rights can be given as security. However, according to the predominant view, the parties can nevertheless only create a chattel mortgage (hipoteca mobiliaria).102 In Estonia, the Law of Property Act explicitly states that all registered IP rights (i.e. patents, trademarks, designs, etc.) can be subjected to a registered security right.103 As an alternative, the respective IP enactments also allow for the security transfer of these rights.104
5
Licences and Royalties as Collateral
First, one needs to distinguish between the use of licences and royalties as collateral on the one hand and the use of a licence as a substitute for a security right (strictly speaking) on the other. In the latter scenario, instead of granting a security right in the IP right, the grantor/holder of the IP right might grant the secured party a “security licence,” which gives the secured party the ability to use the IP right 101 Karjiker (2019), under Section 3 contains a detailed account of all three kinds of security rights in all types of IP rights that can exist under South African law. 102 See in this volume Heredia Cervantes (2019), Section 2. 103 Lepik (2019), at fn. 7. 104 See in this volume Lepik (2019), Section 2.2.
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only in case of default. In order to enable the grantor to continue to exploit the IP right before default, the secured party will sublicense his rights back to the grantor. This scheme is primarily used where IP rights cannot be transferred or collateralized, as is the case in Germany and Austria in relation to copyright,105 but it is also used elsewhere, such as in Cyprus.106 However, licences can also be used as collateral by the licensee.107 There are two main issues connected to this kind of secured transaction. The first involves the fact that the licence will be created through a contract between the holder of the IP right (the licensor) and the licensee, who receives a right to use/exploit the IP right. The holder of the IP right is the debtor of the licensee, who in turn becomes the grantor of the security right. Jurisdictions may require the consent of the licensor (as a third-party debtor) for the transfer or creation of a security right in the licence.108 Also, the terms of the licensing agreement might restrict or even prohibit the (security) transfer or creation of a security right in the licence.109 The second issue relates to the question if and under what conditions a licence or certain kind of licence can be classified as a proprietary right so that, in terms of secured transactions law, it should be treated as intangible property rather than as a mere claim or obligatory right. In Canada, the proprietary nature of a licence was recognized in the famous Contech case, which opened up the possibility of characterizing this security right as a Purchase Money Security Interest (PMSI), giving it so-called “super-priority.”110 In Germany, there is a (mainly academic) debate whether exclusive licences amount to a right in rem.111 Royalties stemming from a licence are usually claims for the payment of money and may thus be used as collateral in the same way as other receivables.112 The French report stresses that creating a security right in the income generated 105 See in this volume Brinkmann et al. (2019), Section 3.5.1; Koukal and Pullmannova (2019), Section 2; Matanovac Vučković et al. (2019), at fn. 59 et seq. Furthermore, see Koziol (2011), passim (covering Germany, Austria, and Japan). 106 See Argyropoulou et al. (2019), text before fn. 33. 107 For example, see in this volume Heredia Cervantes (2019), Section 2; Hara and Haga (2019), Section 3.1(1); Dincă and Rizoiu (2019), Section 2. 108 See in this volume Brinkmann et al. (2019), fn. 235 with further references; Dorfmayr (2019), Section 2.2.5 with further references. 109 See in this volume Brinkmann et al. (2019), Section 2.5. 110 Contech Enterprises, Inc. v. Vegherb, LLC (2015) (Contech), see Howell (2019), at fn. 23. 111 See in this volume Brinkmann et al. (2019), Section 2.5; Picht (2018), pp. 158 et seq. 112 See Dorfmayr (2019), Sections 2.4 and 3.2.7; Storme and Malekzadem (2019), Section 23; see in this volume van Engelen (2019), Section 2.3; see in this volume Ricolfi (2019), Section 3.1.1; McCracken (2019), Section 4.1; see in this volume Hara and Haga (2019), Section 3.1.(1); Matanovac Vučković et al. (2019) , text before fn. 64.
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by the exploitation of IP rights might be economically more attractive and legally more common than creating a security right in the IP right itself.113 In Belgium, the creation and perfection of a security right in royalties is possible without any registration: “control” of the grantee is sufficient and already flows from the grantee’s entitlement to notify the debtor.114 In systems where the security right is automatically extended to the proceeds of the collateral, conflicts of priority can arise between a security right in royalties and a security right in the respective IP right from which the royalties flow as “proceeds.” Belgian law solves this conflict by referring to the time at which the respective rights were created.115
6
Creation (“Attachment”), Perfection, and Priority, Including Requirements as to Form, Registration, and Publicity
With respect to creation, perfection, and priority, again, a main dividing line lies between jurisdictions that follow a functional and unitary approach (e.g. the US, Canada, and Australia) and jurisdictions where various or multiple types of security rights exist, with each type following its own rules for creation and perfection. In the first group, creation (or “attachment” in the terminology of Art. 9 UCC) typically only requires a written document, whereas perfection usually requires registration or notice filing. Priority is typically determined by the “first-tofile” rule, with tailored exceptions, such as those for PMSIs (Purchase Money Security Interests). In the second, non-functional/non-unitary group, rules on creation, perfection, and priority will typically vary according to the type of security right chosen by the parties. After the end of the Soviet regime, many of the Central and Eastern European states saw major reforms in their secured transactions laws (see the reports on Estonia, Croatia, and Romania), which were often inspired by the Model Law of the European Bank for Reconstruction and Development116 and the UNCITRAL Legislative Guide on Secured Transactions. Yet although both of these models advocate a functional approach, some legislators opted for a mixture between traditional and modern (registrable) security rights, creating, as the reporters for Croatia state, a “complex system of security interests as a consequence of [. . .] historical development and of rapidly and erratically introducing a myriad of novel property interests into an emerging system of property law.”117 113 See in this volume Séjean and Binctin (2019), Section 2.5. See also Charpentier (2019), at fn. 45. 114 Storme and Malekzadem (2019), Section 23 at the end. 115 See Storme and Malekzadem (2019), Section 28. 116 Cf. Dahan and Simpson (2004), pp. 98 et seq. 117 See Matanovac Vučković et al. (2019), at fn. 31.
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The following summary also takes note of the fact that not all jurisdictions distinguish between “creation” and “perfection.” Most of them, however, differentiate between effectiveness inter partes and effectiveness erga omnes. With respect to priority in insolvency, most reports focus on priority rules that are specific to security rights. However, it must be kept in mind that where the realization of the security right takes place within the insolvency proceedings (which is the rule in most jurisdictions), a number of specific groups of insolvency creditors will take precedence over any secured creditor.118 The following paragraphs concern what in English terminology is called a “fixed charge,” i.e. a security right relating to specific assets. “All-asset” security rights are looked at separately in Sect. 7.
6.1
Functional Approach
6.1.1 Functional and Unitary Approach The main issue with the modern Art. 9 UCC-type systems lies in the fact that notice will have to be filed under secured transactions law in order to perfect the security interest, but at the same time, the transaction might also need to be registered in an IP register, since it involves an IP right. Where the two bodies of law are placed on different jurisdictional levels (i.e. state/provincial and federal), transaction costs will rise, especially when the different bodies of law are not (sufficiently) coordinated. Parties might be forced to use what the Canadian report terms the “belts and suspenders” approach: “Where feasible, parties are advised to register their security interests on both the federal and the provincial registers in all the relevant jurisdictions.”119 In the United States, an Art. 9 UCC single functional security interest is available for all IP rights. Creation presupposes that the grantor has the power to dispose of the IP right, and it requires a written document. The main issue under US law concerns the question whether registration of the security right in the federal IP registers supplants filing under secured transactions law, which is state law. As a matter of principle, IP law is federal and takes precedence over state law. According to statutory IP law (which is older than Art. 9 UCC), “assignment” includes the granting of security rights, mortgages, etc. Therefore, security rights 118 See in this volume, for example, Murguía-Goebel (2019), Section 3.4 (the detailed list). 119 See Ballagh M (2017) Secured Financing with Intellectual Property: Managing Uncertainties, www.ballaghedward.ca (Law Office, Hamilton, Ont.), noting: “The standard legal advice is sometimes called the ‘belts and suspenders’ approach. Where feasible, parties are advised to register their security interests on both the federal and the provincial registers in all the relevant jurisdictions [i.e. provinces],” cited Howell (2019), Section 2.2.
can be entered in the IP registers. As for the question whether registration in the IP registers “supplants” filing under the UCC, there is neither a statutory provision nor a Supreme Court decision on this matter, so this area is surprisingly unclear. For security rights over patents and trademarks, filing is held to be sufficient, but registration with the Patent and Trademark Office (PTO) is often also undertaken as a precautionary measure. In contrast, federal registration with the Copyright Office (CO) pre-empts the need to file under Art. 9 UCC; however, it seems to be good practice to do so. Of course, with unregistered copyright, there can be no pre-emption of filing under the Art. 9 UCC system, so filing with the UCC filing office suffices. But since filing against an unregistered copyright does not provide security in case the copyright holder does in fact register his copyright (and the security interest therein) with the CO, many lenders will request that borrowers register their copyright with the CO before advancing credit on this basis. Under US law, priority in relation to a subsequent lien creditor and trustee in bankruptcy follows the first-to-file rule. With respect to priority in relation to a buyer or transferee of an IP right, the problem lies in the fact that registration with the PTO, although not necessary for perfection, might be necessary to prevent bona fide acquisition free of encumbrance by a buyer of the IP right. With respect to copyright, the rules pertaining to registration in the copyright register may take precedence over Art. 9 UCC. Therefore, the transfer or assignment of a copyright can be registered within one month of its creation and can thus retroactively take priority over a later security right, even if the earlier right was not visible in the register. The relationship between IP rights legislation and registration at the federal level on the one hand and the PPSAs at the provincial level on the other is also a major issue in the Canadian Common Law provinces and in Québec. Federal IP law at least partly regulates the assignment and licensing of IP rights, but at the same time, the functional definition of security rights under the PPSAs and the rules on hypothecs in the Civil Code of Québec lead to the concurrent application of provincial secured transactions laws. As the reporters for Common Law Canada and Québec show in great detail, the exact delimitation of the applicability of federal and provincial legislation in this area is highly disputed and still awaits an appellate analysis.120 Generally speaking, this issue is relevant for the assignment of IP rights and for licences, whereas charges and mortgages are outside the context of federal legislation. Where federal IP rights legislation comes into play, it seems that ownership and the power of the grantor to dispose are dependent upon the entry of the grantor’s interest in the IP right in the national IP register, whereas perfection as a requirement for priority under 120
Howell (2019), Section 2.3. at fn. 33 ff; Charpentier (2019), at fn. 53 et seq.
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provincial secured transactions legislation is determined by the first-to-file rule.121 By enacting the PPSA as a federal piece of legislation, Australia has successfully avoided the abovementioned difficulties. In addition, Australian legislation explicitly addresses the priority issue between legislation relating to IP and enactments on secured transactions. As the reporter states, although “it is possible for security rights in both patents and trade marks to be registered, both the Patents Act and the Trade Marks Act expressly state that the recording in the relevant register of a PPSA security interest does not affect a dealing with the patent or registered trade mark. They also make clear that the registers do not provide prima facie evidence of security interests. These provisions reflect a legislative intention that the PPSA is the sole governing legislation for security interests and, in particular, for resolving priority disputes.”122 However, the filing of notices of secured transactions over IP rights still seems to involve some complexities connected to the different categories of collateral under which IP rights might be subsumed.123 In addition, and quite interestingly, the Australian PPSA not only distinguishes between “attachment” and “perfection,” but also uses “enforceability against third parties” as a separate category that is a step between attachment and perfection. “Attachment” requires the power to dispose and the giving of value, but does not necessarily require a written security agreement (however, written form may be required by IP legislation).124 “Enforceability against third parties” is regularly achieved through a written security agreement, whereas for perfection, the effective registration of a financing statement in the Personal Property Securities Register is needed. Only perfection gives the security right its maximal effectiveness, which includes effects in relation to the trustee in bankruptcy. As to the issue of priority, Australia follows the usual rule of notice filing systems; thus, as a general default rule (i.e. subject to subordination agreements between the parties), it is the time of perfection that determines the order of priority between two perfected security interests and between a perfected interest and the trustee in bankruptcy.125
modern systems in the EU.126 With regard to the technique of filing, the Belgian reform has been influenced by Book IX of the Draft Common Frame of Reference and by the UNCITRAL Legislative Guide on Secured Transaction, which in turn have drawn inspiration from Art. 9 UCC.127 Nevertheless, Belgian law still distinguishes between retained rights, granted rights, and privileges by operation of law and is characterized here as a functional but non-unitary system. Also, Belgium has opted for a system of transaction filing rather than notice fling.128 Article 7 of the new Belgian Pledge Act specifically mentions IP rights as potential collateral but gives precedence to specific statutes relating to IP rights. Thus, it is doubtful whether the IP-specific requirements concerning the form of security agreements prevail over the more elaborate requirements concerning the form and content of security arrangements in the new Pledge Act.129 Another source of doubt and difficulties lies in the fact that the Belgian legislator has failed to specify whether a pledge of IP rights still needs to be registered in the IP-specific registers for thirdparty effectiveness, or whether filing in the new general pledge register (available online) will suffice.130 This unresolved question also plays a role with regard to priority, especially vis-à-vis a bona fide purchaser.131 Finnish secured transactions law can also be categorized as a functional but non-unitary system, providing for not only pledges but also security transfers and security assignments of IP rights in the relevant IP enactments. A written agreement and an entry in the relevant IP registry are generally required, yet this is problematic for copyright since no such registry exists.132 Priority is, as a matter of principle, determined by the date of creation, not the date of registration; however, a second pledgee or transferee who in good faith registered his security right before the first pledgee or transferee will take priority.133 Croatia has also adopted a functional134 but non-unitary system. Although it formally distinguishes between charges and security assignments,135 the rules relating to charges also apply to security assignments.136 Following the general principles of property law, Croatian law does not differentiate
6.1.2 Functional But Non-unitary Approach Belgian secured transactions law has just undergone a thorough reform and can today be regarded as one of the most
126
121
Howell (2019), Section 4. See McCracken (2019), Section 5.4. 123 McCracken (2019), Section 4.1. et seq. 124 See in greater detail McCracken (2019), Section 5.1. 125 For exceptions (e.g. for PMSIs), see McCracken (2019), Section 6.1.2. et seq.; for the circumstances in which the buyer of an IP right takes it free of encumbrance, see McCracken (2019), Section 6.2. et seq. 122
The new Pledge Act came into force on January 1, 2018. On this Act, see Dirix (2015) and the bibliography in Storme and Malekzadem (2019). 127 See Dirix (2015), p. 273. 128 Storme and Malekzadem (2019), para 17. 129 Storme and Malekzadem(2019), para 16. 130 See in detail Storme and Malekzadem (2019), para 19. 131 See in detail Storme and Malekzadem (2019), para 27. 132 See in this volume Juutilainen (2019), Section 4.3. 133 See in this volume Juutilainen (2019), Section 5. 134 Matanovac Vučković et al. (2019), at fn. 56. 135 Matanovac Vučković et al. (2019), at fn. 32. 136 Matanovac Vučković et al. (2019), at fn. 56.
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between creation and perfection.137 Basically, the security right is created by a notarial deed and needs to be registered in the relevant IP register in order to attach (if the collateral is a registered IP right).138 As a matter of principle, the date of registration decides priority issues.139 Similarly, Romanian law subjects all security rights that can be created over IP rights to the rules on “movable hypothecs,”140 but has retained various aspects based on ownership, such as conditional sale and retention of title.141 However, as far as IP rights are concerned, only the movable hypothec is available. Romanian law has adopted the distinction between attachment and perfection and has also introduced a notice filing system,142 including uniform rules on priority.143 Unfortunately, it has also imported the dichotomy between secured transactions registries and IP registries, as well as the unresolved question whether registration in the former suffices with respect to perfecting security rights in IP.144
6.2
Non-functional Approach
The following section distinguishes between those non-functional jurisdictions that have seen at least some reform of secured transactions law in recent decades and those where the rules of the civil codes, dating back to the eighteenth and nineteenth centuries, are still more or less the foundation of modern secured transactions law.
6.2.1 Modernized Systems French secured transactions law underwent two major reforms, one in 2006 and one in 2009, through which fiduciary or security ownership (fiducie-sûreté) was introduced in French law for the first time. This reform has added some general security rights, such as the gage commun and the fiducie-sûreté, to the existing range; however, it did so without abandoning the pre-existing range of very specific security rights.145 Two of these are of special importance in the present context: the nantissement de logiciel (software) and the nantissement cinématographique, which has existed since 1944146 and is now regulated by the Code du cinéma et de l’image animée of 2009.147 137
Matanovac Vučković et al. (2019), Section 3.2. See Matanovac Vučković et al. (2019), after fn. 68 for details. 139 See Matanovac Vučković et al. (2019), after fn. 88. 140 See in this volume Dincă and Rizoiu (2019), Section 2. 141 See in this volume Dincă and Rizoiu (2019), Section 2. 142 See in this volume Dincă and Rizoiu (2019), Section 3.3. 143 See in this volume Dincă and Rizoiu (2019), Section 4. 144 See in detail in this volume Dincă and Rizoiu (2019), Section 3.3. 145 For a general appraisal of the French reform, see Leavy (2007), pp. 101 et seq. 146 See Loi de 22.2.1944; cf. Fargeaud (1963), pp. 71 et seq. 147 See in this volume Séjean and Binctin (2019), Section 3.2.2. 138
French law does not use the terminology “creation” and “perfection,” but distinguishes between effectiveness entre les parties and opposabilité aux tiers. A mere written agreement is sufficient for effectiveness between the parties. An exception is the fiducie-sûreté, where registration in the registre national de fiducie (which is not open to the public) is a condition for its validity.148 Otherwise, registration is only a condition for the effectiveness of the security interest against third parties. Registration needs to be effected in the various IP registers.149 In the case of a nantissement cinématographique, the security right has to be entered into the Registre public du cinéma et de l’audiovisuel.150 Dutch law does not distinguish between creation and perfection. A pledge (which is the only available security right for IP rights) is created by “the mere execution of the deed of pledge,” which is a written document that can be in electronic form and does not require the involvement of notaries. Registration of the pledge in the relevant IP register is necessary, but is also sufficient for third-party effectiveness.151 In Mexico, the parties may choose between pledging the debtor’s property via a non-possessory pledge, which can attach all categories of movable property (present and future), including intangibles, or a security trust, which transfers title to the trustee/creditor and comes with a more efficient foreclosure procedure.152 Both security rights must be laid down in a written contract (if the debt surpasses a certain amount, a notarial deed will also be necessary) and must be registered both in the IP registry and in the secured transactions registry—but it should be noted that the IP registry will make an automatic entry in the secured transactions registry.153 As a general rule, it is the time of registration which determines priority. As stated earlier, many Eastern European states have seen some reform in their secured transactions laws in recent decades, but these have had very different outcomes. Some countries have retained a non-unitary, non-functional approach. In Estonia, for example, secured transactions involving IP rights are partly regulated by general property law, partly by IP law. As the Estonian report sets out in great detail,154 the requirements concerning form and registration depend first on the security right chosen (i.e. pledge or security transfer) and second on the type of IP right. Generally speaking, Estonian law requires a written security agreement and registration in the relevant IP registry. 148
See in this volume Séjean and Binctin (2019), Section 3.2.2.1. See the details in this volume Séjean and Binctin (2019), Section 3.2.2. 150 See in this volume Séjean and Binctin (2019), Section 3.2.2.3. 151 See in this volume van Engelen (2019), Sections 3.1 and 3.2. 152 See in this volume Murguía-Goebel (2019), Section 3.1. 153 See in this volume Murguía-Goebel (2019), Section 3.1 at the end. 154 See in this volume Lepik (2019), Section 3. 149
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6.2.2 Traditional Systems Under German law, generally speaking, no separate category of “perfection” exists. Once a right in rem is effectively created, it is also effective erga omnes.155 For IP rights of national origin, nothing more than an agreement between the parties is needed in order to assign an IP right by way of security or to pledge it. A written document is only needed as far as European law applies (i.e. for an EU trademark or Community design). In practice, however, security agreements are always in writing.156 A registration of the pledge is possible (in the relevant IP registers), but it does not have any effect with respect to German IP rights.157 With respect to EU rights, registration protects the pledgee or assignee against third parties, who might otherwise take the IP right free from encumbrance.158 The acquisition of a security right in an IP right under German national law always requires the power of disposal on the side of the grantor. But there is some academic debate around the possibility of the bona fide acquisition of security rights in European IP rights from a registered non-holder.159 Priority between different holders of proprietary rights is (as is normal in German secured transactions law) determined by the time of creation through agreement, with the consequence that the order of priority is not visible for third parties—this is, of course, a major shortcoming of German secured transactions law.160 The use of ownership in lieu of a security right (strictly speaking) does not allow for the creation of junior rights in the same property. It also gives rise to concerns about over-collateralization, which the German Supreme Court has solved by giving the secured creditor a duty to release collateral when certain limits have been reached.161 Like German law, Austrian law does not distinguish between creation and perfection; however, in contrast to German law, Austrian law always requires a valid underlying obligation (titulus) for the valid transfer or creation of a proprietary right. In addition, effective creation requires a modus—an “appropriate act of publicity.” Pledges and security transfers of patents, utility models, and protected designs have to be entered in the relevant registers, and this entry in turn requires a notarized deed.162 For trademarks, there is some debate as to whether registration is an absolute must, or whether this can be replaced by a so-called “book entry”
(Buchvermerk).163 The underlying assumption of a distinction between creation and perfection in the European IP regulations creates some tensions with Austrian domestic law.164 Also, in Greece, no distinction is made between creation and perfection. Both require an agreement which must either be in notarized form or be contained in a written document with an officially certified date. For its effectiveness inter partes as well as erga omnes, the security right must also be entered in the relevant IP registry.165 The same is true in the Czech Republic: pledges and security transfers (which are infrequently used with respect to IP rights) both have to be entered in the relevant IP registries to gain effectiveness inter partes as well as erga omnes. However, with respect to trademarks that are pledged as part of a business enterprise, the law provides that registration is to be made in the pledge registry instead of the trademark registry.166 In any event, registration leads to constructive notice of the security right. Interestingly, as a default rule, the grantor remains entitled to transfer the collateral, but parties to the security agreement can exclude the grantor and this agreement can also be registered.167 In Japan, there is a marked difference between the security assignment, which was developed by case law, and the pledge, which is regulated by statute. The difference is especially prominent in enforcement, where the parties to a security assignment are free to agree upon the enforcement method, but the pledgee is bound to follow the statutory rules and sell the IP right by public auction. With respect to creation and perfection, both security assignments and pledges of IP rights need to be registered in the relevant IP registries (only). The date of registration determines priority. The law in England and Wales (which so far has not adopted a unitary, functional system) has in fact adopted the distinction between attachment and perfection, at least in the description of secured transactions law. As the English reporter notes, attachment gives rise to more than a merely obligatory relationship between the debtor and the creditor; thus, an unperfected security interest would still be a proprietary right in relation to an unsecured creditor outside insolvency.168 Attachment presupposes ownership of or legal title to the collateral; a legal mortgage also needs to be in writing.169 It is a special feature of English law that where
155
163
See in this volume Brinkmann et al. (2019), fn. 113. See in this volume Brinkmann et al. (2019), Section 3.1.1. 157 See in this volume Brinkmann et al. (2019), Section 3.1.1. 158 See in this volume Brinkmann et al. (2019), Section 3.1.1. 159 See in this volume Brinkmann et al. (2019), fn. 160, with further references. 160 Kieninger (2008), p. 182. 161 See in greater detail in this volume Brinkmann et al. (2019), Section 3.2.1. 162 Dorfmayr (2019), Section 3.2.1. 156
Dorfmayr (2019), Section 3.2.2. Dorfmayr (2019), Section 3.2.4. 165 See in this volume Kallinikou and Koriatopoulou (2019), Section 3. 166 The reporters from the Czech Republic note that this rule is “without any substantial justification or proper reasoning”; see in this volume Koukal and Pullmannova (2019), Section 4. 167 See in this volume Koukal and Pullmannova (2019), Section 2. 168 See in this volume Bornheim (2019), Section 3.1.1.3. 169 For a detailed account of English IP legislation on this point, see in this volume Bornheim (2019), Section 3.2.1. 164
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the requirements of a common law mortgage are not met, an equitable interest may still be created.170 The dichotomy between registration requirements stemming from secured transactions law and those flowing from IP law is also present in English law. Under the Companies Act 2006, so-called “company charges” need to be registered with the Companies House in order to be perfected. On the relationship between the registration of security rights in IP rights in specialized IP registers and such registration in the Company Registry, the reporter for England and Wales notes that “it is argued that the priority rules of the IP registries should entirely displace the notice function of the company register.”171 In contrast, charges (whether fixed or floating) over IP rights cannot be entered in IP registries in Cyprus; instead, they need to be registered in the companies register (if created by a company) in order to be perfected.172 Assignments of patents and trademarks are registrable in IP registries, but seem not to be used for security purposes.173 In Italy, it is highly debated whether the registration of a security right in the appropriate IP register is merely a mode of perfection, or whether it is a requirement for the creation of a security right inter partes. As the Italian reporter shows, the second view dominates, especially in IP literature; however, a literal reading of the respective provisions speaks in favour of the first view.174 Priority is governed by the sequence of (valid) registrations, validity requiring, inter alia, a notarized deed and payment of the registration fee.175 In Spain, the only available security right over IP rights is the chattel mortgage (hipoteca mobiliaria).176 The security agreement must be contained in a notarial deed, which has to give specific information on the collateral and the secured debt—otherwise, it is void.177 Interestingly, it must only be registered in the “Registry of Movable Goods,” not in the IP registry; however, note that registration in the IP registry is necessary for the creation of the security right since there is no creation by a non-holder.178 Priority is determined by the date of registration on the movable property registry. In Brazil, all security agreements, whether they take the form of a pledge, fiduciary transfer, or usufruct, have to be in writing and have to be registered in the Registry of Deeds and Documents in order to be effective against third parties. In addition, security rights in patents, trademarks, and industrial 170
See in this volume Bornheim (2019), Section 3.1.1.3. See in this volume Bornheim (2019), Section 4.2. 172 Argyropoulou et al. (2019), Section 5. 173 Argyropoulou et al. (2019), text after fn. 24. 174 For a detailed account of this debate, see in this volume Ricolfi (2019), Section 3.1.4. 175 See in this volume Ricolfi (2019), Sections 3.1.5 and 3.1.6. 176 See in this volume Heredia Cervantes (2019), Section 2. 177 See in this volume Heredia Cervantes (2019), Section 3. 178 See in this volume Heredia Cervantes (2019), Section 3. 171
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designs have to be registered in the Instituto Nacional da Propriedade Industrial.179
6.3
Concluding Remarks
It seems quite obvious that, independent of the distinctions between functional/non-functional systems and notice/transaction filing systems, the dualism of the registration of security rights in the relevant IP registers and the registration (or other form of publicity) of secured transactions is the most common source of uncertainty and conflict in jurisdictions. Typically, registers for IP rights are older than secured transaction registers; some of them are organized on a different level (e.g. supranational instead of national, federal instead of state/provincial, etc.) than the secured transaction registers. A major step towards facilitating borrowing against IP rights would be to solve this conflict and either create a single system of publicity or create clear and comprehensive rules on the relationship between both registration systems. Mexico has the interesting solution of simply providing that the registration of a security right in a specialized IP registry will automatically lead to an entry in the secured transactions registry.180
7
Security Over IP Rights as Part of an Enterprise Charge
In practice, IP rights are most often only used as collateral together with a security right in the enterprise holding the IP right as a whole.181 Apart from the value of the IP right in itself, a major reason for this is the concern that otherwise, a secured creditor might not be able to sell the business or its products in the event of default. In such cases, it is not the IP right itself which is viewed as valuable collateral; rather, the possible lack of rights in the IP right is regarded as a potential hindrance to the economic exploitation of the business, especially regarding the sale of the tangible assets of the business. Another motive for including IP rights in enterprise charges is the concern that otherwise, third-party creditors could take a security right in individual IP rights and thus gain priority over the holder of an enterprise charge. The German reporters, after having conducted 120 interviews with IP practitioners, conclude that security rights over IP rights are very rare, “except as additional collateral in situations where 179
Lahorgue (2019), after fn. 23. See in this volume Murguía-Goebel (2019), Section 3.2. 181 For example, see in this volume Brinkmann et al. (2019), Section 1; see also in this volume Juutilainen (2019), Section 9. In contrast, the Mexican report states that although legislation explicitly caters for a floating lien on IP assets, practice in Mexico still shies away from it; see in this volume Murguía-Goebel (2019), Section 3.5. 180
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all of the debtor’s assets are encumbered, such as in the context of project financing. In such a situation, security rights over IP rights might serve as a shield against seizure of the IP right by other creditors rather than a sword (against the debtor).”182 Since foreclosures by other creditors could have ruinous effects on the success of the project, the creditor will try to anticipate such a seizure by taking any IP rights as collateral (e.g. by way of a security assignment) and thus frustrate the drastic effects of a third party’s foreclosure. Charges over the assets of an enterprise or company as a whole (“enterprise charges”) can take very different forms, depending on the jurisdiction. Functional and unitary legislation—such as Art. 9 UCC; the PPSAs of the Canadian Common Law provinces, Australia, and New Zealand; and, following the US model in this respect, Mexican law— allow security agreements that cover all present and future property of the debtor. There are minor differences in the way this intention needs to be expressed. In the US, the different property types of Art. 9 have to be listed, with IP rights falling into the category of “general intangibles.” Other jurisdictions, such as Australia, allow so-called “general security agreements” or “all PAP [present and after-acquired property] agreements.”183 Other jurisdictions, such as France, England, Scotland,184 Cyprus,185 South Africa,186 Japan, Finland,187 and Romania,188 allow security rights over the assets of a company. While the English floating charge (and its Romanian legal transplant189) is special in the way it treats the charge that is only attached to individual assets in the event of crystallization,190 the French nantissement sur fonds de commerce can be described as a fixed charge over specific assets of a company, including certain IP rights.191 Brazilian law allows for a charge over the assets of a corporation, including 182
Brinkmann et al. (2019), Section 1. See the detailed description in McCracken (2019), Section 6.3 et seq. 184 See in this volume Masiyakurima (2019), Section 5. 185 Argyropoulou et al. (2019), Section 6. 186 See in this volume Karjiker (2019), Section 5 on the “general notarial bond.” 187 See in this volume Juutilainen (2019), Section 6. The Finnish system is interesting from a comparative point of view: first, because the creation involves signing a “promissory note,” and second, because only 50% of the value of the encumbered assets can be used to pay off the mortgagor with priority over unsecured creditors. 188 See in this volume Dincă and Rizoiu (2019), Section 5. 189 See in this volume Dincă and Rizoiu (2019), Section 5. 190 See in this volume Bornheim (2019), Sections 5.1.1 and 5.1.2. The Common Law provinces of Canada seem to follow this concept; see Howell (2019), Section 5. 191 See in this volume Séjean and Binctin (2019), Section 5. The same was true for Belgium before January 1, 2018; see Storme and Malekzadem (2019), para 20 (gage sur fonds de commerce). Under the new Act, Belgian law still allows for the pledge of an enterprise, but considers the individual assets to be attached; see Storme and Malekzadem (2019), para 21. 183
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its IP rights, through the issuance of debentures.192 Japanese law distinguishes between an “enterprise mortgage,” which resembles the English floating charge and can only be created by a stock company in order to secure corporate bonds, and a “foundation mortgage,” which was inspired by German law and whose main collateral consists of immovables. Enterprise mortgages include IP rights but are practically never used because they are subordinate to other security rights over the same assets.193 A third group of jurisdictions does not explicitly provide for enterprise charges; rather, it upholds the principles of specialty and specificity, according to which proprietary rights can only exist in specific, determined assets, not in a group of assets. Yet some members of this group of jurisdictions (e.g. Germany) have been able to accommodate an all-asset security transfer of ownership or assignment by lowering their requirements to mere determinability.194 A fourth group of jurisdictions provides for an enterprise charge but only extends it to unregistered IP rights such as copyright. This is the case in Estonia.195 In Italy, the specific legislation that enables companies to secure credit through a special enterprise charge is only applicable to financial institutions (as lenders). Again, this charge only covers unregistered IP rights.196 In a fifth group of jurisdictions, the creation of an enterprise charge or a functional equivalent is not possible at all; see the Netherlands,197 Spain,198 Greece,199 Croatia,200 and Taiwan. Nevertheless, it should be noted that a bill introducing the floating charge is currently being discussed in Taiwan.201
8
The Legal Relationship Before Default
Usually, secured transactions law is not particularly interested in the mutual rights of the parties before default. However, where IP rights are used as collateral, a number of interesting and practically relevant matters arise, such as the 192
Lahorgue (2019), Section 5. See in this volume Hara and Haga (2019), Sections 3.1.(3), 3.1. (4) and 4. 194 See in general Bülow (2017), pp. 482 et seq. For the similar situation in Austria, see Dorfmayr (2019), Section 5; however, Austrian law seems more reluctant to accept all-asset security rights. The Turkish approach, on the other hand, seems to resemble German law; see in this volume Özsunay and Özsunay (2019), Section 5. 195 See in this volume Lepik (2019), Section 5. 196 See in this volume Ricolfi (2019), Section 2.3. 197 See in this volume van Engelen (2019), Section 5. 198 See in this volume Heredia Cervantes (2019), Section 3. 199 See in this volume Kallinikou and Koriatopoulou (2019), Section 5. 200 Matanovac Vučković et al. (2019), Section 5. 201 See in this volume Shieh and Lee (2019), Sections 2.2.4 and 5. 193
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right to use the IP right through production or licensing and the right (or even duty) to defend the IP right against infringements.202 In order to uphold the IP right, the regular payment of fees or the use of the right may be necessary.203 As a matter of principle, mutual rights and obligations will be governed by the security agreement,204 which in many states is subject to the principle of good faith and fair dealing.205 The Australian and Canadian Common Law reports contain useful examples of the typical content of such an agreement.206 Under non-unitary secured transactions systems, the mutual rights and obligations will additionally depend on the category of security right that the parties have created.207 The German, Italian, South African, and Croatian reports contain thorough examinations of typical arrangements.208 The degree to which parties enjoy contractual freedom in structuring their respective rights and obligations of course differs from one jurisdiction to another. For example, while the Italian reporter stresses that most statutory provisions do not involve issues of public policy, thus allowing ample room for party autonomy,209 it is not possible for the parties under Estonian law to limit the right of the pledgor of an IP right to dispose of it.210 Generally speaking, if jurisdictions following a non-functional approach distinguish substantially between pledges and security transfers, the parties to the latter seem to enjoy a greater degree of freedom of contract.211 In some modern secured transactions laws, the legislator has provided specific default rules—see, for example, the new Romanian Civil Code of 2009212 and the new Belgian Pledge Act, in force since January 1, 2018.213 In the absence 202
See in detail Picht (2018), pp. 304 et seq. See e.g. in this volume Séjean and Binctin (2019), Section 6.1. 204 See in this volume Karjiker (2019), Section 6. In Japan, the security agreement is the only source for the mutual rights and obligations. For pledges, there are some rules contained in the respective IP enactments; see in this volume Hara and Haga (2019), Section 6. 205 For example, see in this volume Juutilainen (2019), Section 7. 206 McCracken (2019), Section 7.1 et seq.; Howell (2019), Sections 6.1 and 6.2. 207 See, for example, Lahorgue (2019), Section 6. 208 See in this volume Brinkmann et al. (2019), Section 3.6; see in this volume Ricolfi (2019), Section 3.1.7; see in this volume Karjiker (2019), Section 6; Matanovac Vučković et al. (2019), Section 6. 209 See in this volume Ricolfi (2019), Section 3.1.7. 210 See in this volume Lepik (2019), Section 6.1. However, the pledgee’s written consent is required for the transfer of a trademark; see in this volume Lepik (2019), Section 6.1. 211 For example, see in this volume Lepik (2019), Section 6. 212 For a detailed account, see in this volume Dincă and Rizoiu (2019), Section 6. 213 Storme and Malekzadem (2019), paras 29 et seq. In Turkey, the rights and obligations under security agreements on movables and claims before default are laid down in detail in the Civil Code; see in this volume Özsunay and Özsunay (2019), Section 6. The Estonian reporter also gives a detailed account of the statutory rules relating to 203
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of specific legislative rules, either general principles or rules of secured transactions law will provide the outer limits of party autonomy, as well as default rules. Usually, if the purpose of the secured transaction is to lend and borrow money, it is in the interest of both parties that the security provider continue to manage the IP rights, exploit the rights, pay the fees, sue for infringement, etc.214 A bank will not be in a position to carry out most of these managerial tasks.215 As for entitlement to bring an infringement action, the English High Court already held 100 years ago216 that in equity, the mortgagor retains equitable ownership and is therefore entitled to sue in case of infringement.217 Where the pledge of the IP right transfers the right to use it to the pledgee, the parties may create a sublicence to enable the grantor to continue with the exploitation of the IP right.218
9
Remedies of the Secured Creditor Outside Insolvency (Enforcement)
Rules on enforcement go to the heart of secured transactions law.219 If the secured party is not able to realize the value of the collateral in a sufficiently speedy and low-cost manner, the whole transaction tends to lose much of its commercial effectiveness. Quick and effective enforcement is, as a matter of principle, also in the interest of the debtor (unless the collateral is, for example, his family home), since it will help to reduce or extinguish his debt. Nevertheless, debtors need safeguards against any enforcement that is arbitrary; is contrary to good faith and fair dealing; or gives a surplus to the creditor. Key policy questions in this area cover the extent to which private, out-of-court enforcement should be allowed and the extent to which the parties should be free to set enforcement mechanisms in the security agreement. Considerations specific to IP concern the effect of enforcement on licences220 and the role of IP registries in the context of enforcement. the pre-default relationship in case of a pledge; see in this volume Lepik (2019), Section 6.1. 214 See also in this volume Heredia Cervantes (2019), Section 6. In Japan, any authorization of the pledgee to use the IP right must be expressly granted by contract; see in this volume Hara and Haga (2019), Section 6.1. 215 See the detailed discussion of the parties’ interests in this volume Ricolfi (2019), Section 3.1.7. 216 Van Gelder Apsimon & Co v Sowerby Bridge United District Flour Society (1890), 44 Ch D 374 (CA) [Van Gelder]. 217 See in greater detail in this volume Bornheim (2019), Section 6. In the Netherlands, in contrast, it is the pledgee who has to sue the infringing party; see in this volume van Engelen (2019), Section 6.1. 218 See Dorfmayr (2019), fn. 128. 219 For a general overview (from a European perspective), see Dirix (2008), pp. 223–241. 220 See, for example, in this volume Brinkmann et al. (2019), Section 3.5.3.
Security Rights in Intellectual Property
Jurisdictions can again be grouped according to whether they are modern or unreformed; unitary or non-unitary; or functional or non-functional. As a general rule, the more recent a secured transactions law, the more it tends to opt for contractual freedom and out-of-court enforcement.
9.1
Unitary and Functional Systems
In the unitary and functional systems (e.g. the US, Australia, and the Canadian Common Law provinces), no material distinction is made between enforcement outside insolvency and enforcement in insolvency. As a general rule, enforcement is flexible, allowing for the disposition of the collateral without the necessity of judicial proceedings. There are no special rules on the enforcement of security rights in IP that would differ from the rules applicable to other types of collateral. Generally, the secured party can either retain (i.e. take the collateral “on [his] own account”) or dispose of the IP rights by sale or through a licence. Romania provides a contrast to this. Although it has imported a secured transactions law based on a functional approach and notice filing into its new Civil Code, it has partly retained traditional rules on enforcement, such as the prohibition of the pactum commissorium.221 In addition, the US-inspired self-help remedies are not applicable to security rights in intangibles.222 The lack of clear enforcement rules is the main obstacle to the use of IP rights as collateral in Romania.223
9.2
Non-unitary Systems
In this group, enforcement rules tend to differ from one type of security right to another.224 The degree of flexibility also depends on the time at which the enforcement rules were enacted: the older the law, the stricter it tends to be. Thus, under Austrian law, judicial enforcement is still the rule, following statutory rules on pledges.225 The secured creditor first has to sue for performance and obtain an execution title; then, execution is carried out through the licensing, leasing, or sale of the IP right. Out-of-court enforcement is only possible when this has been previously agreed upon and within the framework of the mandatory debtor protection
221
See in this volume Dincă and Rizoiu (2019), Section 7.1. See in this volume Dincă and Rizoiu (2019), Section 7.2. 223 See in this volume Dincă and Rizoiu (2019), Section 10. 224 See, for example, the detailed account of the different remedies available to the secured creditor in enforcement and insolvency given by the South African reporter: Karjiker (2019), Section 4. 225 See in this volume Dorfmayr (2019), Section 7.1.1. 222
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rules.226 For example, a forfeiture clause (pactum commissorium/pacte commissoire) is prohibited. In the same vein, Dutch law only allows for a foreclosure sale by public auction (in case of a patent or plant variety, this auction has to be carried out by a notary); other means of selling the pledged property require a court order.227 South African law joins these two jurisdictions in requiring a court order for the realization of a pledge, hypothecation, or cession of IP rights.228 The same is true for Spanish and Croatian law, except where the (commercial) parties to the secured transaction have agreed on an out-of-court procedure in the notarial deed; in this case, the realization can be handled by a notary and the sale can be conducted through a public auction.229 In Brazil and Estonia, we find a marked difference between a pledge and a fiduciary transfer: with the former, a court order is necessary (unless agreed otherwise by the parties) and the pactum commissorium is prohibited; with the latter, the fiduciary transferee becomes full owner upon default and can realize the collateral accordingly.230 Under German law, the remedies available to the secured party heavily depend on the type of security chosen. Where the parties choose a pledge, they are bound to the rather strict and outdated rules on enforcement in the Civil Code (i.e. no pactum commissorium, sale only by public auction). If the parties have chosen a security assignment, security licence of the IP right, or security usufruct, they enjoy a greater freedom of contract and can also include elements such as a forfeiture clause. Also, in England and Wales, remedies depend on the agreement between the parties and on the type of security interest chosen. The creditor of a mortgage can apply to a court for a foreclosure order, transferring legal title to the creditor. Where the mortgage is in deed form, the creditor can appoint a receiver, who will then take over the assets and realize them. Italy is yet another example of a jurisdiction where the choice between different security devices is significant when it comes to enforcement. In case of a pledge, the collateral may be seized and sold, or even acquired by the creditor in satisfaction of the debt under further conditions. Mortgages are more complex (see Artt. 555 ff. of the Italian Civil Procedure Code) since they were originally primarily designed for immovables. In its IP legislation, Italy has also adopted some IPR-specific rules on enforcement that involve the IP registry. Belgium and France provide examples of modern, non-functional or non-unitary approaches to secured 226
See Dorfmayr (2019), Section 7.1.2. Van Engelen (2019), Section 7.1. 228 See in this volume Karjiker (2019), Sections 4.1 and 7. 229 See in this volume Heredia Cervantes (2019), Section 7.1.c; Section 2; Matanovac Vučković et al. (2019), at fn. 108. 230 Lahorgue (2019), Section 7.1.; see in this volume Lepik (2019), Section 7.1 for pledges and Section 7.2 for security transfers. 227
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transactions law. In Belgium, out-of-court enforcement can be agreed upon by the parties as long as they act in good faith. The new Pledge Act contains default rules in Arts. 47 to 56. In France, the secured party can obtain a court order ordering either the sale of the assets or the handing over of the collateral to the creditor as payment. An agreement on a pactum commissorium is also possible. In case of retention of title, the creditor can ask for the restitution of the collateral. Another example of a modern jurisdiction is Mexico, which provides for a non-judicial enforcement procedure when the debt and its enforceability are not disputed and there is agreement on the delivery of the collateral.231 In Taiwan, a pactum commissorium is possible if it is registered.232
10
Remedies of the Secured Creditor in Insolvency
Once the security right in the IP right has been created and (if applicable) perfected, and therefore enjoys priority against the insolvency administrator (or trustee in bankruptcy), each jurisdiction’s general rules on the enforcement of security rights in insolvency apply, including the powers of the administrator to avoid or set aside the transaction where it has granted unjustified preferential treatment to a certain creditor (the so-called actio pauliana). Once again, in non-unitary/non-functional systems, the rights and remedies of the secured party may depend on the kind of security right created.233 However, special questions relating specifically to security in IP rights may arise where the IP right has been licensed to a third party (the licensee) and a security right has been created either in the licence (the licensee being the debtor/grantor in the secured transaction) or in the royalties (the licensor and holder of the IP right being the grantor/ debtor in the secured transaction).234 The Italian report contains a detailed account of the rights of the insolvency administrator in either scenario.235 In Germany, the effects on the licence are largely unclear and hotly debated among scholars. One key issue is the question whether a licence (at least an exclusive one) amounts to a right in rem. If this is the case, the preponderant view seems to be that the trustee cannot terminate the licence unilaterally.236
11
Practical Use of Security Rights in IP and Costs
11.1 Costs The reporters list the following as factors that need to be taken into account in assessing the cost of creating and perfecting a security interest in IP rights: • costs for legal advice (which are generally estimated to be rather high, since the area is complex and not sufficiently covered by case law and standardized practice), including documentation • notarial fees, where there is a need for a notarial deed or a signature certified by a notary • registration fees for IP registries • registration fees for the secured transactions register • register tax, stamp duty tax, or “state fee” The reports give individual information on the cost of registration in IP or secured transactions registries, as well as on the cost of notarial documentation. The cost of obtaining legal advice seems to play an important role, but is very hard to estimate.
11.2 Frequency of Transactions The reporters were asked to give some information on how common secured transactions involving IP rights are based on the number of entrances in registries, expert interviews, personal experience, or (if no other source of information was available) a personal estimate. The following summary only gives a rough idea; for all details and the methodology pursued by each reporter, the reader is referred to the national reports themselves. • Australia: rare with respect to single IP rights, but common practice with respect to security rights over “all present and future property” • Austria: rare • Brazil: uncommon • Czech Republic: rare237 • Croatia: rare
231
See in this volume Murguía-Goebel (2019), Section 3.7.1.2.1. See in this volume Shieh and Lee (2019), Section 3.3. 233 For example, see in this volume Brinkmann et al. (2019), Sections 3.1.4, 3.2.4, 3.3.3, 3.4.3 and 3.5.3. 234 On this topic see also Koziol (2011), pp. 115 et seq. 235 See in this volume Ricolfi (2019), Section 5. 236 See in this volume Brinkmann et al. (2019), Section 3.5.3. 232
237 The Czech reporters give some figures taken from the registry for the period of 2014–2016. While the number of registrations of security rights over patents and utility models rests between 1 and 9 per year, security rights over trademarks occur more often (i.e. between 112 and 379 per year). There are around 50 enterprise charges involving patents per year; see in this volume Koukal and Pullmannova (2019), Section 9, table 2.
Security Rights in Intellectual Property
• • • • • • • • • • • • • •
• • • •
Cyprus: very rare238 England and Wales: rare and coincidental Estonia: uncommon Finland: uncommon239 France: common with respect to trademarks Germany: very rare Greece: it is “not easy to obtain credit by granting a security right over IP rights” Italy: very rare (except for security interest in copyright in movies) Japan: IP rights are never used as collateral, except in the case of copyright in movies Mexico: uncommon Netherlands: only done as part of security rights over “all assets” Romania: quite commonly used, but only as part of an enterprise charge Scotland: rare South Africa: far from being a common practice, except for the enterprise charge (“notarial bond” or security cession); the hypothecation of trademarks is also becoming more common Spain: IP is not seen as suitable collateral (except for rights over “cinematographic works”) Taiwan: only trademarks are (sometimes) used as collateral Turkey: rare US: common, especially in the case of “all-asset” security rights
12
Reform and Harmonization Projects
12.1 National Reform Proposals In Scotland, the Law Commission has proposed a new act on secured transactions over tangible and intangible property, which would move Scotland in the direction of a notice filing system.240 In Taiwan, the government and industries have recognized the importance of enterprise charges in fostering security rights in IP and therefore aim to introduce the
238 The reporters for Cyprus note that “guidelines issued by the Central Bank of Cyprus for banking institutions suggest that goodwill and other intangible assets must be valued at zero percent for the purpose of determining a loan amount”; see in this volume Argyropoulou et al. (2019), Section 9. 239 Juutilainen (2019), Section 9, counts a total of only 131 security rights over national patents, 61 security rights over European patents, and 262 security rights over trademarks for the entire period of 1996–2019. 240 See https://www.scotlawcom.gov.uk/files/5514/9987/1139/Move able_Transactions_Scotland_Bill_-_consultation_draft_-_bill_-__July_ 2017.pdf; see in this volume Masiyakurima (2019), Section 11.
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floating charge, following recommendations in the UNCITRAL texts.241 However, generally speaking, security rights in IP rights do not seem to rank high on the political agenda for most countries.
12.2 International Proposals As part of its project on secured transactions, UNCITRAL added a supplement on security rights in intellectual property to its Legislative Guide on Secured Transactions in 2010.242 The Model Law on Secured Transactions, based on the Legislative Guide and adopted in 2016,243 contains a limited number of asset-specific rules relating to intellectual property. These rules mainly try to address potential conflicts between the security rights in assets and the intellectual property rights linked to those assets. Thus, Article 17 provides that: “A security right in a tangible asset with respect to which intellectual property is used does not extend to the intellectual property and a security right in the intellectual property does not extend to the tangible asset.” In the same vein, Article 34, para. 6 states that “subject to the rights of a secured creditor with a security right in intellectual property in accordance with article 50, the rights of a non-exclusive licensee of an intangible encumbered asset licensed in the ordinary course of the licensor’s business are not affected by the security right, provided that, at the time of the conclusion of the licence agreement, the licensee does not have knowledge that the licence violates the rights of the secured creditor under the security agreement.” Article 99, paragraph 1, which is part of the chapter on private international law, follows the traditional lex protectionis approach, and hence subjects the creation, effectiveness against third parties, and priority of a security right in intellectual property to the law of the state in which the intellectual property is protected. Nonetheless, paragraph 2 gives the parties the ability to create a security right in intellectual property (also under the law of the state in which the grantor is located) and to make it effective under that law against third parties other than another secured creditor, a transferee, or a licensee. Paragraph 3 provides that the law applicable to the enforcement of a security right in intellectual property is the law of the state in which the grantor is located.
241
See in this volume Shieh and Lee (2019), Section 5. Available at http://www.uncitral.org/pdf/english/texts/security-lg/e/ 10-57126_Ebook_Suppl_SR_IP.pdf. 243 See http://www.uncitral.org/uncitral/en/uncitral_texts/security/ 2016Model_secured.html. 242
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Some Tentative Conclusions
As already stated at the beginning of this chapter, there are a number of non-legal obstacles to the use of IP rights as collateral that cannot be alleviated through law reform, such as the potentially dramatic loss of value suffered by those rights upon the owner’s insolvency; the difference in the life cycle of a typical bank loan and that of an IP right; and the lack of liquid markets in enforcement. However, there are other, legal issues where law reform can lead to better access to credit based on IP rights as collateral. One example of such a reform involves better coordination between IP registries and the use of registration as a mode of perfection under secured transactions law (i.e. notice filing)—see the best practice example of Australia. Furthermore, it goes without saying that the prohibition of the transfer of certain IP rights such as copyright in German and Austrian law, which makes collateralization impossible, could be removed.244 In fact, in many jurisdictions, copyright presents specific difficulties, especially when it is unregistered. For example, some jurisdictions deny the possibility to charge copyright if the security right cannot be entered in an IP registry. On the other hand, the existence of special enactments on charges over copyright in movies show that these difficulties, which are often of a purely technical nature, may be overcome. Another important issue is the matter of enterprise charges or “all-asset” security rights: where they exist, IP rights can more easily be part of a larger transaction and thus add to the overall value of the collateral. One way to promote security in IP is to allow for the creation of a charge over all of the assets (or certain parts of them) of a company.245 On a more general note, the reports show that the lack of statutory law specifically directed toward the admissibility of security rights in IP and their creation, perfection, and priority is a major hindrance to the development of a financing practice that relies on IP rights as collateral. While courts around the world have managed to create case law on secured transactions with respect to movables and even receivables in the absence of comprehensive, unambiguous statutory law, this seems not to have happened in the field of IP rights. Given the existing non-legal risks highlighted at the beginning of this chapter, in practice, people seem unwilling to take the additional risk of legal uncertainty. This in turn prohibits the development of case law. Clear statutory law seems to be the only way to end this vicious circle. 244 See also in this volume Juutilainen (2019), Section 4.3, on the problem that security rights in copyright should be registered from the perspective of secured transactions law, but cannot be registered due to the lack of a copyright registry. 245 See in this volume Shieh and Lee (2019), Section 5, on a bill aiming to introduce the floating charge.
Another point which is mentioned in several reports is the disproportionally high transaction costs, especially where notaries and several registries have to be involved. Small and medium-sized enterprises in particular are thus prevented from using IP as collateral.246 It goes without saying that jurisdictions that require the creation of separate security interests for each and every asset instead of allowing an “all-asset” clause or an enterprise charge add considerably to these transaction costs. The national segmentation of IP registration and secured transactions law presents yet another obstacle for companies that hold IP rights in various countries and/or seek to obtain financing internationally. As the Italian reporter notes, citing a speech made by WIPO’s Director General F. Gurry247: “A way out has been proposed in the last decade: to set up a global digital register for all copyrighted works for which rightholders intend to have the full copyright protection. One of the goals of the global digital register would be to finally enable a registration of all transactions concerning copyrighted works, including securities, which would be conditional for the creation and perfection of the secured transaction. The technical feasibility of the project has been endorsed by the UN agency responsible for IP. The idea is finding support from research institutions operating in the field.”248 On this optimistic note, the general report comes to a close.
References Argyropoulou V, Christoforou A, Synodinou T-E (2019) Security rights in intellectual property in Cyprus. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Bornheim JJ (2019) Security rights in intellectual property in England and Wales. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Brinkmann M, Rüther D, Scraback B (2019) Security rights in intellectual property in Germany. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Bülow P (2017) Recht der Kreditsicherheiten, 9th edn. CF Müller, Heidelberg Charpentier É (2019) Les sûretés sur la propriété intellectuelle au Québec (Canada). In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Dahan F, Simpson J (2004) The European bank for reconstruction and development’s secured transactions project. In: Kieninger E-M (ed) Security rights in movable property in European private law. Cambridge University Press, Cambridge, pp 98–116 Decker M (2012) Geistiges Eigentum als Kreditsicherheit. Mohr Siebeck, Tübingen
246 For example, see in this volume Murguía-Goebel (2019), Section 3.8. 247 The Future of Copyright, Sydney, February 25, 2011, available at www.wipo.int/about-wipo/en/dgo/speeches/dg_blueskyconf_11.html (accessed June 27, 2019). 248 Ricolfi (2019), Section 7.
Security Rights in Intellectual Property Denoncourt J (2017) IP debt finance and SME’s: revealing the evolving conceptual framework drawing on initiatives from around the world. In: Kono T (ed) Security interests in intellectual property. Springer, Singapore, pp 1–38 Dincă R, Rizoiu RA (2019) Security rights in intellectual property in Romania. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Dirix E (2008) Remedies of secured creditors outside insolvency. In: Eidenmüller H, Kieninger E-M (eds) The future of secured transactions in Europe. De Gruyter, Berlin, pp 223–241 Dirix E (2015) Das neue belgische Gesetz zu den Mobiliarsicherheiten. Zeitschrift für Europäisches Privatrecht (ZEuP) 2015:273–287 Dorfmayr C (2019) Security rights in intellectual property in Austria. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Fargeaud P (1963) Le gage sans dépossession comme instrument de crédit et le Marché Commun. Librairie du Journal des Notaires et des Avocats, Paris Hara M, Haga Y (2019) Security rights in intellectual property in Japan. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Heredia Cervantes I (2019) Security rights in intellectual property in Spain. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Horn C, Grünwald A (2015) Gewerblicher Rechtsschutz II. Verlag Österreich, Vienna Howell R (2019) Security rights in intellectual property in Canada (Common Law). In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Juutilainen T (2019) Security rights in intellectual property in Finland. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Kallinikou D, Koriatopoulou P (2019) Security rights in intellectual property in Greece. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Karjiker S (2019) Security rights in intellectual property in South Africa. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Kieninger E-M (2008) Die Zukunft des deutschen und europäischen Mobiliarkreditsicherungsrechts. Archiv für civilistische Praxis (AcP) 208(2):182–226 Knopf H (2002) Security interests in intellectual property: an international comparative approach. In: Idem (ed) Security interests in intellectual property. Thomson/Carswell, Toronto, pp 1–93 Koukal P, Pullmannova H (2019) Security rights in intellectual property in the Czech Republic. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Koziol G (2011) Lizenzen als Kreditsicherheiten, Zivilrechtliche Grundlagen in Deutschland, Österreich und Japan. Mohr Siebeck, Tübingen
371 Lahorgue S (2019) Security rights in intellectual property in Brazil. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Leavy J (2007) France. In: Sigman HC, Kieninger E-M (eds) Crossborder security over tangibles. Selier European Law Publishers, Munich Lepik G (2019) Security rights in intellectual property in Estonia. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Macdonald R (2009) Transnational secured transactions reform: Book IX of the Draft Common Frame of Reference in Perspective. Zeitschrift für Europäisches Privatrecht (ZeuP):745–782 Masiyakurima P (2019) Security rights in intellectual property in Scotland. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Matanovac Vučković R, Ernst H, Gliha I (2019) Security rights in intellectual property in Croatia. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg McCracken S (2019) Security rights in intellectual property in Australia. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg McGuire M-R (2008) Intellectual property rights: “property” or “right”? The application of the transfer rules to intellectual property. In: Faber W, Lurger B (eds) Rules for the transfer of movables: a candidate for European harmonisation or national reform? Sellier European Law Publishers, pp 217–237 Murguía-Goebel L (2019) Security rights in intellectual property in Mexico. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Özsunay E, Özsunay MR (2019) Security rights in intellectual property in Turkey. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Picht PG (2018) Vom materiellen Wert des Immateriellen – Immaterialgüterrechte als Kreditsicherungsmittel im nationalen und internationalen Rechtsverkehr. Mohr Siebeck, Tübingen Ricolfi M (2019) Security rights in intellectual property in Italy. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Séjean M, Binctin N (2019) Security rights in intellectual property in France. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Shieh M-Y, Lee S-H (2019) Security rights in intellectual property in Taiwan, Republic of China. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Storme ME, Malekzadem J (2019) Security rights in intellectual property in Belgium. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg Van Engelen TCJA (2019) Security rights in intellectual property in The Netherlands. In: Kieninger E-M (ed) Security rights in intellectual property. Springer, Heidelberg
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach Ulla Liukkunen
Abstract
Collective bargaining is a profound channel of collective participation and industrial democracy. The idea of labour protection as a collective phenomenon has been legitimizing the autonomy of collective bargaining and social partners in their relation to the state, which has shaped the strong status of collective agreements in many labour law systems. From the collective labour rights standpoint, recent adjustments to bargaining frameworks that have occurred in many systems under scrutiny place great importance on economic factors and have strikingly narrowed the space of labour rightsoriented argumentation and values. The collective bargaining regimes in Europe and Asia as well as North and South America under scrutiny face challenges posed by globalization and transformations of work and working life. Responses to ongoing changes reflect the diversity of bargaining regimes but they also highlight the need for a contextual understanding of developments. Although in some countries wellfunctioning social dialogue involves developing new strategies to improve labour protection, the transformation of work is so profound that it adds pressure to adopt new and more effective bargaining strategies and agendas. One of the evident consequences of decentralization occurring in many bargaining systems is that the power balance in bargaining tables is changing throughout different bargaining levels. The increase of local bargaining calls for developing institutional settings and procedural safeguards to enable local negotiations based on a more equal footing between the parties. This report was also published in Liukkunen (Ed), Collective Bargaining in Labour Law Regimes – A Global Perspective, Springer Nature Switzerland 2019, 1–64. U. Liukkunen (*) Faculty of Law, University of Helsinki, Helsinki, Finland e-mail: ulla.liukkunen@helsinki.fi
In the domestic systems under comparison, notable differences exist in the status and protection of the right to collective bargaining. Collective bargaining regimes also differ when assessed from local, sectoral and national or regional and global perspectives. Histories shape regulatory approaches and explain the poor development and inefficiency of some bargaining systems. Complex transformations are noticeable in the changing degree of cooperation in industrial relations. There is a need for renewed theoretical approaches to and interpretations of collective bargaining regimes deriving from labour law-originated concepts and values. From the labour law perspective the present discussion on the need to develop bargaining regimes has been carried out loosely. Ongoing changes in collective labour law regimes are so fundamental that they should affect the way we do labour law. They can be argued as calling for a more precise identification of core concepts and their relation to values and capabilities of a certain historical and enabling character which is visible in established collective labour protection mechanisms in many labour law regimes. Collective bargaining produces frameworks for negotiated flexibility and adjustments required for ensuring employability as well as business competitiveness and efficiency. As a result, decollectivization of industrial relations is taking place as, at the local level, new patterns and methods of setting terms of employment are evolving in a way which highlights employer discretion and bargaining as an individualized process between employer and employee. Beyond domestic regimes, the evolution of transnational agreements is an important development adding a new layer to industrial relations systems. On a theoretical level, transnational agreements connect with the broader economic, social, political and cultural framework of cross-border industrial relations within multinational companies as national industrial relations from different legal contexts amalgamate in companies’ bargaining activities.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_14
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1
Introduction
1.1
Background: Comparative Socio-Cultural Contexts
The role and legal nature of collective bargaining and collective agreements vary in different labour law regimes.1 This diversity relates to different kinds of industrial relations models and their particular historical, political and socioeconomic contexts. Within different labour market structures, collective bargaining forms an essential element of industrial relations for many national labour market systems. Each collective bargaining system, be it centralized or decentralized, forms part of a larger framework for industrial relations. Although we can trace certain similarities, and we can identify similar problems that collective bargaining confronts in our time, significant differences exist between collective bargaining systems, as well as the main results of bargaining, collective agreements. For example, the normative function of collective agreements is central in Denmark, Finland, Iceland, Norway and Sweden, together comprising what is called the Nordic countries, where nationwide collective agreements traditionally provide comprehensive regulation of employment relationships.2 In these countries, collective bargaining has developed autonomously and in its own way through wellestablished co-operation between the social partners. Moreover, legal as well as societal history should be paid heed to in order to understand this evolution.3 The Nordic model of labour law is characterized by the unique role of industrial relations based on strong trade unions and collective bargaining mechanisms resulting in high coverage of collective agreements as well as high labour standards. The fundamental nature of collective bargaining is explained by the exceptionally strong role of the autonomy of industrial relations in the Nordic countries, where the state has traditionally been reluctant to intervene in labour market issues and self-regulation by the social partners has received considerable space. Nevertheless, even the Nordic countries each have their own characteristics so that the regulatory framework for collective bargaining in these countries cannot be considered uniform.4 The extent to which labour issues are governed by laws and collective agreements varies between the Nordic countries. In addition, the impact of EU law 1 This article, which is based on my general report made for the IACL Fukuoka World Conference of 2018, has greatly benefited from national reports from Europe, North and South America, and Asia as well as discussions during the session of the Conference where the general report was presented. 2 Malmberg (2002). 3 The Nordic countries discussed include Denmark, Finland and Sweden but not Norway and Iceland. 4 See also Edström (2016).
differs among them. Although membership of the EU has affected collective labour law models in Denmark, Finland and Sweden, increasing the role of statutory regulation in labour standards, nevertheless the basic emphasis on the collective dimension of labour regulation has remained significant.5 On the other hand, not even the Nordic countries have remained immune from pressure set by economic parameters to changes in their models. However, while noteworthy adjustments have taken place, the overall picture of coordinated models has been preserved.
1.2
Legal Comparison as a Window of Understanding
Entering into new domains through legal comparison requires a mindset which does not overlook the question of contextuality. Law as a social phenomenon is deeply embedded in the culture and traditions of a particular community. Yet comparatists tend to focus on the normative structure and system and remain at the surface of the legal system, treating any extra-legal cultural and social factors either as irrelevant or as something to overcome.6 As the example of the Nordic labour law model given above shows, by virtue of legal comparison, certain groupings can be identified and these can help us to understand the formation of collective bargaining models as an integral part of the legal systems of countries that share a similar legal heritage and historical roots. At the same time, the bigger picture is that national regulatory frameworks for collective bargaining and collective agreements diverge, and labour market systems employ collective bargaining powers in remarkably diverse ways. The regulatory framework for collective bargaining and collective agreements has often been shaped through long and complex historical, socioeconomic and political development. The German dual channel model of workers’ representation and bargaining is an example par excellence of a system which has to be seen in its historical context dating back to the Weimar Republic in order to understand its unique nature. Legal comparison adds new dimensions to the study of collective bargaining regimes and their challenges, enriching our understanding of them. That said, however, a critical point needs to be made. It is traditionally emphasized that collective bargaining models per se cannot be compared as they are strongly embedded in the economic, social and political framework and structure of each society. Moreover, they strongly relate to the particular industrial relations 5 Denmark, Finland and Sweden are members of the European Union whereas Iceland and Norway are members of the Agreement on the European Economic Area (EEA). 6 Liukkunen and Chen (2016), p. 5.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
characteristics of each country. The institutional arrangements on which labour law systems rest depend considerably on the historical, economic, political and cultural context of countries and regions.7 Examining the legal sources of labour standards and their interplay requires a contextual understanding of the systems under comparison.8 Hence, cultural layers cannot be overlooked.9 To make these critical observations is not to belittle either the significance of drawing comparisons in the field of collective labour law or the need to better understanding of the similarities and differences between the problems that regulatory frameworks face in the global era.10 Arguably, the labour market development we are witnessing, which increasingly puts pressure on collective bargaining systems resulting in decollectivization of industrial relations, necessitates a comparison of collective bargaining regimes. However, comparisons should be carried out in the light of the context of each system. In Europe, as elsewhere, the economic crisis has profoundly affected collective autonomy and, under pressure towards greater flexibility, the status of collective agreements in many labour law systems has been more or less weakened. With comparisons, we can trace legal developments concerning changes that challenge traditional mechanisms for developing labour standards in collective bargaining systems. We can also test and rethink comparative groupings we tend to make and contextualize our findings in search of a broader perspective. Strong centralized collective bargaining systems are traditionally viewed as a Continental and Nordic European phenomenon. However, evidence exists of well-established systems from elsewhere, too, and well-established systems that are based on decentralized bargaining, like those of the North America and Japan. Importantly, each collective bargaining model should also be seen in the context of the country’s labour rights status. The right to collective bargaining is enshrined in international labour standards and enjoys constitutional recognition in several national legal systems. However, we are living through times where articulating labour questions is changing. Fundamental labour rights are often called for in the arena of debate over the future of collective bargaining. However, there appears to be remarkably little clarity as to what this entails. Arguably, in the field of labour law, we are witnessing regulatory reforms where integrating fundamental labour rights considerations into developing collective bargaining regimes is no longer considered a necessity.
7
See Weiss (2004), pp. 229–230. See also Liukkunen (2007), pp. 152–155. 9 See also Tuori (2002). 10 Collective labour law can be defined as a sub-category of labour law encompassing collective labour rights; both employee participation and collective bargaining, and their regulation. 8
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Although a shift towards more local level bargaining has been simultaneously occurring in many bargaining systems, decentralization of centralized systems has occurred within remarkably different regulatory frameworks with different emphases and divergent locally-embedded solutions. Much of this can be explained by the socio-economic development of the country and its labour market. Placing a comparative analysis in the context of legal culture seems to underline the necessity to combine, at least to some extent, a comparative law and legal historical approach.11 Historical, cultural and social differences are reflected in legal thinking, doctrine, practice and the application of labour law, even within one wider cultural sphere. Comparative law has been a neglected discipline in the field of labour law. The explanation appears to lie in the highlighted domestic nature of labour law but also in wellknown difficulties that entering into the foreign domain through comparative efforts encompasses. Methodological pluralism of comparative law and a steadily growing number of different doctrines have reformed traditional approaches. However, this has not contributed much to clarifying the scene that an individual comparatist may be facing. As already discussed, in the field of collective labour law the particular difficulties that a comparatist faces relate to paying heed to the broader industrial relations framework and related institutional setting that shape regulatory approaches. Although it is known that comparative labour law can cross domestic borders and orientations and point to certain commonalities, it has been practiced largely with a functionalist mindset lacking in-depth inquiry. According to Frankenberg’s well-known critique, comparative law has focused on legocentrism to the extent that what is law is detached from the reality of the society concerned.12 When Frankenberg criticized functionalism he touched upon weaknesses that comparative labour law has also been struggling with. Arguably, comparative law needs to reject legal formalism and move towards a more contextual understanding of law. As a reward for such an attempt, a less fragmentary picture of legal systems may be achieved. Even with its evident restrictions—how could we as outsiders see another system even partially the way people within that system see it13—comparative labour law is capable of taking one step further. In fact, the question might be whether it is time to take comparative labour law out of the box of functionalism. This question appears to arise from the scene we are witnessing: the role of collective bargaining is simultaneously diminishing in several jurisdictions, regardless of the centralized or decentralized nature of the bargaining model—a controversial experience that 11
See Zimmermann (1996), p. 602. See also Zumbansen (2012). 13 See Legrand (2004), pp. 251–253. 12
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necessitates a comparative review. Although each labour law system bears its own research tradition where changes are conceptualized in different ways, comparative labour law can be used as a way to look for a broader picture. What this comparative effort is about is not only examining legal differences and similarities between national bargaining frameworks but to advocate the need for renewed theoretical approaches to and interpretations of collective bargaining regimes deriving from labour law-originated concepts and values. In terms of values, the present discussion on the need to develop domestic bargaining regimes has been carried out loosely. Imprecision is also noticeable in the discourse of collective bargaining as a participatory mechanism. Yet ongoing changes in collective labour regimes are so fundamental that they should affect the way we do labour law. They can be argued as calling for a more precise identification of core concepts and their relation to values of a certain historical and enabling character which is visible in collective labour protection mechanisms in several labour law regimes. Conceptually the debate appears to largely dismiss the full meaning of the participatory idea of collective labour law. Accordingly, the perspective of the ultimate goals of collective labour law and collective autonomy should not be withdrawn from the discussion, which is currently dominated by economic terminology, theories and views. The benefits of local-level bargaining seem to be a taken-for-granted issue in many countries. However, the French national report, for example, raises a critical voice about less power balance between the contracting parties in local bargaining compared to higher levels of negotiations.14 This concern also relates to evidence of erosion of sectoral bargaining as the basis of local level bargaining in many systems. Globalization and the changing nature of work and work organization have challenged national industrial relations systems and diminished the power of trade unions. Ongoing development has strongly affected several collective bargaining regimes. At the same time, traditional regulatory approaches of labour law even more broadly are being challenged, as managing changes in working life—caused, inter alia, by globalization, internationalization, migration, an ageing workforce, urbanization and digitalization—poses a central dilemma to national systems that were originally built for a more stable work and labour market. Importantly, the interplay between industrial relations and collective bargaining, which relates to adapting and reinforcing existing regulatory frameworks and mechanisms, is in the process of change. The challenge of combining flexibility and safety penetrates collective bargaining systems, and related balancing efforts increasingly often unravel to the benefit of greater flexibility. 14
See the report of Mazuyer (2019) about France, p. 269.
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Globalization has also challenged the power balance in a cross-border setting. While power to regulate is moving beyond states, multinational companies (MNCs) as global actors have assumed a role in negotiating transnational contractual arrangements that can be viewed as outcomes resembling collective agreements. It should be noted that comparative insights are also useful in terms of examining this, what could be termed, transnational dimension of collective bargaining as different domestic labour law regimes have different standpoints as to, and diverse experience of, this phenomenon.
2
Legal Frameworks for Collective Bargaining
2.1
Introduction
Legal frameworks for national collective bargaining systems consist of several elements that affect collective bargaining structures and the legal status of collective agreements. Not only do the legal definition of a collective agreement and the parties thereto diverge but also the regulatory approach of agreements and their overall role in the system of labour market regulation. It is important to pay attention to both bargaining processes and collective agreements as regulators of substantive terms and conditions of employment and to pay heed to industrial relations, and their interplay, in national contexts. Procedural clauses in collective agreements are important in terms of administering bargaining systems as they often regulate dispute settlement mechanisms between the parties to the agreement. Particular dispute resolution mechanisms attached to collective agreements reflect the administration and implementation of the system, being essential elements of the system. Moreover, how they function often contributes significantly to the stability of the labour market. In Europe, regional integration within the EU has had more influence on national collective bargaining regimes than can be seen at the level of EU treaties or legislation. Jurisprudence of the Court of Justice of the European Union (CJEU) on fundamental EU economic freedoms and posting of workers has especially affected national collective bargaining regimes and expanded the influence of the EU in the field of collective labour law. The CJEU’s jurisprudence has come to touch upon the foundations of collective bargaining systems, which in turn has raised the question of the conformity of this approach with fundamental labour rights. Another dilemma has been posed by the development that relates to European economic governance and its impact on national collective bargaining systems in the EU.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
2.2
Histories of Evolution
In many countries, collective bargaining systems have a long history which has shaped the regulatory approach to collective bargaining and the legal nature of collective agreements. However, this history is not always a story of constant evolution. Indeed, past breaks with evolution may still profoundly affect the collective bargaining system despite formal changes in the societal order and regulatory framework. This also means that the relevance of the existing regulatory framework and its defects does not become visible unless placed within a broader historical context. In Eastern Europe are to be found examples of countries, currently Member States of the EU, where the development of industrial relations and collective bargaining was for a long period frozen for political reasons. This still affects collective bargaining systems. For example, in Slovenia, the first collective agreements were concluded as early as the end of the nineteenth century during the Austro-Hungarian monarchy. Later, they gained an important role in regulating employment relationships. However, during the period of socialistic Yugoslavia, development of a collective bargaining regime was interrupted for a half a century and it was only in the 1990s that the collective bargaining system was revived.15 Similar to Slovenia, also in Croatia the first collective agreements were concluded as long ago as the late nineteenth century. The 1930s saw a widespread practice of collective agreements in Yugoslavia until the nationalization of private companies in the socialist era. The advent of workers’ selfmanagement made collective agreements redundant because in that period the prevailing ideological position was that there was no opposing side in the employment relationship since the employees themselves managed the means of production. Only at the beginning of the 1990s, with Croatian independence and democratic change, did conditions emerge for the revitalization of collective bargaining.16 Political history affects the framework of industrial relations and may hamper realization of the right to collective bargaining, as, for example, the Czech national report demonstrates. The Czech collective labour law model has remained quite far from Western tradition and the collective bargaining system has remained underdeveloped. During the German Occupation, the Czech state adopted German legislation with a few changes. The Czech regime was forced to restrict collective bargaining and trade unions were required to join the newly formed Centralized National Trade Unions, whose only task was to implement the will of the state. The Communist Party followed the same pattern after 1948. Trade unions were merged and incorporated into the totalitarian state. The democratic revolution in 1989 and 15 16
See the report of Senčur Peček (2019) about Slovenia, pp. 502–503. See the report of Smokvina and Laleta (2019) about Croatia, p. 195.
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subsequent fundamental changes in the society disclosed the insufficiency of existing collective labour law. Because of the suppressed role of trade unions and a poor level of social dialogue collective agreements still play only a secondary role in the Czech Republic. Czech collective labour law has not fully recovered from the communist era, and the European social model, if we can speak of one, has not yet been realized under Czech conditions. Legal actors were educated in different legal cultures, which affects their legal thinking.17 In Poland, many reasons have affected the current crisis of collective bargaining, which also relates to the historical development of industrial relations. An important exception was the short period in the 1980s when independent trade unions, including Solidarność (Solidarity), were established as a result of social protests. The period ended with the imposition of martial law in December 1981, and the regime dissolved all then-existing trade unions. The new law set out company-level structures with the most important trade union prerogatives. This has had a significant impact on the development of trade unions in Poland.18 In terms of comparison of the collective bargaining regimes, Central and Eastern European (CEE) countries are often grouped in a relatively simplistic way. With higher trade union density and a well-developed collective bargaining system, Slovenia shows herself as a contrast to other countries. In the Visegrád countries, Poland, Hungary, the Czech Republic and Slovakia, collective bargaining has remained fragmented and largely decentralized. In most countries, sectoral-level agreements have remained scarce.19 The transition related to EU membership of these countries has been very difficult in the post-communist era for historical reasons which still affect collective labour protection mechanisms. In Russia, the Soviet period saw no development of a tradition of real collective bargaining because strong and independent social partners were not formed and bargaining practices did not exist beyond local level. Collective bargaining remained more decorative than real, serving economic and ideological aims more than protection of workers’ interests. Lack of a tradition of real collective bargaining has influenced post-Soviet and contemporary practices and still causes problems in the system of collective agreements.20
See the report of Pichrt and Štefko (2019) about the Czech Republic, pp. 207–210 and 222–223. 18 See the report of Pisarczyk and Skupień (2019) about Poland, p. 432. 19 See Bernaciak (2015), p. 375. 20 See the report of Gerasimova (2019) about Russia, p. 473. 17
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A Fundamental Labour Rights Perspective and Constitutional Protection
The ILO Declaration of Philadelphia not only reaffirms freedom of association but also sets forth effective recognition of the right to collective bargaining. Along with other international human rights documents, several ILO conventions provide an international regulatory framework for collective bargaining. The right to bargain collectively is considered a core fundamental right of workers. ILO Convention No 9821 concerning application of the principles of the right to organize and to bargain collectively is among the eight core conventions governed by the 1998 ILO Declaration on Fundamental Principles and Rights at Work.22 The Convention refers to collective bargaining as “voluntary negotiation between employers or employers’ organizations and workers’ organizations, with a view to regulating the terms and conditions of employment by means of collective agreements” (Article 4). Importantly, Convention No 98 also provides for protection of workers against acts of discrimination (Article 1), protection of workers’ and employers’ organizations against acts of interference (Article 2), and promotion of development and utilization of machinery for voluntary negotiation of collective agreements (Article 4). Another definition of collective bargaining in ILO Convention No 15423, which seeks to promote the principles set out by Convention No 98, governs all negotiations that take place between an employer, a group of employers or one or more employers’ organizations, and one or more workers’ organizations (Article 2). The objective of collective bargaining in Convention No 154 is defined as to determine working conditions and terms of employment and/or regulate relations between employers and workers and/or regulate relations between employers or their organizations and a workers’ organization or workers’ organizations. Measures adapted to national conditions are to be taken to promote collective bargaining with the aim of enabling bargaining for all employers and groups of employers (Article 5). ILO Recommendation No 9124 complements related conventions, providing a definition of collective agreements as “all 21 Convention No 98 concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, as modified by the Final Articles Revision Convention, 1961. 22 ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted by the International Labour Conference at its Eighty-Sixth Session, Geneva, 18 June 1998 (Annex revised 15 June 2010). 23 Convention No 154 concerning the Promotion of Collective Bargaining. 24 Recommendation No 91 concerning Collective Agreements (Collective Agreements Recommendation).
agreements in writing regarding working conditions and terms of employment concluded between an employer, a group of employers or one or more employers’ organizations, on the one hand, and one or more representative workers’ organizations, or, absent such organizations, the representatives of the workers duly elected and authorized by them in accordance with national laws and regulations, on the other” (Article 2(1)).25 We should not forget that the emergence of fundamental labour rights in international labour law has occurred relatively late. Yet it should be clear that the normative effects of fundamental labour rights should be seen in a broader context than that of international labour standards governed through domestic regulation. Their recognition can be found at different layers of legal normativity, which highlights interaction, dialogue and mutual enforcement. These rights bear a developing function as they introduced the language of fundamental rights and international human rights into the labour protection discourse. Moreover, fundamental rights not only provide workers with a normative floor of rights protection but they can also be viewed as having a radiative effect upon labour protection.26 This emphasises the centrality of the right to collective bargaining and freedom of association, as these rights form a basis for other labour rights to evolve. At a European level, the European courts, the CJEU and the European Court of Human Rights (ECtHR), have played a significant role in shaping the level and coverage of fundamental labour rights protection. However, their divergent paths have created certain controversy and legal uncertainty. Moreover, EU constitutionalization has lacked a coherent vision of the role of collective labour rights. This was manifested in the Laval judgment of the CJEU, where the fundamental nature of the right to collective bargaining was not acknowledged.27 Until its inclusion in the Charter of Fundamental Rights of the EU (CFREU) the right to collective bargaining did not enjoy constitutional protection in the Union.28 With the Lisbon Treaty, the CFREU became binding and a constitutional framework for the right to collective bargaining was set out. European Council human rights instruments follow different approaches from that of the EU. Article 11 of the European Convention on Human Rights has come to encompass the right to collective bargaining with an interpretation adopted by the ECtHR, which has meant strengthening 25 Several other conventions are also relevant to international protection of the right to collective bargaining, such as Convention No 151 concerning Protection of the Right to Organise and Procedures for Determining Conditions of Employment in the Public Service. 26 Liukkunen and Chen (2016), pp. 11–13. 27 See Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avdelning 1, Byggettan, Svenska Elektrikerförbundet. 28 Article 28 of the Charter.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
protection under the right in Europe.29 The right to bargain collectively is also a fundamental right under the European Social Charter. Since the right to collective bargaining within the EU has been affected by CJEU rulings, where economic considerations ensuring the dominance of EU fundamental economic freedoms have prevailed, the development of ECtHR jurisprudence sends a significant (counter-) signal of a more protective approach. The EU approach, while on the one hand formally committed to building social Europe, on the other hand strongly pursuing economic objectives that delimit the autonomy of collective bargaining, has spread distress on the direction of social integration within the Union. The constitutional framework of fundamental labour rights is often important for realization of those rights. In constitutional rights, the legislature can be understood as encapsulating core values protected through rules of different fields of law. Constitutionalization of the right to collective bargaining strengthens and highlights the status of that right, and often relates to heightened status of the right to freedom of association. In many legal systems, the right to collective bargaining and the right to strike are strongly interrelated.30 The existence of the former may presuppose the latter. The right to strike can be considered so important in terms of complete fulfilment of the right to collective bargaining that its non-existence would make employees’ right to collectively bargain inefficient and useless.31 However, in the EU the right to strike has also faced certain restrictions set out by the CJEU.32 Often, in the absence of explicit regulation, constitutional protection of collective bargaining has evolved in the context of freedom of association. Although constitutional recognition of the right to collective bargaining is set forth in the constitutions of several countries, this has not prevented state interventions delimiting the autonomous sphere of the right to collective bargaining. In some countries, the judiciary has played an important role in strengthening the right to collective bargaining. However, this has been hampered when national legislatures have pushed forward reforms that loosen the regulatory framework. There has been increasing discussion and concern over constitutional protection of the freedom of association being challenged in terms of the changing status of collective bargaining system and the traditionally well-established position of trade unions in some countries. 29
See ECtHR, Demir and Baykara v Turkey, 12 November 2008 as well as Enerji Yapi-Yol Sen v Turkey, 21 April 2009. See also Liukkunen (2016), p. 139. 30 For an extensive comparative account of the right to strike, see Waas (2014). 31 See Liukkunen (2016), p. 134. 32 See Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP and OÜ Viking Line Eesti and Case C-341/05 Laval.
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In Germany, the constitutional right of freedom of association encompasses the right to bargain collectively. According to the Federal Labour Court, “[T]he right to bargain collectively is constitutionally due to only those coalitions that are in a position to make sensible use of the area left open by the state by entering into collective agreements. This demands from a trade union the ability to exert at least so much pressure on the other side that the counterpart sees fit to set to embark on negotiations for a collective agreement”.33 In Canada, the right to collective bargaining has only recently received constitutional recognition. The Canadian experience draws attention to the object of regulation. Constitutional protection of the right to collective bargaining is not based on express protection of the right to bargain collectively. Instead, protection is realized through recognition and acceptance by the Supreme Court of Canada of the special relevance of freedom of association to collective bargaining. Constitutional protection falls within the umbrella of freedom of association, while freedom of association of private sector employees enjoys statutory protection at the federal, provincial and territorial levels. However, this is limited to what is primarily a general procedural right to be heard. It is a right to a process rather than to a specific model of collective bargaining. Notably, the right to collective bargaining is also recognized for public sector employees because of the need for “government” action in order to bring the activity within the protection of the Canadian Charter of Rights and Freedoms, which is, by nature, a civil and political rights document rather than an economic, cultural and social rights document.34 Constitutional protection of the right to collective bargaining has to be seen in the context of the prerequisites for using this right. In Brazil, the right to bargain collectively is shielded by the Federal Constitution, within the scope of promoting better social conditions for workers. The Constitution guarantees recognition of collective bargaining instruments as a social right of workers. The Superior Labour Tribunal (Tribunal Superior do Trabalho) has sought to follow international labour standards that promote and value collective bargaining. However, with the single-union representation system, only one labour union for each professional category and one trade association for each economic category can represent workers or companies in the same territory.35 Recently, because of challenges to the Brazilian economy, the collective bargaining system has undergone regulatory changes increasing flexibility of labour 33 See the report of Waas (2019) about Germany, p. 289 and the decision of the Federal Labour Court of 5 October 2010 referred to therein. 34 See the report of McEvoy (2019) about Canada, p. 138. 35 See the report of Campos Medina Maia (2019) about Brazil, pp. 96–100.
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market regulation. Earlier, precedents of the Superior Labour Tribunal had a positive impact on collective bargaining but this ended with the Labour Reform Law of 2017. In order to better adapt labour relations to modern environments, the Law introduced significant modifications, some of which authorize collective bargaining on labour rights and conditions which were earlier protected against making them more flexible. As for the present situation, there is evidence of a tendency to prefer collective bargaining geared toward adapting employment relations to the needs of business, which reflects a greater tendency to engage in collective bargaining at company level.36 In Poland, the Constitution is viewed as having potential to further develop collective bargaining as a fundamental labour right, and constitutional protection is afforded both to the freedom of organisation and the right to collective bargaining. According to the Constitution, solidarity, dialogue and cooperation between social partners along with the freedom of economic activity and private ownership are pillars of the economic system in Poland. Yet collective bargaining does not play a fundamental role in shaping the societal system. Especially, historical reasons have hampered the development of a mature collective bargaining regime.37
2.4
National Regulatory Frameworks for Collective Bargaining
Regulatory frameworks for collective bargaining have developed differently in different countries and they rest, with varying extent and combinations, on legislation or autonomous regulation by social partners. Again, broad generalizations should be avoided, since great variation occurs within different groups and the effect of collective agreements is profoundly different in highly decentralized systems when compared to predominantly multi-level or centralized systems. The particular institutional context and related modes of operation, based on structures of collective representation, which may have evolved over a long time, contribute to the development of collective bargaining models. A regulatory framework for collective bargaining may have evolved in an organization-based manner so that statutory regulation remains limited or largely absent while the social partners play a dominant role, as the Danish example demonstrates. Denmark is held as the foremost exponent of the traditional Nordic model.38 In the late nineteenth century, 36 See the report of Campos Medina Maia (2019) about Brazil, pp. 100–102. 37 See the report of Pisarczyk and Skupień (2019) about Poland, pp. 418 and 432. 38 See for example Sigeman (2003), p. 498.
a system of labour market organization based on collective bargaining emerged in Denmark. In 1899, a serious nationwide conflict was brought to an end with the historic September Agreement. This established fundamental principles for collective bargaining, for instance the right to bargain collectively, the right to strike, and the right of management to conduct business. The September Agreement has provided a solid foundation for Denmark’s collective bargaining system, with the old principles still forming the basic elements of the system, which is highly centralized. In Denmark, systematic legislation on terms of employment is absent. Indeed, it is a joint understanding between the legislature and the social partners that the state should intervene as little as possible in issues relating to pay and working conditions, as these are more suitably settled via collective agreements.39 In Italy, collective bargaining lacks a systematic legal regime, and collective agreements are regarded as a part of ordinary contract law. The Constitution affirms the right of trade unions to organize freely and unions with legal personality may enter into collective agreements. Lack of statutory regulation on collective bargaining has enabled autonomous regulation by the biggest federations of employers and employees. The social partners have defined the important features of the system, such as the relationship between different levels of collective bargaining.40 In the U.S.A., the system of decentralized industrial relations and collective bargaining is based on both federal statutes and individual state laws. The National Labor Relations Act (NLRA), passed in 1935, applies to private sector companies whose operations affect commerce. The Act sets an obligation for both employers and unions to bargain in good faith over wages, hours, and other terms and conditions of employment. The National Labor Relations Board regulates union organizing, union elections and unfair labour practice proceedings encompassing the statutory duty to bargain collectively.41
2.5
Perspectives on the Legal Nature of Collective Agreements
In many national systems, collective agreement provisions on terms and conditions of employment can have binding effect, so that they become applicable on a wider scale than merely between the member organizations of the agreement concerned, and they largely determine the terms and conditions of employment. Normative clauses in collective 39 See the report of Videbæk Munkholm and Højer Schjøler (2019) about Denmark, pp. 225–228. 40 See the report of Magnani (2019) about Italy, pp. 359 and 362. 41 See the report of Ray (2019) about the United States, p. 600.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
agreements can be mandatory so as to make them applicable beyond the normal personal sphere of the agreements. The contents of collective agreements are often characterized by dualism: collective agreements contain provisions on the relation between signatory parties (obligatory part) and provisions on terms and conditions of work (normative part) that on certain conditions apply beyond the parties to the agreement. For example, in Germany collective agreements have normative effect according to the Act on Collective Agreements. A collective agreement is defined in the Act as an agreement which “fixes rights and duties of the parties to the agreement” and “contains legal norms that regulate the content, the conclusion and the termination of employment relationships and questions relating to establishments as well as to the works constitution”. Under the Act, collective agreement provisions that regulate the content, commencement or termination of employment relationships apply directly and with mandatory effect as between both parties bound by the agreement (so-called Tarifgebundenheit) who fall within the area of application of the agreement.42 The division of collective agreement clauses into obligatory and normative does not require a centralized system of collective bargaining. To illustrate, the most significant feature of industrial relations and collective bargaining in Japan is that both are decentralized, which reflects enterprise unionism. A collective agreement is a contract between a labour union and an employer or employers’ organization. However, the latter is rarely a party to the contract. A collective agreement has two kinds of legal effects: an obligatory effect between the labour union and the employer; and a normative effect which governs the content of the individual employment contract between the workers, who are members of the union, and the employer. The Japanese Labour Union Act has used the German Act on Collective Agreements as a model, and collective agreements apply to union members only as a principle. In addition, as a principle, collective agreements, work rules and labour contracts cannot violate labour standards established by mandatory laws such as the Labour Standards Act and the Minimum Wages Act.43
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Changing Nature of Bargaining Regimes: in melius and in peius Derogations In many bargaining systems, collective agreements contain provisions that improve terms and conditions of work compared to legislative requirements, and the principle of favourability is largely followed. Enabling derogation of higher level collective agreements or labour legislation in
peius has often been abolished or enabled only to a limited extent but the situation has changed in many national systems. Several collective bargaining systems have undergone changes as regards opportunities to incorporate in peius derogations via collective agreements. Notably, the possibility of derogations in peius has been either introduced or enlarged. This has affected the protective function of collective agreements and emphasized the role of the state as a regulator intervening in the regulatory collective bargaining framework. Regulatory approaches to enabling derogations from legislation that are sometimes divorced from established principles of labour law have been used to encourage or favour local bargaining. In France, recently, a shift has occurred from a requirement of explicit authorization to enable in peius derogations so that the reform of the “Loi Travail” 2016 has made derogation in peius from the law the main rule. This is a fundamental change to the system where explicit authorization of derogation in peius was previously required in order to make it possible.44 In Italy, non-derogability in peius is considered an essential feature of collective agreements. A collective agreement, as well as an individual employment contract, may improve, but cannot worsen, conditions for workers provided by legislation. This is considered to derive from the nature of labour law, which seeks to protect workers. In some cases, even derogations in peius have been permitted. A third alternative is that no derogation is permissible either in peius or in melius. The Jobs Act states that when the law delegates regulation to collective agreements, this means collective agreements at any level. The aim of the legislature has been to encourage company level bargaining with this change. In addition, the case law suggests that company level agreements prevail, even if they are less favourable to workers, on the basis of a specialty criterion or because they are sources closest to the employment relationship.45 Hungary has adopted a model where in peius derogations via collective agreements are enabled from the general rules implied in the new Labour Code of 2012. However, there is one important sectoral exception, in that the Code severely limits the scope of collective autonomy and collective bargaining in state and municipally owned companies. The Code also gives some impetus to the further decentralization of collective bargaining with rules that redefine the relationship between collective agreements at different levels. A collective agreement of limited effect, for example, a company-level agreement, may derogate from another agreement with broader scope, for example, a sectoral agreement,
42
44
2.5.1
43
See the report of Waas (2019) about Germany, p. 291. See the report of Araki (2019) about Japan, pp. 379–381.
45
See the report of Mazuyer (2019) about France, pp. 257–258. See the report of Magnani (2019) about Italy, pp. 361 and 367.
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unless otherwise provided therein, as far as it contains more favourable regulations for employees. This means that a sectoral agreement can allow a lower-level collective agreement to derogate from it, including in peius.46 In Spain, collective agreements must respect the mandatory provisions of the Workers’ Statute, but deviating from mandatory legislation via a collective agreement is possible under certain circumstances. Since the Labour Reform of 1994, the Workers’ Statute has included a reference to an opt-out clause in collective agreements at sectoral or intersectoral level. Such clauses allow companies to adopt lower wages or to deviate from provisions on working conditions agreed at a higher level when companies are undergoing temporary economic difficulties. These working conditions are: (a) working time; (b) distribution of working time and time schedules; (c) shift work or any method of organizing work in shifts; (d) pay structure and amount; (e) working system and work performance; (f) functions that workers develop in the firm; and (g) voluntary complements to social security benefits.47 In Greece, legal intervention in the collective bargaining system has resulted in the possibility to derogate in peius. In the context of the loan agreement with the International Monetary Fund (IMF), memoranda concerning reforms were attached to the Law 3845/2010. The Law provided that the terms of occupational and company agreements may derogate in peius from the terms of sectoral agreements and the national general collective agreement; in a similar vein, sectoral agreements may derogate from the national collective agreement.48 However, following reactions from the social partners, it was agreed to observe the floor of rights laid down by the national general collective agreement. Reductions in wage levels were enabled through special company level collective agreements. These agreements could be signed by an employer with fewer than 50 employees and the relevant company level trade union or, if there was no such union, by the relevant sectoral trade union or confederation.49 In Brazil, the collective bargaining system is built on two types of collective bargaining instruments: collective bargaining conventions concluded between labour unions and trade associations and collective bargaining agreements concluded between one or more companies and the corresponding trade union. With the Labour Reform Law, derogations from statutory labour rights and conditions in peius are permitted. The only rights protected from this possibility are those safeguarded by the Federal Constitution and by some other specific rules in the law
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itself.50 The Federal Constitution protects certain labour rights against collective bargaining in peius. Among these rights, the Constitution lists protection against arbitrary dismissal or without paying severance benefits; a mandatory severance indemnity fund called the Guarantee Fund for Time of Service (FGTS); a minimum monthly wage; the “thirteenth” salary (a mandatory year-end bonus of one monthly salary); a higher pay rate for night work; a limitation on the length of working hours; the right to a remunerated weekly rest period (at least one paid day off every week); the right to receive prior notice before termination of the employment contract; special protection for women workers; protection against dangerous or unhealthy work; protection against discrimination of all kinds; and maintenance of all preventive measures to assure health and safety in the workplace.51
2.5.2 Erga omnes Effect For many collective bargaining systems, an important element broadening the coverage of collective agreements is extension of their applicability. Often, a particular mechanism of extension of the application of normative clauses in collective agreements exists, and this mechanism is based on public law features of labour law. A system of generally applicable collective agreements enables application of minimum terms and conditions of employment set out by a collective agreement beyond the normal personal sphere of the agreement. In several European states, like Belgium, Finland and France, the erga omnes effect is an essential element in the minimum protection of employees. However, it should be stressed that various mechanisms are available for extending the application of collective agreements. Moreover, their significance in harmonizing terms and conditions of employment as well as providing minimum protection varies. Altogether, erga omnes extension of collective agreements exists in notably different variations. Finland is an example of a country where generally applicable collective agreements play a strong role in setting minimum terms and conditions of employment for employees working for non-organized employers. The erga omnes system was reformed in 2001. The reform involved establishing a separate mechanism for granting general applicability under conditions set out in the Employment Contracts Act. In Finland, generally applicable collective agreements form an essential source of minimum terms and conditions of employment and their coverage is wide. There is no statutory minimum wage but generally applicable collective agreements set out minimum pay. In France, collective agreements can have an erga omnes effect so that every
46
See the report of Kun (2019) about Hungary, pp. 336–347. See the report of Chacartegui (2019) about Spain, p. 533. 48 See Koukiadaki and Kokkinou (2016), pp. 151–152. 49 Ibid. 47
50 See the report of Campos Medina Maia (2019) about Brazil, pp. 95–96 and p. 102. 51 See the report of Campos Medina Maia (2019) about Brazil, p. 97.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
employee is protected by the collective agreement applicable to the company within certain geographic area or sector.52 In Croatia, the Labour Act allows extension of the application of collective agreements (erga omnes effect). The Minister in charge of labour can extend the application of collective agreements on certain conditions. However, the relevance of the extension mechanism has remained limited.53 In Germany, the relevance of generally applicable collective agreements is restricted. According to the Act on Collective Agreements (Tarifeinheitsgesetz), the Federal Minister for Labour Law and Social Affairs can declare a collective agreement generally binding on a joint request by the parties to a collective agreement and acting in consultation with a committee consisting of representatives of the central organizations of employers and representatives of the central employees’ organizations. A precondition to the declaration is that it is in the “public interest”. Public interest is deemed to regularly exist if (1) either the collective agreement concerned has major significance for the content of working conditions within its area of application, or if (2) ensuring the effectiveness of collective norm-setting against the consequences of an “undesirable economic development” requires a declaration of general bindingness.54 In Russia, the present system with the erga omnes effect of collective agreements was introduced in 2001. A collective agreement applies to all employees whether or not they are members of the trade union that participated in concluding the agreement. The principle of equality and prohibition of discrimination in addition to the necessity to provide equal conditions for all employees are usually given as explanations of the need for the current model. However, many trade unions criticize the system on the basis that it reduces workers’ motivation to be union members and to participate in the struggle for better working conditions, and that it ultimately reduces trade union density. 55
3
Decentralization of Collective Bargaining
3.1
Introduction
Changes in the economy, the operating environment of companies and working life have had a profound effect on many collective bargaining systems. In many national systems, erosion of key pillars of collective bargaining is noticeable, while new kinds of regulatory frameworks that 52
See the report of Mazuyer (2019) about France, pp. 262–263. See the report of Smokvina and Laleta (2019) about Croatia, pp. 192–193. 54 See the report of Waas (2019) about Germany, pp. 292 and 304. 55 See the report of Gerasimova (2019) about Russias, pp. 478–479. 53
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enhance local level bargaining have come into being. It should be noted, however, that for some countries the question of decentralization trends is not relevant, as the present system of collective bargaining is, and has been, predominantly decentralized. Notably, in many countries the national legislature has actively sought to promote flexibilization and decentralization of the collective agreement system through legislative reforms. In some cases this has resulted in tension between sectoral or branch level collective agreements and local level agreements, especially when the legislature has sought to strengthen the status of local level agreements at the cost of higher level agreements and their coordinative function. This has raised critical voices about whether legislatures are able to build paths of organized decentralization which can take place in a controlled manner. Although legislatures may create incentives towards local level bargaining, they cannot control bargaining processes. Often, as has been pointed out, legislatures have also allowed to the local level room to agree on certain terms of employment in peius. To a notable extent this has occurred against the legal tradition and basic labour law principles of the country. Decentralization can be seen as a result of decreasing trade union density, changes in the power balance of bargaining and overall weakening of the role of the social partners, but it can also be given historical explanations. Decentralization can also be seen as contributing to decreasing collective agreement coverage. Decentralization is often identified with a growth in company or workplace level bargaining. Nevertheless, it is a multifaceted and complex phenomenon, which relates, inter alia, to changes in bargaining institutions and their interplay, bargaining structures, levels and methods of bargaining and the contents of the bargaining agenda. Decentralization is strikingly connected to economic developments and local bargaining has became an important tool for improving job security. In some systems, decentralization has occurred simultaneously with growing de-unionization, which has pushed forward structural and operational changes to labour market organizations. Sometimes, changes in the bargaining power of the parties are offered as an explanation for weakening bargaining regimes. In Europe, active promotion of decentralization has also been on the explicit agenda of the European Troika, consisting of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), which has presented itself as an active driver for changes in the collective bargaining systems of EU Member States facing economic difficulties.56 The wider framework of ongoing changes touches on an area of political decision-making where bargaining mechanisms are used as means to be adjusted in order to revitalize national economies. 56
See Seifert (2014) and Clauwaert and Schömann (2012).
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3.2
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European Trends in Decentralization
In Europe, different trends in decentralization are under way. In the Nordic countries, decentralization can be considered to have taken place in a coordinated way so that sectoral agreements have set the framework for local bargaining. Importantly, however, the increase in local level bargaining relates to wage-setting becoming more individualized, and affecting factors related to competitiveness are seen not only between companies but increasingly also within sectors and individual companies. In many systems, the pay-rise scale is increasingly decided at the company level. In Sweden, wage formation is based on the Industrial Negotiation Agreement (Industriavtalet), which means that the collective agreement on pay for the export industry exposed to competitiveness serves as a benchmark for other areas of the agreement. In practice, this agreement governs the entire labour market. However, a noteworthy trend which is changing the picture is the use of so-called figureless agreements in wage formation. With these agreements, noted in the national report as the purest form of decentralized negotiations, the size of pay rises and their distribution are both determined at the local level. These agreements may involve specific arrangements for those who do not receive a pay rise, in the form of support, training, and so on. In 2015, 25% of employees were covered by figureless agreements.57 In addition to pay and working hours, in some systems, local level bargaining has also been increasing in issues such as organization of work and training. Following the German model, in many countries collective agreements contain various types of “hardship clauses” that can be applied on the basis of evaluation of changes in the operating environment of the company. This has meant local bargaining becoming a central tool for anticipating and managing changes and with the aim of ensuring better employability. Pressures for institutional changes and changes in the role of social partners are notable in many national systems. In Denmark, specific statutory provisions that are mandatory can be deviated from by a collective agreement when the social partner on the employee side is a member of a national organization and “most representative”. The idea of this qualification of the employees’ representative is that most representative associations ensure the most suitable level of rights for the employee. The new Holiday Act and the Act on Taxi Driving have prompted debate in parliamentary committee and consultations on the concept of “most representative”. According to the national report, the situation among the social partners in Denmark is quite tense as traditional trade unions are in competition with new autonomous ones. 57
See the report of Westregård (2019) about Sweden, pp. 564–565 and p. 574.
The autonomous unions have complained that allowing deviations from mandatory statutory provisions only by “most representative” trade unions introduces a monopoly for the traditional trade unions. In 1985, the autonomous unions had about 13,000 members, but by 2015 their number had risen to 253,000, predominately with a corresponding decrease in the members of traditional trade unions. The traditional unions of a certain history and significance are accepted as the “most representative”. However, the concept, which is not defined in law, has been used according to the understanding that only one collective agreement qualifies as “most representative”.58 The Finnish collective bargaining system has been highly centralized and coordinated. However, in 2007, the Confederation of Finnish Industries (Elinkeinoelämän Keskusliitto) changed its internal rules in order to ban its own participation in central-level bargaining. This change marked the end of central level bargaining and an emphasis to sectoral bargaining, while it also entailed a certain rearrangement of the overall coordination mechanism and bargaining powers within industrial relations. The trend towards differentiation and individualization of wages has been characteristic of decentralization development in Finland, even though wages are negotiated at sectoral and local level. Finland differs from other Nordic countries with its well-established erga omnes system, which significantly broadens collective agreement coverage. In 1996, an important legislative change opened local bargaining to include non-organized employers bound by generally applicable collective agreements, albeit to a limited extent. Non-organized employers were given a possibility of making local agreements on the basis of generally applicable collective agreements they are bound to that deviate from the Act on Working Hours. In Belgium, the centralized collective bargaining system is highly institutionalized and coordinated. Notably, the system has not been much affected by general development towards decentralization. Sectoral collective agreements with high coverage have traditionally been important. Collective agreement coverage is very high, at 96% among the highest in Europe. In addition, trade union density is relatively high, at 52%. Over 70% of employers are organized. Collective bargaining takes place at three main levels: national, sectoral and company. Belgium has not experienced a major trend towards decentralization and the well-established bargaining system has not been under pressure for substantial reforms.59 In France, drastic changes have occurred in the previously strong regulatory framework for collective bargaining, causing destabilization of the foundations and actors involved in collective bargaining. Most important changes concern the 58 See the report of Videbæk Munkholm and Højer Schjøler (2019) about Denmark, p. 236. 59 See the report of Kéfer (2019) about Belgium, pp. 66–67.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
hierarchy between collective agreements; company level agreements prevail over wider-ranging ones and at the local level even less favourable terms can be agreed upon. The aim of the legislative reforms is to encourage labour market flexibility, particularly as regards the “El Khomri Law” and the Macron Orders, which can be partly explained by the latest recommendations from the European Semester for France. The sphere of the in melius principle has been significantly limited by legislative changes. The “El Khomri Law” and, to an even greater extent, the Orders of September and December 2017, have further validated reversing of the collective bargaining hierarchy, which started with the law of 2008, widening the possibilities for bypassing certain higher level collective agreements.60 Moreover, French legislative reforms have weakened the position of trade unions with extended possibilities for the employer to bypass union representatives as the unique negotiating party in collective bargaining. The so-called “trade union monopoly” to conclude collective agreements at company level has been weakened. A works council can be set up by a company agreement. Once such an agreement is concluded, the union representatives give up their ability to negotiate and transfer this to the council, which then becomes the sole negotiator in the company. According to the national report, the system increases possibilities to bypass company level agreements with wider-ranging agreements and decreases the power of trade unions to bargain for better working conditions.61 Collective agreements are concluded on national, sectoral and company levels, and in 2015, there were 1094 sectoral collective agreements in France. The coverage of collective agreements is very high, over 90%, as the extension of collective agreements is widely used.62 In Poland, the collective bargaining system has remained weak. The law distinguishes between typical and atypical collective agreements. The former are negotiated exclusively by trade unions and may regulate all conditions of work and pay. Atypical agreements (accords) supplement the system of typical agreements. The Polish collective bargaining system is highly decentralized. However, company-level bargaining has limited scope and coverage. Multi-level bargaining is almost non-existent. At the national level, the social partners in the Social Dialogue Council can conclude collective agreements for their members. So far, national level collective agreements have not been concluded and there is no general framework at the national or sectoral level. The economic crisis has generally led to a segmenting of social dialogue and a reinforcing of company-level negotiations. In these circumstances, reconstructing sectoral bargaining may be very difficult.63 60
See the report of Mazuyer (2019) about France, p. 269. See the report of Mazuyer (2019) about France, pp. 269–270. 62 See the report of Mazuyer (2019) about France, pp. 262–263. 61
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The level of unionization in Poland was 10.8% in 2017. Collective agreements have played a role in the flexibilization of Polish labour law but their role in shaping working conditions is marginal in the private sector. The decrease in the coverage of collective agreements has been a long process and does not relate only to the economic crisis of the 2000s. However, the crisis has deepened some negative tendencies. The number of collective agreements has continued to decrease. According to the national report, industrial relations would need rather profound changes; without efficient incentives to launch negotiations, the social dialogue cannot be restored. Additionally, legal obstacles hamper the development of collective bargaining, such as formal requirements concerning company-level trade union organizations, complicated procedures for negotiating and registering collective agreements, and excessive state legislation which significantly limits the latitude for social partners. The national report stresses that to achieve the standard determined by the Constitution and to overcome the weakness caused by historical development of collective bargaining in Poland, public support seems to be necessary.64 Similar to the Polish situation, the Hungarian collective bargaining system is dominated by company level bargaining and the coverage of collective agreements is very low. According to one piece of data, in 2016, only 30% of employees were covered by collective agreements. The Hungarian national report points to several problems in the current situation; these relate to the very limited effect of collective bargaining. In practice, collective agreements often merely repeat statutory rules and regularly contain illegal or meaningless terms and conditions of employment. The new Labour Code of 2012 has increased the flexibility of labour standard-setting. Not only does it reorganize the relationship between statutory regulation and collective agreements but it also significantly extends the role of collective agreements in order to promote a more flexible, more reflexive and more autonomous system of employment regulation.65 The new Hungarian Labour Code has introduced a right for works councils and employers to conclude normatively binding works agreements at company and plant level. The works council can conclude agreements with the employer on terms and conditions of employment with the exception of wages and remuneration, which remain within the exclusive competence of trade unions. As such, these agreements can take over the role of collective agreements under specific conditions. Works agreements are valid only when no collective agreement is in force and no trade union is authorised, 63
See the report of Pisarczyk and Skupień (2019) about Poland, pp. 427–431. 64 See the report of Pisarczyk and Skupień (2019) about Poland, p. 422 and pp. 434–435. 65 See the report of Kun (2019) about Hungary, pp. 336–337 and p. 346.
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with at least 10% support, to enter into a collective agreement. However, only a very modest number of industry collective agreements with wider scope have been concluded and trade union density is low in Hungary. Under the abovementioned conditions, all terms and conditions of employment except wages and remuneration may be regulated by works agreements. In addition, all possible derogations offered by the Labour Code can be utilized similarly to collective agreements. According to the Hungarian report, the reform entails problems. Employers may be motivated to facilitate establishment of “yellow” works councils in order to be able to profit from flexible agreements concluded with works councils. On the other hand, according to the national report it has been argued that agreements between employers and works councils might be the first step towards collective arrangements in small and medium sized companies.66 In Spain, the trade union density was 13.9% in 2015. The Labour Law Reform of 2012 has promoted decentralization, fragmentation and atomization of collective bargaining, particularly in the form of company level agreements, with the consequence of reduced central organizational control or coordination. This has been aggravated by intensification of the organizational authority, strengthening of managerial prerogatives and amplification of the employers’ ius variandi. After the Law 3/2012 came into force, workers have had to either sign personal contracts or accept a smaller salary increase. Restrictions that sector level bargaining could impose on company level collective bargaining have been removed by regulatory changes. According to the national report, the new articulation of collective agreements at the lower or inferior levels has increased individual autonomy as an instrument for employers to unilaterally impose working conditions.67 The Italian collective bargaining system reflects the multitier structure of trade union organization. Despite increasing decentralization, industry-wide agreements form the basis of collective bargaining. The increase in the number of industrywide agreements is explained by the growth in the number of trade unions and employers’ associations. The overall picture of the Italian bargaining model is mixed: industry-wide agreements are considered to be less attractive for companies but the majority still seems to appreciate the stabilizing function of these agreements. Recent legislation has encouraged local level bargaining as a way of adapting national collective agreement rules to local conditions. The degree of coverage of collective agreements has been
U. Liukkunen
estimated to be very high, at around 80%, in 2014. The Protocol of 1993 has reorganized the bargaining system basically into two levels of bargaining, industry and company level, and alternatively local level. The Protocol has contributed to the macro-economic goals of aligning inflation and has been considered as serving its purpose.68 How decentralization takes place is essential in terms of labour market stability. It is also a key question in terms of the legal status of collective agreements as outcomes of local bargaining may either bear or lack the legal effects of collective agreements. The legislature and the social partners may seek to support or enhance coordinated decentralization by various means. The social partners may also be entrusted by the legislature with power to exercise some kind of control over local bargaining. Despite similarities, European countries cannot be viewed as a “block” in terms of developments in decentralization of collective bargaining. As noted, in some countries, development of decentralization is explained by historical reasons. Steady decentralization seems to be taking place in Slovenia.69 Social dialogue is well-established and takes place at various levels. At the state level, tripartite social dialogue takes place within the framework of the Economic and Social Council, which is composed of representatives of employers, employees and the government. In 2015, the trade union density rate was 20% and coverage of collective agreements 65%. Collective agreements have been increasingly used to creation of more flexible labour standards.70 In Hungary, in contrast, excessive decentralization is taking place and there are major problems in the functioning of the system. According to the national report, new legislative solutions allowing in peius derogations at the local level if the sectoral level agreement enables this may undermine the already very low effectiveness of sectoral level agreements.71 Employee participation is an essential element of industrial relations in many countries. In some labour law systems, the interrelation between collective bargaining and employee participation is important but generally the possible linkage between these two is not paid much attention to. However, growing pressure on collective bargaining systems and decentralization would seem to highlight a need to seek a stronger interplay. For example in Germany, the interplay between works councils and trade unions is considered important. In Croatia, too, strong cooperation is needed between different forms of employee participation in line with fostering their common aims, better working and living conditions. A works council may conclude a written agreement with the employer containing rules on employment 68
66
See the report of Kun (2019) about Hungary, p. 345. 67 See the report of Chacartegui (2019) about Spain, pp. 531, 539 and 452.
See the report of Magnani (2019) about Italy, pp. 366–369. See Bernaciak (2015), p. 374. 70 See the report of Senčur Peček (2019) about Sloveni, pp. 520–521. 71 See the report of Kun (2019) about Hungary, p. 347. 69
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
matters. Such an agreement is directly applicable to and binding on all workers of the employer who is a party thereto. However, it cannot regulate remuneration, working hours and other matters which are, as a rule, regulated by collective agreement, unless parties to a collective agreement have authorized the parties to do so.72
3.2.1
Opening Clauses: German Decentralization The German model of decentralization has often been referred to as successful in terms of stability and the capacity of the country to go through the economic crisis of 2000s that hit many labour markets dramatically. The reasons seem to relate to the adaptability of the collective bargaining model but also to the peculiarities of the country’s labour market institutions. In many other Western countries, the German model has been viewed as a model of controlled and coordinated decentralization in the path of the increasing flexibility of labour standard-setting. However, the unique nature of the German model makes it a challenging one when the decentralization of collective bargaining is examined. Recent developments show that the German system of collective bargaining also faces increasing challenges and is leaning to company level. Fragmentation of the model is taking place in various forms, demonstrated, for example, by the birth of small labour market organizations and by membership of employers’ associations without an obligation to be bound by related collective agreements.73 In addition, sectoral diversity affects the picture of the process of decentralization. Overall, collective bargaining plays an important role in labour regulation, although there has been a steady decline in collective agreement coverage. In 2016, 71,900 collective agreements existed of which 491 were generally applicable. Collective bargaining coverage has been steadily declining, and in 2011, 60% of all workers in the West, and 48% of all workers in the East were—in one way or another—bound by a collective agreement.74 The development of decentralization relates to the role of works councils, which traditionally have information and consultation rights and also a genuine co-determination right. The German works council system is unique and its co-determination rights for employees are extensive. It cannot, as such, be paralleled with any of the other Continental European systems, which are based on strong information and consultation rights. To a widespread extent, collective agreements at sectoral level contain opening clauses (Öffnungsklauseln) which, with different methods, enable deviation from labour standards 72
See the report of Smokvina and Laleta (2019) about Croatia, pp. 196–197. 73 See the report of Waas (2019) about Germany, pp. 294 and 305. 74 See the report of Waas (2019) about Germany, pp. 297–298.
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with a less favourable agreement not only through company level collective agreements but, under certain circumstances, even by way of works agreements (Betriebsvereinbarungen) concluded between works councils and employers. This combination of regulatory powers has brought about new forms of co-operation between trade unions and works councils. Despite institutional separations, in practice there has been a strong interplay between activities by works councils and trade unions. The use of opening clauses emerged in 1980s, and in 1990s erosion of sectoral bargaining was noticeable. However, a sectoral agreement of metalworking industry set out rules for deviations in 2004. After that, the Pforzheim Accord has acted as a kind of a prototype. It enabled agreement, after verification of the requirements by both parties to the collective agreement, on supplementary provisions or temporary derogation from minimum collective bargaining standards (for example, reductions in special payments, deferment of claims, increase or decrease of working time) in order to improve competitiveness, safeguard employment and enable new investment. Importantly, opening clauses could be used also when companies face competitive pressure but there is now acute crisis at hand.75 In recent years, the German legislature has sought to correct the labour market situation in order to improve labour protection and strengthen the status of collective bargaining. In 2015, the Act for Strengthening Collective Bargaining Autonomy (Tarifautonomiestärkungsgesetz) introduced a general statutory minimum wage. The Act also provided for additional powers to declare collective agreements generally applicable, making it easier to declare a collective agreement generally binding. Previously, a collective agreement could be declared generally applicable if (1) the employers bound by the agreement employed not less than 50% of the employees coming within its area of application and if (2) a declaration appeared that the agreement is generally binding. With the new Act, the threshold of 50% is no longer required.76 However, there is no unanimity as to whether the Act strengthens or weakens collective bargaining in Germany.77 The German legislature has also used statutory opening clauses in order to strengthen collective bargaining, so that, for example, some statutory provisions on temporary agency work can be deviated from only by collective agreements.78 In addition to decentralization of collective bargaining that derives from opening clauses in sectoral collective agreements, Germany has witnessed decentralization in the form of collective bargaining occurring within companies. In 75 See Fornasier (2016), p. 41 and the report of Waas (2019) about Germany, p. 300. 76 See the report of Waas (2019) about Germany, p. 304. 77 See Fornasier (2016), p. 44. 78 See the report of Waas (2019) about Germany, p. 304.
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2010, the Federal Labour Court held that a company can be bound by several collective agreements signed with different trade unions. After that, the Act on the Uniformity of Collective Agreements (Tarifeinheitsgesetz) was amended in 2015 in order to provide that in a given plant only the trade union with most members in the plant may conclude a collective agreement with the company management.79 It is important to note that some basic elements of the collective bargaining system have been under erosion, one of them being that membership of an employer organization entails the employer being bound by the collective agreement for the sector. The so-called OT-Mitgliedschaft means membership of an employers’ association without being bound by collective agreements. Traditionally, coverage by an industry-wide collective agreement relates to the membership of the employers’ association that is party to the agreement. However, in the case of a large number of employers’ associations this is no longer true. In the late 1980s, some employers’ associations launched a special membership status, which provides companies with the full range of services of the association but does not set a duty to comply with an industry-wide collective agreement. Some companies have taken advantage of this special OT status and later negotiated company-level agreements, often with the support of their employers’ association. However, most OT members have withdrawn from collective bargaining. The number of employers having OT membership varies. In 2014, 48.5% of metalworking industry companies belonging to the competent employers’ associations were OT members.80
3.2.2
The Impact of the European Economic Governance The Europeanization of collective bargaining is often viewed from the perspective of regulatory competences; the power of European level social partners to make agreements under EU law by virtue of Article 155 of the Treaty on the Functioning of the European Union (TFEU), or the power of social partners in the Member States to implement EU labour law directives through collective agreements on certain conditions. The EU does not enjoy regulatory competence on freedom of association and collective bargaining by virtue of Article 153.5 of the TFEU. However, this has not prevented development of CJEU jurisprudence having an impact on national bargaining models of the Member States. As we have seen, the EU has adopted a rather controversial approach to its Member States’ national models of collective bargaining, an approach which is manifested in the CJEU jurisprudence. The evolution of European integration has encompassed different phases which have shaped the
79 80
See the report of Waas (2019) about Germany, pp. 304–305. See the report of Waas (2019) about Germany, p. 294.
U. Liukkunen
approach to collective bargaining. On the other hand, it might not even be possible to speak of a single approach if a holistic picture is sought of the influence of European integration on collective bargaining in the EU Member States. Although the trend to decentralization of collective bargaining can be traced back to the 1980s in many European countries, it is notable that with the economic crisis, the EU entered into a new phase with “forced” decentralization in countries most hit by the crisis. In 2010, a new system of European economic governance started to take shape. With the introduction of the so-called European Semester, a yearly cycle of economic policy coordination has been adopted. Accordingly, under the Regulation 1176/ 2011, country-specific recommendations have been adopted.81 Memoranda of understanding between the Troika and EU crisis states have presupposed reforms of collective bargaining systems. These reforms aim at organized decentralization and favour local level collective bargaining. With organized decentralization, national bargaining models with a focus on sectoral or branch level have been required to shift to more local level bargaining. As a result, the reforms have caused structural changes in bargaining systems and, as Achim Seifert has put it, “a profound shift” in industrial relations.82 European economic governance has become a pressing feature of EU influence on national models of collective bargaining, which stands in sharp contrast to the approach previously adopted in other EU contexts. Importantly, EU level measures of economic governance build on solutions that intervene in the autonomy of collective bargaining. The pressure towards decentralization is highlighted by the European economic governance model, which has pushed national bargaining models towards local level bargaining and flexibilization. The establishment of European economic governance has meant intervention in labour law regulatory mechanisms so that collective bargaining is regarded as a means to be adjusted in order to achieve desired economic goals at the national level. The questions of the autonomy of collective bargaining and labour protection related to bargaining processes have not played a role in political interventions, which have influenced wage bargaining frameworks and shaped methods of collective labour standard-setting.83 The system of European economic governance has fundamentally influenced the regulatory framework for collective bargaining, especially in Mediterranean countries, and 81 See Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances. 82 Seifert (2014), p. 326. 83 See Seifert (2014).
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
marked a change of paradigm in the approach to national collective bargaining models and collective autonomy adopted by the EU.84 The system, which builds on mechanisms for monitoring, sanctions and intensified coordination targeted at individual Member States, meant a complex shift in regulatory power over collective bargaining from the national level to the European level. Intervention exercised by the Troika has taken various forms. Some Member States, such as Greece, Portugal and Ireland, have received financial aid on condition that they agree to a memorandum of understanding with the Troika or on condition that they commit to policy reforms in “Stand-By Arrangements” with the IMF, for example, Hungary, Latvia and Romania.85 When Spain received international financial aid for its financial sector, this was linked to a Memorandum of Understanding requiring changes to labour market regulation. In the case of Italy, a confidential letter from the head of the ECB required profound structural reforms, including radical decentralization of collective bargaining.86 The European economic governance system has resulted in intervention in national collective bargaining models with direct impact on labour standards, for example, so that wage cuts via specific forms of decentralization of collective bargaining have been advanced.87 In addition, collective bargaining coverage at the sectoral level has been intervened in, as in the Italian case, where the public sector was to be excluded from collective bargaining for a certain period. Hence, the collective bargaining autonomy of EU Member States has been affected in terms of contents, levels and parties to agreements as well as the personal sphere (sectoral coverage) of agreements. From the labour rights perspective, the European economic governance model does not occur within a clear regulatory setting and it represents democracy deficits.88 However, its legitimacy derives from political mechanisms, underpinned by the tendency of a stronger economic dimension and weaker social dimension to European integration.89 As noted earlier, the competences of the EU are limited to those conferred by the treaties. According to Article 153.5 of the TFEU, the EU lacks competence in the area of wage policy. However, Article 121 of the TFEU enables recommendations to individual EU Member States on wage policy in the context of coordination of economic policies.90
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Restructuring the Greek collective bargaining system has been a striking example of the power exercised by the Troika and of the harsh consequences which implementation of the European economic governance system may have on entire national bargaining models and their institutional setting. It can already be concluded that the intervention has led to radical decentralization and profound erosion of the collective bargaining model.91 The aim was to cut wage costs so that wage flexibility at the company level was advanced. The foundations of the collective bargaining system, like the hierarchy between collective agreements and the role of trade unions in collective bargaining, were affected. The ILO Committee on Freedom of Association has pointed out significant interventions against the inviolability of freely concluded collective agreements. Already the Law 3845/ 2010 provided that company level collective agreements can contain less favourable working conditions than those contained in agreements at another level. Thus, priority was given to company level agreements, regardless of whether they contain less favourable terms than those provided in branch agreements or in national inter-professional collective agreements. With the Law 4024/2011, the favourability principle, which was applied to the hierarchy of collective agreements concluded at different levels, was abandoned in Greece. In addition, application of the extension of collective agreements was to be shelved indefinitely. In order to save jobs and improve competitiveness, a specific company collective agreement was introduced. Additionally, non-trade union representatives were given a right to conclude company level collective agreements when they represent at least three-fifths of the personnel. Companies employing less than 50 employees were empowered to conclude company level collective agreements. These changes were soon followed by others, such as shortening the after-effect of collective agreements from 6 to 3 months.92 With the European economic governance, intervention in the autonomy of collective bargaining has been strong especially in the public sector so that bargaining has been severely restricted in several legal systems. In Italy, the legislature froze public sector bargaining for several years to reduce public spending. The Italian Constitutional Court has considered that the systematic nature of the bargaining freeze has led to an unreasonable imbalance between trade union freedom and the need to distribute resources rationally and curb spending.93
84
See Schulten and Müller (2012). Seifert (2014) as well as Schulten and Müller (2012), p. 184. 86 Schulten and Müller (2012), p. 185. 87 Schulten and Müller (2012), p. 181. 88 See also Seifert (2014), p. 329. 89 See also Fischer-Lescano (2014), p. 55. 90 Seifert (2014), p. 323. 85
91
See Schulten (2015), p. 4. See the report of Papadimitriou (2019) about Greece, p. 327 and Schulten (2015), pp. 1–2. 93 See the report of Magnani (2019) about Italy, p. 369. 92
390
3.2.3
U. Liukkunen
Decentralization as a Channel of the Individualization of Collective Bargaining In the debate enhancing local bargaining, decentralization of collective bargaining is often presented as being symbolic of economic development and progress and a guarantee of prosperity. However, decentralization does not automatically result in desired changes. In some bargaining systems local bargaining is widespread but ineffective. A move towards more local level bargaining does not remove deeply embedded defects of bargaining systems. As we have seen, in some countries, the role of collective bargaining is very weak and local bargaining ineffective to the extent that strengthening bargaining regimes would require profound institutional reforms starting from building co-operation in industrial relations. It is also questionable whether decentralization of collective bargaining can be controlled. There are European countries where local bargaining is being actively advanced by the legislature or the social partners in different ways. In some systems sectoral social partners seek to exercise certain control or coordination of local bargaining. However, regulatory changes that attempt to increase controlled decentralization do not necessarily translate into more decentralised bargaining in a desired manner. With decentralization of collective bargaining, traditional dichotomies between the individual and the collective need reassessment. Individualized bargaining agendas at the local level reflect a growing emphasis on the employer–employee relationship. Local bargaining is increasingly based on a need to differentiate terms of employment on the basis of the needs of individual companies. As a result, locally bargained rules are more individualized than those in higher level collective agreements. Even when local agreements are concluded on the basis of the competence conferred by a sectoral agreement, local agreements may lead to highly differentiated rules between companies. Importantly, the differentiation may continue within individual companies. Swedish experience of decentralized wage formation is illustrative in this regard. In wage formation based on so called “figureless agreements” wage increases depend on individual performance and development of business operations. Accordingly, the focus is on the dialogue between employees and their managers concerning goals, results and salary, whereas the unions’ role is shifting from representing their members in local and industry-wide bargaining to a more supportive and consultative role.94 In Finland, too, local bargaining on wage settlement is increasingly based on clauses that enable taking into account the financial situation of the company and productivity. New wage settlement
In Asian collective bargaining systems, the company or company level has been the dominant or practically the only level of bargaining. Decentralized nature of Asian systems under comparison underlines flexibility of the systems but on the other hand it might have resulted in a fragmented system with a need to develop specific measures for national-level coordination. In some Asian labour law systems, development of a real collective bargaining regime is still under way, or totally absent. Japanese collective agreements are concluded at the enterprise level. The regulatory model consists of law, collective agreements and individual employment contracts as well as work rules (shugo kisoku). Work rules can be established and modified unilaterally by employers but an opinion from the majority representative of workers in the establishment has to be sought when rules are made. The collective bargaining system is decentralized, enabling flexible adaptability of employers and enterprise unions to changing socio-economic circumstances. Nevertheless, the system built on enterprise unionism has suffered from several defects, such as weak bargaining power, a lack of universal impact across the industry or nation, and a lack of social and political influence on national labour policy. To compensate for weakness in bargaining power and the absence of industry or nation-wide impact of collective bargaining, in 1955 union leaders set up a unique wage determination system called Shunto (spring offensive). Under the Shunto system, every spring, industrial federations of enterprise unions set the aim for wage increases and co-ordinate the schedule of enterprise-level negotiations and strikes across enterprises and industries. According to the schedule, strong enterprise unions in a prosperous industry chosen as a pattern-setter begin negotiations first, setting the market price for that year.95 To increase the influence of labour unions in the formation of national labour and social policy, the Japanese Trade Union Confederation (RENGO) was established in 1989. In addition, the tripartite Labour Policy Council and its subcommittees are considered important institutions for developing national labour and social policy. The tripartite Councils consist of representatives of public interest
94
95
See the report of Westregård (2019) about Sweden, p. 564.
systems are not based on determining the wages of all workers in a certain sector similarly but on components that take into account tasks and individual performance. These systems are based on a complex process of wage settlement which is carried out and also largely created at the local level within the frame set by the higher level collective agreement.
3.3
Asian Approaches
See the report of Araki (2019) about Japan, pp. 386–390.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
(academics), labour and management. According to established practice the content of labour law bills submitted to the Diet by the government is deliberated and decided in these Councils. Thus, they have become the most important fora in determining the content of new labour legislation and labour policies. According to the national report, deliberation in these tripartite Councils can in a sense be regarded as quasi-collective bargaining at the national level, with the government and academics as mediators and conciliators.96 In China, the present collective consultation system, established only in the mid-1990s, can still be considered as at the phase of early development.97 Chinese legislation on collective consultation refers to non-confrontational “collective conciliation” instead of employing the term “collective bargaining”. The former refers to “negotiating behaviour between the representatives of the enterprise and its trade union or workers’ representatives, with the aim of concluding and signing a collective contract”. This is the definition given to collective consultation in the Provisions on Collective Contracts. “Collective consultation” refers to a distinctive form of negotiations without confrontation between the employer and employee sides, which is generally understood to be the constellation in collective bargaining. The legal regime which affects the Chinese collective consultation model is complex and has to be seen against the individualization and legalization of labour relations which have marked a profound change in the regulatory framework for work. From the beginning, China’s collective contract system has been mainly implemented at the enterprise level. In June 1950, the Trade Union Law of the People’s Republic of China was adopted. The trade union was given the right to participate in production management on behalf of workers or employees and the right to conclude a collective contract in state-owned enterprises and cooperative enterprises. During the period of socialist transformation, the collective contract system gradually disappeared. With the reform and opening up of China, the collective contract system was restored. In 1986, the State Council promulgated Regulations on the Workers’ Congress of People-Owned Industrial Enterprises. These stated that at a meeting of the Workers’ Congress, the factory director representing the administration team may sign a collective contract with the chairman of the trade union representing the workers. In 1992, the new Trade Union Law of the People’s Republic of China was adopted. Under this law, trade unions may sign collective contracts with the administration team of enterprises and institutions on behalf of workers.98
In 1994, the long-anticipated Labour Law of the People’s Republic of China was issued. It contained concise provisions on the contents of a collective contract, the procedure for concluding a collective contract, its validity, and dispute settlement. Later in the same year, the Ministry of Labour issued the Provisions on Collective Contracts, which laid down more specific provisions on concluding collective contracts and dispute settlement. At the local level, regulations may contain specific rules on collective consultation. The Guangdong Provincial Regulations on Collective Contracts for Enterprises, issued in 2014, have gained much attention as they deviate from national-level rules on collective consultation, strengthen the right to conciliation and represent a step further in the regulatory approach towards the bargaining process. In recent years, several cities and provinces have laid down specific rules on wage negotiations. With these developments, there are conciliation processes that resemble collective bargaining in the country.99 The current system is strongly shaped by the existence of the single trade union model and the societal order of the country and related socialistic legal system with “Chinese characteristics”. Improving the collective conciliation system has been regarded as important by many observers.100 Collective contracts are mostly concluded at the enterprise level. Collective consultation is a precondition and a procedure for concluding a collective contract.101 According to Article 3 of the Provisions on Collective Contracts, a collective contract is a written agreement between an employing entity and its employees on such matters as remuneration, working time, rest and vacations, occupational safety and health, professional training, insurance, and welfare that is concluded through collective negotiation in accordance with relevant laws, regulations and rules.102 The nature of a collective contract mainly refers to the effects of the collective contract, whether it is a contract or an administrative regulation.103 The system of collective consultation has been implemented in China in a top-down approach. One problem with the present system is the lack of substance and efficiency of collective consultation as collective contracts largely repeat what is already provided by law, without raising the labour standards of workers. Another problem is that the practice of collective consultation is highly uneven among different sectors. While state-owned enterprises tend to implement the system widely under pressure from the state and trade unions, its implementation in private enterprises
99
See Brown (2015), pp. 135–154. See Chen (2016), pp. 70–73. 101 Li (2016), p. 107. 102 See the report of Li et al. (2019) about China, p. 174. 103 Chen (2016), p. 76. 100
96
See the report of Araki (2019) about Japan, p. 390. See Chen (2016), p. 73. 98 See the report of Li et al. (2019) about China, p. 171. 97
391
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often presents a challenge. Altogether, collective consultation plays a weak role in regulating terms and conditions of employment in China. However, in recent years, there have been several cases of successful collective consultation.104 There is broad consensus that collective consultation processes would need to be developed further but the entire legal system is under development and the developmental stage as well as the societal system affect the labour law framework. In the Macau Special Administrative Region of the People’s Republic of China, there is no statutory right to collective bargaining and trade union law is non-existent. Several attempts to build regulation on collective bargaining have failed. Lack of trade union law makes it difficult for employees to organize themselves and negotiate in a coordinated way with employees. Local circumstances built on an attempt to attract investments, and Macau has a quite deregulated labour market system. However, Macau has ratified both the ILO Convention No 87 concerning the freedom of association and protection of the right to organise and the ILO Convention No 98, and the ILO Committee of Experts on the Application of Conventions and Recommendations (CEARC) has made a direct request for application of Convention No 98.105 In Taiwan, the existing collective bargaining regime has remained weak. Bargaining takes place mostly at company level, while bargaining between employers and industrial unions or craft unions is rare. The decentralized bargaining model is relatively underdeveloped, and most trade unions have not exercised their right to bargain with employers. Therefore, collective bargaining does not play a role in regulating labour market issues and conditions of employment in Taiwan. Generally, the minimum conditions of employment are set in the Labor Standards Act and some collective agreements merely duplicate the provisions of the Act. It is not common for a collective agreement to establish minimum terms and conditions of employment. It is also not possible to deviate from mandatory legislation via collective agreements.106
3.4
North American Experience
In the U.S.A., collective bargaining has played a vital role in the economy and in the quality of life of employees. It has influenced the labour market and the pay and benefits of employees throughout the economy. However, union membership and the prevalence of collective bargaining in the 104
See the report of Li et al. (2019) about China, pp. 178–179. See the report of Wei and Rafael (2019) about Macau, pp. 403–404. 106 See the report of Cheng (2019) about Taiwan, pp. 579–580 and p. 580. 105
private sector have declined dramatically in recent decades. In 2016, only 12% of workers were represented by unions.107 Of the 14.6 million union members that year, 7.1 million were in the public sector (34.4% of public sector employees) and 7.4 million were in the private sector (6.4% of private sector employees). The protection provided by collective bargaining has declined with the decrease in private sector union representation. According to the national report, several factors have affected the decline, and changes in the employment mix, automation, globalization, and a shifting of politics suggest that a full recovery of collective bargaining is unlikely.108 One of the distinctive characteristics of the U.S. collective bargaining system is the exclusive representative concept. Under the NLRA, the union designated by a majority of employees in the bargaining unit is the exclusive representative of all employees in that unit. This means, firstly, that a minority union is not capable of making a collective agreement. Secondly, a collective agreement negotiated by the majority union controls the terms and conditions of employment for all members of the unit. As a consequence, the employer is forbidden from negotiating terms and conditions of employment with any other labour organization or making an agreement with an employee which differs from the collective agreement. Thus, an employee covered by the collective agreement cannot individually negotiate an improved employment package because the employer is bound to negotiate only with the exclusive representative. According to the NLRA, the union and the employer are required to bargain in good faith over “wages, hours, and other terms and conditions of employment”. In addition to these mandatory subjects of bargaining, other subjects can be bargained over.109 In the U.S.A., most labour unions are national and international organizations but the great majority of collective agreements are negotiated at the individual plant unit level by locals of national or international unions. Although multiemployer bargaining is possible it is lawful only if the union has majority support from each employer’s employees and if each employer and the union agree to be bound on a multiemployer basis. In some situations, centralized bargaining in the form of national agreements covering several worksites within a single company occurs. Such national agreements are often supplemented by local riders which concern local conditions at individual plants.110
107 That year, the public sector employed approximately 20 million people and the private sector more than 115 million people. See the report of Ray (2019) about the United States, p. 616, fn. 92. 108 See the report of Ray (2019) about the United States, pp. 596–599. 109 See the report of Ray (2019) about the United States, pp. 603–606. 110 See the report of Ray (2019) about the United States, p. 597.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
Although bargaining is in decline, it is still possible to have quite effective bargaining processes, assuming existing bargaining relations are mature. Based on his experience as labour arbitrator and mediator, Ray Douglas summarizes: “Experienced parties realize they are part of a continuing relationship and that future relations and morale can be harmed by overly aggressive adversarial conduct. They know that they can learn through good listening and, although firm in their resolve, can often achieve their goals through well designed compromises that preserve employee morale and, through it, increase productivity.”111 Collective bargaining is the foundation of modern Canadian labour law and can be characterized as the basic law or constitution of the workplace. The Canadian collective bargaining model has always been decentralized, with the exceptions of public sector bargaining at the federal level and the automobile industry and the construction industry in Quebec. The regulatory approach has a statutory framework based on the U.S. model. Legislation on collective bargaining is provided at federal, provincial and territorial level depending on the subject matter of the employment relationship. Federal and provincial legislation on collective bargaining generally follows the model of the principles of the 1935 NLRA in the U.S.A. Collective bargaining constitutes a measure of balance between the respective bargaining strengths of employees and their employers. Nevertheless, collective bargaining through union representation is facing challenges. For many years, unionization rates have been declining in the private sector. The decline reflects economic and trade challenges in the industrial and service sectors but also changes to legislation governing bargaining unit certification.112 The decentralized bargaining model is in large part consistent with Canadian federalism. The government predominantly exercises jurisdiction concerning provincial level bargaining. At the federal level, collective bargaining is conducted by national unions certified as bargaining agents under the Canadian Labour Code. The appropriate labour board gives a certificate to the union which will act as the exclusive bargaining agent for the employees in the bargaining unit in question. The certified bargaining unit can be national and include all eligible employees of a named employer anywhere in Canada or it can be limited to its employees within a specific geographic area. The employer and the union have a statutory obligation to bargain in good faith and make every reasonable effort to conclude a collective agreement. Instead of representative democracy the primary focus of the bargaining system is to get the parties to the bargaining table and to promote labour peace.113 111
The report of Ray (2019) about the United States, p. 617, fn. 95. See the report of McEvoy (2019) about Canada, pp. 122–123 and 147–157. 112
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In Quebec, the only province of Canada with a civil law system, the collective bargaining model is different and partially centralized. The construction industry in Quebec is organized on a province-wide sector basis for collective bargaining purposes and is governed by a specific legislative scheme. In the public sector, collective bargaining has been highly centralized.114
3.5
Brazilian Evolution
The Brazilian bargaining system has a history characterized by periods of strict government control over unions and a tightly regulated representation system. As a result, the autonomy of collective bargaining has been severely hampered for many decades. While the Constitution of 1988 has supported the role of collective bargaining in labour relations, it has also created a major obstacle to the guarantee of effective trade union freedom, which prevents Brazil from ratifying ILO Convention No 87. The single-union rule is set out in the Constitution and can only can be changed by a constitutional amendment.115 As we have seen, in the Brazilian system, two types of collective bargaining instruments exist: the collective bargaining agreement and the collective bargaining convention. Both can be concluded at a local, regional or national level, according to the representation of the entities involved but with preference for local scope. In terms of bargaining powers the two regulatory instruments are very similar. However, in the case of collective bargaining agreements workers may be subject to greater pressure to accept certain demands from the employer, which negotiates directly with the labor union, in bargaining more specific matters of their activity.116 The system does not provide for any instrument that would centralize bargaining. At the various levels of union, the lower level entities represent their members in negotiations. Favouring local entities reflects the organizational structure of the representation system, which, even though permitting creation of entities reaching a wider area, such as state or national level, also allows creation of local entities that provide representation at the local level. This criterion adopted by Brazilian law favors decentralization of union/association representation in the country. The 2017 labour law reform marked a shift towards more flexible regulatory regime which weakens labour protection.
113 See the report of McEvoy (2019) about Canada, pp. 124–127 and p. 163. 114 See the report of Fontaine (2019) about Quebec, pp. 449–450. 115 See the report of Campos Medina Maia (2019) about Brazil, pp. 114–115. 116 See the report of Campos Medina Maia (2019) about Brazil, pp. 113–114.
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According to the new legislation, courts are prevented from analyzing the content of collective bargaining instruments. Their role is limited to verifying observance of the legal requirements and formalities needed for their execution. According to the national report, it is however doubtful if this limitation to the powers of the Labor Courts will be applied because of severe incompatibility between the new law and the principles espoused by the Constitution.117 Since the scope of collective bargaining instruments is limited to the territory of the signing party, so that the entity with smallest representation will impose its limits on collective instruments, decentralization of collective bargaining is the main rule. A result of this is the large number of collective bargaining instruments in the country. According to statistics, a total of 28,147 instruments were registered between October 2016 and September 2017. However, with a highly regulated labour law system and limitations on collective bargaining, especially those related to duration, validity and effectiveness, as a general rule, collective bargaining instruments do not have a significant positive impact on the Brazilian labour market. As an exception there have been periods of recession, during which collective instruments become an attractive alternative as they provided more flexibility for the application of certain rights in order to maintain employment. The economic crisis, especially in 2015 and 2016, saw the reappearance of collective bargaining instruments which contain clauses providing for layoffs, suspension of individual work contracts and for cutting wages and working hours. These clauses were agreed upon as alternatives to mass dismissal of workers.118
3.6
Russian Experience
Collective bargaining is recognized as an important means of regulating labour relations and employees’ rights in Russia. The first collective agreements were concluded in the early twentieth century, but during the Civil war collective bargaining was forgotten until 1922, when the Second Code of Labour Laws of the Russian Soviet Federative Socialist Republic introduced collective agreements as normative acts. During the late Soviet period collective bargaining was widespread at the local level but this served more to increase productivity than protection of workers´ interests and rights. A new era of collective bargaining emerged after the collapse of the Soviet Union. After decades of being an arm of the state, trade unions were granted freedom but deprived of numerous earlier privileges. Due to the special developmental phases in the Soviet and post-Soviet era, trade unions have
become the main workers’ representatives at all levels of social partnership, including collective bargaining, in Russia.119 In Russia, two different categories for a collective agreement exist; a collective “contract” is negotiated and concluded at the local level, and an “agreement” is negotiated at all higher levels. A collective contract is defined as a legal act regulating social and labour relations in an organisation or with an individual entrepreneur. It is concluded by representatives of the employees and the employer. An “agreement”, in turn, is defined as a legal act which regulates social and labour relations. It establishes general principles for the regulation of connected economic relations concluded between authorized representatives of employees and employers at different levels of social partnership within the scope of the parties’ competence.120 A local collective contract applies to all employees of the employer or the individual entrepreneur. A collective agreement concluded at a branch, representative office or other separate structural subdivision of the organisation applies only to employees of these subdivisions. It is quite common that collective agreements regulate creation of bilateral bodies and committees dealing with issues that affect women, youth, family and elderly. This practice derives from the Soviet tradition.121 Under estimation, union membership is about 29% of the total workforce in Russia. According to the Labour Code employees may create some “other representative” (representative body) as an alternative to trade unions at the local level. This is possible if there are no established local trade unions at the company level, or none of the local trade unions unites over half of the employees and is not authorized to represent the interests of all employees by employees’ vote. These representative bodies seem not to be very numerous but there is no precise knowledge of their prevalence, role, influence, or of the number of collective agreements they have concluded. However, there are some reported cases of conflicts between employers and trade unions when employers deploy other representative bodies in order to prevent employees from joining trade unions. In many cases employers have taken the initiative by creating a subservient alternative representative for employees in order to avoid the creation of trade unions. According to the national report, this problem seems serious and it threatens to undermine the role and influence of local trade unions in collective bargaining.122
119
See the report of Gerasimova (2019) about Russia, pp. 471–473. See the report of Gerasimova (2019) about Russia, p. 474. 121 See the report of Gerasimova (2019) about Russia, p. 471 and pp. 474–478. 122 See the report of Gerasimova (2019) about Russia, pp. 485–486 and p. 488. 120
117
See the report of Campos Medina Maia (2019) about Brazil, p. 102 and pp. 108–112. 118 See the report of Campos Medina Maia (2019) about Brazil, pp. 110–113.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
4
National Collective Bargaining Models and Globalization
4.1
Introduction
Collective bargaining models reflect changing labour market circumstances in various ways and an increasing amount of changes confronted can be attributed to globalization. In addition to decentralization, which is taking place in many dimensions of national collective bargaining systems, diversification and increased flexibility of labour standards relate to responses to global economic phenomena, which have increased inequalities between states. In some cases, competition between states has advocated reforms that pursue deregulation and more investment friendly regulatory regimes. Flexibilization of labour market regulation is often called for in order to better adapt to economic changes caused by globalization. Economic factors and economic categorizations tend to be highlighted when seeking responses to globalization that concern adjustments to collective bargaining regimes. As a result, responses that collective bargaining could offer in terms of developing social cohesion and more equal labour standards remain more limited and less precisely defined.123 In the EU, strong economic integration has been held as vital to the competitiveness of the EU Member States, which has resulted in overriding fundamental social rights and values in the context of cross-border employment when the exercise of EU fundamental economic freedoms is involved. EU law encompasses complex regulatory developments caused by the need to facilitate economic integration. A controversial blend of CJEU judgments has emerged that emphasises the fundamental economic freedoms affecting the autonomy of social partners and the autonomy of collective bargaining in the EU Member States. In the Viking and Laval cases (C-438/05 and C-341/05), the CJEU handed down controversial judgments that demonstrate a tension between the right to collective bargaining, or the right to industrial action, and EU fundamental economic freedoms. These judgments inaugurated a new era of fundamental rights in the EU. Although the EU Charter of Fundamental Rights protects the right to bargain collectively, outcomes of the use of this right, together with the right to industrial action, have been subjected to certain limitations when fundamental economic freedoms are at stake but without a clear constitutional basis for this. The details of the latter case are noteworthy. In Laval, a question arose about Swedish collective bargaining practice and its compatibility with the Posted Workers Directive.124
123
See also Arthurs (1998).
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The Swedish Byggettan (local branch No 1 of the Swedish Building and Public Works Trade Union) had required Laval, a Latvian company which had posted workers to Sweden, to sign the collective agreement for the building sector in respect of the Vaxholm site where the posted workers were carrying out their work. In Sweden, there was no system of declaring collective agreements generally applicable, nor had Sweden made use of the possibility provided for in the Directive to extend the application of collective agreements. According to the CJEU, a Member State in which minimum rates of pay are not determined in accordance with one of the means provided for in the Directive was not entitled to impose on undertakings established in other Member States negotiation on wages at the place of work on a case-by-case basis. The CJEU confirmed that the Posted Workers Directive did not harmonize the substantive content of host state minimum regulation. Consequently, Member States may also define it by collective agreements, assuming that they have been declared to be of universal application or that they are generally applicable to all similar undertakings in the sector concerned. The juxtaposition between employee protection and internal market interests has proved to be a question that touches the very core of developing a European social model as EU fundamental economic freedoms are placed not only against fundamental labour rights but also against the fundaments of national labour market systems. The interpretation of the Posted Workers Directive adopted by the CJEU in Laval has created pressures to reform national labour law systems where minimum terms of employment are determined mainly on the basis of collective agreements, but where no system of generally applicable collective agreements has been in force. Such a system of autonomous collective agreements has traditionally been applied in Denmark and Sweden.125 Generally, the erosion of social dialogue related to the decreasing power of trade unions, visible in many national systems, has affected the institutional set-up of collective bargaining in many countries. As we have seen, regulatory reforms have been used in order to advance decentralization, with controversial consequences for efforts to seek a balance between flexibility and security. Reconciling flexibility with security is often considered a question to be settled at the local level with company-specific arrangements. At the same time, one of the growing challenges to collective bargaining is to find regulatory approaches that would be inclusive, for 124 See Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services. 125 See Liukkunen (2012). On the impact of the Laval judgment on Nordic collective bargaining models, see, for example, Malmberg and Sigeman (2008), the report of Videbæk Munkholm and Højer Schjøler (2019) about Denmark, pp. 242–244 and the report of Westregård (2019), pp. 568–570.
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example, in terms of new groups of workers entering the labour market. In addition, new labour market phenomena require development of regulatory approaches. In Sweden, as in the other Nordic countries, the social partners have traditionally shown a capacity for developing new ways to deal with new issues emerging in the labour market. For example, in the early 1990s the phenomenon of temporary agency workers began in the Swedish labour market. In 2000 the Employers’ Organization for the Swedish Service Sector (Almega) and all LO organizations concluded a collective agreement for workers, which covered a large new market. As the agreement was concluded with all LO organizations, an employee of a temporary work agency could work in the entire LO area without necessitating the application of different agreements. Moreover, workers for whom the agency cannot find an assignment received a guaranteed salary.126 In addition, the Swedish Co-Determination Act provides a special rule to ensure that employers cannot circumvent collective agreements by hiring self-employed persons. According to the Act, the notion of employee also includes those who carry out work for another party and who are not formally employed but who have a position that is essentially of the same nature as an employee. In the Act, such an employee-like contractor is embodied in the terms “dependent contractor” or “dependent worker”. The principal on whose behalf the work is carried out is to be considered as the employer. Through the rules on dependent contractors, these are protected by the rules in the Co-Determination Act with regard to their right to organize and their right to negotiate. The social partners have an opportunity to subscribe to collective agreements which apply to dependent contractors without coming into conflict with competition law.127 In Spain, one of the most recurrent trade union strategies combats precarious employment and abuse in the use of fixed-term employment contracts. Collective bargaining is an important stimulus for trade unions to achieve this aim, and collective agreements are tools to accomplish that objective. Thus, the legislative initiatives put in practice need to be completed with the specifications that collective agreements provide. Collective agreements have become significant tools for limiting precarious employment and improving the working conditions of atypical and precarious work. There are three main ways to take into account the needs of specific sectors and categories of workers. First, objective reasons justifying renewal of such contracts; second, the maximum total duration of successive fixed-term employment contracts; and third, the number of renewals of such contracts. Collective bargaining in the construction and
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tourism sector is a paradigmatic example of the inclusion of this kind of clauses in collective agreements.128 Japanese experience points to the importance of reconsidering the regulatory models of labour law in order to create social standards for current needs in the labour market. This relates to diversification of statutory norms. In Japan, labour union organization rates had declined to 17.1% by 2017. As a result, more than four fifth of workers were non-union members outside of the application of collective agreements because collective agreements concluded at the enterprise level in Japan cannot have erga omnes effect. Consequently, the importance of state law has been growing. However, in the contemporary diversified work environment consisting of diversified workers with different interests, applying universal regulation is difficult. According to the Japanese report, the nature of state law needs to be reconsidered in order to cope with this challenge. Traditionally, statutory norms are mandatory and can be altered by a collective agreement. It is possible to think of a non-mandatory statute that would be applicable only where the gaps in an agreement between the employment contract parties trigger legal disputes. Soft law could also be useful for establishing new social norms. Moreover, the national report highlights that the fact that substantive regulation is more entrusted to decentralized parties should be taken into account, and so future methods of regulation should develop legislation which incorporates substantive and procedural regulation.129
5
Transnational Dimension of Collective Bargaining
5.1
Introduction
Globalization has given rise to several challenges for labour law and poses a test for regionally and nationally adopted regulation when MNCs are operating on a transnational basis in various regions and countries simultaneously. The operating environments and patterns of MNCs have changed significantly. Multinationals have increasingly stepped away from the previous home-state to host-state model towards a more networked way of operating.130 MNCs have manifested themselves as central actors in globalization for which statebinding international, regional and national norms remain insufficient in the transnational regulatory framework.131 MNCs are increasingly viewed as “stateless”. According to this view, they are not linked to any particular state or 128
See the report of Westregård (2019) about Sweden, pp. 545–546. See the report of Araki (2019) about Japan, pp. 395–396. 130 See also Sobczak (2003). 131 See Liukkunen (2014). 129
126 127
See the report of Westregård (2019) about Sweden, p. 570. See the report of Westregård (2019) about Sweden, pp. 545–546.
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
region but operate wherever it is financially most advantageous to them at a particular time. This development stems from the fact that the competitive advantages of companies and states have become increasingly different. When globalization of companies is based on their own direct investment and not foreign trade, the competitive advantages of companies and states are no longer necessarily the same. States are forced to compete with each other not only over trade in services and goods but also over direct foreign investment. In order to succeed in globalization, states need to attract investment in their region from MNCs.132 This is also why states are engaged in regulatory competition over companies. The increasing role of MNCs in the global economy has highlighted the relevance of the evolving transnational level of collective negotiations and broadened the spectrum of contractual arrangements that relate to a transnational normative setting in the field of collective labour law.133 Previously the national nature of collective bargaining systems was emphasized, and questions concerning the cross-border dimension of collective agreements typically arose either when a domestic collective agreement was explicitly made to concern work to be carried out abroad, or when the application of a domestic collective agreement to workers temporarily working abroad was to be resolved. Consequently, the role of collective agreements as part of the law applicable to individual employment contracts received attention and this link was emphasized.134 While traditional domestic collective bargaining regimes have lost power, transnational normative regimes of MNCs have become increasinlgy important with development of company-level industrial relations. The emergence of new categories of transnational agreements with their own characteristics that remain distant from traditional conceptions of collective bargaining and industrial relations has raised controversy and complex legal questions. Moreover, determining the regulatory framework of transnational agreements has prompted debate about ultimate regulatory competences in the transnational arena of regulation. The transnational context of social dialogue significantly differs from contexts offered by nation-state systems and balancing processes that lie behind collective bargaining in domestic settings.135 Agreements concluded as a result of cross-border negotiations do not readily fit into traditional categories of collective agreements concluded between social partners. Generally speaking, transnational company agreements (TCAs) encompass a variety of forms of
132
See for example Blanpain and Colucci (2004), p. 5. See also Pataut (2016), pp. 95–97. 134 Liukkunen (2017). See also Liukkunen (2004), pp. 120–122. 135 See Liukkunen (2014). 133
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agreement concluded between an international company or group of companies on the one side (as one party) and international or national trade union federations or other parties representing employees on the other side (as the other party). TCAs, which govern labour law-related issues at the company or company group level, so that their personal sphere governs several states, are largely a European phenomenon. Their contents reflect issues that are of concern in the European labour market, such as anticipating and managing changes concerning restructuring. International framework agreements (IFAs), also known as global framework agreements, are a specific group of transnational agreements. They are concluded between a MNC or company group and global union federations, and sometimes also other parties such as European Works Councils (EWCs) representing workers, with a global reach.136 Often, IFAs seek to ensure that the company respects ILO fundamental labour rights in all the countries where it operates. IFAs and also other TCAs can be viewed as a part of companies’ corporate social responsibility (CSR) strategies. They have sometimes been linked to various soft law instruments that international organizations, such as the ILO and OECD, have made to promote better compliance by MNCs with fundamental labour rights and other central standards. In broad terms, TCAs refer to different kinds of crossborder agreements and the characteristics that the abovesketched groupings imply should be met with some caution. For example, the contents of TCAs that are not IFAs may sometimes largely resemble them. IFAs, in turn, do not necessarily focus on fundamental labour rights but they can also address other labour issues that are of relevance to the MNC in question. Since 2000, the number of companies in which TCAs have been concluded has rapidly increased, but no updated information is available about their current total numbers.137 Simultaneously with the increase in transnational agreements, their legal nature has prompted debate, starting from what can be considered an agreement with a legally binding nature. In addition, implementation and enforcement of these agreements raises complicated and largely unresolved legal questions. As labour law systems differ from country to country, considerable pressure is put on adopting cross-border implementation mechanisms that would be efficient enough to ensure compliance of transnational agreements whose scope of application governs highly divergent legal and cultural
136 On the development of the differentiation between different categories of transnational agreements, see, for example Schömann (2012), pp. 202–205. 137 See Database on transnational company agreements. http://ec. europa.eu/social/main.jsp?catId¼978&langId¼en (last visited 26 April 2019).
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contexts. However, weaknesses in implementation mechanisms of TCAs are largely acknowledged. The often strong connection of these agreements to the CSR strategies of MNCs is one element which is controversial. On the one hand, companies’ CSR strategies are often promoted and developed through TCAs. On the other hand, the linkage between TCAs and CSR does not automatically transform into better labour protection, as sometimes weak soft law dispute settlement mechanisms, deriving from vaguely termed CSR strategies, are favoured in concluding these agreements.138 Public corporate guidelines are based on the view that MNCs are significant actors in the global economy. As globalization of the economy has progressed, the sufficiency of international regulatory mechanisms has had to be reassessed.139 Guidelines that emphasize the role of MNCs in guaranteeing the fundamental rights of employees have increasingly emerged alongside traditional regulatory mechanisms. In addition to the ILO defining fundamental labour rights, the increase in soft law can be considered as one of the concrete responses to globalization. In labourrelated questions, globalization is also one of the reasons why international organizations such as the ILO and the OECD aim to regulate the operations of MNCs in the global market, particularly in developing countries. Therefore, public guidelines are often directed at MNCs in the first place. Different sets of both public and private guidelines for MNCs are gaining increasing importance in the regulation of transnational labour law. With the increase in soft law regulation, MNCs are facing increasing demands that they should also require commitment to fundamental labour rights and labour protection from their subcontractor chains and basically their whole transnational operating environment. As a result, the view that subcontracting involves commercial legal relationships where the parties are legally equally able to operate responsibly in a cross-border context has to a certain extent been abandoned. Companies are being required to pay special attention to subcontracting relationships when contracting job performance from other companies. ILO and OECD Guidelines140 seek, with other public and private initiatives, to promote CSR policies of MNCs apparent in the corporate codes of conduct and transnational agreements. They are tools of the soft law approach in terms of workers’ rights protection. The 1998 ILO Declaration on Fundamental Principles and Rights at Work has been an important benchmark in developing the ILO and OECD Guidelines as well as core contents of IFAs. The four 138
See Liukkunen (2014). See also Liukkunen (2007), p. 155. 140 Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (1977, amended in 2000, 2016 and 2017); OECD Guidelines for Multinational Enterprises (2011). 139
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principles that are referred to as fundamental labour rights included in the Declaration are (1) freedom of association and collective bargaining, (2) prohibition of forced labour, (3) elimination of child labour and (4) non-discrimination in employment.
5.2
European Developments: European Works Councils as a Driving Force
The development of TCAs in Europe can be roughly divided into four phases.141 In the 1960s and 1970s, transnational social dialogue emerged as a sort of degree of experimentation at company level in some individual European countries. In some sectors, international trade union organizations started to organize “world works councils” in a number of MNCs.142 The 1980s saw negotiation of the first TCAs while the next decade changed the situation, bringing negotiation of agreements on the establishment of EWCs with the implementation of the European Works Councils Directive 94/45/ EC in EEA countries.143 In the 2000s, a sharp growth in transnational agreements has occurred.144 EWCs have boosted the development of TCAs through being the party which has often initiated negotiations on company-level contractual arrangements. The development of EWCs based on the European Works Councils Directive has been of paramount importance in terms of developments that enhance conclusion of transnational agreements. The Directive provides a transnational right to information and consultation for workers in EEA-scale undertakings and groups of undertakings with at least 1000 employees and at least 150 employees in each of two EEA Member States, and provides a procedure for establishing a EWC or other arrangement for transnational information and consultation of workers. The rules on crossborder participation rights have contributed to the transnational regulatory framework as EWCs have offered an institutional setup used for negotiating and concluding transnational agreements. Thus, establishing EWCs has enabled conclusion of agreements concerning labour rights
141
See also Compa (2006). See also Schömann (2012), pp. 198–199. 143 See Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council or a procedure in Communityscale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees and Directive 2009/38/ EC of the European Parliament and of the Council of 6 May 2009 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (recast) (Text with EEA relevance). 144 See also Carley (2009). 142
The Role of Collective Bargaining in Labour Law Regimes: A Global Approach
and protection whose scope of application may reach beyond Europe. The role of EWCs as a party to TCAs has developed outside competences conferred on EWCs by the EU legislature. These concern transnational information and consultation but do not include negotiating transnational agreements concerning other issues on the workers’ side.145 The role of EWCs in negotiating transnational agreements is not without problems in terms of their representativeness. Some tension has arisen between EWCs and trade union organizations in determining and exercising negotiating roles and powers, including the capacity to represent workers. However, several EWCs have participated in negotiating TCAs. Many companies have realized that negotiations with EWCs can be used to shape corporate CSR policies and even to promote implementation of international labour standards in a transnational context.146 Although TCAs that focus on European labour market issues are regarded as an important European development, there is a huge variation in Europe as regards individual states whose MNCs have actively concluded such agreements. European states can be roughly divided into states whose MNCs conclude transnational agreements and states whose subsidiaries come within the sphere of such agreements. In some Eastern European states TCAs have remained largely unknown until recent years. For example, in Hungary, TCAs in the metal and automobile industry as well as the electricity sector have exerted some influence but the public debate on TCAs began only a couple of years ago. There are problems related to the efficiency of TCAs in terms of labour protection in those European countries where MNC subsidiaries locate.147 However, these problems have not received much attention in Europe. Nor has the EU been active in dealing with this issue although it has paid much attention to enhancing conclusion of TCAs. The Polish report points out communication problems between the central management of a company which is a party to the agreement and its subsidiaries. Polish subsidiaries may not even have received information about the content of concluded agreements. As agreements concluded by the central management of a MNC are not considered sources of labour law in Poland, employees cannot base their claims on them. The problem is the lack of additional measures which would make the agreements enforceable in Poland.148 Also the Hungarian
145 However, the EWC Directive has promoted institution building of EWCs beyond the formal institution for information and consultation. See Waddington (2011), p. 211. 146 See also the report of Mazuyer (2019) about France, pp. 277–278. 147 See the report of Kun (2019) about Hungary, pp. 352–354 as well as the report of Pisarczyk and Skupień (2019) about Poland, p. 438. 148 See the report of Pisarczyk and Skupień (2019) about Poland, p. 438.
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experience demonstrates that the lack of efficient implementation of TCAs is a real problem in Europe.149
5.3
Global Developments: International Framework Agreements
In contrast to other TCAs, IFAs often focus on fundamental labour rights, but they can also concern issues such as social dialogue, anti-corruption, health and safety at work, career and skills development, training, protection of personal data and internet policy. Moreover, issues that do not belong to the sphere of labour law may be governed. Some IFAs include implementation and enforcement mechanisms. Sometimes IFAs are formed merely as a complementary part of the non-binding CSR documentation of an MNC. Overall, IFAs have raised questions about the extent to which they overlap with CSR strategies of MNCs. However, their bilateral aspect distinguishes IFAs from CSR documents.150 A companyspecific IFA may support company CSR strategy by concretizing it in social issues and boosting its enforcement.151 From the perspective of the workers’ side, IFAs have been seen as strengthening not only global industrial relations but also the global union federations themselves.152 Moreover, through IFAs the federations are able to promote compliance with fundamental labour rights. IFAs can shape industrial relations and social dialogue in MNCs.153 In general, however, despite efforts to advance the global applicability of IFAs, they often lack governance over company supply chains. As the French national report points out, EWCs have in many cases also been initiators of IFAs, and in some cases they have also undergone some form of transformation into a Global Works Council. For example, in PSA PeugeotCitroën a World Works Council has been established in order to promote sustainable industrial relations and decent working conditions in the company, its suppliers and subcontractors.154 Similarly, the agreement involving the Italian company ENEL seeks to establish a Global Works Council. The agreement has been signed by the company, as well as on behalf of all the companies/divisions in the group, and by the Global Union Federations IndustriAll and Public Services International, as well as by three of the biggest Italian trade unions in the energy sector. The foreword to the agreement describes the “pivotal role” of ENEL’s EWC, and the involvement in 149
See the report of Kun (2019) about Hungary, p. 353. See Hernnstadt (2007), p. 207. 151 See Liukkunen (2014). 152 See Müller et al. (2008). 153 See in more detail Voss et al. (2008). 154 See the report of Mazuyer (2019) about France, p. 277. 150
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negotiations of the respective trade union organizations in EU Member States, Russia and Latin America.155 In major cases, one problem with IFAs is, as noted above, their inability to promote compliance with international labour standards in MNC supply chains. So far, only a few IFAs deal with supply chains. The Spanish national report points out that in Spain the first Spanish agreement covering a retail supply chain is the agreement between Inditex and IndustriAll Global Union concluded in 2014. The objective of the agreement is to ensure respect for human rights within the labour and social environment by promoting decent work throughout the supply chain. What makes this agreement exceptional is that it emphasizes the relevance of freedom of association and the right to bargain collectively in improving labour protection within the supply chain. According to the agreement, these rights provide workers in the supply chain with mechanisms to monitor and enforce their rights at work.156 The Spanish report emphasizes the interrelation between formation of global union strategy and evolution of IFAs as well as rebuilding the internal structure of the production network through recognition of social rights within the framework agreement.157 It is noteworthy that sometimes national collective bargaining systems involve regulatory or structural constraints that restrict development of transnational contractual arrangements, as is illustrated by the Brazilian example of efforts to conclude a transnational agreement. A collective contractual arrangement was formalized in 1999 between two subsidiaries of Volkswagen and their two corresponding labour unions, one in Brazil and the other in Argentina, with the goal of establishing common principles to regulate workplace relations in Mercosur. However, the Brazilian single union rule was a major obstacle to the success of cross-border negotiations in the country. To overcome this, the solution was to join two separate agreements, with the same text, into one document, which in practice acted as separate agreements since they were executed by two separate companies, based in two countries, with their corresponding labour unions located in São Paulo state and Buenos Aires.158 The Japanese experience shows the influence of decentralized bargaining model on the transnational dimension of collective negotiations and the transformation that is required from industrial relations institutions to build transnational negotiating capacities. Three IFAs have been
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concluded by Japanese MNCs, which is explained in the national report by decentralized industrial relations under enterprise unionism. Japanese IFAs, which confirm respect for ILO fundamental labour rights, have been concluded by four parties: the Japanese MNC, the enterprise-based union, the Japanese labour union federation at the industry level, and Global Union Federations.159 For Japanese employers without experience of bargaining at the sector or industry level across companies, transnational collective negotiations have been unfamiliar. With enterprise-unionism, Japanese labour unions have focused on working conditions at the company level. However, many Japanese corporations recognize the importance of CSR and create a corporate code of conduct. An IFA makes Japanese domestic enterprise-based unions contact overseas labour unions and recognize labour disputes or infringements of fundamental labour rights in overseas subsidiaries as issues to be discussed in negotiations between the Japanese MNC and its enterprise-based union. In this sense, IFAs manifest as a channel to change the inward-looking attitude of Japanese enterprise-based unions and promote crossborder cooperation with overseas local unions. Japanese labour unions have also begun to discuss union social responsibility.160
5.4
Developing a Transnational Regulatory Framework
Transnational company-specific agreements are not concluded in a void but in interaction with diverse normative regimes. At the same time, the development of transnational agreements has been relatively rapid and regulatory actors at the national and international level have not been able to offer ready solutions to questions concerning, for example, the legal nature and effects of such agreements. Some transnational agreements contain clauses on mechanisms for enforcement and dispute settlement. However, in some cases the content of the agreement and the commitments it governs have been so loosely drafted that the question may arise as to whether the agreement contains any enforceable clauses. As the outcomes of transnational negotiations go beyond the traditional categories of collective agreements and as a firm normative basis from which the substance of these agreements could be addressed is absent, private international law questions also become complicated.161 Particular uncertainties may relate to determining the law applicable to transnational agreements, especially when
155
See the report of Magnani (2019) about Italy, p. 371. See the report of Chacartegui (2019) about Spain, p. 548. 157 See the report of Chacartegui (2019) about Spain, p. 547. 158 See the report of Campos Medina Maia (2019) about Brazil, p. 118. 156
159
See the report of Araki (2019) about Japan, pp. 393–395. See the report of Araki (2019) about Japan, pp. 393–395. 161 Liukkunen (2017). 160
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this is done on the basis of the principle of closest connection, as the grounds on which most relevant connections are determined when the principle of closest connection is applied are not unified. For example, contractual obligations in the EU belong to the sphere of the Rome I Regulation.162 By virtue of the Rome I in the absence of a choice-of-law clause, the applicable law is determined on the basis of the law of the country with the closest connection in cases where characteristic performance cannot be determined. Many kinds of connecting factors could be taken into account when determining the country with the closest connection. These include the domicile of the central management of the company or group of companies, the place of work of the personnel or the place of work of that part of the personnel who are party to the dispute. It seems evident that the openness of the rule of the closest connection as such can cause legal uncertainty in determining the applicable law.163 In Europe, demands have been raised for an optional legal framework for transnational agreements.164 Several interpretational challenges are involved in the question of the legally binding nature of such agreements and their legal effects. These challenges cannot be readily resolved on the basis of approaches used in relation to what can be called traditional collective agreement categories. However, an optional regulatory instrument would not be able to resolve them either. In some cases, companies have also drawn up joint transnational texts of various degrees in cooperation with employee representatives as part of their individual CSR strategy. However, in the absence of contractual nature these are not legal agreements. Sometimes the ambiguity of the personal scope of application of IFAs complicates their enforcement. When these (often Western-made) agreements have a global reach, their scope may also include employees from different (including non-Western) countries. If a breach of the agreement occurs in another country, employees in the state where the company has its central management might be willing to react. IFAs may also entail obligations which a MNC or group of companies owes to its sub-contractors or other actors within the global supply chain. The protection sought by the agreement for employees of these actors, whose employer might not even be in a direct contractual relationship with the multinational company or group of companies in question, can be difficult to achieve. Additionally, the enforceability of the agreement might be very difficult to resolve.165 162 See 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). 163 Liukkunen (2017). 164 See Communication from the European Commission on the Social Agenda, COM(2005) 33 final, 2005. 165 Liukkunen (2017).
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Commitments entered into when TCAs are agreed upon vary considerably.166 Some traits of the development appear to be overemphasized whereas, for example, the impact of the normative regimes of MNCs on their contractual commitments has remained a largely unexamined area. Transnational agreements have grown out of a need to ensure compliance with certain basic social values, but we are speaking of a regulatory instrument under development. Yet TCAs derive firstly from centralized negotiating processes, which are dependent on functioning social dialogue at the MNC level and secondly from sufficiently balanced employee representation within MNCs.167 In European level agreements, management of changes is emphasized, whereas in IFAs compliance with ILO fundamental labour rights often occupies a key position when transnational agreements are being negotiated. IFAs offer a possibility that fundamental labour rights will be promoted within the normative regime of the company and its supply chain and they manifest and support global social dialogue in MNC operations.168 However, just as with corporate codes, IFAs do not form a homogenous entity and great differences also exist in their implementation. IFAs are meant to improve working conditions in MNCs and in some cases also their suppliers.169 Some agreements provide for commitment to fundamental labour rights outside the company, in its suppliers. In addition to commitment by the contracting parties, local circumstances play an important role in how efficiently an IFA is implemented.170 General problems of lack of sufficient monitoring and enforcement of an MNC’s unilateral CSR documents are also a central issue in effective implementation of IFAs. However, IFAs often state the manner in which complaints are dealt with and they may transform the CSR policies of multinationals into more concrete and binding commitments.171 Many IFAs provide a complaints procedure for workers if a violation of workers’ rights stated in the agreement occurs.172 These agreements are based on the idea that any disputes or breaches of fundamental labour rights are handled in the company in cooperation with workers’ representatives. However, there is evidence of problems involved with the efficiency of company-specific
166
See also European Commission Staff Working Document of 2008 entitled ‘The role of transnational company agreements in the context of increasing international integration’ (SEC(2008)2155). 167 See also generally European Commission Staff Working Document of 2008 entitled ‘The role of transnational company agreements in the context of increasing international integration’ (SEC(2008)2155). 168 See Liukkunen (2014). 169 See Müller et al. (2008). 170 See Liukkunen (2014). 171 See Schömann et al. (2007), p. 122; Sobczak (2007), p. 476. 172 See Sobczak (2007), p. 478.
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dispute-settlement mechanisms concerning IFAs. This raises a concern about the extent to which such agreements can be regarded as advancing global social accountability without further developing their implementation. A particular problem often lies in implementing IFAs in relation to suppliers. Although some IFAs clearly contain precise sanctions, many agreements merely include a commitment to inform or encourage suppliers to respect the agreement or parts of it without stating the consequences of failure to do so.173 Moreover, although trade unions would seem to prefer monitoring by employees and trade unions themselves, related structures and resources are largely lacking.174 It is difficult to evaluate the impact of TCAs and in particular IFAs on labour rights and protection. Some national reports have taken up innovative developments in contractual arrangements that relate to expanding the sphere of application of IFAs on a global scale. With advancing globalization, it is important that these agreements can be drawn to cover companies’ entire field of operations. However, an efficient implementation of transnational agreements would need further action. In connection with implementation of agreements it is possible to agree that contracting parties representing workers will have the competence and the opportunity to react in a timely and effective manner to breaches of the agreement. In addition, contractual arrangements may involve a control system to monitor that agreements are implemented globally, and include an impartial process for investigating breaches. However, it is not sufficient to focus on private enforcement of transnational agreements. Better congruence of public and private international law is needed.
6
Conclusions
6.1
Transformation of Industrial Relations: A Call for Reconceptualization of Bargaining Regimes
Collective bargaining is traditionally a profound channel of collective participation and industrial democracy. The idea of labour protection as a collective phenomenon has been legitimizing the autonomy of collective bargaining and social partners in their relation to the state and in turn this has shaped the strong status of collective agreements in many labour law systems. What has happened recently is that labour governance has given space to economic governance but a sustainable conciliation between the two has not been attempted. In some European countries, realization of the
173 174
See Sobczak (2007), pp. 471–472. See Müller et al. (2008).
right to collective bargaining has been compromised due to the economic crisis, which has resulted in pushing collective agreements firmly into the political arena. From the collective labour rights standpoint, adjustments to bargaining frameworks placing great importance on economic factors have strikingly narrowed the space of labour rights-oriented argumentation and values elsewhere. The transformation of industrial relations relates to deinstitutionalization of labour markets that has occurred and is ongoing in various degrees in different bargaining systems. Decline in trade union power and collective agreement coverage has occurred simultaneously with certain polarization of labour markets. Moreover, the nature of labour has become more fragmented. Different and differentiated groups of non-standard workers with their particular needs tend to have less bargaining power, but they may also have less interest in attending to collective efforts to improve their labour standards. The development of collective labour law in the direction of more flexibility is creating new vulnerabilities. Existing dispute resolution mechanisms require adaptability in dealing with collectively agreed standards deriving from new kinds of contractual arrangements where, for example, individualized wagesetting procedures to be established and applied at the local level may dominate. Although evidence is available that in some countries social dialogue involves developing new strategies to improve protection of atypical work, the transformation of work is so profound that it constantly adds pressure to adopt new and more effective bargaining strategies. How to conceptualize changing bargaining regimes and demands of labour that are not uniform? One of the evident consequences of decentralization is that the power balance in bargaining tables is changing throughout different bargaining levels. This evolution calls for developing institutional settings and bargaining capacities that would enable negotiations based on a more equal footing between the parties. Most of the regimes discussed above do not construct a strong linkage between employee participation and collective bargaining although both represent a chance for employees to use their collective voice and power at the workplace level. There is no clear picture of how local bargaining and employee participation could be integrated for advancing the capacities of local bargaining. However, practical connections often exist between bargaining tables and tables where employees are informed and consulted by employers. These connections would speak for also improving coverage of employee participation systems in terms of different forms of non-standard and atypical work. From a collective labour law perspective, the evolution of transnational negotiations is an important development adding a new layer to industrial relations systems. On a theoretical level, transnational agreements connect with the
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broader economic, social and cultural framework of crossborder industrial relations within MNCs as national industrial relations from different legal contexts amalgamate in companies’ bargaining activities. Despite uncertainties often centred on the legal effect of transnational agreements, the evolution of these agreements confirms a desire on the part of MNCs to enter into negotiations and agreements that build social dialogue and promote international labour standards as well as social values in a cross-border setting. In periods of economic crises, the autonomy of collective bargaining has often come up against restrictions.175 However, in the 2000s, the economic crisis has placed much pressure on collective bargaining systems which have simultaneously been struggling with other pressures for change. In several countries, legislatures have been actively pursuing economic strategies through substantial reforms of collective bargaining. Even collective bargaining systems that have stood out strongly face increasing pressure to comply more closely with parameters deriving from economic viewpoints and business efficiency. Local level bargaining has been facilitated in order to increase flexibility of standardsetting and this has happened simultaneously with erosion noticeable at higher bargaining levels. However, decentralization is characterized by complexity and certain heterogeneity, and the question of meaningful bargaining looks quite different in different contexts. Notable differences exist in the status and protection of the right to collective bargaining. Collective bargaining regimes also differ when assessed from local, sectoral and national or regional and global perspectives. Histories shape collective labour law regimes and explain the poor development of some bargaining systems. Complex transformations are also noticeable in the changing degree of cooperation in industrial relations. All this calls for a more nuanced analysis of regulatory frameworks so that the law-in-context approach is utilized. In recent decades, we have witnessed a gradual shift in many centralized bargaining systems towards more local level bargaining. Often, economic circumstances, or conclusions based on economic factors, have strongly affected the development. In some countries, centralized models of collective bargaining have increasingly been replaced by more or less decentralized models, whereas in others the national or sectoral level still plays a key role in collective bargaining. Differences also occur in relation to organizing and coordinating the decentralized and centralized models. By and large, decentralization presupposes delegation of competence in bargaining to the local level and emphasizes the relevance of reorganizing competences and related power structures in collective bargaining regimes.
175
See also Rojot (2004), p. 523.
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This also often relates to broadening opportunities to deviate from legislation via collective agreements and from higher level collective agreements via local level agreements. We have seen that in many countries legislatures are using enlargement of the opportunity for in peius deviations at the local level from higher level collective agreements or legislation as a means to facilitate local level bargaining, with the result of weakening labour protection. Increasing pressure towards greater flexibility and tensions between flexibility and security appear common to bargaining systems worldwide. Mandatory minimum protection of workers may have been weakened by legislative intervention in both systems that are decentralized by nature and systems that have become increasingly decentralized. In peius deviations from mandatory labour legislation or higher level collective agreements have been enabled or expanded in countries facing different kinds of decentralization trends. In addition, the hierarchy between collective agreements at different levels has changed and decentralization of bargaining structures has become a significant regulatory objective for many legislatures.
6.2
Grouping Collective Bargaining Systems on the Basis of Developments in Decentralization
Collective bargaining systems can be grouped in different ways according to their structural nature, taking account of developments in decentralization. In addition to expanding local bargaining powers and agendas, decentralization of bargaining structures is an important trend. In some countries, legislatures have rearranged the hierarchy between different bargaining levels in favour of local bargaining. As a consequence, coordinative capacity within the systems has been weakening. Clearly, bargaining systems differ in diverse ways between and within any individual groupings. Also significant within one bargaining system may be sectoral differences, variations in variations. The national collective bargaining systems under comparison can generally be divided into different groups on the basis of the decentralized or centralized nature of the systems as well as trends and modes occurring in decentralization. In some countries, such as Canada, the U.S.A and Japan, the collective bargaining system is decentralized by nature, so that decentralization is thus not relevant to these systems. However, the trend in declining union density is also familiar to those same systems, which face weakening bargaining regimes and bargaining agents as well as diminishing coverage of collective agreements. In some countries, collective bargaining is largely decentralized so that the higher level is almost absent. In
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Eastern Europe, where unionization is typically very low and coverage of collective agreements is small, this development relates to historical influences and regulatory interventions by the state. The Czech Republic, Hungary and Poland can be characterized as countries where the history of industrial relations hampers the realization of collective bargaining, and state legislatures have often been active in promoting a flexible framework for bargaining. In addition, in Asia, Taiwan has built a regulatory framework for collective bargaining, which takes place largely at the company level, but bargaining would need strengthening in order to function properly. In some countries, a multi-level bargaining structure exists despite a gradual shift towards more local bargaining or various weaknesses in the bargaining structure that reduce the efficiency of bargaining. The Russian system is multilevel, but the Soviet heritage causes similar problems to those visible in other Eastern European countries. However, there have been sectoral and cross-border bargaining developments which underline the mixed nature of the picture. The Brazilian system is becoming largely decentralized. Previously, particular characteristics provided certain safeguards for collective bargaining but the present situation is conducive to legislative reforms that enhance local bargaining and reduce the overall efficiency of bargaining. In several European countries where decentralization, which has occurred in various ways, has not affected basic bargaining structures, bargaining regimes have retained their centralized nature. In these countries decentralization has occurred in a controlled manner and the state has not intervened in the autonomy of the social partners. Belgium, Denmark, Finland, Germany and Sweden can be presented as countries where trade union density has remained at a relatively high level and sectoral agreements have maintained an important role, albeit noteworthy changes in that role have occurred. However, the shift in bargaining to the local level has affected Belgium only marginally. In Germany, opening clauses are widespread but the interplay between trade unions and works councils at the local level has remained strong. Additionally, in these countries new kinds of fundamental questions that relate to the right of freedom of association are emerging, as demonstrated by the Danish debate on determining the most representative trade unions and a recent German case pending in the ECtHR about resolving collisions between different collective agreements under the Act on Uniformity of Collective Agreements, which regulates conflicts that arise if several collective agreements are applicable in one company. There can be said to be a group of countries where collective bargaining is becoming more decentralized so that bargaining structures are affected and where adjusting to economic changes has affected the social partnership and increased flexibility. However, this group is not homogenous
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either. In general, within this group of countries decentralization has been pushed forward in various ways by the legislature, leading to erosion of bargaining structures, or external pressure has resulted in regulatory changes. In Slovenia, history affects the bargaining regime, but bargaining decentralization has been occurring only to some extent and the bargaining system is well-developed. There are also countries where national legislatures have facilitated local bargaining due to external pressure deriving from the requirements set by European institutions within the European semester. In France, both the European semester and a more flexible and liberal labour market policy on the part of the national legislature have pushed the system in a more decentralized direction so that the hierarchy of collective agreements has changed and the role of sectoral agreements has weakened. In Croatia, Greece, Italy and Spain, state legislatures have faced pressure from the European semester to intervene in collective autonomy in favour of local bargaining. In the Greek case of destabilized decentralization, harsh state intervention has resulted in erosion of the entire industrial relations system. Comparisons in the field of collective bargaining assume that the existence of particular characteristics of different labour law mechanisms is somehow taken into account. However, the complicated and multi-layered constructions of each bargaining model provide a closer framework for interpretations underlining legal-cultural factors that affect the actual operation of law. Groupings that highlight developments in decentralization are not clear-cut and they emphasize selected perspectives to bargaining regimes. Yet, importantly, they point to the trend in decollectivization of labour relations. There are also bargaining systems that are under construction. In China, the evolution of current collective consultation regime began in the 1990s, and the regulatory framework, which has undergone important changes, would need strengthening to promote capacities of collective bargaining.
6.3
The Right to Bargain Collectively and Decollectivization of Industrial Relations
In many bargaining systems, both decentralized and centralized ones, declining union density and collective agreement coverage as well as institutional and regulatory changes push toward decollectivization of industrial relations. Earlier, the established hierarchy between sectoral and local levels of bargaining protected minimum standards set at the sectoral level so that these standards could not be deviated from in peius. Lately, this hierarchy has been turned the other way round so that such derogations from sectoral agreements at the local level are enabled. In addition, in some
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systems the position of trade unions at the local level has been weakened so that they can be bypassed when local agreements are negotiated. Legislative changes have enabled conclusion of local agreements also with other parties than trade unions. Even in countries where decentralization has been organized, notable changes have occurred in bargaining frameworks and mechanisms that concern local level bargaining. These point to a trend towards individualization in setting wages and other terms of employment at the company or workplace level. Separate wage settlement mechanisms are built and implemented at the local level; this is based on bargaining power entrusted to local parties. What happens is that what used to be collective cases are being split into individual cases. Standardization and gradual improvement of labour protection via collective agreements has increasingly transformed into local bargaining models that produce individual solutions and enhance employability. Individualized bargaining relates to decreasing bargaining capacity of trade unions. Collective bargaining is increasingly understood as producing frameworks for negotiated flexibility and adjustments required for ensuring employability as well as business competitiveness and efficiency. As a result, decollectivization of industrial relations is taking place as, at the local level, new patterns and methods of setting terms of employment are evolving in a way which highlights employer discretion and bargaining as an individualized process between employer and employee. Globalization and related transformation of the economy have affected the power balance in the labour market and the role of states in relation to industrial relations and collective autonomy has been changing. The stronger the role of collective agreements in regulating employment relationships, the more important becomes the industrial relations process.176 The increase in statutory regulation of rearranging bargaining frameworks relates to attempts of national legislatures to increase control over bargaining levels and outcomes. In several systems characterized by high trade union density and collective agreement coverage, the traditionally central role of central labour market organizations has been decreasing and the regulatory capacity of sectoral agreements, also in terms of providing a regulatory framework for local level bargaining by way of various kinds of opening clauses, has been increasing in relevance. As a result, we are witnessing more decentralized bargaining systems but also, to some extent, along with new more individualized ways and means of bargaining at the local level, a gradual shift towards local bargaining models that appear to be less essential to collectively setting labour standards and developing collective labour protection through traditional participatory
mechanisms. However, as local bargaining allows employers considerable discretion, employees would need procedural safeguards in order to ensure a sufficient power balance of local level negotiations. The individualization development we are witnessing appears distant from the original idea of collective bargaining related to workers’ collective pursuit of labour rights. To some extent, an era of reconceptualizing collective bargaining regimes has emerged as workers no longer solely use collective bargaining in their pursuit of collective labour rights but, rather, local bargaining agendas are modified towards more individualized flexibility. National regulatory frameworks which have been built to enable autonomous collective bargaining within the framework of corporatist arrangements have increasingly transformed into regulatory frameworks which set out limitations to and restrictions on collective bargaining. These frameworks derive from the considerations and demands of the state, or in the case of the EU, international institutions. As Tiziano Treu has put it: “The use of legislative method, in place of other normative techniques, for the institutional control of bargaining or for the fragmentation of the existing bargaining structure is a highly relevant matter. Not only is statute law the most formalized and rigid technique, and thus, much harder to modify. It is also the clearest expression of the increased dependence of the industrial system upon the political system.”177 With profound changes to work as such, the scope and extent of protection that collective channels and institutions provide to workers are being challenged. In many countries, including those with well-established centralized or decentralized bargaining regimes, collective labour law mechanisms are in transition due to changes in work and work organization, and the new situation of the labour market appears to be that entire labour law models are struggling. Decentralization is challenging our traditional understanding of collective bargaining regimes in many ways. However, decentralization is a complicated issue to the extent that its degree or mode may be difficult to measure as different components of collective bargaining frameworks are highly interconnected. Yet decentralization is often assessed from certain viewpoints which appear to marginalize some others. Responses to ongoing changes to work highlight economic agendas so that labour law-related considerations appear narrowed and vague when placed in institutional contexts that amalgamate the economic and the social. The pursuit of more flexibility has come to undermine the labour rights perspective and values that are manifested in workplaces in the right to bargain collectively. Labour law is based on an assumption that economic considerations are
176
177
See Malmberg (2002), p. 10.
Treu (1987), p. 166.
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not only issues that determine how work should be regulated. The principle of labour protection upon which labour law is built presupposes collective actors and institutions that can exercise collective power and pressure in order to manifest and defend the collective interests of workers. From the perspective of weaker party protection, the core of labour law can be seen as an expression of public interest, loaded with collective traditions and legal-cultural characteristics to the extent that the impression of a public regime is present in one way or another. The ways in which regulatory frameworks for collective bargaining regimes are being reconstructed in several systems disrupt this portrait. A set of values, democracy, representation and autonomy is involved. The focus of the labour law research agenda should not only be on how regulatory frameworks are changing but also on what is changing in terms of core values that cannot be reduced to material issues of contractual arrangements. This is also the framework from which to assess the changing role of states in the field of industrial relations and their decollectivization. However, singling out and focusing on the collective interest is not enough to identify the labour questions of our day because individualized bargaining between employees and employers distracts the old picture and calls for renewed research agendas. The regulatory framework for collective bargaining needs to be reformed from a broader perspective in response to changes in the labour market. As a consequence, we may face new types of institutions or reformed institutions and related regulatory frameworks that replace or complement those based on more stable working life and industrial relations. Reforms are required to build institutional space for the development of meaningful employee participation in our time and achieve an adaptable system of labour governance. However, without a deeper account of the collective nature of labour rights it is not possible to reformulate research agendas. The development of fundamental labour rights protection provides a useful frame of reference, as the system of international labour law builds on the central importance of the principle of freedom of association. We should not forget that collective bargaining is also an important means of promoting gender equality and women’s position in and contribution to the labour market, workers’ employability and protection regardless of age, race or other categorizations as well as several other issues where more effective safeguards are necessary. International labour law is not solely about international labour standards developed by the ILO and other international organizations and states together. In the transnational dimension of collective contractual arrangements we have seen the emergence of a new kind of actors into the sphere of what was previously the domain of traditional regulatory actors. Importantly, the transnational dimension is not only a feature complementary to domestic approaches but it has its
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own institutional and normative setting where it stems from and evolves, fulfilling a lacuna within transnational labour law beyond state frontiers. Transnational agendas of negotiations consist of issues and terms of work that often bear a collective nature or a fundamental labour rights nature, while in local bargaining tables individualized interests increasingly dominate. Moreover, transnational agendas seek to govern employees of MNCs within certain regions or globally and they may extend to supply chains too. Despite legal ambiguity and diverse experience in different states, transnational agreements add new regulatory frameworks and mechanisms to collective labour law and demonstrate a new kind of enhancement of regulatory instruments developing collective rule-making capacities further. Traditional collective bargaining mechanisms built on trade union representation may not have been sufficiently equipped to respond to labour market changes. However, this does not mean their ultimate basis of legitimacy is defunct. It is important to understand the fundamental rights nature of the right to bargain as a democratic process of discussions and negotiations between employers and employees. It is equally important to understand the relevance of the fundamental right to industrial action backing this right. The discourse reshaping the collective labour law framework has largely overlooked what the core of the fundamental-rights nature of the right to collective bargaining encompasses. A rights-oriented mindset does not mean excluding the need to develop collective bargaining frameworks in adapting institutional responses to new realities but rather to bring back to the debate the democratic mandate perspective and core values that lie behind bargaining efforts and social dialogue.
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and collective bargaining in Europe and China. Mohr Siebeck, Tübingen Liukkunen U, Chen Y (2016) Developing fundamental labour rights in China: a new approach to implementation. In: Liukkunen U, Chen Y (eds) Fundamental labour rights in China – legal implementation and cultural logic. Springer, Berlin Liukkunen U (2017) Employment, collective bargaining. In: Basedow J, Rühl G, Ferrari F, de Miguel AP (eds) Encyclopedia of private international law. Edward Elgar Publishing, Cheltenham Magnani M (2019) Italy. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Malmberg J (2002) The collective agreement as an instrument for regulation of wages and employment conditions. In: Wahlgren P (ed) Stability and change in Nordic labour law: legal abbreviations. Scandinavian studies in law 43. Stockholm Institute for Scandinavian Law, Stockholm Malmberg J, Sigeman T (2008) Industrial actions and EU economic freedoms: the autonomous collective bargaining model curtailed by the European Court of Justice. Common Market Law Rev 45 (4):1115–1146 Mazuyer E (2019) France. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin McEvoy JP (2019) Canada. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Müller T, Platzer H, Rüb S (2008) International framework agreements – opportunities and limitations of a new tool of global trade union policy. Briefing Papers No 8/2008. Friedrich Ebert Stiftung International Trade Union Cooperation Papadimitriou C (2019) Grèce. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Pataut E (2016) European social dialogue and contractual autonomy. In: Basedow J, Chen S, Fornasier M, Liukkunen U (eds) Employee participation and collective bargaining in Europe and China. Mohr Siebeck, Tübingen Pichrt J, Štefko M (2019) Czech Republic. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Pisarczyk Ł, Skupień D (2019) Poland. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Ray DE (2019) The United States. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Rojot J (2004) The right to bargain collectively: an international perspective on its extent and relevance. Int J Comp Labour Law Ind Relat 20:513–532 Schömann I (2012) Transnational company agreements: towards an internationalisation of industrial relations. In: Schömann I, Jagodzinski R, Boni G, Clauwaert S, Glassner V, Jaspers T (eds) Transnational collective bargaining at company level a new component of European industrial relations? ETUI, Brussels Schömann I, Sobzack A, Voss E, Wilke P (2007) International framework agreements: new paths to workers’ participation in multinationals’ governance? Transfer Eur Rev Labour Res 14:111–126 Schulten T (2015) Opportunities for a restoration? The future of Greek collective bargaining after the Third Memorandum. The FriedrichEbert-Stiftung, Berlin Schulten T, Müller T (2012) A new European interventionism? The impact of the new European economic governance on wages and collective bargaining. In: Natali D, Vanhercke B (eds) Social developments in the European Union 2012. ETUI, Brussels Seifert A (2014) European Economic Governance and labor laws of the E.U. member states. Comp Labor Law Policy J 35:311–330 Senčur Peček D (2019) Slovenia. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Sigeman T (2003) Nordic labour law. A brief presentation from a comparative perspective. Juridisk tidskrift 2002(3):497–503
408 Smokvina V, Laleta S (2019) Croatia. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Sobczak A (2003) Codes of conduct in subcontracting networks: a labour law perspective. J Bus Ethics 44:225–226 Sobczak A (2007) Legal dimensions of international framework agreements in the field of corporate social responsibility. Relations Industrielles/Industrial Relations 62:466–491 Treu T (1987) Centralization and decentralization in collective bargaining. Labour 1:147–174 Tuori K (2002) Critical legal positivism. Ashgate, Farnham Videbæk Munkholm N, Højer Schjøler C (2019) Denmark. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Voss E, Wilke P, Sobczak A, Schömann I (2008) Codes of conduct and international framework agreements: new forms of governance at company level. Office for Official Publications of the European Communities, Luxembourg. Access at: http://www.academia.edu/ 678230/Codes_of_conduct_and_international_framework_ agreements_New_forms_of_governance_at_company_level Waas B (ed) (2014) The right to strike: a comparative view. Wolters Kluwer, Alphen aan den Rijn Waas B (2019) Germany. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Waddington J (2011) European Works Councils. A transnational industrial relations institution in the making. Routledge, Abingdon Wei D, Rafael AP (2019) Macau. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin
U. Liukkunen Weiss M (2004) The future of workers’ participation in the EU. In: Barnard C, Deakin S, Morris GS (eds) The future of labour law: Liber Amicorum Bob Hepple QC. Hart, Oxford Westregård AJ (2019) Sweden. In: Liukkunen U (ed) Collective labour law in labour regimes - a global perspective. Springer, Berlin Zimmermann R (1996) Savigny’s legacy: legal history, comparative law and the emergence of a European legal science. Law Q Rev 112:576–605 Zumbansen PC (2012) Comparative law’s coming of age? Twenty years after critical comparisons. In: Miller RA, Zumbansen PC (eds) Comparative law as transnational law. A decade of the German Law Journal. Oxford University Press, Oxford
Ulla Liukkunen is Professor of Labour Law and Private International Law at the University of Helsinki. She is also the Director of the Finnish Center of Chinese Law and Chinese Legal Culture. Professor Liukkunen has published widely on labour law, private international law, comparative law, transnational law and the governance of the social dimension of globalization. She has led two Academy of Finland international labour law research projects, “ILO Core Labour Standards Implementation in China: Legal Architecture and Cultural Logic” and “Employee Participation and Collective Bargaining in the Era of Globalization – Nordic and Chinese Perspectives”. Professor Liukkunen has wide experience in national and EU law drafting and she has acted as an expert in several international projects on labour law and private international law. Her current research interests include transnational labour law.
Legal Aspects of Cruises Cecilia Fresnedo de Aguirre
Abstract
This general report conducts a comparative study mainly on the following issues: (1) the importance of cruise business, (2) general and specific rules applicable to cruises, (3) cruise passengers as consumers, (4) package travels, (5) labour rules on cruises’ workers, (6) rules on ports that are relevant to cruises, including taxes, costs and rates charged to cruises in different ports, (7) rules on environmental impact of cruises, (8) jurisdiction, arbitration, and choice of law in cruise contracts, and (9) general conditions used by companies offering cruise services, aiming at discovering which the existing sources of law on these matters are and whether they are appropriate and sufficient or not
1
Introduction
Carriage of passengers by sea has been an exceptional activity along history, due to the multiple perils and lack of security it had to face. Only crew members and some few people authorised by the captain travelled by sea. That situation changed dramatically when during the nineteenth century means and techniques of navigation were transformed, and carriage by sea stopped to be limited mainly to cargo and started to move great numbers of passengers from one continent to another. The development of commercial aviation after the Second World War had great impact in carriage of passengers by sea, but during the sixties and the seventies, the
This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. C. Fresnedo de Aguirre (*) University of the Republic Uruguay, Montevideo, Uruguay
cruise industry started to be developed in an increasing manner.1 That notorious increase of the cruise business is due to the fact that more and more people have access to different ways of travelling, including cruises and package holidays or package travels that include cruises. This activity generates a great amount of private international law issues regarding different areas of law, such as contracts law, consumer protection law, labour law, port’s regulations, and environmental law, among others. Though it can be stated that there is not yet extensive legal research specifically on cruises, there are several general rules that are applicable to cruises and related matters. This general report conducts a comparative study mainly on the following issues: the importance of cruise business, general and specific rules applicable to cruises, cruise passengers as consumers, package travels, labour rules on cruises’ workers, rules on ports that are relevant to cruises, including taxes, costs and rates charged to cruises in different ports, rules environmental impact of cruises, jurisdiction, arbitration, and choice of law in cruise issues, and general conditions used by companies offering cruise services. It is obvious that all these issues require legal regulation, specific and/or general, national, international or supranational. This research aims at discovering which the existing sources of law on these matters are and whether they are adequate and sufficient. It ends up with a non exhaustive list of all those sources of law, without prejudice of their analysis throughout the report. This general report has greatly benefitted from the thirteen national reports submitted for the Fukuoka Conference2 by experts on the subject matter from various jurisdictions in Europe, North and South America and Asia.
1
Estepa Montero (2013), pp. 332–336. Argentina, Belgium, Brazil, Bulgaria, China (Shanghai), Germany, Japan, Poland, Romania, Spain, Turkey, Uruguay and United States of America. 2
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_15
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The aim of this general report is to shed some light on a matter that is neither well known nor enough studied at the universities worldwide.
1.1
Kinds of Impact That Cruise Tourism Can Originate
Cruise tourism can originate infrastructure impact because of the construction of dams and passenger terminals, which modify the natural environment, for example, the loss of natural habitat, changes in the local coastal surf and changes in the patterns of sediment.3 Cruise tourism can also originate operational impacts derived from the use of energy: operations regarding cruises involve as a result the contamination of the water and the air, since a cruise vessel consumes as an average a volume of gas equivalent to that of 12,000 automobiles. Cruise vessels also produce atmospheric emissions related to toxic ashes and smoke from waste incineration on board, the emission of black and grey waters and other kinds of wastes. There is also an impact originated in the amount of wastes that a cruise produces per person and per day, like oils, sewage water, plastics and dangerous substances, food wastes, glass, etc.4 Cruise tourism also produces impacts associated with the trips tourists make, the logistics of supplies to cruise vessels, and the capacity of destinies. They also originate cultural impacts, derived from the mass tourism.5 However, since cruise industry is a relatively new and globalised one, and in spite of the studies carried on during the last years, we still have little knowledge regarding its effects, particularly in visited port areas, and the environmental consequences of its activities.6
1.2
Maritime Transport of Passengers Throughout History
It is from the nineteenth century that maritime carriage of passengers is developed and maritime transport companies establish regular lines for the carriage of passengers along the oceans.7 The origins of cruises can be found in the twentieth century around the fifties or sixties, when several companies like P&O, Holland American Line and Costa Crociere, and afterwards others like Royal Caribbean, Carnival Cruises and Transmediterránea, organize this particular kind of travel for 3
Ariza Herrerías (2014), p. 24. Ariza Herrerías (2014), pp. 24–25. 5 Ariza Herrerías (2014), p. 25. 6 Vasallo (2015). 7 Estepa Montero (2012), p. 145. 4
leisure and pleasure. Cruises include accommodation, food, beverage, and several activities and spectacles on board, as well as the possibility of visiting touristic and historic places in each scale along the journey.8 All these activities are included in what is called combined trip, on an all inclusive basis, and, depending on the travel agency, it can include the air tickets, previous accommodation and transfers. Some kinds of beverages, exclusive services like laundry, hairdresser, special restaurants and some excursions outside the vessel are not generally included.9 Over time, cruise ships become true floating cities and the amount of cruise passengers has grown enormously in the last decades, particularly in America and in Europe.10
1.3
Maritime Cabotage
During the transition periods of the EU economic integration cruise services in the Mediterranean, as well as other types of maritime transport services, have been exempted from the application of the Regulation EC/3577/92 on the freedom to provide maritime transport services within E.U. Member States (maritime cabotage). This exemption was first granted for the founding member states and later on also upon the accession of Croatia to the European Union, exemptions were granted to Croatia for cruise services between Croatian ports by ships smaller than 650 gt, by reserving those cruise services for Croatian ships till 31 December 2014. Regulation (EC) N 3577/92 was declared applicable to cruise services.11 Case-law of the EU Court of Justice on the meaning of “maritime cabotage” has been reported. In case C-17/13 it was discussed whether a cruise starting and ending at the same port of a Member State, with the same passengers aboard, was covered by the term “maritime cabotage” within the meaning of the Regulation N 3577/92. The Court decided that it was, on the grounds of the principle of freedom to provide services of maritime transport within Member States (maritime cabotage).12 In that case a non-EU (Swiss) river cruise operator claimed that the concept of ‘maritime cabotage’ applies only to services that involve true sea transport and that the river cruise at issue does not involve such transport. The Court ruled that the term ‘sea’ referred to by Regulation No 3577/92 is not limited to territorial sea within the meaning of the United Nations Convention on the Law of 8
Estepa Montero (2012), pp. 146–147. Estepa Montero (2012), p. 147. 10 Estepa Montero (2012), pp. 148–151; Ariza Herrerías (2014), p. 3. 11 Act of 9 December 2011, amending Regulation n EC/3577/92. See Belgian Report, II.9.7. 12 See further information on this case and others in the Belgian Report, II.9.7. See also https://curia.europa.eu/jcms/upload/docs/application/ pdf/2014-03/cp140041en.pdf. 9
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the Sea,13 but also covers internal maritime waters which are on the landward side of the baseline of the territorial sea (referring to Case C-323/03, paragraphs 25–27).14
1.4
Cruises Travel Through Waters Submitted to Different Legal Regimes
1.4.1
International Waters: Principle of Freedom of Navigation When cruises sail through international waters, the principle of freedom of navigation enshrined in the United Nations Convention on the Law of the Sea (Montego Bay, 1982), applies.15 Under some legal and conventional rules16 and some case law, a ship on the high seas is considered to be located in the territory of his flag State. On the other hand, it has been stated that the law on shipboard cannot change at every change of waters. In more recent times, legislative and jurisprudential solutions acknowledge that such law is that of the nationality of the ship, which is that of the State that registered it.17 It has been reported that a ship has the nationality of the State that registered it “only if there is a ‘genuine link’ between the state and the ship, namely whether the company owning the ship is owned by nationals of the state; whether the officers and crew of the ship are nationals of the state; how often the ship stops in the ports of the state; and how extensive and effective is the control that the state exercises over the ship. Regardless of the theoretical basis, an important factor in what law supplements general maritime law is the ship’s nationality”.18 1.4.2 High Seas The United Nations Convention on the Law of the Sea (Montego Bay, 1982) provides that “the high seas are open to all States” and that freedom is exercised under the conditions laid down in the Convention. It comprises, among others, freedom of navigation (arts. 87 and 90).
13
Signed in Montego Bay (Jamaica) on 10 December 1982, entered into force on 16 November 1994 and approved on behalf of the European Community by Council Decision 98/392/EC of 23 March 1998. 14 See further information on this case and others in the Belgian Report, II.9.8. See also https://curia.europa.eu/jcms/upload/docs/application/ pdf/2014-03/cp140041en.pdf. 15 Estepa Montero (2012), p. 135; Ariza Herrerías (2014), p. 9. 16 For example, Article 27 of the Montevideo Treaty on International Civil Law of 1889 provides that: “Vessels on non-jurisdictional waters are deemed to be located at the place of their registration”. If the vessel is on internal or on territorial waters, she is considered to be located in that State where she actually is, the State of the internal or territorial waters (Article 26). 17 For example, Articles 1–3 of the Montevideo Treaty on International Commercial Navigation Law of 1940. 18 Felder (2006), p. 26.
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1.4.3 Internal Waters Internal waters are ruled by the law of the States with adjacent costs to those waters. In principle, foreign vessels cannot enter internal waters, which include ports. The problem of access to ports was solved by customary law and later in time it was ruled by the Convention and Statute on the International Regime of Maritime Ports, Geneva, 9 December 1923. It provides for a simple regime, based on reciprocity for “seagoing vessels” “used for foreign trade” (art. 1).19 1.4.4 Territorial Sea The scope of territorial sea is of 12 nautical miles and is ruled, among other Conventions, by the Convention and Statute on the International Regime of Maritime Ports, Geneva, 9 December 1923. Under Article 2, “. . .every Contracting State undertakes to grant the vessels of every other Contracting State equality of treatment with its own vessels, or those of any other State whatsoever, in the maritime ports situated under its sovereignty or authority, as regards freedom of access to the port, the use of the port, and the full enjoyment of the benefits as regards navigation and commercial operations which it affords to vessels, their cargoes and passengers”. However, the latter is “subject to the principle of reciprocity”. The United Nations Convention on the Law of the Sea (Montego Bay, 1982) provides as a general rule that ships of all States “enjoy the right of innocent passage20 through the territorial sea” (art. 17), as far as it does not mean a jeopardy or menace to peace or security of the coastal State.21
1.5
Final Remarks
Cruise tourism originates impact at different levels affecting not only waters through which they sail but also air, coasts and port areas. It is a relatively new activity that is growing dramatically. Since cruises travel through waters submitted to different legal regimes, it is important to determine whether they can be ruled by one of them only, for example, that of their flag, or to several national and international laws. In this chapter we have just presented the matter and shown some international substantive rules, and some conflict of laws rules. This topic will be developed hereinafter.
19 Estepa Montero (2012), pp. 135–136. See also the United Nations Convention on the Law of the Sea, Geneva, April 29, 1958. 20 Meaning of “innocent passage” is given by Articles 18 and 19. 21 Ariza Herrerías (2014), p. 9.
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2
The Importance of Cruises in General and in Some Particular Areas and Countries
2.1
General Remarks
It can be asserted that the cruise business has a growing importance almost all over the world, although there are significant differences among regions and countries. Transport of passengers by sea or river is an ancient activity, as old as human kind; however, cruises as a touristic option, have appeared in the late decades, becoming a relatively recent business. The most important developments regarding cruises appeared in the late fifties not in Europe but in the USA, with a great demand of cruise trips along the Caribbean islands, and then in the Mexican Pacific coast, as well as in Hawaii.22 Though there is a popular general idea of what a cruise is, there are several technical distinctions in different legal sources, as will be dealt with throughout this general report. Terms like combined trips, package travels, package tours or package holidays refer to those trips that include not only the cruise but also the airplane trip to and from the port of departure, the land excursions chosen by the tourist when the ship is in port, and eventually some hotel night.23 There is also a model of cruise that focuses on providing “Onboard Hospitality and Entertainment” (OHE), where the transportation element is servile to entertainment. They may even limit themselves to onboard entertainment and activities rather than destination-based activities, abandoning the multiplecoast-check program and offering long term ocean-only cruises.24 There are other specific kinds or categories of cruises like ferry-services, which focus mainly on transportation and mobility with no or “Limited Onboard Involvement” (LOI),25 in some cases only tax free shops. Many ferries transport the passengers with their vehicles, particularly those that cover short or medium distance trips to residential and touristic destinations, like services across the English Chanel between the United Kingdom and France, or between Cadiz and the Canary Islands. This mode of transport requires new ships with entry and exit ramps for cars26 and even for bigger vehicles like vans and tourism busses. “Shore to Shore Floating Services” (SSFS) mobilize conventionally land-based services (events, festivities, casino, etc.) on a floating infrastructure often consisting of immobile ships, and even “Condominium/Residential Model” (CRM) 22
Estepa Montero (2013), pp. 336–337. Ariza Herrerías (2014), p. 13. 24 Belgian Report, II.13. 25 Mozuni and Jonas (2016), pp. 59–60. 26 Estepa Montero (2013), p. 334. 23
that offers floating residency27 on condo-cruise ships, floating communities that are increasingly popular. The most famous ocean residence is The World, a luxury ocean liner.28 This variety of modes of passenger transportation by water29 makes qualification difficult in some cases,30 like package travel contract and maritime transport contract, cruise operation and transport operation, among others.31 Whereas N 17 of Directive (EU) 2015/2302 explains that only the combination of different types of travel services, such as accommodation, carriage of passengers by bus, rail, water or air, as well as rental of motor vehicles or certain motorcycles, should be considered for the purposes of identifying a package or a linked travel arrangement.32 Thus, in cases where, unlike in the case of a cruise, overnight accommodation is provided as part of passenger transport by road, rail, water or air, accommodation should not be considered as a travel service in its own right if the main component is clearly transport.33 Cruise ships have been defined as hotels that are operated on an all-inclusive basis, where owners did not have to pay for the land, and that use for free international space and sometimes privative space of a State, with mobility according to climate and demand, which are significant advantages.34 From a commercial perspective, the attractive of cruises is due not only to the referred advantages, but also because they offer the facilities of a high level hotel together with the possibility of visiting interesting historic and artistic destinies, beautiful natural landscapes, and everything without moving the luggage from the cabin.35
2.2
Main Cruise Destinies
There are some traditional destinations for cruises, like for example the USA (Hawaii, Alaska and others), the Caribbean area, Mexico, Northern Europe, the Mediterranean Sea and its coasts, Spain, Italy and Greece, while others are emerging
27
Belgian Report, II.13. http://www.businessinsider.com/what-are-condo-cruise-ships. 29 See the preamble of the EU Directive 2015/2302 for detailed definitions, whose reproduction in this general report would exceed its appropriate extension. 30 E.U. Court of Justice, 7 December 2000, cases nr. C-585/08 and C-144/09. 31 Belgian Report, II.13. 32 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri¼CELEX% 3A32015L2302. 33 See for further information the Belgian Report, II.13. 34 Vasallo (2015). 35 Estepa Montero (2013), p. 336. 28
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ones, like for example Bulgaria, Romania, Poland.36 What appears clear is that even those countries which are not main cruise destinies would like to become one.
2.2.1 Europe General Information The European Market regarding cruises has grown by 41% over the past 3 years and has more than doubled over the last ten. Over the past 10 years, the cruise industry grew in Europe by more than 10% each year. Fifty four percent of destinations are Mediterranean and Atlantic Islands. Twenty one percent of destinations are Northern Europe. Twenty five percent of destinations are the Caribbean and the rest.37 The number of EU cruise passengers starting and ending a cruise in the EU amounted to 6,113,000 in 2015.38 In 2016 there were 301 cruise ships by registered flag (ships of 1000 gt39 and over) worldwide, and 97 out of those 301, i.e. 32% of the total amount of cruise ships in the world were from the EU. In 2014 an estimated 5.85 million passengers embarked on their cruises from a European port,40 about 27% of the world cruise market.41 Some National Jurisdictions Spain is not only a main cruise destiny but “a landmark in cruise traffic” and “the second European country with the biggest number of cruise passengers, just behind Italy”, with an increasing number of cruise passengers arriving in some of the 46 port areas42 in the country.43 Figures are amazing and show the important economic impact of cruise market in Spain: 7,662,010 cruise passengers disembarking in Spanish ports from 3700 cruises in 2014, for example, increasing to 8,435,966 cruisers in 2015, meaning 9.4% on the previous year, in spite of some ups and downs.44 In 2013 “Polish ports attended 1,1% of the gross tonnage (GT) of all passenger ships (including cruise ships) entering main European ports”. Polish Report, I.1. 37 See very detailed information of data and sources with statistics in the Belgian Report, I.1–2. 38 EU transport in figures, statistical pocketbook, European Commission, 2017; Belgian Report, I.1. 39 “Gt” stands for gross tonnage. 40 GP WILD (International), Business Research and Economic Advisors (BREA) (2015), p. 3. 41 Belgian Report, I.1. 42 These 46 ports are comprised in the Spanish port system of state ownership and are “managed by 28 Port Authorities, whose coordination and efficiency control is responsibility of the public body Puertos del Estado (State Ports), body attached to the Ministerio de Fomento (Ministry of Public Works and Transport), which has been appointed by law for the implementation of government policy on ports”. (Spanish Report, 1). 43 See Spanish Report, 1. 44 See Spanish Report, 1. See also some figures in Estepa Montero (2013), pp. 339–341. 36
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The main Spanish attractions for cruise tourism are Barcelona—the first European port and the fourth in the world, with 2.68 million cruisers in 2016—Balearic Islands, Málaga, Valencia, Bay of Cadiz, Vigo, A Coruña, and of course the Canary Islands.45 On the other hand, Germany, for example, “is more a source market than a destiny for cruises, at least sea cruises”.46 The main ports where cruises start are Hamburg, Rostock, Warnemünde, and Kiel; passengers who book cruises in the Mediterranean Sea usually travel by air to reach the port of embarkation.47 The figures for embarkation, disembarkation and port visits of the three leading German ports are interesting48 and reveal a higher percentage of European passengers.49 Belgium represented 1% of the European market share in 2015, with 245,000 cruise passengers over a total of 6,113,000 in the EU.50 Its most important passenger port is Bruges-Zeebrugge, due to several reasons, like its maritime accessibility (easy access to open sea) and proximity to Bruges City (just 3 km/2 ml) and it is equipped cruise ship terminal. In terms of cruise traffic in Northern and Atlantic Europe the port of Zeebrugge is half way in the top ten. Also ports of Ostend and Antwerp are important, as well as the ports of Ghent and Brussels for river inland cruises. Regarding the Brussels Sea Port, it is actually an inland port.51 The case of Bulgaria is particularly interesting. They have no tradition on cruises; Bulgarians still think that cruises are too expensive for them. In addition, there face some facts that conspire against their success as a cruise destination country, like having Turkey and Greece as neighbours, with their traditional and well developed cruise offers. However, there are cruise companies that include some Bulgarian villages in their itineraries along the Black Sea, like Nessebar, a maritime village protected by the UNESCO. In sum, Bulgaria is not yet a main cruise destination but it has an interesting potential to become one, offering its villages with an ancient
45
See Spanish Report, 1. See German Report, 1. 47 See German Report, 1. 48 The German Report, 2, state that: “Hamburg had in 2015 232,000 embarking and 232,000 disembarking passengers and 55,000 port call visits, Warnemünde 132,000 embarking and 131,000 disembarking passengers and 222,000 port call visits, whereas Kiel had 209,000 embarking and 214,000 disembarking passengers and 35,000 port call visits”. 49 See German Report, 2. 50 IRN Research, Cruise Lines International Association Europe (CLIA), Statistics and markets, 2015, p. 4. See further information in the Belgian Report, I.1. 51 See further information on EU and Belgian figures regarding cruises, passengers’ expenditure on land and passenger nationalities, in the Belgian Report, I.1–2. 46
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and rich history, which enable a cultural tourism and thematic cruises.52 Romania is not a main cruise destination either, particularly for maritime passenger ships, due to the current geopolitical situation; it “is a second choice destination for cruise routes in the Mediterranean Sea and the Black Sea”.53 However, the port of Constantza and its new passengers’ terminal are relevant for river passenger vessels, since it is a destination for many Danube and maritime cruise routs. This terminal has an important operating capacity and is very well located.54 Notwithstanding, statistics on the number of cruises and cruise passengers arriving and disembarking on the port of Constantza are very variable and even show a decreasing tendency in the last 3 years.55 As for Poland, though it is not a main cruise destiny yet, it shows interesting perspectives. For example, the port of Gdynia expected for 2017 “the largest cruise ship in the history of Polish ports (Norwegian Getaway)”, which is an indicator of the growth of Poland’s attractiveness as a cruise destiny.56 In fact, statistics—though variable—are expected to raise its numbers in 2017.57 The variations in the number of passengers from 1 year to the other are due to some funny reasons, like the possibility of duty free shopping on sea voyages to and from Germany.58
2.2.2 Asia Since 2008, “cruise tourism is booming in Asia”, states Professor Li and refers particularly to Shanghai, though China is not a main cruise destiny but departure country.59 Statistics show an important increase in the number of cruises and cruise passengers from 2012 to 2016: “Till 2016, more than 1010 cruise ships berthed in China, outbound Chinese cruise tourists reached 2.144 million and the inbound foreign cruise tourists reached 128000, Shanghai Wusongkou International Cruise Port became No. 1 in Asia and No. 4 in the world”.60 52
See Bulgarian Report, I.1–2. See Romanian Report I.1. 54 See Romanian Report. The referred terminal is operated by CN Maritime Port Administration SA Constantza. 55 The statistics of the port of Constantza are the following: “2013: 69 ships boarded, having 54,616 tourists; 2014: 92 layovers took place, with ships having 70,000 tourists aboard; 2015: 35 layovers took place, with ships having 35,000 tourists aboard; 2016: 14 ship visited with 8,632 tourists aboard; 2017: 21 sea and river ships are scheduled to board at the Constantza Port”. Romanian Report, I.2. 56 See Polish Report, I.1. 57 “The number of cruise ships entering Polish ports equalled 240 in 2010 (5.2 mln GT), 194 in 2011 (3.9 mln GT), 199 in 2012 (4.5 mln GT), 226 in 2013 (3.7 mln GT), 223 in 2014 (3.3 mln GT) and 2015 (4.5 mln GT) and 198 in 2016 (3.8 mln GT).” Polish Report, I.2. 58 See Polish Report, I.2. 59 China Report, I.1. 60 China Report, I.2. 53
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Turkey is an important cruise destination and its main ports of embarking and disembarking are Istanbul,61 Kuşadas{,62 İzmir, Bodrum, Marmaris,63 Alanya, Antalya and Çanakkale.64 As for the evolution of the number of cruises and cruise passengers arriving in Turkey, statistics show that: “In 2016, 1296 cruises came to Turkey carrying 1.889.000 passengers.65 In 2013, 1.572 cruises came to Turkey carrying 2.240.000 tourists whereas the number was 1.587 cruises and 2.095.673 tourists in 201266”. Regarding nationalities of cruise passengers, there are mainly German, English, American and Italian; tourists spend approximately US$120–150 daily on cruise ports.67 Japan is a main cruise destiny, particularly Hakata Port, Nagasaki Port, and Yokohama Port, among others. Statistics show interesting figures: “The number of cruise ship ports of call at Japanese ports in 2016 was 2,017 times in total, which is the largest number ever (1,443 times for cruise ships operated by foreign shipping companies, 574 times for cruise ships operated by Japanese shipping companies). The number of Japanese cruise passengers in 2016 was 248,000, which is the largest number ever. The number of foreign passengers who disembarked in Japan was about 1,992,000, which is the largest number ever”. There was also an increase in the money cruise passengers spend when they disembark: “For example, the economic effect of cruise ship ports of call (a round-the-world-trip cruise ship of 5,000 gross tons) at Yokohama port led to increased spending of JPY246,000,000 in 2015 from JPY216,200,000 in 2010”.68
2.2.3 America From a global point of view, South America is not in the first places as cruise destiny but behind Europe and North America. However, Argentina, for example, has become an important cruise destiny during the last 20 years and figures are increasing, though there is a wide margin to improve them. Argentina offers local maritime routs, like the “Circuito maritimo de cruceros Australes”, from Buenos Aires to Patagonia, including the ports of Buenos Aires, Mar del Plata, Puerto Madryn and Ushuaia. Secondly, the “Circuito 61
In 2015, 11% of the cruises came to Istanbul while 30% had come in 2013 (Turkish Report, A). 62 In 2015, 44% of the cruises came to Kuşadas{ while 26% had come in 2013 (Turkish Report, A). 63 In 2015, 8% of the cruises came to Marmaris (Turkish Report, A). 64 See Turkish Report, A. 65 2016 Sector Council Report of The Union of Chambers and Commodity Exchanges of Turkey and the statistic received from the Ministry of Transportation, Maritime Affairs and Communications, Directorate of Sea Commerce. 66 Association of Turkey Travel Agency’s (TURSAB) report in 2013 and 2012. 67 These figures correspond to 2015. See Turkish Report, A. 68 Japanese Report, I.2.
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marítimo de Glaciares”, which goes from the Big Island of Tierra del Fuego with the South American continent—Port of Comodoro Rivadavia or Puerto Deseado—and/or the Antarctic continent and the Islas Malvinas. In 2018 some new itineraries will be added by Alteza Cruises.69 At an international level, Argentina also participates in some important South American itineraries, along the Brazilian coast and the southern coast. The demand of cruises to the Antarctic has grown considerably in the last years, both from national and foreign tourists and they use the port of Ushuaia as the departing or scale port.70 Brazil is also an important cruise destiny and shows interesting figures: 805,189 passengers embarked in the 2011/ 2012 season, but only 552,091 in the 2015/2016 season. However, Brazil is still an important cruise market.71 Statistics on the evolution of the number of cruises and cruise passengers, their nationalities, and the money they spend on land, thorough studies produced by CLIA in partnership with the Fundação Getulio Vargas (“FGV”), a well known research entity in Brazil, may be found online.72 Uruguay has also become an important cruise destiny, though its cruise season is limited to the October-April period. The importance of cruises in the country has become relevant, at least since 2006, with an average of around 200 cruises arriving at the ports of Montevideo and Punta del Este each season. Statistics73 show a growth from 130 cruises arriving at Uruguayan ports in 2006 to a maximum of 237 in the 2013–2014 season. There was a decrease in the following seasons, though larger vessels arrived. The number of cruise passengers arriving in Uruguayan ports grew 113% in the last decade: 149,000 in the 2006–2007 season and 317,000 in the 2015–2016 season. This means an annual average increase of 8% in the number of cruise passengers arriving in Uruguayan ports. However, in the last two seasons there was a fall of 22% in the number of cruise passengers descending in Uruguayan ports.74 The USA is a major cruise destiny; it was reported that there are 21 ports service cruise ships in the continental U.S. and three in the territorial/non-continental U.S.75 The
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state of Alaska is also a popular global destination for cruises, receiving 4.1 % of the global cruise capacity in 2016 (measured by available lower berth day)76. River cruises, are very popular, with 184 ships operating on rivers globally in 2015, and 13 more river cruise ships on order in 2017 to meet increased demand.77
2.3
2.3.1 Statistics Though cruise business is a small portion of tourism as a whole, there is a clear growth of this sector.78 There are statistics about the economic impact of cruise business in Europe in several sources, like those published by CLIA Europe, an important cruise industry trade association with offices in Brussels that promotes the interests of cruise ship operators within Europe. It also “promotes cruising to a wider public audience to encourage expansion of the European cruise market and works closely with a range of other stakeholders, including the wider shipping industry, cruise ports and travel agents”.79 There are other important sources providing statistics on the importance of the cruise business in Europe, like those reported by some jurisdictions like Belgium,80 where in “2014 there were 42 cruise lines domiciled in Europe, operating 123 cruise ships with a capacity of around 146.000 lower berths. Another 60 vessels with a capacity of around 89.000 lower berths were deployed in Europe by 18 non-European lines. In 2014 an estimated 6.4 million European residents booked cruises, representing about 30% of all cruise passengers worldwide.81 In the European Union in 2011 about 570,000 European seafarers were employed in cruise ships”. It has been reported that “in terms of economic value and jobs for Europe, the European cruise industry’s total economic output reached €40.2bn in 2014, up 2% from the previous year, including €16.6bn in direct spending by cruise lines, their passengers and crew. In 2014 the cruise industry 75
69
Argentinean Report, I.1. 70 Argentinean Report, I.1. 71 Brazilian Report, I.1. 72 http://abremar.hospedagemtemporaria.com.br/dados-do-setor/ See Brazilian Report, I.2. See also http://www.abremar.com.br/down/ Cruises_2017_English_WEB_v2.pdf, and http://www.abremar.com.br/ down/Cruzeiros_2017_Portugues_WEB_FINAL.pdf. 73 Statistics on cruises are published by the Ministry of Tourism: http:// mintur.gub.uy/index.php/estadisticas-y-publicaciones/turismo-decruceros; see also http://www.turismo.gub.uy/blog/por-que-tantoscruceros-visitan-uruguay.html?utm_source¼programatica&utm_ medium¼nativa&utm_campaign¼cruceros&utm_content¼cruceropunta-del-este. 74 Uruguayan Report, I.1.
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All things cruise, Cruise Departure Ports, https://allthingscruise.com/ cruise-research/cruise-departure-ports/. 76 Florida-Caribbean Cruise Association, Cruise Industry Overview, 2017, http://www.f-cca.com/downloads/2017-Cruise-Industry-Over view-Cruise-Line-Statistics.pdf. See also CLIA, 2016 Cruise Industry Outlook, at 8 https://www.cruising.org/docs/default-source/research/ 2016_clia_sotci.pdf. 77 See USA Report, I, and reference to CLIA, 2017 Cruise Industry Outlook 14, https://www.cruising.org/docs/default-source/research/clia2017-state-of-the-industry.pdf?sfvrsn¼0. 78 Vasallo (2015). 79 https://www.cliaeurope.eu. 80 Belgian Report, I.3. 81 GP WILD (International), Business Research and Economic Advisors (BREA) (2015), p. 3.
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also accounted for nearly 350,000 European jobs – close to 10,000 more than the previous year – amounting to €10.75bn in employee compensation82”. Moreover, “in the European Union in 2012 cruise tourism alone generated a direct turnover of €15.5 billion and employed 330,000 people and is expected to grow. European ports had 29.3 million passenger visits, a 75% increase over 2006. Half of European coastal tourism’s jobs and value added activities are located in the Mediterranean, but the Atlantic, Baltic and Black Sea regions have significant shares too.83”84 CLIA has also representations in some national markets across Europe. These national chapters provide members with “platforms to work on and solve issues at the local and national levels”.85 However, the studies of this important association include only aggregated figures for Europe as a whole, but no detailed data for countries.86 Regarding Germany, for example, those statistics show “a decline of 9.4 % in direct cruise spending, which is explained as direct result of a 19.7 % fall in spending at German shipyards. This was partially offset by a 1.2 % increase in passenger and crew expenditures”.87 Spanish statistics on cruise industry show that it has very important economic impact in the country. Spain became the fourth more benefited European market by cruise industry.88 In other countries some local and limited statistics are kept. That is the case of Romania, for example, with some statistics at the port level only, which refer to the number of passengers, how many embark and disembark and how many ships dock in the port of Constantza.89 CLIA is present not only in Europe but also in North and South America, Asia, and Australasia, representing “the interests of cruise lines, travel agents, port authorities and destinations, and various industry business partners before regulatory and legislative policy makers”.90 In Argentina, statistics show some ups and downs regarding the cruise activity: the best season of the last years was that of 2012/2013, with 160 arrivals of cruises and 510,815 cruise passengers. During the 2016/2017 season only 82 cruises arrived in Argentine ports with 295,271 82 GP WILD (International), Business Research and Economic Advisors (BREA) (2015), p. 1. 83 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions a European strategy for more growth and jobs in coastal and maritime tourism, com (2014) 86 final, Brussels, 20.2.2014, p. 2. 84 See Belgian Report, I.3, which provides further information. 85 https://www.cliaeurope.eu/. 86 German National Report, I.3. 87 German National Report, I.3. 88 Spanish National Report, I.3. 89 Romanian National Report, I.2–3. 90 https://www.cliaeurope.eu/.
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passengers. However, it is expected that the activity will increase due to the measures adopted to that purpose.91 Uruguay is focused in promoting cruise tourism, which is revealed by the efforts of the Ministry of Tourism and the detailed statistics on cruises and related activities it keeps since 2009.92 In the USA it has been reported that during the last decade the global cruise industry has experienced a massive growth; more than 50% of all cruise passengers are from the USA.93
2.3.2 Policies Favouring Cruise Business General Information There are some countries where governments are developing specific policies to promote and favour cruise business, while others limit themselves to general ones and others do not have policies regarding cruise business at all. Some countries have central general policies at a national scale while others have only local policies to favour cruise business. Europe As reported by some European jurisdictions, the EU promotes its cruise business as a part of a broader policy and strategy of sustainable development of the so-called “blue economy”. In 2009 the EU Commission presented the main strategic objectives for the European maritime transport up to 2018, identifying key areas, where action by the EU would strengthen the competitiveness of the sector while enhancing its environmental performance.94 The “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Strategic goals and recommendations for the EU’s maritime transport policy until 2018”. The Communication states that for Europe shipping has always been fundamental to its economic growth, that Europe plays a major role in today’s shipping world, that a number of measures introduced by Member States, in line with the Community Guidelines for State aids for maritime transport, have contributed to keeping part of the fleet on European registers and generating jobs for European seafarers, among many other things.95 In addition, the European Parliament highlighted the importance of cruise tourism for the growth of the tourism sector in Europe; it “called on the Commission, therefore, together with the Member States, to assess the resources required and existing port and nautical infrastructure, and to 91
Argentine Report, I.3. Uruguayan Report, Sect. 2. Figures were explained supra in Sect. 2.2.3. 93 See detailed figures in USA Report, I. 94 Belgian Report, I.4.1; https://ec.europa.eu/transport/themes/ strategies/2018_maritime_transport_strategy_en. 95 http://eur-lex.europa.eu/legal-content/EN/ALL/? uri¼CELEX:52009DC0008. 92
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standardise the sorting of waste and recycling, in order to create innovative planning actions for these areas by developing the concept of the smart port city96”.97 In Spain there are “no legislative or regulatory measures at a national or a regional level for the promotion of the cruise industry”. However, there are several governmental “specific policies for the promotion of the cruise industry”, like the campaign launched in 2013 by Puertos del Estado, named “Blue Carpet: step into Spain on a blue carpet”, that aimed at offering a global image of Spain and strengthening the cruise sector in the country by improving the port facilities and the cultural touristic offer.98 In Belgium, “the cruise ports of Oostende and Zeebrugge co-operate in the “Belgian Coast Cruise Project” in order to promote cruise tourism in their ports and to reinforce the market position of their ports in the world cruise market.99 “The strategic policy plan for coastal tourism and recreation (2015–2020)” adopted by the Flemish regional government and the Province of West-Flanders includes the promotion of cruise operations (departure and destination) in Belgian seaports.100 The building of the cruise terminal infrastructure in Zeebrugge is one of the achievements in this respect101”.102 At a local level, there are some favourable initiatives in Poland, at the Port of Gdańsk, like discounts on port fees for cruising companies visiting the port several times a year, special safety zones for cruise passengers in the port, among others.103 In Germany, local authorities are competent to adopt this kind of measures, and not the federal government. They do not offer any specific promotion for cruise industry, though they have some general economic promotions for shipyards, ports, logistic and tourism.104 There are other countries that have no national policies to favour the development of cruise tourism and cruise business, but where there are some voices claiming for the development of such business. That is the case of Bulgaria, for example, where though there are no national policies, some 96 P8_TA(2015)0391, New challenges and concepts for the promotion of tourism in Europe, European Parliament resolution of 29 October 2015 on new challenges and concepts for the promotion of tourism in Europe (2014/2241(INI)) (2017/C 355/10). 97 See further information in Belgian Report, I.4.1. 98 Spanish Report, I.4. See also in this report, the measures taken by the Valencia Port Authority, among others. Estepa Montero (2013), p. 344. 99 Haven Zeebrugge. (2014). Belgian Coast Cruise Project. http://www. poz.be/nl/node/807. 100 Phlypo and Gheysen (2014), p. 41 (www.toerismevlaanderen. bewww.toerismevlaanderen.be). 101 Phlypo and Gheysen (2014), pp. 37 and 49 (www. toerismevlaanderen.bewww.toerismevlaanderen.be). 102 Belgian Report, I.4.2. 103 Polish Report, I.4. 104 German Report, I.4.
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tourism companies are trying to develop effective products to develop cruise tourism, on the basis that there is a non-developed niche in the tourism national level. It has been suggested that the measures to be adopted in order to develop cruise tourism are a strategy of active publicity to popularize cruise tourism in the country, to establish long term relations with cruise companies for them to include Bulgarian ports in cruise itineraries and to establish itineraries departing from Bulgarian ports.105 America The Ministry of Tourism in Uruguay has designed some general policies to stimulate tourism, though there are not public specific policies regarding cruise activity. However, it can be stated that in recent years Uruguayan authorities have taken some measures to encourage the arrival of cruise ships. For example, a meeting was held in 1916 in Buenos Aires, Argentina, between Uruguayan and Argentine authorities for the purpose of planning bilateral cooperation to promote the arrival of cruise ships on both sides of the Río de la Plata.106 Argentina has committed itself to a policy in favour of the cruise business. Its authorities have designated specific policies in that sense, like for example the Federal Strategic Plan on Sustainable Tourism elaborated in 2014 and projected up to 2025, which is included in the “Cruise Maritime Circuit”. Other measures to encourage cruise business are the improvement of port terminals, like the cruise specific terminal of “Benito Quintela Martín”, in Buenos Aires, and the addition of the Mar del Plata port as a cruise destiny. It is also remarkable the project to encourage and promote of river cruises, particularly in the Hidrovía Paraguay-Paraná, consisting of the construction of five fluvial terminals in Corrientes, Entre Ríos, Misiones and Santa Fe. It is also worth mentioning that there are also some important measures already in force in Argentina, like reduction in taxes and simplification of paperwork among many others.107 On the other hand, Brazil does not have specific policies to favour the cruise business; on the contrary, according to CLIA/FGV cruise companies mention high taxes and operational costs as the most significant difficulties to be overcome in Brazil.108 In the USA, president Grover Cleveland signed the Passenger Vessel Services Act of 1886 (PVSA),109 which was aimed at protecting the American shipping industry and American jobs. The Act restricts the coastwise transportation 105 Bulgarian Report, I.4. See the analysis of the strong and weak aspects regarding the development of the cruise product at a national level, included in the referred Report, I.4. 106 Uruguayan Report, I.4. 107 See Argentine Report, I.4. 108 Brazilian Report, I.4. 109 Passenger Vessel Services Act, 46 U.S.C. § 55103(b).
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of people between U.S. points, reserving it for U.S. built, owned, and documented vessels.110 Asia Japan has some measures at a national level, like the provision of an information desk at the service of foreign cruise ships regarding their Japanese ports of call. That desk centrally provides information on port facilities and sightseeing information among others. The authorities grant subsidies for the costs incurred by local governments or private businesses in setting mobile boarding bridges or roofed passages. But perhaps the most important measure to encourage cruise business is the establishment of “an interest-free loan system for companies who maintain passenger terminal facilities for cruise ships”.111
2.3.3 Port Services Offered to Cruises The main and modern cruise ports generally provide good services to cruises. That is the case, for example, in South America, of Argentina, Brazil and Uruguay. In Argentina, the Buenos Aires port, where the cruise terminal “Benito Quintela Martín” was inaugurated in March 2011, offers good quality services not only through administrative authorities but also through third parties. The referred terminal is one of the biggest and most modern in South America. The services provided to cruises are of good quality at all the Argentine ports included in the national cruise circuit, like for example, in Puerto Madryn.112 In Brazil the situation varies depending on the port. There were important investments recently in some ports as Santos, Rio de Janeiro and Salvador, which present good infrastructure for passengers. Other ports do not have special terminals for cruises or even divisions between cargo and passenger terminals. Curiously, some relevant cruise destinations, such as Buzios (RJ), do not have ports at all. In those cases, private docks are used.113 Uruguayan ports provide the necessary services required by cruises. These services are more complete at the Montevideo Port and are provided by the National Ports Administration (Administración Nacional de Puertos). They include docks for docking cruises, waste treatment, sewage and black waters discharge, re-provisioning and tourist services for passengers, among others. In Punta del Este port cruises must be anchored in Maldonado Bay and that is the reason why port services are more limited; they include berths for cruise ships, tenders and tourist services for passengers.114 110
See further information in the USA Report, II. Japanese Report, I.4. 112 See Argentine Report, I.5 for more details. 113 Brazilian Report, I.5. 114 Uruguayan Report, I.5. 111
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Something similar occurs in Europe. Services offered to cruises are good in most important cruise destiny ports. In Spain, for example, according to the data base of Puertos del Estado services provided to cruises are of good quality.115 Poland also offers good quality services for cruise and ferry shipping in its ports, including full spectrum of port services, like pilotage, towage, mooring, supply of fresh water, among many others. The cost of those services is partly included in tonnage and tariff fees paid to port administrator.116 In Belgium, particularly in the port of Zeebrugge, shuttle bus, parking area for private cars, busses and taxis, a terminal building that houses all kinds of facilities are provided for. There are reception facilities for the removal of the shipgenerated waste and vessel waste treatment services (collection and processing), medical support and many other services. There are also ship services on request provided by private suppliers, like general maintenance and repairs and cleaning, as well as ship supplies services.117 In Romania services offered to cruises are considered of medium to good quality, though there are no complaints from tourists on this matter. Some services are provided by port administration, like waste removal and power and water supply, while others are performed by private authorized companies, like ship chandlering and bunker supply.118 In Asia there are also good quality services offered to cruises.119
2.3.4 Ship Management Industry Ship management includes crew, technical and commercial management.120 The services that a ship management company is entitled to provide are the following:121 1. The ship management company should do the supervision of the maintenance of machinery on board the ship. The process should also include different surveys and repair work of the ship. 2. The ship management company should provide adequate crew for manning the ship. 3. The company should arrange for loading and unloading of the cargo. 4. The ship management company can hire the ship on behalf of the ship owner. 5. The company should negotiate the contracts for bunker and lube oil. 115
See Spanish Report, I.5 for more details. See Polish Report, I.5 for more details. 117 Belgian Report, I.5. 118 Romanian Report, I.5. 119 National Reports from China and Japan, I.5. 120 Polish Report, I.7. 121 https://www.marineinsight.com/maritime-law/what-is-shipmanagement. 116
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6. The ship management company pays the expenses on behalf of the owner. 7. The ship management company should make an arrangement for the entry of the ship in the P&I (Protection and Indemnity) association. 8. The company also deals with various claims related to insurance, salvage, etc. 9. The ship management company should arrange for the insurance in relation to the ship. 10. The ship management company’s services also include arrangement for providing victualling and stores for the crew of the ship. In America, for example in Argentina, ship management industry generally considered and not limited to cruises is of great importance. It is mainly based on foreign trade; however, the activity is increasing regarding cruise activity and becomes a powerful economic engine for the involved regions.122 Something similar occurs in Brazil, where the management companies are mainly involved in cargo shipping, oil and gas, supply vessels and port support. There are no Brazilian ship management companies in the cruise business.123 There are not published statistics on the economic importance of ship management industry in Uruguay, where there is only a cabotage fleet, consisting mainly of fishing vessels, passenger traffic of minor and medium sized and some medium-sized tanks and cargo ships.124 In Europe, it can be stated, in the light of the jurisdictions considered in this report, that the situation varies from one country to the other. For example in Germany there are German based cruise lines. The biggest three are AIDA Cruises in Rostock, a branch of Costa Crociere in Genoa (Italy), part of the Carnival Group, TUI Cruises in Hamburg, a joint venture of TUI (Hanover) and Royal Caribbean Cruises, and Hapag Lloyd in Hamburg, part of the TUI group.125 In Romania the ship management industry is relevant for the country and particularly for the port of Constantza,126 while in Bulgaria there is no ship management industry.127 In Belgium there are several ship management firms.128 Although after 1989 the Polish navy has lost its significance in the world shipping market, the ship management industry has been developing effectively in Poland. Moreover, since 2008 it has become “one of the driving engines of 122
Argentine Report, I.7. Brazilian Report, I.7. 124 Uruguayan Report, I.7. 125 German Report, I.7. 126 Romanian Report, I.7. 127 Bulgarian Report, I.7. 128 Like for example Exmar, Diamond, Maritec, Euronav, among others. Cfr. https://directories.lloydslist.com/services-browse/ss/3123/country/ Belgium. See Belgian Report I.7. 123
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the Polish maritime economy. As Poland provides high quality services while still being a reasonably priced country it is possible to attract foreign investment into ship management activities conducted from Poland”. Though there are no statistics reported regarding the size of the ship management in Poland, it can be assumed that the volume of operations is quite large.129 It is interesting to notice that the Polish Ship Managers’ Association experience “indicates continuing transition from traditional (or “in-house”) ship management model in which the owner is fully responsible for operation of the ship and employs personnel under his authority, to outsourcing ship management model, where management of the ship is contracted out to a third-party organisation or a company, which runs day to day operations of the ships: technical, crewing, commercial, accounting and financing etc. Currently in Poland a hybrid ship management model exists which is an interim stage between above two models”.130 In Poland there has been a transformation of crewing agencies into management companies, offering all types of management activities.131 If we look to Asia, it has been reported that in China, ship management industry is important,132 while in Japan the ship management business is not a major industry.133
2.3.5 Shipyards and Cruises The construction and also the repairmen of cruise vessels is an activity which requires high specialisation. It has been reported that in 2014 the cruise business generated 16,600 millions of Euros in Europe, and that the mayor part of that amount was due to the construction of cruise vessels, mainly in Italy, France, Germany and Finland.134 However, The Polish national reporters inform us that “members of the Polish Ship Managers’ Association (PSMA) manage (both in full or partial aspect) approximately 200 ships of different types with a combined of 2.3 million deadweight tonnage (DWT). The average tonnage of a vessel managed by a PSMA member is between 9-11.000 DWT with the most dominant types being reefers, LPG carriers and bulk carriers” (I.7). 130 Polish Report, I.7. 131 See Polish Report, I.7 where the Polish national reporters explain that: “The reasons for the current role of ship managers in the Polish maritime economy are manifold. First one is compliance with leading international legal standards. Moreover, despite the downfall of major shipowners, Poland still possesses a highly qualified and experienced management, as well as technical and maritime personnel. Polish seafarers are known for their high standards of training and diligence. Statistics show that over 35 000 Polish seafarers living in Poland work on ships of foreign shipowners or ship operators. Additionally approximately 10 000 people work ashore as marine superintendents or managers. Both these groups constitute approximately 1.5% of total number of Poles working abroad responsible for 37–38% percent of the total number of yearly money transfers to the country. Furthermore, Poland is conveniently located in the heart of Europe, usually within one hour of flight from major shipping centers”. 132 Chinese Report, I.7. 133 Japanese Report, I.7. 134 Vasallo (2015). 129
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there are some attempts from the Asian competitors, mainly Japanese, Korean and Chinese, to enter the cruise shipbuilding market and it seems they are being successful: AIDA, a German operator, hired the construction of two new vessels to the Japanese builder Mitsubishi for a better price than in former opportunities.135 In America and considering the jurisdictions dealt with in this report, there are a large number of shipyards able to serve cruise vessels of different sizes, for example in Argentina,136 in Brazil throughout the country though they do not have tradition with cruise vessels,137 and in Uruguay, where the dike with greater capacity of the country is the TSAKOS floating dock, located in the harbour of Montevideo.138 Looking again towards Europe, Spain is the fourth major centre for cruise ship construction and maintenance and the business is increasing.139 In Germany there is one of the leading shipyards for cruise ships in the world, which is the Meyer Werft in Papenburg. There are other important shipyards located at the Baltic Sea.140 In Romania there are several construction and repair yards for sea and river vessels.141 Poland has managed to maintain ship repair yards in spite of the period of large crisis in the shipyard industry. The national reporters inform that they “continue to offer shipping industry with wide range of services, from minor to class repairs and ships’ conversions. In particular, Gdańsk has become a renowned centre with shipyards specializing in passenger ships and ferries. There are limits however relating to the size of ships attended in Polish shipyards due to restrictions on the size of ships entering and depth of the docks”.142 Also in Belgium, though several shipyards have disappeared by the end of last century due to the crisis in the shipping business and the competition distortion by low-wage countries, there are still many shipyards where ships can be repaired, especially in Antwerp.143 On the 135
Estepa Montero (2013), p. 338. See more information in the Argentine Report, I.8. 137 See the very illustrative map included in the Brazilian Report, I.8 (Mapa dos Estaleiros no Brasil). 138 Uruguayan Report, I.8, where the authors specify that the characteristics of the referred dike are: length 200 m, inner breath of 31.5 m, a lifting capacity of 15,000 tons and two cranes of 10 and 15 tons. See: http://www.tsakosmonte.com.uy/. 139 See more information in the Spanish Report, I.8. 140 See more information in the German Report, I.8. 141 See more information in the Romanian Report, I.8. 142 Polish Report, I.8. 143 Belgian Report, I.8, mentions, for example: Antwerp Ship Repair, Engine Deck Repair Belgium (dry dock maximum capacity 180,000 dwt), Longueville Shiprepairs, etc. Also “in the Baudouin Canal (Zeebrugge), there is a recycling terminal (operated by Denolf Recycling) and a drydock shipyard (operated by Flanders Ship Repair/ Longueville). The shipyard offers 24-hour services (mechanical repairs, welding, piping, propulsion and engines works, diving, high-pressure cleaning, painting, sandblasting). The shipyard has a drydock (Berth 413) with length 106 m (348 ft) and lifting capacity of 4500 tons”. 136
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other hand, in countries like Bulgaria there are no good shipyards to provide services to cruises.144 Regarding Asia, in Japan, “Mitsubishi Heavy Industries builds cargo-passenger ships and small or medium-sized passenger ships. Tsuneishi Shipbuilding has also expanded their business to building of cruise ships”.145 In China the existence of several shipyards has been reported.
2.3.6
Relevance of Cruise Business in Labour Market There is no much information and statistics reported on this topic. However, and shedding some light on the matter, it can be said that in some countries like Argentina, Brazil, Spain, Germany, China and Japan, cruise business is relevant regarding labour market, but in others like Romania, Bulgaria and Poland it is null or not significant yet. Since 2016 the cruise industry in Argentina has been recovering and consequently the creation of related jobs. The impact is bigger in cruise destiny regions.146 In Brazil the cruise business is a relevant labour market.147 In Uruguay there are no specific statistics on the relevance of cruises regarding the labour market, but only general ones on the impact of tourism in general on the national labour market.148 In Spain the cruise business is relevant regarding the labour market, generating 25,483 jobs in 2014 with an increase of 12.1% in 2015.149 The generation of jobs in Germany150 is also important, as well as in China151 and Japan.152 On the other hand, in countries like Bulgaria, there is no impact at all of the cruise business on the labour market.153 In Romania and in Poland that impact is not significant yet.154 2.3.7 Flags of Convenience Flying flags of convenience instead of the natural ones, which are those of the ship and her owners’ nationality, became a necessity during some war conflicts occurred during the twentieth century, when it was inevitable to fly neutral flags to avoid being attacked. However, once the war conflicts 144
Bulgarian Report, I.8. Japanese Report, I.8. 146 Argentine Report, I.6. 147 In the Brazilian Report, I.6, for example, the national reporter informs that “According to CLIA/FGV, the 2015/2016 cruise season created 30.884 jobs: 2.497 crewmembers and 28.387 direct and indirect jobs”. 148 See more information in the Uruguayan Report, I.6. 149 Spanish Report, I.6. 150 See more information in the German Report, I.6. 151 Chinese Report, I.6. 152 Japanese Report, I.6. 153 See more information in the Bulgarian Report, I.6. 154 See more information in the Romanian Report, I.6 and in the Polish Report, I.6. 145
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where over, many ship-owners kept on using flags of convenience since they discovered it was a very good business.155 Nowadays it is a common worldwide practice to sail under flags of convenience which consists of registering ships— cruise ships and cargo ships—not in the ship-owner’s country but in another with less safety and labour requirements, fewer taxes and other advantages. This practice has even been referred to as “a fundamental principle of maritime law”, but at the same time recognized to be “the crux of the most difficult challenges in this industry”, at least for those governments that attempt to regulate personal and environmental safety and raise due tax revenues. It has been reported that only one big cruise ship built in the last 50 years—Pride of America, which is operated by Norwegian Cruise Lines and was launched in 2005—is currently registered in the U.S. and thus is U.S. flagged.156 The most popular flags of convenience are those of Panama, Liberia and Bahamas, in that order, being the latter the most popular registry for cruise ships.157 However, there are many other flags that are used as flags of convenience.158 The right of the States to register ships under their flags is recognized by the International Maritime Organization (IMO) and the United Nations Convention on the Law of the Sea, Montego Bay, 1982 (Article 90).159 There is some case law reported by some jurisdictions considered in this general report, like Lauritzen v. Larsen,160 where the United States Supreme Court stated the U.S. position on the law of the flag.161 Under Article 92 of the Montego Bay Convention ships shall be subject to its exclusive jurisdiction on the high seas. Article 94 provides that: “Every State shall effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag. (. . .)”. As a consequence of the common practice of using flags of convenience, passengers or other claimants are often under the
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jurisdiction of countries with very poor legal systems and no real connection to the case. In spite of the efforts of the international community to obtain the proper flagging of ships, the results are not too encouraging.162
2.4
Statistics demonstrate that the cruise business has a growing importance almost all over the world, and that it has a great economic impact, particularly in some regions and countries. Port services offered to cruises are generally good or very good, or at least acceptable in most cruise destinies. Ship management industry is generally not limited to cruises and is increasing in several jurisdictions. Cruise building and repairmen market is relevant in Europe and also in Asia; in America there are also many shipyards able to serve cruise vessels appropriately. Though there is no much information and statistics on the matter, it can be stated that cruise business is relevant in labour market of several countries, while in others is null. It is a common worldwide practice to sail under flags of convenience, which has been referred to as “a fundamental principle of maritime law”, but at the same time recognized to be “the crux of the most difficult challenges in this industry”, at least for those governments that attempt to regulate personal and environmental safety and raise due tax revenues. It seems we are far from overcoming problems derived from such extended practice.
3
General and Specific Rules Applicable to Cruises
3.1
Cruises as an Issue To Be Approached by Several Law Matters
155
Beltrán Montiel (1981), p. 99; Aguirre Ramírez and Fresnedo de Aguirre (2016), pp. 120–121. 156 USA Report, I, which refers to How the cruise ship industry sails under the radar, Jan. 24, 2012, reuters.com/article/uk-italy-ship-regula tion/how-the-cruise-ship-industry-sails-under-the-radaridUSLINEBON02M0120124. See also https://www.ncl.com/cruiseship/pride-of-america. 157 See detailed information in the USA Report. I. 158 Romero Basaldúa (1996), p. 247, mentions as countries offering flags of convenience: Antigua and Barbuda, Netherlands Antilles, Bahamas, Bermuda, Cayman Islands, Cook Islands, Cyprus, Gibraltar, Honduras, Lebanon, Malta, Marshall Islands, Mauritius Islands, Panama, Saint Vincent, Sri Lanka, Tuvalu, and Vanuatu. 159 http://www.un.org/depts/los/convention_agreements/texts/unclos/ unclos_e.pdf See also Articles 91 on nationality of ships, 92 on status of ship, providing that ships shall sail under the flag of one State only, and 94 on duties of the flag State. 160 Lauritzen v. Larsen, 345 U.S. 571 (1953). 161 USA Report. I.
Final Remarks
It is obviously difficult to reach an adequate legal regulation regarding a complex matter like the touristic phenomenon, including of course cruise services.163 At present a variety of norms coexist at the global level: substantive international conventions, international and national conflict of laws rules and substantive national rules, both of legal and administrative nature, together with sources of self-regulation, soft law and lex mercatoria, most of which will be analysed or at least mentioned hereinafter. Those rules refer to different areas of the law that are all relevant to cruises, most of them with a general scope of application, though some of them refer specifically to carriage of passengers by sea and some of 162 163
Aguirre Ramírez and Fresnedo de Aguirre (2016), p. 121. Barreiro (2008), p. 322.
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them even more specifically to cruises. Let as have a look to that diverse legal scenery. In most countries, like for example, Argentina,164 Bulgaria,165 Canada,166 Japan,167 Poland,168 Romania169 and Uruguay170 there are no specific rules addressed to cruises but more general provisions on several areas of the law which include in their scope of application different activities related to the cruise business. That is the case, for example, of Maritime Law, Commercial Law, Criminal Law, Civil Law, Environmental Law, Tax Law and others,171 as we will analyse throughout this general report. However, some specific rules on cruises can be found in some countries or regions like for example in China,172 Belgium,173 and Brazil.174 As those specific rules are very few,175 rules applicable to broader categories of maritime activities are also applicable to cruises.176
3.2
General Rules Applicable in the Absence or Insufficiency of Specific Rules
It is generally recognised that if there are no specific rules on a certain topic in a certain legal system, general rules on that topic will be applicable. In our case, general rules on carriage of passengers by sea—both of a national or international origin—are applicable to cruise passengers, since cruises are considered a speciality of maritime transport.177 This can be observed throughout various jurisdictions, like Argentina, Brazil, Belgium, Bulgaria, China, Japan, Poland, Romania, Turkey, and Uruguay. In the absence or insufficiency of rules on carriage of passengers by sea, general rules on international contracts should apply to cruise contracts, as it is reported, for example, from Bulgaria,178 164
Argentine Report, II.9. Bulgarian Report, II.9. 166 Chircop et al. (2016), pp. 658–666. 167 Japanese Report, II.9. 168 Polish Report, II.9. 169 See more details in Romanian Report, II.9. 170 Uruguayan Report, II.9. 171 For example, information on the cruise market and competition law is provided for in the Belgian Report, II.9.13. 172 Chinese Report, II. 173 Belgian Report, II.9. 174 Brazilian Report, II.9–10. 175 The USA reports to have “a robust legislative framework regulating major aspects of cruises, including vessel design requirements, safety requirements, civil and criminal liability regimes, labor regulations, and environmental protection. Most of the legislative measures that apply to cruises are maritime laws applying to maritime vessels in general, although a few U.S. laws specifically apply to cruise vessels”. 176 Belgian Report, II.9 and III.14. 177 Spanish Report, III.14. 178 Bulgarian national Report, III.16 and VIII.41 with detailed information. 165
China,179 Romania,180 and Uruguay.181 Together with the aforementioned general rule, it must be taken into account the prevailing application of rules on consumer protection, when applicable.182 In Brazil general rules on international contracts may be seldom applicable to cruises, because Consumer Code regulations are applied in most cases.183
3.3
Sources of Law Relevant to Cruises
This chapter will deal only with the sources of law relevant to cruises in some jurisdictions that are considered in this general report. Most of the subjects mentioned in this epigraph are developed hereinafter in further specific epigraphs and chapters.
3.3.1 In Europe In Bulgaria In Bulgaria the national Act on Consumers’ Protection is applicable to cruise passengers since they are consumers of the “cruise touristic product”. That product is a service under the referred Act. Besides, Bulgaria is a member of the European Union and therefore the Union’s Acts regarding consumers’ protection are part of the Bulgarian national legislation. These Acts prevail if the national rules are in contradiction with the European Acts, particularly with Regulation N 593/2008 of the European Parliament and of the Council of June 17, 2008 (Rome I). However, Bulgarian national rules are harmonized with the European Union’s Acts.184 When there is no direct conventional rules applicable, conflict-of-laws rules indicating the national rules applicable apply. The lex loci contractus rules the legal formalities of the contract and its proof. Regarding the content of the contract, there are several possible formulas, among which the main ones are the lex patriae of the carrier applies, the law of the flag and the law of the place of performance.185 In Germany In Germany the Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (the Package Travel Directive of 1990) currently superseded by the Directive 2015/2302 has been transposed to ss. 651a et seq. of the Civil Code (BGB).186
179
Chinese Report, III.14–17. Romanian Report, III.16. 181 Uruguayan Report, III.16. 182 Romanian Report, III.18. 183 Brazilian Report, III.16. 184 Bulgarian National Report, III.18. 185 See further details in the Bulgarian National Report, III.14. 186 German national Report, III.14, 18. 180
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The German legislator adapted the rules for carriage by sea to the Athens Convention by the review of the sea carriage provisions of the Handelsgesetzbuch (Commercial Code). These provisions are also applicable to internal waterways and therefore they play a certain role for river cruises, as neither the Athens Convention nor Reg. (EU) 392/ 2009 apply to river cruises.187 The Directive 90/314/EEC (Package Travel Directive) was implemented by Germany in 1995. The German legislator amended the contract law sections of the Civil Code (Bürgerliches Gesetzbuch) by a special chapter about package travel (originally §§ 651a to 651k BGB). In Poland In Poland, consumer protection law is that of the European law and are in general applicable to cruises, particularly those on unfair contract terms.188 Consumer protection rules regarding “contracts negotiated away from business premises and distance contracts which are implemented into the Polish law in the Consumer Rights Act of 2014189 are not applicable to the contracts on package as defined in the Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours190 (the Package Travel Directive of 1990) currently superseded by the directive 2015/ 2302191”. As a cruise tour often fulfils the prerequisites of a package, a consumer in such contracts may not benefit from the protection afforded in the Consumer Rights Act.192 The Polish Maritime Code of 2001193 applies to cruises. The Directive 2009/45/EC of the European Parliament and of the Council of 6 May 2009 on safety rules and standards for passenger ships194 which have been implemented in Poland by the Maritime Safety Act of 2011195 are rules of public law character.196 In Spain In Spain, the Royal Decree-Legislative 1/2007 of 16 November approving the Recast text of the General Law on Consumer Protection and other supplementary laws (Real Decreto Legislativo 1/2007, de 16 de noviembre, por el que se aprueba el texto Refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias, B.O.E. 30 November 2007) is applicable 187
German national Report, III.14. Polish Report, III.18. 189 Consolidated text in Journal of Laws 2017 item 683. 190 OJ L 158, 23.6.1990, pp. 59–64. 191 OJ L 326, 11.12.2015, pp. 1–33. 192 See more detailed information in Polish Report, III.18. 193 Consolidated text in Journal of Laws 2016, item 66. 194 OJ L 163, 25.6.2009, pp. 1–140. 195 Consolidated text in Journal of Laws 2016 item 281. 196 See more detailed information in Polish Report, III.15.
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to cruise passengers.197 Also the Royal Decree 357/2015, 8 May 2015, on compliance and enforcement of the 2006 Maritime Labour Convention, applies to cruises.198 The Travel Packages Act (Ley 21/1995, de 6 de Julio reguladora de los viajes combinados), which is the transposition of the European Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours. This directive was replaced by the new Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements, which had to be transposed by the Member States before 1st January 2018.199 The Spanish Law on Shipping (Ley 14/2014 de 24 de julio, Ley de Navegación Maritima) regulates in Articles 287–300 the passage contract and is therefore applicable to cruises. Article 298 regulates carrier’s liability and Article 299 its limitation. It follows the solutions in the Athens Convention and its 2002 London Protocol. Chapter III of Title III of this Law deals with able seafarers on board Spanish ships.200 The law governing the employment contracts in Spain is determined by Article 8 of the Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I).201 There are also some specific collective agreements.202 The main regulation on ports, including cruise ships, is the Real Legislative Decree 2/2011, 5 September and its annexes, and some ministerial rank regulations.203 Rules on jurisdiction regarding cruise matters are in the Spanish Law on Judiciary (Ley Orgánica del Poder Judicial) amended by Act 7/2015 of July 7, and in the Spanish Law on Shipping (Ley 14/2014, 24 de Julio, de Navegación maritima). Regulation CEE 4.055/86, 22/12/86 rules the application of the principle of free provision of services in maritime transport among member States (communitarian coastal navigation or intra-communitarian transport) and among member States and third countries of the continental shelf. Regulation CEE 3.572/92, 7/12/92 rules the application of the principle of free provision of services to maritime transports at the interior of the member States. As a consequence, a system of full freedom to perform maritime traffic of cruises exists in Spain. That traffic is mainly seasonal and may be exercised regularly, repeating routes and duration of cruises, or occasionally with specially designed trips.204
188
197
Spanish Report, II.12. Spanish Report, IV.22. 199 Spanish Report, II.9. 200 See further information in Spanish Report, IV.22. 201 Spanish Report, IV.22. 202 Spanish Report, IV. 21. 203 Spanish Report, V. 28. 204 Estepa Montero (2012), pp. 139–140; Ariza Herrerías (2014), p. 10. 198
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3.3.2 In the Americas In Argentina In Argentina,205 cruises are not specifically ruled. Rules on passage contract—which is an adhesion contract—are applicable (Articles 317–346 of the Navigation Act—Ley de Navegación—and Athens Convention 1974). It is a mixed contract since it includes obligations that belong to the transport (the trip) together with other obligations, like providing entertainment, obligation of navigability (Article 317 of the Navigation Act), which imply to put and maintain the vessel in navigability conditions: to exercise due diligence to guarantee the security and integrity of the passenger, by maintaining generic navigability (floatability, govern, propulsion, provision of trained crew) and concrete navigability (food, lodging, entertainment, swimming pool, sports, casino, gym). Act N 24.240 on Consumer Defence excludes air carriage from its scope of application, but says nothing on carriage by sea. Therefore, it applies to carriage by sea, as has been recognised by commentators and courts.206 The Navigation Act N 20.094, the REGINAVE Decree N 4.516/73, the Travel Agents’ Act N 18.829 and its Regulatory Decree 2182/72 are applicable to cruises. In Brazil In Brazil the Federal Act N 8.078/90, known as Consumer Code, is applicable to cruises.207 The Presidential Decree N 7.381/2010 provides legal definitions for cabotage, international, long haul and hybrid cruises as well as defines scales, embarks, disembarks and transit.208 In Uruguay In Uruguay, Act 17.250 on consumer relations applies to cruise passengers. The passenger is a “final recipient” of the service and the passenger contract is an adhesion contract that refers to “general contracting conditions” imposed unilaterally by the carrier. Article 31 prohibits abusive clauses in adhesion contracts and exemplifies mentioning clauses of limitation and exemption of liability unless a rule of law allows it, the waiver of consumer rights, the authorization to the supplier to unilaterally modify the terms of the contract, those that reverse the burden of proof to the detriment of the consumer, among others.209 The carrier’s obligation to transport the passengers implies to do it safely up to 205 See: Estepa Montero (2012), pp. 142–144; Ariza Herrerías (2014), pp. 13 y ss. 206 See Argentine Report, II.18 and case law mentioned there. 207 Brazilian Report, III.16, 18. 208 Brazilian Report, II.9–10. 209 For further information please see Aguirre Ramírez and Fresnedo de Aguirre (2011). See Uruguayan Report, III.15 and 18.
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destination. This obligation is of public order and cannot be repealed by clauses of irresponsibility. Act 17.250 on consumer relations is very clear in this regard. In Uruguay general rules on carriage of passengers are in the Commercial Code (Articles 1282–1289), Act N 19.246 of August 15, 2015 on Maritime Commercial Law.210 Under Articles 1282–1289 of the Commercial Code, the main obligation of the carrier is to transport the passenger from one place to another, and as accessory obligations, he must provide accommodation and food to the passenger as well as take care of his safety and health. On the other hand, the main obligation of the passenger is to pay the price; travelling without paying is a criminal misconduct provided for in the Penal Code (Article 366) and the captain has the privilege over the baggage (Article 1289 Commercial Code). Obviously there are other accessory obligations: the day and time designated for the departure the passenger must get on board (Article 1283 ejusdem). The omission of compliance with this obligation is sanctioned with the obligation to pay the price, even if he misses the vessel and cannot travel. If the voyage is cancelled because of the fault of the carrier, he owes damages according to the general rules on breach of contract. Under Article 1285.1 ejusdem if the voyage is terminated by force majeure at the port of departure the contract is terminated, without any right to compensation. The passenger has also the obligation to obey the captain (Article 1286 ejusdem) who has disciplinary power to keep order on board and even criminal investigation powers in case of crime (Article 1075 ejusdem), including the power of arresting a passenger and handing it over to the authorities of the first port of arrival.211 USA The USA sources of law regarding cruises are mainly the U.S. Const., art. III, § 2, cl. 1; 28 U.S.C. § 3033(1); Passenger Vessel Services Act, 46 U.S.C. § 55103(b); Merchant Marine Act, also known as the Jones Act, 1920, and further amendments: Jones Act, 46 U.S.C. §30104; Death on the High Seas Act 46 U.S.C. app. §§ 761–768 (1920) (DOHSA), codified at 46 U.S.C. 303, et seq., US House of Representatives, Office of the Law Revision Council, United States Code. Chapter 303 Death on the High Seas;212 Cruise Vessel Security and Safety Act of 2010, Pub. L. 111-207, 124 Stat. 2243, et seq., Jul. 27, 2010, enacted at 46 U.S.C. §3507;213 and Marine Protection, Research, and 210
Uruguayan Report, III.14. Uruguayan Report, III.15. 212 http://uscode.house.gov/view.xhtml?path¼/prelim@title46/subti tle3/chapter303&edition¼prelim. 213 See USA Report, IV; https://www.gpo.gov/fdsys/pkg/BILLS111hr3360enr/pdf/BILLS-111hr3360enr.pdf [hereinafter CVSSA]. 211
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Sanctuaries Act (16 U.S.C. § 1431 and 33 U.S.C. § 1401).214 The General Maritime Law (GML) governs many maritime relationships, while the Constitution “grants the federal courts the judicial power to hear all cases of admiralty and maritime jurisdiction. From this grant of power, the federal courts have developed the substantive law applicable to these cases. GML is a result of the federal court’s decisions, including the body of judicial principles that have been adopted by the federal courts in resolving maritime disputes”. (. . .) “State law can supplement GML provided it does not conflict with GML precedent, federal law, or the need for uniformity – namely that there is not a rule that is different from state to state”. (. . .) “In addition to the judicially created body of GML, Congress has enacted a number of statutes that control issues concerning. . .” for example, the rights of marine employees. Such federal statutes control over the GML. “. . .treaties that the United States has ratified have the same force as a statute, and likewise control areas governed by their terms”.215
3.3.3 In Asia In Japan In Japan provisions on carriage of passengers by sea in Part III “Maritime Commerce” of the Commercial Code apply to cruise passengers. It is to be noted that there is a revised proposal of the Commercial Code which may be enacted during 2018 that provide that “any special clauses to exclude or reduce carrier’s liability for damages caused by death or bodily injury of passengers during carriage of passengers are prohibited irrespective of whether the passenger is a consumer or not, while some exceptions are allowed”.216 In Turkey In Turkey, general rules on carriage of passengers and their baggage by sea are those in the Turkish Commercial Code’s Fifth Book Maritime Law, Fifth Chapter Contract of Carriage of Passengers by Sea, Articles 1247–1271. These rules are mostly enactment of the 2002 Athens Convention, though Turkey is not yet party to this Convention. There are also several provisions in Tourism Law, Port Law and others that refer to cruises.217
3.4
Sources of Self-regulation, Soft-Law, Lex Mercatoria
Current practices and usages developed through the years regarding maritime activities are relevant for cruise business. 214
USA National Report. Felder (2006), pp. 25–27. 216 Japanese Report, III.18. 217 See Turkish Report, B. 215
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There are also some specific soft law instruments on cruise business issued by private organizations like CLIA:218 Guidelines on cruise ship medical facilities,219 cruise industry standard on waste management practices and procedures (2006),220 Cruise Industry Influenza Protocol (2009),221 and Ten Points Cruise Passenger Bill of Rights (2013),222 among others.223
3.4.1 Medical Facilities Regarding medical facilities, many cruise ship physicians are members of the American College of Emergency Physicians (ACEP) and serve on that organization’s Cruise Ship and Maritime Medicine Section. ACEP has also issued Health Care Guidelines for Cruise Ship Medical Facilities (2014)224 regarding facilities, staffing, equipment and procedures for medical infirmaries on cruise ships travelling outside territorial waters of the coastal state. Patients requiring more comprehensive facilities or treatment are typically referred to a shore side medical facility. CLIA cruise lines travelling regularly on itineraries beyond the territorial waters of the coastal state, have agreed to meet or exceed the requirements of the referred ACEP Guidelines.225 3.4.2 Cruise Industry Influenza Protocol (2009) In April 2009 a new strain of the H1N1 flu virus, commonly known as ‘swine flu’, broke out in several countries and panic spread. The World Health Organisation raising its pandemic alert to phase six representing ‘widespread human infection’. By end of April 2009, CLIA developed a special questionnaire that was implemented and given out to all guests and crew prior to embarkation. The aim of that tool was to provide the ship’s medical staff with an important early risk evaluation. Any arrival with influenza-like symptoms is required to undergo a quayside medical examination that includes a quick, accurate test to determine the presence or absence of an influenza that could be H1N1.226 218 As explained supra in Sect. 2.3.1, CLIA (Cruise Lines International Association) Europe is an important cruise industry trade association with offices in Brussels that promotes the interests of cruise ship operators within Europe. CLIA has also representations in some national markets across Europe (national chapters) and is also present in North and South America, Asia, and Australasia. 219 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/health/medical-facilities. 220 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/environmental-protection/waste-management. 221 https://www.vallettawaterfront.com/DetailPage.aspx?id¼156262. 222 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/other/pbor. 223 See Belgian Report, II.9. 224 http://www.acep.org/cruiseship/. 225 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/health/medical-facilities. 226 https://www.vallettawaterfront.com/DetailPage.aspx?id¼156262.
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3.4.3
Ten Points Cruise Passenger Bill of Rights (2013) As reported in CLIA’s website, CLIA member lines have voluntarily adopted the Cruise Industry Passenger Bill of Rights, which is effective for all passengers that book an oceangoing cruise on a CLIA member cruise line worldwide.227
3.5
Liability Issues
3.5.1 Applicable Rules: General or Specific? In most countries there are no specific rules on liability regarding cruises. Therefore, general rules on liability apply, unless specific rules on consumer protection are applicable. In the latter case, consumer protection rules prevail over civil codes’ general rules.228 There is some case-law showing the application of the Consumer Code only or the application of both the Civil and the Consumer Codes.229 3.5.2
International Rules: The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea of 1974 and Protocols Scopes of Application and Definitions The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea230 as amended by the relevant Protocols has been ratified by several countries from Europe and from other regions. In fact, the 1974 Athens Convention is in force in several countries like Argentina, Bahamas, Barbados, China, Congo, Dominica, Egypt, Equatorial Guinea, Estonia, Georgia, Guyana, Ireland, Jordan, Liberia, Libya, Luxembourg, Malawi, Nigeria, Poland, Russian Federation, Saint Kitts and Nevis, Switzerland, Tonga, Ukraine, Vanuatu and Yemen.231 Article 1 of the Convention provides for a definition of several terms, like “carrier”, “performing carrier”, “contract of carriage”, “ship”, “passenger”, “luggage”, among others. Under Article 2, the scope of application of the Athens Convention includes “. . .any international carriage if: (a) The 227
See the full text of the Cruise Industry Passenger Bill of Rights in https://www.cruising.org/about-the-industry/regulatory/industrypolicies/other/pbor. 228 This is the case, for example, of Brazil (National Report IX.45). 229 See Brazilian National Report IX.46. 230 See text, complete list of signatures, ratifications, acceptances, approvals, accessions, Declarations, Reservations and other information at https://treaties.un.org/doc/Publication/UNTS/Volume%201463/vol ume-1463-I-24817-English.pdf. 231 http://www.imo.org/en/About/Conventions/StatusOfConventions/ Documents/Status%20-%202018.pdf and national reports. It is worth noting that several countries have denounced the Convention, like for example, Albania, Belgium. Croatia, Greece and Spain, among other countries.
ship is flying the flag of or is registered in a State Party to this Convention, or (b) The contract of carriage has been made in a State Party to this Convention, or (c) The place of departure or destination, according to the contract of carriage, is in a State Party to this Convention. 2. Notwithstanding paragraph 1 of this Article, this Convention shall not apply when the carriage is subject, under any other international convention concerning the carriage of passengers or luggage by another mode of transport, to a civil liability regime under the provisions of such convention, in so far as those provisions have mandatory application to carriage by sea”. Article 21 states that: “This Convention shall apply to commercial carriage undertaken by States or Public Authorities under contracts of carriage within the meaning of Article 1.” Parties’ Liability Several Articles in the Convention rule the parties’ liability. Article 3 deals with the carrier’s liability for the damage suffered as a result of the death of or personal injury to a passenger and the loss of or damage to luggage. His responsibility is limited to two cumulative hypotheses: (1) that the incident which caused the damage occurred in the course of the carriage, and (2) that the incident “was due to the fault or neglect of the carrier or of his servants or agents acting within the scope of their employment” (Article 3.1). The burden of the proof is of the claimant (Article 3.2). Article 3.3 establishes some presumptions on when the incident is due to the fault or neglect of the carrier or of his servants or agents. In principle the carrier shall not be liable for the loss of or damage to valuables, except if they were deposited with the carrier for the agreed purpose of safe-keeping, and even in the latter case, limits are applicable (Article 5). Article 6 deals with contributory fault cases. Article 4 states rules on how liability is distributed in those cases where the carrier entrusts the carriage or part of it to a performing carrier and the requirements that a special agreement entered into by the carrier and the performing carrier must fulfil to be validated. Limits of Liability Limits of liability are dealt with in Articles 7–13. Article 7 refers specifically to the limitation of liability of the carrier for the death of or personal injury to a passenger (700,000 francs per carriage) but admits that “the national law of any State Party to this Convention may fix, as far as carriers who are nationals of such State are concerned, a higher per capita limit of liability”. The carrier and the passenger may also agree, expressly and in writing, to higher limits of liability than those prescribed in Articles 7 and 8 (Article 10.1). Article 8 states the limit of liability of the carrier for the loss of or damage to cabin luggage (12,500 francs per passenger, per carriage) and vehicles (50,000 francs per vehicle, per
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carriage) and admits some restricted agreements between the carrier and the passenger. Article 9 is a key point in the Convention since it deals with monetary unit and conversion. It states that “the franc mentioned in this Convention shall be deemed to refer to a unit consisting of 65.5 milligrams of gold of millesimal fineness 900”, and then “converted into the national currency of the State of the court seized of the case. . .”. Under Article 10.2, “Interest on damages and legal costs shall not be included in the limits of liability prescribed in Articles 7 and 8”. Under Article 11, defences and limits established in the Convention for carriers are applicable to carriers’ servants and agents. Article 12 refers to limits of liability in case of aggregation of claims. Article 19 provides for a compatibility clause, which states that “This Convention shall not modify the rights or duties of the carrier, the performing carrier, and their servants or agents provided for in international conventions relating to the limitation of liability of owners of seagoing ships”. The carrier and his servants or agents lose their benefit of the limits of liability if it is proved that the damage resulted from an act or omission of the carrier or his servants or agents “done with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result” (Article 13). Article 15 rules how the passenger shall give notice to the carrier or his agent in case of loss or damage to his luggage and the consequences for not doing so. Invalidity of Some Contractual Provisions Article 18 refers to the invalidity of some contractual provision concluded before the occurrence of the incident which has caused the death of or personal injury to a passenger or the loss of or damage to his luggage, particularly those purporting to relieve the carrier of his liability towards the passenger or to prescribe a lower limit of liability than that fixed in this Convention or to shift the burden of proof which rests on the carrier, among others. The nullity of that provision shall not render void the contract of carriage which shall remain subject to the provisions of this Convention. The 1990 Protocol to Amend the Athens Convention Relating to Carriage of Passengers and Their Luggage by Sea This Protocol of 1990 was intended to raise the limits set out in the Athens Convention but it did not enter into force and was superseded by the 2002 Protocol. Therefore, it will not be analyzed here.
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The 2002 Protocol or “Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea, 2002” The Protocol was adopted on November 1, 2002 and entered into force on April 23, 2014, 12 months after being accepted by 10 States. The European Union became a party to the Protocol through the Council Decision 2012/22/EU of 12 December 2011 concerning the accession of the European Union to the Protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, with the exception of Articles 10 and 11 thereof.232 The Protocol main improvements are those related with the strict liability of the carrier, including compulsory insurance or other financial security, such as the guarantee of a bank or similar financial institution, to (Article 4bis), with a right of direct action against insurers up to specified limits, and for rules on jurisdiction and the recognition and enforcement of judgments. The Protocol also introduces other mechanisms to assist passengers in obtaining compensation. Regarding liability, it includes “an “opt-out” clause, enabling State Parties to retain or introduce higher limits of liability (or unlimited liability) in the case of carriers who are subject to the jurisdiction of their courts”.233 Decision 2012/22/EU states that the Protocol and its raising the limits of liability, among other improvements, are “in accordance with the Union’s objective of improving the legal regime relating to carriers’ liability”.234 It is important to point out that the 2002 Protocol amends the 1974 Athens Convention fixing liability limits in Units of Account, and that under Article 9, the Unit of Account is the Special Drawing Right (SDR) as defined by the International Monetary Fund.235 The 1974 Athens Convention fixed the limits of liability in francs that referred “to a unit consisting of 65.5 milligrams of gold of millesimal fineness 900”. It must be noticed that the Protocol “allows a State Party to regulate by specific provisions of national law the limit of liability for personal injury and death, provided that the national limit of liability, if any, is not lower than that prescribed in the Protocol. A State Party, which makes use of this option is obliged to inform the IMO Secretary-General of
232 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri¼celex% 3A32012D0022. 233 http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/Athens-Convention-relating-to-the-Carriage-of-Passengers-andtheir-Luggage-by-Sea-(PAL).aspx. 234 Whereas (1) of the Decision 2012/22/EU. 235 See detailed text of Article 9 in https://eur-lex.europa.eu/legal-con tent/EN/TXT/?uri¼celex%3A32012D0022.
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the limit of liability adopted or of the fact that there is none” (“opt-out” clause).236 The 2002 Protocol supposedly intended an improvement since “any future raises in limits can be achieved more readily. Under the 1974 Convention, limits can only be raised by adopting amendments to the Convention which require a specified number of States’ acceptances to bring the amendments into force”. It introduces “a tacit acceptance procedure for raising the limits of liability. A proposal to amend the limits, as requested by at least one-half of the Parties to the Protocol, would be circulated to all IMO Member States and all States Parties and would then be discussed in the IMO Legal Committee. Amendments would be adopted by a two-thirds majority of the States Parties to the Convention as amended by the Protocol present and voting in the Legal Committee, and amendments would enter into force 18 months after its deemed acceptance date. The deemed acceptance date would be 18 months after adoption, unless within that period not less than one fourth of the States that were States Parties at the time of the adoption of the amendment have communicated to the IMO Secretary-General that they do not accept the amendment”.237 The limit of the compulsory insurance or other financial security shall not be less than 250,000 Special Drawing Rights (SDR) per passenger on each distinct occasion and the liability of the carrier for the death of or personal injury to a passenger is limited to 250,000 SDR per passenger on each distinct occasion. Ships are to be issued with a certificate attesting that insurance or other financial security is in force.238 If the loss exceeds the limit, the carrier is further liable— up to a limit of 400,000 SDR per passenger on each distinct occasion—unless the carrier proves that the incident which caused the loss occurred without the fault or neglect of the carrier (Article 7.1).239 The 2002 Protocol replaces Article 3 of the Athens Convention, which deals with the carrier’s liability, for the following text: 1. For the loss suffered as a result of the death of or personal injury to a passenger caused by a shipping incident, the carrier shall be liable to the extent that such loss in respect of that passenger on each distinct occasion does not exceed 250,000 units of account, unless the carrier proves that the incident:
C. Fresnedo de Aguirre (a) resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character; or (b) was wholly caused by an act or omission done with the intent to cause the incident by a third party. If and to the extent that the loss exceeds the above limit, the carrier shall be further liable unless the carrier proves that the incident which caused the loss occurred without the fault or neglect of the carrier. 2. For the loss suffered as a result of the death of or personal injury to a passenger not caused by a shipping incident, the carrier shall be liable if the incident which caused the loss was due to the fault or neglect of the carrier. The burden of proving fault or neglect shall lie with the claimant. 3. For the loss suffered as a result of the loss of or damage to cabin luggage, the carrier shall be liable if the incident which caused the loss was due to the fault or neglect of the carrier. The fault or neglect of the carrier shall be presumed for loss caused by a shipping incident. 4. For the loss suffered as a result of the loss of or damage to luggage other than cabin luggage, the carrier shall be liable unless the carrier proves that the incident which caused the loss occurred without the fault or neglect of the carrier. 5. For the purposes of this Article: (a) “shipping incident” means shipwreck, capsizing, collision or stranding of the ship, explosion or fire in the ship, or defect in the ship; (b) “fault or neglect of the carrier” includes the fault or neglect of the servants of the carrier, acting within the scope of their employment; (c) ‘defect in the ship’ means any malfunction, failure or non-compliance with applicable safety regulations in respect of any part of the ship or its equipment when used for the escape, evacuation, embarkation and disembarkation of passengers; or when used for the propulsion, steering, safe navigation, mooring, anchoring, arriving at or leaving berth or anchorage, or damage control after flooding; or when used for the launching of life saving appliances; and (d) ‘loss’ shall not include punitive or exemplary damages. 6. The liability of the carrier under this Article only relates to loss arising from incidents that occurred in the course of the carriage. The burden of proving that the incident which caused the loss occurred in the course of the carriage, and the extent of the loss, shall lie with the claimant. 7. Nothing in this Convention shall prejudice any right of recourse of the carrier against any third party, or the defence of contributory negligence under Article 6 of this Convention. Nothing in this Article shall prejudice any right of limitation under Articles 7 or 8 of this Convention. 8. Presumptions of fault or neglect of a party or the allocation of the burden of proof to a party shall not prevent evidence in favour of that party from being considered.
236
http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/Athens-Convention-relating-to-the-Carriage-of-Passengers-andtheir-Luggage-by-Sea-(PAL).aspx. 237 http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/Athens-Convention-relating-to-the-Carriage-of-Passengers-andtheir-Luggage-by-Sea-(PAL).aspx. 238 http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/Athens-Convention-relating-to-the-Carriage-of-Passengers-andtheir-Luggage-by-Sea-(PAL).aspx. 239 http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/Athens-Convention-relating-to-the-Carriage-of-Passengers-andtheir-Luggage-by-Sea-(PAL).aspx.
Regarding the interpretation and application of both the 1974 Convention and the 2002 Protocol, Article 15 states that: 1. The Convention and this Protocol shall, as between the Parties to this Protocol, be read and interpreted together as one single instrument. 2. The Convention as revised by this Protocol shall apply only to claims arising out of occurrences which take place after the entry into force for each State of this Protocol.
Legal Aspects of Cruises 3. Articles 1 to 22 of the Convention, as revised by this Protocol, together with Articles 17 to 25 of this Protocol and the annex thereto, shall constitute and be called the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002.
3.5.3
Law Applicable in Some Countries and Regions In Argentina, while on board, the liability regime of carriage of passengers by sea applies. The characteristics of that liability are: it is contractual, mandatory (art. 339 LN), limited and it must be insured.240 The carrier’s liability starts from the moment the passenger steps on the landing stage he must use to get on board, or when he gets on board of the smaller boat that will carry him to the bigger vessel. However, opinions on this point are not unanimous.241 The period of liability on board is from embarkation until landing of the passenger, and on land, since landing until re-embarkation of the passenger.242 Argentinean Courts have stated that in a cruise trip and regarding the carrier’s obligation, ports of embarkment and disembarkment have the same importance as the intermediate ports, and that the fulfilment of the whole planned itinerary is essential; if it is not fulfilled, the carrier is responsible, unless the breach of contract is due to force majeur (Act of God). In that case, under Article 327 of the Navigation Act, the passenger must pay only in proportion of the itinerary performed.243 In the USA, the Jones Act gives a cause of action to injured sailors to seek damages from their employers for the negligence of the ship owner. The Death on the High Seas Act (DOHSA)244 is a U.S. admiralty law that established a cause of action for damages against the “person or vessel” responsible for a wrongful death in international waters— beyond 3 nautical miles from the shore of the United States— resulting from negligence. Under U.S. law, liability of a cruise ship for personal injury or death is clearly defined.245 A special duty of care owed to passengers by cruise lines was set out in the Shipping Act of 1984, which deems cruise ships as common carriers.246 Thus, the cruise lines have a duty to 240 Chami and Adragna (2013) Regarding limitation of liability, see also Chami n.d. 241 Ray (2002), p. 8. 242 Chami and Adragna (2013). 243 CN Civ. y Com. Fed., Sala II, 8-3-85, ED, 114-648, quoted in Vázquez Ferreyra and Fiscella (1997), pp. 333–334. 244 Death on the High Seas Act 46 U.S.C. app. §§ 761–768 (1920) (DOHSA), codified at 46 U.S.C. 303, et seq., US House of Representatives, Office of the Law Revision Council, United States Code. Chapter 303 Death on the High Seas http://uscode.house.gov/ view.xhtml?path¼/prelim@title46/subtitle3/chapter303& edition¼prelim. 245 46 U.S.C.A. § 30509 (Oct 6, 2006). 246 Shipping Act of 1984, 46 U.S.C. §1702.
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protect passengers from physical harm, including from negligence, and also attacks and other criminal behaviour on board. Generally, it is prohibited for a ship transporting passengers within the United States or between the U.S. and a foreign country to limit in the passenger’s ticket or contract the liability of the owner, master, or agent for personal injury or death caused by the negligence or fault of the owner or the owner’s employees or agents; or the right of a claimant for personal injury or death to a trial by court of competent jurisdiction.247 In Canada, there is a substantive regime governing carrier liability to passengers: the Marine Liability Act, SC 2001 (MLA),248 which applies whether a contractual choice of law clause exists or not, and where the carriage of passengers is “from one place of Canada to the same or another place in Canada, either directly or by way of a place outside Canada”, and applies also, subject to some exceptions,249 to the carriage by water of persons “otherwise than under a contract of carriage”. Although some contractual modifications of that regime are allowed, “the essential elements of the regime are unalterable to the advantage of the carrier (usually the author of the contract. . .)”.250 At the European level, the European Union has issued Regulation (EC) N 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents,251 which is the relevant rule in Spain—and in other European countries— when it comes to the liability regime and the insurance for the carriage of passengers at sea as set out in the relevant provisions of the Athens Convention as amended by the Protocol of 2002 and the IMO Reservation and Guidelines for the Implementation of the Athens Convention adopted by the Legal Committee of the IMO on 19 October 2006.252 The relevance of this Regulation is that though identical to the Athens Convention 2002, it extends its scope of application to all carriages by sea within the EU. Consequently, under Article 2 of the Regulation (EC) N 392/2009 a cruise which, for example, calls only on ports of one member state of the EU and therefore is not under the scope of the Athens Conventions, will be governed by the rules on liability in the Regulation, that are identical to those in the Convention. Therefore, in some countries this Regulation applies to national sea carriage of passengers by internal waters and by river cruises.253 247
See further information in USA Report, II, including case-law. See full text in http://laws-lois.justice.gc.ca/PDF/M-0.7.pdf. 249 MLA, ss 37(2)(b)(i),(ii), (iii), (iv); 37.1(1), (2). 250 Chircop et al. (2016), pp. 662–664. See further analysis the Canadian Maritime Liability Act in pp. 664–675. 251 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/? uri¼CELEX:32009R0392&from¼EN. 252 Spanish Report, II.12. 253 German Report, III.15. 248
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In Europe, the carrier’s liability in passenger carriage contracts is often governed by a supranational or international instrument; therefore, the question of the interrelationship between the package travel254 contract liability regime and the passenger carriage liability regime arises. For maritime cruises, carrier’s liability is ruled basically by the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea (1974 as amended by Protocols.255 In Belgium, the EU Directive 2015/2302 (Recital 35 and art. 14, 4 and 5) was implemented/transposed by Belgian Act of 21 November 2017 (art. 51 and 52).256 In Bulgaria there are no specific rules on liability regarding cruises and they do not apply those included in the Athens Convention and its 2002 Protocol since they consider that the Convention does not include any indication that its rules on liability can be applied to cruise cases.257 In France the carrier is responsible in case of damage occurred to the passenger, but the carrier is not necessarily obliged to provide full compensation. His liability is based on proved negligence, due to the freedom of movement of the passenger on board, with some exceptions.258
3.6
Clubs). The insufficiency of the limited amounts of liability to compensate damages to passengers in many cases may probably lead to a revision of limits of liability.260
3.7
Cruise business is a complex activity dealt with by different areas of the law, including sources of self-regulation, soft-law and lex mercatoria. General rules on liability apply to cruises aspects together with consumer protection law, which prevail over the former. Though cruises have been considered one of the safest ways of travelling and recreation in the world, when an accident occurs, damages use to be important. Therefore, insurance is vital, but not always enough, due to limits of liability that are usually incorporated into maritime law.
4
Cruise Passengers as Consumers
4.1
The Importance of Consumer Law in the Protection of the Tourist, Including the Cruise Passenger
Insurance for Carriage of Passengers by Sea and Particularly for Cruises
Though cruises have been considered one of the safest ways of travelling and recreation in the world,259 when an accident occurs, damages use to be important. Therefore, insurance is vital, but not always enough, due to limits of liability that are usually incorporated into maritime law. In the Costa Concordia case, 4200 persons were on board when the accident occurred, 30 of whom died or disappeared and 60 were injured. Several agreements were reached and indemnities paid, but the case showed that these tragic events produce immense damages and require incalculable amounts of money to indemnify them. Carriage of passengers by sea is covered by pools due to the high value of the interests assured, through insurance companies, re-assurance companies and Protection and Indemnity Clubs (P&I
Final Remarks
The protection of the tourist, including the cruise passenger, requires both the legal protection provided by the State when the tourist faces unfortunate situations and the assurance of the possibility to claim from the tourist’s place of residence. That protection includes security, respect for the tourist’s rights, including those derived from the different contracts of touristic services he entered into, and the necessary guarantees that he will obtain compensation for lack of performance, among others. Consumer Law has had a decisive influence in this complex system of protection of tourists.261 It generally applies horizontally cross-sector wise, save specific exceptions, which is relevant since cruise passengers are normally qualified as consumers.262 If we analyze consumer protection rules we find out that they are applicable to cruise passengers, since cruise passengers are included in the legal definitions of consumers. That is the case, for example, of Argentina,263 Brazil,264 Canada,265
254
See hereinafter in this general report, Sect. 5, on combined trips, package travels and alike. 255 See hereinafter in this general report, Sect. 12.3 on sources of law applicable to cruises and particularly on the Athens Convention. 256 See further information in Belgian Report, II.9.16. 257 Bulgarian National Report, IX.45. 258 Delebecque (2001), p. 68. 259 Haiek (2012), p. 201. The author mentions, in page 208, that the insurer company Allianz Global Corporate & Specialty (AGCS) reaffirms the idea that maritime transport is one of the safer means, with the lowest death accident rate, comparing with land vehicles and even walking.
260
Haiek (2012), pp. 209–213. Barreiro (2008), pp. 322–323. 262 Belgian Report, III.18. 263 Cappagli (2016), p. 14, N 112–113. The author quotes the opinion of Radovich (2012), in similar sense. 264 Brazilian Report, II.12. 265 Chircop et al. (2016), p. 659. 261
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Romania,266 Bulgaria,267 Uruguay268 and Japan.269 Moreover, in some general conditions used by cruise operators in their cruise contracts refer to the passenger as “consumer”.270 Therefore, cruise passengers are protected both by general provisions on carriage of passengers and their luggage by sea, like the Athens Convention on the topic, which are not exclusively addressed to cruise passengers but to passengers by sea in general, and also by rules on consumers.
4.2
National and Regional Rules on Tourists’ Protection
It can be asserted, with doctrinal support, that most part of tourists’ protection is provided by Acts on Consumer Defence. That is the case, among others, of Argentina, Brazil, Chile, Spain, United States of America, Nicaragua, Mexico, Peru, Dominican Republic and Uruguay. Moreover, it is to be noted that all those Acts on consumer’s defence are remarkably uniform in their main guidelines, like those referring to the right to information, the duty to comply with the conditions agreed, the prohibition of misleading advertising and of abusive clauses, and even the objective liability of travel agencies and those providing different kinds of touristic service.271 In Argentina, Consumer Law is applicable to tourism contracts though at the beginning there were some resistance to accept it. However, nowadays it is fully accepted both by scholars and jurisprudence because of two main reasons: the first one is the constitutional basis of Consumer Law (Articles 42–43 of the Argentinean National Constitution). The second reason is that tourism contracts are clearly included in the definition of consumer contracts. In Brazil there is also a constitutional basis of Consumer Law; in the Constitutions of Nicaragua (Article 66) and Peru (Article 65) there are only some references to the right to information. The Spanish Constitution also incorporated the consumer protection (Article 51).272 In Argentina, Capaggli states that lately through case law and afterwards under Act 24.240 on Consumer Defence 266
Romanian Report, II.12. Bulgaria Report, VIII.41. 268 The cruise passenger is a consumer under Uruguayan Act N 17.250, particularly Articles 2, 4. See complete text in http://www.impo.com.uy/ bases/leyes/17250-2000. 269 Japanese Report, III.18. 270 See, for example, Section 11, entitled “Obligations of the Consumer”, in the General Conditions of Goldium Cruises: http://www. goldiumcruceros.com/informacion-legal.php?id¼3; those in Viajes El Corte Inglés: https://www.viajeselcorteingles.es/documento/ condiciones/pdf_condiciones_cruceros.pdf; those in Pullmantur: https://www.pullmantur.travel/general/condiciones-generales.html. 271 Barreiro (2008), p. 324. 272 Barreiro (2008), pp. 31–32. 267
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and amendments, and at present also applying Articles 1092–1122 of the Civil and Commercial Code, the issue of the pre-eminence of the law of consumer protection over those ruling different areas of the law, like maritime law is at stake. He concludes that under Article 1 of Act 24.240 on Consumer Defence, which coincides with Article 1092 of the Civil and Commercial Code, passengers are consumers but as the Navigation Act is a specific law, it applies to contracts of carriage of passengers by sea, and Act on consumer Defence, as a general law, applies in case the specific Navigation Act contains no specific provision. He points out that the Navigation Act aims at protecting users of transport by sea and in many aspects coincide with the rules in the Consumer Defence Act (for ex.: Article 37 of the latter with Article 280 of the former).273 In Brazil it has been recommended to harmonise the specific rules in tourism law with the general ones in the Consumer Code274 to guide tourism service providers on how to comply with them without affecting the touristic activity. Articles 29–44 of the Consumer Code include rules on offer, publicity and abusive practices. In brief, the provider must give specific, clear, concrete and visible information on the characteristics of the service and that information must be included in the contract, being the offer and the contract linked. The consumer may require the fulfilment of the services offered, accept an equivalent service or even terminate the contract and obtain compensation for damages. That is the case, for example, when the relationship between price and cabin was not correctly explained. The Consumer Code pre-establish as null those clauses that are considered abusive, like those reducing the liability of the provider of the service, those that eliminate the option of the consumer to reimbursement, those that transfer liability to a third party, those that put on the consumer the charge of the proof, those that permit the provider to alter the price or to alter the contract unilaterally, among other.275 In Uruguay, Consumer Law is applicable to tourists and tourist services since tourists are considered consumers.276 Act N 17.250 on Consumer Relations, Consumer Defence (Ley de Relaciones de Consumo, Defensa del Consumidor), August 11, 2000277 defines in Articles 30 which clauses are considered to be abusive in adhesion contracts and exemplifies in Article 31. Other countries, like Mexico approved Federal Act on Consumer Protection in 1976, and Dominican Republic
Cappagli (2016), pp. 14–15, N 111–121. Act N 8078 in force since March 11, 1991. 275 Schüter and Winter (2000), pp. 154 and 158–160. 276 Facal and Pezzutti (2008), p. 301. 277 https://www.impo.com.uy/bases/leyes/17250-2000. 273 274
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approved Act N 358-05 on General Protection of the Consumer of User in 2005.278 There are some countries where there are specific rules on consumer protection applicable to cruise passengers, like China, where a model contract of cruise tourism was implemented in Shanghai in 2015 and some national rules at the national level stipulating the national service standards in cruise terminals.279 In the U.S.A. there are some consumer protection laws in place for cruise passengers, but strong regulations or laws for most aspects of cruises are still to be enacted. The Commission’s Office of Consumer Affairs & Dispute Resolution Services reviews any problems and inquiries from passengers and will contact a cruise line on the passenger’s behalf.280 In Europe, the Directive 90/314/EEC was repealed by Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements. Whereas N 2 of Directive 2015/ 2302 points out that the market of package travel, package holiday and package tours had undergone considerable changes since the adoption of Directive 90/314/EEC, among other reasons, because of internet, which has become an increasingly important medium through which travel services are offered or sold and enables packages to be combined in a customised way. Directive (EU) 2015/2302 aims at updating Directive 90/314/EEC, taking into account those developments.281 Directive (EU) 2015/2302 addresses its interrelationship with consumer protection legislation. Among its objectives it is that of achieving a right balance between a high level of consumer protection and the competitiveness of businesses.282 It recognises that the majority of travellers buying packages or linked travel arrangements are consumers within the meaning of Union consumer law.283 It adapted certain EU consumer protection legislative acts, like Regulation (EC) No 2006/2004 on cooperation between national 278
Barreiro (2008), p. 323. Chinese Report, II. 280 See further information in USA Report, II. It has been reported that: “The office’s role is to ensure a quick and fair consideration of the issues involved, but the final resolution of such complaints or inquiries remains between the cruise line and the individual: the consumer has to initiate action on her/his own behalf against the cruise line. It should be noted, further, that most forum selection clauses in cruise ticket agreements do not allow cruise passengers to utilize this service and hence the process is not very effective.” 281 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri¼CELEX% 3A32015L2302. 282 Whereas N 5. 283 Whereas N 7. However, “it is not always easy to distinguish between consumers and representatives of small businesses or professionals who book trips related to their business or profession through the same booking channels as consumers”. 279
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authorities responsible for the enforcement of consumer protection laws.284 EU Directive 2015/2302 defines in Article 3 (6) the “traveller” (as protected by its regime) also as the person who is entitled to travel on the basis of a contract concluded within the scope of the Directive. That means that the travellerconsumer should have the benefit of the protection of the Directive irrespective of whether he is a direct contracting party, a transferee or a member of a group on whose behalf another person has concluded a contract in respect of a package. However, Directive 2015/2302 excludes from its field of application the package travel that is bought by a general agreement for the arrangement of business travel between a travel organiser and another professional (art. 2,2,c). Consequently a framework contract between an employer of travellers and a cruise company is outside the scope of the EU Directive.285 Directive (EU) 2015/2302 is applicable to combined trips involving cruises and “seeks to cover not only traditional package holidays organized by tour operators, but also to those consumers that book in the end combined trips by booking themselves a combination of transport plus hotel or a car rental via a website. This may include a cabotage service plus a car rental”.286 According to a decision of the Court of Justice of the European Union (CJEU)287 the EU Package Travel Directive (2015/2302) was applicable to cruises. Moreover, it was “the most important legislative instrument for complaints of cruise passengers against the cruise line”.288 The information requirements laid down in Directive (EU) 2015/2302 are without prejudice to the information requirements laid down in other applicable European Union legislation, such as Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce), Directive 2006/123/EC on services in the internal market, and Regulation (EU) No 1177/2010 concerning the rights of passengers when travelling by sea and inland waterway.289 The EU Sea Passengers’ Rights Regulation No 1177/ 2010290 expressly declares in its Article 2 (1) (c), that it is 284
Belgian Report, II.12. Belgian Report, II.13. 286 Spanish Report, IV.25. 287 CJEU 7.12.2010, combined cases C-585/98 and C-144/09—Pammer and Hotel Alpenhof. 288 German Report, III.18. OJ L 326, 11.12.2015, pp. 1–33. See https:// eur-lex.europa.eu/search.html?qid¼1526244939663&whOJ¼NO_OJ %3D326,YEAR_OJ%3D2015&type¼advanced&lang¼en& SUBDOM_INIT¼ALL_ALL&DB_COLL_OJ¼oj-l. 289 Belgian Report, II.12. 290 Regulation (EU) No 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation 285
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applicable to cruises.291 It aims at ensuring passengers the basic protection when travelling by sea and inland waterway in case of transport disruption (delayed or cancelled departures), by imposing duties on the service provider. These duties are mainly to provide information, assistance (supply of food and beverage, accommodation, communication, transport), rerouting, compensation and reimbursement. It also imposes special duties on the operator vis-à-vis disabled passengers/customers or passengers with reduced mobility.292 It is worth mentioning that the Regulation (EU) N 1177/ 2010 distinguishes between “commercial passenger services” and “cruise services” and reflects their different characteristics in the different scope of the rights that it grants to passengers. Commercial passenger services are passenger transport services operated between ports according to a published schedule. Cruises are defined as waterborne (by sea or inland waterway) services operated exclusively for the purpose of pleasure or recreation, supplemented by accommodation and other facilities, exceeding two overnight stays on board (art. 3 (t) Regulation No 1177/2010).293 Directive 2011/83/EU on consumer rights294 was amended to ensure that certain consumer rights laid down in that Directive also apply to package travel. It applies without prejudice to rules on the protection of personal data laid down in Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data, to be replaced by the General Data Protection Regulation (GDPR) 2016/679,295 and to the EU rules on private international law, including Regulation (EC) No 593/2008296 and Regulation (EU) No 1215/2012.297 In some countries there are specific rules that aim at dealing with unfair terms not individually negotiated, such as Article 80 et seq. of the Royal Decree-Legislative 1/2007 (EC) No 2006/2004 (EU Sea Passengers’ Rights Regulation), OJ No. L 334 of 17.12.2010, p. 1. 291 German Report, II.12; Spanish Report, II.9; Polish Report II.9; Japanese Report, II.9. 292 See further information in Belgian Report, II.9.8. 293 See further information in Belgian Report, II.9.8. 294 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council. http://eurlex.europa.eu/legal-content/EN/TXT/?uri¼celex:32011L0083. 295 Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation). 296 Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I). 297 Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
433
of 16 November approving the Recast text of the General Law on Consumer Protection and other supplementary laws (Real Decreto Legislativo 1/2007, de 16 de noviembre, por el que se aprueba el texto Refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias, B.O.E. 30 November 2007), in Spain.
4.3
Final Remarks
Consumer Law is of the utmost importance in the protection of the tourist, including the cruise passengers. Consumer law is mandatory in most jurisdictions and therefore prevails over other sources of law.
5
Combined Trips, Package Travels, Package Tours or Package Holidays
5.1
Concept of Combined Trips, Package Travels or Package Holidays
Combined trips, package travels, package tours or package holidays are those that include not only the cruise but also the airplane trip to and from the port of departure, the land excursions chosen by the tourist when the ship is in port, and eventually some hotel night.298 Package holiday and package tour are defined as synonymous: “a completely planned holiday arranged by a company at a fixed price, which includes travel, hotels, meals, etc.”299 “Package travel is understood as travel for more than twenty-four hours or which includes an overnight stay and that combines, at least, two travel services (transport, accommodation, meals or guided visits) as a significant part of the journey, and which is sold at an inclusive price”.300 However, under the wording of the Directive 90/314/EEC (Package Travel Directive)301 it was not clear whether a cruise is a package, as a package consists of at least two travel services, usually carriage and accommodation. But in the already mentioned case Pammer and Hotel Alpenhof (2010)302 the CJEU declared that a cruise—in this case a voyage by freighter—is a package, because transport and accommodation are involved. In 2012, the German Supreme Court (Bundesgerichtshof, BGH) also declared that a cruise 298
Ariza Herrerías (2014), p. 13. Longman Dictionary of Contemporary English, Third Edition, p. 1017. 300 http://www.cec-msssi.es/en/CEC/web/secciones/viajes_ combinados.htm. 301 And also under the German transposition norm (§ 651a BGB). 302 CJEU 7.12.2010, combined cases C-585/98 and C-144/09—Pammer and Hotel Alpenhof. 299
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is a package.303 According to these decisions a cruise is a package notwithstanding whether it is combined with carriage to and from the embarkation and disembarkation port, or with other services as land excursions or special entertainment aboard. This is relevant regarding liability issues.304 Whereas N 10 of Directive (EU) 2015/2302 warns that “In the light of market developments, it is appropriate to further define packages on the basis of alternative objective criteria which predominantly relate to the way in which the travel services are presented or purchased and where travellers may reasonably expect to be protected by this Directive”. It deals with the different types of travel services and terms used to designate them.305 In the case C-585/08 the question of whether the services offered by a freighter (cargo carriage vessel) on board are comparable to those in a cruise, and the EU Court of Justice held that a contract concerning a voyage by freighter is a contract of transport which, for an inclusive price, provides for a combination of travel and accommodation that corresponds to the concept of ‘package’ within the meaning of Article 15(3) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, in the sense of art. 2(1) of Directive 90/314.306
5.2
Retailers, Travel Agents, Tour Operators and Their Liability
A travel agent is a person who owns, operates or works for a travel agency,307 while a tour operator is a person or company that provides package holidays.308 These distinctions might become relevant when it comes to determining liabilities. For example, it has been reported from Germany that the Bundesgerichtshof originally decided that the travel agent is not liable, while the tour operator that sells a package including a cruise and the carriage to and from the port of embarkment and disembarkment is liable under the package travel law.309 Another case reported was that where the flight to the port of embarkment had to be cancelled due to volcano ash and the consumer could not reach the ship. The Bundesgerichtshof said that this was a case of force majeure, 303
BGH 18.12.2012, X ZR 2/12. See further information in German Report, III.18, 24. 305 See also Whereas N 11–12 and subsequent ones. 306 See further information in Belgian Report, II.9.15. See also http:// freecases.eu/Doc/CourtAct/3611261 and https://www.eui.eu/Projects/ CentreForJudicialCooperation/Documents/2012-05-25-26/C585OpinionAGTrstenjak.pdf. 307 http://www.dictionary.com/browse/travel-agent?s¼t. 308 http://www.dictionary.com/browse/tour-operator?s¼t. 309 The German Report mentions in III.18 the case BGH 30.9.2010, Xa ZR 130/08, NJW 2011, 599. 304
so that the consumer could ask for repayment of the money paid for the cruise.310 In Argentina, travel agents have a special legal regime, provided for in Act 18.829 and Decree 2182/72, which expressly include cruises. Travel Agencies need to have a licence issued by the Agencies Registry and they are controlled by the National Direction of Tourism. Services to be provided must be agreed in a signed contract and agencies are liable for any service committed by them, their branch offices or correspondents, though with some exceptions.311 In “Martinotti, Adalberto A. v. Marsans Internacional Argentina S.A. y otro” the operating agency responsible for touristic services and the intermediary agency were condemned to compensate damages for non performance of the travel contract.312 If the cruise line sells the cruise and the carriage to and from the port, it is a package which includes the carriage and in the case the carriage is late and the passenger misses the ship, it is the responsibility of the cruise line either to bring him to the next port or to compensate him. But if the traveller books the carriage to the port separately, it is his own risk that the carriage is in time.313 Under the new Package Travel Directive adopted in November 2015314 a travel agent who sells the cruise and the carriage as a package and not separately may become liable as if being a tour operator for carriage and cruise.315 The obligations of the retailer or where applicable the organiser, are generally established and published. Let us see, for example, those published by the European Consumer’s Centre in Spain (Centro Europeo del Consumidor en España): the retailer or organiser must provide the traveller with a clear, precise and written programme or informative brochure, containing details of the package offered, and information like travel destination(s) and means of transport, including characteristics and categories, duration, itinerary and travel programme, list of accommodation indicating location, category and main features, and tourist category in countries where official rating exists, number of meals to be served and whether or not refreshments are included in the menu, documentation required for travel (passports, visas and heal formalities required), total price 310 The German Report mentions in III.18 the case BGH 18.12.2012, X ZR 2/12, NJW 2013, 1674. 311 Correa (2005), p. 7, IV. 312 Judgment of June 25, 2007, “Sala A de la C. Nac. Com.”, and comments in: Hocsman and Buccheri (2008). 313 German Report, III.18. 314 Directive EU/2302/2015 of the European Parliament and of the Council of 25 November 2015 on package travel, linked travel arrangements, amending regulation (EC) 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC, OJ No. L 326 of 11.12.2015, p. 1. 315 German Report, III.18.
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of the package, and indication of costs of optional excursions, amount or percentage of the total that is to be paid as a down payment, and the timetable for payment of the balance and financing conditions, where available. Also the minimum number of persons required for the package to take place, and where applicable, the time-limit for advising the traveller of the cancellation if that number is not reached, causes and consequences of the cancellation of the package, name and address of the travel organiser, and, where applicable, their legal representative in Spain, any additional and appropriate information regarding the nature of the package offered.316 It is highlighted in the referred web page that the information contained in the brochure is binding for the organiser or the retailer of the package travel, except in any of the following circumstances: that, in the event of modifications, the customer is notified in writing before signing the contract and this condition appears in the brochure in order to be accepted, or that modifications are made subsequently, provided that his condition has been previously agreed in writing between the contracting parties.317
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are able to call at the ports which are promised. German courts have considered that it depends on the relevance of a port for the whole trip, whether the cruise line has to compensate the consumer if a port is missed, even if the reasons are political unrest or bad weather conditions.325
5.4
It is quite frequent that cruise lines charge some service fees aboard. In some countries, like Germany, it was disputed whether the cruise line could charge aboard a service fee in addition to the price for the cruise, “because this might not be in line with the principle of indicating the total price, which is part of German and European law”. In a recent judgment, the Bundesgerichtshof said that a compulsory service fee has to be included into the total price.326
5.5 5.3
Supranational, International and National Rules on Package Travels
Price Reductions for Lack of Conformity
It has been reported318 that price reductions for lack of conformity are important in German travel law, including cruises, and that there are several examples in lower courts case law. Some examples of lack of conformity alleged by cruise passengers are that there was no water in the swimming pool, even when the sea was calm,319 that the temperature in the cabin was sometimes too cold and sometimes too hot,320 that there was no information about a non smoking policy before departure,321 that a sofa was not long enough to sleep on it,322 among others.323 Another cause of lack of conformity is the replacement of the ship, which gives the consumer the right to cancel the trip before departure. Also the shortfall of land excursions, which is often the result of political unrests,324 enables the cruise line and the passenger to cancel the whole cruise for that reason before departure, but after departure it is the risk of the cruise line whether they 316
Service Fees Charged Aboard
http://www.cec-msssi.es/en/CEC/web/secciones/viajes_ combinados.htm. 317 http://www.cec-msssi.es/en/CEC/web/secciones/viajes_ combinados.htm. 318 German Report, III.18. 319 AG München 27.4.2001, 274 C 23427/00, RRa 2002, 25. 320 OLG Koblenz, 13.6.2012, 5 U 1501/11, NJW-RR 2012, 1082. 321 OLG Rostock 27.10. 2008, 1 U 183/08, NJW 2009, 302. 322 AG Offenbach 31.1.2001, 31 C 6017/00, RRa 2001, 97. 323 The so called Würzburger Tabelle (Würzburg list) includes a comprehensive list of court decisions, http://würzburger-tabelle.de. 324 LG Leipzig 27.4.2005, 1 S 4/05, NJW-RR 2005, 995 (two Egyptian ports).
Most legal systems do not contain specific rules on combined trips, package travels or similar or equivalent denominations. That is the case, for example, of Argentina, Brazil, Bulgaria,327 China, Romania,328 and Uruguay. However, more general rules are applicable to this spreading phenomenon. In Argentina the Travel Agents’ Act N 18.829 applies to the travel agent’s liability in case there was one. The rules applicable to the carrier’s liability will depend on whether the damage occurred in the aquatic, aerial or terrestrial medium. If the damage occurred at sea, the Navigation Act N 20.094, the 1940 Montevideo Treaty on International Commercial Navigation Law, and the Athens Convention will apply. If the damage occurs during the aerial section of the trip, the Aeronautic Code and the 1999 Montreal Convention will apply, depending on the case. If the damage occurs on land, several national rules329 or the 1940 Montevideo Treaty on International Terrestrial Commercial law,330 depending on the case, apply. In Argentina, combined trips are those where the previous combination of at least two of the following elements is offered in exchange of a global price, by a travel agency, 325
BGH 14.5.2013, X ZR 15/11, NJW 2013, 3170—Greenland. BGH 7.5.2015, I ZR 158/14, MDR 2015, 1433—Der Zauber des Nordens. See German Report, III.18. 327 Bulgarian national Report, IV.24. 328 See further information in Romanian Report, IV.24–25. 329 See Argentine Report, IV.24. 330 Particularly Articles 17 and 18. 326
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including a night-stay or the provision of services for more than 24 hours: (1) carriage, (2) accommodation, and (3) other touristic services that are not accessory to the carriage or accommodation and accounting for a significant proportion of the package.331 Publicity made by the travel agency in relation to the cruise is binding (art. 61 LGDCU). The offer-program handled to the passenger is binding (art. 156 LGDCU), and any clause included in the contract stating that publicity of the offer-program is not binding is considered abusive. Different kinds of insurances are required to the passenger. Argentinean courts heard a case where a family entered into a contract called “tour package” with a tourism corporation, which included a cruise along different points of the Caribbean Sea. They planned to visit Puerto Rico, but they could not enter that state because they lacked the required visa. They claimed against the tourism corporation for damages. The defendant stated that there was a clause in the general conditions that freed the corporation from liability. The court accepted the claimant’s position, considering that it was an adhesion contract, in a printed form and with the letterhead of the corporation, and that in case of darkness, doubt or silence, it had to be construed against the party issuing the general conditions. The court stated that the clause freeing the corporation from liability was subordinated to the principal obligations of the corporation, which included the duty of controlling that the passengers had the needed documentation.332 The judgment reaches the right solution but on insufficient legal grounds, since it does not even mention the applicable legislation on consumer protection.333 Art. 37 of Act N 24.240 provides that the clauses that denature obligations or limit liability for damages and those that import waiver or restriction of consumer rights or expand the rights of the other party will be deemed as inexistent. Other argument that should have been considered by the court are that the corporation assumed an obligation related to the ends desired (the trip), and therefore it cannot exempt itself for the non-performance arguing that it tried to perform the contract but was not able to.334 In Uruguay the regulation of different issues regarding combined trips can be found mainly in two areas of law: contract law335 and consumer protection law.336 There are
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also some administrative law rules that apply to one of the contracting parties: the travel agency.337 The 1940 Montevideo Treaty on International Terrestrial Commercial law338 also applies, depending on the case. In Brazil all the general labour rules are, in principle, applicable to this category of trips.339 In the EU, Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours340 (the Package Travel Directive of 1990) currently superseded by the Directive 2015/2302 is applicable to combined trips involving cruises and “seeks to cover not only traditional package holidays organized by tour operators, but also to those consumers that book in the end combined trips by booking themselves a combination of transport plus hotel or a car rental via a website. This may include a cabotage service plus a car rental”.341 There are some countries, like Poland, that include specific rules on package (travel) which may be considered a combined trip, and is defined as “not less than two touristic services forming uniform program for an inclusive price and when those services include overnight accommodation, cover a period of more than twenty-four hours or change of place of domicile (Art. 3, Act on touristic services of 1997)”.342 The notion of package travel has been introduced into the Polish national legal system by the Act on touristic services of 1997, that implement the European Union Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours, currently superseded by the directive 2015/2302 which so far has not been implemented into the Polish legal system.343 Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (‘Unfair Commercial Practices Directive’) do not exclude package travel contracts from its scope of application. Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, does neither apply to contracts that fall within the scope of Directive 90/314/EEC on package travel, package holidays and
331
Art. 151 of the Texto refundido de la Ley General de Defensa de los Consumidores y Usuarios (LGDCU). 332 Borda (2003). 333 In Argentina, Act N 24.240—Adla, LIII-D, 4125. 334 Borda (2003). 335 Sconfienza Pérez (2003), pp. 81–89, in http://revista.fder.edu.uy/ index.php/rfd/article/view/199, refers to the regulation of the “tourist agency contract”, under contractual obligations rules in the Civil Code, Act N 16.603. 336 Act No. 17.250 on Consumer Protection.
See, for example, Decree N 268/2015 and Law No. 19.253. Uruguayan Report, IV.24. 338 Particularly Articles 17 and 18. 339 Brazilian Report, III.24. 340 OJ L 158, 23.6.1990, p. 59–64. 341 Spanish Report, IV.25. 342 Polish Report, IV.24. 343 Polish Report, IV.25. 337
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package tours (Article 3.3.g) nor to contracts for passenger transport services, with the exception of article 8(2) (information requirements for distance contracts) and articles 19 (cost of the payment transaction) and 22 (express consumer consent with extra payment) (Article 3.3.k). In Spain package travels are regulated specifically in Articles 150–165 of the “Real Decreto Legislativo 1/2007 de 16 de noviembre, por el que se aprueba el texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios”. These provisions deal with precontractual information and contract formation, specific consumer rights, contract modification, contract termination and liability, noncompliance, liability and guarantees.344 The Directive 90/314/EEC (Package Travel Directive) was implemented by Germany in 1995. The German legislator amended the contract law sections of the Civil Code (Bürgerliches Gesetzbuch) by a special chapter about package travel (originally §§ 651a–651k BGB). As the original Package Travel Directive was a minimum standard Directive, the German legislator could maintain some rules which are more in favour for the consumer than the Directive, in particular rules about a non fault liability for lacks of conformity which gives the consumer a right for a price reduction in many cases.345 In Belgium, Act of 21 November 2017 on the sale of package travel, linked travel arrangements and travel services has transposed the Directive (EU) 2015/2302 into Belgian law.346
5.6
Final Remarks
Cruises are frequently a part of package travels and even considered a package itself, since it provides not only the carriage but also accommodation, meals, entertainment, land excursions and others for a fixed price. Package travels are ruled by general and specific rules, and involve several actors like travel agents and tour operators, each of which has its particularities and liabilities.
6
Labour Rules on Cruises’ Workers
437
Their working regime is mainly temporal. However, there are some companies that employ cruise workers and then provide staff globally to big cruise companies, located in countries with minimal legal rules on the matter.348
6.1
In most jurisdictions considered in this general report it has been reported that there are no specific labour rules on cruises’ workers, but that general labour rules on maritime or seafarer workers apply.
6.2
344
Spanish Report, III.14 and IV.24. German national Report, III.18. 346 Belgian Report, II.9.15. 347 http://www.un.org/depts/los/convention_agreements/texts/unclos/ unclos_e.pdf. 345
General Labour Rules That Are Applicable to Cruises’ Workers in the Absence of Specific Rules on the Matter
At the international level, the Maritime Labour Convention (ILO, 2006, as amended)349 has 86 Member States all over the world.350 It was incorporated into the EU law by means of Council Directive 2009/13/EC of 16 February 2009. Regionally, the Montevideo Treaty on International Commercial Navigation of 1940,351 ratified by Argentina, Paraguay and Uruguay states that the seafarers’ employment contract (contrato de ajuste) is ruled by the law of the nationality of the vessel where the seafarers provide their services, as well as everything concerning the internal order of the ship, the rights and duties of the captain, officials and seafarers, and that the courts of the State of the flag have jurisdiction on the matter (Articles 20–24).352 In many countries there are rules on maritime workers, seamen’s contracts or employment contracts for ship’s crew, though not specific on cruises’ workers. In the absence of those rules, general labour rules on maritime workers are applicable to cruises’ workers. That is the case of Argentina, Brazil, China, Japan, Turkey, and Uruguay, among others. In Argentina, Navigation Act N 20.094353 rules seamen’s contracts in Articles 631–674. As Argentina is a party to the 348
Estepa Montero (2012), pp. 140–141. http://www.ilo.org/global/standards/maritime-labour-convention/ lang%2D%2Den/index.htm Adopted by the International Labour Conference at its 94th (Maritime) Session (2006) and entered into force 20 August 2013. 350 http://www.ilo.org/dyn/normlex/en/f? p¼NORMLEXPUB:11300:0::NO::P11300_INSTRUMENT_ ID:312331. 351 http://www.audm.com.uy/pdf/leyes/tratado-de-derecho-denavegacion-comercial-internacional-1940.pdf. 352 See also Articles 22–24. 353 http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do? id¼43550. 349
The labour legal regime of workers on board of cruises depends on the flag of the vessel. The flag determines also civil and criminal jurisdiction (arts. 27, 28 and 94.3.b) of the Montego Bay Convention of 1982).347
Specific Labour Rules on Cruises’ Workers
438
1940 Montevideo Treaty on International Commercial Navigation, as well as Paraguay and Uruguay, the Treaty is applicable when the case falls within its scope of application. In Brazil, which is not a party of the referred Treaty, the labour rules applicable to cruises’ workers are contained in the Normative Resolution no. 71/2006 of the National Immigration Council concerns the granting of visas to foreign seafarers and other regulations.354 The Decree N 5.452/43 (Labour Act, or “CLT”), which is the main general regulation in this matter, is applicable to the work contracts signed in Brazil. Some of the cruise companies that operate in Brazil signed “Termos de Ajustamento de Conduta – TACs” with the Public Labour Prosecutor’s Office, which are public agreements in which these companies committed to obey certain rules.355 Brazilian labour courts tend to be very protective in their interpretations towards workers, applying the CLT in most cases.356 In Uruguay, general rules included in the Constitution, Acts, and Decrees, are applicable in the absence of specific rules. Collective agreements reached between workers and employers within the different activity sectors that are reached through the Salary Councils (created by Act No. 10.499) are applicable to merchant ships (including passenger ships) flying Uruguayan flag. Issues like workers’ salaries and licenses are regulated by the negotiations carried out in the Group N 13 of Wages Council called “Transport and storage” Subgroup N 09 “Maritime transport”.357 When the case is not within the scope of application of the 1940 Montevideo Treaty on International Commercial Navigation, the seafarers’ employment contract is ruled in Uruguay by Act N 19.246 on Maritime Commercial Law (2014), particularly Article 7, which sends up to the 1940 Montevideo Treaty on International Commercial Navigation regarding all maritime law issues, including specifically seafarers’ employment contract. Therefore, those contracts are ruled by the law of the nationality of the vessel where the seafarers provide their services, as well as everything concerning the internal order of the ship, the rights and duties of the captain, officials and seafarers, and the courts of the State of the flag have jurisdiction on the matter.358 In Europe, Article 8 of Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), deals with individual employment contracts without paying specific regard to seafarers’ employment contracts. This conflict 354
Brazilian Report, III.10, 20. Brazilian Report, III.22. 356 Brazilian Report, III.26. 357 https://www.mtss.gub.uy/web/mtss/9-transporte-maritimo See: Uruguayan Report, IV.22. 358 See on this matter: Fresnedo de Aguirre (2015), pp. 127–168, particularly pp. 154 et seq. 355
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of laws rule poses the problem of which is the habitual place of work when services are provided on high seas, or on different jurisdictions and non-sovereignty areas through which the ship navigates.359 In Germany the Seearbeitsgesetz (SeeArbG, Sea Labour Act)360 was adopted in 2013 and supersedes general labour law. It is applicable for German ships, i.e., ships under German flag of all kinds: cargo ships and passenger ships.361 Notice that this national law is a transposition of the 2006 Maritime Labour Convention (MLC), which came into force on 20 August 2013, and for Germany on 14 August 2014.362 The Belgian Act of 3 June 2007 on the seafarers’ employment contract has harmonized Belgian law to the international conventions on the matter.363 The port state control has its legal basis not only in the MLC, but also in European law. There is a Directive on port State control of 2009,364 amended in 2013.365 The purpose of these Directives is not only to enforce labour law, but also environmental law. In the USA, “seafarers have no common law right to sue their employer for negligence. Rather, they were entitled to maintenance (reasonable expenses of room and board while ashore and unfit for duty), cure (reasonable medical expenses incurred for curative care), and unearned wages (wages that would have been received had the seafarer not become sick or injured, until the end of the voyage). A seafarer assigned to a vessel could also sue for unseaworthiness, meaning that if a sea man suffered injury or death that was caused by the vessel that was not fit for its intended purposes, he would be entitled to damages”. The Jones Act of 1920 “granted seafarers a right of action against their employers for damages caused by negligence”, and also to other employees “permanently assigned to the vessel in aid of its mission — such as cooks, bartenders, musicians and beauticians”. Regarding the Jones Act, courts have also determined that “the statute can apply to foreign-flagged vessels, although Congress made no specific mention that the law should apply extraterritorially”.366 “More recently, general maritime law has applied these choice-of-law principles to extend to all maritime tort cases, not just those between employer and employee. While they 359
Spanish Report, IV.22. For details of the SeeArbG cf. Bubenzer, Transportrecht 2014, 393, and Zimmer, Zeitschrift für Europäisches Arbeitsrecht 2015, 297. 361 See further information in German Report, IV.20. 362 German Report, IV.21. 363 Belgian Report, IV.22. 364 Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port state control, OJ no. L 131, p. 57 of 28.5.2009. 365 Directive 2013/38/EU of the European Parliament and the Council of 12. August 2013, amending Directive 2009/16/EC on port State control, OJ no. L 218, p. 1 of 14.8.2013. 366 Felder (2006), pp. 27–29. 360
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will use a balancing of factors in identifying the contacts of the parties in resolving what law may supplement GML in tort matters, U.S. courts will also recognize the parties’ contractual choice of law with respect to maritime contracts”.367 In Japan the Seamen Act, which is a domestic law, was amended on 1 March 2013 since Japan ratified the Maritime Labour Convention 2006 which was adopted by ILO in February 2006.368 In Turkey there are no specific labour rules on cruises’ workers. However there is a Maritime Labour Code that is applicable to cruises, though only to the crewmembers of the Turkish flagged vessels (Article 1 of the Maritime Labour Code). Turkey is planning to become a party to 2006 Maritime Labour Convention.369 In other countries there are neither special provisions on cruise workers nor on maritime workers or seafarers, and general labour rules apply. That is the case, for example, of Bulgaria,370 Poland371 and Romania.372 In Poland, for example, those general rules include Maritime Labour Convention 2006 and European directives, as well as national acts: Maritime Labour Act of 2015 and Labour Code from 1974.373 It has been reported by some jurisdictions to be quite frequent that cruises’ workers are not enough protected by the labour law “once the ship leaves the port”, and there is some case-law on that matter.374 Perhaps that is the reason why the cruise sector activities often raise conflicts involving labour and social security law.375
6.3
The 2006 Maritime Labour Convention376
A complete analysis of this Convention would exceed the scope of this general report, but anyway, it is worth making some references to its solutions. It must be noted that under Article II.8, “unless expressly provided otherwise, a reference to this Convention constitutes at the same time a reference to the Regulations and the Code”. 367
Felder (2006), p. 29. Japanese Report, IV.23. 369 Turkish Report, 3. 370 Bulgarian national Report, IV.22–23. In Bulgaria, the Labour Code is applicable to every individual working contract. It is a national Code though it is harmonized with the European Rules. 371 Polish Report, IV.22. 372 Romanian Report, IV.20–23. 373 Polish Report, IV.23. 374 Romanian Report, IV.26. 375 For further information on this topic see Belgian Report, IV.26. Case-law is also reported there. 376 http://www.ilo.org/global/standards/maritime-labour-convention/ lang%2D%2Den/index.htm See Spanish Report IV.26 and Belgian Report, IV.20. 368
439
The personal scope of application is widely determined in Article II: it applies to all seafarers and to all ships, except expressly provided otherwise. Any doubt shall be clarified by the competent authority in each Member after consultation with the ship owners’ and seafarers’ organizations concerned with the question at stake. Therefore, seafarers working in cruise ships are included, in principle, within the personal scope of application of this Convention. The Convention provides for substantive rules on seafarers right to a safe and secure workplace, to fair terms of employment, to decent working and living conditions on board ship, which must be implemented through national laws or regulations, through applicable collective bargaining agreements (Articles IV and V). The 2006 Maritime Labour Convention has been implemented in the European Union by Council Directive 2009/13/EC of 16 February 2009 implementing the Agreement concluded by the European Community Ship-owners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) on the Maritime Labour Convention, 2006, and amending Directive 1999/63/EC.377
6.4
Final Remarks
In general, the labour legal regime of workers on board of cruises depends on the flag of the vessel. In most jurisdictions, general labour rules, or those on seafarer workers apply. In State Parties and when the issue is within the scope of application of the 2006 Maritime Labour Convention, its substantive rules on seafarers apply.
7
Rules on Ports That Are Relevant Regarding Cruises
7.1
General and Specific Rules
7.1.1 In Europe In Europe, the Council Decision 87/594/EEC of 30 November 1987 accepting, on behalf of the European Community, Annex F.3 to the International Convention on the simplification and harmonization of customs procedures,378 refers to the location of customs offices, customs formalities, among other issues, and specifies that in some instances, such as cruise ships, it may be possible for travellers to accomplish all the necessary customs formalities on board.379
377
Spanish Report, IV.20, 22; Belgian Report, IV.20. https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼CELEX:31987D0594. 379 Belgian Report, II.9.3. 378
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There are several instruments like the Commission Communication to the Council and the European Parliament entitled “Towards integrated management of the external borders of the Member States of the European Union”,380 the Code of Practice on security in ports (Geneva, 2003),381 which is the product of the cooperation between the International Labour Organization (ILO) and the International Maritime Organization (IMO). Also the amendment of the International Convention for the Safety of Life at Sea, 1974 (SOLAS)382 created a new Chapter XI-2 on special measures to enhance maritime security, which is supplemented by the International Ship and Port Facility Security (ISPS) Code,383 which contains, inter alia, requirements that relate to the security of the ship and to the immediate ship/port interface. The overall security of port areas was left to further joint work between ILO and IMO.384 SOLAS was first adopted before the First World War in 1914, after the 1912 Titanic disaster resulted in the deaths of more than 1500 passengers. In its most recent form it came into force in 1980, and currently has 162 member states.385 This Convention, as amended, contains internationally agreed safety standards for passenger ships engaged on international voyages. Resolutions adopted by the IMO and other measures complement and interpret that Convention, such as the International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code) adopted by the International Maritime Organization (IMO) through Assembly Resolution A.741(18) of 4 November 1993.386 The main objective of the SOLAS Convention is to specify minimum standards for the construction, equipment and operation of ships, compatible with their safety. Flag States are responsible for ensuring that ships under their flag comply with its requirements.387 It is also worth mentioning here Regulation (EU) 2017/ 352 of the European Parliament and of the Council of 15 February 2017 establishing a framework for the provision of port services and common rules on the financial transparency of ports.388 It applies to the provision of several 380
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri¼LEGISSUM: l33205. 381 http://www.imo.org/en/OurWork/Security/Guide_to_Maritime_ Security/Documents/ILOIMOCodeOfPracticeEnglish.pdf. 382 http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/International-Convention-for-the-Safety-of-Life-at-Sea-(SOLAS) ,-1974.aspx. 383 http://www.imo.org/es/OurWork/Security/Instruments/Paginas/ ISPSCode.aspx. 384 Belgian Report, V.27. 385 USA Report, III. 386 Belgian Report, II.9.6. 387 USA Report, III. 388 https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼CELEX:32017R0352.
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categories of port services, either inside the port area or on the waterway access to the port.389 The Regulation applies to all maritime ports of the trans-European transport network, as listed in Annex II to Regulation (EU) No 1315/2013 (Article 1). In Poland, for example, there are no specific rules on ports regarding only cruises, but general rules on ports are applicable to cruise ships and refer to safety of navigation and environmental protection, maintenance of order, forms and registration of passenger traffic, supervision by its crew member of passengers embarking and disembarking, among others. These rules are issued by territorial authorities of maritime administration and vary from one port to the other.390 In Romania general rules on ports and on specific issues like the authorization of commercial operators for the activity of public transport of passengers and/or goods on inland waterways that apply to cruises.391 In Spain there are no specific rules on ports that are relevant concerning cruises, but there are references and sectorial regulation in different State and infra-State regulations. The Spanish Constitution provides for the distribution of competences concerning ports, granting the State the exclusive competence on ports of general interests and the Autonomous Communities that on safe havens, marines and those not carrying business activities. Main regulation regarding ports is in the Royal legislative Decree 2/2011, its annexes and some ministerial rank regulations.392 There is a dual regime depending on the public or private character of services. Ports of general interest are under the State’s competence and are managed by Port’s Authorities. They are public entities subject to private law.393
7.1.2 In the Americas Few jurisdictions have reported information on this topic. For example, Brazilian legal system contains specific rules on ports that are relevant regarding cruises. They cover several tourism issues, general principles on water transportation, customs services and taxes.394 In Argentina, in addition to the objectives of the International Code for the Protection of Vessels and Port Facilities (CPBIP OMI) and the SOLAS Convention of 1974, there are several rules on maritime and port security.395 389
Those categories are: bunkering, cargo-handling, mooring, passenger services, collection of ship-generated waste and cargo residues, pilotage and towage. 390 Polish Report, V.27. 391 Romanian National Report, III.15 and V.27. 392 See very detailed information in Spanish Report, V.27–30. 393 Ariza Herrerías (2014), pp. 15 and 57. 394 See for a detailed list, Brazilian Report, V.27. 395 See further information on this topic in Barone (2008).
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7.1.3 In Asia Also in this region, little information was reported. The Chinese national reporter informs that in China there are specific rules on construction and planning of cruise ports.396
7.2
Costs, Taxes and Rates Charged by Ports to Cruises
7.2.1 In Europe In Europe Regulations CEE 4.055/86, 4.056/86, 4.057/86 and 4.058/86, 22/12/86 and Regulation CEE 3.572/92, 7/12/92 held the principle of freedom to provide maritime transport services between Member States and third countries, modified by the Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.397 There is some case-law of the European Court of Justice reported. For example, in the case C-435/00398 the European Court of Justice held that “Article 1 of Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries precludes the application in a Member State of different harbour dues for domestic or intra-Community traffic and traffic between a Member State and a third country if that difference is not objectively justified”.399 Regarding national jurisdictions reported, in Poland, as in most countries, port fees are charged to cruises, consisting of “1) tonnage fee charged for entrance and departure of the ship into and from the port, transit through the port area and reception of wastes from ships in order to dispose or retrieve them; not exceeding 1.10 euro per 1 GT; 2) demurrage fee collected for the use of quays or piers, not exceeding 0.17 euro per 1 GT; 3) passenger fee collected for passengers embarking and disembarking, that may not be higher than 1.74 euro per passenger.400 Tonnage fee is collected by the port authority whereas demurrage and passenger fee is collected by the quay owner. The exact amount of fee is determined by its collector, within the limits prescribed above”. There are other fees and also tax relieves.401 In Romania, the
396
Chinese Report, V.27. http://eur-lex.europa.eu/legal-content/en/ALL/? uri¼CELEX:32003R0001 See on this topic Estepa Montero (2012), p. 138; and Ariza Herrerías (2014), p. 10. 398 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri¼ecli%3AECLI %3AEU%3AC%3A2002%3A661. 399 See further information in Belgian Report, V.29. 400 Ports and Maritime Piers Act of 20th December 1996 (consolidated text in Journal of Laws 2010 No 33, item 179). 401 See further information in Polish Report, V.29. 397
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system of taxes and rates that ports charge is available on line.402 In Spain applicable taxes to cruises are those regarding maritime signalling or navigation aid, ship tax, passenger tax, encompassed as deployment taxes, pilot service, mooring service and reception facilities for the waste generated by the ship. It is reported that cruises are subject to important allowances, considering the economic impact they have, not only in the port but also in the city where it is located.403 Ports usually charge several taxes and rates for the use of their space and waters and for different services provided by ports.404 There are cruises with particular characteristics that pose some problems regarding tax exemptions and have given rise to case-law from the EU Court of Justice. These are very short cruises, sometimes lasting just a few hours, which aim only at allowing passengers to shop on board and profit from tax exemptions. This practice may distort competition with mainland traders.405 For the purpose of the fiscal exemption regime of sales on board of the cruise vessel, the EU Court of Justice ruled that “the transit stops (intended for excursion and sightseeing) as opposed to the turnaround stops (intended for the embarkation of new passengers or for final disembarkation) in the port of a third (non EU) country were also qualified as ‘stops’”.406
7.2.2 In the Americas We will briefly analyse four American jurisdictions: Argentina, Brazil, Uruguay and the USA. In Argentina there are some general rules on ports that are applicable to cruises, like the Navigation Act N 20.094, the Ports Act N 20.093 and its Regulatory Decree 769/93, and also some specific rules like the Regulation on cruise ships entering the Buenos Aires Port, incorporated into Resolution 052/16 of the Ports General Administration. Each port issues its own Regulation.407 As for taxes and rates, in Argentina each port has its own system, but on the whole, they are all very expensive, much more that regarding cargo vessels.408 In Brazil it is Ordinance N 188/02 and Act N 10.233/01 that regulate taxes and rates charged by ports. Taxes are annually adjusted by the Maritime Authority, following the provisions set forth by the Ministry of Treasury in the Ordinance N 188/02. Rate of adjustment must be set forth in each In www.portofconstantza.com, at the “Port tariffs” section in the main menu, the website of the Constanta Maritime Ports Administration National Company. See Romanian National Report, V.29. 403 See very detailed information in Spanish Report, V.29–30. 404 Ariza Herrerías (2014), p. 15. 405 Belgian Report, II.9.11 and case-law referred there, and V.27. 406 Case C-58/04, see further information in Belgian Report, II.9.14. See also http://curia.europa.eu/juris/liste.jsf?language¼en&num¼C-58/04. 407 Argentine Report, V.27. 408 See more details in Argentine Report, V.29. 402
442
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concession agreement and adjustment of taxes must be based on the fluctuation of the Port’s operational costs or a price index.409 The tax rules are contained in the Normative Resolution N 137/98 of the Federal Revenue (concerning the tax and customs regimes that apply to cruise vessels). Uruguayan port authorities charge costs to each vessel that uses a port for docking, fresh water supply, electricity supply, among other services. The Prefectura Nacional Naval (Coast Guard) collects a rate for the use of the navigation aids on Uruguayan waters, called “rate for aid to maritime navigation”, created under Article 216 of Act No. 13.637.410 In Uruguay, logistic regarding scales of cruises in Uruguay include maritime agents, who coordinate with different actors that intervene in cruises scales in Uruguay, public authorities;411 terminals and port operators, airports and border points, pilots services, tugs and boats, customs brokers, maritime providers, cargo agents, touristic operators; Ministry of Tourism and Sports, Ministry of Transport and Public Works, and Ministry of Interior.412 It has been reported that U.S. lawmakers are concerned with the costs to the government for maintaining the ports used by cruises and to the Coast Guard, which is responsible for all prevention activities associated with the safe operation of vessels and facilities,413 and thus for search and rescue operations. However, the cruise line industry pays very little in income taxes.414
7.2.3 In Asia In Japan, the Yokohama Port, which is the main port for cruises, charges the port arrival fee for an amount of JPY2.70/GT per arrival in the case of a foreign vessel exceeding 700/GT. The wharfage is 10.05/GT per mooring of less than 12 hours. In case mooring exceeds 12 hours, cost is calculated at 6.7/GT for every extra 12-hours.415
7.3
Final Remarks
There are several legal instruments on port issues like customs, maritime and port security, a framework for the provision of port services and common rules on the financial transparency of ports and on costs, taxes and rates charged by ports to cruises. Some rules are of supranational character, others international and also some national rules. Therefore, 409
Brazilian Report, III.29. Uruguayan Report, V.29. 411 Sanidad Marítima y Fluvial, Prefecturas, ANP, Hidrografía, Migración, Aduanas, Política turística. 412 González (2013). 413 See United States Coast Guard, http://www.uscg.mil/. 414 See USA Report, I, regarding measures proposed to recover those costs and the lobby of the cruise industry against them. 415 Japanese Report, V.29. 410
some degree of harmonisation is achieved regarding certain topics, like safety standards, port services and financial transparency of ports.
8
Rules on Environmental Impact of Cruises
8.1
General Remarks
Nowadays environmental law is a specific and generally autonomous branch of law, with its own international and national sources of law. Therefore, it is not only impossible but also would exceed this general report to deal with this matter thoroughly here. This chapter will try to analyse the main Conventions in the area of maritime environmental protection and other relevant rules for cruises. Almost all of them are applicable to all kinds of ships, not only cruise ships, but are applicable to the latter.416 It is worth pointing out that the cruise industry is inextricably linked to the environment, since its aim is to bring people to interesting places in the world, by travelling via water. Cruise ships produce pollution from the day-to-day operations of the ship and its inhabitants and contribute a significant portion of pollution, especially in at-risk natural areas.417 The CLIA document titled “Waste management best practices and procedures” describes waste management practices and procedures that CLIA Members agree shall be incorporated into their respective Safety Management Systems (SMS). The development of industry practices and procedures is based upon the fundamental principles outlined in CLIA’s Waste Management policy. There are many other waste management practices and procedures not described in the referred document; therefore, CLIA Members have agreed to use best waste management practices and to comply with all local, state, national, and flag State operational waste management laws and requirements.418 The standards of MARPOL (the International Convention for the Prevention of Pollution from Ships) have in turn been adopted by most flag and port States and subsequently enacted into national legislation and regulation. Additional national and local legislation have been adopted by many port States. The cruise industry demonstrates its commitment to protecting the environment through the use of a broad spectrum of waste management technologies and procedures employed on its vessels.419 416
See German Report, VI.32. USA Report, V. 418 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/environmental-protection/waste-management. 419 https://www.cruising.org/about-the-industry/regulatory/industrypolicies/environmental-protection/waste-management. 417
Legal Aspects of Cruises
8.2
Regional and National Regulations
8.2.1 International Conventions There are some important international instruments on environmental matters, like the IMO International Convention for the Control and Management of Ships’ Ballast Water and Sediments (BWM),420 adopted 13 February 2004 and entered into force 8 September 2017, and the IMO International Convention for the Prevention of Pollution from Ships (MARPOL), adopted in 1973 (Convention), 1978 (1978 Protocol), 1997 (Protocol—Annex VI); it entered into force on October 2, 1983 (Annexes I and II).421 The International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) was established in 1973 to prevent oil spillage from ships. It afterwards covered also pollution from noxious liquid substances in bulk, harmful substances carried by sea in packaged form, sewage, garbage, (1983–1988) and air pollution (in 2005). A section on limitation of greenhouse gas emissions was added in 2011.422 MARPOL is also working on the problem of the marine industry’s relying on heavy fuel oil and passing some regulation on the matter.423 The MARPOL’s regulation of shipping in a number of areas, defined in its Annexes I, II, and V, that are in need of extra protection from environmental damage, is particularly relevant for cruises. They are designated as either “Special Areas” and given appropriate regulatory protection, or “Particularly Sensitive Sea Areas” (PSSAs).424 420
http://www.imo.org/en/About/Conventions/ListOfConventions/ Pages/International-Convention-for-the-Control-and-Management-ofShips’-Ballast-Water-and-Sediments-(BWM).aspx. 421 http://www.imo.org/en/about/conventions/listofconventions/pages/ international-convention-for-the-prevention-of-pollution-from-ships-( marpol).aspx. 422 As explained with detail in the USA Report, II: “MARPOL Convention, annexes I-VI. The relevant Annexes are: Annex I Regulations for the Prevention of Pollution by Oil (entered into force 2 October 1983); Annex II Regulations for the Control of Pollution by Noxious Liquid Substances in Bulk (entered into force 2 October 1983): “In any case, no discharge of residues containing noxious substances is permitted within 12 miles of the nearest land”; Annex IV Prevention of Pollution by Sewage from Ships (entered into force 27 September 2003): “[S]ewage which is not comminuted or disinfected has to be discharged at a distance of more than 12 nautical miles from the nearest land”; Annex V Prevention of Pollution by Garbage from Ships (entered into force 31 December 1988): “the most important feature of the Annex is the complete ban imposed on the disposal into the sea of all forms of plastics”; Annex VI Prevention of Air Pollution from Ships (entered into force 19 May 2005): “Sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances; designated emission control areas set more stringent standards for SOx, NOx and particulate matter. A chapter adopted in 2011 covers mandatory technical and operational energy efficiency measures aimed at reducing greenhouse gas emissions from ships”.” 423 See further information in the USA Report, III. 424 See further information in the USA Report, III.
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8.2.2 European Rules In Europe, the Directive 2000/59/EC addressed Port Reception Facilities (PRF) for ship-generated waste. The main objective of the Directive is to eliminate uncontrolled dumping from vessels, whatever their activities. The dumping must be done in the facilities designed for that.425 Its main precepts are the creation of an adequate port reception facility for garbage from ships that call at the port, the development of a waste removal plan, a timely declaration by the ship of the quantity of ship’s garbage to be discharged, the contribution by the ship in the cost of reception, removal, processing, and exchange of information on discharge for the purpose of enforcement.426 Regulation (EU) No 1143/2014 of the European Parliament and of the Council of 23 October 2014 on the prevention and management of the introduction and spread of invasive alien species427 recognises the BWM Convention as one of the possible management measures for invasive species of concern.428 In case C-537/11 the European Court of Justice ruled that a cruise ship falls within the scope of Article 4a(4) of Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels with regard to the criterion of ‘regular services’, as laid down in its art. 2 (3g), if it operates cruises, with or without intermediate calls, finishing in the port of departure or another port, provided that those cruises are organised at a particular frequency, on specific dates and, in principle, at specified departure and arrival times, with interested persons being able to choose freely between the various cruises offered, which is a matter for the referring court to ascertain.429 In some countries, like Romania,430 Poland,431 and Germany432 there are national and international rules on environmental protection that are applicable to cruises, though not specific on cruises. In Poland there is “the Prevention of Pollution from Ships Act of 1995433 which implements into the Polish law the MARPOL Convention (with the London Protocol), the HELCOM Convention, the Dumping Convention 1972 (Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter) and the AFS Convention (International Convention on the Control of Harmful Anti-fouling Systems on Ship). It also 425
Ariza Herrerías (2014), p. 19 y ss. Belgian Report, VI.31. 427 https://www.eea.europa.eu/policy-documents/ec-2014-regulationeu-no. 428 See further information in Belgian Report, VI.31. 429 Belgian Report, II.9.10 and https://eur-lex.europa.eu/legal-content/ EN/TXT/?uri¼CELEX%3A62011CJ0537. 430 Romanian National Report, VI.31. 431 Polish Report, VI.31. 432 German Report, VI.31–32. 433 Consolidated text in Journal of Laws 2015 item 434. 426
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meets the Vienna Convention on the protection of the Ozone Layer, to the extent applicable to ships (in respect to ships implemented into the Polish law by Article 20 and 39 of the Act on Substances Depleting the Ozone Layer and on Certain Fluorinated Greenhouse Gases of 2015434)”.435 In Germany, “on the basis of § 15 of the Law relating to the Tasks of the Federal Government in the Area of Maritime Traffic (Seeaufgabengesetz, SeeAufG), the Federal Ministry for Transport and Digital Infrastructure had issued the Environmental Maritime Behaviour Regulation (Seeumweltverhaltensverordnung, SeeUmwVerhV) on the basis of which offences committed against the MARPOL Convention, against other international environmental agreements and other behavioural provisions for the protection of the environment in maritime traffic can be punished. The Federal Maritime and Hydrographic Agency (Bundesanstalt für Seeschifffahrt und Hydrographie, BSH) is the authority responsible for prosecuting the vast majority of offences committed pursuant to the SeeUmwVerhV”.436 It must be noticed, as pointed out by the German reporter,437 that “the SeeUmwVerhV is no implementation of the MARPOL Convention to German law, but gives power to the BSH to enforce the Convention. The Convention is applicable in Germany as such, as it was ratified by the German legislator in 1996 including all the six annexes.438 The SeeUmwVerhV empowers the BSH also to enforce the Convention on the Control of Harmful Anti-Fouling Systems on ships (AFS Convention)439 and the Convention on the Control and Treatment of Ballast Water”.440 In Spain, Act 27/1992441 refers to the right to a balanced, sustainable and healthy environment and to enjoy natural resources and the environment and landscape (Article 28).442 Act 21/2007443 provides that the respect to environmental values must be guaranteed, and forbids any kind of dumping or pollutant emission, whatever its origin, within the port’s public domain. If it occurs, damages must be compensated under an objective liability regime.444
434
Consolidated text in Journal of Laws 2015 item 881. Polish Report, VI.31. 436 German Report, VI.31. 437 German Report, VI.32. 438 Bundesgesetzblatt (Federal Official Journal) 1996 II, p. 399. 439 Bundesgesetzblatt 2008 II, p. 520. 440 Bundesgesetzblatt 2013 II, p. 42. 441 Ley 27/1992, 24/11/92, de Puertos del Estado y de la Marina Mercante. 442 Ariza Herrerías (2014), pp. 20–21. 443 Ley 21/2007, de 18 de diciembre, de Régimen Jurídico y Económico de los puertos de Andalucía, Título V, “Puertos y medio ambiente”. 444 Ariza Herrerías (2014), p. 22. 435
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8.2.3 South American Rules In some countries, like Argentina,445 there are national rules on environmental impact of vessels, which are applicable to cruise ships. Similarly, though Brazil has no specific rules on environmental impact of cruises, there are several national rules and international conventions that are applicable to environmental damages caused by cruises. There are national rules on prevention, control and inspection, control and inspection of pollution caused by oil and its by-products and other noxious or dangerous substances in waters under Brazilian jurisdiction (Act N 9.966/2000), on criminal and administrative penalties for environmental damage (Act N 9.605/1998), administrative penalties for acts and activities harmful to the environment (Decree N 6.514/2008), the procedure for notifying the ANP of oil pollution incidents (ANP Resolution N 44/2009), among others.446 In the Uruguayan legal system there are some general rules that are applicable to the environmental impact of the operation of cruise ships, of national, bi-national and international origin. They refer mainly to the prevention and surveillance regime for possible contamination of the waters of national jurisdiction or other elements of that medium, the repressive and preventive regime of pollution, the prevention of polluting actions in the Río de la Plata, among others. Several international instruments are applicable in Uruguay regarding this topic, like the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78), ratified by Act N 14.885; the International Convention on the Control of Harmful Anti-fouling Systems on Ships (AFS) 2001, ratified by Act N 18.971; the International Convention on Civil Liability for Oil Pollution Damage (CLC) 1969, ratified by Act N 16.820; the 1992 Protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND 1992), ratified by Act N 16.820; and the United Nations Convention on the Law of the Sea (UNCLOS), ratified by Act N 16.287.447 8.2.4 Antarctic Continent Since the late fifties of the twentieth century tourists began visiting the Antarctic continent, mainly by ship but also by airplane flying over the region throwing correspondence and other supplies from the air. During the past 50 years the cruise tourism has increased significantly, with vessels that carry from 200 to 2500 passengers plus 1200 crew members, like the Golden Princess. This phenomenon obviously puts environmental security at risk. In the XXXth Advisory Meeting of the Antarctic Treaty a Resolution was approved recommending the parties to discourage or prohibit 445
See the list in Argentine Report, V.31. See more details in Brazilian Report, III.31. 447 See more detailed information in the Uruguayan Report, VI.31–32. 446
Legal Aspects of Cruises
disembarkment of passengers from vessels carrying more than 500 passengers in the Area of the Antarctic Treaty. Moreover, there were some proposals to reduce or block touristic activities or others that may affect the environment.448
8.2.5 Federal and State Legislation in the USA Both the U.S. Environmental Protection Agency and the U.S. Coast Guard can set regulations for cruise ship pollution under different legislative acts. However, national environmental protections alone would not be sufficient because of the limited jurisdictional reach of any national act. Therefore, Congress has incorporated international standards set by the International Maritime Organization into U.S. law. The most relevant instruments reported are the Marine Protection, Research, and Sanctuaries Act (MPRSA, also known as the Ocean Dumping Act),449 the Clean Water Act (CWA) and the Clean Air Act (CAA).450 The Clean Water Act states, under the title “Restoration and maintenance of chemical, physical and biological integrity of the Nation’s waters; national goals for achievement of objective”, among other goals, that “it is the national goal that the discharge of pollutants into the navigable waters be eliminated by 1985”.451 It is “the primary Federal statute regulating the protection of the nation’s water. The CWA aims to prevent, reduce, and eliminate pollution in the nation’s water in order to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters”, as described in CWA section 101(a). A stated goal of the CWA is to eliminate discharge of pollutants into navigable waters, as that term is defined in CWA § 502(7) and corresponding case law”.452 As reported by the national experts, “discharges are only allowed under the National Pollution Discharge Elimination Program (NPDES), which creates a system for state and federal environmental agencies to issue discharge permits”.453 Moreover, under the CWA, “the administrator of the EPA “shall promulgate Federal standards of performance for marine sanitation devices (hereafter in this section referred to as “standards”) which shall be designed to prevent the discharge of untreated or inadequately treated sewage into or upon the navigable waters from new vessels and existing vessels, except vessels not equipped with installed toilet
448
Aramburu (2008), p. 3. Marine Protection, Research, and Sanctuaries Act (16 U.S.C. § 1431 and 33 U.S.C. § 1401). 450 See further information in the USA Report, V. 451 Clean Water Act. §101, 33 U.S.C. § 1251 (a)(1). See further information at: https://www.law.cornell.edu/uscode/text/33/1251. 452 See further information in https://www.epa.gov/enforcement/cleanwater-act-cwa-and-federal-facilities and in the USA Report, V. 453 See further information in the USA Report, V. 449
445
facilities.”454 However, the Act only applies to “vessels owned and operated by the United States.”455 Regarding U.S. national legislation, national reporters consider that it was “insufficient to control maritime pollution. The Act to Prevent Pollution from Ships456 implements MARPOL and its annexes, and applies to all U.S. flagged ships and all ships in navigable waters of the United States or at port in the U.S. Recent efforts are underway in the cruising industry to meet the MARPOL targets of reducing sulfur in fuel from the current 3.5 percent to 0.5 percent by 2020,457 other new IMO regulations are also responsible for developments in wastewater discharge levels of nitrogen and phosphorous,458 and the industry is also cognizant of the Polar Code promulgated by the IMO, but not especially enthusiastic about its prospects for a good result.459”460 Federal Legislation It has been reported that: “The U.S. Environmental Protection Agency estimates that a single 3,000-person cruise ship produces 150,000 gallons of sewage per week, and that the cruise ship industry can produce more than one billion gallons of sewage per year.461 Untreated human waste can cause a host of environmental problems, such as nitrogen and phosphorus in sewage, causing algae blooms, which can deplete oxygen and suffocate sea-life; human waste transmits harmful bacteria and viruses, including Hepatitis A, Norovirus, and E. Coli,462 and human pathogens emitted near coastlines can infect swimmers and bathers, or infect shellfish and later be consumed by humans”.463 Water Pollution There are some differences in the regulation of graywater, blackwater and ballast water. Environmental Protection Agency. Clean Water Act, CWA § 312 33 U.S.C. 1332 (b)(1), https://www3.epa.gov/npdes/pubs/cwatxt. txt. 455 USA Report, V. 456 33 U.S.C. §§1905–1915. 457 See Mia Bennett, Cruising’s Environmental Impact: “The industry strives to go green and atone for past missteps,” Jan.-Feb. 2017, https:// maritime-executive.com/magazine/cruisings-environmental-impact#gs. eOzkd98 [hereinafter Mar-Ex]. 458 Id. See IMO Marine Environment Protection Committee (MEPC) Resolution 227(64). 459 Mar-Ex, supra note 160. 460 USA Report, V. 461 Friends of the Earth, 2016 Cruise Ship Report Card, https:// 1bps6437gg8c169i0y1drtgz-wpengine.netdna-ssl.com/wp-content/ uploads/wpallimport/files/archive/Cruise_Report_2016.pdf. 462 Centers for Disease Control and Prevention, National Center for Environmental Health Vessel Sanitation Program, Health Practices on Cruise Ships: Training for Employees, Transcript. https://www.cdc.gov/ nceh/vsp/training/videos/transcripts/water.pdf. 463 USA Report, V. 454
446
Graywater Regulation For the purpose of the 2008 Vessel General Permit (VGP), “graywater” means “gallery, bath and shower waters, as well as wastewater from lavatory sinks, laundry, and water fountains”.464 Pursuant to the U.S. Environmental Protection Agency (EPA) Regulation, “ordinary graywater discharges currently are exempt from the CWA’s NPDES465 permit requirement. Environmental groups and other interested parties, however, are pushing EPA to eliminate or modify the exemption” (40 C.F.R. § 122.3(a). However, as reported by the EPA, “in December 2003, the long-standing exclusion of discharges incidental to the normal operation of vessels from the NPDES program became the subject of a lawsuit in the U.S. District Court for the Northern District of California. On March 30, 2005, the same court determined that the exclusion exceeded the Agency’s authority under the CWA, and issued a court order vacating that exclusion. As a result, discharges incidental to the normal operation of a vessel, including graywater, became subject to CWA section 301’s prohibition against discharging without a NPDES permit, unless covered under an NPDES permit”.466 33 U.S.C. § 1362(6) defines the term “pollutant” very broadly, including “dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water”. It adds: “This term does not mean (A) ‘sewage from vessels or a discharge incidental to the normal operation of a vessel of the Armed Forces’ within the meaning of section 1322 of this title; or (B) water, gas, or other material which is injected into a well to facilitate production of oil or gas, or water derived in association with oil or gas production and disposed of in a well, if the well used either to facilitate production or for disposal purposes is approved by authority of the State in which the well is located, and if such State determines that such injection or disposal will not result in the degradation of ground or surface water resources”.467 Nevertheless, it has been stated that “because graywater is not sewage, it is probably a “pollutant” and vessels clearly are “point sources.” Thus, graywater discharges into navigable waters (within the three-mile limit of the territorial seas) arguably fall within the scope of CWA § 301 (a) and thereby require an NPDES permit”. “EPA, however, has excluded, by regulation, the wastewater stream ordinarily referred to as
464
https://www3.epa.gov/npdes/pubs/vgp_graywater.pdf, p. 4. CWA stands for Clean Water Act, and NPDES stands for National Pollutant Discharge Elimination System. 466 https://www3.epa.gov/npdes/pubs/vgp_graywater.pdf, p. 5. 467 https://www.law.cornell.edu/uscode/text/33/1362. 465
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‘graywater’ from the NPDES permitting requirements of the CWA”.468 It is worth mentioning that the London Dumping Convention,469 which regulates ocean dumping of “wastes or other matter”, was implemented in the United States through the Ocean Dumping470 Act, which generally applies to waters beyond the three-mile limit of the territorial seas and prohibits unpermitted disposal at sea.471 However, “unlike the London Dumping Convention, the Ocean Dumping Act does not appear to exclude graywater”. (. . .) “it remains unclear whether graywater discharges are exempted from the Ocean Dumping Act, and there is no case law or regulation addressing the applicability of the Ocean Dumping Act or the London Dumping Convention to graywater discharges”. (. . .).472 Blackwater Regulation Blackwater is “water that contains animal, human, or food waste”.473 It is “any waste from toilets or urinals. It is defined either as treated or untreated (raw), and contains diseasecausing bacteria and viruses that can result in human illness from direct contact, or by consumption of affected fish and shellfish. It contributes to nutrient build-up in ecosystems that result in changes to habitat and the proliferation of nuisance pest species”. The problem with blackwater (sewage) discharged from vessels is that it is more concentrated than 468
Courtney et al. (2004), p. 51. See text of the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter (1972) and further information in http://www.imo.org/en/OurWork/Environment/LCLP/Pages/default. aspx. 470 “Dumping” is defined in 33 U.S.C. § 1402 (f) as “a disposition of material: Provided, That it does not mean a disposition of any effluent from any outfall structure to the extent that such disposition is regulated under the provisions of the Federal Water Pollution Control Act, as amended [33 U.S.C. 1251 et seq.], under the provisions of section 407 of this title, or under the provisions of the Atomic Energy Act of 1954, as amended [42 U.S.C. 2011 et seq.], nor does it mean a routine discharge of effluent incidental to the propulsion of, or operation of motor-driven equipment on, vessels: Provided, further, That it does not mean the construction of any fixed structure or artificial island nor the intentional placement of any device in ocean waters or on or in the submerged land beneath such waters, for a purpose other than disposal, when such construction or such placement is otherwise regulated by Federal or State law or occurs pursuant to an authorized Federal or State program: And provided further, That it does not include the deposit of oyster shells, or other materials when such deposit is made for the purpose of developing, maintaining, or harvesting fisheries resources and is otherwise regulated by Federal or State law or occurs pursuant to an authorized Federal or State program”. 471 33 U.S.C. § 1402(b), https://www.law.cornell.edu/uscode/text/33/ 1402. 472 Courtney et al. (2004), p. 52. 473 https://ofmpub.epa.gov/sor_internet/registry/termreg/ searchandretrieve/termsandacronyms/search.do? matchCriteria¼Contains&checkedTerm¼on&checkedAcronym¼on& search¼Search&term¼blackwater. 469
Legal Aspects of Cruises
domestic blackwater and therefore, though discharged in relatively small amounts, it is an important source of pollution that can and should be avoided.474 Annex IV to MARPOL 73/78 exclusively addresses sewage.475 It is generally considered that, “on the high seas, the oceans are capable of assimilating and dealing with raw sewage through natural bacterial action and, therefore, the regulations in Annex IV prohibit ships from discharging sewage within four miles of the nearest land, unless they have in operation an approved treatment plant”. Nowadays, “. . .all cruise ships and large passenger ships already have sewage treatment plants on board”.476 This Annex IV has about 136 State Parties,477 though the USA has not ratified it yet. Ballast Water Regulation Ballast water “is used to stabilise vessels and maintain their structural integrity. Typically ballast water is pumped in to special tanks while cargo is being unloaded, and discharged while cargo is being taken on board. Safety, weather conditions, the ship’s load, and the route taken are the primary factors that determine how much ballast water is taken on board a vessel for a particular voyage. More ballast is necessary for ships to sit lower in the water during stormy weather to avoid bottom impact from waves. Ballast water is also adjusted so as to balance the ship as it consumes fuel during a long voyage”.478 It must be treated because “taken on in one ecological zone and released into another can introduce invasive and nuisance aquatic species that may have detrimental impacts on the biodiversity, economy or human health of the receiving community and may in time become a serious threat to the environment”.479 In September 8, 2017, the IMO Ballast Water Management Convention (BWMC) entered in full force for all participating nations (73 contracting States), though the USA has not ratified it.480 The situation in the USA has been described as follows: “The regulatory standards applicable to ballast water 474
https://www.epa.sa.gov.au/environmental_info/water_quality/ programs/grey_and_black_water_discharge/black_water. 475 http://pmg-assets.s3-website-eu-west-1.amazonaws.com/ 140729annexiv.pdf. 476 http://pmg-assets.s3-website-eu-west-1.amazonaws.com/ 140729annexiv.pdf, Regulation 8. Courtney et al. (2004), pp. 53–54. 477 See complete list and dates in https://www.ecolex.org/details/interna tional-convention-for-the-prevention-of-pollution-from-ships-annex-ivsewage-tre-000988/participants. 478 http://www.damengreen.com/en/bwt? gclid¼CjwKCAjwpIjZBRBsEiwA0TN1r5NO2z91W8uz2ByeJUs6U4 CgJZvlmCZy9_HhXprNEDkQ6N-q7vl0HBoC__8QAvD_BwE. 479 http://www.damengreen.com/en/bwt? gclid¼CjwKCAjwpIjZBRBsEiwA0TN1r5NO2z91W8uz2ByeJUs6U4 CgJZvlmCZy9_HhXprNEDkQ6N-q7vl0HBoC__8QAvD_BwE. 480 http://www.imo.org/en/About/Conventions/StatusOfConventions/ Pages/Default.aspx.
447
discharges primarily derive from Coast Guard programs under the Nonindigenous Aquatic Nuisance Prevention and Control Act (NANPCA) of 1990, 16 U.S.C. §§ 4701 et seq. and the National Invasive Species Act (NISA) of 1996, Pub. L. No. 104-332, 1120 Stat. 4073. Additionally, certain international guidelines exist. (Many states have also initiated regulatory programs that are not described in this article due to their wide variation.) These regulatory programs are in a state of flux as old standards and guidelines are reviewed and new ones are proposed”.481 Air Pollution USA national reporters inform that “Cruise ship exhaust contains greenhouse gasses, sulfur oxides, nitrogen oxides, and particulate matter. According to a 2017 undercover study, a single cruise ship produces more ultra-fine particulate matter (PM) per day than one million cars.482 Researchers recorded PM concentrations as high as 226,000 particles per cubic centimeter near the exhaust stacks on deck, and concentrations of 84,000 particles per square centimeter downwind from the exhaust.483 Cruise vacationers are exposed to air quality worse than many major metropolitan areas; the research team recorded PM concentrations of 38,400 in central London’s congested Piccadilly Circus484”.485 State Legislation: Alaska We will take the case of Alaska, as an example, since it exceeds the length of this report to analyse all the States of the Union, and because there is great concern in Alaska because of the fact that cruises are one of the largest threats to its environment. The State of Alaska takes great care to protect its uniquely fragile environment from the effects of its status as an immensely popular cruise destination, so its situation provides a good case in point. In 2017, the state expected more than one million visitors via visiting cruise ships.486 The government is caught between “protecting the environment or protecting the economy”, since “many of the residents and business owners in Alaskan port cities depend on the money spent by cruise ship passengers”. Marrin states 481
Courtney et al. (2004), p. 54. Chloe Farand, Air quality on cruise ship deck ‘worse than world’s most polluted cities,’ investigation finds. Independent, July 3, 2017, http://www.independent.co.uk/news/world/pollution-cruise-ships-pooceana-higher-piccadilly-circus-channel-4-dispatches-a7821911.html. 483 Id. 484 Id. 485 See further information in the USA Report, V. 486 See, e.g., AP News, Alaska pollution regulators gear up for cruise ship season, May 3, 2017, https://www.apnews.com/ d26c8908b52b41b1bbd579bd28427f85/Alaska-pollution-regulatorsgear-up-for-cruise-ship-season USA National Report. 482
448
that so far, “there has been a mixed response from both the judiciary and the legislature”487 It was stated that “In response to significant controversy concerning cruise ship discharges in southeast Alaska, Congress passed legislation in December 2000 that regulates the discharge of blackwater and graywater from cruise ships capable of carrying more than five hundred passengers operating in the waters of the Alexander Archipelago and “navigable waters” within the State of Alaska. Pub. L. No. 106-554, 114 Stat. 2763”. The federal legislation arose out of a number concerns, including allegations that beyond three miles from shore, some cruise ships were discharging untreated blackwater and graywater into areas, known as “doughnut holes,” surrounded by Alaskan waters. The legislation also authorized EPA and the Coast Guard to develop regulations. The Coast Guard promulgated regulations on July 26, 2001, largely recasting the requirements established in Pub. L. No. 106-554* 66 Fed. Reg. 38,926, 33 C.F.R. §§ 159.300-321.488 Alaska is served by EPA’s Region 10 office.489 The State of Alaska enacted its own statute and regulations that are similar to the requirements contained in the federal legislation and implementing regulations.490 The joint federal/state regulatory program in Alaska is viewed as a success.491 The Commercial Passenger Vessel Environmental Compliance (Cruise Ship) Program was established in July 2001.492 The Alaska Department of Environmental Conservation (ADEC) worked with a facilitator and a Negotiated Regulations Com mittee to draft regulations to accompany this law. The regulations that were drafted by the Committee became effective November 15, 2002.493 On July 8, 2004 the state law AS 46.03.460–46.06.490 was changed based on Chapter 153, SLA 04 which was passed by the Alaska Legislature and became final and effective May 18, 2006. Changes were made in 2006 to state laws governing the operation and regulation of large cruise ships while those ships are in Alaska Marine waters. These changes passed with voter approval under Ballot Measure 2. In 2013 state law was changed regarding large cruise ship permitting and the small cruise ship BMPs. Regulation changes to match the statute changes were completed. The intent of HB 80 was to make small cruise ship Best Management Practices (BMP)
487
Marrin (2002), p. 325. Courtney et al. (2004), p. 54. 489 See further information in https://www.epa.gov/aboutepa/eparegion-10-pacific-northwest. 490 ALASKA STAT. § 46.03.460–490 (2001); Alaska Admin. Code tit. 18, ch. 69 (2002). 491 Courtney et al. (2004), p. 54. 492 by AS 46.03.460—AS 46.03.490. 493 https://dec.alaska.gov/water/cruise_ships/Law_and_Regs/index. htm. 488
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permanent, however the BMP law expired at the end of 2015. SB 3 in 2017 reintroduced the BMP program.494 As explained by the USA national reporters, under the Commercial Passenger Vessel Environmental Compliance Program,495 ships must be registered and agree to follow discharge regulations.496 “The law ‘bars discharge of treated sewage, greywater, or other waste water without a permit’ and requires the shipper to comply with very strict standards maintained to prevent the vessel traffic from unduly harming the local sea”.497 It is well known that in addition to the problem of congestion and noise pollution affecting any place that is frequented by cruise ships, the problem of greywater is a main one. The Consolidated Appropriations Act of 2001,498 is a federal legislation regulating chemicals and general waste water generated by cruise ships, which reflects “a compromise reached by diverse interests including certain Alaska economic interests, the Clinton Administration, the cruise ship industry and environmental groups”. The legislation also requires inspections by the Coast Guard to ensure full compliance by cruise ships. Since 2001, “cruise ships that operate within the borders of Alaska must submit to Alaska’s Department of Environmental Conservation solid waste plans”.499 The problem is how to reach balanced solutions that contemplate the protection of the environment and the economy, since it has been reported that “the cruise ship economy is vital to Alaska’s very economic existence”. Nevertheless, “citizens have started resenting the large crowds and pollution –noise, air and water- that accompanies the presence of large cruise ships”. Anyhow, “Alaska is still very economically dependent upon the money brought into the state by the passengers of the cruise ships, and do not seek to ban cruise ships, just merely regulate them, keeping the balance between their invaluable natural resources and the ability to profit from them”.500
494 https://dec.alaska.gov/water/cruise_ships/Law_and_Regs/index. htm. 495 Alaska Commercial Passenger Vessel Environmental Compliance Program, http://www.legis.state.ak.us/basis/statutes.asp#46.03.462. 496 Id. Para. 2. 497 See, e.g., Alaska Dept of Environmental Conservation [DEC], Division of Water, Frequently Asked Questions—Cruise Ship Wastewater Discharge Regulation and HB 80, Dec. 5, 2017, http://dec.alaska.gov/ water/cruise_ships/faq.htm. See also Graywater Regulations 33-CFR Part 150, Marine Exchange of Alaska, pt. 159.3, et seq., sec. 1(a)(4), Pub. L. 106-554, 114 Stat. 2763; https://www.gpo.gov/fdsys/pkg/CFR2017-title33-vol2/xml/CFR-2017-title33-vol2-part159.xml. See further information in the USA national report. 498 Pub. L. No. 106-554, 114 Stat. 2763 (2000) (enacted). 499 Marrin (2002), pp. 329–330, where case law is mentioned. 500 Marrin (2002), pp. 335–337.
Legal Aspects of Cruises
8.3
International Convention on Civil Liability for Oil Pollution Damage, Brussels, 1969
This Convention501 states in Article I that State Parties “may take such measures on the high seas as may be necessary to prevent, mitigate or eliminate grave and imminent danger to their coastline or related interests from pollution or threat of pollution of the sea by oil, following upon a maritime casualty or acts related to such a casualty, which may reasonably be expected to result in major harmful consequences”. It rules the measures to be taken by coastal States in accordance with Article I (Article III) and mandates that those measures shall be proportionate to the damage actual or threatened to it (Article V). It includes a compatibility clause stating that “Except as specifically provided, nothing in the present Convention shall prejudice any otherwise applicable right, duty, privilege or immunity or deprive any of the Parties or any interested physical or corporate person of any remedy otherwise applicable” (Article VII). There may be cases where the provisions in the Convention clash with the principle of full compensation of the damage (Restitutio in Integrum) incorporated in many national legal systems, like those of Brazil.502 The solution to this conflict depends on the hierarchy of the different sources of law in each country. For example, in Brazil, the Convention has the status of a common or ordinary Law. Therefore, the Brazilian Constitution and subsequent Federal Laws on the same subject will prevail over the Convention in the event of a conflict. As a consequence, the convention has not been applied by Brazilian courts.503
8.4
International Convention for the Prevention of Pollution from Ships, as Modified by the Protocol of 1978 (MARPOL 73/78)
This is the main international Convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. It was adopted on 2 November 1973 at the International Maritime Organization (IMO). As explained by the IMO, the Protocol of 1978 “was adopted in response to a spate of tanker accidents in 501
http://www.admiraltylawguide.com/conven/civilpol1969.html; https://treaties.un.org/doc/publication/unts/volume%20970/volume970-i-14049-english.pdf. 502 The Brazilian Constitution and Federal laws incorporate the principle of full compensation of the damage. In addition, the principle of full reparation of environmental damage is provided for, among others, by Law N 6.938 regarding the Brazilian National Policy on the Environment, on article 4th, VII, and states that any party held liable for the incident must be held liable for the totality of damage incurred. See Brazilian National Report, VI.33. 503 See Brazilian National Report, VI.33.
449
1976–1977. As the 1973 MARPOL Convention had not yet entered into force, the 1978 MARPOL Protocol absorbed the parent Convention. The combined instrument entered into force on 2 October 1983. In 1997, a Protocol was adopted to amend the Convention and a new Annex VI was added which entered into force on 19 May 2005. MARPOL has been updated by amendments through the years”.504 The Convention includes regulations aimed at preventing and minimizing pollution from ships—both accidental pollution and that from routine operations—and currently includes six technical Annexes: Annex I Regulations for the Prevention of Pollution by Oil (entered into force 2 October 1983), Annex II Regulations for the Control of Pollution by Noxious Liquid Substances in Bulk (entered into force 2 October 1983), Annex III Prevention of Pollution by Harmful Substances Carried by Sea in Packaged Form (entered into force 1 July 1992), Annex IV Prevention of Pollution by Sewage from Ships (entered into force 27 September 2003), Annex V Prevention of Pollution by Garbage from Ships (entered into force 31 December 1988), and Annex VI Prevention of Air Pollution from Ships (entered into force 19 May 2005). Special Areas with strict controls on operational discharges are included in most Annexes.505
8.5
Problems Regarding the Implementation of the Environmental Protection Rules
Cruises have great environmental impact, as explained before, since they release a significant amount of polluting gases, wastewater and other waste generated by the ship.506 Some problems are reported regarding the implementation of the environmental protection rules, like in Poland, the collision between the Prevention of Pollution from Ships Act and the Law on Environmental Protection. “Polish administrative courts have ruled that ships are obliged to pay for the emission permits as prescribed by the Law on Environmental Protection,507 notwithstanding the fact that Article 36a p. 9 of the Prevention of Pollution from Ships Act puts a fine of up to 50,000 SDR for those who use the ship which introduces into the air substances depleting the ozone layer, NOx508 in excess of the limits as well as
504
http://www.imo.org/en/about/conventions/listofconventions/pages/ international-convention-for-the-prevention-of-pollution-from-ships-( marpol).aspx. 505 http://www.imo.org/en/about/conventions/listofconventions/pages/ international-convention-for-the-prevention-of-pollution-from-ships-( marpol).aspx. 506 See further information in Spanish Report, VI.33. 507 See rulings of the Supreme Administrative Court of 25 January 2007 (II OSK 151/06), Woivodship, Administrative Court in Gdańsk of 21 June 2007 (II SA/Gd 257/07). 508 “NOx” stands for nitrogen oxides.
450
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fluorinated greenhouse gases”. The national reporter adds that: “According to the judgment of the Administrative Supreme Court, the Law on Environmental Protection is dedicated to the whole Polish territory, including internal waters and the Polish territorial sea, as well as the airspace above them. That is the basic reason why, ships operators are obligated to cover the cost of the emission permits as a result of “using the environment” by the emission of gas and dust”.509
8.6
Final Remarks
Cruise industry is particularly dangerous for the environment, since it contributes a significant portion of pollution, especially in at-risk natural areas. To eliminate or at least diminish such dangers, the cruise industry demonstrates—in general— its commitment to protecting the environment through the use of a broad spectrum of waste management technologies and procedures employed on its vessels. Notwithstanding, there is probably still room to improve rules, measures and consequently, results in the protection of the environment and technology will surely help to achieve that target.
9
Jurisdiction and Arbitration
9.1
Specific and General Provisions on Jurisdiction Applicable to Cruises
9.1.1
At the International Level: The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea Jurisdiction Article 17 of the Athens Convention gives the claimant the possibility to choose among several reasonable and concurrent jurisdictions that enable access to justice for both parties. It states that: “1. An action arising under this Convention shall, at the option of the claimant, be brought before one of the courts listed below, provided that the court is located in a State Party to this Convention: (a) The court of the place of permanent residence or principal place of business of the defendant, or (b) The court of the place of departure or that of the destination according to the contract of carriage, or (c) A court of the State of the domicile or permanent residence of the claimant, if the defendant has a place of business and is subject to jurisdiction in that State, or (d) A court of the State where the contract of carriage was made, if the defendant has a place of business and is subject to jurisdiction in that State. 2. After the occurrence of the incident which has caused the damage, the parties may
509
Polish Report, VI.33.
agree that the claim for damages shall be submitted to any jurisdiction or to arbitration”. Time-Bar for Actions Article 16 of the Athens Convention refers to time-bar for actions for damages arising out of the death of or personal injury to a passenger or for the loss of or damage to his luggage. It states a period of 2 years and the way in which that period shall be calculated. Paragraph 3 is a conflict-oflaws rule that leaves to the law of the court seized of the case to govern the grounds of suspension and interruption of limitation periods. It adds a substantive rule that limits the competence of the court’s law, since it states that “in no case shall an action under this Convention be brought after the expiration of a period of three years from the date of disembarkation of the passenger or from the date when disembarkation should have taken place, whichever is later. However, “the period of limitation may be extended by a declaration of the carrier or by agreement of the parties after the cause of action has arisen. The declaration or agreement shall be in writing”.
9.1.2 In the Americas In Argentina maritime issues are of federal competence.510 Jurisdiction issues are ruled by the Navigation Act N 24.094, by the 1940 Montevideo Treaty on International Commercial Navigation and by the 1974 Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea, depending on which instrument is applicable in each particular case. The Uruguayan legal system does not provide for specific provisions on jurisdiction on cruises, but some general provisions are applicable. That is the case of the Montevideo Treaties on International Civil Law of 1889511 and 1940,512 both regulating international jurisdiction. Their main and general bases of jurisdiction are that of the State whose law is applicable, and that of the defendant’s domicile (Articles 56). The 1889 Montevideo Treaty on Commercial Law provides for several special rules of jurisdiction, among which it is worth mentioning that of the place where the company acts (Article 7) and that of the domicile of the branches or agencies.513 On the other hand, the 1940 Montevideo Treaty on International Commercial Navigation Law expressly provides for the carriage of passengers, regulating it in the same articles that govern the transport of cargo (articles 25–27). The bases of jurisdiction are, at the 510 Article 116 of the National Constitution. See Argentine Report, VII.35. 511 Ratified by Uruguay, Argentina, Paraguay, Colombia, Bolivia and Peru. 512 Ratified by Uruguay, Argentina and Paraguay. 513 See further information in the Uruguayan Report, VII.35 and in Fresnedo de Aguirre (2009), pp. 168–181.
Legal Aspects of Cruises
plaintiff’s option, the place of performance of the contract or the defendant’s domicile.514 In fact, though with a different drafting, they basically coincide in the chosen criteria. When the aforementioned treaties are not applicable to the case, in Uruguay, under Article 7.2 of Act N 19.246 of August 15, 2015 on Maritime Commercial Law,515 the referred rules of the 1940 Montevideo Treaty on International Commercial Navigation Law are applicable. The applicable law to carriage of passengers is that of the place of performance, construed as that of the place of disembarking of the passenger. Any contractual clause providing for something different is void.516 In Argentina, under Article 604 of the Navigation Act N 20.094517 the provisions in the Navigation Act are applicable to the carrier’s liability in carriage of passengers and its luggage in any case where the contract was entered into in Argentina or where the place of performance starts or terminates at an Argentine port, whether the vessel is national or foreign, among other circumstances. In Brazil, under the Civil Procedural Code the general rule on jurisdiction is that of the defendant’s domicile. Brazilian courts have also jurisdiction when the contract was entered into in Brazil and when the fact or event giving rise to the case occurred in Brazil. Regarding consumers, like cruises’ passengers, under Article 101 of the Consumers Code the courts of the consumer’s domicile have jurisdiction and this provision prevails over the general rules in the Civil Procedural Code. In labour cases, under Article 651 of the Labour Act or CLT (Decree N 5.452/43) the courts of the place where the worker performs his duties have jurisdiction.518 In the USA the Constitution authorizes federal courts to adjudicate “all Cases of admiralty and maritime Jurisdiction.”519 Subsequently, Congress adopted the Judiciary Act of 1789520 and authorized this grant of original jurisdiction. However, state courts have concurrent general maritime jurisdiction, as the Florida Supreme Court stated in the 2007 case of Carnival Corp. v. Carlisle.521 The CVSSA applies extraterritorially in accordance with another U.S. law, 18 U.S.C. § 7, Special Maritime Jurisdiction of the United States Defined.522 Under its provisions, the U.S. can exercise extraterritorial maritime jurisdiction when: the vessel is owned in whole or part by U.S. nationals, the offense was committed by or against a U.S. national on the high seas, the 514
Uruguayan Report, VII.35. https://legislativo.parlamento.gub.uy/temporales/leytemp2250106. 516 Fresnedo de Aguirre (2015), pp. 127–168, p. 150. 517 http://servicios.infoleg.gob.ar/infolegInternet/anexos/40000-44999/ 43550/texact.htm. 518 Brazilian National Report, VII.34, 36. 519 U.S. Const., art. III, § 2, cl. 1. 520 28 U.S.C. § 3033(1). 521 See further information in USA Report, II. 522 Government Publishing Office. 18 U.S.C. § 7. Special maritime and territorial jurisdiction of the United States defined. 515
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incident occurs in a territorial sea of the U.S., or the incident was by or against a U.S. person during a voyage to or from a U.S. port.523 In Canada, though jurisprudence generally respects and enforces choice of laws and choice of forum clauses in commercial contracts, when it comes to passenger contracts those clauses are frequently and sometimes successfully challenged.524
9.1.3 In the European Union Supranational Sources on Jurisdiction In the European Union, supranational sources are mainly the applicable rules, without prejudice of national private international law rules. European Union secondary legislation has direct effect in the Member States legal orders, therefore European Union unified law on jurisdiction applies,525 and that is the Regulation (EU) No. 1215/2012 of the European Parliament and the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels Ia Regulation, recast).526 The general rule on jurisdiction is that of the defendant’s domicile (Article 4.1), a criterion applied worldwide,527 though the recast includes several detailed and specific rules on the matter. Article 7 refers to special jurisdictions; those relevant to cruise issues are those on contracts, which provide that the courts of the place of performance of the obligation in question have jurisdiction and defines the connecting factor (Article 7 (1) (a)), and those on torts, which resource to the traditional connection of the place where the harmful event occurred or may occur (Article 7 (2)), also accepted worldwide. Rules on consumer protection included in the recast are dealt with later in Sect. 9.2 National Sources on Jurisdiction and Application of Supranational and International Sources in EU State Members In Germany there are no specific rules on jurisdiction and arbitration regarding cruises, so general European Union rules on jurisdiction and consumer protection apply. See USA Report, II. Government Publishing Office. 18 U.S.C. § 7. Special maritime and territorial jurisdiction of the United States defined; https://www.gpo.gov/fdsys/pkg/USCODE-2010-title18/pdf/ USCODE-2010-title18-partI-chap1-sec7.pdf. 524 Chircop et al. (2016), p. 659. 525 With the exemption of Denmark. 526 OJ No. L 351 of 20.12.2012, p. 1. This Regulation replaces the Brussels I-Regulation, Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ No. L 12 of 16.1.2001, p. 1. 527 For example, in the Montevideo Treaties on International Civil Law of 1889 and of 1940, in both, Article 56.2; also in the Uruguayan Civil Code, Article 2401. 523
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In Poland the Athens Convention relating to the carriage of passengers and their luggage by sea, 1974 and the Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (Brussels I bis)528 are applicable. Under Article 71 of the Brussels I bis Regulation, where there is a clash between the provisions of the Regulation and the international convention, the convention prevails.529 The Athens Convention protects consumers by providing for limitations on party autonomy (Article 17).530 In Romania, private international law rules on jurisdiction included in the Civil Code are applicable to cases related to cruises, since there are no specific rules on the topic. However, general rules on consumer protection prevail in cases involving cruise passengers.531 In Spain, rules on jurisdiction regarding cruise matters are in the Spanish Law on Judiciary (Ley Orgánica del Poder Judicial) amended by Act 7/2015 of July 7, in the Spanish Law on Shipping (Ley 14/2014, 24 de Julio, de Navegación maritima) and in the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and its Annex containing an indicative and non-exhaustive list of terms which may be regarded as unfair. This Directive has been implemented in Spain by Act 7/1999 of 13 April on general contract terms and Articles 80 et seq of Royal DecreeLegislative 1/2007 of 16 November approving the Recast text of the General Law on Consumer Protection and other supplementary laws. Article 82 deals with terms not individually negotiated and Article 90(2) with forum selection clauses and are to be held as overriding mandatory provisions because they are meant to protect the general interests of consumers.532 In the Costa Crociere SpA case, decided by the Court of Appeals in Madrid, Section 28, judgment N 165/2015 of 8 June 2015, “on an injunction action for the protection of consumers’ interest brought by a consumer association before the Spanish jurisdiction against Costa Crociere SpA, an Italian company”, the court stated that some of the challenged terms were unfair under Articles 80 et seq of the Royal Decree-Legislative 1/2007 and Spanish Act 7/1998, and granted the injunction.533
528
OJ L 351, 20.12.2012, pp. 1–32. Polish National Report, VII.35. 530 Polish National Report, VII.36. 531 Romanian National Report, VII.34–36. 532 See more detailed information in Spanish National Report, VII.34–36. 533 See more detailed information in Spanish National Report, III.19 and VII.36. 529
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9.1.4 In Asia In Japan, general rules on jurisdiction are applicable in cruise cases. The Code of Civil Procedure (Act No. 109 of 1996. hereinafter, CCP) only had rules on domestic jurisdiction until 2011,534 when it incorporated rules on international jurisdiction. The amended CCP protects weaker parties, like consumers and employees. Japanese courts have jurisdiction when the defendant’s principal office, the representative’s domicile or the place of performance of the contract is in Japan, or when the cruise operator’s office is in Japan and the passenger’s claim is related to the activities carried out by the office, or when the cruise operator engages in business in Japan whether it has an office in Japan or not, and the passenger’s claim is related to the business in Japan. If the passenger is a ‘consumer’ under Article 3–4 of the CCP (‘consumer’ is defined as a natural person except where he or she becomes a party to a contract in or for its business), when his or her domicile is located in Japan either at the time of bringing an action against the cruise operator or at the time of concluding the consumer cruise contract. There are other special rules on jurisdiction for torts actions and maritime claims, among others.535 Under the protective rules in the Japanese CCP, a consumer passenger living in Japan or who lived in Japan at the time of contracting will be usually able to bring an action against a cruise operator before a Japanese court. The cruise passenger will not be forced to appear before a foreign court by a cruise operator, and if the latter gets a rendered by a foreign court, it will not be recognized or enforced in Japan on the grounds of lack of jurisdiction of the foreign court under Japanese jurisdiction rules. Even a consumer having no domicile in Japan may in some cases, as long as the disputes have a sufficient connection with Japan.536 9.1.5 Final Remarks In spite of the variety of sources of laws on jurisdiction in the jurisdictions considered in this report, general solutions are not so different. It is worth remarking that in all of them it is the option of the claimant to choose among several concurrent jurisdictions. Most, though not all of those concurrent jurisdictions are frequently repeated in the analysed texts. The jurisdictions most generally recognised are that of the place of domicile or of permanent residence or principal place of business of the defendant, that of the domicile of the branches or agencies acting in the contract or where the contract was entered into, the place of departure or of destination of the passenger, courts of the consumer’s domicile, courts of the place where the worker performs his duties. There are other criteria used by some jurisdictions like for 534
The amendment came into force on April 1, 2012. See detailed information in Japanese Report, VII.35. 536 See detailed information in Japanese Report, VII.36. 535
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example those of the domicile or permanent residence of the claimant, if the defendant has a place of business and is subject to jurisdiction in that State, or the place where the contract of carriage was made, if the defendant has a place of business and is subject to jurisdiction in that State.
9.2
Forum Selection Clauses Included in General Conditions of Cruise Contracts and Consumer Protection Rules
9.2.1 In the Americas In Brazil forum selection clauses included in general conditions of cruise contracts would not be recognized as valid unless the passenger—who is a consumer—voluntarily files his claim in the chosen jurisdiction.537 In principle choice of jurisdiction clauses are not recognised in Uruguay.538 The Buenos Aires Protocol on international jurisdiction in contracts has a limited scope of application and would rarely apply to cruise contracts.539 However, under Article 7.3 of Act N 19.246, post-litem prorogation is admitted, i.e., whatever the jurisdiction is under the applicable rules, after the litigious facts occurred the parties may agree to submit litigation to another state jurisdiction or to arbitration. In Argentina, Article 621 of the Navigation Act N 20.094 provides for a very similar solution, admitting the post-litem prorogation.540 In the USA the matter has been definitively ruled by the US Supreme Court’s decision in Carnival Cruise Lines v. Shute, where the Court held that forum selection clauses in passenger contracts are enforceable if they are fair and reasonable.541 9.2.2 In the European Union Regulation (EU) 1215/2012 of the European Union and of the Council of 12 December 2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Brussels Ia Recast) In the European Union the Brussels Ia Regulation provides for a high standard of consumer protection with regard to jurisdiction and jurisdiction clauses.542 Under Article 18.1 a 537
Brazilian National Report, VII.37. Under Article 2403 of the Civil Code, party autonomy is not admitted unless the applicable law—i.e., the law referred to by the applicable conflict of laws rule—admits it. 539 For more detailed information see Uruguayan Report, VII.37 and Fresnedo de Aguirre (2009), pp. 168–176. 540 Argentine Report, VII.35. 541 See further information in USA Report, II, and its reference to Artistic Stone Crafters, Inc. v. Safeco Ins. Company of America, 2010 WL 317472 (S.D. Ga. 2010), citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593–95 (1991), legislatively overruled on other grounds, by 46 U.S.C § 30509. 542 German Report, VII.36. 538
453
consumer has the choice to bring proceedings against the other party “either in the courts of the Member State in which that party is domiciled or, regardless of the domicile of the other party, in the courts of the place where the consumer is domiciled”. The other party may bring proceedings only in the courts of the Member State in which the consumer is domiciled (Article 18.2). Rules on jurisdiction in Article 18 are mandatory543 and may only be departed from by an agreement that meets the requirements in Article 19. In the hypothesis ruled in Article 18(c), when the consumer has concluded a contract “with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities”, the words “direct to that Member State” are of utmost importance, as pointed out by the German reporter, “because this includes internet bookings. It has to be decided, whether a web site is directed to the Member State of the consumer. The CJEU developed in a leading case (Pammer)544 criteria under which circumstances a web site may be regarded as being directed to the Member State of the consumer’ domicile. Subject of the Pammer case was a cruise on a cargo ship”.545 Regarding forum selection clauses included in general conditions of carriage of passengers in cruises under Article 25.5 of the Recast “an agreement conferring jurisdiction which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. The validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid”. This provision is applicable to the agreement’s existence, validity and effects whenever the claim is filed in the jurisdiction of a Member State of the European Union, regardless the parties’ domicile. If the contract includes a choice-ofcourt clause that submits the carriage of passengers to a third country and not to a Member State of the European Union, then domestic rules of each Member State are applicable, and not the Brussels I Recast.546 Transport contracts are in principle excluded from the scope of Section 4 on jurisdiction over consumer contracts of the Recast. However, it applies to “a contract which, for an inclusive price, provides for a combination of travel and accommodation” (Article 7(3)). Therefore, and since cruises are regarded by the CJEU as packages in the sense of the Package Travel Directive, the consumer jurisdiction rules of 543
German Report, VII.36. CJEU 7.12.2010, combined cases C-585/98 and C-144/09—Pammer and Hotel Alpenhof. 545 German Report, VII.36. 546 Spanish Report, VII.37. 544
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the Recast apply, even if the consumer had booked the cruise without transportation to and from the port of embarkment and disembarkment.547 The Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea Under Article 18 of the Athens Convention, “Any contractual provision concluded before the occurrence of the incident which has caused the death of or personal injury to a passenger or the loss of or damage to the passenger’s luggage, purporting to relieve any person liable under this Convention of liability towards the passenger or to prescribe a lower limit of liability than that fixed in this Convention except as provided in Article 8, paragraph 4, and any such provision purporting to shift the burden of proof which rests on the carrier or performing carrier, or having the effect of restricting the options specified in Article 17, paragraphs 1 or 2, shall be null and void, but the nullity of that provision shall not render void the contract of carriage which shall remain subject to the provisions of this Convention”.548 Under Article 17 of the Athens Convention the claimant may choose between four jurisdictions: “(a) the Court of the State of permanent residence or principal place of business of the defendant, or (b) the Court of the State of departure or that of the destination according to the contract of carriage, or (c) the Court of the State of the domicile or permanent residence of the claimant, if the defendant has a place of business and is subject to jurisdiction in that State, or (d) the Court of the State where the contract of carriage was made, if the defendant has a place of business and is subject to jurisdiction in that State”, as far as the court is located in a State Party to the Convention and “and subject to the domestic law of each State Party governing proper venue within those States. . .”.
9.2.3 In Asia In China forum selection clauses included in general conditions of cruise contracts seem to be recognized as valid.549 9.2.4 Final Remarks It seems clear that in general, at least in the jurisdictions dealt with in this report, jurisdiction cannot be unilaterally imposed to the passenger/consumer by the carrier and that the carrier cannot restrict the passenger’s options between concurrent jurisdictions granted by law. The only exception seems to be China.
547
German Report, VII.36. See Polish Report, VII.37 and case law mentioned there, particularly from the Court of Justice of the European Union. 549 Chinese Report, VII.37. 548
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9.3
Arbitration Clauses Included in General Conditions of Cruise Contracts
9.3.1 In the Americas In Brazil arbitration clauses included in general conditions of cruise contracts are not valid under Article 51, VII of the Consumer Code unless the passenger chooses to submit his claim to an arbitration court.550 In Uruguay, arbitration clauses included in general conditions of international contracts that are not signed or otherwise consented by the adherent party to the contract are not admitted, since they do not comply with Article II of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, or Article 1 of the 1975 Inter-American Convention on International Commercial Arbitration. In those cases the clause is considered a unilateral provision not validly consented by the adherent party. There are several judgments confirming this approach.551 However, if the clause complies with those requirements, it could be considered valid. In the USA, arbitration clauses are usually included in the Seafarer’s Employment Agreement, and the U.S. courts have traditionally upheld them.552 9.3.2 In the European Union In the European Union there are some relevant instruments regarding our subject matter, particularly the Regulation (EU) N 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) N 2006/ 2004 and Directive 2009/22/EC (Regulation on consumer ODR) and the Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR).553 However, it has been reported that cruise lines do not have their own arbitration schemes yet, though with some exceptions. Therefore, “consumer disputes arising from this Regulation play only a minor role compared with disputes arising from the package travel rules, which use to go to court if they cannot be settled amicably”.554 In Bulgaria general rules on arbitration are contained in the International Commercial Arbitration Act, which is based on the UNCITRAL Model Law. Arbitration clause must be 550
See case-law in Brazilian National Report, VII.38. See: Fresnedo de Aguirre (2004), pp. 420–435; Fresnedo de Aguirre (2012), pp. 217–251. 552 See Bautista v. Star Cruises and Yuzwa v. M/V Oosterdam, and further information, in the USA Report, II. 553 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri¼OJ: L:2013:165:TOC. 554 German Report, VII.38. 551
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valid. These clauses are generally included in general conditions of international contracts of carriage of passengers by sea, not only in cruise contracts.555 In Germany, arbitration did not play a significant role for the settlement of consumer disputes in the past due to accessibility and low costs of state courts, but things changed in the last years. The Directive 2013/11/EU on online dispute resolution for consumer disputes was implemented in German law by a Verbraucherstreitbeilegungsgesetz (VSBG, Consumer Dispute Settlement Act). Although under the referred Act arbitration must be offered to consumers, a consumer cannot be obliged to go to arbitration before filing a claim into court, because the right to go to court is regarded as a fundamental right, granted by the Grundgesetz (Basic Law, German Constitution) and the EU Charter of Fundamental Rights as well. Arbitration is only possible if the consumer agrees after the harmful event occurred.556 In Belgium, cruise lines may stipulate the travel contract conditions of the Belgian Travel Dispute Commission (Commission de Litiges Voyages). These conditions provide for alternative dispute resolution (ADR) via mediation or arbitration for package travel contract disputes. The referred Commission is not competent for bodily injury claims, extra-contractual disputes, non-inclusive travel or assistance insurance, etc.557 In Spain under Article 90(1) of the Royal DecreeLegislative 1/2007 “arbitration clauses are null and void if submission to arbitration is made to a system other than consumer arbitration save the case of sector-specific arbitration established by law”. In addition, the Royal Decree 231/2008 of 15 February deals with the Spanish Consumer Arbitration System, which is in accordance with the Directive 93/13/ECC of 5 April 1993 on unfair terms in consumer contracts, is applicable to cruise passengers.558
9.3.3 Final Remarks It might be concluded that in general, and at least in the jurisdictions dealt with in this report, although arbitration may be offered to consumers, a consumer cannot be obliged to go to arbitration, because the right to go to court is regarded as a fundamental right. Arbitration is only possible if the consumer agrees after the harmful event occurred. If submission to arbitration is made to a consumer arbitration system, like the Spanish Consumer Arbitration System, it is considered valid in some jurisdictions.
555
Bulgarian national Report, VII. German Report, VII.38. 557 Belgian Report, VII.38. 558 Spanish Report, VII.38. 556
455
10
Choice of Law
In most countries legal systems do not provide for specific provisions on choice of law regarding cruises.559 Therefore, general rules on carriage of passengers by sea and on international contracts in general apply.
10.1 In the Americas That is the case, for example, of Uruguay, where as it was explained supra, the general rule is that choice-of-law clauses are not valid unless the applicable law admits it. Under Article 2399 of the Civil Code, the law of the place of performance, construed as the place of disembarking of the passenger,560 is applicable.561 If it is a round trip ticket, the place of disembarking is that of the final destination, which coincides with the place of departure.562 Regarding carriage of passengers by sea contracts, Article 7 of Act N 19.246 and its reference to the 1940 Montevideo Treaty on International Commercial Navigation are applicable. In Brazil, under Article 9 of Decree N 4.657/42, the law of the place where the obligation was entered into applies, unless the obligation must be complied with in Brazil, when the Brazilian law applies. However, it must be taken into account that Brazilian courts are very reluctant to applying foreign law and therefore, if a Brazilian court has jurisdiction, it is very likely that Brazilian legislation will be applied.563 Choice of law clauses included in general conditions of carriage of passengers in cruises are not valid and effective in Brazil, as explained before regarding jurisdiction, and may be considered abusive for hampering the defence of the consumer.564 In Canada, a choice of law clause in a passenger ticket is sometimes challenged, though not always successfully, like in Roy v. North American Leisure Group et al, where the Ontario Court of Appeal “found the clause enforceable despite the expiry of a statutory limitation period under the stipulated law”. The court stated that “the contract between the parties, reflected in the cruise brochure, specified England as the choice of law in any action arising out of the contract”
559 That is the case, for example, of Brazil, Bulgaria, China, Germany, Poland, Romania, Spain, and Uruguay. 560 Article 34.b) of the 1889 Montevideo Treaty on International Civil Law, referred to by Article 2399 of the Civil Code. 561 For further information see: Fresnedo de Aguirre (2009), pp. 160–167. 562 Fresnedo de Aguirre (2015), pp. 127–168, p. 150. See Case N 185 “DFPO vs. Transporte Turismo Ltda.”, RTYS (Revista de Transporte y Seguros) N 10. 563 Brazilian National Report, VIII.41–42. 564 Brazilian National Report, VIII.43.
456
and adds that “the mere fact that the plaintiffs failed to read the term was not determinative of the result”.565 If there is no choice of law clause in the passenger contract, or if the clause is not binding, the identification of the applicable law “becomes less certain and more difficult” in Canada, where jurisprudence states that the law governing the contractual relationship is that of the place with which the contract “has its closest and more substantial connection, which regarding passenger contracts could be the place of registration and flag of the ship, the place where the owner or person in possession of the ship has its place of business, the place of residence of the passenger, where the contract was made or where it was to be performed, among others. Regarding tort claims, the lex loci delicti applies.566
C. Fresnedo de Aguirre
Supranational Sources on Choice of Law and Applicable Law The main source on the matter is the 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), which is applicable to all contractual obligations in civil and commercial matters. Freedom of choice of law is the general rule though with some limitations, like those in consumer contracts, insurance contracts, and employment contracts. Article 5 §2, which is applicable to cruise passengers, provides that: “To the extent that the law applicable to a contract for the carriage of passengers has not been chosen by the parties in accordance with the second subparagraph, the law applicable shall be the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence shall apply. The parties may choose as the law applicable to a contract for the carriage of passengers in accordance with Article 3 only the law of the country where: (a) the passenger has his habitual residence; or (b) the carrier has his habitual residence; or (c) the carrier has his place of central administration; or (d) the place of departure is situated; or (e) the place of destination is situated”. This limitation to party autonomy is based on the fact that the passenger is the weaker party in the contract of carriage.567 Moreover, such constraints to party autonomy stem not only from the general limitations in the Regulation
but mainly from the overriding mandatory provisions in Article 9: “1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation. 2. Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum. 3. Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.”568 It must be noted that contracts of carriage of passengers “are not deemed consumer contracts for choice-of-law purposes save the case of ‘a contract relating to package travel within the meaning of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holiday and package tours’ (Article 6(3)(b) Rome I). In such cases and ‘provided that the professional: (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) by any means, directs such activities to that country or to several countries including that country, and the contract falls within the scope of such activities’, the choice of law by the parties is feasible as long as it does not deprive the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law of his habitual residence”.569 In other words, the provision in the Rome Ia Regulation that excludes carriage contracts from the consumer protection rule of its Article 6 does not affect neither package travel nor cruises, since the latter are regarded as package travel. Thus, Article 6 of the Rome Ia Regulation is applicable to cruises.570 However, for other kinds of carriage of passengers, like a ferry service, Article 5 is applicable and allows a choice of law between the law of the place where the passenger has his habitual residence, or the carrier has his habitual residence, or the place of departure or arrival.571 Therefore, under Article 6 of the Rome I-Regulation, a consumer contract shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional directs his commercial or professional activities to that country. The expression “directs his
565
568
10.2 In the European Union 10.2.1
http://ctdj.ca/en/jurisprudence/roy-al-v-north-american-leisuregroup-inc-al/; Chircop et al. (2016), p. 659. 566 Chircop et al. (2016), pp. 661–662. 567 Bulgarian National Report, VIII.41.
See Spanish Report, VII.43. See also Spanish Report, VIII.42. 570 German Report, VIII.42. 571 German Report, VIII.42. 569
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commercial or professional activities” has the same meaning than in the Brussels Ia-Regulation.572 However, choice of law is not prohibit in consumer contracts, as far as it does not deprive the consumer from the mandatory rights he would have in the absence of such a choice of law clause, that are provided for by the law of the country of his habitual residence.573
National Sources on Choice of Law and Applicable Law In Bulgaria, the Private International Law Code has been harmonized with the 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). In Poland, the Polish Maritime Code (Article 181) implements the Athens Convention relating to the carriage of passengers and their luggage by sea, 1974. Besides, as a Member State of the EU, the Regulation (EC) No 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents and the 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)574 are applicable.575 Some of those rules, like the Athens Convention, protect passengers, who are very frequently also consumers.576
457
consumer may invoke any specific provision(s) which would otherwise be mandatorily applicable to the consumer contract under the law of the place where the consumer has its habitual residence (Article 11 (1)), in addition to the chosen law”. In the absence of choice of law, the law applicable to the consumer contract and its formalities is that of the place where the consumer has its habitual residence, though there are some special cases with different solutions.578
10.2.2
10.3 In Asia In China, choice of law clauses, even those included in general conditions of contracts of carriage of passengers in cruises are considered valid. As a consequence of that, in most cruise tickets the law of the cruise corporation is selected. For example, if the cruise corporation is Royal Caribbean, the choice of law clause included in the ticket selects the American Law.577 In Japan, consumer contracts like cruise contracts between passenger and cruise operators, are subject to special rules in Article 11 of the Act on General Rules for Application of Laws (Act No. 78 of 2006). “The parties to a consumer contract may choose a law applicable to a contract in accordance with Article 7, and they may change the chosen law pursuant to Article 9 as well. However, despite such choice, a 572 See previous references to this topic and to the leading case CJEU 7.12.2010, combined cases C-585/98 and C-144/09—Pammer and Hotel Alpenhof already mentioned. See German Report VII.36 and VIII.42. 573 German Report VIII.42. 574 OJ L 177, 4.7.2008, pp. 6–16. 575 See also Spanish Report, VIII.41. 576 See further information in Polish Report, VIII.42–43. 577 Chinese National Report, VIII.42.
10.4 Final Remarks It might be concluded that in general and at least in the jurisdictions dealt with in this report, the law applicable to cruise contracts is that of the place of performance, construed as the place of disembarking of the passenger, or the law of the place where the obligation was entered into applies, or the law of the country where the passenger has his habitual residence. As for the latter, some jurisdictions require that in addition, either the place of departure or the place of destination is situated in the country of the passenger’s residence. The law of the place with which the contract has its closest and more substantial connection is also indicated as the applicable law by some conflict of laws rules. Choice of law clauses included in general conditions of carriage of passengers in cruises are not valid and effective in some jurisdictions. In others, freedom of choice of law is the general rule though with some limitations, based on the fact that the passenger is the weaker party in the contract of carriage. However, in some countries like China, choice of law clauses, even those included in general conditions of contracts of carriage of passengers in cruises are considered valid. As a consequence of that, in most cruise tickets the law of the cruise corporation is selected.
11
General Conditions Used by Companies Offering Cruise Services
11.1 Preliminary Considerations Only some clauses or sections included in some general conditions used by companies offering cruise services will be analysed hereinafter in this chapter. The chosen clauses are those considered particularly relevant for the legal regime of cruises. Besides, it would be beyond the scope of this report to deal with all of them.
578 See more detailed information in Japanese Report, X.41. See also X.44 for some specific problems regarding the implementation of the referred choice of law rules.
458
General Conditions in cruise contracts used by several companies have been studied by the Confederation of Consumers and Users (CECU) and reach some interesting conclusions.579 For example some of them make erroneous references to the law in force,580 they determine incorrectly the different issues to pay to the agency in case of consumer withdrawal and its amounts and they do not properly distinguish between cruises and air and hotels contracts. In all the General Conditions analysed by the CECU there is an express resignation to submit any possible conflict to arbitration.581 Usually, general conditions impose the consumer a specific deadline to claim, when in some countries, like Spain, there is no legal deadline for the consumer to file an extrajudicial claim and that those deadlines imposed by the Agency do not prevent the consumer from asking for a mediation at the General Direction of Tourism of the corresponding Autonomous Community, or even to go to court to exercise actions derived from the rights recognised by the Legislative Real Decree 1/2007 within a time-bar of 2 years.582 There are other examples mentioned by the CECU, regarding the establishment of non-binding prices and itineraries for excursions, insurance subscriptions, incomplete information on implicit risks at destination, imprecise references to services included in the price, prohibition to check prices upwards in the 20 days before the trip, setting of excessive advances, modification of essential elements in the contract and custody of values.583
11.2 Arbitration Many companies offering cruise services do not include in their general conditions an arbitration clause.584 However, some of them require the use of arbitration for certain disputes, like those used by Celebrity Cruises, which advises in its first page, under the title “Important Notice to Guests” and in capital black letters, that “This agreement requires the use of arbitration for certain disputes”. Moreover, section 10 provides: Notice of claims and commencement of suit or arbitration; security: a. Time limits for personal injury/illness/death claims: no suit shall be maintainable against carrier, the vessel or the transport for personal injury, illness or death of any passenger unless written notice of the claim, with full particulars, shall be
C. Fresnedo de Aguirre delivered to carrier at its principal office within six (6) months from the date of the injury, illness or death and suit is commenced (filed) within one (1) year from the date of such injury, illness or death and process served within 120 days after filing, notwithstanding any provision of law of any state or country to the contrary. b. Arbitration of all other claims: any and all other disputes, claims, or controversies whatsoever, except for personal injury, illness or death of a passenger, between passenger and carrier, vessel or transport, whether based on contract, tort, statutory, constitutional or other legal rights, including but not limited to alleged violation of civil rights, discrimination, consumer or privacy laws, or for any losses, damages or expenses, relating to or in any way arising out of or connected with this contract or passenger’s cruise, no matter how described, pleaded or styled, shall be referred to and resolved exclusively by binding arbitration pursuant to the United Nations Convention on the recognition and enforcement of foreign arbitral awards (New York 1958), 21 U.S.T. 2517, 330 U.N.T.S. 3, 1970 U.S.T. LEXIS 115, 9 U.S.C. §§ 202–208 (“the Convention”) and the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., (“FAA”) solely in Miami, Florida, U.S.A. to the exclusion of any other forum. The arbitration shall be administered by the American Arbitration Association under its commercial dispute resolution rules and procedures, which are deemed to be incorporated herein by reference. Any question about the arbitration administrators mentioned above may be directed to them as follows: American Arbitration Association, Bank of America Tower, 100 Southeast 2nd street, ste. 2300, Miami, Fl 33131 (305) 358-7777. Neither party will have the right to a jury trial nor to engage in prearbitration discovery except as provided in the applicable arbitration rules and herein, or otherwise to litigate the claim in any court. The arbitrator’s decision will be final and binding. Other rights that passenger or carrier would have in court also may not be available in arbitration. An award rendered by an arbitrator may be entered in any court having jurisdiction under the convention or FAA. Passenger and carrier further agree to permit the taking of a deposition under oath of the passenger asserting the claim, or for whose benefit the claim is asserted, in any such arbitration. In the event this provision is deemed unenforceable by an arbitrator or court of competent jurisdiction for any reason, then and only then the provisions of section 9 above governing venue and jurisdiction shall exclusively apply to any lawsuit involving claims described in this section 10(b). (. . .).585
11.3 Jurisdiction and Applicable Law The standard passenger ticket terms and conditions of the major international cruise lines, generally published on the website of each cruise line, “contain a choice of law clause and also a mandatory choice of forum for the resolution of disputes between the passenger and the cruise line”.586 This is the case, for example, of the Celebrity Cruises, that in its
579
http://cecu.es/campanas/cuadernos/CRUCEROS09.pdf. See below N 4 in this same chapter. 581 See below N 2 in this same chapter, where some exceptions are mentioned. 582 http://cecu.es/campanas/cuadernos/CRUCEROS09.pdf. 583 http://cecu.es/campanas/cuadernos/CRUCEROS09.pdf. 584 Spanish Report, VII.39. 580
585 Clause 10.c) refers to time limits for non-injury/illness or death claims and d) to the event of an in rem proceeding against the vessel. http://media.celebritycruises.com/celebrity/content/en_US/pdf/Celeb rity_CTC_Eff_08_01_10.pdf. 586 Chircop et al. (2016), p. 661. Spanish Report, VII.43.
Legal Aspects of Cruises
Cruise/CruiseTour Ticket Contract includes section 9, providing: 9. Forum selection clause for all lawsuits; class action waiver: a. Except as provided in section 10 (b) with regard to claims subject to binding arbitration, it is agreed by and between passenger and carrier that all disputes and matters whatsoever arising under, in connection with or incident to this agreement, passenger’s cruise, cruisetour, RCT land tour or transport, shall be litigated, if at all, in and before the United States District Court for the Southern District of Florida located in Miami-Dade county, Florida, U.S.A., (or as to those lawsuits to which the federal courts of the United States lack subject matter jurisdiction, before a court located in Miami-Dade County, Florida, U.S. A.) to the exclusion of the courts of any other state, territory or country. Passenger hereby consents to jurisdiction and waives any venue or other objection that he may have to any such action or proceeding being brought in the applicable court located in Miami-Dade County, Florida. b. Class action relief waiver. Passenger hereby agrees that except as provided in the last sentence of this paragraph, passenger may bring claims against carrier only in passenger’s individual capacity. Even if the applicable law provides otherwise, passenger agrees that any arbitration or lawsuit against carrier, vessel or transport whatsoever shall be litigated by passenger individually and not as a member of any class or as part of a class or representative action, and passenger expressly agrees to waive any law entitling passenger to participate in a class action. If your claim is subject to arbitration as provided in section 10 below, the arbitrator shall have no authority to arbitrate claims on a class action basis. You agree that this section shall not be severable under any circumstances from the arbitration clause set forth in section 10.b below, and if for any reason this class action waiver is unenforceable as to any particular claim, then and only then such claim shall not be subject to arbitration.587
General Conditions used by Goldium Cruceros state that any dispute derived from the use of the offered services or from the contents of the web site of the parties, accepting this Conditions, must be filed to the courts of the place of performance of the contract. However, it states that the parties submit, at their option, for the resolution of conflicts and waiving any other jurisdiction, to the courts and tribunals of the user’s domicile (section 17).588 In the General Conditions used by MSC Cruises S.A., a choice of law and jurisdiction clause is included in fine, providing that the present conditions and the contract are ruled by the Swiss laws and courts of Geneva, Switzerland, have exclusive jurisdiction to hear any dispute arising from them.589
587 Clause 10.c) refers to time limits for non-injury/illness or death claims and d) to the event of an in rem proceeding against the vessel. http://media.celebritycruises.com/celebrity/content/en_US/pdf/Celeb rity_CTC_Eff_08_01_10.pdf. 588 http://www.goldiumcruceros.com/informacion-legal.php?id¼3. 589 See more details in http://www.msccruceros.com.ar/ar_es/GuiaCrucero/Condiciones-Generales.aspx.
459
11.4 Legal References in General Conditions Some general conditions used by companies offering cruise services contain some legal references, like for example those of Goldium Cruceros, which state that the present General Conditions are subject to the provisions in the Real Legislative Decree 1/2007, of November 16, and amendments of Act 3/2014, of March 27, as well as those of Viajes El Corte Inglés and of Pullmantur. The Decree approves the refunded text of the General Act for Consumers and Users Defence and other complementary Acts (B.O.E. 30-11-2007), as well as, when applicable, to the provisions in the Athens Convention and amendments and other rules in international Conventions related to carriage of passengers.590 General Conditions in the Cruise/CruiseTour Ticket Contract used by Celebrity Cruises make reference to the Athens Convention relating to the carriage of passengers and their luggage by sea of 1974, as well as the Protocol to the Athens Convention relating to the carriage of passengers and their luggage by sea of 1976 and to some specific rules in the laws of the United States (section 11). Section 10 refers to the United Nations Convention on the recognition and enforcement of foreign arbitral awards (New York 1958) and to the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.591 It was reported by Spanish national reporters that some general conditions used by companies offering cruise services contain erroneous legal references. They mention some examples.592
11.5 Limitation of Liability Most general conditions used by companies offering cruise services contain sections that intend to limit the carrier’s liability. For example the Cruise/CruiseTour Ticket Contract used by Celebrity Cruises includes in its first page, in black capital letters and under the title “Important Notice to Guests”, the following advice: Your cruise/cruisetour ticket contract contains important limitations on the rights of passengers. It is important that you carefully read all terms of this contract, paying particular attention to section 3 and sections 9 through 11, which limit our liability and your right to sue, and retain it for future reference.593
Section 3.b) provides: 590 http://www.goldiumcruceros.com/informacion-legal.php?id¼3; https://www.viajeselcorteingles.es/documento/condiciones/pdf_ condiciones_cruceros.pdf; https://www.pullmantur.travel/general/ condiciones-generales.html. 591 http://media.celebritycruises.com/celebrity/content/en_US/pdf/ Celebrity_CTC_Eff_08_01_10.pdf. 592 See Spanish Report, VII.39. 593 http://media.celebritycruises.com/celebrity/content/en_US/pdf/ Celebrity_CTC_Eff_08_01_10.pdf.
460 Liability for Loss of or Damage to Baggage. Unless negligent, Carrier is neither responsible nor liable for any loss of or damage to Passenger’s property, whether contained in luggage or otherwise. Liability for loss of or damage to Passenger’s property in connection with any air or ground transportation shall be the sole responsibility of the provider of the service and in accordance with applicable limitations.594
Section 3.c) provides: Limitation of Liability for Lost or Damaged Property. Notwithstanding any other provision of law or this Agreement, Carrier’s liability for loss or damage to property during the RCT Land Tour portion of a CruiseTour is limited to $300.00 per Passenger. Notwithstanding any other provision of law or this Agreement, Carrier’s liability for loss or damage to property for the cruise (or for the cruise only portion of a CruiseTour) is limited to $300.00 per Passenger, unless Passenger declares the true value of such property in writing and pays Carrier within 10 days of final payment for the cruise, a fee of five percent (5%) of the amount that such value exceeds $300.00. In such event, Carrier’s liability shall be limited to its true declared value, but not exceeding $5,000.595
Section 11 provides: Limitations of liability: a. Carrier shall not be liable for injury, death, illness, damage, delay or other loss to person or property, or any other claim by any passenger caused by act of God, war, terrorism, civil commotion, labor trouble, government interference, perils of the sea, fire, thefts or any other cause beyond carrier’s reasonable control, or any act not shown to be caused by carrier’s negligence. b. Passenger agrees to solely assume the risk of injury, death, illness or other loss, and carrier is not responsible for passenger’s use of any athletic or recreational equipment; or for the negligence or wrongdoing of any independent contractors, including but not limited to photographers, spa personnel or entertainers; or for events taking place off the carrier’s vessels, launches or transports, or as part of any shore excursion, tour or activity. c. Carrier hereby disclaims all liability to the passenger for damages for emotional distress, mental suffering or psychological injury of any kind under any circumstances, when such damages were neither the result of a physical injury to the passenger, nor the result of passenger having been at actual risk of physical injury, nor were intentionally inflicted by the carrier. Without limiting the preceding sentence, in no event will carrier be liable to passenger for any consequential, incidental, exemplary or punitive damages. d. On cruises which neither embark, disembark nor call at any port in the United States, carrier shall be entitled to any and all liability limitations, immunities and rights applicable to it under the “Athens Convention relating to the carriage of passengers and their luggage by sea” of 1974, as well as the “Protocol to the Athens Convention relating to the carriage of passengers and their luggage by sea” of 1976 (“Athens Convention”). The Athens Convention limits the carrier’s liability for death or personal injury to a passenger to no more than 46,666 special drawing rights as defined therein (approximately U.S. $70,000, which amount fluctuates, depending on daily exchange rate as printed in the wall street journal). In addition, and on all other cruises, all the exemptions from and limitations of liability provided in or authorized by the 594 http://media.celebritycruises.com/celebrity/content/en_US/pdf/ Celebrity_CTC_Eff_08_01_10.pdf. 595 http://media.celebritycruises.com/celebrity/content/en_US/pdf/ Celebrity_CTC_Eff_08_01_10.pdf.
C. Fresnedo de Aguirre laws of the United States (including title 46, United States Code Sections 30501 through 30509 and 30511) will apply.596
In the General Conditions used by MSC Cruises S.A., clause 12.1 states that the Company accepts liability for death, damage or disease caused by its negligent acts or omissions or those of any of those who provide services that are part of the cruise. It adds that it limits its liability, when applicable, to the provisions of the Conventions mentioned in the same clause, numbers 4–8: the International Air Conventions, including the Warsaw Convention of 1929 amended by The Hague Protocol of 1955 or the Montreal Protocol of 1999, or the Montreal Convention of 1999; the Athens Convention of 1974, and the EU Regulation N 392/2009. It declines liability in case of guilt of the passenger, force majeur and others.597 The General Conditions used by Deluxe Travel S.A.S. provide that since the company is an intermediary of tourist services, it does not assume liability for specific non compliance by the providers of touristic services and for events like accidents, strikes, assonate, political factors, earthquakes, climatic or natural phenomena, damage of the vessel, mechanical failure, fire, collision or labour conflicts that affect navigation, among others.598 The General Conditions used by Viajes El Corte Inglés, provide in clause 9.2 that limits of compensation for damages resulting from non performance or bad performance in the rendering of services are ruled by the Athens Convention of 1974 as amended by the London Protocol of 1976, when applicable, or by the Brussels Convention of 1970 and other legal rules in force.599 The General Conditions used by Pullmantur provide in clause 8 that the organising Travel Agency and the retailer are liable to the consumer in relation to each one’s scope of travel management and that compensation for damages are ruled by national norms and international conventions ruling such services, particularly the Regulation (CE) N 392/2009 which incorporates the Refunded Text of the Athens Convention of 1974 and its 2002 Protocol, and the London Convention of 1976 amended by its Protocol of 1996 and further amendments in force on limitations of liability derived from maritime law claims.600
596 http://media.celebritycruises.com/celebrity/content/en_US/pdf/ Celebrity_CTC_Eff_08_01_10.pdf. 597 See more details in http://www.msccruceros.com.ar/ar_es/GuiaCrucero/Condiciones-Generales.aspx. 598 http://www.deluxetravel.com.co/agencia-de-cruceros-medellincolombia/terminos-legales. 599 https://www.viajeselcorteingles.es/documento/condiciones/pdf_ condiciones_cruceros.pdf. 600 https://www.pullmantur.travel/general/condiciones-generales.html.
Legal Aspects of Cruises
11.6 Final Remarks General conditions used by companies offering cruise services are in general rather similar, at least regarding the topics they deal with. As for arbitration, many companies offering cruise services do not include in their general conditions an arbitration clause. However, some of them require the use of arbitration for certain disputes, like those used by Celebrity Cruises. Regarding applicable law and jurisdiction, it can be stated that the standard passenger ticket terms and conditions of the major international cruise lines, generally published on the website of each cruise line, contain a choice of law clause and also a mandatory choice of forum for the resolution of disputes between the passenger and the cruise line. Regarding the core issue of liability, most general conditions contain clauses or sections dealing with this matter which clearly intend to limit the carrier’s liability. It can be concluded that in spite of what companies include in their unilateral general conditions, it will be the applicable law601 that will determine whether those clauses are valid or not. In case they are considered abusive, or against a mandatory rule of the court’s legal system, or a prevailing consumer rule, those clauses will be null and void and with no effect in that case. Anyhow, they continue to be included in most general conditions just in case they might be validated in some jurisdiction.
12
Sources of Law Applicable to Cruises
This chapter aims at providing a list of sources of law that are relevant to cruises, organised according to their origin and nature, though not exhaustive. Some of them are briefly analyzed while others are just mentioned since they are commented in the corresponding thematic chapter.
12.1 European Union Supranational Sources of Law: Regulations European Union Regulations are binding legislative acts that must be applied in their entirety across the EU.602 They are directly applicable in the Member States; therefore, it is supposed that all Regulations dealt with hereinafter are applicable in all the European Union’s Member States. • Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I)
461
• Regulation (EC) N 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents • Regulation (EU) No 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 (EU Sea Passengers’ Rights Regulation) • Regulation (EU) 1215/2012 of the European Union and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Recast) It must be noted that The Hague Convention of 20 June 2005 on Choice of Court Agreements is not applicable to contracts of carriage of passengers, including cruise passengers, since consumer and labour contracts are excluded from its scope of application (Articles 2.1 and 2.f).603 • Regulations CEE 4.055/86, 4.056/86, 4.057/86 and 4.058/ 86, 22/12/86 and Regulation CEE 3.572/92, 7/12/92 • Regulation (EU) No 692/2011 of the European Parliament and of the Council of 6 July 2011 concerning European statistics on tourism and Commission Regulation (EU) No 1051/2011 implementing Regulation (EU) No 692/2011 concerning European statistics on tourism, as regards the structure of the quality reports and the transmission of the data • Council Regulation (EEC) N 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff This Regulation identifies cruise ships as a particular type of goods. It established a nomenclature, known as ‘Combined Nomenclature’ or abbreviated to the ‘CN’, based on the International Convention on the Harmonised Commodity Description and Coding System (WCO) known as ‘the Harmonised System’ or abbreviated to the ‘HS’.604 • Regulation (EC) N 451/2008 It establishes a new statistical classification of products by activity (CPA), contains several cruise specific categories and identifies cruise ships as a particular type of goods. It is in accordance with the United Nations’ Central Product Classification (CPC) and aligned with the Harmonised System (HS) (International Convention on the Harmonised Commodity Description and Coding System (WCO605) and the Combined Nomenclature (CN).606 • Commission Regulation (EU) 2017/2119 of 22 November 2017
603
Spanish Report, VII.35. Belgian Report, II.9.1. 605 World Customs Organisation. 606 Belgian Report, II.9.1. 604
601 602
See Sect. 10 on this matter. https://europa.eu/european-union/eu-law/legal-acts_en.
462
•
• • •
•
It establishes the ‘Prodcom list’ of industrial products provided for by Council Regulation (EEC) No 3924/91.607 Regulation (EU) 2016/399 on a Union Code on the rules governing the movement of persons across borders (Schengen Borders Code) This Regulation provides for a special immigration regime for cruise passengers (exemption from entry/exit stamping of travel documents) (art. 11, 3 (d) and specific check procedures for cruise ships and depending on whether their itineraries comprise ports situated inside or outside the EU territory (Annex VI art. 3.2.).608 Regulation N 164/2010 on technical specifications for electronic ship reporting in inland navigation609 Regulation EC/3577/92 on the freedom to provide maritime transport services within E.U. Member States (maritime cabotage) Regulation (EU) 2017/352 of the European Parliament and of the Council of 15 February 2017 establishing a framework for the provision of port services and common rules on the financial transparency of ports Regulation (EU) N 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) N 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR) and the Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR)
12.2 European Union Supranational Sources of Law: Directives European Union Directives are legislative acts that set out a goal that all EU countries must achieve. However, “it is up to the individual countries to devise their own laws on how to reach these goals. One example is the EU consumer rights directive, which strengthens rights for consumers across the EU, for example by eliminating hidden charges and costs on the internet, and extending the period under which consumers can withdraw from a sales contract”.610 • Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours611 (the Package
C. Fresnedo de Aguirre
•
•
• • • •
•
• • •
612
OJ L 163, 25.6.2009, pp. 1–140. Belgian Report, II.9.6. 614 http://www.ilo.org/wcmsp5/groups/public/%2D%2D-ed_norm/% 2D%2D-normes/documents/normativeinstrument/wcms_554767.pdf See Spanish Report, IV.22 and Belgian Report, IV.20. 615 Spanish Report, IV.20, 22. 616 Spanish Report, IV.22. 617 German Report, IV.20. 613
607
See further information in Belgian Report, II.9.1. Belgian Report, II.9.2. 609 See Belgian Report, II.9.6. 610 https://europa.eu/european-union/eu-law/legal-acts_en. 611 OJ L 158, 23.6.1990, pp. 59–64. 608
Travel Directive of 1990) currently superseded by the Directive 2015/2302 Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements, amending Regulation (EC) No 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC Directive 2009/45/EC of the European Parliament and of the Council of 6 May 2009 on safety rules and standards for passenger ships612 This is the most extensive instrument on the matter at the EU level and regulates ships made of steel or equivalent material and high speed craft (HSC) engaged in domestic voyages. It does not contain specific rules on cruise vessels.613 Directive 2009/13/EC of 16 February 2009 This Directive incorporates the Maritime Labour Convention, 2006614 Directive 2009/21/EC of the European Parliament and of the Council of 23 April 2009 on compliance with flag State requirements615 Directive 2009/42/EC on statistical returns in respect of carriage of goods and passengers by sea Directive 2013/54/EU of the European Parliament and of the Council of 20 November 2013 concerning certain flag State responsibilities for compliance with and enforcement of the 2006 Maritime labour Convention.616 Directive 2013/38/EU of the European Parliament and the Council of 12. August 2013, amending Directive 2009/16/ EC on port State control, OJ no. L 218, p. 1 of 14.8.2013 The purpose of these Directives is not only to enforce labour law, but also environmental law.617 Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (‘Unfair Commercial Practices Directive’) Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and
Legal Aspects of Cruises
•
•
• •
Directive 97/7/EC of the European Parliament and of the Council Directive 2000/59/CE Its main objective is to eliminate uncontrolled dumping from vessels, whatever their activities. The dumping must be done in the facilities designed for that.618 Directive (EU) 2016/1629 It lays down technical requirements for inland waterway vessels for passengers but does not include any specific rule on cruises. Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC619 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market620
12.3 International Sources of Law It must be considered here that the International Maritime Organization (IMO), the United Nations specialized agency, with 173 state members621 that accounts for 99 % of the world’s shipping,622 establishes standards for all kinds of shipping in order to promote the safe use of the seas and to protect the seas from the polluting effects of transport, and that the global shipping industry, including cruise ships, is subject to its international legal regulation. The IMO’s International Convention for the Prevention of Pollution from Ships (MARPOL)623 and the Convention for the Safety of Life at Sea (SOLAS)624 are perhaps the most relevant instruments for the cruise industry. 618
Ariza Herrerías (2014), p. 19 y ss. https://publications.europa.eu/en/publication-detail/-/publication/ a093e44c-bf78-434b-92c7-d726dc5ad012/language-en. 620 https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼celex:32006L0123. 621 As at Jan. 23, 2018. United Nations Treaty Collection, International Maritime Organization, https://treaties.un.org/Pages/ViewDetails.aspx? src¼TREATY&mtdsg_no¼XII-1&chapter¼12&clang¼_en. 622 USA Report, II. 623 International Maritime Organization. International Convention for the Prevention of Pollution from Ships (MARPOL). Adoption: 1973 (Convention), 1978 (1978 Protocol), 1997 (Protocol—Annex VI); Entry into force: 2 October 1983 (Annexes I and II). http://www.imo. org/en/about/conventions/listofconventions/pages/international-conven tion-for-the-prevention-of-pollution-from-ships-(marpol).aspx [hereinafter MARPOL]. 624 IMO, International Convention for the Safety of Life at Sea (SOLAS), 1974, www.imo.org/en/About/Conventions/ ListOfConventions/Pages/International-Convention-for-the-Safety-ofLife-at-Sea-(SOLAS),-1974.aspx [hereinafter SOLAS]. “The Convention in force today is sometimes referred to as SOLAS, 1974, as amended,” as new amendments enter into force under a “tacit acceptance procedure” contained in the 1974 version that requires express objections from an agreed number of States Parties to prevent it. 619
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• The United Nations Convention on the Law of the Sea (Montego Bay, 1982) • United Nations Convention on the Law of the Sea, Geneva, April 29, 1958 • Convention and Statute on the International Regime of Maritime Ports, Geneva, 9 December 1923 • The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea625 • The 1990 Protocol to amend the Athens Convention relating to Carriage of Passengers and their Luggage by Sea626 • The 2002 Protocol or “Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002”627 • 2006 Maritime Labour Convention • International Convention on Civil Liability for Oil Pollution Damage/1969 • International Convention for the Control and Management of Ships’ Ballast Water and sediments (BWM) • International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) • International Convention on the Control of Harmful Antifouling Systems on Ships (AFS) 2001 • International Convention for the Safety of Life at Sea (1974 SOLAS Convention) • International Regulations for the Preventing of Collisions at Sea, 1972 (COLREGS)
12.4 National Sources of Law In this epigraph, only some national rules relevant for cruises reported by some national jurisdictions are listed. Further information can be found in National Reports and supra, Sect. 3.3.
12.4.1 In Europe In Bulgaria • Act on Consumers’ Protection In Germany • s. 651a et seq. of the Civil Code (BGB) • Handelsgesetzbuch (Commercial Code) • Civil Code (Bürgerliches Gesetzbuch), special chapter about package travel. In Poland • Consumer Rights Act of 2014 • Polish Maritime Code of 2001 • Maritime Safety Act of 2011 625
See supra, Sects. 3.3.2 and 9.1.1. See supra, Sect. 3.3.2. 627 See supra, Sect. 3.3.2. 626
464
In Spain • Royal Decree-Legislative 1/2007 of 16 November approving the Recast text of the General Law on Consumer Protection and other supplementary laws (Real Decreto Legislativo 1/2007, de 16 de noviembre, por el que se aprueba el texto Refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias, B.O.E. 30 November 2007) • Royal Decree 357/2015, 8 May 2015 on compliance and enforcement of the 2006 Maritime Labour Convention • Travel Packages Act (Ley 21/1995, de 6 de Julio reguladora de los viajes combinados) • Spanish Law on Shipping (Ley 14/2014 de 24 de julio, Ley de Navegación Maritima) • Real Legislative Decree 2/2011, 5 September and its annexes, and some ministerial rank regulations • Spanish Law on Judiciary (Ley Orgánica del Poder Judicial) amended by Act 7/2015 of July 7, and in the Spanish Law on Shipping (Ley 14/2014, 24 de Julio, de Navegación maritima).
12.4.2 In the Americas In Argentina • Act N 24.240 on Consumer Defence • Navigation Act N 20.094 • REGINAVE Decree N 4.516/73 • Travel Agents’ Act N 18.829 and its Regulatory Decree 2182/72 In Brazil • Federal Act N 8.078/90 (Consumer Code) • Presidential Decree N 7.381/2010 In Uruguay • Act 17.250 on consumer relations and consumer’s defence • Civil Code (Articles 2399, 2401, 2403) • Commercial Code (Articles 1282–1289) • Act N 19.246 of August 15, 2015 on Maritime Commercial Law • Penal Code (Article 366) USA • U.S. Const., art. III, § 2, cl. 1; 28 U.S.C. § 3033(1); • Passenger Vessel Services Act, 46 U.S.C. § 55103(b); • Merchant Marine Act, also known as the Jones Act, 1920, and further amendments: Jones Act, 46 U.S.C. §30104; • Death on the High Seas Act 46 U.S.C. app. §§ 761–768 (1920) (DOHSA), codified at 46 U.S.C. 303, et seq., • United States Code. Chapter 303 Death on the High Seas; • Cruise Vessel Security and Safety Act of 2010, Pub. L. 111-207, 124 Stat. 2243, et seq., Jul. 27, 2010, enacted at 46 U.S.C. §3507;
C. Fresnedo de Aguirre
• Marine Protection, Research, and Sanctuaries Act (16 U. S.C. § 1431 and 33 U.S.C. § 1401).
12.4.3 In Asia In Japan • Commercial Code, Part III (Maritime Commerce) In Turkey • Turkish Commercial Code’s Fifth Book Maritime Law, Fifth Chapter Contract of Carriage of Passengers by Sea, Articles 1247–1271.
13
Conclusions
This general report dealt mainly with the following issues: (1) the importance of cruise business, (2) general and specific rules applicable to cruises, (3) cruise passengers as consumers, (4) package travels, (5) labour rules on cruises’ workers, (6) rules on ports that are relevant to cruises, including taxes, costs and rates charged to cruises in different ports, (7) rules on environmental impact of cruises, (8) jurisdiction, arbitration, and choice of law in cruise contracts, and (9) general conditions used by companies offering cruise services, aiming at discovering which the existing sources of law on these matters are and whether they are appropriate and sufficient or not. 1. It has been corroborated throughout this comparative study the growing importance of cruise business almost all over the world. There is no doubt about that, as statistics show, though its importance varies depending on the region and country. Policies favouring this business also vary, from regions and countries where they are relevant and others where they do not exist at all. The impact that cruise business has for many countries, including labour markets, is denaturalised by the worldwide practice of using flags of convenience instead of the natural ones. The results of the efforts done by the international community to obtain the proper flagging of ships are not too encouraging. 2. The comparative study carried out all through this general report demonstrate that there is quite a great amount of general rules on different law matters that are applicable to cruises, and only very few specific rules aiming particularly at cruises. Most of those general rules are quite specific and adequate because they refer to carriage of passengers by sea. 3. The protection of tourists and particularly of cruise passengers is guaranteed by consumer protection rules, which are mandatory and prevail over other applicable rules, in most jurisdictions analysed during this general
Legal Aspects of Cruises
4.
5.
6.
7.
report. That is because tourists and cruise passengers are qualified as consumers under most consumer regulations. Cruises are usually part of a package travel, but cruises have also been declared to be a package in itself. Several service providers, like travel agents and tour providers, intervene in this business and sometimes have their own regulation and their own liability. In most jurisdictions considered in this general report there are rules on seafarers’ employment contracts, though not specific on cruise workers. Among them there are international and national, substantive and conflict-oflaws rules, the latter usually indicating the law of the flag as applicable. It has been reported by some jurisdictions to be quite frequent that cruises’ workers are not enough protected by the labour law. It has been discovered throughout this comparative study that there is a wide variety of general rules on different issues on ports that are relevant to cruises, including taxes, costs and rates charged to cruises, customs procedures and formalities, port facilities and security, maritime security measures. Few jurisdictions reported much information on these topics. Environmental impact of cruises has proved to be a major topic regarding this contemporary way of travelling. Though environmental law is a specific and generally autonomous branch of law, with its own international and national sources of law, and a thorough study of it would absolutely supersede this general report, its main rules that are relevant for cruises were analysed in this comparative study. It can be concluded that cruise industry is inextricably linked to the environment and that cruises are a main source of pollution of water, air and visited coast areas. There is a variety of rules and measures that aim at controlling and preventing pollution from cruises, most of them with a wider scope of application, including all kinds of ships. It is not realistic—not even desirable—to attempt to eliminate or diminish the cruise business, since it is a growing and powerful business that is relevant for the economy of many regions and countries. Moreover, it is vital for some of them. Therefore the crux is, in my opinion, to reach balanced solutions that contemplate the need to protect the environment, the convenience of protecting the economy, and the right of cruisers to enjoy the environment responsibly.
465
8. Most rules on jurisdiction, arbitration, and choice of law applicable to cruise contracts have a wider scope of application, and include carriage of passengers and their luggage by sea. Others are even more general and rule contracts. This comparative study enables us to state that solutions are not so different, since most jurisdictions offer several concurrent jurisdictions, at the claimant’s option, that guarantee access to justice to both parties. In principle, jurisdiction cannot be unilaterally imposed to the passenger/consumer by the carrier and the carrier cannot restrict the passenger’s options between concurrent jurisdictions granted by law. Arbitration may be offered to consumers, but a consumer cannot be obliged to go to arbitration. In most jurisdictions the law applicable to cruise contracts is that of the place of performance, construed as the place of disembarking of the passenger, or the law of the place where the obligation was entered into applies, or the law of the country where the passenger has his habitual residence. Choice of law clauses included in general conditions of carriage of passengers in cruises are not valid and effective in some jurisdictions, in others, freedom of choice of law is the general rule though with some limitations, and in seldom they are valid. 9. A comparative study of general conditions used by some companies offering cruise services was carried out in this general report, and it led us to the conclusion that they are rather similar. Most of them do not include in their general conditions an arbitration clause; contain a choice of law clause and also a mandatory choice of forum clause and clauses that clearly intend to limit the carrier’s liability. Of course the validity or not of those clauses will depend on the law applicable. Finally, I would dare state that the existing sources of law surveyed in this general report might be considered rather adequate and sufficient to rule legal aspects of cruises. That is because they cover the main issues relevant to cruises, though with a wider scope of application since they generally apply to all kinds of ships, in a reasonably appropriate manner. That does not mean that the existing regulation cannot be improved. Therefore, efforts shall continue to improve and harmonise the existing rules on legal aspects of cruises, meeting the requirements that may crop up in this fragile and changing world we live in.
466
Web Pages Visited628 • https://curia.europa.eu/jcms/upload/docs/application/pdf/ 2014-03/cp140041en.pdf • http://www.businessinsider.com/what-are-condo-cruiseships • https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼CELEX%3A32015L2302 • http://abremar.hospedagemtemporaria.com.br/dados-dosetor/ • http://www.abremar.com.br/down/Cruzeiros_2017_ Portugues_WEB_FINAL.pdf • http://www.abremar.com.br/down/Cruises_2017_ English_WEB_v2.pdf • http://mintur.gub.uy/index.php/turismo-de-cruceros • http://www.turismo.gub.uy/blog/por-que-tantos-crucerosvisitan-uruguay.html?utm_source¼programatica&utm_ medium¼nativa&utm_campaign¼cruceros&utm_ content¼crucero-punta-del-este • https://allthingscruise.com/cruise-research/cruise-depar ture-ports/ • http://www.f-cca.com/downloads/2017-Cruise-IndustryOverview-Cruise-Line-Statistics.pdf • https://www.cruising.org/docs/default-source/research/ 2016_clia_sotci.pdf • https://www.cruising.org/docs/default-source/research/ clia-2017-state-of-the-industry.pdf?sfvrsn¼0 • https://www.cliaeurope.eu • https://ec.europa.eu/transport/themes/strategies/2018_mar itime_transport_strategy_en • http://eur-lex.europa.eu/legal-content/EN/ALL/? uri¼CELEX:52009DC0008 • https://directories.lloydslist.com/services-browse/ss/ 3123/country/Belgium • http://www.tsakosmonte.com.uy • http://www.un.org/depts/los/convention_agreements/ texts/unclos/unclos_e.pdf • http://uscode.house.gov/view.xhtml?path¼/ prelim@title46/subtitle3/chapter303&edition¼prelim • http://laws-lois.justice.gc.ca/PDF/M-0.7.pdf • https://treaties.un.org/doc/Publication/UNTS/Volume% 201463/volume-1463-I-24817-English • http://www.imo.org/en/About/Conventions/ StatusOfConventions/Documents/Status%20-%202018 • https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼celex%3A32012D0022 • http://www.imo.org/en/About/Conventions/ ListOfConventions/Pages/Athens-Convention-relatingto-the-Carriage-of-Passengers-and-their-Luggage-by-Sea(PAL)
628
Listed in the order they appear in the text of the general report.
C. Fresnedo de Aguirre
• http://uscode.house.gov/view.xhtml?path¼/ prelim@title46/subtitle3/chapter303&edition¼prelim • http://laws-lois.justice.gc.ca/PDF/M-0.7.pdf • http://www.goldiumcruceros.com/informacion-legal.php? id¼3 • https://www.viajeselcorteingles.es/documento/ condiciones/pdf_condiciones_cruceros.pdf • https://www.pullmantur.travel/general/condicionesgenerales.html • http://www.impo.com.uy/bases/leyes/17250-2000 • http://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼celex:32011L0083 • http://www.cec-msssi.es/en/CEC/web/secciones/viajes_ combinados.htm • http://freecases.eu/Doc/CourtAct/3611261 • https://www.eui.eu/Projects/ CentreForJudicialCooperation/Documents/2012-05-2526/C-585OpinionAGTrstenjak.pdf • http://www.dictionary.com/browse/travel-agent?s¼t • http://www.dictionary.com/browse/tour-operator?s¼t • http://www.ilo.org/global/standards/maritime-labour-con vention/lang%2D%2Den/index.htm • http://www.ilo.org/dyn/normlex/en/f? p¼NORMLEXPUB:11300:0::NO::P11300_INSTRU MENT_ID:312331 • http://servicios.infoleg.gob.ar/infolegInternet/verNorma. do?id¼43550 • https://www.mtss.gub.uy/web/mtss/9-transportemaritimo • http://www.audm.com.uy/pdf/leyes/tratado-de-derechode-navegacion-comercial-internacional-1940.pdf • http://www.ilo.org/global/standards/maritime-labour-con vention/lang%2D%2Den/index.htm • https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼CELEX:31987D0594 • https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼LEGISSUM:l33205 • http://www.imo.org/en/OurWork/Security/Guide_to_Mar itime_Security/Documents/ ILOIMOCodeOfPracticeEnglish.pdf • http://www.imo.org/en/About/Conventions/ ListOfConventions/Pages/International-Convention-forthe-Safety-of-Life-at-Sea-(SOLAS),-1974.aspx • http://www.imo.org/es/OurWork/Security/Instruments/ Paginas/ISPSCode.aspx • https://eur-lex.europa.eu/legal-content/EN/TXT/? uri¼CELEX:32017R0352 • http://eur-lex.europa.eu/legal-content/en/ALL/? uri¼CELEX:32003R0001 • https://eur-lex.europa.eu/legal-content/EN/ALL/?uri¼ecli %3AECLI%3AEU%3AC%3A2002%3A661
Legal Aspects of Cruises
• http://curia.europa.eu/juris/liste.jsf?language¼en& num¼C-58/04 • https://www.cruising.org/about-the-industry/regulatory/ industry-policies/environmental-protection/wastemanagement • http://www.imo.org/en/About/Conventions/ ListOfConventions/Pages/International-Convention-forthe-Control-and-Management-of-Ships’-Ballast-Waterand-Sediments-(BWM).aspx • http://www.imo.org/en/about/conventions/ listofconventions/pages/international-convention-for-theprevention-of-pollution-from-ships-(marpol).aspx • https://www.eea.europa.eu/policy-documents/ec-2014regulation-eu-no • https://www3.epa.gov/npdes/pubs/cwatxt.txt • https://www.law.cornell.edu/uscode/text/33/1251 • https://www.epa.gov/enforcement/clean-water-act-cwaand-federal-facilities • https://www3.epa.gov/npdes/pubs/vgp_graywater.pdf • http://www.imo.org/en/OurWork/Environment/LCLP/ Pages/default.aspx • https://ofmpub.epa.gov/sor_internet/registry/termreg/ searchandretrieve/termsandacronyms/search.do? matchCriteria¼Contains&checkedTerm¼on& checkedAcronym¼on&search¼Search& term¼blackwater • https://www.epa.sa.gov.au/environmental_info/water_ quality/programs/grey_and_black_water_discharge/ black_water • http://pmg-assets.s3-website-eu-west-1.amazonaws.com/ 140729annexiv.pdf • https://www.ecolex.org/details/international-conventionfor-the-prevention-of-pollution-from-ships-annex-iv-sew age-tre-000988/participants • http://www.damengreen.com/en/bwt? gclid¼CjwKCAjwpIjZBRBsEiwA0TN1r5NO2z91W8u z2ByeJUs6U4CgJZvlmCZy9_HhXprNEDkQ6Nq7vl0HBoC__8QAvD_BwE • http://www.imo.org/en/About/Conventions/ StatusOfConventions/Pages/Default.aspx • https://www.apnews.com/ d26c8908b52b41b1bbd579bd28427f85/Alaska-pollu tion-regulators-gear-up-for-cruise-ship-season • http://www.legis.state.ak.us/basis/statutes.asp#46.03.462 • https://www.epa.gov/aboutepa/epa-region-10-pacificnorthwest • https://dec.alaska.gov/water/cruise_ships/Law_and_Regs/ index.htm • http://www.admiraltylawguide.com/conven/civilpol1969. html • https://treaties.un.org/doc/publication/unts/volume% 20970/volume-970-i-14049-english.pdf
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• http://www.imo.org/en/about/conventions/ listofconventions/pages/international-convention-for-theprevention-of-pollution-from-ships-(marpol).aspx • https://legislativo.parlamento.gub.uy/temporales/ leytemp2250106 • https://www.gpo.gov/fdsys/pkg/USCODE-2010-title18/ pdf/USCODE-2010-title18-partI-chap1-sec7.pdf • http://cecu.es/campanas/cuadernos/CRUCEROS09.pdf • http://media.celebritycruises.com/celebrity/content/en_ US/pdf/Celebrity_CTC_Eff_08_01_10.pdf • http://www.goldiumcruceros.com/informacion-legal.php? id¼3 • http://www.msccruceros.com.ar/ar_es/Guia-Crucero/ Condiciones-Generales.aspx • https://www.viajeselcorteingles.es/documento/ condiciones/pdf_condiciones_cruceros.pdf • https://www.pullmantur.travel/general/condicionesgenerales.html • http://www.deluxetravel.com.co/agencia-de-crucerosmedellin-colombia/terminos-legales • https://www.cruising.org/about-the-industry/regulatory/ industry-policies/health/medical-facilities • https://www.cruising.org/about-the-industry/regulatory/ industry-policies/environmental-protection/wastemanagement • https://www.vallettawaterfront.com/DetailPage.aspx? id¼156262 • https://www.cruising.org/about-the-industry/regulatory/ industry-policies/other/pbor • https://www.cruising.org/about-the-industry/regulatory/ industry-policies/health/medical-facilities
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Cecilia Fresnedo de Aguirre Professor of Private International Law. University of the Republic, Uruguay. Director of the Uruguayan Institute of Private International Law. Professor at The Hague Academy of International Law (2015).
The Fight Against Poverty and the Right to Development Mads Andenas, Jeremy Perelman, and Christian Scharling
Abstract
This general report conducts a comparative study from two analytical points of view. First, it accounts for the legal dimensions of the fight against poverty and the Right to Development (RtD) as seen from domestic law. It examines the domestic legal tools such as constitutional law, which contribute to the fight against poverty and the RtD. Second, the general report accounts for the domestic contributions to the international legal framework. The report also examines crosscutting themes in relation to the fight against poverty and the RtD. The general report is based on several national reports and one thematic report, which are included as part of the overall volume.
NGOs RtD SDGs UN
1
Non-Governmental Organisations Right to Development Sustainable Development Goals United Nations
Introduction
The fight against poverty1 and the RtD are not constrained to one policy arena or one field of inquiry. Following a long period during which most actors in the development field construed poverty alleviation as a component of development, or poverty itself as an unfortunate by-product of the development process understood as economic growth, the fight against poverty has emerged at the centre stage of development debates since the turn of the century. A number of initiatives, ranging from social
Abbreviations 1
CPRs ESCRs EU ICESCR MDGs
Civil and Political Rights Economic, Social and Cultural Rights European Union The International Covenant on Economic, Social and Cultural Rights of 1966 Millennium Development Goals
The authors would like to express their gratitude to Professor Malcom Langford, Oslo, and Professor Tomaso Ferrando, Antwerpen, for useful comments on earlier drafts of this general report. This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. M. Andenas Faculty of Law, University of Oslo, Oslo, Norway e-mail: [email protected] J. Perelman · C. Scharling (*) Sciences Po Law School, Sciences Po, Paris, France e-mail: [email protected]; christian. [email protected]
The concept and measure of poverty have generated a wide range of debates, in fields including moral and political philosophy, social theory, public and social policy, and development economics. In the latter field, an important distinction is made between absolute poverty (measured in terms of income below fixed income poverty lines) and relative poverty (measured in comparison with other segments of a population), as well as between unidimensional (focusing primarily on income and access to economic resources) and multidimensional approaches (see e.g. United Nations Development Program Human Development Index Multidimensional Poverty Index, which measures income as well as basic needs to measure extreme poverty). Among conceptual proponents of the latter, broader approach to poverty, one can point to Amartya Sen’s approach to poverty as capability deprivation (see notably Sen 1999). Sen’s celebrated approach suggests that poverty is not just a lack of income, but a deprivation of all freedoms that would allow for an individual to flourish and live a life he or she has reason to value (i.e. encompassing income but access to other components of “human development” more broadly understood such as literacy, food, drinking water, as well as employment and the ability to participate politically in decision-making processes). Also notable among the multidimensional approaches to poverty is former United Nations Independent Expert on Extreme Poverty Arjun Sengupta’s concept of poverty as including a combination of income poverty, human development poverty and social exclusion (entailing the systematic exclusion from opportunities or benefits of development), see Sengupta (2010), pp. 85–89.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_16
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movements to religious and philanthropic initiatives, found some echo in policy-making initiatives.2 In the policy-making arena, the international community celebrated the millennium with the adoption of the Millennium Development Goals (MDGs),3 first of which was the reduction of the proportion of people living in extreme income poverty by half by the year 2015. More recently, in 2015, the United Nations General Assembly adopted the Sustainable Development Goals (SDGs), the first target of which now calls for the complete eradication of extreme poverty by 2030. A variety of other aid commitments and debt cancellation initiatives have been announced and celebrated, including the IMF and the World Bank’s 1996 Highly Indebted Poor Countries (HPIC) initiative, supplemented in 2010 by the Multilateral Debt Relief Initiative, or the three United International Conferences on Financing for Development which took place in 2002, 2008 and 2015. In the academic field, post-Cold War works on the ‘End of History’4 gave place to calls for the ‘End of Poverty’,5 and questions about the social consequences of Washington Consensus policies of the 1980s and 1990s were raised in terms of poverty and inequality around the world. Proposals by Nobel Prize laureate Amartya Sen that both development and poverty be conceived and evaluated in broader terms than economic growth and income-based poverty, including a set of interdependent ‘freedoms’ related to both ESCRs as well as CPRs, were among the factors that gave rise to conceptual and methodological debates around new, competing sets of indicators of development. They also played a part, among other factors such as the aftermath of the Rwanda genocide,6 in leading the United Nations to endorse in 1997 human rights-based approaches to development and the fight against poverty, which aimed to mainstream human rights concerns in policy-making processes. In the meantime, while spectacular progress in “lifting millions out of poverty” has been observed, primarily reflecting China and to a slightly lesser extent India and Latin America’s progress in fighting absolute income poverty, an increasingly authoritative set of data suggests that the world’s poor have become, and keep 2
For a historical analysis, suggesting that the reasons for a shift towards a focus on poverty as a central goal of development policy-making are numerous and complex, and include the fact that it allowed to overcome disagreement between U.N. agencies and International Financial Institutions such as the World Bank and the International Monetary Fund over neoliberal development “Washington Consensus” policies as a means towards development, see Fukuda-Parr (2017). 3 The Millennium Declaration was adopted in 2000, which in 2001 gave birth to the MDGs. The United Nations General Assembly formally endorsed the MDGs in 2005. For a thorough analysis, see FukudaParr (2017). 4 Fukuyama (1992). 5 Sachs (2005). 6 For an early analysis of the mainstreaming of human rights in development discourse, see Uvin (2004).
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becoming, relatively poorer.7 In the field of moral and political philosophy, scholars such as Thomas Pogge have called for freedom from poverty to be conceived as a human right, and for the recognition of rich countries’ collective responsibility in violating the human rights of the world’s poor.8 How did this all translate in law? In the field of international human rights law, the fight against poverty is closely associated with its underlying determinants, defined in human rights terms.9 As an example, the absence of the capability to live a healthy life, while always a case of a low level of well-being, can only be recognized as poverty if the ill health is caused by lack of access to basic health-care resources. Furthermore, from a positivist perspective, it will be considered a human rights violation if a breach of a state’s obligation to respect, protect or fulfil a specific right (by commission or omission) can be identified in the causal chain leading to ill health. While strong arguments can and have been made about the link between violations of civil and political rights (CPR) and poverty, either as a cause or a consequence of poverty,10 the fight against poverty is mostly linked with ESCRs. Drawing on the increasingly sophisticated interpretative body of international human rights law on ESCR, such as the notion of minimum core obligations,11 the obligation of non-retrogression12 and the obligation of non-discrimination13 in the fight against poverty, actors such as the United Nations Special Rapporteur on Extreme Poverty and Human Rights were able to make inroads in the international policy-making arena. The Rapporteur, whose mandate was created in 1998, led the U.N. Human Rights Council to adopt in 2012 the wide-ranging Guiding Principles on Extreme Poverty and 7
See e.g. Cornia (2004) and Milanovic (2016). Pogge (2002). For a useful discussion, see Langford (2017), pp. 258–298. 9 The UN Committee on Economic, Social and Cultural Rights defined poverty in 2001 as “a human condition characterized by the sustained or chronic deprivation of the resources, capabilities, choices, security and power necessary for the enjoyment of an adequate standard of living and other civil, cultural, economic, political and social rights”, in terms that echo Amartya Sen’s vision of human rights as interdependent determinants of poverty. The Office of the UN High Commissioner for Human Rights added that poverty-related deprivations are deprivations that are related to the lack of income or access to other productive or economic resources “not every case of a low level of wellbeing can be regarded as poverty (. . .) for poverty to exist, a lack of command over economic resources must play a role in the causal chain leading to a low level of well-being” (2004). 10 See e.g. Dos Costa (2008). 11 For a thorough analysis and discussion, see Young (2008). 12 United Nations Committee on Economic, Social and Cultural Rights General Comment 3, The Nature of States parties obligations (Art. 2, par. 1), 14 December 1990. 13 United Nations Committee on Economic, Social and Cultural Rights General Comment 20, Non-discrimination in economic, social and cultural rights (art. 2, para. 2, of the International Covenant on Economic, Social and Cultural Rights), 2 July 2009. 8
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Human Rights.14 And the current holder of the mandate, former Chairman of the U.N. Committee on Economic, Social and Cultural Rights Philip Alston, has acquired an important and highly influential media presence in denouncing extreme poverty in human rights terms.15 In parallel, efforts by human rights lawyers and scholars led to the adoption in 2011 by the Commission of Jurists of the Maastricht Principles on the Extra-Territorial Obligations of States in the area of Economic, Social and Cultural Rights, a set of disputed but increasingly influential doctrinal interpretations of ESCRs. In parallel to this range of legal institutions and frameworks around which the fight against poverty can be and is often addressed, the concept of the RtD has proved to be resilient, despite its troubled history. The articulation of the RtD, one among other similar proposals to recognize a third generation of collective human rights in the 1970s and 1980s, occurred in the context of a newly configured international stage, and of a specific political agenda. Following the decolonization wave of the 1950–60s, several influential Third World countries leaders sought to use the entry en masse of newly independent countries in United Nations institutions, as well as South-South political alliances such as the Less Developed Countries and the Non-Aligned Movements to frame and claim what emerged as a set of demands for a “New International Economic Order” (NIEO). Linking political liberation and self-determination with economic emancipation based on the sovereign use of natural resources, the NIEO aimed to reconfigure the North-South power structure inherited from colonization and the BrettonWoods system by writing a new set of rules for the globalized economy. Among the concepts associated with this political moment, a highly disputed proposition was the enshrinement, arguably as a legal version of the political and economic claims attributed to the NIEO, of a collective right to development in the international legal framework. Originally articulated by Senegalese jurist Keba M’Baye16 who based it directly on the 1945 UN Charter and the 1948 UDHR, the RtD is often considered as an African contribution to the international human rights legal framework. The RtD first crystallized in its legal form in the UN Commission on Human Rights in 1977.17 It was then enshrined in 14 United Nations Human Rights Council Resolution 21/11, 27 September 2012. 15 See e.g. Carrington, “Climate apartheid: UN expert says human rights may not survive. Right to life is likely to be undermined alongside the rule of law, special rapporteur says”, The Guardian, 25 June, 2019; Booth and Butler, “UK austerity has inflicted ‘great misery’ on citizens, UN says. Poverty envoy says callous policies driven by political desire for social re-engineering”, The Guardian, 16 November 2019. 16 See M’baye (1972). See broader context and discussion in Yusuf (2014, 2016). 17 UN Commission on Human Rights Res. 4 (XXXIII) (Feb 21, 1977).
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Article 22 of the African Charter on Human and People’s Rights 1981, which suggests that, (1) All peoples shall have the right to their economic, social and cultural development with due regard to their freedom and identity and in the equal enjoyment of the common heritage of mankind. (2) States shall have the duty, individually or collectively, to ensure the exercise of the right to development.18
After a decade of lengthy debates, the U.N General Assembly adopted the 1986 Declaration on a Right to Development,19 which, while marked by North-South political controversy since its adoption, remains an oft cited reference in UN documents,20 and the object of continuing work by human rights scholars and experts.21 The Preamble of the Declaration states that, . . .development is a comprehensive economic, social, cultural and political process, which aims at the constant improvement of the well-being of the entire population and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits resulting therefrom.22
The controversies around the RtD focus on several issues.23 One relates to whether the RtD is linked to the right to self-determination and can be qualified as jus cogens. Another dispute, which led some countries including the United States to reject the recognition of the RtD, relates to the perception that it will be used as an excuse for governments in developing countries to justify ‘repressive’ human rights policies, and the main worry has been for the 18 African Charter on Human and Peoples’ Rights, OAU Doc. CAB/LEG/67/3 (Jun. 27, 1981), art. 22. 19 Declaration on the Right to Development, UN GA Res. 41/128, U.N. Doc. A/Res/41/128 (Dec. 4, 1986). 20 The Right to Development was reaffirmed as a “universal and inalienable right and an integral part of fundamental human rights” in the Vienna Declaration and Programme of Action, adopted at the World Conference on Human Rights in 1993 (Vienna Declaration and Programme of Action, UN Doc. A/CONF. 157/23, Jul. 12, 1993, Part I, par. 10). 21 The Right to Development has survived institutionally, notably through the appointment in 1998 by the UN Commission on Human Rights of Indian economist Arjun Sengupta as the Independent Expert on the Right to Development, the establishment (UN Commission on Human Rights resolution 1998/72) of the open-ended Working Group on the Right to Development (renewed in 2007), and the creation in 2004 of a high-level task force on the implementation of the right to development. See overview at the OHCR home pages, http://www. ohchr.org/EN/Issues/Development/Pages/Introduction.aspx [visited: 20.02.2020] and the Report of the Working Group on the Right to Development on its seventeenth session (Geneva, 25 April– 3 May 2016). 22 Declaration on the Right to Development, UN GA Res. 41/128, U.N. Doc. A/Res/41/128 (Dec. 4, 1986). 23 Scholarly debates about and around the RtD have carried on long after 1986, and include critiques by prominent human rights scholars (e.g. Alston 2005, p. 755) as well as critical voices from the Global North (e.g. see Clapham and Marks 2005) or the Global South (e.g. Shivji 1989; Ibhawoh 2011, p. 76. For a useful analysis, see also Marks 2010).
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protection of property rights and contractual relationships. A related dispute, of a doctrinal nature, concerns whether the holders of the RtD are people, individuals or States—and whether it is a group right of peoples, an individual right, or both. Scholarly debates have pitted arguments about the related indeterminacy and unenforceability of this right, against proponents of the RtD as a synthetic, “umbrella” right with both individual and collective dimensions or, going further, as a normative framework for global NorthSouth redistribution. Beyond ESCRs and the debates around the RtD, several related key contemporary themes, issues or debates can be considered to be relevant in the context of the fight against poverty. They include the issue of trade and human rights; the emerging field of human rights and investment, and the broader focus on business and human rights; questions related to human rights and the financing of development; the effects of foreign debt and other related international financial obligations of States on both development and the fight against poverty; the impact of the global financial crisis on human rights; the relationship between human rights and climate change; and indicators and the right to development. It is important to underline how various ESCRs, the RtD and the fight against poverty are inextricably linked for the purpose of this general report. Thus, norms, expressions and various rights will be referenced and used interchangeably in the general report as well as in the national and thematic reports. The general report conducts a comparative legal analysis based on several reports prepared by national and thematic rapporteurs.24 It is divided into three main parts, which were identified in a questionnaire prepared in 2017.25 In general, the questionnaire assisted in guiding the work of the national and thematic rapporteurs. The first part deals with domestic law, including rights and concomitant remedies available to individuals under the RtD and the fight against poverty. Thus, this section contributes to a comparative analysis of domestic law and its relationship to international law obligations. The second part focuses on the domestic contributions to the fight against poverty and the RtD at the international level. This will typically be through the development aid 24
In total twelve reports prepared by sixteen rapporteurs. See above an overview of the contributors to this volume. In addition, Geneviève Dufour and David Pavot also provided a national report for Canada, but it is not published. Moreover, we have ourselves contributed from the contexts of France and Norway and have used input from our session at the 20th Congress of the International Academy of Comparative Law. In this regard, we would like to thank all participants at the session and especially our moderator Lauro Gama Jr., who also provided valuable input from the context in Brazil. 25 The questionnaire prepared for the 20th Congress of the International Academy of Comparative Law is included in annex at the end of this chapter.
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programmes of individual countries or through other means of international cooperation. Contributions by any single State will not, on their own, generate new norms of international law. However, they may assist in the clarification of other sources of international law and in the development of customary law. The use of ‘progressive realization’ as a standard for ESCRs in the UN conventions makes the interaction between domestic and international law particularly interesting. As such, this standard is one mechanism for determining the stages of realisation. Looking at different domestic jurisdictions provide a comparative framework and assist in establishing what the substantive rights and effective remedies mean. The third part focuses on some of the crosscutting themes: Post-conflict contexts, international trade law and investment law as well as business and human rights. These themes were identified in the national and thematic reports, as well as during the session on the fight against poverty and the RtD at the 20th Congress of the International Academy of Comparative Law in Fukuoka Japan on 24 July 2018. Before going to the first part of the general report, we want to note some of the shortfalls of the general report. For example, having only one national report from the regions of Africa, Latin America and Asia is not enough to make a full analysis of the state-of-play in relation to the fight against poverty and the RtD worldwide. Still, the perspectives from each of the national reports are important and they assist in the comparative legal analysis of the fight against poverty and the RtD both domestically and at the international stage. We return to the gaps of the general report in our final conclusion.
2
Domestic Law and Remedies
2.1
General Remarks
This part of the general report addresses the fight against poverty and the RtD within a domestic context. The focus is on the legal nature of the instruments and the judicial remedies available to individuals. For example, to what extent constitutional ESCRs protection is justiciable to individuals versus if such constitutional protection is rather to guide overall State policy. By comparing various jurisdictions and their domestic reality, the idea is to find similarities and differences between them, which can help inform the current legal framework for the fight against poverty and the RtD at domestic level.
2.2
Relationship to International Law
In the following section we will compare ESCRs with other international obligations in how such rights and obligations
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are transposed into domestic law. Secondly, we will explore some of the key international legal instruments in the fight against poverty and to what extent they are implemented by States. To this end, we focus on the States accounted for in the national reports.
2.2.1
How Are ESCR in International Law Transposed into Domestic Law? For this section, we imagined that there could have been a difference in the transposition of ESCRs versus other international obligations. Such differences could have been to apply extraterritorial effects to the legislation enacted so that for example multinational companies cannot escape domestic labour legislation by moving production abroad. Although not necessarily tied to transposing ESCRs obligations, France has recently done so with its vigilance law.26 Moreover, another trend could have been generally looser justiciable frameworks for ESCRs, i.e. viewing the transposition of ESCRs as guidelines as opposed to implementing them and giving them justiciable effect. From the national reports submitted, there has been little evidence to suggest such differences. Three national reports specifically mentioned that there exists no difference in the implementation of ESCRs compared to other international obligations.27 However, even though the national reports of this general report largely did not deal with or did not find such differences, several previous studies have found interesting examples of it.28 We may add the stages of the ICESCR implementation in Norway to illustrate different approaches. After ratification the implementation was supposed to take place in legislation and administrative practice. In 1994 a new article 110 c was introduced in the Norwegian Constitution incorporating Norway’s international human rights. In 1999 a human rights act was adopted, expressly incorporating among other human rights conventions the ICESCR by including it as a schedule to the act and providing that its provisions should prevail in case of conflict with other legislation. In 2014 new constitutional provisions about children’s rights, the right to education and minimum subsistence were added to the provisions about the right to work (from the 1950s) and workers’ codetermination (from the 1970s). On the other hand, Norway has not signed the ICESCR Optional Protocol, so individuals are left without any right of complaint to the treaty body. The national report of the United States, did account for the lack of transposition of ESCRs, as for example the signing of the ICESCR has never led to ratification. The
26
See Sect. 3.4 for more information. Germany, Poland, Czechia. 28 For a survey of a broader sample of countries, see Jung et al. (2014), pp. 1043–1094. See also Nolan et al. (2009). 27
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reason for this lack of transposition of ESCRs in the United States should be found in its political landscape.29 Another interesting perspective was brought in by the Colombian rapporteur, which accounted for the interaction between international and national legal frameworks in Colombia. Inspired in part by French constitutionalism, Colombia has since the mid-1990s used a concept, which allows international norms that are not directly mentioned in the constitution to still have the same effect and hierarchy.30 Having the same hierarchy, has led the Colombian Constitutional Court to recognize the observations made by international monitoring bodies of ESCRs as relevant interpretive criteria of the Colombian constitutional ESCRs framework.31 Similarly, Ghana’s Supreme Court, which is also the Constitutional Court, has found the international right to work applicable within Ghana’s legal order, despite the right is not explicitly provided for in Ghanaian law.32 To briefly summarize, it seems that for the national reports ESCRs are generally implemented the same way as for example CPRs and other international obligations, however, some jurisdictions provided interesting examples of how ESCRs may be less or more expansively applied as according to the national contexts. It is important to underline that even though the national reports of the general report did not find such differences, there are much work to suggest that there does indeed exist such differences in the implementation of ESCRs and CPRs.
2.2.2
Overview of Ratification of Key Legal Instruments In Table 1, we have highlighted the state of implementation of some key instruments in the fight against poverty and the RtD by the jurisdictions examined. Many online webpages may provide a more complete overview worldwide.33
2.3
Constitutional Protection
In this section we will explore to what extent constitutions recognise the right to an adequate standard of living and further what value, if any, constitutions give to rights relating 29 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2. 30 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 4.1. 31 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 4.1. 32 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 1.1. 33 See for example, https://www.ohchr.org/EN/ProfessionalInterest/ Pages/UniversalHumanRightsInstruments.aspx [visited: 20.02.2020].
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Table 1 Implementation overview of key instruments in selected jurisdictions
States
ICESCR
ICESCR
RtD
Optional
Declaration
Protocol
1986
Vienna Dec. and Programme of Action
Canada Colombia Cyprus Czech Republic France Germany* Ghana Italy Netherlands Norway Poland Taiwan** United States
*As the RtD was adopted before German reunification, the two German States at the time voted separately. *Taiwan is not able to become part of these instruments or vote in UN General Assemblies but have chosen to ratify the ICESCR regardless in 2009.34 Colour explanation Ratified/Adopted
No Action/Opposed
Signed/Abstained
Not Applicable
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to work, health, education, housing and water. Notably, we will also examine if these rights are justiciable or what other status they qualify to (e.g. “guiding principles of state policy”).
2.3.1
How and to What Extent Constitutions Include ESCRs Most jurisdictions considered in the general report included some reference to ESCRs and more specifically the right to an adequate standard of living in their constitutions.34 The jurisdiction, which utilised and referenced ESCRs the most in its constitution, was Colombia. The Colombian constitution describes Colombia as a ‘Social Rule of Law’.35 This has been interpreted by the Colombian Constitutional Court as a form government, which aims to achieve social justice and human dignity, ultimately suppressing social inequality. This position of the Court is further reflected in the extensive catalogue of rights protected by the constitution, which includes the State’s duty to protect marginalized groups and especially those people who, “due to their economic, physical and mental condition, are in a circumstance of obvious weakness[.]”36 The constitution also specifically accounts for rights to social security, education and health.37 Specifically on the right to an adequate standard of living, the Constitutional Court has itself built this concept from a holistic interpretation of the constitution, including from the international obligations of Colombia both regionally (interAmerican) and globally.38 Further to Colombia, six jurisdictions all accounted some level of reference and protection of ESCRs.39 Out of these six, two of them specifically provided for the right to an adequate standard of living, namely Cyprus and Taiwan. In Cyprus, the constitution recognizes the ‘right to a decent existence’, an equivalent to the right of an adequate standard of living. Interestingly, it is argued that this right
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further protects other ESCRs in the Cypriot constitution, including rights to health, housing and water, which are otherwise not mentioned.40 The Supreme Court of Cyprus has further provided that said constitutional provision (Article 9) places ESCRs on an equal footing with CPRs.41 Likewise, in Taiwan the ‘right to existence’, a rather broad and vague claim, is commonly understood as ‘the right to an adequate standard of living’. The right is not understood as a fixed standard, rather it is conceived to reflect and accommodate an individual’s and their family’s actual needs and conditions. In other words, in Taiwan’s constitution the right to an adequate standard of living is to be decided on a ‘case-by-case’ basis.42 Three jurisdictions in this general report had no direct constitutional reference to ESCRs. These three were Canada, Germany and the United States. In Canada, while no formal recognition of ESCRs in the constitution exists, implicitly some rights mentioned in the Canadian Charter can only be ensured if an adequate standard of living is maintained. For example, the right to life and the right to dignity.43 Furthermore, the Supreme Court of Canada has refused to rule out an interpretation of the Canadian Charter that would also protect ESCRs, specifically those included in various international covenants.44 In Germany, similarly there is no direct constitutional reference to ESCRs at the federal level. However, some German States provide this individually.45 The reason for excluding specific references in the federal German constitution is historical. The Weimar constitution (the constitution governing Germany from 1919 to 1933) included ESCRs provisions, however, these rights remained unenforced. Therefore, the German founders of Germany’s current constitution decided against their inclusion.46 Still, the current constitution provides that Germany is a democratic and social federal state.47 The social State principle is thus a
40
34
Colombia, Cyprus, Czechia, Ghana, Italy, Poland, Taiwan. Constitution of Colombia, Article 1. 36 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3. 37 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3. 38 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3.2. 39 Cyprus, Czechia, Ghana, Italy, Poland, Taiwan. Also, France provides for ESCRs in paragraph 11 of the Preamble to the Constitution of 1946, see Roman (2012), p. 367. 35
See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 2.2. 41 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 2.2. 42 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, section 2.1. 43 Article 1 & 4, Charter of fundamental freedoms and rights, Canada report, p. 7. 44 Dufour and Pavot, Canada national report (2018) (unpublished), p. 8. 45 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.1. 46 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.1. 47 Article 20(1), German Basic Law.
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constitutional obligation to continuously work towards the realization of social statehood and poverty eradication.48 This principle is further part of the eternity guarantee, which means that it is not open to any constitutional amendment.49 Finally, the United States constitution does not recognize ESCRs at a general level. However, similarly to Germany, individual States do provide expressly for ESCRs in their constitutions. As examples, the State constitutions of New York and Alabama provide for protection equivalent to the right of an adequate standard of living.50 And the right to education has been litigated in all US states, without exception. With these observations, some commonalities and differences can be drawn from the national reports. There seems to be a trend towards more recent constitutions including ESCRs.51 Reasons for this may include the progressive recognition of ESCR as indivisible from and interdependent with CPR, in part due to the end of the Cold War, but also due to progress made in doctrinal interpretations of the nature and content of ESCR obligations.52 Other reasons include constitutional changes that take place after important political and/or economic transitions, as was the case for the jurisdictions in this report that provide for ESCRs.53 Finally, the three jurisdictions, which did not directly and expressly include ESCRs,54 are all federal States. The reason for not including ESCRs could be historical, like in the case of Germany and the United States. However, it could also be afforded to the power division/level of autonomy between the federal level and State level, which is also showcased by the examples of Germany and the United States.
2.3.2
The Justiciability of the Constitutional Rights Framework We return to the constitutional situation in Canada, Germany and the United States which do not provide for ESCRs in their respective constitutions. However, there are still some nuances to this response. In Germany, its form of government has reference to the fight against poverty, namely the social state principle. Still, the principle is an objective and thus subject to what is financially and organizationally possible for the State. This
48
For an example of emerging social rights jurisprudence on this issue in Germany, see Bittner (2011), p. 1941. 49 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.1. 50 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.1. 51 See for example the constitutions of Colombia, Cyprus, Ghana, Czechia and Poland. 52 For an analysis in this sense, see e.g. De Schutter (2010). 53 Colombia, Cyprus, Czechia, Ghana, Poland and Taiwan. 54 Canada, Germany, United States.
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implies that only the full replacement of social legislation would be undoubtedly unconstitutional.55 In the United States, the constitution similarly does not recognize justiciable ESCRs. This has been confirmed by the United States Supreme Court stating that the constitution contains no affirmative state obligation to care for the poor.56 However, individual states have made constitutional ESCRs justiciable. As an example, the right to education has been litigated successfully: not only in the context of equal access but also with respect to adequate substantive levels of education. Another example is the right to housing, which in New York has provided individual entitlements, such as the right to emergency shelter for homeless persons.57 On the other end, Colombia and its justiciable constitutional rights framework has been viewed as Colombia’s contribution to human rights in the American region.58 Regarding the rights’ framework justiciability, the Colombian constitution includes the possibility of claiming before judges, with a preferential procedure, the immediate protection of fundamental rights through the filing of the ‘Acción de Tutela’ (i.e. a petition procedure which allows individuals to seek protection of fundamental human rights before any judge).59 In relation to ESCRs, the Constitutional Court seemed first to specify that ESCRs were not justiciable through a ‘Tutela’ as they depended on the means of the State.60 However, in 2012 the Constitutional Court modified its position and affirmed that all rights are connected to each other and all are related to human dignity. During this year, the Court recognized the possibility that ESCR were justiciable through a ‘Tutela’. Also, on several occasions the Court has affirmed that the purpose of ESCRs is to fight poverty, which is the responsibility of the State and that its authorities must therefore take effective actions in this regard.61 Specifically, on Colombia’s right to an adequate standard of living:62 this right can be claimed by means of ‘Tutela’. 55 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.1. 56 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.2. 57 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.3. 58 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3.2. 59 Colombia Constitution, Article 86. 60 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3. 61 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3. 62 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3.1.
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Furthermore, the right is exclusive to the poor and a judge can make a ruling based on equity, which is otherwise not possible for several other ESCRs. Lastly, the right bearer is not only the State but also private actors.63 Like Colombia, Ghana’s constitutional rights framework is justiciable. The High Court is given jurisdiction in human rights matters.64 However, even though in principle individuals should be able to claim their rights, “the challenge lies in the fact that victims of such violations have both the duty and burden to activate the legal process[.]”65 The traditional court system prevents poor segments of society from asserting their rights as the procedure is cumbersome and expensive. As an example, the Supreme Court is only located in the national capital; the Court of Appeal in a few major cities; and the High Courts are mostly found in regional capitals or other big towns. If you come from outside these cities, the costs to litigate are obvious.66 However, there are other ways to lodge human rights complaints, for example the Commission for Human Rights and Administrative Justice. Some jurisdictions only provide justiciability for some ESCRs, while others only provide justiciability indirectly through implementing laws of constitutional obligations.67 Poland is one of these jurisdictions, where ESCRs fall into two categories in terms of their justiciability. The first group encompasses ESCRs that may be pursued directly in reliance upon the constitution (and if applicable based on statutory law). The second group contains such ESCRs that may be exercised within statutorily prescribed limits and pursuant to relevant statutory law, not the constitution.68 As such, the constitution for some ESCRs only lays the foundation of systems of laws, with ordinary statutes specifying their regime.69 An example is the administration of social security, which is done by statute and may not be claimed through the constitution. For ESCRs that may be pursued through constitutional complaint, the prescribed judicial procedure must be
63
See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 3.2. 64 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 2.1. 65 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 3.1. 66 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 3.2. 67 Cyprus, Czechia, Poland, Taiwan. 68 See in this volume Łasak, the Fight Against Poverty and the Right to Development in Poland, section 2.2. 69 See in this volume Łasak, the Fight Against Poverty and the Right to Development in Poland, section 2.4.
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exhausted first.70 This include statutory laws incorporating constitutional obligations.71 Similarly, in Taiwan, ESCRs are divided into two categories, one being justiciable and one not. For example, the right to an adequate standard of living, the right to work and the right to education are all subject to judicial review.72 These are understood as fundamental rights clauses and are thus justiciable. However, some rights listed in a separate chapter in the constitution are known as fundamental national policies. These do not allow individuals to bring claims against the State. Still, they are constitutional obligations and thus taken seriously by the Grand Justices of Judicial Yuan (the equivalent to a constitutional court).73 An example is the constitutional obligation to establish a system of universal health care and medical insurance. The promise was fulfilled in 1994 by statute, then in 1999 the Grand Justices issued an interpretation, calling the law a “realization of the said provisions of the Constitution[.]”74 The justices also advised that “to those who cannot afford to pay the premium, the state shall give appropriate assistance and relief, in order to fulfil the Constitution’s mandate of promoting national health insurance, protecting the dependent, the disabled and the financially disadvantaged.”75 In the Czech Republic, ESCRs are justiciable in principle, but they may only be claimed within the confines of the laws implementing them. Whereas CPRs have an absolute nature, ESCRs are predominantly relative, which means that their development depends on the situation of the national economy and the State’s general ability to fulfil its constitutional obligations.76 Likewise, in Cyprus, ESCRs are not directly justiciable but must be seen in relation to the laws implementing the constitutional obligation. This is exemplified by the Cypriot equivalent to the right to an adequate standard of living.77 The State is bound to at some point enact a framework for the realisation of the right. Thus, the Courts can only assess the
70 See in this volume Łasak, the Fight Against Poverty and the Right to Development in Poland, section 2.4. 71 See in this volume Łasak, the Fight Against Poverty and the Right to Development in Poland, section 2.4. 72 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, section 2.1. 73 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, section 2.1. 74 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, section 2.1. 75 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, section 2.1. 76 See in this volume Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 1.2. 77 Cypriot constitution, Article 9.
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State’s actions after their materialisation and not before the State takes steps to fulfil its obligations. The Supreme Court has further stated that it views the right to an adequate standard of living in two parts, “the first casts a general duty on the State to maintain minimum standards of existence and social security for everyone. The second imposes a specific duty to establish a system of social security for the protection of the weakest elements of society, the poor and the workers. The general duty, that is to say, one owed to everyone, is absolute in the sense that the State is enjoined to safeguard minimum standards for a decent existence for everyone. This is compatible with the ideal of a human society that places man [sic] in the epicentre of social action. The specific duties are relative, in the sense that social security for the poor and the workers must be compatible with and proportionate to the means of the State.”78 As such, the Cypriot constitution’s ESCRs to some degree rely on the means of the State. Interestingly, it is not just those means presently available to the State, but those means that could be raised by appropriate legislation.79 To sum up, only two jurisdictions80 provided for direct justiciability on a constitutional basis, while most jurisdictions had some level of justiciability either limited to a few ESCRs or through implementing laws. In this regard, justiciability of ESCRs may not always be a successful way to measure the fight against poverty. During the Congress of the International Academy of Comparative Law, various examples were mentioned, which puts the justiciability of ESCRs into question. In both Brazil and Colombia, some justiciable constitutional ESCRs were not implemented, therefore many individuals started to claim their rights in court. This may seem positive at first, however, because of the many cases, the Brazilian and Colombian governments had to allocate large funds to the court systems to ensure access. These resources could potentially have been directed to the implementation of ESCRs instead. Said examples are not included to undermine the potential value of the justiciability of ESCRs, however, they bring an interesting perspective to the debate.
2.4
Remedies and Relationship to International Review Mechanism
In this section, we will explore more broadly the remedies available to individuals to protect rights, which are related to the fight against poverty. Moreover, we will look at how 78
See in this volume Constantinides, the of Cyprus for the Fight Against Poverty tional Levels, section 2.2. 79 See in this volume Constantinides, the of Cyprus for the Fight Against Poverty tional Levels, section 2.2. 80 Colombia, Ghana.
Legal and Policy Framework at the Domestic and InternaLegal and Policy Framework at the Domestic and Interna-
these remedies are connected to regional and/or international review mechanisms. Secondly, we will examine if there is any legislation or case law on limiting social rights to their core. Moreover, is there any domestic parallel to the international law characterisation of ESCRs as subject to “progressive realization” or that takes into account the economic capacity of the domestic authorities?
2.4.1
Remedies Available in the Fight Against Poverty
National Remedies More Broadly Besides constitutional protections and remedies, there are several other mechanisms available at the domestic level that are not necessarily constitutionally based. As already accounted for, the German constitution does not reference ESCRs or make such rights enforceable. However, Germany’s form of government—the social state principle—have in the past decades been given legal effect. Thus, the principle finds legislative concretization not only in social assistance and social insurance statutory laws, but also in seizure law, employment protection law and tax law.81 Statutory laws are—unlike the constitutional social state principle—justiciable and legally enforceable. Furthermore, legal aid is available for those who cannot afford legal action, if the remedy in question has a reasonable chance of success in court.82 Similarly, in Canada there is generally not a constitutional framework to make ESCRs justiciable. The ICESCR should accommodate this, however, Canadian courts have preferred confined interpretations of the Canadian human rights charter, specifying that ESCRs are beyond their reach.83 Canadian provinces, however, does have legislation to combat social exclusion, which is justiciable like in Germany.84 This is also the case in the Czech Republic. However, social rights are in fact justiciable in principle, but they may only be claimed within the confines of the laws implementing the constitutional obligations. As in Germany and Canada, claimants must therefore rather rely on statutory laws than the constitution itself. In general, ESCRs in the Czech Republic remain to form a referential framework for the Constitutional Court.85 81
See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.2. 82 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.3. 83 Dufour and Pavot, Canada national report (2018) (unpublished), p. 10. 84 Dufour and Pavot, Canada national report (2018) (unpublished), p. 11. 85 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 2.5.
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Some national reports also referenced administrative appeals systems, which for example are relevant in cases of arbitrary decisions to social aid or other public benefits.86 Furthermore, also the Ombudsman function was highlighted in the justiciability of ESCRs within the domestic legal order.87 Connections with Regional and International Review Mechanisms In relation to domestic remedies and their connections to regional and international review mechanisms. First, within Europe both the EU and the Council of Europe provide for ESCRs instruments. This was highlighted in the German national report. Germany is part of the European Social Charter (‘ESC’), which is a Council of Europe instrument. The ESC was not intended to lay down subjective or even individually enforceable rights. The limited level of control and enforceability of the rights laid down in the ESC is justified by its dependence on economic, financial and general conditions of the State concerned. Similarly, for the EU Charter of Fundamental Rights there is agreement that ESCRs are not extensively justiciable but allow the EU member States a wide margin of appreciation.88 Therefore, the European ESCRs instruments do not amount to subjectively enforceable claims in the German legal order, except in cases where the social minimum standard is at stake.89 Moreover, the recommendations of international review bodies have some domestic impact in Germany. For example, Germany gets criticism on the conditions for asylum seeking children and regarding the lack of free education at state universities.90 However, while CPRs regularly gain immediate applicability in the German legal order, the direct applicability of ESCRs is not given on a regular basis, since the latter are subject to sufficient economic resources.91 In comparison to Germany, Italy has accepted the various international review mechanism’s competences to examine
86 One such example is Cyprus, which provides for administrative appeal (i.e. the public administration is given a chance to rectify individual decisions). A recourse to the Cyprus Administrative Court is the only judicial venue available in the Cypriot legal order for challenging decisions of the State in connection to social benefits. 87 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 2.2 and Łasak, the Fight Against Poverty and the Right to Development in Poland, section 2.3. 88 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.4. 89 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.4. 90 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.4. 91 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.4.
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individual claims.92 Much of the monitoring to which Italy has been subjected in recent years focuses on the domestic dimension of the fight against poverty and the measures Italy took, or failed to take, to shield people under its jurisdiction from the effects of the global economic crisis.93 Still, even though individuals are able to complain directly to international review mechanisms, it does not seem that the legal reality in relation to ESCRs is much different from Germany. Finally, references to international standards are relatively rare in Italy’s domestic jurisprudence. One reason for this is that the Constitution protects economic and social rights in terms as broad and radical as to make the act of referring to international sources redundant in most cases.94 Secondly, going outside of Europe. In the United States, the link between national and international review mechanisms is not present, due to its historical and cultural roots. However, regional and international ESCRs instruments are used as arguments to move state courts toward more progressive readings.95 In Ghana, the State is subject to various international review mechanisms. However, in comparing Ghana’s mechanism for enforcing ESCRs to international review mechanisms, one may hold the view that Ghana’s mechanisms are more direct and stringent than international review mechanisms. Whereas Ghana has both constitutional and other modes by which ESCRs are enforced, with these modes open to a wide array of individuals and organizations, international review mechanisms draw mainly from reports on the progress of States in enforcing human rights. Still, because of the international review mechanisms, and the reporting mechanisms, they are a further opportunity for Ghana and other States to realize and enforce ESCRs.96 Ghana’s Constitutional Court has further referred to international ESCRs to fill a lacuna on the right to work in Ghana. Thereby implying that where a fundamental human right has not been explicitly stated in the Constitution of Ghana,
92
See in this volume Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 3. 93 See in this volume Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 3. 94 See in this volume Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 2. 95 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.4. 96 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 4.0.
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reference can be made to that right by referring to provisions of international human rights instruments, i.e. to fill a gap in Ghanaian law.97
2.4.2 How Does National Systems Value ESCRs If the ESCRs framework is not justiciable or only to a certain extent, it becomes interesting to examine what value then is given to ESCRs. In Cyprus, as already put forward the right to a decent existence does not give rise to justiciable rights. Instead the right to a decent existence and other ESCRs are rather guiding principles of State policy.98 Similarly, in Germany the social State principle is a mere state objective and thus subject to what is financially and organizationally possible to the State. This means that only the full replacement of social legislation would be unconstitutional.99 Interestingly in Germany, ESCRs and the social state principle has been interpreted by the Federal Constitutional Court to include not only the economic-social but also the mental-psychological situation of people.100 Also, in the Czech Republic, the Constitutional Court has emphasized that social rights depend mainly on the economic situation of the State.101 Finally, the courts in the United States have generally seen limited government resources as a reason to limit judicial intervention in cases involving socio-economic claims. Further, the courts have not established a link between potentially growing public budgets and a corresponding realization of socio-economic entitlements.102 In fact, not only does national systems link the ability to realize ESCRs, also international monitory bodies do as much. For example, the UN Committee on Economic, Social and Cultural Rights has noted that the efforts of certain developing countries to comply with their international ESCRs obligations are impeded if they for example are highly indebted.103 Moreover, it can be difficult for international review bodies and State courts to decide on specific levels of social protection schemes. This is seen in France and 97
See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 1.1. 98 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 4. 99 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.1. 100 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 2.2. 101 See in this volume Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 1.3. 102 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.5. 103 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.1.
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Norway, where the judiciaries recognizes the international ESCRs obligations, however, exercises its control of the social security system poorly.104 The two main notions as to the justiciability of ESCRs in France, is first that such rights are in principle justiciable and secondly that the awarding of for example social security should be done in line with non-discrimination and equality objectives.105 This is broadly the position also in Norway.
3
Domestic Law Contributions in an International Context
3.1
General Remarks
This part of the general report addresses the domestic contribution to the fight against poverty and the RtD at the international level. It has become a ‘hot topic’ to explore States’ international responsibilities in relation to the RtD and to combat poverty more broadly. An example is the 2017 report of the InterAmerican Commission on Human Rights focussing on poverty and human rights in the Americas.106 For this specific part of the report, we were pleased to have Olivier De Schutter submit a thematic report to further qualify our findings. The report seeks to clarify the duties that are imposed on States by the Declaration on the Right to Development and the normative instruments in which the Declaration is grounded. Whereas the national reports focussed on specific jurisdictions, the thematic report of De Schutter rather accounted for several multilateral agreements and other relevant practice on the fight against poverty and the RtD.107
3.2
Domestic Constitutional or Legal Innovations
In this section we will explore domestic contributions to the fight against poverty and the right to development in an international context. For example, such domestic contribution could be a constitutional obligation to further the international legal order or as a developed country employ a comprehensive development programme.
104
Roman (2012), p. 364. Roman (2012), p. 365. 106 IACHR, Report on Poverty and Human Rights in the Americas, 2017, p. 9. 107 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order. 105
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3.2.1
Domestic Constitutional Contributions in an International Context First, looking at some of the jurisdictions which did not have any constitutional contribution to the fight against poverty and the RtD in an international context. In Germany, there are no provisions for a strict commitment to development aid or transnational poverty reduction. Neither can there be found a duty to combat poverty worldwide.108 Furthermore, the RtD is not known to the German legal order. Development is not recognized as a subjective international human right. Hence, Germany’s development program is not designed in accordance with the RtD.109 Similarly, in Canada, the United States and Cyprus, there is not any constitutional basis for a contribution to the fight against poverty and the RtD in an international context.110 In the Czech Republic there is a provision entailing that the Czech Republic has to abide by its international obligations, however, it is not specific to the fight against poverty or the RtD and therefore the provision is not considered to refer to these.111 The general Norwegian constitutional provision on human rights obliges the state authorities ‘to respect and enforce’ other human rights obligations in the Constitution itself and in the conventions Norway is bound by. That will mean that Norway is bound by international law on the right of development including the RtD, to the extent there were any duties to contribute outside the domestic jurisdiction. At the other end of the spectrum, both Ghana and the Netherlands have a constitutional basis for the RtD and the fight against poverty in an international context.112 In the Netherlands, Article 90 of the Constitution provides for the constitutional duty to promote the development of the international legal order.113 The government has noted that this provision should also promote the realisation of human rights, in the broadest sense of the word, which includes both CPRs and ESCRs.114 Because of the broad wording of the
108 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1. 109 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1. 110 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 3, Fedtke, Poverty and the Right to Development in the United States of America, section 2.6 and Dufour and Pavot, Canada national report (2018) (unpublished), p. 10. 111 See in this volume Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 1.2. 112 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 2.1 and Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2. 113 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2. 114 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2.
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provision, also the RtD forms part of it.115 However, even though the government has recognised that CPRs and ESCRs are of equal importance, both in foreign and domestic policy ESCRs have received less attention and their legal status has been questioned.116 This is for example visible in the Dutch foreign human rights policy in the area of development cooperation and assistance, where the RtD as a human right of a holistic nature has been absent. The government has expressly provided that because there is no agreement of the content of the RtD, it is necessary to do so first, before applying the concept in practice.117 To sum up, there are few express constitutional provisions placing a duty on the state in question to make contributions to the fight against poverty in an international context. There seems to be limited basis within the jurisdictions examined in this general report to say that there is a general constitutional basis for the fight against poverty in an international context. Even for a jurisdiction like the Netherlands, the national report is pointing out that having a provision to promote the development of the international legal order does not necessarily apply to the RtD. The relationship between different fields of international law and their base in treaties and custom, domestic constitutional law and the possible emergence of legal principles of international law is an area which deserves further study.
3.2.2
Mechanisms of a Legal or Wider Regulatory Nature Contributing Internationally The most common for the jurisdictions examined was that the developed countries had a development aid program targeted developing countries, which thus contributes to the fight against poverty and the RtD in an international context. An example is Cyprus. Now, Cyprus is one country post World War II that has gone from an aid recipient State to an aid donor State. Since 1994, Cyprus started a technical assistance scheme for foreign countries, where they offered scholarships for third-country nationals within areas of Cypriot expertise.118 Then, since its 2004 accession to the EU, its development programme got aligned with that of the EU.119 Similarly, other EU jurisdictions follow EU policies 115 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2. 116 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2. 117 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 2. 118 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 3.1. 119 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 3.1.
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and programmes and have both bilateral and multilateral development programmes.120 Still there seems to be scepticism from developed countries on the third generation of human rights. Some of the reasons for such scepticism were explained in the German national report. The underlying issue is the vagueness of the third generation of human rights’ content.121 Furthermore, the realization of these rights requires concerted efforts on the part not only of States or the international community, but also of societies, peoples, NGO’s and individuals. Therefore, it becomes harder to monitor progress and define responsibilities.122 Specifically on the RtD, a country like Cyprus has traditionally been supportive of the concept in international fora, not least because of its prominent role in the Non-Aligned Movement until the movements decline in the 1990s. Since its EU accession, however, Cyprus has followed the EU policy on these issues.123 Different from Cyprus and the NIEO movement, the United States was the only State directly opposing the RtD Declaration at the time of its adoption.124 However, a rough comparison between the Declaration and what is perhaps the closest US equivalent, the Millennium Challenge Account, show that both recognise a duty of developed nations to share their wealth by committing substantial resources to the task.125 This approach give some common ground on the understanding of the RtD. Moreover, in De Schutter’s thematic report, he found that States have a global obligation derived from the RtD to conclude new agreements (bilateral, regional or multilateral) in order to address issues of a transnational nature that call for collective action by States.126 De Schutter suggested that this was a procedural obligation, thus a requirement to enter into good faith negotiations, and not necessarily to conclude actual agreements. Many types of agreements can be envisaged; one could be bilateral and multilateral 120 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1 and Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 2.1. 121 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 4. 122 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 4. 123 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 4. 124 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.6. 125 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.6. 126 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 4.2.
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development programmes, as is evidenced by all developed jurisdictions examined having a development cooperation programme.127 This is also supported in the 1993 Vienna Declaration and Programme of Action.128 For example, Article 4 of the Vienna Programme of Action, which stipulates a duty of all States, . . .to take steps, individually and collectively, to formulate international development policies with a view to facilitating the full realization of the [RtD] [with] sustained action [being] required to promote more rapid development of developing countries.129
De Schutter further outlines that the international dimension of the RtD entails that States implement, in good faith, decisions and recommendations emanating from international organizations of which the State is a member, to the extent that they contribute to the realization of the RtD. This goes beyond the duty to comply with treaties that the State is a party to.130 None of the national reports included references to domestic legal obligations with the general effect that recommendations and decisions of international organizations should be implemented, however, this could be an interesting approach for further research. The interplay between domestic law and international law in the formation of custom and general principles on, or with an impact on, the RtD may become increasingly important. Global action, building on domestic processes, is the outcome of the interplay between complex processes of a formal and informal character. The “soft law” nature of many instruments does not prevent them from producing legal effects. The cooperation between states is becoming more durable and international organisations serve as platforms and independent agents in the way in which they give effect to the wills of their member states. The distinction is not clear between practices and policies that are not legally binding and legal obligations with multi-layered implementation depending on the contributions of different states and organisations. Informal policy instruments may use the forms and words of treaties; and formal treaties may use general and open substantive norms, with varying (or no) provision for implementation and enforcement. The sum of international treaties, state practice, the role of international organisations and domestic processes and their interaction requires further attention. The dynamic processes are reaching a 127
Canada, United States, Germany, Czechia, Cyprus, Netherlands, Poland, Italy. 128 World Conference on Human Rights on 25 June 1993 and endorsed by General Assembly resolution 48/121 of 20 December 1993, para. 10. 129 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 3.1. 130 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 4.2.
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transformational stage where international law may bind states in ways which may make the RtD a clearer legal obligation.
3.3
Policy Monitoring and/or Accountability Mechanisms
As was identified in the previous section, the development aid programmes of developed States are considered a contribution to the fight against poverty in a global context. In this part we will explore further the extent to which the development programmes contribute to the RtD and the fight against poverty. This includes looking to policy monitoring and accountability mechanisms.
3.3.1
Relationship Between Development Programmes and the RtD
The Presence of RtD, the SDGs and Other Development Related Policies Only Canada of the jurisdictions examined had its development programme built accordingly to the RtD and as such Canada mainly focuses on poverty reduction.131 The other jurisdictions examined did not explicitly provide reference to the RtD, but rather for example to the SDGs framework. One such jurisdiction is Cyprus. Its prime focus has been the realization of the MDGs and later the SDGs through its development programme.132 For example, a relevant line of ministries has been assigned as coordinators for the implementation of each one of the 17 SDGs. The Ministry of Labour, Welfare and Social Insurance is the coordinator of SDG 1.133 Also, Germany applies the SDGs in its development programmes, which cooperates with a total of 85 countries.134 Germany is further committed to food security and rural development, thus in effect contributing to the fight against poverty.135 The same is true for the Czech
131 Dufour and Pavot, Canada national report (2018) (unpublished), p. 11. 132 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 3.2. 133 See in this volume Constantinides, the Legal and Policy Framework of Cyprus for the Fight Against Poverty at the Domestic and International Levels, section 3.4. 134 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1. 135 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1.
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Republic and Italy, where the eradication of poverty are part of their development programmes.136 Finally, the Netherlands has been consistently committed to the MDGs/SDGs, however, there has been a lot of lip-service rather than actual action. One of the underlying objectives for its development programme is as such to counter irregular migration flows to Europe out of self-interest.137 Still the Netherlands’ development cooperation policy and programs mainly focus on the poorest and most vulnerable groups.138 When it comes to the United States, the government was happy to see the strong recognition of extreme poverty eradication in the SDGs.139 However, with the Trump administration in the White House, focus on eradicating extreme poverty and contributing to the SDGs may be not be followed in practice.140 In general, it seems that all jurisdictions examined reference the SDGs in their development cooperation, however, there may be issues regarding to what extend this leads to different action. Funding Levels for Development Programmes In connection to the RtD, the question of the level of the development aid, which developed countries have committed to setting at 0.7% of their GNI,141 naturally arises. The notion of 0.7% has many opponents, and the commitment is honoured more in breach than in the observance.142 The most vocal opponent of the target is the United States.143 The United States views its development programme as part of its foreign policy, and more specifically, as an integral component of national security considerations. The United States further stipulates that the provision of development aid
See in this volume Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 2.1 and Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 4. 137 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 3.2. 138 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 3.3. 139 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.8. 140 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.10. 141 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.3. 142 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.3. 143 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.6. 136
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remain a sovereign political decision of donor countries rather than a binding obligation under international law.144 Several European countries tend to follow the target of 0.7% and are thus currently reaching that level or working towards it.145 Sweden and Norway have periodically exceeded their higher target of 1.0%. The financial crisis in 2008 had impacts on the levels of development aid, but no developed country decided to abolish its development programme completely. Moreover, since the recovery from the crisis, several countries have begun to raise their funding for development aid again. One such example is Italy; during the economic crisis funding was cut for its development programme, but in 2013 the Italian government pledged to increase the programme again, exceeding the country’s 2008level.146 Likewise, in 2016 the Netherlands reached below the 0.7% threshold at 0.65. However, in the 2018-budget the Netherlands committed itself to raising its level again by 2021 to 0.7%. Some international norms can be drawn from various developed countries practices with regards to the commitment of development aid. Even though the financial crisis could have been used as a scapegoat to substantially lower or completely abolish development programmes, developed countries still retained their development programmes.147 Since the crisis several countries have further gone to increase their levels of aid working towards the 0.7% threshold or at least exceeding their pre-crisis levels.148 Although a country like the United States maintains that development aid is a sovereign decision of donor countries, several developed countries having a development programme seem to pursue their development programme at least in part because of, and with express reliance on, international legal norms.149 It is not only the level of development aid that is interesting in relation to the fight against poverty and the RtD more specifically. Also, the content of the development programmes is important. In this regard, the rise in development aid post the financial crisis—at least in European jurisdictions—seem not to be directly benefitting developing countries. In fact, often no extra funding is in reality made available for the poorest people in the world, the raise in aid only restores previous budget cuts and spending. Furthermore, large parts of the development programmes are effectively not spent in developing countries, but within the 144 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.6. 145 Italy, Netherlands, Czechia. 146 See in this volume Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 3. 147 United States, Netherlands, Italy, Cyprus, Germany, Czechia. 148 Netherlands, Italy. 149 Netherlands, Italy.
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developed countries themselves due to the recent migration and refugee crisis. Such tendency was observed in the Netherlands, Italy, the Czech Republic and Norway.150 Even in Germany the highest priority in the development policy is currently coping with the high number of refugees received.151 In fact, one estimate for the year 2015 provided that 17% of the aid from EU countries did not reflect a real transfer of resources to developing countries, because it was directed to e.g. refugee spending.152 A similar criticism is made by De Schutter, as he accounts for the OECD’s way to calculate development assistance. For example, expenses such as temporary assistance to refugees (up to 12 months) is reportable as development aid, and all costs associated with eventual repatriation to the developing country of origin are also reportable. Of course, how development aid is calculated has major impacts on how the 0.7% of GNI is assessed. Therefore, De Schutter calls for not only looking at the percentage of development aid, but also the effectiveness of aid: whether aid is predictable over a number of years and untied, thus allowing receiving countries to plan long-term strategies and ensure national ownership.153
3.3.2
Accountability and Monitoring Mechanisms for Development Programmes In this section, we will explore accountability and monitoring mechanisms, including how individuals and NGOs can intervene in the design, implementation and follow-up to development programmes. Most jurisdictions had their development programmes monitored by parliament, for example through the yearly budget approval.154 Some jurisdictions went further: Starting with Canada, scrutiny on its development programme is likewise done annually by the Canadian parliament.155 In addition, the competent minister consults with regional governments, international agencies and Canadian 150
See in this volume Gradoni and Pasquet, Failing to protect basic human rights: the fight against poverty and the right to development in Italy’s legal practice, section 4, Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 2.1 and Coomans and ter Vrugt, The Netherlands and the Right to Development, section 3.8. 151 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1. 152 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.3. 153 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.3. 154 See in this volume Schmahl, the Fight against Poverty and the Right to Development in the German Legal Order, section 3.1. 155 Dufour and Pavot, Canada national report (2018) (unpublished), p. 11.
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civil society organisations at least once every two years and takes their views and recommendations into consideration.156 In the Czech Republic, starting from 2009 the government created a new council for foreign development cooperation, which is responsible for ensuring inter-ministerial cooperation of the development agenda. The 15-member council represents various ministries and other public bodies and as well representatives from the business sector and civil society. There is also a particular scheme for businesses in the development aid programme, which includes co-funding for projects with foreign companies. Civil society further provides expertise, for example when sending experts to target countries.157 In Ghana, although not a developed country, citizens, civil society organisations, private enterprises and development partners can still monitor policy, programmes’, plans’ or various projects’ implementation and demand accountability from relevant duty bearers.158 In addition, a civil society platform on SDGs has been established to promote collaboration among CSOs as well as foster effective partnerships with the government and the private sector.159 The United States stood out as a jurisdiction where individuals and NGOs had very little ways to engage in development cooperation and antipoverty policies overall.160
3.4
Unilateral/Bilateral Initiatives or Agreements
This part is included to look broader than just countries’ development programmes and thus explore if there are other measures adopted unilaterally or bilaterally of a voluntary or binding nature related to the fight against poverty. The examples chosen below are thus very diverse and ranges widely. The purpose of this part is to provide inspiration for other initiatives which could contribute to coherence in the fight against poverty and the RtD. In Ghana, the country’s statistical service has set up a SDGs unit which is mandated to collate reliable and accurate data for tracking the SDGs indicators.161 Furthermore, the National Development Plan of Ghana outlines the 156 Dufour and Pavot, Canada national report (2018) (unpublished), p. 11. 157 See in this volume Šturma and Bílková, the Fight against Poverty and the Right to Development in the Czech Republic, section 2.2. 158 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, sections 5.1.2, 5.1.3, and 5.1.4. 159 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 5.1.3. 160 See in this volume Fedtke, Poverty and the Right to Development in the United States of America, section 2.6. 161 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 5.1.3.
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development roadmap of Ghana and is intended to be the means by which the national agenda of development is achieved. This plan provides a holistic picture of the nation’s vision, from which all policies are drawn. Thus, it is from this plan that the extent of Ghana’s intention to implement the RtD may be derived.162 In the Netherlands, the Court of Audit reports frequently about the efficiency and effectiveness of the Dutch foreign and development cooperation policy, including the progress made in the realisation of the SDGs. Recently, the body advised the Dutch government to better clarify what the government’s concrete policy plans are to fulfil its commitments towards the realisation of the SDGs.163 In Taiwan, NGOs have since Taiwan’s democratization in the 1990s played an important role in social policy making more broadly. Concretely, many law reforms are initiated by NGOs. During law drafting periods, both the legislature and administration would hold formal public hearings or informal seminars for gathering ideas, comments or suggestions from the civil society. NGOs are often invited or are welcome to attend to those hearings and seminars. In terms of anti-poverty and the RtD, many Taiwanese NGOs with different focuses and concerns, including child welfare groups, women’s groups, people with disabilities, housing rights groups, labour rights groups and other activist groups for economic and social equality, have contributed greatly in pushing through law reforms, providing essential information and policy suggestions, and establishing empowerment programs.164 Another example is seen in France, where a newer law on the “duty of vigilance for parent and instructing companies” have created much debate. The law gives extraterritorial effects, prompting companies with a presence in France to be liable for its activities abroad.165 As the law wants to combat human rights abuses, the law can be seen as a way to further the RtD. This is supported in De Schutter’s thematic report, where he writes that measures adopted unilaterally by one State can have impacts on the realization of the RtD.166 De Schutter also mentions other ways for States to take unilateral measures in the realization of the RtD. For example, when it comes to how States act in international organisations, they can incur responsibility under international law. As De Schutter writes, 162 See in this volume Atuguba, the Fight against Poverty and the Right to Development: The Ghana National Chapter, section 5.1.1. 163 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 3.7. 164 See in this volume Lee, the Fight against Poverty and the Right to Development in Taiwan, sections 2.2 and 3. 165 Brabant and Savourey (2017). 166 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 3.1.
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. . .where a State seeks to avoid compliance with an international obligation by transferring powers to an international organisation and allowing it to take measures that run counter to such international obligations, it engages its responsibility under international law.167
This way to perceive how States could take ‘wrong’ decisions in international organisations is one way, but another could be that States could actively advance the realization of the RtD within international organisations. Finally, as suggested by De Schutter in his report, States can further work towards the realization of the RtD by engaging in debt reduction for developing countries and work towards eliminating tax evasion.168
4
Crosscutting Contemporary Themes
4.1
General Remarks
As mentioned in the introduction to the general report many crosscutting themes could be relevant in relation to the fight against poverty and the RtD, for example questions related to human rights and the financing of development; the effects of foreign debt and other related international financial obligations of States on both development and the fight against poverty; the impact of the global financial crisis on human rights and; the relationship between human rights and climate change. However, the general report will solely deal with and thus limit itself to the crosscutting themes identified over the course of writing this report. In this regard, three overall crosscutting themes came up. These themes include the fight against poverty and the RtD in relation to post-conflict contexts, international trade and investment law and finally the new evolving area of business and human rights.
4.1.1
The Fight Against Poverty and the RtD in Post-conflict Societies The national report of Colombia put into perspective how legal frameworks for the fight against poverty and the RtD has the danger of being read as if their evolution and interpretation would be alien to the political decisions of their actors. In this context, the Colombian national rapporteur broad the peace agreement with the FARC guerrillas into the discussion. Concretely, how the peace agreement— which got Colombia to enter a post-conflict phase—can potentially enable social change. 167 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 2.3. 168 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.
As a background, in November 2016, after more than 50 years of internal armed conflict, the Colombian government signed a peace agreement with the FARC guerrillas. Even if the significant levels of violence have not been overcome, the Colombian Government considers that the post-conflict and peace-building phase have started.169 The economic consequences for a country in armed conflict is obvious. For example, Colombia had to allocate large economic resources to combat the guerrilla groups, resources that could otherwise have improved industry, infrastructure, rural development, etc. Moreover, the end of the conflict is an opportunity to attract higher amounts of foreign investment.170 To this extent, the Colombian government has previously stated that the armed conflict impacted its ability to satisfy social needs.171 Such line of argument is consistent with other national reports suggesting that the protection of the ESCRs depend on the amount of economic resources available.172 However, such connection raises many questions, as put by the national rapporteur, What exactly would make that in time of peace social needs will be guaranteed? Is it only a matter of economic resources that explains poverty and the violation of social rights in Colombia? The consequences that the armed conflict has had on inequality and the lack of an adequate standard of living for a large part of the population, are essentially due to a lack of economic resources, or are there other structural causes that need to be tackled?173
As put by the national rapporteur—without denying the relationship between the armed conflict and Colombia’s economic resources—also a State’s will to fulfill its ESCRs obligations must be accounted for. For example, Colombia maintains a budget limitation as an excuse for not fulfilling its social obligations, while demonstrating constant economic growth and presenting itself as one of the most robust economies in the Latin American region.174 This shows that the increase in economic resources does not guarantee on its own a greater compliance with ESCRs or the RtD. Such translation requires also political will. In the best case, Colombia is close to put aside the discourse of the 169
See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5. 170 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5. 171 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5. 172 Germany, United States, Taiwan. 173 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5. 174 See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5.
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armed conflict as an explanation of all the harms that affects it. However, after the armed conflict there will always be other discourses available that can help present the decisions made as external situations that objectively limit resources.175 Currently, this could be the Venezuelan refugee crisis.176 As a country entering a post-conflict phase like Colombia demonstrates external circumstances may only be used to a certain degree to explain why ESCRs and the RtD are not ensured. In the end, also the political will of a country is essential to realize the RtD and the fight against poverty.
4.1.2
The Fight Against Poverty and the RtD in International Trade and Investment Law During the workshop session at the 20th Congress of the International Academy of Comparative Law, we discussed how the fight against poverty and the RtD are broadly relevant in various fields of public international law. Take for example the principle of common but differentiated responsibilities and respective capabilities. This principle originally emerged in international economic law to justify positive discrimination in favour of developing countries: as an illustration the Second UNCTAD conference, convened in 1968, expressed itself in favour of giving preferential treatment solely to developing countries.177 Moreover, it is interesting how the fields of international trade law and international investment law have incorporated elements of the RtD and the fight against poverty, as also noted by De Schutter in his thematic report.178 Human rights treaty bodies have also insisted that the negotiation and conclusion of trade and investment agreements should be preceded by human rights impact assessments. Moreover, the UN Committee on Economic, Social and Cultural Rights have recommended that trade and investment agreements include a specific provision
175
See in this volume Betancur-Restrepo, the Colombian Legal Framework for Social Rights and the Challenges of a Post-Conflict Society, section 5. 176 https://www.nationalgeographic.com/photography/proof/2018/06/ refugees-venezuela-colombia-election-crisis-simon-bolivar-culture/ [visited: 20.02.2020]. 177 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 4.2. 178 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.5.
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about the primacy of human rights obligations.179 De Schutter in his report also envisages how trade and investment agreements could make a positive contribution to the realization of the RtD.180 As international trade law and international investment law have evolved separately,181 we will deal with these areas in two parts below. International Trade Law Today, international trade law is mainly governed by the World Trade Organization, as its agreement(s) covers about 164 States and 98% of world trade.182 The WTO’s legal framework is composed of several agreements that together compose one single agreement— the Marrakesh Agreement183—which besides Annex 4 has to be accepted by members as a single undertaking. Although the WTO is thought to only deal with trade matters, there are many examples of non-trade values within its legal system. For at start, the preamble of the Marrakesh Agreement takes into account, . . .allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.184
Another example is Article XX of the GATT, which contains a closed set of admissible justifications to otherwise prohibited measures, including environmental and social concerns.185 In his thematic report, De Schutter argues that the clause could justify the reliance on environmental conditions or labour rights considerations to restrict market access of certain products.186 In this regard, De Schutter argues that the RtD as a framework could serve as a useful tool, especially if combined with a reference to the common but differentiated
179 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, sections 5.4 and 5.5. 180 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, sections 5.4 and 5.5. 181 For an account of how international trade law and international investment law have evolved, see e.g. Kurtz (2016). 182 WTO website, https://www.wto.org/english/thewto_e/thewto_e.htm [visited: 20.02.2020]. 183 It is also referred to as the WTO Agreement and the WTO Institutional Agreement. 184 Marrakesh Agreement, Preamble. 185 See for example Article XX(g), GATT. 186 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.4.
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responsibilities and respective capabilities of different States. However, De Schutter also acknowledges that trade policy measures made to protect the environment and labour rights should be designed in a way that encourages countries to move in the right direction rather than be a sanctioning mechanism.187 Finally, De Schutter argues that as the WTO legal framework already provides for non-trade values it is possible to advance the international dimension of the RtD and fight against poverty within the system. As such he finds that, [t]rade can be a tool for development, provided countries use the flexibilities allowed under the multilateral trade regime, and provided they remain guided, in their reliance on such flexibilities, by the universally agreed human rights norms.188
International Investment Law International investment law is heavily associated with international trade law, however, has mostly been kept as a separate field. An important difference from international trade law is the dispute settlement mechanism. Whereas, WTO law and international trade law issues have traditionally been settled by State-to-State mechanisms, international investment law has given the foreign investor the opportunity to file a complaint directly against the host State. From the outset, it is thus interesting to note that international human rights claim mechanisms share procedural similarities with international investment law. Both fields allow a non-State actor to bring a claim against a State for a violation of an international obligation in a forum outside the domestic legal system.189 As such, human rights law and investment law are widening public international law to more than just inter-State relations. However, even though the two systems share procedural similarities, international investment treaties include almost no references to ESCRs, sustainable development, the fight against poverty or the RtD. Moreover, because of the investment regime’s current structure some say it has stronger legal protection than that of human rights: forcing States to prioritize foreign investors over their own citizens.190 Under the current investment treaty regime, arbitral tribunals are not inclined to consider such difficulties for
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the State, as the system is balanced in favour of the investor.191 To this extent, although not necessarily just because of human rights concerns, several States are terminating their investment treaties and/or removing the possibility for arbitration.192 As an example, the European Union is looking to make an investment treaty, which would abolish the arbitration mechanism and also implement EU human rights jurisprudence.193 Furthermore, new-generation bilateral and multilateral investment treaties are including more ways for States to defend themselves against investor claims; for example, by excluding former investment protections or by legitimatizing traditional wrongdoings if the State have pursued human rights considerations. This approach, i.e. changing the substantive content of the investment regime, seem to be the current way forward.194 From a legal viewpoint this seems as a promising avenue to regulate investment, as it changes the black letter of the treaties, which shall be given legal effect by arbitral tribunals or by whatever other dispute settlement mechanism established in the treaty. Recently, this change in investment treaties has been driven by African countries, in what has been deemed the Africanization of international investment law.195 The Pan-African Investment Code (“PAIC”), although not adopted as a binding instrument,196 is highly innovate and showcases the potential future of investment treaties.197 As such, the PAIC adopts human rights approaches in the treaty, while also omitting or curtailing several former investment protections. It even excludes several types of investment from treaty protection.198 In his thematic report, Olivier De Schutter confirms this trend in international investment law and proposes that the RtD should serve as a framework for arbitral tribunals to take into account human rights concerns.199
4.1.3
The Fight Against Poverty and the RtD in Business and Human Rights The area of business and human rights has the potential to also contribute to the fight against poverty and the RtD, as a globalized world demands transnational solutions, when multinational companies operate abroad. For example, such need 191
Muir Watt (2012), p. 2. Sornarajah (2013), p. 484. 193 Sornarajah (2013), p. 476. 194 Muir Watt (2012), p. 5. 195 Mbengue and Scacherer (2018). 196 Mbengue and Scacherer (2018). 197 Mbengue and Scacherer (2018), pp. 447–448. 198 Mbengue and Scacherer (2018). 199 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.5. 192
187 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.4. 188 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.4. 189 Khalfan (2011), p. 70. 190 Sornarajah (2013), pp. 493–495.
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for transnational solutions was seen with the horrifying Rana Plaza collapse in 2013 killing more than 1000 factory workers in Bangladesh. A transnational solution was needed, as it can be difficult for individual States, specifically least developed countries, to prosecute multinationals for their actions. In the example of the Rana Plaza collapse, a voluntary mechanism was implemented. Concretely, the textile industry, the trade unions and the International Labour Organization went together trying to ensure that such tragedy would not repeat itself.200 Effectively, they made an agreement (“the Accord”): The Accord provides basic safety standards for the factories and involvement measures for the employees.201 If the subsidiaries of the signatory companies do not comply with the Accord, then the mother company (the international investor) can ultimately face arbitration proceedings.202 Even though the Accord is voluntary in nature, more than two million factory workers are now covered by the Accord, which is over half of Bangladesh’s workers in the textile industry.203 Furthermore, the Accord foresees that the Bangladesh government eventually take over the responsibility of the Accord.204 The traction that the field of business and human rights currently has stems in some measure from the UN Human Rights Council unanimously endorsing the UN Guiding Principles on Business and Human Rights in 2011.205 Many initiatives in addition to the Rana Plaza Accord have built on the UN Guiding Principles; as an example, the International Bar Association in 2016 adopted a guide on business and human rights directed at business lawyers.206 The guide sets out how lawyers, when advising their clients, have a key role and responsibility in transmitting the principles found in the UN Guiding Principles.207 There is a range of other international instruments with an impact on the field. Corruption and money laundering are among the fields in which the international community has agreed on an international treaty regime in order to promote goals including the RtD. The rules include wide ranging duties on authorities, companies and individuals with home 200 Accord, Introduction to the Accord on Fire and Building Safety in Bangladesh, Brochure, 2015, p. 3. 201 Accord, Introduction to the Accord on Fire and Building Safety in Bangladesh, Brochure, 2015, p. 3. 202 2018 Accord on Fire and Building Safety in Bangladesh, Scope, p. 2. 203 Accord, Introduction to the Accord on Fire and Building Safety in Bangladesh, Brochure, 2015, p. 6. 204 2018 Accord on Fire and Building Safety in Bangladesh, Termination of the Agreement, p. 8. 205 United Nations, Guiding Principles on Business and Human Rights, HR/PUB/11/04, 2011, New York and Geneva. 206 IBA, “Practical Guide on Business and Human Rights for Business Lawyers”, 2016, p. 7. 207 IBA, “Practical Guide on Business and Human Rights for Business Lawyers”, 2016, p. 7.
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and host country authorities agreeing to administrative and criminal enforcement. International organisations and less permanent forms of cooperation contribute with monitoring and advice, in particular on money laundering. In the wider field of corporate liability most instruments share a “soft law” nature with the UN Guiding Principles. This does not prevent them from producing legal effects. The relationship between companies and the two principal sources of international law, treaty law and customary international law, is important. But there are clear shortcomings of treaties and custom in this field, but general principles of law are tools for the interpretation of state human rights obligations concerning corporate activities, and as a legal basis to develop corporate obligations. Business and human rights were also mentioned in the national report of the Netherlands. Here, the Netherlands has begun to play the role of facilitator with a view to stimulating non-State actors, especially the corporate sector, to take responsibility for the achievement of fair labour conditions, sustainable production cycles and strengthening the rule of law.208 The business and human rights area is still emerging. For example, the United Nations High Commissioner for Human Rights have submitted reports on improving accountability and access to remedy for victims of business-related human rights abuse.209 The interaction of international and domestic law may give rise to general principles of law. Among the questions for future exploration is the role of principles in interpreting the existing human rights obligations vis-à-vis corporate activities, the role of principles in developing obligations for corporations, and the existence, in international law, of a principle on corporate liability relevant to the protection of human rights. Principles of law, as an interpretative tool and as a source of obligations, provide for a complementary source of a high gap-filling potential in closing the ‘accountability gap’ of companies in international law. In particular, the principles of abuse of rights, due diligence and good faith may have a role to play.
5
Concluding Remarks & Future Developments
It is an uneasy task to conclude on the above general comparative overview. We wanted the general report to reflect the diverse responses of national rapporteurs and the brought nature of the field. Although the questionnaire attached in annex assisted in delineating the subject, we deliberately 208 See in this volume Coomans and ter Vrugt, The Netherlands and the Right to Development, section 5. 209 See in this volume De Schutter, the International Dimensions of the Right to Development: Enabling Poverty-Reduction in Domestic Legal Orders by a Reformed International Legal Order, section 5.5.
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encouraged national rapporteurs to think outside the box and prepare their reports in their own style. This approach provided many diverse examples on the contributions to the fight against poverty and the RtD specifically—such examples are referenced throughout the general report. In this regard, it is important to underline the lack of Global South representation in the general report. This gap is even more apparent given the nature of the subject. The thematic report of Olivier De Schutter did balance such gap within the international dimension of the RtD, providing many examples from the Global South. However, we stress the need for future comparative studies of a similar kind, where the datasets are more heavily coming from the Global South as the outcomes and examples may differentiate substantially from the ones in this general report. Still, the general report gives interesting perspectives of the current state-of-play for the fight against poverty and the RtD in the twenty-first century. We encourage readers to go through both the general report and individual reports, as the individual reports will be able to further qualify the findings of the general report and thus provide the reader with interesting new angles. Starting with the domestic context, we primarily looked at whether principles from the RtD and the fight against poverty have translated into constitutional obligations or other domestic obligations for States. On a constitutional basis, there were some interesting commonalities: We notice that typically newer constitutions in unitary States would include obligations deriving from the fight against poverty, for example through justiciability of the right to an adequate standard of living. Also, the national reports provided some interesting examples on how State courts considers the justiciability of ESCRs. In general, State courts and international review monitoring mechanisms will pay attention to a State’s economic ability to fulfil ESCRs obligations. Going to the international context and how domestic contributions can further the fight against poverty and the RtD more specifically. Here, we had the thematic report of Olivier De Schutter qualify the findings from the national reports. Interestingly, the thematic report confirmed several propositions. For example, several national reports described how States had not abolished their development programmes during and after the 2008 economic crisis, in fact some developed States have started or have plans to surpass their pre-2008 development aid levels. Although this seem positive at first for the fight against poverty and enshrining RtD obligations, several reports also concluded that the reason for engaging in development policy was accorded to national agendas. As an example, several States wanted to lower the incentives for unskilled migration coming from developing countries. Consequently, development programmes are directed to further anti-terror and anti-immigration policies instead of directly contributing to the fight against poverty
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and the RtD more specifically. Moreover, some national reports described how otherwise important international processes—such as the SDG’s—was used to cover up national agendas instead of truly delivering on RtD obligations. Indeed, all these tendencies were confirmed in the thematic report of Olivier De Schutter. In addition, the perspectives from several crosscutting themes assist in broadening the debate around the fight against poverty and the RtD to more than traditional public international law issues. For example, the field of business and human rights which inter alia examines the potential to hold multinational companies responsible for breach of ESCRs, where nation States have otherwise often failed to provide remedies for victims of abuse. The interaction with other principles of law are important and is in need of further exploration. The RtD should be seen in broader terms than just obligations in relation to individuals and States. To this extent, the RtD can assist in greater coherence across international legal regimes. Finally, we want to highlight the limits of the law, and some of the national rapporteurs and discussants highlighted the possibility that law may not be the right tool to address the challenges associated with the fight against poverty and the RtD. This was mentioned by several national rapporteurs and during the on-site discussion, which took place in the margins of the 20th Congress of the International Academy of Comparative Law. For example, there were critical voices raised about the possible ‘justiciability’ of ESCRs: One recurring argument is that a court process can drain economic resources, which could otherwise have been directed to fulfil ESCRs obligations. Moreover, legal action can take years to materialize, as the court systems are traditionally cumbersome. A starving person deprived of the right to an adequate standard of living will not be able to eat immediately by lodging a complaint. This highlights the limits of legal solutions in the fight against poverty and in the realization of the RtD. However, rights without legal remedies may not be very effective. It is the interaction of rights in the domestic legal order and litigation that make these a reality. Domestic litigation and international litigation as well as access to other bodies such as UN treaty bodies and their individual complaints mechanism have similar functions, and may also develop and clarify how domestic law and international law interact in providing rights and remedies for the individual. To this extent, litigation serves more than just individual justice in a specific case. Litigation can be a way in which the extent of a right is determined. Standards used in domestic law and international conventions, such as ‘progressive realization’, require review, and courts and international review mechanisms are increasingly taking such task upon them. The interplay between domestic law and international law in the formation of custom and general principles on, or with
The Fight Against Poverty and the Right to Development
an impact on, the RtD or poverty may become increasingly important. Global action, building on domestic processes, is the outcome of the interplay between complex processes of a formal and informal character. This applies with no less force in many domestic jurisdictions, gradually taking account of international economic rights and their consequences the nation State and its duties to counter poverty effects. The development cooperation between States is becoming more durable and international organisations serve as platforms and independent agents in the way in which they give effect to the wills of their member States. The distinction is not clear between practices and policies that are not legally binding and legal obligations with multi-layered implementation depending on the contributions of different States and organisations. Informal policy instruments may use the forms and words of treaties; and formal treaties may use general and open substantive norms, with varying (or no) provision for implementation and enforcement. The sum of international treaties, state practice, the role of international organisations and domestic processes and their interaction requires further attention. The RtD is increasingly based on the right to self-determination as a peremptory norm ( jus cogens). The dynamic processes are reaching a transformational stage where international law may bind states in ways which may make the RtD a clearer legal obligation. Other economic and social rights that in general are subject to progressive realization are clarified in these dynamic processes with core rights that may constitute peremptory norms, for instance not to be subject to extreme poverty. The reports that follow below provide a rich mine for anyone interested in these very fundamental and important issues. Comparative law is not law in the sense of a legal system that on its own provides binding norms or provides for their enforcement. Nevertheless, it assists both domestic law and international law in different ways, including in the determination of what domestic law or international law, or their interaction, mean. There may also be formal mechanisms for taking account of comparative law in the determination of the law that binds and is enforceable through court remedies. Contributions by single states will not, on their own, generate new norms of international law. Still, they may assist in the clarification of other sources of international law, and in the development of customary law and general principles of law. The use of ‘progressive realization’ as a standard for economic and social rights in the UN conventions, makes the interaction between domestic and international law particularly interesting. That interaction is one mechanism for determining the stages of this progressive realisation. Looking at different domestic jurisdictions provide comparators and assists in establishing what the substantive rights and effective remedies mean.
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Legal Documents UN Commission on Human Rights Res. 4 (XXXIII) (Feb 21, 1977). African Charter on Human and Peoples’ Rights, OAU Doc. CAB/LEG/67/3 (Jun. 27, 1981), art. 22 Declaration on the Right to Development, UN GA Res. 41/128, U.N. Doc. A/Res/41/128 (Dec. 4, 1986). Vienna Declaration and Programme of Action, adopted at the World Conference on Human Rights in 1993 (Vienna Declaration and Programme of Action, UN Doc. A/CONF. 157/23, Jul. 12, 1993, Part I, par. 10) UN Commission on Human Rights resolution 1998/72 Declaration on the Right to Development, UN GA Res. 41/128, U.N. Doc. A/Res/41/128 (Dec. 4, 1986) Constitution of Colombia German Basic Law World Conference on Human Rights on 25 June 1993 and endorsed by General Assembly resolution 48/121 of 20 December 1993 WTO Agreement and the WTO Institutional Agreement Accord, Introduction to the Accord on Fire and Building Safety in Bangladesh, Brochure, 2015 2018 Accord on Fire and Building Safety in Bangladesh United Nations, Guiding Principles on Business and Human Rights, HR/PUB/11/04, 2011, New York and Geneva International Bar Association, “Practical Guide on Business and Human Rights for Business Lawyers”, 2016
Miscellaneous Geneviève Dufour and David Pavot, reply to the Questionnaire on the Fight Against Poverty and the Right to Development for the 20th General Congress of the International Academy of Comparative Law, Canada national report, 2018 (unpublished). Report of the Working Group on the Right to Development on its seventeenth session (Geneva, 25 April – 3 May 2016) Inter-American Commission on Human Rights, Report on Poverty and Human Rights in the Americas, 2017
Websites https://www.ohchr.org/EN/ProfessionalInterest/Pages/ UniversalHumanRightsInstruments.aspx [visited: 20.02.2020]. https://www.nationalgeographic.com/photography/proof/ 2018/06/refugees-venezuela-colombia-election-crisissimon-bolivar-culture/ [visited: 20.02.2020]
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WTO website, https://www.wto.org/english/thewto_e/ thewto_e.htm [visited: 20.02.2020] http://www.ohchr.org/EN/Issues/Development/Pages/Intro duction.aspx [visited: 20.02.2020]
News Articles Damian Carrington, “Climate apartheid: UN expert says human rights may not survive. Right to life is likely to be undermined alongside the rule of law, special rapporteur says”, The Guardian, 25 June, 2019 Robert Booth & Patrick Butler, “UK austerity has inflicted ‘great misery’ on citizens, UN says. Poverty envoy says callous policies driven by political desire for social re-engineering”, The Guardian, 16 November 2019
References Books and Journal Articles Alston P (2005) Ships passing in the night: the current state of the human rights and development debate seen through the lens of the millennium development goals. Hum Rights Q 27 Bittner C (2011) “Human dignity as a matter of legislative consistency in an ideal world: the fundamental right to guarantee a subsistence minimum in the German Federal Constitutional Court’s Judgment of 9 February 2010” Special Section: The Hartz IV Case and the German Sozialstaat: Casenote. German Law J 12 Brabant S, Savourey E (2017) Loi relative au devoir de vigilance, des sanctions pour prévenir et réparer ? Revue Internationale de la Compliance et de l’Éthique des Affaires Clapham A, Marks S (2005) Human rights. Lexicon, Oxford Cornia GA (2004) Inequality, growth and poverty: an overview of changes over the last two decades. In: Cornia GA (ed) Inequality, growth and poverty in an era of liberalization and globalization. Oxford University Press de Schutter O (2010) International human rights law: cases, materials, commentary, 1st edn. Cambridge University Press Dos Costa F (2008) Poverty and human rights: from rhetoric to legal obligations a critical account of conceptual frameworks. Sur. Revista Internacional de Direitos Humanos 5(9)
M. Andenas et al. Fukuda-Parr S (2017) Millennium development goals: ideas, interests and influence. Routledge Fukuyama F (1992) The end of history and the last man. Free Press Ibhawoh B (2011) The right to development: the politics and polemics of power and resistance. Hum Rights Q 33(1) Jung C, Hirschl R, Rosevear E (2014) Economic and social rights in national constitutions. Am J Comp Law 62(4) Khalfan A (2011) International investment law and human rights, preface. Kluwer Law International, Chapter 4 Kurtz J (2016) The WTO and international investment law. Cambridge University Press M’baye K (1972) Le Droit du Développement comme un Droit de l’Homme. Revue des Droits de l’Homme 5:503 Marks SP (2010) Obligations to implement the right to development: philosophical, political, and legal rationales. In: Marks SP, Andreassen B (eds) Development as a human right, 2nd edn. Intersentia Mbengue MM, Scacherer S (2018) The Africanization of international investment law: the Pan-African Investment Code and the reform of the international investment regime, Brill Nijhoff Milanovic B (2016) Global inequality: a new approach for the age of globalization. Harvard University Press Muir Watt H (2012) The contested legitimacy of investment arbitration and the human rights ordeal Nolan A, Porter B, Lanford M (2009) The justiciability of social and economic rights: an updated appraisal. CHRGJ Working Paper No. 15 Pogge T (2002) World poverty and human rights: cosmopolitan responsibilities and reform. Polity. For a useful discussion, see Malcom Langford, “Socio-economic rights”. In: Maliks R, Schaffer J (eds) Moral and political conceptions of human rights: implications for theory and practice. Cambridge University Press, 2017 Roman D (2012) La justiciabilité DES DROITS SOCIAUX: vecturs et résistances Sachs J (2005) The end of poverty: economic possibilities of our time. Penguin Sen A (1999) Development as freedom. Oxford University Press Sengupta A (2010) Human rights and extreme poverty. Econ Polit Wkly 45(17) Shivji IG (1989) The concept of human rights in Africa. Codesria Sornarajah M (2013) The case against a regime on international investment law. Oxford University Press Uvin P (2004) Human rights and development. Kumarian Press Young K (2008) The minimum core of economic and social rights: a concept in search of content. Yale J Int Law 33(1) Yusuf AA (2014) Pan-Africanism and International Law Yusuf AA (2016) Diversity of legal traditions and international law. CILJ 24:681
Formal and Informal Constitutional Amendment Mortimer Newlin Stead Sellers
Abstract
The constitutional search for greater justice is the animating principle that guides or should guide constitutional amendment and constitutional change whenever and wherever it occurs. Almost all states and governments formally declare their constitutional commitment to justice, liberty, and the rule of law. Yet reports on constitutional amendment from nations throughout the world remind us that we live at a moment of constitutional peril. The general trend of constitutional government in many states has been towards greater corruption, violence, and arbitrary action. This illustrates the dual and parallel importance of constitutional principles and constitutional structures in securing the rule of law. Constitutional principles animate the constitutional structures that apply our constitutional principles in practice. Constitutional amendment and constitutional change can be formal, informal, cultural, and even at times, illegal. Which techniques are appropriate will vary according to the circumstances. The failure of widely shared and welldeveloped formal or structural constitutional arrangements to prevent the decline of the rule of law in the early twenty-first century confirms the important role that informal and cultural constitutional change have always played in the development of constitutional justice. While constitutions can declare the importance of liberty, justice, and the public welfare, and establish constitutional checks and balances to protect them, they cannot guarantee good faith. That depends on the lawyers, judges, and scholars who make the constitution real.
This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. M. N. S. Sellers (*) University of Baltimore, Baltimore, MD, USA
Constitutional amendment is the process by which constitutions change. The use of “amendment” in this context signifies the expectation that change will be for the better, removing faults that mar the status quo.1 Such amendment may be formal or informal, open or hidden, deeply considered or happened upon without much thought. What makes an amendment legitimate and justified (or not) is its actual effectiveness in making the constitution better, which is to say in securing liberty and justice through law. This Report reflects the insights of twenty authors from fourteen jurisdictions, who considered how their nations and constitutions use constitutional amendment to secure a more just society for all those subject to their government and laws—or fail to do so—by which methods, and with what consequences.2 Every legal system has a constitution, by which I mean an overall structure and guiding rules by which it operates. The concept and reality of any legal system entails the existence of such a governing constitution, and vice versa. Thus, when we study legal systems, we seek to describe their constitutions and when we seek to create or improve legal systems, we seek to develop or amend these constitutions. Constitutions may also change or evolve without the deliberate intervention of any particular actor, but when deliberately made or recognized we call the process of constitutional change “amendment.” To “amend” a constitution is deliberately to change or recognize a change in the guiding rules or overall structure by which the legal system operates in practice.3 Constitutional amendment can be either formal or informal, just as constitutions themselves can be either formal or informal. Formal constitutional amendment is amendment according to the declared rules or announced structures of From the Latin “emendare,” “to remove a fault.” On Constitutional change in general see recently, Albert et al. (2017); Contiades (2013). 3 For the development of modern constitutionalism see Adams (1788); Cf. Montesquieu (1748). 1 2
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_17
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the system itself. Informal constitutional amendment is constitutional amendment by any other means, uncontemplated by, unstated by, or contrary to the declared rules or announced structures of the legal system being modified. Sometimes the legal system has very few declared rules or announced structure. Then constitutional amendment will mostly be informal. Sometimes the existence or nonexistence or the legitimacy or illegitimacy of declared rules and structures of amendment governing a legal system remains disputed. Then the formality or informality or existence or legitimacy of constitutional amendments will also be subject to dispute. There may also be a gap between formally recognized and informally effective methods of constitutional amendment. The mere declaration or announcement of constitutional structures or rules does not necessarily make them effective in fact. Methods of amendment not declared or formally accepted by the legal system may be more effective than those that are formally announced. The nature of constitutional amendment and constitutional change, the methods by which change takes place, and the circumstances in which amendment or change is appropriate will all differ depending on the legitimacy, effectiveness, justice, history, and other contingencies of the existing constitution and institutions of the legal system in question. Yet there are some unifying themes, common aspirations, shared principles and vocabulary that emerge from the systematic study and comparison of constitutional amendment and constitutional change as it takes place in different jurisdictions. Comparisons also help clarify which techniques are most useful in what circumstances, and when they are not.
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Constitutional Amendment
Identifying common themes and shared principles in the project of constitutional government and the science of constitutional law requires consideration of the nature of the enterprise. What is—or should be—the purpose of constitutional amendment? Explicit or implicit in all the national reports on constitutional amendment and constitutional change is the statement or assumption that the only legitimate purpose of constitutional amendment is to improve the constitution in question, by making it more effective in achieving its aims. Those proposing amendments or constitutional change always also advance the necessary justifying assertion that the proposed alteration will make the constitution better than it was before. This makes the assumed purposes of constitutional amendment and formal and informal constitutional change dependent in turn on the purpose or purposes of constitutions and constitutionalism in general. If the purpose of constitutional amendment is or should be to make constitutions
better, then there must be a standard against which constitutions may be judged to be good or bad—and therefore to be better or worse and in need of amendment, or not. Here too some shared basic assumptions pervade the reports: constitutions are better when they establish justice through the rule of law, and worse when they facilitate injustice or oppression. Understanding the nature and purpose of a practice (or a document) makes the practice or institution easier to improve. The value of comparative constitutional law arises not only from the benefits of learning about the practices of others as a good in itself, but also from the insights such comparisons bring to our own particular institutions and laws. We see our own strengths and flaws more clearly in the light of comparison and receive guidance and inspiration for how we might legislate, govern, and adjudicate better in the future than we have in the past.
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Constitutionalism
Constitutionalism is the desire to understand and deliberately to improve the overall structure and guiding rules by which a legal system operates. Every institution has a constitution, whether its structure has been considered or reflected upon or not. The constitution is simply those rules by which an institution predictably operates, at any particular time. Such rules need not be self-consciously maintained, or even understood to be a “constitution” in the most basic sense of that word. But constitutionalism as a discipline goes further. It subjects the existing form of government to scrutiny. “Constitutionalism” is the deliberate study of and search for improvement in the constitutional architecture of the State. The very term “amendment” implies ameliorisation. Formal and informal constitutional amendment are the tools of constitutionalism and reflect the constitutionalists’ deliberate attempt to implement necessary constitutional improvements by design. All human societies and institutions have constitutions, but as applied to “States”, “Commonwealths”, or “Republics” the process becomes more considered. Constitutionalism develops as we seek to perfect our legal and political institutions, through deliberate constitutional change or amendment. Since justice is the measure of political and constitutional legitimacy, the only legitimate purpose of constitutional amendment is to make the constitution more just, and all constitutional amendments implicitly claim to do so. Constitutions and other political institutions are justified only to the extent that are actually just, and therefore all political and legal institutions tacitly or explicitly claim to be just in reality. The search for justice and the claim of justice that are at the heart of the constitutional project need not be absolute or fully successful to justify constitutional change or
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amendment. To be justified, the change must be at least a little bit for the better and must at least somewhat advance public institutions towards the ultimate and unachievable goal of establishing a perfectly just republic. Constitutional change can be legitimate or illegitimate, justified or unjustified, appropriate or not. The primary value and purpose of the study of comparative constitutional law through the gathering of scholarship from different jurisdictions, and the publication of the results, is to advance the shared enterprise of building more just States and societies through law.
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The Rule of Law
Proponents of constitutionalism and better constitutional government and institutions generally assert one or the other or both of two fundamental values as the central principle of their pursuit of justice through constitutional law. These two basic principles—the frequently reiterated aspirations for “liberty” and the “rule of law”—are in many respects the same thing and have both been at the heart of the constitutional project since the writings of Aristotle4 and Cicero.5 In modern legal discourse they have come to represent the two main elements of well-constructed constitutions everywhere. “The rule of law” primarily arises from the procedural and structural elements of constitutions that seek to control and guide the deliberation and actions of public officials towards their proper end of justice through checks and balances, the separation of powers, federalism, and similar structural devices. “Liberty”, in contrast, has come to stand for those substantive and fundamental human rights declared and protected by the constitution, without regard to structure or procedure. In fact, however, substantive liberty and the procedural rule of law are fully complementary and neither is possible without the other. The rule of law bears further scrutiny because it is so often appropriated by autocrats or traduced by self-interested misconstruction. The “rule of law” should not be confused with “rule by law,” to implement the will of corrupt factions and self-interested despots. The “rule of law” in its most useful sense is “the rule of law and not of men” (“imperium legum”) promoted by republican Rome and the eighteenth-century Enlightenment that inaugurated the modern science of constitutional law.6 The rule of law in this sense demands that the laws should rule and not the will or desires of powerful public officials. There is no rule of law when power can achieve its private aims through misappropriation of the public legal apparatus. The rule of law demands that officers of the state should themselves be constrained by law and prevented from
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arbitrary action. Students of constitutional science since Machiavelli and Adams have sought to discover “what combination of powers in society, or what form of government, will compel the formation of good and equal laws, an impartial execution, and faithful interpretation of them, so that citizens may constantly enjoy the benefit of them, and be sure of their continuance.”7 The rule of law in this sense requires the absence of arbitrary government, which is to say, the prevention of any exercise of governmental power that departs from government’s only legitimate purpose, which is service to the welfare of all those subject to its rule. Many governments depart from this standard. Many constitutions, much constitutional change, and numerous constitutional amendments violate the rule of law by facilitating oppression, corruption, and the deliberate betrayal of justice and the public good by those who ought to keep them safe. But since doing so violates the justifying purpose of constitutional government, any governments that do so diminish their own legitimacy, and lay themselves open to criticism. Knowing this, corrupt and self-interested rulers dissimulate their actual purposes. All constitutions, all constitutional change, and all constitutional amendments claim to serve justice, even when they do not do so in fact.
4
Liberty in its most basic sense is equal citizenship in a just community. To live under a just constitution is to enjoy liberty, and vice versa. In this sense liberty and the rule of law go hand in hand. Where there is the rule of law there is liberty, and otherwise not.8 But liberty has a second, more specific connotation, as the enjoyment of fundamental “liberties,” or human rights. Some rights are so basic that there is no justice without them, and therefore no liberty until they are restored. This substantive liberty supplements the procedural liberty associated with the rule of law. Good constitutions address both requirements: first, the procedural checks and balances that prevent arbitrary government; and second, the substantive protections that declare and protect fundamental human rights.9 The substantive liberty of fundamental human rights, like the procedural liberty of the rule of law, may differ in its requirements depending on the circumstances. Constitutionalism everywhere shares (or claims to share) the same basic goals of justice and the common good, but societies differ in their development, education, needs, and circumstances. The project of constitutional change is not and should not be
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Especially Aristoteles, Politika. Especially M. Tullius Cicero, de republica, de legibus, de officiis. 6 Silkenat et al. (2014) and Sellers and Tomaszewski (2010).
Liberty
Adams (1787). Titus Livius. 2.1. 9 See e.g. Reidy and Sellers (2005).
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simply to discover the best institutions of the most free societies and to implement them everywhere, but rather to move each State forward towards greater liberty and justice, as circumstances require or permit. Aristotle, Cicero, Machiavelli, and Montesquieu all engaged in the science of constitutionalism, seeking to make forms of government better and more just. But the real birth of deliberate constitutional amendment and constitutional change came only with the republican revolutions of the late eighteenth century, through their declared commitment to liberty and the fundamental rights of all human beings, everywhere. Constitutions became written documents, expressly dedicated to liberty and justice, with specific procedures for amendment, and carefully drafted bills of rights. This is the project of constitutionalism, in which all governments should be engaged, and to which the contributors to this volume have dedicated their careers.10
amendment or constitutional change share the same underlying putative purpose and two fundamental underlying principles. Whether we seek to change the written constitution, the interpretation of the constitution, the culture of constitutional legality, or the effectiveness of its operation, we claim to do so in pursuit of justice. We claim to amend constitutions in order to secure just laws, to maintain just institutions, to interpret the laws justly, or to develop a culture that supports justice and a just society for all. We claim this— with varying degrees of sincerity—because to admit otherwise would vitiate the enterprise.
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Constitutional Duties
The project of constitutionalism is also the purpose of constitutional amendment, which moves the constitution forward towards greater effectiveness and justice. In the new world of written constitutions, we generally think of constitutional change as taking place in or through four broad forms or techniques: formal constitutional amendment; informal constitutional amendment; customary constitutional amendment; and illegal constitutional amendment. All four of these techniques have the effect of implementing constitutional change. All four techniques have the same declared purpose of creating a more just society. And all four can be legitimate or illegitimate or justified or unjustified, depending on the circumstances in which they take place. Formal constitutional amendment takes place with the introduction of written changes into the text of the constitution itself. Informal constitutional amendment is also a deliberate change, not to the written text, but to the interpretation or application of the written constitution in practice. Customary constitutional amendment is the non-deliberate alteration of the constitution through the evolution of the culture and understanding of the constitution and constitutional interpretation. Illegal constitutional amendment is the deliberate disregard of the constitution and its requirements, sometimes behind the veil or some scant pretense of interpretation, by simply violating the constitution’s actual provisions, and doing something contrary to what the constitution would have required, if understood sincerely.11 Notwithstanding their starkly contrasting modes of operation, all four of these well-known methods of constitutional
The duties of those who interpret, explain, enforce, study, teach, and amend the constitution arise directly from the constitution’s only proper purpose and justification, which is justice. This means that the nature of the constitution and the nature of constitutional interpretation should vary according to the social and historical realities of the societies and institutions in which the proposed constitutional change takes place. The constitutional changes or amendments that will be appropriate at different times and in different places will depend on the nature of the existing constitution, the nature of the society it governs, and the circumstances in which it operates. Suppose that a constitution is substantially just, in the sense that it establishes institutions that facilitate worthwhile and fulfilling lives for all those subject to its rule. If the governing institutions are just, then we share in a duty to protect and defend them. But when the existing constitution has established or maintains an unjust society we have a duty to establish more just institutions, ideally by formal constitutional amendment. So, for example, after fighting a Civil War over the institution of slavery, the United States amended its constitution to abolish slavery, and establish the principle that all persons should enjoy due process of law and the equal protection of the laws. This was an improvement, which made the constitution better.12 Had there been no formal amendment, however, as before the War, when the text of the constitution seemed to require the return to slavery of those who managed to escape, then conscientious judges should have interpreted the Constitution to make it more just. Good judges would have done so in the face of a difficult text and perhaps even in violation of the text, because slavery is such a fundamental injustice that it requires amendment. Teachers of constitutional law, professors and other commentators and publicists, should have guided the constitutional culture in such a way as to
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Cf. Sellers (2003). Cf. Roznai (2017).
See, Constitution of the United States Amendment XIII (December 6, 1865) and Amendment XIV (July 9, 1869).
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protect the fugitive slaves, because slavery is so clearly antithetical to justice.13
but they often do so over time, with considerable opposition and delay.
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Constitutional Justice
The example of the great injustice of slavery in the United States before the Civil War, and the further injustice of racial discrimination and racial oppression afterwards, illustrate the methods and necessity of constitutional change, and the inescapable standard of justice against which to measure every aspect of the constitutional project. Similar, if perhaps smaller, injustices exist in every political community, and need to be rectified. Formal and informal constitutional amendments and constitutional changes always take place in the light of justice and have no use or justification unless they take justice into account. At the same time, justice is impossible without constitutionalism. Constitutional obscurity conceals and facilitates injustice, and only the clearsighted examination and open discussion of scientific constitutionalism can overcome the concealed manipulations of unjustified authority. Constitutional justice is the only legitimate aim of constitutional amendment, and should give continuous guidance to all students of constitutional law. Constitutions play not only a procedural and substantive role in the search for the common good and the protection of fundamental liberties, but also an educative role in improving the civic and constitutional cultures of the societies they regulate and protect. Simply by declaring fundamental rights, constitutions make these rights more real. By announcing commitments to justice, liberty, and the common good, constitutions make citizens and public officials more likely to respect their duties. Not that we will always fulfill all the constitutional duties that we know to exist, but knowledge of justice is the first step towards respect for justice, and its eventual realization. Even hypocrisy is better than ignorance. Hypocrisy is the tribute that vice pays to virtue,14 which is why even the worst regimes declare noble constitutional aims. They do this to claim a legitimacy they do not deserve. Yet even hypocritical declarations of rights and duties have the virtue of reminding us that such constitutional rights and duties exist, and noble sentiments once embedded in constitutions may bloom years later to move the law towards greater justice. This gives formal constitutional amendment a value that transcends its actual effectiveness. Formal, informal, cultural, and even illegal constitutional change are useful and justified only when they make the world more just,
Argentina
Actual constitutions and experiences of constitutional amendment in various nations illustrate both the general principles and some differing realities of constitutional change. For example, the Argentine Constitution contemplates a very formal process of constitutional amendment, beginning with a special act of Congress summoning a constitutional convention. Nevertheless, a constitutional amendment of 1994 made it possible for treaties to achieve constitutional status, bypassing the need for a constitutional convention. This facilitated Argentina’s conformation to global standards of justice, without facing the procedural limitations of ordinary constitutional politics. The 1994 amendment itself respected formal procedures, so constitutional propriety was maintained, but it changed the nature of the Constitution, making formal constitutional change much easier than it had been before. The stricter the formal process of amendment, as in Argentina, the more likely there will be informal “amendments” made to the constitutional regime through judicial interpretation. Estela Sacristan, in report on constitutional amendment in Argentina, notes many emergency measures eroding property rights that were tolerated by the Argentine Supreme Court under the guise of “regulation.” A series of cases beginning with a decision concerning rent control in Ercolano c/ Lanteri de Renshaw showed great caution in protecting property rights. The court’s motivation reflected crisis conditions and economic necessity in the wake of the First World War, but the rationale offered by the Court to justify such decisions relied on the pretense that such regulations were “temporary.” This was disingenuous, but effective. The Argentine example illustrates the symbiotic relationship between formal and informal constitutional change. The great difficulty of achieving formal amendment in Argentina encouraged informal amendment through the non-enforcement of formal constitutional requirements. This was particularly striking in the case of the right to a jury trial, formally incorporated into the Constitution of 1853–1860 in Section 24. This right has never been fully implemented by law and remains a nullity in practice.
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13
See e.g. Dyer (2012). François, Duc de la Rochefoucauld, Réflections: ou sentences et maximes morales (1664) #218: “L’hypocrisie est un homage que le vice rend à la vertu.” 14
Australia’s written Constitution was passed as a statute by the Imperial Parliament in the United Kingdom in 1900. Australians were consulted, but as a formal matter the
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constitution was imposed by the imperial power. To make formal changes in the constitution, the Australian Parliament must propose changes for approval by a majority of electors in a majority of the Australian States (and a majority of electors overall). As in Argentina, this difficult process has made formal amendments rare, and encouraged informal constitutional changes, mostly through judicial interpretation. The High Court of Australia is the ultimate arbiter of constitutional meaning in Australia, and has not been shy in exercising its power. The British background of the Australian constitutional tradition left most human and civil rights with very little formal constitutional protection, but the High Court has stepped in to remedy the deficiency by construction. The Court has found the implication of freedom of political communication (for example) in the necessities of representative democracy, as established by the Constitution as a whole. Elisa Arcioni observes in her report on constitutional amendment in Australia that Commonwealth and State legislation can and has been struck down as invalid when it conflicts with fundamental human rights, including the right to political participation, or any of the other rights necessary for political participation to be effective, and well-informed. The dubious legitimacy of an Australian constitution imposed by the fiat of a foreign parliament, and with very few embedded substantive and procedural rights, has therefore been much enhanced by an Australian judicial culture that values democracy, the rule of law, and fundamental human rights. The ostensibly Federal nature of the Australian constitution has similarly given way in the face of the needs of the Commonwealth as a whole. The formal text of the Australian constitution today is almost unchanged since its enactment in 1900, yet it governs a democratic and substantially just legal system, with the widespread support of all elements of Australian society.
constitutional change that nevertheless has a profound effect on the actual system of government in Belgium. Jurgen Goosens, in his report on constitutional amendment and constitutional change in Belgium, explains the highly complicated nature of Belgian federalism, which divides Belgium not only into linguistic communities, but also into geographic regions. This deliberate structure of checks and balances assures that nothing substantial can be accomplished without broad communal as well as regional consensus. Consensus in reality depends upon the secret negotiations of party leaders and high public officials, with no input from the people and very little from Parliament or any other organs of the State. This small elite often succeeds in effective compromise, which the rest of society accepts, but the process can be difficult. In 2010 and 2011 it took Belgian politicians 541 days to agree on a new state reform and to form a new government. Thus, constitutional reform and ordinary politics were unavoidably linked. In fact, the constitutional amendment or “Sixth State Reform” implementing the compromise of 2011 by substantially altering the structure of the Senate, took place outside the existing procedures for constitutional amendment, adding (and then relying upon) a new “transitional provision” in the clause regulating constitutional change. This sleight-of-hand made compromise possible, and received the imprimatur of the Venice Commission of the Council of Europe, but illustrates the extent to which the legitimacy of constitutional change in Belgium relies on the substantive necessity of satisfying the communities, rather than the procedures through which constitutional alterations take place. Each change has been incremental towards greater communal federalism and it is this value, rather than formal procedures, which has been decisive.
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Belgium
The Belgian Constitution has been evolving since the 1970s from a unitary state into a more federal form of government. This was done through a series of six amendments strengthening the role of linguistic groups in all aspects of the Belgian legal system. This included the establishment of a Belgian Constitutional Court, to review the constitutionality of legislation and its compliance with the division of powers between the linguistic groups. The Constitutional Court is the ultimate arbiter of the Belgian Constitution and therefore the primary engine of informal constitutional change in Belgium. The Legislative Division of the Council of State also has significant influence, since it advises the legislators on proposed legislation. Belgian constitutional lawyers refer to this process as “latent state reform,” unacknowledged
China
Chinese judicial culture is dramatically different from that of Belgium. Where Belgian judges act with self-confident independence, Chinese judges demonstrate no independence at either the formal or the practical level. The rule of law, democracy, and fundamental human rights have no real influence on judicial behavior in China. Thus, judges in China have neither the constitutional power of judicial review nor any inclination to restrain or correct the formally illegal actions of public officials. Since 1949, China has adopted five different formal constitutions, none of which had made a substantial difference on the actual behavior of public officials, or underlying realities of party rule in an autocratic and undemocratic State. The most significant element in actual Chinese legal and political practice since 1949 has been the policy guidelines of the Communist party, such as the “Two Whatevers”
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guideline of the 1970s: “Whatever policy decision was made by Chairman Mao we must resolutely maintain; whatever instruction was made by Chairman Mao, we must unswervingly abide by.” Chengdong Jin in his report on constitutional change in China notes that the seventh paragraph of the Preamble on guidelines is the most frequently amended part of the Chinese Constitution. Recent significant amendment made in this paragraph added “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” to Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Thought of Three Represents and the Scientific Outlook on Development as “Guiding Ideologies of the State.” Thus, although the Chinese Constitution now declares a commitment to improve “the socialist rule of law,” it reiterates that “the leadership of the Communist Party of China is the most essential feature of socialism with Chinese characteristics.” The new constitution also removes the two-term limit that had been placed on the Chinese president, eliminating what had been the most significant restriction on presidential power. Formal constitutional amendment in China is approved by the National People’s Congress at the proposal of the Communist Party of China, but in reality such formal procedures simply ratify and make public decisions already taken and implemented by the President and his coterie. The Chinese Constitution is operative in reality only insofar as it reveals the attitudes of those who are actually in charge. The real constitution follows the vagaries of the President’s will.
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Cyprus
Cyprus is a former British colony and received its independence and constitution, like Australia, through an Act of the British Parliament. Cyprus was unusual in being a bi-communal State, with guarantees and protections for both the Greek Cypriot and the Turkish Cypriot communities. For this reason, 48 out of the 199 Articles of the 1960 Constitution are basic and unamendable, whereas non-basic articles may be amended by a law passed by separate special majorities comprising at least two-thirds of the Greek-Cypriot representatives and at least two-thirds of the Turkish-Cypriot representatives. This structure sought to maintain communal solidarity by respecting all elements of Cypriot society. This noble intention met practical frustration when Greek and Turkish Cypriots failed to develop the culture of cooperation necessary to support their shared political institutions. Greek Cypriots took charge of the government, Turkish Cypriots withdrew their participation, and political control and the island was divided between the two communities in a manner wholly inconsistent with the formal constitutional
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order. The only conceivable justification for such actions was the doctrine of necessity. The formal constitution became a nullity, the Turkish half of the island disregarded the Constitution and the Greek half of the island implemented constitutional amendments without reference to the formal provisions of the Constitution itself. Konstantinos Kombos and Athena Herodotou explain in their report on constitutional change in Cyprus that no other option was available, given the irreconcilable breach between the two communities on the island. The Cypriot experience illustrate the complicated relationship between substantive justice, procedural justice, legitimacy, and effectiveness in constitutional amendment and constitutional law. The structure of the formal Cypriot constitution was dictated by a political compromise between Greece, Turkey, and the United Kingdom, never fully accepted by the citizens of Cyprus. The substantive justice of the compromises embodied in the document could not overcome the mutual hostility of the Cypriots, undermining the effectiveness of the formal document in practice. Necessity therefore required unconstitutional constitutional amendments—amendments which could be justified, if at all, only by their substantive justice and utility. Thus, constitutional amendment like constitution-drafting and constitutional interpretation ultimately derives its legitimacy and validity from the substantive requirements of justice.
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The Czech Republic
The process of formal constitutional amendment in the Czech Republic takes place by three-fifths vote of each of the two houses of the legislature, with the restriction that “Any changes in the essential requirements for a democratic law-based state are impermissible.”15 The Constitution does not specify what these are, giving considerable latitude to the constitutional authorities and especially to the Constitutional Court. The Constitutional Court has stated that “the guiding principle is undoubtedly the principle of inherent inalienable, non-prescriptable, and non-repealable fundamental rights and freedoms of individuals equal in dignity and rights; a system based on principles of democracy, the sovereignty of the people, and separation of powers, respecting the cited material concept of a law-based state.”16 The relatively recent date (1993) and favorable circumstances of the Constitution of the Czech Republic help to explain its clear commitment to the democratic rule of law, and the principles this entails. Miluśe Kindlová, points out in reporting on constitutional amendment in the 15
Art. 9(2) of the Constitution of the Czech Republic. Ruling of the Constitutional Court of 26-11-2008. File No. 19108 (No. 446/2008 Coll.) par. 93. 16
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Czech republic that many of its drafters and interpreters believed such principles to be binding and unamendable in their own right, being principles required of any legitimate constitution, and therefore beyond the competence of any constitution-maker to limit or diminish their peremptory effect. This would make the principles of the democratic rule of law unamendable limitations on constitutional amendment, even when the constitution makes no such express prohibition in the body of its own written text. The Czech Constitutional Court relied on Art. 9(2) of the constitution, protecting the “democratic law-based state” to impose a ratchet on constitutional amendment, so that “no amendment of the Constitution may be construed in a way which would lead to a limitation of the already attained level of procedural protection of fundamental rights and freedoms.”17 This extends to the delegation of powers of the Czech Republic to the European Union, which “must not go so far as to impair the very essence of the republic as a sovereign and democratic state governed by the rule of law and based on the respect for rights and freedoms of man and citizen or establish a change in the essential requirements of the democratic state based on the rule of law.”18
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Denmark
Denmark’s constitutional rules are essentially entrenched in one single act, the “Grundloven,” or “Fundamental Law,” consisting of 89 sections. Formal amendment of the Grundloven requires a positive vote by two consecutive Parliaments (with an intervening election) followed by a direct vote of the electors, and royal approval. Thus, formal constitutional amendment requires not only concurrence of the government and two Parliaments, but also the electorate, requiring both a majority of those voting and positive vote by at least 40% of the electorate as a whole. This very democratic, but also quite restrictive procedure has rendered formal constitutional amendment rather rare in Denmark. The logic of this strict rule of formal constitutional amendment implies that treaties and the case law of bodies established by treaties cannot be read into the rules of the Fundamental Act. Jens Hartig Danielsen in his report on constitutional amendment in Denmark points out the Danish treaties only require a simple majority of votes to take effect, a much less stringent standard than the formal procedures required to amend the basic law. The strictness of the formal standard encourages in Denmark the same creativity in informal procedures that arises whenever formal amendment is 17 Ruling of the Constitutional court of 25.6.2002 File No. Pl. US 36/01 (No. 403/2022 Coll.). 18 Ruling of the Constitutional Court of 26.11.2008 File No. 19/08 (No. 446/2008 Coll.), par. 93.
hard to achieve. In this case, Denmark has developed certain “constitutional customs” that modify the Grundloven. For example, the Parliament’s Finance Committee is entitled to authorize ministers to incur expenses, in clear contravention of Section 46(2) of the Fundamental Act. The Danish Constitution illustrates the flexibility possible in a very small and culturally homogenous nation, with a high level of education and general consensus in favor of the rule of law, social solidarity, and fundamental human rights. Somewhat archaic and under-elaborated constitutional structures operate well through the good will of governments, legislators, and other public officials. Formal constitutional change takes place only with very broad social support and generally ratifies informal changes that have already occurred in the society at large. Formal constitutional details become less important when the society itself is operating well.
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Hungary
Hungary illustrates the threats to constitutional government that arise when the government itself sets out to undermine the rule of law. Formal amendment has been comparatively easy in Hungary since the 1949 Soviet era constitution, which established amendment by two-thirds majority in Parliament. This became significant in 1989, when the Hungarian Republic used formal constitutional amendment to establish a democratic rule of law state. After 2010, with the rise of illiberal and authoritarian parties in Hungary, these same procedures made it easier to constitutionalize provisions that violated the liberal rule of law reforms of 1989. The possibility that the Hungarian Constitutional Court might review illiberal or anti-democratic constitutional amendments for their compatibility with the fundamental principles of the Constitution as a whole was directly attacked by a formal amendment in 2013, which stated that “[t]he Constitutional Court may only review the Fundamental Law and amendment thereof for conformity with the procedural requirements laid down in the Fundamental Law with respect to its adoption and promulgation.”19 Tímea Drinóczi, Fruszina Gárdos-Orosz, and Zoltan Pozsár-Szentmiklósy, in their Hungarian Report point out that vague constitutional provisions concerning fundamental rights invite broad judicial discretion, verging on informal constitutional amendment, that may be challenged by political actors, when they believe that judges have gone too far. When the strength of the governing party in Parliament exceeds two-thirds, as has been the case in Hungary for much of the past decade, the government may be tempted to amend the constitution whenever constitutional protections thwart 19
Article 24(5) of the Fundamental Law adopted by the Fourth Amendment of the Fundamental law in 2013.
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the government’s will. The Constitutional Court of Hungary affirmed in response that the jus cogens of international law and common principles of the constitutional heritage limit the powers of the constituent power, even when this follows the Constitution’s formal procedures.20 Therefore, although the Fundamental Law does not contain unamendable clauses and the Fundamental Law limits the right of the Constitutional Court to review the amendment of the Constitution, the Constitutional Court, by way of interpretation, discovered its inherent power to make substantive review of amendments to the Fundamental Law in certain cases. Whether in practice this will restrain the government in any way, remains to be determined.
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secular nature of the State, and an “undeniable core” of fundamental rights connected to human dignity, despite the absence of any express reference to such matters in the Constitutional text. Many of these developments correspond to broader trends in the European culture of constitutional law, sometimes justified by reference to the “open clause’ of article 11, which allows the ratification of European Treaties through ordinary legislation, without the need to modify the text of the Italian Constitution.21 At the same time, the Court has identified in the “supreme principles of the constitutional system” a limit to the primacy of European law.22 Due to the lack of consensus and the difficulty of amendment, most of the constitutional change since the Second World War in Italy has been informal, made by courts and governments in response to the exigencies of the moment.
Italy
The Italian constitution of 1948 was implemented after a period of fascist rule under a flexible and easily amended constitution, leading to many of the same abuses currently evident in Hungary. The post-war Constitution therefore made amendment more difficult in order to entrench fundamental constitutional values against transient majorities. The new rules required the concurrence of both legislative houses for amendment in two successive debates, and approval by popular referendum (Article 138)—unless both chambers achieve a 2/3 majority at their second reading. The Constitution also stipulated that, “the republican form of the State shall not be a matter for constitutional amendment” (Art. 139). Recent constitutional amendments have limited the death penalty (Art. 27), regulated the vote of Italian citizens living abroad (Art. 48), strengthened the equal opportunities of men and woman (Art. 51) and brought Italy into closer conformity with the institutions of the European Union (Art. 111). Tania Groppi, in her report on constitutional amendment in Italy, observes that the formal amendment procedures set out in Article 138 of the Italian Constitution have implemented reforms very effectively when the political will is present, even in times of considerable opposition and controversy. There have also been many informal amendments, made possible by the generality of most constitutional prescriptions. Electoral Laws or Standing Orders of the Chambers fill in and clarify when the Constitution is vague. The broad capacity of Electoral Laws allow broad changes in the form of government to take place without formal constitutional amendment. The Constitutional Court of Italy has used constitutional interpretation to protect universal human rights not expressly mentioned in the constitutional text. The Court has also discovered unstated constitutional principles, such as the
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The Constitution of Japan was issued on November 3, 1946, shortly after the end of the Second World War, and came into effect on May 3 of the following year. This made it the basis of the post-war settlement, introducing a rigidity even greater than that of Italy, which came into existence in similar circumstances. There has never been a formal amendment of the Japanese Constitution. This makes informal constitutional changes more significant made mainly through a strategy known as “Kaishaku Kaiken,” accomplishing de facto constitutional change by reinterpreting the constitution. The foreign origin and rigidity of their constitution has led many Japanese to view the existing form of government as an alien imposition, and politicians frequently call for more formal amendments, particularly in Article 9, which strictly limits Japan’s recourse to military power. The Japanese experience raises fundamental questions about constitutional legitimacy. Does legitimacy depend on the excellence of the constitution or the procedure which created it? Japan’s constitution as it exists today substantially incorporates a draft constitution prepared by the General Headquarters of Gen. Douglas MacArthur, the Supreme Commander for the Allied Powers in Japan after the Second World War. This implemented democracy and respect for human rights, fundamentally replacing the autocratic institutions of the Meiji imperial regime. Keigo Komamura explains in reporting on constitutional amendment in Japan that some view this American constitution as having inaugurated an “August Revolution,” bringing new authority and self-rule to the Japanese people, while reducing the emperor to a ceremonial role. Others object to what they 21
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Decision 12/2013 (V.24) of the Constitutional Court, Reasoning, [30], [36]–[37], [43].
Japan
Since Decision No. 14/1964. Since Decision No. 183/1973, and especially in Decision No. 170/1984. 22
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characterize as an “imposed constitution,” importing Western values to Japan. The formal procedures of constitutional amendment in Article 96 of the Japanese Constitution require two-thirds majorities in both houses of the Nation Diet, followed by a majority of votes in a subsequent national referendum. When a constitutional amendment is approved in accordance with these procedures, the Emperor immediately announces its official promulgation in the name of the people. This procedure combines popular sovereignty with the authority of the Emperor as the basis of constitutional change, but does not entirely avoid the underlying reality that the Constitution itself arose by imposition, after military defeat. The Constitution of Japan begins in its Preamble declaring constitutional democracy, liberty, and the abhorrence of war as “universal principles of humanity,” and it is on these principles, rather than popular sovereignty, that the legitimacy of the Japanese Constitution must ultimately rest.
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The Netherlands
In the Netherlands, as in all the nations reporting on their constitutions at the World Congress of Comparative Law in Fukuoka, informal constitutional change has taken place much more frequently than formal amendment. That should not be surprising given the deliberately general and open texture of most well-drafted constitutions, and the unavoidable alterations required by changing circumstances in evolving societies. The current Constitution of the Netherlands first came into existence in 1814, and therefore represents one of the world’s most stable constitutional polities. This happened in part with the aid of gradual constitutional change, both formal and informal, over many years. Reijer Passchier in his report on the Constitution of the Netherlands stresses that informal processes of constitutional change have been much more important than formal constitutional revision and that therefore informal change should be the central concern of anyone who seeks to understand Dutch constitutional development. This arises in part from the relative difficulty of formal constitutional changes in the Netherlands, which requires two legislative stages, with general elections for the lower house in between. The first reading requires a simple majority of both houses of parliament. The second reading requires a qualified two-thirds majority in both houses and the assent of the government. This does not frequently occur. Passchier advocates what he calls an “historicalinstitutionalist” view of constitutional change, accepting the authority of formal constitutional norms, while recognizing that institutional practices and understandings of these norms may evolve over time. Thus, the master constitutional text retains its authority, but the institutional context in which the constitution is embedded can adjust to changing
circumstances. This can lead to reinterpretation or to the development of new conventions to govern the application of constitutional principles in practice. The text does not change, but its meaning changes, or actors come to feel bound by standards that are not explicit in the text.
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Poland
Poland offers another example of a constitutional state in which the rule of the law and the stability of constitutional rights has been challenged by the forces of populism. Poland has relatively rigid formal procedures of constitutional amendment, designed to protect the rights of the people and the humanistic orientation of the state. The introduction to the Constitution of Poland refers to the “inherent dignity of the person, his or her right to freedom, the obligation of solidarity with others, and respect for these principles as the unshakeable foundation of the Republic of Poland.” Janusz Trzinski and Michal Szwast in their report on the Constitution of Poland identify the development of a new mechanism of extra-constitutional change of the constitutional order. Thwarted by courts and other institutions in the pursuit of unconstitutional political aims, but without sufficient numbers to effectuate formal amendment, the dominant party in the legislature has used ordinary legislation to alter the laws governing the operation of key state bodies, in order to render them ineffectual in fulfilling their duty of protecting constitutional norms. For example, numerous amendments of the Constitutional Tribunal Act have made it impossible for the Court to function or to exercise its powers normally, and prevented the review of unconstitutional legislation. Such interventions by the legislature may be seen as simple violations of the rule of law, contrary to formal constitutional norms. The innovation of the Polish technique arises from its oblique effect. By incapacitating public authorities, legislation on capacity and procedure renders the formal constitution inoperative, and substitutes a new legislative constitution, superseding the formal institutions of the state. This challenge to the rule of law is more subtle than the open subversion of the rule of law in Hungary, or the constitutionally entrenched extra-legal role of the party in China, but it has a similar effect. By removing the possibility of constitutional review and enforcement, the government renders the existing constitution inoperable and opens the door to less restrictive informal constitutional norms.
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Romania
The 1989 Constitution of Romania has a comparatively rigid structure of formal constitutional amendment, requiring two-thirds majorities in both houses of parliament, followed
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by a referendum. There is also a secure and assertive Constitutional Court. Thus, most constitutional change has been informal and has taken place with the acceptance of even at the initiative of the Constitutional Court. The Constitutional Court is also the first and last authority to give an opinion on formal constitutional changes. This power, conveyed in Article 146 of the Constitution, provides that the popular referendum required for constitutional amendment may not take place until the Court has given its approval. Elena-Simina Tӑnӑsescu and Bianca Selejan-Guţan in their report on constitutional amendment in Romania note that the most striking examples of informal constitutional revision by the Romanian Constitutional Court have been the Court’s efforts to constitutionalise its own new competences, introduced by law. The powers in question were introduced by the organic law of the Court in 2010 concerning review of Acts of Parliament. In a decision made in 2012, the court concluded that Parliament’s legislative power concerning the Court’s powers only extended to increasing the Court’s powers but not to removing powers already conferred by law. These now had a “constitutional rank,” despite the silence of the constitution on such matters. The experience of Romania illustrates the general proposition that the mere existence of a Constitutional Court does not guarantee protection against unconstitutional revisions. Most informal revisions of the Romanian constitution have taken place with the blessing of the Constitutional Court. In addition to the question of extending its own jurisdiction, the Court has been remarkably complacent in the face of legislative incursions against fundamental rights, such as the legislative ban on same-sex marriage, and popular initiatives to entrench the marriage ban in the Constitution. These may to some extent reflect a desire to avoid defying public opinion in emotive cases, even to protect fundamental human rights.
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Singapore
Singapore has been ruled by one party with an overwhelming majority in Parliament since its independence in 1965. This majority has never fallen below the two-thirds threshold required for constitutional amendment, making the Constitution, for the most part, an instrument, rather than a limitation, on the ruling party. The primary aim and main source of legitimacy of the Singapore government since its inception has been economic growth, not democratic or constitutional guarantees, and the government has altered the constitution whenever the court has exhibited a desire to constrain it, as in the Chng Suan Tze decision in 1989, concerning the detention of suspected dissidents. Constitutional change in Singapore has generally been formal, in light of the dominance of a single political party. Swati Jhaveri in her report on the Constitution of Singapore
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observes that this has given rise to an instrumental rather than a normative view of the Constitution and constitutional amendment, as a tool for political consolidation and change, rather than a limit on government power. The aim has been to achieve a sense of stability in politics, which is heavily managed, rather than seeking to protect fundamental rights, or limit the powers of the government. The executive power in Singapore has guided the process from the beginning, and never shared its primacy with other organs of the State. This executive-led process prevented the constitution itself from playing a significant role in conferring legitimacy on government. De facto change in the actual constitution of Singapore always precedes alterations in the de jure constitution, which simply reflects political realities that develop outside the formal constitutional framework. Singapore’s relative stability and financial success under the more-orless untrammeled rule of a single powerful man and his family has avoided too much scrutiny of the largely irrelevant formal constitution. This well illustrates Pope’s dictum that good administration can overcome poor forms of government, more often than good constitutional structures can overcome the corruption of rulers or—what is worse—the corruption of the people themselves.23
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Slovak Republic
The Slovak Constitution shares with many other constitutions and particularly with post-Soviet and post-imperial constitutions, the imbedded desire to overcome and prevent the worst offenses of a preceding regime. More specifically, the Constitution seeks self-consciously to entrench and perpetuate fundamental liberal values, including universal human rights, the rule of law, and democratic participation of citizens in their national government and politics. At the same time, the National Council of the Slovak Republic (the parliament) has the power to approve the Constitution and constitutional laws, as well as their amendment. The task of the constitution and the Constitutional Court is to reconcile this constituent power of the National Council with the values and purposes it exists to serve. Ján Svák and Boris Balog observe in their report on the Slovak Republic that when the current Constitution was adopted by the Slovak National Council in 1992, the measure was not formally described as a constitutional law. Nevertheless, it has been universally accepted as such. Moreover, although the constitution contains no explicit derogatory clause, the National Council of the Slovak Republic has approved constitutional amendments since 1998, in the 23 “For forms of government let fools contest. Whate’er is best administer’d is best” Alexander Pope, Essay on Man, Epistle 3.1.303-4 (1733).
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form of constitutional laws—or “amending constitutional laws”—when they directly amend the Constitution. None of this is formally contemplated by the constitutional text, but it fits the over-all scheme well, reflects Slovak constitutional tradition, and is necessary for the smooth execution of the constitutional structure as a whole. This relationship between formal and informal constitutional institutions reflects the importance of underlying constitutional values in any successful constitutional regime, and the necessary constitutional principles that support these values and give the constitution the coherence and legitimacy that make it effective in practice. Fundamental constitutional values may be explicit or merely implied in the constitutional text, but they animate the whole and constitute the ultimate constitution of the state. To disregard or change these underlying values and principles to overturn the Constitution in toto. The Slovak Constitutional Court has been quite deferential in policing these boundaries, which has weakened the liberal and democratic vitality of the State.
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Switzerland
Switzerland is, with the Netherlands and the United States, one of the world’s oldest federal, liberal, and democratic republics, and provided an inspiration for the development of more scientific constitutional government throughout the world. Paradoxically, the very antiquity and self-confidence of these ancient republics also makes their written constitutions more quirky and antiquated than more recently drafted forms of government. But their supporting constitutional culture is correspondingly deeper, and therefore more able to transcend any weaknesses and infelicities in the formal constitutional order. Luc Gonin, in his report on constitutional amendment in Switzerland, points out that Switzerland’s constitution provides two primary routes towards formal constitutional revision, through popular initiative or representative democracy. Popular initiatives have always played a large part in all aspects of Swiss political life, and in this case require 100,000 signatures within 18 months to raise a question for approval by the people and Cantons of Switzerland. The two Councils and the Federal Assembly may also propose revisions (Art. 193§1) or decree them in the case of partial revisions by the Federal Assembly (Art. 194§1). The requirement of majority approval both by a majority of the people and by a majority of the Cantons combines the democratic and the federal principles, without erecting too significant a barrier to constitutional change. Switzerland’s ancient and very democratic constitutional order also illustrates the growing power of international law and international institutions in constitutional law and constitutional interpretation. Art. 190 of the Constitution of
Switzerland explicitly requires the Federal Court to apply national laws and international treaties without review, but does not specify which should prevail in case of a conflict between the two. The Court now firmly asserts the primacy of international law over federal laws.24 The same applies to the Constitution. The Supreme Court’s role in reconciling national law with international law may constitute a form of informal amendment, particularly where international and constitutional context is used to redefine the constitutional norm.25
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United States of America
The United States Constitution became effective in 1789, opening the modern era of written constitutions and setting a very high bar for formal amendment: two-thirds vote in both houses of the legislature, followed by a three-quarters vote of the States.26 This corresponds closely to the standard set for ratification of the original Constitution, and pays due respect both to Federal and to State power, but is a very strict standard making formal amendment an exceptionally rare occurrence in the history of the United States. As in the approval of the original federal constitution of 1787, there is no recourse to a referendum or plebiscite, procedures strongly disapproved by the founders of the American republic. Richard Kay, in his report on formal and informal amendment in the Constitution of the United States, observes that the very difficult procedure for amendment of the United States Constitution has been offset by the broad and general terms of the document itself. The Fourteenth Amendment in particular, passed after the American Civil War in the mid-nineteenth century, provides that no state shall “deprive any person of life, liberty, or property, without due process of law; nor deny any person within its jurisdiction the equal protection of the laws” and that Congress shall have the power to enforce this article “by appropriate legislation.” This very broad standard establishes basic constitutional values and principles, with an exceptionally wide range of possible legislative and judicial applications. Very significantly, at the outset of constitutional government in the United States, Chief Justice John Marshall noted on behalf of the Supreme Court in the famous case of Marbury v. Madison27 that “it is emphatically the province and duty of the judicial department to say what the law is.” 24
In its decision 139 I. 16. See, Decision 142 II 35, dated November 26, 2015, in which the Supreme Court clarified how it would resolve a normative conflict between national and international law. 26 Constitution of the United States, Article V. 27 Marbury v. Madison, 5 U.S. 137 (2003). 25
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This established the principle of judicial review by which American courts and particularly the United States Supreme Court must disallow laws repugnant to the Constitution of the United States. This decision and its understanding of the Constitution identifies a formal and definitive authority for certifying “informal” constitutional changes, giving them a formal warrant in the Constitution itself, without requiring any modification of the text, Such changes present themselves as no more than a better understanding of the existing document, superseding erroneous readings of the past. Quite often this assertion is actually true—or at least accepted as true by the government and people of the United States of America.
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Challenges
Accounts of constitutional amendment and constitutional change gathered from many different nations as they exist today remind us that we live at a moment of constitutional peril. The general trend of constitutional government in many states for the past decade has been away from constitutional justice, liberty, and the rule of law towards greater oppression, corruption, violence, and arbitrary action. Russia, Turkey, China, Egypt, Hungary, Poland, the United Kingdom and the United States are among the most celebrated examples of nations that beginning from completely different histories and stages of constitutional development have all in recent years seen a steep degradation of their constitutional cultures. Lawyers and scholars everywhere have considered whether some specific constitutional infirmity has contributed to this decline, and which amendments or other constitutional changes might do the most to protect liberty and justice against the inroads of corruption and creeping autocracy. The fault, however, seems to lie less in the structures of the constitutions themselves than in changes of public culture, education, and the formation of public opinion. Television, the internet, and the dissemination of information on-line make public opinion highly manipulable by self-interested governments, oligarchs, and wealthy corporations, to the detriment of the public good. This undermines the democratic elements of modern constitutional governance. The absence of an obvious formal or structural remedy to the decline of constitutional democracy in the early twentyfirst century reminds us of the important role that informal and cultural constitutional change have always played in the development of constitutional justice. If the origin of all law and justice is, as Cicero long ago observed, the love and care we owe our fellow human beings, then the purity of this source of law and justice depends on good faith, the bona fides that we owe to the republic in fulfilling our civic and
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constitutional duties. While constitutions can declare the importance of liberty, justice, and good faith, they cannot instill these virtues directly in the people. To do so is the duty of real human beings—and above all the scholars and practitioners of constitutional law, who teach the public how to understand and venerate their constitutions, governments, and duties to each other, and to the laws.
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Principles and Techniques
Giuseppe Franco Ferrari has usefully observed that constitutionalism as we know it is the product of the liberal tradition, establishing the government of laws, founded on the consent of the people, through such basic principles as the protection of the rights of man and citizen, the separation of powers, the rule of law, and the constitutional review of statutes codified in a higher law. These fundamental constitutional principles and techniques are necessary and fundamental because government without them is invariably unjust and therefore at odds with the first purpose of the constitutional project. Constitutionalism begins by establishing provisions binding both on citizens and on public authorities. Constitutions establish the aims of the State and the principles and techniques necessary to accomplish these aims. Formally confirming this social framework in written form gives the political community the basis to advance the public good. The benefits conveyed by deliberately designed and written constitutions are considerable, but this raises the problem of formal and informal amendment. Societies and nations cannot and should not be static in all aspects of their fundamental laws and institutions. They should aspire to improve, and most in any case respond to changing circumstances and ideas. Amendment is therefore a necessary and inevitable aspect of every constitution whether this is openly acknowledged or not. The principles and techniques of constitutional government are two aspects of the same project. Constitutional principles declare the aims, values, and core ideology that the constitution seeks to serve. Constitutional techniques establish social and political structures that can accomplish and advance these aims. Both are necessary. Neither can be effective without the other. Constitutional principles maintain the purposive element in the enterprise. Constitutional techniques guide deliberation and establish the institutions that implement the policies of the State. The applicable principles and techniques are embodied in the Constitution itself, but must also reflect the inherent requirements of the constitutional project. Many constitutional principles and constitutional techniques are shared by all well-ordered constitutions, regulating the resort to constitutional change—by formal, informal, customary, or even by unconstitutional amendment, when circumstances require it.
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Conclusion
Reports from constitutional law scholars gathered from many jurisdictions throughout the world remind us that constitutional amendment and constitutional change take place in many ways. These can be formal, informal, cultural, and even at times illegal, in violation of the established constitution itself. The unifying force in all such forms of constitutional change or amendment is their claim to advance justice. No constitutional amendment or constitutional change takes place without its proponents claiming that the change will advance justice. They do so because constitutional amendment is not legitimate or justified unless it makes the constitution better, and the sole standard of constitutional value is the constitution’s effectiveness in realizing justice in fact. Constitutionalism is the project of creating or improving the constitutions of the world so that they serve their declared purpose better. Constitutional amendment and constitutional change are the processes by which constitutionalists attempt to do so in practice. The first commitment of constitutionalism is to establish the rule of law, minimizing the arbitrary power of public officials, to guide them towards the public good. Citizens protected in this way enjoy “liberty”, which is to say protection against the domination or arbitrary power of those who would oppress them. The procedural checks and balances of constitutions everywhere exist to restrain arbitrary power in all forms of public and private authority. The constitutional search for greater justice is the animating principle that guides or should guide constitutional amendment and constitutional change whenever and wherever it occurs. We all share a primary duty to implement, interpret, enforce, and amend our constitutions in the light of
justice, liberty, and the rule of law, whatever our other affinities may be. The fundamental principles of justice, once expressed, are hard to forget. Plant the seeds of justice in the constitution if you can, or in the legal or national culture, and eventually they will grow. Seek to establish justice, which is the purpose of constitutional law, or at least amend and interpret the constitution in the direction of greater justice, whenever you can. Scholars of law in every jurisdiction share or should share these same noble purposes. Ita ius esto.
References Adams J (1787) Defense of the constitutions of government of the United States of America, vol I. London, Dilly Adams J (1788) Defense of the constitutions of government of the United States of America. London, Dilly Buckley JD (2012) Natural law and the antislavery constitutional tradition. Cambridge, Cambridge University Press Contiades X (2013) Engineering constitutional change: a comparative perspective on Europe, Canada and the USA. Oxford de Secondat C baron de la Brède et de Montesquieu (1748) De l’Esprit des Lois. Geneva, Barillot Reidy DA, Sellers MNS (2005) Universal human rights: moral order in a divided world. Lanham, Rawman and Littlefield Albert R, Contiades X, Fotiadou A (2017) The foundations and traditions of constitutional amendment. Oxford, Hart Roznai Y (2017) Unconstitutional constitutional amendments: the limits of amendment powers. Oxford, Oxford University Press Sellers MNS (2003) Republican legal theory: the history, constitution, and purposes of law in a free state. Basingstoke, Macmillan Sellers MNS, Tomaszewski T (2010) The rule of law in comparative perspective. Dordrecht, Springer Silkenat J, Hickey J, Barenboim PD (2014) The legal doctrines of the rule of law and the legal state. Dordrecht, Springer
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Global Age Guillaume Tusseau
Abstract
Globalisation has disrupted most of the intellectual and practical tools jurists had devised. Yesterday’s “high definition” law has given way to a new “low definition” law. The main features of the latter have debased such paradigmatic concepts as the authority of the State legislator, the dichotomy between internal and external legal norms, the distinction between public and private sources of law, the image of the Kelsenian pyramid of norms, and the centrality of legal obligation. Legal pluralism and constitutionalism have frequently been presented as the two main competing orientations to meet the challenges of the global age. Whereas the former insists on diversity, the latter insists on common values. The legal, empirical, and doctrinal information gleaned from nine national reporters about the respective situations of Argentina, Botswana, Brazil, Cyprus, Germany, Greece, Singapore, the Solomon Islands, and the United Kingdom tend to prove that no clear-cut distinction between pluralism and constitutionalism is evident. Nor are the strategies these two perspectives embody totally successful to meet the demands of the day. Section 2 of this general report sets the stage for the study of legal interactions in the global age. It sheds light on the degree of pluralism each of the studied legal systems admits, both in its relations with other legal systems that reach beyond the States, and in its relations with more or less autonomous inner forms of legal normativity. Section 3 tackles the forms of interactions that take place among legal actors in the context of an increasingly plural landscape, and how they contribute to changing legal mentalities. By focusing respectively on legal actors’ reasoning and on legal scholarship, understood as the This report was also published in Tusseau (Ed), Debating Legal Pluralism and Constitutionalism – New Trajectories for Legal Theory in the Global Age, Springer Nature Switzerland 2020, 1–92. G. Tusseau (*) Sciences Po Law School, Paris, France e-mail: [email protected]
interacting members of a unified epistemic community, Sects. 4 and 5 contribute to highlighting what “thinking like a lawyer” means today. Finally, Sect. 6 identifies how little neutral, and how value-laden, the current discussion about pluralism and constitutionalism is. The very concepts that are currently used to confront today’s major legal changes testify to the ideological dimension of legal analysis. Non è forse giunto il momento di liberarsi del decrepito schema della gerarchia delle fonti oggi che l’assetto delle fonti smentisce, nel fervore dell’esperienza, quello schema e ne vive un altro?1
1
Introduction: General Perspective
Western legal culture faces many challenges. Yesterday’s “high definition” law has given way to a globalised “low definition” law.2 The imagination of the first,3 at least in the continental tradition, was centered on some essential pillars: (a) an authority – the figure of the State legislator –, (b) a source of law – the national legislation –, (c) a robust legal dogmatics made of concepts, clear reasoning and dichotomies (internal v. external, public v. private, etc.), (d) a legal architecture of which the Kelsenian pyramid offered the paradigmatic image, and (e) a modality of normativity based on coercion and obligation.
On the contrary, the scenario of global law involves different dynamics and different types of legal rationalities, as well as more numerous and more diverse subjects than those that characterized the modern legal scenario. The multiplicity of forms that the global law can 1
Grossi (2007), p. 8. On this image, see Ferrarese (2012), p. 32. For a general presentation, see also Domingo (2008), Walker (2015), Frydman (2012, 2014) and Cotterrell (2006). 3 On the complexity and polycentricity of the common law, see esp. Samuel (2003, 2013). 2
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_18
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508 take, the multiplication of the sources that produce it, and the subjects that populate it tend to give the impression of a crowded environment, in which the distinctive features fade away or are not very formalized, and are subject to frequent changes and high levels of precariousness.4
Thus the new paradigm of global law appears as a law of absence:
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substantive point of view, the constitution is considered to be a document in which the most important values, the main commitments and the most fundamental principles that society wants to protect are established and guaranteed. It is indeed in that respect that human rights protection is provided for in it. Louis Henkin offers the following picture of the key elements of the paradigm that has conquered the world: In general, modern prescriptive constitutions reflect and give effect to ‘constitutionalism’ and ‘the rule of law.’ Constitutionalism is nowhere authoritatively defined, but, as commonly used, a constitution designed to reflect constitutionalism will have common elements, with variations. It declares the sovereignty of the people and derives its authority from the will of the people. It prescribes a blueprint for representative government responsible and accountable to the people through universal suffrage at periodic elections. Governmental authority is to be exercised only in accordance with law established pursuant to constitutional processes and consistent with constitutional prescriptions and limitations. Government is for the people, but is limited by a bill of individual rights. Many constitutional systems fractionate governmental authority by some separation of powers or other checks and balances. (Some systems divide authority ‘vertically’ by forms of federalism.) Increasingly, constitutions provide for constitutional review by a court or other independent institutions with authority to monitor compliance with constitutional prescriptions and to provide remedies against their violation. Constitutionalism implies also that the constitution cannot be suspended, circumvented or disregarded by political organs of government, and that it can be amended only by procedures appropriate to change of constitutional character and that give effect to the will of the people acting in a constitutional mode.11
(a) absence of legislation expressing the will of politically identified authors and development of multiple sources of law, both public (legislative, judicial, etc.) and private (companies, NGOs, activists, etc.), national, supranational, international, and transnational, and even “unofficial”; (b) absence of mandatory, general and abstract substantive standards and development of a soft, essentially procedural, law, based on the negotiated respect of agreed standards; (c) absence of clear static and dynamic hierarchies and perfectly stable and defined modes of connection between these normativities; (d) absence of a geographic space of reference and decline in the territorial dimension of legal intercourse; (e) absence of a unitary society and appearance of various subjectivities and multiculturalism, sources of multiple and mobile allegiances.5
Up to now, legal theory has not met these significant challenges successfully. Most of what is at stake, both empirically and epistemologically, remains adrift in a cloudy space. Drawing data from the national reports, this general report takes a step in this direction. Contemporary constitutionalism can summarily6 be characterised by the apparition of a normative standpoint.7 The constitution is understood as a type of law that prescribes what agents ought to do. Like any other norm, a constitution cannot be automatically efficient. Only a system of implementation can guarantee compliance with its prescriptions. In Marbury v. Madison,8 John Marshall established the necessity for a jurisdictional guarantee of constitutions in order for constitutional norms to really impose themselves as “the supreme law of the land”.9 From a formal point of view, the constitution closes the legal system. It defines the characteristics that all the other elements of the system must exhibit to belong to it. Moreover, it presents itself as a superior norm because of both its active capacity to repeal other norms and its passive capacity to resist being repealed by other norms.10 From a 4
Ferrarese (2012), pp. 52–53. See also Yeh and Chang (2008), pp. 104–108. 6 Introducing further important conceptual discussions, see Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example. 7 On the major trends in constitutionalism, see McIlwain (1940), Wormuth (1949), Fioravanti (1999, 2009), Grimm (1991, 2016), Mohnhaupt and Grimm (2002) and Bastid (1985). 8 5 US 137 (1803). 9 Article VI of the US Constitution. On constitutional supremacy, see esp. Del Rosario-Rodríguez (2011). 10 See e.g. Kelsen (1962) and Merkl (1962). 5
Today however, the link that used to connect all those concepts has become more tenuous. This phenomenon goes far beyond the “weakening of the State” or the “crisis of sovereignty” before other economic, supranational or subnational powers. It is not exceptional nor illegitimate anymore for authors, NGOs, institutions, firms, practitioners, or activists to think of a multiplicity of non State-related contexts through the ideas of constitution, constitutionalisation, or constitutional law. Associated with each other by a family resemblance,12 those ideas form a conceptual nebula the fields of application of which seem to be multiplying and to result in an inescapable situation of plurality. What follows is an attempt at charting these “atypical legal constructs”.13 At the international or supranational level, a supranational sort of constitutionalism14 is emerging. Increasingly numerous international norms relate to human rights, which gives them a constitutional dimension. They overlap in many 11
Henkin (1998), pp. 11–12. See e.g. Wittgenstein (2010), p. 57; Wittgenstein (2014), pp. 64–65. 13 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example. 14 Helfer (2003), Kadelbach and Kleinlein (2006), St. John Macdonald and Johnston (2005), Frishman and Muller (2010), Schwöbel (2011) and Queiroz (2011). 12
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
respects with the jus cogens15 norms which, being at the apex of the pyramid of international norms, confer upon the international legal system the formal structure of a constitutional system. Treaties that do not belong to the strict framework of inter-State reciprocity and favour forms of majority decisionmaking are multiplying.16 Several authors do not hesitate to consider that the United Nations Charter is a world constitution17 and the World Trade Organisation Agreement the economic constitution of the world,18 while the European Court of Human Rights and the European Court of Justice present themselves as agents of a form of constitutionalism. For example, the ECtHR presented the European “Convention as a constitutional instrument of European public order,”19 whereas according to the ECJ, “the European Economic Community is a community based on the rule of law, inasmuch as neither its member States nor its institutions can avoid a review of the question whether the measures adopted by them are in conformity with the basic constitutional charter, the Treaty.”20 More recently, the ECJ considered that “The EU has a new kind of legal order, the nature of which is peculiar to the EU, its own constitutional framework and founding principles, a particularly sophisticated institutional structure and a full set of legal rules to ensure its operation.”21 The European communities and the European Union offer paradigmatic examples of international organisations that have progressively evolved from intergovernmentality to constitutionalism.22 What is most remarkable is the emergence of what some authors analyse as spontaneous forms of constitutionalisation and constitutionalism which are appearing independently of States. Private law and private actors find themselves involved in the protection of fundamental rights.23 Under what is called “corporate social responsibility” or “corporate citizenship”, many norms which belong to soft law thus aim to make sure that economic agents protect human rights.24 15 Art. 53 of the Vienna Convention on the Law of Treaties of 1969. See e.g. Orakhelashvili (2010). 16 Tomuschat (1993) and Simma (1994). 17 Fassbender (2009), Dupuy (1997), Doyle (2009) and Chemain and Pellet (2006). 18 Schneiderman (2008), Cass (2005), Petersmann (2000, 2011), McGinnis and Movsesian (2000) and Trachtman (2006). 19 ECHR, 23 March 1995, Loizidou v. Turkey (Preliminary objections), (Application no. 15318/89), § 75. See e.g. Walter (1999), Alkema (2000) and Stone Sweet (2009). 20 ECJ, 23 April 1986, Parti écologiste “Les Verts” v. European Parliament, Case 294/83, § 23. 21 ECJ, 18 December 2014, Opinion 2/13. 22 Weiler (1999), Weiler and Wind (2003), Schütze (2012), Rosas and Armati (2012), Von Bogdandy and Bast (2010) and Bailleux (2014). 23 Alston (2005), Clapham (2006), Gatto (2011) and Palombella (2012). 24 Nolan (2009). See also the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights of 2003, https://digitallibrary.un.org/record/501576,
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Regarding these institutions, Gunther Teubner has identified several forms of autonomous constitutionalisation in different sectors (economy, health, tourism, sports, culture, new technologies, etc.). He accounts for them in the idea of “societal constitutionalism”.25 As he remarks, “Here we are, [. . .] faced with a curious phenomenon – Stateless selfconstitutionalisation.” Sectors of the global society are progressively developing their own constitutional norms. Urgent social problems which appear within autonomous global systems engender social conflicts which lead to legal norms being conferred constitutional features. Over time, those norms are then brought together under the form of “sectorial constitutions of the global society.”26 Those spheres become de facto relevant from the perspective of global governance.27 They have stable relationships the one with the other, agree on behavioural standards and conflict settlement, for themselves and in relation to third parties, develop a set of fundamental principles that all their other decisions must comply with, and settle their conflicts in a way that is close, in diverse degrees, to that of a jurisdictional process.28 As Horatia Muir Watt puts it, “In redistributing regulatory power, globalisation disrupts the neat ordering of normative space: groups with diverse economic or ideological interests bypass State courts to claim protection in the international arena; private international arbitration has succeeded in creating a parallel system of justice which is gaining ground in many fields where State interests where thought to be paramount; transnational agreements between public authorities fall either side of the public/private divide.”29 Important parts of the lex digitalis, of the lex constructionis, etc. thus turn out to be real “transnational corporate constitutions”.30 Lastly, at the infra-national level, the dynamics of the “new constitutionalism”,31 as it is emerging in Latin America, leads to the identification of new forms of acknowledgement of the constitutional autonomy of the first nations. It goes beyond the forms of normative autonomies that have hitherto been granted to entities such as churches, native communities or professional organisations when they collectively decide on labour conditions.32 These claim to allow for a more sincere and inclusive taking into account of the and the United Nations Global Compact, https://www. unglobalcompact.org/. See e.g. Rasche (2010). 25 Teubner (2004, 2012, 2016). 26 Teubner (2010, 2013). On sectorial constitutionalisation, see also Tuori (2015), pp. 125–318. 27 See e.g. Zumbansen (2010, 2011), Hall and Biersteker (2011), Cutler (2003), Tuori (2013) and Maduro et al. (2014). 28 Scott et al. (2011), Schepel (2004, 2005) and Peters et al. (2009). 29 Muir Watt (2004), p. 274. 30 Teubner (2011). See also Robé (2012, 2013). 31 See e.g. Storini and Alenza García (2012) and Corrêa Souza de Oliveira and Luiz Streck (2014). 32 See esp. De Sousa Santos (2002).
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specific cultures of the people who have until then been more or less violently colonised and whose ways of life and Weltanschauungen have been ignored, silenced, excluded, despised, or even fought against. Based on tolerance and multiculturalism, this sort of infra-national constitutionalism allows for new forms of interaction between State law and the normative practices of indigenous communities.33 As well as the constitution of Ecuador,34 the Bolivian “plurinacional” constitutionalism offers a telling example of this ambition, which results in various devices of vertical and horizontal separation of powers, and more crucially in the constant affirmation of a strong commitment to a specifically inclusive ideology, especially intending to benefit from the traditional knowledge and philosophy, in particular regarding its conception of harmony among human beings, animals and their environment (Pacha Mama), in order to revive the general political culture.35 Today, the very grammar of constitutionalism is quite clearly being redirected towards other legal, political and social “spheres,” “sites of authority” or “sites of normativity”36 which introduce multiplied forms of legal pluralism in opposition to the traditionally bilateral relation that used to exist between the State and the constitution. Animated by a double function of distributing and limiting normative powers, on the one hand, and preserving fundamental rights, on the other hand, international, supranational or transnational constitutions meet the definition of Article 16 of the Declaration of the Rights of Man and the Citizen, according to which “Any society in which no provision is made for guaranteeing rights or for the separation of powers, has no Constitution.” From this brief outline,37 two major characteristics of the different constitutional spheres can be identified. Those norms first claim formal and substantive (axiological or value-based) primacy in their own legal sphere. Then the constitutional systems assert their independence and autonomy towards other legal spheres. That is why they do not have hierarchical relations the one with the other—on the contrary, their relations are “heterarchical”. In other terms, a situation of pluralism emerges. The fact that legal spaces that were unused up to now are adopting similar self-descriptions indeed implies the implementation of specific links among them. Thus the simple plurality of constitutional and constitutionalised spheres, which is quite static, also quite naturally includes a more dynamic dimension of pluralism.38 Only a polycentric 33
See e.g. Neves (2009), pp. 216–229. See e.g. Andrade et al. (2009), Ávila Santamaría et al. (2008) and López Freire et al. (2009). 35 See e.g. Acosta (2013), Pigrau Solé (2013) and Bagni (2013). 36 See also Yeh and Chang (2008). 37 See also Klabbers et al. (2009). 38 On pluralism, see among others, MacCormick (1995, 1999), Walker (2002, 2016), Teubner (1997) and Berman (2009). 34
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model can account for this situation, while insisting, from a dynamic viewpoint, on ideas such as cooperation, networks, mobility, etc. They are revealed in the way the actors try to comprehend one another when, quite unavoidably, they have to regulate, each from its own point of view, a same set of facts or, in Robert M. Cover’s words, when situations of “jurisdictional redundancy”39 arise. The pluralism of constitutional norms, which has become quite apparent, calls for an aggiornamento of legal practices and legal reasoning. Potentially important conflicts result from it. It is not difficult to imagine a situation in which, regarding a professional sportsperson, the constitutional law of a State (e.g. the principles of tax collection or the workers’ fundamental rights), sports constitutional law (e.g. the principles of repressive measures against doping or measures for equality among clubs) and European constitutional law (e.g. the principle of free movement of workers) are in conflict. The absence of a hierarchy among the different systems does not make it a priori possible to foresee any obvious solution. The situation becomes even more complicated and tensions stronger when some of the multiple constitutional spheres are able to assert what Pedro Cruz Villalón presents as forms of “meta constitutionality”.40 That word refers to the capacity for a constitutional system to assert something about another and require that it comply with its demands (such as primacy and direct effect in EU law), while, very often, the targeted system is also able to make meta-constitutional claims towards the other. In such a situation, the constitutional intertwining and the tensions that result from them distort in quite a serious way the analysis grids that are associated to the classic constitutional paradigm. The reflection that has developed about “global constitutionalism,”41 “constitutionalism in the global realm,”42 “constitutional pluralism,”43 “transnational constitutionalism,”44 “multi-level constitutionalism,”45 “transconstitutionalism,”46 “postnational constitutionalism,”47 “societal constitutionalism,”48 “composite constitutionalism49”, “network 39
Cover (1981). Cruz Villalón (2004), p. 73. 41 Fischer-Lescano (2005), Schwöbel (2011), Lang and Wiener (2017) and Belov (2018). 42 Kjaer (2014). 43 Avbelj and Komárek (2008, 2012) and Millet (2018). 44 Stein (1981), Tsagourias (2007), Zumbansen (2012a, b), Goderis and Versteeg (2013) and Yeh and Chang (2008). 45 Pernice (1999, 2002), Freixes et al. (2012), Piattoni (2010), Walker (2012a), Cerri and Donnarumma (2014) and Navas Castillo and Florentina Navas Castillo (2016). 46 Neves (2009, 2015). 47 Shaw (2011), Krisch (2011) and Walker (2012b). 48 Teubner (2003). 49 Besselink (2006, 2007); Pernice and Mayer (2000); Claes and De Visser (2012), p. 144. 40
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constitutionalism,”50 “interordinal constitutionalism,”51 “multi-vocal constitutionalism,”52 “harmonic law,”53 etc., precisely aims to face that issue. Manuel Atienza for example underlines to what extent “constitutionalism” and “globalisation” are both phenomena and ways of conceptualising those phenomena.54 That double dimension is at the core of this report’s topic. The objective of this work on “Debating legal pluralism and constitutionalism: new trajectories for legal theory in the age of globalisation” is to measure to what extent the mutations of legal systems today are upsetting the operation of positive law. At a deeper level, it aims at understanding how the intellectual or cultural backgrounds, which are at the basis of the perception of those mutations, are affected. Its objective is to determine and understand how legal phenomena, when tackled through “constitutionalism”, “pluralism”, “constitutional pluralism”, etc., presuppose, trigger, accompany, impose or hinder the development of renewed ways not only of finding practical solutions to cases, both within a legislative and litigation framework, but, at a deeper level, of questioning the theories, concepts, categories, methods, intellectual tools, reasoning, and arguments which have been called upon to conceive, analyse, understand and describe them. Its goal is to allow the presentation of the new reasoning and elements of legal theory that have been implemented, invented from the beginning or rediscovered in the light of the history of legal practices and jurisprudence—in other words, to try and comprehend whether there is any emergence of a new legal rationality (e.g. the ideas of jus commune, of comitas gentium, the theories of legal pluralism, etc.). In front of globalisation, legal theory has undergone—or should have undergone—a radical paradigm shift.55 In a somewhat oversimplified presentation, two main orientations are commonly identified in the literature: constitutionalism and pluralism. Whereas constitutionalism is mostly based on the foregoing considerations, it tends to unify the legal landscape by organising it from the formal viewpoint and imposing on it a specific substantive telos. From a genealogical perspective, it inevitably derives from the pattern of the State. Constitutionalism can thus be presented as a factor of order, which tends to offer a vernacular that is apt to remedy global fragmentation. Indeed,
fragmentation can be understood as a multi-layered fragmentation, along a vertical axis composed by the States, the supranational or regional bodies, and the international organizations. It is a fragmentation across different levels of governance, from global, through international, supranational, and finally domestic spheres. On the other hand, fragmentation can be intended as a segmentation in a wide range of single regulatory regimes, placed side by side or overlapping on a horizontal plane in the global sphere, each exercising recognizably public governance functions.56
Constitutionalism is classically said to belittle the significance of autonomy. As Lucrezia Palandri notices, global constitutionalism “does not reflect, least of all respect, the pluralistic nature of reality, rather tends to neutralize and negate it, driven by the ambition of a utopian reduction to unity, claiming to re-impose order and re-establish hierarchy.”57 On the contrary, pluralism tends to be presented as rejecting any dimension of hierarchy or even of order, and as admitting disorder, and even welcoming it as evidence of social vitality and equal consideration for varying forms of institutionalisation of social spaces. Whereas constitutionalism tends to impose a single narrative that results from the national States’ historical experience alone, pluralism seems to be more welcoming, more tolerant, and more open-minded regarding the contemporary blurring of traditional intellectual and practical patterns. It is committed to a common and reciprocal recognition of the other party, whatever its own specificities. As a consequence, pluralism is not satisfied with merely admitting, from a somehow static viewpoint, that a plurality of sites of authority exists. It also embraces a more dynamic description and insists on the fruitfulness of the interactions among them. In a seminal article, John Griffiths has defined pluralism as a concomitant of social pluralism: the legal organization of society is congruent with its social organization. ‘Legal pluralism’ refers to the normative heterogeneity attendant upon the fact that social action always takes place in a context of multiple, overlapping ‘semi-autonomous social fields’, which, it may be added, is in practice a dynamic condition. A situation of legal pluralism – the omnipresent, normal situation in human society – is one in which law and legal institutions are not all subsumable within one ‘system’ but have their sources in the self-regulatory activities of all the multifarious social fields present, activities which may support, complement, ignore or frustrate one another, so that the ‘law’ which is actually effective on the ‘ground floor’ of society is the result of enormously complex and usually in practice unpredictable patterns of competition, interaction, negotiation, isolationism, and the like.58
Trying to outline the results of the studies on fragmentation, one could say that the pluralist theorists consider fragmentation essentially from two different points of view. On the one hand, 50
Bustos Gisbert (2005). 51 Gordillo Pérez (2014). 52 Jackson (2010), p. 91. 53 Letsas (2012). 54 Atienza (2013), pp. 31–60. See similarly Zumbansen (2012a, b). 55 De Julios-Campuzano (2009). For an overview of the current theoretical efforts, see Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 2.
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In the context of the debate regarding legal globalisation, Kaarlo Tuori has distinguished three types of pluralism. The “pluralism of legal sources” implies the multiplication of sources of law, the appearance of new legal actors and the 56
Palandri (2013), pp. 61–62. Palandri (2013), p. 67. 58 Griffiths (1986), pp. 38–39. 57
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polycentric59 creation of the law. The “pluralism of legal orders” addresses the situation where several legal orders claim authority on a given social space. The “pluralism of legal systems” calls into question the exclusivity and primacy of State law.60 When compared with constitutionalism, which is adamant that the protection of fundamental values calls for the establishment of a supreme norm and, consequently, of a hierarchy of organs with a supreme one at its apex, the lexicon of pluralism is based on multiplicity, fragmentation, idiosyncrasies, interdependence, and autonomy. It seems to be less reluctant to draw inspiration from the current legal phenomena in order to reform theoretical and practical mindsets, to give up previous lenses and concepts (such as that of sovereignty, the explicative and normative value of which seems to be decreasing). Even tentatively, pluralism promotes new ones that will need to readapt as things change and call for new imaginative efforts. As a consequence, constitutionalism and pluralism seem to offer competing viewpoints or strategies to address the challenges of the global age.61 Some authors have tried to offer a sort of middle-ground between these two conflicting poles.62 For example Palandri has put forward the following proposal:
G. Tusseau national sites of each of its 28 member States), each with its own claim to constitutional authority; 2. There is, in fact, no dominant understanding of this complex that holds across these multiple sites, according to which the claims to constitutional authority associated with each site would be ordered within a hierarchy or otherwise reconciled and resolved by reference to a single meta-authoritative standard; rather, each site is associated with a plausible claim to ultimate constitutional authority that stands independently of the other claims 3. In order to sustain the overall complex in a constitutionally optimal fashion, each site ought to acknowledge and somehow accommodate the claims of the others as independent sites of constitutional authority—thereby ensuring the continuing absence of a single dominant authoritative framework.64
However, according to a logic of “bipolar errors” identified by Gaston Bachelard,65 each of the two alternatives leads to a stalemate, which the other alternative cannot remedy without falling into an abyss of difficulties which are themselves solvable only by means of the antagonistic strategy, itself doomed to failure. Whichever approach is chosen, there is an antinomy the structure of which is comparable to those that Alf Ross has highlighted in Towards a Realistic Jurisprudence.66 In an article summing up in French the perspective of this work, he writes:
This theory aims at the reconciliation of plurality in constitutionally meaning terms. To this end, it goes through various stages. Firstly, constitutional pluralist scholars realize the pluralistic essence of the contemporary legal world, making use of the outcomes of the legal pluralism studies as a starting point. Secondly, they recognize to each non-State legal order its own independent constitutional claims, and respect every distinct constitutional site – national, supranational, international –. Thirdly, they provide a normative sense to the global space, recognizing not only single constitutional identities but also the proper constitutional quality of their mutual relationships. The cooperative dimension between constitutional units cannot be represented anymore either by the old Westphalian order of fully sovereign States, or by an equally fully sovereign global State with a global constitution that absorbs and replaces the existing different sites of authority, repositioning the one-dimensional sovereign order. Constitutional pluralism provides an alternative interpretation of these connections, playing a crucial role in fostering the conditions under which these connections may occur, and thus progressively stabilizing them.63
On this fundamental dualism of the notion of source of law it is possible to develop a whole series of antinomies. [. . .] First antinomy Thesis: The propositions of the doctrine of the sources of law do not themselves belong to positive law, but are valid independently of a given positive system of law. Antithesis: The propositions of the doctrine of the sources of law vary from one legal system to another, and must therefore be parts of these. The proof of the thesis is easy, because if the propositions of the doctrine of the sources of law belong themselves to positive law, they must then be recognized by the very sources of law, which leads obviously to a vicious circle, that is, to an infinite regression. It follows that the question What is a source of law? can only be resolved on the basis of the notion of law itself. But the antithesis seems to be as obvious, because experience undoubtedly teaches us that the sources of law vary according to the systems and can develop in different ways; it does not seem that there is a single historical phenomenon that could be said, in a general way, to be a source of law and should be. Legislation itself, whatever the vagueness of that term, does not constitute a necessary and absolute form of the law. [. . .] The origin of this antinomy can be stated most succinctly in the following way: the propositions of the doctrine of the sources of law are, in their content, conditioned by positive law but at the same time in their form (as the basis of knowledge for any positive rule), they are independent from them.67
Neil Walker, one of the leading proponents of new theories to address legal globalisation, has offered the following presentation: Briefly stated, [Constitutional Pluralism] in its original European context maintains the following: 1. The overall complex of law pertaining to the EU embraces multiple sites (i.e. the supra- national site of the EU and the 59
See esp. Petersen and Zahle (1995). Tuori (2013). See also Tuori and Sankari (2010). 61 Kennedy (2008). 62 See e.g. Walker (2002, 2016); Cohen (2012), esp. pp. 21–79. 63 Palandri (2013), p. 68. 60
64
Walker (2016), pp. 333–334. Bachelard (1967), p. 20. See Ost and Van de Kerchove (1988); Ponthoreau (2010), pp. 203–206. 66 Ross (1946). 67 Ross (2004), pp. 29–30. 65
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radical pluralism – tend to take into account systematic considerations and institutional (rather than textual) constraints, thus allowing the judge, who is the central character in these theories imbued with realism, to resolve disputes. Courts are therefore called on to reconstruct substantive hierarchy, which, far from being fixed, will necessarily fluctuate according to the circumstances.71
In the present case, one could attempt to formulate the antinomy in the following way: Thesis: Pluralism implies respect for the autonomy of selfemerging legal spheres and excludes the external superimposition of hierarchical authority in the name of paramount substantive fundamental values. Antithesis: Constitutionalism allows legal spheres to organise their own autonomy through internal supremacy and external equality, depending on their values, in order to interact with other legal entities.
According to the thesis, pluralism implies autonomy and excludes constitutionalism, whereas according to the antithesis, constitutionalism is one of the ways to express autonomy. As Lorenzo Zucca puts it, “The irony of global constitutional law is that it inevitably defines itself as tolerant and pluralist.”68 More puzzlingly, Hans Kelsen has even suggested that the pluralist standpoint is somehow self-defeating. Pluralism implies that several distinct legal systems enjoy separate scopes of application. But as Christoph Kletzer recently put it with a Kelsenian touch, “the fact that a norm does not apply somewhere is not a brute fact but a legal fact. Thus, there has to be an even higher norm that stipulates that the seemingly highest norm applying to the one legal system does not apply to the other legal system. This higher norm, by definition, applies to both legal systems and establishes legal monism. So, as soon as we think we have established pluralism (our highest norm does not apply there), what we have actually established is monism (there is a higher norm applying to both systems).”69 From a descriptive viewpoint, one that is not committed to the more or less explicit normative standpoints that respectively lie beneath those conceptions, this antinomy allows to surmise a relatively deflationist approach. Both perspectives are entwined with one another. As Mireille Delmas-Marty explained, the global age is the age for multiple practices that are “ordering pluralism”.70 Pluralism implies overlap, conflict, frictions, responsiveness, which are regulated by norms that are materially constitutional. The patterns of interconnection that ensue are justified by substantive values that are constitutional. Even the most cherished values of pluralism, such as autonomy and self-sufficiency, can be regarded as fundamental constitutional requisites. The very independence which legal spheres enjoy in a pluralist landscape needs to be constructed and legitimised. Independence is frequently conquered through a discourse that tends to bestow constitutional properties on the social sphere in question. That is why, according to François-Xavier Millet, it is remarkable that the doctrines of constitutional pluralism – and, more broadly, all pluralist theories that do not belong to
Conversely, the intellectual and practical tools of legal pluralism are necessary to acknowledge the coexistence of the constitutional spheres that tend to proliferate and manage their interactions. Consequently, the distinction between constitutionalism and pluralism should not be regarded as a clear-cut opposition, but would be more fruitfully looked at from a scalar perspective. Current legal practice may illustrate hic et nunc one more than the other, but each necessarily seems to imply the other, and vice versa. With this general background in mind, the following general report tries and offers a picture of the current tensions and accommodations between constitutionalism and pluralism. It has greatly benefited from the information and analysis gleaned from nine national reporters about the respective situations, difficulties, achievements, standpoints, perspectives, etc., of Argentina, Botswana, Brazil, Cyprus, Germany, Greece, Singapore, the Solomon Islands, and the United Kingdom. Although they frequently follow, or draw, from one another, the report successively addresses five major groups of topics. Section 2 sets the stage for the study of legal interactions in the global age. It sheds light on the degree of pluralism each of the studied legal systems admits, both in its relations with other legal systems that reach beyond the States, and in its relations with inner more or less autonomous forms of legal normativity. Section 3 tackles the forms of interactions that take place among legal actors in the context of an increasingly plural landscape, and how they contribute to changing legal mentalities. Sections 4 and 5 do not follow a clear-cut distinction. Section 4 focuses on legal actors’ legal reasoning, whereas Sect. 5 addresses legal scholarship. It is obvious however that legal doctrines and legal thought evolve thanks to (or because of) the simultaneous and joined efforts of legal actors and legal scholars, understood as members of a more or less unified epistemic community. In several countries, it is not exceptional for law professors to become judges or conversely, nor is it exceptional for legal actors, especially judges, to quote legal scholars.72 At a deeper level, a sort of interactive and cyclical process appears according to which (a) legal actors make a decision that somehow changes previous modes of reasoning, (b) legal scholars comment on this decision and help explain its presuppositions and implications, so that (c) new decisions
68
Zucca (2018), p. 5. Kletzer (2018), p. 96. 70 Delmas-Marty (2006). 69
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71 72
Millet (2018), p. 128. See e.g. Pegoraro and Figueroa Mejía (2017).
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by legal actors refine their reasoning, which (d) calls for new comments by legal scholars, etc. The conceptual framework that is in force in a given society thus results from both sources. That is why even though they may seem to draw too sharp a distinction between legal actors and legal scholars, both parts contribute to highlighting what “thinking like a lawyer”73 means today. Finally, Sect. 6 identifies how little neutral, and how value-laden, the current discussion about pluralism and constitutionalism as it appears in the legal systems under review is. The very concepts that are currently used to confront today’s major legal changes testify to the ideological dimension of legal analysis. But as the final part of the document proves by using comparative methodology, making that clear does not necessarily allow one to avoid ideology. At best, it helps to be minimally aware of its possible impact on legal discourses.
2
The Statics of the Relations Among Legal Spheres in Positive Law: Multifaceted Pluralism
This part of the report intends to tackle the following issues. What is the position of national law regarding international and transnational law? Is it open or closed (e.g. monistic or dualist), and to what extent, to their interference in terms of regulation of behaviours? Is its attitude uniform or does is vary depending on the types of international norms (e.g. customary law, principles of international law, international treaties, EU law, international human rights law, etc.)? What type of hierarchy of norms (e.g. place of international and supranational law regarding the constitution or the law) or norm combination (e.g. degree of contractual freedom in the choice of applicable law and litigation resolution, autonomy granted to professionals in collective bargaining, admission of normativities from traditional cultures, native communities or churches, etc.) is established? Are relations among norms mainly founded on the idea of a binding force of the norms of other legal spheres or rather on the idea of a weaker “persuasive”74 force? Are specific appeals organised at the internal level in order to give external norms prevailing force (e.g. distinction and combination of conventionality review and judicial review; preliminary rulings; consequences of the concept of public order on contractual freedom, etc.)? Have those aspects of the relations among legal norms evolved over the past few years? With respect to these questions, one might suspect that in spite of the very respectable tradition of legal thought it is
73
Schauer (2009). Glenn (1987) and Flanders (2009). On the distinction between “must”, “should-”, and “may-” sources of law, see also Peczenik (2009). 74
related to,75 “pluralism” is at best a vague catchword—or at least an “elusive ism”76—to address many different phenomena whenever some sort of disorder appears in what sets out to be an order, and especially some disagreement or conflict among various norms.77 William Twining for example notices: “it is important to distinguish between (a) ‘State legal pluralism’ (recognition within a State legal system of different bodies of law, such as religious or customary law, applying to members of particular groups for given purposes); (b) ‘legal polycentricity’ (the eclectic use of sources in different sectors of a State legal system); and (c) legal pluralism as the co-existence of discrete or semiautonomous legal orders in the same time-space context.”78 Considering the national reports, and with a view to exposing the gathered data without silencing the various perspectives they express, two main interpretations of “pluralism” seem appropriate. Both start from what remains—even though its relevance is sometimes called into question—the major reference point for legal thought, i.e. the State. The first ideal-type can be called “outward pluralism”. It is related to the interconnections between the State, understood as the dominant, classical or prototypical legal system, and other normative orders that reach beyond the State, i.e. classically international, supranational, and transnational legal orders (Sect. 2.1). The second ideal-type can be called “inward pluralism”. It is related to the ways States make room for diverse forms of autonomy that allow taking norms which are not immediately those of the State into account in domestic law (Sect. 2.2).
2.1
Outward Pluralism: Perspectives on the Relationship Between Domestic and International, Supranational, and Transnational Legal Orders
Over the past few years, one has witnessed a general internationalisation of legal systems due to the increasing impact of international law.79 One of the important teachings of the national reports is related to the very little value of the fundamental divide between “monist” and “dualist” States, no matter their definition.80 As a matter of example, Millet proposes the following definition: Dualism refers to separate, autonomous legal orders that are selfcontained and theoretically perfect. This doctrine presupposes 75
See esp. Ehrlich (1913) and Romano (2002). Twining (2009). 77 For critical efforts at conceptual clarification, see for example Griffiths (1986), Merry (1988), Petersen and Zahle (1995), Tamanaha (1993, 2008), Teubner (1992, 1997) and Berman (2009). 78 Twining (2009), p. 28. See also Twining (2000), pp. 82–88, 224–233. 79 See e.g. Fombad (2012) and Killander (2017). 80 See generally Shelton (2011). See also Killander and Adjolohoun (2010) and Ramadi Dinokopila (2017). 76
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . . that the only addressees of international law are the States, and that the international and domestic legal orders do not overlap but, at best, operate side by side. It implies that an external law norm cannot be applied until it has been transformed into an instrument of domestic law, in accordance with the procedures that the latter has laid down for that purpose. Under the monist doctrine, the suggestion is that there is only a single legal order, which is made up of ‘suborders’, also sometimes called ‘partial’ legal orders. Although this approach does not offer any conclusive elucidation as to which legal order enjoys primacy, it indicates that international law is supposed to be, as such, directly applied in the domestic legal order without having to be formally implemented by the State organs through legislative or administrative measures.
In several respects, most of the examples prove how weak this dichotomy is from descriptive and explicative viewpoints. What is interesting moreover is that when one focuses on the specificities presented by the national reports, the validity of this dichotomy is called into question from various angles and in various ways. At the most monist end of the spectrum, Cyprus offers an almost unique example of constitutional deference to supranational law. Whereas the constitution is classically presented as the supreme law of the land, following the 2006 fifth amendment of the Constitution,81 the acquis communautaire acquired precedence over the Constitution. More specifically, the fifth amendment inserted a new provision, namely Article 1A which envisages that ‘[n]o provision of the Constitution shall be deemed to annul laws enacted, acts done or measures taken by the Republic which become necessary by reason of its obligations as a member State of the European Union, nor does it prevent Regulations, Directives or other acts or binding measures of a legislative character, adopted by the European Union or the European Communities or by their institutions or competent bodies thereof on the basis of the Treaties establishing the European Communities or the Treaty of the European Union, from having legal effect in the Republic’.82
This amendment was meant to curb a ruling by the Supreme Court that had overruled a lower court judgement. This judgement had made national measures that implemented EU legislation an extension of EU law, and had allowed them to benefit from the latter’s primacy.83 Pursuant to Article 169 of the Constitution, the remainder of international law only enjoys primacy regarding ordinary statutes, but not the Constitution itself. This distinction has led some authors to debate the monist or dualist perspective of Cyprus’ legal system. But Constantinos Kombos
81
Law relating to the Fifth Amendment of the Constitution, (Law No. 127(I)/2006). 82 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.2.1. 83 Attorney General v. Costas Constantinou (2005) LCR 1356, quoted by Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.3.2.3.
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downplays the intrinsic importance of this divide.84 An appropriate example is offered by the constitutional human rights provisions. The ECHR was a source of inspiration when they were drafted, so that their domestic interpretation heavily relies on an attitude of openness towards the ECtHR’s rulings.85 More generally, there is evidence of an important internal perception of the need to change domestic law, including constitutional law, when the evolution of “contemporary aspirations, interests and desires,”86 as they may be expressed at the global level, call for it. After offering a picture of the complex Greek path and current situation, Ioannis A. Tassoupoulos accurately remarks, regarding the monist/dualist divide, that: “The transition from a monist view of supremacy of domestic law over international law, to the dualist position of two independent legal orders, which do not interpenetrate, to the monist view of preponderance of international law, or to non-hierarchical ‘interacting systems,’ marks the interplay between the constitutionalization of international law or the internationalization of constitutional law, more prominent in the tensions between universalization of human rights, democracy, and market globalization.”87 He thus insists on the very fluidity of the matter. Greece for its part has adopted what can be characterised as a monist position. Pursuant to Article 28 of the Constitution, 1. The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity. 2. Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement. 3. Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.
84 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.2.2. 85 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.2.2. 86 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.3.2.3. 87 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 1.
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Brazil also seems to clearly endorse a position of strict constitutional primacy.88 Nevertheless, among the States covered in this report, it is one of the clearest examples of a monist approach to the relationship among legal systems. Pursuant to Article 49 of the Constitution and constitutional custom, the Congress needs to approve any international treaty or agreement and the President needs to endorse it. Once these steps have been followed, the international norm is integrated into the domestic legal system without any need for a further incorporation through a dedicated legislation. The ensuing hierarchy of norms is not uniform but threefold. Since 2004, treaties which specifically deal with human rights and which are approved following the same procedure as constitutional amendments have been granted a constitutional value. Human rights conventions and treaties approved before that date have an infraconstitutional but supralegislative status. Other international norms merely have a legislative status, and can generally be derogated pursuant to the lex posterior maxim.89 Argentina offers an original case. Following a constitutional amendment in 1994, which had been foreshadowed by the case-law of the Supreme Court, a monist position was clearly adopted.90 Pursuant to Article 75 of the Constitution, the general rule is that treaties prevail over domestic acts. Moreover, regarding specific human rights conventions and declarations, the Constitution even states that these have the same value as the constitution itself.91 Among these norms one can find some of the international norms and documents that have also deserved specific attention in other countries covered in this report. Article 75, 22 of the Constitution remarkably provides that: The American Declaration of the Rights and Duties of Man; the Universal Declaration of Human Rights; the American Convention on Human Rights; the International Pact on Economic, Social and Cultural Rights; the International Pact on Civil and Political Rights and its empowering Protocol; the Convention on the Prevention and Punishment of Genocide; the International Convention on the Elimination of all Forms of Racial Discrimination; the Convention on the Elimination of all Forms of Discrimination against Woman; the Convention against Torture and other Cruel, Inhuman or Degrading Treatments or Punishments; the Convention on the Rights of the Child; in the full force of their provisions, they have constitutional hierarchy, do no repeal any section of the First Part of this Constitution and are to be understood as complementing the rights and guarantees recognized herein.
This means that they are also above other international instruments that only enjoy an ordinary legislative value. See also infra, § 3. STF, RE 349.703; STF, RE 466.343. See De Barcelos, Brazil and Its Many Realities. Courts and State-Centrism; Administrative Agencies and International Cooperation, § 2. 90 Ucín, A Particular Dialogue Between Systems. The Argentinian Case. 91 Ucín, A Particular Dialogue Between Systems. The Argentinian Case, § 1.ii. 88 89
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This testifies to Argentina’s evident openness to international and supranational spheres. That is why it “is integrated into other supranational organizations. It is part of the MERCOSUR (Mercado Común del Sur) since 1991, the UNASUR (Unión de Naciones Sudamericanas), the CELAC (Comunidad de Estados Latinoamericanos y Caribeños) and the OEA (Organización de Estados Americanos).”92 At the other end of the spectrum, the United Kingdom is frequently presented as the locus classicus of dualism. As Athanasios Psygkas makes clear, however, things are more complex depending on which source of international law is concerned. This position clearly corresponds to the relationships between international treaties and domestic law, because of the need for a national parliamentary act of incorporation. But insofar as domestic courts accept it, custom is automatically incorporated into English law unless it conflicts with an Act of Parliament.93 In the famous Miller case, the UK Supreme Court made clear that, except in the case of peace treaties and, according to some judges, human rights treaties, “The first [proposition] is that treaties between sovereign States have effect in international law and are not governed by the domestic law of any State. [. . .] The second proposition is that, although they are binding on the United Kingdom in international law, treaties are not part of UK law and give rise to no legal rights or obligations in domestic law.”94 The major exception to this pattern, which adds to the complexity of the picture, is European Union law. Because of the special nature of this supranational legal order,95 the foundation of which is the European Communities Act 1972 in the United Kingdom, EU norms enjoy primacy over domestic norms. Nevertheless, the Judiciary is adamant that this primacy results from the express consent of the British Parliament, so that the fundamental constitutional “rule of recognition” of the system remains unaltered.96 Once completed, Brexit is expected to put an end to the existing interaction. In the same vein, Botswana illustrates the traditional English common law approach to the relationships between 92
Ucín, A Particular Dialogue Between Systems. The Argentinian Case, § 1. 93 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.1. 94 R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5 [55], quoted by Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.1. 95 See ECJ, 5 February 1963, Van Gend & Loos (26/62); ECJ, 15 July 1964, Flaminio Costa v ENEL (6/64); ECJ, 17 December 1970, Internationale Handelsgesellschaft (11/70); ECJ, 9 March 1978, Simmenthal (106/77). 96 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.3, alluding to Hart (2012).
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
legal systems. As Charles M. Fombad emphasises, “Botswana is a dualist country. Treaties and other international instruments signed and ratified by Botswana only take effect at the domestic level after they have been incorporated into national law by an Act of Parliament.”97 But this does not prevent some more informal or softer ways for international norms from having an influence on the domestic legal system. As Fombad continues, the interpretation of obscure statutes is frequently made on an “international law”-friendly basis, an interpretation of a domestic norm that is consistent with international law being preferred to another one.98 A form of presumption according to which the Parliament cannot be presupposed to have wanted to violate international law thus ensures a minimal harmony between the two. Moreover, a monist approach is adopted as to customary international law. As is traditional in English law, customary norms are automatically incorporated into domestic law, provided they do not conflict with Acts of Parliament. Singapore has also adopted a dualist perspective regarding the incorporation of international law. It cannot be automatic, but needs the passing of specific implementing acts.99 Such a position was clearly affirmed by the High Court in Public Prosecutor v Tan Cheng Yew.100 Nevertheless, as Jaclyn L. Neo, drawing from earlier writings of hers, makes clear, this general dualist attitude is not in itself uniform. It can encompass a complex gradation of legal consequences regarding the hierarchy of norms: First, a dualist State may completely view international law as being entirely irrelevant to domestic law, a position that I have called ‘absolute non-relevance’. Secondly, a dualist State may see international law as relevant but as not hierarchically superior, and thus would not override or supersede national statutes and the common law. In other words, ‘domestic law prevails’. Thirdly, a dualist State may see international law as relevant, but that it could not override or supersede the supreme constitution of the State. This means that the ‘constitution prevails’ at all times, although international law may supersede national statutes or the common law.101
In view of this taxonomy, it appears that Singapore courts have decided to make domestic law prevail. That is why even if domestic law should be, as far as possible, interpreted consistently with international norms, this operation has 97 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 2. See also Tshosa (2007). 98 Attornery-General v. Dow [1992] BLR 119, 154, quoted by Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 2. See also Ramadi Dinokopila (2017), pp. 239–240. 99 Neo, Legal Pluralism in Centralist Singapore, § 2. 100 Public Prosecutor v Tan Cheng Yew [2013] 1 SLR 1095 at [56], quoted by Neo, Legal Pluralism in Centralist Singapore, § 2. 101 Neo, Legal Pluralism in Centralist Singapore, § 2. See also Neo (2012).
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inherent limits. Even jus cogens cannot prevail over a domestic statute.102 Generally, thus, “Singapore courts have declined to apply interpretive incorporation,”103 i.e. to allow international law to “slip into” the legal system more or less informally. Nothing specific is said about the relationship between domestic and international law in the Constitution of Solomon Islands. However, due to the British heritage, a dualist model, according to which international law needs to be incorporated into domestic legislation, seems to be natural.104 A lack of political will, stemming perhaps from a defensive attitude to its newfound sovereignty, coupled with a lack of resources, explain why Solomon Islands has not ratified many human rights treaties since its independence, and why most of the international conventions adopted by Solomon Islands have not been implemented through domestic legislation.105 According to K v. Regina, the Constitution prevails over international law.106 On a case-by-case basis, the implementing legislation may establish a system to solve conflicts and ensure, like the legislation related to the Regional Assistance Mission to Solomon Islands, that domestic legislation yields to the norms of the international law being implemented.107 Germany offers another example of the need to go beyond the monist/dualist divide. It is presented as adopting a “moderate dualist position”.108 Pursuant to Article 25 of the Basic Law, the general rules of international law, which include customary law and the general principles of law, prevail over domestic statutes. Treaties become part of the domestic system as soon as they have been approved by the government and ratified by the parliament. But they rank as ordinary statutes, so that the relationships between them and statutes are governed by the lex posterior principle. Nevertheless, more recently, the Federal Constitutional Court considered that even posterior statutes should be interpreted in conformity with international obligations.109 In particular, international human rights treaties should offer an “interpretive 102
Yong Vui Kong v Public Prosecutor [2015] 2 SLR 1129, quoted by Neo, Legal Pluralism in Centralist Singapore, § 2. 103 Neo, Legal Pluralism in Centralist Singapore, § 2. 104 Corrin, Constitutionalism and Customary Law in Solomon Island, § 3.1. 105 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.1. 106 Quoted by Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.3. 107 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.3. 108 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 2.2.1. 109 BVerfGE 58, 1, 34 (1981); BVerfGE 64, 1, 20 (1983), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.3.
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aid”.110 In the Görgülü case, the authorities had to take into account international treaties and their interpretation by supranational courts.111 According to Lars Viellechner, this amounted to a constitutional entrenchment of international treaties.112 But the recent case-law of the Federal Constitutional Court seems to parallel the British insistence on parliamentary sovereignty by implying that democracy requires that the parliament be able to override international norms.113 As in the UK, EU norms enjoy a specific and “privileged” status. Their authority is based on Article 23 of the Basic Law, which also sets limits to European integration by requiring that the supranational legal order conform to “democratic, social and federal principles, to the rule of law, and to the principle of subsidiarity.” Article 79.3 of the Basic Law imposes a limit on constitutional amendment as well as on European integration.114 German authorities, and especially the parliament, “must retain competences of sufficient weight in both extent and substance so as to keep the scope of democratic action meaningful.”115 In Germany, transnational law is recognised and respected.116 Whatever the prevalent conception of the relationship between domestic and international orders, it appears that all the States covered in this report start from the same basic assumption: even though some examples testify to varying degrees of openness to international norms, this very position results from what has been decided in the States’ constitutions. This principle of constitutional supremacy is clear for example in Botswana117 and Brazil.118 Similarly, even though the British constitutional scene can be presented as an “awesome mess”,119 the principle of parliamentary sovereignty remains the arch-principle ordering the whole system. As Athanasios Psygkas expresses it: “Even as the UK legal order ceded ground to external normative 110
BVerfGE 74, 358, 370 (1987); BVerfGE 128, 282, 306 (2011), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.3. 111 BVerfGE 111, 307, 315 (2004), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.3. 112 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.3. 113 See Cossalter and Klement (2016) and Cossalter et al. (2017). 114 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 2.2.2. 115 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.4. 116 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, §§ 3.1.6 and 3.2.3. 117 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 2. 118 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 2. 119 Wright, quoted by Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 1.
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sources as a matter of practical outcomes, the key national constitutional actors self-consciously justified this move, as a matter of formal constitutional principle, by express reference to domestic constitutional principles and sources. Briefly put, the simplified version of the argument was that it is ‘our Parliament and our courts’ making the conscious decision to establish links between these normative spheres which, in turn, may result in national law being set aside.”120 This is a crude way of expressing it, but one cannot but consider that domestic constitutional sovereignty appears as the necessary building block providing its legal basis to the development of supranational sources. The British case thus allows to make this logical necessity explicit.
2.2
Inward Pluralism: Perspectives on the Internal Consistency of Domestic Legal Systems
Inward legal pluralism involves several legal, historical and social issues. It deals for example with the openness and receptiveness of the States’ legal systems vis-à-vis indigenous, local, and spontaneous normative orderings. Following Kelsen, these can be expressed by the dimensions of centralisation and decentralisation of the legal system. Dynamic centralisation and decentralisation depend on the number of authorities which are empowered to produce legal norms. The more they are, the more decentralised the system is. Static centralisation and decentralisation depend on the scope of validity of the legal norms. The wider their personal, territorial or material scope of application, the more centralised the system is. In the study of concrete examples, both dimensions need to be associated and combined. For example, as a Federal State, Germany implies from its very inception the admission of a degree of pluralism. On the dynamic axis, it can be seen in the existence of several layers of government: the Bund and the Länder. On the static axis, each of these authorities is given specific normative powers regarding specific subject matters. Such is also the case in Brazil and in Argentina. Regarding the States covered by this report, two major forms of inward pluralism can be identified. Due to the circumstances of the historical formation of the State, and especially to former colonisation, it is by no means exceptional for a given legal system to have been submitted to various cross-influences. Such is the case of Botswana, which “received two entirely different and potentially conflicting legal traditions, the English common law and the Roman-Dutch law.”121 This State consequently qualifies 120 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 1. 121 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 1.
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as a “mixed jurisdiction” or a “mixed legal system”.122 That has resulted in the judiciary being more trained either in one or the other law. The domestic legal system thus expresses an inbuilt pluralism, as it is a compound not only of various substantive norms, coming from various social perspectives, but also a compound of various sources of law, legal methodologies and ways of conceiving the legal regulation of behaviour. In the UK, the former mother country, the multi-layered character of constitutional and legal sources does not seem to be a major novelty.123 Indeed, that kingdom is made up of several nations which have enjoyed an increased legal empowerment thanks to the devolution process. Also a former part of the British Empire, Solomon Islands offers another type of inward pluralism. As was frequent when the British Empire was dissolved, a written constitution was drafted by Order in Council in 1978.124 This State consists of 26 main islands and about 900 smaller ones, and its population is about 550,000 persons speaking about 80 vernacular languages. Solomon Islands inherited English law including UK legislation, the common law and equity. It is also the host of several customary communities whose normative autonomy gives a specific appearance to the whole legal system: “Solomon Islands has a plural legal system wherein State laws co-exist with customary laws.”125 That is why inward pluralism is a more acute issue than outward pluralism. As Jennifer Corrin remarks: “rather than being challenged by limits imposed at an international or supranational level, governmental power is being challenged by local initiatives designed to promote the authority of traditional leaders and the customary laws which they promulgate.”126 The colonial administration allowed these customs to develop and be enforced by “native” (now “local”) courts. According to the Constitution, which is the supreme law of the land pursuant to Article 1, these customary laws are to be preferred to common law in case of incompatibility. This is linked to the global philosophy that is expressed by the Preamble to the Constitution. In this text, the people of Solomon Islands claims to be “proud of the wisdom and the worthy customs of our ancestors, mindful of our common and diverse heritage and conscious of our common destiny” and to “cherish and promote the different cultural traditions within Solomon
Islands.” According to the High Court, customary norms and Acts of the UK Parliament rank equally in the hierarchy of norms, so that which one prevails is determined on a caseby-case basis.127 In practice nevertheless, things seem not to be so clear, as common law is routinely enforced, while the government at the same time is reluctant to enforce legislation when it conflicts with customary norms.128 The Constitution of Cyprus is reminiscent of the previous examples, as this country also gained its independence from the British Empire in 1960 and still uses common law and equity, provided it is compatible with the Constitution. It is also an original mixed legal system, as it embodies a specific type of inward pluralism, resulting from the coexistence of the two Greek and Turkish communities. As Kombos puts it, “the assumed absolute mistrust between the two communities (Greek and Turkish) [. . .] resulted in a lengthy, detailed, rigid and permanent Constitution that has at its epicentre two principles: protected bi-communalism and a system of multiple checks and balances to ensure that the status quo remains intact and that minority rule is safeguarded.”129 On a daily basis, ordinary politics is afflicted with tensions and disagreements, so that coexistence does not seem to result in any form of legal hybridation. Freedom of contract is a constitutional right, as well as the right to collective bargaining. Two communal chambers, one Greek and one Turkish, were provided for in the Constitution in order to ensure the self-government of the respective communities regarding topics such as education, culture, religion, etc., but the Turkish community decided to withdraw from all State organs in 1964. Five religions enjoy constitutional status: the Orthodox Christian religion, the Islamic religion, the Maronites, the Roman Catholics, and the Armenians, the two main religious groups being granted special autonomy. Religious pluralism is thus secured, and other religions or rites enjoy religious freedom.130 In Greece, the Muslim minority in Thrace enjoys an increased autonomy. The validity of its customary law and sharia law is accepted, which has an important impact on personal law. As Ioannis A. Tassopoulos comments, this is the only European example where sharia law is valid.131 Although Brazil is a federal State like Germany, pluralism there does not seem to be a heated issue regarding the relationship between the domestic and international orders, nor
122 See for example Tetley (2000), Reid (2003), Du Plessis (2006), Palmer and Mattar (2015) and Palmer (2012). 123 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 1. 124 Corrin, Constitutionalism and Customary Law in Solomon Island, § 1. 125 Corrin, Constitutionalism and Customary Law in Solomon Island, § 1. 126 Corrin, Constitutionalism and Customary Law in Solomon Island, § 1. See also ibid., § 7.
127 K v T [1985–1986] SILR 49, quoted by Corrin, Constitutionalism and Customary Law in Solomon Island, § 3.4. 128 Corrin, Constitutionalism and Customary Law in Solomon Island, § 3.4. 129 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.1. 130 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.2.4. 131 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 5.
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regarding native communities. Nevertheless, according to Ana Paula de Barcellos there is room for a pluralism of a sort in slums, where the “lack of State’s authority leaves room to other kinds of norms, organized by the community itself and frequently defined and imposed by criminal groups.”132 More originally, the concept of pluralism seems to be adequate when addressing the autonomy of public administrations, and especially of powerful administrative agencies. The latter have developed a sort of administrative diplomacy by joining cooperative international agencies, such as the International Coalition of Medicines Regulatory Agencies, the International Cooperation on Cosmetics Regulation, or the Financial Action Task Force. The regulations which are drafted by the Brazilian agencies are “framed through international cooperation in the administrative level without much control or even participation from Congress.”133 Councils for professional supervision in various sectors also enact regulatory norms which tend to exceed the legislative power, and are sometimes considered void by Courts precisely for that reason. Private forms of autonomy can also be exercised pursuant to the constitutional recognition of professional collective bargaining, the autonomy of sports controlling entities and associations. Some attention to traditional communities is given by the Constitution, which tends to recognise and protect their social organisations, customs, languages, creeds, and traditions.134 Although not provided for in the Constitution, some judicial recognition of their own normative orders seems to be implicit in court decisions where charges against members of indigenous people were dismissed because they had already been punished within their own communities.135 In Argentina as well, the discussion regarding the compatibility between Aborigines’ institutions and cosmovision and domestic law is important.136 Singapore offers an example that combines the two previous situations of colonial heritage on the one hand, and of taking account of social diversity on the other hand. This State is also a former British colony and supports the inheritance of English law. Nevertheless, as Neo makes clear, “first, English statute passed after the Second Charter
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law; and secondly, the reception of English law was subject to suitability to local circumstances and could be modified where its application would cause injustice or oppression.”137 Singapore also borrowed from other commonwealth jurisdictions, such as India and Australia. More fundamentally, this had important consequences on the general attitude of Singapore legal authorities towards accommodating local customary law and religious practices. From the institutional perspective, Islam is specifically taken into account because of the establishment of Shariah courts, which are under the supervision of the Ministry of Social and Family Development rather than constitute the Judiciary as such, and the existence of an Islamic Religious Council and the Registry of Muslim Marriages. Pursuant to the Administration of Muslim Law Act 1966, Shariah courts have jurisdiction over marriage, divorce, family, and inheritance questions, where all parties are Muslims or were married under Islamic law.138 A strong form of pluralism seems to be guaranteed, as pursuant to the Supreme Court of Judicature Act 1969, “the High Court shall have no jurisdiction to hear and try any civil proceeding which comes within the jurisdiction of the Sariah Court.” The case-law shows some contradictions and uncertainties regarding the exact boundaries of the respective jurisdictions. Amendments to the Supreme Court of Judicature Act and the Administration of Muslim Law Act led to increase the scope of concurrent jurisdiction between Shariah courts and civil courts. This did not really clarify or stabilise the relationships between the two types of institutions. As Neo documents, “Despite these legislative changes, jurisdictional and normative conflicts between these two legal systems continue to arise.”139 Civil courts are reluctant to admit that religious norms prevail over secular statutes. According to the Court of Appeals, “legislation and the common law prevail over personal laws.”140 Specific legal provisions also address the situations of the Catholic Church and Sikh and Hindu properties, which is evidence of a form of in-built institutional and substantive pluralism within the domestic legal system.
3 [of Justice of 1826] was not to become part of Singapore 132
De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 1. 133 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 2. 134 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 2. 135 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 2. 136 Ucín, A Particular Dialogue Between Systems. The Argentinian Case, § 1.iii.
The Dynamics of the Relations Among Legal Spheres in Positive Law
This part of the report intends to tackle the following issues. Has the reorganisation of the interactions among norms imposed by globalisation happened in a natural, consensual Neo, Legal Pluralism in Centralist Singapore, § 1. Neo, Legal Pluralism in Centralist Singapore, § 3. 139 Neo, Legal Pluralism in Centralist Singapore, § 3. 140 Shafeeg bin Salim Talib and another v Fatimah bte Abud bin Talib and others [2010] 2 SLR 1123, quoted by Neo, Legal Pluralism in Centralist Singapore, § 3. 137 138
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way and “softly” or “smoothly”, or in a more difficult, chaotic, or even conflict-ridden way? Have all the legal actors (constitutional courts, ordinary courts, legislative bodies, administrations, local authorities, etc.) adopted a homogenous attitude in that respect? Is there any consistency between the hierarchy of norms and models of interaction, articulation and collision of norms that have thus been set up and those established, suggested or imposed by the other legal spheres, or is each sphere trying to impose its own supremacy or way of understanding the combination of legal systems upon the other? How are conflicts solved? Is there any idea of transconstitutional “dialogues”? Are they vertical types of dialogues (e.g. between a national and a supranational court) or horizontal ones (e.g. between two national or two supranational courts)? Is it possible to perceive substantial influences, that is, ways for different actors to draw inspiration from one another? Are those types of interaction explicit and openly claimed or are they rather implicit, or even hidden? Has the case-law or the (constitutional or infraconstitutional) legislation gone through a spasmodic evolution? Has this evolution been marked by important decisions, or even by the existence of periods of time or phases that were characterised by different attitudes? Whatever its exact shape, pluralism necessarily leads to a dynamic form of interaction among legal systems that claim to enjoy some form of autonomy vis-à-vis one another. This is connected to the issue of the “relational aspect of the constitutional debate” identified by Kombos.141 The major conceptual tool that has been developed to address that issue is that of “dialogue”.142 It tries and accommodates the more or less conflicting perspectives according to which each legal sphere endeavours to preserve its independence, while it simultaneously needs to take into account the others, which are understood to be partners as well as competitors. Traditionally, two forms of dialogues are identified. Dialogue can take a horizontal form, i.e. between authorities of the same type or co-equal authorities, for example between national constitutional judges or between international judges. In a context that presupposes some sort of integration and, possibly, some claim of hierarchisation, it can also take a vertical form, i.e. between authorities intervening on a separate territorial or legal level, for example between national judges and international or supranational judges.143 Horizontal dialogues frequently take the form of crossquotation between legal actors. Three aspects of this practice need to be distinguished.
141 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 2.1. 142 See infra, §§ 4 and 5. 143 For illustrations, see e.g. Burgorgue-Larsen (2009); Ayala Corao (2012), pp. 128–129.
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First, it is essential in certain cases that domestic judges pay attention to extrasystemic sources, especially international law or foreign law. Here, it seems to be necessary for them to apply or examine foreign sources. Municipal judges may have to deal with cases endowed with a transnational legal dimension, for example when they have to deal with private international law or conflict of laws. In these cases, which are increasingly numerous because of the increasing circulation of persons, national judges are compelled to use and confront materials coming from several legal orders. National judges also have to look at foreign law in the context of extradition procedures. That is not really new, nor can it be regarded as a significant aspect of transconstitutionalism and translegalism. Here resorting to foreign sources is mandatory under national sources, and seems to be intrinsic to this type of litigation. Secondly, it is frequently natural for domestic actors to resort to foreign sources in the contexts where they have to enforce an international norm, such as a human rights treaty (ECHR, EU treaties, Inter-American Convention on Human Rights, etc.). Paying attention to what other parties to the treaty do, and especially to how they interpret and implement it locally is not really mandatory, but it seems quite rational if the aim of an international treaty is to foster uniform or at least convergent practices. This seems internal to the practice of having international relations. Such is for example Justice Scalia’s opinion, in spite of all the prejudices he had against legal cosmopolitanism: “I will use it [foreign] law in the interpretation of a treaty.”144 Thirdly, what is more significant of emerging transnational legal phenomena is the following, which may be called “incidental” involvement with extrasystemic sources. More and more often, it appears that judges will make their decisions, even in a strictly national context for national judges or in a strictly international context for international judges, with reference to foreign, international, supranational, transnational, comparative, etc., legal materials which they are not obliged to use. It is entirely contingent on the actors’ choice. Essential and natural involvements with foreign law do not immediately result in an increase in incidental cross quotation. It needs to be interpreted as an important move in legal reasoning. For example, in Calvin’s Case, Edward Coke reported the following: “Also in their arguments of this cause concerning an alien, they told no strange histories, cited no foreign laws, produced no alien precedents, and that for two causes; the one, for that the laws of England are so copious in this point, as, God willing, by the report of this case shall appear; the other, lest their arguments concerning an alien born should become foreign, 144 Scalia-Breyer Debate on Constitutional relevance of foreign court decisions, available at http://www.freerepublic.com/focus/news/ 1352357/posts.
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strange, and an alien to the state of the question, which being quæstio juris concerning freehold and inheritance in England, is only to be decided by the laws of this realm.”145 There, Coke praised the judges for dealing with the condition of the children born in Scotland after James VI of Scotland had acceded to the English throne under the name of James I, i.e. with the concept of a stranger, without resorting to foreign considerations. Coke’s dictum here represents the anti-global perspective. On the contrary, today, one precisely needs to concentrate on the legal actor that looks at a local matter through extra-local eyes. The voluntarily outward-looking reasoning can be regarded as a significant dimension of the emergence of new global legal characters.146 Most of the time, the tendency to take into account extrasystemic sources has led to what is regarded as progressive jurisprudence in terms of human rights protection.147 That explains why, for example, it is only after South Africa adopted a democratic constitution in 1996 that judges in Botswana appeared to adopt a more cooperative attitude than before. It led them to rely on South African precedents, and to establish a “cross-judicial dialogue”. This practice is known to have been quite important and quite natural among the Commonwealth countries, because for most of them, the supreme court sat at London. That is why the UK seems to have widely benefited from the case-law of other common law jurisdictions such as Australia, the United States, Canada, and New Zealand,148 as much as, generally speaking, the former colonies benefited from the former metropole’s law. But the States under review in this report seem not to have embraced this practice without restrictions. In Brazil, although it is more evident in the case of lower judges than in that of superior judges, the judicial dynamics seems to favour domestic norms over international or supranational ones. It is clear for example in some cases of obvious disregard for rulings of the Inter-American Court of Human Rights by the Brazilian Supreme Court.149 Similarly, State law is generally preferred to native community law, except in the States where native communities live, as States are more
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sensitive to the latter’s perspectives. Judicial quotation of foreign precedents is irregular and depends on the inclinations of the individual judge.150 The German Federal Constitutional Court also happens to quote from other courts that belong most of the time to the Western liberal tradition.151 Nevertheless, it has led to the identification of a fifth method of constitutional interpretation, in addition to those classically mentioned by Savigny.152 According to Viellechner, “Frequently, the [comparative] approach appears random and arbitrary. [. . .] In a more sympathetic appraisal, [commentators] detect mere decoration of a result already found.”153 Cyprus is presented as particularly open to external influence. Domestic courts have not hesitated, especially when human rights were concerned, to pay attention to foreign law and to engage in important dialogues with the ECtHR.154 Generally speaking, offering various examples, Kombos notices that “The willingness of the Supreme Court to engage with other legal systems could also be seen in the strong and frequent use of the comparative method.”155 The existence of vertical dialogues depends on the existence of a more complex institutional setting, where national and international or supranational laws interact. From this perspective, the European Union constitutes a remarkable field of enquiry. In Cyprus, vertical dialogues between domestic courts and the ECJ, especially thanks to the procedure for preliminary reference provided for in Article 267 of the Treaty on the Functioning of the European Union, have been possible in spite of a somewhat unstable domestic legislation that made it complicated. Overall, the judiciary has first been reluctant to use the preliminary reference. But the Alpha Bank Cyprus Ltd case156 testified to the adoption of a more cooperative standpoint and of greater deference to the interpretation of EU law by the ECJ.157 The Greek report offers a detailed presentation of an interesting case study. In this country, one example of transconstitutional dialogue is the reference that the Council of State decided to submit to the European Court of 150
145
7 Coke Report 1a, 77 ER 377 (1608). These remarks follow from a project developped with Horatia Muir Watt and Mikhaïl Xifaras, about “Emerging Global Legal Characters: Arbitrators, Judges and Transnational Legal Analysis”, presented at the Institute for Global Law and Public Policy Workshop of 2011. 147 See for example Supreme Court of the United States, Lawrence v. Texas 539 U.S. 558 (2003); Roper v. Simmons 543 U.S. 551 (2005); Constitutional Court of South Africa, State v T Makwanyane and M Mchunu, Case No. CCT/3/94; Supreme Court of Canada, R. v. Morgentaler, [1988] 1 S.C.R. 30. For a more critical account, see also infra, § 6. 148 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.4. 149 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 3. 146
De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 3. 151 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 2.3.1. 152 De Savigny (1855), pp. 206–208. 153 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 2.3.1. 154 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.3.2.2. 155 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.3.2.2. 156 Alpha Bank Cyprus v. Si Senh Dau and others, Joint Civil Appeals 23-29/2013, Decision of 13 September 2013, quoted by Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.3.2.1. 157 On the remaining limitations, see Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.4.1.
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Justice.158 What can be regarded as an example of cooperative attitude—similar to what has been witnessed in Austria,159 Italy,160 France,161 and Germany162—cannot hide the very heated discussion regarding the relationship between domestic and supranational legal systems that took place in Greece. There are two opposed conceptions of the European Union: one based on supranationalism and favouring integration, the other based on States’ sovereignty and insisting on the national character of democracy. Whereas some judges considered that the Constitution needed to be interpreted in conformity with EU law, as imposed by the ECJ, others refused to let the Constitution give way. Among the arguments of the latter were the principle of national sovereignty, the fact that nothing in the Constitution allows Greek judges to set aside the basic norm, and the fact that the binding nature of the EU legal order depends on a statute that is valid precisely because it has been adopted pursuant to constitutional provisions, especially Article 28, which does not enjoy any paramount status among constitutional norms. The difficulty appears to have been solved by giving up any reasoning in terms of formal normative hierarchies: When the CJEU ruled that the irrebuttable presumption regarding the capacity of major shareholders in both media enterprises and public work contractors, imposed by GRC art. 14.9, violated the principle of proportionality, the CS changed course in 3470/2011 (in pleno). The Court abandoned the strict construction of GRC art. 14.9 and adopted a teleogical and evolutionary interpretation, accepting that it should be harmonized and construed in conformity with EU law, which must be upheld in the domestic legal order, as required by the Constitution itself, establishing the principle of proportionality (art. 25.1).163
The principle of proportionality, which is common to both legal systems, offered a substantive common ground to accommodate the “metaconstitutional claims”164 of both regarding the other. As Tassopoulos puts it, That EU law is upheld over domestic law, including the Constitution, is the legal consequence of the federal principle, which can operate without a federal constitution, or a federal State. In the supranational European structure of dual sovereignties, i.e. of the EU and of the member-States, one may think, not in terms of hierarchy, but of a relation of priority, or precedence, of EU law vis-à-vis the domestic legal order, resulting from the federal 158 Council of State 3670/2006, quoted by Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 2. 159 VfGH, 10 March 1999, B 2251/97, B 2594/97. 160 Corte costituzionale, ord. 102/2008, 103/2008, 207/2013. 161 Decision n 2013-314P QPC, 4 April 2013, M. Jeremy F. [Absence de recours en cas d’extension des effets du mandat d’arrêt européen question préjudicielle à la Cour de justice de l’Union européenne]. See generally Drigo (2013). 162 BVerfG, 2 BvR 2728/13. 163 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 2. 164 Cruz Villalón (2004), p. 73.
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principle. The latter makes necessary, at least for functional purposes of coordination, the prevalence of EU law. More important than figures of speech about vertical or horizontal relations, are the functional aspects and the underlying normative considerations.165
As will be explained in greater detail below,166 because of the lack of any formal hierarchical authority to solve the conflict, the solution has to be found by means of common dialogical efforts and by reference to shared substantive principles.167 Only such principles, understood as underlying each legal system’s claims, can provide common ground for dialogue and accommodation. From this perspective, the notion of a “constitution” cannot be understood in purely formal, hierarchical terms, but also necessarily in substantive terms (values, social ideals, goals, etc.). The convergence of the values that underlay both European and national constitutionalisms is the major building block for a peaceful solution to more or less problematic interactions. A sort of common constitutional patrimony, based on values such as human dignity, freedom, equality, etc., helps offer a shared grammar for dialogue. That is why, for example, Edouard Dubout and Sébastien Touzé regard fundamental rights as the major “hinges” between legal orders and systems.168 Nevertheless, there appears to be some limits to the possibilities of accommodation. In Italy, they have taken the form of “controlimiti”.169 In France and Germany, they are related to “constitutional identities”.170 In Greece, the unamendable provisions of Article 110.1 of the Constitution deal with the form of the government as a parliamentary republic, and proclaim human dignity, legal equality, the free development of personality, religious freedom, and the separation of powers. Article 28 also sets limits to international integration, by insisting on the rights of man, the foundations of a democratic government and reciprocity. That is why the priority of EU law is acknowledged because it is based on a domestic provision, and because it is conditional on the protection of fundamental values. As presented by Tassopoulos, this debate perfectly reflects what has become the grammar of transconstitutional interaction in Europe, whereby “Constitution and EU law [need to be interpreted] in a spirit of mutual deference and consideration, so as to achieve harmony and to avoid conflicts”171: “Were the European integration process to take a different route (e.g. imposing restrictions on voting rights in the Council 165
Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 2. 166 See infra, §§ 4 and 6. 167 See e.g. Dubout (2015). 168 Dubout and Touzé (2010). 169 Bernardi (2017). 170 See infra, § 4. 171 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 3.
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for indebted countries), anti-democratic, scornful of reciprocity, and forgetful of respect for fundamental rights, the [Council of State] would certainly react to the violation of the fundamental principles, which set the material limits to the amendment of the Greek Constitution, following a rationale similar to the German Solange decisions.”172 The Greek report also points to the case of the Public Sector Involvement, leading to the replacement of Greek bonds with new ones in the context of the Greek financial crisis, where three constitutional systems interfered with one another: the Greek domestic one, the ECHR, and the ECJ.173 As is clear from the last remarks, and will also appear later,174 Germany indeed seems to be the focal point of European transconstitutional dialogues. Viellechner underlines the paradoxical situation of the German constitutional order. Although it expresses an unprecedented external openness, the Basic Law simultaneously insists in a very idiosyncratic way on the domestic protection of fundamental rights. That is why friendliness “towards other normative orders, arising both beyond the State through international or transnational cooperation and within the State through migration [do] not mean unconditional recognition”,175 let alone submission. This attitude is obvious in the case of EU law. Regarding European Union secondary law, the German Federal Constitutional Court generally accepts the principle of primacy, but it sets three limits to this openness. First, the Court retains a competence to control secondary norms in case the European supranational level does not offer sufficient guarantees in terms of human rights protection.176 Secondly, supranational acts that are manifestly ultra vires, i.e. go beyond the express conferrals, can be left unapplied on the domestic soil. Thirdly, as is the case in France,177 the constitutional identity of the German legal order offers a last limit to international openness.178 Until recently, that sort of reminder of more or less outspoken threat was hardly regarded as serious, because “the dog appeared to bark more than to bite”.179 Things have 172 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 2. 173 Tassopoulos, Between Constitutionalism and Legal Pluralism: Perspectives from Greece, § 4. 174 See infra, § 4. 175 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 1. 176 BVerfGE 37, 217 (1973); BVerfGE 73, 339 (1986); BVerfGE 102, 147 (2000), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.4. 177 French Conseil constitutionnel, Decision n 2006-540 DC, 27 July 2006 Loi relative au droit d’auteur et aux droits voisins dans la société de l’information. 178 German Federal Constitutional Court, Judgment on Lisbon Treaty, June 30, 2009 (BVerfG, 2 BvE 2/08). On the doctrine of “constitutional identity”, see infra, §§ 4 and 6. 179 See e.g. Schmid (2001).
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changed however because the hostile move was actually made by the Czech Constitutional Court in 2012 in the “Slovak Pensions” case.180 In its ruling of January 31st, 2012, the Czech Constitutional Court directly and brutally jeopardized the ECJ’s authority. In that case, the Court quashed several decisions of administrative courts regarding the old-age benefits of the litigant. The applicant was a Czech citizen, a permanent resident in the current territory of the Czech Republic, who had spent part of his career in the Czechoslovak railways, on the present territory of the Slovak Republic, and then, after the partition of the country, in the Czech railways. The Social Security Administration granted him a pension without taking into account the interpretation by the Constitutional Court of the treaty between the Czech Republic and the Slovak Republic concerning social security of 29th October 1992, which required the administration to increase the pension so as to reach the amount to which one would have been eligible if one had spent one’s entire career on Czech territory with a Czech employer and under the Czech pension system. Since it appeared to be contrary to EU law, such a reading of the Treaty was submitted by the Supreme Administrative Court to the European Court of Justice by way of a reference for a preliminary ruling. The European Court considered that granting a social benefit supplement only to Czech nationals residing on the territory of the Czech Republic violated the rules of European Union law, in particular the principle of equality (Article 12 of the Treaty establishing the European Community; Council Regulation (EEC) No 1408/71 of 14th June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community). Freedom of movement was also undermined, as the scheme did not benefit those residing outside the Czech Republic. According to the ECJ, As regards the requirement of residence in the territory of the Czech Republic, it must be recalled that the principle of equality of treatment, as referred to in Article 3(1) of Regulation No 1408/71, prohibits not only overt discrimination based on the nationality of the beneficiaries of social security schemes but also all covert forms of discrimination which, through the application of other distinguishing criteria, lead in fact to the same result [. . .]. Accordingly, conditions imposed by national law 180 This case is also commented on by Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 2.4. For other examples of transconstitutional conflicts in Poland (where the Constitutional Tribunal was ready to ignore a EU Regulation if it had disregarded domestic fundamental rights (Polish Constitutional Tribunal, Decision SK 45/09), Venezuela (where the constitutional chamber of the Supreme Court decided by Expediente n 11-1130 du 17 octobre 2011, not to abide by a ruling of the Inter-American Court of Human Rights), and Italy (where the Constitutional Court by Constitutional Court, sent. 238/2014, refused to abide by a ruling of the International Court of Justice), see Muir Watt and Tusseau (2016) and Tusseau (2012, 2013b, 2014a). See also Lavranos (2008).
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conclusions of the German Federal Constitutional Court, stated in its Maastricht decision.
The Court identifies three main areas in which it is entitled on that basis to monitor the Union institutions’ exercise of their powers: the non-functioning of its institutions, the protection of the material core of the Constitution, not only in relation to European law but also to the particular application thereof, and, finally, the functioning as ultima ratio, i.e. the authority to review whether an act by European Union bodies exceeded the powers that the Czech Republic transferred to the European Union under Art. 10a of the Constitution; these could be, in particular, abandoning a value identity and exceeding the scope of the entrusted competences.185
ECJ judges concluded that: It follows from the foregoing that the Ústavní soud [Constitutional Court] judgment involves a direct discrimination based on nationality and indirect discrimination based on nationality, as a result of the residence test, against those who have made use of their freedom of movement.182
As a result of this decision, the Czech legislature prohibited the payment of the compensation required by the Constitutional Court’s interpretation of the Treaty. The administrative judges therefore applied the ECJ ruling and its domestic legislative consequences, against the previous decisions of the Constitutional Court. After recalling the decision of the judges in Luxembourg, the Brno Court summarized its own case-law on the relations between Czech law and supranational law.183 Those relations are based on a principle of proper interpretation of national law governing Union law, which, in accordance with the Solange I, Solange II and Maastricht judgments of the German Federal Constitutional Court,184 must ensure that national law is influenced by supranational law, provided principles such as that of the democratic State governed by the rule of law (Article 9 C) are preserved. From its judgments 19/08 and 29/09 it follows that: The Constitutional Court remains the supreme protector of Czech constitutionality, including against possible excesses by Union bodies or European law, which also clearly answers the contested issue of the sovereignty of the Czech Republic; if the Constitutional Court is the supreme interpreter of the constitutional regulations of the Czech Republic, which have the highest legal force on Czech territory, it is obvious that Art. 1 par. 1 of the Constitution cannot be violated. if European bodies interpreted or developed EU law in a manner that would jeopardize the foundations of materially understood constitutionality and the essential requirements of a democratic, law-based State that are, under the Constitution of the Czech Republic, seen as inviolable (Art. 9 par. 2 of the Constitution), such legal acts could not be binding in the Czech Republic. In accordance with this, the Czech Constitutional Court also intends to review, as ultima ratio, whether the legal acts of European bodies remain within the bounds of the powers that were provided to them. In this regard the Constitutional Court basically agreed with certain ECJ, 22 June 2011, Marie Landtová c/ Česká správa socialního zabezpečení, C-399/09, §§ 44–46. 182 ECJ, 22 June 2011, Marie Landtová c/ Česká správa socialního zabezpečení, C-399/09, § 49. 183 Décisions Pl. ÚS 50/04, Pl. ÚS 66/04, Pl. ÚS 19/08, Pl. ÚS 29/09. 184 BVerfGE 89, 155 (1993). 181
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In the case under study, the Constitutional Court had to determine the effects of the ECJ’s ruling on the Czech territory. The purpose of the Constitutional Court’s ruling on pensions has always been to ensure equality among Czech citizens, regardless of the place where, prior to the dissolution of the State, they worked in Czechoslovakia, and to guarantee the maximum level of social benefits. According to the constitutional judges, a period of employment in the Slovak territory before January 1st, 1993 could not be considered retroactively as a period of employment abroad. Therefore, the European regulation in question did not apply. From that point of view, Failure to distinguish the legal relationships arising from the dissolution of a State with a uniform social security system from the legal relationships arising for social security from the free movement of persons in the European Communities, or the European Union, is a failure to respect European history, it is comparing things that are not comparable.186
That is why, according to the Court, Regulation 1408/71 was not applicable: Due to the foregoing, European law, i.e. Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons, self-employed persons, and members of their families moving within the Community, cannot be applied to entitlements of citizens of the Czech Republic arising from social security until 31 December 1992; and, based on the principles explicitly stated by the Constitutional Court in judgment file no. Pl. ÚS 18/09, we cannot do otherwise than state, in connection with the effects of ECJ judgment of 22 June 2011, C-399/09 on analogous cases, that in that case there were excesses on the part of a European Union body, that a situation occurred in which an act by a European body exceeded the powers that the Czech Republic transferred to the European Union under Art. 10a of the Constitution; this exceeded the scope of the transferred powers, and was ultra vires.187
In particular, the Court of Luxembourg erred in the eyes of the domestic court by ignoring the specific features of the Czech Constitutional Court, Pl. ÚS 5/12, § VII. Czech Constitutional Court, Pl. ÚS 5/12, § VII. 187 Czech Constitutional Court, Pl. ÚS 5/12, § VII. 185 186
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Czechoslovak situation. In severe terms, they considered that:
The Argentinian State should have identified the way in which [it] could comply with the given order. [It] must have adopted the measures oriented to leave without effect the analysed judicial decision; [. . .]
the ECJ would familiarize itself with the arguments that respected the case-law of the Constitutional Court and the constitutional identity of the Czech Republic, which it draws from the common constitutional tradition with the Slovak Republic, that is from the over seventy years of the common State and its peaceful dissolution, i.e. from a completely idiosyncratic and historically created situation that has no parallel in Europe.188
This decision, which was also related to conflicts between the Administrative Supreme Court and the Constitutional Court, was revolutionary. Before it, no domestic judge had ever refused to comply with the rulings of the ECJ. In Germany, such a decision could only be reached after prior reference to the European Court of Justice for a preliminary ruling.189 This procedure was followed, for example, for the first reference the Constitutional Court submitted to the ECJ, in the OMT case.190 Unlike what had happened in the Czech Republic however, no suspension of the applicability of EU secondary law ever took place. As María Carlota Ucín makes clear, a similar controversy is going on between Argentina and the Inter-American Court of Human Rights. In the Fontevechia decision of November 29th, 2011, the Court declared that Argentina had violated freedom of speech (Art. 13 in connection with Art. 1.1. of the Convention) because of a judicial ruling awarding damages to former President Menem following the publication of an article regarding his private life in a magazine. The IACHR ordered the Argentinian State to “leave without effect” the aforementioned judicial ruling. But on February 14th, 2017, the Supreme Court decided that, pursuant to Article 27 of the Constitution, which imposes on the government “to strengthen its relationships of peace and trade with foreign powers, by means of treaties in accordance with the principles of public law laid down by this Constitution,” it could not derogate “a decision that was already firm and with the res judicata status”.191 The Supreme Court also considered that the IACHR was exceeding its competences. In what is regarded as a dialogue, the IACHR replied to the Supreme Court’s arguments on October 18th, 2017. Among other considerations, it underlined that: Internal dispositions cannot be alleged as reasons to avoid complying with international compromises;
Czech Constitutional Court, Pl. ÚS 5/12, § VII. BVerfGE 126, 284 (2010), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.4. 190 BVerfGE 134, 366 (2014), quoted by Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.1.4. On this case, see e.g. Tusseau (2014b). 191 Ucín, A Particular Dialogue Between Systems. The Argentinian Case, § 3. 188 189
Additionally, it argued that the Supreme Court cannot evaluate the IACHR remedial competence nor can [it] evaluate its competence as a condition to comply with those orders.192
The United Kingdom is also (for the moment) a member of the EU and a party to the European Convention on Human Rights. According to Psygkas, transconstitutional dialogues have developed with the ECJ and the ECtHR. In order to remain within a pattern reciprocal accommodation, British courts have refused the principle that they had to abide by the other courts’ rulings. As the Supreme Court explained, “This court is not bound to follow every decision of the European court [of Human Rights]. Not only would it be impractical to do so: it would sometimes be inappropriate, as it would destroy the ability of the court to engage in the constructive dialogue with the European court which is of value to the development of Convention law. . . Of course, we should usually follow a clear and constant line of decisions by the European court. . . But we are not actually bound to do so or (in theory, at least) to follow a decision of the Grand Chamber.”193 Even though the principle of the primacy of EU law should lead to a more moderate position regarding the ECJ, UK judges refused this idea and preferred the idea of dialogue. This concept really seems to have displaced the more traditional legal concepts of authoritativeness, bindingness, obligatoriness, mandatoriness, etc. Could pluralism have favoured the emergence of a sort of new form of legal reasoning?
4
The Renewal of Legal Reasoning
This part of the report intends to tackle the following issues. Have the legal interactions that globalisation implies led to a change in both the form and substance of legal reasoning and arguments? Has legal reasoning undergone changes, either in litigation and cases related to the issue of pluralism, or because of some spillover effect in other domains? To give an example, has there been an important development of reasoning in terms of principles, proportionality control or balancing? Is there a strong opposition between syllogism and weighing? Have the “methods of interpretation” been 192 Ucín, A Particular Dialogue Between Systems. The Argentinian Case, § 3. 193 Manchester City Council v Pinnock [2010] UKSC 45 [48] (Lord Neuberger), quoted by Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.4.
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modified depending on the multiplied audience which the different legal spheres now address? Have the concrete working methods of legal actors (constitutional courts, ordinary courts, legislative bodies, individual legislators, administrations, local authorities, companies and their legal services, arbitration courts, law firms, etc.) evolved (e.g. by setting up international relations services, comparative law services, etc.)? Is the idea of “dialogue” used in jurisprudence (and which jurisprudence: constitutionalist? internationalist, etc.?) and/or by legal actors (normative authorities, courts, law professionals, etc.) themselves? Have concepts or tools enabling the interconnection and limitation of the interconnection among legal spheres appeared (e.g. controlimiti in Italy or constitutional identity in France and Germany)? Do these concepts tend to replace arguments founded on sovereignty? Even more fundamentally, has it been necessary to think anew the concepts of “law”, legal “system”, or “order” (e.g. so as to take into account the multiplication of sources of law, soft law, the fragmentation of the law, etc., or to highlight the emergence of a law which has a less determining importance, is based on autonomy, reflexivity, selfcoordination, and operates in mobile and dynamic networks, and not according to the vertical model of the pyramid of norms)? The main teachings of the national reports can once again be presented according to a scalar logic rather than by using clear-cut categories. It seems possible to start with the States where legal reasoning seems to have been impacted by a lower level of pluralisation and to go on studying those where major developments seem to have taken place, especially due to the dynamics of globalisation. In Botswana, because of the colonial past, there has always been a double legal culture, especially among the judiciary. Depending on the specific background of the judge, this has led to using different precedents, different methodologies, and different techniques.194 Fombad does not seem to regard this situation as a factor for the development of a more imaginative legal culture, nor does he seem to document the emergence of any original hybrid legal culture. In Solomon Islands, one of the most important issues is related to the enforcement of human rights. As Corrin puts it, “The rights chapter is modelled on the Universal Declaration of Human Rights (1948) and the European Convention for the Protection of Human Rights and Fundamental Freedoms (1950).”195 In spite however of this evident transplant and the original jurisdiction that is granted to the High Court for the enforcement of these provisions, uncertainties remain in case of conflict between human rights norms and customary 194 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 4. 195 Corrin, Constitutionalism and Customary Law in Solomon Island, § 3.4.
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norms. Especially regarding non-discrimination and freedom of movement, courts have adopted a narrow view of the application of human rights. As far as the right to life and religious freedom are concerned, international norms have had a greater influence.196 In this respect, Corrin concludes that: “Overall, it cannot be said that there has been a ‘reshuffle’ of the interactions among norms imposed by globalisation. Where there has been some movement, it cannot be described as natural or chaotic or conflictive in Solomon Islands. Instead, the more appropriate descriptor is ‘ad hoc’. There is some evidence of international law operating as an influence on the law through its use by the courts as an aid to interpretation. [. . .] However, the courts do not take a uniform approach to application of the international norms encapsulated in the Constitution or to the use of international norms as a guide to interpretation.”197 The local institutions have not adopted any principled or systematic doctrine regarding the interconnection of domestic and international norms, as the review of cases which is offered by Corrin makes clear.198 The courts have refused to let human rights override customary law several times.199 That was for example the case in Taenavalu v. Tanavalu,200 where the court refused to ignore a discriminatory customary law. While it was clearly incompatible with the right to freedom from discrimination proclaimed in Article 15 of the Constitution, customary law was held to be exempt from this constitutional norm. Such an argument, according to which only laws made after the Constitution came into force are subject to this provision, leads to the conclusion that traditional customs cannot be subjected to this part of the Constitution. The rationale for that attitude may also be that, as opposed to a constructivist logic which is prevalent in contemporary legislation, some judges are prone to prefer the traditional wisdom that, according to a sort of Burkean logic, is internal to customary norms.201 The development of the Pacific Islands Forum, of which Solomon Islands is a member, may help improve the international integration of this country. Similarly, although “There 196
Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.1. 197 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.1. 198 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.2.3. 199 See also Corrin Care (1999). 200 Quoted by Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.2.3. 201 See especially in this respect Muria CJ in Pusi v. Leni, quoted by Corrin, Constitutionalism and Customary Law in Solomon Island, § 6: “I have made these observations because it appears to the court that this case is a classic example of an attempt to use the Constitution to circumvent the lawful application of custom, a course of action that may well engender disharmony in society. Such a course must not be allowed to flourish in this country.”
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is little opportunity for transconstitutional dialogue, as there are few avenues for external appeals or referral of disputes from Solomon Islands to supranational bodies,”202 the recent initiatives for a transnational Asian-Pacific regional rights protection system may change this situation in the future. International norms are used as interpretive aids, for example to guide the implementation of domestic human rights norms.203 Sometimes, judges have even referred to international norms to which Solomon Islands had consented but which were not ratified, whereas in other cases they have outrightly refused to consider international instruments. No consistent judicial attitude thus emerges in terms of a formal hierarchy of norms.204 Conversely, “Legal borrowing and engagement has always been part of Singapore’s legal tradition as part of the common law world.”205 However, Neo considers that this attitude is more obvious in the domain of private law than in the domain of constitutional law. In the latter, the judiciary developed a “four-wall doctrine”. According to Chief Justice Yong Ping How, the constitution is “primarily to be interpreted within its own four walls and not in the light of analogies drawn from other countries such as Great Britain, the United States of America or Australia”.206 This attitude, which reminds one of Justice Scalia’s claims of American exceptionalism, is nevertheless presented as somehow paradoxical by Neo, as it iself results from a borrowing from a Malaysian case.207 As a consequence, parochialism precisely appears as a shared and transferable perspective. Singapore courts thus tend to resist one of the most important and widely operating devices of contemporary constitutionalism and transconstitutionalism: proportionality, because it involves too many risks of second-guessing what the political authorities have decided and infringing on the proper separation of powers. Another element of “global [constitutional] doctrine”208 that has been rejected is the Basic structure doctrine that, following the Indian example,209 allows courts to review the (supra)constitutionality of constitutional
202
Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.3. 203 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.3. 204 Corrin, Constitutionalism and Customary Law in Solomon Island, § 4.3. 205 Neo, Legal Pluralism in Centralist Singapore, § 4. 206 Chan Hiang Leng Colin v Public Prosecutor [1994] 3 SLR(R) 209, quoted by Neo, Legal Pluralism in Centralist Singapore, § 4. 207 Government of the State of Kelantan v Government of the Federation of Malaya [1963] MLJ 355, quoted by Neo, Legal Pluralism in Centralist Singapore, § 4. See further Tan (2017). 208 See more precisely infra, § 6. 209 Kesavananda Bharati v. State of Kerala (AIR 1973 SC 1461).
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amendments.210 Even though it is the object of judicial debates,211 and although some mentions of this doctrine are made in order to highlight the importance of the principle of the separation of powers or the possibility of identifying unenumerated fundamental rights, it cannot be said to be in force in Singapore for the moment. In Brazil, the dominant attitude among legal practitioners seems to be rather parochial. Nevertheless, De Barcellos notices some changes. According to her, “As mentioned above, national legal criteria continue to be used by Brazilian Courts to deal with norms from different sources, including international law, to grant them validity and define its hierarchical position in the national system. However, the way these tools are handled, understood and applied by lawyers, academics and Courts have received and continue to receive relevant influence from constitutional and legal globalization. The cross-fertilization of ideas globalization fosters [have given] birth to new tools, incorporated by the national system, and new subjects of interest and research. Globalization [has also] had an important impact [on] the organization of legal services and [on] the dynamic of academic work.”212 In the legal academy, a dynamics of internationalisation, which favours the development of new ideas, is visible: students and professors go abroad, foreign students and professors are welcome, international events, publications, and research projects are organised. The Brazilian report proves that the distinction between Sects. 3 and 4 of this report may be a little artificial. A major change in Brazil has been the development of proportionality reasoning, balancing, and the weighing method used in decisions. It was important enough to lead some scholars to suggest less balancing and more subsumption213 or syllogism.214 The methodological change was indeed correlated to a general tendency to judicial activism, which drew on the techniques invented by other constitutional courts such as the German and the Colombian ones, and led to greater legal uncertainty. The report on the UK and the report on Germany indeed seem to offer the two most important examples of recent changes in legal reasoning due to the impact of globalisation and internationalisation. 210 Teo Soh Lung v Minister for Home Affairs & Ors. [1989] 2 MLJ 449 (High Court of Singapore), quoted by Neo, Legal Pluralism in Centralist Singapore, § 4.2. 211 Mohammad Fiazal bin Sabtu v Public Prosecutor [2012] 4 SLR 947; Yong Vui Kong v Public Prosecutor [2015] 2 SLR 1129, quoted by Neo, Legal Pluralism in Centralist Singapore, § 4.2. 212 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 4. 213 On the opposition between these two types of reasoning, see Alexy (2003). 214 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 4.
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In the UK, the impact of the new transconstitutional dynamics seems to have been important. As Psygkas notices, “European law, broadly understood to cover both EU law and the ECHR, has considerably influenced the UK’s approach to rights protection by enhancing the powers of courts.”215 The impact of supranational norms prompted a revival of the common law in order to protect fundamental rights, and helped to update the content of traditional principles. The general convergence of domestic and international norms towards a pro homine principle prompted legal actors at all levels to identify local principles that had their counterparts in supranational law. “The normative accommodation of external sources, such as the ECHR, does not replace but expands or ‘pluralizes’ the domestic constitutional sphere. The [Human Rights Act] has had a catalytic effect in creating new or expanding existing common law rights.”216 Regarding not the substance of rights but the methods of legal reasoning, a form of spillover effect can be observed in the UK. Proportionality analysis,217 which was first introduced thanks to cases that had an EU law or a Human Rights Act/ECHR dimension, progressively came to be used in purely domestic cases. The methods that are crucial to contemporary transconstitutionalism thus permeate the legal systems in all respects. When compared with the tools that were used before, such as the reasonableness test in the classical practice of administrative judicial review, “the advantage of the terminology of proportionality is that it introduces an element of structure into the exercise, by directing attention to factors such as suitability or appropriateness, necessity and the balance or imbalance of benefits and disadvantages. There seems no reason why such factors should not be relevant in judicial review even outside the scope of [ECHR] and EU law.”218 Because of its influence on European constitutionalism and because of the influence of German scholarship abroad, especially in Latin America, Germany deserves special notice. Not only does legal reasoning seem to have been considerably enriched over the past decades, but this country seems to have supplied Europe—if not the world—with the basic elements of the transconstitutional toolkit. Whereas transconstitutional interactions and pluralism seem to have been handled in a haphazard or at least unsystematic way in other jurisdictions, this does not seem to be the case in Germany. As Viellechner notices, “Notably the Federal 215 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 3.1. 216 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 3.1. 217 Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 3.1. 218 Kennedy v The Charity Commission [2014] UKSC 20 at [54], quoted by Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 3.1.
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Constitutional Court has demonstrated much creativity in dealing with the pluralisation of law. Some of its doctrinal constructions have meanwhile been adopted by other national and international courts. The famous ‘Solange’ rules, for example, have migrated into several other contexts to account for complementary fundamental rights protection between different legal orders.”219 German courts and scholars have indeed greatly contributed to the emergence of a transconstitutional vernacular, not only by developing substantive values, but also by offering concepts and modes of reasoning. Such a common language is all the more necessary as one acknowledges the existence of a plurality of sites of authority which, because of inevitable interlocking and overlapping, are in need of some intellectual and practical devices to connect to one another while not renouncing their own specificities.220 Regarding substantive values, one only needs to mention how influent the Grundrechte that are paradigmatically enshrined in the Basic Law have been. One can hardly imagine a contemporary constitution that would not devote several articles to fundamental rights. Similarly, the international law of human rights has considerably developed over the past decades. Universal instruments, regional instruments, instruments focusing on the fundamental rights of specific categories (women, children, first nations and native people, etc.) have been burgeoning, leading to the idea that human rights, as they qualify as common “constitutional goods,”221 may have constitutionalised the world.222 Values such as dignity, liberty, equality, and fraternity, each being both understood and combined in various ways depending on the circumstances, are among the core values of a worldwide legal and political project, which David M. Beatty regards as “The Ultimate Rule of Law”.223 Regarding concepts and modes of reasoning, it is not surprising that the increasing importance of such abstract values has led to the necessity to reshuffle legal reasoning. This need has been expressed very clearly by a German scholar, Robert Alexy, whose influence on Latin American legal thinking is overwhelming. Regarding legal ontology and following what had already been remarked by Ronald Dworkin, Alexy first noticed the increasing importance of a new type of norms: principles. Principles, among which human rights, are considerably different from rules. The first criterion Ronald Dworkin uses to oppose principles and rules is their origin: “Rules can be identified and 219 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.3. 220 For a discussion from the viewpoint of the language (keywords) that is used by transconstitutional actors, see Bobić (2017). 221 Brudner (2004). 222 Hennette-Vauchez and Sorel (2011). 223 Beatty (2004).
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distinguished by specific criteria, by tests having to do not with their content but with their pedigree or the manner in which they were adopted or developed.”224 “But this test of pedigree will not work for the [. . .] principles. The origin of these as legal principles lies not in a particular decision of some legislature or court, but in a sense of appropriateness developed in the profession and the public over time. [. . .] Even though principles draw support from the official acts of legal institutions, they do not have a simple or direct enough connection with these acts to frame that connection in terms of criteria specified by some ultimate master rule of recognition.”225 The test is the following: “a principle is a principle of law if it figures in the soundest theory of law that can be provided as a justification for the explicit substantive and institutional rules of the jurisdiction in question.”226 Principles thus seem to be already there, implicit in the positive legal norms. They are claimed not to be the product of a decision. Identifying them is independent from any exercise of power that would create them, so that if a legal actor works hard enough, it may reach the “one right answer”. Similarly, Robert Alexy considers that rules are applied in an all-or-nothing process of subsumption. On the contrary, the application of a principle to a given situation does not result in so clear a determination of the outcome: “principles are norms which require that something be realized to the greatest extent possible given the legal and factual possibilities. Principles are optimization requirements, characterized by the fact that they can be satisfied to varying degrees, and that the appropriate degree of satisfaction depends not only on what is factually possible but also on what is legally possible. The scope of the legally possible is determined by opposing principles and rules.”227 Several principles which are formally on a par, for example because they all are constitutional, can be applied to a given situation, and point to conflicting outcomes. For example, the principle of the freedom of the press and the principle of the secrecy of private life may conflict. One is to choose between the two principles. Because every principle is a “mandate of optimisation”, each one is always in competition with all the others. It can prevail (and the other principles be defeated) only for good reasons. Flexible proportionalityjudgments and balancing, as opposed to strict logical deduction, are the proper methodology to assess which principle is to prevail in casu.228 The reasoning appears to be much more indeterminate than in the case of the application of rules. It is an important
224
Dworkin (1978), p. 17. Dworkin (1978), pp. 40–41. 226 Dworkin (1978), p. 66. 227 Alexy (2002), pp. 47–48. 228 Alexy (2003), pp. 436–437. 225
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concern for example in Brazil.229 Moreover, even though similar formulations of principles seem to be valid all around the world, one must not forget the possibility of reasonable disagreements in moral, social, and political matters.230 There will always be several conceptions of the same concept or principle, and several ways to accommodate various principles. Besides, the relative weight given to each principle, even though they are understood in the same way, depends on local circumstances. For example, freedom of expression in hate speech is much more protected in the US than in Canada or Germany.231 Lastly, the confrontation between two apparently identical principles in a single factual situation can very well result in opposite decisions. The Caroline of Monaco case illustrates this. Princess Caroline of Monaco was concerned about the publication of pictures of her in a newspaper. She filed a constitutional complaint with the German Federal Constitutional Court. In its ruling, the Court had to balance the right to privacy, which is protected by Article 2.1 in conjunction with Article 1.1 of the Grundgesetz, and freedom of the press, which is protected under Article 5.1(2) of the Grundgesetz. It decided that for the major part of the contested pictures, freedom of the press had to prevail.232 Unsatisfied, the Princess decided to appear before another “constitutional court”: the ECtHR. In 2004, just as the Bundesverfassungsgericht had, it had to balance the right to privacy, as guaranteed by Article 8 of the Convention, with freedom of the press, as protected by Article 10 of the Convention. The ECtHR eventually “consider[ed] that the German courts [had not struck] a fair balance between the competing interests”,233 and reached the opposite result. German legal actors, and especially the Federal Constitutional Court, whose case-law was explained and conceptualised by legal scholars, offered the language that allowed to deal with these new legal instruments: proportionality reasoning. That is not to say that proportionality was ignored before,234 but it was popularised then.235 Two other important conceptual tools that were devised or developed by the German Federal Constitutional Court are related to the accommodation of legal claims coming from several legal systems. The first one is “Solange reasoning”. For example, the ECJ relied on its constitutional dimension in order to affirm the primacy of EC law, including over national constitutional principles. In 1970, the ECJ See supra, n 40. McMahon (2009). 231 See for example Rosenfeld and Sajó (2006). 232 BVerfGE 101, 361 (1999). 233 ECtHR, 24 June 2004, Von Hannover v Germany (59320/00), §§ 76–79. 234 See especially in this respect Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.4.1. 235 See e.g. Barak (2012) and Bernal Pulido (2007). 229 230
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stated that “The validity or a Community measure or its effect within a member State cannot be affected by allegations that it runs counter to either fundamental rights as formulated by the Constitution of that State or the principles of a national constitutional structure.”236 Thus, in no way could an internal norm, even of a constitutional nature, impair the application of supranational law. The Court also affirmed the obligation for national institutions, and most of all for judges, to set aside internal norms that would contradict the content or the objectives of European norms. In the Simmenthal case, the Court concluded that “every national court must, in a case within its jurisdiction, apply Community law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the Community rule.”237 Nevertheless, this did not prevent national constitutional courts from relying on their own constitutional qualities to resist such an attitude. Though it admitted that national statutes should yield to EC law, the Bundesverfassungsgericht refused to give up constitutional primacy. It contended that “so long as” (Solange) the European protection for basic rights was not globally equivalent to that offered by the Grundgesetz, the Court would submit EC law to national constitutional review.238 This reaction prompted the European institutions to reinforce their concern for human rights, presented as “principles”, drawn from the respective traditions and international commitments of the member States, which underlay the whole European dynamics.239 Later, the Bundesverfassungsgericht admitted that the ECJ’s fundamental rights jurisprudence was good enough to be quite equivalent to that of the Grundgesetz. “So long as” this remains the case, the Court will no more review the constitutionality of EC law.240 That episode, which may as well be regarded as a constitutional fight as a constitutional dialogue, has set a pattern of constitutional interlocking.241 France has reached a similar position regarding the judicial review of administrative acts transposing EU law.242 According to Daniel Halberstam, “The new accommodation on rights, then, may play out something like this: First, the member States will continue to refrain from reviewing fundamental rights violations involving European law as long as the ECJ generally provides an acceptable level of rights protection. [. . .] Second, and even more intriguing, the ECJ will refrain from 236
ECJ, 17 December 1970, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel, 11-70, §§ 3–4. 237 ECJ, 9 March 1978, Amministrazione delle Finanze dello Stato v Simmenthal SpA, 106/77, § 21. 238 BVerfGE 37, 271 (1974). 239 See esp. ECJ, 14 May 1974, Nold, 4-73. 240 BVerfGE 73, 339 (1986). 241 See e.g. Lavranos (2008). 242 Conseil d’Etat, 8 February 2007, Arcelor (287110).
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aggressively reviewing all fundamental rights claims within its jurisdiction but only on the analogous terms.”243 Following the ECtHR,244 the ECJ embraced a similar method in the Kadi case.245 It had to rule on the legality of a European regulation which was enforcing a UN Security Council resolution ordering the freezing of the financial resources of people who were linked to terrorism. The appellant, whose funds had been frozen, claimed that the regulation breached his right to a fair hearing, his right to respect for property and the principle of proportionality, and his right to effective judicial review. The Court of First Instance granted primacy to the Security Council resolutions adopted under Chapter VII of the UN Charter. As a consequence, it refused to review the legality of the resolution and of the ensuing European regulation. On the contrary, the ECJ underlined the constitutional dimension of the EC. This reference was meant to suggest its autonomy, its commitment to the protection of fundamental rights, and its determination not to admit of any unconditional submission to any other legal order.246 It consequently maintained that it was impossible to abandon the review of EC measures: Article 307 EC may in no circumstances permit any challenge to the principles that form part of the very foundations of the Community legal order, one of which is the protection of fundamental rights, including the review by the Community judicature of the lawfulness of Community measures as regards their consistency with those fundamental rights. Nor can an immunity from jurisdiction for the contested regulation with regard to the review of its compatibility with fundamental rights, arising from the alleged absolute primacy of the resolutions of the Security Council to which that measure is designed to give effect, find any basis in the place that obligations under the Charter of the United Nations would occupy in the hierarchy of norms within the Community legal order if those obligations were to be classified in that hierarchy. [. . .] [T]he reviews by the Court of the validity of any Community measure in the light of fundamental rights must be considered to be the expression, in a community based on the rule of law, of a constitutional guarantee stemming from the EC Treaty as an autonomous legal system which is not to be prejudiced by an international agreement.
According to the ECJ, the existence of a system of administrative review before the UNSC could not be regarded as a sufficient guarantee for fundamental rights, which could justify excluding review by the ECJ.247 The ECJ thus set aside the judgment of the CPI and annulled the regulation. A 243
Halberstam (2009), pp. 352–353. See ECtHR, 30 June 2005, Bosphorus Hava Yollari Turizm ve Ticaret Anonim şirketi v Ireland (45036/98) concerning the respect of ECHR standards by EC law. 245 ECJ, 3 September 2008, Yassin Abdullah Kadi and Al Barakaat International Foundation v Council of the European Union and Commission of the European Communities (C-402/05 P and C-415/05 P). 246 Ibid. § 288. 247 Ibid. §§ 318–328, 365–371. 244
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Solange logic seems to permeate this reasoning, for an EC review of international norms will be in order so long as the UN does not comport a system of fundamental rights protection equivalent to that of the Communities.248 In the absence of any hierarchical way to monitor the potential for conflicts in transconstitutional dialogues, it appears that global constitutional actors converged towards the same method: By the Solange principles, each legal order accepts the decisions of the others, even if another decision would have been more consistent with the national constitutional tradition, ‘so long as’ those decisions do not systematically violate its own understanding of constitutional essentials. Solange thus commits each order to monitor the jurisprudential output of the others, and to make acceptance of their deviations from national preferences contingent on a continuing finding of equivalence of fundamental results.249
As will also be discussed when the ideological dimension of this narrative is analysed,250 the main rationale of this grammar for constitutional dialogue seems to be based on pressing every actor to do its best for human rights if it wants the others to defer to its decisions. In the end, the various actors will defer to one another’s decisions provided all scrupulously enforce a homogeneous standard. They will only dare contradict one another—which they have many incentives not to do251—when one of them fails to achieve the purpose of constitutionalism. According to Jean L. Cohen, for example, If reference is to the highest level of protection of human rights that are acknowledged in the relevant legal orders, then the judicial suspension of an external legal obligation is not solipsistic but rather meant to trigger an equivalent level of protection among the relevant interconnected but not hierarchically related legal orders and to initiate dialogue among the respective judicial organs. [. . .] The focus is not on parochial understandings but on arriving at compatible interpretations of constitutionalist principles – an integrative not a dissociative logic.252
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legal system, without renouncing the core principles that are mostly essential to one’s legal system. This deals with the protection of elements that, in some of the jurisdictions covered by the report, would be included in the “basic structure” of the polity. As these elements where conceived of especially in France and in Germany, they are considered to be part of the “constitutional identity” of the State.253 While this doctrine undoubtedly tends to protect substantive domestic values, it also offers a specific way to devise, organise, and manage the interactions between domestic and supranational constitutionalisms, especially the European Union’s. Two decisions by the French Conseil Constitutionnel are worth mentioning in this respect. They dealt with the constitutional review of statutes which transposed European Community directives. There are two major legal difficulties with such statutes. First, their transposition is mandatory under Article 88-1 of the Constitution. The problem is thus whether the Conseil must automatically rule in favour of the constitutionality of these statutes, the enactment of which is mandatory, and the content of which is to a large extent defined by EC authorities, or whether it can exercise any constitutional review on them (and of what type and vis-à-vis which norms). Second, the Court of Justice of the European Union holds a monopoly over the assessment of the validity of EU norms, among which directives. If a domestic constitutional review of transposition-statutes were admitted, this would amount to an indirect review of European directives, thus encroaching on the ECJ’s jurisdiction. In the Decision n 2004-496 DC of June 10th, 2004 Loi pour la confiance dans l’économie numérique, the Conseil decided (Recital 7) that: Considering that under Article 88-1 of the Constitution: ‘The Republic participates in the European Communities and in the European Union, constituted by States which have freely chosen, by virtue of the Treaties which established them, to exercise in common some of their skills’; In this way, the transposition into domestic law of a Community directive is the result of a constitutional requirement which can only be hindered by reason of a contrary express provision of the Constitution; that in the absence of such a provision, it is for the Community judicature, if necessary for a preliminary ruling, to check compliance by a Community directive with both the powers defined by the Treaties and the guaranteed fundamental rights Article 6 of the Treaty on European Union.
Conflicts which sometimes happen do not appear as rival pretensions of competing selfish actors, but as progressive and incremental deliberative adjustments towards the “one right global constitutional answer”. Human rights as a shared set of values eventually benefit from the simultaneous, even though sometimes conflicting, efforts of the several actors. The overall system of social control which the global actors embody gains credit from the constitutional dialogues, be they smooth and congruent, or more chaotic. The second tool that was invented to accommodate rival metaconstitutional claims is related to the more or less puzzling commitment to accept the mandates of another
In the Decision n 2006-540 DC of July 27th, 2006 Loi relative au droit d’auteur et aux droits voisins dans la société de l’information, the Conseil Constitutionnel maintained the principles of the previous ruling, rephrased the ratio decidendi of its previous ruling, and further explained the
See Opinion of Advocate General M Poiares Maduro §§ 54–55. Sabel and Gerstenberg (2010), pp. 512–513. 250 See infra, § 6. 251 See infra, § 6.1. 252 Cohen (2010), p. 30. See also Cohen (2012).
Tusseau G, “On a Constitutional ‘Identity Movement’ in Global Constitutionalism”, Les matinées constitutionnelles du Regroupement stratégique Droit et Changement, McGill University, Montreal, May 6th, 2011; Marti (2011), Derosier (2015), Burgorgue-Larsen (2011), Millet (2013) and Saiz Arnaiz and Alcoberro Llivina (2013).
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basic principles of the relations between European and national laws: - With respect to the obligations specific to a transposing statute 16. Title 1 of the statute referred for review is designed to transpose the abovementioned Directive of May 22nd 2001 on the harmonization of certain aspects of copyright and related rights in the information society; 17. Indent 1 of Article 88-1 of the Constitution provides: ‘The Republic shall participate in the European Communities and the European Union constituted by States which have freely chosen, under the Treaties that established them, to exercise some of their powers in common’; the transposition of a Community Directive into domestic law thus complies with a constitutional requirement; 18. The Constitutional Council, to which referral has been made in the conditions provided for by Article 61 of the Constitution for review of a statute designed to transpose a Community Directive into domestic law, is under a duty to comply with this requirement; the review it carries out to this end is however subject to a twofold limitation; 19. Firstly, the transposition of a Directive cannot run counter to a rule or principle inherent to the constitutional identity of France, except when the constituting power consents thereto; 20. Secondly, insofar as it is required to give a ruling before the promulgation of the statute in the time allotted by Article 61 of the Constitution, the Constitutional Council cannot request a preliminary ruling from the European Court of Justice under Article 234 of the Treaties setting up the European Communities; consequently it can only find a statutory provision unconstitutional under Article 88-1 of the Constitution if this provision is obviously incompatible with the Directive which it is intended to transpose; in all events it is incumbent upon national Courts of law, if need be, to refer a matter to the Court of Justice of the European Communities for a preliminary ruling.
In a nutshell, the Conseil will not bar the application of a European directive. It will even see to it that the French legislator complies with its duty (within the temporal framework imposed by Article 61 C), and it will not (even indirectly) review the constitutionality of a European directive through the review of the statute transposing it, unless it contradicts an “express provision” of the Constitution (2004 version) or a “principle inherent to the constitutional identity of France” (2006 version). In the latest landmark case on the subject, regarding the Lisbon Treaty on June 30th, 2009,254 the German Federal Constitutional Court confirmed the basic principles of its previous rulings.255 Moreover, it insisted on the preservation of the identity of the Constitution, which it has to protect under Article 79.3256 of the Grundgesetz. This provision 254 BVerfG, 2 BvE 2/08, from which an immense literature has resulted. See for example Fischer-Lescano et al. (2010), Grimm (2009), Schorkopf (2009), von Bogdandy (2010), Terhechte (2009), Schönberger (2009) and Reestman (2009). 255 See supra, n 44. 256 “Amendments to this Basic Law affecting the division of the Federation into Länder, their participation on principle in the legislative
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limits the power of constitutional amendment. As a consequence, constitutional identity opposes a limit to European integration. From the Constitutional Court’s very rich discussion, it results that: Within the order of the Basic Law, the structural principles of the State laid down in Article 20 of the Basic Law, i.e. democracy, the rule of law, the principle of the social State, the republic, the federal State, as well as the substance of elementary fundamental rights indispensable for the respect of human dignity are, in any case, not amenable to any amendment because of their fundamental quality. [. . .] From the perspective of the principle of democracy, the violation of the constitutional identity codified in Article 79.3 of the Basic Law is at the same time an encroachment upon the constituent power of the people. [. . .] The empowerment to embark on European integration permits a different shaping of political opinion-forming than the one determined by the Basic Law for the German constitutional order. This applies as far as the limit of the inviolable constitutional identity (Article 79.3 of the Basic Law). [. . .] the powers are granted under the condition that the sovereign statehood of a constitutional State is maintained on the basis of an integration programme according to the principle of conferral and respecting the Member States’ constitutional identity. [. . .] The Federal Constitutional Court has already opened up the way of the ultra vires review for this, which applies where Community and Union institutions transgress the boundaries of their competences. [. . .] Furthermore, the Federal Constitutional Court reviews whether the inviolable core content of the constitutional identity of the Basic Law pursuant to Article 23.1 third sentence in conjunction with Article 79.3 of the Basic Law is respected [. . .]. The ultra vires review as well as the identity review may result in Community law or, in future, Union law being declared inapplicable in Germany.257
The Court thus made a strong claim to limit the potential for European integration and the prospect of a disappearance of the German sovereign State. It also claimed not only to exercise a review which would ensure that the European institutions stick to their enumerated and limited conferred powers, such a review possibly leading to the inapplication of European law in Germany, but also to exercise an “identity review” (Identitätskontrolle) so as to protect fundamental principles which are so entrenched in the German Grundgesetz that they cannot even be altered by the pouvoir constituant. Similar rulings purporting to present the most crucial tenets of domestic constitutionalism, be they expressed in terms of “constitutional identity” or not, have been issued as a limit to supranational integration by several other constitutional courts in Europe, for example in Spain,258 Poland,259 or Italy.260 This jurisprudence of constitutional identity appositely testifies to the current movements process, or the principles laid down in Articles 1 and 20 shall be inadmissible.” 257 Lissabon Urteil, §§ 217–219, 240–241. 258 Tribunal constitucional, DTC 1/2004, Fundamento jurídico 2. 259 Constitutional Tribunal, K 18/04; K 32/09. 260 See regarding European Union law: Corte costituzionale, sent. 183/1973; 170/1984; 232/1989, § 3.1. and very recently the “Tarrico Saga” (ord. 24/2017). Regarding the law of the United Nations, see sent. 238/2014.
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of the global age: Whereas its principles appear to set a limit to integration in order to preserve pluralism, they simultaneously illustrate the extent to which the major tools for the transystemic accommodation of legal sources result from borrowings and an active circulation and migration of constitutional ideas,261 which greatly contributes to the renewal of global legal reasoning.
5
The Renewal of Legal Scholarship
This part of the report intends to tackle the following issues. Have specific teachings and works appeared following the emergence of new normative interactions? Are they related to foreign jurisprudence and law professionals? Have new theories emerged or has the dominant approach consisted in adapting traditional theories? Have elements of other subjects (and if so, which ones—social sciences [ethnology, sociology, etc.], logics, linguistics, systems theory, complexity theories, fuzzy logics, etc.) been called upon? In what proportion? Is this leading to a reorganisation of disciplinary boundaries (e.g. distinction between public and private law, constitutional and international law, etc.)? Is it possible to observe the development of research projects, journals, research centres that are specifically dedicated to the themes of global constitutionalism? Is there a meta-theoretical awareness of the very evolution of concepts and theories? Are there specific studies on that subject? Is the movement of identification of multiple constitutional or constitutionalised spheres admitted or is their constitutionalisation the object of debates, or is it even radically questioned as illegitimate from an intellectual point of view? Have theories of legal pluralism been called upon to face the mutations that the globalisation imposes on legal systems? With what degree of precision (generic reference to pluralism, reference to a specific author, e.g. Santi Romano and his theory of the rilevanza of multiple legal systems, reinvention of new theories of pluralism, etc.)? What did the national tradition use to be in that respect (acknowledgment of pluralistic theories or theoretical centralism)? What representation of the theories and concepts that are being called upon is it possible to suggest to face “global normative disorder”? Many national reports do not really provide in-depth discussion of this aspect of legal pluralism and constitutionalism, i.e. how both are perceived and how they contribute to reshaping legal scholarship. This proves that the problems or the issues of legal pluralism and new forms of constitutionalism and constitutionalisation are not perceived everywhere with the same intensity.262 261 262
Choudhry (2006). See especially infra, § 6.
For example, as the Brazilian reporter puts it, “The questions assume there is a potential legal tension that can be summarized in the following terms. The traditional conception of Constitution, State-originated rules and its claims of hierarchy upon all other norms versus the autonomy of many other non-State-originated [norms] that may not submit to the State’s authority and may even impact the relevance and the construe of the Constitution itself.”263 But in that country, there is hardly any issue or discussion of that sort, to the point that “Despite isolated exceptions, legal pluralism is almost a non-topic in the country’s constitutional discussions; there are important debates concerning constitutional pluralism, trans-constitutionalism and international human rights law, but not from the perspective of an insurmountable legal conflict.”264 In Solomon Islands the impact of globalisation was apparently very limited. As Corrin analyses, “There is no sign that globalisation has had an impact on legal reasoning in Solomon Islands. Nor has a cohesive body of principles governing the relationship between different legal spheres emerged. The country remains protective of its sovereignty and determined to promote domestic culture and custom in preference to ‘foreign’ ideals.”265 She adds: “There is no discernible ‘dialogue’ in the jurisprudence driven by globalisation. Generally, there is an absence of discussion of these issues outside academic circles. Nor have concepts or tools appeared to assist in negotiating between the domestic and international legal spheres. This may be due to the lack of engagement by Solomon Islands government with international law and failure to incorporate international laws into the domestic legal system.”266 Similarly in Cyprus, in spite of its interconnection with the supranational constitutional sphere, “Currently, there is no significant development of domestic research projects, journals or research centres that are specifically dedicated to the themes of constitutional pluralism and global constitutionalism.”267 At first sight, this could be disappointing. On the contrary, however, one may feel that this allows for a very important conclusion. This is evidence that doctrinal questions such as those put forward in the questionnaire and in this report are highly dependent on contextual variables. Again, as Corrin puts it, “the country is still emerging from a tribal society and searching to find itself as a nation. Legal positivism and the 263 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 1. 264 De Barcelos, Brazil and Its Many Realities. Courts and StateCentrism; Administrative Agencies and International Cooperation, § 1. 265 Corrin, Constitutionalism and Customary Law in Solomon Island, § 6. 266 Corrin, Constitutionalism and Customary Law in Solomon Island, § 6. 267 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 3.4.2.
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theory of constitutionalism are themselves foreign concepts, far removed from the everyday experiences of Solomon Islanders. Traditional leaders often have more influence than government officials, and in this context customary law is far more relevant than State law. For many, international laws are not even on the horizon, and even constitutionally enshrined norms are at best aspirational concepts, rather than a reflection of practical reality.”268 Ambitious projects such as a total overhaul of legal scholarship cannot be successful unless some very concrete, human, financial, and material conditions are met. Regarding the case of Botswana, Fombad accurately points to the material conditions of the emergence of a specific legal doctrine. In this respect, he underlines the fact that universities, which are the major institutions to train lawyers, have undergone considerable change since the adoption of the Constitution. “Whereas, a majority of the lecturers until the late 2000s were expatriates, today, most of them are [from] Botswana. The last decade has also seen more reliance on textbooks written on the different aspects of the law in Botswana in lieu of the previous reliance on South African textbooks.”269 How this could lead to the emergence of a more autochthonous legal doctrine remains to be seen. Fombad does not seem to be very optimistic. According to him, “with the departure of expatriate judges, the ideological conflicts that pitted English trained judges and their jurisprudential approach, against RomanDutch trained judges and their jurisprudential approach is likely going to reduce. However, given the limited scope for judicial independence and broad avenues for executive interference, the quality of jurisprudence is bound to diminish because of [the] arbitrary nature of many appointments to the bench.”270 On the contrary, before, it was not exceptional for Botswana precedents to be quoted by other Commonwealth jurisdictions.271 Indeed, Fombad links his remarks on the academy to the current political situation in Botswana. According to him, the legal system as a whole suffers from a fundamental defect: the fact that the constitution is outdated as far as regards the requirements of contemporary constitutionalism, especially in terms of basic liberties. This seems to have prevented any obstacle from hindering the leadership of President Ian Khama, which resulted in severe limits on basic liberties. At a deeper level, most of the discriminatory aspects 268 Corrin, Constitutionalism and Customary Law in Solomon Island, § 7. 269 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 5. 270 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 6. 271 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 3.
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of customary law, especially regarding the situation of women, have been protected from change, whereas in most of the neighbouring countries—Kenya, Tanzania, Zambia, Zimbabwe—the recognition of customary law has been conditional on the elimination of what in it was incompatible with the basic values of contemporary constitutionalism.272 As this in-built defect of the constitution gives huge powers to the presidency, Fombad seems to see no strong incentive for politicians to try and launch any important constitutional reform.273 These reflections prove that constitutionalism, global constitutionalism, transconstitutionalism, etc. are not “machines that would go of themselves”.274 The emergence, development and engrafting onto a local legal reality depend on many contextual factors that are often too neglected. Although this might seem evident, these considerations are frequently overlooked—maybe for ideological reasons.275 The contrast with Germany is quite striking. Germany seems to be significant of the general situation of European countries. To a large extent however, this is due to the fact that German legal institutions and scholars have had a leading role in the creation of the transconstitutional conceptual apparatus.276 According to Viellechner, “legal scholarship mainly focused on ‘dogmatics’, that is the systematic reconstruction of positive law [. . .]. Under the impact of globalisation, however, the so-called ‘basic subjects’, in particular legal history, sociology, theory and philosophy, are gaining fresh steam. Research on processes of normformation beyond the State, their legality and legitimacy has grown rapidly in recent years.”277 It seems that a new kind of literature has emerged about constitutionalism beyond the State or constitutionalisation as a process. Included in this trend are original and innovative works that “consciously depart from the statist tradition and try to establish novel concepts of ‘multilevel constitutionalism’, which are highly contested.”278 There is evidence that, beyond authors, such as Robert Alexy and Peter Häberle, who have developed major theories to deal more broadly with new forms of constitutionalism, many among the leading scholars in this specific field belong to the German tradition, which is especially remarkable for Jürgen Habermas’ seminal 272
Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, §§ 5–6. 273 Fombad, Reconciling Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in the Age of Globalisation in Botswana, § 6. 274 Kammen (2006). 275 See infra, § 6. 276 See supra, § 4. 277 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.1. 278 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.1.
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philosophical contribution to the debate about new forms of political communities. In the legal domain, Gunther Teubner has greatly contributed to offering new tools to confront new legal phenomena, such as the ideas of civil constitution, societal constitutionalism, and transnational constitutions, which he popularised.279 These allow to conceive of forms of constitutionalism beyond the State, at the supranational level, at the international level, or at the transnational level (lex mercatoria,280 lex sportiva,281 lex digitalis, lex petrolea, etc.). Taking into account the material conditions for the development of intellectual doctrines, Viellechner points to the fact that “In part, research in this field has been institutionalised,”282 and mentions several initiatives by the Max Planck Institute for Comparative Public Law and International Law, the German Research Foundation, the Goethe University of Frankfurt, and the part German scholars take in the creation of specialised journals such as Global Constitutionalism and Transnational Legal Theory. Offering a personal contribution to the identification of the lenses that should be resorted to, Viellechner suggests paying attention to the classical tools of private international law: Private international law usefully lends itself as an archetype here for two reasons. Firstly, it has always assumed that there are several valid legal orders coexisting with each other that might simultaneously claim application to cross-border situations. Secondly, since its inception, it has been built on a mechanism of horizontal coordination conceding that conflicts of norms may only be resolved from within a certain legal order, even though its intrinsic logic might strive for generalisation.283
Kombos offers his own tridimensional perspective, and “argues that in terms of the relational debate and the narratives of constitutional pluralism and global constitutionalism, there is an expression of constitutionalism as 3-dimensional concept that encompasses a national, a postnational and a co-owned element. Constitutional discussion cannot take place in isolation and on the basis of exclusively one of the three dimensions, especially in the case where the presence of a post-national setting is strong, as is the case in Europe.”284 He simultaneously points to the symbolic and cultural dimensions of contemporary constitutional interactions, and insists on the progressive consolidation of Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.1. 280 See e.g. Goldman (1964) and Toth (2017). 281 See e.g. Latty (2007), Siekmann and Soek (2012) and Leroy and Yboud (2017). 282 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.1. 283 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.3. See also Viellechner (2015). 284 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 2.2. 279
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a meta-constitutionalism that encompasses both convergence and divergence between national and supranational legal systems, and leads to an ongoing symbiosis. He consequently proposes the following conceptual distinction: Constitutional pluralism is about constitutional symbiosis between legal orders and the mechanics of their co-existence and relation, whereas global constitutionalism forms a descriptive device for an even broader application of the 3-dimensional approach with stronger elements of localisation due to the lack of supranational framework systems, yet with the presence of a commonly shared mentalité. Therefore, the difference between pluralism and global constitutionalism is one about the lack of strong supranational framework systems within which the mentalité can operate. The more loose the framework systems, the slower and weaker becomes the dialogue element.285
6
The Ideological Dimensions of Legal Rationality
This part of the report intends to tackle the following issues. How important and numerous are debates on this report’s topics? Is it possible to find a date or time division for the interest they have kindled? Are the different jurisprudential directions and practices thus described ideologically marked, in any way (right v. left; conservative v. progressive; nationalist v. internationalist; public v. private law supporters, etc.)? Is the issue of the impact of considerations on the factual power rather than the direct normative authority of legal norms being debated (e.g. for economic or social reasons, it is hard for national constitutionalism to resist sports constitutionalism, while EU constitutionalism, which does not participate in competitions, might be more likely to counter it by putting forward its own claims)? Is the current dynamics perceived as a multiplication of spheres of actors who are likely to promote universal human values or as a source of conflicts and a form of more or less hidden imperialism, related in particular to Western financial capitalism? Is the objective of giving birth to a new real pluralism which would lead to the enrichment of perspectives developed on either sides of the fundamental interests of political societies, or is it of hiding a form of covertly developing hegemony? None of the national reports has addressed the foregoing topics straightforwardly and completely, nor has any of them intended to call into question the ideological dimensions of pluralism and constitutionalism, i.e. how these two major ways to address and frame the legal discussion about contemporary legal changes in the global age are involved in supporting specific forms of political power. Regarding the debates about global constitutionalism, global legal pluralism, constitutionalism beyond the State, etc., and the various 285
Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, § 2.2.
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versions of each of them that are competing with one another, Viellechner accurately remarks that “it is unclear if and how far these theories are descriptive or prescriptive.”286 The almost constant lack of clarity between descriptive and normative approaches—i.e. between science and ideology—in itself deserves strong criticism.287 It is not exceptional for many authors mainly to state their claims rather than provide strong arguments to support them.288 As Kombos notices, there is high need for “debating the constitutional debate,”289 and for trying to understand how embedded in “mentalités” the concepts we use or we devise to face contemporary phenomena are. This is not to say that some of the topics directly, indirectly, or implicitly addressed in the national reports do not call for such a “critical” examination,290 as I will try and suggest by an examination of two of the main conceptual achievements of contemporary legal thought: the concept(s) of dialogue291 (Sect. 6.1) and the concept of constitutionalisation (Sect. 6.2). Finally, looking back on the main teachings of this report and carefully paying attention to the fact that some of the initial issues the questionnaire tackled or suggested for consideration were not considered worth dealing at length, I will surmise that one of the most important teachings of our collective enterprise may be that it offers a lively example of the extent to which comparative legal research may help unveil the biases of comparative scholars themselves (Sect. 6.3).
6.1
Questioning Pluralist Dialogism
Intense legal activity from so various national, international, transnational, societal and other spheres could well lead to widespread cacophony and instability. In the heterarchical paradigm, as Mattias Kumm puts it, “There is no one institution that is the final arbiter of constitutional claims. Constitutional conflicts get resolved by reference to underlying constitutional principles that determine which claims to constitutional authority have more weight under which circumstances.”292 There is no doubt at all as to the fact that each retains a final power of interpreting and reviewing the validity of the norms of its own legal order.293 Formally this might very well lead to disorder, but the solution rests in substantive uniformity around a similar set of constitutional Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.2. 287 See esp. Kammerhofer (2010) and Loughlin (2014). 288 Loughlin (2014). 289 Kombos, Legal Pluralism and Constitutionalism in the Cypriot Example, Introduction. 290 See e.g. Muir Watt and Tusseau (2016). 291 For a taxonomy of dialogues, see Poli (2016). 292 Kumm (2010), p. 203. See also Kumm (1999). 293 MacCormick (1995). 286
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principles. In the absence of any supreme constitutional decision-maker, one could expect enduring conflicts and rivalries. Nevertheless, this is hardly what is actually observed. Despite the potential sources of conflict that exist among the various constitutional spheres, the latter appear to be able to live in harmony, to the great benefit of the shared and universal values of human rights, democracy, the rule of law,294 etc. According to what has become a conventional explanation, global constitutional actors have started a “dialogue”.295 According to Joseph Weiler, constitutional discourse in Europe is made of mutual learning and conversation among the actors of a united interpretative community. He thus praises “the current constitutional architecture, which [. . .] encapsulates one of Europe’s most important constitutional innovations, the Principle of Constitutional Tolerance.”296 Every constitutional sphere seems to have renounced “narcissism”297 and parochialism in order to open itself to the others and take part in a mutually fruitful discussion as to the best means to promote constitutional values. As illustrated for example by the growing importance and impact of a multilateral discursive practice of crossquotation among constitutional actors,298 this has resulted in a revival of the idea of comitas gentium and in the prospect of a new jus commune.299 That is why constitutionalisation is not necessarily incompatible with the admission of an important degree of pluralistic autonomy. According to Marcelo Neves’ theory of transconstitutionalism, “the orders relate to one another on the reflexive plan of their normative structures which are self-binding and enjoy primacy. This is a ‘constitutional conversation’, which is incompatible with any ‘constitutional diktat’ from one order on another. [. . .] The reciprocal incorporation of contents implies a rereading of meaning in the light of the receptive order. There is a reconstruction of meaning, which induces a kind of deconstruction of the other and a selfdeconstruction.”300 The fact that one and the same problem of human rights or limitation of power has to be dealt with at 294
See e.g. Rijpkema (2013). For a general overview of the use of the metaphore of dialogue in the literature, see Bateup (2006) and Rosas (2007). On this metaphor and its numerous illustrations see e.g. Fisher (1988), Hogg and Bushell (1997), Manfredi and Kelly (1999), Hogg and Thornton (1999), Hogg et al. (2007), Roach (2001a, b, 2004), Waldron (2004), Tremblay (2005), Petter (2003), Bernatchez and Russell (2008), Nogueira Alcalá (2012, 2013), Burgorgue-Larsen (2013), Friedman (1993), Webber (2002), AA VV (2009), Lichère et al. (2004), Meuwese and Snel (2013), Asociación de letrados del Tribunal constitucional (2013), Brandão (2011), Córdova Vinueza (2016), Fontanelli et al. (2010), Kenney et al. (1999) and Claes et al. (2012). 296 Weiler (2001), p. 10. 297 Neves (2009), p. 166. 298 See e.g. Choudhry (2006) and Le Quinio (2011). 299 McCrudden (2000) and Weiler (2000). 300 Neves (2009), p. 118. 295
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several constitutional levels induces cooperation. Everyone incorporates some of the manner in which the other is accustomed to dealing with legal problems, according to its own ‘legal software’. A partly common and transversal, rationality emerges. It is made of cooperation, open-mindedness, experimentation and progressive harmonisation, to the benefit of shared values. In a similar vein, Viellechner considers that “Under conditions of legal pluralism, the legitimacy and coherence of the law may only be guaranteed through a horizontal coordination among the different legal orders, taking each other into account by internally reflecting their mutual impact. The founding principle animating such practice, which could replace outdated notions of sovereignty, may be called ‘responsivity’.”301 Although largely dominant, this analysis presents no less important limits. Transconstitutional dialogues are presented as one of the major characteristics of the global age.302 A journal, Diálogo jurisprudencial, is even devoted to this topic.303 “It is increasingly en vogue to conceptualise relationships between constitutional courts on the one hand and legislatures and other courts, both at the domestic and the European level, on the other hand, as involving elements of communication and conversation. The notion of ‘constitutional dialogues’, in particular, has gained currency in Canadian and American scholarship to describe interactions between the political branches of government and the constitutional judiciary.”304 The idea is even so powerful that, notwithstanding its artificial or fictional aspect, some authors even go as far as to deploy the metaphor so that hidden or implicit dialogues take place.305 As Claudia Escobar-García notices, “this broad and strong approach is conceived as a necessary and unavoidable process to which the entire legal system is submitted. This is not the result of a conscious and deliberate decision of certain agents or legal operators especially interested in carrying out exchanges, but the inexorable consequence of the contemporary dynamics of the production of the law. And through this note of spontaneity and naturalness, globalisation is understood as a peaceful, harmonious and fluid process, devoid of any backward step or any obstacle; sometimes this approach appears inadvertently, as when legal actors are influenced in their legal production by foreign cultural references. It is not by chance that the paradigmatic presentation of the phenomenon is characterised from the outset as ‘inevitable’.”306
301
Viellechner (2015), pp. 322–323. 302 Yeh and Chang (2008), p. 95. 303 Diálogo jurisprudencial. Derecho internacional de los derechos humanos. Tribunales nacionales. Corte interamericana de derechos humanos. 304 De Visser (2014), p. 329. 305 See esp. Fontanelli and Martinico (2008) and Martinico (2010). 306 Escobar-García (2012), pp. 84–85.
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From the outset, the very concept of dialogue may seem improper to the phenomena in question.307 Indeed, the various authorities that “dialogue”, and in particular the judges, are rarely in a situation in which they are likely to simultaneously exchange arguments in a disinterested manner about an object of common concern. On the contrary, each judge must make a decision that puts an end to the litigation before her. Any new “exchange” can take place only on the occasion of a new case. Thus, strictly speaking, the formula of “crossjurisdictional monologues”308 or “sequential monologues”309 is empirically more accurate. That is why it can very well be regarded as a misleading metaphor.310 Therefore, the use of the term “dialogue” has all of a fictional process in the traditional sense, tending to act as if a form of conversation were taking place between these actors, but the term “dialogue” falls squarely within the category of laudatory (Bentham’s “eulogistic”) terms because of the image it suggests of a polished conversation between good people, willing to exchange and learn from each other. If the metaphor of dialogue is popular, it is as much because of its descriptive dimension, which allows to account for specific forms of institutional interactions, as for its normative dimension, which offers some sort of justification and legitimation of these practices.311 Above all, while the old hierarchies are scrambled, this term cleverly suggests that none of the actors involved owes obedience to another and is imperatively obliged to submit to its decisions, and that all are likely to make a good contribution to a joint venture in good faith. This connotation of the term “dialogue” is undoubtedly one of the main reasons for its success, both in the doctrine and in the eyes of the actors themselves.312 Nevertheless, one needs to acknowledge that exchanges or dialogues are not always for the better. Even though this seems to be the dominant trend, one should not neglect the existence of somewhat regressive comparative jurisprudence. There is a very common assumption that transconstitutional dialogues among global legal actors is to the best of all ends: human rights and the rule of law. But this sounds very naive, as there are many examples of exchanges between global actors which mostly contribute to the opposite end. Such is for example the case of the great amount of exchanges and dialogues which took place between common law judges when they had to face coups d’Etat. In order to decide whether the new de facto legal order should be regarded as 307 Criticizing the “dialogical literature” from a metalinguistic viewpoint, see Bateup (2006) and Meuwese and Snel (2013). 308 Simon and Rigaux (2010). 309 Paterson, quoted by Psygkas, Accommodating Legal Pluralism and ‘Pluralizing’ the Constitution: The Example of the United Kingdom, § 2.4. See also Law and Chang (2001). 310 See Tushnet (2005). 311 See e.g. Gibbs (2018). 312 See e.g. De Visser (2014), pp. 330–331; Meuwese and Snel (2013).
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
a valid legal power, many courts from countries such as Pakistan, Uganda, Southern Rhodesia, Ghana, Nigeria, Cyprus, Seychelles, Grenada, Lesotho, Transkei, and Bophuthatswana paid a great deal of attention to the ways the others had faced the conflicting claims of usurpation and treason of the pre-existing constitutional order, on the one hand, and of successful establishment of a new constitutional order, on the other hand.313 Global transconstitutional dialogues do not necessarily and mechanically contribute to the advancement of basic rights and other fundamental values. In order to go beyond these general remarks, case studies are necessary.314 Episodes from Poland, the Czech Republic,315 Venezuela,316 and Italy317 show that the idea of dialogue does not always offer a convincing picture of what takes place, which might more appropriately be described openly in terms of conflicts. That is why the obsession with dialogue—i.e. in fact decisional convergence—may not only be descriptive, but also prescriptive. As such, what it convincingly describes may very well be accounted for by other theoretical means, while the logic of dialogues appears to be tied to the ex ante or ex post justification of specific forms of power in the global era. First, any decision-maker purporting to direct someone’s behaviour has an incentive to be consistent. If it were to decide strictly at random, past decisions would offer no reliable guide to their addressees. As a consequence, the subjects of the decisions would act without caring for what the decision-maker prefers, thus breaking down its power. From the point of view of the cooperative behaviour of global constitutional actors, if one of them departs from the logic of progressive consistency, others will too, and in the end all will lose their influence. Each can hardly afford to break the rhetorical instrument that is the guarantee of the power of the whole system of social control and its main source of legitimacy. As all use the same type of rhetoric, they all have an incentive to do so in similar ways and with similar results. The self-sustained dynamics of principled jurisprudence helps to progressively reach this objective. Secondly, these actors all claim to be constitutional and, as such, to be independent from one another for their selffoundation. They cannot persist without being accepted by the others as members of the constitutional community. Horizontality induces cooperation, because in this generalised form of Annerkenungstheorie,318 one’s power depends on 313
See e.g. Tayyab Mahmud (1994). See also Siems (2018). See Tusseau (2013a). 315 See supra, § 4. 316 Supreme Court of Venezuela, Constitutional Chamber, 17 October 2011, Expediente n 11-1130. 317 Corte costituzionale, sent 238/2014; ord. 24/2017. 318 On this theory, see esp. Bierling (1894). For a discussion, see Bahlmann (1995) and Yoon (2009). 314
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its being recognised by the others. No one can afford to isolate itself by systematically breaking away from the way the others solve constitutional problems. Lastly, and more precisely, the interconnection of the different constitutional spheres operates primarily through norms that express fundamental rights, values, objectives, and so on. Their generality is likely to offer a shared language through which different actors belonging to discrete legal spheres are able to consider their mutual relations when they happen to govern similar facts. As a result, the discourse of global constitutionalism is very widely expressed in terms of “principles”.319 Because their identification does not depend on any test of pedigree but on their intrinsic substantive importance as values underlying the rules of a legal system, principles are conceived as if they were already implicitly present, in the positive legal system. They are not the product of a decision, so that their identification does not result from the exercise of a power the function of which would be to create them. By claiming to identify pre-existing principles, legal actors can thus conceal their power and suggest that they limit themselves to progress towards an ever more detailed knowledge of a political community and the fundamental morality that the principles embody.320 Two consequences follow. First, if there were no harmony, not even a minimal one, none of the actors could claim that the principles of institutional organisation or the fundamental rights that most of them use to justify their decisions are “already there”, and waiting to be discovered by global Hercules,321 nor could they claim that the way in which they interpret, confront and reconcile these constitutional principles is the product of some sort of rigorous “method” to discover a form of truth. Any discrepancy would prove how much a matter of decision resolving constitutional disputes is. On the contrary, the analysis in terms of dialogue is based on the “inarticulate major premise”322 according to which the global constitutional enterprise is essentially cognitive in nature. Even if they are fundamentally at odds, the constitutional actors seem constrained to converge towards one another, through the type of legal reasoning they have adopted to justify their power. Secondly, the multiplication of constitutional spheres can be justified as an increase in the number of actors who will devote their efforts to the discovery of the harmonious global “one right constitutional answer”. Consequently, according to this presentation, these actors cannot be considered as powers that fight or compete with each other. Each does not decide, in isolation, in consideration of its own objectives, but takes part See supra, § 4. Troper (1988) and Tusseau (2008). 321 On this character, see Dworkin (1978). 322 See Holmes J., dissent in Lochner v. People of State of New York 198 U.S. 45, 76 (1905). 319 320
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in a collaborative and peaceful group, aiming to discover the same hidden object. That is why the possible skirmishes that punctuate the progression of the entire system of actors towards this goal are likely to be presented in a favourable light, and the image of dialogue preserved. A last couple of remarks may be made regarding one of the major devices of dialogue in Europe, constitutional identity. One remarkable form of dialogism is that which follows from and depends on this concept, which has already been mentioned twice.323 What is remarkable is the way reference to one’s “identity” paves the way not for solipsism but for new forms of interaction. Indeed, Article 4 of the Treaty on European Union recites: 1. In accordance with Article 5, competences not conferred upon the Union in the Treaties remain with the Member States. 2. The Union shall respect the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional, inclusive of regional and local self-government. It shall respect their essential State functions, including ensuring the territorial integrity of the State, maintaining law and order and safeguarding national security. In particular, national security remains the sole responsibility of each Member State. 3. Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties.
The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union. The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardize the attainment of the Union’s objectives. Pursuant to Article 6 of the Treaty on European Union, 1. The Union recognizes the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union [. . .] 2. The Union shall accede to the European Convention for the Protection of Human Rights and Fundamental Freedoms. [. . .] 3. Fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Union’s law.324
As a consequence, the concept of “identity” simultaneously appears at the national and supranational levels. In a series of cases, the ECJ had to face States that were invoking their constitutional identities in order not to comply fully with their European obligations. In the case Omega 323 324
See supra, §§ 3 and 4. Italics supplied.
Spielhallen,325 the problem was the following. The firm “Omega” operated a game of laserdrome, where people played at killing each other, in Germany. The German police authorities forbade this activity, contending that this game constituted a danger to public order, because simulated homicide and the trivialisation of violence contradicted the values prevailing in the public opinion. Omega contested this decision on the ground that it contradicted EC law, especially the freedom to provide services. The German Bundesverwaltungsericht considered that this game contradicted human dignity, which is protected by Article 1.1 GG. The following question was referred to the European Court: Is it compatible with the provisions on freedom to provide services and the free movement of goods contained in the Treaty establishing the European Community for a particular commercial activity – in this case the operation of a so-called “laserdrome” involving simulated killing action – to be prohibited under national law because it offends against the values enshrined in the constitution?’.
In other words, the question was whether considerations of constitutional identity could preclude the full effect of crucial European norms. Though admitting that such a decision indeed violated the European freedoms, the ECJ considered it as legitimate. Nevertheless, the invocation of constitutional essential values by States in order to escape European obligations is no carte blanche.326 As the Court put it (§§ 30–40), the possibility of a Member State relying on a derogation laid down by the Treaty does not prevent judicial review of measures applying that derogation [. . .]. In addition, the concept of ‘public policy’ in the Community context, particularly as justification for a derogation from the fundamental principle of the freedom to provide services, must be interpreted strictly, so that its scope cannot be determined unilaterally by each Member State without any control by the Community institutions [. . .] The fact remains, however, that the specific circumstances which may justify recourse to the concept of public policy may vary from one country to another and from one era to another. The competent national authorities must therefore be allowed a margin of discretion within the limits imposed by the Treaty [. . .]. 32. In this case, the competent authorities took the view that the activity concerned by the prohibition order was a threat to public policy by reason of the fact that, in accordance with the conception prevailing in public opinion, the commercial exploitation of games involving the simulated killing of human beings infringed a fundamental value enshrined in the national constitution, namely human dignity. According to the Bundesverwaltungsgericht, the national courts which heard the case shared and confirmed the conception of the requirements for protecting human dignity on which the contested order is based, that conception therefore having to be regarded as in accordance with the stipulations of the German Basic Law. 325 ECJ, 14 October 2004, Omega Spielhallenund Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn (C-36/02). 326 See Opinions of Advocate General Cruz Villalón in Case C-62/14 and of Advocate General Yves Bot in Case C-42/17.
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . . 33. It should be recalled in that context that, according to settled case-law, fundamental rights form an integral part of the general principles of law the observance of which the Court ensures, and that, for that purpose, the Court draws inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international treaties for the protection of human rights on which the Member States have collaborated or to which they are signatories. [. . .] As the Advocate General argues in paragraphs 82 to 91 of her Opinion, the Community legal order undeniably strives to ensure respect for human dignity as a general principle of law. There can therefore be no doubt that the objective of protecting human dignity is compatible with Community law, it being immaterial in that respect that, in Germany, the principle of respect for human dignity has a particular status as an independent fundamental right. [. . .] Since both the Community and its Member States are required to respect fundamental rights, the protection of those rights is a legitimate interest which, in principle, justifies a restriction of the obligations imposed by Community law, even under a fundamental freedom guaranteed by the Treaty such as the freedom to provide services [. . .]. In this case, it should be noted, first, that, according to the referring court, the prohibition on the commercial exploitation of games involving the simulation of acts of violence against persons, in particular the representation of acts of homicide, corresponds to the level of protection of human dignity which the national constitution seeks to guarantee in the territory of the Federal Republic of Germany. It should also be noted that, by prohibiting only the variant of the laser game the object of which is to fire on human targets and thus ‘play at killing’ people, the contested order did not go beyond what is necessary in order to attain the objective pursued by the competent national authorities. [. . .] In those circumstances, the order of 14 September 1994 cannot be regarded as a measure unjustifiably undermining the freedom to provide services.
Thus an ECJ review on the invocation of constitutional identity by national authorities in inescapable. Similarly, in the case Eugen Schmidberger, Internationale Transporte und Planzüge and Republik Österreich,327 the ECJ admitted after careful examination that the Austrian authorities could authorise a demonstration which impeded intra-Community trade for several days, relying on the preservation of the exercise of fundamental rights such as freedom of expression and of assembly which are guaranteed by the Austrian Constitution and the ECHR. Finally, in the case Ilonka SaynWittgenstein,328 the Court expressed in the clearest possible way its respect for the States’ constitutional identity. The problem was that under Austrian constitutional law, titles of nobility have been abolished. The litigant was an Austrian 327 ECJ, 12 June 12 2003, Case C-112/00, Eugen Schmidberger, Internationale Transporte und Planzüge and Republik Österreich. 328 ECJ, 22 December 2010, C-208/09, Ilonka Sayn-Wittgenstein. See also the Runević-Vardyn case, C-391/09 (2011) regarding the protection of national language as an element of constitutional identity that can limit freedom of movement, provided it respects a standard of proportionality.
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citizen who had been adopted by a German national who had a title of nobility. In such cases, the Austrian Constitutional court considers that the claimant has no right to bear a title of nobility, even of a foreign origin. Was the fact that the applicant had to use different names according to where she was in the UE in contradiction with the right to travel within the European Member States? The question referred to the European Court was the following: Does Article [21 TFEU] preclude legislation pursuant to which the competent authorities of a Member State refuse to recognise the surname of an (adult) adoptee, determined in another Member State, in so far as it contains a title of nobility which is not permissible under the (constitutional) law of the former Member State?
One of the arguments of Austria was that these provisions are part of an effort to protect the constitutional identity of the Republic of Austria, and especially the principle of equality. After recalling the principles of Omega, the Court finally ruled in favour of Austria, considering that: The European Union legal system undeniably seeks to ensure the observance of the principle of equal treatment as a general principle of law. That principle is also enshrined in Article 20 of the Charter of Fundamental Rights. There can therefore be no doubt that the objective of observing the principle of equal treatment is compatible with European Union law. 90. Measures which restrict a fundamental freedom may be justified on public policy grounds only if they are necessary for the protection of the interests which they are intended to secure and only in so far as those objectives cannot be attained by less restrictive measures [...]. 91. The Court has already explained in that regard that it is not indispensable for the restrictive measure issued by the authorities of a Member State to correspond to a conception shared by all Member States as regards the precise way in which the fundamental right or legitimate interest in question is to be protected and that, on the contrary, the need for, and proportionality of, the provisions adopted are not excluded merely because one Member State has chosen a system of protection different from that adopted by another State [...]. 92. It must also be noted that, in accordance with Article 4(2) TEU, the European Union is to respect the national identities of its Member States, which include the status of the State as a Republic. 93. In the present case, it does not appear disproportionate for a Member State to seek to attain the objective of protecting the principle of equal treatment by prohibiting any acquisition, possession or use, by its nationals, of titles of nobility or noble elements which may create the impression that the bearer of the name is holder of such a rank. By refusing to recognise the noble elements of a name such as that of the applicant in the main proceedings, the Austrian authorities responsible for civil status matters do not appear to have gone further than is necessary in order to ensure the attainment of the fundamental constitutional objective pursued by them.
The transconstitutional interplay with the notion of constitutional identity shows how this notion can be used simultaneously by domestic and supranational constitutional actors
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and pave the way for specific forms of interaction. What needs to be highlighted is the extent to which this notion should, just like the substantive concepts of human dignity, freedom, equality, right to fair trial, etc. and the structural concepts of proportionality, margin of appreciation, subsidiarity, etc., be regarded as one of the building blocks of an emerging transconstitutional jurisprudence. At the same time a substantive and structural concept, constitutional identity also seems to be directly related to the ideological dimensions of constitutional pluralism. First, as it appears in the discourses of legal actors, constitutional identity is composed of principles such as democracy, human rights, the rule of law, human dignity, etc. Several principles such as dignity, freedom, equality, etc. are included in the constitutional identity of Germany. In a later ruling, the Constitutional Court included basic rights into the constitutional identity of the country. In France, there is no detailed enumeration of what may be regarded as being part of constitutional identity. Some authors would include into it principles such as national sovereignty, laïcité, the unity and the indivisibility of the Republic, human rights, etc. In EU case-law, there is no precise idea of what constitutional identities may consist of. It seems that basic elements of national institutional architecture (horizontal and vertical separations of powers) and political organisation (political regime), as well as fundamental rights may be part of the constitutional identity.329 Second, constitutional identity appears as a text-free or a text-independent notion. Three consequences follow. As such, this argument is easy to handle, because none of the actors invoking it can be regarded as constrained by any specific enumeration of principles, rights or values. It can very well include under the notion of constitutional identity an unwritten principle, or a principle which is the implicit presupposition or the implicit consequence of one or several written provisions. Thus legal actors invoking constitutional identity are more at liberty to invoke it, for it cannot conceptually be encapsulated in any definite and limitative formulation. Just as the identity of an individual cannot exclude some changes over time, constitutional identity can be enriched and modified. This is for example clearly evidenced by a Spanish Tribunal constitucional’s declaration, which mentions “material limits which are not expressly acknowledged in the constitutional text, but which can be implicitly inferred from the Constitution and from the essential meaning of this text.”330 The second consequence is that while it uses that argument, the actor—especially the constitutional judge—can hardly be contradicted. Its appreciation of what belongs to the constitutional identity can hardly be overruled. This may 329 330
See Ritleng (2010). Constitutional Tribunal, DTC 1/2004.
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account for the fact that the French Conseil Constitutionnel changed the way it expressed its reservation vis-à-vis European integration. In 2004, it spoke of an “express provision” of the Constitution, which would bar the principle of refusal of control for statutes transposing European directives. But an express provision can very well be changed by the pouvoir constituant. The Conseil’s appreciation could thus be overruled. In 2006, the Conseil talked about “constitutional identity”, which of course cannot be located as such in any specific “express provision” of the Constitution. Thus its appreciation of what can be included in constitutional identity cannot be overruled so easily. That is similar to what the Indian Supreme Court did in the 1970s to quash constitutional amendments as unconstitutional. First it considered that they violated the provisions of the third part of the Constitution, regarding basic rights. But because they were expressly written provisions, they could be changed through constitutional amendment. Then, in a later decision, the Court resorted to the (necessarily unwritten and severed from any express formulation) idea of the constitutional “basic structure”. Then the Court was not so much exposed to have its decisions overturned by the political power.331 A limit to the analogy between France and India is the fact that the Conseil Constitutionnel expressly seems to keep the possibility for the pouvoir constituant to change the constitutional identity. But that decision may also be regarded as a first step towards a forthcoming new decision which would break with the former case-law and accept to review the constitutionality of constitutional amendments. The third consequence consists in the fact that it is impossible to exhaust the argument of constitutional identity. Even if defeated several times in specific reasoning or controversies, the elements that are presented as belonging to the constitutional identity are not reducible to any exhaustive list. As a consequence of this open-endedness, the argument still remains available to legal actors, even if it is rejected from time to time with respect to the allegation that a specific item belongs to constitutional identity. The third aspect of the substantive character of constitutional identity is the specific flavour of the expression “constitutional identity”. One should not neglect its eulogistic appeal, especially as compared with “national (or State) sovereignty”. The former sounds “in” or legally fashionable, whereas the latter sounds old-fashioned and reactionary. As Joseph Weiler puts it, insisting on the power of the word, “National courts are no longer at the vanguard of the new European legal order, bringing the rule of law to transnational relations and empowering, through EC law, individuals vis-à-vis member-State authority. Instead they stand at the gate and defend national constitutions against illicit encroachment from Brussels. They have received a 331
Kesavananda Bharati v. State of Kerala AIR 1973 SC 1461.
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
sympathetic hearing, since they are perceived as protecting fundamental human rights as well as protecting national identity. To protect national sovereignty is passé; to protect national identity by insisting on constitutional specificity is à la mode.”332 It is possible that constitutional identity is no more than a new version of sovereignty, vital State interests, raison d’Etat, etc. That is for example what a study of the successive rulings of the Bundesverfassungsgericht since the 1970s suggests. The rulings are quite similar in substance. All purport to limit the power of the European legal order when what the Court regards as basic values is at stake. Nevertheless, the novelty is in the name, the linguistic apparel with which those considerations are vested. And it is no doubt more “bankable” or acceptable for other actors than a crude invocation of sovereignty. As it is more substantive, constitutional identity appears as a less voluntaristic concept than sovereignty. It appears as something which it is not really possible to alter voluntarily. Somehow, identity is something one cannot escape from. There is a sort of necessity in it, which suggests that when a constitutional court invokes constitutional identity, it does not limit itself to the expression of a sovereign will or power devoid of any content, but somehow only gives expression to something which is, by its own strength, compelling for any legal actor of the legal order in question. There is thus a kind of “necessitarianism” in the invocation of constitutional identity. As Manuel Nuñez Poblete puts it, constitutional identity expresses some sort of metaconstitution, a set of preconstitutional norms and principles which define the very significance and meaning of the other constitutional norms, understood as formal instruments for the limitation of the political power. Strictly speaking, constitutional identity is inalienable and unavoidable. It strictly cannot be given up.333 The invocation of constitutional identity can thus appear as a form of retreat for States’ crude free will. The invocation of constitutional identity does not only promote the freedom of the legal order. It also demands it and constrains it. Moreover, as we have seen before, it is made of several substantive principles (rule of law, human rights, etc.) which the conflicting levels of legal actors forcefully claim to promote. As a consequence, it does not appear only as a sort of rephrasing of the “national competence reservation” or “vital national interests”. It does not appear as purely selfregarding. That is why it proves so convenient in transconstitutional dialogues. From this last viewpoint, the “constitutional identity argument” presents several advantages for continued transconstitutional dialogues.
332 333
Weiler (2005). Nuñez Poblete (2008).
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First, identity can be considered as an element of selfness. It is a prerequisite to any discussion or dialogue, because there is no dialogue if the two partners are not able to retain their own identity. If they do not preserve their identities, they self-deny themselves. As a consequence, it is crucially useful for tranconstitutional dialogues to be maintained that each actor preserves its constitutional identity. Both partners in the dialogue have an interest in it. Secondly, constitutional identity has been the dominant issue in a form of constitutional “hide-and-seek” game in the European context. When studying the interactions or dialogues between the ECJ and the domestic constitutional courts, it is possible to reconstruct some remarkable exchanges. They are the consequence of the fact that the expression “constitutional identity” simultaneously appears at both levels of the constitutional conflicts or dialogues. Properly speaking and in the intentions of the Founding Fathers of Europe, European Communities had only strictly economic purposes and functions. But the European institutions were pressed to develop. In order to gain legitimacy, they especially resorted to the rhetoric of fundamental human rights, which in the end resulted in the Charter of Fundamental Rights of the European Union.334 How did they make human rights part of the range of action of strictly economic institutions? The process may be reconstructed in the following way. The Court resorted to what it called “principles” of European law, thus benefiting (1) from the contention that those norms were already there, implicitly grounding the more detailed norms which were embodied in the treaties and secondary European law335; and (2) from the self-sustained dynamics principles implying both an increased action of the Communities leads to and the amount of litigation that could be expected as a consequence. But the ECJ made another very important move. In the Nold case,336 it stated that: The applicant asserts finally that certain of its fundamental rights have been violated. The [EEC] decision is said to violate, in respect of the applicant, a right akin to a proprietary right, as well as its right to the free pursuit of business activity, as protected by the Grundgesetz of the Federal republic of Germany and by the constitutions of other Member States and various international treaties, including in particular the Convention for the protection of human rights and fundamental freedoms. [. . .] As the Court has already stated, fundamental rights form an integral part of the general principles of law, the observance of which it ensures. In safeguarding these rights, the Court is bound to draw inspiration from constitutional traditions common to the Member States, and it cannot therefore uphold measures which are incompatible 334 For doubts as to the achievements of human rights protection by the ECJ, see Albi (2010). 335 See supra, § 4. 336 ECJ, 14 May 1974, J. Nold, Kohlen- und Baustoffgroßhandlung v Commission of the European Communities, Case 4-73.
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with fundamental rights recognized and protected by the constitutions of those States.
traditions and international obligations common to the Member States, the Treaty on European Union, the Community Treaties, the European Convention for the Protection of Human Rights and Fundamental Freedoms, the Social Charters adopted by the Community and by the Council of Europe and the case-law of the Court of Justice of the European Communities and of the European Court of Human Rights.
Similarly, international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories, can supply guidelines which should be followed within the framework of Community law.
Thus the Court rooted those principles not only in European law, but claimed to infer them from the national constitutional traditions. It was then all the more difficult for States to criticise the revolution that was under way as the European institutions were opposing precisely their own ethos and telos, enshrined in their more fundamental norms: their constitutions and the deeper national traditions they were built upon, to the States. Of course, those traditions and their content are more or less freely interpreted by judges. Nevertheless, there was hardly any way out for the States from the rhetoric the European institutions had devised to promote human rights. How could a State criticise judicial activism (1) in the field of human rights, moreover (2) if such activism was the fruit of the State’s political essence? As Miguel Poiares Maduro puts it, Where the Union encroached upon State’s sovereignty, that construction of legitimacy was supplemented by the appeal to the protection of freedom and private autonomy in the face of power. European constitutionalism appeared, in this light, like an external but self-imposed constitutional constraint aimed at reinforcing the domestic constitutional limits imposed on the power of the State. In this case, European constitutionalism is, in effect, perceived like an instrument of State constitutional values.337
It appears however that whenever one constitutional actor tries to “trap” another, the other has enough imagination to escape it. In the Maastricht Treaty, both to release the States from the fear of a European federalism that would encroach on national constitutionalism and to legitimate the increased range of action of supranational institutions, article F was inserted, which read: 1. The Union shall respect the national identities of its Member States, whose systems of government are founded on the principles of democracy. 2. The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law.338
Article 53 reads: Nothing in this Charter shall be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised, in their respective fields of application, by Union law and international law and by international agreements to which the Union, the Community or all the Member States are party, including the European Convention for the Protection of Human Rights and Fundamental Freedoms, and by the Member States’ constitutions.339
It appears that the States astutely managed to use the legitimising weapon of the EU law against EU law itself, thus ensuring that the dialogue among equals would continue and that none could be the final interpreter of basic national or European constitutional concepts. The States can in apparent good faith claim that the European institutions are, under the Treaties, under an obligation to respect national identities. As a consequence, when seeing to it that domestic constitutional identities are respected, national judges can claim not to be displaying any kind of nationalism, but merely to be enforcing European obligations.340 At the level of the member States, several constitutional judges decided that they would faithfully respect the supranational law, provided it did not imperil their constitutional identities.341 A whole body of jurisprudence of “Identitätskontrolle”342 has consequently emerged among the national constitutional actors. Thus States have managed to use what was part of a sort of reassuring discourse from the supranational actors, in order to maintain their own independence and autonomy. Nevertheless, as was mentioned before, the ECJ clearly maintained, for example in Omega, that the constitutional identity cannot be a carte blanche for States. As a consequence, the European institutions retain some power of review on how such a concept is to be interpreted and to what ends it can be used. As constitutional identity is mentioned in a European treaty, the authentic interpretation of this expression is the province of the ECJ, and not that of national courts. As the duty to respect the member State’s constitutional identity is contained in the Treaty, of which the Court of Justice is the ultimate interpreter, it plausibly might be argued that it is for this Court to interpret the notion. [. . .] There is however a most fundamental objection to the thesis: it simply seems incompatible
Today, these principles appear in Article 6 of the Treaty on European Union. The Charter of Fundamental Rights of the European Union’s preamble adds that: This Charter reaffirms, with due regard for the powers and tasks of the Community and the Union and the principle of subsidiarity, the rights as they result, in particular, from the constitutional 337 338
Poiares Maduro (2004), p. 16. See also Poiares Maduro (2012). Italics supplied.
339
Italics supplied. See e.g. the insistence of the German Constitutional Court in the Lisbon ruling, §§ 57, 153, 234, 304, 339. 341 See supra, § 4. 342 BVerfG, 2 BvE 2/08 of 30th June 2009, § 240. 340
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . . with the very concept of constitutional identity, understood as specific to one member State (as opposed to constitutional principles which the member States have in common). Except when a constitutional provision explicitly States that it is part of a State’s national identity, the qualification of a provision as belonging to a State’s constitutional identity is always a matter of interpreting the national constitution. And this is the duty and province of national authorities, and more specifically that of the national constitutional courts (if available. Would it not take the heart out of the Union’s duty if it were otherwise? In short, the duty to respect the national constitutional identities seems to include the duty to respect the decisions of the relevant competent national authorities on these matters).343
There is therefore a sort of constitutional hide-and-seek game: (1) The ECJ begins by opposing the States their constitutional identities in order to broaden its scope of action; (2) the States impose the respect of constitutional identities upon the European institutions through a modification of the Treaties, thus making deference to national identities an EC law principle which it is the duty of European actors to enforce; (3) States constitutional courts threaten to disregard European law in case it violates their constitutional identities; (4) While sensitive to the argument, the ECJ maintains its power to review the invocation of constitutional identity. The States have intended to gain protection from a tool which it is the province of the institution they wanted to be protected from to interpret. Each one opposes the other with considerations that belong to the latter’s legal sphere. Each is trying to trap the other with the other’s own weapons, in a renewed and iterative rhetoric that is playing national law against national sovereignty, and European law against European primacy, pursuant to a back-to-the-sender-andback-again logic. The rhetoric of constitutional identity allows global constitutional actors to express the general principle of dialogue, while simultaneously saying that they keep some last-resort argument when what they would not imperil, even in cooperative dialogue, is at stake. The need for accommodation will then remain in the continuing discussions. In that way, while everyone takes advantage of one’s own identities and specificities, one implicitly invokes elements that the other constitutional order intends to protect. Therefore, invoking one’s own constitutional identity is not intended to deviate from the fundamental commitments of the other actor, but precisely to claim what the various parties have in common. Paradoxically, the national insistence on constitutional identity as irreducible “ipseity” frequently leads to underlining much more the elements the constitutionalisms share, that is to say the identity in the sense of “sameness”. As Denys Simon notices, “In other words and in the final analysis, Article 6§1 TEU (now Article 4§2 TEU) guarantees respect for fundamental national constitutional
343
JHR and LB (2007), p. 180.
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values because they merge with the fundamental constitutional values of the Union.”344
6.2
Questioning Constitutionalism and Pluralism
Like dialogism, constitutionalism and pluralism, understood as perspectives one uses to confront the current legal phenomena, are not neutral. That is why, understood not only as a group of empirical phenomena but also as a lens that more or less implicitly tends to conceal disagreement, violence, inequalities, oppressions, etc., global governance, pluralism, and constitutionalism spark criticism.345 Despite the wide legal literature that has developed to account for changes in contemporary law, many authors remain sceptical about constitutional analysis as a model of intelligibility at the global level. According to them, transferring the language of constitutionalism to other spheres than the State remains illegitimate346 or unsuccessful,347 so that the global constitutional discourse is more a manipulation or pure play on words than an objective analysis. Similarly, one could as a matter of principle voice strong objections against the very idea of “pluralism”. Resorting to this lens is a way to ensure a form of uniformisation, i.e. to ignore everybody’s specificities, because an increasing number of social spheres can be analysed through this lens. One may very well contend that the metanarrative of pluralism is precisely one means to force the inclusion of different perspectives into a general perspective that encompasses all the others and implicitly conceals what makes them different. Paradoxically, pluralism would limit the resistance of otherness by purporting to make room for it in a more tolerant and accommodating scheme. Although Viellechner is able to distinguish between the constitutional and the pluralist orientation,348 pluralism is not without its own ambiguities, and can hardly be distinguished from constitutionalism from a global perspective. Whereas constitutionalism would allow for a more centralising dynamics because of its insistence on common values, pluralism would be more adamant that the autonomy and specificities of the various legal spheres should be preserved. However, they are hardly distinguishable in the literature, where many theories of “constitutional pluralism”, which combine both terms, also flourish. That is why both may be dealt with jointly without any important risk of misreading. 344
Simon (2011), p. 41. See e.g. Stout and Love (2016), Gill (2008) and Diggelmann and Altwicker (2008). 346 See e.g. Wahl (2010) and Tzanakopoulou (2018). 347 Deplano (2013). 348 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3. See also Viellechner (2012) and Millet (2018). 345
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Global constitutionalists may be motivated by the generous desire to promote human rights around the world and in the private sphere. Similarly, pluralists may be sincerely motivated by the will to make room for various forms of legal life in the global era. However, from the point of view of reconstituting the dynamics of representations and legal ideologies, the development of these intellectual frameworks can also be the result of deeper tensions within the minds of jurists. Jerome Frank’s legal realism349 suggests analysing the use of the constitutional and pluralist paradigms as ways for legal doctrine and legal practice to relieve themselves of the anxiety of not being able to cope with what is changing today (fragmentation of international law into a multiplicity of specialised regimes,350 disintegration of the postWestphalian order, collapse of pre-existing hierarchies, emergence and reinforcement of new transnational actors, etc.). The use of the constitutional or pluralist mental frameworks could, in such an analysis, prove to be a minimal way of dealing with a more unstable and disturbing reality. In the form of a simple extension of pre-existing, familiar and secure paradigms, the global constitutional or pluralist discourses would be tantamount to a kind of psychoanalytic compensation.351 As Martti Koskenniemi puts it, “Much 20th century debate about Western modernity may be depicted as a succession of perceptions about breakdown, explosion, dispersal, fragmentation, followed by reassuring counternarratives that explain the apparent chaos as mere complexity, healthy pluralism, dynamism, freedom.”352 The idea of constitutional dialogues plays a decisive role in this reassuring project of conceptualising the theoretical and practical disturbances implied by international, supranational, transnational, national, and subnational constitutionalisms and their pluralisation. As Viellechner notices, “the concept of constitutionalism is currently no more than a reminiscence of a historical achievement as a benchmark. It serves as a cipher under which the reconstruction of law under conditions of globalisation has begun and will continue until more adequate concepts [have been] discovered.”353 From this point of view, rather than seizing the opportunity to experiment with new ways of analysing legal phenomena, global constitutionalism and pluralism would be mere avatars of the “rationalizing legal analysis”354 criticized by Roberto 349
Frank (1949, 1950). International Law Commission, Report on the Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, UN Doc. A/CN/4/L.682, 13 april 2006. See also Dupuy (2007) and Fischer-Lescano and Teubner (2013). 351 Peters (2006). 352 Koskenniemi (2005), p. 3. 353 Viellechner, ‘Friendliness’ Towards Others: How the German Constitution Deals with Legal Pluralism, § 3.3.2. See also Viellechner (2012). 354 Unger (1996). 350
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M. Unger.355 The analysis deserves to be extended however. The use of this constitutional or pluralist reading tool does not only illustrate the preservation or transfer of known concepts towards phenomena that are difficult to master. It takes, beyond what may seem only a theoretical or intellectual approach, a practical or political significance. Indeed, it is again important not to neglect the eulogistic dimension of the legal vocabulary. In this respect, it seems difficult to criticise the idea of pluralism, which appears to be linked to those of freedom, tolerance, respect, diversity, etc. From this perspective, everyone has to renounce any claim for supremacy and embrace hybridity. No site of power is immune from being challenged, so that new spaces are created to resist forms of legal hegemony and promote freedom. Nevertheless, some authors highlight some of the possible drawbacks of pluralism. It may not equally expand the possibilities of choice for everyone: “Globally, legal particularism owes its rise to legal pluralism insofar as it entails the ability of pick and choose among multiple legal orders that allow business corporations to play different lawmakers against one another and thereby gain influence over law-making. It also enables global corporate actors to elude oversight by a shared common overarching legal order because it undermines the regulatory reach of existing public political forms while distorting new ones on regional or global levels.”356 Similarly, constitutional language appears to be linked to concepts that tend to morally disqualify the opposite concepts.357 According to Giovanni Sartori for example, “In our minds, constitution is a ‘good word.’ It has favourable emotive properties, like freedom, justice or democracy. Therefore, the word is retained, or adopted, even when the association between the utterance ‘constitution’ and the behavioural response that it elicits (e.g., ‘The constitution must be praised, for it protects my liberties’) becomes entirely baseless.”358 It seems intrinsically linked to the struggle of freedom against oppression, and today to human rights and the rule of law, so that it has become extremely difficult for anyone to wish for a limitation of or a brake on constitutionalism. The idea of a constitution is associated with a rich network of ideas that are not confined to limiting the political power. They also participate in the establishment, rationalisation, stabilisation, and legitimisation of the political power. A constitution empowers authorities to achieve the goals it defines, and these goals in return justify
355 More precisely, regarding the use of the concept of “federalism” in the analysis of the relations between member states and the EU, see Tusseau (2014c). 356 Arato and Cohen (2018), p. 25. 357 Neves (2009), p. 5. 358 Sartori (1962), p. 855.
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
their actions.359 As Eduardo García de Enterría noted about the extent of the change the 1978 Constitution brought to the Spanish political society, “The legal constitution transforms the naked power into a legitimate legal power. The great lemma of the struggle for the Constitutional State was the requirement that the arbitrary government by men be replaced by the legal government by laws.”360 The constitutionalisation of any object confers upon it self-sufficiency and autonomy vis-à-vis other normative institutions. It is for that reason that this vocabulary is essential in the configuration of dialogic and heterarchical—and as a consequence pluralist—rather than hierarchical relationships between global legal actors. The mere application of the “constitutional label” to the least legal regime reinforces the perception of its importance. That is why Jörg Kammerhofer may very well wonder: “What, then, is the problem with constitutionalist scholarship? It is submitted that the use of language in this case has a mythological function.”361 Everyone can accept the empirical finding that the global constitutional and pluralist discourses exist: claims, attitudes and institutional arrangements are described, expressed and justified using them. Knowing whether to enthusiastically welcome this approach or to be wary of it remains an open question.362 For example, several authors have expressed fears about the inherent risk of conservatism that constitutionalism would carry. By concealing the dimension of power and ensuring the apparent control of disorder, constitutional discourse would strengthen existing situations. The constitutional label could thus prove to be an instrument intended to reinforce the pre-existing structures of power, notably non-State structures, and to favour the status quo and unchanged self-reproduction.363 As they establish institutions apposite to the achievement of specific purposes, constitutional devices must be preserved and are defined as more permanent, entrenched, and difficult to change than ordinary law. According to Jeffrey L. Dunoff, who discusses the WTO’s alleged constitutionalisation, “the constitutional turn in much trade scholarship can be understood as a mechanism for withdrawing controversial and potentially destabilizing issues from the parry and thrust of ordinary politics to a less inclusive constitutional domain.”364 The spread of constitution-talk with its reassuring tones is sometimes expressly regarded as a device to legitimate powerstructures, make them immune from everyday political discussion, impair self-government and “enervate real political
engagement”.365 Against the constitutional rigidity that is implied by legal constitutionalism, Richard Bellamy for example proposes to develop forms of “political constitutionalism.”366 In his views, constitutional rigidity limits the ability of a society to deliberate. The argument according to which at least the formal framework of deliberation and the rights to participate must be rigid does not hold, since this framework and these rights themselves are the subject of political debate.367 The latter must be as open as possible, and ensure the construction of a public culture of collective definition of the just social order. As a result, constitutionalisation may appear as a fallacy designed to ensure that political issues such as fundamental rights or the limitation of the political power are removed from the political debate. The exclusion of these elements from the political debate, even though their content is the object of the most essential disagreements of any collectivity, risks being arbitrary and favouring a specific form of pre-established political domination.368 According to this line of analysis, contemporary constitutional inflation, which is particularly illustrated in the field of global law, shows a disdain for the political energy of the people.369 As Third World approaches to international law suggest, we may also be witnessing the emergence of a “nascent imperial global State,”370 which makes global constitutionalism an instrument of cultural and civilisational imperialism, with 20% of the globe claiming that their cognitive and normative patterns are valid for everyone.371 Thus it is no surprise, for example, concerning the Área de Libre Comercio de las Américas, that Alberto J. Sosa considers that “As much as the WTO and the NAFTA, the ALCA project are market-oriented global constitutions. [. . .] Unlike traditional international treaties or to strictly interstate trade agreements, global constitutions regulate multiple aspects which modify and bear upon the ordinary life of the peoples of the member States. The rights that global constitutions confer are for corporations and not for citizens. This bestows in the hands of a privileged group of legislators which represent hegemonic States and/or of corporations the production of norms which will rule the life of present and future generations.”372 There is evidence of a link between “disciplinary neo-liberalism” which imposes structural reforms, liberalisation of exchanges, guarantee of property rights, free trade and freedom of contract upon the States, and the 365
Ward (2001), p. 29 and Sinclair (2012), pp. 1–8, 29. Bellamy (2007) and McGann (2004). 367 Bellamy (2007), p. 178. 368 Bellamy (2007), pp. 145–175. 369 Parker (1994), pp. 66, 76, 98, 105, 107. 370 Chimni (2004). 371 Yasuaki (2006). 372 Sosa (2004). 366
359
Kuo (2010). See also Holmes (1995), pp. 161–166. García de Enterría (2006), p. 55. 361 Kammerhofer (2010), p. 724. 362 See esp. Scheiderman (2013). 363 Kennedy (2008). 364 Dunoff (2009), p. 179. 360
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rights of investors, which secure a stable environment for capitalism and global constitutionalism.373 Trying and identifying the main features of transnational constitutionalism, Jiunn-Rong Yeh and Wen-Chen Chang also notice that whereas it facilitates a global market, it undermines accountability, democracy and the rule of law at both domestic and transnational levels.374 Similarly, pluralism could contribute to the maintenance of the pre-existing power structure by offering the picture of a sort of peaceful and respectful coexistence among various legal spheres. However, just as much as the manifestation of the vigour of these spheres of power, their constitutionalisation could be interpreted as their swan song. As such, the insistence on constitutionalisation can be a symptom of the breakdown of endangered spheres of social power that use this rhetoric to maintain themselves. Such an attempt might appear hopeless, as suggested by Ferdinand Lassalle’s analysis. According to him, the true constitution does not lie in a document or a speech, but in the actual situation of material and social forces on which the content of the laws of the society empirically depend. He draws the following consequence: whenever and wherever you come upon a party which has as its battle-cry the tremulous plea, ‘Let us cling to the constitution!’ – what can you deduce from this? [. . .] Well, gentlemen, without being prophets, you would say with certainty that this constitution is on its last legs; it is as good as dead; a few years more, and it will have ceased to exist. The reasons are simple. As long as a written constitution corresponds to the relation of forces in the nation, such cries will never be raised. Everyone stays three paces away from such a constitution and takes care not to approach closer. No one thinks of tangling with such a constitution; he will undoubtedly come away the worse for it if he does. Wherever the written constitution corresponds to the actually existing relation of forces, it will not occur to any party to take as its special battlecry, “clinging” to it. When such a cry is heard, it is a certain and incontrovertible sign that it is a cry of terror; in other words, it is proof that there is something in the written constitution which contradicts the real constitution, the existing relation of forces. And where-ever such a contradiction exists, the written constitution is inevitably doomed – neither God nor shrieks can help!375
As well as a last resort of a doctrine hampered by the mutations of its object, the constitutional paradigm can be understood as depending on a form of strategy of political survival. Unlike these sceptical analyses, and without necessarily embracing the prospect of global constitutionalism or repelling it, Anne Peters highlights some of its merits. The distance between traditional State constitutionalism and presentday global constitutionalism could lead to progress.376 In Peters’ views, the critical and empowering potential of
G. Tusseau
constitutionalism is based on the fact that any claim of an actor to be “constitutional” necessarily prompts it to take a number of fundamental values seriously. It also invites communities that are subject to its power to question the “constitutionality” of the regime imposed on them.377 As much as it strengthens a given institutional structure, its constitutionalisation would impose constraints on it, which would be commensurate with the ambition of the constitutionalist’s project. Similarly, claims to respect “pluralism” may concretely lead to harmonious coexistence and learning from one another. Whatever the orientation or the concrete results, however, it remains that constitutionalism and pluralism understood as discourse and paradigms to frame the legal landscape and its analysis in today’s global era fall short of being perfectly neutral. That is where the dominant concepts of legal analysis tend to have an ideological dimension, from which this general report is not totally immune.
6.3
Questioning This General Report’s Implicit Biases
In itself, this comparative general report tends to prove that the very questioning about constitutional pluralism and what the global age implies for the considered legal systems says much about the relativity of legal rationality. Indeed, one may consider that many of the aspects that had been imagined in the questionnaire have been ignored or at most dealt with in a tangential way by several jurisdictions. That is by no means a defect or a disappointing result. It precisely offers one example of the fact that much in the comparative enterprise itself is driven by local interests, local perspectives, local ways to look at and to conceptualise objects, local ways to conceive, imagine and formulate problems. When the questionnaire was prepared, it was implicitly embedded in a specific paradigm. This conclusion is by no means original, as this difficulty is nothing other than a version of very general hermeneutical problems, highlighted in particular by HansGeorg Gadamer.378 It is impossible to understand any cultural object in its “own” terms, that is, by freeing oneself from one’s habits, beliefs, prejudices, expectations, interpretations, forms of life, and so on. Every observer is always placed in a certain intellectual disposition or situated in models and preconceptions, according to which she inevitably organises her perceptions and thoughts, and which necessarily condition them.379 As Richard Rorty puts it, “We have not got a language which will serve as a permanent neutral matrix for
373
Gill (2000). Yeh and Chang (2008). 375 Lassalle (1862). 376 Peters (2009a). 374
377
Peters (2009b). Gadamer (2011). 379 See also Skinner (1969), esp. p. 6; Dunn (1968). 378
Debating Legal Pluralism and Constitutionalism: New Trajectories for Legal Theory in. . .
formulating all good explanatory hypotheses, and we have not the foggiest notion of how to get one.”380 The information gathered—or not gathered—thanks to the national reports empirically testifies to this fact, as each report implicitly or explicitly embodies one way to understand, frame, and address the topic “Debating legal pluralism and constitutionalism: new trajectories for legal theory in the global age.” In this respect, any comparative study necessarily expresses a specific viewpoint. If ever one could somehow naively regret one’s predicament, it cannot be avoided. Moreover, it is necessary to be conscious of it, and to take into account the fact that every comparative study speaks from somewhere.381 By confronting the data offered by the national reports, this general reports exposes how dependent on local circumstances the initial questionnaire was. Among comparatists, Pierre Legrand is the author who defends most vigorously the thesis according to which the compared legal systems are dependent on cultural, intellectual, linguistic, historical, social, psychological, etc., environments, which they incorporate to the point of being uneasily commensurable with each other.382 From a methodological perspective, the transition from one culture to another that any satisfactory comparison implies can only be made from a given viewpoint, so that any pretension to conceive a totally neutral and detached comparative metalanguage is illusory. The bias induced by the author’s original culture, and in particular the first legal culture in which she was trained, seems inevitable. As Legrand points out, “All otherness is gathered by a horizon of self-understanding – a precomprehension – which is part of a tradition, thus referring to a claim of truth emanating from a living context of convictions, habits and common value judgments. This means that what is, for the comparatist, only exists to the extent of the meaning, in fact culturally determined, that it takes for her.”383 In spite of the risk of what Joachim Matthes calls “Nostrifizierung”, i.e. understanding someone else as if she were identical to ourselves, one needs to admit that any scheme of intelligibility is embedded in its author’s “cryptotypes”.384 As Günter Frankenberg puts it, “the fictitious neutrality stabilizes the influence and authority of the comparatist’s own perspective, and nurtures the good conscience with which comparatists deploy their self-imposed dichotomies, distinctions and systemizations.”385 As Jack M. Balkin also observes, to postulate the existence of an impartial and detached observer, without any culture or
legal history, amounts either to imagining an individual who does not have the skills to achieve an understanding of the phenomena, or to implicitly or even inadvertently elevating a particular culture to the level of an ideal. On the contrary, it is essential to highlight the active contribution of the knowing subject to the construction of the known object: Legal understanding is not the passive reception of an inert object by a consciousness untouched by the act of understanding. Rather, legal understanding, like all understanding, affects our beliefs and our lives. It is something that we do to the object of interpretation, and something that the constructed object does to us. [. . .] Ideological power is a special case of the power that derives from the tools of understanding that we use to express our values and make sense of the social world. The power of ideology is precisely the power that the tools of our understanding have over us. We need tools of understanding to make sense of the world, but, like our limbs and eyes, these tools become part of us. Those who shape or control the tools of our understanding have a certain power over us because we are, to a large degree, the tools of our own understanding.386
One of the main interests of comparative law is not to allow one to escape from who she is, but at least to be conscious of it. Achieving this operation of consciousnessraising paves the way for deeper comparisons. Geoffrey Samuel offers some important hints from this perspective. Because the method depends on contextual factors, there is no doubt that the conditions of this choice can themselves be the subject of a comparative study. As Samuel notes, “What comparative law should have as its primary object are the models which can be used for constructing facts,”387 so as to “provide an opportunity to study the internal structures of legal knowledge.”388 If one understands comparative law as “the comparative study of the intellectual conceptions that underlie the principal institutions of one or more foreign legal systems,”389 it points to a form of comparative study of legal reasoning, or even more deeply, of the comparative construction of legal consciences. At the same time, it opens the subject of comparative law studies to the legal mindsets and contextual determinisms that drive the development of comparative analysis methods, and argues for a form of “comparison of comparisons” aimed at understanding “how individuals enclosed in one culture are able to penetrate the thought of individuals enclosed in another.”390 For this last activity, this general report cannot be an end but only a beginning.
380
Rorty (1980), pp. 348–349. Tusseau (forthcoming). 382 See e.g. Legrand (2011); Legrand (2009), pp. 209–244; Legrand (1999, 2003, 2013, 2014). 383 Legrand (1999), p. 1058. 384 On this concept, see Sacco (1991), esp. pp. 105–108. 385 Frankenberg (1985), p. 425. See also Frankenberg (2016).
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381
386
Balkin (1993–1994), p. 166. Samuel (1988), p. 827. 388 Samuel (1988), p. 833. 389 Ewald (1995), p. 2114. 390 Geertz (1993), p. 149. 387
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The Right to Be Forgotten Franz Werro
Abstract
The present general report is based on the work of fifteen national rapporteurs. It finds that jurisdictions embrace the right to be forgotten mostly where the right to privacy imposes limits on the right to free expression. Regardless of labels or formal legal recognition, the right to be forgotten takes various forms. In its most traditional form, this right has existed in some parts of Europe for over two centuries. It gives individuals the right to preclude the media from revealing true facts about their private life where no public interest prevails. In today’s world, the right to be forgotten has a more multifaceted meaning. With respect to personal data, this right can involve the right to access, control, and erase these data. The access and the control in turn will depend on various elements, including the roles of data processors, technological devices, competing interests, and the interest of the state. As the world is still assessing the roles of these elements, the right to be forgotten, at least in some of its current manifestations, will gain importance.
1
Introduction
The question that this book addresses is whether and to what extent an individual has the right to preclude anyone from publicizing a particular true fact or event relating to his or her private life, which has lost its newsworthiness or public The publication of this piece considers materials up until September of 2019. This report was also published in Werro (Ed), The Right To Be Forgotten – A Comparative Study of the Emergent Right's Evolution and Application in Europe, the Americas, and Asia, Springer Nature Switzerland 2020. F. Werro (*) Fribourg University, Fribourg, Switzerland Georgetown University Law Center, Washington, DC, USA e-mail: [email protected]
pertinence. This right to be forgotten has found express recognition in some places, such as France, since the middle of the nineteenth century. In today’s world, this right also comprises a person’s entitlement to access, control and, sometimes, erase personal data held by others. In practice, the right to be forgotten serves as a shield against media platforms that would otherwise enjoy the right to publicize this fact or event. On the Internet and in e-commerce, it can serve as a means to know and control information about one’s own personal data, and possibly to erase them. In this European understanding, the right to be forgotten in all its forms finds its roots in fundamental precepts of human dignity. As such, it is part of the right to privacy, understood both as an entitlement between private individuals, as well as a constitutional one against the state. When recognized, the right to be forgotten necessarily comes into conflict with other private or constitutional entitlements, such as the right to freely speak and inform, the right to property or the right to engage in commercial activity, domestically or across borders. The limits of the right to be forgotten thus result from a balance between these rights. In that sense, it is never unconditional. To enjoy recognition, the right to be forgotten depends on the perceived legitimacy of its limits on other fundamental rights. Although the right to privacy has a clear public dimension, this report will focus on the right to be forgotten as the prerogative of an individual against other individuals or private corporations and leave aside other possible entitlements regarding information held by states. The international or transnational aspects of the questions will only be briefly referred to, namely with respect to enforcement issues. The focus will be on a comparison between the various national approaches to the right to be forgotten in its private law dimension. Our report finds its basis in the work of fifteen national rapporteurs. These rapporteurs are scholars from Argentina, Belgium, Brazil, Canada, Czechia, Denmark, Finland, Germany, Ireland, Italy, Japan, Romania, Taiwan, Turkey,
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_19
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and the United Kingdom. I am very thankful for the work of these scholars, who answered a questionnaire I had drafted.1 Their work helped create a contemporary image of the right to be forgotten and deepen the meaning one can give to it, particularly with respect to its multifaceted content. As the work of the rapporteurs shows, the right to be forgotten has acquired global notoriety in recent times, particularly in the application of the right to de-indexation on the Internet, as decided by the Court of Justice of the European Union in Google Spain.2 The unexpected, and at times scandalous, news in recent times also showed the ways in which information held by social networks and other Internet players trigger many troublesome questions about the private life of Internet users. The work of the rapporteurs further suggests that the right to privacy—understood as the right to keep one’s private life free from private and/or public infringements—prevails more strongly in some states than in others. These legal differences surely cannot be separated from cultural ones, which in turn bear on historical and social values. At the same time, I find that a state’s treatment of the right to be forgotten directly correlates with the extent to which a state is willing to recognize and guarantee the right to privacy. Conversely, I found a correlation between a state’s treatment of the right to be forgotten and the importance its legal systems give to capitalism and free market ideas. The more a system values free entrepreneurship, the less it appears willing to compromise free speech with the protection of private life. The report is a survey of what the national reports have exposed, rather than the outcome of our individual research and critical analysis. At the same time, it does not do full justice to the wealth of information provided by the national reports nor to the depth of the work of the individual rapporteurs, some of whom have written books and produced major contributions on the subject.3 In its present form, the general report only touches the surface of many issues. It merely tries to suggest an assessment of the current state of affairs and possibly a grille de lecture that will help sort things out. Accordingly, I will first explore how the general right to privacy comes into opposition with freedom of expression (2). I will then assess the implications of this opposition for the right to be forgotten (3). Subsequently, I will identify the core feature of the right to be forgotten (4) and examine, beyond media and information, its implications with respect to individuals’ ability to control their personal data (5). 1
The questionnaire is an annex to the present report. Case C-131/12, Google Spain SL Google Inc. v Agencia Española de Protección de Datos (AEPD) Mario Costeja González [2014] ECR I-000, at pt. 35 ff, 80 ff, 86 [Hereinafter Google Spain]. 3 A quick look into the bibliography of the national reports will give an idea of the wealth of the research work of their authors and of what is missing in the present report. 2
F. Werro
2
Balancing the Freedom of Expression Against the General Right to Privacy
In this section, I will compare the European and American4 approaches to privacy as balanced against free speech and illustrate their distinct features. Subsequently, I will contrast our findings with the picture that emerges in Latin America and Asia.
2.1
The European Approach vs. the United States’ Approach
In continental European states, the right to privacy often finds its express basis in the constitution.5 In Ireland, the right found its expression in judicial recognition under the doctrine of un-enumerated rights.6 Despite the absence of a written Constitution, the situation appears very similar in the United Kingdom, especially under the influence of the European Convention on Human Rights.7 In Turkey, the constitution expressly proclaims a constitutional right to privacy.8 Free speech finds protection in all national constitutions, as well as in the European Convention on human rights (Art. 10). This right is considered essential to insure the functioning of democracy. The French 1789 « Déclaration des Droits de l’Homme et du Citoyen » was the first one to consecrate this fundamental right in Europe. It found its inspiration in the 1776 United States Declaration of Independence.9 It was then included in the First Amendment of the US Constitution in 1791.10 While they originate from the same source, these European and United States rights did not define the limits to these rights in the same way.11 Interestingly, and the point deserves attention at the outset, these constitutional entitlements, both privacy and free speech, have implications on the correlative rights between 4 We did not receive a United States report, but we analyzed various contributions published in this country. For a recent analysis of the right to be forgotten in the United States’ jurisprudence, see Gajda (2018), p. 201, which interestingly and somewhat unexpectedly claims that the right to be forgotten finds some acceptance in the United States, at least to a larger extent than what has been traditionally acknowledged. See also Post (2018), pp. 1059–61. 5 See, e.g., Convention for the Protection of Human Rights and Fundamental Freedoms, art. 8, Nov. 4, 1950, 213 U.N.T.S. 222 [hereinafter Eur. Conv. on H.R.]; Wildemeersch, Belgium Report, p. 3; Kühling, Germany Report, p. 2; D’Antonio, Pollicino, Italy Report, p. 1–2; Şandru, Romania Report, p. 11. 6 See O’Callaghan, Ireland Report, p. 5. 7 Jacques, UK Report. 8 Article 20 of the Turkish Constitution. See Kapanci B, Paksoy S, Turkey Report, p. 2. 9 Heyman (2008), pp. 7–22. 10 McLean (2004). 11 Whitman (2004), p. 1180.
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private individuals. Indeed, because of what one calls the horizontal effect of constitutional rights, private life protected by the constitution also determines the limits of private life or speech, in private law in general and tort law in particular. As we will see, the constitution does indeed not only oblige the state to refrain from infringing on individuals’ rights. It also obliges the state to preclude private individuals and corporations from interfering with other private individuals’ rights. This so-called “positive obligation” of the state gives individuals public and private protection, and consequently shapes the law of tort in general, as well as the law dealing with the protection of personality and personal data. Moving away from its original raison d’être, the constitution is not just a tool of protection against state action jeopardizing individual’s liberties, but one that entitles actors to protection against other private individuals. This development reinforces what one sometimes refers to as the “constitutionalization of private law,”12 applying constitutional rights between individuals.13 By contrast, in the United States, a right to the respect of one’s private life finds no explicit direct protection in the U.S. Federal Constitution.14 Instead, at the federal level, the right to privacy developed as part of a larger movement finding unenumerated rights in the penumbras of the Bill of Rights.15 In practice, especially under the conservative lens of the current U.S. Supreme Court, the U.S. will, rarely if ever, favor an unenumerated right over an enumerated one— thereby relegating the right to privacy to a second tier right behind those explicitly enumerated in the Bill of Rights, such as the right to freedom of speech (First Amendment). Unless the speech in question implicates one of the few narrow First Amendment carveouts, the U.S. presumption in favor of free speech almost universally prevails.16 The lack of counterweight to this strong recognition of free speech at the constitutional level has had private law implications. In contrast to Warren and Brandeis’ scholar-
12
See for example, Brüggemeier et al. (2010), p. 31. On the effect of fundamental rights in private relations, see Clapham (2006). See also Alston (2005), p. 2. For a recent Swiss perspective, see Müller (2018). 14 See Werro (2009), pp. 285, 291, 299. 15 E.g., Griswold v. Connecticut, 381 U.S. 479, 484–85 (1965) (discussing constitutionally-derived “zones of privacy”); Mapp v. Ohio, 367 U.S. 643, 656 (1961) (holding that the Fourth Amendment creates a “right to privacy”). Note, though, that the right to privacy is found in the Constitutions of ten states: Alaska, Arizona, California, Florida, Hawaii, Illinois, Louisiana, Montana, South Carolina, Washington. National Conf. of State Legislatures, Privacy Protections in State Constitutions (May 5, 2017), http://www.ncsl.org/research/ telecommunications-and-information-technology/privacy-protectionsin-state-constitutions.aspx. 16 See Werro (2009), pp. 296, 300. 13
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ship,17 in large part inspired by European conceptions of privacy, the protection of privacy in the law of tort in the United States has predominantly yielded to free speech. Accordingly, other than in very specific situations,18 individuals have generally been precluded from successfully claiming infringements of their private life against private media reporting about them either with respect to their contemporary or past life.19
2.2
An Illustration
The European Court of Human Rights’ (“ECtHR”) ruling in von Hannover v. Germany illustrates the European approach to privacy in its relation to free speech in general.20 This case neatly demonstrates the European approach to balancing the right to privacy of an individual against the freedom of expression of another. The balance struck between these constitutional entitlements reflects the ways in which private law plays out between individuals—be it in the realm of general tort law or in the private right to protect one’s personality as measured against the right of the press to disseminate and sell information. The plaintiff in von Hannover v. Germany was the eldest daughter of Prince Rainier III of Monaco. She claimed that several media outlets had taken pictures of her in a number of places where the Princess asserted she had a legitimate expectation of privacy. She claimed that the media’s publication of candid photos of her and her family in these places violated her right to privacy under Article 8 of the European Convention on Human Rights.21 Relying on the Princess’ position as a semi-public figure, the German courts found her right to privacy inherently diminished by virtue of her social status, and authorized the publication of these pictures, based on the freedom of the press and of expression.22 Claiming that the German tribunals had failed to adequately protect her privacy rights against infringement by mass media, thereby violating their positive obligations under the constitution and the European Human Rights Convention, the Princess sued the state of Germany before the European Court of Human Rights.
17
Warren and Brandeis (1890), pp. 193–220. For a discussion of the convergence of EU and US privacy regulations, and more specifically the recent California Consumer Protection Act (CCPA, June 2019), see Büyüksagis (2019). 19 For a detailed account, see Page (2010), p. 38. 20 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21. 21 In relevant part, Article 8 of the European Convention on Human Rights provides that “Everyone has the right to respect for his private and family life, his home and his correspondence.” 213 U.N.T.S 221. 22 See von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21at ¶ ¶18–42. 18
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The ECtHR reversed the decision of the German courts. Despite the Princess’s status as a semi-public figure, the European Court “reiterate[d] that the concept of private life extends to aspects relating to personal identity such as a person’s name or a person’s picture.”23 The Court held that the concept of “private life. . .includes a person’s physical and psychological integrity,” thereby interpreting Article 8 “to ensure the development, without outside interference, of the personality of each individual in his relations with other human beings.”24 This, in turn, allowed the Court to conclude that there exists “a zone of interaction with others, even in a public context, which may fall within the scope of ‘private life.’”25 In so concluding, the Court was keen to recognize that the freedom of expression guaranteed by Article 10 of the Convention has to be balanced against the protection of private life.26 The Court considered the publication of the photos a violation of the Princess’ right to privacy because it “cannot be deemed to contribute to any debate of general interest to society despite the applicant being known to the public.”27 Note that because of its constitutional dimension, a mere tort conflict ended up involving a private person against the State. Again, in the European approach, constitutional rights not only protect the individual against State infringements. They also oblige the State to take adequate and positive measures to insure the protection of individuals against other individuals.28 Thus, the von Hannover decision effectively analyzes a claim of a violation of the right to privacy through the lens of the individual’s rights rather than limiting the right to privacy to its public law dimension.29 The ECtHR’s ruling in von Hannover is no outlier in the European approach to privacy rights. Many examples could be provided here. Much in line with the Court’s viewpoint in 23 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 at ¶ 50 (citations omitted). 24 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 at ¶ 50 (citations omitted). 25 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 at ¶ 50 (citations omitted). 26 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 at ¶ 58. 27 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 at ¶ 65 (citation omitted). 28 For a further discussion of these positive duties from a Swiss law perspective, see Müller (2018). 29 The von Hannover case was deliberately styled as a grievance against the Federal Republic of Germany. Per Articles 32, 34 of the Convention, individual applicants may only petition the European Court of Human Rights for grievances they claim to have suffered at the hands of a Party to the Convention (i.e. States). Applicants to the European Court of Human Rights may not style their claims in the form of private grievances against another individual. See Eur. Conv. on H.R., 213 U. N.T.S 221, art. 34. Thus, although the Hannover case was presented as a claim against the Federal Republic of Germany, the decision carries direct implications for private entitlements for all Parties to the European Convention of Human Rights.
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von Hannover, Romania, for example, recognized “broadcasting news or other written or audio-video materials [related to an individual’s] private life, without the consent of the interested person” as an “infringement. . .of. . .privacy.”30 Unsurprisingly, this approach has shaped the understanding and the limits of the right to be forgotten in ECtHR jurisprudence, as we will see below. Respect for one’s private life, autonomy, and dignity imposes limits on what one can publicize when the information has lost its newsworthiness due to the passage of time. Because the aforementioned values are the same, this approach holds essentially true when it comes to the processing of personal data and the right of individuals to control and even possibly erase them when they have lost their public or private relevance.31 The law dealing with data protection is a modern extension of the traditional law protecting the personality of individuals. In part because of the European Directive of 1995, this is true in all countries of the European Union.32 Indeed, all European Union countries follow the same approach. This approach has been reinforced under the General Data Protection Regulation (“GDPR”). Turkey goes a step further. Article 20 of its constitution, which provides for the right to private life, states that “everyone has the right to request the protection of his/her personal data. This right includes . . . requesting the deletion of his/her personal data.”33 Through very different mechanisms of adjudication, the United States’ approach yields an opposite outcome. Smith v. Daily Mail Publishing Company provides an illustration of the limits of tort law and the primacy of the constitutional right to free speech. In Smith a juvenile murder suspect brought suit against a local newspaper for publishing his full name in violation of a West Virginia statute that disallowed newspapers from publicly divulging the names of juvenile criminal defendants.34 The United States Supreme Court struck the West Virginia statute down, finding it contrary to the newspaper’s free speech. The Court considered that because the published information was “lawfully acquired and in the public interest,” any attempt to restrict
Şandru, Romania Report, p. 10. For a contrary view as to the divisibility of the right to be forgotten, see Post (2018), pp. 993–994, who argues that the traditional individual right to be forgotten protecting dignitary privacy is distinguishable from the RTBF, “the distinct bureaucratic version of the right to be forgotten created by the Directive to protect data privacy. . . .” 32 See D’Antonio, Pollicino, Italy Report at 2; O’Callaghan, Ireland Report, p. 9 (indicating that Article 17 of the GDPR improves adds to data protection currently afforded by national law by making data subjects’ consent the touchstone of the data’s use); Kühling, Germany Report, p. 7; Wildemeersch, Belgium Report, pp. 12–13. 33 Kapanci B, Paksoy S, Turkey Report, p. 2. 34 443 U.S. 308 (1977). 30 31
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the newspaper’s free speech “must be necessary to advance a state interest ‘of the highest order.’”35 Following Smith, further Supreme Court caselaw suggests that there is little to be done “to prevent the media from disseminating sensitive information so long as that information is legally obtained.”36 That reasoning sits in stark contrast to the ECtHR’s ruling in von Hannover, which held that “the decisive factor in balancing the protection of private life against freedom of expression should lie in the contribution that the published photos and articles make to a debate of general interest.”37 As we will see below, claims brought under the right to be forgotten have, unsurprisingly, found little success in the United States.
2.3
Variations in Latin America, South East Asia and the Far East
Approaches to the relationship between privacy and free speech in Latin America, Japan, and Taiwan appear to be both different from that in Europe and that in the United States. Examining them as variations on the dichotomous Euro-American approaches, I found that the balance between freedom of expression and a person’s right to private life shifts across Latin America and Asia in ways that do not resemble either approach.38
2.3.1 Latin America On the basis of the national reports, the scope of the right to privacy in Latin America does not appear to be quite as expansive as it is in Europe. For example, although Article 5 of the Brazilian Constitution codifies a right to privacy, Brazilian case law has favored the public dissemination of information even when an individual’s privacy is infringed. As the Brazilian rapporteur explains in Xuxa v. Google Brasil with respect to the right to be forgotten, a children’s television show host sued to remove search results connected with the terms “Xuxa pedophile.”39 The Brazilian Superior Court of Justice denied the action and said that the balance weighed in favor of the public’s right to information. Even more directly, in the Candelária’s Slaughter case, a Brazilian court distinguished between the right to be forgotten’s applicability in cases involving mass media versus its applicability within the context of an internet de-indexing request.40 35
Werro (2009), p. 295. Werro (2009), p. 296. 37 Von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21 ¶ 76. 38 See Alfonsín ML, Argentina Report, p. 3; Gonçalves R, Brazil Report, pp. 4–10. 39 Gonçalves R, Brazil Report, p. 8. 40 See Gonçalves R, Brazil Report, p. 5. The Brazilian high court seems to have implied that information erasure requests are more actionable in mass media cases than in internet de-indexation requests. 36
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Argentina, which constitutionally guarantees a right to privacy, also readily limits it when there is a conflict with the freedom of expression. In Rodriguez v. Google, a professional model sued Google for defamation because it rendered search results that would link users to pages containing sexual content that depicted her. In denying her claim, the Argentina Supreme Court held that Article 13 of the American Convention on Human Rights places a limit on the right to privacy.41 Article 13 consecrates the freedom of expression as free from “abuse of government or private controls. . . .”42 The Court anchored its decision in Law No. 26.032, which places digital search, reception, and dissemination of information within the purview of the constitutionally protected freedom of expression,43 establishing clear limits on the right to be forgotten in Argentina. These cases reflect a pattern of judicial reluctance to restrict mass publications based on the sole reason that the news published trends closer to sensationalism than pure informational facts. These cases exhibit an alignment with the U.S. approach.44 The Argentina rapporteur also speaks of an “Inter-American” approach to the balancing between the freedom of expression and personal data privacy. Such commonality is further substantiated by the Canadian rapporteur’s account of the strong protection granted to the right of expression in a unanimous Canadian Supreme Court decision against the Province of Alberta’s Information and Privacy Commissioner.45
2.3.2 Japan and Taiwan Japan does not explicitly proclaim the right to privacy in its Constitution. Japan’s courts have derived the right to privacy from the guarantee of the pursuit of happiness, found in Article 13 of Japan’s Constitution.46 Yet, the balancing of that right against the freedom of expression remains unsettled.47 In a defamation case, Japan’s Supreme Court has ruled that the “right to personality” is akin to a “property right,” in which the exclusivity of ownership is a defining feature.48 Nevertheless, the Court has also stated that restraints on “expressive conduct should be allowed ‘only and under strict and definite requirements’ as an ‘exception’ to the purpose of
41
Alfonsín ML, Argentina Report, p. 3. Organization of American States, Am. Conv. on Human Rights, Nov. 22, 1969, O.A.S.T.S. No. 36, 1144 U.N.T.S. 123. 43 See Alfonsín ML, Argentina Report, p. 3. 44 See Alfonsín ML, Argentina Report, p. 7 (noting “the differences between the European framework for the protection of personal data and the strong emphasis on the right to freedom of expression in the Inter-American system.”). 45 See Eltis, Trudel, Canada Report, pp. 5–7. 46 Yamaguchi, Japan Report, p. 7. 47 Yamaguchi, Japan Report, p. 7. 48 Yamaguchi, Japan Report, p. 8. 42
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Article 21 of the Constitution which guarantees the freedom of expression and prohibits censorship.”49 Taiwan recognizes a constitutional “right of reputation and privacy.”50 Interestingly, the Taiwanese rapporteur indicates conflicting case law on the balance of the freedom of expression and the right to privacy.51 In one case, Taiwan’s High Court refused to require that Yahoo Taiwan remove a purportedly defamatory article posted on a website Yahoo Taiwan ran.52 The High Court “fear[ed] that the freedom of speech [would] be overly suppressed if an ISP is to play the role of the speech police on the internet.”53 However, in another case, involving criminal slander and a de-indexation request, a district court ordered Google “to remove all search results from the domains of google.tw.”54 As previously mentioned, the contrast between these two jurisdictions’ balancing of the right to privacy vis-à-vis the freedom of expression spills over into these jurisdictions’ considerations relating specifically to the right to be forgotten. These points require further development in the next section.
3
The Right to Privacy’s Implications for the Right to Be Forgotten
Because the right to be forgotten derives from the precepts described with respect to privacy, it always found recognition as part of the right of privacy.55 As the Italian rapporteur aptly puts it: “[an] individual’s request to be forgotten. . . [is] an expression of the right to privacy.”56 The same is true for French law and Swiss law.57 This explains why the decisions of the ECtHR regarding the right to be forgotten are in line with the rational scheme used in the von Hannover case, even when dismissing a claim.58 This is also in part why 49
Yamaguchi, Japan Report, p. 8. Chiou, Taiwan Report, p. 5. 51 Chiou, Taiwan Report, p. 4. 52 Chiou, Taiwan Report, p. 4. 53 Chiou, Taiwan Report, p. 4. 54 Chiou, Taiwan Report, p. 4. 55 See Gajda (2018), pp. 203–204. Wildemeersch, Belgium Report, pp. 2–3 (“La seconde sous-catégorie du « droit à l’oubli » est une expression du droit à la vie privée. . .D’abord utilisé dans le cadre de la presse traditionnelle, il connaît de nouveaux développements à l’aire des archives numériques au travers du droit à l’anonymisation.”). 56 D’Antonio, Pollicino, Italy Report, p. 2. 57 For Swiss law, see Werro (2009). 58 See, e.g., ML and WW v. Germany, Nos. 60798/10 and 65599/10 (Eur. Ct. HR. 2018) (upholding German constitutional court’s decision to quash application by two convicted murderers for the anonymization of stories concerning their conviction, finding, under the Axel Springer criteria, that Article 10 rights outweighed Article 8 rights in this case; Satakunnan Markinaporssi Oy and Satamedia Oy v. Finland, Application no. 931/13, (Eur. Ct. HR. Jun. 27, 2017) (upholding Finish court’s 50
the right to be forgotten, as proclaimed by the CJEU in Google Spain,59 has been met with so much surprise in the United States and has found practically no recognition, if any.60 Some U.S. commentators, like Robert Post, challenged the CJEU decision, in part, because in their view, the court conflated data privacy—purporting to ensure fair information practices and the use of personal information—with dignitary privacy—purporting to restrict inappropriate communication that threatens to degrade, humiliate, or mortify individuals.61 Their surprise was amplified by the fact that the court held Google liable for the diffusion of information that had lost its newsworthiness, while allowing the original newspaper to maintain the information on its own website.62 A complete response to this critique is outside the scope of this report. However, one should note that the distinction made between the two types of privacy ignores the fact that data protection is derivative from the general right to privacy, and that its ultimate justification lies in the same foundational values.63 It is because the court found the information sensitive, harmful and outdated that it found it appropriate to have it removed from Google’s listings and the kind of public access thereby granted. In a persuasive way, it considered the power of a search engine to disseminate information to be incomparably larger than that of a single local news outlet, even when that local outlet has a website,64 and accepted that impact-oriented distinctions can be made between linked defendants. Under this rationale, it accepted that the nature
decision to enjoin the dissemination of tax information (lawfully received and published) via sms message); Furst-Pfeifer v. Austria, Application nos. 33677/10 and 52340/10 (Eur. Ct. HR May 17, 2017) (upholding 4-3 the Austrian courts’ judgment that Article 8 was not infringed by the publication of truthful medical information about a registered psychological expert for court proceedings in custody and contact-rights-related disputes on public care and child abuse); Axel Springer AG v. Germany, App. No. 39954/08 (Eur. Ct. H.R. Feb. 7, 2012) (striking down 12-5, following the application of a 6-part balancing test, as a violation of Article 10, German courts’ decision to fine and enjoin German media companies from publishing the details of a prominent television actor’s arrest for cocaine possession). Post (2018), pp. 1058–1059. 59 Case C-131/12, Google Spain SL v. Agencia Espanola de Proteccion de Datos, 2014 E.C.R. 317. 60 For more details, see Werro (2009); for suggestions as to how to accommodate the European right to be forgotten in the US environment, see Bennett (2012), p. 161. 61 Post (2018), pp. 1059–1061. 62 Post (2018), p. 1010. 63 The Directive itself mentions the protection of these values. It will not grant the right to erasure that could come into conflict with a public interest. Gratuitous harmful information is not protected. Art. 94 GDPR is a repeal of 95/46/EC. 64 Case C-131/12, Google Spain SL v. Agencia Espanola de Proteccion de Datos, 2014 E.C.R. 317 pt. 35, 80, 86.
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of Google’s communication could justify restrictions to its free speech that would not apply to other media outlets.65 Before we shed more light on the implication of privacy for the right to be forgotten, this section will explore competing background principles of liberty, dignity, and capitalism as animating factors beneath the application of the right to be forgotten (3.1), discuss the unavoidable conflict between free expression and privacy in the application of the right to be forgotten (3.2), and catalog the limits on the right to be forgotten (3.3).
3.1
Liberty, Dignity, Capitalism and the Right to Be Forgotten
Differing cultural and social values give rise to different laws that either promote or preclude the recognition of privacy.66 The same is true for the right to be forgotten. A number of considerations prove relevant to the right’s statutory or judicial recognition, including the relationship between individuals and the state in the relevant jurisdiction, that state’s protection of freedoms or rights that may directly compete with the right to be forgotten (i.e. freedom of expression)67 and localized public policy arguments. Because these considerations are also relevant to evaluating jurisdictions’ treatment of the right to privacy, one can generally use a jurisdiction’s treatment of the right to privacy as an indicator of the jurisdiction’s openness toward recognizing the right to be forgotten. Indeed, the right to be forgotten operates in the shadow of the right to privacy, and where this right yields to other constitutional entitlements, the same is true for the right to be forgotten.68 In his work on the right to be forgotten, Post states that “the difference between the right to be forgotten in the United States and the right to be forgotten in other legal systems is that American courts adopt an exceptionally strong presumption in favor of allowing publication.”69 Post’s statement surprises me. Indeed I do not know of any case in which an American court would have recognized a right to be forgotten 65
Case C-131/12, Google Spain SL v. Agencia Espanola de Proteccion de Datos, 2014 E.C.R. 317 pt. 17. 66 For a recent in-depth account on the cultural dimension of privacy, see Legrand (2017), p. 1 (involving a comparison between the work of James Gordley and that of James Whitman). For another fundamental analysis, see also, Mayer-Schönberger (2009), pp. 16–49, analyzing the importance of forgetting. 67 Consider, for example, that in 1985, the Italian Supreme Court established that the right to a personal identity constituted an interest in ensuring against that identity’s improper altering or prejudice. As the rapporteur explains, in a 2004 case, Italy’s data protection authority ordered the de-indexing of prejudicial search links—years before the Google Spain case. See D’Antonio, Pollicino, Italy Report, p. 2. 68 According to Post (2018), p. 1060. 69 Ibid.
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as it is understood in the European sense. The cases on which Post relies are cases in which the court’s reasoning for not allowing publication was based on the fact that the information in question resulted from offensive intrusions.70 Be that as it may, in the European context, it makes no difference to the application of the right to be forgotten whether a state expressly inscribes a right to privacy in its constitution or not. Under the European Convention on Human Rights, all European countries recognize a right to private life, which then determines the extent of their recognition of the right to be forgotten. While upholding this principle, recent decisions from the ECtHR have generally shown deference to national courts on the proper balancing of competing background rights in challenges implicating the right to be forgotten.71 As Post notes, this is because the “newsworthiness” standard at the fulcrum of the right to be forgotten’s application is itself a balancing test between the descriptive and normative meanings inherent in the term newsworthy.72 What end of this sliding scale courts generally hue to in cases concerning the right to be forgotten is often predicated on fundamental cultural understandings and the existence and relative weight of certain background rights (namely, the rights to privacy, dignity, expression, and information.) Such an approach is analogous to the application of other legal standards in the light of concrete circumstances, negligence being perhaps the most prominent one. Furthermore, it makes no difference in our evaluation whether a state’s laws formally recognize the right to be forgotten for the purpose of acknowledging the right’s actual existence. Swiss statutes, for instance, have traditionally not mentioned the right to be forgotten, but courts have never hesitated to affirm that right as a manifestation of the rights of the personality—these rights being themselves the reflection in private dealings of constitutional entitlements to the right of private life.73 The same can be said in the European Union, where the CJEU recognized the right to be forgotten in 2014, that is before the adoption of the GDPR and, arguably, independently from the Data Protection Directive of 1995. More important for the recognition of the right to be forgotten is whether other entitlements, such as free speech, have the tendency to trump the protection of privacy. An analysis through the lens of the freedom of speech, and the economic value it entails for the media, ultimately gives a 70
See Shulman v. Grp. W. Prods., Inc., 955 P.2d 469, 485 (Cal. 1998); Bollea v. Gawker, 913 F. Supp. 2d 1325 (M.D. Fla. 2012). 71 See, e.g., ML and WW v. Germany, App. Nos. 60798/10 and 65599/ 10 (Eur. Ct. HR. 2018); Satakunnan Markinaporssi Oy and Satamedia Oy v. Finland, App. no. 931/13, (Eur. Ct. HR. Jun. 27, 2017); FurstPfeifer v. Austria, App. nos. 33677/10 and 52340/10 (Eur. Ct. HR May 17, 2017); Axel Springer AG v. Germany, App. No. 39954/08 (Eur. Ct. H.R. Feb. 7, 2012). 72 Post (2018), pp. 1058–1059. 73 See Art. 28 CC.
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better picture of the practical applications of the right to be forgotten. Aside from its potential for the proper functioning of democracy, one can see free speech as a powerful engine for the privatization of profits. The expression “marketplace of ideas” to designate the virtues of this right is quite revealing in that respect. Free speech must therefore be put in parallel with free enterprise and capitalism, as well as the interests of media owners that may well trump those of the general population.74 In those countries with a different attachment to capitalism, the tolerance for imposing limits to free speech is greater. In this respect, Professor James Q. Whitman’s distinction between those countries favoring liberty, as in entrepreneurial U.S., over dignity, as in more statist Europe, is quite insightful.75 In parallel with the civil law-common law divide, a distinction can be made between those countries that favor free speech over the protection of private life and those countries that balance privacy against free speech. Under some vestigial influence of the British Empire, the laws in entrepreneurial former colonies would, no doubt, confirm this reality.
3.2
Dignity, Balancing Free Speech and the Right to Privacy, and the Recognition of the Right to Be Forgotten
As all other continental European countries, Switzerland constitutionalizes its right to privacy.76 The Swiss Civil Code of 1912 further provides a general clause providing for the protection of the personality in Article 28. Swiss courts had no trouble recognizing that this general norm implies a specific right to be forgotten, even before Swiss courts began to interpret private law in the light of constitutional entitlements.77 Based on the same principles as laws protecting individuals’ personality, the European Data Protection Directive of 1995 merely reinforced this approach.78 At the same time, it may also be that the rights to deletion, anonymization, or opposition given under this directive helped the national
74
See Stein (2010). See also Cohen (2017b), p. 56, who analyzes the unquestioning deference to the political power of money in free speech jurisprudence. 75 Whitman (2004), pp. 1151, 1171–1188, with interesting insights into the specificities of German and French capitalism. 76 On constitutionalization, see Brüggemeier et al. (2010), p. 31. See Art. 13 of the Swiss federal constitution, and its express reference to the “respect de la vie privée.” 77 See, e.g., Werro (2009), pp. 290–291. 78 This appears to be true also outside the EU; see Berk Kapanci, Sermin Paksoy, Turkey Report, pp. 2, 6.
European courts embrace the right to be forgotten beyond the scope of this directive.79 In 1992, Belgium, for example, passed a statute to ensure the protection of private personal data. In this statute, updated in 1998 to implement the 1995 directive, the rights to deletion, anonymization, and opposition were already partially recognized.80 Perhaps as a result, Belgian courts embraced a right to be forgotten more than two decades before the Google Spain case.81 In 2000, a Belgian court of first instance held against a local television station that replayed images of a theft and mentioned the then-accused thief’s name ten years after the theft had occurred.82 The court found little value in highlighting the thief’s involvement ten years later, and considered instead that the television station had caused him moral prejudice in calling for damages.83 In Germany, the “general right to privacy. . .[is] enshrined in art 2 § 1 read together with art 1 § 1 [of the] Basic Law (Grundgesetz).”84 Despite its derivation from the right to privacy, the right to be forgotten represents a distinct notion.85 While a “general right to privacy. . .[is] enshrined in art 2 § 1 read together with art 1 §1 Basic Law (Grundgesetz)” . . .“no specific right to be forgotten [exists].”86 Like in other countries within the European Union, however, the German Federal Data Protection Act (Bundesdatenschutzgesetz)—implementing the European Data Protection Directive of 199587—provided a framework to solicit deletion by search engines where they “transmit content from third parties that infringes personality rights.”88 In substance, the right to deletion in Germany amounts to a manifestation of the right to be forgotten, even if not labeled as such. A similar approach appears to exist under Irish law. In identifying a source of law for the right to be forgotten, the Irish rapporteur explains: “We might say that a right to be 79
Directive 95/46/EC Art. 12, 14. Wildemeersch, Belgium Report, p. 2. In 1997, Belgium’s Privacy Commission formally recommended the anonymization of personal details in judicial decisions. 81 See Wildemeersch, Belgium Report, p. 11. Nevertheless, the rapporteur notes that the Belgian reaction to the ECJ’s formal declaration of the right to be forgotten was one of surprise. 82 Wildemeersch, Belgium Report, p. 11. 83 Wildemeersch, Belgium Report, p. 11. 84 Kühling, Germany Report, p. 2. 85 Note that although we recognize a practical difference between the right to be forgotten and the right to privacy, we do not wish to assert that the right to be forgotten represents a self-substantiating right independent of the right to privacy. We maintain that the right to be forgotten is a derivative of the right to privacy. For a parallel discussion arguing against the recognition of data protection as its own right, see Poscher (2017), p. 129. 86 Kühling, Germany Report, pp. 1–2. 87 Directive 95/46/EC. 88 Kühling, Germany Report, p. 1. 80
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forgotten already exists in Irish law if we understand it as an alternative label for the right to erasure under s 6(1) DP Act, which implements Article 12(b) DPD.”89 Similarly, Italy guarantees a right to personality in Article 2 of its constitution.90 Italian courts cite the right to privacy and the right to personality as their basis for the right to be forgotten.91 Italy formally introduced the right to be forgotten into its laws over a decade before the Google Spain case when it passed legislation to implement the European Data Protection Directive of 1995. In 2003, Italy adopted a Privacy Code, under which individuals were granted the rights to erase, update, and contextualize their data.92 Likewise, Turkey explicitly codified the right to privacy in Article 20 of its constitution.93 In 2016, the Turkish Constitutional Court formally recognized the right to be forgotten as derivative of personality rights, while acknowledging that the right to be forgotten was nowhere explicitly codified in national law.94 Similarly, Argentina, which constitutionalizes the right to privacy, has created the novel writ of habeas data, which allows parties to request judicial intervention specifically aimed at the removal of certain information on the internet.95
3.3
Liberty and Free Speech As Limits to the Recognition of the Right to Be Forgotten
One cannot say that in countries that give precedence to free speech, there is no recognition of privacy. However, in such countries, recognition remains limited to scattered alcoves of actionable legal intervention. Privacy there typically does not enjoy an explicit constitutional recognition, and it does not amount to an overall or overarching entitlement. It is also in these countries that one can see some reluctance in accepting or acknowledging the existence of a right to be forgotten. In the United States, the European Court of Justice’s recognition of the right to be forgotten in Google Spain was met with surprise, if not derision, and is overall dismissed as inapplicable.96 The United Kingdom traditionally similarly favored free speech, and, at the same time, refused the implications of the protection of private life. As the rapporteur explains, the 89
O’Callaghan, Ireland Report, p. 8. D’Antonio, Pollicino, Italy Report, p. 1. 91 D’Antonio, Pollicino, Italy Report, p. 1. 92 D’Antonio, Pollicino, Italy Report, p. 2. 93 Kapanci B, Paksoy S, Turkey Report, p. 2. 94 Kapanci B, Paksoy S, Turkey Report, p. 6. 95 See Alfonsín ML, Argentina Report, p. 1, 4. 96 See, e.g., Bhardwaj (Feb. 28, 2018, 12:06 PM), http://www. businessinsider.com/google-right-to-be-forgotten-law-in-america2018-2; see generally Gajda (2018), p. 93; Post (2018), p. 67. 90
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United Kingdom legislature and judiciary were “rather reluctant to recognise a right to be forgotten, preferring to advance freedom of expression.”97 Nevertheless, after the European Court of Justice’s decision in the Google Spain case, United Kingdom “courts seem more receptive to privacy rights concerns.”98 Individuals have also acquired some degree of control over their information under the Data Privacy Protection Act of 1998 (successor to the Data Privacy Protection Act of 1984, repealed in 2000).99 However, that law only applies to “processing that causes unwarranted and substantial damage or distress.”100 As a mixed jurisdiction, Canada provides a less unilateral approach than the one traditionally adopted in these common law jurisdictions. As the Canadian rapporteur explains, the right to be forgotten’s earliest appearances date to 1889. At that time, the Superior Court of Québec ruled against a newspaper for publishing certain “accusations depuis longtemps oubliées.”101 More recently, in Ouellet c. Pigeon, a man sued a newspaper for publishing an article describing a crime committed by his late wife ten years prior.102 Reflecting the ECtHR’s approach, the Court of Québec ruled against the newspaper on the grounds that the article was better characterized as sensationalism than strict reporting of fact.103 At the same time, in a 2013 decision, the Supreme Court of Canada unanimously struck down a provincial data protection law to the extent that it prohibited videotaping or photographing individuals in public spaces without their consent.104 In a more one-sided way, Singapore’s Parliament has rejected the notion that the right to privacy is part of domestic law or its national Constitution.105 Further, and arguably as a consequence of this rejection, there is no case law suggesting the existence of the right to be forgotten in Singapore law.106 Yet, while Singapore’s Personal Data Protection Act (2012) allows removal only of confidential identifying information, it does not apply to the data collected by the public sector.107 Further, the Singapore rapporteur further expresses doubt that
97
See Jacques, United Kingdom Report, p. 12. See Jacques, United Kingdom Report, p. 11. 99 Jacques, United Kingdom Report, p. 1. 100 Jacques, United Kingdom Report, p. 1. 101 Eltis, Trudel, Canada Report, p. 3. 102 Eltis, Trudel, Canada Report, p. 4. 103 Eltis, Trudel, Canada Report, p 4. Note that Oullet c. Pigeon was heard in 1997 — prior to the von Hannover case. But compare with the Court’s reasoning in Axel Springer AG v. Germany, App. No. 39954/08 (Eur. Ct. H.R. Feb. 7, 2012). 104 See Eltis, Trudel, Canada Report, p. 6. 105 De Visser, Singapore Draft Report, p. 6. (on file with the author of the general report). 106 De Visser, Singapore Draft Report, p. 2. 107 De Visser, Singapore Draft Report, p. 4. 98
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the present law could be used against search engine operators that have a presence in Singapore.108 As one can expect, public policy is a driving factor behind Singapore’s approach to the right to privacy. As the rapporteur explains, The government is favourably disposed towards a growing role for technology in daily life. . . . In a similar vein, the government has always been keen to cultivate a pro-business environment and the antagonistic attitude towards in Google v González is strong in the jurisdiction.109 In fact, Singapore’s Personal Data Privacy Commission encourages businesses to use consumer data for purposes of business expansion.110 As noted above, Singapore’s preference, like that expressed by U.S. courts, for strong entrepreneurial capitalism causes a less hospitable environment for the recognition of the right to be forgotten.
4
The Core Justifications of the Right to Be Forgotten: Self-realization, Dignity, Personal Freedom, and Control over Information About Oneself
As previously mentioned, the right to be forgotten can no longer be seen merely as a right to delete information or to preclude its diffusion, as it was originally the case. In a rapidly advancing technological world, one must understand the right in a more multifaceted way. At its core, the right to be forgotten expands and defines itself as an entitlement for individuals to better control their personal data. Just as for the original pre-Internet right to be forgotten, this entitlement finds its justification in the recognition of the right to personal freedom, dignity, and self-realization. With privacy as its justification, the right to be forgotten manifests itself further as a right to control personal information and to take back or erase information even after having communicated it. As Whitman frames it, the right to privacy appears as a right to informational self-determination—the right to control the sorts of information disclosed about oneself.111 This approach certainly does not mean that individuals can retain control of information that is in the public interest.112 In order to shed some light on the analysis, this section will open with some general remarks (4.1). It will then explicate the polygonal nature of the right to be forgotten (4.2), and look at ways to expand future conceptions of the right to be forgotten (4.3). 108
De Visser, Singapore Draft Report, pp. 5–6. De Visser, Singapore Draft Report, p. 9. 110 De Visser, Singapore Draft Report, p. 9. 111 Whitman (2004), p. 1161 (referencing German literature). 112 As EU law shows, a right to be forgotten cannot trump the public interest in receiving information that contains historic value. On this question, amongst others, see Vivian Reding, as cited in Post, in footnote 314; for a critique of the way the CJEU handled the question, see Post (2018), p. 1051. 109
4.1
General Remarks
From the foregoing survey, we see that a link exists between the right to be forgotten and a jurisdiction’s balancing of the freedom of expression against the protection of private life. Where freedom of expression prevails over the protection of private life, the right to be forgotten tends to enjoy extremely limited or no protection. This finding parallels those of Whitman, whose work links the preference given to liberty over dignity with that given to free enterprise over a certain belief in the legitimacy of state control.113 There can be no doubt that free speech is the constitutional currency of the United States’ “marketplace of ideas.” Thus, it will come as no surprise that freedom of speech carries a special weight in discounting the strength of the right to privacy and the right to be forgotten in that country. Yet, one can only hope that the development of technology and the omnipresent undisclosed surveillance of consumers and citizens will lead to some changes.114 While one might be tempted to throw in the towel and “forget about the right to be forgotten,” as an American colleague once suggested, one might also envision some mobilization following a continuing emerging consciousness around a cascading Orwellian threat. As noted above, neither the right to free speech, nor the right to privacy, nor the right to be forgotten are advents of the modern world. The intrinsic connection and balance between these entitlements has been tested for centuries. Indeed, there were cases as early as the 1800s requesting the erasure of publicly available information.115 The advent of the Internet, allowing for instant widespread communication, alongside increased digital storage capacity (i.e. information clouds) has, however, increased the frequency of conversations, images, and representations that an individual would want to disassociate him or herself from. Traditionally, the four walls of one’s home served as the sole demarcation of the bounds of acceptable outsiders and governmental probing. Obviously, the digital world calls the sufficiency of this physical border into question. With the Internet, private life has become threatened as it never was before. One’s home no longer delineates the boundaries necessary for full protection from invasions of privacy. At the same time, we easily fathom the great number of people that underestimate the utility of their computers and personal devices as prime conduits of unwelcomed personal data appropriation and spying. As technology advances, questions regarding ownership and use of personal data abound. In this light, the advent of technology may be thought of as having a catalytic role in causing states to formally reconsider the object of property 113
Whitman (2004), pp. 1186, 1210. See Cohen (2017), pp. 230–231. 115 See Eltis, Trudel, Canada Report, p 3; see generally Gajda (2018). 114
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and to recognize, as part of one’s personality, the right to own and keep control over one’s personal information. Therefore, it is possible that societies will grow to find that sharing personal information should not be seen as an act of alienation or renouncement, and that individuals who give up such information keep the right to take it back. In this context, one would have to revisit the notion that social media companies are at liberty to use and sell information entrusted to them. As a means of protecting modern private life, the adoption of the GDPR in 2018 in the European Union can be seen as an attempt to recognize that individuals’ control over personal information is paramount.116 In this vein, and from its core substance, the right to be forgotten can be seen as the individual’s ability to control the public availability of information that relates to him or herself.117 Furthermore, the effort to recapture control over one’s personal data cannot be conceived of as limited to one particular course of action (e.g. the right to erasure.) As the Belgian rapporteur puts it, the right to be forgotten must be understood as a multifaceted entitlement: “le droit à l’oubli se décline au pluriel; c’est un droit ‘multi-facettes’. Les différents droits en cause poursuivent néanmoins le même objectif: permettre aux personnes physiques de (re)prendre et conserver le contrôle sur des informations privées et des données personnelles.”118 At the same time, this controlbased right does not rest on roots distinct from those supporting the traditional right. As mentioned above, this report does not adhere to the distinctions made by Post between control-based and dignitarian privacy.119 Data protection legislation’s regulation of fair practices with respect to information and its removal of a harm requirement for standing does not sever the essential antecedent tether between a consumer’s right to control and erase personal information and his or her right to exist as a free and dignified person. While data privacy regulation’s stated aims may appear distinctive, it relies on the same fundamental justification: the protection of human dignity and self-determination. Consequently, and unlike Post, I do not think that the CJEU conflated the traditional right to be forgotten with a “bureaucratic” RTBF that applies to the protection of data within the meaning of Art. 8 of the Charter of Fundamental Rights and 116
Art. 17 GDPR (“ Right to Erasure”). Cf. Wildemeersch, Belgium Report, p. 2 (“L’article 8 de la Charte des droits fondamentaux de l’Union européenne a même fait du droit à la protection des données à caractère personnel un droit autonome, toute personne ayant, selon l’article 8, paragraphe 2 de la Charte, « le droit d’accéder aux données collectées la concernant et d’en obtenir la rectification »”); D’Antonio, Pollicino, Italy Report, p. 6 (right to contextualize); for a convincing comparison between the European and the American approaches with respect to control over oneself, see Whitman (2004), p. 1161, n. 44, 1169, n. 76, 1182, nn. 127-29. 118 Wildemeersch, Belgium Report, p. 1. 119 See Post (2018), p. 985. 117
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data protection legislation.120 Google Spain focused both on the processing of personal data collected by the search engine and on the constraints that Google must respect when engaging in public communication, and to that effect linked them.
4.2
The Multiple Facets of the Right to Be Forgotten
If dignity, self-realization, freedom, and control over one’s personal information determine the right to be forgotten’s central meaning, it will come as no surprise that the right to be forgotten manifests itself in more than one way. Various reports show that conclusion across regions and continents. For example, Argentina has created the writ of habeas data, which, as noted above, allows individuals to petition courts to intervene in data processors’ handling of their information.121 Similar judicial recourse exists in Turkey.122 Laws in Brazil123 and Taiwan124 allow for similar requests. In Italy and Denmark, individuals have the right to contextualize or update their publicly-available personal information.125 Denmark, Canada and Japan, allow individuals to require the “de-indexation” of their information from search engine results, at least when the information is illegal.126 Regardless of legality, individuals may, as is pointed out in the Finish report, “prohibit processing of [their] personal data ‘for purposes of direct advertising, distance selling, other direct marketing, market research, opinion polls, public registers or genealogical research.’”127 That statement is true across the board in the European Union. 120
Post (2018), p. 985. See Alfonsín ML, Argentina Report, pp. 4–5 (discussion of habeas data). 122 Kapanci B, Paksoy S, Turkey Report, p. 1 (“Personal data which are processed in accordance with this law or relevant other laws shall be deleted, destroyed or anonymized either ex officio or upon request” with the right to be forgotten receiving constitutional backing recognized by the Constitutional Court in 2016). 123 Gonçalves R, Brazil Report, p. 3 (Law No. 12965 of April 23, 2014). 124 Chiou, Taiwan Report, p 1 (conventional right to request deletion of personal data stated in Personal Information Protection Act at article 11). 125 See D’Antonio, Pollicino, Italy Report, p. 6 (right to contextualize); Motzfeldt, Naesborg-Andersen, Denmark Report at 3 (data must be up to date). 126 See Court of Justice of the European Union, Judgment of 13 May 2014, Google Spain and Google, C-131/12, EU:C:2014:317; Eltis, Trudel, Canada Report, p. 5 (“Par contre, lorsqu’il est démontré que le propos contrevient à une loi ou viole un droit fondamental, les tribunaux canadiens n’ont aucune hésitation à ordonner le déréférencement.”); Motzfeldt, Naesborg-Andersen, Denmark Report, p. 2 (Processing of Personal Data Act of 2000 allowing right to demand in a reduction in searchability); Yamaguchi, Japan Report at 12 (Nov. 6, 2009 Tokyo Dist. Ct. case requiring Google to delist 122 URLs because they infringed on the right to personality of the petitioner). 127 Alén-Savikko, Finland Report, p. 5. 121
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The same standard is now reinforced through the European GDPR. This regulation explicitly establishes both a “right to erasure,”128 referred to as the “right to be forgotten” (in parantheses in the title of the law), and a “right to rectification.”129 According to the GDPR, the right to erasure entails the ability of a data subject “to obtain from the [data] controller the erasure of personal data concerning him or her without undue delay,”130 as conditioned upon a number of factors, such as the data’s irrelevance, the data subject’s withdrawn consent regarding the use of data, and the unlawful processing of the data.131 On the other hand, the “right to rectification” entails a person’s ability “to obtain from the [data] controller without undue delay the rectification of inaccurate personal data concerning him or her.”132 This “right to rectification,” however, is not preconditioned. It is a guaranteed right under the law. Despite the fact that the GDPR labels them distinctly, both of these rights fall within the penumbra of the right to be forgotten, and, in some respects, surpass it.
4.3
Expanding the Scope of the Original Right to Be Forgotten
From the foregoing analysis, we can conceive of the right to be forgotten as manifold.133 Founded on the traditional dignity justifications listed above, the right’s scope has expanded to offer individuals a combination of different entitlements allowing them to control or regain control over information that they offered to others and is now publicly available (i.e. de-indexation, erasure, or contextualization, etc.) Because the right to be forgotten relates to an individual’s ability to control the presence of publicly available information about him or herself, a number of socio-political considerations come into play, and the degree to which the right will manifest itself in national laws depends on them.
5
The Implications of the Right to Control Information About Oneself
If one accepts that, as an expression of one’s dignity and privacy, a person’s control of information touching upon his or her personality is the core feature of the right to be 128 Council Regulation 2016/679, art. 17, 2016 O.J. (L 119) 1 (EU) [hereinafter GDPR]. 129 GDPR, art. 16. 130 GDPR, art. 17(1). 131 See GDPR, art. 17(1)(a). 132 GDPR, art. 16. 133 See Wildemeersch, Belgium Report, p. 1, stating that the right to be forgotten “regroupe en réalité plusieurs droits qui reposent sur des fondements législatifs différents.”
forgotten, where countervailing interests do not require disclosure, it is useful to imagine how this right could gain some recognition where it had none and increased recognition where it already existed. The next section will explore how individuals might be empowered to exercise control (5.1), and what obstacles they face (5.2). It will also examine the role of search engines (5.3), and briefly tackle the question of adjudication (5.4). To that end, this section will conclude with the question of search engine liability (5.5).
5.1
Individuals’ Ability to Control Their Personal Data
Individual control of personal information seems to be finding its way to statutory protection, in some places more than others. At the international level, a certain recognition has seen the light of day. The relevant source of law on the subject is the International Covenant on Civil and Political Rights (“ICCPR”). The ICCPR currently counts 170 party states and six signatories. In 2013, the United Nations General Assembly passed a Resolution entitled “The right to privacy in the digital age,” where it “reaffirm[ed] the right to privacy” as recognized in international law under Article 17 of the ICCPR.134 Article 17(1) of the ICCPR guarantees that “[n]o one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence. . . .”135 In that vein, the following activities may constitute an interference with the right to privacy: intercepting, collecting (especially bulk-collection, that is collection of big data without any suspicion against the person whose data are collected), storing, and the further distribution of communications data.136 Notably, though, what Article 17(1) outlaws is unlawful interference: the very same act of unlawful interference may be rendered lawful by subject individual consent.137 Consent is the epitomical acknowledgement of control.138 The role of individual control in matters of privacy—and by consequence, as related to the right to be forgotten—cannot be understated.139 Nevertheless, the amount of control states
134
G.A. Res. 68/167 at 2 (Dec. 18, 2013). International Covenant on Civil and Political Rights, art. 17(1), Dec. 16, 1966, 999 U.N.T.S. 171. 136 See Peters (2017), pp. 145, 149. 137 See generally Peters (2017), pp. 145, 149. 138 For a recent critique of consent in the digital environment, see Richards and Hartzog (2019), p. 96. 139 See also OECD Guidelines Governing the Protection of Privacy and Transborder Flows of Personal Data ¶ 10 (“Personal data should not be disclosed, made available or otherwise used for purposes other than those specified in accordance with Paragraph 9 except: a) with the consent of the data subject. . . .”). 135
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afford data subjects varies dramatically state-to-state.140 Certain states acknowledge that consent is not irrevocable, and certainly not where it has been given mechanically. Indeed, more often than not, consent does not rest on a real choice. One is no longer at liberty to have an email address or not, and the kind of mouth click one engages in when “consenting” certainly does not add up to historical conceptions of control and freedom.141 As already shown above, the 1995 Data Protection Directive in Europe gave some remedies to Internet users. Individuals have direct recourse against data controllers who use their information in a manner beyond that which they assented to, and may demand an explanation from the data administrator or demand that the administrator block, correct, contextualize, or delete the data.142 It will come as no surprise that the GDPR adds some focus to the role of data processers in the handling of personal information. As the German rapporteur explains: “[t]he processing of data from third parties is only legal within the meaning of Art. 6 [of the] GDPR if there is a legitimate interest in the processing of the data when the respective interests and affected fundamental rights are balanced.”143 This is also true outside the European Union. Taiwan provides a right to request deletion of personal data where a data controller utilizes information for no valid purpose.144 Again, in Argentina, the writ of habeas data allows data subjects to collect data about themselves from private and public databases, and request, where certain requirements are met, the suppression, rectification, sealing, or updating of data.145
5.2
140 A deeper analysis on the extent to which the ICCPR and similar international instruments have affected conceptions of the right to be forgotten falls beyond the scope of this report, which is styled as a survey of the current status of the right to be forgotten. 141 Whitman (2004), pp. 1193–1194 makes an interesting point when he remarks that “consumers need more than cheap goods and services, just as they need more than easy credit. They need dignity. If your consumer profile is floating around somewhere in cyberspace, you are not in control of your image. . . . This sort of thinking has far less resonance in America than it does in Germany and France.” But, of course, this is because we have so much less of the continental sense that “a just world [] is a world in which everybody’s respectability is carefully protected.” 142 See Hurdík, Czech Republic Report, p 4; the Alén-Savikko, Finland Report, p. 5, explains that individuals may prohibit processing of their personal data “for purposes of direct advertising, distance selling, other direct marketing, market research, opinion polls, public registers or genealogical research,” See also Kühling, Germany Report at 13; Jacques, United Kingdom Report, pp. 7–8. 143 Kühling, Germany Report, p. 13. 144 Yet note that it is not clear under Taiwanese law that withdrawal of consent guarantees a right to erasure of personal data—the law merely requires that the data processor cease processing the data. See Chiou, Taiwan Report, p. 1 (discussing Article 11 of the Personal Information Protection Act). 145 Alfonsín ML, Argentina Report, pp. 1, 4.
146
Obstacles to Individuals’ Control
However, questions remain on the effectiveness of individuals’ control under these laws. Directly preceding implementation of the GDPR, Facebook relocated 1.5 billion user accounts from EU servers to non-EU servers. The move shows the limits of the GDPR’s protection. Commentators’ criticism and concern are unlikely to change that reality.146 At the same time, whatever Facebook’s motivations may have been, it is undeniable that Europeans have persevered in enforcing their data privacy rights. Between the European Court of Justice’s ruling in the Google Spain case in 2014 and 2017, Google received requests to de-index over 2.3 million URLs from European users.147 As individuals grow increasingly cautious about their online data presence, the question as to how far search engines must go in de-indexing valid requests under the Court’s ruling has surged. Because search engines like Google operate through country-code top level domains (“ccTLDs”) in Europe,148 the question has become: is an individual in France, validly entitled to the de-indexing of his or her personal data from search engine results, only entitled to have that data de-indexed under the search engine’s French ccTLD (i.e. google.fr), or does that right to de-indexation extend beyond the French ccTLD?149 France’s highest administrative law tribunal, the Conseil d’État, lodged this very question before the European Court of Justice in August of 2017,150 and the ECJ issued its judgement on
See Hern (Apr. 19, 2018, 7:03 AM), https://www.theguardian.com/ technology/2018/apr/19/facebook-moves-15bn-users-out-of-reach-ofnew-european-privacy-law?CMP¼share_btn_link. 147 Bertram et al. (2018), p. 17, available at: https://www.elie.net/static/ files/three-years-of-the-right-to-be-forgotten/three-years-of-the-right-tobe-forgotten-paper.pdf. 148 For example: google.fr, google.es, google.it, etc. 149 In other words, to include websites such as google.es, google.it, or even the U.S. google.com. 150 The case was lodged before the European Court of Justice after the French Data Protection Authority ordered Google to comply with universal delisting of certain URLs. See Request for a preliminary ruling from the Conseil d’État (France) lodged on 21 August 2017—Google Inc. v Commission nationale de l’informatique et des libertés (CNIL), Case C-507/17. Question referred number 1: “Must the ‘right to de-referencing’, as established by the Court of Justice of the European Union in its judgment of 13 May 2014 on the basis of the provisions of Articles 12(b) and 14(a) of Directive [95/46/EC] of 24 October 1995, be interpreted as meaning that a search engine operator is required, when granting a request for de-referencing, to deploy the de-referencing to all of the domain names used by its search engine so that the links at issue no longer appear, irrespective of the place from where the search initiated on the basis of the requester’s name is conducted, and even if it is conducted from a place outside the territorial scope of Directive [95/46/EC] of 24 October 1995?”
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September 24, 2019.151 However, the experience of the Canadian Supreme Court shows that concepts of sovereignty and extraterritoriality are not easily applied in the digital realm. In an order noting that the Internet “n’a pas de frontières—son habitat naturel est mondial,”152 the Canadian Supreme Court ordered Google to globally delist certain search results related to a Canadian company’s trade secrets. In the United States, Google turned to an American federal district court for injunctive relief against the Canadian judgment’s effect outside Canadian borders and Google’s Canadian ccTLD (Google.ca), citing the presumption in favor of freedom of expression under American law.153 The federal district court granted Google’s request, undercutting the Canadian Supreme Court’s purportedly global effect.154 The effective overruling of Canada’s highest court by a court of first instance in the United States points to a gaping hole in the law of cross-border digital data privacy, which, until remediated, will continue to frustrate transnational advances in the right to be forgotten. The question of courts’ ability to require extraterritorial de-indexing has also been entertained in Taiwan, whose tribunals have shied away from extraterritorial rulings.155
5.3
The Role of Search Engines/Data Processors
The question of tribunals’ authority to order extraterritorial de-indexation is only one of many that call for answers. Additional concerns regarding the roles search engines and data processors should play with respect to individuals’ control over their own information abound. One of them is the extent to which private actors such as Google should be in charge of deciding whether an individual has a right to be forgotten or not. Another question is that of the sufficiency of these private actors’ protocols for evaluating requests under the right to be forgotten, and the extent to which these 151
See Judgment of the Court (Grand Chamber) of 24 September 2019 Google LLC, successor in law to Google Inc. v Commission nationale de l’informatique et des libertés (CNIL) Case C-507/17. At this late stage, the author regrettably cannot address the outcome of this case. The decision was rendered after the manuscript was submitted to the publisher, and the author regrets the outcome of the case, but has no space to fully comment on it further. For a similar view, see Marc Rotenberg, Google’s Position Makes no Sense: Opposing view, at https://www.usatoday.com/story/opinion/2015/01/22/. http://curia. europa.eu/juris/document/document.jsf; jsessionid¼D3B6FA325F40E19000A709ED4DF087BB?text¼& docid¼218105&pageIndex¼0&doclang¼EN&mode¼lst&dir¼& occ¼first&part¼1&cid¼3535949. 152 Eltis, Trudel, Canada Report, p. 18. 153 Eltis, Trudel, Canada Report, pp. 18–19. 154 Eltis, Trudel, Canada Report, p. 19. 155 See Chiou, Taiwan Report, pp. 2–3.
protocols are standardized, objective, and consistently applied.156 These questions must also be seen in the light of the financial burdens that solving them will impose on the search engine operators and society. The answer to at least some of these questions indicates some reluctance to grant Google decision-maker status with respect to individuals’ right to be forgotten, as manifested through petitions for de-indexing search results.157 For example, in Rodriguez v. Google, an Argentinian court held that determinations bearing on individuals’ right to privacy are a state function that should not be left to private parties.158 Academic commentators have also articulated discomfort with Google’s role post-Google Spain. Post indicates that Google Spain implemented a “structure of enforcement [of the right to be forgotten that] is deeply flawed because it leaves important decisions about freedom of expression in the hands of an unaccountable private company with strong financial incentives to err on the side of censorship.”159 Indeed, in the Google Spain case, the Advocate-General cautioned the Court against leaving a balancing act between personal privacy and the public’s access to information in the hands of search engine providers, noting that “internet search engine service providers should not be saddled with such an obligation. . . .”160 However, Post’s general view of the RTBF, based on Google Spain, does not consider other ECJ cases that address similar topics- notably the case of Salvatore Manni.161 In Manni, the court explicitly considered a person’s individual right in tandem with a public interest to access to data regarding business organizations.162 The ECJ concluded 156 Note, although Google does admittedly publish transparency reports with respect to its de-indexation requests, it is the Authors’ opinion and that of many of the rapporteurs that more work to increase transparency may be done. See, e.g., Alén-Savikko, Finland Report, p. 16; O’Callaghan, Ireland Report, p. 16; Kapanci B, Paksoy S, Turkey Report, p. 9 (calling for transparency at the level of individual applications). 157 Notice and take down is defined as a process operated by online hosts in response to court orders or allegations that content is illegal. Content is removed by the host following notice. Notice and take down is widely operated in relation to copyright infringement, as well as for libel and other illegal content. Under U.S. and European law, this process finds its rules in the Digital Millennium Copyright Act 1998 and the Electronic Commerce Directive 2000. 158 Marcelo Lopez Alfonsín, Argentina Report, pp. 3–4. 159 Post (2018), p. 1067. The Canadian rapporteur also expresses some doubt as to allowing private third parties this role, see Eltis, Trudel, Canada Report, p. 11. 160 Case C-131/12, Google Spain SL v. Agencia Española de Protección de Datos, 2014 EUR-Lex Celex No. 62012CJ0131 (May 13, 2014), Opinion of Advocate General Jääskinen, Celex No. 612CC0131 at ¶ ¶ 133–34 (June 25, 2013). 161 Case C-398/15 Camera di Commercio, Industria, Artigianato e Agricoltura di Lecce v Salvatore Manni ¶ 24 (March 9, 2017). 162 For a comparison of the two cases, see Büyüksagis (2019), pp. 28–33.
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that only in exceptional circumstances, when the data subject proves the existence of overriding and legitimate reasons to withhold disclosure, third parties might not be granted access to the data subject’s personal information found in the company register.163 Google Spain falls under the umbrella of “exceptional circumstances” because Google represents an internet service provider and the information was no longer reflective of the reality, and the “company was dissolved for a sufficiently long period of time.”164 However, in Manni, the public did have an interest in accessing the plaintiff’s business history, and the platform on which they could seek said access’s was that of a public record as opposed to an extraneous search engine. This difference between Google Spain and Manni shows that the ECJ, contrary to Post’s assessment, does consider a public interest and a freedom of information through the lens of a balancing test as opposed to a mechanical process.
5.4
Adjudication of Control
As formulated, the critique above (5.3) falls short of full persuasion. As a matter of law, individuals who wish to challenge a determination made by Google concerning the appearance of their personal data in search results are not deprived of judicial recourse. Google’s internal mechanisms “do not hinder the possibility for individuals to rely on national courts or the [corresponding data protection authority] in order to obtain a delisting order.”165 This very point was recently illustrated in the United Kingdom. In NT1 and NT2 v. Google LLC,166 Google denied a businessman’s petition to de-list search results related to his previous criminal convictions. The man sued Google and argued that the links were no longer relevant. The court agreed with the businessman and ordered Google to de-list them. The same also recently occurred in France when Google refused to de-list links pertaining to a former chief financial officer’s civil penalties in relation to insider trading.167 Likewise, Google rapidly complied with an Italian court’s order to de-list a number of links to pornographic videos of an Italian woman who committed suicide in connection with those videos’ unintended mass dissemination.168 The same is true when it comes to giving individuals the possibility to challenge Google’s decision to delist. Those 163
Manni. ¶ 64. Id. 165 D’Antonio, Pollicino, Italy Report, p. 11. 166 [2018] EWHC 799 (QB). 167 Browning and Sebag (Apr. 13, 2018, 9:49 AM), https://www. bloomberg.com/news/articles/2018-04-13/google-told-to-remove-linksto-businessman-s-criminal-conviction-jfy0dqv4. 168 Warren (May 16, 2018), https://www.theatlantic.com/technology/ archive/2018/05/tiziana-cantone-suicide-right-to-be-forgotten/559289/. 164
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individuals could always take court action to ask the reinstatement of the delisted information, by having the court state the illegality of the removal of the information. Alternatively, and in order to alleviate the costs and the burden on the person potentially affected by a delisting, one could conceive of the creation of an independent state authority in charge of handling such requests.
5.5
The Extent of Search Engines’ Liability in Disputes over Control
In considering the extent of search engines’ liability for disseminating defamatory material, some consider that it is disingenuous to characterize search results as the products of search engines. Under this conception, search results are the byproduct of a number of algorithmic mechanisms processed by bots equipped with artificial intelligence. That fact may, in part, be the reason why some jurisdictions place search engines within a safe harbor from legal liability. The work of the national rapporteurs indicates that some jurisdictions will, accordingly, limit individuals’ ability to pursue libel actions against search engines in the de-indexation context, through a scienter requirement.169 In fact, prior to the Google Spain case, the Italian rapporteur notes that the case law of the Italian Supreme Court “highlighted the neutrality of search engine activities,”170 and perceived them as “mere intermediar[ies] which [made] accessible third-party websites without playing any ‘active’ role. . . .”171 A strong counterargument—in favor of search engines’ accountability—comes from the Japanese Supreme Court, which held that the “provision of search results” has an independent aspect of “expressive conduct by the search service provider itself” because its computer programs were made in a way to achieve the results in accordance with “the search service provider’s policy.”172 The Italian and German 169
See, e.g., Alfonsín ML, Argentina Report, p. 2 (“Internet intermediaries become liable only upon obtaining ‘effective knowledge’ of the illegal content involving the notification by a court or other competent authority. . . .”); Gonçalves R, Brazil Report, p 8 (discussing Google’s liability in the Xuxa case); Eltis, Trudel, Canada Report, p. 7 (“Selon les six juges majoritaires de la Cour, une personne ne peut en diffamer une autre simplement en publiant un hyperlien menant au site Web ou à un document d’un tiers qui contient des propos diffamatoires. . . .”); D’Antonio, Pollicino, Italy Report, p 3 (noting differing approaches to intermediaries’ liability prior to the Google Spain decision); Chiou, Taiwan Report, p 4 (“Court decisions that uphold ISP’s obligation to remove contents. . .are limited situations where the ISP knows that the contents or search results may infringe upon reputations of others or fails to know that as a result of gross negligence.”). 170 D’Antonio, Pollicino, Italy Report, p. 3. 171 D’Antonio, Pollicino, Italy Report, p. 3. 172 Yamaguchi, Japan Report, p. 3.
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rapporteurs suggest that the European Court of Justice would likely agree with this approach, as the ECJ impliedly attributed liability onto search engines in the Google Spain case, despite their “passive” role.173 That said, technological advancement complicates liability attribution. As the Japanese rapporteur advises: “[because] algorithms are increasingly programmed in ways that enable them to learn, decide, and constantly update by themselves, we ought to consider closely who exactly should be held liable for harms caused by algorithmic decisionmaking, among complexly-related multiple entities who are involved in the design and practical implementation of such algorithms.”174 Nevertheless, it appears that liability regimes should consider the degree of data intermediaries’ actual involvement in injuries committed upon private persons.175 Furthermore, cases of actual mismanagement by data intermediaries should be distinguished from injuries they have “passively” facilitated. For example, Facebook recently stood at the center of several enormous data privacy scandals. Notably, the Cambridge Analytica scandal involved the misappropriation of 50 million Facebook users’ online data to Cambridge Analytica, a United Kingdom-based political consultancy, which then sold this information to the Trump campaign for purposes of ad-targeting during the 2016 presidential campaign in the United States.176 Another controversy involves Facebook’s logging of text message and call histories for some of its users.177 Questions surrounding Facebook’s use—or misuse—of its users’ data has prompted the United States Federal Trade Commission to open an investigation into the company’s practices.178 Facebook’s purported mishandling of personal data is clearly and readily distinguishable from any liability that may be attributed to Google for providing search results that link to a blog disparaging an individual.
time you go to share something on Facebook, whether it’s a photo in Facebook, or a message, every single time, there’s a control right there about who you’re going to be sharing it with ... and you can change that and control that in line.”179 So what is it about controversies such as the Facebook/ Cambridge Analytica incident that instills discomfort? Is it that individuals’ personal data is available to third parties, or is it rather that, in a way contrary to their own personal freedom and respect for their autonomy, individuals lose control of how their information is utilized once in the hands of these third parties?180 In either case, the tension between free speech and personal privacy that animates the right to be forgotten seems likely to grow as a dominant feature of international public discourse. This preoccupation will only rise with the anticipated increases in access and interconnectivity. Although it manifests itself in different ways across national and regional laws, the right to be forgotten and its various facets are more ubiquitous than many would think—at least if we accept that it does not cover one single reality but rather a variety of entitlements, as we have tried to show. It also appears that, ultimately, recent societal concern for individuals’ control over their own information may be a catalyst behind the recognition or reinforcement of some of these entitlements. As the world continues into the modern age, questions surrounding the balance between personal freedoms, the public interest, and the role of commercial exploitation of personal data will fuel dialogue, keeping the right to be forgotten and its various manifestations at the center of attention.
6
The Right to Be Forgotten: Questionnaire
Conclusion
In his recent testimony before the United States Congress, the CEO of Facebook, Mark Zuckerberg, emphasized the importance of users’ control over their personal data: “every single 173 German Report, p. 2 (noting that the issue is unsettled at the national level); D’Antonio, Pollicino, Italy Report, p. 3 (discussing conflicting case law on the subject prior to the Google Spain decision). 174 Yamaguchi, Japan Report, p. 20. 175 In that respect, liability for damages should be limited. 176 Rosenberg et al. (March 17, 2018), https://www.nytimes.com/2018/ 03/17/us/politics/cambridge-analytica-trump-campaign.html. 177 McMillan (Mar. 26, 2018, 7:31 PM), https://www.wsj.com/articles/ facebook-logs-text-call-histories-for-some-android-users-1522072657. 178 Salinas (Mar. 26, 2018), https://www.cnbc.com/2018/03/26/ftcconfirms-facebook-data-breach-investigation.html.
Acknowledgements I wish to thank Ephraim David Abreu (JD Georgetown Law ‘19) for his major contribution to an early version of the report without which the current one would not exist. I also wish to thank Sibilla Grenon (JD Georgetown Law ‘21) for her thoughtful work on later drafts.
Question 1 • Comment votre droit protège-t-il le droit à l’oubli ? Le droit à l’oubli est-il consacré de manière spécifique dans une loi ou découle-t-il de dispositions générales ? 179
Watson (Apr. 11, 2018 12:00 AM), https://www.theguardian.com/ technology/2018/apr/11/mark-zuckerbergs-testimony-to-congress-thekey-moments. 180 Facebook retains a great amount of data about its users that a standard consumer would not expect. That data includes users’ phonebook contacts, a list of users’ removed friends, and even the number of advertisers with users’ personal information. See Chen (Apr. 11, 2018), https://www.nytimes.com/2018/04/11/technology/ personaltech/i-downloaded-the-information-that-facebook-has-on-meyikes.html?mtrref¼undefined.
The Right to Be Forgotten
How is the right to be forgotten protected under your law? Does your law specifically grant a right to be forgotten or does this right derive from a more general framework? Question 2 • Quelles sont les limites au droit à l’oubli selon votre droit ? What are the limits to the right to be forgotten under your law? Question 3 • Quels sont, dans votre droit, les moyens de droit pour mettre en œuvre son droit à l’oubli ? What are, in your law, the legal remedies available to enforce the right to be forgotten? Question 4 • Dans le prolongement de la question précédente, est-ce que votre droit permet à une personne qui s’estime lésée par une information sur internet d’obtenir une réparation de son dommage ou de son tort moral ? Si oui, est-ce que la mise en œuvre d’une telle action en responsabilité est réalisable en pratique ? As a follow-up to the previous question, does your law allow the plaintiff to receive material or immaterial damages? If yes, is such remedy realistic in practice? Question 5 • De manière générale, comment évaluez-vous la mise en œuvre du droit à l’oubli dans votre droit ? Est-elle efficace ? Le droit à l’oubli est-il souvent utilisé en pratique ? Existe-t-il des obstacles particuliers à sa mise en œuvre ? In general, how do you assess the implementation of the right to be forgotten in your law? Is it effective? Is it used in practice? Are there particular obstacles in the implementation of this right? Question 6 • Comment les tribunaux et les auteurs de doctrine ont-ils accueilli la décision Google c. González de la CJUE dans votre État ? How did courts and commentators in your country welcome the ECJ ruling on Google v González? Question 7 • Pour les ressortissants d’un État qui ne fait pas partie de l’Union européenne, est-ce que les tribunaux de votre État
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ont suivi la décision de la CJUE ? Pensez-vous qu’ils vont le faire ? For those who are from a country that is not part of the European Union, did your courts follow the ECJ ruling on the right to be forgotten? Is it likely Do that they will follow it? Question 8 • Est-ce que votre droit accordait déjà un droit à l’oubli sur internet similaire à celui consacré par la CJUE ? Did your law already grant a similar right to be forgotten than the one stated in the ECJ ruling? Question 9 • Pour mettre en œuvre la décision de la CJUE, Google a mis en place un formulaire permettant à toute personne intéressée de déposer une requête pour déréférencer une information qui la concerne. Sur la base de cette demande, Google doit faire une pesée des intérêts entre l’intérêt privé de la personne à déréférencer son information et l’intérêt public à ce que l’information soit publique. Google ne rend toutefois pas publique la manière dont il traite les requêtes de déréférencement. En particulier, Google n’informe pas le public du nombre de demandes qu’il reçoit, du type de demande, du cercle des personnes concernées, du nombre d’acceptation et de refus et des raisons des refus. Pensez-vous que Google doive améliorer la transparence dans la mise en œuvre du droit à l’oubli ? To implement the ECJ ruling, Google has created a form in which anyone interested can submit a request to have information about him-or herself be delisted. Based on this request, Google will weigh between the private interest of the petitioner and the public interest to be informed. Google does not disclose the ways in which it deals with requests. In particular, Google does fully not disclose, the category of requests that are excluded or accepted, the proportion of requests and successful de-listings and, among others, the reason for the denial of delisting. Do you think that Google should be more transparent about the ways it uses to implement the right to be forgotten? Question 10 • Est-ce que les citoyens de votre État font usage du formulaire de Google pour mettre en œuvre le droit à l’oubli sur internet ? Is the procedure prepared by Google used in your country?
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Question 11 • Des réformes sont-elles prévues au niveau législatif pour renforcer ou modifier la protection du droit à l’oubli dans votre droit ? Is there any upcoming legal reform in your country whose purpose is to reinforce or modify the right to be forgotten? Question 12 • Quelle devrait être à votre avis la prochaine étape dans la protection du droit à l’oubli ? Pensez-vous que les États devraient protéger davantage la personnalité des utilisateurs sur internet ? Pensez-vous que l’Union européenne devrait modifier ou adapter ses normes qui protègent le droit à l’oubli ? In your opinion, what should be the next step in the protection of the right to be forgotten? Do you think that one must go further and strengthen the right to be forgotten? Do you think that the European Union should modify or adapt its legislation on the right to be forgotten?
References Case Law Axel Springer AG v. Germany, App. No. 39954/08 (Eur. Ct. H.R. Feb. 7, 2012) Case C-131/12, Google Spain SL v. Agencia Espanola de Proteccion de Datos, 2014 E.C.R. 317 Case C-398/15 Camera di Commercio, Industria, Artigianato e Agricoltura di Lecce v Salvatore Manni, 2017 E.C.J Furst-Pfeifer v. Austria, Application nos. 33677/10 and 52340/10 (Eur. Ct. HR May 17, 2017) Griswold v. Connecticut, 381 U.S. 479, 484–85 (1965) Mapp v. Ohio, 367 U.S. 643, 656 (1961) ML and WW v. Germany, Nos. 60798/10 and 65599/10 (Eur. Ct. HR. 2018) Satakunnan Markinaporssi Oy and Satamedia Oy v. Finland, Application no. 931/13, (Eur. Ct. HR. Jun. 27, 2017) Smith v. Daily Mail Publishing Company, 443 U.S. 308 (1977) von Hannover v. Germany (59320/00), [2004] E.M.L.R. 21
Literature Alston P (2005) Non-state actors and human rights. Oxford University Press, Oxford, p 2 Bennett SC (2012) The “Right to be Forgotten”: reconciling EU and US perspectives. Berkeley J Int Law 30(1):161 Bertram T et al (2018) Three years of the right to be forgotten. Google, Inc, Menlo Park, p 17, Available at: https://www.elie.net/static/files/ three-years-of-the-right-to-be-forgotten/three-years-of-the-right-tobe-forgotten-paper.pdf Bhardwaj P (Feb 28, 2018, 12:06 PM) Millions of Europeans are asking Google to be “forgotten” — here’s why Americans don’t have that
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575 dritten Millenium - Liability in the Third Millennium. Bremen. Nomos Publishing, Baden-Baden, p 285, 291, 299 Whitman JQ (2004) The two western cultures of privacy: dignity versus liberty. Yale Law J. 113:1180
Conventions/Statutes Convention for the Protection of Human Rights and Fundamental Freedoms, art. 8, Nov. 4, 1950, 213 U.N.T.S. 222 International Covenant on Civil and Political Rights, art. 17(1), Dec. 16, 1966, 999 U.N.T.S. 171 OECD Guidelines Governing the Protection of Privacy and Transborder Flows of Personal Data ¶ 10 Organization of American States, Am. Conv. on Human Rights, Nov. 22, 1969, O.A.S.T.S. No. 36, 1144 U.N.T.S. 123
Deference to the Administration in Judicial Review: Comparative Perspectives Guobin Zhu
Abstract
Judicial deference to the administration is a concept and legal practice that is present to a greater or lesser degree in every constitutional system. The analysis of the national reports reveals why, how and when the courts defer to administrative actions. In each constitutional system, deference is employed differently as the positioning of the judiciary within the separation of powers, the role of the courts as a mechanism of checks and balances and the scope of the judicial review differ. On the top of that, within the constitutional system itself, the way deference operates is complex, multi-faceted and usually covert within the same legal order. Deference is granted on political and technical grounds. Within this framework though, what is political depends on a number of issues such as the societal values and the political timing. More specifically, it seems that topic of controversial nature, that wide portions of the society oppose, are perceived as political and therefore the courts are keener to grant deference. But the degree of I want to express my special gratitude to Dr. Antonios Kouroutakis, IE University Law School, Spain, for his research assistance in the course of drafting this general introduction. Antonios has been a good friend and an efficient and reliable collaborator, and we have jointly produced other research papers recently published in Stanford Journal of International Law and Hong Kong Law Journal. My great thanks shall go to Judge Fleur Kingham, President of Land Court of Queensland, Australia, who is also the national reporter for this cluster group, for her insightful comment on the draft as far as the case of Australia is concerned. And in the meanwhile, I should thank other national reporters for their suggestions. This report was also published in Zhu (Ed), Deference to the Administration in Judicial Review – Comparative Perspectives, Springer Nature Switzerland 2019, 1–21.
deference depends on the characteristics of the dispute, the gravity of the issue, the level of technicality and whether the dispute is human rights related. It is also a dynamic concept as it is adjusted to the necessity of the circumstances. Résumé
La déférence judiciaire envers l’administration est un concept et une pratique juridique plus ou moins présents dans tous systèmes constitutionnels. L’analyse des rapports nationaux révèle pourquoi, comment et quand les tribunaux s’en remettent aux actions administratives. Dans chaque système constitutionnel, la déférence est utilisée différemment, car le positionnement du pouvoir judiciaire au sein de la séparation des pouvoirs, le rôle des tribunaux en tant que mécanisme de freins et de contrepoids et la portée de la révision judiciaire diffèrent. En plus de cela, dans le système constitutionnel lui-même, la façon dont la déférence fonctionne est complexe, multiforme et généralement cachée dans le même ordre juridique. La déférence est accordée pour des raisons politiques et techniques. Dans ce cadre, cependant, ce qui est politique dépend d’un certain nombre de questions telles que les valeurs sociétales et le calendrier politique. Plus précisément, il semble que ce sujet de nature controversée, auquel s’opposent de larges parties de la société, est perçu comme politique et, par conséquent, les tribunaux sont plus enclins à accorder la déférence. Mais le degré de déférence dépend des caractéristiques du différend, de la gravité de la question, du niveau de technicité et de la question de savoir si le différend est lié aux droits de l’homme. C’est aussi un concept dynamique car il est adapté à la nécessité des circonstances.
G. Zhu (*) School of Law, City University of Hong Kong, Kowloon Tong, Hong Kong e-mail: [email protected] # The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_20
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Introduction
There are numerous discussions on the topic “Deference to the Administration in Judicial Review”. “Deference”, a concept which originated in North American judicial practice, nowadays has gradually come into consideration and even been accepted by other jurisdictions. As deference can have various connotations under different circumstances, be associated with different legal doctrines and theories, and different practices of the court or even sound differently in different legal systems and jurisdictions, a number of questions are to be addressed for a more complete and thorough analysis of it. The central question is when, why, and how much should reviewing courts defer to administrative agency? Nevertheless, more questions are relevant here. For instance, should it matter what type of agency action is being reviewed? In addition, what standard/approach/grounds should courts adopt when reviewing an administrative decision? How are these grounds/standards such as reasonableness, or proportionality, applied in the courtroom? The present report has the following structure: First, it addresses the role of the courts in different constitutional systems and their interaction with the other branches of the government. This part here leads to the second topic which is the discussion on the concept of deference, its scope and how it emerged and how it was further developed. In relation to the above, the third part analyses the divergent aspects of deferential judicial review, and it examines thematically the concept of deference. In particular, it examines deference via the lenses of the separation of powers, by taking into account the institutional role of the executive and of the courts, and the political and the technical nature of some disputes, while it concludes on how deference is manifested. Finally, the last part is devoted to the examination of deference from the perspective of the rule of law.
2
The Role of the Courts: Setting the Scene for Discussion
Undoubtedly, courts hold a unique position in every constitutional order. Regardless the form of the separation of powers or the weighting of the balance of powers between the legislative and the executive branches of the government, courts by default are the link between democracy and the rule of law. Both the legislative and the executive branches filter and are, institutionally speaking, the majoritarian expression of the society. In these institutions, the holders of the office are the representatives of the society channeling the views of the majority in the policy and law making.
On the other hand, courts have a distinct institutional role. They do not express the views of the majority, on the contrary, they are a counter majoritarian institution. Judges are not elected by the people, in fact judges are expected to be politically insulated, thus such institution has limited democratic legitimacy. At the same time, depending on the constitutional configurations, courts are positioned as the guardian of legality, human rights and in general of the rule of law via the mechanism of constitutional and judicial review. While courts lack democratic legitimacy, with the exception of criminal cases and the trial by jury, they are vested with a different kind of institutional legitimacy. Such legitimacy is based on the culture of justification.1 Hamilton in the well cited Federalist Paper 78, has described the judiciary as “beyond comparison the weakest of the three departments of power”2 and has emphatically pointed out that “the judiciary, from the nature of its functions, will always be the least dangerous to the political rights of the Constitution; because it will be least in a capacity to annoy or injure them”.3 However, this view, in the post Marbury vs Madison era, was criticized given the critical power of the courts to strike down laws based on constitutional review.4 Interestingly, courts have also developed a counter force, a practice of deference to the political braches of the government, the executive and the legislative.5 Such practice, which has a critical impact on the relationship between the courts and the executive and legislature is a silent feature in the constitutional order, and this general report seeks to address this issue. In particular this report will focus on the practice of judicial deference to the administration, hence deferential practice for instance between higher and lower courts6 or between the courts and parliament will not be examined.7 Although, the administration is part of the executive, undoubtedly, in the modern era has acquired autonomy. Vile has accurately remarked that “[n]ow the label ‘executive’ is even less appropriate, because it is the administrative machine, influenced but not controlled by the political leadership, which carries the laws into effect.”8 This process is termed “agencification” and characterizes the creation of new agencies, their expansion and the autonomy of the 1
See Dyzenhaus (1998), p. 11. Hamilton (2001). 3 Ibid. 4 Bickel (1998). 5 About the role of deference as the “counter-Marbury” of the administrative state see Sunstein (1990), pp. 2071, 2074–2075. 6 For instance, a well known deferential practice between higher and lower courts is when higher courts reply on the fact findings of the lower courts. 7 For instance the deferential practice of the courts regarding the interna corporis of the law making process. 8 Vile (1998), p. 400. 2
Deference to the Administration in Judicial Review: Comparative Perspectives
bureaucracy.9 The supervisory role over the administration by the executive stricto sensu and the legislature, the so called political branches of the government, has proven to be inefficient and this has led Vile to speak about the emergence of a fourth power, the administration, among the three traditional powers and the need for new checks toward to that power.10 Within this context, the courts were entrusted with the paramount task to check the administration and review the administrative actions. Hence, the judicial deference to the administration is a key issue with many legal implications. Accordingly, the general reporter and national reporters were assigned to address this topic entitled “Deference to the Administration in Judicial Review”. Methodologically, national reporters were invited to elaborate and examine this topic in their jurisdiction based on a questionnaire in the form of guidelines that was circulated and is included as an Annex to this Report. Within this context our national experts submitted their answers to one main question: how deference to the administration in judicial review or deference like practices are manifested, under which justification, and in which areas of laws.11 The range of the constitutional orders in comparison was based on the availability of 9
Egeberg and Trondal (2009), p. 673. Vile (1998), p. 401. 11 The guidelines sent to reporters are included in the Annex. In total, reports from the following (17) countries were received: Pedro Aberastury Associate Professor of Administrative Law; Fleur Kingham President, Land Court of Queensland, Australia; Qinwei Gao, Professor, Central University of Finance and Economics, China; Giacinto della Cananea, Professor of Administrative law and EU Administrative Law, University of Rome “Tor Vergata”, Italy; Zdenek Kühn, Associate Professor of Jurisprudence, Charles University Law School and Judge at the Supreme Administrative Court of the Czech Republic; Josef Staša, Lecturer of Administrative law, Charles University Law School, Czech Republic; Mariolina Eliantonio, Associate Professor in European Administrative Law Maastricht University, Netherlands; Olli Maenpaa Professor University of Helsinki, Finland; Cora Chan, Associate Professor HKU, Hong Kong; Margit Cohn, Henry J. and Fannie Harkavy Chair in Comparative Law, Faculty of Law, the Hebrew University of Jerusalem, Israel Norikazu Kawagishi, Professor Department of Political Science, Waseda University, Japan; Tom Barkhuysen Professor of Constitutional and Administrative law at Leiden University, the Netherlands and partner at Stibbe, Netherlands; Michiel l. Van Emmerik Associate Professor of Constitutional and Administrative law at Leiden University and deputy judge at the District Court Midden-Nederland, Netherlands; Zbigniew Kmieciak, Professor, Faculty of Law and Administration, University of Lodz, Justice of the Supreme Administrative Court, Poland; Joanna Wegner-Kowalska, PhD Faculty of Law and Administration, University of Lodz, Poland; Eugene K B Tan, Associate Professor of Law, School of Law, Singapore Management University; Henrik Wenander, Associate Professor of Public Law, Faculty of Law, Lund University, Sweden; Aytac Ozelci, Chair of Administrative Law Department, Istanbul Kultur University, Turkey; Elif Altinok Caliskan; Assistant Professor, Administrative Law Department, Istanbul Kultur University, Turkey; Sakine Nilufer Bilgin, Administrative Law Department, Istanbul Kultur University, Turkey; John C. Reitz, Edward L. Carmody Professor of Law and International Studies, University of Iowa College of Law; Bent Ole Gram Mortensen, Professor, Department 10
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scholars with the appropriate interest and expertise. Subsequently, the reporters have used both qualitative and quantitative analysis in order to examine the concept and the practice of deference. In particular, their qualitative analysis was based on the assessment of several key decisions. Having said that, the general reservation applies. While the current chapter is based on these national reports and some additional sources and aims to bring together the findings and conclusions running through the national reports, the conclusion of the general report remains distinct from the individual views of the national reporters.
3
Defining the Concept of “Deference”
“Deference” is a concept, which originated in North American judicial practice and is widely associated with the Chevron case but interestingly it long predates this case.12 In 2008, the seminal case of the Supreme Court of Canada, Dunsmuir v New Brunswick, defined the term deference as follows: Deference is both an attitude of the court and a requirement of the law of judicial review. It does not mean that courts are subservient to the determinations of decision makers, or that courts must show blind reverence to their interpretations, or that they may be content to pay lip service to the concept of reasonableness review while in fact imposing their own view. Rather, deference imports respect for the decision-making process of adjudicative bodies with regard to both the facts and the law. The notion of deference ‘is rooted in part in a respect for governmental decisions to create administrative bodies with delegated powers’ . . . Deference in the context of the reasonableness standard therefore implies that courts will give due consideration to the determinations of decision makers.13
“The Deference to the Administration in Judicial Review” is an expression of judicial self-restrain and it is opposed to the concept of judicial activism. However, although selfrestrain and deference overlap, they are not coterminous. Self-restrain is the term of art from the perspective of the court, while deference is the manifestation of the self-restrain. On the other hand, the term judicial activism, which is opposed to judicial deference has no fixed definition. The reporter from Argentina identifies activism when the court has delivered a decision touching broader issues and at the same time intervening in state policies. In theory, Kmiec has recognizes five perspectives of ‘judicial activism’: “(1) invalidation of the arguably constitutional actions of other branches, (2) failure to adhere to precedent, (3) judicial ‘legislation,’ (4) departures from accepted interpretive methodology, and (5) result-oriented judging.”14 of Law, University of Southern Denmark; Frederik Waage, Associate Professor, Department of Law, University of Southern Denmark. 12 See Bamzai (2017), p. 908. 13 Dunsmuir v New Brunswick 2008 SCC 9, [2008] 1 SCR 190. 14 Kmiec (2004), pp. 1441, 1444.
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Given the relatively recent and rapid immigration of the concept of judicial deference in numerous constitutional orders, it is acknowledged by a number of reporters, for instance from Israel, China and Argentina, that equivalent term of art does not exist in their native language respectively, but only a descriptive term or a number of terms with similar legal effect. For instance, the reporter for China points out four terms that are used instead of judicial deference. In particular, judicial self-restraint with caution, judicial respect and deference, judicial self-restraint and judicial passivism. First of all, it is here noteworthy to clarify and draw a distinction between the term deference and the term “jurisdiction”, as it is accurately pointed out by the reporter from Hong Kong. In order for the courts to show deference, jurisdiction is a prerequisite, while when courts lack jurisdiction no latitude is granted to the government on any matter, since the courts do not simply have the authority to intervene. Deference therefore, is exercised only within the scope of court’s jurisdiction. In practice, when the jurisdiction of a court is expressly limited by a law, constitutional or primary, then the court simply lacks jurisdiction. Having said that, what was a great challenge for this report, was to reconcile the divergent jurisdictional differences between various constitutional systems. About the quality of judicial review, some courts apply proportionality15 for judicial review such as the Netherlands, others like Singapore apply the reasonableness test,16 and others like Hong Kong apply both. Needless to say that proportionality test itself is considered as stricter level of review compared to the reasonableness test.17 Furthermore, about the scope of the judicial review a number of differences emerge. Courts in Hong Kong do not have the power to intervene in foreign affairs and defense, but they have the power to strike down socio-economic policies. Israeli courts have broad authority to intervene and evaluate decisions on appointment of elected and non-elected public officials both on formal and substantive grounds, for instance the removal due to criminal investigations. Another example is the EU courts’ review scope, which is limited to the legality and does not extend to the merits of the decisions taken by the European administrative authorities.
15 Proportionality test includes a review based on three steps: (1) whether the right limitation pursues the legitimate aim; (2) whether it is rationally connected to the aim; and (3) whether it is no more than necessary for achieving the aim. See Jackson and Tushnet (2017). 16 Reasonableness test, also known as Wednesbury unreasonableness is a less strict test according to which the courts ask whether the action of the administration was merely reasonable. See Associated Provincial Picture Houses v. Wednesbury Corporation [1948] 1 KB 223. For further details, see Craig (2016). 17 De Burca (1997), p. 561.
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What is more challenging about deference is the fact that as a legal concept, it has no recognized status based on an explicit legal provision. Deference is a silent feature of each constitutional system, present in the actual judicial practice, as the reporter from Finland remarks. Deference is a legal concept developed by judge made law. Interestingly, the analysis of the national reports has shown another important aspect of deference. In some constitutional orders, such concept is well established in the sense that the courts have systematically formulated and analysed this concept, for instance in Hong Kong and USA, while in other constitutional orders, like Sweden, Poland and New Zealand this concept is not formulated by seminal courts’ decisions. In addition, as deference depends on the judge made law, such concept is volatile, not stable. Courts may change their stance towards the executive depending on the circumstances. For instance, the reporter from Czech Republic stated that the courts do not have a solid position on whether to accept the reasonable interpretation of the law by the executive branch. Further, the national reporter for Italy has shown the historical development of the deferential practice towards the administration in Italy during the twentieth century. In addition, it is worth mentioning a remark from the reporter from Israel. The Israeli national reporter stated that courts might often start with an activist position and then change to deference, and provided the example on the review of decisions on the appointment of elected and non-elected public officials. Finally, the analysis of the national reports have shown that deference is treated as the exception to the rule of rigorous judicial review, while in some legal order like Sweden, judicial deference is limited in practice. However, this is not the case in China as the national reporter clarifies that courts have in general a deferential stance, as a rule, towards the administration.
4
Deferential Judicial Review in Operation
4.1
Deference rationae personae or rationae materiae
In practice, the deferential stance of the courts is explained by two main reasons: rationae personae or rationae materiae. In other words, deference is granted based on the institutional characteristics of the institutions, both the courts and the executive (rationae personae) or deference is granted due to the nature of the issue (rationae materiae).18 However, these two grounds rationae personae or rationae materiae are not mutually exclusive as deference may be granted on both grounds simultaneously; due to 18
Allan (2011), p. 96.
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respectful acknowledgment of the authority of another institution, for instance the executive, and at the same time due to the respectful regard for its opinion on a specific matter or are of law.
4.2
Deference and the Separation of Powers
To begin with, deference is inseparably related with institutional and separation of powers concerns, either from the perspective of the court or from the perspective of the administration given their fundamental characteristics. At first glance, deference might be seen as an incompatible practice to the separation of powers principle. When courts exercise deference, this might be seen as a departure from the institutional role allocated to the courts, to uphold the law, and review the acts of the other branches of the government. However, the exact opposite may be argued; when the courts implement deference, they uphold the separation of powers.19 In particular, if there is an allocation of an authority based on the separation of powers principles, an “institutional mandate” as the reporter from Hong Kong describes it, the courts shall defer. Thus, the constitution or a legal provision may specifically preclude the court’s involvement in a specific matter.20 To exemplify this, the reporter for the US states that in areas such as military, security, or foreign affairs law, the courts defer in light of the broad powers of the President to protect national security and conduct foreign policy recognized by the US Constitution. In addition, where the law grants discretion to the administration on a particular matter, the intensity of the judicial review is lower. For instance in Italy, on public appointments, such as the choice of the public accounts’ prosecutor, only extreme procedural impropriety or unfairness and blatant unreasonableness could lead the courts to intervene in the “high degree of discretion” area and annul the measures contested by individuals. Generally speaking, the justification is that the judiciary shall not substitute in the decision making process the original authority based on separation of powers, as the reporter for Australia stressed and identified as that the prevailing stance of the Australian courts on deference.
19
Chan (2011), pp. 7, 9. A prime example is the Bill of Rights 1689 in the UK that precludes the courts’ review of the interna corporis. see English Bill of Rights 1689, An Act Declaring the Rights and Liberties of the Subject and Settling the Succession of the Crown, art 9 “That the freedom of speech and debates or proceedings in Parliament ought not to be impeached or questioned in any court or place out of Parliament”. 20
4.3
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Political Issues and Deference to the Political Branches of the Government
Undoubtedly, the courts have less political legitimacy as the judiciary does not have in its DNA the element of representation,21 and judges lack the electoral connection with the people. On the other hand, the executive and the legislature have more direct connection with the people and the society. This gives to the latter institutions an advantage and a clearer insight on the so-called political issues. Having said that, some topics by default are more political in nature and require political solutions, and not a mere legal solution provided by the courts. By default, some decisions issued by specific bodies, holding a central position in the political system, such as the cabinet might be seen as political. Within this context, decisions delivered by the Ministerial Cabinet of Australia receive deference by the courts, and acts of government in Italy fall outside the scope of judicial review. However, that which issues are political, and which issues are legal, is not always very clear. Undoubtedly, some topics have both legal and political implications. Then it is up to the courts to decide on whether to treat them as political and thus defer, or to treat them as legal and thus review them rigorously. In practice, courts tend to perceive as more political the issues that are highly controversial for the society. The analysis of the national reports has shown that there is no uniform approach on which topics are political deserving deference. Based on the limited political legitimacy of the courts, and the political nature of some topics, the reporters have identified a number of issues that are political in nature and thus the courts shall defer. These topics were: anti-terrorism, such as the expulsion of suspect terrorists (Italy), the allocation of public resources (Hong Kong), governance and broad public policy issues (Hong Kong, Australia and Singapore). A more specific example of political issue was given by the reporter of Australia, which was the acquisition of new territories. It is interesting to note that some legal orders may approach a topic as political while others may threat the exact same topic as too technical requiring the expertise of the executive. Having said that, immigration was recognised as an area with deferential treatment as it is considered a political issue in Israel and Hong Kong, while in the US, this topic is treated with deference because of its technical nature (see below about technical deference). In Australia, immigration cases have presented a particular point of conflict between the judiciary and executive because of the
21
With the exception of the trial by jury.
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increasing attempts though legislation to restrain the scope of judicial review of administrative decisions in this field. An interesting disparity among the examined legal orders was found in the field of human rights. While in some jurisdictions, human rights related disputes are not subject to deferential treatment for instance in Israel, in other legal orders topics like political rights (Hong Kong), minority rights, such as gay rights (Hong Kong and Singapore) due to the fact that they are considered controversial issues, the courts defer the decision making to the administration. As a matter of principle, deference to the administration on political sensitive issues shall depend on the political connection between the executive and the actual administration. Thus, deference shall vary depending on the level and degree of political connection between administration and the executive. For instance, the reporter from Sweden explains the limited application of deference in Sweden due to the lack of political connection between the administration and the executive. The lack of political connection and dependency between the executive and the administration makes the decisions of the administration merely legal and thus subject to rigorous judicial review.
4.4
Deference to the Executive
The term executive includes the executive stristo sensu, and on the other hand, the administration including the agencies. Given the different separation of powers configurations in different constitutional systems, first, the scope of the executive powers differs, and second the connection between the executive and the administration varies. For instance, in some constitutional systems, delegated legislation is very broad such as in Israel, while in others it is more limited such as in the US. To exemplify this, in some systems delegation of powers is directly addressed to the administration, for instance to particular agencies, while in other legal orders, the delegation might be addressed first to the executive and then the executive with sub delegation transfers law making powers to the administration. The administration then issues the so called tertiary legislation. The landmark case on the judicial deference to the administration is the decision of the US Supreme Court Chevron v NRDC.22 The court with a seminal decision determined whether to grant deference to an agency’s interpretation of a statute and has formulated the so-called “Chevron deference”, a test according to which if the agency’s interpretation on a statute that it administers is based on a permissible and reasonable construction, then such interpretation shall be
22
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
accepted as long as Congress has not explicitly positioned to the precise issue at question.23 But, the Chevron deference interferes with one of the main tasks of the judiciary, the interpretation of the laws. As Hamilton had pointed out “[t]he interpretation of the laws is the proper and peculiar province of the courts.”24 Based on this separation of powers concern, in a number of legal orders, such as Australia, New Zealand and Hong Kong, the Chevron deference is not applicable, as the interpretation of the laws falls within the courts’ competence. In constitutional systems with a closer relationship between the administration and the political branches of the government, the degree of deference depends on the degree of supervision. Israel is a good example. The national reporter explains that for secondary legislation (also known as delegated legislation) the courts of Israel are keener to defer if there is legislative involvement in the law making process. On the other hand, the reporters from Denmark stress that the courts are keener to defer if it is obvious from the text of the law that the legislative branch has delegated a wide margin of discretion to the administration. Finally, the reporter from US identifies another reason for deference to the administration. Based on the presumption that state officials perform their tasks in good manner and with good faith that allows the courts to empathize with the administration and position themselves closer to the state officials than the private entities that challenge them. A case that exemplifies that is the deference shown to the administration when interim measures are reviewed. Such deference is shown in Czech Republic, as the national reporter stated.
4.5
Deference Due to the Nature of the Courts
Unequivocally, deference varies given the understanding about the constitutional role of the courts and the legal expectations about its institutional role. As the reporter for China clarifies, only an institutional separation of powers is recognized by the Constitution of China, making deference the norm rather than the exception. On the other hand, in Australia where a separation of power system operates and the judiciary is entrusted with the authority to define what is the law, courts defer mainly on non-jurisdictional issues such as factual and policy questions. Having said that, the reporter from Israel has articulated an alternative aspect of deference based on the court’s separation of powers concerns, the strategic deference. The courts may be strategic and apply rigorous review only for the truly 23 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 24 Hamilton (2001).
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necessary cases, while they might prefer to defer for the rest cases, in order to avoid criticism. As it was mentioned in the introduction, the legitimacy of the courts is based on public trust. However, public trust is not an unlimited source. The courts, especially in critical times shall weight the opposing interests and the various circumstances before delivering their review against or in favor of administrative decisions.
economic measures such as sanctions in Italy. In addition, immigration which was an area mentioned above of political nature, in the US and Japan is treated with deference as it is recognized as an area that requires expertise. However, as the reporters from Denmark point out, the judges also may consider themselves experts in the interpretation of the law, thus they do not defer to the administration on matters of legal interpretation.
4.6
4.7
Technical Deference
It is widely acknowledged by the vast majority of the national reports that deference is granted also to governmental authorities and agencies that possess special institutional competence, such as expertise and knowledge-gathering powers. Such deference is also termed technical deference.25 Given the “technical” advantage of the administration, this body is better armored to formulate, define, modify and apply policies. To put it differently, for a number of policies that require technical expertise, the judiciary has limited institutional capacity to gather, process and evaluate relevant data in order to make firm decisions. Thus in the vast majority of the constitutional orders that were examined by the national reporters, courts show a “thematic” deference on disputes related for instance to environment, health and safety because they are of technical nature, and because they pose great risks for the society. As a result, disputes on such topics require solutions from experts, while the legal expertise of the courts is of secondary value. Accordingly, the reporter for the Netherlands accurately points out that with the ‘growing professionalization within government, it is becoming more and more difficult for the judiciary to keep abreast of these developments. To begin with, technical deference is granted by the courts of Israel if the subject matter requires expertise. In the US, such deference is granted if the administration’s decision involves complex science and technology like disputes related to the nuclear science.26 In addition, a common area that technical deference is granted to the administration is national security (Singapore, USA, and Italy. Also, it is assumed for Hong Kong). Furthermore, the examination of the national reports has revealed more specific areas that are treated with deference due to their technical nature. These areas are: competition law violations, agriculture, and environment in the EU; disciplinary measures against students and public officials, diplomatic matters, and treatment of inmates and detainees in Japan; 25
Chan (2013), p. 598. Under circumstances of complex science expertise it is argued that court’s review is even thicker and thus it is called “super deference”. See Jacobs (2016), pp. 49, 53. 26
How Deference Is Manifested
How deference is manifested was an issue with a plethora of approaches from the courts at the national legal orders under examination. First, courts may relax the standard of review. For instance, in the past the EU courts would implement the “manifest error of appraisal” standard which means that the review is carried out with limited review on the factual support of the conclusions reached by the EU administration. Second, courts may lower the cogency of the evidence required from the administration to meet the general standards. For instance, in Hong Kong courts with a very systematic approach have adjusted the proportionality test. A forth step is added in the proportionality test in Hong Kong as the courts ask in addition “whether a reasonable balance has been struck between the societal benefits of the encroachment and the harm to individual right”. A third way for deference is traced regarding the burden of proof. Courts may adjust or even reverse the burden of proof, requiring for instance the litigant to show that the measure violates the legal standards. For instance, as the national reporter from Italy mentions, for antitrust violations, the antitrust authority despite the fact it has the burden of proof with regard to the existence of an illicit agreement, this obligation is satisfied if the authority provides “serious, precise and univocal clues”. In practice, courts exhibit deference through various ways. On the one hand, countries like New Zealand, Italy and Czech Republic have a case by case approach where the intensity and the degree of deference varies. On the other hand, countries like US, Singapore and Hong Kong have a systematic application of deference clarified by judge made law. Furthermore, the degree of deference varies within the same legal order. Thus, some topics are more deferential, other topics are less deferential. To exemplify that, in Hong Kong the allocation of public resources falls with the scope of judicial deference, and the allocation of scarce resources will attract even more deference. In Singapore, two levels of deference exist: absolute deference and deference. On the one hand, there is no scrutiny at all for issues regarding parliamentary business (the so-called interna corporis), foreign affairs, national security, public safety, peace, and good order. In practice, the courts simply
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examine whether a dispute is related to the aforementioned areas. If the response is in the affirmative then they do not examine the merit of the case. On the other hand, only for cases regarding technical or political nature, they lower the intensity of the review. In Australia, one of the concerns expressed by the judiciary regarding deference is the difficulty in identifying the intensity and degree of deference shown to the administrative decision-maker.
5
Deference and the Rule of Law
Deference to the administration has some important implications to the fundamental concept of the rule of law. Judicial review is one of the paramount mechanisms of the enforcement of the law over executive action or inaction, and therefore, the compatibility of a deferential approach on judicial review with high standards of the rule of law, formal or substantial, is questioned.27 That said, the courts are the guardians of the law and hence deferential practice, which might allow administrative injustice of error in the legal system imply the watering down of the legal force of the law. Criticizing the Chevron deference, Chief justice Robert has said28: Chevron is a powerful weapon in an agency’s regulatory arsenal. Congressional delegations to agencies are often ambiguous— expressing “a mood rather than a message.” [. . .] By design or default, Congress often fails to speak to “the precise question” before an agency. In the absence of such an answer, an agency’s interpretation has the full force and effect of law, unless it “exceeds the bounds of the permissible.” [. . .] It would be a bit much to describe the result as “the very definition of tyranny,” but the danger posed by the growing power of the administrative state cannot be dismissed.
Indeed broad deference might lead to unchecked powers and unequal application of the law, and to absurd results. In line with this criticism, the courts in Australia do not apply the Chevron deference. Among the justifications offered, the reporter from Australia clarifies that there is the danger that the administration would be one of the several competing reasonable interpretations of a statute to fit the described result. Interestingly the national reporters despite the fact they do not directly correlate deference with the rule of law, they discuss the interaction between deference and aspects of the rule of law. In particular, a number of contributors (Hong Kong, Israel, Australia) have stressed that the deferential 27 Judicial deference is considered a controversial topic. See Kavanagh (2010), p. 222. For the concept Rule of law, there is no single definition and different authors have highlighted different aspects. For the purpose of this report, rule of law is perceived with a broad interpretation and as an essentially contested concept. See Waldron (2002), p. 137. 28 City of Arlington v. FCC, 133 S. Ct. 1863, 1870 (2013) at 1879.
approach of the courts depends on the involvement of human rights law in the dispute. In particular, the courts when they adjudicate cases within the scope of the political and technical deference, they take into account if the challenge is in rights or in non-rights context. In addition, some types of disputes are not subject matter to deference at all, and they receive vigilant judicial scrutiny. For instance, in Hong Kong, if a dispute is related to certain human rights, such as the right to life, the right not to be tortured, the right not to be held in slavery, the freedom of expression and opinion, the freedom of religion, the right to a fair trial and the presumption of innocence, then deference is not granted. However, the control of the administrative action is not exclusively subject to judicial review. Legislative oversight, equally, has an important role to play in the control of the administrative activity. Suffice to mention here that in the late medieval England, the paramount safeguard of executive and administrative actions was the parliamentary scrutiny. With that in mind, administrative activity that survives the deferential judicial review is subject to parliamentary oversight, an application of parliamentary supremacy. On the other hand, the legislative oversight might be more appropriate especially on controversial or sensitive for the public opinion subject matters. This way the extensive juridification of the constitutional order is avoided. In addition, it could be argued that deference is a very effective mechanism to fuse in the separation of powers system with the appropriate flexibility. The rigid apposition of the institutions in the separation of powers is not always desirable as legal norms might require adjustment under different circumstances. At the same time, it is significant to mention that a number of national reporters, especially for countries members states of the Council of Europe (The Netherlands, Finland, Italy, Czech Republic), stressed the implication of the European Convention on Human Rights (ECHR) and the jurisprudence of the European Court of Human Rights (ECtHR). It seems that the ECtHR’s jurisprudence and the interpretation of the provision of the article 6 on fair trial has imposed external safeguards limiting the reach of the deferential practice. For instance, in Czech Republic, while Czechoslovak Supreme Administrative Court in the first half of the twentieth century insisted that it had no power to deal with the lawfulness of the amount of the penalty imposed by the administrative agencies. But the jurisprudence of the ECtHR found such practice incompatible with the article 6 of the ECHR, thus limiting the judicial deference on administrative penalties. In addition the reporter from the Netherlands clarifies that the courts cannot defer to the administration on matters of fact that are relevant to the dispute since this practice would be incompatible with article 6 of the
Deference to the Administration in Judicial Review: Comparative Perspectives
ECHR.29 Finally, the reporter from Finland states that the courts, based again on the same article, they have to take an active approach as regards summoning witnesses who can shed light on the crucial facts for the resolution of the dispute. All told, this holistic approach explains the compatibility of deferential judicial review with the rule of law and places deference among the crucial silent features of any constitutional order.
6
Concluding Remarks
The analysis of the national reports on judicial deference to the administration has revealed the multifaceted nature of this concept and its role and function in the constitutional framework of powers. Although as a term, it might not have an equivalent term of art in a number of languages, as a practice is recorded to a greater or to lesser degree in every legal order. It is an integral part of the constitutional system, which brings flexibility in the arteriosclerotic separation of powers system, balances the lack of political legitimacy of the courts as well as the lack of expertise when it is at stake. Interestingly, in each constitutional system deference is employed differently as the positioning of the judiciary within the separation of powers, the role of the courts as a mechanism of checks and balances and the scope of the judicial review differ. But within the constitutional system itself, the way deference operates is complex, multi-faceted and usually covert within the same legal order. Unequivocally, common ground among the constitutional systems under examination were the causes for deference. Deference is granted on political and technical grounds. Within this framework though, what is political depends on a number of issues such as societal values, morals and political timing and agenda. More specifically, it seems that controversial nature of the topic, that the fact wide portions of the society oppose, are perceived as political and therefore the courts are keener to grant deference. Also, the examination of the national reports on deference comes to confirm the assumption that deference is a volatile and at the same time dynamic concept. In particular, the degree of deference depends on the characteristics of the dispute, the gravity of the issue, the level of technicality and whether the dispute is human rights related. It is dynamic also as it is adjusted to the necessity of the circumstances. However, some issues have been left open for further research. There are not enough evidence in order to argue whether the placement of the judiciary in the separation of powers system directly influences the extent of judicial
29
See, for example, European Court of Human Rights 23 June 1981, NJ 1982/602 (Le Compte, Van Leuven & De Meyere v Belgium), par. 51.
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deference, and second, whether there is a correlation between the scope of the jurisdiction and the degree of deference.
Annex: Questionnaire on “Deferene to the Administration in Judicial Review” This Questionnaire is prepared by Professor Guobin Zhu, City University of Hong Kong, email: [email protected], and it will serve as a guide for the writing of national reports to be presented 2018 Congress of International Academy of Comparative Law (IACL/AIDC).
It is my honor to be assigned as the general rapporteur. I am not the initial proposer of this interesting and important topic, and therefore my comprehension of it might slightly differ from the originator’s. As general rapporteur, I will do my best to comply with the original intent, to work out a plan/questionnaire that best suits the situation of most national reporters’, and to meet the expectations of the IACL and national reporters. I am delighted that we have been given this precious opportunity to work together on such an important project. A side note: this topic was first proposed by Professor John Reitz, Edward L. Carmody Professor of Law, University of Iowa College of Law. We corresponded in the process of preparing this questionnaire. I am grateful for his valuable advice and constructive suggestions.
Introduction: Concept and Definition The topic “Deference to the Administration in Judicial Review” has been identified and accepted as one of the general topics for plenary discussion by the IACL. A literature review shows that there are numerous discussions on this topic and related topics in major common law jurisdictions, and in particular in the US, Canada, and Australia.30 “Deference”, a concept which originated in North American judicial practice, has gradually come into consideration and/or been accepted by other jurisdictions. In the seminal
30 See, for example: Deference and Due Process, 129 HARV. L. REV. 1890 (2016); Administrative Procedure and Judicial Restraint, Harvard Law Review Forum May, 2016 129 Harv. L. Rev. F. 338; Transatlantic Perspective on Judicial Deference in Administrative Law, Columbia Journal of European Law Spring, 2016 22 Colum. J. Eur. L. 275; Judicial Deference and Regulatory Preemption by Federal Agencies, Tulane Law Review May, 2010 84 Tul. L. Rev. 1233; Mullan (2004), p. 59; Bree (2015), p. 791; Frank and Falzon (2016), p. 135; Allan (2010), p. 41; Helen and Gavin (2011), p. 863; The Honourable Michel Bastarache (2009), p. 227; Warchuk (2016), p. 87; Cameron (2009), p. 102; Lawrence (2015), p. 35; Guy (2000–2001), p. 133; Cora (2010), p. 1.
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case of Dunsmuir v New Brunswick, the term deference was defined as follows31: Deference is both an attitude of the court and a requirement of the law of judicial review. It does not mean that courts are subservient to the determinations of decision makers, or that courts must show blind reverence to their interpretations, or that they may be content to pay lip service to the concept of reasonableness review while in fact imposing their own view. Rather, deference imports respect for the decision-making process of adjudicative bodies with regard to both the facts and the law. The notion of deference ‘is rooted in part in a respect for governmental decisions to create administrative bodies with delegated powers’ . . . Deference in the context of the reasonableness standard therefore implies that courts will give due consideration to the determinations of decision makers.
Alan Freckelton, a Canadian scholar, also wrote32: Deference is an approach to judicial review taken by the courts, and effectively acts as a form of reconciliation between the rule of law and Parliamentary supremacy. That is, deference to administrative decision-makers balances the courts’ constitutional requirement to review the decisions of administrative decision-makers to ensure that they are both constitutionally valid and within the decision-maker’s power to make, and the power of the Parliament to allocate certain decision-making powers to persons authorised by or bodies created by statute.
The concept of deference can have various connotations under different circumstances, and sound differently in different legal systems and jurisdictions; by legal system, I mean basically common law, civil law, and mixed system. There may/should be different legal doctrines and theories, and different practices of the court.
Objectives of the Project The first and primary objective is to produce a thorough national report on judicial deference to administrative decision makers of the country concerned. The second objective is to enable a deep, structured, and comparative discussion of the topic at the 2018 congress based on all the national reports and discussants’ on-thespot observations. Lastly, as we have been given to understand, there will be a special volume on the topic to be included in “lus comparatum – Global studies in comparative law” to be published by Springer. So a well-formulated and structured report in the form of an academic paper would greatly facilitate the preparation of this volume. In connection with this, I would like to advise national reporters to follow from day one of your report writing the Springer manuscript guidelines
31 32
[2008] 1 SCR 190 at paragraph 47. http://www.austlii.edu.au/au/journals/AIAdminLawF/2013/13.pdf.
G. Zhu
regarding citations and referencing (see: https://www. springer.com/gp/authors-editors/book-authors-editors/bookmanuscript-guidelines). The report can be written in English and/or French.
Proposed Structure Since all national reporters are also experienced writers and experts, I only need to give an indication as to the structure of the report, while leaving the adoption of methodology in the hands of the reporters for them to decide; this largely depends on legal systems, legal training, and practical writing needs. It can be a normative investigation, a doctrinal discussion, a case study, or most likely, a mixture of these. The report should first include an introduction to the background of your jurisdiction and the salient features of the national system of judicial review. A definition of the concept “deference” or “judicial deference” here is also appropriate. Should there be no equivalent concept in your language and legal system, national reporters can feel free to adopt the one scholars of their jurisdictions use to describe the deference-like law and practice. Then follows the main body of the report, focusing on the law, judicial review system, seminal/leading/landmark national cases establishing judicial deference, standard/ grounds of review in deferential cases adopted by the national courts, and appropriate doctrines of administrative law developed to accommodate it. [A reporter specialized in the EU is welcome to discuss judicial deference situations in EU courts.] In the conclusion, a general observation of the national system concerned is a must. The reporter can further sum up some salient features or good practice of the national system, experiences that deserve attention of others, and difficulties national courts has been faced with. A brief comparison between the national system and other systems within your expertise are also welcome.
Main Questions/Issues Introduction to National System In some major common law jurisdictions such as the United States, it can be observed that, of all the areas in administrative law, one of the more fertile for published scholarship and judicial opinions is the notion of deference,33 while in civil law/continental law jurisdictions, the notional development of deference has been conditioned by the existing administrative court/tribunal system and the dynamics of executive33
http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi? article¼1071&context¼naalj.
Deference to the Administration in Judicial Review: Comparative Perspectives
judicial branches. Even among the same civil law family, situations vary from one another; some jurisdictions maintain an independent administrative court system, and some others don’t have such an independent court but have an administrative chamber within the general court. All national reports should first include an introduction to the national legal (and political) system, and address the particularities which affect the making and operation of judicial deference. This will pave the way for our further understanding and reflection of the topic and for comparison. In addition, the topic of judicial deference can be examined through the lens of constitutionalism and the separation of powers.
Questions Concerning Judicial Deference In the context of deference, more questions are to be addressed: (i) When, why, and how much should reviewing courts defer to administrative agency decisions? (ii) Should it matter what type of agency action is being reviewed? (iii) What standard/approach/grounds should courts adopt when reviewing an administrative decision? How are these grounds/standards such as reasonableness, or proportionality, applied in the courtroom? (iv) In relation to the above, reporters are invited to, if applicable: (a) probe the treatment of fact finding, especially that based on science and technology; (b) probe the interpretation of words that could be seen as delegations of policymaking power to the administrative officials, especially vague or general expressions that lack a precise meaning, and (c) probe the use of proportionality review which could be an important topic about deference, even in countries who do not think that their courts generally defer to administrators; (v) Why in this jurisdiction, the courts tend to be active and more engaging (judicial activism), while in others the courts prefer to adopt deferential approach (judicial restraint)? Any political consideration? (vi) In relation to the above, where are the limits of judicial review? (vii) Can we identify a given national system as “model” that can be applied beyond jurisdiction, and on what basis? I understand that the report from a given country may not be able to cover every single issue of the above, however national reporters are invited to address most of them. They are also reminded to highlight not only normative provisions, but also landmark cases that establish deferential practice.
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Comparison and Lessons to Learn To the extent that is possible, national reporters are welcome to make comparisons between her/his national system and the system/s s/he is familiar with. However this part is not a must. National reporters can sum up good practice and some lessons from the national systems for others’ reference.
References Books Bickel AM (1998) The least dangerous branch: the Supreme Court at the bar of politics. Yale University Press Craig P (2016) Administrative law, 8th edn. Sweet and Maxwell Hamilton A (2001) Federalist No. 78. In: Carey GW, McClellan J (eds) The federalist. Liberty Fund Jackson VC, Tushnet M (2017) Proportionality, new frontiers, new challenges. Cambridge University Press Vile MJC (1998) Constitutionalism and the separation of powers, 2nd edn. Liberty Fund
Articles Allan TRS (2010) Deference, defiance, and doctrine: defining the limits of judicial review. Univ Toronto Law J 60:41 Allan TRS (2011) Judicial deference and judicial review: legal doctrine and legal theory. Law Q Rev 127:96 Bamzai A (2017) The origins of judicial deference to executive interpretation. Yale Law J 126:908 Bree H (2015) Judicial review of administrative interpretations: lessons for New Zealand from the United States? N Z Univ Law Rev 26:791 Cameron S (2009) Non-justiciability in Australian private international law: a lack of ‘judicial restraint’? Melb J Int Law 10:102 Chan C (2011) Deference and the separation of powers: an assessment of the court’s constitutional and institutional competences. Hong Kong Law J 41:7, 9 Chan C (2013) Deference, expertise and information-gathering powers. Leg Stud 33:598 Cora C (2010) Judicial deference at work: some reflections on Chan Kin Sum and Kong Yun Ming. Hong Kong Law J 40:1 De Burca G (1997) Proportionality and Wednesbury unreasonableness: the influence of European legal concepts on UK law. Eur Public Law 3:561 Dyzenhaus D (1998) Law as justification: Etienne Mureinik’s conception of legal culture. S Afr J Hum Rights 14:11 Egeberg M, Trondal J (2009) Political leadership and bureaucratic autonomy: effects of agencification. Governance 22:673 Frank AV, Falzon QC (2016) Statutory interpretation, deference and the ambiguous concept of “ambiguity” on judicial review. Can J Adm Law Pract 29:135 Guy D (2000–2001) The paradox of judicial deference. Natl J Const Law 12:133 Helen F, Gavin P (2011) Covert derogations and judicial deference: redefining liberty and due process rights in counterterrorism law and beyond. McGill Law J 56:863 Jacobs S (2016) Energy deference. Harv Environ Law Rev 40:49, 53 Kavanagh A (2010) Defending deference in public law and constitutional theory. Law Q Rev 126:222
588 Kmiec K (2004) The origin and current meanings of “judicial activism”. Calif Law Rev 92:1441, 1444 Lawrence D (2015) Resource allocation and judicial deference on charter review: the price of rights protection according to the McLachlin court. Univ Toronto Fac Law Rev 73:35 Mullan DJ (2004) Establishing the standard of review: the struggle for complexity? Can J Adm Law Pract 17:59 Sunstein C (1990) Law and administration after Chevron. Columbia Law Rev 90:2071, 2074–2075 The Honourable Michel Bastarache (2009) Modernizing judicial review. Can J Adm Law Pract 22:227 Waldron J (2002) Is the rule of law an essentially contested concept (in Florida)? Law Philos 21:137 Warchuk PA (2016) The role of administrative reasons in judicial review: adequacy & reasonableness. Can J Adm Law Pract 29:87
Guobin Zhu PhD and Habilitation (France), is a Professor of Law at School of Law of City University of Hong Kong, Director of Human
G. Zhu Rights Law and Policy Forum, School of Law of City University of Hong Kong; he also serves as Director, City University of Hong Kong Press. He is currently Guest/Adjunct Professor/Research Fellow at Shandong University, Sichuan University, Central China University, Wuhan University Law School, Qingdao University Law School, and Zhejiang University Law School. He is a Titular Member of International Academy of Comparative Law, a Council Member of Chinese Association of Constitutional Law and Chinese Judicial Studies Association, and a Member of International Association of Constitutional Law, etc. His areas of research interest include: Chinese and Comparative Constitutional Law, Hong Kong Basic Law, Chines Human Rights Law, Chinese and Hong Kong Legal System, and Chinese Public Administration. He has published a large number of books, book chapters and articles in English, French and Chinese in above fields, and his recent works have been published in Stanford Journal of International Law, International Journal of Constitutional Law, Human Rights Quarterly, Colombia Journal of Asian Law, Suffolk University Law Review, International Review of Administrative Sciences, China: An International Journal Chinese Journal of Law, and Hong Kong Law Journal.
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings Stephen C. Thaman and Lorena Bachmaier
1
Introduction
Since its earliest articulations, what we call “criminal procedure” has been aimed at inducing suspects of criminal wrongs to admit their guilt. A person caught in flagrante or as to whom strong suspicions existed as to criminal transgressions, confronted the accusing party and the pre-trial organs, such as investigating magistrate or justice of the peace, alone and defenceless. The only help an accused might have had in early customary or procedures, was the ability to hire a “champion” to act on his or her behalf in trials by battle. These “champions,” available to suspects who were too weak or old to represent themselves, could be seen as precursors of criminal lawyers.1 History shows that torture was legally permitted to compel confessions of guilt in inquisitorial systems and lawyers played no role in pre-trial proceedings until after the case had already been investigated and the preliminary hearing dossier prepared. In the adversarial system in Great Britain, as well, the defendant confronted his or her accuser at trial without the aid of counsel, and was compelled to speak and, either by admitting guilt, showing remorse, or alleging mitigation, tried to get the jury to spare him the death penalty.2 Counsel in felony cases, where the death penalty was This report was also published in Bachmaier Winter, Thaman and Lynn (Eds), The Right to Counsel and the Protection of Attorney-Client Privilege in Criminal Proceedings – A Comparative View, Springer Nature Switzerland 2020. 1 Thaman (2010), pp. 303–304; Bachmaier Winter (2008), pp. 11 ff.; Vogler (2005), pp. 20 ff. 2 Langbein (2003), pp. 11–40.
S. C. Thaman Saint Louis University, St. Louis, MO, USA e-mail: [email protected] L. Bachmaier (*) Complutense University Madrid, Madrid, Spain e-mail: [email protected]
threatened, was only allowed in the eighteenth century, around the time the English courts began recognizing the right to silence.3 Today, criminal procedure still attempts in many countries to induce, if not coerce confessions of guilt through mechanisms such as pre-trial detention, plea bargaining, confession-bargaining at trial, penal orders, and various methods of eliminating the full-blown criminal trial. The “trial”, where a lawyer used to be considered the most necessary, is losing significance as the way of testing the prosecution’s case and determining guilt or innocence. The right to defence counsel, which is now recognized as a human right and is included in all human rights conventions and all modern constitutions, is a right, without which the presumption of innocence and the right to remain silent and force the prosecution to prove guilt without the help of procedurally induced self-incrimination, would be of little value. Only counsel stands between the state and the criminal suspect, when state organs, through interrogations, try to get the defendant to admit guilt, and thus relieve themselves from having to prove guilt with objective evidence. Yet the criminal defence lawyer, in order to effectively represent both the guilty and the innocent client, must be trusted by the client not to reveal potentially incriminating admissions or evidence that the client entrusts to the lawyer. Thus the importance of the attorney-client privilege and protected confidentiality of communications and interactions between criminal defence lawyer and criminal suspects or defendants. It has been said that, in the criminal context, confidentiality between attorney and client should be treated like the church confessional.4 The relationship is seen as so crucial to the administration of justice that a lawyer’s duty of confi-
3 4
Ibid., at 106–174. Matter of Nackson, 534 A.2d 65, 69 (N.J. App. 1987).
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_21
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dentiality never ends.5 In a 1981 decision, the US Supreme Court stated: The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice (. . .).6
The European Court of Human Rights has recognized that professional secrecy is the basis of the relationship of confidence between lawyer and client,7 and: “this privilege encourages open and honest communication between clients and lawyers . . . confidential communication with one’s lawyer is protected by the Convention as an important safeguard of one’s right to defence. Indeed, if a lawyer were unable to confer with his client and receive confidential instructions from him without surveillance, his assistance would lose much of its usefulness . . . ”.8 And in Viola v. Italy case “.. the right, for the accused, to communicate with his lawyer without being heard by third parties is among the basic requirements of the equitable process in a democratic society and derives from article 6.3 c) of the Convention”.9 The most controversial aspects of the attorney-client privilege, which are the subject of the country studies which are the basis of this general report, are the extent of the protections against the state, acting through judges, prosecutors, or investigative officials, against violating the secrecy and confidentiality of attorney-client communications and relations in order to find incriminating evidence no longer available through coercive interrogation methods. Thus we deal with attempts to compel lawyers to testify as to these communications, attempts to subpoena lawyers to turn over documentary evidence falling within the lawyer-client relationship, and finally, attempts to search lawyer’s offices or eavesdrop on lawyer-client communications, whether through wiretapping, bugging of offices, homes or jails, intercepting e-mail, or seizing written communications. It could be thought that being such a long established right and recognised as a fundamental right in most of the 5
IT-6; GE-9; GR-13; TR-6; Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998). 6 Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). 7 André and Another v. France, Appl. no. 18603/03, of 24 July 2008, § 41; Xavier da Silveira v. France, Appl. no. 43757/05, § 36. 8 Castravet v. Moldavia, Appl. no. 23393/05, of 13 June 2007, §§ 49–50. In the same sense, Sakhnovskiy v. Russia, Appl. no. 21272/03, of 2 November 2010, §§ 102 and 104; Foxley v. United Kingdom, Appl. no. 33274/96, of 20 June 2000. 9 Marcello Viola v. Italy, Appl. no. 45106/04, of October 5, 2006. If a lawyer could not meet his client without such supervision and receive confidential instructions from him, his assistance would lose much of its usefulness (S. v. Switzerland, Appl. no.12629/87; 13965/88, of 2 November 1991).
S. C. Thaman and L. Bachmaier
countries, the lawyer-client privilege would not need to be further discussed. This assumption, however, has proofed completely wrong. At present the right to lawyer-client confidentiality is facing new challenges and risks, that make it necessary to approach its study from a comparative point of view: first the increasing transnational character of criminal proceedings; and second, due to the impact of the digital data coupled with more intrusive IT investigative measures. In transnational criminal proceedings where the crossborder evidence plays a increasingly important role, it is no longer enough to provide for the protection of the confidentiality of communications between lawyer and client at the national level. The second element, which is closely related to the first one, is the impact of the digital data and e-evidence in criminal investigations. Electronic data and communications are not necessarily located in a national server, or accessible through a national internet service provider and in accessing to such communications different levels of protection may enter into play. Very few systems establish rules on how to carry out the computer searches in order to prevent disclosing confidential communication between the lawyer and his client, an the existing ones do not always provide for an adequate procedure of sifting and filtering the privileged communications and files. Finally, it is still unclear what are the boundaries of the lawyer-client privilege in relation to crimes committed by corporations. In those countries where corporate criminal liability has been introduced, it is discussed whether the in-house lawyer deserves the same level of protection as the traditional lawyer-client privilege and what should be the protections in the course of internal investigations. While there is an increasing awareness of the importance to protect the lawyer-client confidentiality right at the same time rules have been adopted for fighting against money laundering and prevention of financing terrorism that appear to go in the opposite direction, either reducing the safeguards and allowing the breach of the confidentiality or by establishing the obligation of the lawyer to report certain suspicious activities to the police or to the financial intelligence units. In parallel, prosecution services in some countries are demanding to limit the lawyer-client privilege as it hinders seriously the investigations into tax evasion and organised crime, specially in countries were the lawyer-client privilege extends to all documents held by the lawyer connected to the services provided within the professional practice.10 This report will discuss the extent of the attorney-client privilege and the confidentiality of attorney-client communications—to what kinds of communications does it apply, whether it applies to the same extent to corporate 10
NE-1.
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
criminal liability cases, whether it is part and parcel of the constitutional or international right to counsel, etc. It will then be discussed the extent to which attorneyclient communications are protected, the right not to testify of the defence lawyer, the scope of the privileged materials handed over by the defendant to the lawyer, the limits on the search lawyer’s offices and the safeguards that should be in place, specially when it comes to search of electronic files, and the protection of the confidentiality of conversations between lawyer and client when an interception of the communications is judicially granted. Following this will be a brief discussion of when violations of the right to confidentiality of communications between lawyer and client will actually lead to excluding evidence from the trial or even invalidating the trial as a whole. Thereafter will follow a conclusion as to the state of the law in this area with suggestions as to where improvements could be made. This report refers to a number of country reports which discuss the above questions. These country reports prepared for the comparative report where: Brazil (BR) (Humberto Dalla Bernardinha de Pino et al); China (CH) (Changyong Sun & Suhao Chen); Croatia (CR) (Igor Martinović); France (FR)(Johan Dechepy-Tellier); Finland (FI) (Hannu Kiuru); Germany (GE) (Bettina Weißer); Greece (GR) Georgios Triantafyllou; Italy (IT)(Massimo Ceresa-Gastaldo); Japan (JA) (Hiroki Sasakura); Netherlands (NE) (Joost S. Nan & Pieter A.M. Verrest); Poland (PO)(Maria RogackaRzewnicka & Piotr Girdwoin); Portugal (PT) (Vânia Costa Ramos, Carlos Pinto de Abreu, João Valente Cordeiro); Romania (RO) (Corneliu-Liviu Popescu); Spain (SP) (María Luisa Villamarín López); Switzerland (SW) (Wolfgang Wohlers & Veronica Lynn); Turkey (TR) (Oznur Sevdiren) United Kingdom (UK) (Richard Stone); United States (US) (Stephen C. Thaman).11
2
The Attorney-Client Privilege and the Lawyer’s Duty of Confidentiality
2.1
Tensions and Competing Interests: The Role of the Defence Attorney Between the Duties Towards the Administration of Justice and the Defence of the Client’s Interests
The lawyer-client privilege struggles among two competing interests: on one side the duty of confidentiality and loyalty to the client and, on the other side the duty as an independent 11 Reference to the reports will be done by using the two-letter abbreviation indicated and the page numbers of the report, i.e., CR-5 (Croatia Report, p. 5).
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legal professional to cooperate with the justice system. It will be seen that depending the positions of the lawyer in a certain legal system and the role attributed to him the exceptions of the duty of confidentiality will be broader or more limited. Those systems where the lawyer has the sole duty to defend the interests of the defendant and no duty to cooperate with the administration of justice are more prone to refuse any breach of the lawyer-client confidentiality. The countries studied show that while the twofold position of the lawyers is still present in several of them, the trend seems to go in the direction of favouring the role of the lawyer as representative of the party, and not as a player obliged to cooperate with the justice system. The German system has traditionally considered that the defence lawyer is an independent organ of the administration of justice obliged to act in the best interest of his client, but also under a duty to support an efficient administration of justice (Organtheorie).12 This twofold approach, based on the Organtheorie is found also in Greece,13 Turkey14 or Japan,15 and with a different approach also in the UK.16 Despite the role as an independent body of the justice administration, in all these countries it is acknowledged that such a role can be conflicting with the contractual duties to act in the best interest of the client. In most countries, in front of conflicting situations the defence lawyer should act primarily representing the interests of the client, thus the conflict would be solved in favour of the Vertretungstheorie. Although this twofold role of the lawyers is still present in several systems, the conflict between the two focal points of the ellipse (as Japan expresses, p. 13), the general trend is that it should be balanced in favour of defending primarily the interests of the client.17 Countries like Italy, Spain, France, Croatia, The Netherlands, Poland or Portugal18 have clearly established that the defence lawyer has the duty to act exclusively in the interests of the client and thus have overcome the concept of the twofold role of the defence lawyer. Switzerland took also this stance after 2011 making clear that to support his client and represent his interests is the sole duty of the defence counsel.19 In criminal cases this is even considered as the prime professional and ethical rule for lawyers. While these systems are based on the notion of the independence of the 12
GE-9. GR-3. 14 TR-8. 15 JA-13. 16 Uk-2. 17 This does not seem to be always the case in the UK where in case the duty to the court administration and the duty to act in the interest of the client and to keep the affairs of each client confidential, the former could prevail (UK-2). 18 IT-2; SP-6; CR-2; NE-8; PT-7; FR-3; CR-; PO-9. 19 SW-8. 13
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legal profession, they refuse that the lawyer might act as a “representative of justice” with a duty to cooperate with the judicial authorities, and the duty to cooperate in providing justice or promoting the public interest is seen as something linked to the Soviet ideology.20 The collaborative role of the defence is even labelled as an “unacceptable ethical” concept.21 However, the defence counsel has to defend his client while abiding by the law and respecting the ethical rules of the legal profession: legal counsel is not allowed to act against the law, nor to use unlawful means of evidence or pose obstacles to the correct application of the law. In that sense it could be said that while the lawyer does not have to cooperate with the administration of justice, his role as representative of the client does not permit him to take active steps in misleading the facts, obstruct investigative acts, and in general interfere with the authorities’apos; activity in investigating the crime. In this context, Japan can be defined as an example of “cooperation model”, within a traditional context of seeking cooperation with the establishing of the truth as a way towards obtaining a more lenient judgment from the court (confession still seen by certain courts as a form of repentance and thus a first step to rehabilitation). The UK Code of practice of the bar of England and Wales also states that the lawyer must observe the duty “to the court in the administration of justice” and when this duty enter in conflict with the acting in the best interest of the client, the first should prevail. This means that the lawyer shall never knowingly or recklessly mislead the court.22 China presents a different approach, as the community and social interest in searching the truth traditionally used to prevail above the individual defence rights. While the CCP of 2015 recognises the defence attorneys freedom to perform their professional duties, and therefore they are entitled to keep to a large extent confidential the information obtained from the client, the defence lawyer is still not the pure advocate of the defendant, but plays also the role of “social promotor of justice” and contributes to the right implementation of the laws, acting independently from the defendant’s will thus has to act frankly towards the court. Even more: zealous advocacy in criminal cases is seen in China also as uncooperative and may result in reprisal.23 This role is however changing slowly from the role of the lawyer as legal official towards a legal service provider who is not supposed to help finding the truth at the expense of the defendants interests.24
20
PO-9,11. IT-2. 22 Uk-2. 23 CH-8. 24 Ibidem.
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Depending on how the competing interests are balanced in each legal system, a more or less strict character is conferred on the obligation of confidentiality. In those systems where the duty of the lawyer is exclusively to act in the interest of the defendant, he will not be allowed to breach such confidentiality, even when this may run counter the sound administration of justice. Whereas, on the contrary, if the lawyer is considered to assist his client, but within the duty to cooperate with the courts, law provides for a breach of such confidentiality when there is a serious conflict, as will be seen with regard to the perjury case. Related to the independent position of the lawyer, is the question of whether the lawyer may take any position, support any theory of the case, which goes counter to the one adopted by the client. Thus, if the lawyer believes the client’s position will be a loser, can he or she adopt a different position they think will lead to acquittal or a better resolution of the case? In some countries it is categorically prohibited for a lawyer to take a position different than that adopted by the defendant.25 In the U.S. there are cases where the lawyer, without the consent of the client, concedes the client’s guilt, hoping that it will lead to mitigation in punishment. This is sometimes accepted by the court, but other times is condemned as ineffective assistance of counsel. In Japan in a case where the defence lawyer presented a closing argument opposed to the instructions of the client-defendant as to the defence strategy, the Japanese Supreme Court found no breach of the duty because it considered that it was done in the best interest of the client: the opinion of the lawyer against the position of the client only would constitute breach of the duty of loyalty in “extreme cases”.26 This debate, however, has almost no relevance in Europe, because even in those countries where the lawyer could act independently and theoretically adopt a defence strategy against the client’s will, in practice lawyer will make sure to avoid such conflicting situations. It is generally accepted that the defence counsel’s position is bound by the client’s instructions, and in case of conflict where an agreement on the position to be followed is not reached, then the lawyer should withdraw from representing the client.27
2.2
Basic Parameters of the Attorney-Client Privilege
It has been generally recognized in both common law and civil law systems that all communications between criminal suspects and accused persons with their lawyers are confidential, and that the attorney-client privilege enables the
21
25
E.g. NE-7,8. JA-14. 27 E.g. GE-9; NE-8; PT-7; SP-6. 26
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
lawyer to refuse to reveal any information given him or her by the client. Without this guarantee, criminal suspectsaccuseds would not trust intimate, and often incriminating information to their lawyers that would help in defending criminal charges, and that the right to counsel would be greatly impaired as a result.28 The privilege and confidentiality are also linked to the guarantee of effective assistance of counsel and, in the end, the right to a fair trial.29 An outlier in this respect is Japan, where the attorneyclient privilege is not recognized and the lack of adversarial culture among lawyers, their passivity in exercising their defence, has hindered the development of strong rules in this area: the idea that “if you did nothing wrong you have nothing to hide” is still very much present and that confession is a sign of remorse and the first step for rehabilitation, still permeates the whole criminal procedure. This might explain the attitude of defence lawyers seeking more leniency in the sentence than promoting effectively the defence rights.30 CCPs and other laws in many countries determine the parameters of the attorney-client privilege and the duty of confidentiality. Also codes of ethics of bar associations often impose duties which go beyond those required by general law, and include disciplinary panels to punish lawyers who violate their duties. The strongest protections for lawyers can usually be found in those countries where the national, regional or local bar associations are completely independent and self-governing. There was a time in many countries when lawyers were not independent, but were regulated and subject to discipline by the executive branch of government, usually in the form of the Ministry of Justice,31 though this arrangement is gradually becoming less common. It still exists however, in some countries.32 In most countries, the duty of confidentiality of a lawyer goes beyond just the information conveyed them “in confidence,” that is, in the absence of third parties other than members of the defence team.33 It goes to all information, facts, etc., they obtain as a result of their work as defence counsel,34 including what might be called “work product” in See Campbell v. United Kingdom, no. 13590/88, § 46, ECHR 1992-II, recognizing the importance of the attorney-client privilege. 29 Khodorkosvkiy v. Russia, no. 5829/04, § 232, ECHR 2011-II, Castravet v. Moldava, no. 23393/05, § 49, ECHR 2007-II. 30 JA-25,27. 31 This was typical for the Soviet Union and many of the post-Soviet republics. 32 CH-11. 33 See US-11,12, for the classic formulation of the narrower “privilege,” which only applies to conversations without third parties present. 34 For very broad duties of confidentiality, see IT-6; NE-4,5; PO-10; PT-6; RO-5; SP-5,6. In Japan, lawyers have a right and duty not to reveal any information they obtain as a result of their representation, but it is not rooted in attorney-client privilege and is personal to the lawyer, not the client (JA-11,15). 28
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the United States.35 “Work product,” consists, more or less, in the contents of the lawyer’s file, at least in relation to the lawyer’s work done on behalf of the client. It includes “interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs” put to paper by the lawyer.36 In the US this information did not, traditionally, have to be turned over to the prosecutor as a part of pre-trial discovery, but the protection of “work product” has been more recently limited.37 Thus many countries separate information transmitted to counsel as either “privileged” or “non-privileged.”38 This separation is more clearly defined in common law countries than in European continental countries, where historically the work-product privilege had no bearing. The British have created three categories of “protected” material: “privileged” material, which falls directly under the attorney-client privilege and may not be seized, “excluded” material and “special procedure” material, which are not as assiduously protected.39 Although counsel is under a professional obligation to not reveal “confidential” information that is not “privileged,” the non-privileged information can be obtained in some countries through subpoenaing the lawyer to testify, searches of law offices, interception of communications, etc.40 We will discuss these in more detail in the next section. Many countries see the duty of confidentiality to be eternal, that is, to last after the attorney-client relationship has ceased and the case which was the basis thereof, has ended.41 The privilege holder is the client,42 and the client may waive the privilege and allow the lawyer to disclose certain
35
Despite a broad duty of confidentiality in Switzerland, it only applies to information acquired during the exercise of the representation of the client. It also would not apply, for instance, to a message given by the client to transmit to a third party (SW-7,8). 36 Hickman v. Taylor, 329 U.S. 495, 511 (1947)(US-14,15). 37 In California, it is limited to writings reflecting an attorney’s impression, opinions, and theories. People v. Zamudio, 181 P.3d 105 (Cal. 2008). In the federal courts, a written statement taken by a defence investigator will have to be turned over to the prosecution if the witness testifies. United States v. Nobles, 422 U.S. 225, 245–246 (1975). Notes reflecting an opinion by a defence expert would not be discoverable, however, if the expert does not testify (US-14,15). 38 In the U.S. the terminology varies. Under ABA Code § 4-101(A) “confidential” information falls under the privilege, and “secret” information does not. In Texas, “confidential” information is separated into “privileged” and “non-privileged.”(US-13). 39 “Excluded” and “special procedure” material might include physical evidence, such as blood samples or other tissue samples used to prepare the case, or client’s records, etc. (UK-8,9,10). 40 PO-12. 41 E.g. IT-6; PO-9; RO-5. 42 However, the client has no such privilege in Japan (JA-15). The privilege is that of the lawyer and he may even prevent law enforcement officials from interrogating the clients to find out the contents of their communications with the lawyers (JA-16).
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information.43 Any incriminating statements made by client to lawyer in relation to the case for which the lawyer has been retained or appointed by the court may not be revealed by the lawyer without client permission. This also usually is the case, when the client reveals the hiding place of stolen property, where a homicide victim was buried, etc. But the privilege usually ends when the client (and sometimes the lawyer) are using their relationship to commit civil or criminal wrongs, what the Americans call the “crimefraud” exception. Different countries handle these situations differently, and they will also be discussed in the next section. In some countries, the lawyer is relieved of the duty of confidentiality if the client brings a lawsuit against her, or charges her with malpractice or incompetence during posttrial procedures.44 Thus, the default position in most countries is that a lawyer has a right (and duty) to refuse to testify or reveal during an interrogation both “privileged” and “nonprivileged” information which he acquires as a result of defending the client. Technically, then, the state can try to compel testimony about “non-privileged” information, especially if it can allege the “crime-fraud” exception and it then leaves the lawyer with the choice of refusing to testify, and perhaps facing contempt or other criminal charges. The nearly universally recognized duty of the lawyer to work exclusively “in the best interests” of their clients45 often means lawyers need not reveal information that could prevent future harms, information that one would otherwise feel morally obligated to reveal. As seen above, some countries establish also a duty of the lawyer to the court, to facilitate an effective administration of justice, to the duty to work exclusively in the interests of the client.46 In Soviet criminal procedure, the lawyer was supposed to state his or her “civil position” in the case, as an officer of the court, which could amount to a personal reproach of the conduct of the client. Similar arrangements that once existed in other countries, have now, fortunately, been abandoned.47
43 Even in such a situation, in Portugal the lawyer must still get permission from the Bar to reveal the information (PT-8). 44 BR-14; FR-7,8; IT-6; RO-7,8. 45 A “core duty” in England and Wales (UK-2). 46 In England and Wales, the duty “to the court in the administration of justice”, however, has priority over acting in the “best interests of each client.” (UK-2). The same conflict exists in German between the duty to the client and the duty to support an efficient administration of justice, though lawyers insist the priority lies with the contractual duty to the client (GE-8). In France, lawyers face a similar quandary which requires them to act according to their conscience (FR-6). 47 IT-2; PO-11.
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2.3
Dealing with Client’s Untrue Testimony and Perjury
Lawyers in most systems are duty-bound not to knowingly or recklessly mislead the court,48 whether in the presentation of legal authority, or in the presentation of evidence it knows to be false.49 The German’s say that defence counsel is not obliged to say everything he knows - but everything he says must be true and he is not allowed to advice his client to lie in court.50 When client’s mislead the court with untrue testimony the lawyer sometimes faces some difficult decisions. Defendants in criminal cases facing death penalties or very long prison sentences will sometimes testify falsely, denying or minimizing their guilt. This is to be expected and most civil law countries take this into consideration by not swearing the defendant before he or she testifies, and thus do not subject defendants to possible prosecution for perjury. One says, in recognition of this arrangement, that the defendant “has a right to lie” and there is thus no duty to prevent such lies.51 Defence counsel may even advise the defendant that he or she may not be prosecuted for perjury.52 In some countries, a lawyer may even encourage the defendant to lie if it will help his case,53 though this would be treated as misleading in others.54 Of course, when a client tells a defence lawyer his story of the events, the defence lawyer may find the defendant’s version unlikely, but, being the defendant’s advocate, it is completely ethical to allow the defendant to present this version in court, for counsel does not know the testimony is false. On the other hand, if the defendant initially admits guilt, and then tells defence counsel he wants to present an alibi defence, or testify to innocence, then the lawyer is in a more complicated position. In Japan the defence counsel should not simply accept it, but rather persuade the defendant not to lie, and if they fail to persuade the client, they should withdraw from the case.55 In the U.S., there are several approaches to dealing with this situation. The lawyer can seek to prevent the defendant from testifying perjuriously, and then, if unsuccessful, withdraw from the case,56 but this might disrupt a long trial and be counter-productive for the administration of criminal justice. 48
IT-6; PO-11; UK-2. CH-9; US-17,18. 50 GE-11. The same in Greece (GR-3) and Switzerland (SW-10). 51 CR-2; GE-11; IT-2; NE-7,8; PT-7; SP-6; SW-10. 52 GE-11; SW-10,11. 53 CR-2; NE-7,8. 54 GE-11; SW-11. 55 JA-13. In any event the lawyer would not be allowed to report to the court about the intention to commit perjury of the defendant. 56 US-17,18. This is the preferred approach in Japan (JA-13). 49
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
The lawyer may allow the defendant, or alibi witness to testify in a narrative fashion, without asking specific questions on direct examination, and then refuse to base the closing argument on the purportedly perjurious testimony.57 In some countries, the lawyer in such a situation must not present defence evidence, such as an alibi, which contradicts the defendant’s earlier confession.58 Most systems, however, in such situations would allow the lawyer to argue the insufficiency of the prosecution’s evidence of guilt, the reliability of the evidence presented by the prosecution, etc., and to ask for an acquittal.59 In China, lawyers may be prosecuted for suborning perjury if they encourage or permit the defendant to testify that his confession to the police was the result of torture or other coercion, and that, in reality he is innocent of the charge. This puts the lawyer in a very difficult position and may lead to lawyer deserting clients who make such claims in court.60 This approach is outrageous, as it is well documented that Chinese police routinely engage in coercive practices.61
2.4
Handling of Incriminating Evidence or Revealing Its Whereabouts
Occasionally an accused will turn over incriminating evidence, whether in the form of documents, the instruments of crime, such as a murder weapon, or perhaps the fruits of crime, such as stolen goods. Such evidence is usually not protected by the attorney-client privilege as it does not constitute a communication, and thus it can be lawfully seized in a search of a lawyer’s office, or via a subpoena.62 Clearly, the lawyer may not destroy or hide this evidence, for this would potentially be prosecutable obstruction of justice, tampering with evidence, etc.63 Laws or codes of ethics in some jurisdictions say a lawyer should not accept physical evidence, or incriminating documents, or should return them to the defendant.64 In some jurisdictions,
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documentary evidence which may be incriminating should be copied by the lawyer and then returned to the client.65 Furthermore, possession of the evidence could constitute a crime.66 In the U.S. a lawyer must normally turn the evidence over to the prosecution, though the act of turning it over is considered privileged, thus breaking the chain of custody from client-lawyer to police. If the prosecutor reveals where he got the evidence he has violated the attorney-client privilege.67 Statutes and codes of legal and attorney’s ethics, however, sometimes have differing approaches as to what the lawyer should or should not affirmatively do, when she comes into possession of such evidence. It is a common axiom, that a defendant may not prevent the seizure of incriminating evidence from him (through a search for instance) by just giving it to his lawyer.68 However, in many jurisdictions the lawyer has no duty to tell the prosecution or court that he is in possession of incriminating evidence or to turn it over.69 Another common occurrence is where the client tells the lawyer where the murder weapon has been hidden, where a kidnapping victim may be held, or where the victim of a homicide has been buried or hidden. In this latter situation, the general ethical rule for lawyers is that they may not reveal the whereabouts of the physical evidence nor even the whereabouts of the victim’s body without the permission of the client, because this would be like revealing a confession of guilt.70 Some jurisdictions, however, require the lawyer to at the minimum reveal the whereabouts of a live kidnap victim,71 and perhaps also a victim’s body, though in a way so as not to establish the chain of evidence linking the defendant to the location of the body.
2.5
Special Disclosure Rules in Relation to White Collar Crime, Money Laundering and Terrorist Financing
A number of countries have fashioned exceptions to the general duty not to disclose information relating to crime 57
US-17,18. SW-10,11; UK-2. 59 Most of the EU civil law countries recognize the defendant’s right to lie either implicitly or explicitly, but see also UK-2. 60 CH-9,10. 61 In a similar vein, it has been found to be reversible error for a defendant to claim his confession was the fruit of torture in Russian jury cases. Russia is another country with a well-known record of using torture and other coercion to induce confessions. Thaman (2007), pp. 375–377 (2007). 62 SW-11; US-18. 63 CH-8; GR-3; NE-7.; TR-8. The same is true if he advises the client to destroy it: SW-11. 64 CH-10; FR-8; PT-7. This is also the preferred choice in Switzerland (SW-11). 58
65
SW-11. Such as being an accessory to the crime charged to the client: UK-2,3. On Chinese lawyers’ justified fears of prosecution if they were to hold incriminating evidence: CH-10. 67 The lawyer may, however, subject the evidence to testing (fingerprints, etc.) before turning it over (US-18). 68 JA-12, UK-9. 69 CR-2; GE-12; NE-7; SP-6; TR-8. 70 BR-8,14; CH-10; NE-7; PT-7; SW-12; UK-2; US-18. 71 The lawyer is given the discretion to reveal this information in the US (US-18). In most EU jurisdictions this situation of the live-kidnapped person would fall within the obligation of the lawyer to report in order to prevent future crimes or dangers for persons—despite not being strictly a future crime, but an on-going commission of a crime—and thus, would be considered as an exception of the lawyer-client confidentiality duty. 66
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acquired during the attorney-client relationship in the area of economic crimes, money laundering and terrorist financing. In the U.S. corporate lawyers who are licensed before the Securities and Exchange Commission (SEC) are required to be whistleblowers and report securities fraud up the chain of command in the company and seek to rectify it. The have a duty to report such violations to the chief legal officer and chief executive officer of the corporation and this is deemed not to violate the duty of confidentiality. As in France, once the lawyer is hired to defend the corporation during a criminal investigation or enforcement action, the reporting rules do not apply.72 Within the EU, European Union Law has provided for a harmonised approach at the EU level in the field of fighting money laundering. Since 2001 a series of professionals— including independent lawyers—are obliged to identify clients and to report suspicious transactions.73 The Directive 2015/849 on the prevention of money laundering or terrorist financing74 has followed the same line, and specifies the precise acts and transactions with regard to which they are under the obligation to report suspicious activities.75 It states that there “should, however, be exemptions from any obligation to report to the financial intelligence units information obtained before, during or after judicial proceedings, or in the course of ascertaining the legal position of a client.” Therefore, legal advice should remain subject to the obligation of professional secrecy, except where the legal professional is taking part in money laundering or terrorist financing, the legal advice is provided for the purposes of money laundering or terrorist financing, or the legal professional knows that the client is seeking legal advice for the purposes of money laundering or terrorist financing.”76 In compliance with EU law, the Member States have implemented those Directives into their national legal 72
This is pursuant to the Sarbanes-Oxley Act of 2001 (US-16). Mainly Directives 2001/97/EC of 4 December 2001 and 2005/60/EC of 26 October 2005. 74 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC. This Directive was amended by Directive (EU 2018/843 of 30 May 2018. 75 Article 2.1. (3) (b) Directive 2015/849:“where they participate, whether by acting on behalf of and for their client in any financial or real estate transaction, or by assisting in the planning or carrying out of transactions for their client concerning the: (i) buying and selling of real property or business entities; (ii) managing of client money, securities or other assets; (iii) opening or management of bank, savings or securities accounts; (iv) organisation of contributions necessary for the creation, operation or management of companies; (v) creation, operation or management of trusts, companies, foundations, or similar structures.” 76 Explanatory Memorandum (9) of the Directive 2015/849. 73
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framework. In France, lawyers are, since 2004, subject to customer due diligence laws imposed on banks to combat money laundering and terrorist financing, which include reporting and disclosure requirements. However this technically only applies when the lawyer is acting, not as criminal defence lawyer, but is assisting clients in financial or real estate transactions, or acting as a trustee. The rules, in accordance with EU law, do not apply when the lawyer is engaged in defending suspected money launderers or terrorist financers against criminal charges.77 Similar duties to report in money laundering and financing of terrorism cases exist in all EU countries.78 In Spain, lawyers who advise businesses relating to financial or real estate transactions are obliged by legislation aimed at combatting money laundering and terrorist financing to report any operation if it could relate to those crimes to the financial intelligence agency (Commission for the Prevention of Money Laundering and Monetary Infractions). Once again, if the lawyers come across this information while acting as defence counsel in an on going investigation or case, then the duty to report disappears.79 This duty to report has been widely criticised by the lawyers,80 considering it not only against the lawyer-client confidentiality, but also difficult to apply. They claim that in practice it is not easy to identify which transactions are covered by the obligation to report, what is the due diligence required in order to assess the existence of a suspicious activity, and what is the level of suspicion that should trigger the alert to the financial intelligence unit. Despite those concerns, the European Court of Justice in 2007 in the case of Ordre des barreaux francophones81 already decided that such obligation did not violate the right to a fair trial as guranteed under Article 6 ECHR. Later the ECtHR in the benchmark judgment Michaud v. France82 held that such interference in the legal professional privilege was legitimate, necessary, not disproportionate and did not violate either Article 8 of the Convention, as the obligation to report 77
FR-21,22. For the UK, see § 330 Proceeds of Crime Act (2002) and § 21A Terrorism Act (2000) (UK-3). 79 SP-7. 80 See the CCBE (Council of the Bars and Law Societies of the European Union) Position on the requirements on a lawyer to report suspicions of money laundering of November 2004, arguing that the EU Directives infringe upon the principles of independence and professional secrecy of lawyers, available at https://www.ccbe.eu/fileadmin/special ity_distribution/public/documents/ANTI_MONEY_LAUNDERING/ AML_Position_papers/EN_AML_20041104_CCBE_position_on_the_ requirements_on_a_lawyer_to_report_suspicions_of_money_launder ing_and_on_the_European_Commission_Proposal_for_a_Third_EU_ Directive_on.pdf. 81 ECJ C-305/05 (Grand Chamber) Ordre des barreaux francophones et germanophone and Others v. Conseil des ministres, of 26 June 2007. 82 Michaud v. France, Appl. no. 12323/11, of 6 December 2012. 78
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under the EU Directive does not “go to the very essence of the lawyers defence role which forms the very basis of legal professional privilege.83
2.6
The “Crime-Fraud” Exception to the Privilege
The “crime-fraud” exception to the privilege is understood to be the situation where the attorney-client relationship is being used to commit a crime or fraud, or to conceal the commission of a crime or fraud. Professional secrecy or the privilege won’t protect documents or property from a subpoena or search if they constitute the corpus delicti of an offense, or establish the lawyer’s participation therein.84 However the boundaries between a zealous exercise of the legal profession, acting in the best interest of the client and the aiding and abetting conducts that might turn the lawyer criminally liable, are not always clear. The limits of the proper performance of the attorney’s duties and criminal conducts cannot be defined in abstract always, but need to make an assessment on a case by case basis. While all the legal systems studied recognise as a clear exception to the lawyer-client privilege when the lawyer himself is participant to the criminal offence, there are no clear limits generally applicable. On the other side there is also the risk that in practice the lawyer is considered as a suspect precisely to seize privileged documents or be able to intercept the communications with the client. The US Supreme Court has stated that “the purpose of the crime-fraud exception to the attorney-client privilege (is) to assure that the ‘seal of secrecy’ . . . between lawyer and client does not extend to communications ‘made for the purpose of getting advice for the commission of a fraud’ or a crime.”85 In England and Wales, documents given to a lawyer are not privileged, if the client was pursuing a criminal purpose in turning over the documents, even though the lawyer was not aware of this purpose.86 The “crime-fraud” exception encompasses in some jurisdictions also frauds on the court. A lawyer’s duty to the court usually prevents the knowing introduction of fabricated or false evidence.87 In some countries, a lawyer can be criminally charged for knowing introduction of false or fabricated evidence, as well.88 However, in others, a conflict may arise between the fraud on the court and the duty of confidentiality. Thus there are lawyers in Spain who believe 83 § 128. The Court took into account that the obligation to report is legally restricted to a few precise transactions and it is excluded when the information received is connected to judicial proceedings (§ 127). 84 FI-3; FR-8; § 97(1)(3) CCP(GE-17); IT-7; JA-12; SP-7,8. 85 United States v. Zolin, 491 U.S. 544, 574-75 (1989)(US-12). 86 UK-9. 87 IT-6,7. 88 IT-7.
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the duty of confidentiality would prevent the lawyer from revealing the falsity of evidence or testimony produced by defence witnesses. If the damage done by the fraud would be flagrant, however, the lawyer should turn to the head of the Bar in which he is a member for advice.89
2.7
Duty to Reveal Information from the Client Concerning Future Crimes or Civil Wrongs
Although the lawyer must definitely not reveal information about passed crimes committed by the client or others conveyed to the lawyer in confidence by the client,90 this is not necessarily the case when it comes to information about future crimes or civil wrongs, or impending harm or damage which he receives as a result of legal representation of the client. If the knowledge is of future crimes, for instance, that the client or his or her associates plan to commit, then this is usually not considered to be privileged information as it does not relate to the past crime for which the lawyer is representing the client.91 In many countries there is even the obligation to report such acts to prevent the future crime to be committed and the lawyer who does not seek to prevent the commission of the crime would be subject to criminal liability,92 although the lawyer may have a defence if he or she tries to persuade the client not to commit the crime.93 In other countries, in relation to crimes which do not necessarily portend a risk to life or serious injury the lawyer can choose to maintain silence.94 In the US, the ABA Rule 1.6(b)(1-3), suggests that a U.S. lawyer may reveal the information obtained in confidence: “(1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that 89
SP-6,7. § 344-bis CCP(IT-9); § 160 CCP(NE-7)(even serious crimes like murder). 91 CR-2. 92 § 301 CC (CR-2); IT-6; FR-7; § 371.4 CCP (GR-14); § 138 CC (GE-10)(serious crimes); NE-5; PT-7; SP-7. In the Netherlands it is required that the lawyer reports in breach of the confidentiality for preventing the future crime, but has to do it in a manner that it minimizes the obligation of secrecy (NE-5). In Portugal the reporting should be done without disclosing where the evidence came from (PT-7). 93 GE-10 (but only if the crime is not murder, genocide, or otherwise very serious. 94 Even if the crime is as serious as an incestual relationship with a child (FR-7). 90
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is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services.”95 Some states, such as California, require the lawyer to first try to persuade the client not to commit the offense.96 In the case of knowledge of an impending risk to life or limb, the lawyer must, in some jurisdictions, report the information, as protection of life trumps the duty of confidence.97 In others, such as Portugal and the U.S., the lawyer must balance the duty of confidentiality against the interest of protecting life and health, but is subject to no penalties if she decides not to disclose the information.98 In Portugal, the lawyer would try to reveal the information in a way that would not, if possible, hurt the client, such as by revealing the information to the Bar, which would then convey it to police or prosecutor.99 If, nonetheless, evidence ends up being derived from this act that damages the client in the case, it would be admissible under the justification of “lesser evils” or perhaps excludable, if the lawyer’s act was deemed to be excusable.100
2.8
Lawyers for Corporate Clients
In the U.S., where corporations are subject to criminal liability, there was once a real discussion as to whether legal entities actually may benefit from the lawyer-client privilege, inasmuch as the legal entity, as such, cannot itself communicate in private. In the meantime, however, the US Supreme Court has clearly sided with those who would grant corporations such a privilege.101 Some courts have applied what is called the “control group” test, which recognizes corporate communications as privileged if the person making the communication to the lawyer was in a position to control or play a substantial role in an action subject to the lawyer’s advice or is an authorized member of the control group capable of “personifying” the corporation. Others apply the “subject matter test,” pursuant to which the privilege would cover some communications with counsel by employees outside the control group when 95 An attorney for an issuer of stock may also reveal an intent to commit securities fraud to the SEC to prevent substantial injury to the financial interest or property of the issuer (US-16). 96 (US-16). 97 CH-7; FR-8; § GE-10); IT-6; RO-7. This is also true in the state of New Jersey, where the duty extends to crimes which might lead to “substantial injury to the financial interest or property of another, or might perpetrate a fraud upon a tribunal (US-15,16). 98 US-16 (in reference to a California rule). 99 PT-7; Cf. FR-8; NE-5; RO-7; US-16. 100 PT-7. Cf. SP-7, alluding that a lawyer could plead the “lesser crime” of exposure of secrets to defend against the crime of omission to prevent a crime. 101 Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).
they are authorized by corporate leaders to make the communication and it deals with the subject matter upon which the lawyer’s advice is sought.102 The U.S. Department of Justice (USDOJ) has adopted guidelines that encourage corporate lawyers to waive the attorney-client and work product privileges, so that the corporation will qualify as “cooperative”, and be eligible for significant mitigation of punishment under the United States Sentencing Guidelines. The inducement of such privilege waivers are controversial, but have become the norm.103 In Japan, as well, the Japan Fair Trade Commission has opined that it would be inappropriate to recognize an attorney-client privilege in the anti-monopoly area, as it would be detrimental to its enforcement efforts. Corporate lawyers argued that this would hamstring communication in companies and impair internal investigations aimed at compliance monitoring.104 When a new leniency program goes into effect in 2019, a kind of plea-bargaining system, new issues may arise similar to those which corporate lawyers deal with in manoeuvring through the U.S. Sentencing Guidelines.105 In China information corporate counsel may obtain in the day-to-day work as corporate counsel may not be protected by the privilege, so it could be unwise to hire that lawyer to defend in a criminal case, where the privilege would otherwise apply.106 In Switzerland, in-house corporate counsel may not act as defence counsel in a criminal case.107 The Court of Justice of the European Union has also declared that in-house counsels are not sufficiently independent from the firm they work for to make communications with them and other employees privileged. In its judgment of 14 September 2010108—although a competition case—the Court, following its ruling in AM & S Europe v Commission,109 held that “the confidentiality of written communications between lawyers and clients should be protected at Community level, however such protection is subject to two cumulative conditions: “first, that the exchange with the lawyer must be connected to ‘the client’s rights of defence’ and, second, that the exchange must emanate from ‘independent lawyers’, that is to say ‘lawyers who are not 102
US-12,13. US-19. 104 JA-17-19. 105 JA-28,29. 106 CH-11. 107 SW-12. Turkey, where there are no specific rules for in-house lawyers it is considered that the general protections for independent lawyers apply (TR-19). 108 ECJ Case C-550/07 P, Judgment of the Court (Grand Chamber) of 14 September 2010, Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission. 109 ECJ Case 155/79, Judgment of the Court of 18 May 1982, AM & S Europe Limited v Commission of the European Communities. 103
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
bound to the client by a relationship of employment’.” (§§ 40 and 41). Nevertheless there are many voices that claim that, when acting as defence lawyer, the in-house lawyer, regardless of his condition as employee of the corporation, should also be privileged. Doubts have been also expressed as to the information held by the compliance officer who is also the in-house lawyer, when carrying out internal investigations following the internal reporting obligation established in the corporate compliance officer.110 Experience in corporate criminal liability in European countries is quite recent and thus the protection of work-product within the corporations is hardly developed.
2.9
Sanctions for a Lawyer’s Breach of the Duty of Confidentiality
If a lawyer violates the duty of confidentiality to his or her client, the lawyer could be subject to civil, or criminal sanctions. In most countries studied, all three are possible, depending on the seriousness of the violation.111 The local or national Bar association could initiate disciplinary procedures against the lawyer, which could result in reprimands, fines, suspensions, or at worst expulsion from the Bar and thus a bar to further practice of law in the jurisdiction.112 The lawyer will also be civilly liable for disclosing lawyer-client confidential information in all countries studied, although this rarely happens in practice: claiming damages is more a theoretical possibility than an actual one, because proofing the intent or recklessness and the causal link between the financial loss or moral damages and the infringement of the lawyer’s duty to secrecy will be in most cases impossible to substantiate.113 The most extreme sanction, of course, is criminal prosecution, which is provided for in most jurisdictions, although
in several countries only upon private complaint.114 Penalties for the criminal offense of “violation of a secrecy obligation” range from one year—this is the maximum penalty foreseen in the majority of the countries studied—up to seven years prison.115 As to the procedural consequences the infringement by the lawyer of the duty of confidentiality such breach may have an impact upon the admissibility of evidence. Several countries include a strong protection of the right to confidentiality by excluding the evidentiary value of the testimony given by the lawyer in breach of this duty;116 while other systems would not render such evidence inadmissible, as long as the disclosure was not compelled by public authorities.117 In the Netherlands it is claimed that statement of the defence counsel should not be used as evidence, even if there is no rule in the CCP providing its exclusion.118
3
State Intrusion Into the Confidentiality of Attorney-Client Communications
3.1
Subpoenaing the Attorney to Testify Against the Client
As was stated above, lawyers in principle have a right to refuse to testify, if subpoenaed by a court or agency, or declare, during an interview or interrogation, with respect to privileged information they have received as a result of their representation of a suspect-accused in a criminal case. Testifying would constitute a breach of the privilege and be subject to criminal or disciplinary action, as was noted in Sect. 2.9, supra. If the information sought by the authorities is not “privileged,” however, and only subject to a duty of
114
IT-10; GR-14; SW-6. § 303 CC (BR-13); § 145 CC (CR-2)(punishment of up to one year prison); § 226-13 CC (FR-5)(up to one year prison); § 203(1)(3) CC (GE-10,11); § 371.1 CC (GR-14) ) (up to one year prison); § 622 CC (IT-10)(up to one year prison); § 134 CC (JA-11)(up to 6 months prison); §272 CC (NE-5); §§ 195,196 CC (PT-10) (punishing violation of secrecy, and exploitation of information gathered in violation of a pledge of secrecy with up to one year prison); RO-8 (up to 5 years prison); § 199 CC (SP-8) (up to 4 years prison); § 321 CC (SW-6)(up to 3 years prison); § 257 CC (TR-10). China provides for a harsh criminal punishment of up to seven years prison for breaching the confidentiality and disclosing commercial or state secrets (CH-7, 12). 116 PT-10; SP-8. In Greece the violation of the prohibition to testify and reveal confidential information by the lawyer will cause a relative nullity of the proceedings, upon being invoked by the defendant or the prosecution (GR-14). 117 IT-11; GE-11; UK-3; FR-5: in France the transcription of conversations exchanged between the lawyer and his client may be admissible as long as such breach is not carried out by a public authority. 118 NE-5. 115
110
See Nieto (2013), p. 6. The Spanish Bar (Consejo General de la Abogacía de España) in its report 4/2018 has officially recommended that the corporations do not appoint as compliance officer the in-house lawyer, but preferably chose an external lawyer to fulfil those tasks. 111 FR-5; GR-14; IT-10; PO-13; PT-10; RO-8; SP-8; TR-9; UK-3. All European countries have to provide a sanctioning system, following the CoE Recommendation (2000)21 of 25 October 2000, which under III.2 reads “Professional secrecy should be respected by lawyers in accordance with their internal laws, regulations and professional standards. Any violation of this secrecy, without the consent of the client, should be subject to appropriate sanctions”. 112 BR-9; IT-10; CH-12; CR-1,2; JA-11; NE-5; PO-13; PT-10; SP-8; TK-9; RO-8; SW-13; UK-3; US-18. 113 NE-5; GE-11.
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confidentiality recognized in a code of ethics, or other law, then the lawyer must decide whether to refuse to testify or declare, and perhaps to face the consequences if she decides to withhold testimony.119 In Portugal, if the court thinks the information is not privileged, the question will be forwarded to the Bar for an opinion, which is, however, not binding on the court. If the court seeks to compel testimony, then the lawyer might have a justification defence based on the choice of a lesser evil.120 In the majority of the countries studied, a lawyer may not even be subpoenaed or summoned to testify in a case against his or her client, nor arrested in order to be interrogated for that purpose unless, of course, the lawyer is a suspect in the same crime.121 Then the lawyer would, of course, have her own right to remain silent. There is again the problematic issue with regard to the in-house lawyer in cases where the company is indicted, but no case law on this issue has been reported. A quite different situation is to be found in the U.S., where a lawyer may be subpoenaed to testify and then may, however, assert the attorney-client privilege on behalf of his client. The court, may however, order the lawyer to testify. The attorney can move to quash the subpoena, but subpoenas of attorneys are quite common, especially in the federal system in drug and white-collar crime cases. By requiring a lawyer to testify before a grand jury, the prosecutor can ensure that this lawyer will be disqualified to serve as the suspect’s trial attorney, as the testimony will create an ethical conflict. If the lawyer refuses to testify, he or she can be held in contempt and jailed.122
3.2
Subpoenaing Documentary or Physical Evidence from an Attorney
If the client has entrusted physical evidence or documents123 to the lawyer which fall within the attorney-client privilege, that is, do not constitute corpus delicti of a criminal offense,
119
In Poland, the court can seek to compel testimony about non-privileged information subject to confidentiality rules. The Bar recommends, however, against the opinion of judges and prosecutors, that lawyers however refuse to testify, and this refusal may not be prosecuted (PO-17-19). 120 PT-14. 121 § 284 CCP (CR-3); FI-3; §153(1)(3) CCP(GE-9); IT-8,9; § 149 CCP (JA-11); § 218 CCP (NE-11); §178 CCP(PO-11,17); PT-14; RO-7,11; SP-5; § 171 CCP(SW-12); UK-2,3. 122 US-19,20. 123 The US Supreme Court has ruled that documents given by a client to her lawyer for the purpose of getting legal advice are privileged and may not be subpoenaed from the lawyer if they couldn’t have been subpoenaed from the client herself. Fisher v. United States, 425 U.S. 391, 403-05 (1976).
i.e., instruments, fruits of crime, then the lawyer can rely on the privilege to refuse to turn over the evidence.124 Although lawyers’ files contain privileged material as well as non-privileged “work product” or other information gathered in investigating the case, most jurisdictions protect the contents of a lawyer’s file from attempts to access it to the detriment of the client.125 In other jurisdictions, however, non-privileged, but otherwise confidential material in the hands of a lawyer, which is not corpus delicti, etc., may be subject to subpoena upon a showing that it will be useful to the prosecution.126 If the lawyer is a suspect in crime, however, then in most countries he or she would be subject to giving up non-privileged material whether by subpoena or search warrant.127 A lawyer may attempt to quash a subpoena, whether or not she is a suspect, for being too broad,128 if the lawyer felt it targeted privileged information, or confidential communications of other clients, not linked to the crime of which the lawyer is a suspect.129 In some jurisdictions, a court must ask for cooperation of the bar in deciding which documents are privileged, and therefore not subject to subpoena, and which are not.130 In the U.S., a lawyer could challenge a subpoena of her records based in the 5th Amendment privilege against self-incrimination, not on account of the content of the documents (which was not compelled by the government), but based on the compelled act of production, which would show her possession of the records, their authenticity, and that they are the documents requested in the subpoena.131 However, unlike an individual criminal defendant, a corporation has no 5th Amendment privilege against selfincrimination.132 Even a closely-held corporation owned by one person,133 or a small law office partnership would have no 5th Amendment right to resist a subpoena as a legal entity.134 Subpoenas are preferred by federal U.S. prosecutors, because they are less intrusive than search warrants, and
124
NE-11; US-21. § 97 CCP(GE-9); JA-11; § 98 CCP(NE-11); RO-11. 126 UK-10,11. 127 NE-11. 128 “Unreasonable and oppressive” in the terms of F.R.Crim. P. 17(c)(2) (US-21). 129 IT-9. 130 PT-9. 131 Fisher v. United States, 425 U.S. 391, 410 (1976); United States v. Doe, 465 U.S. 605 (1984); United States v. Hubbell, 530 U.S. 27 (2000). (US-21,33). 132 Hale v. Henkel, 201 U.S. 43 (1906)(US-33). 133 United States v. Braswell, 487 U.S. 99 (1988)(US-33). 134 Bellis v. United States, 417 U.S. 85 (1974)(US-33). 125
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
may be used, for instance, to access a law firm’s e-mail records or telecommunications metadata.135
3.3
Searches of Lawyer’s Offices
It is pretty much accepted in international law that all searches of homes and other private places, like law offices,136 must be authorized by a judge137 based on probable cause or sufficiently grounded suspicion, that a crime has been committed and that evidence relating to that crime can be found in the place searched. To be valid, a search warrant should particularly describe the place to be searched, and the things, or persons which are the object of the search. Judicial authorization could be omitted in cases of emergency, or exigent circumstances (danger in delay) if delay would cause evidence to be destroyed or suspects to escape, etc. In most European countries, a judge would then be asked to retroactively verify the legitimacy of the warrantless search within one to 3 days.138 It is, of course, extremely important that the lawyer, whose office is searched, is present during the search. In most countries the person whose premises are searched have a right to be present, though this is not the case in the U.S.139 Who, after all, is more able to tell the searching officers which documents fall within the warrant, which are privileged, and which are not? Criminal defence attorney offices are, of course, goldmines of potential evidence in criminal cases, whether the target of the investigation is one of the lawyer’s clients, or the lawyer himself. Where the target is the client and the lawyer is not suspected to be in collusion with the client, then the lawyer is an innocent third party which may be in possession of useful information. Some countries apply special rules when a search is aimed at a neutral third party, rather than at the suspect proper.140 In a few U.S. states, searches of
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non-suspect lawyer’s offices for evidence against their clients are prohibited.141 General requirements for the search of lawyer’s offices are set out in the ECtHR’s case law. According to the Court’s case-law, the search of a lawyer’s office, amounts to an interference with his “private life”, “home” and “correspondence” and such interference gives rise to a breach of Article 8 ECHR unless it can be shown that it was in accordance with the law, legitimate and necessary. With regard to the searches in lawyers’ offices, in addition to general criteria for assessment of the proportionality of the measure, the judicial warrant has to be based on reasonable suspicion and the scope of the search has to be reasonably limited. “The Court must also review the manner in which the search has been executed, and – where a lawyer’s office is concerned – whether it has been carried out in the presence of an independent observer to ensure that material subject to legal professional privilege is not removed. The Court must finally take into account the extent of the possible repercussions on the work and the reputation of the persons affected by the search”.142 The ECtHR has also ruled that there must be “compelling reasons” to search non-suspect lawyer’s offices,143 and that the seizure of a client’s documents from a lawyer’s office can also violate the privilege against self-incrimination.144 Searches of law offices are much more intrusive than subpoenas, as police, prosecutors, etc. have the possibility to rummage through a huge amount of information contained in filing cabinets, and computers, only a tiny part, if any of which may be within the scope of the warrant. Thus in many countries the requirement of particularity of lawyer’s office searches is looked at in a more rigorous fashion.145 In Portugal, if the authorities seek to search the office of a lawyer as a suspect, they must first charge the lawyer with the criminal offense, so as to prevent using such a search as a pretext to look for clients’ material.146
135
US-21 In Niemietz v. Germany (ECtHR), Appl. No. 13710/88, of 16 December 1992, §§ 29-33, the ECtHR held that a lawyer’s office deserved the same protection as the “home” under Art. 8 ECHR. 137 In the Soviet Union and other socialist countries following its model, prosecutors could authorize searches. This is still the case in China (CH-18). See PO-19, which suggests a prosecutor could authorize a search of a lawyer’s office. See also §§ 221, 244 CCP (SW-21), which appears to allow the prosecutor to order a search of a law office. 138 See in general, Thaman (2008), pp. 56–59. 139 Ibid., at 59–60. 140 See § 103 CCP(GE-14), requiring more particularity as to the items to be seized. Spain does not foresee different requirements to those provided for any other search and seizure (SP-11), and in practice every document that does not fall out of the scope of the judicial warrant, can be seized. In fact, all documents related to the crime can be seized, not filtering at that stage those that may be confidential or privileged. 136
141 By statute in Oregon, and by court decision in Minnesota. See O’Connor v.Johnson, 287 N.W.2d 400, 400-05 (Minn. 1979), finding a violation of attorney-client privilege and the 6th Amendment right to counsel. (US-22,23). 142 Iliya Stefanov v. Bulgaria, Appl. no. 65755/01, of 22 May 2008, § 38; Wieser and Bicos Beteiligungen GmbH v. Austria, Appl. no. 74336/ 01, of 16 October 2007, § 57; Société Colas Est and Others v. France, Appl. no. 37971/97, of 16 April 2002. 143 Khodorkovskiy & Lebedev v. Russia (ECtHR), of 31 May 2011,Appl. no.11082/06, 13772/05. 144 In André & Others v. France, Appl. no. 18606/03, of 27 July 2008, § 41. 145 Thus the “reasonable suspicion” needed to search in Switzerland is examined more assiduously in cases of lawyer’s offices (SW-22). 146 PT-15.
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Search warrants must specifically designate, as clearly as possible, which types of records or files, or other evidence are sought, so that the searching officers do not rummage through unrelated matter, thus revealing confidential material relating to non-targeted clients.147 Special attention merits the search of computers and the seizure of electronic files, as most countries do not provide for specific rules on how these searches are to be executed. The judicial warrant may specify the type of documents that are to be searched and can be seized, but still not the keywords that are to be used to filter the targeted files. On the other hand, in some cases the on-site search cannot be done, and the officers proceed to the seizure of the whole computer, carrying out later off-site the search of the files needed.148 The ECtHR case Sérvulo & Associados v. Portugal149 is illustrative of the need to establish adequate standards and protections on the lawyer-client confidentiality. Upon a feeble suspicion on the lawyer’s implication in corruption acquisition of prohibited interests and money laundering in connection with the purchase by the Portuguese Government of two submarines from a German consortium, the court ordered the search of the lawyer’s office. Using 35 keywords (such as “counterpart”, “swap” or “financial contribution”,150 89,000 electronic files and 29,000 e-mails were seized from the lawyer’s office. After complaints filed by the suspects-lawyers for infringement of the lawyer-client confidentiality and the disproportionate amount of documents seized, 850 files were eliminated from the investigative file. The Court found that the seizure of computer records in the offices of the law firm had been compensated for by procedural safeguards to prevent abuse and arbitrariness and to protect legal professional secrecy: the existence of a judicial warrant; the presence of the lawyers; the Head of the Bar as an independent observer; the fact that the search was carried out by the Investigating Judge; the procedure to supress files held before the court at an oral hearing.
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Interesting is also the dissenting opinion to this judgment written by Portuguese ad hoc Judge.151 In the UK there is a special procedure for searches of law offices when the target is protected material, such as “excluded” or “special procedure” material. In these cases, there is a preference to proceed by subpoena, similar to the preference one finds in the U.S. federal prosecutor’s guidelines.152 Thus, only in emergency circumstances, or where the lawyer refuses to turn over the requested items or is otherwise not available, circumstances usually associated with the lawyer’s own possible collusion in the client’s criminal acts, would a search warrant of the lawyer’s office be sought. And even then, the searching officials must first ask the lawyer to turn over the requested material before the search may commence.153 Where the client is the target, all of the client’s file may be covered by the duty of confidentiality, and much of it may fall within the privilege. The privileged material should be beyond the reach of the searching officials in all jurisdictions,154 the non-privileged confidential material, perhaps not.155 Naturally, physical non-documentary evidence, the corpus delicti of crime, or evidence falling within the “crime-fraud” exception would normally not be protected.156 Where the lawyer is the suspect, or one of the suspects, then the search is in many ways no different than any other search, other than the lawyer still has the duty to protect the confidentiality of the privileged material and “work product,” etc. in his clients’ files. In many legal systems special procedures must be followed in the search of lawyer’s offices so as to protect privileged, and sometimes other confidential information from being read by searching officers while they are looking for the evidence described in the search warrant. In some countries, however, searches of lawyer’s offices are no different that any search and the searching officers may seize
147
In Robathin v. Austria, ECtHR, Appl. No. 30457/06, of 3 July 2012, §§ 47, 51,52, the ECtHR found a violation of Art. 8 ECHR in relation to a warrant for the search of a lawyer-suspect’s law office because it was excessively broad in the way it permitted seizing and preliminarily searching all personal computers and disks of the lawyer, among other things, instead of narrowing in on files as to which there was a suspicion. In Niemetz v. Germany, § 37, the court also found the search warrant, which sought “documents” was too broadly formulated, and additionally found a violation of the Art. 6 ECHR right to a fair trial due to its effect on counsel’s ability to defend the client (NE-7). In Andresen v. Maryland, 427 U.S. 463, 479–482 (1976), the US Supreme Court discussed this problem in the context of a law office search (US-22). For examples on overbroad law office warrants and searches, see US-24.25. 148 On electronic searches in lawyer’s offices see the ECtHR cases Petri Sallinen and others v. Finland, Appl. no. 50882/99, of 27 September 2005; Wieser and Bicos Beteiligungen GmbH v. Austria. 149 Sérvulo & Associados - Sociedade de Advogados, Rl v. Portugal, Appl.no. 27013/10, of 3 September 2015. 150 Ibidem, §§ 83 and 103.
151 Ad hoc judge Paulo Jorge Saragoça da Matta, in disagreement on the necessity and proportionality assessment done by the Court in the instant case, and the elements taken into account to substantiate the suspicions upon the lawyers. 152 US-22; UK-11,12. 153 This requirement is found in many jurisdictions. Such as searches by special masters in California (US-23). 154 As in: CR-4; §§ 97, 160 CCP (GE-16); § 103(1,2) CCP(IT-13); PT-17; RO-11. In the UK, “privileged” material may not be the subject of subpoena or search, but the other two protected types of confidential material, “excluded” and “special procedure” material, may be seized but not pursuant to a normal search warrant (UK-8,9). 155 In Switzerland, it appears as if the entirety of the lawyer’s file is exempt from seizure (SW-21). 156 GE-16.
Attorney-Client Confidentiality as a Fair Trial Right in Criminal Proceedings
and read documents to determine whether they are those designated in the search warrant.157 In some systems, the head of the Bar association, or a specially designated lawyer unrelated to the case, must be called in to be present and monitor the search,158 if not actually carry out the search and determine which files are seizable and which are not.159 Sometimes this procedure is not regulated by statute, but is just considered good practice and is encouraged by the courts.160 Presumably, in most systems, the lawyer whose office is being searched will be present. In other systems, the investigating magistrate,161 or a pre-trial judge will look through the material, sometimes at the scene of the search, sometimes after its seizure, to determine what is seizable, and what not. In the Netherlands, the investigating magistrate must investigate each piece of evidence, document, or computer file,162 ask the opinion of the lawyer whose office is being searched, and then decide, on the scene or later in her office, whether the evidence may be seized or must be returned to the lawyer. The opinion of the lawyer that a document is privileged is usually respected, though the judge may reject that conclusion.163 In some countries, a judge carries out the search in the presence of a representative of the local bar, who gives advice.164 The decision on seizure, or not is usually made
157 JA-20,21. This is the case also in Spain, were the limits are set in the judicial warrant, but in executing the warrant, police may go through non-targeted files and documents. 158 The Dean of the Dutch Bar will observe the search which is carried out by the investigating magistrate and the judge may ask his advice. (NE-11,12). See also GR-16; PO-21,22; TR-18. 159 See Cal. Penal Code § 1524(c), which requires the California Bar to name a lawyer as “special master” to actually conduct the search of a non-suspect lawyer’s office. Courts in some other states will appoint such special masters, as well, who may be lawyers or judicial officials (US-23,24). In Niemetz v. Germany, § 37, supra note 213, the court saw the absence of a member of the bar during the search as an inadequacy of German procedure at the time. At the same time, in Jacquier v. France (ECtHR), No.45827/07, 1 Sept. 2009, the court found the presence of the Dean of the local bar association as a factor which made the search of a lawyer’s office not violating of Art. 8 ECHR (NE-7). 160 See SP-11, where the Supreme Court is divided on whether the presence of the Head of the Bar should be mandatory or not, although in his absence the evidence will not be considered as unlawfully obtained See also: UK-11,12. 161 In the Netherlands, only the investigating magistrate may authorize and conduct such a search, unless there are exigent circumstances. §§ 97, 110 CCP (NE-11,12). 162 In Italy the law forbids seizing an entire hard drive or copying it for examination later, though prosecutors continue to ignore the law (IT-14). 163 The lawyer may even appeal the decision and the controversial item will remain unread until the appeal has been heard (NE-12,13). 164 In Italy, searches during the preliminary investigation are carried out by prosecutors, and by judges after charging. In both cases, a representative of the Bar must be present (IT-13,14).
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by the judge.165 If the bar representative objects and claims the item is privileged, some systems will send the question for review to another judge.166 If there is an objection by a lawyer as to whether the material is privileged, many systems provide for packaging of the suspected files, or suspected computer hard-drives (or copies thereof) and their submission to a judge without inspecting them first, so as to preserve the confidentiality of the possibly privileged material.167 In other systems, the safeguard is deemed to be that the prosecutor conducts the search, rather than the (judicial) police,168 or the police must turn over any documents to the prosecutor, who would then review them.169 The prosecutor’s office may itself do the screening, but may use a team of prosecutors unrelated to the investigation so as to prevent direct influence on those prosecuting the case.170 In our opinion, this system lacks the guarantees that are present when the Bar itself, or a judge is the arbiter as to what may or may not be seized. In England and Wales, the police themselves conduct searches of lawyer’s offices, but special “seize and sift” rules apply when they come upon a computer hard-drive, or a trove of documents, where it is not readily clear whether they include privileged non-seizable material. The police may then seize the file, or hard-drive for the purposes of subjecting it to a later search to see if it contains seizable material.171 Although the logical place to find lawyer-client communications protected by the privilege is in the lawyer’s office or on the lawyer’s computer, it is also possible, that the client’s home or home computer also contain correspondence from the lawyer which would be subject to the privilege. If searching officers come across something, such as a letter from lawyer to client, which would fall under privileged material, then many jurisdictions impose a prohibition on seizing, or of course, reading the item.172
165
CR-4; FR-16,17; PT-16. FR-16,17 (the judge of liberties and detention); PT-16(President of the Court of Appeal). 167 This is the case in: PO-20; TR-18; SW-23. Some U.S. states use such procedures (US-23). 168 IT-13,14; RO-12. 169 GE-14,15. 170 In the U.S. federal system, the separate prosecutorial filter team is called a “taint team” or “Chinese wall.” (US-24). 171 UK-12,13,14. 172 FR-17; NE-13,14. 166
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Interception of Confidential Communications Between Lawyer and Client
3.4.1 Interception of Communications by Mail In all systems studied, postal correspondence between lawyer and out-of-custody client is protected not only by the attorney-client privilege, but also by the general constitutional right to privacy in communications. A specific protection to the lawyer-client’s communications is provided, for instance, in Switzerland, where written messages from the accused to his defence counsel or from the defence counsel to the accused may not be seized by the criminal justice authorities.173 Some countries protect those communications as lawyer-client privilege only when in the possession of the lawyer, but not when the defendant is holding them.174 When the client is in custody, however, in-and-outgoing mail between client and lawyer may be controlled to make sure envelopes or packages do not contain illegal items, yet there is still almost always175 a prohibition on prison, or other law enforcement authorities reading the contents of correspondence. In some countries, however, there is an exception for prisoners charged with terrorist offenses.176 In some countries, however, it is possible that a judge could authorize a search of the cell of a prisoner for the purpose of seizing correspondence with his lawyer, though the issue is controversial.177 3.4.2
Use of Informants to Overhear Privileged Conversations There is hardly any experience with regard to the use of informants to overhear and perhaps record otherwise privileged conversations in European countries, and the reports in Asia do not mention it either, although this type of intrusion should be condemned for violating the right to counsel, not to speak of the attorney-client privilege and perhaps the right to silence. In the U.S. there is contradictory case law in this area. In a seminal decision, the US Supreme Court held, in a case where an undercover agent was arrested along with the defendant for anti-Vietnam-war vandalism and maintained his cover during the trial by participating in attorney-client discussions, that a 6th Amendment violation § 264(1)(a)CCP(SW-25). JA-11; GR-13. 175 A glaring exception is in China, where prison officials routinely read prisoner-lawyer correspondence, which, as a result, seldom takes place (CH-19,20). 176 Monitoring of correspondence is possible with a court order if the defendant is charged with belonging to or forming a terrorist organization: § 148(2) CCP(GE-17). In the US federal system, correspondence in terrorist cases may also be monitored (US-25). 177 A Japanese court found such a search illegal, but refused to categorically rule out the practice (JA-16). 173 174
would only occur if the defendant could prove that privileged information actually contributed to the defendant’s conviction.178 In California, however, the mere use of such an informant to overhear privileged communications and report them to the police can constitute a violation of the 6th Amendment and the California right to counsel and the remedy is dismissal of the case.179 Some countries, however, allow for exceptions for cases involving terrorism, national security, or other serious crimes, as long as a warrant has been obtained.180 However a “Catch 22” factor exists here, in relation to attorney-client privilege in some jurisdictions, for if the undercover informant was not a member of the defence team, then the overheard conversation may not be privileged, as it was not conducted in private.181
3.4.3
Wiretapping, Bugging, Intercepting Electronic Communications or Communications Metadata Wiretapping, acoustic eavesdropping (bugging), and intercepting electronic communications or e-mail are all considered to be serious invasions of privacy which may only be authorized by a judge182 in the investigation of serious crimes and which must be based on probable cause, that the conversations targeted relate to the commission or preparation of such crimes, or will help prove guilt thereof. The rules governing wiretapping and bugging are usually more demanding than those related to a normal search warrant, and may be requested only by a prosecutor and sometimes require approval by a higher-level judge.183 Most statutes also require swift notification to those whose conversations were intercepted or recorded, that the measure was taken, so 178
Weatherford v. Bursey, 429 U.S. 545, 557-58 (1977)(US-25). Barber v. Superior Court, 598 P.2d 818 (Cal. 1979)(US-25,26). In comparison, in another case, federal officials secretly placed a body bug on a lawyer and monitored conversations between the lawyer and his client. While recognizing an invasion of the attorney-client privilege, the court found “harmless error”, in that the defendant had pleaded guilty, and thus no evidence from the manoeuvre was used in court. United States v. Ofshe, 817 F.2d 1508, 1510 (11th Cir. 1987).)(US-26). 180 The Regulation of Investigatory Powers Act 2000 in the UK (RIPA) allows “intrusive surveillance” to listen and record otherwise protected conversations based on a decision of the Secretary of State and approval by a surveillance commission. This could also extend to the use of hidden microphones (bugs)(UK-16,17). 181 US-26. 182 Again with the exception of China, where there appears to be no hindrance to wiretapping or bugging attorney-client communications (CH-19). 183 In general, see Thaman (2008), at 61–68. Cf. FR-17,18. After England and Wales, for years, had a system permitting police officials to do bugging with only retroactive review by a commission composed of judges, the Investigative Powers Act 2016, which applies to the whole UK, now clearly requires judicial authorization before the measure goes into effect (UK-14,15,16). 179
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they can inspect the content of the conversations and take other legal action. When these measures are aimed at attorney-client conversations, then considerations related to the attorneyclient privilege and, of course, the right to counsel arise,184 along with the usual privacy concerns. In most of the countries studied it is absolutely prohibited to intercept or listen in to attorney-client conversations, even if they will reveal evidence that could lead to the conviction of the client of the crime for which he has sought representation.185 In the notorious Gürtel case, the Spanish Supreme Court condemned interceptions of attorney-client communications ordered by former investigating judge Baltasar Garzón of the National Court and commented how such illegal actions undermine the presumption of innocence and the privilege against self-incrimination.186 The problem in practice is not so much the interception of the lawyer’s telephone or e-mails, but that those confidential conversations are tapped by chance when intercepting the suspect’s or defendant’s phone or computer. Usually it is recognised that there is hardly any possibility to avoid that such conversations are finally intercepted or even recorded. In particular if the conversations are in another language or the interlocutors do not identify themselves, it may not be possible to know at the moment of recording the conversation that the privileged lawyer-client relationship is being affected. In such cases, the interception will continue and the critical conversations likely be recorded. In Spain after 2015 amendment of the CCP it is provided that when lawyer-client confidential conversations or communications had been captured or intervened during the execution of any interception measure (phone or computer), “the court shall order the removal of the recording or delivery to the recipient of the detained correspondence, noting this circumstance in the proceedings”.187 Most systems will not avoid listening to those conversations even if this is unlawful and thus will not be able to be presented as evidence in court. But at the end it is difficult that such communications are not used to lead to other relevant information for the investigation. A very protective solution has been implemented in the Dutch system. Since 2011, Dutch lawyers may designate up to four telephone numbers which may not be tapped.188
Furthermore, while other phone numbers are tapped, if they connect to one of the numbers registered as excluded, the intercepting system automatically will impede the interception. Some countries will allow prosecutors to ask a judge to allow bugging or listening into conversations conducted between lawyer and client in jails and pre-trial detention facilities in cases of terrorism or other serious crimes, if there is a suspicion of collusion between the two.189 Otherwise, the confidentiality of such conversations, which are clearly covered by the privilege, may not be violated.190 The ECtHR has also spoken against interception in any way of conversations between detained suspects or accuseds and their lawyers, for even the possibility of being overheard will chill the protections of the attorney-client privilege.191 Where the lawyer is suspected of colluding with the client, thus triggering the “crime-fraud” exception, then wiretapping is often allowed.192 In the UK. Since 2016, warrants to intercept may be obtained by high police officials from the Home Secretary, who must get authorization from a judicial official. This is only allowed in cases involving terrorism, national security, or “serious crime” and there must be “exceptional and compelling circumstances” which make the intervention proportional, that is, outweigh the interest in the confidentiality of attorney-client conversations.193 Many countries, as well, have a separate, often less rigorous arrangement for intercepting conversations in terrorism or organized crime cases, or cases which otherwise are a threat to national security. Here, often, judicial authorization is not required, nor must there be classical “probable cause” that a crime is being committed or prepared. Also, notification may often be indefinitely withheld if it would jeopardize the investigation. In the U.S., the National Security Agency’s (NSA) massive secret wiretapping and telecommunications metadata-collection operations have by and large been approved under the Foreign Intelligence Surveillance Act’s (FISA) special regime for wiretapping by a secret court of judges. Normally, wiretaps under this law aimed solely at “foreign agents” or those involved in international terrorism need no judicial authorization. As a result of the NSA’s
§ 76 CCP(CR-4); SP-12 (only with judicial authorization). A prosecutor who secretly listened to prisoner-lawyer conversations in Indiana was suspended from the Bar for 4 years for misconduct (US-27,28). 191 NE-8,9, citing S. v. Switzerland, § 48; Brennan v. UK, Appl. no. 39846/98, § 58; Zagaria v. Italy, no. 58295/00, of 27 November 2007, § 35-36; Castravet v. Moldava, § 51; Sakhnovskiy v. Russia (GC), § 97; and Khodorkosvkiy v. Russia, § 232. 192 BR-16,17; FR-18; NE-14; § 179(2) CCP(PT-17); RO-12,13 (but only if suspected of a grave crime); SP-12; SW-23. 193 UK-17,18. 189
184
See Bachmaier Winter (2004), p.44 ff. In the U.S. it is normally considered to be a serious violation of the right to counsel if the prosecutor wiretaps or otherwise listens in to conversations of a suspect-accused with his or her lawyer (US-27). 185 § 103(5) CCP(IT-14); JA-23; RO-12; SW-23. 186 SP-12, citing decision of the Supreme Court of October (Auto del tribunal Supremo)19/2010. As a consequence of this severe infringement, the judge was dismissed from the judiciary. 187 Bachmaier Winter (2016), pp. 700–701. 188 NE-14.
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program, conversations between lawyers and terrorism suspects overseas have been intercepted.194 In relation to active listening into conversations, most statutes require a process of “minimization,” that is, attempts by the eavesdroppers to not listen to conversations that are not related to the probable cause which justified the warrant.195 This is the equivalent of non-rummaging dictates in the area of searches. In the case of lawyer-client conversations, the listener should immediately turn off the listening device, stop listening and recording any conversations that appear to fall within the attorney-client privilege. Despite the call to “minimize”, in the U.S. under FISA, a violation of the right to counsel will only occur when investigative officials listen in to conversations of charged defendants with their lawyers, as the 6th Amendment right to counsel only inures upon charging. Thus, conversations between criminal suspects would not be covered. In addition, some courts say it does not violate the minimization requirement or the right to counsel to listen to conversations for a while, to see if the lawyer might be involved in the suspected criminal activity. Thus, they need not turn off their microphones when they realize they have intercepted a conversation between lawyer and client.196 At least one court has held that a telephone conversation between defendant and the defence lawyer’s investigator was not privileged, because a third party, defendant’s mother, was listening in to the conversation.197 Unlike with searches, one seldom finds provisions where judges or presidents of the bar are called upon to make the decisions about what conversations are protected by privilege and which are not. Usually it is the prosecutor who makes this decision.198 Thus challenges to the seizure of an arguably privileged call must be made ex post facto after the interception has been made.199 Once challenges are made, however, it may ultimately be a judge who decides whether particular
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conversations are covered by the privilege and may not be turned over to the prosecution.200 In the U.S. prosecutors try to police themselves by having, as with searches, “taint teams” of prosecutors not directly involved in the investigation, to sift through intercepted conversations and separate out those between client and lawyer which may be privileged.201 Investigators can also use devices to record, in real time, ingoing and outgoing calls from a particular telephone number, which are called “pen registers” or “trap and trace devices” in the U.S. Although these devices do not access the content of conversations, they could ascertain when and whether a suspect contacted a lawyer, which is itself privileged material in many legal systems. Judicial authorization is required for these measures in some, but not all countries.202 Some countries have enacted new legislation which also allows law enforcement agents, with judicial authorization, to hack into computers and actually capture electronic communications as they take place. There are not always special rules relating to law-firm computers or discussions between lawyer and client in these countries.203 Finally, many lawyers communicate with clients by e-mail and, thus, privileged conversations are often archived and stored by telecommunications service providers. In some countries, these stored communications enjoy the same protection as do attorney-client conversations in real time.204 This is not true in the U.S., where federal prisoners are specifically told that their e-mail communications are not private.205 In many jurisdictions, law enforcement officials have an easier time gaining access to stored e-mail conversations, than they do in getting a warrant to intercept conversations in real time.206 Naturally, service providers also store archived telecommunications metadata which indicate who called whom on what day and at what time, as well as who exchanged e-mails with whom. This is also sometimes quite easy to access.
194
Lawyers joined a suit brought by Amnesty International to try to discover whether their conversations had been intercepted by NSA but the US Supreme Court rejected the suit, claiming they could not prove that they were targets of the NSA’s taps. Clapper v. Amnesty International, U.S.A., 568 U.S. 398, 404-05 (2013)(US-28). 195 In Title III, the statute regulating criminal wiretaps and bugs, and in FISA, the statute regulating foreign intelligence wiretaps, officials must attempt to exclude lawyer-client conversations when they “minimize.” (US-28). 196 US-28. 197 People v. Alexander, 235 P.3d 873, 888-93 (Cal. 2010), cited at US-28. 198 NE-14. In Spain it will be the investigating judge who shall make this decision, following Article 118.4 CCP, after 2015, see Bachmaier Winter (2016), p. 701. 199 NE-14.
200
SW-23,24. US-28. Such teams have not, however, been used in relation to cases where under FISA, or the NSA program, conversations between indicted foreign clients and lawyers have been intercepted (US-29). 202 Italy and Germany would require judicial authorization, but not the U.S.; see Thaman (2008), pp. 69–71. 203 FR-18 (no protection for lawyers from police use of IMSI-catchers). 204 IT-14,15; PT-17. Nevertheless the frequent practice of mirroring the whole computer in physical as well as when a remote search of computer is carried out, it will cause the unavoidable seizure of the privileged communications. See Bachmaier Winter (2017), pp. 10 ff. 205 US-27,28. 206 In Japan they may be accessed with judicial authorization, though the lawyer may make a claim of privilege (JA-23). Cf. CH-19. 201
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4
Exclusionary Rules Related to Violations of the Attorney-Client Privilege and the Right to Counsel
If a criminal defendant is completely denied the right to counsel at trial, then in most countries207 we have a fundamental jurisdictional flaw in the proceedings and no judgment emanating from the trial will be valid.208 In civil law jurisdictions one sometimes talks of an “absolute nullity.”209 However, despite the egregiousness of such violations, there may actually be no evidence to exclude from the trial. These are examples of fundamental violations of due process which cannot be purged, or declared harmless.210 A step below complete denial of counsel, would be egregious violations of the right to attorney-client confidentiality, examples of which have been discussed in the previous section, such as secretly wiretapping or listening in to such conversations, using informants to crash the defence team, or searches of lawyers’ offices in violation of the special rules established for such searches to protect attorney-client privilege. Some jurisdictions have strong exclusionary rules for such violations.211 In other systems, a serious breach of attorney-client privilege could result in the case being dismissed.212 In France, however, a privileged conversation secretly recorded by a private party may be admissible in a criminal case.213 Naturally, the attorney-client privilege may be violated where law enforcement accesses electronic communications stored in the “cloud” by internet service providers.214 In many countries, this, as with a wiretap or bug, will lead inexorably to exclusion. In the U.S., however, stored communications are accessible with a simple search warrant,
207
Again, China is an outlier here (CH-20). § 439(1)(10) CCP(PO-8,26)(when provisions for mandatory counsel violated). 209 § 158(2) CCP(SW-25,26) makes any evidence inadmissible if the defendant was not advised of the right to counsel. On “absolute” and “relative” nullities, see Thaman (2013), pp. v410–412. 210 They are called “plain error” in the U.S. Unites States v. Olano, 507 U.S. 725 (1993). 211 CR-5 (normally exclusion of evidence and fruits of the poisonous tree by violation of the rules relating to law office searches); §§ 100-5 (3); 56-1 CCP(FR-19); § 160(a) CCP(GE-16,18); IT-15; JA-24; § 359a CCP (NE-14,15); § 126(3) CCP(PT-20,21) (a violation would also be grounds for not recognizing an European arrest warrant, a kind of inter-European extradition order); RO-13,14; SW-25,26 (though the CCP is not clear on this, the case law has clearly recognized inadmissibility of evidence gathered in violation of the right to counsel). The State of Oregon excludes all evidence gained in violation of its law regulating law office searches (US-34). On the exclusionary rules of evidence in Spain, see. Bachmaier Winter (2013), pp. 209–234. 212 NE-15,16; UK-21. 213 FR-5 214 § 179(1) CCP (PT-21). 208
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rather than the more demanding wiretap order of Title III, the wiretap statute. In the U.S., a non-suspect lawyer, whose office is searched in violation of the 4th Amendment, can enjoin the use of the evidence to protect the attorney-client privilege and lawyer confidentiality and seek to compel its return, but cannot move to suppress the evidence due to a violation of the 4th Amendment, because she is not a defendant and has no standing to move to suppress.215 Similarly strong rules exist for violations of the right to counsel in the form of compelling the lawyer to testify or make declarations regarding what her client confided to her.216 On the other hand, as mentioned earlier, if the lawyer violates the privilege and testifies against the wishes of his or her client, this does not necessarily lead to exclusion.217 Although nearly all countries provide for exclusion of conversations intercepted in violation of the country’s legislation regulating wiretapping, bugging and interception of electronic conversations,218 and the constitutional right to privacy in one’s communications,219 the interception of a lawyer-client conversation may not have violated such constitutional or legal prohibitions, as it may have been authorized by a judge and based on probable cause. The same is true with a search of a law office. In the U.S. a search of a law office may not violate the 4th Amendment, but the evidence may not be usable due to the attorney-client privilege. The courts are split, however, on whether the prosecutor could make derivative use of the information, such as in furthering the investigation.220 The exclusionary rule in U.S. Title III, however, normally only applies to core violations, such as a lack of a warrant or probable cause, and not necessarily to violations in the “minimization” requirement.221 However when the failure to minimize relates to attorney-client conversations, most courts will suppress all the monitored conversations between attorney and client.222 Even if the interception violated the wiretap and bugging laws, as well as the constitution, the rules of many systems 215
US-34. Such statements may not be used in § 300 CCP (CR-2). 217 It does mean exclusion in: PT-21; RO-8; it does not trigger exclusion in: GE-11; UK-3. 218 An exception may be England and Wales, where conversations intercepted in conformity with the law are not usable as evidence, but only for intelligence purposes (UK-18); the strong exclusionary rule in Title III of the U.S. Code, which extends to fruits of the poisonous tree, is found at 18 U.S.C. § 2517(4). FISA has a similarly expansive exclusionary rule. 50 U.S.C. § 1806(c,e).) Fruits of illegal wiretaps may also not be used to impeach a testifying defendant, as may the fruits of a search made in violation of the 4th Amendment (US-34). 219 PT-18 (neither under Art. 32-8 Const. nor § 126(3) CCP). 220 US-34. 221 Scott v. United States, 436 U.S. 128 (1978). (US-35). 222 US-35. 216
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permit the use of physical evidence, or corpus delicti evidence which may have been gathered as a “fruit of the poisonous tree”, that is derivative evidence indirectly related to the violation.223 The doctrine of the “fruits of the poisonous tree” was first articulated in US Supreme Court case law in the 1930s224 and has since been developed to contain certain well-known “exceptions”: such as (1) where the link between the illegality and the evidence sought to be excluded has been attenuated (“attenuated taint”); where there was an illegality, but the evidence was ultimately seized in an errorfree way (“independent source”) or where it is likely that the evidence would have been discovered without any violations despite the violation which actually led to its discovery (“inevitable discovery”).225 Many countries now accept these “exceptions,”226 which are really not exceptions at all, for the evidence was not, in the end, the “fruit” of the violation at all. Some countries allow “fruits,” thus, “if the evidence could not otherwise have been legally discovered.”227 Although many countries do not recognize the doctrine of the “fruit of the poisonous tree,” when it comes to physical fruits of unlawful wiretaps, or other privacy violations,228 this may be a different case when the core violation is that of the right to counsel and violation of the attorney-client privilege.229 In the U.S., some courts, while recognizing a violation of the privilege and even the right to counsel, may not reverse a conviction if they are convinced that the information gathered during the violation was not used at trial.230 Here, of course, there is the further question of benefits which can be gleaned from just knowing the defence strategy in a case, which might not show up as “evidence” in the traditional sense of the word. Finally, of utmost importance are the violations of the right to counsel in relation to interrogations. In Europe, the Salduz decision has reinforced a strong right to counsel 223 CH-20; IT-15(however an unlawful wiretap may not be used to provide probable cause for a subsequent lawful wiretap); PO-23. In general, see Thaman (2013), p. 439. 224 In the case of Nardone v. United States, 308 U.S. 388 (1939). 225 See Thaman (2013), at 432–433. 226 § 157 CCP(BR-18,19) recognizes the fruits of the poisonous tree with exceptions for attenuated taint, independent source and inevitable discovery. The Constitutional Court has ruled virtually the same in Portugal (PT-19). In a decision of March 14, 1994, the Spanish Constitutional Court explicitly adopted the “doctrine of the fruit of the poisonous tree”, introducing similar exceptions as the ones recognised in the US, see Bachmaier Winter (2013), p. 215 ff. 227 RO-13. 228 Thaman (2013), p. 435. 229 This appears to be the case in the Netherlands (NE-14,15), though the courts will not deem an arrest of a suspect invalid because the information of his whereabouts was obtained from a violation of the attorneyclient privilege (NE-16). 230 US-32.
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during the pre-trial stages, and especially before and during interrogation, and has even declared a violation of the Art. 6 ECHR right to a fair trial if the right to counsel has been denied. This is tantamount to creating an exclusionary rule in the event of a Salduz violation and most European countries see it this way. Many countries have seemingly categorical exclusionary rules when police or prosecutor violate any constitutional guarantees or rules laid out in the CCP.231 Thus, in such countries, the mere violation of the attorney-client privilege, which may not be of constitutional stature, or the right to counsel, which is, would automatically lead to exclusion. If the categorical exclusionary rule extends to the fruits of the poisonous tree, then physical evidence would also be inadmissible. Other countries limit exclusion to constitutional violations, or violations of “fundamental rights and guarantees.”232 Here the right to counsel, when violated, should lead to automatic exclusion, and perhaps also of derivative physical evidence.233 Sometimes a statute will include its own exclusionary rule, which is the case, often, with wiretapping laws.234 However, again, some countries do not extend exclusion to derivative physical evidence, discovery of witnesses, use of evidence to further the investigation, etc. The majority of countries do not have categorical exclusionary rules, but use various balancing or proportionality tests which are set out either in statutes, constitutions or in case-law.235 The importance of the right breached is usually a crucial factor. Here, violation of the right to counsel should be considered to be among the most serious because it undermines the procedural position of the defendant throughout the proceedings. Many countries, which treat the right to privacy as being of lesser importance,236 and therefore seldom exclude derivative physical evidence, may treat the right to counsel as being more important. The importance of the right breached is then balanced against the gravity of the violation, i.e., did the officer act in good faith, thinking he 231
Art. 5(LVI) Const.-(BR-17). The Polish Supreme Court seemed to rule in 2010 that any evidence gathered in violation of procedural rights could not be used, but this contradicted § 168 CCP-PO which says that exclusion is not necessarily required following such violations (PO-23,24,25). Cf. RO-13. In general, see Thaman (2013), pp. 414–415. 232 § 11.1 Law on the Judicial Power in Spain (SP-14). 233 Art. 32(8) Const. (PT-18) lists a number of violations of fundamental rights which will lead to exclusion, but does not mention the right to counsel. § 11.1 Law on the Judicial Power in Spain also expressly extends to derivative evidence (SP-14). 234 As with Title III in the U.S. 18 U.S.C.§ 2515. 235 FI-5. In general, see Thaman (2013), pp. 426–430. 236 Indeed, the ECtHR has found serious violations of the Art. 8 ECHR right to privacy, but to my knowledge none of these violations has resulted in a finding of an unfair trial (or possible exclusion of the evidence) under Art. 6 ECHR.
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was following the law, as well as the importance of the evidence in proving the case, and the seriousness of the case.237 These last two factors are questionable, as it is only probative, material evidence that a defendant would ever want to exclude, and it is in serious cases, with the harshest of punishments, that due process should be stronger, than in trivial ones. Some systems characterize their balancing regimes in the terms of the right to a fair trial, which is the approach taken by the ECtHR. This is true in England and Wales where §78 PACE allows exclusion “if:. . . it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it”.238 Other systems will only exclude if introduction of the evidence would bring the court into disrepute.239 In these systems, violations of the right to counsel are also treated more seriously than violations of the right to privacy and often lead to exclusion.240 Finally, even some of the strictest countries in relation to exclusionary rules have recently relaxed their vigour. Spain’s seemingly ironclad rule on “fruits of the poisonous tree” has been turned into a kind of balancing test by a decision of the Constitutional Court in 1998, where the seriousness of the violation, the importance of the right infringed, the immediacy of the connection of the evidence with the illegality, etc., are weighed.241 The idea of “core areas” of privacy and personality protection which will not admit of violation, does not exist in many countries. Normally everything is accessible with judicial authorization and probable cause. However, there are voices who feel the violation of the attorney-client privilege, in the sense of listening in to actually privileged conversations, should be recognized as a “core area” where the defendant should have a “reasonable expectation of privacy” as long as conversations are limited to discussing the preparation of the case for which representation has been sought.
5
Conclusion
When it comes to protection of the confidentiality of attorney-client communications, most of the countries studied have quite solid legislation which prohibits interceptions of these communications especially with non-suspect lawyers and render inadmissible as evidence any communications 237
Exception for serious cases is recognized in: CR-5; SW-25. UK-19; See in general, ibid., at 427–428. 239 See in general, ibid., at 428–429. 240 Under § 78 PACE in England and Wales (UK-4,5). 241 Bachmaier Winter (2013), p. 217, SP-14. 238
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unlawfully accessed. Nevertheless, there are still important problems to be addressed. One of these problems comes with the “crime-fraud” exception, or, more clearly, the cases where the lawyer is suspected of colluding in the criminal schemes of the client. Fears have been expressed that police and prosecutors use trumped-up suspicions of attorney collusion to get warrants to overhear attorney-client communications, as a pretext for monitoring selfincriminatory statements of the client.242 Many countries have protective procedures for searches of law offices (of suspect-, and non-suspect lawyers) which provide for neutral third parties (Bar officers, judges) to decide which materials are privileged and which not. There is a desire to extend this type of protection to wiretaps, though, naturally, this is more complicated, though not impossible, to effectuate. The Dutch rules are a good example on how to prevent any intrusion in telephone conversations of lawyers.243 Searches of computers and the sifting of privileged and non-privileged materials, is still a challenge in most countries, lacking precise rules on how to carry out such e-searches. Another danger is the gradual switch in the paradigm of law enforcement from repression of past crimes, to prevention of future crimes.244 Certain jurisdictions allow for exceptions to allowing suspects to meet with their clients, or allowing them to confer in secrecy, where the client is suspected of terrorism, organized crime or other serious offenses. In a sense, there is a pretext at work in this situation, as well, that is, that the lawyer is in cahoots with the terrorist suspect. Fortunately in some jurisdictions, this must be alleged in a reasoned affidavit before judicial authorization may be granted. There is a related preventive measure gaining in popularity, of requiring lawyers who represent corporate clients to report on signs of money laundering or terrorist financing, thus turning lawyers into quasi-government agents. The need to ensure access to lawyer and the confidential communication between the detained person and his counsel is of crucial importance. Criminal procedure has often been used and abused to induce criminal suspects to admit guilt, initially as a result of more or less coercive interrogation techniques, but now through systems of inducing guilty pleas or waivers of the right to trial as early as possible during the criminal process. American plea bargaining was the pioneer in this area, and now has eliminated 95% or more of full criminal trials. In those cases where criminal justice no longer consists in litigation, but in administrative-like negotiations, then the 242
PT-24. NE-20. 244 See in general, Ashworth and Zedner (eds) (2014); Ross and Thaman (2016), pp. 494–497; Hirsch Ballin (2012), p. 10 ff.; Bachmaier Winter (2018), pp. 171–191. 243
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attorney-client privilege is also endangered, for there may be the risk that prosecutor may offer a favourable deal in return for waiver of important rights, such as the right to appeal or the attorney-client privilege. Thus, an effective right to counsel at arrest and before the first interrogation is essential both to assure suspects don’t confess under pressure in the police station, in the arraignment court, during the preliminary investigation, or at trial. Europe has taken big strides here in the wake of the Salduz decision, and the European Union rules have also spoken for a categorical protection of attorney-client consultations in jails and detention centres, before interrogations or cooperation or consensual procedures take place. The U.S., once a pioneer in this area with the Miranda decision, has fallen behind and still clings to the notion that the right to counsel only inures upon charging. Although the reports do not show significant problems in defence counsels being compelled to testify in breach of their legal privilege, it has still to be encouraged that lawyers in any event must refuse to testify, even at the expense of being held in contempt, if they believe the sought-after testimony falls within the privilege. They must move to quash subpoenas of protected material and vigorously oppose seizure of privileged files during searches. In this respect, the classic adversarial posture of Common Law systems dovetailed better with the privilege than the old inquisitorial criminal proceedings, but the progressive legislation in the European landscape to ensure the lawyer-client privilege has shown to be in some areas an example of protection of this right. Still the measures to be taken regarding the protection of work-product and electronic files and communications are to be strengthened in all countries studied. Strong, independent Bar associations are indispensable to the functioning of the attorney-client privilege and its protection against overzealous legislators and law-enforcement cadre.245 In this context the Council of Europe Recommendation 2121 (2018) “The case for drafting a European convention on the profession of lawyer”, of 24 January 2018 is to be welcomed: by this recommendation the Assembly calls on the Committee of Ministers to draft a Convention to reinforce the legal status of the profession of lawyer as defined in Rec (2000)21, and among others “7.1.2. ensure that guarantees in relation to fundamental issues such as access to a lawyer and lawyers’ access to their clients, legal professional privilege, civil and criminal immunity for statements made in the course of their professional duties and the confidentiality of lawyer-client communications are reinforced as necessary in 245
In this sense, the Council of Europe Recommendation R. (2000)21, on the freedom of exercise of the profession of lawyer, of 25 October 2000, requiring that the bar is completely independent. For a long time the trend has been to remove the bar from under the tutelage of ministries of justice.
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order to respond to developments in the surrounding legal and regulatory context, including measures introduced to counter corruption, money laundering and terrorism”.246
References Ashworth A, Zedner L (eds) (2014) Preventive Justice. Oxford University Press, Oxford Bachmaier Winter L (2004) Intervenciones telefónicas y derechos de terceros en el proceso penal. La necesidad de una regulación legal del secreto professional y de otras relaciones de confianza. Revista de Derecho Procesal 1–3:41–82 Bachmaier Winter L (ed) (2008) Proceso penal y sistemas acusatorios. Marcial Pons, Madrid Bachmaier Winter L (2013) Spain: the constitutional court’s move from categorical exclusion to limited balancing. In: Thaman S (ed) Exclusionary rules in comparative law. Springer, New York, pp 209–234 Bachmaier Winter L (2016) Access to telecommunication data in criminal justice: Spain. In: Sieber U, von zur Mühlen N (eds) Access to telecommunication data in criminal justice. Duncker & Humblot, Berlin, pp 647–704 Bachmaier Winter L (2017) Remote computer searches under the new 2015 Spanish Law: the proportionality principle and the protection of privacy. ZSTW 2017 129(1):1–27 Bachmaier Winter L (2018) Countering terrorism: suspects without suspicion and pre-suspects under surveillance. In: Sieber U, Mitsilegas V, Billis E, Mylonopolus C, Knust N (eds) Alternative systems of crime control. Duncker&Humblot, Berlin, pp 171–191 Hirsch Ballin MFH (2012) Terrorism causing a shifting responsibility in criminal pre-trial investigation: from repression to prevention. In: Ballin H et al (eds) Shifting responsibilities in criminal justice. Critical portrayals of the changing role and content of a fragmented globalizing law domain. Eleven International Publishing, The Hague, pp 9–29 Langbein JH (2003) The origins of adversary criminal trial. Oxford University Press, Oxford Nieto A (2013) Investigaciones internas, whistleblowing y cooperación: la lucha por la información en el proceso penal. Diario La Ley 8120:1–17 Ross JE, Thaman SC (eds) (2016) Comparative criminal procedure. Elgar, Cheltenham–Northampton Thaman SC (2007) The nullification of the Russian Jury: lessons for jury-inspired reform in Eurasia and beyond. Cornell Int Law J 40:355–428 Thaman SC (2008) Comparative criminal procedure: a casebook approach, 2nd edn. Carolina Academic Press, Durham Thaman SC (2010) A typology of consensual criminal procedures: an historical and comparative perspective on the theory and practice of avoiding the full criminal trial. In: Thaman SC (ed) World plea bargaining: consensual procedures and the avoidance of the full criminal trial. Carolina Academic Press, Durham, pp 297–396 Thaman SC (2013) Balancing truth against human rights: a theory of modern exclusionary rules. In: Thaman S (ed) Exclusionary rules in comparative law. Springer, New York, pp 403–446 Vogler R (2005) A world view of criminal justice. Ashgate, Aldershot
246 This shall be done by translating the provisions of the previous Recommendation No. R (2000) 21 on the freedom of exercise of the profession of lawyer into a legally binding convention, with an effective control mechanism. See Rec (2121) 2018, available at http://assembly. coe.int/nw/xml/XRef/Xref-XML2HTML-EN.asp?fileid¼24466& lang¼en.
Data Protection in the Internet Dário Moura Vicente and Sofia de Vasconcelos Casimiro
Abstract
This general report seeks to identify and explain the basic approaches to the regulation of data protection in the Internet that are currently adopted at the national, supranational and international levels. As will be shown, although the Internet is by nature a global computer network and personal data processing conducted through it is largely also a trans-border phenomenon that tends to ignore national frontiers, the regulation of that phenomenon is still—with the notable exception of the European Union which has, to a certain extent, succeeded in harmonizing its law in this respect over the past 20 years—essentially the result of national, or even private, initiatives. The approaches to that regulation differ widely, particularly between the two major Western trading blocks, in what concerns its sources, contents, remedies and scope of application. The diversity of such approaches does not appear to constitute the mere result of different legislative techniques or historical traditions; it is rather the fruit of deeply rooted different perceptions of the respective roles of private ordering, the protection of individuals’ fundamental rights and the preservation of national security in a market economy.
This report was also published in Moura Vicente and de Vasconcelos Casimiro (Eds), Data Protection in the Internet, Springer Nature Switzerland 2020, 1–44. D. Moura Vicente (*) University of Lisbon, Lisboa, Portugal e-mail: [email protected] S. de Vasconcelos Casimiro (*) University of Lisbon, Lisboa, Portugal Portuguese Military Academy, Lisboa, Portugal e-mail: [email protected]
As such, the prospects for a comprehensive international unification or harmonization of the law on data protection in the Internet are, for the time being, limited.
1
Introduction
1.1
Subject-Matter, Purpose and Scope of the Present Report
In recent years, data protection, i.e., the legal regulation of the collection, storage, transmission and use of information concerning identified or identifiable individuals, has become a major concern in most countries, as well as at the supranational and international levels. In fact, the emergence of computing technologies that allow, at ever lower costs, the processing of increasing amounts of information, associated with the advent and exponential use of the Internet and other communication networks and the widespread liberalization of the trans-border flow of information, have allowed the large-scale collection and treatment of individual data, not only for scientific or commercial, but also for political uses. A growing number of governmental and private organizations now possess and currently use data processing in order to determine, predict and influence individual behavior in all fields of human activity. This inevitably entails new risks, not only from the perspective of individual privacy, but also from those of other fundamental rights, such as the right not to be discriminated, as well as of the fair competition between commercial enterprises and of the proper functioning of democratic institutions. The abovementioned phenomena have not remained ignored from a legal point of view: both at the national, supranational and international levels, an increasing number of regulatory instruments—among which the European Union’s General Data Protection Regulation applicable as
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_22
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of 25 May 20181—have been adopted with the purpose of preventing and sanctioning personal data misuse. Nevertheless, distinct national approaches still prevail in this domain, notably those that separate the highly comprehensive, detailed and protective rules adopted in Europe since the 1995 Directive on the protection of individuals with regard to the processing of personal data was enacted2 from the more fragmented and liberal attitude of American courts and legislators in this respect. In a globalized world, in which personal data can instantly circulate and be used simultaneously in communications networks that are ubiquitous by nature, these different national and regional approaches are a major source of conflicts of laws. These, in turn, are also the object of divergent solutions, ranging from the application of data protection rules on a purely territorial basis to extra-territorial choice of law regimes, according to which data protection laws may also apply to the processing of personal data undertaken by entities established outside the jurisdiction of the data subject’s place of habitual residence. Ultimately, those different approaches may lead to judicial or administrative decisions preventing the transfer of personal data to third countries that do not provide a degree of protection deemed equivalent to that of the forum State, as has recently occurred in the European Union.3 The main purpose of this report is to identify and explain these different national approaches and to determine the extent to which they may be overcome or harmonized in the near future. A number of national and special reports, drafted in response to a questionnaire prepared by the authors of this general report, have been instrumental for this purpose. Those reports provide a wealth of information regarding the legal systems of fifteen jurisdictions from four continents, as well as those of the European Union, the United Nations and of International Trade Law.4
1.2
Organization of the Report
This report is divided into five sections. After the introduction provided in Sect. 1, Sect. 2 will give an overview of the general data protection framework in the 1
See Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, OJ L 119, 4.5.2016, pp. 1 ff. 2 See Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJ L 281, 23.11.1995, pp. 31 ff. 3 See the judgment of the CJEU of 6 October 2015, C-362/14, Schrems v. Data Protection Commissioner, ECLI:EU:C:2015:650. 4 The abovementioned reports will be cited hereafter in an abbreviated manner, according to their denominations in the appended list.
legal systems covered by the report. For this purpose, that section will examine the applicable rules in the relevant jurisdictions, the notion of personal data prevailing in those rules, the existing supervision authorities and the extent to which the subject matter of the report is also governed by self-regulation instruments. Section 3 will analyze, from a comparative perspective, a number of critical issues concerning data protection in the Internet, in particular those related to data processed by electronic means, data protection in the electronic communications sector, data protection and digital forensics, data protection and electronic surveillance for security and defense purposes and the remedies and sanctions available for the breach of the applicable rules. Section 4 will address the international dimension of data protection. Notably, it will seek to determine the extent to which national or supranational rules on data protection are applied on a territorial or an extraterritorial basis, the specific conditions applicable to the transfer of personal data to foreign jurisdictions and the law applicable to liability for damages caused by the unlawful processing of personal data. Finally, Sect. 5 will identify the basic approaches to regulation of data protection in the Internet that flow from the preceding sections and will endeavor to make a general assessment thereof.
2
The General Data Protection Framework
2.1
The Applicable Rules
The first issue raised by a comparative study on the subjectmatter of this report is the extent to which personal data protection is covered by specific legislation or case law and the nature and scope of that legislation or case law. The protection of privacy has been a relevant concern in Western legal systems for more than a century5 and has found expression as a personality right in several European codifications,6 as well as a human right in international covenants.7 The adoption of specific rules governing the collection, storage, transmission and use of personal data is, however, a much more recent phenomenon, which is closely linked to the technological developments (occurred mostly in the 1980s and 1990s) that have made those operations possible on a large scale, namely the digitization of information, the integration of the processing functions of computers onto 5 See the seminal article by Warren and Brandeis (1890). For an overview of the law of privacy in Western legal systems, see Strömholm (1967). 6 See, for example, article 80 of the Portuguese Civil Code. On the genealogy of this provision, see Mota Pinto (2018), pp. 475 ff.; and Menezes Cordeiro (2011), pp 259 ff. 7 See, e.g., article 12 of the Universal Declaration of Human Rights.
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low-cost microprocessors and the advent of the Internet as a global network of computer networks.8 Since then, data protection statutes have experienced a dramatic increase in number and scope, and have been extended to most countries. After the adoption of Directive 95/46/EC, virtually all European Union Member States have enacted legislation on this topic seeking to transpose that Directive or to adapt pre-existing statutes to it.9 That legislation has, in turn, had a considerable influence over the law of other regions of the world.10 The European tendency to enact comprehensive laws on data protection has been further enhanced by the adoption in 2016 of the General Regulation on Data Protection (hereafter GDPR), which has replaced the 1995 Directive and is directly applicable in all EU Member States. It contains a detailed regime, which aims at codifying the law in this field. Notwithstanding some relevant exclusions, the Regulation covers all fundamental topics of data protection, notably: (1) the general principles governing this matter; (2) the rights of the data subject; (3) the status of the data controller and processor; (4) the transfer of personal data to third countries; (5) the supervision authorities and their reciprocal cooperation; and (6) the applicable remedies, liabilities and penalties.11 It is important to note, however, that the adoption of the GDPR has not excluded the relevance of the significant body of case law emanating from the Court of Justice of the European Union (hereafter CJEU) on the interpretation of the 1995 Directive, nor the Guidelines adopted by the socalled Article 29 Data Protection Working Party set up under that Directive (which will become the European Data Protection Board under articles 68 et seq. of the GDPR).12 The GDPR will be complemented by other European legal acts concerning the protection of personal data, among which a Regulation concerning privacy in the electronic communications sector.13
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In several European countries, personal data protection, or informational self-determination, is a fundamental right, either derived from the Constitution’s general rules, such as article 2(1) of the German Basic Law, which enshrines a “right to the free development of one’s personality”,14 and article 2 of the Italian Constitution, which establishes that “the Republic recognizes and guarantees the inviolable rights of the person, both as an individual and in the social groups where human personality is expressed”15; or contained in specific provisions, such as article 35 of the Portuguese Constitution,16 and article 9A of the Greek Constitution.17 Informational self-determination comprises, according to an authoritative definition in German literature: the right of a person to decide for herself on whether, when, the contents of, as well as the form of the use and disclosure of her personal data.18
Some countries have, however, refrained from adopting European-style comprehensive data protection rules and follow instead a sector-specific approach: such is the case of the United States of America, the law of which relies in this respect on a combination of federal and state-level legislation, administrative regulations and self-regulation instruments.19 Although the Privacy Act was adopted in the U.S. in 1974, it only applies to the collection, maintenance, use, and dissemination of information about individuals that is maintained in systems of records by federal agencies. For their most part, data protection rules in force in this country are contained in a myriad of consumer protection regulations. The right to privacy is, to be sure, protected under the Constitution of the United States,20 but so is free speech, to which the First Amendment expressly refers and on which data protection laws potentially impinge. Unsurprisingly, no constitutional right to personal data protection is enshrined in the American Constitution.21
14
8
See, for recent overviews of this matter, de Miguel Asensio (2015), pp 291 ff.; Hoeren (2018), pp 445 ff. 9 See, as examples thereof, the statutes cited in the German National Report, Sect. 1.1; the French National Report, Sect. 1; the Greek National Report, Sect. 1.1; the Italian National Report, Sect. 1; the Portuguese National Report, Sect. 1; the Romanian National Report, Sect. 2.1; and the Spanish National Report, Sect. 1.1. 10 As was the case, e.g., of Cape Verde: see Cape Verdean National Report, Sects. 2 and 5.2. 11 See, for a comprehensive description of this Regulation, the European Union Special Report. 12 See ibidem, Sect. 1.1. 13 See the Proposal for a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Regulation on Privacy and Electronic Communications), COM (2017) 10 final.
See the German National Report, Sect. 1.1. See the Italian National Report, Sect. 2.1. 16 See the Portuguese National Report, Sect. 1. 17 See the Greek National Report, Sect. 1.1. 18 See Larenz and Wolf (2004), p. 137: “Die informationelle Selbstbestimmung umfasst das Recht der Person, selbst über das Ob, die Zeit, den Inhalt sowie die Art und Weise der Verwendung und Preisgabe ihrer persönlichen Daten zu entscheiden”. For a more recent analysis of this theme, see Sousa Pinheiro (2015) and van der Sloot (2017). 19 See, for a detailed description of those sources, the United States of America’s National Report, Sect. 1. 20 Although the exact extent to which it is so is far from settled in caselaw and legal literature: see, on this, Prosser (1960); Fried (1968); Rubenfeld (1989); and Post (2001). 21 See, however, arguing for the constitutional recognition of a right to information self-determination, as part of the substantive due process liberty elaborated on by the U.S. Supreme Court, Eberle (2001). 15
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A “light touch” regime, which establishes a minimum data protection standard, has been adopted in Singapore.22 Other countries, such as South Africa, are still in the process of adopting general data protection legislation.23 Data protection rules, contained in the abovementioned legislative instruments, mostly have a mixed nature, covering both Public and Private Law issues. In fact, as noted earlier, a fundamental right to data protection has been enshrined in several countries, which enjoys the corresponding constitutional status. The enforcement of that right, and the overall supervision of the application of data protection rules, is entrusted not only to judicial, but also to administrative authorities; as a consequence thereof, a considerable number of Administrative Law rules on this topic have emerged. Liability for the breach of data protection rules, however, is to a large extent still governed by Tort Law rules. And the territorial scope of application of data protection rules is a matter essentially pertaining to the realm of Private International Law. At the international level, a number of relevant multilateral initiatives aiming at the protection of personal data have also been undertaken by several organizations, among which the Council of Europe,24 the United Nations,25 and the OECD.26 The subject is also addressed in several bilateral trade agreements.27 The most accomplished international instrument providing for a right to personal data protection is, however, the Charter of Fundamental Rights of the European Union, Article 8 of which provides, under the heading “protection of personal data”, that: (1) Everyone has the right to the protection of personal data concerning him or her. (2) Such data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law. Everyone has the right of access to data which has been collected concerning him or her, and the right to have it rectified. (3) Compliance with these rules shall be subject to control by an independent authority.
Three major trends can be inferred from the existing data protection legal framework, as described above: (1) the trend to adopt specialized legislation covering several areas of the
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law; (2) the trend to constitutionalize rules on data protection; and (3) the trend to internationally harmonize its regime. The first of these trends has, however, different expressions across the world. In fact, European legal systems, as well as those more closely influenced by them, adopt a systematic approach to the regulation of data protection, consisting of legislation that comprises most, if not all, aspects of this topic, including data collection and treatment both by public and private entities: such is clearly the vision underlying the GDPR. The United States instead favors a more topical approach, which restricts data protection laws to specific aspects, notably the collection and treatment of personal data by public agencies, and leaves broad areas of potential conflict between data subjects and data controllers or processors to case law or self-regulation. As for the second trend, it has also known different expressions: while a number of countries, notably in Europe, has indeed enshrined a new fundamental right to personal data protection, or at least derived it from other constitutionally recognized rights, and certain international instruments have even elevated it to the status of a human right, other countries, such as the U.S., where privacy is still essentially regarded as the “right to be left alone”, have not taken this step. Likewise, the third trend has experienced different degrees of accomplishment: whilst at the worldwide level data protection rules have so far been restricted to a limited number of highly general and abstract principles, such as quality of data, exclusion of processing of sensitive data, data security and right of access by the data subject, in the European Union a much more intense and detailed harmonization has taken place, the enforcement of which is ensured through the applicability of administrative fines to their infringement. As noted by the special rapporteur on United Nations Law, “a single international data privacy regulatory framework is yet to be seen”.28
2.2
The second issue to be addressed in this report concerns the notion of personal data. In the European Union, a very broad notion of personal data has been adopted, most recently in article 4(1) of the GDPR, which comprises:
22
See the Singaporean National Report, Sect. 1. See the South African National Report, Sect. 2. 24 See the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, adopted in Strasbourg, on 28 January 1981. 25 See Guidelines for the Regulation of Computerized Personal Data Files, adopted by the Resolution of the General Assembly 45/95 of 14 December 1990; and the Policy on the Protection of Personal Data of Persons of Concern to UNHCR, of 27 November 2015. 26 See OECD Privacy Guidelines (revised in 2013). 27 See the International Trade Law Special Report.
The Notion of Personal Data
Any information relating to an identified or identifiable natural person (data subject).
23
Personal data concerning legal persons are, accordingly, not included in the notion of personal data relevant for the purposes of the said Regulation. An identifiable natural person is, for the purposes of the abovementioned provision, “one who can be identified, 28
See the United Nations Special Report, Sect. 1.1.
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directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person”. IP addresses are included in the notion of personal data, according to the case-law of the CJEU.29 The broad European notion of personal data has been replicated in several non-EU countries.30 As already mentioned, in the EU the right to personal data protection is recognized as a specific fundamental right, which is distinct from privacy, although closely related to it, as is clear from the comparison of articles 7 and 8 of the Charter of Fundamental Rights.31 This is not the case of other legal systems, in which the right to personal data is not seen as an independent right, but rather as a derivative of the right to privacy: such is the case, inter alia, of South Africa32 and the U.S.33 Within the notion of personal data, a distinct category is established in the European GDPR concerning particularly sensitive data, which are subject to special, more protective rules. Such data are defined by article 9(1) of the Regulation as: personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person’s sex life or sexual orientation.
The concern with sensitive data is equally present in other jurisdictions, the law of which evidences the European influence.34 European legislation regarding personal data protection is in principle equally applicable to their processing by public and private entities. However, “public authorities which may receive personal data in the framework of a particular inquiry in accordance with Union or Member State law shall not be regarded as recipients; the processing of those data by those public authorities shall be in compliance with the applicable data protection rules according to the purposes of the processing” (article 4(9) of the GDPR). Furthermore, special
29
See judgment of 19 October 2016, case C-581/14, Patrick Breyer v Bundesrepublik Deutschland, ECLI:EU:C:2016:779. 30 See, for instance, the Cape-Verdean National Report, Sect. 2.1; Swiss National Report, Sect. 1.1. 31 See, on this European Union Special Report, Sect. 1.2. 32 See the South African National Report, Sect. 2.2. 33 See the United States of America’s National Report, Sects. 1.1 and 1.2. 34 See, for instance, the Cape-Verdean National Report, Sect. 2.2.5, and the Swiss National Report, Sect. 1.1.
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rules apply to the processing of personal data by European Union institutions and in criminal matters.35 The opposite view has prevailed in the U.S., where personal data protection rules are primarily aimed at federal agencies. This difference in part reflects, according to the American national reporter, a divergence in citizens’ sources of distrust: while, to her mind, Europeans particularly distrust private corporations, Americans are apparently more concerned with their Government’s attempts to invade their privacy.36
2.3
The Supervision Authorities
The role and nature of entities that supervise and control the processing of personal data also differ considerably across the globe. In Europe, such entities (as is the case of, e.g., in France, the Commission Nationale Informatique et Libertés; in Greece, the Hellenic Personal Data Authority; in Italy, the Garante per la protezione dei dati personali; in Portugal, the Comissão Nacional de Proteção de Dados; in Spain, the Agencia Española de Protección de Datos; and, in Switzerland, the Eidgenössische Datenschutz- und Öffentlichkeitsbeauftragte) play an essential role in this field. According to the GDPR, each Member State shall provide, in accordance with its constitutional organization, for the existence of one or more independent public authorities, which shall be responsible for monitoring the application of the Regulation, in order to protect the fundamental rights and freedoms of natural persons in relation to processing and to facilitate the free flow of personal data within the Union. Such authorities shall act with complete independence in performing their tasks and exercising their powers. Supervising authorities’ tasks under the GDPR are manifold and include, inter alia: (1) the monitoring and enforcement of the application of the Regulation; (2) the promotion of public awareness and understanding of the risks, rules, safeguards and rights in relation to processing; (3) advising public institutions on legislative and administrative measures relating to the protection of natural persons’ rights and freedoms with regard to processing; (4) handling complaints lodged by data subjects; and (5) conducting investigations on the application of the Regulation. In order to perform such tasks, supervisory authorities in EU Member States are entrusted with a wide range of investigative, corrective, authorization and advisory powers. The exercise of such powers is nevertheless subject to appropriate safeguards, including effective judicial remedy and due process.37 35
See, on this, the European Union Special Report, Sect. 1.3. See the United States of America’s National Report, Sect. 8. 37 See, on this, the European Union Special Report, Sect. 1.4. 36
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Other countries have followed the European model of concentrating the supervision of data protection legislation in a single administrative body: such is the case of Japan, which has created a Personal Information Protection Commission; of Singapore, where a Personal Data Protection Commission has been set up; and of South Africa, where an Information Regulator was instituted. The legal status of these bodies—notably their independence vis-à-vis constitutional powers—is however extremely varied: in Singapore, for example, the said Authority is under the purview of the Info-Communications Media Development Authority, which is itself under the Ministry of Communications and Information38; and in South Africa the Regulator is appointed by the President of the Republic.39 A considerably different approach has prevailed in the U. S., where a public agency specifically devoted to personal data protection does not exist. Instead, it is the Federal Trade Commission (FTC)—which was created in 1914 and is entrusted inter alia with the protection of consumers—that has become the primary privacy enforcement agency in that country.40 Although it is an independent law enforcement agency, the FCT’s jurisdiction is limited to challenging privacy violations through information practices that are deemed to be deceptive or unfair. In Brazil, a specific data protection agency is also hitherto non-existent. Some of the tasks typically entrusted to such agencies in other countries are incumbent upon the so-called “Internet Steering Committee” (Comité Gestor da Internet), which was created in 1995 with the purpose of coordinating and integrating all Internet service initiatives in Brazil. Law no. 13.709, of 13 August 2018, on the protection of personal data, provided for the setting up of a National Personal Data Protection Authority (Autoridade Nacional de Proteção de Dados) and a National Council for Personal Data and Privacy Protection (Conselho Nacional de Proteção de Dados Pessoais e da Privacidade). However, the President of the Republic vetoed that Law’s provisions on these institutions. Subsequently, Provisional Measure no. 869/2018 created these entities, but their setting up is still impending.41
2.4
The Self-Regulation Instruments
Similar conclusions may be reached in respect of the relevance of self-regulation instruments on data protection in the different jurisdictions covered by this report, which has been encouraged inter alia by the OECD Guidelines governing the
38
See the Singaporean National Report, Sect. 2.3. See the South African National Report, Sect. 3. 40 See the United States of America’s National Report, Sect. 1.4. 41 See the Brazilian National Report, Sect. 2.5. 39
protection of privacy and transborder flows of personal data, “whether in the form of codes of conduct or otherwise”.42 Such instruments are particularly relevant, given the lack of public regulation of the sector, in the United States of America, where the Network Advertising Initiative (NAI), comprised exclusively of digital advertising companies, has adopted a Code of Conduct, last updated in 2017,43 requiring transparency, an opt-in choice before sensitive information may be used for behavioral advertising and reasonable security provisions. The breach of the Code’s provisions may be publicized by the NAI and reported to the FCT. Another organization, the Digital Advertising Alliance (DAA), also seeks to establish and enforce privacy practices for digital advertising through a set of Principles of Transparency and Control to Data Used Across Devices that apply to Multi-Site Data and Cross-App Data gathered in either desktop or mobile environments.44 These instruments have, however, so far only obtained limited results in preserving consumer privacy.45 In Europe, the GDPR also encourages the drawing up of codes of conduct by associations and other bodies representing categories of controllers or processors and intended to contribute to the proper application of the Regulation, which take account of the specific features of the various processing sectors and the specific needs of micro, small and medium-sized enterprises. However, such codes are subject to approval by national supervising authorities, which must assess whether they provide sufficient appropriate safeguards and, in the affirmative case, shall also register and publish them. Compliance with approved codes of conduct is to be monitored by independent bodies with an appropriate level of expertise in relation to the subject-matter of the code and accredited for that purpose by the competent supervisory authority.46 Self-regulation by data controllers or processors is thus much more strictly allowed and controlled in the EU than in the U.S. Unsurprisingly, self-regulation instruments are considerably less developed in Europe than in the U.S.47 In some non-European countries, supervising authorities have taken upon themselves the task of issuing guidelines or codes of conduct concerning personal data protection: such is the case, e.g., of Singapore,48 and of South Africa.49 Whether binding or not, and even when issued in consultation with the 42
See section 19d), of the Guidelines as amended in 2013. Available at https://www.networkadvertising.org/sites/default/files/ NAI_Code15encr.pdf. 44 Available at http://digitaladvertisingalliance.org/principles. 45 See the United States of America’s National Report, Sect. 1.5. 46 See the European Union Special Report, Sect. 2.6. 47 See, for instance the French National Report, Sect. 5. 48 See the Singaporean National Report, Sect. 2.4. 49 See the South African National Report, Sect. 3.3. 43
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industry, such instruments do not seem to qualify as selfregulation initiatives. Other non-European countries simply lack any self-regulation instruments in this area: thus far, that’s, for example, the case of Brazil50 and Cape Verde.51
3
Specific Problems Concerning Data Protection in the Internet
3.1
Personal Data Processed by Electronic Means
Personal data protection or, as it is more commonly referred to in Anglo-Saxon countries, data privacy, has become an increasingly central topic in the last two or three decades due to the rapid development of information processing technologies. These technologies, which are closely related to the socalled Information Society, are essentially aimed at optimizing information, making it available through electronic means where and when it is necessary. The term “information” is used in this context in a very broad sense, and comprises all types of data, independently from its purposes, forms, contents or other criteria. The possibilities that information-processing technologies offer in terms of speed, ease and quantity of data processing intensify the potential harm caused by its unauthorized use. These possibilities have caused alarm in relation to certain types of data, leading several countries to react through the enactment of specific legislation or, whenever specific legislation is absent, giving rise to significant, and often controversial, case law. Personal data has been in the center of these concerns. It isn’t possible to address in detail all topics related to personal data processed by electronic means, as there are countless relevant ones in this regard. The exact configuration of the right to be forgotten in the electronic context, the process for obtaining a valid consent for personal data processing online, the operation of the information right by electronic means, the meaning of the “privacy by design” and the “privacy by default” concepts in this same context, profiling and portability, are just some of those topics. Some decisions had to be taken in order to select the topics which are addressed in more detail. The selected topics are, thus, those with a wider scope, which comprise many of the other topics,52 as well as those which have been in the spotlight of important case law or new legislation. In this 50
See the Brazilian National Report, Sects. 1–5. See the Cape-Verdean National Report, Sect. 2.4. 52 Security obligations, for example, cover concepts such as “privacy by design”, which represents a deepening and an extension of those obligations. On privacy by design, see Orrù (2017). 51
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regard, topics such as portability or profiling aren’t dealt with, autonomously, in a separate section. Some brief lines should be dedicated, though, to the challenge of data portability and its potential impact in the economy and in the protection of the data subjects. Data portability grants the data subject a right to have the personal data transmitted directly to him or to another entity, through electronic means. Data portability, inasmuch as it requires the adoption of technical standards to ensure interoperability between the different entities that process those data, promotes the free movement of personal data and, consequently, works as an inducement or a driving force to the economy. The easiness of personal data transfer may promote competition, improving innovation and service variety. Although there is sectorial legislation granting data portability, dating back from the 1990s,53 the general right to data portability provided by the GDPR, which is applicable in all contexts, with minor exceptions, is noteworthy.54 Also noteworthy are the GDPR provisions on profiling. The ability to build a very complete psychological profile of the data subject has been made possible by current technologies,55 and the possibilities keep evolving. Taking into account the particular risks posed to the data subjects by profiling, some legal systems have adopted specific rules to deal with these risks. Swiss law is one of those legal systems, since it requires the controller to conduct an impact assessment in case of profiling, given the fact that this form of data processing may pose a threat to the data subject’s privacy.56 The GDPR also addresses profiling. Besides setting out particular requirements for authorizing the profiling, it grants the data subject the right not to be subject to a decision based solely on automated processing, including profiling.57 In France, the constitutionality of legislation enacted to adapt domestic law to the GDPR has been challenged in respect of this particular topic. The Conseil Constitutionnel held that a decision based on automated processing is possible, as long as it obeys to certain conditions, such as the fact that it does not involve the processing of sensitive data and it is subject to an administrative appeal.58 Some other aspects of data protection though electronic means are separately dealt with in the following pages in a more detailed way. First, national legal systems will be compared in respect of the existence of legislation or relevant case law covering the protection of personal data in the context of services provided at a distance, by electronic means, at the 53 See, for instance, the United States of America’s Health Insurance Portability and Accountability Act of 1996. 54 See article 20 of the GDPR. 55 See the International Trade Law Special Report, Sect. 4. 56 See the Swiss National Report, Sect. 2.8. 57 See article 22 of the GDPR. 58 See the French National Report, Sect. 2.
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individual request of a recipient of services. Subsequently, specific aspects of data protection in this context will be compared in the jurisdictions covered by this report, such as electronic communications for marketing purposes, protection of minors, the existence of a right to be forgotten, the processing of employees’ data and security obligations and data breach notifications.
3.1.1
Processing of Personal Data in the Context of Services Provided at a Distance by Electronic Means Even before the adoption of the GDPR, the European Union had set out a considerable number of rules, both through the Directive on electronic commerce59 and through the Directive on privacy and electronic communications,60 which are applicable to services provided at a distance, by electronic means, at the individual request of their recipient. These rules reinforce the protection of data subjects whenever their personal data are processed in the context of electronic communications. The European Union’s Directive on electronic commerce, expressing consumer protection concerns, addresses the requirements for the conclusion of contracts by electronic means by imposing that certain information be mandatorily provided in a durable medium, such that the recipient of the services may store and reproduce it. When combined with the obligation to provide certain minimum information to data subjects relating to personal data processing, set forth in the GDPR,61 this requirement means that the information provided in a durable medium must include the mandatory privacy policy terms. Furthermore, the Directive provides that service providers that send unsolicited commercial communications by electronic mail should consult regularly and respect the existing opt-out registers, containing the identification of data subjects that did not give their consent to receive those communications. The legislation of EU Member States reflects the transposition of these provisions.62 The legal framework for unsolicited commercial communications and for managing personal databases for that specific purpose is further detailed in the Directive on privacy and electronic communications. Although primarily 59 See Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”), OJ L 178, 17.07.2000, pp. 1 ff. 60 See Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (“Directive on privacy and electronic communications”), OJ L 201, 31.7.2002, pp. 37 ff. 61 See article 13 of the GDPR. 62 See, for example, Spanish National Report, Sects. 2.1.1 and 2.1.2.
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designed to regulate privacy in the electronic communications sector, notably the processing of personal data in connection with the provision of publicly available electronic communications services and public communications networks, including public communications networks supporting data collection and identification devices, this Directive includes several provisions applicable to the processing of personal data by electronic means, in general, whether by a provider of a publicly available electronic communications service or networks or by any other entity. This Directive establishes, as a rule, an opt-in system for unsolicited commercial communications, requiring the prior consent of the data subject, except for certain specific scenarios, such as in the context of the sale of a product or a service. Moreover, this Directive addresses the storing of information, or the gaining of access to information already stored, in the terminal equipment of a subscriber or user of an electronic service. According to the Directive, this specific data processing, such as the one that takes place with the use of cookies in certain websites, shall only be permitted on the condition that the subscriber or user concerned has given his or her consent, which must be preceded by clear and comprehensive information on the conditions of the corresponding processing of personal data.63 The abovementioned legal framework, contained in the European Union’s directives, has been transposed to the Member States’ domestic laws.64 In certain circumstances, though, the conformity of national legislation with the European Union’s legal framework has been challenged, as was the case of the transposition of the opt-in system in the Czech Republic.65 The gap that divides the European Union Member States’ legal systems and the United States’ legal system is rather evident in respect of this first set of statutory provisions. Contrasting with the increasing consumer protection concerns in the European Union, the United States of America has no federal legislation that grants a private right of 63 The Directive on privacy and electronic communications also covers obligations to protect personal data conveyed and stored through electronic means, as well as obligations to inform third parties about data breaches. Nevertheless, and contrarily to the previous provisions, these obligations are set out only for providers of publicly available electronic communications services and or for providers of public communications networks and, consequently, should be addressed in the following topic, regarding data protection in the electronic communications sector. 64 See, for instance, the opt-in system referred to in the German National Report, Sect. 2.1.4, the Portuguese National Report, Sect. 2, the Greek National Report, Sect. 2.1.1, the French National Report, Sect. 2, and the Spanish National Report, Sects. 2.1.1 and 2.1.2. The national provisions on the storing of information, and access to information already stored, in the terminal equipment, are also included, for example, in the Czech Republic National Report, Sect. 2.1, the Portuguese National Report, Sect. 2, the Greek National Report, Sect. 2.1.1, the French National Report, Sect. 2, and the Spanish National Report, Sect. 2.1.2. 65 See the Czech National Report, Sect. 2.1.
Data Protection in the Internet
action to consumers based on unsolicited commercial communications by electronic mail. Although there is a federal law that applies to all commercial emails66 and gives their recipients the right to prohibit marketers from continuing to send commercial communications by electronic mail, through an opt-out system, this law is primarily enforced by the FTC. Instead of setting up clear rules for companies on how personal data should be processed, the FTC has focused mainly in raising awareness about the issues that companies should consider when collecting data.67 At the state level, the small number of laws that regulate electronic marketing has a very narrow scope and is applied to very specific sectors of activity. It is noteworthy that the other legal systems comprised in the scope of this study that have legal provisions on this particular topic bear a greater resemblance to that of the European Union,68 which widens the gap between the United States and other parts of the world. This can be explained by several factors, including those legal systems’ cultural or geographical proximity with the European Union, their historical tradition of protecting personality rights, or, more interestingly, the convenience to adapt themselves to the most demanding legislation in order to provide legal certainty to international transactions. Switzerland has an opt-in-system.69 Japan has two laws that regulate unsolicited commercial communications by electronic means, both of them setting an opt-in system.70 The recent general data protection law enacted in South Africa, although not yet fully in force, provides for an opt-in system, which will repeal the existing opt-out system currently laid down by specific legislation on electronic communications and transactions.71 In the United States, the most important federal legislation applicable to services provided at a distance and designed to protect personal data is the Fair and Accurate Credit Transactions Act (hereinafter FACTA).72 In the specific context of online transactions, FACTA protects consumers from identity theft and ensures that consumers’ credit information is accurate. FACTA includes provisions on security of cardrelated data and the ability to place fraud alerts. This Act 66
Controlling the Assault of Non-Solicited Pornography and Marketing of 2003 (CAN-SPAM Act). 67 See the United States of America’s National Report, Sect. 2.2. 68 See the South African National Report, Sect. 4.1.2, the Swiss National Report, Sect. 9, the Japanese National Report, Sect. 3.1.1, the Canadian National Report, Sect. 2.3 and the Singaporean Report, Sect. 3.7.1. Other non-European countries don’t have any relevant provisions on this subject (see the Cape Verdean National Report, Sect. 3.1, according to which Cape Verde’ provisions on this topic concern exclusively the electronic communications sector, and the Brazilian National Report, Sect. 3.1). 69 See the Swiss National Report, Sect. 3. 70 See the Japanese National Report, Sect. 3.1.1. 71 See the South African National Report, Sect. 4.1.2. 72 See the United States of America’s National Report, Sect. 2.1.
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grants consumers the right to request and obtain a free credit report per year from the three main consumer credit reporting companies in the United States. Notwithstanding the fact that FACTA does protect personal data processed by electronic means, this Act is designed to reduce credit fraud and improve confidence in online transactions. Its rules are, thus, primarily aimed at protecting electronic commerce, rather than personal data. It is also relevant to highlight the fact that whenever regional trade agreements contain provisions on electronic commerce, they frequently include personal data protection rules.73 Although these rules differ in their extent and effectiveness,74 some of those agreements encourage the enactment of data protection rules by their Member States. The fact that these may be required to adopt certain minimum data protection rules in order to be able to conclude such trade agreements naturally contributes to the expansion and enhancement of personal data protection and encourages harmonization in this area. As already mentioned, international organizations, such as the United Nations, also play a significant role in setting common rules on personal data protection in the context of services provided at a distance by electronic means.75
3.1.2
Protection of Minors’ Personal Data Processed by Electronic Means In the European Union, the GDPR sets forth additional relevant rules for personal data processing by electronic means, such as restrictions on profiling, which is defined as a form of automated processing of personal data,76 data breaches notification procedures, protection of minors in relation to information society services and the right to be forgotten, among many others.77 The protection of minors in relation to information society services is regulated by specific provisions in several countries and, in some of them, such as the United States, through specific laws. In this respect, the GDPR’s main concern is to set special requirements regarding a child’s consent in relation to information society services. Where personal data processing is based on the consent given by the data subject, the GDPR has given Member States the possibility to choose the age limit above which a child may give a valid consent to operators of
73 See the Data Protection in International Trade Law Special Report, Sect. 8.1. 74 See the Data Protection in International Trade Law Special Report, Sects. 8.1 and 9. 75 See supra, Sect. 2.1, and the instruments mentioned therein. 76 See article 4(4) of the GDPR. 77 See the European Union Special Report, Sect. 2.
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information society services, without the intervention of the holder of the corresponding parental responsibilities.78 Nevertheless, that age limit cannot be set below 13 years. In the event that a Member State chooses not to regulate this topic, the processing of data of children below the age of 16 years in that context is only deemed lawful to the extent that consent is given or authorized by the holder of the parental responsibility over the child. The United States has a specific law for regulating the processing of personal data of children under the age of 13 by operators of websites or online services.79 The Children’s Online Privacy Protection Act of 1998 (hereinafter COPPA) imposes certain specific requirements for the processing of data on operators of websites or online services directed to children under 13 years of age and on operators of other websites or online services that have actual knowledge that they are collecting personal information online from a child under 13 years of age. COPPA has assigned the enforcement of its provisions to the FTC, at the federal level, and has given this agency the power to promulgate rules to guide the interpretation and enforcement of this Act. Taking into account that COPPA was enacted in 1998, and technology and the risks that it poses to children have evolved radically since then, the FTC has updated and expanded the focus of the COPPA regulations and has issued additional guidance. Although the COPPA Act itself does not provide for specific penalties, courts have determined damages pursuant to the Federal Trade Commission Act, because COPPA infringements are considered to be unfair or deceptive trade practices under that Act. Nevertheless, there is no private cause of action for COPPA infringement, so states have to file civil actions to obtain injunctions and damages in the interest of their citizens.80 With regard to the consent of the minor when using the services regulated under the COPPA, which consists in the single topic specifically regulated under the GDPR regarding minors, COPPA determines, as a rule of thumb, that prior to any collection, use, and or disclosure of personal information from a child under 13, the respective operator must obtain verifiable parental consent. Furthermore, COPPA regulates in detail the requirements for obtaining a verifiable parental consent, defining admissible methods for this purpose.
78 See the European Union Special Report, Sect. 2.2. Some European Union Member States have already set their age limit under this GDPR provision. By way of example, after the full implementation of the GDPR, on the 25th of May 2018, France has set that age limit at 15 years through its Law of 20 June 2018. 79 See the United States of America’s National Report, Sect. 2.3. 80 Important case law on this subject has been further developing processes for determining damages. See the United States of America’s National Report, Sect. 2.3, referring to the case law United States v. Boston Scientific Corp., 253 F. Supp. 2d 85, 98 (D. Mass. 2003).
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Therefore, with respect to minors’ personal data protection, when using online services and or websites, the United States of America has more detailed and restrictive legislation than the European Union. Other countries covered by this report do not have specific provisions on the protection of minors’ personal data processed by electronic means.81 In the absence of specific provisions, the consent given by children is regulated by common law or general statutory rules on whether and to what extent minors may personally exercise their rights and conclude contracts.82 In this regard, it is important to highlight the fact that France is the only European Union country included in the scope of this report which, previously to the GDPR, had specific provisions on the protection of personal data of minors processed by electronic means.83 According to the French legal framework applicable before the GDPR, minors had a specific right to obtain the erasure of personal data collected online concerning him or her. This right, which may also be denominated as a right to be forgotten, or a right to the erasure of personal data, according to the terminology of the GDPR, is now extended to all data subjects comprised in the scope of application of the GDPR.
3.1.3
The Right to the Erasure of Personal Data Processed by Electronic Means This leads us to another relevant provision of the GDPR related to the protection of personal data processed by electronic means: the “right to be forgotten”, enshrined in the GDPR and recognized, long before it came into force, in the CJUE’s judgment on the Costeja case.84 81
See, for example, the Canadian National Report, Sect. 2.1. See, for instance, the Singaporean National Report, Sect. 3.3. Advisory guidelines from the Singaporean administrative body also comprise guidelines on the treatment of minors, including how consent to obtaining and using their data should be obtained. The South African National Report, Sect. 4.1.3, refers to specific provisions for the protection of minors, included in a data protection law. These provisions determine the conditions under which minors personal data may be processed. Albeit relevant, these are general provisions, applicable to all types of personal data processing related to minors, regardless of the means used. Therefore, these provisions aren’t specific for the processing of personal data by electronic means. 83 See the French National Report, Sect. 2. 84 See the judgment of the CJEU of 13 May 2014, rendered in case C-131/12, Google Spain SL and Google Inc. v Agencia Española de Protección de Datos (AEPD) and Mario Costeja González, ECLI:EU: C:2014:317. In this case, the CJEU held that an electronic search engine operator is the controller of the processing of personal data available on the websites, run by third parties, which appear on its search results lists. Consequently, the respective data subject may approach that operator directly in order to obtain the removal of a hyperlink to a certain website from the search results list, as long as this website contains his or her personal data and even if this data is accurate and doesn’t have to be removed from the website where it is made available. On this case, see de Vasconcelos Casimiro (2014). 82
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Under the GDPR, the data subject, besides having the right to obtain the erasure of its personal data directly by the data controller, whenever one of the grounds provided for in article 17 applies, also has the right to have its personal data erased by other entities which may have linked, copied or, in any other way, disseminated those data, particularly when they were made public.85 The said provision was clearly designed for the online environment,86 as it is stated in the corresponding recital of the GDPR.87 A right with such an extensive scope has no equivalent in the other jurisdictions covered by the present study.88 However, in most countries, as is the case of South Africa89 and Brazil,90 there is a general right to obtain the erasure of personal data whenever their processing is no longer authorized, similar to that which was already set out in Directive 95/46/EC.91 Japan stands out in this respect, for its restrictive understanding of the right to erasure of personal data processed by electronic means. In Japan, there are no statutory laws or administrative guidelines regulating a right to the erasure of personal data comparable to that of the GDPR. Additionally, court cases in that country have emphasized the importance of other legal interests whenever there is a request to remove contents from search results. In particular, the Japanese Supreme Court has held that a search engine service provider is under the obligation to delete search results only in the event that the legal interests involved in the deletion are clearly superior to the legal interests involved in providing the search results. This court has stressed the social importance of the search engine in the Internet era.92 Nevertheless, case law in Japan confirms that search engines are obliged to erase results containing infringements, including, thus, infringements to data protection legislation. It can therefore be concluded that although most jurisdictions covered by this report recognize a right to the erasure of personal data, currently the broadest and most detailed provisions in this respect are set forth in the GDPR.
85
See the European Union Special Report, Sect. 2.3. Following the CJEU decision in the Google Spain case, there are some relevant case law and administrative decisions relating to this topic. The Portuguese data protection authority, for example, issued a decision (section 536/2016, not publicly available) imposing on a search engine operator the removal of search results relating to a public figure that was under the suspicion of having committed a crime 8 years earlier. See the Portuguese National Report, Sect. 2. 87 See the GDPR, recital 66. 88 See, for example, the Canadian National Report, Sect. 2.2. 89 See the South African National Report, Sect. 4.1.4. 90 See the Brazilian National Report, Sect. 3.3. 91 The Law section 13.709, of 13 August 2018, on the protection of personal data introduce this right. See the Brazilian National Report, Sect. 3.3. 92 See the Japanese National Report, Sect. 3.1.3. 86
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In this respect, the United States also differ from most countries for not having a provision or relevant case law related to a general right to delete personal data, particularly in the online context.
3.1.4
Protection of Employees’ Personal Data Processed by Electronic Means Another topic which accentuates differences between the European and the United States’ legal framework on personal data processed by electronic means is the processing of employees’ personal data. Employees enjoy few privacy rights in their workplace in the United States.93 At the federal level, the Electronic Communications Privacy Act of 1986 (hereinafter ECPA) is the law that primarily governs the monitoring of electronic communications in the workplace. The ECPA prohibits individuals and companies from intercepting electronic communications. However, there are two exceptions to this prohibition that apply to the workplace. One of the exceptions allows interception for monitoring purposes of employees’ electronic communications by the employer as long as the interception is done in the “ordinary course of business” and the employer uses certain limited types of equipment to monitor those communications. Based on this exception, many employers use electronic mail systems that automatically copy all messages that pass through their system in order to monitor their employees’ productivity and illegal conduct. The other exception gives employers the right to track the websites visited by their employees. In addition to the interception of electronic communications without the consent of the employee, under the referred exceptions, the employer may monitor other electronic communications, including personal messages of the employee, as long as the employer can demonstrate the employee’s consent for that monitoring. Some courts have held that this consent may be a tacit one. It is also important to highlight the fact that the definition of electronic communications for interception purposes does not include communications held in electronic storage and that, for that reason, courts have been granting the possibility to read the private electronic messages of employees stored in electronic systems.94 Although the Fourth Amendment to the Constitution of the United States grants employees who work for public employers a specific right against “unreasonable government searches”, this right has been interpreted in a very restrictive sense in the context of personal data processed by electronic means. The Supreme Court of the United States, in particular, has adopted a very restrictive interpretation of this constitutional right, by requiring an adequate balance between the 93 94
See the United States of America’s National Report, Sect. 2.5. See the United States of America’s National Report, Sect. 2.5.
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protection of the public employee and the government’s need for an adequate supervision control and for an efficient operation of the workplace.95 The monitoring of an employee’s activity on electronic social networks is prohibited under the Stored Communications Act (hereinafter SCA), although this prohibition is easily circumvented in the event that the electronic communication made available in those networks is readily available to the public or is disclosed by an authorized receiver of the communication. There are several cases denying relief to employees fired on the grounds of the content of communications made available on electronic social networks.96 Sectoral legislation may, however, offer some protection to employees in certain specific areas and under specific statutes, such as the protection of their credit card information, under the FACTA, medical records, genetic information and disabilities.97 At the state level, there are no significant additional protections for employees in the context of personal data processed by electronic means. It is, therefore, a fact that the United States’ legal framework, both at the federal level and at the state level, does not grant employees significant protection in that context. In contrast with the United States, the European Union Member States have developed a very strict legal framework that affords employees a considerable level of protection to their personal data, whenever processed by electronic means.98 While in the United States there are many exceptions to the protection of the personal data of employees, processed by electronic means, in the European Union such exceptions are much less extensive and numerous, and they are mainly justified by the legitimate interests of the employer. Although the GDPR does not contain specific rules concerning this topic,99 Member States have a considerable level of freedom to accommodate their own solutions and, in particular, they may provide protections beyond the minimum requirements set forth in that legal instrument.100 This is true in general and specifically in this case, since the GDPR contains a general clause allowing Member States to provide 95
See the United States of America’s National Report, Sect. 2.5.1. It is noteworthy that, since 2012, 25 states have enacted legislation preventing employers from forcing their employees to disclose the respective passwords. See the United States of America’s National Report, Sect. 2.5.3. 97 See the United States of America’s National Report, Sect. 2.5. 98 See van der Sype et al. (2017). 99 See the European Union Special Report, Sect. 2.4. 100 See, for instance, article 5 of the GDPR, which sets out the main principles applicable to the processing of personal data, such as lawfulness, fairness and transparency, purpose limitation, minimization, accuracy, storage limitation, integrity, confidentiality and accountability. 96
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for specific rules to ensure the protection of rights and freedoms in respect of the processing of personal data of employees in the employment context.101 Additionally, collective agreements may provide for specific rules for personal data processing in the employment context, including the conditions for processing based on the consent of the employee.102 The exercise of the right to exceed the minimum requirements set forth in the European Union’s legal framework is particularly noticeable in what concerns the processing of personal data of employees through electronic means. Member States have specific legislation, administrative guidance and, in some cases, abundant case law on this subject. This is the case of Spain,103 Portugal,104 Germany,105 Italy,106 Czech Republic,107 Romania,108 France109 and Greece.110 All these countries have specific statutory provisions on the protection of employee’s personal data, including personal data processed by electronic means.111 Portugal is illustrative in this regard. The Portuguese Labor Code (approved by Law no. 7/2009, of 12 February 2009, as amended), provides that employees have the right to privacy in the workplace.112 Among other rules, it states that the employer may not use distance surveillance means at the workplace through the use of technological equipment, such as closed-circuit television, in order to control the professional performance of the employee. The use of such monitoring equipment may only serve specific purposes, notably to ensure the safety of people or goods, or to meet particular demands arising from the specific activity involved. Furthermore, the data collected by these means are considered sensitive data.113 There is also extensive Portuguese case law and administrative guidance on topics related to the processing of employees’ data by electronic means, such as geolocation of vehicles used by employees, the use of electronic equipment at the workplace, access control management systems and biometric systems, among many others. 101
See article 88(1) of the GDPR. See recital 155 of the GDPR. 103 See the Spanish National Report, Sect. 2.1.6. 104 See the Portuguese National Report, Sect. 2. 105 See the German National Report, Sects. 2.1.5–2.1.7. 106 See the Italian National Report, Sect. 2.3. 107 See the Czech National Report, Sect. 2.2. 108 See the Romanian National Report, Sect. 3.2. 109 See the French National Report, Sect. 2. 110 See the Greek National Report, Sect. 2.1.4. 111 Some non-European countries, such as Singapore, also cover the protection of personal data of employees, although there are no specific statutory provisions for these data subjects. See the Singaporean Report, Sect. 3.5. 112 See article 16 of the Code. 113 See the Portuguese National Report, Sect. 2. 102
Data Protection in the Internet
It should be noted that these domestic law provisions are intended to grant additional protection to employees or to clarify the legal regime already applicable under the GDPR or other general provisions on data protection. This means that, besides these specific provisions, employees enjoy the protection provided by the general personal data legal framework. The main reason why the European Union countries have enacted specific legislation or issued guidance in this regard relates to the fact that an employee is particularly vulnerable at the workplace and in the employment context in general, given its subordination to the employer, and may feel pressed to accept restrictions to its privacy rights. Nevertheless, under certain conditions, the employer may legitimately access electronic communications of an employee. Such is the case, for example, when the rules adopted by the latter include that possibility and are notified in advance to the former. In any event, an employer should not have access to an employee’s private communications. As a rule, tracking websites visited by employees is not allowed. Nevertheless, the employee’s activity in electronic social networks may be used to justify dismissals, insofar as the information at stake is publicly accessible.114
Security Obligations and Data Breach Notifications Concerning Data Processed by Electronic Means The GDPR has also introduced stricter provisions regarding the notification of security and data breaches. According to these provisions, the data controller and the data processor are obliged to implement technical and organizational measures, such as encryption, in order to ensure a level of security that is appropriate to the risks inherent to the processing. The obligation to implement security measures was already provided for in the Directive 95/46/EC.115 The main novelty lies in the provisions on data breach contained in the GPDR. Data breach is defined in a very broad sense and there are specific obligations on data controllers to notify a personal data breach to the supervisory authority and, under certain circumstances, to the data subject.116 In the United States, neither of these two topics, i.e., security obligations and data breach notification obligations are regulated in a general federal law, despite efforts to pass federal legislation in this respect. Security provisions and notification obligations are therefore disseminated in various sector-specific legislative enactments. Notification provisions usually require the implementation of a notification policy,
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including procedures for incident reporting, incident handling and data breach notification requirements.117 In the remaining legal systems, solutions differ. In certain countries, such as Japan although there are provisions on security measures, there is no general obligation to notify an authority or data subject of a data breach.118 However, certain practices have been implemented and guidelines were adopted in this respect.119 In Canada, there are data breach notification provisions.120 It is expected that in the coming years more and more countries will implement security obligations, as well as data breach notification obligations. This is a trend that has started at the beginning of the twenty-first century and that has been steadily expanding across the globe. Singapore is a good example of this trend. It started by adopting, in 2012, a statutory rule imposing a general obligation to protect personal data from unauthorized use. This rule was complemented with detailed guidelines issued by the Personal Data Protection Commission and developed by case law. Further laws and regulations on this subject, comprising a mandatory data breach notification regime, are intended to be tabled in Parliament in the near future.121
3.1.5
114
See, for example, the French National Report, Sect. 2. See the European Union Special Report, Sect. 2.5. 116 See the European Union Special Report, Sect. 2.5. 115
3.2
Data Protection in the Electronic Communications Sector
The electronic communications sector—which is a new term for the telecommunications sector—and the legislation governing it have been developing for more than a century. Communications often have a transnational character, since they take place without consideration of national borders. This transnational character, combined with the fact that the International Telecommunications Union (hereinafter ITU)122 is the oldest international organization, explains the existence of a relatively large set of harmonized rules applicable to electronic communications at the international level. Given this international context, data protection in the electronic communications sector benefits from a certain 117
See the United States of America’s National Report, Sect. 2.7. Except for the My Number Act, which set forth the obligation to report data breaches, for certain relevant institutions. See the Japanese National Report, Sect. 3.1.5. 119 See the Japanese National Report, Sect. 3.1.5. 120 See the Canadian National Report, Sect. 2.5. 121 See the Singaporean National Report, Sect. 3.6. 122 The ITU, originally the International Telegraph Union, was created in 1865 and is, since 1947, a United Nations specialized agency. ITU is an international body that promotes the development of telecommunication networks and access to telecommunication services by fostering cooperation among governments and standardizing technologies and protocols, among many other undertakings. See http://www.itu.int. 118
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level of harmonization within the geographical scope of the present study. For this reason, all jurisdictions covered by this report have adequate and very comprehensive legislation, regulation and supervisory systems concerning the electronic communications sector, which, given the international context in which they were adopted, are extremely similar. In each country, there are specific statutes that regulate the electronic communications sector, which comprise provisions on data protection in this sector.123 The prohibition of the interception of communication data and, in general, the obligation to guarantee the confidentiality of communications are enshrined in international instruments such as the Universal Declaration of Human Rights of 1948, the European Convention on Human Rights of 1950 or the European Union Charter of Fundamental Rights of 2000. Several countries have transposed the provisions of these international instruments into their national legal systems. Furthermore, different categories of communications data are subject to different confidentiality levels of protection. The protection of confidentiality in communications entails the implementation of security measures, as well as of notifications obligations, including security breaches or data breaches notification obligations, which are provided for in the legislation of all analyzed legal systems. In all these systems, there is also a national independent authority with supervisory powers in the electronic communications sector.124
3.3
Data Protection and Digital Forensics
Security concerns and the need to collect, preserve, analyze and transmit factual evidence in criminal investigations, as well as in civil procedures, in the specific context of data processed by electronic means, have determined the establishment of a legal framework allowing, under certain conditions, restrictions to personal data protection for these specific purposes. That legal framework—which, in the context of electronic communications, is designed as an exception to the confidentiality of communications—exists in all countries comprised in the scope of this study.125
Nevertheless, the extent those the restrictions on personal data protection and, most importantly, the conditions under which they operate, differ significantly. Again, the United States of America stands out in this respect among other countries.126 The ECPA is the primary federal legislation that regulates privacy on electronic communications. This Act regulates the interception and collection of electronic communications, not only when in transit but also when stored on an equipment. The particularity of the United States’ legal framework stems from the fact that the ECPA has been amended several times and that some of these amendments, most notably the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (hereinafter USA PATRIOT Act), have greatly facilitated the access to personal data processed by electronic means. There is case law holding that the USA PATRIOT Act violates the First Amendment to the United States’ Constitution, as it allows the Federal Bureau of Investigation to resort to certain mechanisms in order to obtain electronic communication service providers’ customer records without giving them the possibility of challenging such requests.127 Nevertheless, the ECPA is still in force and allows the Government to routinely access personal data processed by electronic means, such as data held by search engines, social networks and providers of electronic communication services. In addition to ECPA, the Communications Assistance for Law Enforcement Act of 1994 (hereinafter CALEA), as well as the SCA contribute to a legal framework that facilitates the access of government to personal data processed by electronic means. The CALEA, for example, requires electronic communication network providers to redesign their network architectures to make it easier for the government to wiretap digital telephone calls. Data retention is also facilitated and even stimulated under the United States’ federal legislation. The European Union’s legal framework embodies a totally different approach. The protection of personal data is a fundamental right, enshrined in a comprehensive general regulation. Consequently, all restrictions to this right must be applied to the minimum possible extent. In the context of criminal proceedings and forensics,128 the most important instrument providing common rules for the processing of the personal data of individuals involved in criminal proceedings is Directive (EU) 2016/680.129 This
123
See, for example, the United States of America’s National Report, Sect. 3, the European Union Special Report, Sect. 3, the Cape Verdean National Report, Sect. 3.2, and the Japanese National Report, Sect. 3.2. 124 See, for example, the Portuguese National Report, Sect. 3, the Cape Verdean National Report, Sect. 3.2, and the Spanish National Report, Sect. 2.2. 125 See the United States of America’s National Report, Sect. 4, the European Union Special Report, Sect. 3.4, the Cape Verdean National Report, Sects. 20–21, and the Singaporean National Report, Sect. 3.8.
126
See the United States of America’s National Report, Sect. 4. See the United States of America’s National Report, Sect. 4.1. 128 See the European Union Special Report, Sect. 3.4. 129 See Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free 127
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European act grants a high level of protection to the personal data of natural persons while facilitating the cooperation between competent authorities of Members States. Furthermore, article 15(1) of the Directive on privacy and electronic communications, which establishes, among other important provisions, the confidentiality of electronic communications, provides, under the heading “Application of certain provisions of Directive 95/46/EC”: Member States may adopt legislative measures to restrict the scope of the rights and obligations provided for in Article 5, Article 6, Article 8(1), (2), (3) and (4), and Article 9 of this Directive when such restriction constitutes a necessary, appropriate and proportionate measure within a democratic society to safeguard national security (i.e. State security), defense, public security, and the prevention, investigation, detection and prosecution of criminal offences or of unauthorized use of the electronic communication system, as referred to in Article 13(1) of Directive 95/46/EC. To this end, Member States may, inter alia, adopt legislative measures providing for the retention of data for a limited period justified on the grounds laid down in this paragraph. All the measures referred to in this paragraph shall be in accordance with the general principles of Community law, including those referred to in Article 6(1) and (2) of the Treaty on European Union.
This provision is one of the most controversial ones in the European Union’s data protection legal framework. It led to the approval of the Data Retention Directive,130 which was considered invalid by the CJEU.131 The Court decided that the Directive did not strike an adequate balance between personal data protection and the public interests underlying criminal investigations. The Data Retention Directive provided that Member States should impose electronic communications service providers the obligation to retain certain communications data, such as traffic data, for a certain period of time. If necessary, these communications data could be used in the investigation of serious crimes. Among other aspects stressed by the Court, this Directive did not define precise boundaries or adequate safeguards concerning the period of time during which data retention could take place or concerning the entities which could access those data. This judgment is illustrative of the position of the European Union regarding restrictions to personal data protection, since it establishes a very demanding level of requirements for the movement of such data, and repealing Council Framework Decision 2008/977/JHA, OJ L 119, 4.5.2016, p. 89. 130 Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC, 2006 OJ L 105, 13.04.2006, p. 54. 131 See the judgment of the CJEU of 8 April 2014, joined cases C-293/12 and C-594/12, Digital Rights Ireland v Seitlinger, ECLI:EU: C:2014:238. In a similar vein, although relating to national legislation which had transposed the data Retention Directive, see the judgment of the CJEU of 21 December 2016, joined cases C-203/15 and C-698/15, Tele2 Sverige AB v Secretary of State for the Home Department, ECLI: EU:C:2016:970.
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lawfulness of these restrictions, and highlights the fact that the EU and the US are evolving in opposite directions. A brief reference to another topic that may raise an interesting debate in respect of digital forensics, particularly with regard to its limits, is in order. As cyberspace challenges existing State borders, digital forensics rules aimed at extracting evidence from computer systems should take into account the sovereignty of States and create limits whenever a computer system spreads throughout several States. Some of the legal systems comprised in this study seem to have a very broad understanding of these limits, at least in specific circumstances. According to recent amendments to the Singaporean Criminal Procedure Code, investigators located in Singapore may inspect and search, in or from Singapore, any data stored on or available to a computer implicated in the investigation, regardless of whether the computer is located inside or outside Singapore.132 While the stated intent is to enable access to data on web-based email accounts or web storage accounts residing in computers outside Singapore, the wording remains fairly broad.133 In Portugal, the Cybercrime Law also has a controversial provision on computer data searching, providing that whenever, in the course of a search, there are reasons to believe that the data sought are found elsewhere in the system, this search may be extended to other parts of that system. This provision raises several doubts as to its exact territorial scope.134 In the United States, a recently approved federal law also raises interesting questions concerning sovereignty in cyberspace. In 2018, the Clarifying Lawful Overseas Use of Data Act (hereinafter CLOUD Act) was enacted in order to amend the SCA. The Cloud Act allows federal law enforcement agencies to issue a warrant to electronic communications service providers based in the United States in order to demand the provision of data stored in any server they own and operate, regardless of whether the data are stored in the United States or on foreign soil. In the event that these service providers believe that the request violates the laws of the foreign country where the data are stored, the Cloud Act provides for a mechanism to facilitate the interaction with the foreign country, through executive agreements, as an alternative to the usually slow process followed under a mutual assistance, treaty (hereinafter MLAT). The standard mechanism used in a context of cross-border law enforcement, in order to request data or aid in data discovery in a foreign country, consists in resorting to informal mutual legal assistance or to formal MLAT, which requires the consent, on equal terms, of the countries involved. Under the Cloud Act, even if the electronic communications service provider 132
See the Singaporean National Report, Sect. 3.2. See the Singaporean National Report, Sect. 3.2. 134 See article 15(5) of the Portuguese Cybercrime Law (Law section 109/2009, of 15 September 2009). 133
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considers that the request of the federal law enforcement agency violates the law of the country where the data is stored, the alternative mechanisms should consist of those set forth in the United States’ law.
3.4
Data Protection and Electronic Surveillance for Security and Defense Purposes
Restrictions to personal data protection for security and defense purposes are one of the most complex topics in this field. The difficulties in determining the proper balance between the values at stake have given rise to intensive debate. The European Union’s legislation does not provide guidance on this subject, since it falls outside its jurisdiction.135 It is up to each Member State to enact its national legislation in this respect, without an obligation to reach harmonization in the Union. For this reason, national legislation differs also in this part of the globe. In the Czech Republic, for example, a bill is pending to amend the Act on Military Intelligence, which, if approved, shall allow the military intelligence to access traffic data, upon previous authorization from the court.136 In Portugal, the Security Information Service and the Strategic Defense Information Service may, under determined circumstances, gain access to banking and tax data, data on communication traffic, locality or other data connected with communications.137 In South Africa there are specific provisions allowing the electronic surveillance in the event that there are grounds to believe that there is a potential threat to national security.138 In France, there is a specific law on electronic surveillance of international electronic communications.139 Additionally, the French Code of Internal Security provides for the electronic surveillance of individuals who may represent a serious threat to public order. The French Code of Defense also has provisions which ensure the security of national information systems. The French Criminal Procedures Code provides for specific provisions regarding the implementation of electronic surveillance mechanisms. This implementation is subject to the approval of the Minister of Justice. In the United States, the Foreign Intelligence Surveillance Act (hereinafter FISA) provides for the legal framework for conducting foreign intelligence gathering for national security threats, while maintaining the secrecy of the respective 135
See the European Union Special Report, Sect. 3.4. See the Czech Republic National Report, Sect. 5. 137 See the Portuguese National Report, Sect. 3. 138 See the South African National Report, Sect. 4.4. 139 See the French National Report, Sect. 5. 136
investigations.140 After the National Security Agency’s programs on data collection became public on 2013, the USA Freedom Act of 2015 was enacted in order to set out some limits to the collection of data permitted under the USA PATRIOT Act, prohibiting the bulk collection of US call metadata and telephonic records.141 The restrictions to personal data protection for security and defense purposes vary significantly in all the analyzed legal systems, either in terms of the type of restrictions allowed, the requirements to implement them, the extent of those restrictions, or the competent authorities to supervise their implementation.
3.5
Remedies and Sanctions
In the European Union, supervisory authorities have significant corrective powers, including those to issue warnings and reprimands, impose temporary or definitive limitations on processing, and impose administrative fines. These administrative fines may amount to up to 20 million euros or four percent of the annual worldwide turnover of an undertaking in the preceding financial year, whichever is higher.142 Data subjects are granted several remedies under the GDPR in case of infringement to their rights. The main ones consist of the right to lodge a complaint with a supervisory authority and the right to an effective judicial remedy, either against the supervisory authority or against a third party, such as the data controller or the data processor. Data subjects have the right to receive compensation for damages suffered by any infringement. Additionally, Member States may set forth national rules for criminal responsibility. The infringer may, thus, be 140
See the United States of America’s National Report, Sect. 5. The federal legislation on intelligence gathering for security and defense purposes has been highly criticized, both at a national level and at an international level. In the recent history of the United States of America, there have been several cases in which the means and methods used by the Government in this context were questioned. The Echelon case, involving authorities of several other countries as data controllers, is one such case, which determined a strong reaction from the European Parliament—see the Report on the existence of a global system for the interception of private and commercial communications (ECHELON interception system) (2001/2098(INI)). More recently, the Prism case has reignited the debate on the topic. It has also resulted in a strong reaction from the European Parliament—see the Report on the US NSA surveillance program, the surveillance bodies of various EU Member States and their impact on EU citizens’ fundamental rights and on transatlantic cooperation in the areas of Justice and Home Affairs (2013/2188(INI)). The Article 29 Data Protection Working Party has also issued an opinion on this topic—see the Opinion 04/2014 on the surveillance of electronic communications for intelligence and national security purposes, adopted on 10 April 2014. On this, see Edgar (2017). 141 See the United States of America’s National Report, Sects. 5.1 and 5.2. 142 See the European Union Special Report, Sect. 4.1.
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subject to civil liability, criminal and administrative responsibility. In the United States, the fact that data protection legislation is essentially of a sectoral nature determines that rules on remedies and sanctions, as well as the jurisdiction to enforce them, are equally sectoral in nature. As in Europe, sanctions for infringements of data protection rules in the United States may be administrative, civil or criminal, but the amounts of the applicable penalties are far lower.143 Other legal systems included in the scope of this study also have rules on remedies and sanctions for breaching data protection rules, such as the Singaporean legal system.144
4
The International Dimension of Data Protection
4.1
The Territorial Scope of Rules on Data Protection
We now turn to the issues raised by the international dimension of personal data protection. Due to, on the one hand, the global reach of the communications networks through which personal data are currently collected, transmitted, and used—and, hence, the ubiquitous nature that their processing typically takes on— and, on the other hand, the different approaches that, as seen in the previous sections, are adopted by several jurisdictions in respect of certain key aspects of their protection, these issues are now of paramount significance. One may therefore ask, primarily, how is the territorial scope of application of data protection rules, including those on electronic data processing, defined in the jurisdictions covered by the present study. In this respect, the GDPR sets out a basic rule in article 3 (1), according to which: This Regulation applies to the processing of personal data in the context of the activities of an establishment of a controller or a processor in the Union, regardless of whether the processing takes place in the Union or not.
The place of establishment of the personal data controller or processor is, thus, the primarily relevant connecting factor to determine the applicability of the Regulation’s provisions. In the abovementioned Costeja case,145 the CJEU has clarified, in respect of the corresponding provision of Directive 95/46, that: processing of personal data is carried out in the context of the activities of an establishment of the controller on the territory of a Member State, within the meaning of that provision, when the operator of a search engine sets up in a Member State a branch or 143
See the United States of America’s National Report, Sect. 6. See the Singaporean Report, Sect. 3.10. 145 See, supra, para 7.3. 144
627 subsidiary which is intended to promote and sell advertising space offered by that engine and which orientates its activity towards the inhabitants of that Member State.
The processing of personal data through a search engine such as Google Search, which was operated by Google Inc. (a company incorporated in the U.S. but with an establishment in Spain, Google Spain SL), was thus deemed to be carried out “in the context of the activities” of that establishment, since the latter was “intended to promote and sell, in that Member State, advertising space offered by the search engine which serves to make the service offered by that engine profitable”.146 In such circumstances, the activities of the operator of the search engine and those of its establishment situated in the Member State concerned were, as the Court held, “inextricably linked”, since the activities relating to the advertising space “constitute the means of rendering the search engine at issue economically profitable and that engine is, at the same time, the means enabling those activities to be performed”.147 This broad definition of the notion of establishment of the data controller or processor, which the CJUE has reaffirmed in the Weltimmo case,148 is now reflected in recital 22 of the GDPR, which states that: Establishment implies the effective and real exercise of activity through stable arrangements. The legal form of such arrangements, whether through a branch or a subsidiary with a legal personality, is not the determining factor in that respect.
The European approach in respect of the scope of application of personal data protection rules, centered on the place of establishment or the domicile of the data controller or processor, instead of the geographical location of the personal data at stake, is also to be found in some non-European jurisdictions. Such is the case of Cape Verde,149 and South Africa.150 A more markedly territorial approach, based on the place of processing of the personal data, is preferred by Brazil, which adopts it in its Civil Framework of the Internet (“Marco Civil da Internet”),151 and by Switzerland, where it has been affirmed by the Federal Administrative Court.152
146
See CJEU of 13 May 2014, rendered in case C-131/12, Google Spain SL and Google Inc., ECLI:EU:C:2014:317, para. 56. 147 See ibidem, para. 57. 148 See the judgment rendered on 1 October 2015 in case C-230/14, Weltimmo s.r.o. v Nemzeti Adatvédelmi és Információszabadság Hatóság, ECLI:EU:C:2015:639. 149 See the Cape-Verdean National Report, Sect. 4.1. 150 See the South-African National Report, Sect. 5.1. 151 Namely in article 11 thereof, according to which Brazilian law on rights to privacy shall apply to any process of collection, storage, custody or treatment of personal data that occurs in national territory: see the Brazilian National Report, Sect. 4.1. 152 See the Swiss National Report, Sect. 2.1.
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4.2
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The Applicability of Data Protection Rules to Foreign Entities
A related issue is whether, and to what extent, electronic data processing by entities seated outside a given jurisdiction is comprised in the scope of application of the local rules concerning personal data protection. Such is the purpose of article 3(2) of the GDPR, which states that: This Regulation applies to the processing of personal data of data subjects who are in the Union by a controller or processor not established in the Union, where the processing activities are related to: (a) the offering of goods or services, irrespective of whether a payment of the data subject is required, to such data subjects in the Union; or (b) the monitoring of their behavior as far as their behavior takes place within the Union.
The GDPR hereby seeks to ensure that natural persons who are in the European Union are not deprived of the protection to which they are entitled under the Regulation, when the processing of their personal data is carried out by a controller or processor not established in the Union, if the processing activities are related to the offering goods or services to such persons153 or to the monitoring of their behavior.154 The so-called market-place principle, which the previously applicable Directive 95/46/EC did not explicitly enshrine as a criterion for the determination of its spatial scope of application,155 was thus introduced in the Regulation.156 By virtue of that principle, European personal data protection rules have gained a certain degree of extraterritorial applicability. As recital 23 of the Regulation makes it clear, in order to determine whether a controller or processor is offering goods or services to data subjects who are in the Union, one should ascertain whether it is apparent that the controller or processor “envisages offering services to data subjects in one or more Member States in the Union”, i.e., that it is targeting them. For this purpose, the recital goes on to say, the mere accessibility of the controller’s, processor’s or an intermediary’s website in the Union, of an email address or of other contact details, or the use of a language generally used in the third country where the controller is established, is insufficient; instead, “factors such as the use of a language or a currency generally used in one or more Member States with the possibility of ordering goods and services in that other language, or the mentioning of customers or users who are in
153
See, on this, recital 23 of the Regulation. See, on this, recital 24 of the Regulation. 155 On which see Carrascosa González (2015), pp. 448 ff. 156 See, in this sense, the German National Report, Sect. 2.7.1. 154
the Union, may make it apparent that the controller envisages offering goods or services to data subjects in the Union”. In what concerns the issue of whether a processing activity can be considered to “monitor the behavior of data subjects”, recital 24 of the Regulation states that one should ascertain whether natural persons are “tracked on the internet”. This includes subsequent use of personal data processing techniques such as “profiling a natural person, particularly to take decisions concerning her or him or for analyzing or predicting her or his personal preferences, behaviors and attitudes”. The applicability of domestic rules on data protection to foreign business operators (notably those that process such data in connection with the supply of goods or services to persons located in national territory) is also provided for in article 75 of the Japanese Act on Protection of Personal Information,157 and in the Singaporean Personal Data Protection Act 2012, which covers, according to section 2(1), companies formed under non-Singapore laws and/or resident outside Singapore.158 A particularly difficult issue arises in connection with the applicability of the provisions on the so-called right to be forgotten to search engine service providers established abroad when their listings appear on websites with different domain names: should in those cases the removal of the search results be ordered only in respect of the website identified by a domain name that serves the forum State or should it extend to any other sites? This issue motivated a request for a preliminary ruling of the Court of Justice of the European Union from the French Conseil d’État,159 to which the Court replied as follows160: On a proper construction of Article 12(b) and subparagraph (a) of the first paragraph of Article 14 of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on
157
See the Japanese National Report, Sect. 4.2. See the Singaporean National Report, Sect. 4.1. 159 Case C-507/17, Google, OJ C 347, 16.10.2017, p. 22. An opinion was rendered by Advocate General Maciej Szpunar on 10 January 2019 in respect of the issues raised in this request for a preliminary ruling, according to which “the search engine operator is not required, when acceding to a request for de-referencing, to carry out that de-referencing on all the domain names of its search engine in such a way that the links in question no longer appear, irrespective of the location from which the search on the basis of the requesting party’s name is performed”. Nevertheless, according to the Advocate General “once a right to dereferencing within the EU has been established, the search engine operator must take every measure available to it to ensure full and effective de-referencing within the EU, including by use of the ‘geoblocking’ technique, in respect of an IP address deemed to be located in one of the Member States, irrespective of the domain name used by the internet user who performs the search”. See, on this, de Miguel Asensio (2019). 160 Judgment of the Court (Grand Chamber) of 24 September 2019, ECLI:EU:C:2019:772. 158
Data Protection in the Internet the protection of individuals with regard to the processing of personal data and on the free movement of such data, and of Article 17(1) of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and repealing Directive 95/46 (General Data Protection Regulation), where a search engine operator grants a request for de-referencing pursuant to those provisions, that operator is not required to carry out that dereferencing on all versions of its search engine, but on the versions of that search engine corresponding to all the Member States, using, where necessary, measures which, while meeting the legal requirements, effectively prevent or, at the very least, seriously discourage an internet user conducting a search from one of the Member States on the basis of a data subject’s name from gaining access, via the list of results displayed following that search, to the links which are the subject of that request.
In this landmark judgment, the Court has, in sum, decided that the right to be forgotten does not require search engine operators to de-list search results on a global basis, but rather solely within the EU territory. While acknowledging that the objective of Directive 95/46/EC and the GDPR is to “guarantee a high level of protection of personal data throughout the European Union” (para. 54) and that a de-referencing carried out on all the versions of a search engine “would meet that objective in full” (para. 55), the Court admitted—as this Report shows— that “numerous third States do not recognise the right to dereferencing or have a different approach to that right” (para. 59) and that the right to the protection of personal data is not an absolute right, and must be balanced against other fundamental rights, in accordance with the principle of proportionality (para. 60). Furthermore, the Court stated, “the balance between the right to privacy and the protection of personal data, on the one hand, and the freedom of information of internet users, on the other, is likely to vary significantly around the world” (ibidem). In particular, the Court noted, it is not apparent from the wording of the Directive or the GDPR that the EU legislature would, for the purposes of ensuring that the said objective is met, have chosen to confer a scope on the rights enshrined in those provisions which would go beyond the territory of the Member States (para. 62). From this it follows, according to the Court, that there is no obligation under EU law, for a search engine operator who grants a request for de-referencing made by a data subject to carry out such a de-referencing on all the versions of its search engine (para. 64). Nevertheless, the Court added, it is for the search engine operator to take, if necessary, “sufficiently effective measures” to ensure the effective protection of the data subject’s fundamental rights (para. 70). Such measures should have the effect of “preventing or seriously discouraging” Internet users in the Member States from accessing the links in question using a search based on that data subject’s name (ibidem).
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4.3
The Specific Conditions Applicable to the Transfer of Personal Data to a Foreign Jurisdiction
Thirdly, one may ask whether the transfer of personal data to a foreign authority is freely allowed or subject to specific conditions and, in the latter case, what they are. The free flow of data across national borders is, of course, a major concern in a global information society; but the different levels of protection of personal data that still prevail in national legal systems inevitably entail restrictions to their transfer abroad. The GDPR addresses this issue in chapter V. According to article 45(1), transfer of personal data to a third country or an international organization may, in principle, only take place when the Commission has decided that: the third country, a territory or one or more specified sectors within that third country, or the international organization in question ensures an adequate level of protection.
When assessing the adequacy of the level of protection in the third country or international organization, the Commission shall, pursuant to article 45(2) of the GDPR, take account in particular of: (1) the rule of law and respect for human rights and fundamental freedoms; (2) the existence and effective functioning of one or more independent supervisory authorities; and (3) the international commitments that the country or organization has entered into in relation to the protection of personal data. This rule reflects the CJEU’s 2015 judgment in the Schrems case,161 in which it held that the notion of an “adequate level of protection” cannot be understood as requiring a level of protection identical to that guaranteed in EU law, but rather as demanding the third country in fact to ensure, by reason of its domestic law or its international commitments, a level of protection of fundamental rights and freedoms that is “essentially equivalent to that guaranteed within the European Union”.162 After having assessed the adequacy of the level of protection, the European Commission may decide, by an implementing act, that a third country, a territory or one or more specified sectors thereof, or an international organization ensures an adequate level of protection (article 45(3)).163 A list of the third countries, territories, and specified sectors within third countries and international organizations for which the Commission has decided that an adequate level
161
On which see CJEU of 6 October 2015, C-362/14, Schrems v. Data Protection Commissioner, ECLI:EU:C:2015:650. 162 See ibidem, para. 73. 163 See, on this, the communication from the Commission to the European Parliament and the Council “Exchanging and Protecting Personal Data in a Globalized World”, COM (2017) 7 final, published on 10 January 2017.
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of protection is or is no longer ensured is to be published in the Official Journal of the European Union (article 45(8)). Absent an adequacy decision, a controller or processor may still transfer personal data to a third country or an international organization, according to article 46 of the GDPR, if it has provided “appropriate safeguards”, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available. Such safeguards may be provided for, without a specific authorization from a supervisory authority, by: (1) a legally binding and enforceable instrument between public authorities or bodies; (2) binding corporate rules; (3) standard data protection clauses adopted by the Commission; (4) standard data protection clauses adopted by a supervisory authority and approved by the Commission; (5) an approved code of conduct together with binding and enforceable commitments of the controller or processor in the third country to apply the appropriate safeguards; or (6) an approved certification mechanism together with binding and enforceable commitments of the controller or processor in the third country to apply the appropriate safeguards, including as regards data subjects’ rights. In the absence of either an adequacy decision or appropriate safeguards, a transfer of personal data to a third country or an international organization may only occur in one of the cases laid down in article 49 of the GDPR, namely: (1) the data subject has explicitly consented to the proposed transfer, after having been informed of the possible risks of such transfers; (2) the transfer is necessary for the performance of a contract between the data subject and the controller or the implementation of pre-contractual measures taken at the data subject’s request; (3) the transfer is necessary for the conclusion or performance of a contract concluded in the interest of the data subject; (4) the transfer is necessary for important reasons of public interest; (5) the transfer is necessary for the establishment, exercise or defense of legal claims; (6) the transfer is necessary in order to protect the vital interests of the data subject or of other persons, where the data subject is physically or legally incapable of giving consent; (7) the transfer is made from a register which according to Union or Member State law is intended to provide information to the public and which is open to consultation. In the Schrems case, Decision 2000/520, adopted by the Commission on the basis of Article 25(6) of Directive 95/46/ EC, whereby the “Safe Harbor Privacy Principles” issued by the U.S. Department of Commerce in 2000 were considered to ensure an adequate level of protection for personal data transferred from the EU to organizations established in the U. S., was held invalid by the CJUE. Thereafter, a new “Privacy Shield Framework”,164 which imposes stronger, self-certified, obligations on American 164
Available at https://www.privacyshield.gov.
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companies, was designed for the transfer of personal data from the EU to the U.S. On July 12, 2016, the European Commission considered that the Framework is adequate to enable such data transfers under EU law, which allowed it to enter into force as of 1 August 2016.165 Rules similar to those adopted in the EU in respect of the transfer of personal data to third countries have been enacted in Cape-Verde,166 Japan,167 Singapore,168 and South Africa.169
4.4
The Law Applicable to Liability for Damages Caused by the Unlawful Processing of Personal Data
Finally, the question should be addressed of what law applies to liability for damages caused by the unlawful processing of personal data in the jurisdictions under analysis in this report. As the EU Special Report emphasizes, there are no common European conflict of laws rules on this topic, since noncontractual obligations arising out of violations of privacy and rights relating to personality, including defamation, are excluded from the scope of application of 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 (the “Rome II Regulation”) by its article 1(2) (g).170 Although the GDPR proclaims in article 82(1) that “[a]ny person who has suffered material or non-material damage as a result of an infringement of this Regulation shall have the right to receive compensation from the controller or processor for the damage suffered”, it is silent on the issue of the law applicable to the ensuing claims. To be sure, in its Resolution of 10 May 2012 on the amendment of Regulation (EC) No. 864/2007,171 the European Parliament requested the Commission to submit, on the basis of point (c) of Article 81(2) of the Treaty on the Functioning of the European Union, a proposal designed to add to the Rome II Regulation a provision on the law applicable to non-contractual obligations arising out of violations 165 However, on 3 October 2017 the High Court of Ireland has ruled, in The Data Protection Commissioner v. Facebook Ireland Limited and Maximillian Schrems (available at https://www.dataprotection.ie/ docimages/documents/Judgement3Oct17.pdf), to make a reference for a preliminary ruling to the CJEU in order to determine, inter alia, whether certain features of the Privacy Shield constitute an adequate remedy for the protection of the rights to privacy and personal data enshrined in the EU Charter of Fundamental Rights. 166 See the Cape-Verdean National Report, Sect. 4.3. 167 See the Japanese National Report, Sect. 4.3. 168 See the Singaporean National Report, Sect. 4.2. 169 See the South-African National Report, Sect. 5.2. 170 See the European Union Special Report, Sect. 4.4. 171 Published in the OJEU, C 261, of 10 September 2013, pp. 17 ff.
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of privacy and rights relating to personality, in respect of which it recommended the following text: 1. The law applicable to a non-contractual obligation, arising out of a violation of privacy or rights relating to the personality, including defamation, shall be the law of the country in which the most significant element or elements of the loss or damage occur or are likely to occur. However, the law applicable shall be the law of the country in which the defendant is habitually resident if he or she could not reasonably have foreseen substantial consequences of his or her act occurring in the country designated by paragraph 1. [. . .].
This recommendation has so far not been enacted. In the EU, the matter is thus left to domestic conflict of laws rules, which differ considerably in this respect.172 Although many Civil Law jurisdictions traditionally opt for the applicability of the lex loci delicti commissi in respect of tort liability,173 the issue arises as to where the wrongful act should be held committed whenever—as is often the case in respect of the unlawful processing of personal data through the Internet—the place of the wrongful activity and that of its harmful effect differ. Portuguese Private International Law174 provides a solution for this type of situations, according to which: If the injurer is considered liable by the law of the State where the injury was inflicted but not by the law of the place where the conduct causing the damage occurred, the former law applies, provided that the injurer should have foreseen the occurrence of an injury in that country as a consequence of his/her act or omission.175
Hence, if the data controller or processor has acted in its home country, where its actions were ex hypothesis lawful, but should have foreseen the occurrence of an injury to the data subject in a foreign country, as a consequence of the processing of its personal data, e.g. because it was offering its goods or services in that country, and this country’s law holds 172
See, for a comparative analysis, Kuipers (2017), pp. 1350 ff. Such is the case, e.g., of Greek, Portuguese, and Spanish Private International Law: see, respectively, articles 26, 45(1) and 10(9) of the Civil Codes of those countries. 174 See article 45(2) of the 1966 Civil Code and, on the applicability of this provision to the situations referred to in the text, Moura Vicente (2005), pp. 307 ff.; Dias Oliveira (2011), pp. 395 ff.; and de Lima Pinheiro (2015), pp. 502 ff. 175 A similar rule can be found in article 133(2) of the Swiss Private International Law Act 1987, which states: “If the injury occurs in another State than the State, in which the act that caused injury arose, the law of that State shall be applicable if the tortfeasor should have foreseen that the injury would occur there”. The same happens with article 17 of the Japanese General Law on the Application of a Law, pursuant to which: “The formation and effect of a claim arising from a tort shall be governed by the law of the place where the result of the wrongful act occurred; provided, however, that if the occurrence of the result at said place was ordinarily unforeseeable, the law of the place where the wrongful act was committed shall govern”. See the Japanese National report, Sect. 4.4. 173
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the controller or processor liable in tort for the damage thus caused to the data subject, this law shall apply. Other legal systems, such as the Belgian,176 German177 and Italian178 ones, offer the plaintiff a choice, in what concerns torts committed at a distance, between the law of the place of the harmful event and that where the damage was sustained. Such a choice is in line with the GDPR’s rule on jurisdictional competence contained in article 79(2), which also applies to court proceedings for the exercise of the right to receive compensation by virtue of article 82(6) of the Regulation, according to which: Proceedings against a controller or a processor shall be brought before the courts of the Member State where the controller or processor has an establishment. Alternatively, such proceedings may be brought before the courts of the Member State where the data subject has his or her habitual residence, unless the controller or processor is a public authority of a Member State acting in the exercise of its public powers.
A preference for the law of the place of the injury is more openly expressed by several Common Law systems, notably the American and the English ones, which determine its applicability to claims for compensation of personal injury.179
See article 99, § 2, according to which: “Obligations resulting from a tort are nevertheless governed: 1 in the event of defamation or violation of privacy or personality rights, at the choice of the plaintiff, by the law of the State on the territory of which the act leading to the damage or the damage occurred or is likely to occur, unless the person liable proves that he could not have foreseen the damage to occur in that State [. . .]”. 177 See article 40(1) of the Introductory Act to the German Civil Code, according to which: “Tort claims are governed by the law of the country in which the liable party has acted. The injured party can demand that instead of this law, the law of the country in which the injury occurred is to be applied. The option can be used only in the first instance court until the conclusion of the pre-trial hearing or until the end of the written preliminary procedure”. 178 See article 62(1) of Law of 31 May 1995, section 218, on the Reform of the Italian System of Private International Law, according to which: “The law of the State where the event occurred governs tort liability there for. However, at the request of the injured party, the law of the State where the fact which caused the damage occurred shall apply”. 179 Accordingly the § 146 of the American Restatement 2nd on the Conflict of Laws states that: “In an action for a personal injury, the local law of the state where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the occurrence and the parties, in which event the local law of the other state will be applied”. Section 11 of the English Private International Law (Miscellaneous Provisions) Act 1995 provides, in turn, that: “(1)The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur. (2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being (a) for a cause of action in respect of personal injury caused to an individual or death resulting from personal injury, the law of the country where the individual was when he sustained the injury [. . .]”. 176
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However, the effectiveness of this conflicts rule is somewhat mitigated, on the one hand, by the fact that Common Law jurisdictions may dismiss cases on the basis of the doctrine of forum non conveniens if the issues in dispute are subject to a foreign law180; and, on the other hand, because the contents of the foreign applicable law are not to be determined ex officio by the competent court, but rather pleaded and proven by the party relying on it.181 As a result, Common Law jurisdictions will tend to apply more frequently the lex fori by default to claims of liability for damages caused by the unlawful processing of personal data. Although this may improve efficiency in international litigation, it may as well, to a certain extent, promote forum shopping in respect of such claims.
5
Concluding Remarks
5.1
The Basic Approaches to Regulation of Data Protection in the Internet
In the era of the Internet and of large scale automated processing of information, the protection of personal data has unequivocally become a universal concern. Although the technological developments occurred in this area over the past four decades have dramatically improved humankind’s access to information and knowledge, and opened impressive new perspectives for scientific research and entrepreneurial activities, new and unprecedented risks have also arisen in what regards, for example, the safeguard of informational privacy, off air competition and even—as recent occurrences in Europe and the U.S. with potentially long-lasting effects in public life have shown—of the proper functioning of democratic institutions. The present report has evidenced that, although these concerns are currently shared by a significant number of countries and supranational organizations, the basic approaches to the regulation of personal data protection still differ widely around the globe. The major differences identified in the previous sections concern in particular the following areas: a) The sources of regulation of personal data processing, in respect of which the European trend to codify and comprehensively harmonize the law applicable in this field sharply contrasts with the American sector-specific approach to public regulation on data protection, which is largely complemented by self-regulation instruments emanating from the private sector, such as codes of
180
See Fentiman (2017), pp. 797 ff. See, for a comparative overview of this matter, see Esplugues et al. (2011). 181
conduct or transparency principles, which enjoy only a limited degree of enforceability; b) The notion and scope of personal data covered by the relevant legal sources, which ranges from the very broad concept adopted in European legislation and in several non-European legal systems closely influenced by it, which comprises “any information relating to an identified or identifiable natural person”—the protection of which is regarded as a fundamental, constitutionally protected right—to the much more narrow scope of the personal data that enjoys legal protection currently prevailing in the United States, where data protection rules are primarily aimed at federal agencies; c) The role and nature of supervision authorities, which in the European Union have been entrusted with a wide range of investigative, corrective, authorization and advisory powers, typically concentrated in a single independent public agency, whereas in certain non-European countries such authorities are sometimes put under the control of the executive power (as happens in Singapore and South Africa) or have their attributions dispersed among a number of distinct public agencies, none of which is specifically devoted to data protection (as is the case of the U.S.); d) The protection specifically awarded to the electronic processing of personal data pertaining to consumers and workers, in respect of which the European Union and its Member States have also taken the lead, e.g., through the imposition of strict rules in respect of the collection of data through the use of cookies or other technological devices and the distribution of unsolicited commercial communications, which have no equivalent in the U.S.; and the enactment of special provisions ensuring workers’ right to privacy which include, inter alia, a general prohibition to use surveillance means at the workplace and to access workers’ private electronic communications, in respect of which American law allows a far broader range of exceptions; e) The enshrinement of the data subject’s so-called right to be forgotten, which has been recognized in the widest terms by the case-law of the Court of Justice of the European Union (so as to affect also information provided by search engines) and was recently regulated in substantial detail in the GDPR, but which has so far found no acceptance in U.S. federal or state law; f) The existence of specific duties to secure personal data and to notify data breaches, which European law now regulates in general terms, but which in other legal systems have been the object of only limited or sector-specific legal provisions; g) The exceptions to personal data protection allowed in respect of criminal investigations, as well as for security and defense purposes, which are considerably more far-
Data Protection in the Internet
reaching in the U.S., particularly in the context of antiterrorist statutory enactments, than in Europe; h) The remedies and sanctions available for the breach of the applicable personal data protection rules, which, albeit provided for in most legal systems, have recently been considerably aggravated in the European Union, in particular through the power granted to supervisory authorities to impose administrative fines of extremely high values that have no equivalent in other jurisdictions; i) The territorial scope of application of national rules on personal data protection, in respect of which the recent European GDPR has made an express option for a mitigated form of extraterritorial applicability—comprising all situations in which the processing of personal data, albeit undertaken by entities not established in the Union, concerns data subjects who are in Europe and takes place in the context of the offering of goods or services to those subjects or in the monitoring of their behavior occurred in the Union—that has no explicit equivalent on the other side of the Atlantic; j) The conditions applicable to the transfer of personal data to foreign jurisdictions, in respect of which the European Union, followed by other countries such as Cape-Verde, Japan, Singapore and South Africa, has established a particular system of control of the adequacy of the level of protection provided by the country of destination as a condition for the lawfulness of such transfer; and k) The law applicable to liability for damages caused by the unlawful processing of personal data in cross-border situations, with regard to which Private International Law rules provide an array of different solutions, even within the European Union, that vary from the (quasi) systematic application of the lex fori to the optional applicability of the law of the wrongful activity or that of the harmful effect.
5.2
A General Assessment
The comparison conducted above denotes a rather paradoxical situation: whilst the Internet is by nature a global computer network and personal data processing conducted through it is largely also a trans-border phenomenon that tends to ignore national frontiers, the regulation of that phenomenon is still—with the notable exception of the European Union—essentially the result of national or even private initiatives. What’s more, the approaches to that regulation differ widely, particularly among the two major Western trading blocks, in what concerns its sources, contents, remedies and scope of application.
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The diversity of such approaches does not appear to constitute the mere result of different legislative techniques or historical traditions; it is rather the fruit of deeply-rooted different perceptions of the respective roles of private ordering, the protection of individuals’ fundamental rights and the preservation of national security in a market economy.182 The very notion of privacy—which, as mentioned above, lies at the root of contemporary rules on individual data protection—is perceived differently in the American and Continental European legal traditions: whilst the former tends to see it essentially as an expression of individual liberty, which is primarily threatened by the Government, the latter conceives it basically as a requirement of personal dignity, which must be safeguarded above all against the mass media.183 As such, the different approaches identified in this study do not seem capable of being easily overcome, as the limited reach of international instruments in this field clearly illustrates. This is, in reality, a recurring problem in Internet history, which the well-known UEJF et Licra c. Yahoo! Inc. et Yahoo France case already illustrated nearly 20 years ago.184 Far from being subtracted from State law, the so-called cyberspace still reflects the often unsurmountable divergences between national legal systems.
182 This was recognized by the Irish High Court in its judgment of 3 October 2017 on The Data Protection Commissioner v. Facebook Ireland Limited and Maximillian Schrems (see note 158) where it stated: “A central purpose of the European Union is the promotion of the peace and prosperity of citizens of the European Union through economic and trading activity within the single market and globally. The free transfer of data around the world is now central to economic and social life in the union and elsewhere. The recent history of our continent has shown how crucially important each of these objectives is to the wellbeing of the people of Europe. Damage to the global economy has resulted in very real detriment and hardship to millions of Europeans. International terrorist atrocities have been and continue to be perpetrated in many Member States of the European Union. There are many who experienced the corrosive effects of widespread state surveillance upon their private lives and society in general who regard preservation of the right to privacy, includ[ing] data protection, as fundamental to a democratic society. In a democratic society, a balance must be struck between these competing concerns, interests and values. Not every State will strike the same balance” (see paras. 45–47 of the decision). 183 See, on this, Whitman (2004). 184 See the Ordonnance de référé rendered by the Tribunal de Grande Instance de Paris on 22 May 2000, available at http://juriscom.net/2000/ 05/tgi-paris-refere-22-mai-2000-uejf-et-licra-c-yahoo-inc-et-yahoofrance/.
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References Carrascosa González J (2015) The Internet – privacy and rights relating to personality. Recueil des Cours de l’Académie de La Haye de Droit International 378:267 ff. de Lima Pinheiro L (2015) Direito Internacional Privado, vol II, 4th edn. Almedina Coimbra de Miguel Asensio P (2015) Derecho Privado de Internet, 5th edn. Madrid de Miguel Asensio P (2019) Ámbito espacial del derecho al olvido: las conclusiones en el asunto C-507/17, Google. La Ley Unión Europea 67:1 de Vasconcelos Casimiro S (2014) O direito a ser esquecido pelos motores de busca: o Acórdão Costeja. Revista de Direito Intelectual 2:307 Dias Oliveira E (2011) Da responsabilidade civil extracontratual por violação de direitos de personalidade em Direito Internacional Privado. Coimbra Eberle EJ (2001) The right to information self-determination. Utah Law Rev 965 Edgar TH (2017) Beyond Snowden: privacy, mass surveillance and the struggle to reform the NSA. Washington Esplugues C, Iglesias JL, Palao G (2011) Application of foreign law. Munich, Sellier Fentiman R (2017) Forum non conveniens. In: Encyclopedia of private international law, vol 1. Edward Elgar, Cheltenham Fried C (1968) Privacy. Yale Law J 77:475 Hoeren T (2018) Internetrecht. De Gruyter, Berlin Kuipers JJ (2017) Personality rights. In: Encyclopedia of private international law, vol 2. Edward Elgar, Cheltenham Larenz K, Wolf M (2004) Allgemeiner Teil des Bürgerlichen Rechts, 9th edn. C.H. Beck, Munich
D. Moura Vicente and S. de Vasconcelos Casimiro Menezes Cordeiro A (2011) Tratado de Direito Civil, vol IV, Pessoas, 3rd edn Mota Pinto P (2018) O direito à reserva sobre a intimidade da vida privada. In: eiusdem, Direitos de Personalidade e Direitos Fundamentais. Estudos, Coimbra Moura Vicente D (2005) Problemática Internacional da Sociedade da Informação. Coimbra Orrù E (2017) Minimum harm by design: reworking privacy by design to mitigate the risks of surveillance. In: Data protection and privacy: (in) visibilities and infrastructures, Law governance and technology series, vol 36, p 107 Post RC (2001) Three concepts of privacy. Georgetown Law J 89:2087 Prosser WL (1960) Privacy. Calif Law Rev 48:383 Rubenfeld J (1989) Right to privacy. Harv Law Rev 102:737 Sousa Pinheiro A (2015) Privacy e proteção de dados: a construção dogmática do direito à identidade informacional. Lisbon Strömholm S (1967) Right of privacy and rights of the personality: a comparative survey. Stockholm van der Sloot B (2017) Legal fundamentalist: is data protection really a fundamental right? In: Data protection and privacy: (in) visibilities and infrastructures, vol 36, Law governance and technology series, p3 van der Sype YS, Guislan J, Seigneur JM, Titi X (2017) On the road to privacy – and data protection – friendly security technologies in the workplace – a case-study of the MUSES risk and trust analysis engine. In: Data protection and privacy: (in) visibilities and infrastructures, Law governance and technology series, vol 36, p 241 Warren S, Brandeis L (1890) The right to privacy. Harv Law Rev 4:193 Whitman JQ (2004) The two western cultures of privacy: dignity versus liberty. Yale Law J 113:1151
Legal Aspects of Genetic Testing Regarding Insurance and Employment Lara Khoury, Adelle Blackett, and Lukas Vanhonnaeker
Abstract
The legal analysis of genetic testing in insurance and employment reveals layered tensions that are central to the governance of contemporary social risk. The development of genomic medicine promises much, through the ability to identify risk on an individualized basis. However, individualization inevitably raises concerns about privacy protection, all the more pressing when genetic testing is not a fully refined, predictive technology. The individualization of risk yields still more profound tensions to the extent that the Post-War consensus in many societies has been to seek to transfer certain social risks away from the individual, by collectivizing them through a range of state-supported social security mechanisms. On the occasion of the 20th General Congress of the International Academy of Comparative Law held on 24 July 2018 at Kyushu University in Fukuoka, Japan, legal experts worldwide prepared reports on the legal aspects of genetic testing in the contexts of insurance and employment, fourteen of which are revised as chapters in this edited volume. This general report highlights commonalities and differences between legal regimes on their approach to genetic testing in these contexts. It chronicles the justifications for and against the collection of genetic information by insurers and employers, legal definitions, as well as the specific rights and obligations and generalist frameworks that apply from a privacy rights and anti-discrimination lens. This comparative endeavor concludes with a reflection on the This report was also published in Khoury, Blackett and Vanhonnaeker (Eds), Genetic Testing and the Governance of Risk in the Contemporary Economy – Comparative Reflections in the Insurance and Employment Law Contexts, Springer Nature Switzerland 2020. L. Khoury (*) · A. Blackett · L. Vanhonnaeker Faculty of Law, McGill University, Montreal, QC, Canada e-mail: [email protected]; [email protected]; lukas. [email protected]
relevance of transnational standards to address the legal challenges of genetic testing in insurance and employment.
1
Introduction1
Colleagues from 16 jurisdictions have generously reported2 on how the legal systems of their different jurisdictions tackle the challenges brought by legal aspects of genetic testing in insurance and employment.3 Grounded in their work, this General Report offers an overview of the diverse set of 1
Questions 1–2 of the Questionnaire. Our questionnaire in French and English is available as an Annex to this chapter. 3 The national report for Belgium was prepared by Thierry Vansweevelt, Britt Weyts and Cindy Cornelis (Vansweevelt, Weyts and Cornelis, Belgian national report); the national report for Brazil was prepared by Mario Viola (Viola, Brazil national report); the national report for Canada was prepared by Colleen Thrasher and Hilary Young (Thrasher and Young, Canada national report); the national report for Cyrpus was prepared by Theodoros Trokanas (Trokanas, Cyprus national report); the national report for Czechia was prepared by Filip Křepelka (Křepelka, Czechia national report); the national report for Estonia was prepared by Kärt Pormeister (Pormeister, Estonia national report); the national report for France was prepared by Christian Byk (Byk, France national report); the national report for Greece was prepared by Lilian Mitrou (Mitrou, Greece national report); the national report for Italy was prepared by Carlo Casonato and Marta Tomasi (Casonato and Tomasi, Italy national report); the national report for Japan was prepared by Yuichiro Sato (Sato, Japan national report); the national report for Poland was prepared by Monika Wałachowska (Wałachowska, Poland national report); the national report for Quebec was prepared by Yann Joly (Joly, Quebec national report); the national report for Switzerland was prepared by Valérie Junod (Junod, Switzerland national report); the national report for Taiwan was prepared by Wenmay Rei (Rei, Taiwan national report); the national report for the United Kingdom was prepared by Gerard Porter (Porter, United Kingdom national report); insights with respect to challenges brought by legal aspects of genetic testing in insurance and employment in the United States were provided by Eric A. Feldman and Erin Quick after the Congress (Feldman and Quick, United States national report). The national reports are on file with the authors. 2
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_23
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norms that surround genetic testing in insurance and employment, accompanied by a window into relevant international, regional and national incursions into the field. This general report does not purport to offer a comprehensive or even freestanding investigation. Similarly, it does not seek fully to describe national orders in respect to the questions raised by the topic.4 Rather, this report offers a basis for comparative reflection, including on whether transnational standard setting might be useful or necessary to address some of the legal challenges of genetic testing in insurance and the employment. The report is structured into two main sections. The first section looks at the range of norms that specifically address the use of genetic testing in employment and insurance. They encompass international sources—including human rights norms—that may be binding or non-binding, as well national statutory, regulatory or soft law mechanisms (Sect. 2). The second section considers general frameworks relevant to genetic testing of each country, including those that flow from general anti-discrimination rules and norms protecting rights to autonomy, self-determination, confidentiality and privacy (Sect. 3). The legal analysis of genetic testing in insurance and employment reveals layered tensions that are central to the governance of contemporary social risk. The development of genomic medicine promises much, through the ability to identify risk on an individualized basis. However, individualization inevitably raises concerns about privacy protection,5 all the more pressing when genetic testing is not a fully refined, predictive technology.6 The individualization of risk yields still more profound tensions to the extent that the Post-War consensus in many societies has been to seek to transfer certain social risks away from the individual, by collectivizing them through a range of state-supported social security mechanisms.7 The transfer tends to occur through a variety of fiscal measures and social security benefits that are tied to employment and often involve insurance coverage. One rapporteur astutely questions whether genetic testing is part of the same continuum, or rather accelerates a different, contemporary trend of transferring risk back onto the shoulders of the individual.8
4
For a fulsome account of how national orders tackle the questions raised by our theme, the reader is invited to consult the revised contribution of some of the authors of the national reports: Khoury et al. (2020). 5 Wałachowska, Poland national report. 6 This tension was raised in different ways by several national rapporteurs. See e.g. Thrasher and Young, Canada national report; Byk, France national report. 7 See Universal Declaration of Human Rights, G.A. Res. 217A (III), U.N. Doc. A/810 at 71 (1948), Arts 22, 23 and 25. 8 Byk, France national report.
L. Khoury et al.
It is therefore somewhat surprising that the vast majority of jurisdictions surveyed in this report have little or no data available on the frequency of use of genetic testing in the insurance and employment contexts.9 This apparent lack of data stands in stark contrast with the data available on the prevalence of genetic testing undertaken for medical purposes (e.g. for prenatal diagnostic, filiation, medical diagnosis, predictive testing, and now personalized medicine)10 as well as for the investigation of crimes.11 National reporters pointed to a number of factors that might affect the prevalence of genetic testing in the contexts of insurance and employment. The design of national health or social insurance systems, especially where they provide comprehensive coverage, and even of private insurance schemes, has an impact on the frequency of genetic testing12: one national rapporteur suggests that if the cost of genetic testing13 is covered, physicians may be more likely to prescribe genetic tests.14 Moreover, if the national health insurance provides comprehensive coverage for health services,15 there may be little incentive for private insurers to use genetic testing.16 Finally, the availability of low cost direct-to-consumer genetic testing may have an impact on the prevalence of genetic testing.17 Of course, how countries regulate genetic testing— forbidding it altogether for employment and insurance purposes, or permitting it under strict conditions (Sect. 2 below)—is likely to influence the frequency of the test-
9 Viola, Brazil national report; Thrasher and Young, Canada national report; Křepelka, Czechia national report; Casonato and Tomasi, Italy national report; Sato, Japan national report; Rei, Taiwan national report; Wałachowska, Poland national report; Mitrou, Greece national report; Pormeister, Estonia national report; Joly, Quebec national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgian national report; Porter, United Kingdom national report (the Health and Safety Executive noted in 2007 that: “(w)e have not found any evidence that employers are currently carrying out genetic testing in Britain (with the exception of the Ministry of Defence for aircrew training)”). 10 Křepelka, Czechia national report; Wałachowska, Poland national report; Rei, Taiwan national report; Byk, France national report. 11 Křepelka, Czechia national report (because of rapidly decreasing prices, genetic testing proliferates in both domains). 12 Sato, Japan national report; Porter, United Kingdom national report; Joly, Quebec national report; Rei, Taiwan national report; Křepelka, Czechia national report. 13 E.g. Porter, United Kingdom national report (access to genetic testing is free within the NHS based upon clinical need—usually when there is relevant family history). 14 Suggested by Junod, Switzerland national report. 15 Rei, Taiwan national report. 16 Rei, Taiwan national report. The existence of a publicly funded healthcare system in Canada also explains the limited amount of discriminatory treatment on the ground of genetic status and why it took so long to adopt legislation on genetic discrimination: Joly, Quebec national report. 17 E.g. Porter, United Kingdom national report.
Legal Aspects of Genetic Testing Regarding Insurance and Employment
ing.18 For instance, the Quebec rapporteur observes that a conjunction of three factors could affect the reliance upon genetic testing in the Canadian context: (1) the adoption of a specific genetic anti-discrimination statute in 2017; (2) a commitment by Canadian insurers, starting on 1 January 2018 to restrict the use of genetic test results for life coverage equal to or above $250,000; and (3) the inclusion of genetic testing within the services covered by the public health care system.19 Diving into the heart of our topic, we find another factor influencing prevalence: insurer-induced fear of higher premiums or exclusion of coverage not only affects the willingness of individuals to undergo useful predictive genetic tests, but also affects the protection of their rights as patients by restricting de facto their access to preventive health care20 and equitable access to health care.21
2
Specific Rights and Obligations Regarding Genetic Testing in the Insurance and Employment Context
2.1
Justifications for and Against the Collection of Genetic Information by Employers and Insurers22
As suggested in the introduction, perspectives vary on whether employers and insurers should be permitted to collect genetic information in the employment and insurance contexts, even though some jurisdictions report an absence of political and bioethical debates about genetic testing altogether.23 We therefore asked national rapporteurs to share their appraisal of the justifications and objections raised in their jurisdictions for and against such collection. The justifications for collection by the insurance industry are grounded in a number of arguments. In some countries, the insurance industry invokes its business model of setting
18
Thrasher and Young, Canada national report; Joly, Quebec national report; Junod, Switzerland national report. 19 Joly, Quebec national report, citing to CLHIA, “Industry Code: Genetic Testing Information for Insurance Underwriting” (11 January 2017) and Genetic Non-Discrimination Act, Canada, SC 2017, c 3. 20 Protected under article 35 of the Charter of Fundamental Rights of the European Union, OJ C 326/391, 26 October 2012 (Trokanas, Cyprus national report). 21 Protected under article 3 of the Oviedo Convention (Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164): Trokanas, Cyprus national report. This could include their right to access healthcare, where applicable: Pormeister, Estonia national report. 22 Question 19 of the Questionnaire. 23 Křepelka, Czechia national report.
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premiums based on risk to justify collecting genetic information.24 In a nutshell, genetic information enables industry actors to classify individuals in the appropriate risk category.25 The argument is that by avoiding inaccurate risk classification, genetic data collection fends off against unfair practices26 and solidifies the foundations of insurance, namely the collectivization of risk and solidarity.27 The collection of genetic information can also be seen as remedying the asymmetry of information between the insurer and the individual seeking insurance, which may lead to self-selection or anti-selection.28 Moreover, as scientific developments allow the identification of genetic origins for an increasing number of diseases, protection against the disclosure of genetic health risks may undermine an insurer’s ability to decide what risks to underwrite when applicants simply remain silent on frequently occurring illnesses with a genetic origin and potentially on a broader range of medical data.29 In the employment context, justifications for the collection of genetic data30 are generally formulated through the lens of the employers’ right to manage, which includes ascertaining an employee’s ability to carry out the duties of the employment relationship31 and helping to match employees with suitable jobs.32 A further articulated justification is linked to employers’ responsibility to provide a safe workplace: some argue that employers may need an employee’s disclosure in order to protect the worker with a genetic disorder against specific risk factors (e.g. if a particular task requires exposure to a particular substance).33 Others situate the responsibility
24 Thrasher and Young, Canada national report. See also Feldman and Quick, United States national report. 25 Vansweevelt, Weyts and Cornelis, Belgium national report. See also Byk, France national report and Pormeister, Estonia national report (insurers, contrary to employers, may have a legitimate interest in accessing an individual’s genetic information, especially in the context of life insurance or long-term medical insurance). 26 Joly, Quebec national report; Porter, United Kingdom national report; Junod, Switzerland national report. 27 Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report. See also Sato, Japan national report (insurers frame genetic information collection as part and parcel of a distributive justice scheme). 28 Raised by Vansweevelt, Weyts and Cornelis, Belgium national report. The concepts of self-selection and anti-selection are explained by the rapporteurs on Belgium. 29 Raised by Vansweevelt, Weyts and Cornelis, Belgium national report. 30 Some jurisdictions report that no data is available on that topic (Casonato and Tomasi, Italy national report) or that employers and insurers do not collect genetic information (Rei, Taiwan national report). 31 Thrasher and Young, Canada national report; Joly, Quebec national report; Křepelka, Czechia national report. 32 Feldman and Quick, United States national report. 33 Křepelka, Czechia national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgian national report.
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at the level of avoiding compromising the safety of others in the workplace,34 or of arriving at an equitable organization and distribution of work.35 In some case, the broader organization of work has an impact on genetic testing. In Japan, it is argued that the collection of genetic information as part of the recruitment process is justified by the “lifelong employment system” whereby employees are expected to remain in the same employment until their retirement age (usually 60 years old).36 Yet in other contexts, the debate might be mute for distinct structural reasons. In Czechia for instance, there is little incentive for employers to have recourse to genetic testing for two seemingly contradictory reasons: the skilled workforce available is limited and employment contracts can easily be terminated.37 Context matters. Objections to the collection of genetic information are also varied, some being general and others pertaining to each of the contexts under study. The main objection common to both the employment and insurance sectors focuses on the danger of genetic discrimination, which we discuss below.38 Another shared objection centres on the state of the science: genetic testing often cannot conclusively predict a person’s future health, as one may have a predisposition to a disease, but not ever actually acquire it.39 Moreover, requiring disclosure and allowing the use of genetic data in insurance and employment has broader health consequences: it may serve as a disincentive for individuals who could receive life-saving information from pursuing genetic testing, out of the fear that they will be compelled to disclose the results.40 In the insurance sector, opponents to genetic testing emphasize the dangers of creating an uninsured “genetic
underclass.”41 They also point to objections grounded in the protection of privacy and personality rights42 and contractual freedom.43 They worry about the consequence of disclosure for relatives whose health history may be required for—or whose health risks might be revealed through—the testing.44 They additionally raise the dangers of self-selection by the insurance seeker who is often not in a position to obtain an accurate market assessment.45 Finally, in the employment context, it is argued that there are less intrusive means by which to assess the reasonable ability of potential employees to perform the work required for their employment, such as by asking about suitability and ability to perform certain tasks.46 Next, we explore normative approaches that address specifically whether genetic tests can be requested by employers and insurers or whether employers and insurers can request existing genetic results. Given these rules are often influenced by concerns about potential discrimination, we start by exploring anti-discrimination and other human rights provisions dealing specifically with genetics (Sect. 2.3) before moving on to other types of legislation, subordinate regulations, and soft law instruments governing the use of genetic information and testing in the employment and insurance sectors (Sect. 2.4). But we look first at the treatment of the various concepts associated with genetic testing under the international and national laws surveyed (Sect. 2.2).
34 Křepelka, Czechia national report; Porter, United Kingdom national report; Junod, Switzerland national report (safety of third parties). The Czechia report observes that causal links between genetic disorders and workplace safety are largely speculative but notes that geneticists indicate that early symptoms of Huntington’s disease could compromise work performance and safety (Křepelka, Czechia national report). 35 Junod, Switzerland national report. 36 Sato, Japan national report. 37 Křepelka, Czechia national report. 38 Thrasher and Young, Canada national report; Casonato and Tomasi, Italy national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report. See also Sato, Japan national report. Interestingly, the rapporteurs for the United States explain with respect to the prohibition of genetic discrimination in both sectors, that the enactment of the Genetic Information Nondiscrimination Act (PL 110–233, 21 May 2008, 122 Stat 881) was not a response to actual discriminatory practices but instead was aimed at mitigating the public’s fear of future genetic discrimination and preventing such practices (Feldman and Quick, United States national report). 39 Thrasher and Young, Canada national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 40 Vansweevelt, Weyts and Cornelis, Belgium national report (raised by the rapporteurs for the insurance sector, but applicable to employment as well).
The field of genetics is gaining in importance at the international and regional levels. Relevant concepts—mainly genetic tests and genetic data/information48—have been
2.2
41
Legal Conceptualizations of Genetic Testing and Information47
Porter, United Kingdom national report. Vansweevelt, Weyts and Cornelis, Belgium national report; Sato, Japan national report. 43 Vansweevelt, Weyts and Cornelis, Belgium national report (the Belgium national report provides an explanation of the impact on the contractual freedom of the policyholder). They also raise possible suspicion on the part of the insurer if genetic information is not voluntarily disclosed. 44 Vansweevelt, Weyts and Cornelis, Belgium national report. 45 Vansweevelt, Weyts and Cornelis, Belgium national report. 46 Pormeister, Estonia national report. 47 Questions 3 and 4 of the Questionnaire. 48 For ILO documents referring to genetic data and testing, see: ILO— Report of the Director-General, Equality at Work: Tackling the Challenges (Global Report under the follow-up to the ILO Declaration on Fundamental Principles and Rights at Work, ILO Conference, 96th Session 2007, Report I(B)) at 48–49; ILO—Report of the DirectorGeneral, Equality at Work: The Continuing Challenge (Global Report under the follow-up to the ILO Declaration on Fundamental Principles and Rights at Work, ILO Conference, 100th Session 2011, Report I(B)) at 52 (the report briefly identifies some regulatory developments in 42
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defined internationally, and those definitions have influenced definitions adopted nationally. International law recognizes a “special status” for human genetic data. Indeed, the nonbinding49 United Nations Economic, Social and Cultural Organization (UNESCO) 2003 International Declaration on Human Genetic Data (2003 UNESCO Declaration) invokes four reasons for this status, namely that it may: (1) be predictive of genetic predispositions concerning individuals; (2) have a significant impact on the family, including offspring, extending over generations, and in some instances on the whole group to which the person concerned belongs; (3) contain information the significance of which is not necessarily known at the time of the collection of the biological samples; and, finally (4) have cultural significance for persons or groups.50 Accordingly, “(d)ue consideration should be given to the sensitivity of human genetic data and an appropriate level of protection for these data and biological samples should be established.”51 Some
Serbia, Armenia, the United States and Canada with respect to genetic status and testing); ILO—Protection of Workers’ Personal Data (ILO 1997) at 1, 4 et seq and 17; ILO, Technical and Ethical Guidelines for Workers’ Health Surveillance, Occupation Safety and Health Series No. 72 (ILO 1998) at v and 7. It should be noted that the International Labor Organization (ILO) increasingly distinguishes between genetic screening and monitoring (ILO—Protection of Workers’ Personal Data (ILO 1997) at 17). UNESCO International Declaration on Human Genetic Data, 16 October 2003; European Convention on Human Rights (1950); Charter of Fundamental Rights of the European Union, OJ C 326/391, 26 October 2012, Art 21; 12th Additional Protocol to the Convention (signed in 2000, not yet into force); Council directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, OJ L 303, 2 December 2000; Council directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, OJ L 180/22, 19 July 2000; Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164; Treaty on the Functioning of the European Union, OJ C 326/47, 26 October 2012, Art 10; Thrasher and Young, Canada national report (Canadian Human Rights Act, RSC, 1985, c H-6); Trokanas, Cyprus national report (referring to EU norms and the Oviedo Convention); Křepelka, Czechia national report (Constitution of the Czech Republic); Mitrou, Greece national report (Additional Protocol to the Convention on Human Rights and Biomedicine concerning Genetic Testing for Health Purposes, adopted 27 November 2008, CETS no 203); Byk, France national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016). 49 UNESCO refers to declarations as “purely moral or political commitment[s], binding States on the basis of good faith.” 50 UNESCO International Declaration on Human Genetic Data, 16 October 2003, Art 4(a). 51 UNESCO International Declaration on Human Genetic Data, 16 October 2003, Art 4(b).
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jurisdictions52 recognize implicitly53 this “special status” although not necessarily through explicit reference to the 2003 UNESCO Declaration. Implicit recognition flows from the inclusion of “genetic characteristics” as a ground of discrimination in human rights legislation for instance,54 or because of its special treatment in national legislation.55 This special status is sometimes contested, however.56 Finally, the Greek Constitution generally states that everyone has a right to the protection of his or her health and his or her genetic identity, which is interpreted as entailing the protection of genetic information.57 In the surveyed jurisdictions, distinct normative texts define genetic data or information. Internationally, the 2003 UNESCO Declaration defines human genetic data as: “(i)nformation about heritable characteristics of individuals obtained by analysis of nucleic acids or by other scientific analysis.”58 Regionally, the EU General Data Protection Regulation 2016/679,59—which entered into force and is applied only since 25 May 2018,60—considers genetic data to be “personal data relating to the inherited or acquired genetic characteristics of a natural person which give unique information about the physiology or the health of that natural person and which result, in particular, from an analysis
52
Others do not: Viola, Brazil national report; Porter, United Kingdom national report. 53 Thrasher and Young, Canada national report (but the cultural significance of genetic information is neither explicitly nor implicitly recognized in Canada); Joly, Quebec national report; Trokanas, Cyprus national report (“sensitive”); Křepelka, Czechia national report; Casonato and Tomasi, Italy national report (through the prohibition); Sato, Japan national report; Rei, Taiwan national report (“sensitive”); Wałachowska, Poland national report (“sensitive data”); Pormeister, Estonia national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report; Byk, France national report; Mitrou, Greece national report (soft law). 54 As observed by: Joly, Quebec national report (Canadian Human Rights Act, RSC, 1985, c H-6); Křepelka, Czechia national report; Pormeister, Estonia national report (Personal Data Protection Act, RT I, 6 January 2016, 10, and Human Genes Research Act, RT I, 14 March 2014, 30, ss 25–27). 55 E.g. Rei, Taiwan national report (Personal Data Protection Act, Art 6: “sensitive personal data”). 56 As noted by Porter, United Kingdom national report and Wałachowska, Poland national report. 57 Mitrou, Greece national report (Arts 2, 5(5), 9(a), 21 and 25). 58 UNESCO International Declaration on Human Genetic Data, 16 October 2003, Art 2(i). 59 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016. 60 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Art 99(2).
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of a biological sample from the natural person in question.”61 At the national level,62 examples include Estonia’s definition of genetic data as “data concerning the genes, gene products or hereditary characteristics of a human being, including a description of DNA or a part thereof, which is obtained as a result of genetic research.”63 In the United States,64 the Genetic Information Nondiscrimination Act defines genetic information as “(i) such individual’s genetic tests, (ii) the genetic tests of family members of such individuals, and (iii) the manifestation of a disease or disorder in family members of such individual”,65 excluding information about an individual’s sex and age.66 As for genetic test, testing or screening, a number of definitions exist. The 2003 UNESCO Declaration defines genetic testing as “a procedure to detect the presence or absence of, or change in, a particular gene or chromosome, including an indirect test for a gene product or other specific metabolite that is primarily indicative of a specific genetic change.”67 Several of the national regulatory regimes surveyed have adopted definitions that are consistent with this terminol-
61
Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Art 4(13). A second definition is found in the preamble (Rec 34): Genetic data should be defined as personal data relating to the inherited or acquired genetic characteristics of a natural person which result from the analysis of a biological sample from the natural person in question, in particular chromosomal, deoxyribonucleic acid (DNA) or ribonucleic acid (RNA) analysis, or from the analysis of another element enabling equivalent information to be obtained. 62 Some jurisdictions do not provide definitions of genetic information: Viola, Brazil national report; Trokanas, Cyprus national report; Křepelka, Czechia national report; Sato, Japan national report; Rei, Taiwan national report; Wałachowska, Poland national report; Mitrou, Greece national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgian national report. 63 Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, s 2(9)). This definition applies in the contexts of insurance and employment in particular (see Human Genes Research Act, RT I, 14 March 2014, 30, ss 26–27)). See also for genetic information: Casonato and Tomasi, Italy national report (Authorization No. 8/2016 for the Processing of Genetic Data—15 December 2016, point 1 (i)); Thrasher and Young, Canada national report (one can infer from the definition of genetic test exposed below that “genetic information” includes DNA, RNA or chromosomes and the predictions of disease or vertical transmission risk that they suggest); Joly, Quebec national report. For other definitions of genetic data, see: Italy, Casonato and Tomasi, Italy national report (Authorization No. 8/2016, point 1a). 64 Feldman and Quick, United States national report. 65 Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881, s 201(4). 66 Feldman and Quick, United States national report. 67 UNESCO International Declaration on Human Genetic Data, 16 October 2003, Art 2(xii).
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ogy,68 while others have adopted narrower definitions than that contained in the 2003 UNESCO Declaration.69 In Canada, the recent Genetic Non-Discrimination Act defines “genetic test” as “a test that analyses DNA, RNA or chromosomes for purposes such as the prediction of disease or vertical transmission risks, or monitoring, diagnosis or prognosis.”70 Finally, the United States’ Genetic Information Nondiscrimination Act defines “genetic test” as “analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detects genotypes, mutations, or chromosomal changes”.71 Soft law instruments also provide definitions of “genetic information” and “genetic testing,”72 such as in the United Kingdom where the 2014 Concordat and Moratorium on Genetics and Insurance states that “predictive genetic tests” examine the structure of chromosomes (cytogenetic tests) or detect abnormal patterns in the DNA of specific genes (molecular tests).73 68 Thrasher and Young, Canada national report (the terminology is similar to article 2(i) and (xii) of the UNESCO Declaration with a few differences); Joly, Quebec national report (the Genetic Non-Discrimination Act does not use or define the terms “human genetic data” or “human proteomic data”: Genetic Non-Discrimination Act, Canada, SC 2017, c 3, ss 2 and 8); Casonato and Tomasi, Italy national report (similar but not exactly the same wording. There is no mention of proteomic data); Pormeister, Estonia national report (similar but not identical language. Estonian law does not define “genetic testing” but has a definition for “genetic research” which is broader (Human Genes Research Act, RT I, 14 March 2014, 30, s 2(7)). Contra: The Swiss Federal Act on Human Genetic Testing of 8 October 2004 (in force since 1 April 2007, RS 810.12) adopts definitions different from those of the Declaration; it focuses on the notion of genetic analysis (analyse génétique): Junod, Switzerland national report. 69 E.g. Porter, United Kingdom national report (the definition provided in the Concordat and Moratorium does not extend to “an indirect test for a gene product or other specific metabolite that is primarily indicative of a specific genetic change”). 70 An Act to prohibit and prevent genetic discrimination, 1st sess, 42nd Parl, 2015, (assented to 4 May 2017), SC 2017, c 3, s 3), s 2. 71 Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881, s 201(7). 72 Mitrou, Greece national report (see the definition of genetic data for insurance purposes of the Greek National Bioethics Commission); Porter, United Kingdom national report (“genetic testing” is used repeatedly throughout the ICO Employment Practices Code, but no clear definition is given). 73 Porter, United Kingdom national report (UK Government and the Association of British Insurers (ABI), “Concordat and Moratorium on Genetics and Insurance’ (2014), available at: https://www.abi.org.uk/ globalassets/sitecore/files/documents/publications/public/2014/genet ics/concordat-and-moratorium-on-genetics-and-insurance.pdf. In the United Kingdom, the government has deliberately avoided resorting to the general non-discrimination framework, rather relying on two soft law instruments applying respectively in the employment and insurance sectors: Porter, United Kingdom national report. For other definitions of genetic screening, see: Casonato and Tomasi, Italy national report (Authorization No. 8/2016, point 1 (g)). For other definitions of genetic test, see: Casonato and Tomasi, Italy national report (Authorization No. 8/2016, point 1 (c)); Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Art 3).
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Proteomic or epigenetic data are generally not included in the definition of genetic information, data or test(ing)74— although the UNESCO Declaration does provide a definition of human proteomic data.75 The rapporteurs for Canada and Quebec observe that relevant definitions tend implicitly to include proteomic or epigenetic data.76 In the United States, the Genetic Information Nondiscrimination Act explicitly refers to “an analysis of human (. . .) proteins” in its definition of “genetic test”.77 Do the definitions of the relevant terminology refer explicitly to the broader concept of family history? Many do not.78 However, in Estonia for instance, family history is covered by the definition of genetic data under the Personal Data Protection Act if the family history reveals genetic information regarding a specific, directly or indirectly identifiable, individual.79 National orders distinguish between genetic tests in two distinct ways. A first distinction pertains to whether tests are diagnostic (used to identify existing health problems) or predictive (used to predict disease susceptibility). In general, definitions in national laws do not make this distinction.80 However, the Oviedo Convention—which Cyprus, Czechia, 74
Thrasher and Young, Canada national report; Joly, Quebec national report (see Genetic Non-Discrimination Act, Canada, SC 2017, c 3, ss 2 and 8); Casonato and Tomasi, Italy national report; Porter, United Kingdom national report; Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, s 2(9) includes gene and hereditary characteristics, however); Junod, Switzerland national report (no explicit reference in the Federal Act on Human Genetic Testing of 8 October 2004 (in force since 1 April 2007, RS 810.12) but it applies to any results arising from genetic testing). 75 The Declaration defines it as: “[i]nformation pertaining to an individual’s proteins including their expression, modification and interaction” (Art 2 (ii)). 76 Thrasher and Young, Canada national report; Joly, Quebec national report (some but not all proteomic and epigenetic data). 77 Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881, s 201(7). 78 Thrasher and Young, Canada national report; Joly, Quebec national report; Casonato and Tomasi, Italy national report; Porter, United Kingdom national report (the ABI Concordat and Moratorium does not include family history, but section 21(f) explicitly allows insurers to seek, with the person’s consent, access to appropriate family medical history, inter alia, to accurately price the risk from any health information an applicant discloses). 79 Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, ss 2(9) and 4(2)–(4) of the Personal Data Protection Act (RT I, 6 January 2016, 10)). In Cyprus, “genetic information” and “genetic test” are not defined in legislation but soft law instruments include family history implicitly or explicitly: Trokanas, Cyprus national report. In Greece, family history is regarded as data pertaining to the health of a person if it allows explaining, assessing or predicting the health status of this person: Mitrou, Greece national report. 80 Thrasher and Young, Canada national report; Joly, Quebec national report (s 2 of the Genetic Non-Discrimination Act (SC 2017, c 3) refers to both diagnostic and predictive tests); Casonato and Tomasi, Italy national report.
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Estonia, France, Greece, and Switzerland have ratified81— does so by limiting the use of predictive tests82 to health purposes or research linked to health purposes.83 Switzerland provides an example in which the distinction is made in the legislation and determines whether genetic testing is allowed, as we will see below.84 In the United Kingdom, the “Concordat and Moratorium” applies only to predictive genetic tests.85 Cyprus seeks to prohibit insurers from conducting preventive medical screening for diagnosis of existing pathologies and tests for the detection of risks of future disorders and diseases.86 Finally, the rapporteurs for the United States note that the Genetic Information Nondiscrimination Act’s definition of “genetic information” subtracts from the Act’s protections individuals whose diseases have manifested themselves.87 A second reported distinction concerns the “venue” in which the genetic tests are conducted: within a clinical or research setting or sold directly to consumers (DTC).88 For instance, in Canada, the Genetic Non-Discrimination Act
81 See https://www.coe.int/en/web/conventions/full-list/-/conventions/ treaty/164/signatures?p_auth=lczs9fbu 82 Defined as: “(t)ests which are predictive of genetic diseases or which serve either to identify the subject as a carrier of a gene responsible for a disease or to detect a genetic predisposition or susceptibility to a disease” (Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 12). 83 Subject to appropriate genetic counselling: Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 12 (mentioned in Mitrou, Greece national report and Křepelka, Czechia national report). 84 It refers to predictive tests as pre-symptomatic genetic analysis (“analyses génétiques présymptomatiques”): Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Art 3(d)). 85 Porter, United Kingdom national report (an exception is found in section 21(c)(iii) of the ABI Concordat and Moratorium). 86 Trokanas, Cyprus national report (“National Bioethics Committee’s Opinion with respect to predictive health-related medical information before the conclusion of private (life or health) insurance” of 22 January 2008: by classifying medical history under medical methods and practices to predict diseases. This Opinion is classified as a “soft law” instrument. Trokanas, Cyprus national report. 87 Feldman and Quick, United States national report (Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881). 88 Pormeister, Estonia national report (the Human Genes Research Act (RT I, 14 March 2014, 30) implicitly distinguishes through the way it is structured); Porter, United Kingdom national report (the ICO Employment Practices Code does not, but the ABI Concordat and Moratorium establishes that customers are not required to disclose predictive or genetic test results acquired as part of clinical research). Other countries do not make such distinction: Trokanas, Cyprus national report; Casonato and Tomasi, Italy national report; Mitrou, Greece national report (but the Greek national report provides a caveat).
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does not apply to researchers or health care practitioners89; in Switzerland, despite efforts to regulate DTC, they currently fall outside the scope of application of existing regulatory regimes.90 National laws may regulate genetic testing, implicitly or explicitly, directly or indirectly, via constitutional law,91 consumer law,92 laws pertaining to biobanks,93 employment law,94 and even criminal law.95 Regulatory regimes have tended to regulate genetic testing through non-discrimination provisions or other legislation specifically targeting genetic testing and information. In addition, data protection laws play a crucial role, which is described in Sect. 3.2. Some jurisdictions surveyed do not have laws specifically regulating the use of genetic data for employment or insurance purposes96 (see Table 1 in the Appendix) or, even, data protection laws.97 The countries that have regulated on the matter through specific regulatory texts include Canada,98 89
Thrasher and Young, Canada national report and Joly, Quebec national report. See also Wałachowska, Poland national report (a distinction was made in a 2012 Bill between tests occurring within a clinical setting, for research purposes, and tests sold to consumers; a working group recommended testing for medical purposes only). 90 Junod, Switzerland national report. See also Pormeister, Estonia national report (parts of the Human Genes Research Act apply only to research (i.e. to the EGB), and others apply more generally to genetic testing). 91 Thrasher and Young, Canada national report (Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982 being Schedule B to the Canada Act 1982 (UK), 1982, c 11, esp ss 7-8, 15; Trokanas, Cyprus national report (Constitution of the Republic of Cyprus of 1960; Mitrou, Greece national report (Greek Constitution, Art 5). 92 Mitrou, Greece national report (Act 2251/1994 on the protection of consumers). 93 Rei, Taiwan national report (Biobank Management Act of 2010); Mitrou, Greece national report (Recommendation on Biobanks in biomedical Research the Greek National Bioethics Committee). 94 Casonato and Tomasi, Italy national report (articles 5 and 8 of the Statute of the Workers’ Rights (Law no. 300 of May 20, 1970, “Rules on the protection of the freedom and dignity of workers and of trade union freedom and union activity in the workplace, and rules on the public employment service”). 95 Křepelka, Czechia national report (the report explores this possibility); Junod, Switzerland national report (Penal Code, Art 321, protecting medical secrecy); Byk, France national report (Penal Code, Art 225-3(1), protecting against discrimination). 96 Viola, Brazil national report; Trokanas, Cyprus national report; Křepelka, Czechia national report; Sato, Japan national report; Rei, Taiwan national report; and the UK, Porter, United Kingdom national report (except in the insurance sector through soft law). 97 Viola, Brazil national report. 98 Genetic Non-Discrimination Act, Canada, SC 2017, c 3: Thrasher and Young, Canada national report; Joly, Quebec national report (the Genetic Non-discrimination Act amends the Canadian Labour Code and the Canadian Human Rights Act, RSC, 1985, c H-6). This Genetic Non-Discrimination Act was found to be an invalid exercise of federal powers by the Quebec Court of Appeal in December 2019, after the Canadian and Quebec reports were drafted: Dans l'affaire du: Renvoi relatif à la Loi sur la non-discrimination génétique, 2018 QCCA 2193.
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Italy,99 Estonia,100 Switzerland,101 France,102 Belgium103 and the United States104 (see Table 1 in the Appendix).
2.3
Anti-discrimination Norms Dealing Specifically with Genetic Status105
Human rights based anti-discrimination norms that apply to genetic discrimination exist internationally, regionally and nationally. Some are of general application and have been interpreted to include genetic discrimination. Others have been adopted specifically to tackle the issues arising in genetic testing. While different rapporteurs underscore important developments in non-discrimination law, none considers the measures in place to offer a panacea. Some even query whether the increasingly affordable and widespread nature of genetic testing blurs the line between discriminatory use of genetic information and attention to how an individual’s genetic constitution may make him or her more or less suitable for a particular job or more or less of an insurance risk.106 Internationally, the Universal Declaration of Human Rights, the two UN covenants107 and the anti-discrimination conventions108 provide a generalist framework of human rights that is reflected in the specific, more contemporary, The Supreme Court of Canada reversed this decision and confirmed the constitutional validity of the GNDA in July 2020: Renvoi relatif à la Loi sur la non-discrimination génétique, 2020 CSC 17. 99 General Authorisation No. 8/2016 for the Processing of Genetic Data: Casonato and Tomasi, Italy national report (General Authorisation No. 8/2016 for the Processing of Genetic Data—15 December 2016 (issued by the Garante per la protezione dei dati personali)). 100 Human Genes Research Act, RT I, 14 March 2014, 30 (ss 25–27 for insurance and employment: Pormeister, Estonia national report). 101 Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Arts 26 to 28). 102 Byk, France national report. 103 Vansweevelt, Weyts and Cornelis, Belgium national report (Insurance Act of 4 April 2014, Belgian State Gazette 30 April 2014, Arts 58 and 64 and Act of 28 January 2003 concerning medical examinations that are carried out within the framework of industrial relations, Belgian State Gazette, 9 April 2003). 104 Feldman and Quick, United States national report. 105 Questions 8, 9 and 11 of the Questionnaire. 106 Feldman and Quick, United States national report. 107 International Covenant on Civil and Political Rights of 16 December 1966; International Covenant on Economic, Social and Cultural Rights of 16 December 1966 (the United States have not ratified this International Covenant); Convention on the Elimination of All Forms of Discrimination against Women, 18 December 1979 (the United States have not ratified the Convention); International Convention on the Elimination of All Forms of Racial Discrimination, adopted on 21 December 1965. 108 See in particular the UN Convention on the Rights of Persons with Disabilities of 13 December 2006.
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texts that have since been elaborated by other UN agencies. The generalist norms are discussed in greater detail in Sect. 3 below. Discrimination based on genetic status is specifically addressed in a number of international instruments of varying normativity (see Table 1 in the Appendix). These include the non-binding UNESCO Universal Declaration on Human Genome and Human Rights of 11 November 1997 (1997 UNESCO Human Genome Declaration), which states that “[e]veryone has a right to respect for their dignity and for their rights regardless of their genetic characteristics” and that no one shall be “subjected to discrimination based on genetic characteristics that is intended to infringe or has the effect of infringing human rights, fundamental freedoms and human dignity.”109 In addition, the 2003 UNESCO Declaration provides that “[e]very effort should be made to ensure that human genetic data and human proteomic data are not used for purposes that discriminate in a way that is intended to infringe, or has the effect of infringing human rights, fundamental freedoms or human dignity of an individual or for purposes that lead to the stigmatization of an individual, a family, a group or communities.”110 The United Nations specialized agency, the International Labour Organization (ILO), has similarly issued a non-binding Code of practice on the protection of workers’ personal data. The Code of practice stresses “the need to develop data protection provisions which specifically address the use of workers’ personal data in order to safeguard the dignity of workers, protect their privacy and guarantee their fundamental right to determine who may use which data for what purposes and under what conditions.”111 At the regional level in Europe, the Charter of Fundamental Rights of the European Union112 prohibits any discrimination based on “genetic features” by EU institutions when applying EU law.113 The EU General Data Protection Regulation 2016/679 emphasizes the importance of preventing discriminatory effects on natural persons on the basis of genetic or health status, or measures having such an 109 UNESCO Universal Declaration on Human Genome and Human Rights of 11 November 1997, Arts 2(a) and 6. 110 UNESCO International Declaration on Human Genetic Data of 16 October 2003, Art 7. 111 ILO—Code of practice on the Protection of Workers’ Personal Data (ILO 1997), preamble at 1. Although, the ILO does not address the specific issue of genetic discrimination, one could argue that it includes genetic information in the notion of data. 112 The Charter of Fundamental Rights of the European Union (OJ C 326/391, 26 October 2012) covers all of the rights and freedoms enshrined in the ECHR as well as others flowing from the ECJ case law, constitutional traditions of EU countries and other instruments. 113 Charter of Fundamental Rights of the European Union, OJ C 326/ 391, 26 October 2012, Art 21(1). See also Arts 3 (integrity of the person), 7 (respect for private and family life) and 8 (protection of personal data).
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effect.114 The regional human rights body, the Council of Europe, has issued the Oviedo Convention on Human Rights and Biomedicine, which also prohibits any form of discrimination against a person “on grounds of his or her genetic heritage.”115 The American Convention on Human Rights provides generalist protection, and is discussed under Sect. 3 below. Legislative texts in several surveyed jurisdictions explicitly mention genetic grounds for prohibited discrimination (see Table 1 in the Appendix).116 This is the case of Canada, where the Genetic Non-Discrimination Act of May 2017 amended the Canadian Human Rights Act—which only applies to federal regulated activities—to include “genetic characteristics” as a prohibited ground of discrimination.117 The Belgian Anti-Discrimination Act, applying to public and private sectors, and to labour relations, forbids the use of genetic characteristics to discriminate.118 It should be noted that some jurisdictions specifically refer in their national legislation to international texts that address genetic discrimination (Italy119) or that prohibit any form of discrimination (Poland120). Finally, the French Penal Code also prohibits discrimination based on genetic characteristics, but makes an exception for health-related discrimination for life, health and invalidity insurance. This exception was later modified to forbid, even in such cases, reliance on predictive genetic 114 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, para 71 of the Preamble. 115 Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 11. 116 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 9); Trokanas, Cyprus national report (in application of Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 11); Křepelka, Czechia national report (in application of the Charter of Fundamental Rights and Freedoms of the European Union, Art 11 of the Oviedo Convention, Art 11 and the Law on Specific Medical Services); Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Art 4; Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 10 May 2007 to combat certain forms of discrimination, Belgian State Gazette 30 may 2007, Art 3). 117 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 9. Provincial human rights legislations do not address genetic discrimination specifically. But before the Act was adopted, the case law in the Canadian province of Quebec started to recognize genetic information as a possible ground for discrimination: Joly, Quebec national report and cases cited). 118 Vansweevelt, Weyts and Cornelis, Belgium national report (Art 3) (discrimination can be justified, however). 119 Casonato and Tomasi, Italy national report. 120 Wałachowska, Poland national report (“undoubtedly” encompasses discrimination based on genetic history).
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tests for a disease that is not yet declared or for a genetic predisposition to a disease.121 Other jurisdictions also explicitly recognize genetic status as a ground of discrimination in soft law instruments.122 However, virtually all of the national rapporteurs indicated a lack of judicial decisions dealing specifically with genetic discrimination in the insurance and/or employment contexts.123 There were two limited exceptions in Quebec124 and in the United States where, according to the Employment Opportunity Commission (EEOC), 206 genetic discrimination claims were filed with the Commission in 2017.125 In some contexts, for example in Italy, this dearth of information could have resulted from strict observance of the prohibition against the use of genetic data or from the fact that genetic data discrimination did not lead to legal action when it occasionally occurred.126 The rapporteurs for Belgium underscored the extent to which “genetic discrimination, as with a lot of other forms of discrimination, stays under the radar.”127 For the countries in which human rights or anti-discrimination rules do not address genetic status specifically, we will consider below whether the general anti-discrimination framework can be extended to cover situations of genetic discrimination, in particular through expansive definitions 121 Byk, France national report (Penal Code, Arts 225-1 and 225-3). There are also provisions applying to employment (the report only covers insurance). See also Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, but provides no sanction; the latter has to be found within other norms); Pormeister, Estonia national report. 122 Trokanas, Cyprus national report (Cyprus National Bioethics Committee’s Opinion of 22 January 2008); Mitrou, Greece national report (Greek National Bioethics Commission, Explanatory Report of the Recommendation on the collection and use of genetic data). 123 Vansweevelt, Weyts and Cornelis, Belgium national report; Viola, Brazil national report; Thrasher and Young, Canada national report; Křepelka, Czechia national report; Trokanas, Cyprus national report; Pormeister, Estonia national report; Mitrou, Greece national report; Wałachowska, Poland national report; Casonato and Tomasi, Italy national report; Sato, Japan national report; Junod, Switzerland national report; Rei, Taiwan national report; Porter, United Kingdom national report. Sato, Japan national report discusses a case dealing with the refusal to provide disability insurance based on the diagnosis of Krabbe disease. Partially granting the plaintiff’s claim, the court, in an obiter dictum, identified a link between this case and the problem of genetic information (the Japanese report provides details on the reasoning of the court on this issue). 124 Joly, Quebec national report (The Quebec Superior Court annulled a life insurance contract because of the omission to disclose the results of a genetic test, but in a context where the insured had symptoms of the disease, as did his father and brother. This 1990 decision precedes the adoption of the Genetic Non-Discrimination Act). 125 Feldman and Quick, United States national report. This number must be put in perspective as it corresponds to only 0.2% of total discrimination claims filed with the EEOC in 2017. 126 Casonato and Tomasi, Italy national report, nothing the absence of data to support this claim, however. 127 Vansweevelt, Weyts and Cornelis, Belgium national report.
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of the notion of “disability.” Initially, though, we look at other types of normativity regulating the insurance and employment contexts and specifically addressing the rights and obligations of insurers and employers with regard to genetic testing.
2.4
Specific Rights and Obligations of Insurers and Employers in Other Types of Norms128
2.4.1 The General Prohibition Model The general prohibition model is found in jurisdictions that either specifically forbid requiring genetic testing or transmission of genetic information for employment and insurance purposes, or that reserve the testing for healthcare (“therapeutic model”129) and/or research purposes. Several of our surveyed jurisdictions have adopted general laws prohibiting both insurers and employers from requiring genetic testing or from disclosing genetic test results (see Table 1 in Appendix).130 For instance, Italy forbids employers to ask questions regarding the genetic status of job applicants and to require genetic testing prior to employment.131 In Belgium, using genetic information and testing is absolutely banned in the context of insurance.132 In Canada, since 2017, it is a crime under the Genetic Non-Discrimination Act to require individuals to undergo testing or to disclose results of genetic tests whether they are diagnostic or predictive.133 Finally, some jurisdictions prohibit the use of
128 Questions 5–6, 8 and 19–23 of the Questionnaire. Kindly note that we have not included Regulation (EU) 2017/746 on in vitro diagnostic medical devices due to enter into force 26 May 2022. On this Regulation: Pormeister, Estonia national report. 129 Byk, France national report. The French rapporteur describes six different models: therapeutic, prohibition and quality control models, moratory, proportional approach and status quo. 130 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3); Joly, Quebec national report; Trokanas, Cyprus national report; Casonato and Tomasi, Italy national report; Wałachowska, Poland national report; Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, s 26 (employers) and s 27 (insurers)); Vansweevelt, Weyts and Cornelis, Belgium national report (exceptions to the prohibition are not regulated); Byk, France national report (Code civil, Art 16-10; Code de la santé publique, Art L-1141-1). 131 Casonato and Tomasi, Italy national report (Arts 5 and 8 of the Statute of the Workers’ Rights (Law no. 300 of 20 May 1970)). 132 Vansweevelt, Weyts and Cornelis, Belgium national report (Insurance Act of 4 April 2014, Belgian State Gazette 30 April 2014). In the employment context, information gathering would be allowed only to determine current (not future) health status to assess suitability for a particular job. 133 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3).
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genetic data in employment and/or insurance contexts through soft law.134 Another prohibition model is found in the United States, where it applies to the employment context but is restricted to only certain types of insurance contracts. More specifically, Congress passed the Genetic Information Nondiscrimination Act in 2008, which limits the ability of employers and insurers in the health insurance sector to obtain, and use, genetic information when making decisions.135 This prohibition does not apply to other types of insurance such as life, disability and long-term insurance.136 At the state level, many states have adopted non-discrimination statutes which apply to health insurance but are, however, of limited practical use because they generally echo the federal law on that topic.137 The most important state laws are those that extend the prohibition of genetic discrimination to the forms of insurance not covered by the federal law (e.g. life, disability or long-term insurance), although some states include exceptions to the extended prohibitions in their legislation.138 The Oviedo Convention regulates the employment and insurance sectors by reserving predictive genetic tests for health purposes or for scientific research linked to health purposes.139 France has incorporated this rule in its Civil Code,140 without specifying if data collected for medical and scientific purposes could then be used in insurance; however, since 2002, the French Public Health Code (Code
134 Mitrou, Greece national report (in employment, consent is not an exception); Trokanas, Cyprus national report (insurance, if the person is unaware). 135 Feldman and Quick, United States national report (Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881). 136 The rapporteurs for the United States note though that the Patient Protection and Affordable Care Act and the Americans with Disabilities Act provide an additional layer of protection by prohibiting discrimination based on pre-existing conditions. The Patient Protection and Affordable Care Act of 2010 explicitly lists “genetic information” as a prohibited ground for discrimination (s 2705): Patient Protection and Affordable Care Act of 2010, PL 111–148, 23 March 2010, 124 Stat. 119; Americans with Disabilities Act of 1990, PL 101– 336, 26 July 1990, 104 Stat. 327. See Feldman and Quick, United States national report. 137 Feldman and Quick, United States national report. 138 E.g., in Arizona: Feldman and Quick, United States national report. 139 Subject to appropriate genetic counselling. Predictive tests are those which are predictive of genetic diseases or which serve either to identify the subject as a carrier of a gene responsible for a disease or to detect a genetic predisposition or susceptibility to a disease: Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 12 (this article opposes explicitly medical and insurance purposes, however. See Byk, France national report). 140 Byk, France national report (article 5 of law 94-653 of 29 july 1994, JO 30 july 1994 which introduced new article 16-10 of the Civil Code).
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de la santé publique) explicitly forbids such use.141 The Recommendation CM/Rec-(2016)-8 of the Committee of Ministers to the member States on the processing of personal health-related data for insurance purposes, including data resulting from genetic tests, applies the Oviedo Convention rule above by more specifically prohibiting predictive genetic testing in the insurance sector, while making an exception for existing test results under strict conditions.142 Caveats exist, which vary depending on whether one looks at the insurance or the employment contexts. One caveat surrounds consent. An exception to the Oviedo Convention’s prohibition of genetic testing outside of the health care and health research context applies if the person concerned consents to genetic testing.143 This consent-based exception also exists in Canada.144 However, from a human rights law perspective, consent would not necessarily shield the insurer or employer against allegations of discrimination where genetic status is a recognized ground of discrimination or where it is covered by other grounds of discrimination.145 Moreover, Belgium, Italy, Switzerland and Estonia prohibit even voluntary disclosure of genetic information in the insurance and employment contexts; France does so for insurance and Greece for employment purposes.146 Another possible caveat concerns legal obligations that may indirectly pressure candidates to disclose information that may have a genetic component, such as where laws require the disclosure of “relevant information” to obtain life insurance. The rapporteurs on Canada point out that information about family history could presumably be
141
Byk, France national report (Code de la santé publique, Art L-1141-
1). 142 As noted by Byk, France national report and Casonato and Tomasi, Italy national report. 143 As noted by Trokanas, Cyprus national report (Explanatory Report of the Oviedo Convention, nrs. 84–85). 144 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, ss 3- 5); Joly, Quebec national report (e.g., “an employer with the consent of the employee can ask healthrelated questions/examinations (. . .)—when these are relevant for a quality or an aptitude required by the employment”). See also Mitrou, Greece national report (insurance context) and Feldman and Quick, United States national report. In addition to non-discrimination laws, many states have adopted laws on the privacy of genetic information (not necessarily stand-alone laws, sometimes included in non-discrimination laws). Under these laws, genetic information can generally be disclosed with the consent of the individual at issue. Interestingly, some question whether consent can truly be valid at the conclusion of a contract if the consequence of withholding it is that no employment or insurance will be provided: e.g., Wałachowska, Poland national report. 145 Thrasher and Young, Canada national report. 146 Vansweevelt, Weyts and Cornelis, Belgium national report; Casonato and Tomasi, Italy national report (General Authorization 8/2016); Junod, Switzerland national report; Pormeister, Estonia national report; Byk, France national report (Code de la santé publique, Art L-1141-1); Mitrou, Greece national report (soft law).
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disclosed under this obligation. As family history is not included in the restrictions under the 2017 Genetic NonDiscrimination Act, questions concerning family history would thus be exempt from the anti-discrimination provisions of provincial human rights legislation.147 Finally, some jurisdictions make an exception where disclosure is necessary to protect the life or physical integrity of the person concerned or a third party, which could arguably apply in the employment context.148 Finally, it is not necessarily the case that in some jurisdictions where the law is silent, as in Japan, Taiwan and Czechia,149 insurers and employers simply assume that they can ask questions about genetic information or require genetic testing prior to offering employment or insurance. In fact, the rapporteurs on Japan and Taiwan note that they generally do not do so in practice.150 Failing to respect the different prohibitions amounts to a criminal offence in Canada,151 Cyprus,152 Belgium,153 and under article 25 of the Oviedo Convention.154 It exposes the offender to fines,155 imprisonment,156 or other sanctions.157 Aside from these prohibitions that are broad and apply to both the employment and insurance sectors, national laws may regulate with specific rules applicable to one or the other 147 Thrasher and Young, Canada national report. See also Junod, Switzerland national report. 148 Casonato and Tomasi, Italy national report; Vansweevelt, Weyts and Cornelis, Belgium national report (possible by Royal Decree); Mitrou, Greece national report. 149 Sato, Japan national report. See also Rei, Taiwan national report and Křepelka, Czechia national report (public health insurance is compulsory so genetic status plays no role in this context. The Czechia report notes that the situation is different with respect to private insurance). 150 Sato, Japan national report (assumed by the rapporteur for Japan). The Taiwanese rapporteur also notes that employers and insurers there do not collect genetic information: Rei, Taiwan national report. 151 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 7). 152 Trokanas, Cyprus national report (Law 69 (I)/2015 on the Application of Medically Assisted Reproduction, Art 18(1)(d) and 18(7)). 153 Vansweevelt, Weyts and Cornelis, Belgium national report (employment). 154 Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164 (noted by Trokanas, Cyprus national report). 155 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 7): up to CAD 1 million); Trokanas, Cyprus national report (not exceeding EUR 100,000; in case of a second breach, not exceeding EUR 150,000); Casonato and Tomasi, Italy national report; Pormeister, Estonia national report; Junod, Switzerland national report. 156 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 7): up to 5 years; Trokanas, Cyprus national report: not exceeding 7 years; Junod, Switzerland national report: up to 3 years; must be intentional. 157 Trokanas, Cyprus national report. For instance, damages: Pormeister, Estonia national report.
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sector only. This approach is generally found where, instead of generally forbidding genetic testing, national laws allow it under certain conditions.
2.4.2
Conditional Allowance to Request Information or Testing158 Switzerland offers an interesting model of conditional allowance of requesting genetic information (not testing) in the insurance sector. Rights of insurers vary according to the type of insurance at stake, compulsory or optional.159 All candidates to compulsory insurance (health insurance, invalidity insurance, accident insurance, unemployment insurance, old age insurance) must be accepted; insurers are forbidden from asking questions on medical status, including, presumably, genetic status.160 However, at the conclusion of a contract for optional insurance, the insurer can ask questions regarding the applicant’s state of health, under strict conditions. The questions must be relevant and cannot concern a future risk that has not yet materialized, except if the person has already taken a pre-symptomatic test. This exception is itself subject to numerous conditions; in addition to the relevance of the information, the insurer must also demonstrate the scientific validity of the test. Moreover, there are restrictions as to the type of insurance this exception applies to and the sum insured.161 Another national practice is to allow insurers to use genetic information only for certain types of insurance (e.g. life insurance) and above a fixed insured amount.162 For instance, in the United Kingdom, requiring genetic testing is prohibited but insurers can request existing test results under narrowly defined conditions163 referred to as a “ceiling approach.” This approach means that customers are not asked or pressured to take a predictive genetic test to obtain 158
Our questionnaire (question 22) also asked what power insurers and employers have over the samples used to conduct genetic testing. Some rapporteurs explained that genetic testing would be done either within the clinical context of the health care system (e.g. the National Health System in the UK) and/or would be subject to obligations imposed on health care institutions or laboratories where the test would be conducted (e.g. in Taiwan): Porter, United Kingdom national report (it is doubtful that such a retention would be permissible under the Human Tissue Act 2004, the Data Protection Act 1998 or the Human Rights Act 1998); Rei, Taiwan national report. 159 A similar distinction is relevant in France: Byk, France national report. 160 Junod, Switzerland national report. 161 Junod, Switzerland national report (the rapporteur explains how one determines the relevance of the medical information sought and observes that for life insurance, for instance, almost any health-related information is likely to be relevant). 162 Thrasher and Young, Canada national report: The practice in the Canadian insurance sector shows that insurers tend to use genetic information only for life insurance policies with a value of at least CAD 250,000. These industry standards are not enforceable, however. 163 Porter, United Kingdom national report.
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insurance cover, and do not have to disclose predictive test results under a certain ceiling of insurance coverage.164 For policies that exceed this ceiling, insurers may seek information about, and customers must disclose, tests approved by the Government for use with a particular insurance product.165 Insured persons do not have to disclose the results of a genetic test taken after the insurance coverage has started for as long as that coverage is in force.166 Finally, national orders may regulate genetic testing indirectly by discouraging, for instance, insurance companies from resorting to genetic testing.167 For example, Brazil forbids insurance companies from excluding applicants from coverage for more than one year, rendering tests largely useless.168 Industry normativity can also establish parameters within which requests for information of testing will have to remain. For instance, the Canadian Life and Health Insurance Association (CLHIA) adopted in 2014 an Industry Code on Genetic Testing Information for Insurance through which their members commit to (1) not require applicants to undertake genetic testing, (2) seek genetic test results conducted in the context of research only when test results have been made available to the applicant or his physician, and (3) not require genetic test results for life insurance policies for coverage equal to or below $250,000, as of January 2018.169 Similarly, in France, the Fédération française des Sociétés d’assurances announced in 1994 that its members would not use genetic information to assess the insurability of its applicants.170 Finally, in a joint initiative between government and industry, the United Kingdom government and the Association of British Insurers (ABI) have agreed to abide by a policy framework (“Concordat”) and voluntary Moratorium on insurers’ use of predictive genetic tests until 1 November 2019.171 164
Policies up to GBP 500,000 of life insurance, or GBP 300,000 for critical illness insurance, or paying annual benefits of GBP 30,000 for income protection insurance: Porter, United Kingdom national report. 165 To date, the only test approved under the agreement is for Huntington’s Disease: Porter, United Kingdom national report. 166 Porter, United Kingdom national report. 167 Junod, Switzerland national report. Soft law instruments also address the rights and obligations of insurers. E.g. Cyprus National Bioethics Committee’s Opinion of 22 January 2008 (the insurer is not entitled to request tests in order to calculate a risk of future disorders or diseases unknown by the insured at the time of the conclusion of the contract): Trokanas, Cyprus national report. 168 Viola, Brazil national report; Trokanas, Cyprus national report. 169 Joly, Quebec national report (Industry Code on Genetic Testing of the Canadian Life and Health Insurance Association, s 4.1-4.3). 170 Byk, France national report: for a 5-year period—corresponding to the period of time after which the Loi sur la bioéthique (Loi n 94-653 du 29 juillet 1994) had to be reviewed—later renewed for another 5 years. 171 Porter, United Kingdom national report.
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In the employment sector, different models172 also exist that allow for exceptions to a general prohibition, such as for safety concerns. In the United Kingdom, the Information Commissioner’s Office (ICO) Employment Practices Code permits genetic tests to be required, but only once a job offer is made. This enables a potential employer to obtain information where a worker with a particular, detectable genetic condition is likely to pose a safety risk to others or where it is known that a specific working environment or practice might pose risks to workers with particular genetic variations.173 The Swiss employer also benefits from narrow latitude: if the position requires it and symptoms justify it, a genetic analysis can be undertaken by the work physician with the candidate’s consent, but the employer would only be informed of the evaluation of fitness to work, not of the test results. As for “presymptomatic” testing, it is permissible only under very strict conditions that turn on the need to diagnose a condition that could threaten the safety of the worker, or third parties or the environment, which remains rare.174
2.4.3 Extraterritorial Jurisdiction We have asked the national rapporteurs whether their jurisdictions exercise any extraterritorial jurisdiction over human genetic data collection. Some rapporteurs noted that where national laws criminalize the practice of insurance companies requiring genetic testing or the disclosure of genetic results, criminal law would apply on the basis of the location where the crime occurs rather than the place of incorporation.175 Some national laws also address the transfer 172
This area is also influenced by soft law instruments in several jurisdictions (e.g. Trokanas, Cyprus national report; Mitrou, Greece national report; Junod, Switzerland national report; Byk, France national report) as well as at the ICO level: The ICO Employment Practices Code puts forwards some key principles and restricts the freedom of employers to make use of genetic testing. 173 Porter, United Kingdom national report. Statute, case law or the ICO Employment Practices Code do not require disclosure in the employment context: the General Data Protection Regulation will apply in the United Kingdom until 31 december 2020 and governs the processing of genetic information by organizations operating within the European Union. 174 Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Arts 22–23). It is reportedly rare for employers to ask questions about the genetic status of a candidate, or health-related questions in general. Some jurisdictions also have relevant legal rules regulating the conduct of medical examinations in the context of employment: Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 28 January 2003 concerning medical examinations that are carried out within the framework of industrial relations, Belgian State Gazette, 9 April 2003); Křepelka, Czechia national report (unclear whether genetic testing falls within their ambit). 175 Thrasher and Young, Canada national report (The same applies in the context of employment contracts); Vansweevelt, Weyts and Cornelis, Belgium national report.
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of confidential genetic information across borders.176 In Taiwan, multinational companies must abide by Taiwanese law when collecting genetic data in Taiwan and individuals must be informed of any export of their human tissue,177 which is only permitted with government approval.178 Finally, an agreement between Canadian and United States insurers allows the confidential sharing of information provided by insurance applicants between insurers of these two countries.179 Italy, Estonia, the United Kingdom and Switzerland do not report any exercise of extraterritorial jurisdiction over human genetic data collection.180 Although the United Kingdom does not exercise extraterritorial jurisdiction over human genetic data collection, its “Biobank Access Procedures” provide that “Information will not be transferred to people or organisations situated abroad without adequate protection.”181 Finally, the EU Data Protection Directive 95/46/EC restricts the transfer of “personal data” outside of the European Economic Area to countries or territories that ensure an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of the data.182
The rights and obligations of the person whose genetic information is sought are also relevant, and necessarily take on a
different shape depending on whether genetic testing or required disclosure of results of genetic tests is prohibited or allowed. In jurisdictions that prohibit mandatory genetic testing and the disclosure of genetic information, domestic law sometimes explicitly provides that employees must not face disciplinary measures or reprisals for insisting on their rights.184 Requesting medical screening to diagnose existing pathologies the insured is not aware of may infringe a person’s right not to know in Cyprus.185 In jurisdictions where genetic disclosure or testing can be required, the question is rather what sanctions a person may face in the event of a refusal to comply. Non-compliance may affect contractual relationships, rendering insurance contracts void186 or allowing disciplinary measures or the termination of an employment contract.187 It can also affect the insurance coverage.188 Section 2 provided a portrait of the legal normativity that explicitly and specifically surrounds the use of genetic testing in employment and insurance, uncovering the fact that several jurisdictions have not yet regulated the field. Does this mean that genetic testing by employers and insurers can take place freely in these jurisdictions? Not necessarily as there exist generalist frameworks that create a legal environment in which the use of genetic testing is circumscribed and even, in some cases, forbidden. In this respect, we have invited national rapporteurs to explore the substance and efficacy of their general human rights frameworks, focusing on general protections against discrimination, and the protection of confidentiality and privacy of health-related information.
176 E.g. the Japanese Data Protection Act: Sato, Japan national report (the Act does not apply, however, to transfers within a company). Moreover, Japanese ethical guidelines require that a research institution guarantees that human dignity and human rights in the context of research are respected in the foreign country: Sato, Japan national report. 177 Human Subjects Research Act (Rei, Taiwan national report). 178 Human Biobank Management Act (Rei, Taiwan national report). 179 Joly, Quebec national report (in addition, some large-scale biobanks and databases—for example that of the International Cancer Genome Consortium in Toronto—host genetic data, which include data collected outside of Canada. Similarly, some genetic data of Canadians is held in research centres abroad, on the Internet and in the cloud compute. Biobanks and research centres have to comply with legal and ethical requirements that are applicable, and which may include Canadian requirements). 180 Casonato and Tomasi, Italy national report; Pormeister, Estonia national report; Porter, United Kingdom national report: Junod, Switzerland national report. 181 Porter, United Kingdom national report and UK Biobank, “UK Biobank Access Procedures” (2011), available at: http://www. ukbiobank.ac.uk/wp-content/uploads/2012/09/Access-Procedures2011.pdf. 182 Noted by Porter, United Kingdom national report (incorporated in the UK by the Data Protection Act 1998). 183 Questions 24–25 of the Questionnaire.
184 Thrasher and Young, Canada national report (Canada Labour Code, which only applies to federally-regulated entities. For other instances, the legal regime is unclear); Joly, Quebec national report (retaliation is also prohibited in the context of insurance); Wałachowska, Poland national report. 185 Trokanas, Cyprus national report (National Bioethics Committee’s Opinion of 22 January 2008). 186 E.g. under the doctrine of uberrima fides in the UK (requiring parties to the contract to act in the “utmost good faith”): Porter, United Kingdom national report. See also Junod, Switzerland national report (Swiss Federal Law on Insurance Contracts, 2 April 1908, RS 221.229.1, Art 6). 187 Junod, Switzerland national report; Porter, United Kingdom national report (on grounds of breach of the duty of mutual trust and confidence or even misrepresentation, subject to anti-discrimination rules). 188 Junod, Switzerland national report. This can also be the case in jurisdictions where the law is silent but where insurance applicants must disclose their family history and any pre-existing diseases: Rei, Taiwan national report (note that by contrast, in the employment context, there exists no duty to inform of pre-existing symptoms and employers cannot terminate contracts simply because an employee failed to disclose his or her genetic status).
2.5
Rights and Obligations of the Insurance or Job Applicant, the Insured or Employee, and Close Family Members183
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3
Generalist Frameworks Relevant to the Regulation of Genetic Testing189
This section focuses on how general protections against discrimination, as well as protections of the rights to privacy and confidentiality, inform permissible and prohibited uses of genetic information by employers and insurers.
3.1
General Non-discrimination Protection
International and regional instruments prohibiting discrimination may be relevant to preventing the discriminatory use of genetic information or testing by employers and insurers, even where they do not mention genetic status in the list of grounds for prohibited discrimination. At the international level,190 the United Nations Convention on the Rights of Persons with Disabilities generally provides for the principles of equality and non-discrimination and applies them explicitly to the work and employment contexts.191 The UNESCO Universal Declaration on Bioethics and Human Rights of 19 October 2005 (2005 UNESCO Bioethics Declaration) also prohibits discrimination and stigmatization on “any grounds, in violation of human dignity, human rights and fundamental freedoms.”192 In employment matters, the International Labour Organization’s widely ratified Equality of Treatment and Opportunity Convention, 1958 (No. 111)193 prohibits: (a) any distinction, exclusion or preference made on the basis of race, colour, sex, religion, political opinion, national extraction or social origin, which has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation; (b) such other distinction, exclusion or preference which has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation 189
Questions 8–18 of the Questionnaire. Most surveyed jurisdictions are original signatories to this Convention; Switzerland acceded to the Convention in 2014. 191 UN Convention on the Rights of Persons with Disabilities of 13 December 2006, Arts 5 and 27 (the United States have not ratified the Convention). 192 UNESCO Universal Declaration on Bioethics and Human Rights of 19 October 2005, Art 11. In addition to the UNESCO Universal Declaration, other conventions apply as general non-discrimination protections: International Covenant on Civil and Political Rights of 16 December 1966; International Covenant on Economic, Social and Cultural Rights of 16 December 1966; Convention on the Elimination of All Forms of Discrimination against Women, 18 December 1979; International Convention on the Elimination of All Forms of Racial Discrimination, adopted on 21 December 1965. 193 Convention concerning Discrimination in Respect of Employment and Occupation, No. 111, adopted 25 June 1958. 190
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as may be determined by the Member concerned after consultation with representative employers’ and workers’ organisations, where such exist, and with other appropriate bodies. Similarly, regional instruments afford general protection against discrimination. They include the American Convention on Human Rights—signed and ratified by Brazil194— which protects against discrimination for reasons of “race, color, sex, language, religion, political or other opinion, national or social origin, economic status, birth, or any other social condition.”195 The Council of Europe’s European Convention on Human Rights (ECHR), which applies to all of the EU member states surveyed, similarly protects against discrimination “on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”196 The rapporteur on Estonia notes that the ECHR considers that “differential treatment based on a genetic disease” could fall within this provision.197 In the European Union, discrimination is prohibited by Council Directive 2000/43/EC of 29 June 2000, implementing the principle of equal treatment between persons irrespective of racial or ethnic origin and, in the specific context of employment and by Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation. Binding regional instruments, to which some national laws specifically refer,198 may be 194
Viola, Brazil national report. The Convention has not been signed by Canada and the United States. 195 American Convention on Human Rights of 22 November 1969, Art 1.1. 196 European Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols nos 11 and 14, adopted 4 November 1950, entered into force 3 September 1953, CETS no 005, Art 14 (noted in Trokanas, Cyprus national report and Porter, United Kingdom national report). See also article 8 (respect for private and family life) of the 12th Additional Protocol to the Convention (signed in 2000, not yet into force), and Art 10 of the Treaty on the Functioning of the European Union (OJ C 326/47, 26 October 2012) applying to policies and activities of the EU. Note that Art 21 of the Charter of Fundamental Rights of the European Union (OJ C 326/391, 26 October 2012) mentions “genetic features” (see above Sect. 2). 197 Pormeister, Estonia national report (GN and others v Italy, no. 43134/05). 198 E.g. Casonato and Tomasi, Italy national report (the Italian Authorization 8/2016 refers in its preamble to Art 11 of the Oviedo Convention (The ratification process of the Oviedo Convention has not been completed in Italy, but a decision by the Corte di Cassazione allows judges to use the Oviedo Convention as an interpretative tool when specific legislation is missing or it is unclear); Rei, Taiwan national report (recognizes the UN Convention on the Rights of Persons with Disabilities of 13 December 2006); Porter, United Kingdom national report (European Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols nos 11 and 14, adopted 4 November 1950, entered into force 3 September 1953, CETS no 005: incorporated in UK law in the Human Rights Act
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directly applicable in certain national orders, as specifically referenced by certain rapporteurs.199 At the national level, most of the jurisdictions under consideration prohibit discriminatory treatment on the basis of origin, race, sex, colour, or age without explicitly mentioning genetic status. Several jurisdictions enshrine general antidiscrimination protection in their constitutional frameworks.200 In addition, most provide generalist human rights legislation,201 which tends to apply to the private sector 1998); Junod, Switzerland national report (Constitution, Art 8 (linked to Art 14 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols nos 11 and 14, adopted 4 November 1950, entered into force 3 September 1953, CETS no 005; Arts 2, 3 and 26 of the International Covenant on Civil and Political Rights of 16 December 1966; Art 11 of the Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 6 of the UNESCO International Declaration on Human Genetic Data, 16 October 2003). 199 Viola, Brazil national report; Trokanas, Cyprus national report; Křepelka, Czechia national report; Casonato and Tomasi, Italy national report; Rei, Taiwan national report; Wałachowska, Poland national report; Mitrou, Greece national report; Pormeister, Estonia national report; Porter, United Kingdom national report; Vansweevelt, Weyts and Cornelis, Belgium national report; Byk, France national report. 200 Viola, Brazil national report (Article 3, IV of the Constitution provides that one of the fundamental objectives of the Republic is “to promote the well-being of all, without prejudice as to origin, race, sex, colour, age and any other forms of discrimination”; Article 7 prohibits “any discrimination with respect to wages and hiring criteria of handicapped workers”); Thrasher and Young, Canada national report (Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982 being Schedule B to the Canada Act 1982 (UK), 1982, c 11: mental and physical disability. Also protects against unreasonable search and seizure and interference with life, liberty and security); Trokanas, Cyprus national report (community, race, religion, language, sex, political or other convictions, national or social dissent, birth, colour, wealth, social class or any ground whatsoever); Křepelka, Czechia national report (Constitution of the Czech Republic: equality); Casonato and Tomasi, Italy national report (Italian Constitution: equality and race); Sato, Japan national report (Article 14 of the Japanese Constitution: equal protection. It is not clear whether the equal protection clause covers discrimination on the ground of a genetic condition); Rei, Taiwan national report (Article 7 of the Constitution (equal right for all citizen)); Wałachowska, Poland national report (Article 32 of the Polish Constitution of 1997); Pormeister, Estonia national report (s 12 of the Constitution, only applies to relationships with the state; Estonian Equal Treatment Act, RT I, 26 April 2017, 9, applying to private parties); Junod, Switzerland national report (Constitution, Art 8). 201 Casonato and Tomasi, Italy national report (Authorization 8/2016: does not explicitly mention genetic status as an included ground of discrimination but preamble refers to international sources doing so); Sato, Japan national report (Act on Prohibition of Discrimination by Disability); Rei, Taiwan national report (Article 16 of the People with Disabilities Right Protection Act (disabilities)); Wałachowska, Poland national report (Art 11(3) of the Labour Code of 1974); Pormeister, Estonia national report (Estonian Equal Treatment Act, RT I, 26 April 2017, 9, ss 1, 2 and 5); Porter, United Kingdom national report (Equality Act 2010, but the UK rapporteur notes that the approach in the United Kingdom is to deliberately avoid using human rights framework, rather relying on specialized soft law instruments). See also: the Czech Law on Insurance (industry timidly supports anti-discrimination measures,
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as well as the public sector. Some rapporteurs mention that constitutional or human rights anti-discrimination rules that do not mention genetic characteristics can sometimes be interpreted as encompassing them.202 Notably, the reports identify intersections between discrimination on the ground of genetic status and other forms of discrimination,203 such as those based on actual or perceived disability,204 or race205 and with the principles of non-discrimination and non-stigmatization of the UNESCO International Declaration on Human Genetic Data.206 One rapporteur also argues that a case could be made for the inclusion of “genetic discrimination” in relation to insurance and employment within the prohibition of discrimination on the grounds of “birth or other status” provided in the ECHR.207 However, others
while explicitly allowing differentiation of premiums or exclusion on gender, age and health status if justified by methods of insurance mathematics. The individual genome as a specific criterion for differentiation is not explicitly mentioned): Křepelka, Czechia national report. 202 E.g., Casonato and Tomasi, Italy national report (the Italian Constitution does not explicitly include genetic status as a ground for discrimination, but Art 2 (inviolable rights) and Art 3 (discrimination, including racial) can be interpreted as including genetic status as a ground of discrimination. No case law exists on that question. Moreover, even though Italian Authorization 8/2016 (human rights legislation) does not explicitly list genetic status as a ground of discrimination, its preamble refers to international sources doing so). See also Pormeister, Estonia national report (para 12 of the Constitution. Genetic discrimination is without a doubt understood to be covered by the Constitution’s general prohibition against discrimination and genetic discrimination intersects with forms of discrimination based on traits or factors that can be revealed by genetic data (race, ethnic origin, and disability in some cases) which is forbidden by the Estonian Equal Treatment Act (RT I, 26 April 2017, 9)). 203 Trokanas, Cyprus national report; Křepelka, Czechia national report; Pormeister, Estonia national report. 204 Pormeister, Estonia national report (Estonian Equal Treatment Act, RT I, 26 April 2017, 9, ss 1, 2 and 5); Thrasher and Young, Canada national report (Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982 being Schedule B to the Canada Act 1982 (UK), 1982, c 11, s 15, presented as a potential argument); Joly, Quebec national report and Thrasher and Young, Canada national report (in Québec (CDPPDJ) v Montreal (City of), [2000] 1 SCR 665, par. 76, L’Heureux-Dubé J. of the Supreme Court of Canada notes that the concept of handicap under the Quebec Charter of Human Rights and Freedoms must be interpreted in light of advances in biomedical technology, including genetics). Note that in some jurisdictions, disability inclusion may be unlikely if the person is asymptomatic. See Porter, United Kingdom national report and Pormeister, Estonia national report. 205 Porter, United Kingdom national report; Junod, Switzerland national report; Sato, Japan national report (in Japan, as a consequence of the relatively homogeneous population, discrimination on the basis of race or national origin is not common. Discrimination on the basis of genetic status might be relevant with respect to some tribes/large families that suffer from physical disabilities such as congenital deaf). 206 UNESCO International Declaration on Human Genetic Data, 16 October 2003, Art 7(a), noted by Trokanas, Cyprus national report. 207 Porter, United Kingdom national report.
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report no intersection of discrimination on the ground of genetic status with other forms of discrimination.208 How do anti-discrimination norms fare —whether they mention genetic status or not—in the employment and insurance contexts? The answers may be deceptively simple. The rapporteur from Taiwan even suggests that genetic discrimination in the contexts of employment and insurance is not a challenge given the comprehensiveness of the national health insurance scheme.209 Other rapporteurs argue that the same analytical framework that applies to discrimination generally should apply to genetic discrimination in the contexts of employment and insurance210 (Canada,211 Italy,212 Poland,213 Belgium214). Certainly anti-discrimination legislation215 typically applies in the employment and insurance contexts, such as the Belgian Anti-Discrimination Act216 and the Estonian Human Genes Research Act.217 Jurisdictions that adopt soft law approaches also tend explicitly to encompass the employment218 and the insurance219 contexts. Yet some national reports take pains to illustrate the potential complexity of applying non-discrimination principles particularly in the insurance context, where the individual
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assessment of risk based on statistical probabilities may come into conflict with human rights frameworks that seek precisely to avoid stereotyping individuals on the basis of assumed group characteristics.220 Finally, rapporteurs note other rights that may appear in human rights legislation and that are relevant to the protection of citizens’ genetic information, such as the right to equality,221 to privacy,222 to respect for private and family life,223 to autonomy and self-determination224 and to social solidarity.225 The protection against unreasonable search and seizure is also invoked.226
3.2
Privacy, Confidentiality and Disclosure227
Protections afforded to the rights to privacy and confidentiality, as well as rules to follow when disclosing personal information, are also all relevant, even if indirectly, to our topic. We review here briefly the positions of our surveyed jurisdictions.
3.2.1 208
Viola, Brazil national report; Thrasher and Young, Canada national report (no case or secondary sources discussing the issue); Casonato and Tomasi, Italy national report; Sato, Japan national report; Rei, Taiwan national report; Mitrou, Greece national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 209 Rei, Taiwan national report (moreover, specific laws prohibit discrimination in the employment context). 210 Junod, Switzerland national report (except for discrimination based on gender). 211 Thrasher and Young, Canada national report (in Canada, the only difference consists of the scope of application of the different laws— federal or provincial level); Joly, Quebec national report. 212 Casonato and Tomasi, Italy national report (General Authorization 8/ 2016). 213 Wałachowska, Poland national report. 214 Vansweevelt, Weyts and Cornelis, Belgium national report (the Act of 10 May 2007 to combat certain forms of discrimination, Belgian State Gazette 30 May 2007 applies both to insurers and employers). 215 Pormeister, Estonia national report. 216 Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 10 May 2007 to combat certain forms of discrimination, Belgian State Gazette 30 May 2007, Art 5, para 1 and Art 4, 1 ). 217 Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, ss 25 and 27. This Act partially applies only to the Estonian Gene Bank (EGB) but parts of it have a more general application). 218 Mitrou, Greece national report (Greek National Bioethics Commission, Recommendation on the collection and use of genetic data); Porter, United Kingdom national report (ICO, “The Employment Practices Code” (2011)). 219 Mitrou, Greece national report (Greek National Bioethics Commission, Recommendation on the collection and use of genetic data (2002) and Greek National Bioethics Commission, Opinion on the use of genetic data on private insurance (2008)); Porter, United Kingdom national report (UK Government and the Association of British Insurers, “Concordat and Moratorium on Genetics and Insurance” (2014)).
Confidentiality of Clinical and Research Data Genetic testing regularly occurs, some would argue without controversy,228 in the clinical medical context (e.g. prenatal genetic testing, use of genetic testing for diagnostic purposes) and in biomedical research settings. These are not the focus of our reports. However, a brief look at safeguards existing in the clinical and research spheres is important because of the risk that information revealed in these contexts— communicated to patients and appearing in their medical records or, in an anonymized manner, in the researcher’s files—will be requested by the insurer or employer.229 220
See e.g. Joly, Quebec national report, discussing Zurich Insurance Co. v Ontario (Human Rights Commission) [1992] 2 SCR 321. 221 Joly, Quebec national report; Sato, Japan national report (Japanese Constitution, s 14. Not clear it includes discrimination based on a genetic condition); Křepelka, Czechia national report. 222 Joly, Quebec national report; Trokanas, Cyprus national report. 223 European Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocols nos 11 and 14, adopted 4 November 1950, entered into force 3 September 1953, CETS no 005, Art 8, noted by Porter, United Kingdom national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 224 Joly, Quebec national report; Vansweevelt, Weyts and Cornelis, Belgium national report; Mitrou, Greece national report (personal freedom and integrity). 225 Joly, Quebec national report. 226 Thrasher and Young, Canada national report (Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982 being Schedule B to the Canada Act 1982 (UK), 1982, c 11, s 8). 227 Questions 7 and 13–17 of the questionnaire. 228 See Byk, France national report. 229 Although we will not explore these, it is noteworthy that several rapporteurs cite medical laws relevant to our topic: Křepelka, Czechia
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Particular safeguards exist in most countries to protect the confidentiality of this information. In the background of debates with respect to genetic testing and the use of resulting information are, as the United Kingdom rapporteur aptly observes, concerns about patients’ autonomy and self-determination.230 Relevant codes of ethics,231 other soft law instruments,232 formal legislation233 or private law norms234 hold physicians to an obligation of confidentiality.235 The physicians’ Code of Ethics of Brazil is particularly on point in this respect as it specifically forbids physicians to disclose a worker’s medical examination results to employers.236 Moreover, Brazilian physicians can only share information with an insurance company in the case of their patient’s death and only if the information is included in the death certificate.237 The physician’s obligation of confidentiality is also enforced through criminal laws (e.g. in Greece,238 Japan239 and Switzerland240) or other laws governing the medical sector.241 national report; Casonato and Tomasi, Italy national report; Byk, France national report. On patients’ rights: Trokanas, Cyprus national report. 230 Porter, United Kingdom national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 231 Viola, Brazil national report (Code of Ethics of the medical profession, Arts 73–79); Casonato and Tomasi, Italy national report (Code of medical ethics (2014), Art 46); Mitrou, Greece national report (Hippocratic Oath; 2005 Code of Medical Ethics, Art 13 (also Arts 8 and 20); Penal Code, Art 371). 232 See Porter, United Kingdom national report. 233 E.g. the Code of Ethics of Physicians of the Canadian province of Quebec is a formal legal text: Code of Ethics of Physicians, c M-9, r17, s 20; Rei, Taiwan national report (Physician Act, s 23 and Medical Care Act, s 74. Consent is an exception); Sato, Japan national report (Criminal Code); Wałachowska, Poland national report; Křepelka, Czechia national report; Pormeister, Estonia national report (unless the patient consents, an exception that applies in most jurisdictions). 234 Porter, United Kingdom national report. Also in Canada (Thrasher and Young, Canada national report). 235 See also Vansweevelt, Weyts and Cornelis, Belgium national report (not even released by consent because of its public order character). 236 Viola, Brazil national report (Code of Ethics of the medical profession, Art 76). 237 Viola, Brazil national report (Code of Ethics of the medical profession, Art 77). Patient’s written consent constitutes an exception, however. 238 Mitrou, Greece national report (Penal Code, Art 371; exceptions are provided in the Code of Penal Procedure). 239 Sato, Japan national report (Criminal Code, Art 134 governs doctors and medical staff’s duty of confidentiality and imposes up to 6 months of imprisonment and a fine of up to 100,000 yen in case of a breach). 240 Junod, Switzerland national report (Penal Code, Art 321). 241 See legislation cited in: Rei, Taiwan national report; Wałachowska, Poland national report; Porter, United Kingdom national report. See also more generally: Pormeister, Estonia national report (Law of Obligations, s 768(1) and Personal Data Protection Act, RT I, 6 January 2016, 10, para 14(2); genetic data, as sensitive information can only be disclosed in very limited circumstances), Human Genes Research Act, RT I, 14 March 2014, 30, ss 26–27: employers and insurers cannot collect data); Junod, Switzerland national report (cantonal laws might apply; Penal
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In several of the jurisdictions surveyed, physicians may be allowed to share results of genetic tests with employers and insurance companies if the patient provides written consent242 or has otherwise given explicit and informed consent.243 Limited exceptions exist, however.244 Belgium,245 Estonia246 and Italy247 go further by forbidding consensual Code, Art 321 and Loi fédérale sur la protection des données, 19 june 1992, Art 35); Vansweevelt, Weyts and Cornelis, Belgium national report. 242 Viola, Brazil national report; Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 5); Joly, Quebec national report (Law on Specific Medical Services); Křepelka, Czechia national report (informed consent must be given in writing for genetic testing and the communication of results to third parties); Rei, Taiwan national report. The fact that the patient consents to the disclosure of his or her genetic information to the employer or insurer does not mean the employer and insurer are permitted to use it, see e.g. Junod, Switzerland national report and discussed above in Sect. 2. 243 Trokanas, Cyprus national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/ 1, 4 May 2016, Art 9(1)–(2)); Wałachowska, Poland national report (Statute on Doctor’s Activities (1996), Art 40; Statute on Patient’s Rights of 2008, Arts 13–14); Mitrou, Greece national report (Penal Code, Art 212 (2) and Data Protection Act (Act 2472/97), Art 7); Porter, United Kingdom national report (Access to Medical Reports Act 1988, s 3); Junod, Switzerland national report; Sato, Japan national report (refers to consent generally); Thrasher and Young, Canada national report (Genetic NonDiscrimination Act, Canada, SC 2017, c 3, s 5. Personal Health Information Protection Act, 2004, SO 2004, c 3, s 44. Personal Information Protection and Electronic Documents Act, SC 2000, c 5, ss 4.3.4. and 4.3.6, clause 4.3 of schedule 1); Joly, Quebec national report; Trokanas, Cyprus national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Rec 32); Pormeister, Estonia national report. In Italy, this appears prohibited as concerns disclosure to employers or insurers: Casonato and Tomasi, Italy national report (2014 Code of medical ethics, s 46). 244 Thrasher and Young, Canada national report (Personal Health Information Protection Act, 2004, SO 2004, c 3, ss 29 and 44; Personal Information Protection and Electronic Documents Act, SC 2000, c 5, s 7 (3); Health Protection and Promotion Act, RSO 1990, c H.7. [Ontario]); Joly, Quebec national report (ss 6 and 8 Genetic Non-Discrimination Act, Canada, SC 2017, c 3 (exception for health practitioners and researchers)); Trokanas, Cyprus national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Art 9(2)); Pormeister, Estonia national report (para 14(2) of the Personal Data Protection Act, RT I, 6 January 2016, 10). 245 Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 22 August 2002 concerning the rights of the patient, Belgian State Gazette, 26 September 2002, Art 9). 246 Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, ss 26–27). 247 Casonato and Tomasi, Italy national report (in Italy, genetic data is considered more-than-sensitive data and is therefore entitled to the highest degree of protection. See General Authorization 8/2016,
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and non-consensual communication of genetic information to the employer and the insurer; France does the same for the insurance sector.248 Similar safeguards exist for biomedical research. At the regional level, the Oviedo Convention includes provisions seeking to protect research participants’ privacy.249 Several jurisdictions surveyed also regulate the use of genetic test results, or more broadly any information, obtained in the context of biomedical research.250 For instance, in Italy, employers and insurers are explicitly forbidden from accessing genetic information obtained in the context of biomedical research.251 In Poland, genetic data obtained in the context of medical research can be disclosed for scientific purposes (so presumably not to the insurer or employer) but the anonymity of the person tested must be ensured.252 Confidentiality of research-related genetic data may in some countries be protected through internal university ethics codes or guidelines (e.g. in Brazil)253 or funding agencies’ policies (e.g. in Canada, the Tri-Council Policy
Recital). Although the General Authorization 8/2016 only explicitly addresses the case of employers, art 46 of the Code of medical ethics (2014) seems to extend this regime to the insurance context. 248 Byk, France national report (Code de la santé publique, Art L-1141-1). 249 Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Arts 10 and 16 and Chapter V in general (general protections that do not concern genetic research data in particular however (Pormeister, Estonia national report)). 250 Křepelka, Czechia national report (regulating who is allowed to provide genetic testing and how); Rei, Taiwan national report (Personal Data Protection Act, Art 6: prohibits the collection, processing and usage of sensitive personal data unless it is stipulated by law, within public duty, part of public record already opened to the public or necessary for the statistics or research of health or criminal prevention); Wałachowska, Poland national report (Civil Code of 1964, Art 23); Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, s 22(4): applies to the Estonian Gene Bank, and Personal Data Protection Act, RT I, 6 January 2016, 10); Porter, United Kingdom national report (biomedical researchers in the UK are bound by the common law duty of confidentiality and the Data Protection Act 1998. In addition, individual biomedical research projects (e.g. UK Biobank) usually provide information on their policy for data management and the sharing of anonymised data at the time of obtaining informed consent from participants); Junod, Switzerland national report (Penal Code, Art 321bis); Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 8 December 1992 on the protection of privacy with regard to the processing of personal data, Belgian State Gazette, 18 March 1993, Art 2. See also the directives of the National Council of the Order of Physicians. In Japan, ethical guidelines on the transfer of information govern this topic. If the researcher is not a doctor or medical staff, there is no legal duty of confidentiality, but contractual confidentiality clauses provided in the employment contracts may apply: Sato, Japan national report (Data Protection Act, Art 76: does not apply to research institutions and/or researchers). 251 Casonato and Tomasi, Italy national report. 252 Wałachowska, Poland national report (Statute on Doctor’s Activities, 1996, Art 28). 253 Viola, Brazil national report.
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Statement254). Finally, in Canada, the Canadian Life and Health Insurance Association (CLHIA)255 has committed not to seek the results of genetic tests conducted in the context of research if the results have not been communicated to the applicant or her/his physician.256 Genetic data257 or, more generally, medical information, are often treated as sensitive information requiring stringent legal protections. As our discussion on consent above reveals, privacy and data protection legislation258 play a 254
Thrasher and Young, Canada national report (Canadian Institute of Health Research, Natural Sciences and Engineering Research Council of Canada and Social Sciences and Humanities Research Council of Canada, Ethical Conduct for Research Involving Humans (Government of Canada, 2014) [Tri-Council Policy], Art 13, available at: http://www. pre.ethics.gc.ca/pdf/eng/tcps2-2014/TCPS_2_FINAL_Web.pdf. The Canadian Tri-Council consists of the Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council of Canada. Its policy regarding the ethical conduct of research specifies that core principles of ethical research involving consent, privacy and confidentiality apply to genetic information and genetic research. Although the Tri-Council cannot enact legally binding instruments, research ethics approval and adherence to the Tri-Council’s policy are conditions for receiving Tri-Council research funding. 255 Industry Code on Genetic Testing of the Canadian Life and Health Insurance Association, s 4.2. 256 Thrasher and Young, Canada national report and Joly, Quebec national report. 257 Casonato and Tomasi, Italy national report. 258 Trokanas, Cyprus national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Art 9(3)). Křepelka, Czechia national report (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016; Law on Protection of Personal Data); Pormeister, Estonia national report; Rei, Taiwan national report (Personal Data Protection Act reinforces the Physician Act and the Medical Care Act, tightening the regulation for sensitive personal data which includes genetic data); Mitrou, Greece national report (Data Protection Act (Act 2472/97, Art 10)); Wałachowska, Poland national report; Sato, Japan national report (Data Protection Act); Porter, United Kingdom national report (Data Protection Act 1998: “personal data”; Access to Medical Reports Act 1988, s 3); Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 8 December 1992 on the protection of privacy with regard to the processing of personal data, Belgian State Gazette, 18 March 1993; Act of 22 August 2002 concerning the rights of the patient, Belgian State Gazette, 26 September 2002 for medical records); Junod, Switzerland national report (Loi fédérale sur la protection des données, 19 june 1992); Pormeister, Estonia national report (exceptions apply, such as to protect one’s life, health or freedom); Trokanas, Cyprus national report. The EU General Data Protection Regulation, which entered into force 25 May 2018 (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/ EC, OJ L 119/1, 4 May 2016), also imposes a confidentiality obligation. In some jurisdictions, while a physician may be asked to deliver a medical certificate or report confirming ability to work, this does not mean that the employer will have access to the medical record or even to the detailed
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central role in securing the confidentiality of personal files containing genetic information.259 For instance, in Canada, different federal and provincial laws govern medical records, as well as employers’ and insurers’ records.260 Subject to some exceptions, genetic test results contained in a patient’s medical or hospital file cannot be disclosed to third parties, including employers and insurers, without the patient’s consent.261 Provincial and federal legislation also addresses the question of privacy in the context of biomedical research, and the Canadian rapporteurs report that this web of legislation makes non-consensual disclosure rarely permissible.262 Notably, federal law permits non-consensual disclosure for statistical or scholarly study or research, purposes that cannot be achieved without disclosing the information and where it is impracticable to obtain consent.263 Thus, it is only rarely that disclosing the results of genetic tests obtained in biomedical research is permissible without the patient’s consent. Beyond privacy and confidentiality, the disclosure of socio-legal risks is also a concern where genetic testing is undertaken for clinical or biomedical research purposes. While some rapporteurs inform us that the issue is unclear 264 or has not been addressed 265 in their jurisdiction, others point to national 266 and reasons as to why a person may or may not be able to exercise certain types of employments: e.g., Wałachowska, Poland national report and Junod, Switzerland national report. 259 Some rapporteurs also note the confidentiality of information contained in medical or research records, but without referring to data protection laws: Casonato and Tomasi, Italy national report. 260 Thrasher and Young, Canada national report (Privacy: Privacy Act (RSC 1985, c P-21) and statutory privacy torts in British Columbia, Saskatchewan, Manitoba and Newfoundland & Labrador); Joly, Quebec national report (Data protection: Personal Information Protection and Electronic Documents Act (SC 2000, c 5) applies to the private sector and the Personal Health Information Protection Act, 2004, SO 2004, c 3, which provides an example of provincial personal health privacy legislation (esp s 4(1), 29)). 261 Thrasher and Young, Canada national report (Personal Health Information Protection Act, 2004, SO 2004, c 3, s 29). 262 Thrasher and Young, Canada national report: Personal Information Protection and Electronic Documents Act, SC 2000, c 5, s 7(3) and Personal Health Information Protection Act, 2004, SO 2004, c 3, s 44. 263 Personal Information Protection and Electronic Documents Act, SC 2000, c 5. The organization disclosing must also inform the Commissioner of the disclosure before the information is disclosed: Personal Information Protection and Electronic Documents Act, SC 2000, c 5, Art 7(3)(f). See also Personal Health Information Protection Act, 2004, SO 2004, c 3, s 44; Thrasher and Young, Canada national report. 264 Křepelka, Czechia national report (according to unofficial sources, several geneticists providing genetic counseling recommend that their clients purchase life insurance prior to genetic testing). 265 Viola, Brazil national report; Pormeister, Estonia national report. 266 Thrasher and Young, Canada national report (Tri-Council Policy, at 195–196); Joly, Quebec national report (a study demonstrates that this is also often done in clinical and research consent forms in Canada); Rei, Taiwan national report; Junod, Switzerland national report (for presymptomatic genetic tests); Sato, Japan national report (“7 Informed Consent” (3)) and explanatory note: In Japan, government-issued
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international 267 laws and ethical guidelines promoting the disclosure to biomedical research participants of the risks of discrimination in employment or insurance associated with both the fact of having undergone genetic testing and the possible test results. The physician’s 268 and researcher’s269 duty to inform is also invoked as the source for this disclosure. Canada even requires researchers to develop plans to manage information in order to address these risks.270 In addition, private companies offering Direct-to-Consumer (DTC) services in the United Kingdom do sometimes include details about possible consequences for insurance and employment in their information and/or informed consent forms.271 Interestingly, the UK Biobank information leaflet uses potential socio-legal risks as a justification for not disclosing individualized genetic research results to participants, explaining that: “(t)his is because such feedback outside of the normal clinical setting is of questionable value,
Ethical Guidelines require a head researcher to inform the donor of “any disadvantage that the donor might incur”, including social stigma). In the clinical setting, guidelines issued by the Japanese Association of Medical Sciences warn that genetic information may cause a social disadvantage to the examinees and their relatives should such information be inappropriately handled or disclosed (2011 “Guidelines for Genetic Tests and Diagnoses in Medical Practice”, available at http:// jams.med.or.jp/guideline/genetics-diagnosis_e.pdf. The guidelines do not provide more information regarding such risks). Some note that given the prohibition existing in their jurisdiction, the need for such disclosure may be mute: Casonato and Tomasi, Italy national report (although the socio-legal risks have to be communicated in the context of research carried out on “isolated populations”, as per point 5 of the General Authorization 8/2016); Joly, Quebec national report; Pormeister, Estonia national report. 267 World Medical Association, Declaration of Helsinki—Ethical Principles for Medical Research Involving Human Subjects (2013), s 26: Joly, Quebec national report. 268 E.g., Vansweevelt, Weyts and Cornelis, Belgium national report; Wałachowska, Poland national report; Joly, Quebec national report. Porter, United Kingdom national report (but a court would need to be persuaded to extend the scope of the duty to warn—usually concerned with risks of physical injuries resulting from treatment—to include socio-legal and economic risks of genetic testing). 269 Joly, Quebec national report; Rei, Taiwan national report (Human Subject Research Act 2011, s 14). 270 Thrasher and Young, Canada national report (Tri-Council Policy, at 194 and Art 13.2). 271 Porter, United Kingdom national report (for instance, the company 23andMe includes such information within its “Consent and Legal Agreement”: 23andMe, “Consent and Legal Agreement” (2017), available at: https://www.23andme.com/en-gb/about/consent/?version=1.3). See also in the UK (Porter, United Kingdom national report): Joint Committee on Medical Genetics, “Consent and Confidentiality in Clinical Genetic Practice: Guidance on Genetic Testing and Sharing Genetic Information” which addresses ways in which healthcare professional should respond to patient concerns about the possible implication with respect to insurance of genetic testing for Huntington’s disease and other conditions. There is no similar overarching professional guidance document for the biomedical research setting.
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and might even be harmful (for example, causing undue alarm and having potentially adverse effects on insurance status), especially when given without prior counselling or support.”272 Finally, the Swiss case law has developed a general rule forcing physicians to inform their patients of a manifest risk of prejudice in insurance or employment. Whether a physician assesses a risk as manifest or not may depend on whether that physician exercises in a field where this risk arises frequently.273 It is unclear whether this could include socio-legal risks linked to genetic testing. Beyond the confidentiality of medical and research information, an additional consideration concerns the confidentiality of the genetic data collected by the employer or insurer, when they are permitted to do so.274
3.2.2
Confidentiality of Insurer or Employer’s Data Data protection laws,275 privacy laws and privacy torts276 are all relevant to address this issue. They may require the holder of the information to keep it confidential.277 For instance, the Porter, United Kingdom national report, UK Biobank, “Information Leaflet” (2010), available at: https://www.ukbiobank.ac.uk/wp-content/ uploads/2011/06/Participant_information_leaflet.pdf?phpMyAdmin= trmKQlYdjjnQIgJ%2CfAzikMhEnx6. 273 Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Arts 5 and 14). For instance, the Swiss rapporteur notes that the risk of increased difficulties in getting life insurance of more than CHF 400,000 may not be “manifest” to all physicians. 274 Of course, where genetic testing is forbidden in an employment or insurance context—such as in Italy—insurers and employers are prohibited from detaining genetic information: Casonato and Tomasi, Italy national report. The only exception to this general rule provided in articles 3.1 and 3.2(b) of the General Authorization 8/2016 arises where it is indispensable in order to protect the life or the physical integrity of the job applicant or of a third person. 275 E.g. Canadian Personal Information Protection and Electronic Documents Act, SC 2000, c 5 and Japanese Data Protection Act (Sato, Japan national report). 276 Thrasher and Young, Canada national report; Joly, Quebec national report; Porter, United Kingdom national report (insurers or employers in the UK are bound by the common law duty of confidentiality and the Data Protection Act 1998. In addition, insurers are required to protect personal medical information in accordance with the ABI Confidentiality Policy (para 21(h)). The ICO Employment Practices Code also emphasizes that information about a workers’ health must be kept securely and handled in accordance with the Data Protection Act (Porter, United Kingdom national report)); Junod, Switzerland national report. 277 It goes beyond the scope of this general report to explore in detail the complex web of data protection legislation and privacy rules applying in our 15 national jurisdictions. This topic was addressed by the rapporteurs: Thrasher and Young, Canada national report; Joly, Quebec national report; Trokanas, Cyprus national report; Křepelka, Czechia national report; Casonato and Tomasi, Italy national report; Rei, Taiwan national report; Wałachowska, Poland national report; Mitrou, Greece national report; Pormeister, Estonia national report; Porter, United Kingdom national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 272
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European Union is regulating the use of genetic information mostly through its data protection laws278 which require that genetic data be “processed by or under the responsibility of a professional subject to the obligation of professional secrecy.”279 Canada is also a good example of a non-EU country that mostly regulates the use of genetic information through its data protection regime.280 Finally, the legislation of 41 US states protects specifically the privacy of genetic information through varying models such as including provisions in broader non-discrimination laws or in standalone statutes.281
3.2.3
Right to Access Information and the Right Not to Know We invited national rapporteurs also to address whether, where genetic testing is allowed in the employment or insurance context, the person tested may require access to the test results or, conversely, can ask not to be told by invoking a “right not to know.” The Oviedo Convention recognizes that “(e)veryone is entitled to know any information collected about his or her health” but notes that a wish not to be so informed shall be observed.282 Several jurisdictions also provide for the right of the patient to gain access to information about his or her health in national laws and regulatory texts (e.g. dealing with data protection, patients’ rights, physicians’ practice, hospitals, medical ethics, privacy, freedom of information, and consumer law)283 or in soft law 278
Such as through the regime of its General Data Protection Regulation which replaced on 28 May 2018 the Data Protection Directive 95/46/ EC: Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Article 9(2) to (4), esp 9(2)(h) and (3), therefore applying in the EU member states that have already implemented the Data Protection Directive in their domestic legislation. 279 Referred to by Trokanas, Cyprus national report. 280 Moreover, CLHIA members have committed to maintain strict confidentiality in handling and storing genetic test results they may detain: Joly, Quebec national report. 281 Feldman and Quick, United States national report (See the Genome Statute and Legislation Database Search: Privacy (2018)). 282 Noted by Trokanas, Cyprus national report. 283 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC, OJ L 119/1, 4 May 2016, Art 15; Trokanas, Cyprus national report; Casonato and Tomasi, Italy national report; Rei, Taiwan national report; Wałachowska, Poland national report; Mitrou, Greece national report; Pormeister, Estonia national report; Joly, Quebec national report; Porter, United Kingdom national report; Junod, Switzerland national report; Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 22 August 2002 concerning the rights of the patient, Belgian State Gazette, 26 September 2002); Viola, Brazil national report (e.g. the right to access information protected by the Consumer Protection Code applies to any kind of processing of data in a consumer-provider relationship, including that
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instruments,284 although some report it may be difficult to exercise in practice.285 Can a person invoke his or her right not to know to prevent the employer and insurer from disclosing genetic information in their possession? This also calls into question whether national orders surveyed pay attention more generally to the right not to know one’s genetic information, particularly where the information in question is non-actionable. While Brazil has not addressed the issue,286 Canada (including Quebec),287 Cyprus,288 Czechia,289 Greece,290 291 292 293 Switzerland, Italy, and Belgium explicitly preserve the right of individuals to refuse knowing about their genetic information once they undergo a genetic test.294 In Canada, such a refusal cannot justify denying the individual access to services or contracts.295 The right not to know is also between an insurer and its clients. The Code grants consumers the right to access his/her personal data; Brazilian courts extend these rights to the data subject’s legal representatives (parents/tutors) or his/her heirs). 284 Vansweevelt, Weyts and Cornelis, Belgium national report (Privacy Commission, “Informatienota over de bescherming van persoonsgegevens in België”, available at https://www.ou.nl/documents/40554/ 187634/Belgische_regelgeving_bescherming_van_persoonsgegevens. pdf/b1e5f2f1-eeb4-4a8b-a44c-500da473015c). 285 Sato, Japan national report (although the Data Protection Act provides in theory for the right of access to information, in order to exercise this right, one must be able to identify the data controller and the data that the data controller possesses). 286 Viola, Brazil national report. 287 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 2. See also Canada Labour Code, RSC 1985, c L-2, s 8); Joly, Quebec national report. 288 Trokanas, Cyprus national report (Cyprus National Bioethics Committee’s Opinion of 22 January 2008, Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 10(2) and Law 1 (I)/2005, Art 10(4)). 289 Křepelka, Czechia national report (Law on Specific Medical Services, Chapter on “Genetic examinations”). 290 Mitrou, Greece national report (Code of Medical Ethics of 2005, Art 11(2)). 291 Junod, Switzerland national report (Federal Act on Human Genetic Testing of 8 October 2004, in force since 1 April 2007, RS 810.12, Art 6 (exception in Art 18(2) in case of imminent physical danger. Abolishing this exception is planned as part of the current reform of the Federal Act on Human Genetic Testing). 292 Casonato and Tomasi, Italy national report (General Authorization 8/ 2016, point 6, para 2). 293 Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 22 August 2002 concerning the rights of the patient, Belgian State Gazette, 26 September 2002, Art 7, para 3 and Art 8, para 3; Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 10, paras 2–3). 294 Casonato and Tomasi, Italy national report (General Authorization 8/ 2016, point 6, para 2); Wałachowska, Poland national report; Pormeister, Estonia national report (Human Genes Research Act, RT I, 14 March 2014, 30, s 11(1) with respect to donors of the EGB). 295 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 2); Joly, Quebec national report (in
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addressed in soft law instruments in Cyprus,296 Japan,297 Taiwan,298 and the United Kingdom.299 Finally, all parties to the Oviedo Convention would be held to its injunction to respect the wishes of individuals not to be informed of information concerning their health.300 We end this section by considering the position of family members who may have an interest in having the familial genetic information kept private considering the risks they may run as well when seeking employment or insurance.
3.2.4 Family Members’ Interests Traditional medicolegal approaches focused on the individual patient come under pressure in the context of genetic testing in which the interests of family members could be relevant.301 Nevertheless, many domestic regulatory regimes surveyed do not address the interests of family members in keeping a patient’s or research subject’s genetic information private,302 although some, like the regime in the United States, do.303 In other contexts, those interests may be the few instances where genetic information may be required in order for the employee to be fit for the employment, the right not to know could be restricted since the test results could provide indications on unwanted health information). 296 Trokanas, Cyprus national report (Cyprus National Bioethics Committee’s Opinion of 22 January 2008). 297 Sato, Japan national report (through ethical guidelines issued by the Government, divulging genetic information to the patient without the latter’s consent would constitute a tort). 298 Rei, Taiwan national report (the legal system is silent but IRBs (research ethics boards) normally requires principal investigators to respect the right not to know when the research involves genetic testing). 299 Porter, United Kingdom national report (Joint Committee on Medical Genetics, “Consent and Confidentiality in Clinical Genetic Practice: Guidance on Genetic Testing and Sharing Genetic Information” (2011). In the UK, there are discussions on the topic, but the right not to know is not formally recognized within statute or at common law). 300 Convention for the Protection of Human Rights and Dignity of the Human Being with regard to the Application of Biology and Medicine, adopted 4 April 1997, CETS no 164, Art 10(2) (does not mention genetic information specifically). 301 As emphasized in the UK context by Porter (Porter, United Kingdom national report). 302 Viola, Brazil national report; Thrasher and Young, Canada national report; Rei, Taiwan national report (in Taiwan, insurers and employers can only access genetic information with the person’s consent. This access is limited to the information that is necessary for the purpose of the collection. In case consent is granted, family members might be vulnerable); Pormeister, Estonia national report (in Estonia, the Human Genes Research Act recognizes the interests of family members as far as it expressly states that the gene donor does not have the right to access information regarding his genealogy: Human Genes Research Act, RT I, 14 March 2014, 30, s 11(2). The strict prohibition of collecting the genetic information of an employee / insurance seeker arguably indirectly protects family members); Junod, Switzerland national report. 303 The Genetic Information Nondiscrimination Act includes “the genetic tests of family members” under its definition of “genetic information”: Feldman and Quick, United States national report (Genetic Information Nondiscrimination Act of 2008, PL 110–233, 21 May 2008, 122 Stat 881).
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protected under human rights laws (e.g. in Canada304) or other laws (e.g. Belgium305). General principles of human rights and privacy law may also apply to protect the right not to know of their genetic information belonging to family members of the person tested.306 Interestingly, while the UK Concordat and Moratorium allow insurers to access appropriate information on family history with a person’s consent,307 they acknowledge—and try to address—the fact that requesting information about family history from an applicant’s doctor presents ethical and practical difficulties with regards, particularly, to the confidentiality owed to family members.308 The Belgian rapporteurs suggest that where regulations impose several layers of safeguards to protect an insured person’s health data,309 the interests of family members may not be completely absent from the minds of domestic regulators. What if a family member is not in possession of genetic information, but would like to gain access to genetic information? In Canada and the United Kingdom, family members do not have a right to access a relative’s medical information even where that information may have implications for them.310 Conversely, in Italy, disclosure of 304 Thrasher and Young, Canada national report (Canadian Human Rights Act (RSC, 1985, c H-6) and other provincial human rights codes); Joly, Quebec national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3, s 85 individuals cannot authorize the disclosure of genetic test results of a relative). 305 Vansweevelt, Weyts and Cornelis, Belgium national report (Act of 22 August 2002 concerning the rights of the patient, Belgian State Gazette, 26 September 2002, Art 9: prevents access by third parties to medical records, which may contain familial information; Insurance Act of 4 April 2014, Belgian State Gazette 30 April 2014, Arts 58 and 61: prohibition to request and communicate genetic information in connection with the conclusion or performance of an insurance contract also introduced to protect the privacy of relatives); Act of 28 January 2003 concerning medical examinations that are carried out within the framework of industrial relations, Belgian State Gazette, 9 April 2003: in the employment context, examinations and questions to receive genealogical information are forbidden. 306 Thrasher and Young, Canada national report; Vansweevelt, Weyts and Cornelis, Belgium national report. 307 Porter, United Kingdom national report (ABI Concordat and Moratorium on Genetics and Insurance, para 21(f). Furthermore, in the UK it is not clear that family members could successfully invoke the Data Protection Act 1998 to prevent disclosure in this context). 308 Porter, United Kingdom national report. 309 Vansweevelt, Weyts and Cornelis, Belgium national report. See also for Canada, Joly, Quebec national report (insurers have committed not to require genetic test results from family members). 310 Thrasher and Young, Canada national report; Joly, Quebec national report (Loi sur les services de santé et les services sociaux, Québec, 2015, RLRQ C-42, Art 19); UK, Porter, p. 12 (Access to Medical Reports Act 1998 does not extend the right of access to personal information to family members; Data Protection Act 1998, s 7: it is unclear whether family members’ rights to access personal information are included and it is unlikely that the Freedom of Information Act 2000 could be used by family members as a legal route to gain access to another family member’s medical information or medical report).
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genetic tests/screening results and/or research findings to individuals belonging to the same genetic line as the data subject is possible if they entail factual, direct benefits in terms of treatment, prevention and/or awareness of reproductive choices. However, disclosure is only allowed if a request has been made and the data subject has expressly consented to it. If the data subject’s consent is not or cannot be given because he or she cannot be found, disclosure is also permitted if the results/findings are indispensable to protect family members’ health—including reproductive.311 Other countries also recognize the right for the family members of a tested individual to gain access to the individual’s information where their health might be jeopardized if they are not given the relevant information.312 Finally, in Italy, the ban on the disclosure of genetic information to employers and insurers applies in a similar manner to the tested individual and to its family members. Accordingly, if an individual possesses genetic data about one or more of his or her relatives, employers and insurers are banned from having access to this information as well.313 Under some conditions, a physician in Greece, Poland, Estonia and Quebec may be relieved from confidentiality obligations after the patient’s death.314 This is also the case in Japan where surviving family members may have a right to obtain the data if it relates to them. Interestingly, upon the death of an individual, his or her information appears to become familial: “if the information on the dead is also information on surviving individuals such as bereaved families, it is the information of the surviving individuals.”315
4
Conclusion316
Jurisdictions that have not yet elected specific legal regimes to address genetic testing may be considered in this uncertain moment to have an advantage as they can now choose how to address genetic testing in the contexts of insurance and 311
Casonato and Tomasi, Italy national report (General Authorization 8/ 2016, point 9, para 7). 312 Casonato and Tomasi, Italy national report (General Authorization 8/ 2016, point 9, para 7); Junod, Switzerland national report (assumption of the author). Also, in Japan, family members have access to genetic information if the tested individual is a minor and the family member is a parent or a legal guardian: Sato, Japan national report. 313 Casonato and Tomasi, Italy national report. 314 Wałachowska, Poland national report; Mitrou, Greece national report; Pormeister, Estonia national report (Personal Data Protection Act, RT I, 6 January 2016, 10, Chapter 3); Joly, Quebec national report (Loi sur les services de santé et les services sociaux, Québec, 2015, RLRQ C-42, Art 23). See also in Belgium, regarding access to medical files: Vansweevelt, Weyts and Cornelis, Belgium national report. 315 Sato, Japan national report (commentary to the Japanese Data Protection Act). 316 Questions 26–29 of the Questionnaire.
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employment on the basis of the experience of others. But they must choose. The lack of guidance may otherwise leave existing insurance or employment applicants, as well as industry actors themselves, with a range of uncertainties, and heightened inequality.317 Not acting may leave the space open for abusive practices on genetic testing to proliferate. In these jurisdictions, resort to non-discrimination laws in the context of health risks may be a way to fill gaps. Broader and explicit regulatory regime may also be called upon to address the practice of insurers or employers making decisions based on genetic testing.318 For some of the national rapporteurs, the avenue of general data protection laws tended to be favoured.319 But, even where data protection laws exist and are considered helpful to protect a person’s privacy, rapporteurs insist on the need to regulate more specifically genetic testing in the contexts of employment and insurance, should the practice become more widespread. Rapporteurs from jurisdictions with a specific regulatory regime expressed satisfaction: some jurisdictions reported that regulations imposing the highest level of protection for employees, job seekers and insurance applicants were particularly appropriate.320 The United Kingdom rapporteur felt that the regime provided in soft law instruments adopts a reasonable and proportionate approach, which pragmatically balances the conflicting interests involved.321 But even where this matter is specifically regulated, legal uncertainties remain, including on aspects of genetic privacy322 and discrimination on the ground of genetic status in the insurance and employment contexts.323 In Belgium, although the 317
Sato, Japan national report. Rei, Taiwan national report; Wałachowska, Poland national report. 319 Viola, Brazil national report (Brazil appears to be taking this route, with three bills on general data law pending in the National Parliament). 320 Casonato and Tomasi, Italy national report. 321 Porter, United Kingdom national report (with respect to insurance, the approach taken in the ABI Concordat and Moratorium seems on its face to be a pragmatic attempt to balance the conflicting interests involved. However, an irony of this framework is that while insurers will not reject individuals because of an adverse genetic test result, they remain free to reject them on the basis of family history). 322 Thrasher and Young, Canada national report. Křepelka, Czechia national report; Joly, Quebec national report (raising the necessity to avoid needlessly distinguishing genetic testing information from other types of predictive medical data in laws as such a distinction is untenable from both a scientific and social justice standpoint). 323 Trokanas, Cyprus national report (raising the need to add to the existing regimes specific legislation addressing the question of genetic status in the insurance and employment contexts and suggests adopting a regime modelled on other European countries. Cyprus also expressed the view that ratifying the Additional Protocol to the Convention on Human Rights and Biomedicine concerning Genetic Testing for Health Purposes (adopted 27 November 2008, entered into force 1 July 2018, CETS no 203) would constitute a first step in providing a comprehensive legal framework in the field of genetic testing); Křepelka, Czechia national report; Mitrou, Greece national report. 318
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current regulation offers particularly comprehensive protection of genetic information,324 the rapporteurs call for a global evaluation of the existing legislation on the basis of what is done elsewhere (such as in the Netherlands) and for national regulation of the use of genetic research and testing.325 They also note the lack of efficient enforcement mechanisms as an issue in the field of genetic testing in the insurance context, leading to incomplete protection and abuse.326 In Canada, the specific legal regime of the Genetic Non-Discrimination Act327 allows individuals to undergo genetic testing and to benefit from its advantages without being exposed to risks of insurance-based or employmentbased discrimination on the basis of genetic status.328 However, the rights and obligations of insurers and employers to family members or relatives that voluntarily disclosed genetic information need to be clarified;329 in particular precision is needed on the exact use that can be made of genetic information that is voluntarily disclosed.330 Rapporteurs also call for the situation to be more closely monitored; for more information about how existing regulations are being applied by insurers and employers to be acquired;331 for more statistics on genetic testing to be collected;332 for more empirical research on the topic to be carried out; and for education campaigns to be developed.333 Finally, the regulation of private DNA testing companies and their relationship with the fields of insurance and employment could become increasingly important in the coming years.334 Looking forward, one question of central interest is whether the anti-discrimination frameworks of the different jurisdictions surveyed—whether they include or not genetic status—are sufficiently effective to tackle the challenges of genetic testing in employment and insurance. Some rapporteurs described their country’s general anti-discrimina-
324
Vansweevelt, Weyts and Cornelis, Belgium national report. Vansweevelt, Weyts and Cornelis, Belgium national report. 326 Vansweevelt, Weyts and Cornelis, Belgium national report. 327 Thrasher and Young, Canada national report (Genetic Non-Discrimination Act, Canada, SC 2017, c 3). 328 Thrasher and Young, Canada national report. 329 Thrasher and Young, Canada national report. 330 Thrasher and Young, Canada national report; Joly, Quebec national report; Křepelka, Czechia national report. 331 Porter, United Kingdom national report. 332 Junod, Switzerland national report. 333 Raised by Joly, Quebec national report. 334 Emphasized by Porter, United Kingdom national report. Interestingly, the French rapporteur also asks whether the fact that the concept of insurance relies on uncertainty whereas genetic testing aims to foresee the future raises the question of whether the use of genetic testing could mean the end to the idea of insurance as such: Byk, France national report. 325
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tion framework as insufficient in this respect.335 Most notably, the rapporteur affirms this to be the case of Czechia because of the impact its history has had on the public perception of the need for anti-discrimination safeguards. As the rapporteur notes, the transition from communist ideology to liberal democracy and market economy brought with it a general reluctance to embrace anti-discrimination laws in the population, as they were associated with new leftism or neo-Marxism.336 This reluctance is said to explain the delay in the implementation of EU anti-discrimination directives in Czechia337 and the weakness in the enforcement of national, international and supranational laws. The effectiveness of the anti-discrimination framework with respect to genetic status can be questioned in Czechia if principles of non-discrimination are not respected by employers and if selection in that context on the basis of gender, age, race or handicap is practiced.338 The rapporteurs for Canada also offer a mixed assessment of the ability to address genetic discrimination in the context of insurance or employment.339 While some commentators in Canada argue that explicitly addressing the issue of genetic discrimination is a step forward for human rights, others contend that the Genetic Non-Discrimination Act does not go far enough (for example by only addressing genetic testing340). There is a lingering concern in Canada about the effect on insurance premiums of genetic testing and genetic information in general, as well as about genetic exceptionalism. The genetic exceptionalism point calls into question why family medical history or other medical information should be treated differently under law than genetic information, recognizing that to single out prohibitions on genetic testing may offer insufficient protection.341 The rapporteurs for the United States also raise the broad issue of genetic exceptionalism, noting that people generally subscribe to this idea
335 Viola, Brazil national report; Trokanas, Cyprus national report; Křepelka, Czechia national report. See also Ajunwa (2016), p. 75. 336 Křepelka, Czechia national report. 337 Křepelka, Czechia national report: the Law on Equal Treatment was temporarily blocked by the president. 338 Křepelka, Czechia national report. 339 Thrasher and Young, Canada national report (as observed above, the Quebec Court of Appeal has found the Act unconstitutional because it exceeds Parliament’s constitutional authority by legislating on matters of provincial jurisdiction (Dans l'affaire du: Renvoi relatif à la Loi sur la non-discrimination génétique, 2018 QCCA 2193)). See also Mitrou, Greece national report (there are discussions as to whether processing genetic data in the specific sectors of employment and insurance should be prohibited). 340 Thrasher and Young, Canada national report. 341 Thrasher and Young, Canada national report; Joly, Quebec national report (more discrete and new types of genetic discrimination such as by law enforcement or immigration agencies can still be an issue. Another problem lies in the fact that the law still provides for consensual use of genetic results by employers and/or insurers).
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which is strengthened by genetic information privacy laws.342 Likewise, the Swiss rapporteur notes that the precise meaning of discrimination on the basis of genetic information will require clarification, in light of the fact that both employers and insurers are allowed to take decisions on the basis of the insured or the employee’s health.343 As for the rapporteur for Japan, he notes that the absence of legal texts tackling the question of discrimination on the ground of genetic status and information is problematic. In particular, a survey by the Japanese Ministry of Health revealed that 70% of the participants surveyed thought that there should be a statute to regulate and protect genetic information. 3.2% of the participants reported experiencing some sort of discrimination in the insurance context on the basis of family members’ genetic disease.344 Similarly, the rapporteur for Taiwan observed that people worry about genetic discrimination in general in the absence of a specific regime addressing the issue, since Taiwan only regulates discrimination on the grounds of disability and gender. The rapporteur for Taiwan insists on the necessity to enact legislation protecting against discrimination based on all health risks, regardless of whether they are revealed by genetic tests or not.345 Meanwhile, some national rapporteurs are confident that the non-discrimination framework of their jurisdiction provides a sufficient basis to address the challenges posed by genetic testing in the context of insurance or employment.346 In Estonia, where there is a genetic non-discrimination framework in place for the employment and insurance contexts, a remaining drawback is that the regime is not subject to the same procedural rules and remedies as other forms of discrimination.347 In Switzerland, there are difficulties in assessing the efficiency of the existing framework because of the absence of data, but it would seem that it provides little protection against genetic discrimination.348 Finally, in the United States, as more information is obtained about the extent of genetic discrimination in the areas of insurance and employment, and as genetic testing becomes more reliable, the US rapporteurs suggest that a policy-based 342
Feldman and Quick, United States national report. The rapporteurs for the United States further argue that once predictive genetic testing becomes demonstrably accurate and reliable, the time will have come to reconsider the idea of genetic exceptionalism. 343 Junod, Switzerland national report. 344 Sato, Japan national report. 345 Rei, Taiwan national report. 346 Casonato and Tomasi, Italy national report; Wałachowska, Poland national report (observing thought that there are some uncertainties, especially if the practice becomes more common); Vansweevelt, Weyts and Cornelis, Belgium national report. 347 Pormeister, Estonia national report. 348 Junod, Switzerland national report.
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approach that challenges insidious discrimination instead of an approach that carves out genetic information for special treatment.349 Another aspect that will need to be explored further as research advances on this topic is the need for more solid transnational action. The rapporteurs for Brazil and Belgium raise the critical need for transnational, and European action in this context,350 given the transnational nature of some stakeholders such as insurance companies. The rapporteur for Brazil suggests that ILO, UNCITRAL and UNIDROIT could play a role in fostering transnational action.351 The rapporteurs for Canada acknowledge the potentially fruitful role of transnational action in terms of harmonization in the context of privacy laws and international data sharing.352 They nevertheless find it more likely that progress will result from domestic effort in Canada.353 For the Japanese and United Kingdom rapporteurs, transnational action could be beneficial in contributing to the creation of a “minimum standards,” “best practices” and workable models. They recognize, however, that differing circumstances and legal situations (in particular in terms of the structure of healthcare systems and general regulation of insurance and employment) might limit the role of transnational action in the governance of genetic testing in the insurance and 349
Feldman and Quick, United States national report. Viola, Brazil national report; Vansweevelt, Weyts and Cornelis, Belgium national report (the Council of Europe’s Committee on Bioethics is actively working on the subject). See also Rei, Taiwan national report. However, Pormeister, Estonia national report (transnational action is only relevant in the employment context especially with respect to the enforcement of the prohibition of genetic discrimination by contrast with the insurance field where the systems might differ from one country to the other and, consequently, render the task of harmonized transnational action difficult). 351 Viola, Brazil national report. 352 Thrasher and Young, Canada national report; Joly, Quebec national report. 353 Thrasher and Young, Canada national report (as a consequence of the country’s dualist tradition, issues pertaining to the division of powers, and in light of the complexity of existing laws). 350
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employment sectors.354 The rapporteur for Poland echoed this concern and suggested the creation of a supranational body to monitor genetic data processing.355 This general report offers a modest contribution to future reflections on the potential usefulness of transnational action on genetic testing in insurance and employment. It has canvassed the range of regulatory initiatives on genetic testing in insurance and employment that exist, and has noted the spaces created both through a range of legislative mechanisms of a general or specific nature, and through industry action. It has clarified the interplay between international and regional instruments and the various emerging, local initiatives. In this sense, it has also been able to capture both the specificity of certain national experiences and the high degree of convergence that has emerged, often in keeping with the relevant regional and international texts. To the extent that leading stakeholders are self-organized transnationally, and that whether or not it should, data travels beyond borders, minimum standards or more robust governance frameworks established internationally or regionally may well provide needed guidance for future coordinated action. International organizations like the tripartite ILO where governments are represented alongside workers and employers might be well placed to reflect in particular on the employment dimensions. But this general report makes no recommendation beyond the following: the canvassed national experiences confirm that it is both timely and useful to pursue further comparative and international analysis of law and practice, with a view to standard-setting into the future.
354 355
Sato, Japan national report; Porter, United Kingdom national report. Wałachowska, Poland national report.
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Appendix
Table 1 Summary table Other types of legislation/ regulation specifically addressing genetic testing in employment and insurance (Y/N)
Anti-discrimination norms (national) specifically mentioning genetic status • UNESCO (1997, 2003) ILO Code (1997) • EU Charter (2000), art. 21 • Oviedo Convention, art. 11 (1997) • Additional protocol 2008 (In force on 1 July 2018) (non-stigmatization) • Treaty on the functioning of the EU, art. 21(1) (equality of people with different genetic features) • General Data Protection Regulation 2016/679
• Oviedo Convention, art. 12 (1997) • Recommendation CM/Rec (2016) 8
Belgium
• Anti-discrimination Act 2007 (Note that Belgium did not sign Oviedo Convention)
• Patient Rights Act Insurance Act 2014 Medical Examination Act 2003
Brazil
No
No
Canada
• Genetic Non-Discrimination Act (2017)—amending Canada Human Rights Act
• Genetic Non-Discrimination Act (2017)
Cyprus
• Soft law instruments Oviedo Convention
• Soft law Oviedo Convention
Czechia
• Law on Specific Medical Services • Oviedo Convention and Additional protocol 2008
• Law on Specific Medical Services (genetic testing for medical purposes) • Oviedo Convention
Estonia
• Human Genes Research Act (part of Act only applies to EGB) • Oviedo Convention
• Human Genes Research Act (part of Act only applies to EGB) • Oviedo Convention
France
• Oviedo Convention • Code pénal, art. 225-3 (1) (1994) (insurance, discrimination based on predictive genetic tests or genetic predispositions)
• Code de la santé publique, L1141-1 (insurance) • Code civil, art. 16-10 (1994) • Soft law (Fédération française des Sociétés d’assurance) • Oviedo Convention
Jurisdiction International EU
Genetic testing in employment and insurance forbidden, allowed, allowed under some conditionsa 1. Genetic discrimination forbidden (1997; 2003) 2. Need for safeguards stressed (ILO) 1. Predictive genetic tests forbidden for purposes other than health-related (Oviedo). Forbidden to request predictive genetic tests for insurance (Rec 2016) 2. Consent is an exception (Oviedo) 3. National laws may request results of existing tests depending on the particular risk to insure (insurance) (Rec 2016) 4. Genetic discrimination forbidden (Oviedo; Reg 2016/679; Charter: by EU institutions when applying EU law) 1. Forbidden test and data; absolute ban (insurance) 2. Predictive tests forbidden. Information about current health allowed only to determine suitability (employment) (MEA) 3. Consent not an exception (insurance; PRA) 4. Exceptions allowed by Royal Decree (employment, e.g., safety to worker or others. None as of now) 5. Use of genetic characteristic to discriminate forbidden (ADA) Mute for insurance as insurers cannot exclude coverage for more than 1 year 1. Forbidden (diagnostic and predictive) 2. Exception if consent 3. Anti-discrimination provision only for federally regulated activities 1. Forbidden (by reference to EU legislation?) 2. Predictive and diagnostic tests forbidden for conditions person unaware of (insurance) (soft law) 1. Communication of results to third parties only with consent (LSMS) 2. Forbids discrimination based on results of genetic tests done medical purposes (LSMS). Discrimination impossible under public health (universal) insurance 1. Forbidden to collect data 2. Consent not an exception under HGRA 3. Genetic discrimination prohibited generally and with respect to employment and insurance 1. Genetic tests can only be carried out for medical or scientific purposes. Does not say whether results thereby obtained can be used in insurance (C.civ.), but CSP forbids (insurance) 2. Absolute ban for tests and communication of results (insurance) 3. Consent not an exception (CSP) 4. Voluntary moratorium between 1994 and 2004 (insurance) 5. Forbids discrimination based on genetic characteristics (except for life, health and disability insurance to reveal actual disease (not predictive) (CP) (No information provided for employment sector) (continued)
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Table 1 (continued)
Jurisdiction Greece
Other types of legislation/ regulation specifically addressing genetic testing in employment and insurance (Y/N) • No legislation • Soft law • Constitution (protection of genetic identity) • Oviedo Convention
Italy
(Not mentioned. Note that Italy did not ratify the Oviedo Convention)
• General Authorization 8/2016 (by reference in the preamble)
Japan Poland
No No (Polish constitution and Labour Code refer to “any form” of discrimination however) (Poland signed but did not ratify the Oviedo Convention) • Genetic Non-Discrimination Act (2017), amending Canadian Human Rights Act
No • No • Draft Bill in 2012 (not yet adopted)
Switzerland
• Loi fédérale sur l’analyse génétique humaine 2004 • Oviedo Convention
• Genetic Non-Discrimination Act (2017) (also amends Canadian Labour Code)— diagnostic and predictive • Loi fédérale sur l’analyse génétique humaine 2004 • Oviedo Convention
Taiwan
No
No
United Kingdom
(UK did not sign Oviedo Convention)
• Concordat and Moratorium (soft law) (insurance) • ICO Employment Practice Code 2011 (employment)
United States
• Genetic Information Nondiscrimination Act of 2008 (GINA) • Patient Protection and Affordable Care Act of 2010
• American with Disabilities Act of 1990 (ADA) • State laws (both nondiscrimination laws and privacy laws)
Quebec
a
Anti-discrimination norms (national) specifically mentioning genetic status • No legislation • Soft law • Oviedo Convention
For jurisdictions subject to the Oviedo Convention, see the EU section
Genetic testing in employment and insurance forbidden, allowed, allowed under some conditionsa 1. Forbidden. Consent not an exception, but other exceptions apply (protection and safety) (employment) (soft law) 2. Forbidden (insurance). Consent is an exception for private insurance (soft law) 3. Protection of genetic identity/information (Greek Constitution) 4. Soft law prohibits discrimination based on genetic characteristics 1. Forbidden (insurance), without any exception 2. Forbidden (info and tests) (employment), except for the aim of protecting the life or physical integrity of the job applicant or a third party 3. Consent not an exception n/a. Does not occur in practice 1. Forbidden (through EU rules?) 2. Any form of discrimination encompasses genetic history
1. Forbidden (both diagnostic and predictive), consent is an exception 2. Discrimination grounded on genetic characteristics forbidden (federal activities) 1. Forbidden for compulsory insurance. Allowed (information) under strict conditions for optional insurance 2. Allowed if necessary to assess aptitude (employment) 3. Consent not an exception under LAGH 4. Discrimination based on “genetic patrimony” forbidden (LAGH) Mute for insurance and employment (comprehensive coverage from NHI) 1. Forbidden to request tests (insurance) 2. Forbidden to request results of predictive and diagnostic genetic tests acquired as part of clinical research (insurance) (C&M) 3. Forbidden to request results of predictive genetic tests acquired otherwise (diagnostic tests not protected) (insurance) (C&M) 4. Allowed to ask results of existing tests (info) according to “ceiling” approach (insurance). (C&M). Not required to disclose results after cover has started 5. Voluntary moratorium on use of predictive genetic tests until 1 Nov 2019 (insurance) (C&M) 6. Freedom restricted for employers (safety risk or risk to worker) (ICO). Medical tests prohibited until a job offer is made 1. Forbidden (employment and health insurance) 2. Genetic discrimination with respect to other types of insurance (e.g. life, disability or long-term insurance) is regulated by state laws
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Annex I Questionnaire: Legal Aspects of Genetic Part I: Are Existing Generalist Frameworks for Testing Regarding Insurance and Employment Regulating Genetic Testing Adequately Adapted to the Insurance and Employment Contexts? Useful Details for Reading the Questionnaire The questions have been formulated to enhance their relevance across a wide variety of jurisdictions and legal traditions. It is understood, however, that in certain cases, the questions might need to be slightly adapted by the national rapporteurs to enable a fulsome response. The rapporteurs are asked to: • refer to the most important sources. These sources may be constitutional, legislative, jurisprudential, doctrinal, or derived from the agreements between concerned parties or public policies. • underscore at opportune moments, the context (juridical, social, economic) within which the responses are inscribed, and refer to statistical data if pertinent and available. The questionnaire does not distinguish between the different types of insurance (e.g. life insurance, health and accident insurance) but the national rapporteurs may make these distinctions where necessary. Also, the term “insurance” is used to refer to insurance obtained through a private company. Moreover, the use in the questionnaire of the terms “insurer” and “employer” is meant to include, where applicable, agencies or medical intermediaries undertaking tests on their behalf. Your response may require you to distinguish between the responsibilities of each. If there are particular considerations that apply to public health insurance, do not hesitate to take these into account in your responses. Similarly, in respect to questions on employment, national rapporteurs are kindly asked to provide any nuances necessary to account for differences in the law—including available recourse and remedies—that might apply to workplaces or workforces that are unionized, and those that are not unionized.
Introduction 1. Are data available about the frequency of use of “genetic testing” in insurance and employment processes? Have you observed a change over time? 2. Please briefly identify any public policies that may influence both the prevalence of genetic testing and the assumption of risk.
A. General 3. Does your jurisdiction define “genetic” information for the purpose of employment or insurance? More particularly: (a) Does the definition include family history? (b) Does it include proteomic or epigenetic data? (c) Is a distinction made between genetic tests occurring within a clinical setting, for research purposes, and tests sold to consumers? (d) Is a distinction made between genetic tests that reveal existing health problems (diagnostic tests) and genetic testing that only predicts disease susceptibility (predictive tests)? (e) Is the use of terminology consistent with Article 2 (i) (ii) and (xii) of the UNESCO International Declaration on Human Genetic Data? 4. Does your jurisdiction recognize the “special status” of genetic data in keeping with Article 4 of the UNESCO International Declaration on Human Genetic Data? 5. Briefly, does information derived from genetic testing receive particular or distinctive legal consideration (e.g. through specific regulatory texts, state-initiated policies or voluntary codes) in your jurisdiction? 6. Does your jurisdiction exercise extraterritorial jurisdiction over human genetic data collection, notably by multinational insurance companies headquartered there? 7. Where genetic testing is undertaken in a clinical medical setting or in a biomedical research setting, does the physician or researcher have a duty of disclosure to the patient or participant of the socio-legal risks associated with the testing, in particular in relation to the possible impact for insurance or employment applications? B. Human Rights (Please, note any applicable international, supranational and/ or regional (including the following regional human rights instruments: African (Banjul) Charter on Human and Peoples’ Rights, the American Convention on Human Rights and the European Convention on Human Rights and Fundamental Freedoms,) norms, in addition to domestic norms). B.1 Non-discrimination Protection 8. Is protection against genetic discrimination covered under general human rights protections in your jurisdiction? If so, is genetic status expressly referenced as an included ground of discrimination, or are other categories, such as disability, interpreted to include genetic status?
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9. Has discrimination on the basis of genetic status been seen to intersect with other forms of discrimination, for example on the basis of gender, family status, race, ethnic origin or national origin, for individuals belonging to groups that may be considered pre-disposed to particular illnesses (e. g. persons of African descent and Sickle-cell anemia; TaySachs disease in persons of Ashkenazi Jewish heritage, etc.)? 10. Are discrimination in employment and discrimination in respect to insurance addressed according to the same analytical framework? 11. Please discuss any pivotal human rights decisions from your jurisdiction regarding genetic discrimination in the insurance and/or employment contexts. In the process, please explain: (a) Your jurisdiction’s dominant approach to identifying discrimination (e.g. adverse impact or intent focused analysis); (b) How the burden of proof and evidentiary burden are distributed between the parties; (c) The adequacy of the remedial awards. 12. Overall, does the general non-discrimination framework provide a sufficient basis to address the challenges posed by genetic testing in the context of insurance or employment? B.2 Privacy, Confidentiality and Disclosure 13. How does your jurisdiction protect the confidentiality of information derived from genetic testing and the privacy of the person who was subject to it? More precisely, what protection is afforded to: (a) Genetic test results contained in a patient’s medical or hospital file from disclosure to or access by third parties, including employers and insurers? (b) Genetic test results obtained in the context of biomedical research? (c) Genetic information detained by, or for, an insurer or employer in case genetic testing is permitted in these contexts? 14. What role does consent play in allowing genetic information contained in a medical or hospital file to be disclosed to third parties such as insurers and employers? 15. How does your legal system protect the interests of family members, including those not yet born, in the protection of their genetic information? What if any role does your jurisdiction provide to family members in decision-making about disclosure to third parties— notably employers and insurers—of genetic information contained in an individual’s medical or hospital file? 16. Does your jurisdiction recognize individuals’ right of access to information regarding their health or medical status that might be available to insurers or potential
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employers? Does it recognize the same right to family members? 17. Does your legal system recognize that individuals and their family members have a right not to know about their genetic information? If so, how does this right play out in the context of insurance and employment? B.3 Other 18. Please discuss and evaluate any other rights or principles, recognized in your legal system, that are relevant to the use of genetic testing in the context of insurance or employment (e.g. autonomy, self-determination).
Part II: Do the Specific Rights and Obligations in the Insurance and Employment Contexts Effectively Reconcile Stakeholders’ Interests? A. Rights and Obligations of Insurers and Employers Insurance 19. How does the insurance industry justify collecting genetic information? What are the main objections?
Employment How do employers in your jurisdiction justify collecting genetic information as part of the recruitment process? What are the main objections? 20. Are insurers specifically During the recruitment process, allowed to ask questions about an are employers specifically applicant’s genetic status, or to permitted to ask questions of job require genetic testing prior to applicants regarding their genetic granting insurance coverage? status, or to require genetic Please, specify the conditions and testing prior to employment? clarify the moment at which this Please specify the conditions (e. information may be requested. g. specific safety-sensitive jobs) What are the sanctions for and clarify the moment during contravening these rules? If you the hiring process at which this have relevant data, please indicate information may be requested (e. whether the regulatory framework g. only after an offer of yields high compliance employment has been made conditional on successfully passing a medical examination?) 21. Where genetic testing is permitted for insurance purposes, including employer-provided insurance, does your regulatory framework distinguish between: (a) The nature of insurance to be underwritten (b) The monetary value to be insured (c) The kind of testing/result (e.g. predictive versus diagnostic) (d) The type of uses considered appropriate for information derived from the genetic testing (e.g., in insurance: assessing rates/caps; excluding some conditions/rejecting coverage) 22. Where an insurer is allowed Where an employer is permitted by law to use genetic testing, is by law to undertake genetic retention of the samples after the testing as part of the recruitment insurance-related decision has process, can the samples be been made permitted? If so, for retained by the testing agency (e. how long can the samples be g. medical intermediary) after the kept? Is the insurer permitted to hiring decision has been made? If undertake further, future testing so, for how long can the samples be kept? Is the employer (continued)
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Employment
(in case tests for new conditions are developed for instance)?
permitted to undertake further, future testing (in case tests for new conditions are developed for instance)? 23. Where the law permits an insurer or employer to require genetic testing, does the insurer or employer have any obligations to manage the psychosocial risks to the person associated with the testing, or learning the results of the testing (e.g. psychological harm; disclosure of facts about close family relationships, such as non-paternity; stigmatization; intra-family conflict. . .)?
B. Rights and Obligations of the Insurance or Job Applicant, the Insured or Employee, and Close Family Members Insurance 24. Does your jurisdiction require voluntary disclosure on the part of an insurance applicant where results of DNA testing are contained within their existing medical records? If such an obligation exists, is it imposed only at the application stage? 25. What are the consequences of failing to disclose the results of prior genetic testing or other genetic information?
Employment Does your jurisdiction require disclosure of genetic information or any prior genetic testing by the job applicant to a potential employer?
If a job applicant refuses or fails to disclose past genetic testing to an employer, is the employee liable to disciplinary measures including potentially the termination of employment (e.g. for “dishonesty”)?
Conclusion 26. Do you consider that the risks and benefits associated with genetic testing in the insurance and employment context are currently appropriately distributed through your jurisdiction’s regulatory framework? 27. What if any recommendations would you formulate to address genetic testing in the insurance and employment contexts in an equitable and efficient manner? 28. Is there a fruitful role for transnational, including international, action in the governance of genetic testing in insurance and employment? 29. Are there other themes or issues of central importance to your jurisdiction that were not covered by this questionnaire?
Annex II Questionnaire: Les Aspects Jurisdiques des Tests Génétiques en Relation à l’Assurance et l’Emploi Précisions utiles à la lecture du questionnaire Les rapporteurs sont priés de :
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• Citer les sources les plus importantes. Ces sources peuvent être constitutionnelles, législatives, jurisprudentielles, doctrinales, ou relever d’accords entre les acteurs concernés ou de politiques publiques. • Souligner aux moments opportuns le contexte (juridique, social, économique) dans lequel leurs réponses s’inscrivent, et faire référence aux données statistiques si elles sont pertinentes et disponibles. Les questions sont formulées pour être pertinentes à une variété de ressorts et de traditions juridiques. Il est toutefois possible que, dans certains cas, les rapporteurs nationaux doivent reformuler légèrement les questions afin de favoriser leur plus grande pertinence. Le questionnaire ne fait pas de distinction entre les différents types d’assurance (assurance vie, assurance maladie-accident, etc.), mais les rapporteurs nationaux peuvent faire les distinctions nécessaires. De plus, le terme “assurance” tend à référer à l’assurance provenant de l’industrie privée. Enfin, lorsque le questionnaire utilise les termes “assureurs” et “employeurs”, il inclut les agences ou intermédiaires médicaux effectuant des tests en leur nom, si pertinent. Il pourrait être nécessaire de différencier les responsabilités de chacun lorsque pertinent. Si des considérations particulières s’appliquent à l’assurance maladie « publique », n’hésitez pas à en tenir compte dans vos réponses. Similairement, en ce qui a trait aux questions concernant l’emploi, les rapporteurs nationaux sont priés d’apporter les nuances nécessaires afin de tenir compte des distinctions s’imposant entre les recours et remèdes pertinents aux milieux de travail ou employés qui sont syndiqués, et à ceux qui ne le sont pas.
Introduction 1. Est-ce que des données sont disponibles concernant la fréquence de l’utilisation des « tests génétiques » en matière d’assurance ou d’emploi ? Avez-vous observé des changements au fil du temps ? 2. Identifiez brièvement les politiques publiques influençant la prévalence des tests génétiques, ainsi que la répartition des risques.
Partie 1: Est-ce que les cadres généralistes qui réglement ent les tests génétiques sont adaptés aux contextes de l’assurance et de l’emploi? A. Général 3. Est-ce que votre ressort définit l’information génétique à des fins d’emploi ou d’assurance ?
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Plus particulièrement : (a) Est-ce que la définition inclut l’historique familial ? (b) Est-ce qu’elle inclut les données protéomiques ou épigénétiques ? (c) Fait-on une distinction entre les tests génétiques effectués dans un contexte clinique, dans un contexte de recherche, et ceux vendus directement aux consommateurs ? (d) Fait-on une distinction entre les tests génétiques qui révèlent des problèmes de santé existants (tests diagnostiques) et ceux qui ne font que prédire la susceptibilité de développer une maladie (test prédictif) ? (e) Est-ce que l’usage de la terminologie concorde avec celle utilisée par l’article 2(i)(ii) et (xii) de la Déclaration internationale sur les données génétiques humaines de l’UNESCO ?
4. Votre ressort reconnait-il le « statut spécial » des données génétiques en accord avec l’article 4 de la Déclaration internationale sur les données génétiques humaines de l’UNESCO ? 5. Brièvement, est-ce que l’information dérivée des tests génétiques fait l’objet d’un traitement juridique particulier (par exemple, par le biais de textes règlementaires, de politiques publiques ou de codes volontaires) ? 6. Est-ce que votre ressort exerce une compétence extraterritoriale à l’égard de la collecte des données génétiques humaines, notamment par des compagnies d’assurance multinationales dont le siège social y est situé ? 7. Lorsque des tests génétiques sont entrepris dans un contexte médical clinique ou de recherche, est-ce que le médecin ou le chercheur a une obligation de renseignement préalable en ce qui concerne les risques sociaux-juridiques associés à ces tests, particulièrement en ce qui a trait à leurs effets sur la possibilité d’obtenir une assurance ou un emploi ?
B. Droits de la personne Vous êtes priés de noter les normes internationales, supranationales et/ou régionales (incluant par exemple la Charte africaine des droits de l’homme et des peuples [Banjul], la Convention américaine relative aux droits de l’homme, et la Convention européenne de sauvegarde des droits de l’homme et libertés fondamentales) applicables, en plus des normes nationales pertinentes. B.1 Protection contre la discrimination 8. Est-ce que la protection contre la discrimination génétique est assujettie à la protection générale des droits de la personne dans votre ressort ? Si oui, est-ce que le statut génétique est expressément reconnu comme un motif de
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discrimination, ou est-ce que d’autres catégories, telles que le handicap, sont plutôt interprétées de façon à inclure le statut génétique ? 9. Dans votre ressort, est-ce que la discrimination basée sur le statut génétique recoupe d’autres formes de discrimination fondée, par exemple, sur le sexe, le statut familial, la race, l’ethnicité ou l’origine nationale, pour des individus appartenant à des groupes prédisposés à certaines maladies (par ex., l’anémie drépanocytaire chez les personnes de descendance africaine ; la maladie de TaySachs chez les personnes d’origine juive ashkénaze, etc.) ? 10. Est-ce que la discrimination en matière d’emploi et la discrimination en matière d’assurance sont abordées selon le même cadre analytique ? 11. Discutez des décisions charnières en matière de droits de la personne provenant de votre resort concernant la discrimination génétique dans le contexte de l’assurance et/ ou de l’emploi. Ce faisant, expliquez : (a) L’approche dominante utilisée afin d’identifier les instances de discrimination (par exemple, une analyse fondée sur les effets préjudiciables de la discrimination ou centrée sur l’intention) ; (b) Comment le fardeau de la preuve est réparti entre les parties ; (c) Si les mesures correctives sont satisfaisantes. 12. Dans son ensemble, la protection juridique générale offerte contre la discrimination est-elle suffisante afin de faire face aux défis soulevés dans le contexte de l’assurance et de l’emploi à l’égard des tests génétiques ? B.2 Vie privée, confidentialité et divulgation 13. Comment votre ressort protège-t-il la confidentialité de l’information obtenue à la suite de tests génétiques et la vie privée de la personne concernée par ces tests ? Plus précisément, quelle protection est offerte à/aux : (a) Résultats des tests génétiques contenus dans le dossier médical ou hospitalier d’un patient afin d’éviter la divulgation aux, ou l’accès par les, tiers, incluant les employeurs et assureurs ? (b) Résultats des tests génétiques obtenus dans le contexte de la recherche biomédicale ? (c) L’information génétique détenue par, ou pour, un assureur ou un employeur dans les cas où les tests génétiques sont permis dans ces contextes ? 14. Quel rôle joue le consentement dans la divulgation de l’information génétique contenue dans un dossier médical ou hospitalier à des tiers tels que les assureurs et employeurs ? 15. Comment votre système juridique protège-t-il les intérêts des membres de la famille, incluant ceux des individus à naître, dans la protection de leur information génétique ? Quel rôle jouent les membres de la famille dans le
Legal Aspects of Genetic Testing Regarding Insurance and Employment
processus décisionnel menant à la divulgation à des tiers — notamment à des employeurs ou assureurs — de l’information génétique contenue dans le dossier médical ou hospitalier d’un individu ? 16. Est-ce que votre ressort reconnait aux individus un droit d’accès à l’information concernant leur santé ou leur statut médical qui pourrait être à la disposition des assureurs ou des employeurs potentiels ? Est-ce qu’elle reconnait le même droit aux membres de sa famille ? 17. Est-ce que votre système juridique reconnait aux individus ainsi qu’à leur famille un droit de ne pas connaitre leur information génétique ? Si oui, quel rôle se droit joue-t-il dans le contexte de l’assurance et de l’emploi ? B.3 Autre 18. Veuillez discuter et évaluer tout autre droit ou principe, reconnu dans votre système juridique, pertinent à l’utilisation des tests génétiques dans le contexte de l’assurance et de l’emploi (par exemple, autonomie, autodétermination) ?
Partie 2: Est-ce que les droits et obligations spécifiques dans les contextes de l’assurance et l’emploi concilient efficacement les intérêts des acteurs? A. Droits et obligations des assureurs et des employeurs Assurance 19. De quelle façon l’industrie de l’assurance justifie-t-elle l’obtention d’informations génétiques ? Quelles sont les objections principales ? 20. Est-ce que les assureurs sont spécifiquement autorisés à poser des questions concernant le statut génétique d’un candidat, ou à requérir un test génétique avant de lui fournir une couverture d’assurance ? Spécifiez les conditions et identifier à quel moment un assureur peut exiger ces informations. De plus, indiquez quelles sont les sanctions en cas de contravention. Si vous possédez des données pertinentes, indiquez si le cadre réglementaire génère un haut taux de conformité
Emploi Comment les employeurs justifient-ils l’obtention d’informations génétiques dans le cadre du processus de recrutement ? Quelles sont les objections principales ? Durant le processus de recrutement, est-ce que les employeurs sont autorisés à poser des questions spécifiques aux candidats concernant leur statut génétique, ou à requérir des tests génétiques avant l’embauche ? Spécifiez les conditions (par exemple, des emplois sujets à des enjeux de sécurité) et clarifiez le moment durant le processus de recrutement lors duquel ces informations peuvent être requises ? (Par exemple, seulement après qu’une offre d’emploi soit émise à la condition qu’un examen medical (continued)
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soit effectué ?) Si vous possédez des données pertinentes, indiquez si le cadre réglementaire génère un haut taux de conformité. 21. Lorsque des tests génétiques sont permis à des fins d’assurance, incluant l’assurance offerte par l’employeur, est-ce que votre cadre réglementaire fait des distinctions quant à : (a) La nature de l’assurance à être souscrite (b) La valeur monétaire assurée (c) Le type de test/résultat (par exemple, prédictif versus diagnostique) (d) Le type d’utilisation considérée comme appropriée de l’information obtenue à la suite de tests génétiques (par exemple, établir les taux/ plafonds ; exclure certaines conditions/rejet de la protection). Lorsque le droit autorise un 22. Lorsque le droit autorise un employeur à requérir des tests assureur à requérir des tests génétiques dans le cadre du génétiques, celui-ci peut-il conserver les échantillons après la processus de recrutement, les prise de décision ? Si oui, pendant échantillons peuvent-ils être combien de temps ? Est-ce que conservés par l’agence ayant l’assureur a la permission effectué le test (par exemple un d’effectuer d’autres tests dans le intermédiaire médical) après la futur (dans le cas où, par exemple, prise de decision concernant des tests pour détecter de l’embauche ? Si oui, pendant nouvelles conditions sont combien de temps ? Est-ce que développés) ? l’employeur a la permission d’entreprendre d’autres tests dans le futur (dans le cas où, par exemple, des tests pour détecter de nouvelles conditions sont développés ?) 23. Lorsque le droit permet à un assureur ou un employeur de requérir des tests génétiques, est-ce que ces derniers ont l’obligation de gérer les risques psychosociaux associés à ces tests (par exemple, préjudice psychologique ; divulgation des faits concernant des relations familiales, tels que la nonpaternité ; stigmatisation ; conflit intrafamilial...) ?
B. Droits et obligations du preneur d’assurance ou du candidat à l’emploi, de l’assuré ou de l’employé, et des proches Assurance 24. Quelles sont les obligations de divulgation à l’assureur dans l’hypothèse où des résultats de tests d’ADN se trouvent au dossier médical ? Si une obligation de divulgation existe, est-elle imposée uniquement au moment de la souscription ? 25. Quelles sont les conséquences d’une absence de divulgation d’un résultat de test génétique ou d’une information de nature génétique ?
Emploi Est-ce que votre ressort requiert une divulgation de l’information génétique ou de tests génétiques préalables par le candidat à l’emploi à un employeur potentiel ?
Si un candidat à l’emploi refuse ou omet de divulguer des tests génétiques antérieurs, l’employé est-il sujet à des mesures disciplinaires incluant potentiellement son congédiement (par exemple, pour « malhonnêteté ») ?
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Conclusion 26. Est-ce que vous considérez que les risques et bénéfices associés aux tests génétiques en matière d’assurance et d’emploi sont actuellement convenablement distribués au travers du cadre réglementaire de votre ressort? 27. Quelles recommandations formuleriez-vous afin d’aborder les enjeux reliés aux tests génétiques dans le contexte de l’assurance ou de l’emploi de manière équitable et efficace dans votre ressort ? 28. L’action transnationale, incluant l’action internationale, peut-elle jouer un rôle fécond dans la gouvernance des tests génétiques en matière d’assurance et d’emploi ?
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29. Y a-t-il d’autres thèmes centraux propres à votre ressort que le présent questionnaire n’aborde pas ?
References Ajunwa I (2016) Genetics data and civil rights. Harv Civ Rights Civ Liberties Law Rev 51:75 Khoury L, Blackett A, Vanhonnaeker L (eds) (2020) Genetic testing and the governance of risk in the contemporary economy – comparative reflections in the insurance and employment law contexts. Springer, Berlin
The Legal Services Market and Conveyancing Andrea Fusaro
Abstract
This general report to the World congress of the International Academy of Comparative Law provides a wide picture of legal services offered with respect to the transfer of real estate in various jurisdictions, both European and non-European. The focus is on the legal professionals that assist the parties to the transaction, on their roles and responsibilities, on the level of protection offered to consumers, on the time and costs which are typically necessary to carry out the transaction, and on the problems and the current reforms of the sector.
1
Introduction
This general report conducts a comparative study on the conveyancing market, particularly focusing on the role of legal professionals, examining their responsibilities, their costs and their specific contributions to the overall balance of the transaction.1 It is based on the responses to a Questionnaire and on various papers submitted by national reporters who accepted to participate in the project.2 We received answers from several European countries (Netherlands, 1
This text reproduces, with some slight additions and modifications, the General report held at the Twentieth World congress of the International Academy of Comparative Law, Fukuoka, 2018. For a general overview and case studies on conveyancing in the European context and for further references, see Martínez Velencoso et al. (2017). 2 See the national reports by Pascale Lecocq (Belgique); Frederic Helsen (Belgique); Pablo Renteria (Brazil); Jaan Ginter (Estonia); Joachim Münch (Germany); Maria Psarra (Greece); Carlo Marchetti (Italy); Akio Yamanome (Japan); Leon Verstappen (Netherlands); F.J. Vonck (Netherlands); Malgorzata Krol (Poland); Flavius-Antoniu Baias (Romania) Bogdan Vişinoiu (Romania); Andy Duncan (Scotland); and Jer-shenq Shieh (Taiwan); prepared on the occasion of the International Academy of Comparative Law World Congress, Fukuoka 2018. A. Fusaro (*) University of Genova, Genova, Italy e-mail: [email protected]
Romania, Poland, Greece, Estonia, Belgium, Italy, and Germany), other civil-law countries (Brazil, Japan, and Taiwan), no common law countries, and only one mixed jurisdiction (Scotland). The report at first comparatively examines whether the intervention of third parties or professionals is mandatory to complete the real estate transfer. Then, the nature, role and tasks of third parties involved in the conveyancing are analyzed, focusing on the responsibilities assumed by them, as well as the guarantees and protections offered by their involvement. Subsequently, the report scrutinizes the costs associated with legal assistance, the time necessary to complete the entire procedure of real estate transfer, and how it is affected by different kinds of required procedures. Finally, some outstanding issues concerning current challenges, problems and reforms are examined. In order to avoid misunderstandings, we clarify that this report deals only with disposals for value of immovable properties, with the main example being the purchase of a house.
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The Landscape of Conveyancers, Their Role and Responsibility
With regard to technical support to conveyancing parties, we find a big difference between the considered legal systems— some require the compulsory intervention of professionals, some require it in some stages (e.g. draft of contract and registration of title), and others leave the parties free to drive the procedure alone. The contrast is more apparent than real, because—as we will see—even in the latter cases, parties ask for professional advice from experts, technicians, and real estate agents. Only three systems (Scotland, Japan, and Taiwan) give the parties total autonomy to manage the whole real estate transfer procedure and the conveyance of immovable property,
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_24
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with no further requirement. The other legal systems demand the involvement of a highly specialized and impartial professional, who is qualified as a public official (civil law notary), because these transactions are deemed very relevant to the market, and it is necessary to ensure the protection of public policy principles and consumers. The intervention of the Latin notary is situated at various steps in the transfer process, in relation to the different legal value of the sale contract, the different model of transfer of rights in rem, as well as the different role of the real estate registration. In most systems with Latin notaries, a notarial deed is required for sale contracts of immovable properties (Romania, Poland,3 Brazil, Greece, Estonia, and Germany). In the Netherlands the deed is not compulsory for the titulus, but only for the modus adquirendi. In other countries (Belgium, and Italy) the authentic form is required only for the purpose of an erga omnes effect, not for the transfer between the parties, which is perfected with the consent only. However, beyond the formal requirements prescribed by the law, in all the legal systems examined—even in those that do not claim the obligatory intervention of professionals— the parties are addressed to various intermediaries and professionals working in real estate field, whose intervention, although not legally mandatory, is in fact necessary to ensure the successful completion of the entire operation. For example, with regard to the contractual phase, in Scotland we usually find two solicitors (even if, formally, licensed conveyancers are qualified to provide legal assistance in this field), in Japan real estate agents, and in Taiwan professional land registration agents (who can also be lawyers). Also, the registration of property is performed by various subjects—by the purchaser’s solicitor (Scotland), by a special jurist (Shiho-shoshi in Japan), or by the land registration agent (in Taiwan). In addition to the legal professionals, which was our focus, the parties have the right to consult and instruct other experts (surveyors, engineers, etc.) in order to perform technical surveys (e.g. energy performance diagnosis, assessment of building suitability). This shows that legal difficulties and economic risks make conveyancing a complex sector in which consumers (especially the buyer) need specific assistance and a lot of consultants, in order to provide them with information on the factual and legal status of the transferred property and to ensure the full validity and effectiveness of the entire procedure. Where its intervention is expected, the Latin notary is usually required to assist both the parties in drafting the contract—maintaining an impartial position, in their interest4—sometimes (as in France) each party may hire its own notary. 3
Art. 158 of Civil Code—act of 23 April 1964 (as amended). Under the Polish Code of Professional Ethics of a Notary, impartiality is the fundamental feature of notarial activity. 4
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The notary is responsible for drafting the deed of conveyance (or the final contract for the transfer of property) and can be addressed by both parties for questions regarding the meaning of the clauses, general queries about the applicable law and taxation. Due to his/her public office, the notary is independent and has a comprehensive obligation to advise both parties, acting as an impartial go-between. The Latin notary’s role differs from that of a lawyer since he/she is an independent party who acts in the interest of both buyer and seller, is responsible for the legality of the contract, conducts a series of formal document checks, and must ascertain the identity of buyer and seller as well as their respective powers and entitlements to stipulate the transaction.5 This means that even if contractual parties may search for additional expertise at their own expense, in most of the examined countries they may choose to approach the notary as the only legal professional of reference for both, since he/she is neutral and his/her involvement ensures the balance of the contract. Usually the notary takes charge and is required to perform most of the background checks that must be carried out prior to the drafting of the final deed of conveyancing and before the price is paid. The notary always guarantees the legal title of the seller, the legal status of the object of sale, and the validity and effectiveness of the contract concluded by the parties. The notary must carry out checks on the legal status of the property, based on the evidence provided by the public registries, in order to determine who is entitled to the right of property and the existence of encumbrances on the property, such as mortgages, liens, servitudes, etc., resulting from the public records.6 In countries where the land registration does not have a constitutive effect (Belgium, Poland, and, currently, Romania; in Italy registration has a constitutive effect only for mortgages), the notary must perform the complex and delicate research of the previous titles whereby the property was purchased and sold, in the time span required for the acquisition of ownership through ‘usucapio’.7 Parties may also choose to hire a surveyor or other experts to carry out additional checks regarding the characteristics of the house; the compliance of the building to the existing standards, such as those required by the urban plans; and/or the habitability and energy efficiency. In some cases the intervention of expert technicians is mandatory—in Greece, the buyer must ask an engineer to inspect the real estate before the sale and identify the existence or not of unauthorized establishments and settlements of planning, and he/she 5 See the Polish Act of 14 February1991—Law on Notaries (as amended). 6 And due to the statements and assurances (guarantees) of a seller—in the Polish law. 7 But in the Polish legal system the principles of the public trust and credibility of land and mortgage registers are enforced—art. 5 of the Act of 6 July 1982 on land and mortgage registers and mortgage (as amended).
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issues a relevant attestation which is attached to the deed of conveyance. Somewhere the mention or the allegation of documents that provide information based on technical surveys is prescribed by law, for example the obligation to carry out an energy performance diagnosis or to predispose a special document which certifies the energy efficiency rate of the property (Italy, Romania, and Poland).8 The notary, even when lacking technical expertise in the extra-juridical field, has to inform the parties, especially the buyer, of many aspects relating to the condition of the asset. This includes checking the existence of various requirements prescribed by law, the request for certificates and the correct analysis of the documentation submitted by the parties (with a sort of “documental” responsibility, according to a “principle of submission” on the basis of which relevant facts must be procured by the parties themselves). This guarantees by law a minimum protection of the weak contractor, who is more exposed to risks (i.e. the buyer). The position of Greece is peculiar—the notary prepares the deed of conveyance, but the parties in most cases turn to a lawyer too (whose intervention, starting from 1 January 2014, is optional). The purchaser’s lawyer is normally appointed to carry out the inspection of the title, carrying out a due diligence of the property titles in combination with a search in the registration, mortgage and seizure books, in order to ensure that the seller is the owner of the real estate and that the real estate is not encumbered with a mortgage; to draw up a draft contract; to negotiate the terms with the counterpart and his/her lawyer; to review the text drawn up by the notary; to make arrangements with the lending bank; and to submit the registration to the competent authority responsible for providing evidence of real estate transfer. In systems without Latin notaries, the buyer is normally addressed to a solicitor (Scotland) or to a real estate broker (Japan and Taiwan) to check the legal and factual status of the asset. In Scotland, each party usually refers to his/her solicitor, according to an adversarial logic. However, there is a very limited range of circumstances in which one solicitor may represent both parties, such as in transactions involving residential property where the seller is not a developer, and parties are related or both parties are established clients of the solicitor. The freedom of the buyer to choose the professionals appears in some cases strongly limited and influenced by the preferences of the lender bank; in a residential purchase, a solicitor usually acts for both the purchaser and the purchaser’s bank, and in that case the solicitor acting for the purchaser will need to be on the bank’s panel of solicitors (a list of solicitors specified by
8
Such documents are facultative in the Polish law in relation to buildings developed before 2014 and mandatory after that date—Act of 29 August 2014 on energy performance of buildings (as amended).
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the bank, which usually includes an extremely large number of firms of all sizes). Moreover, the payment of the purchase price implies the involvement of conveyancers in various ways. In some systems (e.g. Romania and Brazil) legal professionals usually do not handle the money and are not responsible for receiving the payment of the agreed price; however, in most cases (e.g. Scotland, Belgium, Netherlands, and Poland) they often perform as an escrow, receiving money on deposit and ensuring that the price is released to the seller only upon successful completion of the registration of the buyer’s title, in order to protect him/her and avoid undue payments. Recently, in Italy, under Law n. 124 of 29 August 2017, notaries are required, unless otherwise requested by the parties, to receive the purchase price together with the money to cover tax expenses and keep it in a dedicated escrow account until the registration of the sale. Conveyancers (solicitors, notaries, real estate agents, and Shiho-shoshi) are also generally held to perform controls (e.g. identification of parties and denunciation to the authority in case of suspicious operations) to fight against money laundering and financing of terrorism. They should also abstain from the provision of their services, if certain facts give reason to believe that the transaction is connected with money laundering.9 Although the responsibility of third parties involved in real estate transactions is quite similar in nature (i.e. only in case of negligence), in all the countries analyzed the guarantees offered to the buyer vary in relation to the extent of controls and the intensity of the responsibilities assumed by the conveyancers. All in all, the presence of the Latin notary offers a broader and more pervasive guarantee regarding the successful completion of the transaction, ensuring the effectiveness, validity, and correspondence of the transaction with respect to the parties’ wishes. The kind of responsibility assumed by the notary appears extremely strong, since the due diligence carried out on parties’ behalf corresponds in most cases to a specific duty imposed by the law by virtue of their nature as a public official. However, if we adopt a strictly economic point of view, the level of protection offered to the parties also varies according to the kind of professional insurance adopted by the conveyancers. Only some of the countries examined (Scotland, Netherlands, Romania, Poland,10 Belgium, Estonia, and Italy) prescribe a mandatory professional insurance (for notary or lawyer). This makes it compulsory to obtain professional indemnity insurance for economic damage to cover the civil liability cases as a result of valid claims for negligence. In other 9 In the Polish law, due to Act of 16 November 2000 on prevention of money laundering practices and financing of terrorism (as amended). 10 Due to Act of 14 February1991—Law on Notaries (as amended) and other particular acts.
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countries, protections are lower—in Brazil, it depends on whether the insurance is demanded by the Federal State or by the Federal District where the notary’s office is located; in Greece it is not mandatory (neither for public notaries, lawyers, nor engineers); and in Taiwan the professional insurance is available but optional. In some countries (e.g. Scotland and Italy), consumer guarantees are even more extensive since, in addition to the insurance required by law, the professional order (of solicitors or Latin notaries) has also established an additional form of consumer protection, i.e. a protection fund that indemnify customers who have suffered economic damages from the professional who acted dishonestly.
3
Costs, Timeframe and Other Issues
Regarding the cost of legal assistance, it should be noted that some countries provide—with very different calculation methods—an obligatory standard tariff for professionals or maximum/minimum fees predetermined by law, in order to protect the consumer from overpricing and, at the same time, ensure a fair compensation to the professional. Most countries in which Latin notaries exist (Greece, Belgium, Romania, Estonia, Germany, Brazil, and Poland) provide mandatory tariffs (only maximum fees in Poland)11 established by the public authority, through a law or a ministerial decision (in Brazil they are established by the individual Federal States or Districts, but in compliance with the framework provisions of a Federal Statute). Also, in Japan we find a ceiling, set by an administrative regulation, for real estate agent’s fees (in the majority of cases, a percentage equal to 3% of the selling price). In other cases, there is no generally established legal fee or pricing structure and fees are agreed between the professional and the client. In Greece, lawyer’s fees are determined by a written agreement, and, in Scotland, fees are agreed between the buyer and his/her solicitors, and negotiated according to their respective market forces on a flat fee basis, including a mechanism for raising the fee if additional difficulties arise. In addition, with regard to the services of the Japanese Shihoshoshi or those of the land registration agent and the real estate broker in Taiwan, fees are freely determined and negotiable. Even some countries with Latin notaries (Netherlands and Italy) have repealed the mandatory tariff, through liberalization reforms; however—as widely explained in the national paper of the Netherlands—the outcomes regarding price levels and quality of services are still controversial and it is not at all certain that the result benefitted consumers. With regards to the distribution of expenses between parties for the service provided by lawyers (e.g. Scotland 11
Regulation of the Minister of Justice of 28 June 2004 on maximum rates of notarial fee (as amended).
and Greece), generally each party will pay the cost of their own legal assistance, while in legal systems with Latin notaries—even if both parties are jointly and severally liable for payment of the notarial fees—the parties normally agree that the buyer will bear the costs of the transaction,12 and the same happens for the fees of the Japanese Shiho-shoshi or those of the land registration agent in Taiwan. It is worth pointing out that, in the systems that allow the presence of two notaries involved in the same transaction (Greece, Belgium, and France), the fee paid is still unique and it is divided between the two professionals, so that the choice to involve a second notary does not affect the impartiality and neutrality of each professional nor the total cost of notarial representation, as the notaries will split the fee. In any case, the costs related to legal assistance appear to be rather moderate if compared to those of other intermediaries (such as banks and real estate agents) and, above all, to transfer taxes which are often decisive in the overall calculation of the expenses necessary to complete the real estate transaction.13 The average time taken to complete the whole transaction is variable (from a few days to several weeks or even months) and is usually connected with its complexity. ICT and telematic procedures for the investigation and inspection of public registers and the execution of the formalities for registration in the land registries, considerably contribute to extend the overall time required. In this aspect, civil law notaries demonstrate a particular competency in most countries, as they are equipped with a permanent connection with public registers and being able to communicate in real time with the main infrastructures of the public administration. Where voluntary jurisdiction procedures before judicial bodies are required in order to register the transfer of rights in rem (such as in Germany), the timing may increase significantly—in fact, court procedures, so concerned with giving certainty to the property title, are far from immediate (in Poland, for example, they can take about 1–3 months).14 General or public data collection systems that measure customer satisfaction with professional services are not widespread. In some cases they are provided by an organism that should defend clients’ interests, or by the professional organizations that have a stake in the smooth functioning of the market (e.g. ombudsman du notariat in Belgium or self
12 Due to the Polish legal system—Act of 9 September 2000 on civil transaction tax (as amended)—the purchaser is obliged to pay civil transaction tax, while other fees like court and notarial ones can be shared by parties but they are usually paid by a purchaser. 13 2% of the price in Poland—Act of 9 September 2000 on civil transaction tax (as amended). 14 Depending on the number of transfers, i.e. “activity” of parties in this sphere.
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government of notaries in Poland).15 Other times single professionals carry out investigations in this regard (solicitors in Scotland), sometimes using special IT services (notaries in Belgium). However, some indirect indices, such as the lack of disciplinary proceedings promoted by unsatisfied customers and the low level of professional-client litigation, can reveal a good standard of quality, while the emergence of disputes can be attributed to lower professional skill (for example, in Taiwan the land registration agents are generally less able than lawyers and the reliability of the Registrations Books largely depends on the controls carried out by the registrar). Some other issues appear, especially as a result of technology evolution, with an increasing move to digital conveyancing including the use of digital documents, contracts, and registration procedures, and an increasing use of standard contracts (Scotland); with the need for some countries to improve the reliability of the transfer and real estate registration system. In Poland, from the 1st of July 2016, notaries are obliged to put motions to land and mortgages registers by the telematic tools on the day of the transaction.16 In Scotland, real estate frauds and property thefts are areas of concern. There are some protections within the system, for example a limited ability (subject to some protection for future good faith purchasers) to rectify the public Land register where a fraud or property results in a manifest inaccuracy in the register itself. Furthermore, the Law Society of Scotland imposes strict regulatory requirements on solicitors, which need to properly identify their clients, and some types of fraud (for example where an imposter impersonates a seller’s solicitor) are harder to commit, due to the fact that in a smaller jurisdiction fewer solicitors deal with each other more regularly. Although these protections cannot prevent all frauds, the number of reported court cases nevertheless suggests that such phenomenon is less common in Scotland than in other similar systems such as England and Wales. Some civil law countries have undertaken reforms to strengthen some elements of the system and increase its efficiency. In Romania, for example, a land registry system with constitutive effect will be applicable, even though this new system, introduced by the new civil code from 2011, is still suspended. Other countries (Greece and Italy) have launched reforms designed to “align” the Cadastral Offices with the Land registries (which operate on a person-based system), to
15 Membership of all Polish notaries is mandatory, according to Act of 14 February 1991—Law on Notaries (as amended); self government controls the professional activity of notaries in all aspects—also deontological, is competent to carry out disciplinary proceedings. 16 Act of 15 January 2015—amendment of code of civil procedure and some other Acts.
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ensure that their content is corresponding and equally updated. In Poland, within territorial self-government there are surveying offices which collaborate ex officio with land and mortgage registries (courts). In Greece, the system of the Cadastre, achieving the recordation of both spatial and legal information concerning real estate, is more modern and comprehensive in comparison with the old system of the Land Registry, and it is envisaged that by 2020 all Land Registries will be replaced by the Cadastral Offices. In Italy, the existence of two separate branches, due to historical reasons, is going to be updated too, since in 2010 a Law Decree passed for the creation of an integrated real estate registry, which would collect the data deriving from both offices into one integrated system. In the spring of 2017, the Japanese government started to reform the land registration regime and solved the problem of inheritance origins (due to the fact that very often the death of the owner of an immovable property is not promptly publicized in the land register). The Brazilian National Congress is currently analyzing several bills dealing with the activities of notaries and real estate registrars, including the proposal of fee exemptions to promote access by the lowerincome population to the transfer of their own property, as well as the proposal to make the intervention of a real estate broker mandatory in the sale of real estate. On the whole, therefore, the conveyancing sector appears to be constantly—though gradually—evolving towards an ever greater reliability of information concerning the ownership and content of property rights and the more complete protection of the consumer. The objective of obtaining greater speed and simultaneity in the management of procedures—also through the use of electronic tools—does not obscure, but rather accentuates the importance of the role played by conveyancers; in particular the function of guaranteeing and protecting the weak contractor performed by legal professionals, in their irreplaceable task as advisers to the parties and impartial guardians of the legality of transactions.
Reference Martínez Velencoso LM, Bailey S, Pradi A (eds) (2017) Transfer of immovables in European private law (The common core of European private law). Cambridge University Press
Climate Change Litigation and the Individual: An Overview Francesco Sindico, Makane Moïse Mbengue, and Kathryn McKenzie
Abstract
This chapter serves as an introduction to the comparative climate change litigation exercise, which stems from efforts leading up to the 2008 International Academy of Comparative Law Colloquium. The chapter is based on several fact scenarios established by the editors, in order to develop a comparative look at climate change across a variety of countries. This effort will ultimately lead to the development of the Climate Change Litigation Initiative (C2LI), an online platform intended to further explore the state of climate change litigation in national courts. This introductory chapter summarises the findings deriving from individual chapters of the edited book (hereinafter, ‘the book’) that has been prepared on climate change litigation, following the 2008 Colloquium. It further explores in detail the issues of standing, grounds and remedies in climate change litigation, and highlights a number of crosscutting issues discussed throughout the book.
1
Introduction
Despite progress in international climate change processes, such as the adoption of the Paris Agreement in December 2015,1 climate change requires an “all hands on deck” This report was also published in Sindico and Mbengue (Eds), Comparative Climate Change Litigation: Beyond the Usual Suspects, Springer Nature Switzerland 2020. 1 UNFCCC, Decision 1/CP.21, ‘Adoption of the Paris Agreement’, FCCC/CP/2015/10/Add.1.
F. Sindico (*) · K. McKenzie Strathclyde Centre for Environmental Law and Governance, University of Strathclyde Law School, Glasgow, UK e-mail: [email protected]; [email protected] M. M. Mbengue University of Geneva Law School, Geneva, Switzerland e-mail: [email protected]
approach.2 The latter includes not only states, international organisations and large emitters (businesses), but also the individual. In particular, in order to mitigate and adapt to climate change, individuals need to be in a position to not only lobby towards a better future (via, for example, public participation in law making processes related to climate change), but also to bring public and private actors to court for their alleged “climate change” related violations. This is even more important when key countries shift their climate change policies.3 Against this background, past examples of climate change litigation brought forward by individuals (or group of individuals) such as the Urgenda case in the Netherlands,4 or the Leghari case in Pakistan,5 raise some important and interesting legal issues: how can an individual bring a case against a government whose actions or omissions are causing dangerous climate change? How can an individual bring a case against a public body whose actions or omissions lead to a rise in greenhouse gas emissions or to a failure to adapt to climate change? How can an individual bring a case against a private actor whose acts are causing an increase in greenhouse gas emissions and are allegedly violating national law requirements leading to further climate change? The research does not focus on international litigation. It does not focus on whether States can bring other States before international courts as a means to deal with climate change. The research focuses on the legal challenges that individuals face when deciding to take climate change cases before national courts, whether it is to boost mitigation or adaptation, or even to advance the overall international community’s fight against climate change. 2
Moncel and van-Asselt (2012). As has taken place in the US with the stance of the Trump administration on climate change, see Mehling (2017); and, more recently, in Brazil under the Bolsonaro administration. 4 Urgenda Foundation v. Kingdom of the Netherlands (2015). 5 Leghari v. Federation of Pakistan (2015). 3
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_25
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While there is a bourgeoning literature on climate change and litigation,6 together with international projects and online databases,7 these tend to come from specific jurisdictions and to focus mainly on common law approaches. The research developed in the edited book opens up the discussion of climate change and individuals (and the role of litigation therein) to a wider geographical array enabling us to capture challenges and opportunities coming from different sociolegal cultures. In particular, the book raises issues also from countries where litigation has not (yet) happened and discusses the reasons behind the lack of litigation. This chapter is divided in six sections. Following this brief introduction, Sect. 2 will frame climate change litigation in the current reality of climate change, the state of play of the literature on climate change litigation and will explain the scenario based methodology behind the project that led to this book. Section 3 will focus on three key stages in any case: standing, merits (grounds of review) and remedies. In Sect. 4, we will discuss particularly challenging crosscutting issues, such as causation, science and separation of powers. Section 5 will discuss a number of challenges such as access to justice, lack of capacity, legal culture and the lack of climate change awareness within society, which could prevent individuals from lobbying in favour of litigation in the first place. Finally, Sect. 6 will draw some general conclusions about the project and the book that results from it.
2
Climate Change and Litigation
In this section, we will contextualise the project behind the book. On the one hand, although much has been written about climate change science, it is necessary to stress again the urgency and level of the problem. On the other hand, climate change litigation is by no means a novelty and we will discuss the current state of the literature around it highlighting how it has usually focused (understandably) on countries with litigation. Finally, we will explain why this project and the book resulting therefrom is different from previous ones, but at the same time complementary thereto.
6 Burns and Osofsky (2009), Lord et al. (2011), Faure and Peeters (2011), Lin (2012). A very useful resource is the recently released report on climate change litigation by UNEP, The Status of Climate Change Litigation, a Global Review (2017a). Savaresi and Auz (2019), Peel and Osofsky (2018), Wilensky (2015). 7 Useful information can be found in the litigation database complied by the Sabin Centre for Climate Change Law at Columbia University in collaboration with Arnold & Porter, LLP. The database is available at http://wordpress2.ei.columbia.edu/climate-change-litigation/.
2.1
We Really Do Not Have Much Time Left. . .
In the past few years, we have seen a rise in extreme and increasingly deadly weather events, such as flooding, wildfires, hurricanes, droughts, heatwaves and the like throughout the world. Sea levels are rising and glaciers are melting and the World Health Organization has reported that patterns of infection of life-threatening diseases are on the rise, that approximately 250,000 additional deaths are expected per year between 2030 and 2050 due to climate change related health issues, and that the cost of direct damage from climate change related health issues will average approximately US$ 2–4 billion per year by 2030.8 As climate science gets increasingly more sophisticated and technically advanced, our understanding of the severity and urgency of the problems we face is becoming more advanced as well: The UN’s Intergovernmental Panel on Climate Change (IPCC), in its most recent scientific report (Fifth Assessment Report, or AR5), found that climate change will not only amplify the risks of extreme weather events and harm to human (and natural) health, but will create new ones if decisive action is not taken immediately.9 The IPCC’s AR5 further underscored the urgency of this issue by clarifying that we will see a ‘high to very high risk of severe, wide-spread and irreversible impacts globally’ by the end of the twenty-first century without additional action on mitigation and adaptation beyond what is currently in place.10 The severity, length and frequency of climate change and its lifethreatening risks will be significantly affected by whichever actions are taken now to reduce overall emissions: substantial reductions can indeed reduce these risks.11 The United Nations Environment Program (UNEP) in its most recent Emissions Gap Report (2018) raised the stakes even higher, reporting that, rather than a reduction, 2017 saw an increase in global emissions, highlighting once again that current commitments and actions are inadequate and that ‘unprecedented, urgent action’ is required by all governments.12 It is not all doom and gloom, however. Yes, the science tells us that action must be taken with extreme urgency, but the science also tells us that if action is taken, these risks can be mitigated. It will require what the Acting Director of UNEP, Joyce Msuya calls ‘existential change’ on the part of everyone.13
World Health Organization, ‘Climate Change and Health’. IPCC, Fifth Assessment Report, Climate Change 2014: Synthesis Report, s 2.3. 10 Ibid s.3.2. 11 Ibid s.3. 12 UNEP ‘Emissions Gap Report’ (2018), pp. xiv–xxiii. 13 Ibid p. xiii. 8 9
Climate Change Litigation and the Individual: An Overview
2.2
All Hands on Deck
Governments are perhaps best positioned to take action to address these urgent and severe challenges and must play a significant role in developing, adopting, and implementing policies and other measures to tackle the range of problems we face due to climate change. Indeed, 195 countries have, by signing the Paris Agreement, committed to taking such action. However, while an adequate response to climate change requires each Member State to take decisive and urgent action to develop comprehensive and effective climate policy, we must also understand that the problems we face do not have any one single solution and will require responses at every level. We cannot rely on only one form of action. Instead, effective climate governance means that responses must be developed and implemented across scales, including inter-governmental, national and local.14 An adequate response to climate change will, therefore, require an ‘all hands on deck’ approach, which includes litigation. Much of the academic literature on climate change litigation is skewed toward high-profile cases, countries where there has been significant judicial activity and international legal actions that can be taken in response to the global problem of climate change.15 It makes sense, of course, that the literature would focus on lessons for potential future cases based on past litigation experiences. It also makes sense for much of the literature to focus on regions and countries where there has been a significant amount of litigation, like the USA or Australia. There is a wealth of case law and legislative or parliamentary history relevant to climate change in some countries and high-profile cases provide fertile ground for discussion, research and strategizing. However, it is the smaller scale actions and the regions or countries where there has been little or no such litigation that we want to also highlight in this book. It is the question of how civil society, the individual, can participate in the judicial system where the effects of climate change are impacting life now and for future generations that interest us. Increasingly, civil society has been stepping up (and out) to raise concerns that government action on climate change has thus far been inadequate, and to raise awareness about the need for more urgent action. We have seen climate strikes and demonstrations in many areas of the world, young people taking to the streets to raise the alarm and demand action. Civil society also has another tool to employ in this fight and that is climate change litigation, the very kind of litigation this book is meant to discuss. Although litigation is 14 IPCC, Fifth Assessment Report (2014) s 4.4; See also Bouwer (2018), Moncel and van-Asselt (2012). 15 See, e.g. Carnwath (2016), Banda and Fulton (2017); ibid; Burns and Osofsky (2009); UNEP ‘The Status of Climate Change Litigation: A Global Review (2017b); Cox (2016), McCormick et al. (2017) and Peel (2017).
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only one piece of the climate change puzzle, it can serve as a tool to inform social perceptions, highlight the importance and potential harm of certain conduct by public and private actors, help shape judicial attitudes, and can push governments to take more substantial action to address climate change. An apparent lack of political will to take urgent action, or failures by institutions at any level, be they public or private, can be a motivating factor for civil society to turn to litigation.16 As Lord Carnwath puts it, ‘the courts will also have an important role in holding their governments to account, and, so far as possible within the constraints of their individual legal systems, in ensuring that those commitments are given practical and enforceable effect.’17
2.3
Beyond the Usual Suspects and Going Beyond the Literature
Having acknowledged the urgency of the climate change challenge and the need to pursue all options, including litigation, we will now explain the rationale behind the project and the book. Every two years the International Academy of Comparative Law (IACL) organises its Biannual Conference where a number of topics are discussed. In 2016 climate change was chosen as one of the areas that would be covered in the 2018 Biannual IACL Conference in Fukuoka, Japan. The two editors of the book were chosen as rapporteurs and they decided to turn their attention to climate change litigation. From the beginning, we wanted to focus on climate change litigation in a slightly different way than what was done until then. On the one hand, we wanted to open up the discussion of climate change litigation to as many countries as possible, including jurisdictions with little or no litigation at all. This meant putting together a wide-ranging group of national rapporteurs (see Table 1), which include both researchers and practitioners, including practising lawyers, some involved in disputes themselves. On the other hand, rather than giving national rapporteurs the task to report on the state of play within their jurisdiction, we decided to take a more practical approach. We developed six scenarios and asked the national rapporteurs to write a report discussing whether such a scenario had materialised in their country and, if so, whether it had led to litigation. More importantly, we asked national rapporteurs to focus on those scenarios that had not taken place in the countries they were responsible for and discuss legal and non-legal reasons why litigation had not taken place. We also encouraged national rapporteurs to consider legal and non-legal strategies for litigation to take place in the future. 16 17
Bouwer (2018), p. 491. Carnwath (2016), p. 8.
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Table 1 Countries included in the book by Continent Continent Africa
Asia
Europe
Oceania North America
South America
Country Kenya Nigeria South Africa China India Israel Philippines Qatar Russia Belgium Czech Republic Finland France Italy Netherlands Norway Slovenia Spain Switzerland Ukraine United Kingdom New Zealand Canada Mexico United States of America Bolivia Brazil Chile Colombia
Chapter 20 21 2 19 18 16 11 17 27 22 23 26 25 24 4 5 30 29 6 28 7 10 8 13 9 12 15 14 3
In hindsight, the six scenarios can be reduced to three. We focus our attention on cases brought against the government, the government or another public actor, and cases against private actors. Firstly, the book discusses cases where individuals have taken a government to court for its actions or omissions that have allegedly led to an increase in greenhouse gas emissions or to a failure to adapt to climate change. Secondly, we discuss how an individual can take the government or another public authority to court for authorising an activity that leads to an increase in greenhouse gas emissions. Within this second group, we also consider cases focusing on adaptation in which a claimant would bring a case against a public actor for authorising a specific activity that fails to adapt properly to climate change, or fails to adopt an adaptation measure altogether. Thirdly, our attention moves to cases against private actors. Here we focus on disputes where individuals bring cases against private actors (industry) for their operations, which lead to an increase in greenhouse gas emissions. In this third and final scenario, we also look
into possible cases against pension and investment funds for failure to divest from financing activities that cause climate change. National rapporteurs duly submitted their reports prior to the 2018 IACL Biannual Conference where preliminary results were presented. National rapporteurs were then asked to revise their national reports in order for them to be included as chapters in this book. The result brings together insights from over thirty countries and more than forty contributors. While we do not want to judge based on the quality of our own work, what we can say without a doubt is that the book goes beyond the usual suspects in terms of countries covered and, by using the above-mentioned scenario based methodology, goes beyond the existing literature.
3
Climate Change Litigation: Standing, Grounds of Review and Remedies
This part of the chapter develops a better understanding of the journey individuals face when bringing climate change disputes against the government, public bodies and/or private actors. Before proceeding, it is important to make two observations. First, this section also focuses on individuals in countries where there has not been any litigation. This is an important aspect of the efforts put into the project and book: i.e. to highlight the experience of countries with little or no climate change litigation. In the latter situation, some of the challenges discussed in this section are speculative, as they have not been tested. A second observation, which is valid for the entire book, is that we are not discussing challenges faced by individuals who want to bring cases as a means to advocate in favour of litigation as the main or even only way to deal with climate change in a given jurisdiction. Quite the opposite: we are not advocating for litigation in the book, but also not against it. We understand the merits of climate change litigation, but also its limits. Going back to the above-mentioned journey, bringing a climate change dispute to court involves three different phases: standing (the possibility to be heard by a court in the first place), grounds of review (discussion on the merits of the claim) and remedies (action following a positive decision by the court in favour of the individual bringing the claim). For each one of these phases we sketch its main characteristics and refer to some critical examples and cases stemming from the countries analysed in the book and project. However, this provides just a glimpse and readers are encouraged to go to the specific chapters to gain a much more in-depth understanding of how this journey operates in the different countries covered in the book.
Climate Change Litigation and the Individual: An Overview
3.1
Standing
For an individual to be able to consider taking the government, a public actor or a private entity to court, she needs to have standing. When it comes to standing against the State or public bodies, plaintiffs will usually have to meet the following requirements: the interest at stake has to be genuine,18 the issue has to be serious,19 it has to be an issue that can be validly resolved by a court20 and, lastly, there should be no other effective way to bring the dispute before the court.21 In some cases against private actors, standing will require the individual to prove that she has a sufficient legal interest, which could require, as is the case in Canada, a direct, personal, existing and actual interest in the dispute.22 Standing is a procedural legal challenge that becomes the first strategic hurdle for claimants and the first line of attack for the defendants. Several of the crosscutting issues that we will discuss in Sect. 4 are relevant also during the standing phase of the climate change litigation journey, such as, for example, causation.23
3.2
Merits (Grounds of Review)
Once an individual has standing, the case against the government, a public actor or a private entity will be decided based on an alleged violation of a specific obligation. In other words, it is paramount that the claimant identifies a legal obligation that has been breached. This calls for an examination of possible grounds of review in the context of climate change litigation. 18 When an organisation brings a claim on behalf of individuals, the nature and objectives of the organisation will be scrutinised from a standing perspective. This is what happened in the Urgenda case, where the Court pointed to the aims of the Urgenda Foundation, which referred to its goal of advancing a more sustainable society. Interestingly, the Court elaborated on what a sustainable society meant, linking it to the famous definition of sustainable development stemming from the Brundtland Report “Our Common Future”, World Commission on Environment and Development, ‘Our Common Future’ (1987), which includes the rights not only of current, but also of future generations. In doing so, it is unclear whether the Court embraced standing for future generations, but it clearly opened the door to considering long-term negative effects stemming from climate change, which will inevitably impinge upon the (human) rights of future generations. For a more detailed discussion of the Urgenda case and standing issues, see Sect. 1 in the chapter on The Netherlands in the book. 19 For example, in Switzerland a claimant has to demonstrate that the decision of the public actor affects them more than how it affects the general public. In other words, it puts on the individual a heavy burden that can be sometimes very difficult to meet. See Sect. 3 in the chapter on Switzerland in the book for a more detailed discussion. 20 See Sect. 5.2 in the chapter on Canada in the book. 21 Ibid. 22 Ibid. 23 See Sect. 4.1 below in this chapter.
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3.2.1 Breach of International Law Obligations A first ground of review could be a scenario whereby a government has a legally binding obligation under international law and does not comply with it, either through its actions or through omissions. Whether an individual could bring such a dispute before a national court depends on the country’s approach to international law. If international law is immediately and directly applicable (monist approach), then a breach of international law could be a ground of review in a national court. If the country favours a dualist approach,24 according to which international law will be effective only by means of domestic legislation, the breach of that specific national law will be at the core of the dispute, rather than international law per se.25 Finally, in some cases, the individual may challenge not the domestic piece of legislation that implements a country’s commitments under, for example, the Paris Agreement, but a country’s nationally determined contribution (NDC) set for under the Paris Agreement itself.26 An obvious challenge that needs to be highlighted is when an individual finds herself faced with a lack of a domestic climate change law and policy altogether. Without such normative presence, it will be very difficult (although not impossible) for plaintiffs to ground their complaint on precise and enforceable obligations.27 While the lack of domestic legislation is still a challenge in some countries, there has been a tremendous rise in climate change legislation over the years. With the adoption of the Paris Agreement, this trend has 24
See Shaw (2008), p. 131. Canada can be considered a dualist country and the government passed the Kyoto Implementation Act as a means to comply with its international obligations, but then decided to withdraw from the Kyoto Protocol altogether. Two cases were brought against the Canadian government arguing that, by withdrawing from the Kyoto Protocol, it had breached its international law obligations. The Court decided against the individuals referring mainly to the executive prerogative and claiming that separation of powers was not breached in this case. See Sect. 2.2 in the chapter on Canada in this book for a more in-depth discussion. Another case in which an individual brought a case against a domestic piece of legislation that implemented the country’s international obligations is the Thomson case in New Zealand. Here, the plaintiff challenged the Climate Change Response Act 2002 claiming that the publication of a new IPCC report required the government to revise its national climate change target. The government responded by saying that such a decision fell within its discretionary power, but the Court ruled against the State making it clear that the release of new science in the form of a new IPCC report called for a revision. The Court ultimately did not enforce its decision due to the change in government in 2017 and its position that it would revise its climate change targets. See Sect. 2 in the chapter on New Zealand in this book for more detail. 26 In the Thomson case the plaintiff argued that the NDC was illegal because a number of elements had not been taken into consideration, including the negative effects of climate change on Tokelau, a non-selfgoverning territory of New Zealand, and the ineffectiveness of the country’s NDC from a global perspective. Ibid. 27 The lack of climate law has been mentioned as one of the reasons for the difficulties faced by Earthlife Africa in South Africa. See Sect. 2 in the chapter on South Africa in the book for more detail. 25
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increased and it is now more a matter of having better law, rather than just law.28 Moving back to the Paris Agreement, it is important to recall that, even for monist countries, the Paris Agreement imposes only a procedural obligation consisting of the obligation to develop, publish and maintain an NDC.29 It will be very difficult for an individual to sue a government for its breach of the Paris Agreement.30 This does not mean that the Paris Agreement has no relevance in climate change litigation since, in some cases, courts have referred to the Paris Agreement to interpret national climate law.31 International law obligations will be less relevant, if not completely absent, when it comes to disputes against private actors, since their operations will mainly fall under the competence of the State where they are based.
3.2.2 Human Rights One interesting avenue to bring a State to court is for individuals to argue that the government has breached its human rights obligations towards its citizens. Here, the dispute will focus on the alleged fact that national climate change efforts (law and policy) are not sufficient and will lead to a violation of a number of human rights.32 The main question will be to consider whether a domestic piece of climate change legislation is compatible with human rights law. Moreover, in those jurisdictions where the margin of appreciation doctrine operates, individuals will need to prove that the State has exceeded such margin. In order to assess the compatibility with human rights law, the individual will need to first ascertain that the State is indeed bound by human 28 See the London School of Economics Database on Climate Laws available at http://www.lse.ac.uk/GranthamInstitute/climate-changelaws-of-the-world/. 29 Paris Agreement (n1); Rajamani and Brunnée (2017) and Klein (2017). 30 In a case against the Norwegian government in which the latter would have breached its own international climate change obligations, as enshrined in its Intended Nationally Determined Contribution, by granting licences for deep-sea extraction in the Barents Sea. The Court did not entertain the international law dimension of the case and did not consider the Paris Agreement in the interpretation of the government’s obligations. It decided against the claimants suggesting a strong deference towards the government. See Sect. 3.2.1 in the chapter on Norway in the book for more detail. 31 The climate change decision in South Africa is relevant because in this case the Court did consider that the obligation to undertake an environmental impact assessment under South African law had to be interpreted taking into account the participation of the country in the Paris Agreement. See Sect. 2 in the chapter on South Africa in the book for more detail. 32 The unsuccessful case in the UK, Plan B Earth, also hinged upon human rights grounds. The claimants considered the failure of the UK Secretary of State to revise upwards the ambition of emission reduction targets to constitute a human rights violation. See Sect. 2.1 in the chapter on the United Kingdom in the book for an in-depth discussion of this case.
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rights law. In some cases, the international human rights law will be incorporated into national law, in others the country will be obliged from its participation in regional (and global) human rights processes.33 Taking a human rights grounds route can be an important strategic option for individuals in countries like Switzerland where the Constitution prevents pieces of legislation being scrutinised in terms of their legality before the courts.34 It can also be strategically important when Indigenous Peoples are considering whether to bring a claim against a State or a public actor.35 Indigenous Peoples will not only look at climate change litigation for possible breach of substantive human rights, but they will also focus on the possible violation of procedural human rights, such as the right to be consulted.36 Human rights cases are usually conceived as a case of an individual against her own State. However, in some cases the law provides that human rights have to be protected also by the private sector.37
3.2.3 Tort Law A further ground to consider is tort law (or tort of negligence) and the breach of the standard of due care. Here, a court will be asked to judge whether a State has met its duty of care towards its citizens when it comes to its actions to mitigate climate change. A number of steps need to be considered here. First, is there a duty of care in the first place?38 Second, 33
An important case was lodged in Switzerland by a group of elderly women who maintained that Swiss climate change law was not strong enough and would, ultimately, lead to a violation of their right to life as well as their human rights enshrined in articles 2 and 8 of the European Convention on Human Rights. The claimants argued that Switzerland was in breach of its human rights obligations because it did not set a target that would achieve “well below 2” and because in a global question like climate change the margin of appreciation for the State was much less. See Sect. 2 in the chapter on Switzerland in the book for a detailed discussion. 34 Ibid; in particular, see art. 190 of the Swiss Constitution in this respect. 35 In Canada there could be a plethora of other human rights that are particularly relevant for indigenous peoples’ claims. For example, equality rights and freedom of religion have been used in environmental claims. Although unsuccessful, they could show what lies ahead. For a discussion on equality and religion in this context, see Sect. 3.2.2 in the chapter on Canada in the book. 36 Procedural human rights, such as the right to be consulted are becoming relevant grounds for action in cases brought by indigenous peoples in Canada. Ibid. 37 This is the case in the Quebec Charter, which opens the door to human rights cases against private actors. Ibid. 38 In the Urgenda case the main question become what amounts exactly to the duty of care. The Urgenda legal team examined numerous sources of law (European human rights law, the Dutch Constitution and international law) that provided the contours of the duty of care. The latter amounts to an obligation upon a State to take mitigation measures to prevent dangerous climate change. See Sect. 3.2.2 in the chapter on The Netherlands for a discussion.
Climate Change Litigation and the Individual: An Overview
has the duty been breached? Third, is there a causal link (causation) between the action or omission of the state or public authority and the alleged breach? Finally, is there actual loss?39 Tort law could be also used to challenge a public actor’s decision leading to less resilient adaptation, mainly on negligence and nuisance grounds. These kinds of disputes could arise especially in relation to flooding events, although some cases brought by individuals may well be accompanied by larger claims lodged by insurance companies.40 Tort cases are more often than not linked to the actions of private actors. In fact, a tort law action could be brought against private actors for their actions leading to a rise in greenhouse gas emissions, provided that the individual is able to show a relationship between the damage suffered and the actions undertaken by the private actor.41 The damage is often referred as “special” harm and can be defined as “particular, direct and substantial damage over and above that sustained by the public at large”.42 A new kind of tort, the tort of “intentional investment in abnormally dangerous activities”, was developed by claimants in a case in the US aimed at challenging investment by funds in climate unfriendly projects and activities.43 The case was considered not justiciable, as standing was not granted, hence raising the question as to whether tort could be used by individuals as a ground to challenge pension and investment funds.
3.2.4 Liability In civil law jurisdictions, liability can be a powerful ground for plaintiffs to sue private actors in a climate change case. However, there will be plenty of obstacles along the way. First, liability requires proof of fault.44 Second, once fault is 39
For a discussion of the legal standards under tort law, see e.g. Sect. 5.2 in the chapter on Canada in the book. 40 This was the case in the United Kingdom. See Sect. 3.2 in the chapter on the UK for a more detailed discussion. 41 Frequently this type of case will be public nuisance case. Ibid. 42 See note 115 in the chapter on Canada in this book. A case of this nature, extending the arguments of duty of care from the State to a private actor, was filed in April 2019 in The Netherlands against Royal Dutch Shell. See http://www.lse.ac.uk/GranthamInstitute/litigation/ milieudefensie-et-al-v-royal-dutch-shell-plc/ for details of the case. Royal Dutch Shell whose emissions amounted to 1.7% of global emissions between 1988 and 2015, ranking as the 9th biggest global contributor to climate change, has been found guilty in tort cases in the past and asked to pay damages to Nigerian farmers for the environmental deterioration caused by oil spill damages in Nigeria. See Sect. 4.2 ‘Litigation against major GHG emitters’ in the chapter on the Netherlands in this book for a history and more detail regarding Royal Dutch Shell. 43 This case is discussed briefly in footnote 96 in the chapter on the United Kingdom in the book. 44 If we take Quebec as an example, fault means acting not in accordance with the normal behaviour of a “prudent and diligent actor placed in the
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assessed, damage must be proved and actual and future damage must be certain and assessable.45 Third, causation needs to be tackled. The plaintiff will need to prove a causal link between the fault and the damage. From a climate change case perspective, this requires the plaintiff to prove not only that greenhouse gas emissions cause climate change, but that the plaintiff’s damage is caused by climate change.
3.2.5 Judicial Review An individual may seek to bring a government or a public actor to court because of the irrationality (unreasonableness) or the procedural impropriety of an act or of a decision it has taken. The former requires the plaintiff to prove that the decision from the public body has been unreasonable, where reasonableness can be defined as “the existence of justification, transparency and intelligibility within the decision-making process.”46 The latter requires an individual to prove that specific procedural obligations incumbent upon the public actor have not been complied with. In some instances, acts can require to take climate change effects into consideration 47 and, if such effects are not fully or properly considered, the decision adopted by the public body may be challenged. These grounds fall under what is often referred to as judicial review. While the latter is a term better known in common law jurisdictions,48 we use it here as an allencompassing term that includes different means of appealing against State or government decisions under a regulatory and administrative law regime. Judicial review will be mainly used against a government or a public authority’s decision to authorise socio-economic activities that could lead to a rise in greenhouse gas emissions, hence leading to more climate change.49 Judicial review can, however, also be used when a government or a public actor fails to take measures crucial same circumstance”. See the chapter on Canada for more detail, specifically note 106. Fault could also be construed as an abuse of rights. 45 See, for example Sect. 4.1.3 in the chapter on Canada in the book for a discussion about damages. 46 See note 149 in the chapter on Canada in the book. 47 See Sect. 5.1.1 in the chapter on Canada in the book. 48 Judicial review in common law countries bestows power on the judiciary to review executive and administrative actions and decision for legality and appropriateness; it is “the means by which executive action is prevented from exceeding the powers and functions assigned to the executive by law and the interests of the individual are protected accordingly.” Church of Scientology v Woodward; see also https:// www.alrc.gov.au/publications/common-law-principle-11. 49 The UK has seen a flurry of such cases, with cases brought by individuals against, for example, the planned construction of a third runway at Heathrow airport. The UK has also seen judicial review used to challenge developments that would lead to a decrease in greenhouse gas emissions, such as the planning of wind farms, showing that litigation can also be used to put other interests before climate change mitigation. See Sect. 2.2 in the chapter on the United Kingdom in this book for more detail on these examples. In Canada a recent case, unrelated to climate change, has opened the possibility of judicial review
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to adapt to climate change. In some jurisdictions, like in the UK, claimants have challenged State-wide climate change law and policy via judicial review.50
3.2.6 Public Trust Doctrine In some common law jurisdictions, the public trust doctrine could be used in climate change litigation. According to this doctrine, the State holds specific natural resources (air or water for example) in trust for public use. If the State takes actions that could lead to negative effects to those natural elements that it is keeping in trust, then it would be violating its public trust doctrine obligations and can be held accountable. Where a domestic piece of legislation embodies the public trust doctrine, then plaintiffs will have a greater chance of success.51 The public trust doctrine is akin to the active protection on the part of the Crown, which can be found, for example, in New Zealand’s legal system.52 The possibility to use the public trust doctrine is an interesting strategy in countries where the life and culture of indigenous peoples are closely linked to nature, the latter is being negatively affected by climate change and the country has entered into an agreement with the Indigenous Peoples whereby they are granted rights over the land.53 3.2.7
Breach of Other Environmental Obligations If there is not a specific climate change law that can be invoked, or if the existing climate change governance framework cannot be relied on, a possible ground is to rely on an alleged breach of other environmental obligations.54 on grounds of lack of social acceptability in cases where the local public does not accept a specific project. 50 In the Plan B Earth case the claimants argued that the Secretary of State was acting irrationally in not revising upward the level of emission reduction targets. See note 33 in the chapter on the United Kingdom in the book. 51 In Canada, for example, no cases have been brought before a court under this doctrine, but the British Columbia Islands Trust Act embodies the public trust doctrine very well. BC Islands Trust Act, section 3 states “The object of the trust is to preserve and protect the trust area and its unique amenities and environment for the benefit of the residents of the trust area and of British Columbia generally, in cooperation with municipalities, regional districts, improvement districts, other persons and organizations and the government of British Columbia.” Islands Trust Act, RSBC 1996, c. 239, s. 3. 52 The Wai 2607 was a claim brought by Maori representatives against the State for the lack of climate change action, which had negatively affected Maori livelihoods, ecosystems and culture. See Sect. 2.2 in the chapter on New Zealand in the book for a more detailed discussion of this case. 53 An example of this is enshrined in Article II of te Tiriti in New Zealand, which guarantees “The full exclusive and undisturbed possession of their lands and estates, forests, fisheries and other properties which they may collectively or individually possess as long as it is their wish and desire to retain the same in their possession.” Ibid. 54 This was the case in the Netherlands, where claimants wanted to stop the construction of coal power plants, but the way the energy sector was
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Individuals interested in contesting the lack of effective adaptation in their countries may find this route promising. In fact, good climate change adaptation really means good environmental law and policy. The realm of climate change adaptation includes, amongst others, water governance, flood polices, agricultural law, etc.55
3.2.8 Criminal Law Grounds If a private actor is breaching the law, there may be instances when this could amount to a criminal offence. Criminal law has been used to strengthen environmental law and make environmental protection more effective.56 However, climate change cases are not that straightforward since in most cases the release of greenhouse gas emissions stems from lawful activities.57 3.2.9 Anti-Competitive Grounds In Canada an inquiry was sought against organisations for sharing false and misleading representation.58 Such actions regulated under the EU Emissions Trading Scheme prevented a case being brought on climate change grounds. Since the plants were planned close to high biodiversity sites (Natura 2000 sites), the claimants alleged that the construction and operation of the coal power plants had to be further investigated in order to comply with the government’s environmental and biodiversity obligations. Ultimately, this led only to a delay in the construction of the plants, which were built nonetheless, but they demonstrate that an individual can bring the breach of non-climate change legal obligations as a strategy to delay or block altogether the authorisation by public bodies of activities that will lead to an increase in greenhouse gas emissions. See Sect. 3.3 in the chapter on The Netherlands in this book. In South Africa, the decision to link climate change to air pollution most likely played an important role in the Court’s decision to accept the requirement of a climate change impact assessment for the authorisation of a socio-economic activity (coal power plant) that affects negatively both air pollution, with knock on effects on human health, as well as climate change. For more detail, see Sect. 3.1 in the chapter on South Africa in the book. 55 In some countries, like in Switzerland, an individual can bring a case against a public actor for a breach of a law in one of these non-climate fields. In the Swiss case of A. et al. v. Linthwerk for example, claimants argued that a flood protection plan was insufficient to protect their agricultural land. Although the claim was properly brought, the Court ruled against the claimants, stating the flood protection plan was sufficient. For a more detailed discussion of this case, see Sect. 4 in the chapter on Switzerland in the book. 56 Environmental crimes take the form of illegal trade in wildlife or hazardous materials or waste, illegal logging, etc. and there is growing concern about environmental crimes affecting air quality (e.g. through deforestation), damage to soil and water, and biodiversity loss. See the United Nations Interregional Crime and Justice Research Institute for a discussion about international and transnational environmental crimes, http://www.unicri.it/topics/environmental/. For examples of domestic criminal law related to environmental and/or climate change laws, see the chapters in this book on France, specifically Sect. 3.2.2; Canada, particularly footnote 6 and Sect. 4.2.4; Bolivia, Sects. 3.2 and 3.3; and China, Sect. 3.3. 57 For a discussion of these complexities, see Sect. 3.4 in the chapter on Norway in the book. 58 Anti-competitive grounds are discussed in more detail in Sect. 4.2.4 in the chapter on Canada in the book.
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would have been in breach of the Competition Act and would have the effect of reducing competition for carbon-intensive economic activities. Although the inquiry was not undertaken, the Commissioner was not altogether against opening such a line of inquiry. It will be interesting to see whether competition law could be a new ground for climate change litigation in the future in countries where individuals feel that part of the private sector is actively promoting climate scepticism and confusing citizens as to the negative effects stemming from carbon intensive activities.
3.2.10 Fiduciary Duties In possible cases against pension or investment funds, fiduciary duties may be used as grounds for legal action. The legal obligation being allegedly breached could be their fiduciary duty towards their shareholders.59 The question of pension and investment funds is also particularly interesting in countries like Switzerland, home to large portfolios of equity.60 No case has arisen because pension funds are not justiciable before the courts in Switzerland, since they are under the control of the national supervisory authority. However, the latter has quasi-judicial powers and could consider that persons managing the funds be held liable if they do not act with care.61 What is emerging, however, is that climate change is being perceived as a risk, not so much towards the environment or people, but towards the financial return of the fund.62 This could be the driver that will push pension and investment funds to become more climate friendly. However, whether an individual can bring a case before a court and attack the risk stemming from investments in non-climate friendly activities is still an open question. 3.2.11
Breach of International, National and Corporate Guidelines A further way to attack pension funds and oblige them to divest from carbon-intensive industries could be by relying on their own allegiance to codes of conduct that call for taking climate change seriously.63 These codes of conduct are voluntary guidelines developed at the international, national or corporate level. The OECD has developed its own Guidelines for Multinational Enterprises and has set up Interestingly, the largest Norwegian pension fund mentions ‘childrens rights’ in connection with climate change in its annual report, appearing to open the door to the possibility of invoking the principle of intergenerational equity. For an in-depth discussion, see Sect. 3.4.2 in the chapter on Norway in this book. 60 See Sect. 6 in the chapter on Switzerland in the book. 61 See note 57 in the chapter on Switzerland in the book. 62 See Sect. 3.3 in the chapter on the United Kingdom in the book. 63 Norway is home to the largest sovereign wealth fund and it follows Ethical Guidelines. By following them, Norway has distanced itself from carbon intensive operations, such as the Dakota Access Pipeline in the United States, but has continued investing in companies producing coal in other parts of the world. See (n60) above. 59
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an institutional structure that includes National Contact Points.64 The latter can be approached by individuals who consider the guidelines to have been breached by companies operating in their territory.65 Canada is one of the five largest oil producers in the world, so it is not surprising that pension funds continue to invest in this sector. Having said that, most key players are committing themselves to national and international “voluntary” climate change initiatives and there seems to be no appetite in Canada to take divestment to the courts, at least for now.66 Tables 2 and 3 provide the reader with an overview of the different grounds of review discussed in this section.
3.3
Remedies
The third key in the chain of effective litigation, after standing and merits (grounds of review), are the remedies that the individual will be seeking in her dispute against the government, a public actor or a private entity. Remedies could include declarations of constitutional invalidity, severance, reading or reading down offensive litigation, prohibitive or mandatory injunctions or even damages.67 What this really means is that there are three layers when it comes to remedies. The first one is to seek a declaration according to which the law that is being challenged will be considered invalid or illegal. In particular, when it comes to cases against public authorities who have authorised an activity that could lead to an increase in greenhouse gas emissions the requested remedy on behalf of the claimants can be to annul (declare invalid) or revisit the decision.68 A step further, a second layer, acknowledges that, while such initial remedy may send a positive political signal, it does not stop any action stemming from the implementation of the law to take place. Hence, a second remedy can be framed generally as an injunction, if the case revolves around 64
OECD Guidelines for Multinational Enterprises. In 2017 ING was brought before the Dutch National Contact Point for allegedly breaching a number of procedural duties including the obligation to disclose current and future greenhouse gas emissions stemming from its operations. The challenge was declared admissible and in April 2019, the NCP issued its first ever final statement requiring ING to bring its investment strategy in line with climate goals set out in the Paris Agreement. See https://www.business-humanrights.org/en/netherlandsnational-contact-point-accepts-first-oecd-guidelines-complaint-linkedto-climate-change-against-ing-bank. 66 See Sect. 6 in the chapter on Canada in the book. 67 There is a good discussion of available remedies in the chapter on Canada in the book. See section 2.2.3 ‘Remedies available under the Canadian Charter and the Quebec Charter’. 68 This was indeed the case in the unsuccessful Norwegian case where the claimants were seeking a declaration from the Court that the government’s decision to grant permits for offshore oil exploration in the Barents Sea was invalid. For a longer discussion of this case, see Sect. 3.2.1 in the chapter on Norway in the book. 65
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Table 2 Grounds of review and applicable scenarios Grounds of review Breach of international law obligations Human rights
Applicable scenario(s) Claim against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change Claim against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change
Claims against the government or other public authority for authorising activity that leads to increased GHG emissions
Tort law
Claim against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change
Claims against the government or other public authority for authorising activity that leads to increased GHG emissions
Liability
Claims against private actors for activities that lead to increased GHG emissions, or against pension or other investment funds for improper or negligent investment Claims against the government or other public authority for authorising activity that leads to increased GHG emissions Claims against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change Claims against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change Claims against private actors for (illegal) activities that lead to increased GHG emissions Claims against private actors for activities that lead to increased GHG emissions or against pension or other investment funds for improper or negligent investment Claims against private actors such as pension or investment funds for improper or negligent investment activity Claims against private actors for activities that lead to increased GHG emissions or against pension or other investment funds for improper or negligent investment
Judicial review
Public trust Doctrine Breach of other environmental obligations Criminal law grounds Anti-competitive grounds
Fiduciary duties
Breach of international, national and corporate guidelines
an action or omission authorised by a public actor, or as reform, if the case is primarily against the State and is about the failure to act strongly enough against climate change. A possible remedy here could be to request the government to consider developing a more ambitious climate policy so that its actions will lead to a decrease in greenhouse gas emissions and in adaptation that is more resilient.69 As we will see 69
In a tort claim like the Urgenda case, the remedy requested by the claimant was along these lines and consisted of encouraging the State to develop a more ambitious climate plan with a legally binding target in line with its duty of care towards its citizens. Urgenda requested the Dutch State to aim for an emission reduction between 25 and 40% in 2020. For an in-depth discussion of the Urgenda case, see the chapter on the Netherlands in the book. A similar approach was taken in the KlimaSeniorinnen Schweiz case where the claimants requested Switzerland to put in place “adequate” environmental legislation in order to comply with its human rights obligations. “Adequate” was informed by international climate change law and by climate science
Claims against private actors for activities that lead to increased GHG emissions Claims against private actors for activities that lead to increased GHG emissions
Claims against the government or other public authority for authorising activity that leads to increased GHG emissions
below,70 a remedy of this sort may appear to encroach on politics, potentially blurring the competence boundaries of judiciary and government.71 Injunctions are also a remedy
and a target of “well below 2” was what was being requested. For an indepth discussion of the KimaSeniorinnen Schweiz case, see the chapter on Switzerland in this book. 70 See Sect. 4.3 in the chapter. 71 In the Thomson case in New Zealand the remedy that was being asked by the individual was an order by the Court obliging the government to revise national climate change targets following the publication of an IPCC report. A further remedy was sought in this case and that was a declaration of illegality of the government’s decision setting the country’s NDC. For an in-depth discussion of the Thomson case, see Sect. 2.1 in the chapter on New Zealand in the book. The Wai 2607 case called for recommendations to the government for stricter climate policy and action. For an in-depth discussion of the Wai 2607 case, see Sect. 2.2 in the chapter on New Zealand in the book.
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Table 3 Applicable scenarios and grounds of review Applicable scenarios Claim against the State for actions or omissions that allegedly lead to an increase in GHG emissions or a failure to adapt to climate change
Claims against the government or other public authority for authorising activity that leads to increased GHG emissions
Claims against private actors for activities that lead to increased GHG emissions or against pension or other investment funds for improper or negligent investment
that can be considered when an action is taken against a private actor.72 Finally, individuals may well feel aggrieved and request the third layer of remedies, damages. In some cases, a declaration of invalidity coupled with policy reform and injunction will still not be enough to respond to the negative effects of the law or of its implementation. In some cases the latter will lead to costs incurred by the claimants, for example related to how they had to adapt to negative climate change effects. In such cases, it is likely that the individual will also seek damages as a further and final remedy. For example, a remedy in a case against a private actor whose actions lead to an increase in greenhouse gas emissions may consist in a request for damages.73 Individuals bringing tort claims against private actors may decide to request damages as a compensatory measure for the negative effects stemming from climate change.74
4
Climate Change Litigation: Crosscutting Matters
The previous section highlighted the challenges facing an individual when it comes to standing, merits (grounds of review) and remedies. We now turn our attention to a number of legal issues that can appear in one or more of the chains of litigation, starting with causation, followed by the presence of
72
There is a good discussion of injunctive relief as a remedy in Sect. 4.3 in the chapter on Norway in the book. 73 Along the lines of the Shell case discussed in more detail in Sect. 4.2 in the chapter on The Netherlands in the book. See also (n42) above. 74 In Canada, the Quebec Charter allows for punitive damages against private actors for human rights breaches. See Sect. 3.2.2 in the chapter on Canada in the book, particularly the section ‘Remedies under the Canadian Charter and the Quebec Charter’.
Ground of review • Breach of international law obligations • Human Rights • Tort Law • Public Trust Doctrine • Breach of other environmental obligations • Human Rights • Tort Law • Judicial Review • Breach of other environmental obligations • Human Rights • Tort Law • Liability • Criminal law grounds • Anti-competitive grounds • Fiduciary duties • Breach of international, national and corporate guidelines
climate science and concluding with the doctrine of separation of powers.
4.1
Causation
One of the key hurdles an individual will face when it comes to a climate change case is the question of causation. Climate change, framed by some as a wicked problem,75 is inherently multipolar and multifaceted with no one clear-cut responsible party. From a litigation perspective, the challenge often lies in being able to trace down which emissions lead to a specific injury. The extent to which this becomes an insurmountable challenge depends on the specific legal culture of each country and the progressive nature of the court’s response to causation.76 Causation can lead to a different set of challenges. Some countries may argue before a court that their share of greenhouse gas emissions is insignificant from a global perspective and that an increase in domestic climate change ambition will not make a tangible difference. This was very much one of the lines of defence of the Dutch government in the Urgenda case. The Court relied on UNFCCC art. 3.1 and on the principle of common but differentiated responsibilities therein to clarify that any level, however small, of emissions will lead to increased climate change and a State has an
75 Climate change has frequently been referred to as a ‘wicked problem’ or a ‘super wicked problem’ due to global nature of its effects and the difficulty of determining specific responsible parties. See Termeer et al. (2013), Davoudi et al. (2009), Jordan (2010). 76 In Chile, for example, both climate change cases against a public body and a private actor failed because of the failure to demonstrate the necessary correlation between the climate change damage and the actions at stake. See Sects. 3.2 and 3.2.2 in the chapter on Chile in the book.
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obligation to mitigate its greenhouse gas emissions accordingly.77 In recent years, plaintiffs have moved beyond seeing causation as necessarily the end of the road for a climate change dispute. From a scientific perspective, numerous reports,78 and the most recent IPCC report in particular,79 prove very strongly the relationship between human activity and climate change. Causation is not an issue when it comes to the anthropogenic nature of climate change. What is still problematic is attributing emissions from a specific source to a specific damage caused by climate change. However, even here things have changed quite considerably. On the one hand, the amount of information related to the share of greenhouse gas emissions per individual company has been studied and backed by hard data.80 Together with progressive approaches towards the effect of cumulative emissions,81 this allows plaintiffs to overcome the causation hurdle in some cases. On the other hand, evidence is being released that companies operating in carbon intensive sectors were well aware of the negative effects from a climate change perspective of their operations,82 akin to what happened in the past in the tobacco sector.83 The extent to which this prior knowledge will be brought before a court of law is yet to be seen, but it could lead to interesting results in relation to causation.
4.2
Science and Climate Change Litigation
To what extent can claimants invoke climate science to strengthen their position? Science can be invoked to back the anthropogenic nature of climate change, but it can also be used to justify a stronger response against climate change. The latter was the case in the Urgenda case where the claimants referred to the IPCC 4th Assessment Report to encourage the Dutch government to take a more ambitious stand when it comes to climate change mitigation.84 The use of climate science, and of the IPCC in particular, to push for stronger domestic targets has been criticised by some,85
arguing that the IPCC Assessment Report was used as if it constituted a legally binding source of international law. The truth is, however, that it is international climate change law itself that requires States to take science into account when interpreting climate law.86 Following the Urgenda case and its nature as a tort law case,87 the content of what amounts to a duty of care for its citizens was interpreted also in reference to existing climate science and the IPCC reports in particular. The KlimaSeniorinnen Schweiz case builds on the Urgenda approach and it has been maintained that “[t]he well below 2 C target is possibly the standard of care required today.”88 In this case, the claimants considered UNFCCC article 2 and its targets as legally binding upon Switzerland.89 The success of using international law within a domestic court depends not only on the predisposition of judges and domestic legal systems, but also on how persuasive the arguments are in relation to the legally binding nature of the provisions within the international climate change legal regime, including the Paris Agreement.90 What is clear is that for those individuals who look at climate science as a means to put pressure on their governments, the 2018 IPCC Special Report on 1.5 will provide further data and will surely feature in cases in the future.91 The Thomson case is one of the examples where climate science was truly at the heart of the dispute. The plaintiff argued that the reason why the New Zealand government had to review its climate change national target was because of the release of a new IPCC report. The latter, she argued, should trigger the revision of climate policy domestically. The Court agreed with the plaintiff, although it did not have to enforce its decision due to the change in government. References to climate science both within the UNFCCC and the Paris Agreement were instrumental in the Court’s decision.92 Another interesting aspect of the Thomson case is the way it relied on expert witnesses. Such procedural practice is likely to become more and more relevant especially if judges do not sit on environmental courts and do not possess the necessary technical expertise.93
77
Urgenda Decision, Para 4.90; see also the chapter on the Netherlands in this book for an in-depth discussion of the Urgenda case and the Urgenda Decision. 78 See for example, IPCC, Fifth Assessment Report (2014); IPCC, Climate Change 2007: Synthesis Report (2007). 79 IPCC—Special Report on Global Warming of 1.5 C (2018a). 80 Griffin (2017). 81 See for example, Heede (2014). 82 Recently uncovered documents show that the oil and gas industry had knowledge of the effects of their industry. See Center for International Environmental Law (CIEL) ‘Smoke and Fumes’; see also Robinson and Robbins (1968). 83 See CIEL’s reporting on the relationship between the tobacco and oil industries and their knowledge regarding health effects at https://www. smokeandfumes.org/smoke/moments/15. 84 See (n77) above.
85
See note 27 in the chapter on The Netherlands in the book. United Nations Framework Convention on Climate Change (UNFCCC); Paris Agreement (n1). 87 Urgenda Decision, Para 2.31; see also (n77) above. 88 See note 21, chapter on Switzerland in the book. For an in-depth discussion of the KimaSeniorinnen Schweiz case, see the chapter on Switzerland in this book. 89 See Sect. 2 in the chapter on Switzerland in the book. 90 Bodansky (2016), Klein (2017) and Rajamani (2016). 91 IPCC (n79) above. 92 For an in-depth discussion of the Thomson case, see Sect. 2.1 in the chapter on New Zealand in the book. 93 Ibid. 86
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4.3
Separation of Powers
Why does an individual take its own government to court? In most cases, it is because the government faces an accusation of having breached an obligation it owes towards its citizens. The latter feel aggrieved and look to the courts for a decision and a remedy. As we have already mentioned before in discussing the Urgenda case,94 climate change litigation can lead to tensions between the government and the judiciary. The former will believe that the courts should not interfere in what are ultimately political questions. Courts will argue that it is their democratic duty to keep the government in check. In other words, we are before a question of separation of powers, dealt with differently by courts in different countries. The Urgenda case was a resounding success for those believing that the doctrine of separation of powers should not prevent the courts from entering into delicate political territory. In the judges’ own words: “The task of providing legal protection from government authorities, such as the State, pre-eminently belong to the domain of a judge.”95 The KlimaSeniorinnen Schweiz case provides a different narrative with the defendant (the State) strongly arguing that it was not for the judiciary to get involved in determining what constitutes adequate environmental legislation.96 The Thomson case in New Zealand was also fought on justiciability grounds. According to the government, an NDC is eminently a political exercise and not one that can be judged by a court of law. The latter did not quash the NDC as it considered that the government had included the considerations required by the plaintiff. However, the Court did undertake a discussion on its role and considered that judges do have a role to play when it comes to climate change policy. Interestingly, the Thomson Court did this by referring to several cases elsewhere, showing a high degree of judicial cross fertilisation.97 Norway is also an example where judges have taken a different approach. The country has passed a progressive piece of legislation according to which the government has to explain how it will achieve its climate change targets in the framework of the annual budget and how the budget will impact on climate change.98 Both obligations cannot be challenged before courts in Norway, leaving individuals with the possibility of recourse through the Parliamentary 94
See Sect. 3.3 above. Urgenda Decision, Para 4.97. See also (n77) above. 96 After the authorities denied the initial request, the Swiss Administrative Court denied the plaintiffs’ appeal and the case is now before the Swiss Supreme Court for consideration. See https://www.greenpeace. org/international/press-release/20343/swiss-seniors-appeal-climatecase-in-federal-supreme-court/. 97 See (n92) above. 98 See Sect. 2 in the chapter on Norway in the book. 95
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Ombudsman.99 Moreover, in a major case brought before the courts trying to annul the Norwegian government’s decision to grant deep-sea extraction licences in the Barents Sea the Court showed a high-level of deference towards the government.100
5
Climate Change Litigation: Challenges Ahead
We now move on to discuss some further challenges that individuals may face if they were to bring climate change cases before courts in countries with little or no climate change litigation. These challenges include lack of access to justice, often for financial reasons; lack of capacity, which can relate to the lack of specialised courts; a legal culture that does not favour litigation; and lack of climate change awareness.
5.1
Access to Justice
A challenge for any individual in any jurisdiction is the possibility to have access to justice. If the costs of litigation are too high, and are not mitigated by suitable legal aid provisions, then access to the judicial system becomes an illusion. Climate change cases can be very costly due to the complex nature of the subject matter. Many countries may see less climate change litigation because of this financial challenge. South Africa is one of these countries.101 Even in a rich country like Norway, there have been debates as to the affordability of climate change cases. In addition, the decision by a court to request the government’s case expenses to be covered by the claimants has been criticised.102 Litigation costs are a problem in the United Kingdom, where cuts and policy changes have made things even more complicated.103 Even in countries where there is an option to file for relief from high court fees and litigation costs, such as Kenya, the process of obtaining such relief can be prohibitively complex and long.104 To overcome this challenge, access to courts should be affordable. However, creative solutions are being explored whereby individuals and groups of individuals are starting to rely on crowdfunding to bear the costs of litigation. The 99
See Sect. 3.2.1 in the chapter on Norway in the book. Ibid. 101 For a discussion on the financial hurdles faced by claimants in South Africa, see Sect. 4 in the chapter on South Africa in the book. 102 See Sect. 3.2.2 in the chapter on Norway in this book for more detail. 103 For a discussion on the costs of litigation in the UK, see Sect. 1.2 in the chapter on the United Kingdom in the book. 104 See Sect. 4.2 in the chapter on Kenya in this book for a discussion of filing as a pauper in Kenyan courts. 100
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extent to which such a strategy is sustainable in the long term is, however, debatable. Another challenge for individuals in accessing the domestic judicial system can be issues related to standing before courts for climate change issues. Qatar is an example of a country where individual private parties lack standing to sue the State over climate change or environmental issues.105 China is an example of a country where there has been progress on broadening standing to NGOs to bring cases to court; however, it is still up to the individual judge to determine whether an NGO has an appropriately worded purpose in order to have access to courts at all.106
5.2
Lack of Capacity (Including Lack of Specialised Courts)
The complex nature of climate change cases together with the relative novelty of the climate change law discipline lead to a further important challenge for individuals interested in bringing a government, a public body or a private actor to court. The challenge lies in the lack of capacity not only of the individuals themselves, but also of the judiciary. South Africa falls into this category.107 Also countries like Norway could benefit from further judicial training on climate change legal matters.108 Training seems the obvious solution to overcome a capacity challenge. While this may be true, lack of capacity is being dealt with by litigation itself. What we mean by this is that judges are learning in the process of hearing climate change cases. Obviously not an ideal solution, it is nevertheless a powerful one and is happening nonetheless, albeit in some countries more than others. Another way of dealing with the lack of capacity of the judiciary is by focusing on traditional legal doctrines that judges will be familiar with. A further way to challenge the fact that some judges and courts may have difficulties in grasping the scientific complexity present in climate change cases is through the establishment of a specialist environmental court.109 Depending on how such courts are financed and resourced, the latter can be more agile and more effective when dealing with climate change cases. However, even in countries where specialised courts have been developed, such as India’s National Green Tribunals, there can still be a lack of capacity in terms of overflowing dockets and high unpredictability of outcomes of individual tribunals and judiciary decisions.110 105
See Sect. 3 in the chapter on Qatar in the book. See Sect. 3.3 in the chapter on China in the book. 107 See (n101) above. 108 See (n102) above. 109 See Sect. 5.1.1 in the chapter on Canada in the book. 110 See Sect. 4 in the chapter on India in the book. 106
In addition to these issues regarding the lack of capacity of the judiciary, political instability can result in a lack of capacity of the legislature to draft and pass appropriate laws and a lack of trust in the judicial system due to a history of corruption. Ukraine is such an example.111
5.3
Legal Culture
By legal culture, we refer to a twofold possibility here. On the one hand, a country may well have a legal system where courts thrive and where tensions are often solved through traditional dispute settlement systems before tribunals. In such instances, the challenge will be the unpreparedness or incompatibility of how law has evolved, often through case law, with the specific challenges that climate change cases present to a legal system. On the other hand, legal culture can mean a historical and sometimes cultural aversion to adversarial dispute settlement systems. Some countries may well favour administrative or negotiated solutions to disputes, and such an approach will impact on the possibility of bringing climate change cases before the courts of such a country. The Russian Federation is an example of this latter approach to legal culture in the context of litigation.112 In other instances, legal culture is driven by the political landscape in a country that makes bringing climate change litigation difficult. In Qatar, for example, the department responsible for climate regulatory enforcement is embedded in the State energy producer, Qatar Petroleum, potentially creating a conflict of interest in enforcement.113 Similarly, in the Czech Republic, the highly influential industrial lobby makes it politically challenging to pass climate change regulation.114 In other examples, a lack of specific legislation, on which claimants could base a challenge to a State’s action or inaction can make bringing litigation against the State problematic or uncertain, such as in China.115 Other uncertainties in legal cultures that can make bringing climate change litigation difficult include uncertainties on enforcement, such as in India,116 and a lack of guidelines for damages’ calculations, such as in Kenya.117
111
See Sect. 4 in the chapter on Ukraine in the book for an in-depth discussion of these issues. 112 See Sect. 4.1 in the chapter on the Russian Federation in the book. 113 See Sect. 4 ‘Effective climate change litigation in Qatar: the way forward’ in the chapter on Qatar in the book. 114 See Sect. 2.2 in the chapter on the Czech Republic in the book. 115 See Sect. 3.1 in the chapter on China in the book. 116 See Sect. 4 in the chapter on India in the book. 117 See Sect. 4.1 in the chapter on Kenya in the book.
Climate Change Litigation and the Individual: An Overview
5.4
Lack of Climate Change Awareness
Where a country’s population is either not fully aware of climate change and how it affects them, or unaware of the State’s role in tackling climate change, climate litigation is unlikely, regardless of other challenges faced by claimants as discussed in this section. Kenya is an example where a survey by the Kenyan government revealed that much of the country’s population that is most vulnerable to the effects of climate change are aware of rising temperatures and increased drought, but do not link these phenomena with climate change or greenhouse gas emissions, not to mention the State’s role.118 Similarly, a lack of awareness of the Paris Agreement and States’ obligations, along with more immediate social society concerns like economic crises or sustained armed conflict serve to perpetuate a lack of climate litigation in some countries. Ukraine is an example of this.119
6
The Promise of Climate Change Litigation
Climate change litigation literature has burgeoned over the past years and one may wonder why the need for yet another book. Two aspects make this book different. On the one hand, the book and the chapters are based on a scenariobased methodology. We have focused our attention on cases brought against the government, the government itself or another public actor, and cases against private actors.120 On the other hand, this book goes beyond the usual suspects in that it does not limit its attention to countries that have experienced climate change litigation. The added value of the book is that it focuses also on countries with little or no climate change litigation,121 hence exploring the reasons for the lack of litigation and discussing strategies towards litigation. While the chapters clearly go into much more detail for each country, this introductory chapter has focused its analysis on issues of standing, grounds and remedies. It has then discussed cross cutting issues present in many jurisdictions 118 See Sect. 4.3 in the chapter on Kenya in the book for an in-depth discussion of this issue. 119 See (n111) above. 120 As outlined in Sect. 2.3 of this chapter, the book discusses three main types of cases: cases where individuals take a government to Court for its actions or omissions regarding greenhouse gas emissions and adaptation to climate change, cases where an individual takes the government or another public authority to Court for authorising an activity that leads to an increase in greenhouse gas emissions, and cases by individuals against private actors (industry) for operations that lead to an increase in greenhouse gas emissions, including pension and investment funds failing to divest from financing activities that cause climate change. 121 See Table 1 for a full list of countries included in the book.
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that make climate change litigation particularly complex such as causation, science and separation of powers. Finally, it has sought to highlight those aspects that still stand in the way of climate change litigation in some countries, such as lack of access to justice, lack of capacity, legal culture and lack of climate change awareness. The analysis in this chapter and throughout the book leads to a number of considerations that deserve to be briefly mentioned as they represent aspects, which future academic research on climate change litigation might explore. Firstly, international courts and tribunals do not have the monopoly in the development and implementation of international law. In this respect, climate change litigation is a laboratory to show and assess how domestic courts can act as vehicles for the promotion of the rule of international law, in general, and for the progressive development of climate change law, in particular. The various chapters have highlighted the exponential potential of climate change litigation and the promise that could come with more efficient climate change litigation strategies. At a time where multilateralism is threatened and where certain states are questioning their obligations to tackle global warming under the Paris Agreement, climate change litigation can help to fill the gap and prompt compliance with international obligations and climate action both by governments and also other stakeholders at the domestic level. Secondly, the IPCC reiterated that countries are not doing enough to contribute meaningfully to the overall Paris Agreement emission reductions122 and highlighted that “[t] ransnational networks that support multilevel climate action are growing, but challenges in their scale-up remain.”123 Transnational networks encompass actions and initiatives that involve a multiplicity of actors from different countries in pursuit of the same objective, i.e. tackling global warming. The various chapters in the present book show that climate change litigation can be seen as one response to the challenges identified above. On the one hand, climate change litigation in some countries, as illustrated by the Urgenda, Thomson or Leghari cases for instance, has the potential of bringing states to adopt more ambitious national pledges on mitigation. On the other hand, climate change litigation brings a multi-stakeholder perspective that would render
122 “Current national pledges on mitigation and adaptation are not enough to stay below the Paris Agreement temperature limits and achieve its adaptation goals. While transitions in energy efficiency, carbon intensity of fuels, electrification and land-use change are underway in various countries, limiting warming to 1.5 C will require a greater scale and pace of change to transform energy, land, urban and industrial systems globally (. . .) Although multiple communities around the world are demonstrating the possibility of implementation consistent with 1.5 C pathways, very few countries, regions, cities, communities or businesses can currently make such a claim.” (IPCC 2018b). 123 Ibid.
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communities,124 regions, cities or businesses more accountable,125 or hopefully more active in the fight against global warming. In fact, even if they do not expressly mentioned so, the chapters show indirectly that climate change litigation has the potential to develop “transnational networks” in support of climate action.126 Linked to the considerations above there is a final point that we wish to make. In order for climate change litigation to play a positive role in the global fight against climate change, it is important to educate different stakeholders in the practice of climate change litigation. Climate education should not be perceived only as making climate science accessible and understandable to children and young people. Climate education should include bringing all policy efforts to improve climate change mitigation and adaptation closer to relevant stakeholders. When it comes to climate change litigation, these stakeholders include civil society, the judiciary and all actors involved in climate change related operations, both in the public and private sector. All of which will hopefully benefit from the book. We wish to conclude this chapter by highlighting once more that the book is not a plea for litigation; it is a book about climate change litigation. By educating as many stakeholders as possible in as many countries of the world by going beyond the usual suspects, climate change litigation can play a positive role in the global fight against climate change.
References Literature Banda M, Fulton C (2017) Litigating climate change in national courts: recent trends and developments in global climate law. Environ Law Rep 47(2):10121–10134 Bodansky D (2016) The legal character of the Paris Agreement. Rev Eur Comp Int Environ Law 25(2):142–150 Bouwer K (2018) The unsexy future of climate change litigation. J Environ Law 30(3):483–506 Burns W, Osofsky H (2009) Adjudicating climate change: state, national and international approaches. Cambridge University Press, Cambridge Carnwath L (2016) Climate change adjudication after paris: a reflection. J Environ Law 28(1):5–9
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See for instance, Sect. 2 in the chapter on Switzerland in this book. See for instance, Sect. 3.5 in the chapter on Colombia in this book. 126 The phenomenon of emulation that derives from climate change litigation reveals its transnational character. For instance, attempts such as “The Case of the Century” in France are largely influenced by litigation actions that took place in The Netherlands and before that in the United States with the case labelled the “Climate Case of the Century”. For further information on the cases mentioned above see Singer (2018) and Pochon (2019). 125
F. Sindico et al. Cox R (2016) A climate change litigation precedent: Urgenda Foundation v the State of the Netherlands. J Energy Nat Resour Law 34 (2):143–163 Davoudi S, Crawford J, Mehmood A (2009) Planning for climate change: strategies for mitigation and adaptation for spatial planners. Earthscan, London Faure M, Peeters M (eds) (2011) Climate change liability. Edward Elgar, Cheltenham Heede R (2014) Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010. Clim Change 122(1–2):229–241 Jordan A et al (2010) Climate change policy in the European Union: confronting the dilemmas of mitigation and adaptation? Cambridge University Press, Cambridge Klein D et al (eds) (2017) The Paris Agreement on climate change analysis and commentary. Oxford University Press, Oxford Lin J (2012) Climate change and the courts. Legal Stud 32(1):35–57 Lord R, Goldberg S et al (2011) Climate change liability: transnational law and practice. Cambridge University Press, Cambridge McCormick S et al (2017) Science in litigation, the third branch of U.S. climate policy. Science 357(6355):979–980 Mehling M (2017) A new direction for US climate policy: assessing the first 100 days of Donald Trump’s Presidency. Carbon Clim Law Rev 11(1):3–25 Moncel R, van-Asselt H (2012) All hands on Deck! mobilizing climate change action beyond the UNFCCC. Rev Eur Commun Int Environ Law 21(3):163–176 Peel J (2017) Climate change litigation: lessons and pathways. Judicial Comm 29(11):99–104 Peel J, Osofsky H (2018) A rights turn in climate change litigation. Transnl Environ Law 7(1):37–67 Rajamani L (2016) The 2015 Paris Agreement: interplay between hard, soft and non-obligations. J Environ Law 28(2):337–358 Rajamani L, Brunnée J (2017) The legality of downgrading nationally determined contributions under the Paris Agreement: lessons from the US disengagement. J Environ Law 29(3):537–551 Robinson E, Robbins RC (1968) Sources, Abundance, and Fate of Gaseous Atmospheric Pollutants. Final Report and Supplement. Available at https://www.osti.gov/biblio/6852325. Accessed 26 July 2019 Savaresi A, Auz J (2019) Climate change litigation and human rights: pushing the boundaries. Clim Change Law 9:244–262 Shaw M (2008) International law, 6th edn. Cambridge University Press, Cambridge Termeer C, Dewulf A, Breeman G (2013) Governance of wicked climate adaptation problems. In: Knieling J, Filho W (eds) Climate change governance. Springer, Berlin Wilensky M (2015) Climate change in the courts: an assessment of nonU.S. climate litigation. Duke Environ Law Policy Forum 26(1):131– 179
Treaties, Conventions and Other International References IPCC (2007) Climate Change 2007: Synthesis Report. Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. https://www.ipcc.ch/ report/ar4/syr. Accessed 2 July 2019 IPCC (2014) Fifth Assessment Report, Climate Change 2014: Synthesis Report. https://www.ipcc.ch/pdf/assessment-report/ar5/syr/SYR_ AR5_FINAL_full_wcover.pdf. Accessed 7 June 2019 IPCC (2018a) Special Report on Global Warming of 1.5 C: Summary for Policymakers. https://www.documentcloud.org/documents/
Climate Change Litigation and the Individual: An Overview 4556564-Summary-for-Policy-Makers.html#document/p1. Accessed 12 July 2018 IPCC (2018b) Special Report on Global Warming of 1.5 C: Chapter 4 – Strengthening and Implementing the Global Response. https://www. ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_Chapter4_Low_ Res.pdf. Accessed 6 Sept 2019 OECD Guidelines for Multinational Enterprises. http://www.oecd.org/ corporate/mne/. Accessed 9 July 2019 Paris Agreement under the United Nations Framework Convention on Climate Change (2015) Entered into Force 4 Nov. 2016 UNEP (2017a) The Status of Climate Change Litigation, a Global Review. http://columbiaclimatelaw.com/files/2017/05/BurgerGundlach-2017-05-UN-Envt-CC-Litigation.pdf. Accessed 3 July 2019 UNEP (2018) Emissions Gap Report. http://wedocs.unep.org/bitstream/ handle/20.500.11822/26895/EGR2018_FullReport_EN.pdf? sequence=1&isAllowed=y. Accessed 3 July 2019 UNEP (2017b) The Status of Climate Change Litigation: A Global Review. https://www.unenvironment.org/resources/publication/sta tus-climate-change-litigation-global-review. Accessed 12 Mar 2018 United Nations Framework Convention on Climate Change (1992) 1771 U.N.T.S. 107, 31 I.L.M. 849. Entered into Force 21 Mar. 1994 UNFCCC (2015) Decision 1/CP.21. Adoption of the Paris Agreement. FCCC/CP/2015/10/Add.1 World Commission on Environment and Development (1987) Our Common Future. UN Doc A/42/427 Annex 1 World Health Organization, ‘Climate Change and Health’. https://www. who.int/news-room/fact-sheets/detail/climate-change-and-health. Accessed 7 May 2019
Case Law and Legislative Resources A. et al. v. Linthwerk, FSC 1C_148/2008 (Switzerland) Church of Scientology v Woodward (1982) 154 CLR 25, 70 (Brennan J) (USA) Islands Trust Act. RSBC 1996, c. 239 (United Kingdom)
691 Leghari v. Federation of Pakistan (2015). http://wordpress2.ei.colum bia.edu/climate-change-litigation/non-us-case/ashgar-leghari-v-fed eration-of-pakistan. (Pakistan) Urgenda Foundation v. Kingdom of the Netherlands (2015). http:// wordpress2.ei.columbia.edu/climate-change-litigation/non-us-case/ urgenda-foundation-v-kingdom-of-the-netherlands/. (The Netherlands)
Online Resources Australian Law Reform Committee. https://www.alrc.gov.au/ publications/common-law-principle-11. Accessed 14 July 2019 Center for International Environmental Law (CIEL) ‘Smoke and Fumes’ reporting at https://www.smokeandfumes.org/documents/16. Accessed 23 July 2019 Griffin P (2017) The Carbon Majors Database: CDP Carbon Majors Report 2017. Carbon Disclosure Project. https:// 6fefcbb86e61af1b2fc4-c70d8ead6ced550b4d987d7c03fcdd1d.ssl. cf3.rackcdn.com/cms/reports/documents/000/002/327/original/Car bon-Majors-Report-2017.pdf?1501833772. Accessed 20 July 2019 London School of Economics Database on Climate Laws. http://www. lse.ac.uk/GranthamInstitute/climate-change-laws-of-the-world. Accessed 15 July 2019 Pochon M (2019) Two million signatures in support of French climate litigation ‘Case of the Century’. Notre Affaire A Tous. https:// notreaffaireatous.org/press-release-two-million-signatures-in-sup port-of-french-climate-litigation-case-of-the-century. Accessed 8 Sept 2019 Sabin Centre for Climate Change Law at Columbia University in collaboration with Arnold & Porter, LLP. http://wordpress2.ei.colum bia.edu/climate-change-litigation. Accessed 15 July 2019 Singer P (2018) ‘Trial of the century’ as American group asks court to rule on US climate inaction. Shanghai Daily. https://archive.shine. cn/opinion/foreign-perspectives/Trial-of-the-century-as-Americangroup-asks-court-to-rule-on-US-climate-inaction/shdaily.shtml. Accessed 8 Sept 2019 United Nations Interregional Crime and Justice Research Institute. http://www.unicri.it/topics/environmental. Accessed 22 July 2019
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types of Solidarity in the Context of an Aging Society Eri Kasagi
Abstract
This work will examine the issue, which is both universal and topical, of solidarity between generations, focusing on forms of financial and material mutual support within family, as well as collective redistribution, realized by state social security systems. In contemporary demographic, social and economic contexts, we are facing new legal questions, as well as rediscovering and reexamining classic issues, in the field of pension law, family law, social law. Ultimately, through these separate legal questions, the respective roles of State (public) solidarity and family (private) solidarity need to be reconsidered and reconfigured. Comparative and comprehensive analyses of the way that different countries answer these contemporary questions about solidarity between generations in civil, social and public law give us some clues to tackle this complex and challenging issue.
1
Introduction: Issues and Context
1.1
‘Solidarity Across Generations’ from the Perspective of Social and Family Law
This contribution deals with the issue of ‘solidarity across generations’ from a comparative legal perspective, based on the national reports of 16 countries in different regions of the We would like to thank Julie Zambau, research engineer at CNRS and director of documentation centre of COMPTRASEC, as well as Tomoyo Sato, undergraduate student of Sophia University, for their precious help in the realization of this work. This General Report will be also published, together with the National Reports from each jurisdiction, by Springer Nature Switzerland in a thematic volume. E. Kasagi (*) CNRS, Centre for Comparative Labour and Social Security Law (COMPTRASEC UMR5114), University of Bordeaux, Bordeaux, France e-mail: [email protected]
world.1 This extremely topical subject2 covers many of the issues and different disciplines of law, in the fields of both public and private law, as well as other fields of social science. Among these various topics, we will study solidarity across different generations in the form of mutual financial and material support or responsibility within families, as well as in the form of collective redistribution carried out by the state. This report will therefore deal primarily with issues concerning state pension systems, family support duties towards elderly people in need, as well as formal and informal long term care of elderly people, from the perspective of social and civil (family) law. As a result, we will not deal with other questions, specifically environmental ones, which could also be discussed in relation to the issue of ‘solidarity across generations’.
1 (In alphabetical order) Belgium, Brazil, Cameroon (Virginie Yanpelda), China, Czech Republic(Ondřej Horák, Jana Boulaouad), Finland, France, Germany, Greece(Helen Rethymiotaki), Hungary, Italy, Japan, Singapore, South Africa, Spain(Gabriel García Cantero), United Kingdom “England and Wales”. Among the authors of these national reports, 12 authors participate to Kasagi (2020b) (Above indicated are the names of authors who don’t contribute to this volume but had edited national reports for the general congress). To edit this contribution, we have examined all the national reports of above mentioned 16 countries as well as the chapters of the above mentionned volume which had been updated or newly edited (in the case of Spanish law) after the congress. We will try to distinguish these references in mentioning ‘national report’ when we would like to refer to the reports which had been edited at the occasion of congress, and ‘chapter’ when we would like to refer to the updated or newly edited version for Kasagi (2020b). We try to refer to the latter when it is possible. We have also added several elements by ourselves, in that case in directly indicating their sources. 2 The issues which will be treated in this report are relevant primarily for developed welfare states with an aging population. The issues of environmental law are theoretically important in both developing and developed countries, though the debates on these issues are more or less active in different countries.
# The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 K. Boele-Woelki et al. (eds.), General Reports of the XXth General Congress of the International Academy of Comparative Law - Rapports généraux du XXème Congrès général de l’Académie internationale de droit comparé, Ius Comparatum - Global Studies in Comparative Law 50, https://doi.org/10.1007/978-3-030-48675-4_26
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1.2
E. Kasagi
Definitions of “Generation” and Different Types of “Solidarity”
There are two key concepts in the topic of our discussion, which can have various meanings and which therefore need to be clearly defined before we begin discussing specific issues. Firstly, we are, of course, aware that ‘solidarity’ is a polysemous term widely discussed from many perspectives, especially in the field of sociology and, historically, in the French academic and political context.3 In this report, we use a simple and broad definition of ‘solidarity’, already mentioned above: ‘mutual financial and material support or responsibility between individuals as well as in the form of collective redistribution carried out by the state.’ We will not be exploring in detail the concept of solidarity itself. Within this large definition, two types of solidarity should be distinguished: private solidarity and public solidarity.4 Private solidarity will be defined as solidarity at work within the family—family solidarity.5 On the whole, private solidarity primarily develops spontaneously, without state intervention. However, it can be made partly mandatory by legal provisions in a form of ‘support duty,’ as we will see later in Sect. 3. Public solidarity will be defined as collective solidarity with state (or local government) intervention, which is organized, and often required by law, for the entire population of the country, as well as a part of the population (workers, persons in need, etc.), sometimes at the regional level. Some scholars use similar concepts, such as ‘social solidarity (solidarité sociale)’6 or ‘collective solidarity (solidarité collective).’7 The typical example of public solidarity is national pension systems, which will be one of our main topics. The other concept which needs to be defined is ‘generation’. Here again we try to define generation in a broad and flexible way as “groups of persons which are distinguished or identified by the year of birth.” The exact definition of generation and how different generations are divided can vary according to context. We also speak of the ‘present generation,’ which includes all existing persons, as opposed to the ‘future generation,’ which concerns those who are not born. The difficulty of the issue of solidarity across generations, as we have defined it, is the fact that the legal questions treated as well as perspectives on this issue in different 3 About Durkheim’s theory of ‘social solidarity,’ see Durkheim (1893). See also Bourgeois (1926), Spiot (2015), Paugam (2011). 4 Boissard (2014). 5 Without going into too much detail, there is some controversy about the political usage of this concept, particularly in France and the French academic community. See Minonzio (2004), p. 8. 6 Lenoir (2011), p. 169. Vigneau (1999), pp. 51–81. 7 Maisonnasse (2016), Minonzio (2004), pp. 7–19.
countries can differ dramatically according to the demographic, economic and political contexts. This is why we will first briefly describe the different contexts in which this issue is dealt with and debated in different countries, and then proceed to focus on issues of social and civil law in the following three sections.
1.3
Different Issues in Different Demographic and Economic Contexts
When considering solidarity across generations, the issues which are actively debated differ largely depending on demographic and economic contexts. Of the 16 countries included in this report, the majority are experiencing a trend of aging and waning populations—although of varying degrees and over different time spans—which present (or could potentially present) issues and conflicts concerning solidarity across generations. In these countries, the burden of supporting the older generation has become increasingly heavy on younger generations, whether in terms of contributions to the states’ redistribution and social benefit schemes, or in terms of care support for the elderly members within a family. Cameroon is almost the only country where the demographic situation does not raise this kind of question,8 and, in fact, the issues of younger generations are a priority in public debates and social policies without causing conflicts with the older generations. The economic situation can also greatly affect the issues concerning solidarity between different generations. In almost all 16 countries, we can observe a deterioration of (at least) a part of the population’s financial situation, especially after the world’s financial crisis of 2007, because of economic stagnation. The financial crisis brought about a policy of austerity in many countries, especially in Europe, which led to the reduction of some social benefits, which then further aggravated the situation of these populations. In this context, a growing interest in the role of family as a safety net can be seen in a lot of countries. Family solidarity across generations can be imagined in two directions. Firstly, young adults, who often have more financial difficulties at the beginning of their professional careers, are supported by their parents, who own their place of residence and possibly also have a stable income from pension schemes. Secondly, adult children, when they have a more stable situation, financially support their elderly parents who have few resources and who sometimes need to pay for health care or long term care services (see below).
8 The fertility rate in Cameroon is still around 4.63 in 2015, although it has decreased from 6 in 1976. The younger generation (0–24 years old) makes up more than 60% of the nation’s population.
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
1.4
Developed Welfare States or Countries with Limited Social Expenditure
The issues concerning solidarity across generations can be very different from one country to another depending on the national Social Security systems they have developed. In other words, these issues are discussed very differently in well-established welfare states—which constitute the majority of the countries examined in this report—and in countries with limited social expenditure. The latter category can be divided again into two groups, though this distinction is by no means rigid: developing countries that are currently developing social security systems in the wake of their economic development (China, Cameroon) on the one hand, and countries that clearly promote a liberal ideology by keeping social expenditure and redistribution relatively small (South Africa, Singapore). For developed welfare states, the previously mentioned issue of the heavy burden on the younger generation is especially controversial for social security systems, notably pay-as-you-go pension systems, which require significant contributions or taxes from younger generations. Social security systems set up in these countries often guarantee elderly people a comfortable income, even compared to that of the younger working generation. This fact—a success, in a sense, of the welfare state—could create serious concerns/doubts for the younger generation about the legitimacy and fairness of existing social institutions, especially in a context where this younger generation is not sure they will enjoy the same living standards and economic security when they are older. Furthermore, the classic categorization of elderly people as vulnerable is not necessarily accurate in this context. The inversion of the economic positions of younger and older generations is even more striking when we consider the fact that older people are not always physically vulnerable at retirement age, thanks to the overall improvement of the population’s physical health, as well as significantly less arduous working conditions for the contemporary worker. In countries which favour a liberal ideology, the burden of collective solidarity on the younger generation is marginal, especially as these countries do not have a pay-as-you-go pension system. Therefore, the other issues, as the employment of the elderly population, or the need for long-term care (LTC), which we will discuss in the following paragraph, seem to draw more attentions in these countries.9
9
See the chapter about Singapore in Kasagi (2020b).
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Appearance of a New Problem: Long Term Care (LTC)
Today, almost all those countries with an aging population are facing a new challenge—a growing need for long-term care (henceforth LTC). LTC was, and still is to some extent, invisible because of the presence of informal care, often supplied by female family members. The increasing number of elderly people who are in need of long-term care combined with the increase of female workers has made this problem much more visible and calls for a solution. This newly revealed problem raises the question of its nature: in other words, do we consider LTC a private matter, or a public one? Certain countries consider LTC to be at least partly a public matter, and introduce state or local initiatives to provide care services or financial aid to elderly people in need of LTC. At the same time, the importance of informal and family carers has never disappeared, even in the countries where state intervention exists. Compensation or support for these informal carers therefore remains an important issue in a lot of countries.
1.6
Three Main Topics of Discussion
This is the complex and rapidly changing context in which the issues examined in this report are debated. We will attempt to cover the various issues and the different countries’ contexts by examining three main topics concerning solidarity across generations from the perspective of comparative law. Firstly, we will deal with public solidarity, which is actually achieved by mandatory state pension systems. We will also tackle the question of reconciling the interests of the younger and older generations, specifically by analyzing the possibility for the legislative branch to cut existing pension benefits (Sect. 2). Both the second and third topics concern the role of private (family) solidarity and the relationship between private (family) solidarity and public solidarity. Specifically, one will focus on family duties in civil law to support the needs of elderly family members, as well as the relationship between these civil law duties and social welfare schemes (Sect. 3). The third question concerns the respective roles of public and family support for elderly people who need long term care (LTC). This section will examine public intervention for LTC, as well as the legal measures taken to encourage, support and compensate informal care provided by family members (Sect. 4).
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Solidarity in Pension Systems
In contemporary welfare states, social security systems can play a role of redistribution across generations, normally towards vulnerable generations—the elderly and very young (children). This redistribution takes the shape of pensions, health care and various benefits which are allocated to the elderly or to children. Among these systems of intergenerational and public solidarity organized and enforced by the state, pension systems are central to the national social policy of many countries because of their importance to elderly people, as well as for the large part of contributions and public spending they represent. This section will analyze solidarity across generations operating within state pension systems.
2.1
Different Types of Pensions
Pension systems can be divided into several types according to different criteria, such as the category (or categories) of people eligible for the system (all residents of the country, employee, self-employed, public servant, general worker, etc.), rule of affiliation (obligatory or voluntary), level of contributions and benefits (universal or proportional to income), administrator (government, social partners, public or private fund), and so on. In terms of ‘solidarity across generations,’ one criterion is extremely meaningful, much more so than the others listed above. Indeed, pension systems can be divided into two groups according to the financial scheme that these systems use to guarantee the pension benefit: tax-financed pensions or contributive pensions. Contributive pensions can again be divided into two groups. The first is what is called ‘pay-asyou-go’, where pension benefits for the older generation are financed directly by the contributions of the younger, active generation. The second group, pre-funded pensions, sees the individual (and sometimes his employer) contribute to his pension continuously as he works, which he then receives some years later, based on what he himself (or his employer) has provided to his account. Many countries combine these three financial schemes, in order to either separate different levels of pension (e.g., minimum and tax-based pension, basic pay-as-you-go pension, complementary pre-funded pension10), or to provide complementary financing within a same pension system (e.g., introducing tax revenue to a primarily contributive pension system, or providing a certain amount of funding to a primarily pay-as-you-go pension system, etc.). 10 Within the European Union, this three-layer model is considered somewhat standard, even though there are some exceptions, such as the French pension system. See Del-Sol (2014), p. 627.
Among these different financial schemes, the pay-as-yougo scheme probably best illustrates the idea of solidarity across generations,11 as it means the working generation makes direct contributions in order to immediately finance the older generation’s pension benefits. At first glance, this so-called intergenerational ‘solidarity’ seems to be a one-way contribution from the younger generation to the older, as the working age population receives nothing from the retired population. There is therefore no mutual help between these two generations. However, this system of contribution legally and technically provides a right to a pension benefit for those who contribute once they reach retirement age. And in reality, the working-age population’s future pension will be financed by the next generation—the future working-age population. The pay-as-you-go pension scheme thus creates a series of virtual mutual contributions between several—at least three—generations, thanks to the contribution of the working age population, as well as a legal and theoretical right to a future pension.12 Inversely, the pre-funded pension scheme excludes the idea of solidarity across generations, as it separates each contributing person’s individual pension account. Therefore, in the countries which use a pre-funded financial scheme exclusively, the pension systems do not foster solidarity across different generations as we define in this contribution.13 The tax financed pension systems, on the other hand, provide a certain level of solidarity across generations, as taxes are usually payed by the working population. However, the level, as well as the actual content, of this solidarity differs greatly according to the types of taxes which are used to finance the pension benefit. For example, the older generation itself contributes to the pension when the benefits are financed by a tax, such as consumer tax. Whereas with income tax, the contribution made by the older generation is obviously much less significant. It should also be noted, even though this point will not be examined in this report, that pay-as-you-go pension systems, as well as those financed by tax, very often allow income redistribution between people of a same generation who are contributing to these schemes, in addition to creating solidarity across generations.
11 The French ‘Code de la sécurité sociale’ has been changed recently to declare that the pay-as-you-go pension schemes is at the center of the social pact which unites generations and the goal of this pay-as-you-go system is to create solidarity across generations (Code de la Sécurité Sociale, L. 112-2-1). See Camaji in Kasagi (2020b). 12 Kasagi (2020a). 13 We can mention Singapore and South Africa as examples of countries that have this kind of pension system. See Chungu and Kalula in Kasagi (2020b) about the solidarity which can nevertheless be identified in the pre-funded pension schemes.
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
2.2
Old Age Pension or Retirement Pension?
Another important criterion in terms of ‘solidarity between generation’ is the relationship between pension and retirement. In most countries,14 one of the conditions of eligibility for pension benefits is to have reached a certain age; we speak of ‘pensionable age.’ Furthermore, some countries require people to retire from work before receiving their pension benefit, while other countries do not. This means we make a distinction in theory between retirement pension (pension for those who are a certain age and have also retired from work) and old age pension (pension for those who are simply a certain age). In the past, these two statuses (retirement and old age) were almost synonymous, as people were generally no longer able to work past a certain age. In today’s society, the meaning of ‘old age’ has changed and to have a certain age does not automatically mean that someone is unable to work, as it is more and more frequent for people to work longer, and the distinction between the two has become relevant. We can analyze this point by asking if it is possible to receive pension benefits as of a certain age, without retiring from work. The answer to this question differs greatly according to the country. In certain countries, it is possible for a worker to receive full pension benefits and continue to work with no time limit.15 In this case, someone can theoretically be both a pensioner and a full time worker, thus contributing to the pension system and working at the same time.16 The pension benefit then covers the risk of ‘old age,’17 regardless of the income of the person who receives it. 14
Brazil is one of the rare exceptions. See note 17. Italy (reform of 2009), Brazil, Czech Republic, England and Wales, South Africa. In Japan, tax based universal and basic pension benefits have no restrictions on combining pension benefits and work. For the old age employee’s pension insurance, however, there is a certain restriction as we will see later. In the South African pre-funded pension system, it seems somewhat logical that whether a person who can receive pension benefits continues to work or not stays a private matter. 16 It should be noted that in this case (and in the case that the pensioner can work and contribute to the pension system under certain restriction, as we will see later) there is the possibility of revising their pension benefits by taking into consideration the contributions made after liquidation must be considered (that is, whether the pension benefit will be increased once the pensioner stops working). In Brazil, according a recent decision of the Supreme Court (in 2016), once pension benefits are liquidated, the worker cannot waive this pension and claim a new, revised pension, which means the amount cannot be revised (increased) even if the pensioner continues to work and contribute to the pension system. The pensioner contributes to the pension system without any personal return by contributing to the pension system as a whole. 17 One exception is the Brazilian system, which allows those who have contributed for a certain period of time (35 years for men and 30 years for women) to receive pension benefits, irrespective of the retiree’s age. The pensioner can continue working after the liquidation of their pension benefits. Pension benefits are therefore neither defined as ‘retirement pension,’ nor exactly as ‘old age pension’ (at least in today’s 15
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In certain countries, there are restrictions to combining pension benefits and salaries, even after one reaches retirement age. In Japan, when a pensioner works and receives a given amount of money, his pension benefit can be reduced.18 As explained in detail in the Japanese national report, this adjustment of the pension benefit is controversial. On the one hand, this reduction is justified by the fact that, as we have discussed above, people who have a stable and suitable income have no need for pension benefits no matter what their age. On the other hand, this mechanism discourages older people from working, when the goal is to encourage their employment. Furthermore, the idea of reducing benefits for those who have income is similar to that of the means test, in the sense that the benefits are provided only when there is a real need, and a social security (social insurance) system is normally and theoretically meant to avoid this situation, as benefits are based on contributions. Finally, some countries19 do not allow people to work while receiving a pension. In these countries, pension benefits can be considered to be strictly a retirement pensions,20 which thus cover loss of income related to the old age, and not ‘old age’ itself.
2.3
Crisis of the Pension System: How Can Pensioner’s Rights be Protected? How Can the Interests of Different Generations be Reconciled?
2.3.1 Context An aging population affects pension systems very differently, depending on their financial scheme. While pre-funded pension systems are not affected by demographics, pay-as-yougo pension systems need stable demographic growth to maintain financial balance, as well as keep a pre-established pension fund. As previously explained, this scheme is based on the promise of a future pension to the active and contributing generation, and this promise can only be fulfilled by the existence of a future active and contributing generation. These pay-as-you-go pension systems are faced with a difficult challenge in this new society of aging and low birthrates, for a simple and obvious reason: there will be fewer and fewer people to contribute to the system, while the number those who receive benefits from it will increase rapidly. In countries where pension systems are already well developed and long-established, the problem is even more serious because the burden on the active generation is much heavier. context), as one can start receiving pension benefits in one’s 40s. See Shimamura (2015). 18 See Ohta in the Kasagi (2020b) for details. 19 Cameroon, Greece. 20 The Japanese pension system once required ‘retirement from work’ as one of the conditions for eligibility to benefits. See Shimamura (2015).
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What is more, the economic context of growing unemployment and negative GDP growth, which we already mentioned in the introduction, means diminishing revenues for welfare programs, including the pension systems. In particular, austerity measures implemented in European countries after the financial crisis often targeted spending on pensions, which represents a large proportion of government outlays.21 Furthermore, due to this economic context, political tensions concerning pension systems are growing. As young adults in many countries find it increasingly difficult to enter the job market, the heavy burden of supporting the older generation’s fairly generous pension benefits can cause a feeling of injustice to fester. Not only is their burden heavier than the previous generation’s, but they cannot necessarily expect that they will be any better off when they are old. It is within this demographic, economic and political context that many countries with pay-as-you-go pension systems have tried to, or are trying to, cut pension benefits. Before going into a detailed discussion on this topic, it is worth pointing out that there are several ways of reducing pension benefits: raising the pension age, extending the minimum contribution period, limiting the price or wage indexation of benefits (thus giving rise to the reduction of the real value of benefits), imposing social contributions or taxes on pension benefits, reducing the value of points when the amount of pension benefit is calculated by multiplying the number of acquired points by the value of a point, etc. While each country chooses one or several options according to different aspects of their pension system (financial or demographic situation, existing conditions of pension benefit, etc.), these different ways of reducing pension benefit may have different effects and consequences beside simply cutting pension spending. Thus, for example, the first and second cited options above effect only the pension benefits of those who have not yet started receiving them. The second option (extension of the minimum contribution period) will increase the population having zero pension benefits and most likely depending on social assistance in their old age. The third option (limiting the automatic indexation of benefits), the fourth (imposing tax or social contribution on pension benefits) and the fifth (reducing the value of points) have the specificity of being able to reduce, in theory, not only future pension benefits, but the pension benefits of those who have already liquidated their pension benefits.
2.3.2
Reducing Benefits in Pay-As-You-Go Pension Systems What is most interesting here is whether the cuts to payas-you-go pension benefits22 are limited. Since all of the 21
The following 2013 OECD report indicates this is a general trend of OECD countries. See the ‘editorial’ of the report “Pension at a glance 2013 OECD and G20 indicators”, http://www.oecd.org/pensions/ pensionsataglance.htm. 22 As pension cuts are not a crucial question in pre-funded pension systems, we will discuss pay-as-you-go pension systems only. However,
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above-mentioned changes used to cut pension benefits can be carried out by legislation in almost every country examined in this report, the question is what limitations—legally binding, and therefore effective, or not—to this legislative power exist: supranational regulations, national constitutions, national legislations, political obstacles, etc. In several countries, constitutional rights, or principles written into their constitutions, are considered to limit the lawmaker’s ability to cut pension benefits by legal reform.23 Firstly, in some countries, judges have deemed the entitlement to a future pension equivalent to property right, and therefore protected by constitutional24 or supra-national norms.25 In Finland,26 for example, this protection is based on the idea that the right to a pension is earned while working, which means that pension benefits are earned income even though they are paid later. They are considered to be a part of a worker’s compensation,27 thus benefit from constitutional protection as a property right.28 Protection as a property right is often related to the fact that the right to a pension is obtained on the basis of contribution. Thus, in Finland, the protection in question is recognized only for the contributive pension scheme and not for the national minimum pension given to those who do not have the right to the contributive pension. In Germany, the importance of contribution in terms of constitutional protection of pension rights is more controversial.29 However, the decision of the Federal Constitutional Court is that a protection of ‘legitimate
we can quickly think on this question for pre-funded pension systems. In pre-funded pension systems, one acquires pension benefits by contributing and accumulating premiums. The individual pension account being separate, it is logical that pension benefits cannot be easily reduced once they are acquired (In South Africa, as explained in national report, pension benefits are considered to be intangible by legal provisions). 23 This can be partly rephrased as a question of the judges’ ability to control lawmakers’ discretion concerning social rights through constitutional and fundamental rights or principles of constitutional value. This question is treated in the following article, which examines the decisions of some European countries in the context of the financial crisis: Roman (2014). 24 Finland, Germany. In Japan, though there is no judicial decision on this topic, certain legal scholars support the protection of entitlement to pension benefit as a property. 25 See Civ.2è 17 avril 2008, n 07-12144 which refers to the Art 1 of the Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms (the decision considers that the decrease of a point value in complementary pension does not represent an unjustified infringement of this article). 26 According Finish national report. 27 PeVL 9/1999 vp, s. 2/I, PeVL 60/2002 vp, s. 2/I. 28 Section 15 of the Finnish Constitution. 29 See the chapter Kasagi (2020b) for details. As the article shows, the equal treatment principle can also affect the legitimacy of pension reforms.
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
expectation’30 is necessary and would ensure that individuals receive a pension that is fair in relation to their contribution. We can observe that in those countries which adopted (at least partly) a pay-as-you-go system, contribution and benefits are considered to be strongly related, despite, as mentioned above, this relation remaining more or less abstract in this financial scheme. Concerning the protection of pension rights, the distinction between different stages of pension (during the contribution period, after pensionable age, and after liquidation, etc.) could also affect the possibility and degree of protection,31 although this point was not often discussed in the national reports. It would be interesting to look at this matter in more depth, from a comparative perspective, in relation to the theoretical basis of the protection of pensions rights as a property right. Secondly, some countries have specific social rights written into their constitution, whereby any legislation covering pension cuts can be controlled by judges, thus providing another limitation other than property rights protection. We would like to mention the case of Belgium in particular. The art. 23 of their constitution describes a right to social security benefits.32 While it is accepted that the benefits acquired through this right change according to time, social change and the financial means of the government, this article is interpreted as a ‘standstill’ obligation for lawmakers. A ‘standstill’ obligation means an obligation to keep social benefits at their status quo, especially those which existed at the time this article was implemented (1994). Unlike the previously discussed protection as a property right, the protection provided by the standstill obligation is not related to the contributive nature of the social benefits in question. Standstill obligation does not imply, however, an obligation to preserve social benefits. Small reductions, as well as modifications of practical aspects of benefits, are possible. Also, the reduction of one benefit can be compensated by other measures. In Italy, the constitution has two articles concerning workers’ social rights, which also describes the right to pension benefits.33 According to a recent Constitutional Court ruling,34 the discretionary power of the lawmaker to Though we cannot explore this in detail, the protection of the ‘expectation’ of pension rights might and should be distinguished from the protection of pension rights. The principle of legal security can be discussed in relation to this point, as Camaji in Kasagi (2020b) examines in detail. 31 This question is discussed in Camaji and Ota in Kasagi (2020b). 32 Art. 23 of the Belgian Constitution. The article guarantees, first of all, a right to have a standard of life respecting human dignity (para.1), which should be specified by economic, social and cultural rights through laws and administrative rules (para.2), including a right to work, a right to social security, a right to protection of health, a right to decent accommodation, etc. (para.3). 33 Art. 36(1), as well as Art. 38(2). 34 Judgement no. 70 of 2015 on April 30, 2015. 30
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modify pension income of individuals must meet the constitutional limit of the rationality and proportionality principles, derived from these two articles.35 In a court decision in 2015, a reform which stopped automatic adjustment for those who receive a pension exceeding a certain amount36 was considered to be unconstitutional.37 In other countries, the various descriptions of social rights or, more broadly, welfare state principles in their constitution have been referred to in order to limit the discretionary power of lawmakers. In Greece, the reaction to financial crisis led to an attempt to cut pension benefits in 2012. These cuts were judged to be against primary constitutional rights and principles, such as: the ‘obligation of the State to respect and protect the value of human beings’;38 ‘contribution by citizens without distinction to public charges in proportion to their means’;39 ‘rights of human beings. . . . and the principle of welfare state rule of law. . . .’40 and ‘the duty of citizens to social and national solidarity.’41 particularly because there was no sufficient justification to go through with them. What these countries have in common in terms of constitutional protection for pension benefits is that they do not guarantee the inviolability of pension benefits even when they are liquidated, as we have already briefly discussed with the Belgian ‘standstill’ obligation. On the contrary, the general tendency of the judges in almost all the countries that we examined is to allow the lawmakers a great deal of leeway when it comes to legislation on social rights, including pension rights. In these countries (Greece, Belgium,42 Italy,43 Germany, France), the decision to cut pension benefits can be justified by the economy, the national budget, the financial sustainability of the pension system, extraordinary circumstances, etc., as long as the pension cut is proportional 35
Art. 36, para. 1 (Workers have the right to a remuneration commensurate to the quantity and quality of their work and in any case such as to ensure them and their families a free and dignified existence) and Art. 38 para. 2 (Workers have the right to be assured adequate means for their needs and necessities in the case of accidents, illness, disability, old age and involuntary unemployment) of the Italian Constitution. 36 The 2011 reform stopped the automatic adjustment (indexation) of pensions over 14,000 euros per month. 37 About this decision, see Bergonzini (2016), p. 177. 38 Art. 2, paragraph 1 of the Greek Constitution. 39 Art. 4, para. 5 of the Greek Constitution. 40 Art. 25, para. 1 of the Greek Constitution. 41 Art. 25, para. 4 of the Greek Constitution. 42 According to the Belgian Constitutional Council and the Conseil d’État, standstill obligation is violated only when the reduction of benefits is significant. Conseil d’État 23 septembre 2011, nr. 215.309,20, Conseil d’État 6 décembre 2011, nr. 216. 702, nr. 33. See Alofs and Van Limberghen in Kasagi (2020b) for the detail. 43 Judgment No. 223 of 2012. According to this decision, the government can adopt exceptional measures in a serious financial crisis to reconcile (1) the need to stabilize the budgetary situation and (2) the need to guarantee services and rights for individuals according to the constitutionally entrenched principles of equality.
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to the chosen justification. It is worth mentioning that in France, equity across generations has been brought up as one of the justifications for pension cuts.44 In addition to these substantial justifications, the judges often require procedural and supplementary efforts to justify pension cuts. For example, they can ask for an adequate explanation of justification from the government.45 German courts have also instructed that pension cuts be implemented gradually, over a long period.46 To summarize, two common ideas emerge about the role of judges concerning pension cuts. Firstly, lawmakers have a wide scope for decisions concerning the legal provisions which guarantee social rights. Secondly, the financial stability or sustainability of the pension system is often considered sufficient justification for pension cuts.
2.3.3
The Legislative and Political Limitations of Pension Cuts In the countries where the constitutional protection of the right to pension benefits has not been recognized (or not yet discussed) by judicial ruling, there are attempts at limiting pension cuts by means of legislative or political promises.47 Japanese law is an interesting case. It not only introduces the automatic adjustment of the indexation rate of pensions according to the demographic situation (i.e. substantial reduction of the amount of the pension), but it also sets a limit for this pension cut by fixing the minimum replacement rate (50%48) for the amount of a model pension49 and by requiring the government to take measures to ensure this limit. 2.3.4
Different Perspectives on the Question of Pension Cuts The question of pension cuts and their limits can be discussed from different perspectives. The judicial decisions that we have examined seem, overall, to have treated this question from a perspective of balancing two important 44 CE, 26 mars 2010, n 323201. See Chap. 5 of Kasagi (2020b). In Japan, while there is no judicial decision on this point, the government raises the argument of intergenerational justice to justify pension cuts. See page 37 of the Japanese national report. 45 See the Greek and Italian cases cited above. 46 According to the decisions of the German Federal Constitutional Court, this adjustment period can protect the legitimate expectation that we have mentioned above. 47 In England, what is called the ‘triple lock’ principle was a political promise of the coalition government formed in 2010, which ensured that state pensions would increase by the highest of the increase in earnings, the increase in prices (as measured by the Consumer Price Index) and 2.5%. This principle recently provoked a controversy. See Chap. 10 of Kasagi (2020b) and Crawford et al. (2016). 48 This rate was fixed at 62% in 2014. 49 The total pension of a male worker who has worked for 40 years for the average male worker’s salary.
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requirements—the protection of individual rights, as well as financial and budgetary sustainability of pension systems. These requirements, individual and collective respectively, are closely tied to each other, in the sense that the financial balance, or, in other words, the sustainability,50 of the pension system is the basis of an individual’s pension right.51 This connection between collective and individual interests of different generations is a unique aspect of solidarity across generations as it is organized by pay-as-you-go pension systems. From this point of view, even if the individual right to pension benefits is protected as a property right, this protection cannot be of the same nature as the traditional individual property right, since the collective interest of sustainability can never be neglected. This dichotomy is particularly interesting in the context of Italy, where an article which calls for a balanced budget has recently been added to their constitution (Art. 81). The recent court decision (No.70 of 2015), discussed above, pointed out that (even though this decision was made before Art. 81 was introduced) lawmakers could adjust pensions in consideration of the available economic resources. The Court emphasized the fact that the economic reasons which could be given as justification had not be adequately clarified.52 Spain also introduced a new article (Art. 135) in its Constitution, in 2011, pronouncing a principle of budgetary stability, the application of which includes the social security administration. This Spanish Constitutional reform was an important contextual factor of the pension system reform which opened the possibility of automatic adjustment of pension level according to demographic development.53 Though it is not clearly discussed in the different decisions that we examined, this also raises the question of the weight of different legislative decisions at different moments in time. Pension cuts decided by lawmakers today can, after all, be considered to be a withdrawal from promises made by lawmakers in the past54 (which, in a way, can be said of all the changes in legal institutions). The trend of judicial decisions we discussed in this section means, from this point of view, that the judges primarily respect the considerations and decisions of today’s lawmakers, who consider the current financial and demographic situation that require changes to what had been decided by lawmakers in the past. As we have seen, judges often require that the justification for change be thoroughly explained by lawmakers, without examining themselves the changes of
50
See Janda in Kasagi (2020b) about for details on the concept of ‘sustainability’. 51 See particularly Camaji and Ohta in Kasagi (2020b). 52 See Bergonzini (2016). 53 For more details, see Maldonado Molina in Kasagi (2020b). 54 Ota (2000), p. 120.
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
the financial and demographic situations, as well as the sustainability of the pension system.
Family Solidarity and Public Solidarity55
3
In these third and fourth sections, we will tackle solidarity across generations within the family, as well as the relationship between this family solidarity and collective solidarity, which is organized and made obligatory by the state through various institutions (what we have called ‘public solidarity’ in this report). Almost all the national reports talk of the importance of inter-generational solidarity, whether in the form of financial and material support or in the form of care within the family, between three different generations—grandparents, adult children and grandchildren. Solidarity across generations within the family can be divided into several types of solidarity, and in the following two sections (3, 4) we will focus on two of these. Firstly, solidarity in the form of financial support towards a person in need, made mandatory often by provisions in civil and family law on support duties between family members. Secondly, solidarity beyond legal duties, notably in the form of ‘care’ for a person in need of LTC. For both of these types of solidarity within the family, we will analyze the relationship between private (family) and public (collective) solidarity. These two types of family solidarity must be clearly distinguished, especially from a legal point of view, because financial support between family members is, as we have mentioned, for a long time and in almost all countries, partly considered to be legal obligation in family law. The ‘care’ within the family, on the other hand, has been until very recently largely invisible, and then often ignored or very marginally taken in consideration by family law. It should also be noted that from a legal point of view, ‘care’ might not be considered suitable to integrate in the framework of legal obligation, which implies compulsory execution under certain circumstances.56
3.1
Support Duties Between Adult Members of a Family and Welfare Benefits
3.1.1 Different Types of Support Obligations Among the different legal support duties between family members, the duty of parents to support their minor children holds a privileged position in all countries. The protection of children is a value shared internationally, as is demonstrated by the UN convention on the Rights of the Child.57 The 55 56
For both Sects. 3 and 4, see Sayn (2006). Yamawaki (1997) p. 78.
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maintenance obligations between spouses also exist in most countries. However, support and maintenance duties between other family members are prescribed (or not prescribed) by family law provisions in ways which vary from one country to another. In this section, we will concentrate on support duties of adult children towards their aged parents in need.58 In many countries, there are laws describing the support duties between family adult members, including those of adult children towards their aged parents.59 However, very often these laws have conditions, such as, first of all, in almost every country where adult family members have an obligation to support other adult family members, the person claiming support (ex. aged parent) must be unable to support himself/herself (need of support). The person from whom the support is claimed (the adult child) must also be able to support the claimant (capacity of support). The nature, as well as the level, of these obligations between adult family members are often clearly differentiated from the obligations of parents towards their minor children, as well as obligations between spouses.60 In addition to the conditions of need and capacity for support, many countries also require a condition of minimum reciprocity of support between family members, to recognize support duties between adult family members. This third condition is usually discussed in the context of support duties of adult children towards aged parents. This means, more specifically, that adult children can deny support when their parents have seriously neglected their own duties towards their minor children.61 The reciprocity of support is 57
See Art. 7 of the UN Convention on the Rights of the Child. Even though other relatives can also play a very important role in supporting elderly people who are in need. 59 Germany, Cameroon, Belgium, Spain, Czech Republic, Singapore, Hungary, Brazil, Japan, South Africa, Italy. However, the effectiveness of these obligations should be carefully examined, as adults are often reluctant to ask for the support of their family when this support is not volunteered. See the Belgium report on this point. 60 We can see a typical example in Japan where doctrine and case law clearly distinguish two types of support duties by giving them different names and definitions. Concerning obligations of parents toward minor children, as well as obligations between married persons, the provider must assure the claimant the same standards of living as their own (so called obligation to maintain) without any other condition than family relation. For other types of relations, support duty is less demanding, the provider should help only when the claimant is in need and the provider can afford to do so (so called obligation to help). 61 In Hungarian law, the claimant of support should not be ‘unworthy’ of maintenance. When it comes to adult children’s obligations toward parents, if the parent fulfilled his or her obligation to maintain and care for the child and to provide for his or her upbringing, the child cannot allege unworthiness except in the case where there is proof of extreme misconduct of the parent against the child. Section 4: 194 (2) and (3) of the Hungarian Civil Code. In French family law, according art. 207 of the Civil Code, the judge can ‘supprimer ou diminuer (eliminate or reduce)’ support obligations, in cases where the claimant has not fulfilled his own obligations (a typical example of this is a parent who had not cared for his child). Bénabent (2016), p. 498. 58
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especially emphasized in this child-parent relationship,62 probably, and at least partly, because of the essential nature of support obligations of parents towards minor children. In Belgian law, the loss of parental authority is considered to be the only factor of ‘unworthiness’ of support;63 thus distinguishing the child-parent relationship from other types of family relationships. Among the European countries included in this contribution, Hungarian law, unlike the law in other countries, features in the constitution (Basic Law) an article which prescribes the support duties of adult children towards parents (Art. XVI). Hungarian law is also unique in that it requires absence of fault of the support claimant in general for a person of legal age to claim support from relatives,64 therefore requiring a sort of ‘worthiness’ to claim family support. On the other hand, there are some countries where support duties towards adult family members does not exist.65 In these countries, adult children are never obliged or enforced to support their parents even when they are in need. However, it should be said that in these countries, as we can see in Greece and in Finland in particular, even though the law does not specifically state this obligation of support, financial support from children towards their aged parent is in fact widespread. With today’s trend of aging populations, longevity, and the rapid increase of the cost of nursing homes, support duties towards elderly family members will surely become an important and controversial issue.66
3.1.2
Reinforcing Support Duties in the Context of an Aging Society An interesting trend has emerged in some Asian countries, which tend to have relatively little social spending. They reinforce the support duties of adult children towards aged parents by promoting traditional family values. In 1995, after much debate and controversy, a law was passed in Singapore called the ‘Maintenance of Parents Act,’67 which prescribes the maintenance obligations of
62 In German doctrine, support obligations between parents and children are considered to be based on a relationship of reciprocity across different generations. This reciprocity can therefore limit, as well as justify the support obligations. Hilbig-Lugani (2013), p. 763. 63 Cour de Cassation, 6 mai 1987, 5796. 64 Section 4:194 (1) of the Hungarian Civil Code. Belgian law excludes support obligations between adult family members only when the condition of the person in need has been caused deliberately. 65 Finland, England, Greece. 66 See the following report published in France on the initiative of the French Sénat: Étude de législation comparée n 189 - octobre 2008 – L’obligation alimentaire envers les ascendants. 67 See the following website: https://sso.agc.gov.sg/Act/MPA1995.
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adult children towards their vulnerable and elderly parents. According to this law, any Singaporean resident of 60 years old or more, and who is unable to support himself/herself adequately, is entitled to claim support from their children, either as a lump-sum payment or as a monthly allowance. This entitlement to support, however, is denied to parents who neglected or abused their children, which condition is justified by the ‘principle of reciprocity of care.’68 This law must be examined separately from the support obligations that we have observed previously in other countries, because it was introduced specifically as a response to the problem of an aging society. Moreover, the context of the law’s creation is further complicated by the fact that Singapore has a meager collective or public mechanism for supporting people in need, including the elderly,69 and civil law has no regulation about support duties between adult family members. This law is sometimes explained as reflecting the Confucian idea of reciprocity in child rearing and caring for aged parents, which is deeply rooted in Singaporean society. However, these ‘Asian family values’, including filial piety and respect for elders, may be weakened in contemporary Singaporean society as they come into conflict with industrialization and Westernization, at least from the lawmaker’s point of view. Actually, this transformation of social norms—or, at any rate, a fear of this transformation—was a significant factor of this legislation.70 Singapore has also recently introduced a ‘proximity housing grant’ to encourage their citizens to live close to their family. This grant is attributed to those who buy a resale flat to live with or close to their parents or children.71 More recently in China, the General Provisions of the Civil Law (implemented October 1, 2017) stipulates for the first time the obligation of adult children to support their aged parents.72 This reform is part of a general tendency in China to reinforce the values of family and family solidarity, also in the context of an aging society, which is also exemplified by another law requiring children to care for their aged parents (‘Law about protection of the interest and the rights of aged persons’). We will discuss this trend in more detail in Sect. 4.
68
See the Singaporean national report. Except the Public Assistance Scheme. 70 Lee (1995), p. 671. 71 This grant is a part of a comprehensive public housing program, common in Singapore. See for example Phang and Helble (2016), pp. 174–209. 72 Here again, the abandonment of the minor child by the parents by blood breaks the legal relationship of family and therefore exempts the child from the obligation to support the parents. 69
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
3.2
Family Support Duties and Social Minimum Benefit
3.2.1
Principle of Subsidiarity and Family Support Duties Since solidarity between family members provides a guarantee for a basic standard of living for those who are in need, part of public solidarity, typically the state’s social minimum benefit, can play a similar role. Historically, the social minimum benefit was introduced and developed to complement and replace family solidarity, thus relieving, at least partly, the burden of financially supporting family members.73 This is why the question of the relationship and balance between these two support systems—family (private) solidarity and public solidarity—should be examined carefully74 and especially in the contemporary context. More specifically, in those countries where adult family members have a duty to support each other, and where social minimum benefit (social assistance) is based on the subsidiarity principle and accompanied by a means test (which is almost always the case), the question of coordination and adjustment between family solidarity and collective solidarity is raised. We can distinguish different circumstances which could impact this issue. Firstly, the least problematic circumstance is when the person who has support duties fulfills these duties voluntarily. In this case, social minimum benefits are attributed when the applicant is still in need, even with the support of family. The question becomes more complicated when the applicant or recipient of minimum benefits has a family member who can take on support duties, but does not do so voluntarily. In this case, there are two main situations in which applying the principle of subsidiarity can be especially problematic: a priori through the means test, or through the retrospective recovery of social benefit costs. First of all, it is worth asking whether the support of family members should be seen as a potential resource of the person in need, in the context of the means test for social minimum benefits.75 In other words, when someone has a family member who has an obligation to support him, is capable of doing so, but does not actually fulfill this obligation, should the person in need be none the less considered eligible for social minimum benefits, or should he or she first of all resort to his family members’ support? The question truly seeks to clarify how the law about social minimum benefits should position the family members support duties, which are of a civil and 73
Minonzio (2004), pp. 7–19. Maisonnasse (2013), p. 747. 75 When the resources of the applicant is appreciated by unit of household and not individually, support duty is actually imposed on all persons in a same household, even those who do not have support duty according to Civil Law. See Sayn (2005), p. 16. We observe a similar situation in Japan. 74
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family law nature.76 It becomes clear that there are different ways of responding to this question. In certain countries, the law about minimum social benefits prescribes the principle of subsidiarity regarding support duties between family members,77 thus excluding in theory the attribution of social minimum benefits to those who have family members who can financially support the applicant. However, this principle is not always strictly applied and strict application often occurs only within the same household.78 In Germany, the support duties of family members are generally included in the resources of the person in need. However, in case it is used for a social minimum benefit system specifically designed for elderly people, the means test is slightly more generous compared to tests carried out in other systems. One of the reasons for this relatively generous means testing is to prevent support duties towards their parents from being too burdensome to the adult children. In Japan, the Public Assistance Act excludes the potential possibility of family support from the resources considered in the person’s means test for eligibility for this benefit, while at the same time recognizing that family support comes before public assistance, when the support is actually supplied (see Art. 4, para. 1 and 2 of the Public Assistance act).
3.2.2
Recovery of the Cost of Social Benefits from Family Members The second solution is the possibility for the social security system (often an agency of the state or local government) to retrospectively recover the cost of social benefits attributed to the person in need from the family members who should have supported them. In some countries, the state or a municipality can turn to the family members who are under the obligation to provide support to recover what they have payed to the recipient.79 This recovery procedure introduces an 76
Sayn (2005), p. 11. Brazil, Germany, Belgium, South Africa, France. See Art. L. 132-6 of the French Code de l’action sociale et des familles. 78 Theoretically speaking, this situation could be independent from support duty and a result instead of the fact that the means test is executed at household level. See note 75. See also Kesteman (2011), pp. 219–226. As for the French personalized allowance for autonomy (allocation personnalisée d’autonomie), the very application of this principle is excluded. See L. 232-24 of the Code de l’action sociale et des familles. However, it should also be noted that the APA does not, in general, impose a strict means test for the attribution of allocation. Therefore, French scholars do not consider the APA as a ‘social minimum benefit’ in its classical form. Martin (2015), pp. 768–776. About the detailed analyses of the treatment of support duties in different social security and welfare schemes, see Sayn (2005). 79 France, Belgium, Japan. In Japan, public assistance administrators must also notify family members who will take on the duty to support public-assistance recipient before they make the decision to start public assistance when there is a strong possibility that the administrators will claim such payment later (Clause 8 of Article 24 of the Public Assistance 77
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exceptional feature to family support duties, which are often seen as duties of a private nature and of which, therefore, only the creditor himself can require the fulfillment.80 What should also be highlighted here is that the law often allows the authorities some discretion when turning to family members and does not impose any obligation to do so. This means that even in countries where cost recovery is possible, or, even more, considered a principle, it might not often actually be applied. The sensitive and personal nature of support duties, as well as the administrative cost of recovery, which can be more expensive than the social benefits in question, might discourage the authorities from applying this measure. In Japan, for example, while the law authorizes the welfare office to retrospectively recover the cost of social minimum benefits from family member with a duty to support the recipient of the benefit, actual requests are very rarely attempted, and even more rarely carried out through judicial action.81 Moreover, when the local authorities have this discretion, as it is often the case, it can produce a disparity between different districts within a country. A controversy arose decades ago in Belgium concerning this system of recovery claims from family members, because claims were treated differently according to the municipality in which the elderly person was accommodated in a nursing home.82
4
LTC: Formal and Informal Care
In this fourth section, we will discuss the role of informal care, provided by family members for elderly people who have lost their autonomy and need long-term care (LTC). While the issue of LTC also concerns family solidarity and its relationship with the state, or public solidarity, the laws on this issue should be dealt with separately from those we looked at in the third section, because ‘care’ was not generally considered a part of traditional support duties prescribed in civil and family law.83 Here, we primarily discuss family solidarity that goes beyond support duties defined by law, and is in reality widespread in our society. act and Clause 2 of Article 2 of the Regulation for Enforcement of the Public Assistance Act). 80 Sayn (2005). 81 There are only 551 reported cases of attempt of recovery, 0 judicial action from year 2010 to 2012. See the document by the Ministry of Internal Affairs and Communications: http://www.soumu.go.jp/main_ content/000305399.pdf. 82 See the Belgian report for the details. The following article points out a similar problem in France: Kesteman (2011), p. 222. 83 It should be noted, in some countries and under certain circumstances, civil law recognizes (or is interpreted to recognize) the obligation of family members to welcome the other member in their place of residence as a part of their support duties (France, Japan and Belgium, for example).
Until very recently, and even to this day in some countries, the need for LTC has not been provided by social security systems, even in well-developed welfare states. The provision of LTC is therefore undertaken de facto in many countries by family members or close relatives, very often by adult children (including in-laws), particularly women. As we have already discussed in the introduction, these informal contributions may also be one of the reasons why social security systems have not fully developed in many countries, as they make LTC invisible in modern society. It is important to mention that this lack of visibility on the problem of LTC also means a lack of visibility on informal care. Informal care by family members is considered a natural part of family function in many countries, although, as we have already mentioned, there is no legal obligation for family members to care for elderly relatives in these countries84 (except for spouses who can be, to some extent, legally obliged to take on the LTC of his or her spouse). Recently, this problem of LTC has become more and more visible in many countries, particularly for three reasons. Firstly, the number of elderly people who need LTC is increasing due to a worldwide trend of longer lifespans. Secondly, the population who support these elderly people has become much smaller in many countries, which have declining birth rates and trend toward nuclear families. Thirdly, family members, especially children (including inlaws), are less and less available to take on informal care. There are several factors behind this third change, such as the increasing participation of women in the workforce and changes in traditional family values. Encouraging women’s participation in the workforce is motivated for some governments, who are trying both to increase the country’s workforce and to create more gender equality in their society. In this context, who can, or who should, deal with the developing LTC problem by partly taking on the role of family members? One option might be to continue considering LTC a private matter and opt for private and market solutions. For those with sufficient resources, people who need LTC can personally purchase care services (including a nursing home) on the private market, which has already been working to meet this need.85 Another option might be to prioritize LTC as a social and public matter and to develop some type of public intervention. Among the countries included in this report, these three options—family, market and public—are combined in different ways, sometimes explicitly, but also implicitly in state policy and legislation. We can try to imagine a rough 84
See Sloan (2015), p. 275. It is clear that though the third and fourth sections deal with questions that should be legally quite distinct, in reality, these two questions cannot be separated, as the cost of LTC can drive elderly people into financially difficulty, which can then raise an issue about support duties of family members. 85
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typology of ways these options can be combined, even though the distinction between different types of combination remains extremely relative and cannot be defined in the absolute.86 First of all, there are countries where LTC is clearly considered to be mainly (except in cases where the elderly person is in financial difficulty) private—a personal and family matter. These countries can be divided into two groups: countries where care provided by family members is encouraged, and countries where there is no such explicit promotion of family solidarity. Secondly, there are countries where LTC is to some extent considered a public matter. Among these countries, the level of public intervention varies considerably, and in many of them, informal care provided by family members is also both explicitly or implicitly encouraged, supported, or at least expected.
Government’s will “to explore the establishment of a longterm care insurance system”.89 At the other hand, Hungary90 sets itself apart from the group because of its decision to define LTC clearly and more and more as a family matter. China seems to be crossing a transitional period concerning its position about the role of family in the society and in the field of care. While, as mentioned above, the LTC has recently and repeatedly been declared to be public matter in China, China’s ‘Law about protection of the interest and the rights of aged persons’, implemented in 1996 and significantly reformed in 2013,91 seems to go in the opposite direction. This law requires adult children who live far from their aged parents “to frequently go back to his parents’ home and care for them,”92 This law emphasizes the importance of caring for parents from a psychological point of view, not only a financial or material one.93
4.1
4.1.2 LTC as a Public Matter In the other countries, LTC is considered, to a certain extent, a public matter which requires substantial public intervention. In particular, Germany, Japan, France, Spain and Finland have all introduced universal public LTC systems, which do not use a means test. While Germany94 and Japan have opted for universal social insurance systems covering all elderly citizens (and in Germany, young citizens with disabilities as well), the French system is completely tax based, with no obligation of contribution. The French LTC system (Allocation Personnalisée d’Autonomie, APA) is also different compared to German and Japanese LTC systems, in relation to the above mentioned solely tax based financial mechanism, in that it requires the recipients to pay a percentage of care cost, which can amount to 90% for those with a relatively high income. On the other hand, the German LTC social insurance system is unique in that it covers disabled people in general, thus without making a categorical distinction between young disabled people and elderly people in need of LTC.
Taking Care of Elderly People: An Individual, Family or State Concern?
As we previously mentioned, compared to ‘classic’ problems like sickness or old age (loss of working ability and income loss on account of old age), the need for LTC has only recently come to light, and state intervention has been, generally speaking, quite weak on this issue. We can divide the 16 countries included in this report into two groups—ones where LTC is considered a personal and family matter, and ones where LTC is considered, at least to some extent, a public matter.87
4.1.1 LTC as a Personal and Family Matter In the countries where there is very little or no public intervention for elderly people in need of LTC,88 we might say that the Governments of these countries consider or have considered it to be primarily a personal and family matter, even when this is not officially declared by law or national authorities. However, some of these countries’ governments have recently officially declared a certain degree of state responsibility for LTC, showing that this situation will change in the near future. For example, China’s 12th and 13th Five-Year Plans (2011–2015, 2016–2020) declared the 86
Furthermore, as we will see, there is often a gap between what is officially declared as social policy direction and what is really happening. Even when state responsibility for LTC is officially indicated, the family can continue to play a dominant role if the system remains insufficient in practice. A report on the role of family in the care and support of elderly people argues that the level to which each legal system and national policy is family oriented can be appreciated by the evaluation of the abundance of social measures for elderly people. It also points out that the radical way to appeal to family solidarity toward elderly people is not to introduce social measures for them. Sayn (2006). 87 See also Martin (2011) about the situation in European countries including those we don’t examine in this contribution. 88 Brazil, Greece, Italy, Cameroon, South Africa, Hungary, Singapore.
89
For the detail, see Wang in Kasagi (2020b). In Hungary, public intervention is not inexistent (the Social Welfare Act (1993)), but not universal, and very limited in quality and quantity of services. Particularly, the direction of policy changed in the late 2000s to reduce public intervention and to shift the burden of care to families. The 2011 reform of the Constitution, which imposes a duty of caregiving on families, has confirmed this trend from a legal point of view. See Sczéman (2015), pp. 245, 247, 248 and 250. 91 中华人民共和国老年人权益保障法. 92 Art. 18, para. 2 of the law. 93 Art. 18, 1st para. 94 For Germany, see the “Gesetz zur Neuausrichtung der Pflegeversicherung.” Germany reduces the contribution for LTC social security of the citizens who are raising (or have raised) one or several children. For Japan, see ‘Kaigohokenho(Long-Term Care Insurance Act)’ and Curry et al. (2018). 90
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Meanwhile, there are countries where public intervention exists, but offer benefits only on the basis of a means test,95 which indicates a fundamental belief that state intervention should remain only secondary. For a more rigorous study of the real significance and consequence of these systems as well as a comparison of the different positions of each country, it will be necessary to look at the details of the services these systems offer, the financial cost that the users of these systems should pay, as well as the trend of the development of these elements. In Finland, the recent trend of above mentioned system is a decrease of public home care services, therefore reallocating the responsibility of care to the elderly person’s family and relatives (see also the note 118 about the Spanish system).
4.2
Rewards, Support, or Compensation for Family and Informal Carers
4.2.1 The Importance of Informal Care Even in countries where substantial public intervention exists for LTC, it does not cover all the LTC needs of elderly people. Informal care, including, especially, that provided by family, plays an important role almost without exception throughout the world.96 There are several reasons for this situation: absent or insufficient public intervention, lack of financial means for elderly people to purchase services on the private market, resistance to leaving the home and ‘official’ involvement in one’s care, social or cultural norms,97 etc. As we have already mentioned, informal care is not a legal requirement or obligation, unlike the obligation of financial support of certain family members towards another family member in need. At the same time, many countries have introduced measures to support, compensate or encourage these care givers, as a response to the clear importance of 95 For example, England and Belgium. In England, lawmakers intended to substantially lighten the means test with the 2014 Care Act. However, this part of the 2014 reform has later been delayed and scrapped. For Belgium, see Belgian ‘Allocation pour l’aide aux personnes âgées, APA’. 96 In the Czech Republic, it is estimated that approximately 80% of care is provided by the family, mainly spouses, children and other relatives. Sowa (2010), pp. 15–16. 97 Public opinion also varies significantly from country to country regarding the idea that children should pay for the care of their parents if their parents’ income is not sufficient. In the two candidate countries support is most widespread (88% in Turkey and 86% in Croatia). Greece is the only EU member state where over three-quarters of the public agree (78%). Conversely, there is strong opposition to this idea in Denmark (86% disagreeing) and Sweden (84% disagreeing), with Finland and the Netherlands not far behind with 77% disagreeing. So, support for the idea that close relatives should care for dependent people even when it means sacrificing their careers ranges from only 7% in Sweden to 77% in Turkey. (Special Euro Barometer, European Commission, Health and long-term care in the European Union, 2007).
informal care.98 We can observe that, generally speaking, the clear trend in EU countries is to officially recognize the importance and the burden of family care.99 These measures try to fulfill the real and pressing need of care givers who require recognition of their effort and who need to conciliate their professional or private life with care work for their family. At the same time, through these measures, the state relies, at least implicitly, on family carers to support and continue to support the increasing number of aged people who need long-term care.100
4.2.2
Types of Measures for Informal Care Givers We observe several types of measures for informal care givers, in different branches of law (civil law, as well as social law (labour law, social security law and welfare law)), which do not exclude each other.101 In fact, more than one of the following solutions can be found in a same country’s law. Firstly, if the care giver is working, it is often difficult for him to reconcile his professional life with care work for his family. A typical measure to help juggle the problems of caring and working is to give workers a right to carer’s leave.102 China’s law, mentioned above, which obliges children “to frequently go back to his parents’ home and care for them” also provides a right to “children’s leave” to fulfill this obligation.103 Therefore employers are obliged to accept the absence of workers when they go back to their family.104 Furthermore, in Spain, as well as in England and Wales, workers who care for adults have a right to request flexible working hours. In some countries like Germany, England and 98
As a majority of these carers are female, this question could also be examined from the perspective of female workers’ work and life conditions, as well as from a gender perspective more generally, though this report will not be able to discuss these perspectives in depth. 99 See for example Recommendation n. R98(9) of the Committee of ministers to member States adopted on 18th September 1998, during the 641th meeting of Ministers’ Deputies, mentioned in Rousset (2015). 100 See chapters on Finland and England ((Kasagi 2020b) Chaps. 9 and 10) where government intention is relatively obvious. In England and Wales, around 5.8 million informal carers and the majority of elderly people who need care are in their own homes and receive care from family members. 101 See also Rousset (2015), pp. 96–98. 102 This measure exists, for example, in Germany, Japan, Spain, England and Wales. In other countries, like the Czech Republic and Belgium, while there is no specific mechanism for the worker taking care of the family member in need of LTC, there is working leave when the family member needs to be accompanied for medical treatment or examinations. About the support for informal carers in Spain, see Blázquez Agudo E-M et Quintero Lima (2014), pp. 115–134. 103 Art. 18 of the ‘Law about protection of the interest and the rights of aged persons’. See also Kwang-jun (2014), p. 43. 104 In this law, employers also have to supervise the children’s obligation to go back to their family and care for their aged parents, as well as to sanction those who do not carry out this obligation.
Solidarity Across Generations from the Perspective of Comparative Law: Reconfiguration of Different Types. . .
Wales, we can also observe the financial support for the social contribution burden of carer. The second typical example of measures to help care givers are developed in social security law, in countries where a public LTC system exists. In these countries, it is possible to somewhat ‘formalize’ these informal carers by allowing the care recipient the possibility of directly contracting and paying the carer, in the framework of or in relation to the public LTC system.105 A similar measure consists of granting financial aid to care givers. Several countries give a social benefit directly, with certain conditions, to the family carer.106 The third type of measure concerns civil and family law. In some countries, the contribution of an informal carer can be taken into consideration in the succession process.107 Other private law sources are also debated by English scholars, for example those which could realize the remedies for the carers at the basis of the unjust enrichment theory.108 Lastly, there is also a new comprehensive and theoretical approach, which can also cover the above cited different individual measures. This approach is to create a status of ‘caregiver’ and devise a series of rights or supports that this caregiver can receive for himself and for his own needs, including training and information. A typical example can be found in England. UK law has developed a policy to clearly and officially recognize the importance of carers’ 105 This kind of measure exists, for example, in Germany, France, Czech Republic and Spain. About the French system, see I. Sayn (2006), p. 52. On the contrary, in England, the care recipients are not allowed hire their family members, including their children, when they are living in the same household (see Care and Support (Direct Payments) Regulations 2014 SI No 2871 for the exact conditions) in the Direct Payments Scheme (a system which allows care recipients to directly hire their care givers). About the Czech Republic’s ‘care allowance’, see Wija (2015), pp. 233–244. According to this article, in Czech Republic, ‘Care allowance presents a significant, often the only, source of income for informal carers, although the allowance is not primarily intended as a reward for informal caregivers but rather as income support for care recipients, enabling them to buy professional social services’. (p. 240). 106 In Finland, as well as in England and Wales. As we can see in chapter 9, of Kasagi (2020b) the caregivers of adults (including handicapped adults) in Finland can receive some allowance for informal care (act on support for informal care). The allowance can be accepted if a person is taken care of at his or her home and the care is especially demanding and binding. The municipality has some discretion in the decision of the amount of the allowance. This allowance entails a considerable expense (The expense for this allowance amounts to 2.8 billion euros, compared to 5.2 billion euros in total for the services for old people and disabled people), despite the limited number of carers who receive it (One in three of informal carers (estimated to be 60,000) do not receive this allowance). 107 In the Czech Republic and in Japan. In Japan, a 2018 reform of Civil law introduced a new ‘claim for special contribution’ in relation to inheritance, which gives a person who is not a heir but has contributed to the care of the late person, a right to claim a certain amount of money (art. 1050 of reformed Civil Code). 108 Sloan (2015), p. 275.
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work109 and thus has been introducing and developing laws about carers since the 1990s,110 with the idea of making carers ‘not so much unpaid providers of care services, but as people in their own right’. Also in France, recent reform has established the legal status of ‘close caregiver’111 for those who take care of their family members and people closely related to the person who receives care. This status gives them new support and rights, including a right to respite.112 It should also be noted that the downside of this policy to promote this status of caregiver, in the UK, is that the idea persists that some responsibility for care should, or at least will inevitably, rest with family members.113 It is interesting to mention that in Japan, on the contrary, the possibility of creating an allowance for family carers was fiercely debated when the social insurance system for LTC was established in 1997. The allowance was discarded in the end, partly to encourage people to choose the new options of professional and formal care, rather than informal care. There were concerns that people would continue to count on informal and family care if the system officially recognized this option by compensating it with this kind of allowance. One author explains that this choice, not to take into consideration informal care, was a way of ‘socializing’ care by encouraging all families to use professional services, but it only contributed to masking actual existing forms of informal cares.114 In these two countries, we can observe contrasting attitudes towards informal care, which raises further questions about the ambiguous results of compensation for informal carers and the logical and legal relationship between social, civil, public law. Should stronger attention to family care be 109
See the following report: http://www.jil.go.jp/institute/siryo/2017/ documents/186_04.pdf. 110 The carers (recognition and services) Act 1995, the carers and disabled children act 2000, the carers (equal opportunities) Act 2004. 111 The ‘Close caregiver’ of an elderly person is a concept which covers three categories of people – (1) ‘family caregivers’ (spouse, partenaire in civil union, cohabitant, parent, etc.,), (2) those who live with the person, as well as (3) those who maintain close relation with him. The law recognizes a status of close caregivers to those people when they come to help the elderly person regularly and frequently, in non-professional way, to accomplish all or a part of acts and activities of everyday life (art. L. 113-1-3 of Code de l’Action sociale et des familles). 112 About the details and the limitation of this new legal system, see Rebourg (2018), p. 693. The support for close caregiver was recently reinforced by a new law: LOI n 2019-485 du 22 mai 2019 visant à favoriser la reconnaissance des proches aidants. 113 See Sloan in Kasagi (2020b). 114 Shimoebisu (2007), p. 223. In Spain, when the public LTC system was introduced, professional care was theoretically favoured over family care, for similar reason. However, the Spanish system attributes a cash benefit for those who receive family care so that the elderly person can pay to family members directly. And also, in practice, family care remains dominant in the Spanish LTC system. When also taking into consideration the cutbacks of the state’s LTC benefit, the system has today almost entirely changed its direction, keeping in reality only a residual role in supporting family solidarity.
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interpreted as a sign that the government intends to rely on family solidarity, or a sign that it recognizes the inadequacy or failure of its social policy on LTC? Or rather, should this compensation be considered a necessary measure which can be justified independently of these state policies? Should attention to family care in private and succession law be considered secondary to state intervention, or are they totally independent of each other?115
5
Conclusion
To conclude, we would like to go back to the question of the relationship between family solidarity and public solidarity across generations, and we will make several points from a broader perspective covering all sections (2, 3, 4) of this report. As we have already discussed concerning the family support duty (see Sect. 3), in developed welfare states, public solidarity has largely replaced family solidarity, through the development of various social security systems. However, when we see the current and future demographic and economic trends, interest for family solidarity may be rediscovered or restored once more even in these countries,116 implicitly or explicitly. There are two main reasons for this that we have already examined: the trend for reducing pension benefits (2) and the increase of LTC, which is, and which will probably continue to be, insufficiently covered by existing social security systems (4). The somewhat classic question of the respective roles of family solidarity and public solidarity for people in need (3) will require new perspectives and considerations in this current and future context. Two Asian countries have caught our attention precisely for insisting on the importance of family solidarity across generations, though in a completely different manner. Singapore and China have reinforced the legal obligations of adult children towards their aged parents as a way of dealing with longevity and an aging population.117 Both countries have tried to restore and revive traditional family values,118 which, in reality, are fading fast,119 by imposing new regulations.
115 Sloan (2015) argues that the compensation of informal carers by private law provisions should be justified independently of the failure (or not) of public and social care services supplied by the state. See also Sayn (2006), p. 52. 116 Maisonnasse (2016), p. 748. 117 Although, for China, we have observed rather stronger accent on State’s role in the field of LTC. See 4.1.1. 118 About the tradition of Confucianism in Singapore and about the Maintenance of Parents Act, see Lee (1995). 119 Kwang-jun (2014), p. 33.
Generally speaking, the increase of the need for LTC is a universal trend in almost all of the countries included in this contribution. However, in the current economic and demographic context it does not seem realistic to think that this need will be sufficiently covered by collective solidarity in the future. Therefore, family solidarity plays and will play, de facto, an important role in current and future societies. At the same time, the traditional view of care work within family as being totally free is changing rapidly.120 Thus, a new question emerges of how to treat this existing and more and more visible family solidarity in public, social and private laws (4). A comprehensive overview of these different fields of law would seem extremely interesting and useful, particularly from a comparative point of view. Lastly, almost all the national reports showed the real importance of family solidarity, whether in a country where it is not legally imposed or in a country where public solidarity is very well developed. The Finnish national report, in particular, tells us that the reinforcement of public solidarity (e.g. The expansion of social welfare systems) does not weaken voluntarily organized family solidarity, in fact, quite the opposite. The relationship between the law and reality would also be an interesting question to tackle, though we cannot do so in this report.
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