Yearbook of Private International Law: Volume VII 2005 9783866537187

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YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME VII – 2005

EDITORS PETAR ŠARČEVIĆ † Professor at the University of Rijeka

PAUL VOLKEN

ANDREA BONOMI

Professor at the University of Fribourg

Professor at the University of Lausanne

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

Sellier. European Law Publishers

Stæmpfli Publishers Ltd. Berne

Sellier. European Law Publishers ISBN-10 3-935808-60-7 ISBN-13 978-3-935808-60-6

Stæmpfli Publishers Ltd. Berne ISBN 3-7272-2724-9

Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.ddb.de abrufbar. © 2006 by Sellier. European Law Publishers GmbH, München, Stæmpfli Publishers Ltd., Berne, and Swiss Institute of Comparative Law. Dieses Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfilmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. Herstellung: Karina Hack, München. Druck und Bindung: Pustet, Regensburg. Gedruckt auf säurefreiem, alterungsbeständigem Papier. Printed in Germany.

ADVISORY BOARD JÜRGEN BASEDOW Hamburg

RUI MANUEL GENS DE MOURA RAMOS Lisbon/Coimbra

GENEVIÈVE BASTID-BURDEAU Paris

YASUHIRO OKUDA Tokyo

SIR LAWRENCE COLLINS London

GONZALO E. PARRA-ARANGUREN The Hague/Caracas

HUANG JIN Wuhan HANS VAN LOON The Hague

SYMEON C. SYMEONIDES Salem (Oregon)

FERENC MÁDL Budapest

PIERRE WIDMER Lausanne

ASSISTANT EDITOR GIAN PAOLO ROMANO Legal adviser Swiss Institute of Comparative Law ADDRESS FOR MANUSCRIPTS AND CORRESPONDENCE Swiss Institute of Comparative Law Dorigny, CH–1015 Lausanne ENGLISH REVISION GENEVIÈVE SAUMIER Professor at the McGill University

NATASHA PITTET Independent Legal Translator

TABLE OF CONTENTS ________________ Foreword ........................................................................................................ ix Abbreviations................................................................................................. xi Doctrine Andrea SCHULZ The Hague Convention of 30 June 2005 on Choice of Court Agreements. 1 Kurt SIEHR General Problems of Private International Law in Modern Codifications De Lege Lata and De Lege Europea Ferenda............................................ 17 Robert G. SPECTOR Maintenance in Private International Law in the United States: Harmonization of Divergent Rules and the Proposed Hague Maintenance Convention ........................................................................... 63 Diego P. FERNÁNDEZ ARROYO What’s New in Latin American Private International Law? ...................... 85 National Reports Nadia DE ARAUJO / Frederico DO VALLE MAGALHÃES MARQUES Recognition of Foreign Judgments in Brazil: the Experience of the Supreme Court and the Shift to the Superior Federal Court..................... 119 Anatoliy DOVGERT Codification of Private International Law in Ukraine.............................. 131 Valentin MIKELENAS Reform of Private International Law in Lithuania ................................... 161 Jan L. NEELS Private International Law of Succession in South Africa ........................ 183 Gian Paolo ROMANO Is Traditional Multilateral Rule Relating to Capacity to Marry in Line with the Italian Constitution?................................................................... 219 News from The Hague J.H.A. VAN LOON The Hague Conference on Private International Law Work in Progress (2004-2005)................................................................. 239 Court Decisions Michael TRAEST Law Applicable to Arbitrability (Cour de Cassation, 15 October 2004) and Review of Foreign Law (Cour de Cassation, 3 June 2004) .............. 249

Marie-Elodie ANCEL The New Policy of the Cour de Cassation Regarding Islamic Repudiations: A Comment on Five Decisions Dated 17 Feb. 2004 ......... 261 C.G.VAN DER PLAS / T.H.D. STRUYCKEN Torts and the Conflict of Laws in the Netherlands: Remarks on Hoge Raad 12 November 2004............................................ 269 Beatriz AÑOVEROS TERRADAS Effects in Spain of a Deed of Sale and Purchase of a Property Located in Spain, Authorised by a German Notary Public: DGRN of 7 February 2005 and 20 May 2005 .......................................... 277 Simon OTHENIN-GIRARD Federal Tribunal, 6 April 2004: Recognition of an Israeli Judgment of Paternity in Switzerland – Circumvention of the Law (fraude à la loi)? 283 Forum Paola PIRODDI International Subcontracting in EC Private International Law ................ 289 Jasnica GARAŠIĆ Recognition of Foreign Insolvency Proceedings: the Rules That a Modern Model of International Insolvency Law Should Contain ......... 333 Texts, Materials and Recent Developments Bart VOLDERS / Valentin RÉTORNAZ Belgium – Article 9 of the Act of 19 December 2005: Analysis of a Leaky Umbrella ................................................................. 381 Bea VERSCHRAEGEN Austria – § 79l of the Law on Genetically Modified Organisms: Recent Changes in Austrian International Environmental (Torts) Law ... 387 Eva LEIN European Union – Proposal for a Regulation Concerning the Law Applicable to Contractual Obligations (Rome I): A Short Commentary. 391 Book Reviews .............................................................................................. 415 Books Received ........................................................................................... 417 Index ............................................................................................................ 429

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FOREWORD ________________

Presenting the current volume of the Yearbook of Private International Law is a particularly sad task for the Editors. After only seven years, this still young publication becomes orphan of his spiritual father and initiator, our dear friend and colleague Petar Šarčević. It was Petar Šarčević who conceived the ambitious idea of creating a new publication in English entirely devoted to private international law issues. He convinced the Directors of the Swiss Institute of Comparative Law that the project was worthwhile, chose the editing staff and raised the financial support which was indispensable for its feasibility. During the last intense seven years, he was always at the forefront in the search and selection of the contributions and in the coordination of the editing work; he assisted his beloved and dedicated wife Susan in the linguistic revision of the papers of the non-native-English contributors; he constantly promoted the diffusion of the Yearbook around the world. What drove and inspired him was not personal ambition, but the strong passion for conflict of laws issues and the firm conviction that the Yearbook could be an important contribution to disseminate the knowledge and intensify the scientific exchange among legal scholars of all continents. Young scholars in particular were always at the heart of his concerns. Life must go on. As Editors of the Yearbook and Petar’s friends, we are committed to the continuation and the further development of his project. We can proudly say that volume VII is further proof of the vitality of Petar’s idea. The previous volume (VI) of the Yearbook was permeated by a highly ‘eurocentric’ approach. Although the process of ‘communitarisation’ of private international law moves forward (see the Commission proposals for regulations in the field of contractual and maintenance obligations), this volume deliberately takes a more ‘universal’ approach, in order to show once again the wealth of private international law on a broader scale. This global perspective already appears from the ‘Doctrine’ section. 2005 has been the year of the new Hague Convention on choice of forum; the first article of this section presents this important achievement of the Hague Conference. A paper on the US approach to maintenance obligations gives an important insight into another issue which is presently at the centre of negotiations in the Hague as well as in Brussels. An extensive analysis of the codification of general principles of private international law as well as a broad overview of the current developments in Latin America complete this section. The universal reach of the Yearbook is once again confirmed by the ‘National Reports’ section. An entire, most promising continent, Africa, was until now absent from our publication; a first step towards filling this lacuna is now made thanks to an article on South-African conflict-of-laws in the field of successions. Two reports on recent PIL codifications in states of the former Soviet Union,

Lithuania and Ukraine, show that national codifications are still ‘fashionable’, notwithstanding the ever growing number of international instruments in the field, particularly at the EU level. A description of the new regime of recognition and execution of foreign decisions in Brazil and an Italian analysis of the compatibility of the single connecting factor conflict rule in the field of capacity to marriage with the constitutional principle of non-discrimination complete this rich section. The greatest innovation of this volume is a new section on national ‘Court Decisions’, an old idea of the Editors, that finally becomes reality. In the present issue, the review of national case law is limited to some European countries (Belgium, France, The Netherlands, Spain and Switzerland), but we do plan to extend it to judgments from other continents, with the aim of creating a really new information tool for practitioners and researchers from all over the world. The traditional section ‘News from the Hague’ provides information on the always considerable work in progress at the Hague Conference. We have hopes that, as of the next volume, it will be regularly accompanied by a parallel section ‘News from Brussels’, in order to keep the reader informed of ongoing EU projects and achievements. In the ‘Forum’ section two highly technical subjects, cross-border insolvency and international subcontracting, both very important from a theoretical and practical point of view, are discussed in a clear and thorough way by two young scholars. The section ‘Texts, Materials and Recent Developments’ has also somewhat evolved. Instead of simply publishing texts which are nowadays easily accessible on the net, we have preferred to give place to short comments on recent national and international legislative developments, such as the Commission proposal for a ‘Rome I’ regulation and some national conflict of laws provisions, this year of Austria and Belgium, which, due to their being dispersed across substantive law statutes, may easily go undetected. We would like to thank all the authors who contributed to this volume as well as the members of the editorial staff, in particular our precious Assistant Editor Gian Paolo Romano, Mrs. Geneviève Saumier and Mrs. Natasha Pittet, who accepted this year to take over Susan Sarcevic's difficult task of linguistic review of the texts, and Mrs. Annette Donnier, who was once again responsible for the formatting of the book. Last but not least, many thanks are owed to Sellier European Law Publishers for their support in the publication of the Yearbook. We have good reasons to believe that Petar Šarčević would have been proud of this new issue of ‘his’ Yearbook, which we tried to keep in line with his principles and convictions. At the moment of sending the manuscript to press, our most painful regret is that he will not share with us the satisfaction of having volume VII in our hands.

Andrea Bonomi

Paul Volken

ABBREVIATIONS ________________

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

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

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

DOCTRINE ________________

THE HAGUE CONVENTION OF 30 JUNE 2005 ON CHOICE OF COURT AGREEMENTS Andrea SCHULZ∗

I.

The Origins of the Convention and the History of the Negotiations A. The Preparatory Phase B. The Negotiations between 1997 and 2001 C. Change of Focus: the Informal Working Group 2002/2003 and Formal Negotiations on a Choice of Court Convention 2003-2005

II.

The Convention of 30 June 2005 on Choice of Court Agreements A. Scope of the Convention B. Validity Requirements C. Exclusivity D. The Operative Rules of the Convention

III.

Particular Issues A. Interim Measures of Protection B. Intellectual Property Litigation C. Flexibility D. Preliminary Questions E. Non-Exclusive Choice of Court Agreements F. Relationship with Other International Instruments

IV.

Conclusion

I.

The Origins of the Convention and the History of the Negotiations

On 30 June 2005, the XXth Session of the Hague Conference on Private International Law unanimously adopted the Convention on Choice of Court Agreements. This concludes a long process of political and legal discussions with many ups and ∗

First Secretary at the Permanent Bureau of the Hague Conference on Private International Law. Since the beginning of 2002, the author has been in charge of the negotiations which led to the Convention on Choice of Court Agreements. Yearbook of Private International Law, Volume 7 (2005), pp. 1-16 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Andrea Schulz downs. While according to its Statute, the Hague Conference normally holds a Diplomatic Session every four years (see Article 3 of the Statute1), which adopts at least one Convention, the negotiations which eventually generated the Convention on Choice of Court Agreements lasted nine years at their formal stage which was preceded by a four-year phase of informal preparations.

A.

The Preparatory Phase

Following a proposal put forward by the United States of America in 1992,2 the XVIIth Session of the Hague Conference on Private International Law decided – first tentatively at the Centenary of Hague Conference meetings in 1993, then definitely at the conclusion of the XVIIIth Session in 1996, ‘... to include in the Agenda of the Nineteenth Session the question of jurisdiction, and recognition and enforcement of foreign judgments in civil and commercial matters’.3 Some preparatory work was carried out between 1992 and 1996.

B.

The Negotiations between 1997 and 2001

In 1997, in accordance with the decision taken in 1996, the Secretary General of the Hague Conference convened a Special Commission which held five meetings of one or more weeks between June 1997 and October 1999.4 At the meeting in October 1999, which was supposed to be the last meeting of the Special Commission,5 a ‘preliminary draft Convention6 on Jurisdiction and Foreign Judgments in 1

Available at under ‘Conventions’. By letter from the Legal Adviser of the Department of State to the Secretary General of the Hague Conference; see PFUND P., ‘Contributing to Progressive Development of Private International Law: The International Process and the United States Approach’, in: Recueil des Cours 1994-V, t. 249, p. 13 et seq., at 83. 3 Final Act of the Eighteenth Session, Part B, No 1, Hague Conference on private international law, Actes & Documents / Proceedings of the Eighteenth Session, Tome I, 1999, p. 47. 4 For further details, see NYGH P. / POCAR F., ‘Report on the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters adopted by the Special Commission’, Hague Conference, Prel. Doc. No 11, p. 25 et seq. All Preliminary Documents are available on the website of the Hague Conference at under ‘Conventions’ – ‘Convention No 37’ – ‘Preliminary Documents’. 5 According to the working methods so far largely followed by the Hague Conference, the Diplomatic Sessions held every four years normally adopt (1) the main elements of the work programme for the four years to follow, in particular the next convention project, and (2) the text of a ‘draft Convention’ elaborated by a Special Commission during the four years since the last Diplomatic Session. 6 The Special Commission constituted for each project will normally end its work about one to one and a half years before the envisaged date of the Diplomatic Session with the adoption of a ‘preliminary draft Convention’, thereby leaving time for consultations on 2

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Yearbook of Private International Law, Volume 7 (2005)

The Hague Convention of 30 June 2005 on Choice of Court Agreements Civil and Commercial Matters’7 was adopted by vote. In its structure and content the text very much resembled the Brussels Convention of 27 September 19688 and the Lugano Convention of 16 September 1988,9 both on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters. The text contained rules on jurisdiction as well as on the recognition and enforcement of judgments rendered in a Contracting State by a court having Convention-based jurisdiction. The chapter on jurisdiction provided for a general defendant’s forum (in the defendant’s State of habitual residence; Article 3), where all actions against a particular defendant could be brought, as long as they fell within the scope of the Convention (Article 1) and were not subject to exclusive jurisdiction under the Convention. Equally open to all actions independent of the subject matter were fora based on a choice of court agreement (Article 4), on appearance and submission by the defendant (Article 5), on a joinder of actions against multiple defendants (Article 14), counter-claims (Article 15) and third party claims (Article 16). In addition, there were rules on specific jurisdiction for certain subject matters – some of them exclusive (Article 12), but most of them not (Articles 6-11). The Convention was drafted as a ‘mixed Convention’: It contained harmonised bases of jurisdiction which entitled the resulting judgment to benefit from the simplified recognition and enforcement regime of the Convention in other Contracting States. Furthermore, however, unlike the Conventions of Brussels and Lugano which are sothe text in the Member States of the Hague Conference and other States participating in the negotiations. The final text then adopted during the Diplomatic Session, which is immediately opened for signature, was until 2002 called ‘draft Convention’ as long as it had not been signed by any State or other entity entitled to do so. The last Hague Convention which fell under this regime was the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, which was adopted in December 2002. Until it receives its first signature, it will remain a ‘draft Convention’. At the XXth Diplomatic Session, however, it was decided that in the future, the Hague Conventions will bear the date of the day of the signing of the Final Act of the Session which adopted the Convention concerned, regardless of whether any State actually signed the Convention on that day. The Convention of 30 June 2005 on Choice of Court Agreements is the first one to fall under this new regime. 7 The text of the preliminary draft Convention 1999 and its Explanatory Report by Peter Nygh (Australia) and Fausto Pocar (Italy) have been published in Prel. Doc. No 11 (note 4). 8 OJ EC C 27/1998, p. 1. On 1 March 2002, the Brussels Convention was replaced by Regulation (EC) No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters of 22 December 2000 (OJ EC L 12/2001, p. 1; the ‘Brussels I Regulation’) for 14 of the then 15 EU Member States. Since 1 May 2004, the Regulation also binds the ten new Member States. The Convention is, however, still in force between Denmark, on the one hand, and the 14 EU Member States Parties to it. It is envisaged to replace it by an agreement between the Community and Denmark along the lines of the Brussels I Regulation. In this paper, the Brussels and Lugano Conventions, together with the Brussels I Regulation, will be referred to as ‘the European instruments’. 9 OJ EC L 319/1988, p. 9. The Lugano Convention applies between the 15 ‘old’ Member States of the European Union and Iceland, Norway, Poland and Switzerland.

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Andrea Schulz called double conventions, the 1999 Hague text allowed Contracting States to continue to use bases of jurisdiction contained in their internal law, as long as they were not prohibited by a so-called black list in the Convention. These bases were called ‘the grey area jurisdiction’. A judgment based on one of these national grounds which was neither explicitly echoed in nor prohibited by the Convention would not be entitled to recognition and enforcement under the Convention in other Contracting States. Recognition and enforcement under the internal law of the State concerned remained possible. The consultations carried out in the Member States of the Hague Conference on the preliminary draft Convention adopted in October 1999, indicated that the text was mainly interesting for those States Party to the Brussels and Lugano Conventions and, perhaps, a few others with similar or at least compatible legal – and in particular procedural – systems. This was partly attributed to the fact that the text had been adopted by vote, and on many occasions there had been a very narrow majority, thus leaving a large number of delegations unsatisfied. Moreover, in the late 1990s, the Internet and electronic commerce were becoming ever more important. Doubts were raised as to whether rules drafted in the 1960s (the Brussels Convention) and largely based on the localisation of the connecting factors such as the place of performance, the place of the injury, etc., could be applied to a digital environment where everything was ubiquitous. This was of particular importance for the areas of torts committed over the Internet, e.g. defamation or the infringement of intellectual property rights. And there was a third party involved in addition to the alleged injurer and the injured person: the Internet service provider (ISP). In the substantive laws of the States negotiating in The Hague, the role of the ISP and its possible liability had not yet been defined or regulation was just under way, and among ISPs there was a fear of being held liable under highly different laws, depending on jurisdiction rules and the possibility for forum shopping. Also, the intellectual property community became finally aware10 that the Hague treaty under negotiation could affect intellectual property rights. For all these reasons, it was felt that more time and study was needed in order to appropriately deal with the factual changes brought about by the new digital media. The negotiating parties in The Hague therefore decided in April 2000 to suspend formal negotiations and conduct informal discussions on how to reach consensus on specific issues, including intellectual property and e-commerce. Informal meetings hosted by individual States were held in Canada, the Netherlands, Scotland, Switzerland and the United States of America in 2000 and 2001.11 The Geneva meeting in January 2001 was the first meeting on the Judgments Project ever to focus exclusively on intellectual property issues.12 10 See, i.a., DREYFUSS R., ‘An Alert to the Intellectual Property Bar: The Hague Judgments Convention’, in: University of Illinois Law Review 2001, No 1, p. 421. 11 See, for a summary description of the informal meetings, the report produced by the Permanent Bureau of the Hague Conference (Prel. Doc. No 15) at (note 4). 12 A report (Prel. Doc. No 13) is available at (note 4).

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Yearbook of Private International Law, Volume 7 (2005)

The Hague Convention of 30 June 2005 on Choice of Court Agreements After this series of informal meetings, delegations felt sufficiently confident that they could now come to agreement when resuming formal negotiations. Moreover, it was agreed that the next step should not be based on voting but be consensus-based. Because it was felt that the latter might require more time, it was decided to split the Diplomatic Session (which was the only remaining ‘formal’ step because the Special Commission had terminated its work in October 1999) in two parts. The first part took place in June 2001 and produced a draft entitled ‘Interim Text’.13 Wherever it was impossible to reach unanimity – even in case of a single delegation opposing a proposal –, square brackets were added. The number of square brackets, options, variants and alternatives made the text very difficult to read, to say the least. For those who did not participate in the meeting, it was almost incomprehensible. Moreover, it did not reflect how weak or strong the support or opposition to a particular provision was, because strict unanimity was required.

C.

Change of Focus: the Informal Working Group 2002/2003 and Formal Negotiations on a Choice of Court Convention 2003-2005

In April 2002, the Special Commission on General Affairs and Policy of the Hague Conference14 convened in order to decide how to proceed further. While some delegations still had a strong interest in a global instrument covering all kinds of civil and commercial cases, and containing specific bases of jurisdiction for all of them, others stressed that the meeting in 2001 had demonstrated that it would be impossible to reach unanimity on all these issues within a reasonable time. In light of the time and effort already spent on the project and in an attempt to reconcile both positions, it was therefore decided to change first of all the working method: The Permanent Bureau of the Hague Conference was requested to establish an informal working group, reflecting the legal traditions of the Member States of the Hague Conference, which should try to draft a text that could then serve as a basis for future work. The group was supposed to use a ‘bottom-up-approach’, starting from the basis of jurisdiction in previous drafts that seemed least controversial, namely choice of court clauses in business to business (B2B) cases. The group was supposed to subsequently examine other bases of jurisdiction on which consensus seemed possible. As possible ‘candidates’, the Commission on General Affairs listed general defendant’s forum, submission, counter-claims, branches, trusts and physical torts.15

13

Available at (note 4). This is a plenary meeting of Member State representatives which now meets annually and decides on the work programme of the Conference, within the four-year framework set up by the Diplomatic Session (note 5). 15 This last expression was used in order to exclude mere financial damage and damage to intangible rights (intellectual property, reputation). See, for the Conclusions of the Commission, under ‘General Affairs and Policy’. 14

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Andrea Schulz The informal working group was chaired by Professor Allan Philip from Denmark and included participants from Argentina, Brazil, China, Egypt, the European Commission, Germany, Italy, Japan, Mexico, New Zealand, the Russian Federation, South Africa, Spain, Switzerland, the United Kingdom and the United States of America. The Permanent Bureau prepared a paper to facilitate the discussions of the group. It dealt with choice of court clauses in B2B cases as well as with submission, counter-claims and the general defendant’s forum.16 During the three meetings held between October 2002 and March 2003,17 the group drafted a text on choice of court clauses in B2B cases.18 It was however not possible to reach consensus on the other bases of jurisdiction. The draft was submitted to the Commission on General Affairs and Policy of the Conference at its meeting in April 2003. This meeting as well as further consultation subsequently carried out by the Secretary General of the Hague Conference in 2003 demonstrated that there was sufficient support for a Special Commission to be convened for further work, using the draft as a starting point. The Special Commission met in The Hague from 1 to 9 December 200319 and, because it had not been able to complete its work at the December 2003 meeting due to a lack of time, again from 21 to 27 April 2004.20 The latter meeting was preceded by an informal meeting in the United States of America hosted by the Department of State and the U.S. Patent and Trademark Office from 28 to 30 March 2004 which focused exclusively on intellectual property issues. The preliminary draft Convention received wide support, and the few remaining open issues were clearly identified in the text and in the Explanatory Report prepared by Masato Dogauchi and Trevor Hartley. In order to facilitate discussions at the Diplomatic Session and to provide delegates with some options to choose from, the Drafting Committee met in January and April 2005. A Diplomatic Session was convened for June 2005. Following the sudden death of the Chairman of the Special Commission, Professor Allan Philip, the Session elected Professor Andreas Bucher from Switzerland as Chairman of Commission II, which was charged with the completion of the new Convention.

16

Prel. Doc. No 19, available at (note 4). See the reports of the three meetings (Prel. Docs No 20, 21 and 22) at (note 4). 18 Prel. Doc. No 8 (General Affairs), available at (note 4). The same draft text, accompanied by a report with comments on the provisions, subsequently drawn up by the Permanent Bureau of the Hague Conference and reflecting the discussions in the informal working group (Prel. Doc. No 22), is available ibid. 19 The text produced at the December 2003 Special Commission, together with an Explanatory Report drawn up by Trevor Hartley (United Kingdom) and Masato Dogauchi (Japan) (Prel. Doc. No 25) is available at (note 4). 20 The text produced at the April 2004 Special Commission, together with an Explanatory Report drawn up by Trevor Hartley (United Kingdom) and Masato Dogauchi (Japan) (Prel. Doc. No 26) is available at (note 4). 17

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Yearbook of Private International Law, Volume 7 (2005)

The Hague Convention of 30 June 2005 on Choice of Court Agreements

II.

The Convention of 30 June 2005 on Choice of Court Agreements

A.

Scope of the Convention

The Convention applies primarily to exclusive choice of court agreements in international B2B cases in civil or commercial matters (Article 1), with an optional extension to non-exclusive choice of court agreements through reciprocal declarations (Article 22). It excludes consumer and employment contracts and some other subject matters (Article 2). The reason for some of the exclusions in Article 2(2) is the existence of other, more specific international instruments, or of national, regional or international rules on exclusive jurisdiction for some of these matters. This is true for: e) insolvency, composition and analogous matters; f) the carriage of passengers and goods; g) marine pollution, limitation of liability for maritime claims, general average, and emergency towage and salvage; h) anti-trust (competition) matters; i) liability for nuclear damage; l) rights in rem in immovable property, and tenancies of immovable property; m) the validity, nullity, or dissolution of legal persons, and the validity of decisions of their organs; n) the validity of intellectual property rights other than copyright and related rights; and p) the validity of entries in public registers. In a Convention with a wider scope, a clause on the relationship with other international instruments would have to be included in the final clauses to ensure the respect of rules in other Conventions that grant exclusive jurisdiction. For exclusive jurisdiction based on internal law, this would not be a solution. However, since this Convention only covers choice of court agreements and party autonomy, the easier way – which should also facilitate the application of the Convention in practice – is to exclude the matter concerned directly from the scope of the Convention. Therefore, although the list of exclusions looks longer than in some other Conventions on civil and commercial matters, this impression is not quite right. Another list of exclusions concerns what is called ‘family law and succession’ in other Hague Conventions on civil and commercial matters: a) the status and legal capacity of natural persons; b) maintenance obligations; c) other family law matters, including matrimonial property regimes and other rights or obligations arising out of marriage or similar relationships; d) wills and successions. Most of these are not ‘civil or commercial matters’ in the business-related sense; some are subject to specialised treaties, and internally, these matters are sometimes subject to special rules of procedure which differ from normal contentious litigation. Consumer and employment contracts are equally excluded (Article 2(1)), leaving the Convention to cover B2B cases. The Convention only applies in international cases. In order to obtain as wide a scope as possible for the Convention without interfering too much with internal law, the definition of what is an international case is different in the jurisdiction chapter, on the one hand, and in the chapter on recognition and enforcement, on the other hand. For the Convention’s jurisdiction rules to apply, a case is

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Andrea Schulz international unless the parties are resident21 in the same Contracting State and the relationship of the parties and all other elements relevant to the dispute, regardless of the location of the chosen court, are connected only with that State (Article 1(2)). An illustration of the effects of this rule will be given when discussing the operational rules of the Convention. For the purposes of obtaining the recognition and enforcement of a judgment in a Contracting State, it is sufficient that the judgment presented is foreign (Article 1(3)). Further details will be discussed below.

B.

Validity Requirements

The Convention defines the exclusive choice of court agreement to which it applies in paragraph a) of Article 3: ‘an agreement concluded by two or more parties that meets the requirements of paragraph c) and designates, for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting State or one or more specific courts in one Contracting State to the exclusion of the jurisdiction of any other courts’. Paragraph c) contains the Convention’s form requirement: The exclusive choice of court agreement must be ‘entered into or evidenced i) in writing; or ii) by any other means of communication which renders information accessible so as to be usable for subsequent reference’. This text is drawn from the UNCITRAL Model Law on Electronic Commerce 1996. No additional form requirements may be established by internal law. Where internal law provides for less rigid form requirements, a choice of court agreement that meets those requirements but not the stricter requirements established by the Convention would still be valid under internal law. It would, however, not fall within the scope of the Convention.

C.

Exclusivity

Article 3 b) contains an important rule that will change the legal situation in particular in the common law world, and will greatly expand the scope of the Convention: ‘A choice of court agreement which designates the courts of one Contracting State or one or more specific courts in one Contracting State shall be deemed to be exclusive unless the parties have expressly provided otherwise’. This is the rule contained in the European instruments, but the presumption under com21

In this context it is worth mentioning that Article 4 contains a definition of the residence of an entity or a person other than a natural person: it shall be considered to be resident in the State a) where it has its statutory seat; b) under whose law it was incorporated or formed; c) where it has its central administration; or d) where it has its principal place of business.

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Yearbook of Private International Law, Volume 7 (2005)

The Hague Convention of 30 June 2005 on Choice of Court Agreements mon law is normally the opposite. By establishing this rule, the Convention will therefore greatly increase respect for the choice of the parties.

D.

The Operative Rules of the Convention

The Convention contains three main rules addressed to different courts: -

The chosen court must hear the case if the choice of court agreement is valid according to the standards established by the Convention (Article 5).

-

Any court seised but not chosen must dismiss the case unless the choice of court agreement is invalid according to the standards established by the Convention (Article 6).

-

Any judgment given by the court of a Contracting State which was designated in an exclusive choice of court agreement that is valid according to the standards established by the Convention must be recognised and enforced in other Contracting States (Article 8).

The first rule excludes in particular any discretion that the chosen court might have under its internal law, e.g. under the doctrine of forum non conveniens, to stay or dismiss the proceedings in favour of the courts of another State (Article 5(2)). Paragraph 3 clarifies that the Article does not affect rules on subject matter jurisdiction or venue. Where parties choose a court that lacks subject matter or territorial jurisdiction, the choice of court agreement will remain without effect under the Convention. But even where the chosen court is a proper venue and does have subject matter jurisdiction, the chosen court retains any freedom that might exist under its internal law, to transfer the case to another court in that same Contracting State. This is not an issue where the choice of court agreement only designated ‘the courts of that State’. But even where parties chose one specific court within that State, the freedom remains. If the transfer is discretionary, however, the court, when deciding whether to transfer the case, shall give due consideration to the choice of the parties (Article 5(3)).22 At first sight the second rule only states the obvious, namely that a court seised but not chosen has to suspend or dismiss proceedings, provided that the choice of court agreement is valid. Article 6 a)-e) contain exceptions which allow a court seised but not chosen to take the case in spite of the choice of court agreement. Although the language looks somewhat different, these grounds basically echo the well-established exceptions contained in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards23 (hereinafter: the New York Convention): the agreement does not have to be respected where it is ‘null and void, inoperable or incapable of being performed’. Paragraph a) echoes the 22 For the effect of such transfer on other courts, see Articles 6 e) and 8(5) which will be discussed below. 23 Available on the UNCITRAL website at .

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Andrea Schulz ‘null and void’, paragraph d) echoes the inability to perform. The latter is qualified, however, in order to prevent abuse: The inability must be due to exceptional reasons beyond the control of the parties. Paragraph c) contains the public policy exception and, for those States that have an extremely narrow concept of public policy, a related ‘manifest injustice’ exception. Paragraph b) echoes (and slightly modifies) the reference to a lack of capacity of a party in Article V a) of the New York Convention. Only paragraph e) adds a really new ground that does not exist in the New York Convention: where the chosen court has decided not to hear the case,24 any other court seised is no longer bound to dismiss the case because of the choice of court agreement. This rule is necessary because of the States’ duty to give access to justice. Where party autonomy no longer requires the respect of the agreement because the court chosen has decided not to hear the case, the possibility for the parties to seek justice elsewhere has to be re-established in order to avoid a denial of justice. While these provisions largely resemble those contained in the New York Convention, Article 6 a) contains a change which constitutes a major achievement: It establishes that the validity of the choice of court agreement has to be examined ‘under the law of the State of the chosen court’. This includes the conflict of laws rules of the State of the chosen court. Although this rule may be a bit more difficult to apply for the court seised than the rule in Article II(3) of the New York Convention, its benefits outweigh the difficulty: In a case where one party seises the chosen court and the other party seises a different court, both courts have to examine whether the choice of court agreement is valid. If they do this under their own choice of law rules and the substantive law designated by them, it can happen that the chosen court finds the agreement valid and continues to hear the case, while under a different law the court seised but not chosen finds the agreement invalid and also proceeds with the case. It could also happen that the chosen court finds the agreement invalid and dismisses the case, while under a different law the court seised but not chosen finds it valid and therefore also dismisses the case. Both parallel proceedings and a denial of justice are undesirable. To oblige both courts to apply the same law minimizes the risk of such a situation to occur. Of course there is always a risk that courts might make mistakes when applying a foreign law but one should trust the courts and at least provide them with a rule that has the potential to avoid the situations described above. The third rule, concerning the recognition and enforcement of a judgment given by the chosen court, is set out in Article 8. A judgment given by a court in a Contracting State which was designated in an exclusive choice of court agreement is entitled to recognition and enforcement in all other Contracting States

24

This rule also applies where the parties have chosen one specific court in a Contracting State, and that court decides to transfer the case to a court not chosen which is located in the same Contracting State. It does not apply, on the other hand, where the parties chose ‘the courts of State X’. If, in this case, the court initially seised in State X transfers the case to another court in the same State, that is still a ‘chosen court’ under the Convention.

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The Hague Convention of 30 June 2005 on Choice of Court Agreements (Article 8(1)).25 There shall be no review on the merits, and the court addressed is bound by the findings of fact on which the court of origin based its jurisdiction, unless the judgment was given by default. The judgment shall be enforced only if it is enforceable in the State of origin (Article 8(3)), and even if it is already enforceable, the court addressed may postpone or refuse recognition or enforcement where the judgment is the subject of review in the State of origin, or the time limit for seeking ordinary review has not yet expired (Article 8(4)). Article 8(5) clarifies that all this also applies to a judgment given by a court of a Contracting State pursuant to a transfer of the case from the chosen court in that Contracting State as permitted by Article 5(3) b). However, where the chosen court had discretion as to whether to transfer the case to another court, recognition or enforcement of the judgment may be refused against a party who objected to the transfer in a timely manner in the State of origin. This last sentence is intended to limit the number of cases where this ground for refusal will apply to the cases where this seems justified. Normally, a case is transferred either upon request of the defendant or on the court’s own motion. It is obvious that it should not be possible for the defendant who requested the transfer, which was then granted, to later object to the enforcement of the judgment because of the transfer. But it seems also obvious that a plaintiff who brings proceedings before the chosen court and is then forced to litigate before a different court, because the case is transferred (on the court’s own motion or upon request of the defendant), should not be punished twice – first by losing the agreed court against his or her will, and subsequently by being denied recognition and enforcement of the judgment given in his or her favour because of the transfer. Article 8(5), second sentence, ensures this result. Article 8(1), second sentence, explicitly states that recognition or enforcement may be refused only on the grounds specified in the Convention. As mentioned above, these grounds are listed in Articles 9 and 11. In addition to the traditional grounds such as public policy (Article 9 d) and e)), incompatible judgments (Article 9 f)) and g)) and a defective service of process (Article 9 c)), two grounds already mentioned in Article 6 which allow the court seised but not chosen to disregard the choice of court agreement are repeated here: the invalidity of the choice of court agreement under the law of the chosen court (Article 9 a)), and the lack of capacity of a party to conclude such an agreement under the law of the requested State (Article 9 b)). Like in Article 6, capacity is thus subject to double scrutiny under the law of the chosen court (which may make the agreement invalid under paragraph a)) and under the law of the court seised, or of the court addressed for recognition and enforcement, respectively. And like in Article 6, the enforcement court is also obliged under the Convention to examine the validity of the choice of court agreement under the law of the State of the chosen court, including its choice of law rules.

25 According to Article 12, judicial settlements (transactions judiciaires) approved by, or concluded before, a court designated in an exclusive choice of court agreement, and which are enforceable in the same manner as a judgment in the State of origin, shall be enforceable in the same manner as a judgment.

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Andrea Schulz A final ground for refusal of recognition or enforcement is provided by Article 11 and concerns awards for damages. These awards are governed by the Convention provided that they are covered by the choice of court agreement between the parties. A judgment awarding damages is therefore entitled to recognition and enforcement in other Contracting States just like any other judgment. To the extent that the damages awarded are non-compensatory, however, recognition and enforcement of the non-compensatory part may be refused. This is an option, not an obligation for the requested State. The court addressed shall take into account whether and to what extent the damages awarded by the court of origin serve to cover costs and expenses relating to the proceedings (Article 11(2)). This rule will help victims and protect debtors: Those States that already now recognise and enforce foreign damages awards, including punitive damages, to the full extent, may continue to do so. States that currently ‘shave off’ the punitive part (e.g. under the public policy exception) and enforce the compensatory part, may continue to do so. And those States that currently refuse recognition and enforcement of the judgment as a whole because the punitive part is incompatible with their legal system and they lack a rule to divide the judgment, will in the future be obliged under the Convention to enforce the compensatory part but will be entitled (but not obliged) to enforce the non-compensatory part.

III. Particular Issues A.

Interim Measures of Protection

The Convention does not govern interim measures of protection (Article 7). In order to avoid any uncertainty that exists under the New York Convention, it does however state explicitly that the Convention neither requires nor precludes the grant, refusal or termination of interim measures of protection ordered by a court of a Contracting State.

B.

Intellectual Property Litigation

Article 2(2) n) and o) exclude certain types of intellectual property litigation from the scope of the Convention. Litigation concerning copyright and related rights is always within the scope, regardless of the object of the proceedings in question. For other intellectual property rights, validity is excluded from the scope of the Convention where it is the main object of the proceedings. This flows from the fact that the grant of a patent or the registration of a trademark is a sovereign act. Revocation or nullification of such an act is usually within the exclusive jurisdiction of the State under the law of which the right was created and party autonomy is not admitted. For other relief sought, be it in tort or in contract, the situation is as follows: Cases of ‘sheer piracy’ are in most cases already outside the 12

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The Hague Convention of 30 June 2005 on Choice of Court Agreements scope because there will normally be no contract between the rightholder and the alleged infringer. Contractual litigation (i.e. on the scope of a license or the payment of royalties) is covered by the Convention, as well as the contractual transfer of certain exploitation rights. Where proceedings are brought in tort and not in contract for procedural reasons, but could have been brought in contract because they relate to the scope of a license or its possible termination, or any other contract between the parties relating to intellectual property rights, these cases are within the scope of the Convention.

C.

Flexibility

While it was acknowledged during the Diplomatic Session that State sovereignty and some other State interests may require a limitation of party autonomy, there was a common wish not to reduce the scope of the Convention more than necessary. Some States had a strong interest to exclude other subject matters from this scope (because they do not recognise party autonomy for these matters and/or claim exclusive jurisdiction), but this was not shared by others. Under the New York Convention, the requested State could hold the agreement to be invalid under its own law, but this option is precluded under the Hague Convention which obliges all courts involved at the jurisdiction and enforcement stage to apply the law of the chosen court to determine the validity of the agreement. In order to accommodate these conflicting interests and enable wide adherence to the Convention while maintaining as wide a scope as possible, Article 21 establishes a declaration system by which States can exclude a specific matter if this is required by a strong interest. This declaration will have reciprocal effect: in their relations with the State making the declaration, all other Contracting States are not obliged to apply the Convention with regard to the matter excluded where an exclusive choice of court agreement designates the courts, or one or more specific courts, of the State that made the declaration. They would therefore not be obliged to decline jurisdiction under Article 6, nor be obliged to recognise and enforce a judgment given by the chosen court in the State that made the declaration, on a matter which was excluded by it. Article 19 allows a State to make a declaration that its courts, when chosen in an agreement under the Convention, will not be obliged to decide the dispute if the case has no other connection with that State except for the location of the chosen court. This declaration prevents two outside parties from contracting into the jurisdiction. Article 20 deals with the reverse situation where two parties residing in the same Contracting State want to contract out of a jurisdiction for a case that is purely internal to that State except for the location of the chosen court. At the jurisdiction stage, this is not an international case under Article 1(2). Should the chosen court give judgment nonetheless and one of the parties take this judgment back to the common State of residence of the parties, that State would be obliged to recognise and enforce the judgment. For the chapter on recognition and enforcement to apply, it is enough that the judgment is foreign and was given by a court

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Andrea Schulz exclusively chosen and located in a Contracting State. The requested State may however declare under Article 20 that it will not recognise such decisions.

D.

Preliminary Questions

Article 10 contains a number of rules, some of them declaratory and others regulatory in nature. They all refer to proceedings where a matter excluded under Article 2 or Article 21 arises as a preliminary question in the proceedings while the object of the proceedings falls within the scope of the Convention. To give an example: Proceedings which have the validity of a patent as their object are excluded from the scope of the Convention under Article 2(2) n). Proceedings brought by the patent owner for payment of royalties due under a patent license agreement, however, are within its scope. If – as is usually the case – the licensee now raises the alleged invalidity of the patent as a defence, the money claim remains within the scope of the Convention. Article 2(3) explicitly states this. To continue with the same example: Article 10 sets out in detail which effects a judgment given in the proceedings just mentioned would have to be given under the Convention in other Contracting States. Paragraph 1 says that the (incidental or preliminary) ruling on the validity of the patent will not be given any effect under the Convention in other Contracting States. Whether the internal law of the State concerned attributes any further effects such as collateral estoppel or issue estoppel to it is a matter for the internal law of the requested State. Paragraphs 2 and 4 state that even regarding the judgment as such (in our example the payment order), recognition or enforcement may be refused to the extent that it was based on a preliminary ruling on an excluded matter. What is not said here but what is implied is that this rule only applies where the courts of the requested State – or the courts of the State which in the view of the requested State would have (exclusive) jurisdiction over the excluded matter – would have come to a different result as concerns the preliminary question. In concrete terms: If, in our example, the patent had been granted in the State which was requested to enforce the judgment awarding royalties, and the authorities of the requested State had in the meantime found that the patent was invalid, they would not be obliged to enforce the foreign money judgment which was based on the assumption that the patent was valid. If there had been proceedings on the validity of the patent in the requested State which had affirmed the validity, why should recognition or enforcement of the royalties due under a licence be refused? If, at the time of the request for enforcement of the money judgment, proceedings on the validity of the patent are still pending in the State that granted the patent, the decision on recognition and enforcement may be postponed (Article 10(2)-(4)).

E.

Non-Exclusive Choice of Court Agreements

Under Article 22, a Contracting State may declare that its courts will recognise and enforce judgments given by a court in another Contracting State that was desig14

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The Hague Convention of 30 June 2005 on Choice of Court Agreements nated in a choice of court agreement which meets all of the requirements established in Article 3 except for exclusivity. This declaration has reciprocal effect; a judgment given in one Contracting State that has made such a declaration shall be recognised and enforced in other Contracting States that have made such a declaration. In addition to the grounds for refusal listed in Articles 9 and 11, Article 22 contains some additional grounds due to the fact that the agreement is not exclusive. Recognition will be refused where there exists either a judgment given by another court that was not explicitly excluded by the agreement, or proceedings are pending before such a court. In addition, even if neither is the case any more but was the case earlier, the court of origin must have been the court first seised.

F.

Relationship with Other International Instruments

Article 29 enables Regional Economic Integration Organisations (such as the European Community) to adhere to the Convention if the Member States of the Organisation have transferred their competence over some or all of the matters governed by the Convention to the organisation. Article 26 contains rules on the relationship with other international instruments. In this paper, it is only possible to give a brief overview of the basic principles.26 The rules in Article 26 only apply in cases where both instruments, under their own terms, would ‘want’ to be applied and such application would lead to incompatible results. On matters of jurisdiction, this could be the case, e.g., where the other treaty contains rules on exclusive jurisdiction while the Hague Convention would recognise party autonomy over a certain matter within its scope. Here the Convention gives way to other general (earlier or later) treaties where none of the parties are resident in a Contracting State that is not a Party to the treaty (paragraph 2). In other words, where the case (in terms of residence of the parties) is purely internal to States Party to the other treaty, the Hague Convention gives way in case of conflict. In that case it does not matter whether the parties to the agreement all reside in States that are Party to both the Hague Convention and the other treaty, or in States Party to the other treaty only. Where the case has an element external to the other treaty which is connected to the Hague Convention (because one of the parties resides in a State that is only Party to the Hague Convention but not to the other treaty), the Hague Convention prevails.27 An identical rule applies

26 A more detailed explanation and appropriate examples may be found in other publications, in particular in the Explanatory Report by Masato Dogauchi and Trevor Hartley which is under preparation. As soon as it is ready, it will be made available on the Hague Conference’s website at . 27 In this hypothesis the other party resides in a State Party to both the Hague Convention and the other treaty. Paragraph 3 ensures that the State Party to both Conventions is not obliged to breach its pre-existing obligations under the other treaty vis-àvis any State Party to that other treaty but not to the Hague Convention. This will also apply

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Andrea Schulz to Community instruments (e.g. the Brussels I Regulation) under paragraph 6. The European Community thereby gives up a bit of the territorial scope of Article 23 of the Brussels Regulation which, according to its own terms, would already apply if one of the parties is domiciled in an EU Member State. This compromise was agreed upon for the benefit of achieving a global instrument, and the impact on the Brussels Regulation is limited to a minimum: The Regulation remains unaffected where the other party is resident in a third State that is not Party to the Hague Convention because the latter has no interest to interfere here. But where the non-EU party is resident in a State Party to the Hague Convention, the latter prevails in case of conflict. At the stage of recognition and enforcement, the Convention does not affect the application of other (earlier or later) treaties; however, the judgment shall not be recognised or enforced to a lesser extent than under the Hague Convention (Article 26(5)). Treaties on specific subject matters which also contain rules on jurisdiction and/or recognition and enforcement are treated in paragraph 5. No matter whether they are earlier or later than the Hague Convention, they remain unaffected – but only if the Contracting State concerned in the particular case has made a declaration in respect of the treaty under this paragraph. In that case, other Contracting States shall not be obliged to apply the Convention to that specific matter to the extent of any inconsistency, where an exclusive choice of court agreement designates the courts, or one or more specific courts, of the Contracting State that made the declaration.

IV. Conclusion It is hoped that the new Convention will do for choice of court agreements what the most successful 1958 New York Convention28 does for arbitration agreements, namely to protect party autonomy and to provide predictability and legal certainty to business parties who want to make arrangements for the resolution of disputes that have arisen or may arise between them. The business world is highly supportive, and so are the legal professions. Informal consultations so far carried out by governments have been very positive. As soon as the Explanatory Report is available, formal consultations will start in many States. What initially seemed to be a small step as compared to the more ambitious general Convention, may become a major milestone for the harmonisation of international civil procedure.

to the revised Lugano Convention although that is a later treaty as compared to the Hague Convention (Article 26(3), 2nd sentence). 28 As of 23 January 2005, the Convention has 137 Contracting States. See .

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GENERAL PROBLEMS OF PRIVATE INTERNATIONAL LAW IN MODERN CODIFICATIONS - DE LEGE LATA AND DE LEGE EUROPEA FERENDA Kurt SIEHR∗

I. II.

Modern Codifications of Private International Law General Problems of Private International Law A. Field of Application 1. What is an International Problem? a) International Connections b) Relevant International Contacts c) Open-ended Rules of Private International Law d) Intermediate Summary 2. Hierarchy of Sources a) General Problems b) Special Problems in the European Union B. Form of Conflicts Rules 1. Hard and Fast Rules v. Approach and Weighing of Contacts 2. Evasion or Escape Clauses a) Special Evasion or Escape Clauses b) General Evasion or Escape Clauses 3. Multilateral or Unilateral Conflicts Rules C. Connecting Factors 1. General Policy of Law Selection 2. Nationality v. Domicile / Habitual Residence 3. Statutory Designation of the Law Governing v. Party Autonomy 4. Unity of Property v. Splitting the Property 5. Time Factors a) Conflit mobile b) Vested Rights 6. Dépeçage a) Formalities b) Capacity c) Choice of the Applicable Law d) Statute of Limitations

∗

Professor emeritus of the University of Zurich Faculty of Law; research scholar of the Max-Planck-Institute of Foreign Law and Private International Law in Hamburg. This paper is based on a lecture given in March 2005 in Taipei (Taiwan). It has been completely revised and is dedicated to the memory of my dear friend and colleague Petar ŠARČEVIĆ (1941-2005). Yearbook of Private International Law, Volume 7 (2005), pp. 17-61 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Kurt Siehr D.

III.

Qualification, Characterization 1. General Rule on Qualification 2. Special Qualifications 3. Intermediate Summary E. Renvoi 1. Foreign Private International Law (Blockverweisung) 2. Renvoi Proper (Rück- and Weiterverweisung) 3. Intermediate Summary F. Law of Third Countries G. Domestic and Foreign Law 1. Domestic Law 2. Foreign Law a) Establishing Foreign Law b) Non-Unified Foreign Legal Systems c) Foreign Public Law d) Reciprocity e) Application of Foreign Law 3. Intermediate Summary H. Preliminary Questions 1. General Rule on Preliminary Questions 2. Special Answers to Preliminary Questions I. Public Policy 1. General Clause on Public Policy a) Non-Application of Foreign Law b) Law Subsidiarily Applicable 2. Special Clauses on Public Policy 3. Ordre public européen 4. Lois d’application immédiate J. Evasion of Law Summary

I.

Modern Codifications of Private International Law

Since the late 19th century, many Continental-European scholars of private international law have dreamt of preparing a comprehensive codification of private international law. The Italian scholar and politician Pasquale Stanislao Mancini (1817-1888), the man behind the conflict-of-laws provisions of the Italian Codice civile of 1865, vigorously advocated such a codification on an international basis.1

1 MANCINI P.S., ‘De l’utilité de rendre obligatoire pour tous les Etats, sous la forme d’un ou de plusieurs traités internationaux, un certain nombre de règles générales du Droit international privé, pour assurer la décision uniforme des conflits entre les différentes législations civiles et criminelles’, in: Clunet 1874, pp. 221-239, 285-304. Reprint in JAYME E. (ed.), Della nazionalità come fondamento del diritto delle genti di Pasquale Stanislao Mancini, Torino 1994, pp. 123-168. As to the present discussion cf.

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General Problems of PIL in Modern Codifications The Institute of International Law, founded in 1873, supported Mancini’s ideas2 and, in 1893, the Dutch scholar Tobias Michael Carel Asser (1838-1913) and the Dutch government convened the Hague Conference on Private International Law for the first time, in order to begin the drafting of international conventions for the global unification of private international law.3 The South-American States also engaged in preparing international conventions for their region.4 But many countries did not want to wait until the dreams of Mancini, Asser, and others became true. They enacted national statutes on private international law.5 The first set of separate conflict-of-laws provisions were Articles 1-7 of the Civil Code of the Swiss Canton of Zurich of 1854/56,6 and the most modern codification is the Belgian Code of 2004 on Private International Law.7 In recent years, the European Union has prepared conventions and regulations unifying private international law within the European Union.8 All these instruments concentrate on special problems of private international law. Most general problems of conflicts law were omitted or treated as collateral questions. There is only one international convention exclusively devoted to the problem of renvoi, the Hague Convention of 1955 on the Regulation of Conflicts between the Law of Nationality and the Law of Domicile.9 This so-called Renvoi-Convention never entered into force. Yet the problem still GUILLEMARD A. / PRUJINER A., ‘La codification internationale du droit international privé: un échec?’, in: Les Cahiers de Droit 2005, pp. 175-192. 2 Annuaire de l'Institut de Droit International 1877, p. 1. 3 Actes de la Conférence da La Haye chargée de réglementer diverses matières de droit international privé (12-27 Septembre 1893) vol. I, The Hague 1893, p. 2. 4 Cf. CAICEDO CASTILLA J.J., El derecho internacional en el sistema interamericano, Madrid 1970, p. 33 et seq.; SAMTLEBEN J., Internationales Privatrecht in Lateinamerika, vol. I, Tübingen 1979, p. 6 et seq. 5 Cf. the collection of national statutes on private international law compiled by RIERING W. (ed.), IPR-Gesetze in Europa, Bern and Munich 1997, and by KROPHOLLER J. / KRÜGER H. / RIERING W. / SAMTLEBEN J. / SIEHR K. (eds.), Außereuropäische IPR-Gesetze, Hamburg and Würzburg 1999. 6 Cf. BLUNTSCHLI J.C., Privatrechtliches Gesetzbuch für den Kanton Zürich, vol. 1, nd 2 ed. Zurich 1854, pp.1-19. 7 Loi du 16 juillet 2004 portant le Code de droit international privé, in: Moniteur belge 2004, p. 57344. 8 KREUZER K., ‘Zu Stand und Perspektiven des Europäischen Internationalen Privatrechts. Wie europäisch soll das Europäische Internationale Privatrecht sein?’, in: RabelsZ 2006, pp. 1-88; SIEHR K., ‘Auf dem Weg zu einem Europäischen Internationalen Privatrecht’, in: Zeitschrift für Europarecht 2005, pp. 90-100; ID., ‘Internationales Privatrecht in der Europäischen Union’, in: Rozprawy prawnicze. Księga pamiątkowa Profesora Maksymiliana Pazdana, Kraków 2005, 293-306; WEBER A., Die Vergemeinschaftung des internationalen Privatrechts, Berlin 2004. Sceptical, HARTLEY T.C., ‘The European Union and the Systematic Dismantling of the Common Law of Conflict of Laws’, in: I.C.L.Q. 54 (2005), pp. 813-828. 9 Recueil des conventions. Collection of Conventions (1951-2003), The Hague 2004, No. VI.

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Kurt Siehr exists: Should general problems of private international law be codified, and how should such rules be formulated? This question must also be answered within the European Union, which, in the years to come, shall codify the entire field of private international law.10

II.

General Problems of Private International Law

A.

Field of Application

Private international law is concerned with cases and problems, which have some sort of connection with foreign countries. These cases and problems must be distinguished from purely domestic cases and problems. National and regional private international law must also define its relation to international instruments. Should the field of application of private international law be explicitly regulated in a national or supranational codification?

1.

What is an International Problem?

Many modern codifications start with the statement that they apply to ‘issues with connections to the law of a foreign State’,11 to ‘international situations’12 or to problems in their ‘international relation’.13 There is no further explanation of which issues, situations or problems may qualify as ‘international’ ones. It always must be kept in mind that merely collateral issues of a purely domestic case may also have international dimensions. Three different steps may lead to an answer. a)

International Connections

Most legal problems of daily life are local ones, having no connection whatsoever with any foreign legal system. Local people take part in domestic business, local people and their families enjoy their life in their hometown, and local people die at their domicile in their own country. As soon, however, as there is any connection to a foreign legal system, because, e.g., participants are foreign nationals, property is located abroad, or certain transactions took place in a foreign country, the case is SIEHR, ‘Auf dem Weg’ (note 8), p. 100. Article 3 (1) German EGBGB: ‘Bei Sachverhalten mit einer Verbindung zum Recht eines ausländischen Staates’. 12 Article 2 of the Belgian PIL Code of 2004 (note 7): ‘dans une situation internationale’. 13 Article 1 (1) Swiss Statute of Private International Law of 1987: ‘im internationalen Verhältnis’ or ‘en matière internationale’ or ‘nell’ambito internazionale’. 10 11

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General Problems of PIL in Modern Codifications potentially an international one. The question whether such a connection is relevant must be answered by the conflict-of-laws rules of the forum State. b)

Relevant International Contacts

Conflict-of-laws rules decide whether certain international contacts of an issue are relevant for jurisdiction and the selection of the law governing said issue. In contractual relations, the nationality of the contracting parties is not relevant in most jurisdictions. This was different under Article 25 of the abolished Italian Disposizioni preliminari to the Codice civile of 1942, according to which a contract between parties with the same nationality was governed by their common lex patriae.14 In the succession law of many jurisdictions, it matters whether the deceased person was a foreign national, because the law governing succession is the deceased’s lex patriae15 or that chosen by the testator.16 In France, the United Kingdom, and in the United States of America, however, the nationality of the deceased is irrelevant, because the estate is governed by the deceased’s lex domicilii for movables and by the lex rei sitae for immovable property. The nationality or domicile of the heirs is completely irrelevant for matters of succession. Their domicile is, however, relevant if an heir is sued for the return of assets given to the deceased by the plaintiff.17 From these examples two conclusions may be drawn: (1) The applicable conflicts rules decide whether certain international dimensions of an issue are relevant. (2) As the conflicts rules still differ from country to country, the same set of facts (e.g. a foreign person dies at his or her domicile) may be an international case for countries adhering to the principle of nationality and a simple local one for those countries which favour the principle of domicile. c)

Open-ended Rules of Private International Law

Some conflicts rules are open-ended, insofar as they give to the parties a free choice of the law governing their contracts,18 or as they authorize the courts, by escape clauses, to deviate from black letter rules and apply the law of the closest Today Article 57 of the Italian PIL Statute of 1995 makes a reference to the Rome Convention of 1980 on the Law Governing Contractual Obligations. 15 Cf., e.g., § 28 (1) Austrian PIL Statute of 1978; Article 25 (1) German EGBGB; Article 28 Greek Civil Code; § 36 (1) Hungarian PIL Regulation of 1979; Article 46 (1) Italian PIL Statute of 1995; Article 9 (8) Spanish Código civil; Article 22 (1) Turkish PIL Statute of 1982. 16 Article 90 (2) Swiss PIL Statute of 1987. 17 He or she may be sued under Article 2 (1) Lugano / Brussels Convention / Regulation in the country of his or her domicile. 18 An example is Article 3 (1) of the 1980 Rome Convention. 14

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Kurt Siehr connection.19 If there were no limitations to cases with international contacts, parties to a local contract could, by choosing a foreign law as the lex contractus, create international dimensions and transform a purely local contract into an international one. Therefore, Article 3 (3) of the 1980 Rome Convention was added, prescribing that in such cases one may not derogate from the mandatory rules of local law. With respect to escape clauses, the court making use of such a clause is already faced with an international problem and cannot create one by placing the centre of gravity of the case somewhere else. d)

Intermediate Summary

There is no disputing that rules of private international law are limited to issues with international dimensions. This may be mentioned at the outset of every statute or instrument of a private international law character. Four caveats must, however, be added. (1)

The international dimensions are characteristics of single issues, not of cases. Certain problems may be completely local (a national died at home) and only a preliminary question (e.g. has a child been validly adopted abroad, therefore taking a share as a descendent?) has international dimensions.

(2)

If a problem has international dimensions for purposes of jurisdiction, it is also an international problem for the issues of substantive law. If, e.g., a person domiciled abroad is sued in local courts, the question of jurisdiction is a matter of international civil procedure, as is the problem of applicable law.

(3)

A purely local case may become an international one by the simple fact that one of the parties moves to a foreign country and must be sued at his or her former domicile or abroad at his or her new domicile.

(4)

A purely domestic case does not become an international one by choice of a foreign law.

2.

Hierarchy of Sources

a)

General Problems

At present, the multitude of different sources of private international law creates problems in court and makes it difficult for attorneys to supply good advice. They hardly know whether to apply national conflicts rules, conventions of substantive 19

22

An example is Article 15 (1) Swiss PIL Statute of 1987.

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General Problems of PIL in Modern Codifications law (e.g. the Vienna Convention on the International Sale of Goods of 1980) or conventions, treaties or European regulations on problems of private international law. There seems to be an ‘anarchy of sources’. There are four major schools of legislation to cope with this problem. (1)

No reference to, or mention of, international instruments, because they themselves determine their relation to national sources expressly, or take precedence under the general rule of lex specialis derogat legi generali.

(2)

Formulation of a general provision that national conflict rules apply, provided that no international instrument takes precedence.

(3)

Copying of international sources and transforming them into national provisions of private international law.

(4)

Reference to international sources when they cover the entire problem in question, in short when they apply erga omnes.

In the early days of conflicts legislation, no reference was made to international sources. These sources only applied between State parties and, if applicable, replaced autonomously enacted conflicts rules. There was no need to deal with the hierarchy of sources. Times have changed. National publications of all sources of private international law valid in the country of publication are heavy volumes.20 They serve as guides in a labyrinth of conflicts sources. National statutes also take the new situation into account and, apart from the copying of – or referral to – international sources,21 prefer attitude under (2) above by stating briefly: ‘This Act 20 Austria: BORIĆ T. (ed.), Internationales Privatrecht und Zivilverfahrensrecht, 3d ed. Vienna 2001, 879 pp.; Belgium: CARLIER J.-Y. / FALLON M. / MARTIN-BOSLY B. (eds.), Code de droit international privé, Brussels 2004, 779 pp.; Germany: JAYME E. / HAUSMANN R. (eds.), Internationales Privat- und Verfahrensrecht. Textausgabe, 12th ed. Munich 2004, 817 pp.; Italy: PICONE P. / FOCARELLI C. (eds.), Codice del diritto internazionale privato, Naples 1996, 623 pp.; Netherlands: BOELE-WOELKI K. (ed.). Internationaal Privaatrecht. Verordeningen, Verdragen & Wetten 2004/2006, Nijmegen 2004, 438 pp.; Spain: ÁLVAREZ GONZÁLEZ S. / ESPLUGUES MOTA C. / RODRÍGUEZ MATEOS P. / SÁNCHEZ LORENZO S. (eds.), Legislación de derecho internacional privado, 7th ed. Granada 2004, 694 pp.; BORRÁS RODRÍGUEZ A. / BOUZA VIDAL N. / GONZÁLES CAMPOS J.D. / VIRGÓS SORIANO M. (eds.), Legislación básica de Derecho internacional privado, 13th ed. Madrid 2003, 1131 pp.; Switzerland: BUCHER A. (ed.), Internationales Privatrecht. Bundesgesetz und Staatsverträge. Textausgabe, 5th ed. Basel / Geneva / Munich 2003, 293 pp.; ID. (ed.), Droit international privé. Loi fédérale et Conventions internationales. Recueil de textes, 5th ed. Basel/Geneva/Munich 2003, 268 pp.; WALTER G. / JAMETTI GREINER M. / SCHWANDER I. (eds.), Internationales Privat- und Verfahrensrecht. Texte und Erläuterungen, 2 vols., Berne, loose-leaf. 2004, approx. 700 pp.; United Kingdom: CHUAH J. / EARLE R. (eds.), Statutes and Conventions on Private International Law, 2nd ed. London, Sydney, Portland 2004, 349 pp. 21 Germany, e.g., copied the 1973 Hague Maintenance Convention in Article 18 EGBGB and the 1980 Rome Convention on the Law Applicable to Contractual Relations in Articles 27 et seq. EGBGB. Other legislators preferred to refer to international instruments as dealing with contracts (cf. § 35 (1) Austrian PIL Statute; Article 57 Italian PIL Statute),

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Kurt Siehr does not affect international treaties’22 or ‘Provisions of instruments of public international law take precedence, insofar as they have become law directly applicable in Germany. Instruments of the European Communities remain unaffected.’23 Such statements may be useful to remind the reader that there are other sources than the national statute on private international law. But they do not reveal the ranking of these sources. This is done more precisely by the international instruments themselves. They sometimes expressly or tacitly provide that conventions on the law governing international issues replace conflicting national rules24 or that conventions on international legal assistance do not exclude the application of competing rules of national or international origin.25 Uncertainties about the hierarchy of sources still remain.26 The problems which authors have attempted to solve in lengthy studies27 may not be solved in these short lines. Therefore, one should prefer a very flexible statement, such as ‘This [national] Act does not affect international instruments’. b)

Special Problems in the European Union

Special problems arise within the European Union. As soon as the European Communities have passed legislation on issues of conflict of laws, the Member States may no longer deviate from this Community legislation by entering into international agreements different from Community law. As the normal conflicts rules of Community legislation are not limited to inter-European cases, but extend also to relations with third States, it is impossible to enter into conventions on the applicable law with third States without the permission of the European legislator. Until now, the drafts for the Rome Regulations on the law applicable to contractual

maintenance (cf. Articles 49 and 83 (1) Swiss PIL Statute) or torts (cf. Article 134 Swiss PIL Statute). Cf. to this problem KRÄTSCHMER S., Die Integration von Staatsverträgen in nationales IPR und IZPR am Beispiel der italienischen IPR-Kodifikation von 1995, Berlin 2004. 22 Article 1 (2) Swiss PIL Statute. 23 Article 3 (2) German EGBGB. 24 Cf., e.g., Article 23 of the 1980 Rome Convention on Contractual Obligations. 25 Cf., e.g., Article 23 of the 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations; Article 34 of the 1980 Hague Convention on Child Abduction. 26 As to the relation between the Brussels / Lugano Convention / Regulation of 1988/2000 and national rules on enforcement of foreign judgments cf. DONZALLAZ Y., La Convention de Lugano du 16 septembre 1988 concernant la compétence judiciaire et l’exécution des décisions en matière civile et commerciale, vol. 1, Berne 1996, p. 98 et seq.; KROPHOLLER J., Europäisches Zivilprozeßrecht, 8th ed. Heidelberg 2005, Article 32, at n. 6. 27 Cf., e.g., MAJOROS F., Les Conventions internationales en matière de droit privé, vol. II/1: Le droit des conflits de conventions, Paris 1980; VOLKEN P., Konventionskonflikte im internationalen Privatrecht, Zurich 1977.

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General Problems of PIL in Modern Codifications and non-contractual obligations28 provide three different answers to the problems mentioned: -

There is no provision giving any freedom to Member States to enter into international conventions covering the same matters as a Regulation.

-

Existing conventions remain in force and may be applied in relation to third States (Draft for Rome I Regulation Article 23 (2) Sentence 1) or until the Community adopts detailed legislation in the same field (Draft for Rome II Regulation Article 7 (1) concerning the Hague Traffic Accident Convention of 1971).

-

In intra-European relations, European law takes precedence over international conventions (Draft for Rome I Regulation Article 23 (2) sentence 2).

These provisions, however, do not solve the vigorously debated question of the general treaty-making power of the European Union with respect to the private law relations of Member States with third States. The European Union has no general treaty-making power. Treaties may, however, be negotiated by the Union if, for specific cases, this is expressly mentioned in the Rome Treaty establishing the Community, or if this power is implicitly attributed to the Union for matters within the legislative competence of the Union,29 provided this has already been exercised.30

B.

Form of Conflicts Rules

1.

Hard and Fast Rules v. Approach and Weighing of Contacts

National statutes of private international law have a long tradition of formulating hard and fast conflicts rules, intentionally avoiding ‘non-rules’, such as guidelines for courts, which may then decide disputes according to choice-influencing considerations or according to a list of contacts and principles for adjudicating conflicts cases. Such non-rules may be excellent for a non-binding restatement of rules, such as the American Restatement of the Law Second, Conflict of Laws 2nd of 1971, but they should be avoided in a binding statute of private international law. Courts, lawyers, and laymen should know how a case will be decided in local courts. They 28 Draft of the Commission of the European Communities of a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I) of 15 December 2005, COM(2005) 650 final; Position of the European Parliament adopted at first reading on 6 July 2005 with a view to the adoption of Regulation (EC) No. …/2005 of the European Parliament and the Council on the law applicable to non-contractual obligations (Rome II), EP-PE_TC1-COD(2003)0168. 29 ECJ 31 March 1971, Case 22/70, in: ECR 1971, 263 (Commission v. Council, ‘AETR’). 30 Opinion 1/1994 (WTO/GATS/TRIPS) of the ECJ 15 November 1994, in: ECR 1994, I-5267.

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Kurt Siehr do not need a kind of ‘cookbook’, in which they might check how a decision may be prepared, in order for the final ‘dish’ to be presented to the parties. Statutes codify legal norms and should be more than a manual instructing the reader in how to prepare norms by himself. Because of this, national statutes and international conventions do not start with the general principles, which should be applied by law courts. Such principles are the basis of specific conflicts rules, as can be seen in Article 4 (1) of the 1980 Rome Convention on the Law Applicable to Contractual Obligations. The law of that State should govern, with which the contract has ‘the closest connection’. In addition to this, there are presumptions as to the closest connection with respect to certain types of contracts (Article 4 (2)-(4) Rome Convention) and special evasion clauses to avoid artificial results (Article 4 (1) sentence 2, (5), Article 6 (2) Rome Convention). Apart from explaining the underlying philosophy of an instrument, in detailed considerations laid down in lengthy preambles, the question of whether evasion clauses should belong to the general part of a conflict of laws statute or instrument must be answered.

2.

Evasion or Escape Clauses

Evasion or escape clauses (Ausnahmeklauseln, exceptieclausule, clauses échappatoires ou d’exception,31 clausole d’eccezione) in European codifications are recent phenomena. The first instrument enacting special evasion clauses was the 1980 Rome Convention. This Convention, unifying the private international law of contracts, was intended to avoid rigid conflicts rules and provided special evasion clauses as a kind of ‘safety valve’. a)

Special Evasion or Escape Clauses

National codifications and international instruments of private international law adhere, more or less, to the ‘jurisdiction-selecting approach’, as it is called in the United States, as opposed to the ‘rule-selecting approach’ favoured by many American courts and some American codifications.32 Therefore, contracts, torts, 31 Cf. DUBLER C.E., Les clauses d’exception en droit international privé, Geneva 1983; KOKKINI-IATRIDOU D. (ed.), Les clauses d’exception en matière de conflits de lois et de conflits de juridictions – ou le principe de proximité, Dordrecht 1994. 32 Cf. Articles 3515-3549 Louisiana Civil Code, in West’s Louisiana Statutes Annotated, Civil Code, vol. 17 (St. Paul, Minn. 1972 and 2005 Cumulative Annual Pocket Part), p. 182 of the Pocket part; also reproduced in: IPRax 1993, p. 56 et seq. and in: RabelsZ 1993, p. 508 et seq., with an article by SYMEONIDES S., ‘Private International Law Codification in a Mixed Jurisdiction: The Louisiana Experience’, in: RabelsZ 1993, pp. 460507; in French translation in: Rev. crit. dr. int. pr. 1992, p. 394 et seq., with an article by SYMEONIDES S.,‘Les grands problèmes de droit international privé et la nouvelle codification de Louisiane’, in: Rev. crit. dr. int. pr. 1992, pp. 223-281. As to the Oregon Act Relating to Conflict of Laws Applicable to Contracts cf. Oregon Revised Statutes 81.100-81.135 (2001 and Annual Supplements), also in: RabelsZ 2003, p. 748 et seq., with an article by

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General Problems of PIL in Modern Codifications and other private law relations are governed by the law of that country, which has the closest connection with that relation, except those parts of it, which, by dépeçage, are treated separately, such as, e.g., formalities, capacity of the parties or traffic regulations. If the closest connection is, by presumption, rigidly fixed, some legislators try to avoid fixed results in choice-of-law rules and allow courts to deviate from said rigid rules by making use of special evasion clauses. These may be applied if the presumption of the closest connection does not work. A good example of a special evasion clause is Article 4 (5) of the 1980 Rome Convention on the Law Applicable to Contractual Obligations. This paragraph reads: ‘Paragraph 2 [law of the habitual residence of the party performing the characteristic performance as the law applicable to contracts in the absence of choice by the parties] shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country.’ The reason for including such an evasion clause is very simple. There are so many different situations of fact, and so many different types of contracts, that each detail and specific circumstance may not be taken into consideration when formulating a general rule on the law governing all types of contracts. In order to avoid unfair, over-generalized, and rigid results, the special evasion clause functions as a ‘safety valve’ and invites the judiciary to formulate certain sub-rules for special circumstances. National legislators also add special evasion clauses to their codifications of private international law.33 As of today, there are very few cases in which special evasion clauses have been applied.34 SYMEONIDES S., ‘Codifying Choice of Laws for Contracts – The Oregon Experience’, in: RabelsZ 2003, pp. 726-747. Also, Puerto Rico got a new project of PIL codification. Cf. SYMEONIDES S., ‘Codifying Choice of Law for Contracts: The Puerto Rico Project’, in: Law and Justice in a Multistate World. Essays in Honor of Arthur T. von Mehren, Ardsley, N.Y. 2002, pp. 419-437. 33 Cf. Articles 41 and 46 German EGBGB (torts and property). 34 Cf. Cass. soc. 23 March 2005 (unpublished) with note by BUREAU D., in: Revue des contrats 2005, p. 1181 (applying French labour law and not the law of Zaire); Cour d’appel de Versailles 6 February 1991 (Bloch c. Société Lima), in: Rev. crit. dr. int. pr. 1991, p. 745 with note LAGARDE P. and in: Clunet 1992, with note FOYER J. (applying Italian law instead of French law); Bank of Baroda v. Vysya Bank, in: [1994] Lloyd’s Law Reports 87 (Com. Ct.) (applying English law instead of Indian law); Definitely Maybe (Touring) Ltd. v. Marek Lieberberg Konzertagentur GmbH, in: [2001] 1 Weekly Law Reports 1745 (Q.B.) (applying German law instead of English law). Most cases, however, declined to apply Article 4 (5) and stayed with the regular conflicts rule of Article 4 (2). Cf., e.g., OLG Frankfurt am Main 10 January 2001, in: IPRspr. 2001, Nr. 23; Hoge Raad 25 September 1992 (Société Nouvelle des Papéteries c. B.V. Machinefabriek BOA), Nederlandse Jurisprudentie 1992 Nr. 750, with report by RAMMELOO S., ‘Die Auslegung von Art. 4 Abs. 2 und Abs. 5 GVÜ: eine niederländische Perspektive’, in: IPRax 1994, pp. 243-

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Kurt Siehr b)

General Evasion or Escape Clauses

It is a general problem in jurisdiction-selecting codifications of private international law to diversify and differentiate rigid conflicts rules. This can be done, and has been done, by law courts modo legislatoris. They formulated sub-rules for special types of cases and for certain problems to be decided separately as Teilfragen (collateral questions). Such a rule-creating effort may be encouraged by evasion clauses. If this is done only by special evasion clauses, it may be argued that, in cases covered by conflicts rules without a special evasion clause, courts are not permitted to deviate from rigid conflicts rules. Therefore, it is better to formulate a general evasion clause. This was done for the first time by the Swiss legislator in Article 15 (1) of the Federal Statute of 1987 on Private International Law. This provision reads: ‘As an exception, any law referred to in this Act is not applicable if, considering all the circumstances, it is apparent that the case has only very loose connections with this law and that the case has much closer connections with another law.’ Article 15 (2) of the same Statute adds that the evasion clause does not apply in cases in which the law governing has been chosen by the parties. Up to now, there have been at least three codifications, which have taken the Swiss Federal Act as a model, and also included a general evasion clause. The Quebec Civil Code of 1991 copied the Swiss general evasion clause almost verbatim in Article 3082 Civil Code;35 the new Act of 2001 on Private International Law of the Republic of Korea36 and the Belgian Code of 2004 on Private International Law did the same.37 Other legislators may have been afraid to introduce a general

248; Credit Lyonnais v. New Hampshire Insurance Co., in: [1997] 2 Lloyd’s Law Reports 1 (C.A.); Ennstone Buildung Products Ltd. v. Stanger Ltd., in: [2002] 1 Weekly Law Reports 3059 (C.A.); Caledonia Subsea Ltd. v. Micoperi Srl., in: [2002] Scots Law Times 1022. 35 Article 3082 Quebec Civil Code reads: ‘A titre exceptionnel, la loi désignée par le présent livre n’est pas applicable si, compte tenu de l’ensemble des circonstances, il est manifeste que la situation n’a qu’un lien éloigné avec cette loi et qu’elle se trouve en relation beaucoup plus étroite avec la loi d’un autre Etat. La présente disposition n’est pas applicable lorsque la loi est désignée dans un acte juridique.’ 36 § 8 of the Korean PIL Statute of 2001. Original and German translation in: RabelsZ 2006, issue No. 2, with article by PIßLER B., ‘Einführung in das neue internationale Privatrecht der Republik Korea’, ibid. English translation in this Yearbook 2003, p. 135, with article by SUK K.H., ‘The New Conflict of Laws Act of the Republic of Korea’, ibid., 99-141. The English translation of Article 8 (1) reads: ‘If the governing law designated by this Act is only slightly connected with the legal relationship concerned, and it is evident that the law of another country is most closely connected with the legal relationship, the law of the other country shall apply.’ 37 Article 19 Belgian PIL Code (note 7) reads: ‘§ 1er. Le droit désigné par la présente loi n’est exceptionnellement pas applicable lorsqu’il apparaît manifestement qu’en raison de l’ensemble des circonstances, la situation n’a qu’un lien très faible avec l’Etat dont le droit

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General Problems of PIL in Modern Codifications evasion clause because it might create uncertainty and less respect for rigid conflicts rules. In a play on words, the ‘Ausweichklausel’ (escape clause) has derogatively been called ‘Aufweichklausel’ (softening clause).38 There is, however, no evidence supporting such fears. It has recently been shown that Article 15 (1) Swiss Federal Act on Private International Law has not produced any of the difficulties and uncertainties predicted by sceptical observers.39 This may be an incentive for all legislators to introduce a general evasion clause. They should do so, as should the European Union.

3.

Multilateral or Unilateral Conflicts Rules

Should conflicts rules be unilateral, insofar as they only determine the territorial and personal field of application of the lex fori, or should they determine the law governing in multilateral rules, which also designate foreign law as governing the relevant issue? This question has been answered variously in the past. The Imperial legislator of the German EGBGB of 1896 refrained from providing multilateral rules because of arguments based on public international law.40 Very soon, however, German courts extended the statutory unilateral conflicts rules to multilateral ones. The main argument for this extension was that the underlying principle of unilateral rules for the application of domestic law is also valid for foreign law. Both laws should be treated equally. Since that time, there has been no national codification of private international law, which restricted its sphere of application to that of the lex fori. All national codifications formulate multilateral conflicts rules and in very few instances are satisfied with unilateral rules. est désigné, alors qu’elle présente des liens très étroits avec un autre Etat. Dans ce cas, il est fait application du droit de cet autre Etat. Lors de l’application de l’alinéa 1er, il est tenu compte notamment: du besoin de prévisibilité du droit applicable, et de la circonstance que la relation en cause a été établie régulièrement selon les règles de droit international privé des Etats avec lesquels cette relation présentait des liens au moment de son établissement. § 2. Le § 1er n’est pas applicable en cas de choix du droit applicable par les parties conformément aux dispositions de la présente loi, ou lorsque la désignation du droit applicable repose sur le contenu de celui-ci.’ 38 STURM F., ‘Die allgemeinen Grundsätze im schweizerischen IPR-Gesetzesentwurf. Eine kritische Analyse’, in: Beiträge zum neuen IPR des Sachen-, Schuld- und Gesellschaftsrechts. Festschrift für Prof. Rudolf Moser, Zurich 1987, pp. 3-23, at 7. 39 VON OVERBECK A.E., ‘The Fate of Two Remarkable Provisions of the Swiss Statute on Private International Law’, in: this Yearbook 1999, pp. 119-133, at 127-133; and recently Appellationsgericht Basel-Stadt 17 March 2004, in: Basler Juristische Mitteilungen 2005, p. 322 (applying Article 15 of the Swiss PIL Statute to an undecided collateral matter of a French divorce decree), confirmed by the Federal Court on 11 February 2005, in: La sem. judiciaire 2005, p. 452. 40 Cf. HARTWIEG O. / KORKISCH F. (eds.), Die geheimen Materialien zur Kodifikation des deutschen Internationalen Privatrechts 1881-1896, Tübingen 1973, pp. 12-18.

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Kurt Siehr Today unilateralism is discussed in debates on the hierarchy of sources. Within the European Union, it has been proposed to limit regulations of the Union to unilateral rules and to rules on the recognition of foreign acts and decisions.41 By restricting European legislation to such a system, the national conflicts law would retain more relevance before the bilateral rules. There seems, however, to be no chance of this system being accepted by the European Union. All member States want to avoid a complicated concurrence of national and European conflicts rules. There has also been a debate in Australian the possibility of federal courts creating multilateral conflicts rules, which would bind the State legislatures and State courts.42

C.

Connecting Factors

One of the most important decisions to be made by every legislator of private international law statutes is the selection of connecting factors for choice-of-law rules. Some major issues must be decided. What is the personal law of physical persons? Is party autonomy permitted? Should there be a unitary approach to conflicts law, without any distinctions between different types of property and different issues of legal transactions? Should the general policy of selection of the applicable law be stated at the beginning?

1.

General Policy of Law Selection

The Austrian Federal Statute of 1978 on Private International Law starts with a general statement of the basic policy of the statute. Under the headline ‘Principle of the Strongest Connection’, § 1 of this Statute provides: ‘(1) Factual situations with foreign contacts shall be judged, in regard to private law, according to the legal order to which the strongest connection exists. (2) The special rules on the applicable legal order, which are contained in this Federal Statute (conflicts rules), shall be considered as expressions of this principle.’43

41 LAGARDE P., ‘Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures’, in: RabelsZ 2004, pp. 225-243. 42 STELLIOS, J., ‘Choice of Law and the Australian Constitution: Locating the Debate’, in: Federal Law Review 2005, pp. 7-55, at 44-55. 43 Translation by PALMER E. in: 28 Am. J. Comp. L. 222 (1980). The German original reads: ‘Grundsatz der stärksten Beziehung. § 1 (1) Sachverhalte mit Auslandsberührung sind in privatrechtlicher Hinsicht nach der Rechtsordnung zu beurteilen, zu der die stärkste Beziehung besteht. (2) Die in diesem Bundesgesetz enthaltenen besonderen Regelungen über die anzuwendende Rechtsordnung (Verweisungsnormen) sind als Ausdruck dieses Grundsatzes anzusehen.’

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General Problems of PIL in Modern Codifications Although there may be some doubt as to whether this provision may serve as a kind of escape clause,44 it is rather intended to be a guideline for unforeseen cases, as a rule for gap-filling by the courts.45 This has been more precisely expressed by the Liechtenstein Statute of 1996 on Private International Law. Article 1 (2) of this Statute reads: ‘If there is no conflict rules, that legal order governs, with which the factual situation has the strongest connection.’46 A very similar attitude can be found in Louisiana. Article 3515 of the Civil Code states: ‘Except as otherwise provided in this Book [Book IV of the Civil Code], an issue in a case having contacts with other States is governed by the law of the State whose policies would be most seriously impaired if its law were not applied to that issue. – That State is determined by evaluating the strength and pertinence of the relevant policies of all involved States in light of: (1) the relationship of each State to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of the parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one State.’47 Such statements drafted by eminent scholars are extremely helpful. They indicate whether the codification follows a rather conservative model, based on a jurisdiction-selecting approach, determining the law with the closest connection,48 or 44 PALMER E., ‘The Austrian Codification of Conflicts Law’, in: Am. J. Comp. L. 28 (1980), pp. 197-221, at 204-205; MÄNHARDT F., Die Kodifikation des österreichischen Internationalen Privatrechts, Berlin 1978, p. 39; SCHWIMANN M., ‘Zu den allgemeinen Bestimmungen des österreichischen IPR-Entwurfs 1975’, in: Juristische Blätter 1978, pp. 110 (2), was afraid of an ‘ungehemmten und allzu bequemen Billigkeitsjudikatur’ (unbridled and too comfortable equity jurisprudence). This expectation did not become true. In a procedural system based on the principle of iura novit curia, courts like hard and fast rules and abstain as long as possible from making use of their discretion. The situation is different in systems in which the attorneys must plead conflicts rules and foreign law and in which they calculate their fees according to their time sheet. In such systems, attorneys like to discuss conflicting policies for days and weeks. Here we can see that very down-to-earth elements contribute to the explanation of major differences between legal systems. 45 SCHWIND F., ‘Entwurf eines Bundesgesetzes über das internationale Privat- und Prozeßrecht’, in: Zeitschrift für Rechtsvergleichung 12 (1971), pp. 161-248 (180-184). 46 The Liechtenstein PIL Statute is reproduced in: Liechensteinisches Landesgesetzblatt 1996, No. 194, as well as in: IPRax 1997, p. 364 et seq., RabelsZ 1997, p. 545 et seq., Riv. dir. int. priv. proc. 1998, p. 251 et seq.; French translation in: Rev. crit. dr. int. pr. 1997, p. 858 et seq. 47 See supra note 32. 48 NEUHAUS P.H., ‘Zum Schwindschen Entwurf eines österreichischen IPR-Gesetzes’, in: Zeitschrift für Rechtsvergleichung 1973, pp. 81-90, at 82.

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Kurt Siehr whether the statute is based on a rule-selecting approach, weighing conflicting policies and choice-influencing considerations.49 These attitudes are important for gap-filling and corrections by making use of escape clauses.

2.

Nationality v. Domicile/Habitual Residence

There are some national codifications of private international law which define the personal law of physical persons for all references to that law in special conflicts rules. An example is § 9 (1) of the Austrian Federal Statute on Private International Law of 1978. Here it is said that the personal law is the law of the person’s nationality, his or her lex patriae.50 Most national statutes, however, abstain from such definitions and prefer to use the person’s nationality, domicile or habitual residence as a connecting factor in special conflicts rules on matters of family law and the law of succession. Definitions of the Austrian type may be inserted into a general part of a codification. More important, however, are two other questions: Should the lex patriae be the personal law, and which national law should prevail if a person has more than one nationality? In former times, the nationality of a person was advocated as a connecting factor in private international law for political reasons. Young national States wanted to strengthen the relations of all their citizens with their country,51 and the legal affairs of foreigners were qualified as problems hardly to be solved exclusively by conflicts rules of the forum State.52 These reasons are no longer relevant. The pros and cons of the nationality principle are very practical ones: Which is the State with which a physical person is most closely connected? Is it the country of origin, or the country in which the person is domiciled or has his or her habitual residence? There are serious doubts whether these questions can be answered in the same way for all personal relations. In matters between a husband and wife, the common lex domicilii or the law at the common habitual residence may be preferred, in order to avoid discriminations against mixed marriages of spouses from different countries.53 In the field of filiation, the child’s habitual residence is the place where the best interests of the child can most easily be evaluated.54 In patrimonial matters (matrimonial property, succession) and with respect to the person’s SYMEONIDES S., ‘Private International Law’ (note 32), p. 468 et seq. Similar definitions of the personal law of natural persons can be found, i.a., in Article 10 Liechtenstein PIL Statute; Article 9 (1) Spanish Código civil; Article 39 (1) Tunisian PIL Statute. 51 MANCINI P.S., ‘Della nazionalità come fondamento del diritto delle genti. Prelezione al corso di diritto internazionale e marittimo pronunziata nella R. Università di Torino nel di 22 gennaio 1851’, in: JAYME E. (ed.), Della nazionalità (note 1), pp. 19-64. 52 As to the discussion in Germany at the end of the 19th century when the EGBGB was drafted, cf. HARTWIEG / KORKISCH (note 40). 53 Cf. Article 14 (1) No. 2 German EGBGB. 54 Cf. Article 21 German EGBGB. 49 50

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General Problems of PIL in Modern Codifications name, a choice may be given to the spouses,55 the deceased56 or the person,57 between the lex patriae and the lex domicilii. Finally, it must be taken into account that most Hague Conventions and the forthcoming regulations of the European Union prefer the habitual residence as primary connecting factor.58 A co-ordination of different sources may be easier if these sources adopt the same connecting factor. In these circumstances, it seems better not to define a person’s personal law in the general part of a conflicts instrument and to decide pragmatically, for each specific problem of the special part of a codification, which connecting factors may be used to choose the law of the person’s closest connection. More important are certain collateral problems of definitions and clarifications. The first problem is whether the notions of ‘nationality’, ‘domicile’ and ‘habitual residence’ should be defined. Some codifications insert definitions of these terms.59 There are, however, good reasons not to do so. The notion of ‘nationality’ cannot be defined unilaterally. Every country must do so with respect to its own citizens. The term ‘domicile’ (woonplaats, Wohnsitz, domicile, domicilio) may be defined and distinguished from the habitual residence. The notion of ‘habitual residence’ is hard to define. The Hague Conference on Private International Law declined to give a definition and admitted that in different circumstances the ‘habitual residence’ may be acquired or lost more or less easily. In order to keep abreast with the Hague Conventions, it seems better not to define this term. If a person’s nationality is used as a connecting factor, and the person has more than one nationality, it must be decided which of these nationalities prevails. Very often, a distinction is drawn between local citizens with another foreign nationality and foreign nationals with several nationalities. With respect to the first group, the local citizenship should prevail,60 and in other cases the ‘effective’ nationality should be the relevant one, i.e. the nationality of that country with which the person is most closely connected, especially through his or her habitual residence.61 There are no valid reasons to treat these two situations differently.62 No State is obliged, under national or international law, to apply, in private law cases, to its own national citizens, wherever they live, their national law. The person’s local nationality is preferred only because of practical reasons. Even this is no longer valid, because within the European Union any discrimination because of Cf. Article 15 (2) No. 1 German EGBGB. Cf. Article 90 (2) Swiss PIL Statute. 57 As to a person’s name cf. Article 10 (2) No. 1, (3) No. 1 German EGBGB. 58 Cf. the reactions of national governments to the Green Books COM (2005) 65 on Succession and Wills and COM (2005) 82 on Divorce. 59 Cf. Articles 20-22 Swiss PIL Statute. 60 Cf. Article 5 (1) sentence 2 German EGBGB. 61 Cf. Article 5 (1) sentence 1 German EGBGB. 62 MANSEL H-P., Personalstatut, Staatsangehörigkeit und Effektivität, Munich 1988, p. 85 et seq. 55 56

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Kurt Siehr nationality is prohibited (Article 12 EC). Therefore, the principle of nationality has been held – at least in commercial transactions – as incompatible with the law of the European Economic Community.63 Another distinction, however, is necessary. The ‘effective’ nationality is decisive only with respect to the law governing substantive law. If, however, jurisdiction is given to the forum patriae, the State of each nationality may make use of this basis for jurisdiction. The other fora patriae, later seized of the same dispute between the same parties, should stay proceedings because of lis pendens and should not deny recognition of the foreign judgment because of lack of jurisdiction. This distinction is excellently drawn by Article 23 of the Swiss Federal Act on Private International Law and therefore could serve as a model for the treatment of multi-national persons in the general part of a conflicts codification.

3.

Statutory Designation of the Law Governing v. Party Autonomy

An international instrument on the law governing contractual obligations may start with party autonomy, as do the Hague Sales Convention of 1955 and the Rome Contracts Convention of 1980.64 But no comprehensive codification has ever stated that the law governing international problems may be chosen by the parties. In general, the applicable law is fixed by statutory designations and, in some cases, the parties or the party may fix it by a choice of law. This may be done in contractual matters and, with certain limitations as to the laws to be chosen, in matters of personal names, matrimonial property and succession. Other areas of party autonomy may be added, but they must be mentioned in the special part of a codification, where party autonomy is granted to the parties. The tendency to favour party autonomy may not be codified in a general clause. The only provision of general interest would be an article providing that contractual choices of law refer to substantive law and do not incorporate the conflicts rules of the law chosen, and that a subsequent choice of law shall not impair the legal position of third parties.65

4.

Unity of Property v. Splitting the Property

There are two different attitudes towards the treatment of matrimonial property law and the estate of a deceased person. Property may be treated as a unit and be subject to the law governing the entire matrimonial property or the entire estate, or property may be subject to different laws, depending on whether the property is 63 DROBNIG U., ‘Verstößt das Staatsangehörigkeitsprinzip gegen das Diskriminierungsverbot des EWG-Vertrages?’, in: RabelsZ 1970, pp. 636-662. 64 Article 2 of the Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods; Article 3 of the Rome Convention of 19 June 1980 on the Law Applicable to Contractual Obligations. 65 A general conflicts rule of this kind is part of the Austrian PIL codification. Cf. § 11 (1) and (3) Austrian PIL Statute of 1978.

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General Problems of PIL in Modern Codifications movable or immovable. There is no correct or incorrect solution to this problem. The solution may be found in substantive law. If domestic law provides a mandatory portion of the deceased’s estate for family members, it might be better to treat all property in a unitary way, in order to prevent the evasion of the mandatory share through investment in real estate in foreign countries without such a mandatory share. This should be regulated in the conflicts rule for matrimonial property and for succession, not as a general provision. There is also no reason to make a general exception with respect to immovable property located abroad, and to give in to a ‘stronger foreign lex rei sitae’ as in Article 3 (3) of the German EGBGB.66 Legislators may, however, refrain from assuming jurisdiction with respect to foreign immovable property as in Article 86 (2) Swiss PIL Statute. In short, there is no need for a general provision on property issues.

5.

Time Factors

a)

Conflit mobile

Every conflicts rule shall determine the time at which the connecting factor (nationality, domicile, location of goods, and choice of applicable law) must exist. The Turkish Statute on Private International Law generally fixes the personal connecting factors (nationality, domicile, habitual residence) at the time of initiating a lawsuit, unless special rules provide otherwise.67 Such a generalization does not seem to be very useful. The time factor should be left to each separate conflicts rule. b)

Vested Rights

Entire conflicts systems have, both yesterday and today, been based on the theory of vested rights. Ulricus Huber (1636-1694) applied local law to each person living in the forum State and to each act performed in that State, and obliged each State to recognize all rights acquired under a foreign law as a vested right.68 This theory

66 Cf. SIEHR K., ‘Vermögensstatut und Geldausgleich im IPR. Gilt Art. 3 Abs. 3 EGBGB auch für den Pflichtteil, den Zugewinnausgleich und den Versorgungsausgleich?’, in: Balancing of Interests. Liber Amicorum Peter Hay, Frankfurt am Main 2005, pp. 389401. 67 Article 3 Turkish PIL Statute. 68 HUBER U., Praelectiones iuris civilis, part 2 (Leipzig 1735) book I, title III, no. 2; also reprinted by MEILI F., ‘Ein Specimen aus der holländischen Schule des Internationalen Privatrechts (Ulricus Huber 1636-1694)’, in: Zeitschrift für Internationales Privat- und Strafrecht 1898, pp. 189-200, at 193. Cf. also GUTZWILLER M., Geschichte des Internationalprivatrechts, Basel, Stuttgart 1977, p. 155 et seq, at 158.

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Kurt Siehr was applied in the United States69 until it was replaced by the ‘local law’ theory and other approaches.70 Today, the ‘vested rights’ theory has been revived in Europe in the uniform legislation of the European Union on conflict of laws.71 However, only the – correct – idea that rights and positions (of status) acquired abroad under the competent law (governing that acquisition according to the conflicts rules of the recognizing State) must be recognized as vested rights has survived. This is expressed differently in some codifications. § 7 of the Austrian Federal Statute on Private International Law correctly provides: ‘A subsequent change in the prerequisites determinant for the choice of a particular legal order has no effects upon already completed facts.’72 Without mentioning the technical term ‘vested rights’, this provision in substance recognizes such rights and positions (acquisition of status). The Romanian Act of 1992 on Private International Law is more explicit and provides: ‘Rights acquired abroad are recognized in Romania unless they violate public policy of the Romanian private international law.’ A similar, but more complicated, provision has been included in the recent codification of Venezuela.73 Any theory on the recognition of vested rights must answer the crucial question of which is the foreign law competent to vest rights and positions. It is the applicable law according to the conflicts rules of the recognizing State. This was already explained by Carl Georg von Wächter (1797-1880) in 1842.74 If this is not mentioned in a statutory provision, any rule on vested rights might be misleading. Therefore, it might be better to leave this problem unregulated and accept it as a general question associated with the – equally general – problem of conflit mobile.

Cf. Justice HOLMES O.W., in: Slater v. Mexican National R.R. Co., 194 U. S. 120, 126 (1904), and BEALE J., Selection of Cases on the Conflict of Laws, vol. III, Cambridge, Mass. 1902, p. 517. 70 COOK W.W., ‘The Logical and Legal Bases of the Conflict of Laws’, in: 33 Yale Law Journal 457 (1923/24), p. 469 et seq., reprinted in: COOK W.W., The Logical and Legal Bases of the Conflict of Laws, Cambridge, Mass. 1949, pp. 3 et seq. at 20 et seq. 71 Cf. LAGARDE (note 41), at 229 et seq. 72 Translation by PALMER (note 43). The original reads: ‘Die nachträgliche Änderung der für die Anknüpfung an eine bestimmte Rechtsordnung maßgebenden Voraussetzungen hat auf bereits vollendete Tatbestände keinen Einfluß.’ 73 Article 5 of the Ley de Derecho Internacional Privado de 1998. 74 WÄCHTER C.G. VON, ‘Ueber die Collision der Privatrechtsgesetze verschiedener Staaten’, in: Archiv für die civilistische Praxis 1842, pp. 1-9; KELLER M. / SIEHR K., Allgemeine Lehren des internationalen Privatrechts, Zurich 1986, p. 418 et seq., at 424. 69

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General Problems of PIL in Modern Codifications 6.

Dépeçage

It is well known and accepted almost everywhere that not all questions in a single case will be answered by the same law. Certain general problems, to be found in many cases, are treated separately. The question is whether they should be regulated in the general part of a conflicts codification. a)

Formalities

It may be hard to distinguish between substance and formalities. Once a problem has been qualified as a formality, almost all jurisdictions agree in at least two respects. Formalities should not be governed exclusively by the law applicable to substance, and formalities deserve the favor negotii vel validitatis. Most PIL statutes provide different provisions for the law applicable to formalities of different kinds of transactions, e.g. commercial contracts, matrimonial property contracts or wills. In a very few codifications, this is the case for all transactions, whatever their subject matter might be.75 The most liberal provision for formalities is Article 1 of the Hague Convention of 1961 on the Conflict of Laws Relating to the Form of Testamentary Dispositions.76 This article enumerates not less than eight different laws according to which a will may be valid as regards form. In addition to this, different rules of PIL statutes of the contracting States are not excluded (Article 3). There is no need for a general provision on formalities for all legal transactions. b)

Capacity

It seems to be an ancient tradition in conflicts codification to have a general provision on personal status and the law governing a person’s capacity. Article 3 sentence 3 of the French Code civil of 1804 is well-known, which provides as follows : ‘Les lois concernant l’état et la capacité des personnes régissent les Français, même résidant en pays étrangers.’ Similar provisions may also be found in the early codifications of Prussia (1794), Austria (1811), Zurich (1854) and Italy (1865).77 Such provisions may have served the old statutist theory of conflict of laws, according to which the law governing the statuta personalia had to be fixed. Modern PIL codifications follow this tradi75 This is the case in § 8 of the Austrian PIL statute for the formalities of a ‘Rechtshandlung’, comprising all kinds of legal transactions. 76 Recueil (note 9), No. XI. 77 Prussian Allgemeines Landrecht, Introduction, § 23; Austrian ABGB, §§ 4 and 34; Zürich PGB, §§ 1 and 2; Italian Codice civile of 1865, Article 6. All these provisions may be found in: MEILI F. (ed). Die Kodifikation des internationalen Civil- und Handelsrechts, Leipzig 1891, pp. 12, 25-26, 52-53 and 29.

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Kurt Siehr tion, but for other reasons. They want to ensure that capacity be treated separately from the main issue (e.g. validity of a contract), and sometimes they define, for the entire PIL codification, the so-called personal status as, e.g., codified in Austria and Spain.78 This may also be stated in a European PIL codification. c)

Choice of the Applicable Law

The applicable law may be chosen by the parties to a contract, by spouses with respect to their matrimonial property regime and, unilaterally, by the testator in his or her will. In all these cases, the law governing the validity of the choice must be determined. It seems to be accepted today that the law governing the choice is the law which the parties or party wish to choose for the transaction, the so-called ‘prospective’ lex causae.79 Up to now this has never been precisely formulated in a PIL codification.80 But it could be formulated like this: ‘The validity of a choice of law is determined by the law which, according to the intention of the parties, would govern the transaction if the transaction were valid.’81 And then one might add what the Austrian PIL Statute provides in § 11.82 d)

Statute of Limitations

In most jurisdictions, there is no dépeçage with respect to the statute of limitations, because these time periods are also governed by the law applicable to the relevant class of action, as is provided in Article 10 (1) (d) of the Rome Convention, in

Austrian PIL Statute § 9; Spanish Código civil Art. 9 (1). AUDIT B., Droit international privé, 3rd ed. Paris 2000, p. 679; BALLARINO T. / BONOMI A., Diritto internazionale privato, 2nd ed. Padova 1996, pp. 602-603; DICEY A.V. / MORRIS J.H.C. / COLLINS L., The Conflict of Laws, 13th ed. London 2000 with 4th Suppl. 2004, vol. II, p. 1232, para. 32-100; MARTINY D., in: Münchener Kommentar zum BGB, vol. 10, 4th ed. Munich 2006, Article 27 EGBGB, at n. 100; RIGAUX F. / FALLON M., Droit international privé, 3rd ed. Brussels 2005, p. 801; SIEHR K., Das Internationale Privatrecht der Schweiz, Zürich 2002, p. 234. 80 Also, Article 3 (1) sentence 1 of the Rome Convention of 1980 reads: ‘A contract is governed by the law chosen by the parties.’ 81 This formula generalizes Article 8 (1) Rome Convention of 1980, which also applies, according to Article 3 (4) Rome Convention, to the ‘existence and validity of the consent of the parties as to the choice of the applicable law’. The formula of the present text covers choice-of-law agreements as well as unilateral choice-of-law clauses in wills. 82 Supra at note 65. 78 79

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General Problems of PIL in Modern Codifications several Hague Conventions,83 and in national codifications or statutes.84 This may be stated in the general part of a PIL regulation, but it is not essential.

D.

Qualification

1.

General Rule on Qualification

More than one hundred years ago, the problem of qualification or characterization (kwalificatie, Qualifikation, qualificazione, calificación) was discovered by Franz Kahn (1860-1904) and Etienne Bartin (1860-1948).85 Since then, this notion has served as a key term of private international law and as an enigma in a complicated and mysterious field of law. Most codifications refrain from dealing expressly with qualification. But there are some, which try to define and regulate the problem of characterization. The earliest provision of this kind seems to be Article 15 of the Portuguese Código civil of 1966/67. This article reads in an English translation: ‘Provisions of this statute cover only such norms which, according to their contents and their functioning, match the provisions of this statute.’86 Article 27 of the Tunisian Code de droit international privé of 1998 is more detailed. Here is the English translation: ‘Qualification takes place according to the categories of Tunisian law, if the task of a provision of a conflicts rule is to designate the law governing. In order to correctly qualify the parts of legal institutions unknown to Tunisian law, these must be interpreted according to foreign law. Qualification must take into account all different international legal categories and specialities of private international law. Qualification within international conventions takes place according to the particular categories of the relevant convention.’87

83 Cf., e.g., Article 10 (2) of the Hague Maintenance Applicable Law Convention of 1973, in: Recueil (note 9), No. XXIV. 84 Cf., e.g., sect. 1 of the British Foreign Limitation Periods Act 1984 (c. 16); Swiss PIL Statute Art. 148 (1); Article 7 Turkish PIL Statute. 85 KAHN F., ‘Gesetzeskollisionen. Ein Beitrag zur Lehre des IPR’, in: Jherings Jahrbücher für Dogmatik 1891, pp. 1-143; reprinted in: KAHN F., Abhandlungen zum IPR, vol. 1, Munich and Leipzig 1928, pp. 1-123 (92 et seq.: ‘latente Gesetzeskollisionen’); BARTIN E., ‘De l’impossibilité d’arriver à la suppression définitive des conflits de lois’, in: Clunet 1897, pp. 225-255, 466-49 and 720-738; reprinted under the title ‘La théorie des qualifications en droit international privé’ in: BARTIN E., Etudes de droit international privé, Paris 1899, pp. 1-82. 86 The original of Article 15 Código civil português reads: ‘A competência atribuíta a uma lei abrange somente as normas que, pelo seu conteúdo e pela função que têm nessa lei, integram o regime do instituto visado na regra de conflitos.’ 87 The original of Article 27 Code de droit international privé reads: ‘La qualification s’effectue selon les catégories du droit tunisien si elle a pour objectif

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Kurt Siehr This provision is correct, yet there are serious doubts whether such a provision should form part of a codification of private international law. The problem of qualification or characterization is a problem of interpretation, construction, and creation of conflicts rules designating the law governing some known and unknown matters of substantive law. Civil law countries, in which the Anglo-American trust is unknown, must qualify trusts. Secular jurisdictions must qualify institutions of religious law, e.g. the Islamic ‘mahr’ (bride-price), and all courts must think about the correct qualification of claims based on culpa in contrahendo. The question is always whether certain institutions are covered by written or unwritten multilateral conflicts rules. Therefore, qualification may be called the ‘cover-question’ of private international law. It seems to be the better policy to leave the general problem of qualification to books and commentaries on private international law. A statutory rule on qualification in general cannot solve all cases. It can only give some methodological directions as to how a correct qualification may be achieved. However, it must be admitted that such a statutory rule does not devalue a conflicts codification.

2.

Special Qualifications

The problem of qualification is, to a large extent, a self-produced problem of private international law. If there were conflicts rules for every question of substantive law, there would be no qualification problem. Codifications, however, provide conflicts rules for certain limited numbers of legal institutions (e.g. contracts, torts, effects of marriage). Under such a system, the question as to which of the mentioned institutions should be considered when attempting to answer the unregulated questions remains open. An answer may be given by special statutory definitions, explanations and specifications. A good example for such a clarification is Article 3 of the Hague Convention of 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement, and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children.88 In order to guarantee the uniform application of this Convention and to avoid the qualification problem of the 1961 Hague Convention on the Protection of Minors,89 Article 3 of the 1996 Convention enumerates the most important matters, which qualify as a ‘measure of protection’ within the meaning of the Convention, and Article 4 of the same Convention tells us which matters are not covered by the Convention. Also, national codifications of d’identifier la règle de conflit permettant de déterminer le droit applicable. Aux fins de qualification, l’analyse des éléments d’une institution juridique inconnue du droit tunisien s’effectue conformément au droit étranger auquel elle appartient. Lors de la qualification, il sera tenu compte des différentes catégories juridiques internationales et des spécificités du droit international privé. La qualification dans le cadre des traités internationaux sera effectuée en fonction des catégories particulières des traités en question.’ 88 Recueil (note 9), No. XXXIV. 89 Recueil (note 9), No. X. This convention did not define the term ‘measure of protection’ (mesure de protection).

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General Problems of PIL in Modern Codifications private international law clarify certain problems. Article 17a German EGBGB specifies that the use of the matrimonial home and the household goods, if located in Germany, are governed by German law and thereby decides that these matters are neither general effects of marriage nor covered by the law governing property or divorce. Also, the Swiss codification makes it clear that the financial support of the mother after the birth of a child is governed by the law applicable to maintenance, thus avoiding any difficult qualification problem.90

3.

Intermediate Summary

The problem of qualification is a hermeneutical matter of correct interpretation and the creation of new conflicts rules. The method cannot be described in a few words in an article on conflicts codification. A rule stating, ‘All qualifications are made lege fori’ would be completely misleading and not very helpful. Therefore, a conflicts codification should not try to insert a general rule on qualification. The only correct statement would be that international conventions and European regulations should be interpreted flexibly according to the specific categories of the relevant instrument and in consideration of uniform application in the Contracting States.91 But this rule should be left to the conventions and regulations, to be emphasized in a separate article of every international instrument.

E.

Renvoi

One of the most complicated matters of private international law to be decided by legislators and law courts is the problem of renvoi (verwijzing, IPR-Verweisung, rinvio, reenvío). It is a problem of co-ordination of conflicts systems. If reference is made to foreign law, it must be decided whether this reference is made to foreign substantive law (Sachnorm-Verweisung), or to foreign conflicts rules, accepting a possible reference back to the lex fori (terugverwijzing, Rückverweisung, rinvio indietro, reenvío de retorno) or on to a third jurisdiction (verderverwijzing, Weiterverweisung, rinvio oltre, reenvío ulterior), or whether the forum State must take foreign conflicts rules into account in a different way. These questions cannot be answered by a single word. Renvoi is neither a necessary evil nor should it be abolished by statute.92 The problems of renvoi are more complicated to address than that.

Cf. Article 83 (2) Swiss PIL Statute of 1987. Cf. BARATTA R., ‘The Process of Characterization in the EC Conflict of Laws: Suggesting a Flexible Approach’, in: this Yearbook 2004, pp. 155-169. 92 SIEHR K., ‘Renvoi: A Necessary Evil or is it Possible to Abolish it by Statute?’ in: FLETCHER I. / MISTELIS L. / CREMONA M. (eds.), Foundations and Perspectives of International Trade Law, London 2001, pp. 193-212. 90 91

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Kurt Siehr 1.

Foreign Private International Law (Blockverweisung)

Every forum State must start with its own rules of private international law. The conflicts law of the lex fori applies. This, however, does not mean that foreign rules of private international law are never applied, or at least taken into consideration. Every forum faced with allegations that rights have been vested, or relations created, abroad, must make up its mind whether to recognize these rights as vested rights and these relations as valid relations or not. When recognizing these rights and relations, the forum must also consult the conflicts rules of that State, where the rights or relations have allegedly been vested or created. The forum rules designate, by a kind of ‘Blockverweisung’ (riferimento in blocco; block reference, référence en bloc), the jurisdiction competent to answer the relevant question in its entirety, including its own conflicts rules.93 To give an example: Title to movable property located in Switzerland at the time of an alleged transfer of title has in fact been transferred under the Swiss lex rei sitae only if the lex rei sitae agrees to be applied and does not, by way of exception, yield to the lex loci destinationis for res in transitu.94 The same principles apply in order to find out whether a couple has been validly married in a foreign country. Muslims who were married in Germany in the embassy of their home country are not validly married under German conflicts law, because the general principle of mandatory civil marriage also applies to foreigners and only very few exceptions, which are absent here, apply. Therefore, the marriage will also not be recognized e.g. in Switzerland and Austria.95 In short: Each jurisdiction may be faced with the problem of foreign private international law, whatever its general attitude towards the principle of renvoi may be. The ‘Blockverweisung’ cannot be reduced to a statutory provision. The correct understanding of a specific reference must reveal whether there is a ‘Blockverweisung’ or not.

2.

Renvoi Proper (Rück- and Weiterverweisung)

There are three major attitudes towards the problem of renvoi: PICONE P., ‘La méthode de la référence à l’ordre juridique compétent en droit international privé’, in: Recueil des Cours 1986, t. 197, pp. 229-419; ID., Ordinamento competente e diritto internazionale privato, Padova 1986; ID., ‘Les méthodes de coordination entre ordres juridiques en droit international privé’, in: Recueil des Cours 1999, t. 276, pp. 9-296; SIEHR K., ‘Paolo Picone: Gesammelte Aufsätze zum Kollisionsrecht und die Blockverweisung auf die “zuständige Rechtsordnung” im IPR’, in: IPRax 2005, pp.155-158. 94 This was the case in Autocephalous Greek-Orthodox Church of Cyprus v. Goldberg & Feldman Fine Arts Inc., 717 F.Supp. 1374 (S.D. Ind. 1989), 917 F.2d 278 (7th Cir. 1990). The mosaics stolen in Cyprus were taken to Geneva airport to be transported to Indianapolis and sold in this airport to the defendant. There was no bona fide purchase under Swiss lex rei sitae because Swiss law did not agree to be applied to res in transitu (Article 101 Swiss PIL Statute). 95 Article 45 (1) Swiss PIL Statute and § 16 (2) Austrian PIL Statute. 93

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General Problems of PIL in Modern Codifications (1)

It may be completely excluded, as in Greece96 and in international instruments.97

(2)

It may be liberally recognized unless excluded by special provisions, as in Germany.98

(3)

Renvoi may be admitted in certain types of situations, as in Italy.99

The problem of renvoi is a particular one. Unless it is completely excluded, renvoi cannot be accepted in the same way by every jurisdiction. Renvoi is not a universal principle. If at all, it will be applied differently by conflicting jurisdictions. This can be shown by the Forgo affair, one of the earliest cases, which led to the ‘invention’ of the renvoi problem.100 In 1869, the Bavarian citizen François-Xavier Forgo died in France, without having acquired a legal domicile (domicile légal) in that country, but leaving a substantial amount of movable property in France. The French conflicts rule on succession with respect to movable property of that time applied the last lex patriae of the deceased who had not yet acquired a ‘domicile légal’ in France. Therefore, Bavarian law should be applied. But which Bavarian law? Bavarian substantive law, or Bavarian conflicts law, which applied to succession the last lex domicilii of the deceased? The French court accepted the renvoi of Bavarian conflicts law to the French law at the last domicile of Mr. Forgo and applied French substantive law. The French court did not ask whether Bavarian conflicts law refers to French substantive law or to French conflicts law. If Bavarian law had also referred to foreign conflicts law and accepted a renvoi back to the law of the deceased’s last lex patriae, there would have been an ‘endless oscillation backwards and forwards from one law to the other’,101 a ‘vicious circle’.102 If French and Bavarian law had politely said ‘after you’, the result would have been an endless reference back and forth. We would be caught in a ‘logisches Spiegelkabinett’103 (logical mirror cabinet). In order to escape this impasse, at least one of the conflicting jurisdictions must give in and interrupt the ‘vicious circle’. This is done, e.g., by Article 4 (1) German EGBGB, which reads: ‘If the law of the other Article 32 Greek Civil Code. Article 15 Rome Contracts Convention of 1980; many Hague Conventions refer to the ‘internal law’ and thereby implicitly exclude any renvoi. Cf. Article 4 (1) of the Hague Maintenance Applicable Law Convention of 1973, in: Recueil (note 9), No. XXIV. 98 Articles 4 (1) and 35 (1) German EGBGB. 99 Article 13 Italian PIL Statute of 1995. 100 Cass. 24 June 1878, in: Clunet 1879, p. 285; Cass. 22 February 1882, in: Recueil Sirey 1882, part I, p. 393; both decisions are reproduced in: ANCEL B. / LEQUETTE Y., Grands arrêts de la jurisprudence française de droit international privé, 3rd ed. Paris 1998, p. 52 et seq. (nos. 7-8). 101 LUXMORE J. in: In re Ross [1930] 2 Ch. 377, 389. 102 FRANCESCAKIS P., La théorie du renvoi et les conflits de systèmes en droit international privé, Paris 1958, p. 96. 103 KAHN F., Gesetzeskollisionen (note 85), at p. 23 and p. 20. 96 97

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Kurt Siehr State refers back to German law, German substantive law applies.’ The better solution would be the so-called foreign-court theory, which has been formulated as follows: ‘If the law of a foreign State is applicable, the case must be decided as it would be by the foreign court.’104

3.

Intermediate Summary

Following are the main results of the preceding statements: (1)

International instruments of private international law on applicable law, whether they are international conventions or European regulations, should make reference to substantive law of the Member States There should not be any renvoi for inter-European cases insofar as private international law has been harmonized or unified within the European Union.

(2)

When reference is made to the law of third countries, a renvoi should be accepted if international harmony of results will be achieved and administration of justice be made easier. This will especially be the case if reference is made to the lex fori of a Member State as the lex domicilii of a person (e.g. American law designated by the law of a Member State as lex patriae refers back to the person’s domicile in Europe) or as the lex rei sitae of real property (e.g. the Canadian law of succession refers back to the European lex rei sitae of the real property estate of a deceased person).

(3)

The same should be done as long as, and insofar as, European private international law has not yet been unified.

(4)

Every renvoi should be accepted only if the foreign jurisdiction referring to the law of a Member State would also apply European law or decline jurisdiction so far. The foreign-court theory should be applied.

(5)

Apart from any renvoi, vested rights should be recognised and any ‘Blockverweisung’ be accepted.

F.

Law of Third Countries

One of the modern problems of private international law discussed everywhere, and sometimes regulated, is the problem of whether the law of a third country (different both from the law designated by the conflict of law rules and from the lex fori) should at least be taken into consideration when deciding a case with some connections to that third country. The most famous examples of a provision taking 104 BEITZKE G. (ed.), Vorschläge und Gutachten zur Reform des deutschen internationalen Personen-, Familien- und Erbrechts, Tübingen 1981, p. 15: ‘Ist das Recht eines ausländischen Staates anzuwenden, dann ist so zu entscheiden, wie der ausländische Richter entscheiden würde.’

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General Problems of PIL in Modern Codifications into consideration the law of third States are Article 7 (1) of the Rome Convention of 1980 and Article 19 of the Swiss Federal Act of Private International Law of 1987.105 Article 7 (1) of the 1980 Rome Convention reads: ‘When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country [different from the forum State], with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to those mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.’ The problem arose during the last century when certain States closed their borders and prohibited the import of merchandise under their Trading with the Enemy Act.106 Export prohibitions of third States were also taken into consideration.107 In such cases governed by the applicable law of the exporting enemy State or the importing co-operating State, the law of the importing or exporting foreign country was taken into account and the contract avoided because of risks of frustration of contract or impossibility of performance.108 For such situations, a general rule with regard to the law of third countries should be provided. Some States refrained from doing so. Germany and the United Kingdom did not accept Article 7 (1) of the Rome Convention and filed the pertinent reservations. There is, however, evidence that courts will apply such provisions cautiously and will not be tempted to apply the law of a third country very often.109 The German and British reservations under the Rome Conventions do not indicate that the courts of these countries do not take the law of third countries into account. They do, but indirectly. They apply the law governing the main issue and decide whether any obstacles arising under the law of a third country amount to a frustration of contract. It seems, however, to be the Cf. BONOMI A., Le norme imperative nel diritto internazionale privato. Considerazioni sulla Convenzione europea sulla legge applicabile alle obbligazioni contrattuali del 19 giugno 1980 nonché sulle leggi italiana e svizzera di diritto internazionle privato, Zurich 1998, p. 223 et seq. 106 Cf. ERNE M., Vertragsgültigkeit und drittstaatliche Eingriffsnormen, Zürich 1995; SIEHR K., ‘Ausländische Eingriffsnormen und ausländisches Wirtschaftskollisionsrecht’, in: RabelsZ 1988, pp. 41-103. 107 Cf. the German-Nigeria case: Bundesgerichtshof 22 June 1972, 59 Entscheidungen des Bundesgerichtshofs in Zivilsachen (BGHZ) p. 82; English translation in: International Law Reports, vol. 73, p. 226. 108 Cf. SIEHR (note 106), at pp. 59-60. 109 VON OVERBECK (note 39), p. 119 et seq., points out that in ten years there has been no Swiss case applying Article 19 of the Swiss PIL Statute. This has not changed since. Cf. ID., ‘Swiss Decisions on Foreign Mandatory Rules’, in: this Yearbook 2004), pp. 247250. Also in the decision of the Federal Court of 8 April 2005 (Union de l’Inde c. Crédit Agricole Indosuez), in: Entscheidungen des Schweizerischen Bundesgerichts, 131 III, p. 418, Article 19 of the Swiss PIL Statute was not applied. 105

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Kurt Siehr better policy to provide expressly for the law of a third country and to take it into consideration directly. Therefore, a Community regulation on general problems of private international law should also comprise a provision on the law of third countries.

G.

Domestic and Foreign Law

1.

Domestic Law

Every country has its own rules on the application of law. In some States, it must be pleaded, in other States it is applied ex officio under the iura novit curia rule. And there may be intermediate solutions. Domestic conflicts law shares the system of the respective forum State. There is no special treatment. It is neither optional nor is it ius dispositivum.110 Therefore, no special rules for the application of domestic conflicts law can be found in codifications of private international law. Obvious statements such as ‘Domestic law applies unless foreign law governs’ should also be avoided. Codifications are neither treatises nor collections of conflicts lessons for students. They should be limited to normative rules and avoid narrative statements.

2.

Foreign Law

a)

Establishing Foreign Law

Foreign law is mostly unknown outside the national borders. What should be done in such a situation? Should foreign law be neglected, and local law substituted? In some countries, foreign law is treated as a fact, which must be pleaded and proven by evidence presented by the interested party. Other countries, however, do not make any difference between domestic and foreign law. Thus, foreign law is law and must be treated in almost the same way as domestic law. Therefore, many national codifications of private international law provide that foreign law must be established ex officio by local authorities.111 Switzerland modified the general principle and, in matters of economic interest, the parties may be assigned by the court to establish foreign law or at least to assist the court in establishing the gov-

110 There is, so far, no fakultatives Kollisionsrecht as advocated by FLESSNER A., ‘Fakultatives Kollisionsrecht’, in: RabelsZ 1970, pp. 547-584; see also REICHERT-FACILIDES D., Fakutatives und zwingendes Kollisionsrecht, Tübingen 1995. Also domestic conflicts law is ius cogens unless party autonomy is admitted and replaces objectively applicable conflicts rules. 111 § 3 Austrian PIL Statute of 1978; § 293 German Code of Civil Procedure; Article 14 Italian PIL Statute of 1995; Article 16 Swiss PIL Statute of 1987; Article 2 PIL Statute of Venezuela of 1998.

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General Problems of PIL in Modern Codifications erning foreign rules of law.112 In Austria, the Federal Ministry of Justice must assist the courts in establishing foreign law,113 in Germany, the Max-Planck-Institute in Hamburg and University institutes give evidence on foreign law by memoranda,114 in Switzerland, this task is assigned to the Swiss Institute of Comparative Law, based in Lausanne, and in Europe, the European Convention of 7 June 1968 on the Information on Foreign Law (so-called London Convention)115 is very useful. In a European codification of private international law, the laws of the Member States should be treated identically, either to be pleaded, as is domestic law, or applied ex officio as is any rule of substantive law. If foreign law cannot be established, several PIL systems provide explicitly that the lex fori should be applied.116 The better approach seems to be not to provide anything for the subsidiarily applicable law (Ersatzrecht) because flexibility is needed. If Turkish law cannot be established, it is better to apply Swiss law than to apply the lex fori because Turkish law is based on Swiss law. If Californian law is unknown, the law e.g. of New York is normally a better option than any non-U.S. law. If Egyptian religious law cannot be established, it is preferable to apply the Islamic law of specific schools and not to return to the lex fori. b)

Non Unified Foreign Legal Systems

1.

Territorial Diversity

Private law is not uniform in all national States. Canada and the United States of America are examples of such nations. But in Europe, there are also countries with regional differences in private law. This is the case in Spain and the United Kingdom. If conflicts rules refer to the domicile or habitual residence of a person, such a reference is made directly to a territorial unit of a country with several regional systems of private law. This may be expressed, as it is in Article 19 (1) of the Rome Convention: ‘Where a State comprises several territorial units each of which has its own rules of law in respect of contractual relations, each territorial unit shall be considered as a country for the purpose of identifying the law applicable under this Convention.’ Such a provision does not cover, however, the reference to a lex patriae, which may apply in matters of personal law, in family law and in the law of succession, because separate territorial units may not correspond to a separate Article 16 (1) sentence 2 Swiss PIL Statute of 1987. § 41 of the ‘Erlass of 24 January 1997 über die internationale Rechtshilfe und andere Rechtsbeziehungen mit dem Ausland in Zivilsachen’, in: BORIĆ (note 20), No. 74. 114 The most important memoranda are published in the series IPG: Gutachten zum internationalen und ausländischen Privatrecht (IPG). The last volume of this series with the memoranda given in 2000 and 2001 was published in Bielefeld in 2004. 115 European Treaty Series No. 62. 116 Cf., e.g., § 4 (2) Austrian PIL Statute, § 5 (3) Hungarian PIL Regulation, Article 16 (2) Swiss PIL Statute, Article 32 (4) Tunisian PIL Statute, Article 2 (3) Turkish PIL Statute. 112 113

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Kurt Siehr provincial or State citizenship. In such instances, the European Union should copy the respective clauses of Hague Conventions, which, primarily, refer in such cases to the rules of national interstate conflicts law and, in the absence of such rules, to the unit of the closest connection.117 2.

Personal Diversity

Within the European Union, there is hardly any Member State, which has different rules of personal law for different groups of people. There may be some differences in substantive law as, e.g., for the celebration of marriages of Jews or Muslims,118 and there may be a special regime for the Muslim minority of the Greek province of Thracia,119 but there is no general reservation of religious law for members of certain religious groups. Outside the European Union, however, there are several countries (in Africa and Asia), which have two or more legal systems applicable to the private law relations (especially in family law) of different categories of persons. For some references to the law of these countries, a special clause designating the pertinent personal law is necessary. Here also, the experience of the Hague Conference and the practice of the Hague Conventions should be considered,120 and one should try to ensure that the European courts apply the same law as the foreign courts of that country of which the law applies according to European conflicts rules. c)

Foreign Public Law

Private international law is designed to select the applicable private law governing relations of private law. Public law, i.e. the law primarily governing the relation between individuals and public authorities, is limited to local relationships and only local courts and authorities apply local public law. Yet, the problem arises as Cf., e.g., Article 16 of the Hague Convention of 1978 on Matrimonial Property Regimes, Article 19 of the Hague Convention of 1989 on Succession to Estates; and Article 47 of the Hague Convention of 1996 on the Protection of Children, in: Recueil (note 9), nos. XXV, XXXII and XXXIV. 118 Cf., e.g., the Italian ‘Legge 8.3.1989, n. 101, norme per la regolazione dei rapporti tra lo Stato e l’Unione delle Comunità ebraiche italiane’, in: Gazzetta Ufficiale n. 79 del 23.3.1989, Supplemento ordinario n. 21; the Spanish ‘Leyes 24, 25 y 26 de 10.11.1992 por las que se aprueban los Acuerdos de cooperaciόn del Estado español con la Federaciόn de Entidades Evangélicas de España, la Federaciόn de Comunidades Israelitas de España y la Comisiόn Islámica de España’, in: REDI 1982, p. 747. 119 KALLIKLES A.Z., Τό Οθωμανικόν Δίκαιον εν Ελλάδι, Athens 1931, p. 30; TENEKIDES C.G., ‘Des principes de compétence et de loi applicable régissant les Hellènes en Turquie et les Musulmans en Grèce’, in: Revue de droit international et de législation comparée 1925, pp. 394-418, at 414-415; Presidential Regulation of 24 December 1990, in: Κώδικας Νομικόυ Βήματος 1990, at 1221; Statute No. 1920/1991, ibid. 1991, at 16. 120 Cf., e.g., Article 19 of the Hague Convention of 1978 on Matrimonial Property Regimes. 117

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General Problems of PIL in Modern Codifications to whether courts dealing with private law relations must also apply, or, at least, take into account, foreign public law. This question may arise with respect to foreign trade regulations prohibiting the export or import of certain goods or with regard to other market regulations. Apart from obligations under international treaties, courts never directly apply and enforce foreign public law.121 This does not exclude that they take foreign law into account indirectly and invalidate contracts because they violate foreign export prohibitions122 or declare that foreign public123 law has been violated. This correct policy has been codified in Article 13 sentence 2 of the Swiss PIL Statute of 1987.124 This provision reads: ‘The application of a foreign law is not precluded by the mere fact that a provision is considered to have a public law character.’ This provision is based on Section A 1 (1) of the Wiesbaden-Resolution of the Institute of International Law on ‘The Application of Foreign Public Law’125 and a similar provision should be incorporated into a European regulation on conflicts of law. d)

Reciprocity

The principle of reciprocity survives in three different forms: (1) reciprocity in the law of aliens (e.g. Article 16 of the Italian Disposizioni preliminari to the Italian Codice civile126), (2) reciprocity in the application of foreign law (cf. § 6 of the Hungarian PIL Regulation of 1979), and (3) reciprocity as a requirement for the recognition of foreign judgments (cf. § 328 (1) no. 5 German Zivilprozeßordnung Code of Civil Procedure). Reciprocity in the law of aliens is not part of private Cf., e.g., Attorney-General of New Zealand v. Ortiz, [1984] 1 Appeal Cases 1, 35 (H.L.), concerning a New Zealand prohibition against the export of Maori carvings. This case would be have been decided differently if the UNESCO Convention of 1970 on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (823 U.N.T.S. 231) had to be applied. 122 Cf. the Germany-Nigeria case (note 107) invalidating a German insurance contract because of lack of an insurance interest as the contract violated an export prohibition of Nigeria. 123 Kingdom of Spain v. Christie, Manson & Woods Ltd., [1986] in: 1 Weekly Law Reports 1120 (Ch. D.), declaring that a Spanish export license has been forged. 124 More or less the same is provided in Article 38 (3) of the Tunisian PIL Statute of 1988. 125 Annuaire de l’Institut de Droit International 56 (Session de Wiesbaden 1975), p. 551. The English version of Section A I. 1 of this Resolution reads: ‘The public law character attributed to a provision of foreign law which is designated by the rule of conflict of laws shall not prevent the application of that provision, subject however to the fundamental reservation of public policy.’ 126 COSCIA G., ‘Condizione di reciprocità e diritto internazionale privato’, in: Riv. dir. int. priv. proc. 2001, pp. 557-568. This approach to international relations with foreigners dates back to § 33 Austrian ABGB of 1811. Cf. VESQUE VON PÜTTLINGEN J., Handbuch des in Oesterreich geltenden internationalen Privatrechtes, Vienna 1860, p. 87 et seq. 121

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Kurt Siehr international law in the restricted sense127 and would be incompatible with European law as far as EU citizens are concerned. Reciprocity for the application of foreign law is not any more reasonable and even the Hungarian PIL Regulation presumes reciprocity.128 The only permissible use of reciprocity, however questionable, may be in the field of the recognition of foreign decisions,129 but should not be mentioned in a codification of the general principles of private international law. e)

Application of Foreign Law

The designation of foreign law as the law governing implies that the applicable foreign law, be it private or public, must be applied in the same way as in the country of origin. A classic statement of this policy is to be found in Article 15 of the Italian PIL Statute of 1995: ‘Foreign law is applied according to its own criteria of interpretation and according to its rules of application as to time.’ Similar provisions may be found in many other jurisdictions.130 Such a provision may be inserted into a European codification of private international law in order to emphasize the importance of a correct construction of foreign law.

3.

Intermediate Summary

A European codification of the general problems of private international law should provide guidance in cases where a foreign jurisdiction with laws for different territorial units or religious or ethnic group applies. Foreign public law should not be disregarded only because it is public law, and foreign law, whatever its quality, may be, or should be, interpreted according to the rules of the country of origin.

H.

Preliminary Questions

1.

General Rule on Preliminary Questions

There is hardly any national codification of private international law and no international instrument which dare to codify the answer, which should be given to a preliminary or incidental question (voorvraag, question préalable, Vorfrage, ques-

127 It is also for this reason that Article 73 of the new Italian PIL Statute of 1995 did not abrogate Article 16 of the Disposizioni preliminari. 128 The same is true according to Article 6 of the Romanian PIL Statute of 1992. 129 Cf. also Article 166 (1) (c) Swiss PIL Statute concerning foreign decisions on bankruptcy. 130 § 3 Austrian PIL Statute, Article 2055 Código civil of Peru, Article 23 (1) Portuguese Código civil; Article 34 (1) Tunisian PIL Statute.

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General Problems of PIL in Modern Codifications tione preliminare, cuestión previa) arising in private international law.131 Article 6 of the PIL Statute of Venezuela of 1998, as the only modern act dealing expressly with the law governing the answer to a preliminary question,132 correctly provides: ‘The primary, preliminary or incidental questions which may arise with a principal question, need not be solved necessarily according to the law governing the last one [the principal question].’133 Some international instruments even provide that preliminary questions regarding any family relationship, to be answered in maintenance proceedings, shall be without prejudice to the existence of such relationships.134 The reluctance to legislate on the solution of the problem of preliminary questions seems to be simple. Preliminary questions arise when the applicable substantive law must be applied. If the law governing is the law of a foreign country, the problem is whether the answer to the preliminary question must be given indirectly by the conflicts rules of the foreign jurisdiction (unselbständige Anknüpfung der Vorfrage) or directly by the conflicts rules of the forum State (selbständige Anknüpfung der Vorfrage). There is no one correct answer for all purposes, as can be shown by an example. Greek citizens living in Germany marry in Germany. The ceremony takes place in a Greek-Orthodox Church administered by an ordinary Greek-Orthodox priest and not, as required by German conflicts law (Article 13 (3) EGBGB), by a German registrar or a duly authorized clergyman. This marriage is, according to German law, nonexistent and does not need to be annulled or ended through divorce. It is completely null and void ab initio even if the couple live together as husband and wife. During this companionship, two different problems may arise. If either of them wants to get married to another person in Germany, he or she may do so because, according to German law, the partners are unmarried and no further obstacles to getting married exist. The fact that they are validly married according to Greek law is of no importance to the German registrar. He or she must answer the preliminary question of a valid pre-existing marriage directly by application of German conflicts law (Article 13 (3) EGBGB). The answer is ‘no’. It is up to the ‘remarrying’ partner to solve his or her problem of bigamy under Greek law. But what about the maintenance claims raised by the ‘wife’, who has returned to Greece, against her ‘husband’, still living in Germany? German courts must apply Greek substantive law under Article 4 (1) of the 1973 Hague Maintenance Convention. Because the Article 6 of the Italian PIL Statute of 1995 only provides jurisdiction of Italian courts to decide incidentally preliminary questions. 132 Article 6 of the Italian PIL Statute deals only with jurisdiction on preliminary or incidental questions. 133 The original Spanish text reads: ‘Las cuestiones previas, preliminares o incidentales que puedan surgir con motivo de una cuestión principal, no deben resolverse necesariamente de acuerdo con el Derecho que regula esta última.’ 134 Article 5 (2) sentence 2 Hague Convention of 1956 on Maintenance for Children; Article 2 (2) Hague Convention of 1973 on the Law Applicable to Maintenance Obligations, in: Recueil (note 9), No. VIII and XXIV. 131

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Kurt Siehr parties are validly married under Greek law, German courts will answer the preliminary question, as to the validity of the marriage in Germany, indirectly under Greek conflicts law and affirm the validity of the marriage under Greek law. – This example shows that the problem of the preliminary question cannot be solved by a general rule. The same question may be answered differently for different issues. The preliminary question must be answered directly by the conflicts law of the forum State if it has a closer connection to the forum State than to the foreign country (Germany requires mandatory civil marriage also for foreigners, with only very few exceptions) and it must be answered indirectly by foreign conflicts law if it has a closer connection to the foreign country, the law of which governs the main question (maintenance for the wife living abroad). A general rule on the preliminary question could only give some directions and provide: ‘A preliminary question must be answered either directly by the conflicts rules of the forum State or indirectly under the conflicts rules of the jurisdiction which governs the main question. The choice of method depends on the close connection of the preliminary question with the law governing the answer. The closer the connection of the preliminary question with the forum State or with the foreign country, the more likely it is that the law of the closest connection must give the answer to the preliminary question.’

2.

Special Answers to Preliminary Questions

There are some codifications which provide solutions to specific preliminary questions, which have created problems in the past. The most well known example of such specific answers to a very special preliminary question can be found in the Austrian, German and Swiss private international codifications. If a foreigner has been validly divorced in the forum State, he or she can remarry in the forum State even if his or her national law does not recognize the divorce given in the forum State.135 The historical backgrounds are the famous German ‘SpanierEntscheidung’ of the Federal Constitutional Court136 and the well-known ‘Dal Bosco Entscheidung’ of the Swiss Federal Court.137 Spanish and Italian spouses had been validly divorced in Germany or Switzerland and wanted to marry again at a time when their national laws governing marriage still did not provide for divorce and therefore did not recognize the foreign divorces of Spanish or Italian citizens and hence prohibited remarriage. In these cases, the divorced Spanish or Italian 135 Cf. § 17 (2) Austrian PIL Statute of 1978; Article 13 (2) no. 3 German EGBGB, version of 1986; Article 43 (3) Swiss PIL Statute of 1987. 136 Bundesverfassungsgericht 4 May 1971, in: 31 Entscheidungen des Bundesverfassungsgericht, p. 58, and the collection of articles on this decision in: RabelsZ 1972, pp. 1140. 137 Bundesgericht 3 June 1971 (Dal Bosco und Walther v. Regierungsrat Bern), in: Entscheidungen des Schweizerischen Bundesgerichts, 97 I, p. 389.

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General Problems of PIL in Modern Codifications citizens went to Denmark and remarried under the Danish law of domicile or habitual residence because marriage is governed by the law of domicile or habitual residence under Danish conflicts law. Having returned to Germany or Switzerland, they applied for the recognition and registration in the civil register of their Danish marriage. The highest courts of Germany and Switzerland ultimately decided that such a registration must be granted and that every person validly divorced in the forum State can get married again as a single person and that their foreign lex patriae cannot deprive the local divorce decree of its very essence, i.e. the termination of a family relation and the freedom to get married again. A different solution would be a violation of the freedom to marry as guaranteed by the European Convention of Human Rights and Fundamental Freedoms. Therefore, the new codifications of German-speaking countries provided for the preliminary question of divorce linked to a main issue of remarriage. There is no objection to specific provisions for the solution of special preliminary questions.

I.

Public Policy

1.

General Clause on Public Policy

a)

Non-application of Foreign Law

There seems to be no national codification of private international law which does not provide for a general clause of public policy or ordre public (openbare orde, öffentliche Ordnung, ordine pubblico, orden público). International instruments also formulate such rules.138 The most common version of such a rule (Vorbehaltsklausel) may be found in Article 16 of the 1980 Rome Convention on Contractual Obligations and in Article 21 of the Hague Convention of 13 January 2000 on the International Protection of Adults.139 Article 16 of the Rome Convention reads: ‘The application of a rule of the law of any country specified by this Convention may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum.’ It is interesting to note that no statutory or conventional public policy clause requires a ‘Binnenbeziehung’ (relation with the forum State) of the case in order for it to be scrutinized under the public policy clause. Such a close relation to the forum State is, apparently, considered as an inherent requirement of such a clause and an implied part of the evaluation of ‘incompatibility of foreign law with local public policy’. There is no ‘incompatibility’ if the case has no or no sufficient ‘Binnenbeziehung’ with the forum State.

138 Cf. GOTTSCHALK E., Allgemeine Lehren des IPR in kollisionsrechtlichen Staatsverträgen, Berlin 2002, p. 240 et seq. 139 Recueil (note 9), No. XXXV.

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Kurt Siehr b)

Law Subsidiarily Applicable

Although all jurisdictions agree on the necessity of a public policy clause, they differ with respect to the subsidiarily applicable law. Many PIL statutes remain silent on this issue,140 whereas others provide that the lex fori applies subsidiarily.141 An intermediate position is taken by those jurisdictions which consider the lex fori as subsidiarily applicable, ‘if necessary’.142 The best clause of this type is provided by Article 22 (2) of the Portuguese Código civil: ‘In this case [violation of the ordre public], the most suitable provisions of the applicable foreign law should be applied or subsidiarily such provisions of the internal Portuguese law.’ The best solution for European legislation seems to be not to mention any subsidiarily applicable law and, if at all necessary, to leave the selection of subsidiarily applicable provisions to the judiciary.

2.

Special Clauses on Public Policy

Special clauses on public policy are formulated in connection with special problems of private international law. Such special clauses may be useful for daily practice. They are, however, unnecessary because the general public policy clause applies to all cases in which foreign law is governing and in which the public policy defence is raised. The general part of European private international law need not deal with such special public policy clauses.

3.

Ordre public européen

Within the European Union there is an emerging European public policy (ordre public européen), which, externally, protects European minimum standards of legislation against the law of third countries and which, internally, may reduce the use of public policy defences against the application of the law of Member

140 This is the case according to, e.g., Article 6 German EGBGB, Article 33 Greek Civil Code, Article 3081 Code civil of Quebec, Article 17 Swiss PIL Statute, Article 8 PIL Statute of Venezuela. 141 Cf., e.g., § 7 (3) Hungarian PIL Regulation, Article 2049 (2) Código civil of Peru, Article 8 (2) Romanian PIL Statute, Article 36 (5) Tunisian PIL Statute. 142 Cf. § 6 sentence 2 Austrian PIL Statute; Article 16 (2) Italian PIL Statute (referring first to alternatively applicable laws); Article 5 Turkish PIL Statute. There is no necessity for the public policy exception if the parties agree with the result: FRICK C., Ordre public und Parteiautonomie, Hamburg 2005.

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General Problems of PIL in Modern Codifications States.143 The external effect of such a public-policy clause has been implicitly shown by the European Court of Justice (ECJ) in the Ingmar case.144 Ingmar was the commercial agent of the American defendants for the territory of England and in their contract, the parties had chosen the law of California as the law governing their relationship. When this relationship was terminated, Ingmar asked for an indemnity or compensation as provided by Articles 17 and 18 of the European Directive 86/653/EEC of 1986 on self-employed commercial agents.145 The law of California does not provide for any indemnity or compensation as requested. The ECJ decided that articles 17 and 18 of the Directive must be applied ‘where the commercial agent carried out his activity in a Member State, although the principal is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of that country.’146 The result of this decision is that the European minimum standard as fixed by a European directive, is ‘d’ordre public’ and any foreign law, which does not meet these minimum standards, violates European public policy if the case has sufficient contacts (Binnenbeziehung) with Europe as, e.g., in the Ingmar case, carrying on the activity of a commercial agent in Europe. This may be formulated as follows: ‘Foreign law will not be applied, as violating European public policy, if it does not meet the minimum standards of harmonized European law in a case which has close contacts with the territory of the European Union.’ Another problem of intra-European private international law has been raised by the ECJ in the Garcia Avello case.147 The Spanish husband and his Belgian wife applied in Belgium to enable their children of dual nationality (Spanish and Belgian) to bear the surname to which they are entitled according to Spanish law and tradition. The ECJ obliged the Belgian State and its registrars to apply Spanish, and not Belgian, law as required under Belgian private international law with respect to surnames of persons with dual nationality. To do otherwise would be a violation of Articles 12 and 17 EC. The ECJ in the Garcia Avello case held that the private international law provisions of a Member State may violate European law as laid down in the EC. This choice between the law of domicile and the law of nationality has, however, been applied only in a case of dual nationality. This choice should be extended at least to all matters of party autonomy as, e.g., matrimonial property and wills. A 143 Cf. FUMAGALLI L., ‘EC Private International Law and the Public Policy Exception – Modern Features of a Traditional Concept’, in: this Yearbook 2004, pp. 171-183. 144 ECJ 9 November 2000, Case C-381/98 (Ingmar GB Ltd. v. Eaton Leonard Technologies, Inc.), in: ECR 2000, I-9305. 145 Council Directive of 18 December 1986 on the co-ordination of the laws of the Member States relating to self-employed commercial agents (86/653/EEC), in: OJ 1986, L 382, p. 17. 146 ECJ 9 November 2000 (note 144), at p. I-9335. 147 ECJ 2 October 2003, Case C-148/02 (Carlos Garcia Avello v. Belgium), in: ECR 2003, I-11613. Cf. also BALLARINO T. / UBERTAZZI B., ‘On Avello and Other Judgements: A New Point of Departure in the Conflict of Laws?’, in: this Yearbook 2004, pp. 85, 89 et seq.

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Kurt Siehr European public policy clause for the still non-unified private international law could read like this: ‘In matters of party autonomy (surnames, matrimonial property, wills), every Member State should allow the parties to choose between the law of their habitual residence and the law of their nationality.’ Such a clause should not form part of a code of general provisions of private international law but be a guideline for the codification of private international law for personal, family and succession matters.

4.

Lois d’application immédiate

The term ‘lois d’application immédiate’ will shortly turn 50. In 1958, it was coined by the Greek scholar Phocion Francescakis (1910-1992).148 It did not originate in Greece, which has a full-fledged codification in Articles 4-33 Greek Civil Code of 1940/46. The term originated in France, one of the very few continental-European countries, which have not codified their private international law. In France, the ‘lois d’application immédiate’ are very useful. As soon as a domestic rule has been qualified as being directly applicable, there is no longer any need to formulate a conflicts rule. In countries, however, with full-fledged codifications of private international law, the ‘lois d’application immédiate’ form part of local public policy and need not be dealt with separately from the general clause on public policy.149 Yet, the term ‘lois d’application immédiate’ has been discussed extensively in many other jurisdictions as ‘rechtsstreeks toepasselijke regels’,150 ‘mandatory rules’,151 ‘Exklusiv- oder Eingriffsnormen’,152 ‘norme di applicazione necessaria’,153 ‘normas de aplicação imediata’,154 and ‘leyes de aplicación inmediata’.155 The ‘lois d’application immédiate’ even have been included in comprehensive codifications

FRANCESCAKIS P. (note 102), pp. 11-16. SIEHR K.‚‘“False Conflicts”, “lois d’application immediate” und andere “Neuentdeckungen” im IPR. Zu gewissen Eigengesetzlichkeiten kollisionsrechtlicher Systeme’, in: Festschrift für Ulrich Drobnig, Tübingen 1998, pp. 443-454, at 447-449. 150 SAUVEPLANNE J. G., Elementair internationaal privaatrecht, 9th ed. Deventer 1989, p. 101; STRIKWERDA L., Inleiding tot het Nederlandse Internationaal Privaatecht, 7th ed. Deventer 2002, p. 66 et seq., refers correctly to ‘voorrangsregels’ (rules of priority). 151 DICEY / MORRIS / COLLINS (note 79), at n. 1-050 et seq. 152 KEGEL G. / SCHURIG K., Internationales Privatrecht, 8th ed. Munich 2000, p. 132 et seq.; NOJACK J., Exklusivnormen im IPR, Tübingen 2005. 153 BALLARINO / BONOMI (note 79), p. 176 et seq. 154 MARQUES DOS SANTOS A., As Normas de Aplicação Imediata no Direito Internacional Privado, 2 vols., Coimbra 1991. 155 PARRA ARANGUREN G.E., Curso General de Derecho Internacional Privado, 3d ed. Caracas 1998, p. 167 et seq. Spanish treatises do not deal with ‘lois d’application immédiate’. 148 149

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General Problems of PIL in Modern Codifications of private international law,156 and the Rome Convention adheres to this theory in Article 7 (2). Such a legislative acceptance of the ‘lois d’application immédiate’ is superfluous because these ‘lois’ apply directly or form part of the public policy of the forum State and, hence, are already covered by the general public-policy clause.

J.

Evasion of Law

We are familiar with ‘evasion of law’ or ‘fraude à la loi’ in substantive law. The Swiss Civil Code of 1907 seems to be one of the modern codifications which, at the outset in Article 2 (2), provides: ‘The law does not sanction the evident abuse of a person’s rights.’157 The same principle is recognized in other jurisdictions as the prohibition of ‘misbruik’,158 ‘Rechtsmissbrauch,’ ‘frode alla legge’ or ‘fraude de ley’. This idea has also been transferred to private international law and even been codified.159 There are very few decisions on ‘fraude à la loi’ in private international law.160 Of course there are decisions on fraudulently obtained foreign judgments because of fraud exercised during court proceedings,161 but hardly any decisions in which the choice of forum, the choice of law or the creation of a new connecting factor (nationality, domicile, place of contracting) has been held to be fraudulently created. The only classic example seems to be the Bauffremont affair decided more than one hundred years ago by the French Cour de Cassation.162 And even in this case there are serious doubts as to whether there was any fraud. The French courts had not been properly informed that the Princesse de Bauffremont, nationalized in Sachsen-Altenburg, had established a real domicile there and that she did not

156 Cf. Article 20 (1) Belgian PIL Statute; Article 17 Italian PIL Statute; Article 18 Swiss PIL Statute; Article 38 Tunisian PIL Statute. 157 The three original versions read: ‘Der offenbare Missbrauch eines Rechts findet keinen Rechtsschutz’; ‘L’abus manifeste d’un droit n’est pas protégé par la loi’; ‘Il manifesto abuso del proprio diritto non è protetto dalla legge’. A somewhat longer provision may be found in Article 6 (4) of the Spanish Código civil of 1889. 158 Article 3:13(1) Dutch Civil code (Burgerlijk Wetboek). 159 Article 18 Belgian PIL Statute, Article 21 Portuguese Código civil, Article 12 (4) Spanish Código civil, Article 30 Tunisian PIL Statute. 160 Cf. RÜTTEN M., Gesetzesumgehung im Internationalen Privatrecht, Zurich 2003. 161 Swiss Federal Court 6 April 2004, in: Die Praxis 2005, p. 665 (no fraud by obtaining paternity decision in Israel although the same claim would have been time-barred in Switzerland): see the commentary by OTHENIN-GIRARD S. in: this Yearbook. Cf. also the English case Jet Holding Inc. v. Patel, [1990] 1 Q.B. 335 (C.A.) (fraudulently obtained judgment in California). 162 Cass. 18 March 1878, in: Recueil Sirey 1878.1.193; also in: ANCEL / LEQUETTE (note 100), No. 6, at p. 41.

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Kurt Siehr fraudulently pretend that her separation under the French separation decree became a dissolution of marriage under German law.163 The principal problem of ‘fraude à la loi’ in conflicts law is the almost impossible task of distinguishing it from the legitimate avoidance of law by choosing the best contract law, by establishing companies under the best company act, by moving to the place with the least tax burden, by suing in a competent court with the fastest procedure and with the potentially best result as to the claim itself, or by emigrating to a country with no restrictions whatsoever with respect to dispositions by will and testament. Today, in times of extreme mobility and globalization, people are given the opportunity to make use of the offers of competing jurisdictions and to take advantage of favourable institutions and legislative acts.164 The best solution seems to be to codify only special types of potential abuses of law and to abstain from any general prohibition of ‘fraude à la loi’. This has been done in Art. 45 (2) Swiss PIL Statute with respect to marriages celebrated in a foreign country in order to avoid obstacles at home.165 Such a provision, however, is only necessary when the recognition of foreign marriages is as liberal as in Switzerland. If the personal law of the prospective spouses also governs the validity of marriages celebrated abroad, no such special abuse clause is required. In other cases, an abuse clause need not be provided because the international mandatory rules of the forum State apply anyway. Therefore, parties to specific contracts are not allowed to choose the law of a third State in order to eliminate the European minimum standards of consumer protection.166

III. Summary 1.

Every legislator of a codification of private international law must decide whether general problems of private international law should also be provided for or left to the courts to be solved in daily practice.

2.

For more than one hundred years, national codifications of private international law have also dealt with the newly ‘discovered’ general problems of

163 Cf. JAYME E., ‘Johann Kaspar Bluntschli (1808-1881) und das Internationale Privatrecht. Zu einem Brief Bluntschlis an den Fürsten Bibesco’, in: Humaniora. Medizin – Recht – Geschichte. Festschrift für Adolf Laufs, Heidelberg 2006, pp. 135-144. 164 This may have been different fifty years ago. Cf. VISCHER F., ‘Zum Problem der rechtsmissbräuchlichen Anknüpfung im internationalen Privatrecht’, in: Aequitas und bona fides. Festgabe für August Simonius, Basel 1955, pp. 401-410. 165 Art. 45 (2) Swiss PIL Statute reads: ‘If either prospective spouse is a Swiss national or if both prospective spouses have their domicile in Switzerland, a marriage celebrated in a foreign country shall be recognized, unless it was celebrated in a foreign country with the clear intent of avoiding the grounds of nullity provided for by Swiss law.’ 166 See FUMAGALLI L. (note 143), p. 178 et seq.

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General Problems of PIL in Modern Codifications conflicts law. The German EGBGB of 1896 with Articles 27-31 and the Japanese Horei of 1898 with §§ 27-30 seem to be the first instruments with provisions on general problems of private international law. 3.

Modern codifications of private international law deal with general problems in the first articles of the codification. The same should be done with a European Code of Private International law.

4.

Not all general problems of private international law should be codified. They are either general problems of construction or not yet ready to be fixed by a hard and fast rule.

5.

A code of private international law is designed to deal with international problems. As they are hardly to be defined exhaustively, it is better to abstain from any provision at the outset that the code is limited to ‘international cases’ or ‘cases with international dimensions’. Even a provision like Article 3 (3) of the Rome Convention is unnecessary.

6.

A European Code of Private International Law does not need a general provision on the hierarchy of sources. Special problems with special concurring conventions or instruments must be dealt with separately in the final provisions of the Code.

7.

Precise multilateral conflicts rules should be accompanied by a general evasion clause making an exception for special cases with closer connections to a third country than to the country whose law was designated as governing by the hard and fast conflicts rule.

8.

In a European Code of Private International Law, the principal personal connecting factor for choice of law should be the person’s habitual residence. This term should not be defined in the general part. If nationality serves as a subsidiarily applicable connecting factor, effective nationality should be decisive in cases of multiple nationalities.

9.

Parties may choose the law governing with respect to all transactions in which the parties can also exercise contractual or transactional freedom in substantive law. Party autonomy may be unrestricted in international contract law and must be restricted in the law of matrimonial property, law of succession, and property law. The implementation of these guidelines should be left to the special part of any Code of Private International Law. A general provision on choice-of-law agreements may be included in the general part of such a Code.

10.

The special conflicts rules for issues touching matrimonial property and successoral estates should not distinguish between movable and immovable property. A general rule on this problem should not be formulated.

11.

Also, provisions on ‘conflit mobile’ and on vested rights should be left to the special part of a European Code of Private International Law. These matters are so closely connected with the special conflicts rules and recogYearbook of Private International Law, Volume 7 (2005)

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Kurt Siehr nition provisions that a general rule can hardly be formulated without creating confusion or providing not very helpful narrative clauses. 12.

European instruments already subscribe to dépeçage. The Rome Convention of 1980 provides special rules for formalities (Article 9), capacity (Article 11) and assignment and subrogation (Articles 12 and 13). Such a tradition should be continued.

13.

The problem of qualification or characterization is a hermeneutical problem. In the supranational instrument of a European Code of Private International Law, qualification cannot be based on the lex fori of the national court seized of the matter. European conventions provided either special rules on uniform interpretation (Article 18 Rome Convention of 1980) or transferred jurisdiction for uniform interpretation to the European Court of Justice (Protocol of 1971 to the Brussels Convention of 1968). A European Code of Private International Law, passed as a regulation, needs neither. The regulation is automatically subject to the jurisdiction of the European Court of Justice, in charge of uniform interpretation and of the making of binding decisions on the correct meaning of European law in dispute. There is no need to provide more.

14.

Renvoi in cases arising between the Member States of the European Union must be excluded. Any reference to the law of a Member State refers to substantive law. If reference is made to the law of third countries, renvoi should be accepted in certain cases. Apart from renvoi proper, foreign conflicts law should be applied in cases with any block references (Blockverweisung). This, however, cannot be provided in a general rule.

15.

The European Code of Private International Law should take into account the law of third countries as does Article 7 (1) of the Rome Convention.

16.

In proceedings concerning international cases, proof of the law of Member States should be established in the same way as domestic law in the respective forum, either by the pleading of both parties or ex officio by the court. If foreign law cannot be established, the designation of the subsidiarily applicable law should be left to the courts.

17.

A clause on States with more than one legal system should be added in order to designate the applicable regional or personal law.

18.

The application of foreign public law should not be precluded by the mere fact that a provision is considered to have a public law character.

19.

Preliminary or incidental questions can hardly be answered by a single general provision. This does not exclude that the special part of a European Code of Private International Law deal with specific preliminary questions and give a proper answer.

20.

The public policy clause of a European regulation should be limited to two provisions. Any foreign law violating public policy of the forum State

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General Problems of PIL in Modern Codifications should not be applied. Another provision may formulate a clause on an ‘ordre public européen’, excluding the law of third States not meeting the minimum standards of European harmonized mandatory law. There is no need to provide by regulation for a subsidiarily applicable law and for mandatory provisions (lois d’application immédiate) of the forum State. 21.

Rules on the evasion of law should be left, in specific cases, to be regulated in the special part of a codification of private international law.

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MAINTENANCE IN PRIVATE INTERNATIONAL LAW IN THE UNITED STATES: HARMONIZATION OF DIVERGENT RULES AND THE PROPOSED HAGUE MAINTENANCE CONVENTION Robert G. SPECTOR∗

I. II.

IV. V.

Introduction Jurisdiction A. Direct Rules of Jurisdiction B. Indirect Rules of Jurisdiction Applicable Law A. Establishment of Orders B. Enforcement of Orders Modifications or Variations of the Original Support Order Conclusion

I.

Introduction

III.

In April, 1999, the Hague Conference on Private International Law’s Special Commission on Maintenance Obligations voted to begin work on a new convention on maintenance obligations.1 At this point, the work is well underway. Special ∗

Glenn R. Watson Chair and Centennial Professor of Law, University of Oklahoma Law Center. The author is a member of the United States delegation to the Hague Conference on Private International Law’s Special Sessions on the Maintenance Convention. The views expressed in this article are those of the author and do not necessarily reflect those of the Department of State or the United States government. 1

See ; select ‘Work in Progress’; select ‘Maintenance Obligations’; select ‘Report on Conclusions of the Special Commission on Maintenance Obligations of April 1999’, drawn up by the Permanent Bureau of the Hague Conference on Private International Law, December, 1999; also see DUNCAN W., ‘Note on the Desirability of Revising the Hague Conventions on Maintenance Obligations and including in a New Instrument Rules on Judicial and Administrative Co-operation’, in: ; select ‘Work in Progress’, select ‘Maintenance Obligations’, select ‘Prel. Doc. No. 2 of January, 1999 for the attention of the Special Commission’. All documents relating to the negotiations of the new maintenance convention can be found at under ‘Work in Progress’, ‘Maintenance Obligations’. Yearbook of Private International Law, Volume 7 (2005), pp. 63-83 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Robert G. Spector Commissions took place in May, 2003, June, 2004, and April, 2005. The sessions were well attended with more than 55 countries and more than thirteen international organizations present.3 The negotiations on the maintenance convention have proven to be far more challenging than those that led up to the Convention of 13 January 2000 on the International Protection of Adults4 or the Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children.5 All States generally have the same approach to jurisdiction, applicable law and enforcement of judgments in cases concerning children and incapacitated adults. As a result, arriving at an agreement on those aspects of the 1996 and 2000 Conventions was not extremely difficult.6 That is not the case with regard to maintenance. There are large differences between common law countries, particularly the United States, and the civil law countries of the European Union. Arriving at a convention that can harmonize the differences between the two systems has indeed proved challenging. This article describes the system of private international law regarding maintenance in the United States, indicates where this law departs from the system in place in many civil law countries, and discusses whether harmonization in one convention is possible. The United States has a federal system of government where some of the functions are performed by the national government and others are performed by the individual unit states. Domestic relations issues, including the subjects of marriage, divorce or dissolution of marriage, maintenance, division of marital property, custody and access to children, as well as other areas of parental responsibility, are almost exclusively within the control of the individual states.7 However, the United 2

For a description of the work of the 2003 and 2004 Special Commissions see DUNCAN W., ‘The Development of the New Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance’, 38 Fam. L. Q. (= Family Law Quarterly) 663 (2003) 3 Available on the website: (Jan. 13, 2000). 4 Available on the website: (Jan. 1, 2002). 5 That is not to say that there were not issues dividing the delegates during the discussions of the 1996 Convention.. For a discussion of the negotiations see SILBERMAN L., ‘The 1996 Hague Convention on the Protection of Children: Should the United States Join?’, 34 Fam. L. Q. 239 (2000). For a discussion of the interstate custody rules in the United States with a comparison to the 1996 Children’s Convention see SPECTOR R.G., ‘The Uniform Law With Regard to Jurisdictional Rules in Child Custody Cases in the United States’, in: this Yearbook 2000, pp. 75-99. 6 The federal government does plays a peripheral role in some family law areas that are of national concern. For example, pursuant to the Full Faith and Credit Clause of the United States Constitution, the federal government may regulate the effect that the judgments and the laws of one state have in another state. See the discussion in SCOLES E. / HAY P. / BORCHERS P. / SYMEONIDES S., Conflict of Laws, 4th ed., St. Paul 2004, pp. 1257-1337. In another example, the federal government passed the ‘Defense of Marriage’ Act, Publ. L. No. 104-199, § 3 (a) 110 Stat. 2419 (1996) (codified in 1 U.S.C. § 7), which authorized the individual states to refuse to recognize a same-sex marriage performed in other states. That

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Maintenance in U.S. Private International Law States Supreme Court may limit a state’s control. Even if a federal court were to have jurisdiction over the parties on an independent federal ground, such as diversity of citizenship,8 the federal court will abstain from deciding issues of domestic relations when it finds that individual state courts are a more appropriate forum.9 Since each individual state is solely competent to decide cases involving problems of domestic relations, like maintenance issues, they relate to each other in the same way as independent countries. Therefore, it has become necessary to develop some method to determine which state will have jurisdiction to decide the various family law issues, the law applicable to those issues, and to determine which family law judgments shall be enforced by other states.

II.

Jurisdiction

A.

Direct Rules of Jurisdiction

In the United States, family law cases are subject to three different jurisdictional standards. First, jurisdiction to enter a judgment of divorce or dissolution depends on the relationship between one of the parties and the forum.10 Second, jurisdiction over measures to protect minors, such as custody or access, depends on the length of time the minor has been habitually resident in the state. If the minor has been a resident of the state for six months, jurisdiction to determine the minor’s custody and access, as an original matter, is normally present.11 The third jurisdictional issue concerns the ability of a court to enter a maintenance order. In this jurisdictional area, the United States Supreme Court has interpreted the United States Constitution to mandate an entirely different approach to jurisdiction. Instead of focusing on the relationship between the creditor/child and the forum, the court adopted the approach used in tort and contract cases and focused on the relationship between the defendant/debtor and the forum. In cases law also provides that for federal law purposes, such as federal income taxation and social security, a marriage shall be defined as one man and one woman. 7 28 U.S.C. §1332 (2005). 8 Barber v. Barber, 62 U.S. 583 (1858); ex parte Burrus v. Burrus, 136 U.S. 586 (1890). 9 If one party is domiciled in the state that grants the divorce, all other states must much give recognize the divorce under the Full Faith and Credit Clause of the United States Constitution. Williams v. North Carolina [I], 317 U.S. 287 (1942). The United States does not recognize divorce jurisdiction based upon nationality. By statute, most states have a durational residency requirement, usually six months, before the state will grant a divorce. The constitutionality of these statutes was upheld in Sosna v. Iowa, 419 U.S. 393 (1975). 10 Uniform Child Custody Jurisdiction and Enforcement Act § 201. The entire topic of jurisdiction and recognition with regard to measure for the protection of minors in the United States is discussed in SPECTOR R.G. (note 5), pp. 75-99.

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Robert G. Spector involving monetary awards, such as maintenance cases, the jurisdictional standards dictated by the Constitution are based on the relationship between the defendant/debtor, and the forum. A state is always allowed to exercise jurisdiction over defendants who are residents of the state. The case of Kulko v. California determined this approach.12 In Kulko, the parents lived in New York. The couple divorced and the mother moved to California. The divorce agreement provided that the couple’s two children would reside with the father in New York. After a few years under this arrangement, the older child, a daughter, desired to live in California with her mother. The father paid for an airline ticket to send his daughter to California. Later the mother sent the other child, a son, an airline ticket to California. When both children were in California, the mother sued the father for maintenance in California. The father resisted the suit arguing that California had no relationship to him and, therefore, California could not require him to pay maintenance. The United States Supreme Court agreed. It noted that generally the United States requires that the defendant have minimum contacts with the forum before a monetary judgment may be entered against the defendant. Purchasing the ticket to send his daughter to California did not satisfy the minimum contacts requirement. The mother argued that California should have jurisdiction because it had substantial interests in protecting the welfare of its minor residents. The court responded that: ‘These interests are unquestionably important. But while the presence of the children and one parent in California arguably might favor application of California law in a lawsuit in New York, the fact that California might be the “center of gravity” for choice-of-law purposes does not mean that California has personal jurisdiction over the defendant. And California has not attempted to assert any particularized interest in trying such cases in its courts by e.g., enacting a special jurisdictional statute.’13 A decade after the Supreme Court’s decision in Kulko, Congress recognized the need for broad reform in the area of interstate maintenance. It created the Commission on Interstate Child Support (‘the Commission’) and required it to submit a report that contained recommendations for improving the interstate establishment and enforcement of child support and for improving the uniform laws that govern interstate child support in the United States, including the issue of jurisdiction. The Commission, after extensive discussion, urged reliance on statutes that expand the circumstances where jurisdiction over the debtor would be permissible. It also encouraged Congress to attempt to enact measures to create ‘child-state’ jurisdiction, i.e., a system whereby the duty of support itself provides the nexus for issuance of a support order even though the debtor has no other contact with the

11 12

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436 U.S. 84 (1978). 436 U.S. at 1700.

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Maintenance in U.S. Private International Law forum state.14 However, to date Congress has not acted on the Commission’s recommendation. The promulgation and subsequent enactment in all states of the Uniform Interstate Family Support Act (‘UIFSA’) implemented the recommendation to rely on expanded jurisdictional statutes.15 Section 201 of UIFSA tackled the challenge presented in the Kulko case and enacted a particularized statute that asserts personal jurisdiction in many cases where the child is in the forum state and the defendant/debtor resides outside the state. Under UIFSA, a state may exercise jurisdiction over a nonresident defendant in the following circumstances:16 (A) the individual is personally served with a legal citation within the state; (B) the individual submits to the jurisdiction of the state by consent, by entering a general appearance, or by filing a responsive document that has the effect of waiving the objection to the state’s jurisdiction; (C) the individual resided with the child in the state; (D) the individual resided in the state and provided prenatal expenses or support for the child; (E) the child resided in the state as a result of the acts or directives of the individual; (F) the individual engaged in sexual intercourse in the state and the child may have been conceived by that act of intercourse;17 (G) the individual asserted parentage in the state’s putative father registry. 13 U.S. Commission on Interstate Child Support, Supporting Our Children: A Blueprint for Reform 239-261 (U.S. Govt. Printing Office: Washington D.C. 1992). 14 All citations to the Uniform Interstate Family Support Act are to the 2001 revision of that Act and can be found at: 9 Uniform Law Annotated page 159 et seq. (2001). 15 It must be noted that personal jurisdiction over a nonresident obtained under Section 201 authorizes a state to enter the original order for child support. Satisfaction of one of the jurisdictional bases of this section does not allow a state to modify a child support order of another state. Modifications of child support orders are governed by Sections 611, 613 and 615 of the UIFSA Uniform Interstate Support Act. LeTellier v. LeTellier, 490 S.W.3d 490 (Tenn. 2001). For the discussion of modifications, see Section IV below. 16 A case that illustrates the complexity of the jurisdiction problems in the United States is Abu-Dalbough v. Abu-Dalbough, 547 N.W.2d 700 (Minn. Ct. App. 1996). Out of a total of three children, the father was subject to the jurisdiction of Minnesota for one child. This child was conceived in Minnesota. The father provided for the mother and the unborn child and lived in the forum for a short period of time. Because the child lived in Minnesota for the requisite period of time, Minnesota had jurisdiction under the Uniform Child Custody Jurisdiction and Enforcement Act. Since the other two children were born in another nation, Minnesota could not assert jurisdiction to determine child support for those children. The father was found to be subject to the jurisdiction of Minnesota for one child – that child was conceived in Minnesota – and he provided for the mother and the unborn child and thereafter lived with the child for a short period in the forum. But the father was not subject to personal jurisdiction for the two other children who were born in another nation. The forum had jurisdiction under the Uniform Child Custody Jurisdiction and Enforcement Act to decide matters of custody and access since the children had lived in Minnesota for the requisite period of time, but was prevented from asserting jurisdiction to determine child support for the latter two children. The interesting question, not discussed in the case, is whether personal jurisdiction over the father to determine support for one child would be sufficient under the Constitution to exercise jurisdiction over support for all the children.

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Robert G. Spector American courts find that all of these enumerated circumstances conform with the Due Process Clause of the United States Constitution.18 Therefore, the enumerated circumstances mentioned in UIFSA represent the extent of the United States’ courts ability to exercise jurisdiction over a nonresident defendant for the purpose of entering a maintenance order. Conspicuously absent from the list of enumerated circumstances is the exercise of jurisdiction based solely on the residence of the maintenance creditor. The notion that a creditor can sue for maintenance at the place of the creditor’s habitual residence, or at the creditor’s option, at the habitual residence of the debtor, is mandated in the European Union.19 The difficulty of harmonizing two such disparate approaches to jurisdiction are well known.20 Therefore as noted by the Deputy Secretary General of the Hague Conference on Private International Law: ‘[T]he difficulty of achieving a consensus on agreed jurisdictional standards, combined with doubts as to whether the absence of [direct jurisdictional] rules constitutes at present an important stumbling block to international maintenance recovery, have convinced most States participating in the Special Commission, that it is better to concentrate the resources of the Special Commission on the principal concerns, namely establishing an effective system of co-operation combined with broad-based and simple procedures for recognition and enforcement.’21

B.

Indirect Rules of Jurisdiction

An indirect rule of jurisdiction is a rule of enforcement that indicates under what circumstances a judgment will be enforced. The United States makes no distinction between direct and indirect rules of jurisdiction. Therefore, under UIFSA, American courts will enforce a support order if jurisdiction is proper under Section 201. Conversely, if none of the jurisdictional bases of Section 201 are present, then the court cannot enforce a maintenance decision. Again, there is a dichotomy between the United States and Civil Law countries. Current rules on recognition of maintenance decisions in Civil Law are con17

SAMPSON J.J., ‘The Uniform Family Support Act (1996) With More Unofficial Annotations’, 32 Fam. L. Q. 390 (1998), at 421. 18

Council of the European Union, Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, No. 44/2001 of 22 December 2000, Art. 5.2. The discussions at the first two special sessions indicated that, with the possible exception of Korea, the United States is the only country that does not accept the principle of allowing the creditor to sue at home. 19

See the discussion in SPECTOR R.G., ‘Toward an Accommodation of Divergent Jurisdictional Standards for the Determination of Maintenance Obligations in Private International Law’, 36 Fam. L. Q. 273 (2002). 20 DUNCAN W. (note 2), at 681.

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Maintenance in U.S. Private International Law tained in Article 3 of the 195822 and Articles 7 and 8 of the 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations.23 These two conventions contain rules of indirect jurisdiction in that they require recognition of maintenance obligations if: (A) the maintenance creditor or debtor had his habitual residence in the State where the decision was rendered at the time when the proceedings were instituted; (B) the maintenance debtor and the maintenance creditor were nationals of the state at the time the proceedings were instituted; (C) the defendant submitted to the jurisdiction either expressly or by presenting his case on the merits; (D) the decision was part of a divorce, legal separation, or annulment by an authority of a State recognized as having jurisdiction in such matters. Some of the indirect jurisdictional rules of Articles 7 and 8 of the 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations would be unconstitutional in the United States. The United States requires that, if the maintenance debtor is not a resident of the state, there must be an adequate relationship between the debtor and the forum to justify the forum asserting jurisdiction. The habitual residence of the maintenance creditor is not such a relationship. In addition, the common nationality of the maintenance creditor and debtor is not, by itself, a constitutionally sufficient relationship since nationality does not require that there be substantial contacts between the debtor and the forum. Regardless of whether the issue is one of divorce, custody and access, or maintenance, the United States does not recognize jurisdiction based solely on nationality. Therefore, if the state of the parties’ nationality performed a divorce, annulment, or legal separation without the debtor having some adequate relationship to the state or being domiciled in that state, then the United States will find that enforcement of a maintenance decision based on Article 8 of the 1973 Hague Convention is unconstitutional. More than likely, some of the jurisdictional foundations of UIFSA would be unacceptable to the states that are parties to the 1973 Hague Convention. Under UIFSA, a state may exercise jurisdiction when the defendant is served with a citation in the jurisdiction. This is a form of ‘tag’ jurisdiction that is commonly accepted in the United States but is not generally accepted by civil law countries.24 The same may be true of jurisdiction based upon sexual relations that took place in the state and that may have resulted in the conception of the child at issue. This could result in a court asserting jurisdiction when neither the maintenance creditor nor the debtor habitually reside in the state. 21

The text of the Convention is available on the website: (Jan. 1, 1962). 22 The Convention Available is available on the website: (Aug. 1, 1976). 23 Service on the defendant by citation within the jurisdiction does not justify a basis for recognition of a maintenance decision under the 1973 Hague Convention on the Recognition of Maintenance Obligations, Article 7. The Convention is available on the website: .

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Robert G. Spector This dichotomy presented a very difficult problem for the Special Sessions drafting the new maintenance convention. In response, to a questionnaire distributed by the Secretariat of the Hague Conference on Private International Law, states agreed that provisions for recognition and enforcement of foreign maintenance decisions should be a key and compulsory element in the new instrument.25 The United States proposed that recognition and enforcement of a foreign maintenance decision should not be conditioned on specific rules of indirect jurisdiction. Rather, a foreign maintenance decision should be enforced if, under the facts and circumstances of the case, jurisdiction would have been proper under the law of the state addressed.26 In other words, the United States would recognize a maintenance judgment of a civil law country if, under the facts and circumstances of the case, it became apparent that any of the jurisdictional bases of UIFSA section 201 were present. Conversely, a civil law country would recognize a United States maintenance judgment if any of the provisions of the recognition section of the 1973 Hague Convention were apparent in the case. Ultimately the Special Sessions compromised and adopted the current version as follows: ‘Article 16 – Bases for recognition and enforcement 1. A decision made in one Contracting State (‘the State of origin’) shall be recognised and enforced in other Contracting States if – a) the respondent was [habitually] resident in the State of origin at the time proceedings were instituted; b) the respondent has submitted to the jurisdiction either expressly or by defending on the merits of the case without objecting to the jurisdiction at the first available opportunity; c) the creditor was [habitually] resident in the State of origin at the time proceedings were instituted; d) the child for whom maintenance was ordered was [habitually] resident in the State of origin at the time proceedings were instituted, provided that the respondent has lived with the child in that State or has resided in that State and provided support for the child there; [e) there has been agreement to the jurisdiction by the parties in writing or evidenced by writing; or f) the decision was made by an authority exercising jurisdiction on a matter of personal status, unless that jurisdiction was based solely on the nationality of one of the parties.] 2. A Contracting State may make a reservation, in accordance with Article 54, in respect of paragraph 1 c)[,e) or f)].

24

See DUNCAN W. (note 2), at 667. The full proposal is set out in SPECTOR R.G. (note 19), at 278-279. This provision appears in the United States bilateral agreements with other countries on the establishment and enforcement of child support obligations. See e.g. the Agreement between the Government of the United States of America and the Government of the Kingdom of the Netherlands for the Enforcement of Maintenance (Support) Obligations (May 1, 2002), State Dept. No. 02-46, 2002 WL 1404525. 25

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Maintenance in U.S. Private International Law 3. A Contracting State making a reservation under paragraph 2 shall recognise and enforce a decision if its law would in similar [factual] circumstances confer or would have conferred jurisdiction on its authorities to make such a decision. 4. A Contracting State shall, if recognition of a decision is not possible as a result of a reservation under paragraph 2, and if the debtor is [habitually] resident in that State, take all appropriate measures to establish a decision. The preceding sentence does not apply to direct applications for recognition and enforcement under Article 15(5) unless a new application is made under Article 10(1) d). 5. A maintenance decision which cannot be recognised by virtue only of a reservation under Article 16(1) c)[, e) or f)] shall for the purpose of such proceedings, be accepted as establishing the eligibility of the creditor. 6. A decision shall be recognised only if it has effect in the State of origin, and shall be enforced only if it is enforceable in the State of origin.’27 This compromise contains both specific rules on indirect jurisdiction for those countries which prefer this approach as well as the more flexible approach advocated by the United States. The draft allows states to take a reservation to subsection 1 c) which requires recognition of a decision based on the habitual residence of the creditor. The United States would undoubtedly take such reservation. However, those countries that typically recognize such decisions would find specific authority allowing them to continue to do so.28 If a country, such as the United States, were to take a reservation to section 1(c), then section 3 would require a state to recognize a maintenance decision if ‘its law would in similar [factual] circumstances confer or would have conferred jurisdiction on its authorities to make such a decision.’ In essence, this is the United States’ proposal for enforcement based on whether the facts and circumstances of the case indicate that the jurisdiction would have been proper under the law of the state addressed. 26

Preliminary Document No. 16 of October 2005, Tentative Draft Convention on the Recovery of Child Support and Other Forms of Maintenance, available on the website: . 27 The current draft of the convention has bracketed the question of whether a country ought to be allowed to take a reservation to section 1(e) and (f). Those sections require recognition if the parties agreed to the jurisdiction in writing or if the decision was made by a state exercising jurisdiction on a matter of personal status unless that jurisdiction was based solely on nationality. The first of these is probably acceptable to the United States, in that would fall under section 1(b) which requires recognition if the debtor submits to jurisdiction. However, section 1(f) presents the same problem as recognition of a decision made by the country of the creditor’s habitual residence. If a state is allowed to grant a divorce to a couple based on the habitual residence of only one party without having jurisdiction over the other party, then the United States would not recognize a decision made by that state requiring the absent party to pay maintenance.

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Robert G. Spector Section 4 contains a proposal that is featured in the United States’ bilateral arrangements. It provides that where a state has taken reservation to recognizing a maintenance decision based solely on the habitual residence of the creditor and where such state is the habitual residence of the debtor that state has an obligation to establish a maintenance decision against the debtor. This compromise successfully harmonizes the difference between those countries that recognize maintenance decisions based on the habitual residence of the creditor and those countries that require jurisdiction over the debtor. But, this successful harmonization only applies to principles of recognition regarding to the original maintenance decision. As will be explained, there are still significant problems with regard to recognition of modifications or variances of the original decision.

III. Applicable Law Unlike civil law countries, the common law systems have never utilized applicable law rules to determine either entitlement to maintenance or the amount of maintenance to award.29 There is a long history of only applying the law of the forum in maintenance cases, regardless of the exact issue. In the United States, as well as some other common law countries, child support cases are predominantly handled by administrative agencies and not the court system. In addition to jurisdictional problems, the Commission on Interstate Child Support considered problems of the applicable law in the establishment and enforcement of maintenance obligations. The Commission heard testimony advocating a number of different choice-of-law approaches. Some witnesses advocated applying the law that is most advantageous to the child. Other witnesses argued that the law of the debtor’s residence applied. Adoption of this rule would best reflect the economic conditions facing the debtor. Still other witnesses asserted that the laws of the child’s state should always govern because the application of the child’s law best reflects the living conditions facing the child. Witnesses supporting the law of some place other than the forum argued that the drastic differences in standards of living among America’s regions should impact maintenance decisions. However, there was no consensus as to the correct result when the child and the creditor live in a state with higher-than-average

28 SCOLES E. / HAY P. / BORCHERS P. / SYMEONIDES S. (note 6), at 630-631: ‘Most American courts have applied the substantive law of the forum in divorce actions because of the historical assumption that the forum was acting as the state of the matrimonial domicile of the parties. The courts have continued to apply local law regardless of whether the marriage was originally celebrated in the forum, whether the forum was or now is the matrimonial domicile of the parties (where they last lived together as husband and wife), and whether the marital offence or the breakdown of the marriage had occurred there or elsewhere.’

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Maintenance in U.S. Private International Law earnings and a high cost-of-living and the debtor lives in a poor state with a low cost-of-living. The Commission also noted that state child support guidelines, which determine the amount of support, vary widely across the country. State laws also differ on the age of termination of a support order. In some states, support ends at age 21. In others, it terminates at age 18, or support ends at age 18 unless the child attends college. In the latter case, support continues so long as the child is regularly enrolled and is performing at a satisfactory level. Given these wide differences in the state laws, and the fact that there were almost no cases applying any other law than the forum, the Commission recommended that the procedural and substantive law of the forum state govern cases involving the establishment and modification of support orders. The Commission decided that the most important considerations are the ease and the efficiency by which the administrative tribunals apply local law.30

A.

Establishment of Orders

As noted, the Commission’s recommendation for a new uniform statute to govern interstate child support cases resulted in the drafting of the Uniform Interstate Family Support Act (UIFSA). UIFSA has two sections concerned with the applicable law. The first of these is Section 303 which governs applicable law in the establishment of support orders. This section adopts the recommendation of the Commission and requires the tribunal to apply the procedural and substantive law of the forum to determine who is entitled to support and the quantum of support. The Official Comments of the drafters of UIFSA note that the major concern is establishing procedures to insure that the significant number of interstate support cases are processed efficiently. In order to accomplish this goal, it is vital that tribunals apply familiar rules of local law to the maximum degree possible. The comments of the drafters remain true today. The United States requires the child support system to process a large number of cases. For example, in Texas alone, there are over 89,000 interstate child support cases currently pending in the administrative system. At any given time, there are over one million cases in the child support system in the United States. The administrative tribunals established to decide most child support cases are highly specialized. The administrative law judge and the attorneys who appear in these cases are trained in the support law and procedures of their particular states. The administrative law judge hearing these cases processes 20 to 40 cases a day. Local cases, interstate cases, and international cases are all a part of the mix. If the applicable law rule required the judge and the attorneys to apply the law of some other state, then the entire system would interminably slow down and would delay support when it is needed most. The law governing the establishment of child support has to be far more concerned with the efficient administration of justice 29

U.S. Commission on Interstate Child Support (note 13), at 91-92.

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Robert G. Spector than at arriving at the absolutely correct result in a particular case. Therefore, applicability of local law is the only way to ensure an efficient operation of the administrative system. However, states will never refuse to recognize a foreign order because of an error in the applicable law.

B.

Enforcement of Orders

When an order from one state is sought to be enforced in another state, a few choice-of-law problems arise. One of the basic principles of UIFSA is that when one state is asked to enforce an order from another state, the order remains that of the state that issued it. It is not necessary, or even desirable, for the enforcing state to make the order its own before enforcing it. In conformity with this principle, UIFSA § 604 provides that a number of aspects of the enforcement process are governed by the law of the issuing state. The following aspects of the enforcement process are governed by the law of the issuing state: (a) The duration of the order: American states differ on whether child support continues until age 18 or 21. This means that if the order originates in a state permitting child support until age 18, then the child is entitled to support until such age, even though the child may currently reside in a state that provides for support until age 21.31 (b) The computation and payment of arrearages and the accrual of interest on arrearages. This includes such issues as whether the noncustodial parent is entitled to credit against child support for the time when the noncustodial parent is exercising an extended period of access,32 as well as questions of 30

See Robdau v. Commonwealth, Virginia Dept. Social Serv., 543 S.E.2d 602 (Va. Ct. App. 2001), where the Virginia child support agency sought enforcement of a New York child support order against the debtor. The trial court confirmed the registration and the debtor appealed, seeking to end his support obligation under the Virginia law, that specified that child support ended at age 18, rather than the law of New York, where child support ended at age 21. The appellate court held that Virginia had jurisdiction to enforce the New York order for child support payments beyond the time frame mandated by when the father’s child support obligation would have terminated under Virginia law. See also Gonzalez-Coengaga v. Gonzalez, 426 So.2d 1106 (Fla. Ct. App. 1983), where when the obligor moved to Florida and claimed that he was no longer required to pay child support because his new states recognized 18 as the age of majority. The court held that the statute of the ‘foreign jurisdiction’ where the original order was issued applied. Therefore the duty to support continued until the child turned 21. In Taylor v. Taylor, 175 Cal. Rptr. 716 (Cal. App. 2 Dist. 1981), the creditor registered a Missouri child support order in California where the obligor lived. He argued that he no longer had to pay child support because California’s age of majority was 18. The court held that enforced the Missouri’s order and required is entitled to enforcement and that the debtor must continue to support payments support until the child reaches 21, the age of majority under that order[]. 31 Many of the states in their Child Support Guidelines provide for a reduction in the amount of support that is paid when the parents have joint physical custody or an extended period of access. The usual point where support is reduced is where the parent without parental responsibility has access for more than 120 nights a year. See e.g. Oklahoma Statutes, Title 43 section 118(E)(10)(a) (Supp. 2005).

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Maintenance in U.S. Private International Law whether governmental benefits paid on behalf of a child can constitute a credit against unpaid child support.33 (c) There is a special rule on the statute of limitations for the collection of arrearages. UIFSA § 604 provides that the enforcing tribunal shall apply either the statute of limitations of the forum or that of the issuing state, whichever is longer.34 (d) All remedies for the enforcement of the order of the issuing state are to be determined by the law of the enforcing state. This is another strong statement that the law of the forum applies. It is impossible for an order to be enforced by means that are not available in the enforcing states. The Special Commission established a Working Group on the Law Applicable to Maintenance Obligations (‘the Working Group’). The report of the Working Group35 concluded that compromise was not possible between the common law jurisdictions, which always apply the law of the forum, and the civil law jurisdictions, which have a well-developed system of using applicable law principles to determine entitlement and the amount of maintenance and therefore recommended that the proposed convention not include an article on the applicable law.36 However, the Special Commission adopted the recommendation of the Working Group that, although there would be no general article on the applicable law, the Convention would contain four special applicable law rules. 32 In many states social security disability benefits that are paid to the child as a result of the disability of the noncustodial parent are considered a credit against the noncustodial parent’s support obligation. See e.g., Baker v. Baker, 923 P.2d 11298 (Okla. Ct. Civ. App. 1996). 33 It should be noted that there are two different statute of limitations problems. The first governs how far back in time an creditor may go in seeking arrears. Some states allow the collection of arrears to be collected back to the original date of the order. Others have a 5 or 10 year limitation period. The other limitation accounts for when an enforcement action may be maintained after the obligation ceases to exist, period is how long after the obligation ceases may an enforcement action be maintained, even if only for a money judgment for arrears. Some states have no limitations in this regard; some states allow the creditor or the child support agency 2 to 4 years after the child becomes an adult to reduce the arrears to final judgments. The language of Section 604 is ambiguous as to whether either or both of these statutes of limitation are intended to be included. Since the rule requires the application of the longer period, it could result in the anomaly of a dépeçage in applying the law of one state to determine how far back arrears can be collected and the law of another state to determine how long after the child’s attainment of majority a case can still be brought for the collection of the arrears. 34 Working Document No. 13 of March 2005, Proposal of the Working Group on the Law Applicable to Maintenance Obligations, available on the website: . 35 A number of States present at the Special Commission have ratified either the 1956 Hague Convention of 24 October 1956 on the Law applicable to Maintenance Obligations Towards Children or the 1973 Hague Convention of 2 October on the Law Applicable to Maintenance Obligations. The Working Group recommended that those states parties two those two conventions work on revising them and that the revision be included as an optional article in the new maintenance convention. Work on that revision in ongoing within the Working Group.

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Robert G. Spector The first of these rules is directed to the situation where a state cannot recognize a maintenance order because it has taken a reservation to recognizing an order where the jurisdictional basis was solely the habitual residence of the maintenance creditor. This problem arose in the context of the Working Group’s discussion. In Germany and some other civil law countries, a child is entitled to support so long as the child continues university studies. If the United States recognized a German maintenance decision, then the United States would acknowledge the order for the duration mandated by German law, i.e. until the child was no longer studying at a university. However, the question was posed as to what would be the decision if there was a request to establish an original maintenance decision for a German university student at age 22. Because the maximum age for support, as an original order, in the United States is age 21, the response was that the United States could not establish such a decision. The Working Group agreed that there should be a mandatory applicable law rule to solve this particular problem. However, the successful drafting of such a rule has been met with many obstacles. Article 16 (5) contains the current version of the applicable law and states as follows: ‘A maintenance decision which cannot be recognised by virtue only of a reservation under Article 16(1) c)[, e) or f)] shall for the purpose of such proceedings, be accepted as establishing the eligibility of the creditor.’37 This provision establishes an applicable law rule which would require the state addressed to apply the law of the requesting state to determine eligibility for maintenance. However, the current version is extremely broad and goes well beyond the hypothetical of the German university student. It applies to all maintenance obligations, including those of collateral relatives. Maintenance beyond spouses and children is not recognized in the United States. While the United States might well be willing to agree to an applicable rule regarding maintenance arising out of a parent’s relationship to a child who is otherwise considered an adult, or between spouses, it is doubtful that the United States would be willing to agree to an applicable law rule that would require it to recognize maintenance outside the parent-child or spousal relationship. The provision also seems very problematic given that Article 7 of the 1973 Convention on the Law Applicable to Maintenance Obligations allows the debtor to object to the imposition of a maintenance obligation based on a collateral or affinity relationship when there was not a comparable obligation under the law of the debtor’s habitual residence.38 The problem may be resolved by Article 44 of the proposed convention. That article, which is still in flux, would, under one possibility, authorize a country to take a reservation to the scope of the convention and limit the applicability of

36

Available on the website: . Convention of 2 October, 1973 on the Law Applicable to Maintenance Obligations, Article 7 available on the website: . 37

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Maintenance in U.S. Private International Law the convention to maintenance obligations arising out of the parent-child relationship. The Working Group also recommended three other applicable law rules that would be part of the mandatory part of the proposed convention. Article 27 of the proposed draft provides that: ‘1. Subject to paragraphs 2 and 3, enforcement shall take place in accordance with the law of the State addressed. 2. Effect shall be given to any rules applicable in the State of origin of the decision relating to the duration of the maintenance obligation. 3. Any limitation on the period for which arrears may be enforced shall be determined either by the law of the State of origin of the decision or by the law of the State addressed, whichever provides for the longer limitation period.’39 Subsection 2 is derived from UIFSA section 604(a)(1). This section provides that the duration of the order shall be governed by the law of the place that issued the order.40 Subsection 3 is based on UIFSA section 604(b) which provides that in a proceeding for arrears, the long of the statute of limitations of the issuing state or enforcement state is applicable. The ambiguity of UIFSA section 604(b) is thus carried over into the proposed convention since there is no indication in Article 27 (3) as to whether the section is applicable to the time period to sue for arrears or to the issue of how many years of arrears can be sued for, or to both. All other issues regarding enforcement of a support order are referred to the law of the state addressed. This is in accordance with UIFSA section 604(c)) which applies the law of the forum to determine the procedures and remedies available for the enforcement of support orders.41

38

Available on the website: . The Working Group rejected including a provision comparable to UIFSA 604(a)(1) which provides that the computation and payment of arrears and the accrual of interest on arrears are governed by the law of the place that issued the order. The Working Group thought that it imposed too much of a burden on the state addressed to determine what the law of the issuing state was on those issues. 40 Article 32 contains the final, and non controversial, applicable law rule. It provides that the right of a public body to seek reimbursement of a benefit provided to the creditor in place of maintenance is governed by the law to which the public body is subject. 39

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IV. Modifications or Variations of the Original Support Order In the United States, two main rules exist regarding modifications of the maintenance obligation. Section 205 of UIFSA contains the basic rule. That section provides that the state which issued the original support order retains continuing exclusive jurisdiction to modify the order so long as the state is the residence of the debtor, the individual creditor, or the child.42 If all of the parties and the child no longer reside in the issuing state, then the issuing state no longer has an appropriate nexus with the parties or the child to exercise jurisdiction to modify its child-support order.43 However, if the parties agree, then they may designate some other state to assume jurisdiction over the support order.44 and that state would become the state with continuing exclusive jurisdiction over the support order. Sections 611 and 613 contain the second rule. If the creditor, debtor and the child leave the state that issued the original support order, then that state loses the ability to modify its own order. If all parties now reside in another state, then section 613 provides that the new state may modify the original order and it may also assume continuing exclusive jurisdiction over the support order. 41 It is not necessary that there be a continuous residence of one of the named parties from the time of the original support order until the time a party files a motion to modify. All that is necessary is that one of the parties be a resident at the time a party files the motion to modify. If all parties and the child leave the issuing state and then one party returns, continuing exclusive jurisdiction is re-established in the issuing state. Porter v. Porter, 684 A.2d 259 (R.I. 1996); Peddar v. Peddar, 683 N.E.2d 1045 (Mass.. Ct. App. (1997). Temporary absences do not terminate the continuing exclusive jurisdiction of the forum. In State ex rel Havlin v. Jamisonohnson, 971 S.W.2d 938 (Mo. Ct. App. 1998), a Tennessee order was registered in Missouri and one of the issues was whether the debtor continued to reside in the issuing state. Although he worked in Singapore, the debtor maintained significant contacts with Tennessee, including that he: was a resident there for seven years; worked for a Tennessee company for that entire period; received his pay, stored his personal effects, maintained his bank account, had his driver’s license, and was registered to vote in Tennessee. Finally, he stated that he would return to Tennessee after completing his overseas assignments. The court labelled his absence as ‘temporary’ due to his employment, and found that his intent to return was determinative. 42 In re Marriage Matter of Erickson, 991 P.2d 123 (Wash. Ct. App. Div. 3 2000); Groseth v. Groseth, 600 N.W.2d 159 (Neb. 1999). Even though the issuing state may not modify its own order, all states must enforce the order, including the issuing state, until such time that a state with jurisdiction modifies the order. 43 This designation may include the original issuing state. Section 205: provides that even if the issuing state is not the residence of the obligor, the individual obligee, or the child for whose benefit the support order is issued, the parties may consent in a record or in open court that the tribunal of the original issuing state may continue to exercise jurisdiction to modify its order. The designated state must have personal jurisdiction over at least one of the parties to the case. The parties cannot simply designate a state that has no relationship to either of them.

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Maintenance in U.S. Private International Law A different approach prevails if both parties leave the state that issued the original order and each moves to a different state. In that case, section 611 provides that a state may modify a child support order of another state if the person seeking the modification is a nonresident of the state and the state would have jurisdiction over the nonmoving party under the standards set forth in section 201. Thus if the debtor is seeking a downward modification of the order, then it must be done in a state with jurisdiction over the creditor, which will usually be the creditor’s state of residence. If the creditor is seeking an upward modification, then it must be done in a state with jurisdiction over the debtor, which will usually be where the debtor resides. This restriction on the jurisdictional grounds otherwise available under section 201 attempts to achieve a rough justice between the parties in the majority of cases by preventing a litigant from choosing to seek a modification in a local tribunal to the marked disadvantage of the other party. For example, a debtor visiting the children at the residence of the creditor cannot be validly served with a citation accompanied by a motion to modify the support order. Even though section 201 authorizes such personal service on the debtor in the obligee’s home state and such service is consistent with the United States Supreme Court’s holding in Burnham v. California,45 the motion to modify does not fulfil the requirement of being brought ‘by a petitioner who is a non resident of this state.’ Thus both parties are prohibited from seeking a hometown modification. Under the system in place for the original order, in those instances in which the parties began in the same state, the party who moves from the issuing state is the one who bears the burden of litigating in a foreign forum. But when both parties move, the individual who is seeking the modification bears the burden to litigate in a distant forum. When there is a valid order in existence, the person seeking to change it bears this burden. Pursuant to the applicable law rule of section 604, certain aspects of the original support order are not modifiable. These aspects include the duration of the order, the accrual of interest on arrears, and the existence and satisfaction of other obligations under the support order.46 There is a special rule for some foreign countries in section 615. If a child support order has been issued by a foreign country and that country will not or cannot modify its own order pursuant to its laws, then a state of the United States may modify the order and bind all persons who are subject to its jurisdiction under section 201. This situation arises when there is a support order from a foreign 44

4985 U.S. 604 (1990). The above rules are applicable to modification of a maintenance decision where the maintenance is ordered for a child. A special rule applies to spousal-only maintenance orders. Those orders can only be modified by the state that issued the original order. UIFSA Section 211. Thus if State A issues an order requiring the debtor to pay an amount for child support and a separate amount for spousal support, the child support can be modified according to the above procedure, but the spousal support could only be modified by the state that issued the order. See e.g., Hook v. Hook, 611 S.E.2d 869 (N.C. Ct. App. 2005); Spalding v. Spalding, 886 So.2d 1075 (Fla. Ct. 5th Dist. App. 2005); Hibbitts v. Hibbitts, 749 A.2d 975 (Pa. Super. Ct. 2000). 45

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Robert G. Spector country which would have continuing exclusive jurisdiction under UIFSA but, under its own law, cannot modify the order. This could occur where the foreign country’s law requires both parties to be present for a modification but cannot force the absent party to return. Without a special rule the United States could not modify the order because the foreign country would have exclusive continuing jurisdiction and the foreign country could not modify the order because it could not compel the absent party to return. When this happens, a state of the United States that has jurisdiction over the parties may modify the foreign order. Conspicuously missing from the grounds for modification is the option given by civil law countries of the European Union to the creditor to modify the support order where the creditor is habitually resident or, at the creditor’s option, where the debtor is habitually resident. This dichotomy between European and United States rules on modification is likely to be the most difficult problem to harmonize. Currently the only provision in the draft of the proposed convention on modification is Article 14 which provides: ‘1. Where a decision is made in a Contracting State where the creditor is [habitually] resident, the debtor may not bring proceedings for a new or modified decision in any other Contracting State as long as the creditor remains [habitually] resident in that State. 2. The previous paragraph shall not apply: a) where there is agreement between the parties as to the jurisdiction of that other Contracting State in writing or evidenced in writing; b) where the creditor submits to the jurisdiction of that other Contracting State either expressly or by defending on the merits of the case without objecting to the jurisdiction at the first available opportunity; or, c) where the competent authority in the State of origin cannot, or refuses to, exercise jurisdiction to modify the decision or make a new decision.’47 This Article is relatively uncontroversial since it involves the fact patterns where both systems agree on the determination of where the modification proceeding should be brought. When the maintenance decision is made in the state where the creditor is habitually resident and the creditor continues to reside there, then that state is the appropriate state for any proceeding for modification.48 Under UIFSA the restriction on the debtor is appropriate because the state of the creditor’s habitual residence has continuing exclusive jurisdiction. The solution is also appro46

Available on the website: . The Drafting Committee has a footnote after this section which indicates that ‘[c]onsideration should be given to insert in paragraph 1 after the terms “any other Contracting State” the following phrase: “in which the original decision can be recognized and enforced under the Convention.”’ The insertion of this phrase is absolutely necessary. If a state cannot recognize the original decision, then there is no maintenance decision existing in that state. Therefore, there cannot be a decision to modify and should the debtor choose to bring a proceeding to set maintenance, there is no reason to prohibit such an action since an order does not exist. 47

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Maintenance in U.S. Private International Law priate under the civil law rules since the modification proceeding would take place where the creditor habitually resides. The exceptions to the general rule contained in section 2 of Article 14 generally comport with the UIFSA rules. Section 205 of UIFSA allows the parties to agree that another state shall assume continuing exclusive jurisdiction over the support order. However, UIFSA requires that the parties must file the consent with the court of the new state assuming continuing jurisdiction. The same is required if all the parties move from the state that issued the original order, but the parties agree to allow the issuing state to retain continuing jurisdiction. Unlike Article 14 of the proposed convention, UIFSA does not allow a new state to assume continuing exclusive jurisdiction where one party defends on the merits without raising the jurisdictional issue.49 The major problem is that the current Article 14 only covers the situation where the creditor remains in the original state. There are a large number of fact patterns that are not covered by Article 14. First, consider the situation where a married couple habitually resides in Texas and divorces in Texas with a child support order issued by a Texas tribunal. Suppose the creditor and the child move to France and wish to modify the support order. Under the current Brussels regulation, jurisdiction to modify would be proper in France since that is the habitual residence of the creditor. Under UIFSA, if the debtor has not moved, only Texas would have jurisdiction to modify the order. It is certainly possible for an European Union country to modify an American support order when the creditor seeking the modification is habitually resident in the European Union country. However, if the debtor still resides in the American state that entered the order, then the United States will not recognize the European Union order, even though countries of the Europe Union would undoubtedly recognize it. This runs contrary to the overriding theory of UIFSA: there should be one and only one support in existence at any given time. The second situation is a variation of this problem and occurs when the creditor, child, and debtor leave the original issuing state. For example, suppose the child and creditor move from Texas to France and the debtor moves to another state within the United States, such as Oklahoma. Under the Brussels regulation, modification would be proper in France since France is the habitual residence of the creditor. However, under UIFSA section 613, because all parties left Texas, the state that originally issued the order, the support order can only be modified in a state where the petitioner is a nonresident and where jurisdiction is proper over the respondent. The UIFSA solution would require the debtor to modify the order in France and the creditor to modify the order in Oklahoma. If the creditor obtained a modification in France, then the United States would not recognize the modification. The only solution that would avoid two orders would require compliance with the UIFSA system. If the creditor modifies in Oklahoma, then the United States would recognize the modification under UIFSA and France would recognize it because French law allows the creditor to modify where the debtor resides. Both 48

See e.g. Knowlton v. Knowlton, 2005 OK CIV APP 22, 110 P.3d 578.

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Robert G. Spector France and the United States would also recognize a modification instituted by the debtor in France. The United States would recognize it because it comports with the UIFSA system. France would find the modification proper in France because it is the habitual residence of the creditor. The third situation is the case where a married couple habitually resides in and then divorces in France. France issues a support order for the child. Assume that the creditor and the child move to Texas and the debtor remains in France. Under the current Brussels regulations, Texas has jurisdiction to modify the order since it is now the creditor’s habitual residence. However, under UIFSA, Texas would decide that it had no jurisdiction because France had continuing exclusive jurisdiction over the support order. The only way that a modification of the support order could be recognized under both system is if the creditor returns to France to seek a modification. This would be proper under UIFSA which provides that France has continuing exclusive jurisdiction. French law would also find this permissible since the creditor has the option of suing at the place where the debtor habitually resides. A fourth situation is where France issues a support order against a resident of the United States. Assume that the United States would recognize the order under Article 16 of the draft of the proposed convention. The creditor then moves to Italy from France and wishes to obtain a modification of the French support order. Under the Brussels regulation the creditor may obtain a modification in Italy. However, since UIFSA section 613 will only recognize modifications that take place in a state where the petitioner is a nonresident and therefore the modification in Italy would not be recognized in the United States. Again in order to avoid two orders, the creditor would have to obtain a modification in Texas. Article 14 does not address any of these fact patterns. The Special Commissions have not discussed, in any detail, how they should be resolved. It is entirely possible that the convention will not cover all problems involving modifications. That would be unfortunate. Not deciding modification problems would lead the international support system to one of two undesirable results. The first would be that, for a large number of cases, there would be two valid support orders in existence. This result negates UIFSA’s major purpose to eliminate this problem. The second result is that, to avoid duplicate enforceable orders, creditors would have to modify where the debtor habitually resides. This means that creditors of limited resources would face significant burdens in pursuing a modification. If the special session attempts to include recognition of modifications in the current convention it will require a compromise between the United States’ UIFSA system and the European Union’s Brussels regulation regime. Such a compromise would undoubtedly entail crafting a system that would be unique to international cases and not applicable to cases internal to the United States or the European Union. One possible answer would be to require states to recognize modifications in those situations where the state making the original support order would recognize the modification. In other words recognition of the original support order would also entail recognition of those situations where the state that issued the original order would or would not allow the order’s modification. Thus if France 82

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Maintenance in U.S. Private International Law issued the original support order and the United States recognized the order, then a modification of the order made where the creditor habitually resided, or, at the creditor’s option, where the debtor habitually resided would receive recognition in the United States. Conversely, if the United States issued the original order and France recognized it, then such recognition would obligate France to acknowledge any modification that the United States, as the original issuing state, would recognize. Such a rule would also have to require that a state not recognize a modification which was not made in accordance with the modification rules of the state that originally issued the order. Whether such a rule would resolve the qualms of both the United States as well European countries is a current concern. The United States’ constitutional issues may well stand in the way of such a result. As previously noted, the United States currently cannot recognize a maintenance judgment from a state that does not have personal jurisdiction over the debtor. The current debate addresses whether that rule also applies to modification scenarios. Assume that there is a maintenance judgment entitled to recognition under Article 16 from France against a United States debtor. The creditor then moves to Italy, a state which does not have jurisdiction over the debtor, and obtains a modification. Should the United States be able to recognize the judgment under the theory that recognition of the original French order implies recognition of any modification of the order that France would recognize? While the author believes that there is no constitutional constraints against such recognition, there is no agreement in the United States concerning the appropriate resolution of that issue.

V.

Conclusion

The drafting of the new Hague Convention on Child Support and Other Forms of Family Maintenance has proven to be very challenging. Attempting to develop a uniform system of private international law calls for a delicate blend of two significantly different legal systems. Though the Special Commission succeeded in crafting an approach that permits the recognition of the original maintenance decision across international borders, the Commission has yet to achieve a perfectly blended, all encompassing solution, especially in relation to child support modification. It is unknown whether the 2006 Special Commission and the 2007 Diplomatic Session will lead to a complete harmonization. But one thing is certain. Both sides of the Atlantic will be anxiously watching and waiting.

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WHAT’S NEW IN LATIN AMERICAN PRIVATE INTERNATIONAL LAW? Diego P. FERNÁNDEZ ARROYO*

I. II.

V.

Introduction Unification and Harmonization A. Current Stage of Inter-American Codification B. Latin American States between Universalism and Regionalism C. Sub-Regional Developments D. The CIDIP in the Context of Economic Integration and Free Commerce E. Keys for the Future: Towards the CIDIP VII National Codifications of Private International Law A. The Argentinean Draft of a Private International Law Code (2003) B. The Uruguayan Draft of a Private International Law Act (2004) C. Towards a Mexican Draft of a Private International Law Act D. Other Legislation 1. The Brazilian Reform of Exequatur (2004) 2. The Chilean Marriage Act (2004) 3. Foreign Companies in Argentina (2003/2005) Some Current Trends in Latin American Courts and Scholarship A. The Venezuelan Example B. Party Autonomy C. Reception of Foreign Law and Decisions D. Flux and Reflux of Arbitration Conclusions

I.

Introduction

III.

IV.

Private International Law (‘PIL’) is moving ahead in Latin America. This is reflected in several factors, namely the international and national codification of PIL, which remain strong in the current millennium. In addition, the internationalization of the Latin American economies is provoking an unusual number of conflict cases. In such a context, it can be appreciated that PIL is taking considerable space *

Professor of Law, Complutense University of Madrid (Spain). Honorary Professor, National University of Córdoba (Argentina). Argentinean representative before the Expert Group for the preparation of the Seventh Inter-American Specialized Conference on Private International Law of the Organization of American States (CIDIP VII – OAS). In this essay, following abbreviations will be used: ‘DeCITA’ for derecho del comercio internacional – temas y actualidades, ‘Rev. Mex. DIP’ for ‘Revista Mexicana de Derecho Internacional Privado’. Yearbook of Private International Law, Volume 7 (2005), pp. 85-117 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Diego P. Fernández Arroyo in postgraduate university studies. At the same time, publications either dedicated to, or dealing with, PIL have appeared. The growing interest in PIL includes a great interest in so called Derecho del comercio internacional, which in these countries deals with both International Business Law and International Trade Law. This interest is apparent in a number of books and articles published throughout Latin America (or elsewhere about Latin American PIL issues) in the last years. On the one hand, one can mention some journals entirely devoted to PIL issues, like Revista Mexicana de Derecho Internacional Privado, Revista Uruguaya de Derecho Internacional Privado, derecho del comercio internacional – temas y actualidades (DeCITA, published jointly in Argentina and Brazil), and other legal reviews exclusively dedicated to arbitration.1 On the other hand, many other reviews, while not only dedicated to these matters, pay much attention to them.2 This essay deals mainly with current considerations on the international unification of PIL in America (II). I am also going to discuss, though more concisely, the national codification of PIL in some Latin American countries (III), and some trends in Latin American case law on PIL and in the writings of Latin American scholars (IV).

II.

Unification and Harmonization

A.

Current Stage of Inter-American Codification

The codification process, initiated in 1975 by the Inter-American Specialized Conference of Private International Law (CIDIP) of the Organization of American States (OAS), underwent fundamental changes during its sixth edition in 2002.3 Indeed, the CIDIP VI (2002) changed courses, moving the codification of InterAmerican PIL towards privatization, commercialization, the use of soft-law tech-

1

Revista Brasileira de Arbitragem, Revista Iberoamericana de Arbitraje (Peru), Revista Latinoamericana de Mediación y Arbitraje (México), Revista de Arbitragem e Mediação (Brazil), etc. 2 For instance, in Argentina, Revista de Derecho Comercial y de las Obligaciones, Revista de Derecho Privado y Comunitario, Revista de Derecho Internacional del MERCOSUR (also published in Brazil), eldial.com, etc. 3 PARRA-ARANGUREN G., ‘Los trabajos de la Sexta Conferencia Especializada Interamericana sobre Derecho Internacional Privado’, in: Liber Amicorum en homenaje al Profesor Dr. Didier Opertti Badán, Montevideo 2005, pp. 443-468; SEQUEIROS J.L., ‘La Sexta Conferencia Especializada Interamericana sobre Derecho Internacional Privado (CIDIP VI)’, in: Rev. Mex. DIP 2002, pp. 9-30; FERNÁNDEZ ARROYO D.P. / KLEINHEISTERth KAMP J., ‘The VI Inter-American Specialized Conference on Private International Law (CIDIP VI): A New Step towards Inter-American Legal Integration’, in: this Yearbook 2002, pp. 237-255 (with references to basic literature on CIDIP in note 1).

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Latin American Private International Law niques, and the harmonization of substantive, rather than conflicts, law.4 The modification of every parameter of this process allows one to imagine a ‘new paradigm’, so that the whole codification process is thereby conceived in another way.5 In my opinion, some changes – such as the use of a plurality of methodologies – should be welcomed, while other changes – such as the privatization or the commercialization of the process – need to be moderated. Thus I cannot but agree with the way in which the OAS has set forth the tasks for the CIDIP VII, since these opinions seem well reflected therein. I must once again insist on the inter-American – and, consequently, not just Latin American – character of the modern process of PIL codification developed by the OAS. To be sure, this process has contained a strong Latin American component since its very inception. Latin American States have taken most of the initiative and, with a few exceptions (two ratifications by the United States, four by Belize, one by Antigua and Barbuda and two adhesions by Spain), they alone have ratified inter-American conventions. Nevertheless, since the CIDIP V, the interAmerican character of this process has been growing. Canada and the United States have become more active and, at the same time, some Latin American countries, which used to be principal actors in the regional process of codification, have become less active. In its first thirty years, the CIDIP has produced twenty-one conventions, two protocols, one model law and one uniform document. Twenty conventions and the two protocols are in force, while the Inter-American Model Law on Security Interests (CIDIP VI, 2002) has already been adopted, with some modifications, by Peru.6 The subject of the only failed convention – carriage of goods by road, in the CIDIP IV, 1989 – has been reprised with a different approach, that of a uniform document, in 2002. Although the last conventions were approved in 1994 (CIDIP V), ratifications continue. Since 1995, more than fifty instruments of ratification have been deposited at the OAS headquarters.7 Nevertheless, the relevance 4

FERNÁNDEZ ARROYO D.P. / KLEINHEISTERKAMP J. (previous note), pp. 238-243 and

253-254. 5 FERNÁNDEZ ARROYO D.P., ‘La CIDIP VI: ¿cambio de paradigma en la codificación interamericana de derecho internacional privado?’, in: XXIX Curso de derecho internacional del CJI -2002- (also in: Derecho internacional privado interamericano. Evolución y perspectivas, 2nd ed., Mexico 2003, pp. 103-111). See the influence of these ideas in VÁZQUEZ C.M., ‘Regionalism versus Globalism: A View from the Americas’, in: Unif. L. Rev. 2003-1/2, pp. 68-70; VARGAS D.T., ‘As CIDIPs em seu novo papel: um foro eclético de harmonização de direito conflitual e material’, in: XXXI Curso de derecho internacional del CJI -2004-, p. 404; HERNÁNDEZ-BRETÓN E., ‘Verdades, mitos y realidades del derecho internacional privado latinoamericano actual’, in: An. Español de Derecho Internacional Privado 2004, p. 87. 6 Security Act (Ley de la garantía) Nr 28677, of February 10, 2006, see: El Peruano, March 1, 2006, p. 313457 et seq. 7 In 2005, El Salvador and Nicaragua ratified the Inter-American Convention on the International Traffic of Minors of CIDIP V (1994), and Peru ratified the Inter-American Convention on Support Obligations of CIDIP IV (1989).

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Diego P. Fernández Arroyo of inter-American conventions does not only depend on the number of ratifications. The CIDIP conventions provoke a modernization of national PIL systems by other means. Reprisals of the CIDIP in national legislation are obvious.8 Traces of interAmerican solutions can be found in almost all statutes or drafts on PIL elaborated in Latin America during the last decades. The same can be said of the rules of PIL produced by the MERCOSUR. This ‘indirect’ reception of inter-American solutions is even more important than the ‘direct’ one, in countries that do not yet recognize the hierarchical superiority of international rules.9 In addition, by means of ‘indirect’ reception, the rules of inter-American conventions become generally applicable, i.e., they apply not only to cases connected to member States. It is important to emphasize that the effect of modernization must also be understood in a strict sense, regarding the concrete content of several of these inter-American solutions.10

B.

Latin American States between Universalism and Regionalism

It may be said that Latin American States have only a ‘limited’ participation in the elaboration of the PIL that is developed by international organizations with a ‘universal’ scope. This is even the case in the most universal one – the United Nations – where every Latin American State is a member and where Latin American delegations are usually well represented. In the United Nations Commission on International Trade Law (UNCITRAL), they are all periodically members and, in the periods when they are not, can largely participate as observers. Nevertheless, a brief look at the tasks carried out by UNCITRAL working groups shows that the participation of Latin American States is, with a few exceptions, not significant. In other organizations, namely in the Hague Conference on Private International Law and UNIDROIT, less than half of Latin American States are members. However, membership is not the main issue. Even though they are members of these organi8

MAEKELT T.B., ‘La codificación interamericana desde la perspectiva de la codificación estatal de derecho internacional privado’, in: FERNÁNDEZ ARROYO D.P. / MASTRANGELO F. (eds.), El futuro de la codificación del derecho internacional privado en América. De la CIDIP VI a la CIDIP VII, Córdoba 2005, pp. 34-40. As this author states (pp. 40-51), however, in the Venezuelan case the influence was reciprocal, since InterAmerican conventions were strongly influenced by the Venezuelan draft of PIL of 1965. See also PARRA-ARANGUREN G., ‘General Provisions and Family Law Matters in the Venezuelan 1998 Act of Private International Law’, in: International Conflicts of Laws for the Third Millennium. Essays in Honor of Friedrich K. Juenger, Ardsley (NY) 2001, p. 98. 9 See SAMTLEBEN J., ‘Los resultados de la labor codificadora de la CIDIP desde la perspectiva europea’, in: España y la codificación internacional del derecho internacional privado, Madrid 1993, p. 302. 10 See, for instance, HERBERT R. / FRESNEDO DE AGUIRRE C., ‘Flexibilización teleológica del derecho internacional privado latinoamericano’, in: Avances del derecho internacional privado en América Latina. Liber Amicorum Jürgen Samtleben (KLEINHEISTERKAMP J. / LORENZO G., eds.), Montevideo 2002, pp. 55-76.

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Latin American Private International Law zations, most Latin American countries are often not represented. If Latin American governments think anything about international unification, they often realize that to send representatives to the number of meetings which take place every year in every organization is very expensive. Thus, what often happens is that most of the Latin American seats in these meetings are either empty or occupied by an official of the local embassy or consulate, who is generally an excellent professional but unfamiliar with the technical issues treated there. All this makes it very difficult for Latin American States to have any influence on the agenda of these organizations and on the drafting of texts elaborated by them.11 Nevertheless, this does not mean that Latin American States refuse global unification. On the contrary, as far as they can, their representatives try to cooperate with the work of global organizations.12 In addition, when a legal instrument adopted by these organizations is viewed as a useful tool for the improvement of the legal treatment of international private relationships, Latin American States, even those who are not member States, usually ratify or adhere to that instrument. However, within the Inter-American space, OAS member states have no problems dealing with membership. All of them (with the well-known exception of Cuba) are at the same time CIDIP ‘members,’ i.e., they are entitled to participate in all the activities related to Inter-American PIL codification. That membership gives American States, in an egalitarian regime which includes full voting rights, the right to take part in the process from the beginning until the end. They are entitled to propose topics to be codified, to participate in the preliminary works, to discuss the terms of the concrete drafting of Inter-American legal instruments during the diplomatic conferences, and to adopt these instruments. In certain ways, Latin American states still seem to consider the CIDIP as a natural forum for the elaboration of a PIL with a regional scope, understanding this regional unification as a measure which contributes to global unification. Didier Opertti Badán has thus said: ‘regionalism also has a place in globalization, if globalization is an inclusive issue rather than an exclusive one.’13 This would not, of course, impede Latin American States from creating another forum to unify PIL, a true Latin American forum. 11 Due to its significance, one could mention, among many other examples, the presence of only two Latin American delegations in the work of the Hague Conference on the Private International Law of jurisdiction and judgments. See SIQUEIROS J.L., ‘La cooperación judicial internacional. Expectativas para el siglo XXI’, in: Rev. Mex. DIP (sp. issue) 2000, p. 152 and note 22. 12 BORRÁS A., ‘El cambio de los tiempos: los hispanoparlantes en la Conferencia de La Haya de Derecho Internacional Privado’, in: Liber Amicorum Opertti Badán (note 3), pp. 79-95. 13 OPERTTI BADÁN D., ‘Palabras introductorias’, in: FERNÁNDEZ ARROYO D.P. / MASTRANGELO F., eds. (note 8), p. 19. See also the ‘Declaration of Cordoba’ (issued by professors from South America assembled in Cordoba, Argentina, on December 18, 2003), available at : ‘We declare (…) that the Americas, a pioneering continent in international efforts to harmonize and standardize private international law, has the historic duty to maintain this tradition, by cultivating a constructive dialogue with other codification forums in the world.’

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Diego P. Fernández Arroyo The external dimension of Inter-American PIL codification can be seen from a different perspective. Concretely, what is the prevailing opinion about the CIDIP process outside America? On the one hand, UNCITRAL, UNIDROIT, and the Hague Conference pay attention to the CIDIP proceedings. There is a certain dialogue between these organizations and the OAS, which deals with PIL codification. To mention only current facts, it cannot be a surprise that the UNCITRAL Working Group VI, dedicated to security interests, has had on its table the InterAmerican Model Law on Security Interests of 2002, in its debates to achieve a Legislative Guide on this matter.14 Similarly, the proceedings on maintenance obligations of the Hague Conference have an eye on the Inter-American Convention on Support Obligations.15 The Hague Conference has also issued a specific document on the relationship between American instruments on PIL and the Hague Convention on the Exclusive Choice of Courts Agreements.16 On the other hand, Inter-American unification increasingly arouses the interest of non-American scholars. Thus, in one of the most significant works on conflict laws of the last years, published as a General Course of the Collected Courses of the Hague Academy of International Law, the activities of the CIDIP are analyzed – and criticized – in detail.17 Another French author has recently proposed to take into account the 1994 Inter-American Convention on the Law Applicable to International Contracts (better known as the Mexico City Convention) in the current reform process of the 1980 Rome Convention on the Law Applicable to Contractual Obligations, which is to transform it into an EU instrument.18 In Spain, an author closely linked to Latin America has proposed that the Spanish Government adhere to the Inter-

14

Cf. BUXBAUM H.L., ‘Unification of the Law Governing Secured Transactions: Progress and Prospects of Reform’, in: Unif. L. Rev. 2003, pp. 333-334. See . 15 DUNCAN W., ‘Jurisdiction to Make and Modify Maintenance Decisions – The Quest for Uniformity’, in: Intercontinental Cooperation Through Private International Law. Essays in Memory of Peter E. Nygh, The Hague 2004, p. 93. 16 Prel. Doc. No 31, June 2005, prepared by SCHULZ A., MURIÁ MUÑÓN A. and VILLANUEVA MEZA R. 17 AUDIT B., ‘Le droit international privé en quête d’universalité. Cours général’ (2001), Recueil des Cours 2003, t. 305, pp. 98-104. 18 BERAUDO J.-P., ‘Faut-il avoir peur du contrat sans loi?’, in: Le droit international privé: esprit et méthodes. Mélanges en l’honneur de Paul Lagarde, Paris 2005, pp. 106-110 (a similar opinion was already held more than a decade ago by the late Friedrich K. Juenger in JUENGER F.K., ‘The Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and Comparisons’, in: Am. J. Comp. L. 42 (1994), p. 381 et seq.). But cf. Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 final, of 15.12.2005, which authorizes the application of ‘principles and rules of the substantive law of contract recognised internationally or in the Community’ (Art. 3.2), but only if chosen by the parties.

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Latin American Private International Law American Conventions on the International Return of Children (CIDIP IV, 1989), and on International Traffic in Minors (CIDIP V, 1994).19

C.

Sub-Regional Developments

Not only universalism and inter-Americanism have an influence on Latin American unification and on the very notion of Latin-American PIL. On the contrary, within the limits of Latin America, another relevant phenomenon also affects the unification of PIL. It is the economic integration process that is now developing at a sub-regional scale. In Latin America, there are currently three sub-regional processes of inter-State integration. From the South to the North, we have first MERCOSUR (Southern Common Market), created in 1991 by Argentina, Brazil, Paraguay and Uruguay, which are full members of this system. Secondly, we find CAN (Andean Community of Nations), with the membership of Bolivia, Colombia, Ecuador, Peru and Venezuela. All of these countries (plus Chile) have an associative relationship with MERCOSUR, and Venezuela became a full member of MERCOSUR in December 2005. Finally, there is SICA (Central-America Integration System), which is formed by Belize, Costa Rica, El Salvador, Guatemala and Honduras. Mexico is linked with many countries by means of free trade treaties, even though the most important one is that with Canada and the United States (North American Free Trade Agreement, NAFTA), that is to say, a non-Latin American economic integration system. This sub-regional structure does not reflect the real picture. There are several reasons to affirm this. Firstly, attention must be paid to the membership of all American States (including Cuba) in the World Trade Organization, which has transformed a great part of the world into a true free trade area. This fact is important, as the material scope of the WTO agreements becomes broader (from goods to services and from services to intellectual property). In consequence, any process of regional economic integration has a minimum threshold of usefulness.20 At the same time, the WTO system has a different kind of influence on the regional and sub-regional integration systems.21 Besides, the existence of the Latin American Association of Integration (ALADI), which, in spite of certain critiques, imposes

19

MIRALLES SANGRO P.P., ‘Balance de la actuación que desarrolla la CIDIP en materia de protección internacional de menores: regionalismo versus universalismo’, in: Liber Amicorum Opertti Badán (note 3), pp. 408-409. Spain has already adhered to InterAmerican Conventions on Letters Rogatory (CIDIP I, 1975) and on Proof and Information on Foreign Law (CIDIP II, 1979). 20 See Art. XXIV GATT 1994 and the Understanding on its interpretation, to be found at . 21 One of these influences is a confusion about dispute resolution systems. See FERNÁNDEZ ARROYO D.P. / DREYZIN DE KLOR A., ‘O Brasil frente à institucionalização e ao direito do MERCOSUL’, in: O Direito Internacional e o Direito Brasileiro. Homenagem a José Francisco Rezek, Ijuí 2004, pp. 350-352.

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Diego P. Fernández Arroyo some exigencies on its member States, is still significant.22 Another fact worthy of note is that some countries are not included in the sub-regional scheme,23 while others have links with more than one sub-regional system.24 Furthermore, it is too early to know whether the new South American Community of Nations, created in Cuzco on December 8, 2004, will have any success.25 Last but not least, another free trade trend may be found in a number of treaties, which regulate different aspects of international commerce between States of the Americas or between them and non-American States.26 Sub-regional systems work as well as the member States do. It is very difficult for developed systems to emerge from undeveloped countries. This means that all these processes go forward or back, depending on different factors.27 Nevertheless, in spite of their relative weakness, there is a progressive legal harmonization, which is constant, though heterogeneous. In the field of PIL, MERCOSUR is the system that has experienced the biggest legal production. Indeed, since Art. 1 of the Asunción Treaty (the MERCOSUR legal founding text) obliged the member 22

They are Cuba, Mexico, and all South American countries except Guyana and Suriname. 23 Cuba is a member state of the ALADI but not of any sub-regional system; Chile is an associated member of the MERCOSUR but is not a full member; the same is true of the Dominican Republic in relation to the SICA. 24 Belize is a member state of both CARICOM and SICA; CAN states are ‘associated’ with the MERCOSUR (see O’KEEFE T.A., ‘The Andean CommunityMERCOSUR Free Trade Agreement’, in: DeCITA 5 (2006) (forthcoming) and Venezuela – as was stated – is now in a process to obtain full membership. 25 The twelve South American states are part of this project, i.e., the four of the MERCOSUR, the five of the CAN, Chile, Guyana, and Suriname. It will require time to know whether this sub-continental project has a future. See DREYZIN DE KLOR, A., ‘La creación de la unión sudamericana de naciones: ¿un nuevo bloque de integración?’, in: DeCITA 3 (2005), pp. 634-639. 26 The net is truly impressive as well as of a great complexity. Besides free trade treaties of various scopes, there is a diverse range of commercial agreements. Among them, the most significant are agreements relating to the protection of foreign investments. The dimensions of the issue become apparent in the cases of Chile and Mexico. Chile, in addition to its association with MERCOSUR, has signed free trade treaties with Canada, the United States, Mexico, Costa Rica, Nicaragua, El Salvador, Honduras, and Guatemala – within America -, and with the European Union, the European Free Trade Association, and Korea. México, besides NAFTA and its treaty with Chile, has signed free trade treaties with Bolivia, Costa Rica, Nicaragua, and others with Colombia and Venezuela, on the one hand, and with El Salvador, Guatemala and Honduras, on the other hand (plus an additional economic agreement with Uruguay). Outside America, Mexico has signed treaties with the European Union, the European Free Trade Association, Israel, and Japan. 27 See FERNÁNDEZ ARROYO D.P. / DREYZIN DE KLOR A., ‘Avances y fracasos de los esquemas subregionales latinoamericanos. El caso del MERCOSUR’, in: elDial.com 8 (March 2005). On the imagination necessary to go further in SICA, see HERDOCIA SACASA M., ‘La integración centroamericana: una tercera vía’, in: Curso de derecho internacional CJI -2004-, pp. 163-193.

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Latin American Private International Law States ‘to harmonize their laws in the appropriate areas to reach the strengthening of the integration process,’ MERCOSUR authorities have decided that one of these areas is PIL.28 Thus, at the very beginning of the integration process, they adopted the Las Leñas Protocol on Co-operation and Jurisdictional Assistance in Civil, Commercial, Labor, and Administrative Matters of 1992, in order to regulate the international legal co-operation between the Contracting States.29 In 1994, MERCOSUR adopted two new PIL conventions, the Buenos Aires Protocol on International Jurisdiction in Contractual Matters30 and the Protocol on Preventive Measures.31 Two new conventions were agreed in 1996: the San Luis Protocol on Civil Liability in Traffic Accidents,32 including jurisdiction and choice of law rules, and the Santa María Protocol on International Jurisdiction in Consumer Relationships.33 In 1997, MERCOSUR elaborated two ‘complementary agreements’, respectively to the Las Leñas Protocol and to the Protocol on Preventive Measures, containing the formal requirements for the application of these Protocols. In 1998, two identical Arbitration Agreements were concluded; one between the MERCOSUR States,34 the other between MERCOSUR, Bolivia and Chile. In 2000, two identical Agreements on the Free Access to Justice and Judicial Assistance were also adopted.35 Finally, in 2002, on the one hand, the Las Leñas Protocol was modified and another ‘mirror’ Protocol was agreed to extend the Las Leñas system to Bolivia and Chile; on the other hand, two identical Agreements (one between the member States and the other between them and Bolivia and Chile) on Jurisdiction over International Cargo Transport Contracts were reached.36 28 See generally DREYZIN DE KLOR A., El MERCOSUR. Generador de una nueva fuente de derecho internacional privado, Buenos Aires 1997, p. 250 et seq.; SAMTLEBEN J., ‘Das Internationale Prozess- und Privatrecht des MERCOSUR. Ein Überblick’, in: RabelsZ 1999, pp. 7-10. In addition to conventions on strict PIL matters, MERCOSUR has also elaborated several conventions on co-operation in criminal matters. 29 In force in the four Member States. See DREYZIN DE KLOR A. (note 28), pp. 266280; SAMTLEBEN J. (note 28), pp. 13-27. 30 In force in the four Member States. See FELDSTEIN DE CÁRDENAS S., Jurisdicción internacional en materia contractual, Buenos Aires 1995, pp. 31-98. 31 In force in the four Member States. See DREYZIN DE KLOR A. (note 28), pp. 303305, 312-322. 32 In force in the four Member States. See SAMTLEBEN J. (note 28), p. 50. 33 Not yet in force. SAMTLEBEN J. (note 28), pp. 50-53. 34 In force in Argentina, Brazil and Uruguay. See ALBORNOZ, J.R., ‘El arbitraje en el derecho internacional privado y en el MERCOSUR (con especial referencia a los acuerdos de arbitraje de 23 de julio de 1998)’, in: An. AADI 1999, pp. 51-91. On the massive presence of arbitration conventions, see KLEINHEISTERKAMP J., ‘Conflict of Treaties on International Arbitration in the Southern Cone’, in: Liber Amicorum Jürgen Samtleben (note 10), pp. 666700. 35 Not yet in force. 36 None of the ‘mirror’ conventions is in force.

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Diego P. Fernández Arroyo Fortunately, after such a codification fever, the representatives of MERCOSUR member States seem to have made a necessary pause in their legislative work. It is a good decision, taking into account both the technical flaws of conventions and the problems in the ratification process.37 The only good reason to attempt such a comprehensive Merco-southern PIL codification was the particular Brazilian attitude towards the codification of American PIL, that began in the 19th century and was characterized by a complete aloofness towards what was done by its Southern Cone neighbors and a limited (more theoretical than practical) participation in the Pan-American codification work represented by the Bustamante Code of PIL of 1928. Therefore, when MERCOSUR member States started to work together, they found that a significant legal38 integration already existed but did not apply to Brazil.39 Consequently, upon the entry into force of the Asunción Treaty in 1991, the codifying process of the MERCOSUR PIL began to create a real, though fragmented, Merco-southern PIL. Nevertheless, since some of the rules of the MERCOSUR PIL were made according to the solutions of the CIDIP, the Brazilian authorities reasonably decided to shorten the proceedings and ratified fourteen inter-American conventions in a very short period of time (between 1994 and 1998). Instead of rewriting the CIDIP conventions for the sub-regional area, Brazil directly joined these inter-American conventions, getting involved not only with its integration partners but with other OAS States as well. Thus, from a State-based PIL system, Brazil quickly moved towards a partial, but progressive, ‘internationalization’.40 In this context, MERCOSUR lost its best reasons for the codification of PIL. 37

For other problems, see FERNÁNDEZ ARROYO D.P., ‘La nueva configuración del derecho internacional privado del MERCOSUR: ocho respuestas contra la incertidumbre’, Jurídica 1998, pp. 267-286. See also SAMTLEBEN J., ‘Die Entwicklung des Internationalen Privat- und Prozessrechts im MERCOSUR’, in: IPRax 2005, pp. 376-377; LIMA MARQUES C., ‘Procédure civile internationale et MERCOSUR: pour un dialogue des règles universelles et régionales’, in: Unif. L. Rev. 2003, pp. 465-484. 38 Not only the Montevideo Treaties were in force in Argentina, Paraguay, and Uruguay. Besides, several inter-American conventions created within the process started by the OAS in 1975 were also in force in these countries. 39 See SAMTLEBEN J., ‘A codificação interamericana do direito internacional privado e o Brasil’, in: CASELLA P.B. / DE ARAUJO N. (eds.), Integração jurídica interamericana: as convenções interamericanas de direito internacional privado (CIDIPs) e o direito brasileiro, 2nd ed., São Paulo 2003, pp. 25-45. 40 The opening of the Brazilian order to international treaties that regulate different aspects of PIL also allowed the ratification of very important international conventions from ‘universal’ forums, such as the conventions on child kidnapping and adoption of the Hague Conference, the United Nations New York Convention on arbitration, or the UNIDROIT Convention on the recovery of cultural property. The return of Brazil to the Hague Conference in 2001 confirmed this attitude change. There is also another, much broader, consequence of the mercosurização of the Brazilian legal system. The fulfilment of the obligations assumed with the ratification of the Asunción Treaty and other rules of Mercosouthern law, have created several problems for the courts (inferior and superior, provincial and federal), giving International Law a central place in the legal discussion. This is not a

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Latin American Private International Law At the other end of Latin America, we find Mexico and its various free trade treaties. Among them, as was mentioned above, the most important is the treaty which links Mexico with Canada and the United States, known as NAFTA. This treaty has deeply influenced Mexican international commerce and politics, and the very economic structure of Mexico as well. However, for this essay, what is important is to underline that, as a consequence of NAFTA, important changes have been made to the Mexican legal order. Indeed, with the development of NAFTA and the necessities of international commerce, matters as important as competition, energy or security interests are under the influence of the United States.41 It is not a coincidence that the American Law Institute, the Uniform Law Center of Mexico, and UNIDROIT are working together to unify the law of obligations.42 In a broader sense, it has been said that there is a presumption of harmony of laws within NAFTA.43

D.

The CIDIP in the Context of Economic Integration and Free Commerce

In this complicated context, a North American initiative has appeared (strongly supported, among others, by the other NAFTA members), to constitute a sole ‘hemispheric’ free trade zone (Free Trade Area of the Americas, FTAA), with a

capricious judgment. The number of professors of Public International Law, PIL, Integration Law, International Economic Law and International Relationships has grown exponentially in Brazil in the last years. This situation has a multiplying effect, shown by the overwhelming number of work done on these topics, as well as the many post-graduate studies on them. Many of these legal problems have arisen when the texts of MERCOSUR related to PIL were put into practice, particularly the Las Leñas Protocol of 1992 and the Protocol on Preventive Measures of 1994. See SECRETARÍA DEL MERCOSUR, Primer informe sobre la aplicación del derecho del MERCOSUR por los tribunales nacionales (2003), Montevideo 2005, pp. 68-86; DREYZIN DE KLOR A., ‘La aplicación judicial del derecho del MERCOSUR’, in: O novo direito internacional – estudos em homenagem a Erik Jayme (LIMA MARQUES C. / DE ARAUJO N., eds.), Rio de Janeiro 2005, pp. 787-811. 41 See PEREZNIETO CASTRO L., ‘La codificación en México y la influencia del derecho estadounidense a través del Tratado de Libre Comercio de América del Norte’, in: Rev. Mex. DIP 15 2004, pp. 225-235; and ID., ‘El panorama del derecho internacional privado en materia comercial en México en los umbrales del siglo XXI’, in: Rev. Mex. DIP (sp. sigue) 2000, pp. 174-178. 42 PEREZNIETO CASTRO L., ‘El futuro del derecho internacional privado en México’, in: Rev. Mex. DIP 2005, p. 61. 43 GLENN H.P., ‘Conciliation of Laws in the NAFTA Countries’, in: Louisiana L. Rev. 2000, pp. 1103-1112. According to this author, the presumption of harmony justifies the invocation of PIL rules only when they are claimed by one or both of the parties to the dispute; in other words, he proposes that the traditional principle of the obligatory application of PIL rules be forgotten.

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Diego P. Fernández Arroyo broad material and geographical scope.44 In general terms, it can be said that such an initiative would not offer an entirely new scenario, since, on the one hand, there is already a remarkable level of general liberalization and, on the other hand, the model proposed is already in force between the NAFTA member States and Chile, and is present as well in both the Treaty between the United States and the Central American States,45 and that which the United States is negotiating with Colombia, Ecuador and Peru. This implies that, at least in one sense, there is already a FTAA, which is materially quite broad but geographically limited. The main problem is, without any doubt, the reluctance expressed – even though in a heterogeneous way – by some countries, namely Argentina, Brazil and Venezuela.46 Of course, without these countries, the original North-American project could not be considered successful. The incorporation of Venezuela into MERCOSUR and some evolving political changes in South America make the future of the FTAA uncertain. This lack of agreement on the basics of international market rules is not exclusive to the Americas. More or less the same thing is occurring at a global level.47 Another point to be taken into consideration is the rapid evolution towards a commercial, political and cultural integration between Cuba and Venezuela.48 The current situation, therefore, seems to be very distant from that imagined some time ago, when the FTAA was taken for granted, to begin on the first day of 2005. Now, if the terms of negotiation do not change drastically,49 it is unlikely that it will become anything more than the limping FTAA-light that already exists de facto.50 This being said, does the Nineties’ boom of free commerce and its current vicissitudes have something to do with the CIDIP, its agenda and its future? In my 44

See OROPEZA GARCÍA A. (ed.), ALCA – un debate sobre la integración, México

2003. 45 This Treaty was signed on August 5, 2004, between the United States and Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala and the Dominican Republic. 46 Paraguay and Uruguay, also MERCOSUR members, have shown, though with discretion, some disagreements with their fellow states on this issue. 47 The results of the last two Ministerial Conferences of the WTO (Cancun 2003, and Hong Kong 2005) show the current tensions in this field. 48 These countries have created the ALBA (Bolivarian Alternative for the Americas), and they are offering this model to other Latin American countries (). See ROMERO BALLENILLA O., ‘Construyendo el ALCA’, in: DeCITA 5 (2006) (forthcoming). 49 Among the most difficult topics we find agricultural subsidies, market access for non-agricultural products, dumping, preferences given to domestic supplies and suppliers, dispute resolution on investments, and intellectual property. 50 See CARRANZA M.E., ‘MERCOSUR, the Free Trade Area of the Americas, and the Future of U.S. Hegemony in Latin America’, in: Fordham Int’l L.J. 2004, pp. 10291064. Apparently, the question is not so important from a North-American perspective. On the contrary, Latin America does not seem to be a priority nor an ‘exclusivity’ in the United States free trade offensive, as is shown by the free trade agreements that the United States have lately negotiated with Israel, Jordan, Singapore, Australia, Bahrain, and Morocco. Furthermore, the question does not seem so decisive to the United States.

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Latin American Private International Law opinion, this is so. The evolution of the inter-American codifying movement experienced during the last fifteen years could only have taken place in an atmosphere dominated by the strong belief in the rightness of commercial liberalization that, together with privatization and deregulation, form the tripod on which the neo-conservative ideas, very much in fashion during the 90’s (mainly in Latin America), rest. There are many ways of corroborating this affirmation, but, due to their conclusive character, I will only refer to three closely related facts: a)

The main codifying motor of this period has been a private center, of which the principal objective is the development of ‘free Inter-American commerce’. Its contribution was essential for the approval of texts on contracts (CIDIP V), security interests and guarantees and way-bills (CIDIP VI) and in the preparation of other texts on some related topics.

b)

The manner in which the trans-border contamination topic was dealt with before and during the CIDIP VI,51 and the radical contrast with the treatment given to commercial topics, clearly reflects (unless it is coincidence) the prevailing trend in ALCA52 negotiations.

c)

The logic used recently when organizing the agenda of the CIDIP clearly shows that the topics which ‘demand attention’ are the commercial ones. As a matter of fact, both the effective content of the CIDIP VI and the proposed agenda for its last plenary session53 were overwhelmingly ‘commercialist’ (restated by the General Assembly in the resolution summoning the CIDIP VII54).

Considering the facts, could the codifying process be altered, changing its agenda and dynamics? In my opinion, this not only could, but must be done. I am sure a rebalancing will take place in the aforementioned sense, taking the various present interests into consideration in a more equitable and realistic way. In fact, this is what is happening in the preparation of the CIDIP VII. If this were not the case, taking into account the inveterate Latin-American predisposition towards international codification and the need for common legal answers, it could be expected that some States might try to find other, probably sub-regional, forums for their 51 Critical towards the treatment given to this subject during the Conference, SIQUEIROS J.L., ‘La Sexta Conferencia Especializada Interamericana sobre Derecho Internacional Privado (CIDIP-VI)’, in: Rev. Mex. DIP 2002, pp. 21-24. 52 DEERE C., ‘Greening Trade in the Americas: An Agenda for Moving Beyond the North-South Impasse’, in: JWT 2004, pp. 137-151; see also, generally, DEERE C. / ESTY D. (eds.), Greening the Americas: NAFTA’s Lessons for Hemispheric Trade, Cambridge (MA) 2002. 53 Doc. OEA/Ser.K/XXI.6, CIDIP-VI/RES.1/02. At the last moment, two partially or entirely non-commercial topics were included (one on the ‘international protection of adult persons whose personal faculties are insufficient’ and the other on ‘trans-border movements and migratory flows of persons’) and the open character of the list was established. 54 AG/RES 1923 (XXXIII-O/03).

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Diego P. Fernández Arroyo negotiations regarding legal regulations, matching integration with codification. In addition, obviously, if what is done in the CIDIP does not address the interests and needs of the involved parties, those who were unsatisfied would look for another valid forum. The CIDIP has been the natural forum insofar as it is (among other things) the only continental legal organization. However, another one could be created with different characteristics and range.

E.

Keys for the Future: Towards the CIDIP VII

As of now, the trends shown by the preliminary proceedings of the CIDIP VII authorize moderate optimism. If one looks at how the OAS is preparing the next CIDIP, all our prior concerns seem to have been taken into account.55 In particular, the subjects selected for this Conference are justified and have received broad support. What we have said about the commercialization of the CIDIP should not be understood as a negative opinion on the presence of commercial topics in the CIDIP agenda. On the contrary, it seems apparent that these topics must be addressed. In fact, they have been on the agenda from the very beginning of the CIDIP, which, as early as 1975, approved in Panama City an Inter-American Convention on International Commercial Arbitration, now in force in eighteen States. Moreover, commercial topics will remain important if the FTAA does not succeed or if it merely becomes an FTAA-light. Note what has happened in the organization of the next CIDIP. As is usual, less than a quarter of the States that are members of the OAS suggested topics when they were requested to do so by the OAS. The United States, on the basis of the previously mentioned list, proposed two topics related to electronic commerce: investment securities and electronic commercial registries. The same topics were reprised in the Chilean and Peruvian proposals. Brazil and Mexico referred to electronic commerce in general, though Mexico specifically mentioned consumer protection within this field. Canada and Uruguay focused on the treatment of jurisdiction in electronic contracts (Canada thinks this is the only important topic to be discussed in the CIDIP VII but Uruguay includes international jurisdiction in general and extra-contractual responsibility in trans-border pollution).56 55

See The Present and Future of CIDIP (CIDIP-VI, doc. 18/02), in: . 56 In the Canadian proposal, the habitual position of this country can easily be seen. It does not treat the topics that are in the agendas of universal forums of codification (or that are of universal vocation) within an inter-American framework. On the contrary, the Uruguayan letter states ‘the pertinence of a regional codifying process’. See also FRESNEDO DE AGUIRRE C., ‘Responsabilidad por hecho ilícito en el ámbito internacional con especial referencia a la responsabilidad civil por contaminación transfronteriza. Recientes desarrollos y perspectivas para la convención regional en la materia’, in: Liber Amicorum Opertti Badán (note 3), pp. 208-215. Regarding the terms to be taken into account to analyze these positions, see FERNÁNDEZ ARROYO D.P., Derecho internacional privado interamericano (note 5), pp. 68-73.

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Latin American Private International Law Given these facts, the good will of the State representatives in the Permanent Council and the ability of the officials of the Department of International Legal Affairs57 obtained what some scholars had been struggling towards for a long time,58 that is a balanced agenda,59 with a few feasible topics.60 The United States accepted to set aside the investment securities issue.61 The electronic registries issue was presented, very reasonably in my opinion, as a logical complement to the Model Law on security interests. The OAS’ idea is to draft three Inter-American instruments on secured transaction registries: 1) a uniform registration form (as in Art. 1 UCC, the national financing statement) for use with the Model Law; 2) guidelines/regulations for movable property registries; and 3) guidelines/regulations for electronic registries. To date, however, the member States have not presented proposals for any of these instruments. The other chosen topic – consumer protection – was not on the list drawn up by the CIDIP VI, but was the concern of many scholars62. There are various proposals on the subject: Mexico, Canada and Uruguay refer to protection within the specific framework of electronic commerce, Canada and Uruguay to the regulation of international jurisdiction; the Brazilian convention project is on applicable law and is not limited to electronic commerce;63 the United States have suggested to 57

OAS had experienced a change of structure in 2004. In that reform, the old Subsecretariat of Legal Affairs became the Department of Legal Affairs and Services, which included a Bureau of Inter-American Law and Programs, heirs to the Department of International Law. But it was a short-lived reform. In 2005, with a new General Secretary, there has been a new modification of the structure. In the new scheme, there is a high level Department of International Legal Affairs. 58 See FERNÁNDEZ ARROYO D.P., Derecho internacional privado interamericano, (note 5), pp. 98-99. 59 See ‘Declaration of Cordoba’ (note 13): ‘it is important that the thematic agenda for codification reflect the interests of the different countries and integration plans in the Americas in a balanced manner.’ 60 Doc. OEA/Ser G, CP/CAJP-2309/05. See WILSON J.M., ‘Conferencias Especializadas Interamericanas sobre Derecho Internacional Privado. Informe sobre los preparativos para la CIDIP VII’, in: DeCITA 3 (2005), pp. 569-575. 61 The issues dealing with the law applicable to this topic were well managed by the Hague Conference (see GARCIMARTÍN ALFÉREZ F.J., ‘La tenencia indirecta de valores. El convenio de La Haya sobre la ley aplicable a ciertos derechos sobre valores depositados en un intermediario’, in: DeCITA 3 (2005), pp. 369-375), and UNIDROIT is making an important effort to establish a material regulation on the same subject (see EINSELLE D., ‘The Book-Entry in a Securities Account: Linchpin of a Harmonised Legal Framework of Secuirities Held with an Intermediary’, in: Unif. L. Rev. 2004, pp. 41-50). 62 In the study carried out by the Inter-American Legal Committee composed of specialists from different countries, the topic was repeatedly mentioned. See ‘CIDIP VII y etapas sucesivas’, Doc. OEA/Ser. K/XXI.6, CIDIP-VI/doc.10/02. 63 This is a proposal of Professor Claudia LIMA MARQUES, of the Federal University of Rio Grande do Sul, lately adopted as an ‘official’ document by the Brazilian Government. See her explanation in ‘A insuficiente proteção do consumidor nas normas de PIL. Da necessidade de uma Convenção interamericana sobre a lei aplicável a alguns contratos e

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Diego P. Fernández Arroyo make a model law to facilitate the refunding of consumers in international transactions.64 Therefore, the protection of consumers is an open issue on the agenda as regards its material scope and the legislative technique to be used (convention or model law). The approval of more than one text or of a combination of techniques should not be dismissed. No one can deny that this agenda includes useful and necessary topics, even if it is not to everyone’s liking. From a certain point of view, it could be said that both topics are related to the exponential growth of international commerce, and although consumer protection in general is not considered to be typically commercial, it is obviously patrimonial and represents one of commerce’s ‘human’ sides. We will later be able to see if this was a good decision, when the approved text or texts are incorporated into the laws of the OAS States. We can, as always, expect some surprises. As an example, we can mention what happened with the Convention on the Law Applicable to International Contracts, which is well known and thoroughly studied in other regions (mainly Europe). While it is apparently the principal achievement of the CIDIP V – it even received the monopoly of the host city’s name – it has only been ratified by Mexico and Venezuela, while the other Convention approved in Mexico, regarding the not very appealing topic of trafficking in children, is in force in twelve States. So far, the Department of International Legal Affairs has implemented a careful working plan with steps65 that, if carried out (which depends on the collaboration of the member States), will improve the results.

III. National Codifications of Private International Law A.

The Argentinean Draft of a Private International Law Code (2003)

For many years, there has been a movement towards a PIL codification in Argentina, which meets with general support among conflict scholars. Argentinean PIL rules are so isolated, heterogeneous, and, sometimes, contradictory, that projects relações de consumo’, in: FERNÁNDEZ ARROYO D.P. / MASTRANGELO F. (eds.) (note 8), pp. 105-165 (with Spanish version of proposal). 64 In its proposal, this country expressed that ‘specifically, the U.S. proposes that the CIDIP focus on developing a model law on mechanisms for consumers to obtain monetary redress. There are many possible redress routes including judicial mechanisms such as small claims tribunals, administrative adjudication of small claims, and private, associational and governmental (or parens patriae) collective court actions. A model law could cover some or all of these options.’ See: ). 65 WILSON J.M., ‘CIDIP VII: trabajos preparatorios para la Séptima Conferencia Especializada Interamericana sobre Derecho Internacional Privado’, in: DeCITA 5 (2006) (forthcoming).

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Latin American Private International Law arise quite often.66 The last one was written under the auspices of the Justice Department. The draft was presented to the then Minister of Justice in 2003. More than two years later, the draft is still in Parliament, but no one can say what will come of it or even what its present status is. The Ministry of Justice has been trying to promote some discussion about the draft on its website.67 The PIL Section of the Argentinean Association of International Law also arranged a discussion on the draft in a colloquium, which took place at the National University of Buenos Aires in May 2005. In my opinion, the draft is a good starting point for a good act.68 Although several draft provisions, and even its contents in general, may be criticized and, therefore, would need an in-depth revision, most solutions are both logical and consistent with the best Argentinean court decisions. To draw attention to some of these ‘good’ solutions, one could mention the following: a) the elimination of exorbitant grounds of jurisdiction; b) the introduction of a list limiting exclusive grounds of jurisdiction; c) the avoidance of the old forum causae as a general rule of jurisdiction;69 d) the granting of protection to weak contractual parties; d) express recognition of party autonomy in the selection of both the forum and the applicable law; e) the avoidance of the effects of the kidnapping of minors on jurisdiction rules; f) the inclusion of a lis pendens rule; g) the acceptance of the application of general principles and usages to international contracts. Nevertheless, one might underline some negative aspects of the draft. Without a doubt, the most important one is the absence of any rules on the recognition and enforcement of foreign decisions and, in general, the lack of any reference to international cooperation.70 The decision not to regulate these sectors of PIL seems paradoxical in the drafting of a ‘Code’ of PIL. Constitutional reasons, namely the separation between federal and provincial law-making powers, however, have been invoked in this matter. The Argentinean Constitution does, indeed, reserve proce66 Based on the well-known ‘Goldschmidt Project’ of 1974 (see GOLDSCHMIDT W., Derecho internacional privado – Derecho de la tolerancia, 9th ed., Buenos Aires 2002, pp. 668-691), several projects have been presented, most of them in the last decade. See DREYZIN DE KLOR A., ‘Los principales desarrollos dentro del derecho internacional privado en el próximo siglo en Argentina’, in: Rev. Mex. DIP (sp. issue) 2000, pp. 74-76. 67 See . 68 See FERNÁNDEZ ARROYO D.P., ‘Notas acerca del tratamiento de la jurisdicción internacional en el Proyecto de un Código de derecho internacional privado para la República Argentina de 2003’, in: DeCITA 4 (2005), pp. 445-468. 69 Forum causae is an old ground of jurisdiction, according to which a state has jurisdiction whenever its law applies. While it could be justified as a subsidiary rule, it has no justification as a general rule. Nevertheless, it is the general rule – parallel to the defendant’s domicile – in the Montevideo Treaties (Art. 56 of Montevideo Treaty of International Civil Law), which still have a strong influence in Argentina. This rule, of course, was written when rules of jurisdiction had not undergone the current evolution. 70 See DREYZIN DE KLOR A., ‘La ausencia de normas de reconocimiento y ejecución de sentencias en el Proyecto de Código de DIPr argentino’, in: DeCITA 4 (2005), pp. 469484; FERNÁNDEZ ARROYO D.P. (note 68), pp. 449-450.

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Diego P. Fernández Arroyo dural issues for the provinces.71 Nevertheless, this provincial power is neither unlimited nor has it impeded some ‘procedural’ rules from being included in federal codes in the past. As a common sense issue, the recognition and enforcement of foreign judgments should be regulated on the federal level.72 In fact, there are already many international treaties on the subject in force in Argentina, which have been signed without any participation of the provinces. Furthermore, a federal character has been assigned to various PIL rules.73 In any case, if political reasons – rather than legal ones – do not allow the inclusion of these matters in the Code of PIL, this last should be accompanied by some kind of model law on international legal cooperation, including rules on the recognition and enforcement of foreign decisions. Other negative aspects of the draft are the limitation of party autonomy to exclusively patrimonial cases, on the one hand, and the lack of coordination with Uruguayan authorities, which – as will be exposed in the next paragraph – were concurrently preparing their own project of a PIL Act, on the other hand.

B.

The Uruguayan Draft of a Private International Law Act (2004)

In 2004, a draft of a PIL Act was also presented to the Parliament in Uruguay. This draft was prepared by a commission created and headed by Professor – and exMinister of Foreign Affairs – Didier Opertti Badán. One can but regret that Uruguay and Argentina, two countries with such a deep and broad legal integration, do not avail themselves of this opportunity to try to draft similar PIL Acts – if not a single one. Given that both texts are now in an impasse, it is perhaps not too late to reach some degree of harmonization between them. More than a century of legal integration should make such an attempt relevant. Nevertheless, there are several similar rules in both drafts, especially those that reflect solutions of either the Montevideo Treaties or the CIDIP Conventions. The Uruguayan draft shows respect for legal traditions, especially the legacy of the Montevideo Treaties of 1889 and 1939/1940. For example, the already criticized notion of the forum causae as a general rule of jurisdiction74 is kept in the draft. However, at the same time, it introduces a modern approach to several issues. Perhaps the most important is the introduction of party autonomy in contracts, which in Uruguay can be seen as a near revolution. Indeed, party autonomy has been, at least since 1940, the Uruguayan PIL taboo. The express prohibition of 71

See Art. 75(12), 121, 125 and 126 of the Argentinean Constitution. See DREYZIN DE KLOR A. (note 70), pp. 481-483. 73 See BOGGIANO A., Derecho internacional público y privado y derecho del MERCOSUR – En la jurisprudencia de la Corte Suprema de la Nación Argentina, t. I, Buenos Aires 1998, pp. 469-470. See also decisions of the Argentinean Supreme Court ‘Eberth Clemens GmbH v. Buque Pavlo’ (November 25, 1975, in: Fallos 293:455); ‘Fernando Méndez Valles v. A.M. Pescio S.C.A.’ (December 26, 1995, in: Fallos 318:2639); ‘Calvo Gainza v. Corporación de Desarrollo de Tarija’ (July 11, 1996, La Ley (1996-B), p. 305 et seq.). 74 See note 69. 72

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Latin American Private International Law party autonomy in the Montevideo Treaty of 1940 was introduced at the same time into national legislation, as a rule of the Appendix (1941) to the Civil Code.75 As long as the most influential and outstanding Uruguayan scholar, Quintín Alfonsín, rejected party autonomy, this attitude remained deeply rooted in the courts and scholarship. The strength of this view blocked the ratification of the Inter-American Convention on the Law Applicable to International Contracts of 1994 (CIDIP V) by the Parliament. In a similar way – and much more surprisingly –, it also blocked the ratification of the Buenos Aires Protocol on International Jurisdiction in Contractual Matters of 1994 for ten years, though it is now finally in force in all of the Merco-southern States. This ratification and that of other international texts, like the Vienna Sales Convention of 1980, on the one hand, and the Panama, New York, and MERCOSUR Conventions on Arbitration, on the other hand, weaken the arguments against party autonomy. Thus, for some scholars, even if Uruguay does not enact the PIL Act, nor ratify the Mexico Convention, party autonomy is already an overriding principle in the Uruguayan conflict system.76 Nevertheless, one cannot say that there is unanimity among scholars.77 Of course, the introduction of party autonomy is not the only modern item in the Uruguayan draft. Among others, it is important to remark that it includes a special rule regarding ‘International Commercial Law’, providing for the application of its own sources and, in particular, of every usage broadly known and regularly observed in commercial traffic.

C.

Towards a Mexican Draft of a Private International Law Act

The winds of codification are also blowing in Mexico. The Mexican Academy of Private International and Comparative Law has taken the first steps to propose a comprehensive Act on the matter. Taking into account that this Academy has been, since its very foundation in 1968, behind all Mexican reforms of PIL, attention 75

Both the 1940 version of the Montevideo Treaties and the Uruguayan Appendix were inspired by a Uruguayan scholar, A. Vargas Guillemette. See FRESNEDO DE AGUIRRE C., in: FERNÁNDEZ ARROYO D.P. (ed.), Derecho internacional privado de los Estados del MERCOSUR, Buenos Aires 2003, pp. 1018-1024. 76 TALICE J. (a member of the drafting commission of the PIL Act), ‘La autonomía de la voluntad como principio de rango superior en el derecho internacional privado uruguayo’, in: Liber Amicorum Opertti Badán (note 3), pp. 527-562. In the same direction, FERNÁNDEZ ARROYO D.P., ‘International Contract Rules in MERCOSUR: End of an Era or Trojan Horse?’, in: Essays in Honor of Friedrich K. Juenger (note 8), pp. 168-172. In addition, in 2005, the Uruguayan Government presented to the OAS the ‘Basis for a interAmerican convention on international jurisdiction’, where party autonomy in forum selection is expressly recognized. 77 An eminent scholar, also a member of the drafting commission of the PIL Act, has recently reproduced her arguments against party autonomy, already firmly exposed fifteen years ago. FRESNEDO DE AGUIRRE C., ‘La autonomía de la voluntad en la contratación internacional’, in: Curso de derecho internacional CJI -2004-, pp. 323-390.

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Diego P. Fernández Arroyo should be paid to its current plans.78 In addition, the close link between the most relevant Academy members and the Mexican Foreign Relations Department has permitted them to play a significant role in determining relevant interests in the area of Mexican participation in the international unification of law. On this basis, early in 2005, the Academy created nine working groups and named a leader for each one. These working groups were related to an equal number of chapters to be found in the future Act. They were dedicated to: principles of PIL; persons and family; property; obligations; contracts; labor law; insolvency; titles; and procedural issues. The results of this work were discussed in the XXIXth Seminar of the Academy, which took place in Puebla from November 30 to December 3, 2005. In this meeting, a decision was made to separate the work into two bodies: on the one hand, a draft to reform Mexican federal PIL; on the other, a draft of a model law of PIL, containing reforms that the Mexican States should introduce into their own legislation. There is still a lot to do, as no homogenization of the drafts has yet been carried out.

D.

Other Legislation

1.

The Brazilian Reform of Exequatur (2004)

Among all Latin American countries, Brazil is perhaps that which is currently undergoing the deepest changes in general International Law. Contrary to other States of the region, in Brazil PIL has lived under the shadow of other disciplines for a long time, trapped in a double bind: a scientific one, in relation to the common trunk of Public International Law and an academic one, as the teaching of PIL was included in the syllabi of Civil Law.79 This situation remained because most people had a ‘publicist’ conception of the object of PIL, and a conception that the contents of PIL should be limited to the question of the law applicable.80 This way of considering PIL, traditional in some European countries until the 20th century, was the cause and consequence of its lack of scientific and academic independency. The fact that PIL has not had a central place in Brazilian law can be understood, as there has not been any legislative autonomy, the few rules on PIL being scattered all over the Brazilian legal system (Introductory Act to the Civil Code, Code of Civil Procedure, and Internal Regulation of the Supreme Federal Tribunal), and there were no international rules of PIL in force until recently. Nevertheless, a normative framework, common to many countries of the region – mainly Latin American –, has been established thanks to the important number of CIDIP conventions that are now in force in Brazil. This has a quantitative importance. Many of the solutions contained in the CIDIP conventions signify (at least as they are received in Brazilian courts) a significant change in the way 78

See PEREZNIETO CASTRO L. (note 42), p. 64. DE ARAUJO N., Direito internacional privado, Rio de Janeiro 2003, pp. 123-127. 80 On these questions, see FERNÁNDEZ ARROYO D.P.(ed.) (note 75), pp. 42-58. 79

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Latin American Private International Law private international relationships are regulated.81 Just to mention one, we must examine the methods introduced by the Inter-American Convention on Support Obligations of 1989, which in its Art. 13 states: ‘Compliance with the above requirements shall be ascertained directly by the competent authority from which enforcement is sought, which shall proceed summarily, giving notice to the debtor and, where necessary, to the appropriate public agency and holding a hearing without reopening the merits.’ This makes a very relevant exception to the Brazilian legal tradition, which used to give sole control of the efficiency of foreign decisions to the highest court of its jurisdictional system.82 This kind of solution, new to the Brazilian legal system, had not had repercussions on the national legislation until now.83 Nevertheless, an important though limited reform occurred in 2004, when competence for the recognition and enforcement of foreign judicial and arbitral decisions, and also for the execution of letters rogatory, was shifted from the Federal Supreme Court (STF, Brazilian highest court) to the Superior Court of Justice (STJ), by means of the Emenda Constitucional 45 of December 8, 2004.84 The reform, which has been in force since January 2005, is apparently broader than it seems. According to some interpretations, the wording of Constitutional Amendment 45/2004 allows that some kinds of foreign judgments do not need exequatur.85 It will take some time in order to discover whether the STJ will agree with these interpretations. Nonetheless, it is clear that there is a feeling of optimism about the future work of the STJ on the matter. In particular, most scholars think that, since the STJ is both more specialized and more progressive than the STF, its

81

See the articles included in CASELLA P.B. / DE ARAUJO, N., eds. (note 39). No other Merco-southern country has such a ‘concentration’ system. In Argentina, Paraguay, and Uruguay, indeed, competence for the recognition and enforcement of foreign decisions is given to judges of the first instance. DREYZIN DE KLOR A. and others, in: FERNÁNDEZ ARROYO D.P. (ed.) (note 75), pp. 475-502. 83 See the pessimism showed by DOLINGER J. / TIBÚRCIO C., ‘O DIP no Brasil no século XXI’, in: Rev. Mex. DIP (sp. issue) 2000, pp. 94-95 (‘perspectives for the immediate future of the Brazilian PIL are not positive’). 84 Diário Oficial da União of December 31, 2004. The STJ has established the procedural rules for the exercise of this new competence in Resolution 9 of May 4, 2005. According to these rules, competence belongs concretely to the chief judge. Requirements for the recognition and enforcement of foreign decisions remain unaltered. On this reform, see the contribution of DE ARAUJO N. / DO VALLE MAGALHÃES MARQUES F., in this Volume, pp. 119-130. 85 See CÂMARA A.F., ‘A Emenda Constitucional 45/2004 e a homologação de sentença estrangeira: Primeras impressões’, in: TIBURCIO C. / BARROSO L.R. (eds.), O Direito Internacional Contemporâneo. Estudos em homenagem ao Professor Jacob Dolinger Rio de Janeiro 2006, p. 7. 82

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Diego P. Fernández Arroyo case law could improve international cooperation in Brazil.86 Overall, the reform would have been even more important if the shift had not been from the STF to the STJ, but to the judges of first instance.87 The reform of exequatur is just one of the several changes occurring in Brazilian PIL. The Brazilian Civil Code of 2004 has not decisively affected the PIL system, since most PIL rules are contained in the Introductory Act (1942) to the Civil Code (LICC), which has remained untouched by the new Code. There have been several attempts to reform the LICC. The most important was the 1995 project, based on the preparatory draft by professors Coelho, Dolinger, França and Rodas. This project is likely to be taken into account in the near future, when the necessary reform of the Brazilian PIL system occurs. At this time, a commission designated by the Ministry of Justice is elaborating a preparatory draft of a comprehensive Act on International Legal Co-operation, which obviously includes the regulation of both letters rogatory and the recognition and enforcement of foreign judgments.88

2.

The Chilean Marriage Act (2004)

In Chile, the most internationalized economy of Latin American still co-exists with the most nationalist PIL system. This paradox has many reasons, the most important being the strength of the tradition of territorialism.89 In addition, an open mind on economic and commercial issues does not necessarily mean the same regarding some cultural traditions. In this context, it was only in 2004 that Chile enacted a

86

See GAMA JR. L., ‘La reconnaissance des sentences arbitrales étrangères au Brésil: évolutions récentes’, in: Bull. CCI, 16/1 (2005), pp. 72-73 (‘the STJ is better suited to civil and commercial matters than the Supreme Court (whose chief role is to ensure that the Federal Constitution is respected) and more progressive in its decision-making’). For a similar opinion, see DE ARAUJO N. / VARGAS D. / GAMA JR. L., ‘Cooperação jurídica nos litígios internacionais. Cartas rogatórias no Brasil e no Protocolo de las Leñas’, in: DeCITA 4 (2005), p. 495. 87 See LOULA P., ‘Breves reflexões sobre repercussão da Reforma do Judiciário (Emenda Constitucional nº 45/04) no Direito Internacional Privado’, in: Estudos em homenagem ao Professor Jacob Dolinger (note 85), p. 793 (‘it would have been a great service to the country, and helped to make its international relations easier’). 88 The preparatory draft covers all public and private law matters, including cooperation in criminal, administrative or tax law, besides co-operation in civil, labor, and commercial law. The drafting commission includes outstanding conflict scholars like Carmen Tibúrcio and Nadia de Araujo. 89 See SAMTLEBEN J., ‘Heirat und Scheidung im neuen chilenischen Ehegesetz’, in: StAZ 2004, p. 288. Actually, territorialism has been underlined as a major Latin American PIL tradition, Chile being an example of ‘absolute territorialism’. See PEREZNIETO L., ‘La tradition territorialiste en droit international privé dans les pays de l’Amérique latine’, in: Recueil des Cours 1985, t. 190, pp. 271-400.

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Latin American Private International Law Marriage Act, introducing divorce as a means to dissolve marriage.90 What would have been a normal – though tardy – development, became a subject of studies for curious scholars, when trying to understand the PIL provisions of this Act.91 As in other countries with similar family law traditions,92 the reluctance to accept divorce as a spouses’ right creates some restrictions and contradictions.93 Thus, although Art. 83 of the Act allows the recognition of foreign divorces, it provides that divorces not decided by judicial authorities are against Chilean public policy, therefore avoiding the recognition of divorces declared, according to the applicable law, by other foreign authorities. Furthermore, the last paragraph of Art. 83 imposes a condition for the obtaining of a divorce abroad, which is that the spouses (it is unclear whether both or just one of them) have not been domiciled in Chile ‘in any of the three years prior to the judgment’, although Art. 55 allows spouses to divorce at any time upon a joint claim, provided that they have not lived together for more than a year. To be sure, the reasons for these complicated rules are found in traditions less rationalistic than territorialism or other types of legal thinking.

3.

Foreign Companies in Argentina (2003/2005)

The economic troubles suffered by Argentina at the change of millennium have had a strong influence on legal regulations. Within the field of PIL, it might be interesting to mention that the Argentinean authorities’ worry about the operation of foreign companies within the country.94 The most significant among many political, legislative and judicial decisions are several resolutions issued by the Inspección General de Justicia, a section of the Ministry of Justice which controls the activity of companies in the City of Buenos Aires.95 Despite the complexity of the

90

Ley de Matrimonio Civil n. 19.947 of May 7, 2004, in: Diario Oficial, May 17,

2004. 91

Arts. 80-84. Perhaps the best example is the Spanish marriage reform of 1981, which placed many procedural obstacles in the way of divorce. This harsh system was replaced by a rapid procedure in 2005. 93 See SAMTLEBEN J. (note 89), pp 288-290. 94 See also some exorbitant decisions on insolvency, like the decision of the Commercial National Court of Appeals, Chamber D, of April 13, 2000, ‘Proberan International Corp. S.A. s/ped. Quiebra por: Braticevich, Jorge’, in: La Ley (2001-B), p. 101 et seq.; FELDSTEIN DE CÁRDENAS S.L., Colección de análisis jurisprudencial. Derecho internacional privado y derecho de la integración, Buenos Aires 2003, pp. 438-447. 95 Of special significance are Resolutions 7/2003 (Boletín Oficial, September 25, 2003), 8/2003 (Boletín Oficial, October 22, 2003), 12/2003 (Boletín Oficial, November 4, 2003), 2/2005 (Boletín Oficial, February 17, 2005), 3/2005 (Boletín Oficial, March 10, 2005), 4/2005 (Boletín Oficial, April 6, 2005), and 6/2005 (Boletín Oficial, May 31, 2005). See . 92

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Diego P. Fernández Arroyo problem, it can be summarized in the following way:96 a) Argentina has, besides the international conventions in force on the matter, a federal regulation on Company Law, which states the requirements foreign companies must meet in order to act in the country;97 b) the Inspección General de Justicia has power to ensure the respect of Argentinean law, but lacks law-making power on the matter; c) nevertheless, based on legitimate public policy arguments – in particular, in order to fight against the fraudulent activities of off-shore companies –, the Inspección issues resolutions, which have a truly normative content; d) as a result, controversy has arisen regarding both the Inspección’s invasion of the Federal Parliament’s law-making power,98 and – more importantly – the consequences of the concrete rules contained in its resolutions. In this respect, most scholars claim the necessity of creating a better balance between legitimate policies and the necessary legal certainty about the law applicable to the activities of foreign companies.99 A country so dependent upon foreign investments should not ignore these opinions. In the same field, it might be worth mentioning the new interest in the old discussion of Argentinean jurisdiction over foreign companies, because of the activities of their controlled companies or of their branches domiciled within the country.100

96

See ALBORNOZ J.A. / ALL P.M., ‘Actualidad y perspectivas del régimen de actuación de sociedades extranjeras en la Argentina’, in: DeCITA 3 (2005), pp. 441-454. 97 See NOODT TAQUELA M.B., in: FERNÁNDEZ ARROYO D.P. (ed.) (note 75), pp. 1332-1339. See also MANÓVIL R., ‘Sociedades extranjeras en la Argentina: algunas cuestiones’, Liber Amicorum Jürgen Samtleben (note 10), pp. 325-338. 98 Similar administrative bodies, with jurisdiction over Argentinean provinces, have shown the same attitude. See ALBORNOZ J.R. / ALL P.M. (note 96), pp. 448-449 (about Resolution 321/2004 of the Inspección General de Personas Jurídicas of Santa Fe). 99 Ibid., pp. 452-454; ERIZE L.A., ‘Las sociedades extranjeras: nuevos requisitos para el ejercicio de los derechos de los inversores’, in: La Ley (2003-F), p. 1131 et seq.; LÓPEZ TILLI A.M., ‘Las sociedades extranjeras a la luz de las recientes resoluciones de la Inspección General de Justicia’, in: El Derecho 2004), p. 969 et seq. 100 Although it was based on exceptional reasons, it is relevant to cite, e.g., the decision of the Superior Court of Justice of Río Negro (highest provincial court) in ‘Baldini, Omar Emilio y Zas, Ángela María s/ amparo-mandamus’ (February 2, 2002), where the Court extends its jurisdiction ‘to the economic group’ which ‘must be understood as including its parent company and its subsidiaries’. In other countries, this question has a concrete regulation. Thus, Art. 88 of the Brazilian Civil Procedure Code provides that foreign legal persons are domiciled in Brazil if they have in Brazil an agency, subsidiary, or branch. In these cases, the parent company is subjected to Brazilian jurisdiction, even if the case has no connection with agency, subsidiary, or branch activities, since Art. 88(I) provides that the defendant’s domicile is a general ground of Brazilian jurisdiction.

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IV. Some Current Trends in Latin American Courts and Scholarship A.

The Venezuelan Example

In 1998, Venezuela enacted an Act on Private International Law,101 largely based on a draft written in 1963-1965 by three outstanding scholars, namely, Roberto Goldschmidt, Joaquín Sánchez Covisa, and Gonzalo Parra-Aranguren. The latter, together with another well-renowned internationalist, Tatiana B. de Maekelt, and other scholars, saw the opportunity to return to the former project and, with several updates and modifications, lead it to its legislative enactment in 1998.102 The Venezuelan Act has been welcomed by both foreign academics and lawmakers for its great technical quality.103 Nevertheless, it is perhaps more interesting to indicate that, in just a few years, a compact body of jurisprudence has been produced by the Venezuelan courts, especially by the highest one. Indeed, the Supreme Tribunal of Justice (especially its Political and Administrative Chamber) applies PIL Act provisions in a regular manner. Of course, some decisions can be criticized, as is possible for the decisions on PIL matters – which are particularly difficult – of any court in the world. In my opinion, however, more important than the contents of some decisions is the fact that the Act is known and applied by courts, and that Supreme Tribunal of Justice decisions can easily be consulted.104 Although it is not simple to choose some decisions, one can point out some trends arising from case law. In particular, the general trends mentioned here below (party autonomy, reception of foreign law and decisions, and arbitration development) are present in Venezuelan case law, though not without problems. A concrete issue that I find relevant is the limitation of exclusive grounds of jurisdiction, according to some decisions and scholars.105 101

Gaceta Oficial Nr. 36.511 of August 6, 1998. See Ley de derecho internacional privado de 6 de agosto de 1988 (antecedentes, comentarios, jurisprudencia). Libro homenaje a Gonzalo Parra-Aranguren, Caracas, TSJ, 2001; PARRA-ARANGUREN G. (note 8), pp. 97-108; MAEKELT T.B. / VILLARROEL I.E. / RESENDE C. (eds.), Ley de Derecho Internacional Privado comentada, Caracas 2005. 103 Recently, a Bolivian author has proposed an Act on Private International Law for his country. The text he proposes takes, with just a few modifications, the Venezuelan Act as a model. See SALAZAR PAREDES F., in: , edition of June 2005. 104 See . This is almost a luxury in the Latin American context. On issues related to jurisdiction and the recognition and enforcement of foreign judgments, see PÉREZ Y., ‘Regulaciones de derecho procesal civil internacional en la Ley de DIPr venezolana’, in: DeCITA 4 (2005), pp. 739-761, with a number of citations of judicial decisions. See also the list of cases reproduced in DeCITA 4 (2005), pp. 811-817. 105 See the decision of the Supreme Court of Justice, Political and Administrative Chamber, of September 29, 2004, ‘María del Carmen Vaamonte de Torres v. Vicente Daniel Torres’, and RODRÍGUEZ L.E., ‘Algunas consideraciones sobre la jurisdicción inderogable y 102

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Diego P. Fernández Arroyo B.

Party Autonomy

The admission of party autonomy in private international relationships has always been a controversial issue in Latin American countries. This controversy is not easy to explain, especially if one remembers that the parties’ right to choose the judge was already present in the 1928 Bustamante Code, in force in fifteen out of twenty Latin American States.106 Although historical precedents are important, contemporary data is even more persuasive on this subject. Among these facts, perhaps the most conclusive is that all Latin American countries accept that parties can validly solve their disputes before arbitrators. Moreover, with the ratification, in 2002, by Brazil and the Dominican Republic, and, in 2003, by Nicaragua, of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, this Convention is in force in all Latin American States. The Inter-American Convention on International Commercial Arbitration of 1975 (the ‘Panama Convention’) is also in force in all Latin American States, except the Caribbean States. In every arbitration regulation, arbitrators must apply the rules chosen by the contracting parties. Whenever a State has recognized the parties’ option to ‘evade’ national courts by means of an arbitral agreement and to choose the applicable law for that arbitral litigation as well, it is difficult to understand the reason for denying similar options regarding litigation before foreign courts.107 la jurisdicción exclusiva (tres niveles de la exclusividad)’, in: DeCITA 4 (2005), pp. 147173. But see PÉREZ Y. (note 104), p. 757. Compare, dealing with Art. 89 Brazilian Procedural Civil Code, the restrictions imposed by the decision of the Federal Supreme Court RE 90.961 (DJU October 10, 1985), and Informativo 272 (SEC-7.146); DE ARAUJO N. (note 79), pp. 212-215 and 270; SAMTLEBEN J., ‘Brasilien’, in: Der Internationale Rechtsverkehr (2003-IV), pp. 1023.8; DOLINGER J., ‘Brazilian International Procedural Law’, in: DOLINGER J. / ROSEN A. (ed.), A Panorama of Brazilian Law, Miami 1992, p. 358 et seq. 106 The fact remains important, although in most of these countries, the applicability of the Bustamante Code is rather theoretical than real. SAMTLEBEN J., Derecho internacional privado en América Latina. Teoría y práctica del Código Bustamante, Buenos Aires 1983, passim; PARRA-ARANGUREN G., ‘El Código Bustamante: su vigencia en América y su posible ratificación por España’, in: ID., Codificación del Derecho Internacional Privado en América, vol. I, Caracas 1982, pp. 132-138, 173-179; concerning specifically to Brazil, DOLINGER J., ‘The Bustamante Code and the Inter-American Conventions in the Brazilian System of Private International Law’, in: Liber Amicorum Jürgen Samtleben (note 10), pp. 136, 142-143. 107 For an articulate proposal of the constitutional basis of party autonomy in Brazilian law, see GAMA JR. L., ‘Autonomia da vontade nos contratos internacionais no Direito Internacional Privado brasileiro: Uma leitura constitucional do artigo 9º da Lei de Introdução ao Código Civil em favor da liberdade de escolha do direito aplicável’, in: Estudos em homenagem ao Professor Jacob Dolinger (note 85), pp. 609-610 (talking about this ‘paradox’ in Brazilian law); another favourable opinion of party autonomy in Brazil can be found in JACQUES D.C., ‘A adoção do princípio da autonomia da vontade na contratação internacional pelos países do MERCOSUL’, in: Estudos em homenagem a Erik Jayme (note 40), pp. 277-306.

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Latin American Private International Law Conversely, the Mexico City Convention of 1994 not only widely accepts the parties’ freedom to choose the applicable law, but also allows decision-makers to take into account the lex mercatoria, both in determining the applicable law and ‘in order to discharge the requirement of justice and equity in the particular case’.108 It is true that this Convention is only in force in Mexico and Venezuela, but its principles are an influence on Latin American courts and scholars. Furthermore, in several countries this principle applies generally.109 In MERCOSUR, there is not only a regulation on arbitration.110 The 1994 Buenos Aires Protocol on International Jurisdiction on Contract Matters is also now in force in all MERCOSUR member States. This is a singular and relevant fact. Paraguay, in 1995, and Brazil and Argentina, in 1996, had already ratified this Protocol.111 But Uruguay needed ten years to accept that the Buenos Aires Protocol contained nothing but the logical legal principle that parties to a contract are entitled to choose the court before which they wish to litigate. It must be said that the Protocol excludes all matters one might consider ‘difficult’ in this respect. Regarding matters other than commercial ones, Latin American legal tradition seems more restrictive. In the Argentinean and Uruguayan drafts, for example, party autonomy is reserved for patrimonial matters and contracts, respectively. In Venezuela, however, parties can select the court also in family disputes, though this selection requires an effective link between the case and the State.112 The Venezuelan judges and courts decide when a link can be considered an effective one, either in order to take the case or to recognize foreign judgments. Thus, according to Supreme Court decisions, the following links, among others, could be consid108

See JUENGER F.K., ‘Contract Choice of Law in the Americas’, in: Am. J. Comp. L. 45 (1997), pp. 203-208. 109 Art. 32 Venezuelan Act of PIL. See OCHOA MUÑOZ J., ‘Aplicación de la lex mercatoria’, in: MAEKELT T.B. / VILLARROEL I.E. / RESENDE C. (eds.) (note 102), pp. 805832. Panamanian Supreme Court, First Civil Chamber, decision of February 27, 1996, ‘Banco Exterior de los Andes y de España v. Banco Cafetero de Panamá’, in: Registro Judicial (February 1996), pp. 160-178; BOUTIN L.G., ‘Lex mercatoria: fundamento y apreciación en el derecho internacional privado panameño’, in: Liber Amicorum Jürgen Samtleben (note 10), pp. 287-300; KRONKE H., ‘The Scope of Party Autonomy in Recent UNIDROIT Instruments and the Conflict of Laws in the MERCOSUR and the European Union’, in: Liber Amicorum Opertti Badán (note 3), pp. 289-302. 110 In addition to the New York and Panama Conventions, the Mercosouthern Member States concluded an Agreement on Arbitration in 1998, which is in force in Argentina, Brazil, and Uruguay. The same countries have ratified the identical Agreement concluded between Mercosouthern States and their associated States, Bolivia and Chile. Nevertheless, this Agreement is not in force, the ratification of at least one among the associated States being necessary. 111 Argentina, Paraguay and Uruguay have also ratified the Vienna Convention on the Sale of Goods of 1980. 112 See Art. 42(2) Venezuelan PIL Act and decision Nr. 2822 of the Supreme Court of Justice, Political and Administrative Chamber, of December 14, 2004, ‘Giancarlo Salvatore Rosignoli v. María Karelya Martínez Alonso’.

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Diego P. Fernández Arroyo ered effective: the claimant’s domicile, place of marriage, former spouses’ domicile, spouses’ nationality, spouses’ property, etc.113

C.

Reception of Foreign Law and Decisions

American PIL tradition is rather open to the application of foreign law and to the recognition of the effects of foreign decisions. The influence of Savigny’s and Mancini’s legal thinking contributed to the equal consideration of lex causae and lex fori. As is well known, the former influenced the Montevideo Treaties of 1889 through its mentor, G. Ramírez;114 the latter is especially taken into account in the Bustamante Code.115 This tradition is followed by Art. 2 of the Inter-American Convention on the General Rules of Private International Law of 1979, in force in ten Latin American countries, which provides that: ‘Judges and authorities of the State Parties shall enforce the foreign law in the same way as it would be enforced by the judges of the State whose law is applicable, without prejudice to the parties’ being able to plead and prove the existence and content of the foreign law invoked.’116 The same principle is to be found in several Latin American rules and in the abovementioned Argentinean and Uruguayan drafts. Of course, the presence of rules in codes and conventions does not guarantee their application to real cases. The classic conflict system has its own mechanisms to evade unwanted decisions or laws (the famous ‘escape devices’, so often criticized by F.K. Juenger).117 Nevertheless, current practice in Latin American countries offers several examples of the fair recognition of foreign judgments as well as of the correct application of foreign law.118 In this context, on April 6, 2004, the highest Colombian court sent down an important decision on the scope of the ordre public exception raised against the 113

See PÉREZ Y. (note 104), pp. 754-756, and cases cited there. AGUIRRE RAMÍREZ G., ‘Semblanza de Gonzalo Ramírez’, in: Liber Amicorum Opertti Badán (note 3), pp. 54-60. 115 SAMTLEBEN J. (note 106), pp. 191-231. 116 See MAEKELT T.B., Teoría general del derecho internacional privado, Caracas 2005, pp. 257-280. 117 Thus, compare Arts. 2051-2055 of the Peruvian Civil Code with decision 138798 of the Lima Superior Court, of June 30, 1998. SIERRALTA RÍOS A., ‘La experiencia peruana sobre competencia jurisdiccional, aplicación de ley extranjera y reconocimiento de sentencias’, in: DeCITA 4 (2005), pp. 679-681. For the recognition of judgments and awards, Peruvian practice seems to be quite open. ID., pp. 681-691. 118 For example, see the correct application of ‘updated’ ordre public in a case dealing with a foreign divorce decreed before the entry into force of Argentinean Civil Marriage Act. Supreme Court of Justice, decision of November 12, 1996, ‘S. J.V., s/ suc.’, in: La Ley (1997-E), p. 1032 et seq.; FELDSTEIN DE CÁRDENAS S.L. (note 94), pp. 96-107. 114

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Latin American Private International Law enforcement in Colombia of a Portuguese judgment.119 Rather than the decision on the case itself, what is significant is the doctrine of ordre public as expressed by the Supreme Court. Since the defendant argued that there was a contradiction between the foreign judgment and pertinent Colombian rules, the Court took the opportunity to emphasize that the ordre public exception cannot serve to avoid the effects of foreign judgments simply because the rules applied by the foreign court are different from those of the recognizing State. In other words, the Court confirmed that the law applied exception may not be used in order to counter the recognition of foreign judgments in Latin American countries. The main elements of the Colombian Supreme Court decision are as follows:120 not all Colombian mandatory provisions must be applied, but only those which represent fundamental principles; the recognition of foreign judgments does not imply the revision of their merit; the notion of ordre public must be defined in reference to international principles, as a requirement of a globalized world; the ordre public notion must not be defensive, nor destructive, but dynamic, tolerant and constructive; 121 Colombian citizens should not use this subterfuge to escape the fulfillment of obligations assumed abroad. Uruguayan case law shows the same attitude, towards both foreign law and foreign decisions.122 In Venezuela, the PIL Act of 1998 does not even mention public policy as a concrete ground for the refusal of recognition or enforcement of foreign judgments.123 In Brazil, there is a certain optimism with respect to the above-mentioned changes in competence on the same matter124. However, no one could say that the Federal Supreme Court has been restrictive in the treatment of

119

Case ‘Prodeco Productos de Colombia, S.A.’ See note by SILVA J.A., in: Rev. Mex. DIP 2005, pp. 81-84. 120 As summarized by SILVA J.A., ibid. 121 In the Declaration of Uruguay to the Inter-American Conventions of 1979 (CIDIP II) on the General Rules of Private International Law and on the Extraterritorial Validity of Foreign Judgments and Arbitral Awards, the following paragraph is included: ‘in the opinion of Uruguay, the approved formula conveys an exceptional authorization to the various State Parties to declare in a non-discretionary and well-founded manner that the precepts of foreign law are inapplicable whenever these concretely and in a serious and open manner offend the standards and principles essential to the international public order on which each individual State bases its legal individuality.’ 122 See ARRIGHI P., ‘Jurisprudencia uruguaya actual de DIPr, fallos de la Suprema Corte de Justicia; ejecución de sentencias extranjeras’, in: Rev. Urugaya DIP 2001, p. 146 et seq.; VESCOVI E., ‘El litigio judicial internacional en Uruguay’, in: DeCITA 4 (2005), pp. 732-735. 123 See MAEKELT T.B., ‘Das neue venezolanische Gesetz über Internationales Privatrecht’, in: RabelsZ 2000, p. 399; ID., ‘Eficacia de las sentencias extranjeras en el sistema venezolano’, in: Liber Amicorum Jürgen Samtleben (note 10), pp. 568-569. 124 See supra note 84 and accompanying text.

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Diego P. Fernández Arroyo foreign decisions.125 For the moment, there have been some good signs since the transfer of competence, among others, in the application of the Inter-American Convention on the International Return of Children (CIDIP IV, 1989).126

D.

Flux and Reflux of Arbitration

The concept of international commercial arbitration, as a reality that goes beyond legal and geographical borders – while believable from the arbitrators’ perspective or in a purely theoretical dimension –, becomes a scarcely apparent truth when it comes to the perception of arbitration held by some national authorities and many judges and courts. Certainly, there are countries in which, though present in the legal systems, arbitration as a method of solving international commercial disputes has had to overcome serious cultural and even psychological obstacles. This was the case in the Latin American countries that have moved towards arbitration during the last years.127 States send many signals about arbitration, but do not always proceed in the same direction. Obviously, time changes attitudes, but at the same

125 DE ARAUJO N. / MARQUES F., ‘Os requisitos para a homologação de sentença estrangeira: análise dos julgados do STF’, in: Estudos em homenagem a Erik Jayme, (note 40), p. 238 (‘the STF has shown tolerance’). 126 See the decision of the Chief-Judge of the Superior Court of Justice, of January 10, 2006 (available on the website ) which orders the return of a child, required by a Bolivian judge by means of a letter rogatory. Chief-Judge Vidigal expressly stated that nothing in this letter rogatory was contrary either to Brazilian public policy or to Brazilian sovereignty. 127 Since 1989, fifteen Latin American States have renewed their arbitration law. See MONTILLA SERRANO F., ‘Le traitement législatif de l’arbitrage en Amérique Latine (quelques réformes récentes)’, in: Revue de l’arbitrage 2005, pp. 561-602; KLEINHEISTERKAMP J., International Commercial Arbitration in Latin America. Regulation and Practice in the MERCOSUR and the Associated Countries, Dobbs Ferry (NY) 2005; GRIGERA NAÓN H.A., ‘Arbitration in Latin America: Overcoming Traditional Hostility (An Update)’, in: Univ. Miami Inter-Am. L. Rev. 22 (1991), p. 203 et seq.; id., ‘Latin American Arbitration Culture and the ICC Arbitration System’, in: FROMMEL S. / RIDER B.A.K. (eds.), London 1999, pp. 117-146; GONZALO QUIROGA M., ‘Hacia la consolidación de una cultura arbitral en América Latina: la colaboración entre jueces y árbitros’, in: RCEA 1999, pp. 339350; BLACKABY N. / LINDSEY D. / SPINILLO A. (eds.), International Arbitration in Latin America, The Hague 2002; SAMTLEBEN J., ‘Die Reform der Schiedgerichtsbarkeit in den Mitgliedstaaten der Andengemeinschaft’, in: IDR 2004/4, pp. 159-172; MASON P.E., ‘Sete chaves para a arbitragem na América Latina’, in: RAB 2004, pp. 60-82; SILVA-ROMERO E., ‘América Latina como sede de arbitrajes comerciales internacionales. La experiencia de la Corte Internacional de Arbitraje de la CCI’, in: DeCITA 2 (2004), p. 17 (talking about the current relevance of Latin America in the arbitration world). This fact also has a correlate in the encouragement and development of alternative methods for the solution of disputes (ADR) in Latin America. See DROULERS D.C., ‘Alternative Methods of Dispute Resolution in Latin America’, in: ICC Bull., Sp. Supp., 2001, pp. 51-61; FALCÃO H. / SÁNCHEZ F.J., in: BLACKABY N. / LINDSEY D. / SPINILLO A. (eds.) (this note), pp. 415-438.

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Latin American Private International Law time, these may contain obvious contradictions.128 Two kinds of obstacles to arbitration remain: those based on traditional hostility towards arbitration in general, and those, less severe, of a technical character.129 In countries with a separation of powers, it is common that the judicial power does not follow the pace of the Legislative or the Executive. In some cases, it creates bolder solutions but, in general, it slows the developments achieved through the approval of new legal texts or the incorporation into international agreements. The paradigmatic example of this may be what happened in Brazil with the Arbitration Act of 1996, which was delayed for five long years in the Supreme Federal Court because of a long discussion of its constitutionality, caused by a request for the homologation of a decision issued in Spain.130 The matter had to do with the constitutional regulation that guarantees access to the judicial courts.131 Another kind of dichotomy, between national and international rules, on the one hand, and judicial practice related to arbitration, on the other hand, may be found in the experiences of other Latin American countries.132 Without a doubt, this troubled situation is linked to the proliferation of arbitral controversies on investment issues (State contracts), a matter prone to attract political, rather than legal arguments.133 In spite of all these contradictions, it is interesting to confirm that in the 580 cases registered in the Arbitration Court of the ICC during 2003, 12,12% of the involved parties came from Latin America and the Caribbean. It is also astonishing that Argentina, Mexico and Brazil are among the twelve States that offer the most arbitrators within that Court.134

128

See GRIGERA NAÓN H.A., ‘Arbitration and Latin America: Progress and Setbacks (2004 Freshfields Lecture)’, in: Arb. Int. 2005-2, pp. 127-176. 129 KLEINHEISTERKAMP J. (note 127), p. 465. Nevertheless, MONTILLA SERRANO F. (note 127), p. 600-602, does not find such hostility. For him, the problems are the heavy tradition of local procedural rules and the lawmakers’ lack of experience of practical arbitration issues. 130 Supreme Federal Court, Sentença estrangeira contestada, Processo n. 5.206/7. 131 MURIEL M.A., ‘A arbitragem frente ao judiciário brasileiro’, in: Revista Brasileira de Arbitragem 2004, pp. 27-39. 132 See URIBE-BERNATE C.L., ‘La práctica del arbitraje internacional en Colombia’, in: Liber Amicorum Jürgen Samtleben (note 10), pp. 701-718 (cf. specially p. 717: ‘it is really worrying ... to realize that the traditional territorialism of judicial authorities is not avoidable by means of legislation or the ratification of international treaties’). Also, in Argentina, several recent decisions of the Supreme Court show some uncertainty about arbitration. Compare decision of November 5, 2002, ‘Meller’, with decision of June 1, 2004, ‘Cartellone’. See CASELLA D.A., ‘El control judicial de los laudos arbitrales en el derecho argentino’, in: DeCITA 3 (2005), pp. 462-469. 133 See FERNÁNDEZ ARROYO D.P., ‘Los dilemas del Estado frente al arbitraje comercial internacional’, in: Revista Brasileira de Arbitragem 2005, pp. 99-128. 134 See ‘2003 Statistical Report’, in: ICC Bull. 2004/1, pp. 7-16.

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Diego P. Fernández Arroyo

V.

Conclusions

Since this essay is not exhaustive, it cannot be used as a basis for conclusive opinions. However, it may be a guide to current trends and to what can be expected of the foreseeable future. The present trends of PIL imply challenges, and many of them need a global response. In fact, the phenomena that take place within the internationalization framework (markets, law), the post-modern culture, the influence of human rights and the privatization of PIL,135 contribute to a new PIL, different from that of some years ago. The clearest phenomenon could be that which shows that private legal relationships, related to two or more legal systems (that is to say those which are subject to PIL), are no longer an exception or something unusual. Therefore, the times in which systems could easily function with some unconnected rules are gone. In addition, the search for international solutions to international problems, so well imagined by jurists like Gonzalo Ramírez or Antonio Sánchez de Bustamante, is now more necessary than ever. It may have been an option in the past. Today it is a necessity. Within this framework, the codification of international private relationships on a regional scale is still meaningful. If national PIL systems last, and they will in the foreseeable future, there must be some rules of engagement between the State and the world, considering the difficulties and the notorious heterogeneity in the ways States relate to the world. State integration, seen as an internal improvement of resources and an external strengthening (the EU is a paradigmatic example of this), brings a series of legal consequences that have singular repercussions on PIL. The exponential growth of international private relationships has increased the work of the international organizations, which are in charge of creating mechanisms to make these relationships work optimally. This task requires cooperation and dialogue between organizations of universal vocation and those that have a more defined and limited geographical range. The OAS has played a key role in the American codification of PIL during the 30 years the CIDIP has been in force. Nowadays, it is suffering some pressure from the universal ambit (which better adapts to a legal reality marked by the globalizing trends) and from the sub-regional level (in which normative unification will tend to stand out, if the current processes evolve beyond the inter-governmental character, becoming more supra-national). Although the OAS’ future as a codifying forum of PIL, able to give valid responses to all the member States, is questionable, the regional codification of PIL will continue. The OAS States will have to decide if the Organization can and must be the forum to develop such a codification. So far, this seems to be what the majority thinks. If the Organization continues in its role, it is essential to take into account that the law, the OAS and the problems have all changed in the last 20 or 30 years,136 and that all interests must be 135

About these trends in PIL, see FERNÁNDEZ ARROYO D.P. (ed.) (note 75),

pp. 59-81. 136

See the persuasive analysis of ARRIGHI J.M., ‘Nuevos desarrollos del derecho interamericano’, in: Liber Amicorum Opertti Badán (note 3), pp. 565-591.

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Latin American Private International Law represented in the selection of the topics to be addressed, in the processes of drafting legislative texts and, mainly, in their results. It is time for Latin-American countries to look to the future rather than to the past.

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RECOGNITION OF FOREIGN JUDGMENTS IN BRAZIL: THE EXPERIENCE OF THE SUPREME COURT AND THE SHIFT TO THE SUPERIOR FEDERAL COURT Nadia DE ARAUJO* / Frederico DO VALLE MAGALHÃES MARQUES∗∗

I. II. III.

IV.

Introduction Recognition of Foreign Judgments in Brazil: Concepts and Characteristics Requirements for Recognition of Foreign Judgments in Brazil A. Jurisdiction of the Foreign Courts B. Process Serving and the Due Process Clause C. Evidence that the Foreign Decision Is Final D. Authenticity and Translation Conclusion

I.

Introduction

The current rise in trans-national commercial operations of all types has had an impact on the harmonization of the legal framework for international judicial cooperation.1 Most countries are developing bilateral relations, as well as participat*

SJD in International Law, University of São Paulo and Master of Comparative Law, George Washington University. Professor of Private International Law, Pontifical Catholic University of Rio de Janeiro and District Attorney for the State of Rio de Janeiro. ∗∗ SJD, Federal University of Rio Grande do Sul and Master of International Law, State University of Rio de Janeiro. Lawyer in Rio de Janeiro. 1 Judicial cooperation can be achieved in many forms. One of the most traditional ones is the procedure to recognize and enforce foreign judgments and decisions. In Brazil, this procedure has been known since the days of the Empire and has a specific name in Portuguese: homologação de sentença estrangeira. It can be translated by homologation process. Homologation is a technical term, derived from the Greek homologos for ‘agree’, which is generally used in English to signify the granting of approval by an official authority. This may be a court of law, a government department, or a professional body, any of which would normally work from a set of strict rules or standards to determine whether such approval should be given. The word may be considered very roughly synonymous with accreditation, and in fact in French may be used with regard to academic degrees. Certified is another possible synonym. However, in international conventions, as the ones produced by the Organization of American States (see ) or by the Hague Conference on Private International Law, the term is not used. These texts rather refer to the process as as ‘recognition and enforcement of foreign decisions’. See , e.g. the current Yearbook of Private International Law, Volume 7 (2005), pp. 119-130 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Nadia de Araujo / Frederico do Valle Magalhães Marques ing in regional and multilateral integration in the field.2 National legal systems and mediation and arbitration centers are receiving a substantial number of international cases that need to be dealt with in the context of international judicial cooperation. According to Brazilian law, as stated in Article 493 of the Code of Civil Procedure, all foreign decisions must undergo a procedure of recognition, know as homologação de sentença estrangeira, before being able to have a full effect in the country. Thus, it is only after going through the recognition procedure, which will take place in a Federal Court, that the decision will become enforceable. Until last year, the Supreme Court (Supremo Tribunal Federal) had exclusive jurisdiction to recognize foreign judgments, arbitral awards and any foreign orders to be executed in Brazil. After the reform of the Brazilian Legal System in 2004, jurisdiction over the recognition of foreign decisions was transferred to the Superior Federal Court, the court in charge of the interpretation of federal law (Superior Tribunal de Justiça).3 However, the change of Court did not mean a change of procedure, exworks and drafts of the conventions on child support. This gives a more precise idea of the meaning of the procedure. Thus, although the term in Portuguese is homologação, we will use ‘recognition’ throughout this work. According to the Brazilian system, it is mandatory to introduce a recognition procedure in order for the foreign decision to be enforced in Brazil. In an article that Nadia de Araujo wrote a few years ago, translated by Professor Keith Rosenn, (ARAUJO N., ‘Dispute Resolution in Mercosul: the Protocol of Las Lenas and the Case Law of the Brazilian Supreme Court’, in: Inter-American Law Review 2001, pp. 25-56) the Protocol of Las Lenas, which is the document that regulates the matter for MERCOSUL, is described as dealing with ‘recognition and enforcement of foreign judgments and arbitral awards’. Thus, also in the Las Lenas system, the decision will first be recognized and only after will it be enforceable. 2 The Organization of American States is a good example of this trend. Through a series of Specialized Meetings, known as the Inter-American Specialized Conference on Private International Law, begun in 1975, it has produced, in six meetings, more than twenty conventions on several topics. It is important to this work to point out a few: at the second meeting, the Inter-American Convention on the Extraterritorial Validity of Judgments and Arbitral Awards mentioned the topic; at the third meeting, the Convention on Jurisdiction in the International Sphere for the Extraterritorial Validity of Foreign Judgments dealt with it as well; at the Fourth Inter-American Specialized Conference on Private International Law, the Inter-American Convention on the International Return of Children made provisions for the recognition of foreign decisions. 3 Constitutional Amendment No. 45/2004. The Superior Federal Court issued Resolution No. 9, in May 2005, which contains the legal requirements for the recognition of foreign judgments and arbitration awards in Brazil, as well as the granting of letters rogatory, and will be in force until the final approval of its Internal Rules. It is important to explain that until the Constitution of 1988, the Supreme Court had jurisdiction over all matters in the so-called third instance, the right to review any threats to the Constitution and to Federal Law. Although Brazil is a federal system, all legislation in civil and criminal matters is federal (thus the system can be called national). The States’ legislative power is very limited, unlike in other systems, such as Canada and the United States. The 1988 Constitution created a new Court, the Superior Federal Court, which has taken over some of the jurisdiction for review in matters of Federal Law from the Supreme Court. Now, with the

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Recognition of Foreign Judgments in Brazil cept for the granting of provisional measures that are now expressly allowed under these new rules. The Supreme Court ruled on countless questions about the requirements for the recognition process, ranging from formal requirements to the analysis of the question of public policy. Requirements for recognition can be found in the Introductory Law to the Civil Code of Brazil, (‘Lei de Introdução ao Código Civil’ – LICC), in Resolution No. 9/05 of the Superior Federal Court (hereinafter ‘Resolution No. 9’) and in case law.4

II.

Recognition of Foreign Judgments in Brazil: Concepts and Characteristics

The system of recognition of foreign judgments in Brazil is a giudizio di delibazione, inspired by the Italian model. This method does not evaluate the merit of the foreign judgment to be recognized,5 but does ensure the fulfillment of certain legal requirements and, at least tangentially, the evaluation of the merits of the question so as to prevent the flouting of public policy, national sovereignty or good customs. Over the years, the Supreme Court clarified the scope of each of the requirements and established which public policy notions are applicable to foreign judgments.6 Foreign judgments will only be enforced in Brazil after the recognition

new amendment, additional jurisdiction of the Supreme Court has been transferred to the Superior Federal Court in order to lighten the Supreme Court’s burden. The aim was that the Supreme Court finally become a true Constitutional Court, dealing only with constitutional questions. All decisions cited in this paper can be easily accessed by their class and number directly at both courts’ websites: that of the Supreme Court is , that of the Federal Superior Court . Research through these websites is easy and very reliable. The full text of all decisions is also available. The key word to research case law is ‘jurisprudência’. A word in the decision or the type or number of the decision will then reveal the case. For this reason, other publications will not be cited in this paper. 4 In this respect, see, ARAUJO N., Direito Internacional Privado, Teoria e Prática Brasileira, 2nd ed., Rio de Janeiro 2004, pp. 264-285. Resolution No. 9 can be found at (no full English translation is available yet). Resolution No. 9 regulates all aspects of international judicial cooperation that previously were regulated by some articles of the Regimento Interno do Supremo Tribunal Federal. 5 Cf. for historical comments ARAUJO N. (note 4). 6 Cf. Foreign Judgment (SEC) No. 5093. Summary: ‘(…) Recognition by the Supreme Court is a condition to the efficacy of foreign judgments. The judgments made by foreign courts will only have effect in Brazil after recognition by the Supreme Court. The recognition process before the Supreme Court – which is the Forum Tribunal –, is an essential function in the granting of enforceability to decisions emanating from foreign States.’ Contested Foreign Judgment No. 5093. Origin: United States. Publication: DJ 13/12/1996. Observation: Unanimous Opinion. Result: Granted.

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Nadia de Araujo / Frederico do Valle Magalhães Marques process (known in Portuguese as homologação de sentença estrangeira). On two occasions where there was a request for an injunction and immediate measures to obstruct the recognition process, the Supreme Court denied the request on the basis that the foreign judgment can only have an effect in Brazil after the entire process is completed.7 Since May 2005, Resolution No. 9 has authorized provisional measures during the recognition process of foreign judgments, but there have been no decisions in this matter yet. The only defendant’s arguments permitted in responding to a recognition request are those dealing with the procedural legal requirements, because it is a judgment of delibazione.8 The Supreme Court has ruled in this way in many cases and, through the years, has not permitted exceptions to this rule.9 Only those foreign judgments that contravene national legislation have led to refusal of recognition. Thus, the contents of the foreign decision are only analyzed to determine that there is no infringement of public policy.10 The Supreme

7

Reporter: Justice Minister Celso de Mello; Foreign Judgment (SEC) No. 4738. Summary: ‘(…) Judgments made by the foreign tribunals will only be enforceable in Brazil after being ratified by the Supreme Court. The recognition process of foreign judgments has a constitutive character and creates a situation of limited contentiousness. The aim of the recognition process is the recognition of foreign decisions by the Brazilian government, with the object of allowing the legal effects of the judgment. The system of limited control instituted by Brazilian law for the recognition of foreign judgments does not allow the Supreme Court, acting as the recognising Court, to proceed to the examination of the merits of the judgment formed abroad or to the appreciation of questions pertinent to the meritum causae, except for the judgement of delibazione that they carry out, an analysis of the aspects concerning national sovereignty, public order and good customs. The material legal aspects allowing the recognition of the foreign judgment are not discussed in the recognition process. (…)’. Foreign Judgment No. 4738. Origin: United States. Publication: DJ 07/04/1995. Judgment: 27/11/1994. Observation: Unanimous Opinion. Result: Extinction of the process. 8 Reporter: Justice Celso de Mello; Foreign Judgment (SEC) No. 4795. Summary: ‘Contested Foreign Judgment. Divorce. Recognition. Art. 221 of the Internal Regime of the Supreme Court restricts contradictory discussion to the indispensable requirements for recognition. Where these procedural requirements are met, the requests for recognition of foreign judgements must be granted.’ Contested Foreign Judgment No. 4795. Origin: Switzerland. Publication: DJ 20/10/1995. Judgment: 16/08/1995. Observation: Unanimous Opinion. Result: Granted. 9 Reporter: Justice Maurício Correa; Foreign Judgment (SEC) No. 4948. Summary. ‘Constitutional. Business agreed abroad between institutions subject to local law. Promissory note signed in Brazil. Evaluated. Submission to the court elected by the contracting parties. Enforceability of the title of credit in Brazil. The object of the request for recognition is not to discuss the efficacy of the contract according to the law of origin, but of the judgment that is based on it. The impossibility of discussing the legal underpinnings. Precedent. Judgment ratified.’ Foreign Contested Judgment No. 4948. Origin: United States. Publication: DJ 26/11/1999. Judgment: 08/10/1998. Observation: Unanimous Opinion. Result: Granted. 10 B ARBOSA M OREIRA J.C., Comentários ao Código de Processo Civil, Vol. 5, Art. 476-565, Rio de Janeiro 1998, pp. 59-60.

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Recognition of Foreign Judgments in Brazil Court restricts its analysis to the fulfillment, or lack thereof, of the existing formal requirements of Brazilian legislation, ensuring that the foreign judgment will be enforced within national territory with the same effects as in the country of origin.11 It has, however, partially recognized foreign decisions, not enforcing the portion containing an infringement of public policy, national sovereignty or good customs.12 After granting the request, the foreign decision will become an internal decision. Thus, its effects are the same as a domestic judicial decision and it will be enforced accordingly.

III. Requirements for Recognition of Foreign Judgments in Brazil The requirements for the recognition of foreign judgments appear in domestic and international documents. The rules are found in the Brazilian Code of Civil Procedure (‘Código de Processo Civil’ – CPC), in the Introductory Law to the Civil Code and in Resolution No. 9.13 They are: (i) the foreign court or authority had jurisdiction to make the decision; (ii) the parties were correctly notified or the default judgment was legally certified, (iii) there is evidence of the authenticity of the judgment or decision and of its final character (the foreign decision shall be enforceable in the country of origin); and (iv) the foreign judgment or decision has been certified by the Brazilian consul of the country of origin and has been translated into Portuguese by a Brazilian legal translator.

11

Cf. see: B ARBOSA M OREIRA J.C. (note 10). According to this author, the function of recognition is to allow enforceability, determined by the law of the State in which the judgment was given, to produce its effects in the territory of the State that recognises it: with the recognition the enforceability is ‘imported’. In this sense, expressly, PONTES DE MIRANDA F.C., Comentários ao Código de Processo Civil, t. VI, Rio de Janeiro 1973, p. 479. 12 A RAUJO N., (note 4), p. 266, note 560. 13 Cf. Brazilian Code of Civil Procedure, Article 483: ‘The judgment made by a foreign court will not be enforceable until after its recognition by the Supreme Federal Court. The recognition will observe the Supreme Federal Court Internal Rules [after the Brazilian Reform of the Legal System of 2004, this provision shall have the following meaning: The judgment made by a foreign court will not be enforceable until after its recognition by the Superior Federal Court. The recognition will observe the Superior Federal Court Internal Rules]. Since no Superior Federal Court Internal Rules are in force yet, Resolution No. 9, which establishes the legal requirements for the recognition process of foreign judgments, does apply.

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Jurisdiction of the Foreign Courts

It is a common error to believe that the jurisdiction of Brazilian courts hinders the recognition of a judgment obtained abroad. In reality, not even a procedure actually begun in Brazil precludes recognition of a foreign judgment. It should be noted that rules on international jurisdiction have a twofold goal. They serve: a) to regulate the original jurisdiction of Brazilian courts in cases that, because of their multiple connective elements, can be adjudicated by the judge of one or more States; this despite the fact that an action already brought abroad may or may not cause lis pendens (litispendência); and b) to regulate the characterization of questions, which were decided by a foreign judiciary or arbitration authority and which, for various reasons, must have effects in the national territory, as well as to regulate the execution of foreign judicial measures decided by foreign courts or arbitral tribunals. Jurisdiction in the Brazilian legal system is regulated by the Brazilian Code of Civil Procedure (articles 88 to 90). These provisions are the rules on jurisdiction and apply to Brazilians and foreigners alike, establishing the outlines of national jurisdiction by defining when the Brazilian Judicial Power has exclusive or concurrent jurisdiction.14 Only after it is determined that the case falls within national jurisdiction, according to articles 88 and 89, will the subsequent analysis of which judge will hear the case take place. There are two hypotheses: (i) exclusive jurisdiction (Article 89 of the Brazilian Code of Civil Procedure): in questions relating to real estate, the Brazilian legal system does not recognize the jurisdiction of any other country over the case; thus any foreign decision on real estate will not be recognized; (ii) concurrent jurisdiction (Article 88 of the Brazilian Code of Civil Procedure): in three cases, in which other States are permitted to judge, foreign decisions may be recognized.15 In cases of exclusive jurisdiction, the Supreme Court cannot recognize the jurisdiction of any Foreign State if the real estate is located in Brazil.16 Article 89 covers two situations: property rights over real estate situated in Brazil and procedures related to the inheritance of real property located in Brazil.17 14

According to scholar Celso Agrícola Barbi: ‘jurisdiction is limited as soon as it must produce effects in another jurisdiction, because there are other countries organized in such a way that the validity or the enforceability of the judgment within its territory may not be recognized. BARBI C.A., Comentários ao Código de Processo Civil, vol. II, Rio de Janeiro 1975, p. 239. 15 Article 88: The Brazilian judiciary has concurrent jurisdiction to hear cases when: I. The defendant, whatever his nationality, is domiciled in Brazil; II. The obligation must be performed in Brazil; III. The case is based on an incident that took place, or arises from an action taken, in Brazil. 16 BARBOSA MOREIRA J., Temas de Direito Processual, 5th Series, Rio de Janeiro 1994, p. 140. 17 Pontes de Miranda writes that: ‘Only the Brazilian judges have jurisdiction to appreciate actions related to real estate located in Brazil. Any procedural act or judgment in

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Recognition of Foreign Judgments in Brazil In concurrent jurisdiction situations, the plaintiff can choose between the Brazilian and foreign jurisdictions. If the foreign jurisdiction has been chosen, the foreign judgment could later be recognized. In particular, this is the case when the defendant has accepted the jurisdiction of the foreign court, through an express agreement or an implicit renouncement of Brazilian jurisdiction18. When a party sues in a foreign court, jurisdiction is asserted and the plaintiff cannot subsequently claim a lack of jurisdiction of the foreign court in order to frustrate the Brazilian recognition process. Thus, if the case falls under Article 88, and the party was present, the Supreme Court has always recognized the foreign decision without delay, and the Superior Federal Court will probably do the same.19 Brazilian law repudiates the hypotheses of international lis pendens. Thus, recognition will be granted even if there is an action pending in Brazilian courts.20 The Supreme Court, in case N° 5116, decided that it would not deny the recognition process because a similar action was already being brought in Brazil.21

relation to such cannot be decided abroad because it will not be recognized in Brazil, even if the parties were foreigners’. PONTES DE MIRANDA F.C. (note 11), p. 195. See: Recognition of Foreign Judgment No. 3.989-3. Origin: Portugal. Full Court. Defendant: Fundação Elisio Pereira Afonso. Summary: Foreign Judgment: Real estate located in Brazil. Not executable. It is not possible to recognize foreign judgments relating to the legal status of real estate located in Brazil, because this is against Article 89, section I of the Code of Civil Procedure’s mandatory rule. Writ not admitted. Date: 17 March 1988. 18 If the defendant presents his defence before a foreign jurisdiction, the court will have jurisdiction, unless he expressly argues the lack of jurisdiction of the foreign jurisdiction. 19 In this sense, it is important to translate part of the opinion of Justice Francisco Rezek, given in Foreign Judgment (SE) No. 4415: ‘(…) the Brazilian procedural civil law states the only hypothesis in which there is exclusive Brazilian jurisdiction. These are the contents of Article 89 of the Code of Civil Procedure: there is exclusive jurisdiction of our own judicial authority, to the exclusion of any other, to decide on cases related to real estate located in Brazil. In other cases of Brazilian Jurisdiction, this court has repeatedly decided, there is concurrent jurisdiction. This does not exclude the foreign jurisdiction, contrary to Article 89.’ 20 Foreign Judgment (SE) No. 2727. The existence of an action between the same parties with the same object before the Brazilian judge does not prevent the recognition of a foreign judgment.’ Reporter Justice Xavier de Albuquerque. Foreign Judgment No. 2.727-5. Origin: Italy. Judgment: 09/04/1981. 21 Foreign Judgment (SEC) No. 5116. Summary: ‘Foreign Judgment. Connection. When there is an action already proposed in Brazil. Identity of the Object. The identity of object between a foreign final judgment and an action in motion in Brazil does not obstruct recognition of the foreign judgment. Considering the request for recognition according to the rule stated in articles 216 to 218 of the Internal Rules of the Supreme Court, the recognition shall be granted. Foreign Judgment. Translation. Authorship. The translator needs to be a duly registered Brazilian public notary according to the national rules.’ Reporter: Justice Marco Aurélio. Foreign Contested Judgment No. 5116. Origin: Paraguay. Publication: DJ 07/08.1998. Observation: Unanimous Opinion. Result: Ratified.

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Nadia de Araujo / Frederico do Valle Magalhães Marques Conversely, it is irrelevant to a Brazilian judge if there is an identical action pending abroad; this fact alone will not be enough to deny its jurisdiction. The case initiated in Brazil will follow its normal course and may only be interrupted if a final foreign decision is recognized by the Superior Federal Court. Only after the recognition process is finished, will the foreign judgment produce effects in Brazil.22 In the same way, if a case brought before a Brazilian judge reaches a final decision first, the pending of the recognition process before the Superior Federal Court is irrelevant. In this case, the foreign decision will not be recognized. In conclusion, concurrent jurisdiction exists in those situations in which there is jurisdiction under Brazilian law but a foreign judge may also hear the case. In this situation, the recognition of the foreign judgment is possible, even if proceedings are still pending in Brazil. When faced with a case of exclusive jurisdiction, however, only the Brazilian judicial power can hear the case, and a foreign judgment will not be recognized.23 The Federal Superior Court has already ruled in the matter, upholding the Supreme Court’s previous ruling.24

B.

Process Serving and the Due Process Clause

Process serving and due process are the second requirement under Brazilian law. The Superior Federal Court will examine the evidence that the parties have been regularly notified and that notice was duly served even if the party did not appear in Court. Resolution No. 9 expressly mandates that this requirement be reviewed by the Superior Federal Court, so that the due process of the law may be followed.25 If a party appears in the foreign court without being coerced and takes part in all procedural phases of the case, the due process clause is fulfilled. According to old cases before the Supreme Court, even if there has been an irregularity in the

22

Article 483 of the Brazilian Code of Civil Procedure. ARAUJO N. (note 4), pp. 202-207. 24 Superior Federal Court, SE 1030, Reporter Francisco Falcão. Judgment published on 21.07.05. The case concerned a decision that awarded property rights on the basis of a will. The Superior Federal Court denied the request and quoted the Supreme Court on the issue. 25 The principle of due process is found in Article 5, section LV of the Constitution. The principle is relevant because it informs the parties and protects their participation during all phases and procedural acts of the case, guaranteeing, in an equal fashion, the right to have access to all existing information and to participate in the case in order to achieve a fair and an appropriate decision on the case. To ensure the effectiveness of due process, with respect to every single act, to be carried out whether by a party or by the judge, the right of participation and defence has to be awarded to the other party (or parties), whether claimant or defendant, including the observance of the terms and processes, citations, production of evidence, restrictions to the exercise of these rights as well as to the actions which the judge may take, etc. 23

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Recognition of Foreign Judgments in Brazil notification, the un-coerced attendance of the party is enough to correct the legal defect.26 In the past, if a defendant domiciled in Brazil had not appeared in foreign proceedings, the Supreme Court was willing to recognize the foreign judgment only if process had been served by a letter rogatory. Therefore, even if the local foreign law states various ways of notifying, for example, by mail or by way of an affidavit, such notification would violate Brazilian public policy and the request for recognition would be denied.27 The Superior Federal Court has ruled on the matter and decided according to the Supreme Court previous case law.28

C.

Evidence that the Foreign Decision Is Final

Evidence that the foreign decision is recognized as final is an essential requirement for the granting of the request according to Resolution No. 9,29 and the Introductory Law to the Civil Code.30 This requirement also aims to ensure the fulfillment of the due process of law rule, in total harmony with the established principles of the 1988 Constitution.31 It is an obligation of the requesting party to present evidence that the decision constitutes a final decision in the country of origin of the judgment. This evidence usually comes in two forms (i) through a certificate, or express declaration, of the foreign tribunal; or (ii) when such documents do not exist, through a legal opinion issued by two lawyers, applying the rule contained in the Bustamante Code (articles 409-411) on the proof of foreign law. The Supreme

26 See Foreign Contested Judgment – (SEC) No. 6122, where the defendant was domiciled in Brazil and there was no evidence of process being served or of her appearance in the foreign court. Origin: United States. Publication: DJ 20/10/2000. Date of Judgment: 06/09/2000. Unanimous opinion. Denied. 27 See Foreign Decision (SE) No. 4125. Reporter, Minister Celio Borja. Publication: DJ, in 09-11-90. Judgment 12/09/1990. Full Court. Summary: Process to a person domiciled in Brazil must be served by rogatory letter. This is a public policy matter. Recognition was denied. Unanimous opinion. Result: denied. 28 See Foreign Decision 919 by the Superior Federal Court. Reporter Minister Paulo Gallotti. Judgment published on 28.11.05. The request was denied because process was not served by a rogatory letter and thus did not fulfil the due process clause. 29 Resolution No. 9 states the requirement in Article 5, section III. The Superior Federal Court has already ruled on this matter in Foreign Judgment case No. 32. See , SEC 32. 30 See Resolution No. 9, Article 15, at . 31 Article 5 th, section LV of the Brazilian Constitution, available at the website .

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Nadia de Araujo / Frederico do Valle Magalhães Marques Court has stated that the Bustamante Code should be used in an extensive way when no other rule exists.32 The Introductory Law to the Civil Code, Resolution No. 9 and the Code of Civil Procedure do not establish a specific form by which it should be demonstrated that the foreign judgment constitutes a final ruling. Thus, it is crucial to ensure that the judgment is final according to the laws of the State in which the judgment was originally pronounced. Many examples concern requests from the United Kingdom. In these cases, the General Attorney’s Office demonstrated familiarity with the British procedural system and accepted the differences between the two legal systems. Thus, although the customary certificate was not produced, other means of evidence were accepted. For example, in requests for the ratification of divorces pronounced in the United Kingdom, a certification of the act, according to British custom, was considered to be sufficient.33 Justice Celso de Mello adopted this position when he granted the request for recognition.34 Thus, the procedures adopted by foreign courts, as well as foreign law provisions, are respected in the recognition process.35 The Superior Federal Court has already decided cases in this matter, upholding the previous Supreme Court case law.36

D.

Authenticity and Translation

The fourth and final requirement is related to the translation and authenticity of the document. No documents in a foreign language will be accepted by the Brazilian Court. Resolution No. 9 is in accordance with the Introductory Law to the Civil Code, but it adds that the authenticity of the foreign judgment must be made by the Brazilian consul at the place of origin, a requirement which is not mentioned in the Introductory Law to the Civil Code.37 Therefore, the foreign decision and other documents presented with the request for recognition must be authenticated by the 32

See Foreign Judgment (SE) No. 993 (published in: Revista dos Tribunais 1987, vol. 136, p. 824) where the Bustamante Code was used in a case where the foreign country was not a party to the Treaty. 33 Legal opinion of the Attorney General on Foreign Judgment No. (SE) 5518: The certificate (that declared the divorce) presented in this process should be considered a foreign judgment. Registry in 14/02/1997. 34 See Foreign Judgment No. (SE) 5518. The Court judged according to the opinion of the General Attorney’s office, and the decision was recognized. 35 According to Brazilian law, Brazilian judges must determine the substantive content of foreign law, as a matter of law and not of fact. Nowadays, it is easier to obtain information about foreign law, especially with the new means of communication and access to the laws, doctrine and jurisprudence of other countries, available at Internet official websites. 36 See Foreign Judgment 919, Superior Federal Court. Reporter Minister Edson Vidigal. Judgment published on 15.12.05. 37 B ARBOSA M OREIRA J.C. (note 10), p. 89.

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Recognition of Foreign Judgments in Brazil Brazilian consular authority in the country of their origin, before arriving in Brazil, unless transmitted under a relevant convention or treaty. This is explained by the fact that Brazilian consuls abroad carry out notarial functions, enabling them to issue the documents that will be presented in Brazil. The translation into Portuguese by a public translator, certified as a notary, is another requirement that cannot be circumvented. The lack of a proper translation will result in the denial of the recognition request. The Supreme Court has already ruled that the translation needs to be performed by a legal translator38 who can therefore certify the authenticity of what is written in the foreign language. If a legal translator of the language of origin cannot be found, the parties can nominate an ad hoc translator or use an interpreter who is registered with the competent organ of the Brazilian Commercial Register. Recognition will be denied if the translation was performed in the country of origin, unless it was made pursuant to a specific provision in a bilateral or multilateral treaty or convention, such as the convention in force between Brazil and France. The Superior Federal Court has had the opportunity to rule on both issues, upholding the previous position of the Supreme Court.

IV. Conclusion For more than sixty years, the Supreme Court, as the sole court responsible for the recognition process, developed a broad experience in the field of international judicial co-operation, and obtained a solid understanding of the requirements necessary to the recognition of a foreign judgment or decision. This task was transferred to the Superior Federal Court in 2005. The Supreme Court’s understanding of other legal systems concurred with the fundamental goals of a global society, which continue to be crucial to the objectives of private international law. It has demonstrated its understanding of foreign law by granting requests for the recognition of foreign decisions that appear to be very different from Brazilian judgments on the surface, and yet actually further the same goals of justice that a domestic court would consider. One example is the recognition of a Japanese administrative decision granting divorce, which was unknown in our system. Decisions originating in common law countries have also been accepted in spite of their peculiarities. The Superior Federal Court has replaced the Supreme Court and will therefore exercise exclusive jurisdiction over all pending and future cases relating to the recognition of foreign judgments, including arbitral awards, and the enforcement of rogatory letters. We believe that the case law developed by the Supreme Court will continue to serve as a solid guide for the Superior Federal Court. However, the 38 See Foreign Judgment (SE) No. 5663 (reporter: Justice Celso de Mello), where the recognition of foreign decision was denied because the translation was not done by a certified public translator.

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Nadia de Araujo / Frederico do Valle Magalhães Marques Superior Federal Court will gradually make its own mark in the field of international judicial co-operation. Brazil is undergoing many structural reforms, and the Ministry of Justice is currently preparing a statute on international judicial co-operation. The Superior Federal Court, as the Court in charge of this subject, will have to face new challenges, including the implementation of more efficient mechanisms to foster international co-operation.

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CODIFICATION OF PRIVATE INTERNATIONAL LAW IN UKRAINE Anatoliy DOVGERT∗

I. II.

VI.

Preamble Conceptual Approaches to the Codification of Private International Law in Ukraine in the Early 1990s Codification of Private International Law within the Model Civil Code for CIS Countries Development and Elaboration of Private International Law Codification as a Part of the Draft Civil Code of Ukraine in 1996-2000 Consideration of the Draft Codification of Private International Law by the Verkhovna Rada (the Parliament) of Ukraine in 2001-2005 The Main Provisions of the Law on Private International Law A. Structure of Codification B. General Provisions of Private International Law C. Conflict Law Rules Related to Some Institutions of Private Law 1. Persons 2. Conflict Law Rules Regarding Legal Acts, Contracts and NonContractual Obligations 3. Conflict Law Rules Regarding Rights in rem, Intellectual Property Law and Succession Law 4. Conflict Law Rules of Family Law D. International Civil Procedure E. Conclusions

I.

Preamble

III. IV. V.

The Law on Private International Law (‘PIL’) was adopted in Ukraine on June 23, 2005 and entered into force on September 1, 2005 (the ‘Law’). It is the first instance of PIL codification in one single document. Previously, in Ukraine, as in other former USSR republics, PIL rules were to be found in three main documents: the Civil Code, the Civil Procedure Code and the Family Code. This paper is divided into two main parts. The first restates the history of the codification and the second contains an analysis of its main provisions, in order to permit a better understanding of the main approaches accepted by the new Law.

∗ Professor, Head of the Department of Private International Law, Institute of International Relations of Kiev National University.

Yearbook of Private International Law, Volume 7 (2005), pp. 131-159 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Anatoliy Dovgert

II.

Conceptual Approaches to the Codification of Private International Law in Ukraine in the Early 1990s

The codification of the PIL of Ukraine could be considered as a continuation of the legislative work begun during the Gorbachev ‘perestroika’. In those years (19861991), the idea of a new codification of civil law was born and launched, together with the systematization of PIL norms. In 1991, the Basis of Civil Legislation of the USSR and Republics (‘Basis 1991’) was adopted, comprising a much more elaborate system of conflict law rules and other legal provisions of PIL than the Basis of Civil Legislation of 1963.1 In the late 1980s, there was much discussion within the legal community about the idea of adopting a separate law on PIL. A draft law on PIL was even drawn up (‘PIL Draft 1991’).2 These events appear to be closely related, because many innovations of the PIL Draft 1991 were incorporated into Basis 1991. Some substantial provisions of the PIL codification of 1986-1991, present both in Basis 1991 and in the PIL Draft 1991, basically reflect already well-known principles of national doctrine. Firstly, some general rules of conflict law were stated by Basis 1991: the legal grounds for applying foreign law; determination of the contents of foreign law, and detailed rules of ordre public (Articles 156, 157 and 158).3 These rules were identical to the relevant provisions of the PIL Draft 1991. They determined, in particular, that foreign law should be applied to civil relationships in cases defined by national laws, international treaties of the USSR, international custom, and by agreements between parties (so called ‘autonomy of will’). The contents of foreign law provisions were to be determined in accordance with its official interpretation, jurisprudence, and the doctrine of the foreign country concerned. The Ministry of Justice of the USSR, other State organs, experts and persons involved in a case might be called to help in determining the contents of foreign law. When it was impossible to determine the contents of the provisions of foreign law, then Soviet law should be applied. Where the application of the rules of foreign law would be in conflict with ordre public, Soviet law should be applied concurrently. There were some innovations concerning ordre public, namely: the new law contained the notion of ‘public 1 News (Vedomosti) of the Congress of People’s Deputies of the USSR and the Supreme Council of the USSR, 1991, No. 26, Art. 733. It should be noted that all references to Ukrainian or Russian sources have been translated into English. 2 Works of the VNII of Soviet State Building and Legislation, Moscow 1991, No. 49, pp. 123-148. 3 Basis 1991 did not contain the rules proposed by PIL draft 1991 regarding reciprocity, reverse reference and reference to the law of third country, application of the law of a country with multiple legal systems, consequences of evading the law, enforcement of the imperative provisions of the national law.

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Codification of Private International Law in Ukraine order’, interpreted as including the fundamentals of the legal order, but not the ‘fundamentals of Soviet order’, to be found in the legislation in force. Secondly, due to the new developments in international relations, it was particularly noted that the difference between the political and economic systems of the USSR and other countries must not be grounds for refusal to apply the foreign law. Following the global modern tendency to strengthen the protection of personal non-patrimonial rights, the conflict law rule of Article 163 of Basis 1991 provided that the plaintiff had a right to choose either the law of the country, where the tort occurred, or the law of his permanent place of residence. In the area of property rights, some new legal rules appeared concerning the determination of the law, which should be applied to ownership rights over various means of transportation (the law of the country, where the registration took place) and the protection of ownership rights (a person who requested the protection of ownership rights could choose the application of the following rules: lex rei sitae, lex fori or the law of the country, where the registration took place). There were considerable changes in the law of obligations. The emergence of a new general rule concerning the determination of the rights and duties of parties to a legal act should be noted. Previously, only a single rule for foreign trade transactions existed (Article 568 of Civil Code of Ukraine 1963), stating that the rights and duties of the parties should be determined according to the law of the place of the conclusion of the contract, unless otherwise agreed. The new rule applied to all types of legal acts. As for contractual obligations, a new modern conflict law connection was established: the law of the country, where a party responsible, under the contract, for a performance of crucial significance for the contents of the contract is established or has its place of residence or its main place of business. This connection was detailed for some types of contract: sales contract, lease, etc. Finally, there was a connection concerning unjust enrichment (the law of the country, where this enrichment took place), which reflected the fact that Basis 1991 consisted of considerably updated material rules of law bearing on this type of non-contractual obligation. USSR legislation on PIL thus underwent a substantial modernization of the general provisions of conflict law, personal non-patrimonial rights and the law of obligations. To this end, the solutions found in international conventions, in the latest legislation on PIL in Germany, Switzerland and the ex-socialist countries – GDR, Hungary, Poland, and Czechoslovakia – were drawn upon. The PIL Draft 1991 suggested further reforms, or a substantial modernization, of family and labor law and the rules of international civil procedure. However, the scope of the conflict law rules of Basis 1991 was limited by the scope of the material rules of this document, which is the reason for which these last areas of law were not included in the new codification.

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Anatoliy Dovgert The achievements of the codification process of 1986-1991 were never applied in Ukraine, as the Basis came into force on 1 January 1992, and the USSR ceased to exist in December 1991.4 After the collapse of the USSR, work on the codification of civil law, including the codification of PIL, began in all the former Republics. On the one hand, it was a logical continuation of the civil law codification of the former USSR, but on the other hand, it was the reflection of a new political and economic situation (independence, development of a market economy, etc.). In early May 1992, a Conference on the codification of the civil law of Ukraine was held in Kiev.5 In March 1992, according to the Decree of the Cabinet Ministers of Ukraine, a Working Group on the elaboration of a new Civil Code of Ukraine (the ‘Working Group’) was established. In the summer of 1993, the Ministry of Justice of Ukraine appointed 12 experts as members of this Working Group.6 From the very beginning, the idea of including the legal rules on PIL in the new Civil Code of Ukraine (‘CC’) received overwhelming approval. Nevertheless, the scope and contents of the rules were still not determined at that time. At the end of 1993, there was an attempt to undertake the codification of PIL to a full extent (including international civil procedure) by adopting a separate law. The Verkhovna Rada of Ukraine (‘VR’) initiated a draft Law ‘On Solving Conflicts with the Legislation of Foreign Countries Concerning Civil, Family and Labor Issues.’7 This document was derived from Basis 1991 and the PIL Draft 1991. However, it differed to some extent. In particular, it contained provisions regarding ‘legal qualification’, the notion of the ‘lex personalis’ of a natural person or legal entity, by which it was proposed to solve the issues of legal capacity and capacity to act. The Ukrainian draft law, as compared with Basis 1991 and the PIL Draft 1991, contained provisions on the determination of the law applicable to the property rights of a passenger over personal items (Article 19), to situations with a compulsory transfer of ownership rights (Article 20), to the acquisitive prescription (Article 21) and to mortgaged property (Article 23). The majority of innovations was to be found in the areas of family and labor relations. A special chapter on the protection of intellectual property rights was inserted. A chapter on international civil procedure was also modified. The Ukrainian draft Law On Solving Conflicts with the Legislation of Foreign Countries Concerning Civil, Family and Labor Issues was not considered by the first session of the VR, as it ended in the Spring of 1994. The next sessions of the Parliament never returned to this draft Law, as work on the codification of civil 4

In some countries of the former USSR (for example, Russia), Basis 1991 was enforced and applied before the adoption of the new Civil Codes. 5 Materials of the Scientific-practical Conference on Conceptual Issues of the Creation of the New Civil Code of Ukraine, Kiev 1992. 6 See DOVGERT A. / KALAKURA V., ‘About Preparation of the Draft Civil Code of Ukraine’, in: Ukrainian Law 1997, No. 1, pp. 108-114. 7 See the Addendum to the Letter of the Head of the Commission on Economic Reform Issues and Management of Economy of the VR, No 6-3/8-1257 of December 20, 1993.

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Codification of Private International Law in Ukraine law had begun. At the same time, this draft was analyzed in depth by the Working Group and, as a result, it was accepted that, because the draft had a lot of drawbacks and did not follow the modern tendencies of PIL in many areas, it should not be used as the basis for PIL codification within the framework of the preparation of the new draft CC. At this time, the Working Group had to decide theoretical issues concerning the scope and method of codification.8 Concerning the method of codification, the Working group had to decide between three alternatives. The first was to preserve the present approach to the sources of PIL and carry out the codification by dividing the whole array of legal rules into three groups, placing them into three new codes, namely: a Civil Code, Family Code, and a Civil Procedure Code. The second was to carry out the codification of PIL through the adoption of a separate law. The third was a broad codification of PIL within the framework of the new CC. In the PIL doctrines of the USSR, and later of the newly independent countries, at the end of the 1980s and the beginning of the 1990s, the idea of a codification of PIL within the framework of a separate law prevailed.9 Nevertheless, Basis 1991 demonstrated the survival of the old approach to the placing of conflict law rules. The conference of experts of the CIS of February 1994, held in Saint Petersburg, also pointed out the importance of the inclusion of conflict law rules in new civil codes, but within the narrow scope of civil relations.10 In the global practice of codification of PIL in the 19th and 20th centuries, beginning with the Napoleon Code (1804), PIL provisions have mostly been included in civil law codifications. The French Civil Code contained a few such rules. The courts had a primary role in developing PIL rules.11 The German BGB, adopted almost a century later, contained many more PIL rules.12 The Civil Code of Italy of 1942, in its Chapter on General Legal Provisions (this Chapter preceded Book One on ‘Persons and Family’) and in other parts of the Code, contained even more conflict law rules.13

8

The main rules of PIL of Ukraine were concentrated within two major sources: the Civil Code 1963 and the Family Code. Rules on international civil procedure were included in the Civil Procedure Code 1963. In the period of 1991-1995, new Ukrainian laws appeared (on external economic activity, pledges, Trade Maritime Code etc.), which contained some conflict law rules, some of which replaced some rules of the effective Civil Code. At the international level, within the CIS countries, the following documents appeared: Agreement on the procedure for solving disputes related to economic activity (1992); Convention on legal aid and legal relations on civil, family and criminal cases (1993). 9 See SEMENOV N.P., ‘About the Justification for the Preparation of the Law on Private International Law’, in: Soviet State and Law 1990, No. 1, p.10. 10 See DOVGERT A., ‘Civil Codes of the NIS Countries. Harmonization and Modeling’, in: Legal News 1994, No. 4. 11 LUNTZ L.A., Course of Private International Law – General Part, Moscow 1975, p. 85. 12 Ibid., pp. 86-87 13 See DE NOVA G. (ed.), Codice Civile e Leggi Collegate, Milano 2000, pp. 79-80.

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Anatoliy Dovgert In the second part of the 20th century, the processes of the globalization of all areas of life required the emergence of relevant legal instruments. Together with the international codification of material and conflict law rules governing international civil relations, the national conflict law systems were also modified. This was done in various ways. In the middle of the 1990s, the following occurred. In Germany, in 1986, PIL was modified by relevant changes to the Civil Code.14 The Canadian province of Quebec included both conflict law rules and rules of international civil procedure in Book 10 of the Civil Code.15 We find the same approach in the Dutch doctrine of codification.16 Austria, Switzerland, and other countries adopted separate laws on PIL.17 Italy developed a separate law on PIL, which was adopted in 1995, and the relevant articles of the Civil Code were abolished.18 Thus, foreign practice showed three main methods of codification and modification of PIL: (1) the inclusion of its body into the civil codes, which approach dominated for almost two centuries; (2) the adoption of separate laws on PIL when civil codes were insufficient (Austria, Switzerland, Turkey and several other countries)19; (3) the abolition of the conflict law rules of civil codes as a result of the adoption of a new law on PIL (Italy). Based on the analysis of the situation in Ukraine, of its history of law developments, and of the international practice of PIL codification, the Working Group accepted the idea of a codification and modernization of Ukrainian PIL within the framework of the preparation of a new CC, which would contain a separate Section (later a Book) on PIL. As to the scope of the codification of PIL within the framework of the CC, at the beginning of 1994, the Working Group decided to include therein not only legal rules for international civil relations in their narrow sense, but also conflict law rules for family and labor law and legal rules on international civil procedure. In fact, this was actually the development of a special law on PIL, within the framework of a new CC. Firstly, the members of the Working Group were convinced that such an approach would contribute to the elimination of the excessive number of internal sources of conflict law in Ukraine. The CC itself would be more complete, because it would be unwise to separate conflict law rules from material rules within the CC. The adoption of separate laws on PIL in some countries was rather an exception to the rule of inclusion of PIL into civil codes. This would only 14

German Law. Part 1. Civil Code (translation from German), Moscow 1996, pp.

501-515. 15

Civil Code of Quebec (translation from English), Moscow 1999, pp. 450-464. HARTKAMP A., ‘Civil Code Revision in the Netherlands 1947-1992’, in: New Netherlands Civil Code, Deventer/Boston 1989. 17 Switzerland’s Private International Law Statute of December 18, 1987, Deventer/Boston, 1989. 18 Reform of Italian System of Conflict Law (Law No. 218/1995 and amendments), in: The Italian Civil Code and Complementary Legislation, New York 1996. 19 See: BOGUSLAVSKY M.M., Private International Law, Moscow 2002, pp. 65-77. 16

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Codification of Private International Law in Ukraine occur in those countries where civil law codification was not current. Secondly, the full incorporation of PIL rules into the CC would increase the influence of this last over private relations, and that of the PIL rules themselves. Thirdly, the possibility of including PIL provisions on family law, while material rules in this area were at that time not included in the draft CC, and on labor law was permitted in accordance with the view that the CC was to be a codification of private law as a whole, and that its provisions must be applied to all civil (private) relationships, including family and labor relationships, unless special rules exist in these areas. The Canadian experiment convinced us of the possibility of incorporating international civil procedure rules into the draft CC. This approach guaranteed the effective operation of Ukrainian PIL, because leaving the codification of procedural issues to the separate procedural laws codification might have narrowed the implementation of PIL rules, and solved the problem of adopting a separate law on PIL in the future, which, according to the drafters, would have been a threat to the direct application of the new CC provisions. One important argument in favor of the inclusion of the rules of international civil procedure in the CC was the specific situation in Ukraine, where there was competition between the economic courts and courts of general jurisdiction over the cases involving a foreign element. At the same time, the procedural codes (Civil Procedure Code (‘CPC’) of 1963 and Economic Procedure Code (‘EPC’)) had contradictory provisions on competence and jurisdiction. There is still no hope that these codes will be synchronized or that a single procedural code will be adopted for all courts of general jurisdiction. Furthermore, the absence, in PIL, of a clear border between material and procedural law was taken into account. Thus some provisions (for example, periods of limitation) are considered to be material law in continental law countries, while in common law countries, they are related to procedural law. This conception of the codification of PIL was developed in 1994, and presented at the international meeting of the Working Group, including Dutch, German and Russian experts, in June 1994.20 It is embodied in the structure of the first version of the draft CC of 1994. This structure, in particular, includes: general provisions (Chapter 51); the legal status of persons (Chapter 52); conflict law rules in property law (Chapter 53); conflict law rules in the law of obligations (Chapter 54); intellectual property rights in international relations (Chapter 55); conflict law rules in succession law (Chapter 56); international civil procedure (Chapter 57).21 These chapters are closely related to the work on a Model Civil Code for CIS Countries, which contained a special Section on PIL.

20

Cryptogram of the First International Working Session on Draft Civil Code of Ukraine (June 11-15, 1994), in: Archive of the Ukrainian Legal Foundation 1994. 21 Civil Code of Ukraine – Draft, in: Archive of the Ukrainian Legal Foundation 1995.

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III. Codification of Private International Law within the Model Civil Code for CIS Countries In July 1995, the next meeting of the group of experts from CIS countries, held in the Netherlands, pushed on with the work on the Model Civil Code (Model). During this session, the following parts were written: succession law, intellectual property law and private international law. For the purposes of writing the Section on PIL, a special committee was established, headed by myself (professor Anatoliy S. Dovgert), and including scientists and experts from Ukraine, Georgia, Kazakhstan, Kirgizstan, Moldova, Belarus, Russia and Uzbekistan.22 The committee received codification drafts from Ukraine, Georgia, Kazakhstan, Belarus and Russia, which were then combined and compared in a table.23 The experts first addressed the concept of the codification of PIL. After careful study of these drafts, it was noticed that Basis 1991, and also some provisions of the draft PIL 1991, were essentially correct (‘reverse reference’ or ‘renvoi au premier degré’, reference to the law of a third country or ‘renvoi au deuxième degré’, evasion of law or ‘fraude à la loi’, registration of civil acts abroad, acknowledgement of documents issued by foreign authorities, tutorship and guardianship). According to the experts, the main disadvantages of these drafts were the following. Firstly, they contained many gaps in regulation, as compared with modern European acts. In particular, the rules concerning legal qualification, the application of imperative provisions, and the application of the law of a country with several legal systems, were missing. Secondly, unilateral conflict law prevailed, a reminder of former protective thinking. Thirdly, the basic institutions of modern conflict law, which are the autonomy of will and the principle of the closest connection, were not fully represented. Finally, in many cases, obsolete connections applied, which were contradictory to the rules of international conventions and of modern codifications. After having analyzed the drafts, the experts defined the following principles for the writing of the PIL drafts as a part of the Model: (i) codification must include all basic legal principles in conflict law regulation, according to modern global legislative practice and doctrine; (ii) codification shall be extended beyond Basis 1991, the PIL Draft 1991, and the submitted national drafts. To that aim, it is important to avoid the wide use of unilateral conflict law provisions, to find modern connections, and to apply more consistently such basic categories of PIL as the autonomy of will and the principle of the closest connection; (iii) codification shall be based upon the doctrine of PIL (including national doctrine, which had evolved 22 List of the members of the Committee: professors A. Dovgert (the Head), Y. Basin, N. Kuznetsova, M. Suleimenov, L. Chanturia; associate professors A. Zhiltsov, V. Peremienko, Z. Ubaidulaev, N. Beishenalieva. 23 See Comparative Table, prepared by the Scientific-Consultative Center of Private Law (Moscow).

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Codification of Private International Law in Ukraine over almost a century and a half), and modern codifications of PIL at the national (Austria, Italy, Switzerland, Germany, Canada, the Netherlands) and international (the Hague Conference conventions on PIL, and those of the EU, CIS, etc.) levels. As a basis for codification, the members of the committee, following the report of its Head, decided to work towards a broad codification, including conflict law provisions in family and labor law, as well as international civil procedure rules. The reasons were the same as for the choice of structure of the Ukrainian CC. Furthermore, Article 1 of the Model, which stated that family and labor relations are regulated by civil legislation, unless family and labor legislation prescribes otherwise, allowed such an inclusion. Nevertheless, this approach failed to meet with overwhelming approval beyond the committee. A special meeting of the experts who were present at the working meeting in Leiden came to the conclusion that the scope of the conflict law regulation of the Model should remain within that of its material provisions. In accordance with the above-mentioned concept, a draft text of Section VII on ‘Private International Law’ of the Model was created. It caused much discussion at the meetings of experts with western specialists. The foreign expertise used for the drafts was that of professors Y. Scoles and S. Raynolds (USA), and M. Polak (Netherlands)24. The plenary sessions were held at the office of the Hague Conference on Private International Law, with the assistance of Mr. H. van Loon, the Secretary General of the Hague Conference, and other experts. After some changes to this Section made in December 1995 at the working meeting of experts in Leiden, the text was adopted at the seventh plenary meeting of the Interparliamentary Assembly of Member States of the CIS of 17 February 1996, as a recommended legislative draft for the CIS countries.25 The codification consisted of the 43 Articles (Articles 1194-1235) of Section VII. The articles were grouped in two Chapters: ‘General provisions’ and ‘Conflict law rules’. The second Chapter consisted of eight paragraphs, which followed the structure of the material part of the Model: persons; personal nonpatrimonial rights; legal acts, representation, period of limitations; property rights, contractual obligations; non-contractual obligations; intellectual property and succession law. What innovations did this Model contain in comparison with various national codifications and Basis 1991? The general part introduced more detailed and complete principles of modern PIL. Article 1194 laid down such important principles of PIL as the autonomy of will and the principle of the closest connection. Lex fori was used when there was a question about the legal qualifications of terms, 24 E. Scoles, professor at Oregon University, is co-author of a fundamental work on PIL (SCOLES E. / HAY P., Conflict of Laws, St. Paul, Minn., 1992, 1160 p.). S. Raynolds is teacher of law at Harvard Law School. M. Polak, professor of private international law at Leiden University, is co-author of a fundamental work on PIL in the Netherlands (VAN ROOJ R. / POLAK M., Private International Law in the Netherlands, Deventer/Antwerp 1987, 337 p.) 25 Civil Code. Part Three. Model, Addendum to the Information Bulletin, 1996, No. 10.

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Anatoliy Dovgert nevertheless, for example, when legal notions are not known to the law of the forum, foreign law might be applied. The application of conflict law rules did not restrict the application of national, or even foreign, imperative rules, if they had a close connection to the case (Article 1201). Furthermore, the application of foreign legal rules was not to be limited by the fact that the rule is of public character (Article 1194). In cases where the law applicable is that of a country with multiple legal systems, the relevant legal system was to be chosen in accordance with the law of this country (Article 1202). Beyond those mentioned here above, the Model contained additional exact and complete interpretations of PIL principles: the determination of the contents of foreign law (Article 1196), reverse reference (Article 1197), evasion of law (Article 1198), reciprocity (Article 1199), a public order clause (Article 1200), and retorsion (Article 1203). The second Chapter on ‘Conflict law provisions’ contained innovations with respect to all areas of law. The conflict law rules concerning persons were already reciprocal. Of great importance was the establishment of a basic notion of lex personalis, not only for natural persons, but for legal entities as well (Article 1211). Lex personalis governed both capacity to act and legal capacity (Article 1205). The same conflict law rules were to apply to international civil relations with State participation, unless otherwise required by law (Article 1214). The innovations in property law consisted of the introduction of new rules concerning the legal qualification of property, which was to be governed by lex rei sitae (Article 1219). It was also suggested that lex loci contractus be replaced by lex causae, regarding the emergence and termination of rights in rem to a property which is the subject of a legal transaction, and to choose lex rei sitae when determining the emergence of ownership rights to a property by virtue of acquisitive prescription (Article 1220). It is well known that lex voluntatis has a wider application in determining the law applicable to contractual obligations. This is the reason for which lex voluntatis was given a broader scope in the relevant paragraph. In particular, there was a new provision according to which the parties to a contract might choose the law applicable both to the contract as a whole and to specific parts thereof (Article 1224). The law applicable to a contract covered not only the rights and obligations of the parties, but the interpretation, the performance of the contract and the consequences of a default on performance or improper performance of the contract, the assignment of rights and the transfer of debts, termination, and the consequences of the invalidity of a contract (Article 1227). The danger of different approaches to the regulation of foreign trade agreements and other agreements was avoided. The application of the law of the party responsible for the performance of crucial significance for the contents of a contract has become a universal connection in commercial and consumer contracts. Among the conflict rules, which governed non-contractual obligations, there were new rules concerning unilateral obligations (public promise of a reward, unauthorized agency, etc.) and special conflict law rules regarding consumer claims for compensation of harm caused as a result of defects in goods and services (Articles 1228, 1230). 140

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Codification of Private International Law in Ukraine Lex voluntatis seems to have been applied restrictively to the drawing up of wills under succession law (Articles 1233, 1235). Thus, the Model constituted considerable progress in the legislative practice of PIL in the former Soviet republics, which in many aspects met international requirements and corresponded to global tendencies in PIL developments. The Model law was implemented in the new Civil Codes of Belarus (1999), Armenia (1998), Kazakhstan (1999), Kirgizstan (1999) and Uzbekistan (1996), with almost no changes. The Model also served as a foundation for the drafting of the relevant parts of the Ukrainian and Russian Civil Codes.

IV. Development and Elaboration of Private International Law Codification as a Part of the Draft Civil Code of Ukraine in 1996-2000 Between January and March 1996, the Working Group continued to work on the draft CC. At this time, it was decided to include a draft Family Code, developed by a separate working group of experts, in the updated and elaborated draft CC26. On March 20, 1996, work on this new version of a CC was completed. Book 8 on ‘Private international law’ included the provisions from the Model and conflict law rules concerning family and labor law, as well as international civil procedure provisions. Nevertheless, the PIL part of the draft CC was considerably modified during the codification work of the Summer of 1996, according to the provisions of the new Ukrainian Constitution. The international evaluation of Book 8 was organized by the German Fund for International Legal Cooperation and performed by professor Dr. H. Dörner27. This is how the draft CC of 25 August 1996 was born, later adopted in the first reading by the VR on June 5, 199728. The project offered, compared to the Ukrainian CC of 1963, a more complete regulation of international civil relations that, in the opinion of the drafters, provided for an effective interaction of the Ukrainian legal system with global legal systems. Among the innovations were general conflict law rules, deserving a special mention (legal qualification, determination of the contents of foreign law, reverse reference, evasion of law, public order, the application of imperative rules, etc.), the majority of which were previously only known in national doctrine. The preparatory period for the second reading, the next phase of codification in Ukraine, lasted three years (1997-2000). There was considerable discussion

26

See: DOVGERT A. / KALAKURA V. (note 6), pp. 108-114. H. Dörner is professor of the department of civil law, private international and comparative law of the University of Dusseldorf. 28 See the text of the Draft in: Ukrainian Law 1996, No. 2 27

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Anatoliy Dovgert of Book 8 at the IVth Ukrainian conference on codification (18-20 June 1997)29 and in different legal publications. The experts of the Special Temporary Commission of VR on the Adoption of a Draft CC (‘Temporary Commission’) twice (August-September 1997 and August-September 1999) discussed the articles of the Book on ‘Private International Law’, and changes and additions were proposed by MPs of the second and third convocations of Parliament. A meeting on PIL issues with German experts, professors U. Drobning30 and H. Dörner, in September 1997, was also very fruitful and helpful. On 15 September 1999, during a meeting of the Temporary Commission, the results of this work were discussed and a draft of the Comparative Table was approved for the second reading. There were nearly 50 amendments proposed to Book 8.31 The majority was intended to allow editorial and terminological improvements, and to clarify the contents of some provisions. Proposals to considerably alter some articles of the Book were made in order to more fully integrate modern principles of PIL. The main intent of these major changes was the avoidance of some restrictions regarding the application of foreign law by Ukrainian courts. In particular, it was proposed that both the rule of reciprocity in the application of foreign laws (Article 1558), and the rule that foreign law shall not be applied if the harmful act for which compensation is requested is not considered unlawful under Ukrainian law (Article 1593), be abolished. There is a close connection between the above mentioned proposal and that to abolish the rule under which Ukrainian courts were not obliged to perform rogatory and other commissions from foreign courts, if there was no reciprocity in this matter (Article 1619). The abolition of the rule under which Ukrainian courts only executed foreign court judgments if a relevant international agreement was in force was also proposed. The drafters were convinced that such restrictions would threaten the development of international business relations, which is the reason for which these no longer exist in most countries. Taking into account the legal experience of other countries, the drafters proposed that the voluntary principle of Ukrainian PIL be strengthened. In particular, claimants in matters of torts and of unjust enrichment had a right to choose the law of country of the court (Articles 1593, 1595). Foreign legal entities could choose between the Ukrainian courts of special and general jurisdiction. It was also suggested that the main ground for determining the jurisdiction of Ukrainian courts in cases involving a foreign element be the agreement between the parties on the jurisdiction of Ukrainian courts over the case (Article 1616). On June 8, 2000, the suggested changes were approved by the VR, and the draft CC was adopted in the second reading. 29

See: Ukrainian Law 1997, No. 3 U. Drobning is one of the outstanding civil law specialists of Western Europe. He was the Director of the Max Plank Institute of Foreign Private Law and Private International Law for a long period. 31 See these amendments in: Ukrainian Law 1999, No. 1. 30

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Codification of Private International Law in Ukraine The preparatory work for the third reading was done in July and August 2000. The experts offered only a few more precise definitions and additions to the text of the Book32. In particular, they suggested that it be made very clear that PIL rules apply not only to the courts and other organs, but also to the participants in the relevant legal relationship (Article 1551).

V.

Consideration of the Draft Codification of Private International Law by the Verkhovna Rada (the Parliament) of Ukraine in 2001-2005

The draft CC, which was prepared for the third reading in 2000, alas failed to receive parliamentary consideration in the version prepared by the experts. In 2001, the Temporary Commission destroyed the chosen structure and abolished or even considerably worsened many of its provisions, as compared with the text of the second reading. Firstly, the Book on Family Law was unlawfully excluded. A draft of a separate Family Code, introduced in breach of parliamentary procedure (which prohibits the consideration of draft legislation which is in contradiction to any draft legislation which was approved in the first reading), was adopted as final in November 2001. The exclusion of the Book on Family Law from the draft CC does not only affect the structure of this systematic document. For example, Book 8 on Private International Law contained a chapter of conflict law rules for family relations. The legislator could not find a ‘better’ way than to continue the destruction of the document. Thus, in the Summer of 2001, the Book on Private International Law was excluded as well. The draft Civil Code was finally adopted at the end of 2001, comprising only six Books. The drafters attempted to remedy the situation (in particular by restoring the PIL rules to the structure of the CC) during a modification of the document according to the Presidential veto comments (February 2002 – January 2003), but they failed. The final version of the CC was adopted on January 16, 2003 and entered into force on January 1, 2004. These thoughtless and non professional actions of the MPs involved and their experts led to a situation where Ukraine, during a considerable period of time (from January 2004 till September 1, 2005), had no general conflict law rules in force. This exclusion of the Book on PIL from the CC was carried out in an untimely spirit of autonomous codification. Only in October 2002 was a relevant draft introduced in Parliament, and it only received its first reading on November 18, 2003. The draft Law on PIL copied the provisions of Book 8 of the draft CC. Nevertheless, the MPs and their experts were so careless that they included 32

See: Comparative Table to the Draft Civil Code of Ukraine (third reading) of July 8, 2000, Kiev 2000.

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Anatoliy Dovgert (with various mistakes) the provisions of the earlier, not the latest version of the draft CC. This meant that all the improvements made between 1997 and 2000 were missing. The draft Law on PIL has been before the Committee on Legal Policy of the VR more than two and a half years. It should be noted that this Committee has failed to organize a transparent consideration of the document. It is enough to say that the draft, submitted for the second reading and finally adopted without a third reading, was never published or placed on the web site of the VR beforehand. As a result, the ‘Law on Private International Law’ (the ‘Law’) adopted on June 23, 2005 contains numerous mistakes, inaccuracies and back-offs from the progressive rules, to which we will draw attention here below.

VI. The Main Provisions of the Law on Private International Law A.

Structure of Codification

The Law consists of 82 articles and some final provisions, divided into 14 Sections. The First Section contains general provisions of PIL. The next nine Sections contain conflict law rules concerning some areas of PIL, arranged in the following order: persons; legal acts, representation, periods of limitation; intellectual property law; property law; law of obligations; non-contractual obligations; labor law; family law; succession law. Provisions of international civil procedure are placed in the following three Sections: procedure in cases involving foreign persons; court jurisdiction and execution of foreign court commissions; recognition and execution of foreign court judgments. Finally, the last Section contains final provisions, which set the date of entry into force of the Law (September 1, 2005), and references to the changes to other laws. The structure of the Ukrainian codification obviously follows that of the material provisions of the CC 2003 for the most part and reflects the practice of many codifications. Moreover, Ukrainian PIL doctrine and that of many other countries recommend similar structures. Such structure was the product of the conceptual approach prevalent in the 1990s, concerning the scope and contents of the codification of PIL rules in Ukraine. This made it possible to include the results of PIL doctrine and practice of the latter half of the XXth century. Nevertheless, there are some inaccuracies. For example, Section VI of the Law is titled ‘Conflict law rules concerning the law of obligations’, though it contains only contractual provisions. The Section on intellectual property law should follow after property rights, as required by the structure of the CC. The Section on labor relations, in accordance with the logic of this Law, should be placed after the law of succession. The structure of the Sections themselves are also a cause for complaint.

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Codification of Private International Law in Ukraine B.

General Provisions of Private International Law

We will begin by mentioning that the Law uses such doctrinal categories of PIL as ‘civil relationships with a foreign element’, ‘conflict law rule’, ‘conflict law’. Thus, in particular, this Law provides that the law governing civil relationships involving a foreign element shall be determined in accordance with the conflict law rules and other conflict law provisions of the Law, of other laws, and of international agreements and customs. Articles 1-4 of the Law state the following basics: (i) the country of which the law is applicable must be determined in international civil relationships33; (ii) civil relationships are qualified as involving a foreign element when they, for example, exist between foreign and national or solely foreign persons or legal entities. Civil relationships also fall into the international category when they present other foreign elements, in particular, when their object is located, or a legal act took place, abroad. Civil relationships may have several foreign elements at the same time; (iii) civil relationships, involving a foreign element, when international unified material legal rules are lacking, shall be governed by the mechanism called ‘conflict law’; (iv) conflict law is an array of conflict law rules and other provisions (principles, legal qualification, ordre public, etc.); (v) sources of PIL are: the laws of Ukraine, international agreements, and customs. Of course, this list is not exhaustive. Agreements between the parties on the applicable law, principles of natural law, including general principles of law, the principle of the closest connection, etc., may also be included in this list. These sources contain objective conflict rules, i.e. those which determine the law applicable to particular relationships in the absence of a choice of law (lex voluntatis) or of rules regarding lex voluntatis itself. It should be noted that, according to national doctrine, conflict law rules are intended not only for the courts or other State organs, but firstly for participants in the particular relationship.34 This rule was sadly forgotten when drafting the document. This is the first time in national legislative practice that the basic principles of conflict law were included in the Law. The voluntary character of civil law in international civil relations is demonstrated, first of all, in such legal institution as lex voluntatis. The Ukrainian codification contains a more complete treatment of this institution than the Model. Firstly, it has a broader scope of application. Apart from the main areas of application, which were already known – foreign trade contracts and property rights under such agreements –, it can now be applied to determine the contents of any type of 33 In the Law, the term ‘country’ is replaced by the term ‘State’. In our opinion, this is not a happy replacement because when solving problems of inter-territorial conflict law, global PIL doctrine operates according to the law of a certain country but not of a certain State since these terms are not synonymous. The term ‘law of the country’ was used by previous Ukrainian legislation and thus by the draft PIL codification of Ukraine. Therefore, we will hereafter use expression ‘law of the country’. 34 See, for example,: MATVEEV G.K., ‘Subject Matter, System and Sources of Private International Law’, in: Private International Law, Kiev 1985, p. 21.

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Anatoliy Dovgert agreement between the parties. Lex voluntatis also has a limited application with respect to: the protection of property rights, where the choice is restricted to either the law of the country where the property concerned is located or the lex fori (Article 42); consumer contracts, because the chosen law must not restrict those rights of the consumer, prescribed by the imperative rules of the country where the consumer has his place of residence or place of staying (Article 45); tort cases, where parties may choose the lex fori, and the consumer in such cases may choose his lex domicilii or the law of the country where the manufacturer or service provider has a place of residence (or seat – for a legal entity) or the law of the country where the consumer bought the goods or where the service was provided (Articles 49 and 50); obligations incurred because of unjust enrichment, where the parties may choose lex fori (Article 52); many areas of family law; succession cases, where the testator may choose in his will the law of the country of his citizenship (Article 70). The main provisions regarding lex voluntatis can be found in Article 5 of this Law. Except when lex voluntatis has a limited application, as mentioned above, the parties, according to national doctrine, are not limited in choosing the applicable law. Hypothetically, they may choose the law of any country of the world without any restrictions, even the law of a country to which there is not the closest connection. This last provision was forgotten in the Law, but the previous draft contained it. According to the lex mercatoria theory, the parties may choose not only the national law of a particular country, but also the lex mercatoria, which is an array of rules of transnational character; in other words these are rules of law, which do not belong to any of the national systems of law. Lex mercatoria is a self-sufficient, independent legal order, which is based on rules of a commercial nature, originating not in States, but in the participants in international trade themselves. As is shown by modern practice, international arbitration tribunals, and even national courts, tend to ever more broadly recognize the right of the parties to an international contract to choose lex mercatoria in their respective relationships.35 Taking into account modern tendencies in the development of international commercial relations and the fact that lex mercatoria receives an ever broader recognition in legal doctrine and practice, the draft codification of PIL within the framework of the CC contained the rule that parties are not limited in choosing the applicable law and, in particular, in choosing ‘lex mercatoria’ or ‘general principles of law’ or similar rules. This was based on Article 1:101 (3)(a) of the Principles of European Contract Law, and also upon the provision of the Preamble of the Principles of UNIDROIT, where it is stated that the abovementioned Principles may be applied, when the parties ‘have agreed that their contract be governed by general principles of law, the lex mercatoria or the like’.36 Alas, this important rule was also forgotten during the adoption of this Law. 35 MEREZHKO A.A., Lex Mercatoria: Theory and Principles of Transnational Trade Law, Kiev 1999, pp. 197-217. 36 Principles of International Commercial Agreements, Moscow 1996, p. 251.

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Codification of Private International Law in Ukraine Concerning the form of lex voluntatis, the Law adopts a liberal approach – the choice of applicable law must be expressed clearly or directly result from the conduct of the parties or the terms of the contract or the circumstances of the case. In some cases, the law requires specific concrete forms, in particular: the choice of law regarding some parts of the legal act must be expressed precisely (part 2 of Article 5); the agreement of the spouses on the law applicable to the legal consequences of marriage should be made in the written form or clearly result from the marriage contract, and if such an agreement was made in Ukraine, it must be notarized (Article 62). The Law contains some other modern provisions regarding lex voluntatis. The legislator recognizes the idea of ‘legal biotechnology’, meaning the possibility of ‘dividing’ a legal act into parts, these to be governed by different legal systems (Article 5). This opinion is not shared by some experts37, but the legislators of some countries (Czech Republic, Slovakia, USA) and international legal practice (Rome Convention of 1980) recognize some advantages of such a technique. Countries have different approaches to the determination of the moment when parties may choose the applicable law. Several countries (e.g. Germany and Switzerland) allow the applicable law to be chosen (or the chosen law to be replaced) at any moment. Other countries require that the choice should be made at the moment the legal act is concluded. Ukrainian codification solves this problem by using the approach prevailing in national and international practice, namely: the choice of the law or its replacement may be made at any moment. If this choice is made after the conclusion of a legal act, the choice/replacement of the law has a reversionary effect and is valid from the moment of conclusion, but without prejudice to the rights acquired by third parties (Article 5). The Ukrainian approach of different aspects of the autonomy of will is based not only on those existing in various countries with modern PIL rules. The drafters also tried to harmonize the basic essentials of PIL with European and international legislation. The relevant acts in this regard were the Rome Convention of 1980 and the Hague Convention on the Law Applicable to Contracts of International Sale of Goods.38 The closest connection of the relevant international civil relationship with the law of a country was recognized as the basic principle for the construction of an objective conflict law. The legislator thus refuses protectionist policy, the attempt to subordinate international civil relations to national law. The Law provides that in cases where it is impossible to determine the applicable law based on objective conflict law and lex voluntatis, the law, which has the closest connection to the relevant legal relations, shall be applied (part 2 of Article 4). This rule shows that objective conflict law regarding some civil law areas (property law, law of obligations, succession law, etc.) was developed according to this principle. For example, 37

RUBANOV A.A., ‘Autonomy of Will of Private International Law as a Theoretical Problem’, in: Soviet Yearbook of International Law 1986, p. 219. 38 Convention on the Law Applicable to Contracts of International Sale of Goods, Edited by the Permanent Bureau of the Conference, The Hague 1987.

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Anatoliy Dovgert such connection point as lex rei sitae in property law serves as an example of the aforementioned principle. A defect of the construction of conflict law regulation on the basis of the diversified system of objective conflict law is that it is impossible to cover all legal situations and that the application of objective rules, in some particular circumstances, may destroy the principle of the closest connection. The abovementioned rule (part 2 of Article 4) is intended to correct the first defect. The second defect of the diversified system of objective conflict law could be remedied by the legislator by adopting the rule that, in exceptional cases, the law determined by the objective conflict law might not be applied, if, in the circumstances, the relevant relationship has a weak connection with the law of one country and a closer connection with the law of another. This provision shall not be applied, if the parties (or a party) made a choice of the law, applicable to the relevant legal relationship. Thus, the system of conflict law regulation, in the absence of the autonomy of will, is constructed with the help of a general principle (the closest connection), combined with a number of objective conflict law rules, which reflect this principle. Doctrine considers that the combination of a flexible rule of the closest connection with certain conflict law rules constitutes the modern achievement of PIL.39 A considerable portion of the rules of the Law is aimed at the complete and precise application of foreign law in Ukraine. If the parties or the court applies foreign law, taking into account the conflict law reference, this includes all the provisions, which would be applicable to the case, including public law provisions (Article 6). The conflict law provisions of the foreign law are also included, but only in cases involving the personal or family status of a natural person. At the same time, ‘reverse reference’ to Ukrainian law is accepted. In all other cases, the foreign conflict law, as a rule, is not included in the applicable foreign law, in accordance with the conflict law rules of Ukraine (Article 9). When the foreign law includes more than one legal system (territorial and others), the applicable legal system shall be determined in accordance with the law of that country, and if there are no such rules, the legal system with the closest connection to the legal relationship shall be applied. How can the Ukrainian court or other organ determine the scope of the foreign law and the contents of its rules? The Law proposes this basic rule: the court determines the contents of foreign rules in accordance with their official interpretation, with the practice, and with the doctrine, of the foreign State concerned. Assistance in interpretation can be provided by the Ministry of Justice of Ukraine or by other competent authorities or institutions in Ukraine or abroad. The court can call for expert assistance. Moreover, the parties involved in the case have a right to assist (for example, by presenting the necessary documents) the court in determining the content of these provisions (Article 8). The Law contains modern provisions on the limits to the application of foreign law. Thus, foreign law shall not apply if the court fails to determine the contents of its provisions. In this case, Ukrainian law shall apply (Article 8). 39

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Codification of Private International Law in Ukraine Reference to public order is stated in its modern interpretation: foreign law (the Law actually states ‘the legal rules’) shall not apply in cases, where its application may cause a result incompatible with the fundamentals of the legal order (public order) of Ukraine. At the same time, such a refusal shall not be justified only by differences in the legal, political or economic systems. Where the refusal for application of the foreign law is made because of a possible infringement of ordre public, the law of the country with the closest connection shall be applied, and if it is impossible to determine or apply this law, the law of Ukraine shall be applied (Article 12). The Law requires the application of so-called mandatory rules. These rules, to some extent, narrow the application of foreign law. The substance of these rules is that conflict law does not limit the application of the imperative rules of Ukraine, regulating the relevant relationship, notwithstanding the law applicable to this last. Moreover, when applying the law of a country, the court may apply the imperative rules of another country, which has a close connection with said relationship. At the same time, the court must take into account the contents and character of such rules, and also the consequences of their application or non-application (Article 14). The foreign law shall be taken into account for the legal qualification of the legal facts concerned, when they include notions unknown to the law of Ukraine or known in another wording or with other contents (Article 7). The foreign law (as well as the national) may not be applied if the court determines that there has been a so-called ‘evasion of law’. The (other) legal act between the parties to the relationship that causes the application of another law in order to avoid the application of conflict law rules, is invalid. In this case, the law of the relevant country shall apply in accordance with the conflict law rules of the Law (Article 10). The drafters of the CC refused to establish a restrictive application of foreign law in cases where reciprocity is lacking. The relevant article of the draft, prescribing the application of foreign law only on a reciprocal basis, was withdrawn in the process of the preparation of the draft CC for the second reading. Nevertheless, this provision, which was already out of date, was inserted into this Law (Article 11), thus, in our opinion, contradicting the modern principles of international cooperation between countries.

C.

Conflict Law Rules Related to Some Institutions of Private Law

1.

Persons

The conflict law rules regarding persons begin with an innovation in Ukrainian PIL, namely, the consideration of the notion of the personal law of natural persons (Article 16). This is, according to the general rule, determined by the obsolete connection point of the lex patriae. If a person has two or more citizenships, his personal law shall be the law of the country with which such person has the closest connection. The personal law of the person without any citizenship is considered to be the law of the country of his place of residence or, if none such exists, of the Yearbook of Private International Law, Volume 7 (2005)

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Anatoliy Dovgert place where he is staying. The abovementioned criterion is used to determine the personal law of a refugee (the authors of the draft CC had used the internationally accepted notion of ‘habitual residence’). As the terms ‘place of residence’ and ‘habitual residence’ in PIL differ from the similar notions of internal civil law, our version of PIL codification contained a reference to their definitions. In particular, we suggested to consider that a person has: a place of residence in that country, where he lives with the intention to make a permanent stay; his habitual residence is in that country, where he lives during a certain period of time, even though the original intent was that the period of staying there be limited. Alas, these provisions were not included in the Law. The basic categories of the legal status of persons are legal capacity and capacity to act (unfortunately, the Law uses the terms ‘civil legal capacity’ and ‘civil capacity to act’, that may in practice lead to a narrower interpretation of these categories, i.e. to exclude legal capacity and capacity to act in the labor and family spheres). The beginning and termination of the legal capacity and capacity to act of a natural person shall be determined by his personal law (parts 1 of Articles 17, 18). This law determines the grounds and legal consequences of the recognition of a natural person as having no, or a limited, capacity to act. But the capacity to act of a natural person in legal acts and obligations, which arise from torts, may be determined also by the law of the country, where such legal acts were concluded or where such obligations arose, unless otherwise required by law. When determining the legal regime for foreign citizens, the Law states that foreigners and persons without any citizenship possess the same legal capacity as the citizens of Ukraine, unless otherwise required by law or by the international agreements of Ukraine (Article 17). The law of the country, in which a natural person is registered as an entrepreneur, shall determine the right of a natural person to pursue entrepreneurial activity. If there are no requirements concerning compulsory registration, the law of the country of the main place of business shall apply (Article 19). The last known personal law of the missing person shall govern the grounds and legal consequences of the recognition of the fact that he is missing or of declaring him dead. The personal law of a natural person shall determine his rights to his name and over its use, unless otherwise required by law (Article 21). The new CC is the first in the history of private law codification that devotes a separate Book to the regulation and protection of the personal non-patrimonial rights of a natural person. Notwithstanding the location of this separate Book in the CC structure, the legislator has placed the conflict law rules of this institution in the Section on the legal status of such persons. It is likely that the legislator was guided by legal and technical reasons and by the small amount of conflict law rules in this area. Personal non-patrimonial rights shall be governed by the law of the country, where the action or other circumstances took place, which are the grounds for claiming the protection of such rights, unless otherwise required by law (Article 22). Thus, for example, personal non-patrimonial rights in the sphere of intellectual or industrial property shall be governed by the general conflict law rule for 150

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Codification of Private International Law in Ukraine the institution of intellectual property, namely, by the law of the country, where such protection is claimed. In the Law, parallel to the structure of the CC, the legal provisions regarding the status of natural persons are followed by tutorship and guardianship (Article 24). The appointment and rescinding of tutors or guardians over minors, or adults having no, or a limited, capacity to act shall be governed by the personal law of the person concerned. The tutor’s (or guardian’s) duty to accept the tutorship (guardianship) shall be determined according to the personal law of the person who is appointed tutor (guardian). The legal relationship between a tutor (guardian) and a person under his/her tutorship (guardianship) shall be determined according to the law of the country whose authorities appointed the tutor (guardian). However, when a person under tutorship (guardianship) has a place of residence in Ukraine, Ukrainian law shall apply if it is more favorable to such a person. Tutorship (guardianship) over citizens of Ukraine, living abroad, is valid in Ukraine, unless there is a clear legal objection from a consular or diplomatic mission of Ukraine. The legal status of legal entities in international private relations is also determined through the category of personal law. This rule relates both to the legal entities of private law or (unless otherwise prescribed by law) to the legal entities of public law, including States (Article 30). The personal law of a legal entity is considered to be the law of the country of the seat of the legal entity (the country of the seat of a legal entity is the country where the legal entity was registered or founded in another way in accordance with the law of that country or, if such conditions are absent, the law of the country where the administration of entity is located). A special article governs the determination of the personal law of a foreign organization, not qualified as a legal entity according to the law of the country where it was founded (Article 27). This concerns some trade companies, which do not have the status of legal entities according to the law of some countries. The legal capacity and capacity to act of a legal entity shall be determined according to its personal law (Article 26). A legal entity may not claim a limitation of the powers of its organs or representatives to enter into a deal, which is unknown to the law of the country, where the other party has its place of staying or seat, except for cases when the other side knew or obviously should have known of said limitation (Article 28). In such a case, the rules of Article 92 of the new CC 2003 should be mentioned, which envisage that any limitations of the right to represent a legal entity in relations with third persons is null and void, unless the legal entity proves that the third person knew or should have known about such restrictions. This rule applies to legal entities with universal or special legal capacities. As for special legal capacity, it must be noted that, for a long time in Ukraine and in global doctrine and practice as well, it was considered that the actions of a legal entity, which contradict its statutes, are null and void (the so-called ‘ultra vires’ doctrine). Nowadays, the majority of countries refuses this doctrine. The company’s responsibility for any actions of its organs, which exceed the limits determined by the statutes, is provided for by the EU Directive of 9 March 1969. As for the legal regime of foreign entities in Ukraine, they exercise entrepreneurial and other activities governed by civil law in accordance with the rules, Yearbook of Private International Law, Volume 7 (2005)

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Anatoliy Dovgert which govern the activity of Ukrainian legal entities, unless otherwise required by law (Article 29).

2.

Conflict Law Rules Regarding Legal Acts, Contracts and Non-Contractual Obligations

a.

Form of Legal Acts

In order to stabilize civil society, the Law has a modern approach towards the forms of legal acts, comprising a wide range of alternative conflict law rules: it is sufficient that the form of a legal act meets the requirements of lex causae, lex loci actus or lex domicilii, of at least one of the parties to said legal act, unless otherwise required by law (Article 31). There are strict requirements regarding the form of a legal act for international contracts involving citizens and legal entities of Ukraine (written form unless otherwise required by law or by international agreements) and for legal acts with immovable property as their object (lex rei sitae, and in the case of movable property, which is registered in the State Register of Ukraine the law of Ukraine shall be applied).

b.

Autonomy of Will

As legal acts (specially contracts) are the most widespread basis for the establishing of civil legal relationships, Articles 32, 43 and 44 of the Law, which describe the contents of a legal act, repeat the basic principles of conflict law – the autonomy of will and the closest connection. The law determined by these approaches applies not only to the rights and duties of the parties, but also to the validity and interpretation of the legal act, the legal consequences of its invalidity (Article 33), and periods of limitation (except regarding the claims, not covered by this institution, if at least one of the parties to the relevant relationship is a Ukrainian citizen or a legal entity of Ukraine) (Article 35). We should bear in mind that the period of limitations is an institution of the general part of civil law and extends over all civil legal relationships. Except for those issues we have mentioned, the law of a contract covers the issues of performance under a contract and the consequences of a default on performance or improper performance of a contract (regarding the methods and procedure of performance, which shall be applied in cases of improper performance of a contract, it is possible in some situations to apply the law of the country, where the performance takes place), the termination of a contract, the assignment of claim and the transfer of a debt (Article 47). The ‘autonomy of will’ plays a major role. The contents of a legal act should be regulated by the law of the country, which is agreed by the parties, unless otherwise required by law (Article 32). In principle, the same wording is used in respect of the autonomy of will for contracts: the parties to a contract may choose the applicable law, unless this is prohibited by law (Article 43). The Law prohibits the parties from choosing the law for the founding agreement of a legal 152

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Codification of Private International Law in Ukraine entity involving a foreign element. Such cases are governed by the strict rule, that the applicable law shall be the law of the country, where a legal entity will be founded (Article 46). The Law establishes imperative rules on powers of attorney: their issuance, effective terms, termination and consequences of termination. All these issues are to be determined by the law of the country where such powers of attorney were issued (Article 35). Taking into account the modern predominance of consumer contracts, the rules of the autonomy of will were composed in such a way as to better protect the weaker party – the consumer. Consumer contracts include contracts for the acquisition of goods or services by a person (consumer) for non-commercial purposes. The choice of law by the parties should not deprive the consumer of the protection provided by imperative rules of the country of his place of residence or of staying if: the offer or advertisement in that country preceded the conclusion of the contract and the consumer performed all actions required to conclude the contract in that country; or the contractual partner of the consumer received an order from the consumer in that country; or when a consumer had to go abroad, upon the other party’s invitation, to conclude the contract on acquiring goods (Article 45). These provisions do not apply to contracts of carriage or of services if they were concluded or performed in a country, other than the country of the place of residence of a consumer (except tourist contracts, which provide for combined transportation and accommodation). We had considered it necessary to include in the PIL codification some rules regarding the autonomy of will for labor contracts. In accordance with the European approach, we proposed a right for the parties to choose the applicable law, that choice necessarily being made in written form. However, this law should not deprive the worker of the rights, which he enjoys under the imperative rules of a country, whose law would have been applied in the absence of a choice of law. Such provisions were not included in the Law. Does this signify a prohibition against applying the autonomy of will to labor affairs? We think not. The general conflict law rules of the law of obligations on the choice of law by the consent of the parties will be applied in such cases (Article 43).

c.

Closest Connection

In the absence of a choice of law (and also, in the original draft, when the legal act is null and void due to the chosen law), the law of the country, which has the closest connection, shall apply. It is considered, unless otherwise required or implied from the conditions or from the substance of the legal act, that the legal act has its closest connection with the law of the country, where the party responsible for the performance of crucial significance for the contents of the legal act has its place of residence or seat (Article 32). Article 44 of the Law, which states the law applicable to the contract in the absence of lex voluntatis, recalls the abovementioned provisions, but at the same time provides that a party responsible for the performance of crucial significance for the contents of the contract is: for a sale’s contract, the seller; for a donation Yearbook of Private International Law, Volume 7 (2005)

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Anatoliy Dovgert contract, the donor (the Law further lists conflict law connections regarding the contracts as listed within the structure of Book 5 on ‘Law of Obligations’ of the CC 2003). Different criteria are applied for determination of the closest connection of some legal acts and contracts. Thus in a contract on immovable property, the connection is to the law of the country, where such property is located; for contracts on the execution of work or joint activity, the connection will be to the law of the country, where such activity takes place or the results envisaged by the contract appear; in a contract, concluded at an auction, a competition or a stock exchange, this connection will be to the law of the country, where the auction or competition took place or the stock exchange is located. The codification of PIL within the draft CC framework provided bilateral objective conflict law connections for labor contracts in the absence of a choice of law by the parties. Unless the labor relationship has the closest connection to the law of another country, the following law will be applied to the labor relationship: lex loci laboris, even when the employee is on a business trip abroad; the law of the country where the usual place of residence of the employer, through which the employee was hired, is located, if the employee performs his work in several countries; the law of the country of the flag or other sign under which the vessel or aircraft, on which he works, or travels. The Law does not use the term ‘labor contract’. The array of conflict law rules was grouped under the term ‘labor relations’. The main rule is lex loci laboris (Article 52). The Law uses unilateral rules for some aspects of the labor relationships of Ukrainian citizens abroad (Article 54) and labor relationships of foreigners in Ukraine (Article 54), instead of the abovementioned bilateral conflict law rules. Such an approach is rather surprising, as it fails to cover a considerable number of international labor relationship cases.

d.

Non-Contractual Obligations

The Law contains conflict law rules for several types of non-contractual obligations. In obligations emerging from unilateral actions (for example unauthorized agency, etc.), the law of the country where such an action takes place shall be applied (Article 48). Rights and duties based on torts shall be determined in accordance with the law of the country, where the action or other circumstances that serve as grounds for a claim for damages occurred. However, the parties may, at any time after the obligations emerge, choose the law of the country of the court. If the parties have the same place of residence or place of seat, the rights and duties emerging from torts are determined by the law of this country (Article 49). The Law permits the parties to tortious obligations to choose lex fori at any time after the obligation has emerged (parts 4 of Article 49). However, at the discretion of the victim, the following shall be chosen to govern a claim for compensation for harm inflicted as a result of defects of goods, works or services: the law of the country where the consumer has his place of residence or main place of 154

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Codification of Private International Law in Ukraine business; or the law of the country where the producer of goods or provider of services has a place of residence or seat; or the law of the country where the consumer acquired the goods or the services were provided (Article 50). For obligations under unjust enrichment, the law of the country, where such an enrichment occurred, shall be applied. The parties may choose the law of the country of the court at any time after the obligation has emerged (Article 51).

3.

The Conflict Law Rules Regarding Rights in rem, Intellectual Property Law and Succession Law

The main conflict law rule, which applies to rights in rem, relating to movable as well as to immovable property, is lex rei sitae. Thus, the right of ownership and other rights in rem relating to immovable and movable property shall be determined according to the law of the country where such property is located, unless otherwise provided by Law. Property shall be classified as movable or immovable (or otherwise qualified) in compliance with the law of the country where such property is located (Article 38). In principle, lex rei sitae also applies to determine the emergence and termination of rights in rem and to protect rights in rem relating to immovable property. The emergence of ownership over property by virtue of acquisitive prescription shall be determined by the law of the country where the property was located at the time of the expiry of the acquisitive prescription term (Article 39). Rights in rem relating to means of transportation and other property subject to State registration shall be subject to the law of the country where such property is registered (Article 40). Accordingly, the protection of rights in rem registered in Ukraine shall be subject to the law of Ukraine (part 3 of Article 42). In some cases the Law permits the application of the autonomy of will in the sphere of rights in rem. It is possible to determine, by a choice of law agreement, the law applicable to the emergence and termination of rights in rem over property which is the subject of a contract. However, the choice of law shall not affect the rights of third parties (part 2 of Article 39). The autonomy of will also applies to the determination of the law applicable to rights of ownership and other rights in rem over movable property en route. In the absence of a choice of law, the Law states that the connection is to the country, from which the property was delivered (Article 41). The general rule on the protection of rights in rem offers the possibility of choosing between the law of the country of the court and the law of the country, where the property is located (Article 42). In the field of intellectual property law, the Law provides two rules, which were borrowed from Swiss PIL. The first rule sets forth the well-known principle that the applicable law shall be the law of the country, were the protection of intellectual property rights is claimed (Article 37). In reminder of the fact that legal relationships in intellectual property matters are of absolute character, the Law contains the rule that contracts (the Law uses term ‘legal acts’), of which the subject matter is intellectual property rights,

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Anatoliy Dovgert shall be governed by the law determined by the rules of the Law on contractual obligations (Article 36). As for succession relations involving a foreign element, it was proposed as a general rule that such relations be governed by the law of the country where the testator had his last place of residence unless the testator in his will chose the law of the country of his citizenship. If, after making his will, the testator changed his citizenship, the choice of law will be invalid (Article 70). While applying this general rule, the special conflict law rules should be taken into account here. Thus, the succession of immovable property is regulated in accordance with the law of the country, where such property is located, and the succession of the property required to be registered in Ukraine, shall be governed by the law of Ukraine (Article 71). The following special rules are related to testamentary issues. The capacity of a person to make a will or to revoke it, the form of a will, and the act of its revocation, shall be determined by the law of the country, where the testator had his place of residence at the moment of making the will or at the moment of his death. A will or an act of its revocation shall not be declared null and void because the forms were not observed, if the form meets the requirements of the law of: the place of the making of the will; or of the country of citizenship; or of the country of the habitual residence of the testator at the time he made the will or at the moment of death; and, finally, the country, where the immovable property is located (Article 72).

4.

Conflict Law Rules of Family Law

The relevant rules of the Law on PIL cover the main segments of international family law, namely: celebration, dissolution and invalidity of a marriage, the marriage contract, legal consequences of a marriage, establishing and disputing of fatherhood (motherhood), adoption, rights of parents and children, etc.

a.

Marriage

The right to enter into a marriage shall be defined by the personal law of each person entering the marriage. The requirements of the Family Code of Ukraine as to the obstacles against marriage shall apply in cases where the marriage is celebrated on the territory of Ukraine (Article 55). Ukrainian law shall define the form and procedure of marriage celebrations in Ukraine. A marriage between Ukrainian citizens, if at least one of them resides abroad, may be entered into at the diplomatic representations or at the consular institutions of Ukraine according to the law of Ukraine (Article 57). The recognition of marriages celebrated abroad is a very specific issue. Marriages between Ukrainian citizens and foreigners, and between Ukrainian citizens and persons without any citizenship, celebrated abroad in accordance with foreign law, will be declared valid if the requirements of the Family Code of 156

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Codification of Private International Law in Ukraine Ukraine on the obstacles against marriage were applied to the citizen of Ukraine entering the marriage. Marriages between foreigners, between foreigners and persons without any citizenship, and between persons without any citizenship, celebrated in accordance with the foreign law shall be recognized as a valid in Ukraine (Article 58). The invalidity of a marriage celebrated in Ukraine or abroad shall be determined by the law of the country, of which the law has been applied while entering into the marriage. Ukrainian law allows the conclusion of a marriage contract. If this relationship belongs to the sphere of international civil law, the parties to the marriage contract may choose the law applicable to such a contract (Article 59). However, the choice of the applicable law is limited to: the law of the country of the personal law of one of the parties; the law of the country, where the immovable property concerned is located; the law of the country, where one of the spouses has his habitual residence (part 1 of Article 61). When chosen in such a way, the applicable law may be cancelled or changed by the consent of the parties, when there is a change in the personal law or habitual residence of that of the parties to whose personal law or habitual residence the chosen law was tied. The new law applies to the marriage relation from the time the marriage was celebrated, unless otherwise stated in writing by the parties (Article 61). In the absence of a choice of law, the conflict law provisions for the legal consequences of a marriage shall apply. Thus, the mutual personal law of the spouses, or, in its absence, the law of the country, where the spouses had their joint place of residence, provided that one of the spouses still resides in that country, or, in its absence, the law of the country with which the spouses have the other closest connection, shall be applied. If the spouses do not have a mutual personal law, they may in some cases choose the applicable law here as well. Nevertheless, the choice is limited to the personal law of one of the spouses, to be cancelled if the citizenships become mutual (Article 60). The Law provides strict requirements for the form of the agreement between the spouses on the choice of applicable law. The agreement, concluded in Ukraine, must be notarized. In other cases, the agreement must be in written form or should be clearly determined by the provisions of marriage contract (Article 62). The law, governing the legal consequences of marriage, also applies to the issues of marriage dissolution and its legal consequences (Article 63).

b.

Parent-Child Relationships and Adoption

The establishing and disputing of fatherhood shall be determined according to the law of the country where the child was born (Article 65). The rights and duties of parents and children shall be governed by the personal law of the child or by the law of the country, which has a close connection with the relevant relationship and provides the most favorable regime for the child. Maintenance obligations arising from family relationships (except obligations of parents and children) shall be governed by the law of the country of the Yearbook of Private International Law, Volume 7 (2005)

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Anatoliy Dovgert place of residence of the creditor. If the creditor cannot obtain maintenance from the debtor according to the chosen law, the law of their joint personal law shall apply. If, according to the abovementioned rules, the creditor still cannot obtain maintenance, the law of the country where the debtor has his place of residence shall apply (Article 67). A claim for the maintenance of relatives and other members of the family (except parents and children) will not be satisfied if according to the law of the country of the debtor’s place of residence such an obligation for maintenance does not exist (Article 68). Adoption and its revocation are governed by the personal law of the child and the personal law of the adopter. If the adopters are a married couple, with different personal laws, the law that governs the legal consequences of the marriage shall apply. However, the personal law of the adopter determines the adopter’s capacity to be an adopter and the legal consequences of adoption and its termination, and the personal law of the child determines the supervision and listing of adopted children (Article 69).

D.

International Civil Procedure

The Law devotes three Sections (XI-XIII) to international civil procedure. They provide for the procedural rights of foreigners; jurisdiction, the execution of foreign court commissions; the recognition and enforcement of the foreign court judgments. The rules of these Sections are to be applied by all courts of general jurisdiction in Ukraine. Thus, unified rules of international civil procedure are provided to all courts of Ukraine, irrespective of which court considers the case: be it a court having a competence with respect to economic matters (an ‘economic court’) or another court of general jurisdiction. It must be noted that the Law has failed to undertake the complete codification of the legal rules of international civil procedure, as was proposed by the draft CC. It appears that the law on international civil procedure is now divided between three separate documents: the Law, the Civil Procedure Code of 2004 and the Economic Procedure Code. These acts also contain duplicate legal rules that cause collisions, because they have different wording. As regards procedural rights of foreigners, foreign persons (including natural persons, legal entities, States and international organizations) enjoy the same procedural rights as Ukrainian persons; they can apply to courts for the defense of their rights, freedoms and interests. The procedural legal capacity and capacity to act of foreigners is determined in accordance with the law of Ukraine. If required, a foreign legal entity should submit a document certifying its legal capacity to the court, which considers the case (Articles 73 and 74). According to Article 13 of the Law, the abovementioned certificate issued by the appropriate foreign State organ is subject to legalization in Ukraine, unless otherwise provided by a law or international treaty. As regards jurisdiction, Article 76 of this Law contains a non-exhaustive list of the possible grounds for jurisdiction of the Ukrainian courts. It should be noted 158

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Codification of Private International Law in Ukraine that the Law did not abolish the relevant chapter of the Economic Procedure Code, which provides specific rules of procedure in cases involving foreign persons. Therefore, these rules must not be applied, if they contradict the provisions of the Law. The Ukrainian courts (if the same case between the same parties, on the same subject and same grounds is not before foreign courts) may take and consider all cases with a foreign element: if the parties have chosen the jurisdiction by their agreement; if a defendant has a place of residence or place of staying or has movable or immovable property in the territory of Ukraine; or has a representative office of a legal entity or a branch in Ukraine; if the case is about compensation for harm inflicted in Ukraine; if the case is about maintenance or a disputing of fatherhood and the plaintiff has a place of residence in Ukraine; if the case is about compensation for harm and the plaintiff is a natural person with a place of residence in Ukraine or the defendant, being a legal entity, has its seat in Ukraine; if the case is about succession and the testator was a citizen of Ukraine or had his last place of residence in Ukraine; in some other cases defined by Article 76 of the Law, by other laws or international agreements. Jurisdiction is exclusive in cases involving a foreign element, if the disputed immovable property is located in the territory of Ukraine; if both parties have a place of residence in Ukraine in cases of relationships between parents and children; and if, in succession cases, the testator, a citizen of Ukraine, had a place of residence here. In the draft PIL, the abovementioned grounds were exhaustive. The Law adds six additional grounds (Article 77). As regards rogatory and other commissions of a foreign court, the Law contains references to the Civil Procedure Code and to international agreements. The logic of such references is questionable, because the provisions of the Law are general, addressed not only to all courts, but also to other authorities of Ukraine. In their turn, Ukrainian courts, in the manner prescribed by law, may forward commissions to foreign courts with a request to exercise certain procedural actions. The Law on PIL does not contain rules concerning the recognition and execution of foreign court judgments on civil and commercial disputes. In this respect, the Law refers to other legal sources, which is a great drawback of the Law.

E.

Conclusions

Notwithstanding the abovementioned and other disadvantages, the new Law is a considerable step towards modern conflict regulation. It includes such basic essentials of PIL as the autonomy of will, the closest connection, the exact application of foreign law, and broad international jurisdiction.

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REFORM OF PRIVATE INTERNATIONAL LAW IN LITHUANIA Valentinas MIKELENAS*

I.

Introduction A. Historical Overview B. Developments After 1990

II.

Notion of Private International Law A. The Position of Legal Doctrine B. Statutory Law and Court Practice

III.

Private International Law in the Civil Code of 2000 A. System of the Private International Law Rules in the Civil Code B. General Provisions C. Persons D. Family Relationships E. Contractual Relationships F. Extra-contractual Relationships G. Real Rights H. Intellectual Property I. Succession J. Other Areas

IV.

Private International Law Outside the Civil Code A. Labour Relationships B. Other Areas C. International Civil Procedure D. International Commercial Arbitration

V.

Conclusions

I.

Introduction

A.

Historical Overview

The problem of conflict of laws is as old as the systems of national law themselves.1 Therefore, the analysis of the rules and doctrines of the national conflict of laws must start from the very beginning of the formation of a national State and its national law system. With respect to Lithuania, this means that we must start from *

Professor, Faculty of Law, Vilnius University, Lithuania. NORTH P.M. / FAWCETT J.J., Cheshire and North’s Private International Law, 13th ed., London 1999, pp. 15-23. 1

Yearbook of Private International Law, Volume 7 (2005), pp. 161-181 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Valentinas Mikelenas the 13th century, when Lithuania became a European State. However, a detailed historical analysis of the Lithuanian legal system, including private international law, is not the subject of this article. Because the most important developments of private international law on the global scale took place in the 19th and 20th centuries, my historical introduction starts with the first part of the 20th century. Until 1918, the largest part of Lithuania was under the jurisdiction of Russia, and after the declaration of Independence on February 16, 1918, reception of former laws took place. Due to historical reasons, a reception of 4 different legal systems of civil law occurred in 1918. In the largest part of Lithuania, the Russian Civil Laws of 1830 were applied; in the Klaipeda region the German Bürgerliches Gesetzbuch (BGB) was applied; in the territory on the right side of the river Nemunas (called Uznemune) the French Code Napoléon was applied; and in the regions of Palanga and Zarasai the Restatement for Kursh Province of 1864 was applied. In 1922 the Faculty of Law of Kaunas Vytautas Magnus University was established. Private international law was among the 33 legal disciplines that were taught in the Faculty of Law. However, no Lithuanian textbooks on private international law were prepared during this period although one could mention the dissertation in the area of conflict of laws prepared in Paris by A. Vabalas.2 Due to the fact that four private law systems were applied in Lithuania, the main concern was the problem of internal rather than foreign conflicts of laws. The main rule that applied to resolve those internal conflicts was the principle of territoriality – the law applicable was the law valid in the territory where the dispute arose. Only a few rules could be mentioned in the area of international civil procedure. For example, according to Article 1273 of the Statute of Civil Procedure of 1864, foreign court judgements were recognised and enforced exclusively on the basis of an international treaty. In the period between 1918 and 1940, Lithuania entered into bilateral treaties in the area of legal co-operation with 32 foreign States.3 However, legal doctrine at that time criticised the need for an international treaty and argued in favour of broader recognition and enforcement of foreign judgements.4 During the period between 1940 and 1990, private international law lost its importance. This could be explained by the fact of total economic, political and social isolation of Lithuania from the Western countries during the Soviet period. During that period, the discipline of private international law was excluded from the curriculum of the Faculty of Law. For this reason, private international law remained a terra incognita for both law students and most practitioners until 1990. The Civil Code and the Code of Civil Procedure, both of 1964, provided only a 2

VABALAS A., Les conflits de lois interprovinciaux dans le Droit Privé Lituanien, Paris 1939. 3 Collection of International Treaties between Lithuania and Foreign States (in Lithuanian), Vol. I-II, Kaunas 1939. 4 MACYS Vl., Lectures on Civil Procedure (in Lithuanian), Kaunas, Law Faculty Publication 1924, pp. 35-36.

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Reform of Private International Law in Lithuania few rules of private international law. For example, Article 607 of the Civil Code established the principle of lex loci delicti commissi in respect of extracontractual obligations. Contractual obligations were governed by the lex loci contractus (Article 607). The judgments of foreign courts continued to be recognised and enforced only in the event of the existence of a relevant international treaty. Absolute immunity of the State in respect of foreign court jurisdiction was thus established (Article 481 of Code of Civil Procedure).

B.

Developments After 1990

The Declaration of the Independence of Lithuania on March 11, 1990 opened new opportunities for the development of a national legal system as well as a national legal doctrine, including private international law. In 1991 the private international law course was introduced into the curriculum as an obligatory discipline at the Faculty of Law of Vilnius University. In 1994 several important amendments were introduced into the Civil Code of 1964, including amendments to the rules on private international law. For example, some 20 Articles of the Civil Code containing conflict of laws rules were amended. The main result of these amendments was the establishment of the freedom of the parties to a contract to choose the law applicable to their contractual obligations. On January 17, 1995 Lithuania ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (entered into force on June 12, 1995).5 Some important changes took place in the court practice as well. For example, by its judgement of January 5, 1998, the Supreme Court abolished the absolute immunity of the State from the jurisdiction of the foreign court in the area of relationships governed by private law.6 On July 18, 2000, the new Civil Code of Lithuania was adopted. The rules on the conflict of laws were codified in Book One of the Civil Code. On June 19, 2001, the Parliament of Lithuania ratified the Statute of the Hague Conference on Private International Law.7 The Ministry of Justice was appointed as the Central Authority for relationships with the Permanent Bureau of the Hague Conference. In 2002, two other Codes important for private international law were adopted – the Code of Civil Procedure and the Labour Code. That is also the year when the reform of statutory law in the area of private international law was completed. Nevertheless, other important sources of private international law – court practice and legal doctrine – are still in the process of development.

5

Valstybes zinios, 1995, No 10-208. Civil Case of the Supreme Court, No 3K-1/1998. 7 Valstybes zinios, 2001, No 61-2180. 6

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Valentinas Mikelenas

II.

Notion of Private International Law

A.

The Position of Legal Doctrine

The private international law doctrine of Lithuania is still in the process of creation. The first textbook on Private International Law was published only in 2001.8 During the period between 1990 and 2005, only two dissertation theses in the area of private international law were submitted. These facts explain why the discussion regarding the notion of private international law is not very intensive. There are a few opinions regarding the nature of private international law. The prevailing position is that private international law is part of national law and consists of choiceof-law rules, i.e. private international law is a system of conflict of laws rules including questions of international jurisdiction and the recognition and enforcement of foreign court judgements and foreign arbitral awards.9 Thus, the legal rules of substantive law that deal with relationships that contain a foreign element are excluded from private international law. However, another theory should also be mentioned. According to this position, private international law comprises two kinds of rules – choice-of-law rules and substantive rules. For example, according to proponents of this doctrine, the Vienna Convention on Contracts for the International Sale of Goods of 1980 is part of private international law. A third position is that the procedural rules regarding international jurisdiction and recognition of foreign court judgements are part of civil procedure, not of private international law. The legal basis for such an opinion is the fact that procedural rules are included into the Code of Civil Procedure and there is no single codified legal act in the area of private international law.

B.

Statutory Law and Court Practice

The position of statutory law regarding the notion of private international law is quite clear. According to Part 3 of Article 1.10 of the Civil Code, a reference to an applicable foreign law means a reference to the national substantive law of the State concerned, not a reference to the private international law of that State. Thus, the Civil Code clearly establishes the difference between the substantive legal rules and choice-of-law rules. On the other hand, Part II of Book One of the Civil Code contains only choice-of-law rules, not substantive ones. These two facts support the conclusion that from the standpoint of statutory law, substantive legal rules are not part of private international law.

8 MIKELENAS V., An Introduction to Private International Law (in Lithuanian), Vilnius 2001. 9 MIKELENAS, ibid., pp. 28-30.

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Reform of Private International Law in Lithuania The position of court practice is still unclear. There are no reported court judgements in which the court has expressed its understanding of private international law.

III. Private International Law in the Civil Code of 2000 A.

System of the Private International Law Rules in the Civil Code

In 1992, the Working Group for the preparation of a new Civil Code was formed by the Ministry of Justice. The Working Group decided to incorporate private international rules into Book One, titled ‘General Provisions’, of the Civil Code. The main foreign sources used by the Working Group were Book Ten of the Civil Code of Quebec, the Italian Law on Private International Law of 1995, the Swiss Law on Private International Law of 1987, etc. Initially, the Working Group intended to incorporate all private international law rules into the Civil Code. However, later it was agreed to exclude from the Civil Code all procedural issues (international jurisdiction, recognition and enforcement of foreign court judgments, etc.) and leave them to be included in the new Code of Civil Procedure, which was also under preparation. As a separate Labour Code was being prepared at that time as well, the rules of conflict of laws in the area of labour relationships were also excluded from the Civil Code. Book One of the Civil Code contains Section II titled ‘Private International Law’. This Section consists of 53 Articles, which are divided into ten subsections. Subsection 1 deals with general provisions of conflict of laws rules while the other subsections establish rules on the applicable law in respect of various groups of legal relationships.

B.

General Provisions

The general rules on conflict of laws are provided by Articles 1.10 to 1.14 of the Civil Code. According to Part 1 of Article 1.10 of the Civil Code, there are three bases for the application of foreign law – international treaties of the Republic of Lithuania, agreements between the parties or the laws of the Republic of Lithuania. An applicable foreign law means a reference to the national substantive law of the State concerned, not a reference to the private international law of that State, except in cases provided for by the Civil Code (Part 3, Article 1.10). Part 2 of Article 1.10 introduces an important rule that a reference to foreign law includes all the provisions applicable to the facts of a case under that law. The application of a provision of foreign law may not be precluded solely because of the public law nature of the provision.

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Valentinas Mikelenas The Civil Code also provides special rules regarding the establishment of the applicable law in the event that the State has several legal systems. Where the legal system of the State comprises different legal systems based on the criteria of division into several territorial units, a reference to an applicable foreign law means a reference to the legal system of the relevant territory determined in accordance with the criteria established in the law of that foreign State. Where the legal system of the State comprises several legal systems applied to different categories of persons, the applicable legal system is determined in accordance with the criteria established in the law of that foreign State. However, where the above mentioned criteria may not be identified within the scope of the applicable foreign law, the law of the legal system to which the relevant case is most closely connected shall apply (Parts 4, 5 and 6, Article 1.10). The Civil Code also establishes three possible limitations to the application of foreign law. First, according to Part 1, Article 1.11 of the Civil Code, foreign law shall not be applied where its application might be inconsistent with the public order established by the Constitution of the Republic of Lithuania and other laws. In such instances, the civil laws of the Republic of Lithuania shall apply. However, there have not yet been any reported cases on the interpretation and application of this provision. Second, the mandatory legal rules of the Republic of Lithuania or those of any other State closely related with a dispute shall be applicable regardless of the fact that another foreign law has been agreed upon by the parties. In deciding on these issues, the court shall take into consideration the nature of these provisions, their purpose and the consequences of application or non-application thereof (Part 2, Article 1.11). Third, the applicable foreign law established in accordance with the conflict of laws of the Civil Code may not be applied where, in the light of all attendant circumstances of the case, it becomes evident that the foreign law concerned is clearly not pertinent to the case or part of it, with the case in question being more closely connected with the law of another State. However, this provision shall not apply where the applicable law is determined by the agreement of the parties (Part 3, Art. 1.11). The determination of the content of the applicable foreign law is regulated by Article 1.12 of the Civil Code. This Article establishes two main rules. First, in instances where the application of foreign law is established upon agreement between the parties, the content of foreign law is a question of fact. This means that the burden of proof in relation to the content of the applicable foreign law in accordance with its official interpretation, the practice of application and the legal doctrine in the relevant foreign State shall be imposed on the disputing party that refers to the foreign law. However, the disputing party may request that the court provide assistance in collecting information on the applicable foreign law. Second, in certain cases the application, interpretation and determination of the content of foreign law must be performed by the court ex officio as required

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C.

Persons

Articles 1.15 to 1.23 of the Civil Code establish different rules regarding the applicable law in respect of the legal status of both natural and legal persons. For the legal status of natural persons, the main connecting factor is the domicile of that natural person. For example, according to Article 1.15 of the Civil Code, the time of birth and death of foreign citizens or stateless persons shall be determined in accordance with the law of the State of the domicile of the foreign citizens or stateless persons at the moment of their birth or death. The domicile of a natural person is described as an expression of the person’s relationship with the State or part of its territory, i.e., the domicile of a natural person shall be that State or its part in which he or she permanently or ordinarily resides and which is regarded as the seat of his or her personal, social and economic interests (Article 2.12). Civil active capacity of foreign citizens or stateless persons shall be governed by the laws of their State of domicile. If such persons have no domicile or it cannot be determined with certainty, their legal active capacity shall be determined in accordance with the laws of the State within the territory of which these persons formed a relevant transaction. If a person has residences in more than one State, the 10

Judgement of the Supreme Court of November 19, 2003, Civil Case No 3K-31093/2003.

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Valentinas Mikelenas law of the State with which he or she is most closely connected shall apply. The ascertainment of incapacity or limited capacity of foreign citizens and stateless persons with permanent residence in the Republic of Lithuania shall be governed by the laws of the Republic of Lithuania (Article 1.16). Foreign citizens and stateless persons shall be acknowledged missing or declared dead in accordance with the law of the State of their last known domicile (Article 1.18). Civil capacity of foreign legal persons or any other organisations shall be governed by the laws of the State where these persons or organisations are established (Part 1, Article 1.19). According to Article 1.20 of the Civil Code, the applicable law in respect of civil capacity of a legal person shall determine the following: the legal nature (legal form and status) of the legal person or any other organization; the foundation, reorganization and liquidation of a legal person or any other organisation; the name of a legal person or any other organisation; the system and competence of the bodies of a legal person or any other organisation; the civil liability of a legal person or any other organisation; the power to represent a legal person or any other organisation; the legal effects of any violation of laws or the founding documents. If the procedure for creating a foreign legal person or any other organisation has been violated, its civil capacity shall be determined by the law of the State of its actual functioning. However, irrespective of the State of foundation of a legal person or any other organisation, the civil capacity of its subdivisions shall be determined in accordance with the law of the Republic of Lithuania if the head office, principal place of business or other activity of the subdivision is located in the Republic of Lithuania. Merger, association or transfer of the head office of legal persons or any other organisations, one of which is located in the Republic of Lithuania and the other in a foreign State, shall have effect on their civil capacity in the Republic of Lithuania only if implemented in conformity with the laws of both States concerned. Protection against infringement of the business name of a legal person or any other organisation registered in the Republic of Lithuania shall be governed by the law of the Republic of Lithuania. Representative offices and branches of foreign legal persons or any other organisations registered in the Republic of Lithuania shall be governed by the law of the Republic of Lithuania (Article 1.21). The rights and obligations (competence) of the persons acting on behalf of a representative office or a branch registered in the Republic of Lithuania shall be also determined by the law of the Republic of Lithuania. At least one of the persons acting on behalf of a representative office or a branch shall be bound to reside in the Republic of Lithuania. If the business of a legal person or any other organisation founded under foreign law is conducted in the Republic of Lithuania, the civil liability of the persons acting on behalf and in the interests of those legal persons or any other organisations shall be governed by the law of the Republic of Lithuania. However, a legal person or any other organisation may not claim for annulment or invalidity of a transaction formed by its body or any other representatives in excess of their 168

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D.

Family Relationships

Private international law rules regarding family relationships are established by Articles 1.24 to 1.36 of the Civil Code. Domicile is the main connecting factor used in these rules. However, other connecting factors, such as citizenship, residence, place of marriage, etc., are used as well. According to Article 1.24 of the Civil Code, a promise to marry and its legal effects shall be governed by the law of the State of domicile of the parties to the promise. Where the parties to the promise of marriage are domiciled in different States, the promise of marriage and its legal effects shall be governed by the law of the place where the promise was made, or by the law of the State of domicile of one of the parties, or by the law of the State of citizenship of one of the parties, whichever law is most closely related with the dispute. The Civil Registration Bureaus of the Republic of Lithuania shall have jurisdiction to perform the registration of marriage if either of the persons intending to marry is domiciled in the Republic of Lithuania or is a Lithuanian citizen at the time of the solemnization of the marriage. Capacity and other substantial conditions to contract marriage shall be governed by the law of the Republic of Lithuania (Article 1.25). However, capacity and other substantial conditions to contract marriage in respect of foreign citizens and stateless persons without Lithuanian domicile may be determined by the law of the State of domicile of both persons intending to marry if such marriage is recognized in the State of domicile of either of them. A marriage validly performed abroad shall be recognized in the Republic of Lithuania, except in cases where both spouses domiciled in the Republic of Lithuania celebrated the marriage abroad with the purpose of evading the grounds for nullity of their marriage under Lithuanian law. The procedure of contracting marriage shall be determined in accordance with the law of the State where the marriage is solemnized. A marriage shall also be recognized valid if the procedure of its contracting is in compliance with the requirements of the law of the State of domicile of either of the spouses or the law of the State of citizenship of either of them at the moment of solemnization of the marriage (Article 1.26). The property relationships between spouses in the event of the absence of a marriage contract shall be governed by the law of the State of domicile of the spouses. Where the spouses are domiciled in different States, the law of their common State of citizenship shall apply. Where the spouses have never had a common domicile and are citizens of different States, the law of the State where the marriage was solemnized shall apply. Yearbook of Private International Law, Volume 7 (2005)

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Valentinas Mikelenas In the event of a marriage contract, the law applicable to the contractual regime of matrimonial property shall be determined by the law of the State chosen by the spouses upon agreement. In this event, the spouses may choose the law of the State in which they are both domiciled or will be domiciled in future, or the law of the State in which the marriage was solemnized, or the law of the State of which one of the spouses is a citizen. The agreement of the spouses on the applicable law shall be valid if it is in compliance with the requirements of the law of the chosen State or the law of the State in which the agreement is made. However, the applicable law chosen by the spouses may be invoked against third persons only if they knew or should have known of that fact, i.e. if the third party knew or should have known the chosen law that governed the matrimonial property regime when the legal relationship commenced. The applicable law chosen by the spouses may be used in resolving a dispute related to real rights in immovable property only in the event that the requirements of public registration of this property and of the real rights therein, as determined by the law of the State where the property is located, were complied with. Any agreed change in the matrimonial property legal regime shall be governed by the law of the State of domicile of the spouses at the time of the change. If the spouses were domiciled in different States at the time in change of the matrimonial property legal regime, the applicable law shall be the law of their last common domicile, or failing that, the law governing matrimonial property relationships between the spouses (Article 1.28). Personal relations between spouses shall be governed by the law of the State of their domicile. However, personal relations between the spouses domiciled in different States shall be governed by the law of the State of their last common domicile. Where the spouses have never had a common domicile, the law applicable to their personal relations shall be the law of the State to which the personal relations between the spouses are the most closely related. Where it is not possible to determine the law with which the personal relations between the spouses is most closely related, the law of the State where the marriage was solemnized shall apply (Article 1.27). Separation and dissolution of marriage shall be governed by the law of the spouses’ State of domicile. If the spouses do not share a common domicile, the law of the State of their last common domicile shall apply, or failing that, the law of the State where the case is tried. If the law of the State of common citizenship of the spouses does not permit a dissolution of marriage or imposes special conditions for dissolution, the dissolution of marriage may be performed in accordance with the law of the Republic of Lithuania if one of the spouses is also a Lithuanian citizen or is domiciled in the Republic of Lithuania (Article 1.29). Filiation (ascertainment or challenge to paternity or maternity) shall be established either in accordance with the law of the State of the citizenship which the child acquired at his or her birth, or with the law of the State which is recognized as the domicile of the child at the time of his or her birth, or with the law of the State in which one of the child’s parents is domiciled, or with the law of the State the citizen of which one of the parents was at the time of the child’s birth, whichever is more beneficial to the child. The consequences of ascertainment of filiation shall be governed by the law of the State of domicile of the child. The parents’ (the 170

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Reform of Private International Law in Lithuania father’s or the mother’s) legal active capacity in acknowledging paternity (maternity) shall be governed by the law of the State of his or her domicile at the time of the acknowledgement. The form of the acknowledgement of paternity (maternity) shall be governed by the law of the State in which it is made or by the law of the State of the child’s domicile (Article 1.31). Personal and property relationships between the parents and the child shall be governed by the law of the State of the child’s domicile. If neither parent is domiciled in the State of the child’s domicile, while the child and the parents are citizens of the same State, the law of the State of their common citizenship shall apply (Article 1.32). Relationships of adoption shall be governed by the law of the State of the child’s domicile. Relations between the adopted person (the adoptee) on the one side, and the adopting persons (the adopters) and the relatives of the latter on the other side shall be governed by the law of the State of the adopters’ (the adopter’s) domicile (Article 1.33). It is important to mention that Lithuania is a party to the Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoption of 1993. Maintenance obligations within the family shall be governed by the Hague Convention on the Law Applicable to Maintenance Obligations of October 2, 1973 (Article 1.36). The law applicable to the protection of minors, their guardianship and curatorship shall be determined pursuant to the Hague Convention concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Minors of October 5, 1961 (Article 1.34). Guardianship and curatorship of an incapable family member who has reached majority shall be governed by the law of the State of the incapable person’s domicile (Article 1.35).

E.

Contractual Relationships

At the time the Civil Code was being prepared, Lithuania was not yet a State Member of the European Union. Nevertheless, the Rome Convention of 1980 was the main source for the choice-of-law rules in the area of contractual relationships. Article 1.37 of the Civil Code clearly establishes the principle of the freedom of the parties to agree on the applicable law. According to Part 1 of Article 1.37 of the Civil Code, contractual obligations shall be governed by the law agreed to by the parties. Such agreement of the parties may be expressed in the form of separate terms of the concluded contract or it may be determined in accordance with the factual circumstances of the case. The law of the State designated by the agreement of the contracting parties may be applied to the whole contract or only to a part or parts thereof. The law initially chosen may be changed by the agreement of the parties at any time. A change of law shall be retroactive to the time the contract was concluded though such change may not adversely affect the rights of third persons and shall not prejudice the formal validity of the contract. However, the choice of law Yearbook of Private International Law, Volume 7 (2005)

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Valentinas Mikelenas by the parties will not exclude the application of the mandatory legal norms of the Republic of Lithuania or those of any other State that cannot be changed or declined by the agreement of the parties. If no law applicable to a contractual obligation is designated by the agreement of the contracting parties, the law of the State with which the contractual obligation is most closely connected shall apply. The contractual obligation shall be presumed to be the most closely connected with the State in the territory of which: 1)

the party bound to perform the obligation most characteristic to the contract is domiciled or has its central administration. If the obligation is most closely connected with the law of the State where the business of the party to the obligation is located, the law of that State shall apply;

2)

immovable property is located, if the subject matter of the contract is the right in the immovable property or the right to its use;

3)

the principal place of business of a carrier at the time when the contract for carriage was made, is situated if the State of the principal business of the carrier is also the same State where the cargo was loaded, or the head office of the sender is located, or the place the cargo was dispatched from.

The Civil Code also establishes several special choice-of-law rules relating to specific contracts. For example, a contract of insurance shall be governed by the law of the State where the domicile or the place of business of the insurer is located; a contract of insurance for an immovable thing shall be governed by the law of the State where the thing is located. An arbitration agreement shall be governed by the law applicable to the principal contract, and in the case of invalidity of the principal contract, by the law of the place where the arbitration agreement was concluded, where it is impossible to identify the place of conclusion, the law of the State in which arbitration takes place shall apply. Contracts concluded on a stock exchange or by auction shall be governed by the law of the State in which the stock exchange or auction is located. Gifts shall be governed by the law of the State of the donor’s domicile or his or her business activities with the exception of contracts upon gifting of an immovable thing, as such contracts shall be governed by the law of the State where that immovable thing is located. However, a gift cannot be declared invalid as to its form if the form satisfies the requirements of the law of the State in which the act of gift was performed, or of the law of the State of the donor’s domicile or his or her place of business activities (Article 1.41). Special rules are also established in respect of consumer contracts. The parties to a consumer contract may also include a choice-of-law clause into the consumer contract. However, the right of the contracting parties to choose the law applicable to a contractual obligation shall not result in depriving or restricting the consumer’s right to protect his or her interests by the remedies determined by the provisions of the law of the State of his or her domicile if: 172

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the formation of the contract in the State of his or her domicile was preceded by a special offer or by advertising in that country;

2)

the consumer was induced by the other contracting party to travel to a foreign State for the purpose of forming the contract;

3)

an order was received by the other party or his or her agent from the consumer in the State of the latter’s domicile.

If the parties to a consumer contract have not chosen the applicable law, the law of the State in which the consumer is domiciled shall apply. However, the abovementioned provisions shall not apply to contracts for carriage or contracts for the supply of services where the services are to be supplied to the consumer exclusively in a country other than the Republic of Lithuania (Article 1.39). Article 1.38 of the Civil Code provides special conflict of laws rules related to the formal requirements of a contract. The general rule is that the form of a contract or any other transaction shall be governed by the law chosen by the parties. If no applicable law is designated by the agreement of the parties, the form of transaction shall be governed by the laws of the place where the parties entered into that transaction. A contract made by the parties residing in different States shall also be considered valid if its form conforms to the legal requirements in respect of the form of the relevant transaction established in the national law of at least one of those States. The form of transactions regarding an immovable thing or the rights therein shall be governed by the law of the State in which the immovable thing is located. The form of a power of attorney shall be governed by the law of the State in the territory of which it is issued. The time-limit of validity of a power of attorney, where it is not indicated in the document itself, the powers (rights and obligations) of the agent, the bilateral liability of the principal and the agent, and their liability in respect of third persons shall be governed by the law of the State in which the agent acts (Article 1.40). Relations connected with the assignment of a claim and the assumption of a debt shall be governed by the law chosen by the parties upon agreement. The choice of law made by the parties in the assignment of a claim may not be applied against the debtor without his or her consent to the application of the chosen law. In the event of the parties not having made a choice of the applicable law, relations connected with the assignment of a claim and the assumption of a debt shall be regulated by the law governing the principal obligation, the claim (the debt) arising from which is to be assigned (assumed). The form of the assignment of a claim or the assumption of a debt shall be governed by the law applicable to the contract of assignment or assumption (Article 1.42).

F.

Extra-contractual Relationships

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Valentinas Mikelenas was committed or any other tortious circumstances occurred, or by the law of the State in which the damage occurred. Conditions of civil liability, its extent, the person liable and the terms of release from civil liability shall be governed by the law applicable to the obligations resulting from the delictual obligations. Where it is impossible to determine the place where the act was committed or other circumstances occurred, or the State in which the damage appeared, the law of the State most closely connected with the case where damages are being sought shall apply. If both parties are domiciled in the same State, the law of that State shall be applicable to the claim for compensation. After damage has occurred, the parties may agree that the law applicable to liability shall be the law of the State where the case is being heard. An obligation to make reparation for damage caused by defective products shall be governed by the law of the State where the damage was incurred if the aggrieved person is domiciled in the same State, or it is the place of business of the person liable for the damage, or the products of inferior quality were acquired there by the aggrieved person. If the State of domicile of the aggrieved person coincides with the State of the place of business of the person liable for the damage caused, or with the State in which the defective product was acquired, the law of the State of the aggrieved person’s domicile shall apply. Where it is impossible to determine the applicable law in accordance with the criteria indicated in this paragraph, the law of the State where the business of the person liable for the damage is located shall apply, except in cases when the claim of the plaintiff is based on the law of the State in which the damage has occurred (Article 1.43). Special conflict of laws rules are also applicable in respect of specific torts. For example, claims resulting from a traffic accident shall be governed by the Hague Convention on the Law Applicable to Traffic Accidents of May 4, 1971 (Article 1.44). Claims for damages resulting from infringement of personal nonproperty rights committed by the mass media shall be governed, depending on the choice of the aggrieved person, by the law of the State where the aggrieved person is domiciled, or has his or her place of business, or where the infringement occurred, or by the law of the State where the person who caused the damage is domiciled or has his or her place of business. Response to the media (denial) shall be governed by the law of the State in which the publication appeared, or the radio or television program was broadcast (Article 1.45). Claims for reparation for damage resulting from an act of unfair competition shall be governed by the law of the State in whose market the negative effects of unfair competition occurred. If the act of unfair competition has affected exclusively the interests of an individual person, the applicable law shall be that of the State where the place of business of the aggrieved person is located (Article 1.46). Claims resulting from an unjustified enrichment shall be governed by the law of the State pursuant to the laws of which the legal sources for the obligation are determinable. Claims related to unjust enrichment resulting from unlawful actions shall be governed by the law of the State where such unlawful actions were performed. Where reception of a thing not due or unjust enrichment flows from the existing legal relationship between the parties, the law determining that legal relationship shall apply (Article 1.54). 174

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Real Rights

The Civil Code establishes different rules regarding immovable and movable property. According to Article 1.48 of the Civil Code, the ownership right and other real rights in an immovable thing shall be governed by the law of the State where the thing was situated at the moment of change of its legal status. The movable or immovable nature of the thing shall be determined by the law of the State where the thing is located. Official registration of the ownership right and other real rights shall be governed by the law of the State where the thing was located at the time of its registration. The ownership right and other real rights in a movable thing shall be governed by the law of the State where the thing was situated at the moment of change of its legal status. This rule has been applied by the courts in several cases regarding revendication of stolen cars. For example, according to the facts of one such case, a car was stolen in Germany and afterwards sold to a new owner. The new owner resold the car in Lithuania to a Lithuanian citizen. The German insurance company sued the new owner and requested revendication of the car. In deciding this case, the courts of first and appeal instances applied Lithuanian law. However, the Supreme Court ruled that the law of Germany should be applied because, at the moment of the first sale, the car was situated in Germany.11 The ownership right and other real rights in a thing in transit (cargo) shall be governed by the law of the State of destination of this thing. The parties may choose upon their agreement the law of the State of dispatch or the State of destination of the thing, or the law regulating the underlying legal transaction as the law applicable to the creation and termination of the rights to the movable property (Article 1.49). Nevertheless, the choice of the applicable law may not affect the rights of third persons. There are several special rules regarding specific real rights in movable property. For example, where a movable thing over which an encumbrance of right was validly established abroad is imported to the Republic of Lithuania, that encumbrance is acknowledged to be likewise valid in the Republic of Lithuania. Retention of title over a movable thing validly established abroad shall remain valid after that thing has been transported into the Republic of Lithuania, though such retention may not affect the rights of third persons in good faith. Retention of title over a movable thing in transit shall be governed by the law of the State of its place of destination (Article 1.50). The pledge of rights, securities and claims shall be governed by the law chosen by the parties, though the choice of law may not affect the rights of third persons. In the absence of the parties’ choice of law, the pledge of claims and securities shall be governed by the law of the State where the place of domicile or business of the secured creditor is located; the pledge of other rights shall be governed by the law applicable to such rights (Article 1.51). 11

Judgement of the Supreme Court of February 18, 2004, Civil Case No 3K3113/2004.

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Intellectual Property

Due to the fact that the majority of intellectual property rights are governed by international instruments, the Civil Code establishes only a few conflict of laws rules in this area. According to Article 1.52, in the absence of the parties’ choice of applicable law, contracts related to intellectual property rights shall be governed by the law of the State where the party transferring the intellectual property rights or granting the use thereof has his or her domicile or place of business. Contracts between an employer and an employee regarding the rights to intellectual property created by the employee in the course of his or her employment shall be governed by the law applicable to employment contracts. Intellectual property rights and their protection shall be governed by the law of the State where the protection of the intellectual property rights is sought. In the event of infringement of intellectual property rights, the parties may agree after the occurrence of the damage that the applicable law shall be the law of the State where the court hearing the case concerned is located (Article 1.53).

I.

Succession

Legal relationships of succession, with the exception of those related to inheritance of immovable things, shall be governed by the law of the State of domicile of the testator at the time of his or her death. Relations of succession in respect of an immovable thing shall be governed by the law of the State where the immovable thing is located. Where succession opens by the death of a citizen of the Republic of Lithuania, irrespective of the law applicable, his or her heirs who reside in the Republic of Lithuania and are in possession of the right to the mandatory share of the succession shall inherit this part in accordance with the law of the Republic of Lithuania, except the immovable things. Where in accordance with the law applicable to relations of succession, a property cannot devolve to a foreign State, and where no other heir thereto is known and the property is located in Lithuania, that property shall be devolved to the ownership of the Republic of Lithuania (Article 1.62 of the Civil Code). Special rules are applied in respect of wills. The capacity of making, amending or revoking a will shall be governed by the law of the State of the testator’s domicile. Where a person has no domicile or it is impossible to be determined, the capacity of such person to make a will shall be governed by the law of the State were the will is made. The form of a will, its amendment or revocation shall be governed by the law of the State where these acts are performed. A will as well as its amendment or revocation shall also be valid in regard of their form if this form is in compliance with the requirements of the law of the State of the testator’s domicile, or those of the laws of the State of the testator’s citizenship at the time when the relevant acts were performed, or the law of the State of the testator’s residence at the time when those acts were performed or at the time of his or her death. A will in respect of an immovable thing, as well as any amendment or revocation thereof shall be valid if the form of the acts concerned is in compliance with 176

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J.

Other Areas

The Civil Code provides several other conflict of laws rules in respect of various specific relationships. For example, questions of prescription (prescription under Lithuanian law is a matter of substantive, not of procedural law) shall be governed by the law applicable to rights and obligations of the participants in the relevant civil legal relationship (Article 1.59); unilateral transactions shall be governed by the law of the State where they were formed (Article 1.55); currency in which payments are to be made shall be determined by the law of the State where the payment must be made, unless the parties have agreed on the currency in which the payments are to be made. In all other cases, currency shall be regulated by the law of the State which issued the currency (Article 1.57).

IV. Private International Law Outside the Civil Code A.

Labour Relationships

Labour relationships are regulated by the separate Labour Code of 2002.12 Private international law rules in the area of labour relationships are established by Articles 5 to 7 of the Labour Code. According to Article 5 of the Labour Code, labour laws and other regulatory acts are to be applied to labour relations in the territory of the Republic of Lithuania regardless of whether the person is employed in Lithuania or has been posted by his or her employer abroad. Labour relations which arise when persons are employed on board of ships or on board of aircraft shall be regulated by the labour laws and other regulatory acts of the Republic of Lithuania when the ships are flying the national flag of the Republic of Lithuania or the aircraft is marked with the symbols of Lithuania. The labour laws or other regulations of the Republic of Lithuania shall be applied to persons working on other means of transport if the employers who own the means of transport are domiciled within the jurisdiction of the Republic of Lithuania. Where the employer is a foreign State, the Government or an administrative unit or a unit operating as a diplomatic mission, foreign organisation or person, the laws and other regulatory acts apply to labour relations with the residents of the Republic of Lithuania to the extent that they do not violate diplomatic immunity. The labour laws and other regulatory acts of the Republic of Lithuania are not applied to the labour relations that occur between foreign employers and

12

Valstybes zinios, 2002, No 64-2569.

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Valentinas Mikelenas employees when the employees are posted by the employer in the territory of the Republic of Lithuania. Parties to an employment contract may choose the law applicable both to the entire employment contract and to a part thereof. The choice must be explicit or implicit from the conditions of the employment contract or other circumstances. The choice by the parties of the applicable law shall not invalidate in the sphere of employee protection the mandatory legal provisions of the State whose laws would apply in the absence of an agreement on the applicable law concluded between the parties (Article 7 of the Labour Code). However, the mandatory provisions of the labour law of the Republic of Lithuania shall be applied regardless of the fact that the parties have chosen to apply foreign law (Article 6 of the Labour Code). In case of failure by the parties to choose the applicable law by agreement, the applicable law shall be chosen on the basis of the following principles: 1)

in case of permanent employment in one State, the labour law of that State shall be applied irrespective of the employee’s temporary employment in another State;

2)

if the employee has no permanent employment in any State, the labour law of the State where the employer has his or her principal place of business (headquarters) shall be applied;

3)

if all the existing circumstances allow to conclude that labour relations are connected to a greater extent with a State other than the one whose law is applicable according to the above mentioned principles, the labour law of that other State shall be applied.

B.

Other Areas

Some particular rules of private international law can be found in other special laws as well. For example, the Law on Commercial Maritime Shipping of September 12, 1996 provides several private international rules for commercial maritime shipping.13 According to Article 5 of this Law, the right of ownership to the ship sailing beyond the territorial boundaries of the Republic of Lithuania are determined on the basis of the laws of the State whose flag the ship is sailing under. The right of ownership to the ship being built are determined on the basis of the laws of the State where the ship is being built unless the ship-building contract provides otherwise. Relations with regard to the carriage of goods by sea are regulated by the laws referred to by the parties to the contract of carriage of goods by sea. Unless the parties to the contract agree otherwise, the relations relating to the carriage of goods by sea are regulated by the laws of the carrier’s State. Relations with regard to the carriage of passengers and luggage by sea are to be governed by the laws of the carrier’s State, unless the parties agree otherwise. Relations regarding 13

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Reform of Private International Law in Lithuania the chartering of a ship are regulated by the laws of the ship owner’s country, whereas relations with regard to the contract of lease with option to purchase are to be regulated by the laws of the lessor’s country, unless the parties agree otherwise.

C.

International Civil Procedure

Procedural questions of private international law are regulated by the Code of Civil Procedure of 2002.14 Special rules on international civil procedure are established by Part VII of this Code titled ‘International Civil Procedure’ (Articles 780 to 817). Questions of international jurisdiction are regulated by Articles 781 to 787 of the Code of Civil Procedure and bilateral international treaties. Such treaties have been concluded with Armenia, Azerbaijan, Belarus, China, Estonia, Moldova, Latvia, Poland, Russia, Turkey, Ukraine, and Uzbekistan. In the absence of a relevant international treaty, the rules of international jurisdiction established by the Code of Civil Procedure apply. The Code of Civil Procedure establishes an extremely wide jurisdiction for Lithuanian courts. First, the courts of Lithuania have jurisdiction if at the moment when a claim is filed, the defendant is in Lithuania or has a fixed place of residence therein. A claim against a defendant who has no place of residence in the Republic of Lithuania may be lodged according to the situs of his or her property or the last known place of residence in the Republic of Lithuania (Art. 783, CCP). Second, the courts of Lithuania have jurisdiction if the defendant is the owner of property located in Lithuania. Third, the courts of Lithuania have jurisdiction if the subject matter of a dispute is a thing or legacy located in Lithuania, or an obligation that has arisen or should be performed in Lithuania. Commercial entities may agree in writing to exclude the jurisdiction of Lithuanian courts in disputes arising out of contractual legal relations if such agreement does not contradict the law of the country whose courts are designated by the parties. The said agreement is not allowed in civil cases falling under the exclusive jurisdiction of courts of the Republic of Lithuania. Agreements on jurisdiction are observed by the court only at the request of the party concerned (Article 788 of the Code of Civil Procedure). Several categories of civil cases provided by Articles 784 to 786 of the Code of Civil Procedure are under the exclusive jurisdiction of Lithuanian courts, e.g., disputes among spouses where both spouses are permanent residents of the Republic of Lithuania; cases related to an immovable thing located in the Republic of Lithuania, etc. In the event of an international treaty, the procedure and grounds for the recognition and enforcement of foreign judgments are established by the international treaty itself. Bilateral treaties of Lithuania provide that judgments rendered in one of the Contracting States shall be recognized in the other Contracting State without a re-examination of the case. However, the defendant has the right to prove the existence of the grounds for non-recognition provided for by a bilateral treaty. 14

Valstybes zinios, 2002, No 36-1340.

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Valentinas Mikelenas In any case, the court must ex officio ascertain whether recognition of a foreign judgment would contradict the public order of Lithuania. If recognition of a foreign judgment violates the public order of Lithuania, such recognition must be refused. In the absence of a relevant international treaty, the recognition and enforcement of a foreign court judgement is also possible. No requirement of reciprocity is established in Lithuanian law for such eventuality. According to Article 810 of the Code of Civil Procedure, recognition of a foreign court judgement could be refused only in the following cases: -

the judgment is not res judicata under the laws of the State where the judgment was passed;

-

the case was under the exclusive jurisdiction of courts of the Republic of Lithuania or a third State in accordance with provisions of the law of the Republic of Lithuania or an international treaty;

-

a party absent in the proceedings was not duly informed about the institution of civil proceedings nor provided with an opportunity to exercise procedural remedies or proper representation (if the party was legally incapable) during the proceedings;

-

a judgment of a foreign court, the recognition of which is sought, is incompatible with the judgment passed by a court of the Republic of Lithuania in the proceedings between the same parties;

-

the foreign court judgment is against the public order determined in the Constitution of the Republic of Lithuania;

-

a court of a foreign State resolved matters on legal capacity, legal representation, family property or inheritance of a citizen of the Republic of Lithuania, where such a judgment is against the international private law of the Republic of Lithuania, except in cases where Lithuanian courts would have passed the same judgment in the proceedings.

D.

International Commercial Arbitration

As it was mentioned above, on June 12, 1995 Lithuania became a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. The Lithuanian Law on Commercial Arbitration of 1996 was prepared on the basis of UNCITRAL Model Law on International Commercial Arbitration. In general, the same rules of procedure are applied in respect of domestic and international commercial arbitration. There are a few important court judgements in the area of international arbitration. For example, in one civil case, the Supreme Court ruled that in decid-

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Reform of Private International Law in Lithuania ing on the recognition of foreign arbitral awards, the notion of ‘public order’ must be interpreted not as national but as international public order.15

V.

Conclusions

After having been neglected for a period of about fifty years, private international law has been ‘rediscovered’ in Lithuania within the last fifteen years. Private international law is becoming an increasingly important area of law in today’s Lithuania. Statutory reform of private international law was completed in 2002 after a decade of preparatory work, in the course of which the new Civil Code, the Code of Civil Procedure and the Labour Code were adopted. A distinguishing feature of this reform is the absence of a single legal act which contains all of the rules of private international law. A lack of vision of the unity of the national legal system resulted in the rules of private international law being incorporated into several legal acts. The majority of conflict of laws rules is found in the Civil Code. At the same time, special conflict of laws rules are established in the Labour Code and in some other separate laws. Questions of international jurisdiction and recognition are regulated by the Code of Civil Procedure. This fragmentation of private international law rules is the weakest part of the reform. However, the statutory reform is only the first step in the development of private international law. The next steps of the reform are the interpretation and application of statutory rules by the courts and the development of the doctrine of private international law. The first positive results of the developments in these areas support the conclusion that future contacts with private international law for Lithuanian judges and lawyers will no longer be a Sprung ins Dunkel.

15

Judgement of the Supreme Court of November 17, 2004, Civil Case No 3K-3-

612/2004.

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PRIVATE INTERNATIONAL LAW OF SUCCESSION IN SOUTH AFRICA Jan L. NEELS*

I. II. III.

Introduction Intestate Succession Testate Succession A. Testamentary Capacity B. Formal Validity of Wills 1. Introduction 2. Applicability of Section 3bis 3. The Common-Law Rules 4. The Basic Statutory Rule 5. Will Executed on Board of a Vessel or Aircraft 6. Power of Appointment 7. Revocation of a Previous Will 8. Requirements for Witnesses; Extra Formalities Required for Certain Testators 9. Foreign Internal Conflicts Law and Absence thereof 10. Common Law Remains Applicable 11. Changes in Foreign Legal System C. Interpretation of Wills D. Inherent Validity and Effect of Wills E. Capacity to Inherit F. Revocation of Wills

I.

Introduction

In South Africa there is no general code of private international law; indeed, there are not many statutory provisions that are relevant for private international law. Thus often the common law applies. The common law of South Africa in the field of private international law is built upon Roman-Dutch foundations with significant influence of English law.1 *

Professor of Private International Law and Director of the Institute for Private International Law in Africa, University of Johannesburg. 1 See FORSYTH C.F., Private International Law. The Modern Roman-Dutch Law including the Jurisdiction of the High Courts, Lansdowne 2003, p. 16-17; SCHOEMAN E., ‘South Africa’ in: VERSCHRAEGEN B. (ed.), Private International Law in: BLANPAIN R. (gen. ed.), International Encyclopaedia of Laws, The Hague (loose-leaf) 2001, par. 1-3; SCHOEMAN E., ‘The South African Conflict Rule for Proprietary Consequences of Marriage: Yearbook of Private International Law, Volume 7 (2005), pp. 183-203 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Jan L. Neels This article deals with choice of law pertaining to succession in South African private international law. It can only attempt to be a short introduction to the subject and for detailed information the reader is referred to the standard texts on South African private international law.2 Only the specific rules and principles relating to succession will be discussed. The general doctrines of private international law affect all its components, including international succession. The exclusion of foreign law due to public policy,3 classification,4 renvoi5 and the incidental question,6 however, fall outside the scope of this article.7 Learning from the German Experience’, in: Tydskrif vir die Suid-Afrikaanse Reg / Journal of South African Law (‘TSAR’) 2004, p. 115 et seq., at 117-119. The Roman-Dutch conflicts authors, however, had a profound influence on many other legal systems, especially English law. See FORSYTH C.F. (note 1: 2003), pp. 16 and 43; FORSYTH C.F., ‘The Provenance and Future of Private International Law in Southern Africa’, in: TSAR 2002, p. 60 et seq., at 6264. Take note that South Africa is a party to the Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions (1961) but not to any of the other Hague conventions in the field of succession: Hague Convention Concerning the International Administration of the Estates of Deceased Persons (1973); Hague Convention on the Law Applicable to Trusts and on their Recognition (1985); Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons (1989). South Africa is also not a party to the UNIDROIT Convention Providing a Uniform Law on the Form of an International Will (Washington) (1973). 2 The following are the standard texts on South African private international law and they contain full references to case law and other authority: EDWARDS A.B. / KAHN E. ‘Conflict of Laws’ in: The Law of South Africa, vol. 2, part 2, Lansdowne 2003; FORSYTH C.F. (note 1: 2003); SCHOEMAN E. (note 1: 2001). In addition, reference must be made to the following specialised chapters: KAHN E, ‘Conflict of Laws’ in: CORBETT M.M. / HOFMEYR G.Y.S. / KAHN E., The Law of Succession in South Africa, Lansdowne 2001, at 579, and ‘Jurisdiction and Conflict of Laws’ in: CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E., Honorè’s The South African Law of Trusts, Lansdowne 2002, p. 646. Also see VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B., Die Suid-Afrikaanse Erfreg, Pretoria 1990, pp. 113-114 and 576-584; SCHULZE H.C.A.W., ‘Conflicting Laws of Conflict in Cases of International Succession’, in: The Comparative and International Law Journal of Southern Africa 2001, p. 34 et seq.; MEYEROWITZ D., The Law and Practice of Administration of Estates and Estate Duty, Cape Town 2004, ch 10; KAHN E., ‘Jurisdiction and Conflict of Laws in the South African Law of Husband and Wife’ in: HAHLO H.R., The South African Law of Husband and Wife, Cape Town 1975, pp. 529-674. 3 See EDWARDS A.B. / KAHN E. (note 2), par. 292-295; FORSYTH C.F. (note 1: 2003), pp. 13-15 and 109-115; KAHN E. (note 2: 1975), pp. 583-584; KAHN E. (note 2: 2001), pp. 609-612; SCHOEMAN E. (note 1: 2001), par. 73-75; MALAN F.R. / NEELS J.L. / O’BRIEN P.H. / BOSHOFF A., ‘Transnational Litigation in South African Law’ (part 2): in: TSAR 1995, p. 282 et seq., at 297-299; NEELS J.L., ‘Geoorloofdheid van ‘n Kontrak en Openbare Beleid in die Internasionale Privaatreg’, in: TSAR 1991, p. 694 et seq. 4 See EDWARDS A.B. / KAHN E. (note 2), par. 284-285; FORSYTH C.F. (note 1: 2003), pp. 68-81; KAHN E. (note 2: 1975), pp. 578-580; KAHN E. (note 2: 2001), pp. 591-599; SCHOEMAN E. (note 1: 2001), par. 58-62; BENNETT T.W., ‘Cumulation and Gap: Are They Systemic Defects in the Conflict of Laws?’, in: South African Law Journal (‘SALJ’) 1988, p. 444 et seq.; FORSYTH C.F., ‘Enforcement of Arbitral Awards, Choice of Law in Contract,

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Private International Law of Succession in South Africa The methodology used in South African private international law is primarily the orthodox multilateralism based on the theory of the German author von Savigny.8 As is common knowledge, this methodology utilises connecting factors to link a certain factual situation to a particular legal system. According to South African private international law, the content of a connecting factor must be established by the lex fori.9 Domicile is an important connecting factor in South African private international law in general and in the South African private international law of succession in particular. A person’s domicile as it is today has to be determined acCharacterization and a New Attitude to Private International Law’, in: SALJ 1987, p. 4 et seq.; FORSYTH C.F. (note 1: 2002), pp. 64-66; KAHN E. ‘Ruminations of a Quondam Wouldbe South African Conflicts Lawyer’, in: TSAR 2002, p. 125 et seq., at 126; MALAN F.R. / NEELS J.L. / O’BRIEN P.H. / BOSHOFF A. (note 3), pp. 291-297; NEELS J.L. ‘Via Media Classification in Private International Law’, Tydskrif vir Hedendaagse Romeins-Hollandse Reg / Journal for Contemporary Roman-Dutch Law 1994, p. 687 et seq.; NEELS J.L. ‘Die Voorlopige Regsoordeel in die Internasionale Privaatreg’, in: Stellenbosch Law Review 1994, p. 288; NEELS J.L. ‘Classification as an Argumentative Device in International Family Law’, in: SALJ 2003, p. 883 et seq.; SCHULZE H.C.A.W., ‘Formalistic and Discretionary Approaches to Characterization in Private International Law’, in: SALJ 2006 (to be published); TURPIN C.C., ‘Characterization and Policy in the Conflict of Laws’, in: Acta Juridica 1959, p. 222 et seq. 5 See EDWARDS A.B. / KAHN E. (note 2), par. 286; FORSYTH C.F. (note 1: 2003), pp. 81-92; SCHOEMAN E. (note 1: 2001), par. 68-72; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), pp. 581-582; KAHN E. (note 2: 1975), p. 580; KAHN E. (note 2: 2001), pp. 602-607; KAHN E. (note 4), pp. 126-127; NEELS J.L., ‘Die Gedeeltelike Uitsluiting van Renvoi in Resente Wetgewing’, in: TSAR 1992, p. 739. 6 See EDWARDS A.B. / KAHN E. (note 2), par. 287; FORSYTH C.F. (note 1: 2003), pp. 92-95; KAHN E. (note 2: 1975), pp. 580-581; KAHN E. (note 2: 2001), pp. 607-609; SCHOEMAN E. (note 1: 2001), pp. 63-67; CORBETT M.M., ‘The Zambian Trust: An Opinion Revisited’, in: TSAR 1993, p. 1 et seq., at 12-14; NEELS J.L., ‘Die Onegte Insidentele Vraag in ‘n Internasionaal-erfregtelike Geskil’, in: TSAR 1993, p. 760 et seq. 7 See on the administration of estates in an international context: EDWARDS A.B. / KAHN E. (note 2), par. 321; FORSYTH C.F. (note 1: 2003), pp. 253-255 and 382-384; KAHN E. (note 2: 2001), pp. 588-591; MEYEROWITZ D. (note 2), ch 10; Nusca v Nusca 1995 4 SA 813 (T). See CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), pp. 669-673 on the legal system applicable to the administration of a trust. South Africa is not a party to the Hague Convention concerning the International Administration of the Estates of Deceased Persons (1973). 8 VON SAVIGNY F.C., System des heutigen römischen Rechts, vol 8., Berlin 1849. See FORSYTH C.F. (note 1: 2003), pp. 6-8; SCHOEMAN E. (note 1: 2001), par. 14-24. 9 Ex Parte Jones: In re Jones v Jones 1984 4 SA 725 (W); Chinatex Oriental Trading Co v Erskine 1998 4 SA 1087 (C) 1093H; EDWARDS A.B. / KAHN E. (note 2), par. 284; FORSYTH C.F. (note 1: 2003), pp. 10-11 and 125-127; KAHN E. (note 2: 1975), p. 580; KAHN E. (note 2: 2001), p. 599; SCHOEMAN E. (note 1: 2001), par. 28. But the connecting factor of nationality or citizenship should rather be determined by the law of the country of nationality: FORSYTH C.F. (note 1: 2003), p. 11; SCHOEMAN E. (note 1: 2001), par. 26. Also see section 13 (1)(a) of the Divorce Act 70 of 1979.

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Jan L. Neels cording to the provisions of the Domicile Act 3 of 1992.10 The act entered into force on 1 August 1992 and does not have retrospective effect.11 If, for instance, the testator’s domicile at the time of execution of his or her will during 1985 has to be determined, the common-law rules in this regard apply.12

II.

Intestate Succession

Intestate succession to movables is governed by the law of the country of the deceased’s last domicile (the lex ultimi domicilii). Intestate succession to immovables is governed by the law of the country where the immovable property is situated (the lex situs). These rules apply to complete and to partial intestate succession.13 Example:

E died leaving a will in which she bequeathed her car to A. E was domiciled in Kenya when she died. She had a car, furniture and immovable property in South Africa. In terms of which legal system will her furniture and immovable property in South Africa be distributed?

Answer:

The furniture in terms of Kenyan law (the lex ultimi domicilii) and her immovable property in terms of South African law (the lex situs).

10

The most important provisions of the Domicile Act 3 of 1992 are the following: ‘Every person who is over the age of 18 years... shall be competent to acquire a domicile of choice, regardless of such a person’s sex or marital status’ (s 1(1)). ‘A domicile of choice shall be acquired by a person when he is lawfully present at a particular place and has the intention to settle there for an indefinite period’ (s 1(2)). A child is ‘domiciled at the place with which he is most closely connected’ (s 2(1)). ‘If, in the normal course of events, a child has his home with his parents or with one of them, it shall be presumed, unless the contrary is shown, that the parental home concerned is the child’s domicile’ (s 2(2)). ‘No person shall lose his domicile until he has acquired another domicile, whether by choice or by operation of law’ (s 3(1)). Section 4 excludes renvoi when domicile is a connecting factor (also see note 53 below). Section 5 determines that the acquisition or loss of a person’s domicile shall be determined by a court on a balance of probabilities. 11 See s 8(2). 12 For a discussion of the law of domicile (in private international law context), see EDWARDS A.B. / KAHN E. (note 2), par. 296-304; FORSYTH C.F. (note 1: 2003), pp. 118-155; SCHOEMAN E. (note 1: 2001), par. 27-38. 13 EDWARDS A.B. / KAHN E. (note 2), par. 319; FORSYTH C.F. (note 1: 2003), pp. 366-368; KAHN E. (note 2: 2001), pp. 614-615; SCHOEMAN E. (note 1: 2001) par. 226227; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), pp. 113-114. Also see COLLINS L. (gen. ed.), Dicey and Morris on the Conflict of Laws, vol 2, London 2000, pp. 1026-1029; NORTH P. / FAWCETT J.J., Cheshire and North’s Private International Law, London 1999, pp. 985 and 999-1000.

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III. Testate Succession Formal validity of wills in private international law is primarily governed by section 3bis of the Wills Act 7 of 1953. The other aspects of private international law of succession are governed by the common law.

A.

Testamentary Capacity

Testamentary capacity (for instance the competent age to be able to execute a will) will probably be governed by the lex domicilii at the time of execution of the will as far as movables are concerned. The lex situs governs in respect of immovables.14 Requirements for testators of a certain age, nationality or other personal qualifications to observe special formalities in the execution of a will are for purposes of section 3bis of the Wills Act 7 of 1953 to be regarded as formal requirements.15 The (other) provisions of section 3bis are therefore applicable to this type of stipulation.

B.

Formal Validity of Wills

1.

Introduction

The law in this regard is primarily found in section 3bis of the Wills Act 7 of 1953, which is based on the Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions of 1961.16 14 EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), pp. 374-376; KAHN E. (note 2: 2001), pp. 615-617; SCHOEMAN E. (note 1: 2001), par. 228; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 582. Also see Cheshire and North (note 13), pp. 986-987 and 1001; Dicey and Morris (note 13), pp. 1029-1030. CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), p. 665 add in respect of movables: ‘though possibly capacity by the [legal system of the country of] domicile at death is also sufficient, given the legal policy of upholding the validity of wills where possible (favor testamenti)’. 15 S 3bis (2). Also see paragraph III.B.8. Cf a 5 of the Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions of 1961. 16 The text is available at . The convention entered into force on 5 January 1964. S 3bis was inserted in the Wills Act 7 of 1953 by s 2 of the Wills Amendment Act 41 of 1965. An international convention becomes law in South Africa only when incorporated in an act of parliament (see s 231 (4) of the Constitution of the Republic of South Africa, 1996). S 3bis does not literally follow the wording of the convention but it ‘agrees in major principles and in considerable detail’ with the corresponding provisions in the Wills Act, 1963 of the United Kingdom (KAHN E., ‘Conflict of Laws’, in: Annual Survey of South African Law 1965, p. 475); see for a discussion of the relevant provisions of the English Wills Act: Cheshire and North (note 13), pp. 988-991 and 1001; Dicey and Morris (note 13), pp. 1031-1036. (References to the corresponding provisions in the convention will

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Applicability of Section 3bis

In terms of section 3bis (4), the (other) rules of section 3bis are not applicable in two cases: (1) if the deceased was a South African citizen who executed a will not in written form (e.g. an oral will or one on video or DVD);17 and (2) if the deceased died before 4 December 1970 (the date when section 3bis entered into force).18 In both these cases the common law applies.

3.

The Common-Law Rules

The common-law rules are the following: The formal validity of a will in respect of movables is governed by the lex loci actus (the law of the place where the will was executed) or the lex domicilii (the law of domicile of the deceased).19 It is uncertain whether the lex domicilii is to be determined at the time of execution of the will or at the time of death.20 The modern authors suggest that both would suffice.21 The formal validity of a will in respect of immovables is governed by the lex situs or the lex loci actus22 and possibly the lex domicilii.23 In both cases (movables and

be given in the footnotes.) A South African court may nevertheless refer to the convention in the interpretation of s 3bis: see Tomlinson v Zwirchmayr 1998 2 SA 840 (T) 847-850. The rules and principles in a 4 (the convention applies to testamentary dispositions made by two or more persons in one document), 6 (the convention is not based on reciprocity and its application does not depend on whether the relevant person was a national of a contracting state) and 7 (ordre public) of the convention are not expressly found in s 3bis but are otherwise in conformity with South African private international law (a 7) or follow from the other provisions of s 3bis (a 4 and 6). South Africa made reservations in terms of a 9, 10 and 12 of the convention. 17 South Africa made a reservation in terms of a 10 of the convention (but not in terms of a 11). S 3bis (4), however, refers to a South African citizen whilst a 10 of the convention refers to a national possessing no other nationality. 18 Cf a 8 and 13 of the convention. 19 CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), p. 665; EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), pp. 369-371; KAHN E. (note 2: 2001), pp. 618-620; MEYEROWITZ D. (note 2), pp. 4-12; SCHOEMAN E. (note 1: 2001), par. 236; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 577. 20 EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), pp. 370-371; KAHN E. (note 2: 2001), p. 619; MEYEROWITZ D. (note 2), pp. 4-12; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 577. 21 CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), p. 665; FORSYTH C.F. (note 1: 2003), p. 371; KAHN E. (note 2: 2001), p. 619; SCHOEMAN E. (note 1: 2001), par. 236. Cf VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 577. 22 EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), p. 370; KAHN E. (note 2: 2001), p. 620; MEYEROWITZ (note 2), pp. 4-12; SCHOEMAN E. (note 1: 2001), par. 236; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 577.

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Private International Law of Succession in South Africa immovables) the will has to comply with the formalities of only one of the mentioned legal systems to be formally valid in terms of South African (private international) law.

4.

The Basic Statutory Rule

In all other cases (that is: where the two circumstances referred to in section 3bis (4) are not present) wills have to comply with the formalities of at least one of the following legal systems24 to be valid in terms of South African (private international) law:25 -

the lex loci actus; the lex domicilii at the time of execution of the will; the lex ultimi domicilii; the law of habitual residence26 at the time of execution of the will; the law of habitual residence at the time of death; the lex patriae (the law of nationality or citizenship) at the time of execution of the will;27 the lex ultimae patriae (the law of nationality or citizenship at the time of death).28

23 See VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 577, FORSYTH C.F. (note 1: 2003), p. 370 note 201 and EDWARDS A.B. / KAHN E. (note 2), par. 320. It is suggested that both the lex domicilii at execution and at death would suffice: cf the sources in note 21. 24 S 3bis, as amended by s 6 of the Law of Succession Amendment Act 43 of 1992, refers to the internal law of these systems (as does the convention in a 1). S 1 of the Wills Act 7 of 1953 defines ‘internal law’ as ‘the law of a state or territory, excluding the rules of the international private law of that state or territory’. The definition was inserted by s 2(c) of the Law of Succession Amendment Act 43 of 1992. These provisions will often, but not always, exclude the application of renvoi: see note 53 below and on renvoi in general the sources in note 5 above. 25 See s 3bis (1)(a)(i)-(iii). Cf a 1 of the convention. 26 On the concepts of habitual residence, residence simpliciter and ordinary residence, see SCHOEMAN E. (note 1: 2001), par. 39-52. Also see KAHN E. (note 2: 2001), p. 622. 27 In the case of dual citizenship, this will probably include both the testator’s nationalities; and the same would apply to multi-nationality. See KAHN E. (note 2: 2001), p. 622 and FORSYTH C.F. (note 1: 2003), p. 372. Also see Cheshire and North (note 13), p. 989. 28 See note 27.

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Jan L. Neels In respect of immovable property, the lex situs must be added to this list.29 In as far as a will bequeaths immovable property, the formalities of that will have to comply with either one of the systems in the list above or the lex situs. The lex situs is not the sole legal system that is relevant here. This is not immediately clear from the text of section 3bis but it has been so interpreted in Tomlinson v Zwirchmayr30 on the basis of the text of the convention31 and because already in common law the lex loci actus was an alternatively applicable legal system.32 It should be noted that compliance with the lex situs in respect of movables33 and the law of the place of death of the deceased is not sufficient. In addition, if South African law is not one of the legal systems listed in section 3bis, compliance with the prescribed South African formalities for wills is also not sufficient. In principle this should apply to section 2(3) of the South African Wills Act 7 of 1953 as well – this subsection makes provision for the condonation by a court of the non-compliance with the prescribed formalities in specified circumstances. The South African Law Commission overlooks this fact when stating that there is no need for the doctrine of renvoi34 in this context in South African private international law due to the existence of section 2(3).35 It is nevertheless submitted that it is open for a South African court to decide on grounds of policy that the lex fori governs condonation.36 As has been stated above,37 the content of the connecting factors domicile and habitual residence must be determined in terms of the lex fori, whilst nationality must be established in terms of the lex causae.38

29

S 3bis (1)(b). 1998 2 SA 840 (T) 847-850. 31 See a 1. 32 Also see FORSYTH C.F. (note 1: 2003), p. 372 note 211; KAHN E. (note 2: 2001), p. 621-622; SCHOEMAN E. (note 1: 2001), par. 233; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 579. Cf Cheshire and North (note 13), 1001; Dicey and Morris (note 13), p. 1036. 33 KAHN E. (note 2: 2001), p. 623. 34 See the sources in note 5 on the doctrine of renvoi. 35 South African Law Commission Verslag oor Hersiening van die Erfreg Project 22 (1991), p. 54. See NEELS J.L. (note 5), p. 742. 36 Cf the obiter dicta in Ex Parte Senekal 1989 1 SA 38 (T) 39-40 in respect of an application in terms of s 21(1) of the Matrimonial Property Act 88 of 1984 and the commentary by FORSYTH C.F. (note 1: 2003), p. 282. Also see FORSYTH C.F. (note 1: 2003), p. 14-15 on direct applicability of statutes by implication. See, further, the reference in s 2(3) to the formalities in s 2(1) and the opening phrase of s 2(1): ‘Subject to the provisions of section 3bis...’; NEELS J.L. (note 5), p. 742. 37 See (the text at) note 9. 38 The last sentence of a 1 of the convention was not incorporated in s 3bis (South Africa made a reservation in terms of a 9 of the convention) and therefore the common-law rule in the text applies. 30

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Private International Law of Succession in South Africa Example:

E died in Switzerland during 2005, while she was domiciled in Germany and habitually resident in Austria. She left a will in which she bequeathed her movable and immovable property in South Africa. The will was executed in Mozambique, while she was domiciled and habitually resident in Botswana. She was a national of France at all relevant times. Which legal system(s) govern(s) the formal validity of her will?

Answer:

As the exceptions in section 3bis (4) are not relevant, the legal systems listed in section 3bis (1)(a)-(b) of the Wills Act 7 of 1953 are applicable. In respect of E’s movables these are: the legal systems of Germany (the lex ultimi domicilii); Austria (the law of habitual residence at death); Mozambique (the lex loci actus); Botswana (the lex domicilii at the time of execution; the law of habitual residence at the time of execution); France (the lex patriae at the time of execution; the lex ultimae patriae). In respect of E’s immovables in South Africa, the law of South Africa as the lex situs must be added to this list. The law of Switzerland does not apply, nor South African law to the movables, as the law of the place of death is not listed as a relevant system in section 3bis and the lex situs is applicable to immovables only.

5.

Will Executed on Board of a Vessel or Aircraft

For particular situations and for specific types of clauses extra legal systems are added to these discussed above. For the situation that a will is executed on board of a vessel or aircraft, these are the lex libri siti (the law of the country where the vessel or aircraft was registered) at the time of the execution of the will and the law of the country with which the vehicle otherwise had the closest connection at that time.39 The ship or aeroplane need not be in motion for the extra systems to be applicable.40 Example:

39 40

During 2001, E executed a will on board of an aeroplane owned by Air France, while it was on the airport in Addis Ababa (Ethiopia). The aeroplane was leased to Kenyan Airways for daily flights between Mombassa (Kenya) and Addis Ababa. Kenyan Airways provided the crew for the flight. E was a national of Namibia but domiciled and habitually resident in South Africa at all relevant times. All his property, movable and immovable, is situated in South Africa. Which legal system(s) govern(s) the formal validity of E’s will?

S 3bis (1)(e). KAHN E. (note 2: 2001), p. 624.

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Jan L. Neels Answer:

As the exceptions in section 3bis (4) are not relevant, the legal systems referred to in section 3bis (1)(a)-(b) and (e) of the Wills Act 7 of 1953 are applicable. In respect of E’s movables these are: the law of France (the lex libri siti); Ethiopia (the lex loci actus); Kenya (the law of the country with which the aeroplane had the closest connection at the time of execution of the will); Namibia (the lex patriae at the time of execution; the lex ultimae patriae); South Africa (the lex domicilii at the time of execution; the lex ultimi domicilii; the law of habitual residence at the time of execution; the law of habitual residence at death). In respect of E’s immovables, South African law as the lex situs must be added to the list. What would the answer have been if E executed the will while the aeroplane was flying over Somalia or its territorial waters en route to Addis Ababa? The answer would remain the same except that the lex loci actus would now be the law of Somalia and not that of Ethiopia.41

6.

Power of Appointment

If a power of appointment is conferred in a will (will 1; the will of A) which is executed in another will (will 2; the will of B),42 the execution of the power of appointment in will 2 (not the whole of will 2) may, to be accepted as formally valid, in addition to the legal systems listed in paragraphs III.B.4 and III.B.5 above as they apply to will 2, comply with the formalities as prescribed by the lex loci actus of will 1.43 It is irrelevant whether will 1 is valid in terms of its lex loci actus. Example 1:

Q’s will (‘will 1’) granted the power of appointment of a final beneficiary under a trust to R. R executed this power in his will (‘will 2’). The legal systems applicable to the formal validity of will 1 are the law of A, B and C. A is inter alia the lex ultimi domicilii, B

41

See Dicey and Morris (note 13), p. 1033; KAHN E. (note 2: 2001), p. 624. The intrinsic validity of the exercise of the conferred power of appointment by B should be governed by the lex ultimi domicilii of A: see CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), pp. 666 and 678-681; FORSYTH C.F. ‘Exercise of Powers of Appointment in Foreign Wills’, in: SALJ 1983, p. 172 et seq.; FORSYTH C.F. (note 1: 2003), pp. 380-381; KAHN E. (note 2: 2001), pp. 628-630. Cf Cheshire and North (note 13), pp. 1011-1012; Dicey and Morris (note 13), pp. 1060-1063. It is submitted that the lex situs governs in respect of immovable property: see Cheshire and North (note 13), p. 1012; Dicey and Morris (note 13), p. 1062. 43 See s 3bis (1)(c). The subsection is indeed formulated wider than in the text above: ‘so far as therein a power conferred by any instrument is exercised or a duty imposed by any instrument is performed, not to be invalid merely by reason of the form thereof, if such form complies with the internal law of the state or territory in which such instrument was executed’. But the scenario in the text is probably the most common. 42

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Private International Law of Succession in South Africa is the lex ultimae patriae and C is the lex loci actus. Will 1 is formally valid in terms of the law of A but not in terms of the law of B or C. The legal systems applicable to the formal validity of will 2 are the law of D, F and G. Will 2 is formally invalid in terms of the legal systems of C, D, F and G but it is formally valid in terms of the law of A and B. Is the execution of the power of appointment (the appointment of a final beneficiary under the trust founded by Q) formally valid? Answer:

Will 2 is formally invalid as it does not comply with any of the relevant legal systems D, F and G. The execution of the power of appointment in will 2 may be formally valid on its own if it complies with the lex loci actus of will 1. Will 2 (including the execution of the power of appointment) is, however, invalid in terms of the lex loci actus of will 1 (the law of C) and accordingly the execution of the power of appointment is formally invalid.

Example 2:

Q’s will (‘will 1’) granted the power of appointment of a final beneficiary under a fideicommissum to R. R executed this power in his will (‘will 2’). The legal systems applicable to the formal validity of will 1 are the law of A, B and C. A is inter alia the lex ultimi domicilii, B is the lex ultimae patriae and C is the lex loci actus. Will 1 is formally valid in terms of the law of B and C but not in terms of the law of A. The legal systems applicable to the formal validity of will 2 are the law of D, F and G. Will 2 is formally invalid in terms of the legal systems of A, B, D, F and G but it is formally valid in terms of the law of C. Is the execution of the power of appointment (the appointment of a final beneficiary under the fideicommissum set up by Q) formally valid?

Answer:

Will 2 is formally invalid as it does not comply with any of the relevant legal systems D, F and G. The execution of the power of appointment in will 2 may be formally valid on its own if it complies with the lex loci actus of will 1. Will 2 (including the execution of the power of appointment) is indeed valid in terms of the lex loci actus of will 1 (the law of C) and accordingly the execution of the power of appointment is formally valid. The remainder of R’s will is still invalid.

Example 3:

Q’s will (‘will 1’) granted the power of appointment of a final beneficiary under a trust to R. R executed this power in his will (‘will 2’). The legal systems applicable to the formal validity of will 1 are the law of A, B or C. A is inter alia the lex ultimi domicilii, B is the lex ultimae patriae and C is the lex loci actus. Will 1 is formally valid in terms of the law of A but not in terms of the law of B or C. The legal systems applicable to the formal validity of will 2 are the law of D, F

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Jan L. Neels and G. Will 2 is formally invalid in terms of the legal systems of A, B, D, F and G but it is formally valid in terms of the law of C. Is the execution of the power of appointment (the appointment of a final beneficiary under the trust founded by Q) formally valid? Answer:

Will 2 is formally invalid as it does not comply with any of the relevant legal systems D, F and G. The execution of the power of appointment in will 2 may be formally valid on its own if it complies with the lex loci actus of will 1. Will 2 (including the execution of the power of appointment) is indeed valid in terms of the lex loci actus of will 1 (the law of C) and accordingly the execution of the power of appointment is formally valid. It is of no consequence that the first will is not formally valid in terms of the law of C; it is formally valid in terms of the law of A. The remainder of R’s will is still invalid.

Example 4:

Q’s will (‘will 1’) granted the power of appointment of a final beneficiary under a usufruct to R. R executed this power in his will (‘will 2’). The legal systems applicable to the formal validity of will 1 are the law of A, B or C. A is inter alia the lex ultimi domicilii, B is the lex ultimae patriae and C is the lex loci actus. Will 1 is formally valid in terms of the law of A but not in terms of the law of B or C. The legal systems applicable to the formal validity of will 2 are the law of D, F and G. Will 2 is formally invalid in terms of the legal systems of C, D and F but it is formally valid in terms of the law of A, B and G. Is the execution of the power of appointment (the appointment of a final beneficiary under the usufruct constituted by Q) formally valid?

Answer:

Will 2 is formally valid as it complies with the formalities of the law of G. The execution of the power of appointment will therefore also be formally valid.

7.

Revocation of a Previous Will

A provision in a later will (will 2) that revokes (part of) an earlier will (will 1) of the same testator will not only be valid if it complies with the formalities of one of the legal systems governing formal validity as they apply to will 2,44 but also if it complies with one of the legal systems mentioned in section 3bis (1)(a)-(c) as they apply to will 1 provided (the revoked part of) will 1 is valid in terms of that legal system.45 44

See paragraph III.B.4-6 above. S 3bis (1)(d) only refers to the legal systems mentioned in s 3bis (1)(a)-(c) (see paragraphs III.B.4 and III.B.6) but not to the legal systems referred to in s 3bis (1)(e) (see paragraph III.B.5). 45

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Private International Law of Succession in South Africa It is unclear whether this provision applies to express revocatory provisions only or also to tacit revocations. A tacit revocation inter alia takes place when a certain asset is bequeathed to somebody else in a later will without expressly revoking the previous bequest.46 Example 1:

E left two wills. The first will (‘will 1’) bequeathed his estate to A. The second will (‘will 2’) expressly revoked the first will and bequeathed his estate to B. The intestate heirs are C and D. The legal systems applicable to the formal validity of will 1 are K, L, M and N. Will 1 is formally valid in terms of the law of K, L and M but not in terms of the law of N. Will 2 is formally invalid in terms of all the primarily applicable legal systems (the ones listed in paragraphs III.B.4-6 above) but it is formally valid in terms of the law of N. Who inherits E’s estate?

Answer:

As will 2 is formally invalid in terms of all the legal systems primarily applicable to formal validity, the revocatory clause can only be held to be formally valid if it is such in terms of any of the legal systems listed in paragraphs III.B.4 and III.B.6 above as they apply to will 1, provided that will 1 is valid in terms of that system. The revocatory clause is, however, only valid in terms of the law of N. This is indeed one of the systems applicable to the formal validity of will 1 but will 1 is not valid in terms of the law of N and thus cannot save the revocatory clause. The whole of will 2 is therefore invalid. Will 1 applies and A inherits the estate.

Example 2:

E left two wills. The first will (‘will 1’) bequeathed his estate to A. The second will (‘will 2’) expressly revoked the first will and bequeathed his estate to B. The intestate heirs are C and D. The legal systems applicable to the formal validity of will 1 are K, L, M and N. Will 1 is formally valid in terms of the law of K, L and M but not in terms of the law of N. Will 2 is formally valid in terms of the law of the place where it was executed but not in terms of any of the other systems applicable to its formal validity. In addition, it is valid in terms of the law of N. Is the revocatory clause in will 2 valid?

Answer:

Will 2 is formally valid in terms of one of the legal systems applicable to its formal validity, the lex loci actus. The will (including the revocatory clause) is therefore formally valid for purposes of South African (private international) law.

Example 3:

E left two wills. He was domiciled in South Africa when he executed the wills but he was domiciled in Mauritius at the time of his death.

46

See DE WAAL M.J. / SCHOEMAN-MALAN M.C. Inleiding tot die Erfreg, Lansdowne 2003, pp. 95-96.

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Jan L. Neels E was the owner of immovable property situated in South Africa. The first will (‘will 1’) bequeathed the immovable property to A. The second will (‘will 2’) expressly revoked the first will and bequeathed the immovable property to B. In terms of South African law, the intestate heirs are C and D. In terms of the law of Mauritius, F and G are the intestate heirs. The legal systems applicable to the formal validity of will 1 are K, L, Mauritius, N and South Africa. The law of L is the lex loci actus and the law of K is the lex patriae at the time of execution of the will. Will 1 is formally valid in terms of the law of K, L and Mauritius but not in terms of the law of N or South Africa. Will 2 is formally invalid in terms of all the primarily applicable legal systems (see paragraphs III.B.4-6 above) but it is formally valid in terms of the law of K. Who inherits E’s immovable property in South Africa? Answer:

8.

As will 2 is formally invalid in terms of all the legal systems primarily applicable to formal validity, the revocatory clause can only be held to be formally valid if it is such in terms of any of the legal systems mentioned in section 3bis (1)(a)-(c) that are applicable to the formal validity of will 1, provided will 1 is valid in terms of that specific system. Both the first will and the revocatory clause in will 2 are valid in terms of the law of K. The revocatory clause is therefore formally valid but the remainder of will 2 is still invalid. The effect of the revocatory clause in respect of movables is governed by the lex domicilii at the time of execution of the will. In respect of immovables, the lex situs governs. This is discussed in paragraph III.F. As these legal systems are South African law in casu, the revocatory clause has the intended effect to revoke the first will. The intestate heirs will therefore inherit. The lex situs governs the intestate succession of immovables (see section II above). South African law is therefore applicable and C and D will inherit the immovable property.

Requirements for Witnesses; Extra Formalities Required for Certain Testators

Provisions in a legal system that articulate requirements for witnesses (e.g. their minimum age) are for purposes of section 3bis to be regarded as formal requirements. The same applies to requirements for testators of a certain age, nationality or other personal qualifications to observe special formalities in the execution of a will. The (other) provisions of section 3bis are therefore applicable to this type of stipulation.47

47

196

S 3bis (2). Also see paragraph III.A above. Cf a 5 of the convention.

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Private International Law of Succession in South Africa 9.

Foreign Internal Conflicts Law and Absence thereof

If a legal system indicated by section 3bis has two or more systems of internal law relating to the form of wills, the internal conflict laws of that legal system must be applied to determine which subsystem applies.48 This will be the position if the foreign law applies different legal rules to adherents of various religions or when the foreign law consists in separate geographical spheres. If no such internal conflict rules exist, the subsystem should be applied with which the deceased was most closely connected. A distinction is made between the law of the closest connection at the time of death (namely, ‘if the matter is to be determined by reference to the circumstances prevailing at his death’) and the law of the closest connection at the time of the execution of the will (namely, ‘in any other case’).49 It is submitted that this provision should be interpreted as follows: In the case of a reference to a foreign legal system (by virtue of the provisions of section 3bis) qua lex ultimi domicilii, qua the legal system of habitual residence at death or qua lex ultimae patriae, where the foreign legal system has no relevant internal conflicts provision in force, the law with which the testator was most closely connected at the time of his or her death must be applied. In the case of such a reference qua any other legal system mentioned in section 3bis (the lex loci actus, the lex domicilii at the time of execution, the law of habitual residence at execution, the lex patriae at execution, the lex situs, the lex libri siti and the law of the country with which the relevant vessel or aircraft had the closest connection at the time of execution of the will), the law with which the testator was most closely connected at the time of the execution of the will must be applied.50

10.

Common Law Remains Applicable

Finally, section 3bis states in subsection (5) that a will that would have been valid in terms of the common law51 remains valid irrespective of the provisions of article 3bis.52 Prima facie this provision seems to be superfluous as all the common law systems have been integrated in section 3bis. The provision may, however, play a role in the context of the doctrine of renvoi.53 48

See s 3bis (3). Cf a 1 of the convention. See s 3bis (3). This distinction is not found in a 1 of the convention. 50 See already NEELS J.L., ‘FORSYTH C.F., Private International Law (1990)’ (book review), in: TSAR 1990, p. 553 et seq., at 555. Cf Cheshire and North (note 13), p. 989; Dicey and Morris (note 13), pp. 1032-1033; FORSYTH C.F. (note 1: 2003), p. 374; KAHN E. (note 2: 2001), p. 623; KAHN E. (note 16), p. 477. 51 See paragraph III.B.3. 52 ‘The provisions of this section shall not affect the validity of a will which but for such provisions would be valid.’ Cf a 3 of the convention. 53 S 3bis (5) could also have provided another but more limited ground for the decision in Tomlinson v Zwirchmayr 1998 2 SA 840 (T): see KAHN E. (note 2: 2001), p. 621 note 266 and FORSYTH C.F. (note 1: 2003), p. 372 note 211. Application of the doctrine of 49

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Jan L. Neels 11.

Changes in Foreign Legal System

It was decided in Sperling v Sperling54 that changes in a foreign legal system should be applied by a South African court, whether retrospective or not, and irrespective of whether the connecting factor with that legal system has since fallen away. According to the authors, this principle should in the context of the formal validity of wills only apply if the outcome thereof is the validation of the will; if changes lead to invalidation of the will they should not be applied.55

C.

Interpretation of Wills

A will should be interpreted according to the express or tacit intention of the testator. An express provision could read: ‘This will must be interpreted in terms of Moroccan law.’ A tacit intention may be clear from the use of terminology peculiar to a certain legal system, e.g. terminology inherent to English trust law. If no intention is clear, the will should be interpreted in accordance with the lex domicilii at the time of execution. This applies to both movables and immovables.56 The lex situs may apply in respect of immovable property ‘should the lex domicilii produce a result which is illegal or impossible to give effect to by the lex situs’.57

renvoi implies the acceptance of the reference by the lex causae to South African law or a third legal system (see the sources in note 5). In the context of the formal validity of wills, renvoi may still be applied in respect of the lex loci actus (in respect of both movables and immovables) and the lex situs (in respect of immovables only). These are the common-law legal systems (see paragraph III.B.3.) that are in terms of section 3bis (5) still applicable, therefore not influenced by the exclusion of renvoi by s 6 of the Law of Succession Amendment Act 43 of 1992 (see note 24) and are also not touched in the exclusion of renvoi in s 4 of the Domicile Act 3 of 1992 (which excludes renvoi when domicile is the connecting factor). See on other possibilities for the application of renvoi in respect of the formal validity of wills in private international law and the international law of succession in general: NEELS J.L. (note 5). Cf Cheshire and North (note 13), p. 990; Dicey and Morris (note 13), p. 1034 and 1036. 54 1975 3 SA 707 (A). 55 KAHN E. (note 2: 2001), p. 622; FORSYTH C.F. (note 1: 2003), p. 372 note 213. Cf Cheshire and North (note 13), pp. 990-991; Dicey and Morris (note 13), p. 1034. But see VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 113. 56 CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), pp. 664, 666, 668 and 679; EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), pp. 378-379; KAHN E. (note 2: 2001), pp. 625-630; SCHOEMAN E. (note 1: 2001), par. 239; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 583. Also see Cheshire and North (note 13), pp. 995-996 and 1002-1004; Dicey and Morris (note 13), pp. 1040-1045. See note 60 on the rectification of wills and note 61 on accrual. 57 SCHOEMAN E. (note 1: 2001), par. 239. See EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), p. 379; KAHN E. (note 2: 2001), pp. 627-628. Cf VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 584 (quoted in note 62).

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Private International Law of Succession in South Africa D.

Inherent Validity and Effect of Wills

The category of the inherent validity58 and effect of wills includes, for instance, disinheritance and the existence of a right to a legitimate portion (a ius relictae),59 the effect of undue influence, duress and mistake, the validity of conditions, rectification,60 accrual,61 collation and substitution.62 In respect of movables the inherent validity and effect of a will is governed by the lex ultimi domicilii; in respect of immovables this is governed by the lex situs.63

E.

Capacity to Inherit

The capacity to inherit should, according to Forsyth, be governed by the lex domicilii of the beneficiary at the time of execution of the will of the deceased; and by 58

Also known as the essential, intrinsic, material or substantive validity. A ius relictae is a succession claim to a family member’s estate irrespective of the provisions of the will. See FORSYTH C.F. (note 1: 2003), p. 377; KAHN E. (note 2: 2001), p. 631; SCHOEMAN E. (note 1: 2001), par. 230; SCHULZE H.C.A.W (note 2), pp. 39-45. 60 FORSYTH C.F. (note 1: 2003), p. 377-378. See Evelyn-Wright v Pierrepoint 1987 2 SA 113 (E) 113: rectification in respect of movables is governed by the lex ultimi domicilii; this is an obiter dictum as the case concerns a jurisdictional issue only. Due to its close link to the intention of the testator, rectification could conceivably also be classified to belong to the interpretation of wills. The lex domicilii at the time of execution would then apply, unless a contrary intention is clear from the will: see paragraph III.C. 61 FORSYTH C.F. (note 1: 2003) 377; KAHN E. (note 2: 2001), p. 631. But in Wynn NO & Westminster Bank NO v Oppenheimer 1937 TPD 91 it was held that accrual is a question of interpretation (see paragraph III.C. and CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), p. 671). 62 See Cheshire and North (note 13), pp. 1004-1007, Dicey and Morris (note 13), pp. 1045-1049, FORSYTH C.F. (note 1: 2003), p. 378 and KAHN E. (note 2: 2001), p. 632 on the doctrine of election. See note 68 on rules excluding from succession the writer of and witnesses to a will and the executor of an estate. See note 42 on the inherent validity of the exercise of a power of appointment. On the trust in South African private international law, see CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), pp. 647-681 and FORSYTH C.F. (note 1: 2003), pp. 361-365. South Africa is not a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition (1985). See, in general, VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 584: ‘Onder die materiële geldigheid van ‘n testament word verstaan dat aan die beskikkings in die testament vervat, regtens uitvoering gegee kan word.’ 63 CAMERON E. / DE WAAL M. / WUNSH B. / SOLOMON P. / KAHN E. (note 2), pp. 661 and 666; EDWARDS A.B. / KAHN E. (note 2), par. 320; FORSYTH C.F. (note 1: 2003), pp. 377378; KAHN E. (note 2: 2001), pp. 630-632; SCHOEMAN E. (note 1: 2001), par. 230; SCHULZE H.C.A.W (note 2), pp. 39-45; VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), pp. 583-584. Also see Evelyn-Wright v Pierrepoint 1987 2 SA 113 (E) 113 (referred to in note 60); Cheshire and North (note 13), pp. 992-995 and 1001-1002; Dicey and Morris (note 13), pp. 1036-1040. 59

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Jan L. Neels the lex situs in respect of immovables.64 Kahn refers to Roman-Dutch authority in favour of the lex situs in respect of immovables.65 The author suggests the following in respect of movables: ‘In the absence of strong authority in our law, the following views are put forward as sound in principle. Where capacity to take is more closely related to the personal law of the testator – for instance, where an heir or legatee has allegedly written out or witnessed the will, or has acted unworthily in relation to the deceased, and therefore should not benefit – the domiciliary law of the testator should govern; and as the decisive moment appears to be the date of death of the testator, the lex ultimi domicilii. Where, however, the question is more closely related to the capacity of the beneficiary – for instance, whether an unborn person, an unincorporated association, a corporation or a particular charity can take – the appropriate law appears to be the domiciliary law of the beneficiary at the date of death of the testator.’66 As far as the time question is concerned, the moment of the deceased’s death should prevail as this is also the instant that capacity to inherit is usually determined according to internal South African law.67 To prevent classification disputes,68 the legal systems to be applied should ideally be identical to that pertaining to essential validity. It is therefore suggested that in all cases the lex ultimi domicilii of the testator should govern in respect of movables and the lex situs in

64

FORSYTH C.F. (note 1: 2003), pp. 376-377; cf SCHOEMAN E. (note 1: 2001),

par. 229. 65

KAHN E. (note 2: 2001), p. 618. KAHN E. (note 2: 2001), pp. 617-618. Cf Cheshire and North (note 13), p. 987 and 1001; Dicey and Morris (note 13), pp. 1030-1031. 67 Also see VAN DER MERWE N.J. / ROWLAND C.J. / CRONJÉ M.B. (note 2), p. 583: ‘Trouens, die bevoegdheid om te erf is tog eers ter sake wanneer die testament in werking tree en nie wanneer dit verly word nie.’ See for the principle in internal South African law, e.g. DE WAAL M.J. / SCHOEMAN-MALAN M.C. (note 46), pp. 8-9. 68 FORSYTH C.F. (note 1: 2003), pp. 376-377 and SCHOEMAN E. (note 1: 2001), par. 230 list the possible disqualification of a witness or writer of a will (one could add: the executor of an estate) under the inherent validity of wills (see paragraph III.D.). According to KAHN E. (note 2: 2001), pp. 617-618 (with note 237), these type of issues should be classified as involving passive testamentary capacity (the capacity to inherit). KAHN E. (note 2: 2001), p. 618 note 237 adds: ‘Anyway, nothing turns on the question, for the lex ultimi domicilii of the testator governs whatever the correct characterization be.’ This, however, does not apply in a case where ‘the question is more closely related to the capacity of the beneficiary’, when – according to KAHN E. (note 2: 2001), p. 618 – the lex domicilii of the beneficiary at the date of death of the testator should apply. It should be noted that reference is here made to the correct classification in terms of the lex fori only. See the sources in note 4 on classification in private international law. 66

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Private International Law of Succession in South Africa respect of immovables. This also the view of Van der Merwe, Rowland and Cronjé.69

F.

Revocation of Wills

Revocation of a will may take place by a testamentary provision, by destruction or ex lege. The formal validity of a revocatory clause is governed by section 3bis of the Wills Act 7 of 1953.70 The inherent validity and effect of an express revocatory provision in a will should be governed by the lex domicilii at the time of the execution of the will as far as movables are concerned and the lex situs in the case of immovables.71 The same should apply in respect of the tacit revocation of a previous will or one or more provisions in such a will.72 Revocation by destruction, in respect of its inherent validity as well as, it seems, its formal validity,73 should be governed by the lex domicilii at the time of the alleged revocation in respect of movables and by the lex situs in respect of immovables.74 Ex lege revocation by marriage (which is not part of internal South African law) was held to be governed by the lex domicilii matrimonii, both in respect of movables and immovables.75 The lex domicilii matrimonii (the law of matrimonial domicile) governs the proprietary consequences of marriage. This concept was interpreted to indicate the law of the country where the husband was domiciled at the time of marriage.76 This rule is clearly in conflict with the equality principle in the Constitution77 but it is uncertain which legal system(s) will be substituted.78

69

(note 2), p. 583. S 3bis in general and s 3bis (1)(d) in particular. See paragraph III.B.7 above. 71 FORSYTH C.F. (note 1: 2003), pp. 381-382; KAHN E. (note 2: 2001), pp. 632-634; cf SCHOEMAN E. (note 1: 2001), par. 237. 72 FORSYTH C.F. (note 1: 2003), pp. 381-382; KAHN E. (note 2: 2001), pp. 632-634. 73 See, for internal South African law, s 2A of the Wills Act 7 of 1953. 74 See FORSYTH C.F. (note 1: 2003), pp. 381-382; KAHN E. (note 2: 2001), pp. 632634. Cf Cheshire and North (note 13), pp. 997-998 and 1007; Dicey and Morris (note 13), p. 1049 with note 69. 75 See Pitluk v Gavendo 1955 2 SA 573 (T) and the discussion by KAHN E. (note 2: 2001), pp. 593-595. 76 Frankel’s Estate v The Master 1950 1 SA 220 (A); Sperling v Sperling 1975 3 SA 707 (A). 77 S 9 of the Constitution of the Republic of South Africa, 1996. It also does not provide for same-sex marriages: see Fourie v Minister of Home Affairs 2005 1 All SA 273 (SCA) par. 124-125; Minister of Home Affairs v Fourie CCT 60/04 and Lesbian and Gay Equality Project v Minister of Home Affairs CCT 10/05 (1 December 2005) par. 29 note 24 (also see par. 70 note 80) (per ). 70

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Jan L. Neels The classification of ex lege revocation by marriage as a proprietary consequence of marriage is debatable.79 This type of revocation could also, probably with more justification, be classified as a succession issue as it primarily pertains to the validity of previous wills. A more important consideration, however, is the fact that there are other forms of ex lege revocation, not necessarily related to marriage (e.g. birth of a child) and all these should ideally be governed by the same legal system. It is therefore submitted that all forms of ex lege revocation should be governed by the lex domicilii at the relevant time (e.g. the time of marriage or birth of a child) in respect of movables and the lex situs in respect of immovables.80 It is further submitted that ex lege revocation by divorce and the automatic revival of a testamentary provision at a determined stage failing the execution of a new will after the divorce (internal South African law makes provision for both)81 should in the case of movables be governed by the lex domicilii at the time of the divorce and the lex domicilii at the time of the alleged revival respectively. The lex situs should govern in respect of immovables.82 Example (issues governed by the common law): E died leaving movable and immovable property in South Africa. She left a will in which she bequeathed her movable property to A. A negligently caused E’s death in a motor car accident. E was a passenger in A’s car. The will was executed in Amsterdam (the Netherlands), while E was domiciled and habitually resident in the United Kingdom. E was domiciled and habitually resident in Zimbabwe at her death. At all relevant times, E was a citizen of Iran. A was domiciled in Mozambique and habitually resident in Senegal at the time of the execution of E’s will. He was domiciled and habitually resident in Japan at the time of E’s 78

It is submitted that the proposal by STOLL H. and VISSER P.J., ‘Aspects of the Reform of German (and South African) Private International Family Law’, in: De Jure 1989, p. 330 et seq., at 335 be followed: In the absence of an express or tacit choice of law, the proprietary consequences of marriage must be governed by the law of the country of the common domicile of the parties. If they do not have a common domicile, the law of common habitual residence applies. If they do not have a common habitual residence, the law of common nationality governs. If they do not have a common nationality, the law of the state with which both spouses are most closely connected at the time of marriage applies. Cf SCHOEMAN E. ‘The Connecting Factor for Proprietary Consequences of Marriage’, in: TSAR 2001, p. 72 et seq.; SCHOEMAN E. (note 1: 2004); SCHOEMAN E. ‘The South African Conflict Rule for Proprietary Consequences of Marriages: The Need for Reform’, in: IPRax 2004, p. 65 et seq. 79 See the discussion in KAHN E. (note 2: 2001), pp. 593-595, who – however – supports the principle deduced from Pitluk v Gavendo 1955 2 SA 573 (T). To the same effect are FORSYTH C.F. (note 1: 2003), pp. 381-382 and SCHOEMAN E. (note 1: 2001), par. 238. Also see Cheshire and North (note 13), pp. 998-999 and 1007-1008. 80 Cf Dicey and Morris (note 13), pp. 1050-1052; KAHN E. (note 2: 2001), p. 634. 81 S 2B of the Wills Act 7 of 1953. 82 Cf KAHN E. (note 2: 2001), p. 634.

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Private International Law of Succession in South Africa death. Which legal systems govern (a) E’s testamentary capacity; (b) the interpretation of E’s will if no intention in this regard is clear from the will; (c) the inherent validity of a condition in E’s will; (d) A’s capacity to inherit; (e) the intestate succession to E’s immovables in South Africa? Answer:

(a) Probably the law of the United Kingdom (the lex domicilii at the time of execution); (b) probably the law of the United Kingdom (the lex domicilii at the time of execution); (c) the law of Zimbabwe (the lex ultimi domicilii); (d) according to Forsyth: the law of Mozambique (the lex domicilii of A at the time of the execution of E’s will) but according to Kahn and Van der Merwe, Rowland and Cronjé: the law of Zimbabwe (the lex ultimi domicilii of E); (e) the law of South Africa (the lex situs).

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IS MULTILATERAL CONFLICT RULE ON CAPACITY TO MARRY IN LINE WITH THE ITALIAN CONSTITUTION? SOME OBSERVATIONS SUGGESTED BY TWO RECENT CONFLICT CASES SUBMITTED TO THE ITALIAN CONSTITUTIONAL COURT Gian Paolo ROMANO∗

I. II.

III. IV.

V.

VI.

VII.

Introduction The Legal Framework and the Decision of the Court A. Provisions at Stake B. Grounds for Constitutional Challenge C. The Court’s Answer Non-Delivery of the Certificate for Procedural Reasons Law as a Facility and the Beneficiaries of the Law A. Law as a Facility for Private Arrangements B. The Conflict Rule and the Beneficiaries of the Law C. The Consequences of the Nationality Nexus D. A Comparative Law Look Distorted Use of Public Policy A. Foreign Rule or Conflict Rule as Target of Public Policy? B. The Nature of the Public Policy Exception C. Regular Use of Public Policy by the Courts D. Parallel to a French Decision on Declaration of Parentage The Proper Constitutional Basis for Challenge A. Fundamental Rights vs. Principle of Equality B. The Two Steps of the Equality Assessment C. Assessing the Equivalence of the Situations 1. Substantive Equivalence and Spatial Equivalence 2. Equivalence Between Citizens Domiciled Abroad and Foreigners Domiciled in the Forum 3. Equivalence Between Citizens Regardless of the Nationality or Residence of Their Proposed Spouse D. Assessing the Reasonableness of the Difference of Treatment 1. Purpose of the Difference of Treatment 2. Appropriateness of the Instrument 3. Reasonableness of the Purpose Conclusions

∗ PhD at the Universities of Paris 2 (Panthéon Assas) and Padua; Legal Adviser at the Swiss Institute of Comparative Law, Lausanne.

Yearbook of Private International Law, Volume 7 (2005), pp. 205-237 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Gian Paolo Romano

I.

Introduction

In two recent conflict cases, the Tribunal of Rome raised some doubts as to the constitutional compatibility of Italian rules of private international law on capacity to marry.1 In the first case, a Tunisian woman wished to marry an Italian man in Italy. However, because her intended spouse was not Muslim, the Tunisian authorities were unwilling to deliver a certificate stating that there were no impediments to the marriage under Tunisian law. In the second case, a Syrian man proposed to marry an Italian woman in Italy. He too was unable to obtain the requisite certificate from the Syrian authorities because he had not yet served in the army in Syria. In both cases, the civil registrar in Rome refused to authorise the bans and, as a result, to solemnise the marriage. The interested parties challenged this refusal before the Tribunal of Rome. The Tribunal of Rome submitted to the Constitutional Court the question whether the rule of Italian law leading to the refusal to solemnise an Italian marriage between foreign citizens and Italian citizens based on their inability to obtain the ‘no-impediment certificate’ may be held to be contrary to the constitutionally-based right to marriage. The Constitutional Court dismissed the challenge. Although the facts triggering the ruling are rather trivial, the suspicion they arose in the mind of the Tribunal of Rome and the subsequent reasoning of the Constitutional Court in dismissing the cases act as a stimulus to look at the traditional conflict rule on essential validity of marriage under a perspective which is virtually unexplored so far in Italy:2 that of its compliance with the Constitution.

1 Order (‘Ordinanza’) of 30 January 2003, n. 14, in: Riv. dir. int. pr. proc. 2003, 937 ff., with a commentary by D’ARIENZO S., ‘La Corte costituzionale e il matrimonio dello straniero in Italia’, ibidem, 924 ff. See also PIGNATELLI L., ‘Pubblicazioni di matrimonio di cittadino straniero’, in: Semplice 2003, N. 3, at 7. The request by the Tribunal of Rome (Order of 3 September 2001) is published in: Gazz. Uff., N. 24, 19 June 2002, 116 ff. 2 This is also true of most European countries, the notable exception being Germany, where a spectacular ruling concerning the traditional conflict rule on capacity to marry was rendered by the Federal Constitutional Tribunal (Bundesverfassungsgericht) on 4 May 1971, in: BVerfGE, vol. 31, 58 f., also in: RabelsZ. 1972, 145 f. and in: BAREL B. / COSTANTINO B. (eds.), Norme di conflitto italiane e controllo di costituzionalità, Padova 1990, 202 f.

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Multilateral Rule on Capacity to Marry and the Italian Constitution

II.

The Legal Framework and the Decision of the Court

A.

The Provisions at Stake

According to Article 27 of the Italian Private International Law Act 1995,3 the law applicable to the capacity to marry is the national law of each spouse. Article 116(1) of the Italian Civil Code specifies the way the civil registrar shall make sure that foreign law is complied with. The interested party has to obtain from the authority of the country of his or her nationality a certificate stating that he or she has the capacity to marry by the law of that country (the ‘no-impediment certificate’). Failure by the authorities to deliver such a certificate may have two different bases, which may be referred to as purely procedural (or administrative or technical), on the one hand, and substantive, on the other.4 A procedural failure arises where a certificate is not delivered due to an administrative oversight or breakdown or negligence of the foreign authority or simply because there is no such authority having the power to deliver it. A substantive failure occurs where the certificate is not delivered because the party requesting it is under a legal impediment to marry according to the foreign applicable law.

B.

Grounds for Constitutional Challenge

The provision formally considered by the Court was Article 116(1) of the Civil Code. In its reference to the Constitutional Court, the Tribunal of Rome invoked Article 2 of the Italian Constitution that ‘protects and fosters the enforcement of fundamental rights of human beings’, tacitly including the ‘right to marry’.5 The Tribunal of Rome first submitted that Article 116(1) fails to allow for proof of capacity other than by way of the foreign no-impediment certificate. By limiting the means of proving foreign law to the production of the certificate, Article 116(1) restricts the enforcement of the right to marry. This follows because enforcement of this right in Italy depends exclusively on the attitude of foreign authorities; the forum judge before whom the refusal is challenged has no power under existing provisions to authorise the marriage without the certificate. As a result, the Tribu3 Law No. 218 of 31 May 1995. For a general presentation of the Act in English, see BALLARINO T. / BONOMI A., ‘The Italian Statute on Private International Law of 1995’, in: this Yearbook 2000, at 99-131. 4 See D’ARIENZO S. (note 1), at 928, who makes a distinction between ‘impedimenti formali’ and ‘impedimenti sostanziali’; see also the arguments of the Italian government before the Constitutional Court quoted in the Court’s ruling (note 1), at 939. 5 See e.g. the anonymous commentator of the decision by Trib. Reggio Emilia, 29 September 1986, in: Dir. fam. pers. 1987, 268 ff., at 271. Also see D’ARIENZO S. (note 1), at 933 and CANTA A., ‘Coppie miste e limiti di applicazione dell’art. 116 c.c.’, in: Fam. e dir. 1996, 455 f., at 456, note 5.

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Gian Paolo Romano nal of Rome concluded that, for the process to be in line with the Constitution, Article 116(1) should either be struck down or include the possibility that capacity be proved directly to the civil registrar by adequate documentation offered by the parties themselves and that, should any uncertainty arise, the judge be empowered to make further enquiries.

C.

The Court’s Answer

The Court observed that Article 116(1) more often than not results ‘in facilitating rather than restricting the celebration of marriage’, for its purpose is to release the civil registrar from any potentially burdensome investigation into foreign law.6 As the case law shows, where the certificate is not delivered for administrative or procedural reasons, the Italian judge is allowed to look into foreign law despite the inaction or silence of the foreign authority, notably by giving weight to other evidentiary documents offered by the parties. Though the Tribunal of Rome does not seem to have expressly raised the question of substantive impediments in the cases at issue, the Constitutional Court took care to suggest that marriages prohibited under applicable foreign law may be solemnized in Italy despite these impediments because the rules under attack do not operate in isolation but together with other rules, notably the public policy clause, which allow solemnisation notwithstanding any foreign prohibition which is contrary to public policy. Because the certificate requirement could be circumvented based on existing provisions and principles, the Court concluded that there was no basis, and no need, to question the constitutionality of the rules at stake. As implicitly noted by the Court, a distinction should be made between cases where non-delivery of the certificate is due to procedural or technical reasons, on the one hand, and those where such non-delivery flows from substantive reasons, on the other. A proper analysis of the issues should proceed from this distinction.

III. Non-Delivery of the Certificate for Procedural Reasons In the view of the Court, the judicial authority before which the denial is challenged may itself verify that the conditions under foreign law are met. It is not entirely clear, however, from which legal basis, according to the Court, this possi6

See SCOVAZZI T., ‘Il matrimonio del cittadino straniero in Italia’, in: Riv. dir. int. pr. proc. 1984, at 438-439; MIELE A., Il matrimonio dello straniero in Italia, Padova 1972, at 13; D’ARIENZO S. (note 1), at 928; CANTA A. (note 5), at 456. Cp. PANOZZO R., ‘La capacità matrimoniale dello straniero’, in: Dir. fam. pers. 1988, at 568. In the recent caselaw, see Trib. Belluno, 18 May 2002, in: Riv. dir. int. pr. proc. 2002, 1071 f., at 1072.

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Multilateral Rule on Capacity to Marry and the Italian Constitution bility flows. Neither Art. 116(1) nor Art. 987 of the Civil Code alone can reasonably be invoked in support. The case law to which the Court refers shows that public policy – now codified in Article 16 of the PIL Act – is what has been resorted to.8 One may wonder, however, whether public policy is a proper basis to justify bypassing the certificate requirement when non-delivery is due to procedural reasons. To be sure, in each country there is almost invariably an authority able to confirm at least the identity of the citizens involved and their civil status. The case may well arise, however, where there is no foreign authority to deliver the no-impediment certificate. Some legal systems do not require such a certificate in similar circumstances and, consequently, do not contemplate such an authority to deliver it for use abroad.9 This is a case of technical impossibility for Art. 116(1) to operate.10 Is the public policy exception the appropriate tool to escape this impossibility, which ultimately flows from the somewhat parochial belief of the Italian legislator that the certifying power is distributed abroad as it is in Italy?11 First, if one wishes to speak of public policy, one should note that it is not the substantive public policy which is at stake here – for it is not the substantive foreign law which raises difficulty – but a sort of procedural public policy. More importantly, public policy implies in its traditional meaning a value judgment with respect to the contents of the foreign law. It would not seem to be reasonable to formulate a value judgment on the way the certifying power is organised or distributed abroad.12 It appears nonetheless reasonable in these cases to grant Italian authorities the power to assess 7 Art. 98 (2) of the Civil Code allows the interested party to challenge the refusal of the civil registrar before the Tribunal, who then settles the issue after having heard the public prosecutor (pubblico ministero). 8 Cp. D’ARIENZO S. (note 1), at 934. 9 See Trib. min. Roma, 19 July 1989, in: Dir. fam. pers. 1990, 538 f., at 540. See D’ARIENZO S. (note 1), p. 981; PANOZZO R. (note 6), at 568; SCOVAZZI T. (note 6), at 438 and 448, MIELE A. (note 6), at 32 f. The typical case is the United States, with which Italy reached an agreement by way of an exchange of notes of 29 July and 18 August 1964 to overcome this impasse (see the text in: GIULIANO M. / POCAR F. / TREVES T., Codice della convenzioni di diritto internazionale privato e processuale, 2 ed., Milano 1981, 39 f.): the U.S. citizen should present a sworn statement executed before the U.S. consular authority instead of the no-impediment certificate. See MIELE A. (note 6), at 33; SCOVAZZI T. (note 6), at 448; CUOCO G., ‘Matrimonio dello straniero in Italia, Articolo 116, 1° co., C.C. – Problematiche’, in: Stato civ. 1988, 595 f., at 596; PIGNATELLI L. (note 1), at 6; D’ARIENZO S. (note 1), at 929, note 10; ARENA S., ‘Osservazioni in merito al ‘nulla osta’ di cui all’art. 116 c.c. per il matrimonio in Italia del cittadino straniero’, in: Stato civ. it. 1986, at 492 f. 10 According to MIELE A. (note 6), at 32, this is a case of an ‘impossibilità giuridica’; of ‘impasse d’ordre technique’, talks MUIR WATT H., La fonction de la règle de conflit de lois, thèse dactyl., Paris II 1985, at 490 f., and CALLÉ P., L’acte public en droit international privé, Paris 2004, at 87. 11 Cp. PANOZZO R. (note 6), at 557. 12 Cp. PANOZZO R. (note 6), at 540 who warns of the risk of a ‘pericoloso sindacato sull’organizzazione amministrativa adottata dall’ordinamento giuridico straniero’.

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Gian Paolo Romano the capacity to marry under foreign law, just as it does in any case of application of foreign law. One can most assuredly argue that not to do so would run against constitutional principles.13 Indeed, first-instance courts have often suggested this.14 If this is so, one may wonder whether what raises doubts under these circumstances as to its being in harmony with fundamental conceptions incorporated in the Constitution is actually the foreign law – more precisely the foreign procedural or administrative system – in that it does not contemplate an authority able to deliver the certificate of no impediment required by the Italian rule or rather the Italian rule itself which provides that, lacking this certificate, the civil officer has to refuse to solemnize the marriage even if other evidence reasonably suggests that foreign law is complied with. The Tribunal of Rome’s reasoning leads one to suspect that the public policy device is here actually used to attack not so much the foreign rule but rather the rule of the forum.15 If this is so, the natural purpose of the public policy clause, i.e. to make sure that foreign rules are in tune with fundamental policies and values – which, according to the Italian courts, are, at least in this matter, almost invariably incorporated in the Constitution16 – has been silently 13 See clearly BALLARINO T. (con la collaborazione di BONOMI A.), Diritto internazionale privato, 3. ed., Padova 1999, at 394; PANOZZO R. (note 6), at 550 and 552, quoting Corte Cost. n. 18 of 22 January 1982, in: Stato civ. it. 1982, at 265 f.; SCOVAZZI T. (note 6), at 440; VITTA E., Diritto internazionale privato, Vol. II, Torino 1973, at 193-194. 14 See e.g. Trib. Milano, 11 October 1947, in: Arch. ric. giur. 1948, 195 f.; Trib. Potenza, 30 November 1989, in: Dir. fam. pers. 1990, 558 f., at 560; Trib. Reggio Emilia, 29 September 1986, in: Dir. fam. pers. 1987, 268 f, at 271; Trib. Camerino, 12 April 1990, in: Riv. dir. int. pr. proc. 1991, 800 f., at 801; Trib. Barcellona, 9 March 1995, in: Dir. fam. pers. 1996, 164 f., at 165; Trib. Torino, 24 June 1993, in: Dir. fam. pers. 1993, at 1181; Trib. Torino, 24 February 1992, Riv. dir. int. pr. proc. 1992, 985 f., at 988, Trib. Napoli, 29 April 1996, in: Fam. e dir. 1996, 454 f.; Trib. Treviso, 15 April 1997, in: Riv. dir. int. pr. proc. 1997, 744 f., at 745; Trib. Pisa, 31 May 1996, in: Toscana giur. 1996, 1005 f., at 1007; Trib. Belluno, 18 May 2002, in: Riv. dir. int. pr. proc. 2002, 1071 f., at 1072. 15 With regard to substantive impediments, Trib. min. Bologna, 9 February 1990, in: Dir. fam. pers. 1990, 928 f. appears to confirm such a suspicion. 16 This has been made clear by the Constitutional Court – see Cort. Cost., 22 January 1982, n. 18, in: Raccolta ufficiale delle sentenze e delle ordinanze della Corte costituzionale (hereinafter: ‘Raccolta’) 1982, 165 f., at 199. Among the lower court’s decisions, see particularly Trib. Roma, 9 July 1968, in: Giur. mer. 1970, 464 f.; Trib. Verona, 6 March 1987, in: Stato civ. it. 1987, 201 f.; Trib. min. Roma, 19 July 1989, in: Dir. fam. pers. 1990, 538 f.; Trib. min. Bologna, 9 February 1990, in: Dir. fam. pers., 1990, 928 f.; Trib. Genova, 4 April 1990, in: Giur. mer. 1990, 1195 f.; Trib. Camerino, 12 April 1990, in: Riv. dir. int. pr. proc. 1991, 800 f.; Trib. Torino, 24 February 1992, Riv. dir. int. pr. proc. 1992, 985 f.; Trib. Torino, 24 June 1993, in: Dir. fam. pers. 1993, at 1181; Trib. Barcellona, 9 March 1995, in: Dir. fam. pers. 1996, 164 f.; Trib. Napoli, 29 April 1996, in: Fam. e dir. 1996, 454 f.; Trib. Taranto, 13 July 1996, in: Giur. mer. 1996, 284 f.; Trib. Pisa, 30/31 May 1996, in: Toscana giur., 1005 f.; cp. Trib. Treviso, 15 April 1997, in: Riv. dir. int. pr. proc. 1997, 744 f.; Trib. Belluno, 18 May 2002, in: Riv. dir. int. pr. proc. 2002, 1071 f., where, if the Constitution is not expressly mentioned, the ‘diritti fondamentali ed inviolabili dell’uomo’ are at stake: this wording reproduces the ‘diritti inviolabili dell’uomo’ protected by Art. 2 of the Constitution. On the contribution supplied by the constitutional provisions and principles to the shaping of

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Multilateral Rule on Capacity to Marry and the Italian Constitution extended to monitor the compliance with the Constitution of the rule of the forum itself and to make its circumventing possible when it is not. To be sure, such a heteroclite use of public policy as a conflicts device makes practically redundant any constitutional control of Art. 116(1) by the Constitutional Court itself. This is indeed the conclusion reached by the Constitutional Court in the case at issue.17 One may argue however that, in order to make the certificate prerequisite ineffective, a constitutional challenge of the rigorous forum rule inescapably requiring such a certificate would have been a better option with respect to both conflicts and constitutional methodology than the use of conflict public policy, which, to reach the same result, forces the judge to retrieve a foreign rule and to judge it repugnant to a fundamental forum policy. It has even been suggested that the use by courts of public policy to make domestic rules or values ineffective through their mere non-application in the specific case instead of transiting through the declaration of non-compliance with the Constitution may represent a serious infringement of constitutional principles.18 Be that as it may, though neither the Tribunal of Rome nor the Constitutional Court took any particular interest in scholars’ discussions on the subject, commentators have increasingly

public policy generally, also see Court of Cassation of 6 September 1980, n. 5156, in: Giust. Civ. Mass. 1980, fasc. 9, and of 25 May 1985, in: Giust. Civ. Mass. 1985, n. 3209, fasc. 5. Among scholars, see BALLARINO T., Costituzione e diritto internazionale privato, Padova 1974, esp. at 177 f.; ID. (con la collaborazione di BONOMI A.) Diritto internazionale privato, 3th ed., Padova 1999, at 398 f.; GIARDINA A., ‘L’eguaglianza dei coniugi nel diritto internazionale privato’, in: Riv. dir. int. pr. proc. 1974, 5 f., at 27; BARILE G., ‘Principi fondamentali dell’ordinamento costituzionale e principi di ordine pubblico internazionale’, in: Riv. dir. int. pr. proc. 1986, at 8; PISILLO PAZZESCHI R., ‘La sentenza 71/1987 della Corte costituzionale, il ruolo dell’ordine pubblico e l’attuale regime di conflitto del divorzio’, in: BAREL B. / COSTANTINO B. (note 2), 23 f., esp. 26-27; MENGOZZI P., ibidem, at 82-83; LAGOMARSINO G., ‘Principio di eguaglianza e norma straniera discriminatoria fra i nubendi a causa della disparitas cultus’, in: Giur. mer. 1990, 1196 f., at 1204 f.; ID., ‘Irrilevanza, per contrasto con l’ordine pubblico e col principio di eguaglianza, del diniego allo straniero del nulla osta alle nozze per motivi religiosi’, in: Giur. mer. 1995, 702 f., at 708 f.; CANTA A. (note 5), at 456; VENCHIARUTTI A., ‘Matrimonio dello straniero e impedimenti di carattere religioso’, in: Fam. e dir. 1996, 445 f., at 447; cp. CUOCO G. (note 9), at 596. 17 As Prof. Ballarino noted in a similar context (BALLARINO T., ‘Le norme di diritto internazionale privato davanti alla Corte costituzionale. L’abrogazione parziale dell’art. 18 Disp. prel.’, in: Riv. not. 1987, at 663-664, note 1), ‘fa parte dello stile della nostra Corte Costituzionale ricorrere a scappatoie formali per evitare pronunce su materie forse poco sentite’. 18 BARILE G. (note 16), at 6: ‘Il procedimento di difesa incentrato sui principi di ordine pubblico internazionale non può, invece (…) essere seguito dal giudice ordinario nei confronti di regole nazionali. Un tale procedimento infatti, costituirebbe un inammissibile attentato ai principi supremi della divisione dei poteri e della certezza del diritto. Tali principi non permettono che autorità diverse da quelle costituzionalmente competenti possano condizionare (pure solo attraverso il procedimento della disapplicazione nel caso concreto) la validità e l’efficacia di valori ‘nazionali’ direttamente posti dallo Stato’.

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Gian Paolo Romano shown dissatisfaction with Art. 116(1) itself and some of them have directly questioned its compliance with the Constitution.19

IV. Law as a Facility and the Beneficiaries of the Law Moving to the arguably more important question of the substantive impediments, which were the ones at stake in the two cases at issue,20 the Constitutional Court unequivocally suggested that, here again, no constitutional concerns are justified because the judicial authority before which the refusal is challenged may, under existing legislation, take no account of those impediments that are against public policy and thereby authorise the celebration of the marriage despite the non-delivery of the certificate. According to the Court, the legal basis for this outcome is here again, more explicitly, the substantive public policy of Art. 16 of the PIL Act. Again, this raises the question whether this is an appropriate instrument. This point is arguably more complex than the Court suggests and deserves some further attention. In so doing, we will take the liberty to depart from the specific arguments which were raised in the proceedings and reason in general terms.

A.

Law as a Facility for Private Arrangements

The purpose of a significant proportion of private law rules – so two distinguished legal theorists, Hart21 and Raz22, remind us – is to provide facilities for private arrangements. These rules are ‘facilitative rules’23 in that they set out the conditions 19 PANOZZO R. (note 6) puts an end to his thorough study on Art. 116(1) by categorically maintaining that this provision is contrary to the Constitution ‘nella parte in cui non dispone che il giudice italiano possa autonomamente acclarare la capacità matrimoniale dello straniero sulla base della legge nazionale (…)’. This is precisely what the Tribunal of Rome suspected, except that, according to latter, the provision should state that adequate documentation may be supplied by the parties to the civil registrar itself, without having to transit through the judicial authority. In favour of an amendment of Art. 116(1) also pleads ARENA S. (note 9), at 493; also see VENCHIARUTTI A. (note 16), at 448-449. 20 It is clear that the procedural fact of non-delivery of the no-impediment certificate by the foreign authority on the basis that, according to foreign law, the party concerned has no capacity to marry, cannot itself be contrary to Italian public policy. Of course, it would be more practical if the reasons for refusal were substantiated by the foreign authority itself, but Art. 116(1) does not and indeed cannot require the foreign authority to do it. The interested parties or the judicial authority may be informed by the relevant diplomatic channels, as took place in the two cases at issue: see the Order of the Tribunal of Rome (note 1), at 117. 21 The Concept of Law, 2nd ed., Oxford 1994, particularly at 9 and at 27 f. 22 The Authority of the Law, Oxford 1979, at 169. 23 This expression is taken from TEITELBAUM L.E., ‘Family History and Family Law’, in: Wis. L. Rev. 1135 (1985), e.g. at 1178; HART L. (note 21), at 41, speaks of ‘power-

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Multilateral Rule on Capacity to Marry and the Italian Constitution under which an individual may, if he or she so wishes, take advantage of the facilities they offer, e.g. to make valid contracts or wills, to establish valid companies, to have parentage validly declared, to validly adopt and be adopted, and so on. Whatever the legal system to which they belong, substantive rules on capacity to marry do fall within this category. These rules provide that, if one of the individuals to whom they are addressed fulfils conditions A, B and C (age, mental ability, no consanguinity with the other spouse, and so on), he or she may, if he or she so wishes, get married, thereby giving rise to a legal relationship, the marital relationship, from which a number of legal effects flow. Under this perspective, facilitative rules offer ‘huge and distinctive amenities’24 to the individuals to whom they are addressed – which may therefore be best described as the potential users or beneficiaries of these rules – because ‘by providing facilities for private arrangements between individuals [they] help [] individuals pursuing ends of their choice’.25

B.

The Conflict Rule and the Beneficiaries of the Law

The deep-rooted paradigm in conflicts methodology is the bilateral or multilateral choice of law rule. The purpose of this type of rule is notoriously to identify, for each category of legal relationships, the contact which is perceived by the forum as being the strongest, the one expressing the most significant relationship. According to the usual phraseology, such a contact becomes the connecting factor for that category. To the extent that the law is a facility for private arrangements, it may legitimately be said that conflicts rules of a country are called upon to establish in the first place which category of individuals may take advantage of the laws of that country, that is, which category of individuals may, by fulfilling the conditions set out in the relevant substantive facilitative rules, validly give rise to the legal relationships of their wishes.26 Under this perspective, the conflict rule of a country has the purpose or the effect of determining the circle of potential users or beneficiaries of the facilities provided by the substantive facilitative rules of this country.27 conferring rules’. On the ‘función facilidadora’ of private law in a similar sense, see in the conflicts literature GARCIMARTÍN F.A., La racionalidad económica del derecho internacional privado, Cursos de derecho internacional y relaciones internacionales de Vitoria Gasteiz, 2001, esp. at 128 f. 24 So HART L. (note 21), at 41. 25 So RAZ J. (note 22), at 170. 26 Cp. KOGAN T., ‘Towards A Jurisprudence of Choice of Law: The Priority of Fairness over Comity’, 62 N.Y.U.L. Rev 651 (1987): ‘(...) an individual who wishes to marry is empowered to enter into [marital] relationship by virtue of a state’s law defining who may marry and under what circumstances’. 27 See clearly HEUZÉ V., ‘La volonté en droit international privé’, in: Droits 1999, 113 f., at 122 (with regard to succession): ‘si la loi française permet, dans une certaine mesure, au de cuius de disposer de ses biens à cause de mort, le rôle de la règle de conflit successorale doit être de délimiter le cercle des individus qui jouissent de cette autorisation de la loi française’.

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Gian Paolo Romano By so doing, the conflict rule inevitably procures that any and all categories of individuals who fall outside this circle cannot in principle take advantage of this facility.28 Each connecting factor identifies one category of beneficiaries and each traditional multilateral rule, as said above, incorporates only one connecting factor. As a consequence, only one category of individuals may benefit from the facilitative rules of the State, i.e. the individuals which have with the relevant State the link selected as a connecting factor. Accordingly, all other categories of individuals are excluded by the conflict rule from using the facility offered by the law of the forum, no matter how otherwise strong may be their relation with that country. This is a logical necessity flowing directly from the structure of the single connecting factor conflict rule.

C.

The Consequences of the Nationality Nexus

By choosing nationality to govern capacity to marry, Italy has restricted to Italian citizens the benefit of the Italian rules of the Civil Code enabling individuals fulfilling a number of conditions to give rise to a marital relationship in Italy. As a consequence, Italy in principle refuses the right to invoke Italian rules to any other categories of individuals, including foreigners domiciled or resident in Italy or wishing to get married to an Italian citizen, including when the latter is also domiciled or resident in Italy.29 It would seem that the Tribunal of Rome faced this very state of affairs. In the two cases under its scrutiny, this particular effect of the traditional conflict rule was apparent in all its crudeness. A Syrian man and a Tunisian woman, very possibly having both their domicile and residence in Italy (this is certainly the case for 28 Of course, one may object that, while excluding any other individuals from the benefit of its rules, the forum state allows these individuals to take advantage of the rules of foreign countries. To counter this objection suffice it to say, with regards to capacity to marry in Italy, that this is not really the case, for Art. 116(2) of the Civil Code (requiring the compliance by the foreign citizen with Art. 85, 86, 87 n. 1, 2 and 4, 88 and 89 of the Civil Code) jointly with a judicially-based rule imposing the respect of the minimum age set forth in Art. 84 (Trib. min. Roma, 19 July 1989, in: Dir. fam. pers. 1990, 538 f.; cp. also Trib. min. Bologna, 9 February 1990, in: Dir. fam. pers., 1990, 928 f.) provide that virtually all requirements stated by Italian law must also be complied with by foreigners wishing to marry in Italy. See SCOVAZZI T. (note 6), at 433-434, QUADRI R., Applicazione della legge in generale, Bologna-Roma 1978, at 119 f.; also see ROMANO G., in: Rev. crit. 2006 (forthcoming). Furthermore, the rules of a foreign country are ex hypothesis different from those of the forum, and it may well be the case – indeed these are the only situations where a conflict rule is actually necessary – where the individual concerned, while having capacity under the law whose benefit is denied to him or her, does not have capacity under the law whose benefit is offered to him or her. 29 On the rigorous consequences of the conflict rule adopted by Italy with respect to the favor matrimonii, cp. CARELLA G., Art. 27, in: Riforma del sistema italiano di diritto internazionale privato (BARIATTI S. ed.), in: Nuove leggi civili commentate 1996, esp. at 1159, 1161 and 1163.

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Multilateral Rule on Capacity to Marry and the Italian Constitution the Tunisian woman),30 wished to marry, in Italy, Italian citizens having their domicile or residence in Italy.31 They wished in practice to take advantage of the Italian rules enabling a person to get married if he or she fulfils a number of essential conditions set forth in the Italian Civil Code, which they did fulfil. The conflicts rule excludes these persons from the circle of the individuals who may directly claim the benefit of Italian provisions on capacity to marry. Is this exclusion in line with the Italian Constitution? Before attempting to answer this question, let us look briefly at solutions in other countries.

D.

A Comparative Law Look

The conflict rules of a number of countries differ significantly from the Italian ones. They do not restrict the benefit of their law to only one particular category of individuals, to be identified by one particular connecting factor, be it nationality or domicile or residence, to be referred to the interested party only. Instead, they enlarge the range of beneficiaries, often considerably, in two cumulative ways: a) by adopting two connecting factors – both nationality, on one side, and domicile/residence, on the other side – which are alternatively sufficient for the individual to claim the benefit of their laws; and b) by enabling an individual having no such ties but wishing to get married to an individual who does have one such tie to avail him or herself of their laws. Let us take some examples. According to Section 44 of the Swiss Private International Law Act 1987, when marriage is to be celebrated in Switzerland, capacity to marry is in principle governed by Swiss law.32 A marriage may be celebrated in Switzerland – so Section 43(1) tells us – if one of the spouses is a Swiss national or has his or her domicile in Switzerland. As a result, Swiss law is offered to all those couples of proposed spouses of whom one is either Swiss national or domiciled in Switzerland.33 More specifically, Swiss law is directly offered to four categories of individuals (instead of one): Swiss nationals, foreigners having their domicile in Switzerland, foreigners having their domicile abroad wishing to marry a Swiss national, foreigners having their domicile abroad wishing to marry a foreigner having his or her domicile in Switzerland. The situation is identical in the Netherlands. Pursuant to Article 2(a) of Private International Law Marriages Act of 1989, a marriage may be celebrated in the Netherlands if each of the spouses fulfils the requirements set forth by Dutch substantive law and one of the spouses has Dutch nationality or

30

See Trib. of Rome, 3 September 2001 (note 1), at 116. Ibidem, 116-117. 32 Art. 44(1) provides that ‘the substantive requirements for a marriage celebration in Switzerland are governed by Swiss law’. 33 Art. 43(1) provides that ‘the Swiss authorities have jurisdiction to celebrate a marriage if one of the prospective spouse is domiciled in Switzerland or has Swiss nationality’. 31

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Gian Paolo Romano habitual residence in the Netherlands.34 Here again, four categories of individuals may have direct access to Dutch rules on capacity to marry. Recent developments in Swedish law are most enlightening. Until recently, the nationality principle was basically followed in matters relating to capacity to marriage. New provisions were enacted in December 2003 making Swedish law relating to capacity to marry available to both spouses, including foreign ones, when the marriage is to be solemnised in Sweden, provided only that one of the spouses has either Swedish nationality or habitual residence in Sweden.35 It would seem that the situation is identical in Finland as of 2002 and most similar in the other Nordic countries.36 In England, according to the general rule, which adopts the ante-nuptial domicile of origin of each spouse as a connecting factor, access to English law may be claimed by English domiciliaries of origin only. This rule is subject to an important exception, which one may arguably best describe as a second, parallel rule: a non English domiciliary may benefit from English law if he or she wishes to marry an English domiciliary.37 Is a U.K. citizen domiciled abroad prevented from invoking English law to solemnise his or her marriage? This does not seem to be the case to the extent that he or she is allowed to request solemnisation abroad before U.K. consular authorities. Again, it would seem that, in these situations, English law also applies to his or her spouse, who may well be neither a British citizen nor an English domiciliary.38 According to Article 3(3) of the French Civil Code, French citizens, event if resident abroad, may claim the benefit of French law in status matter, including capacity to marry.39 Does this mean that access to the French rules in

34 For an English translation of the Act see SUMNER I. / WARENDORF H., Family Law Legislation of the Netherlands, Antwerp [etc.] 2003, at 220 f. 35 See JÄNTERÄ-JAREBORG M., Foreign Law in National Courts, Rec. cours 2003, t. 304, at 212. 36 See JÄNTERÄ-JAREBORG M., ‘Combating child marriages and forced marriages – the prospects of the Hague Marriage Covnvention in the Scandinavian multicultural societies’, in: Essays in memory of P. Nygh, The Hague 2004, 163 f., at 170-171. 37 Such a rule has been inferred from Sottomayor v. De Barros (No. 1) (1877), 3 P.D. 1, 6-7 and received the approval of the Court of Appeal in Ogden v. Ogden [1908], p. 46, 74-77. See also Chetti v. Chetti, [1909] and Vervaeke v. Smith [1981]. See CLARKSON C.M.V., ‘Marriage in England: Favouring the Lex fori’, in: 10 Legal Stud. 80 (1990), at 83-85; DICEY A.V. / MORRIS P., Conflict of Laws, vol. II, 13th ed., London 2000, at 685; CHESHIRE G. / NORTH P., Private International Law, 13th ed., London 1999, at 732733; BRIGGS A., Conflict of laws, Oxford 2002, at 226-228. 38 See for the conditions stated by the Foreign Marriage Act 1892, MORRIS P. / MCLEAN I., The Conflict of Laws, 5th ed., London 2000, at 190-191. Marriage may be solemnised by U.K. authorities outside the U.K. ‘between parties of whom at least one is a United Kingdom national’: s. 1(1) of the Foreign Marriage Act 1892. 39 See ANCEL B. / LEQUETTE Y., Grands arrêts de la jurisprudence française de droit international privé, 4th ed., Paris 2001, at 3 f.; MAYER P. / HEUZÉ V, Droit international privé, 7th ed., Paris 2004, at 365; AUDIT B., Droit international privé, 3th ed., Paris 2000, at 537; LOUSSOUARN Y. / BOUREL P. / DE VAREILLES SOMMIÈRES P., Droit international

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Multilateral Rule on Capacity to Marry and the Italian Constitution point should be denied to any non-French national? This is not so. The Instruction générale de l’état civil directs that the civil registrar shall celebrate the marriage even if the foreigner fails to produce a certificate stating that he or she has capacity to marry by his or her national law, provided that he or she complies with the requirements set forth by French law, no matter what the reasons, procedural or substantive, for the non-delivery by the foreign authority or the non-production of the certificate by the interested party.40 As a result, a non-French national having capacity under French law can marry in France a French national (who has capacity under French law). To reach this result, there is no need to transit through the public policy exception or through any judicial procedure. Although the Instruction says that the civil registrar should warn the parties that the marriage may not be recognized abroad and may possibly be held void in France, no case is ever cited where a marriage solemnised in France between two individuals, of whom one is a French national, both having capacity under French law, has actually been held void. The situation in Spain is less clear, due to the silence of the Civil Code. A number of authors take the view that Spanish law should apply if the marriage is celebrated in Spain, which may be the case if one of the spouses is a Spanish national or has his or her habitual residence in Spain.41 According to a recent study, it would seem that this is what takes place in practice.42 If this is so, again, four categories of individuals may take advantage of the Spanish provisions on substantive requirements. Had Italy adopted the same rules as any of the above countries (as well as a wide range of others),43 the spouses could in both cases have had their marriage privé, 8th ed. Paris 2004, at 360; HOLLEAUX D. / FOYER J. / GEOUFFRE DE LA PRADELLE G., Droit international privé, Paris 1987, at 516; VIGNAL TH., Droit international privé, Paris 2005, at 144. 40 See BATIFFOL H., ‘L’instruction générale sur l’état civil du 21 septembre 1955 et le droit international privé’, in: Trav. com. fr., Année 1955-1957, 41 f., esp. at 46 f.; MARQUARDT, K.-H., Le certificat de capacité matrimoniale en droit comparé, Paris 1965, at 52 f., AUDIT (note 39), at 541, LOUSSOUARN Y. / BOUREL P. (note 39), at 362, note 4. 41 See for a discussion FERNÁNDEZ ROZAS J. / SÁNCHEZ LORENZO S., Derecho internacional privado, 3rd ed., Madrid 2004, at 435; GONZÁLEZ CAMPOS J. (ET AL.), Derecho internacional privado, Parte especial, 6th ed., Madrid 1995, at 296; CALVO CARAVACA A. / CARRASCOSA GONZÁLEZ J. (ed.), Derecho internacional privado, 6th ed., vol. II, Granada 2005, at 73; OREJUDO PRIETO DE LOS MOZOS P., La Celebración y el Reconocimiento de la Validez del Matrimonio en Derecho Internacional Privado Español, Pamplona 2002, at 64 f. 42 OREJUDO PRIETO DE LOS MOZOS P. (note 41), at 64: ‘las autoridades españolas (…) at ienden la ley española más endémica que excepcionalmente (…)’. 43 This generous offer by a State of its law on capacity to marry seems to gain momentum in recent codifications. See e.g. Lithuania, where, according to Art. 1.25 of the Civil Code, Lithuanian law on capacity to marry is made available to all prospective spouses of whom at least one has either Lithuanian nationality or is domiciled in Lithuania: see MIKELENAS V., ‘Reform of Private international law in Lithuania’, in: this Volume, at 169. Similar is in essence the solution adopted by the Ukrainian legislator (Art. 55 and 57 of the Law on Private International Law of 2005): see DOVGERT A., ‘Codification of Private International Law in Ukraine’, in: this Volume, at 156.

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Gian Paolo Romano solemnized in Italy, and this with no delay. This would have flowed directly from the conflict rule itself, because this conflict rule would have directly incorporated in the circle of beneficiaries of Italian provisions both the foreign citizen having his or her domicile or residence in Italy (which was the case at least for the Tunisian national) and the foreign citizen having his or her domicile or residence abroad wishing to marry an Italian citizen (which was certainly the case in both situations). No intervention of the judicial authority would have been necessary, for the civil officer would have had the power (and the duty) to make sure the requirements under Italian law are fulfilled by the foreign spouse. In contrast, to reach this result the current Italian system compels the civil registrar to refuse the solemnisation, forces the interested party to challenge this refusal and leaves the judicial authority with no other possibility than to resort to public policy to authorise the solemnisation. One may indeed wonder whether this is a satisfying situation with respect to both conflicts and constitutional methodology and values.44

V.

Distorted Use of Public Policy

A.

Foreign Rule or Conflict Rule as Target of Public Policy?

When a foreign substantive rule is given effect in the forum, this is the result of the application of two different rules: the conflict rule of the forum, on the one side, and the substantive rule of the foreign State, on the other. As mentioned earlier, when the substantive foreign rule on capacity to marry does not apply due to public policy, Italian courts invariably refer to a constitutional provision or principle (often more than one) to assist in specifying the meaning of the forum’s fundamental policy which cannot be set aside.45 In their view, a foreign rule shall be ineffective in Italy because its application is contrary to the Italian Constitution. One may talk of ‘constitutional public policy’.46 Since, on the one hand, the two elements of the chain – domestic conflict rule and foreign substantive rule – operate jointly and, so to say, generate a single 44

Cp. CANTA A. (note 5), at 456-457, VENCHIARUTTI A. (note 16), at 448. See note 16 above. 46 See particularly Trib. Genova, 4 April 1990, in: Giur mer. 1990, at 1195, and Trib. Verona, 6 March 1987, Stato civ. it. 1987, at 201. Interestingly, courts have sometimes found it sufficient to resort to constitutionally-based fundamental rights without really mentioning conflicts public policy: see recently Trib. Belluno, 18 May 2002, in: Riv. dir. int. pr. proc. 2002, 1071 f., at 1072. Also LAGOMARSINO G. (note 16: 1990), at 1210, appears to consider superfluous the resort to public policy in these cases, which he described as a ‘sovrastruttura concettuale’. The idea of a direct non application of foreign law because of a contrast with constitutional principles has been rather popular among Italian scholars: BALLARINO T. (note 16), at 145 f. and PISILLO MAZZESCHI R. (note 16), at 25 (see also ibidem, note 8 for other references). 45

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Multilateral Rule on Capacity to Marry and the Italian Constitution ‘product’, and, on the other, the last element of the chain is the foreign substantive rule, it is rather natural to instinctively conclude that when this ‘product’ is perceived as a whole to be undesirable and contrary to constitutional public policy, it is the foreign rule, the last one to operate, which is undesirable and contrary to constitutional public policy. Logically, however, when the foreign substantive rule does not apply (allegedly) due to constitutional public policy, this may also be because the conflict rule itself is not in line with the Constitution.47 The truth is that the two elements of the chain are so inextricably linked that, if one of them yields, the whole chain collapses and any inquiry into which element is responsible appears to have little practical importance for the outcome is the same: forum substantive law applies and foreign substantive law does not. For our purposes, however, it is key to attempt to ‘pierce the veil’ and discover which element is actually the rebellious one in the chain: is it the foreign rule designated by the Italian conflict rule in that it sets forth a requirement that is unknown to Italian law and is repugnant to some fundamental policy with respect to the right to marry, or rather is it the Italian conflict rule itself in that it excludes a foreigner having his or her domicile in Italy or wishing to marry an Italian citizen in Italy from access to the benefit of Italian law? Whereas the traditional public policy clause is arguably an appropriate instrument in the first case, a brief overview of the nature and the logic of public policy suggests that this is not so in the second.48

B.

The Nature of the Public Policy Exception

Public policy is usually referred to as an exception.49 The meaning of this phraseology is twofold. First, whenever public policy operates, the conflict rule does not apply in its logic and purpose: public policy is an obstacle to the ordinary operation of the conflict rule.50 Secondly, the use of public policy should occur in exceptional circumstances only.51 This means that whenever the forum law and the foreign law differ and generate different substantive results, resort to public policy should be a relatively rare occurrence.52 With respect to the Italian conflict rule on capacity to 47 See clearly BARILE G. (note 16), at 8. For a warning against any confusion between the constitutional assessment of foreign substantive rules and that of a domestic conflict rule, see GIARDINA A. (note 16), at 17. 48 See BARILE G. (note 16), passage quoted above, note 18. 49 See e.g. in the Italian scholarship MOSCONI F., ‘Exception to the operation of Choice of Law Rules’, Rec. cours 1989-V, 9-214. 50 See e.g. MOSCONI F. (note 38), e.g. at 158. 51 See with respect to capacity to marry, CARELLA G., Art. 27, in: Riforma del sistema italiano di diritto internazionale privato (BARIATTI S. ed.), in: Nuove leggi civili commentate 1996, at 1166, note 45. Cp. BOSCHIERO N., Art. 16, ibidem, 1046 f., esp. at 1048, and BALLARINO T. (note 13), at 308.

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Gian Paolo Romano marry, if in virtually all cases the marriage is solemnized in Italy because the foreigner has capacity by Italian law, despite the prohibition under foreign law, then the public policy device appears to be somewhat distorted in its nature, because, far from operating exceptionally, it does operate regularly, which is precisely at the opposite end of the spectrum. One may suspect, therefore, that, in these cases, the problem lies not so much with the foreign law but rather with the conflict rule of the forum.53

C.

Regular Use of Public Policy by the Courts

A close look at Italian case law shows that in those situations where no certificate is delivered by the foreign authority for whatever reasons, Italian courts tend to resort directly to Italian law and, as a result, to authorise the marriage if Italian law is complied with.54 In other words, public policy, which is the only actual device 52 Logically, one may say that, when it comes to rules setting forth the requirements to give rise to a particular legal relationship, out of all cases in which the foreign law does not allow a particular individual to give rise to the proposed legal relationship in a situation where the forum law does allow him or her to do so, the cases in which the foreign law is disregarded, and in which, as a consequence, the creation of the proposed legal relationship is permitted, should, at least in principle, be a minority with respect to those in which the foreign law is not disregarded, and in which, as a consequence, the creation of the proposed legal relationship is not permitted. 53 The contradiction no longer occurs between the foreign law and the public policy of the forum, but between the conflict rule of the forum providing for an application of foreign law, which implies that the forum is willing to accept different substantive results, and the public policy of the forum providing that foreign law shall apply only insofar as it leads to no different substantive results than under the law of the forum. 54 All reported decisions (we have counted 17) triggered by the challenge of the refusal to solemnize on the basis of Art. 98 of the Civil Code since the enactment of the Italian Constitution of 1948 (only the first is of 1947) have resulted with no exception in the court ordering the civil registrar to solemnise the marriage because the requirements of Italian law were met: Trib. Milano, 11 October 1947, in: Arch. ric. giur. 1948, 195 f.; Trib. Torino, 22 April 1959, in: Riv. dir. int. 1959, 502 f.; Trib. Roma, 9 July 1968, in: Giur. mer. 1970, 464 f.; Trib. Roma, 2 January 1979, in: Giust. civ. 1979, I, 74 f.; Trib. Reggio Emilia, 29 September 1986, in: Dir. fam. pers. 1987, 268 f.; Trib. Verona, 6 March 1987, in: Stato civ. it. 1987, 201 f.; Trib. Potenza, 30 November 1989, in: Dir. fam. pers. 1990, 558 f.; Trib. Genova, 4 April 1990, in: Giur mer. 1990, 1195 f.; Trib. Camerino, 12 April 1990, in: Riv. dir. int. pr. proc. 1991, 800 f.; Trib. Torino, 24 February 1992, in: Riv. dir. int. pr. proc. 1992, 985 f., Trib. Torino, 24 June 1993, in: Dir. fam. pers. 1993, 1181 f.; Trib. Barcellona, 9 March 1995, in: Dir. fam. pers. 1996, 164 f.; Trib. Napoli, 29 April 1996, in: Fam. e dir. 1996, 454 f.; Trib. Pisa, 30/1 May 1996, in: Toscana giur. 1996, 1005 f.; Trib. Taranto, 13 July 1996, in: Giur. mer. 1996, 284 f.; Trib. Treviso, 15 April 1997, in: Riv. dir. int. pr. proc. 1997, 744 f.; Trib. Belluno, 18 May 2002, in: Riv. dir. int. pr. proc. 2002, 1071 f., at 1072. These rulings have all been rendered by Tribunals, i.e. by first instance courts. According to Art. 98 of the Civil Code, the public prosecutor (pubblico ministero) may challenge the decision of the Tribunals before the Court of Appeal. No decision by Italian

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Multilateral Rule on Capacity to Marry and the Italian Constitution one may positively wield in order to attain this outcome, is practically triggered as soon as a) no such certificate is delivered and b) Italian requirements are met.55 Indeed, as a court has recently pointed out – ‘the authorisation to publish the bans [and, consequently, to solemnise the marriage] in the absence of the foreign noimpediment certificate [not delivered for substantive reasons] has constantly been granted’ by the Italian courts.56 Not a single case appears to have ever been reported where the solemnisation of a marriage in Italy between two spouses both having capacity by Italian law has been denied by the judicial authority hearing a challenge of the refusal by the civil registrar where the refusal was based on the foreigner being under an impediment by his or her national law. A court went as far as saying, though incidentally, that any and all foreign provisions limiting or excluding the right to marry to an individual who is adult and not already married – which conditions are required by Italian law – shall have in any event no effect in the forum.57 In the cases at issue, Tunisian law did not allow solemnization for religious reasons and Syrian law because service in the army had not yet been performed by the Syrian citizen. Neither the Tribunal of Rome nor the Constitutional Court bothered to assess the merits of these impediments. Neither shall we. Arguably, the Tribunal of Rome saw a general problem here, one that exceeds the restricted scope of the circumstances at stake. Though the Tribunal did not express it clearly, its confusion suggests that what may be contrary to (constitutional) public policy is Courts of Appeal is reported on this issue, which leads one to believe that the public prosecutor has never objected to such an authorisation (it appears from a number of rulings that the public prosecutor was expressly favourable: see e.g. Trib. Treviso, 15 April 1997, Trib. Reggio Emilia, 29 September 1986, Trib. Torino, 24 February 1992, Trib. Napoli, 29 April 1996, Trib. Pisa, 30/31 May 1996, all of which cited in this note). 55 This is particularly apparent when non-delivery is due to procedural reasons: the simple non-delivery is automatically viewed as contrary to public policy and, as a result, Italian law is practically left to govern, even if a substantive assessment of foreign law remains possible. See typically Trib. Camerino, 12 April 1990 (note 54), at 801, where the mere fact that the Romanian authorities failed to deliver the certificate led the court to resort to Italian law, no enquiry about Romanian law being performed. 56 Trib. Pisa 30/31 May 1996 (note 54), at 1006. 57 Trib. Reggio Emilia, 29 September 1986 (note 54) at 270; also cp. Trib. Verona, 6 March 1986 (note 54), at 201, and Trib. Taranto, 13 July 1996 (note 54), at 284. Arguably, this reality tends to go undetected because in any event the interested party has to, or does in practice, produce one or more foreign documents, notably the one confirming his or her identity and unmarried status, which the forum authority has to, or does in any event in practice, examine: see e.g. Trib. Treviso, 15 April 1997 (note 54), at 745; Trib. Torino, 24 February 1992 (note 54), at 987; Trib. Potenza, 30 November 1989 (note 54), at 559; Trib. Reggio Emilia, 29 September 1986 (note 54), at 272; Trib. Belluno, 18 May 2002 (note 54), at 1071-1072. This may generate the belief that foreign law is being proved and looked into. The purpose of this is, however, simply to make sure that the unmarried status that is required by Italian law – and, as the case may be, some other requirements which are also set forth by Italian law and may be best certified by foreign authorities – are effectively complied with.

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Gian Paolo Romano the mere fact that the conflict rule does not allow solemnisation of a marriage in Italy between an Italian citizen and a foreign citizen domiciled or resident in Italy when both have capacity to get married by Italian law, regardless of the nature of the impediments under foreign law and the extent of the substantive gap between domestic and foreign conceptions. This line of reasoning diverts focus from the foreign substantive law and places it rather on the Italian conflicts rule in that it does not include in the beneficiaries of Italian law the foreign citizens who are in the situation above. To put it otherwise, the defendant in this ‘constitutional (public policy) trial’, is no longer the foreign rule but the conflict rule of the forum.58 58

Interestingly, this has been indirectly confirmed by a court (Trib. min. Bologna, 9 February 1990, in: Dir. fam. pers., 1990, 928 f., at 929) which ruled that the verification of compliance with the Constitution of Art. 116 – and, accordingly, of the nationality conflict rule stated in what is now Art. 27 of the Italian PIL Act – may be dispensed with because the public policy instrument is sufficient to make these provisions. According to the Tribunal, Art. 116(2) may indeed be contrary to the constitutional principle of equality in that it denies the protection of Italian law – notably of Art. 84 of the Civil Code which prevents a minor below 16 to get married in Italy – to the foreign minor; there is no need, however, to resort to a constitutional control of Art. 116 because the public policy (laid down in Art. 31 of the Preleggi) is the appropriate instrument to prevent Art. 17 of the Preleggi (which makes provisions for application of foreign law to foreign national) from generating unconstitutional consequences. By contrast, the public policy device has been implicitly set aside in favour of constitutional control by the Constitutional Court in two important decisions of 1987 (n. 71 and n. 477: see the text in: BAREL B. / COSTANTINO B. (note 2), at 147 f.), whereby the Court notoriously held two conflict rules – Art. 18 and Art. 20(1) respectively of the previous Preleggi – contrary to the Constitution. As regards Art. 18 relating to personal relationships between spouses, which is more directly in point here, some authors suggested that the same result could also have been reached by using the public policy device: see e.g. PISILLO MAZZESCHI R. (note 16), at 24; BALLARINO T. (note 17), at 667-688. Two of the three courts which had requested the intervention of the Constitutional Court, that is the Tribunals of Rome (16 January 1984, n. 929) and Turin (11 January 1985, n. 514: see the texts in BAREL B. / COSTANTINO B. (note 2), at 161 f. and 171 f.) opined that a foreign law ignoring the institution of divorce or separation could hardly be considered to be repugnant to Italian public policy (the Tribunal of Palermo, 30 March 1984, n. 864, ibidem, 168 f., did not mention any public policy). All three cases triggering the ruling of the Court involved an Italian woman (resident in Italy in the three cases) and a foreign husband (respectively a Chilean, resident in Italy, a German, resident in Germany, and a Tunisian, whose residence does not emerge clearly from the relevant decision). The requested divorce and separation orders could not be rendered based on the national law of the husband, which was designated by Art. 18, because Chilean law did not contemplate divorce and neither German nor Tunisian law contemplated separation. The Constitutional Court held that the problem lay not in the relevant foreign rules (see expressly decision n. 71, quoted above, at 151) but in the Italian conflict rule delimiting the circle of beneficiaries of the Italian rules on divorce and separation by using nationality of the husband (only), so that neither the Italian woman (at least when she is resident in Italy: Trib. Torino) nor his foreign spouse (Trib. Palermo) nor both of them jointly (Trib. Rome) were allowed to invoke Italian law to obtain divorce or separation in Italy. It would seem that Italian authors all agreed that the declaration of non compliance with the Constitution of the forum rule was the best option to reach this result: see intervention by STROZZI G., in: BAREL B. / COSTANTINO B. (note 2), at 103 f.

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Multilateral Rule on Capacity to Marry and the Italian Constitution D.

Parallel to a French Decision on Declaration of Parentage

This situation recalls a much discussed decision by the French Cour de cassation with respect to declaration of parentage.59 The Court held that foreign law, in the specific case Algerian law, is not in itself contrary to French public policy to the extent it prohibits the declaration of parentage in situations where French law allows it. What is contrary to French public policy is rather the fact that minors having either French nationality or habitual residence in France are prohibited from relying on French law when wishing to establish parentage before French courts, which prohibition flows from the French conflict rule reserving French law to French mothers only. Interestingly, an author has contended that the use of the ordre public clause to justify this result is inappropriate (she figuratively talks of ‘ordre public dévoyé’).60 Indeed, it would seem that what is attacked by the public policy device is not the foreign law – which, in the view of the Court, is expressly not per se contrary to it – but, as curious as it may sound, the conflict rule itself in that it reserves the ‘amenities’ of French law regarding conditions to establish parentage only to mothers having French nationality and, as a result, excludes from this benefit children having either French nationality or French habitual residence. A new conflicts rule – it has been submitted – has been created or rather discovered by the Court.61 This new conflict rule allows – in addition to French mothers – French children and children having their habitual residence in France, as well as foreign mothers on their behalf, to rely on French law in order to judicially establish parentage in France. One is tempted to apply a similar reasoning to the creation of a marital relationship through solemnisation of marriage in Italy. If the source of perplexities with respect to public policy is the single connecting factor conflict rule of the forum and not the foreign substantive rule, and if this public policy finds its source in a constitutional rule or principle, one is tempted to suggest that it is the single connecting factor rule which may be contrary to this constitutional rule or principle. If so, which rule or principle is involved?

59 Cass. civ. I, 10 February 1993, in: Rev. crit. 1993, 620 f., commentary by FOYER, also in: Clunet 1994, 124 f., commentary by BARRIÈRE-BROUSSE, also in: Dalloz 1994, 66 f., commentary by MASSIP. 60 PULJAK M.-P., Le droit international privé à l’épreuve du principe communautaire de non-discrimination en raison de la nationalité, Aix-Marseille 2003, at 306 f. 61 PULJAK M.-P. (note 60), at 309 f. This conflict rule adopts three connecting factors instead of one and extends in this way the circle of the beneficiaries of French law. It would appear that no value judgment with respect to the contents of foreign law, no assessment of the extent of the cleavage between French law and foreign law, will be necessary in future. French law may in these situations be invoked not exceptionally and as a result of the unpredictable chicane of public policy artifice, but regularly and directly by virtue of a conflict rule.

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VI. The Proper Constitutional Basis for a Challenge A.

Fundamental Rights vs. Principle of Equality

The whole debate between the Tribunal of Rome and the Constitutional Court revolved around Article 2 of the Constitution providing for ‘fundamental rights’, tacitly including the right to marry. It is undisputed that these rights accrue to foreigners.62 Can it be claimed that it is against the fundamental right to marry, as incorporated in Article 2, to prevent a foreigner, having his or her residence in Italy and/or wishing to marry an Italian citizen, from invoking the benefit of Italian law? To be able to say this, one has to argue that Italian substantive provisions on capacity to marry are the only ones complying with Article 2. This reasoning is not convincing in that it runs against the constitutional teachings. One of the underlying features of constitutional provisions on fundamental rights is that they set a core framework within which the legislator may determine freely the single rules implementing each particular right. As a result, two or more different specifications, that is two or more different sets of requirements to get married, may equally be compliant with the right to marry under Article 2.63 This is clearly recognised by scholars.64 There does not seem to be any reason why it should not be so with respect to foreign rules as well. Accordingly, there can be foreign rules differing from Italian ones and leading to a different substantive result in an individual case – typically to a refusal of solemnisation of marriage to a foreigner having capacity under Italian law – which are nonetheless not contrary to the fundamental right to marry under Art. 2, because, had the Italian legislator enacted such rules itself, they would have passed the constitutional test. If the denial of the benefit of Italian rules to the foreign citizen in these situations continues to be perceived as being contrary to constitutional public policy, a different constitutional basis should be searched for. We take the view that Article 3 setting forth the general principle of equality before the law may be of assistance. Though Article 3 mentions citizens only, the Constitutional Court has extended the benefit of equal treatment to foreigners, 62 See clearly Corte Cost., 15 November 1967, n. 120, in: Raccolta, 311 f, at 341; Corte Cost., 18 July 1986, n. 199, in: Giur. cost., 1986, 1563 f. Among the rulings on capacity to marry, see clearly Trib. Reggio Emilia, 29 September 1986 (note 54), at 268; Trib. Camerino, 12 April 1990 (note 54), at 801; cp. also Trib. Treviso, 15 April 1997 (note 54), at 745; Trib. Napoli, 29 April 1996 (note 54), at 455; Trib. Torino, 24 February 1992 (note 54), at 988; cp. NASCIMBENE B., ‘Il matrimonio del cittadino italiano all’estero e dello straniero in Italia alla luce della riforma del sistema di diritto internazionale privato’, in: Studi G. Broggini, Milano 1997, at 359. 63 Cp. BVerfG, 4 May 1971 (note 2), at 212-213, where the Court stresses both the discretionary power of the legislator when fixing the conditions of essential validity of marriage (such as the minimum age) as well as the constitutional limits within which such a power shall be used. 64 LAVAGNA C., Istituzioni di diritto pubblico, Torino 1986, at 889; CRISAFULLI V. / PALADIN L., Commentario breve alla Costituzione, Padova 1990, at 209.

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Multilateral Rule on Capacity to Marry and the Italian Constitution notably when it comes to fundamental rights, whenever there is no particular reason not to do so.65 Interestingly, the Court of cassation has on two occasions indirectly confirmed this by denying effect in Italy to a foreign labour law which was less favourable than Italian labour law, and by consequently awarding the benefit of Italian labour law, with respect to a foreign employee, the principle of equal treatment of Art. 3 being invoked as a legal basis.66 The Constitutional Court has itself ruled that an unequal treatment of foreign minors compared to Italian minors with respect to the possibility of benefiting from Italian law concerning the conditions for adoption is contrary to the principle of equality.67 While ruling on conflict cases regarding legal impediments to marry, a number of lower courts have also assumed that the principle of equality also applies to foreigners.68 A court went as far as to say that the non application to a foreign minor of the Italian rule protecting minors by preventing them to marry before 16 years of age may result in discrimination between citizens and foreigners which is contrary to the principle of equality before the law laid down in Art. 3.69 If citizens and foreigners wishing to marry Italians or being themselves Italian residents have to be treated equally with respect 65 See Corte Cost., 15 November 1967, n. 120, in: Raccolta, 311 f., at 341: ‘(…) se è vero che l’art. 3 si riferisce espressamente ai soli cittadini, è anche certo che il principio di eguaglianza vale pure per lo straniero quando trattisi di rispettare []i diritti fondamentali’ (i.e. those to which refers Art. 2); also see Corte Cost., 19 June 1969, n. 104, in: Raccolta 1969, 173 f., at 183; Corte Cost. 18 July 1983, in: Raccolta 1983, 479 f., at 486, 491, 495, as well as Corte Cost., 20 April 1988, n. 490 (ordinanza), in: Raccolta 1988, 83 f., at 85. 66 Cass. 6 September 1980, n. 5156, in: Giust. civ. mass. 1980, fasc. 9, and Cass. 25 May 1985, in: Giust. civ. mass. 1985, n. 3209, fasc. 5. 67 Corte Cost., 18 July 1986, n. 199, in: Giur. cost. 1986, 1562 f: ‘Pure il principio di eguaglianza risulta violato, restando limitato il favor minoris soltanto al cittadino e non anche allo straniero (…)’. 68 Trib. Genova, 4 April 1990 (note 54); Trib. Turin, 24 February 1992 (note 54), Trib. Potenza, 30 November 1989 (note 54), Trib. Barcellona, 9 March 1995 (note 54), Trib. Reggio Emilia, 29 September 1986 (note 54), Trib. Napoli, 29 April 1996 (note 54); Trib. Taranto, 13 July 1996 (note 54); Trib. Pisa 30/31 May 1996 (note 54), at 1007. PANOZZO R. (note 6), at 552, CANTA A. (note 5), at 455, VENCHIARUTTI A. (note 16), at 447, D’ARIENZO S. (note 1), at 933; cp. MESSINA S., ‘Capacità matrimoniale, impedimenti razziali e ordine pubblico internazionale’, in: Giur. compl. Corte Cass. 1946 I, 441 f., at 444. To be sure, the principle of equality was mainly used to reject unequal treatment based on religious beliefs of the interested parties, which means that Art. 3 may also be invoked by foreigners (who, in the reported cases, were predominantly Italian residents), in the sense that citizens and foreigners (who are resident in Italy) cannot receive a different treatment in Italy when wishing to enforce in Italy their right to marry based on religious reasons. However, the phraseology used by the courts is so general as to lead one to believe that different treatment between a citizen and a foreigner (who is resident in Italy) with respect to the enforcement of right to marry in Italy is hardly in line with the principle of equality regardless of the particular source of this different treatment: cp. GIARDINA A. (note 16), at 28-29. 69 Trib. min. Bologna, 9 February 1990, in: Dir. fam. pers. 1990, 928 f., esp. at 529; Trib. min. Roma, 19 July 1989, in: Dir. fam. pers. 1990, at 538, esp. at 540. See on these decisions, BALLARINO T. (note 13), 398-399.

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Gian Paolo Romano to this particular rule on capacity to marry, one may wonder why this should not be the same also with respect to the other rules on capacity to marry. As a prominent author recently pointed out, it is ‘when nationality (…) results in denying [foreigners] certain rights or benefits [awarded by the law of the forum] (…) then it may result in discrimination’.70 This is arguably the case when it comes to the right to marry. On the other hand, one should hasten to add that had a single connecting factor rule adopting residence or domicile been preferred by Italy, the inconsistency with Article 3 would have been even more difficult to justify, since all citizens are equal before the law, and the fact that a citizen lives abroad does not seem to represent per se a sufficient reason to deprive him or her of the benefit of national law to get married in his or her country (or abroad by consular authorities) based on the law of this country, as the venerable Article 3 of the Code civil and the widely recognized possibility of consular or diplomatic marriages seem to confirm.

B.

The Two Steps of the Equality Assessment

As has been authoritatively suggested, the assessment of the compliance or noncompliance of a particular provision with the principle of equality is divided into two distinct steps, which we will address separately here: the equality or rather the equivalence of two situations (giudizio di eguaglianza o di equivalenza) and the reasonableness (or unreasonableness) of the difference of treatment with respect to these two situations (giudizio di ragionevolezza).71 This assessment involves three elements: 1) the principle of equality, 2) the rule suspected of breaching this principle, which sets forth a particular treatment for a particular situation and 3) the rule setting forth a different treatment for a distinct situation, against which the equivalence of the two distinct situations caught by the two rules and, if this is verified, the reasonableness or unreasonableness of the difference of the treatment effected by the two rules have to be assessed. The rule suspected of breaching the principle of equality is the ‘outwardlooking’ branch of the conflict rule. The breach flows from its failure to grant the benefit of Italian law to foreigners who are resident or domiciled in Italy or wish to marry Italian citizens. The rule against which the assessment is conducted is the ‘inward-looking’ branch of the conflict rule that ensures the benefit of forum law

70 LAGARDE P., ‘Nationalité et droit international privé’, in: Annales de droit de Louvain 2003, at 217; ID. ‘Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures’, in: RabelsZ. 2004, 225 f., at 238-239. 71 PALADIN L., Il principio costituzionale d’eguaglianza, Milano 1965, esp. at 248 f.; CERRI A., ‘Uguaglianza (principio costituzionale di)’, in: Enc. giur., Roma 1994, at 9; SCACCIA G., Gli strumenti della ragionevolezza nel giudizio costituzionale, Milano 2000, at 50 f.; GHERA F., Il principio di eguaglianza nella Costituzione italiana e nel diritto comunitario, Padova 2003, at 47 f.

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Multilateral Rule on Capacity to Marry and the Italian Constitution to Italian citizens even if they are domiciled or resident abroad.72 The purpose is to see whether the treatment reserved by the second rule (application of Italian law) to the individuals caught by it (Italian citizens, even if resident abroad, wishing to marry in Italy) may be extended to the situations caught by the first rule (foreigners resident in Italy or wishing to marry Italian citizens in Italy) to which the first rule reserves a different treatment (denial of application of Italian law) because the situations are equivalent and the difference of treatment does not pass the reasonableness test.73

C.

Assessing the Equivalence of the Situations

1.

Substantive Equivalence and Spatial Equivalence

The condition triggering equal treatment of two individuals is that these two individuals are in equivalent situations or conditions (‘treat like cases alike’). When a State applies this principle in international cases, the equivalence (or ‘likeness’) requirement is arguably twofold: substantive conditions should be equivalent and ‘conditions of proximity’, i.e. the strength of the connections, should be equivalent. With respect to equivalence in terms of proximity, which one may also describe as ‘spatial equivalence’, the principle of equality in its negative formulation (‘treat different cases differently’)74 appears to direct that the law of the forum allowing for marriage in the forum should not benefit all foreigners but, as will be shown below, only those foreigners who have an otherwise significant link with the forum. Indeed, the legitimacy of an individual’s claim to the protection of the law of a country is proportional to the strength of the connection between this individual and that country.75 An individual having no ties directly or indirectly with that country cannot claim the protection of the law of that country, in any event not on an equal basis with an individual having a connection with that country, because

72 For the English terminology ‘inward-looking’ and ‘outward-looking’, see e.g. SYMEONIDES S., The American Choice-of-Law Revolution in the Courts: Today and Tomorrow, Rec. cours 2002, t. 298, at 372. 73 As GHERA F. (note 71), at 50-51, points out, the equality assessment may aim at one of two following purposes: a) extension of the reach of a particular rule to other situations due to a similarity of these situations to those already caught by that rule; b) restriction of the scope of application of a particular rule due to the fact that it illegitimately fails to differentiate between different situations. 74 See PALADIN L., ‘Corte costituzionale e principio generale d’eguaglianza: Aprile 1979 – dicembre 1983’, in: Studi V. Crisafulli, vol. II, 1985, 605 f., at 614 f.; GHERA F. (note 71), at 33 f. 75 KOGAN T., ‘Towards A Jurisprudence of Choice of Law: The Priority of Fairness over Comity’, in: 62 N.Y.U.L. Rev 651 (1987), passim; cf. SALERNO F., ‘L’uguaglianza di trattamento rispetto all’applicazione di ordinamenti diversi nel diritto internazionale privato’, in: BAREL B. / COSTANTINO B. (note 2), 36 f., esp. at 42 f.

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Gian Paolo Romano these two individuals are most assuredly non in ‘like cases’ or situations in terms of proximity, even if the requirement of substantive equivalence is fulfilled.76

2.

Equivalence Between Citizens Domiciled Abroad and Foreigners Domiciled in the Forum

Interestingly, the Constitutional Court suggested (almost forty years ago) that what may reasonably justify a difference of treatment between a citizen and a foreigner with respect to the enforcement of a fundamental right is a difference in the ‘factual situation’ of the two subjects.77 The Court reasoned that, while the citizen usually has a domicile in the forum and may reside there freely and with no limitation, a foreigner usually has no such domicile and his or her stay in the forum has to be authorised and is generally limited, unless he or she is granted a right of establishment. All this – the Court concluded – comes down to the ‘basic difference existing between the citizen and the foreigner’, according to which the citizen normally has a connection with the forum which ‘is original and in any event permanent’, while the foreigner is usually connected to the forum ‘in a non-original and precarious way’.78 This phraseology, whose current aptness is not explored here any further, shows that the proximity between an individual and the forum may play a role when it comes to equal treatment before the law of the forum. If what may ultimately justify unequal treatment is that a citizen is domiciled or resident in the forum and, more generally, has a strong, permanent connection with the forum, whereas the foreigner has no such domicile or residence and his or her connection is therefore usually tenuous and temporary, one is driven to conclude that this 76

Interestingly, an author (SALERNO F., note 75, esp. at 38-39), suggested that the constitutional principle of equality may also positively direct how to fill the lacuna brought about when the Constitutional Court struck down Art. 18 of the Preleggi because it contradicted the principle of equality (see note 56). In his view, a solution would be to ‘ensure [the application of] the same substantive law to all situations which are in abstracto comparable’ (the translation is ours). This law is arguably the lex fori (the context of the author’s reasoning seems to confirm this). The author is careful to caution that it is advisable to ‘restrict the scope of the principle of equality on the basis of reasonableness by considering the specific connection which the single situation presents with a particular legal order’. If this legal order is, under the perspective of a State, the one of the forum (again, this appears to be the framework of the author’s stance), the principle of equality may direct that Italian (substantive) law shall apply to all situations presenting with Italy (not necessarily the same connection, but) connections which are ‘reasonably significant’. The author concludes that is arguably the most appropriate way of understanding equality in private international law (‘pur mancando indicazioni specifiche della Corte sul punto in esame, le sue recenti decisioni in materia di diritto internazionale private possono essere lette proprio nel senso testé indicato, che è poi quello maggiormente coerente con l’approccio tradizionale seguito dal giudice della costituzionalità in merito all’applicazione del principio di uguaglianza’). 77 Corte Cost. 19 June 1969 (note 55), at 183-184. 78 Ibidem.

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Multilateral Rule on Capacity to Marry and the Italian Constitution balance of proximity changes if the citizen has his or her domicile or residence abroad while the foreigner has a permanent domicile or residence in the forum.79 Indeed, nationality is normally a strong link but domicile or residence are normally strong links as well, so much so that, as comparative conflicts law has never ceased to confirm, any attempt to state which of the two is more significant is probably doomed to permanent failure.80 Accordingly, one may argue that two individuals fulfilling the requirements to get married under the law of a country (substantive likeness), of whom one is connected to that country through nationality (even if he or she resides abroad) and the other through domicile or residence (even if he or she is foreign national), also comply with the likeness requirement in terms of proximity, and as such may claim equal treatment. If this is so, the Italian conflict rule may prove incompatible with the principle of equal treatment of individuals finding themselves in equivalent situations – such individuals being, on the one hand, Italian citizens, even if domiciled or resident abroad, and, on the other, domiciliaries or residents in Italy, even if foreign nationals. This incompatibility, which may result in a prohibited discrimination if it does not pass the reasonableness test, flows from the fact that they are treated unequally before the law – before the substantive law of the forum – for the former is allowed to claim the benefit of such law and the latter is not, even though in principle they both demonstrate a substantially equivalent links with the Italian social community and comply with the same substantive conditions,. As has been authoritatively suggested by a French author, a way, arguably the only one, for a State to avoid any such discrimination is to adopt both nationality and domicile or residence81 to the effect of allowing both citizens and residents or domiciliaries to benefit from its law. A similar conclusion has been reached by some Italian authors with respect to Italian provisions on divorce.82 79 GAJA G., ‘Sulle relazioni fra norme di diritto internazionale privato e principio di eguaglianza’, in: BAREL B. / COSTANTINO B. (note 2), at 80, suggests that, in order to be compatible with the principle of equality of Art. 3 of the Constitution, the selection of the connecting factors incorporated in the conflict rule by the forum should not be ‘arbitrary’ and should respond to ‘reasonableness’, which is, according to the author, substantiated by the strength and the significance of the selected connections. As a result, one may also say that the exclusion of a connecting factor shall be ‘reasonable’ and ‘non-arbitrary’ and argue on this basis that offering the right to marry under forum law to a citizen who is resident abroad and excluding it to a foreigner having residence in the forum may be problematic with respect to the ‘reasonableness’ test. 80 The Italian reported cases on capacity to marry (see note 54) are insofar uninteresting as all the Italian citizens (without exception) involved were also resident in Italy. One may argue therefore that the application of Italian law could retrospectively be just as well justified on the basis of their residence in Italy. 81 LAGARDE P., ‘Nationalité’ (note 70), at 217: ‘si le critère de l’Inlandsbeziehung [i.e. the connection with the forum which directs the application of the law of the forum] est alternativement la nationalité et le domicile, le problème [of the discrimination] disparaît’. 82 These authors have argued in essence that the ‘technique of alternative connecting factors’, which appears to be the only way to make forum law available beyond the single category of beneficiaries identified by the single connecting factor rule, is more in line with

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Gian Paolo Romano 3.

Equivalence Between Citizens Regardless of the Nationality or Residence of their Proposed Spouse

So far we have focused on the situation of foreigners who are resident or domiciled in Italy, which accounts for a fair proportion of the reported cases.83 Equality may arguably operate in yet another direction. The refusal to solemnise in Italy the marriage between an Italian citizen and a foreign citizen – both of whom have capacity under Italian law – equally affects the Italian citizen because the right to marry the person of his or her choice is ultimately denied to him or her.84 There the Constitution: see clearly MARI L., ‘Valori costituzionali e valori di diritto internazionale privato: i termini del confronto’, in: BAREL B. / COSTANTINO B. (note 2), 47 f., at 66 (also see the communication by STROZZI G, ibidem, at 104 f.); BALLARINO T. (note 13), at 74. As an author – GAJA G. (note 79), at 80 – suggested, also in the context of divorce, Art. 3 of the Constitution may be of further relevance in relationships between two foreigners. It would not amount to a ‘reasonable’ difference of treatment between two foreigners (resident in Italy) whose national laws prohibit the marriage in a specific case whereas Italian substantive law would permit it in such a case, consisting in allowing one of them to invoke Italian law because his or her law so widely differs from Italian law that it thoroughly ignores the institution of divorce, and to prevent the other to do so on the basis that his or her law does contemplate such an institution but considers that the conditions for divorce in the particular case are not fulfilled (see in this sense BARATTA R., Scioglimento e invalidità del matrionio nel diritto internazionale privato, Milano 2004, at 26 and BUCHER A., Le couple en droit international privé, Genève [etc.], 118-119). By the same token, it is difficult to defend the reasonableness of the difference of treatment consisting in allowing the solemnisation of a marriage based on Italian law to a foreigner (resident in Italy) where the foreign substantive impediment is contrary to the basic conception of the forum and to refuse such a solemnisation to a foreigner (equally resident in Italy, equally having no capacity under his or her national law and equally having such a capacity under Italian law) because the foreign substantive impediment is not per se contrary to the forum basic conception of marriage. 83 Trib. Rome, 2 January 1979, Trib. Potenza, 30 November 1989, Trib. Genova, 4 April 1990, Trib. Napoli, 29 April 1996 (all of which referenced in note 54 above). Though in a number of other cases (Trib. Roma, 9 July 1968, Trib. Reggio Emilia, 29 September 1986, Trib. Verona, 6 March 1987, Trib. Camerino, 12 April 1990, Trib. Torino 24 February 1992, Trib. Torino, 24 June 1993, Trib. Barcellona, 9 March 1995, Trib. Taranto, 13 July 1996, Trib. Treviso, 15 April 1997, all of which also referenced in note 54 above), the place of residence of the foreign spouse is not evident from the facts of the decision, it is likely that this place was in Italy (except possibly for the cases adjudicated by Trib. Reggio Emilia, Trib. Camerino and Trib. Treviso, where little or no information about the foreign spouse was available to the court). 84 Trib. Pisa 30/31 May 1996 (note 54); cp. BVerfG (note 2), at 220. Interestingly, the case law shows that the Italian spouse more often than not joins the foreign spouse in challenging the refusal of solemnisation by the civil registrar (see Trib. Roma, 9 July 1968, Trib. Reggio Emilia, 29 September 1986, Trib. Potenza, 30 November 1989, Trib. Treviso 15 April 1997, Trib. Barcellona 9 March 1995, Trib. Pisa, 30/31 May 1996, Trib. Taranto 13 July 1996, all of which quoted in note 54 above) and sometimes he or she is the only one who formally takes action (e.g. Trib. Camerino, 12 April 1990). It is also interesting to note that the Tribunal of Pisa asserted jurisdiction on the basis inter alia of Art. 9 of the

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Multilateral Rule on Capacity to Marry and the Italian Constitution seems to be some arguments in support of construing the principle of equality between (this time) two Italian citizens so as to imply that both shall be able to marry the partner of their choice – regardless of the latter’s nationality or citizenship residence85 – under the same conditions. Under this perspective, the substantive requirements imposed upon their partners are ultimately – at the same time – substantive requirements imposed upon themselves, for the enforcement of their own right to marry is entirely conditional on compliance with these requirements as well. Accordingly, a rule requiring the two proposed spouses of two Italian citizens to comply with different substantive requirements depending on their national laws may be contrary to the principle of equality between these two Italian citizens because, in spite of them fulfilling identical conditions with a view to enforcing their right to marry, including with respect to their partners (all four having ex hypothesis capacity under Italian law), these two Italian citizens are treated unequally in that one of them may enforce his or her right to marry and the other may not.86 Interestingly, a recent decision has authorised solemnisation of marriage despite foreign prohibition by focusing particularly on the situation of the Italian spouse.87 One may argue, therefore, that, in the few cases where Italian Italian PIL Act by maintaining that the ‘decision [on the challenge] concerns an Italian citizen’. 85 Cp. the anonymous annotator of Trib. Reggio Emilia, 29 September 1986 (note 54), at 271: ‘Fra le libertà del cittadino vi è certamente quella di potere contrarre matrimonio con chi desidera’. 86 The practical purpose for which the decision n. 71 of 1987 by the Constitutional Court was sought (the three cases triggering it – see note 56 – indicate this) was to allow all Italian citizens (at least if resident in Italy), no matter whether husbands or wives, to obtain a divorce or separation in Italy under Italian law (cp. the commentary of this decision by ANCEL B., in: Rev. crit. 1987, 569 f., at 577; in favour of this solution, see MARI L., note 82, at 66 f., SALERNO F., note 75, at 41 f., PISILLO MAZZESCHI R., note 16, at 34 f., GAJA G., ‘Divorzio per indivorziabilità secondo leggi straniere’, in: Riv. dir. int. 1987, at 352 f. and ID., note 71, at 80). This implies of course that the national law of the foreign spouse, whichever it is and whatever it provides, should not stand in the way, e.g. should be disregarded. The inevitable ‘by-product’ of the implementation of such a ‘scheme’ is that the Italian law on conditions for divorce and separation extends to the foreign spouse (whether man or woman) of the Italian citizen: not only does she or he inevitably have to endure the application of Italian law but he or she can also benefit from it, notably by joining the Italian citizen in invoking it or even by invoking it against the Italian spouse (see MARI L., note 82, at 66 f.), as happened in the case before the Tribunal of Palermo (see note 58; cp. ANCEL B., in this note, at 573). Similar reasoning may apply with respect to solemnisation of marriage: if one wishes to grant an Italian citizen (at least when he or she is resident in Italy) the full benefit of Italian law, the national law of the foreign spouse, whichever it is and whatever it provides, shall not stand in the way, i.e. shall be disregarded. As a ‘by-product’ of this, the benefit of Italian law is extended to the foreign spouse to the effect that he or she may also invoke this law regardless of his or her nationality and residence (contrary to what happens in divorce or separation, it would be unthinkable for him or her to invoke Italian law against the proposed Italian spouse!). 87 Trib. Pisa, 30/31 May 1996 (note 54), at 1006 and 1009.

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Gian Paolo Romano courts allowed non-resident foreign citizens to marry in Italy,88 the extension of the benefit of Italian law to these foreigners is the consequence or the ‘by-product’ rather than the ultimate purpose, such a purpose being primarily to allow the Italian spouse to enforce his or her right to marry under Italian law, which includes the right to marry the partner of his or her choice regardless of his or her nationality or residence and upon no stricter conditions than the ones set forth by such a law.89

D.

Assessing the Reasonableness of the Difference of Treatment

According to constitutional teachings and case law, the difference of treatment may still be justified under Art. 3, despite the equivalence of two situations, if such a difference of treatment is ‘reasonable’.90 The assessment of reasonableness implies the identification of the purpose of the rule at stake and, consequently, of the difference of treatment (which is sometimes called ratio distinguendi).91 However diverse the reasoning techniques and patterns used by the Constitutional Court, one may generally say that the reasonableness test implies reasonableness of purpose, on the one hand, and reasonableness of instrument, on the other. The purpose is reasonable when the difference of treatment fosters other constitutional values or, at least, when it is not contrary to other constitutional values.92 This brings into play other provisions of the Constitution and, if more than one is at stake and they are in

88

Trib. Pisa, 30/31 May 1996 (note 54); Trib. Belluno, 18 May 2002 (note 54). This line of reasoning leads one to conclude that, while a foreigner having his or her residence or domicile in Italy may directly claim the benefit of Italian law for him or herself based on his or her connection with this country, such benefit is extended to the foreigner having no residence in the forum only indirectly, i.e. through the person of his or her spouse, an Italian citizen or, possibly, an Italian resident, and, so to say, by way of ‘attraction’. Be that as it may, it is interesting to note that GAJA G. (note 79), at 79 concludes (with respect to divorce) that the ‘Italian rules implementing constitutional principles’ shall have a certain scope of application (internationally) and that according to BALLARINO T., Diritto internazionale privato, Padov 1982, at 148 – the Constitution requires that this scope of application shall be independent of, i.e. shall not be restricted to, the one which the traditional conflict rule reserves to law of the forum, i.e. – we take the liberty of so explicating the author’s view – shall be larger than this one (also see BVerfG 4 May 1971, note 2, at 218). In a similar vein, GIARDINA A. (note 16), at 28, suggests that this scope is determined by all situations having ‘the contacts deemed to be necessary and sufficient’ with Italy. If Italian rules on capacity to marry do fall within this category, one may conclude that the Constitution directs that beneficiaries of such rules shall be all those presenting a sufficient contact with Italy, including foreigners who are resident in the country. 90 GHERA F. (note 71), at 53-54. 91 See recently Corte cost. 441/2000 on which GHERA F. (note 71), at 49, note 30; also see Corte cost. 54/1968, 132/1984, 43/1987, 55/1989: see CRISAFULLI V. / PALADIN L. (note 54), at 20. 92 GHERA F. (note 71), at 56 f. 89

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Multilateral Rule on Capacity to Marry and the Italian Constitution conflict between one another, a balancing of them may be necessary or advisable.93 The instrument is reasonable when it is appropriate, that is when it is neither insufficient nor disproportionate with respect to the purpose.94

1.

Purpose of the Difference of Treatment

The essential purpose for which foreigners having their residence or domicile in Italy or wishing to marry Italian citizens are denied access to Italian marriage law in Italy is that the marriage so celebrated might not be recognized in their national country, which would generate for them and their Italian partners a limping relationship.95 Having said this, one may doubt whether this philosophy would pass either of the two tests discussed above.

2.

Appropriateness of the Instrument

The instrument – denial of the benefit of Italian law – appears to be irrationally disproportionate insofar as an increasing number of countries tend to set aside the traditional choice of law test when recognising marriages celebrated abroad96. Rather than peremptorily refusing access to Italian law, the conflict rule may make Italian law on capacity to marry available to foreigners on the condition that the marriage so celebrated in Italy will be recognized by the foreign country.97 This solution would be more rational in that it would ensure both avoidance of limping relationships and compliance with the principle of equal treatment, without unnecessarily sacrificing any of the values at stake.

3.

Reasonableness of the Purpose

The purpose of avoiding the disruption of international uniformity by creating a limping relationship means that uniformity – which is ex hypothesis only attained by denying the benefit of Italian law and, as a result, by prohibiting the solemnisa93

See among many others Corte cost. 26/1979; 132/1982, 126/1985, quoted by CRISAFULLI V. / PALADIN L. (note 54), at 21. 94 SANDULLI A.M., ‘Il principio di ragionevolezza nella giurisprudenza costituzionale’, in: Dir. soc. 1975, at 563 f., LAVAGNA C., ‘Ragionevolezza e legittimità costituzionale’, in: Studi C. Esposito, Padova 1972, at 1573 f., CERRI A., L’eguaglianza nella giurisprudenza della Corte costituzionale, Milano 1976, at 97 f., GHERA F. (note 71), at 58 f. 95 See clearly BVerfG (note 2), at 219; cp. ANCEL B. (note 86), at 374, BARATTA R. (note 83), at 24 (with respect to divorce). 96 See ROMANO G., in: Rev. crit. 2006 (forthcoming). See for a similar argument with respect to divorce, BARATTA R. (note 83), at 24. 97 See for a similar mechanism, Art. 43(2) and 44(1) of the Swiss LDIP.

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Gian Paolo Romano tion of marriage – is a more important value than granting such a benefit to a foreign citizen having his or her domicile or residence in Italy and, more generally, to a couple involving an Italian citizen (at least if also resident in Italy), on an equal basis with a couple of two Italian citizens residing abroad, thereby solemnising a marriage which will then be valid and thoroughly effective in Italy. Does this hierarchy of values conform to the Constitution, with regard particularly to the promotion of the creation of a legitimate family through the solemnisation of a marriage (favor familiae, which implies the favor matrimonii), the awareness of whose beneficial effects to society at large emanate from a number of Constitutional provisions?98 The invariable use of public policy by the courts to the effect of allowing the extension of the benefit of Italian law in the above cases, particularly with respect to impediments of such a nature that the risk of non recognition in the country of origin is high, suggests that such a hierarchy of values is constantly reversed. Such a reversal of hierarchy – it is a fact – has been perceived by courts as more in tune with justice.99 Can one go a step further and suggest that this is because the hierarchy underlying the traditional conflict rule is not in line with the Constitution or at all events is less so than the one flowing from the reversal of this hierarchy? In 1987 the Constitutional Court struck down the conflict rule that sought to avoid generating an Italian divorce with little or no chance of being recognized in the foreign national country of (only) one of the spouses – the husband. In its decision, the Court implicitly refused to attach any weight to such (limited) non-recognition.100 Its ruling further suggests that giving to any couple involving an Italian citizen access to Italian divorce law is a better option, arguably in that it is more respectful of the constitutional hierarchy of values.101 This ruling has led some authors to suggest that the right for international couples to obtain a divorce in Italy is now based in the Constitution, implicitly considering irrelevant or in any event 98

Art. 29 f., particularly Art. 31. On the favor familiae and favor matrimonii in the Constitution, see GRASSETTI C., ‘I principi costituzionali relative al diritto familiare’, in: CALAMANDREI P. / LEVI A., Commentario sistematico alla Costituzione italiana, 1949, at 312 f.; BESSONE P., ‘Commentario all’art. 29 Cost.’, in: Commentario alla Costituzione, vol. II, Bologna 1977, at 1 f.; LAVAGNA C. (note 54), at 887 f.; SALERNO G., ‘Commentario all’art. 31’, in: CRISAFULLI V. / PALADIN L. (note 54), at 214 f.; BARILE P. / CHELI E. / GRASSI S., Istituzioni di diritto pubblico, 8th ed., Padova 1998, at 696; CUOCOLO F., Istituzioni di diritto pubblico, 11th ed., Milano 2000, at 739. 99 A court has peremptorily stated the utter irrelevance of a non recognition in the national country of the foreign spouse of a marriage to be celebrated in Italy when discussing whether or not to solemnise it. See Trib. Roma, 9 July 1968 (note 54), at 466: ‘Né, infine, può avere rilevanza, al fine che ne occupa, il fatto che il matrimonio civile de quo potrà essere dichiarato nullo nell’ordinamento spagnolo. Trattasi, infatti, di una conseguenza giuridica, peraltro eventuale, che non può avere alcuna efficacia nella sfera territoriale del nostro Stato, nel cui ambito il matrimonio potrà restare pienamente valido’. 100 See note 58 above for references. 101 This was the content of Art. 12-quinquies of law n. 74 of 1987.

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Multilateral Rule on Capacity to Marry and the Italian Constitution less relevant the concern for the avoidance of limping divorces as well as the values underlying such a concern.102 Though it is not entirely clear who are the beneficiaries of such a right, it is nonetheless clear that they are by far more numerous than Italian citizens alone and presumably include at least all couples involving a spouse having Italian nationality and possibly also, alternatively, his or her residence in Italy.103 It is tempting to conclude that, if the Constitution mandates that the right to claim the protection of Italian law on divorce extends to these categories of individuals despite the absence of any reference whatsoever to the dissolution of marriage in the Constitution,104 it is all the more justified to extend a right to invoke the protection of Italian law on marriage to a similar circle of individuals, given that marriage is expressly favoured by the Constitution and – what seems paramount – that to do so invariably corresponds, contrary to divorce, to the common intention of both spouses. Interestingly, in what has been described as the ‘most significant decision on private international law of the whole century’,105 the German Constitutional Court has suggested that it would not be in line with the constitutional idea of individual freedom and the associated self-responsibility, nor with the constitutional conception of marriage, to refuse the amenities of a marriage – which ex hypothesis is not only permissible under forum law but also encouraged by the forum Constitution – based on the sole concern to avoid for the proposed spouses the prospective prejudice flowing from non recognition in the foreign country (of the nationality of a spouse).106 It would seem therefore that such constitutional freedom and responsibility involve an equally constitutionally-based freedom to assume the risk of a limping marriage,107 which freedom may therefore hardly be restricted by the legislator. For all of these reasons, the hierarchy of values underlying the traditional conflict rule may not be compliant with the Italian Constitution. By giving priority to uniformity and, consequently, refusing the benefit of a marriage permissible 102 See PISILLO MAZZESCHI R. (note 16), at 35; cp. MARI L. (note 82), at 66 f., SALERNO F. (note 75), at 41 f. 103 Cp. BALLARINO T. (note 13), at 440; PISILLO MAZZESCHI R. (note 16), at 35. 104 The absence of any reference to the ‘principle of dissolubility’ of marriage in the Italian Constitution ultimately suggests that divorce is not imposed per se to the legislator by the Constitution. What the Constitution directs is arguably that, if the Italian legislator makes provisions for the possibility to divorce, which it is free to do or not to do (the opposite principle of indissolubility not having been incorporated in the Constitution of 1948, though the majority in favour of this solution was a thin one: 194 vs. 191: see CUOCOLO F., note 98, at 731-732), such possibility, if and once provided, should be made available to certain categories of individuals. This cannot be based but on Art. 3 of the Constitution on equal treatment before the law. 105 Cp. LEQUETTE Y., ‘Le droit international privé et les droits fondamentaux’, in: CABRILLAC R. / FRISON-ROCHE M. A. / REVET TH., Droits et libertés fondamentauxs, Paris 2003, 8th ed., at 84, referring to BVerfG of 4 May 1971 (note 2). 106 BVerfG (note 2), at 222-223. 107 Ibidem, at 223.

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Gian Paolo Romano under Italian law to a foreigner resident in Italy or wishing to marry an Italian citizen on an equal basis with an Italian citizen resident abroad, the traditional conflict rule denies the benefit of Italian law to such individuals even if they are determined to take the risk of non-recognition in the national country of the foreign spouse. Against this constitutional background, the purpose of the exclusion of such individuals from the benefit of Italian law which is pursued by the singlefactor nationality rule hardly meets the ‘reasonableness’ test.108

VII. Conclusions The Tribunal of Rome suspected a lack of harmony between the Constitution and the private international law provisions relating to solemnisation in Italy of a marriage between an Italian citizen and a foreigner, notably when the latter has his or her domicile or residence in Italy. Though its attention was diverted to the ancillary question of whether the Constitution points to ways of dealing with non-delivery of the foreign no-impediment certificate, the Tribunal of Rome was not fully satisfied with recourse to public policy to resolve the issue. To the extent that public policy is triggered each time Italian law would allow marriage to the foreign national but foreign law would not, as appears to be the case, that exceptional instrument does not operate soundly. One is tempted to suggest that the problem rests not so much in the contents of the foreign law but in the conflict rule itself in that it reserves the benefit of Italian law to Italian nationals and denies it to foreigners having their domicile or residence in Italy or wishing to marry Italian nationals. The conflict rules of a rising number of European countries directly include in the range of beneficiaries of their rules on essential validity of marriage their nationals, their domiciliaries or residents as well as individuals who are neither their nationals nor their domiciliaries or residents but who wish to 108

Interestingly, all European countries having enacted legislation on registered partnerships have adopted a conflict rule which also make their substantive rules on conditions for registration – which are often identical to those for solemnisation of a marriage – available to a large number of categories of individuals, including their nationals and their domiciliaries or residents and, more often than not, foreigners having no residence or domicile in the forum but wishing to marry one of its nationals or domiciliaries or residents (see ROMANO G., in: Rev. crit. 2006, forthcoming). While meditating on this new challenging field of law, a number of authors have explained that the reason why the traditional single connecting factor conflict rule has been set aside in favour of a new rule enlarging the circle of the direct beneficiaries of the forum law is that the traditional rule would have been discriminatory in that foreigners would have often been prevented from having access to forum law even if, we may add, they have their residence or domicile in the forum or wish to marry forum nationals. See e.g. KESSLER G., Les partenariats enregistrés en droit international privé, Paris 2004, at 125; also see ROMANO G., in: Rev. crit., 2006 (forthcoming).

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Multilateral Rule on Capacity to Marry and the Italian Constitution marry nationals or domiciliaries or residents. This is also true with respect to registered partnerships of virtually all European countries having enacted rules in the field. No recourse to judicial authority or to public policy is then necessary. The rules existing in Italy force the civil officer to refuse the celebration, the parties to challenge this refusal and the Tribunal to use public policy to authorise the celebration. This process would still make sense if there were cases in which the Tribunals did not grant authorisation even though the foreigner had capacity under Italian law. Since this, as said, does not appear to be the case, this process risks being needlessly and irrationally laborious. Just as the concern for non discrimination between foreigners and citizens has been used to justify the new rules on capacity to register a partnership, one may argue that the same concern is responsible for the adoption of such conflict rules on marriage as exist in a number of countries and, in Italy, for the distorted use of public policy in order to attain the same result. To the extent that one considers that such discrimination is not in line with the constitutional principle of equality before the law, one may doubt whether the conflict rule adopting the sole nationality as regards capacity to marry would pass the constitutional test. If this has gone undetected so far, this is arguably because public policy, whose natural purpose and logic is to bring the foreign substantive law in harmony with fundamental policies of the forum – which more often than not, and almost invariably in the field of family law, are constitutionally-based – was silently misused to make the conflict rule of the forum reconcilable with the forum’s Constitution.

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NEWS FROM THE HAGUE ________________

THE HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW WORK IN PROGRESS (2004-2005)∗ J. H. A. VAN LOON∗∗

I

Twentieth Session of the Hague Conference on Private International Law A. Adoption of the Convention on Choice of Court Agreements B. Hague Conference Membership Opens to Regional Economic Integration Organisations

II.

Hague Children’s Conventions A. Regional Work on the Cross-Border Protection of Children B. Special Commission on Maintenance C. Preparation for Special Commission on Inter-Country Adoption D. Information Technology Support for the Abduction Convention

III.

International Legal Co-operation and Litigation A. International Forum on Electronic Notarization and Electronic Apostilles B. Service of Process Abroad

IV

International Commercial and Finance Law A. Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary B. International Conference on the Legal Aspects of an E-Commerce Transaction C. Co-operation with Sister Organisations

V.

Growth of the Hague Conference

∗

For earlier reviews, see this Yearbook, Vol. I, 1999, pp. 205-214; Vol. II, 2000, pp. 169-178; Vol. III, 2001, pp. 237-244; Vol. IV, 2002, pp. 219-226; Vol. V, 2003, pp. 169-175; Vol. VI, 2004, pp. 237-245. ∗∗ Secretary General of the Hague Conference on Private International Law. Yearbook of Private International Law, Volume 7 (2005), pp. 239-247 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

J. H. A. van Loon

I.

Twentieth Session of the Hague Conference on Private International Law

Introduction From 14 to 30 June 2005 the Twentieth Ordinary Session of the Hague Conference since 1893 took place at The Hague. Delegations from 43 States and 16 international organisations participated in this Diplomatic Conference, which was chaired by Professor A.V.M. (Teun) Struycken, President of the Netherlands Standing Government Committee on Private International Law. The following delegates were elected as vice-chairs: H.E. Mrs Hanqin Xue (China) and Messrs David Bennett (Australia), João Grandino Rodas (Brazil), Rolf Wagner (Germany) and Arthur von Mehren (USA).1 A Closing Ceremony in the Great Hall of Justice of the Peace Palace concluded the meeting on 30 June 2005 with the signing of the Final Act by the delegations of the Member States that had participated in the Session. Highlights from this meeting included the adoption of the Convention on Choice of Court Agreements and the opening of Hague Conference membership to Regional Economic Integration Organisations.

A.

Adoption of the Convention on Choice of Court Agreements

Three years ago, it was decided to take a new approach to working methods and the possible scope of a worldwide Convention on jurisdiction and recognition and enforcement of judgments. On the basis of an informal process conducted by the Permanent Bureau, notably by First Secretary Andrea Schulz, with experts from the Member States, a Special Commission was convened in December 2003 and again in April 2004. The late Professor Allan Philip from Denmark chaired the meetings. The Special Commission produced a draft Convention and mandated two co-Reporters, Professor Trevor Hartley (United Kingdom), and Masato Dogauchi (Japan), to prepare a draft Explanatory Report. First Secretary Andrea Schulz had the primary responsibility, on behalf of the Permanent Bureau, for the preparation of the negotiations and drew up important additional reports.2 The negotiation of the Convention on choice of court agreements and recognition and enforcement of judgments based upon such agreements was consigned to a Commission (Commission II) chaired by Professor Andreas Bucher 1

Sadly, Professor von Mehren passed away on 16 January 2006. See Prel. Doc. No 28, Report on the meeting of the Drafting Committee of 18-20 April in preparation for the Twentieth Session of June 2005 – April 2005; Prel. Doc. No 31, The American instruments on private international law – a paper on their relation to a future Hague Convention on exclusive choice of court agreements – June 2005; and Prel. Doc. No 32, The future Convention on exclusive choice of court agreements and arbitration – June 2005, all available at www.hcch.net under ‘Conventions’ ‘Convention of 30 June 2005 on Choice of Court Agreements’, ‘Preliminary Documents’. 2

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The Hague Conference on Private International Law from Switzerland. After two and a half intense weeks, the Convention on Choice of Court Agreements was adopted by consensus on 30 June 2005. This Convention will bring benefits to international trade and investment and work as a longawaited corollary to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

B.

Hague Conference Membership Opens to Regional Economic Integration Organisations

Further to the request of the European Community of December 2002 to become a Member of the Hague Conference on Private International Law and further to the subsequent consultation undertaken by the Secretary General,3 the Special Commission on General Affairs and Policy of the Conference at its meeting of 31 March-1 April 2005, under the chairmanship of Mrs Monique Jametti Greiner from Switzerland, adopted a draft Recommendation to the Twentieth Session of the Hague Conference with respect to the admission of the European Community as a Member and required amendments to the Statute of the Conference. The negotiations were finalised during the Twentieth Session by a Commission (Commision I), once again chaired by Mrs Monique Jametti Greiner. On 30 June 2005, States represented at the Twentieth Session adopted the amendments of the Statute allowing for Regional Economic Integration Organisations to become Members of the Hague Conference. In accordance with a procedure adopted at the same time, the Secretary General invited on 12 July 2005 the Member States to cast their votes on the amendments, if possible within a period of nine months following the Session, by notification to the Permanent Bureau. Once the required votes will have been received, but not before 31 March 2006, the Secretary General will draw up a procès-verbal declaring that the amendments have been approved. Their date of the entry into force will be the first day of the month following the expiration of three months after the date of the procès-verbal. A meeting on general affairs and policy convened shortly after the entry into force of the amendments will decide upon the admission of the European Community in accordance with the amended Statute.

II.

Hague Children’s Conventions

A.

Regional Work on the Cross-Border Protection of Children

The essential monitoring, assistance and support in respect of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction, the Hague Convention of 29 May 1993 on Protection of Children and Co-operation in 3

See: Hague Yearbook 2004, pp. 365-366.

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J. H. A. van Loon Respect of Intercountry Adoption and the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children have intensified considerably over recent years, including regional efforts by the Permanent Bureau to assist the effective implementation of the Hague Conventions. As reported in last year’s volume of the Yearbook,4 a successful regional seminar for 90 Latin American judges was held in December 2004 in Monterrey, Mexico. With a view to strengthening the effective implementation of the Conventions in the region, it has been possible to employ the assistance of a Liaison Legal Officer for Latin America to implement the special programme. As a follow-up to the Monterrey Seminar, the Permanent Bureau, with the support of The Hague Forum for Judicial Expertise, organised an advanced judicial seminar for Latin American States for winter 2005. Furthermore, preparations were made for a second Malta Judicial Conference for March 2006, which would involve a wider range of States from both ‘Hague Convention’ and ‘non-Hague Convention’ States from the Middle East and North Africa to examine crossfrontier family law issues. Some exploratory work has also been undertaken in the Southern and Eastern African regions with a view to identifying ways to lend support to existing efforts to improve the cross-border protection of children in the regions.

B.

Special Commission on Maintenance

From 4 to 15 April 2005, the Special Commission charged with the elaboration of a new global convention on child support and other forms of family maintenance met for the third time. Representatives from 41 Member States of the Hague Conference, 9 non-Member States, 5 intergovernmental organisations and 7 nongovernmental organisations attended. The meeting had been prepared by Deputy Secretary General, William Duncan with the assistance of the First Secretary, Philippe Lortie, and was chaired principally by Judge Fausto Pocar, expert form Italy, but also from time to time by Ms Mária Kurucz, expert from Hungary. In addition to the usual English / French interpretation, Spanish interpretation was offered at this meeting and will be offered again at the next meeting of the Special Commission thanks to the additional support of certain Member States. The Child Support and Maintenance Project has the potential to benefit tens of thousands of children and other family dependants from around the world, as well as to relieve the burden of taxpayers. With the aim of producing a tentative draft of a Convention for the attention of the Fourth meeting of the Special Commission (scheduled for June 2006), meetings in person and via conference calls, supported by the Office for Child Support Enforcement of the United States of America, were planned for the Administrative Co-operation Working Group (ACWG), its Country Profiles and Monitoring and Review Sub-committees, and the Drafting Committee. In addition, on 27 and 28 April 2005, a training session 4

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The Hague Conference on Private International Law organised and financed by the TAIEX Program (Technical Assistance and Information Exchange instrument of the European Union) took place in Ankara, where the draft text of the maintenance project was discussed.

C.

Preparation for Special Commission on Intercountry Adoption

The second meeting of the Special Commission to review the practical operation of the Hague Convention of 29 May 1993 on the Protection of Children and Cooperation in respect of Intercountry Adoption was convened for September 2005. A draft Guide to Good Practice is under preparation. With over 40,000 children adopted internationally in 2004, the Convention has provided a framework for improving standards and procedures for international adoption, to the benefit of children, birth parents, and adoptive parents.

D.

Information Technology Support for the Abduction Convention

Preparations continued for fall 2005 publication of the Third Part of the Guide to Good Practice, focusing on measures to prevent abductions from taking place, with the elaboration of further parts dealing with access / contact and enforcement of return orders underway. While persevering with this traditional support for its Conventions, the Hague Conference, primarily under the guidance of First Secretary Philippe Lortie, has also been developing new information technology systems in support of its Conventions and post-Convention services. The International Child Abduction Database INCADAT,5 for instance, was established by the Permanent Bureau, greatly assisted by Senior Legal Officer Marion Ely, with the objective of making freely accessible many of the leading decisions rendered by national courts in respect of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction. It now contains more than 800 summaries of decisions in English and French (and soon in Spanish) along with the text of these decisions in their original language. INCADAT also includes a section providing information on non-Hague Convention child abductions such as bilateral treaties and case law. Judges, practitioners, Central Authorities, researchers and others around the world use INCADAT. Meanwhile, efforts by the Permanent Bureau have continued in developing INCASTAT, a statistical database on International Child Abduction. INCASTAT was endorsed as a complement to the INCADAT database at the Fourth Meeting of the Special Commission to review the practical operation of the 1980 Child Abduction Convention (22-28 March 2001). It was concluded that Central Authorities should be encouraged to maintain accurate statistics concerning the cases dealt with by them under the Convention, and to make annual returns of statistics to the

5

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J. H. A. van Loon Permanent Bureau in accordance with the standard forms established by the Permanent Bureau in consultation with Central Authorities. With the assistance of several voluntary contributions made by Member States for the development of INCASTAT, the Permanent Bureau anticipates that the electronic statistical database will be launched during spring 2006. It will be located in a secured area of the Hague Conference website where the more than 90 Central Authorities designated under the 1980 Child Abduction Convention, through a secured Internet communication, will be invited to reproduce their annual statistics under the 1980 Convention. The system will also allow Central Authorities to generate statistical analysis and graphs of different kinds. Finally, in partnership with WorldReach Software Canada, the Permanent Bureau, in consultation with interested States,6 has completed the development of the iChild software. iChild is an electronic case management tool, which may eventually be used on a day-to-day basis by many of the 90 Central Authorities designated under the 1980 Child Abduction Convention located around the world. Available in English, French and Spanish, this tool is designed to store and keep track of all essential information concerning a child abduction case. This system will considerably improve standards of case management, leading the way towards paperless child abduction case management. Communication between Central Authorities will also be improved, which will mean greater consistency in practice in the different States. iChild will also be used to generate the annual statistics forms. The official launch of the iChild pilot project is slated for fall 2005, to run for the period of one year, with the participation of Central Authorities from Argentina, Australia, Canada (Ontario and Quebec), the Netherlands, New Zealand and Panama.7 An evaluation of the system will be undertaken during the Fifth Meeting of the Special Commission to review the practical operation of the Child Abduction Convention (scheduled for fall 2006). Upon the successful completion of the pilot, invitations will be made to other Central Authorities to implement the system.

6 The following States have participated in the first phase of the pilot: Argentina, Australia, Canada (British Columbia and Quebec), Germany, China (Hong Kong SAR), Ireland, New Zealand, Panama, South Africa, Spain, Sweden, Switzerland, United Kingdom (Scotland) and United States of America (NCMEC). The following States have participated in the second phase of the pilot: Argentina, Australia, Canada (British Columbia and Quebec), Germany, Ireland, Netherlands, New Zealand, Sweden and Switzerland. 7 See the News Release at www.hcch.net under ‘Latest Developments’ and ‘News & Events’ ‘2005’.

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III. International Legal Co-Operation and Litigation A.

International Forum on Electronic Notarisation and Electronic Apostilles

The Special Commission of October / November 2003 on the Practical Operation of the Apostille, Evidence and Service Conventions had identified four stages in the issuing of an Apostille in respect of which the application of modern technology might be considered.8 It also recommended that ‘States party and the Permanent Bureau should work towards the development of techniques for the generation of electronic Apostilles’ (Recommendation No 24). To initiate action in light of this recommendation, the Hague Conference jointly organised the first International Forum on Electronic Notarization and electronic Apostilles with the International Union of Latin Notaries for 30-31 May 2005. Hosted in Las Vegas, Nevada by the National Notaries Association of the United States of America, the Forum was attended by more than 170 participants from 31 States who unanimously endorsed a set of 20 Conclusions and Recommendations.9 In particular, the Forum confirmed that the spirit and letter of the Apostille Convention do not constitute an obstacle to the usage of modern technology and that the Convention’s application and operation can be further improved by relying on such technologies. As a result, the Forum encouraged the development and application of eApostilles and e-Registers. First Secretary Christophe Bernasconi is working with the National Notary Association of the United States towards the development of the e-APP (electronic Apostille Pilot Program) that will be launched at the next meeting of the Special Commission on General Affairs and Policy, in April 2006. The e-APP is neither intended nor designed to favour one specific technology over another; its objective merely is to demonstrate how currently available technology allows for the practical implementation and operation of e-Apostilles and e-Registers. The suggested model will require the use of digital certificates so as to provide, in particular, integrity, authentication and non-repudiation. The ultimate goal for this pilot program is that at the end of its four-year run, half of the States Party to the Apostille Convention (the number of States Party in January 2006 was 87) will issue and accept e-Apostilles and operate electronic Registers.

B.

Service of Process Abroad

Work also continued to encourage the effective operation of the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial 8 See the Conclusions and Recommendations of the 2003 Special Commission (especially Recommendations Nos 63 and 64) at www.hcch.net, under ‘Apostille Section’, ‘Practical operation documents’. 9 Available at www.hcch.net, under ‘Apostille Section’, ‘International Forum on eNotarization and e-Apostilles’, ‘Conclusions, final programme and attendees’.

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J. H. A. van Loon Documents in Civil or Commercial Matters. In conjunction with the Canadian and Finnish Governments, the Permanent Bureau, under the direction of First Secretary Christophe Bernasconi, prepared a seminar on the practical operation of the Convention that was to be held in Moscow in October 2005. Furthermore, preparations of the new edition of the Practical Handbook on the Convention continued with publication anticipated for spring 2006.

IV. International Commercial and Finance Law A.

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

As regards the Securities Convention, which continues to be given wide attention, another milestone has been reached during the past year. The Reporters, Professors Sir Roy Goode (United Kingdom), Hideki Kanda (Japan) and Karl Kreuzer (Germany), greatly assisted by First Secretary Christophe Bernasconi, finalised the Explanatory Report. A paper edition of the major work was published in the summer of 2005. This should encourage States to sign and ratify the Convention, which is designed to provide legal certainty and predictability to cross-border transactions worth more than US $2,000 million per day.

B.

International Conference on the Legal Aspects of an E-Commerce Transaction

As discussed in last year’s volume of the Yearbook,10 the Hague Conference cohosted an ‘International Conference on the Legal Aspects of an E-Commerce Transaction’ with the International Chamber of Commerce (ICC) and the Dutch Ministry of Economic Affairs in October 2004. Preparations for the publication of a conference book continued under the direction of First Secretary Andrea Schulz, with publication anticipated for early 2006.

C.

Co-operation with Sister Organisations

Further steps were made this year concerning co-operation with ‘sister’ organisations such as UNCITRAL and UNIDROIT. A co-ordination meeting took place in December 2004 among the heads of the Secretariats of the three Organisations, resulting in common initiatives such as co-operation with the World Bank. The Permanent Bureau also actively participated in the ongoing work of UNCITRAL to develop a Legislative Guide on Secured Transactions, which will include an 10

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The Hague Conference on Private International Law important chapter on conflict of laws. Finally, the Hague Conference, UNCITRAL and UNIDROIT were jointly invited by APEC to present their Conventions and other instruments adopted in the commercial field at a seminar that took place in Singapore in December 2004.

V.

Growth of the Hague Conference

On 28 June 2005, Paraguay became a Member State of the Hague Conference, bringing the total number of Member States to 65. With the continuing growth of signatures, ratifications and accessions to the Hague Conventions, 124 States are now connected to the Hague Conference either as a Member State or as a Party to one or more of its Conventions.

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COURT DECISIONS ________________

BELGIUM LAW APPLICABLE TO ARBITRABILITY (COUR DE CASSATION, 15 OCTOBER 2004) AND REVIEW OF FOREIGN LAW BY THE SUPREME COURT (COUR DE CASSATION, 3 JUNE 2004) Michael TRAEST∗

I. II.

III.

I.

Introduction Determining if a Subject Matter is Capable of Settlement by Arbitration (Belgian Supreme Court, 15 October 2004) A. Antecedents B. Divergence in Belgian Case Law C. The Decision of 15 October 2004 Review of Foreign Law by the Belgian Supreme Court is only Admissible if Breach of the Applicable Choice-of-Law Rule is also Invoked (Belgian Supreme Court, 3 June 2004) A. Introduction B. Review of Foreign Law by the Belgian Supreme Court: a Brief Overview C. The Decision of 3 June 2004

Introduction

For Belgian private international law, the year 2004 undoubtedly marked an important and historic turning point, because a Code of Private International Law was adopted.1 Apart from some exceptions,2 this code entered into force on 1 October ∗

Law clerk at the Belgian Cour de cassation; Researcher at the University of Antwerp. The views expressed in this article are strictly personal. The author is grateful to Ilse Vermeiren for the linguistic correction of this text. 1 Belgian Code of Private International Law of 16 July 2004, in: Moniteur belge of 27 July 2004. 2 The part of the Code dealing with adoption only entered into force on 1 September 2005. This was due to the fact that a new Belgian law on adoption was passed and that it Yearbook of Private International Law, Volume 7 (2005), pp. 249-259 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Michael Traest 2004. Since then, Belgian private international law has been a codified body of law. Needless to say, this means a thorough change compared to the earlier situation, in which the larger part of Belgian private international law consisted of pure judge-made law. Nevertheless, a large part of the new Code does not radically change existing solutions but merely clarifies and codifies leading case law. It is, of course, not our objective to analyse here this new Code.3 Nor has it been possible yet to analyse case law applying its provisions. This overview of Belgian case law comes a bit too early for this; one still has to wait for case law of the Belgian Supreme Court4 applying the new Code. Nevertheless, the introduction of the new code does not imply that all the earlier case law dating from the period before the entering into force of the Code has become irrelevant now. Proof of this is that although one of the two cases of the Belgian Supreme Court that are to be analysed in this contribution dates from before 1 October 2004, it is still relevant now for cases initiated after the entering into force of the Code. As we shall see, it has even since been confirmed by the Belgian Supreme Court.

could only apply from the day of the entering into force in Belgium of the Hague Convention of 29 May 1993 on Protection of Children and Co-operation in respect of Intercountry Adoption. This day was the 1st September 2005. It was thought useful that the chapter of the Code on adoption would also come into force on the same day as the new adoption law and the Hague Convention. Cf. article 6 of the arrêté royal du 24 août 2005 fixant des mesures d’exécution de la loi du 24 avril 2003 réformant l’adoption, de la loi du 13 mars 2003 modifiant le Code judiciaire en ce qui concerne l’adoption et de la loi du 16 juillet 2004 portant le Code de droit international privé, in: Moniteur belge of 29 August 2005. 3 See nevertheless inter alia: BARNICH L., ‘Présentation du nouveau code belge de droit international privé’, in: Revue du notariat belge 2005, pp. 6-67; BOULARBAH H. and others, ‘Le nouveau droit international privé belge’, in: Journal des tribunaux 2005, pp. 173-203; CARLIER J.Y., ‘Le Code belge de droit international privé’, in: Rev. crit. dr. int. pr. 2005, pp. 11-45; DE PAGE P., ‘Les règles de conflit de lois du nouveau Code de droit international privé relatives aux régimes matrimoniaux et aux successions’, in: Revue trimestrielle de droit familial 2005, pp. 647-690; ERAUW J., ‘Het vernieuwde internationaal privaatrecht van België wordt van kracht’, in: Rechtskundig Weekblad 2004-2005, pp. 121132; SAROLEA S., ‘Le Code de droit international privé et le droit familial: le grand nettoyage de printemps’, in: Revue trimestrielle de droit familial 2004, pp. 819-871. 4 Cour de cassation de Belgique / Hof van Cassatie van België.

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Arbitrability and Review of Foreign Law in Belgium

II.

Determining if a Subject Matter is Capable of Settlement by Arbitration (Belgian Supreme Court, 15 October 2004)

A.

Antecedents

On 15 October 2004 the Belgian Cour de cassation5 decided the following longdisputed point: when dealing with applications to refer disputes to arbitration, which law should determine whether a subject matter is capable of settlement by arbitration? Should this be judged by the lex fori or the lex arbitrationis?6 A Belgian company had concluded a concession agreement for the exploitation of a ‘Les Must de Cartier’ boutique in Antwerp. The other party was a Swiss company and in the agreement, a choice-of-law clause designated Swiss law as the governing law. The parties had also agreed to submit all disputes that could arise in respect of the agreement to arbitration; such arbitration had to take place in Switzerland according to the provisions of the Concordat suisse sur l’arbitrage. After the Swiss company terminated the agreement, the Belgian concessionaire sued it for damages before the Antwerp commercial court. The action was based on the Belgian Act of 27 July 1961 that provides inter alia that each concessionaire can sue in Belgium the person who has granted a concession upon termination of the concession agreement where the termination affects at least part of the Belgian territory. In such a case, that court also has to apply Belgian law exclusively.7 Earlier case law of the Supreme Court confirmed that disputes falling under this Belgian Act cannot be decided by arbitration if the arbitration agreement was 5

Cass. 15 October 2004, in: , in: Nieuw Juridisch Weekblad 2005, p. 630, in: Rechtskundig Weekblad 2004-2005, p. 1063, obs. PIERS M., in: Revue de droit commercial belge 2005, p. 488, obs. TRAEST M. and obs. HOLLANDER P. and in: [email protected] 2004, p. 23. 6 The lex arbitrationis can in a certain way be considered a special application of the lex contractus. As we will note later, Belgian case law and some scholars regularly invoke similar arguments to decide whether arbitrability should be judged by the law applicable to the principal contract or the law applicable to the arbitration agreement and not by the lex fori. It has indeed been said that the law applicable to the principal contract does not exclude the autonomy of the arbitration convention. See: RIGAUX F. / FALLON M., Droit international privé, II, Droit positif belge, Bruxelles 1993, p. 616-617. These authors explicitly refer to the law applicable to the principal contract in which an arbitration clause has been inserted whereas other Belgian authors refer to the law applicable to the arbitration convention for judging the arbitrability of the subject matter, see HUYS M. / KEUTGEN G., L’arbitrage en droit belge et international, Bruxelles 1981, p. 482. For reasons of simplicity we have thought it unnecessary to elaborate further on this question since it was more important to oppose the arguments in favour of the lex fori to those in favour of the lex contractus or lex arbitrationis. 7 See Article 4 of the Belgian loi relative à la résiliation unilatérale des concessions de vente exclusive à durée indéterminée, in: Moniteur belge of 5 October 1961.

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Michael Traest concluded before the dispute arose and if it aimed at and resulted in the application of foreign law to the dispute.8 Following this interpretation of these Belgian provisions, the parties’ dispute could not be settled by way of arbitration. Nevertheless, the Swiss company argued before the Antwerp Court of appeal that parties had to be referred to arbitration and that the question whether the subject matter was capable of settlement by arbitration had to be judged according to the lex contractus or the lex arbitrationis. The Court of appeal decided in favour of the Swiss company. According to the Court of appeal, Article II.3 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 does not refer to the lex fori but to the lex contractus when assessing an arbitration agreement. Since the parties had meant to submit all their differences to arbitration according to Swiss law, the court of appeal ruled that the validity of the arbitration clause also had to be decided according to Swiss law and not according to the Belgian lex fori. As we shall see, the Belgian Supreme Court nevertheless decided in favour of the Belgian concessionaire.

B.

Divergence in Belgian Case Law

The question of the law applicable to arbitrability has divided (Belgian) case law for a very long time. In this respect, the decision of the Supreme Court is certainly to be welcomed, since it is not unlikely that this division in Belgian case law will at last come to an end. A majority of that case law opted in favour of the lex contractus or the lex arbitrationis, depending on the choice made for the law applicable to the principal contract or the law applicable to the arbitration agreement.9 The arguments mostly invoked in Belgium in favour of the application of the lex contractus or the lex arbitrationis10 can be summarised as follows. In the first place, this solution is 8 See: PIERS M. / VERBIST H., ‘Concessiegeschillen en arbitrage. Welk recht bepaalt vatbaarheid voor arbitrage’, in: Nieuw Juridisch Weekblad 2005, p. 619 et seq., at 620. 9 See inter alia Court of Appeal of Brussels 4 October 1985, in: Journal des tribunaux 1986, p. 93, obs. KOHL A.; Court of Appeal of Antwerp 15 September 1997, in: Revue de droit commercial belge 1998, p. 132; Court of Appeal of Liège 28 April 2003, in: Journal des tribunaux 2003, p. 811; Commercial Court of Brussels 10 December 1987, in: Revue de droit commercial belge 1990, p. 791, obs. LOUIS P.M.; Commercial Court of Brussels 29 October 1991, in: Revue de droit commercial belge 1993, p. 1118, obs. NUYTS A.; Commercial Court of Louvain 24 March 1992, in: Revue de droit commercial belge 1993, p. 1131; Commercial Court of Brussels 5 October 1994, in: Journal des tribunaux 1995, p. 344, obs. HANOTIAU B. and Revue de l’arbitrage 1995, p. 311, obs. HANOTIAU B.; Commercial Court of Hasselt 24 December 1996, in: Revue de droit commercial belge 1997, p. 270; Commercial Court of Antwerp 15 September 1997, in: Revue de droit commercial belge 1998, p. 132; Commercial Court of Louvain 14 September 1999, in: Rechtskundig Weekblad 1999-2000, p. 1302, obs. NEUT M.; Commercial Court of Ghent 21 December 2000, in: Droit des affaires 2001, p. 60, obs. HANOTIAU B. 10 For each of these alternatives analogous arguments are used.

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Arbitrability and Review of Foreign Law in Belgium thought to be in conformity with the principle of the favor arbitrandum.11 Furthermore, the preparatory works of the New York Convention of 1958 make clear that the drafters of the convention wanted to limit the intervention of the law of the country of enforcement to the question whether the decision had to be enforced or not. For this reason, no reference to the applicable law was made in Article II.12 Others said that a choice of the lex fori is not internationally inspired and only concerns the lex fori.13 It will not be surprising that arbitration practitioners were in favour of this point of view. On the other hand, a minority of Belgian case law opted for the lex fori,14 a position that was also taken by some foreign higher courts.15 One of the main arguments invoked in favour of this position is an argument of logic: Article V.2 – and especially Article V.2.a – of the New York Convention subjects the question of arbitrability to the lex fori at the stage of recognition and enforcement of the arbitral award. It therefore seems logical to subject that same question to the lex fori at the preceding jurisdictional stage of referring parties to arbitration, especially since Article II.3 of the New York Convention does not expressly indicate the law governing subject matter arbitrability. The internal consistency of the New York Convention is served in this way.16 Moreover, the Belgian Supreme Court was said 11

See inter alia HANOTIAU B., ‘L’arbitrabilité des litiges en droit belge au regard de la pratique internationale’, in: Mélanges Roger-O. Dalcq, Bruxelles 1994, p. 269 et seq., at 275. 12 HANOTIAU B., ‘Arbitrage et concessions de vente’, in: Journal des tribunaux 1995, p. 346 et seq., at 347; HANOTIAU B., ‘L’arbitrabilité des litiges relatifs à la résiliation d’une concession exclusive de vente à durée indéterminée’, in: Revue de droit commercial belge 1993, p. 1146 et seq., at 1150. 13 KLEIN F.E., Considérations sur l’arbitrage en droit international privé, Bâle 1958, p. 258; VAN HECKE G. / LENAERTS K., Internationaal privaatrecht, Brussel 1989, No. 853. 14 Court of Appeal of Brussels 25 June 1982, in: Revue de droit commercial belge 1983, p. 66 obs. WATTE N.; Commercial Court of Brussels 13 September 1979, in: Journal des tribunaux 1980, p. 374. Sometimes this solution is adopted in an implicit way: Court of Appeal of Liège 12 May 1977, in: Journal des tribunaux 1977, p. 710, obs. KEUTGEN G. / HUYS M.; Court of Appeal of Brussels 19 December 1986, in: BOGAERT G. / MAEYAERT P. (eds.), Distributierecht. Droit de la distribution 1987-1992, Antwerpen 1994, p. 141; Commercial Court of Brussels 1 April 1976, in: Journal des tribunaux 1976, p. 664, obs. BRICMONT G. / PHILIPS J.M. 15 See inter alia Corte di Cassazione 27 April 1979, in: Riv. dir. int. priv. proc. 1979, p. 565; Bundesgerichtshof 15 June 1987, in: Yearbook of Commercial Arbitration 1994, p. 653. 16 See inter alia: DEMEULENAERE B., ‘Arbitrabiliteit in het Belgisch arbitragerecht. Anno 1998’, in: Tijdschrift voor Privaatrecht 1998, p. 645 et seq., at 658; NUYTS A., ‘Le contrôle de l’arbitrabilité selon la loi du for dans les Conventions de New York et de Genève et les concessions de vente exclusive à durée indéterminée et les conventions d’arbitrage’, in: Revue de droit commercial belge 1993, p. 1122 et seq., at 1125; NUYTS A., ‘La loi belge du 27 juillet 1961 relative à la résiliation des concessions de vente exclusive à durée indéterminée et les conventions d’arbitrage’, in: Journal des tribunaux 1993, p. 349 et seq., at 355.

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Michael Traest to have already accepted this point of view in an implicit way17 in a decision of 22 December 1988.18 It was also said that the principle of favor arbitrandum, as it was invoked in favour of the lex contractus, is not sufficiently precise to decide the conflict between the New York Convention and the Geneva Convention in favour of the lex contractus.19 Article VI.2 of the latter convention – that was not applicable in this case – subjects arbitrability to the lex fori, and it was thought to be surprising that the drafters of the New York Convention would have renounced the applicability of the lex fori whereas the drafters of the Geneva Convention did not.20 Finally, an argument was also drawn from the idea that underlies Article V.2 of the New York Convention: the fact that arbitrability in this article has been subjected to the lex fori is thought to be justified by a State’s concern to keep intact the jurisdiction of its courts. This concern does not only have to be taken into account at the stage of recognition and enforcement of an arbitral award but also at the preceding stage of referral to arbitration. The arbitration convention cannot in itself oblige a judge to decline jurisdiction in a case submitted to him; such an obligation may only flow from the law of the State itself.21 It is therefore necessary not to exclude the lex fori.

C.

The Decision of 15 October 2004

In its decision of 15 October 2004, the Supreme Court first referred to both Articles II.1 and II.3 of the New York Arbitration Convention. Article II.1 provides that ‘each contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.’ Article II.3 provides that ‘the court of a contracting State, when seized of an action in a matter in respect of which the parties have made an agreement 17 NUYTS A., ‘Le contrôle de l’arbitrabilité selon la loi du for dans les Conventions de New York et de Genève et les concessions de vente exclusive à durée indéterminée et les conventions d’arbitrage’, in: Revue de droit commercial belge 1993, p. 1122 et seq., at 1126. 18 Cass. 22 December 1988, in: BOGAERT G. / MAEYAERT P. (eds.) (note 14), p. 145. However, the Belgian Supreme Court only said in this decision that disputes falling under the application of the Belgian loi relative à la résiliation unilatérale des concessions de vente exclusive à durée indéterminée (note 7), can only be settled by arbitration under the condition that it is certain that the arbitrators will apply Belgian law. Like others, we personally find it hard to accept that this decision also indicated according to which law the arbitrability should be judged when such an issue is raised as a challenge to jurisdiction or in a referral to arbitration. See: PIERS M. / VERBIST H. (note 8), p. 621. 19 NUYTS A., La concesssion de vente exclusive, l’agence commerciale et l’arbitrage, Bruxelles 1996, p. 43 et seq. 20 PARTSCH P.E., ‘L’arbitrabilité des litiges dans la Convention de New York’, in: Actualités du droit 1992, p. 1259 et seq., at 1270-1271. 21 PARTSCH P.E. (note 20), p. 1265-1266.

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Arbitrability and Review of Foreign Law in Belgium within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.’ Afterwards, the court found that the obligation provided for in Article II.3 to refer parties to arbitration only applies to differences capable of settlement by arbitration but that this article does not expressly indicate the law according to which it should be determined whether the subject matter is capable of settlement by arbitration. Furthermore, the court decided that this provision allows the judge dealing with that question to test it by his own system of law and to determine in this way the limits within which the private administration of justice is compatible with the legal order. According to the Supreme Court, if an arbitration clause has been submitted to a foreign law by way of a choice made by the parties, the public judge, when deciding on a request to refer to arbitration, is authorised to hold that the subject matter is not capable of settlement by arbitration if he finds that the public policy of his legal order is being affected. By excluding a priori the possibility of referring to the lex fori in determining arbitrability, the Court of appeal had violated the provisions of the New York Convention of 1958 mentioned above. Nevertheless, the ruling of the Supreme Court was criticised by some for being rather ambiguous. By deciding that it was not possible to exclude a priori the possibility for a judge to implicate the lex fori in its judgement on arbitrability, the Supreme Court did not exclude that the lex contractus can still play a role either. It is indeed possible that the court wanted to preserve the possibility that a double test is needed:22 first a test according to the lex fori and afterwards a test according to the lex contractus. One could thus imagine a cumulative application of the lex fori and the lex arbitrationis.23 In this way, it is possible to implicate a priori the lex fori in the judgement on arbitrability of a certain subject matter. As Partsch argued,24 it is indeed logical to test the arbitrability of a subject matter in the first place according to the lex fori if this question is raised on an application to refer the matter to arbitration. It is the lex fori that gives the judge authority to decide a case; as a consequence, only the lex fori can determine whether this judge is able to declare that the difference can be decided by way of arbitration and that he has to decline jurisdiction. However, once that judge has ruled that the subject matter is capable of settlement by arbitration, it is of course logical that the arbitrator himself decides the arbitrability of the question according to the lex arbitrationis. The Supreme Court’s decision does indeed not exclude this double test – firstly according to the lex fori and afterwards according to the lex arbitrationis – and it

22

See also: PIERS M. / VERBIST H. (note 8), p. 624. Cf. PIERS M., ‘Arbitreerbaarheid en toepasselijk recht: is de controverse nu ten einde’, in: Rechtskundig Weekblad 2004-2005, p. 1049 et seq., at 1053. 24 PARTSCH P.E. (note 20), p. 1265-1266. 23

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Michael Traest could even be said that this was what the court probably wanted to underline in its decision.25

III. Review of Foreign Law by the Belgian Supreme Court is only Admissible if Breach of the Applicable Choice-of-Law Rule is also Invoked (Belgian Supreme Court, 3 June 2004) A.

Introduction

This decision sheds light on the way foreign law can be reviewed by the Belgian Supreme Court.26 Though the specific point of interest of this ruling is rather technical in nature, the decision presents nevertheless an occasion to briefly overview the way the Belgian Supreme Court reviews the application of foreign law by lower court judges.27 Such an overview seems to be all the more useful as this decision has seemingly gone unnoticed in Belgium by private international law practitioners who rather focused on later decisions of the Belgian Supreme Court repeating the same principle.28 On the specific issue clarified here, the decision of 3 June 2004 was undoubtedly innovative, even though the decisions of 14 February 2005 and 18 April 2005 have confirmed the principle decided in the ruling of 3 June 2004 in a more elaborate way.29

25

At the time of writing (31 December 2005) another case was pending before the French division of the Belgian Supreme Court but it is very likely that the decision will be analogous to the one decided by the Flemish division. 26 Cass. 3 June 2004, in: and in: [email protected] 2005, Vol. 2, p. 32. 27 Of course only a very short overview is given here, in order to understand and evaluate the decision of 3 June 2004. For a detailed analysis of the practice of the Belgian Supreme Court in this respect, see, inter alia GEEROMS S., Foreign law in civil litigation: a comparative and functional analysis, Oxford 2004, p. 294-310; SIMONT L., ‘La Cour de cassation et la loi étrangère. Quelques réflexions’, in: Imperat Lex – Liber Amicorum Pierre Marchal, Brussel 2003, pp. 189-207. 28 Cass. 14 February 2005, in: ; Cass. 18 April 2005, in: and in: Nieuw Juridisch Weekblad 2005, p. 1167. 29 See previous footnote.

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Arbitrability and Review of Foreign Law in Belgium B.

Review of Foreign Law by the Belgian Supreme Court: a Brief Overview

The so-called Babcock case, which led to the decision of 9 October 1980,30 marked an end to the long-disputed question whether the correct application of foreign law could be reviewed by the Supreme Court.31 In this decision, the court ruled that it was indeed able to review the application of foreign law by the lower court judges. This review was nevertheless more limited than the review the Supreme Court exercised on the application of Belgian law: it was considered that the Supreme Court may only review the question of whether foreign law has been applied in conformity with the interpretation prevailing in the respective foreign country.32 It was also said that the review was necessarily marginal since only glaring errors in the application of foreign law could be sanctioned.33 This is understandable: the review of foreign law cannot go as far as the review the court exercises on the application of Belgian law, since it cannot engage in the interpretation and development of foreign law as it can with respect with Belgian law. Review of foreign law is a conformity review instead of a real legality review.34 This is a question of normal self-restraint.35 Moreover, the problem can occur with the way foreign law is to be ascertained. The capacities of the Belgian judiciary are of course limited in this respect and the same holds true for the Belgian Supreme Court.36 Nevertheless, some later decisions of the Supreme Court seemed to imply that the review of foreign law could be considered equal to the review it exercised on any other provision of Belgian law37 because those decisions considered that foreign law was a provision of law within the meaning of Article 608 of the Judicial Code (Code judiciaire). The latter provision implies, amongst others, that it is 30 Cass. 9 October 1980, in: Pasicrisie belge 1981, Vol. I, nr. 90, in: Arresten van het Hof van Cassatie 1979-80, nr. 90, in: Revue critique de jurisprudence belge 1982, p. 8, obs. VAN COMPERNOLLE J. and obs. RIGAUX F., in: Journal des tribunaux 1981, p. 70 and in: Rechtskundig Weekblad 1981-82, p. 1471, obs. ERAUW J. 31 Cf., inter alia: STORME H., ‘Vreemd recht voor Belgische rechter’, in: Nieuw Juridisch Weekblad 2005, p. 1154 et seq., at 1161 et seq. 32 SIMONT L. (note 27), p. 199. 33 RIGAUX F., ‘La scission du fait et du droit et la distinction ente le droit interne et le droit étranger’, in: Revue critique de jurisprudence belge 1982, p. 38 et seq., at 54. Cf. SIMONT L. (note 27), p. 200. 34 GEEROMS S. (note 27), p. 305. 35 Cf. STORME H. (note 31), p. 1163. 36 STORME H. (note 31), p. 1162. 37 E.g.: Cass. 2 april 1981, in: Pasicrisie belge 1980, Vol. I, nr. 446, in: Arresten van het Hof van Cassatie 1980-81, nr. 446 and in: Rechtskundig Weekblad 1982-83, p. 922; Cass. 7 December 1989, in: Pasicrisie belge 1990, Vol. I, nr. 227 and in: Arresten van het Hof van Cassatie 1989-90, nr. 227; Cass. 29 November 1990, in: Pasicrisie belge 1991, Vol. I, nr. 170, in: Arresten van het Hof van Cassatie 1990-91, nr. 170 and in: Rechtskundig Weekblad 1990-91, p. 1270.

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Michael Traest the Belgian Supreme Court’s task to review decisions pronounced in last instance on their conformity with the ‘law’. If, however, foreign law is explicitly considered as a ‘law’ in the sense of domestic law, there does not seem to be a reason anymore to consider that the review exercised on the violation of foreign law should be less extensive than that on Belgian law or that this review should only be marginal.38 Moreover, considering foreign law as a ‘law’ in the sense of Article 608 of the Judicial Code necessarily implies that invoking a violation of foreign law before the Supreme Court becomes possible in the same way as it is possible with Belgian law. It means that it is not necessary (anymore) to invoke breach of the choice-of-law rule because the breach of foreign law is an independent ground for annulment of the decision in itself. It implies that the Belgian Supreme Court recognizes its power to directly review an erroneous interpretation of foreign law without the petitioner being obliged to have recourse to a choice-of-law rule for his petition to be admissible. In line with this, several decisions of the Belgian Supreme Court have reviewed foreign law without any claim of violation of the choice-of-law rule.39 But even then, these later decisions notwithstanding, it was said that, in general, the court only reviewed whether the foreign law was in conformity with the prevailing interpretation in the respective foreign country.40

C.

The Decision of 3 June 2004

In the case that led to the decision of 3 June 2004, breach of German law was invoked without an accompanying claim of a violation of the Rome Convention of 19 June 1980 that would normally have led to the application of German law in the given case. The court simply ruled that this ground of annulment of the decision was not admissible, since the breach of foreign law was invoked without raising a breach of the choice-of-law rule. Later decisions of 14 February 2005 and 18 April 2005 said more clearly that the court is only seized of the violation of foreign law by means of the choice-of-law rule but also that the Supreme Court’s review of

38

Cf. SIMONT L. (note 27), p. 195. Cass. 3 June 1985, in: Arresten van het Hof van Cassatie 1984-85, nr. 597 and in: Pasicrisie belge 1985, Vol. I, nr. 597; Cass. 12 January 1990, in: Arresten van het Hof van Cassatie 1989-90, nr. 294, in: Pasicrisie belge 1990, I, nr. 294 and in: Revue critique de jurisprudence belge 1993, p. 450, obs. WATTE N.; Cass. 9 December 1991, in: Arresten van het Hof van Cassatie 1991-92, nr. 190, in: Pasicrisie belge 1992, Vol. I, nr. 190 and in: Journal des tribunaux de travail 1992, p. 174; Cass. 17 January 1994, in: Arresten van het Hof van Cassatie 1994, nr. 22, in: Pasicrisie belge 1994, Vol. I, nr. 22 and in: Revue générale de droit civil belge 1995, p. 480, obs. MARQUETTE V.; Cass. 13 May 1996, in: Arresten van het Hof van Cassatie 1996, nr. 170 and in: Pasicrisie belge 1996, Vol. I, nr. 170; Cass. 6 December 1996, in: Arresten van het Hof van Cassatie 1996, nr. 490 and in: Pasicrisie belge 1996, Vol. I, nr. 490. 40 Cf. GEEROMS S. (note 27), p. 305. 39

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Arbitrability and Review of Foreign Law in Belgium foreign law is restricted to verifying conformity with the interpretation prevailing in the foreign country.41 Since this decision, the Supreme Court has not performed a direct review of foreign law without the choice-of-law rule being invoked as violated.42 A petition that does not invoke violation of the choice-of-law rule that led to the application of foreign law will be declared inadmissible. This undoubtedly brings more coherence with the traditional point of view that, unlike domestic law, the review of foreign law is limited to the question whether the foreign law was in conformity with the interpretation prevailing in the foreign country.43 In this respect, one could even say that the Belgian system is converging in a certain way towards the French and Dutch ones: whereas the Belgian Supreme Court has accepted a review of foreign law within certain limits and with respect to certain conditions, the French Cour de cassation and Dutch Hoge Raad nevertheless seem to exercise a certain review of the interpretation of foreign law by the lower court judges, despite leading case law or statute law44 that prohibits the review of foreign law by French and Dutch Supreme Courts.45

41

Cass. 14 February 2005, in: ; Cass. 18 April 2005, ibidem and in: Nieuw Juridisch Weekblad 2005, p. 1167: ‘Attendu que lorsqu’il applique la loi étrangère, le juge du fond doit en déterminer la portée en tenant compte de l’interprétation qu’elle reçoit dans le pays dont elle émane; Attendu que la Cour vérifie la conformité de la décision du juge du fond à cette interprétation; Qu’elle n’est toutefois saisie de la violation de la loi étrangère que par le truchement de la règle de conflit (…).’ 42 Article 15 of the new Code does not change this conclusion. 43 SIMONT L. (note 27), p. 202-203. 44 Cf. article 79.1.b) of the Dutch Wet op de rechterlijke organisatie. 45 SIMONT L. (note 27), p. 206-207 and the references to French and Dutch law.

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FRANCE THE NEW POLICY OF THE COUR DE CASSATION REGARDING ISLAMIC REPUDIATIONS: A COMMENT ON FIVE DECISIONS DATED 17 FEB. 2004∗ Marie-Elodie ANCEL∗∗

I. II. III.

Introduction First-Level Test: a Fair and Adversarial Procedure Second-Level Test: Equal Rights for the Spouses in the Event of Marriage Dissolution

I.

Introduction

French courts have never felt comfortable with Islamic repudiation (called talaq) when it concerns a Muslim woman who lives in France. The French legal system does not permit a man to repudiate his wife arbitrarily on French territory, whatever his personal status. However, if a Muslim husband performs a talaq abroad against his Muslim wife, and if recognition of the judgment registering this talaq is sought in France, French courts are put in a quandary. On the one hand, there is the need for continuity in personal status and, due to bilateral agreements, this need is particularly strong between both France and Algeria (French-Algerian Convention, August 27th 1964, on exequatur and extradition) and France and Morocco (FrenchMoroccan Convention, August 10th 1981, on personal and family status as well as judicial cooperation). On the other hand, talaq repudiation as a marital privilege is in direct contradiction with the current French understanding of the relationship between husband and wife. Thus it is easy to see why, during the last twenty years, the Cour de cassation has changed its approach so frequently. In the 1980s, foreign judgments on talaq repudiations were recognised on the grounds of effet atténué de l’ordre public: French public policy could not oppose repudiation between two foreigners ∗

Cass. 1e civ., Feb. 17th 2004, cases n° 02-17.479, 01-11.549, 02-11.618, 02-15.766, 02-10.755, in: Bull. civ. 2004, I, n° 46 to 50. In this article, the five cases will be referred to by their numbers in the Bulletin des Chambres civiles (Bull. civ.) de la Cour de cassation (Cass.). As for every judicial decision cited therein, they may be found very easily using their numéro d’affaire (case number) on the Legifrance website: . ∗∗ Professor of law, University of Paris 12. Yearbook of Private International Law, Volume 7 (2005), pp. 261-267 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Marie-Elodie Ancel that had been legally pronounced and registered abroad, at least if the wife had received some financial compensation.1 The main ground for non-recognition was fraude au jugement, which itself is very difficult to characterize. Take the example of a Muslim couple living together in France. The wife decides to start divorce proceedings according to French law (Article 310 and, from July 1st 2006, 309, of the Civil code) in France. Her husband hurries back to the country of their common nationality and there repudiates his wife. Proving fraude au jugement means establishing that the husband chose his national courts for no other reason than bypassing French proceedings and circumventing a French judgment.2 During the 1990s, things changed somewhat: ordre public international was reactivated as a more strict blocking device against foreign decisions. As a result, most foreign judgments on talaq were rejected because the rights of the defence had not been respected, or because the financial position of the wife had not been guaranteed. Over time, however, these grounds for decision came to be seen as insufficient.3 The Cour de cassation is finally taking a stand on talaq judgments following five decisions issued on Feb. 17th 2004 regarding repudiations which had been registered by Algerian and Moroccan courts.4 Pursuant to these cases, as a rule, talaq repudiations registered abroad will not be recognised in France. More precisely, foreign judgments will be subject to a two-tier ordre public test. First, foreign decisions will not be recognised if they were not fair and adversarial (II). Secondly, foreign judgments that pass the first test will nonetheless be rejected if the equality between spouses that is required in the event of marriage dissolution by Protocol n°7 to the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) was not respected (III). As we shall see, the Cour de cassation is keen that this sequence be followed.

II.

First-Level Test: a Fair and Adversarial Procedure

According to one of the two decisions regarding the recognition of Moroccan judgments5, the Cour de cassation first requires that the wife must have been duly notified, and that she must have been represented in court. Furthermore the foreign judgment must also be regularly rendered, final and enforceable. In reaching this Cass. 1e civ., Nov. 3rd 1983, case n° 81-15.745, in: Bull. civ. 1983, I, n° 251. 2 For instance Cass. 1e civ., March 1st 1988, case n° 87-12.007, in: Bull. civ. 1988, I, 1

n° 55. 3 Cass. 1e civ., July 3rd 2001, case n° 00-11.968, in: Bull. civ. 2001, I, n° 199, known as the Douibi case. 4 HAMMJE P., Rev. crit. dr. int. pr. 2004, pp. 423-439; GANNAGÉ L., Clunet 2004, pp. 1200-1211; NIBOYET M.-L., ‘L’avenir du nouveau revirement de la Cour de cassation sur la reconnaissance des répudiations musulmanes’, in: Gazette du Palais, Sept. 4th 2004, n° 248, pp. 27-31. 5 Cass. 1e civ., Feb. 17th 2004, case n° 49.

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Islamic Repudiations before the French Cour de cassation decision the Cour relies on two bilateral agreements between France and Morocco: the previously mentioned 1981 Convention – particularly Article 13, in which Moroccan judgments registering talaq are assimilated with foreign divorce judgments – and the Convention of Oct. 5th 1957 on the recognition of judgments in general. These procedural requirements are, for example, applicable to Moroccan divorce judgments generally and their application to talaq judgments is not new.6 In French-Moroccan cases, this control is based on bilateral Conventions. Thus, the French legal system’s rejection of repudiation judgments flows from the application of common French-Moroccan rules: in a certain sense, the solution appears to be ‘diplomatically correct’. Nevertheless, such a view may seem artificial. One should remember that Article 13 of the 1981 Convention equates talaq judgments with divorce judgments, and surely the French negotiators of the 1981 Convention were aware that a talaq judgment was (at least at that time) often issued without the wife’s knowledge. Furthermore, the role of Article 13 was precisely to equate these suspect judgments with legal divorce judgments. In this context, ruling now, years later, that talaq judgments are subject to the same conditions as divorce judgments may be considered duplicitous. However, one must admit that Morocco does not abide by the 1981 Convention faithfully. In agreeing to this Convention, France gave up much on the repudiation topic in order to obtain a better cooperation from Moroccan authorities on child abduction. Since France still awaits this improved cooperation, the Cour de cassation feels free to regain lost ground regarding talaq repudiations. Apart from these French-Moroccan skirmishes, judgments from other countries registering talaq must also comply with procedural requirements. With respect to judgments issued in Algeria, French courts will apply Article 1 of the 1964 Convention. This stipulates notably that (a) the Algerian court must have jurisdiction7, (b) the procedure must be legal and the rights of the defence respected, and (c) the decision must be final.8 Finally, when no bilateral agreement applies, the general procedural requirements for the recognition of foreign judgements are very much the same.9 When considering the rights of the defence – that is, in such cases, the rights of the wife – French authors speak of ordre public procédural (which could be equated with a fundamental requirement of procedural fairness).

6

For instance Cass. 1e civ., June 6th 1990, case n° 88-15.008, in: Bull. civ. 1990, I,

n°138. Cass. 1e civ., Feb. 17th 2004, case n° 46; for an explanation of this case, see LEMONTEY J., ‘Les répudiations des droits musulmans’ to appear in: Tr. Com. fr. dr. int. pr. 2005-2006. 8 Cass. 1e civ., Feb. 17th 2004, case n° 47: as a minimum, the proceedings shall be ‘fair and adversarial’. 9 MAYER P. / HEUZÉ V., Droit international privé, Paris 2004, n° 367 et seq. 7

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Marie-Elodie Ancel In all the above cases, the Cour rules that French judges must, of their own motion, rigorously verify satisfaction of the conditions imposed for recognition, and that their judgments must provide specific reasons when granting recognition.10 Thus, compared to previous decisions, which had already imposed procedural controls, the 2004 cases are not innovative. A new aspect, however, is that no particular significance is given to any financial compensation received by the wife. Indeed, in the past, when the wife had received no financial compensation, the talaq judgment was to be kept out of the French legal system in the name of what was then called ordre public alimentaire.11 The intention was good, but its implementation proved to be disappointing to say the least, as in many cases the sums that the husband was required to pay abroad had no relation to the cost of living in France. Despite this, the Cour de cassation was obliged to accept a talaq decision awarding the repudiated wife such derisory sums since the Cour has no control over the amount of financial compensation.12 It is thus worth noting that two of the ‘Algerian cases’ dated Feb. 17th 2004 take a completely different perspective. If the amount of financial compensation was the only room for manoeuvre available to the wife, then it is clear that the repudiated wife had no say in the dissolution of the marriage. Therefore, financial indemnities are no longer a visa for recognition. They are now just a clue in the examination of marital equality. This leads us to the second-level test.

III. Second-Level Test: Equal Rights for the Spouses in the Event of Marriage Dissolution Some talaq judgments may be the result of a fair and adversarial procedure in which case they will be in conformity with the procedural requirements stated in bilateral agreements or with the ordre public procédural in general. Often this is the case for judgments issued in Algeria13, whilst for those issued in Morocco it is generally the case after 1993 (Dahir of Sept. 10th 1993) and even more so since 2004 (with the coming into force of the new Moroccan Family Law Act). Nevertheless these talaq decisions must now be confronted with another aspect of French ordre public international. They will be rejected if they authorize ‘a unilateral repudiation by the husband, giving no legal effect to the wife’s possible opposition, and depriving the judicial authorities of every power save that of organizing the financial consequences of this dissolution of matrimonial ties’14. The reason for this refusal lies in Article 5 (Equality between spouses) of the Protocol n°7 to the Cass. 1e civ., Feb. 17th 2004, case n° 50. 11 Cass. 1e civ., Nov. 3rd 1983 (note 2). 12 Cass. 1e civ., July 3rd 2001 (note 4). 13 For example, Cass. 1e civ., Feb. 17th 2004, case n° 47. 14 Cass. 1e civ., Feb. 17th 2004, cases n° 47 and 48. 10

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Islamic Repudiations before the French Cour de cassation ECHR. This provides that ‘spouses shall enjoy equality of rights and responsibilities of a private law character between them, and in their relations with their children, as to marriage, during marriage and in the event of its dissolution…’ and, as such, is part of French ordre public.15 This activation of Article 5 is the most important aspect of the Feb. 17th 2004 decisions. Thus, they are again linked with other French decisions in which talaq judgments had been challenged due to the talaq’s intrinsic imbalance between husband and wife.16 They are thus in sharp contrast with the already mentioned Douibi case, in which the Cour de cassation was satisfied with a successful procedural test.17 The 2004 decisions do, however, raise a question: is it wise to enforce equality between spouses using the ordre public device? Commentators have offered two types of critique in response. One critique contends that such a rejection of talaq decisions is a misuse of ordre public. It is argued that the role of ordre public should be to react against the application of a foreign law leading to an intolerable result in the particular situation under consideration, but that in the 2004 decisions the Cour de cassation used ordre public to categorically reject the foreign institution of talaq per se.18 It is further contended that this alleged misuse might stir up a ‘clash of civilizations’. Such arguments may not be convincing. Firstly, one must admit that sometimes ordre public reacts directly to a rationale of the foreign decision when it conflicts with the forum State’s principles and values.19 Secondly, in the 2004 decisions, the Cour de cassation did not use ordre public in an abstract manner: there is no doubt that if the wife acquiesces in the talaq judgment, then this judgment must be recognised.20 Equally, if the wife seeks the recognition of a talaq judgment, this judgment must be recognised in France. And last of all, the ‘conflict of civilizations’ argument is too broad: Muslim societies evolve as do all societies, and Westerners are not helpful when they take the side of ultraconservatives. The second critique holds that the line followed by the Cour de cassation may be questioned because Article 5 of Protocol n°7 could perfectly well have been implemented independently, avoiding ordre public and its own requirements. Indeed, the ECHR, as well as Protocol n°7, are part of the French legal system in which they are directly applicable. Is this not the reason why the former Swiss law on matrimonial property was put aside by the Cour de cassation, precisely on the

15

On the belonging of Article 5 to the French ordre public international, see Cass. 1 civ., Feb. 17th 2004, case n° 47. 16 Very clearly Cass. 1e civ., March 11th 1997, case n° 94-19.447. 17 See the above-mentioned (note 3) Douibi case, Cass. 1e civ., July 3rd 2001. 18 HAMMJE P. (note 4), p. 434. 19 MAYER P. / HEUZÉ V. (note 9), n°3 83. 20 Cass. 1e civ., Feb. 17th 2004, case n° 49. And the Cour de cassation adds that, though she may claim a higher compensation for her and her children, a wife does not necessarily acquiesce in the talaq. e

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Marie-Elodie Ancel grounds of equality between spouses?21 Of course, in some cases, French courts may face the dilemma of two directly applicable rules: for example Article 5 of Protocol n°7, and Article 13 of the French-Moroccan 1981 Convention that prima facie should lead to a straightforward recognition of talaq judgments. However, it may be contended that Protocol n°7 should prevail over the bilateral agreement, whatever its interpretation.22 Despite the above criticism, the Cour de cassation, in its 2004 decisions, seems to have been unwilling to confront Muslim countries directly with the European Protocol: indeed, once again, the Cour de cassation preferred to seek support in the bilateral conventions. The reason is that there is an ordre public clause in Article 1 (d) of the French-Algerian Convention23 as well as in Article 16 of the French-Moroccan 1957 Convention24 and Article 4 of the French-Moroccan 1981 Convention. In that respect, the 2004 Report by the Cour de cassation instructs lower courts to proceed rigorously according to the two-tier test, and to raise the inequality argument only as a final recourse.25 Furthermore, the Cour de cassation may have avoided the direct application of Protocol n°7 in order not to be too tightly constrained by the interpretation given by the Strasbourg Court.26 On the contrary, the ordre public device seems to be a good way to adapt fundamental rights to the peculiarities of private international law according to the French understanding of what these peculiarities are. In other words, human rights may be ‘metabolised’ by the Cour de cassation in private international cases in France. However, there is a striking aspect of this metabolic use of ordre public: the Cour de cassation insists that the ‘equality between spouses’ barrier should be dropped when the repudiated wife is domiciled in France. Indeed, the Cour de cassation noticed that in one case ‘the two spouses were both domiciled on the French territory’27 and in the other that ‘the wife, if not both the spouses, were domiciled on the French territory’28. This raises numerous questions. At what date should the wife be domiciled in France if she wants to be protected against a repudiation pronounced abroad – when she is repudiated or when she challenges the recognition of the talaq decision in France? In any case, why should she not be 21

Cass. 1e civ., Feb. 24th 1998, cases n° 95-18.646 and 95-18.647, in: Bull. civ. 1998,

I, n° 71. 22 GANNAGÉ L., La hiérarchie des normes et les méthodes du droit international privé, foreword by LEQUETTE Y., Paris 2001, n° 360 et seq. 23 Cass. 1e civ., Feb. 17th 2004, cases n° 47 and 48. 24 Cass. 1e civ., Feb. 17th 2004, case n° 49. 25 See , ‘Troisième partie: La jurisprudence de la Cour / L’application du droit communautaire et du droit international / Conflits de juridictions’ in: Rapport de la Cour de cassation 2004. 26 Which, one must notice, has approved the new policy of the Cour de cassation regarding talaq : see case D.D. v. France (application n° 3/02), European Court of Human Rights, Nov. 8th 2005: struck out of the List. 27 Cass. 1e civ., Feb. 17th 2004, case n° 47. 28 Cass. 1e civ., Feb. 17th 2004, case n° 48.

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Islamic Repudiations before the French Cour de cassation protected if she is domiciled somewhere else in Europe, while her husband has moved to live in France? And is the close connection condition also a part of ordre public procédural? However, the essential question is the following: why should the blocking by ordre public be subject to a close connection condition? Is this a French version of Binnenbeziehung or Inlandsbeziehung? Or is the explanation to be found in the European Convention, whose Article 1 states that ‘The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section 1 of this Convention’? In practice, while controlling repudiation judgments, the Cour de cassation is careful not to tread on situations that were completed in a foreign context. Case n° 50 gives a good example of such a situation. After having married a French woman in 1986, a Moroccan man obtained French nationality. Soon after, in 1991, the couple divorced and, as a consequence the naturalisation of the ex-husband was challenged. The argument was based on the fact that in 1981 this man married a Moroccan woman in Morocco, and that the dissolution of this marriage by repudiation in 1983 in Morocco could not be recognised. Therefore, as a bigamist, his marriage with a French woman could not be legal, and neither could his naturalisation. As already mentioned, the Cour d’appel’s decision on non-recognition was found to be inadequate by the Cour de cassation, and this was sufficient to overrule the lower court’s decision. But clearly this situation of a marriage which had been celebrated, probably lived and surely dissolved in the Moroccan legal system does not require a strict application of ordre public resting upon Article 5 of Protocol n°7. However, while everyone agrees on this legal outcome, the ways to reach it are diverse: effet atténué de l’ordre public, ordre public de proximité, prevalence of the fundamental right to privacy, reasonable restriction of equality between spouses... But, as another example shows, it is not just a question of legal technique, and something more than that may be at stake. Let us imagine that a Moroccan woman is repudiated in Morocco where she lives. She acquiesces in the talaq, obtaining financial compensation but losing custody of her children. Despite that, she flees with her children to France. Then her ex-husband asks a French court to recognise the talaq and to return the children. Ordre public de proximité would probably be an insufficient ground to reject such a talaq judgment, but an appropriate implementation of Protocol n°7 would certainly lead to a rigorous examination of the conditions under which the wife acquiesced in the talaq.29 To conclude, not every question raised regarding the recognition of Islamic repudiations in France has been settled in a definitive manner since Feb. 17th 2004. Surely the matter is a delicate one, burdened with sociological, historical, political and diplomatic considerations. However the five 2004 decisions are a step in the right direction for women subject to a talaq repudiation. There are many reasons to believe that the Cour de cassation will not retreat on these issues.

29

See NIBOYET M.-L. (note 4), p. 30.

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THE NETHERLANDS TORTS AND THE CONFLICT OF LAWS IN THE NETHERLANDS: REMARKS ON HOGE RAAD 12 NOVEMBER 2004∗ Cathalijne G. VAN DER PLAS∗∗ / Teun H.D. STRUYCKEN∗∗∗

I. II.

III. IV. V.

The Statute The Case A. Facts B. Issue C. The Hoge Raad Decision Comments Rome II Conclusion

I.

The Statute

The rules of private international law of the Netherlands are in the process of being codified in a piecemeal fashion. Some parts of the law, such as the rules on divorce and corporations, have already been codified. Others, such as the rules on property interests, are still in draft form. The conflict rules for torts (delicts) are now to be found in the Wet conflictenrecht onrechtmatige daad (hereinafter referred to as the WCOD), that entered into force on 1 June 2001. In the WCOD, Article 3(1) codifies the classic lex loci delicti rule: tort liability is governed by the law of the State where the tort was committed. For situa∗ The case is reported in: Nederlandse Jurisprudentie 2005, p. 552. Following abbreviations will be used in this paper: NJ for Nederlandse Jurisprudentie, AA for Ars Aequi, NIPR for Nederlands Internationaal Privaatrecht, WPNR for Weekblad voor Privaatrecht, Notariaat en Registratie, LMCLQ for Lloyd’s Maritime and Commercial Law Quarterly and HR for Hoge Raad. ∗∗ Dr. C.G. VAN DER PLAS obtained a doctorate from the University of Nijmegen on ‘De taak van de rechter en het IPR’. She is now practising lawyer at Höcker Rueb Doeleman Advocaten in Amsterdam. ∗∗∗ T.H.D. STRUYCKEN practices banking law at NautaDutilh in Amsterdam. He is a regular author of publications on property law, financial law and private international law.

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Cathalijne G. van der Plas / Teun H.D. Struycken tions in which the place of the act (the Handlungsort) differs from the place where the damage occurs (the Erfolgsort), Article 3(2) clarifies what counts as locus delicti: the law of the State where the damage occurs is applicable, unless the tortfeasor could not reasonably foresee that the damage would occur in that State. The lex loci delicti rule is subject to two statutory exceptions. Article 3(3) derogates from Article 3(1) if the tortfeasor and the victim both have their habitual residence in a State other than the State of the locus delicti. In such a case, the law of the State in which both have their habitual residence is applicable. This rule of exception is known as the gevolgenuitzondering, which means literally the ‘exception as to the consequences’. If for example a Dutch person harms another Dutch person in a car accident in Spain, Dutch law applies because both tortfeasor and victim have their habitual residence in the Netherlands, even though the lex loci delicti is Spanish law.1 In this example, the Netherlands is the country where the consequences of the tort, that is the rights and obligations to which the tort gives rise, come into play. The second statutory exception to the lex loci delicti applies if there is a preexisting relationship between the tortfeasor and the victim. If there is a close connection between the tort and this pre-existing relationship between the same parties, the court may, pursuant to Article 5 WCOD, apply the law that governs that pre-existing relationship to the obligations arising out of the tort. In foreign legal literature, this doctrine is sometimes referred to as ‘accessory allocation of law’ and in Dutch law as accessoire aanknoping. It has been codified for tort, but it may also be relevant for webs of contracts. In the abstract, it presupposes that one juridical relationship is closely related to another, to which it is accessory, so that it is felt that the applicable laws should coincide. The function of the doctrine of accessory allocation is to avoid a multiplicity of applicable laws to a relationship between the same or related parties, either for reason of efficiency or for reason of justice, when the parties could reasonably expect the law of the pre-existing relationship to cover related issues. Fourthly, apart from the lex loci delicti and the two statutory rules of exception, the WCOD allows a choice of the applicable law by agreement between tortfeasor and victim. Article 6 states that the obligations arising out of the tort are governed by the law chosen by the parties instead of the law that is applicable according to the other conflict rules of the WCOD. The travaux préparatoires explicitly state that the law that would govern the consequences of a tort can be chosen prior to that tort being committed.

1 As in the Hague Convention on the Law Applicable to Traffic Accidents 1971, Article 4 sub a, last part, and sub c, and the Hague Convention on the Law Applicable to Products Liability 1973, Article 5 sub a.

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Torts and the Conflict of Laws in the Netherlands

II.

The Case

A.

Facts

Schulte, who lives in the Netherlands, was employed by a German company, called Tiefbohr, in the business of drilling rigs. The employment contract contained a choice-of-law clause designating German law. Schulte had been sent abroad for work by Tiefbohr several times. For the work abroad, an additional contract was concluded, that also contained a similar choice-of-law clause. In 1995, Schulte was sent to Thailand in order to ship a drilling rig from one place to another and back. For tax reasons the contract with the Thai counterpart for the transfer of the drilling rig was concluded by the Dutch company Deutag instead of the German company Tiefbohr. During the transfer of the rig, an accident seriously injured Schulte.

B.

Issue

Schulte sued Deutag in a Dutch court and claimed damages. According to Schulte, Deutag could be held responsible for the accident, because the work in Thailand was done under the direction of Deutag, a Dutch company established in the Netherlands. Schulte argued that Dutch law applied, because both he and the defendant were residing in the Netherlands. Deutag argued that the liability issues were governed by German law instead of Dutch law. The Dutch rechtbank in the city of Assen held that the liability claim concerned the violation of a rule that puts an employer under the obligation to protect the safety of its employees, also when they are seconded to a third party. On the issue of the applicable law, the rechtbank decided that for this reason the most appropriate solution was to apply the law of the employment contract. The court added that this was all the more so, because applying the law of the employment contract would ensure that one coherent set of rules would govern the relationship between all parties possibly involved. Since the employment contract between Schulte and Tiefbohr contained a choice of German law, German law was held to be applicable to the liability issue. Schulte appealed to the supreme court of the Netherlands, the Hoge Raad, arguing that the rechtbank had violated Dutch rules of private international law on tort.

C.

The Hoge Raad Decision

The Hoge Raad held that the rechtbank had indeed applied Dutch rules on the conflict of laws incorrectly and reversed its judgment. The Hoge Raad started its reasoning by disentangling two conflict rules that the rechtbank had apparently mixed up: first, the Hoge Raad clarified the scope of the rule of accessory allocaYearbook of Private International Law, Volume 7 (2005)

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Cathalijne G. van der Plas / Teun H.D. Struycken tion – the second statutory rule of exception to the lex loci delicti, discussed above in Part I. Second, it considered the extent to which Dutch conflict rules on tort leave space for a general exception in favour of a law that is considered to be more closely connected with a particular case. Third, it ruled on the application of the first statutory rule of exception. On the accessory allocation doctrine, the Hoge Raad emphasized that the Dutch choice-of-law rules on tort only refer to the law governing a pre-existing relationship if both tortfeasor and victim are party to that pre-existing relationship. Identity is a statutory condition for application of the rule of exception instead of the lex loci delicti. On the second question, the Hoge Raad stated that the rechtbank had misunderstood the Dutch conflict rules on tort with regard to a general exception in favour of a more closely connected law. This arose because the rechtbank judged that – taking into account the specific circumstances of this case – Germany was more closely connected to the tort than Thailand or the Netherlands and that therefore an exception to the lex loci delicti was justified. The Hoge Raad held instead that the statute does not leave space for a law that is more closely connected with a concrete case than the law applicable pursuant to any of the statutory conflict rules. Finally, the Hoge Raad decided that the gevolgenuitzondering replaces the lex loci delicti rule if the case comes within the scope of this rule of exception. In other words, if the rights and obligations resulting from a tort arise in a country other than the locus delicti because both parties are resident in that other country, the law of the mutual residence shall be applied instead of the lex loci delicti. This means that a Dutch court has no discretion in determining whether or not to apply the rule of exception in such case. However, if parties have chosen a law or if the rule of accessory allocation is applicable, neither the main rule of lex loci delicti nor the rule of exception of the gevolgenuitzondering is relevant. In this case it was clear that both Schulte’s habitual residence and Deutag’s principle place of business were in the Netherlands, that the conditions for accessory allocation were not fulfilled and that the parties did not agree on a choice of law. As a result, the Hoge Raad held that Dutch law applied to Schulte’s claim.

III. Comments The case merits some further comments on accessory allocation and on a general ‘closer connection’ exception. The Hoge Raad did not accept Deutag’s arguments for applying the law governing the employment contract by way of accessory allocation. According to Deutag the rationale of the doctrine of accessory allocation leaves space for a broad interpretation of this doctrine. The travaux préparatoires on Article 5 WCOD make clear that the legislature codified the doctrine of accessory allocation in order to avoid dépeçage, i.e. that separate issues concerning a specific tort be governed by different laws. In addition, the legislator did not formulate Article 5 WCOD in an imperative way but rather in a discretionary way. 272

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Torts and the Conflict of Laws in the Netherlands The legislator did so in order to give the courts the possibility to fully take into account the circumstances of a concrete case.2 Furthermore, Dutch scholars widely criticised the statutory condition of identity of the parties to the pre-existing relationship for accessory allocation.3 A decision of the Hoge Raad is always preceded by a conclusion from an Advocate-General stating his or her independent opinion on how the legal issues put by the parties before the Hoge Raad should be decided. In this case, AdvocateGeneral Strikwerda added a new dimension to the debate by pointing out that the Dutch conflict rules on tort – unlike Article 4(1) and (5) of the Rome Convention on contractual obligations – are not open-ended. By this he apparently meant that only an open-ended conflict rule would allow a more closely connected law to displace, in a concrete case, the law designated by the basic lex loci delicti rule or by one of the rules of exception discussed above. The Hoge Raad agreed: the statutory conflict rules on tort do not leave space for a general exception. From the point of view of legal certainty, the decision of the Hoge Raad on the interpretation of the theory of accessory allocation is understandable: Article 5 WCOD sets a statutory condition for accessory allocation, so this condition has to be applied. A wider application of the doctrine would amount to the application of a general ‘closer connection exception’ not provided for by the WCOD. The reference of the Advocate-General to Article 4(5) of the Rome Convention could be relevant in the context of contract law, and taken as an indication that in this area there may be room for the application of the doctrine of accessory allocation. This could be highly relevant for international letters of credit. These webs of contracts between several parties, such as the advising bank, the issuing bank and the beneficiary, require a sensible determination of the applicable laws in case the parties were not so wise as to make an explicit choice in each contract of a single law governing all of the contracts involved. The Rome Convention does not provide for a specific rule for such contractual webs, but it is submitted that in such cases the exception clause in Article 4(5) derogates from the presumption in subsection (2). If not, Article 4(2) would probably lead to different laws being applied to the contracts involved in an international letter of credit transaction. However, whether the exception clause in Article 4(5) may be applied in such situations is doubtful.4 In any event, it presupposes that it is possible to characterise one of the contracts as the main contract, to which the other contracts are accessory. 2

In this way POLAK M., ‘Lees maar, er staat wél wat er staat: het conflictenrecht met betrekking tot verbintenissen uit onrechtmatige daad’, in: AA 2005, p. 43 on the basis of the travaux préparatoires of the WCOD. 3 See DE BOER TH.M., in his commentary on HR 23 February 1996 (Total Liban/Blue Aegan), in: NJ 1997, p. 276, par. 4; PONTIER J.A., Onrechtmatige daad, Praktijkreeks IPR, Deventer 2001, no. 141; VONKEN A.P.M.J., ‘Accessoire aanknoping in het licht van artikel 5 Wet conflictenrecht onrechtmatige daad. Een voorstel tot wetswijziging’, in: NIPR 2003, pp. 233-239. 4 See the English case Bank of Baroda v. Vysya Bank in: [1994] 2 Lloyd’s Rep. 87, and the French case Bloch v. Lima Cour d’appel de Versailles, 6 February 1991, in: Rev. crit. dr. int. pr. 1991, p. 745, and in: Clunet 1991, p. 125. In the Netherlands, the Balenpers

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Cathalijne G. van der Plas / Teun H.D. Struycken A general exception clause, not very different from the one in Article 4(5) of the Rome Convention, will in the near future probably become part of Netherlands PIL. The Dutch State Committee on Private International Law has drafted a set of General Rules that should one day become part of a comprehensive code on PIL.5 The outcome of cases such as the one at issue could then be very different. Article 11 of the proposed General Rules contains a general exception clause: ‘The law applicable pursuant to a statutory conflict rule based on the presumed close connection with that law, shall not be applied in exceptional circumstances, if, taking into account all circumstances of a case, it appears that the presumed close connection does in fact exist only to a very limited extent, and a much closer connection exists with another law. In such a case, the latter law shall be applied.’6 On this basis, all conflict rules based on a factual and geographical connecting factor can be set aside.7 In the Explanatory Report8 the State Committee mentions that the general exception formulated in Article 11 can play a role in situations where the issue that has to be decided is closely connected to a pre-existing relationship that is governed by another law, without explicitly requiring identity of the

case of the Hoge Raad (HR 25 September 1992, in: NJ 1992, 750) leaves very little room for the application of the exception clause in Art. 4(5), but this narrow interpretation has not yet been confirmed in the specific context of international letters of credits or other contractual webs. See further the discussion of this Dutch case by STRUYCKEN T.H.D., ‘Some Dutch judicial reflections on the Rome Convention, Article 4(5)’, in: [1996] LMCLQ 18-24 and in: NIPR 2001/2, pp. 204-206. See generally on divergences in case law in respect of Article 4(5): VAN DER PLAS C.G. / STRUYCKEN T.H.D., ‘Schuldoverneming en accessoire aanknoping bij samenhangende overeenkomsten: over twee vraagstukken inzake het EVO’, in: NIPR 2004/2, pp. 148-162. 5 It has been proposed that this code will form part of the Netherlands Civil Code as a Book 10. The WCOD and other statutes already in force will then be integrated into this code. 6 Draft-article 11(1) reads in Dutch: ‘Het recht dat is aangewezen door een wettelijke regel die berust op een veronderstelde nauwe band met dat recht, blijft bij uitzondering buiten toepassing, indien, gelet op alle omstandigheden van het geval, kennelijk de in die regel veronderstelde nauwe band slechts in zeer geringe mate bestaat, en met een ander recht een veel nauwere band bestaat. In dat geval dient dat andere recht te worden toegepast.’ Subsection 2 of Article 11 provides that the general rule of exception does not apply if parties have made a valid choice of law. 7 In the Explanatory Report it is stated that Article 11 does not apply if the conflict rule that will be set aside by the general exception clause is based on the proposition that a weaker party deserves protection or on the proposition that the content of substantive law is decisive for the applicability of that law. Also, the general rule of exception cannot be applied if it would constitute a derogation from a conflict rule that stems from a treaty, a regulation or another binding international instrument. 8 This Report is available at .

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Torts and the Conflict of Laws in the Netherlands parties.9 This means that the broad interpretation of the doctrine of accessory allocation will become part of the general rule of exception. And what is more: the proposal for a European Regulation on the law applicable to non-contractual obligations (often referred to as Rome II)10 also contains a general exception clause.

IV. Rome II The general conflict rule for non-contractual obligations proposed in Rome II departs from the classic lex loci delicti and is based on the Erfolgsort: according to Article 3(1) of this draft regulation, the law of the State where the damage arises or is likely to arise is applicable, irrespective of the State in which the event giving rise to the damage occurred and irrespective of the State or States in which the indirect consequences of that event arise. In Article 3(2) an exception is made similar to the gevolgenuitzondering in Dutch law: where the person presumed to be liable and the person sustaining damage have both their habitual residence in the same State at the moment when the damage occurs, the non-contractual obligation shall be governed by the law of that State. Similar to the rule in the Dutch WCOD, this exception to the general rule in Article 3(1) is formulated imperatively. It is not without reason that these conflict rules are drafted in the form of rules instead of mere presumptions similar to those in Article 4 of the Rome Convention on Contractual Obligations. In its Explanatory Memorandum to the proposal for Rome II, the European Commission stresses that experience with Rome Convention has shown that courts in some Member States seem inclined to apply the exception clause as the general rule and seek the law that best meets the proximity criterion (the proper law approach), rather than applying the presumptions.11 Nevertheless, Article 3(3) of the draft Rome II regulation contains a general exception clause: where it is clear from all the circumstances of the case that the non-contractual obligation is manifestly more closely connected with another State, the law of that State shall apply. According to the Explanatory Memorandum, the general exception of Article 3(3) is intended, similarly to Article 4(5) of Rome I, to bring a degree of flexibility, ‘enabling the court to adapt the rigid rule to an indi-

9

See on Article 11 of the proposal for General Rules on PIL: DE BOER Th.M., ‘Uitzonderingen en correctieven: de artikelen 8 tot en met 12’, in: WPNR 2003, pp. 469-470. 10 Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations (Rome II), Brussels, 22.7.2003, COM (2003) 427 final, 2003/0168 (COD). 11 See the Green Paper on converting the Convention of Rome of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654, point 3.2.5.

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Cathalijne G. van der Plas / Teun H.D. Struycken vidual case so as to apply the law that reflects the centre of gravity of the situation’. The general exception of Article 3(3) is formulated in an imperative way. But when will there be a manifestly closer connection with another State? Here the court is left with a margin of discretion. In the Explanatory Memorandum to the draft regulation, the European Commission stresses that the rule of exception should really remain exceptional, since the clause generates a degree of unforeseeability as to the law that will be applicable to non-contractual obligations. By way of example, the second sentence of Article 3(3) refers to the theory of accessory allocation – the Commission speaks of the ‘secondary connection mechanism’ –: a manifestly closer connection with another State may be based in particular on a pre-existing relationship between the parties, such as a contract that is closely connected with the non-contractual obligation in question. This ‘exemplary rule’ in the second sentence of Article 3(3) also appears to assume identity between the parties to the non-contractual relationship and the parties to the preexisting relationship. However, neither the text of the draft regulation nor the Explanatory Memorandum precludes the application of the general exception clause if there is no identity of parties.12 As was pointed out by Advocate-General Strikwerda in his opinion submitted to the Hoge Raad, the proposed rule in Rome II appears to be open-ended, whereas the Dutch WCOD is not. Finally, Article 10 of the Rome II proposal endorses party autonomy. However, in comparison with Article 6 of the Dutch WCOD, it is stricter. Parties can only make a choice of law by an agreement entered into after their dispute arose, whereas the choice of law in Article 6 WCOD can be made by parties prior to a tort possibly being committed. For practical purposes, this is a missed opportunity. It is for instance desirable that parties are given the option to agree in advance on the law governing potential tort liability when parties start negotiations and wish to clarify which law would determine the consequences of a breach or breakdown in negotiations.

V.

Conclusion

Where the Dutch statutory conflict rules on tort limit the theory of accessory allocation to cases where the tortfeasor and the victim are both party to a pre-existing relationship, the Hoge Raad is not willing to apply a general rule of exception based on the concept of a close connection. However, the proposal for Dutch General Rules on PIL and the proposal for Rome II may mean that this decision of the Hoge Raad on accessory allocation in the field of tort liability will not last.

12

See DE BOER TH.M., case note under HR 12 November 2004, NJ 2005, 552,

point 6.

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SPAIN EFFECTS IN SPAIN OF A DEED OF SALE AND PURCHASE OF A PROPERTY LOCATED IN SPAIN, AUTHORISED BY A GERMAN NOTARY PUBLIC: DGRN OF 7 FEBRUARY 2005 AND 20 MAY 2005 Beatriz AÑOVEROS TERRADAS*

I. II. III.

IV.

Introductory Remarks The Facts of the Decisions Legal Issues A. The Equivalence of an Act as a Condition of the Validity of the Transaction B. The Equivalence of the Foreign Public Deed Conclusions

I.

Introductory Remarks

In two recent decisions (7th February and 20th May of 2005)1 the Dirección General de los Registros y del Notariado refused the registration in the Spanish Land Register of a deed of sale and purchase of a property located in Spain, which had been authorised by a German Notary Public. In order to understand the significance of such decisions, it is necessary, firstly, to state the importance of the Dirección General de los Registros y del Notariado (hereinafter, ‘DGRN’) in the Spanish system. The DGRN is an organ which belongs to the Spanish Ministry of Justice and is one of the most prestigious organs of the Spanish Civil Service. Among its functions, are the oversight and control of all the Land Registers in Spain, and the decision of appeals (recursos gubernativos) lodged against the characterisation of * Phd, MSt, LLM, Lecturer in Private international law at ESADE Faculty of Law (Universitat Ramon Llull; Barcelona, Spain). This commentary was completed before the Court of First Instance of Santa Cruz de Tenerife of 2 March 2006 (non-reported) declared the nullity of the DGRN’s decision of 7 February 2005 (which is here under scrutiny). I do approve of the nullity of the DGRN’s decision which is, as will be shown, contrary to Spanish law and, potentially, to Community law as well. The ruling of the Court of First Instance can still be appealed. Should this happen, I do hope that its findings will not be reversed. 1 Resolución Dirección General de los Registros y del Notariado, of 7 February 2005 (RJ 2005/2452); Resolución Dirección General de los Registros y del Notariado of 20 May 2005 (RJ 2005/5645).

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Beatriz Añoveros Terradas the titles made by the Land Registers. Its decisions (called ‘resolutions’) belong to the scope of voluntary jurisdiction. They may be considered neither as a source of law nor as legal doctrine that may be invoked before the Spanish Supreme Court. Nevertheless, they have authority because of the usually strong argumentative basis underlying them.2 Against DGRN decisions, it is possible to file an appeal before the courts.

II.

The Facts of the Decisions

The facts of the decisions in question are very similar and the legal reasoning identical. For this reason, I will only refer to the decision of 7th February 2005, as it was the first one on the matter in question. The facts were the following. In 1984, a German Notary Public authorised a document, in which Mr Otto, a widower resident of Germany, sold to Mrs Ulrike, resident of Berlin, half of his non-divided property (an apartment located in Puerto de la Cruz, Tenerife), coowned with Mrs Olga, also resident of Germany. Mr Otto reserved to himself a life-interest usufruct. Mrs Olga, the co-owner of the property, agreed to the contents of the document. The apartment had been purchased by Mr Otto and Mrs Olga, both residing in Germany, through a Spanish public deed, authorised by a Spanish Notary Public, and duly registered in the Spanish Land Register. The relevant taxes having been paid, the German public deed was filed with the Spanish Register, accompanied by the Hague Convention Apostille, and officially translated into Spanish. The Register denied registration to the German document, both because it could not have legal effects in Spain and because the Spanish system with regard to the transfer of the ownership was different from the German one. Mrs Ulrike appealed against the Register’s decision denying registration to the German deed. The DGRN, on appeal, issued the decision which is the object of this commentary.

III. Legal Issues The basic question at stake concerns the potential legal effects in Spain of a deed of sale and purchase of a property located in Spain, authorised by a German Notary Public. When I refer to the legal effects of a foreign deed of sale and purchase, I refer both to the transfer of the rights in rem (ownership) and to the registration in the Spanish Land Register. These are two different, but very much related issues.

2 LACRUZ BERDEJO J.L. / SANCHO REBULLIDA F. / LUNA SERRANO A. / DELGADO ECHVARRÍA J. / RIVERO HERNANDEZ, F., Elementos de Derecho Civil, III bis. Derecho inmobiliario registral, Barcelona, José María Bosch, 2nd ed., 2003, at 294.

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Effects in Spain of a Foreign Deed of Sale of Spanish Property As will be shown, the decision of the DGRN confuses both effects, reaching, in my point of view, an erroneous decision. The potential effects of an act, authorised by a foreign Notary Public, in a country different from the one in which it was drawn up, raise the question of the equivalence of acts, i.e. the characterisation of the instrumental act in question (in the case at hand, the equivalence of the public deed).3 In this sense, we should consider (i) on the one hand, the equivalence of the public deed as a public document and its registration in the Land Register, and (ii), on the other hand, the equivalence of the act as an instrument of the validity of the transaction. I will first deal with the second question and then come back to the characterisation of the public deed as a public document.

A.

The Equivalence of an Act as a Condition of the Validity of the Transaction

In order to have any legal effect, a public document needs first to be formally valid with regard to the act which it incorporates.4 As is well known, in different legal systems, formal requirements may pursue different aims. On the one hand, the form may merely constitute proof of the existence of the parties’ consent to the act (ad probationem); on the other hand, some acts, because of their social significance, demand special formal requirements for their validity (ad solemnitatem). According to Spanish law, in order for the purchaser of a property to acquire the rights in rem (ownership) it is necessary to have a titulo (contract) and a modo (traditio or transfer of possession) (art. 609 CC). The sale and purchase agreement is not in itself sufficient to transfer the property rights over the land to the purchaser. The purchaser will only obtain a property right when the traditio has taken place. According to art. 609 CC, ownership of the asset is acquired by contract through the traditio. When the sale has been executed in the form of a public deed, however, the deed is regarded as equivalent to the traditio of the asset (art. 1462(2) CC). The deed of sale and purchase constitutes, in this case, the ‘modo’ mentioned here above. In this framework, the establishment of a deed of sale and purchase of a property is not considered as a formal requirement for the transfer of the rights in rem (forma ad solemnitatem), even though, as said, it may be considered as an instrumental traditio. According to art. 1278 CC, a contract shall be valid regardless of its form. Nevertheless, art. 1279 CC states that, whenever the law requires the establishment of a public deed to transfer personal rights, the parties may compel each other to fulfil such formal requirements. Furthermore, art. 1280 CC states that contracts, the object of which is the transfer of a right in rem, shall be written in the form of a public deed. The reasons behind this formal requirement are the wish to protect the 3

BORRÁS A., ‘Eficacia ejecutiva internacional de los títulos extrajudiciales’, in: Anales de la Academia Matritense del Notariado 2004, 31-53, at 37. 4 FERNÁNDEZ ROZAS J.C./ SÁNCHEZ LORENZO S., Derecho internacional privado, Madrid, Civitas, 2001, at 331.

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Beatriz Añoveros Terradas security of transactions concerning real property as well as the vested rights of third parties. The establishment of a public deed of sale and purchase and its registration guarantees State control over the rights of the owner, both for private (i.e.: protection of the contracting parties) and public (i.e.: the payment of taxes) purposes. Nevertheless, it is widely accepted that the formality required in art. 1280 CC is not ad solemnitatem but ad probationem. Therefore, the registration of the deed is a formality independent of the traditio and fulfilling a different aim. It proves and protects the rights in rem, excluding the possibility of attacking the acquisition by claiming a defect in the ownership of the transferor5. In a situation such as this (sale and purchase of a property located in Spain between by two parties with their residence in Germany), the law applicable to the acquisition of the rights in rem is, according to art. 10(1) CC, the law of the place where the property is located, i.e. Spain. Therefore, the transfer of the rights in rem to the apartment located in Puerto de la Cruz must be carried out according to Spanish law, i.e. in compliance with the theory of titulo and modo explained here above. Spanish law shall also apply to the question of whether the public deed may be considered as an instrumental traditio (the modo). A different question is whether a foreign public deed of sale and purchase of a property may be considered as equivalent to a Spanish public deed. This is the key issue in this decision, i.e. the characterisation of the public deed as such and its aptitude to be registered in the Land Register. If we consider the foreign public deed as equivalent to the Spanish one, it will cause the transfer of the property (instrumental traditio) according to art. 1462(2) CC, regardless of the German system of transfer of the rights in rem. Because of this, I cannot understand the DGRN’s reasoning, which is as follows: ‘the relevant German public deed cannot cause the transfer of the rights in rem, nor be registered in the Spanish Land Register, since the powers conferred by Spanish law to the Spanish notaries cannot be extended to foreign ones’. As said above, the DGRN confuses the transfer of the rights in rem and the registration of the deed, reaching an unreasonable decision.

B.

The Equivalence of the Foreign Public Deed

As said before, the key issue in this decision is whether a foreign public deed may be considered as equivalent to a Spanish one. In its previous decisions, the DGRN ruled that equivalence is to be judged according to Spanish law (art. 12(1) CC, characterization ex lege fori). It is thus necessary to make a ‘comparison between the basic requirements for a Spanish document to be considered as a public deed and those required for the foreign document’.6 Therefore, in order to consider that a foreign document is equivalent to a Spanish public document, it will have to comply both with the formalities at the place where it was established (auctor regit 5 LACRUZ BERDEJO J.L. / SANCHO REBULLIDA F. / LUNA SERRANO A. / DELGADO ECHVARRÍA J. / RIVERO HERNÁNDEZ, F. (note 2), at 105. 6 DGRN’s decision of 15 March 2000.

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Effects in Spain of a Foreign Deed of Sale of Spanish Property actum, in the case at issue, Germany) and with those necessary for Spanish deeds (Art. 323 Ley de Enjuiciamiento Civil, Art. 4 Ley Hipotecaria and Art. 36 Reglamento Hipotecario); moreover, it must be accompanied by the the Hague Convention Apostille (see above) and by a certified translation. With regard to the formalities established by the law of the place where the act was drawn up (Germany), the DGRN has stated a presumption iuris tantum of their accomplishment.7 Furthermore, according to the DGRN, art. 4 of the Ley Hipotecaria, which states that ‘titles authorised in a foreign country shall have access to the Land Register, whenever they have effects in Spain according to the Law [...]’ is to be interpreted as requiring the equivalence of acts.8 Therefore, the minimum requirements established by Spanish law for a public deed must be fulfilled by a foreign public deed; these requirements are: a) it shall be authorised by a competent Notary Public (art. 1216 CC); b) it shall comply with the formalities laid down by law, i.e. the identification of the parties to the contract and the assessment of their capacity by the Notary (art. 1216 CC).9 Following this doctrine, the DGRN sees no problem in admitting equivalence, when Spanish law requires a formality ad probationem. For instance, equivalence has been confirmed with respect to a power of attorney authorised by a foreign Notary.10 On the contrary, and surprisingly, according to the DGRN in this new decision, ‘more difficulties arise when the validity of the act depends on the fulfilment of formal requirements, as in the case of the transfer of the rights in rem of real property’, i.e., when the formalities are required ad solemnitatem. In my opinion, this reasoning is not very convincing for two reasons. As explained above, the registration of the deed of sale in the Land Register, although important for private and public purposes, is not a condition for the transfer of property. It is true that the transfer of the rights in rem and the registration are closely related, since the latter is established to protect the first. As has been pointed out, however, the main effect of the deed (the transfer of the rights in rem) cannot be frustrated by the instrumental effect (the protection of third parties).11 On the other hand, even in such a case, equivalence could have been possible, if all the requirements, laid down by Spanish law in order for a deed to be considered, had been fulfilled. Moreover, according to the DGRN, equivalence is to be denied, because a foreign deed may ensure neither private nor public verifications, contrary to a Spanish document. On the one hand, a Spanish Notary verifies the ownership of the real property and the charges and encumbrances on it, through a computer 7

See DGRN’s decision of 21 April 2003, commented by REQUEJO ISIDRO M. in: REDI 2004, at 337-340. 8 DGRN’s decision of 15 March 2000. 9 On the interpretation of this requirement, see DGRN’s decision of 21 April 2003 and the commentary by REQUEJO ISIDRO M. (note 7). 10 DGRN’s decisions of 11 June 1999 (see the commentary by REQUEJO ISIDRO M. in: REDI 2000, at 616-619) and of 21 April 2003 (see note 7). 11 FORNER DELAYGUA J., ‘Jornadas sobre propiedad y Derecho internacional privado. Estatuto real: aspectos generales’, unedited.

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Beatriz Añoveros Terradas check of the Land Register, when the transaction is taking place. Furthermore, he or she immediately sends to the Register, normally by fax, a copy of the deed of sale and purchase in order to create a registration entry. According to the DGRN, a foreign Notary cannot guarantee this verification because he or she does not have the above mentioned computer communication with the Spanish Register.12 Additionally, a foreign Notary does not cooperate with the Spanish tax authorities for the payment of the taxes due for the transfer, since he or she does not belong to the Spanish Civil Service. This point is also not completely understandable. It is true that Spanish Notaries perform several duties in order to collaborate with the Spanish Treasury, but the obligation to pay the corresponding taxes rests with the parties. Moreover, whenever the parties have not fulfilled this requirement, the Register could always compel the parties to do so; therefore this mistake can always be rectified.

IV. Conclusions In conclusion, I consider that it is necessary for the Register to carry out a special verification of the equivalence of the act, but once the equivalence to a Spanish public deed has been proved, there should be no problem in the registration of a foreign public deed. As has been pointed out13, behind the issue of the ‘equivalence of forms’ lie the existing differences with respect to the duties performed by Notaries in Europe, especially between the so-called Latin Notaries and the British Notaries.14 In the present case, German Notaries belong to the category of Latin Notaries, as do the Spanish ones. Apart from the different systems of access to the profession, all Latin Notaries fulfil a similar duty, since they receive the parties’ will and guarantee the faithful transcription of the contents of the act.15 On the contrary, British Notaries fulfil another type of function, as they give advice to the parties. The free movement of Notaries in Europe is far from being reached. Thus, the proposal for a Directive of the European Parliament and of the Council on services in the internal market, 13th January 200416 mentions, as a derogation from the country of origin principle, the acts requiring by law the involvement of a Notary.17 In any case, decisions such as the one at issue do not further the construction of the internal market. 12

See on this aspect the DGRN’s decision of 15 March 2000. Idem, p. 338. 14 See on this issue, BORRÁS A. (note 3), at 34-35. 15 BORRÁS A. (note 3), at 34. 16 COM (2004) 2 final. 17 On the free movements of Notary services in Europe see REQUEJO ISIDRO M. (note 7). 13

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SWITZERLAND FEDERAL TRIBUNAL, 6 APRIL 2004: RECOGNITION OF AN ISRAELI JUDGMENT OF PATERNITY IN SWITZERLAND – CIRCUMVENTION OF THE LAW (FRAUDE À LA LOI)? Simon OTHENIN-GIRARD*

In this decision1, the Federal Tribunal had to deal with a case concerning the recognition in Switzerland of an Israeli judgment of paternity; it was given the occasion to examine whether the application of the circumvention of the law, or of the judgement, theories (fraude à la loi or fraude au jugement) should hinder recognition. Substantially, the facts of the case could be described as follows. A. X., a Swiss citizen, born in Switzerland, is the child of F. X., a Swiss citizen, and of H. Y., a French citizen, Jewish and born in Morocco, who were not married. He is registered in the Swiss civil register as his mother’s child, born of an unknown father. H. Y. died in Geneva without leaving a will and A. X. wished to enter a claim for the succession of his father. He introduced filiation proceedings against the testamentary executor and administrator of the succession, before the Family Division of the Tribunal of Haifa in Israel. After the death of his father, but before the beginning of the filiation proceedings, he became an Israeli citizen by naturalization. The Tribunal of Haifa attested that A. X. is an Israeli citizen and that the deceased was his father. This was evidenced by a DNA expert evaluation by rogatory commission, which took place in Geneva. The plaintiff requested the transcription of this judgment into the Swiss civil register; the superior administrative authority for the civil registry office, which is competent, based on Article 32 of the federal law on private international law, thereafter the PIL, and the administrative tribunal of the canton of Vaud dismissed the transcription. The cantonal administrative and judicial authorities considered that the plaintiff wanted to become an Israeli citizen only in order to evade the former Article 308 of the Swiss civil code, and that therefore the naturalization was fraudulent. This former provision stated that filiation proceedings must be introduced within one year of the birth of the child; if the child failed to claim within this time-limit, he lost his rights. The plaintiff submitted the case to the Federal Tribunal.

*

Dr. iur., Lecturer at the University of Fribourg (Switzerland), Attorney; [email protected]. 1

ATF 130 III 723. Yearbook of Private International Law, Volume 7 (2005), pp. 283-288 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Simon Othenin-Girard The Federal Tribunal first notes that there is no treaty between Israel and Switzerland on the recognition and enforcement of civil decisions and that, consequently, the Swiss PIL is applicable. For the cantonal authorities, the Israeli authorities had indirect jurisdiction according to Articles 25 lit. a, 26 lit. a and 70 PIL. The fact that foreign law did not submit the filiation proceedings to an absolute time-limit was not contrary to Swiss public policy. However, the cantonal authority refused recognition of the judgment, considering that it was fraudulent: the naturalization of the plaintiff and his claim in Israel were solely intended to evade the Swiss civil provisions stating the time-limit within which a child must introduce filiation proceedings. At this stage, we observe that the plaintiff could have introduced proceedings in Switzerland, because the Swiss tribunal of the place of his residence had jurisdiction (Article 66 PIL), but in this case the Swiss judge would have applied the Swiss law of the residence of the plaintiff at the time of his birth (Article 68 sec. 1, combined with Article 69 PIL). His action would have been dismissed under Swiss material law, according to the former Article 308 of the Swiss civil code. This provision, today repealed, would still have been applicable to the case, according to transitory law (Articles 13 and 13a of the Final part of the civil code). Article 70 PIL deals with the indirect jurisdiction of the State where the decision was issued, in the field of parent-child relationship, or filiation; according to this provision, foreign decisions relating to a declaration or denial of a parent-child relationship shall be recognized in Switzerland, if they were issued in the State of the child’s habitual residence or in the child’s national State or in the State of domicile or the national State of the mother or of the father. In the present case, the plaintiff has two nationalities, Swiss and Israeli. The Federal Tribunal underlines that the nationality of a person is to be determined according to the law of the State whose nationality is involved (art. 22 PIL). According to Article 23 sec. 3 PIL, if recognition of a foreign decision in Switzerland depends on a person’s nationality, it is sufficient to take into consideration one of that person’s nationalities. The aim of this rule is to increase the number of States, which may be taken into consideration as having jurisdiction, at the stage of recognition of foreign decisions, and consequently to make recognition easier.2 The Israeli nationality of the plaintiff could not be denied, as it had been admitted by Israeli authorities themselves. Concerning the circumvention of the law (fraude à la loi), the Federal Tribunal considers that the legislator did not introduce a special rule, as it did for the recognition of marriage in Article 45 sec. 2 PIL (‘if either spouse is a Swiss national or if both prospective spouses have their domicile in Switzerland, a marriage celebrated in a foreign country shall be recognized, unless it was celebrated in a foreign country with the clear intent of avoiding the provisions on the annulment of 2 DUTOIT B., Droit international privé, Commentaire de la loi fédérale du 18 décembre 1987, 4th ed. Basel/Geneva/Munich 2005, N° 4 ad art. 23; KELLER M. / KREN KOSTKIEWICZ J., in: Zürcher Kommentar zum IPRG, 2nd ed., Zürich 2004, N° 21 ad art. 23; OTHENIN-GIRARD S., ‘Nationalité multiple et apatridie: conflits positifs et négatifs de nationalités en droit international privé suisse (art. 23 et 24 LDIP)’, in: Aktuelle Juristische Praxis, St. Gallen 2000, pp. 1498-1512 (1511).

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Recognition of Paternity Judgment in Switzerland marriage provided by Swiss Law’). One should in each case examine whether the intent of the rules of conflict allows recourse to the fraude à la loi theory. The Federal Tribunal gives a definition of fraude à la loi: it exists when a person modifies the configuration of the facts, with the intention of submitting himself to another legal system; in so doing, he complies with the letter of the law, but not with its intent. Thus, fraud is not possible when the manipulation focuses on domicile, because it is impossible to move the centre of one’s existence; in other words, the definition of domicile excludes manipulation and fraud, because the judge can verify whether a change of domicile is effective. Fraude à la loi would also be excluded when the conflict of laws rule allows the parties, or one of them, to choose the applicable law, as in Article 116 PIL on contracts. When the law introduces nationality into the conflict rule, one must determine if the intent of the rule consists in general considerations such as the international harmony of decisions or whether, on the contrary, the purpose in using nationality is the effective relationship between the person who obtains the new nationality and the State in question. In the first situation, the judge will take the new nationality into consideration and in the second, he will not, if the nationality has been acquired without animus mutandi. The Federal Tribunal adds that, when a nationality is regularly acquired, naturalization is rarely considered as fraudulent in the application of conflict of laws rules. The Federal Tribunal underlines that the PIL is less strict for the recognition of decisions than in the matter of jurisdiction and applicable law. Actually, according to Article 23 PIL, when a person has one or more foreign nationalities in addition to the Swiss nationality, jurisdiction based on citizenship shall be determined by reference to the Swiss nationality only (sec. 1). The nationality of the State with which the person has the closest relationship shall be held exclusively relevant to determine the applicable law (art. 23 sec. 2 PIL). On the contrary, at the stage of recognition and execution, it is sufficient to take into consideration one or another nationality of the person (art. 23 sec. 3 PIL). The purpose of this provision is the favor recognitionis, as declining recognition could contribute to creating limping situations. In matters of filiation, the indirect jurisdiction rule comprises alternate connecting factors. According to Article 70 PIL, foreign decisions relating to a declaration or denial of a parent-child relationship shall be recognized in Switzerland if they were issued in the State of the child’s habitual residence or in the child’s national State or in the State of domicile or the national State of the mother or of the father. The intent of this rule is to harmonize the civil status of a person in Switzerland with that which he has abroad. The Federal Tribunal considers that the fact of obtaining Israeli nationality in order to submit the case to the application of Israeli law and, by this means, obtain an Israeli judgment, that could not have been obtained in Switzerland, is not violating the intent of Articles 23 and 70 PIL. The Federal Tribunal admitted the appeal and ordered that the Israeli judgement should be recorded in the civil status register. It has not been obtained by means of a fraude à la loi. In order to clarify the case, it would have been useful if the Federal Tribunal had looked at the question from the angle of Swiss public policy, in its negative construction (Art. 17 PIL for the applicable law, Art. 27 PIL for the recognition of Yearbook of Private International Law, Volume 7 (2005)

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Simon Othenin-Girard foreign decisions); foreign law that doesn’t submit affiliation proceedings to a time-limit (péremption or prescription) is not contrary to Swiss public policy.3 The Swiss public policy mechanism was therefore not brought into play on this ground. As public policy does not hinder the recognition of the decision in Switzerland, the Federal Tribunal has to verify whether the cantonal judgement, which based its refusal of recognition on the theory of fraude à la loi, is in conformity with the PIL. It is interesting to note that the Federal Tribunal does not exclude the application of this theory at the level of the recognition of a foreign judgment, even though this theory is not mentioned among the grounds for denial of recognition (art. 27 PIL), which are exhaustive according to Swiss precedents.4 One could consider that the theory is applicable in all matters and therefore also in private international law,5 but this point is debatable. However, the Federal Tribunal admits the intervention of the theory of fraude à la loi but only in a restrictive way. It could be useful to recall that the Federal Tribunal has already been reluctant to use this mechanism in private international law.6 When we look at it, the chronology of this case shows some analogies with the French leading case de Bauffremont, well known to the readers of this review. In this case, judged in the last resort by the French Cour de cassation,7 the French tribunals had pronounced the legal separation of the prince de Bauffremont, a French citizen, and his wife; she was Belgian and had become French through marriage. At this time, French law did not admit divorce. The princess transferred her domicile to the Dukedom of Saxe-Altenburg; she obtained the nationality of the Dukedom. She obtained her matrimonial liberty again, because her new national law considered separated Catholics (séparation de corps) to be divorced. She then married the prince of Bibesco, for whom she had made this trip to Germany. 3

ATF 118 II 475; on public policy in this matter, see BUCHER A., L’enfant en droit international privé, Genève/Bâle/Munich/Paris 2003, p. 10, 15-17, 44-48; OTHENINGIRARD S., La réserve d’ordre public en droit international privé suisse, PersonnesFamille-Successions, Etudes suisses de droit international, vol. 110, Zurich 1999, pp. 519546. 4 See ATF 120 II 83; however DUTOIT B. (note 2), N° 2bis ad art. 27, considers that this decision is questioned by ATF 126 III 330. 5 See SCHWANDER I, Einführung in das internationale Privatrecht, 3rd ed., St. Gallen/Lachen 2000, p. 352. For more restrictive points of view, see e. g. VISCHER F., in: Zürcher Kommentar zum IPRG (note 2), N° 26 ss. ad art. 17; RÜTTEN M., Gesetzesumgehung im internationalen Privatrecht, Schweizer Studien zum Internationalen Recht, vol. 120, Zürich 2003, p. 154 ss. 6 See in the matter of companies, ATF 117 II 497, where the Federal Tribunal considered that the exception of a fictitious registered office, based on the theory of fraude à la loi, no longer had its place in the system of PIL, see DUTOIT B. (note 2), N° 6 ad art. 154 and the references. 7 See C. Cass., 18 mars 1878, Sirey 1878.1.193; ANCEL B. / LEQUETTE Y., Les grands arrêts de la jurisprudence française de droit international privé, 4th ed., Paris 2001, N° 6.

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Recognition of Paternity Judgment in Switzerland The Prince of Bauffremont introduced proceedings in France; he claimed the annulment of the German marriage that had been celebrated whilst the French marriage was still in force. The French tribunal considered that the naturalization was obtained in order to escape French law and, therefore, was not opposable to the Prince of Bauffremont. It is certain that the intent of the rule on indirect jurisdiction is to promote the recognition of decisions and to avoid multiplying limping situations in parentchild relationships. This aim is reached by the multiplication of connecting factors and also by the fact that the nationality of the child, the father or the mother must not necessarily be an effective one, as the PIL is very open to the recognition of foreign judgments; each time the indirect jurisdiction rule uses nationality as a factor, the possession of more than one nationality increases the number of States of which the decisions shall be recognized in Switzerland. Does the fact that the PIL is open to foreign judgments really mean that one should deny the possibility of using the fraude à la loi mechanism? When someone’s sole aim in becoming a citizen of another State is to obtain the jurisdiction of a foreign court, do we have to admit, with the Federal Tribunal, that we should give up this mechanism, when the intent of the choice of law rule is based on general considerations, such as harmony between decisions, and that these general considerations are applicable when the PIL does not require an effective nationality? In my opinion, the Federal Tribunal has come to this conclusion a little too fast. It seems indeed that a judge should have the possibility of resorting to the fraud mechanism when the naturalization of the interested person is intended for the sole purpose of obtaining a judgment that would be impossible in Switzerland, because of the choice of law rule and the material law, which would be applicable in Switzerland. As A. Bucher notes,8 A. X. had made no steps in Switzerland to establish a legal child-parent relationship before the death of his father. In this case, the manipulation seems to be directed at the indirect jurisdiction rule. The situation would have been very different if the plaintiff, being an Israeli citizen, had chosen the Israeli jurisdiction, knowing that the Israeli judge would not apply the Swiss law; this would have been a strategic choice of jurisdiction, but not a manipulation. It is interesting to note, with A. Bucher,9 that the description of the facts as related in the official publication of the case is not exactly the same as the unabridged version of the case, as seen on the web site of the Federal Tribunal:10 prior to his naturalization, A. X. had contacted the cantonal authority and asked for its opinion: he explained that he could become an Israeli citizen and get a judgment in Israel and that he wanted to obtain the modification of the Swiss civil register based on the future Israeli judgment. He underlined that he would claim for the 8 BUCHER A., ‘Jurisprudence suisse en matière de droit international privé des personnes et de la famille’, in: Revue Suisse de droit international et européen 2005, pp. 382384. 9 BUCHER A. (note 8), p. 382. 10 .

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Simon Othenin-Girard succession of his father, who had no other descendants; as his father died without leaving a will, he would be his sole heir. It seems therefore that the naturalization was purely formal and the sole aim of the plaintiff in asking for it was to allow him to refer the case to the Israeli tribunals and not to establish a real connection with this State. The situation would have been different if A.X. had had some links with Israel, while having closer connections with Switzerland. This would for instance have been the case if A. X. had an interest in an Israeli judgment because the deceased had some property in Israel. The judgment gives no information on possible connections with Israel, except for the religion of the plaintiff’s father. In my opinion, considering the liberalism of the PIL in the matter of the recognition of foreign decisions, the exception of fraud should be maintained in this matter as well as in others. Nationality is not frequently subject to fraud, because the steps to obtain a nationality are usually complicated, slow, or expensive. However a manipulation cannot be excluded, and one can seriously wonder if this case is not an illustration of this possibility. This decision could be interpreted as an invitation to interested parties to manipulate the facts in order to obtain a favourable decision. One may indeed ask if a good Swiss lawyer should not suggest to his client, in a strategic way, to try to obtain a foreign nationality, regardless of his true links with the foreign country, when filiation proceedings would be rejected in application of the law, which the Swiss judge would otherwise have to apply. This would not be sound. The intent of the rule is to create a certain international harmony, but does that mean giving priority to a decision issued in a State with which the interested party seems to have no serious connections, with the exception of a nationality that has been obtained only for a procedural purpose? One must also relativize the affirmation of the Federal Tribunal, that there is no fraud possible when interested parties can choose the applicable law. It is too absolute: manipulation and, consequently, fraud are always theoretically and practically possible, when the choice of law or jurisdiction rule offers the parties a possibility to choose, but limits this choice on the ground of objective factors, for instance if a party submits by will or inheritance agreement his estate to the law of one of his national States, as allowed by Article 90 PIL; some scholars consider that there is a fraude à la loi if, in this case, a person seeks a nationality with the sole purpose of escaping the provision that grants certain heirs a minimal proportion of the inherited goods, the so-called réserve héréditaire.11 Finally, one would have appreciated it, if the Federal Tribunal had distinguished the manipulation of the choice of law rule from the manipulation of the (direct or indirect) jurisdiction rule.12 In this case, from a Swiss point of view, the indirect jurisdiction rule may have been manipulated. This could have been the case if the judge had considered that A. X., knowing the choice of law rule and the direct jurisdiction rule of Israel, had obtained Israeli nationality, knowing that the Swiss indirect jurisdiction rule admitted the factor of nationality and that the Israeli judgment would be recognized in Switzerland on this ground. 11

See for instance DUTOIT B. (note 2), N° 5 ad art. 90. See for instance KNOEPFLER F. / SCHWEIZER PH. / OTHENIN-GIRARD S., Droit international privé suisse, 3rd ed., Berne 2005, N° 335. 12

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FORUM* ________________

INTERNATIONAL SUBCONTRACTING IN EC PRIVATE INTERNATIONAL LAW Paola PIRODDI∗∗ I. II.

III.

IV.

Introductory Remarks Material Features of Recourse Subcontracts A. Recourse as the Ordinary Atypical Variation on Subcontracting B. Contingent Payment Clauses as Instances of Recourse C. Recourse Subcontracts under Common Law and Transnational Practice D. Contingent Payment Clauses in Civil Law E. Survey of Recourse Subcontracts by the Economic Analysis of Contracts Recourse Subcontracts in EC Private International Law A. The EC Private International Law in Contracts 1. The Rome Convention and the Proposal for its Revision 2. The Principles of European Contract Law (‘PECL’) 3. The Option of the Materialization of the ‘Rome I’ Instrument B. Recourse Subcontracts under the Scope of the Rome Convention 1. Are Recourse Subcontracts Contractual Obligations? 2. International Character of Domestic Recourse Subcontracts C. Party Autonomy in the Choice of Law in Recourse Subcontracts 1. Express Choice-of-Law Clauses 2. Implicit or Tacit Choice of Law 3. The Choice of a Non-State Law or of the PECL D. Voluntary and Judicial Dépeçage in Recourse Subcontracts E. The Closest Connection of Recourse Subcontracts F. The Characteristic Performance of Recourse Subcontracts G. Article 4(5) and the Law Applicable to Recourse Connected Subcontracts 1. Pitfalls of the Current Version of the Rome Convention 2. How Article 4 Could Reflect the Rise of the European Contract Law H. The Law Applicable to the Relation of the Subcontractor with the Employer I. EC Public Policy and Mandatory Rules 1. Article 16 and the ‘EC Public Policy’ 2. Overriding Mandatory Rules and Recourse Subcontracts 3. A ‘Modernized’ Statute of Mandatory Rules State-of-the-Art Conclusion *

This section contains summaries of books recently published by young authors in languages other than English. ∗∗ Associate Professor of European Union Law at the University of Cagliari (Italy). This paper sets out some of the ideas developed in the author’s work La subfornitura nel diritto internazionale privato comunitario, Padova 2004. Yearbook of Private International Law, Volume 7 (2005), pp. 289-331 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Paola Piroddi

I.

Introductory Remarks

‘International subcontracting’ (sous-traitance de marché ou de services or soustraité, sous-entreprise, Zulieferwesen or Zuliefervertrag, subappalto or subfornitura)1 refers to a widespread contractual practice of the modern construction industry, at the very core of the ‘self-made law of building industry’,2 which has so extensively contributed to the development of the lex mercatoria. As often described in literature, international subcontracting denotes an agreement, entered into by a contractor and a third party that undertakes to perform all or a part of the contractor’s obligations required by an employer under an actual or proposed cross-border construction contract. Reference hereby shall be made to private procurements only, since subcontracts related to public procurements almost exclusively involve administrative concerns, which deserve a separate appreciation. International subcontracts, because of the contractual connection to the construction contract, raise significant issues of private international law that require, subject to certain conditions, a deviation from the classic standard of neutrality and blindness of conflict rules in contracts.3 Indeed, only conflict rules likely to support the substantial private interests within the contractual connection can properly keep the focus on the functional unity that closely connects international subcontracts and construction contracts, which escape mechanical allocation by means of hard and fast conflict rules.

1

On international subcontracting see, generally, LAGARDE P., ‘La sous-traitance en droit international privé’, in: GAVALDA CH. (éd.), La sous-traitance de marchés de travaux et de services, Paris 1978, p. 1 et seq.; DUBISSON M., Les groupements d’entreprises pour les marchés internationaux, 2ème éd., Paris 1985, p. 54; ID., ‘Quelques aspects juridiques particuliers de la sous-traitance de marchés dans la pratique du commerce international’, in: Dr. prat. comm. int. 1983, p. 479 et seq.; BISMUTH J.L., ‘La sous-traitance internationale’, in: Trav. Com. fr. dr. int. privé 1984-1985, p. 23 et seq.; ID., ‘Le contrat international de sous-traitance. Étude de quelques règles juridiques applicables’, in: Rev. dr. aff. int. 1986, p. 536 et seq.; JAYME E., ‘Subunternehmervertrag und Europaïsche Gerichtsstands und Vollstreckungsübereinkommen (EuGVÜ)’, in: Festschrift für Klemens Pleyer zum 65. Geburtstag, Köln / Berlin / Bonn / München 1987, p. 63 et seq.; VAN HOUTTE H., ‘International Subcontracting’, in: Int. Constr. Law Rev. 1991, p. 301 et seq.; PIRODDI P., La subfornitura nel diritto internazionale privato comunitario, Padova 2004, p. 157 et seq. 2 LORENZ W., ‘Contracts for Work on Goods and Building Contracts’, in: ZWEIGERT K. / DROBNIG U. (eds.), International Encyclopædia of Comparative Law, III, LIPSTEIN K. (ed.), Private International Law, Chap. 8, Tübingen / Aalphen aan den Rijn 1980, p. 11 et seq. 3 See on this point POCAR F., ‘Problemi di legge applicabile ai contratti internazionali di subfornitura’, in: DRAETTA U. / VACCÀ C. (eds.), Contratti di subfornitura. Qualità e responsabilità, Milano 1993, p. VII et seq.; POCAR F., ‘Quelques remarques sur la loi applicable au contrat de sous-traitance’, in: DOMINICÉ CH. / PATRY R. / REYMOND C. (éds.), Études de droit international en l’honneur de Pierre Lalive, Bâle / Francfort-sur-leMain 1993, p. 155 et seq.

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International Subcontracting in EC Private International Law

II.

Material Features of Recourse Subcontracts

A.

Recourse as the Ordinary Atypical Variation on Subcontracting

Amongst the varying reasons for subcontracting,4 the parties’ major objective is to avoid a contractual link between the subcontractor and the employer, because the contractor’s obligations under the construction contract are to be performed by the subcontractor. So-called ‘nominated subcontractors’ do not constitute an exception to the rule of the absence of a contractual relation between the subcontractor and the employer. In fact, nominated subcontractors, although selected and frequently even paid by employers, which also may negotiate the terms and conditions of the subcontract, are nevertheless directly employed by contractors, thus not entering into the construction contract’s agreement. The performance of the contractor’s obligations by the subcontractor, absent a contractual link between the subcontractor and the employer, entails the need for a coordination of the obligations and responsibilities of the subcontractor under the subcontract with the obligations and responsibilities of the contractor under the construction contract.5 Therefore, the contractor should have, within the subcontract’s scope of agreement, the same rights and obligations towards the subcontractor that the employer has towards the contractor, under the terms and conditions of the construction contract. Furthermore, the subcontractor should have, towards the contractor, rights and obligations comparable to those that the contractor has towards the employer – both, obviously, except as to price, and to possible minor discrepancies, which nevertheless do not necessarily make the subcontract inconsistent with the construction contract. Furthermore, absent a contractual relation of the subcontractor with the employer, the contractor holds sole responsibility under the construction contract for the fulfilment of the subcontractor’s obligations. Thus, in order to avoid a contractor’s liability towards the employer because of non-compliance by the subcontractor with its obligations, the subcontractor should, within the terms of the subcontract, carry a liability for non-performance, based on the contractor’s liability under the principal contract. In other words, the subcontractor should undertake the obligation to indemnify the contractor for any liability arising from the non-performance of the obligations which were subcontracted. In order to achieve these objectives, the transnational practice of the construction industry has, over the years, evolved a special drafting technique for agreements, namely the so-called ‘recourse subcontract’ (sous-traitance transparente de marché ou de services or sous-entreprise transparente, subappalto or subfornitura). A recourse subcontract sets forth the obligations and liabilities of the parties 4 E.g., procurement requiring performance from a sole entity, so that the subcontract appears to be a convenient mechanism for collaboration, while avoiding the joint bidding of the contractor and the subcontractors. 5 SEPPALA CH., ‘The New FIDIC International Civil Engineering Subcontract’, in: Int. Constr. Law Rev. 1995, p. 5 et seq., at p. 8.

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Paola Piroddi not by a self-contained convention, but rather, wherever practicable, by an incorporation by reference (pass-through, flow down, flow-through or pari passu contract), or by a verbatim incorporation of all or a part of the clauses of the principal contract (back to back contract). Obviously, the referred or incorporated provisions of the principal contract shall apply to the subcontract, with all suitable or necessary alterations to the wording (mutatis mutandis), as required to oblige the subcontractor to abide by the terms and conditions of the principal contract.6

B.

Contingent Payment Clauses as Instances of Recourse

Transnational practice admits of varying grades of recourse, depending on the clauses which are affected.7 In any case, a major and rather peculiar category of recourse concerns the liability exclusion (or limitation) clauses, which fully or partly discharge a contracting party from liability for non-performance, because of an unpredictable event, which fundamentally alters the equilibrium of the contract or of the related circumstances, adversely affecting that party’s ability to perform its contractual obligations. Contrary to ordinary recourse, recourse of the liability exclusion clauses often does not restate, as concerns the subcontractor, the grounds for the exclusion of liability of the contractor under the principal contract. In contrast, a subcontract’s clause, which incorporates, by way of recourse, the liability exclusion clauses of the construction contract, frequently assumes that events and contingencies, considered by the principal contract as grounds for the exemption of liability of the contractor, are also grounds for relieving not the subcontractor, but the contractor for non-performance of its obligations in relation to the subcontractor. In other words, contrary to the above-mentioned ordinary recourse, recourse resting on the clauses of exclusion of liability for non-performance does not mean to relieve the contractor of a liability for non-performance in relation to the employer, but ultimately in relation to the subcontractor. One of the most typical cases of this peculiar variety of recourse affects the clauses related to the contractor’s obligation to pay the subcontract price. These clauses are thus converted into ‘contingent payment’ or ‘condition precedent’ clauses, because of their typical phrasing, which sets forth that the contractor’s obligation to pay the subcontractor depends on the actual payment by the employer

6 See DRAETTA U., ‘Il subcontratto internazionale’, in: Riv. dir. int. priv. proc. 1984, p. 641 et seq.; ID., ‘Il subcontratto nella prassi internazionale’, in: DRAETTA U. / VACCÀ C. (note 3), p. 3 et seq.; GLAVINIS P., Le contrat international de construction, Paris 1993, p. 105 et seq. 7 Only jurisdiction and arbitration clauses generally escape recourse: see NICKLISCH F., ‘Multi-Party Arbitration and Dispute Resolution in Major Industrial Projects’, in: Journ. Int. Arb. 1994, p. 57 et seq.; ID., ‘Infrastructure projects: interlinked contracts and interlinked arbitration?’, in: Int. Bus. Lawyer 1999, p. 212 et seq.

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International Subcontracting in EC Private International Law of the price of the principal contract.8 The earliest examples thereof, which were formulated by transnational practice in exceedingly varied terms, are usually referred to by the formulas pay when paid and if and when (or pay if paid).9 Pay when paid and if and when clauses stipulate that, notwithstanding the subcontractor’s entitlement to its remuneration, on the completion of its obligations, a late payment or, respectively, the non-payment of the contractor by the employer are grounds for excluding any liability of the contractor for late performance or, respectively, for non-performance of the obligation to pay the subcontract’s price (either progress payments, or final payment, or both). Although frequently the (often deliberately) ambiguous language of these clauses does not consent to properly ascribe a given term to the former or latter category, a pay when paid clause should merely involve the time for payment, only relieving the contractor from responsibility for delay, whereas an if and when clause, affecting the very coming into existence of the obligation of payment, should exclude even the contractor’s responsibility for failure thereof. Nevertheless, where the pay when paid clause does not stipulate a peremptory expiry date of the obligation of payment by the contractor, as frequently occurs, its contents correspond, as to effects, to an if and when clause. Contingent payment clauses have developed so extensively across the espace économique transnational that, nowadays, the term ‘recourses’ almost always refers, stricto sensu, to a subcontract including a pay when paid or an if and when clause (sous-traitance tout court). On the contrary, both ordinary and other recourse subcontracts, which do not conventionally subject the contractor’s obligation to pay the subcontractor to the pre-condition of an actual receipt by the contractor itself of the principal contract price, are generally referred to as ‘non-recourse’ or ‘limited recourse’ subcontracts (sous-traitance opaque or non transparente). By means of recourse, payment clauses are converted into a contractual device for allocating upon the subcontractor the contractor’s payment risks. Indeed, by requiring the subcontractor to relieve the contractor of its responsibility for delay or non-payment, pay when paid and if and when clauses shift upon the sub8

A first-tier subcontractor, which has been burdened with the credit risk, usually endeavours to shift it to the next lower-tier subcontractor, tying it in turn by the same terms and conditions of agreement. 9 See VETTER E., ‘Aspekte der Risikodurchstellung zwischen Hauptvertrag und Subunternehmenvertrag im internationalen Anlagengeschäft’, in: NICKLISCH F. (Hrsg.), Das Subunternehmen bei Bau- und Anlagenverträgen in In- und Auslandsgeschäft, Heidelberg 1987, p. 82 et seq.; GALGANO F., Diritto civile e commerciale, II, t. 1, 3a ed., Padova 1999, p. 247; BONELLI F. / RELLINI S., ‘Effetti della clausola “if and when”: una rassegna ragionata della giurisprudenza italiana ed internazionale’, in: Dir. comm. int. 1997, p. 239 et seq.; LORDI A., ‘Sulla ragionevolezza dei termini di pagamento nella subcontrattazione: profili comparativi’, in: Contr. impr. 2001, p. 717 et seq.; SEPPALA CH., ‘Contentieux des contrats internationaux de construction. Commentaire des sentences CCI relatives aux conditions FIDIC pour les contrats internationaux’, in: Rev. dr. aff. int. 1999, p. 716 et seq.; SALANITRO U., Contratti onerosi con prestazione incerta, Milano 2003, p. 7 et seq.

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Paola Piroddi contractor, pro quota (i.e., up to the value of the obligation that has been subcontracted), the risk of the employer’s delay in paying or failure to pay the construction contract price. The recourse subcontractor thus not only bears the ordinary risk of delay or failure to perform by its co-contracting party, as in any contract, but also the risk of a delay or failure by a third party (e.g., the employer), absent a contractual relation thereto. Thus, pay when paid and if and when clauses, by an atypical subdivision between the parties of the risks arising from the payment of the price of the subcontract, pass on to the subcontractor a genuinely exorbitant risk, to which the subcontractor in principle should not be exposed, and its financial burden.10 As a matter of fact, a pay when paid or an if and when clause constructs, for the contractor’s benefit, a (virtual) set-off between the non-receipt of the construction contract price by the employer, and the non-performance of the obligation to pay the subcontract price to the subcontractor, thus creating a contractual device for the private self-protection of the contractor’s credit against the employer. Therefore, a recourse subcontract serves not only its typical and essential function of a technical cooperation with the contractor’s performance under the principal contract, but also the atypical interest of (indirectly) granting the contractor a financial resource for the performance of the construction contract, broadly equivalent to an interestfree overdraft facility.

C.

Recourse Subcontracts under Common Law and Transnational Practice

Pay when paid and if and when clauses appeared at the outset of nineteenth century in North American domestic procurements. Rarely were they invalidated, although they ostensibly breached the fundamental common law rule establishing the need for an exchange of reciprocal considerations, which private parties could not in principle abrogate by agreeing contingent payment clauses. Nevertheless, the United States legal system granted subcontractors real and personal securities, according to the classic formula, which entitles those who perform work on real property to ‘claim a mechanics’ lien or sue on a contractor’s bond’ for the value of the services and materials provided.11 Thus, the concrete availability to subcontrac-

10 In the usual approach, lex mercatoria uses the clauses of exemption of responsibility as instruments for the conventional shift of allocation of contractual risks, which, typically, are represented by force majeure and hardship clauses – and not strangely created by the transnational practice of construction contract cooperation. See DRAETTA U., ‘Hardship and Force Majeure Clauses’, in: Rev. dr. aff. int. 2002, p. 347 et seq. 11 See MURPHY H., ‘Pay When Paid Clause in Construction Contracts: Condition Precedent or Term of Payment?’, in: Int. Constr. Law Rev. 1989, p. 196 et seq.; PERLMAN M.S., ‘USA: Contract Interpretation, Pay When Paid Clauses’, ibid. 1990, p. 138 et seq.; POWELL-SMITH V., ‘Payment of Subcontractors When Main Contractor Is Insolvent’, ibid. 1991, p. 241 et seq.

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International Subcontracting in EC Private International Law tors of remedying devices prevented courts from declaring pay when paid and if and when clauses null and void as against public policy. Pay when paid and if and when clauses were subsequently transplanted into transnational practice, and became an ordinary term of agreement of subcontracts within cross-border projects, particularly in the industrial building sector across developing countries. Neither general conditions of contract, nor standard forms, nor model contracts originally furthered the extension of contingent payment clauses. In fact, uniform terms and conditions of subcontracts have only recently been adopted, namely by F.I.D.I.C. (Fédération Internationale des IngénieursConseils), and other minor regional associations. Because of the transition process to the espace économique transnational, contingent payment clauses eventually lost the guarantees provided by the United States system of law to protect the subcontractor’s credit. Nevertheless, a survey of transnational practice reveals that, although a pay when paid and an if and when clause consent to a temporary, respectively a permanent withholding of payment, unchallenged as to principle, both clauses may only temporarily suspend or postpone payment, not ultimately withhold it. According to transnational practice, even an if and when clause has the material effects of an agreement providing that the subcontractor shall first perform his or her obligation and then claim the payment vis-à-vis the creditor; namely a reversal, or a waiver by agreement of the right to plead defences for the purpose of avoiding or delaying performance, in case of the contractor’s delay or failure to pay (i.e., a sort of a ‘solve et repete’ clause, often inserted in obligations arising from surety contracts). Therefore, under transnational practice, the recourse subcontractor actually only carries the risk of delay, not ultimately the risk of failure in the contractor’s performance. Furthermore, both pay when paid and if and when clauses are enforceable under lex mercatoria (i.e., by international commercial arbitration), on condition that the reason for non-payment by the employer cannot be credited to the contractor’s failure to perform, or that the contractor cannot otherwise be found to have contributed to non-payment by the employer. Article 7.1.6 of the UNIDROIT Principles of international commercial contracts restates this customary rule, by stipulating that a party may not rely upon a clause of exemption of liability for non-performance if ‘it would be grossly unfair to do so, having regard to the purpose of the contract’.12 Accordingly, pay when paid and if and when clauses may be kept alive only by a bona fide enforcement of the construction contract by the contractor. Moreover, contingent payment clauses are enforceable under lex mercatoria (i.e., by international commercial arbitration), only on condition that the terms of agreement of the subcontract, or, more frequently, of the construction contract, 12 See also Article 4.118 of the PECL (quoted here below, note 32) Exclusion or restriction of remedies: ‘(1) Remedies for fraud, threats and excessive benefit or unfair advantage-taking, and the right to avoid an unfair term which has not been individually negotiated, cannot be excluded or restricted. (2) Remedies for mistake and incorrect information may be excluded or restricted unless the exclusion or restriction is contrary to good faith and fair dealing’.

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Paola Piroddi provide for contractual devices of guarantee in favour of the recourse subcontractor. Such contractual devices may either restate by agreement the protective instruments afforded by common law to recourse subcontractors, or establish individually-tailored measures, against the contractor or the employer.13 Lex mercatoria, although deprived of coercive force, has thus not abandoned the subcontractor’s rights, requiring a fair balance of interests, if not under the scope of agreement of the recourse subcontract, at any rate under the scope of agreement of the construction contract. In fact, the construction contract and the recourse subcontract are regarded by lex mercatoria as collectively conveying an entire bundle of rights, interests, securities, i.e., a functional unity, which make the subcontractor the beneficiary of terms and conditions agreed by the contractor and the employer under the scope of the construction contract. Pay when paid and if and when clauses have nevertheless often been adopted by transnational practice (or even by domestic standardized documents) without the securities generally provided for by common law or by lex mercatoria to safeguard the recourse subcontractor’s rights and interests. As a result, contingent payment clauses have started, indeed not unreasonably, to be deemed an unfair contractual device per se.

D.

Contingent Payment Clauses in Civil Law

In civil law, type-by-type classification (characterization) files ordinary subcontracts under the category of synallagmatic contracts, in the sub-category of commutative contracts, which entail not only reciprocal obligations, but also correlative performances. So far, if and when clauses, though not affecting the unconditional obligation of performance by the subcontractor, set forth a condition precedent which suspends the reciprocal obligation of the contractor. If and when clauses thus alter the synallagmatic and commutative nature of the subcontract, converting it into an aleatory contract by the intention of the parties.14 By contrast, pay when paid 13 For instance, the contractor can undertake the obligation, towards the subcontractor, to make all reasonable efforts and to take timely action to obtain payment from the employer, and to keep the subcontractor constantly informed, in order to avoid the risk of a fraudulent agreement for the recovery of its debt against the employer through other channels. Alternatively, the contractor can agree to co-management with the subcontractor of disputes opposing the contractor itself and the employer. Breach of such obligations by the contractor entitles the recourse subcontractor to claim damages, for an amount theoretically equal to the debt represented by the subcontract price. Alternatively, the construction contract can grant the subcontractor (especially when it is a ‘nominated’ subcontractor) a direct action against the employer, or an action by way of subrogation: see PULKOWSKI J.F., ‘The Subcontractor’s Direct Claim in International Business Law’, in: Int. Constr. Law Rev. 2004, p. 31 et seq. 14 In this perspective, the recourse subcontract appears to be close to the class of agreements referred to by economic analysis as ‘relational contracts’. See GOLDBERG V.P., ‘Relational Contract’, in: NEWMAN P. et al. (eds.), The New Palgrave. A Dictionary of

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International Subcontracting in EC Private International Law clauses, which affect only the time of the contractor’s counter-performance, do not alter the synallagmatic nor the commutative character of the subcontract, on condition that the contractor balances the uncertainty of the time of payment by affording the subcontractor an adequate increase in price, or a higher interest rate for delayed payment. If this is not the case, a pay when paid clause should also be deemed to alter the synallagmatic and commutative character of the subcontract. As a result, if and when and (as the case may be) pay when paid clauses are regarded as exorbitant provisions (clauses abusives), thus null and void per se, as contrary to public policy.15 Should contingent payment clauses be deemed an essential or co-essential part of the agreement, recourse subcontracts may be invalidated in their entirety, regardless of the possible fair balance of the overall terms and conditions of agreement. Furthermore, under a type-by-type characterization, if and when and pay when paid clauses also alter the accessory (ancillary) nature of the contractual connection of the subcontract to the principal contract. In fact, pay when paid and if and when clauses, as theoretically enforceable regardless of the reasons for the employer’s delay or failure of payment,16 are deemed to convert the otherwise accessory connection of the subcontract to the construction contract into a connection, which is by nature not accessory. Because of this missing accessory nature, recourse subcontracts, with their atypical character, escape strict characterization as accessory connected contracts. As a result, the overly constraining category of bilateral and commutative contracts (indeed, the very concept of contract) cannot properly enclose recourse subcontracts, separately considered, nor can the anachronistic and ever shrinking concept of contractual connection satisfactorily assess the functional unity that closely connects recourse subcontracts to construction contracts.

Economics, IV, 3rd ed., London / New York 1998, p. 290 et seq. 15 The alteration of the synallagmatic and commutative nature of the subcontract entails the suspension of the usual legal means which are admitted in synallagmatic and commutative contracts. Thus, recourse should suspend the objection of the subcontractor to performing its obligation due to the contractor’s failure to perform its counter-obligation (exceptio inadimpleti contractus); the objection of the subcontractor to performing its obligation when the other party’s financial condition no longer allows the former to perform its own obligation; the right of the subcontractor, as the creditor of a monetary debt, to an early termination of the contract upon the failure of the debtor-contractor to perform its monetary obligation. 16 For instance, because of the employer’s inability, insolvency, bankruptcy, or bad faith, or even as a consequence of the employer’s withholding payments after a contractor’s fault: see SEPPALA CH. (note 5), p. 14. As a consequence of the sheer breadth of their wording, pay when paid and if and when clauses should also theoretically prevent the subcontractor, absent the employer’s payment, from proceeding against the contractor to recover its debt (even though the subcontractor’s right to raise an objection of exceptio doli or condictio indebiti should remain unaffected).

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Survey of Recourse Subcontracts by the Economic Analysis of Contracts

Recourse subcontracts may nevertheless take advantage of the theoretical models recently developed in academic scholarship to overcome the strictly legal characterization of relationships under abstract types of contract – or the very concept of contract, indeed. Firstly, the notion of ‘economic transaction’, albeit not a straightforward rubric (as submitted to a still inchoate process of evolution), provides a reasonable device for the analysis, on empirical grounds, of the fairness of the terms and conditions of the agreement, granting a prominent role to the economic balance of obligations and performances, and to a good faith execution, according to the reasonable expectations of the parties. Literature on the economic analysis of contracts also appreciates, on a case-by-case basis, the obligations and responsibilities of the parties, by means of an ‘economic value’ test and by ascribing transactions, which lack the essential requirements of a formal contract, to the category of the so-called ‘relational contract’. Finally, the closely related literature on ‘incomplete contracts’ also inclines to admit, in principle, the validity of recourse subcontracts.17 This theory assumes that several factors, among which information asymmetries, unequal bargaining power, risk-adversity level and, particularly, transaction costs on crucial terms and conditions, may prevent the parties from agreeing on some terms and conditions of the contract ex ante, thus inducing them to leave these, wherever necessary, to renegotiation ex post or to adjudication by the courts.18 Therefore, the core requirements of a fair recourse subcontract shift from the obligation of an unconditional counter-performance by the contractor, to the right of the subcontractor to be granted detailed information, at the negotiation stage, on the creditworthiness and financial reliability of the employer, so as to be able to analyse the credit risks of both the construction contract and the subcontract. All this literature endorses the theory that, subject to a case-by-case analysis, a recourse subcontract agreement may be deemed to have been fairly entered into, and hence to be valid and enforceable; furthermore, the contractual connection of a recourse subcontract to a construction contract, though not of an accessory nature, nevertheless establishes a legally relevant functional unity between the recourse subcontract and the construction contract.

17

POSNER R., ‘Economic Analysis of Contract Law After Three Decades: Success or Failure?’, in: Yale Law Journ. 2003, p. 829 et seq. 18 AYRES I. / GERTNER R., ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’, in: Yale Law Journ. 1989, p. 87 et seq.

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III. Recourse Subcontracts in EC Private International Law A.

The EC Private International Law in Contracts

1.

The Rome Convention and the Proposal for its Revision

European Community Member States appraise recourse subcontracts under the Rome Convention of 19 June 1980 on the law applicable to contractual obligations, which applies by default, in the absence of other applicable international conventions (Article 21).19 The frame of reference of the Rome Convention has recently undergone a radical change as a result of the Commission’s ‘Green Paper on the conversion of the Rome Convention of 1980 into a Community instrument and its modernization’.20 The ‘Green Paper’ opened a public debate on the timeliness of converting 19

Convention on the law applicable to contractual obligations, Rome, 19.6.1980, whose consolidated text is published in: OJ C 27, 26.1.1998. See GIULIANO M. / LAGARDE P., ‘Report on the Convention on the law applicable to contractual obligations’, in: OJ C 282, 31.10.1980 (hereinafter: ‘GIULIANO/LAGARDE Report’). Article 21 of the Rome Convention stipulates that the Convention ‘shall not prejudice the application of international conventions to which a contracting State is, or becomes, a party’. In the very extensive bibliography on the Rome Convention, see: GIARDINA A., ‘La Convenzione comunitaria sulla legge applicabile alle obbligazioni contrattuali e il diritto internazionale privato italiano’, in: Riv. dir. int. 1981, p. 795 et seq.; FLETCHER I., Conflict of Laws in the European Community with Special Reference to the Community Conventions on Private International Law, Amsterdam / New York / Oxford 1982; KASSIS A., Le nouveau droit européen des contrats internationaux, Paris 1993; KAYE P., The New Private International Law of Contract of the European Community, Aldershot (etc.) 1993; PLENDER R. / WILDERSPIN M., The European Contracts Convention, 2nd ed., London 2001. Although the Hague Convention of 15 June 1955 on the law applicable to the international sale of goods theoretically applies to ordinary cross-border subcontracts collateral to construction contracts (as well as the Hague Convention of 22 December 1986, which is intended to replace it, but has not yet entered into force), recourse subcontracts seem to fall outside its scope of application, as they lack the synallagmatic and commutative character which, regardless of any classification (characterization) of the recourse subcontract as a ‘sale of goods’ in the meaning of the Convention, constitutes a pre-requisite of the application of this Hague Convention: see FERRARI F., Fondamenti della vendita internazionale, Padova 1998, p. 54. Moreover, the Hague Conventions apply only to cross-border contracts (Article 1(1) and 1(4) of the Convention of 1955 and Article 1(a) and 1(b) of the Convention of 1986): hence, recourse subcontracts, which are often domestic, and not necessarily crossborder contracts, should fall outside the scope of both Conventions. 20 ‘Green Paper on the Conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization’, COM(2002)654 final, 14.1.2003, p. 12. See JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2003 – Der Verfassungskonvent und das Internationale Privat- und Verfahrensrecht’, in: IPRax 2003, p. 485 et seq.

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Paola Piroddi the Rome Convention into a prospective European Community measure, to revise and re-introduce the rules of the Convention. The conversion of the Rome Convention is regarded by the ‘Green Paper’ as a keystone in the process of restructuring the European choice-of-law system in contracts, as opposed both to past sectoral initiatives of the European Community (basically represented by conflict rules in harmonization directives), and to purely domestic rules issued by Member States.21 Indeed, at present, the European Community action for private international law represents a branch of judicial cooperation in civil matters, as a consequence of the amendments inserted by the Amsterdam Treaty into the Rome Treaty on the development of a single European ‘area of freedom, security and justice’ (Article 2, 61(1)(c) and 65 Tr. EC), restated by Article 2(4) of the Nice Treaty and by Article III-170 of the Treaty establishing a Constitution for Europe. By virtue of the ‘Draft Programme of measures for the implementation of the principle of mutual recognition of decisions in civil and commercial matters’,22 adopted by the European Council in connection to the so-called ‘Vienna Strategy’, and endorsed by the ‘Hague Programme strengthening freedom, security and justice’,23 European Union judicial cooperation in civil matters rests on the cornerstone, which is the principle of the ‘mutual recognition of judicial decisions’. Under the ‘Draft Programme’, the Commission has enacted a policy of harmonization at the Community level of the rules of private international law on contractual and non-contractual obligations in civil and commercial matters, which 21 Accordingly, see VON HOFFMANN B. (ed.), European Private International Law, Nijmegen 1998, p. 13 et seq.; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2000 – Interlokales Privatrecht oder universelles Gemeinschaftsrecht’, in: IPRax 2000, p. 454 et seq.; JAYME E., ‘Zum Jahrtausendwechsel. Das Kollisionsrecht zwischen Postmoderne und Futurismus’, ibid. 2000, p. 165 et seq.; REMIEN O., ‘European Private International Law, the European Community and its Emerging Area of Freedom, Security, Justice’, in: Common Market Law Rev. 2001, p. 53 et seq.; BOELE-WOELKI K., ‘Unification and Harmonization of Private International Law in Europe’, in: BASEDOW J. / MEIER I. / SCHNYDER A.K. / EINHORN T. / GIRSBERGER D. (eds.), Private International Law in the International Arena – From National Conflict Rules Towards Harmonization and Unification. Liber Amicorum Kurt Siehr, The Hague / Zürich 2000, p. 61 et seq.; FALLON M., ‘Les conflits de lois et de juridictions dans un espace économique intégré – L’expérience de la Communauté européenne’, in: Recueil des Cours 1995-III, t. 253, p. 9 et seq.; LAGARDE P. / VON HOFFMANN B. (éds.), L’européanisation du droit international privé. Actes de la Réunion: Le droit européen et le droit international privé, Trèves, 11-12 novembre 1993, Köln 1996. 22 Respectively, JHA and JUSTCIV Council, 2314° session, 30.11.2000-1.12.2000, doc. 13865/00, in: OJ C 12, 15.1.2001; European Council of Brussels of 4-5.11.2004 and annexed to the Presidency Conclusions, doc. 14292/1/04 REV1 (§ 14-20), Annex I, in: OJ C 53, 3.3.2005. 23 Action Plan of the Council and the Commission on ‘How Best to Implement the Provisions of the Treaty of Amsterdam on an Area of Freedom, Security and Justice’, JHA Council, 2146° session, 3.12.1998, doc. 13673/98, adopted by the European Council of Vienna of 11-12.12.1998 and annexed to the Presidency Conclusions (§ 83-93), in: OJ C 19, 23.1.1999.

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International Subcontracting in EC Private International Law so far encompasses the ‘Brussels I’ Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters,24 converting the Brussels Convention of 27 September 1968, and the Proposal for a European Parliament and Council Regulation on the law applicable to non-contractual obligations (Rome II).25 The ‘Green Paper’ underlines that the Rome Convention, although agreed by the Member States as an international treaty, over which the European Court of Justice does not yet have jurisdiction, complements both the instruments already issued, which ‘are to be regarded as the expression of a unitary policy’.26 The forthcoming instrument ‘Rome I’ therefore should increase the consistency of the overall Community-based private international law.

2.

The Principles of European Contract Law (‘PECL’)

The European Community judicial cooperation in civil matters also embraces, in principle, the recent Commission’s Action Plan focused on a closer approximation of the material European Community acquis on contracts, of which the results have been summarized by the Commission’s Communication to the European Parliament and the Council, called ‘A more coherent European contract law’.27 Indeed, the Commission’s Action Plan, although this is not specifically contemplated by Article 65 Tr. EC, should be considered, according to the European Council at Tampere, to be substantially included in the ‘measures in the field of judicial cooperation in civil matters’, in order to facilitate the adoption of measures to implement the principle of mutual recognition of judicial decisions.28

24 Council Regulation 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‘Brussels I Regulation’), in: OJ L 12, 16.1.2001. 25 Proposal for a European Parliament and Council Regulation on the law applicable to non-contractual obligations (‘Rome II’), COM(2003) 427 final, 22.7.2003. 26 BONOMI A., ‘Conversion of the Rome Convention on Contracts into an EC Instrument: Some Remarks on the Green Paper of the EC Commission’, in: this Yearbook 2003, p. 53 et seq., at p. 59. 27 COM(2003)68 final, 12.2.2003, in: OJ C 63, 15.3.2003. See also European Parliament resolution on the Commission communication ‘A more coherent European contract law – An action plan’ of 2.9.2003 (A5-256/2003, in: Bull. UE 9/2003, § 1.4.56). European Parliament welcomed the inclusion in the action plan of a common terminology within a ‘common frame of reference’ and called on the Commission to complete the latter by the end of 2006. See also Council resolution of 22.9.2003 (C/03/259-12339/03, in: OJ C 246, 14.10.2003). 28 Meeting of 15-16.10.1999: see Presidency Conclusions, doc. 200/1/99, § 38-39. The determination of the European Council to speed up the implementation of all aspects of the programme adopted in Tampere for the creation of an area of freedom, security and justice in the European Union has been restated by the Seville European Council, 21-22.6.2002: see Presidency Conclusions, doc. 13463/02, § 26.

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Paola Piroddi In order to achieve a closer approximation of the material law of contracts, which is the intended objective of the Action Plan, the Commission entrusts a crucial role to the ‘Common Frame of Reference’ for the European contract law (‘CFR’).29 The CFR shall represent a minimum standard for a prospective ‘optional’ (opt-in) instrument devised for the harmonization of material contract law in the Community. Taking into account that the parties to a contract ‘could simply refer to this instrument as the applicable law’,30 by a choice-of-law agreement, the CFR shall also have a private international law relevance. Although likely to be conclusively represented by the prospective ‘Common Principles of European Contract Law’ (‘CoPECL’),31 the CFR seems so far to have been advanced by the ‘Principles of European Contract Law’ (‘PECL’), which as a result strictly hold the Action Plan to a closer approximation of the material European Community acquis on contracts.32 The PECL are drafted under the auspices of the European Union (and through a project financed by the European Commission), with the purpose of unifying contract law within the European Union and providing the relevant interpretative guidelines.33 Although lacking binding legal force, as not issued by an 29

On the ‘Common Frame of Reference’ (CFR) for European contract law, see the Commission’s Communication ‘A more coherent European contract law’ (note 27), and the Commission's Communication on ‘European Contract Law and the Revision of the Acquis: The Way Forward’, COM (2004)651 final of 11.10.2004. On the Community competence to adopt a binding horizontal instrument see ECJ, 5.10.2000, C-376/98, Tobacco, in: ECR 2000-I, p. 8419 et seq. See WEATHERILL S., ‘The European Commission’s Green Paper on European Contract Law: Context, Content and Constitutionality’, in: Journ. Cons. Pol. 2001, p. 339 et seq. 30 Commission’s Communication ‘A more coherent European Contract law’ (note 27), § 90. 31 Pursuant to the Commission’s Communication on ‘A more coherent European contract law’, a Joint Network on European Private Law (see ) has been recently created under the Sixth Framework Programme for Research, Technological Development and Demonstration 2002-2006 (RTD) (). The goal of this Network is to draft ‘Common Principles of European Contract Law’ (CoPECL) as a proposal for the Common Frame of Reference in the European Community contract law (CFR). 32 Although the Commission’s Communication ‘A more coherent European Contract law’ (note 27) does not refer to the PECL, not stating clearly whether the ‘CFR’ for the European contract law should join with or be substituted for the PECL, nevertheless the PECL are expressly mentioned by the Communication of the Commission to the Council and the European Parliament on ‘European contract law’, COM(2001)398, § 1-6, in: OJ C 255, 13.9.2001. 33 LANDO O. / CLIVE E. / PRÜM A. / ZIMMERMANN R. (eds.), Principles of European Contract Law. Parts I-III, The Hague / London / Boston 2003 (hereinafter quoted as: the PECL). In the perspective of the PECL as a means of ‘communitarization of private law’, see WERRO F., ‘La dénationalisation du droit privé dans l’Union Européenne’, in: ID. (éd.), L’européanisation du droit privé. Vers un code civil européen, Fribourg 1998, p. 3 et seq.; HARTKAMP A.S., ‘Modernisation and Harmonisation of Contract Law: Objectives, Methods

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International Subcontracting in EC Private International Law authoritative source, but by a panel of jurists, the PECL have been compared to an (optional) ‘restatement of contracts’, because of their stated intention to apply ‘as general rules of contract law in the European Community’, both to domestic and cross-border contracts (Article 1:101(1)). Particularly, Article 1:101(2) seems to consent to apply the PECL to cross-border contracts, using party autonomy as a connecting factor (kollisionsrechtliche Verweisung) – although a conflict-of-laws reference to the PECL seems contrary to Article 1:103(1), which apparently only provides for a material reception of the PECL, subject to the mandatory rules of the otherwise applicable national law (materiellrechtliche Verweisung).34 Nevertheless, the ‘Green Paper’ also seems to incline towards a kollisionsrechtliche Verweisung to the PECL, as shall be observed, thus authoritatively endorsing a construction of the latter as an advanced ‘Common Frame of Reference’ of the material European Community acquis on contracts.

3.

The Option of the Materialization of the ‘Rome I’ Instrument

A coordinated reading of the Commission’s Action Plan on ‘A more coherent European contract law’ and of the ‘Green Paper’ induces one to regard the ‘modernization’ of the Rome Convention as a ‘minimum harmonization’ of the material European Community Patrimony on contracts, to the extent required by the principles of subsidiarity and proportionality (Articles 5(2) and 3 Tr. EC).35 In essence, the ‘modernized’ Rome Convention contributes to the achievement of the Commission’s plan, devised to favour a closer approximation of reality and uniformity of application of the material European Community acquis on contracts – to be found at the moment in the PECL, although prospectively represented by the CFR. Though at the proposal stage, the concept of a system of private international law of contracts, as a means of achievement of a substantive policy on contracts, so strongly challenges the neutrality and blindness adopted in principle by the Rome Convention that the ‘Green Paper’ has been considered as the start of a genuine ‘European conflict-of-laws revolution’.36 and Scope (General Report)’, in: Worldwide Harmonisation of Private Law and Regional Economic Integration. Acts of the International Congress to Celebrate the 75th Anniversary of the Founding of Unidroit (Rome, 27-28 September 2002), in: Uniform Law Rev. 2003, p. 81 et seq. 34 JUENGER F., ‘The Problem with Private International Law’, in: BASEDOW J. / MEIER I. / SCHNYDER A.K. / EINHORN T. / GIRSBERGER D. (note 21), p. 289 et seq., at p. 306. 35 Cf. Commission’s Communication on ‘European contract law’ (note 29), § 42 et seq. See also Opinion of the European Economic and Social Committee on the ‘Green Paper’, 405th Plenary Session, 28-29 January 2004, in: OJ C 108, 30.4.2004, esp. § 4.4.2. See also KOCH H., ‘Private International Law: A “Soft” Alternative to the Harmonization of Private Law?’, in: Eur. Rev. Priv. Law 1995, p. 329 et seq. 36 POCAR F., ‘La comunitarizzazione del diritto internazionale privato: una “European Conflict of Laws Revolution”?’, in: Riv. dir. int. priv. proc. 2000, p. 873. See also KESSEDJIAN CH., ‘La Convention de Rome du 19 juin 1980 sur la loi applicable aux obli-

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Paola Piroddi In connection thereto, the Rome Convention should no longer apply as a self-contained international treaty, but should already be interpreted according to the principles outlined by the ‘Green Paper’, notwithstanding its current status of a mere proposal. As a result, the application of the Rome Convention according to the guidelines laid down by the ‘Green Paper’ should enforce, rather than the older concept of contract, current at the time of its drafting, the modern concept of contract, set forth by the CFR, and already proposed by the PECL. The adoption of such a concept of contract may in turn also advance the analysis of recourse subcontracts under private international law in a noteworthy manner.

B.

Recourse Subcontracts under the Scope of the Rome Convention

1.

Are Recourse Subcontracts Contractual Obligations?

Recourse subcontracts should fall within the scope of a ratione materiae application of the Rome Convention, on condition that the obligations arising there from may be construed as ‘contractual obligations’ under Article 1(1).37 Whereas the characterization of recourse subcontracts under the rubric of ‘contract’ does not appear problematic, as observed above, the concept of ‘contractual obligation’, encompassing in principle not only bilateral, but also unilateral acts of private autonomy, regardless of any synallagmatic or commutative nature of the transaction, should also theoretically apply to recourse subcontracts.38 Nevertheless, the obligations arising from subcontracts have so far not been construed as ‘contractual obligations’, because of an analogical application of the European Court of Justice judgment in the Handte case, which excluded any liability of a manufacturer towards a sub-buyer under a sub-purchase contract, under gations contractuelles – vingt ans après’, in: BASEDOW J. / MEIER I. / SCHNYDER A.K. / EINHORN T. / GIRSBERGER D. (note 21), p. 329, 333 et seq. 37 To be construed by reference to the ‘international character and to the desirability to achieve uniformity’ of the Rome Convention (Article 18): see also the Recommendation of the Commission 85/111/EEC 15.1.1985 concerning the Convention of 19 June 1980 on the law applicable to contractual obligations, addressed to the German Federal Republic, in: OJ L 44, 14.02.1985. 38 Although the GIULIANO/LAGARDE Report is silent on this point, the scope of application limited to ‘contractual obligations’ and not to contracts seems to be mainly a vestige of the original title of the first preliminary project, focused on ‘contractual and noncontractual obligations’: see the Avant-projet de Convention sur la loi applicable aux obligations contractuelles et non contractuelles (doc. XIV/398/72-F, Rev. I) in LANDO O. / VON HOFFMANN A. / SIEHR K., European Private International Law of Obligations, Tübingen 1975, p. 220 et seq. On the meaning of the expression ‘contractual obligations’ see RIGAUX F., ‘Examen de quelques questions laissées ouvertes par la Convention de Rome sur la loi applicable aux obligations contractuelles’, in: Cahiers dr. eur. 1988, p. 306 et seq.; LAGARDE P., ‘Les limites objectives de la Convention de Rome (conflits de lois, primauté du droit communautaire, rapports avec les autres Conventions)’, in: Riv. dir. int. priv. proc. 1993, p. 33 et seq.

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International Subcontracting in EC Private International Law the phrase ‘matters relating to a contract’ to be found in Article 5(1) of the Brussels Convention’.39 Under closer scrutiny though, the Handte judgment seems to originate in the procedural technicalities of the case.40 Therefore, the exclusion, for mere procedural reasons, of purchase sub-contracts from the scope of application of Article 5(1) of the Brussels Convention, should not prevent the applicability in principle of Article 1(1) of the Rome Convention either to recourse subcontracts (characterized by underlying interests substantially different from those of purchase subcontracts), or to the functional unity composed of the construction contract and the connected recourse subcontract.41 Furthermore, although the ‘Green Paper’ remains silent on the concept of ‘contractual obligations’, it should not be neglected that Article 2:101 of the PECL stipulates that: ‘A contract is concluded if: (a) the parties intend to be legally bound, and (b) they reach a sufficient agreement without any further requirement’. Recourse subcontracts definitely fall under Article 2:101 of the PECL, which requires neither a synallagmatic nor a commutative nature of the contract. Thus, on condition that Article 1(1) of the Rome Convention be construed so as to comply with Article 2:101 of the PECL, recourse subcontracts may fall under the scope of application of the Rome Convention.

2.

International Character of Domestic Recourse Subcontracts

The Rome Convention may only apply in situations ‘involving a choice between the laws of different countries’ (Article 1(1)). As the Giuliano and Lagarde Report remarks, this clause restricts the scope of application of the Convention to contractual obligations characterized by ‘one or more elements foreign to the internal social system of a country’, thus excluding contracts that ‘are connected with one country only’ (Article 3(3)).42 Transnational recourse subcontracts are frequently merely domestic contracts, as entered into by subjects having their habitual residence (or, in the case of a body corporate or unincorporate, its central administration, under Article 4(2)) in 39

ECJ, 17.6.1992, C-26/91, Handte, in: ECR 1992-I, p. 3967 et seq., § 15. See also ECJ, 27.101998, C-51/97, Réunion, in: ECR 1998-I, p. 6511 et seq., § 17 (compare also the opinion of Advocate General Cosmas, 5.2.1998, in: ECR 1998-I, p. 6527 et seq., § 24); ECJ, 17.9.2002, C-334/00, Tacconi, in: ECR 2002-I, p. 7357 et seq., § 23; ECJ, 1.10.2002, C-167/00, Henkel, in: ECR 2002-I, p. 8111 et seq., § 35; ECJ, 5.2.2004, C-265/02, Frahuil, in: ECR 2004-I, p. 1543 et seq., § 25. 40 GAUDEMET-TALLON H., ‘Observations’ (to ECJ, 17.6.1992, C-26/91, Handte), in: Rev. crit. dr. int. pr. 1992, p. 730 et seq., at p. 735. 41 GIARDINA A., ‘Les contrats liés en droit international privé’, in: Trav. Com. fr. dr. int. privé 1995-1998, p. 97. 42 GIULIANO/LAGARDE Report, sub Article 1(1). See also LAGARDE P., ‘Examen de l’avant-projet de Convention C.E.E. sur la loi applicable aux obligations contractuelles et non contractuelles’, in: Trav. Com. fr. dr. int. privé 1971-1973, p. 147 et seq., at p. 153.

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Paola Piroddi one State only, which often also corresponds to the place of execution of the contract. The only ‘element foreign to the internal social system of the country’ of such domestic recourse subcontracts may be a pay when paid or an if and when clause, on condition that such a clause connects the subcontract to a cross-border construction contract, or to a construction contract ‘foreign to the internal social system of the country’ in which the recourse subcontract should otherwise be a domestic situation. Such a pay when paid or if and when clause can definitely meet the requirements of a foreign element ‘relevant to the situation’, likely to convert an otherwise domestic recourse subcontract into a contract ‘involving a choice between the laws of different countries’ (Article 1(1)). Indeed, it should not be neglected that the combination of Articles 1(1) and 3(3) of the Rome Convention overrules the dividing line traced by classic scholars between materiellrechtliche Verweisung and kollisionsrechtliche Verweisung. As a result, domestic contracts also fall within the scope of application of Article 1(1) – on condition that party autonomy, when selecting the applicable law, shall not prejudice the application of the mandatory rules of the country of the otherwise applicable law, with which ‘all the other elements relevant to the situation at the time of the choice are connected’ (Article 3(3)).43 Thus, domestic recourse subcontracts, although not, strictly speaking, representing international contracts, can also ‘involve a choice between the laws of different countries’, under Article 1(1).

C.

Party Autonomy in the Choice of Law in Recourse Subcontracts

1.

Express Choice-of-Law Clauses

Pursuant to Article 3(1), the contractor and the subcontractor may agree, by party autonomy, on the law governing the recourse subcontract. As written above, the parties may also select the applicable law in domestic recourse subcontracts, on condition that the selected law shall not affect the application of mandatory rules of the State of the otherwise applicable law, with which ‘all the other elements relevant to the situation at the time of the choice are connected’ (Article 3(3)). Nevertheless, the choice of law may hardly be considered the result of true party autonomy on the subcontractor’s side, insofar as recourse subcontracts are drafted by means of general conditions of contract, model forms or standard contracts. In fact, if the subcontractor could not object to the standardized contract proposed by the contractor, which very often also predetermines the law applicable to the recourse subcontract, the choice formally credited to party autonomy only serves to conceal a genuine unilateral submission to the lex contractus chosen by the contractor.44 Frequently, even the selection of the set of general conditions of contract, the standard form or the model contract adopted for drafting the recourse 43

LAGARDE P. (note 1), p. 186 et seq. CRIVELLARO A., ‘Contratti internazionali: tipi e autonomia negoziale’, in: AA.VV., Fonti e tipi del contratto internazionale, Milano 1991, p. 24. 44

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International Subcontracting in EC Private International Law subcontract is the subcontractor’s unavoidable choice, because of the opportunity that subcontracts (especially recourse subcontracts), to avoid inconsistencies of performance, match the standardized document used for drafting the construction contract. It should be borne in mind, in connection thereto, that the existence and material validity of the consent of the recourse subcontractor to the choice of law shall be determined by the chosen law (Article 3(4)). Furthermore, the recourse subcontractor may rely upon the law of the country of its habitual residence or central administration to establish that it did not consent to the choice if, according to the circumstances of the case, it is not reasonable to determine the effect of its conduct under the above-mentioned law (Article 8(2)). On the other hand, a scrutiny of transnational practice evinces the fact that virtually each and every recourse subcontract, either standardized or individually negotiated, refers to the governing law of the construction contract as the applicable law of the subcontract. Furthermore, such choice-of-law clauses very frequently refer not to the State of which the law governs the construction contract, but indirectly to ‘the governing law’ of the construction contract. This rather peculiar recourse choice-of-law clause is a sort of material incorporation of the contents of the construction contract’s choice-of-law clause (materiellrechtliche Verweisung), granting it at least an intended conflict-of-laws function (kollisionsrechtliche Verweisung). As a result, such a clause eludes the requirement of the spatial localization of the recourse subcontract in a State, which should be satisfied by party autonomy, acting as a kollisionsrechtliche Verweisung, like any other connecting factor. Nevertheless, taking into account that, as mentioned above, Articles 1(1) and 3(3) of the Rome Convention overrule the classic dividing line between party autonomy as a materiellrechtliche Verweisung and as a kollisionsrechtliche Verweisung, even such recourse choice-of-law clauses may be regarded as valid and effective under Article 3(1).

2.

Implicit or Tacit Choice of Law

Pursuant to the Giuliano and Lagarde Report, the practice of making use of standardized terms and conditions for the drafting of recourse subcontracts may also allow, subject to all the ‘circumstances of the case’, a tacit or implicit choice of law, under Article 3(2) of the Rome Convention.45 As a matter of fact, the adoption of a set of general conditions of contract, of a standard form or of a model contract may be deemed to entail an implied reference to the system of law within which the relevant instrument has been conceived – depending on the circumstances of the case and provided that the parties were aware of the choice-of-law issue. One passage of the ‘Green Paper’ seems to include, among the ‘circumstances of the case’ that authorize the inference of a tacit or implicit expression of party autonomy, the close connection of a contract with ‘an earlier contract in which there had been a deliberate choice of law’, or with ‘a series of operations, 45

Cf. GIULIANO/LAGARDE Report, sub Article 4(3).

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Paola Piroddi the law having been chosen only for the basic contract underlying the general operation’.46 Undoubtedly, pay when paid and if and when clauses meet the requirements of ‘a close connection’ of the recourse subcontract to the construction contract. A tacit or implicit agreement on the applicable law can thus be deduced, absent an express choice-of-law clause, by the insertion of contingent payment clauses that closely connect the recourse subcontract to an earlier construction contract, ‘in which there had been a deliberate choice of law’.47 Obviously, the omission of a choice-of-law clause in the recourse subcontract should not originate in circumstances, which convey a deliberate change of policy by the parties as regards the applicable law of the construction contract. A further condition should be that the construction contract is a cross-border or foreign contract, with respect to the recourse subcontract. If this is not so, as mentioned above, pay when paid and if and when clauses may not play the role of a foreign element ‘relevant to the situation’ (Articles 1(1) and 3(3)), nor of a connecting factor, as would a tacit or implicit reference by party autonomy under Article 3(2). Under closer scrutiny, moreover, the above-mentioned passage of the ‘Green Paper’ seems to echo French case law on the applicability of Article 3(2) of the Rome Convention to collateral guarantee contracts. The Cour d’appel of Paris, in a case on a recourse (non-accessory) surety bond, ruled that the parties had implicitly intended to subject the bond to French law, on the sole grounds that its terms and conditions strictly observed the French statute on securities.48 Therefore, the court assumed by implication not only that the recourse of the surety met the requirements of an implicit choice of law under Article 3(2), but also that such an implicit choice was bound to refer, among the available laws, to the only one which allowed the validity of the surety. By analogy, favor validitatis may also induce one to regard contingent payment clauses as implicit or tacit choice-of-law clauses under Article 3(2) that, absent an agreement by party autonomy, make a reference to the system of law which, among the available ones, does not affect the validity of the recourse subcontract. Ostensibly, such a construction of Article 3(2) gives rise to another major interaction between the kollisionsrechtliche and materiellrechtliche Verweisung of party autonomy under the Rome Convention.

3.

The Choice of a Non-State Law or the PECL

Because of the interaction between the kollisionsrechtliche Verweisung and materiellrechtliche Verweisung of private autonomy, which characterizes the Rome Convention, the choice of a non-State body of rules could hardly be considered invalid under Article 3(1). Nevertheless, according to the majority of doctrine, the 46

‘Green Paper’ (note 20), respectively § 3.2.4.1 and 3.2.4.2. See LAGARDE P. (note 1), p. 188. 48 Cour d’appel Paris (1ère ch.), section urgences, 10.11.1993, SPLM, in: Clunet, 1994, p. 678 et seq., obs. JACQUET J.-M. 47

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International Subcontracting in EC Private International Law choice by the parties of a non-State law is not a valid and effective kollisionsrechtliche Verweisung under Article 3(1), but merely a materiellrechtliche Verweisung, to be assessed by the applicable law in the absence of a valid choice by the parties (Article 4(1) et seq.).49 The need for revising Article 3(1) has increasingly been advocated by scholars, who state that the parties must be able to choose ‘a system of internationally accepted principles’ as the governing law of the contract, such as the UNIDROIT Principles of international commercial contracts, and the PECL,50 which ‘would be perfectly incardinated within an optional approach to European contract law’.51 The ‘Green Paper’ also submits that Article 3(1) should be amended so as to admit a kollisionsrechtliche Verweisung referring to a non-State corpus for contracts.52 This proposal can hardly be opposed, because the PECL so far do not cover ‘the entire range of contract law’, nor include ‘to a sufficient extent provisions of a mandatory character’. Indeed, the incomplete nature of the PECL could not prevent a kollisionsrechtliche Verweisung, provided that a complementary reference to mandatory rules of national State law fills in the gaps in the PECL – as Article 1:103(2) stipulates. Indeed, as far as recourse subcontracts are concerned, a kollisionsrechtliche Verweisung to the PECL would have the advantage that the Principles, contrary to many State legal systems, do not per se invalidate contingent payment clauses. Notably, under Article 8:109, on clauses limiting or excluding remedies, ‘remedies for non-performance may be excluded or restricted unless it would be contrary to good faith and fair dealing to invoke the exclusion or restriction’. Subject to this condition, this provision may therefore endorse the validity of pay when paid and if and when clauses. 49

LAGARDE P., ‘Le nouveau droit international privé des contrats après l’entrée en vigueur de la Convention de Rome du 19 juin 1980’, in: Rev. crit. dr. int. pr. 1980, p. 287, 300; KASSIS A. (note 19), p. 373 et seq.; GAUDEMET-TALLON H., ‘Le nouveau droit international privé européen des contrats. Commentaire de la Convention CEE n. 80/394 sur la loi applicable aux obligations contractuelles, ouverte à la signature à Rome le 19 juin 1980’, in: Rev. trim. dr. eur. 1981, p. 215 et seq.; RIGAUX F. (note 38), p. 318; ID., ‘Quelques problèmes d’interprétation de la Convention de Rome’, in: LAGARDE P. / VON HOFFMANN B. (note 21), p. 41 et seq. 50 See, among many others, BUCHER A., ‘Transnationales Recht im internationalen Privatrecht’, in: SCHWIND F. (Hrsg.), Aktuelle Fragen zum Europarecht aus der Sicht in- und ausländischer Gelehrter, Wien 1986, p. 48 et seq.; BASEDOW J., ‘Germany’, in: New Approach to International Commercial Contracts, The Hague 1999, p. 125 et seq., at p. 146. 51 VON BAR CH. / LANDO O., ‘Communication on European Contract Law: Joint Response of the Commission on European Contract Law and the Study Group on a European Civil Code’, in: , p. 36 et seq., and in: Eur. Rev. Priv. Law 2002, p. 183 et seq., at p. 225, § 16, and in SCHULTE-NÖLKE H. / SCHULZE R. (Hrsgs.), Europäisches Vertragsrecht im Gemeinschaftsrecht – European Contract Law – Droit des contrats à l’aune du droit communautaire, Trier 2002, p. 326 et seq. 52 ‘Green Paper’ (note 20), § 3.2.3.

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Paola Piroddi D.

Voluntary and Judicial Dépeçage in Recourse Subcontracts

An interaction between the kollisionsrechtliche and materiellrechtliche Verweisung of party autonomy may also be observed in that section of Article 3(1) of the Rome Convention that admits, by way of exception, a choice of applicable law for ‘a part only of the contract’ (severability or dépeçage). Pursuant to the Giuliano and Lagarde Report, voluntary dépeçage may exist particularly whenever ‘a contract, although apparently a single contract, consists in reality of several contracts or parts which are separable and independent of each other from the legal and economic points of view’.53 Indeed, the Report’s concept of ‘severable part of the contract’ which, separately considered, meets the requirements of another (typical) contract, seems conceivable under a type-based characterization only, which regards atypical contracts as composed of a plurality of typical contracts. Bearing in mind that it is a function of material party autonomy (materiellrechtliche Verweisung) to trace a dividing line between one (atypical) contract and several (typical) connected contracts, the right to voluntary dépeçage cannot merely be regarded as a connecting factor. Furthermore, the right to the voluntary dépeçage of a contract may be used by the parties as a tool to apply to the contract a fragmentary set of rules, which does not actually correspond to any national system of law currently in force.54 Nevertheless, the right to frame a special regime of a material nature for a contract also rests on material party autonomy (materiellrechtliche Verweisung), a part of which voluntary dépeçage should therefore be. Like the voluntary dépeçage afforded to the parties by Article 3(1), judicial dépeçage granted to the courts by Article 4(1), in fine, represents ‘une règle substantielle de droit international privé, exprimant une sorte de favor executionis à l’égard du contrat international’.55 By using judicial dépeçage, courts separately localize the closest connection of a ‘severable part’ of the contract, so that each obligation of the contract may be submitted to a law, which accepts its validity, and be considered as severally enforceable as such, without prejudice to the enforceability of the rest. Pay when paid and if and when clauses may also theoretically be regarded as ‘severable parts’ of the contract, so that they may be submitted, by way of exception, to a voluntary or judicial dépeçage, under Articles 3(1) or 4(1). Nevertheless, because of the functional unity, which connects the recourse subcontract and construction contract, and which requires a unity of the legal framework, further severance of the recourse subcontract would hardly be acceptable. Thus, voluntary or judicial dépeçage of pay when paid and if and when clauses should be admitted 53

LAGARDE P. (note 49), p. 307 et seq. See also NYGH P., ‘The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and in Tort’, in: Recueil des Cours 1995, t. 251, p. 269 et seq., at p. 309. 54 LAGARDE P., ‘Le ‘dépeçage’ dans le droit international privé des contrats’, in: Riv. dir. int. priv. proc. 1975, p. 649 et seq. 55 ANCEL M.E., La prestation caractéristique du contrat, Paris 2002, p. 189.

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International Subcontracting in EC Private International Law restrictively, i.e., only if the otherwise applicable law of the recourse subcontract would invalidate the clauses at issue (Article 8(1)). Furthermore, both Articles 3(1) and 4(1), in fine, reflect an obsolete approach, which should induce one to no longer accept either voluntary or judicial dépeçage as connecting factors under a ‘modernized’ Rome Convention, especially should a conflict-of-laws reference to a non-State system of law (such as the PECL) be admitted. In fact, Article 2:101 of the PECL rejects the typical cause i.e. the ‘socio-economic function’ of the contract, which is today the prerequisite of a characterization as to type of contracts and thus also the factor which allows the placement of a dividing line between a sole (atypical) contract, composed of several (typical) contractual schemes, and a plurality of connected (typical) contracts.

E.

The Closest Connection of Recourse Subcontracts

‘To the extent that the law applicable to the contract has not been chosen in accordance with Article 3’, Article 4 of the Rome Convention frames a complicated default rule, composed of a general principle (§ 1), tempered by an equally general presumption (§ 2) and by special presumptions (§ 3 and 4), as well as a final clause providing for cases in which the presumptions fail or cannot be enforced (§ 5). Article 4(1) first stipulates that ‘the contract shall be governed by the law with which it is most closely connected’. This general clause conveys the ‘proximity principle’ (‘principe de proximité’), which represents the very core of the rationale underlying modern private international law systems.56 Nevertheless, Article 4(1) has been described as a non-rule,57 because of its flexibility, which enables courts to conduct a functional scrutiny of the terms and conditions of the contract, in order to select, by discretionary appreciation of the circumstances of the case, the localizing element that may serve as the closest connection of the contract.58 It should be emphasized that all the territorial contacts, either subjective or objective in nature, that a contract may have with the jurisdiction of a State may be retained as connecting factors under Article 4(1). Although the functional survey entailed by Article 4(1) requires an assessment ex post of the contract and its circumstances, according to the vast majority of doctrine, Article 4(1) only allows 56 LAGARDE P., ‘Le principe de proximité dans le droit international privé contemporain. Cours général de droit international privé’, in: Recueil des Cours 1986-I, t. 196, p. 9 et seq., at p. 25 et seq. 57 JESSURUN D’OLIVEIRA H.U., ‘“Characteristic Obligation” in the Draft E.E.C. Obligations Convention’, in: Am. J. Comp. L. 1977, p. 303 et seq. See also JUENGER F., ‘The E.E.C. Convention on the Law Applicable to Contractual Obligations: An American Assessment’, in: NORTH P.M. (ed.), Contract Conflicts. The E.E.C. Convention on the Law Applicable to Contractual Obligations: A Comparative Study, Amsterdam/New York/Oxford 1982, p. 301; ANCEL M.E. (note 55), p. 686. 58 GIULIANO/LAGARDE Report, sub Article 4(1). See also JUENGER F., ‘Parteiautonomie und objektive Anknüpfung im EG-Übereinkommen zum Internationalen Vertragsrecht’, in: RabelsZ 1982, p. 57 et seq., at p. 72 et seq.

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Paola Piroddi the selection of territorial or spatial elements, ‘faisant abstraction de considérations de droit matériel, ou si l’on préfère, de la teneur des règles en conflit’.59 Article 4(1) does not constitute a content-oriented rule, and does not allow reliance on material considerations to select the closest connection, nor the appraisal of the material content of the available laws ahead of time, in order to orient the choice towards the one applicable to the contract at issue. Indeed, the functional scrutiny of the contract (analyse fonctionnelle) conducted under Article 4(1) brings to mind the descriptive logic underlying the ‘typology method’ (Typuslehre) adopted by German scholarship in the characterization of contracts.60 By way of analogy to the Typuslehre, a functional analysis of the contract pursuant to Article 4(1) may induce courts to select as connecting factors both typical and atypical interests, on the only condition that they localize the contract in space. Insofar as recourse subcontracts are concerned, a pay when paid or an if and when clause, regarded as the evidence of an atypical subdivision of risks arising out of the transaction, may also be assumed to be the closest connection of a recourse subcontract, under Article 4(1). Indeed, pay when paid and if and when clauses definitely meet the territorial or spatial requirements of a localizing factor, as it may be considered, by analogy to Article 1(3), that they localize the recourse subcontract in the State in the territory of which the subcontract’s risks are situated, e.g., in the place of performance of the subcontract, or in the State of the subcontractor’s habitual residence (or, in case of a body corporate or unincorporate, central administration, pursuant to Article 4(2)) – respectively, the place where the subcontract’s risks arise and the place where the subcontract’s risks are absorbed.61 Therefore, because of a pay when paid or an if and when clause, a recourse subcontract’s closest connection may be localized, taking into consideration all the circumstances of the case, in the place of performance of the subcontract, or in the place of the subcontractor’s habitual residence or central administration. Incidentally, the State of performance of the recourse subcontract, and the State of the subcontractor’s habitual residence or central administration are very probably the legal systems according to which the recourse subcontractor evaluated its risks and obligations at the stage of the formation of the agreement. Therefore, although Article 4(1) selects the closest connection of the contract on ex-post considerations, the localization of the recourse subcontract in the State of performance, or in the State of the subcontractor’s habitual residence or central 59

LAGARDE P. (note 56), p. 118. See also PATOCCHI M., Règles de rattachement localisatrices et règles de rattachement à caractère substantiel, Genève 1985, p. 2, 16; BUCHER A., ‘Sur les règles de rattachement à caractère substantiel’, in: Liber amicorum Adolf F. Schnitzer, Genève 1979, p. 37 et seq.; VASSILAKAKIS E., Orientations méthodologiques dans les codifications récentes du droit international privé en Europe, Paris 1987, p. 164 et seq., 343; KROPHOLLER J., Internationales Privatrecht, 4. Aufl., Tübingen 2001, p. 22 et seq. Contra KASSIS A. (note 19), p. 205 et seq.; DE BOER TH.M., ‘The E.E.C. Contracts Convention and the Dutch Courts’, in: RabelsZ 1990, p. 24 et seq. 60 KREUZER K., ‘Berichtigungsklauseln im internationalen Privatrecht’, in: Festschrift für Imre Zajtay, Tübingen 1982, p. 304. 61 SEATZU F., Insurance in private international law, Oxford / Portland 2003, p. 92.

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F.

The Characteristic Performance of Recourse Subcontracts

Article 4(2), in fine presumes that the closest connection of the contract is localized in the country where the party, which is to carry out the characteristic performance, has its habitual residence (or, in case of a body corporate or unincorporate, its central administration). The ratio legis of Article 4(2) depends on a choice-influencing consideration, i.e. the attempt to reduce any uncertainty of application of the closest connection and to enhance the predictability of judicial decisions, by ‘a combination of an ex ante consideration with an ex-post evaluation’.63 Schnitzer, who settled the concept of characteristic performance in theory, admitted only one characteristic performance for each contract, so as to provide only one connecting factor to localize the ‘centre of gravity’ (Schwerpunkt) of each contract.64 In other words, Schnitzer considered characteristic performance as a means to prevent judicial dépeçage of a contract, which, although composed of severable obligations, should be regarded as un et indivisible. After Schnitzer, civil doctrine at the time of the drafting of the Rome Convention began to add to the characteristic performance principle the concept of the typical performance, focused on the ‘socio-economic function’ of the contract. As a result, Article 4(2) of the Rome Convention connects characteristic performance to the typical ‘socioeconomic function’ of the contract, by means of the presumptive localization of the closest connection in the State of habitual residence (or central administration) of the debtor.65 Thus, the type-by-type characterization of the contract, on the grounds

62

BLAUROCK U., ‘Vermutungen und Ausweichklausel in Art. 4 EVÜ – ein tauglicher Kompromiss zwischen starren Anknüpfungsregeln und einem flexiblen approach?’, in: Festschrift für Hans Stoll zum 75. Geburtstag, Tübingen 2001, p. 463, at p. 472 et seq.; JUENGER F. (note 58), p. 72 et seq. 63 VISCHER F., ‘The Concept of Characteristic Performance Reviewed’, in: BORRÁS A. / BUCHER A. / STRUYCKEN T. / VERWILGHEN M. (eds.), E pluribus unum. On the Progressive Unification of Private International Law. Liber amicorum Georges A. L. Droz, The Hague / Boston / London 1996, p. 499 et seq., at p. 514, 504. See also LIPSTEIN K., ‘Characteristic Performance – A New Concept in the Conflict of Laws in Matters of Contract for the E.E.C.’, in: Northwest. Journ. 1981, p. 402 et seq., at p. 411. 64 SCHNITZER A.F., Handbuch des Internationalen Privatrechts, Basel 1944, spec. p. 645 et seq.. Schnitzer’s theory has been followed up by VISCHER F., Internationales Vertragsrecht. Die kollisionsrechtlichen Regeln der Anknüpfung bei internationalen Verträgen, Bern 1962, p. 111. 65 On Schnitzer’s line of thought, the GIULIANO/LAGARDE Report, sub Article 4(3), concludes that ‘the concept of characteristic performance essentially links the contract to the social and economic environment of which it will form a part’. Although the Report only quotes VISCHER F. (note 64), p. 89 et seq., as a matter of fact, the above-mentioned passages are an almost literal translation of SCHNITZER A.F. (note 64), p. 645 et seq.; ID., ‘Les contrats

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Paola Piroddi of which the typical ‘socio-economic function’ of the contract must be ascertained, may be deemed to represent not only a condition precedent, but indeed an integral part of the characteristic performance. As a result, Article 4(2) does not take the atypical interests underlying economic transactions into consideration: the atypical nature of a contract should therefore induce one to rebut the application of the presumption, as a case in which ‘characteristic performance cannot be determined’ (Article 4(5)).66 Furthermore, the Giuliano and Lagarde Report, in Schnitzer’s footsteps, explicitly rejects monetary performances as the characteristic performance of bilateral (reciprocal) contracts, whereby the parties undertake reciprocal performances.67 Furthermore, the omission of monetary performances as the characteristic performance of the contract has also frequently led to objections by many academic scholars, as having misleading consequences, because the contracting party owing a monetary performance often provides an essential contribution to the completion of the contract.68 Furthermore, bearing in mind that the exchange between performance and monetary counter-performance constitutes a distinctive feature of commutative, thus synallagmatic, contracts, the conclusion may be drawn that the Giuliano and Lagarde Report causes Article 4(2) not to be applied to non-synallagmatic or noncommutative contracts. The non-synallagmatic or non-commutative nature of a contract should induce one to rebut the application of the presumption as a case in which ‘characteristic performance cannot be determined’ (Article 4(5)). The non-applicability of Article 4(2) to both atypical and non-synallagmatic contracts has induced several academic scholars to remark that ‘loin d’être un aboutissement, comme la présentent les Rapporteurs de la Convention de Rome, la notion de prestation caractéristique est aujourd’hui.... de plus en plus souvent inadaptée à l’évolution des conditions économiques, sociales et politiques, et à l’évolution correspondante tant du droit matériel que de la méthode conflictuelle’.69 Yet Article 4(2), albeit allegedly neutral as to principle, actually takes a material approach, not of the classic result-selective or content-oriented nature, but internationaux en droit international privé suisse’, in: Recueil des Cours 1968-I, t. 123, p. 541 et seq., at p. 579 et seq. 66 For a critical perspective see DIAMOND A.L., ‘Conflicts of Law in the E.E.C.’, in: Curr. Leg. Problems 1979, p. 154 et seq., at p. 168. Also JUENGER F. (note 58), p. 301; JESSURUN D’OLIVEIRA H.U. (note 57), p. 310; PATOCCHI M., ‘Characteristic Performance: A New Myth in the Conflict of Laws? Some Comments on a Recent Concept in the Swiss and European Private International Law of Contract’, in: DOMINICÉ CH. / PATRY R. / REYMOND C. (note 3), p. 113 et seq. 67 GIULIANO/LAGARDE Report, sub Article 4(3). 68 FRIGO M., ‘La determinazione della legge applicabile in mancanza di scelta dei contraenti e le norme imperative nella convenzione di Roma’, in: SACERDOTI G./FRIGO M. (a cura di), La Convenzione di Roma sul diritto applicabile ai contratti internazionali, 2a ed., Milano 1994, p. 22. 69 KAUFMANN-KOHLER G., ‘La prestation caractéristique en droit international privé’, in: Ann. suisse dr. int. 1989, p. 195 et seq., at p. 217.

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International Subcontracting in EC Private International Law rather with the assumption, by implication, of a type-by-type characterization of contracts, as a means of an ex ante selection of the parties’ interests underlying contractual obligations. Thus, the characterization by typology of contracts as a pre-requisite of the determining of connecting factors adopted by Article 4(2) should be regarded as an obsolete constraint, which unnecessarily hardens the flexibility of the closest connection principle. Because of the non-applicability of the characteristic performance to both non-synallagmatic and non-commutative contracts, Article 4(2) could theoretically not apply to subcontracts, either recourse or non-recourse. Thus, should courts apply Article 4(2) by analogy to subcontracts, the characteristic performance should be not the subcontractor’s, but the contractor’s performance, despite the Giuliano and Lagarde Report, which rejects the debtor of the monetary payment as the characteristic performer of the contract. By contrast, the subcontractor’s performance merely serves as an instrument of the contractor’s performance, which definitely represents the centre of gravity and the socio-economic function of both the construction contract and the subcontract.70 The application by analogy of Article 4(2) to the subcontract, in any case in which it also applies to the construction contract, subjects both the construction contract and the subcontract to the law of the place in which the contractor has its habitual residence or central administration, thus enhancing the uniformity of the legal framework of the overall transaction. Thus, as observed above, virtually every construction contract sets forth an express choice-of-law clause, which almost always refers to the State of the employer’s place of business. In this case, the application by analogy of Article 4(2) to the subcontract per se cannot grant the result of subjecting the subcontract to the governing law of the construction contract. This effect can be achieved only if the contractor’s habitual residence or central administration is localized in the State of the employer’s place of business, or habitual residence, or central administration – i.e., if the construction contract is a domestic contract. In any other case, if the parties to a subcontract intend to submit the subcontract (either recourse or non-recourse) to the same applicable law as the construction contract, they should agree an express choice-of-law clause, pursuant to Article 3(1). Nevertheless, as far as recourse subcontracts are concerned, the atypical financing service indirectly performed by the subcontractor through the pay when paid or the if and when clause may overrule the contractor’s performance, thus inclining the centre of gravity and the socio-economic function of the recourse subcontract to its side.71 At least where contingent payment clauses play an essential or co-essential role in the recourse subcontract, the characteristic performance 70 POCAR F. (note 3), p. XII. See also the GIULIANO/LAGARDE Report, sub Article 4(3), which, with reference to an accessory guarantee, which is a functionally accessory contract, states ‘even ... in the contract of guarantee where the characteristic performance is always that of the guarantor, whether in relation to the principal debtor or the creditor’. 71 Likewise, the characteristic performance of contracts regarding financial services (of credit or of funding) is deemed to be due by the party, which undertakes to grant the financial service: see ANCEL M.E. (note 55), p. 114, 116.

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Paola Piroddi of the contract may be reallocated to the subcontractor, which, as the party bearing the greater risks of performance, possesses the strongest material interest in the application of the law of its habitual residence or central administration, according to which it evaluated its obligations and liabilities at the stage of the formation of the agreement. Obviously, the reallocation of the characteristic performance of the recourse subcontract to the subcontractor’s side also entails an application by analogy of Article 4(2).

G.

Article 4(5) and the Law Applicable to Recourse Connected Subcontracts

1.

Pitfalls of the Current Version of the Rome Convention

Apart from cases in which ‘the characteristic performance cannot be determined’, Article 4(2) may be set aside, pursuant to either Article 4(1) or 4(5), ‘if it appears from the circumstances as a whole that the contract is more closely connected with another country’ (Article 4(5), in fine).72 In this case, Article 4(1) should apply. Contradictory doctrinal opinions and jurisprudential uncertainty still persist on the hierarchy of application of Articles 4(2) and 4(5). On the one hand, some scholars regard Article 4(2) as a strict presumption, likely to reverse the burden of proof, albeit of a rebuttable nature. In connection thereto, Article 4(5) applies as an open-ended ‘exception clause’, enforceable as an escape device, should the characteristic performance conduct to an unfair result.73 This extremely restrictive line of thought has been followed by the Italian Supreme Court, by judgments of the United Kingdom, Germany, and by the Dutch Hoge Raad.74 72

DIAMOND A.L., ‘Harmonization of Private International Law Relating to Contractual Obligations’, in: Recueil des cours 1986-IV, t. 199, p. 233 et seq., at p. 273 et seq.; JAFFEY A.J.E., Choice of Law in Relation to Ius Dispositivuum with Particular Reference to the E.E.C. Convention on the Law Applicable to Contractual Obligations, in: NORTH P. (note 57), p. 39. 73 DUBLER C.E., Les clauses d’exception en droit international privé, Genève 1983, p. 31. See also for references NADELMANN K.H., ‘Choice of Law Resolved by Rules or Presumptions with an Escape Clause’, in: Am. J. Comp. L. 1985, p. 297 et seq., at p. 308. 74 Respectively, Cass., sez. un., 1.2.1999, n. 6, Mantovani, in: Riv. dir. int. priv. proc. 2000, p. 112 et seq.; Cass., sez. un., 30.6.1999, n. 366, Payen, in: Riv. dir. int. priv. proc. 2000, p. 738 et seq.; Cass., 11.6.2001, n. 7860, Kogler, in: ; Queen’s Bench Division, Definitely Maybe (Touring) Ltd. v. Marek Lieberberg Konzertagentur GmbH, in: Weekly Law Rep. 2001, p. 1745 et seq.; Bundesgerichtshof, 25.2.1999, VII ZR 408/97, in: Neue Jurist. Wochen. 1999, p. 2442 et seq.; Hoge Raad, 25.9.1992, n. 14566, Nouvelles des Papeteries de l’Aa v. BV Machinenfabriek BOA, in: Nederlandse Jurisprudentie 1992, p. 3263 (translated into English by STRUYCKEN A.V.M., ‘Some Dutch Reflections on the Rome Convention, Art. 4(5)’, in: Lloyd’s Marit. Com. Law. Quart. 1996, p. 18 et seq.). See, for other references, especially to German caselaw, MAGNUS U., MANKOWSKI P., ‘Joint Response to the Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations Into a

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International Subcontracting in EC Private International Law On the other hand, an opposed school endorses that Article 4(2) should not be restrictively construed as a legal presumption, but merely as a sort of indicative guideline, established mostly for the purpose of controlling the judge’s discretionary power in selecting the closest connection. Thus, Article 4(5) should not be regarded as an ‘exception’, strictly speaking, to Article 4(2), but as a sort of fallback clause, which allows courts to assess, on empirical grounds, the particular circumstances of the case, and to choose a connection closer than the characteristic performance of the contract – which indeed strengthens the general principle of Article 4(1).75 The Italian Supreme Court has ruled accordingly, as have the Danish Supreme Court and some French courts.76 The latter theory uses a narrow construction of Article 4(5), which may apply only to ‘circumstances’ represented by territorial elements of localization in space. Nevertheless, some authors admit that Article 4(5) may feature an ‘open invitation to a covertly result-selective choice of law’, easily concealable in the objective geographical terms of closest connection, which would allow courts a result-oriented selection of the applicable law.77 By contrast, the former conception, which regards Article 4(5) as an ‘exception clause’, enables courts (albeit not officially) to enforce a material value policy in order to select a law likely to be adequately protective of the parties’, or the weaker party’s, rights and interests. Thus, the atypical interest represented by the connection to another contract, or to multiple contracts within the framework of a complicated transaction, may also be taken into consideration as a relevant ‘circumstance’ under Article 4(5).78 Actually, Article 4(5) has often been retained as a general connecting factor to determine the law applicable to accessory-connected contracts, insofar as the opportunity to avoid any inconsistency in the legal framework requires the submis-

Community Instrument and its Modernisation, COM (2002) 654 final’, in: , p. 20. 75 It is thus ‘quite incorrect to refer to Article 4(2) as containing the ‘main rule’ and Article 4(5) the ‘exception’ and even less appropriate to refer to Article 4(5) as containing a ‘counter-presumption’’: PLENDER M./WILDERSPIN M. (note 19), p. 119. 76 See, respectively, Cass., sez. un., 28.7.1998, n. 7398, Glencore, in: Giust. civ. 1999, I, p. 2760 et seq.; Cass., sez. un., 6.8.1998, n. 7714, BS Electrodomesticos, in: Riv. dir. int. priv. proc. 1999, p. 583 et seq.; Cass., sez. un., 14.9.1999, n. 8895, Imperial Bathroom, in: ; Cass., sez. un., 10.3.2000, n. 58, Krauss, Maffei, in: ; PHILIP A., ‘First Danish Decisions on the Rome Convention’, in: IPRax 1994, p. 150 et seq.; Cass., 1ère ch. civ., 16.2.1994, in: Rev. crit. dr. int. pr. 1994, p. 341 et seq.; Cass., 1ère ch. civ., 12.10.1999, in: Rev. crit. dr. int. pr. 1999, p. 720 et seq., obs. REMÉRY J.P.; Cour d’appel Versailles, 6.2.1991, Roger Gilbert Bloch c. Lima S.p.a., in: Rev. crit. dr. int. pr. 1991, p. 745 et seq., obs. LAGARDE P. 77 DE BOER TH.M. (note 59), p. 29. 78 See MANKOWSKI P., ‘Die Ausweichklausel des Art. 4 V EVÜ und das System des EVÜ’, in: IPRax 2003, p. 464 et seq., at p. 471 et seq.

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Paola Piroddi sion of the accessory contract to the governing law of the principal contract.79 In this line of thought, some courts ruled for the application of Article 4(5), not of Article 4(2), to accessory guarantee contracts, ostensibly for the purpose of submitting the guarantee to the same applicable law as the debt. A French court has judged on the merits in this way, as has the British High Court.80 This interpretation of Article 4(5) has raised some criticism from that part of doctrine, which upheld that ‘an ‘accessory’ determination of the applicable law should not be endorsed as a general principle’ under Article 4(5).81 In this perspective, each contract should be submitted to its own law according to the presumptive rule of Article 4(2). Actually, if contracting parties intend to avoid that a transaction composed of multiple accessory contracts be subjected to multiple governing laws, they should agree a separate choice-of-law clause for each contract under Article 3(1). By contrast, application of Article 4(5) to non-accessory contractual connections remains uncertain. The Court of Milan applied Article 4(2) to determine the lex contractus of a non-accessory guarantee contract on first demand. The judge allegedly enforced the classic principle of conflict of laws, according to which the applicable law should be determined separately for each contract, irrespective of any contractual connection to other contracts.82 On the contrary, the Cour d’appel of Versailles, in a similar case, applied Article 4(5), thus submitting the autonomous guarantee contract to the applicable law of the principal contract.83 In practice, however, in the case submitted to the Cour d’appel, the law referred to by Article 4(2) would have invalidated the autonomous guarantee contract, See BATIFFOL H. / LAGARDE P., Droit international privé, t. II, 7ième éd., Paris 1983, p. 300; MOHAMED SALAH M., ‘Groupe de contrats: intérêt de la notion en droit international privé et dans le droit de l’arbitrage international’, in: Rev. dr. aff. int. 1996, p. 598 et seq., at p. 602; TRAIN F.X., Les contrats liés devant l’arbitre du commerce international, Paris 2003, p. 32. Nevertheless, Article 4(5) may apply only if the relationship between the accessory contract and the main transaction ‘serait si étroit que les contrats ne sauraient être dissociés, …constitueraient le complément nécessaire l’un de l’autre et qu’il se justifierait, en conséquence, de déroger aux règles de rattachement habituel et de les soumettre à un même ordre juridique’: GIARDINA A. (note 41), p. 97. 80 See respectively Tribunal de grande instance Poitiers, 22.12.1999, in: Rev. crit. dr. int. priv. 2001, p. 670 et seq., obs. RÉMY-CORLAY P.; High Court (Queen’s Bench Division), Bank of Baroda v. Vysya Bank Ltd, in: Lloyd’s Law Rep. 1994, 2, p. 87 et seq., 93. 81 MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (hereinafter: MAX PLANCK INSTITUTE), ‘Comments on the European Commission’s Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations Into a Community Instrument and its Modernization’, in , p. 45. 82 Trib. Milano, 4.12.1997, in: Banca, borsa 2000-II, p. 72 et seq., obs. RADICATI DI BROZOLO L., ‘Giurisdizione e legge regolatrice del Garantievertrag (anche alla luce della Convenzione UNCITRAL)’, ibid., p. 75 et seq. 83 Cour d’appel Versailles, 6.2.1991 (note 76), p. 745 et seq. 79

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International Subcontracting in EC Private International Law whereas its validity would have been accepted by the law governing the principal contract. So, one may wonder whether the Cour d’appel’s choice was to set aside Article 4(2) in order to enforce a non-accessory contractual connection by means of Article 4(5), or rather to allow a favor validitatis for the non-accessory guarantee contract – which last seems quite probable. An analogy may be drawn between guarantee contracts on first demand and recourse subcontracts, on the grounds of the non-accessory nature of the connection to the principal contract. As a result, although Article 4(5) cannot apply for the straightforward purpose of subjecting recourse subcontracts to the construction contract’s applicable law,84 depending on the circumstances of the case, reasons of favor validitatis may induce one to set aside Article 4(2), and to apply Article 4(5), in order for pay when paid and if and when clauses not to be invalidated. Thus, Article 4(5) consents to enforce the functional unity, which closely connects the recourse subcontract to the construction contract, endorsing the parties’ legitimate interest in the application of a law, which admits the validity of contingent payment clauses.

2.

How Article 4 Could Reflect the Rise of the European Contract Law

The ‘Green Paper’ conveys the Commission’s opinion that the complicated structure of Article 4 gives rise to alleged uncertainty and unpredictability of decisions. Nevertheless, despite the criticism raised of the characteristic performance, the Commission does not envisage the abrogation of Article 4(2), but indeed strengthens its contents, so that courts shall be forced to begin by applying the presumption.85 Actually, the Commission emphasizes that, as already canvassed by doctrine, characteristic performance has the advantage of consistency with the ‘home country control’ or ‘country of origin control’ principle, which, on grounds of mutual recognition, represents the cornerstone of the European Community internal market.86 According to this principle, directly arising from Article 30 Tr. 84

Così POCAR F. (note 3), p. XII. ‘Green Paper’ (note 20), § 3.2.5.3. 86 See, for a comprehensive survey of doctrine, GKOUTZINIS A., ‘Free Movement of Services in the EC Treaty and the Law of Contractual Obligations Relating to Banking and Financial Services’, in: Common Market Law Rev. 2004, p. 119 et seq., at p. 152. On the construction of mutual recognition as a lato sensu conflict-of-laws device, or as a sui generis conflict rule or, respectively, as a substantive rule, see, among many others, BASEDOW J., ‘Der kollisionsrechtliche Gehalt der Produktfreiheiten im Europäischen Binnenmarkt: favor offerentis’, in: RabelsZ 1995, p. 1 et seq.; DE MIGUEL ASENSIO P.A., ‘Integración europea y derecho internacional privado’, in: Rev. der. com. eur. 1997, p. 413 et seq.; HATZOPOULOS V., Le principe communautaire d’équivalence et de reconnaissance mutuelle dans la libre prestation de services, Athènes / Bruxelles 1999, p. 85 et seq.; VON WILMOWSKY P., ‘EG-Vertrag- und Kollisionsrechtliche Rechtswahlfreiheit’, in: RabelsZ 1998, p. 1 et seq.; GARDEÑES SANTIAGO M., La aplicación de la regla de reconocimiento mutuo y su incidencia en el comercio de mercancía y servicios en el ámbito comunitario e internacional, Madrid 1999, p. 102. 85

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Paola Piroddi EC, only reasons of overriding public interest may be raised by national authorities to forbid the entry into the territory of a State of goods or services, which freely circulate in the internal market, on condition, respectively, that national measures be appropriate and proportional to the alleged objective, that the objective cannot be attained by less restrictive measures, and that a minimum standard of harmonization already exist at the Community level.87 The Commission, by means of the recently-issued Commission’s Proposal for a directive of the European Parliament and of the Council on services in the internal market88, makes the country of origin principle strongly interact with the forthcoming Community-based conflict system of rules for contracts. Actually, insofar as material harmonization has taken effect, Article 16 of the proposed directive on services, entitled ‘Country of origin principle’, may have priority over the Rome Convention rules. Indeed, Article 20 of the Rome Convention stipulates that the Convention should not affect the application of Community acts, which, ‘in relation to particular matters’, lay down conflict rules related to contractual obligations (‘precedence of Community law’). Although the directive on services can hardly appear as a measure ‘in relation to particular matters’, because of the sheer breadth of its scope, the ‘Green Paper’ nevertheless states at the very outset that the Community instrument that shall convert the Rome Convention should leave internal market principles intact.89 As a result, the applicability of the country of origin principle by Article 16 of the directive on services shall consistently reduce, albeit in principle, the scope of application of Article 4(2) – beyond, generally, the scope of application of the forthcoming Community instrument ‘modernizing’ the Rome Convention. Notwithstanding the compliance, in principle, of Article 4(2) with the country of origin rule, a revision of the Rome Convention devised to uphold the characteristic performance as a principle of the internal market attributes to the Commission the intent to enact a policy based on a regulatory competition model, which the ‘Green Paper’ expressly excludes. As a further method to grant priority of application to the characteristic performance principle, the ‘Green Paper’ considers a possible deletion of Article 4(1), to grant priority to Article 4(2), as already proposed by the European Group of Private International Law (‘EGPIL’).90 This proposal implies that the deletion of 87

FALLON M., ‘Variations sur le principe d’origine, entre droit communautaire et droit international privé’, in: Nouveuax itinéraires en droit. Hommage à François Rigaux, Bruxelles 1993, p. 187 et seq. 88 COM(2004)2 final/3 2004/0001 (COD), 5.3.2004. 89 ‘Green Paper’ (note 20), § 5. See also, for another application of the country of origin principle in a private international law instrument, Article 23(2) of ‘Rome II’ Regulation. 90 EUROPEAN GROUP OF PRIVATE INTERNATIONAL LAW (hereinafter: ‘EGPIL’), (Treizième réunion, Vienne, 19-21 septembre 2003), ‘Réponse au Livre vert de la Commission sur la transformation de la Convention de Rome en instrument communautaire ainsi que sur sa modernisation’, Annexe I ‘Troisième version consolidée des propositions de modification des articles 1er, 3, 4, 5, 6, 7, 9,10bis, 12 et 13 de la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, et de l’article 15 du

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International Subcontracting in EC Private International Law Article 4(1) should not imply the abolition of the rationale underlying the closest connection principle, but on the contrary its absorption into Article 4(2). In connection thereto, the EGPIL also advanced the proposal of an amendment of Article 4(2) inspired by Article 117(3) of the Swiss Federal Statute of Private International Law, which establishes a catalogue of the characteristic performances of the main abstract types of contracts.91 However, it should be remembered that the deletion of Article 4(1) would challenge the courts’ discretionary margin of appreciation in selecting the closest connection of the contract. On the other hand, a detailed list of characteristic performances of contracts by category, on the model of Article 117(3) of the Swiss Federal Statute, although appreciable in its predictability of solutions, would considerably harden Article 4(2), thus affecting the flexibility of Article 4 in its entirety. In contrast, a genuine absorption of the rationale underlying the closest connection principle into the characteristic performance would entail that Article 4(2) be amended to list a catalogue of performances organized, rather than by types of contracts, by the nature of private interests involved, on the model of Article 5(1)(b) of the ‘Bruxelles I’ Regulation. Article 5(1)(b) outlines a broad subdivision of contractual transactions into large categories, represented by ‘the sale of goods’ and by ‘the provision of services’, which encompass both typical and atypical contracts. Furthermore, so as to abide by the ratio legis of the closest connection principle, Article 4(2) should delete any word, which could suggest an identification of the characteristic performance with the non-monetary performance, as per the above-mentioned recent case law on connected contracts, which often focus on the monetary performance as the characteristic performance of a group of contracts. Indeed, contrary to the Commission’s opinion, the alleged uncertainty and unpredictability of decisions under Article 4 does not arise, upon closer scrutiny, from a neglectful application of Article 4(2), but from a tendency of courts to discard Article 4(2) too quickly, ‘by means of a widely construed Article 4(5)’.92 In connection thereto, another school of doctrine proposes ‘a stricter wording of Article 4(5), which makes it clear to the judge that this paragraph is to be invoked in exceptional circumstances only’.93 By analogy to Article 3(3) of the Proposal for a

Règlement 44/2001/EC (Règlement ‘Bruxelles I’)’, in , p. 3. See also Opinion of the European Economic and Social Committee (note 35), § 4.6.1. 91 See BUCHER A. / BONOMI A., Droit international privé, Bâle / Francfort-sur-leMain 2001, p. 164 et seq. 92 Cf. MAX PLANCK INSTITUTE (note 81), p. 43. 93 CALLIESS G.P., ‘European Contract Law: Substantive and International. A Comment on the Inherent Interrelation of the Action Plan on European Contract Law COM(2003) 68 Final and the Green Paper on the Modernisation of the 1980 Rome Convention COM(2002) 654 final’, in: , p. 23; MAX PLANCK INSTITUTE (note 81), p. 44.

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Paola Piroddi ‘Rome II’ Regulation, the restrictive re-phrasing of Article 4(5) should emphasize its nature of an exception clause. It seems that undue application of Article 4(5) can be reduced only if Article 4(2) is amended to reflect ‘the rise of the European contract law’.94 Indeed, Articles 5:102 and 6:102 of the PECL, which focus on the assessment of the contract simply under the general clause of good faith and of reasonableness, would enable courts to assess the characteristic performance of the contract on grounds of the concrete ‘nature and object of the contract’, regardless of any abstract type-bytype characterization of the obligations undertaken by the parties. As a consequence, the application of Article 4(5) to atypical contracts would also be reduced.

H.

The Law Applicable to the Relation of the Subcontractor with the Employer

Occasionally, subcontracts, or construction contracts (especially in cases of ‘nominated subcontractors’), or even national statutes, entitle the subcontractor to a ‘direct action’, to claim the payment of the price of the subcontract directly from the employer, notwithstanding the absence of a contractual relation of the subcontractor with the employer itself, as observed above. The Rome Convention gives no answer to the question of whether the – contractual or statutory – direct claim by the subcontractor against the employer should fall under the scope of application of the law governing the subcontract or the construction contract. Article 12, which contains a provision on the voluntary assignment of rights, cannot support either choice. Nevertheless, it seems reasonable that direct contractual claims should be submitted to the law governing the contract that stipulates that claim, whilst courts shall ascertain the law applicable to direct statutory claims by looking at the characterization of that claim under the law of the forum, where it is admitted. Besides, taking into account that the non-recourse subcontractor holds a contractual claim upon the contractor, because of the non-completion of the contractor’s obligation of payment, the question may arise whether such a subcontractor is entitled to exercise against the employer, debtor of the contractor, the contractor’s own rights. Pursuant to Article 13(1) on subrogation, the governing law of the subcontract should determine whether the subcontractor is entitled to exercise against the employer, debtor of the contractor, the rights which the contractor has against the employer under the governing law of the construction contract, and if so, the extent to which it may do so. Indeed, it would be unreasonable to subject the claim of the subcontractor against the employer, based on the contractual rights of the subcontractor against the contractor, to a legal system other than that which regulates the subcontractor’s relationship with the contractor95 (although that legal system would not be totally unforeseeable for the subcontrac94 95

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CALLIESS G.P. (note 93), p. 23; MAX PLANCK INSTITUTE (note 81), p. 44. SEATZU F. (note 61), p. 120 et seq.

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International Subcontracting in EC Private International Law tor, as virtually each construction contract stipulates an express choice-of-law clause, as commented above).

I.

EC Public Policy and Mandatory Rules in Recourse Subcontracts

1.

Article 16 and the ‘EC Public Policy’

Should the forum invalidate contingent payment clauses, Article 16 of the Rome Convention on public policy (‘ordre public’), can prevent the effects in the forum State of a foreign law likely to accept pay when paid and if and when clauses as valid and effective. In fact, the right to an unconditional compensation for an unconditional performance definitely represents an essential requirement of public policy, related to the protection of the weaker party, across the entire European Community, both in civil and common law Member States. Article 16 of the Rome Convention allows use of the public policy clause as a strictly worded exception, since the application of a foreign law may be refused ‘only if such application is manifestly incompatible with the public policy (‘ordre public’) of the forum’.96 The so-called ‘European Community public policy’97 has always been considered an integral part of Article 16, whereas the national principles of public policy of Member States contrary to the ‘European Community public policy’ have always been deemed to be outside the scope of application of Article 16.98 Besides, national courts should not assess whether or not to classify a national rule as a part of national public policy (‘ordre public’) on discretionary grounds, rather depending on the obligation to construe domestic legislation in conformity with the European Community system of law. The conversion of the Rome Convention into a Community instrument shall further enable the Court of Justice to adjudicate on the effects of Article 16 per se, by reference to the general principles of the European Community and to the basic requirements of cooperation among Member States. Because of such developments, the ‘Green Paper’ does not consider it necessary to advance any proposal of revision of Article 16.

2.

Overriding Mandatory Rules and Recourse Subcontracts

The classic scope of application of public policy seems to be increasingly eroded, across the European Community, by overriding or internationally mandatory rules for the purpose of private international law (règles d’application immédiate). Overriding mandatory rules take precedence over domestically mandatory rules, to be understood, pursuant to Article 3(3), as that part of the lex contractus that cannot 96

Cf. GIULIANO/LAGARDE Report, sub Article 16. See ECJ, 1.6.1999, C-126/97, Eco Swiss, in: ECR 1999-I, p. 3055 et seq., § 36. 98 See GIULIANO M. / LAGARDE P. / VAN SASSE VAN YSSELT TH., ‘Rapport concernant l’Avant-projet de Convention sur la loi applicable aux obligations contractuelles et noncontractuelles (doc. XIV/408/72-F, Rev. I)’, in: Riv. dir. int. priv. proc. 1973, p. 198 et seq. 97

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Paola Piroddi be evaded by party autonomy. Whilst the Rome Convention stipulates that courts have a duty to enforce the overriding mandatory rules of the forum (Article 7(2)), Article 7(1) by contrast consents to a discretionary assessment of whether or not to enforce overriding mandatory rules of a closely connected State, which serve the interests of ‘the protection of weaker parties, international comity, and uniformity and international harmony of decisions’.99 Particularly, the choice of whether or not to enforce overriding mandatory rules of a closely connected State should be based, regardless of the process of spatial localization of the contract within the territory of that State, on the concrete circumstances of the case, including the nature and the purpose of the overriding mandatory rules, and the consequences of their application or non-application. Overriding mandatory rules affecting recourse subcontracts very frequently are issued by the governing law of the construction contract, which turns out to also be the law most closely connected to the recourse subcontract (obviously, inasmuch as it is not itself the governing law of the recourse subcontract). The effects of overriding mandatory rules on the recourse subcontract seem, in practice, to be resolved not by means of Article 7(1), but on grounds of recourse. In fact, recourse subcontracts usually incorporate, by reference or verbatim, the clauses of the construction contract which, pursuant to standard transnational practice, take into account the content of mandatory rules of the lex contractus or the lex loci executionis. As a practical consequence, only overriding mandatory rules of the forum (Article 7(2)), not of the lex contractus or the lex loci executionis (Article 7(1)) may affect recourse subcontracts. As far as recourse subcontracts are concerned, a major concern relates to the effect under Article 7(1) or 7(2) of national mandatory rules implementing the European Community harmonization directives, which protect the subcontractor as the weaker party of the contract, on the one hand, and safeguard the proper functioning of the internal market, on the other. The harmonization directives referred to are, basically, directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions, and directive 93/13/EEC of the Council of 5 April 1993 on unfair terms in con-

99

BONOMI A., ‘Mandatory Rules in Private International Law: The Quest for Uniformity of Decisions in a Global Environment’, in: this Yearbook 1999, p. 215 et seq., at p. 234 et seq. On overriding mandatory rules, see, in a large bibliography, the most recent authors: VOSER N., Die Theorie der lois d’application immédiate im internationalen Privatrecht, Basel / Frankfurt-am-Main 1993; BONOMI A., Le norme imperative nel diritto internazionale privato. Considerazioni sulla Convenzione europea sulla legge applicabile alle obbligazioni contrattuali del 19 giugno 1980 nonché sulle legge italiana e svizzera di diritto internazionale privato, Zürich 1998, p. 9 et seq.; NUYTS A., ‘L’application des lois de police dans l’espace’, in: Rev. crit. dr. int. pr. 1999, p. 247 et seq.; WOJEWODA M., ‘Mandatory Rules in Private International Law’, in: Maastricht Journ. Eur. Comp. Law 2000, p. 183 et seq. The cautious approach of States to overriding mandatory rules of a closely connected State, corresponding neither to the lex fori nor to the lex contractus, results from the reservation that some member States placed on Article 7(1), by permission of Article 22(1)(a).

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International Subcontracting in EC Private International Law sumer contracts.100 Actually, whilst directive 2000/35/EC applies by express statement to recourse subcontracts,101 directive 93/13/EEC, in contrast, does not apply per se to recourse subcontracts, which are obviously commercial contracts, and escape the strict description of ‘consumer contracts’ given by Article 2(b) of the directive. According to Article 8 of the directive, Member States have often implemented directive 93/13/EEC by more stringent national rules, which provide for a higher level of protection than the ‘minimum standard’ prescribed by the directive. Therefore, even recourse subcontracts, like other commercial contracts, may often fall under the national implementing rules of directive 93/13/EEC. Article 3(3) of directive 2000/35/EC compels Member States to provide that an agreement on the date for payment or on the consequences of late payments, which does not grant the creditor the remedying devices made available by the directive102, shall not be enforceable or shall entitle it to damages if ‘it is grossly unfair to the creditor’, on condition that courts take all the circumstances of the case into account, including good commercial practice and the nature of the product (or service) covered by the contract. So, contingent payment clauses are not invalidated per se by Article 3(3). By contrast, Article 3(1) of directive 93/13/EEC may invalidate an if and when clause which has not been individually negotiated if, ‘contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations’, to the detriment of the recourse subcontractor, regarded as the weaker party to the contract. In connection thereto, Article 4(1) provides that courts should take into account the nature of the goods or services for which the contract was concluded, all the circumstances attending the conclusion of the contract and all the other terms and conditions of the recourse subcontract or of the construction contract, on which the recourse subcontract may be deemed dependent. On the contrary, Article 4(2) does not invalidate a pay when paid clause which has been adequately remunerated, as it stipulates that assessment of the unfair nature of the terms and conditions of the contract (insofar they are in plain language) should not depend on the adequacy of the price of goods or services supplied in exchange. The question thus arises whether national mandatory rules implementing harmonization directives 2000/35/EC and 93/13/EEC should apply merely as domestically mandatory rules under Article 3(3) of the Rome Convention, or as overriding mandatory rules under Articles 7(1) and 7(2) thereof. The Court of Justice has not addressed the question in a conflict-of-laws manner, but by applying the material principles of equivalence of protection, effectiveness and mutual recognition, which underlie the free movement of goods and services in the internal market.

100

Respectively, OJ L 200, 8.8.2000, and OJ L 095, 21.4.1993. See 22nd and 19th recital. 102 Basically, automatically payable interest at a special rate, damages, retention of title, compensation for recovery costs incurred by the creditor, and recovery procedures for unchallenged claims. 101

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Paola Piroddi The Court of Justice held in the Arblade case that national courts should ex officio apply mandatory rules implementing harmonization directives (considered the Community minimum standard of protection) to ‘all the legal relationships within the national territory of a Member State’.103 The subsequent Ingmar judgment stated precisely that mandatory rules implementing harmonization directives should apply ex officio under Article 7(2) not only to contracts exclusively connected to the Community, but also to contracts ‘closely connected with the Community’, or with a Member State, thus prevailing over any possible agreement on the choice of a non-member State applicable law.104 In connection thereto, a contract should be considered ‘closely connected with the Community’ or to a Member State where it has a territorial or functional link with the jurisdiction of the Community or a Member State, such that its clauses may affect the interests of the Community or of that Member State. The territorial link, according to the Ingmar ruling, relies basically on the localization in the territory of the Community of the principal establishment of the party responsible for providing services (as a means to subject that party to the country of origin, pursuant to the ‘internal market clause’), even if the place of establishment of the other party is localized outside the territory of the Community. The functional link, by contrast, consists of a connection to fundamental Community policies. As far as harmonization directives are concerned, the policies involved are, basically, reducing distortions of competition, which may arise from disparities in the Member States’ legal systems (Article 3(1)(g) Tr. EC), and achieving free movement, especially of services, which also provides a minimum standard of protection to the parties (Article 49 et seq. Tr. EC). Obviously, taking for granted that all harmonization directives strive for the goal of reducing distortions to competition arising from discrepancies between Member States’ legislations, all of them should turn out to be functionally connected (at least indirectly) to the Community. Thus, all national rules implementing harmonization directives are also likely to be converted into overriding mandatory rules (in principle, at least). Pursuant to the Ingmar test, a Member State could, according to Article 7(2), apply its national rules implementing harmonization directives 2000/35/EC and 93/13/EEC to recourse subcontracts governed by a non-member State law, on condition that a territorial and functional element closely connects the recourse subcontract to the Community. Taking for granted the functional link between recourse subcontracts and harmonization directives, intended for the reduction of discrepancies between Member States’ legislations applicable to recourse subcontracts, as commented above, the territorial link may be represented (absent any special clause as to the territorial scope of application of directives 2000/35/EC and 93/13/EEC) by the localization of the subcontractor’s place of establishment in a Member State’s territory. Therefore, a recourse subcontractor 103

ECJ, 23.11.1999, C-369/96 and C-376/96, Arblade, in: ECR 1999-I, p. 8453 et

seq., § 30. 104

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ECJ, 9.11.2000, C-381/98, Ingmar, in: ECR 2000-I, p. 9305 et seq., § 25.

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International Subcontracting in EC Private International Law having its establishment within the Community shall not be deprived of the minimum standard of protection granted by directives 2000/35/EC and 93/13/EEC, irrespective of the fact that the subcontract is governed by a non-member State law – obviously, insofar as the governing law does not turn out to be substantially more favourable to the subcontractor than the Member State’s lex fori. As a consequence, a part of doctrine considers that a Member State should also apply its national rules implementing the harmonization directives to a contract governed by a Member State law, where the implementing rules of the lex fori would offer a higher standard of protection than the one provided by the lex contractus.105 Notwithstanding the Ingmar statement, another part of doctrine argues that national mandatory rules implementing harmonization directives issued by the Member State of the lex contractus should always apply, although the corresponding rules of the lex fori would provide a higher standard of protection.106 Thus, national rules of the lex fori implementing harmonization directives would be granted not overriding, but only domestically, mandatory nature under Article 3(3) of the Rome Convention – a conclusion which indeed neglects the equivalence of protection at the very root of harmonization directives. Intra-community conflicts of national rules implementing a harmonization directive become more complicated when the Member State of the forum has only partially or incorrectly implemented the harmonization directive. According to one scholarly view, the national rules of the lex fori, which partially or incorrectly implemented a directive, should always apply, irrespective of the fact that the lex contractus correctly implemented the directive at issue. Thus, national rules implementing harmonization directives should be retained as ‘variable-geometry’ overriding mandatory rules (‘lois de police à géométrie variable’),107 having a sort of (indirect) ‘horizontal effect’, contrary to the ‘vertical’ effect, which so far constitutes the only effect granted to harmonization directives by the Court of Justice.108 Another group of scholars, on the contrary, considers that national rules implementing harmonization directives should apply not as overriding mandatory rules, but on grounds of the public policy exception (‘ordre public’). Pursuant to the Arblade case, even the public policy of a Member State must observe the material principles of the primacy of Community law and the preservation of the uniformity of the community patrimony. Therefore, a Member State could apply its 105

BOSCHIERO N., ‘Verso il rinnovamento e la trasformazione della Convenzione di Roma: problemi generali’, in PICONE P. (a cura di), Diritto internazionale privato e diritto comunitario, Padova 2004, p. 374. 106 QUIÑONES ESCÁMEZ A., ‘Marché intérieur, harmonisation minimale et contrats de consommation (proposition de modification de l’article 5 de la Convention de Rome)’, in: , p. 3 et seq. 107 IDOT L., ‘Observations’ (ECJ, 9.11.2000, C-381/98, Ingmar), in: Rev. crit. dr. int. pr. 2001, p. 107 et seq. 108 See BONOMI A., Le norme imperative (note 99), p. 127.

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Paola Piroddi national rules implementing harmonization directives only as ‘overriding reasons relating to the public interest’, which are the only exception to the free movement of goods and services.109 By contrast, if a sector has not yet been addressed by harmonization directives, Article 7(2) can materially restrict the internal market principles, particularly the cross-border free movement of services, because of the extra-territorial effect granted to the overriding mandatory rules of the lex fori. Although Article 7(2) represents a rule indistinctly applicable to domestic and foreign operators, it nevertheless may hinder or make less attractive the exercise of the freedom to provide services, resulting in delays or additional costs imposed on the parties to contracts most closely connected to another Member State. Indeed, mutual recognition could allow the unconditional application of the overriding mandatory rules of a Member State to contracts most closely connected to another Member State, only subject to requirements of restrictions to the free movement of services, pursuant to Court of Justice case law: firstly, the Member State of destination (lex fori), and the Member State of origin (the closest connection) should meet the equivalence test (minimal or optional harmonization); secondly, the State of destination should pursue an overriding objective of general interest; ultimately, unconditional application of overriding mandatory rules should meet the test of necessity and proportionality.110 Particularly, the Court of Justice established, in the Mazzoleni judgment, that national courts shall assess whether the national mandatory rules of the lex fori, issued for ‘overriding reasons relating to the public interest’, entail unjustified restrictions to the free movement of services, which are neither necessary nor proportionate under the principle of equivalence of protection.111 On condition that the tests of necessity and proportionality are met, the national mandatory rules of the lex fori, issued for ‘overriding reasons relating to the public interest’, may apply as overriding mandatory rules by investiture of the European Community, hence also to contracts governed by the law of another Member State. On the contrary, should the alleged ‘overriding reasons relating to the public interest’ not meet the tests of necessity and proportionality, the relevant national rules should be regarded as measures equivalent to quantitative restrictions to the free movement of services, therefore not being enforceable by the forum Member State. Nor should the ‘overriding reasons relating to the public interest’ apply, if the ‘public interest’ of the forum (considered as the State of destination), turns out to be adequately protected by the lex contractus (considered as the State of origin).

109

ECJ, 23.11.1999, C-369/96 and C-376/96, Arblade (note 103), § 31. FALLON M. / MEEUSEN J., ‘Private international law in the European Union and the exception of mutual recognition’, in: this Yearbook 2002, p. 37 et seq., at p. 61. 111 ECJ, 15.3.2001, C-165/98, Mazzoleni, in: ECR 2001-I, p. 2189, § 30, 37-39. 110

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A ‘Modernized’ Statute of Mandatory Rules

The ‘Green Paper’ holds that the content of Articles 7 and 3(3) should be revised to comply with the above-mentioned Court of Justice case law.112 In connection thereto, the EGPIL proposes, firstly, to add a third paragraph to Article 7, drafted on the pattern of a ‘safeguard clause’, which authorizes Member States to give effect to their national mandatory rules, on condition that they do not constitute an unjustified restriction on the free movement of services, and that requirements of necessity and proportionality are met.113 Secondly, the EGPIL also suggested that Article 3(3) be amended so as to introduce, by analogy to the concept of ‘domestic contract’, the ‘intra-Community contract’, a contract of which relevant elements are exclusively or most closely connected to a Member State or the Community’s territory as a unit. The application by party autonomy of a non-member State law to an intra-Community contract shall not prejudice the application of mandatory rules issued by Community instruments (e.g., harmonization directives) that are in force in the Member State to which the intra-Community contract is exclusively or most closely connected, so that the parties (or, at least, the weaker party) should not be deprived of the ‘Community minimum standard’ of protection. Although the pattern of the ‘Community minimum standard’ clause has often been considered too vaguely conceived to provide for an effective protection of the rights and interests of the weaker party, the Commission seems to accept the EGPIL’s advice. In fact, the ‘Green Paper’ endorses an amendment to Article 3(3), which reproduces the ‘Community minimum standard’ clauses set forth by some harmonization directives, namely by Article 6(2) of directive 93/13/EEC.114 Nevertheless, so far neither the Court of Justice nor the Commission nor the EGPIL have addressed the key issue of whether a non-national rule might apply as a mandatory rule implementing an harmonization directive, where it provides a higher level of protection than the ‘minimum standard’ prescribed by the directive at issue.115 The question arises in relation to Article 4:110(1) of the PECL, on the 112 ‘Green Paper’ (note 20), § 3.2.8.3 and 3.2.11. See also the European Parliament Resolution on the prospects for approximating civil procedural law in the European Union, P5_TA(2004)0097, in: OJ C 97 E, 22.4.2004, p. 643 et seq.; Opinion of the European Economic and Social Committee (note 35), § 4.10.2. 113 EGPIL, Réponse au Livre vert de la Commission (note 90), p. 5. See also a different proposal by BONOMI A. (note 26), p. 90. 114 ‘Green Paper’ (note 20), § 3.1.2.2. On the doubtful opportuneness of preserving the universal scope of application of the Rome Convention (Article 2) in the future Community instrument, either to extra-Community or intra-Community cases, see BONOMI A. (note 26), p. 59. 115 Article 4:110(1) stipulates: ‘A party may avoid a term which has not been individually negotiated if, contrary to the requirements of good faith and fair dealing, it causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of that party, taking into account the nature of the performance to be rendered under the contract, all the other terms of the contract and the circumstances at the time

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Paola Piroddi invalidity of unfair terms which have not been individually negotiated, which may substantially be considered a restatement of the principles of harmonization directive 93/13/EEC – furthermore, granting them a broader scope of application, as the PECL apply not only to consumer, but also to commercial, contracts. The applicability of Article 4:110(1) of the PECL as equivalent to a mandatory rule implementing a harmonization directive by restrictive provisions would have a crucial impact on recourse subcontractors, which would not be deprived of the ‘Community minimum standard’ of protection where submitted by party autonomy to a non-member State law.

IV. State-of-the-Art Conclusion The increasing relevance to recourse subcontracts of overriding mandatory rules, as opposed to the corresponding restriction of the scope of application of public policy clauses, suggests a state-of-the-art conclusion. To this purpose, a recent wave of scholarship should be taken into account, which describes overriding mandatory rules as functional rules, and the policy underlying Article 7(1) as a functional approach,116 whilst naming the scrutiny performed by courts to select the closest connection of the contract under Article 4(1) a functional analysis. This phrasing brings to mind the functional allocation method or functional approach to conflict rules, which focuses on the nature of the relationships between the parties, rather than on the territorial scope of the applicable rules, to achieve the application of the law ‘which is presumed to be most concerned with the party in need of protection’.117 In this perspective, overriding mandatory rules appear as functional rules, insofar as they are devised basically for the protection of parties’ interests (or, more precisely, the weaker party’s interests), and enforced by courts after an open assessment of the nature, object and the consequences of the application or non-application (Article 7(1) of the Rome Convention). Therefore, under a functional approach, both overriding and domestically mandatory rules do not appear as superior structures intended by public authority the contract was concluded’. Article 3(1) of the directive 93/13/EEC establishes: ‘A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer’. 116 Respectively, GUEDJ TH.G., ‘The Theory of the Lois de Police. A Functional Trend in Continental Private International Law. A Comparative Analysis with Modern American Theories’, in: Am. J. Comp. L. 1991, p. 661 et seq.; WEINTRAUB R.J., ‘Functional Developments in Choice of Law for Contracts’, in: Recueil des Cours 1984-IV, t. 187, p. 239 et seq., esp. p. 261 et seq. 117 Even though the functional approach does not automatically consent to the application of the law which is the most favourable to the weaker party: DE BOER T.M. (note 59), p. 24, 32.

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International Subcontracting in EC Private International Law to restrict contractual practices, as public policy is, but as instruments at the service of the contracting parties, or material supports for the achievement of private interests. Thus, a functional perspective causes one to consider that the increasing relevance of overriding mandatory rules, as opposed to the corresponding restriction of the scope of public policy, outlines a development likely to reduce outside restrictions by the State on party autonomy, causing public control of private interests to shift inside contractual agreements. As a result, this functional leaning towards overriding mandatory rules appears to be not only a major achievement of the increasing materialization of conflict rules, but also the early outlines of a positive tendency of private international law ‘to lapse back into private law, out of which once it was born’.118

118 CARBONE S.M., Giurisdizione e circolazione dei provvedimenti giudiziari, Intervention to the XXXV Round Table of European Community law: ‘Il diritto internazionale privato comunitario. Un nuovo sistema?’, organized by the Università Cattolica del Sacro Cuore, Milan, 7.5.2004.

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RECOGNITION OF FOREIGN INSOLVENCY PROCEEDINGS: THE RULES THAT A MODERN MODEL OF INTERNATIONAL INSOLVENCY LAW SHOULD CONTAIN Jasnica GARAŠIĆ∗ I. II. III.

IV.

V.

VI.

Introduction Subject of Recognition Precondition for Recognition A. Decision to Open Insolvency Proceedings B. Other Decisions Recognition Proceedings A. Decision to Open Insolvency Proceedings B. Other Decisions One and/or More Insolvency Proceedings A. Particular Proceedings B. Secondary Proceedings C. Delimitation of Insolvency Estates in Various Insolvency Proceedings Conducted Simultaneously against the Same Debtor Individual Legal Effects of Recognition A. Recognition of Foreign Main Proceedings 1. Without Opening Domestic Separate Proceedings a) The Legal Position of a Foreign Insolvency Representative in the State of Recognition b) Permissibility of Domestic Law Suits (Erkenntnisverfahren) c) Permissibility of Domestic Enforcement Proceedings and Domestic Security Proceedings aa) Enforcement in a Narrower Sense bb) Security Proceeding d) Volume of the Insolvency Estate e) Rights of Exclusion (Aussonderungsrechte) and Rights to Separate Satisfaction (Absonderungsrechte) f) Insolvency Law Set-Off g) Current Contracts of the Debtor h) Insolvency Law Avoidance i) Priority Claims and Rank of Satisfaction j) Obligation to Return to the Insolvency Representative and Imputation of Amounts Obtained in Other Proceedings against the Same Insolvent Debtor aa) Satisfaction in Enforcement Proceedings bb) Satisfaction in Other Insolvency Proceedings ∗

Dr. Sc., Assistant Professor in the Department of Civil Procedural Law of the Faculty of Law of the University of Zagreb. The author dedicates this paper to the memory of the very distinguished Professor Dr. Sc. Petar Šarčević. Yearbook of Private International Law, Volume 7 (2005), pp. 333-380 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Jasnica Garašić 2. 3.

VII.

With Opening Domestic Secondary Proceedings The Existence of Domestic Particular Proceedings Opened Prior to the Recognition of Foreign Main Proceedings B. Recognition of Foreign Separate Proceedings Conclusion

I.

Introduction

Globalisation and the ever-increasing internationalisation of the economy over the last 15 years have significantly increased the importance of international insolvency law. Although many international organisations and institutions such as UNCITRAL, the Council of Europe, the International Monetary Fund, the World Bank, the International Bar Association, the American Law Institute, and the Organisation pour l’Harmonisation en Afrique du Droit des Affaires have been working intensively on developing and harmonising this branch of law, many countries have not incorporated it to a sufficient degree, if at all, into their national legal corpus. The existence or non-existence of provisions regulating the recognition of foreign insolvency proceedings and the quality of such provisions in a state’s legislation speak volumes about a particular country’s readiness to cooperate internationally in this area of law, which is of particular significance to the economy. In this paper, the author presents the conclusions reached in her doctoral thesis entitled Anerkennung ausländischer Insolvenzverfahren: Ein Vergleich des kroatischen, des deutschen and des schweizerischen Rechts sowie der Europäischen Verordnung über Insolvenzverfahren, des Istanbuler Übereinkommens und des UNCITRAL-Modellgesetzes.1 As early as 1996, the Croatian legislator regulated issues relating to international insolvency law in great detail in the Bankruptcy Law (hereinafter referred to as BL, Arts 301-335 BL).2 In Germany, after many years of reformist thinking, an Act on the New Regulation of the International Insolvency Law3 was adopted in 2003, amending the Insolvency Code (hereinafter referred to as InsC)4 by adding detailed provisions on international insol1 GARAŠIĆ J., Anerkennung ausländischer Insolvenzverfahren: Ein Vergleich des kroatischen, des deutschen and des schweizerischen Rechts sowie der Europäischen Verordnung über Insolvenzverfahren, des Istanbuler Übereinkommens und des UNCITRALModellgesetzes, Teil 1 (pp. 499) und Teil 2 (pp. 633), Peter Lang, Frankfurt am Main [etc.] 2005. 2 Stečajni zakon, in: official gazette Narodne novine nos. 1996/44, 1999/29, 2000/129, 2003/123. 3 Gesetz zur Neuregelung des Internationalen Insolvenzrechts, in: Bundesgesetzblatt 2003 I pp. 345. 4 Insolvenzordnung, in: Bundesgesetzblatt 1994 I, pp. 2866; most recently amended in: Bundesgesetzblatt 2001 I, pp. 3574, Bundesgesetzblatt 2003 I, pp. 345 and Bundesgesetzblatt 2005 I, pp. 837.

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Recognition of Foreign Insolvency Proceedings vency law to part 11 thereof (§§ 335-358 InsC). As early as 1987, the Swiss legislator was among the first in Europe to regulate the recognition of foreign insolvency proceedings, in Chapter 11 of the Federal Act on Private International Law (hereinafter referred to as PILA, Arts 166-175 PILA).5 After more than 30 years of work on provisions regulating international insolvency law among its member states, the European Union finally adopted an instrument in 2000, in the form of the Regulation on Insolvency Proceedings (hereinafter referred to as the European Regulation, EuInsR, Arts 1-47 EuInsR),6 which entered into force in 2002. In 1990 the European Convention on Certain International Aspects of Bankruptcy (also called the Istanbul Convention – hereinafter referred to as IstCon; Arts 1-44 IstCon)7 was drafted by the Council of Europe and submitted for signature. The Convention is particularly significant for its development of the idea of secondary insolvency proceedings. In order to encourage states to regulate their international insolvency law, in 1997 UNCITRAL developed the Model Law on Cross-Border Insolvency, which was adopted by the General Assembly of the United Nations (hereinafter referred to as Model Law, ML; Arts 1-32 ML).8 Following an analysis of the provisions of the six aforementioned models for regulating international insolvency law, as well as research into the corresponding literature and relevant case law, conclusions were reached in the author’s doctoral thesis which provide an answer to the question of what rules for recognition ought to be contained in a modern model regulating international insolvency law. With the aim of presenting the conclusions reached in her doctoral thesis as thoroughly as possible, and taking into account the prescribed length of this article, the author had no choice but to omit references to various sources in literature and case law that concur or disagree with particular viewpoints. Consequently, the author has only made reference to the corresponding places in the doctoral thesis where such literature and case law are exhaustively cited. To begin, it is necessary to provide several notes regarding different terms used in legislative texts to describe concepts such as main insolvency proceedings, separate insolvency proceedings, particular insolvency proceedings, and secondary insolvency proceedings. For the purposes of this paper, the term main insolvency proceedings is understood as insolvency proceedings opened on the basis of a primary jurisdictional ground, such as the centre of the debtor’s main interests, the centre of the debtor’s business operations, or the debtor’s habitual residence, domiBundesgesetz über das Internationale Privatrecht, in: Bundesblatt der schweizerischen Eidgenossenschaft 1988 I, pp. 5. 6 Council Regulation (EC) No. 1346/2000 of 29 May 2000 on Insolvency Proceedings, in: Official Journal of the European Communities, 2000, L 160, p.1; 2003, L 236, p.1. 7 European Convention on Certain International Aspects of Bankruptcy, in: European Treaty Series/Séries des Traités européens no. 136. 8 Model Law on Cross-Border Insolvency, A/CN.9/442, General Assembly Resolution 52/158 of 15 December 1997, A/RES/52/158 v. 30/1/1998. The text of this Model Law is available at , visited 15 December 2005. 5

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Jasnica Garašić cile or the place of his registered office. As a rule, this term is intended to encompass the debtor’s entire assets, both in the country and abroad. The term separate insolvency proceedings is understood as referring to proceedings opened on the basis of some subsidiary jurisdictional ground, such as the presence of a debtor’s establishment or the debtor’s inland assets alone, which (according to insolvency law in the continental European states) is intended, as a rule, to encompass only the debtor’s assets located in the state where the proceedings were opened. The term particular insolvency proceedings is understood as separate insolvency proceedings which do not presuppose the opening and recognition of foreign main insolvency proceedings, and which are completely independent of such foreign proceedings. Particular insolvency proceedings may be opened both before and after the opening of foreign main insolvency proceedings, should the main insolvency proceedings not have been recognised in the country. Secondary insolvency proceedings are separate insolvency proceedings that presuppose the opening and recognition of foreign main insolvency proceedings, and are, at least in that respect, dependent on them. As a rule, however, they are subordinate to the main insolvency proceedings, based on the rule regarding cooperation and coordination of these two different types of proceedings. Secondary insolvency proceedings may only be opened upon the recognition of foreign main insolvency proceedings.

II.

Subject of Recognition

The following sovereign acts or decisions may be described as direct subjects of recognition in international insolvency proceedings: a) a decision to open foreign insolvency proceedings; b) decisions rendered within already opened foreign insolvency proceedings, and aimed at conducting (course) and concluding (closure) the same; c) decisions rendered outside the framework of foreign insolvency proceedings, but closely connected therewith, i.e. decisions in proceedings initiated with regard to open insolvency proceedings concerning the insolvency estate and the satisfaction of creditors’ claims in insolvency proceedings; d) decisions from previous proceedings, i.e. proceedings which are based on a motion to open insolvency proceedings, and which precede the opening of insolvency proceedings. In order to avoid any possible ambiguity, a modern model of international insolvency law should expressly prescribe which of the above decisions are regarded as possible subjects of recognition, i.e. which of them are subject to insolvency law recognition.9

Unfortunately, of the six models of international insolvency law analysed, only the European Regulation contains express provisions on the aforementioned possible and direct subjects of recognition (Art. 16(1)(1) and Art. 25(1)(1,2,3) EuInsR; see Arts 308, 311, 335 of Croatian BL; Arts 166(1), 173(3), 175 of Swiss PILA; § § 343(1,2), 344 of German InsC; Arts 3, 6 of IstCon; Arts 17, 2(a) ML). 9

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Recognition of Foreign Insolvency Proceedings Due to the fact that the aforementioned sovereign decisions are recognised not for their own sake, but for the legal effects arising in the country where they are recognised, the legal effects may, in fact, be viewed as indirect subjects of recognition in international insolvency law. Basically, these legal effects must always be determined by conflict of laws provisions. In German literature, a distinction is frequently made between effects that should be recognised through the procedural law (so-called verfahrensrechtliche Anerkennung) and those that should be determined by conflict of laws provisions.10 Attempts to find a flawless criterion for differentiating the effects of recognition in this way have not been successful thus far. The issue of determining which effects are suitable for recognition, i.e. which are entailed by the recognition of a foreign decision to open insolvency proceedings, must be clearly distinguished from the question of identifying which law should regulate the effects that should be recognised.

III. Preconditions for Recognition A.

Decision to Open Insolvency Proceedings

A modern model of international insolvency law should take into account only the following preconditions for recognition of a foreign decision to open insolvency proceedings: a) the decision must concern the opening of proceedings qualified as insolvency proceedings; b) the foreign court or organ which has opened the proceedings must be internationally competent to do so; c) the decision to open insolvency proceedings must be effective i.e. enforceable according to the law of the state of opening; and d) this decision must not be contrary to the public policy of the state of recognition. Qualification of proceedings as insolvency proceedings. There are abundant solutions in various legal systems that prescribe how to deal with the problem of a debtor’s insolvency. When qualifying foreign proceedings as proceedings concerning insolvency, it is necessary to proceed from a broader, internationally defined notion of insolvency proceedings, considering not only liquidation procedures but also compulsory settlement and various reorganisation and recovery procedures as insolvency proceedings, and thus suitable for recognition.11

For a detailed review of the discussion in German literature concerning the subject of recognition in international insolvency law, see GARAŠIĆ J. (note 1), vol. 1, pp. 89-98. 11 Such a tendency of recognition can be found in all the models of international insolvency law analysed in this paper (Art. 311(1) of Croatian BL; § 343(1) of German InsC; Art. 166(1) of Swiss PILA; Art. 1(1) EuInsR; Arts 17(1)(a), 2(a) ML), except in the Istanbul Convention, which, unfortunately, provides only for recognition of proceedings which may entail the liquidation of the assets (Art. 1(1)sent.1 of IstCon). 10

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Jasnica Garašić International jurisdiction to open insolvency proceedings. Such jurisdiction, as a precondition for recognition of a foreign decision to open insolvency proceedings (‘indirect international jurisdiction’), may be regulated in several ways: It may be derived by interpretation from provisions on the international jurisdiction of domestic courts with regard to the opening of insolvency proceedings (‘direct international jurisdiction’);12 it may be derived by interpretation from provisions on the local jurisdiction of domestic courts with regard to the opening of insolvency proceedings;13 or there may be a norm on indirect international jurisdiction, which regulates it expressly14. This last solution may be recommended, as it poses the least danger of an incorrect determination of jurisdiction due to inappropriate interpretation. For the sake of fairness and equal treatment of domestic and foreign courts, indirect and direct international jurisdictions should be harmonised.15 The question of whether a foreign court which opened insolvency proceedings according to the law of the state of opening has local jurisdiction has no impact on recognition insofar as this court, pursuant to the law of the state of recognition, has international jurisdiction.16 Both direct and indirect international jurisdiction for the opening of main insolvency proceedings must be defined in such a way that, in every concrete case, the courts (or organs) of only one state have jurisdiction for such opening. The place of the registered office (seat) of a legal person or the domicile or habitual residence of a natural person have not proven satisfactory as criteria for determining international jurisdiction in international insolvency law,17 due to the possibility of being easily transferred to another state in order to avoid or substantially impede the conduct of insolvency proceedings. Therefore, more recent models of international insolvency law have adopted a new criterion for determining international jurisdiction, which is referred to by different names: thus Croatian law speaks of the centre of the debtor’s business operations (Art. 301(1) BL), German law speaks of the centre of the debtor’s independent economic activity (§ 3(1)sent. 2 InsC), while the European Regulation, Istanbul 12

E.g. Croatian legislation (Arts 301, 302 BL) and European Regulation (Art. 3

EuInsR). E.g. German legislation (§ 3 InsC). E.g. Model Law (Arts 17(2)(a,b), Art. 2(b,c) ML), Istanbul Convention (Art. 4 IstCon) and Swiss law (Art. 166(1) PILA). 15 Unfortunately, indirect and direct international jurisdictions to open insolvency proceedings do not harmonise in Model law (see Arts 17(2)(b), 28. ML). 16 If a decision to open insolvency proceedings is rendered by an organ which is not a court in the narrow sense, then the court of the state of recognition which is a member to the European Convention on the Protection of Human Rights and Fundamental Freedoms must examine whether this organ fulfils the requirements referred to in Article 6 of the Convention. This article regulates the necessary minimum procedural standards in proceedings deciding on civil rights: in essence regarding the court i.e. organ, it must be an independent and impartial tribunal established by law, i.e. the decision of the organ deciding on civil rights must be subject to examination by a court/organ fulfilling the requirements set forth in Article 6 of the Convention. 17 Unfortunately, Swiss law prescribes such a solution (Art. 166(1) PILA). 13 14

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Recognition of Foreign Insolvency Proceedings Convention and UNCITRAL Model Law speak of the centre of the debtor’s main interests (Art. 3(1)sent. 1 EuInsR; Art. 4(1)sent. 1 IstCon; Art. 17(2)(a) in connection with Art. 2(a) ML). Determination of the place or state where this new criterion for the establishment of jurisdiction exists may, in specific cases, facilitate rules that refutably presume that this is the place or state of the debtor’s registered office, domicile or habitual residence.18 Since this new criterion is still not commonly applied in autonomous national bodies of law, problems may arise when the state of recognition provides for this criterion, while the state where this new criterion in the concrete case exists does not provide for the possibility of opening insolvency proceedings based thereon, but rather defines as a criterion the debtor’s seat (the place of the registered office) or domicile/habitual residence, which, in this concrete case, is in a third country. This problem may be solved in such a way that the state of recognition nonetheless recognises the international jurisdiction of the court of the state where the debtor’s seat (the place of the registered office) or domicile/habitual residence is situated, if this court opened insolvency proceedings.19 However, the essential problem connected with this new criterion for determining jurisdiction lies in the fact that its content has not been sufficiently defined, thus creating difficulties in its application. In any case, when determining jurisdiction, where the seat of administration is located and where the debtor’s affairs are administered from should not be the sole decisive criteria. Such a seat may be transferred across a border more easily than a place of the registered office, and therefore is much more subject to manipulation, to the detriment of the creditors. In that respect, it should be noted that the practice of British courts in the application of the European Regulation does not seem appropriate. Namely, when the seat of a parent-company is in the United Kingdom, these courts consider themselves internationally competent for opening insolvency proceedings concerning an insolvent subsidiary if the parent-company manages its affairs, even in the case where the subsidiary is registered in another member state of the European Union, and most of the subsidiary’s assets and creditors are located in that other state.20 There can be no doubt that, in order to ensure legal security, the centre of the debtor’s main interests or economic activity should be determined based on elements known to the debtor’s creditors, since the dominant conflict of laws norm in international insolvency law is the applicability of the lex fori concursus. Specific elements for determining international jurisdiction on basis of the centre of debtor’s main interests have still not been found. In particular, when dealing with autonomous international insolvency law, the effects of seizure of an insolvent debtor’s assets, as the result of insolvency proceedings based on the debtor’s establishment (branch ofThe corresponding rules are provided for in Croatian law (Art. 301(1)sent.2 BL), in the European Regulation (Art. 3(1)sent.2 EuInsR), in the Istanbul Convention (Art. 4(1)sent.2 IstCon) and in the Model Law (Art. 16(3) ML). 19 Such a solution is provided for in Croatian law (Art. 301(1)sent.3 BL). 20 For more, see PAULUS C., ‘Zustandigkeitsfragen nach der Europäischen Insolvenzverodnung, Zugleich Besprechung High Court of Justice Leeds, Beschl. v. 16.5.2003 – No 861-876/03, ZIP 2003, 1362’, in: Zeitschrift für Wirtschaftsrecht 2003/38, pp. 1725-1729. 18

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Jasnica Garašić fice) or on his assets only, should not cross the border of the state where the insolvency proceedings were opened, for in such a case the connection with the debtor’s assets abroad is not close or strong enough. With regard to separate insolvency proceedings (both particular and secondary), the modern model of international insolvency law should prescribe international jurisdiction based not only on the debtor’s establishment but also based on his assets alone, so as to make it possible for the proceedings to accomplish whichever of their various functions are needed in the case at hand.21 Efficacy and enforceability of a decision on opening insolvency proceedings. By its very nature, the recognition of a foreign decision in another state may only occur if the decision also has legal effects in the state where it was made. In order to protect insolvent assets, it is not necessary to require the finality (Rechtskraft, res iudicata) of a foreign decision opening insolvency proceedings.22 No contrariety to the public policy of the state of recognition. When applying the public policy clause in international insolvency law, it is necessary first to examine whether a (correct or incorrect) application of substantive or procedural law in foreign proceedings prior to the opening of insolvency proceedings leads to a result that is contrary to the public policy of the state of recognition. If contrariety to public policy is established, recognition of the decision to open insolvency proceedings will be rejected. If it is not established, then it is necessary to examine further whether, in the case of hypothetical recognition of the decision to open insolvency proceedings, the resulting legal effects (without any additional decision by a foreign court or any other organ being necessary) would lead to a result which is contrary to the public policy of the state of recognition. In the process of this further examination, the relevant public policy clause will have the weight of a real precondition for recognition only if it is established that these legal effects are indeed contrary to the public policy of the state of recognition, such that it is necessary to deny recognition to a foreign decision opening insolvency proceedings in 21 The Istanbul Convention leaves the question of the permissibility of particular insolvency proceedings and determining jurisdiction for opening them to its member states (Art. 14(1), IstCon). All the other models analysed allow the opening of particular proceedings based on the presence of an establishment. According to the Croatian and German laws, in some particular situations it is possible to open such proceedings on the basis of a debtor’s assets only. In all the models analysed, it is possible to open secondary insolvency proceedings based on the presence of an establishment, while according to the Croatian, German and Swiss laws, as well as the Istanbul Convention (Chapter III) and the Model Law, secondary proceedings may be opened on the basis of a debtor’s assets only, but with certain particular differences according to the individual source of law. See: Art. 302(1,2) of Croatian BL; § § 354(1,2), 356(1) of German InsC; Arts 166(1,2), 170(1) PILA and Art. 50(1) of Swiss Bundesgesetzes über Schuldbetreibung und Konkurs (hereinafter referred to as SchKG); Arts 3(2,3,4), 27 EuInsR; Arts 14(1), 11(1)sent.2,3, and Art. 16 IstCon; Arts 28, 29(a/i, a/ii, b/i, b/ii) ML. 22 The efficacy and enforceability of a foreign decision on opening insolvency proceedings as a precondition for recognition is expressly provided for in Croatian law (Art. 311(1)(2) BL), Swiss law (Art. 166 (1)(a) PILA), the European Regulation (Art. 16(1)sent.1 EuInsR) and the Istanbul Convention (Art. 3(b) IstCon).

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Recognition of Foreign Insolvency Proceedings its entirety. In practice, the most common situation is one in which only some of the effects of a foreign decision will not be recognised due to their contrariety to domestic public policy, while the decision to open insolvency proceedings itself will be recognised.23 The rule that the public policy clause should be applied very carefully and strictly also holds in the area of international insolvency law. If, in a concrete case, insolvency proceedings in the state of opening are used for purposes of confiscation or expropriation or the achievement of some other statist goal, then the problem of qualifying the proceedings does not exist. Here it is a question of an abuse which, as a rule, will be contrary to the public policy of the state of recognition.24 Other preconditions for recognition. Apart from those previously mentioned, a modern model of international insolvency proceedings should not prescribe any other preconditions for recognition, so as not to make international judicial cooperation in this economically highly important field of law any more difficult. This applies particularly to requests for reciprocity, which should not be made within the scope of international insolvency law.25 The existence of separate domestic insolvency proceedings should not present an obstacle, in international insolvency law, to the recognition of a foreign decision on the opening of main insolvency proceedings and its effects on assets of the debtor (property, rights and interests of the debtor, tangible or intangible, movable or immovable) which, from the point of view of the state of recognition’s law, pertain to the insolvency estate of the foreign main insolvency proceedings. Likewise, the existence of main or separate domestic insolvency proceedings should not be an obstacle to recognition of a foreign decision on the opening of separate insolvency proceedings and its effects on the debtor’s assets which, from the point of view of the state of recognition’s law, pertain to the insolvency estate of the foreign separate proceedings.

The public policy clause as a precondition for recognition is set forth in Article 311(1,2) of Croatian BL, Arts 166(1), 27 of Swiss PILA, § 343(1)(2) of German InsC, Art. 26 of the European Regulation, Arts 3(c), 14(2)(b) of the Istanbul Convention, and in Arts 17(1), 6 ML. 24 In theory, opinions on this are divided. For more regarding particular authors, see GARAŠIĆ J. (note 1), vol. 1, p. 225, fn. 490 and 491. 25 Differing from Croatian (Art. 311(1,2,3) BL) and German law (§ 343(1) InsC), and the Model Law (Art. 17(1,2) ML), Swiss law prescribes reciprocity as a precondition for recognition (Art. 166(1)(c) PILA). However, in Swiss theory and practice there has been an attempt to modify this requirement by way of interpretation. For more, see GARAŠIĆ J. (note 1), vol. 1, pp. 213-215. The European Regulation and the Istanbul Convention likewise do not prescribe reciprocity as a precondition for recognition. Reciprocity is optimally guaranteed for states in which the European Regulation applies, and the same will be the case for member states to the Istanbul Convention when it eventually enters into force. – On arguments against applying the request for reciprocity in international insolvency law, see GARAŠIĆ J. (note 1), vol. 1, p. 216. 23

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Other Decisions

A modern model of international insolvency law should also contain preconditions for the recognition of decisions which, after foreign insolvency proceedings have been opened, are made in these same proceedings for the purposes of conducting and concluding them.26 Essentially, all such decisions should be subject to the same preconditions for recognition as a decision to open proceedings, as well as an additional precondition, namely, that the decision to open proceedings where these decisions were rendered (brought) has been recognised. In addition, any decision on distribution of insolvent assets and satisfying creditors’ claims should be final, valid (‘rechtskräftig’), due to its central importance in insolvency proceedings. Given that limitations on freedom and postal privacy are related to fundamental human rights (generally constitutional rights), a modern model must expressly stipulate whether and under what circumstances a decision rendered in foreign insolvency proceedings and limiting such rights may be recognised in the country. Furthermore, it is necessary to strictly regulate the possibility of and preconditions for recognising decisions in ‘preliminary’ proceedings, in which it is determined whether there is a reason for opening insolvency proceedings. This is required by the need to protect the insolvency estate. Essentially, such foreign decisions should be subject to the same preconditions for recognition as a foreign decision on opening insolvency proceedings. Finally, it must be clearly regulated under which preconditions decisions rendered external to foreign insolvency proceedings, but closely connected thereto, may be recognised, i.e. decisions in proceedings initiated with regard to insolvency proceedings that concern the insolvency estate and satisfaction of an insolvent debtor’s creditors.27 As a rule, the same preconditions should apply for recognition of these decisions as are required for recognition of a foreign civil court decision: finality (res iudicata), the ability of a party to participate in the proceedings where the decision was rendered, no contrariety to the public policy of the state of recognition, the lack of a domestic decision or previously-recognised foreign decision regarding the same matter, the absence of pending domestic proceedings on the same matter (lis pendet), and the international jurisdiction of the court or organ which made the decision. A request for reciprocity should not be deemed a precondition for recognition. As an additional precondition for recognition of such decisions, the prior recognition of the decision to open insolvency proceedings due to which the given decision was rendered should be required, at least incidentally. At For example, a decision on appointing and dismissing an insolvency representative, a decision on the establishment, appointment or dismissal of a member of a board of creditors, a decision on remuneration or a fee for an insolvency representative or a member of a board of creditors, a decision on the confirmation of an insolvency plan or settlement, or a decision on the conclusion of insolvency proceedings. 27 For example, a civil court decision on the existence and amount of a disputed claim, a civil court decision based on an action challenging an insolvent debtor’s legal actions, or a civil court decision in an action concerning a contract concluded by a debtor prior to the opening of insolvency proceedings. 26

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Recognition of Foreign Insolvency Proceedings the same time, there must also be an express provision on indirect jurisdiction for such decisions, which clearly sets forth whether foreign vis attractiva concursus should be recognised or not. The simplest and most practical solution would be that preconditions for recognising such decisions be prescribed by the same act which regulates recognition of foreign insolvency proceedings.28

IV. Recognition Proceedings A.

Decision to Open Insolvency Proceedings

One of the fundamental questions in international insolvency proceedings is whether, with respect to the recognition of a foreign decision to open insolvency proceedings, we should opt for a system of automatic recognition as a rule, or for a system of generally required formal recognition proceedings.29 In a system of automatic recognition, the day of opening of foreign insolvency proceedings is, at the same time, also the day of its recognition in the country which has opted for this particular system. In principle, the insolvency representative (liquidator, trustee) can also dispose of and administer the insolvency estate immediately in the country of recognition. In this system, the burden of examining the preconditions for recognition lies, in fact, on those legal subjects (debtors and creditors of the insolvent debtor, third parties) who within the country enter into contact with a foreign insolvency representative. Namely, a foreign insolvency representative may dispose of and administer a debtor’s assets within the country, provided that all the preconditions for recognition have been fulfilled. This system, therefore, requires that legal subjects be familiar not only with all the preconditions for recognition, but also with the insolvency law of the state of opening, so as to be capable of establishing that the effects of the decision on opening are not contrary to the public policy of the state of recognition. Legal subjects in the economic sphere do not actually possess such broad knowledge. This is particularly the case where more remote countries, with which business relations are not frequent, and whose legal orders are not similar to the domestic one, are involved. Such legal subjects could possibly request a legal opinion on recognition of the concrete foreign insolvency proceedings, yet the question arises as to For more details on preconditions for recognition of a foreign decision to open insolvency proceedings and for recognition of other decision in connection with an foreign insolvency proceedings in the six models analysed see GARAŠIĆ J. (note 1), vol. 1, pp. 117258. 29 German law (see § 335-358 InsC), the European Regulation (see Art. 17(1) EuInsR) and the Istanbul Convention (see Arts 6-15 IstCon) have opted for a system of generally automatic recognition. Croatian law (see Arts 308-317 BL), Swiss law (see Arts 166175 PILA) and the Model Law (see Arts 15-24 ML) have opted for a system of generally required separate formal recognition proceedings. 28

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Jasnica Garašić who would bear the costs for this legal opinion. In addition, in countries where international insolvency law has not yet been developed, there are not many legal experts capable of producing such an opinion. There is also the question of liability for indemnification where a legal subject delivers a local thing belonging to an insolvent debtor to a foreign representative, not knowing that the preconditions for recognition have not been fulfilled. In this system, the preconditions for recognition of a foreign decision to open insolvency proceedings may be examined only incidentally in domestic court proceedings, such as a lawsuit between a foreign insolvency representative and an insolvent debtor’s domestic debtor, or if there is an intention to open domestic secondary proceedings, or if a foreign decision to open insolvency proceedings is pronounced enforceable in domestic proceedings. In court proceedings where the preconditions for recognition of a foreign decision to open insolvency proceedings are examined only incidentally, it is possible that the courts will arrive at controversial conclusions regarding the existence thereof, and this will not enhance legal security in the state of recognition. Indeed, a decision on the existence of preconditions for recognition which is made only incidentally has an effect solely inter partes, and not erga omnes. Furthermore, since a foreign insolvency representative in this type of system is authorised to act immediately in the state of recognition, there is a risk that he will transfer objects or things constituting the insolvency estate and located in the state of recognition to the state where insolvency proceedings were opened. This could prevent the opening of secondary proceedings in the state of recognition by interested creditors of the insolvent debtor’s. On the other hand, if secondary proceedings are subsequently opened in the state of recognition, the applicable law with regard to a debtor’s assets belonging to the insolvency estate and located in the state of recognition will be the insolvency law not of the state where the main insolvency proceedings were opened, but rather that of the state of recognition, where these secondary proceedings were opened. In other words, this will result in a change of statutes, and so, if two insolvency laws differ as to their effects, a number of very difficult legal questions may arise: Does the right of a creditor to separate satisfaction of his claim from the value of the specific object, thing or right of a debtor’s assets (Absonderungsrechte), which ceased to exist, revive? Does the realized creditor’s right of exclusion of a specific object, thing or right from the insolvency estate, based on proof that this specific object, thing or right doesn’t belong to the insolvency estate, due to a creditor’s material or personal right (Aussonderungsrechte), lose its effect? What happens with the insolvency set-off and with the insolvency avoidance of debtor’s act detrimental to all the creditors, which have been carried out? Should everything received on the basis of partial distribution be returned? Which of the two insolvency estates will settle obligations of the insolvency estate, which came into existence prior to the opening of secondary proceedings? With regard to the aforementioned issues, and in particular to autonomous international insolvency law applying to all states in cases where there are no bilateral or multilateral agreements, it seems that, at present, when the insolvency laws of individual states still vary to a large degree, it would be more correct to opt for a system of generally required formal recognition proceedings, that is, as a rule, required. In this system, the preconditions for recognition are examined by the court 344

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Recognition of Foreign Insolvency Proceedings as the main issue, whereby the effect of a decision on recognition is erga omnes. Namely, with regard to the aforementioned large differences in the insolvency law of individual states,30 and due to the fact that the dominant choice-of-law rule concerning international insolvency is the lex fori concursus, it seems desirable that the effects of a foreign decision to open insolvency proceedings be examined from the standpoint of contrariety to the public policy of the state of recognition. It is also desirable to examine whether the court that opened insolvency proceedings has international jurisdiction, as this has a direct impact on the applicable law, and is thus tied to legal predictability and the legal certainty of an insolvent debtor’s creditors. The defects of this system should be alleviated by careful creation of provisions regulating formal recognition proceedings. A state that has opted for a system of formal recognition proceedings must leave open the possibility of incidental recognition of a foreign decision to open insolvency proceedings in all cases where such recognition is more acceptable. This is for example the case when only one lawsuit or enforcement procedure, where the authority of a foreign insolvency representative is in question, is being conducted in the state of recognition, and in the country there are no other creditors of an insolvent debtor nor other objects, things or rights belonging to a foreign insolvent debtor, apart from those which are subject to such civil law or enforcement proceedings. Provisions regulating formal recognition proceedings must be such as to enable a correct and expeditious recognition decision. Legislation regulating international insolvency law and the corresponding proceedings should determine which courts have subject-matter jurisdiction over recognition proceedings. Designated courts should be those which are otherwise competent for domestic insolvency proceedings, and are familiar with the subject. In addition, this legislation must expressly specify the content of a motion for recognition and what documents must be submitted, in order to avoid any misunderstandings and loss of time. For the same reasons, legalisation of the documentation should not be required. Apart from the insolvency representative, creditors should also be authorised to submit a motion for recognition.31 The insolvent debtor himself should also be authorised to do so, under the precondition that he have a legal interest and be entitled to request the opening of insolvency proceedings according not only to the insolvency law of the state of opening, but also of the state of recognition. In order to protect the insolvency estate, it is necessary to anticipate the possibility of defining security measures during the course of the recognition proceedings. One such measure should be a prohibition on conducting enforcement 30 The question arises as to what extent and when the insolvency laws of individual states will begin to be harmonised pursuant to the Legislative Guide on Insolvency Law developed by UNCITRAL. This Guide was adopted at 37th session of UNCITRAL on 14-25 June 2004, A/59/17, and approved by the General Assembly of the United Nations, A/RES/59/40. Text of this Legislative Guide is available at , visited 15 December 2005. 31 Unfortunately, under the Model law only insolvency representative is authorised to submit a motion for recognition (Art. 15(1) ML).

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Jasnica Garašić proceedings.32 Automatic (ex lege) staying enforcement proceedings and security proceedings to which an insolvent debtor is a party, as well as statutorily prohibiting the initiation of such proceedings in the course of recognition proceedings, would be of interest in all cases where a person entitled to request such temporary measures, or the court authorised ex officio to impose them, are not aware of all enforcement proceedings or security proceedings of the debtor pending in the country. The law should prescribe in advance who is authorised to participate in recognition proceedings. In principle, this should include all those whose rights are affected by a decision on (non-)recognition. It is sufficient for the participants in the proceedings to be given an opportunity to declare in writing their position regarding recognition. Courts should also be empowered to hear persons who have declared themselves in writing as being against recognition. The time limit for a written declaration should be a short one. Besides this, the task of the court deciding on recognition should be limited to examining whether, in a concrete case, statutory preconditions for recognition exist. ‘Révision au fond’ of a foreign decision to open insolvency proceedings should be excluded. It is not sufficient for the law to prescribe that notices regarding a motion for the recognition of a foreign decision to open insolvency proceedings be delivered only to known participants in recognition proceedings. It should also prescribe publication of the motion in the state of recognition’s official gazette, since it is possible that there are unknown creditors of the insolvent debtor. A court decision on (non-)recognition of a foreign decision on insolvency proceedings must be effective over the entire territory of the state of recognition, and must have an effect erga omnes. At the same time, it must contain an enforceability clause against the insolvent debtor. The recognition of a foreign decision to open insolvency proceedings should not automatically entail opening of domestic secondary insolvency proceedings.33Such a solution is impractical in cases where there are insufficient assets to carry out such proceedings in the state of recognition, or where there are no creditors to be protected by opening such proceedings. However, if an intention to open secondary insolvency proceedings exists, it should be prescribed that their opening may, as a rule, only be ordered in a decision on the recognition of a foreign decision to open insolvency proceedings, assuming of course, that an authorised person has submitted such a motion, and if other preconditions for their opening have been met. Namely, if a legislator permits the opening of secondary proceedings at a later point in time after recognition proceedings,34 then it would be in It is not clear, whether a prohibition on conducting enforcement proceedings could be imposed in a Swiss regocnition proceedings according to Art. 168 PILA. The prevailing opinion in Swiss literature denies this possibility. See GARAŠIĆ J., (note 1), vol. 1, pp. 280281. 33 Unfortunately, according to Swiss law, recognition of a foreign decision on opening insolvency proceedings necessarily entails the opening of domestic secondary proceedings (Art. 170(1) PILA). 34 Unfortunately, such a possibility is foreseen in Art. 28 ML. 32

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Recognition of Foreign Insolvency Proceedings a system of a formal recognition proceedings also possible, for the insolvency representative in foreign insolvency proceedings to transfer the things from the insolvency estate from the state of recognition in the state of opening, thus making the opening of domestic secondary proceedings impossible. Or, if domestic secondary proceedings were really opened at a later point in time (after recognition of foreign main proceedings), a change of statutes would occur with respect to the debtor’s assets contained in the insolvency estate in the state of recognition, since, instead of the previous foreign lex fori concursus, the domestic lex fori concursus would now be valid for these assets. In other words, the court should specify in its decision on recognition whether this concerns recognition of a foreign decision without the opening of domestic secondary proceedings, or whether, in a concrete case, recognition is to be followed by the opening of such domestic proceedings. In this latter case, the decision on recognition also has the legal effect of the decision on opening of insolvency proceedings.35 The (non-)opening of domestic secondary proceeding really should depend on the circumstances of the concrete case. In a system of generally required formal proceedings, it is extremely important to appropriately regulate the time between the opening of foreign insolvency proceedings and their domestic recognition. Indeed, there is a great danger that the insolvent debtor’s assets which are located in the state of recognition during that period of time may be decreased by the debtor’s disposal thereof, or by enforcement proceedings conducted by his creditors. Therefore, it is very important at least to prescribe that, during this period of time, any satisfaction made in domestic enforcement proceedings against the foreign insolvent debtor, as well as the resulting rights of creditors to separate satisfaction of their claims from the value of the specific object, thing or right of debtor’s assets, be without effect. Likewise, it should be prescribed that, during this period of time, any disposals undertaken by the insolvent debtor and any obligation honoured to the benefit of a debtor instead of an insolvency representative, as well as any offsetting, be without effect – at the same time protecting the bona fides of the opposing party.36 Moreover, decisions on recognition of a foreign decision to open insolvency proceedings should be published. A remedy against decisions on recognition or non-recognition should be also prescribed; however, this should not have an effect of suspension. The issue of bearing the costs of recognition proceedings should also be expressly regulated. Given that the United States has recently incorporated the UNCITRAL Model Law on Cross-Border Insolvency into its law,37 it is to be expected that an increasing number of countries will follow suit. This also means in all probability Such a solution is foreseen in Croatian law (Art. 315 (2,3) BL). Such solutions are foreseen in Croatian law (Arts 320-323 BL). 37 On 17 October 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act entered into force, through which the USA got a new international insolvency law. For more details see PAULUS C., ‘Das neue internationale Insolvenzrecht der USA’, in: Neue Zeitschrift für das Recht der Insolvenz und Sanierung 2005/8, pp. 439-441; RÜFNER T., ‘Neues internationales Insolvenzrecht in den USA’, in: Zeitschrift für Wirtschaftsrecht 2005/42, pp. 1859-1865. 35 36

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Jasnica Garašić an increasing number of states where autonomous international insolvency law provides for a system of generally required formal recognition proceedings.38

B.

Other Decisions

The means of recognising decisions rendered in insolvency proceedings once they have been opened, and for the purpose of conducting these proceedings and bringing them to a conclusion, must also be regulated by law. It is worth considering it is a good idea to prescribe the automatic recognition of decisions not containing an enforcement clause, even in a legal order which has opted for a system of generally required formal recognition proceedings regarding the decision to open insolvency proceedings itself. Indeed, conducting formal proceedings for every decision rendered in insolvency proceedings, even those not containing an enforcement clause, would create too many costs and require an undue amount of time. Legislation regulating international insolvency law should also expressly determine the means of recognising decisions rendered outside foreign insolvency proceedings but in close connection therewith, i.e. decisions in proceedings initiated due to open insolvency proceedings and related to the insolvency estate and satisfaction of an insolvent debtor’s creditors. In legal orders where a system of generally required formal recognition proceedings has been adopted, it would be practical to prescribe that the same court which decides on recognition of a foreign decision to open insolvency proceedings should also decide on recognition of all aforementioned decisions for which formal recognition proceedings are foreseen. In recognising a decision to open insolvency proceedings this court will already have become familiar with the insolvency law of the state of opening. The means of recognising decisions rendered in ‘preliminary’ proceedings, i.e. those which precede the opening of insolvency proceedings, must also be expressly regulated. In order to observe the principle of efficacy, the same court that decides on recognition of any such decisions should also be competent for recognition of a subsequently rendered decision to open insolvency proceedings, decisions rendered in insolvency proceedings itself, and decisions in proceedings initiated with regard to already opened insolvency proceedings.

38 Apart from the USA, the Model Law has been adopted by the following countries so far: Eritrea, Japan, Mexico, Poland, Romania, South Africa, within Serbia and Montenegro Montenegro, the British Virgin Islands, overseas territory of the United Kingdom of Great Britain and Northern Ireland. Information is available at , visited on 15 December 2005. For more details on recognition proceedings, authors and arguments for and against separate, formal recognition proceedings, and proposals for formal recognition proceedings, see GARAŠIĆ J. (note 1), vol. 1, pp. 259-320.

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V.

One and/or More Insolvency Proceedings

In the literature on international insolvency law, there are no longer extended discussions as to whether it is correct to allow several simultaneous insolvency proceedings against the same debtor (i.e. the main proceedings and one or more separate proceedings, either particular or secondary). Today, a more frequent subject of discussion is whether the disadvantages of several simultaneous proceedings against a debtor may be alleviated by organising and regulating separate proceedings. All modern models of international insolvency proceedings allow the possibility of conducting separate proceedings.39

A.

Particular Proceedings

Particular proceedings have an important additional or substitutional function in the following cases: when main proceedings in a foreign state whose court is competent pursuant to its domestic law cannot be opened due to conditions contained in the relevant foreign law (e.g. differently defined international jurisdiction), although an insolvency ground does exist; when the main proceedings have been opened but, pursuant to the law of the state of opening, these encompass only assets located in that state; when the main proceedings cannot be recognised due to contrariety to the public policy of the state of recognition. The possibility of opening particular proceedings is aimed at preventing a race among creditors to conduct enforcement proceedings regarding a debtor’s assets in a state which does not have primary jurisdiction for opening insolvency proceedings, as well as to prevent actions by an insolvent debtor that could be harmful to his creditors. For such cases, international jurisdiction to open particular proceedings based on a domestic debtor’s establishment but also based solely on an insolvent debtor’s assets in the country should be prescribed.40 Particular proceedings should only pertain to an insolvent debtor’s assets which, at the moment proceedings are opened, are located (or should be located in cases of insolvency law avoidance of debtor’s acts detrimental to insolvency creditors) in the state of opening, since the connection with the debtor’s assets abroad is too weak. The insolvency estate should include the debtor’s entire domestic assets.41

See note 21. Of the six models analysed, only Croatian law (Art. 302(2)(1,2,3) BL) and German law (§ 354(2) InsC) provide for the possibility of opening particular proceedings based on an insolvent debtor’s assets. 41 According to the prevailing opinion in Swiss literature, particular proceedings opened pursuant to Article 50 SchKG, based on a debtor’s establishment, include only those assets which can be ascribed to this establishment. For more details on this issue, see GARAŠIĆ J. (note 1), vol. 1, pp. 362-363. 39 40

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Jasnica Garašić Essentially, such particular proceedings should not be an obstacle to recognition of a foreign decision to open main or separate (particular or secondary) proceedings, since, apart from the effect of seizure of an insolvent debtor’s assets under insolvency law, there are also other effects of opening insolvency proceedings, for which recognition of a decision to open them may prove necessary. Clear rules should be developed for delimitating insolvency estates of individual proceedings. With regard to a situation in which recognition of a foreign decision to open main proceedings occurs after domestic particular proceedings have been opened, a rule should be provided whereby domestic particular proceedings are rendered secondary to the extent permitted by the current stage of the particular proceedings. The rules on cooperation and coordination applicable to main and secondary proceedings would thus also apply in this situation.42 Grounds for opening insolvency proceedings should also be expressly defined. In addition, the issue of whether insolvency grounds are defined only in relation to assets in a country, or rather in relation to the debtor’s entire assets (world-wide), should be resolved. A modern model of international insolvency law should also expressly prescribe who is authorised to propose the opening of particular proceedings. In situations where particular proceedings have an additional and substitutional function, the right to submit such a proposal should be granted to all creditors of an insolvent debtor, as well as to the debtor himself. In situations where the opening of main proceedings suitable for recognition is possible, it would be desirable, in order to avoid abuse, to limit the right to submit a proposal for opening particular proceedings solely to creditors, particularly those whose registered office or domicile/habitual residence is in the country, or whose claims are based on activities by a debtor’s establishment (branch office).43 Another precondition for opening such proceedings is that the debtor’s assets pertaining to the insolvency estate be sufficient to cover the costs thereof. The exclusion of any kind of creditor from participation and satisfaction in these proceedings is unacceptable, since all of the debtor’s domestic and foreign assets guarantee each of his obligations.44 Rules regarding the inclusion (imputation) of what a creditor may have already received on account of his claims in main or other separate insolvency proceedings, or in enforcement proceedings abroad against the same debtor, should also apply in the case of particular proceedings.

Of the six models analysed, only Croatian law (Art. 318(1,2) BL) and the European Regulation (Art. 36 EuInsR) contain such a rule. 43 Compare Art. 3 (4)(b) EuInsR. 44 Unfortunately, in proceedings opened according to Art. 50 of the Swiss SchKG, only creditors whose claims have accrued on the account of a Swiss establishment may participate and obtain a satisfaction. For more details on the advantages and disadvantages of regulating particular proceedings in the individual models analysed, and a review of the corresponding literature and practice, see GARAŠIĆ J. (note 1), vol. 1, pp. 321-495. 42

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Recognition of Foreign Insolvency Proceedings B.

Secondary Proceedings

There are situations in which it is better, with regard to the insolvency estate of foreign main proceedings and all creditors, to conduct secondary proceedings. For example when the law of the state of recognition in which secondary proceedings are to be opened is more favourable to the insolvency estate; or when it is simpler to conduct proceedings concerning a domestic debtor’s establishment in accordance with domestic insolvency law and with the involvement of local insolvency law organs, rather than to familiarise the foreign insolvency representative with the insolvency law of the state of recognition; or when, in general, it is simpler and cheaper to conduct several proceedings concerning the nature of the assets and legal relations, rather than single, integral proceedings. In such a situation, secondary proceedings have what is called a supporting function. Due to all these possible situations, it is necessary that a modern model of international insolvency law provide for the possibility of opening secondary proceedings based not only on the presence of an establishment, but also based on the debtor’s domestic assets alone.45 Secondary proceedings should concern only those assets of the debtor which, at the moment the proceedings are opened, are located, or ought to be located, within the country, for the same reasons as in the case of particular proceedings.46 The debtor’s insolvency estate should include all of his domestic assets. The possibility of conducting particular and secondary proceedings in the same country simultaneously should be excluded, as this is not cost-effective, and there is rarely an insolvency estate that would require the conducting of two insolvency proceedings.47 Domestic secondary proceedings limited to domestic assets only should not pose an obstacle to recognition of a decision to open foreign particular or secondary proceedings. The existence of insolvency grounds need not be examined and determined when opening secondary proceedings, because a recognised foreign decision to open main proceeding in fact functions as an insolvency ground. The insolvency ground justifying the opening of foreign main proceedings does not need to be prescribed by the law of the state of recognition where secondary proceedings have been opened. In order to achieve the supporting function of secondary proceedings, it is necessary that the insolvency representative in the main proceedings have the authority to propose the opening of secondary proceedings. Of the six models analysed, only the European Regulation does not permit the opening of secondary proceedings based solely on a debtor’s domestic assets (Art. 3(2) EuInsR). The existence of a debtor’s establishment (branch office) is required. 46 Unfortunately, the Model Law provides for the possibility that, under particular conditions, secondary proceedings can also encompass an insolvent debtor’s assets abroad (Art. 28 ML). 47 Unfortunately, Swiss law provides for possibility of simultaneous conducting of domestic particular and secondary proceedings in the country (Art. 166(2) PILA). 45

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Jasnica Garašić However, secondary proceedings may also have what is called a protective function, in that the domestic lex fori concursus is applied in secondary proceedings. By opening them, the legal positions of domestic creditors are, as a rule, ensured in terms of their right to participate in the proceedings, the possibility to realise their secured claims according to domestic law, and their right to preferential satisfaction as well as with regard to rules applying to the avoidance of an insolvent debtor’s harmful legal actions. These legal positions might not be realised, or might be jeopardised, in foreign main proceedings in a concrete case. The protective function of secondary proceedings should not be abused and, therefore, the right to propose the opening of domestic secondary proceedings should not be granted to every creditor without limitation. The right to submit a proposal to open secondary proceedings should certainly be granted to domestic creditors with public law claims (e.g. tax claims) and domestic social security authorities (Sozialversicherungsträger), regardless of whether their claims are preferential under domestic insolvency law. According to the prevailing practice in most states, these creditors would not be able to satisfy their claims in foreign proceedings. The right to propose secondary proceedings should also be granted to workers whose habitual place of work is located in the state of recognition, so that their legal position under domestic law in the case of foreign insolvency proceedings is protected for reasons of social policy. It is indeed possible that, according to foreign insolvency law, their claims would not be privileged as they would be in domestic insolvency law, or that, in the case of an employer’s insolvency, a foreign country, as opposed to the domestic one, would not be aware of any system of insuring workers via payment of a corresponding sum of money. Besides this, workers usually belong in the group of small creditors, for whom the auxiliary function of secondary proceedings is realised. By opening secondary proceedings, this group of creditors, who usually do not have sufficient professional or linguistic knowledge nor the financial means to participate in foreign insolvency proceedings, are given an opportunity to participate in domestic insolvency proceedings and thus, at least in part, satisfy their claims. On the other hand, there are cases in which the number of creditors with public law claims or of social security authorities and workers is not large, and the amount of their claims is small, so that automatically opening secondary proceedings on their proposal would seem impractical, uneconomical, and harmful to the creditors as a whole. Therefore, for these categories of creditors, the special right to satisfaction from a debtor’s domestic assets might additionally be foreseen. This could be realised via an exemption from the prohibition on conducting enforcement proceedings, which is set into motion by recognition of a foreign decision to open main proceedings. In this case, these creditors would have a legal interest in opening domestic secondary proceedings only if a debtor’s domestically disposable assets were not sufficient to satisfy their claims. However, if secondary proceedings were to be opened, their value would increase in that articles and objects of value would have to be returned to the insolvency estate should the debtor have undertaken any avoidable (refuting) actions with regard to his domestic assets, or if completed satisfaction within domestic enforcement proceedings would cease to be effective due to subsequently opened secondary proceedings, such that the materialised amount would have to be returned to the insolvency es352

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Recognition of Foreign Insolvency Proceedings tate.48 The same is true of autonomous insolvency law. Within the framework of international agreements, conventions or other international instruments for the regulation of international insolvency law, the satisfaction of public law claims and claims by social security authorities and workers can be realised in some other way, which would then be obligatory for all signatories i.e. member states. When the right of other creditors to submit a proposal to open secondary proceedings is at issue, and a debtor does not have a domestic establishment, their opening might be made to depend not only on the condition that a creditor demonstrate that satisfaction of his claim in foreign insolvency proceedings would involve significant difficulties, but also that opening secondary proceedings would not be economically inappropriate from the point of view of all the creditors.49 A debtor’s authority (power) to propose the opening of secondary proceedings is disputable. It seems, however, that this power should be granted to the debtor where, according to the insolvency law of the state where the main proceedings were opened, he has not lost the power to administer or dispose of his own assets, as in the case of personal management (debtor in possession), for example. In order for secondary proceedings to be opened, a domestic debtor’s assets must be sufficient to cover the costs of the proceedings. The exclusion of any kind of creditors from participation in and satisfaction from secondary proceedings is unacceptable for the same reasons as in the case of particular proceedings.50 The distribution of an insolvency estate in domestic secondary proceedings may take place separately and independently of the distribution of the insolvency estate in the main proceedings. In that case, however, it is necessary to at least define rules for calculating what a creditor has already received in main or any other separate proceedings opened against the same debtor, or through enforcement proceedings abroad, so that the debtor’s assets may be distributed among creditors in the fairest possible way.51 This goal of the fairest possible distribution among creditors may be accomplished even to a greater degree if integration of the insolvency estates in main and secondary proceedings and the integral computation of a quota are foreseen. First, the following claims would have to be satisfied: the costs of the proceedings and other obligations of the insolvency estate, claims of secured creditors with rights to separate satisfaction from the certain objects, things or rights of the insolvency estate and of creditors with 48 For example, Croatian law provides for such a solution (Arts 324(1,2), 326(1) BL). See similar solution in Art. 11(2) of the Istanbul Convention. 49 Croatian law provides for a corresponding solution (Art. 326(2,3) BL). 50 Unfortunately, Art. 172 of the Swiss PILA and Art. 21 of the Istanbul Convention don’t permit all categories of the creditors a participation and satisfaction of their claims in the secondary proceedings. The problem exists especially in Swiss law, because it does not provide for the participation and satisfaction of Swiss creditors with public law claims in secondary proceedings. 51 See Art. 329(1,2) of Croatian BL; § 342(2) of German InsC; Art. 172(3) of Swiss PILA; Art. 20(2) of the European Regulation; Art. 5 of the Istanbul Convention; and Art. 32 of the Model Law.

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Jasnica Garašić rights of exclusion of certain objects, things or rights from the insolvency estate, claims of workers with their habitual residence in the country, of domestic creditors with public law claims, domestic social security authorities and other possible privileged creditors. Then the court conducting the secondary proceedings could distribute the remainder of the insolvency estate in these proceedings according to the insolvency quota determined in the distribution base of the foreign main proceedings. In calculating the distribution base, the remaining proceeds in secondary proceedings are added to the insolvency estate to be divided in the main proceedings, and claims by as yet uncompensated creditors established in secondary proceedings are taken into account. This integration of two insolvency estates should entail recognition of the right of the insolvency representative in the main proceedings to challenge claims lodged in secondary proceedings and to avoid (refute) the debtor’s legal actions concerning the estate in secondary proceedings according to insolvency law in secondary proceedings. After claims of insolvency creditors in secondary proceedings have been satisfied, any possible remaining assets of the insolvency estate should immediately be handed over to the insolvency representative in the main proceedings. In such a way, regular, simple creditors are allowed to participate, and their claims are satisfied in secondary proceedings. At the same time, such creditors in secondary proceedings are prevented from realising a higher insolvency quota than that established in integral proceedings encompassing the debtor’s entire assets. Computation (imputation) rules cannot achieve the same results since according to these a creditor may retain what he has received in other insolvency proceedings (main, particular, secondary). Due to the fact that in secondary proceedings only the insolvency estate determined therein may be divided, a regular creditor should, in cases where the insolvency quota determined by integrating the insolvency estate of the main and secondary proceedings is higher, and only the insolvency estate of the secondary proceedings is to be distributed, exercise his right to the remaining quota in the main proceedings. Therefore, a rule should be established whereby the insolvency representative in secondary proceedings, as authorised by creditor in such proceedings, could lodge his claim in the main proceedings. Such integration and distribution of the insolvency estate of the main and secondary proceedings is possible only under the condition that this is permitted by the insolvency law not only of the secondary proceedings, but also of the main proceedings. If the lex fori concursus in the main proceedings does not permit this, or if the distribution base established in the main proceedings is contrary to the public policy of the state where secondary proceedings have been opened, or if the distribution base in the main proceedings has not been established within the appropriate time limit, the court conducting secondary proceedings should then be authorised to distribute the insolvency estate in the secondary proceedings irrespective of the estate of the main proceedings, but in accordance with domestic rules valid for secondary proceedings. Regardless of how the insolvency estate in secondary proceedings is to be distributed (independently, or integrated with the insolvency estate in the main proceedings), the possible assets remaining

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Recognition of Foreign Insolvency Proceedings in the secondary proceedings must immediately be handed over to the insolvency representative in the main proceedings.52 In order for creditors to realise their right to participation and satisfaction, a modern model of international insolvency law should also contain provisions on informing creditors of the opening of domestic insolvency proceedings (main, particular or secondary). With regard to foreign creditors, a domestic general public announcement of the decision to open proceedings is insufficient. Foreign creditors whose address is available should be notified of such a decision.53 In addition, it is necessary to foresee the cooperation of organs involved in main and secondary proceedings and the coordination of such proceedings. Apart from cooperation by the insolvency representatives, the cooperation of courts conducting various proceedings should be expressly regulated.54 At any rate, it is necessary to provide expressly for the exchange of information between organs involved in the two types of proceedings and vital for the conduct thereof. If the insolvency estates of the main and secondary proceedings are integrated at the distribution stage, it would be desirable to authorise the insolvency representative in the foreign main proceedings to challenge the lodged creditors’ claims in secondary proceedings and to have the right to avoid (refute) a debtor’s legal actions concerning the estate of the secondary proceedings in accordance with the insolvency law of the secondary proceedings, in order to increase the insolvency estate therein. The rule whereby the insolvency representatives in domestic proceedings (both main and secondary) are authorised to lodge claims in other insolvency proceedings against the same debtor that have already been lodged in the proceedings for which they were appointed is very important for creditors who are not familiar with the law and language of the state where other insolvency proceedings are being conducted, or when this state is located at a geographical distance. Therefore, a modern model should contain this rule, adding, however, that the insolvency representative may execute this power only if so authorised by a creditor. The theory of international insolvency law has not yet completely clarified whether the insolvency representative in domestic insolvency proceedings should be authorised to 52 Croatian law provides for the described means of integrating insolvency estates in secondary and main proceedings according to the rules recommended above (Art. 327-330 BL). 53 This possibility exists in all six of the models analysed. See Art. 65(5) of Croatian BL, § 30(2) of German InsC, Art. 233 of Swiss SchKG, Art. 40(1,2) of the European Regulation, Art. 30(1,2) of the Istanbul Convention, and Art. 14(1,2) of the Model Law. 54 Express provisions on cooperation and coordination between main and secondary proceedings is provided for in Croatian law (Arts 307(1,2), 318(1,2), 327(1,2,3), 328(1,2,3,4), Art. 329(1,2), 330, 331(1,2) BL); German law (§ § 341, 342(2,3), 355, 357, 358 InsC); the European Regulation (Arts 20(2), 31-37 EuInsR); the Istanbul Convention (Arts 5, 20(2), 22-28 IstCon); and the Model Law (Arts 25-32 ML). Some provisions, albeit to a lesser extent, are also contained in Swiss law (Arts 171, 172(3), 173(1) PILA). Of the six models analysed, only the Model Law expressly emphasises cooperation not only by insolvency representatives in main and secondary proceedings, but also by courts conducting these proceedings.

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Jasnica Garašić exercise the right to vote in foreign insolvency proceedings for claims lodged in domestic proceedings and simultaneously in foreign insolvency proceedings as well.55 The question may arise as to whether exercising such a right in foreign insolvency proceedings has an impact on the insolvency representative’s impartiality in domestic insolvency proceedings. If the answer is negative, then this right of the insolvency representative in domestic insolvency proceedings should at least be linked to the existence of the creditors’ express authorisation that the insolvency representative exercise this right in a concrete case, with specific instructions regarding how to vote. Moreover, the insolvency representative in the foreign main proceedings should have the opportunity to influence the liquidation and distribution of the insolvency estate in secondary proceedings. In any case, he should have an opportunity to declare his position as to the manner of liquidation of the insolvency estate in secondary proceedings. In addition, he should receive any insolvency plan which has been developed, and should also have the right to submit an insolvency plan himself.56 Under an international insolvency law treaty or convention, or some other multilateral instrument obliging all its member states, the insolvency representative in main proceedings may be allowed an even stronger influence on the distribution of the insolvency estate in secondary proceedings, by means of a provision that secondary proceedings cannot, as a rule, be terminated without the consent of the insolvency representative in the foreign main proceedings,57 or that closure of secondary proceedings by means of a rescue plan, composition, or other comparable measure shall not become final without the consent of the insolvency representative in the main proceedings; failing his agreement, it may become final if the financial interests of the creditors in the main proceedings are not affected thereby.58 Particular problems arise when the main or secondary proceedings, or both, are aimed at recovery i.e. rescue of the debtor, rather than liquidation of the debtor’s assets, since the debtor guarantees any obligation by his entire assets both in the country and abroad, and creditors’ claims are not territorially divisible. Therefore, stay of payment, discharge of debt, or any other limitation or modification of a claim in domestic insolvency proceedings (main or secondary) that can not encompass the debtor’s entire assets cannot be imposed on a creditor with an effect on those debtor’s assets not pertaining to domestic insolvency proceedings; rather, each creditor concerned thereby must give his consent. These problems may be solved by developing an integral plan that encompasses the insolvency estates in all insolvency proceedings pending against the 55 Such a power of the insolvency representative is provided for in German law (§ 341(3) InsC). The European Regulation speaks only of the insolvency representative’s right to participate in domestic proceedings as well as in other foreign insolvency proceedings, and in particular to participate in an assembly of creditors (Art. 32(3) EuInsR), without defining in greater detail what this right to participate precisely entails. 56 Such solutions can be found in Croatian law (Art. 331(1,2) BL) and German law (§ 357(1,3) InsC) and partly in European Regulation (Art. 31(3) EuInsR). 57 Art. 26 of the Istanbul Convention. 58 Art. 34(1)(2) of the European Regulation and Art. 27 of the Istanbul Convention.

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Recognition of Foreign Insolvency Proceedings debtor. A modern model of international insolvency law should expressly provide for the possibility of developing such a plan and determining the rules for its acceptance, verification, and legal effects.59 In cases where a debtor’s recovery is attempted in the main proceedings, while secondary proceedings are oriented towards liquidation of the debtor’s assets, it may prove useful to authorise the insolvency representative in the main proceedings to seek a temporary stay of liquidation of the insolvency estate in the secondary proceedings, should this jeopardise the recovery in the main proceedings. Therefore, it is desirable that this power of the insolvency representative in the main proceedings also be foreseen in the regulatory instrument.60 A model of international insolvency law may also prescribe other forms of cooperation between the organs of main and secondary proceedings.61

C.

Delimitation of Insolvency Estates in Various Insolvency Proceedings Conducted Simultaneously against the Same Debtor

In order to delimitate the insolvency estates in various insolvency proceedings simultaneously conducted against the same debtor, it is necessary to provide rules on how to localise objects, things, rights so as to make it easier to determine whether these are domestic or foreign objects, things, rights belonging to the debtor’s assets. Here it is sufficient to adopt the already existing rules in private international law. As for temporal delimitation of the insolvency estate in separate domestic proceedings, the moment in time or the day when particular separate proceedings were opened should, as a rule, be employed. A modern model of international insolvency law should also contain provisions on the belonging of pArts of the debtor’s assets which were located abroad at the time foreign insolvency proceedings recognised in the country were opened, and then subsequently (before or after the opening of domestic separate insolvency proceedings) transferred into the country. Such provisions are also necessary in situations where, after domestic separate proceedings have been opened, pArts of the debtor’s assets are transferred abroad.

59 For a detailed review of these problems, see REINHART S., Sanierungsverfahren im internationalen Insolvenzrecht: eine rechtsvergleichende Untersuchung über die besonderen internationalrechtlichen Probleme liquidationsabwendender Insolvenzverfahren, Berlin 1995, pp. 299-325. Of the six models analysed, the possibility of developing an integral plan for all insolvency estates is provided for only in the Model Law (Art. 27(d) ML), albeit inadequately. 60 Such a solution is provided for in Art. 33(1,2) of the European Regulation. 61 For more details on regulating particular and secondary proceeding and on regulating cooperation and coordination of different simultaneous proceedings against the same debtor in six models analysed see GARAŠIĆ J. (note 1), vol. 1, pp. 321-495.

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VI. Individual Legal Effects of Recognition The legal effects of the recognition of a foreign decision on opening insolvency proceeding are very numerous. In this paper, as in her doctoral thesis, the author presents only the most important legal effects commonly occurring in practice.

A.

Recognition of Foreign Main Proceedings

With regard to the recognition of a foreign decision to open main proceedings, we may distinguish three possible situations: first, a situation where separate domestic proceedings have not been opened; second, a situation where domestic secondary proceedings have been opened, as a consequence of recognition; and third, a situation where domestic particular proceedings were already opened prior to recognition of the decision to open main proceedings. In a modern model of international insolvency law, the lex fori concursus should be applicable in a situation where domestic separate proceedings have not been opened, with regard to determining the effects of a recognised foreign decision to open insolvency proceedings, and to regulating these effects. In order to treat an insolvent debtor’s creditors equally and to respect the deviation from the lex fori concursus determined by the lex fori concursus itself, the foreseen reference to the lex fori concursus in the autonomous law of the state of recognition should be understood as a conflict of laws reference to the overall legal order of the state where the main proceedings were opened (Gesamtverweisung). This includes not only the substantive norms but also the conflict of laws norms of the state in which the main proceedings were opened.62 In an international insolvency agreement or convention, or any other international legal instrument on insolvency (such as the European Regulation), the conflict of legal norms need not necessarily refer to the entire legal order. The agreed or foreseen rules referring to substantive norms must, in fact, be observed by all contractual parties or member states such that there is no difference in the treatment of creditors. It must also be emphasised that, in such an international legal document dealing with insolvency, conflict of laws norms concerning insolvency via reference to substantive rights (Sachnormverweisung) can be harmonised to a greater extent than via reference to the entire legal order (Gesamtverweisung). The applicability of the lex fori concursus foreThe same is also found in German law: see DROBNIG U., ‘Die in grenzüberschreitenden Insolvenzverfahren anwendbaren Rechtsordnungen’, in: STOLL H. (Hrsg.), Stellungnahmen und Gutachten zur Reform des deutschen Internationalen Insolvenzrechts, Tübingen 1992, pp. 55 et seq.; CAMPE M.V., Insolvenzanfechtung in Deutschland und Frankreich – Das neue Sach- und Kollisionsrecht (InsO und Loi nº 85-98), Köln/Berlin/Bonn/München 1996, pp. 395 et seq.; TRUNK A., Internationales Insolvenzrecht, Systematische Darstellung des deutschen Rechts mit rechtsvergleichenden Bezügen, Tübingen 1998, pp. 286 et seq.; GEIMER R., Internationales Zivilprozeβrecht, Köln 2001, reg. no. 3375; AHRENS W., Rechte und Pflichten ausländischer Insolvenzverwalter im internationalen Insolvenzrecht, Berlin 2002, p. 106. 62

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Recognition of Foreign Insolvency Proceedings seen by the state of recognition basically means extending those effects of a foreign decision to open insolvency proceedings determined and regulated by the lex fori concursus to the state of recognition. Due to the fact that in international insolvency law – as in private international law in general – the principle of the closest connection must be observed, the general applicability of the lex fori concursus should relate only to effects connected with the main issue to be settled in insolvency proceedings, i.e. that of satisfaction of the insolvent debtor’s creditors out of the debtor’s assets. The public policy clause of the state of recognition limits the applicability of the foreign lex fori concursus regarding a debtor’s assets located in the state of recognition. The applicability of the foreign lex fori concursus may also be limited in the law of the state of recognition by a possible provision whereby the effects provided for in applicable foreign law should not be contrary to the basic principles of domestic insolvency law.63 Such a clause may be useful at a time when the most appropriate solutions are still being sought in international insolvency law. At the same time, there must be an awareness that this carries a certain risk in terms of legal certainty. Therefore, it should be applied with some restraint in practice, and its application in a concrete case should be justified by very strong arguments. A deviation from the applicability in principle of the lex fori concursus, as foreseen in the law of the state of recognition with regard to a specific legal effect of the decision to open insolvency proceedings, constitutes a further limitation on the applicability of the lex fori concursus with regard to a debtor’s assets located in the state of recognition. It must be emphasised that, upon recognition of a foreign decision to open insolvency proceedings, the law of the state of recognition may theoretically also bring into play effects not foreseen in the law of the state where insolvency proceedings were opened. The question of when mandatory rules of the state of recognition may limit the applicability of the foreign lex fori concursus has not yet been answered in international insolvency law theory. In a situation where, as a result of the recognition of a foreign decision to open main insolvency proceedings, domestic secondary proceedings have been opened in the state of recognition, one cannot speak of an extension of foreign legal effects to a debtor’s domestic assets, excluding, of course, the fact that opening domestic secondary proceedings presupposes the existence of recognised foreign main insolvency proceedings. In such a situation, the law of the state of recognition determines, as the lex fori concursus, the effects of the secondary proceedings opened on the debtor’s domestic assets pertaining to the insolvency estate in these secondary proceedings. In a situation where domestic particular proceedings have been opened prior to recognition of a foreign decision to open main insolvency proceedings, there is Such a clause is contained in Croatian law (Art. 319(1), BL). Compare the clause in the decision by the German Bundesgerichtshof of 11/7/1985 (BGH, Urt. Of 11/7/1985 – IX ZR 178/84, in: Zeitschrift für Wirtschaftsrecht, 1985, p. 944 et seq.), referred to as the Wende-Entscheidung, wherein German case law marked a turning-point in German autonomous international insolvency law by replacing the territorial principle with the principle of universality. This decision states, among other things, that recognition of foreign insolvency must be embodied in the overall structure of German insolvency regulations and principles. 63

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Jasnica Garašić no extension of foreign legal effects. The domestic lex fori concursus is applicable to the debtor’s domestic assets pertaining to the insolvency estate in these particular proceedings.

1.

Without Opening Domestic Separate Proceedings

a)

The Legal Position of a Foreign Insolvency Representative in the State of Recognition

In a modern model of international insolvency law, the term ‘insolvency representative’ may, but need not necessarily be given a definition.64 In an international law treaty, convention, or other international instrument, it is possible to enumerate those persons or organs that are considered insolvency representative in signatories or member states.65 A foreign insolvency representative must establish his credentials by presenting the decision appointing him as an insolvency representative. This can also be included in the decision to open insolvency proceedings.66 Some other form of proof acceptable in the state of recognition may also be allowed.67 If a particular model of regulation has opted for a system of generally required formal recognition proceedings, then the insolvency representative in foreign main proceedings will not be able to perform his powers in the state of recognition with regard to the debtor’s assets prior to recognition of the foreign decision to open insolvency proceedings through the prescribed formal recognition proceedings. If the model in question also foresees the possibility of incidental recognition of a foreign decision to open insolvency proceedings, then this decision must be at least incidentally recognised in the proceedings wherein this issue was raised. In such a manner, the insolvency representative will be able to exercise his powers within the proceedings and within the meaning of a decision resulting from the proceedings in which the opening of foreign insolvency proceedings was treated incidentally. If the model of regulation has opted for a system of generally automatic recognition of a foreign decision to open insolvency proceedings, then the insolvency representative may exercise his powers in the state of recognition without a court’s preliminary examination of the existence of preconditions for such recognition. At any rate, a power of attorney issued by an insolvent debtor, authorising the insolvency representative to administer and dispose of the debtor’s assets abroad, should not be recognised in countries which have developed their own 64 Art. 2(b) of the European Regulation, Art. 1(3)(a) of the Istanbul Convention, and Art. 2(d) of Model Law. 65 List C of the European Regulation and List B of the Istanbul Convention. 66 A corresponding provision is provided in German law (§ 347(1) InsC), the European Regulation (Art. 19 EuInsR), the Istanbul Convention (Art. 2 IstCon), and the Model Law (Art. 15(2) ML). 67 Art. 15(2)(c) Model Law.

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Recognition of Foreign Insolvency Proceedings autonomous international insolvency law. Otherwise the state of recognition’s rules on international insolvency law would be circumvented: not only rules concerning preconditions for the recognition of a foreign decision to open insolvency proceedings, but also conflict of laws norms dealing with insolvency. On the other hand, an insolvent debtor’s power of attorney empowering the insolvency representative to gather information on his assets abroad should be recognised, as this makes it easier for the insolvency representative to decide whether to request recognition of a decision to open insolvency proceedings in another state incidentally or, instead, within the framework of formal proceedings, as well as whether it is worth proposing the opening of secondary proceedings in the state of recognition.68 If a certain model has opted for a system of generally required formal proceedings of recognition, it is important, with regard to protection of the insolvency estate, to foresee the insolvency representative’s authority to propose recognition of a decision to open insolvency proceedings and, from the moment such a proposal is made, to request security measures. These measures include a prohibition on conducting enforcement proceedings, unless the model itself has determined that this prohibition on enforcement proceedings should take effect ex lege, by proposing recognition of a foreign decision to open insolvency proceedings. In addition, a modern model of international insolvency law should authorise the insolvency representative to propose the domestic public announcement of a foreign decision to open insolvency proceedings and its registration in domestic public books or registers. This is important not only in the case of domestic creditors whose addresses are not known to the foreign insolvency representative, but for legal transactions in general. Namely, it is possible to link the moment in time when a domestic public announcement of a foreign decision to open insolvency proceedings and its registration in domestic public books and registers takes place to legal preconditions concerning the good faith (bona fides) of a person who, after opening foreign insolvency proceedings, honoured certain obligations for the benefit of a insolvent debtor rather than the insolvency representative. This may also pertain to the good faith of a person who has acquired an object, thing or right from the insolvency estate through unauthorised disposal by the debtor following the opening of insolvency proceedings. Even in models where the aforementioned legal preconditions regarding good faith are connected with the moment when an announcement of a proposal to recognise a foreign decision to open insolvency proceedings is published, these powers of the insolvency representative may be useful for all creditors and business partners of the debtor who have not learned of the opening of insolvency proceedings in some other way.69 Unlike an international insolvency law treaty, convention, or other international instrument, autonomous international insolvency law cannot oblige the inAs earlier HANISCH H., ‘Vollmacht und Auskunft des Insolvenzschuldners über sein Auslandsvermögen (zu OLG Koblenz, 30.3.1993 – 4 W 91/93, in: IPRax 1994, 370, Nr. 45)’, in: IPRax 1994, p. 353. 69 Compare Arts 312(5), 313(1), 315(4) of Croatian BL; Art. 169(1,2) of Swiss PILA; § § 345, 346 of German InsC; Arts 21, 22 of the European Regulation and Art. 9 of the Istanbul Convention. 68

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Jasnica Garašić solvency representative or other organs in foreign insolvency proceedings to inform domestic creditors of the opening of insolvency proceedings.70 However, a court in the state of recognition may refuse recognition of a foreign decision to open insolvency proceedings if it has established that domestic creditors, due to a discriminatory failure to serve notice, were unable to participate in the proceedings. It is desirable that the insolvency representative be expressly bound to inform the court in the state of recognition, upon whose cooperation he relies, of any important change in the foreign insolvency proceedings in which he is the representative, as well as of any other foreign insolvency proceedings opened against the same debtor.71 A modern model of regulation should expressly determine whether the powers of a temporary insolvency representative are to be recognised.72 As for the powers and obligations of a foreign insolvency representative, the lex fori concursus should determine which law is applicable; it will, as a rule, establish its own applicability. The applicability of the law determined in such a manner may be restricted by a public policy clause and possible mandatory rules in the state of recognition, a provision in the law of the state of recognition pursuant to which the effects of a recognised foreign decision to open insolvency proceedings must not be contrary to the fundamental principles of domestic insolvency law, as well as rules in the state of recognition which deviate from the applicability of the lex fori concursus with respect to particular powers and obligations of the insolvency representative. An indirect modification of the powers and obligations of the insolvency representative provided in the foreign lex fori concursus occurs when the state of recognition’s law provides, with respect to an institute of insolvency law (e.g. security interests, avoidance of detrimental acts etc.), for a deviation from the lex fori concursus such that the insolvency representative is granted powers and obligations not provided in the lex fori concursus. The state of recognition’s law may impose on both domestic and foreign insolvency representatives not only obligations typical of insolvency proceedings, but also other obligations, such as the duty of confidentiality, or obligations towards financial organs or state labour offices. In this regard, a foreign insolvency representative is obliged to fulfil these obligations in the state of recognition in the same way as a domestic insolvency representative. It would also be desirable to foresee the possibility of appointing an auxiliary insolvency representative in the state of recognition in cases where a debtor’s legal relations in that state are complicated, or where the debtor’s assets are sub70 Such an obligation exists pursuant to Art. 40 of the European Regulation and Art. 30 of the Istanbul Convention. Compare also Article 14(1,2,3) of the Model Law. 71 For example, such an obligation for insolvency representative is provided in § 347(2) of German InsC and Art. 18 of Model Law. 72 Of the six models analysed, this possibility is expressly provided in German law (§ § 343(2), 344(1), 346(1), 353(2), InsC), the European Regulation (Arts 25(1)(3), 38 EuInsR), the Istanbul Convention (Art. 6 IstCon) and the Model Law (Art. 2(d) ML).

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Recognition of Foreign Insolvency Proceedings stantial. An auxiliary insolvency representative who has the necessary knowledge of the law and language of the state in question could contribute to the expeditiousness and regularity of insolvency proceedings regarding the debtor’s assets in the state of recognition.73 In order to protect a debtor’s assets pertaining to the insolvency estate, a modern model of international insolvency law should expressly prescribe which security measures are available to a foreign insolvency representative in the state of recognition. As a rule, these should be the same security measures that a representative in domestic insolvency proceedings would have at his disposal.74 In a system generally requiring formal recognition proceedings, the court of recognition should be authorized to grant security measures for which the foreign insolvency representative needs the cooperation of a court of insolvency. Moreover, this court should be a domestic court that normally conducts domestic insolvency proceedings. Once the power of disposing of and administering an insolvent debtor’s assets has been transferred to the insolvency representative, he should be clearly authorised to propose all enforcement actions and security measures to protect claims in the state of recognition that could have been proposed by the debtor as a creditor had insolvency proceedings not been opened. In addition, the foreign insolvency representative should be authorised to propose the recognition of decisions on security measures rendered by a foreign insolvency court. If the transfer of the power to administer and dispose of assets from an insolvent debtor to the insolvency representative is recognised, then, pursuant to the law of the state of opening, the anticipated transfer of the power to conduct proceedings concerning these assets should also be recognised. Among other things, a foreign insolvency representative should be authorised to initiate, when necessary, a court action avoiding an insolvent debtor’s legal actions. However, this says nothing regarding the applicable law for such avoidance.75 73 For example, such a possibility is expressly provided in Article 9 of the 1979 Treaty between the Federal Republic of Germany and the Republic of Austria in the area of insolvency and settlement law, which entered into force in 1985 (in: German Bundesgesetzblatt 1985, II p. 410; in: Austrian Bundesgesetzblatt 1985/233, 1986/612). Of the six models analysed in the doctoral thesis, only the Model Law, in its Art. 21(2)(e) provides for the possibility of appointing such an auxiliary insolvency representative. 74 See Article 21(1)(g) of the Model Law and Art. 8 of the Istanbul Convention. The Croatian and Swiss laws have only an express provision authorising the foreign insolvency representative to propose security measures within formal recognition proceedings (Art. 312(1) of Croatian BL and Art. 168 of Swiss PILA). Other models do not contain an express provision regarding this issue. German law and the European Regulation, with regard to a temporary foreign insolvency representative, provide for the possibility of his proposing all measures that can be proposed in the state of recognition pursuant to its law following a proposal to open insolvency proceedings, in order to protect the insolvency estate (§ 344(1) InsC; Art. 38 EuInsR). 75 Of the six models analysed, where secondary proceedings have not been opened, only the Model Law (Art. 23 ML) contains a clear and express provision on this issue. In the Croatian and German laws, as well as in the European Regulation, it is possible to derive

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Jasnica Garašić One principle of international insolvency law should be that a foreign insolvency representative, when liquidating objects, things or rights pertaining to the insolvency estate in the state of recognition, should observe that state’s rules regarding the means and manner of liquidation.76 A situation where, following the opening of foreign insolvency proceedings, an insolvent debtor disposes without authorisation of objects, things or rights pertaining to the insolvency estate should also be provided for. In principle, the applicable law here should be the lex fori concursus, but general domestic rules on protecting confidence in domestic public books and registers must also be respected.77 Unauthorised disposals by a debtor to which domestic rules on protecting confidence in domestic public books and registers apply should, in any case, be refutable. A situation where a debtor of the insolvent debtor with a registered office, domicile or habitual residence in the state of recognition fulfils his obligation following the opening of foreign insolvency proceedings, not to the insolvency representative but rather directly to the debtor, should also be expressly provided for. The good faith of an insolvent debtor’s debtor must also be protected in such a case.78 b)

Permissibility of Domestic Law Suits (Erkenntnisverfahren)

For the purposes of protecting the insolvency estate, the opening of foreign insolvency proceedings should lead to the interruption (stay) of all pending actions by an insolvent debtor in the state of recognition which concern objects, things, rights pertaining to the insolvency estate. In doing so, it is not necessarily important which category of creditors an insolvent debtor’s litigation adversary belongs to. Models of regulation which have opted for a system of generally formal recognition proceedings may link interruption of pending domestic actions to publication of an announcement regarding a proposal for recognition of a foreign decision to open insolvency proceedings, determining that these proceedings are interrupted ex lege by the act of announcement.79 Interruption of a lawsuit need not necessarily be insolvency representative’s powers for avoidance from the provisions concerning the applicable law for avoidance (Art. 319(1) of Croatian BL; § 339 InsC; Arts 4(2)(m), 13 EuInsR). 76 An express rule is contained in the European Regulation (Art. 18(3)sent.1 EuInsR) and, indirectly, also in the Istanbul Convention (Art. 10(2) IstCon). 77 Compare Art. 321 of Croatian BL, § 349 of German InsC and Art. 14 of the European Regulation. 78 Express provisions on this issue are contained in Art. 322 of Croatian BL, § 350 of German InsC, Art. 24 of the European Regulation, and Art. 13 of the Istanbul Convention. For more detail on the legal position of a foreign insolvency representative in the state of recognition in all six of the models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 17-111. 79 Such a solution has Croatian Law (Art. 312(2) BL). Such automatic termination prescribed by law has an advantage when compared with the Model Law solution, according to which a foreign insolvency representative must recommend interruption of all pending actions in the state of recognition (Art. 19(1)(d) in connection with Art. 21(1)(g) ML).

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Recognition of Foreign Insolvency Proceedings made to depend on the transfer of authority to conduct proceedings from the insolvent debtor to the insolvency representative.80 In theory, it is disputable whether the interruption of domestic lawsuits upon the opening of foreign insolvency proceedings which are suitable for recognition is an insolvency law issue, or merely a procedural law issue. Therefore, the provision on interruption should clearly state whether or not such interruption is conditioned on the fact that the foreign lex fori concursus likewise provides for an interruption of the proceedings. In principle, the lex fori concursus should determine whether it is permissible to continue an interrupted lawsuit or initiate a new lawsuit following the opening and recognition of insolvency proceedings. Exceptionally, in the case of certain categories of creditors whose claims need to be protected, the state of recognition may deviate from the applicability of the lex fori concursus. The question of which law is applicable in determining the authority of an insolvent debtor to initiate a lawsuit must be qualified according to insolvency law, and be subject to the applicability of the lex fori concursus. The question of how to continue or initiate lawsuits following the opening and recognition of foreign insolvency proceedings must be clearly distinguished from the previous one. Answers to these questions should be found in the civil procedural law of the state where the lawsuit is to be continued or initiated. We must also mention here that the issue of whether the vis attractiva concursus possibly foreseen by the lex fori concursus needs to be recognised, and to what extent, has unfortunately not been resolved, either in theory or in case law.81 c)

Permissibility of Domestic Enforcement Proceedings and Domestic Security Proceedings

aa)

Enforcement in a Narrower Sense In principle, the lex fori concursus should be applicable to the issue of the permissibility of conducting enforcement proceedings against a debtor’s

Namely, interruption takes effect even when the insolvency representative is still unaware of any pending lawsuit concerning the insolvency estate in a particular state. According to the Model Law, automatic interruption of lawsuits takes effect only upon recognition of a foreign decision to open insolvency proceedings (Art. 20(1)(a) ML). 80 There are situations in which a debtor retains the right to litigate, yet his actions (both procedural and substantive) are subject to supervision by the insolvency organs, as in the case of personal management (debtor in possession). 81 The issue of whether domestic lawsuits are permitted following the opening and recognition of a foreign decision to open insolvency proceedings is differently regulated in the six models analysed. See: Arts 312(2), 324(1,2,3) of Croatian BL; § 352 (1,2) of German InsC; Arts 4(2)(f), 15 of the European Regulation; Arts 10, 11(2,3) 14(2)(a) of the Istanbul Convention; Arts 19(1)(c,d), 20(1,2), 21(1)(a,g), 24 of the Model Law. For more detail on the aforementioned issues in the six models analysed, see GARAŠIĆ, J. (note 1), vol. 2, pp. 112-148.

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Jasnica Garašić assets in the state of recognition.82 This issue must be qualified in accordance with insolvency law, as insolvency proceedings are, by their nature, general enforcement proceedings. In the case of autonomous international insolvency law, the law of the state of recognition may provide for a deviation from the foreign lex fori concursus with regard to certain categories of creditors where the permissibility of domestic enforcement proceedings is concerned. It would be desirable to limit this exemption solely to domestic creditors with public law claims, domestic social security authorities, and workers having their habitual residence in the country.83 A modern model of international insolvency law should also clearly regulate the question of the permissibility of enforcement proceedings against a debtor’s assets in the state of recognition regarding secured creditors with rights to separate satisfaction from the certain objects, things or rights of the insolvency estate and creditors with rights of exclusion of certain objects, things or rights from the insolvency estate.84 If a particular model, in relation to certain categories of creditors, provides for an exemption from the applicability of the lex fori concursus regarding the permissibility of enforcement proceedings in the state of recognition, and opens the possibility for these creditors to conduct enforcement proceedings, it should also provide for the possibility of a temporary interruption of such domestic enforcement proceedings, as requested by a foreign insolvency representative where this is necessary in order to achieve higher Such a solution is provided for in the Croatian (Art. 319(1) BL) and German (§ 335 InsC) laws, the European Regulation (Art. 4(2)(f) EuInsR) and the Istanbul Convention (Arts 11(2), 14(2)(a) IstCon). Upon recognition of a foreign decision to open insolvency proceedings, the Model Law prescribes an automatic prohibition on enforcement proceedings, regardless of what is stated in the lex fori concursus (Art. 20(1)(b) ML). 83 The corresponding provisions are provided in Art. 324(1,2,3) of Croatian BL and Arts 11(2), 14(2)(a) of the Istanbul Convention. The Model Law, in its Art. 20(2) opens the possibility for exemptions to the prohibition of enforcement. As has already been said, in this way a situation is prevented in which domestic secondary proceedings proposed by creditors to protect the satisfaction of their claims must also be opened even where this is not economical. Within the framework of an international insolvency law treaty, convention or other international instrument, it may be prescribed that creditors with public law claims and social security authorities in all member states be authorised to participate in insolvency proceedings and have their claims satisfied. For workers’ claims, it may be prescribed the uniform satisfaction, and there is thus no need for a member state, as the state of recognition, to foresee exemptions to the prohibition on enforcement proceedings with regard to these categories of creditors. 84 Namely, the law which provides for the authority of such creditors to conduct enforcement proceedings in the state of recognition need not necessarily be the law applicable to the existence or validity of rights of exclusion and rights to separate satisfaction when opening insolvency proceedings against the debtor. 82

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Recognition of Foreign Insolvency Proceedings quotas for satisfaction of creditors’ claims, or if such enforcement would jeopardise recovery of the debtor’s enterprises in insolvency proceedings.85 Models which have opted for a system of generally required formal recognition proceedings should link prohibition on conducting enforcement proceedings to publication of an announcement regarding submission of a proposal for recognition of a foreign decision to open insolvency proceedings, such that this arises ex lege from the announcement itself.86 It is important that the prohibition on conducting enforcement proceedings already be in effect during recognition proceedings. In addition, this model of regulation should expressly regulate the effect of a satisfaction in enforcement proceedings made during the period between the opening of foreign insolvency proceedings and their domestic recognition.87 bb)

Security Proceedings All that has been said with regard to the permissibility of enforcement in the state of recognition in a narrower sense applies to the permissibility of proceedings for securing claims in that state as well. In models of regulation which do not directly link the opening of domestic secondary proceedings to recognition of a foreign decision to open main insolvency proceedings, i.e. those where a certain period of time may elapse between the recognition of this decision and the opening of domestic secondary proceedings, domestic security measures should be permitted, despite the recognition of a foreign decision to open main proceedings. Such measures may be pronounced in preliminary proceedings for opening secondary proceedings, in order to secure the debtor’s domestic assets for domestic secondary proceedings.88

85 Such a possibility – with an exemption concerning enforcement proceedings conducted by creditors with rights of exclusion and rights to separate satisfaction – is provided for in Art. 324(4) of Croatian BL. 86 A corresponding solution can be found in Art. 312(2) of Croatian BL. Such an automatic prohibition ex lege on enforcement proceedings has an advantage compared to the solution contained in the Model Law, according to which a foreign insolvency representative must propose the prohibition of such proceedings (Art. 19(1)(a) ML) in the state where he seeks recognition. This advantage consists in the fact that prohibition takes effect even when the insolvency representative is unaware of enforcement proceedings being conducted in this state. Pursuant to the Model Law, the automatic prohibition on enforcement proceedings takes effect only upon recognition of a foreign decision to open foreign insolvency proceedings (Art. 20(1)(b) ML). 87 Pursuant to Croatian law, such satisfaction will, as a rule, lose its effect (Art. 320(1,2,3,4) BL). 88 Such a solution is provided in Art. 18(1)sent.1 of the European Regulation. For more details on the permissibility of enforcement proceedings and security proceedings in the state of recognition in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 149-183.

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Volume of the Insolvency Estate

The insolvency law of the state in which the main insolvency proceedings are opened, based on a jurisdictional basis that, is regarded as primary by the state of recognition, should provide an answer to the question as to whether, by means of these proceedings, only the debtor’s assets in the state of opening have been seized, or rather the entire assets possessed by the debtor in other countries. As a rule, the lex fori concursus will prescribe that such proceedings encompass the debtor’s entire assets. If foreign insolvency proceedings are opened based on a jurisdictional basis that is regarded as subsidiary from the point of view of the state of recognition, then in principle these proceedings could not encompass the debtor’s assets in the state of recognition, even where the lex fori concursus provides otherwise.89 In addition, the lex fori concursus should be applicable to the question of which objects, things or rights belonging to the debtor and subject to seizure, form part of the insolvency estate or, rather, to what extent the debtor must be guaranteed social protection, such that e.g. certain things are exempted from seizure, or the debtor is given the possibility of being maintained by the insolvency estate. The public policy clause in the state of recognition can limit here, in a self-explanatory way, the applicability of the lex fori concursus. With regard to the question of whether a debtor’s newly-acquired assets (those acquired after the opening of insolvency proceedings) pertain to the insolvency estate, the applicability of the lex fori concursus should again be foreseen.90 91 e)

Rights of Exclusion (Aussonderungsrechte) and Rights to Separate Satisfaction (Absonderungsrechte)

The first notion concerns creditors with rights to exclude certain objects, things or rights from the insolvency estate based on proof that this certain object, thing or right doesn’t belong to the insolvency estate, due to a creditor’s right in rem or in personam (Aussonderungsrechte). The second notion refers to secured creditors with rights to separate satisfaction from the certain objects, things or rights of the insolvency estate, because their claims are secured e.g. by a mortgage, pledge, right of retention, etc. (Absonderungsrechte). The applicable law for issues concerning the emergence, existence, transfer, termination and content of a right upon A different solution is found e.g. in Art. 4(2) of the Istanbul Convention. A problem may arise where the foreign lex fori concursus prescribes that newlyacquired assets constitute part of the insolvency estate, while the insolvency law of the state of recognition states that they do not. In this case, the law of the state of recognition must clarify whether or not non-seizure of the newly-acquired assets falls within the sphere of application of public policy. 91 Of the six models analysed, only Art. 4(2)(b) of the European Regulation provides for an express provision on the law applicable to the issue of whether a certain object, thing or right pertains to the insolvency estate, proclaiming the lex fori concursus to be applicable. For more details on these issues in the individual models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 184-208. 89 90

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Recognition of Foreign Insolvency Proceedings which rights of exclusion and rights to separate satisfaction may be based must be determined according to the relevant statute, which, according to the rules of international private law, is in principle the lex rei sitae. With regard to opening insolvency proceedings, the lex fori concursus should determine the further effects or limitations of such a right that is under civil law valid and effective right, as the basis for rights of exclusion and rights to separate satisfaction, with regard to objects, things, rights located in the state of opening. In the case of objects, things, rights which are, at the moment when insolvency proceedings are opened, located in another state, the insolvency law of that state, i.e. the lex sitae, should be applicable, if the intended purpose is to secure and protect that type of creditor.92 In this case, the lex fori sitae must regulate not only the question of whether rights of exclusion and rights to separate satisfaction exist, but also how creditors with those rights may realise their claims. It must also determine if a creditor is subject to any restrictions and, if so, what kind of restrictions are to be imposed with regard to the possibility of individually conducting a lawsuit or enforcement proceedings, as well as to the liquidation of an object, thing or right subject to rights of exclusion or rights to separate satisfaction (e.g. a temporary stay of encashment). In addition, the lex fori sitae should also be applicable to the issue of the effect of foreign insolvency proceedings on a creditor’s secured claim, should there be an intention of protecting the confidence of those secured creditors. In international insolvency law, the substantive law aspect of reservation of title should be treated like any other substantive law security for claims. If a model is intended to protect the right to seek a purchaser’s right (Anwartschaftsrecht) in the case of opening insolvency proceedings against a seller retaining the title of ownership, then this must be regulated by means of an express provision.93 f)

Insolvency Law Set-off

Considering the security function of set-off and the principle of equal treatment of all creditors, it seems that the most appropriate solution concerning the law applicable to insolvency law set-off would be that which takes into account the statute regulating set-off outside insolvency proceedings (as a rule, this is the statute applicable to the main claim, i.e. the claim by an insolvent debtor) and its civil law provisions on set-off, as well as the insolvency law provisions on set-off in the law of the state of opening, i.e. lex fori concursus. Insolvency law provisions of the lex fori concursus which limit and impede (aggravate) set-off may be applied only if a creditor has already acquired the right to set-off according to a statute of set-off 92 Such a solution is provided for in Croatian law (Art. 304 BL). The Swiss PILA does not contain any provisions on this issue. German law (§ 351 InsC) and the European Regulation (Art. 5 EuInsR) opt for a solution where creditors with rights of exclusion and rights to separate satisfaction are not subject to any limitation in this case. Art. 14(2)(a) of the Istanbul Convention has been similarly interpreted by many authors. For more details on arguments for and against different solutions in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 209-262. 93 As is the case in Art. 7(2) of the European Regulation.

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Jasnica Garašić valid outside insolvency proceedings. Insolvency law provisions of the lex fori concursus which facilitate set-off may enable set-off in situations where an entitlement thereto does not yet exist, according to a statute of set-off valid outside insolvency proceedings.94 A modern model should include an express provision regarding this issue.95 It remains to be seen whether a deviation from this solution is necessary for a payment or settlement system or a financial market, such that the law applicable to the issue of set-off will be the law of the state which is applicable to that system or market.96 g)

Current Contracts of the Debtor

As for the effects of opening foreign insolvency proceedings on an insolvent debtor’s current contracts, i.e. contracts not fulfilled by either party or not fulfilled completely, the lex fori concursus should determine the applicable law.97 However, two exemption are desirable. With regard to the effects of opening insolvency proceedings on a employment contract and employment relations, the applicable law should be: a) the law of the state in which the worker habitually performs his work in fulfilling the employment contract, even when he is temporarily sent to another country, or b) the law of the state where the establishment where the worker is employed is located, should the worker not habitually perform his work duties in a single state, with exception – when it may be derived from the overall circumstances that the employment contract and employment relations are closely connected with another state, in which case the law of this other state must apply.98

Art. 319(1) of Croatian BL should be interpreted in this way (there is no express provision on insolvency law set-off). 95 Of the six models analysed, an express provision on insolvency law compensation exists in German law (§ § 335, 338 InsC) and the European Regulation (Arts 4(2)(d), 6 EuInsR) which, unfortunately, foresee a deviation from the application of the lex fori concursus: when this does not permit compensation, should the insolvency law provisions of a statute of set-off valid outside insolvency proceedings regulate set-off in a concrete case. 96 Such a deviation is provided for in German law (§ 340(1,2,3) InsC) and in the European Regulation (Art. 9(1) EuInsR). For more details on the applicable law covering insolvency law set-off in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 263292). 97 An express provision on this issue is provided in Art. 4(2)(e) of the European Regulation. Such a solution can be derived by interpretation from Art. 319(1) of Croatian BL and § 335 of German InsC, whereas the other models analysed do not contain any corresponding provisions. 98 Separate provisions on the effect of insolvency proceedings on employment contracts are given in the Croatian (Art. 305 BL) and German laws (§ 337 InsC) and the European Regulation (Art. 10 EuInsR), stipulating that the applicable law is that which is applicable to the contract of employment. 94

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Recognition of Foreign Insolvency Proceedings As for the effects of opening insolvency proceedings on lease contracts and rental contracts, the applicable law should be the insolvency law of the state where the immoveable property is located, so that the socially and politically motivated regulations of the relevant state dealing with these types of contracts are observed.99 It remains to be seen whether it would be desirable to deviate from the applicability of the lex fori concursus in the case of lease or rental contracts also concerning movables which are subject to registration, defining the insolvency law of the state where these movables are registered as the applicable law.100 Likewise, it remains to be seen whether, in relation to the effects of insolvency proceedings on rights and duties arising from an insolvent debtor’s current contracts concluded within a payment or settlement system or a financial market, it will be necessary to deviate from the applicability of the lex fori concursus and as the applicable law to that issue designate the law of the state which is applicable to that system or market.101 h)

Insolvency Law Avoidance

In principle, the lex fori concursus should determine the applicable law for insolvency law avoidance. As a rule, it should determine its own applicability, as it represents the law of the closest connection.102 With respect to avoidance of legal actions undertaken within a payment or settlement system or a financial market, it remains to be seen whether it is necessary to deviate from the applicability of the lex fori concursus, so that the law applicable to the issue of avoidance will be the law of the state which is applicable to that system or market.103

Compare the solution set forth in Art. 8 of the European Regulation and § 336sent.1 of German InsC, which foresee a deviation from the applicability of the lex fori concursus for several types of contracts concerning immoveable property. 100 Compare the solution in § 336sent.2 of German InsC. 101 A corresponding provision is given in German law (§ 340 of InsC) and the European Regulation (Art. 9(1) of EuInsR). For more details on the applicable law with regard to the effects of the opening and recognition of foreign insolvency proceedings on current contracts of the debtor in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 293323. 102 Such a solution results from the interpretation of Art. 319(1) of Croatian BL. German law (§ 339 InsC) and the European Regulation (Art. 4(2)(m), 13 EuInsR) have, unfortunately, opted for a combination of the applicability of the lex fori concursus and the lex fori causae. The other models analysed do not provide any solutions in this regard. For more details on arguments for and against applicable law solutions for insolvency law avoidance, and the corresponding literature and case law, see GARAŠIĆ J. (note 1), vol. 2, pp. 324-376). 103 A corresponding solution is set forth in § 340(1,2) of German InsC and Art. 9(2) of the European Regulation. 99

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Priority Claims and Rank of Satisfaction

In principle, the lex fori concursus, as the applicable law, should determine which claims are regarded as obligations of the insolvency estate and which are actual insolvency claims, as well as the rank according to which these must be satisfied.104 In terms of autonomous international insolvency law, there are two situations in which a deviation from the applicability of the lex fori concursus comes into play. The first situation relates to the satisfaction of public law claims by domestic creditors and claims by domestic social security authorities. This is because, according to currently valid international practice, these claims cannot, as a rule, be satisfied in foreign insolvency proceedings.105 With regard to a debtor’s assets located in the state of recognition, these creditors should be granted a special right of satisfaction, as provided in Croatian law (Art. 324(1), in connection with Art. 326(1)(1) BL). The second situation relates to the satisfaction of claims by workers whose habitual residence is in the state of recognition, since there are countries which do not recognise any system for insuring workers in the case of an employer’s insolvency by paying them specific amounts of money or designating their claims as preferred. These creditors should also be entitled to a special right of satisfaction from the debtor’s assets in the state of recognition (see Art. 324(1) in connection with Art. 326(1)(2) of Croatian BL). A special right of satisfaction should at least exist for the creditors’ claims specified in Article 6, entitled Protection of Workers’ Claims (Employer’s Insolvency) Convention.106 104 An express provision is given in Art. 4(2)(i) of the European Regulation. Such a solution may be derived by interpretation from Art. 319(1) of Croatian BL and § 335 of German InsC. Pursuant to Art. 13(1) of the Model Law, foreign creditors have the same rights with regard to initiating and participating in insolvency proceedings in the enacting state. However, pursuant to Article 13(2), this does not affect the ranking of claims in proceedings under the insolvency law of that state, except that claims by foreign creditors shall not be ranked lower than general non-preferential claims, while providing that a foreign claim shall be ranked lower than general non-preferential claims if an equivalent local claim is ranked lower than such claims. The other models analysed contain no provisions concerning this issue. 105 Even Article 13(2) of the Model Law, in variant b, offers the possibility that foreign tax and social security claims may be excluded from satisfaction in insolvency proceedings. 106 This Convention was produced under the auspices of the International Labour Organisation, C 173, and adopted in 1992. It entered into force on 8/6/1995. See (status as of 15/12/2005). The following claims are enumerated in Article 6 of this Convention: ‘(a) the workers’ claims for wages relating to a prescribed period, which shall not be less than three months, prior to the insolvency or prior to the termination of the employment; (b) the workers’ claims for holiday pay due as a result of work performed during the year in which the insolvency or the termination of the employment occurred, and in the preceding year; (c) the workers’ claims for amounts due in respect of other types of paid absence relating to a prescribed period, which shall not

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Recognition of Foreign Insolvency Proceedings If the foreign insolvency representative does not recognise a special right of satisfaction for the aforementioned creditors, a model of autonomous international insolvency law should allow them to initiate enforcement or security proceedings in the state of recognition.107 As has already been said, the right of a foreign insolvency representative to propose a temporary stay on any enforcement proceedings conducted by such creditors in the state of recognition should be foreseen. Corresponding solutions may be found in Croatian law (Art. 324(2, 4) BL). A special right of satisfaction from the debtor’s assets in the state of recognition has, in fact, the function of a specific right to separate satisfaction (Absonderungsrecht). Within an international insolvency treaty, convention, or other international instrument, the satisfaction of creditors with public law claims and social security authorities, as well as workers whose habitual place of work is located in the country, may be regulated so as to equalise domestic and foreign creditors belonging to these categories. Such satisfaction should be acceptable, and thus also obligatory, for all signatories or member states,108 so that there is no need to grant these categories of creditors in the state of recognition special rights of satisfaction from the debtor’s assets located therein.109 j)

Obligation to Return to the Insolvency Representative and Imputation of Amounts Obtained in Other Proceedings against the Same Insolvent Debtor

aa)

Satisfaction in Enforcement Proceedings Where it is a requirement of the insolvency estate of the recognised foreign main proceedings that a creditor return what he received from enforcement

be less than three months, prior to the insolvency or prior to the termination of the employment; (d) severance pay due to workers upon termination of their employment.’ 107 Compare the solution in Art. 11(2) of the Istanbul Convention: ‘During the period mentioned in paragraph 1 (a two-month period commencing on the day after publication of the notice referred to in Article 9), only creditors who, in the Party where the liquidator intends to exercise his powers, enjoy a right to preferential payment, or would have enjoyed such a right had bankruptcy been opened in that Party, creditors who have a public law claim, or creditors who have a claim arising from the operation of an establishment of the debtor or from employment in that Party, may commence or pursue individual legal action against the assets of the debtor.’ 108 Thus Art. 39 of the European Regulation expressly provides that any creditor whose habitual residence, domicile or registered office is located in a Member State other than the State where proceedings were opened, including the tax authorities and social security authorities of Member States, shall have the right to lodge claims in insolvency proceedings in writing. In addition, in the European Union is valid Council Directive 80/987/EEC of the European Union concerns the approximation of the laws of Member States relating to the protection of employees in the event of their employer’s insolvency. Official Journal of the European Communities 1980, L 283, p. 23; 2002, L 270, p. 10. 109 For more details on priority claims and a rank of satisfaction in the case of recognition of foreign main insolvency proceedings in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 377-415.

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Jasnica Garašić proceedings against the debtor in the state of recognition, this effect should, in principle, be recognised, regardless of whether the creditor has lodged a claim in the main proceedings.110 This does not apply to creditors with rights of exclusion and rights to separate satisfaction, as their claims are not satisfied at the expense of the insolvency estate. Likewise, this does not apply to creditors who are permitted, pursuant to the law of the state of recognition, to conduct domestic enforcement proceedings against an insolvent debtor even following recognition of foreign main proceedings. A model which has opted for a system of generally required formal recognition proceedings, but does not link ex tunc effects to recognition from the moment foreign insolvency proceedings are opened, must expressly regulate the issue of whether a creditor is obliged to return to the foreign insolvency representative what the former acquired in domestic enforcement proceedings during the period between the opening and the recognition of these proceedings. Otherwise, a legal loophole arises.111 A creditor who has already received a certain sum in enforcement proceedings in the state of recognition will participate in the main insolvency proceedings only if he believes that he will receive more. If the state of recognition does not recognise the insolvency representative’s request that a creditor hand over what he has already received in enforcement proceedings and the creditor lodges his claim in foreign main insolvency proceedings, sums that were received in enforcement proceedings must be taken into account by distribution in the foreign insolvency proceedings. Therefore, the principle of imputation based on a quota should be applied, since, in this way, the principle of treating all creditors equally may be better realised than if the principle of imputation based on a claim were to be applied.112 The latter principle should only apply if a creditor’s claim is satisfied in enforcement proceedings in a state where insolvency proceedings have not been opened concerning the debtor’s assets, and with regard to which he has a security interest which would guarantee him the status of a creditor with

110 Of the six models analysed, express provisions on this issue are given only in Croatian law (Art. 320(1,2) BL), in German law (§ 342(1,3) InsC) and the European Regulation (Art. 20(1) EuInsR). 111 See the corresponding solution in Art. 320(2) of Croatian BL. 112 Imputation based on a quota means that a creditor who has already partly satisfied his claim will be considered for distribution in insolvency proceedings only after other creditors of the same rank or same group have realised, in these same proceedings, the quota already realised by the aforesaid creditor outside these proceedings. Imputation based on a claim means that a creditor who has already partly satisfied his claim outside insolvency proceedings participates in distribution in insolvency proceedings with the unsatisfied part of the claim and, based on this amount, receives the same quota as all other creditors of the same rank whose claims are completely unsatisfied.

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Recognition of Foreign Insolvency Proceedings an right to separate satisfaction (Absonderungsrechte) in insolvency proceedings.113 The requirement of the insolvency estate of the recognised foreign main insolvency proceedings, that a domestic creditor in the state of recognition return to the insolvency representative that what he received as the result of enforcement proceedings in a third state should undoubtedly be recognised if this third state also recognises the main insolvency proceedings, and if its law foresees such return to the foreign insolvency representative of that what was received in domestic enforcement proceedings. bb)

Satisfaction in Other Insolvency Proceedings A rule should exist in international insolvency law whereby a creditor is not obliged to return to the insolvency representative what he received as the result of separate insolvency proceedings against the same debtor, since the opposite would jeopardise the purpose of conducting separate proceedings. There should also be a rule that creditors with rights of exclusion (Aussonderungsrechte) and rights to separate satisfaction (Absonderungsrechte) should retain what they received through separate proceedings.114 If a creditor has not received full satisfaction in separate insolvency proceedings, he may participate in the main insolvency proceedings, in which case the rule of imputation based on a quota is to be applied. Since a creditor, in exercising his right to satisfaction in insolvency proceedings, must, as a rule, bear the costs accrued solely and entirely, fairness demands that imputation based on a quota in the main proceedings should be performed only after the costs accrued in realising a satisfaction in separate proceedings have been deducted from the amount received in those proceedings. As for creditors whose claims have, in accordance with the law of the state where separate proceedings are opened, been satisfied in part, based on a substantive law security or permissible set-off, imputation based on a claim should be applied in the main proceedings. Imputation based on a quota would, in this case, be contrary to the purpose of substantive law security (Absonderungsrechte, security interest) and the function of security of set-off.115

113 The autonomous law of the state of recognition cannot determine rules on imputation in foreign insolvency proceedings. Rules on imputation should be provided in international insolvency law treaties, conventions, or other international instruments, and these would then be binding on all signatories or member states and valid in both main and separate insolvency proceedings. 114 Corresponding rules are provided in Art. 306 of Croatian BL, in § 342(2,3)of German InsC, Art. 20(2) of the European Regulation, Art. 5 of the Istanbul Convention, and Art. 32 of the Model Law. Swiss law provides a corresponding provision, but this refers to a situation where secondary proceedings have been opened in the country (Art. 171(3) of PILA). 115 What has already been said in the previous footnote is valid here as well. For more details on the obligation to return and the imputation of amounts already received in

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With Opening Domestic Secondary Proceedings

Where secondary proceedings are opened in the state of recognition with regard to an insolvent debtor’s assets located in that state, the law of the state of recognition is the lex fori concursus. As the applicable law, it will, as a rule, determine and regulate the effects of opening insolvency proceedings concerning these assets.116 Not only substantive norms but also conflict of laws norms in the insolvency law of the state of opening will be applied here. In principle, the same rules of the state of recognition will be applied in secondary proceedings as are applied in domestic main or particular proceedings. However, autonomous international insolvency law, conventions, or other international instruments usually provide some additional rules for secondary proceedings. These are primarily concerned with coordination and cooperation with foreign main proceedings, whereby the means of satisfaction of creditors in secondary proceedings is determined. The lex fori concursus of the state where secondary proceedings are opened will thus regulate, among other things, the legal position of the insolvency representative and the effect of opening secondary proceedings on the permissibility of lawsuits and enforcement proceedings involving domestic assets of a debtor which pertain to the insolvency estate. It will also regulate the volume of the insolvency estate, including a determination of which objects, things or rights may be seized, and whether newly acquired property of the debtor will also become part of the insolvency estate. Furthermore, it regulates the impact of opening secondary proceedings on rights constituting the basis for rights of exclusion and rights to separate satisfaction with regard to objects, things or rights that constitute the insolvency estate in these proceedings, the permissibility of set-off, the impact on certain current contracts of the insolvent debtor, and the possibility of avoiding detrimental actions. The lex fori concursus will also determine the means of distribution and satisfaction for creditors in secondary proceedings. With regard to the permissibility of set-off, it must be emphasised that setoff in secondary proceedings is possible only when the main claim, i.e. the insolvent debtor’s claim, pertains to the insolvency estate in secondary proceedings. In the theory of international insolvency law, the question of whether opening secondary proceedings has any effect at all on an insolvent debtor’s current contracts has still not been clarified. It seems that secondary proceedings may have an effect on such contracts at least when the following preconditions have been cumulatively fulfilled: that what the debtor must fulfil pursuant to the relevant contract is subject to seizure within secondary proceedings, and therefore pertains to the insolvency estate; the creditor obliged to fulfil certain obligations has his registered office, domicile, habitual residence, or the centre of his main interests, in the state where secondary proceedings have been opened, such that the insolvent debtor’s claim submitted in the state of opening, pursuant to the customary rules of other proceedings against the same insolvent debtor, as foreseen in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 426-461. 116 This is expressly provided in Art. 28 of the European Regulation, and the same conclusion may be derived from Art. 303 of Croatian BL, as well as § 335 of German InsC.

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Recognition of Foreign Insolvency Proceedings private international law, may be considered as having been submitted therein, and may thus be designated as a right pertaining to the insolvency estate in domestic secondary proceedings; and, finally, that the relevant contract is closely connected with the given country.117 Only if these preconditions have been fulfilled, provisions concerning the insolvent debtor’s current contracts valid in domestic main proceedings can also apply in domestic secondary proceedings. As for the avoidance of detrimental actions, it must be emphasised that the insolvency law of the state where secondary proceedings are opened applies to the avoidance only of those legal actions (including the failure to act) without which a certain object, thing or right would pertain to the insolvency estate or be in this estate. Anything removed from the insolvency estate in an unlawful manner must be returned, and so it is important to distinguish between a request for avoidance concerning the insolvency estate in domestic secondary proceedings and a request for avoidance concerning the insolvency estate in foreign main insolvency proceedings or other foreign separate proceedings. This presupposes the development of rules for determining which insolvency estate an alienated value belongs to. Distribution in domestic secondary proceedings may be carried out under the same rules valid for domestic main or particular proceedings; it is also possible to deviate therefrom. Distribution may be carried out completely autonomously and independently of distribution in the main proceedings, or in connection with it.118 As has already been said, no creditor may be excluded from participation and satisfaction in secondary proceedings. The insolvency estate in secondary proceedings may not require the return of an amount what a creditor received in enforcement proceedings in a third country. Neither the insolvency estate in domestic secondary proceedings nor that in foreign main proceedings may require the return of sums that a creditor received in separate insolvency proceedings (secondary or particular) in third state. The rules on addition, imputation, valid in main proceedings, should also be correspondingly valid in secondary proceedings. A modern model of international insolvency law should not exclude the possibility that the insolvency representative in main proceedings be chosen as the insolvency representative in domestic secondary proceedings. In models in which the moment of opening of secondary proceedings is not directly linked to the recognition of a foreign decision to open main insolvency proceedings, when secondary proceedings are subsequently opened, the result is a change of statutes and rules applying to assets located in the state of recognition. This leads to a number of difficult legal questions. A model that has opted for a system of generally required formal recognition proceedings should expressly regulate the period of time between the opening of main insolvency proceedings and their recognition, regardless of whether recognition will result in domestic secondary proceedings. Compare TRUNK A. (note 63), pp. 249-250, 406. The connection between distribution in secondary proceedings and distribution in main proceedings is prescribed by Croatian law (Art. 328 BL). 117 118

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The Existence of Domestic Particular Proceedings Opened Prior to the Recognition of Foreign Main Proceedings

The lex fori concursus, including its substantive norms and its conflict of laws norms, is the applicable law with regard to debtor’s assets belonging to domestic particular proceedings. As has already been emphasised, particular proceedings do not presuppose the recognition of foreign main proceedings and are completely independent of them. Domestic particular proceedings are, as a rule, conducted according to the same rules as domestic main proceedings but with at least two deviations. By opening particular proceedings, the seizure of a debtor’s assets should be limited to the assets which, at the moment of opening, were located or should have been located in the country. On the other hand, the provisions on cooperation and coordination with some foreign separate proceedings do not apply in particular proceedings. It would be desirable to foresee, at least, the exchange of information between the insolvency representative in domestic particular proceedings and the insolvency representative in other insolvency proceedings simultaneously conducted against the same insolvent debtor so as to achieve the best possible distribution of the debtor’s assets among different creditors.119 What has been said about the effect of the opening of secondary proceedings on the permissibility of set-off, current contracts and return or imputation of what a creditor has already received as partial satisfaction of his claim in some proceedings against the same debtor is also valid in particular proceedings. In a situation where the recognition of a foreign decision on opening main proceedings followed the opening of domestic particular proceedings, particular proceedings should be transformed into secondary proceedings if the phase of particular proceedings permits such transformation.

B.

Recognition of Foreign Separate Proceedings

The possibility of recognizing foreign insolvency proceedings should not depend on the volume of the debtor’s seized assets i.e. on the volume of the insolvency estate. The need for recognising those insolvency proceedings whose effects of seizure are limited to objects, things or rights which, at the moment of their opening, are located or should be located in the state of opening, does not occur very frequently. However, recognition is possible where the insolvency representative of such foreign proceedings in the country (in the state of recognition) exercises his right of disposing and administering individual pArts of the debtor’s assets and engages in liquidations related to the insolvency estate of these particular proceedings. Therefore, a modern model of international insolvency law should also regulate the recognition of such types of insolvency proceedings.120 Such a provision is provided in Art. 307(1) of Croatian BL. For example, the insolvency representative has transferred certain things from the insolvency estate of separate proceedings to another state for the encashment that is more 119 120

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Recognition of Foreign Insolvency Proceedings Separate proceedings may be both particular and secondary. As a rule, the applicability of the lex fori concursus, i.e. of the insolvency law of the state of opening, and the preservation of the clause regarding the public policy of the state of recognition with respect to the effects of recognition of a foreign decision on the opening of separate proceedings, should not be questioned. Both in the cases of main proceedings and separate proceedings, in the models of regulation where the moment (day) of opening of foreign insolvency proceedings does not coincide with the moment (day) of their recognition in the country, the effects of recognition for that particular period must also be regulated. If that is not the case, a legal loophole opens up. If the recognition of foreign separate proceedings involves secondary proceedings and if in the state of recognition main proceedings are opened, then the provisions of domestic law providing for cooperation and coordination of several proceedings will apply. If foreign separate proceedings are particular proceedings, then the law of the state of recognition should envisage a rule which prescribes the exchange of information, important for both insolvency proceedings, between the insolvency representative in particular proceedings and the insolvency representative in domestic main proceedings. This rule of exchanging information should also come into play in the relationship between the insolvency representative of foreign particular or secondary proceedings and the insolvency representative of one domestic particular or secondary proceeding. The possibility of exchanging important information between the courts conducting these proceedings should also be foreseen. Technically speaking, the simplest way for a modern model of international insolvency law way to formulate the provisions on the effects of recognition of foreign insolvency proceedings is to make them apply to the recognition of not only main but also separate proceedings. If any such provisions do not need to apply to separate proceedings, or if their application requires some limitation, this must be clearly set out. The rules that are only valid for separate proceedings must also be expressly laid down.121

VII. Conclusion The complexity of the economy at the international level requires good regulation of international insolvency law. The cooperation of states in this very important legal area of significance for the economy is unavoidable and no country can confavourable for all creditors in separate proceedings. It is possible that the debtor had transferred some things that would have been a part of the insolvency estate to another state (state of recognition) in a refutable or a fraudulent way, prior to the opening of separate proceedings, and similar situations. 121 For more details on (insufficient) provisions regarding the recognition of separate proceedings in the six models analysed, see GARAŠIĆ J. (note 1), vol. 2, pp. 462-504.

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Jasnica Garašić tinue postponing the regulation of its autonomous international insolvency law. When developing this branch of law, it is desirable to take into account already existing solutions in the autonomous laws of other countries and in international treaties, conventions and other international instruments providing for this area of law. In addition, it is necessary to take into account the experience in the application of these existing models as well as the knowledge developed in contemporary international insolvency law theory. In conformity with the acquired experience and knowledge, it is also necessary to continue enhancing existing models of regulation of international insolvency law.

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TEXTS, MATERIALS AND RECENT DEVELOPMENTS ________________

BELGIUM ARTICLE 9 OF THE ACT OF 19 DECEMBER 2005 ‘The pre-contractual phase of a commercial partnership agreement is subject to the provisions of Belgian law and to the international jurisdiction of Belgian courts, whenever the activity to which the commercial partnership agreement relates is exercised primarily in Belgium by the person granted the right [under Article 2].’ (Article 9 of the Act of 19 December 2005 on a pre-contractual duty of disclosure with respect to commercial partnerships agreements, in: Moniteur belge of 18 January 2006)

ANALYSIS OF A LEAKY UMBRELLA Bart VOLDERS∗ / Valentin RÉTORNAZ∗∗

I. II. III.

I.

The Act of 19 December 2005 on a Pre-Contractual Duty of Disclosure with Respect to Commercial Partnership Agreements Article 9 of the Act of 19 December 2005 Critical Remarks

The Act of 19 December 2005 on a Pre-Contractual Duty of Disclosure with Respect to Commercial Partnership Agreements

The Act of 19 December 20051 deals with pre-contractual negotiations of so-called ‘commercial partnership agreements’, as that term is defined in Article 2 of the Act. Without entering into the details of the definition, one can safely presume that ∗

Swiss Institute of Comparative Law. University of Neuchâtel. 1 Moniteur belge of 18 January 2006. The Act (retroactively) entered into force on the first of September 2005 (see Article 10). ∗∗

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Bart Volders / Valentin Rétornaz the Act of 19 December 2005 applies to a substantial number of commercial contracts, particularly all sorts of partnership agreements whereby one contracting party provides the other with know-how, a commercial sign or supply facilities, as it is frequently the case in distribution or franchising agreements. The Act does not regulate all issues relating to pre-contractual negotiations of commercial partnership agreements, but merely addresses a single aspect of the negotiation process, i.e. the duty to disclose certain facts and other relevant information in order to allow each of the contracting parties to evaluate the exact scope of their contractual obligations. The Explanatory Memorandum reveals that the Act of 19 December 2005 intends to protect the beneficiaries of know-how, a commercial sign or supply facilities, provided for under the partnership agreement.2 The Belgian legislator irrefutably presumes that the beneficiaries of these rights – often so-called ‘Small and Medium-sized Enterprises’ (hereinafter, ‘SMEs’) – are the commercially weaker contracting parties to the agreement. In order to ascertain that the (presumed) weaker commercial entities are equally protected in international contract negotiations, the Belgian legislator extended the geographical scope of the Act of 19 December 2005 through the inclusion of a particular private international law provision.

II.

Article 9 of the Act of 19 December 2005

Article 9 of the Act of 19 December 2005 addresses both the allocation of international jurisdiction and the question of the applicable law. The text of Article 9 clearly recalls the drafting of Article 4 of the Act of 27 July 1961 on the unilateral termination of exclusive concession agreements3 and of Article 27 of the Act of 1995 on commercial agency agreements,4 although the connecting factors that are used in these three provisions are not identical. Article 9 chooses a single connecting factor to allocate international jurisdiction and to identify the applicable law, i.e. the place where the beneficiary of know-how, the commercial sign or the supply facilities, mainly exercises the activity to which the commercial partnership agreement relates. Hence, the provision is drafted in a purely unilateral manner. Whenever the beneficiary exercises its activities predominantly on Belgian soil, international jurisdiction will be allocated to Belgian courts and Belgian law will apply to the dispute. Unsurprisingly, the applicable law will simply be the lex fori. The legislator clearly presumes that the commercial interests of commercial entities operating principally in Belgium are best protected if their disputes are litigated before Belgian courts applying Belgian law. A comparable presumption 2

Doc. Parl., la Chambre, sess. 2004-2005, n° 51-1687/001, p. 5 and Doc. Parl., la Chambre, sess. 2004-2005, n° 51-1687/005, p. 4. 3 ‘Loi du 27 juillet 1961 relative à la résiliation unilatérale des concessions de vente exclusive à durée indéterminée’, in: Moniteur belge of 5 October 1961. 4 ‘Loi du 13 avril 1995 relative au contrat d’agence commerciale’, in: Moniteur belge of 2 June 1995.

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Commercial Partnership Agreements in Belgium exists in labour law and consumer law relations, and, although to a lesser extent, in insurance matters. Hence, it appears that the Belgian legislator silently transformed the ordinary ‘trio’ of presumed weaker contracting parties into a ‘quartet’, by adding SMEs to the list of parties that benefit from a particular protection in private international law.

III.

Critical Remarks

The Belgian legislator made a firm choice in the Act of 19 December 2005 to protect the commercial interests of SMEs and to balance their unequal bargaining power in international contract negotiations. Whether or not SMEs or other categories of commercial entities should be protected in international trade by providing them with a particular private international law umbrella in order to prevent litigation of their disputes before foreign courts and to hinder the application of foreign law, will not be dealt with here. The idea has already appeared in scholarly writing.5 A closer examination of Article 9 of the Act of 19 December 2005 reveals however a particularly leaky umbrella. First, the protection of certain categories of commercial entities has no effect whenever international or community instruments are to be applied. Contrary to the protection mechanisms that are available to the ordinary ‘trio’ of consumers, employees and policy holders, the Brussels I Regulation6 does not provide SMEs with particular protective rules, nor does the Regulation guarantee them an exclusive allocation of jurisdiction before the courts of the place where the centre of their main activities is located. The same remark can be made with respect to the Rome Convention on the law applicable to contractual obligations,7 protecting consumers and employees entering into particular international agreements. Since the Belgian territory is rather small, the vast majority of commercial partnership agreements unquestionably qualify as international. Hence, through the conclusion of a jurisdiction agreement in accordance with Article 23 of the Brussels I Regulation and the provisions on the recognition and enforcement of judgments without review of the merits of the case, the (presumed) commercially stronger party will have no difficulty by-passing the Belgian Act of 19 December 2005. 5 MORSE R., ‘The substantive scope of application of Brussels I and Rome I: Jurisdiction Clauses, Arbitration Clauses and ADR Agreements’, in: MEEUSEN J. / PERTEGÁS SENDER M. / STRAETMANS G. (eds.), Enforcement of International Contracts. Convergence and divergence between Brussels I and Rome I, Antwerp 2004, p. 191, nr. 6-01, footnote 1 (‘the paper takes no position on whether so-called SMEs should be protected from the full rigours of the party autonomy principle. There is some evidence to suggest a move in such a direction more generally’). 6 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: OJ L 12 of 16 January 2001. 7 Convention on the law applicable to contractual obligations, in: OJ C 334 of 30 December 2005 (consolidated version).

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Bart Volders / Valentin Rétornaz Moreover, the coordination between Article 9 of the Act of 19 December 2005 and the new Belgian Private International Law Code,8 which entered into force on 1 October 2004, faces criticism. Pursuant to its Article 2, the Code of Private International Law does not prejudice the application of international treaties, the laws of the European Union or provisions of special statutes. Although de lege lata, the coordination of Article 9 of the Act of 19 December 2005 and the Code of Private International Law is not to be criticised, de lege ferenda, the manner in which the legislator handled the coordination of this particular private international law provision and the Private International Law Code, is questionable. The draft proposal of the Act of 19 December 2005 was presented before the Belgian House of Representatives on 22 March 2005, hardly six months after the Code of Private International Law entered into force. Throughout the preparatory Parliamentary works for the Act of 19 December 2005, the legislator did not once refer to the provisions of the Code of Private International Law on the issue of the applicable law or the allocation of international jurisdictions for disputes relating to the (pre-) contractual period. The coordination of the Act of 19 December 2005 and the Code of Private International Law was never an issue in the Parliamentary debates. This strongly suggests that the Belgian legislator is not entirely conscious of the importance of the new Code of Private International Law. Instead of a simple compilation of certain disparate provisions of private international law, the Private International Law Code provides its own system for allocating international jurisdiction, designating the applicable law and determining the effect of foreign judgements and foreign authentic instruments in the Belgian legal order, around which particular private international law provisions of special statutes should gravitate. The fact that the Belgian legislator defined the territorial scope of Article 9 of the Act of 19 December 2005 is therefore to be deplored. Finally, the manner in which the legislator drafted Article 9 of the Act of 19 December 2005 equally calls for criticism. At first sight, one could argue that this provision, which refers to ‘the pre-contractual phase of a commercial partnership agreement’, covers all private international law questions with respect to the negotiation process of commercial partnership agreements, regardless of the application of the Act of 19 December 2005. However, the Act merely addresses a single issue of the pre-contractual negotiations, i.e. the pre-contractual disclosure of certain facts by the (presumed) commercially stronger party in order to allow the (presumed) commercially weaker contracting party to evaluate the exact scope of its contractual obligations. Other pre-contractual issues, such as those listed in articles 2.1.15 and 2.1.16 of the 2004 UNIDROIT Principles of International Commercial Contracts, are not dealt with in the Act of 19 December 2005. Whether or not these issues should be litigated before Belgian courts applying Belgian law pursuant to Article 9 of the Act of 19 December 2005, can not be resolved on the basis of the text of Article 9, nor do the Parliamentary works provide any assistance for the interpretation of this provision. However, it would be surprising for a statutory rule of private international law to have a broader scope 8

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Commercial Partnership Agreements in Belgium than the material law provisions of the statute itself. Moreover, the unilateral manner in which Article 9 is drafted, implicitly suggests that the provision merely marks out the statute’s geographical scope and identifies the competent forum and the applicable law for disputes arising out of infringements of the pre-contractual duty of disclosure. In any case, it is striking that the same legislator managed to draft on the one hand, a clear and straightforward codification of private international law such as the recently enacted Code, and, on the other hand, Article 9 of the Act of 19 December 2005, the scope of which is particularly vague.

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AUSTRIA § 79L OF THE LAW ON GENETICALLY MODIFIED ORGANISMS ‘Tort claims to recover damages for harm caused by emissions referred to in § 79k shall be decided according to the law of the place where the damage occurred.’ (Art. 79l Law on Genetically Modified Organism: ‘Gentechnikgesetz’, ‘GTG’)

RECENT CHANGES IN AUSTRIAN INTERNATIONAL ENVIRONMENTAL (TORTS) LAW Bea VERSCHRAEGEN∗

I. II. III.

Introduction Applicable Law Summary

I.

Introduction

On December 1, 2004 a new conflict of laws rule on international environmental (tort) law was introduced in Austria: § 79l Law on Genetically Modified Organisms (‘Gentechnikgesetz’, hereinafter ‘GTG’).1 The rule stipulates that ‘Tort claims to recover damages for harm caused by emissions (‘Einwirkungen’) referred to in § 79k shall be decided according to the law of the place where the damage occurred.’2 According to § 79k para. 1 of the Act, owners or persons legally entitled to use an agricultural land may apply for a negative injunction against a neighbour whose genetically modified organisms (‘GMOs’) substantially affect the use of the agricultural land at issue, provided that the usual degree of emissions in the area where the agricultural land is situated has been exceeded and that the emissions in dispute have substantially affected the use of the agricultural land. The use of an ∗

Professor, L.L.M., E.M.M. BGBl. (the Austrian ‘Official Journal’) I 2004/126. 2 ‘Außervertragliche Ansprüche auf Ersatz von Schäden durch Einwirkungen im Sinn des § 79k sind nach dem Recht des Staates zu beurteilen, in dem der Schaden eingetreten ist.’ 1

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Bea Verschraegen agricultural land is ‘substantially affected’ if the emissions prevent the owner, or the person who is legally entitled to use the agricultural land, from (properly) placing his/her agricultural products on the market in the way he/she envisaged. The damage caused must derive from GMOs or from products which involve such substances. According to § 79k para. 2 of the cited Act, the affected land owner, or the person entitled to use the agricultural land, is entitled to damages against the tortfeasor, including, but not limited to, the remedial costs (restoration of the land). With the provisions of §§ 79k and 79l GTG, the Austrian legislator has introduced liability for the use of GMOs or products involving GMOs in agriculture. Furthermore, it has determined the applicable law. This is in line with Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms,3 with the ‘precautionary principle’ (Art. 4 of the Directive), and more specifically with Art. 26a of the Directive4 (inserted by Art. 43 no. 2 of the Regulation (EC) No. 1829/2003 of the European Parliament and of the Council of 22 September 2003 on genetically modified food and feed).5 Accordingly, the national legislators are allowed to take additional measures in order to avoid adverse effects (of emissions) on human health and the environment which might arise from the deliberate release or the placing of GMOs on the market.

II.

Applicable Law

§ 79l GTG is a lex specialis to the general rule on the applicable law for torts, i.e. § 48 para. 1 1st sentence of the Law on Private International Law (‘Gesetz über das Internationale Privatrecht’, ‘IPRG’). § 48 para. 1 1st sentence IPRG stipulates: ‘Tort liability shall be determined according to the law of the state in which the behaviour causing the damage occurred.’6 According to the materials on the amendment to the Law on GMOs,7 it follows from § 79l that if the agricultural land is situated in Austria tort liability is to be decided according to the conflict of laws rule of and within the substantive scope of application of § 48 IPRG. Hence, the tort liability shall be governed by Austrian substantive law.8

3

OJ L 106, 17/04/2001, p. 0001-0039. The provision stipulates: ‘Measures to avoid the unintended presence of GMOs: 1. Member States may take appropriate measures to avoid the unintended presence of GMOs in other products. 2. (…).’ 5 OJ L 268, 18/10/2003, p. 0001-0023. 6 ‘Außervertragliche Schadenersatzansprüche sind nach dem Recht des Staates zu beurteilen, in dem das den Schaden verursachende Verhalten gesetzt worden ist.’ 7 ‘Erläuternde Bemerkungen’, in: BGBl. I 2004/126, p. 13. 8 See also KERSCHNER F., ‘Neue Gentechnikhaftung in der Landwirtschaft (§§ 79k79m GTG)’, in: Recht der Umwelt 2005, 112 (129). 4

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Austrian International Environmental (Torts) Law Basically, § 48 para. 1 1st sentence IPRG considers the law of the place, where the behaviour causing the damage occurred, as the lex loci delicti commissi. However, § 48 para. 1 2nd sentence IPRG allows deviations from this rule if there is a closer connection to another place. Indeed, quite a lot of exceptions have been accepted by the courts, i.a. for international environmental tort cases. In case of strict liability, the place where the accident occurred or where the control of dangerous goods was lost has been regarded as the decisive place.9 If the place of action and the place where the damage occurred do not coincide (so-called multicountry torts), by exception, the place where the damage occurred can be decisive, provided that the tortfeasor could foresee injury occurring beyond the state borders.10 In such cases, there is a closer connection to the place where the damage occurred.11 The underlying reasoning is that by damaging the property of another person or impairing the use of the property (e.g. placing products of such property on the market) through emissions, the defendant is creating a link to the place where the damage occurs. Hence, according to § 48 para. 1 2nd sentence IPRG, a closer connection to the law of the injured party is established.12 Indeed, the latest project of ‘Rome II’13 stipulates in Art. 8 that ‘[t]he law applicable to a non-contractual obligation arising out of environmental damage or damage sustained by persons or property as a result of such damages shall be the law determined by the application of Article 5 (1), unless the person sustaining damage prefers to base his claim on the law of the country in which the event giving rise to the damage occurred.’ Art. 5 (1) states that ‘(w)here no choice has been made under Article 4, the law applicable to a non-contractual obligation shall be the law of the country in which the damage arises or is likely to arise, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or the countries in which the indirect consequences of that event arise.’ The new Austrian conflict rule does not give the person who sustained damage a right to opt for the law of the country in which the event giving rise to the damage occurred, unlike Art. 8 1st sentence in connection with Art. 5 para. 1 of the latest project of ‘Rome II’. Under Austrian conflict of laws rules, the result envis-

9 See VERSCHRAEGEN B., in: Rummel Kommentar zum ABGB, 3rd ed., Wien 2004, No. 23 to § 48 IPRG. 10 KOZIOL H., ‘Einige Fragen des internationalen Schadenersatzrechts, in: ZVR 1980, 1 (4); ID., Haftpflichtrecht, 3rd ed., Wien 1997, No. 19/26. 11 VERSCHRAEGEN B. (note 9), No. 25 & 30 to § 48 IPRG. Renvoi is applicable and choice of law by the parties is allowed in both § 48 para. 1 1st and 2nd sentence IPRG: see VERSCHRAEGEN B. (note 9), No. 27 and 31, and 61 to § 48 IPRG. 12 VERSCHRAEGEN B. (note 9), No. 59 to § 48 IPRG. 13 Amended Proposal for a European Parliament and Council Regulation on the Law applicable to Non-Contractual Obligations (‘Rome II’), COM(2006) 83 final, 2003/0168 (COD).

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Bea Verschraegen aged in ‘Rome II’ can only be achieved by a choice of law by the parties14 and such a choice, of course, depends on an agreement between the injured person and the tortfeasor. The applicable law determines whether a tort has occurred, who and whether a person is liable, how much compensation must be paid and why liability shall be affirmed. Furthermore, it provides rules on contributory negligence and possibly grounds for excuse, on illegality and legal justification, causality, the right of recourse in case of joint and several liability, the concept of damage, the amount of loss, non-physical damage and compensation for pain and suffering etc.15

III.

Summary

The reference of the Austrian legislator to § 48 IPRG is too general, if not incorrect. Even though, in practice, the exceptional rule (§ 48 para. 1 2nd sentence IPRG) has become the basic rule i.a. for environmental torts, according to the wording of § 48 para. 1 1st sentence IPRG, the basic connecting factor for torts is principally the place where the behaviour causing damage occurred. The place where the damage occurred is but the exception (‘Ausweichklausel’). According to § 79l GTG, if the damage occurs in Austria and the tortfeasor produced the damaging products in another country, substantive Austrian law shall apply. If, however, the tortfeasor produced the damaging products in Austria and caused damage in another country or in different foreign countries, the law(s) of this country (these countries) shall apply. Hence, the provision of § 79l of the Act is an exception to the general conflict of laws rule for torts. If the applicable foreign law does not provide for tort claims similar to those contained in § 79k of the Act, the injured person will not be able to claim damages. § 79k GTG does not apply in this case, because it cannot be deemed to be a mandatory rule that would apply irrespective of the law otherwise applicable. In spite of the new provision of § 79k GTG, it is still possible to apply the law of the place where the tortfeasor produced the damaging products, because § 79l of the Act should be deemed to be a basic rule, which allows for exceptions. For damage to agricultural land which arise from GMOs or products which involve GMOs, the Austrian legislator explicitly wants to apply the exception of § 48 para. 1 2nd sentence IPRG as a general rule. This means that the ‘rule-exceptionrelationship’ is shifted to an ‘exception-rule-relationship’. Hence, the law of the country where the event giving rise to the damage occurred may apply, if there is a closer connection to the law of this country. Moreover, the parties are free to choose the applicable law.

14 § 35 para. 2 in connection with § 48 para. 1 IPRG: see VERSCHRAEGEN B. (note 9), No. 1 to § 35 IPRG. 15 VERSCHRAEGEN B. (note 9), No. 32 to § 48 IPRG.

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EUROPEAN UNION PROPOSAL FOR A REGULATION ON THE LAW APPLICABLE TO CONTRACTUAL OBLIGATIONS (ROME I) COM (2005) 650 FINAL, 15.12.2005∗ A SHORT COMMENTARY Eva LEIN∗∗

I. II.

III.

IV.

Introduction Modifications of Concept and Substance A. Scope of Application 1. Spatial Scope of Application 2. Material Scope of Application a) Contractual Obligations b) Pre-Contractual Obligations B. Freedom of Choice and the Law Applicable in the Absence of Choice: Flexibility versus Predictability 1. Freedom of Choice a) Implicit Choice of Law b) Choice of Non-State Principles or International Uniform Law c) EC Provisions as a Limit to Choice of Law 2. Law Applicable in the Absence of Choice C. Particular Contracts 1. Consumer Contracts 2. Individual Employment Contracts 3. Agency D. Mandatory Rules 1. Definition 2. Mandatory Rules of Community Law 3. Mandatory Rules of Third Party States E. Subsidiary Issues 1. Voluntary Assignment, Contractual and Statutory Subrogation 2. Joint Liability 3. Statutory Set-off Transformation into a Community Instrument A. Relationship to Other Provisions of Community Law B. Consequences Linked to the Nature of the Rome I Instrument Conclusions

∗ The text is not reproduced here since it is available at . ∗∗ Staff Legal Advisor, Swiss Institute of Comparative Law.

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Eva Lein

I.

Introduction

As part of the ongoing efforts to establish a genuine and comprehensive set of private international law rules in civil and commercial matters at the Community level,1 in an ambitious move, a proposal was made to convert the Rome Convention2 into a Community instrument. This proposal followed wide-ranging debates and extensive consultations3 focusing on the modernisation of the Convention, the improvement of its functionality, as well as its consistency with the Brussels I Regulation4 and the Rome II proposal.5 While balancing practical needs and structural inconsistencies, the ‘Proposal for a Regulation on the Law Applicable to Contractual Obligations’ dated 15 December 2005 (hereafter ‘Rome I’)6 includes fundamental changes to the keystones of the international private law system of the Rome Convention. On the one hand, the proposal strengthens party autonomy, opening the choice of law to ‘non-State bodies of law’. On the other hand, it was necessary to balance the principle of freedom of choice with a reinforced conception of the protection of the 1 See recital 4 of the Rome I proposal: ‘The proper functioning of the internal market creates a need, in order to improve the predictability of the outcome of litigation, legal certainty and the free movement of judgements, for the rules of conflict of laws in the Member States to designate the same national law irrespective of the country of the court in which an action is brought. For the same reasons there is a need to achieve the greatest harmony between three instruments – this regulation, Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (Brussels I) and Parliament and Council Regulation (EC) N° […] on the law applicable to non-contractual obligations (Rome II)’. 2 Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 (80/934/EEC), in: OJ L 266, 09.10.1980, pp. 1-19, hereafter ‘Rome Convention’. 3 See the replies to the Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM(2002) 654 final, 14.1.2003; EHLE B., ‘Das Grünbuch Rom I – die Modernisierung des EVÜ steht bevor’, in: Zeitschrift für Gemeinschaftsprivatrecht 2003, pp. 49 et seq. ; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization’, in: RabelsZ 2004, pp. 1 et seq.; LEIBLE S.(ed.), Das Grünbuch zum Internationalen Vertragsrecht, München 2004. 4 Council Regulation 44/2001/EC of 22.12.2000, in: OJ L 12, 16.1.2001, p. 1 et seq., hereafter ‘Brussels I’. 5 Amended proposal for a European Parliament and Council regulation on the law applicable to non-contractual obligations (hereafter ‘Rome II’), COM (2006) 83 final, 21.02.2006. 6 Proposal for a regulation of the European Parliament and the Council on the law applicable to contractual obligations (hereafter ‘Rome I’), COM (2005) 650 final, 15.12.2005.

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A Short Commentary on the ‘Rome I’ Proposal weaker party; as a result, the parties may no longer choose the law applicable to consumer contracts. In the event of the absence of a choice of law, the proposal presents an approach manifestly less flexible than that of the Rome Convention to the determination of the applicable law in the absence of a choice by the parties. The new provision reduces the discretionary power of national courts to a minimum, with the aim of avoiding uncertainties in its practical application. Rome I further seeks to stipulate clear-cut conflict-of-law rules and to insert definitions, which should lead to more uniformity in the treatment of cross border disputes, boosting legal certainty and constituting a further step towards discouraging forum shopping. The proposal, however, remains silent on certain points where clarifications should have been made and does not always attain optimal interaction and coordination with other Community private international law instruments. This essay provides a short overview of important amendments, with emphasis on fundamental changes and omissions, and discusses new or unresolved inconsistencies, which may give rise to problems of application of the future Rome I Regulation.

II.

Modifications of Concept and Substance

A.

Scope of Application

1.

Spatial Scope of Application

The Rome I proposal opts for universal application, both perpetuating the erga omnes approach of the Rome Convention, and following the example of its counterpart, the proposal for a Rome II Regulation.7 Unlike the Community instrument on conflict of jurisdictions, neither proposal requires a significant connection with a Member State as a prerequisite of application. Nevertheless, it remains unclear whether Arts. 61 lit. c) and 65 EC actually confer the power to adopt rules providing for universal application. The latter thus far depends on a broad interpretation of the expression ‘in so far as necessary for the proper functioning of the internal market’ in Art. 65 EC.8 Actually, there seems to be a growing tendency to interpret Community rules – even those of international procedural law – as open to an erga omnes approach.9

7

See Art. 2 of the Rome II proposal as amended, COM (2006) 381 final. BONOMI A., ‘Conversion of the Rome Convention into an EC Instrument’, in: this Yearbook 2003, pp. 53 et seq., at 59; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2003: Der Verfassungskonvent und das Internationale Privat- und Verfahrensrecht’, in: IPRax 2003, pp. 485-495, at 493. 9 ECJ, C-281/02, 1.3.2005, Owusu. 8

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Eva Lein 2.

Material Scope of Application

a)

Contractual Obligations

Pursuant to its Art. 1 (1), Rome I applies to ‘contractual obligations in civil and commercial matters in any situation involving a conflict of laws’. As the proposal remains silent on the preliminary issue of how contractual obligations are to be defined,10 the ECJ will be required to interpret the regulation in light of its system and objectives and in a manner consistent with the notion of ‘matters relating to a contract’11 within the framework of Brussels I.12 The enactment of a regulation governing conflict of laws in matters of contract would, however, be the prime occasion for determining the circumstances which relate to the contractual sphere, the task should not be deferred to the ECJ. Moreover, the jurisprudence on conflict of jurisdictions should serve as a guideline rather than allowing an unconditionally parallel interpretation, as in borderline situations13 conceptual differences between the two instruments remain.14

b)

Pre-Contractual Obligations

An example of such a borderline situation is Art. 1 (2) lit. i) Rome I, which expressly exempts any ‘obligation arising out of a pre-contractual relationship’ from its scope of application. This categorical exclusion may engender criticism for several reasons.

10

Due to the late ratification of the protocols on the interpretation of the Rome Convention, a uniform interpretation was solely effectuated within the limits of Art. 18, but no guidance was given by the ECJ (see OJ 1989 nr. L 48/1 und nr. L 48/17). Belgium ratified the second Protocol only in 2004 (in: Moniteur belge, 18.08.2004, p. 62135), see VOLDERS B. / DUTTA A., ‘Was lange währt, wird endlich gut? Zur Auslegungskompetenz des EuGH für das EVÜ’, in: EuZW 2004, pp. 556-558, at 556. 11 See the extensive discussion on the relationship between Rome I and Brussels I in PERTEGÁS M., The Notion of contractual Obligation in Brussels I and Rome I, in: MEEUSEN J. / PERTEGÁS M. / STRAETMANS G. (eds.), Enforcement of International Contracts in the European Union, Antwerp 2004, pp. 175 et seq. Different and more precise is the German wording, i.e. ‘Vertrag oder Ansprüche aus einem Vertrag’. 12 ECJ C-34/82, Peters, in: ECR 1983, 987, para. 9 and 10; C-9/87 Arcado, in: ECR 1988, 1539, para. 10 and 11; C-256/91 Handte, in: ECR 1992, I-3967, para. 10; C-189/87 Kalfelis, in: ECR 1988, 5565, para. 15, 16; C-261/90, Reichert/Kockler, in: ECR 1992, I2149, para. 15; ECJ Gabriel, in: ECR 2002, I-6367, also in: NJW 2002, 2697 (2698), para. 41 et seq. 13 An example of possible difficulties arising from the interaction of the different private international law instruments at the EU level are pre-contractual obligations, see infra, this paragraph, under b). 14 PERTEGÁS M. (note 11), pp. 175 et seq.; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (note 3), at 88.

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A Short Commentary on the ‘Rome I’ Proposal First, the term ‘pre-contractual relationships’ appears for the first time in a European private international law rule, without drawing a clear dividing line either between the notions of contractual and pre-contractual obligations or between the different claims arising from the latter. Secondly, the explanatory memorandum to the provision focuses on the restrictive concept of a contract adopted by the ECJ under art 5 (1) lit. a) Brussels Convention15/Brussels I (aa) and on the divergent approaches in national laws which broadly characterise any form of culpa in contrahendo as non-contractual (bb), and which should therefore fall within the scope of the future Rome II Regulation (cc).16 Some reflexions shall demonstrate that these arguments however are not entirely convincing: (aa)

It is without doubt of fundamental importance to aim at utmost symmetry between the interpretation of similarly structured provisions of Brussels I and Rome I to prevent inconsistencies. It may however be questioned whether new legislation concerning conflict of laws in the field of contract, lacking jurisprudential support due to disadvantageous circumstances, must obligatorily follow the jurisprudence interpreting an instrument on conflict of jurisdictions as regards the determination of what is to be qualified as contractual and what is not. As mentioned above, the drafting of Rome I is the prime occasion to establish a concept of the contractual sphere. It would have been worth considering the implementation of a differentiated concept of pre-contractual relationships. Moreover certain discrepancies between Brussels I and Rome I will remain as the interpretation of the notion of ‘matters relating to a contract’ in Art. 5 (1) lit. a) Brussels Convention/Brussels I is determined by the procedural aspects of cross-border disputes. The Tacconi judgment,17 to which the Commission refers in the context of Art. 1 (2) lit. i) Rome I, is the best example: The ECJ reiterates, in its conclusions, that the formation of a (main) contract is not a prerequisite to the application of Art. 5 (1) lit. a) Brussels Convention/Brussels I, but simultaneously stresses that the provision does not apply to pre-contractual situations which arise solely from a

15 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, 27 September 1968, in: OJ C 027, 26.01.1998, pp. 1 – 27. See also ECJ, C-34/82 Peters, 22.3.1983, 34/82, in: ECR p. 987 para. 9-10, C-9/87, Arcado, 8.3.1988, in: ECR p. 1539, para. 11, 16., C-26/91, Handte, 17.6.1992, in: ECR p. 3967, para. 10 et seq. 16 Explanatory Memorandum of the Commission to Rome I, COM (2005) 650 final p. 5. 17 The case concerned a claim founded on a breach of an obligation to act honestly and in good faith with view to the conclusion of a contract ECJ C-334/00, Tacconi/HWS, 17.9.2002, in: ECR 2002, I-7357, para. 25.

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Eva Lein breach of rules of law and lack a consensual element, more specifically an obligation ‘freely assumed by one party towards another’.18 Art. 5 (1) lit. a) Brussels Convention/Brussels I does not require the existence of a litigious contractual obligation, due to the fact that the regulation lays down common rules on jurisdiction. If this were not the case, the allegations of one party could interfere with the allocation of jurisdiction and deprive the provision of its legal effect: the claim by one of the parties that no contract existed would suffice to circumvent the application of the provision.19 Besides the ECJ does not state a categorical preclusion of any type of pre-contractual relationship from the scope of Art. 5 (1) lit. a) Brussels Convention/Brussels I, as the conclusion of a contract remains non-compulsory for its application. The undifferentiated exemption in Art. 1 (2) lit. i) Rome I is also inconsistent from that point of view. Similarly, the requirement of a ‘freely assumed obligation’ must be placed within the scheme of Art. 5(1) lit. a) Brussels Convention/Brussels I, since the jurisdiction of the national court is determined by the place of performance of the obligation in question.20 The conflict of law rules do not follow this approach as the law applicable to contractual obligations will be the law of the habitual residence or seat of the party.21 (bb)

Leaving aside the impact of the ECJ jurisprudence, the conception of precontractual liability under Rome I, should rather be guided by the qualification of such liability in the UNIDROIT Principles22 and the European Principles of Contract Law23 than by the national approach of the Member States. A global reference to the major Member States’ approach to precontractual liability does not take into account the variety of pre-contractual

18 MANKOWSKI P., ‘Die Qualifikation der culpa in contrahendo – Nagelprobe für den Vertragsbegriff des europäischen IZPR und IPR’, in: IPRax 2003, pp. 127 et seq., at 129; KÖNDGEN J., Selbstbindung ohne Vertrag, Tübingen 1981, pp. 156-164; ECJ Handte C26/91, in: ECR 1992, I-3967, I-3994 para. 15; ECJ Réunion européenne, C-51/97, in: ECR 1998, I-6511, I-6542, para. 17, 19; ECJ C-334/00, Tacconi/HWS, 17.9.2002, in: ECR 2002, I-7357, para. 25 and Opinion of Advocate General Geelhoed, 31.1.2002, para. 75, 82. 19 ECJ C-38/81, Effer, in: ECR 1982, para. 7. 20 ECJ C-334/00, Tacconi/HWS, 17.9.2002, in: ECR 2002, I-7357, para. 22. 21 MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (note 3), at 88. 22 UNIDROIT Principles of International Commercial Contracts 2004 (hereafter ‘UPICC’), Rome 2004, Art. 2.1.15 (2) UPICC: ‘(…) a party who (…) breaks off negotiations in bad faith is liable for losses caused to the other party’. 23 Principles of European Contract Law (hereafter ‘PECL’), Parts I and II, The Hague 2000, Art. 2: 301 subpara. 2 and 3 PECL: ‘However a party which has negotiated or broken off negotiations contrary to good faith and fair dealing is liable for the losses caused to the other party’.

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A Short Commentary on the ‘Rome I’ Proposal obligations, which can be very closely linked to a contractual relationship and depend solely on the interaction of the parties in view of a future contract, as is the case for the breaking off of contractual negotiations.24 The UNIDROIT and European Principles have perceived this difference, as they each provide rules on pre-contractual liability in the case of a bad faith cessation of negotiations. As these Principles exclusively refer to the contractual sphere, pre-contractual liability has been at least partly assimilated to contractual liability.25 Notwithstanding their characterisation as eligible ‘non-State bodies of law’ within Art. 3 (2) subpara. 1 Rome I,26 and their recognition on the European legislative level,27 their view of pre-contractual liability seems to have been of no relevance. The suggestion that at least the breach of contractual negotiations be included in e.g. Art. 9 Rome I, with the consequence that liability would be determined by the law governing the contract, if concluded, should have been examined more seriously.28 (cc)

The dilemma arising out of the global submission of pre-contractual relationships to the regime of Rome II is that every variety of pre-contractual relationship will necessarily fall under Art. 3 Rome II relating to ‘torts’. Rome II does not provide for any special rule, which would take into account the fact that the circumstances engendering pre-contractual liability, which exclusively emerges from the special tie between parties willing to contract, can not be considered equal to a case of tort. In consequence, even in the case of cessation of negotiations, the applicable law does not conform to the law which would apply to the contract. A party

24 KÖNDGEN J. (note 18), at 160; MANKOWSKI P. (note 18), at 133, who distinguishes between duties which are inherent to the contractual transactions (‘transaktionsspezifische Pflichten’) and those which solely concern the interest in safeguarding the integrity of the goods of the other party (‘Integritätsinteresse’); in the same sense also MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (note 3), at 88-90. Besides, a number of national courts qualified the cessation of negotiations as contractual: see the reference in MANKOWSKI P. (note 18), p. 128: Hof Amsterdam, 19.9.1996, in: NIPR 1997 nr. 370, p. 469 et seq. nr. 4; Rb. Arnhem 26.10.2000, in: NIPR 2001, nr. 50, p. 116, nr. 6; LG Dortmund, 19.2.1998, in: IPRspr 1998, nr. 139, p. 255. 25 MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (note 3), at 88, 89. 26 See infra under B.1.b. 27 See the Explanatory Memorandum of the Commission with respect to Art. 3 (2) Rome I, COM (2005) 650, p. 5: ‘The form of words used would authorise the choice of the UNIDROIT principles, the principles of European Contract law […]’. 28 Of course the question remains whether these arguments would then have the same impact under Brussels I and lead to the application of its Art. 5 (1) lit. a) to precontractual obligations. In that case, the ‘place of performance’ would have to be interpreted as the place of performance of the ‘contemplated’ contract.

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Eva Lein willing to conclude a contract, certain that it would be subject to its own law under Art. 4 or even Art. 3 Rome I, would not reasonably expect to be liable under the law applicable to the other party in the event of a breaking off of negotiations. This result seems particularly strange where the conclusion of the contract is disputed and a liability for cessation of negotiations is pleaded only in the alternative. If Rome I exempts pre-contractual relationships, it would at least have been an option to revise the originally proposed Art. 9 Rome II29 relating to ‘noncontractual obligations arising out of an act other than a tort or delict, concerning relationships previously existing between the parties, such as a contract’. As for the law applicable to the contract, the inclusion of precontractual relationships in its scope could have guaranteed a certain degree of predictability for the party sued for e.g. cessation of negotiations.30 This option no longer seems feasible, as Art. 9 Rome II has been modified in the course of the Parliament’s motions for amendment and has now been replaced by Arts. 10 and 11 which exclusively relate to unjust enrichment and negotiorum gestio.31

B.

Freedom of Choice and the Law Applicable in the Absence of Choice: Flexibility versus Predictability

1.

Freedom of Choice

a)

Implicit Choice of Law

Under the Rome Convention, national courts have been acting in a non-uniform manner concerning an implicit choice of law, at times imposing a tacit will where a clear party intention could not be found.32 As the choice of the applicable law is a contract requiring consent,33 the court is not permitted to infer a tacit choice. The wording of Art. 3 (1) subpara. 2 Rome I has been slightly modified, giving the court one more guideline to exclude situations in which the parties did not consider 29

Art. 9 of the first Rome II proposal COM (2003) 429 final related to ‘noncontractual obligations arising out of an act other than a tort or delict, concerning relationships previously existing between the parties, such as a contract, closely connected with the non-contractual obligation’ with the consequence that the applicable law would have been that applicable to the contract. 30 NEWTON J., The Uniform Interpretation of the Brussels and Lugano Conventions, Oxford 2002, pp. 63-64; PERTEGÁS M. (note 11), at 186. 31 Art. 10, 11 of the Rome II proposal as amended, COM (2006) 381 final. 32 VON HOFFMANN B., in: Soergel Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, vol. 10, 12th ed., Stuttgart 1996, Art. 27 EGBGB, para. 40 et seq. 33 See Art. 3 (6) Rome I.

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A Short Commentary on the ‘Rome I’ Proposal the choice of law issue at all.34 It stipulates that a choice can be ‘demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case’ but also by the ‘behaviour of the parties’. Contrary to this cautious approach to implicit choice, a new Art. 3 (1) subpara. 3 Rome I incorporates the English presumption qui elegit iudicem elegit ius,35 presuming that a choice of court clause equally indicates the choice of the lex fori.36 Even if this presumption will ‘obviate the expense and delay that an enquiry into foreign law inevitably entails’,37 it will de facto impel the court to consider a purely hypothetical will of the parties as it frees the judge from the obligation to undertake an in-depth examination of the circumstances. It might lead to a quasi-automatic application of the lex fori, circumventing Art. 4 Rome I and disregarding possibly unfavourable consequences for the parties.38 The approach is indeed not entirely convincing as a choice of jurisdiction clause as such rather indicates that the parties wish to subject their dispute to the legal system of the forum as a whole, including its private international law, and not directly to the lex fori.39 Moreover, such clauses can take different forms, some of which may not 34

The French version of the proposal reads unchanged ‘de façon certaine’, i.e. ‘with certainty’, unlike the German wording, ‘mit hinreichender Sicherheit’. VON HOFFMANN B. (note 32), para. 40, commented the term ‘hinreichend’ which means ‘nicht zuviel und nicht zuwenig’. In consequence, the requirements as regards certainty are not exhaustive; see also BGH, in: IPRax 2002, pp. 37, 38. 35 JUENGER F.K., ‘The Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and Comparisons’, in: Am. J. Comp. L. 1994, p. 381 et seq, at 388; MORSE R., ‘The Substantive Scope of application of Brussels I and Rome I’, in: MEEUSEN J. / PERTEGÁS M. / STRAETMANS G. (ed.) (note 11), pp. 191 et seq., at 199. 36 The Giuliano/Lagarde report on the Rome Convention (GIULIANO / LAGARDE, ‘Rapport concernant la convention sur la loi applicable aux obligations contractuelles’, in: OJ 31.10.1980, C 282 pp. 1 et seq., at 17) considered choice of court agreements to be an indication of the choice of law of the forum, but only provided that the other terms of the contract and the circumstances of the case permit this conclusion. 37 JUENGER F.K. (note 35), at 388; MORSE R. (note 35), at 199 ; AUDIT B., Droit international privé, Paris 3rd ed. 2000, at 796; STURM F. / STURM G, in: Staudinger Kommentar zum Bürgerlichen Gesetzbuch: mit Einführungsgesetz und Nebengesetzen, Einleitung zum IPR, Berlin 2003, at 186. 38 At least a recital might be added to Rome I, reprising the formula proposed by the Parliament for the Rome II proposal (recital 18 b, Report on the proposal for a regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’) 27 June 2005) which read: ‘In the interests of ensuring that the issue of applicable law is properly considered by the parties and the court, the parties should be under a duty to inform the court in the document originating proceedings and the defence of the law or laws which they maintain are applicable to all or any parts of the claim’. 39 GROUPE EUROPÉEN DE DROIT INTERNATIONAL PRIVÉ (‘GEDIP’), Troisième commentaire consolidé des propositions de modification des art. 1er, 3, 4, 5, 6, 7, 9, 10bis, 12 et 13 de la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles et de l’art. 15 du règlement 44/2001/CE, at 10-6.

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Eva Lein even allow a clear implicit choice of law to be deduced. They may contain the option to sue instead in another jurisdiction or be agreed upon at a later stage. Notwithstanding other options regarding tacit choice of law,40 it might have been preferable to either retain the solution of the Rome Convention and consider choice of court clauses as one indication among others of a tacit choice of law or to follow the solution of Art. 7 (2) of the Mexico Convention, which stipulates that the ‘selection of a certain forum by the parties does not necessarily imply selection of the applicable law’,41 and which obliges the court to decide in light of all the facts.42 A tacit choice of law must be ‘found rather than presumed’.43

b)

Choice of Non-State Principles or International Uniform Law

Art. 3 (2) Rome I confirms the conclusion that ‘the prevailing view seems to have been that a contract will always be governed by a national legal system,44 allowing the choice of principles and rules of the substantive law of contract recognised internationally or in the Community’. The controversy over whether the term law in Art. 3 of the Rome Convention includes compilations of restatements elaborated by private law commissions or is limited to the designation of State codifications has now been settled.45 As Art. 3 was rather interpreted in the latter sense, arguing that incomplete catalogues 40 It was e.g. suggested to admit only an express choice of law or to stipulate conditions compliant to Art. 23 Brussels I, see BONOMI A. (note 8), at 67, 68. 41 See also GEDIP, Troisième version consolidée des propositions de modification des art. 1er, 3, 4, 5, 6, 7, 9, 10bis, 12 et 13 de la Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles et de l’art. 15 du règlement 44/2001/CE, point II, Art. 3 (1) Rome I: ‘En particulier, le choix d’un tribunal ou des tribunaux d’un Etat déterminé ne vaut pas en lui-même choix de la loi de cet Etat’. 42 Regarding the application of the lex fori, a question worth considering might be the issue of whether European private international law could in certain cases, however, by means of objective rules, provide for the application of the lex fori to reduce the cost factor engendered by the examination of the applicable foreign law. The proposal of LANDO opting for the application of the lex fori in cases of trivial matters with an insignificant value in dispute could serve as a point of departure: LANDO O., ‘Länderbericht Skandinavien’, in: Die Anwendung ausländischen Rechts im internationalen Privatrecht, 1968, pp. 128, 131 et seq., cited in STURM F. / STURM G. (note 37), at 187. 43 MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW, (note 3), at 38. 44 Principles of European Contract Law, parts I and II, 2000, Art. 1:101, under 3b). 45 Contra a choice of non-State bodies of law under the Rome Convention: COEN C., Vertragsscheitern und Rückabwicklung, Berlin 2003, pp. 100 et seq. and MANKOWSKI P. ‘Stillschweigende Rechtswahl und wählbares Recht’, in: LEIBLE S. (ed.), Das Grünbuch zum Internationalen Vertragsrecht, München 2004, p. 63 et seq., at 91 extensively discuss the option of a choice of non-State principles, demonstrating its practical problems. Pro among others BOELE-WOELKI K. in: IPRax 1997, at 17, indicating, however, that the wording of the Rome Convention must be changed.

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A Short Commentary on the ‘Rome I’ Proposal of principles would not be appropriate to replace the legitimacy function of a State legislator, non-State rules were considered equivalent to national non-mandatory rules and their designation only respected within the limits of the law applicable to the contract in the absence of choice.46 This gave rise to inconsistencies, as the parties’ will to subject their contractual relationship to the UNIDROIT Principles, for example, was entirely respected when the dispute was resolved by arbitration: a distinction unjustifiable in light of the fact that the State court is indirectly required to deal with such rules if the dispute cannot be settled by the arbitrator. Art. 3 (2) is, in the author’s opinion, satisfactory in its rationale, enabling the European or UNIDROIT Principles to gain practical relevancy and to encourage the spread of a common European vision of contract law. Nonetheless, the wording of Art 3 (2) Rome I, ‘principles and rules (…) recognised internationally or in the Community’, is not well chosen. It remains unclear when one can speak of recognition and which instance decides upon the acceptance or non-acceptance of such principles.47 The eligible uniform rules are the UNIDROIT Principles, the Principles of European Contract Law or a future optional Community Contract Law, as well as instruments of international uniform law, e.g. the CISG, if it does not directly apply on the basis of its Art. 1 (1).48 At the same time, the Commission wishes to exclude the lex mercatoria for example, because of its imprecise and indefinite compilations.49 Nevertheless, the lex mercatoria plays an important role on a global level. The Mexico Convention attributes a key position to the lex mercatoria.50 And even on the European scale, French jurisprudence gives some support to the supposition that the lex mercatoria may be on its way to general recognition.51 The same problem arises as regards the customs of international trade, where global recognition 46 BUSCH D. / HONDIUS E., ‘Die Principles of European Contract Law aus niederländischer Sicht’, in: ZEuP 2001, p. 227. 47 See also MANKOWSKI P., ‘Der Vorschlag für die Rom I-Verordnung’, in: IPRax 2006, p. 101 et seq. at 102. 48 See the decisions of the Hoge Raad vom 25.5.1989, in: NJ 1992, p. 105 and 5.1.2001, in: NJ 2001, p. 391, cited in the Green Paper of the Commission (COM (2003) 654 final, p. 28), which are in favour of a choice of law of the CISG. 49 See the Explanatory Memorandum of the Commission, Art. 3, COM (2005) final, p. 6. 50 FERNANDEZ ARROYO D.P., ‘La Convention interaméricaine sur la loi applicable aux contrats internationaux: certains chemins conduisent au-delà de Rome’, in: Rev. crit. dr. int. priv., 1995, pp. 178 et seq.; JÜNGER F.K., ‘Contract Choice of Law in the Americas’, in: Am. J. Comp. L. 1997, pp. 203-208. 51 See the comment of OPPETIT B., Cour de Cassation (1re Ch. Civ.), 22.10.1991, in: Rev. crit. dr. int. priv. 1992, pp. 114 et seq.: ‘La lex mercatoria apparaît non comme un véritable système, certes, mais néanmoins comme un ensemble, entendu au sens de totalité d’éléments réunis’. The German doctrine shows that it will be one of the future missions of private international law to define the relationship between autonomous customs of international trade and national substantial private law; yet, the lex mercatoria is considered unable to guarantee legal certainty and cannot be compared to a State codification: see VON HOFFMANN B., Internationales Privatrecht, 6th ed., München 2000, § 2 para. 56.

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Eva Lein seems to be quite obvious. Uncertainties emerge with respect to compilations of various commissions acting in the field of contract law, such as the Codice Gandolfi,52 which is as precise in its language as the PECL or UPICC. The ECJ will be, once again, required to establish criteria for the interpretation of the provision.53 It would be preferable, in the interest of legal certainty, to establish a precise list of eligible compilations, which could be supplemented if any new restatement were to be officially recognized. At least Art. 3 (2) Rome I should specify who is the recognising subject, following the example of Art. 9 (2) of the Mexico Convention which states ‘the general principles of international commercial law accepted by international organisations (…)’.

c)

EC Provisions as a Limit to Choice of Law

To guarantee a minimum EC standard in cases in which the parties subject their contract to the rules of a non-Member State, Art. 3 (5) Rome I limits the freedom of choice of law, providing for the application of ‘mandatory EC rules’ if those rules would apply in the concrete case in the absence of a choice.54 The provision protects the Community standard even beyond the usual limits of choice of law, such as the protection of the commercially weaker party, internationally mandatory rules within the meaning of the new Art. 8 Rome I, or ‘ordre public’. It is important to note that the proposed wording is not limited to purely intra-Community cases, as it does not stipulate the requirement that all elements relevant to the case be connected with one or more Member State at the time of the choice.55

2.

Law Applicable in the Absence of Choice

The proposal submits Art. 4 of the Rome Convention to substantial changes. The present system of Art. 4 of the Rome Convention is based on the principle of the closest connection and its presumptive concretisation by way of the characteristic performance concept stipulated in Art. 4 (2). It leads to the application of the law of the State in which the party required to perform the service characterising the contract has his usual residence. This presumption can be disregarded due to the ‘escape clause’ of Art. 4 (5) of the Rome Convention. The application of Art. 4 (5) 52 ACADÉMIE DES PRIVATISTES EUROPÉENS, Code Européen des Contrats, Avantprojet, livre premier, Milan 2004. 53 So OPPETIT B. (note 51), at 116, citing E. Lambert: ‘La coutume ne [peut] tirer sa valeur obligatoire que de la seule consécration jurisprudentielle’. 54 A typical case is Art. 6 (2) of the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, in: OJ L 095, 21.04.1993, pp. 29-34. 55 A limitation of Art. 3 (5) Rome I to ‘internal’ situations would not be coherent with the Ingmar jurisprudence, ECJ, C-381/98, 9.11.2000, in: ECR 2000-I, p. 9305; see BONOMI A. (note 8), at 69.

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A Short Commentary on the ‘Rome I’ Proposal enables a party to rebut the presumption of Art. 4 (2) in two cases: if the characteristic performance cannot be determined; or if it appears from the circumstances taken as a whole that the contract is more closely connected with another country. The interpretation of this clause constitutes a constant source of divergence.56 The interaction of Art. 4 (1), (2) and (5) of the Rome Convention is thus complex and controversial in national doctrine and jurisprudence.57 With the aim of greater predictability and legal certainty, the Rome I proposal presents a more precise and objective, though significantly less flexible, approach.58 Art. 4 (1) Rome I lays down precise rules for standard contracts, also inserting the present Art. 4 (3) of the Rome Convention,59 which are de facto concrete cases in which the characteristic performance has been predetermined by law. Only in Art. 4 (1) lit. g) and h) does the element of protection of the weaker party prevail in the definition of the connecting factor. Art. 4 (2) Rome I retains the characteristic performance concept – as a general rather than a presumptive rule – only for those contracts, not specified under para.1, where a categorisation is not practicable. The principle of the closest connection applies only in a subsidiary manner where a characteristic performance cannot be discerned.60 As regards the new concept, it might be questioned whether the enumeration of certain contracts in Art. 4 para. 1 actually grants any advantages, or if the new Art. 4 (2), as a general rule specifying the cases of para. 1 lit. g) and h), would not have avoided the problems of the categorisation and delimitation of contract types, which must now be made.61 The option to apply the law of a State to which the particular contract is ‘more closely connected’, as the escape clause of Art. 4 (5) sub. 2 Rome Convention provides, has not been reintegrated into the new system. Its elimination should prevent the former interpretative problems and national divergences, as the general rule was too easily displaced by virtue of the existence of a manifestly closer con-

56

After analysing the national jurisprudence, the Commission came to the conclusion that Art. 4 (5) has in some cases even been applied ab initio, see the Green Paper COM (2003), 654 final, p. 30 (3.2.5.2.). 57 JUENGER F.K. (note 35), at 384. 58 See also POCAR F., ‘La codification européenne du droit international privé: vers l’adoption de règles rigides ou flexibles vers les États tiers’, in: Mélanges P. Lagarde, Paris 2005, pp. 697 et seq., at 702. 59 According to Art. 4 (3) in its present wording, it shall be presumed that, where the subject matter of the contract is a right over immovable property or a right to use immovable property, the contract is most closely connected with the country where the immovable property is situated. The provision is reprised in Art. 4 (1) lit. d) Rome I. 60 The proposal largely adopts the idea presented by the GEDIP (note 39), at 10-8 to 10-10. 61 See also MANKOWSKI P. (note 47), at 103.

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Eva Lein nection with another country.62 Art. 4 (2) subpara. 2 only allows recourse to the principle of the closest connection where a characteristic performance test fails. Subsequently, justice and equity in the particular case lose relevance, as the courts will be deprived of any discretion in taking into account the real centre of gravity of a contract, whenever a characteristic performance can be defined.63 The objective approach of Art. 4 further strengthens the contrast between the European rules on conflict of laws and the Mexico Convention. The latter embodies the principle of closest connection, granting to the court wide discretionary powers, stipulating that it must take into account all the objective and subjective elements of the contract in determining the applicable law.64 Adding, in its Art. 9 (2) subpara. 2, that the court ‘shall also take into account the general principles of international commercial law recognized by international organizations’, it enables, to a large extent, the granting of justice and equity in the particular case. The Mexico Convention never adopted the objective approach of the Rome Convention, as it never approved the characteristic performance concept. It has been stated that a localisation of international contracts is subject to difficulties and only a substantive approach meets the requirements of international trade.65 It is clear that this approach of ‘internationalisation’ could not have been followed within the framework of Art. 4 Rome I, which abandoned the flexible interplay of the principle of the closest connection and the escape clause for the sake of greater predictability.66

62 See also Kenburn Waste Management Ltd v. Heinz Bergmann [2002] I.L.Pr. 588 [C.A.] at para. 29. 63 This is a reminder of the widespread criticism to which the concept of characteristic performance has been subject. It was considered to be a privilege for international entrepreneurs, a rule hindering the sufficient taking into account of the specifics of the particular contract: ‘The drafters borrowed the concept from a legal writer who had invented this deus ex machina to escape from the Swiss lex loci solutionis rule, which would submit the obligation of each party to potentially different laws.(…) Instead of divining a contract’s true center of gravity, article 4 (2) artificially inflates the weight of a single connecting factor’, JUENGER K.F., ‘The EEC Convention on the Law Applicable to Contractual Obligations: An American Assessment’, in: NORTH P.(ed.), Contract Conflicts, Amsterdam 1982, pp. 295 et seq., at 300, 301. 64 Art. 9 (2) Convención de Mexico: ‘El tribunal tomará en cuenta todos los elementos objetivos y subjetivos que se desprendan del contrato para determinar el derecho del Estado con el cual tiene vínculos más estrechos. También tomará en cuenta los principios generales del derecho comercial internacional aceptados por organismos internacionales’. 65 JUENGER F.K. (note 35), at 391 et seq. 66 ‘(…) It is surely fairer to apply supranational standards than to privilege one party by granting it the benefit of its home-state law’, JUENGER F.K. (note 35), at 392. It was even proposed, but finally rejected, that the following formula be integrated into the Mexico Convention: ‘If the parties have not selected the applicable law, or if this election proves ineffective, the contract shall be governed by the general principles of international commercial law accepted by international organizations’.

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A Short Commentary on the ‘Rome I’ Proposal C.

Particular Contracts

1.

Consumer Contracts

A number of modifications became necessary due to the wording or technique of regulation of the Rome Convention. The proposal clarifies that Art. 5 should only apply to contracts concluded between consumers and persons pursuing a trade or profession. The present incomplete enumeration of typical consumer contracts is replaced by a definition.67 Furthermore, according to its para. 2 and, by analogy, to Art. 15 Brussels I Regulation, Art. 5 Rome I only applies to those contracts, concluded by professionals, directing such activities to the Member State in which the consumer has his or her habitual residence. The reference to the targeted activity allows for the inclusion of interactive websites accessible in the state of residence of the consumer and for the taking into account of the ‘mobile consumer’. Contrary to the present Art. 5 of the Rome Convention, providing for a limited choice of law in consumer contract matters,68 that can lead to a complex accumulation of a legal system plus foreign consumer protection provisions, Rome I subjects consumer contracts exclusively to the law of the Member State in which the consumer has his habitual residence. The exclusion of party autonomy in consumer contract law corresponds to the idea of extensive consumer protection, and, at the same time, responds to the concern of private international law to approach, as far as possible, the application of a single legal order. Art. 5 (2) subpara. 2 Rome I contains a provision releasing the professional from the burden of adapting his contract to the law of the State in which the consumer is a resident, if the consumer did not inform the professional of his habitual residence. In this case, the contract will not fall within the scope of Art. 5, but will be subject to the general rule of Art. 4 Rome I. Only the exemptions in Art. 5 (3) could be criticised for lack of coherency. Residential tenancy contracts, although a central issue in consumer contract law, will be exempt from the application of Art. 5 (1) and can thus be subject to a choice of law. The exclusion of contracts for the supply of services, which are to be supplied to the consumer exclusively in a country other than that of his habitual residence, is not convincing, as package travel contracts, in the context of which services typically are supplied in a foreign country, fall under Art. 5 Rome I.69 Furthermore, the rule does not correspond to Art. 15 (3) Brussels I, which does not provide for this exemption. 67 See in detail LEIBLE S., ‘Verbesserung des kollisionsrechtlichen Verbraucherschutzes’, in: LEIBLE (ed.) (note 3), pp. 133 et seq., at 139; CZERNICH D. / HEISS H., Das Europäische Schuldvertragsübereinkommen – EVÜ, Wien 1999, Art. 5 , para. 14 et seq. 68 Under the Rome Convention, the contract can be subject to the law of the State in which the professional is established, but, pursuant to its Art. 5 (2), a choice of law made by the parties shall not have the result of depriving the consumer of the protection afforded to him by the mandatory rules of the law of the country in which he has his habitual residence. 69 See art 5 (3) lit. b) Rome I; LEIBLE S. (note 67), pp. 133 et seq., at 141.

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Individual Employment Contracts

The changes effectuated to the provision essentially concern its wording. Art. 6 (1) Rome I maintains the limited choice of law provided for under the Rome Convention, i.e. an employee must not be deprived of the benefits of the mandatory protection provisions of the law applicable in the absence of a choice as determined by Art. 6 (2) of the proposal. Art. 6 (2) lit. a) Rome I, which has been adapted from Art. 18 Brussels I, provides that the law of the country applies ‘in or from which’ the employee habitually carries out his work. The wording specifically intends to include aircraft personnel. The temporary posting of workers in the framework of the provision of services is now defined in Art. 6 (2) lit. a) subpara. 3 Rome I. The modalities of complex employment relationships are taken into account in Art. 6 (2) lit. a) subpara. 4 Rome I.

3.

Agency

Because the Hague Agency Convention70 has been ratified by only a few Member States, matters relating to agency are no longer excluded from the scope of Rome I. Hence, the inclusion of this outstanding issue has been carried out in a way which confuses rather than clarifies. In the absence of a choice of law, Art. 7 (1) Rome I subjects the contract forming the relationship between principal and agent to the law of the habitual residence of the agent, provided that the latter does not exercise his main activity in the principal’s state of residence. Surprisingly, unless a choice of law pursuant to Art. 7 (3) has been effectuated, this connecting factor equally prevails71 within Art. 7 (2) Rome I, which designates the law applicable to the relationship between the principal and the third party. This relationship is only governed by the law of the country in which the agent acted, if this State is at the same time the country of residence of either the principal or the third party, or if the agent acted at an exchange or an auction. The wording of this paragraph leads to the conclusion that the binding effects for the principal of a contract concluded by an agent result from a law, which might have no connection with the contract itself and might not even be predictable for the principal, and which might be contrary to his interests. At least Art. 7 (2) subpara. 2 reduces the impact of this rule by subjecting contracts concluded by ‘professional’ representatives acting at exchanges or auctions, to the law of the State of action. To avoid inconsistencies, Art. 7 should be revised and the relationship between principal and third party should be subject to the general rule of Art. 4, as it constitutes a ‘normal’ contractual relationship. 70

Hague Convention of 14 March 1978 on the Law Applicable to Agency. The proposal generally puts the emphasis on the State of residence of the agent, which is unusual as a general rule and only justified in cases of commercial agents, see RUTHIG J., Vollmacht und Rechtsschein im IPR, Heidelberg 1996, p. 120 et seq. 71

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A Short Commentary on the ‘Rome I’ Proposal D.

Mandatory Rules

1.

Definition

Art. 8 (1) Rome I introduces a definition of internationally mandatory rules,72 which apply irrespective of the lex causae73 and regardless of the fact that international private law generally only regulates relations under private law. The new statutory definition also constitutes a limitation to 3 (4) Rome I, which deals with the national mandatory rules comprising the substantial ius cogens.74 With the aim of respecting the supremacy of EC law and for the sake of a genuine interpretation of what are international mandatory rules, Art. 8 (1) Rome I defines as mandatory such rules ‘the respect for which is regarded as crucial by a country for safeguarding its political, social or economic organisation to such an extent that they are applicable to any situation falling within the scope, irrespective of the law otherwise applicable to the contract’. The use of this formula, borrowed from the ECJ judgement Arblade,75 should guarantee that national mandatory legislation is only considered if it does not constitute an unjustified restriction of the EC fundamental principles.76 Provisions serving solely private interests will not be covered if they are not decisively motivated by social, political, or economic grounds. It remains vague however where this boundary should be fixed, and it has been suggested that a clearer distinction be drawn between rules protecting individual interests and those defending public interest requirements.77 Moreover, the correspondent article of the Rome II proposal, which is still based on the wording of the present Art. 7 of the Rome Convention, should adapt its terms to Art. 8 Rome I.78 Still, the relationship between Art. 8 and Arts. 5 and 6 Rome I remains unclear,79 inter alia the question of whether, in consumer contract law, Art. 8 can lead 72

The coordination between the English wordings of Art. 8 (1) and Art. 3 (3) and (4) Rome I proves to be misleading, as both speak of ‘mandatory rules’, hence defining them twice, each time for the purpose of the respective article. The German wording is clearer, as it refers to ‘zwingende Bestimmungen’ within Art. 3 and to ‘Eingriffsnormen’ within Art. 8. 73 BONOMI A., ‘Mandatory Rules in Private International Law’, in: this Yearbook 1999, pp. 215 et seq., at 230; DE VAREILLES-SOMMIÈRES P., ‘Ordre public et contrats internationaux en Europe’, in: Mélanges Ph. Malaurie, Paris 2005, pp. 393 et seq., at 395 ; DICEY A.V. / MORRIS J.H.C. The Conflict of Laws, 13th ed., London 2000, p. 21 et seq. and at 1242; CHESHIRE G. / NORTH P., Private International Law, 11th ed., London 1993, p. 455 et seq., at 466. 74 MAGNUS U. in: Staudinger Kommentar zum Bürgerlichen Gesetzbuch: mit Einführungsgesetz und Nebengesetzen, Berlin 2003, Art. 27 EGBGB, para. 130. 75 ECJ, C-369/96, 376/96, 13.11.1999 Arblade, para. 34, Explanatory Memorandum of the Commission to Rome I COM (2005) 650, p.7. 76 See also the proposal of the GEDIP (note 39), under VIII. 77 MANKOWSKI P. (note 45), at 109. 78 Art. 13 Rome II proposal as amended, COM (2006) 83 final.

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Eva Lein to a protection, exceeding that granted by the law of the habitual residence of the consumer.

2.

Mandatory Rules of Community Law

Despite the suggestions made on this issue, Art. 8 (2) Rome I, providing for the application of the mandatory rules of the lex fori, further fails to clarify that it also covers the mandatory rules of Community law, which are directly applicable. The issue remains relevant, as Art. 3 (5) Rome I has a different conception of mandatory rules and only refers to cases in which a choice of law has been made. Similarly to the ‘Europeanisation’ of the national ordre public80 the domain of internationally mandatory rules is partly governed by supranational law.81 The supremacy of Community law should have been emphasized in the wording of Art. 8 (2) Rome I.

3.

Mandatory Rules of Third Party States

Art 8 (3) Rome I specifies the criteria, set out in Art. 7 (1) of the Rome Convention, on which national courts should base their decision of whether to give effect to foreign mandatory provisions or not. Despite the reservation in respect of Art. 7 (1) of the Rome Convention filed by some Member States under its Art. 22 lit. a), the provision of Art. 8 (3) Rome I appears to be indispensable.82 It addresses the problem that a contract or its performance could be rendered illegal in the relevant foreign country due to disrespect of its mandatory rules. Two well-known issues however continue to be insufficiently regulated; first, the question of whether the expression ‘mandatory rules of the law of another country’ is meant to include those of the lex causae, secondly, whether special weight should be given to the mandatory rules of other EU Member States. As the reservation in respect of Art. 7 (1) of the Rome Convention becomes obsolete under Rome I, a most comprehensive coverage of the issue would have been preferable to supply clear guidance to national courts. Vis-à-vis the mandatory rules of the lex causae, which could either automatically apply as a part of the law governing the particular case, or be subject to Art. 8 (3) Rome I, the formulation ‘law of another country’, in contrast to the term 79

See in detail BONOMI A. (note 73), p. 215 et seq.; BONOMI A. (note 8), at 86 et seq.; FREITAG R., ‘Einfach und international zwingende Normen’, in: LEIBLE (ed.) (note 3), pp. 167-191, at 179. 80 DE VAREILLES-SOMMIÈRES P. (note 73), at 398 ; BAUMERT A.J., ‘Europäischer ordre public und Sonderanknüpfung zur Durchsetzung von EG-Recht’, Frankfurt a.M. 1994. 81 FREITAG R. (note 79), at 190. 82 The provision engendered widespread criticism, opponents objecting either to its conception as such or to its vague wording.

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A Short Commentary on the ‘Rome I’ Proposal lex fori used in Art. 8 (2), seems to indicate that these questions must be addressed by 8 (3) Rome I. This opinion seems to be confirmed by the fact that the choice of the lex causae would otherwise be guided rather by the ‘choice of its mandatory rules’, a situation which is contrary to the principle of independence of mandatory rules and party autonomy. The proposal should have clarified whether internationally mandatory rules of the proper law of the contract are deemed to be comprised in the applicable contract law or fall under Art. 8 (3) Rome I. As regards mandatory rules of other EU Member States, the genuine European area of justice, the principle of mutual recognition, the quest for uniformity of decisions in different jurisdictions, and Art. 10 (2) EC underline the fact that the role of mandatory rules of other Member States closely connected with the case is significant. This is particularly the case where the other Member State would have had concurrent jurisdiction.83 Although the Member States’ internationally mandatory rules must be in line with the limits of EC freedoms and thus follow equivalent standards, the suggestion of making their application obligatory or allowing their refusal only under exceptional circumstances has not been adopted.84 They still underlie the general rule of the current Art. 8 (3) Rome I, which leaves their observance to the court’s discretion.85

E.

Subsidiary Issues

1.

Voluntary Assignment, Contractual and Statutory Subrogation

The proposal restructures the current Art. 12 and 13 of the Rome Convention, but deals in particular with a question that has been left open in Art. 12 of the Rome Convention: the law determining the validity of the assignment with regard to third parties. Consequently, no clear consensus existed concerning which connecting factor should govern the question of whether an assignment may be relied upon against third parties.86 The discrepancy has been resolved in a new Art. 13 (3) Rome I, in favour of the application of the law at the assignor’s habitual residence at the time when the assignment is entered into.87 The solution favours predictability, as the law of the assignor’s habitual residence is recognizable to all parties to an assignment before and after it takes place. 83 FURRER A., ‘Zivilrecht im gemeinschaftsrechtlichen Kontext’, Bern 2002, pp. 314 et seq.; FREITAG R. (note 79), at 184-186; BONOMI A. (note 8), at 92. 84 BONOMI A. (note 73), at 240, 246 and (note 8), at 93; FURRER A. (note 83), pp. 314 et seq.; FREITAG R. (note 79), at 184-186. 85 FREITAG R. (note 79), at 184-186, BONOMI A. (note 8), at 92. 86 Absent a ratification of the First Protocol on the interpretation of the 1980 Convention by the Court of Justice, in: OJ C 27, 26.01.1998, pp. 47 – 51; see also KIENINGER E.-M., ‘Das Statut der Forderungsabtretung im Verhältnis zu Dritten’, in: RabelsZ 1998, pp. 678-711. 87 As proposed by KIENINGER E.-M. (note 86), at 702-710; HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, in: RabelsZ 2003, pp. 1 -56, at 47 et seq.

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Eva Lein A capital reason for adopting this solution was the alignment of the European provisions with Arts. 22 and 30 of the UNCITRAL Convention on the Assignment of Receivables (hereafter ‘CARIT’).88 The Member States of the Rome Convention, applying either the law governing the assigned right89 or the law applicable to the assignment contract,90 were de facto prevented from adhering to the convention, as it remained unclear how Art. 38 CARIT defined its relationship to the Rome Convention or to the Rome I regulation.

2.

Joint Liability

The provision on joint liability has been structured along the lines of the private international law rules on assignment and subrogation. In cases of joint liability, the debtor satisfying the creditor may rely on the law governing his obligation towards the creditor. This law governs not only his right to claim against the other joint debtors, but also applies if it provides for rules deemed to protect the debtor from actions to ascertain his liability. Still, the new Art. 15 Rome I does not clarify under what conditions joint liability arises, in the event that the law applicable to one of the obligations at issue provides for a joint liability while the other does not.91 The exact wording of the first sentence of Art. 15 Rome I has been adopted in the new Art. 17 Rome II92, which however remains surprisingly silent with respect to the last sentence of Art. 15 Rome I, referring to the debtor’s protection in cases of joint indebtedness.93

88 UNCITRAL Convention on the Assignment of Receivables in International Trade, 12 December 2001. 89 See German Supreme Court (BGH) decisions in: BGHZ 111, 376, 379 et seq.; BGHZ 125, 196, 205, in: IPRax 2000, p. 128; Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC and others, in: Weekly Law Reports 2001, at 1344. 90 Hoge Raad, 16.5.1997, Rechtspraak van de Week (RvdW) 1997, nr. 12 C, p. 739 et seq., in: Ned. Jur. 1998 nr. 585, p. 3326 et seq.; STRUYCKEN T., ‘The international assignment of debts: the Dutch Hoge Raad applies the Rome Convention, Art. 12, to the proprietary issues’, in: Lloyd’s Maritime and Commercial Law Quarterly 1998, p. 345 et seq. 91 See also MANKOWSKI P. (note 45), at 111. 92 Amended proposal for a European Parliament and Council regulation on the law applicable to non-contractual obligations (Rome II), COM (2006) 83 final, 21.02.2006. 93 The HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW proposed adding a similar paragraph to Art. 15 (now Art. 17) of the Rome II proposal (note 87), at 46.

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A Short Commentary on the ‘Rome I’ Proposal 3.

Statutory Set-off

In accordance with the concept embodied in Art. 6 Regulation (EC) 1346/2000,94 Art. 16 subjects statutory set-off to the law applicable to the obligation in relation to which the right to set-off is asserted, an approach which takes into account the concerns of the party against which the set-off has been alleged. The Rome I proposal follows the predominant opinion within the Member States, which is founded on Art 10 (1) lit. d) of the Rome Convention, and according to which the law applicable to a contract equally governs the various means of extinguishing the obligations.95 It must be specified that the provision does not address contractual offsetting, which falls under Arts. 3 or 4 Rome I. The application of the latter may however give rise to problems, as the characteristic performance is not an adequate criterion in cases of set-off.96

III. Transformation into a Community Instrument A.

Relationship to Other Provisions of Community Law

The concern for consistency in Community law requires Rome I to be without prejudice to conflict-of-law rules in specific matters embodied in other instruments of secondary Community legislation. Art. 22 lit. a) Rome I refers to the priority of Community rules with which possible conflicts are likely to arise. The regulatory technique of Art. 22 lit. a) Rome I, a simple reference to an appendix listing such Community instruments, is rather astonishing, given the interest shown in this issue in the consultative phase of the Green Paper on contractual obligations. In fact, the aforementioned appendix neither clearly reveals the relevant provisions in such instruments nor gives any indication of where they have been implemented in national law. It does take the opportunity to truly integrate existing conflict-of-law rules in EC directives into the system of Rome I, as was requested by scholars, but thus does not solve the fundamental problem of dispersed coexisting conflict rules in directives and regulations. 94

Art. 6 (1) Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings states that ‘the opening of insolvency proceedings shall not affect the right of creditors to demand the set-off of their claims against the claims of the debtor, where such a set-off is permitted by the law applicable to the insolvent debtor’s claim’. See KOLMANN S., in: EuLF 2002, pp. 167 et seq., at 175 considering the application of the law governing the obligation in relation to which the right to set-off is asserted as a European acquis. 95 CZERNICH D. / HEISS H. (note 67), Art. 10 para. 32; REITMANN C. / MARTINY D., Internationales Vertragsrecht, 6th ed., Köln 2004, para. 309 et seq.; 96 MAGNUS U., ‘Internationale Aufrechnung’, in: LEIBLE S. (ed.) (note 3), pp. 209233 at 224; KANNENGIESSER M.N., Die Aufrechnung im Internationalen Privat- und Verfahrensrecht, Tübingen 1998, pp. 74 et seq., at 136 et seq.

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Eva Lein This issue will actually need to be settled in relation to the new services directive.97

B.

Consequences Linked to the Nature of the Rome I Instrument

The changes to the legal nature of the Rome convention will simultaneously partly hinder, and widely promote, uniformity in the European legal area. On the one hand, new Member States will automatically adopt the Regulation as a part of the acquis communautaire. Moreover, as the framework of a convention will be abandoned, several of its characteristics, such as the provisions allowing Member States to specify reservations to certain articles of the Rome Convention,98 will not be maintained. Finally, Art. 68 EC will pave the way towards a uniform interpretation of Rome I by the ECJ. On the other hand, the special status accorded to some Member States as regards title IV of the EC Treaty,99 especially Denmark, may at least temporarily lead to the usual gaps within the European legal area, as long as those Member States continue to apply the Rome Convention. As a result, the protocols on the interpretation of the Rome Convention, unused to date, might be of use in the future.100

IV.

Conclusions

The Rome I Regulation will in principle perpetuate the Rome Convention and solve certain imperfections, which have appeared during the last 25 years of its rather successful application. The transformation of the Rome Convention, however, also entails significant structural and substantial changes. The author again calls the reader’s attention to the introduction of a choice of law rule for non-State principles, the total ban on party autonomy in the field of consumer contracts and the evolution from flexibility to a more rigid conflict rule within the framework of Art. 4 Rome I.

97

See Arts. 3 (2), 16 and 17 et seq. of the Proposal for a directive of the European Parliament and of the Council on Services in the Internal Market, 5.3.2004 (COM (2004) 2), the Draft of the European Parliament legislative Resolution on the proposal for a directive of the European Parliament and of the Council on services in the internal market (P6_TAPROV (2006)0061) and the amended proposal COM (2006) 160 final. 98 See Arts. 7 ( 1) and 10 (1) lit. e) of the Rome Convention, now Arts. 8 (1) and 11 (1) lit. e) Rome I. 99 Art. 69 EC, Protocols 4 and 5 to the Treaty of the European Union on the position of the United Kingdom and Ireland as well as Denmark, in: OJ, L 325/7 24.12.2002. 100 VOLDERS B. / DUTTA A. (note 10), at 558.

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A Short Commentary on the ‘Rome I’ Proposal Some of the proposed provisions seem either not to take sufficiently into consideration, or to overestimate the mutual influence of the ‘triad’ of Brussels I and Rome I and II. The latter is the case for the global exemption of precontractual relationships from the scope of Rome I. In the interests of clarity and legal certainty, the European legislator should opt for a revision of some of the proposed articles, in particular Arts. 3 (2) and 7 (2) Rome I, which are not persuasive in their present wording. The same is true for the still unclear interaction between the Rome I Regulation and other Community conflict-of-law rules in the field of contractual obligations, now addressed in Art. 22 Rome I. The concept of internationally mandatory rules, one of the most controversial issues of conflict of law rules in matters of contract, would benefit from a more comprehensive and clearer approach, given that the corresponding provision of the Rome Convention was not accepted by all signatories for reasons including its vagueness. Even if Rome I widely provides for acceptable and expected solutions, it might emulate its counterpart Rome II and continue to occupy the European legislator for a while.

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BOOK REVIEWS ________________

Fritz STURM / Gudrun STURM, J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen. EGBGB / IPR. Einleitung zum IPR, Berlin (Sellier de Gruyter) 2003, 298 p. The well-known Commentary founded by Standinger has increased its size and changed its marketing through the years. From the first (1898) package edition in six volumes, which became more numerous in the subsequent editions, the publisher has changed its way of commercializing the work. Now the volumes are published separately according to the needs of the market. When the ninth edition was published, the most comprehensive private international law commentary existing at that time was the one by the famous Professor Leo Raape. Later Professor Raape published a textbook on conflict of laws which had many successive editions. The last one was edited by Professor Fritz Sturm who from 1984 also began working on Staudinger Kommentar’s introductory remarks on German private international law. The present edition is considerably expanded from the previous one (1996). In 270 pages, and following the German method of ordering the material through ‘side numbers’ (Randnummern), the general problems of conflict of laws are exposed in a very succinct but essential and brilliant way. The text deals with fundamental problems of conflict of laws like characterization, adaptation, the preliminary or incidental question, ordre public, and the influence of public international law. Renvoi is not included and the authors refer to Hausmann’s scrutiny of the problem. The exposition starts with recent theories on the theoretical foundation of private international law and also includes items such as lex mercatoria, general principles of conflict of laws etc. While debating the tendency to resort to the lex fori (Zug zur lex fori) the authors hold, like Sturm in the most recent edition of Raape’s textbook, that the lex fori must always be in the choice of the parties, except for international treaties (par. 198). Characterization has to be undertaken on the basis of the lex fori and the authors warn against every different opinion (par. 214). A detailed presentation of the preliminary question is provided. Having accurately reviewed the state of the problem, the authors declare their preference for an autonomous regulation of this question. This means that the conflict rules contained in the legal system that governs the principal question are not to be applied to all incidental questions on which the answer to the principal question depends. Instead the conflict rules of the forum are applicable. The reasons for this

Yearbook of Private International Law, Volume 7 (2005), pp. 415-416 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

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Book Reviews

solution, which runs against the need for international harmony and has been rejected in classical works on private international law, are threefold. First it creates harmony with the resolution of the case using the conflict rules of the forum (wir bleiben uns selbst treu). Second the incidental question could become an autonomous legal question and in this case the German judge has to apply von Amt wegen German conflict rules (giving rise to questions about the facultative character of private international law rules). Third the opposite view leads to different solutions according to the specificity of the case and this is unsatisfactory since the world is a little village (par. 240). The authors agree however with some limited exceptions which reverse the dominant theory: not a general rule inspired by the search for international harmony with exceptions dictated by the need for internal harmony, but internal harmony counteracted by the opposite principle in cases like the right to a name. It would take too much time to analyze the content of Mr and Mrs Sturm’s contribution. What makes their work highly appreciated is the fact that all topics, inside the limits of the contribution, are thoroughly researched and clearly presented, through short periods which remind of some classics of the English literature. The completeness and accuracy of the bibliographical references are another value of the work. Tito BALLARINO

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BOOKS RECEIVED ________________

ALSINA NAUDI Anna, Die Umsetzung des europäischen Zivilprozessrechts in Spanien: Zuständigkeit, einstweiliger Rechtsschutz, Anerkennung und Vollstreckung, Hamburg (Kovač) 2005 ARENAS GARCÍA Rafael, Crisis matrimoniales – Nulidad matrimonial, separación y divorcio en el nuevo Derecho internacional privado español, Santiago de Compostela (Universidad de Santiago de Compostela) 2004 AUDIT Bernard, Droit international privé, 4. éd., Paris (Economica) 2006 BACHMANN B. / BREIDENBACH S. / COESTER-WALTJEN D. / HESS B. / NELLE A. / WOLF C. (Hrsg), Grenzüberschreitungen. Beiträge zum Internationalen Verfahrensrecht und zur Schiedsgerichtsbarkeit, Festschrift für P. Schlosser zum 70. Geburtstag, Tübingen (Mohr Siebeck) 2005 BADELT Thomas, Aufrechnung und internationale Zuständigkeit unter besonderer Berücksichtigung des deutsch-spanischen Rechtsverkehrs, Frankfurt a.M. [etc.] (Peter Lang) 2005 BARLETTI Maria Caterina, Il diritto di visita nel diritto internazionale privato e comunitario, Padova (Cedam) 2006 BASEDOW Jürgen / YASSARI Nadjima (Hrsg.), Iranian Family and Succession Laws and their Application in German Courts, Tübingen (Mohr Siebeck) 2004 BASEDOW Jürgen / KEGEL Gerhard / MANSEL Heinz-Peter (Hrsg.), Gutachten zum internationalen und ausländischen Privatrecht (IPG) 2000/2001, Bielefeld (Gieseking) 2005 BASEDOW Jürgen / SCHERPE Jens M. (Hrsg.), Transsexualität, Staatsangehörigkeit und Internationales Privatrecht, Tübingen (Mohr Siebeck) 2004 BECKER Ulrich, Grundrechtsschutz bei der Anerkennung und Vollstreckbarerklärung Zivilverfahrensrecht – Bestimmung der Grenzen für die Einführung eines europäischen Vollstreckungstitels, Frankfurt a.M. [etc.] (Peter Lang) 2004 BERTOLI Paolo, Corte di giustizia, integrazione comunitaria e diritto internazionale privato e processuale, Milano (Giuffré) 2005 BEULKER Jette, Die Eingriffsnormenproblematik in internationalen Schiedsverfahren, Tübingen (Mohr Siebeck) 2005 BINDER Peter, International Commercial Arbitration and Conciliation in UNICTRAL Model Law Jurisdiction, 2nd ed., London (Sweet & Maxwell) 2005 BODENÈS Armelle, La codification du droit international privé français, Paris (Defrénois) 2006 BOGGIANO Antonio, Curso de Derecho Internacional Privado – Derecho de las Relaciones Privadas Internacionales, Buenos Aires (Lexis Nexis – Abeledo-Perrot) 2004 BORGI Alvaro, L’immunité des dirigeants politiques en droit international, Paris (L.G.D.J), Bâle (Helbing & Lichtenhahn) 2003

Yearbook of Private International Law, Volume 7 (2005), pp. 417-427 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Book Received BOSCH Tobias, Die Durchbrechungen des Gesamtstatuts im internationalen Ehegüterrecht, Frankfurt a.M. [etc.] (Peter Lang) 2004 BRANDT Thomas A., Die Adoption durch eingetragene Lebenspartner im internationalen Privat- und Verfahrensrecht, Frankfurt a.M. [etc.] (Peter Lang) 2004 BRAUCHLIN Christian, Die grenzüberschreitende Fusion von Aktiengesellschaften – dargestellt am Beispiel Schweiz-England, St. Gallen (Dike Verlag) 2004 BROMBACH Monika, Das internationale Gesellschaftsrecht im Spannungsfeld von Sitztheorie und Niederlassungsfreiheit, München (Sellier) 2006 BUNGE Jürgen, Zivilprozess und Zwangsvollstreckung in England und Schottland. Eine Gesamtdarstellung mit internationalem Zivilprozessrecht, einem Glossar und einer Bibliographie, 2. Aufl., Berlin (Duncker & Humblot) 2005 CALVO CARAVACA Alfonso Luis / CARRASCOSA GONZÁLEZ Javier / CASTELLANO RUIZ Esperanza (coord.), Derecho de Familia Internacional, 3 ed., Madrid (Colex) 2005 CALVO CARAVACA Alfonso Luis / CARRASCOSA GONZÁLEZ Javier (coord.), Estudios sobre la contratación internacional, Madrid (Colex) 2006 CAMPIGLIO Cristina, Procreazione assistita e famiglia nel diritto internazionale, Padova (Cedam) 2003 CARLIER Jean-Yves / FALLON Marc / MARTIN-BOSLY Bernadette, Code de droit international privé, Bruxelles (Bruylant) 2004 CARSTENS Nils, Die internationale Zuständigkeit im europäischen Insolvenzrecht, Köln (Carl Heymans) 2005 CATAPANO Ferdinando, La separazione dei coniugi nel diritto italiano internazionale, Padova (Cedam) 2004 CHATILLON Stéphane, Droit des affaires internationales, 4e éd., Paris (Vuibert) 2005 CONCETTA Marino, La delibazione delle sentenze ecclesiastiche di nullità matrimoniale nel sistema italiano di diritto internazionale privato e processuale, Milano (Giuffré) 2005 CORBETTA Filippo, Stranieri e matrimonio: il diritto applicabile, Piacenza (La Tribuna) 2004 CORNUT Etienne, Théorie critique de la fraude à la loi – Etude de droit international privé de la famille, Paris (Defrénois) 2006 COURVOISIER Matthias, In der Sache anwendbares Recht vor internationalen Schiedsgerichten mit Sitz in der Schweiz, Zürich (Schulthess) 2005 CRETELLA NETO José, Comentários à lei de arbitragem brasileira, Rio de Janiero (Forense) 2004 CUBE Nikolai, Die internationale Zuständigkeit der englischen Zivilgerichte - Im Spannungsverhältnis von Common Law und Europarecht, Frankfurt a.M. [etc.] (Peter Lang) 2004 CUEVILLAS SAYROL Jaime Alonso, Las normas jurídicas como objeto de prueba. Tratamiento del Derecho extranjero y de la costumbre en el proceso civil español, Valencia (Tirant lo Blanch) 2004 CURRY-SUMNER Ian, All’s well that ends registered? The Substantive and Private International Law Aspects of Non-Marital Registered Relationships in Europe, AntwerpOxford (Intersentia) 2005

418

Yearbook of Private International Law, Volume 7 (2005)

Book Received DÄTWYLER Cornelia, Gewährleistungs- und Interventionsklage nach französischem Recht und Streitverkündung nach schweizerischem und deutschem Recht im internationalen Verhältnis nach IPRG und Lugano-Übereinkommen unter Berücksichtigung des Vorentwurfs zu einer schweizerischen Zivilprozessordnung, St. Gallen (Dike Verlag AG) 2005 DAWE Christian, Der Sonderkonkurs des deutschen internationalen Insolvenzrechts: zugleich ein Beitrag zu deutschen Sonderinsolvenzverfahren im Anwendungsbereich der Europäischen Insolvenzverordnung, Tübingen (Mohr Siebeck) 2005 DI BLASE Antonietta, Guida alla giurisprudenza italiana e comunitaria di diritto internazionale privato, Napoli (Editoriale Scientifica) 2004 DILGER Jörg, Die Regelungen zur internationalen Zuständigkeit in Ehesachen in der Verordnung (EG) Nr. 2201/2003. Vergemeinschaftung, Anwendungsbereich und insbesondere die Anknüpfung an die Staatsangehörigkeit, Tübingen (Mohr Siebeck) 2004 DOAK Bishop (ed.), The Art of Advocacy in International Arbitration, New York (Juris Publishing), Berne (Staempfli) 2004 DOHRN Heike, Die Kompetenzen der Europäischen Gemeinschaft im Internationalen Privatrecht, Tübingen (Mohr Siebeck) 2004 DORNBLÜTH Susanne, Die europäische Regelung der Anerkennung und Vollstreckbarkeitserklärung von Ehe- und Kindschaftsentscheidungen, Tübingen (Mohr Siebeck) 2003 DRAETTA Ugo, Internet e commercio elettronico nel diritto internazionale dei privati, 2. ed., Milano (Giuffré) 2005 DREYZIN DE KLOR Adriana / SARACHO CORNET Teresita, Trámites judiciales internacionales, Buenos Aires (Zavalía) 2004 DREYZIN DE KLOR Adriana / FERNÁNDEZ ARROYO Diego P. (dir.), DeCITA derecho del comercio internacional – Temas y actualidades, Buenos Aires (Zavalía), vol. 01/2004 Solución de controversias, vol. 02/2004 Arbitraje, vol. 03.2005 Inversiones extranjeras DURÁN AYAGO Antonia, La protección internacional del menor desamparado: Régimen jurídico, Madrid (Colex) 2004 DUTOIT Bernard, Le droit international privé ou le respect de l’altérité, Bruxelles (Bruylant) 2006 EBNER Timm, Streitbeilegung im Welthandelsrecht, Tübingen (Mohr Siebeck) 2005 EBRAHIMI Seyed Nasrollah, Mandatory Rules and Other Party Autonomy Limitations in International Contractual Obligations With Particular Reference To The Rome Convention, 1980, Twickenham (Athena Press) 2004 EHRIC Mirko, Der internationale Anwendungsbereich des deutschen und französischen Rechts gegen irreführende Werbung – Freie Wahl von Form und Mittel, Rom II und Herkunftslandprinzip, Frankfurt a.M. [etc.] (Peter Lang) 2006 EINHORN Talia / SIEHR Kurt (Hrsg.), Intercontinental Cooperation Through Private International Law, Essays in Memory of Peter E. Nygh, The Hague (T.M.C. Asser Press) 2004 ELLENBERGER Holger, Wirtschaftsrelevante Kollisionsnormen im japanischen internationalen Recht, Frankfurt a.M. [etc.] (Peter Lang) 2004

Yearbook of Private International Law, Volume 7 (2005)

419

Book Received EPSTEIN Richard A. / GREVE Michael S. (eds.), Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy, Washington (AEI Press) 2004 ESPLUGUES MOTA Carlos (dir.), Comentarios a la Ley de Extranjería, Valencia (Tirant Lo Blanch) 2006 FARMAND VANESSA Roya, Der international zwingende Charakter des 89 b HGB: eine Untersuchung zur kollisionsrechtlichen Sonderanknüpfung und Gemeinschaftsrechtskonformität des nachvertraglichen Ausgleichsanspruchs des Handelsvertreters gegen seinen Prinzipal, Hamburg (Kovač) 2005 FELDSTEIN DE CÁRDENAS Sara L. (dir.), Colección de Análisis Jurisprudencial – Derecho Internacional Privado y de la Integración, Buenos Aires (La Ley) 2004 FERNÁNDEZ ARROYO Diego P. / MASTRÁNGELO Fabio (dir.), El futuro de la codificación del Derecho internacional privado en América – De la CIDIP VI a la CIDIP VII, Córdoba (Advocatus) 2005 FERNÁNDEZ MASIÁ Enrique, Arbitraje en inversiones extranjeras: el procedimiento arbitral en el Centro Internacional de Arreglo de Diferencias relativas a Inversiones (CIADI), Valencia (Tirant lo Blanch) 2004 FERRAND Frédéric (sous la direction de), La procédure civile mondiale modélisée: le projet de l’American law Institute et d’Unidroit de principes et règles de procédure civile transnationale – Actes du colloque de Lyon du 12 juin 2003, Paris (Editions juridiques et techniques) 2004 FEUILLADE MILTON C., Competencia internacional civil y comercial – Elementos judiciales en el proceso internacional, Buenos Aires (Editorial Abaco de Rodolfo Depalma) 2004 FLESSNER Axel / VERHAGEN Rick, Assignment in European Private International Law. Claims as Property and the European Commission’s “Rome I Proposal”, München (Sellier) 2006 FLETCHER Ian F., Insolvency in Private International Law, 2nd ed., Oxford (Oxford University Press) 2005 FRANCQ Stéphanie, L’applicabilité du droit communautaire dérivé au regard des méthodes du droit international privé, Bruxelles (Bruylant) 2005 FREITAG Robert, Internationales Familienrecht für das 21. Jahrhundert: Symposium zum 65. Geburtstag von Ulrich Spellenberg, München (Sellier) 2006 FRIEDLAND Paul D., Arbitration Clauses for International Contracts, New York (Juris Publishing), Berne (Staempfli) 2004 FULCHIRON Hughes (sous la direction de), Les enlèvements d’enfants à travers les frontières, Actes du colloque organisé par le Centre de droit de la famille (Lyon 20 et 21 novembre 2003), Bruxelles (Bruylant), Paris (L.G.D.J.) 2004 FULCHIRON Hughes / NOURISSAT Cyril (sous la direction de), Le nouveau droit communautaire du divorce et de la responsabilité parentale, Paris (Dalloz) 2005 GAILLARD Emmanuel / BANIFATEMI Yas (ed.), Annulment of ICSID Awards: The Foundation of a New Investment Protection Regime in Treaty Arbitration, New York (Juris Publishing) 2004 GAILLARD Emmanuel, La jurisprudence du CIRDI, Paris (Pédone) 2004

420

Yearbook of Private International Law, Volume 7 (2005)

Book Received GAILLARD Emmanuel / SCHLAEPFER Anne-Véronique / PINSOLLE Philippe / DEGOS Louis, Towards a Uniform International Arbitration Law? New York (Juris Publishing), Berne (Staempfli) 2005 GALLANT Estelle, Responsabilité parentale et protection des enfants en droit international privé, Paris (Defrénois) 2004 GARAŠIĆ Jasnica, Anerkennung ausländischer Insolvenzverfahren – Ein Vergleich des kroatischen, des deutschen und des schweizerischen Rechts sowie der Europäischen Verordnung über Insolvenzverfahren, des Istanbuler Übereinkommens und des UNCITRAL-Modellgesetzes, 2 Bände, Frankfurt a.M. [etc.] (Peter Lang) 2005 GIORGINI Giulio Cesare, Méthodes conflictuelles et règles matérielles dans l’application des nouveaux instruments de règlement de la faillite internationale, Paris (Dalloz) 2006 GONZALO QUIROGA Marta, Arbitrabilidad de la controversia internacional en Derecho de la competencia y condiciones generales de contratación, arbitraje internacional de consumo, seguros y trabajo, Granada (Ahulia) 2004 GONZALO QUIROGA Marta, Orden público y arbitraje internacional en el marco de la globalización comercial, Madrid (Dykinson) 2003 GOODE Roy / KANDA Hideka / KREUZER Karl (avec l’assistance de / with the assistance of BERNASCONI Christophe), Convention de la Haye sur les titres, Rapport explicatif / Hague Securities Convention, Explanatory Report, The Hague (Martinus Nijhoff Publishers) 2005 GÖRDES Anna Christina, Internationale Zuständigkeit, Anerkennung und Vollstreckung von Entscheidungen über die elterliche Verantwortung, Frankfurt a.M. [etc.] (Peter Lang) 2004 GOTTWALD Peter (Hrsg.), Perspektiven der justiziellen Zusammenarbeit in Zivilsachen in der Europäischen Union, Bielefeld (Gieseking) 2004 GRISPO Jorge Daniel / SCIGLITANO Natalia Laura, Sociedades Extranjeras, Resoluciones de la I.G.J. Jurisprudencia administrativa y judicial, Buenos Aires (La Ley) 2004 HANDORN Boris, Das Sonderkollisionsrecht der deutschen internationalen Schiedsgerichtsbarkeit, Tübingen (Mohr Siebeck) 2005 HASS Detlef, EU-Insolvenzverordnung: Kommentar zur Verordnung (EG) Nr. 1346/2000 über Insolvenzverfahren (EuInsVO), München (Beck) 2005 HEIDE Irene (VON DER), Das deutsche und italienische internationale Kindschaftsrecht im Rechtsvergleich. Favor filii oder favor filiationis?, Frankfurt a.M. [etc.] (Peter Lang) 2004 HERNÁNDEZ-BRETON Eugenio, Problemas contemporáneos del Derecho procesal civil internacional venezolano, Caracas (Sherwood) 2004 HERRERA PETRUS Christian, La obtención internacional de pruebas. Asistencia jurisdiccional en Europa, Bolonia (Publicaciones del Real Colegio de España) 2005 HERVEG Cornelia, Die Vereinheitlichung des internationalen Erbrechts im europäischen Binnenmarkt, Baden-Baden (Nomos) 2004 HOMAYOON Arfazadeh, Ordre public et arbitrage international à l’épreuve de la mondialisation – Une théorie critique des sources du droit des relations transnationales, Bruxelles (Bruylant) 2005

Yearbook of Private International Law, Volume 7 (2005)

421

Book Received HOOTZ Carolin Nina, Durchsetzung von Persönlichkeits- und Immaterialgüterrechten bei grenzüberschreitenden Verletzungen in Europa: unter besonderer Berücksichtigung des deutsch-britischen Verhältnisses, Frankfurt a.M. [etc.] (Peter Lang) 2004 HOPPE Vera, Die Einbeziehung ausländischer Beteiligter in US-amerikanische class actions unter Berücksichtigung des Class Action Fairness Act 2005, Frankfurt a.M. [etc.] (Peter Lang) 2005 HUB Torsten, Internationale Zuständigkeit in Versicherungssachen nach der VO 44/01/EG (EuGVVO), Berlin (Duncker & Humblot) 2005 HUNTER-HENIN Myriam, Pour une redéfinition du statut personnel (préface H. MUIR WATT), Aix-en-Provence (PUAM) 2004 HUTNER Armin, Das internationale Privat- und Verfahrensrecht der Wirtschaftsmediation, Tübingen (Mohr Siebeck) 2005 HYE-KNUDSEN Rebekka, Marken-, Patent- und Urheberrechtsverletzungen im europäischen Internationalen Zivilprozessrecht, Tübingen (Mohr Siebeck) 2005 ISRAËL Jona, European Cross-Border Insolvency Regulation, Antwerp / Oxford (Intersentia) 2005 JELINEK Mirka, Internationales Schuldvertragsrecht in der Tschechischen Republik und der Europäischen Union, Aachen (Shaker) 2004 JENN Matthias, Illegal nach Deutschland verbrachtes Staatsvermögen, Berlin (Rhombos Verlag) 2004 JEREMIAS Christoph, Internationale Insolvenzaufrechnung, Tübingen (Mohr Siebeck) 2005 JÜTTNER Andreas, Gesellschaftsrecht und Niederlassungsfreiheit nach Centros, Überseering und Inspire Art, Frankfurt a.M. (Recht und Wirtschaft) 2005 KARAYANNI Michael M., Forum non conveniens in the modern age: a comparative and methodological analysis of anglo-american law, New York (Transnational Publishers) 2004 KALANKE Irène, Schiedsgerichtsbarkeit und schiedsgerichtsähnliche Verfahren im Internet: eine rechtsvergleichende Analyse der Online-Schiedspraxis weltweit, Hamburg (Kovač) 2004 KAUFMANN-KOHLER Gabrielle / SCHULTZ Thomas, Online Dispute Resolution – Challenges for Contemporary Justice, The Hague (Kluwer Law International) 2004 KERN Konrad, Überseering – Rechtsangleichung und gegenseitige Anerkennung, eine Untersuchung zum Wettbewerb der Gesetzgeber im Europäischen Gesellschaftsrecht, Berlin (Duncker & Humblot) 2004 KIENLE Florian, Die fehlerhafte Banküberweisung im internationalen Rechtsverkehr, unter besonderer Berücksichtigung des Artikels 4A US Uniform Commercial Code, Frankfurt a.M. [etc.] (Peter Lang) 2004 KLEMM Michael, Erfüllungsortvereinbarungen im Europäischen Zivilverfahrensrecht, Jena (JWV) 2005 KOCH Harald / MAGNUS Ulrich / MOHRENFELS Peter W. von, IPR und Rechtsvergleichung – Ein Studien- und Übungsbuch zum Internationalen Privat- und Zivilverfahrensrecht und zur Rechtsvergleichung, 3. Aufl., München (Beck) 2004 KOFMEL EHRENZELLER Sabine, Der vorlaüfige Rechtsschutz im internationalen Verhältnis – Grundlagen, Tübingen (Mohr Siebeck) 2005

422

Yearbook of Private International Law, Volume 7 (2005)

Book Received KOLLER Torsten, Die europäische Harmonisierung des Rechts der Verschmelzung – Eine vergleichende Betrachtung der Verschmelzung von Aktiengesellschaften in Deutschland sowie der Verschmelzung von Public Companies in England und Wales nach Umsetzung der Dritten Richtlinie 78/855/EWG, Frankfurt a.M. [etc.] (Peter Lang) 2004 KRAUSE Rüdiger / VEELKEN Winfried / VIEWEG Klaus (Hrsg.), Recht der Wirtschaft und der Arbeit in Europa, Gedächtnisschrift für Wolfgang Blomeyer, Berlin (Duncker & Humblot) 2004 KRESS Victoria, Internationale Zuständigkeit für elterliche Verantwortung in der Europäischen Union – Das neue europäische Familienverfahrensrecht in Fragen der elterlichen Verantwortung im Kontext der Haager Abkommen, Frankfurt a.M. [etc.] (Peter Lang) 2006 KROPHOLLER Jan, Europäisches Zivilprozeßrecht – Kommentar zu EuGVO, Lugano-Übereinkommen und Europäischem Vollstreckungstitel, 8. Aufl., Frankfurt am Main (Recht und Wirtschaft) 2005 KÜHL Isabel, Der internationale Leihverkehr der Museen, Köln (Carl Heymans) 2004 KULPA Norman Norbert, Das anwendbare (materielle) Recht in internationalen Handelsschiedsgerichtsverfahren: ein rechtsvergleichender Ansatz ausgehend vom UNCITRAL-Modellgesetz mit besonderer Berücksichtigung des österreichischen, deutschen, schweizerischen, englischen sowie französischen Rechts, Frankfurt a.M. [etc.] (Peter Lang) 2005 KURPIERS Olaf Rafael, Die lex originis-Regel im internationalen Sachenrecht – Grenzüberschreitende privatrechtliche Ansprüche auf Herausgabe von abhanden gekommenen und unrechtmäßig ausgeführten Kulturgütern, Frankfurt a.M. [etc.] (Peter Lang) 2005 KURKELA Matti S. / SNELLMAN Hannes (eds.), Due Process in Commercial Arbitration, New York (Oceana Publications, Inc.) 2005 LAGHETTO Sonia, Le adozioni nazionali e internazionali: procedura, effetti giuridici, privacy con casi pratici e modulistica, Rimini (Maggioli) 2004 LEJEUNE Yves, Le droit des relations transfrontalières entre autorités régionales ou locales relevant d’Etats distincts – Les expériences franco-belge et franco-espagnole, Bruxelles (Bruylant) 2005 LEVONTIN Avigdor V., Choice of Law – A Model Statute with Section-by-Section Commentary, Jerusalem (The Hebrew University of Jerusalem) 2004 LIMA PINHEIRO Luis (org.) Seminário sobre a Comunitarização do Direito internacional Privado, Direito de Conflitos, Competência Internacional e Reconhecimento de Decisões Estrangeiras, Coimbra (Almedina) 2005 LIONNET Klaus / LIONNET Annette, Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit, 3. Aufl., Stuttgart [etc.] (Boorberg) 2005 LIUKKUNEN Ulla, The Role of Mandatory Rules in International Labour Law – Comparative Study in the Conflict of Laws, Helsinki (Talentum) 2004 LOHMANN Arnd, Parteiautonomie und UN-Kaufrecht. Zugleich ein Beitrag zum Anwendungsbereich des Wiener Kaufrechtsübereinkommens der Vereinten Nationen vom 11. April 1980, Tübingen (Mohr Siebeck) 2005

Yearbook of Private International Law, Volume 7 (2005)

423

Book Received LOOKOFSKY Joseph / HERTZ Ketilbjørn, Transnational Litigation and Commercial Arbitration – An Analysis of American, European, and International Law, New York (Juris Publishing) – Copenhagen (DJØN Publications) 2004 LOPEZ DE GONZALO Marco, Giurisdizione civile e trasporto marittimo, Milano (Giuffré) 2005 LOQUIN Eric, Les séparations internationales d’entreprises, Dijon (Litec) 2004 LORENZ S. / TRUNK A. / EIDENMÜLLER H. / WENDEHORST C. / ADOLFF J., Festschrift für Andreas Heldrich zum 70. Geburtstag, München (Beck) 2005 LOTTI Paolo, L’ordine pubblico internazionale – La globalizzazione del diritto privato ed i limiti di operatività degli istituti giuridici di origine estera nell’ordinamento italiano, Milano (Giuffré) 2005 LÜCKE Dorothea, Neuere Entwicklungen des deutschen und europäischen internationalen Deliktsrechts, Hamburg (Kovač) 2006 LÜKE Stephan, Punitive Damages in der Schiedsgerichtsbarkeit. Erlaß und Wirkungen von Punitive Damages-Schiedssprüchen nach US-amerikanischem, schweizerischem und deutschem Recht, Tübingen (Mohr Siebeck) 2003 MAGNUS Ulrich (Hrsg.), Global Trade Law: International Business Law of the United Nations and Unidroit, Collection of UNCITRAl’s and Unidroits’s Conventions, Model Act, Guides and Principles, Munich (Sellier) 2004 MARIANI Maria Paola, Il leasing finanziario internazionale tra diritto uniforme e diritto internazionale privato, Padova (Cedam) 2005 MARTIUS Alexander, Verteilungsregeln in der Grenzüberschreitenden Insolvenz, Frankfurt a.M. [etc.] (Peter Lang) 2004 MARXER Florian, Das internationale Erbrecht Liechtensteins: ein Vergleich mit dem österreichischen und schweizerischen Recht, Vaduz (Liechtenstein Verlag) 2002 MAUERHOFER Katharina, Mehrfache Staatsangehörigkeit: Bedeutung und Auswirkungen aus Sicht des schweizerischen Rechts, Bâle [etc.] (Helbing & Lichtenhahn) 2004 MÉLIN François, Droit international privé, 2. éd., Paris (Montchrestien) 2005 MOHS Florian, Drittwirkung von Schieds- und Gerichtsstandsvereinbarungen, München (Sellier) 2006 MOTZER Stefan / KUGLER Roland, Kindschaftsrecht mit Auslandsbezug, Bielefeld (Gieseking) 2003 MOURA VICENTE Dario, Direito Internacional Privado, Ensaios, vol. II, Coimbra (Almedina) 2005 MÜLLER Carsten, International zwingende Normen des deutschen Arbeitsrechts, Tübingen (Mohr Siebeck) 2005 MURPHY John F., The United States and the rule of law in international affairs, Cambridge [N.Y.] (Cambridge University Press) 2004 NAPPENBACH Celina, Parteiautonomie im internationalen Gesellschaftsrecht, Berlin (Logos) 2002 NIYUNGEKO Gérard, La preuve devant les juridictions nationales, Bruxelles (Bruylant) 2005 NOJACK Jana, Exlusvinormen im IPR, Tübingen (Mohr Siebeck) 2005 OOI Maaisie, Shares and Other Securities in the Conflict of Laws, Oxford (Oxford University Press) 2003

424

Yearbook of Private International Law, Volume 7 (2005)

Book Received OSTHAUS Wolf, Informationszugang für den internationalen Prozess zwischen lex fori und lex causae – Zur kollisionsrechtlichen Behandlung von Informationszugangsrechten am Beispiel des Deliktsrechts mit rechtsvergleichender Einführung, Göttingen (V & R Unipress) 2005 PARROT Karine, L’interprétation des conventions de droit international privé, Paris (Dalloz) 2006 PATTLOCH Thomas, Das IPR des geistigen Eigentums in der VR China, Tübingen (Mohr Siebeck) 2003 PETROCHILOS Georgios, Procedural Law in International Arbitration, Oxford (Oxford University Press) 2004 PIRONON Valérie, Les joint ventures. Contribution à l’étude juridique d’un instrument de coopération internationale, Paris (Dalloz) 2004 POCAR Fausto / HONORATI Costanza (ed.), The Hague Preliminary Draft Convention on Jurisdiction and Judgments, Padova (Cedam) 2005 PRETELLI Ilaria, La protection du droit de gage général en droit international privé: l’action oblique, l’action paulienne et l’action en déclaration de simulation: l’azione surrogatoria, l’azione revocatoria e l’azione di simulazione (préface de B. ANCEL), Imperia (Chiusanico) 2005 PULKOWSKI Florian, Subunternehmer und Internationales Privatrecht – Der Subunternehmer als Quasi-Verbraucher im Europäischen Kollisionsrecht, Frankfurt a.M. [etc.] (Peter Lang) 2005 PÜTZ Silke, Parteiautonomie im internationalen Urhebervertragsrecht – Eine rechtsdogmatische und rechtspolitische Betrachtung der Grenzen freier Rechtswahl im internationalen Urhebervertragsrecht unter besonderer Berücksichtigung des neuen deutschen Urhebervertragsrechts, Frankfurt a.M. [etc.] (Peter Lang) 2005 RAMALHO DE ALMEIDA Ricardo (coord.), Arbitragem Interna e Internacional – questões de doutrina e da prática, Rio de Janeiro (Renovar) 2003 RASMUSSEN-BONNE Hans-Eric (Hrsg.), Balancing of interests, Liber amicorum Peter Hay zum 70. Geburtstag, Frankfurt a.M (Recht und Wirtschaft) 2005 REBER Ulrich, Die Rechte der Tonträgerhersteller im Internationalen Privatrecht, München (Utz) 2004 REED Alan, Anglo-American Perspectives on Private International Law, New York (Edwin Mellen) 2003 REICHELT Gerte, Europäisches Kollisionsrecht – Anwendbares Recht, gerichtliche Zuständigkeit, Vollstreckung von Entscheidungen im Binnenmarkt, Wien (Manz) 2004 RIGOZZI Antonio, L’arbitrage international en matière de sport, Bruxelles (Bruylant) 2005 ROCCO Giuseppe, Come redigere un contratto internazionale, Milano (Giuffré) 2004 ROSSANI GARCEZ José Maria, Curso de direito internacional privado, 2a ed., Rio de Janeiro (Forense) 2003 SANDROCK Otto / WETZLER Christoph F. (Hrsg.), Deutsches Gesellschaftsrecht im Wettbewerb der Rechtsordnungen nach Centros, Überseering, Inspire Art, Heidelberg (Recht und Wirtschaft) 2004 SANTOS BELANDRO Ruben B., Derecho internacional privado, 50 años de estudio de casos reales originados en el ámbito notarial y resueltos por la Asociación de Escribanos de Uruguay, Montevideo (AEU) 2003

Yearbook of Private International Law, Volume 7 (2005)

425

Book Received SAYED Abdulhay Sayed, Corruption in International Trade and Commercial Arbitration, The Hague (Kluwer Law International) 2004 SCHÄFER Erik / VERBIST Herman / IMHOOS Christophe, ICC Arbitration in Practice, The Hague (Kluwer Law International), Berne (Staempfli) 2005 SCHÄRTL Christoph, Das Spiegelbildprinzip im Rechtsverkehr mit ausländischen Staatenverbindungen: unter besonderer Berücksichtigung des deutsch-amerikanischen Rechtsverkehrs, Tübingen (Mohr Siebeck) 2005 SCHINDLER Christian, Durchbrechungen des Spiegelbildprinzips bei der Anerkennung ausländischer Entscheidungen unter vergleichender Berücksichtigung des portugiesischen und brasilianischen Rechts, Aachen (Shaker) 2004 SCHLAUSS Stephan, Das neue Gesetz zum internationalen Familienrecht – das internationale Familienrechtsverfahrensgesetz, Köln (Bundesanzeiger) 2005 SCHLOTTER Jochen N., Erbrechtliche Probleme in der Société privée européenne, Frankfurt a.M. [etc.] (Peter Lang) 2004 SCHMIDHUBER Martin, Verhaltenskodizes im nationalen und grenzüberschreitenden elektronischen Geschäftsverkehr, Frankfurt a.M. [etc.] (Peter Lang) 2004 SCHOCH Sonja, Die Auslegung der Ausnahmetatbestände des Haager KindesentführungsÜbereinkommens – Ein Vergleich der US-amerikanischen und deutschen Rechtsprechung, München (Utz) 2004 SCHÖMMER Hans-Peter, Das internationale Erbrecht Italiens, 2. Aufl., München (Beck) 2005 SCHROEDER Hans-Patrick, Die lex mercatoria arbitralis – Strukturelle Transnationalität und transnationale Rechtsstrukturen im Recht der internationalen Schiedsgerichtsbarkeit, München (Sellier) 2006 SCHULTE-BUNERT Kai, Das Vertragsstatut der Treuhand im internationalen Privatrecht, Frankfurt a.M. [etc.] (Peter Lang) 2005 SCHULZ Andrea, Legal Aspects of an E-Commerce Transaction. International Conference in The Hague, 26 and 27 October 2004, München (Sellier) 2006 SCIOTTI-LAM C., L’applicabilité des traités internationaux relatifs au droit de l’homme en droit privé, Bruxelles (Bruylant) 2004 SFEIR Khalil, Droit international privé comparé, 2 voll., Bruxelles (Bruylant) 2005 STIESS Kathrin, Anknüpfungen im internationalen Urheberrecht unter Berücksichtigung der neuen Informationstechnologien, Frankfurt a.M. [etc.] (Peter Lang) 2005 STOLLE Roland, Das Recht der nationalen Schiedsgerichtsbarkeit in Schweden und Deutschland im Vergleich, Hamburg (Kovač) 2004 STRENGER Irineu, Direito internacional privado, 5a ed., São Paulo (LTr) 2003 TASSIKAS Apostolos, Dispositives Recht und Rechtswahlfreiheit als Ausnahmebereiche der EG-Grundgreiheiten. Ein Beitrag zur Privatautonomie, Vertragsgestaltung und Rechtsfindung im Vertragsverkehr des Binnenmarktes, Tübingen (Mohr Siebeck) 2004 THÖLKE Ulrich, Die Entstehungssitztheorie, Berlin (Scrîpvaz-Verlag) 2003 TOMLJENOVIC Vesna / ERAUW Johan A. / VOLKEN Paul, Liber Memorialis Petar Šarčević, Universalism, Tradition and the Individual, München (Sellier) 2006 TORZ Timo, Gerichtsstände im Internationalen Insolvenzrecht zur Eröffnung von Partikularinsolvenzverfahren – Eine Untersuchung über die internationale Zuständigkeit zur Eröffnung von Partikularinsolvenzverfahren sowie deren Beschrän-

426

Yearbook of Private International Law, Volume 7 (2005)

Book Received kungen und Auswirkungen auf die Anerkennungszuständigkeit, Frankfurt a.M. [etc.] (Peter Lang) 2005 ULMAR Susanne Barbara, Rechtsverkehr und Handel mit Kulturgütern in Italien unter Berücksichtigung europarechtlicher und internationalrechtlicher Aspekte, BadenBaden (Nomos) 2005 VANDERLINDEN Jacques, Les conflits de lois (common law), Bruxelles (Bruylant) 2004 VENTURA Deysi / PEROTTI Alejandro D., El Proceso Legislativo del MERCOSUR, Montevideo (Konrad Adenauer Stiftung A.C.) 2004 VIANGALLI François, La théorie des conflits de lois et le droit communautaire (Préface de G. LÉGIER), Aix-en-Provence (PUAM) 2004 VIGNAL Thierry, Droit international privé, Paris (Dalloz) 2005 VISINONI-MEYER Claudia, Die vollstreckbare öffentliche Urkunde im internationalen und nationalen Bereich: unter besonderer Berücksichtigung des Entwurfs der schweizerischen Zivilprozessordnung, Zürich (Schulthess) 2004 VITTORIA Paolo, La competenza giurisdizionale e l’esecuzione delle decisioni in materia civile e commerciale nella giurisprudenza della Corte di giustizia, Milano (Giuffré) 2005 VOGLER Daniela, Die internationale Zuständigkeit für Insolvenzverfahren, Berlin (Tenea) 2004 VON HOFFMAN Bernd / THORN Karsten, Internationales Privatrecht einschliesslich der Grundzüge des Internationalen Zivilverfahrensrechts, 8. Aufl., München (Beck) 2005 WAGNER Florian D., Vorvertragliche Aufklärungspflichten im internationalen Franchising – zur Harmonisierung von Delikts- und Vertragsstatut im internationalen Privatrecht unter besonderer Berücksichtigung der Franchise-Gesetzgebung des US-Bundesstaates Kalifornien, Frankfurt a.M. [etc.] (Peter Lang) 2004 WANNEMACHER Kathrin, Die Aussenkompetenzen der EG in Bereich des Internationalen Zivilverfahrensrechts. Der räumliche Anwendungsbereich des Art. 65 EGV am Beispiel der EuGVO und der EheVO, Frankfurt a.M. [etc.] (Peter Lang) 2003 WEBER Ania, Die Vergemeinschaftung des internationalen Privatrechts, Berlin (Tenea) 2004 WEINBERG Inés M., Derecho Internacional Privado, 3a ed., Buenos Aires (Lexis Nexis – Depalma) 2004 WELLER Matthias, Ordre-public-Kontrolle internationaler Gerichtsstandsvereinbarungen im autonomen Zuständigkeitsrecht, Tübingen (Mohr Siebeck) 2005 WIÓREK Piotr Marcin, Das Prinzip der Gläubigergleichbehandlung im Europäischen Insolvenzrecht, Baden-Baden (Nomos) 2005 ZHAO Yun, Dispute Resolution in Electronic Commerce, Leiden / Boston (Martinus Nijhoff Publishers) 2005 ZOBEL Petra, Schiedsgerichtsbarkeit und Gemeinschaftsrecht im Spannungsverhältnis zwischen Integration und Exklusion, Tübingen (Mohr Siebeck) 2005

Yearbook of Private International Law, Volume 7 (2005)

427

INDEX ________________

Absence of choice of law Lithuanian PIL 172 Rome I Proposal 393 Ukrainian PIL 147-148, 153 Accessory connecting factor 31, 270 Acquis communautaire 412 Adoption Lithuanian PIL 171 Ukrainian PIL 158 Agency 406 Alfonsín Quintín 103 Apostille 245, 278 Approach vs rules in PIL 25 Arbitration arbitral agreement 110, 172 Belgian PIL 251-256 ICC Arbitration Court 115 Latina America 114-115 Lithuanian PIL 172, 180-181 also see ‘New York Convention’ and ‘Panama Convention’ Arblade case 325, 407 Argentinean PIL 100, 107 Armenian PIL 141 Asser Tobias Michael Carel 19 Assignment of claims 173 of rights 322 of contracts 409 of receivables 410 Asunción Treaty 92 Auctor regit actum 280-281 Aufweichklausel 29 Austrian PIL Act 30 GMO 387-390 Torts 387-390 Ausweichklausel 29, 390 also see ‘Clause d’exception’ B2B relationships 5-16 Bartin Etienne 39 Bauffremont case 57, 286 Belarus and PIL 141

Belgian PIL Code 19, 28, 249-250, 384 Bilateral treaties between France and Marocco 261 between France and Algeria 261 in Lithuanian PIL 179 Binnenbeziehung 53, 55, 267 Blockverweisung 41 Brazilian PIL 104-106, 109-130 Brussels I Regulation 396 Buenos Aires Protocol on International Jurisdiction in Contractual Matters of 1994 103 Bustamante Antonio Sánchez 116 Bustamante Code 112, 127 Capacity capacity to inherit 199-200 Lithuanian PIL 167 testamentary capacity 187 Ukrainian PIL 150 Carriage contract 172 Carriage of goods 178 Celebration of marriage see ‘Marriage’ Centre of the debtor’s business 338339 Characteristic performance 133, 321, 402, 403 Characterization 39-40, 149, 296 connecting factor 185, 189 contracts 296, 297 insolvency 337 special characterization 40 Child abduction 243 Child support see ‘Maintenance’ Chilean PIL 106-107 Choice of court employment contracts 178 exclusivity 8 family matters 111 formal validity 3, 170 Hague Convention 1-16

Yearbook of Private International Law, Volume 7 (2005), pp. 429-437 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Index

intellectual property 12 Lithuanian PIL 170, 179 non-exclusive choice 4 Ukrainian PIL 159 CIDIP 86-91 Circumvention of the law see ‘Fraude à la loi’ Citizenship see ‘Nationality’ Clash of civilization 265 Classification see ‘Characterization’ Clause d’exception 26-28 Lithuanian PIL 166 Ukrainian PIL 148 also see ‘Special exception clause’ Closest connection 149, 166, 172, 178, 197, 272, 311, 403-404 Codice Gandolfi 402 Colombian PIL public policy 113 Commercial partnership agreements 381-385 Companies see ‘Legal persons’ Concession agreements 251, 382 Conflict of conventions 15-16 Conflict of judgments 180 Conflict of nationalities 285 Conflict rule and public policy 218-219 and the Constitution 212-237 and the principle of equality 222 jurisdiction selecting vs. rules selecting 26 neutrality 290 open-ended 21 unilateral vs. multilateral 29 vs. substantive rules 164 Conflit mobile 35 Connecting factor 30 nationality vs. domicile 32 characterization 185, 189 Constitution and PIL 205-237 Argentina 101 Italy 205-237 Brazil 105

430

Lithuania 166 U.S. 69 Construction contracts 322 Consular or diplomatic marriage 225 Consumer contracts 146, 172, 405 Contracts carriage contracts 172, 178 consumer contracts 146, 172, 405 concession contracts 252, 382 construction contracts 322 employment contracts 271, 177178, 383, 405 insurance contracts 172 Lithuanian PIL 171-173 subcontracting 289-331 Ukrainian PIL 153 Croatian PIL insolvency 330-380 Culpa in contrahendo 40, 395 Currency 177 Dal Bosco case 52 Damages 269, 387 non-compensatory vs. compensatory 10 Death, declaration of Lithuanian PIL 168 Default judgments 180 Denial of justice 10 Dépeçage 37, 147, 310 DGRN 277 Direct jurisdiction see ‘Jurisdiction’ Disposizioni Preliminari 21 Dissolution of marriage see ‘Divorce’ Divorce Chilean PIL 106-107 French PIL 262 Italian PIL 222 Lithuanian PIL 170 repudiations 261 Domicile characterization 190 Lithuanian PIL 169 South African PIL 185 Douibi case 265 Droits acquis see ‘Vested rights’

Yearbook of Private International Law, Volume 7 (2005)

Index

Dual nationality see ‘Conflict of nationalities’ Due process clause Brazil PIL 126 Dutch PIL marriage 215-216 tort 269-276 Dutch state committee on PIL 274 EC Draft Regulation ‘Rome II’ see ‘Rome II Proposal’ EC public policy see ‘ordre public européen’ EC Regulation No. 1346/2000 of 29 May 2000 on Insolvency Proceedings 335 Effet atténué de l’ordre public 261 Employment contracts 383, 405 Dutch PIL 271 Lithuanian PIL 177-178 Ukrainian PIL 154 Encumbrances 175 Enforcement of maintenance orders 74-77 of decisions in Brazil 104-106 English PIL marriage 216 Environmental damages 389 Equality, principle of 224-237, 265-266 Erga omnes approach 393 Escape clause 26-28 Lithuanian PIL 166 also see ‘Special exception clause’ Espace économique transnational 293, 295 EU and the Hague Conference 241-242 European Convention on Certain International Aspects of Bankruptcy 335 European Group of Private International Law 321 European PIL Code 58-59 European Principles of Contract Law 302, 396 Evasion of law 57 also see ‘Fraude à la loi’ Exception clause see ‘Escape clause’

Exclusive jurisdiction 78, 101, 159 Brazilian PIL 124 Lithuanian PIL 180 Venezuelan PIL 109 Exequatur 120 also see ‘Enforcement’ and Recognition of foreign decisions’ Fakultatives Kollisionsrecht 46 Family matters choice of court 7 Lithuanian PIL 167-169 Ukrainian PIL 165-168 Favor arbitrandum 253 Favor matrimonii 234 Favor negotii 37 Favor recognitionis 285 Favor validitatis 37, 308, 319 Fideicommissum 193 Finnish PIL marriage 216 Forced share (in succession law) 176 Foreign companies Argentinean PIL 107 Foreign element 20-21, 145 Foreign judgment finality of 127, 342 notification of 127 also see ‘Recognition of foreign decisions’ Foreign law ex officio application 46, 142 Latin American PIL 112 Lithuanian PIL 165-166 London Convention 47 public law 48, 165 reciprocity 49 review of by supreme court 256 Swiss Institute of Comparative Law 46 Ukrainian PIL 142, 148 Foreigners and the fundamental rights 224 and Ukrainian PIL 158 Forgo case 43 Formal validity ad probationem vs. ad solemnitatem 279 contracts in Lithuanian PIL 173

Yearbook of Private International Law, Volume 7 (2005)

431

Index

marriages 169 property agreements between spouses 157 public deeds 277-282 Ukrainian PIL 152 wills 37, 176 Forum causae 101, 102 Forum non conveniens 9 Forum patriae 34 Forum shopping 393 Francescakis Phocion 56 Fraude à la loi 57 CIS countries 138 Swiss PIL 283-289 Ukranian PIL 149 Fraude au jugement 262, 283 French PIL establishment of paternity 223 marriage 216 repudiations 261-267 French-Algerian Convention of 1964 261 French-Moroccan Convention of 1981 261 Fundamental rights and PIL 224 General Problems of PIL 20-61 Lithuanian PIL 165-167 South African PIL 184 Ukrainian PIL 145-147 German EGBGB 26 Art 17a 40 Art 4 on renvoi 43 Insolvency 334 German EGBGB of 1896 29 Gifts 172 GMO and PIL 387-390 Goldschmidt Roberto 109 Greek Civil Code 43 Guardianship Lithuanian PIL 171 Ukrainian PIL 151 Habitual residence 31-32 in the Hague Conventions 33 of maintenance creditor 69, 80 Ukrainian PIL 149-150 Hague Apostille Convention 278 Hague Conference 239-247

432

and Lithuania 163 and Ukraine codification 139 cooperation with UNCITRAL and Unidroit 246 EU membership 241 Special Commission on General Affairs and Policy 5 Special Commission on Maintenance Obligations 6364, 75 Hague Convention Concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Minors (5 October 1961) Hague Convention on the Law Applicable to Agency (14 March 1978) 406 Hague Convention on Child Support and Other Forms of Family Maintenance 63-64, 70, 74-75, 83 Hague Convention on Choice of Court agreements 1-16, 240-241 intellectual property 12 recognition of judgment 12 relationships with other instruments 15-16 scope 7 validity of agreement 8 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Cooperation in Respect of Parental Responsibility and Measures for the Protection of Children (19 October 1996) 40, 46, 242 Hague Convention on Protection of Children and Co-operation in Respect of Inter-country Adoption (29 May 1993) 171, 242 Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions (5 October 1961) 187 Hague Convention on the Law Applicable to Certain Rights in

Yearbook of Private International Law, Volume 7 (2005)

Index

Respect of Securities Held with an Intermediary (13 December 2002) 246 Hague Convention on the Law Applicable to Maintenance Obligations (2 October 1973) 171 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations (2 October 1973) 52, 69 Hague Convention on the Law Applicable to Traffic Accidents (4 May 1971) 174 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (15 November 1965) 245 Hague Forum for Judicial Expertise 242 Handte case 304 Hart H.L.A. 212 Immovable property succession 186 transfer of 277-282 Lithuanian PIL 175 Ukrainian PIL 155 also see ‘Property’ Immunity 177 Implicit choice of law 307 Indirect jurisdiction see ‘Jurisdiction’ Ingmar case 55, 325-326 Inlandsbeziehung see ‘Binnenbeziehung’ Insolvency 333-380 Instanbul Convention of 1990 335, 339 Intellectual property choice of court 12, 14 contracts related to 176 Lithuanian PIL 176 Swiss PIL 155 Ukrainian PIL 155 validity of patents 12

Inter-American Convention on International Commercial Arbitration of 1975 98, 103, 110 Inter-American Convention on International Traffic of Minors of 1994 91 Inter-American Convention on Support Obligations of 1989 105 Inter-American Convention on the General Rules of Private International Law of 1979 112 Inter-American Convention on the International Return of Children of 1989 90-91, 114 Inter-American Convention on the Law Applicable to International Contracts of 1994 103 Inter-American Model Law on Security Interests of 2002 87, 90 Inter-country adoption 243 Interim measures Lithuanian PIL 167 International sub-contracting 289-331 Italian PIL adoption 225 and the Constitution 205-237 foreign law 50 marriage 203 renvoi 43 Iura novit curia 46 also see ‘Foreign law’ Ius cogens 407 see also ‘Mandatory rules’ Joint liability 410 Juenger Friederich Karl 112 Jurisdiction Brazilian PIL 124 commercial partnership agreements 381-385 indirect jurisdiction 124, 284, 338 insolvency 338 Lithuanian PIL 179 maintenance in US law 65-72 Ukrainian PIL 158 Kahn Franz 39

Yearbook of Private International Law, Volume 7 (2005)

433

Index

Kazakhstan and PIL 141 Lithuanian PIL 170 Maintenance obligations 63-83 Ukrainian PIL 157-158 Kyrgyzstan and PIL 141 Las Leñas Protocol on Co-operation and Jurisdictional Assistance in Mercosur 94 Latin-American PIL 85-117 Legal persons Lithuanian PIL 168 Argentinean PIL 107-108 Ukrainian PIL 149-150 Lex arbitrationis vs. lex fori 251 vs. lex contractus 262 Lex domicilii 21, 32-33 Lex fori interim measures 167 maintenance disputes in the US 72 Lex fori concursus 339, 342, 347, 359 Lex libri siti 191 Lex loci actus 188 Lex loci contractus 140 Lex loci delicti 269 Lex loci executionis 324 Lex loci laboris 154 Lex mercatoria 111, 146, 290, 295, 296, 401 Lex patriae 21, 31 also see ‘Nationality’ Lex rei sitae 21, 35, 155, 186 Lex situs see ‘lex rei sitae’ Lex ultimae patriae 189 Lex voluntatis see ‘Party autonomy’ Liability exclusion clause 292 Liechtenstein PIL Act 31 Limping marriages 233 Lis pendens 34, 101, 124, 125, 342 Lithuanian PIL 161-181 Lois d’application immédiate 55, 323 also see ‘Mandatory rules’ Lois de police see ‘Mandatory rules’ Louisiana Civil Code 31

434

Maintenance applicable law 72-77 child support and maintenance Hague project 63, 241-242 common law vs. civil law approach 75, 80 jurisdiction 65 modification or variation 78-83 statute of limitation 75 recognition of decisions 68-72, 74-77 Ukrainian PIL 157-158 US PIL 63-83 Mancini Pasquale Stanislao 18, 112 Mandatory rules 43, 324 in employment contracts 178 EC mandatory rules 324, 402, 408 subcontracts 324 Ukrainian PIL 149 Maritime shipping 178 Marriage 57 Dutch PIL 215-216 English PIL 216 formalities 52 fraude à la loi 57 Italian PIL 205-237 limping marriage 233 Lithuanian PIL 169 matrimonial relationships 157, 169 preliminary question 52 Spanish PIL 216 Ukrainian PIL 156-157 Mass media torts 174 Matrimonial property Lithuanian PIL 170 Max Planck Institut, Hamburg 47 Mazzoleni case 328 Means of transport 133 Lithuanian PIL 177 Ukrainian PIL 155 MERCOSUR 88, 91, 92-93 Mexican Draft PIL Act 104 Mexico City Convention 401, 400, 404 Minimum contacts 66 Montevideo Treaty of 1889 112

Yearbook of Private International Law, Volume 7 (2005)

Index

Montevideo Treaty of 1940 103 Multilateral rule 29 also see ‘Conflict rule’ Multiple contracts 317 NAFTA 91 Name 150 Nationality and the Constitution 214-237 conflict of nationalities 32 discrimination by reason of 34 dual nationality 32 effective nationality 32 nationality rule 285 nationality vs. domicile 21 Negotiorum gestio 398 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 9, 103, 110, 253 Non-discrimination principle 224-237 Non-State law 392, 397, 400 Non-unified legal systems Lithuanian PIL 166 Rome Convention 47 South African PIL 197 Off-shore companies 108 Open-ended conflict rules 21, 276 Ordinamento competente 42 Ordre public and the Constitution 166, 205237 capacity to marriage 205-237 Lithuanian PIL 166, 180 ordre public de proximité 267 ordre public dévoyé 222 effet atténué 261 ordre public européen 53, 323, 408 recognition of decisions 113, 133, 122-123 substantive vs. procedural 208209, 263 Soviet law 132-133 Ukrainian PIL 149 Panama Inter-American Convention on Commercial Arbitration 103, 110 Parallel proceedings 10

Parenthood Ukrainian PIL 157 Party autonomy 34, 140 Argentinean PIL 111 consumer contracts 405 employment contracts 406 implicit choice of law 398-399 Latin-American PIL 110 law applicable to choice of law clause 38 lex mercatoria 146 Lithuanian PIL 165, 166, 170, 171 matrimonial relationships 157, 170 non-State law 400 recourse sub-contracts 306 Rome I Proposal 398-402 third party protection 34 torts 133, 389 UNIDROIT Principles 146 Uruguayan PIL 102, 400 Patent, validity of 14 Paternity, establishment of 157, 170, 222, 283-289 Personal rights (non patrimonial) 150 Private international law and public international law 104 rules vs. approach 25 sources 22-24 also see ‘Conflict rule’ Pledge 175 Portuguese PIL 39, 52 Power of attorney 173 Pre-contractual relationships 382, 394395, 397 Predictability vs. flexibility 403 Preliminary question 14, 50 Prescription 177 Principe de proximité 311 Principles of European Contract Law 301, 396 Professio iuris see ‘Party autonomy’ Promise of marriage 169 Proof of foreign law see ‘Foreign law’

Yearbook of Private International Law, Volume 7 (2005)

435

Index

Property 34 lex voluntatis 146 Lithuanian PIL 175 matrimonial property 157, 170 ships 178 transfer by notarial deed 277 Ukrainian PIL 155 Public documents and deeds 278-279 Public foreign law 48, 165 Public policy 53, 286 Binnenbeziehung 53, 55 clauses abusives 297 in Chilean PIL 107 insolvency proceedings 340-341 Rome Convention 53 special clauses 54 also see ‘ordre public’ Québec PIL codification 137, 138 Ramírez Gonzalo 112, 116 Raz Joseph 212 Real property see ‘Property’ Reciprocity 39, 142 Recognition of foreign decisions Brazilian PIL 119-130 foreign marriages 169, 284 insolvency proceedings 333-380 Lithuanian PIL 180 maintenance decisions 68-72 ordre public exception 113 Ukrainian PIL 159 Recourse subcontracts 289-331 Registered partnerships 236, 237 Renvoi 19, 41 CIS countries 138 German PIL 43-44 Greek PIL 43 international conventions 43 Italian PIL 43 Lithuanian PIL 167 succession law 190, 197 Repudiations 261-267 Res in transitu 42, 155, 175 Res iudicata 180, 342 Restatement of the Law Second 25 Révision au fond 346 Revocation of will 156, 194, 201

436

Rogatory commissions 142 Rome Convention on the Law Applicable to Contractual Obligation of 1980 assignment of rights 322 consumer protection 383, 405, 408 employment contracts 406 escape clause 402 mandatory provisions 5, 324, 407 non-unified legal systems 47 public policy 323 statute of limitations 38 subcontracts 299 subrogation 322 time of choice 147 Ukrainian PIL 147 Rome I Proposal 275-413 Rome II Proposal 275, 301, 322, 389, 397 Savigny 112, 185 Schnitzer Adolf 313 Set-off 411 insolvency law 370 Shipping and PIL 177 wills executed on board of 191 SME 382 Sources of PIL 22-24, 145 South African PIL 183-203 Spanier Entscheidung 52, 235 Spanish PIL marriage 217 Special exception clause 388-389 Rome II 275 tort 272, 274 Stateless persons 167 Statuta personalia 37-38 Statute of limitation 37 in maintenance 75 in Rome Convention 38 in Ukrainian PIL 152 Stock exchange contracts 172 Subcontracts 289-331 Succession 34 forced share 176 Lithuanian PIL 176 party autonomy 141

Yearbook of Private International Law, Volume 7 (2005)

Index

South African PIL 183-203 Ukrainian PIL 156 Swedish PIL marriage 216 Swiss Institute of Comparative Law 47 Swiss PIL conflict of nationalities 285 foreign law 46 fraude à la loi 57, 283-289 indirect jurisdiction 283 insolvency 335 mandatory rules 43 marriage 215 public foreign law 46, 48 Tacconi judgment 395 Tag jurisdiction 69 Talaq 262-267 Territorialism 106 Third parties 34, 175 Time factor 35-36 Tort and PIL Austrian PIL 388-390 closest connection 174 Dutch PIL 269 environmental torts 387-390 GMO 388-390 Lithuanian PIL 173-175 mass-media torts 174 pre-contractual relationships 397 pre-existing relationships 274 Ukrainian PIL 154 Tunisian PIL 39 Tutorship 151 UIFSA 67, 73, 74 Ukrainian PIL 131-159 closest connection 147, 153 contracts 152 family law 156-158 foreign law 148 general provisions 145 habitual residence 149-150 history 131-144 intellectual property law 155 jurisdiction 158 lex voluntatis 145-146, 152

mandatory rules 149 non-contractual obligations 154 persons 149-150 property rights 155 structure 144 succession 155 UNCITRAL 88, 246 Model Law on Cross-Border Insolvency 335, 347 Model Law on Electronic Commerce 8 Convention on the Assignment of Receivables 410 Unfair competition 174 UNIDROIT Principles of International Commercial Contracts 246, 295, 309, 384, 396 Uniformity of decisions 234-236, 324 Unilateral rules 29 Unilateral transactions 177 Unjust enrichment 146, 174, 398 Uruguayan PIL 102 US PIL Constitution 69 federal law 64-65 maintenance 63-83 Uzbekistan and PIL 141 Venezuelan PIL Act 36, 50, 109, 113 Vested rights 35-36, 42 Vis attractiva concursus 343, 365 Vorfrage see ‘Preliminary question’ 50 Wächter Carl Georg von 36 Weaker party 324, 382, 392-394 Wills 187-203 capacity 37-38, 157, 187 formal validity 37, 157, 187 Hague Convention of 5 October 1961 37 interpretation 198 Lithuanian PIL 176 power of appointment 192 revocation 156, 194, 201 Zurich Civil Code of 1853 19

Yearbook of Private International Law, Volume 7 (2005)

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