Yearbook of Private International Law: Yearbook of Private International Law Vol. XXIV – 2022/2023 9783504388454

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YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME XXIV – 2022 / 2023

Founding Editors PETAR ŠARČEVIĆ † Paul Volken

Editors ANDREA BONOMI

ILARIA PRETELLI

Professor at the University of Lausanne

Legal Counsel at the Swiss Institute of Comparative Law

Gian Paolo Romano Professor at the University of Geneva

Published in Association with SWISS INSTITUTE OF COMPARATIVE LAW LAUSANNE, SWITZERLAND

The Deutsche Nationalbibliothek lists this publication in the Deut­sche Na­tio­nalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.dnb.de. Verlag Dr. Otto Schmidt KG Gustav-Heinemann-Ufer 58, 50968 Köln Tel. +49 221 / 9 37  38-01, Fax +49 221 / 9 37  38-943 [email protected], www.otto-schmidt.de ISBN (print)  978-3-504-08024-2 ISBN (eBook)  978-3-504-38845-4

©2024 by Verlag Dr. Otto Schmidt KG, Köln and Swiss Institute of Comparative Law, Lausanne All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior per­mis­sion of the publisher. The paper used is made from chlorine-free bleached materials, wood and acid free, age resistant and environmentally friendly. Printing and binding: Beltz, Bad Langensalza Printed in Germany.

Advisory Board JÜRGEN BASEDOW Hamburg

HUANG JIN Wuhan

GENEVIÈVE BASTID-BURDEAU Paris

THOMAS KADNER GRAZIANO Geneva

MICHAEL BOGDAN Lund

EVA LEIN London/Lausanne

SIR LAWRENCE COLLINS London

YASUHlRO OKUDA Tokyo

DIEGO P. FERNÁNDEZ ARROYO Paris

LINDA J. SILBERMAN New York

RICHARD FRIMPONG OPPONG San Diego (California)

SYMEON C. SYMEONIDES Salem (Oregon)

RUI MANUEL GENS DE MOURA RAMOS Lisbon/Coimbra

HANS VAN LOON The Hague

LUKAS HECKENDORN URSCHELER Lausanne

Production Assistant Françoise Hinni Swiss Institute of Comparative Law

Assistant Editors CHRISTINA BLANCHET Research Assistant, University of Lausanne

CORINNE MAMMINO Research Assistant, University of Lausanne

English Revision KAREN TOPAZ DRUCKMAN Lecturer, University of Lausanne

TABLE OF CONTENTS ________________

Foreword ......................................................................................................... xi Abbreviations ................................................................................................ xiii Doctrine Elisabetta BERGAMINI / Raluca BERCEA / Andreea VERTEȘ-OLTEANU The Changing Scenario on Advance Directives between National Rules and Private International Law .................................................................... 1 Gerald GOLDSTEIN Objective, Subjective and Imperative Localization in the Resolution of Conflict of Laws ....................................................................................... 19 Giesela RÜHL / Man YIP Success and Impact of International Commercial Courts – A First Assessment ............................................................................................... 45 Adam SAMUEL A “Common Law” of International Arbitration? – In Memory of Claude Reymond .................................................................................................... 59 Sharon SHAKARGY Un-Identifying Identification .................................................................... 81 Guojian XU / Xin CAI Recognition and Enforcement of Foreign Judgments in China – Legal Framework and Recent Developments ..................................................... 93 New Technologies and Private International Law Andrea BONOMI Blockchain and Private International Law – Some General Remarks ..... 153 Narges KESHAVARZBAHADORI Due Process Requirements in Blockchain-based Arbitration ................. 165 Marta ZAMORSKA Artificial Intelligence-Supported Arbitral Awards – A Pandora’s Box or the Future of International Commercial Arbitration? .......................... 193 Robert WALTERS / Harsha RAJWANSHI Reconciling “Confidentiality” in Data Protection, Cyber Security, Artificial Intelligence in International Arbitration ............................................ 215 The French Draft Private International Law Code Cyril NOURRISSAT The Draft Code of French Private International Law .............................. 237

Dominique BUREAU / Horatia MUIR WATT Codifying against the Clock... – On a French Project for the Codification of Private International Law ............................................... 247 Marie GORÉ Rules on Trust in the French Draft Code of Private International Law .. 261 Recognition of status filiationis within the EU and Beyond Cristina GONZÁLEZ BEILFUSS / Ilaria PRETELLI The Proposal for a European Regulation on Filiation Matters – Overview and Analysis ........................................................................... 275 Tamir BOLDBAATAR / Batzorig ENKHBOLD Surrogate Motherhood under Different Laws – Legal Arrangements and Challenges of Mongolia ........................................................................... 309 Valentina CALDERAI / Rachele ZAMPERINI Surrogacy Contracts and the (In)Alienability of Fundamental Rights a View from Italy – On Case No 38162/2022 of the Corte di Cassazione ............................................................................................... 327 Helga LUKU Free Movement, Children’s Rights and National Identity in the EU Parenthood Proposal ............................................................................... 345 Paulina TWARDOCH Surrogacy Agreements from the Conflict-of-Laws Perspective Today and Tomorrow ........................................................................................ 367 Recent Developments in International Successions Georges KHAIRALLAH The New Right of Compensation under French International Succession Law – A Provision with an Uncertain Future .......................................... 397 Eva LEIN Choice of English Succession Law and German Ordre Public ................ 407 Andrea BONOMI Revocation of the Willl upon Marriage – Issues of Characterisation, Applicable Law, and Renvoi – An Italian Supreme Court’s Decision and Some Reflexions on the Potential Outcome under the European Succession Regulation ............................................................................. 419 National Reports Chukwuma OKOLI The Enforcement of Foreign Jurisdiction Clauses in Nigeria – A Critique of the Nigerian Court of Appeal’s Recent Restatement ......... 443

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Forum Yves EL HAGE “How to Locate a Cyber Tort?” .............................................................. 455

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FOREWORD ___________ We are glad to present a rich new volume of the Yearbook of Private International Law. The Doctrine section opens with a contribution on the relevance of party autonomy in the context of the protection of vulnerable adults in comparative and private international law. The possibility for human beings to establish advanced directives concerning their health and affairs, in contemplation of future impairment of their mental faculties, is critical in a world where we live longer although not necessarily in better health. Two other articles will invite you to share in interesting methodological reflexions, one on the meaning of “localisation” for the purposes of law selection and the other on the opportunity to rethink the relevant elements of “personal identity”, at least for the purpose of the EU rules of private international law. The same section further includes three contributions addressing important issues for the settlement of commercial disputes. The first one discusses the advantages and downsides of new commercial courts specialised in international litigation – some of these courts were created to seize the opportunities offered by the impact of Brexit on the traditional centrality of English courts. The two others address, on the one hand, the advances and hurdles encountered in the development of a true “common law” of international arbitration, and, on the other, the recent efforts of Chinese authorities to facilitate the recognition and enforcement in China of foreign state courts’ judgments. This year’s volume also contains no fewer than four dedicated sections, each of which covering an area of significant interest for our Yearbook. In the first, several private international law issues related to the use of Blockchains and Artificial Intelligence are explored, such as general conflict of law questions – in particular the difficult determination of the law applicable to crypto assets – as well as due process, public policy and confidentiality concerns arising from the use of those technologies in arbitration. A second section is dedicated to filiation and covers various aspects of the EU “parenthood proposal” as well as national perspectives on surrogacy agreements. If the EU proposal seems to be a healthy attempt to grant full civil rights for minorities and victims of discrimination, it also seems to “force a square peg into a round hole”, by encouraging forum and law shopping and disregarding the variety of situations in which parent-child relationships can be established or contested. The wealth and breadth of the human rights and culturally-oriented points of view presented by our contributors suggest that balancing the interests at stake in this area of law is a particularly challenging exercise.

A third specific section reports on the important work carried out in France in connection with the drafting of a PIL code and the heated debates incited by such endeavours. The opportunity for national PIL codification in times of substantial erosion of EU Member States’ sovereignty in this field has been called into question, which leaves us to ponder the ambiguity of the present times, where the importance of inter-state cooperation is, within the EU and elsewhere, routinely proclaimed while, understandably, the impulse for each country to go its own way cannot always be resisted. Be that as it may, many of the rules contained in the proposed French code are worth considering for their technical and theoretical value and, in the case of some of them, for their ingenuity and original approach. In the fourth section – dedicated to the latest developments in the area of international successions – the somewhat surprising resurgence of reserved heirship rights in two Member States of the EU is presented in the first two contributions. While such development takes place in Germany through a broad interpretation of the public policy exception provided in the EU Succession Regulation, the compatibility with EU law of the new right of compensation provided to reserved heirs by the recent French legislation seems dubious. On a more “exotic” question, a third paper considers the confrontation of Italian courts with the peculiar English rule on revocation of a will upon marriage of the testator, and the characterisation problems it raises. A national report on enforcement of foreign choice-of-court clauses in Nigeria and, in the Forum section, a discussion on how best to localise cross-border cyber torts, complete the book. We wish to thank our contributors for relying on our Yearbook to share their knowledge, thoughts and ideas, just as we are indebted to our readers for their continued and extended interest and support. Françoise Hinni has once again been the perfect Production Assistant throughout. We are especially grateful to her as well as to all other members of the editorial team, in particular Karen Topaz Druckman for her tireless efforts in revising the articles of our non-native English-speaking authors.  

Andrea Bonomi

Ilaria Pretelli

Gian Paolo Romano

ABBREVIATIONS ________________

Am. J. Comp. L. Am. J. Int’l L. Arb. Clunet Comm. Comp. ECR I.C.L.Q. I.L.M. ibid. id. Int’l IPRax

American Journal of Comparative Law American Journal of International Law Arbitration Journal de droit international Commerce Comparative European Court Reports International and Comparative Law Quarterly International Legal Materials ibidem idem International Praxis des internationalen Privat- und Verfahrensrechts J. Journal L. Law OJ Official Journal PIL Private International Law Q. Quarterly RabelsZ Rabels Zeitschrift für ausländisches und internationales Privatrecht Recueil des Cours Recueil des Cours de l'Académie de la Haye de droit international = Collected Courses of The Hague Academy of International Law Regulation (EU) No 2019/1111 Council Regulation (EU) 2019/1111 of 25 June 2019 on jurisdiction, the recognition and enforcement of decisions in matrimonial matters and the matters of parental responsibility, and on international child abduction (recast) OJ L178/1, 2.7.2019 Regulation (EU) No 2201/2003 Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000, OJ L 338/1, 23.12.2003 REDI Revista española de derecho internacional

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

Tech. this Yearbook Un.

Review Revue critique de droit international privé 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 Technology Yearbook of Private International Law University

DOCTRINE ________________

THE CHANGING SCENARIO ON ADVANCE DIRECTIVES BETWEEN NATIONAL RULES AND PRIVATE INTERNATIONAL LAW Elisabetta BERGAMINI*/ Raluca BERCEA**/ Andreea VERTEȘ-OLTEANU***

I.

II.

III.

A Panorama of National Legal Solutions for Advance Directives A. The Acknowledgement of Advance Directives by the National Legal Systems B. Legal Force – Binding Character and Limits of Advance Directives C. Formal Requirements The Need for a Private International Law Set of Rules for Advance Directives A. The Need to Evaluate Advance Directives in the Framework of PIL Rules B. The Hague Convention on the Protection of Vulnerable Adults of 2000 and its Possible Application to Advance Directives C. The EU New Proposals on the Protection of Vulnerable Adults and their Possible Application to Advance Directives Conclusions

* Professor at the University of Udine. Author of Part II on “The need for a Private International law set of rules for advance directives”. ** Professor at the West University of Timișoara. Co-Author of Part I on “A panorama of national legal solutions” with Andreea Verteș-Oltenu. See also note *** below. *** Associate Professor at the West University of Timișoara. Co-Author of Part I on "A panorama of national legal solutions" with Raluca Bercea. Part I of this contribution partly builds on the information provided in some of the national reports submitted for the 2022 General Congress of the International Academy of Comparative Law in Asuncion, where Raluca Bercea and Andreea Verteș-Olteanu, together with Angelika Reichstein, acted as general rapporteurs for the section devoted to the law and bioethics of end-of-life decisions. We would like to thank Régis Aubry, Albina Candian, Mihaly Filó, Gilles Genicot, Jenny Gesley, Luka Mišič, Janne Rothmar Herrmann, Angelika Reichstein, Graciela Rodriguez-Ferrand, Petr Šustek, Martin Šolc, François Vialla, Monika Wałachowska and Bettina Weisser for their valuable insights on their respective national legal systems in respect with advance directives and Ilaria Pretelli for chairing the general report presentation and for suggesting the present contribution. All national reports referred to below will be published in R. BERCEA/ A. REICHSTEIN/ A. VERTES OLTEANU (eds), The Law and Bioethics of End-of-Life Decisions, Intersentia, Cambridge forthcoming 2024.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 1-18 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu

I.

A Panorama of National Legal Solutions for Advance Directives

According to the current European medical law standards, patients’ participation in the decision-making process represents a genuine right. However, particularly in end-of-life situations, decision‐making varies according to patients’ ability to be actively involved in it.1 While patients always remain part of the process, procedures laid down in the relevant national legislation can envisage various ways to take into account their previously expressed wishes,2 as required by Article 9 of the Convention on Human Rights and Biomedicine.3 Among these, continuing powers of attorney and advance directives for incapacity are expressly recommended the Committee of Ministers of the Council of Europe.4 While a wide margin of appreciation continues to be granted to States in respect with the extent to which advance directives should be deemed imperative, the Recommendation indicates that even when lacking binding effect, advance directives should be treated as statements of wishes to be given “due respect”. Noteworthily, the “due respect” represents itself a standard to receive a significant variety of interpretations at the national level. Formal statements (or “advance directives”, which are sometimes also referred to as “living wills”) are usually described as written documents drawn up by persons having legal capacity (i.e. having attained majority and being able to express a free and informed wish) containing provisions relating to medical treatment in the event that they are no longer capable of taking part in the decision‐making process.5 Formality makes advance directives reliable in respect with the patients’ genuine will, therefore they generally take precedence over the other non‐medical opinion expressed during the decision‐making process and, as we will 1 For a general overview and an historical perspective, see I. PRETELLI, “Droit compare”, in A. LEUBA/ A. BÜCHLER/ M. STETTLER & CH. HÄFELI, (eds), Protection de l'adulte, FamKomm, Stämpfli, Bern 2013, p. 68-84. 2 For instance, patients may draw an advance directive (also known as a living will), grant powers of attorney on health‐care questions or merely confide their intentions to a person of trust who can bear witness to and pass on their wishes if needed. In each of these situations, the roles assigned to the third parties vary and so does the part that they can play in the medical decision-making as balanced against the physicians’ role. For example, and without exhausting such relevant differences, the attorneys will only be able to act in accordance with their powers and in the granter’s interest. Besides, like any other person that the patient confided in, they can provide clarification concerning other situations not mentioned in the power of attorney or arising as the illness progresses. 3 Convention on human rights and biomedicine’ signed in Oviedo, Spain, April 4, 1997, European Treaty Series No 164. 4 Council of Europe, Recommendation CM/Rec(2009)11 on principles concerning continuing powers of attorney and advance directives for incapacity, available at: https://rm.coe.int/168070965f. 5 Guide on the decision-making process regarding medical treatment in end-of-life situations, available at: https://www.coe.int/en/web/bioethics/guide-on-the-decisionmaking-process-regarding-medical-treatment-in-end-of-life-situations.

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The Changing Scenario on Advance Directives see, in a limited number of legal systems, over the physicians’ opinion as well. The salient problem in respect with advance directives in Europe is undoubtedly their binding character. In this first part of our contribution, we will offer a panorama of European legislative solutions provided in the field. In the second one we will try to assess whether it is still possible to advocate the need to apply a straight recognition to any documents containing advance directives or whether, on the contrary, it is necessary to evaluate them in the framework of private International Law rule. A brief section of conclusions will follow. A.

The Acknowledgement of Advance Directives by the National Legal Systems

In a number of European legal traditions, advance directives are not yet recognized by national law, i.e. they do not enjoy a specific regulation. Such would be, for instance, the case of Romania. However, as a rule, capable adults’ prior will must be considered by physicians once the former become unable to personally participate in the decisionmaking process. Such previous expression of a patient’s will may well take a similar form to what in other legal systems would be qualified as an advance directive. This position was for instance expressed by the highest court’s case law of Poland legal system, in the absence of an expressed regulation in Polish law.6 Still, where advance directives are not legally acknowledged, such expression of will could not prevail over the other elements leading to a clinical decision, and the physician’s part in assessing the overall general context will be significant. On the contrary, in several other European countries, advance directives are explicitly and formally recognized. The legal provisions enshrining them usually define the categories of persons allowed to so express their will (informed adults, capable of understanding and expressing themselves), the general legal hypothesis taken into account (in case they become unable to do so in the future) and the object of the will (e.g. consent / refusal of medical acts or therapeutical choices), sometimes under conditions relating to the author’s future medical situation that should be qualified as an end-life situation pursuant to the criteria put forward by the national law. Thus, according to the French law, any major person can draft advance directives in case in the future they become unable to express their wishes. The advance directives express the persons’ will in respect with the end of their lives with regard to the conditions for the continuation, limitation, cessation or refusal of treatment or medical act.7 6 Judgment of Supreme Polish Court 27.10.2005, III CK 155/05, OSNC 2006 no 78, item. 137, apud M. WAŁACHOWSKA, National report – Poland, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 7 French Code de la Santé Publique, Art. L1111-11, available at: https://www.legifrance.gouv.fr/codes/texte_lc/LEGITEXT000006072665/, apud R. AUBRY, National report – France, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay),

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu Similarly, the Italian legal system recognizes the possibility of drafting a living will regarding end-of-life arrangements for the hypothesis when the patient can no longer make decisions. The relevant legal text is very much similar to the French legal provision: “All adults capable of understanding and expressing their will, in anticipation of a possible future inability to decide for themselves, after having acquired adequate medical information on the consequences of their choices, may, through advance directives, express their wishes regarding health treatments, as well as their consent or refusal regarding diagnostic tests or therapeutic choices and individual health treatments”.8 The object of the advance directive is even more important in England and Wales, where it must be situation specific and indicate the type of medical procedure and support the person wishes to refuse in the future situation taken as legal hypothesis9. Germany included living wills in its Civil Code,10 and physicians are bound to respect the wishes thus expressed by their patients, as long as a given situation falls within the hypothesis foreseen by the will. In Switzerland, a capable individual can also lay down in advance the procedures they wish to refuse or are willing to accept in cases of incapacity, while also being able to nominate proxy to take decisions on their behalf in the case of incapacity.11 Such “patient decree”, regarding a specific treatment, is to be distinguished from an “advance care directive” which is more general, but, in the same legal tradition, serves to nominate another person or legal entity to act on the patient’s behalf for the same general hypothesis. Similarly, the Hungarian Healthcare Act also stipulates that a person with legal capacity who considers the possibility of becoming in the future incapable of making decisions has the right to decide on the refusal of life-saving or lifesustaining treatments in advance, subject to strict formalities, in the framework of a living will.12 The same possibility is granted by the Spanish legal system.13 23-28 October 2022; also F. VIALLA, National report – France, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 8 A. CANDIAN, National report – Italy, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 9 A. REICHSTEIN, National report – England and Wales, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 10 German Civil Code, Section 1901a, available at: https://www.gesetze-iminternet.de/englisch_bgb/. apud B. WEISSER, National report – Germany, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 11 ZGB art. 371, para. 1, available at: https://www.fedlex.admin.ch/eli/cc/ 24/233_245_233/de, apud J. GESLEY, National report – Switzerland, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 12 B. VISSY, “Méltatlan figyelem a méltó halál kérdésének – széljegyzetek az Alkotmánybíróság második eutanáziahatározatához”. Állam- és Jogtudomány, 57 (4), p. 56,

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The Changing Scenario on Advance Directives In Slovenia, according to the national Patients’ Rights Act,14 full-aged patients, who possess full capacity, can also pre-express in writing their will concerning medical treatment in cases of no longer being able to give full and informed consent. Additional conditiones are added by the national regulation, as the advance directive must concern either a moment when the patient is (a) suffering from a serious, incurable disease which would lead to death in a short time even with appropriate medical treatment provided, or a situation when (b) medical treatment would only prolong the patient’s life in a situation in which the disease or injury had inflicted severe disability, leading to a permanent loss of physical or mental ability to take care of him or herself. In Danish law, the national Health Act15 has strengthened the scope for advance directives about end-of-life decisions; a “treatment testament” can be drawn up by anyone over the age of 18 years to give advance directives if that person should in future be in a situation where they are unable to make autonomous choices. The object and hypotheses of the act are again essential: the treatment testament is an advance directive concerning 1) withdrawal of life prolonging treatment in a situation where the patient is irreversibly dying, 2) withdrawal of treatment if the patient becomes unable to take care of themselves physically or mentally due to serious disease or old age, or 3) withdrawal of treatment in a case where treatment could be lifesaving but the physical consequences would be serious and cause suffering that could not be remedied. A special situation is to be described for the systems that are favourable to euthanasia by conditionally decriminalizing it. In Belgium, the absolute right of an adult patient to refuse any treatment, including through binding advance directives has been described. Besides this type of general advance directives based on the national Act on patient’s rights,16 the system acknowledges the advance declaration

at: http://real.mtak.hu/43479, apud M. FILÓ, National report – Hungary, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 13 Ley 5/2018 sobre Derechos y Garantías de la Dignidad de las Personas en el Proceso del Final de la Vida, Comunidad Autónoma del Principado de Asturias, BOE Jul 27, 2018, Preambulo, Sec. 10, available at: https://perma.cc/9HEW-TKNS, apud G. RODRIGUEZ-FERRAND, National report – Spain, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 14 Slovenian Patient’s Rights Act, Article 34, available at: https://www.varuhrs.si/en/about-us/legal-framework/powers-of-the-hro-in-other-laws/patients-rights-act/, apud L. MIŠIČ, National report – Slovenia, section XXV – The Law and Bioethics of End-ofLife Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 15 Available at: http://www.ilo.org/dyn/natlex/natlex4.detail?p_isn=70825, apud J. ROTHMAR HERRMANN, National report – Denmark, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 16 Available at: https://www.health.belgium.be/en/health/taking-care-yourself/ patient-related-themes/patients-rights, apud G. GENICOT, National report – Belgium,

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu of euthanasia in which patients record in writing, in the case where they are no longer able to express their will, that a physician should perform euthanasia when recognizing that they are affected by a serious and incurable disorder, caused by illness or accident, are unconscious, and that the condition is irreversible given the current state of science.17 B.

Legal Force – Binding Character and Limits of Advance Directives

Even if legally acknowledged, the binding character of the advance directives may vary from one country to another, as there is broad acceptance in Europe that a patient’s choice may not be followed for serious reasons that are again to be defined at the national level. In general, such reasons may be connected with the directives themselves and the patient’s consent (e.g. the directive is manifestly inappropriate, it is not consistent with the patient’s clinical condition, there are doubts about the voluntary nature of the act) or with a significant and relevant change of circumstances (medical developments have occurred that would have reasonably implied a different decision should the patient have known them). For instance, in Danish law, informed advance decisions given prior to commencement of a current treatment are binding on physicians, thus ensuring the patients’ full autonomy in the decision-making process.18 Similarly, in England and Wales, advance directives are legally binding, if they comply with the Mental Capacity Act 2005.19 In Germany, the extent to which the patient’s explicit wishes or an advance directive are binding for the medical personnel when making decisions about the patient’s treatment is established by the private law.20 In principle, the system allows patients to deny unwanted medical treatment for certain physical conditions in advance, and, provided the living will is applicable to a subsequent situation, physicians are legally bound by the patient’s former dispositions. According to Slovenian law, a different binding regime is granted in the two cases where advance directives are legally permitted. While they are binding for any physician if stemming from patients suffering from a serious, incurable disease which would lead to death in a short time, they ought to be considered mere guidelines whenever deciding on the most appropriate medical treatment, should this treatment prolong the patients’ lives in a situation in which the disease or injury had inflicted severe disability, leading to a permanent loss of physical or mental ability to take care of themselves In any case, advance directive should be section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022. 17 Ibid., available at: https://apmonline.org/wp-content/uploads/2019/01/belgiumact-on-euthanasia.pdf. 18 Supra (note 14). 19 Available at: https://www.legislation.gov.uk/ukpga/2005/9/contents, supra (note 8). 20 In particular, sec. 630a-630h of the Civil Code on contracts on medical treatment, supra (note 9).

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The Changing Scenario on Advance Directives considered only if no reasonable doubt exists as to whether the patient would, under the present circumstances, revoke his or her declaration. Equally, advance directives are binding on physicians in France, except in the event of a life-threatening emergency for the time necessary for a full assessment of the situation and when they appear manifestly inappropriate or not in accordance with the medical situation. Noteworthily, the decision to refuse to apply advance directives, deemed by the doctor to be manifestly inappropriate or not in accordance with the patient's medical situation, can only be taken following a collegial procedure defined by the national regulation and recorded in the patient’s medical file.21 It is brought to the attention of the person of trust designated by the patient or, failing that, of the family or relatives. In Italy as well, physicians are bound by the patient’s advance directive. However, this may be waived, in whole or in part, by the physician, in agreement with the patient’s trustee, if it is manifestly incongruous or inconsistent with the patient's current clinical condition or if new therapies exist, which could not have been foreseen at the time of signing the directive, and which offer real possibilities of improving the patient’s living conditions.22 Similarly, in the Czech Republic, advance directives are binding except if a medical development occurred since the wish has been expressed so that the patient can now reasonably be expected to consent to treatment. Furthermore, in this particular legal system, respecting a previously expressed will is explicitly forbidden, for instance if it could endanger other persons, or if it would actively cause death.23 Under Belgian law,24 the patient’s advance refusal of any given intervention must be respected as long as the patient has not revoked it. Equally, in an emergency situation, the doctor may immediately perform an intervention that is necessary in the patient's interest only if there is uncertainty as to whether or not the patient has previously expressed will. On the contrary, the doctor is bound by an advance directive in which a certain intervention is refused, even if this endangers the patient’s life. In Switzerland, physicians must comply with a patient decree, unless it violates statutory regulations or there is reasonable doubt that it was based on the patient’s free will or that it still corresponds to the patient’s presumed will.25 Besides being binding on the physicians, advance care directives are also binding on the appointees, who must comply with it and fulfil their duties with due care in accordance with the provisions of the national Code of Obligations on agency L.1111-11, supra (note 6). Supra (note 7). 23 Section 36(5) of the Czech Act on Health Services, available at: https://www.uzis.cz/index-en.php?pg=nhis--legislation, apud P. ŠUSTEK &, M. ŠOLC, National report – Czech Republic, section XXV – The Law and Bioethics of End-of-Life Decisions, General Congress of the International Academy of Comparative Law, Asunción (Paraguay), 23-28 October 2022 24 Section 8, § 4 (4) of the Belgian Act on patient's rights, supra (note 15). 25 ZGB, art. 370, Living Wills, Swiss Authorities Online, art. 372, paras. 1, 2, available at: https://www.ch.ch/en/health/living-wills/, supra (note 10). 21 22

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu contracts.26 Upon the request of the appointee, the adult protection authority may interpret the advance care directive and add clarification to secondary points.27 If there is a conflict of interest, the powers of the appointee cease to apply by law,28 while if the patient regains capacity, the advance care directive ceases to have effect.29 C.

Formal Requirements

As already mentioned, as a rule, when they exist and if legally acknowledged by a national system, advance directives will supersede any other non‐medical opinion expressed during the decision‐making process. In order to be granted such extensive effect, the directives must fulfil a number of requirements established by the national systems, mainly meant to ensure their validity and accessibility. While significantly varying from one jurisdiction to another, such criteria usually encompass the written form, the authentication of the author, as well as the fulfilment of the conditions regarding the author’s legal capacity, the appropriate content of the act, with respect to its object as referred above, or the term of the directive validity. In some cases, advance directives also refer to the possibility to be redrafted to keep in line with the latest medical standards and developments. The possibility for the directive to be revoked is also sometimes mentioned in the document. The minimum formalities appear to be the written form (although, as we will see, exceptions are noted to this as well), while a witness or some other equivalent element that grants imputability. For instance, in Poland, to avoid doubts, an advance directive should be drafted in writing and ideally witnessed, although no official requirement has been described regarding their form. In Germany, provisions on the prerequisites and legal effects of living wills were introduced into the Civil Code in 2009.30 A close relationship can be established between various formal requirements and the extent of the advance directives’ legal force. For example, in the Czech legal system, two types of advance directives are allowed, of which only the most formal one is granted unlimited validity, while the second one is only valid 26 Ibid. art. 365, para. 1; Obligationenrecht [OR], 30.03.1911, SR 220, art. 394 et seq., https://fedlex.data.admin.ch/filestore/fedlex.data.admin.ch/eli/cc/27/317_321_377/ 20210701/de/pdf-a/fedlex-data-admin-ch-eli-cc-27-317_321_377-20210701-de-pdf-a18.pdf; (original), https://fedlex.data.admin.ch/filestore/fedlex.data.admin.ch/eli/cc/27/317_ 321_377/20210701/en/pdf-a/fedlex-data-admin-ch-eli-cc-27-317_321_377-20210701-enpdf-a-4.pdf (English translation). 27 ZGB, Living Wills, Swiss Authorities Online, https://www.ch.ch/en/health/livingwills/., art. 364. 28 Ibid. art. 365, para. 3. 29 Ibid. art. 369, para. 1. 30 Sec. 1901a et seq. of the Civil Code, see in detail H. SCHNEIDER, ‘vor § 211’, in V. ERB & J. SCHÄFER (eds), Münchener Kommentar zum StGB, vol. 4, 4th ed., C.H. Beck, München 2021, mn. 138 et seq., supra (note 9).

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The Changing Scenario on Advance Directives for the provider of health services in whose facility it was issued. In the first case, the patient’s wish must be made in writing and the patient’s signature must be officially verified. It must also encompass the instructions regarding its consequences written by the patient’s general practitioner or by another health professional in a field related to the wish.31 The second type can be made upon admission to care or during hospitalization, only requiring the signatures of the patient, a health professional, and a witness, and its inclusion in the patient’s medical records.32 According to Italian law, the patient’s will as expressed in an advance directive can take the form of a written public deed, of a certified private deed or of a private deed delivered personally by the persons to the civil office of their city of residence, who will register it in the appropriate register. Such acts are exempt from registration fees, stamp duty and any other tax. When the physical condition of the patient requires it, the advance directive can be expressed by a video recording or devices allowing the person to communicate. Under Italian law, advance directives are renewable, modifiable and revocable at any time. In cases where reasons of urgency and necessity prevent the directive from being revoked in the manner initially foreseen, it may be revoked by a verbal statement recorded or videotaped by a doctor, with the assistance of two witnesses. In England and Wales, formalism consists in the requirement that the directive be conceived in writing and signed by both the individual drafting it and a witness. Apart from the object-related requirements mentioned above, a directive might be considered invalid if there is doubt regarding the voluntary nature of drafting it or if since drafting it the person has made affirmations contradicting its content. In Switzerland, patient decrees must be in writing, signed, and dated to be valid,33 but no witnesses are necessary. Equally, the existence and location of a patient decree may be recorded on the patient’s health insurance card.34 A person may revoke a patient decree at any time by drafting a signed and dated document to that effect, by destroying the patient decree, or by drawing up a new patient decree without explicitly revoking the old one.35 On the other hand, within the same legal system, in order to be valid, an advance care directive must either be holographic (meaning entirely handwritten, dated, and signed) or notarized by a notary public.36 The existence and location of an advance care directive may be recorded in the Civil Register upon request.37 Similar to a patient decree, a person

Section 36(2) and (3) of the Czech Health Services Act, supra (note 21). Section 36(4) of the Czech Health Services Act, supra (note 21). 33 ZGB, art. 370, Living Wills, Swiss Authorities Online, https://www.ch.ch/en/ health/living-wills/, supra (note 10). 34 Ibid. art. 371, para. 2. 35 Ibid. art. 371, para. 3, in conjunction with art. 362. 36 Ibid. art. 361, paras. 1, 2. 37 Ibid. art. 361, para. 3. 31 32

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu may revoke an advance care directive in the same way that it was established, by destroying it, or by drawing up a new one without explicitly revoking the old one.38

II.

The Need for a Private International Law Set of Rules for Advance Directives

As we have seen in the previous paragraphs the regulatory framework on advance directives differs dramatically in the different Countries. Considering the extensive migration flows we are facing today and more specifically the free movement of persons that we have inside the European Union, together with the progressive ageing of the population it is clear that the current scenario makes a problem arise. A few years ago Ballarino theorized that there was probably no need to apply conflict of law rules to living wills (reaching the same conclusions for euthanasia as he considered both aspects) and stressed the relevance of the role of the lex fori in “providing a legal discipline for personal relationships which are sufficiently connected with the country” leading to straight recognition in all cases in which there is sufficient connection with the country where they needed to be applied.39 He considered living wills as acts setting out rules about the person’s physical wealth and therefore not belonging to a definite legal order and not subject to the need to respect specific forms required by internal law under the principle locus regit actum. Therefore he argued that conflict of laws applied only to the capacity to make them and not to their content. We now need to argue and examine whether this approach is still acceptable after the extensive evolution of the legal framework we have been facing in recent years. Is it still possible to advocate the need to apply a straight recognition to any documents containing advance directives or is it necessary to evaluate them in the framework of Private International Law rules? And if the latter is the case, which set of rules should we apply: only the ones on legal capacity or also different sets of rules on validity and content? Can we make reference to shared set of rules such as the ones contained in the Hague Convention on the protection of vulnerable adults of 2000 or in future common Instruments at EU level? This part of the paper will try to propose some solutions to these still open questions.

Ibid. art. 362. T. BALLARINO, Is A Conflict Rule For Living Wills And Euthanasia Needed?, in this Yearbook, 2006, p. 25 et seq. The opinion expressed by the author were clearly related to the situation at the time, a situation that as we will see in the subsequent paragraphs, evolved recently thanks to the evolution in the national legal frameworks but mainly, for what is of interest for this part of the paper, to the new possible interpretation of the Hague Convention of 2000 (that was not considered applicable to Advance Directives at the time) and to the role assumed by the EU in harmonization of Private International Law. 38 39

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The Changing Scenario on Advance Directives A.

The Need to Evaluate Advance Directives in the Framework of PIL Rules

The idea to fully exclude the need to apply PIL in such a delicate field as the one related to advance directives seems fascinating but not acceptable in a complex framework such as the one that was created in recent years. Such an attitude could surely promote an extensive recognition of similar documents respecting any national legal framework, but the differences in content may lead to difficulties in their practical full application and the lack of a common framework could endanger the effectiveness of the choices made in such documents. Even though there is sure margins to recognise limited effects to living wills or advance directives in any country when they specifically deal with a medical intervention, thanks to the provision contained in Article 9 of the Oviedo Convention40 that provides for the need to take into account the previously expressed wishes of a patient who is not, at the time of the intervention, able to express them, we need to consider that advance directives may also deal not exclusively with a specific medical intervention and that the provision of Article 9 of the Oviedo Convention cannot be considered as a sufficient mean to apply and recognise full value to advance directives drafted in a cross border situation. Also the experience coming from foreign (out of Europe) legal frameworks is relevant to understand that advance directives respecting the law of one Country are not always considered as valid in a different one. Many States in the USA have reciprocity laws ensuring that out-of-state directives be considered validly executed, but still they have problems in their interpretation and consequent application due to the different national regulations,41 making it necessary in some cases to have a court evaluate their possible recognition and interpretation. It is therefore relevant to explore in more detail the existing framework of PIL rules that may be helpful in recognizing a cross border validity to the different instruments existing at national level.

Convention on human rights and biomedicine signed in Oviedo (supra, n. 2). For a comment see H. TEN HAVE/ M. DO CEU PATRÃO NEVES (2021). Oviedo Convention (See also Council of Europe). In: Dictionary of Global Bioethics, Cham 2021. On its Article 9, see D. ZANNONI, Right Or Duty To Live? Euthanasia And Assisted Suicide From The Perspective of The European Convention on Human Rights, European Journal of Legal Studies, 2020, p. 181-212. At the time of writing (June 2023) the Oviedo Convention is applicable in thirty States, but it is relevant to stress that ten EU member States have not ratified it (Austria, Belgium, Germany, Ireland, Italy, Luxembourg, Malta, Netherlands, Poland, Sweden). 41 See L.S. CASTILLO et al., Lost in Translation: the Unintended Consequences of Advance Directive Law on Clinical Care, Annals of Internal Medicine, 2011, p. 121-128. More recently for the Australian situation see O.C. PANDOS & B.J. RICHARDS, Lost in Translation: Overcoming Practical Barriers in the Operation of Advance Care Directives and Enduring Powers of Attorney in South Australia, Adelaide Law Review, 2022, p. 271297. 40

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu B.

The Hague Convention on the Protection of Vulnerable Adults of 2000 and its Possible Application to Advance Directives

A first thought must be devoted to the Hague Convention on the protection of vulnerable adults of 2000 that was clearly created to protect adults in need, and so also adults that want to express their decisions for a moment in which they will not be able to do it in person.42 Like all Hague Conventions, this one focusing on protection of adults creates harmonised PIL rules dealing with applicable law and jurisdiction. These rules are meant to apply to the protection of adults who “by reason of an impairment or insufficiency of their personal faculties, are not in a position to protect their interests” (Article 1). Its focus is on the measures directed to protect the person or property of the adult that may be related, inter alia, to the determination of incapacity and the institution of a protective regime, but also to “the designation and functions of any person or body having charge of the adult's person or property, representing or assisting the adult” (Article 3 letter d).43 Some authors argued that the Convention, that unfortunately is only into force for a limited number of States44 may not apply to advance directives as it only applies to mandates that give power of attorney to a person and not to documents just detailing the instructions and wishes of the adult with relationship to the future treatment of his person, not addressed to a representative, however it may be argued that Article 3 letter d, as we have seen, contains a general reference to assistance of the adult. 42 For a first comment see E. CLIVE, The New Hague Convention on the Protection of Adults, in this Yearbook 2000, p. 1-23; P. LAGARDE, La convention de La Haye du 13 janvier 2000 sur la protection internationale des adultes, Revue critique de droit international privé, 2000, p. 159-179; A. BUCHER, La Convention de La Haye sur la protection internationale des adultes, in Swiss Review of International and European Law, 2000, p. 37- 59; K. SIEHR, Das Haager Übereinkommen über den internationalen Schutz Erwachsener, in Rabels Zeitschrift für ausländisches und internationales Privatrecht, 2000, p. 715-751; M. REVILLARD, La convention de La Haye sur la protection internationale des adultes et la pratique du mandat d’inaptitude, in Mélanges en l’honneur de Paul Lagarde, Paris 2005, p. 724-735. See also L. RASS-MASSON, The HCCH and Legal Co-Operation Shaping the Fourth Dimension of Private International Law, in T. JOHN/ R. GULATI & B. KOEHLER (eds), The Elgar Companion to the Hague Conference on Private International Law, Cheltenham, 2020, p. 150-159. On the Convention see also D. HILL, The Hague Convention on the International Protection of Adults, The International and Comparative Law Quarterly, 2009, p. 469-476. More in general see H. BAKER/ M. GROFF, The Impact of the Hague Conventions on European Family Law, in J.M. SCHERPE (ed.) European Family Law Volume I, Cheltenham 2016, p. 143-208. 43 A. RUCK KEENE, Private Mandates and Other Anticipatory Measures in The International Protection of Adults in R. FRIMSTON et al. (eds), The International Protection of Adults, Oxford 2015, p. 152. 44 At the time of writing (June 2023) the number of contracting Parties to the Convention is fifteen, twelve of them EU Member States: Austria, Belgium, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Greece, Latvia, Malta, Monaco, Portugal, Switzerland, United Kingdom (but only extended to Scotland).

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The Changing Scenario on Advance Directives In particular there was a long ongoing debate among scholars regarding the possible application to advance directives of Articles 15 and 16 of the Hague Convention dealing with the power of representation granted by an adult under an agreement to be exercised when such adult is not in a position to protect his or her interests, as it seemed that not all types of advance directives may fall under these provisions.45 The problem was in particular related to cases in which no representative was appointed by the adult and therefore no power of attorney was given, as advance directives may be simple anticipatory acts addressed to the world at large, where an adult details his or her wishes on health, welfare and other personal matters (including economic and financial matters). However the recent document of the Permanent Bureau “Instructions given and wishes made by the adult within the scope of the 2000 Protection of Adults Convention”46 approved in October 2022 suggests that States should apply the Convention to advance directives as they qualify as “instructions given and wishes made by an adult fall within the general scope of the Convention under Article 1” and are therefore subject at least to the co-operation provisions of Chapter V of the Convention. The term “power of representation” in articles 15 and 16 may be interpreted in an extensive way in order to include also documents that only detail the wishes of the adult in case of future impairment. Therefore the Instructions (para 38) suggest that Contracting Parties may go further and choose to consider Articles 15 and 16 applicable to all kind of advance directives in the spirit of the self-determination and autonomy of the adult as voluntary, anticipatory acts that deserve to be respected in accordance with the law of habitual residence at the time the document was drawn up even in case of cross border situation due to subsequent transfer of residence or domicile. The public policy exception contained in Articles 20-21 is sufficient to allow the State retaining jurisdiction to exclude relevance of forms of advance directive (i.e. allowing end of life decisions) conflicting with domestic laws the application of which is mandatory in that State. This broad interpretation seems also respectful of the Council of Europe’s 2009 Recommendation regarding “principles concerning continuing powers of 45 While drafting the Practical Handbook on the Operation of the 2000 Protection of Adults Convention, the members of the Working Group suggested to undertake more research as the situation was unclear and preferred not to take a position on applicability of articles 15 and 16 to advance directives. 46 Prel. Doc. No 6 of October 2022 (revised version) on Instructions given and wishes made by the adult within the scope of the 2000 Protection of Adults Convention, available at https://assets.hcch.net/docs/0f3444e1-3d12-44b6-bfe1-502917252308.pdf. For a different opinion on applicability of the Hague Convention to Advance directives see S. ROLLAND & A. RUCK KEENE, Study: Interpreting the 2000 Hague Convention on the International Protection of Adults Consistently with the 2007 UN Convention on the Rights of Persons with Disabilities, 2021, available at https://www.ohchr.org/Documents/ Issues/Disability/Hague-CRPD_Study.docx. See also the Explanatory Report, paragraph 96 which provides that “The powers thus conferred may be very varied. They have to do with the management of the adult's property as well as his or her personal care. One often finds in them the instruction given to the person mandated to refuse any persistent course of treatment in the event of incurable illness”.

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu attorney and advance directives for incapacity”, a document that recognises the difference between these two instruments but stresses their common aim as anticipatory measures enhancing the right to self-determination of the adult (as opposed to judicial or public intervention) in order to better allow adults to exercise their fundamental rights.47 This debate on the possible application of the Hague Convention and on the consequences of the lack of harmonisation of PIL rules seems to imply that the need to apply PIL rules to recognition of advance directives should be nowadays considered as commonly accepted and that the exclusion from the domain of private international law is not an option anymore. Starting from this standpoint we need to stress that unfortunately, as we have seen, the Convention is not in force in many countries and therefore its use cannot fully solve the problem we are assessing. In fact we still have different PIL rules applied (even in EU Member States):48 notwithstanding the fact that many countries, as we have seen in the comparative part of this article, have tried to regulate living wills and adults- mandate for future incapacity, not all of them accepted the suggestion made by legal scholars to innovate their rules also from the PIL point of view.49 Therefore it is becoming more and more relevant, as advocated by many authors, to have an intervention at EU level promoting ratification of the Hague Convention on the International Protection of Adults, or even furthering the cooperation among Member States by creating a common framework of rules based on Article 81 of the TFEU.50

47 Recommendation CM/Rec(2009)11 of the Committee of Ministers to member states on principles concerning continuing powers of attorney and advance directives for incapacity, 9 December 2009, (supra, n. 3). 48 For a comparison between the PIL existing in Italy, France and the United Kingdom before the Hague Convention see P. FRANZINA & J. LONG, The Protection of Vulnerable Adults in EU Member States. The Added Value of EU Action in the Light of The Hague Adults Convention, in C. SALM (ed.), Protection of Vulnerable Adults – European Added Value Assessment, 2016, p. 106-177. On the Spanish rules of PIL see Adroher Biosca, Salomé, La protección de adultos en el Derecho internacional privado español: novedades y retos, Revista Española de Derecho Internacional, (2019 p. 163-185. See also R. FRIMSTON, The 2000 Adult Protection Convention - Sleeping Beauty or Too Complex to Implement?, in T. JOHN/ R. GULATI & B. KOEHLER (note 42), pp. 226-235. 49 J. LONG, Rethinking Vulnerable Adults’ Protection in the Light of the 2000 Hague Convention, International journal of law, policy, and the family, 2013 p. 51-73. 50 For this opinion see, inter alia, See P. FRANZINA & J. LONG (note 10). On the issue see also A. MUÑOZ FERNÁNDEZ, Notas Sobre El Informe Del Instituto de Derecho Europeo Acerca de La Protección de Adultos En Situaciones Internaciones, Cuadernos de derecho transnacional, 2020, p. 1099, M. DRVENTIĆ, The protection of adults in the European Union, in D. DUIĆ & T. PETRAŠEVIĆ, EU and Member States – Legal and Economic Issues, EU and Comparative Law Issues and Challenges Series, ì 2019, p. 803-829. See recently P. FRANZINA, L’evoluzione del diritto internazionale privato della protezione degli adulti tra iniziative dell’Unione, modelli universali e norme interne, Jus online, 2022, p. 212 et seq.

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The Changing Scenario on Advance Directives C.

The EU New Proposals on the Protection of Vulnerable Adults and their Possible Application to Advance Directives

The request for the EU to assume an active leading role heading to application in the freedom, security and justice area of common PIL rules on protection of adults was answered by the European Commission that recently presented two proposals to address the issue: one meant to create common rules on jurisdiction, applicable law, recognition and enforcement of measures and cooperation relating to the protection of adults,51 and the second one meant to authorise Member States to become or remain parties, in the interest of the EU, to the Hague Convention.52 The two proposals were preceded by a Report, published in 2022, that stressed the existence of gaps and inconsistencies in the cross-border protection of adults and made a comparative analyses of the existing legislation in the EU Member States distinguishing private mandates from advance directives and focusing only on the first ones.53 The proposal of regulation itself missed the opportunity to explicitly address the issue of advance directives: while the focus on the need to safeguard the right and autonomy for an adult to make one’s own choices, and to have such choices respected in another member States (recital 44) represent a welcomed result, no express reference was made to the content of this power of representation and to the possibility for it to include also situations in which no person is appointed as representative. However it is relevant to note that the definition of “powers of representation” contained in the regulation (“powers granted by an adult, either under an agreement or by a unilateral act, to be exercised when that adult is not in a position to protect his or her interests” – Article 3) is almost identical to the one we find in Article 15 of the Hague Convention (“powers of representation granted by an adult, either under an agreement or by a unilateral act, to be exercised when such

51 Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of measures and cooperation in matters relating to the protection of adults, 31 May 2023 COM(2023) 280 final, 2023/0169 (COD). The proposal is based on the Hague Convention and its Article 4 expressly provides that “Where referred to in this Regulation, the HCCH Convention of 13 January 2000 on the International Protection of Adults (‘the HCCH 2000 Protection of Adults Convention’), which is attached to this Regulation, shall apply mutatis mutandis”. For a first comment see J. VON HEIN, Towards an EU Regulation on the International Protection of Adults, available at https://conflictoflaws.net/2023/towards-an-eu-regulation-on-the-international-protectionof-adults/. 52 Proposal for a Council decision authorising Member States to become or remain parties, in the interest of the European Union, to the Convention of 13 January 2000 on the International Protection of Adult, 31 May 2023 COM(2023) 281 final, 2023/0170 (NLE). 53 European Commission report L. ADRIAENSSENS/ C. BORRETT/ S. FIALON/ P. FRANZINA/ I. SUMNER & N. RASS-MASSON, Study on the Cross-border Legal Protection of Vulnerable Adults in the EU, Bruxelles, 2022, https://op.europa.eu/en/publication-detail//publication/facf667c-99d6-11ec-83e1-01aa75ed71a1/language-en/format-PDF/source270389740.

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu adult is not in a position to protect his or her interests”) and therefore a similar interpretation is to be expected. In particular as this definition was recently interpreted by the Permanent Bureau of the Hague Convention as possibly including advance directives, we can argue that such an interpretation could apply also to the proposal for a regulation. Considering the need to have a clear and certain legal framework to be applied in the Member States, it would have been better for such a new instrument to expressly approach the issue in order to remove the inefficiencies of the Hague Convention and the interpretative options. We need to remember, in fact, that the 2022 Instructions related to the Hague Convention do not compel State Parties to accept this broad interpretation but only suggest such a possible extension. Moreover the regulation does not contain specific provisions on applicable law, as its Article 8 makes a full renvoi to Chapter III (i.e. Articles 13-21) of the Hague Convention in order to determine the law applicable to the cross-border protection of adults, being the proposal for a regulation complimentary to the proposal of Council Decision meant to authorise the 14 Member states that are not party of the Hague Convention yet to ratify it in the interest of the European Union in order to create a common framework applicable to EU e non-EU countries.54 The most innovative aspect of the proposal for a regulation is the creation of a “European Certificate of Representation”, that however is not helpful in the situation we are evaluating as it may be used “by representatives, who, in another Member State, need to invoke their powers to represent adults who, by reason of an impairment or insufficiency of their personal faculties, are not in a position to protect their interests” therefore implying that the representative powers have been given to a specific subject and not dealing with the possible recognition of advance directives issued without an appointment of a representative body or person. It seems therefore that, even if the regulation will be approved (and it does not seem that this possibility is too near due to the time usually requested for the approval of similar harmonisation instruments at EU level) we will still be far away from having a possible system of recognition of the different legal instruments qualified as advance directives that exist in the various Countries. We should also remember that the choice of the correct legal basis upon which there was a large debate, was found in Article 81.2 TFEU and not in Article 81.3 TFEU (devoted to harmonisation in the field of family law): this would make it easier for the act to be approved, being the procedure less complex and not requiring unanimity even if it will still be possible (or eventually needed) to choose the option of enhanced cooperation to open the way to this new harmonization on a

The two proposals were clearly influenced by the Report of the European Law Institute, that suggested to have and External and an Internal Strategy, the firs one linked to the need for the Hague Convention to be in force in all Member States, and for the EU to promote the Hague Convention Worldwide, the second one on “Improving the Hague Convention Without Disrupting It”: see P. FRANZINA/ R. FRIMSTON, The protection of Adults in International Situations, Report of the European Law Institute, Vienna, 2020, p. 23 et seq and p. 28 et seq. A relevant influence also needs to be recognised to the position paper of the working Group established within the European Association of Private International Law, EU-wide protection for vulnerable adults, 26 March 2022. 54

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The Changing Scenario on Advance Directives relevant topic,55 a path that may become inevitable if the agreement between Member States would be impossible to reach as was the case for regulation 1259/201056 on law applicable to divorce and separation proceedings and, more recently, for regulations 2016/1103 and 2016/1104 on private international law rules related to matrimonial property regimes and on the property consequences of registered partnership.57

III. Conclusions While the choice between conflicting values implied in end-of-life decisions persists, where self-determination/autonomy of the individual is contrasted to the need to protect life/the need to protect vulnerable adults, a trend more favorable to autonomy is to be noticed at the European level. As a consequence, the national actors are encouraged to adopt legislation that acknowledges and grants full effect to anticipatory measures, enhancing the right to self-determination of the adult, as opposed to judicial or public intervention, in order to better allow adults to exercise their fundamental rights. Yet, even when such anticipatory measures like advance directives are recognized by the national legislation, the states’ discretion remains significant in basically all relevant respects – conditions of validity, formalism, limits, binding character. Within such a discontinuous legal background, we considered to be questionable whether documents containing advance directives need to be evaluate in the framework of Private International Law rules or, on the contrary, be granted a straight recognition. What becomes evident from the previous is the necessity to privilege the use of advance directives containing a power of attorney, at least in all crossborder situations in which it may be relevant to have the personal decisions 55 On enhanced cooperation and the first attempts of its application in the field of family law see J. JAAP KUIPERS, The Law Applicable to Divorce as Test Ground for Enhanced Cooperation, European Law Journal, 2012, p. 201 et seq. A. FIORINI, Harmonizing the law applicable to divorce and legal separation - enhanced cooperation as the way forward?, The International and Comparative Law Quarterly, 2010, p. 1143 et seq. 56 Regulation (EU) No 1259/2010 of the Council of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation, OJ L 343 of 29.12.2010. 57 Regulation (EU) No 2016/1103 of the Council implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes, OJ L 183, 8.07.2016, and Regulation (EU) No. 2016/1104 of the Council implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of the property consequences of registered partnerships, OJ L 183, 8.07.2016. For some first remarks see B. NASCIMBENE, Compétence juridictionnelle et loi applicable en matière matrimoniale: un règlement Rome III? Droits patrimoniaux des couples mariés et non mariés: vers des règles européennes sur les régimes matrimoniaux?, Revue des affaires européennes, 2007/08, p. 601 et seq.

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Elisabetta Bergamini/ Raluca Bercea/ Andreea Verteș-Olteanu respected in a different Country as the appointment of a representative is, in many cases, the only way to reach an effective result. Unfortunately, anticipatory acts addressed to the world at large, even when regulated by a specific Country, and usually accessible in that Country to everybody, irrespective of citizenship and residence, may remain ineffective in case of cross border situations. Being unsure whether Article 15 Hague Convention may be applied or not to such general instruments (being such a decision de facto left to the choice of each State Party) the risk is that the Country in which the adult would like (and need) for the advance directive’s content to be enforced, could refuse to proceed by not recognizing the validity of the instrument or its full content in application of the law identified by its own PIL rules. In fact while the Hague rules of Article 15 are quite open to the possibility to apply multiple laws (the law of the State of the adult's habitual residence at the time of the agreement or act, being the standard rule, unless the adult designated in writing the law of nationality, or the law of a State of former habitual residence of the adult58) the internal PIL may be more restrictive, for example by applying only the law of nationality or by not allowing a choice of law.59 Assisted suicide is clearly creating even more relevant issue in the field of PIL, but we consider this is not the place to develop a reasoning on it, given that the focus of this article is on mandates that do not necessarily imply such a specific choice.60

58 Article 15.2 lett c) contains also a reference to the choice of the law of “a State in which property of the adult is located, with respect to that property” which is clearly irrelevant for Advance Directives. 59 This is what happens under the PIL rules now applicable in Italy, where the Hague Convention has not been ratified yet. Under law 218/95 containing the general framework of Italian PIL, Articles 43 (Protection of adults) and 44 (Jurisdiction for the protection of adults) currently identifies in the law of nationality the one regulating the assumptions and effects of the protection of the incapable adults, as well as the relations between the incapable and the care-giver. 60 O. VANIN, “Assisted Suicide from the Standpoint of EU Private International Law.” Journal of private international law 18.2 (2022): 186-208; S. ROHLFING-DIJOUX/ U. HELLMANN. Culture and Law: Multidisciplinary Cross-Fertilization of Views on the End of Life, in S. ROHLFING-DIJOUX & U. HELLMANN. 1st ed. Baden-Baden, Germany: Nomos Verlagsgesellschaft, 2022.

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OBJECTIVE, SUBJECTIVE AND IMPERATIVE LOCALIZATION IN THE RESOLUTION OF CONFLICT OF LAWS Gerald GOLDSTEIN*

I.

II.

I.

Introduction – The Three Foundations of Resolution of Conflict of Laws A. Objective Localization 1. The Search for the Objective Center of Gravity According to Savigny 2. Objective Localization According to Professor Batiffol 3. The Proximity Principle According to Professor Lagarde and the Exception Clause B. Imperative or Mandatory Localization 1. The Public Policy Exception 2. Public Policy Crystallizations 3. Mandatory Laws C. Subjective (or Material) Localization 1. Extension of the Parties’ Choice of Law 2. Extra-Contractual Localization – The Defense of Foreseeability 3. The Targeting Approach 4. The Foreseeability or Legal Certainty Exception Conclusion – The Plurality and Complementarity of Localization Methods in Resolution of Conflict of Laws

Introduction – The Three Foundations of Resolution of Conflict of Laws 1

The purpose of this paper is to expose and justify logically the three fundamental systems of reasoning explaining the solutions given in positive law to the resolu-

* Maîtrise, D.E.S.S. (Paris I, Panthéon-Sorbonne), PhD (McGill Un.); Professor (Law faculty, Université de Montréal). 1 This paper uses the following abbreviations: Collected Courses, Collected courses of The Hague Academy of International Law; Colum. J. Transnat’l L., Columbia Journal of Transnational Law; LQ, Lois du Québec; J.D.I., Journal du droit international; Neth. J. of International L., Netherlands Journal of international law; O.J.E.U., Official Journal of European Union; par., paragraphe; RabelsZ, RabelsZeitung; Rev. crit. dr. int. pr., Revue critique de droit international privé; Trav. com. fr. d.i.p., Travaux du comité français de droit international privé; Tul. L. Rev., Tulane Law Review.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 19-43 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Gerald Goldstein tion of conflicts of laws in private international law, which has been rightly described as the “science of connection”.2 Historically, the modern era of private international law, and more specifically, of the resolution of conflicts of laws, began with the masterly work of Savigny. Since Savigny, the central aim of private international law rules intended to solve conflicts of laws has been to determine the objective center of gravity of each legal situation, in order to apply the law of that place, a physical location, in principle. This reasoning will designate the law that is objectively most closely connected to that situation. This principle of reasoning has more recently been called the “proximity principle”. It provides a flexible way of designating the legal system that all the courts seized of the matter should think of, thereby creating uniformity of applicable law and decisions. In this way, forum shopping is discouraged. This method enshrines the objective localization (Part 1). Increased state interventionism in private relations, however, through peremptory norms, has necessitated the use of other methods or instruments, such as the public policy exception or the method of overriding laws, in order to impose the application of the rules of the State of origin, even in international situations, to the detriment of the application of others. The purpose of this state intervention is to ensure the coherence of the essential policies of each legal system, such as the protection of individuals placed in an unfavorable position, which represents a second fundamental principle of resolution of conflict of laws. It imposes exceptionally an imperative localization of the situation (Part 2). Finally, in a kind of pendulum swing, more current liberal ideas have led to the advent of a third, more recent trend, based on respect for the individual and his or her basic needs, especially freedom. New rules are needed to apply in each international situation not only a law that is closely connected to it, but also the law that leads to a better material solution. In particular, allowing the parties to choose the law and the court that seem to them the most adapted to their needs will strongly favor this aim. It promotes predictability and allows for the growth of international relations and a sense of substantive justice. This trend towards respect for the principles of predictability and material or substantive justice is methodologically translated into a subjective localization (Part 3).3 Each of these three profoundly different methods of localization within, or connection, with a legal order is thus based on its own principle (proximity; respect for the coherence of the legal order of the court seized; foreseeability and substantive justice) and each has given rise to the formulation of a specific exception. First, an exception clause to ensure respect for the principle of proximity; second, a public policy exception to maintain the coherence of the legal order of 2 See A. PRUJINER, Le droit international privé: un droit de rattachement, in Études de droit international en l’honneur de Pierre Lalive, Helbing & Lichtenhahn, Bâle, 1993, pp.161-172. 3 The chronological presentation of these three modes of localization in the table of content and development do not correspond exactly to the order of the title of this article. This is not a mistake but a conscious choice expressing the visual and sound logic of the title, which subjectively seemed more appropriate, without affecting the logic of the text.

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Three Methods of Localization in the Conflict of Laws the court seized; and third, an exception of foreseeability (or legal certainty exception) to achieve material justice. These three exceptions are intended to exceptionally redirect the result of the resolution of the conflict of laws towards the fundamental principle for which it is intended to ensure respect. The essential purpose of this essay is to underline the logical coherence of this theoretical structure inherent to the various methods used to solve conflict of laws. A.

Objective Localization

The foundation of modern private international law dates back to the formulation of objective localization as a method of resolving conflicts of laws. The foundation of this method is based on Savigny's strong ideas, which focus on the search for the objective center of gravity of each type of international situation (1.1.). Professor Batiffol then modernized and generalized this approach, which he clearly named objective localization, not only in contractual matters, but in all areas of private law (1.2.). Finally, Professor Lagarde completed this theory by synthesizing the more general concept of the proximity principle, in which objective localization or connection is at the heart of the reasoning, particularly, but not only, in the resolution of conflicts of law (1.3.). 1.

The Search for the Objective Center of Gravity According to Savigny

Against a background of “statutist” theories inherited from the Middle Ages, Savigny developed a scheme whose intellectual force has never yet been equaled in private international law. Rather than seeking, as did the statutist scholars, to determine the international domain of laws (the “statutes”) according to a binary classification, aimed either at persons - in which case they would follow these persons outside the territory of the State that enacted them (personalist system) - or at things - in which case they would apply to all those in the territory of this State (territorialist system) - Savigny starts from the situation subject to the law and seeks to determine the law most naturally applicable to it, according to its type (its “nature”). This is why we speak of a Copernican revolution in private international law.4 Unlike, in particular, the Anglo-Saxon doctrine expounded by Story and influenced by the Dutch territorialist school, the perspective is no longer that of the interest of States seeking to assert their sovereignty through their laws and decisions, but rather that of the private interest of individuals involved in a relationship subject to a law, whose objective seat is sought, according to its nature, in order to submit it to the law of that place.5 4 See F. KNOEPFLER/ P. SCHWEIZER/ S. OTHENIN-GIRARD, Droit international privé suisse, 3ème éd., Berne, 2005, p. 27, No 74.

See H. BATIFFOL/ P. LAGARDE, Traité de droit international privé, t. 1, 8ème édition, Paris, 1993, No 237, p. 399: “il cherche à rattacher objectivement chaque institution 5

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Gerald Goldstein This reasoning of connection to a law by the (physical, geographical) seat of the relationship is the essence of the process of localization in private international law. This seat is supposed to be materially determined by the choice of a localizing or connecting factor deemed to be the most characteristic6 according to the specific nature of the relationship: the location of an asset for a real right of which it is the subject, the domicile of the person concerned, etc. The resolution of the conflict of laws thus amounts to determining in a neutral way, without preference for the law of the forum, and objectively the material center of gravity of each type of legal situation in order to apply the law of that place. According to Savigny, there is no reason for a court to favor the application of the law of the local “sovereign”: first, theoretically, because applying a foreign law does not infringe its sovereignty,7 since in principle only private interests are at stake. Moreover, practically, because the author is analyzing international relations taking place between “civilized nations”, an expression that covers only those Western peoples who have followed or received Roman law.8 Thus, the content of the laws of these nations does not appear, in principle, to be unreasonable or odious: they are therefore more or less interchangeable. The objective character of this location is also linked to the nature of the relationship. It is indisputable from this point of view that a real right in immovable property is governed by the law of the place where it is situated, since no one can dispute that the “natural” material situation of the object of the right (the immovable property) is the seat of the legal relationship. It is in this place that the title to the property is expressed by its exclusive character and by its effects: right of enjoyment, limits, etc. This “objective” type of reasoning, based on intellectual presuppositions that are nevertheless open to discussion – neutrality and fungibility limited to the laws of the “civilized nations”; objective determination of the seat according to the “nature” of the relations – has the great advantage of permitting a coordination of laws and possible decisions, a mutual articulation that is the essential goal of this method of reasoning. In fact, by starting from the examination of the nature of the situation, and no longer directly from the will of the legislator,9 one favors its uniformity of analysis because of the community of legal conceptions of the “civilized nations”.10 Any court (of a “civilized” country!) seized of a legal situation should normally come to the same conclusion as to its material center of gravity and therefore the same law should apply in any (civilized!) country. In this way, the legal status of persons and things can be maintained even when crossing the à la loi qui lui convient selon sa nature” (“it seeks to objectively link each institution to the law that suits it according to its nature) (Our translation). 6 B. AUDIT, Droit international privé, 5ème éd., Paris, 2008, No 93. B. AUDIT (note 6), No 92; F. KNOEPFLER/ Ph. SCHWEIZER/ S. OTHENIN-GIRARD (note 5), p. 27, No 74. 7

8

See H. BATIFFOL/ P. LAGARDE (note 5), p. 398.

9

B. AUDIT (note 6), No 93, p. 76.

10

22

See H. BATIFFOL/ P. LAGARDE (note 5), p. 399.

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Three Methods of Localization in the Conflict of Laws border, which favors international relations since they are permanently enshrined in the same law on both sides of the border. Even today, Savigny's method is universally accepted for resolving conflicts of law, even when they involve culturally distant legal systems. Its scope is therefore fundamental. It implies, first, an analysis of the nature of the legal relationship in question (operation called “characterization”), and second, for this type of relationship, a determination of the law that must objectively govern it according to this very nature by materially concretizing the most characteristic localizing element (called “connecting factor”). For instance, for Savigny, the law relating to the capacity of a person domiciled in Italy must be subject to Italian law because the conception of Roman law shows that this domicile, defined as the place where he lives without taking into account any intentional element, is the natural connecting factor of the person.11 However, there are criticisms concerning the certainty of the “nature of things” that allows this objective determination of the seat of a situation. While it is easy to affirm that the natural center of gravity of real property rights is the place where the tangible property that is the object of the right is located, and that the center of gravity of civil liability arising from an accident is the place where it occurred, it is more uncertain to determine objectively and materially the natural center of gravity of a situation directly involving a person12 (place of domicile or nationality?), of a contract (place of conclusion, of performance?), of a succession, etc. The intangible character of certain elements of the situation, such as the conclusion of a contract at the place of the meeting of the wills, dictates the use of fictions (place of meeting of the wills at the place of issuance or receipt of the acceptance; fictitious place of location of the movables included in a succession at the domicile of the deceased, etc.). In addition, Savigny takes into account, among other elements, the willingness of individuals implicitly to subject certain elements of the situation to a law, including the right of ownership of property, and the concordance between the applicable law and the jurisdiction of the court.13 However, the taking into account of these two elements – artificial or more subjective for the first; subject to considerations of efficiency and material power over the situation, for the jurisdiction of the court – casts doubt on the purely objective character of the analysis in its practical applications. Thus, if the method seems reliable, neutral and worthy of an abstract and objective scientific approach, in its practical application, the determination once and for all of the center of gravity according to the “nature of things” seems less obvious. Consequently, this material designation of the center of gravity and of the

11

See H. BATIFFOL/ P. LAGARDE (note 5), No 238, p. 400.

See H. BATIFFOL, Aspects philosophiques du droit international privé, Paris, 1956, No 3, p. 13. 12

Y. LOUSSOUARN/ P. BOUREL/ P. privé, 9ème éd., Paris, 2007, p. 104. 13

DE

VAREILLES-SOMMIÈRES, Droit international

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Gerald Goldstein applicable law may seem more arbitrary than objective,14 especially if the analysis remains confined to abstract and general ideas that may not be well adapted to new circumstances such as electronic commerce. Paradoxically, however, it may be thought that the variability that it allows in its practical application, because of its abstract starting point, not only in the determination of the division and content of the broad categories of situations considered, but also from the point of view of the characteristic factors of location, has favored its universal acceptance and expansion, since it opportunely allows the justification of very diverse doctrinal constructions.15 Nevertheless, these more or less free interpretations based on the same principle did not favor its “marketing image”. Thus, because of its function considered either too rigid, too abstract or too artificial by the more pragmatic Anglo-Saxon scholars, with regard to the diversity of international situations, it gave rise, towards the 1960s, to a partial reconsideration in the course of an American doctrinal methodological “revolution”, in order to lead directly to good material results. The disadvantages however of these American theories, which are imprecise and random in practice, have proven so great in terms of uncertainty and unpredictability, and therefore indirectly in terms of the quality of justice, that they have not convinced any foreign legislator and are essentially ignored by international conventions. Nevertheless, in order to improve the Savignian method's flexibility without destroying its advantages, while avoiding the dive into the chaos resulting from the American revolution, essentially European scholars, inspiring legislators and case law, were themselves inspired from time to time by some of its contributions while preserving the fundamental structure of the method.16 2.

Objective Localization According to Professor Batiffol

Taking up for the most part the contributions of the classical method, known as “Savignian”, Professor Batiffol exposes what he sees as the courts’ general “quasiinstinctive tendency”, which he calls objective localization, in these terms17 (our translation): 14 In addition, if the designated law does not produce a satisfactory result, the courts use a number of “gimmicks” such as the public policy exception to modify the designation of the law. 15 Y. LOUSSOUARN/ P. BOUREL/ P. DE VAREILLES-SOMMIÈRES (note 13), p. 104. 16 In particular, with the adoption of exception clauses (see below on this concept) and in the formulation of materially oriented conflict of laws rules, with several alternative connecting factors, such as Art. 3128 C.c.Q. 17 H. BATIFFOL (note 12), No 103, p. 230: “le droit international privé cherche à déterminer le champ d'application respectif des divers systèmes juridiques en présence dans une situation donnée; la réponse la plus simple consiste à donner compétence à la loi en vigueur sur le territoire où la situation se localise objectivement, c'est-à-dire par ses éléments principaux; ainsi une localisation très apparente est celle que dénote l'existence d'un objet matériellement localisé, tel un immeuble”.

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Three Methods of Localization in the Conflict of Laws [...] private international law seeks to determine the respective scope of application of the various legal systems involved in a given situation; the simplest answer consists in giving jurisdiction to the law in force in the territory where the situation is objectively localized, i.e., by its principal elements; thus a very apparent localization is that denoted by the existence of a materially localized object, such as an immovable. As in the case of Savigny, it is a matter of setting out a general principle of solutions, directly inspired by this author, the scope of which was obviously undisputed in matters of real property law, but which was extended in case law to all areas of private law, such as extra-contractual liability, the law of the person, and contracts. However, in the contractual field, this principle takes on a more particular meaning for Batiffol. The doctrine was then divided between two trends. A subjectivist trend allowed the parties to choose directly the law applicable to the contract and the judge was bound by this choice. In the absence of a choice of law clause, an implicit choice was made based on the material elements of the contract. The opposite trend was to base the judge's choice of law on the objective center of gravity of the situation through various factual elements (place of conclusion; place of performance). Professor Batiffol proposed an intermediate position, called objective localization, which was then adopted for a time by French case law, according to which the parties, in choosing the various elements of the contract (place of conclusion, place of performance, language, etc.), were merely localizing it,18 from which operation the court deduced the applicable law. This idea is particularly relevant in a system requiring that the chosen law have a material connection with the contractual situation. Unlike for the subjectivists, following this reasoning, the choice of law clause appeared only as an element chosen by the parties from among others to designate the applicable law and was not mandatory for the judge. Indeed, Professor Batiffol gave priority to the “material” elements of location, in particular because of the appearance they create vis-à-vis third parties and society, rather than to the “psychological” location resulting from the will of the parties to choose a law.19 3.

The Proximity Principle According to Professor Lagarde and the Exception Clause

a)

The Meaning of the Proximity Principle

Following the reflections of Professor Batiffol, Professor Lagarde20 has endeavored, with great success, to set out and develop this methodological approach 18

H. BATIFFOL (note 12), No 111, p. 245

H. BATIFFOL (note 12), p. 250-251. P. LAGARDE, Le principe de proximité dans le droit international privé contemporain, Collected Courses 1986, Vol. 196, p. 9 et seq. 19 20

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Gerald Goldstein based on objective localization by means of a principle, which he calls the “principle of proximity”, defined as follows: “A legal relationship is governed by the law of the country with which it is most closely connected” (our translation).21 The aim in each case is to apply the law that is objectively most closely connected with the situation: this is the justification for the name of the principle. An example of this trend is Article 3112 C.C.Q., which sets out the Quebec conflict rule in contractual matters as follows: If no law is designated in the act or if the law designated invalidates the juridical act, the courts apply the law of the State with which the act is most closely connected in view of its nature and the attendant circumstances. As for the method used, it is closely inspired by Savigny's idea of determining the center of gravity of by Professor Batiffol’s objective localization. That said, Professor Lagarde considers more localizing elements than geographical considerations analyzed abstractly in a rigid and quantitative way. First, by referring to “links” or connecting factors, one moves away from the idea of a geographical and material location to that of a possible connection to a non-territorial legal system, such as the nationality of the parties or the currency of payment in a contract. Second, this formula and that of Article 3112 C.C.Q. also have a qualitative dimension that is different from a more or less automatic and abstract calculation: the potential connecting factors have an unequal value, depending on the nature of the act and the circumstances of the case, in terms of proximity.22 However, there is no direct consideration of the purpose or intent of the material rules in conflict under this reasoning.23 Thus, in contrast to the objective location of Savigny and Batiffol, Professor Lagarde explains that this principle also means abandoning fixed connections, such as the place of performance or of conclusion of a contract, in favor of connections with a variable value depending on the circumstances.24 As explained by the author25 (our translation): 21 P. LAGARDE (note 20), p. 29, No 4: “Un rapport de droit est régi par la loi du pays avec lequel il présente les liens les plus étroits”. 22 Very accurately described as (our translation) “the expression, at once condensed and uncluttered, of the functional link that connects the question of the right in dispute and the connection retained, in the Savignian method” (“l'expression à la fois condensée et décharnée du lien fonctionnel qui relie la question du droit litigieux et le rattachement retenu, dans la méthode savignienne”): D. BUREAU/ H. MUIR WATT, Droit international privé, t. 1, Paris, 2007, p. 347. 23 See D. BUREAU/ H. MUIR WATT (note 22), p. 118. This consideration of the purpose of the laws reflects the specific character of the different method of mandatory laws. 24 P. LAGARDE (note 20), p. 33 et seq. 25 P. LAGARDE (note 20), p. 30: “Aussi, à la démarche abstraite de Savigny, le principe de proximité substitue-t-il une démarche concrète, fondée sur l'examen des différents éléments de la situation dans son ensemble”.

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Three Methods of Localization in the Conflict of Laws Thus, instead of the abstract approach of Savigny, the principle of proximity substitutes a concrete approach, based on the examination of the different elements of the situation as a whole. This closest connection formula includes flexibility in the determination and discretionary power given to the judge26 that allows for a better adaptation of the resolution of the conflict of laws to the circumstances. On the other hand, it also requires the intervention of the judge and leads to greater unpredictability. Indeed, it brings into play several localizing elements, whereas the conflict rules formulated according to the Savignian method generally use a single connecting factor. Moreover, since this approach gives more weight in the localization process to intangible elements than in the Batiffol and Savigny approaches, their effects and their localization value are much more susceptible to variations in assessment than if tangible elements such as the location of a building were used. This flexibility is expressed not only in the way in which its application is envisaged, by designating the competent law taking into account all the concrete circumstances, but also by the adoption of a specific exception to the application of the conflict rule: the exception clause. b)

The Exception Clause

With the exception clause, the function of the proximity principle will no longer be to designate the applicable law directly, as in Article 3112 C.C.Q., but to correct the result of the application of the normal conflict rule by giving a broader choice of locating elements than that retained in the classic conflict rule. An example of this is the rule that has served as the inspiration for a number of recent codifications,27 Article 15 of the Swiss Federal Act of 1987, which states:28 26

See H. BATTIFOL (note 12), No 3, p. 13.

See: Article 3082 Civil code of Québec; Article 19 par. 1 of the Belgian code of PIL 2004 (Loi portant le Code de droit international privé, 16 juillet 2004, http://www.juridat.be/cgi_loi/legislation.pl; http://www.dipr.be/databank.aspx; Code de droit international privé, Loi du 16 juillet 2004); Article 8 of the 2001 Korean law (Law amending the Conflict of Laws Act of the Republic of Korea, (Law No 6465, enforced April 7th 2001, translation by K.H. SUK, this Yearbook, Vol. 5, 2003, pp. 315-336; Article 8, Book 10, Civil Code of the Netherlands (Wet 19 mei 2011 tot vaststelling en invoering van Boek 10 (Internationaal privaatrecht) van het Burgerlijk Wetboek (Vaststelling – en Invoeringswet Boek 10 Burgerlijk Wetboek), Staatsblad (BGazteet officielle) 2011, 272, English translation by M.H. TEN WOLDE/ J.G. KNOT/ N.A. BAARSMA, this Yearbook, Vol. 13, 2011, pp. 667-694. 28 Loi fédérale du 18 décembre 1987 sur le droit international privé (LDIP), R.O. 1988.1776, R.S. 291, http://www.admin.ch/ch/f/rs/c291.html: art. 15: “Le droit suisse désigné par la présente loi n'est exceptionnellement pas applicable si, en regard de l'ensemble des circonstances, il est manifeste que la cause n'a qu’un lien très lâche avec ce droit et qu'elle se trouve dans une relation beaucoup plus étroite avec un autre droit. Cette disposition n'est pas applicable en cas d'élection de droit”; translation (Federal Act on Private International Law): https://www.fedlex.admin.ch/eli/cc/1988/1776_1776_1776/en. 27

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Gerald Goldstein As an exception, the law referred to by this Act is not applicable if, considering all the circumstances, it is apparent that the case has only a very loose connection with that law and that the case has a much closer connection with another law. This provision does not apply where a choice of law has been made. Thus, by virtue of the exception clause, also known as the “escape clause”,29 if the law designated by the conflict rule does not have a close connection with the situation, while another law, not designated, has a much closer connection with it, the exception clause will operate to designate the latter law, thereby correcting the operation of the conflict rule. The principle of proximity is thus respected in all cases, which is the major contribution of this recent concept. However, it has three disadvantages. First, it adds a potential additional step to the already complex Savignian method of resolving conflicts of laws. In addition, the variability of the result of this analysis is not necessarily conducive to system coordination. To try to limit this negative effect, it is required that the lack of proximity to the normally designated law and the much closer connection to another law be obvious. Finally, since the exception clause also extends the unpredictability inherent in the principle of proximity to all areas of private law, its use is excluded when respect for this principle of foreseeability is deemed so essential that the parties are allowed to choose the applicable law,30 as in contractual matters, as the text of Article 15 of the Swiss law and that of all the other exception clauses expressly state. The conflicts of general principles must thus be solved.

B.

Imperative or Mandatory Localization

In addition to the defense of private interests, the State must also intervene actively in an international situation to support the defense of the community' interests (protection of the consumer, of the weaker party, of the environment, etc.). Private international law must also “preserve the rule of law”31, that is to say, respect the coherence of the internal policy of the forum State, or even of that of a foreign State considered to be fundamental.

29 See C. DUBLER, Les clauses d’exception en droit international privé, Genève, 1983; G. GOLDSTEIN, Commentaires sur le Code civil du Québec, Le droit international privé (art. 3076 à 3133 C.c.Q.), Y. Blais, 2011, par. 3082 550 et seq.; G. GOLDSTEIN, Mécanismes correctifs à l’application de la règle de conflit: clause échappatoire et exception d’ordre public, in Jurisclasseur de droit québécois, volume Droit international privé, P.-C. LAFOND/ G. GOLDSTEIN (ed.), (2022). 30 The same role is played at the jurisdictional level by the forum non conveniens theory. See G. GOLDSTEIN, Forum Non Conveniens and Exception Clauses: Coordinating Conflicting Legal Systems in Civil Law Jurisdictions in a Global Context, this Yearbook, Vol. 19, (2017-2018), pp. 1-29. 31 H. BATIFFOL (note 12), No 103, p. 230 (“ménager l’autorité de la loi”).

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Three Methods of Localization in the Conflict of Laws As Professor Batiffol wrote in 1956 in relation to contractual matters, in particular in relation to mandatory laws: “one cannot lose sight of a growing tendency to set certain mandatory localizations against the will of the parties”32 (emphasis added). This mandatory or imperative localization takes three forms. From the earliest days of private international law, when its precepts were mixed with those of public international law, particularly by the Dutch scholars, the designation of the applicable law included a reservation to the obligation to respect the laws of foreign States, based at the time on international comity and State (territorial) sovereignty, centered on the public policy exception (2.1.). Moreover, the link, highlighted by some German scholars, between the requirement of an impact on the forum (Binnenbeziehung theory) and the public policy exception has made it possible to envisage a second form of mandatory localization resulting from public policy crystallizations (2.2.). Meanwhile, around 1958, in order to better conceptualize the sometimes systematic intervention of the public policy exception, Phocion Francescakis proposed a new concept, that of the “laws of immediate application”, later called more simply “lois de police” (or mandatory laws) by contemporary scholars (2.3.). 1.

The Public Policy Exception

a)

Classical Conception

The public policy exception, a concept that has a specific function in private international law, has always been accepted as a ground for excluding the law applicable under the conflict of laws rule. Thus, the first paragraph of Article 21 of the Belgian Code of Private International Law 2004 states, for example, under the heading “public policy exception”:33 The application of a provision of the foreign law designated by the present statute is refused in so far as it would lead to a result that would be manifestly incompatible with public policy. In determining this incompatibility, special consideration is given to the degree in which the situation is connected with the Belgian legal order and to the significance of the consequences produced by the application of the foreign law. The function of this exception is to prevent a local decision based on foreign law from leading to a result that would be inconsistent with the fundamental principles or mandatory laws of the court seized. The rationale is that such a local decision, inspired by foreign considerations (e.g., discrimination on the basis of sex), would nonetheless belong to the receiving legal system, not to the original legal system of the rule. Consequently, its inclusion within this system of reception would give 32 H. BATIFFOL (note 12), p. 250: “on ne peut perdre de vue une tendance croissante à opposer certaines localisations impératives à la volonté des parties”. 33 Law of 16 July 2004 holding the Code of Private International Law, English translation by C. CLIJMANS/ P. TORREMANS, this Yearbook, Vol. 6, 2004, 319, p. 326.

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Gerald Goldstein rise to an inconsistency favoring the absence of respect for the law: the objective of “respecting the authority of the law” (according to Batiffol’s expression) would be called into question. The effect of the public policy exception is therefore to exclude the foreign law designated by the objective localization method and to replace it in principle by the solution inspired by the law of the forum: in this way, its consistency will be respected. However, the application of such local law in the name of public policy risks precluding any respect for the principle of proximity insofar as this law is not that of the objective center of gravity. Indeed, the imperative localization in this method is guided by another competing principle. This is why the second paragraph of Article 21 of the Belgian Code of Private International Law 2004 states, in a very coherent manner: If a provision of the foreign law is not applied because of the incompatibility, another relevant provision of that law or, if required, of Belgian law applies. Thus, the Belgian court will first need to look to the applicable foreign law, following the objective localization, for a subsidiary rule that would be compatible with the concepts of the forum. Only in the absence of such a rule will the Belgian court have recourse to Belgian law, which is not that of the center of gravity. This provision attempts to reconcile the two conflicting principles before giving exclusive priority to the coherence of the Belgian legal order. It is necessary, however, that the situation be truly exceptional, or that the seriousness of the opposition of conceptions justifies this priority, and that the infringement not be merely theoretical, stated abstractly in the foreign rule, but concrete, that is to say, that its application materializes such an opposition, as the first paragraph of Article 21 makes clear. The purpose of these restrictive conditions is to preserve the exceptional character of this mandatory connection in favor of the proximity principle. In addition to these two conditions that fully justify the energetic and imperative intervention of the State, a third condition is being added more and more clearly by scholars and case law, that of a material impact on the legal order of the forum, a requirement born of the German theory known as Binnenbeziehung. This third condition is also intended to limit the use of the public policy exception. b)

The Binnenbeziehung theory and “l'ordre public de proximité”

According to German and Swiss scholars, in order to invoke the public policy exception, it is not sufficient to establish an abstract difference in conceptions, but it is also necessary to verify the existence of a concrete contact or impact, usually of a territorial nature (the theory is also called Inlandsbeziehung), between the situation and the legal order of the forum.34 This additional requirement for the 34 See P. LAGARDE, Recherches sur l'ordre public en droit international privé, Paris, L.G.D.J., 1959, p. 55 et s; G. GOLDSTEIN, De l'exception d'ordre public aux règles d'application nécessaire; étude du rattachement substantiel impératif en droit international

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Three Methods of Localization in the Conflict of Laws intervention of the public policy exception based on an element of contact with the State of the forum follows logically from the requirement of a concrete assessment of the conflict with it.35 Article 21 of the Belgian law expressly states this as follows (emphasis added): The application of a provision of the foreign law designated by the present statute is refused in so far as it would lead to a result that would be manifestly incompatible with public policy. In determining this incompatibility, special consideration is given to the degree in which the situation is connected with the Belgian legal order and to the significance of the consequences produced by the application of the foreign law. This reasoning amounts to considering that even if contacts with the legal order of the forum are not sufficient to give its law direct jurisdiction, under the conflict rule that leads to a foreign law, it can be applied indirectly, through the public policy exception, by creating a form of subsidiary conflict rule in its favor.36 From its negative function of excluding the foreign law, the public policy exception expresses a positive function: the designation of a subsidiary law (that of the forum in general). This “subsidiary conflict rule” has the element materializing the impact on the legal order of the forum as a connecting factor: the local residence of a person affected by the rule, the place of performance of an act, etc. One can indeed generally speak of a mandatory substantive connection,37 or, more specifically, of a mandatory or imperative localization when this element is territorial in nature. Moreover, French scholars, having noted the adoption of this theory by the French Court of Cassation,38 called it “ordre public de proximité”39 (proximity based public policy), thus highlighting the localizing function of public policy.

privé canadien, Montréal, 1996, p. 55 et s.; H. BATIFFOL/ P. LAGARDE (note 5), No 359; W. WENGLER, Les conflits de lois et le principe d'égalité, Rev. crit. dr. int. pr. 1963, 203, 503, p. 505. 35 See C. LABRUSSE, Note, sous Poitiers, 24 juillet 1980, J.D. I. 1981, 567, 570, p. 575. 36 See P. DE VAREILLES-SOMMIÈRES, L’exception d’ordre public et la régularité substantielle international de la loi étrangère, Collected Courses, 2015, Vol. 371, p. 153, 170, but see, to the contrary, ibid., No 107. Which corresponds to the following title: G. GOLDSTEIN, De l'exception d'ordre public aux règles d'application nécessaire; étude du rattachement substantiel impératif en droit international privé canadien (note 34). 38 M.L. c. Mme B., Cour de Cassation (1ère Ch. civ.), 10 février 1993, Rev. crit. dr. int. pr. 1993, 620, note J. FOYER; see G. GOLDSTEIN (note 34), No 160. 37

39 J. FOYER, note sous M.L. c. Mme B., Cour de Cassation (1ère Ch. civ.), 10 février 1993, Rev. crit. dr. int. pr. 1993, 620, p. 622, also using the expression “ordre public territorial” (territorial public policy exception).

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Gerald Goldstein In fact, as a consequence of this additional requirement of an impact, special conflict rules have developed, called by some scholars “special public policy clauses”,40 that we have named “public policy crystallizations”.41 2.

Public Policy Crystallizations

While the requirement of a public policy linked to an impact on the territory or to the legal order of the State of the forum became widespread, the question arose as to what links were sufficient to trigger the exception. The answer could clearly only depend on the field in which it occurred and did not call for a single answer. For each of them, the material element justifying the application of the law of the forum had not been sufficient to designate that law directly and in principle. It could however constitute sufficient justification for a subsidiary imperative localization of the law of the forum when certain unacceptable results would follow from its non-application. Ultimately, in our opinion, this reasoning goes beyond an assessment of the conflict in the substantive content of the laws in question, and leads to an assessment of the localizing relevance of the conflict rule. Not only does the intervention of public policy obviously reflect the interest of the forum in the substantive solution of the dispute, but it also indicates significant localizing links, since these show that the legal order is normally concerned when certain facts take place in the territory of the forum.42 A localizing function is fulfilled by the requirement of a Binnenbeziehung in the use of the public policy exception: one seeks to remedy a partly defective conflict of laws rule by laying the groundwork for a new, more concrete,43 rule of derogation, the connecting factor of which should be inspired by this link, this Binnenbeziehung. In other words, the repetition of the intervention of the public policy exception may constitute an indication of a lack of localizing relevance of the conflict rule itself, leading, if necessary, to its reformulation on the basis of factors, likely to be bilateralized, that constitute a sufficient link between the legal situation and the legal order of the forum. The resulting reformulation of the new conflict rule will have a strong substantive character and will reflect an imperative localization.44 For instance, Article 3117 C.C.Q. allows the “chosen” law (usually imposed by the merchant) to be disregarded in consumer contracts if it results in a reduction of the protection that would otherwise be applicable. It reads as follows (emphasis added):

40

H. BATIFFOL/ P. LAGARDE (note 5), No 359, p. 577.

41

G. GOLDSTEIN (note 34), p. 301 et seq. See G. GOLDSTEIN (note 34), No 162, p. 73.

42

43 See among others: B. AUDIT, Le caractère fonctionnel de la règle de conflit, Collected Courses, 1984, Vol. 186, 219, p. 348 et 393, note 446; H. VERHEUL, Public Policy and Relativity, (1979) Neth. J. of International L. 109, pp. 117-118. 44 See G. GOLDSTEIN (note 34), No 166, p. 74.

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Three Methods of Localization in the Conflict of Laws The choice by the parties of the law applicable to a consumer contract cannot result in depriving the consumer of the protection afforded to him by the mandatory rules of the law of the State where he has his residence if the conclusion of the contract was preceded, in that State, by a specific offer or by advertising and the consumer took in that State all the steps necessary on his part for the conclusion of the contract, or if the order from the consumer was received in that State. It can be seen that in this rule, public policy is indeed the basis for setting aside the “chosen” law - its formulation using the word result leaves no doubt about this and the residence of the consumer and the other elements (advertising, etc.) are the elements that materialize the impact on the applicable legal order in application of the Binnenbeziehung theory. This provision may be considered a “public policy crystallization”, a method which has been favored on this point in Quebec law, whereas previous case law discussed whether Quebec’s consumer protection legislation should be characterized as mandatory rules.45 Thus, these crystallizations of public policy are part of a process of imperative localization, as well as the classical public policy exception completed by the Binnenbeziehung theory and the mandatory laws, the third manifestation of this reasoning aiming at the respect of the coherence of the legal order of the forum. 3.

Mandatory Laws

Noting the existence of two types of reasoning linked to public policy, one based on the traditional territorial notion of “police and security laws” (lois de police et de sûreté ),46 the other on a methodology of mandatory application of “public policy laws” (lois d'ordre public), independent of a territorial connection and using rather a personal connection, Phocion Francescakis, around 195847 suggested/proposed bringing them together in a new concept, that of “laws of immediate application”, more recently simply called “mandatory laws” (lois de police) by contemporary scholars.48 Article 9 (first paragraph) of the Rome I regulation defines the concept as follows: 45 See among others: G. GOLDSTEIN/ E. GROFFIER, Traité de droit civil. Droit international privé, tome II, Règles spécifiques, Montréal, 2003, No 409. 46 See Art. 3 of the French Civil Code: “Les lois de police et de sûreté obligent tous ceux qui habitent le territoire”; R. VANDER ELST, Les lois de police et de sûreté en droit international privé français et belge, Paris, t. 1, 1956, p. 37. 47 PH. FRANCESCAKIS, La théorie du renvoi et les conflits de systèmes en droit international privé, Paris, 1958. 48 See among others: PH. FRANCESCAKIS, Y a-t-il du nouveau en matière d'ordre public?, (1966-69) Trav. Com. fr. d.i.p. 149; Quelques précisions sur les “lois d'application immédiate” et leur rapport avec les règles de conflit de lois, Rev. crit. dr. int. pr. 1966, 1; P. GRAULICH, Règles de conflit et règles d'application immédiate, in Mélanges Dabin, t. 2, Paris, 1963, pp. 629-644; P. MAYER, Les lois de police étrangères, J.D.I. 1981, pp. 277-345;

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Gerald Goldstein Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organization, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation. As in the “statutist” method prior to Savigny, the starting point is a law of a mandatory nature, and its scope of international application is determined by taking into account its purpose relating to a vital State interest for its economic or social organization. The aim is thus to respect the coherence of the legal order of the forum. This intensity of interest makes it unnecessary to apply a foreign law, which would systematically be set aside by the public policy exception in the event of the slightest difference with the solution given by the law of the forum. By an “economy of reasoning”, one dispenses with the conflict rule and the Savignian method which could designate such a foreign law, to apply directly and immediately the law of the forum. The latter “forces its application”49 by excluding a priori any foreign law, and its function determines the situations which must materially be submitted to it. We thus see a forced imperative localization of certain situations in the legal sphere of the forum, even though objective localization would designate a foreign law. It is still a method of localization, but it uses connecting factors in a functional manner. Their use is very different not only from that of Savigny and Batiffol, but also from that of Professor Lagarde, for whom, according to the principle of proximity, the localizing value of the various connections is variable and depends on the circumstances, which also leaves room for a functional analysis of these elements, but without taking into account the imperative will to apply of the relevant laws. Finally, we find the same difference in approach between the two modes of localization already considered and the third, subjective localization, which is based on yet another principle, that of substantive justice.

C.

Subjective (or Material) Localization

Contrary to the concepts at the origin of mandatory localization, the current undeniable success of liberal ideas, according to which, in an idealized and globalized world, the happiness of each person would constitute/ensure the happiness of all, is transposed into private international law by the unprecedented development of an J.A. TALPIS, Legal Rules Which Determine their Own Sphere of Application: A Proposal for their Recognition in Quebec Private International Law, (1982-83) 17 Revue Juridique Thémis 201; G. GOLDSTEIN (note 34); G. GOLDSTEIN, Commentaires (note 29), par. 3076 550 et seq. 49 See P. MAYER (note 48), p. 277.

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Three Methods of Localization in the Conflict of Laws opposite methodological trend, that of subjective localization. By this expression, we mean a rationale which directly or indirectly gives the parties a central and more or less autonomous role in the designation of the applicable law in order to reach predictability of the law and thus the achievement of material justice from the subjective point of view of these parties. It is thus an approach to conflict resolution that takes into account, above all, the “rise in power” of the private, material and concrete interests of the parties, who are now free to participate in a transnational life because of the globalization resulting from the progressive disappearance of borders.50 In a broad sense, this search for substantive justice underlying the principle of foreseeability would also include the tendency to adopt conflict rules of a substantive nature comprising alternative connecting factors, and aimed at designating the law that obtains the best concrete solution in the case (the better law approach in a broad sense). It would also cover the new recognition method intended to maintain the status of a person without using the conflict rule of the forum. Although such method could be more aptly considered as a way to coordinate legal systems by ignoring conflict of laws, one could also view it as a transfer of a conflict of laws to the jurisdictional level, in addition to a renvoi scheme using the conflict rule of the legal order having previously dealt with the situation. In any case, these are both expressions of a reasoning aimed at a material localization of the situation in order to deduce the best concrete solution. We will however essentially limit our analysis in this study to the forms of subjective localization, more directly linked to the will of the parties. Thus, in addition to the increasing extension given to the freedom of the parties to choose the applicable law directly or indirectly (3.1), we shall examine other specific manifestations of this concern ensuring the taking into account of the subjective situation of the parties, such as the defense of unforeseeability, accepted in particular in matters of extra-contractual liability (3.2), and the connection through the concept of targeting in order to adapt the resolution of conflicts of law to the new situations arising from electronic commerce (3.3). Lastly, the recent phenomenon of the adoption of general exceptions of legal certainty, used in particular in (but without limiting their field to) the context of family matters (3.4), is included in this trend. 1.

Extensions of the Parties’ Choice of Law

The liberal and individualistic concerns of the present day explain, without needing to be set forth here in detail, the expansion given to areas in which the parties can directly choose the applicable law, that is to say, expressly localize their relationship according to their will (subjective localization) without taking into account material elements that would support this choice in an objective manner. From contracts and matrimonial property regimes, it has easily reached extracontractual liability (in particular by transforming the nature of the relationship 50 See J. BASEDOW, The law of Open Societies. Private Ordering and Public Regulation in the Conflict of Laws, The Hague Academy of International Law, 2015.

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Gerald Goldstein from extra-contractual to contractual, by means of settlements) to be permitted in matters of trust, succession and increasingly even in family matters (divorce, maintenance, etc.). Chinese law even admits it in theory since 201151 in matters of movable property rights, a very debatable solution.52 We may, however, mention the indirect choice of law by the parties by locating their relationship with a foreign public officer, in particular by registration, as in the case of registered partnerships,53 or by the new recognition method, a method which we will not explore in depth here.54 In these last two cases, the law must accept a greater freedom for the parties to localize their relationship, even indirectly, and to apply the law of that place. We are indeed witnessing an authentic subjective localization, in order to promote predictability for the parties. 2.

Extra-Contractual Localization – The Defense of Foreseeability

Even where the legal relationship is extra-contractual in nature, apart from the possibility of choosing the applicable law directly, or alternatively, a number of See art. 37 of the Statute on the Application of Laws to civil relationships involving foreign elements of the People's Republic of China, 20 October 2010, English translation by W. CHEN & K. MOORE, this Yearbook, Vol. 12, 2010, p. 669 et seq. 52 See among others: J.N. ZHENG/ G. GOLDSTEIN, The 2011 Chinese Law on Conflict of Laws: A Comparative Law Perspective from Québec, (2014) 48 Revue Juridique Thémis 329-387. 53 See G. GOLDSTEIN, La cohabitation hors mariage en droit international privé, Collected Courses, 2006, Vol. 320, p. 9 et seq. 54 On this method, see: Ch. PAMBOUKIS, L’acte public étranger en droit international privé, Paris 1993; L. BARNICH, Les actes juridiques en droit international privé. Essai de méthode, Brussels 2001, especially p. 311; P. LAGARDE, Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures, RabelsZ., 2004, p. 225; P. MAYER, Les méthodes de la reconnaissance en droit international privé in Mélanges P. Lagarde, Paris, 2005, p. 547; G.P. ROMANO, La bilatéralité éclipsée par l’autorité. Développements récents en matière d’état des personnes, Rev. crit. dr. int. pr. 2006, p. 457, bibliography note 2, p. 458; G. GOLDSTEIN (note 53), pp. 55-88; S. BOLLÉE, L’extension du domaine de la méthode de reconnaissance unilatérale, Rev. crit. dr. int. pr. 2007, p. 307; D. BUREAU/ H. MUIR WATT (note 22), No 575; P. MAYER Le phénomène de la coordination des ordres juridiques étatiques en droit privé, Collected Courses, 2007, Vol. 217, p. 9, No 337-345; H. MUIR WATT, European Federalism and the “New Unilateralism”, Tul. L. Rev., Vol. 82, 2008, 1983; P. LAGARDE, La reconnaissance, mode d’emploi in Liber Amicorum Gaudemet-Tallon, Paris, 2008, p. 479; Ch. PAMBOUKIS, La renaissance-métamorphose de la méthode de reconnaissance, Rev. crit. dr. int. pr. 2008, p. 513; G. GOLDSTEIN / H. MUIR WATT, La méthode de la reconnaissance à la lueur de la Convention de Munich du 5 septembre 2007 sur la reconnaissance des partenariats enregistrés, J.D.I. 2010, pp. 1085-1125; R. BARATTA, La reconnaissance internationale des situations juridiques personnelles et familiales, Collected Courses, 2010, Vol. 348, p. 9 et seq.; P. LAGARDE (ed.), La reconnaissance des situations en droit international privé, Actes du colloque international de la Haye du 18 janvier 2013, Pédone, 2013; La méthode de la reconnaissance est-elle l’avenir du droit international privé? Collected Courses, 2014, Vol. 371, p. 9 et seq. 51

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Three Methods of Localization in the Conflict of Laws legislators and conventions have intervened to adopt an exceptional subjective localization in order to ensure respect for the principle of foreseeability. For example, in the matter of product liability, Article 3126 C.C.Q. provides (our emphasis): The obligation to make reparation for injury caused to another is governed by the law of the State where the act or omission which occasioned the injury occurred. However, if the injury appeared in another State, the law of the latter State is applicable if the author should have foreseen that the injury would manifest itself there. Another example is Article 99 of the Belgian Code of 2004 on defamation, which reads as follows (our emphasis): § 2.[..], obligations resulting from a tort are ... governed: 1° in the event of defamation or violation of privacy or personality rights, at the choice of the plaintiff, by the law of the State on the territory of which the act leading to the damage or the damage occurred or is likely to occur, unless the person liable proves that he could not have foreseen the damage to occur in that State; The same type of rules are to be found, in particular, in matters of liability for breach of the rules of competition law, etc. Thus, in all these cases, if the defendant proves that he could not foresee or that he did not actually foresee the place where the damage materialized, the law of the place of the fault applies because this place was obviously foreseeable. The setting aside of the law of the place of the damage and the application of the law of the place of the fault arise from a subjective localization. However, such localization is unilateral and does not result from any agreement between the parties. Its underlying purpose is to respect the foreseeability of the wrongdoer since, beyond this foreseeability, such a solution will respect substantive justice. The exact same concept informs the targeting approach. 3.

The Targeting Approach

The adoption of the concept of targeting corresponds to the new requirements for determining the applicable law by locating activities related to electronic commerce, in order to take account of the ubiquitous nature of these activities. However, its origin could be found in the American approach to jurisdiction. In International Shoe,55 the Supreme Court of the United States held that, in order to respect the constitutional requirement of due process, jurisdiction could be taken over a defendant having no domicile or no residence in the forum State as long as the defendant shows minimum contacts with it so that such defendant could have a fair warning that he could be sued in that State. In Burger King,56 the Supreme court explained in 1985 that this “fair warning” requirement is satisfied if the defendant has “purposefully directed” his activities at residents of the forum, 55 56

International Shoe Co. v. Washington, 326 US 310 (1945). Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).

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Gerald Goldstein and the litigation results from alleged injuries that arise out of those activities. Thus, an absence of physical contacts by a defendant with a State cannot allow the defendant to avoid its jurisdiction if such defendant targeted the State even while staying outside of its territory. This broad approach to jurisdiction or to the determination of the applicable law – which has also been adopted under European law for consumer contracts57 – not limited to “mechanical tests” used in a reasoning based on objective localization, such as the place of conclusion or execution of a contract, can be seen as an extension of the role given to the parties' intention outside the express choice of a system. For example, Article 6 of the Rome I Regulation,58 states (our emphasis): [...] a contract concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional) shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional: (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) by any means, directs such activities to that country or to several countries including that country. Under this rule, the law of the consumer's residence applies if (b) the trader directs his activity to that place. This provision adopts the connecting factor of the consumer's residence where it has been targeted by the trader.59 57 See: Hotel Alpenhof GmbH v. Olivier Heller, Case 144/09, December 7th 2010, ECJ 2010, ECR I-12570, OJEU 19.2.2011, C55/4. See among others: M. BOGDAN, Website Accessibility as a Basis for Jurisdiction under Art. 15(1) (C) of the Brussels I Regulation: Case Note on the ECJ Judgment Pammer and Alpenhof, this Yearbook, vol. 12, 2010, pp. 565-569; O. CACHARD, Jurisprudence. Union européenne, Rev. crit. dr. int. pr. 2011, 429438; L. GILLIES, Clarifying the “Philosophy of Article 15” in the Brussels I Regulation: C-585/08 Peter Pammer v Reedere Karl Schluter GmbH & Co and C-144/09 Hotel Alpenhof GmbH v Oliver Heller, International and Comparative Law Quarterly 2011 Vol. 60 Part 2 pp. 557-564; V. PIRONON, Dits et non-dits sur la méthode de la focalisation dans le contentieux – contractuel et délictuel – du commerce électronique, J.D.I. 2011, pp. 915-941. 58 Regulation (EC) No 593/2008 of The European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations, J.O.E.U. No L-177/6 4 July 2008 (Rome I). 59 See also, in terms of jurisdiction: Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), J.O.E.U. No L-351/1 20 December 2012 (Brussels I bis), Art. 17 (our emphasis): “1. In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section, [...], if: [...] (c) [...] the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities [...]”.

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Three Methods of Localization in the Conflict of Laws What are the criteria possibly used to consider that an activity has been directed to a State? The court must ascertain whether, prior to a potential conclusion of a contract, it appears from the overall activity of the trader or his website that he intended to trade with a consumer from that country. The following positive elements on a site or advertisement, among others, are indicative of this intent.60 Indication of routes to the merchant from other States; use of a foreign language or currency, mention of telephone numbers with an international prefix, mention of an international clientele, international nature of the merchant's activity, etc. are examples of such elements. On the other hand, negative elements can also be used to determine the absence of targeting, such as the installation of filters prohibiting access to a site for residents of a given country. As the above clearly shows, since it is impossible to target without an intention to do so, directing one's activity to a state implies an intention on the part of the actor to affect the legal situation by possibly concluding contracts there. Consequently, the application of the law of the targeted place responds to a party’s intention and respects a principle of material justice. This is why it seems legitimate to see in this concept another manifestation of the process of subjective localization at work in modern private international law. Incidentally, one author uses the expression “focalization” to describe a method of international application of mandatory rules based on the subjective will of electronic commerce operators.61 However, while he shares the subjective anchoring of this method with our discussion, he does not see it as a method of localization by a party, neither directly nor indirectly, but merely as a “rule of interpretation of the spatial scope of a unilateral rule”.62 For the rule-maker, it is a way of establishing that a given activity fits within the scope of the rule. The commercial operator intentionally focuses his activity on one state, which triggers the application of a compulsory rule under consideration.63 This author's perspective is therefore that of a state authority issuing a norm of a more or less imperative nature, which would fit into the method of imperative localization that we considered in the previous section. Thus, if we wish to respect the author's logic and creativity, it does not seem appropriate to use the expression “focalisation” to describe what we study under the term targeting approach in our paper. Nevertheless, those two rationales/analyses seem complementary in that they describe the same phenomenon from different angles (that of the operator and that of the regulatory authority) to attach new consequences to the parties' will affecting the determination of the applicable law to electronic commerce in particular.

The elements cited here as examples are based on/inspired by the European court decision rendered in the Hotel Alpenhof GmbH v. Oliver Heller case (Case 144/09, December 7th 2010, ECJ 2010, ECR I-12570, pars. 83 and 93). 61 See O. CACHARD, La régulation internationale du marché électronique, Paris, 2002, No 107-110. 62 O. CACHARD (note 61), No 111, pp. 67-68. 63 O. CACHARD (note 61), No 110, p. 67. 60

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Gerald Goldstein 4.

The Foreseeability or Legal Certainty Exception

With the legal certainty exception,64 there is a general extension of the role given to the parties' intention in localizing legal situations without any express choice of a law. Article 9 of Book 10 of the Netherlands Civil Code has in fact codified a new general exception to the application of the normal conflict rule in these terms.65 In the Netherlands, the same legal consequences may be attributed to a fact to which legal consequences are attributed ensuing [sic] the law which is applicable under the private international law of a foreign state involved, in contravention of the law applicable according to Dutch private international law, to the extent that not attaching those consequences would constitute an unacceptable violation of the legitimate expectations of the parties or of legal certainty. According to this provision, if the parties to an international relationship legitimately believed that the situation was subject to a law other than that resulting from the application of the Dutch rule of private international law, pursuant to the rule of private international law of another State concerned and that to continue to apply that normally applicable law would result in an unacceptable violation of the parties' expectations, or, more generally, of "certainty of legal commerce", i.e. legal certainty, then the Dutch court may disregard that law and replace it with the law envisaged by those parties. The purpose of this article is to correct a lack of predictability arising from the application of the applicable law under the normal conflict rule, which would constitute an unacceptable violation of a legitimate, but erroneous, belief of the parties to the dispute, or which, more generally, would result in legal uncertainty. This uncertainty can be expressed by the consecration of a limping situation, valid in one country, null in another. Nevertheless, Art. 9 does not require that legal effects have already been established abroad. It is sufficient, more broadly, that legitimate expectations have arisen from the situation. The possibility of social disorder arising from the refusal to take account of the error of individuals would justify the exception. The legal certainty exception in s. 9 is based on the justice of private international law, and is also aimed at a fundamental aim of that discipline: the coordination of systems by means of a general rule that adds flexibility to the resolution of conflicts of laws. This exception thus gives individuals a greater role in the resolution of these disputes. They can invoke it to explain to the court seized that the normal conflict rule is not appropriate in this case to ensure that their legitimate expectations are met. See: G. GOLDSTEIN, L’exception de prévisibilité, Rev. crit. dr. int. pr. 2018, 3-29; The legal certainty exception, this Yearbook, Vol. 23 (2021-22), pp. 25-57. 65 Wet 19mei 2011 tot vaststelling en invoering van Boek 10 (Internationaal privaatrecht) van het Burgerlijk Wetboek (Vaststelling – en Invoeringswet Boek 10 Burgerlijk Wetboek), Staatsblad (BGazteet officielle) 2011, 272, English translation by M.H. TEN WOLDE/ J.G. KNOT/ N.A. BAARSMA, this Yearbook, Vol. 13, 2011, pp. 667-694. 64

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Three Methods of Localization in the Conflict of Laws These new liberal ideas are reflected in the discretionary power given to the Dutch judge to reverse the hierarchy of private international law principles. Thus, the Dutch legislator gives priority to the foreseeability principle over the proximity principle even in a situation where the parties have not chosen the applicable law Unlike the exception clause, which is based on the proximity principle, the law applicable under the exception of foreseeability is not necessarily or objectively the most closely connected. It is the law that is subjectively applicable according to the expectations of the parties, or the law that has already produced effects that should not be called into question. It is possible that these expectations are not based on an objective grouping of points of contact, but on an error (relating, for example, to the determination of the place of conclusion) or on a widespread but erroneous belief (concerning, for instance, the decisive importance of a single factor, such as the place of conclusion of a contract) or on an appearance of something decided abroad. In order to be legitimate, this belief must relate to the application of the rules of a relevant foreign state involved, which implies a subjective localization on the part of the parties, due to certain connecting factors that have not, however, been retained by Dutch private international law in order to formulate the normal conflict rule. Its effects also differ notably from those of the public policy exception, aimed at respecting the coherence of the legal order of the forum. It is not a question of establishing a serious concrete opposition of concepts between a foreign system and that of the forum, and then setting aside the former in favor of the latter. Since Dutch law elevates this violation of the legitimate expectations of the parties, or of foreseeability, into a ground relating to the fundamental concepts of the law of the forum, we are faced with a concretization of Dutch public policy. This public policy, however, which is very international in character, could set aside Dutch law in favor of a foreign law; this is completely different from the effects of the public policy exception, but it completes the range of rules that are useful in an international situation. In the same perspective, Article 26 of the European Council Regulation (EU) 2016/1104 implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of the property consequences of registered partnerships66 reads as follow: 1. In the absence of a choice-of-law agreement pursuant to Article 22, the law applicable to the property consequences of registered partnerships shall be the law of the State under whose law the registered partnership was created. 2. By way of exception and upon application by either partner, the judicial authority having jurisdiction to rule on matters of the property consequences of a registered partnership may decide that the law of a State other than the State whose law is applicable pursuant to paragraph 1 shall govern the property consequences of the registered partnership if the law of that other State attaches property consequences to the institution of the registered partnership and if the applicant demonstrates that: (a) the partners had their last common habitual residence in that other State 66

O.J. E. U. n. L-183/30 (July 8th 2016).

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Gerald Goldstein for a significantly long period of time; and (b) both partners had relied on the law of that other State in arranging or planning their property relations. We find here a specific legal certainty exception to the matter of the effects of the registered partnership, based on the expectations of the parties, which would be set aside by the application of the law normally competent. The exception will be based on proof of the legitimacy of these expectations of the application of another law, linked to the existence of a habitual residence for a significant period of time in a State other than that of the place of registration. This rule gives a discretionary power, which is expressed in particular in the requirement of a significant period of habitual residence in the State whose law is to be applied. This is a flexible and implicit condition for the involvement of that State in the situation. The location remains linked to the parties’ subjectivity and cannot be interpreted as an application of the proximity principle. The existence of this connection for a certain period of time subjectively justifies the belief or expectation that this law governs the property effects of the partners. This is very different from an objective localization determined by the legislator, who does not venture to assert the unique and relevant moment of occurrence of this residence.

II. Conclusion – The Plurality and Complementarity of Localization Methods in Resolution of Conflict of Laws The solid structure of private international law, based on three fundamental complementary principles (proximity, predictability and respect for imperative state interests), has made it possible to develop in succession three competing methods of localization. They each reflect, in a coherent manner, their own existential principle, so as to offer together a sufficiently rich range to fulfil the varied functions assigned to the resolution of conflict of laws. They were adopted at the same time, but not in the same rule, in any modern system of private international law. Imperative localization expresses the fundamental requirements of society, at the international level, of each legal system: protection of the weaker party, access to justice, defense of collective interests, etc. Objective and subjective localization [more efficiently/effectively] meet [more closely ]the specific needs of the parties. In a more abstract and general way for objective localization – even in the flexible form of direct or indirect appeal (through the exception clause) to the proximity principle – in a more concrete way for subjective localization. The former is linked to the aim of private international law justice (to ensure the predictability of the competent legal system); the latter to that of achieving the predictability of the concrete result of the application of the law, and thus substantive justice. One may wonder whether such a method of resolving conflicts of laws, based on reasoning conducted in terms of localization, continues to be relevant 42

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Three Methods of Localization in the Conflict of Laws today, when the dematerialization of international relations is becoming increasingly pressing. How should one localize an international relationship taking place, for example, on the occasion of the operation of a blockchain, in which personal information may be inadvertently transmitted to people who could damage someone's reputation? How should one localize the breach of a contractual obligation to transmit data occurring during the operation of such a blockchain? The immaterial nature of the environment of these relationships seems a priori to make such an attempt at localization impossible. This would be to forget, however, that this intellectual process is, in fact, aimed at the more general idea of ensuring a connection to a set of norms, to a legal order that does not depend for its creation on a territorial entity constituted as a State. Whether or not one accepts the validity of the voluntary choice of parties to inscribe their relationship in a set of norms of non-state origin, we are still witnessing a process of localization within a legal order ((as long as one accepts the idea of a legal rule of non-state origin). This operation belongs fully to the process of subjective localization. It could also be seen as the expression of a reasoning more related to a material localization, because of the content and the relevance of the designated norms. Following the same logic, one can conceive of an objective localization carried out by a court leading to the designation of this legal order not based - or not exclusively based - on a concrete territory. Private international law and its methods of conflict resolution based on three types of localizations have thus fortunately evolved with the needs and ideas of society. Originally conceived in a very theoretical manner, they have been able to reinvent themselves and thus maintain their relevance in a world subject to various practical needs. This is a remarkable result: the result of joint creative efforts, about which the whole doctrine, the fundamental intellectual fuel in this field, ignoring borders, generation after generation, has every reason to congratulate itself.

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SUCCESS AND IMPACT OF INTERNATIONAL COMMERCIAL COURTS – A FIRST ASSESSMENT1 Man YIP*/ Giesela RÜHL**

I. II.

VI.

Introduction Notion and Concept A. The Settled Core Meaning 1. Judicial Bodies Established by a State 2. Established to Settle International Disputes 3. Innovation Institutional Design and Procedural Framework B. The Conceptual Penumbra Driving Forces and Motivation Institutional and Procedural Features A. Example 1 – Foreign Judges B. Example 2 – Conduct of Proceedings Success and Impact A. Number of Cases B. Effect on Local Judiciary Conclusion and Outlook

I.

Introduction

III. IV.

V.

During the past two decades a number of jurisdictions have established so-called “international commercial courts”. These courts are located in various regions of the world and have attracted a lot of attention because they enrich the current landscape for the resolution of international disputes.2 In particular, they present The following contribution is based on the General Report prepared for the study “New specialized commercial courts and their role in cross-border litigation” under the auspices of the International Academy of Comparative Law (IACL). The General Report will be published in a separate volume – alongside all national and special reports prepared for the study – in the course of 2023. * Professor of Law and Associate Dean (Faculty Matters and Research) at Singapore Management University, Yong Pung How School of Law (Singapore). ** Professor of Law at Humboldt-University of Berlin (Germany) and Secretary General of the European Association of Private International Law (EAPIL). 2 See, for example, X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019; S. BREKOULAKIS/ G. DIMITROPOULOS 1

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 45-60 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Man Yip/ G. Rühl themselves as alternatives to litigation before ordinary courts on the one hand and to international commercial arbitration on the other. However, to this date it remains largely unclear whether these courts have turned out to be a success in practice. It even remains unclear how their success should or could be measured. In the following contribution we set out to provide a first – tentative – assessment of how recently established international commercial courts do in practice and whether they have achieved their aims or not. To this end the contribution is organized in four parts. The first part looks at the notion and the concept of international commercial courts (II.). The second part analyses the driving forces and the motivation behind the establishment of international commercial courts (III.). The third part highlights – by way of example – some important institutional and procedural features of these courts (IV.). The fourth part, finally, offers some thoughts on the success and the impact that international commercial courts have had in practice so far (V.).

II.

Notion and Concept

With regards to the notion and the concept of international commercial courts we start our analysis with an interesting observation: the term “international commercial court” is not legally or otherwise defined. Therefore, it is not clear what attributes turn a court into an international commercial court. However, an analysis of the available literature suggests that the term has a settled core meaning, as well as a conceptual penumbra3 in which it is debatable whether a court can be regarded as an “international commercial court”.4 We will deal with both the settled core meaning and the conceptual penumbra and begin with the settled core meaning.

(eds), International Commercial Courts: The Future of Transnational Adjudication, Cambridge, 2022. See also P.K. BOOKMAN, The Adjudication Business, Yale Law Journal 45 (2020), p. 227; L. CLOVER ALCOLEA, The Rise of the International Commercial Court: A Threat to the Rule of Law? Journal of International Dispute Settlement 2022, p. 1; W. GU/ J. TAM, The Global Rise of International Commercial Courts: Typology and Power Dynamics, Chinese Journal of International Law 22 (2022), p. 444; M HWANG, Commercial Courts and International Arbitration – Competitors or Partners? Arbitration International 31 (2015), p. 193; M. REQUEJO, International Commercial Courts in the Litigation Market, International Journal of Procedural Law 9 (2019), p. 4; S. WILSKE, International Commercial Courts and Arbitration: Alternatives, Substitutes or Trojan Horse?, Contemporary Asia Arbitration Journal 11 (2018), p. 153. 3 We borrow the language of Hart in his description of the open-textured nature of all legal concepts: H.L.A. HART, Essays in Jurisprudence and Philosophy, Oxford, 1983, p. 63. 4 See for a more detailed discussion M. YIP/ G. RÜHL, General Report, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 2.

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Success and Impact of International Commercial Courts A.

The Settled Core Meaning

Remarkably, even in the absence of a clear definition, there is general consensus in the literature that the following three groups of courts clearly count as international commercial courts:5 (1) the courts established in Special Economic Zones in the Gulf region, namely the Dubai International Financial Centre Courts (2004), the Qatar International Financial Centre Courts (2005) and the Abu Dhabi Global Market Courts (2015); (2) the courts created in Singapore, China and Kazakhstan, namely the Singapore International Commercial Court (2015), the two Chinese International Commercial Courts (2018) and the Astana International Financial Centre Court (2018); and (3) the courts to be found in the Netherlands, France and Germany, namely the Netherlands International Commercial Court (2019), the French international chamber in Paris (2018) as well as the large number of German international chambers (2010, 2018, 2020, 2021). Against this background, the interesting question is what the common features are that turn these courts into international commercial courts? The question is not easy to answer because the aforementioned courts – as we will demonstrate by way of example in the third part of this contribution (infra IV.) – are very dissimilar in many respects. However, it seems fair to say that, at its core, all of these courts share three essential features. First, they are all judicial bodies established by a state. Second, they were all established to settle international commercial disputes. And, third, they exhibit innovative features in their institutional or their procedural framework that set them apart from the ordinary courts in the same jurisdiction. 1.

Judicial Bodies Established by a State

The first essential feature relates to the legal nature of international commercial courts: despite their name they are not international courts in the strict sense, but domestic courts. Unlike, for example, the International Court of Justice or the International Criminal Court, they are not established by an international body or the international community as such. Rather they are established by individual states. What is more is that some of the courts that are commonly referred to as “international commercial courts” are not even courts in the strict sense. In fact, it is broadly accepted that an international commercial court does not have to be a See, for example. P.K. BOOKMAN (note 2), 239 et seq.; S. BREKOULAKIS/ G. DIMITROPOULOS, International Commcercial Courts: The Future of Transnational Adjucation – An Introduction, S. BREKOULAKIS/ G. DIMITROPOULOS (eds), International Commercial Courts: The Future of Transnational Adjudication, Cambridge, 2022, p. 1, 4 et seq.; L. CLOVER ALCOLEA (note 2), p. 1 et seq.; W. GU/ J. TAM (note 2), p. 461 et seq.; M. REQUEJO (note 2), p. 9 et seq.; J. SORABJI/ X. KAMER, Introduction – The International Business of Courts, in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 1, 2 et seq.; S. WILSKE (note 2), p. 160 et seq. 5

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Man Yip/ G. Rühl separate institution from other courts of the host jurisdiction. The Netherlands, France and Germany, for example, have recently established special chambers for the settlement of international disputes. And even though these are commonly called “commercial courts” – or, in the case of the Netherlands “international commercial court” – these “courts” are really special chambers or special divisions of other national courts.6 The same holds true for the Singapore and the Chinese International Commercial Courts which are established as a division of the apex courts of their jurisdiction, namely the Singapore High Court and the Supreme People’s Court.7 2.

Established to Settle International Disputes

The second essential feature of international commercial courts relates to their purpose: they are established to settle international disputes. As a consequence, international commercial courts usually focus on the resolution of disputes with a cross-border element. However, it should be noted that this does not mean that international commercial courts only hear international cases. In fact, there are some courts, namely those in Abu Dhabi, Dubai, Qatar and Kazakhstan as well as some German international chambers that may also hear purely domestic cases.8 Yet, that does not change the fact that they are primarily established to settle international disputes. 6 G. CERQUEIRA, France, in M. YIP/ G. RÜHL, General Report, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 1; T. RIEHM/ Q. THOMAS, Germany, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 1 and 2.1.; S.F.G. RAMMELOO, The Netherlands, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 2.1; K. HO LAU, Singapore, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 3.2.1; Z. HUO, China, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 1. 7 K. HO LAU, Singapore, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 3.2.1; Z. HUO, China, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 2. 8 M. BYRNE, The Dubai International Financial Centre Courts (DIFC Courts), in M. YIP/ G. RÜHL, General Report, in M. YIP/ G. RÜHL (eds.), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 2.1; T. NA’EL AL-TAWIL/ H. YOUNIES, DIFC: Courts of the Future, in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 205, 208; A. DAHDAL, International Commercial Courts: The Qatari Experience in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 235, 247.; N. ZAMBRANA-TEVAR, The Court of the Astana International Financial Center in the Wake of Its Predecessors, Erasmus Law Review 2019, 122, 124 et seq.; T. RIEHM/ Q. THOMAS (note 6), Section 4.1. See for details M. YIP/ G. RÜHL (note 4), Section 4.

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3.

Innovation Institutional Design and Procedural Framework

The third essential feature of international commercial courts, finally, relates to their institutional and procedural framework. In fact, all of the earlier mentioned courts – or court chambers – exhibit innovative features that set them apart from the ordinary courts in their respective jurisdictions. And these features are usually oriented towards greater internationalisation: Some international commercial courts, for example, appoint foreign judges to the bench or allow the participation of foreign lawyers in court proceedings.9 Other courts adopt English-style or arbitration-style rules of procedure or allow English as court language.10 We will discuss this aspect in more detail – by way of example – in the third part of this contribution (infra IV.). B.

The Conceptual Penumbra

Moving to the conceptual penumbra of “international commercial courts” we submit that it comprises (at least) the London-based Commercial Court of England and Wales and the New York federal and state courts.11 They share the virtue of being domestic commercial courts that have developed a global reputation for the settlement of international commercial disputes with recognised openness to foreign parties.12 Most remarkably, the docket of international commercial disputes of these courts is very large. For example, 74% of all the cases heard by the London Commercial Court between October 2020 and September 2021, were international cases, i.e. cases involving at least one foreign party.13 Yet, if we take the three essential features discussed earlier, these courts do not clearly qualify as “international commercial courts”.

See for details M. YIP/ G. RÜHL (note 4), Section 5.1. and 5.2. See for details M. YIP/ G. RÜHL (note 4), Section 6.2. and 6.3. 11 This is why these courts are very often discussed together with new international commercial courts. See, for example, L. CLOVER ALCOLEA (note 2), p. 1 et seq.; W. GU/ J. TAM (note 2), p. 447 et seq.; J. SORABJI/ X. KAMER, Introduction – The International Business of Courts, in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 1 et seq.; S. WILSKE (note 2), p. 160 et seq. 12 P.K. BOOKMAN, The US District Court for the Southern District of New York and the New York, in M. YIP/ G. RÜHL, General Report, in M. YIP/ G. RÜHL (eds), New International Commercial Courts: A Comparative Perspective, Cambridge, 2024 (forthcoming), Section 2; D. FOXTON, The Commercial Court of England and Wales, in M. YIP/ G. RÜHL (eds), New Specialized Commercial Courts and their Role in Cross-Border Litigation, Cambridge, 2023 (forthcoming), Section 2. See also P.K. BOOKMANN (note 2), p. 233. 13 See Business and Property Courts: The Commercial Court Report 2020-2021, p. 20 et seq., available at https://www.judiciary.uk/wp-content/uploads/2022/02/14.50_ Commercial_Court_Annual_Report_2020_21_WEB.pdf. 9

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Man Yip/ G. Rühl To begin with, they were not established to deal with international commercial disputes. Rather, they were set up to improve the resolution of domestic disputes.14 By the same token they do not exhibit specific institutional or procedural features geared towards internationalisation: Both the London Commercial Court and the New York courts are exclusively staffed with local judges.15 Both apply the ordinary rules of civil procedure.16 And procedural innovations that both the London Commercial Court and the New York courts have come up with are not primarily oriented towards internationalisation, but more at increasing efficiency.17 In fact, as established destinations for international dispute resolution, there is little reason for the London Commercial Court and the New York courts to additionally internationalise their institutional or procedural frameworks. It follows, that both the London Commercial Court and the New York courts are not clearly international commercial courts in the above-mentioned sense. That being said, we cannot just ignore them. And this is because they – especially the London Commercial Court – have variously inspired the creation of the earlier mentioned new international commercial courts. As a consequence, it is not possible to properly study international commercial commercials without reference to the London Commercial Court and the New York courts. However, owing to space constraint, we will not dwell on these traditional courts beyond a respectful acknowledgement of their influence here. In the discussion to follow, we focus on the modern international commercial courts that exhibit all three essential features discussed above.

III. Driving Forces and Motivation With regard to the driving forces for the establishment of new international commercial courts, in general, the host jurisdictions are united by the wish to make an attractive dispute resolution offer to international litigants.18 More specifically, they all wish to establish an attractive forum to settle (a certain group of) international disputes. Interestingly, however, the precise reasons why jurisdictions wish to do – and, hence, their long-term goals – differ vastly. We start with Abu Dhabi, Dubai, Qatar and Kazakhstan. They established Special Economic Free Zones to attract international investors.19 And to offer these investors a trustworthy, reliable and more familiar dispute resolution mechanism unavailable in their local judiciary, they decided to establish completely independent and separate international commercial courts to settle disputes arising out of D. FOXTON (note 11), Section 3. P.K. BOOKMAN (note 11), Section 2.4; D. FOXTON, (note 11), Section 7. 16 P.K. BOOKMAN (note 11), Section 2.6; D. FOXTON, (note 11), Section 9. 17 P.K. BOOKMAN (note 11), Sections 2.6.2 and 3; D. FOXTON, (note 11), Section 15. 18 See for a more detailed discussion M. YIP/ G. RÜHL (note 4), Section 3. 19 See M. BYRNE (note 8), Section 1.3; T. NA’EL AL-TAWIL/ H. YOUNIES (note 8), p. 205 et seq.; A. DAHDAL (note 8), p. 236 et seq.; N. ZAMBRANA-TEVAR (note 8), p. 122 et seq. 14 15

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Success and Impact of International Commercial Courts businesses activities in the Special Economic Free Zones. In other states, in contrast, the motivation for creating international commercial courts is not so much to attract investors, but rather to boost the national legal services industry. This is true for the Netherlands and Singapore where the legal sector is regarded as a key segment of the economy.20 As a consequence, they established international commercial courts specifically to offer legal services to the global business community. Other states, in contrast, are less ambitious. They established their international commercial courts primarily to improve the resolution of cross-border disputes for local or regional businesses. This holds true for France and Germany. And the same may be said of China even though its ambition appears to be more political in nature than the ambition of France and Germany. In fact, China established its International Commercial Courts to protect and foster an important political (and economic) project, namely the Belt and Road Initiative.21 The bottom line, therefore, is that the reasons for the establishment of international commercial courts vary widely. And we submit that the different reasons have a decisive influence on the institutional and procedural design of the courts, as well as (most likely) their success in practice). In fact, we observe that the more ambitious the design, the more ambitious the reasons for the establishment of the international commercial court.

IV. Institutional and Procedural Features This brings us to the third part of our contribution, the institutional and procedural features of international commercial courts.22 As we have indicated at the beginning, all of the courts that fall into what we perceive to be the core of international commercial courts, exhibit special institutional and procedural features that can be described as innovative on the one hand and as geared towards internationalization on the other. However, the degree of innovation and the degree of internationalization varies from court to court and moves along a broad spectrum. On this spectrum (most of) the European international commercial courts are to be found on the less ambitious side while (most of) the Asian international commercial courts as well as the international commercial courts located in the Gulf region are to be

20 E. BAUW, Commercial Litigation in Europe in Transformation: The Case of the Netherlands Commercial Court, Erasmus Law Review 2019, p. 15 et seq.; H. SCHELHAAS, “The Brand New Netherlands Commercial Court: A Positive Development” in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 45, 46 et seq.; K. HO LAU (note), Section 3.1; M. YIP, The Singapore International Commercial Court: The Future of Litigation? Erasmus Law Review 2019, p. 82, 83 et seq. 21 Z. HUO/ M. YIP, Comparing the International Commercial Courts of China with the Singapore International Commercial Court International and Comparative Law Quarterly 2019, p 439. 22 See for a more detailed discussion M. YIP/ G. RÜHL (note 4), Section 5 and 6.

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Man Yip/ G. Rühl found on the more ambitious and advanced side. We want to illustrate this point by way of two examples. A.

Example 1 – Foreign Judges

The first example relates to the institutional framework, by which we mean the overall design of a court.23 A key feature for the settlement of international disputes is the constitution of the bench, i.e. the judges. As we know from the world of international commercial arbitration, parties care a lot about who gets to decide a dispute. In particular, they are interested in having experienced, competent and neutral judges on the bench. Some of the states that have recently established international commercial courts have taken this observation seriously and decided to allow not only domestic, but also foreign judges to hear cases: see, for example, Abu Dhabi, Dubai, Qatar, Kazakhstan, as well as Singapore.24 Their international commercial courts have appointed international judges hearing cases (alongside domestic judges). What is equally interesting, however, is that the afore-mentioned courts do no invite just anybody to sit on the bench. In fact, they overwhelmingly draw on (retired) English judges, or on judges from other common law countries such as Australia, Canada, Hongkong, South Africa and New Zealand.25 This clearly shows that common law courts, notably the English courts (including the London Commercial Court), enjoy a special reputation in the world of international dispute resolution. And by bringing in judges from these courts, Abu Dhabi, Dubai, Qatar, Kazakhstan as well as Singapore obviously try to import at least some of that reputation and expertise. The picture looks very different when we turn to France, Germany and the Netherlands. These jurisdictions only allow national judges to sit on their international commercial courts and, hence, do not attempt to capture the benefits of an international bench.26 The same holds true for China.27 However, with regards to China it needs to be mentioned that the Chinese International Commercial Courts are supported by what is referred to as an “International Commercial Law Expert Committee” comprising both Chinese and foreign experts in international law, See for a more detailed discussion M. YIP/ G. RÜHL (note 4), Section 5. See M. BYRNE (note 8), Section 2.9; T. Na’el Al-Tawil/ H. Younies (note 8), p. 209; A. DAHDAL (note 19), p. 244 et seq. For Abu Dhabi and Kazakhstan see the information available at https://www.adgm.com/adgm-courts/judges and https://court.aifc.kz/who-we-are. 25 See M. BYRNE (note 8), Section 2.9; T. Na’el Al-Tawil/ H. Younies (note 8), p. 209; A. DAHDAL, (note 19), p. 244 et seq. For Abu Dhabi and Kazakhstan see the information available at https://www.adgm.com/adgm-courts/judgesFor and https://court.aifc.kz/who-we-are. 26 G. CERQUEIRA, (note 6), Section 1.2.1.1; T. RIEHM/ Q. THOMAS (note 6), Section 4.2.; S.F.G. RAMMELOO (note 6), Section 2.4. 27 Z. HUO (note 6), Section 3; N. ZHAO, The CICC: An Endeavour towards the Internationalization and Modernization of Chinese Courts, in X. KRAMER/ J. SORABJI (eds), International Business Courts: A European and Global Perspective, The Hague, 2019, p. 159, 170. 23 24

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Success and Impact of International Commercial Courts commercial law, and the law of their home jurisdiction.28 That Committee may, among other things 1) provide advisory opinions on specialized legal issues, 2) provide advice and suggestions on the development of the court and 3) provide advice and suggestions on the formulation of judicial interpretations and judicial policies. The current expert committee is composed of 47 experts (retired judges, arbitrators, scholars and practitioners) including 28 foreign experts from 22 jurisdictions spanning a variety of common law and civil traditions (including Hong Kong, Macau and Taiwan).29 And this certainly lends the Chinese International Commercial Courts at least some degree of internationalization. It should be noted, however, that it is not clear how much influence the Committee actually has on the Chinese International Commercial Courts since it is not allowed to act on its own motion, but only upon request of the Courts or upon application of the parties. It has been observed that thus far, the experts have operated like a think tank by submitting research reports and/or attending the seminars of the Expert Committee.30 B.

Example 2 – Conduct of Proceedings

The second example that shows that the degree of innovation and internationalization varies greatly between different international commercial courts relates to the procedural framework, i.e. the manner in which proceedings are conducted.31 Like the constitution of the bench, the conduct of proceedings is something that matters very much for the parties. Hence, it does not come as a surprise that this features in the procedural design of international commercial courts. In fact, virtually all international commercial courts offer more flexible, more arbitration-style and more English-style proceedings than ordinary courts. It is the degree of flexibilization, however, that differs from court to court. There are, first, the courts in the Gulf region and in Kazakhstan. As separate courts, they are completely detached from the local judiciary and apply their own set of independent rules of procedure that largely follow English procedural law.32 A very good example are the international commercial courts in Dubai. They are commonly categorized as “English-language common law courts”33 because they apply rules that are “modelled on the high standard of English civil procedure”.34 Second, there are the international commercial courts in the Netherlands, China and Singapore. Since they are not independent separate courts but court Z. HUO (note 6), Section 1.4.2; N. ZHAO (note 28), p. 170 et seq. Z. HUO (note 6), Section 1.4.2. 30 Z. HUO (note 6), Section 1.4.2. 31 See for a more detailed discussion M. YIP/ G. RÜHL (note 4), Section 5. 32 M. BYRNE (note 8), Section 2.1; N. ZAMBRANA-TEVAR (note 8), p. 127 et seq. See for an overview J. WALKER, A Comparative Perspective on International Commercial Courts. Jurisdiction, Applicable Law and Enforcement of Judgments, in S. BREKOULAKIS/ G DIMITROPOULOS (eds), International Commercial Courts: The Future of Transnational Adjudication, Cambridge, 2022, p. 115, 138 et seq. 33 M. BYRNE (note 8), Section 2.1; T. NA’EL AL-TAWIL/H. YOUNIES (note 8), p. 208. 34 M. BYRNE (note 8), Section 2.3. 28 29

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Man Yip/ G. Rühl chambers or divisions of existing national courts, they conduct proceedings on the basis of the general (national) rules of civil procedure.35 However, in all three countries the proceedings before the international commercial courts are complemented by an ambitious set of rules that take over aspects from international commercial arbitration or English law.36 In the Netherlands, for example, the rules for the Netherlands Commercial Court introduce elements of party autonomy into the proceedings by allowing parties to agree on a departure from the Dutch rules of evidence.37 In a similar vein, the rules applicable to the Singapore International Commercial Court allow the court to apply customized rules of evidence (whether part of a system of foreign law or not) if all parties agree.38 Finally, there are the international commercial courts in France and Germany. They essentially (have to) apply the ordinary (national) rules of civil procedure which are also applied by ordinary courts.39 These rules are generally of a mandatory nature and leave little room for party autonomy and hardly any room for courts to adjust the procedure to the needs and the expectations of international parties. However, despite these limits, international commercial courts in both countries have done their best to show flexibility and to adopt best international practices where possible. For example, they engage in active case management and usually start the proceedings with a case management conference as it is good practice in international commercial arbitration.40 In addition, they allow proceedings to be conducted in English to the extent possible.41 Overall, however, and when compared to the earlier mentioned international commercial courts, proceedings in the French and the German international commercial chambers exhibit a more limited degree of flexibilization and internationalization.42 35 S.F.G. RAMMELOO (note 6) Section 2.6; Z. HUO (note 6), Section 4; K. HO LAU (note 6), Section 3.3. As of 1 April 2022, the Singapore International Commercial Court has its standalone set of procedural rules. 36 S.F.G. RAMMELOO (note 6) Sections 2.6 and 2.7; Z. HUO (note 6), Section 4; K. HO LAU (note 6), Section 3.3. 37 Art. 8(3) NCC Rules. See also S.F.G. RAMMELOO (note 6), Section 2.7; E. BAUW (note 20), p. 19. 38 Division 3 § 18K(1) Supreme Court of Judicature Act 1969 as amended; Order 13, Rule 15 SICC Rules 2021. See K. HO LAU (note 6), Section 3.3.1. 39 G. CERQUIERA (note 6), Section 2.2.2.1; T. RIEHM/ Q. THOMAS (note 6), Section 4.3. 40 T. RIEHM/ Q. THOMAS (note 6), Section 4.3.2. 41 G. CERQUIERA (note 6); Section 2.2.2.1; T. RIEHM/ Q. THOMAS (note 6), Section 4.3.3. 42 It should be noted, however, that the German Federal Ministry of Justice has recently published a bill that is meant to improve the framework conditions for the settlement of international disputes in Germany. It allows the federal states (Bundesländer) to establish „commercial chambers“ at the regional courts (Landgerichte) and “commercial courts” at the higher regional courts (Oberlandesgerichte) that may conduct (international) proceedings completely in English. In addition, the bill contains a number of proposals designed to internationalize (high-volume) commercial proceedings. See Bundesministerium der Justiz, Entwurf eines Gesetzes zur Stärkung des Justizstandortes Deutschland durch Einführung von Commercial Courts und der Gerichtssprache Englisch in der Zivilge-

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Success and Impact of International Commercial Courts

V.

Success and Impact

With this having said, let us turn to the last part: the success and the impact that international commercial courts have had in practice so far. The rise of international commercial courts has often been described as a “game changer” for the resolution of international disputes.43 In fact, it has been argued that international commercial courts fundamentally reshape “the landscape of international dispute resolution by disrupting the traditional dichotomy between international litigation and arbitration as mutually exclusive dispute resolution service providers, and by challenging the conventional advantage of international arbitration in handling cross-border commercial disputes.”44 However, one may wonder whether this assessment actually holds true. In fact, recent studies suggest that international commercial arbitration remains the most popular way of settling international commercial disputes.45 And literature insists that the large bulk of international cases (in absolute numbers) in a great number of jurisdictions is dealt with by local, ordinary courts instead of international commercial courts.46 So, can international commercial courts truly be described as a game changer or disruptive force for international disputes resolution? We submit that the answer to this question can and should be found using two criteria: First, the number of cases that international commercial courts have received since their establishment (notably the number of cases in which the court was actively chosen by the parties) and, second, the impact that international commercial courts have on the local judiciary and the legal system they are located in at large. The first criterion helps us to understand whether international commercial courts have succeeded in making a dispute resolution offer that is attractive for international parties. It, therefore, measures the success of international commercial courts against their own goal. The second criterion, in contrast, measures the success of international commercial courts based on their impact on the dispute resolution landscape. It addresses this perennial debate: proponents of international commercial courts very often argue that international commercial courts will have positive spill-over effects on the local judiciary while opponents fear the bifur-

richtsbarkeit (Justizstandort-Stärkungsgesetz), 25 April 2023, available at https://www. bmj.de/SharedDocs/Gesetzgebungsverfahren/DE/Commercial_Courts.html. 43 See, e.g., W. GU/ J. TAM (note 2) p. 445; M. YIP, The Battle for Jurisdiction through Jurisdictional Requirements, in S. BREKOULAKIS/ G. DIMITROPOULOS (eds), International Commercial Courts: The Future of Transnational Adjudication, Cambridge, 2022, p. 176. 44 W. GU/ J. TAM (note 2), p. 445. 45 White & Case and Queen Mary University of London 2018 International Arbitration Survey: The Evolution of International Arbitration (97% of the survey respondents indicated that international arbitration is their preferred method of dispute resolution); SIDRA International Dispute Resolution Survey: 2020 Final Report, pp. 5-6 (Between 2016 and 2018, 74% of respondents used international commercial arbitration for the resolution of international disputes). 46 See, for example, T. RIEHM/ Q. THOMAS (note 6), Section 3.

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Man Yip/ G. Rühl cation of the civil justice system with good courts for the rich and bad ones for the poor. A.

Number of Cases

Starting with the development of case numbers, a review of the available literature reveals that different international commercial courts do very differently in practice. By far the least busy courts are the international commercial courts recently established in Germany, the Netherlands, and China. In Germany, for example, each international chamber has had only a handful of cases so far and the combined number of cases of all international commercial chambers does not exceed 20 per year.47 The situation is similar in the Netherlands where the Netherlands Commercial Court has heard a total of 13 cases since its inception in 2019.48 Equally low are the numbers for the Chinese International Commercial Courts which has thus far accepted 19 cases.49 However, in contrast to the cases heard by the German international chambers and the Netherlands International Commercial Courts, the vast majority of these cases came through transferrals from other courts or through the court’s competence for setting aside arbitral awards.50 In fact, in only two cases was the Chinese International Commercial Court actively chosen by the parties.51 And both cases concerned, again, the setting aside of an arbitral award.52 This means that – up to now – parties have never submitted their disputes directly to the Chinese International Commercial Court. The picture looks much different – at least at first sight – when turning to France. Here the Paris international chamber had a total number of 186 in early 2022 (up from 3 in 2018).53 However, this rather impressive number of cases is in part the result of the chamber’s competence for all arbitration related disputes (including disputes about the setting aside of arbitral awards). The number of cases not related to arbitration is only 80.54 In addition, it needs to be mentioned that the Paris international chamber – unlike most other international commercial courts or chambers, notably those in Germany and the Netherlands – also hears cases that are not based on party choice.55 And even though precise figures are hard to obtain there seems to be agreement that the large bulk of cases – as in China – is based on

T. RIEHM/ Q. THOMAS (note 6), Section 3. See the information available at https://www.rechtspraak.nl/English/NCC/Pages/ judgments.aspx and S.F.G. RAMMELOO (note 6), Section 2.9 (referring to 10 cases in January 2022). 49 Z. HUO (note 6), Section 5. 50 Ibid. 51 Ibid. 52 Ibid. 53 G. CERQUEIRA (note 6), Section 1. 54 Ibid. 55 G. CERQUEIRA (note 6), Section 2.1.1.1. 47 48

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Success and Impact of International Commercial Courts objective grounds of jurisdiction rather than on active party choice.56 A similar picture as in France, emerges when turning to Singapore. Here the Singapore International Commercial Court received 2 cases in 2015 and roughly 20 cases per year ever since. The official (total) docket today stands at a little bit over 80 cases. However, of these roughly 80 cases, only a fairly small proportion, namely 10, consisted of fresh filings that did not come through transfers from other divisions of the Singapore High Court. It follows, that as in France, the number of cases in which the Singapore International Commercial Court was actively chosen by the parties remains fairly low to this day. The situation is very different when looking at the international commercial courts established in the Gulf region and in Kazakhstan. They seem to have attracted a quite large number of cases since their inception, including a large number of cases in which the parties actively chose to litigate before the relevant international commercial court. Take, for example, the international commercial court in Dubai.57 It received 39 cases in 2007 and had a total of 747 cases on docket in 2021.58 Of course, it should be mentioned – as with China, France and Singapore – that the Dubai court also accepts cases based on objective grounds of jurisdiction and not only cases based on parties’ choice.59 However, at least in 2021, roughly 50% of all new cases were opt-in cases, i.e. cases in which the parties actively chose the jurisdiction of the Dubai international commercial court.60 In the light of the above, it seems fair to say that, to this day, only the international commercial courts established in free economic zones settle a larger number of cases based on parties’ choice. All other international commercial courts, notably those established in France, Germany, the Netherlands, China and Singapore, in contrast, attract a small number of opt-in cases. It therefore seems that these courts – while offering a new way of settling international disputes that complements international commercial arbitration and litigation in ordinary courts – cannot yet be considered as game changers based purely on the number of direct filings. Of course, this may well change in the future, once these courts have developed their reputation and garnered users’ trust. However, with a view to the current numbers and at least for the time being, it must be concluded that most of the international commercial courts have not yet managed to establish themselves as go-to dispute resolution hubs (regionally or worldwide). It follows, that – as of yet and when just considering only the first criterion, the number of cases – they can hardly be described as having been a disruptive force.

Ibid. M. BYRNE (note 8), Section 3.3. 58 Ibid. 59 Ibid. 60 Ibid. 56 57

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Man Yip/ G. Rühl B.

Effect on Local Judiciary

A different picture, however, emerges when turning to the second criteria, the effect of international commercial courts on the local judiciary and the landscape for the settling international commercial disputes at large. In fact, it may be that the procedural and other innovations that these courts have introduced will eventually spill over to other courts in the system and, hence, contribute to the development and the improvement of the local judiciary of the respective jurisdiction. Indeed, some of the traditional international commercial courts have served that very function. The London Commercial Court is a case in point. It has repeatedly set up procedural innovations which were later adopted by other UK courts.61 Can the same be said about the new international commercial courts? The problem with the answer to this question is that any spill-over effect is more much more difficult to observe (and to measure) than the objective size of the courts’ docket. However, there is anecdotal evidence that at least some international commercial courts have already started to change their local civil justice environment (and arguably for the better). Take, for example, Germany. Here more and more Länder, i.e. the federal States that make up the whole of Germany, have set up international chambers over the past years. In fact, whereas there were only two international chambers in 2010 (namely those in Bonn and Cologne), there are now seven (namely those in Bonn, Cologne, Frankfurt, Hamburg, Stuttgart, Mannheim and Berlin).62 And while this development can simply be seen as another example for the proliferation of international commercial courts, it can also be understood as expression of the wish to not fall behind. On this reading, the introduction of the first international chambers started a chain reaction that has changed – and arguably improved – the overall landscape for settling international commercial disputes in Germany. We, therefore, submit that what can be observed in Germany is an example for how international commercial courts (or chambers) may exercise a good and healthy influence on the local judiciary (even though it must be noted that in the case of Germany the changes have been minimal because the overall legislative framework has remained the same). Similar developments (even though anecdotal in nature) can be observed in China. As in the case of Germany, the Chinese International Commercial Court may have had minimal practical effect in terms of its own docket. But it has inspired the establishment of local international commercial courts in China. By the end of December 2022, eight local international commercial courts – being specialized tribunals customised for the adjudication of international commercial disputes falling within their jurisdiction – have been established in China. Like in Germany this development can be viewed as a first step towards a better dispute resolution landscape in China. Thus, all in all, one may cautiously conclude that international commercial courts have indeed had some positive influence on the resolution of international commercial disputes and the dispute resolution landscape at large. This particularly holds true for those countries whose international commercial courts are estab-

61 62

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D. FOXTON (note 12), Section 15. T. RIEHM/ Q. THOMAS (note 6), Section 2.1.

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Success and Impact of International Commercial Courts lished as part of the local judiciary. In contrast, courts that were specifically set up independently of the local judiciary, the influence seems to be much weaker.

VI. Conclusion and Outlook Over the past decades, a number of jurisdictions have established international commercial courts. Located in the Gulf region (Abu, Dubai, Qatar), in Asia (Singapore, China, Kazakhstan), and in Europe (Germany, France, the Netherlands) these courts share the virtue of being state courts that specialize in the resolution of international commercial disputes. However, when it comes to the details they differ vastly and fall along a broad spectrum. Clearly, there is not a single institutional or procedural feature which is common to all international commercial courts and this is, we submit, because they were set up for very different reasons and in vastly different jurisdictional contexts. What can be said about all international commercial courts, however, is that they have not yet turned out to be game changers for the dispute resolution landscape. At least when focusing on cases in which the international commercial courts were actively chosen by the parties, the newly created courts have not yet managed to convince a large number of business parties to change their dispute resolution habits. In fact, the bulk of international disputes is still dealt with by international arbitration tribunals and ordinary, local courts. Why is this so? With regard to some courts, it seems plausible that the benefits that they offer are simply not significant enough to make parties change their dispute resolution habits. France and Germany may be examples: they have adjusted their institutional and procedural framework only to a very limited extent and without amending the overall legislative framework.63 As a consequence, their international commercial courts offer only marginally more internationalized services than ordinary French and German courts. The story is more complicated when turning to the Netherlands and Singapore. Both countries have established very ambitious international commercial courts that try to offer (arbitration style and common law style) litigation service that appeal to international parties. What is the reason that they have not been more successful in practice? Firm answers are, of course, hard to obtain. And absent empirical studies all answers entail an element of speculation. Be that as it may, we offer one observation here: it seems plausible that it is mainly one factor that has prevented these courts from becoming an overwhelming success in practice: enforcement of their judgments abroad. Enforcement of the outcome is the paramount concern for international litigants because a judgement that cannot be enforced is not worth the paper that it is written on. However, in contrast to arbitral awards, which are recognized and enforced virtually across the globe

63

Note that this will most likely change in Germany in the near future. See supra

note 42.

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Man Yip/ G. Rühl through the New York Convention,64 there is no uniform or common legal framework to ensure recognition and enforcement of judgments rendered by international commercial courts. Judgments by the international commercial courts – in view that they are constitutionally domestic courts – are, therefore, subject to the same rules on recognition and enforcement as any other national judgment. And while national judgments may benefit from (multilateral or bilateral) international treaties or regional instruments that facilitate enforcement of judgments abroad,65 they generally have a much more limited reach than arbitral awards. In the light of the above, international commercial courts still have to show whether they have the potential to seriously compete with international commercial arbitration as a means to settle international disputes. In fact, since the creation of international commercial courts is still a fairly new phenomenon, more time needs to pass before we can cast a final verdict. In addition, more (empirical) studies are necessary to fully understand the impact of international commercial courts on the resolution of international disputes as well as their relative significance visà-vis international commercial arbitral tribunals on the one hand and ordinary courts on the other.

New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). 65 See for a more detailed overview M. YIP/ G. RÜHL (note 4), Section 6.7. 64

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A “COMMON LAW” OF INTERNATIONAL ARBITRATION? IN MEMORY OF CLAUDE REYMOND Adam SAMUEL*

I.

III.

Setting the Scene A. Claude Reymond and the “droit commun” of International Arbitration B. A Statutory “Common Law” of Arbitration? Searching for a Common Law of Arbitration in the Specific Areas of Arbitration Law A. Formal Validity of Arbitration Agreements B. Separability C. Subject-Matter Arbitrability D. Consolidation or Joinder E. Oh Competence-Competence F. Interim Measures G. Accepting Arbitrator Appointments H. Arbitration Procedure I. The Rules or Standards Governing the Merits J. Different Rules for International Cases K. Le siège d’arbitrage (Seat of Arbitration) Final Thoughts

I.

Setting the Scene

A.

Claude Reymond and the “droit commun” of International Arbitration

II.

In the preface to my 1989 book (Volume 11 of the Swiss Institute of Comparative Law’s publications), Claude Reymond wrote about “the development of a common law (“droit commun”) of arbitration in the countries regularly chosen as seats of international commercial arbitration”.1 He noted that all these states had gradually

* Attorney, member of the New York and English Bars; member of the Chartered Institute of Arbitrators’ Practice & Standards Committee. 1 C. REYMOND, Preface to A. Samuel, Jurisdictional Problems in International Commercial Arbitration: a study of Belgian, Dutch, English, French, Swedish, Swiss, U.S. and West German Law, Zurich 1989. The original comment in French was “le développement d’un droit commun de l’arbitrage dans les pays habituellement choisis

Yearbook of Private International Law, Volume 23 (2022/2023), pp. 61-80 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Adam Samuel adopted principles as important as the separability of the arbitration clause, the right of the arbitrator to decide on his own jurisdiction including the validity of the arbitration clause, and the freedom of international arbitration from the constraints of domestic arbitration. Nevertheless, Claude accepted that even among these systems there remained enormous differences. On top of that, he noted Michael Kerr’s wise comments about the problem of accessing arbitration law through skeletal statutes and “a bewildering array of reported decisions in which the courts have in fact intervened or refused to intervene.”2 So, in the succeeding 33 years, has a common law of international arbitration emerged and if so in what areas and with what effect? Perhaps a pause to define terms makes sense. Common law, at least in the English-speaking world’s sense, has not remained static or unchanged. It has a habit of bending, being corrected and going off course only to return. Nevertheless, there are some themes where a form of “droit commun” can be detected. At the same time, the dreams of any form of arbitration unification remain as far away as ever.3 B.

A Statutory “Common Law” of Arbitration?

Since 1989, there have been two “common law” developments on the statutory side of enormous significance. The ratification of the New York Convention was already well underway in 1990. Nevertheless, there remained some holdouts (notably Iraq) which have gradually disappeared. The widespread adoption of the UNCITRAL Model Law has been more surprising. This has spread in a variety of forms not just in developing countries but others, like Germany, that have a great tradition of arbitration law and thinking. Inevitably, caselaw in one country, where available in the same language, can be cited in courts of others. Between 1989 and 2022, numerous countries have reformed their own statutes in some cases more than once, many inspired by the Model Law. In this respect, there has been a happy coincidence between the Law and a desire around the world to address the Michael Kerr concerns described above, most obviously apparent in the 1996 English Arbitration Act. The ease with which English translations (admittedly of variable quality) have become available has enabled governments and lawyers of many countries to compare and copy others’ results.

comme siège d’arbitrages commerciaux internationaux” and the translation is that of the author. 2 M. KERR, Arbitration and the Courts: The UNCITRAL Model Law, I.C.L.Q., 1985/34, p. 9. 3 Official attempts at unifying arbitration hit the buffers when the European Convention providing a Uniform Law on Arbitration 1966 (the “Strasbourg Convention”) was only signed by Belgium and Austria and ultimately only ratified by Belgium.

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A “Common Law” of International Arbitration?

II.

Searching for a Common Law of Arbitration in the Specific Areas of Arbitration Law

A.

Formal Validity of Arbitration Agreements

Some areas have witnessed more coming together than others. Occasionally, the development has taken a less than smooth path. Formal validity is a curious example here. A country like Sweden seems never to have had a requirement for the arbitration agreement to be in writing.4 Its absence of difficulties caused by this could have inspired others to take the same approach. This, though did not happen until relatively recently. The French omitted any form requirement from its 1981 international arbitration provisions. However, nobody seems to have paid this much attention until the Cour de cassation’s second decision in Bomar Oil.5 In 2014, the French CPC confirmed the absence of any form rules in international cases (but not domestic ones) in article 1507. Awkwardly, Article 1516(3) still requires a party seeking enforcement to provide a copy of the arbitration agreement. Could this be a CD of a recording of the conversation in question? Intriguingly, Belgium simply removed the formal requirement in 2013 and essentially “became Swedish” on this.6 It may have been inspired by the 2006 change to Article 35 of the Model Law, which removed the obligation to produce a copy of the written agreement for the purpose of recognition and enforcement of the award. The English 1889 Arbitration Act and the caselaw under its somewhat threadbare provisions dominated the old British Empire until relatively recently. Section 27 defined a “submission” as “a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.” Baker v Yorkshire Fire and Life Assurance Company7 created the rule that “a written agreement” just had to be written somewhere by somebody, not necessarily the parties. An oral agreement to a written document became acceptable in this way throughout the British Empire, culminating in the Zambia Steel 8 English Court of Appeal decision. US caselaw seems to have followed broadly the same approach. Strangely, Article III(a) of the ICC draft of what became the New York Convention seems to follow the Anglo-American line: 4 Lag om utländska skiljeavtal ach skiljedomar 1929, sec. 3 & 8; U. HOMBACK, “Commercial Arbitration in Sweden”, Droit et pratique du commerce international, 1980, p. 496. 5 Bomar Oil N.V. v Entreprise Tunisienne D’activités Pétrolières, Cass Civ 1er, 9 November 1993, Revue de l’Arbitrage, 1994, p. 108. 6 Code judiciaire, Art. 1681. 7 [1892] 1 Q.B. 144. 8 Zambia Steel & Building Supplies Ltd. v. James Clark & Eaton Ltd, Lloyd’s L. Reports, 1986/2, p. 225. The Arbitration Act 1975 defined an “arbitration agreement” as “an agreement in writing (including an agreement contained in an exchange of letters or telegrams) to submit to arbitration present or future differences capable of settlement by arbitration”.

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Adam Samuel To obtain the recognition and enforcement mentioned in the preceding article, it will be necessary: a) that there exists between the parties named in the award a written agreement stipulating settlement of their differences by means of arbitration. Paragraph 18 of the ECOSOC meeting report of 28 March 1955 rejected a Swedish resolution which had English and Indian support to introduce a clause which would have required the enforcement of arbitration agreements without any formal requirement. A great deal of printer’s ink has been spilt over what became Article II(2) of the New York Convention and the dangers of inserting provisions into Conventions at the last minute. What was probably an attempt to lay down minimum standards for formal validity ended up having some curious results for Switzerland. There, the self-executing nature of international treaties has led the courts to apply the Convention requirements for an agreement in writing where the seat is outside Switzerland while it uses the more relaxed approach found in the Swiss PIL Act (hereinafter: “LDIP”) in international cases located at home.9 Happily, the advent of modern technology and the inability of people not to communicate by messages which are as much letters as formally posted correspondence has made this problem of largely historical interest. However, if one is looking for a common law of arbitration, it is necessary to note that there are three distinct standards in the form area on top of the New York Convention Article II(2)’s exchange of letters and telegrams. The Swiss PIL Act and UNCITRAL Model Law 1985 version both require documentary evidence of an agreement.10 Article 7 of the 2006 Model Law option 1 adopts the English approach and option 2 is the Swedish one. There is a growing consensus that formal validity rules are a very blunt instrument for discovering whether parties agreed to arbitrate or not. The 2006 version of the Model Law recognises this. In practice, the difference between the two options is almost non-existent. B.

Separability

On the surface, separability appears to be a good example of the developing common law of arbitration. Even in 1989, most of the major arbitration countries had accepted that a void main contract did not disable the arbitration clause contained in it. England was the exception although House of Lords comments suggested that that court could well reverse what was effectively half a century of

LDIP, Art. 176 restricts the Swiss rule for international arbitration cases to those where the seat is in Switzerland. There is no adjustment to the New York Convention’s formal validity requirements for cases to which it applies which must be cases where the seat is outside Switzerland. 10 LDIP, Art. 178(1); UNCITRAL Model Law on International Commercial Arbitration 1985, Art. 7(2). 9

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A “Common Law” of International Arbitration? obiter dicta.11 Caselaw in the form of the Harbour case12 involved sidestepping a vast amount of obiter dicta and decisions on different facts to bring England into the mainstream. Section 7 of the 1996 Act just confirmed it.13 In recent years, the final frontier in this area, namely deciding whether an arbitration clause could survive in a contract over which the parties might not have reached agreement seems to have been gradually surmounted in Switzerland,14 England15 and France16 in line with earlier Swedish caselaw17 even though the English Court of Appeal took a step backwards recently in the Newcastle Express.18 Arguments about the second wing of separability, concerning the law applicable to the arbitration agreement have reared their ugly head in recent times with two English Supreme Court decisions, Enka19 and notably Kabab-Ji20. The issue in the latter case was relatively simple in one sense. Can an unlimited choice of law in the main contract apply to an arbitration clause providing for arbitration in a different country? The English courts said yes and the French Cour d’appel de Paris and the Cour de cassation said: “non”21. The practical result is that parties will now have to put choices of law to govern their arbitration clauses where they want a seat in a different country to the law applicable to the merits. This decision offends against the notion that when parties agree to arbitrate in a particular country, they sign up to the arbitration law of that state. The real problem that the facts of Kabab-Ji shows up is the extent to which a court should read across a choice of substantive law to the arbitration clause.

11 Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation, [1981] AC 909 per Lord Diplock, p. 980 and Lord Scarman, p. 998 and Paal Wilson and Co v Partenreederei Hannah Blumenthal, A.C., 1983/1, p. 917; A. SAMUEL, Jurisdictional Problems in International Commercial Arbitration: a study of Belgian, Dutch, English, French, Swedish, Swiss, U.S. and West German Law, Zurich 1989, p. 171. 12 Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701. 13 Premium Nafta Products Ltd v. Fili Shipping Company Ltd [2007] UKHL 40, para. 9. 14 ATF 142 III 239 (2016), X Co. v Z Ltd. 15 Premium Nafta Products Ltd v. Fili Shipping Company Ltd [2007] UKHL 40, para. 9. 16 Cour de cassation, (civ. 1ere), 14 May 2014, SAS Hautbois v GAEC, Revue de l’Arbitrage, 2014, p. 937. 17 Hermansson v. AB Asfaltbeläggningar, NJA 1976 p. 125. D. CZERNICH, The theory of separability in Austrian arbitration law: is it on stable pillars?, Arbitration International, 2018, p. 463, paints a somewhat different picture as regards Austria. 18 DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd (Re “Newcastle Express”) [2022] EWCA Civ 1555. 19 Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] UKSC 38. 20 Kabab-Ji SAL (Lebanon) v. Kout Food Group (Kuwait) [2021] UKSC 48. 21 Cour d’appel de Paris, 23 June 2020 and Cour de cassation, 28 September 2022, Kabab-Ji (Lebanon) v Kout Food Group (Kuwait), Revue de l’Arbitrage, 2020, p. 839.

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Adam Samuel The actually legal rules in various countries here may not be that different. For example, in Sweden, section 48 of the legislation reads:22 “If an arbitration agreement has an international connection, the agreement shall be governed by the law agreed upon by the parties. If the parties have not reached such an agreement, the arbitration agreement shall be governed by the law of the country where, in accordance with the parties’ agreement, the arbitration had or shall have its seat.” More recently, the German Bundesgerichtshof, following an older Dutch first instance judgement, preferred the English to the French approach and applied the law governing the merits to an arbitration clause where there was no choice of law applicable to the arbitration clause.23 In these three decisions, the Courts have read the choice of law governing the contract as being designed to cover the arbitration clause. A more separability-focused country might have taken a different (or French) view. One can see this from principles (iv)-(vii) of the Enka judgement24 of the same court: iv) Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract. v) The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement. vi) Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are: (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration agreement will also be treated as governed by that country’s law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective. Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration. vii) Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place.” The Stockholm Chamber of Commerce website translation. BGH, 26.11.2020 – I-ZR 245/19; M Alternkirch & J Hagmann, “German Federal Court of Justice Applies CISG to Validity of the Arbitration Agreement”, Global Arbitration News, 4 February 2021; X BV v. Assuranceforeningen Skuld (Gjenslidig), Rechtbank, Rotterdam, 23 December 2015, Yearbook Commercial Arbitration, 2017 p. 449. 24 See above (note 19), para. 170. 22 23

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A “Common Law” of International Arbitration? A separability-focused answer would probably have produced four rather different principles. This is notwithstanding the fact that the result in Enka and the first of these para 170 principles makes it clear that the law governing the main contract can be different from that applicable to the arbitration clause, the essence of this branch of separability. The difference can be seen from paragraph 8 of the Cour de cassation’s decision. This makes it clear that an unequivocal choice by the parties, reflected in their agreement is required in order to submit an arbitration clause to a law other than the seat: “Ayant souverainement retenu que le choix du droit anglais comme loi régissant les contrats, ainsi que la stipulation selon laquelle il était interdit aux arbitres d'appliquer des règles qui contrediraient les contrats, ne suffisaient pas à établir la commune volonté des parties de soumettre l'efficacité de la convention d'arbitrage au droit anglais, par dérogation aux règles matérielles du siège de l'arbitrage expressément désigné par les contrats, et que la société KFG ne rapportait la preuve d'aucune circonstance de nature à établir de manière non équivoque la volonté commune des parties de désigner le droit anglais comme régissant l'efficacité, le transfert ou l'extension de la clause compromissoire, la cour d'appel a, sans dénaturation, légalement justifié sa décision d'apprécier l'existence et l'efficacité de la convention d'arbitrage, non pas au regard du droit anglais, mais au regard des règles matérielles du droit français en matière d'arbitrage international.” “Having concluded, as it was entitled, that the choice of English law as the law governing the contracts as well as the stipulation according to which it was forbidden to the arbitrators to apply rules which would contradict the contracts, did not suffice to establish to common wish of the parties to submit the effectiveness of the arbitration agreement to English law by virtue of a derogation to the material rules of the seat of arbitration expressly designated by the contracts and that KFG had not produced any evidence of any circumstances tending to establish in an unequivocal way the common wish of the parties to designate English law as governing the effect, transfer or extension of the arbitration clause, the Court of Appeal has, without distortion, justified in law its decision to interpret the existence and effect of the arbitration agreement, not as regards English law but the substantive rules of French international arbitration law.”25 Countries have generally not followed the Swiss idea of making an agreement valid if it conforms to a variety of different laws including both those governing the merits of the dispute or of the seat.26 Much of the relevant discussion in this area concerns the French approach to identifying the parties to contracts which allows non-parties’ performance to 25 26

Translation by the author. LDIP, Art. 178(2) .

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Adam Samuel insert them into the agreement to arbitrate. In Kabab-Ji, this apparently unorthodox approach produces a far more sensible answer in practice where a different corporate entity within the same group takes over the performance of the contract. C.

Subject-Matter Arbitrability

One area where any form of common law type development has failed concerns subject-matter arbitrability. In this area, countries have a habit of announcing that everything or at least everything of monetary value is arbitrable27 until it is not. Countries with exclusive jurisdictions over certain subject-matters, such as patent validity,28 bankruptcy29 or employment law30 really need to declare openly whether these issues render a dispute either non-arbitrable or only capable of arbitration at the court’s discretion, the request of the weaker party or on some other terms. Another aspect of this subject is also causing problems. In 1986, nobody took terribly seriously the US Supreme Court’s second look doctrine derived from footnote 18 of the Mitsubishi majority judgement.31 The idea was that on enforcement, the US courts would not take kindly to an award that ignored its antitrust laws. Soler’s subsequent insolvency rendered all this academic. When the Austrian Supreme Court declined to stay court proceedings in the light of the New York arbitrator’s refusal to apply EU antitrust laws, the old chestnut of mandatory laws reared its ugly head again.32 The tolerance of various countries towards the disapplication of their mandatory laws varies considerably, even within the same location, such as Belgium, where the Cour de cassation is much stricter than the lower courts on this subject.33 Equally variable is the extent to which national courts outside those areas insist on extra-territorial application of other country’s laws not chosen by the parties.34 This is the case even where, if the events concerned took place in the seat

LDIP, Art. 177(1). The US 35 USC para. 294 has the merit of at least clarifying the position. The French Code de la propriété intéllectuelle, Art. L615-17, seems to give the go ahead to patent validity arbitration although it raises questions about the enforceability in the patent court of an arbitration clause and the perennial problem of deciding what Code Civil Art. 2059 and 2060 mean. 29 Liquidateurs of Sté Jean Lion v. Sté International Company for Commercial Exchange Income, Cass Civ 1er, 6 May 2009, Revue de l’Arbitrage, 2019, p. 438; J. HARGROVE/ V. LIBORIO, Arbitration and Insolvency: English and Swiss Perspectives, Arbitration, 2009, p. 1. 30 Cass, Soc, 30 November 2011, Nos. 11-12.905 and 11-12.906; Clyde & Co LLP, John Morris v Krista Bates van Winkelhof [2011] EWHC 668 QB. 31 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). 32 T GesmbH v O Inc., OGH 1.3.2017, 5 Ob 72/16y. 33 H. VERBIST/ J. ERAUW, Note: Arbitrability of exclusive distributorship agreements with application of foreign law confirmed by Belgian courts after the reform of the Belgian arbitration law of 2013, Belgian Review of Arbitration, 2019, p. 263. 27 28

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A “Common Law” of International Arbitration? of arbitration, the local courts would insist on the application of the public laws concerned. D.

Consolidation or Joinder

Joinder or consolidation is another area where any common law development has been against innovation. In 1986, the Dutch reforms introduced consolidation at the court’s discretion.35 The judicial trend elsewhere if anything has been in the opposite direction.36 Arbitration institutions have grappled with the problem, feeling compelled to limit themselves to party agreement or at least agreement to arbitrate under their institution although the wording of articles 6 and 7 of the Swiss Rules might suggest a more expansive approach. In fact, the holding of concurrent cases with the same panels and the sharing of evidence may be more efficient. The law is no more favourable to that idea than it is to consolidation. E.

Oh Competence-Competence

One area that Claude Reymond mentioned, the right of an arbitrator to rule on his own jurisdiction, has actually become a greater mess since 1985. Before then, a consensus had emerged that an arbitrator faced by a challenge to his jurisdiction need not stop proceedings unless ordered to by a national court. However, the subject remains infested by misunderstandings, faulty assumptions and differences of opinion – even about the meaning of basic terms. Only various Court of Appeals in the US has interpreted an agreement to arbitrate under the ICC or similar rules as barring any court review of the arbitrator’s jurisdiction. The US Supreme Court in Henry Schein II37 and Piersing38 has run away from this issue by refusing to tackle the question of whether agreement to arbitration rules constitutes a waiver of the right to challenge the arbitrator’s ruling on jurisdiction. The American Law Institute filed briefs in both cases to try to bring US law back to where everyone else is. The UNCITRAL Model Law still retains an extraordinary mistake, which the UK delegation drew attention to in 1985, in blocking challenges to a no-

34 ATF 132 III 389 (2006), X. S.p.A. v Y. S.r.l. (breach of EU competition law is not a matter of Swiss public policy); ATF 118 II 193 (1992), G. S.A. v V. S.p.A (the arbitrator is wrong to deny jurisdiction to deal with an EU competition law claim where the seat is in Switzerland). The two positions are consistent with each other but only just. 35 Art. 1046. 36 Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010). 37 Henry Schein, Inc., v. Archer and White Sales, Inc., cert denied as improvidently granted 25 January 2021. 38 Derek Piersing v. Domino’s Pizza Franchising LLC, 962 F.3d 842 (6th Cir, 2020), cert denied 25 January 2021.

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Adam Samuel jurisdiction ruling.39 Under article 36, the court can only set aside an award if the arbitrator has wrongly accepted jurisdiction. It cannot annul an award declining jurisdiction over part or all of the dispute. This puts enormous pressure on tribunals faced with borderline jurisdictional issues to give a positive ruling. Unlike other countries, the Swiss Tribunal fédéral will not review the arbitrator’s factual findings in this area.40 More importantly, the rules on the extent of review of jurisdiction (superficial or full) and timing vary enormously and can depend on the type of application being brought. In England, a non-participant in an arbitration can go straight to court for a ruling on jurisdiction.41 This is an option also with the tribunal’s consent.42 In the US, parties can seek injunctions and bring motions to compel arbitration seemingly at any stage.43 Sweden used to take a similar approach but now only does so with regard to consumer disputes and the situation where the arbitration has not commenced.44 Countries then divide up into those which provide for a review of the arbitrator’s decision immediately after it is made45 and those that expressly reserve this for after the final award on the merits.46 Some states allow a superficial jurisdictional look on appointment applications,47 others none48 and in the US, the statute does not lay down the extent of the review.49 In the case of England which appears to sit in the first group, there is always the option to apply for an injunction to stop the proceedings!50 Switzerland allows a surface review if court proceedings

39 Art. 36(2). Lord Wilberforce’s comments appear at U.N. Doc. A/CN. 9/SR 316, p. 5. For this discussion, see A. SAMUEL (note 11), p. 218-220. 40 ATF 119 II 380 (1993), National Power Corporation v Westinghouse International Projects Company, Westinghouse Electric S.A., Westinghouse Electric Corporation, Burns & Roe, Enterprises Inc. 41 Arbitration Act 1996, sec. 72(1). 42 Arbitration Act 1996, sec. 32(2)(b) but only with the leave of the court. The parties can also agree to a judicial ruling on the subject: sec. 32(2)(a). 43 Federal Arbitration Act sec. 4 & 16(b)(4); Rent-A-Center West Inc v Jackson, 561 US 63 (2010). 44 Lag (1999:116) om skiljeförfarande, as amended by Lag om ändring I lagen (1999:116) om skiljeförfarande (“Swedish Arbitration Act”), sec. 4a. 45 LDIP, Art. 186(3) and 190(3). 46 Belgian Code judiciaire, Art. 1690(4); Dutch Burgerlijke Rechswordering, Art. 1052(4). 47 LDIP, Art. 179(3); Arbitration Act 1996, sec. 18 (which is silent on the subject); National Investment Bank Ltd v Eland International (Thailand) Co Ltd, Eland International Ghana Limited [2022] EWHC 1168 (Comm); London Steam-Ship Ltd v Kingdom of Spain [2022] 1WLR 3434 at p. 3464, para. 58. 48 Belgian Code judiciaire, Art. 1685(4-5); Dutch Burgerlijke Rechswordering, Art. 1027(3). 49 Federal Arbitration Act, sec. 5. 50 Arbitration Act 1996, sec. 72.

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A “Common Law” of International Arbitration? are brought in breach of an arbitration agreement to arbitrate in Switzerland while employing a full examination where the seat is elsewhere.51 What this all shows is that stating that an arbitrator can rule on his own jurisdiction is almost meaningless beyond the original remark about the tribunal not having to stop proceedings just because someone has objected to its jurisdiction.52 Increasingly like separability, one is left saying that a particular country has more compétence-compétence or less, here depending on the timing and extent of court of intervention on jurisdictional matters. F.

Interim Measures

The UNCITRAL Rules and subsequently the 2006 version of the Model Law has started a movement which could be said to have some common-law-like force on the subject of interim measures, as regards emergency cases. Arbitration organizations around the world have rushed in recent years to institute emergency procedures, involving interim tribunals issuing orders to hold the status quo before the arbitral tribunal is actually constituted.53 Without judicial support, these orders may be fairly useless although breaching an emergency order is not a good way to curry favour with the arbitrators ultimately appointed. There is a move to make parties using these procedures in preference to national courts.54 In practice, it might be more sensible to obtain an order from the tribunal and supplement it with a court order to the same effect issued immediately afterwards. The arbitration world has come up with one common law rule which ironically rejects a court decision of a common law court, the old 1974 McCreary decision that interim measures may be inconsistent with the agreement to arbitrate and Article II(3) of the New York Convention.55 Only the absence of a US Supreme Court decision prevents one from being able to consign this aberrant decision to the arbitral dustbin. G.

Accepting Arbitrator Appointments

There is some form of common law development as regards the acceptance of appointments and bias. The IBA Guidelines on Conflicts of Interest are studied

51 ATF 121 III 38 (1995), Compagnie de Navigation et Transports SA v MSC Mediterranean Shipping Company SA; ATF 122 III 139 (1996), Fondation M. v Banque X. 52 Christopher Brown Ltd v Genossenschaft Oesterreichischer Waldbesitzer Holzwirtschaftsbetriebe Registrierte GmbH [1954] 1 Q.B. 8; A. SAMUEL, CompetenceCompetence, Kompetenz-Kompetenz – now just an excuse for confused thinking about arbitrator jurisdiction, Arbitration, 2014, p. 67. 53 ICC Rules, Art. 29; LCIA Rules, Art. 9B. 54 Gerald Metals SA v The Trustees of the Timis Trust [2016] EWHC 2327. 55 McCreary Tire & Rubber Company v. Ceat S.p.a., v. Mellon Bank, N.a. Garnishee, 501 F.2d 1032 (3d Cir. 1974); Belgian Code judiciaire, Art. 1683.

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Adam Samuel copiously and tweaked occasionally to ensure that they reflect caselaw developments. This affects arbitrator disclosure forms. The reasoning of the English Supreme Court decision in Halliburton probably reflects a worldwide consensus on the subject.56 Arbitrators who take appointments and then accept multiple nominations from the same party in relation to connected facts, need to disclose them to the other party in the original case. If that is not possible, the tribunal member has to resign. The only disappointment in that case was the acceptance of the odd and quite unnecessary exceptions reflected in footnote 5 of the IBA guidelines for sport, maritime and commodities cases. Non-compliance with the IBA guidelines does not mean that the award must be set aside or the arbitrator removed. The guidelines do not address those issues. Occasionally, a case comes up where the arbitrator is totally unaware of a problem and so cannot disclose it or resign. Equally, at least one of the nonwaivable red categories may be too strict. In W Ltd v M SDN BHD57, the court disapplied the guidelines where after the commencement of the proceedings and unbeknown to the arbitrator, a major client of the firm had been acquired by the parent company of one of the parties. In institutional cases, there are now three different streams of approach towards the process of removing an arbitrator. England and the Model Law go for the double-hit approach allowing an unsuccessful applicant to go to the court in the seat.58 The US has no statutory provision allowing for the removal of arbitrators and the Fifth Circuit relied on that to stop an application going forward in Gulf Guaranty Life59. Although some of the caselaw has varied, this seems increasingly to be the consensus position.60 Others, such as France, Switzerland, Sweden, Netherlands and Belgium make it clear that the parties are bound to use exclusively any process of the institution for an application to remove arbitrators.61 Only after an award has been rendered can the parties apply to court to set it aside for reasons relating to the unsatisfactory nature of the arbitrators. H.

Arbitration Procedure

One area where a common law seems to have developed concerns arbitration procedure. In 1970, one spoke of the procedural law of the arbitration. The term

56

Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48 [2021]

AC 1083. [2016] EWHC 422 (Comm). Arbitration Act 1996, sec. 24(2); UNCITRAL Model Law, Art. 13(3). 59 Gulf Guar. Life Ins. v. Connecticut Gen. Life Ins., 304 F. 3d 476 (5th Cir 2002). 60 L. SCHIFFER, Are Pre-Award Challenges to Arbitrator Qualifications Still Possible?, https://casetext.com/analysis/are-pre-award-challenges-to-arbitratorqualifications-still-possible (accessed on 10 May 2023). 61 CPC, Art. 1456(3); LDIP, Art. 179(1); Swedish Arbitration Act, sec. 11, Burgerlijke Rechswordering, Art. 1035(7) & Code judiciaire, Art. 1687(1). 57 58

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A “Common Law” of International Arbitration? now only persists as a way of indicating the country whose arbitration law has to be observed. There are now relatively few differences in that law. Some countries still prohibit arbitrators from administering oaths.62 However, this has no real impact on proceedings. No mainstream country would set aside an award for breach of such a rule. Some countries (like Holland) and arbitration rules insist that one party can force the tribunal to hold an oral hearing.63 For some time, though, there has been an awareness that an oral hearing cannot cover every conceivable aspect of the case. Instead, a form of common-law/civil procedure has emerged with a moderated version of discovery, the admission of statements rather than evidence-inchief, cross-examination followed by tribunal questioning of witnesses. A curious feature of this is the way in which it may have influenced local civil procedure, particularly in the English-speaking world (apart from in the US). A courtroom experience in London or Gibraltar may feel remarkably similar to an arbitration hearing in Geneva.64 The only difference is the ordering of the furniture and the absence of decent refreshments in the former. I.

The Rules or Standards Governing the Merits

An area where a sort of consensus has emerged over the years concerns the law governing the merits where the parties have not selected any particular rules on the subject. The right to apply the rules that the tribunal considers to be appropriate led in the 1980s to the growth of the lex mercatoria.65 This appears to have died not because it was unlawful but because of party hostility to it. There was a noticeable increase in choices of law and in some cases clauses that provided for the tribunal to determine an applicable municipal law even if the parties could not agree on the subject. There are two main approaches used to select the applicable law or rules. Some countries require the tribunal to determine the conflict of law rules that it considers appropriate. 66 Others just insist on the arbitrators applying the rules of law that the tribunal deems appropriate.67 The different impact of the two approaches is probably minimal although there is a fun question as to whether party agreement to the ICC rules incorporates an express choice of the rules of

62 63

Code judiciaire, Art. 1700(4). Burgerlijke Rechswordering, Art. 1038b; ICC Rules, Art. 26(1); LCIA rules,

Art. 19.1. William van Geens & Beckett Ltd v. Jyske Bank (Gibraltar) Ltd, Supreme Court, 4 December 2014 reported on Gibraltar Court Service website in which the author gave evidence. 65 For an example, see Deutsche Schachtbau- und Tiefbohrgesellschaft mbH v. Ras Al Khaimah National Oil Co. Lloyd’s L. Reports, 1987, p. 246. 66 UNCITRAL Model Law, Art. 28(2); Arbitration Act 1996, sec. 46(3). 67 LDIP, Art. 187(1). 64

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Adam Samuel law68 rather than the conflicts approach where the seat is in an UNCITRAL state or England. The sad thing about all this is that a consensus may have formed over something that does not really make sense: the need to avoid applying the conflicts rules of the seat. When the view that an arbitrator has no forum and therefore no conflicts rules emerged in the 1970s, codifications of private international law were few and far between. With the LDIP in Switzerland, the Rome Convention (and now the Rome Regulation) and countries producing clear works on the subject, the parties might be better off having their arbitrators apply the private international law of a particular country. Instead, arbitrators have spent some decades trying to find sometimes non-existent consensus about the right rule to apply. Exercises in comparative private international law are expensive, pointless and not very accurate. J.

Different Rules for International Cases

In 1989, Claude Reymond felt that there was a growing consensus that international arbitration deserved a different treatment from domestic cases. This view which lay behind Chapter 12 of the LDIP has received a variety of responses. In 1986, the Dutch rejected it and continue to have the same regime for both types of case. The same applies in Belgium. Perhaps, the best case for it was France which built an entirely separate regime for international cases in 1981 and then realised that it might be easier to incorporate bits of its domestic regime subject to a right to opt-out, something reflected in the 2011 decree.69 By contrast, the English only had one small part of the 1996 Act which only applied in domestic cases and never brought it into force out of a concern that it might not comply with EU law.70 Actually, the provision which gave the courts a discretion not to stay court proceedings brought in breach of an arbitration clause was probably a breach of article II(3) of the New York Convention whose application, contrary to traditional UK view, is not limited to international cases. The Model Law only by its terms applies to international cases although there is nothing in the document to stop countries from applying it to all cases within their territory. In 2011, Hong Kong unified its regimes around the Model Law while allowing the parties to opt into its creative rules on court-ordered consolidation which originally emerged in the 1980 Ordinance and may have inspired the original Dutch rules on that subject and some very odd features of English arbitration law, notably on merits review.71 Although the US has added new chapters to its Federal Arbitration Act to encompass international treaties on the subject, its core provisions remain the same for both domestic and international cases. ICC rules, Art. 21(1-2). CPC, Art. 1506. 70 Arbitration Act 1996, sec. 85-87; Philip Alexander Securities & Futures Ltd v Bamberger [1996] C.L.C. 1757. 71 Schedule 2. 68 69

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A “Common Law” of International Arbitration? Countries using a unified approach often point out that there is nothing in their international regimes that are unsuitable for domestic cases. As the Hong Kong experience shows, it is hard to see what aspects of the Model Law are not suited to domestic cases. One area where a different rule could apply to international cases is subjectmatter arbitrability where domestic arbitration users may need for protection than those involved in international transactions. Even then, recently the French Cour de cassation72 correctly rowed back from its original stance on consumer cases which detached international arbitration from what are mandatory provisions of EU law making arbitration clauses presumptively unfair and thus unenforceable against consumers. K.

Le siège d’arbitrage (Seat of Arbitration)

The great arguments of the 1970s and 80s concerned the role of the seat of arbitration and in particular its courts’ ability to control what was going on through setting aside proceedings. One by one countries have introduced clear rules to make it possible to set aside arbitration awards rendered in their country. In some places, the rules had long been in place, notably section 10(a) of the US Federal Arbitration Act. In others, such as England, the idea had somewhat airily been assumed prior to the 1996 Act.73 When Germany adopted a version of the Model Law, it put an end to the fun speculation that an award rendered in France under German procedural law could be set aside in Germany. The Swiss and French both killed off their SEEE74 and Götaverken75 caselaw which made it impossible to obtain the setting aside of insufficiently Swiss or French awards rendered in those countries’ territories.76 The triumph of the seat and its formal inventor André Panchaud77 seemed complete and probably still is in many ways. Yet, the world does not function in the way in which Panchaud imagined. The use of cyberspace makes the location of proceedings difficult to identify. It has always been accepted that hearings and other activities need not occur in the seat. Increasingly that selection which is often made by an organization, such as

72 Cass civ 1re, 30 October 2021, Soc. PWC Landwell – PricewaterhouseCooper Tax & Legal Services v Lefebvre, Revue de l’Arbitrage, 2021, p. 740. 73 Naviera Amazonica Peruana SA v Compania Internacional de Seguros de Peru, Lloyd's L. Reports, 1988, p. 116; Arbitration Act 1996, sec. 2. 74 SEEE v Yugoslavia JT 1958 III 107. 75 General National Maritime Transport Company c/ Götaverken Arendal A.B., Revue de l’Arbitrage, 1980, p. 524. 76 NCPC, Art. 1504 (now CPC, Art. 1518-1519), Concordat sur l’arbitrage, 27 March 1969, Art. 1(1) & 3, (now LDIP, Art. 176(1)). 77 A PANCHAUD, Le siège de l’arbitrage international de droit privé, Revue de l’Arbitrage, 1966, p. 2. PANCHAUD was one of the two arbitrators in SEEE v Yugoslavia and a key author of the Concordat which reversed it.

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Adam Samuel the Court of Arbitration for Sport,78 rather than the parties, is purely juridical. A modern question for all is whether the choice of a seat actually connotes anything at all about the proceedings as opposed to the applicable arbitration law. The first issue concerned the ability of courts outside the seat to support an arbitration by issuing necessary injunctions and other measures such as discovery orders. Section 2 of the English Arbitration Act reversed or allayed concerns raised by the Channel Tunnel case79: (3) The powers conferred by the following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined – (a)section 43 (securing the attendance of witnesses), and (b)section 44 (court powers exercisable in support of arbitral proceedings);but the court may refuse to exercise any such power if, in the opinion of the court, the fact that the seat of the arbitration is outside England and Wales or Northern Ireland, or that when designated or determined the seat is likely to be outside England and Wales or Northern Ireland, makes it inappropriate to do so. (4) The court may exercise a power conferred by any provision of this Part not mentioned in subsection (2) or (3) for the purpose of supporting the arbitral process where – (a)no seat of the arbitration has been designated or determined, and (b)by reason of a connection with England and Wales or Northern Ireland the court is satisfied that it is appropriate to do so. (5) Section 7 (separability of arbitration agreement) and section 8 (death of a party) apply where the law applicable to the arbitration agreement is the law of England and Wales or Northern Ireland even if the seat of the arbitration is outside England and Wales or Northern Ireland or has not been designated or determined. There is a great deal to be said for a provision like this. Article 1(2) of the Model Law is built in a similar way: The provisions of this Law, except articles 8, 9, 17 H, 17 I, 17 J, 35 and 36, apply only if the place of arbitration is in the territory of this State.

78 Court of Arbitration for Sport (CAS) Arbitration Rules For The XXII Commonwealth Games in Birmingham 2022, Art. 7 which reads: “The seat of the ad hoc Division and of each Panel is in Lausanne, Switzerland. However, the ad hoc Division and each Panel may carry out all the actions which fall within their mission in Birmingham or in any other place they deem appropriate. The arbitration is governed by Chapter 12 of the Swiss Act on Private International Law”. 79 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334.

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A “Common Law” of International Arbitration? We are moving gradually away from a rigidly linear approach at least to supporting arbitrations. The same 1981 Decree that reversed the Paris Götaverken decision and rendered every arbitration in France subject to French setting aside proceedings also made the grounds for enforcing arbitration awards regardless of their origin identical to those same annulment proceedings.80 Although the breakthrough case, Pabalk v Norsolor,81 allowing the enforcement of an award set aside in its seat, was actually based on the old Code of Civil Procedure, the 1981 Decree ensured that the lack of any deference to the seat’s courts would remain French law in the future. This removed the impact of any setting aside proceedings in the seat on enforcement in France. Everyone knew at the time that Article IX(1) of the 1961 European Convention on International Commercial Arbitration allowed for the enforcement of awards set aside for grounds other than those listed in that Article. This explained why the UK and Switzerland never ratified the Convention and thus reduced the practical importance of the provision. The French law change brought about by the 1981 decree and Pabalk went much further because it no longer just applied to European Convention cases. After Pabalk, the most-favoured right provision of the New York Convention was firmly in the spotlight. Actually, this may have changed the way in which contracting states read the Convention in a more general way. Much ink has been used on whether the use of “may” in the English version of Article V(1) of the New York Convention allowed countries to enforce awards that did not comply with the grounds set out in that paragraph. Perhaps, we all started to realise that the purpose of Article V was to lay down the maximum defenses to enforcement allowed to each contracting state. In that respect, a literal translation of the French version takes one to the same destination: “Recognition and enforcement…. Will be refused…. Only if…..” Everyone recognised that a party could waive an objection to the validity of an arbitration agreement or a procedure and that a small slip in following the parties’ instructions on the latter point should not give rise to the refusal of enforcement of the award.82 The whole point of the New York Convention was to ease the way towards the execution of awards, not to make it more difficult. The response of other major countries has been intriguing, led by the US. In a string of cases, it elucidated a view that setting aside should be fatal to enforcement unless there was something about the court decision concerned that would ordinarily have led to its denial of recognition in the US: typically corrup-

80 Originally NCPC, Art. 1502 which just lists the grounds for resisting enforcement and does not include annulment in the seat of arbitration - now CPC, Art. 1520 & 1525(4). 81 Pabalk Ticaret Ltd. Sirketi v Soc. Annon. Norsolor, Dalloz, 1985, p. 101 with a note by J. ROBERT/ B. MOREAU. As a keen 24-year-old, I bounced up to Jean Robert at a conference and asked him about whether enforcement of a setting aside award was possible. He calmly replied that it had already happened and kindly gave me the reference. 82 Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 [2011] 1 AC 763, para. 127.

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Adam Samuel tion or completely aberrant decision-making.83 This approach seems to have influenced the Dutch and English responses to the Yukos awards that had been set aside in Russia.84 The French are in a different place here. In Hillmarton 1, the court never considered whether the decision of the Swiss Tribunal federal was in any sense not worthy of recognition.85 It could not have res judicata effect since the applicable rules were different. Less controversially, probably because rarely applied in practice, is an expanding group of countries that allow parties wholly unconnected to the seat to exclude setting aside proceedings by express agreement. This started with Switzerland’s LDIP, spread initially by caselaw to Sweden and is now in that country’s arbitration law and has since been adopted by France and Belgium.86 In the latter case, this was part of a row-back from the bizarre Code judiciaire article 1717(4) which, introduced in the 1980s, banned setting aside proceedings in cases wholly involving foreign parties.87 Since the 1980s, there has been a general consensus about limiting the grounds for setting aside awards to jurisdictional, procedural and public policy grounds. However, there are two big exceptions to this rule. England remains in an entirely different place for non-institutional arbitration courtesy of section 69 of the Arbitration Act 1996. The parties still have to opt-out of an appeal on a question of law. Otherwise, the appeal but only with leave of the court or the parties’ consent, introduced in the Arbitration Act 1979 remains broadly in place without the restrictions imposed on the parties’ ability to contract-out in advance in special category cases introduced by that legislation. Disturbingly, influential members of the judiciary have been heard commenting about the need to have more appeals in order to provide material for the common law.88 By contrast, in the 83 Baker Marine (Nigeria) Ltd v Chevron (Nigeria) Ltd, 191 F 3d 194 (2d Cir 1999); Chromalloy Aeroservices v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996). 84 A.J. VAN DEN BERG, Enforcement of Arbitral Awards annulled in Russia, J Int’l Arb., 2010/27, p. 179. The Höge Raad rejected the appeal & Yukos Capital SARL v OJSC Rosneft Oil Company [2012] EWCA Civ 855; [2014] 1 QB 458. The Amsterdam Court of Appeals reached the opposite result in Gerechtshof, Amsterdam, 27 September 2016, 42 YCA Netherlands Case 59 (2017). 85 Hilmarton v. Omnium de Traitement et de Valorisation, Cour de cassation, Mar. 23, 1994, Revue de l'Arbitrage, 1994, p. 327. The same court then considered itself issue estopped by its prior decision from enforcing the post-annulment award: Omnium de Traitement et de Valorisation c/ Hilmarton, Cour de cassation, June 10, 1997, Revue de l’Arbitrage, 1997, p. 376. 86 LDIP, Art. 192(1); Republic of Uganda and the National Housing and Construction Corporation of Uganda v. Solel Boneh International Ltd. and Water Resources Development (International) Ltd., Swedish Supreme Court, 18 April 1989, now Swedish Arbitration Act, sec. 51(1); Belgian Code judiciaire, Art. 1718, 87 M. STORME, Proposition de loi relative à l'annulation des sentences arbitrales, Revue de l’Arbitrage, 1985, p. 461; M. STORME, Belgium: A Paradise for International Commercial Arbitration, Int’l Business Lawyer, 1986, p. 294. 88 Lord Thomas of Cwmgiedd, “ Commercial dispute resolution - courts and arbitration” [2017] UK Speech GS3QN (25 April 2017), available at http://www.bailii.org/uk/other/speeches/2017/GS3QN.html (accessed on 10.5.2023).

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A “Common Law” of International Arbitration? US, the Supreme Court has ruled on a differently drafted statute that parties cannot contract into setting aside proceedings on broader terms than section 10 of the Federal Arbitration Act.89 However, the same court (very differently constituted) introduced a definition of excess of jurisdiction which includes not appearing to apply the contract or the law in Stolt-Neilsen.90 This resembles the Swiss domestic “arbitraire” ground removed in international cases by the LDIP.91

III. Final Thoughts Since 1989, there has been some convergence in international arbitration law and practice. The effect of instant messaging in various forms has removed the horrors of formal validity cases. There has been a gradual shift in national laws and through the 2006 changes to the Model Law towards removing or removing the fangs of those rules that still exist. Separability, in terms of the effect of invalidity of the main contract on the arbitration clause, has become almost universal. While not denying that the law governing one agreement need not apply to the other, there is now an argument of some vehemence about how separate the arbitral provisions are from the rest of the agreement for the purposes of determining the law governing the arbitration clause. The concept of the arbitrator having the right to rule on his own jurisdiction is something on which everyone seems agreed except as to its meaning, where the range of views remains almost as divergent as in 1989. The main area in which a common law is probably developing concerns procedure and the appointment process. Limits on merits review have become broadly universal with the odd exception of England in non-institutional cases and the US as regards its wide definition of excess of jurisdiction. As regards, the law governing the merits, the main concern which existed in 1989 about the effects of mandatory laws remains. Countries like Belgium have set out their stall clearly here in defence of what used to be their legislation on distributors.92 Where arbitrators disregard competition law claims because they are sitting in the wrong country, the Mitsubishi second-look doctrine could yet come back to haunt the arbitral process. Parties generally look to the courts of the seat for setting aside proceedings. However, the effect of such an annulment in another country is becoming an

Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) although one should note the reverse decision on very similar facts in Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013). 91 Concordat sur l’arbitrage, Art. 36(f), now Code de procedure civile, Art. 393(e). 92 H. VERBIST/ J. ERAUW (note 32), p. 263; S.A. Unamar c. Société de droit Bulgare, Navigation Maritime Bulgare, Cour de Cassation 12 September 2014, Arrêts Cassation, 2014, p. 1849; Pasicrisie, 2014, p. 1845. 89 90

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Adam Samuel evolving topic, particularly where either the courts of the seat have significant ethical issues or enforcement is sought in France. Claude Reymond was right to see the creation of a sort of common law of arbitration. He would have been surprised at the high levels of acceptance of the Model Law. I think, though, that he would have been horrified to see how far away any form of consistency beyond that still remains.

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UN-IDENTIFYING IDENTIFICATION Sharon SHAKARGY*

I.

II.

III. IV.

Introduction – Free Movement, Identification and Identity A. Free Movement in the EU B. The Regulation 1. Legislative Background 2. The Arrangement 3. Legal Identity and Status Legal Identity and the Regulation – What is Missing? A. Surprising Omissions B. Status, State and Unrecognised Identities C. Conflict of Laws Modern Legal Identity and the Regulation – What Might be Redundant? Conclusion

Identification documents are a crucial part of modern reality. Humans have, for centuries, documented various facts of life, such as births, marriages, and deaths. This was mainly done through local parishes as part of their community regulations. With time, more facts became documentation-worthy, and more situations arose where the documentation was needed. Therefore, gaps between legal documents of different jurisdictions pose difficulties and limit free movement. The European Union has attempted to address this challenge through the EU 2016/1191 Regulation, which sets out to promote free movement by simplifying certain public documents within the European Union. However, this paper uses a more nuanced concept of identity to argue that the Regulation is only a first step in a much longer journey, and possibly not even a very good one. A first step, because the Regulation focuses only on some government-issued documents, thus solving one issue while inexplicably neglecting others. Second, the Regulation does not pose the more fundamental question: why these documents? Therefore, this paper suggests initial thoughts on how to better address these aspects of cross-border identification and documentation.

* Senior Lecturer, Faculty of Law, Hebrew University of Jerusalem. All internet citations were last consulted on August 10, 2022.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 81-92 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Sharon Shakargy

I.

Introduction – Free Movement, Identification and Identity

A.

Free Movement in the EU

It is well known that the primary goal of the European Union is to enable the free movement of people and goods within it.1 Borders, by nature, hinder such free movement. Hence, since its creation, the Union has sought to find ways to bridge the gap between the autonomous and sovereign nature of the Member States, on the one hand, and free movement, on the other.2 This has been done through various instruments of harmonisation or coordination ranging from currency to law and beyond. One prominent example is driver’s licenses. The cross-border recognition of such a license is a crucial part of the free movement of people and goods. It is necessary for the livelihood of those who work as drivers as well as the dayto-day life of those who need to drive to work or the supermarket. Indeed, the EU addressed this issue by creating the European drivers’ license.3 EU 2016/1191 (hereafter: the Regulation) is a further step in the Union’s endeavour to facilitate movement: not only should it be allowed, but it should be practical. Alongside the wish to make movement possible and easy, the Union, its Member States and other jurisdictions worldwide are increasingly concerned by issues of national security and counter-terrorism. Travel documents are becoming increasingly relevant and technologically increasingly advanced such that dangerous elements can be accurately and swiftly identified and stopped, in order that all others may freely move about. The Regulation focuses on facilitating the crossborder recognition of certain public documents to enable the Member States to do just that. B.

The Regulation

1.

Legislative Background

The right to an individual identity is a human right, and one’s ability to cross borders is closely connected with the ability to transfer one’s legal identity. That is As articulated, e.g., in Article 21 (and similarly, Article 45) of the Treaty on the Functioning of the EU (TFEU); M Cocoșatu and CE Marinică. “Free Movement of Persons and The Legal Security of Documents Within the European Union.” (2021) 53 Revue Européenne du Droit Social 76-89, 77. 2 See e.g. cases such as Coman, Hamilton and Asociatia Accept v Inspectoratul General pentru Imigrări and Ministerul Afacerilor Interne (C-673/16) EU:C:2018:385 or Garcia Avello v. État belge, (C-148/02,) 2003 E.C.R. I-11,613, and more generally in H. KROEZE, “Distinguishing between Use and Abuse of EU Free Movement Law: Evaluating Use of the ‘Europe-route’ for Family Reunification to Overcome Reverse Discrimination”. In European Citizenship under Stress, (Brill – Nijhoff, 2020) 222-270. 3 See https://europa.eu/youreurope/citizens/vehicles/driving-licence/get-drivinglicence/index_en.htm. 1

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Un-Identifying Identification because, beyond its personal importance, legal identity is a crucial key to unlocking rights.4 Hence, ensuring the stability and transferability of one’s legal identity throughout the EU is essential for allowing actual free movement through the Union. Indeed the EU was well aware of this. The Regulation is the result of a long process, which started as early as 2010. At that time, the EU Commission released the Green Paper on “Less bureaucracy for citizens: promoting the free movement of public documents and recognition of the effects of civil status records”.5 Consequently, and following three years of discussions and negotiations, the EU Commission proposed the EU Regulation in 2013, which resulted in the adoption of the Regulation.6 However, as the discussion below will show, it is not at all clear that the Regulation did sufficiently address the challenge of cross-border identity throughout the Union. 2.

The Arrangement

The Regulation standardises certain legal documents and removes the need for an apostille to be acceptable in other jurisdictions. It covers documents attesting to a person’s birth; death; name; marriage, including the capacity to marry and marital status; divorce, legal separation or marriage annulment; registered partnership, including the capacity to enter into a registered partnership and registered partnership status; dissolution of a registered partnership, legal separation or annulment of a registered partnership; parenthood, including adoption; domicile or residence; nationality; absence of a criminal record; the right to vote; and the right to stand as a candidate in municipal elections and elections to the European Parliament.7 The Regulation applies only to such documents issued by a Member State, and not to documents issued by a third country, even if certified by a Member State.8 The Regulation dictates the creation of central authorities in charge of managing the documents and supplying information regarding them.9 However, the Regulation does not require that all Member States produce all of the documents, therefor the central authority must only manage documents that are required under the national law of the state in question.10 Moreover, the regulation does not create a united system of registration for the aforementioned facts (i.e., it does not unify the Member States’ public registries or registration practices, for example). 4 Open Society Foundation and Namati, A community-based practitioner's guide to documenting citizenship and other forms of legal identity (2018), page 14. Available at: https://www.refworld.org/pdfid/5b34e2bd4.pdf. 5 https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A52010DC0747. 6 A. VETTOREL, “EU Regulation No. 2016/1191 and the Circulation of Public Documents between EU Member States and Third Countries” (2017) 9 Cuadernos de Derecho Transnacional, 342-351, 344. 7 The Regulation, Art. 2(1). 8 Id., Art. 2(3), and see also Vettorel, supra (note 6) at p. 343. 9 Id., Art 16. 10 Id., Preamble, Sec. 7.

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Sharon Shakargy Instead, it simplifies the mutual recognition of documents concerning the abovementioned facts among the Member States. It accomplishes this, while maintaining any other document-recognition systems, such as Apostilles.11 Importantly, the Regulation also introduces new multilingual standard forms, which accompany the public documents discussed in the Regulation and are easily understood and used throughout the Union.12 C.

Legal Identity and Status

The list of items to which the Regulation applies (birth, death, name, etc.) might seem like a benign list of administrative data. Indeed, the Regulation presents itself as dealing only with “public documents”, which are defined as documents emanating from an authority, administrative documents, certain official certificates, and certain documents drawn up by diplomatic authorities. However, on closer inspection, it appears that the aggregation of this information is not only a useful way to identify a person, it also constitutes the traditional components of one’s legal identity. Collection of such data started even before the inception of states, through church registries and the like, as a way for the community to document and manage itself.13 Furthermore, the aggregation of the information allows the state (and previously: other rulers, civil or religious) to regulate its people, their rights and duties, and social order, in general.14 The law used - and often still uses - details such as marital status, gender and nationality to determine people’s capacities and incapacities, rights and duties. Through these details, the law can fully describe one’s legal status, that is to say, one’s legal standing vis-à-vis the state and society.15 Matters of status are of special interest to the state,16 as reflected in the meaning the state gives to them, as well as, in some cases, the state's overseeing their creation and dissolution. For example, Id., Preamble, Sec. 4. Id., Art 7. 13 See e.g. J.C .TORPEY, The Invention of the Passport: Surveillance, Citizenship and the State (Cambridge University Press, Second Edition, 2018), at pp. 22-25, 53-54; See e.g., J. CAPLAN & J.C. TORPEY, Documenting Individual Identity: The Development of State Practices in the Modern World (Princeton University Press 2001), at pp. 28-29 and at p. 36: “[T]he republican legislation did no more than legalize a conception of the individual and the family that had been elaborated by the Church since the Middle Ages.” 14 See e.g. J. TORPEY, supra (note 13), throughout the book and particularly on page 218: “documents involved have been critical to state-building activities in that they identify who is “in” and who is “out” in membership terms, and thus help distinguish who may make legitimate claims to the rights and benefits of membership.” 15 See, e.g. J. AUSTIN, Lectures on Jurisprudence or The Philosophy of Positive Law (Robert Campbell ed., vol. II, 5th ed., 1911) 389-390; RF Cleveland, “Status in Common Law” (1925) 38 Harvard Law Review 1074. 16 R.H. GRAVESON, Status in the Common Law (Athlone, 1953) 117; C.K. ALLEN, “Status and Capacity” (1930) 46 Law Quarterly Review 277-310, 299; S. SHAKARGY “Marriage by the State or Married to the State” (2013) 9 Journal of Private International law 499-533, 500. 11 12

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Un-Identifying Identification the law once closely regulated and oversaw one’s capacity to marry, the marriage ceremony, and whom one married. It also regulated the meaning of marriage by barring a married person from marrying someone else, criminally forbidding intimate relations between unmarried people, and forbidding the granting of monetary rights and various types of public benefits to out-of-wedlock relationships.17 Under such strict regulation, marriage was clearly a matter of status, as it created unique sets of rights, duties, capacities and incapacities, uniquely reserved for those who were married. Similar regulation applied to other aspects of personal identity, including one’s gender, majority, nationality, etc. Arguably, the compilation of the data collected on a person’s status composed his or her legal identity. That identity, which was created and regulated by that person’s law of origin (usually one’s national law), was usually upheld and understood as meaningful by other jurisdictions as well. In this sense, a legislative attempt to regulate identity across borders, such as that of the Regulation, if done properly, may serve as an important tool not just for identification, but also for the free movement of substantive legal identities, throughout the Union. However, as the following discussion will show, it seems that the Regulation does not provide sufficient support for free movement due to the modern meaning of legal identity and its needs, nor does it allow for maintaining substantive identity across borders, as it does not account for conflict of laws challenges.

II.

Legal Identity and the Regulation – What’s Missing?

A.

Surprising Omissions

As mentioned, items such as one’s age, gender and legal capacity are usually considered an essential part of one’s legal identity, like marriage, parentage and nationality. While the Regulation does not stipulate its intention to provide rules to determine legal identity, its content rather distinctly alludes to that conclusion. Therefore, it is surprising that the Regulation does not contain provisions concerning age, gender and legal capacity. Arguably, one might ascertain these details, in some cases, from the registration of birth, as in many cases, the registration of birth includes the gender of the baby and the time of birth, which allows for calculating age. However, the Regulation does not address birth certificates but instead addresses only births themselves. Moreover, those details, particularly gender, are not always included in the birth certificate, either because they are unknown, or debated, or due to local norms at the place of registration. The omission of age, gender and legal capacity in the Regulation is particularly curious since those items are considered to have significant legal ramifications and since those items are curated and regulated in the same official documents with which the Regulation does deal. Although omitting these items might 17

S. SHAKARGY, supra (note 16), pp. 501-506.

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Sharon Shakargy reflect forward-thinking legal understanding, along the lines discussed in Section 3 below, this assumption seems unlikely due to the fact that the Regulation contains provisions concerning other traditional statuses such as marriage and nationality. B.

Status, State and Unrecognised Identities

One’s nationality or age has a significant bearing on one’s rights and duties. Some obvious examples when dealing with age are criminal liability and eligibility for marriage. An example aggregating age and nationality might be compulsory military service in countries where such a duty exists, as the duty usually applies only to citizens of a certain age, whereas minors, older people and non-citizens are exempt. Another example is political participation; minors and non-citizens (or, in some cases, people who do not habitually reside in the area in question) are usually ineligible to vote or be elected. In this sense, age and nationality, or habitual residence, are relevant matters of status. The state can better identify and serve its citizens and people within its jurisdiction by collecting this data. Therefore, the omission of age, gender and legal capacity, all legal categories that currently do carry significant legal meaning, is a problematic omission in the Regulation. Furthermore, not all statuses are created or curated directly by the state. While marriage is a state-sanctioned action, one’s birth is a fact to which the state only reacts. Other private actions might also affect status if the state so deems; being a Catholic priest, monk or nun had been, and at least in some jurisdictions (the Vatican, and likely also in Lebanon, Israel and other Millet18 and Millet-like systems) is to this day, a matter of status due to the significant effect of this sworn undertaking on one’s life, including one’s capacity to marry.19 States that respect the religion’s view on marital capacity must be mindful of facts such as taking the oath of the priesthood, even though it is undertaken with no state intervention and its meaning is not governed by the state but rather by the religious institution. While not including priesthood in the Regulation might be understandable due to the limited scope of its effect in modern Europe, the omission of other components of identity which are not created by the state is far more problematic. Many facts, particularly various diplomas and licenses, which are crucial to one’s life, livelihood or self-definition, are not curated in “public documents” as defined by the Regulation. They are not regulated through state documents, though they are often issued by bodies certified to do so by the state (e.g. universities, professional guilds). Indeed, the recognition of professional licenses throughout

18 This Turkish word (from the Arabic milla, nation) referes to an arrangment intoduced by the Ottoman Empire, according to which subjects of the Empire were divided based on their religion into different millets, or communities (e.g. Greek-Orthodox, Jewish). All personal law matters of the members of a Millet were under the sole jurisdiciton of the religious court of the Millet. See . B. Masters, “Millet”, in G. ÁGOSTON, B. MASTERS (eds) Encyclopedia of the Ottoman Empire (2009) pages 383–4. For further reading see B. BRAUDE and B. LEWIS, eds, Christians and Jews in the Ottoman Empire (New York: Holmes & Meier, 1982). 19 See e.g. C.K. ALLEN, supra (note 15) at p. 306.

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Un-Identifying Identification the EU is covered by a different legal arrangement.20 However, recognition of other qualifications, such as academic diplomas, 21 (and, to some extent, academic titles)22 is not. This, of course, hinders free movement and might infringe on one’s selfidentification as a holder of a specific academic or other qualification. The omission of state-curated facts such as age and capacity from the Regulation is curious, while the omission of privately (or non-state)-created facts seems more understandable. However, on the practical level, both are challenging, and on the theoretical level, both are counter-intuitive when considering the declared goal of the Regulation regarding the “recognition of the effects of civil status records”.23 C.

Conflict of Laws

As mentioned, the Regulation creates a mechanism for the easy cross-border transference of legal documents curating particular facts. While the Regulation allows for the transference of the legal document itself, it seems to ignore the need to transfer its content as well as the meaning of that content. That is to say, the Regulation ignores the possibility of substantive conflicts that may arise from the document. According to the Regulation, an accepting state would be required to register a certain fact, but it might not be required to give it any practical meaning within its territory. Some documents include local content that raises no cross-border issues. This is the case, for example, with a document attesting to one’s criminal record within the jurisdiction. While other jurisdictions may have different information about the person, based on their records, they are unlikely to dispute the information contained in a foreign document, since the two do not conflict: country A is the only one authorised to attest to one’s criminal record according to country A’s law; country B is the only one authorised to attest to one’s criminal record according to country B's law. The two documents would (usually) not contradict or encroach on each other. Documents attesting to nationality give rise to similar effects: while two countries might declare that an individual is a citizen of that country, they usually cannot, nor do they wish to, say anything about that individual’s national status regarding other countries. The two facts may stand side by side without any tension between them. 20 Council Directive 77/249/EEC of 22 March 1977 facilitating the effective exercise by lawyers of freedom to provide services; Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 facilitating practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained; Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications. 21 https://europa.eu/youreurope/citizens/education/university/recognition/index_en. htm: “There is no automatic EU-wide recognition of academic diplomas”. 22 Directive 2005/36/EC Art. 54. This Article allows the host state to require the title to be followed by the name and address of the establishment or examining board which awarded it (thus changing its general nature). It might also dictate a different form of use of the title in some cases. 23 As noted in the title of the Green Paper, supra (note 5).

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Sharon Shakargy Other local documents do not reflect facts unique to a particular place but instead aim to reflect one truth that transcends borders and contradicts differing positions. Such is the case, for example, of documents attesting to one’s marital status, name and parenthood. One expects, and is expected, to either be married or not. Traditionally, it was assumed that two countries should not have valid contradictory positions on this matter, as it would make life very difficult for all involved. Therefore, traditional conflict of laws rules dictate that only one country is authorised to determine an individual’s marital status. All other countries must follow its lead.24 While the basic premise of the rule remains unchanged, the rise of dual nationalities and new connecting factors such as habitual residence have added complexity to the execution of the rule:25 countries are still likely to have different positions on the question of whether one is married or not. With the rise of dual citizenship and multiple connecting factors for matrimonial issues, however, more than one country might have a significant-enough connection to the person in question to think that its position should govern, making conflicts almost inevitable. Therefore, one might have a document from country A attesting to one’s marital status, while country B might have a different legitimate documented position. Thus, while both documents may be presented in other jurisdictions according to the Regulation, they might not be of much value. One might think that in the case of marital status, the Regulation might not need to concern itself with crossborder issues since the EU has already regulated the matter through the Rome III26 and Brussels II bis Recast.27 Nonetheless, while these regulations allow for the information contained in the official documents to be substantively meaningful in other jurisdictions, they do not fully solve the problem of people with dual nationalities.28 This is not, however, the case with other items to which the Regulation applies, such as names and registered partnerships, and possibly some parenthood matters. Countries may very well disagree on an individual’s name, as became apparent when cases such as Grunkin-Paul29 or Garcia Avello30 came before the European Court of Human Rights. There is currently no EU conflict of laws rules regarding the regulation of names. Therefore, disputes are possible; in such cases, the official documents would not mean much, and the standard multilingual form 24 Traditionally, this would be the country of nationality in civil law jurisdictions and that of domicile in common law jurisdictions. For a more comprehensive discussion see Shakargy, supra (note 16), pages 502-504. 25 See S. SHAKARGY, supra (note 16), pp. 516-522. 26 Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation. 27 Council Regulation (EU) 2019/1111 of 25 June 2019 on jurisdiction, the recognition and enforcement of decisions in matrimonial matters and the matters of parental responsibility, and on international child abduction. 28 See e.g. O.W. VONK, Dual Nationality in the European Union 153-156 (Leiden, 2012). 29 2008 E.C.R. 30 2003 E.C.R.

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Un-Identifying Identification issued through the Regulation would be of little use.31 The same is true for registered partnerships and other alternative spousal relationships, which are not “marital matters” and are therefore not subject to the Brussels and Rome regulations that govern marriage.32 Such is also the situation of some parenthood matters,33 particularly surrogacy.34 Matters of family and personal status are often debated and even contentious between countries. The fundamental principle according to which the EU has no jurisdiction over the “organisation of family life”35 clearly reflects this. Despite the integrative nature of the Union, family matters are still considered an issue, which must be reserved for the states.36 A similar structure, reflecting similar consideration, exists in the United States. Broadly speaking, the US is a federation of states, connected, despite many differences, not only by one supreme court (which might be equated to the ECJ or the ECHR), but also under a joint Federal Constitution (which take precedence over the constitutions of each federated state). However, even in this closely connected union, family law is still reserved to the states, and matters of mutual recognition of personal statuses are subject to the norm of full faith and credit between states where no superseding constitutional right is involved,37 as was the case, to some extent, regarding same-sex marriages, until 2015.38 It is, therefore, no surprise that EU states might not be willing to grant automatic substantive cross-border recognition of various issues of personal status. 31 For a comprehensive discussion and a proposed rule on this matter, see S. SHAKARGY “You Name It: On the Cross-Border Regulation of Names” (2020) 68 American Journal of Comparative Law 647-688. 32 For a comprehensive discussion and a proposed rule on this matter see S SHAKARGY, “What Do You Do When They Don't Say I Do: Cross-Border Regulation for Alternative Spousal Relationships” (2015) 48 Vanderbilt Journal of Transnational Law 427-469. 33 Section 14 of the Preamble of the Regulation defines “parenthood” as the “legal relationship between a child and the child’s parents”. 34 K TRIMMINGS, “Surrogacy Agreements and the Best Interest of the Child: The Human Rights and Private International Law Dimensions in the Case-Law of the European Court of Human Rights” in E Bergamini and C Ragni (eds), Fundamental Rights and the Best Interest of the Child in Transnational Families (Cambridge, 2019) 187-208; F. FORET & F. BOLZONAR “How the European Union Deals with Surrogacy: Birth Without Borders as a Driver of Value Conflicts?” (2021) 25 Gender, Technology and Development 131-145; C THOMALE, “State of Play of Cross-Border Surrogacy Arrangements – Is There a Case for Regulatory Intervention by the EU?” (2017) 13 Journal of Private International Law, 463-473. For a comprehensive discussion and a proposed rule on this matter see S. SHAKARGY, “Choice of Law for Surrogacy Agreements: In the in-between of Status and Contract” (2020) 16 Journal of Private International law 138-162. 35 Case 184/83 Hofmann v. Barmer Ersatzkasse [1984] ECR 3047, para. 24. 36 C. MCGLYNN, “A Family Law for the European Union?” in Jo Shaw (ed.), Social Law and Culture in an Evolving European Union (Hart Publishing, 2000) 223-241. 37 Stipulated in Article IV, Section 1 of the United States Constitution. 38 Things only changed following a supreme court decision in Obergefell v. Hodges, 576 U.S. 644, which struck down the relevant section (Sec. 3) of the Defense of Marriage Act (1996; 104th Congress H.R. 3396).

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Sharon Shakargy Under such circumstances, the mere registration of facts, which are not substantively recognised, might still grant rights derived from EU legislation. This granting of rights might cause the state to oppose even the mere registration of such facts. Furthermore, generally speaking, registration of facts which are not recognised is likely to be a bad idea and cause additional problems.39

III. Modern Legal Identity and the Regulation – What Might be Redundant? As mentioned, one’s gender, age (in the sense of minority or lack thereof), marital status, legal capacity, etc were traditionally core parts of one’s legal identity, described as one’s “status”.40 As mentioned, the items that are considered matters of status are used by laws and the countries that make them as a means to place people in different legal spheres: these items classify people into groups that have various capacities and rights. The list of items considered “matters of status” has changed over time. Of the 16 items Holland41 mentioned, some are no longer relevant. “Pateria postas”, caste, celibacy, and illegitimacy are, for the most part, inconsequential to modern law, whereas marriage, age, and gender are still generally considered matters of status.42 The legal literature, however, has neglected the research of status and the classification of legal phenomena as matters of status, due perhaps to the significant influence of the scholar HS Maine, who tied status to lack of progress, arguing that “the movement of the progressive societies has hitherto been from Status to Contract.” 43 That said, this movement is not yet complete. Some aspects of legal identity have progressed more along Maine’s line of argument than have others. Marriage, which was once considered the epitome of matters of status, could arguably no longer be regarded as such, as it no longer fits the definition — or indeed the legal need and justification — that underlies the concept of status.44 If that finding extends to other categories that are considered matters of status as well, serious reconsideration must be given to how people are

39 The Israeli example of registration of marriages performed by citizens abroad, despite contradiction to local conflict of laws rules, might be illuminating in this point. See further S. SHAKARGY, “Israel” in J.M. SCHERPE and A. HOWARD (eds.) The Legal Status of De Facto Relationships (forthcoming Intersentia, 2023). 40 See, e.g., T.E. HOLLAND, The Elements of Jurisprudence (Oxford, 13th ed., 1924) 351. 41 Id. 42 See, e.g., regarding marriage, Graveson, supra (note 16) at pp. 78-91; HO Hunter, “An Essay on Contract and Status: Race, Marriage, and the Meretricious Spouse” (1978) 64 Virginia Law Review 1039-1079, 1067 (1978). 43 H.S. MAINE, Ancient Law (London, 13th ed., John Murray, 1890) 170. 44 S. SHAKARGY, supra (note 16), pp. 510-516.

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Un-Identifying Identification defined by law and country. In light of recent changes, this might, with time, become true for gender, age, and possibly even parenthood. This shift is not only a matter of terminology. If indeed these items are no longer matters of status (or will become such in the future, as at present it is not at all certain that they are), it is because they do not affect capacities and incapacities, rights and duties in a significant and unique way. The argument is not that marriage, age, and gender are no longer essential parts of life but are not necessary parts of legal life. While married people were different from other people in many significant legal ways in the past, this is no longer the case: married people are often very similar to people in various alternative spousal relationships, and many of the benefits which used to be unique to marriage are now attainable outside of marriage.45 If that is the case, then marriage is a significant matter of personal — but not legal — identity and, therefore, should not be of particular interest to the state. Hence, the inclusion of marriage in the Regulation is far from obvious. In light of recent socio-legal changes, the same might be true for many other items traditionally considered matters of status, particularly gender (which today seems to convey a narrower legal meaning due to growing party autonomy over the definition of gender, as well as the efforts made to promote gender equality), and possibly also age, and even nationality46. While this last point needs further investigation,47 it already raises questions regarding the Regulation. One might read the Regulation as making a thoughtful up-to-date distinction when it omits gender and age but includes, e.g. a criminal record in the aggregated legal identity it creates. However, if that is the case, then the inclusion of marriage in the Regulation is surprising. Indeed, it is a tall order to ask a legislative document, particularly one created through multi-state negotiations, to be so bold and progressive as to deliberately omit marriage as a component of legal identity. Nonetheless, since the Regulation has already omitted several issues which (possibly) should have been included, as discussed in Part 2 above, its inclusion of marriage might have been a lost opportunity to fit better with the law as well as reality and to promote legislative change.

45 See e.g. J.M. SCHERPE & A. HOWARD eds., The Future of Registered Partnerships (Cambridge 2017) part I; S. SHAKARGY supra (note 32). 46 Concerning gender, see S. HANSSEN “Beyond Male or Female: Using Nonbinary Gender Identity to Confront Outdated Notions of Sex and Gender in the Law” (2017) 96 Oregon Law Review 283-311; for age, see W.R. BARNES, “Arrested Development: Rethinking the Contract Age of Majority for the Twenty-First Century Adolescent”, (2017) 76 Maryland Law Review 405-448; for nationality, see S. MUSTASAARI, “Best Interest of the Child and Citizenship” in A. GRIFFITH, S. MUSTASAARI, A. MÄKI-PETÄJÄ-LEINONEN, Subjectivity, Citizenship and Belonging in Law (London, 2018) 123-145. 47 This study is already underway: S Shakargy, “Old Identities, New Times: Does the Common Legal Identity Withstand Modernity?”(in preparation).

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IV. Conclusion The Regulation aims to simplify the cross-border use of various official documents to facilitate free movement within the European Union. While it does so, at least to some extent, it also seems to enumerate the components of personal identity according to the EU. However, it does so in a surprising way. Despite best efforts, it seems the Regulation does not fully facilitate free movement since it ignores some significant parts of the modern identity, such as degrees and academic qualifications. In this sense, the Regulation does not accept a full (more personal and not status-based) understanding of identity but sticks to a more traditional one. The same is true, though in a different way, with respect to the Regulation’s inclusion of marriage, despite the diminishing legal importance and uniqueness of marriage. At the same time, and despite its apparent traditionalist approach, the Regulation does not address all identification-related items curated in public documents (e.g. age, gender, legal capacity). It is equally surprising that it applies to items that are likely to be disputed and, therefore, cases where the document itself is expected to be insufficient e.g. (marriage, some cases of parenthood). Lastly, even when considering the difficulties resulting from international negotiation processes, since the Regulation is aimed at maintaining identity across borders (though only within the EU), it is almost inexplicable that it fails to address conflict of laws questions, thus creating a mechanism of recognition in name only. This, in turn, is likely to be a breeding ground for limping statuses and litigation. If the Regulation aims to help the masses and ignore the few problematic issues, why not include items such as age and gender? If it is intended to include only matters that are subject to less dispute between states, why include names, registered partnerships, and marriages – including same-sex marriages? If the Regulation is designed to offer only a bold, modern sense of status and legal identity, why include marriage and spousal relationships? If the Regulation is designed to only transmit facts (as opposed to legal facts) across borders, why would it include any of the items which are likely to raise conflict of laws questions? Consequently, the Regulation might facilitate more straightforward use of certain documents, but the number and type of records, as well as their likely effect in the country of destination, is overly limited. Moreover, from an academic standpoint, the Regulation misses a vital opportunity to initiate a comprehensive contemporary discussion of legal identity in a way that would minimise state involvement and legal battles to the places where they are justified and needed. It is also a missed opportunity to better understand modern identity even beyond the law, and to better serve the people to which it applies by protecting facets of identity which are essential even if the law has thus far ignored them.

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RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS IN CHINA – LEGAL FRAMEWORK AND RECENT DEVELOPMENTS Guojian XU*/ Xin CAI**

I. II.

III.

IV.

Introduction The Legal Framework for China’s Recognition and Enforcement of Foreign Judgments A. Recognition and Enforcement of Foreign Judgments under the International Treaty Framework 1. Multilateral Conventions 2. Bilateral Treaties B. Recognition and Enforcement of Foreign Judgments under the Domestic Legal Framework 1. Finality 2. Reciprocity 3. Due Process 4. Public Policy Recent Developments in China Regarding the Recognition and Enforcement of Foreign Judgments A. Expanding the Understanding of Reciprocity - From Several Opinions on the People’s Courts Providing Judicial Services and Guarantees for the Construction of the Belt and Road to the Nanning Declaration 1. A. Two Opinions of the Supreme People’s Court on Providing Judicial Services and Safeguards of the “Belt and Road” 2. The Nanning Declaration B. 2022 Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work 1. Overview 2. Key Provisions Conclusion

* Dean and Professor of Law, School of International Law, Shanghai University of Political Science and Law, Senior Partner of SGLA Law Firm, Shanghai, China. ** Lecturer, School of International Law, Shanghai University of Political Science and Law, China; PhD, Wuhan University.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 93-151 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Guojian Xu/ Xin Cai

I.

Introduction

Recognition and enforcement of foreign judgments is undeniably a crucial aspect of private international law. Some scholars even argue that it is the most significant issue in this field.1 For parties involved in transnational disputes, whether or not foreign judgments will be recognized and enforced profoundly affects their choices of dispute resolution methods,2 selection of competent courts, and litigation strategies, which are crucial issues that concern their fundamental interests. Moreover, recognition and enforcement of foreign judgments have become a focal point for states in facilitating the free flow of judgments, enhancing mutual judicial trust, saving judicial resources, and promoting the value of litigation in resolving cross-border disputes.3 Refusal to enforce foreign judgments without valid grounds can lead to repeated litigation on the same issue, increasing the litigation burden for the parties and the courts, and ultimately undermining judicial stability. As the world witnesses the consistent progress of China’s Belt and Road” initiative, 4 the occurrence of cross-border civil and commercial conflicts has surged, generating a pressing need for the recognition and enforcement of foreign judgments.5 Since 2013, Chinese courts have adjudicated a total of 7,313 cases involving applications for recognition and enforcement of foreign judgments from nearly 40 countries including the United Kingdom, the United States, Italy, and Australia.6 However, the existing legal framework for recognizing and enforcing F. VISCHER , General Course on Private International Law at the Hague Academy of International Law (6-24 July 1992), Recueil des Cours, Vol. 232, 1992, p. 234. 2 As it is relatively difficult for a judgment or ruling made by a domestic court of one country to be recognized and enforced in another country, many international commercial disputes have turned to arbitration. In contrast, the system for recognition and enforcement of foreign arbitral awards established by the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as “1958 New York Convention”) has achieved tremendous success in practice. 3 W. ZHANG, A Study of “Service of Process Defense” in the Context of Recognition and Enforcement of Foreign Judgments, Presentday Law Science, Vol. 2, 2019, p. 150. 4 Regarding the impact of the “Belt and Road” initiative, please refer to: G. WANG, The Belt and Road Initiative in Quest for a Dispute Resolution Mechanism, Asia Pac. L. Rev., Vol. 25, Issue 1, 2017. 5 There has been a significant surge in the count of first-instance foreign-related civil and commercial cases accepted by Chinese courts, rising from 14,800 in 2013 to 27,300 in 2021. Within the duration of 2013 to June 2022, various levels of Chinese courts concluded a total of 384,000 foreign-related, Hong Kong, Macao and Taiwan-related cases. 6 Q. ZHOU , Report on the Work of the People’s Courts in Handling Foreign-related Trials, presented on October 28, 2022, at the 37th meeting of the Standing Committee of the 13th National People’s Congress. Most of the cases involved the recognition of foreign divorce judgments, while cases involving international civil and commercial judgments only accounted for a very small proportion. See, e.g., RESEARCH GROUP OF THE INTERMEDIATE PEOPLE’S COURT OF YANBIAN KOREAN AUTONOMOUS PREFECTURE, JILIN PROVINCE, The Examination and Analysis of Cases on Recognizing the Effectiveness of Divorce Judgments from the Republic of Korea by Chinese Courts, People’s Judicature, Vol. 25, 2020. In another 1

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Foreign Judgements in China – Legal Framework and Recent Developments foreign judgments in China is rudimentary and the judicial practice is conservative, which is inconsistent with the increasing demand for mutual recognition and enforcement of foreign judgments.7 In recent years, there has been a discernible shift in the approach to recognizing and enforcing foreign judgments in China. This transformation can be traced to a series of judicial documents released by the Supreme People’s Court (hereinafter referred to as “SPC”), the highest judicial authority in the country, which places emphasis on advancing the recognition and enforcement of foreign judgments. This evolution has, to some degree, expanded the traditionally conservative attitude towards recognizing and enforcing foreign judgments within the conventional Chinese judicial framework.8 Local courts have also made a series of influential rulings recognizing foreign court judgments.9 In 2022, the SPC released the “Minutes of the National Symposium on Foreignrelated Commercial and Maritime Trial Work” (hereinafter referred to as “Minutes”), providing comprehensive guidelines for Chinese courts at all levels regarding the recognition and enforcement of foreign judgments. This marks a new era in this field, offering unprecedented clarity and detailed guidance to Chinese courts dealing with foreign-related commercial and maritime disputes. This article will first explain the legal framework for recognizing and enforcing foreign judgments in China, with a specific focus on the bilateral treaty framework established through China’s bilateral civil and commercial judicial assistance agreements, as well as the domestic legal framework that encompasses the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as “ Civil Procedure Law”) and related judicial interpretations. This aims to analyze the key bases and conditions for China’s recognition and enforcement of foreign court judgments, as well as the challenges that arise in the operation of this empirical study examining the recognition and enforcement of foreign judgments by Chinese courts from 1994 to 2016, the author surveyed a total of 2,931 cases. Among these, 57 cases were commercial, comprising a mere 1.9% of the total, while the overwhelming majority of 2,874 cases were non-commercial, primarily consisting of cases recognizing divorce judgments (2,844 cases). The remaining non-commercial cases included 23 guardianship and custody cases, 4 inheritance cases, and 3 criminal compensation cases, collectively accounting for 98.1% of the total. See, K.TSANG, Enforcement of Foreign Commercial Judgments in China, Journal of Private International Law, Vol.14, Issue 2, 2018, p. 262-294. 7 B. ELBALTI, Reciprocity and the Recognition and Enforcement of Foreign Judgments: A Lot of Bark but not Much Bite, Journal of Private International Law, Vol.13, Issue 1, 2017, p.184-218. 8 For example, in 2015, the SPC issued Several Opinions on Providing Judicial Services and Safeguards for the Construction of the Belt and Road by People’s Courts, and in 2019, the SPC issued Opinions of the Supreme People’s Court on Providing Further Judicial Services and Safeguards for the Construction of the Belt and Road by People’s Courts. 9 Typical cases include Kolmar Group AG v. Jiangsu Textile Industry (Group) Import & Export Co., Ltd., (2016) Su 01 Xie Wai en No 8; Liu Li v. Tao Li et al., (2015) E Wuhan Zhong Min Shen Wai Chu Zi No 00026; CHOI JONG WON v. YOON JI YOUNG, (2018) Lu 02 Xie Wai Ren No 6; Power Solar System Co., Ltd. v. Suntech Power Investment Pte. Ltd. (2019) Hu 01 Xie Wai Ren No 22. In the subsequent text, certain cases shall be discussed in greater depth.

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Guojian Xu/ Xin Cai system. Next, the article will examine the recent Chinese developments in this field. The article will particularly focus on the specific provisions on judgment recognition and enforcement in the Minutes. Finally, the article concludes by providing a summary of the entire study and an outlook on the ongoing revision of the Chinese Civil Procedure Law. By offering a comprehensive analysis of the legal framework governing the recognition and enforcement of foreign judgments in China, as well as recent developments in this area, this study seeks to contribute to a better understanding of the challenges and opportunities involved in this complex and dynamic field.

II.

The Legal Framework for China’s Recognition and Enforcement of Foreign Judgments

China’s current legal framework for the recognition and enforcement of foreign civil and commercial judgments can be broadly divided into three regimes: the international treaty regime applicable to countries that have signed multilateral and bilateral treaties with China; the domestic legal regime governed by Chinese law and the judicial interpretations of the SPC or the principle of reciprocity, and the interregional regime between Mainland China and the Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan region. 10 Since the recognition and enforcement of judgments between Mainland China and the Hong Kong SAR, the Macao SAR, and the Taiwan Region should fall strictly within the scope of interregional private law,11 which shares notable similarities

A. CHONG (ed.), Recognition and Enforcement of Foreign Judgments in Asia, Asian Business Law Institute, 2017, p. 49-50. 11 The corresponding legal documents regarding the recognition and enforcement of civil and commercial judgments between Mainland China and the Hong Kong Special Administrative Region include: the 2008 Arrangement of the Supreme People’s Court on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of Mainland China and of the Hong Kong Special Administrative Region on Jurisdiction Agreements; the Arrangement between the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region Concerning Mutual Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region, issued on January 18, 2019 (not yet in effect); and the 2022 Arrangement of the Supreme People’s Court on Mutual Recognition and Enforcement of Judgments in Marriage and Family Civil Cases by the Courts of Mainland China and of the Hong Kong Special Administrative Region. The corresponding documents regarding the recognition and enforcement of civil and commercial judgments between Mainland China and the Macao Special Administrative Region include: the 2006 Arrangement of the Supreme People’s Court on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of Mainland China and of the Macao Special Administrative Region. The corresponding documents regarding the recognition and enforcement of civil and commercial judgments between Mainland China and the Taiwan region include: the 10

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Foreign Judgements in China – Legal Framework and Recent Developments with the bilateral treaty mechanism, this article will primarily concentrate on analyzing the first two regimes.12 A.

Recognition and Enforcement of Foreign Judgments under the International Treaty Framework

1.

Multilateral Conventions

From a theoretical standpoint, multilateral conventions possess numerous advantages, including the involvement of a greater number of contracting parties and the incorporation of more rational and scientifically grounded content. As a result, such conventions are better equipped to coordinate the recognition and enforcement of judgments across countries. 13 At present, the most notable multilateral treaty framework pertaining to the recognition and enforcement of judgments are the Hague Convention system and the EU Brussels system. These systems represent the leading approaches in the international community and offer significant benefits in facilitating cross-border legal cooperation. The Hague Conference on Private International Law (hereinafter referred to as the “HCCH”) has dedicated itself to the harmonization of international civil procedure in multiple jurisdictions since its inception.14 To this end, it has successively enacted three conventions: the 1954 Convention on Civil Procedure, the 1971 Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, and the 2005 Convention on Choice of Court Agreements (hereinafter referred to as the “HCCH 2005 Choice of Court Convention”).15 However, the influence of the first two conventions has remained confined, whereas the scope of application of the HCCH 2005 Choice of Court Convention is relatively narrow and limited to judgments rendered by courts

2015 Provisions of the Supreme People’s Court on the Recognition and Enforcement of Civil Judgments Rendered by Courts of Taiwan. For more information on inter-regional judgment recognition and enforcement in China, please refer to: J. HUANG, Interregional Recognition and Enforcement of Civil and Commercial Judgments, Hart Publishing, 2014, p. 62–64. 12 The foreign judgments discussed in this article mainly refer to monetary judgments made by foreign courts. For divorce judgments that only involve personal issues, the SPC has issued specific judicial interpretations, as further elaborated in the following sections. 13 J. WANG, Research on the International Cooperation Mechanism for Recognition and Enforcement of Foreign Judgments, China University of Political Science and Law Press, 2014, p. 114-131. 14 See G. XU, General Introduction to Private International Uniform Law, Law Press, 2011, p. 448-494. 15 China signed the HCCH 2005 Choice of Court Convention on September 12, 2017, but has not yet ratified it.

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Guojian Xu/ Xin Cai designated in exclusive choice of court agreements among contracting states.16 The Brussels system, on the other hand, deals mainly with the recognition and enforcement of extraterritorial judgments within the European Union (EU) and has been developed through a series of normative documents, including the 1968 Brussels Convention, the 1988 Lugano Convention, and the 2001 Brussels Regulation. Nonetheless, this system has a regional character and is only effective within the European region.17 From a global perspective, there is currently no universallyaccepted convention on the recognition and enforcement of judgments similar to the New York Convention in the field of arbitration, which poses significant challenges to addressing the cross-border flow of judgments effectively. There are also conventions in the field of recognition and enforcement of international civil and commercial judgments that address specific matters; these conventions include the 1958 Hague Convention of 15 April 1958 Concerning the Recognition and Enforcement of Decisions Relating to Maintenance Obligations towards Children and the 1973 Convention of 2 October 1973 on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations. Furthermore, some specialized conventions also cover the recognition and enforcement of judgments, such as the 1969 International Convention on Civil Liability for Oil Pollution Damage (hereinafter referred to as the “1969 Oil Pollution Convention”). It is noteworthy that China has only acceded to the 1969 Oil Pollution Convention in the realm of multilateral treaties concerning the recognition and enforcement of judgments. This convention’s Article 10 specifically addresses the recognition and enforcement of judgments issued by courts in the contracting States. 18 However, the convention’s scope is limited to addressing liability for oil pollution damage resulting from maritime accidents involving shipowners. In practice, Chinese courts have not yet recognized or enforced any foreign judgments based on this convention. On July 2, 2019, the 22nd Diplomatic Session of the Hague Conference on Private International Law was held at the Peace Palace in The Hague, Netherlands. During the closing ceremony, the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (hereinafter referred to as the “2019 Hague Judgments Convention”) was adopted. The 2019 Hague Judgments Convention endeavors to replicate the success of the 1958 New York Convention by establishing a universal, multilateral, international treaty, which seeks to facilitate the global recognition and enforcement of foreign judgments. This initiative represents the most scrutinized project in the domain of international judicial systems with respect to the recognition and enforcement of foreign civil 16 HCCH 2005 Choice of Court Convention, Article 1(1): This Convention shall apply in international cases to exclusive choice of court agreements concluded in civil or commercial matters. 17 See Y. FU, The Study on Legal System of the Recognition and Execution of Foreign Judgments, Law Press, 2011. 18 Article 10 of the 1969 Oil Pollution Convention provides two reasons for refusing recognition and enforcement of foreign judgments: if the judgment was obtained through fraud, or if the defendant was not given appropriate notice and a fair opportunity to present their case.

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Foreign Judgements in China – Legal Framework and Recent Developments and commercial judgments and is, by far, the project of its kind in which there is the most active participation by numerous countries worldwide.19 The 2019 Hague Judgments Convention has been ratified by the European Union and Ukraine,20 and will officially take effect on September 1, 2023. Notwithstanding China’s active participation in the convention’s negotiation process,21 China has not yet signed it. Despite numerous appeals from the academic community for China to ratify the convention at the earliest opportunity,22 it has taken no steps to do so. 2.

Bilateral Treaties

Bilateral treaties are more likely to be successfully concluded in the field of the recognition and enforcement of foreign judgments due to several advantageous features. First, bilateral treaties are formed between selective and flexible contracting parties, allowing for a greater ability to tailor the content to meet the parties’ specific needs. This targeted approach ensures the breadth and certainty of the treaty content, ultimately leading to a simplification of the treaty-making process. In addition, is easier for contracting parties to reach a consensus on the interpretation and understanding of treaty provisions, enhancing the effectiveness of bilateral treaties in their application. These benefits are particularly valuable when compared to the difficulties in concluding multilateral conventions. Consequently, bilateral treaties facilitate the recognition and enforcement of judgments in the realm of international cooperation, providing an effective mechanism for achieving these goals.23 As of January 2023, China has signed 39 bilateral judicial assistance agreements or treaties pertaining to civil and commercial matters,24 38 of which have been implemented. 25 It is noteworthy that the majority of the bilateral judicial 19 See G. XU, of the Recognition and Enforcement Mechanism of the 2019 Hague Judgments Convention, China Journal of Applied Jurisprudence, Vol. 4, 2020. 20 Data source available at https://www.hcch.net/en/instruments/conventions/statustable/?cid=137 accessed on 1.3.2023. 21 J. SUN/ Q. WU, On China's Contribution to the Negotiations of the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, Chinese Yearbook of Private International Law and Comparative Law, Vol. 26, 2020. 22 See Y. CAI, Feasibility Study on China’s Accession to the Hague Judgments Convention: From the Perspective of Indirect Jurisdiction, Journal of Taiyuan Normal University (Social Science Edition), Vol. 4, 2021. 23 J. WANG, Research on the International Cooperation Mechanism for Recognition and Enforcement of Foreign Judgments, China University of Political Science and Law Press, 2014, p. 81. 24 Please refer to Table 1: List of China’s Bilateral Civil and Commercial Judicial Assistance Agreements or Treaties. Data source: Treaty Database of the Ministry of Foreign Affairs of the People’s Republic of China, website available at http://treaty.mfa.gov. cn/web/index.jsp. accessed on 1.2.2023. 25 China and Belgium signed the Agreement between the People’s Republic of China and the Kingdom of Belgium on Judicial Assistance in Civil Matters on November 20, 1987. The agreement, however, has not yet come into force. Notably, the agreement

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Guojian Xu/ Xin Cai assistance agreements or treaties – 35 out of 38 – include specialized provisions for the recognition and enforcement of civil and commercial judgments.26 However, in both judicial practice and relevant academic research, the role of bilateral treaties in recognizing and enforcing foreign judgments is often overlooked. Some Chinese courts fail to give due consideration to the principle of “pacta sunt servanda” or the provisions of the Civil Procedure Law that prioritize treaties.27 Instead, they directly apply the Civil Procedure Law and other relevant judicial interpretations as the legal basis for recognition and enforcement, without verifying whether a relevant bilateral judicial assistance agreement exists between China and the country where the judgment was rendered.28 In the realm of legal scholarship, there is a noticeable dearth of studies examining the recognition and enforcement of judgments through the lens of bilateral judicial assistance agreements. 29 Despite some existing research that underscores the similarities among such agreements,30 or suggests their limited efficacy due to China’s reluctance to enter into such agreements with its primary trading partners, relatively few studies have explored their practical application in recognizing and enforcing foreign judgments in China. 31 Furthermore, some scholars contend that compared to between China and Belgium only provides for mutual recognition and enforcement of arbitral awards and does not include provisions for the recognition and enforcement of judgments. 26 The judicial cooperation agreements concluded with Singapore, South Korea, and Thailand do not extend to the recognition and enforcement of civil and commercial judgments. 27 Article 267 of Civil Procedure Law provides that: where there is any discrepancy between an international treaty concluded or acceded to by the People’s Republic of China and this Law, the provisions of the international treaty shall prevail, except clauses to which the People’s Republic of China has declared reservations. All the Chinese Laws and bilateral treaties have been translated by the authors. 28 For example, in one case tried by the Intermediate People’s Court of Xinyang, the court recognized the judgment made by the Krakow District Court of Poland to dissolve the marriage. However, it is worth noting that the court did not apply the 1987 Agreement between the People’s Republic of China and the Republic of Poland on Judicial Assistance in Civil and Criminal Matters, but instead directly applied relevant provisions from the Civil Procedure Law and the SPC's Provisions on the Procedures for Chinese Citizens to Apply for Recognition of Foreign Divorce Judgments. (2016) Yu 15 Xie Wai Ren 1(（2016）豫 15 协外认 1 号). 29 See K. TSANG, Chinese Bilateral Judgment of Enforcement Treaties, Loy. L. A. Int’l & Comp. L. Rev. 1., Vol. 40, No 1, 2017; W. CHEN, Research on China’s Recognition and Enforcement of Foreign Civil and Commercial Judgments from the Perspective of Bilateral Treaties, Journal of Southwest University of Political Science and Law, Vol. 5, 2020. 30 W. XU, The Construction Path of China's System for Recognizing and Enforcing Foreign Court Judgments: A Discussion on the Change in China's Attitude towards Recognizing Reciprocity, Studies in Law and Business, Vol. 2, 2018. 31 J. WANG, Research on the International Cooperation Mechanism for Recognition and Enforcement of Foreign Judgments, China University of Political Science and Law Press, 2014, p. 243; B. FAN, Empirical Study on Application of the Principle of Reciprocity

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Foreign Judgements in China – Legal Framework and Recent Developments recognizing foreign judgments based on reciprocity, the rigorous requirements and procedural formalities associated with bilateral treaties pose a more significant obstacle.32 It is worth noting, however, that this perspective remains a subject of debate and warrants further investigation. In recent years, a number of scholars have begun to reassess the role of bilateral treaties in relation to the recognition and enforcement of foreign judgments. Some of the research has focused on analyzing changes in trade volume between China and those countries which have signed bilateral judicial assistance agreements with China. Through this analysis, it has been discovered that, on the one hand, the total trade volume between China and these countries is considerable and continues to grow.33 On the other hand, the experience gained from utilizing bilateral treaties to recognize and enforce foreign judgments can serve as a valuable resource for future domestic legislative revisions, and can also factor significantly into decisions regarding China’s participation in multilateral conventions for the recognition and enforcement of foreign judgments.34 With this in mind, it is essential to provide a brief overview of the recognition and enforcement of foreign judgments under the framework of bilateral treaties. By doing so, we can better understand the nuances of this system and appreciate the potential implications for both China and its international counterparts. Table 1: List of China’s Bilateral Civil and Commercial Judicial Assistance Agreements or Treaties 35 Treaty Signing Effective Date Date 1 Agreement between the People’s 1987.05.04 1988.02.08 Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters 2 Agreement between the People’s 1987.06.05 1988.02.13 Republic of China and the Polish People’s Republic on Judicial Assistance in Civil and Criminal for Recognition and Enforcement of Foreign Judgments in China, Journal of International Economic Law, Vol. 3, 2021. 32 M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019. 33 K.TSANG, Chinese Bilateral Judgment of Enforcement Treaties, Loy. L. A. Int’l & Comp. L. Rev., Vol. 40, No 1, 2017. 34 W. GU, China’s Approach to Recognition and Enforcement of Foreign Civil and Commercial Judgments and International Litigation Capacity Building, The Journal of Comparative Law, Vol. 15, Issue 2, 2020. 35 Table Legend: BR indicates that the country is a participant in the Belt and Road Initiative. ND indicates that the country is a member of the Association of Southeast Asian Nations (ASEAN), as covered in the Nanning Declaration. N indicates that the agreement does not cover the recognition and enforcement of civil and commercial judgments.

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Matters (BR) Treaty between the People’s Republic of China and the Mongolian People’s Republic on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and Romania on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Italian Republic on Judicial Assistance in Civil Matters (BR) Treaty between the People’s Republic of China and the Kingdom of Spain on Judicial Assistance in Civil and Commercial Matters Treaty between the People’s Republic of China and the Russian Federation on Judicial Assistance in Civil and Criminal Matters (BR) Agreement between the People’s Republic of China and the Republic of Turkey on Judicial Assistance in Civil, Commercial and Criminal Matters (BR) Treaty between the People’s Republic of China and Ukraine on Judicial Assistance in Civil and Criminal Matters (BR) Agreement between the People’s Republic of China and the Republic of Cuba on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Belarus on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Kazakhstan on Judicial Assistance in Civil and Criminal Matters (BR) Agreement between the People’s Republic of China and the Republic of Bulgaria on Judicial Assistance in Civil Matters (BR) Agreement between the People’s Republic of China and the Kingdom of

1989.08.31

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Thailand on Judicial Assistance in Civil and Commercial Matters and Cooperation in Arbitration (ND)(N) Agreement between the People’s Republic of China and the Arab Republic of Egypt on Judicial Assistance in Civil, Commercial and Criminal Matters (BR) Agreement between the People’s Republic of China and the Hellenic Republic on Mutual Legal Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Cyprus on Mutual Legal Assistance in Civil, Commercial and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Hungary on Judicial Assistance in Civil and Commercial Matters (BR) Agreement between the People’s Republic of China and the Kingdom of Morocco on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Kyrgyz Republic on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Tajikistan on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Republic of Singapore on Judicial Assistance in Civil and Commercial Matters (ND) (BR) (N) Treaty between the People’s Republic of China and the Republic of Uzbekistan on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Socialist Republic of Vietnam on Judicial Assistance in Civil and Criminal Matters (ND) (BR) Treaty between the People’s Republic of China and the Lao People’s Democratic Republic on Judicial

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Assistance in Civil and Criminal Matters (ND) (BR) Treaty between the People’s Republic of China and the Republic of Tunisia on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Republic of Lithuania on Judicial Assistance in Civil and Criminal Matters (BR) Treaty between the People’s Republic of China and the Argentine Republic on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Republic of Korea on Judicial Assistance in Civil and Commercial Matters (BR) (N) Treaty between the People’s Republic of China and the Democratic People’s Republic of Korea on Judicial Assistance in Civil and Criminal Matters Agreement between the People’s Republic of China and the United Arab Emirates on Judicial Assistance in Civil and Commercial Matters (BR) Agreement between the People’s Republic of China and the State of Kuwait on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Republic of Peru on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Federative Republic of Brazil on Judicial Assistance in Civil and Commercial Matters Treaty between the People’s Republic of China and the People’s Democratic Republic of Algeria on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and Bosnia and Herzegovina on Judicial Assistance in Civil and

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Commercial Matters (BR) Treaty between the People’s Republic of China and the Federal Democratic Republic of Ethiopia on Judicial Assistance in Civil and Commercial Matters (BR) Treaty between the People’s Republic of China and the Islamic Republic of Iran on Judicial Assistance in Civil and Commercial Matters (BR)

2014.05.04

2018.01.03

2016.01.23

2021.07.13

It is worth noting that the provisions are not entirely consistent, and significant differences exist in some cases dealing with the recognition and enforcement of foreign judgments under bilateral treaties or agreements concluded by China. 36 However, we can roughly summarize the contents of these treaties as follows: first, the court that rendered the judgment must have proper jurisdiction; second, the judgment must be final and conclusive; Third, the judgment must have been made in accordance with due process; fourth, there should be no conflicting judgments; and fifth, the judgment must not violate public policy. The following will combine relevant Chinese theory and judicial practice to provide a more specific analysis of the aforementioned requirements. a)

Proper Jurisdiction

All bilateral judicial assistance agreements concluded by China that provide for the recognition and enforcement of foreign judgments require that the court rendering the judgment possess proper jurisdiction over the matter at hand. However, the specific provisions and language employed to express this requirement differ across these agreements. Three broad categories can be classified into the following types: (1) only stipulating that the judgment must comply with the jurisdictional rules of the recognizing and enforcing country’s laws;37 (2) not only proSome bilateral agreements provide grounds for refusing to recognize and enforce foreign judgments, which may include an examination of choice of law issue in the judgment. For example, Article 22(2) of the Agreement between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters provides that: “[w]hen the original jurisdiction has, in matters of personal status or capacity, applied a law other than that which would have been applicable according to the rules of private international law of the requested Party, unless the application of the designated law would have led to the same result” the judgment will be neither recognised nor enforced. Similar provisions also exist in the Treaty between the People’s Republic of China and the Kingdom of Spain on Judicial Assistance in Civil and Commercial Matters. 37 For example, the Agreement between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters lists several grounds for refusing to enforce a court judgment, among these, Article 22(1) states that, in accordance with the laws of the requested State, the court that rendered the judgment has no jurisdiction over the case. The countries that adopt this type of provision include (in order of the signing date of the treaty): France, Poland, Romania, Turkey, Mongolia, Cuba, Bulgaria, 36

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Guojian Xu/ Xin Cai hibiting infringement upon the exclusive jurisdiction of the recognizing and enforcing country, but also explicitly listing the jurisdiction basis of the court rendering the judgement;38 (3) only explicitly prohibiting infringement upon the exclusive jurisdiction of the recognizing and enforcing country.39 Quantity Percentage b)

Type 1 14 40%

Type 2 13 37%

Type 3 8 23%

Total 35 100%

Finality

All bilateral judicial assistance treaties to which China is a party require that foreign judgments or rulings for which recognition and enforcement is sought must be final. To elaborate, the requirement of finality requires that the foreign judgment or ruling have gone through all possible stages of appeal or review in the country where it was rendered, such that it is no longer subject to alteration or modification by that country’s judicial authorities.40 This standard of finality serves as a safeguard against the potential for conflicting decisions, as well as the possibility of undue interference in the domestic legal affairs of another sovereign state. By ensuring that the foreign judgment or award is not subject to further review or modification in its country of origin, the requirement of finality promotes legal certainty and predictability in the enforcement of judgments and rulings across international borders.

Hungary, Morocco, Lithuania, Argentina, North Korea, Brazil, and Algeria, for a total of 14 countries. 38 For example, Article 21(1) of the Treaty between the People’s Republic of China and the Italian Republic on Judicial Assistance in Civil Matters provides that lack of jurisdiction of the court that rendered the judgment constitutes a ground for refusing to recognize and enforce the foreign judgment. Article 22 further provides a comprehensive list of ten scenarios in which the rendering court has jurisdiction, and reaffirms that the rules on exclusive jurisdiction in the law of the requested State remain applicable. The countries that adopt this type of provision include(in order of the signing date of the treaty): Italy, Spain, Egypt, Cyprus, Vietnam, Laos, Tunisia, United Arab Emirates, Kuwait, Peru, Bosnia and Herzegovina, Ethiopia, and Iran, for a total of 13 countries. 39 For example, the Treaty between the People’s Republic of China and the Russian Federation on Judicial Assistance in Civil and Criminal Matters lists several grounds for refusing to enforce a court judgment, among these, Article 22(2) provides that the requested State holds exclusive jurisdiction according to its own law. The countries that adopt this type of provision include (in order of the signing date of the treaty): Russia, Ukraine, Belarus, Kazakhstan, Greece, Kyrgyzstan, Tajikistan, and Uzbekistan, for a total of 8 countries. 40 For example, Article 17(1) of the Treaty between the People’s Republic of China and the Socialist Republic of Vietnam on Judicial Assistance in Civil and Criminal Matters provides that, according to the law of the contracting party that has rendered a judgment, the judgment has not yet taken effect or cannot be enforced.

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Foreign Judgements in China – Legal Framework and Recent Developments It is worth noting that there exists a diversity of formulations and interpretations regarding the definition of “finality” within the context of bilateral judicial assistance treaties. In general, these treaties require that the determination of finality be based on the law of the country where the judgment was rendered. These formulations can be broadly categorized into the following types: (1) the judgment is not yet effective or enforceable;41 (2) the judgment is not final or does not have the force of execution;42 (3) the judgment has not yet been determined or does not have the force of execution;43 (4) the judgment has no legal effect and cannot be executed;44 (5) the judgment is not yet effective;45 (6) the judgment is final and can be executed;46 and (7) the judgment has legal effect and is executable.47

41 For example, Article 20(2) of the Agreement on Judicial Assistance in Civil and Criminal Matters between the People’s Republic of China and the Polish People’s Republic provides that, according to the law of the contracting party that has rendered a judgment, the judgment has not yet taken effect or cannot be enforced. The countries that fall under this type of provision include (in order of the signing date of the treaty): Poland, Mongolia, Spain, Russia, Turkey, Ukraine, Cuba, Belarus, Kazakhstan, Egypt, Greece, Kyrgyzstan, Tajikistan, Uzbekistan, Vietnam, Lithuania, Peru, and Algeria, totaling 18 countries. 42 For example, Article 20(1) of the Agreement on Judicial Assistance in Civil and Commercial Matters between the People’s Republic of China and the Kingdom of Morocco provides that, according to the law of the contracting party that has rendered a judgment, the judgment is not final or does not have enforceable effect. The countries that fall under this type of provision include (in order of the signing date of the treaty): Morocco, Tunisia, Argentina, North Korea, United Arab Emirates, Kuwait, Brazil, Bosnia and Herzegovina, Ethiopia, and Iran, totaling 10 countries. 43 For example, Article 22, Para. 3 of the Agreement between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters provides that, according to the law of the contracting party that rendered the judgment, the judgment has not yet been determined or is not enforceable. 44 For example, Article 22(1) of the Treaty between the People’s Republic of China and Romania on Judicial Assistance in Civil and Criminal Matters provides that, according to the law of the state where the judgment was rendered, the judgment is not legally effective and cannot be enforced. 45 For example, Article 21, Para. 2 of the Agreement between the People’s Republic of China and the Republic of Italy on Judicial Assistance in Civil Matters stipulates that if, according to the law of the contracting party that rendered the judgment, the judgment has not yet come into effect. The countries that fall under this type of provision include (in order of the signing date of the treaty): Italy, Bulgaria, totaling 2 countries. 46 For example, Article 25(1) of the Treaty between the People’s Republic of China and the Republic of Cyprus on Judicial Assistance in Civil, Commercial and Criminal Matters states that, according to the law of the contracting party that rendered the judgment, the judgment is final and enforceable. The countries that fall under this type of provision include (in order of the signing date of the treaty): Cyprus and Laos, totaling 2 countries. 47 For example, Article 17(1) of the Treaty between the People’s Republic of China and the Republic of Hungary on Judicial Assistance in Civil and Commercial Matters provides that, according to the law of the contracting party where the judgment is rendered, the judgment is legally effective and enforceable.

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Quantity Percentage

Type 1 18 51%

Type 2 10 29%

Type 3 1 3%

Type 4 1 3%

Type 5 2 6%

Type 6 2 6%

Type 7 1 3%

Total 35 100%

It is important to note that Types (1) and (2) are the most common, accounting for 80% of bilateral treaties. The precise language and interpretation of these formulations may vary depending on the specific terms of each treaty as well as the legal and cultural contexts in which they were negotiated. Despite this diversity of approaches, the fundamental principle underlying the requirement of finality in bilateral judicial assistance treaties remains consistent: to promote legal certainty and predictability in the recognition and enforcement of foreign judgments and arbitral awards, while respecting the sovereignty and autonomy of each participating state. In 2005, the Intermediate People’s Court of Wenzhou in Zhejiang Province issued a ruling on the recognition of a French judgment in favor of Schneider Electric Industries SAS.48 This ruling provides a valuable illustration of how courts in China approach the issue of finality in the context of bilateral judicial assistance treaties. To demonstrate the finality of the French judgment in question, Schneider Electric Industries SAS submitted to the Wenzhou Court a copy and a Chinese translation of the judgment, bearing docket number 03/05688 and issued by the Judicial Court of Paris on November 9, 2004, as well as a copy and a Chinese translation of the certificate of enforceability issued by the Court of Appeal of Paris. In its ruling, the Wenzhou court found that the evidence submitted by Schneider Electric Industries SAS did not clearly demonstrate the finality of the French judgment. Specifically, the court reasoned that the evidence provided by the applicant merely indicated that there was no record of an appeal against the judgment of the Judicial Court of Paris in the case of Schneider Electric Industries SAS v. Wenzhou Feilong Electric Appliance Co., Ltd. on November 9, 2004, in the registration of appeals at the civil litigation department of the Court of Appeal of Paris. According to the court, this was insufficient to establish finality under French law. The court pointed to Article 540 and Article 505 of the French New Code of Civil Procedure, which require that a judgment be final and unappealable before a certificate of enforceability can be issued. The court also noted that Article 540 of the French Code of Civil Procedure allows for an extension of the appeal period under certain circumstances, but only in the year when the judgment is issued. Based on these considerations, the court concluded that the evidence submitted by Schneider Electric Industries SAS did not prove that the French judgment in question had been finalized. Some commentators suggest that the court’s reasoning in this case lacks clarity and fails to conform strictly to the provisions of the Agreement between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters. This Agreement stipulates that the finality should be determined based on the laws of the country having rendered the judgment . But 48 Schneider Electric Industries SAS v. Wenzhou Feilong Electric Appliance Co., Ltd. (2005) Win Min San Chu Zi No 155.

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Foreign Judgements in China – Legal Framework and Recent Developments based on the wording of its opinion, the Wenzhou Court primarily based its assessment of the finality of the French judgment on the provisions of the Chinese Civil Procedure Law regarding the effects of appeals on judgments. This led to the court ultimately rejecting the finality of the French judgment in question.49 It is worth noting that each jurisdiction has its own definition and understanding of what constitutes finality. Determining the finality of a judgment based on the laws of the country that rendered the judgment would inevitably involve ascertainment of foreign laws. Assigning this responsibility to judges would only increase their judicial burden. c)

Due Process

Countries generally do not review the substantive content of foreign judgments. Nonetheless, a key ground for refusing to recognize and enforce foreign judgments is whether the court rendering the judgment has complied with due process. In practice, refusals to recognize and enforce foreign judgments frequently stem from procedural flaws.50 Most of China’s bilateral judicial assistance agreements provide that due process defenses typically arise because the losing party did not receive appropriate notification from the court or that a party who lacks legal capacity did not receive appropriate representation.51 Some treaties stipulate only that a losing party’s failure to appear in court because the party was not lawfully summoned constitutes a ground for refusal to recognize the judgment, but do not mention representation issues. 52 In addition, China’s bilateral judicial assistance treaties exhibit significant differences in the framework for defenses based on deficient service of process. First, the mode of application of these treaties varies, with some treating proper service of process as a prerequisite for recognition and enforcement, while others consider deficient service grounds for refusing recognition and enforcement. Second, despite sharing similar grounds for refusal to recognize or enforce a judgment, these treaties differ in the definition of service of process defenses, which may include not only not being lawfully summoned, but also lack of reasonable representation of parties without litigation capacity. Additionally, there are significant differences among judicial assistance agreements regarding the criteria for determining objections to service of process, as well as whether such objections must be based on default judgments. In addition, these treaties fail to 49 W. ZHANG, The Finality Requirement of Recognition and Enforcement of Foreign Judgments, Wuhan University International Law Review, Vol. 2, 2020, p. 34. 50 See J. LIU/ C. ZHANG, Empirical Research on the Recognition and Enforcement of Foreign Court Judgments in China: An Analysis of Typical Cases of the People’s Courts from 2018 to 2020, Cross-strait Legal Science, Vol. 3, 2021. 51 China has adopted this model in bilateral agreements signed with Poland, Mongolia, Romania, Italy, Spain, Russia, Turkey, Ukraine, Cuba, Belarus, Kazakhstan, Bulgaria, Egypt, Morocco, Kyrgyzstan, Tajikistan, Uzbekistan, Vietnam, Tunisia, Lithuania, Argentina, North Korea, Peru, Brazil, Algeria, Bosnia and Herzegovina, and Iran. 52 For example, the Agreement between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters.

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Guojian Xu/ Xin Cai address essential issues concerning notification defenses, such as the quality of service and the guarantee of the opportunity to respond.53 China is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 1965 (hereinafter referred to as the “ HCCH Service Convention “), which provides rules for the service of process in cross-border civil or commercial matters. However, China made a reservation when joining the Convention with regard to service of process by post.54 In practice, conflicts may arise between the Hague Service Convention and bilateral judicial assistance treaties. Unfortunately, existing legislation fails to provide clear provisions for resolving such conflicts. 55 According to the Provisions of the Supreme People’s Court on the Service of Judicial Documents and Investigation and Evidence Requests in Civil and Commercial Cases Pursuant to International Conventions and Bilateral Judicial Assistance Treaties, the people’s courts should determine, based on the principles of convenience and efficiency, whether to make requests for the service of judicial documents and the investigation and collection of evidence in civil and commercial cases pursuant to the Hague Service Convention, the Hague Evidence Convention, or a bilateral civil and commercial judicial assistance treaty.56 According to this provision, the court can make its own choice, but due to the inconsistent provisions of each bilateral treaty, it is relatively difficult to determine and apply the treaty. In judicial practice it is more common for courts to give precedence to the Hague Service Convention. In recent years there have been several instances in which Chinese courts have refused to recognize and enforce foreign judgments that rely on service of process by post from foreign courts, even in cases where bilateral agreements are in place.57 This phenomenon suggests that Chinese courts 53 See W. ZHANG, A Study of “Service of Process Defense” in the Context of Recognition and Enforcement of Foreign Judgments, Presentday Law Science, Vol. 2, 2019. 54 Article 3 of the Decision of the Standing Committee of the National People’s Congress on Approving the Accession to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters stipulates that China opposes the adoption of the method prescribed in Article 10 of the Convention for the service of documents within the territory of the People’s Republic of China. One of the methods prescribed in Article 10 of the Convention is service of judicial documents directly by postal channels to addressees abroad. 55 X. QIAO, International Civil and Commercial Judicial Assistance under The Belt and Road Initiative in China: Practice, Issues and Prospects, Journal of Northwest University (Philosophy and Social Sciences Edition), Vol. 47, No 6, 2017. 56 FA SHI (2013) No 11. 57 Reply on Issues Related to the Application for Recognition and Enforcement of the Judgment of the Supreme Economic Court of the Republic of Belarus by Minsk Automatic Line Production Joint Company, (2003) Min Si Ta Zi No 4. It is important to note that although China has made reservations regarding the use of postal services for serving legal documents under the Hague Service Convention, Article 274, Para 6 of the Civil Procedure Law allows for the service by mail for recipients located in countries where it is permitted by law. This inconsistency between domestic and international rules may create the impression that China also allows service by mail for service abroad, thereby increasing the likelihood of foreign courts and nationals using

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Foreign Judgements in China – Legal Framework and Recent Developments may be interpreting the Hague Service Convention in a restrictive manner, and that additional clarification may be necessary to resolve conflicts between international legal instruments and to ensure effective cross-border adjudication. In judicial practice, there have been instances in which Chinese courts have meticulously assessed the components of due process and subsequently recognized foreign judgments. In the case of Przedsiebiorstwo Przemyslu Chlodniczego Fritar S.A. v. Ningbo Yongchang Industry & Trade Co., Ltd,58 the applicants applied for recognition and enforcement of the judgment of the Wrocław Court of Appeal in Poland under the Agreement between the People’s Republic of China and the Republic of Poland on Judicial Assistance in Civil and Criminal Matters (hereinafter referred to as the “China-Poland Agreement”). The court reasoned that the pivotal point of contention in the case centered around whether the judgment of the Polish court contravened Article 20(3) and (4) of the China-Poland Agreement, specifically whether Yongchang Company was either not lawfully summoned by the court, or was deprived of the opportunity to present a defense. The court found that before March 26, 2008, Yongchang Company had entrusted Agnieszka Kanawka to participate in the litigation at the Green Mountain City Court, the Opole Regional Court, and the Wrocław Court of Appeal in Poland by means of a “Power of Attorney”, and Yongchang Company stated in the Power of Attorney that it would recognize the judgment regardless of whether it was favorable or unfavorable. In addition, it is worth noting that Yongchang Company had received payments of $54,521 and 34,600 zlotys in accordance with the second-instance judgment of the Wrocław Court of Appeal. As such, the Polish courts, including the Supreme Court of the Republic of Poland and the Wrocław Court of Appeal, reasonably inferred that Agnieszka Kanawka had the authority to represent Yongchang Company in the litigation, and that she indeed represented the company in the proceedings. Consequently, it can be established that the losing party was lawfully summoned and provided with an adequate opportunity to defend itself in the present matter, thereby satisfying the requirements set forth in Article 20 of the China-Poland Agreement. The Ningbo Court accordingly ruled that the defense of objection to service under the aforementioned article is inapplicable to the circumstances of this case. Moreover, the court has duly recognized the Polish judgment. d)

Non-Contradictory Judgments

Certain bilateral agreements provide that if a court in the recognizing country has already issued a decision legally binding on the same parties and concerning the same subject matter, is currently hearing such a case, or has already recognized a judgment made by a court in a third country on the same case, then recognition of the foreign court judgment may be refused. This is a widely accepted ground for non-recognition of foreign court judgments under such agreements. service by mail to serve documents on China. See Q. HE, The Dilemma and Choice of China's Extraterritorial Service Mechanism, Chinese Journal of Law, Vol. 2, 2005. 58 (2013) Zhe Yong Min Que Zi No 1.

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Public Policy

China’s bilateral judicial assistance treaties generally include public policy as a ground for refusing to recognize and enforce foreign court judgments, though the specific wordings and requirements may differ. Some treaties include public policy as a ground for refusing to recognize foreign judgments, stipulating that foreign judgments must not harm the sovereignty, security, or public order of the requested contracting party.59 In contrast, some other treaties provide a separate provision that outlines public policy as a general rule that judicial assistance must not harm the sovereignty, security, and public order of the country.60 Chinese courts have adopted a cautious approach towards invoking public policy in recent years.61 This has resulted in few situations where foreign court judgments have been denied recognition due to the public policy provision contained in bilateral judicial assistance treaties. Furthermore, some cases where public policy has been invoked also raise questions about the reasoning of the judgment.62 In general, the presence of explicit treaty provisions provides a framework for foreign judgment recognition and for allowing courts to focus their attention on whether specific cases meet the requirements for recognition and enforcement. Nevertheless, the fact remains that the recognition of foreign judgments under bilateral treaties is relatively infrequent, and its significance can be easily overlooked by parties or judges. Given the variances in specific provisions among different treaties, judges often find it more expedient to rely on relevant domestic law rather than the treaty itself when deciding whether to recognize and enforce a foreign judgment. Furthermore, some research has suggested that certain bilateral agreements may be out of touch with current practice due to their early conclusion, and even form a so-called “treaty disadvantage”.63 For example, under the provisions of the Civil Procedure Law, both parties and relevant courts can initiate applications for recognition and enforcement, but some bilateral judicial assistance treaties stipulate that only the court can initiate the application. Moreover, some bilateral treaties impose stricter conditions for judgment recognition and enforcement than those prescribed by the Civil Procedure Law.64 All of these factors suggest that a

59 Treaty between the People’s Republic of China and the Kyrgyz Republic on Judicial Assistance in Civil and Criminal Matters, Article 21(5). 60 Treaty between the People’s Republic of China and the Republic of Tunisia on Judicial Assistance in Civil and Commercial Matters, Article 6. 61 Y. MA, Public Order in Recognition and Enforcement of Foreign Court Judgments, Tribune of Political Science and Law, Vol. 5, 2010. 62 Reply on the Application for Recognition and Enforcement of the Judgment of Tashkent City Economic Court of the Republic of Uzbekistan by Uzprommashimpeks State Joint-Stock Company, (2014) Min Si Ta Zi No 9. 63 Z. HUO, On the Legal Dilemma of Recognizing and Enforcing Foreign Judgments in the United States - China's Response and Lessons, Science of Law (Journal of Northwest University of Political Science and Law), Vol. 5, 2019.

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Foreign Judgements in China – Legal Framework and Recent Developments cautious and optimistic attitude should be maintained towards the recognition and enforcement of foreign judgments under bilateral treaty frameworks. B.

Recognition and Enforcement of Foreign Judgments under the Domestic Legal Framework

The prevailing domestic legislation regarding the recognition and enforcement of foreign judgments in China is primarily articulated in Article 288 and Article 289 of the Civil Procedure Law.65 Article 288 provides that where an effective judgment or ruling of a foreign court requires recognition and enforcement by a people’s court of the People’s Republic of China, a party may (i) apply directly to the intermediate people’s court of the People’s Republic of China having jurisdiction for recognition and enforcement or (ii) apply to the foreign court for the foreign court to request recognition and enforcement by the people’s court in accordance with the provisions of an international treaty concluded or acceded to by the People’s Republic of China or under the principle of reciprocity.66 Article 289 stipulates that, after examining an application or request for recognition and enforcement of an effective judgment or ruling of a foreign court in accordance with an international treaty concluded or acceded to by the People’s Republic of China or under the principle of reciprocity, a people’s court shall (i) issue a ruling to recognize the legal force of the judgment or ruling, and (ii) issue an order for enforcement as needed to enforce the judgment or ruling according to the relevant provisions of this Law, if the people’s court deems that the judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China and the sovereignty, security, and public interest of the People’s Republic of China. If the judgment or ruling violates the basic principles of the laws of the People’s Republic of China or the sovereignty, security, or public interest of the People’s Republic of China, the people’s court shall not grant recognition and enforcement.67 The above mentioned provisions are relatively rudimentary, for they only specify the jurisdictional court responsible for recognizing and enforcing foreign 64 For example, Article 23(2) of the Agreement between the People’s Republic of China and the Republic of Cuba on Judicial Assistance in Civil and Criminal Matters stipulates that the requested contracting party court shall review the substance of the judgment on the request for recognition and enforcement made by the court of the requesting contracting party. 65 Adopted at the 4th Session of the Seventh National People’s Congress on April 9, 1991, amended for the fourth time in accordance with the Decision of the Standing Committee of the National People’s Congress to Amend the Civil Procedure Law of the People’s Republic of China as adopted at the 32nd Session of the Standing Committee of the Thirteenth National People’s Congress on December 24, 2021. Effective on January 1, 2022. 66 This provision was formerly Article 281 in the Civil Procedure Law (2017 Amendment). 67 This provision was formerly Article 282 in the Civil Procedure Law (2017 Amendment).

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Guojian Xu/ Xin Cai court judgments, the grounds for recognition, and the public policy exception. Despite several amendments to the Civil Procedure Law in recent years, the fundamental content of these provisions has remained unchanged. 68 This lack of development has resulted in a situation where the Civil Procedure Law, despite being the most authoritative basis for recognizing and enforcing foreign judgments in China, fails to provide effective guidance for parties and courts. Consequently, difficulties and controversies have arisen in determining the reciprocity in judicial practice.69 The Enterprise Bankruptcy Law of the People’s Republic of China (hereinafter referred to as “Bankruptcy Law ”) provides specific provisions for the recognition and enforcement of judgments in bankruptcy cases.70 However, this provision is only limited to judgments and rulings of foreign courts that have legal effect in bankruptcy cases involving the debtor’s assets outside the territory of the People’s Republic of China. Otherwise, it is no different from Article 289 of the Civil Procedure Law. The SPC has developed a substantial body of judicial interpretations to provide guidance to lower courts on the proper application of the law in their adjudicative work based on the principles of law and relevant legislative intent. These judicial interpretations serve to clarify or fill gaps in unclear or absent legal The Civil Procedure Law of the People’s Republic of China was enacted on April 9, 1991, and has been amended several times since then, in 2007, 2012, 2017, and 2021. However, the provisions related to the recognition and enforcement of foreign judgments have remained consistent in content, apart from the order in which they appear. As of the writing of this article, the latest draft amendment has been submitted for review at the 38th meeting of the Standing Committee of the 13th National People’s Congress of China. The proposed amendments aim to adjust various provisions related to foreign-related civil litigation procedures. The draft specifies that unless certain statutory circumstances apply, parties’ applications for the recognition and enforcement of foreign court judgments shall be granted. However, foreign court judgments that violate China's basic legal principles or infringe upon national sovereignty, security, or public interests shall not be recognized or enforced. Additionally, if the dispute involved in the application for recognition and enforcement of a foreign judgment is the same as the one being heard by a Chinese court, the Chinese court may suspend the proceedings. Source available at China National People’s Congress website http://www.npc.gov.cn/npc/kgfb/202212/15316721389e4a5483d 056c2cc448b90.shtml (accessed on 17 May 2023). 69 M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019. 70 Article 5(2) of the Bankruptcy Law provides that where any legally effective judgment or ruling made by a foreign court involves any debtor's assets within the territory of the People’s Republic of China and if the debtor applies with or requests the people’s court to confirm or enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or according to the principles of reciprocity, conduct an examination thereon and, when believing that it does not violate the basic principles of the laws of the People’s Republic of China, does not damage the sovereignty, safety or social public interests of the state, and does not damage the legitimate rights and interests of the creditor within the territory of the People’s Republic of China, grant confirmation and permission for enforcement. 68

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Foreign Judgements in China – Legal Framework and Recent Developments provisions.71 The SPC derives the legal basis for issuing these interpretations from Article 18 of the Organic Law of the People’s Courts of the People’s Republic of China, which empowers the SPC to provide interpretations on the specific application of law in the trial work.72 The Resolution of the Standing Committee of the National People’s Congress Providing an Improved Interpretation of the Law also confirms the SPC’s authority to interpret specific legal provisions in adjudication.73 In accordance with the principles stated above, the “Provisions of the SPC on Judicial Interpretation Work” issued in 2021 (hereinafter referred to as the “Provisions on Judicial Interpretation Work”) provides that the judicial interpretations issued by the SPC shall have legally binding force (Article 5). Additionally, after the implementation of a judicial interpretation, the people’s court shall cite it as a basis for judgment in judicial documents (Article 27). Hence, judicial interpretations play a pivotal role as a significant legal source in the adjudication of cases within Chinese courts. The most important judicial interpretation regarding the recognition and enforcement of foreign judgments is encapsulated within the “Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China” (hereafter referred to as the “Civil Procedure Law Interpretation”),74 including Articles 531, 541-547. Article 531 delineates the protocol for cases in which Chinese courts and foreign courts possess concurrent jurisdiction in the same case, as well as when a party brings the same dispute to a Chinese court subsequent to the recognition of a foreign judgment by a Chinese court.75 Article 541 mandates the submission of specific materials by an applicant to a Chinese court when seeking recognition and enforcement of a foreign judgment, including evidence of service for default judgments,76 which is deemed a safeguard for due process.77 Article 542 specifies 71

X. LIU (ed.), Chinese Private International Law, Hart Publishing, 2021,

p. 10-11. Adopted at the 2nd session of the Fifth National People’s Congress on July 1, 1979, and amended in 1983, 1986, 2006, and 2018. 73 Adopted at the 19th Meeting of the Standing Committee of the Fifth National People’s Congress on June 10, 1981. 74 Adopted at the 1,636th meeting of the Judicial Committee of the Supreme People’s Court on December 18, 2014, and amended in 2020 and 2022. 75 Article 531 of Civil Procedure Law Interpretation. For a case over which both a people’s court of the People’s Republic of China and a foreign court have jurisdiction, if one party institutes an action in the foreign court whereas the other party institutes an action in the people’s court of the People’s Republic of China, the people’s court may accept the case. If, after a judgment is rendered, the foreign court or a party requests the people’s court's recognition and enforcement of the judgment or ruling rendered by the foreign court concerning this case, the people’s court shall not consent to the request, unless it is otherwise prescribed by an international treaty concluded or acceded to by both countries. Where the judgment or ruling rendered by the foreign court has been acknowledged by the people’s court, and the parties institute an action over the same dispute in the people’s court, the people’s court shall not accept the action. 76 Article 541 of Civil Procedure Law Interpretation. Where the applicant applies to the people’s court for recognition and enforcement of an effective judgment or ruling of a 72

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Guojian Xu/ Xin Cai that the grounds for a Chinese court to recognize a foreign judgment are bilateral treaties and reciprocity; in the absence of such grounds, the application should be rejected, but the party can bring a separate lawsuit to a Chinese court. Divorce judgments are excluded.78 Article 544 governs the relationship between recognition and enforcement. It emphasizes that specific enforcement should be carried out in accordance with the provisions of the Civil Procedure Law. 79 Furthermore, the Civil Procedure Law Interpretation also prescribes the period for recognition and enforcement of foreign judgments, as well as the organization of the trial.80 Regarding the recognition of foreign divorce judgments, the SPC has issued two specialized judicial interpretations, namely the SPC Regulation on the Procedures of Applications of Chinese Nationals to Recognize Foreign Divorce Judgments and the Regulation on Several Issues on the People’s Courts Handling Applications to Recognize Foreign Court Divorce Judgments. 81 However, these two judicial interpretations only adjust the recognition of foreign divorce judgments, while matters such as the division of marital property, financial support, and child custody in those judgments still need to be based on the Civil Procedure Law and Civil Procedure Law Interpretation.82 In summary, then, the recognition and enforcement of foreign judgments in China, as set forth in the Civil Procedure Law and its corresponding judicial interpretations, entails four fundamental criteria. First, the foreign judgment or ruling must be legally binding and conclusive. Second, there must be a reciprocal relationship between the foreign jurisdiction and China. Third, the foreign judgforeign court, the applicant shall submit a written application, to which the original or the certified error-free duplicate and Chinese translation of the effective judgment or ruling of the foreign court shall be affixed. If the judgment or ruling rendered by the foreign court is a default judgment or ruling, the applicant shall, at the same time, submit the certification documents on a legal summons from the foreign court, unless the judgment or ruling has expressly stated the fact. Where an international treaty concluded or acceded to by the People’s Republic of China has otherwise provided for the submission documents, the relevant provisions shall apply. 77 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018. 78 Article 542 of Civil Procedure Law Interpretation: Where a party applies to an intermediate people’s court of the People’s Republic of China having jurisdiction for recognition and enforcement of an effective judgment or ruling of a foreign court, if the home country of the foreign court has neither concluded or jointly acceded to an international treaty nor has a relationship of reciprocity with the People’s Republic of China, the court shall rule to dismiss the application, unless the party applies to the people’s court to recognize an effective divorce judgment rendered by a foreign court. 79 Article 544 of Civil Procedure Law Interpretation. 80 Article 545, 546 and 547 of Civil Procedure Law Interpretation. 81 FA SHI (2020) No 20. 82 It is important to note that, in judicial practice, foreign courts' recognition of Chinese divorce judgments does not establish a precedent for Chinese courts to reciprocally recognize and enforce foreign judgments within China. Such recognition by foreign courts will not be regarded as evidence of factual reciprocity between the two countries.

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Foreign Judgements in China – Legal Framework and Recent Developments ment or ruling must have been rendered in compliance with due process requirements. Last, the judgment or ruling must not conflict with the fundamental principles of Chinese law or the sovereignty, security, or public interests of the People’s Republic of China.83 This article will expound on these requirements by scrutinizing the relevant legal provisions, judicial interpretations, and judicial practices. 1.

Finality

A foreign judgment must possess a sufficient degree of stability, and the rights it establishes must be clear, specific, and enforceable, in order to be recognized and enforced in another country. Finality is not only a necessary requirement for ensuring legal certainty and authority, but also plays a crucial role in safeguarding the authority of a country’s judicial system and protecting the legitimate rights and interests of the parties involved.84 The certainty and finality of foreign judgments are universally recognized as the most fundamental prerequisites for their recognition and enforcement, as enshrined in the legislation of most countries.85 Foreign judgments must have legal effect to be recognized and enforced in Chinese courts according to the Civil Procedure Law and its interpretations. Although there may be differing interpretations of what constitutes “legal effect,”86 it is generally understood to mean that the judgment or ruling has binding, determinative, and enforceable force under Chinese domestic law.87 This requirement is explicitly stated in the Civil Procedure Law, the Bankruptcy Law, Civil Procedure Law Interpretation, and the Provisions of the Supreme People’s Court on the Recognition of Foreign Divorce Judgments.88 Article 158 of the Civil Procedure Law further specifies that the judgments and rulings of the Supreme People’s Court and the judgments and rulings not appealable in accordance with law or not appealed during the prescribed time limit shall be effective judgments and rulings. In judicial practice, it is widely acknowledged that civil judgments issued by

83 Some scholars hold the view that the grounds for refusing to recognize and enforce foreign judgments as stipulated in bilateral treaties, such as lack of jurisdiction in the rendered court, should also be applicable to cases based on the principle of reciprocity. G. TU, Private International Law in China, Springer, 2016, p. 172-174; J. SONG, Recognition and Enforcement of Foreign Judgments in China: Challenges and Developments, ZChinR (Zeitschrift für Chinesiches Recht), 2017. 84 X. QIAO, On the Finality Problems in the Recognition and Enforcement of Foreign Judgments, Wuhan University International Law Review, Vol. 1, 2017. 85 F. QIAN, Finality: Prerequisites for the Recognition and Enforcement of Foreign Civil and Commercial Judgments, People’s Judicature, Vol. 6, 2006. 86 G. CHEN/ L. CHENG, Re-examining Res Judicata in Civil Litigation, Science of Law (Journal of Northwest University of Political Science and Law), Vol. 6, 2010. 87 W. ZHANG, The Finality Requirement of Recognition and Enforcement of Foreign Judgments, Wuhan University International Law Review, Vol. 2, 2020. 88 Article 288 and Article 289 of the Civil Procedure Law; Articles 541-546 of the Interpretation of Civil Procedure Law.

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Guojian Xu/ Xin Cai people’s courts in China take effect upon pronouncement or delivery, as evidenced by the judgment’s res judicata, binding force, and enforceability.89 While Chinese legislation and judicial interpretations mandate finality as a precondition for the recognition and enforcement of foreign judgments, the criteria for determining finality and the method for ascertaining the legal effect remain nebulous.90 This dearth of clarity has resulted in courts approaching the issue of finality in an indeterminate manner, with little dedicated scrutiny or rationale. In the limited instances where this issue has arisen, courts have usually relied on Chinese law, requiring only that the requested judgment not be in the process of appeal.. In Wuxi Luoshe Printing and Dyeing Co., Ltd. v. Li Anshan and TA Home Co., Ltd., the applicant applied to the Intermediate People’s Court of Wuxi City, Jiangsu Province, to recognize and enforce the civil judgment of the Superior Court of San Mateo County, California, USA (Case No. 502381).91 The respondent contended that the US judgment was not final and definitive because an appeal had been filed within a reasonable period after the judgment was made, and the case was still pending in the US appellate court. Therefore, the US judgment could not be recognized and enforced in China. The court agreed that the foreign civil judgment lacked finality and certainty as the case was still under appeal, despite having become effective and entered into the execution process in accordance with the law of California. The applicant had the obligation to submit evidence proving that the foreign judgment was final and definitive. Thus, the foreign civil judgment did not meet the requirements of a “legally effective judgment” under Article 281 of the Civil Procedure Law. The court rejected the recognition of the US judgment on this basis, but also noted that if the US judgment becomes final and definitive after the appeal process in the California court ends, the applicant can apply for recognition and enforcement again to a competent people’s court. The court’s decision to deny recognition and enforcement of the US judgment in this instance was premised on the determination that the California judgment lacked legal effect. However, no explanation was given for this conclusion. While it is true that, pursuant to the fundamental principles of Civil Procedure Law, a judgment does not take effect during the appeal process, it is important to acknowledge that different jurisdictions may maintain varying standards for finality. In Common Law jurisdictions, such as the United States and the United Kingdom, a foreign judgment is regarded as “final” if the trial court has adjudicated all contested issues in the case, and the parties are unable to pursue further ordinary proceedings challenging the trial court’s decision. The availability of appeals or other legal remedies does not undermine the “ finality” of foreign judgments.92

(2015) Hu Gao Min Yi (Min) Shen Zi No 1019. Some advocate for the utilization of analogous provisions in bilateral agreements to ascertain the finality of foreign judgments under the law of the country in which the judgment wasrendered. G. TU, Private International Law in China, Springer, 2016, p. 173. 91 (2017) Su 02 Xie Wai Ren No 1. 92 W. ZHANG, The Finality Requirement of Recognition and Enforcement of Foreign Judgments, Wuhan University International Law Review, Vol. 2, 2020; A. CHONG, Moving 89 90

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Foreign Judgements in China – Legal Framework and Recent Developments Consequently, rendering a judgment based solely on Chinese law may lead to complications in the absence of explicit legal guidance. While Chinese laws and judicial interpretations pertaining to the recognition and enforcement of foreign judgments stipulate that such judgments must possess “legal effect,” this requirement is frequently disregarded in court and inadequately litigated by parties. This may be attributed to the indeterminate nature of the requirement, which lacks explicit standards and legal justification for its implementation. Consequently, there exists a pressing need for enhanced guidance and elucidation concerning the interpretation and application of this requirement to establish uniformity and predictability in the recognition and enforcement of foreign judgments in China. 2.

Reciprocity

Foreign judgments do not automatically have legal effect in China, and they must undergo a review and recognition process by Chinese courts in order to be enforceable. The determination of whether a foreign judgment can be recognized and enforced, particularly in cases where no judicial assistance treaty exists or the treaty does not cover the recognition and enforcement of foreign judgments, hinges on the principle of reciprocity. Reciprocity remains the primary focus of numerous studies related to the recognition and enforcement of foreign judgments in the Chinese academic community, as it is an essential factor in this field.93 Although towards harmonisation in the recognition and enforcement of foreign judgment rules in Asia, Journal of Private International Law, Vol. 16, Issue 1, 2020, p. 31-68. 93 T. DU, The Principle of Reciprocity and the Recognition and Enforcement of Foreign Court Judgments, Global Law Review, Vol. 1, 2007; M. REN, On the Application of the Principle of Reciprocity in the Recognition and Enforcement of Foreign Judgments, Citizen and Law, Vol. 1, 2011; J. LIAN, The Application of the Principle of Reciprocity by China’s Courts under the Belt and Road Initiative: Judicial Practices, Problems and Improvements, Journal of Henan University of Economics and Law, Vol. 6, 2016; W. ZHU, The Construction of Negative Reciprocity System in the Recognition and Enforcement of Foreign Judgments in China, Heibei Law Science, Vol. 4, 2017; Y. WANG, The Principle of Reciprocity in Recognition and Enforcement of Foreign Judgments: Based on the Analysis of the Representative Kolmar Case under the Belt and Road Initiative, Journal of Soochow University (Law Edition), Vol. 3, 2017; J. LIAN, A Study on the Application of Reciprocity Principle in China’s Judicial Practice of Carrying Out Foreign Judgments: With Discussion of the Possibility of Its Abolishment, Journal of Shihezi University (Philosophy and Social Sciences), Vol. 1, 2018; S. LI/ Q. ZHAO, The Application of the Principle of Reciprocity in the Recognition and Enforcement of Foreign Judgments, People’s Judicature, Vol. 2, 2018, W. XU, The Construction Path of China's System for Recognizing and Enforcing Foreign Court Judgments: A Discussion on the Change in China’s Attitude towards Recognizing Reciprocity, Studies in Law and Business, Vol. 2, 2018; M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019; Y. LIU/ W. CHEN, The Application of the Principle of Reciprocity in the Recognition and Enforcement of Foreign Judgments in China, Journal of Xinjiang University (Philosophy, Humanities and Social Sciences), Vol. 48, No 4, 2020; X. ZHANG, The Application of Presumed Principle of Reciprocity in the Recognition and Enforcement of Foreign Civil and Commercial Judgments under the

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Guojian Xu/ Xin Cai there is no uniform understanding of the meaning and classification of reciprocity,94 most scholarship acknowledges two distinct types; de jure reciprocity and de facto reciprocity.95 De jure reciprocity refers to two countries that have enacted comparable criteria for acknowledging and executing foreign court judgments, requiring mutual assurances through domestic legislation. De facto reciprocity requires actual precedents demonstrating that the requesting country has recognized and enforced judgments of the country in which recognition and enforcement is requested in the past.96 The Civil Procedure Law and the Civil Procedure Law Interpretation provide only basic provisions that allow for the recognition and enforcement of foreign judgments based on the principle of reciprocity. In particular, important issues have not been addressed, including the definition of reciprocity, the standards for determining reciprocity, and the allocation of burden of proof. This principle-based legislation has several shortcomings, including the lack of clear legislative objectives, the absence of effective legislative guidance, and a lack of necessary legislative constraints.97 As a result, courts face significant difficulties and controversies when determining reciprocity in judicial practice. a)

Criteria

Chinese courts have traditionally applied de facto reciprocity to determine whether reciprocity exists, using it as the sole criterion.98 In practice, the recognition and enforcement of foreign judgments in China are contingent upon whether there is a precedent for recognizing and enforcing Chinese judgments in the foreign country in question. Background of the 'Belt and Road, People’s Judicature, Vol. 28, 2021; L. WANG, On the Principle of Reciprocity in the Recognition of Foreign Court Judgments, Nanjing University Law Journal, Vol. 1, 2022. 94 W. LI, On the Principle of Reciprocity in the Recognition of Foreign Court Judgments, Nanjing University Law Journal, Vol. 1, 2022. 95 Some studies have further divided de facto reciprocity into “single factual reciprocity” and “strong factual reciprocity”. The former only necessitates one precedent where a foreign court has been recognized and enforced for the forum to recognize reciprocity between the two countries. On the other hand, the latter requires multiple precedents of recognition and enforcement, as well as more established reciprocal practices, but there is no precise standard. See K. TSANG, Enforcement of foreign commercial judgments in China, Journal of Private International Law, Vol. 14, Issue 2, 2018, p. 262294. 96 W. ZHANG, Recognition and Enforcement of Foreign Judgments in China: The Status Quo and Future, Wuhan University International Law Review, Vol. 2, 2016. 97 J. WANG, Reconstruction on the Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: For Tools with the Interests-balancing Doctrine, The Jurist, Vol. 6, 2012. 98 M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019.

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Foreign Judgements in China – Legal Framework and Recent Developments The Gomi Akira case holds a significant place as the foremost and most frequently referenced case concerning the recognition and enforcement of foreign judgments.99 In this case, after reviewing the application, the Dalian Intermediate People’s Court found that there were no relevant international treaties or mutual recognition and enforcement arrangements in place between China and Japan with respect to civil judgments. Subsequently, the case was referred to the SPC, which issued a Reply entitled “Regarding Whether People’s Courts Should Recognize and Enforce Japanese Judgments with Respect to Debt Obligations.” The reply stated that there are no international treaties or equivalent reciprocal relationships between China and Japan that pertain to the recognition and enforcement of judgments. Consequently, the Japanese judgment should not be recognized and enforced under the Civil Procedure Law.100 This case is widely considered to have established the principle of de facto reciprocity.101 In DNT France Power Engine Co., Ltd. v. Zheng Xiyong, the SPC also denied the application on the basis that there was no reciprocity between China and Australia. However, the reasoning behind the SPC’s decision was not fully explained in the series of Replies which started with the Gomi Akira case.102 Those Replies did not sufficiently elaborate on the reasons for refusing to recognize and enforce judgments based on the reciprocity principle. The SPC merely stated that there was no treaty between the two countries and found that there was no reciprocity, thus refusing recognition, but did not clarify what constitutes reciprocity between the two countries.103 The SPC issues documents such as “Reply(复函 Fu Han),” “Answer (答复 Da Fu)” in response to requests from lower courts seeking guidance on difficult legal issues. These documents are case-specific and do not strictly constitute judicial interpretations. A reply issued by the SPC does not constitute a legal provision or a judicial precedent and, in essence, only has legal significance for the court that submitted the request and the specific case involved. The SPC has also stated that its response to individual cases in reply only represents its views on that particular (1994) Min Wai Zi No 74. Some Chinese scholars have argued that the decision not to recognize the Gomi Akira case was not based on the absence of de facto reciprocity, but rather on the principle of “no treaty, no reciprocity”. See W. LI, On the Principle of Reciprocity in the Recognition of Foreign Court Judgments, Nanjing University Law Journal, Vol. 1, 2022. 100 (1995) Min Ta Zi No 17. 101 X. ZHANG, The Application of Presumed Principle of Reciprocity in the Recognition and Enforcement of Foreign Civil and Commercial Judgments under the Background of the Belt and Road, People’s Judicature, Vol. 28, 2021. 102 Reply of the Supreme People’s Court on Request for Instructions Re Application of DNT France Power Engine Co., Ltd. for Recognition and Enforcement of Australian Court Judgment, (2006) Min Si Ta Zi No 45. 103 Due to the lack of specific guidance, it is argued that the SPC’s reply usually uses precise wording. By not explicitly identifying de facto reciprocity as the sole standard for recognition, some suggest that the Court has left room for future expansion and interpretation. See W. YANG/ Y. LUO/ J. XIAO, On the recognition and enforcement of foreign court judgments and decisions in China, China Journal of Maritime Law, Vol. 30, No 1, 2019. 99

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Guojian Xu/ Xin Cai case and does not have universal applicability, meaning it does not have the legal effect of a judicial interpretation.104 Despite this, the reply in the Gomi Akira case, which provides a rare direct explanation of the determination of reciprocity, has been followed by other courts at all levels. Some Chinese courts have directly cited this reply when dealing with applications for recognition and enforcement of foreign judgments. The reason for this lies in the fact that, although China has assigned the duty of recognition of foreign judgments to intermediate courts, 105 such cases still account for a very small proportion.106 Courts that have fewer opportunities to handle cases involving the recognition and enforcement of foreign judgments tend to avoid exploring such cases in order to reduce their risk of errors and workload. The acknowledgement and adherence to the de facto reciprocity standard, as manifested in non-universally effective replies, has become a firmly established legal precedent in the realm of recognizing and enforcing foreign judgments, regardless of the underlying reasons.107 Furthermore, de facto reciprocity in judicial practice gives rise to several additional issues. The recognition of Chinese judgments by foreign courts does not automatically guarantee the establishment of reciprocity as determined by Chinese courts. Additionally, there have been instances where Chinese courts have failed to acknowledge precedents where foreign courts recognize Chinese judgments.108 The strict de facto reciprocity standard applied in Chinese judicial practice has been subject to criticism. Detractors contend that this approach has negative consequences, it may lead to retaliatory actions, and puts Chinese courts in a passive position when it comes to recognizing and enforcing foreign judgments.109 104 Nanjing Honggutan Xinqu Boneng Small Loan Co., Ltd. v. Xu Bin, (2021) Zui Gao Fa Min Shen No 1049. 105 Article 288 of the Civil Procedure Law. Where an effective judgment or ruling of a foreign court requires recognition and enforcement by a people’s court of the People’s Republic of China, a party may apply directly to the intermediate people’s court of the People’s Republic of China having jurisdiction for recognition and enforcement or apply to the foreign court for the foreign court to request recognition and enforcement by the people’s court in accordance with the provisions of an international treaty concluded or acceded to by the People’s Republic of China or under the principle of reciprocity. 106 In 2021, Chinese courts resolved 15,746 million civil and commercial cases in the first instance. Q. ZHOU, Report on the Work of the People’s Courts in Handling Foreignrelated Trials, presented on October 28, 2022, at the 37th meeting of the Standing Committee of the 13th National People’s Congress. 107 M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019. 108 B. FAN, Empirical Study on Application of the Principle of Reciprocity for Recognition and Enforcement of Foreign Judgments in China, Journal of International Economic Law, Vol. 3, 2021. Some argue that China has one of the most restrictive reciprocity systems in the world. B. ELBALTI, Reciprocity and the Recognition and Enforcement of Foreign Judgments: A Lot of Bark but not Much Bite, Journal of Private International Law, Vol. 13, Issue 1, 2017, p. 184-218. 109 Following the Gomi Akira case, Japanese courts have repeatedly refused to recognize and enforce Chinese judgments. J. LIAN, A Study on the Application of

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Foreign Judgements in China – Legal Framework and Recent Developments Additionally, Chinese courts lose the initiative to establish reciprocity precedents and to actively foster international judicial cooperation.110 b)

Allocating the Burden of Proof

The allocation of the burden of proof in determining the existence of reciprocity is a significant issue. It is imperative to ascertain whether the court or the parties involved, which include both the applicant and the respondent, is responsible for meeting this burden of proof. Ambiguity regarding the distribution of the burden of proof may hinder the enforcement of the reciprocity principle and grant the court broad discretion. In practice, it is typically the applicant who bears the consequences of failing to provide sufficient evidence.111 The allocation of the burden of proof for reciprocity is an unsettled matter in the Civil Procedure Law and its related interpretations. In practice, it is often borne by the applicant who takes the initiative to submit foreign precedents to the court.112 Nonetheless, the final decision rests with the court, and the criteria utilized by the court to arrive at such determinations remain obscure. This has led to divergent outcomes among various courts.113 The issue of allocating the burden of proof to ascertain the existence of reciprocity is not addressed in legislation. Some judges propose that the allocation of responsibility for ascertainment of foreign law under the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Reciprocity Principle in China’s Judicial Practice of Carrying Out Foreign Judgments: With Discussion of the Possibility of Its Abolishment, Journal of Shihezi University (Philosophy and Social Sciences), Vol. 1, 2018. 110 L. CHEN/ X. JIANG, The Current Status, Influence, and Improvement of the Principle of Reciprocity in Recognizing and Enforcing Foreign Court Judgments - Starting from the Case of Israel Recognizing and Enforcing the Judgment of Nantong Intermediate Court, Journal of Law Application, Vol. 5, 2018. 111 J. WANG, Reconstruction on the Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: For Tools with the Interest-balancing Doctrine, The Jurist, Vol. 6, 2012. 112 For example, in the case of CHOI JONG WON v. YOON JI YOUNG, the applicant submitted to a Chinese court that a South Korean court had recognized and enforced a Chinese judgment. (2018) Lu 02 Xie Wai Ren No 6. 113 In Herbert Truhe and Maryellen Truhe v. Jiangxi Lidu Fireworks Group Co., Ltd, the parties brought to the court's attention that the Central District Court of California had previously recognized and enforced a judgment from the Higher People’s Court of Hubei Province in China relating to the Gezhouba Sanlian Company case. Despite this, the court refused to recognize and enforce the US judgment due to the absence of an international treaty between China and the United States regarding mutual recognition and enforcement of judgments, or a corresponding reciprocal relationship. (2016) Gan 01 Min Chu No 354. In Liu Li v. Tao Li et al., the Wuhan Intermediate People’s Court considered the same California precedent submitted by the applicants and held that it can prove the existence of precedents in the US for recognizing and enforcing judgments from Chinese courts. Therefore, the court acknowledged the existence of a reciprocal relationship between China and the United States. (2015) E Wuhan Zhong Min Shen Wai Chu Zi No 00026.

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Guojian Xu/ Xin Cai (hereinafter referred to as the “Application of Law”) can be used as a reference.114 Ideally, the court should determine the existence of reciprocity, but the judge may seek assistance from the parties involved. The complexity of determining foreign judicial precedents is compounded by the constantly evolving nature of case law. As such, determining reciprocity based on whether a country recognizes or refuses to recognize domestic judgments would be a more comprehensive reference factor.115 Nevertheless, there is still no consensus on this matter in practice. 3.

Due Process

The concept of due process is subject to varying interpretations when it comes to recognizing and enforcing foreign judgments in different countries. In China, the requirements for due process are not explicitly defined in the Civil Procedure Law or its interpretation with respect to the recognition of foreign judgments. Instead, only Article 541 of the Civil Procedure Law Interpretation mandates that if the judgment or ruling rendered by the foreign court is a default judgment or ruling, the applicant shall, at the same time, submit the certification documents on a legal summons from the foreign court, unless the judgment or ruling has expressly stated the fact. According to this provision, China essentially considers limited service of process requirements as the only criterion for due process. To elaborate, first, the service requirements specified by this provision are only applicable to default judgments; second, the applicant should bear the burden of proving that service of process has been affected; and finally, the existence of documents from foreign courts that demonstrate service or explicit indications of service in the judgment or ruling constitutes due process. According to the Civil Procedure Law Interpretation, the burden of proof for service of process is placed on the applicant, because it is a requirement rather than a defense against service, deviating from mainstream practices.116 It is also unclear whether the standard for determining the legality of service should be based on Chinese law or the law of the country where the judgment was rendered. When applying Article 541 of the Civil Procedure Law Interpretation to foreign judgments which were rendered in countries that have no treaties with China, the legality of service should be judged according to the foreign law on which the judgment was made, but no lower than the minimum standard required by Chinese law.117 It is also essential to ensure that service of process within the territory of 114 Article 10 (1) of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China provides that foreign laws applicable to foreign-related civil relations shall be ascertained by the people’s court, arbitral authority or administrative organ. If any party chooses the applicable foreign laws, he shall provide the laws of this country. 115 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018. 116 W. ZHANG, A Study of “Service of Process Defense” in the Context of Recognition and Enforcement of Foreign Judgments, Presentday Law Science, Vol. 2, 2019. 117 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018.

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Foreign Judgements in China – Legal Framework and Recent Developments China does not violate the mandatory provisions on service in the Civil Procedure Law. According to Article 284 of the Civil Procedure Law, requests and provisions for judicial assistance should be made through treaties or diplomatic channels. Foreign consulates in China can serve documents on their own citizens, but only if it does not violate Chinese law or require compulsory measures. Finally, no foreign agency or individual may serve documents within Chinese territory without the permission of China’s competent authorities. Furthermore, since China opposed the use of postal service delivery when it joined the Hague Service Convention, 118 Chinese courts typically reject foreign judgments that have been delivered by the postal service. In HUKLA-WERKE G.m.b.H. Matratzen- und Polstermöbel v. Beijing Fukela Furniture Selling Co., Ltd.,119 the SPC determined that the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters should apply in the case at hand due to China and Germany being parties to the convention and having no bilateral judicial assistance agreement. Despite the absence of a specific standard for service defence in the Civil Procedure Law, the court declined to recognize the judgment on the ground that it was not yet legally effective against Beijing Fukela Furniture Selling Co., Ltd. Consequently, although the postal service had delivered the judgment to the company, it did not meet the standards of a legitimately valid service of process. 4.

Public Policy

Public policy or public order has long played an essential role in private international law, specifically in the recognition of foreign judgments. 120 Stability, predictability, and consistency are highly prized in recognizing and enforcing foreign judgments. To reduce obstacles to judicial cooperation, the international community has urged restriction of the scope of public order to the greatest extent possible. Therefore, public order in the recognition and enforcement of civil and commercial judgments is becoming increasingly self-restricted, leading to a gradual decline in its significance.121 The Civil Procedure Law recognizes public policy as a basis for refusing to recognize and enforce foreign judgments. 122 Nonetheless, Chinese courts have 118 Article 3 of the “Decision of the Standing Committee of the National People’s Congress on the Approval of the Accession to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters” opposes the use of the method specified in Article 10 of the Convention for service within the territory of the People’s Republic of China. 119 (2010) Min Si Ta Zi No 81. 120 Y. WANG, The Dilemma and Breakthrough of Public Order Reservations in Recognizing Foreign Judgments: A Case Study of Transnational Surrogacy, Studies in Law and Business, Vol. 1, 2018. 121 Y. MA, Public Order in Recognition and Enforcement of Foreign Court Judgments, Tribune of Political Science and Law, Vol. 5, 2010. 122 Article 289 of the Civil Procedure Law. After examining an application or request for recognition and enforcement of an effective judgment or ruling of a foreign court

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Guojian Xu/ Xin Cai exercised greater caution in applying public policy in recent years, and there have been only a few instances in practice where foreign law has been rejected based on public policy.

III. Recent Developments in China Regarding the Recognition and Enforcement of Foreign Judgments A.

Expanding the Understanding of Reciprocity

The reciprocity principle provided in the Civil Procedure Law has been the primary basis for Chinese courts to recognize and enforce foreign judgments due to the limited bilateral agreements. However, the strict adherence to the de facto reciprocity standard in Chinese courts has resulted in difficulties in recognizing and enforcing foreign judgments and may also lead to cross-border parallel litigation and foreign courts refusing to recognize Chinese judgments based on reciprocity. Therefore, it is crucial to exercise restraint in applying the reciprocity principle to avoid creating a judicial deadlock.123 Over the past few years, numerous academics have been advocating for China to adopt a more flexible approach to recognizing reciprocal relationships.124 With the continuous advancement of the “Belt and Road” initiative and the growing number of international civil and commercial transactions, China has introduced a range of judicial documents to strengthen its judicial mutual trust with other nations, and actively promote reciprocal relationships in the recognition and enforcement of foreign judgments.

in accordance with an international treaty concluded or acceded to by the People’s Republic of China or under the principle of reciprocity, a people’s court shall issue a ruling to recognize the legal force of the judgment or ruling and issue an order for enforcement as needed to enforce the judgment or ruling according to the relevant provisions of this Law if the people’s court deems that the judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China and the sovereignty, security and public interest of the People’s Republic of China. If the judgment or ruling violates the basic principles of the laws of the People’s Republic of China or the sovereignty, security or public interest of the People’s Republic of China, the people’s court shall not grant recognition and enforcement. 123 J. LIU/ C. ZHANG, Empirical Research on the Recognition and Enforcement of Foreign Court Judgments in China: An Analysis of Typical Cases of the People’s Courts from 2018 to 2020, Cross-strait Legal Science, Vol. 3, 2021. 124 J. LIAN, A Study on the Application of Reciprocity Principle in China’s Judicial Practice of Carrying Out Foreign Judgments: With Discussion of the Possibility of Its Abolishment, Journal of Shihezi University (Philosophy and Social Sciences), Vol. 1, 2018; M. MA/ S. CAI, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019.

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Foreign Judgements in China – Legal Framework and Recent Developments 1.

Two Opinions of the Supreme People’s Court on Providing Judicial Services and Safeguards of the “Belt and Road”

On June 16, 2015, the SPC issued “Several Opinions on Providing Judicial Services and Safeguards for the Construction of the “Belt and Road” (hereinafter referred to as the “2015 Safeguard Opinions”).125 Article 6 of the Opinion stipulates that courts may: [...] actively explore strengthening regional judicial assistance, cooperate with relevant departments to introduce new models of judicial assistance agreements in a timely manner, promote the conclusion of bilateral or multilateral judicial assistance agreements, and promote the mutual recognition and enforcement of judicial judgments among countries along the Belt and Road. In countries along the route that have not yet concluded judicial assistance agreements with China, Chinese courts can consider giving judicial assistance to parties from the other country first, actively promote the formation of reciprocity, and advocate and gradually expand the scope of international judicial assistance according to the intention of international judicial cooperation and the commitment of the other country to give China reciprocity. In 2019, the SPC issued “Opinions of the Supreme People’s Court on Further Providing Judicial Services and Safeguards for the Construction of the ‘Belt and Road’” (hereinafter referred to as the “2019 Safeguard Opinions”). Article 19 of the Opinion stipulates that China should strengthen international judicial cooperation, coordinate the exercise of jurisdiction, clarify the legal status of international cooperation centers established in border areas, explore the application of foreign laws in domestic economic and trade cooperation zones as well as the application of Chinese laws in overseas economic and trade cooperation zones, and adopt positive measures to facilitate the recognition and enforcement of foreign civil and commercial judgments. Article 24 stipulates that China should adopt a judicial attitude that presumes reciprocity, and continuously promote and expand the mutual recognition and enforcement of international commercial judgments.126 The “2015 Safeguard Opinions” and the “2019 Safeguard Opinion[s]” signal a more flexible stance by the SPC towards reciprocity. The former suggested that Chinese courts may take the lead in recognizing foreign judgments to facilitate the creation of mutual reciprocity. The latter even more boldly proposed a change in the understanding of reciprocity, moving away from the traditional reliance on de facto reciprocity and towards presuming reciprocity. While the Opinions have been a significant step forward, some problems still exist. First, the Opinions only apply to countries that are part of the “Belt and Road” initiative. While the initiative has expanded in recent years, many of 125 126

Fa Fa (2015) No 9. Fa Fa (2019) No 29.

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Guojian Xu/ Xin Cai China’s major trading partners are still not part of it.127 Thus, the Opinions’ scope of application is still limited. Second, Chinese courts will not unconditionally prioritize the recognition of foreign judgments. Prerequisites such as “intentions for international judicial cooperation and exchange” or “the other country’s commitment to give reciprocal judicial assistance to China” need to be considered. However, determining the existence of such intentions or commitments essentially involves evaluation of the diplomatic relations between the two countries. This task may be beyond the ability or qualifications of the courts handling specific cases. Moreover, it may not be possible to provide judicial assistance to the parties in the other country if these prerequisites are not met, hindering the establishment of a reciprocal relationship between the two sides and bringing China’s reciprocity back to its starting point.128 Despite their limitations, the Opinions signal a positive development in China’s approach to recognizing and enforcing foreign judgments. Since their release, multiple courts have recognized foreign judgments, with the Nanjing Intermediate People’s Court setting a precedent in 2016 by recognizing a civil judgment from the Singapore High Court based on reciprocity.129 This landmark case marks a significant shift towards China’s recognition and enforcement of foreign judgments based on reciprocity.130 2.

The Nanning Declaration

On June 8, 2017, the 2nd China-ASEAN Justices Forum was held in Nanning, Guangxi, with the theme of “Justice and Regional Judicial Cooperation in the Internet Era.” Judges from various countries’ supreme courts jointly passed the “Nanning Declaration,”131 which emphasized the need for a mechanism of mutual recognition and enforcement of judgments for cross-border transactions and investments in the region. Article 7 of the Nanning Declaration states: Cross-border transactions and investments in the region require the mechanism of mutually recognizing and enforcing appropriate judgments as judicial guarantees. Within the scope permitted by the law 127 To name a few, including United States, Japan, South Korea, Germany, Australia, Canada and United Kingdom. 128 Y. WANG, Feasibility Study of the Doctrine of Comity in Recognition and Enforcement of Foreign Judgments under the Building Belt and Road, Journal of Henan University (Social Science), Vol. 57, No 5, 2017. 129 (2016) Su 01 Xie Wai Ren No 3. 130 Y. WANG, The Principle of Reciprocity in Recognition and Enforcement of Foreign Judgments: Based on the Analysis of the Representative Kolmar Case under the Belt and Road Initiative, Journal of Soochow University (Law Edition), Vol. 3, 2017; K. TSANG, Enforcement of foreign commercial judgments in China, Journal of Private International Law, Vol. 14, Issue 2, 2018, p. 262-294. 131 The attending countries include: the Kingdom of Cambodia, Indonesia, Laos, Malaysia, Sabah and Sarawak (East Malaysia), Myanmar, the Philippines, Singapore, the Kingdom of Thailand, Vietnam, Afghanistan, Bangladesh, Nepal, Pakistan, and Sri Lanka.

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Foreign Judgements in China – Legal Framework and Recent Developments in China, courts from participating countries will interpret their own laws to reduce unnecessary parallel litigation, and consider the appropriate promotion of mutual recognition and enforcement of civil and commercial judgments in different nations. In countries that have not yet concluded international treaties for recognizing and enforcing foreign civil and commercial judgments, it can be presumed that there is a reciprocal relationship between each other within the scope permitted by the law in China if there is no precedent for refusing to recognize and enforce civil commercial judgments on the grounds of reciprocity in the judicial process of recognizing and enforcing the country’s civil and commercial judgments. The adoption of the presumed reciprocity principle in the Nanning Declaration marks the most significant breakthrough, as it removes the burden of proof required to prove the existence of de facto reciprocity and enhances the possibility of mutual recognition and enforcement of civil and commercial judgments.132 The Nanning Declaration establishes a presumed reciprocity with ASEAN countries through a judicial consensus, which may facilitate the practical effectiveness of mutual recognition and enforcement of judgments. However, as an international soft law document, the Declaration lacks legally binding force and instead relies on implementation mechanisms based on interests, ideas, and norms, rather than state coercion. 133 Despite the absence of detailed rules and formal legally binding force, such documents serve to coordinate the wills of cooperating parties and lay the groundwork for future development of both soft and hard law norms.134 Regarding the role played by these judicial documents and international soft law in the transformation of the reciprocity principle, most studies take a positive attitude,135 but some scholars point out that its actual significance should not be overestimated,136 and even directly deny its role.137 Furthermore, even if all courts

Y. ZHANG, New Trends in the Practice and Development of Reciprocity Principle under the Background of Belt and Road, People’s Court Daily, June 20th, 2017. 133 Y. HAN, Outline of the Soft Law Guarantee Mechanism for International Cooperation in the “Belt and Road”, Contemporary Law Review, Vol. 4, 2016. 134 Ibidem. 135 J. HUANG, Reciprocal Recognition and Enforcement of Foreign Judgments in China: Promising Developments, Prospective Challenges and Proposed Solutions, Nordic J. Int'l L., Vol. 88, Issue 2, 2019, p. 250-279. 136 H. ZHENGXIN, On the Legal Dilemma of Recognizing and Enforcing Foreign Judgments in the United States – China’s Response and Lessons, Science of Law (Journal of Northwest University of Political Science and Law), Vol. 5, 2019. 137 Some argues that this kind of non-binding presumption of reciprocity or commitment to reciprocity, which lacks legal binding force, cannot ensure that all Chinese judgments be recognized by the other country meet the reciprocity condition or that the other country adopts recognition conditions equivalent to those of China. Such a practice of disregarding the meaning of reciprocity conditions and interpreting them arbitrarily does not help improve and enhance China's international judicial image in recognizing and enforcing foreign civil and commercial judgments. See LI Wang, On the Principle of Reciprocity in 132

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Guojian Xu/ Xin Cai strictly adhere to the de jure reciprocity and presumed reciprocity promoted by these documents, countries such as Japan that are already in a reciprocity deadlock with China will still face difficulties in mutual recognition and enforcement of judgments without legislative changes. In addition, due to the crude conditions set by Chinese law for recognition and enforcement of foreign judgments, reciprocity and public order are two grounds that can still be used to refuse recognition and enforcement. Therefore, once the people’s court adopts a loose standard for reciprocity, public policy may become the only reason to refuse to recognize and enforce foreign judgments, and must be applied with caution. In this way, lowering the threshold for the establishment of reciprocity may pose potential risks to China’s fundamental interests and judicial authority. B.

2022 Minutes of the National Symposium on Foreign-Related Commercial and Maritime Trial Work

1.

Overview

On January 24, 2022, the SPC issued the Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work (the “Minutes”), which provided guidance on many legal issues and disputes in foreign-related commercial and maritime trials. The Minutes are structured into three primary parts: the section on foreign-related commercial matters, the section on maritime matters, and the section on arbitration review. It covers a range of topics including issues of jurisdiction, service of process, evidence collection, ascertainment and application of foreign law, recognition and enforcement of foreign judgments and arbitration awards, disputes over ship-property rights and tort liability, review of the effectiveness of arbitration awards, and application by reference138 in cases related to Hong Kong SAR, Macao SAR and Taiwan, comprising a total of 111 provisions.139 In accordance with the Provisions on the Work of Judicial Interpretation, judicial interpretations can take one of five forms: “interpretation,” “provision,” “rule,” “ reply,” and “decision.”140 Meeting minutes, although not strictly classified as judicial interpretations, are utilized as an essential way of filling legal gaps in Chinese judicial practice. As a normative document issued by the SPC, meeting minutes represent a form of judicial policy and offer abstract supplementary guidthe Recognition of Foreign Court Judgments, Nanjing University Law Journal, Vol. 1, 2022. 138 Since Hong Kong, Macau and Taiwan are part of China, the Minutes only apply to “Foreign-related” cases. Therefore, the last article of the Minutes expands its scope by stipulating that:”[f]or commercial and maritime disputes involving the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and Taiwan, if no relevant judicial interpretation has been provided, the provisions of these Minutes shall apply” 139 See Appendix 1: Excerpt from Minutes of the National Symposium on Foreignrelated Commercial and Maritime Trial Work. 140 Article 6 of the Provisions of the Supreme People’s Court on the Work of Judicial Interpretation, Fa Fa (2021) No 20.

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Foreign Judgements in China – Legal Framework and Recent Developments ance to the law. Lower courts should consider using them as a means of reasoning in the “this court considers that” part of their judgment when encountering related issues, although they cannot be directly cited as the basis for judgments. Failing to do so may result in erroneous legal applications and may potentially lead to reversal by higher courts.141 As such, it is essential for lower courts to consider meeting minutes as a valuable resource in their decision-making processes. Since their release in 2022, the Minutes have been utilized by various Chinese courts in cases involving the recognition and enforcement of foreign judgments, 142 and some of their content has been absorbed into the pending Civil Procedure Law (2023 Amendment).143 Additionally, foreign courts have recognized the influential role of the Minutes in Chinese judicial practice, as evidenced by the citation by Judge Gregory H. Woods of the Southern District of New York Federal District Court, of Article 11 of the Minutes in the case of Smart Study Co., LTD. v. Acuteye-US, et al.144 While the Minutes do not have force of law in China, they serve as a means by which the SPC expresses its opinions to lower courts and provides guidance for their actions. As such, lower courts should adhere to the guidance outlined in the Minutes.145 2.

Key Provisions

Section 9 of Part I of the Minutes is entitled “Hearing on Applications for Recognition and Enforcement of Foreign Judgments” and contains 17 provisions. This section specifically governs the review standard when recognizing and enforcing foreign judgments, the scope of application of the Minutes, the court’s jurisdiction, application materials, handling of jurisdictional objections, preservation measures, the determination of “finality” and “reciprocity,” the recognition and enforcement of foreign judgments granting punitive damages, the grounds for refusing recognition and enforcement of foreign judgments, and the reporting and notification mechanisms for recognition and enforcement of foreign judgments. Compared to the Civil Procedure Law and related judicial interpretations, the Minutes provide more detailed regulation. They incorporate best practices from recent judicial cases and provide stronger guidance and operability.

X. HE, The Inherent Constraints of Systematic Thinking on the Uniformity of Civil Adjudication - Taking the Application of the Civil Code as a Perspective, China Journal of Applied Jurisprudence, Vol. 4, 2022. 142 A notable example is Spar Shipping AS v. Grand China Logistics Holding (Group) Co., Ltd., (2018) Hu 72 Xie Wai Ren No 1, which will be discussed later. 143 See Appendix 2: Excerpt from Civil Procedure Law of the People’s Republic of China (Draft Amendment). 144 Smart Study Co., LTD. v. Acuteye-US, et al., S.D.N.Y. 2022. 145 Id. 141

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Guojian Xu/ Xin Cai a)

Scope of Application

The “Minutes” first clarify that the legal bases for Chinese courts to handle applications for recognition and enforcement of foreign court judgments and rulings are Article 289 of the Civil Procedure Law and Article 544(1) of the Civil Procedure Law Interpretation. Specifically, the court first needs to examine whether the country in question has concluded or jointly participated in international treaties with China, and if so, must handle the case in accordance with the treaty. If there is no treaty, or if the treaty does not specify relevant matters, the specific examination standard shall be that provided by the Minutes. The Minutes also exclude the following types of cases: bankruptcy, intellectual property, unfair competition, and monopoly, because these types of cases have strong regional and specific characteristics.146 This provision is the same as the Civil Procedure Law and the Civil Procedure Law Interpretation, but further clarifies that treaties must be given priority,147 which is more in line with the basic principles of international law. b)

Criteria for Foreign Judgment or Ruling

Article 41 of the Minutes sets out the criteria for what constitutes a foreign judgment or ruling. According to this provision, whether foreign judgments fall under the category of “judgment or ruling” as defined in Article 289 of the Civil Procedure Law should be based on their substantive content, rather than their type or name. The second paragraph of this Article further explains that legal documents such as judgments, rulings, decisions, orders, and other legal documents made by foreign courts regarding civil and commercial disputes, as well as legal documents made in criminal cases regarding compensation for civil damages, all belong to the category of “judgment or ruling” specified in Article 289 of the Civil Procedure Law. Previously, some Chinese bilateral judicial assistance treaties on civil and commercial matters have already included compensation for civil damages in criminal cases within the scope of judgment recognition and enforcement, 148 and some courts have recognized foreign judgments on compensation requests in criminal cases on this basis.149 This unifies the provisions of domestic law and international treaties. However, this provision also excludes preservation orders made by foreign courts and other procedural legal documents. Article 33 of the Minutes. According to Article 289 of the Civil Procedure Law, the recognition and enforcement of foreign judgments in China should be reviewed based on either international treaties that China has signed or acceded to, or (emphasis added) on the principle of reciprocity. However, in practice, some courts have disregarded these bilateral treaties and directly applied the principle of reciprocity, See (2016) Yu 15 Xie Wai Ren No 1. 148 For example, see Article 16 of the Agreement between the Government of the People’s Republic of China and the Government of the Polish People’s Republic on Judicial Assistance in Civil and Criminal Matters. 149 Santint Poland Sp. zo. o. v. Zhang Pawuleikedan, (2018) E 06 Xie Wai Ren No 1. 146 147

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Foreign Judgements in China – Legal Framework and Recent Developments c)

Determination of the Effectiveness of the Judgment (Finality)

Articles 42 and 43 of the Minutes establish guidelines for determining the finality of foreign judgments and addressing situations where the authenticity and finality of the judgment cannot be confirmed. This section specifically refers to the provisions in the Civil Procedure Law and its Interpretations, which mandate that foreign judgments can only be recognized and enforced in China if they have legal effect.150 The Minutes provide a clear standard for determining finality by requiring judges to review foreign judgments to determine whether they have legal effect in the country of origin. This standard aligns with China’s bilateral treaties and makes logical sense. 151 However, applying this standard requires judges to have some knowledge of how finality is determined in specific foreign countries, which may involve the ascertainment of foreign law. The Minutes do not specify who is responsible for determining the standard of finality in foreign countries, but according to the Application of Laws and its judicial interpretations,152 the parties may be responsible for determining and examing the issue, with the court making the final determination. If the parties do not raise the issue, the court shall determine it. Due to the complexity of this issue, the Minutes provide that judgments or rulings pending appeal or in the appeals process are not legally effective. For foreign judgments that are not final or whose finality and authenticity cannot be determined during review, the court should reject the application. However, the applicant can reapply when the conditions have been met. d)

Recognition of a Reciprocal Relationship

China’s current legislation does not provide clear criteria and guidance for the courts in the matter of reciprocity, resulting in a rigid adherence to the de facto reciprocity established in the Gomi Akira Case. This approach, however, has been widely criticized, prompting scholars to suggest that the courts adopt a more flexible approach towards reciprocity. 153 Notably, the Minutes have introduced significant changes to this issue. Article 44 of the Minutes outlines various factors that the People’s Courts can consider when determining the existence of reciprocity for the purpose of recognizing and enforcing foreign judgments. This provision is particularly significant, as it represents the first time that the SPC has offered a relatively clear understanding of reciprocity. The Minutes provide that reciprocity can be recognized if any of the following three situations are met: first, if under the law of the country where the Article 288 and Article 289 of the Civil Procedure Law, and Article 542 of the Civil Procedure Law Interpretation. 151 Please refer to the relevant discussion in the previous section on bilateral treaties. 152 Article 10 of Application of Law and Article 16 of the Interpretation of Application of Law. 153 J. HUANG, Interregional Recognition and Enforcement of Civil and Commercial Judgments, Hart Publishing, 2014, p. 62–64. 150

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Guojian Xu/ Xin Cai foreign court is located, the civil and commercial judgments made by Chinese courts can be recognized and enforced by that country’s courts; second, if China and the country where the court is located have reached mutual understanding or consensus; and third, if the country where the court is located has made a reciprocal commitment to China through diplomatic channels and vice versa. 154 This marks a significant change on this issue and is likely to be the most notable provision of the Minutes, as well as the first time the SPC has clearly stated its understanding of the standard for recognizing reciprocal relations. The first criterion established by the Minutes can be seen as a significant shift in China’s attitude towards the recognition of reciprocal relations. In the past, China’s recognition of foreign judgments, represented by the Gomi Akira Case, has adhered to the principle of de facto reciprocity, requiring that recognition of a Chinese judgment by a foreign court must be a necessary precondition for the recognition of reciprocal relations. This criterion greatly broadens the understanding of reciprocity and achieves a shift from de facto reciprocity to de jure reciprocity. It is worth noting that determining the existence of de jure reciprocity is a more complex task than identifying de facto reciprocity. To ascertain whether a foreign judgment can be recognized and enforced under the law of the host country, an examination and comprehension of the pertinent legal provisions in that jurisdiction is required. This undertaking can be arduous, particularly in instances where the applicant has not provided adequate evidence and there is no involvement of legal experts.155 The de jure reciprocity standard, while encompassing a wider range of scenarios, also involves a greater degree of risk and difficulty in its implementation. The second criterion as set out in the Minutes requires examining whether China and the country where the judgment was rendered have reached an agreement or consensus on mutual recognition. The Minutes do not explain what constitutes “agreement or consensus,” but memoranda signed between the highest courts of the two countries, such as the “Guidance Memorandum between the Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore on Recognition and Enforcement of Money Judgments in Commercial Cases”, signed in 2018, may well fall into this category. Such memoranda are not legally binding156 but, considered in conjunction with the Minutes, do signify the existence of an understanding or consensus, leading to the inference of a Article 44 of the Minutes. S. LI / Q. ZHAO, The Application of the Principle of Reciprocity in the Recognition and Enforcement of Foreign Judgments, People’s Judicature, Vol. 2, 2018. 156 Article 2 of the Memorandum of Guidance Between the Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore on Recognition and Enforcement of Money Judgments in Commercial Cases: This memorandum has no binding legal effect. It does not constitute a treaty or legislation, is not binding on the judges of either contracting party [i.e. China or Singapore] and does not supersede any existing or future laws, judicial decisions or court rules. It is not intended to be exhaustive and is not intended to create or alter any existing or future legal rights or relations or to create any binding arrangements for the reciprocal recognition and enforcement of each party's money judgments. 154 155

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Foreign Judgements in China – Legal Framework and Recent Developments reciprocal relationship between the two countries. This is because the Minutes do not require a formal treaty or agreement to be in place, but rather allow for a looser concept of “agreement or consensus” compared to bilateral treaties, which require extensive negotiations and are subject to international relations and environments. Over the past decade, China has significantly decreased the pace at which it concludes treaties or agreements with foreign countries, in contrast to the 1980s and 1990s.157 It is much easier for countries to reach such an agreement or consensus on the recognition and enforcement of judgments. The third criterion for determining the existence of reciprocity, as stipulated in the Minutes, is that China or the judgment-rendering country has made reciprocal commitments through diplomatic channels. The Nanning Declaration mentioned earlier can be considered as a specific manifestation of this standard. Overall, the Minutes have brought a significant change to the recognition of reciprocity in China. On the one hand, it has broadened the narrow understanding of reciprocity in previous judicial practices from de facto reciprocity to de jure reciprocity. Additionally, diverse methods have been employed to establish reciprocal relationships. to establish reciprocity using diversified approaches, including making reciprocal promises through diplomatic channels and reaching judicial understandings, memoranda, or agreements with China for mutual recognition and enforcement of judgments.158 This expansion of avenues for establishing reciprocity is a notable achievement of the Minutes. It’s also worth noting that Article 5 of the Minutes requires a case-by-case examination by the People’s Court to determine the existence of a reciprocal relationship. This means that when a court receives an application to recognize and enforce a foreign judgment, it must carefully examine whether any of the three criteria exists. If one of them does, the court can recognize the existence of a reciprocal relationship. Even if there was a previous instance of a Chinese court refusing a judgment from a particular country, it does not carry absolute weight. 159 Moreover, if this provision is interpreted strictly, the mere fact that a Chinese court had previously recognized a foreign judgment does not automatically establish the existence of a reciprocal relationship between the two countries. The determination of such reciprocity must be made on a case-by-case basis, taking into account all relevant factors. The previous recognition, while relevant, can only serve as evidence of reciprocity, subject to further judicial confirmation. The Minutes fail to address a crucial aspect regarding the establishment of reciprocity, specifically, the allocation of the burden of proof. Based on prevailing G. WEIXIA, China’s Approach to Recognition and Enforcement of Foreign Civil and Commercial Judgments and International Litigation Capacity Building, The Journal of Comparative Law, Vol. 15, Issue 2, 2020. 158 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018. 159 This provision is particularly favorable for the recognition and enforcement of judgments in common law countries. In many common law jurisdictions, foreign judgments can be recognized as long as certain conditions are satisfied. For instance, in the United States, there are instances where judgments from China have been recognized and other instances where they have been refused recognition. 157

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Guojian Xu/ Xin Cai judicial practice, the primary responsibility of proving reciprocity should fall on the applicant, with the court ultimately rendering the final determination. On March 17, 2022, the Shanghai Maritime Court made a ruling in the case of Spar Shipping AS v. Grand China Logistics Holding (Group) Co., Ltd., recognizing a judgment of the High Court of England and Wales.160 This is the first published case based on reciprocity under the Minutes after its entry into force. In this case, the applicant, Norwegian shipowner Spar Shipping AS, signed three ship charter contracts with Grand China Shipping (Hong Kong) Co., a wholly owned subsidiary of the respondent Grand China Logistics Holding (Group) Co., Ltd. The respondent issued three performance bonds to guarantee the performance of the contracts, which were all governed by English law and clearly stipulated that the High Court of England and Wales had jurisdiction over disputes arising from the bonds. When the lessee (the Hong Kong subsidiary) failed to perform the charter contracts on time, the applicant filed a lawsuit against the respondent (Grand China Logistics) in the High Court of England and Wales. After trial, the court ruled that the respondent should bear the applicant’s loss of principal plus interest totaling USD 37,238,126.161 The respondent raised no objection to jurisdiction in the English court nor did it file any lawsuit in any Chinese court; it appeared in court and appealed to the Court of Appeal, which eventually dismissed its appeal.162 In 2018, the applicant applied to the Shanghai Maritime Court, which has jurisdiction over the respondent, for recognition of the English judgment. In the absence of a bilateral agreement addressing the recognition and enforcement of judgments between China and the UK, the recognition of UK judgments in China is contingent upon the existence of reciprocity between the two nations. This was evidenced in the 2004 case of the Russian National Symphony Orchestra and Art Mont Company v. Beijing International Music Festival Society, wherein the Beijing Second Intermediate People’s Court declined to recognize the UK High Court’s judgment. The Beijing court held that since no international treaty existed governing the recognition and enforcement of judgments between China and the UK, reciprocity had not been established between the two nations.163 During the trial of the present case, the applicant argued that UK courts have recognized Chinese judgments in the past. In support of this argument, reference was made to the 2015 case of Spliethoff’s Bevrachtingskantoor BV v. China Bank Co. Ltd.,164 where the UK High Court recognized the judgments and 160 Spar Shipping AS v. Grand China Logistics Holding (Group) Co., Ltd., (2018) Hu 72 Xie Wai Ren No 1. This case was filed in 2018, but faced a change in the assigned judges during the process. In 2019, the applicant's lawyer wrote an article discussing the case. See W. YANG/ Y. LUO/ J. XIAO, On the recognition and enforcement of foreign court judgments and decisions in China, China Journal of Maritime Law, Vol. 30, No 1, 2019. 161 Spar Shipping AS v Grand China Logistics Holding (Group) Co, Ltd [2015] EWHC 718 (Comm). 162 Grand China Logistics Holding (Group) Co. Ltd v Spar Shipping AS [2016] EWCA CIV 982. 163 Russian National Symphony Orchestra and Art Mont Company v. Beijing International Music Festival Society , (2004) Er Zhong Min Te Zi No 928. 164 [2015] EWHC 999 (Comm).

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Foreign Judgements in China – Legal Framework and Recent Developments freezing orders issued by the Qingdao Maritime Court and the Shandong Provincial Higher People’s Court in Rongcheng Xixiakou Shipbuilding Co. Ltd., Wartsila Engine (Shanghai) Co. Ltd., and Wartsila Finland Oy.165 The applicant argued that this constituted de facto reciprocity between the UK and China. However, the Shanghai Maritime Court did not adopt this view and held that these cases do not constitute precedents of English courts recognizing and enforcing Chinese judgments, nor do they constitute precedents of English courts refusing to recognize Chinese court judgments. According to the court, the principle of reciprocity under the Civil Procedure Law does not mandate that foreign courts recognize and enforce civil and commercial judgments rendered by Chinese courts as a prerequisite for reciprocity. The court thus opined that if a civil and commercial judgment rendered by a Chinese court can be recognized and enforced by a foreign court in accordance with its law, there would be reciprocity between China and that jurisdiction in terms of recognizing and enforcing civil and commercial judgments. In this case, the Shanghai Maritime Court departed from the traditional de facto reciprocity criterion held by most courts since the Gomi Akira Case when determining reciprocity. The presiding judge confirmed that determining reciprocity was a crucial aspect of the case because the Minutes provide rather specific guidance on the judicial determination of reciprocity, which no longer requires prior recognition and enforcement of Chinese judgments by foreign courts as a necessary prerequisite. Therefore, de jure reciprocity was adopted in this case, which holds that if a foreign country can recognize and enforce civil and commercial judgments made by Chinese courts based on its own laws, then there is a reciprocal relationship between China and that country.166 In the end, the Shanghai Maritime Court issued a ruling recognizing the British court judgment in question. This case is significant as it represents the first instance of a foreign court’s judgment being recognized based on the principle of the de jure reciprocity as set out in the Minutes. While this case effectively transformed the reciprocity principle from its traditional de facto reciprocity to de jure reciprocity, there are still some aspects that require further clarification when it comes to its practical implementation. After this ruling, the Commercial Court of England and Wales granted a summary judgment on December 19, 2022, in the matter of Hangzhou Jiudang Asset Management Co. Ltd v. Kei Kin Hung. This judgment recognized two judgments made by the Gongshu District Court and Jianggan District Court of Hangzhou. 167 This recognition of Chinese judgments by an English court is an important development that further reinforces the principle of de jure reciprocity established by the Shanghai Maritime Court’s ruling. Nonetheless, there are still uncertainties and challenges in the implementation of this principle, which need to

165

(2011) Qinghai Fa Hai Shang Chu Zi No 271, 361. (2013) Lu Min Si Zhong Zi

No 87, 88. 166 See: “What Criteria Are Adopted to Determine Reciprocity? Shanghai Maritime Court Recognizes Commercial Judgment of English Court for the First Time”, available at https://shhsfy.gov.cn/hsfyytwx/hsfyytwx/spgk1356/spdt1420/2022/11/07/09b080ba83262c2 20184516312342d71.html?tm=1668405003360 (accessed on 17 May 2023). 167 [2022] EWHC 3265 (Comm).

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Guojian Xu/ Xin Cai be addressed by both China and its foreign partners to promote greater legal certainty and consistency in cross-border dispute resolution. e)

Grounds for Refusal of Recognition and Enforcement

The existing provisions governing the refusal to recognize and enforce foreign judgments in China are fragmented and present challenges for judicial practice. The Civil Procedure Law stipulates that foreign judgments must be final and must not contravene public policy, while the judicial interpretations only furnish limited guidelines for ensuring due process. In contrast, the Minutes offer a more comprehensive framework for addressing this matter in a structured manner. The Minutes seek to address the dearth of guidance in extant laws by unambiguously outlining the grounds for refusing to recognize and enforce foreign judgments. This effort not only bolsters the predictability and certainty of the law but also lays the groundwork for the establishment of a systemic basis for future recognition of de jure reciprocity between countries that share fundamental similarities in their legal frameworks.168 In this respect, the Minutes represent a significant milestone. According to the Minutes, if a people’s court finds any of the following circumstances, it shall decide not to recognize and enforce foreign judgments: (1) The foreign court had no jurisdiction over the case according to Chinese law; (2) The respondent was not lawfully summoned, or although lawfully summoned, did not receive a reasonable opportunity to present arguments or was not properly represented; (3) The judgment was obtained by fraud; (4) The people’s court has made a judgment on the same dispute, or has recognized and enforced a judgment or arbitration award made by a third country on the same dispute; (5) The foreign judgment violates China’s basic principles of law or national sovereignty, security, or social public interests.169 (1)

Indirect Jurisdiction

The first ground for refusing to recognize foreign judgments, according to the Minutes, is lack of jurisdiction, which refers to indirect jurisdiction. Article 46(1) of the Minutes states that judgments made by foreign courts without jurisdiction over the case will not be recognized under the laws of the People’s Republic of China. The absence of provisions on indirect jurisdiction in the Civil Procedure Law and the Civil Procedure Law Interpretation, in contrast to the bilateral judicial assistance agreements that China has signed, has been identified as a shortcoming. The Provisions of the Supreme People’s Court on Issues Concerning the Procedures for Chinese Citizens to Apply for Recognition of Foreign Divorce JudgM. MA/ C. SIYANG, The Principle of Reciprocity of China in Recognition and Enforcement of Foreign Judgments: Dilemmas and Solutions, Political Science and Law, Vol. 3, 2019. 169 Regarding the grounds for refusing to recognize and enforce foreign judgments, the provisions of the “Civil Procedure Law (2023 Amendment)” are consistent with the “Minutes”, except for the more explicit requirements for establishing indirect jurisdiction. 168

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Foreign Judgements in China – Legal Framework and Recent Developments ments, while requiring foreign courts to have jurisdiction, fail to establish any standards for determining jurisdiction.170 As a result, there have been only a limited number of cases that have considered indirect jurisdiction in the context of applications for recognition and enforcement of foreign divorce judgments, and the different courts have applied varying standards. 171 This lack of clarity has been criticized by some scholars as a significant defect.172 Before the promulgation of the Minutes, a judge from the SPC emphasized the significance of indirect jurisdiction and suggested that relevant provisions of bilateral treaties should be directly applied in cases where such treaties exist. With respect to nations that have not yet established treaties with China regarding the recognition and enforcement of judgments, the principle of reciprocity mandates Chinese courts to scrutinize whether the foreign court had proper jurisdiction over the case, as these countries typically require indirect jurisdiction for recognition and enforcement of foreign judgments.173 However, in practice, courts rarely examine this issue and often merely skim over it, even when it pertains to jurisdiction.174 The Minutes have provided a notable breakthrough in this regard, as they have explicitly stipulated the requirements for indirect jurisdiction for the first time. The standard for indirect jurisdiction can be categorized into three models, as can be seen from the research on China’s bilateral treaties in the previous section: (1) Only stipulating that the judgment must comply with the jurisdictional rules of the recognizing and enforcing country’s laws; (2) Not only explicitly listing the jurisdictional basis that the court rendering the judgment must satisfy but also prohibiting infringement upon the exclusive jurisdiction of the recognizing and enforcing country; (3) Only explicitly prohibiting infringement upon the exclusive jurisdiction of the recognizing and enforcing country. The Minutes follow the first model, which establishes that whether a foreign court has jurisdiction over a case should be judged based on the laws of the People’s Republic of China. In this regard, it should be understood that: first, the foreign court must have jurisdiction over the case in accordance with the laws of its own legal system; second, the

170 Article 12 (2) of the Provisions of the Supreme People’s Court on Issues Concerning the Procedures for Chinese Citizens to Apply for Recognition of Foreign Divorce Judgments provides that the foreign court that rendered the judgment lacked jurisdiction over the case. Fa Shi (2020) No 20. 171 Y. HUANG, On Review of Indirect Jurisdiction in Recognition and Enforcement of Foreign Judgments in China, Shantou University Journal (Humanities & Social Sciences Monthly), Vol. 35, No 2, 2019. 172 Z. XUAN, Research on the Recognition and Enforcement of Judgments between States, China University of Political Science and Law Press, 2009, p. 257. 173 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018. 174 In Russian National Symphony Orchestra and Art Mont Company v. Beijing International Music Festival Society, although the respondent, the Beijing International Music Festival Society, raised objections concerning the lack of jurisdiction of the UK High Court in this case, the Second Intermediate People’s Court of Beijing did not examine this issue, but directly refused to recognize the judgment on the grounds that there was no treaty or reciprocity between China and the UK. (2004) Er Zhong Min Te Zi No 928.

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Guojian Xu/ Xin Cai foreign judgment must not violate China’s exclusive jurisdiction;175 third, if the foreign court’s jurisdiction is based on an agreement between the parties, it must not violate China’s relevant agreement jurisdiction provisions;176 fourth, there must not be any parallel litigation that has been decided in China over the same dispute; 177 and fifth, the parties involved in the case must not have reached an effective arbitration agreement on the same dispute.178 This provides clear guidance on the factors that should be considered when determining whether a foreign court has jurisdiction over a case, which is a significant development. (2)

Due Process

The second ground for refusing recognition and enforcement specified in the Minutes focuses on the issue of due process. As most countries do not subject foreign court judgments to substantive review, the focus is on procedural review for recognition and enforcement. Although the Civil Procedure Law does not explicitly address due process, China’s bilateral judicial assistance agreements and domestic judicial practice adopt a formalistic approach to reviewing foreign judgments. That is, the judges base their review on the legally prescribed recognition criteria, without reviewing the foreign court’s determination of facts and law.179 Whether proper service of process has been made has become a core consideration for the courts. Some studies have shown that a defense based on improper service of process is one of the most commonly used grounds for refusing recognition and Article 34 of Civil Procedure Law. “The following cases shall be under the exclusive jurisdiction of the people’s courts as specified below: (1) An action instituted for a real estate dispute shall be under the jurisdiction of the people’s court at the place where the real estate is located. (2) An action instituted for a dispute arising from harbor operations shall be under the jurisdiction of the people’s court at the place where the harbor is located. (3) An action instituted for an inheritance dispute shall be under the jurisdiction of the people’s court at the place of domicile of the deceased upon death or at the place where the major part of the estate is located.” 176 Article 35 of Civil Procedure Law. “Parties to a dispute over a contract or any other right or interest in property may, by a written agreement, choose the people’s court at the place of domicile of the defendant, at the place where the contract is performed or signed, at the place of domicile of the plaintiff, at the place where the subject matter is located or at any other place actually connected to the dispute to have jurisdiction over the dispute, but the provisions of this Law regarding hierarchical jurisdiction and exclusive jurisdiction shall not be violated.” 177 Article 533 of Civil Procedure Law Interpretation. “For a case over which both a people’s court of the People’s Republic of China and a foreign court have jurisdiction, if one party institutes an action in the foreign court whereas the other party institutes an action in the people’s court of the People’s Republic of China, the people’s court may accept the case. If, after a judgment is rendered, the foreign court or a party requests the people’s court’s recognition and enforcement of the judgment or ruling rendered by the foreign court concerning this case, the people’s court shall not consent to the request, unless it is otherwise prescribed by an international treaty concluded or acceded to by both countries.” 178 Article 47 of the Minutes. 179 H. SHEN, Research on Several Difficulties in Recognizing and Enforcing Foreign Civil and Commercial Judgments, Journal of Law Application, Vol. 5, 2018. 175

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Foreign Judgements in China – Legal Framework and Recent Developments enforcement of foreign judgments in Chinese judicial practice.180 The Civil Procedure Law Interpretation takes the limited requirements for service of process as the sole standard for due process, but only applies it in cases of default judgment, and places the burden of proof on the applicant. The Minutes follow the pattern that China has employed in most of its bilateral judicial assistance treaties, by providing that a failure to receive a lawful summons, a lack of reasonable opportunity for statements or arguments, or the absence of adequate representation for a party without litigation capacity, are grounds for refusing to recognize and enforce foreign judgments. (3)

Fraud

Fraud is widely accepted as a valid ground for refusal to recognize and enforce foreign judgments. However, there is a lack of clear guidance on the definition and extent of fraud in international documents.181 Similarly, Chinese law and judicial interpretations do not directly address fraud. Instead, the approach aligns with that of Civil Law systems, which typically rely on public policy.182 Currently, none of the 35 bilateral treaties in force between China and other countries contain provisions addressing fraud defenses. The sole exception is the agreement on recognition and enforcement of judgments signed with the Hong Kong SAR, which includes provisions for rejecting judgments obtained through fraud.183 Scholars have argued for the inclusion of provisions regarding fraudulent defenses in China’s framework for recognizing and enforcing foreign judgments, 184 particularly in 180 W. ZHANG, Recognition and Enforcement of Foreign Judgments in China: A Call for Special Attention to Both the “Due Service Requirement” and the “Principle of Reciprocity”, Chinese Journal of International Law, Vol. 12, Issue 1, 2013, p. 143. 181 Article 5 of the 1971 Hague Convention on the Recognition and Enforcement of Foreign Judgments, Article 5 of the 1973 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations, Article 9 of the 2005 Hague Convention on Choice of Court Agreements, and Article 22 of the 2007 Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance. 182 F. LIN/ Z. QIAN, On the Fraud Defense in the Recognition and Enforcement of Foreign Judgments - A Perspective of the Recognition and Enforcement of Judgments between Mainland China and Hong Kong, Law-Based Society, Vol. 2, 2019. 183 Article 9 of the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region” signed in 2006; Article 9 of the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Matrimonial and Family Cases by the Courts of the Mainland and of the Hong Kong Special Administrative Region” signed in 2017; and Article 12 of the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region” signed in January 2019. 184 W. LI, The Fraud Exception in the Recognition and Enforcement of Foreign Judgments, Wuhan University International Law Review, Vol. 5, 2017; F. LIN/ Z. QIAN, On the Fraud Defense in the Recognition and Enforcement of Foreign Judgments - A Perspective of the Recognition and Enforcement of Judgments between Mainland China and Hong Kong, Law-Based Society, Vol. 2, 2019.

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Guojian Xu/ Xin Cai anticipation of China’s possible formal ratification of the Hague Convention on Choice of Court Agreements185 and the Hague Convention on the Recognition and Enforcement of Foreign Civil and Commercial Judgments.186 This presents a significant challenge for Chinese courts in terms of interpreting and applying the notion of fraud within the context of their legal system. The Minutes recognize fraud as a valid ground for rejecting the recognition and enforcement of foreign judgments, alongside public policy, which can be seen as an effort to align with international practices. It is worth noting that the Minutes only provide a rather simple rule that if the foreign judgments are obtained through fraud, such judgments shall be refused recognition and enforcement. However, the Minutes do not provide specific guidance on how to apply this provision. In light of the dearth of both theoretical and practical underpinnings, the crux of the matter pertains to the interpretation and application of the fraud exception. Certain scholars have proposed that pertinent frameworks and tenets from the realm of civil retrial ought to be adopted to ascertain fraud.187 Given that courts ordinarily do not engage in de novo review in the context of the recognition and enforcement of foreign judgments, it is possible to fashion a relatively rigorous evidentiary regime that serves to circumscribe the purview of the fraud exception,188 while simultaneously accommodating the exigencies of formal review. (4)

Res Judicata

As per the Minutes, in the event that a Chinese court has previously rendered a judgment in the same dispute or has acknowledged and executed a judgment or arbitration award from a third nation concerning the same dispute, such a circumstance shall serve as a basis for refusing to recognize and enforce a foreign judgment. (5)

Public Policy

The doctrine of public policy is a widely accepted defense mechanism in almost every jurisdiction and finds expression in both China’s Civil Procedure Law and its bilateral judicial cooperation agreements. In practice, this exception is usually invoked as a measure of last resort, and instances of its application as grounds for declining to recognize and enforce foreign judgments are relatively infrequent.189 The stipulations contained in the Minutes pertaining to public policy align with those enshrined in Article 289 of the Civil Procedure Law, which defines public 185 Article 9, Para. 4 of the Hague Convention on Choice of Court Agreements: “The judgment was obtained by fraud in connection with a matter of procedure”. 186 Article 7, Para. 2 of the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters: “The judgment was obtained by fraud”. 187 F. LIN/ Z. QIAN, On the Fraud Defense in the Recognition and Enforcement of Foreign Judgments - A Perspective of the Recognition and Enforcement of Judgments between Mainland China and Hong Kong, Law-Based Society, Vol. 2, 2019. 188 Ibidem. 189 X. GAO, The Application of Public Policy in Private International Law, China Democracy and Legal System Press, 2008, p. 115.

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Foreign Judgements in China – Legal Framework and Recent Developments policy as encompassing “the fundamental principles of the laws of the People’s Republic of China, national sovereignty, security, and public interests.” f)

Reporting and Notifying Mechanism

The Minutes also introduce a reporting and notification mechanism for the recognition and enforcement of foreign judgments. As for the reporting mechanism, Article 49 stipulates that after a ruling is made by a people’s court at any level, the case must be reported to the SPC within 15 days, along with the application, the original foreign judgment and its Chinese translation, and the court’s ruling. The notification mechanism is particularly noteworthy. The Minutes mandate that in cases that hinge on the examination of whether a reciprocal relationship exists, all tiers of people’s courts must refer their proposed decisions to the higher court within their jurisdiction for scrutiny prior to issuing a verdict. Upon receiving the endorsement of the higher court, the proposed decision must then be subject to review by the SPC, which is the final authority to sanction it before a ruling can be made. In the aftermath of the implementation of the Minutes, multiple courts across different regions have abided by these provisions and sought approval from their respective higher courts and the SPC before deciding on the recognition and enforcement of foreign judgments.190 The notification mechanism outlined in the Minutes resembles the SPC’s arbitration judicial review and approval system. China acceded to the New York Convention in 1986, and the establishment of its commercial arbitration system was initiated with the promulgation of the “Arbitration Law of the People’s Republic of China” (hereinafter referred to as the “Arbitration Law”) in 1995. However, during the nascent stages of foreign-related commercial arbitration, certain local courts lacked expertise and exhibited local protectionism, which resulted in a dual review process comprising substantive and procedural scrutiny for the judicial review of arbitration agreements and awards. Judicial intervention in arbitration activities resulted in diminished finality and certainty of arbitration awards, and undermined the credibility of both arbitration and the judicial system as a whole.191 To ensure high-quality judicial review in international commercial arbitration cases and prevent lower courts from making inappropriate decisions, the SPC has issued several judicial documents since 1995. including “Supreme People’s Court Notice on Several Questions Concerning the People’s Court’s Handling of the Issues in Relation to Foreign-related Arbitration and Foreign Arbitration,” 192 “Supreme People’s Court Notice on Relevant Issues Concerning the Revocation of Foreign-related Arbitration Awards,”193 and “Provisions on Fees and Review Periods for Recognizing and Enforcing Foreign Arbitration 190 Wang Anqing v. Zeng Fang, (2019) Yue 01 Xie Wai Ren No 3. Xia Yeqing v. Zeng Fang, (2019) Yue 01 Xie Wai Ren No 22. 191 W. SHEN, Normative Review of the Judicial Review System for Arbitration in China: Origin, Evolution, Institution and Defects, Legal Forum, Vol. 34, 2019, p. 114. 192 Fa Fa (1995) No 18. 193 Fa (1998) No 40.

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Guojian Xu/ Xin Cai Awards,” 194 initially establishing an internal reporting mechanism for judicial review of foreign-related arbitration awards and arbitration agreements. Under this mechanism, if a people’s court intends to determine the invalidity of a foreignrelated arbitration agreement, revoke or decline to enforce a foreign-related arbitration award, or refuse to recognize and enforce a foreign arbitration award, the case must be reviewed by the higher court within its jurisdiction and finally approved by the SPC before a ruling can be made.195 The purpose of the internal reporting mechanism is to unify the standard for revoking foreign-related arbitration awards and reduce the number of such revocations as much as possible.196 In 2017, the SPC introduced a new reporting mechanism for judicial review of commercial arbitration, which was based on the previous internal reporting mechanism. This is done through the issuance of several judicial interpretations and documents, including “The Provisions of the SPC on Report for the Approval of the Arbitration Cases that are Subject to Judicial Review,”197 “The Provisions on Several Issues Concerning the Trial of Cases of Judicial Review of Arbitration,” and “Notice on Centralized Handling.” The aim of this new mechanism was to streamline the judicial review process and ensure consistency in decision-making, with the ultimate goal of enhancing the credibility of the arbitration and judicial systems. The internal reporting system and subsequent judicial review and approval system have faced some operational issues, including the lack of participation by parties in the procedures, the inability to fully guarantee the parties’ right to debate,198 the failure to establish a time limit for the review by higher courts resulting in low case processing efficiency, and an increased burden on the SPC. Nevertheless, the reporting and approval system has demonstrated positive and effective results by ensuring consistency in the grounds199 for revoking arbitration awards and safeguarding the recognition and enforcement of foreign arbitration awards in China.200 Therefore, there has been a call to establish a reporting system for the recognition and enforcement of foreign court judgments, and to report to the SPC Fa Shi (1998) No 28. K. ZHU, Transformation of Internal Reporting System, in Judicial Review of International Commercial Arbitration in China, Law Science Magazine, Vol. 6, 2017. 196 X. HE, From Dual Track to Convergence: Reflection and Reconstruction of China's Domestic Arbitration and International Arbitration Judicial Review System, People’s Judicature, Vol. 17, 2013. 197 Fa Shi (2017) No 21. 198 X. LIU, Research on China's International Commercial Arbitration System and Theory, Law Press, 2001, p. 239-240. 199 Z. BEIBEI/ W. SHEN, Go Dutch - A Proposal to Optimise the Standards and Procedures for Judicial Review of Arbitral Awards in China, J. Int'l & Comp. L., Vol. 9, 2022, p. 179 et seq. 200 J. WOO-JUNG, Interim Measures in Arbitration and Enforcement of Arbitral Awards in Korea and China, J. Arb. Stud., Vol. 26, 2016, p. 67; S. JAYNE LORD, The Procedure for Enforcement of Foreign-Related and Foreign Arbitral Awards in the People’s Republic of China: Is There a Need for Reform, Asian Int'l Arb. J., Vol. 11, Issue 1, 2015. 194 195

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Foreign Judgements in China – Legal Framework and Recent Developments before the final decision is made in cases related to the recognition and enforcement of foreign civil and commercial judgments, in order to unify the standards for review of such cases by Chinese courts.201 The Minutes introduce the reporting and approval system into the field of recognition and enforcement of foreign judgments, and its purpose is also to enhance the importance attached to the determination of the reciprocity by courts at all levels through the reporting and approval system. On the one hand, in dealing with such cases, lower courts will inevitably be more cautious in their recognition of reciprocity, as they are required to report upwards at each level according to the regulations; on the other hand, the SPC will further standardize and unify the reciprocity standards through this reporting and approval system, avoiding contradictions in judicial results caused by different standards of review by courts in different regions, thus facilitating the operation of this principle in practice. 202 In addition, since parties cannot appeal the court’s decision to recognize and enforce a foreign judgment, this reporting and approval system ensures, to some extent, the stability of the decision. However, it must be noted that only foreign judgments related to the review of the principle of reciprocity need to be reported, whereas other cases only need to be filed.

IV. Conclusion The legal framework for China’s recognition and enforcement of foreign judgments is complex and multifaceted. While China is a party to several international treaties governing recognition and enforcement, the domestic legal framework plays a more significant role. Key factors considered include finality, reciprocity, due process, and public policy. The existing legal framework, however, is still rudimentary and fragmented, and the conservative nature of judicial practice further exacerbates this dilemma, which is inconsistent with the unprecedented surge in international commerce sparked by the Belt and Road Initiative. Nonetheless, there has been a discernible shift in the approach to recognizing and enforcing foreign judgments in China in recent years, which can be attributed to a series of judicial documents released by the SPC that place emphasis on advancing the recognition and enforcement of foreign judgments. The release of the Minutes expanded the understanding of reciprocity and offered more clarity and detailed guidance to Chinese courts dealing with foreign-related commercial and maritime disputes. The newly introduced reporting and notification mechanism aimed to enhance the importance attached to the determination of reciprocity by courts at all levels, and ensured stability of the decision, which marks a new era 201 S. LI/ Q. ZHAO, The Application of the Principle of Reciprocity in the Recognition and Enforcement of Foreign Judgments, People’s Judicature, Vol. 2, 2018. 202 Article 55 of the Civil Procedure Law Interpretation provides that, if the application for recognition and enforcement is dismissed, the party may institute an action in a people’s court. However, a provision added to the Civil Procedure Law (2023 Draft Amendment) states that if any party disagrees with the ruling, such party may apply for a review to the higher people’s court within 10 days from the date of receipt of the ruling.

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Guojian Xu/ Xin Cai in this field. It is also expected that ongoing revisions to the Civil Procedure Law will further enhance the legal framework, and provide greater clarity and guidance. There are, however, still practical challenges and uncertainties in the implementation of these developments, and parties seeking to enforce foreign judgments in China should carefully consider the relevant legal framework and recent developments.

*** Appendix 1: Excerpt from Minutes of the National Symposium on Foreignrelated Commercial and Maritime Trial Work* PART IX Hearing on Applications for Recognition and Enforcement of Foreign Judgments Article 33 Review Standards and Scope of Application When hearing the application for recognition and enforcement of foreign judgments and rulings, the people's court shall, in accordance with the provisions of Article 289 of the Civil Procedure Law and Paragraph 1 of Article 544 of the Judicial Interpretation of the Civil Procedure Law, first examine whether the country requesting recognition/enforcement has concluded or jointly participated in an international treaty with China. If there is an international treaty, it should be handled in accordance with the treaty; if there is no international treaty, or if the international treaty does not provide for relevant matters, specific review standards can be applied according to these Minutes. The Minutes will not be applicable to the recognition and enforcement of judgments involving bankruptcy, intellectual property, unfair competition, and monopoly due to the strong regional attributes and special characteristics of these areas of law. Article 34 Jurisdiction of the Court at the Applicant’s Domicile If the applicant applies for the recognition of a foreign judgment or ruling, but the respondent is not domiciled in China and does not have property within Chinese territory, the intermediate people's court at the applicant's domicile may have jurisdiction over the case. Article 35 Application Documents An applicant applying for recognition and enforcement of foreign judgments and/or rulings must submit an application and attach the following documents: (1) The original judgment or a certified true copy thereof; (2) Documents proving that the judgment has legal effect; (3) In case of a default judgment, documents proving that the foreign court legitimately summoned the absentee party.

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Foreign Judgements in China – Legal Framework and Recent Developments If the circumstances of the judgment or ruling fall under items (2) and (3) of the preceding paragraph and have already been stated, no other supporting documents need be submitted. If the judgment and other documents submitted by the applicant are in a foreign language, they shall be accompanied by a Chinese translation bearing the seal of a translation agency. If the documents submitted by the applicant have been issued/prepared outside the territory of the People's Republic of China, they should go through notarization and certification procedures or comply with the certification procedures stipulated in any relevant international treaties concluded between the People's Republic of China and the country where the documents are formed. Article 36 Application The application shall set out the following matters: (1). If the applicant or respondent is a natural person, the applicant’s and the respondent’s names, genders, dates of birth, nationalities, domiciles, and identity document numbers should be provided. If the applicant or respondent is a legal person or an unincorporated organization, their name, domicile, and the name and position of his, her or its legal representative or agent shall be provided. (2) The name of the court rendering the judgment , the case number of the judgment, the date of commencement of the proceedings and the date of the judgment; (3) Specific requests and grounds; (4) If applying for the enforcement of the judgment, the financial status and location of the respondent's property shall be provided, as well as the status of the enforcement of the judgment outside the territory of the People's Republic of China; (5) Any other relevant information that needs to be clarified. Article 37 Service to the Respondent When a party applies to recognize and enforce a foreign judgment or ruling, the people's court shall designate the other party as the respondent in the judgment. If both parties make the application, they shall both be designated as applicants. The people's court shall serve a copy of the application on the respondent. The respondent shall submit his, her or its opinions within 15 days from the date of receipt of the copy. If the respondent does not have a domicile in the territory of the People's Republic of China, such party shall submit their opinions within 30 days from the date of receipt of the copy. Failure by the respondent to submit opinions within the above-mentioned time limit shall not affect the review by the people's court. Article 38 Jurisdictional Challenge After the People's Court accepts the application for recognition and enforcement of the judgment or ruling of a foreign court, if the respondent challenges the jurisdiction, such party shall do so within 15 days from the date of receipt of the copy of the application; if the respondent has no domicile in the territory of the People's Republic of China, such party shall do so within 30 days from the date of receipt of the copy of the application.

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Guojian Xu/ Xin Cai The people’s court shall examine and rule on the jurisdictional challenge raised by the respondent. If the parties are not satisfied with the ruling on jurisdictional objection, they may file an appeal. Article 39 Preservation Measures/Interim Measures When a party applies to the people's court for the recognition and enforcement of a foreign judgment or ruling, and applies for property preservation, the people's court may refer to the provisions of the Civil Procedure Law and relevant judicial interpretations. The applicant shall provide a guarantee, otherwise the application shall be dismissed. Article 40 Case Filing Review If the applicant’s application does not meet the filing requirements, the people's court shall make a ruling to reject the application and explain the reasons for the rejection. If the application has already been accepted, the people's court shall make a ruling to dismiss the application. If the party is dissatisfied, such party may file an appeal. If the people's court has ruled to reject the application or dismiss the case, and the applicant subsequently submits an application that meets the filing requirements, the people's court shall accept the application. Article 41 Criteria for Determination of Foreign Judgment or Ruling The people’s court shall review and determine whether a foreign court judgment or ruling is a “judgment or ruling” as stipulated in Article 289 of the Civil Procedure Law based on the substance of the judgment or ruling. Foreign legal documents such as judgments, rulings, decisions, orders, etc. made by foreign courts in substantive civil and commercial disputes, as well as legal documents on civil damages compensation made in criminal cases, should be deemed “judgments or rulings” as stipulated in Article 289 of the Civil Procedure Law. This does not, however, include preservation orders made by foreign courts and other procedural legal documents. Article 42 Determining whether a Judgment is Binding The people's court shall examine whether the judgment or ruling has taken legal effect according to the law of the country where the judgment was made. Judgments and rulings that are subject to appeal or in the process of appeal are not “legally effective judgments and rulings” as stipulated in Article 289 of the Civil Procedure Law. Article 43 Situations where the Authenticity and Finality of a Judgment cannot be Confirmed If the people's court, upon examination, cannot confirm the authenticity of the foreign judgment or ruling, or if the judgment or ruling has not yet taken legal effect, it shall rule to reject the application. After the application is rejected, if the applicant re-applies and meets the requirements for acceptance, the people's court shall accept the [renewed ]application. Article 44 Recognition of Reciprocity When hearing cases involving the recognition and enforcement of foreign judgments or rulings, the people's court may find that reciprocity exists under one of the following circumstances: 148

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Foreign Judgements in China – Legal Framework and Recent Developments (1) According to the law of the country where the judgment-making court is located, the civil and commercial judgments made by the people's court can be recognized and enforced by the courts of that country; (2) China and the country where the judgment-making court is located have reached a reciprocal understanding or consensus; (3) The country where the judgment making court is located has made reciprocal commitments to China through diplomatic channels, or China has made reciprocal commitments to the country where the judgment-making court is located through diplomatic channels, and there is no evidence to prove that the country where the judgment-making court is located has refused to recognize or enforce the judgments or rulings made by the people's court on the grounds that there is no reciprocal relationship. The People's Court shall examine the existence of reciprocity on a case-bycase basis to determine whether a reciprocal relationship exists. Article 45 Judgment including Punitive Damages If the judgement of a foreign court awards damages and clearly exceeds the actual loss, the people's court may refuse to recognize and enforce the portion of the judgment that exceeds the actual losses. Article 46 Grounds for Refusal of Recognition and Enforcement The People's Court shall refuse to recognize and enforce a judgment or ruling made by a foreign court that has taken legal effect, after reviewing the judgment or ruling in accordance with the principle of reciprocity and finding that one of the following circumstances exists: (1) According to the laws of the People's Republic of China, the foreign court has no jurisdiction over the case. (2) The respondent was not lawfully summoned or, even if lawfully summoned, did not have a reasonable opportunity to present his case, or a party without litigation capacity did not receive appropriate representation. (3) The judgment was obtained by fraud. (4) The People's Court has already made a judgment on the same dispute, or has recognized and enforced a judgment or arbitration award made by a third country on the same dispute. Judgments or rulings made by foreign courts that violate the basic principles of Chinese law or China’s national sovereignty, security, or public interests shall not be recognized and enforced. Article 47 Recognition of Foreign Judgments Made in Violation of Arbitration Agreements If, after a foreign court has rendered a default judgment, the parties apply to the people's court for recognition and enforcement of the judgment, the people's court, upon examination, finds that a valid arbitration agreement exists between the parties to the dispute and that the defaulting party has not expressly waived the arbitration agreement, it shall rule that the foreign court judgment shall not be recognized and enforced.

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Guojian Xu/ Xin Cai Article 48 Handling of Applicant's Withdrawal of Application If a party applies to a People's Court to recognize and enforce a foreign judgment or ruling, and before the ruling is made, the applicant asks to withdraw the application, the People’s Court may make a ruling allowing the withdrawal. After the People's Court has made a ruling to allow the withdrawal of the application, if the applicant applies again and meets the requirements for acceptance, the People’s Court shall accept the application. If the applicant has no justifiable reason for refusing to participate in the inquiry procedure, the application shall be deemed to be withdrawn by the applicant. Article 49 Reporting and Notifying Mechanism of Recognition and Enforcement of Foreign Judgement After the People’s Courts at all levels have concluded cases involving applications for the recognition and enforcement of foreign judgments, they shall report to the Supreme People’s Court for filing within fifteen days after making the ruling, level by level. The materials to be filed shall include the application submitted by the applicant, the foreign judgment and its Chinese translation, and the ruling made by the People's Court. For cases that require review based on the principle of reciprocity, the People’s Court shall submit its proposed ruling to the higher People’s Court of the same jurisdiction for review before making the ruling. If the higher People’s Court agrees with the proposed ruling, it shall submit its review opinions to the Supreme People’s Court for approval. Only after the Supreme People's Court has replied can the ruling be made. Appendix 2: Excerpt from Civil Procedure Law of the People’s Republic of China (2023 Draft Amendment) 24. Add an additional article, as Article 302: “The People’s Court of the People’s Republic of China, after examination, shall not recognize and enforce a judgment under any of the following circumstances: (1) The foreign court has no jurisdiction over the case in accordance with Article 303; (2) The respondent was not lawfully summoned or, even if lawfully summoned, did not have a reasonable opportunity to present his[or her] case, or a party without litigation capacity did not receive appropriate representation. (3) The judgment was obtained by fraud. (4) The People's Court has already made a judgment on the same dispute, or has recognized and enforced a judgment or arbitration award made by a third country on the same dispute. (5) It violates the basic principles of the laws of the People's Republic of China or the sovereignty, security or public interest.” 25. Add an additional article, as Article 303: “Where any of the following circumstances exist, the foreign court shall be deemed to have no jurisdiction over the case:

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Foreign Judgements in China – Legal Framework and Recent Developments (1) The foreign court does not have jurisdiction over the case in accordance with its laws; (2) It violates the provisions of this Law on exclusive jurisdiction; (3) Violation of the parties' exclusive choice of court agreement; (4) There is a valid arbitration agreement between the parties.” 26. Add an additional article as Article 304: “Where a party applies to the People’s Court of the People's Republic of China for recognition and enforcement of a foreign judgment, and the dispute involved in the foreign judgment is the same as the dispute under trial by the People’s Court of the People’s Republic of China, the People’s Court of the People’s Republic of China may suspend the ongoing litigation. If the dispute is more closely related to the People's Republic of China, or if the foreign judgment does not meet the recognition conditions stipulated in this Law, the application shall be rejected by ruling. If it meets the recognition conditions stipulated in this Law, the lawsuit shall be dismissed by ruling.” 26. Add one additional article as Article 305: “If any party disagrees with the ruling, they may apply for a review to the higher people's court within 10 days from the date of receipt of the ruling.”

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NEW TECHNOLOGIES AND PRIVATE INTERNATIONAL LAW ISSUES ________________

BLOCKCHAIN AND PRIVATE INTERNATIONAL LAW – SOME GENERAL REMARKS Andrea BONOMI*

I. II.

III.

Introduction Determination of the Applicable Law A. Characterization and General Issues B. Proprietary Aspects 1. Classification as Property Issues 2. Relevant Distinctions C. Contract and Tort Law Issues Issues of Jurisdiction and Enforcement

I.

Introduction

1

While registered ledgers may be very helpful in preventing disputes from arising (through self-executing smart contracts, for instance), or in resolving them (through Blockchain-related Dispute Resolution mechanisms, for example), they also raise new and complex challenges for lawyers. These new issues should be addressed by using existing legal tools, and should not simply be left to technology. It should be obvious to most lawyers that technology cannot (and should not) displace the rule of law. Slogans like “Code is law”2 or “lex cryptographica”3 cannot blur the distinction between technology and * Professor at the University of Lausanne; co-director of the LL.M. in International Business Law. 1 This contribution is based on the author’s speech at the Inaugural CODIFI Conference (see note 14): A. BONOMI, Opening of the Digital Economy ‘Framework Track’, on 12.9.2022. 2 L. LESSIG, Code Is Law, Harvard Magazine, January 1, 2000, available at https://www.harvardmagazine.com/2000/01/code-is-law-html accessed on 31.5.2023, who points out the risks of replacing the law with the code (“the law in cyberspace”).

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Andrea Bonomi law; between what is technically (or scientifically) possible and what is legally just and fair.4 In this short contribution, I will address only some PIL issues, which although very specific, are nonetheless crucial for legal comprehension of blockchains, a technology which is inherently transnational.5 The objective is to provide only some indication of what sort of PIL issues might arise and how they could be addressed, with the full awareness that it will not be possible, in this short contribution, to bring truly new elements to the ongoing academic and institutional debate. I will also cautiously refrain from trying to explain what blockchain technology is and how it is intended to work. There are many specialized contributions that do this, certainly much better than I could. I would only stress, as many scholars have already done before me, that some of the distinctive features of this technology raise serious challenges, from a legal point of view and particularly from a PIL perspective. This is of course particularly true for the distributed and decentralized nature of blockchains, which makes them inherently transnational and refractory to attempts at territorial localization. Another serious difficulty is related to the pseudonymity allowed by the typical combination of public and private keys, which is corollary of the transparency of distributed ledgers, but, at the same time, may impede or complicate the identification of the parties involved in a dispute.

3 See among others the well-known book P. DE FILIPPI/ A. WRIGHT, Blockchain and the Law – The Rule of Code, Harvard University Press 2018. 4 See also D. SINDRES, in A. BONOMI/ M. LEHMANN/ S. LALANI (eds), Blockchain and Private International Law, Brill 2023, p. 82 et seq. 5 On PIL aspects related to the use of the blockchain technology, in addition to the contributions collected in the book quoted at note 4, see, among others: M. AUDIT, La blockchain et les crypto-monnaies, Le droit international privé confronté à la blockchain, Rev. crit. DIP, 2020, p. 669 et seq.; F. GUILLAUME, Blockchain: le pont du droit international privé entre l’espace numérique et l’espace physique, in I. PRETELLI (ed.), Conflict of Laws in the Maze of Digital Platforms, Genève/Zürich 2018, p. 164 et seq.; F. JAULT-SESEKE, La blockchain au prisme du droit international privé, quelques remarques, Dalloz IP/IT, 2018, p. 544 et seq.; C. KLEINER, Aspects juridiques internationaux. Réflexion renouvelée en raison des “crypto-monnaies”, Revue de droit bancaire et financier, 2019, p. 4 et seq.; M. LEHMANN, Who owns Bitcoin? Private Law facing the Blockchain, European Banking Institute Working Paper Series, 2019, p. 42 et seq.; M. LEHMANN/ F. KRYSA, Blockchain, Smart Contracts und Token aus der Sicht des (Internationalen) Privatrechts, Bonner Rechtsjournal, 2019, p. 90 et seq.; M. NG, Choice of Law for property issues regarding Bitcoin under English Law, JPIL, 2019, p. 315 et seq.; G. RÜHL, Smart (Legal) Contracts, or: Which (Contract) Law for Smart Contracts, in B. CAPPIELLO/ GHERADO CARULLO Blockchain, Law and Governance, Springer 2021, p. 159 et seq.; S. SCHWEMMER, Das Tokenstatut – Zur Kollisionsrechtlichen Behandlung der Übertragung von Bitcoin, Kryptowertpapieren und andere Kryptotoken, IPRax, 2022, p. 331 et seq.; E. TREPPOZ, Quelle régulation internationale pour la blockchain? Code is law v. Law will become Code, in F. MARMOZ (ed.), La blockchain: big bang de la relation contractuelle, Dalloz, 2019, p. 55 et seq.; Ch. WENDEHORST, Digitalgüter im Internationalen Privatrecht, IPRax, 2020, p. 490 et seq.

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Blockchain and Private International Law – Some General Remarks Before I delve into some specific issues, I would like to stress the importance of private international law and of the work that can be done in this area by specialized organizations, in particular by the Hague Conference on Private International Law (HCCH). The legal questions raised by the use of blockchain technology are far from having been elucidated. Admittedly, an increasing number of states have issued legislation to cope with at least some specific uses of distributed ledgers, and some national courts have already had the opportunity to clarify certain important questions. Some national lawmakers have even adopted new conflict-of-law rules, at least for some specific categories of crypto-assets.6 Nonetheless, these laws and decisions look like islands in a sea of uncertainty. This is even more clearly the case since the proposed solutions do not always take the same approach, such that the resulting picture is one of fragmentation and divergence. This situation is, of course, problematic for technology uses that are inescapably transnational, and calls for legal harmonization. Several institutions have begun work on this aspects, including Unidroit,7 UNCITRAL,8 the European Law Institute (ELI),9 and the European Union as well.10 Some of them have also addressed private international law issues, but they have done so either 6 This is, for example, the case of Germany (Para 32 of the 2012 Electronic Securities Act of 3.6.2021 – “eWpG”), Liechtenstein (see Article 3 of the Act of 3.10.2019 on Tokens and VT Service Providers – “TVTG”), Switzerland (see the new Article 145a of the Swiss PIL Act, added by the Federal Statute of 25.9.2020, RO 2021 33). In the United States, see Uniform Commercial Code Section 12-107 (Governing Law) as modified by the 2022 Amendments, and already enacted in several US states. 7 The Unidroit Working Group on Digital Assets and Private Law is currently working on a set of Principles. A draft of this text is already available: Draft Unidroit Principles on Digital Assets and Private Law, Study LXXXII – W.G.8 – Doc. 2 (February 2023), available at https://www.unidroit.org/wp-content/uploads/2023/03/W.G.8-Doc.-2Draft-Principles-and-Commentary-Clean.pdf accessed on 31.5.2023. This text also includes a Principle 5 on Private International Law. 8 Work at UNCITRAL is particularly focused on technology-related dispute resolution and adjudication: see the agenda of Working Group II – Dispute Settlement: available at https://uncitral.un.org/working_groups/2/arbitration accessed on 31.5.2022. 9 See the ELI Principles on the Use of Digital Assets as Securities, available at https://www.europeanlawinstitute.eu/fileadmin/user_upload/p_eli/Publications/ELI_Principl es_on_the_Use_of_Digital_Assets_as_Security.pdf accessed on 31.5.2023, and the ELI Principles on Blockchain Technology, Smart Contracts and Consumer Protection, available at https://www.europeanlawinstitute.eu/fileadmin/user_upload/p_eli/Publications/ELI_ Principles_on_Blockchain_Technology__Smart_Contracts_and_Consumer_Protection.pdf accessed on 31.5.2023. 10 On 16.5.2023, the Council of the EU adopted the Regulation of the European Parliament and the Council on markets in crypto-assets, and amending Regulation (EU) No 1093/2010 and Directives 2013/36/ and (EU) 2019/1937 (MiCA Regulation), available at https://www.consilium.europa.eu/en/press/press-releases/2023/05/16/digital-financecouncil-adopts-new-rules-on-markets-in-crypto-assets-mica/#:~:text=MiCA%20will%20 protect%20investors%20by,so%2Dcalled%20%27stablecoins%27 accessed on 31.5.2023. The newly adopted Regulation is based on the Commission Proposal of 24.9.2020 (COM 2020(593) final).

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Andrea Bonomi in very general terms11 or in limited and specific areas, such as secured transactions.12 There is no doubt that, with respect to such issues, the Hague Conference is best placed to come up with convincing uniform solutions. Since March 2022, the Hague Conference has allocated resources to follow the private international law implications of digital ledger technology, in particular in relation to Fin Tech. Important preliminary documents have been prepared for this purpose.13 In 2023, the HCCH organized the inaugural HCCH Conference on Commercial, Digital and Financial Law Across Borders (CODIFI Conference); the outcomes of this Conference have been compiled to inform HCCH Members.14 In its March 2023 meeting, the Council on General Affairs and Policy mandated the Permanent Bureau to continue and develop its work in the area of digital economy. In this context, a HCCH-UNIDROIT Joint Project on Law Applicable to Cross-Border Holdings and Transfers of Digital Assets and Tokens was launched in June 2023.15 As suggested in the documents prepared by the Permanent Bureau of the Hague Conference, the work should ideally focus on issues of applicable law, however without neglecting jurisdiction, as well as recognition and enforcement of decisions.

II.

Determination of the Applicable Law

A.

Characterization and General Issues

The determination of the applicable law raises very important questions regarding characterization and the choice of the relevant connecting factors. In this respect, certain distinctions made among different kinds of crypto assets can prove very relevant. The crucial importance of taxonomy in this new

11 Thus, Principle 5 of the Draft Unidroit Principles on Digital Assets and Private Law (note 7), only acknowledges party autonomy (see infra, note 33), but does not attempt to determine the governing law in the absence of a parties’ choice. 12 See Article 3 of the ELI Principles on the Use of Digital Assets as Securities. 13 See, in particular HCCH, Developments with respect to PIL implications of the Digital Economy, Prel. Doc. No 4 REV of January 2022, available at https://assets.hcch.net/ docs/b06c28c5-d183-4d81-a663-f7bdb8f32dac.pdf accessed on 31.5.2023. 14 See Digital Economy and the HCCH Conference on Commercial, Digital and Financial Law Across Borders (CODIFI Conference): Report, Prel. Doc. No 3A (January 2023). 15 Based on the Proposal for Joint Work: HCCH-UNIDROIT Project on Law Applicable to Cross-Border Holdings and Transfers of Digital Assets and Tokens, Prel. Doc. No 3C of January 2023. The kick-off meeting of this project was held on 12.6.2023: available at https://www.hcch.net/en/news-archive/details/?varevent=921 accessed on 15.6.2023.

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Blockchain and Private International Law – Some General Remarks area is stressed in academic writing16 and is at the center of important comparative and uniform law projects.17 While the well-known classification between currency, utility and investment tokens18 is not particularly useful for legal purposes, other criteria can prove extremely relevant from a private international law perspective, in particular the distinctions between endogenous and exogenous tokens, between fungible and non-fungible tokens as well as that between permissioned and permissionless ledgers. In terms of characterization, it is also very important to distinguish between the different legal issues that may arise in relation to the specific uses of blockchain technology. Private international law traditionally works with broad legal categories, such as contracts, torts, property, company, insolvency, etc. These categories remain relevant despite the use of new technologies, as we know from the Internet. It is important to differentiate among these different kinds of issues because the parties involved and their interests differ greatly. This has a crucial impact on the choice of the relevant connecting factors. B.

Proprietary Aspects

1.

Classification as Property Issues

Property law issues related to crypto assets are the most complex, because they involve third party interests. They include the identification of the rights that a person can assert over crypto-assets, the effects of such rights vis-à-vis third parties, the conditions for their acquisition, both derivative acquisition, by way of transfer, and original acquisition, in particular bona-fide acquisition that should also be permitted with regard to tokens. These questions may become relevant where there are competing claims of ownership, not only in the case of transfer of the rights but also in connection with secured transactions. Property issues can also arise as a preliminary question in cases of tortious claims, and for the purpose of asset segregation in insolvency. In several disputes decided by courts19, the question of whether cryptoassets are capable of being the object of (some kind of) property was regarded as a F. KRYSA, Taxonomy and Characterisation of Crypto Assets, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 157 et seq. 17 Both UNCITRAL and UNIDROIT have set up Working and Experts’ Groups that have worked on the development of legal taxonomies related to distributed ledgers. Principle 2 of the Unidroit Draft Principles (note 7) includes definitions. See also UNCITRAL, Legal issues related to the digital economy – digital assets (12.5.2020), available at https://documents-dds-ny.un.org/doc/UNDOC/GEN/V20/025/48/PDF/V200 2548.pdf?OpenElement accessed on 31.5.2023. 18 European Securities and Markets Authority (ESMA), Advice on Initial Coin Offerings and Crypto-Asset, 9 January 2019, available at https://www.esma.europa.eu/ document/advice-initial-coin-offerings-and-crypto-assets accessed on 31.5.2023. 19 For an updated overview of case law in both common law and civil law jurisdictions see LAW COMMISSION, Digital Assets – Consultation paper (July 2022), 16

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Andrea Bonomi crucial one. While this question is still controversial in many countries, and while “property” might not be the most appropriate concept, there is a clear trend by courts to provide an affirmative answer. The rivalrous nature of such assets and their capability of being subject to exclusive control20 by their owner are the relevant considerations in that regard. In any event, and whatever the answer under domestic law, a characterization as property appears to be appropriate in PIL. Indeed, PIL categories are broader than domestic categories and should be forged through a functional approach. Here, both the questions and the interests involved (in particular third-party interests) are typical of property law. However, the connecting factor traditionally used for property issues, based on the situs of the assets, is obviously inappropriate for crypto assets (and more generally for digital assets). The challenge is to find functional equivalents. These should reflect the rationale of the lex situs, which essentially consists of protecting third party interests. With that in mind, it is important to apply a law that a third party can easily anticipate and ascertain. 2.

Relevant Distinctions

In this respect, the distinction between endogenous and exogenous tokens seems to be crucial.

available at https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/ uploads/2022/07/Digital-Assets-Consultation-Paper-Law-Commission-1.pdf accessed on 31.5.2023, in particular p. 60 et seq., Among the English cases we will mention: Vorotyntseva v MONEY-4 Ltd (t/a nebeus.com) & Ors [2018] EWHC 2596 (Ch), 13; Ion Science & Duncan Johns v Persons Unknown (unreported) (21 December 2020), as summarised by Lorna Sleave, “Cryptocurrency Fraud - The High Court Considers The Position Of ‘Crypto-assets’” (Mondaq Business Briefing, 6 May 2021), available at https://link.gale.com/apps/doc/A663644295/ITOF?u=milano&sid=bookmark-ITOF&xid=03 ffe69d accessed on 31.5.2023; Fetch.AI Lrd & Anor v Persons Unknown Category A & Ors [2021] EWHC 2254 (Comm), at 9. For Singapore, see B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 03, at 142. For New Zealand, see Ruscoe v Cryptopia Ltd (In liquidation) [2020] NZHC 728, [2020] 22 ITELR 925, at 69. In Italy, see Trib. Firenze, 19.12.2018, Contratti 2019, p. 661, note D. FAUCEGLIA; Trib. Firenze (Sez. Fall.) 21.1.2019, Giur. It. 2020, p. 2657, note D. FAUCEGLIA 20 See Principle 6 of the Draft Unidroit Principles on Digital Assets and Private Law, Study LXXXII - W.G.8 – Doc. 2 (February 2023), Commentary, Para 1, p. 27: “‘control’ assumes a role that is a functional equivalent of that of ‘possession’ of movables”, available at https://www.unidroit.org/wp-content/uploads/2023/03/W.G.8-Doc.-2-Draft-Principlesand-Commentary-Clean.pdf accessed on 31.5.2023.

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Blockchain and Private International Law – Some General Remarks a)

Exogenous Tokens

Exogenous tokens represent rights that exist outside the ledger,21 such as shares in a company, property rights in movable, immovable or intangible assets, or claims of any sort. NFTs are also a specific kind of exogenous tokens, which represent unique and often high-value assets, such as a piece of digital artwork, a movie, or a game. By and large, exogenous tokens resemble traditional negotiable instruments. Therefore, a significant role should probably be reserved for the law applicable to the represented assets (lex societatis, lex situs, lex protectionis, lex obligationis). This law should very probably be decisive for the issue of “tokenization” as such (or more exactly to determine the possibility and effects of such tokenization). In particular, it should govern the question of whether the underlying right may be represented by a crypto-token, and therefore whether the transfer of such token also involves the transfer of the represented right. This solution, that has been proposed by scholars22 but also by some specialized institutions,23 is criticized by at least one author,24 who argues that the application of the law governing the represented right would too severely impact the potential benefits of tokenization; therefore, that author suggests applying to exogenous tokens the law chosen by the parties, or the law of the issuer of the tokens – in other words, to adopt an approach that will probably need to be followed for endogenous tokens. Such a “liberal approach” has also been adopted in some countries.25 While it is certainly beneficial to tokenization, it will probably meet serious objections in other countries, at least for certain kinds of real-world assets (such as immovables), because it might deprive state law of its control over them.

21 Principle 4 of the Draft Unidroit Principles on Digital Assets and Private Law uses the term “linked assets”. 22 K. TAKAHASHI, Blockchain-based Negotiable Instruments (with Particular Reference to Bills of Lading and Investment Securities), in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 515 et seq. (who refers to the ‘lex creationis’ as the law under which the right represented by the negotiable instrument is created). 23 See FINANCIAL MARKETS LAW COMMITTEE, Distributed Ledger Technology and Governing Law: Issues of Legal Uncertainty (March 2018), available at http://fmlc.org/wpcontent/uploads/2018/05/dlt_paper.pdf accessed on 31.5.2023, § 6.25, p. 20 (application of the law governing the assigned claim). See also HCCH (note 13), Annex II. 24 E. PRÉVOST, The Law Applicable to Digital Representations of Off-chain Assets, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 299 et seq. 25 Under Swiss PIL, the new Article 145a SPILA see (note 6) provides that the law designated in the title (token) determines whether the title represents a claim and whether the transfer of the claim is effected through the transfer of the title. In the absence of a choice of the applicable law, those issues are governed by the law of the country where the issuer of the titles has its seat or, failing a seat, its habitual residence.

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Andrea Bonomi b)

Stablecoins

Is a similar approach also needed for stablecoins26 (which are “value-referenced” tokens27)? As exogenous tokens, stablecoins often also refer to off-chain assets, such as gold or commodities; however, the purpose of such reference is not to allow the circulation or mobilization of the underlying assets, but to prevent or limit fluctuations in the value of the coin. Despite this difference from exogenous tokens, a distinction seems to be necessary between the law applicable to the coin, on the one hand, and the law applicable to the assets of reference, on the other. The latter law might also be relevant in determining what kind of relationship exists between token and asset28. However, the distinction seems less relevant for stablecoins pegged at one or more fiat currencies or cryptocurrencies, or based on algorithms or smart contracts. c)

Endogenous (or Native) Tokens

Contrary to exogenous tokens, endogenous (or native) tokens represent rights that only exist within the ledger. Therefore, when it comes to determining the applicable law, there is no possibility of resorting to the law governing off-chain rights. The appropriate connecting factor is to be found with reference to the crypto assets as such.29 To that effect, several connecting factors have been proposed by academics and institutions. The Financial Markets Law Committee30 and the Permanent Bureau of the Hague Conference31 have established comprehensive lists, resuming the pros and cons of each. Some of these criteria focus on the specific ledger on which the tokens are run. This is the case of criteria such as PROPA (based on the residence or place of establishment of the relevant authority or administrator), PREMA (based on the residence of the holder of the Master key which allows control over the system) or LIMA (based on the location of the issuer of the tokens).32 Their main advantage is to ensure the application of one single law to all tokens that are registered and Such as Tether, US-Dollar Coin, PAX Gold, Wrapped Bitcoin etc. The EU MiCA Regulation (note 10) refers in this respect to “assets-referenced tokens”, which are defined as “a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies”. 28 M. LEHMANN/ H. MEYLE, The Law Applicable to Stablecoins, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 395 et seq. 29 FINANCIAL MARKETS LAW COMMITTEE (note 23), § 6.27, p. 20. 30 FINANCIAL MARKETS LAW COMMITTEE (note 23), §§ 6.1 to 6.28, p. 12 et seq. 31 HCCH (note 13). See also F. VILLATA, Cryptocurrencies and the Conflict of Laws, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), Cryptocurrencies and Conflict of Laws, at 340 et seq.; CH. WENDEHORST, Proprietary Rights in Digital Assets and the Conflict of Laws, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 119 et seq. 32 FINANCIAL MARKETS LAW COMMITTEE (note 23), §§ 6.16 to 6.20, p. 18 et seq. 26 27

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Blockchain and Private International Law – Some General Remarks issued together on the same ledger. They can certainly work with respect to permissioned (or private) blockchains, but normally fail for permissionless (public) blockchains, which often lack a central authority or administrator, For the same purpose, it would also be possible to resort to party autonomy. A choice of law can establish an “elective situs”,33 provided that it is accepted by, or at least known to, all participants and thus binding on them.34 While the application of a chosen law to proprietary aspects might be problematic for certain countries, this has already been done (although with limited success) in the Hague Securities Convention and in the relevant EU law instruments.35 Contrary to intermediate securities, however, the choice of law could not be in a separate account agreement (which is often lacking in the case of tokens), but would have to be “coded” within the distributed ledger or referred to in its terms and conditions, if any. Once again, this option is certainly feasible with respect to permissioned blockchains, the access to which is restricted, subject to authorization and frequently contingent on the acceptance of the terms and conditions set up by a central authority. These may include a choice of law, which would be visible for all participants. This seems much less realistic for permissionless systems, in particular when the system is entirely open, also because of the reluctance of creators and participants in such blockchains to submit to the application of legal rules in general and to a specific state law in particular. Regulators can help, by subjecting the legal authorization to issue some types of crypto assets to certain formal conditions, which might include a choice of the applicable law, but such a requirement is rarely imposed in legislation.36 In any case, permissionless ledgers can always be created without any authorization, on the fringes of state law. When these “centralized” criteria fail, a different approach might consist in focusing on the parties involved in each individual transaction (in particular on the residence of the transferor or, in the case of secured transactions, on that of the security provider).37 The ELI Principles adopt this approach with respect to FINANCIAL MARKETS LAW COMMITTEE (note 23), §§ 6.4 to 6.11, p. 15 et seq. Principle 5(1) of the Draft Unidroit Principles on Digital Assets and Private Law provides that proprietary issues in respect of a digital asset are governed by the law (or the principles) expressly specified in the digital asset, or in the system or platform on which the digital asset is recorded, as the law applicable to such issues. Under Principle 5(2)(c), every person dealing with a digital asset, and who could be affected by a determination of a proprietary issue, is deemed to have consented to the choice of law rule in Principle 5(1). See also Section 12-107(c) of the Uniform Commercial Code, as modified by the 2022 Amendments. 35 See Article 4 of the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, of 5 July 2006. 36 The newly adopted EU MiCA Regulation (note 10) does not include a requirement for a person making an offer of crypto assets to the public to include in the socalled crypto assets white paper a designation of the governing law, as had been suggested during the negotiations: see F. VILLATA (note 31), p. 346. 37 FINANCIAL MARKETS LAW COMMITTEE (note 23), §§ 6.21 to 6.24, p. 19 et seq. 33 34

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Andrea Bonomi security rights in digital assets,38 but this might also be an option for proprietary aspects at large. This approach draws on the application of the law of the assignor as envisaged in several instruments adopted by UNCITRAL (Model Law on Secured Transactions, the Convention on Assignment, etc.)39 as well as in the EU Commission Proposal on third party effects of assignment.40 Similarly, some authors suggest focusing on the modalities by which crypto-assets (or more precisely their public and private keys) are stored.41 Although crypto assets are decentralized, we know that, in practice, a pattern has emerged based on which tokens are entrusted to a wallet provider, a crypto-exchange, or another kind of intermediary. Although the role of these actors is different from financial intermediaries acting in the field of dematerialized securities (indeed the transfer of the rights does not result from a book-entry in the relevant account, but from the entry on the distributed ledger), a certain analogy still exists between the two situations, because the custodian often has control over the private key and can thus dispose of the token. This might be regarded as a virtual equivalent to possession, which is traditionally paramount for tangible property and on which the application of the lex situs ultimately rests. Thus, the law governing the intermediary can be regarded as a form of fictitious situs that might be recognizable for third parties. These party-centered solutions certainly grant several advantages, but they jeopardize the unity between the different tokens run on a single blockchain. d)

Crypto Securities Held through Traditional Intermediaries

Whatever solution is finally adopted, many commentators argue – with good reasons – that the existing conflict of law rules governing intermediate securities (the Hague Securities Convention and the relevant EU law instruments) should apply in any case to crypto-securities held through a traditional intermediary.

38 ELI Principles on the Use of Digital Assets as Securities, Principle 3(2): “For the purposes of Principle 3(1), the ‘applicable law’ is the law of the jurisdiction in which the security provider has, at the time of the creation of the security interest, its place of business, or its central administration (if it has a place of business in more than one jurisdiction) or the law of the jurisdiction in which the security provider has its habitual residence (absent a place of business)”. A derogation is only provided for the case “where the digital asset itself is clearly connected with one particular jurisdiction”. 39 See Articles 22 and 30 of the U.N. Convention on the Assignment of Receivables in International Trade; Article 86 of the UNCITRAL Model Law on Secured Transactions. 40 See Article 4 of the Commission Proposal for a Regulation of the European Parliament and of the Council on the law applicable to third-party effects of assignment of claims, COM 2018(096). 41 See CH. WENDEHORST (note 31), p. 121 et seq.; For secured transactions, see also M. HAENTJENS/ M. LEHMANN, The Law Governing Secured Transactions in Digital Assets, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 465.

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Blockchain and Private International Law – Some General Remarks C.

Contract and Tort Law Issues

The application of traditional connecting factors is easier with respect to contract and tort law issues related to use of registered ledgers. On one hand, there is no objection to the use of party autonomy, at least for contracts, because third-party interests are not involved. Of course, in this case the choice of law will not need to be one for the entire blockchain, but will only cover the specific transaction. On the other hand, objective criteria commonly used in these areas of law do not focus on the location of the assets, but either on the location of a party (typically the debtor of the characteristic performance) or on the place of an act or on its effects (performance, wrongful act, damage, affected market etc.).42 Their localization is relatively easy when such acts or effects occur in the real world (for example, the delivery of tangible goods in exchange of cryptocurrencies, or the theft or destruction of the private key giving control over a token). Localization becomes more complex if they take place on-chain, but even then, a fictitious localization can be easily envisaged, at the place of residence of one of the parties or of the custodian of the tokens. Admittedly, pseudonymity might be a very serious obstacle in this respect. However, in many practical situations, this problem must be nuanced, either because the blockchain is permissioned (and therefore the participants can be identified), or because the tokens are stored with an intermediary (a wallet provider, a crypto-exchange, an investments platform) which is subject to “Know-YourCustomer” obligations.43 In any event, even in the residual cases of full pseudonymity, the problem transcends PIL, because it affects the very possibility of bringing a claim: no defendant, no claim. It seems therefore that the question should rather be addressed by state regulators at the material law level. The lex contractus is also decisive for smart contracts, at least when these can be characterized as legal contracts.44 By contrast, if these are only used as a technical device facilitating the performance of a traditional contract,45 their validity and effects will depend on the law governing the off-chain contract – which might of course also result from a choice made by the parties.

See T. LUTZI, The Tort Law Applicable to the Protection of Crypto Assets, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 405 et seq. 43 A.-G. KLECZEWSKI, The Good, the Bad and the Ugly: The Private International Law, the Crypto Transactions and the Pseudonyms, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 133 et seq. 44 Pursuant to Principle 4(a) of the ELI Principles on Blockchain Technology, Smart Contracts and Consumer Protection, “[t]ransactions made or supported by Blockchain technology are subject to the rules of the law that would apply to functionally equivalent acts outside the Blockchain; this include all rules of private international law”. See also M. EL HARRAK, Do Smart Contracts Need New Conflict-of-Laws Rules ?, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 481 et seq. 45 According to Principle 3 of the ELI Principles (note 44), “various types of smart contracts can be distinguished”. When the smart contract is just “a tool to execute a legal agreement […] the legal agreement exists off-chain”. 42

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III. Issues of Jurisdiction and Enforcement Similar considerations apply, mutatis mutandis, to jurisdiction, and recognition and enforcement of decisions. Indeed, jurisdictional criteria are rarely based on the location of the assets and more frequently on the location of the parties or their actions. This is also true, with respect to “indirect jurisdiction”. As for the other conditions for recognition and enforcement of foreign decisions, the fact that a state court judgement is rendered in a blockchain-related dispute does not seem to make its transnational recognition fundamentally different from that of any other judgment. In particular, the existing Hague conventions, such as the 2005 Choice of Court Convention and the 2019 Judgments Convention, should in principle be applicable, provided of course that the specific dispute is not excluded from their material scope. A more serious problem – which is similarly not PIL-specific – is the veritable enforcement of decisions, not only because of pseudonymity or the localization of the assets, but also because of the immutability of distributed ledgers, which might represent an obstacle to the enforcement of the decision. In this respect decisions issued within a procedure of “Blockchain-based Dispute Resolution” (BDR) are more effective since they can often be enforced on-chain, which can be extremely important when the dispute involves the wrongful execution of a smart contract, or the governance of a DAO.46 However, onchain enforcement mechanisms can only work if the parties have made it possible, in particular if crypto-assets have been previously stored in an escrow wallet – which is not always feasible when it requires the freezing of an important amount of cryptocurrencies.47 Moreover, since some of these decisions do not rest on the application of legal rules, but rather on economic incentives and game-theoretical principles, they cannot be equated to arbitral awards.48 Therefore, not only is their off-chain enforcement on real-world assets normally excluded, but they also do not have res judicata effect, with the consequence that they cannot prevent a party from relitigating the dispute before a state court. In view of such difficulties, it is extremely interesting to follow the progress of UNCITRAL Working Group II on technology-related dispute resolution.49 Nothing seems to prevent recognition and enforcement of real blockchain arbitration awards, provided that an agreement to arbitrate results from the ledger, and that they are rendered by an arbitral panel, selected by the parties or in application of neutral criteria, and fully respectful of due process principles.

46 F. GUILLAUME/ S. RIVA, Blockchain Dispute Resolution for Decentralized Autonomous Organizations: The Rise of Decentralized Autonomous Justice, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 607 et seq. 47 P. ORTOLANI, Recognition and Enforcement of the Outcome of Blockchain-based Dispute Resolution, in A. BONOMI/ M. LEHMANN/ S. LALANI (note 4), p. 643 et seq. 48 F. GUILLAUME/ S. RIVA (note 44), p. 613 et seq.; P. ORTOLANI (note 45), p. 660 et seq. 49 See supra, note 8.

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DUE PROCESS REQUIREMENTS IN BLOCKCHAIN-BASED ARBITRATION Narges KESHAVARZ BAHADORI*

I. II. III.

IV. V.

VI.

Introduction – Background and Characteristics of Blockchain Technology Blockchain-Related Disputes and On-chain Dispute Settlement Blockchain-Based Mechanisms to Resolve On-Chain Disputes A. Multi-signature Smart Contracts B. Existing Blockchain-Based ODR Platforms 1. Ricardian Contracts 2. Crowdsourcing Due Process in International Commercial Arbitration A. Due Process – Definition and Characteristics Due Process Requirements in Blockchain-Based Platforms A. Due Process Requirements in the Commencement of Dispute Resolution within Blockchain-Based Platforms – Arbitration Agreement B. Due Process Requirements in an Arbitration Proceeding within BlockchainBased Platforms 1. Impartiality and Independence 2. Equality of Arms and the Parties’ Right to be Heard C. Due Process Requirements in the Closure of the Blockchain-Based Procedure Conclusion

The advent of blockchains has changed the world of transactions. The application of this technology has not been limited to contracts but has been extended to dispute settlements, as well. This has been conducted through a variety of methods, one of which being the Online Dispute Resolution (“ODR”) platforms that reside in a blockchain medium. Kleros, Jur, Oath, Sagewise and Aragon are among the most successful existing systems. These systems rely on jurors’ voting and crowdsourcing methods and are mainly based on the rationality assumption and game theory insights. Adopting a purely economic perspective, each juror will try to vote for the decision that they expect from the majority of the other jurors. However, the fact that these platforms are based merely on economic notions raises concerns regarding the legality of such procedures and the validity of the awards rendered. The fundamental feature of arbitration is that the arbitral award is final, binding and widely enforceable. For an award to produce such an effect, the * PhD Candidate, The Swiss National Science Foundation (SNSF) Doctoral Researcher (Doc.CH), University of Lausanne.

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Printed in Germany

Narges Keshavarz Bahadori arbitral tribunals must meet certain standards called “Due Process”. This includes rights to neutral justice, fair procedure, and equal treatment as well as the right to be heard. Accordingly, the most important question that the present paper aims to answer is whether the aforementioned economic notions, i.e. the assumption of rationality, game theory, and crowdsourcing adopted by the on-chain ODR platforms, are admissible in international arbitration, and therefore, in line with due process requirements. In other words, does the adoption of such notions during an arbitration proceeding violate the parties’ right to a fair trial? These issues are of utmost importance as they may give rise to serious issues regarding the recognition and enforcement of a blockchain-based award. Concretely, as per Article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, such issues may even lead to the annulment of blockchain-based awards and result in huge legal uncertainties in the domain.

I.

Introduction – Background and Characteristics of Blockchain Technology

Maximizing efficiency and fairness in adjudication and minimizing dispute settlement costs have always been the key factors where law and technology interact. In determining the effect of technological development in adjudication, scholars have identified four phases.1 The first is digitalization, i.e. converting paper-based information into binary codes, which according to Berring has led to the creation of large online legal databases.2 The second phase consists of “bringing automation in decision making process”3 as developed by Waterman et al. In this second phase, judges relied heavily on the analytical power of computers to retrieve legal provisions, jurisprudence, and doctrine, with the aim of making a solid and flawless legal decision.4 The third phase began by the emergence of “Lex informatica” in 1997.5 This subsequently led to the more popular “Code is Law” idea introduced by

1 P. DE FILIPPI/ S. HASSAN, Blockchain Technology as a Regulatory Technology: From Code Is Law to Law Is Code, ArXiv Preprint ArXiv:1801.02507, 2018. 2 R.C. BERRING, Full-Text Databases and Legal Research: Backing into the Future, High Technology Law Journal, Vol. 1, Issue 27, 1986, p. 27-60, available at https://www.btlj.org/data/articles2015/vol1/1_1/1-berkeley-tech-l-j-0027-0060.pdf accessed on 31.5.2023. 3 P. DE FILIPPI/ S. HASSAN (note 1). 4 D.A. WATERMAN/ J. PAUL/ M. PETERSON, Expert Systems for Legal Decision Making, Expert Systems, Vol. 3, Issue 4, 1986, , p. 212-226, p. 223. 5 J.R. REIDENBERG, Lex Informatica: The Formulation of Information Policy Rules through Technology, Texas Law Review, Vol. 76, No 3, 1997, p. 553-559, available at https://core.ac.uk/download/pdf/144222024.pdf accessed on 31.5.2023.

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Due Process Requirements in Blockchain-based Arbitration Lessing in 1999.6 In this phase, the focus was not only on the incorporation of legal provisions into computer codes as an assistance to decision-making but also as a “means to directly enforce rules”.7 The “Code is Law” idea, which precisely relies on computer codes rather than the human brain to define binding legal rules and provisions, originated in computer scientists’ attempts to use cryptographic protocols resembling contractual clauses rather than traditional contracts.8 In 1994, Nick Szabo introduced for the first time the concept of “Smart Contracts”. He defined this concept as “A set of promises, including protocols within which the parties perform on [sic] the other promises. The protocols are usually implemented with programs on a computer network, or in other forms of digital electronics, thus these contracts are “smarter” than their paper-based ancestors”.9 About fourteen years later and in 2008, Blockchain technology was introduced through the invention of Bitcoin as a “peer to peer electronic cash system” by the pseudonymous Satoshi Nakamoto.10 The aforementioned technological developments led to the fourth phase. After the “Lex informatica”, recent discussions were shaped mainly around the concept of “Lex Cryptographia”, which can be defined as a series of rules administered through self-executing, decentralized and autonomous mechanisms such as smart contracts.11 The invention of Bitcoin cast new light on the field. Even though it was the most successful case of the use of blockchain technology, it showed some limitations, which led to the emergence of Ethereum, the second most important milestone of the evolution of blockchains, in 2015. “Ethereum sought to expand the use 6 L. LESSIG, Code: And Other Laws of Cyberspace, Version 2.0, 2nd ed. ReadHowYouWant.com, New York, 2009, p. 5. 7 P. DE FILIPPI/ S. HASSAN (note 1). 8 I. SHEHATA, Smart Contracts & International Arbitration., Vol. 1, Issue 25, 2018, p. 1, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3290026 accessed on 06.11.2022. 9 N. SZABO, Formalizing and securing relationships on public networks, First Monday, Vol. 2, No 9, 1997, available at https://firstmonday.org/ojs/index.php/fm/article/ download/548/469 accessed on 08.5.2023; C. KONSTANTINOS/ M. DEVETSIKIOTIS, Blockchains and Smart Contracts for the Internet of Things, IEEE Access, Vol. 4, 2016, p. 2292-2303, at 2296, available at https://people.cs.pitt.edu/~mosse/courses/cs3720/ blockchain-iot.pdf accessed on 31.5.2023; C. SILLABER/ B. WALTL, Life Cycle of Smart Contracts in Blockchain Ecosystems. Datenschutz Und Datensicherheit-DuD, Vol. 41, Issue 8, 2017, p. 497-500, p. 498. 10 S. NAKAMOTO, A Peer-to-Peer Electronic Cash System, 2008, available on Bitcoin–URL: https://bitcoin.org/bitcoin.pdf accessed on 06.11.2022, p. 1; P. CUCCURU, Beyond Bitcoin: An Early Overview on Smart Contracts, International Journal of Law and Information Technology, Vol. 25, Issue 3, 2017, p. 179-195, p. 179; M. LEHMANN, Who Owns Bitcoin? Private Law Facing the Blockchain, Minnesota Journal of Law Science & Technology, Vol. 21, Issue 1, 2019, p. 93-136, p. 98, available at https://scholarship. law.umn.edu/mjlst/vol21/iss1/4/ accessed on 31.5.2023. 11 A. WRIGHT/ P. DE FILIPPI, Decentralized Blockchain Technology and the Rise of Lex Cryptographia, 2015, p. 1-58, p. 48, available at https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2580664 accessed on 31.5.2023,

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Narges Keshavarz Bahadori of blockchain beyond cryptocurrencies to the realm of smart contracts”.12 Blockchain is a “decentralized, peer-validated crypto-ledger that provides a publicly visible, chronological and permanent record of all prior transactions”.13 Being decentralized, immutable, and anonymous are the most important characteristics of the blockchains.14 Firstly, blockchains are decentralized as they eliminate the role of the trusted middleman in transactions. The duty of verifying the identity and solvability of parties and the authenticity of the documents presented by them to conclude a transaction was normally carried out by banks or escrow agents. In blockchains, however, this duty is spread among various nodes (miners) who validate each transaction in a block.15 Secondly, blockchains are immutable. Once a transaction is validated by the work of the miners, it is added to the chain and creates an unchangeable and stable environment.16 Altering, tempering, or eliminating transactions is normally very difficult. Lastly, blockchains provide anonymous or pseudonymous transactions. This function is ensured by the user’s public and private key. The former allows for traceability and the latter works as an encrypted signature to validate transactions.17 These three principal characteristics contribute to the integrity, resilience, and transparency of the blocks.18 The aforementioned blockchain characteristics are of importance when a transaction happens via a smart contract. Smart contracts are enforceable and automated agreements residing in blockchains.19 They can be triggered when a user directs a transaction order to them.20 Considering blockchain as a network, a set of non-trusting parties can transact via smart contracts in the absence of a centralized trusted middleman. The transaction must be signed by the contract’s owner to be

12 O. RABINOVICH-EINY/ E. KATSH, Blockchain and the Inevitability of Disputes: The Role for Online Dispute Resolution, Journal of Dispute Resolution, Vol. 2019, Issue 2, 2019, p. 47-75, p. 51, available at https://scholarship.law.missouri.edu/cgi/viewcontent. cgi?article=1837&context=jdr accessed on 31.5.20223 13 E. MIK, Smart Contracts: Terminology, Technical Limitations and Real-World Complexity, Law, Innovation and Technology, Vol. 9, Issue 2, 2017, p. 269–300, p. 274, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3038406 accessed on 31.5.2023. 14 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 52; A. WRIGHT/ P. DE FILIPPI (note 11), p. 21 et seq.; M. LEHMANN (note 10), p. 109. 15 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 53. 16 C. KONSTANTINOS/ M. DEVETSIKIOTIS (note 9), p. 2293-2294. 17 Ibidem, at 2297. 18 J. BARNETT/ P. TRELEAVEN, Algorithmic Dispute Resolution—The Automation of Professional Dispute Resolution Using AI and Blockchain Technologies, The Computer Journal, Vol. 61, Issue 3, 2018, p. 399-408, p. 403, available at https://academic.oup.com/ comjnl/article/61/3/399/4608879 accessed on 31.5.2023. 19 C. CLACK/ D. VIKRAM/ A. BAKSHI et al., Smart Contract Templates: Foundations, Design Landscape and Research Directions, ArXiv Preprint ArXiv:1608.00771, Vol. 20, 2016-2017, p. 1-15, p. 2, available at https://arxiv.org/abs/1608.00771 accessed on 31.5.2023. 20 C. KONSTANTINOS/ M. DEVETSIKIOTIS (note 9), p. 2297.

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Due Process Requirements in Blockchain-based Arbitration validly completed.21 Once validated and accepted by both parties, smart contracts “can be self-enforcing running in the cloud”.22 The combination of enforceable self-executed smart contracts with decentralized, immutable and anonymous blockchains generate a phenomenal creature. Even though it is no longer a simple contract, there is no other word to describe it properly. These being self-sufficient structures, some commentators have even considered that smart contracts have the potential to render courts obsolete.23 The increase of smart contract transactions into blockchains triggered a broad spectrum of controversial legal opinions. The supporters of pro-smart contract ideas focus on the advantages of smart contracts in comparison to their traditional peers. Employing smart contracts can considerably reduce transaction costs.24 By eliminating the need for a trusted third party, the drafting and execution of contracts is simplified and concluding contracts becomes more affordable for smaller businesses. Being deployed and executed on a distributed network of nodes, smart contracts are distributed across jurisdictions, which “increases their trust and enforceability while reinforcing their privacy and security”.25 This feature, coupled with their automated enforcement, decreases the risk of prosecution or legal proceedings in smart contracts.26 Despite their aforementioned advantages, the self-enforcing nature of smart contracts makes them inflexible compared to traditional contracts.27 Firstly, hardship, force majeure, and frustration of the commercial purpose of a contract may result in its dissolution. This function is, however, nearly impossible in smart contracts due to their automated self-enforcement feature.28 Secondly, it is difficult, if not impossible, to incorporate the intent of the

21 Ibidem, at p. 2300; G. GOVERNATORI/ F. IDELBERGER/ Z. MILOSEVIC et al., On Legal Contracts, Imperative and Declarative Smart Contracts, and Blockchain Systems, Artificial Intelligence and Law, Vol. 26, No 4, 2018, p. 377–409. 22 C. KONSTANTINOS/ M. DEVETSIKIOTIS (note 9), p. 2296; G. GOVERNATORI/ F. IDELBERGER/ Z. MILOSEVIC et al. (note 21); A. SCHMITZ/ C. RULE, Online Dispute Resolution for Smart Contracts, Journal of Dispute Resolution,Vol. 2019, Issue 2, 2019, p. 103-125, p. 106 et seq., available at https://scholarship.law.missouri.edu/jdr/vol2019/ iss2/8/ accessed on 31.5.2023. 23 P. ORTOLANI, The Impact of Blockchain Technologies and Smart Contracts on Dispute Resolution: Arbitration and Court Litigation at the Crossroads, Uniform Law Review, Vol. 24, Issue 2, 2019, p. 430–448, p. 431; A. SCHMITZ/ C. RULE (note 22), p. 111, available at https://www.researchgate.net/publication/333169372_The_impact_of_ blockchain_technologies_and_smart_contracts_on_dispute_resolution_arbitration_and_cour t_litigation_at_the_crossroads accessed on 31.5.2023. 24 C. SCHÖNFELD, Smart Contract under Swiss Law, in G. A. WALKER (ed), The FinTech Edition, Fintech Hub, London, 2018 10th article, p. 1-26, p. 9, https://www.qmul. ac.uk/law/media/law/docs/research/the-fintech-edition-2018.pdf accessed 12.05.2023. 25 A. SCHMITZ/ C. RULE (note 22), p. 108. 26 P. DE FILIPPI/ S. HASSAN (note 1); E. MIK (note 13), p. 278; C. SCHÖNFELD (note 24), p. 19. 27 G. GOVERNATORI/ F. IDELBERGER/ Z. MILOSEVIC et al. (note 21). 28 E. MIK (note13), p. 278; C. SCHÖNFELD (note 24), p. 19; E. TJONG TJIN TAI, Formalizing Contract Law for Smart Contracts, Tilburg Private Law Working Paper Series,

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Narges Keshavarz Bahadori parties as such into a smart contract. Subjective concepts such as reasonableness, fairness, etc. cannot be translated into mechanical codes.29 Moreover, smart contracts were assumed to reduce transaction costs by eliminating the trusted third party’s role. However, recent issues related to cyber security, hacking, forking problems, and the lack of coding standards have resulted in escalation of transaction costs.30 Therefore, the pro-smart contract allegations about the elimination of disputes and legal proceedings cannot be utterly flawless. To begin with, smart contracts residing in blockchains produce effects in the real world.31 Transfer of title and on-chain payments can trigger a number of disputes, the resolution of which is of paramount importance as it can affect the individuals’ access to justice. To that effect, the present study first seeks to identify blockchain-related disputes and their settlement methods. Second, the focus will be on the two main available on-chain mechanisms, namely multi-signature smart contracts and blockchain-based platforms, and their functions and efficiencies in rendering a final and binding decision will be examined. This will be followed by an analysis of whether due process requirements are respected in blockchain-based proceedings. Finally, the existing legal and technical drawbacks of on-chain dispute settlements will be analysed with a critical approach and the necessity of their existence will be questioned.

II.

Blockchain-Related Disputes and On-chain Dispute Settlement

Blockchain-related disputes can mainly be categorized into off-chain and on-chain disputes.32 Off-chain disputes are those related to the blockchain protocol and occur outside the on-line structure, i.e. in the real world. These include disputes such as non-transactional problems related to the behaviour of the transacting parties, the issue of confidentiality, and the issues related to the governance of a blockchain, its evolution, and, in the case of a hard fork33, its remedies.34 No 6, 2017, Para 3.1, available at http://dx.doi.org/10.2139/ssrn.3038800 accessed on 06.11.2022. 29 C. SCHÖNFELD (note 24), p. 9. 30 C. KONSTANTINOS/ M. DEVETSIKIOTIS (note 9), p. 2292. 31 C. SCHÖNFELD (note 24), p. 11 and 15. 32 K. SZCZUDLIK, “On-Chain” and “off-Chain” Arbitration: Using Smart Contracts to Amicably Resolve Disputes, Newtech.Law (blog), available at https://newtech.law/en/onchain-and-off-chain-arbitration-using-smart-contracts-to-amicably-resolve-disputes/ accessed on 06.11.2022. 33 As described by VUJIČIĆ et al., a hard fork is when “a software update [introduces] a new rule to the network, thus rendering the old software unable to recognize new blocks”: See D. VUJIČIĆ/ D. JAGODIĆ/ S. RANĐIĆ, Blockchain technology, bitcoin, and Ethereum: A brief overview, In Conference 2018 17th International Symposium INFOTEH-

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Due Process Requirements in Blockchain-based Arbitration On the other hand, on-chain disputes are related to the transactions concluded or executed within the blockchain.35 These include transactions wholly performed on chain such as transfer of cryptocurrencies from a wallet to another, and transactions partially performed on-chain or at least recorded on it. For instance, a sale contract by which a party buys a house and pays Bitcoin for the price. This transaction is executed on chain and produces an off-chain effect, which is the transfer of property. The same thing can happen when parties record their contractual rights and obligations into a smart contract within a blockchain. Despite the blockchain inventor’s promises to have a dispute-free domain, and as with any other lucrative activities, disputes are inevitable when there is an on-chain transaction.36 It is important to note that disputes arising from the innovative and complex environment of blockchains need to be settled by a rapid, efficient, and preferably extra-legal dispute settlement mechanism, which is tailormade to fit perfectly the type of the dispute in question. Possessing all the mentioned characteristics in addition to the possibility of producing a binding and globally enforceable decision, arbitration seems to be the most efficient mechanism to deal with such disputes.37 Arbitration has shown great flexibility when facing new technological developments. For example, in the mid 90’s and with the growing popularity of internet and the development of E-commerce, instead of rigidly dealing with numerous small claims from different geographical locations, arbitration not only provided a bespoke procedure, but also embraced the potential offered by the internet and integrated it into its proceedings.38 The word “online” was added to “dispute resolution” and created online dispute resolution (“ODR”) platforms to bypass human limitations when dealing with online disputes. An ODR can be defined as “a means of dispute resolution; uses a third party which is not involved in the dispute, to facilitate the resolution conversation along with the technology itself”.39 The technology in ODR is labelled the “fourth party”40 as it does not JAHORINA (INFOTEH), IEEE, 2018, p. 1-6, p. 4, available at https://www.researchgate. net/publication/324791073_Blockchain_technology_bitcoin_and_Ethereum_A_brief_overvi ew accessed on 31.5.2023. 34 N. HEWETT/ J. CIEPLAK/ S. WARREN, Bridging the Governance Gap: Dispute Resolution for Blockchain-Based Transactions, 2020, p. 3-24, p. 20, available at https://theblockchaintest.com/uploads/resources/file-262482875273.pdf accessed on 31.5.2023. 35 Ibidem, at p. 7. 36 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 55. 37 G. BORN, International Commercial Arbitration, 2nd ed., Kluwer Law International, Netherlands, Vol. 2, 2014, Para 20.02, p. 250-255. 38 E. KATSH, ODR: A Look at History, in D. RAINEY/ E. KATSH/ M. ABDEL WAHAB (eds), Online Dispute Resolution: Theory and Practice A treatise on Technology and Dispute Resolution, The Hague: Eleven International, 2021, p. 1-17, p. 5. 39 L.WING/D.RAINEY, Ethical Principles and Standards for Online dispute resolution, in D. RAINEY/ E. KATSH/ M. ABDEL WAHAB (eds), Online Dispute Resolution: Theory and Practice A treatise on Technology and Dispute Resolution, The Hague: Eleven International, 2021, p. 19-47, p. 20.

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Narges Keshavarz Bahadori replace the third party, i.e. the arbitrators and also mediators, but rather functions like an ally or collaborator.41 ODR systems provide dispute settlement services through different middlemen such as E-commerce platforms, credit card companies or startups. They serve for money claims, personal injury claims and, of course, claims against the online platforms. Famous examples of companies implementing ODR platforms are eBay, Amazon, PayPal, and Internet Corporation for Assigned Names and Numbers (ICANN).42 eBay for example, by offering a cloudbased platform to businesses, resolves over 60 million disputes each year, among which 90% are settled even without the intervention of a court.43 Similarly, the disputes related to anonymous automated on-chain transactions also need to be settled by an efficient, rapid and accessible mechanism.44 “Justice delayed is justice denied”,45 therefore, being free from human limitations, ODRs are more efficient mechanisms when it comes to blockchain-based disputes.46 As stated by Rabinovich, “the very technology that made traditional dispute resolution processes inaccessible, could also provide the basis for developing new, innovative and accessible avenues of redress”.47 If one uses the growth of ODRs in E-commerce as an indication, it might take less than twenty years to have on-chain dispute resolution in all everyday agreements.48 In the last three years, blockchain-based ODR projects have been established to serve as a dispute settlement venue.49 This method not only encompasses the offline limitations by combining online and offline elements in different stages of a proceeding and the final decision, but also uses automation and decentralized blockchain to create a more efficient, rapid and flexible dispute resolution mechanism.50 At present and with the development of on-chain transactions, the element of being “automated” has been added to the ODR concept and has 40 D. RAINEY, Third Party Ethics in the Age of the Fourth Party, International Journal of Online Dispute Resolution, Vol. 1, Issue 1, 2014, p. 37-56, p. 40, available at https://www.elevenjournals.com/tijdschrift/ijodr/2014/1/IJODR_2014_001_001_003.pdf accessed on 31.5.2023. 41 J. RIFKIN, Online Dispute Resolution: Theory and Practice of the Fourth Party, Conflict Resolution Quarterly, Vol. 19, Issue 1, 2001, p. 117-24, p. 121. 42 C. SHEARRER, Library Guides: Online Dispute Resolution: Companies Implementing ODR, University of Missouri Libraries, 2020, available at https://libraryguides.missouri.edu/c.php?g=557240&p=3832247 accessed on 06.11.2022. 43 J. BARNETT/ P. TRELEAVEN (note 18), p. 404. 44 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 56; J. BARNETT/ P. TRELEAVEN (note 18), p. 400. 45 W.E. GLADSTONE, in T. SOURDIN/ N. BURSTYNER, Justice Delayed is Justice Denied, Victoria University Law and Justice Journal, Vol. 4, No 1, 2014, p. 46-60, p. 46, available at https://vulj.vu.edu.au/index.php/vulj/article/view/61 accessed on 31.5.2023. 46 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 57. 47 Ibidem, at p. 57. 48 A. SCHMITZ/ C. RULE (note 22), p. 124. 49 O. RABINOVICH-EINY/ E. KATSH, (note 12) , p. 58; K. SZCZUDLIK, supra (note 32). 50 A. SCHMITZ/ C. RULE (note 22), p. 125.

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Due Process Requirements in Blockchain-based Arbitration changed it from simply online dispute resolution to an on-chain and automated dispute resolution platform.51 Despite their recent popularity, blockchain ecosystems are still “terra incognita” for international dispute resolution, which needs to be explored more profoundly.52 In the next section, the available blockchain-based dispute resolution methods will be introduced and their uses in resolving on-chain disputes will be examined.

III. Blockchain-Based Mechanisms to Resolve OnChain Disputes In order to resolve disputes related to blockchains, whether on-chain or off-chain, two distinctive methods have been deployed: first, resolving disputes using multisignature smart contracts, and secondly, dispute settlement by means of existing blockchain-based platforms. To shed more light on the role of these methods, they are examined from both technical and legal viewpoints in the following discussion. A.

Multi-signature Smart Contracts

To comprehend thoroughly the role and efficiency of multi-signature smart contracts (multi-sigs) in adjudication, a technical and legal analysis is inevitable. As previously defined, smart contracts are a set of binding promises residing on a blockchain. Once triggered by the blockchain participants, they are fully automated and self-enforced.53 As mentioned above, automation can be both an advantage and a disadvantage of smart contracts. As long as there is no dispute, this data structure provides for a rapid and safe means of transaction. But what happens when a dispute arises? How is a smart contract designed to avoid or automatically resolve any potential disputes? As mentioned, the owner of the smart contract or the other participants in a blockchain can deploy it to conduct a transaction by means of their private key.54 For example, consider two parties contracting for delivery of goods in exchange for a certain amount of cryptocurrency. The goods are delivered, but they are defective. If a smart contract is selfexecuting with some “if/then” clauses, as soon as the goods are delivered, funds must be transferred. This, however, can engender various fraudulent and malicious transfers of funds. To remedy this shortcoming, multi-signature smart contracts were introduced in 2013.55 Multi-sig transactions require electronic signatures 51

O. RABINOVICH-EINY/ E. KATSH (note 12), p. 59. P. ORTOLANI (note 23), p. 434 et seq. 53 C. KONSTANTINOS/ M. DEVETSIKIOTIS (note 9), p. 2295 et seq. 54 Ibidem. 55 W. BRONKEMA, Introduction to Multisig Contracts, MyCrypto, 2020, available at https://medium.com/mycrypto/introduction-to-multisig-contracts-33d5b25134b2 accessed on 14.5.2023. 52

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Narges Keshavarz Bahadori (private key) from more than one party to initiate a transaction and to transfer funds.56 They are in M of N forms where “M stands for the number of signatures required to spend funds and N stands for the maximum number of public keys that are permitted to sign”.57 Accordingly, for the execution of a multi-sig contract, a set of multiple signatures from different addresses are required. These addresses normally belong to different people and are stored in a digital wallet, which is either hardware-based or private-key-based.58 If one owner of a multi-sig wants to send a transaction – e.g. transfer of a certain number of tokens – the latter cannot be executed unless multiple addresses, normally three other owners, approve this transaction. As soon as the transaction is fully approved, the funds are transferred immediately.59 Generally, two smart contractual parties can transact without the need for a middleman. However, as stated above, on-chain disputes are inevitable; therefore, multi-sig smart contracts seem to be a safe option for transactions within the blockchain. In this mechanism, the third owner of the electronic signature operates as the arbitrator, designated by the parties before the dispute occurs.60 Although controversial, this feature of multi-sig smart contracts can be beneficial for on-chain dispute resolution. Parties, while transacting anonymously and within the blockchain, can envisage a multi-signature contract in the form of a wallet to safeguard their rights and obligations. A multi-sig wallet can function as an off-chain escrow agent. Accordingly, the third party/parties, which approve the transfer of funds, can function as an adjudicator, and as a result, the process can resemble an arbitration proceeding.61 The importance of this agent becomes evident when a dispute arises and one of the parties does not confirm the transfer of funds. Here, the other key owner, i.e. the arbitrator, steps in to resolve the dispute. After his or her decision, the arbitrator, jointly with the winning party, allows the transfer of funds.62 Some scholars believe that the raw data of a multi-sig transaction should be recognized as an arbitral award under the New York Convention where parties have opted out of a reasoned award.63 This, however, is possible only when the law of the seat is not strict about the form of the award. While promising, the use of 56 A. J. SANTOS, Recognition of Blockchain-Based Multisignature E-Awards, ArXiv Preprint ArXiv:1911.12968, 2019, Para III (A). 57 N. CHKUASELIDZE, Creating Multisignature Transactions, Bcoin Guide, 2018, available at https://bcoin.io/guides/multisig-tx.html accessed on 06.11.2022. 58 W. BRONKEMA (note 55). 59 H. GUO/ W. LI/ E. MEAMARI et al., Attribute-Based Multi-Signature and Encryption for EHR Management: A Blockchain-Based Solution, 2020 IEEE International Conference on Blockchain and Cryptocurrency (ICBC), IEEE, 2020, p. 1-5, available at https://doi.org/10.1109/ICBC48266.2020.9169395 accessed on 14.5.2023. 60 P. ORTOLANI (note 23), p. 435; A. J. SANTOS (note 56), Para III (C). 61 A. GURKOV, Blockchain in Arbitration Development: Multi-Signature Wallet Showcase, International Journal of Online Dispute Resolution, Vol. 2, Issue 4, 2018, p. 6365, p. 63. 62 Ibidem. 63 A.J. SANTOS (note 56), Para II.

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Due Process Requirements in Blockchain-based Arbitration multi-sig smart contracts is still limited to the transfer of cryptocurrencies via multi-sig wallets, which seems to be more of an enforcement mechanism than an adjudication. Moreover, for a great number of arbitration users, the underlying technology is too strange and complicated. Therefore, the focus of this study will be on the existing blockchain-based ODR platforms, which deploy blockchain technology in the dispute resolution process. This will be further explained in the next section. B.

Existing Blockchain-Based ODR Platforms

As stated in the previous sections, the ODR mechanism uses technology to facilitate the process of dispute settlement among the parties. It can be fully automated or involve human intervention.64 This automation can be used in different stages, from negotiations and bringing parties together to hearings, and finally, to rendering a binding decision. The Automated ODR (“AODR”) becomes of paramount importance especially when there is a need for a fast and efficient dispute settlement in a complex, anonymous, and self-executed blockchain environment.65 Considering their potential, blockchain protocols are used for dispute settlement.66 Their functions extend beyond issues related to cryptocurrencies and provide dispute settlement services for businesses and individuals even when they know nothing about the blockchain technology per se. Some even consider blockchain-based arbitration a “new normal” fit for day-to-day legal issues.67 At present, a wide range of blockchain-based arbitration platforms exists for both on-chain and off-chain disputes. Some scholars have categorized the mechanisms used in these platforms into arbitration of blockchain-related disputes in traditional sense, crowdsourcing, and bot resolution.68 For the purpose of this study, these resolution mechanisms are separated into two main groups: semi-automated and fullyautomated mechanisms. Fully-automated mechanisms or bot resolutions aim to replace courts and tribunals by AI-powered platforms. Deep learning and neural network technology developers intend to eliminate the human touch in the proceeding and to create a fully impartial and automated dispute resolution mechanism. This might be achieved in the near future; however, for the moment, scholars are sceptical about the biases developed by this technology due to insufficient data feed and technological limitations.69 The reputation and success of semi-automated dispute resolution platforms however are increasing every day. On these platforms, human intervention does

J. BARNETT/ P. TRELEAVEN (note 18), p. 400. O. RABINOVICH-EINY/ E. KATSH (note 12), p. 58. 66 Ibidem, at p. 59. 67 A. SCHMITZ/ C. RULE (note 22), p. 109. 68 Ibidem, at p. 117 and 121. 69 A J. SCHMITZ, Dangers of Digitizing Due Process, University of Missouri School of Law Legal Studies Research Paper, No 2020-01, p. 1-26, p. 20, available at https://ssrn.com/abstract=3525757 accessed on 06.11.2022. 64 65

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Narges Keshavarz Bahadori not completely vanish, although it is limited to specific aspects of the proceeding.70 Even though smart contracts are self-executing, the platforms allow the automated execution of the contract to be suspended for the duration of the dispute resolution proceeding.71 Blockchain-based arbitration platforms using different legal, technical, and economical notions provide the parties with a variety of options to choose their own specific method to settle the dispute. Although they use common notions, each of these platforms has its own methods for providing dispute resolution services to their clients. Let us review two main examples of these methods: i.e. Ricardian contracts and crowdsourcing. 1.

Ricardian Contracts

Being one of the first platforms to take a step toward decentralized tribunals, Mettereum uses Ricardian contracts. Ricardian contracts, invented by Ian Grigg in 1995, is a method that converts a natural-language document into a digital coded format recorded on a blockchain, which can be signed electronically by the parties.72 The natural language format remains even after digitization; this was intended to help parties with no programming expertise to be able to read the contract.73 Although Mettereum has a “governing committee” with legal decision-making power for its token holders, “The Mattereum White Paper74 claims that, as it has been developing this infrastructure, the focus has been on dispute avoidance rather than on dispute resolution”.75 According to the Mattereum working paper76, dispute settlement via the Ricardian contracts mechanism is achieved by using a natural language contract.77 70 T. SOURDIN/ B. LI/ T. BURKE, Just, Quick and Cheap: Civil Dispute Resolution and Technology, Macquarie LJ, Vol. 3, 2019, p.17-38, p. 34, available at http://classic. austlii.edu.au/au/journals/MqLawJl/2019/3.html accessed on 31.5.2023. 71 J. METZGER, The Current Landscape of Blockchain-Based, Crowdsourced Arbitration, Macquarie LJ, Vol. 5, 2019, p. 81-101, p. 87, available at http://classic. austlii.edu.au/au/journals/MqLawJl/2019/5.html accessed on 31.5.2023. 72 V. GUPTA/ R. KNIGHT/ A. BUCHANAN et al. , Smart Contracts Real Property, Working Paper, Matereum, 2020, p. 1-48, p. 2, available at https://mattereum.com/wpcontent/uploads/2020/02/mattereum_workingpaper.pdf accessed on 11.5.2023. 73 I. GRIGG, The Ricardian Contract, Proceedings. First IEEE International Workshop on Electronic Contracting, IEEE, 2004, p. 25-31, p. 2, available at https://doi.org/ 10.1109/WEC.2004.1319505 accessed on 06.11.2022. 74 An introductionary short paper drafted in 2018 by the Mattereum team on the legal, technical and commercial infrastructure layer for on-chain property transfer in accordance with the Mattereum Protocol, available at: https://mattereum.com/wpcontent/uploads/2020/02/mattereum-summary_white_paper.pdf accessed on 08.5.2023. 75 J. METZGER (note 71), p. 90. 76 Mattereum Authors claim that the working paper seeks to outline how Mattereum implements Ricardian contracts in a way that integrates smoothly with existing arbitral and legal frameworks, available at https://mattereum.com/wp-content/uploads/2023/04/ mattereum_workingpaper.pdf accessed on 08.5.2023. 77 V. GUPTA (note 72), p. 22.

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Due Process Requirements in Blockchain-based Arbitration In this type of contract, parties seeking to obtain a binding and final decision rely on two external systems, which are either smart contracts or traditional contracts.78 It is clear that the arbitration services offered on this platform are of a conventional and off-chain form, and hence, the resulting award is backed by the New York Convention 1956 (“NYC”). According to Matttereum developers, the intent of [the creators of] this platform is not to arbitrate and settle the dispute but rather to “have a dual nature: setting up the infrastructure, and then acting as a (lead) investor in the companies that are coming into the space to build businesses in the ecosystem”.79 LTO is a Dutch start-up that serves as another example of platforms using Ricardian live80 contracts to resolve disputes on blockchain.81 Contrary to smart contracts, a live contract does not contain a transfer of value when conditions are satisfied, but merely an outline of how the parties should interact.82 Deviation is possible in these contracts. Parties wishing to resolve a dispute on this platform may agree on a deviation of their contractual clauses.83 Similar to Mattereum, LTO also envisages an off-chain dispute resolution – mostly arbitration – to settle the dispute outside the blockchain.84 Accordingly, categorizing these types of platforms under the decentralized blockchain-based dispute resolution seems questionable. 2.

Crowdsourcing

Many of the remaining platforms rely on some form of crowdsourcing or decisionmaking by putting disputes to a public vote, i.e. “using the wisdom of the crowd”.85 I. GRIGG (note 73), p. 7. V. GUPTA (note 72), p. 18. 80 Live contracts are a reframed version of the static and paper-based contracts. They are designed to interact with other software, users and even contracts and to take new actions that are independent of predefined parameters or rules. This feature distinguishes live contracts from smart contracts which are set up to support a limited number of automated tasks. See N. HEINZMANN, Live Contracts: How Next-Gen CLM Solutions Will Make Contracts More Than Merely “Smart”, Spend Matters, 2019, available at https://spendmatters.com/2019/01/21/live-contracts-how-next-gen-clm-solutions-will-makecontracts-more-than-merely-smart/ accessed on 08.5.2023. 81 L.T.O. Network, Blockchain for Decentralized Workflows, 2014, available at https://ltonetwork.com/documents/LTO%20Network%20-%20Technical%20Paper.pdf accessed 08.5.2023. 82 Ibidem. 83 Ibidem. 84 A. DARCY WE/ A.M. LANE/ M. POBLET, The Governance of Blockchain Dispute Resolution, Harvard Negotiation Law Review, Vol. 25, 2019, p. 75-101, p. 90 et seq., available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3334674 accessed on 31.5.2023. 85 F. AST, Kleros, A Protocol for a Decentralized Justice System, Medium, 2017, available at https://medium.com/kleros/kleros-a-decentralized-justice-protocol-for-theinternet-38d596a6300d accessed on 06.11.2022. 78 79

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Narges Keshavarz Bahadori In this mechanism, the decisions are made through the vote of the majority of the jurors; therefore, the assumption here is purely economic, which means that each juror will try to vote for the decision for which they expect the majority of the other jurors to vote.86 Among the existing platforms, Blockchain Arbitration Forum (“BAF”), Kleros, Juris, Jur, Jury online, Sagewise, Aragon, RHubarb and OATH use game theory considerations and economic notions such as assumption of rationality and Schelling focal point to settle disputes among parties.87 Each platform promises to provide the parties to a smart contract with “an automatically available dispute resolution mechanism that can be encoded directly into the contract”.88 The functions and dispute resolution mechanism of each of the mentioned platforms have been thoroughly examined, not only through their published white papers but also in several recent scholarly papers. To that effect, the present study will focus on their similarities and differences to explain how a blockchain-based platform using the crowdsourcing mechanism works in general. The platforms normally serve for smart contract-related disputes. In order to activate the dispute resolution mechanism, the parties must first incorporate the arbitration clause into their smart contract, specifying their desired platform for resolving their potential disputes.89 This can be also done by adopting the platform code in their smart contracts (e.g. Juris Code, Sagewise SDK). The jurisdiction of the dispute resolution platforms is normally limited to the smart contracts residing in their own blockchain.90 In such proceedings, the execution of the smart contract will normally be frozen until the final decision is rendered. In addition to freezing the disputed smart contract, platforms such as Sagewise allow the parties to amend their contractual rights or obligations.91 Crowdsourcing as the basis for the dispute resolution in a blockchain-based platform is itself based on “Schelling point”.92 In accordance with this theory, it is assumed that in the absence of communication, people will reach a consensual result, because it is a logical outcome.93 This assumption in the blockchain-based adjudication is reinforced by the parties’ and arbitrators’ economic incentives. On the one hand, in order to start a dispute resolution proceeding, parties must deposit a certain number of tokens (the special cryptocurrency of the platform) as an arbitration fee. On the other hand, token holders wishing to be selected as jurors also F. AST/ C. LESAEGE, Kleros, a Protocol for Decentralized Justice, in Dispute Revolution - The Kleros Handbook of Decentralized Justice, Kleros.IO, available at https://ipfs.kleros.io/ipfs/QmZeV32S2VoyUnqJsRRCh75F1fP2AeomVq2Ury2fTt9V4z/Dis pute-Resolution-Kleros.pdf accessed on 13.5.2023. 87 O. RABINOVICH-EINY/ E. KATSH, (note 12), p. 71. 88 J. METZGER (note 71), p. 87. 89 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 65. 90 Ibidem, at p. 64. 91 A. DARCY WE/ A. M. LANE/ M. POBLET (note 84), p. 92. 92 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 59. 93 C. LESAEGE/ F. AST/ W. GEORGE, Kleros Long Paper v1.0.0, 2020, p. 1-45, p. 13, available at https://kleros.io/whitepaper_long_en.pdf accessed on 13.5. 2023. 86

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Due Process Requirements in Blockchain-based Arbitration deposit tokens. The more tokens they deposit, the higher their chance of being selected as a juror.94 Finally, if their vote is in conformity with the majority, they receive the deposited arbitration fees. However, if they vote against the majority’s vote, they will be sanctioned by losing all their deposited tokens.95 Thus, a monetary or crypto-monetary incentive motivates the jurors to choose the answer that they find most logical. Another incentive to vote in line with the majority is the system of reputation debits and credits, which are associated with the jurors’ answers. “Any juror that is part of the Schelling Point consensus will earn reputation, whilst any juror who is outside of the consensus will be penalised with a deduction of reputation”.96 Albeit randomly, the arbitrators/jurors are normally selected based on the parties’ specifications about the number or sometimes special qualifications of the jurors in their agreement. However, some platforms such as Rhubarb’s dispute portal provide a “poll verdict”.97 In this platform, parties simply post their dispute on Rhubarb’s dispute portal, along with the proposed resolution options. All RHUCoin holders can nominate themselves as jurors by depositing tokens and can subsequently submit their votes as jurors. The result will be the poll verdict. Some platforms, such as Jury online, have different stages in the dispute settlement, which begin with off-chain negotiations and mediation and end with rendering a final arbitration award.98 In all cases, the jurors, voters, and arbitrators are anonymous; they do not know each other and have no contact with each other. They submit their decision anonymously; however, they are identifiable by their hash. They use their public key to have access to the documents and evidence recorded on the blockchain and are required to make their decision within a given time.99 The final decision is binding for the parties as it unfreezes the smart contract and the transfer of fund occurs.100 Whenever there is a binding and final decision, the main question that comes to mind is whether basic procedural guarantees and due process requirements are respected during the process of decision-making. Is the parties’ right to be heard respected? Do the parties have sufficient opportunities to present their case? The question that arises here is whether respecting such guarantees is also necessary in dispute resolution on blockchain-based platforms. Answering these questions is of paramount importance, as the answers might subject the recognition and enforcement of these decisions in the off-chain environment and in different jurisdictions to doubt. In the next section, we will first present a short explanation of the due process requirements and their importance in legal instruments. This will be followed by an

Ibidem, at p. 3 Ibidem, at p. 2. 96 J. METZGER (note 71), p. 94. 97 O. RABINOVICH-EINY/ E. KATSH (note 12), p. 68. 98 J. METZGER (note 71), p. 92; O. RABINOVICH-EINY/ E. KATSH (note 12), p. 69. 99 A. DARCY WE/ A.M. LANE/ M. POBLET (note 84), p. 75; J. METZGER (note 71), p. 95; O. RABINOVICH-EINY/ E. KATSH (note 12), p. 59. 100 Ibidem. 94 95

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Narges Keshavarz Bahadori analysis of the due process requirements during the different steps of a blockchainbased proceeding.

IV. Due Process in International Commercial Arbitration The fundamental feature of arbitration is that the arbitral award is final, binding and widely enforceable.101 For an award to produce such an effect, the arbitral tribunals must meet certain basic procedural standards during the arbitration procedure, which constitute “Due Process”.102 This section attempts to define the due process requirements in dispute resolution proceedings and studies their importance in different national and international legal instruments. A.

Due Process – Definition and Characteristics

Due process consists of the minimum mandatory requirements in each proceeding that cannot be derogated by parties’ agreements.103 Natural justice and fundamental procedural fairness are other terms used to describe such requirements.104 The notion of due process first appeared in state court criminal procedure to guarantee the basic rights of defendants.105 Now, however, there is no doubt amongst legal scholars that these requirements are also mandatory in civil procedure and must also be respected before extrajudicial tribunals such as arbitration tribunals.106 Due process can be defined by its constitutive elements. To that effect, due process is the mandatory requirement that ensures that parties are given proper notice of the case and an adequate opportunity to present their case before an independent and impartial tribunal that treats them equally.107 Due process is especially important in arbitration proceedings for two main reasons. First, an arbitration agreement as the basis for an arbitration proceeding has both a positive and a negative effect in dispute settlement. On the positive side, it grants a panel the authority to resolve a dispute, and at the same time, on the M. KURKELA/ S. TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI), Due Process in International Commercial Arbitration, 2nd ed., Oxford University Press, USA, 2010, p. 1. 102 Ibidem, at p. 3 et seq. 103 H. A. TOSUN, Public Policy Concepts in International Arbitration, PhD Thesis, UC Berkeley, 2019, p. 48. 104 M. KURKELA/ S.TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p. 1. 105 L. REED, Ab (Use) of Due Process: Sword vs Shield, Arbitration International, Vol. 33, Issue 3, 2017, p. 361–77, p. 366. 106 Ibidem, at p. 367 107 Ibidem, at p. 366. 101

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Due Process Requirements in Blockchain-based Arbitration negative side, it restricts access to the courts and excludes them from settling the parties’ dispute.108 Secondly, as previously mentioned, it is the fundamental feature of arbitration, which is its final, binding and widely enforceable outcome.109 Due process is also related to some similar notions such as ethics of proceeding or public policy. Normally, these notions are more extensive than due process. Issues related to the parties’ consent, conflict of interest, confidentiality, competence, corporate-organizational liability, communication and counselling, costs, complaints and conflict of laws are also related to the ethics of proceedings.110 Although some of the aforementioned issues also fall within the scope of due process, such notions are broader and failing to comply with them does not have the same effect as violation of due process on the outcome of the proceeding. The more important related notion here is public policy, the violation of which can result in the annulment or non-enforcement of an arbitration award. Different national legal systems have different approaches with respect to public policy and due process. Some, such as the French legal system, consider the equal treatment of the parties, which is a constitutive element of due process, as a public policy.111 Dividing public policy into procedural and substantive public policy is a widely accepted practice. This approach was also confirmed by the Swiss federal tribunal in its judgment of January 9, 2005. It ruled that “procedural public policy guarantees parties the right to an independent judgment on their submissions and the facts submitted to the arbitral tribunal, in accordance with the applicable procedural law; substantive public policy is breached when fundamental and generally recognized principles are breached, leading to an untenable contradiction with the notion of justice, so that the decision appears incompatible with the values recognized in a state governed by the rule of law”.112 This approach has since been adopted in other jurisprudences.113 It can be concluded based on this judgment that “due process is also termed as the procedural public policy”.114 Moreover, even though procedural public policy requires conformity with due process requirements, many national laws treat the breach of due process as a separate ground for refusal of an arbitral award.115

108

M. KURKELA/ S.TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101)

p. 2. Ibidem, at p.4. C. MENKEL-MEADOW, Ethics Issues in Arbitration and Related Dispute Resolution Processes: What’s Happening and What’s Not, University of Miami Law Review, Vol. 56, No 4, 2002, p. 949-1008, p. 953, available at https://repository.law.miami.edu/cgi/ viewcontent.cgi?referer=&httpsredir=1&article=1494&context=umlr accessed on 31.5.2023. 111 B. HANOTIAU/ O. CAPRASSE, Arbitrability, Due Process, and Public Policy under Article V of the New York Convention-Belgian a French Perspectives, Journal of International Arbitration, Vol. 25, Issue 6, 2008, p. 721-741, p. 730. 112 Federal Supreme Court of Switzerland, 4P.280/2005, Para 2.1. 113 Federal Supreme Court of Switzerland, 4A_486/2019 and 4A_242/2022. 114 H. A. TOSUN (note 103), p. 48. 115 Ibidem, at p. 49. 109 110

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Narges Keshavarz Bahadori As mentioned above, due process gives parties equal rights during the proceeding to present their case and benefit from an impartial and independent tribunal.116 These requirements are of such importance that respecting them is vital for a sound and just proceeding. Equal treatment covers not only the parties’ equal right to present their case during the arbitration proceeding but must also be respected in the constitution of arbitral tribunal itself.117 Despite the crucial importance of respecting due process in a tribunal proceeding, it should be noted that, in practice, a very fine line exists between the fear of violation of one’s constitutional rights and abuse of rights.118 Accordingly, tribunals are hesitant when dealing with allegations of due process violations and rarely is an award set aside based on such allegations.119 However, the fear of abuse of right is not a sufficient justification to disregard the mandatory due process requirement in dispute settlement proceedings. In addition to national jurisdictions, due process requirements are also essential in international dispute resolutions and are reflected in international instruments, soft laws, and institutional rules. For instance, Article 17(1) UNCITRAL Arbitration Rules stats that “subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at any stage of the proceedings each party is given a full opportunity of presenting his case…”.120 This approach is also reflected in Article 18 of the UNCITRAL Model Law. Moreover, the New York Convention adopts permissive language in its Article V(1)(b), thereby affirming that the recognition and enforcement of foreign awards may be refused when “the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.”121 Article 34(2)(a)(ii) of the UNCITRAL Model Law reaffirms the same approach as grounds to set aside an award. These provisions of the UNCITRAL Model Law have been adopted (verbatim or similar) by many countries in their national arbitration laws.122 In line with the international instruments, the arbitration institutions also provide for minimum procedural guarantees. The ICC Arbitration Rules, for instance, require that “in all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case”.123 L. REED (note 105), p. 366. Z. JORDANOSKI, Due Process as Minimal Procedural Safeguard in International Commercial Arbitration, Iustinianus Primus L. Rev, Vol. 8, 2017, p. 1-14, p. 2. 118 L. REED (note 105), p. 372. 119 M. POLKINGHORNE /B. A. GILL, Due Process Paranoia: Need We Be Cruel to Be Kind, Journal of International Arbitration, Vol. 34, Issue 6, 2017, p. 935-946, p 936. 120 UNITED NATION COMISSION ON INTERNATIONAL TRADE LAW, UNCITRAL Arbitration Rules (with Article 1, Para 4, as adopted in 2013 and Article 1, Para 5, as adopted in 2021), 2021. 121 B. HANOTIAU/ O. CAPRASSE (note 111), p. 727. 122 Z. JORDANOSKI (note 117), p. 6. 123 ICC Arbitration Rules in force as from 1 January 2021, Article 22(4). 116 117

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Due Process Requirements in Blockchain-based Arbitration The LCIA Arbitration Rules also took the same position when regulating the general duties of the arbitral tribunal.124 Article 19(1) of the Swiss Rules of International Arbitration similarly states that “the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, including by adopting measures for the efficiency of the arbitration proceedings, provided that it ensures equal treatment of the parties and their right to be heard”; this reaffirms the approaches taken by the aforementioned national and international instruments, emphasizing the importance of the due process requirements in a dispute resolution process.

V.

Due Process Requirements in Blockchain-Based Platforms

As mentioned in the previous sections, blockchain technology has been adopted for on-chain and off-chain dispute settlements. Blockchain-based platforms offer dispute resolution services to their token holders by means of game theory consideration, rationality assumption, and crowdsourcing. The three key players in decentralized justice, i.e. Kleros, Aragon and Jur platforms, have established mechanisms that resemble the arbitration proceeding.125 Technology in the justice sector can be perceived and categorized as either sustaining or disruptive.126 Contrary to most examples of AI in dispute settlement, blockchain technology does not seek, at least for the moment, to replace all human intervention in the adjudicating process, but merely to assist it, or more accurately, to present a hybrid (human- and machine-based) nature for the dispute settlement mechanism.127 Its use in arbitration proceedings can give rise to a number of doubts and questions regarding procedural fairness. Safeguarding the due process requirements in technology-based dispute settlements are of such importance that the International Centre for Online Dispute Resolution (“ICODR”) published a set of principles as guidance for policy makers when dealing with an online dispute resolution mechanism.128 Accessibility, accountability, competency, confidentiality, impartiality, legality, security, and transparency are the main principles listed by ICODR.129 These principles can serve by analogy for an on-chain dispute settlement as well. This section will further outline the requirements of due process through a step-by-step examination of blockchain-based arbitration within the 124 The London Court of International Arbitration, Arbitration Rules, effective 1 October 2020, Article 14.1(i). 125 Y. AOUIDEF/ F. AST/ B. DEFFAINS, Decentralized Justice: A Comparative Analysis of Blockchain Online Dispute Resolution Projects, Frontiers in Blockchain, 2021, p. 1-8, p. 2, available at https://doi.org/10.3389/fbloc.2021.564551 accessed on 06.11.2022. 126 T. SOURDIN/ B. LI/ T. BURKE (note 79), p. 16. 127 A.J. SCHMITZ (note 69), p. 20; T. SOURDIN/ B. LI/ T. BURKE (note 79), p. 24. 128 A.J. SCHMITZ (note 69), p. 26. 129 Ibidem, at p. 26.

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Narges Keshavarz Bahadori existing platforms. As mentioned, the focus will be on the platforms that offer mechanisms assimilated to real world arbitration. A.

Due Process Requirements in the Commencement of Dispute Resolution within Blockchain-Based Platforms – Arbitration Agreement

The parties to a smart contract who opt for a dispute resolution by blockchainbased platforms can effect a crypto payment in a blockchain to guarantee the possibility of dispute resolution in case of a future contractual conflict.130 They sometimes have the opportunity to designate ex-ante certain procedural elements.131 For example, in Kleros proceedings, parties can decide on their preferred sub-court, the number of arbitrators/jurors, and can establish a list of their desired prayers for relief.132 These elements appear in the arbitration agreement, which was constitutes the basis for arbitration. In platforms such as OpenBazaar (Closure announced on January 15, 2021), there was the possibility of drafting an arbitration agreement in natural language in parallel with the code-based smart contract in order to avoid ambiguity and to facilitate the enforcement process.133 To initiate an arbitration proceeding, a party to a smart contract who is not satisfied by the performance of its counterparty can trigger the dispute settlement procedure. The party must also propose the possible remedies for such a dispute (e.g. performance, payment, etc.).134 As previously stated, one of the due process requirements is the right of a party to be notified of the case against them.135 In a blockchain-based platform such as Jur, for example, the other party (defendant) will be notified on chain and will be given 24 hours to respond by presenting its alternative remedy.136 The blockchain users are anonymous or pseudonymous, meaning that when they mutually agree on an arbitration clause in their smart contractual relationship, their identity does not raise an issue. The issue, however, can arise when the pseudonymous party is not in fact an individual but, instead, a group of people who are unaware of a proceeding going on against them (e.g. consumers), or as per Art. V(1)(a) NYC, a party who is under some legal incapacity to be a part of the arbitral pro-

O. RABINOVICH-EINY/ E. KATSH (note 12), p. 59. M. BUCHWALD, Smart Contract Dispute Resolution: The Inescapable Flaws of Blockchain-Based Arbitration, University of Pennsylvania Law Review, Vol. 168, Issue 5, 2019-2020, p.1369-1423, p. 1412, available at https://scholarship.law.upenn.edu/penn_law_ review/vol168/iss5/3/ accessed on 31.5.2023. 132 F. AST/ C. LESAEGE (note 86), p. 6. 133 A. SCHMITZ/ C. RULE (note 22), p. 117. 134 JUR WHITEPAPER V2.0.2, 2019, p. 1-67, p. 37, available at https://jur.io accessed on 06.11.2022; C. LESAEGE/ F. AST/ W. GEORGE (note 93), p 3. 135 L. REED (note 105), p. 366. 136 M. BUCHWALD, (note 131), p. 1387. 130 131

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Due Process Requirements in Blockchain-based Arbitration ceeding.137 This is particularly important when recognition and enforcement of an award is sought. Some propose to identify the parties by their private key or their Ethereum address to solve this conundrum.138 The identification of the blockchain users for each proceeding, however, will negate the very nature of a blockchain, which is an anonymous automated data structure. B.

Due Process Requirements in an Arbitration Proceeding within Blockchain-Based Platforms

After the initiation of the arbitration proceeding, the two most important principles of due process come into play: the right to an independent and impartial tribunal and one’s right to fully present their case.139 1.

Impartiality and Independence

In most blockchain-based platforms such as Kleros, Aragon, and Jur, the process of jury selection is not based on the parties’ decision, as in normal off-chain arbitration proceedings.140 These platforms adopt a crowdsourcing method and jurors volunteer to decide a case.141 In order to do so, they deposit a certain amount of cryptocurrency and nominate themselves to random jury selection rounds.142 In some platforms such as Kleros, the more cryptocurrency jurors deposit, the higher their chances of being selected. The jurors’ incentive is the arbitration fee that the parties deposit to initiate the process. Even though in some extremely democratic platforms every volunteer juror has the right to vote (e.g. Rhubarb’s dispute portal), in the majority of existing platforms, some sort of filtering based on the juror’s experience, expertise, or simply his/her good reputation exists. These qualities can be assessed based on the number of times that a selected juror has voted in line with the majority in the previous proceedings.143 As explained in the previous sections, in blockchain-based platforms, jurors decide based on the rationality assumption and game theory. Platforms such as Kleros function based on the Schelling focal point. Jurors are anonymous or pseudonymous with no contact with each other. The remuneration method is based on whether a juror votes in line with the majority. Those who do not vote in line with the majority will be

M. KURKELA/ S. TURUNEN/ CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p. 37. 138 M. BUCHWALD, (note 131), p. 1419. 139 L. REED (note 105), p. 366. 140 L. CUENDE/ J. IZQUIERDO, Aragon Network: A Decentralized Infrastructure for Value Exchange, Whitepaper, 2017, p. 24, available at https://aragon.org/about-aragon accessed on 09.5.2023; C. LESAEGE/ F. AST/ W. GEORGE (note 93), p. 2. 141 Ibidem, at p. 2. 142 Ibidem, at p. 7. 143 Ibidem. 137

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Narges Keshavarz Bahadori penalized by losing all their deposited tokens.144 Platform developers believe that since the panel members are randomly selected amongst anonymous volunteer jurors, the chance of corruption and collusion is very slim, and therefore, the parties are judged by impartial and independent jurors.145 As promising as the random jury selection seems to be, there may still be certain drawbacks when rights and obligations are to be decided based on purely economic incentives. The first drawback that comes to mind is that a juror shaping his or her mind around the game theory consideration risks preferring “what is more popular than what is correct”.146 In off-chain arbitration, the arbitrator evaluates the evidence and deliberates with their co-panellists, but in the end, each juror decides based on what he or she, as an individual, believes is the correct remedy. Although the reasoning and justification of the other panellists might direct his or her decision, the outcome is what the arbitrator believes to be true. In game theory consideration, the juror does not decide on what is the fair remedy for the case but rather decides based on how the other jurors might behave in such a case. As Buchwald has stated: “Here the decision maker does not think about well-being of disputant but more of her own well-being”.147 It is clear that even though anonymous, the decision makers are not totally independent, and their decisions depend on what the majority might find to be the right answer. One argument in favour of on-chain arbitration relates to the importance and the degree of impartiality and independence requirement in arbitration as opposed to court proceedings. This requirement is slightly less strict in the former as compared to the latter. For example, Article 4 of the IBA Guidelines on Conflicts of Interest in International Arbitration provides for an ex-post waiver of bias by parties wholly aware of potential conflicts and with a certain degree of decision-making power.148 In on-chain environments, the arbitration parties are not aware of the arbitrators’ identities, however, they know, or are assumed to know, that the basis for decision-making is crowdsourcing. Accordingly, when they agree to this type of procedure, it could be said that they waive their right to challenge ex-ante based on bias. As of the writing this paper, the possibility of changing/challenging arbitrators based on bias – not in a traditional method but in a platforms-specific manner – is only available for some platforms, and only to themselves, but not the parties. Jur arbitration hub, for example, provides for a peer review of the first draft of the arbitration award in order to filter any kind of bias and partiality.149 The peer reviewers also lose or gain their tokens based on game theory. It will be assessed by examining how closely their scores match the average score of all the three peer reviewers.150 Such peer reviews motivate the jurors to O. RABINOVICH-EINY/ E. KATSH (note 12), p. 68. JUR WHITEPAPER (note 134), p. 40. 146 M. BUCHWALD, (note 131), p. 1404. 147 Ibidem. 148 M. KURKELA/ S.TURUNEN / CONFLICT MANAGEMENT 101), p. 127. 149 JUR WHITEPAPER (note 134), p. 15. 150 Ibidem, at p. 27. 144 145

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Due Process Requirements in Blockchain-based Arbitration be more cautious in the first place. However, all the previous arguments on how the game theory consideration affects the independence of the jurors and creates bias are also applicable to the peer reviewers’ impartiality. 2.

Equality of Arms and the Parties’ Right to be Heard

Equality of arms, i.e. the parties’ ability to present their case, is also one of the main principles of due process.151 Equal treatment, the parties’ right to be heard, and the right to submit their evidence are the main examples of the parties’ right to present their case.152 “Essentially, each party must be given a fair and equal opportunity to argue his or her case as to both matters of fact and law and each party should have a right to react to and rebut the submissions of the other party. Evidence and relevant material must be disclosed to both parties in an accessible and adequate way so that they can obtain informed notice of the case, and the arguments against them”.153 In addition to the parties’ right, arbitrators have broad discretion to demand further documents or discovery, or to request an expert opinion on the disputed subject or a third party’s testimony, when they see fit.154 This can be achieved either by issuing an internal order addressed to the parties in the arbitration or by an external order that can be enforced with the assistance of the court of the seat of arbitration.155 Even in document-only proceedings, in which speediness and costs are crucial, the arbitrators may have different rounds of document submissions for further clarification and may also give the parties several occasions to respond to their opposing party’s allegations.156 In a decentralized blockchain-based platform, after the initiation of the arbitration proceeding and jury selection, parties have only a one-time possibility to submit their documents and other evidence according to the established rules of the platforms.157 As there is no discovery nor rounds of hearings, the parties submit as much evidence as they desire and find pertinent to win the case, with no real filters.158 Platforms indicate that evidence production is self-imposed and will be L. REED (note 105), p. 371. M. KURKELA/ S.TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p. 186. 153 EUROPEAN COMMITTEE ON LEGAL CO-OPERATION, Online Dispute Resolution and Compliance with the Right to a Fair Trial and the Right to an Effective Remedy, 93rd plenary meeting 14-16 November 2018. 154 Art. 3(6) IBA Guidelines on Conflicts of Interest in International Arbitration, 2014. 155 M. KURKELA/ S. TURUNEN/ CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p. 189. 156 Art. 1(4), CIArb, Guideline on document only arbitration, Chartered Institute of Arbitrators, “Guideline-8-Documents-Only-Arbitration-Proceedings,” 2015. 157 JUR WHITEPAPER (note 134), p. 33; C. LESAEGE/ F. AST/ W. GEORGE (note 93), p. 7. 158 Ibidem, at p. 10. 151 152

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Narges Keshavarz Bahadori conducted unilaterally by the parties.159 The Jurors have no discretion to require a round of discovery. However, normally, the parties include the material in their favour and to the detriment of the opposing party. This can be problematic, as stated by Buchwald, since “even in [the] simplest disputes, the proverbial “smoking gun” disappears behind a wall of blockchain pseudonymity, presenting major opportunities for deceitful, but not impermissible, omissions”.160 The total absence of discovery and the absence of an opportunity for rebuttal by the other party are huge shortcomings in blockchain-based arbitration with respect to the due process requirements and the right to a fair procedure. Moreover, and even if discovery were possible at some level in a blockchain-based arbitration, this would only be applicable to the disputing parties. However, sometimes a third party’s presentation in an arbitration proceeding is crucial to the fair and unbiased decision-making.161 Yet, in blockchain-based arbitration, a third party is unreachable for discovery purposes. The first reason is that third parties to the dispute are anonymous or pseudonymous. Secondly, even if identifiable, as they are not a party to the smart contract and do not deposit any tokens to initiate the proceeding, their assets are intangible; therefore no mechanism exists to compel them to participate in a discovery procedure.162 Some might argue that with ex-ante designation of the seat of arbitration, the court of the seat can assist the tribunal by obliging the third party to cooperate. This justification, if possible, would however negate the nature of the blockchain as a decentralized data structure. Some platforms such as Jur have remedied this shortcoming by providing three types of standard procedure, which the parties and arbitrators can preselect depending on the level of complexity of the issue.163 Documentary arbitration, quick arbitration, and ordinary arbitration are Jur’s three standard proceedings; the latter two are apt for hearing and witness presentation.164 An unlimited/unfiltered evidence production and the absence of the discovery procedure in blockchain-based arbitration can be misleading for the jurors and increase the risk of adverse inference and that of rendering an award in complete disregard of the facts pertinent to the case, which thereby leads to the violation of the parties’ right to a fair trial.165 C.

Due Process Requirements in the Closure of the Blockchain-Based Procedure

The final step in an arbitration proceeding is the phase of rendering the final and enforceable award. The right to a reasoned award is one of the main elements of M. BUCHWALD (note 131), p. 1395. Ibidem, at p. 1395. 161 Ibidem, at p.1400. 162 Ibidem, at p. 1401. 163 JUR WHITEPAPER (note 134), p. 29. 164 Ibidem, at p. 29 et seq. 165 JUR WHITEPAPER (note 134), p. 33; C. LESAEGE/ F. AST/ W. GEORGE (note 93), 159 160

p. 7.

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Due Process Requirements in Blockchain-based Arbitration the parties’ right to a fair trial.166 The duty of the tribunal to give sufficient reasons for their decisions is enshrined in Art.6 (1) ECHR and will assure the parties that they have been duly heard.167 In addition to the ECHR, the right to a motivated award is also reflected in other legal provisions such as Art. 25 (2) ICC and Art. 31(2) UNCITRAL Model law.168 The main problem here, however, is that it is not clear to what extent the rendered award needs to be reasoned.169 Legal scholars believe that the level of motivation of an award is related to the level of complexity of a dispute.170 A reasoned award will reduce the risk of challenge before the state courts. In order to draft a reasoned award, the tribunal will rely on the parties’ submissions, evidentiary matters and existing law and jurisprudence.171 As previously mentioned, in an on-chain proceeding, parties are solely responsible for submitting the documents and evidence, normally with no possibility of rebuttal.172 Moreover, as the basis of decision-making is crowdsourcing involving anonymous jurors, the possibility of interacting and deliberation among the arbitrators is close to zero. Even on platforms with specialized sub-courts such as Kleros or arbitration hubs such as Jur, there is no guarantee that the jurors share the same understanding of a given subject matter.173 This is important in the blockchainbased platforms, as there is no geographical constraint, and the jurors can nominate themselves from different jurisdictions. Therefore, jurors, even specialists in the subject, can have different concepts in mind when dealing with the same dispute.174 For example, if the moment of the conclusion of the contract and the transfer of liability is in question, and the parties opt for a sub-court with legal expert jurors, an expert from a civil law jurisdiction might have a different understanding of the subject than would a common law attorney. Even though this problem is also inevitable in off-chain arbitration, it is aggravated in on-chain crowdsourced decisionmaking due to the absence of communication among the jurors. Furthermore, based on the ad hoc and decentralized nature of blockchain-based arbitration, there is no precedent to inspire the arbitrators or on which they may rely. This can also create an obstacle in the path of rendering a reasoned award. The blockchain-based platforms have adopted different approaches to tackle this procedural issue. From the possibility of an internal appeal in Kleros or Aragon to a peer review of the

M. KURKELA/ S. TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p. 196. 167 European Court of Human Rights, ECHR Art.6 Guide, Version April 30, 2021. 168 M. KURKELA/ S. TURUNEN / CONFLICT MANAGEMENT INSTITUTE (COMI) (note 101), p 197. 169 Ibidem, at p. 198. 170 EUROPEAN COMMITTEE ON LEGAL CO-OPERATION (note 153). 171 Ibidem 172 M. BUCHWALD, (note 131), p. 1395. 173 JUR WHITEPAPER (note 134), p. 30. 174 M. BUCHWALD, (note 131), p. 1414. 166

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Narges Keshavarz Bahadori final decision in Jur, each platform strives to optimize its dispute resolution services and to minimize the risk of challenge or annulment of the final decision.175 It should be noted that, despite the aforementioned shortcomings with respect to procedural fairness of a blockchain-based dispute settlement within online platforms, one cannot completely reject such mechanisms. First, fairness is a flexible notion and should be assessed on a case-by-case basis, considering all the relevant elements. Commercial arbitration and ODR are less rigid than court proceedings. As elaborated, in various laws and provisions, e.g. the UNCITRAL Model Law and the ICC Rules, the possibility of waiver of some procedural rights is envisaged. Accordingly, parties to a dispute can assume some risks and waive some of their procedural rights in exchange for a specialized, rapid, and efficient proceeding. The court’s precedents demonstrate, however, that a successful experience of setting aside a decision based on a due process violation is very rare in practice. Blockchain-based dispute resolution is still in its infancy. It is therefore the right path to examine its proceedings as a “terra incognita” and with a critical and somehow sceptical approach in order to find an optimal and harmonized viewpoint. However, a balance of interests is vital in this examination. Sometimes, especially among smart contractual parties, the only accessible way to settle a dispute is to resort to a blockchain-based platform. This can be due to the anonymity and self-executing nature of smart contract transactions or due to the rigid approach that their jurisdiction might have regarding on-chain transactions. If we completely exclude blockchain-based dispute resolution for some technological or legal flaws, we might end up blocking access to justice, which is a basic principle in international human rights. Therefore, with the aim of balancing the interest of the right to procedural fairness, on the one hand, and the right to have access to justice, on the other hand, a case-by-case analysis of the situation seems inevitable and crucial.

VI. Conclusion Technological developments have always directed the evolution of the dispute resolution mechanism. After a long period of online dispute resolution, currently, on-chain dispute settlement, with the help of blockchain as a decentralized immutable and anonymous data structure, has opened a new door to facilitated adjudication, especially in commercial and small claims. The two existing methods for the settlement of blockchain-related disputes are the utilisation of multi-signature smart contracts and the blockchain-based ODR platforms. The latter are structured in a way that is more similar to an off-chain arbitration proceeding. These platforms, by the adoption of the game theory consideration and by crowdsourcing methods, seek to resolve a dispute in a rapid and decentralized manner. As onchain dispute resolutions produce final and binding awards for the parties, respect175 L. CUENDE/ J. IZQUIERDO (note 140); JUR WHITEPAPER (note 134), p 30; C. LESAEGE/ F. AST/ W. GEORGE (note 93), p. 2.

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Due Process Requirements in Blockchain-based Arbitration ing the due process requirements such as the parties’ right to present their case before a fair and impartial tribunal that treats the parties equally, is mandatory. Blockchain-based platforms, however, suffer from some technological shortcomings and some fundamental legal flaws. For example, the right of the parties to an impartial unbiased panel can be tainted as the jurors, by game theory consideration and with financial incentives, care more about their economic well-being than about what should be the right and fair decision. Moreover, the right to present a case in an on-chain proceeding is limited by the fact that document submission occurs only once, with the arbitrator having no authority to compel discovery; this can result in adverse inference and unfair decision not corresponding to the reality of the disputed issues. In order to remedy these shortcomings, some have suggested allowing state court intervention to assist the jurors or to scrutinize the award in the post-hearing phase. This, however, can negate the very nature of the blockchain as a decentralized structure aimed at eliminating a centralized authority as the trusted middleman. Even though respecting the due process requirements is mandatory in almost all jurisdictions, due to the specific nature of an on-chain transaction based on smart contracts, a total exclusion of on-chain dispute settlement can result in depriving one party from access to justice, and thus, causing more harm than good. Therefore, in balancing the interest of the right to procedural fairness on the one hand and the right to access to justice on the other hand, a caseby-case analysis of the situation is crucial.

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ARTIFICIAL INTELLIGENCE-SUPPORTED ARBITRAL AWARDS – A PANDORA’S BOX OR THE FUTURE OF INTERNATIONAL COMMERCIAL ARBITRATION? Marta ZAMORSKA*

I. II. III.

V. VI.

Introduction Use of Artificial Intelligence Tools in Arbitration Legal Possibilities for Resorting to AI in Adjudicating a Case A. Use of AI Tools as per Current Arbitration Rules and Laws B. Resorting to AI Tools in Light of Arbitrators’ Duties C. Can AI Applications be Considered as Secretaries to the Tribunals? Grounds for Refusing to Recognize an AI-Supported Arbitral Award A. Possible Grounds of Refusal to Recognize an AI-Supported Award under the European Convention on Human Rights 1. Components of the Right to a Fair Trial 2. Non-Waivable Rights under Article 6(1) of the ECHR B. Possible Grounds for Refusal to Recognize an AI-Supported Award as per the New York Convention 1. The Notion of International Arbitral Award under the New York Convention 2. Grounds for Refusal to Recognize an International Arbitral Award How AI-Supported Awards Interfere with Due Process Conclusion

I.

Introduction

IV.

Although they are not circumscribed by the legal realm, intellectual reasoning combined with value inclusiveness are distinctive features of legal work. It is widely believed that legal work requires something more than a mechanical application of legal rules to the cases at hand.1 The cognitive tasks involved include knowing how to construct and use informational artifacts; and their symbolic and * Ph.D. Candidate, University of Lausanne, Switzerland, Centre of Comparative, European and International Law. E-mail: [email protected] 1 M. LAURITSEN, Toward a Phenomenology of Machine-Assisted Legal Work, Robotics, Artificial Intelligence & Law, 2018, p. 71.

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Marta Zamorska emotional aspects are a non-negligeable part of the process. This is especially true in arbitration, in which parties voluntarily submit themselves to decision-makers “chosen to correspond to [their] own idea of justice, the antithesis of technique or craft or machinal predictability.”2 Consequently, as Jan PAULSSON emphasised, the following virtues constitute an arbitrator’s archetype: personal and deep engagement in the work, concern for parties to the arbitration, attentiveness to consequences, and condignity.3 A desirable arbitrator should not only be competent and experienced, which includes the possession of particular industry knowledge and legal qualifications, but also compassionate and self-aware of their duties and obligations.4 The intuitu personae nature of the arbitrator’s mandate may be reconsidered in light of the pervasiveness of modern technologies; if we take into consideration the scale and pace of the COVID-19 crisis and its disruptive effect on many commercial contracts, this may happen even more quickly than expected. Indeed, one of the consequences of the crisis was the proliferation of legal proceedings,5 including those involving arbitration. The latter, which was already under pressure to engage in time and cost-efficiency reforms, has quickly risen to the occasion by further adopting new technologies. In this paper, I scrutinize the possibility of challenging AI-supported arbitral awards. While the idea of using artificial intelligence (“AI”) systems during arbitral proceedings, or even resorting to fully automated robot-arbitrators, is not new, their application in situations in which arbitrators use those systems to issue the awards has not been adequately explored. To assess this risk, this paper first presents the main features of AI tools that may be used for the purpose of issuing the arbitral awards. Second, it addresses the question of legal possibilities for resorting to AI in issuing awards under current arbitration rules, practice, and general principles that apply to international commercial arbitration. Then, possible grounds for challenging an AI-supported award are highlighted, with a special focus on grounds for refusing to recognize international arbitral awards under the New York Convention and in light of the right to a fair trial provided for in the European Convention on Human Rights and the jurisprudence of the European Court of Human Rights. Finally, in the conclusion, I will look to the future and J. PAULSSON, The Idea of Arbitration, New York, 2013, p. 3. Ibi, at p. 4 and 9. 4 G.J. HORVATH, The Angelic Arbitrator Versus The Rogue Arbitrator: What Should an Arbitrator Strive to Be?, in P.L. SHAUGHNESSY/ S. TUNG (eds), The Powers and Duties of an Arbitrator: Liber Amicorum Pierre A. Karrer, Alphen aan den Rijn, 2017, p. 149; G.L. BENTON, What Makes a Great Arbitrator? The 5 C’s, Silicon Valley Arbitration & Mediation Center, available at https://svamc.org/what-makes-a-great-arbitrator-the-5-cs/. All websites quoted in the present paper were last checked on 10.5.2023.(du coup j’ai supprimé les autres dates de consultation dans les notes de bas de page) 5 BAKER MCKENZIE, COVID-19: Implications for the future of Dispute Resolution, p. 1, available at https://www.bakermckenzie.com/-/media/files/insight/publications/ 2020/07/covid19-implications-for-the-future-of-dispute-resolution.pdf. See also, A. MOODY/ H. GARFIELD/ L. GEST, COVID-19: Implications for the future of Dispute Resolution, A Blog by Baker McKenzie, 2020, available at https://globallitigationnews.bakermckenzie. com/2020/04/22/covid-19-implications-for-the-future-of-dispute-resolution/. 2 3

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Artificial Intelligence-Supported Arbitral Awards explore possible amendments that would be necessary to protect the decisions in AI-adjudicated arbitral disputes against challenges.

II.

Use of Artificial Intelligence Tools in Arbitration

Although, until recently, legal technology was still considered to be “remarkably primitive”,6 the current technological transition may result in the complete transformation of the arbitral landscape. The use of AI is becoming increasingly common in the field of legal decision-making and has permeated the world of arbitration.7 The latest AI systems already show “superior cognitive capabilities of comprehension and decision-making.”8 In particular, machine learning uses probabilistic methods to recognize patterns in large amounts of unstructured data,9 and can extrapolate the result from this analysis.10 Such systems are already being used in sectors that are traditionally based on human intelligence and cognitive processes. For example, algorithms integrated into platforms that provide financial services can not only deliver tailored advice, but also “construct an aggregated portfolio based on an individual’s current holdings, investment horizon, and risk tolerance.”11 In the legal field, those cognitive functions can be employed at various stages of the proceedings. Among the tools that provide assistance to arbitrators, Horst EIDENMUELLER and Faidon VARESIS distinguish those serving case management, fact gathering as well as its analysis and, finally, decision-making.12 However, the aim of this paper is not to analyse the replacement of human arbitrators by AI tools, but rather the impact of AI applications that are used to assist human arbitrators in arbitral proceedings. Therefore, only AI systems that could be used for the purpose of issuing arbitral awards are of interest in this context. M. LAURITSEN (note 1), p. 67. A. VIJ, Arbitrator-Robot: Is A(I)DR the Future?, ASA Bulletin, Vol. 39, No 1, 2021, p. 124, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3808956. 8 Ibi, at p. 128. 9 P. BENETT MARROW/ M. KAROL/ S. KUYAN, Artificial Intelligence and Arbitration: The Computer as an Arbitrator – Are We There Yet?, Dispute Resolution Journal (American Arbitration Association), Vol. 74, 2020, p. 51, available at https://papers.ssrn. com/sol3/papers.cfm?abstract_id=3709032. 10 Ibi, at p. 49. 11 B. NOVICK et al., Digital Investment Advice: Robo Advisors Come of Age, ViewPoint, 2016, p. 5, available at https://perma.cc/HQT5-PS4F. 12 H. EIDENMUELLER/ F. VARESIS, What is an Arbitration? Artificial Intelligence and the Vanishing Human Arbitrator, 2020, available at http://dx.doi.org/10.2139/ssrn.3629145; M. SCHERER, Artificial Intelligence and Legal Decision-Making: The Wide Open? Study on the Example of International Arbitration, Queen Mary School of Law Legal Studies Research Paper No. 318/2019, 2019, p. 540, available at https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=3392669. 6 7

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Marta Zamorska One way to use AI systems is in award drafting. The most recent tool applicable in this area would be ChatGPT13, which can generate documents based on provided instructions, including from a legal standpoint.14 Other applications enable document review and analysis, which may be useful in formulating the written parts of final decisions, including “procedural history, applicable legal rules, or parties’ analysis of specific issues.”15 Several AI applications have also been used in legal prediction. ArbiLex,16 which uses the Bayesian machine learning paradigm, and is based on models inspired by game theory. It can identify risk factors in arbitration cases and quantify their probabilities, which consequently allows for a more realistic approach to the outcome of the case.17 Similarly, Solomonic (supported by HERBERT SMITH FREEHILLS,18 providing various legal services, including in the field of international arbitration19) permits the assessment of case outcomes and the probability of winning through a judgments analysis function. Other applications perform tasks that are ancillary to decision-making. One of such tools, in the field of legal research, is Lexis+AI, which was developed by LexisNexis.20 It is an analytics and innovative research tool, which helps the user to find the most important cases for the purpose of crafting legal arguments or uncovering possible risks in submitted cases. Another research programme called Ross Intelligence21 performed a similar function by allowing the user, inter alia, to recognise patterns in case law and submissions easily.22 Although frequently cited in the legal literature, Ross Intelligence ceased operations in January 2021, due to financial difficulties stemming from ongoing litigation. Everlaw,23 a platform that uses technology-assisted review, identifies relevant documents and other information based on requirements

See https://openai.com/blog/chatgpt. L.F. SOUZA-MCMURTRIE, Arbitration Tech Toolbox: Will ChatGPT Change International Arbitration as We Know It?, Kluwer Arbitration Blog, 2023, available at https://arbitrationblog.kluwerarbitration.com/2023/02/26/arbitration-tech-toolbox-will-chat gpt-change-international-arbitration-as-we-know-it/. 15 H. EIDENMUELLER/ F. VARESIS (note 12), p. 12. 16 See https://www.arbilex.co/welcome. 17 F. DASO, ArbiLex, A Harvard Law School Legal Tech Startup, Uses AI to Settle Arbitrations, Forbes, 2020, available at https://www.forbes.com/sites/frederickdaso/ 2020/02/04/arbilex-a-harvard-law-school-legal-tech-startup-uses-ai-to-settle-arbitrations/?sh =5f3ed1b452c5. 18 See https://www.solomonic.co.uk/. 19 HERBERT SMITH FREEHILLS, Our Expertise: Specialist Knowledge, Global Perspective, available at https://www.herbertsmithfreehills.com/our-expertise. 20 LexisNexis, “Advancing What’s Possible”, available at https://www.lexisnexis. com/pdf/lexis-advance/la-overview-brochure.pdf. 21 ROSS INTELLIGENCE, “About Us”, available at https://www.rossintelligence.com/ about-us. 22 H. EIDENMUELLER/ F. VARESIS (note 12), p. 10. 23 See Everlaw, main website, https://www.everlaw.com/. 13 14

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Artificial Intelligence-Supported Arbitral Awards presented by clients and its own predictive technology algorithms.24 In addition, it continuously trains its algorithm by enabling the upload of final corrections implemented by human teams. Although such technologies have not yet progressed to the point where they can completely replace human intelligence, they are expected to become increasingly accurate in the next few years. Moreover, because most AI systems are based on machine learning processes or large language models, and thus continually improve their performance without the need of intervention from developers, this transformation towards fully attaining the level of human intelligence may not be easily and clearly recognizable. Thus, arbitrators may unconsciously shift their responsibility for adjudicating cases to AI applications. What then?

III. Legal Possibilities for Resorting to AI in Adjudicating a Case A.

Use of AI Tools as per Current Arbitration Rules and Laws

To date, no arbitration rules or laws specifically regulate the use of AI applications in arbitration. Although some authors have explored the possibility of having recourse to a fully automated arbitrator under the current rules, nothing in those rules seems to address the possibility of using AI tools, or the exact type that arbitrators may or may not employ, during arbitral proceedings. The fact that arbitral proceedings are purposefully described in the most general terms is one of the most fundamental characteristics of arbitration.25 Nevertheless, even when construed in such broad terms, party autonomy remains subject to limitations that result from mandatory public policy safeguards related to the opportunity to be heard and the equality of treatment. Of interest in this regard may be soft law instruments, which already caution against the use of AI tools in judicial processes that may not respect fundamental rights. In this regard, the European “Ethical Charter on the use of artificial intelligence in judicial systems and their environment” emphasises the importance of ensuring the quality and security of technologies used as well as their “understandable character” to all users involved.26 Although applicable to policy- and lawmakers, as well as judicial professionals, the Charter provides a comprehensive list of the most important principles to be respected when using AI tools in the judicial context. 24 J. ARMOUR/ R. PARNHAM/ M. SAKO, Augmented Lawyering, European Corporate Governance Institute - Law Working Paper, 2020, p. 20, available at http://dx.doi.org/ 10.2139/ssrn.3688896. 25 G.B. BORN, International Commercial Arbitration, 3rd ed., Alphen aan den Rijn, Vol. 2, 2021, p. 2295. 26 EUROPEAN COMMISSION FOR THE EFFICIENCY OF JUSTICE (CEPEJ), European ethical Charter on the use of Artificial Intelligence in judicial systems and their environment, 2018, p. 10-12, available at https://rm.coe.int/ethical-charter-en-forpublication-4-december-2018/16808f699c.

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Resorting to AI Tools in Light of Arbitrators’ Duties

If the rules and/or laws of the arbitral institution at the seat of arbitration do not mention the possibility for the arbitrators to resort to different AI tools during their mandate, such a possibility will arise in most cases from the arbitrators’ relationship with the parties to arbitration. This relationship is particularly difficult to delineate, as none of the existing institutional arbitration rules and national arbitration laws expressly address this issue.27 Moreover, the few existing provisions on the more general subject of arbitrators’ rights and duties provided for in institutional arbitration rules are limited to arbitrators’ disclosure obligations, right to fees, their immunities, and their obligations of confidentiality.28 Thus, to fill this legal void, national courts and legal scholars resorted to the theory that classifies the arbitrators’ relationship with the parties as a contractual one,29 where “the arbitrators and the parties to an arbitration enter into a separate agreement with one another, pursuant to which the arbitrators undertake to perform specified functions vis-à-vis the parties in return for remuneration, cooperation and defined immunities.”30 The underlying obligations resulting from such a contract include the diligent conduct of the arbitration in accordance with the parties’ arbitration agreement, the duty of confidentiality, the completion of the arbitrator’s mandate and, in accordance with the recent trend, compliance with applicable data protection regulations.31 Moreover, as the arbitrator’s primary duty remains adjudication32 (i.e., to settle the dispute between the parties), s/he inherently carries out other responsibilities. In that context, the arbitrator’s most relevant obligations are (1) to devote the necessary time and attention to the case (which is ancillary to the much broader duty of care, skill and integrity), (2) to be diligent, and (3) to refrain from delegating duties.33 The first two applications would likely encompass the possibility of using AI applications, whilst the third would involve limits for such assistance. C.

Can AI Applications be Considered as Secretaries to the Tribunals?

Current arbitration rules and laws do not tackle the question of the use of AI tools by arbitrators during arbitral proceedings. Nonetheless, not everything that is not Extensively on the issue, G.B. BORN (note 25), p. 2108 et seq. See e.g., Articles 13.4 and 36 SIAC Rules; Articles 11 and 38(1) ICC 2021 Rules; Article 44(1) 2021 Swiss Rules of International Arbitration; Article 45 2018 German Arbitration Institute Rules. 29 E. GAILLARD/ J. SAVAGE (eds), Fouchard Gaillard Goldman on International Commercial Arbitration,The Hague/ Boston/ London, 1999, p. 558. 30 Ibi, at p. 2110. 31 Ibidem. 32 E. ONYEMA, International Commercial Arbitration and the Arbitrator’s Contract, London, 2010, p. 118-66. 33 G.B. BORN (note 25), p. 2295. 27 28

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Artificial Intelligence-Supported Arbitral Awards forbidden is allowed. Some functions of the AI technologies may play a role akin to that of secretary to the tribunal; even in the absence of a specific agreement between the parties on the use of AI technologies by arbitrators, essential adjudicative functions, such as decision-making, arbitral award signing or attending a hearing,34 must still be personally fulfilled by arbitrators. Few arbitral institutions have specifically tackled the issue of the duties that may be delegated to the secretaries to the tribunals. All of them provide for the possibility of appointing a tribunal secretary solely after informing, and sometimes requiring, informed consent from the parties.35 Moreover, according to the widely accepted benchmark, appointed secretaries can only perform organisational and administrative tasks. The Hong Kong International Arbitration Centre’s “Guidelines on the Use of the Secretary to the Arbitral Tribunal” non-exhaustively enumerate such tasks, stipulating that the tribunal cannot in any case rely on a tribunal secretary to perform any of its essential duties.36 By the same token, the High Court of England and Wales ruled that “[c]are must be taken to ensure that the decision-making is indeed that of the tribunal members alone.”37 Therefore, as a safeguard the arbitral tribunals should not assign to the secretaries any task that could entail expressing a view on the substantive merits of the issue. Otherwise, according to the English High Court, “there may arise a real danger of inappropriate influence over the decision-making process by the tribunal, which affects the latter’s ability to reach an entirely independent minded judgment.”38 Moreover, responsibilities delegated to a secretary must be performed under the tribunal’s direction and control.39 The delegation of a tribunal’s essential duties B. BERGER/ F. KELLERHALS, International and Domestic Arbitration in Switzerland, Bern, 2021, p. 360. 35 HONG KONG INTERNATIONAL ARBITRATION CENTRE (HKIAC), HKIAC Guidelines on the Use of the Secretary to the Arbitral Tribunal, Para 2.1, available at https://www.hkiac.org/sites/default/files/ck_filebrowser/PDF/services/HKIAC%20Guidelin es%20on%20Use%20of%20Secretary%20to%20Arbitral%20Tribunal_R.pdf; INTERNATIONAL CHAMBER OF COMMERCE (ICC), Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, Para 218 et seq., available at https://iccwbo.org/publication/note-parties-arbitral-tribunals-conduct-arbitration/; SINGAPORE INTERNATIONAL ARBITRATION CENTRE, Practice Note for Administered Cases: On the Appointment of Administrative Secretaries, Para 3, available at https://siac.org.sg/wpcontent/uploads/2022/08/Practice_Note_for_Tribunal_Secretaries_PN-01-15-January-2015 _Final.pdf; LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA), LCIA Notes for Arbitrators, Para. 74, available at https://www.lcia.org/adr-services/lcia-notes-forarbitrators.aspx. 36 HONG KONG INTERNATIONAL ARBITRATION CENTRE (note 35), Para 3.2. 37 The High Court of England and Wales of Justice, Queen’s Bench Division, Commercial Court, P v. Q and Others [2017] EWHC 194 Comm, Para 68. 38 Ibidem. 39 LCIA decision on the first challenge, 4 August 2016, Vale S.A. v. BSG Resources Limited, Case No 142683, Para 275; J. MENZ/ A. GEORGE, How Much Assistance is 34

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Marta Zamorska could amount to a violation of the arbitrator’s personal mandate to the parties.40 Similarly, any work performed by a secretary that is undisclosed to parties could be personally attributed to the arbitrator and ultimately trigger their civil liability.41 Ultimately, a grave transgression of the arbitrator’s duties can result in setting aside of the arbitral award.42

IV. Grounds for Refusing to Recognize an AISupported Arbitral Award A.

Possible Grounds of Refusal to Recognize an AI-Supported Award under the European Convention on Human Rights

Enacted in 1953 and applicable in all Member States of the Council of Europe, the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereafter referred to as “the ECHR”) is generally considered to be “the most effective international instrument for the protection of individual rights.”43 Traditionally, the ECHR addresses and creates obligations for states and does not apply to the horizontal relationships between private parties.44 Therefore, it could be argued that the ECHR cannot be applied to arbitral proceedings, especially given that the basis of arbitration is having recourse to private judges with the prima facie exclusion of involvement from state courts. However, the ECHR’s controlling authorities (namely, the European Commission of Human Rights and

Permissible? A Note on the Federal Supreme Court of Switzerland’s Decision on Arbitral Secretaries and Consultants, Journal of International Arbitration, 2016, p. 311; G.B. BORN (note 25), Vol. 2, p. 2198 et seq.; HONG KONG INTERNATIONAL ARBITRATION CENTRE (note 35), Para 3.1; ICC, Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, 1st January 2021, Para 222, available at https://iccwbo.org/wp-content/uploads/sites/3/2020/12/icc-note-to-parties-and-arbitraltribunals-on-the-conduct-of-arbitration-english-2021.pdf. 40 E. FISCHER/ F. PETER, The Consequences of a Tribunal Secretary’s Breach of Duties: The Games of Thrones Edition, ASA Bulletin, Vol. 37, No 2, 2019, p. 364. 41 B. HUGHES, The Problem of Undisclosed Assistance to Arbitral Tribunals, in P. SHAUGHNESSY/ S. TUN (eds), The Powers and Duties of an Arbitrator: Liber Amicorum Pierre A. Karrer, Alphen aan den Rijn, 2017, p. 167. 42 J.O. JENSEN, Tribunal Secretaries in International Arbitration, Oxford, 2019, p. 341 et seq. 43 L.R. HELFER, Consensus, Coherence and the European Convention on Human Rights, Cornell International Law Journal, Vol. 26, No 1, Article 4, 1993, p. 133. 44 T. KRŪMIŅŠ, Arbitration and Human Rights: Approaches to Excluding the Annulment of Arbitral Awards and Their Compatibility With the ECHR, Cham, 2020, p. 35.

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Artificial Intelligence-Supported Arbitral Awards the European Court of Human Rights) 45 supported by the legal doctrine have recognized that the ECHR applies to arbitration at the very least indirectly.46 The indirect applicability refers to state’s responsibility under the ECHR whenever its courts are involved in matters relating to arbitral proceedings.47 Every time an arbitral award is challenged, or considered to be recognized and enforced, “the courts thereby [exercise] a certain control and guarantee as to the fairness and correctness of the arbitration proceedings.”48 Consequently, if the State courts do not provide a remedy in case of the violation by the tribunal of the Convention’s rights, the State itself is held responsible under the ECHR.49 Consequentially, the provisions stemming from the ECHR should be taken into account by state courts when dealing with arbitration cases and “the European Court can be the judge of last resort for challenging decisions of courts of the contracting states […].”50

1.

Components of the Right to a Fair Trial

With regard to arbitration, the applicability of the ECHR is rooted in the provisions concerning protection of property, as well as the right to an independent and impartial tribunal and a fair hearing. The former safeguard stems from the European Court of Human Rights’ interpretation of “award” that can amount to possession within the meaning of Article 1 of the Protocol No. 1 to the ECHR and in this sense, the non-enforcement of an award may violate the Convention. The latter right, pertaining to a fair trial, is enshrined in Article 6, Paragraph 1 of the Convention51 and constitutes a cornerstone of procedural fairness and equal treatment of 45 See e.g., European Commission of Human Rights, 5 March 1962, X. v. Federal Republic of Germany, App. No 1197/61; ECHR, 27 February 1980, Deewer v. Belgium, App. No 6903/75; European Commission of Human Rights, 9 April 1997, Hedland v. Sweden, App. No 24118/94; ECHR, 25 May 1999, Pastore v. Italy, App. No 46483/99. 46 T. KRŪMIŅŠ (note 44), p. 45; M. BENEDETTELLI, Human Rights as a Litigation Tool in International Arbitration: Reflecting on the ECHR Experience, Arbitration International, Vol. 31, Issue 4, 2015, p. 640; G. KAUFMANN-KOHLER, Arbitration procedure: identifying and applying the law governing the arbitration procedure, in A.J. VAN DEN BERG (ed), Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, International Arbitration Congress Paris, 3-6 May 1998, The Hague, 1999, p. 362, available at https://archive-ouverte.unige.ch/ unige:44075. 47 T. KRŪMIŅŠ (note 44), p. 46. 48 European Commission of Human Rights, 2 December 1991, Jakob BOSS Söhne KG v. the Federal Republic of Germany, App. No 18479/91. 49 T. KRŪMIŅŠ (note 44), p. 46. 50 M. BENEDETTELLI (note 46), p. 649. 51 Art. 6(1) ECHR: “In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law (…)”.

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Marta Zamorska the parties, which is one of the most fundamental human rights.52 Therefore, it is also the most significant provision in the ECHR from an arbitration perspective. It not only ensures “that justice is served through the outcome of the disputes, but also through the path to reach the outcome.”53 Its two facets relevant to arbitration are the right to a fair hearing and the right to an independent and impartial tribunal established by law. a)

The Right to a Fair Hearing

Although no definition of a fair hearing is included in the text of Article 6(1) ECHR nor is one provided by the European Court of Human Rights itself, the case law pertaining to this provision notes when this right has been thwarted: “Each party must be afforded a reasonable opportunity to present his case – under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent.”54 This principle of procedural equality is further completed by the right to adversarial proceedings, which guarantees “the opportunity for the parties to have knowledge of, and comment on, the observations filed or evidence adduced by the other party.”55 Both components aim to ensure a fair balance between the parties. A third element of a right to a fair hearing can be found in the requirement for the relevant court to provide reasons for its judgment.56 These do not need to be detailed, or cover every argument raised by the parties; therefore, their extent will depend on each case.57 b)

The Right to an Independent and Impartial Tribunal

To define the term “tribunal”, the European Court of Human Rights held that

T. KRŪMIŅŠ (note 44), p. 51. L.V.P. DE OLIVEIRA, To What Degree Should Access to Justice Be Secured in Arbitration, in L.V.P. DE OLIVEIRA/ S. HOURANI (eds), Access to Justice in Arbitration: Concept, Context and Practice, Alphen aan den Rijn, 2020, p. 10, available at https://pure.royalholloway.ac.uk/en/publications/to-what-degree-should-access-to-justicebe-secured-in-arbitration. 54 ECHR, 27 October 1993, Dombo Beheer B.V. v. the Netherlands, App. No 14448/88, Para 33. 55 ECHR, 23 February 2010, Sebahattin Evcimen v. Turkey, App. No 31792/06, Para 25. 56 ECHR, 9 December 1994, Hiro Balani v. Spain, App. No 18064/91, Para 27.2 an 57 Ibidem. 52 53

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Artificial Intelligence-Supported Arbitral Awards “the word ‘tribunal’ in Article 6(1) ECHR is not necessarily to be understood as signifying a court of law of the classic kind, integrated within the standard judicial machinery of the country.”58 On the one hand, the concepts of independence and impartiality relate to the standard of behaviour expected from the adjudicator;59 on the other hand, they refer to an absence of bias in the adjudicatory body’s assessment of the case.60 Thus, independence and impartiality are key components of the concept of a “tribunal”.61 Nonetheless, it is disputed whether Article 6(1) also covers arbitral tribunals or whether parties expressly waive their right to a fair and independent tribunal when they refer their case to a private judge. 2.

Non-Waivable Rights under Article 6(1) of the ECHR

In 1962, the European Commission of Human Rights held that arbitration agreements may be construed as a partial waiver of the right to a tribunal included in the ECHR.62 However, as the Commission indicated in what appears to be the obiter dictum of its decision, this consent to arbitrate may be voided by the arbitrator’s subsequent conduct during arbitral proceedings.63 The same question of the nonwaivability has arisen as to the other features of Article 6(1) that are relevant for arbitration, namely the extent to which parties can waive the rights provided to them by the ECHR. Although the European Court of Human Rights, in the case Albert and Le Compte v. Belgium, stressed that “the nature of some of the rights safeguarded by the Convention is such as to exclude a waiver of the entitlement to exercise them”64, neither of the ECHR’s controlling authorities has precisely determined these nonwaivable rights to date. In the case of Suovaniemi and Others v. Finland, the Court confirmed that a voluntary waiver of court proceedings in favour of arbitration is in principle permissive under the Convention but, J.C. LANDROVE, The European Convention on Human Rights’ Impact on Consensual Arbitration: An État des Lieux of Strasbourg Case-Law and of a Problematic Swiss Law Feature in S. BESSON/ M. HOTTELIER/ F. WERRO (eds), Human Rights at the Center, Basel/Geneva/Zurich 2006, p. 79, available at http://landrove.ch/pdf/ECHR_ 2006_Landrove.pdf. 59 ECHR, 22 October 1984, Sramek v. Austria, App. No 8790/79. 60 ECHR, 15 October 2009, Micallef v. Malta, App. No 17056/06. 61 COUNCIL OF EUROPE/ EUROPEAN COURT OF HUMAN RIGHTS, Guide on Article 6 of the European Convention on Human Rights: Right to a Fair Trial (Civil Limb), 2022, Para 179, available at https://www.echr.coe.int/documents/guide_art_6_eng.pdf. 62 European Commission of Human Rights, 5 March 1962, X. v. Federal Republic of Germany, App. No 1197/61. 63 Ibidem. 64 ECHR, 10 February 1983, Albert and Le Compte v. Belgium, App. No 7299/75 and 7496/76, Para 35. 58

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Marta Zamorska “[e]ven so, such a waiver should not necessarily be considered to amount to a waiver of all rights under Article 6 (…).”65 Scholars have highlighted the right to equal treatment, the right to an independent and impartial tribunal and the right to be heard as rights that cannot be excluded by the parties.66 In Suovaniemi and Others v. Finland, the Court seemed to accept a waiver of the right to an independent and impartial tribunal, as two of the arbitrators lacked objective impartiality. However, the details of the case were very particular, and the parties expressly approved the two biased arbitrators to decide the case despite being aware that they lacked independence and impartiality. It was only after the tribunal issued its final award that the losing party decided to raise the challenge.67 Consequently, the Court’s conclusion can only be understood within the very specific confines of this case and cannot be construed as a general possibility to waive the right to an independent and impartial arbitral tribunal. By the same token, the court decided in the case of Tabbane v. Switzerland68 that waiving the right to challenge an international arbitral award does not violate the ECHR. There is, however, still some doubt about whether the broad exclusion of the setting-aside proceedings could indirectly provide for the exclusion of all rights under the Convention.69 For a right to be validly waived under the Convention, not only must the right itself be waivable, but the waiver must also satisfy certain formal conditions. In addition to being unequivocal, the waiver must be made freely and lawfully, be accompanied by certain minimum safeguards and must not run counter to any important public interest.70

ECHR, 23 February 1999, Suovaniemi and Others v. Finland, App. No 31737/96. T. KRŪMIŅŠ (note 44), p. 54. 67 ECHR (note 65): “The Court considers that the Contracting States enjoy considerable discretion in regulating the question on which grounds an arbitral award should be quashed, since the quashing of an already rendered award will often mean that a long and costly arbitral procedure will become useless and that considerable work and expense must be invested in new proceedings (…). In view of this the finding of the Finnish court based on Finnish law that by approving M. as an arbitrator despite the doubt, of which the applicants were aware, about his objective impartiality within the meaning of the relevant Finnish legislation does not appear arbitrary or unreasonable. Moreover, considering that throughout the arbitration the applicants were represented by counsel, the waiver was accompanied by sufficient guarantees commensurate to its importance (…) the Court comes to the conclusion that in the circumstances of the present case concerning arbitral proceedings the applicants' waiver of their right to an impartial judge should be regarded as effective for Convention purposes.” 68 ECHR, 1 March 2016, Tabbane v. Switzerland, App. No 41069/12. 69 T. KRŪMIŅŠ (note 44), p. 55. 70 Ibi at p. 81. 65 66

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Artificial Intelligence-Supported Arbitral Awards B.

Possible Grounds for Refusal to Recognize an AI-Supported Awards as per the New York Convention

1.

The Notion of International Arbitral Award under the New York Convention

The New York Convention does not specify the requirements that the arbitral tribunal’s decision must satisfy in order to be considered as an award. However, as underlined by Gary BORN, the minimum characteristics of the decision include a written format (which results at least implicitly from the New York Convention) and, most importantly for the purposes of this analysis, the fact that it must be made by arbitrators.71 Thus, it has been argued that Article IV of the New York Convention precludes the use of fully automated robot arbitrators (at least according to the current interpretation), due to, inter alia, the written format requirement that seems to entail written signatures from arbitrators.72 According to another interpretation, a decision in the form of “a document prepared and executed by persons other than the arbitrators cannot constitute an ‘award’.”73 Therefore, it remains to be defined by courts whether AI tools used by arbitrators for drafting substantial parts of arbitral awards can be deemed a decision made by a person other than the arbitrator him- or herself. 2.

Grounds for Refusal to Recognize an International Arbitral Award

Under the New York Convention, a party that opposes the recognition of an arbitral award can raise five exceptions to the presumption that the arbitral award is valid and subject to recognition. More specifically, and for the purposes of this paper, the most important exceptions are denial of the opportunity to present one’s case, improper composition of the arbitral tribunal, and awards contrary to public policy. a)

The Right to a Fair Hearing

The right to a fair hearing, which is established in Article V(1)(b) of the New York Convention, requires gauging whether the basic procedural fairness from which the final decision derives was preserved. According to the Federal Supreme Court of Switzerland (hereafter referred to as “the Swiss TF”), “[t]he right to be heard (…)

G.B. BORN (note 25), Vol. 3, p. 3171. H. EIDENMUELLER/ F. VARESIS (note 12), p. 31. 73 G.B. BORN (note 25), Vol. 3, p. 3171. 71 72

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Marta Zamorska provides each party with the right to state all its factual and legal arguments on the object of the dispute (…).”74 As an example, German courts also include in this right the parties’ prerogative to have the tribunal “acknowledge, consider, and evaluate the given arguments, as far as relevant, when rendering its award”.75 The most frequent issues to appear in the context of the violation of the right to present one’s case include denial of the opportunity to comment on evidence or arguments,76 factual investigations conducted by an arbitrator without the consent of the parties,77 and taking into consideration facts or legal arguments not presented or discussed with the parties.78 All of these could be relevant in cases in which the arbitral award is determined by resorting to machine learning systems. In the Textile Workers Union v. American Thread Co. case,79 the United States Court of Appeals for the Fourth Circuit affirmed the annulment of an award because the arbitrator based his/her decision on determinations from another proceeding. In the case Fleetwood Town FC v. AFC Fylde80 from 2018 before the High Court of England and Wales, the award was vacated on the grounds that the arbitrator issued the decision based on the information from a person extraneous to the proceedings and without “giv[ing] the parties a reasonable opportunity to put their case.”81 The House of Lords in the case Interbulk Ltd v. Aidan Shipping in relation to so-called “surprise” decisions82 stated that it is a matter of fairness as

Federal Supreme Court of Switzerland, 8 October 2008, X. v. Y., Case No DFT 4A_294/2008. 75 Oberlandesgericht München, 5 July 2011, Case No 34 SCH 09/11, Para 5(c)(bb). 76 See e.g., The High Court of England and Wales, Gbangbola v. Smith & Sheriff Ltd. [1998] 3 All ER 730 (QB); The High Court of England and Wales, Maass v. Musion Events Ltd. [2015] EWHC 1346. 77 See e.g., French Supreme Court, 24 March 1998, Excelsior Film v. UGC-PH, Case No 95-17.285. The award was set aside for the violation of public policy, but the Court took into consideration the fact that one of the arbitrators transmitted information from related arbitral proceedings, which may have influenced the final decision. See also Supreme Court of the Netherlands, 29 June 2007, Case No R06/005 HR, Para 3.3.3: “arbitrators (…) will in principle have to refrain from gathering evidence, in such a way that they must not themselves, without the involvement of the parties, collect evidence.” 78 See e.g., Cofinco, Inc. v. Bakrie & Bros., NV, 395 F.Supp. 613 (United States Court for the Southern District of New York, 11 June 1975). 79 Textile Workers Union v. American Thread Co., 291 F.2d 894 (United States Court of Appeals for the Fourth Circuit, 5 June 1961). 80 The High Court of England and Wales, Fleetwood Town FC v. AFC Fylde [2018] EWHC 3318. 81 Ibi at Para 7. 82 G.B. BORN (note 25), Vol. 3, p. 3528. 74

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Artificial Intelligence-Supported Arbitral Awards “[i]t is not fair to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it.”83 Similarly, the Swiss TF attached the prohibition of the award’s surprise effect to the right to be heard, while at the same time construing the said effect restrictively.84 In the decision issued in 2017, it contended that the right to be heard would be violated should the court base its assessment of the facts of the case on the rule of law, which was argued by neither of the parties nor could be reasonably expected by them to be invoked.85 The right to a fair hearing also encompasses the equality of treatment, which refers to the guarantee that the proceedings “are organized and conducted in such a way that each party has the same possibilities to present its case.”86 This in turn presupposes the fair treatment of both parties and that they are subjected to the same procedural rules, rights and opportunities.87 Equality does not imply the same treatment of both or more parties, but rather the granting to them the same status in proceedings. Similarly, the opportunity to be heard does not connote a party’s absolutely symmetrical right to address every aspect of the case.88 Instead, as expressed by the High Court of England and Wales, it is the “arbitrators’ duty (…) to give parties a fair opportunity of addressing them on all factual issues material to their intended decision as to which there had been no reasonable opportunity to address them during the hearing.”89 Although, none of the above cases expressly addressed the question of the award rendered with the help of AI programmes, the opacity of the machine learning systems on which modern AI applications are often based may be subject to the same considerations by the courts and result in the vacating of such awards, as is further explained in this paper.

83

House of Lords, Interbulk Ltd v. Aidan Shipping Co Ltd. [1984] 2 Lloyd's Rep 60,

Para 75. 84 Federal Supreme Court of Switzerland, 31 January 2022, A. v. B., Case No 4A_464/2021. 85 Federal Supreme Court of Switzerland, 7 February 2017, Case No 4A_478/2016. 86 Federal Supreme Court of Switzerland, 19 February 2009, Case No 4A_539/2008, Para 4.1., reported in ASA Bulletin, 2009, p. 801. 87 For a more detailed discussion on different facets of procedural equality see M. SCHERER/ D. PRASAD/ D. PROKIC, The Principle of Equal Treatment in International Arbitration, 2018, p. 21 et seq., available at http://dx.doi.org/10.2139/ssrn.3377237. 88 G.B. BORN (note 25), Vol. 2, p. 2341. 89 The High Court of England and Wales, Bulfracht Ltd. v. Boneset Shipping Co. MV Pamphilos [2002] EWHC 2298, Para 8.

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A Lack of Independence and Impartiality or Misconduct of the Arbitrator

The New York Convention does not directly address the issue of non-recognition of an arbitral award due to the arbitrator’s lack of independence and impartiality or because the arbitrator violated his/her essential duties. Nonetheless, these grounds can be invoked to resist the recognition as per Articles V(1)(b), V(1)(d), and V(2)(b) of the Convention. Although each of these provisions pertains to a different feature of the arbitrator’s duties, they involve a similar analysis of the issue.90 Consequently, invoking justifiable doubts as to the arbitrator’s independence and impartiality would not suffice to set aside the arbitral award. The legal threshold applicable to recognition proceedings seems to be high and must be based on a clear demonstration of the arbitrator’s bias and the material influence of that bias on the final award.91 Although this approach is particularly restrictive, it still cannot be excluded that biased AI applications used by arbitrators during proceedings may substantially affect the award. The New York Convention also includes much broader wording pertaining to the improper constitution of the arbitral tribunal that may constitute a reason for non-recognition of an arbitral award. Against this background, the question arises whether an arbitrator’s misconduct due to, for example, delegating its essential duties may be sufficient to deny enforcement of the award.92 If we assume that AI applications may fulfil the role of secretaries to the tribunal, if an arbitrator entrusts them with his/her adjudicative duties, it may violate the parties’ agreement on the composition of the tribunal. Until now, when assessing this ground of refusal, courts have followed a formal analysis and have rarely denied recognition of the award.93 It appears, however, that even under this strict assessment, they are willing to give some weight to the argument pertaining to the exact role exercised by the secretary.94 c)

Violation of Public Policy in Light of the Right to a Reasoned Decision

Unless otherwise agreed, it is now commonly accepted that the parties in arbitration are entitled to a comprehensible reasoned decision. This requirement has nearly been elevated to the status of a universal principle in international arbitraG.B. BORN (note 25), Vol. 3, p. 3937. See e.g., the Supreme Court of Germany, 1 February 2001, Case No III ZR 332/99, Para 4(b)(aa): “Außerdem muß der in der Mitwirkung eines befangenen Schiedsrichters liegende Verstoß gegen das Gebot überparteilicher Rechtspflege sich im schiedsrichterlichen Verfahren konkret ausgewirkt haben (…)”; The Supreme Court of Cassation in Italy, 11 July 1992, reported in Yearbook Commercial Arbitraiton, Vol. XXII, p. 722. 92 On the question of misconduct see e.g., the High Court of England and Wales, Queen’s Bench Division, Threlfall v. Fanshawe [1850] 19 LJQB 344. 93 See e.g., the Federal Supreme Court of Switzerland, 21 May 2015, Case No 4A_709/2014; The High Court of England and Wales, Sonatrach v. Statoil [2014] EWHC 875. 94 J.O. JENSEN (note 42), p. 353. 90 91

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Artificial Intelligence-Supported Arbitral Awards tion,95 and is enshrined in the European Convention on International Commercial Arbitration,96 as well as the Convention on the Settlement of Investment Disputes between States and Nationals of Other States,97 and implicitly results from Article 6(1) of the ECHR.98 According to scholars, a requirement of a reasoned decision entails explaining how the evidence presented by the parties and the rules applicable to the dispute led to the tribunal’s decision.99 However, the tribunal’s thought-process does not need to be described in a very detailed way; rather, the parties should be able to understand tribunal’s logic. As put forward by the Court of Appeal in England, “[a]ll that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is.”100 Consequently, the reasons underlying the tribunal’s decision need not be persuasive, well-researched or address all arguments submitted by the parties. Nonetheless, arbitrators should apply their interpretations of the law to the facts of the case in order for the parties101 and, alternatively, the court, to understand the tribunal’s view on the evidence and legal provisions.102 Thus, reasoned decision is a form of justification for conclusions that take the form of an arbitral award.103

G.B. BORN (note 25), Vol. 3, p. 3290 et seq.; M. SCHERER (note 12), p. 22. Article VIII entitled “Reasons for the Award” provides that absent the agreement to the contrary, “the parties shall be presumed to have agreed that reasons shall be given for the award”. 97 Article 48(3) provides that “[t]he award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based.” 98 ECHR, Hiro Balani v. Spain (note 56), Para 27: “The Court reiterates that Article 6 Para 1 (article. 6-1) obliges the courts to give reasons for their judgments.” 99 G.B. BORN (note 25), Vol. 3, p. 3294. 100 The Court of Appeal in England, Bremer Handelsgesellschaft mbH v. Westzucker GmbH [1981] 2 Lloyd’s Rep. 130. 101 The so-called winning party may also be interested in the tribunal’s justification in order to potentially restructure its contracts or arbitration clause. See also F. DASSER/ E.O. IGBOKWE, The Award and the Courts, Efficient Drafting of the Arbitral Award: Traditional Ways Revisited – Lesson Learned from the Past?, in Ch. KLAUSEGGER et al. (eds), Austrian Yearbook on International Arbitration 2019, Vienna, 2019, p. 284, available at https://www.lalive.law/wp-content/uploads/2019/10/Felix-Dasser-and-EmmanuelIgbokwe_Efficient-Drafting-of-the-Arbitral-Award-Traditional-Ways-Revisited-%E2%80% 93-Lesson-Learned-from-the-Past.pdf. 102 G.B. BORN (note 25), Vol. 3, p. 3295. 103 S. STRONG, Reasoned Awards in International Commercial Arbitration: Embracing and Exceeding the Common Law-Civil Law Dichotomy, Michigan Journal of International Law, Vol. 37, Issue 1, 2015, p. 51. 95 96

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Marta Zamorska Following the UNCITRAL Model Law on International Commercial Arbitration, many national laws that govern arbitration provide for a reasoned award.104 In some jurisdictions, part of the legal doctrine even contends that tribunals are only relieved of their obligation to present reasons for their decision if the parties agree on that.105 Institutional arbitration rules, including those that originate from the most prominent institutions, also require that the tribunal states the reasons for its final decision.106 However, none of the provisions related to reasons for an award explicitly defines the scope of this duty and some national courts interpret this right in the context of international arbitration more restrictively than in the case of state court decisions.107 One of the most frequently invoked reasons for denying the recognition of an arbitral award is the public policy ground.108 Article V (2)(b) explicitly refers to the public policy of the recognition forum,109 which means that the standard and content of the public policy notion will differ depending on the court’s jurisdiction. However, it is widely accepted that in order to keep consistency in the interpretation of the New York Convention, it must be uniformly interpreted; this ordre public entails the application of international public policy.110 According to the German Supreme Court, this internationalised standard of review “applies in the interest of international commerce.”111 Alternatively, some courts only refer to those national public policies that should be mandatorily applied to international matters.112 See e.g., Article 189 Swiss Private International Law Act; Article 52 English Arbitration Act 1996; Article 1057 Dutch Code of Civil Procedure; Article 606 Austrian Code of Civil Procedure; Article 38 Singapore Arbitration Act; Article 54 Chinese Arbitration Law; Article 56 Peruvian Arbitration Act; Article. 43 Egyptian Arbitration Law; Article 31 UNCITRAL Model Law on International Commercial Arbitration. 105 G. VON SEGESSER/ A. GEORGE, Swiss Private International Law Act (Chapter 12: International Arbitration), 1989, in L.A. MISTELIS (ed.), Concise International Arbitration, Alphen aan den Rijn, 2015, p. 1232. 106 See e.g., Article 36(1) 2021 Arbitration Rules of the Vienna International Arbitration Centre; Article 42(1) 2017 Arbitration Rules of the Stockholm Chamber of Commerce; Article 32(3) 2021 Swiss Rules; Article 26.2 2020 LCIA Arbitration Rules; Article 32.4 2016 Arbitration Rules of the Singapore International Arbitration Centre; Articles. 35.2 and 35.4 2018 Administered Arbitration Rules of the Hong Kong International Arbitration Centre. 107 See the case law of the Federal Supreme Court of Switzerland: ATF 134 III 186, Para. 6.1, ATF 133 III 235, Para 5.2; ATF 130 III 125, Para 2.2. 108 G.B. BORN (note 25), Vol. 3, p. 3999; W. ABASS DAR, Understanding Public Policy as an Exception to the Enforcement of Foreign Arbitral Awards. A South-Asian Perspective, European Journal of Comparative Law and Governance, 2015, p. 318. 109 G.A. BERMANN, Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and Application of the New York Convention by National Courts, Cham, 2017, p. 59. 110 G.B. BORN (note 25), Vol. 3, p. 4009. 111 The Supreme Court of Germany, 2 March 2017, Case No I ZB 42/16, Para bb. 112 The Supreme Court of India, Renusagar Power Co. v. Gen. Elec. Co., XX Yearbook Comm. Arb., 1995, p. 681. 104

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Artificial Intelligence-Supported Arbitral Awards The current tendency to construe public policy restrictively in the context of international arbitration,113 will bar considering that there has been a violation of such policy in cases of permanent participation of the tribunal’s secretary in the tribunal’s work, including in drafting the award,114 or of a tribunal’s lack of a reasoned decision.115 However, public policy will still be invokable in cases of serious procedural unfairness and irregularities, typically the manifest violation of the rights to a fair trial and the right to be heard.116

V.

How AI-Supported Awards Interfere with Due Process

As outlined in the previous sections, in the case of AI-supported awards, the most important obstacles for the recognition of an arbitral award under the New York Convention can be the violation of the right to a fair hearing, the arbitrator’s lack of independence and impartiality, or his/her misconduct. Similarly, fair trial protections also mandate that Member States ensure the basic fairness of arbitral proceedings under the ECHR. Resorting to AI tools in adjudicating a case is related to features of AI models that are based on machine learning. Such systems do not use previously developed algorithms or pre-defined rules, which do not interfere with the explainability of the model, in order to extract the required results, but, rather, they use pattern-recognition in constructing and continually adapting the algorithm. These systems may use hidden units, because

113 J.R. JUNKER, The Public Policy Defense to Recognition and Enforcement of Foreign Arbitral Awards, California Western International Law Journal, 1977, Para 245: “The courts have given the public policy defense so narrow a construction that it now must be characterized as a defense without meaningful definition.”; see also G.A. BERMANN (note 109), p. 61. 114 The Supreme Court of Germany, 18 January 1990, reported in XVII Yearbook Commercial Arbitration (1992), p. 503. 115 See e.g., British Columbia Supreme Court, Food Servs. of Am., Inc. v. Pan Pac. Specialties Ltd. [1997] 32 BCLR3d 225; Brussels Court of Appeal, Inter-Arab Inv. Guarantee Corp. v. Banque Arabe et Internationale d’Investissements in: XXII Yearbook Commercial Arbitration (1997), p. 643, 652; Athens Court of Appeal, Case No 6886, reported in XIV Yearbook Commercial Arbitration (1989), p. 637; Federal Supreme Court of Switzerland, 7 February 2017, Case No 4A_478/2016. 116 Federal Supreme Court of Switzerland, 20 July 2011, Case No 4A_162/2011; Section 8(7A) Australia’s International Arbitration Act specifies that “the enforcement of a foreign award would be contrary to public policy if: (…) (b) a breach of the rules of natural justice occurred in connection with the making of the award”.

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Marta Zamorska “in most applications, we do not know what structure there is in the input, especially as we go up, and the corresponding concepts become ‘hidden’.”117 In other words, the decision-making process is extremely complex, inaccessible to human understanding. Therefore, the results are not only opaque but, more importantly, may also interfere with each party’s right to present its case. Indeed, the learnable parameters used in machine learning yield results without the developers’ even understanding the process. Moreover, the values obtained through learnable parameters are out of the control of the developers118 and of the other stakeholders, for instance arbitrators or parties to the dispute. If an AI application uses data completely outside of a party’s control and extracts a result based upon these units of information, the arbitrators who used the system may be deemed to have based their reasoning on facts and legal argumentation extraneous to the proceedings at hand. The parties would not be able to address any legal arguments that the arbitrators received through the results produced by the AI applications. Furthermore, if an award resulting from using such AI tool were to be published and consequently added to a database for use by other AI applications, this could perpetuate the opacity of the decision-making process. In addition, although the right to a reasoned decision has not yet been recognised by many courts as being sufficiently important to deny the possibility of recognising an award that disregards this principle, it remains one of the components of the right to a fair hearing. Therefore, it is possible that courts will begin to give it more weight in view of the growing importance of the AI applications used to help arbitrators reach their final decisions. In this context, AI programmes will have substantial difficulties in justifying generated outcomes. Indeed, what is required is not necessarily knowledge of how the AI system works but rather providing a useful explanation to stakeholders, adjusted to their roles and status. Maxi SCHERER cited the example of a study that used machine learning methods to predict decisions of the European Court of Human Rights.119 Although the accuracy rate for predictions was 79%, the high prediction value was attributed to words such as “Ukraine”, “course”, “January”, “well”, and “region”. This outcome does not fulfil the requirement of a comprehensible explanation, which is based on the premise that an explanation must be based on reasoning, according to Douglas WALTON.120 Finally, societies currently rely on quantification driven by the growing trend of evidence-based evaluation.121 This so-called “audit society”122 increasingly 117

E. ALPAYDIN, Machine Learning: The New AI, Cambridge, Massachusetts, 2016,

p. 106. C. ZEDNIK, Solving the Black Box Problem: A Normative Framework for Explainable Artificial Intelligence, p. 3, available at https://arxiv.org/pdf/1903.04361.pdf. 119 M. SCHERER (note 12), p. 548. 120 D. WALTON, A New Dialectical Theory of Explanation, Philosophical Explorations, Vol. 7, Issue 1, 2004, p. 75. 121 S. MAU, Numbers Matter! The Society of Indicators, Scores and Ratings, International Studies in Sociology of Education, Vol. 19, Issue 1-2, 2020, p. 20. 118

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Artificial Intelligence-Supported Arbitral Awards focuses on performance and a preference for parameters that can take the form of numbers.123 The current trend is further warranted by the expansion of digitalisation. The importance of data has become omnipresent and “changes the way in which we construct and understand what is valuable or desirable.”124 Quantitatively driven predictions may unconsciously influence a judge or an arbitrator’s final decision. If an AI tool shows that a certain set of facts or legal arguments prevailed in a large percentage of cases, it could be virtually impossible for the decision-makers to ignore that result. Consequently, they may inadvertently pay less attention to the actual argumentation and facts due to their confidence in the accuracy and trustworthiness of the data used. Of course, the concern that judges might base their decisions on non-legal factors existed long before the advent of AI systems,125 however, the collected data are not free from human bias. This can in turn affect the extracted model and constitutes another risk factor in the rendering of decisions on the merits of the case.126 Therefore, parties should have the right to know if arbitrators resort to AI applications during the adjudicative process and/or request the exclusion of such tools in their case.

VI. Conclusion The right to a fair hearing is a fundamental principle in international commercial arbitration. It is also an important ground for challenging an arbitral award. The aim of this paper was to explore whether it can play a larger role in challenges to AI-supported arbitral awards. After assessing the main features of AI tools that may be used for the purpose of issuing the arbitral awards, and the risk that they present to due process and thus the vacating of an award, I present the following conclusions. First, in the same manner that arbitral institutions regulate the question of the use of secretaries to the tribunals, they should also issue guidelines on the use of AI applications during arbitral proceedings. Arbitrators and parties 122 A. SCHENKER-WICKI, Auswege aus der Audit Society: staatliche Kontrolle versus kollektive Selbstbindung, in C. HIRSZOWICZ/ P. LAUTENSCHLAGER/ M. NÖLDEKE (eds), Die ISB-Jahre mit Ruedi Volkart und Hans Geiger: auf den Wogen von Banking und Finance (Festschrift), Zürich, 2008, p. 233, available at https://www.researchgate.net/publication/ 278747724_Auswege_aus_der_Audit_Society_staatliche_Kontrolle_versus_kollektive_Selb stbindung. 123 S. MAU (note 121), p. 21. 124 Ibi at p. 22. 125 F.A. PASQUALE/ G. CASHWELL, Prediction, Persuasion, and the Jurisprudence of Behaviorism, University of Toronto Law Journal, Vol. 68, 2018, p. 1, at 63-81, available at https://digitalcommons.law.umaryland.edu/fac_pubs/1604. 126 M. MAGNARELLI, Cogito ergo (intelligens) sum? Artificial Intelligence and international arbitration: who would set out the rules of the game?, Revista del Club Español del Arbitraje, No 43, 2022, p. 43.

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Marta Zamorska should be aware that AI systems may affect the process of rendering arbitral awards and interfere with the parties’ procedural rights. Secondly, lawyers and arbitrators must be aware of the features of the AI applications that they use, and how they evolve over time. In particular, for the purposes of arbitral proceedings, they should be aware of the AI systems’ data sources and the fact that the infallibility and objectivity of these systems are not guaranteed as they may perpetuate existing biases. Finally, parties should have the option to require arbitrators to disclose the types and commercial names of AI applications that they use in arbitrations. Some platforms receive support from law firms; thus, parties should have the right to assess a possible conflict of interest resulting from these ties. Similarly, “[t]he current generation of advocates in arbitration (…) face a rollercoaster ride with technology.”127 Legal actors should also be aware of the impact of AI tools on their profession and the rights that their clients may have. Computers can work more efficiently than humans from both a time and a cost perspective. However, their features are still not entirely adapted to the field of law. The results generated by AI systems may not only be opaque in the context of the right to a reasoned decision, but this opacity may also be further exacerbated by the quality of the data used as input for such systems. Therefore, it is necessary to consider these issues not only from a purely theoretical perspective but also in the context of the practice of arbitration. After all, “the arbitration is only as good as the arbitrators.”128

127 S. NAPPERT/ P. COHEN, The March of the Robots, Global Arbitration Review, 2017, available at https://globalarbitrationreview.com/article/the-march-of-the-robots. 128 J.-F. LALIVE, Some practical suggestions on international arbitration, in R.-J. DUPUY (ed.), Mélanges en l'honneur de Nicolas Valticos: droit et justice, Paris, 1999, p. 289.

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RECONCILING “CONFIDENTIALITY” IN DATA PROTECTION, CYBER SECURITY, ARTIFICIAL INTELLIGENCE IN INTERNATIONAL ARBITRATION Robert WALTERS*/ Harsha RAJWANSHI**

I. II. III.

IV.

Introduction Confidentiality Confidentiality in Data Protection, Cyber Security and Artificial Intelligence A. Data Protection B. Defining Personal Data C. Consent D. Cyber Security E. Artificial Intelligence [AI] Conclusion

I.

Introduction

International commercial arbitration has emerged as one of the most beneficial, if not the option of choice to resolve transnational commercial disputes. It is now the principal method of resolving international disputes involving states, individuals and corporations.1 Redfern and Hunter believe that arbitration has resulted in increasingly harmonised arbitration practices by specialised international arbitration practitioners who speak a common procedural language, whether they practise in England, Switzerland, Nigeria, Singapore, or Brazil.2 Arbitration today is widely used because of its efficient and effective process to resolve complex disputes that would otherwise take an extensive amount of time when having to go through the Court. * LLB (Victoria), MPPM (Monash), PhD (Victoria) Senior Lecturer & Head Digital Economy Research Group, Victoria University, Melbourne, Australia. Adjunct Professor of Law, European Faculty of Law, New University, Slovenia, Europe, International Arbitrator and admitted to Practice law in Australia. Advisor Corporate and Insolvency Center Gujarat National Law University, India. ** Assistant Professor of Law at Gujarat National Law University, Gandhinagar, India. PhD Candidate who has submitted a thesis related to Arbitration in Competition Law. 1 N. BLACKABY/ C. PARTASIDES/ A. REDFERN et al., Redfern and Hunter on International Arbitration, Oxford 2015, p. 1. 2 Ibidem.

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Printed in Germany

Robert Walters/ Harsha Rajwanshi Many proponents of international commercial arbitration regard Confidentiality as an important, and arguably essential, advantage of the arbitral process.3 Gary Born points out that “arbitration is not a spectator sport” and cites unhappy instances of public “arbitrations” gone awry.4 Born asserts that, Confidentiality is perceived as encouraging efficient, dispassionate dispute resolution, rather than emotive “trial by press release” or efforts to gain extraneous leverage; reducing the risks of damaging disclosure of commercially-sensitive information to competitors, customers and others; facilitating settlement by minimising the role of public posturing; and complementing the parties’ obligations to resolve their disputes in good faith in a cooperative manner”.5 Although there are contrary suggestions, there seems to be little doubt that international businesses place very substantial value on these attributes of the arbitral process, as evidenced by both empirical research and anecdotal reports from experienced participants.6 For Born, Confidentiality is: typically used to refer to the parties’ asserted obligations not to disclose information concerning the arbitration to third parties or the public. Obligations of confidentiality extend not only to prohibiting third parties from attending the arbitral hearings, but also to prohibiting parties to an arbitration from disclosing hearing transcripts, as well as written pleadings and submissions in the arbitration, evidence adduced in the arbitration, materials produced during disclosure and the arbitral Award(s) and orders, to third parties. As noted above, the confidentiality of the arbitral proceedings serves to centralise the parties’ dispute in a single forum and to facilitate an objective, efficient and commercially-sensible resolution of the dispute, while also limiting disclosure of the parties’ confidences to the press, public, competitors and others. Proponents of confidentiality in international arbitration frequently argue that the uniformly-accepted privacy of the arbitral process naturally requires that this process also be confidential (absent contrary agreement by the parties).7 Based on the above, one of the core elements that make arbitration attractive is that proceedings and the outcome of the matter is confidential between the parties only. Part I discusses Confidentiality as part of the overall international arbitration framework and the relevant laws of the European Union (EU), United Kingdom (UK), Australia and Singapore. Part II addresses the limited points of the respective jurisdictions data protection (definition of personal data and the concept of consent), cyber security and Artificial Intelligence (AI) law, which might or might not confirm the level of Confidentiality that exists. Part III concludes this brief examination and calls for a much broader examination of the issue of ConfidentialG.B. BORN, International Commercial Arbitration, Alphen aan den Rijn 2020, p. 1957. Ibidem. 5 Ibidem. 6 Ibidem. 7 Ibidem. 3 4

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Data Protection, Cyber Security and AI in International Arbitration ity in arbitration and how this concept needs to be reconciled in the law of data protection, cyber security and AI. The most problematic challenge that lies ahead is how AI technology has the ability to dilute Confidentiality, and the lack of international and national law regulating its use – whether that be in commercial transactions or in an arbitration.

II.

Confidentiality

Confidentiality has emerged as an important concept in international arbitration. It has been discussed by legal scholars and the judiciary for some time because of its high level of uncertainty. Practically, the concept has by and large, been afforded a level of protection from arbitrator’s, counsel and parties themselves. It has served parties well, however, as this section will highlight, where there are conflicting legal principles, and the concept is open to interpretation across different national judiciaries there can be issues of enforcement, and expectations of how far the concept extends. Leon Trakman is of the view that the “issue of confidentiality is key to the successful practice of international commercial arbitration”.8 It is the very nature of Confidentiality that makes arbitration attractive to commercial entities that are in dispute. It allows them to keep the dispute out of the public domain. The Confidentiality of arbitration proceedings is a reason for resorting to arbitration, as distinct from litigation. It is a collateral expectation of parties to an arbitration that their business and personal confidences will be kept. The United Nations Commission on International Trade Law (UNCITRAL) Model Law9 on Arbitration does not specifically refer to Confidentiality. Likewise, the UNCITRAL Arbitration Rules do not specifically refer to Confidentiality. However, Article 34.5 of the UNCITRAL Arbitration Rules,10 arguably it presupposes a level of Confidentiality attached whereby the Award requires consent of both parties for the Award to be made public. On the other hand, the UNCITRAL Notes on Organising Arbitral Proceedings11 specifically recognise the importance 8 L.E. TRAKMAN, Confidentiality in International Commercial Arbitration, Arbitration International, 2002/18, p. 1, available at https://academic.oup.com/arbitration/ article-abstract/18/1/1/183069?redirectedFrom=fulltext accessed on 8.5.2021. 9 United Nations Commission on International Trade Law (UNCITRAL), Model Law on International Commercial Arbitration, 1985, with amendments as adopted in 2006. 10 UNCITRAL, Arbitration Rules, 1976, as revised in 2010. 11 UNCITRAL Notes on Organising Arbitral Proceedings, 2012. Title 6, “Confidentiality of information relating to the arbitration; possible agreement thereon”, para 31 states that “[i]t is widely viewed that confidentiality is one of the advantageous and helpful features of arbitration. Nevertheless, there is no uniform answer in national laws as to the extent to which the participants in an arbitration are under the duty to observe the confidentiality of information relating to the case. Moreover, parties that have agreed on arbitration rules or other provisions that do not expressly address the issue of confidentiality cannot assume that all jurisdictions would recognise an implied commitment to confidential-

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Robert Walters/ Harsha Rajwanshi of Confidentiality as being an advantage and helpful element of arbitration. Any level of Confidentiality has largely been left to institutional rules. That is, the International Chamber of Commerce Rules on Arbitration, Article 6 of Appendix I, and Article 1 of Appendix II, only impose duties on arbitrators and the staff of the International Court of Arbitration, but not on the parties, although Article 22.3 authorises the Arbitral Tribunal to make orders concerning Confidentiality upon the request of any party.12 Additionally, Article 37.1 of the ICDR Rules13 imposes duties of Confidentiality on arbitrators and institutions, and Article 37.2 establishes that the Tribunal may make orders concerning Confidentiality. It further establishes a level of [Code of] Ethics with provisions on Confidentiality for arbitrators that applies to both domestic AAA arbitrations and international ICDR arbitrations. On the other hand, Article 30 of the LCIA Rules regulates the duty of Confidentiality in a well-defined manner.14 In the case of the United States (US) and the United Kingdom (UK), unless the parties agree to Confidentiality within the arbitration agreement, the legal concept will have little to no effect. Similarly, Article 34 of the International Centre for Dispute Resolution, Arbitration Rules also states that:

ity. […]”. Para 32: “An agreement on confidentiality might cover, for example, one or more of the following matters: the material or information that is to be kept confidential (e.g. pieces of evidence, written and oral arguments, the fact that the arbitration is taking place, identity of the arbitrators, content of the award); measures for maintaining confidentiality of such information and hearings; whether any special procedures should be employed for maintaining the confidentiality of information transmitted by electronic means […]”. 12 International Chamber of Commerce (ICC), 2021 Arbitration Rules, available at https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/#article_6 accessed on 8.5.2021. 13 International Centre for Dispute Resolution (ICDR), International Dispute Resolution Procedures (Including Mediation And Arbitration Rules), rules amended and effective June 1, 2014, fee schedule amended and effective July 1, 2016, icdr.org, 2016, available at https://www.adr.org/sites/default/files/ICDR%20Rules_0.pdf accessed on 8.5.2021; American Arbitration Association, The Code of Ethics for Arbitrators in Commercial Disputes: Effective March 1, 2004, icdr.org, 2021, available at https://www.icdr.org/sites/default/files/document_repository/Commercial_Code_of_Ethics_ for_Arbitrators.pdf accessed on 8.5.2021. 14 Art. 30 (“Confidentiality”) London Court of International Arbitration (LCIA) Arbitration Rules 2014, para 30.1: “The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority”. Para 30.2: “The deliberations of the Arbitral Tribunal shall remain confidential to its members, save as required by any applicable law and to the extent that disclosure of an arbitrator's refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal under Articles 10, 12, 26 and 27”. Para 30.3: “The LCIA does not publish any award or any part of an award without the prior written consent of all parties and the Arbitral Tribunal”.

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Data Protection, Cyber Security and AI in International Arbitration Confidential information disclosed during the proceedings by the parties or by witnesses shall not be divulged by an arbitrator or by the administrator. Unless otherwise agreed by the parties, or required by applicable law, the members of the Tribunal and the administrator shall keep confidential all matters relating to the arbitration or the Award.15 A lingering question arises whether other important international and regional legal instruments pertaining to arbitration contain an express or implied form of Confidentiality. Gary Born concludes that the ”New York Convention, the European Convention and the Inter-American Convention are all silent on the subject of confidentiality of the arbitral proceedings. As discussed below, there is a substantial argument that Articles II(1) and II(3) of the New York Convention (and comparable provisions of other international conventions) require giving effect to parties’ agreements (both express and implied) with regard to the confidentiality of arbitral proceedings, but neither the Convention nor other international arbitration conventions directly address the subject”.16 Nonetheless, confidentiality under the laws of Australia, Singapore, the UK and the EU when applied to national laws, the results are starkly different. That is, the UK and Australia differ on the recognition of Confidentiality within their respective national laws. The Australian International Arbitration Act 1974 defines confidential information to include all statements and evidence, notes, transcripts, rulings or Award.17 By contrast, in the Arbitration Act 1996, the UK is also silent on confidentiality. Interestingly, all this confidential information defined under the Australian Arbitration Act 1974 would contain a level of personal data defined under state’s respective data protection laws or those states that have implemented such laws. At the EU level there is no specific Arbitration Decision, Directive or Regulation for commercial disputes. There is however, a dispute resolution Directive (Recital 29),18 which addresses the issue of Confidentiality related to consumer disputes, as a principle or concept that is to be protected. Generally, for transnational commercial arbitration, the EU has left this up to member states to regulate. For instance, the member state of Slovenia, not long following accession

American Arbitration Association (AAA), International Arbitration Rules of the American Arbitration Association (2001), available at https://olrl.ouplaw.com/display/ 10.1093/law/9780199596843.001.0001/law-9780199596843-chapter-34 accessed on 15.5.2023. See also International Bar Association (IBA), IBA Rules on the Taking of Evidence in International Arbitration, 2020. 16 G.B. BORN (note 3), p. 1959. 17 International Arbitration Act 1974, sec 15. For disclosure of confidential information, there are sec 23C and 23D. 18 Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC, (Directive on consumer ADR), OJ L 165/63, 18.6.2013. Recital 29: “Confidentiality and privacy should be respected at all times during the ADR procedure. Member States should be encouraged to protect the confidentiality of ADR procedures in any subsequent civil or commercial judicial proceedings or arbitration”. 15

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Robert Walters/ Harsha Rajwanshi to the EU enacted its Arbitration Law in 2008.19 It was modelled on the 2006 UNCITRAL Model Law. Significant too, and on the point of transnational versus domestic, as an illustration of the intersect, or between the EU and its member states, the Slovenian Arbitration law provides that in accordance with Article 1(1), an arbitration is considered as being domestic if the seat is in Slovenia, irrespective of the nationality (or country of incorporation in respect of legal persons) of the parties to the proceedings. In accordance with paragraph 2 of Article 1, an arbitration is considered foreign (or international) if its seat is abroad. Paragraph 3 of Article 1 goes on to say that until the seat of arbitration has been determined, Slovenian courts have jurisdiction to decide matters referred to in Article 9 of the Law, provided that one of the parties has its permanent or temporary residence in the Republic of Slovenia. Singapore, on the other hand, has established itself as an arbitration hub in the Asia-Pacific Region. The International Arbitration Act 2012 (IAA) requires the management of information that is provided by the parties confidentially.20 Complimenting the IAA, the 2016 SIAC Rules [Singapore International Arbitration Centre] provide: “Unless otherwise agreed by the parties, a party and any arbitrator, including any Emergency Arbitrator, and any person appointed by the Tribunal, including any administrative secretary and any expert, shall at all times treat all matters relating to the proceedings and the Award as confidential. The discussions and deliberations of the Tribunal shall be confidential.”21 Despite its central importance, Confidentiality cannot be assumed in all jurisdictions.22 It is therefore critical that arbitrators be fully informed about the legal and policy issues surrounding Confidentiality in order to appropriately resolve disputes concerning those aspects of the arbitration that should, or should not, be confidential.23 Confidentiality, can be viewed as a powerful attraction to companies and institutions that may become involved in legal proceedings (often against their will).24 In other words, there may be trade secrets or competitive practices to protect, or there may simply be a reluctance to have details of a commercial dispute (or some bad decision-making) made the subject of adverse publicity. The once-general Confidentiality of arbitral proceedings has been eroded in recent years, but it still remains a key attraction of arbitration.25 19 Art. 11 Law on Employment and Social Courts (Official Gazette of the Republic of Slovenia, No 2/04 and 10/04); Art. 205(3) Law on Employment Relations (Official Gazette of the Republic of Slovenia, No 42/02, 79/06, 46/07, and 103/07); Art. 19(3) Law on Electronic Commerce (Official Gazette of the Republic of Slovenia, No 61/06); Art. 20(5) Law on Collective Bargaining (Official Gazette of the Republic of Slovenia, No 43/06); and Art. 105 Law on the Participation of Employees in Management (Official Gazette of the Republic of Slovenia, No 42/07). 20 International Arbitration Act 2012, sec 17, 12, and 26A. 21 Rule 39(1) Singapore International Arbitration Centre Rules 2016. Disclosure of confidential information can be made in the limited circumstances specified in Rule 39(2). 22 Ibidem, at note 20. 23 Ibidem. 24 N. BLACKABY/ C. PARTASIDES/ A. REDFERN et al. (note 1), p. 30. 25 Ibidem.

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Data Protection, Cyber Security and AI in International Arbitration Nonetheless, parties to an arbitration tend to face confidentiality issues at two different stages; first, when presenting evidence in support of their case, and second when being requested to produce evidence by their opponent.26 Baizeau and Richard believe that whilst the latter scenario is the most commonly addressed, the former also can give rise to difficulties, and the practical solutions adopted tend to be the same in both cases. The authors further states that Confidentiality in practice can be divided into four groups: 1) redaction of confidential information; 2) restricted access to confidential information, including the restricted reference in materials submitted by the parties; 3) use of third parties; and 4) specific measures arising with respect to testimonial evidence.27 Moreover, when related directly to arbitration, Confidentiality pertains to the proceedings, evidence, the Award and other matters that have been agreed upon within the arbitration agreement to be confidential. Notwithstanding the aforementioned, the current trend in international arbitration is to diminish – or at least to question – the Confidentiality of arbitral proceedings as a whole. This trend seems to have been considerably influenced by arbitrations in which there was a genuine public interest – in the sense that the decision of the arbitral Tribunal would in some way affect the general public. In Esso Australia Resources Ltd v The Honourable Sidney James Plowman and others28, the High Court of Australia concluded that whilst the privacy of the hearing should be respected, Confidentiality was not an essential attribute of a private arbitration. Specifically, the Court found that a requirement to conduct proceedings in camera did not translate into an obligation prohibiting disclosure of documents and information provided in, and for the purpose of, the arbitration. The Court then concluded that although a certain degree of Confidentiality might arise in certain situations, it was not absolute. In the particular case before the Court, ”the public’s legitimate interest in obtaining information about the affairs of public authorities” prevailed.29 Furthermore, in the case of Cockatoo Dockyard Pty Ltd,30 the appellate Court decided that an arbitrator had no power to make a procedural direction imposing an obligation of Confidentiality that would have had the effect of preventing the government from disclosing to a state agency, or to the public, information and documents generated in the course of the arbitration that ought to be made known to that authority or to the public. However, the Court noted that: “Whilst private arbitration will often have the advantage of securing for the parties a high level of confidentiality for their dealing, where one of those parties is a government, or an organ of government, neiD. BAIZEAU/ J. RICHARD, Addressing the Issue of Confidentiality in Arbitration Proceedings: How Is This Done in Practice?, in E. GEISINGER (ed.), Confidential and Restricted Access Information in International Arbitration, New York 2016, p. 53. 27 Ibidem, p. 55. 28 High Court of Australia, Esso Australia Resources Ltd v. The Honourable Sidney James Plowman and others [1995] 193 CLR 10. 29 Ibidem. 30 New South Wales Court of Appeal, Commonwealth of Australia v. Cockatoo Dockyard Pty Ltd [1995] 36 NSWLR 662. 26

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Robert Walters/ Harsha Rajwanshi ther the arbitral agreement nor the general procedural powers of the arbitrator will extend so far as to stamp on the governmental litigant a regime of confidentiality or secrecy which effectively destroys or limits the general governmental duty to pursue the public interest”.31 Viewed this way, Confidentiality is diluted when government pursues the public interest, unless the parties agree to have it included within the arbitration agreement. Turning to the US, Gary Born argues that, the issue of Confidentiality often arises in the context of disclosure of the arbitral proceedings’ materials, following a third-party request for discovery. While this paper does not compare the US with the other jurisdictions, the US has been a formidable player in transnational arbitration. The US Courts generally admit the production of submissions, evidence and transcripts from arbitration proceedings.32 However, Born goes on to highlight how the courts do so without addressing the issue of the implied obligation of Confidentiality, and sometimes even despite express confidentiality provisions in the arbitration agreement, or the existence of implied obligations of Confidentiality under the law of the arbitral seat.33 In the case of Lawrence E. Jaffe Pension Plan v. Household Int’l Inc.,34 the plaintiff subpoenaed a third party seeking all arbitration documents relating to an earlier, separate arbitration against Household. There was a blanket confidentiality agreement in that arbitration endorsed by the arbitrator.35 The third party was willing to produce but concerned that he would violate the confidentiality order, Household then moved to quash the subpoena. The Court refused to reach what it viewed as the novel issue of its authority to countermand the arbitrator’s order, staying the discovery against the third-party and requiring the parties to address the discovery issues in the underlying action. Because the material was produced, there was no further ruling.36 In another case, the issue was centred around making the Award available to publication. In Global Reinsurance Corp.-U.S. Branch v. Argonaut,37 it was held that the plaintiff had not made a showing of harm sufficient to justify impinging the presumption of access to judicial materials. This was in light of the fact that the mere filing of an award for enforcement did not require the submission to the Court of any underlying documentation, which could remain protected. This suggests that the greater the information disclosed in an award, the more Confidentiality may be threatened, so that the desire for a reasoned award may have to be tempered or satisfied in a form that is separate from the Award itself if there is a

Ibidem, para 682. G.B. BORN (note 3), p. 2790-96. 33 Ibidem. 34 U.S. District Court Colorado, Lawrence E. Jaffe Pension Plan v. Household International Inc [2004] WL 1821968. 35 Ibidem. 36 Ibidem. 37 U.S. District Court New York, Global Reinsurance Corp.-U.S. Branch v. Argonaut Insurance Co. [2008] WL 1805459. 31 32

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Data Protection, Cyber Security and AI in International Arbitration great desire or need for privacy.38 While there are many other court decisions available considering Confidentiality, Laura Kaster notes that even within the agreement, the parties, particularly those who have undertaken an ongoing relationship, may be able to agree that if any dispute arises, they will want to resolve it privately and confidentially. While arbitrations are conducted in private, this is distinctly different from arbitrations being conducted confidentially. Therefore, it could be argued that the arbitration agreement will address the concerns of Confidentiality, is somewhat debatable. On the other side, any Confidentiality obligations arising from an international arbitration agreement should not be regarded as absolute.39 Rather, as Gary Born highlights, they are nuanced and subject to important exceptions. In his view, there are varying degrees of Confidentiality attached to different aspects of the arbitral process. On the one hand, both national court decisions and institutional rules reflect the most confidential aspects of the arbitral process, being the arbitrators’ deliberations and the arbitral hearing.40 On the other hand, it is in no case justifiable for third parties to be present during, or otherwise to intrude into (e.g., through post hoc discovery) the arbitrators’ deliberations; similar, if less rigorous, limitations apply to the arbitral hearing. These intrusions would be directly contrary to the basic conception of arbitration as a means of resolving a dispute between specified parties without the participation or involvement of third parties. On this basis, the concept of Confidentiality continues to retain a level of uncertainty. It can be argued that the concept has been perceived as encouraging efficient and dispassionate dispute resolution. This is in contrast to the parties being subject to broader public scrutiny, when matters are reported in the media. Confidentiality does provide a level of protection to commercially sensitive information. This, in turn ensure competitors are not advantaged by disputing parties. The resulting effect is that an arbitration agreement, with its likely exceptions to Confidentiality, will not reconcile the broader issues related to cyber security, data protection or AI. Therefore, the next section attempts to unpack the concepts of privacy, Confidentiality and data protection.

38 L. KASTER, Confidentiality in US Arbitration, NYSBA New York Dispute Resolution Lawyer 2012/5, p. 23, available at https://www.mediate.com/mediator/ attachments/26226/Confidentiality%20in%20Arbitration%20DRSNewsSpr12.pdf accessed on 8.5.2021. 39 G.B. BORN (note 3), p. 2790-99. 40 Ibidem.

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III. Confidentiality in Data Protection, Cyber Security and Artificial Intelligence The duty of confidentiality has always been considered as originating naturally from the private nature of the arbitration proceeding.41 Gu Weixia, argues that this notion is controversial to the extent that it fails to distinguish “confidentiality” from “privacy.” Unfortunately, however, only passing reference has been made in the contemporary texts on arbitration laws and institutional rules as to the legal definition of confidentiality and the distinction between the seemingly synonymous concept of privacy. This dichotomy is further problematic when privacy and confidentiality is coupled with data protection in arbitration. This is because they are all separate legal concepts that have been regulated differently internationally, nationally and within, and by, industry sector specific rules. This section will highlight the differences between the three legal concepts. A.

Data Protection

Data protection has also been characterised as a tool of “privacy”.42 Some scholars make the case that data protection underpins privacy and constitutes the personal data used to identify a person. Identifying a person by their personal data has historically been achieved through state records, such as a passport or birth certificate. Data protection as a tool of privacy also helps to facilitate economic growth in the trade of personal data.43 This is an important point because increasingly personal data is being used as a tradable commodity. Arguably, “data protection and privacy have converged primarily as a legal framework to protect people’s personal data and is defined by the law and as rights. This convergence also includes finding a balance between economic development and innovation in the digital economy”.44 Even though privacy and data protection is an evolving area of law and economic development, it has not matured as a measure of redressing economic and personal harm comparably to the protection of intellectual property, copyright, criminal procedure, international trade law, or international arbitration.45 What has emerged are fledgling principles directed at regulating privacy and data protection, whether through government regulations, by courts, and industry sector specific selfregulation, protecting data on a case-by-case basis. 41 G. WEIXIA, Confidentiality Revisited: Blessing or Curse in International Commercial Arbitration?, American Review of International Arbitration 2006/15, p. 607-8. 42 P. DE HERT/ S. GUTWIRTH, Privacy, Data Protection and Law Enforcement. Opacity of the Individual and Transparency of Power, in E. CLAES/ A. DUFF/ S. GUTWIRTH (eds), Privacy and the Criminal Law, Antwerp/ Oxford 2006, p. 61. See also R. WALTERS/ L. TRAKMAN/ B. ZELLER, Data Protection Law: A Comparative Analysis of Asia-Pacific and European Approaches, Singapore 2019, p. 13. 43 Ibidem, p. 14. 44 Ibidem. 45 Ibidem.

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Data Protection, Cyber Security and AI in International Arbitration A further accentuating issue is how personal data has been defined by nation-states. Why? This poses probably the most challenging area for arbitrations going forward. This is because the definition of personal data diverges significantly between and from one state to another. Some states, and in the case of the EU has a comprehensive definition, whereas other states have not generally defined the concept. This section only provides a brief examination of Australia, Singapore, EU and UK respective data protection laws. The comparison is limited to the definition of personal data, and the concept of consent. Consent becomes important, because it is what data subjects undertake when providing an entity with the authority to use their personal data. B.

Defining Personal Data

Generally, personal information and personal data include but are not limited to: the name, date of birth, and residential address of the data subject. This common approach is not new and has been used as identifying information since modern records of personal information began. The contemporary view of the definition of personal data is derived from the OECD.46 From the mid-1970s, the OECD sought to provide guidelines to its member states on respecting privacy as a right. These guidelines have influenced the definition of personal data in legislation in many jurisdictions across the world. However, the OECD highlights how the definition of personal data in the twenty-first century is a moving target due to the new dimensions added by advanced information communication technologies and including intrusive devices, use of biometrics, social media, powerful search engines and maintenance of transnational databases. The OECD defines personal data as any information related to an identified or identifiable person.47 Take Australia and Singapore, for example, whereby their respective definitions generally align. However, when compared narrowly, the subtle differences are significant at law. For example, the law in Australia and Singapore specifically state what and how personal data and information is to be defined. Australia defines general personal data and information to be a person’s full name, alias or previous name, date of birth, sex, current or last known address, and driver’s license.48 Interestingly, an important identifying information under Australian law also includes a person’s current and last employer. Unlike Singapore, Organisation for Economic Cooperation and Development (OECD), OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data, (OECD Guidelines), September 23, 1980. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States of America. The Commission of the European Communities takes part in the work of the OECD. OECD, Thirty Years after the OECD Privacy Guidelines, 2011, available at http://www.oecd.org/sti/ieconomy/49710223.pdf accessed on 26.8.2022. 47 Ibidem; see also R. WALTERS/ L. TRAKMAN/ B. ZELLER (note 42), p. 267. 48 Australian Privacy Act 1988, sec 6. 46

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Robert Walters/ Harsha Rajwanshi Australia does not have a national identification card. The ensuing parts require that, once a person has begun working or undertaking business, no matter what age, that person does have a Tax File Number. A material difference is that, unlike Singapore’s identity card,49 that tax file number does not capture every person, because it only applies to those people that are registered to pay taxes. In Singapore, personal data has been defined broadly to mean data, whether true or not, about an individual who can be identified a), from that data; or b) from that data and other information to which the organisation has or is likely to have access. This broad definition arguably can include personal data that can be automated. On the other side, Australia has added a further layer to the definition of personal data- information by defining what constitutes sensitive information. An important observation is that sensitive personal information includes, but is not limited to, automated biometrics verification. Neither the other jurisdictions of Singapore, UK or the EU segregate the definition of personal data to have a separate meaning for sensitive personal information. The UK50 has since exiting the European Union, generally, retained the General Data Personal Regulation 2016/679 (GDPR)51 within its national laws. However, this could change in the near future. The UK has replicated the GDPR and Article 4, in relation to the definition of personal data and the processing of that data. It states that personal data constitutes any kind of: “information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person”.52 Article 4 (2) goes on to say that any processing of the above data “whether or not by automated means, such as collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction”.53 The Court of Justice of the European Union in ClientEarth and Pesticide Action Network Europe (PAN Europe) v European Food Safety Authority ruled that the: “characterisation as personal data cannot be excluded: a) by the fact that the information is provided as a part of the professional activity Singapore Personal Data Protection Act 2012, sec 2. U.K. Data Protection Act 2018. 51 Regulation (EU) No 2016/679 of the European Parliament and of the Council of 27 April 2016 on the Protection of Natural Persons with regard to the Processing of Personal Data and on the Free Movement of Such Data and Repealing Directive 95/46/EC (General Data Protection Act), OJ L 119/1, 4.5.2016, p. 46. 52 Ibidem, Art. 4(1). 53 Ibidem, Art. 4(2). 49 50

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Data Protection, Cyber Security and AI in International Arbitration and b) by the circumstance that the identity of the experts and the comments were previously made public on the EFSA website and c) by the circumstance that the persons concerned do or do not object”.54 The point is, compared to the other laws examined in this paper, the EU data laws account, in part, for the data that could be used by AI. The evidence highlights how the definition of personal data, while similar, varies greatly at law. This sample did not consider the EU, or other states, which have separated general personal data from that sensitive personal data. Unlike Australia, the GDPR does not specifically define sensitive data. Article 9 deals with processing special categories of personal data. The processing of personal data revealing racial or ethnic origin, political opinions, philosophical beliefs, or trade union membership is illegal. Furthermore, Article 9 (2) states that sensitive data can be processed where consent has been obtained. In addition, sensitive data can be processed for employment and social security and social protection law.55 Arbitrators will need to understand this difference. Sensitive personal data is that data which is predominantly health data, which has been afforded a higher level of protection-control. Equally problematic and central to the definition of personal data is how a data subject consents to its use and storage. The next section briefly highlights the concept of consent that pertains to personal data use. C.

Consent

Central to the definition of personal data is a data subject providing consent to its use. Consent is arguably now one of the most important principles of data protection law. Consent is broad and has been used as a tool to verify and confirm that data subjects approve of their personal data and information being collected and processed.56 The OECD Guidelines regard consent as an important step to the lawful collection and processing of personal data.57 Consent relates to both children and adults and the nature and extent of notice that must be given in securing consent from the data subject. Consent in Australia can be in the form of express or inferred, written, verbal or by silence.58 It must be noted that from jurisdiction to jurisdiction, implied consent will be referred to differently. It is the terminology used. For example, under the Australian framework, silence and inferred can constitute implied consent. However, it would be up to the judiciary to make such a determination. The definition of CJEU, 16 July 2015, ClientEarth and Pesticide Action Network Europe (PAN Europe) v. European Food Safety Authority (EFSA), EU:C:2015:489, paras 29-30. 55 Ibidem, Art 9(2). 56 R. WALTERS/ L. TRAKMAN/ B. ZELLER (note 42), p. 275. 57 Ibidem; see also OECD, OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data, (OECD Guidelines), September 23, 1980, available at https://www.oecd.org/digital/ieconomy/oecdguidelinesontheprotectionofprivacyandtransbor derflowsofpersonaldat a.htm#part5 accessed on 8.5.2021. 58 Australian Privacy Act 1988. 54

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Robert Walters/ Harsha Rajwanshi consent requires that an individual be adequately informed of the issues and obligations before giving consent (express or implied). Consent must be current and specific or voluntary. Importantly, the person must have the capacity to understand and communicate that consent. On the other hand, Singapore’s consent assumes a similar form to most other jurisdictions studied.59 An organisation is required to obtain consent that is in writing or recorded in a manner that is accessible for future reference. The Personal Data Protection Act 2012 deals with a number of issues relating to the Consent Obligation. In particular, an individual is deemed not to have given consent unless the individual has been notified of the purposes for which his or her personal data will be collected, used or disclosed and that individual has provided consent for those purposes.60 Moreover, an organisation may also obtain consent verbally, although it may correspondingly be more difficult for an organisation to prove that it had obtained consent. Deemed consent has similarities to implied consent. However, in Singapore, deemed consent arguably operates more broadly than implied consent because, when data subjects hand over their personal data, they have automatically done so voluntarily and therefore are deemed to have consented. Consent under the UK data protection regime follows the consent requirements under the EU GDPR. Article 7 of the GDPR requires consent to be freely given. Article 4.11, states that ‘consent’ of the data subject means any freely given, specific, informed and unambiguous indication of the data subject’s wishes by which he or she, by a statement or by a clear affirmative action, signifies agreement to the processing of personal data relating to him or her. This takes away any ambiguity surrounding what an agreement might constitute. Secondly, Recital 32 requires that consent should be given by a clear affirmative act establishing a freely given, specific, informed and unambiguous indication of the data subject’s agreement to the processing of personal data. In other words, the data subject ticking a box that they have visited the internet website is enough to constitute consent. Compared to the other jurisdictions, the GDPR provides some guidance on how consent should operate. That is, consent should be given by a clear affirmative act.61 The small sample demonstrates how the respective data protection laws are far from consistent or coherent. There is no confidentiality in consent or definition of personal data, yet, there is a limited level of Confidentiality in the processing of that data, particularly in the EU, as highlighted above by the GDPR. Rather a consent to the use of personal data is far from settled. The concept itself is applied differently across jurisdictions compared, and it will be challenging to arbitrators to reconcile where the consent for the use of personal data rests. On the other side, the respective states of Australia and Singapore are by and large silent on Confidentiality when it relates to the processing of that data.

Singapore Personal Data Protection Act 2012. Ibidem, sec 14; see also R. WALTERS/ L. TRAKMAN/ B. ZELLER (note 42), p. 276. 61 Preamble 32 Regulation No 2016/679. 59 60

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Data Protection, Cyber Security and AI in International Arbitration D.

Cyber Security

Confidentiality in cyber security is also tricky to navigate and is another area of law that is evolving as it has to respond to the new digital economy. Singapore, for example, in 2018 established the Cybersecurity Act62 (CSA), which provides for specific circumstances where Confidentiality has a high-level protection. For the most part, the handling of confidential information is controlled by a specified person.63 Based on the CSA, information obtained from a third person by a specified person can only be used with the third person’s permission.64 Section 43(5) goes onto require that any person, ”when furnishing any information to a specified person, may identify information that the person claims to be confidential information”.65 Importantly any claim for the information provided to be Confidential must be supported by a statement outlining why the information is to be treated confidentially. Clearly, one of the reasons would be where an individual could be subject to a form of mental or physical violence, and their person is potentially at threat of injury. In addition, there is a specific provision pertaining to the management of information that has been provided to a foreign country.66 The third country must undertake to ensure that the information, including any documents, is kept confidential at all material times. This alone, when coupled with data protection law, poses significant challenges to any arbitration. These measures, along with the broader provisions of the CSA, have been designed to not only protect Singapore’s economy but also specific sectors such as Energy, Water, Banking and Finance, Healthcare, Transport (Land, Maritime, and Aviation), Infocomm, Media, Security and Emergency Services, and Government.67 These sectors are the lifeblood of the Singapore economy and collect large quantities of personal data annually. On the other hand, it is these sectors that will, at times, be subject to arbitration. The UK equivalent Computer Misuse Act 1990 (CMA), does not provide for similar provisions to that of Singapore. The CMA is supported by the Investigatory Powers Act 2016 (IPA), the Data Protection Act 2018 (DPA), and the Network and Information Systems Regulation 2018 (NISR). This section only examines the scope of the IPA as it pertains to confidential information and Singapore Cybersecurity Act 2018. Cybersecurity (Confidential Treatment of Information) Regulations 2018, sec 2. “Specified person” constitutes the Commissioner, the Deputy Commissioner, an Assistant Commissioner, a cybersecurity officer or a person appointed or employed to assist the Commissioner; an authorised officer; a member of an Appeals Advisory Panel; a cybersecurity technical expert; the Minister, or a person appointed or employed to assist the Minister. 64 Singapore Cybersecurity Act 2018, sec 23(8)(i). 65 Ibidem, sec 43(5). 66 Ibidem, sec 43(9)(b). 67 “Explanatory Statement: Explanations of each Part and Section of the Cybersecurity Act, Part 3: “[…] An essential service is defined in Section 2 as any service essential to the national security, defence, foreign relations, economy, public health, public safety or public order of Singapore, and specified in the First Schedule. […]”. 62 63

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Robert Walters/ Harsha Rajwanshi confidentiality. Earlier in this paper, Confidentiality was addressed in relation to the UK data protection laws. The IPA provides for specific provisions that deal with privacy and confidential information. Section 2 (5)(c) ensures that information remains confidential,68 within the confines of any Code of Practice established under the IPA to secure and protect data. The IPA overall provides for the use and investigatory powers of the Commissioner related to communications, equipment interference and the acquisition and retention of communications data, bulk personal datasets and other information.69 While generally, the confidential information and confidentiality pertains to information that is subject to a warrant70 for the interception of communications. The resulting effect to arbitration from the confidentiality requirements of the IPA are law enforcement related, whereby a commercial entity has been under investigation by the state. In Australia, cybercrime is regulated at a state71 and federal levels. The examination of Australia will only focus on the Federal Criminal Code Act 1995 (Criminal Code). This section on Australia does not deal with the recent implementation of the Telecommunications Sector Security Reforms and the Security of Critical Infrastructure Act 2018 or the Cybercrime Legislation Amendment Act 2012 (CLA). The CLA amended the Telecommunications (Interception and Access) Act 1979 specifically pertaining to telecommunications data confidentiality pertaining to interception of this communication. Under Part 10.7 of the Criminal Code pertaining to Computer Offences, there are no specifical confidentiality requirements. Moreover, there are no confidentiality requirements throughout the Criminal Code. On the other hand, the EU established the Regulation 2019/881 on Cyber Security and Certification.72 Article 27 specifically deals with confidentiality obliging the European Union Agency for Cybersecurity (ENISA) to not divulge thirdparty information that the agency processes or receives, where there has been a request for that information to be handled confidentially. Article 27 (2) goes onto to provide that members of the Management Board, the Executive Director, the members of the ENISA Advisory Group, external experts participating in ad hoc working groups, and members of the staff of ENISA, including officials seconded U.K. Investigatory Powers Act 2016, sec (5)(c), refers to the paragraph in Schedule 2, whereby Codes of Practice can be established to assist on the overall governance and management of data that is subject to confidential arrangements. Each code must include (a) a provision designed to protect the public interest in the confidentiality of sources of journalistic information, and (b) a provision about particular considerations applicable to any data which relates to a member of a profession which routinely holds items subject to legal privilege or relevant confidential information. 69 Ibidem. 70 Ibidem, sec 27(3), 55, 112, 131, 153, 194. 71 Australia is a federated state made up of 6 states and 2 territories (Victoria, New South Wales, Queensland, South Australia, Western Australia, Tasmania, Australian Capital Territory and Northern Territory). 72 Regulation (EU) No 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act), OJ L 151/15, 7.6.2019. 68

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Data Protection, Cyber Security and AI in International Arbitration by Member States on a temporary basis shall comply with the confidentiality requirements of Article 339 TFEU,73 even after their duties have ceased. ENISA shall lay down, in its internal rules of operation, the practical arrangements for implementing the confidentiality rules74 Prior to the above, Directive (EU) 2016/114875 (NIS) establishes measures that ensure that member states embrace a model of security across the economy. Gloria Fuster and Lina Jasmontaite make the point that the Directive 2016/1148 security of network and information systems is regarded the ability of network and information systems to resist, as a given level of confidence, any action that compromises the availability, authenticity, integrity or Confidentiality of stored or transmitted or processed data or related services offered by, or accessible via, those network and information systems.76 The authors argue that the complexities involved in cybersecurity today make it even more difficult for Confidentiality to be retained when system and infrastructure can be intruded upon. The problem is the dislocation of the regulatory regime from country to country. Even this brief comparison has demonstrated how each jurisdiction has approached the concept of Confidentiality very differently within the regulation of cyber security. The complexity of the above highlights how cyber security and data protection at a technical-technological level are intertwined significantly. It is the system and infrastructure that is breached that overrides the cyber security framework(s), which leads to data being compromised illegally collected and used. Reconciling this through an arbitration both by what the law requires and any institutional rules is far from settled. Further research is required to inform practitioners that undertake arbitration of the challenges they face when having to deal with data protection and cyber security issues. Understood this way, the law is somewhat limited as to where Confidentiality lies in cyber security. It is, however where there is a contract or arbitration agreement prepared between the parties that there is an opportunity for Confidentiality to be addressed. It is problematic, though, that there will likely be areas of Confidentiality that cannot be fully addressed within an arbitration agreement itself. This is because, for example, where a system or infrastructure has failed, the party may not want to disclose that failure due to personal or commercial reasons.

Treaty on the Functioning of the European Union, OJ C 2020/193. Art. 27(3) Regulation (EU) No 2019/881. 75 Directive (EU) No 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union, OJ L 194/1, 19.7.2016. 76 G. GONZÁLEZ FUSTER/ L. JASMONTAITE, Cybersecurity Regulation in the European Union: The Digital, the Critical and Fundamental Rights, in M. CHRISTEN/ B. GORDIJN/ M. LOI (eds), The Ethics of Cybersecurity, Zürich 2020, p. 97-115. 73 74

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Artificial Intelligence [AI]

The regulation of AI is in its infancy. AI-based application(s) are increasingly being adopted in hospitals, courtrooms, schools, home and office.77 Legal scholars across the world are grappling with the various areas of the law that can be used, and will need to be developed to regulate AI technology more broadly. Urs Grasser and Virgilio Almeida are of the view that there needs to be a shared understanding of AI technologies, the underlying techniques, and societal consensus about what is or isn’t desirable,78 the design of effective and efficient regulation to govern the uncertainty and complexity of AI ecosystems. They pose a top-down approach to regulating AI, by interacting layers through social, legal, technical foundations that are supported by ethical and social layers.79 How the law responds to find a place for Confidentiality in AI systems that are used in commercial activities that acquire personal data, has not been considered adequately enough. Significant, too, is how AI and confidentiality can ever be reconciled when it is the systems and infrastructure that are compromised and confidential data and information is leaked. From a regulatory approach, it is, in our view, for governments and regulators to undertake a comprehensive review of the area due to its multilayered and systems approach. Moreover, it will require government and regulators to expand on the current internationally agreed AI principles of ethics to establish a minimum standard for risk assessments, audits and reviews to be undertaken in a similar way to other sectors such as food production and aircraft maintenance. Central to the current-day regulation of AI, is the valued-based principle approach that aims to provide a level of stewardship and trust in the technology.80 The OECD, in setting high-level policy principles, argues that AI should benefit people and the planet by driving inclusive growth, sustainable development and well-being. The technology should also be designed in a way that respects the rule of law, human rights, democratic values and diversity and should include appropriate safeguards – for example, enabling human intervention where necessary – to ensure a fair and just society. This value and ideological-based approach will be hotly debated as regulation at the national and international level emerges. They also make the point that “AI should be transparency and responsible disclosure around AI systems to ensure that people understand AI- based outcomes and can challenge them. AI systems must function in a robust, secure and safe way throughout their life cycles and potential risks should be continually assessed and U. GASSER/ V. ALMEIDA, A Layered Model for AI Governance, IEEE Internet Computing, 2017/21, p. 58-59. 78 Ibidem, p. 60. 79 Ibidem. 80 “The OECD Principles on Artificial Intelligence promote AI that is innovative and trustworthy and that respects human rights and democratic values”. OECD available at https://www.oecd.org/going-digital/ai/principles/ accessed on 30.4.2021. Member countries: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. 77

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Data Protection, Cyber Security and AI in International Arbitration managed. In addition, organisations and individuals developing, deploying or operating AI systems should be held accountable for their proper functioning in line with the above principles”.81 The policy framework has been set, and while not every nation-state may buy into this approach, the importance of having open, secure and transparent legal regime in place will be challenging enough. When addressing Confidentiality in arbitration within these parameters and the proposed OECD Guidelines on AI provides for adequate opportunity to do so. The challenge for nation-states is to buy into such arrangements at this early stage. In our view, it is better to develop such a response as a preventative measure rather than wait until the issues arise operationally, which has been the traditional response. Most problematic is that AI devices and systems operate autonomously. Simon Chesterman highlights how AI when used in “situations of autonomous practices is less visible”.82 This lack of visibility allows routine decisions to benefit significantly from the processing power of computers in cases where similar facts should lead to similar treatment. Chesterman makes a further point that an algorithm could provide a fair and consistent result, however, in cases affecting the rights and obligations of individuals, automated decisions-making processes risk treating human subjects purely as a means rather than an end. Understood in this way, it is possible that automation, when adopted in arbitration, poses the most significant challenges not only to the parties in the proceeding, but also to the notion of Confidentiality. How can Confidentiality be guaranteed and safeguarded against, as it currently is today? One argument would be that technology itself will be secure enough to ensure that Confidentiality is maintained. On the contrary, though, it is well understood that even the most secure systems can be penetrated and that confidential data and information can be harvested. A further accentuating problem is how AI technology is being used to dilute Confidentiality in the law. Legal Confidentiality is a shield for citizens.83 Simon Chandler, in referring to an earlier research undertaken in Switzerland, highlights how individuals were able to be identified in confidential legal cases, even though such participants had been anonymised.84 Chandler further points out that to achieve this result, the researchers in Switzerland combined AI with Big data, which could then mine more than 120,000 public records and by using an algorithm identify specific connections in the information that lead to identifying individuals. More ominous was how the technology succeeded in de-anonymising participants in 84% of the judgements that had been mined, with results achieved in less than an hour.85 At the time of this study, in 2016-2017, the use of AI was not as advanced as it is today in 2021. Therefore, imagine in a decade or two from Ibidem. S. CHESTERMAN, Artificial Intelligence and the Problem of Autonomy, Notre Dame Journal on Emerging Technologies, 2020/1, p. 210-214. 83 S. CHANDLER, Researchers Use Big Data and AI to Remove Legal Confidentiality, Forbes, available at https://www.forbes.com/sites/simonchandler/2019/09/04/researchersuse-big-data-and-ai-to-remove-legal-confidentiality/?sh=3470f37715f6 accessed on 8.5.2021. 84 Ibidem. 85 Ibidem. 81 82

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Robert Walters/ Harsha Rajwanshi now, how this technology could evolve and change the entire landscape of confidentiality within and of, court decisions. This, in and of itself, also poses significant challenges to arbitration. Take for example, AI used in robots in the medical and health sector.86 As highlighted above, some jurisdictions have afforded a higher level of control over health data than general personal data. The confidential nature of the traditional doctor and patient will be significantly transformed once robots and other AI machines take over. It is this technology that will open up the availability of that traditional doctor-patient information to then be stored within the robot. Thus, making it available to many more people and potentially having it exposed to cyber-attacks and incursions. While no robots were involved, in 2018, 1.5 million Singaporean’s health data87 was compromised by a cyber breach. This is one example, of many, across the world in recent times, and if this sort of activity is happening in the health sector, it can also easily happen to those parties involved in arbitration.

IV. Conclusion Confidentiality has long been an important component of international commercial arbitration. In part, arbitration has become the choice for parties to resolve disputes due to the confidential nature of proceedings. It minimises the public exposure of party’s disputes when going through the courts. This paper has only scratched the surface of the issue(s) of Confidentiality in data protection, AI and cyber security that will be used and form part of transnational arbitration disputes. It calls for a wider research to be undertaken to better understand the gaps and tensions in the law between these jurisdictions and other major economies. On the one hand, and as highlighted earlier in this paper, confidentiality Article 34.5 of the UNCITRAL Model Law, has an implied notion of Confidentiality. Gary Born, in 2021, recently wrote that the treatment of Confidentiality in international commercial arbitration is currently unsatisfactory.88 When combining cyber security, AI and data protection law, the concept of Confidentiality is far from settled at either the international or national level. At the institutional level, such as SIAC in Singapore and other arbitration center’s, there have been some guidance notes on how to treat Confidentiality. This will be further complicated as data flow provisions within data protection law also need to be considered. 86 T. ZAPUSĚ K, Artificial Intelligence in Medicine and Confidentiality of Data, Asia Pacific Journal of Health Law & Ethics, 2017/11, p. 105, available https://eiblejournal.org/index.php/APHLE/article/view/80/32 accessed on 8.5.2021. 87 K. KWANG, Singapore Health System Hit By “Most Serious Breach Of Personal Data” In Cyberattack: PM Lee's Data Targeted, CNA, available at https://www.channelnewsasia.com/singapore/singhealth-cyberattack-usually-state-linkedattackers-iswaran-801956 accessed on 15.5.2023. 88 G.B. BORN (note 3), at 2790-99.

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Data Protection, Cyber Security and AI in International Arbitration On the other hand, we argue that much more needs to be done to reconcile the application and operation of Confidentiality in arbitrations that will cross-cut cyber security, AI and data protection. The reason for raising this point is to place regulators and institutions at the forefront of resolving this complex balancing act rather than wait until such an issue arises in the future. Put another way, the arbitral process would be improved if national legislatures and arbitral institutions developed more certain and predictable standards for Confidentiality, so as to better guide the parties and tribunals. Further compounding the tensions raised in the aforementioned is the onset of the digital economy. It is changing economic activity at a fast pace, and the world is going through a period of hyperconnectivity. With this connectivity, cyber security threats are heightened across the economy. The rise and application of AI is formidable and regulators along with governments, cannot keep pace. In a final note to this paper, and as Professor Walter Brenner of the University of St. Gallen in Switzerland stated: “The aggressive use of data is transforming business models, facilitating new products and services, creating new processes, generating greater utility, and ushering in a new culture of management.”89 For any transformation, whatever it will look like, the international and national law and policy as well as the institutional arbitration rules, need to rapidly consider where and how it can be reconciled with Confidentiality.

89 “Future of Digital Economy,” Taxbeech, 2021, https://www2.deloitte.com/mt/ en/pages/technology/articles/mt-what-is-digital-economy.html, accessed on 15.5.2023.

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THE FRENCH DRAFT PRIVATE INTERNATIONAL LAW CODE ________________

THE DRAFT CODE OF FRENCH PRIVATE INTERNATIONAL LAW Cyril NOURISSAT*

I. II.

III.

Text Variety of Techniques A. Principles B. Innovation Some Solutions A. International Jurisdiction B. Office du juge C. Personal Status D. Legal Persons

The draft code of French private international law was officially submitted just a year ago (March 31, 2022) to the French Minister of Justice, Mr Éric DUPONDMORETTI.1 It has since followed a path punctuated by a few major steps: the public consultation organized by the Ministry of Justice which ended in November 2022 (around forty contributions received),2 the day of debate at the Comité français de droit international privé on October 21, 20223 and then, on January 5, 2023, the

* Professor at the University Jean Moulin – Lyon 3, Director of the Equipe de droit international, européen et comparé (EDIEC – EA 4185). This article reflects the opinions of all the permanent members of the working group. 1 Available at http://www.textes.justice.gouv.fr/art_pix/projet_code_droit_ international_prive.pdf accessed on 13.07.2023. 2 Available at http://www.textes.justice.gouv.fr/textes-soumis-a-concertation-10179/ consultation-sur-le-projet-de-code-de-droit-international-prive-34487.html accessed on 13.07.2023. 3 Available at http://www.cfdip.fr/717_p_57719/projet-de-codification.html accessed on 13.07.2023.

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Printed in Germany

Cyril Nourissat announcement by the Minister of Justice that the code will be implemented by an enabling law4. We are now in this final phase. Following several previous to codify French private international law that never came to fruition, Mrs. Nicole BELLOUBET, former Minister of Justice, announced, by an engagement letter dated July 24, 2018 that she had decided to set up a working group composed of academics, judges and lawyers, to reflect on a project to codify private international law. Many meetings were held (face-to-face or remotely, the pandemic lockdown having delayed the drafting of the text), many specialists (academics and practitioners) were heard on one or another aspect of the project, thus making it possible to submit a draft of the code including 206 articles with an explanation report of approximately sixty pages. Since then, three permanent members of the working group have published an article, outlining, in particular, a few methodological choices that led to the development of this code.5 The reaction of the legal community (French or foreign) to this draft code – not surprisingly – quite contrasting has been varied, representing the whole spectrum of possible attitudes, from firm rejection to full acceptance, including all manner of suggestion that a given provision be rewritten or that a new article should be inserted. We stress, however, that legal practitioners (judges, lawyers, notaries and in-house lawyers) have expressed their satisfaction with the possibility of finally having an “all-in-one” code to facilitate their professional practice. The purpose of this rapid study is to present, first and broadly, the text (I); then, to review the variety of private international law techniques used by this draft code (II); and, finally, to present some of the solutions that have been adopted and which demonstrate the working group’s thinking (III).

I.

Text

The text is divided into six books: General Rules, Special Rules, Procedure, Recognition and Enforcement of Foreign Acts and Judgments, Provisional and Conservatory Measures, and Transitional Provisions. The first two books successively deal with general rules and special rules, and each book develops these rules concerning, the applicable law and the competent judge. The distinction between the applicable law and the competent judge is made in most works of doctrine, manuals and treatises. It is found in foreign texts but also in a certain number of European regulations. The next four books adopt a different structure. Although this might be confusing for the reader, it reflects the desire to adopt a concrete approach. By simply 4 Speech by Eric DUPOND-MORETTI presenting the Action Plan resulting from the états généraux de la justice, in which the codification of private international law is presented as a “outil de promotion du droit français à l'international très attendu par les entreprises et les Français de l'étranger notamment”. 5 D. FOUSSARD/ M.-L. NIBOYET/ C. NOURISSAT, Réflexions méthodologiques sur le projet de code de droit international privé, Rev. crit. dr. int. pr., Issue 3, 2022, p. 477 et seq.

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The Draft Code of French Private International Law reading the titles, the reader can immediately find the rule s/he needs. Thus, without the need for cross-referencing among them, the last four books cover procedure, the circulation of decisions, provisional and conservatory measures, and finally transitional provisions, which are of particular importance in this matter in France. Discussing the text also means examining the writing style which has been retained for the 206 articles themselves. Naturally, we take account of the specific rules for this type of codification exercise, which come under what is known in France as légistique. For example, in a French code – contrary to what is practiced in other legal systems – it is not possible to give a title to each article. However, other requirements guided the working group in the drafting of the text. It is therefore necessary to focus on the meaning of the notions on which the draft code is based. To this end, we note that the draft code includes a certain number of definitions, less important for specialists than for less informed users: international situation (art. 1st), domicile (Art. 3 para 1), habitual residence (Art. 3 para 2), property rights (Art. 97), trust (Art. 108), etc. Moreover, in certain cases it appeared desirable to make lists, as for example in terms of lex societatis (cf. infra) or provisional and conservatory measures (Art. 199). On the other hand, lists were not provided for mandatory rules (lois de police), to the disappointment of certain commentators, in order to limit constraints on the judge’s discretion which might have unfortunate consequences. Finally, as was the case for many other international codes or conventions, the drafters decided to describe a legal notion rather than to define it. This is the case, for example, of renvoi (Art. 8) or fraude à la loi (Art. 12). The draft code does not define the conflict rules because any definition would have been too complex. The draft code was intended to be precise. For example, the provisions relating to the applicable law distinguish the general case, where the application of foreign law is mandatory (Art. 9) from cases where it is only applicable at the request of a party (Art. 8) or from cases where the application of foreign law is presented as optional (Art. 10), or finally of the case where foreign law is simply taken into consideration (Art. 131). Above all, the draft code opens with a general article which, after having defined international situations, provides, on the one hand, that "les dispositions du présent code s’appliquent hors du champ du droit de l’Union européenne et des conventions internationales, sauf renvoi à leurs dispositions", but, on the other hand, that “le livre 1er du présent code ne concerne que les situations hors du champ d’application du droit de l’Union européenne et des conventions internationales”. This provision, which is quite difficult to understand, tends – in reality – to specify the “périmètre” of the draft code: its provisions apply outside the scope of European Union law or conventional law. However, in other situations, the provisions of both are applicable and must be coordinated. When necessary and depending on the subject, a provision concerning coordination with the regulations or directives of the European Union, or international conventions is provided. The idea is not to oppose the sources but, on the contrary, to articulate them clearly: the rules of the code apply “hors du champ d'application du droit de l'UE et des conventions internationals”, except for matters for which the code refers to rules of European Union law or applicable internaYearbook of Private International Law, Volume 24 (2022/2023)

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Cyril Nourissat tional conventions. In this sense, a logic of "synergy" of sources prevails, which requires that the coordination in question not always be limited to a simple reference to the European and international sources, but “goes further" because some of those rules are made applicable beyond their original scope. More specifically, three cases can be highlighted, all of which contribute to ensuring the coordination between French and EU law by the French judge or by the French "authorities or legal professionals" concerned. Each time, it is a question of satisfying the requirement of foreseeability and therefore of legal certainty. The coordination is “simple” and refers to the rule of conflict finding its source directly in a European regulation or in an international convention duly signed and ratified (for instance Art. 52 of the draft code). In the other hypotheses, the coordination is “enrichie” according to two propositions. First, by “extension”, which refers to the case where it appeared necessary to extend the scope of the conflict rule resulting from the European regulation or the international convention to situations a priori not covered by such rule out of concern for consistency and simplification (Art. 89 or Art. 94). Secondly, coordination is “enrichie” by “complément”, which covers the situation where it the drafters of the Code propose to supplement the European or international conflict rule with an internal provision in order to fill any gaps (Art. 74).

II.

Variety of Techniques

The draft code demonstrates great openness by using all the techniques offered by private international law in its current state: in addition to the classic rule of conflict (bilateral or unilateral), the mandatory rules (lois de police) and material or substantive rules, it allows the recognition of situations arising abroad or a hybrid method linking jurisdiction and applicable law. The draft code also imposes a proportionality analysis and purports to adapt national procedures from time to time to link them with the rules of international law and European Union law. This description leads us to say a few words discuss briefly about the principles that guided the working group (A) and to highlight certain essential innovations from a French point of view (B). A.

Principles

Several principles shed light on how the code was designed from a technical point of view: achieving, or trying to achieve, the enactment of rules that can be considered predictable while combining flexibility and pragmatism in the handling of all resources of the discipline and, thus, meeting the expectations of its users. We must never forget that one of the objectives of this codification is precisely to bring together in a single text all the rules of French private international law that practitioners are called upon to implement. Everyone knows that practitioners associate codification with this requirement of “readability” which requires a single instrument as a guarantee of legal certainty. 240

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The Draft Code of French Private International Law The draft code therefore makes the deliberate choice to use the full range of available procedures in order to take into account, for example, the increase of mobility of people and the resulting risks of legal uncertainty. New techniques have thus been proposed to respond to the need to protect citizens – and not only nationals – exposed to the application of prohibitive or discriminatory rules. This is true in non-patrimonial family law and therefore in patrimonial law. The working group was guided by a pragmatic approach, question by question, in search of the rule best suited to resolving the difficulties that arose in practice and to satisfying the objectives – of either “conflict justice” or material justice – to be achieved. B.

Innovations

In substance, and this is a major innovation, the draft Code envisages the recognition of legal situations. It is certainly strictly framed. It first postulates the existence of a public document, which moreover complies with the law of the enacting State. In addition to requiring compliance with international public order, it also imposes two conditions: there must be a close link between the situation in question and the foreign State; and the recognition must be in accordance with the legitimate expectations of the parties. However rigorous these conditions, which are intended to avoid overuse of this clause, the draft code makes extensive use of judicial recognition, through special provisions, and, reasoning on a case-by-case basis, sometimes relaxing the conditions of application. This method has been implemented in several articles of the draft code, mainly in the area of personal status. For example, changes of surname or first name regularly formalized abroad are recognized in France (Art. 42). In matters of marriage, it is the principle of recognition of marriages celebrated abroad that has been retained (Art. 45). The same applies to partnerships registered abroad in accordance with the law of the State of registration (Art. 56) and for the recognition of the filiation of a child born through medically assisted procreation, without surrogacy (Art. 62). In addition to personal status, it is still the method of recognition that has prevailed for the recognition of companies (Art. 85) and that of foundations (Art. 115). It should be noted, however, that particular rules of recognition, operating without the intervention of a public authority but as a result of the application of a rule of conflict of laws, are provided for to favour the recognition of a movable security without dispossession created under a foreign law or of a trust established abroad (Art. 111). The working group has also endeavoured to deactivate in France the foreign laws which lead to discrimination prohibited by the international commitments of France. Thus, in terms of filiation, if the French courts are competent, French law is substituted for the applicable foreign law, if the latter prohibits the establishment of filiation due to discrimination linked to the circumstances of the birth of the child (Art. 59, Para 3 and Art. 60). It will therefore no longer be necessary to bring the public order exception into play in such a case, nor to examine the intensity of the elements of connection with France in the situation. The application of French law will be automatic. Once again, the application of French law is subject to the

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Cyril Nourissat jurisdiction of the French courts in this matter, and this for two reasons: on the one hand, the jurisdiction of the French courts reveals a significant link between the situation and France, based on the nationality or domicile of the persons concerned (plaintiff or defendant); on the other hand, since the situation falls under the jurisdiction of French courts, within the meaning of Article 1 of the EHR Convention, it is necessary to protect the child against discrimination prohibited by this convention.

III. Some Solutions It is difficult to make a selection among the great variety of fields dealt with in the Code. However, several solutions in the draft code illustrate not only the breadth of the fields covered (even if questions such as immunities or international arbitration are excluded) but also the fact that, sometimes, the proposed text consolidates existing rules and, sometimes, and clearly demonstrates innovation as compared to current solutions. To verify this, it is possible to draw on both the general rules and the special rules, both in terms of applicable law and international jurisdiction. Four examples will be selected; they concern, respectively, international jurisdiction (A), the office du juge (B), personal status (C) and, finally, legal persons (D). A.

International Jurisdiction

When the international jurisdiction of the French judge depends neither on an international convention nor, above all, on a regulation of the European Union, the draft code takes up the jurisprudential principle of extending the internal rules of territorial jurisdiction to international matters. Without ignoring the debates raised by the nature of the rules of international jurisdiction, the principle of extension has the merit of providing a connecting criterion that is easy to implement whenever there is no statement of a rule of jurisdiction specific to a particular matter. Thus, a preponderant place is given to the jurisdiction of the French courts when the domicile or habitual residence of the defendant is located in France. The draft defines these two criteria when they apply to natural persons (Art. 3) and determine the domicile of legal persons (Art. 16). However, other provisions must also be mentioned. On the one hand, several articles deal in detail with jurisdiction resulting from a choice of jurisdiction clause (Arts. 25 to 33) or relating to the risk of denial of justice (Art. 18). On the other hand, there are many rules of jurisdiction, specific to a given subject, set out in Book II, devoted to special rules, of course subject to the existence of such rules in a European Union regulation or in an international convention. In a clearly subsidiary manner, the draft code maintains – after much discussion within the working group – the grounds of jurisdiction derived from the French nationality of one of the parties to the dispute. Thus, it should be understood that, as expressed by many practitioners, this “privilège de jurisdiction” responds to worrysome situations that occur quite regularly. We refer, for example, 242

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The Draft Code of French Private International Law to the situation where referral to the courts of a third State would expose the party of French nationality to the risk of the application of discrimination of a substantial nature prohibited by France's international and European commitments, without fulfilling the conditions for the implementation of the forum necessitatis, which relate exclusively to jurisdictional considerations (Art. 18). This jurisdictional rule will also, however, be appropriate to provide European citizens who are expatriates in a third State (where one of whom is French) with the possibility to seise a European court in a family matter, when neither a choice of court clause nor a tacit prorogation of jurisdiction would be allowed. It should be emphasised that in these cases, the subsidiary jurisdiction of the French courts contravenes neither the international coordination of solutions nor the principles of European Union law. Above all, it should be stressed that an essential limit is imposed in a totally unprecedented way: the French judge would have the option of staying the proceedings and then refusing to exercise his jurisdiction in the event of a particularly serious violation of the rights of the defendant, except for exclusive jurisdiction, and on the condition of having ensured beforehand that there is no risk of denial of justice (Art. 21). B.

Office du juge

With regard to the implementation by the French judge of the rule of conflict of laws, the drafters decided to oblige this judge to apply the internationally designated law (Art. 9). The draft code chooses to abandon the distinction made by the Court of Cassation at the end of an evolution “en dents de scie” marked by several judgments, between the availability or unavailability of the rights (“droits disponibles” and “droits indisponibles”) in question, which currently determines the office of the judge. Let us recall that until then the judge is, in fact, required to apply the relevant conflict of law rule only in the presence of unavailable rights, whereas in the presence of available rights, he is only obliged to do so if one of the parties has invoked it, although he may raise it himself ex officio. While the solution identified by the case law raises questions concerning its implementation, the principle of the mandatory application of the rule of conflict by the judge provides clarity, if not simplicity. However, it was decided to maintain the implicit “accord procédural” recognised by the case law, by framing it with precision (Art. 9, Para 3), to respond to certain criticisms, but to impose in matters of divorce an express agreement in accordance with Article 7 of the “Rome III” regulation. C.

Personal Status

Nationality as the connecting factor with respect to the applicable law for the determination of personal status has been maintained while including numerous exceptions in favour of the law of domicile. Article 35 makes this clear: “si le présent code n’en dispose autrement, l’état d’une personne est régi par le droit de l’État dont il a la nationalité”. It is well-known that many are in favour of the law of habitual residence as a connecting fact, considering this to be the place of inteYearbook of Private International Law, Volume 24 (2022/2023)

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Cyril Nourissat gration of the person. It is also well-known that this is the connecting factor that is favoured in the European regulations and the Hague conventions to which the code refers. We should not however forget the case of the increasing number of French expatriates who establish their habitual residence for a few years in a State that does not share European family values. They will thus be able to continue to be subject to French law, and to seise the French courts, in particular in application of the subsidiary rules of jurisdiction based on French nationality previously explained. Moreover, it should be noted that a large number of European States have retained the attachment in principle to national law. The draft does provide for some strictly framed exceptions. These exceptions appear in many special rules, in particular in the rules offering a choice of law in favour of the law of domicile or that of habitual residence, such as in matters of surname and first name or in the field of adoption. Finally, it should be noted that in terms of applicable law, the draft code generally shows a preference for the law of domicile over that of habitual residence, which is nevertheless what prevails in European regulations and international instruments. In addition, domicile – the definition is given in Article 3 Para 1 of the draft code – is a better indicator of the attachment of a person to a place than residence; domicile is easier to determine and less subject to debate than habitual residence, as demonstrated by the abundant case law of the Court of Justice of the European Union on this subject. D.

Legal Persons

From the perspective of applicable law, it appeared necessary to change the French provisions in force (Art. 1837 of the Civil Code and Art. L. 210-3 of the Commercial Code), particularly those identical to Para 2 of the aforementioned articles, which, by giving third parties the choice between the law of the State of the registered seat and that of the State of the real seat, no longer complies with the case law of the Court of Justice of the European Union in matters of freedom of establishment. This change must be made in favour of the submission of companies to the law of the State where their registered office is located. This attachment of the lex societatis to the place of incorporation, corroborated by registration in a public register, when such registration is required, as proposed in Article 86, is an element of simplification and legal certainty for third parties who can easily identify the location of the registered office by consulting the national registers, unlike the real seat, the location of which is still subject to discussion. Such a change in favour of the criterion of the registered office was thus recommended by the Haut Comité Juridique de la Place financière de Paris in its report on the attachment of companies issued on March 31, 2021.6 The same change is observed in comparative law, the majority of Member States of the 6 Available at https://www.banque-france.fr/sites/default/files/rapport_41_f.pdf last accessed on 13.07.2023.

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The Draft Code of French Private International Law European Union now having adopted the criterion of the registered office, such as Belgium, which, on the occasion of a reform of its company law in 2019, abandoned the real seat in favour of the law of the state of registration. Finally, this development in favour of the registered office is in line with European Union law, whose case law on freedom of establishment as well as the Directive (EU) 2019/2121 on cross-border conversions, mergers and divisions follow the criterion of the registered office. With regard to the field of applicable law, it is appropriate for reasons of clarity of French law to determine, the main elements albeit not exhaustively as evidenced by the particular adverb used. Thus, the enumeration of Article 87 confirms, on the one hand, the solutions resulting from the case law - both French and European - for example with respect to the elements constituting the company or the company’s validity as well as its legal capacity, and, on the other, provides for solutions that reflect a consensus of academics, such as the liability of the corporate bodies and their members towards the company and the partners for violation of their legal or statutory obligations.

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CODIFYING AGAINST THE CLOCK... ON A FRENCH PROJECT FOR THE CODIFICATION OF PRIVATE INTERNATIONAL LAW Dominique BUREAU*/ Horatia MUIR WATT**

I. II. III. IV.

Introduction What Exactly Is There to Codify? Why on Earth Codify? Final Remarks

After the failure, in the course the 20th century,, of various French codification projects relating to (national) private international law, a new proposal has recently been submitted to the French Minister of Justice. It is quite curious to see the idea of a purely national code resurfacing at a time when unified European instruments now cover most of the field. Moreover, the underlying premises of this draft appear flawed. There is a double discrepancy between the content of the project itself and, on the one hand, the essential features of the specific area of the law that it aims to codify, and on the other, the objectives it is supposed to pursue. Our claim – which refrains from any assessment of the substantive quality of the (numerous) provisions comprised within the project, some of which are undoubtedly useful - is that it is still not too late to do nothing.

I.

Introduction

In response to a “letter of mission” dated 24 July 2018, a draft code of French private international law1 was recently submitted to the French Minister of Professor at the University of Paris-Panthéon-Assas. University Professor at the Sciences Po Paris Law School. The following text is drawn in part from an article published in French in La Semaine juridique, Édition générale (D. BUREAU and H. MUIR WATT, “Codifier à contretemps... À propos d’un projet français de codification du droit international privé”, JCP G 2022, doctr. 1309). 1 At least according to the terms of the mission letter; the draft submitted by the working group in charge of its elaboration refers to a [French] Code of Private International Law (see http://www.textes.justice.gouv.fr/art_pix/rapport_code_DIP_mars_2022%20.pdf). *

**

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Printed in Germany

Dominique Bureau/ Horatia Muir Watt Justice.2 A Code of private international law. A French national code. The idea seems to have germinated, if not in the “secret councils of the Prince”,3 at least in the invisible antechambers of a ministerial cabinet. So here comes one more sectoral code, to be added to the list of no less than 78 others that can be consulted on the Légifrance website. However, unlike many of the latter, at least according to the chairman of the working group in charge of its preparation, this is not a mere assemblage of existing provisions, but involves, intriguingly, substantive changes.4 Various projects in the same vein were undertaken and abandoned successively during the 20th century.5 There was a great deal of scholarship on the subject6 and reiterative exchanges of arguments, for and against the whole codification process, harked back to earlier endeavours, in France and elsewhere, in the wider field of private law. In short, some hundred years later, the discussion might have

On this semantic shift, seeinfra, pp. 223 s.. And, on the genesis of the project, see Interview with Th. Andrieu, DACS, Ministry of Justice, JCP N 2019, n° 19, act. 460. 2 The draft code and the accompanying explanatory report are now widely available on the website of the French Committee on Private International Law (www.cfdip.fr/ offres/gestion/actus_717_43783-1/projet-de-code-de-droit-international-prive-et-seance-du21-octobre-2022.html). Curiously, the draft that can be consulted on the Chancellery's website (cf. previous note) is not, however, identical in every respect to the one distributed by the Comité fr. DIP (reproduced in JDI, 2022, p. 785 et seq.); see, for example, the text of Art. 15, where the words "subject to their adaptation to international matters" appear in only one of these versions. 3 Portalis, Discours relatif aux lois, 4 ventôse an XI. 4 J.-P. ANCEL, JCP G 2022, prat. 539 (again going beyond the terms of the engagement letter, which envisaged a simple consolidation). 5 Projects by J.-P. NIBOYET (1954), H. BATIFFOL (1959) and J. FOYER (1967). 6 See, for example, not. A. BODÉNÈS-CONSTANTIN, La codification du droit international privé français, Defrénois, 2005, pref. I. FADLALLAH. & D. BUREAU, “La codification du droit international privé”, in La codification, Dalloz, coll. Thèmes et Commentaires, 1996, p. 119 et seq. - H. GAUDEMET-TALLON, “Droit international privé et Code civil” in 1804-2004, Le Code civil, un passé, un présent, un avenir, Dalloz, 2004, p. 749 et seq. - V. HEUZÉ, “Le droit international privé” in Le Code civil 1804-2004, Livre du bicentenaire, Dalloz-Litec, 2004, p. 401 et seq. - C. KESSEDJIAN, “La codification en droit international privé” in La codification du droit international, A. PEDONE, 1999, p. 101 and s. - P. LAGARDE, “Sur la non-codification du droit international privé français”, Syracuse Journal of International Law, 1998, vol. 25, p. 45. - Y. LOUSSOUARN, “Les vicissitudes de la codification du droit international privé français” in Liber amicorum G.A.L. Droz, Martinus Nijhoff Publishers, 1996, p. 191 et seq. - H. MUIR WATT, “La codification en droit international privé”, Droits, 27/1998, p. 149 et seq. - L. PERREAUSAUSSINE, “Le droit international privé français: l’avenir de la codification est-il national ou européen?”, in Codification du droit privé et évolution du droit de l'arbitrage, Société de législation comparée, 2014, p. 83 et s. - E. PUTMAN, “Réflexions sur la question de la codification du droit international privé”, in La codification du droit international, A. PEDONE, 1999, p. 111 et seq. - E. VASSILAKAKIS, Orientations méthodologiques dans les codifications récentes du droit international privé en Europe, LGDJ, 1987, pref. P. LAGARDE.

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Codifying Against the Clock… seemed to have run out of steam. However, the imaginary of a Napoleonic codification7 seems to have retained its appeal.8 Systematise! Simplify! Clarify! Let us recontextualise and remember that at the turn of our century, a project for a uniform European code of private law fell apart in the face of multiple (largely academic) objections, mainly linked to the irreducible diversity of national traditions. It was dismissed as nonsensical9 for pragmatic, cultural or epistemological reasons. Thereafter, rather than attempting to unify or approximate all substantive private law, the European Commission chose to unify private international law, sector by sector, thereby investing this field with a new function within the internal market. A large number of EU regulations containing common rules on conflict of laws and jurisdiction were adopted.10 This allowed a diversity of substantive solutions to coexist with a minimum of predictability. In other words, a methodology of coordination was considered appropriate to reconcile the stability of transnational trade with respect for the national cultures thus united in their diversity. At that point, a proposal appeared with a view to gather this new corpus into a “European Code of Private International Law”, but did not succeed.11 After a substantial period during which the current legislative construction site was kept tightly secret while the experts were at work,12 the public is now 7 On the different models of code and the imaginaries that underlie them, see in particular D. DE BÉCHILLON, “L'imaginaire d'un code”, Droits, n° 27/1998, p. 173 f. On the meaning of the phenomenon of codification, its possible models, as well as on the essential distinction - although obviously ignored here - between codification and legislation, see, in particular, D. BUREAU, Dictionnaire de la codification de l'État, No. 27/1998, p. 173. D. BUREAU, Dictionnaire de la culture juridique, (dir.) D. ALLAND & S. RIALS, Lamy Puf, 2003, V° Codification. For a long-term view, showing that the very modalities of the act of codification are far from trivial, A. WATSON, “The Importance of Nutshells”, 42 Am. Journ. Comp. Law, 1993, 1 (and spec. on French civil law, p. 16 et seq.). 8 For first presentations, see in particular, JCP N 2021, n° 25, 1233, Dossier (L. PAILLER), JCP N 2021, n° 25, 1234 (J. FOYER); JCP N 2021, n° 25, 1235 (J. CHAMOT), – (J.-P. ANCEL) JCP G 2022, prat. 539; S. CLAVEL & F. JAULT-SESEKE: D. 2022, p. 984; H. GAUDEMET-TALLON: JDI 2022, p. 769; Rev. crit. DIP 2022, p. 473 s. (various contributions); Travaux comité fr. DIP 2020, p. 347 et seq. 9 P. LEGRAND, “Sens et non-sens d’un code civil européen", RIDC, n° 4/1996, p. 779 s. 10 Rome I, Rome II, Rome III, Brussels Ia, Brussels IIb... and many others. 11 See European Parliament recommendation, Report on the cost of non-Europe. A European Code of Private International Law, PE 504.468, CoNE 3/2013 (www.europarl.europa.eu/RegData/etudes/STUD/2013/504468/IPOL-JOIN_ET(2013)5044 68_EN.pdf). Comp. M. FALLON/ P. LAGARDE & S. POILLOT-PERUZZETTO (eds), La matière civile et commerciale, socle d'un code européen de droit international privé, Dalloz, 2009 and What architecture for a European code of private international law? 2011, PIE Peter Lang. 12 The revelation took place before the Comité français de droit international privé of 21 October 2022, but the initial idea had apparently sprung up before 24 July 2018, date of the “letter of mission” by the ministry of justice to the (presumably pre constituted) working group . A consultation had been opened previously in June 2022, but had already closed by November, and many scholars were unaware of its existence before the 21st of October. Contrary to the methods of the American Law Institute's Third Restatement, no

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Dominique Bureau/ Horatia Muir Watt allowed access to the text and the discussion continues, if somewhat tepidly. Indeed, most opinions (whether in favour or against) other than those of the working group itself seem to be voiced in private only.13 Whatever the reasons for this uncritical or prudential stance of “la Doctrine”, our own point concerns the strange reversal that the draft seems to be operating. At the very time when European Union regulations have unified most of private international law (including rules of choice of law with ‘universal’ applicability) in all of the Member States, the idea of a purely national code is re-emerging, with no apparent reaction from the ranks of academia. Yet it is perfectly obvious that a national code can only be interstitial, filling in the (rare) gaps between existing rules or clarifying various procedural dimensions that still belong to the local jurisdiction of the various Member States. The utility of both these moves is not contested here; the issue is whether, rather than one or two specific amendments to the code of civil procedure, a whole new code national of over two hundred articles was necessary, or indeed desirable. The following reflections are mainly for the professional audience of judges, lawyers and another practitioners whom this code purports to address.14 The short question is whether an imperfect code is preferable to no code at all. One may doubt it. But let us assume however that the codifiers’ promise of clarification is fulfilled (even though one might more realistically promote the virtues of the enhanced teaching of private international law than put faith in a utopia of textual revelation). This point notwithstanding, the real problems are elsewhere. First and foremost, one may wonder why there was not a properly democratic debate15 both as to the legitimacy and the appropriateness of the whole foreign jurists participated and NGOs concerned by provisions such as those on the legal standing of associations etc were unable to voice their positions. Despite the tensions that met our critique when it was expressed within a restricted academic circle gathered to hear the presentation of the project four years later (see the session of the DIP Committee, 21 Oct. 2022), it is directed not at the drafters personally but at the in initial decision to codify made within the Ministry, under conditions that remain to be clarified, as well as its implementation by a working group without any questions being asked on this point. 13 Except for our own, which has generated a violent backlash from the working group (see our further response to the most recent fierce attack: ‘A propos d’une “approche pratique et comparative” de la codification du droit international privé français’, Rec. Dalloz, 2023.1128). Beyond the scripts produced by those who participated in the working group, one or two scholars have adopted an analytical approach, devoted on the sole content of individual draft provisions: see H. GAUDEMET-TALLON, “Quelques réflexions sur le projet de Code français de droit international privé”, JDI, 2022, doctr. 6, p. 769. Two others however, have also voiced a critical perspective on the code for reasons of principle: P. LAGARDE, “Quelques remarques sur le projet de codification du droit international privé français”, Rev. crit. DIP 2022, p. 515; L. D'AVOUT, “Les pouvoirs publics au soutien du droit international privé français”, D., 2023. 80. Various objections to the production of a national code were formulated orally by a certain number of jurists, French and foreign, during the session of the French Committee of Private International Law of 21 October 2022, devoted to the presentation of the draft. 14 Lawyers and magistrates, but also notaries, bailiffs, social institutions: see D. FOUSSARD, Travaux Comité fr. DIP, 2018-2020, p. 356. 15 A public consultation was indeed opened in June 2022, until the end of November. But neither the time limit nor the modalities of this consultation are in line with

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Codifying Against the Clock… endeavor, and concerning the normative principles underlying what is quite obviously a political project. No such debate appears to have actually taken place prior to the 'letter of mission' containing the executive decision to codify. Perhaps private international law is still perceived, in the corridors of power, to be “merely technical”. Yet, even a cursory glance at the draft shows that it involves important societal choices, over which the general public might reasonably disagree.16 Secondly, the sheer scale of European legislation in the field today signifies that none of the promises made by the proposed national provisions can realistically be kept, except of course in the dire case of a Frexit (which although occasionally mooted in some political quarters, is hopefully not on the current governmental agenda). Measured therefore in terms of costs and benefits for a professional actor confronted with the notorious difficulty of crossborder cases, this sudden reappearance of a local project side by side with the European uniform rules leads to a largely negative balance sheet.17 There is no point in delving into an exegesis of each of the draft provisions, taken in isolation.18 It would be counterproductive to go down this road since the problem is located well upstream: it is the very principle of such a code19 that is at issue here. Bracketing the doubtful symbolism of a national code at a time and within a context where European judicial cooperation and coordination are arguably more urgent than ever before, our claim is that the best thing that could happen to this draft would be for it to be tidied away in an administrative drawer – even at this late stage and despite the (unknown) extent of time and effort to which the ministry of justice has devoted public resources, arguably better spent elsewhere because of the confusion it is likely to entail. It is not in itself of any use to specialists of the field (who have done quite well without it up to now) since they have abundant sources (treatises, practical exercises, case-books) to consult. Moreover, the requirements of an open debate. On the one hand, as P. Lagarde writes: “This period is too short, if at least the Ministry hopes for useful observations on each of the 207 articles of the draft” (Rev. crit. DIP 2022, spec. p. 516). On the other hand, the website is essentially devoted to receiving comments on technical details. 16 Just as in the previous case of the uniform civil code. - See our editorial comments: Rev. crit. DIP 2022, p. 474: “The stakes are naturally proportionate to the intensity of the debates: they are as much a question of the aesthetics of law (what symbolic form should be given to the norm?) as of legal epistemology (producing legal knowledge through the judge or through the law) or again, and above all, of political projects (unifying, imperial, panoptic or democratic). The code is imaginary or fantasy before being a practical tool in which the law is materially embodied”. 17 We wish to distance ourselves radically from the comments made by Tocqueville (Journey to America, 1835, quoted in Rev. crit. DIP 2022, p. 474), explaining that a certain reluctance to codify could be explained by the personal interest of jurists in maintaining the obscurity of the law. On the contrary, the aim here is to show that, precisely, this code does not make private international law more accessible to non-specialists. 18 This is the approach taken, for example, by the German comparatists who contributed to the above-mentioned issue of the Rev. crit. DIP (see S. LEIBLE & F.M. WILKE: Rev. crit. DIP 2022, p. 503 f.). 19 On the other hand, a more modest project, merely clarifying certain obscuree points of positive law, could have been very useful.

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Dominique Bureau/ Horatia Muir Watt all the relevant regulatory instruments and ECJ case-law applicable to the vast majority of cross border cases are readily available online. In this respect, perhaps other (non specialist) users might have preferred a set of current European Union texts, with the indication of additional national procedural rules where necessary and the indication of the leading case-law. But of course such books actually exist already.20 As for the small area – largely relating to procedural institutions – still governed by the national rules of Member States, a clear cartography of the overall state of the law in France might have been useful. Indeed, one of the greatest difficulties for national courts confronted with cross border disputes is knowing which legal source to consult. Meanwhile, other users such as ONGs involved in multi-national litigation would have welcomed a short presentation of the various interconnected choice of law rules on European Union and national law on issues such as legal standing. But codifying as if the whole area was still national law creates an optical illusion. This could generate the sort of mistakes (using the wrong rule) which (at least for the bar) are assessed nowadays in terms of professional liability.21 The gist of our argument, then, is simple: Mind the gap (between promise and reality)! The project is flawed in two ways, both related to its erroneous premises. Thus, there is a considerable hiatus between the draft code and, on the one hand, the characteristics of the discipline that it is designed to codify (II), and on the other, the objectives it purports to pursue (III).

II.

What Exactly Is There to Codify?

The first discrepancy22 points to a well-known methodological paradox. As has been said elsewhere and long ago: “On the one hand, in wishing to express the determination of the natural relationship of each legal relationship through fixed, pre-established and abstract rules, one necessarily betrays the spirit of Savignian methodology. On the other hand, however, by wanting to enshrine in the very wording of the codified rules the judge’s creative freedom, the notion of a Code is

20 See thus, among others: M. ATTAL/ J. BAUCHY, Code de droit international privé français, Bruylant, ed. 2017/2018; S. CLAVEL & E. GALLANT, Les grands textes de droit international privé, Dalloz, 4e éd., 2021; J.-Y. CARLIER, M. FALLON, S. FRANCQ, Codes essentiels, Droit international privé, Larcier, 9e éd., 2020. Moreover these indications are usually covered by most handbooks and textbooks. 21 See, as a recent example: Cass. 1re civ., 6 July 2022, n° 20-50.029, unpublished. 22 We also bracket the epistemological dimensions of the whole debate (how does the formal design and architecture of the code affect the way we think about the law?). We would have thought this point to be fundamental in terms of legal scholarship. However, it does not seem to have occurred to those designing the project to think in terms of legal epistemology.

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Codifying Against the Clock… distorted”.23 In other words, a code of private international law cannot and should not, in view of the particularities of the discipline, avoid including open-textured rules, which at the same time discredit the security and predictability that are supposed to serve as its justification. This is a fairly widespread view, even in France. Why then commit to such a project?24 The question arises in respect of formulae such as: “Exceptionally, a situation constituted or recorded in a public document drawn up abroad, in accordance with the law of that State, with which this situation was closely connected at the time of its establishment, may be recognised in France, in order to respect the legitimate expectations of the parties, and subject to its conformity with international public policy”.25 “Foreign mandatory rules with which the legal relationship in question has a close link may be applied in view of the objectives they pursue or the effects they produce”.26 “In order to verify compliance with public policy, account may be taken of the proximity of the situation to the French legal order”27 Many other examples could be cited, all on the same lines. All these signify that if ever it enters into force, the code will immediately delegate (the many) hard cases to the courts. In other words, codifying open-textured standards (as opposed to rules) entails a form of self-denial: if the code itself acknowledges the relativity of its own normative value, it can no longer claim to provide rules of conduct, nor even a realistic aid to judicial assessment.28 The promise of greater predictability falls by the wayside and one can only wonder if the assemblage was worth the effort. With regard to the inadequation of a code with regard to the contemporary state of private international law, it suffices to reread the first lines of the letter of mission of 24 July 2018 addressed by the then Minister of Justice to President Jean-Pierre Ancel: “French private international law is essentially derived from the case law of the Court of Cassation, which, after relying for a long time solely on Article 3 of the Civil Code, is now based on the general principles of private international law that it itself has forged. Thus, apart from a few rare provisions scattered throughout the various existing codes, the rules governing this matter, most of which have been established for a long time, are of praetorian origin. The time now seems to have come to finally bring together all these rules and principles of case law in a single text, as has been envisaged several times in the past but never achieved”. 23 H. MUIR WATT, “Codification in Private International Law”, supra note 8, and spec. p. 158. 24 The existence of such codes abroad cannot even be used as an argument, for many reasons relating to the times, national particularities, needs and techniques. More generally, see J. Carbonnier, “A beau mentir qui vient de loin ou le mythe du législateur étranger” in Essais sur les lois, Defrénois 1979, p. 191 et seq., and speculatively p. 201. 25 Draft, art. 5; emphasis added. 26 Draft, Art. 7(3); emphasis added. 27 Draft, Art. 11(2); emphasis added. 28 H. MUIR WATT, “La codification en droit international privé”, supra note 8, speculative p. 160, adding: “the Code that would bring together such provisions would be a pseudo-code”.

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Dominique Bureau/ Horatia Muir Watt Such a roadmap would undoubtedly have made more sense if it had been intended for past projects – successively led by Niboyet (1954), Batiffol (1959), or Foyer (1967) – in support of a local code of French private international law. But for the same discipline today, the terms of the mission make little sense. Where oh where has the ministry been since 1968 and the first radical transformations resulting from the influx of European texts (now regulations)? The Cour de cassation’s case law and the general principles devised under its aegis no longer play an essential role. It falls now to the European Court of Justice to guide the interpretation of the multiple instruments which compose the sources of legality in this field. Of course, the drafters themselves were initially, or later became aware of this and, without questioning the codification in its very principle, attempted to deal with this first discrepancy in the following ways. First, by stating, in Article 1(3), that : “The provisions of this code apply outside the scope of European Union law and international conventions, unless reference is made to their provisions. From the outset, this code thus asserts its subsidiary vocation. This is enough to raise questions about its very relevance, while revealing the modesty of the rank it has assigned itself. A code, certainly, but of second or third rank. Moreover, it is already clear that the planned linkage between purely national law, European regulations and international conventions will make the whole thing extremely tricky for practitioners inexperienced in the discipline.29 Since the code is applicable only by default, it will be necessary to ascertain in advance that a European regulation or an international convention does not exist or is not applicable to the case in question,30 before being able to rely on it.31 Well, at least the user is forewarned! In the next paragraph, the draft states that: “Book Ier of the present code concerns only situations outside the scope of application of European Union law and international conventions. Subsidiarity is once again asserted. This means, for example, that it applies to Article 6 of the draft,32 which takes up the principle of characterisation lege fori. But can we exclude the risk that an insufficiently attentive reader, relying on the apparent generality of this principle as enunciated here, might be tempted to think that it is relevant to situations covered by a European regulation? Yet as we know, in the latter case, characterisation under national law gives way to “autonomous” interpretation: detached from national particularities, this “autonomy” of European conThe others knew only too well the difficulty of this kind of exercise. As to the technique of referral, also referred to in the text, see n° 10. 31 See on this point, H. GAUDEMET-TALLON, “Quelques réflexions sur le projet de Code français de droit international privé du 31 mars 2022”, JDI 2022, p. 769, and speculatively p. 775: “The reservation of European law and treaty law was necessary, but an important difficulty remains: it is not always easy to know whether a European text applies or not and the practitioner will always be confronted with a first step: does the legal relationship in question fall within the scope of a European regulation or an international convention? And to answer this question, the French code will not be of any help and could not be”. 32 “The qualifications necessary for the implementation of the conflict rule are made in the light of French law”. 29 30

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Codifying Against the Clock… cepts is regularly enforced by the European Court of Justice.33 Beyond this sole illustration, the real question is of a much broader thrust: are all the devices linked to the concrete operation the choice of law rule34 – that is, the exception of public policy,35 (fraudulent) evasion of the law,36 “transitory” provisions relating to statutory changes within the designated legal system,37 and evidence of foreign law38 – all irrelevant when the dispute is governed by a European regulation? Or even an international convention? No doubt, according to the aforementioned paragraph. And we know too that European law has created, inductively, through the tessiture of its multiple regulations, a new, as it were special, “general theory” in which such “old” questions as renvoi, characterisation, public policy etc are all radically reshaped. But where then can guidance be found in such cases?39 How can one find one’s way around without wandering outside the code? What to conclude on this point, since everything we have said is perfectly elementary? More than 20 years ago, Bruno OPPETIT observed that: “the simultaneous double movement of codification of private international law which has developed both in a national framework [in several countries with a great legal tradition] and on an international scale by way of treaty law remains incomprehensible to this day”.40 Does it make any more sense today for France to embark on a national codification process when European regulations have far exceeded the network of international conventions in force at the time those lines were written? The answer lies in the question itself.

33 Thus, for example, while an action brought in the context of a chain of contracts transferring ownership by one of its extreme links to the other is contractual in French civil law (Cass. ass. plén., 7 Feb. 1986, 2 judgments: JCP G 1986, II, 20616, note PH. MALINVAUD), it is not contractual in the light of the Brussels I Regulation (CJEC, 17 June 1992, aff. C-26/91, Jakob Handte: Rev. crit. DIP 1992, p. 726, note H. GAUDEMETTALLON; JCP G 1992, II, 21927, note C. LARROUMET; JDI 1993, p. 469, obs. J.-M. BISCHOFF; RTD eur. 1992, p. 709, note P. DE VAREILLES-SOMMIÈRES). 34 Draft, art. 9. 35 Draft, art. 11. 36 Draft, art. 12. 37 Draft, art. 13. 38 Draft, art. 14. 39 From a purely practical point of view, all those who might be confronted with the discipline would in fact have to refer alternately to two bodies of rules in relation to the questions raised in the text, whereas they would have no guide in the code to enable them to answer them when implementing a European regulation or an international convention (which occupy the widest field of contemporary private international law...). Moreover, as we have tried to show in our joint work (Droit international privé, 5è éd. PUF, 2021), the various elements mentioned, which make up what is generally agreed to be called “the general theory of conflict of laws”, are themselves undergoing a mutation inductively from the mosaic of the many so-called “special” European rules (relating to specific matters). Such mutations are very interesting to analyse and reveal a subtle form of methodological inversion (the “special” shapes the “general”) which is not captured by the wording of the above-mentioned articles. 40 B. OPPETIT, Essai sur la codification, PUF, 1998, spec. p. 68.

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III. Why on Earth Codify? The draft announces the policy objectives pursued in the following clear terms: “Codification is intended to improve the accessibility and readability of French private international law, thus contributing to the attractiveness of our legal system abroad by constituting a body of clear and coherent rules”.41 Let us see. Accessibility? How would private international law be made more accessible through this code which, despite its significant volume,42 cannot claim to cover anything more than a residual part of the picture? For those who are uncomfortable using the tools provided by the European Union’s website, further (paper) collections of texts published by private publishers,43 bringing together international, European and national sources, would still be indispensable.44 It is a peculiar conception of a code to reduce it to the status of a mere “external reference45 ... And so our “occasional user” already has on their desk: a national code of private international law signalled a subsidiary, the relevant European regulations and/or international conventions – which they will have managed to discover by reading textbooks or consulting a privately edited code. But our occasional user is not yet off the hook: they will still have to complete this set by consulting European, or national French and comparative case law: welcome to Légifrance and Curia, with a few European Encyclopaedias thrown in! Over their cluttered desk, their gaze must also be riveted on the computer screen. Has all this facilitated access to private international law? In case of doubt as to the relevant source, a few journals, blogs and other works will have followed the most recent legislative and judicial moves. So one may wonder whether our reader might not have gained a lot of time and energy if they had simply started there. But what of the ideal of completeness?46 It appears to be all the more elusive that several important issues have been excluded from the draft. One example is Report, p. 6-7. 207 articles. Comp. with previous French drafts, comprising between 21 and 150 articles; or, abroad: Belgium (140 articles); Switzerland (200 articles); Italy (72 articles); Monaco (100 articles). 43 See above. 44 As seen above, this is not ignored in the draft, which repeatedly refers to European regulations and international conventions. 45 On this legislative technique, see N. MOLFESSIS, “Le renvoi d'un texte à un autre”, in Les mots de la loi, Economica, 1999, p. 55, and spec. p. 69: “the external reference raises a problem of access to the rule, requiring the reader to have at his disposal the sources of information referred to by the initial text. The effect of economy of law and codification all the law in one hand - is then an illusion”. See too, L. D'AVOUT, “Les pouvoirs publics au soutien du droit international privé français” (“une fonction d’aiguillage”), op. cit. 46 This has been emphasised many times. - See, for example, D. FOUSSARD, M.-L. NIBOYET & C. NOURISSAT (all three members of the working group in charge of drafting the project): Rev. crit. DIP 2022, p. 483, or to "exhaustiveness", p. 489 and 493 et seq. 41 42

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Codifying Against the Clock… the legal status of aliens (foreigners), relegated to other codes47 at a time when migration occupies the centre of the scene and might have served, if sufficiently hospitable, to counteract the disagreeable impression created by a return to legal nationalism. As for the law of citizenship or nationality, it gets just one article,48 the main part being located elsewhere, in the Civil Code.49 While evidence of foreign law is mentioned,50 nothing is said about the (trickiest) issues of interpretation and the power of review that the Court of Cassation is likely to exercise in this area.51 Let us also have a thought for the notary (or other public office-holder) responsible for determining the law applicable to the matrimonial property of spouses married before 1er September 1992. They will look in vain for the answer, curiously and deliberately left out of the scope of the code. Many other items could be pointed out in a similar vein.52 Notably, the risks linked to this (inevitable) incompleteness of all codification projects should underlined. As has already been pointed out: “If there is the slightest doubt in this respect, the whole endeavour will collapse: for, in this case, it will always be necessary to check whether such and such a provision has not remained outside the Code”.53 In short, completeness is unattainable and serves too to undermine the very foundations of the code in terms of accessibility. It is hardly worth mentioning that the argument based on the usefulness – attractiveness? – of such a code for foreign lawyers also falls by itself. 11 - Readability, then? The dictionary definition refers us to “the quality of what is easy to read, to decipher”.54 With foreign readers also in mind, let us read, then (in an admittedly arcane version produced by deepl pro): “The jurisdiction of French courts in matters of protection of minors is determined, when the minor is habitually resident in a Member State of the European Union, by Council Regulation (EU) No 2019/1111 of 25 June 2019 concernC. civ., art. 11; CESEDA... Draft, art. 2. See Article 114 of an “embryonic regulation on a European code of private international law” (P. LAGARDE, “En guise de synthèse”, in Quelle architecture pour un code européen de droit international privé? See also Article 3 of the Belgian C. DIP (despite a Belgian Nationality Code...). 49 Draft, Art. 17 et seq. 50 Draft, arts. 10 and 14. 51 On this classic question, see in particular. D. BUREAU & H. MUIR WATT, Droit international privé, t. I: PUF, coll. Thémis, 5e éd., 2021, p. 556 s. We bracket here, again, the epistemological question of the distinction between law and fact and its ramifications in respect of foreign law. These do not seem to have been considered, as if the state of scholarly reflection on this point had not moved since the early twentieth century. 52 From the point of view of sources (since bilateral conventions are not even mentioned; nor, of course, the important case law of the CJEU...); of techniques (equivalence, taking into consideration...); of questions (beyond those mentioned in the text, see various examples given during the session of the Fr. DIP Committee meeting on 21 October last) . 53 D. BUREAU, “Remarques sur la codification du droit de la consommation”, D. 1994, p. 291, spec. § 12. 54 Dictionnaire de l'Académie française, V° Lisibilité. Comp. J.-P. ANCEL: JCP G 2022, prat. 539: “we have endeavoured to be simple and clear, in a word, to show pedagogy”. 47 48

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Dominique Bureau/ Horatia Muir Watt ing jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility as well as in matters of international child abduction [recast]. Where the minor's habitual residence is located in the territory of a State which is not a member of the European Union but which is bound by the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Cooperation in respect of Parental Responsibility and Measures for the Protection of Children, the jurisdiction of the French courts is determined by that Convention. Where the minor is present on French territory and either his or her habitual residence cannot be established, or he or she is a refugee or has been internationally displaced as a result of disturbances in his or her country, the French courts have jurisdiction. Where the minor's habitual residence is located in the territory of a State not bound by the Convention of 19 October 1996, the French courts have jurisdiction to hear actions against a defendant who is domiciled or habitually resident in France, or failing that, pursuant to Article 17 of this Code, where one of the parties is of French nationality”.55 “Easy to read”? Will practitioners of domestic family law really be tempted to engage in international cases after reading such provisions? Do we really need to labour this point any further? The apparently unshakable conviction of the French ministry of justice that the draft is both helpful and attractive encourages us to continue, however: “The maintenance effects of a partnership are governed as to the competent court by Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations and as to the applicable law by the Hague Protocol of 23 November 2007 on the law applicable to maintenance obligations. Its property effects are governed as to the competent court by Article 78 and as to the applicable law by Articles 79 to 81 of this Code. Its inheritance effects are governed as to jurisdiction by Article 82 and as to applicable law by Articles 83 and 84 of this Code”.56 Perhaps we can stop here? It may be more to the point to ask how a field such as private international law, whose reputation for complexity is no longer to be established (the metaphor of the “dismal swamp” coined by Dean Alfred Prosser nearly a century ago across the Atlantic, still dies hard…), suddenly becomes “easy to read” by the grace of a code? And that, assuming that this is the case – quod non – “easy to read” is transformed by a kind of alchemy into “easy to understand?” To be fair, various other texts within the project are drafted much more concisely. But are they more helpful? Is there any guarantee that a non-specialist will fully understand this simple sentence: “The intentionally mandatory rules of the forum must be applied”,57 55 56

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Codifying Against the Clock… without any further specification of the modalities according to which the court must proceed? A definition provided without instructions may give an illusory impression of “ease of reading”. But what of its concrete application? Or take this paragraph: “The application of internationally designated law is imperative for the judge”.58 What does this mean, exactly, when it is announced in article 1 that the code applies outside the scope of international conventions.59 Other examples include Articles 860 and 13,61 which will hardly be easy to decipher for an ordinary practitioner. And does it really make things easier if cases of evasion no longer mention “fraud on the law”,62 or if renvoi is dealt with in a similar silence?63 There is hardly any point in continuing these illustrations.64 Lastly, the attractiveness of the French legal system abroad? Once again, there is no need to dwell on this point. It is not enough to repeat the term "attractiveness" like a mantra for it to become performative...65 .It is already very doubtful that a reform as important (and invested with comparatively much more scholarly attention) as that of the law of obligations66 can really serve the

Draft, Art. 7, para. 2. Draft, Art. 9, para. 1er ; emphasis added. 59 On this difficulty, see P. LAGARDE, “Quelques remarques sur le projet de codification du droit international privé français”, Rev. crit. DIP 2022, p. 515, and spec. p. 519, note 13. 60 “If this Code does not provide otherwise, the designation of the foreign law shall include the conflict rules. However, the French courts or authorities are only obliged to apply these rules if one of the parties so requests. 61 “When declared applicable, foreign law must be implemented as applied in its original legal order, including its transitional provisions and internal conflict of laws rules. 62 Draft, Art. 12; the word “fraud” is however used elsewhere in the draft Code, in various places. 63 Draft, art. 8. 64 Similarly, it would be pointless to point out, in support of a Code of Private International Law, that the readability of other codes - such as the Commercial Code, for example - is no more guaranteed for a non-specialist. Quite simply because the argument would prove exactly the opposite of what it intends to defend, revealing the illusion of a code that would suffice to make comprehensible a subject that is beyond the usual field of competence of any lawyer. It would also reveal an insufficient reflection on the phenomenon of codification in general, and on the Commercial Code in particular (on which these arguments have already been discussed: F. TERRÉ/ A. OUTIN-ADAM, “Codifying is a difficult art (about a ‘commercial code’)”, D. 1994, p. 99. D. BUREAU & N. MOLFESSIS, “Le nouveau Code de commerce? Une mystification”, D. 2001, Chron. p. 361). 65 It is true, however, that some seem to have been convinced, to the point of linking France's attractiveness on the markets to the draft Code of Private International Law, in its provisions relating to the law of collective proceedings. Seriously? (!). See J.-L. VALLENS, “Un Code français de droit international privé pour les procédures collectives”, RTD com. 2022, p. 225. 66 Resulting from Order No 2016-131 of 10 February 2016 and Act No. 2018-287 of 20 April 2018. 57 58

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Dominique Bureau/ Horatia Muir Watt attractiveness of French law.67 By contrast, and as current protest movements show, a reform of labour law or tax law would, on the other hand, be powerful markers. Given moreover the extent of European legislation on the questions that “count” (data privacy, global value chains, corporate free movement), “attractiveness” is hardly a serious claim in respect of an interstitial, national, code of private international law, with its limited application and less than clear provisions: it is hardly likely to strengthen the magnetism of the French legal system.68.

IV. Final Remarks Given its erroneous premises, the outcome was compromised, ab initio. Of course, as Paul Lagarde pointed out, we should not underestimate “the amount of work and the merits [of the] authors”69 of this project. But the problem is upstream, with regard to the very principle of codification. While it is essential in our view to abandon the code, it might nevertheless be quite relevant to retain certain specific provisions.70 In enriching the provisions of existing codes (Code of Civil Procedure, Civil Code, essentially), the state of private international law in France would be improved, more modestly. Nothing of the kind, however, could possibly result from a holistic approach to codification, the merits of which are illusory. Not to mention the risk, inherent in any code, that it would “freeze” this discipline at the very moment when major contemporary challenges just round the corner - notably what we have come to know as the “ the ecological and digital transitions” – would require much more attention.71 Why on Earth spend energy on an interstitial local code when the problems of our world are planetary? As we know, legislative hell is paved with good intentions.

67 Despite the strong assertions of the promoters of the reform. - On the discussion, see in particular F. TERRÉ/ PH. SIMLER/ Y. LEQUETTE/ F. CHÉNEDÉ, Droit civil. Les obligations, Dalloz, coll. Précis, 13e éd., 2022, speculative n° 67 et seq. 68 See, however, the interview with Th. ANDRIEU, supra note 2, which presents the project in these terms. 69 “Some remarks on the draft codification of French private international law”, supra note 57, and spec. p. 520. 70 For example: on extra-judicial divorce (Draft, Art. 53), on certain rules of procedure (Draft, Art. 130 et seq.) or on enforcement (Draft, Art. 147 et seq.), on automatic recognition of foreign judgments (Draft, Art. 171-172). 71 Faced with new frontiers (digital, ecological, democratic), should not law - in all its positive forms - be inspired by other legal imaginaries, in terms of plurality, otherness, even multiversality? Our observations on this point were once again disqualified as “intriguing”. A great shame, when the attention of a large part of the world is focusing on the crossborder dimensions of these issues!

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RULES ON TRUST IN THE FRENCH DRAFT CODE OF PRIVATE INTERNATIONAL LAW Marie GORÉ*

I.

IV. V.

Introduction A. The Opportunity of a Code of Private International Law B. The Challenge of Codifying Trusts Scope of Application A. Creation of a New Category B. Concept of Trust C. Exclusion of the Fiducie D. Relationship with European Sources and International Conventions Determining the Applicable Law A. Method B. Choice of Applicable Law C. Applicable Law in the Absence of Choice D. Scope of the Law Applicable to Trusts Recognition of the Trust Concluding Remarks

I.

Introduction

II.

III.

The draft code of private international law (“Draft”) drawn up by an independent working group chaired by J.-P. Ancel1 at the request of the Minister of Justice has certainly not left the legal profession indifferent. The whole range of adjectives has been used, from more or less positive, to very critical. We do not won’t to pursue. The Draft is vast in scope, covering the general theory of private international law, conflicts of laws and conflicts of jurisdictions (Book I - General Rules) as well as the so-called special part (Book II - Special Rules), which proposes texts for the various branches of law. These include a Title IV devoted to property law, which, after Chapters I and II that are devoted, respectively, to rights in rem and Professor, University of Paris-Panthéon-Assas, Director of the Institute of Comparative Law. 1 The draft, in the original French language, may be read on the following website of the French Comity of Private International Law, http://www.cfdip.fr, as well as on the website of the French Ministry of Justice on the following web page: http://www.textes. justice.gouv.fr/art_pix/projet_code_droit_international_prive.pdf (all websites quoted in the present article have been last accessed on 7 June 2023). *

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Marie Goré intellectual property rights, contains a Chapter III devoted to trusts and foundations. The aim of the following discussion is to assess the appropriateness and relevance of the Draft, from the particular point of view of that institution still unknown in French law, the trust, to which we shall confine our discussion. A.

The Opportunity of a Code of Private International Law

Suffice it to say that the hallmark of continental legal culture, whose birthplace is Europe and in which French law holds a special place, is codification. The merits of codification are well known and the proliferation of codes throughout the world is a living illustration of this.2 The code meets a need for legal certainty to remedy chronic legislative inflation, disorder or even a confusion in the sources of the law. In particular, at a time when European influences are clearly evident and case law needs guidance, it may be timely and appropriate to consolidate common French private international law, which has been wisely developed through a close symbiosis of case law and legal doctrine. A code also serves a technical purpose, the aim of which is to rationalise the law in view of economic development, and possibly to export the French model to countries where private international law is still in its infancy, such as Africa and the Middle East. The project could thus contribute to the attractiveness of French law, an objective often presented as the key to reforming national law.3 This project is part of this process of clarification, consistency of texts and accessibility for professionals. This target justifies the proposals put forward by, and the classic structure of, the Draft, which for the most part reproduces the state of French positive law. Yet, in view of our topic, we could have thought of a more inventive proposal such as a more general rule common to trusts, fiduciaries and foundations. This was probably neither the time nor the place for such innovation. What is most important is that this draft, if enacted, is intended to be enriched by interpretations of case law and doctrine, in other words to become a bulk of living rules. B.

The Challenge of Codifying Trusts

The trust has the peculiarity of being an institution born of both trust and fraud: a dual origin that is also reflected in the approach taken to it in comparative law. In fact, the trust appears to be necessary for one part of the world, i.e. the Common Law countries, while having long been suspect, even hermetic, for the other, in reality only certain civil law countries. It is true that the trust cannot easily be exported to legal systems structured on principles other than Common Law principles. In fact, the trust is particularly dependent on the concept of property as defined in English law and on the original distinction between Common Law jurisdictions and Equity jurisdictions. These two elements could appear to be The latest Chinese Civil Code, effective as of 1st January 2021. 3 See the objectives of the last reform of the French law of obligations by ordinance n°2016-131 of February 10th 2016. 2

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Trust in the French Draft Code of Private International Law obstacles to the assimilation of the trust by civil law countries. Nevertheless, the trust has gradually made its appearance in civil law systems through certain international conventions. These include the Hague Convention of 14 March 1978 on the Law Applicable to Agency Contracts and Agency (Art. 3.b), which refers to the trust only to exclude it from its scope, and, above all, the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition. However, this Convention was not as successful as expected and although France signed it, it was never ratified. In the context of the European Union, rules of jurisdiction specific to trusts are contained in Regulation 44/2001 of 20 December 2001 (Brussels I, Art. 5.6), revised by Regulation 1215/2012 of 22 December 2012 (Brussels I recast, or Brussels I bis, Art. 7.6). With regard to conflicts of law, it is well known that the Rome 1 Regulation on the law applicable to contractual obligations excludes from its scope the creation of trusts and the relationships trusts create among settlors, trustees and beneficiaries (Art. 1, g)), as does Regulation (EU) No 650/2012 of 4 July 2012, which, while supporting the idea of anticipating the consequences of death, nevertheless excludes from its scope the creation, operation and dissolution of trusts (Art.1, §2, point j), the mechanism par excellence of anticipation of inheritance and more generally of what is known as Estate Planning. The proliferation of legislation in European private international law is therefore of no help to integrate the trust in France.4 This is not to say that civil law countries, France in particular, are not confronted with the Anglo-American institution – far from it. The relationship between the trust and civil law concepts poses complex problems, and the trust in itself raises all the most sophisticated questions of private international law, of the general theory of conflicts of laws and of conflicts of jurisdictions. This poses a problem of method: is an international convention necessary? Should we think in terms of applicable law or rather in terms of recognition of the situation created abroad, relegating conflict of laws to the background? The trust also poses problems of classification as judges are faced with an institution unknown to the court seized. Problems of connection exist as well: can the designated law be that of a country that does not recognize the institution? Trusts similarly pose problems of the effect of foreign judgments: many trustees are appointed or confirmed in court and it is important to know what effect to give to the foreign decision designating them. Finally, remedies for the misapplication of the conflict rule – fraud, international public policy, adaptation – are also likely to come into play. In addition, there is the tax dimension, which is often essential when a trust is used. In French law, in the absence of any international convention, it has been left to French case law and doctrine5 to resolve the difficulties posed by trusts on a The convention has been in effect since 1st January 1992, in Cyprus, Italy, Liechtenstein, Monaco, Panama, Netherlands, Malta, Australia, Canada, Great Britain, Hong Kong, Luxembourg, San Marino and Switzerland.  5 As a non-exhaustive list, we can mention: S. GODECHOT, L’articulation du trust et du droit des successions, préf. Y. LEQUETTE éd.Panthéon-Assas, 2004; P. TOUR-SARKISSIAN & H. PEISSE, Trusts américains et pratique notariale française, préf. M. GRIMALDI Défrénois, 2013; L. MAERTEN, Le trust patrimonial anglo-américain en droit privé français, 1990; J-P. BERAUDO & F. TRIPET, Les trusts anglo-saxons et les pays de droit civil, Academy &Finance, 2006. E. BENDELAC, Le transfert de bien au décès autrement que par 4

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Marie Goré case-by-case basis. The abundance of regular scholarly works on the subject and the recurrence of French decisions demonstrates, if needed, how important the subject is in French law. Not only is the trust unknown to our legal system, but it takes a wide variety of forms - judicial trusts, voluntary trusts, revocable or irrevocable trusts, discretionary or non-discretionary trusts – and, above all, its function is versatile: management, security, transmission, protection of vulnerable persons, sanction for unjust enrichment, protection against future insolvency, etc.... We are all aware of the hesitations of French case law in qualifying the trust without distorting it, in accepting the effectiveness of the powers of the trustee in France, or in articulating the trust and the French substantive provisions specific to certain matters directly affected by the trust. These uncertainties are a source of insecurity for professionals, lawyers and notaries, as well as for the judges themselves, who, even if they have become familiar with the mechanism over time, can only be reassured by the existence of clearer solutions that facilitate their decision-making. Of course, one should not imagine that codification would wipe out all practical difficulties, but at least the existence of guidelines would make it possible to harmonise decisions to a certain extent. In this context, it is to be welcomed that the authors of the Draft have taken the trouble to define rules on trusts and to 'fill the gap'6 in terms of both applicable law and jurisdiction.

II.

Scope of Application

A.

Creation of a New Category

We know that in private international law the specificity of the operation of characterisation consists of classifying the question of law in the categories of the forum, which are not purely international categories, but rather, as far as we are concerned, those of French law, possibly extended to consider elements of comparative law. Moreover, the characterisation of the question of law is made lege fori, which is in fact specified in the Draft in Article 6.7 In the case of trusts, as we know, the task of characterisation presents a specific difficulty, since this is an institution unknown to French law, and we also know that French case law has proceeded in two stages. In the first stage, it felt it was sufficient to transpose the succession en droit international privé, préf. M. GORÉ Bruylant, 2016. F. BARRIÈRE, La réception du trust au travers de la fiducie, préf. M. GRIMALDI, Litec, Bibliothèque de droit de l’entreprise, 2004; D. LE GRAND DE BELLEROCHE, La reconnaissance des trusts étrangers en droit français: étude comparative du concept anglais de trust et du contentieux des trusts en France, Paris 1, 2003. 6 L.DIMITROV, Projet de code de droit international privé français: une approche pratique et comparative, D.2023 n°19, Chr.p.968, n°22. 7 “The characterisations necessary to implement the conflict rule are made according to the views of French law. Where the legal relationship in question incorporates an institution of foreign law unknown to French law, the foreign law is taken into consideration”.

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Trust in the French Draft Code of Private International Law trust into a French institution deemed to be equivalent, with the serious disadvantages of this alleged equivalence between mechanisms that are very far apart. In the second stage, much more wisely, the courts and tribunals wished to respect the originality of the mechanism and not to assimilate the trust to known civil law techniques. French law has thus moved away from an approximate assimilation of the trust to a French category and has characterised the trust based on its function. As has been shown, “under cover of this solution, the French courts, rather than incorporating the trust into a category of the forum, add it to the existing categories, the trust constituting in itself its own category which is linked to the law of autonomy”.8 More or less stabilised in French law, the question of classification was settled by the Hague Convention by the pure and simple creation of a new connecting category, considered by the supporters of the Convention to be one of its essential contributions. This addition had – at the time9 – left some observers sceptical: it is not certain that all the consequences resulting from the break with Bartin’s ideas that the categories of private international law should reflect domestic law were fully appreciated. The creation of a category that is not recognised by domestic law undermines the cohesion of the forum and the mediating function of the conflict rule could not be exercised. It was therefore proposed that the synthetic nature of the categories of private international law should be respected in order to grasp the idea of patrimony and avoid the specialisation of the conflict rule. This is not the path taken by French case law and we must now reckon with the multiplication of conflict rules and the abandonment of synthetic categories.10 The Draft is therefore in line with French case law and echoes the new category of connecting factor created by the Convention. B.

Concept of Trust

Under Article 108 of the Draft, “[a] trust exists where a person, the trustee, holds property in the interest of one or more beneficiaries or for a specific purpose. Such property constitutes a separate estate and does not form part of the trustee's patrimony”.11 As the institution is unknown in French law, in the sense that there is no category of “trust” in domestic law, its contours necessarily had to be defined. Specifically, the Draft stresses the main characteristics of trusts: allocation of a mass of assets for the benefit of one or more beneficiaries, or for a specific 8 Y. LEQUETTE, Les mutations du droit international privé: vers un changement de paradigme, Collected Courses Vol. 387 n°88. 9 M. GORÉ, L’administration des successions en droit international privé français, Economica 1994.  10 Y. LEQUETTE, Les mutations du droit international privé: vers un changement de paradigme, Collected Courses Vol. 387 n°44 p.75. 11 Freely translated by the author from the French original version [“Article 108 Il y a trust lorsqu’une personne, le trustee, détient des biens dans l’intérêt d’un ou de plusieurs bénéficiaires ou dans un but déterminé. Ces biens constituent une masse distincte et ne font pas partie du patrimoine du trustee. “].

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Marie Goré purpose, autonomy of the trust assets from the trustee's assets. It is regrettable, however, that the triangular relationship between settlor, trustee and beneficiary is not clear, and that the trustee's powers are specified only in the laconic word “hold”. To be honest, the definition given in Article 2 of the Hague Convention seems more relevant. It states that a trust “refers to the legal relationships created by a person, the settlor – by inter vivos deed or mortis causa - where property has been placed under the control of a trustee in the interest of a beneficiary or for a specific purpose”. Paragraph 2 of the same text sets out the main characteristics of trusts, in particular “(c) the trustee is vested with the power and charged with the duty, for which he is accountable, to administer, manage or dispose of the property in accordance with the terms of the trust and the special rules imposed on the trustee by law”. This clarification would have been entirely consistent with the rest of the Draft, which makes the trustee - quite rightly - the hub of the trust, in particular with regard to the applicable law, the connecting factor in the absence of a choice by the parties being the domicile of the trustee. In fact, the originality of the trust lies in the special legal relationship that the trustee has with the assets placed in trust: having legal title to the assets, he must administer them in the interests of the beneficiaries who have equitable title. As the report points out, “a deliberately comprehensive definition of the institution has been proposed in which the emphasis is placed on the effects of the trust rather than on its nature”.12 The general formulation of the institution adopted leads quite naturally to Article 113 of the Draft which states that the rules laid down in Aarticles 109 to 112 apply to voluntary trusts - inter vivos or mortis causae - or to judicial trusts. This may explain why the Draft has departed from the definition given by the Hague Convention, which was limited to voluntary trusts, except for the declaration provided for in Article 20. Moreover, although this is not specified in the text, the Draft does intend to extend the rules “to similar institutions known in other legal systems”.13 C.

Exclusion of the Fiducie

It should be noted that there is no conflict of law rule specific to the fiducie: the institution exists in French law,14 as in some other countries, and there is nothing to prevent a French fiducie from being implemented in an international context, such that the formulation of a conflict of law rule could have confirmed the validity of a fiducie created in France when it contains a foreign element and, conversely, accepted the effects in France of a fiducie validly created abroad. It would there12

Freely translated by the author from the Report of the working group, p.47.

Ibidem. The fiducie is regulated in the French Civil Code in Articles 2011 to 2031. According to the first of these articles, it is “a transaction whereby one or more settlors [constituants] transfer property, rights or security, or a pool of present or future property, rights or security, to one or more fiduciaires who, keeping them separate from their personal assets, act for a specified purpose in favour of one or more beneficiaries" (Art. 2011) (freely translated by the editor). See https://www.legifrance.gouv.fr/codes/id/LEGISCTA00000611 8476/2020-10-04/. 13 14

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Trust in the French Draft Code of Private International Law fore be possible to add – as was initially proposed – a conflict rule specific to fiducie by reference to the articles relating to trusts, as the difficulties are similar. It seems that this silence is linked to the latest developments of the Court of Justice of the European Union.15 It is well known that, faced with a fiducie contract (Treuhandvertrag) relating to shares acquired by Austrian investors in a limited partnership governed by German law, the Court considered that the dispute, which was specifically linked to a clause contained in the contract binding the settlor and the fiduciary, fell within the scope of the Rome Convention of 19 June 1980 on the law applicable to contractual obligations (Art.1). As the question was not raised directly, the Court did not consider the scope of the exclusion of internal trust relationships mentioned above, which might have been expected to apply to similar institutions such as the Treuhand or the fiducie. It is regrettable that the exclusion was interpreted restrictively, given that the institutions are so similar in their structures and objectives. Moreover, faced with proposals to extend the fiducie to the gratuitous transfer,16 the development of a conflict of laws rule could provide reassurance as to the relationship of this fiducie with the mandatory provisions of the applicable law of succession. D.

Relationship with European Sources and International Conventions

As the report emphasizes, a methodological choice was made here. The authors of the Draft have opted to combine “a general principle (Article 1) and reminders, where necessary, in the special part by means of what may be called coordinating or cross-referencing articles”.17 This method, in the more specific area that concerns us here, is simple and clear. Firstly, Paragraph 3 of Article 1 states: “The provisions of this Code shall apply outside the scope of European Union law and international conventions, unless reference is made to their provisions”. With regard to trusts, it has already been pointed out that French law has not ratified the Hague Convention of 1 July 1985, and that trusts are excluded from the scope of the Rome 1 Regulation on the law applicable to contractual obligations. Hence the usefulness of the rules for determining the applicable law and the recognition of trusts proposed by the Draft. Secondly, with regard to the rules of international jurisdiction, the Draft recalls in Article 107 that the jurisdiction of French courts is determined by Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I recast or Brussels I bis). This reference to European texts has the advantage of avoiding any overlapping of texts. This reference concerns both the special jurisdiction rule in Article 7 and the voluntary prorogation of jurisdiction provided for

ECJ 3 october 2019, VKI c.TVP,Aff. 272/18, Rev. crit. dr. int. pr. 2022/2, p.349359, D. BUREAU, D.2020.378, note J. CHACORNAC. 16 Fiducie, trust et gestion de patrimoine, in Ingénierie patrimoniale, 2022/4, pp.81138. 17 Freely translated by the author from the Report of the working group, p.12. 15

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Marie Goré in Article 25(3) and (4), and we are aware of the almost systematic nature of jurisdiction clauses in trust deeds. Finally, provision is made in the alternative for the jurisdiction of the French courts, depending on the nationality of one or the other of the parties, where the European Regulation refers to national rules of jurisdiction, in accordance with Article 17 of the Draft.

III. Determining the Applicable Law The determination of the applicable law results very clearly from Article 109 of the Draft, which provides: “The trust is subject to the law designated in the instrument of constitution. The choice of law must be express or must be clear from the terms of the instrument. The designated law may apply to all or only part of the trust. In the absence of a choice of law, the trust shall be subject to the domestic law of the State of domicile of the trustee at the time of its creation, unless the trust is manifestly more closely connected with another law”.18 This rule needs a short explanation according to the method (A) used by the drafters, before analysing the choice of law (B) and the law applicable in the absence of choice (C). A.

Method

From a methodological point of view, the French project joins the cohort of other legal systems that have preceded it, The choice of the conflict of laws method is also justified because the method of recognition of situations seemed inappropriate. First, it does not seem that the recognition method can be recommended on the basis of the Hague Convention.19 Some readers may have thought that the Hague Convention refers to this method based on the provision in Article 11 that a 18 The original version reads: “Le trust est soumis à la loi désignée dans l’acte constitutif. Le choix de loi doit être exprès ou résulter de façon certaine des termes de cet acte. La loi désignée peut s’appliquer à la totalité ou à une partie seulement du trust. À défaut de choix de loi, le trust est soumis à la loi interne de l’État du domicile du trustee au moment de sa constitution, à moins que le trust n’entretienne des liens manifestement plus étroits avec une autre loi.” 19 S. GODECHOT-PATRIS, General report on the trust in the draft code. 

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Trust in the French Draft Code of Private International Law trust created in accordance with the law designated by Articles 6 or 7 “shall be recognized as a trust”; others, that this is not, strictly speaking, the method of recognition of situations, since it is merely a question of admitting that the signatory States recognise the operation of the trust in accordance with the provisions of the law applicable to the trust. In fact, the question of whether the method of recognition is relevant in trust matters directly concerns the concept of a trust. In most cases, it is the result of a purely private law act: a unilateral act between the settlor and the trustee, which defines the purpose of the trust, the functions of the trust, the beneficiaries and the assets placed in trust. There is no public authority involved and therefore, strictly speaking, the trust does not evolve in the field of public administration of private law, which is at the heart of the method of recognition. Moreover, if the assets placed in trust constitute a whole – an autonomous patrimony – distinct from that of the trustee, any analogy with a legal person must be rejected. Similarly, although it has been said that several elements allow for an analogy between a trust and a contract, such an analysis breaks down at some point. Just because a trust pursues certain functions according to the will of the settlor does not mean that it should be assimilated to the institution whose purpose is closest to such function. Secondly, it is unclear whether, as things stand at present, the method of recognition is really effective in French law; it would appear that it increasingly seen as inappropriate. One author has expressed himself as follows: “[i]t is really capable of attaining its primary objective of co-ordination of the law only if it is provided by an international or European instrument in order to impose that the situation so created is recognized in all other states and to define the precise effects that this recognition must be produced”.20 B.

Choice of Applicable Law

The choice of party autonomy as the connecting factor supports the solutions developed in French case law, which are widely shared by legal [scholars/ commentators] and are in line with professional practice in this area. It is also in line with the choice made by the Hague Convention of 1 July 1985; we can only endorse it. From this point of view, the Draft remains relatively sober, in the sense that it does not include all the details of Article 3 of the Rome 1 Regulation, nor does it draw on the flexibility provided by the Principles on the Choice of Law in International Commercial Contracts approved on 19 March 2015. There was no need to do so, given that, for trusts, we cannot reason by purely and simply transposing contract law solutions, even if they can be read in a more contractual way, particularly in financial matters or in international trade.21 In fact, the Draft Code is silent on the possibility of a choice being made as a result of the circumstances of M-L. NIBOYET & G. DE GEOUFFRE LGDJ, 7è. Ed. 2020, n°310 p.226. 20

DE LA

PRADELLE, Droit international privé,

21 B. OPPETIT, le trust dans le droit du commerce international, Rev. crit. dr. int. pr. 1973, p.1 et s ; J.H. LANGBEIN, The contractarian basis of the Law of Trusts, Yale Law Journal, Vol.105, n°3, Dec. 1995, pp.625-675.

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Marie Goré the case, and on the timing of the choice, which favors legal certainty and the durability of the trust over time. It should be borne in mind that it will be the law of the trust chosen by the settlor and the trustee that applies in deciding these questions, as well as the consequences of the voluntary change of law (Art. 110), which obviously cannot be prejudicial to the beneficiaries or undermine the validity of the trust. The splitting of the applicable law is admitted, the formula being the same limited one as in Article 3 §1, as opposed to what is provided for in Article 2 §2 of the Hague Convention. C.

Applicable Law in the Absence of Choice

As regards the connecting factor in the absence of choice – an uncommon hypothesis – the Draft departs from the Hague Convention. That Convention provided that, in the absence of a choice, the trust would be governed by the law with which it was most closely connected, and specified the factors that could be taken into account to determine this closest connection: administration of the trust, location of the assets, residence or establishment of the trustee, objectives of the trust and the places where they are to be achieved. In practice, the choice of the convention was subject to a great deal of hesitation. The Draft favours legal certainty by retaining the trustee's domicile as the connecting factor, renvoi being excluded. In itself, this choice is understandable: “the trustee is the linchpin of the trust”, but the trustee's habitual residence or domicile may be merely a matter of convenience - for tax reasons, for example. One could add that, except for professional corporate trustees, the trustees are chosen for their personal links with the settlor, irrespective of their place of residence or place of business. More often, the trust deed will say where the administration of the trust takes place and therefore, it would be more convenient to take that factor into consideration.22 This choice has the merit of being in line with the choice made at the European level with regard to jurisdiction. The special jurisdiction rule for trusts in Article 7(6) of the Brussels I bis Regulation provides that a person domiciled in a Member State may be sued in another Member State “if the action is brought against a settlor, trustee or beneficiary of a trust constituted either by operation of law or in writing or by an oral agreement confirmed in writing, in the courts of the Member State in which the trustee is domiciled”. The coordination of legislative and jurisdictional competence will therefore presuppose the same interpretation of the trustee's domicile. Article 63(3) of the Brussels I bis Regulation specifically provides that the court seised will determine the domicile of the trust by applying its rules of private international law. Moreover, Article 3 of the Draft defines it as the place chosen for the principal and permanent centre of its interests. A connection with the administration of the trust, the heart of the operations revolving around the trust, would appear to be a preferable location in space and would correspond more closely to the originality of the triangular relationship The question of the applicable law is perceived differently in different common law countries, as some link the law applicable to validity and to administration while others, such as USA, seem to admit more splitting between the law governing the validity and that governing administration. 22

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Trust in the French Draft Code of Private International Law established by the trust. However, it is likely that the place of administration of the trust most often coincides with the domicile of the trustee, therefore, for the sake of legal certainty here too, we regret the introduction of the exception clause in Article 109 Paragraph 4, in fine, which introduces an escape clause: the national law of the state of the domicile of the trustee at the time of its creation is disregarded if the trust is manifestly more closely connected with another law. It is justified in the introductory report, as follows: “[t]his would reintroduce a little flexibility into the conflict of law rule and take into account the complexity of the institution”. What is explicable in the case of a contract cannot be extended to a mechanism such as a trust, which is not contractual in origin, and whose effects must be foreseeable in the long term, since trusts are built for the long term. D.

Scope of the Law Applicable to Trusts

Article 110 of the Draft provides a synthetic and extensive definition of the scope of the law applicable to trusts. Moreover, it should be remembered that it concerns both voluntary and judicial trusts, since they are both encompassed in the definition in the Draft. The creation, administration, interpretation, modification and dissolution of the trust - in other words all the internal relationships of the trust - are governed by the law designated or chosen. In fact, this is the position taken by French case law, which has relied on the law applicable to the trust as a basis for broadly accepting the powers of the trustee, including over property situated in France. The importance of the applicable law should not be overestimated. The trust deed will certainly refer to the appropriate text of the chosen law to define the rights and obligations of the trustee and the role of the settlor, if any.23 This reference however is often supplemented by a very detailed – even tedious – list of the very specific powers available to the trustee: it is very common for the trust instrument to be very precise about the trustee's rights and obligations, especially as the legislative provisions, where they exist, usually allow a trust to be a perfect reflection of the will of the settlor. The trust deed therefore almost systematically sets out the trustee's rights: the power to dispose of trust assets, to delegate, to invest trust assets, to borrow in the name of the trust, to designate or exclude a beneficiary, to create a trust in the interests of the beneficiaries, to act in a discretionary manner, etc. It goes on to list the trustee’s duties: loyalty, respect for a balance among the various beneficiaries, absence of conflicts of interest, departure from the prudent man rule and respect the prudent investor rule, the appropriate standard of care, the portfolio strategy, the risk and return objectives. The entire trust regime is contained in the instrument itself to a much greater extent than in contracts; and the question of the applicable law, however important it may be, is, in our view, secondary in the implementation of the trust.

23

For example, Trustee Act 2000 UK.

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IV. Recognition of the Trust This is the essential question. In fact, although the difficulties at the qualification stage have been resolved by the creation of a new category, the concrete questions have been postponed to the final stage of the conflictual process, that is to say, to the moment of the coordination of the trust with the different laws likely to be affected by the operation of the trust. Three observations should be made here. First, Article 111 of the Draft provides that “a trust constituted in accordance with the law designated in Article 109 shall be recognized as such”, i.e. as a trust. The wording is that of Article 11 of the Hague Convention, and is consistent with French case law, which has come to recognize the originality of the trust, sui generis, without attempting to translate the institution. The trustee’s prerogatives are recognized without translation to known civil law techniques, and the trustee is entitled to act as such without the need for approximate assimilation.24 Secondly, there then arises “a problem of adjusting the law governing trusts to the laws governing neighbouring categories, in particular droits réels or succession”.25 In many situations, the recognition of the trust will need to be combined with the application of the law of the location of the assets, the law of succession26 or the law applicable to insolvency in case of bankruptcy proceedings. With regard to the very specific question of public notice of ownership recorded in the French land registry y, the Draft formulates a common-sense rule that some practitioners had already anticipated and which takes into account the particular nature of the trustee's rights. Thus, a trustee who wishes to have movable or immovable property or a title relating thereto entered in a registry will be entitled to apply for registration in his capacity as trustee.27 Furthermore, by creating a new category of trust in the French system, the Draft could not ignore the inevitable overlap with the other categories of the forum and needed to make an exception for the mandatory provisions of a law which would be designated by the French conflict rule, which might be a foreign law or a French law. This is precisely the purpose of Article 111 Paragraph 3: “[r]recognition of a trust shall not prevent mandatory provisions of a law designated pursuant to another conflict of law rule from limiting its effectiveness”. In so doing, the Draft maintains the French solutions, which means that the trust must respect the mandatory provisions of the applicable succession law, such as the reserved portion of an estate.28 24 [For example][E.g.] Cass.civ.1 3 November 1983, Clunet 1985, 115, note B. ANCEL; as for the power of the bank trustee to declare a claim in a bankruptcy proceeding in France, Cass.com.13 September 2011, n°10-25533, Rev. crit. dr. int. pr.2011,870, J.P.REMERY. 25 Y. LEQUETTE, Les mutations du droit international privé: vers un changement de paradigme, Collected Courses Vol. 387, n°88. 26 Cass.civ. 1. 7 december 2005, Rev. crit. dr. int. pr.2006,583 S. GODECHOT-PATRIS. 27 The registration procedures are specified by decree.  28 It should be so despite Cass.1er civ. 27 September 2017, n°16-13151 et n°1617198 which does not consider forced heirship to be part of international public policy.

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Trust in the French Draft Code of Private International Law Lastly, there is a limit to recognition “where all the elements of the situation, with the exception of the law chosen or the domicile of the trustee, are located in the same State whose law is unaware of this institution”. In this case, the trust cannot produce any effect in France. This requirement, linked to the need for the trust to have been created in a strictly international context, makes it possible to thwart possible fraud.29

V.

Concluding Remarks

There is nothing revolutionary about the Draft code of French private international law on trusts. It will reinforce the solutions patiently arrived at through dialogue between judges and academics, a hallmark of French private international law. In other words, it will reassure legal professionals by giving them the possibility of analysing trusts over time, but it will not remove any difficulties of adaptation. It remains for the judicial authorities of the forum to make these rules their own. It is well known that in Anglo-American law the court is an organ of control and advice for the trust: close collaboration between the judicial authority and the trustee gives the implementation of the trust its permanence and flexibility. The Brussels I bis Regulation gives the French court’s jurisdiction over disputes relating to trusts, and the role of the French judge in non-contentious matters should prove useful in dealing with trusts, through the interpretation of the instrument of incorporation and the purposes pursued by the settlor. Could the Draft have gone further? It does not take up the adaptation proposed by Paragraph 2 of Article 15 of the 1985 Hague Convention, which states: “Where the provisions of the preceding paragraph are an obstacle to the recognition of the trust, the court shall endeavour to give effect to the purposes of the trust by other legal means”. The idea was to have, in the context of the Convention, a flexible interpretation of the mandatory provisions to avoid non-recognition of the trust, or even its invalidity. The fact remains that this provision is easily understandable in the context of a convention designed to promote the integration of trusts in a civil law country; but the same objective need not be given priority in the context of a French conflict of law rule, where care must be taken to ensure that the trust is understood in a measured way, otherwise there is a risk of undermining the coherence of the forum.

29

The UK Recognition Of Trusts Act 1987 takes the same position.

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RECOGNITION OF STATUS FILIATIONIS WITHIN THE EU AND BEYOND ________________

THE PROPOSAL FOR A EUROPEAN REGULATION ON FILIATION MATTERS – OVERVIEW AND ANALYSIS Cristina GONZÁLEZ BEILFUSS*/ Ilaria PRETELLI**

I. II.

III.

IV.

V.

Introduction Context of the Proposal A. Terminology B. Legal Basis C. Methodology D. Initial Reactions from Member States Purpose A. The Objective of Strengthening “the Protection of Fundamental Rights and Other Rights of Children” B. Existing Violations to Children’s Rights C. The Right of Children to Know their Origins Scope D. Material Scope of Application E. Scope in Space F. Scope of Application over Time Competence A. General Competence B. Subsidiary Jurisdiction, Subsidiary Rules and forum necessitatis C. Incidental Questions

* Professor at the University of Barcelona. Member of the Expert Group “Recognition of Parenthood between Member States” (E03765). Mainly responsible for paras. IV to VIII and co-author of para. X. ** Senior Research Fellow at the Swiss Institute of Comparative Law. Member of the Expert Group “Recognition of Parenthood between Member States” (E03765). Mainly responsible for paras. I to III and IX, co-author of para. X. Some parts of the present article are freely translated from C. GONZÁLEZ BEILFUSS, “La Proposition de Règlement européen en matière de filiation : analyse liminaire”, in Revue trimestrielle de droit européen, 2023, forthcoming.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 275-307 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Cristina González Beilfuss/ Ilaria Pretelli

X.

D. The Right of Children to Express their Views Applicable Law A. General Rule B. The Rules on Change of Applicable Law and Public Policy Recognition of Decisions and Authentic Instruments Non-binding Authentic Instruments The European Certificate of Parenthood A. Procedural Aspects B. Establishment of Filiation by Means of a Presumption, Evidence or with Binding Legal Effect C. Effects of the Certificate D. Mutual Trust as a Goal, not a Given Final Remarks

I.

Introduction

VI.

VII. VIII. IX.

The Proposal for a Council Regulation on Jurisdiction, Applicable Law, Recognition of Decisions and Acceptance of Authentic Instruments in Relation to Parenthood and the Creation of a European Certificate of Parenthood1 published in December 2022 came about as a result of the intervention by Commission President Ursula von der Leyen in her 2020 State of the Union speech. In this speech, the initiative was explicitly linked to the EU strategy for LGBTQI equality.2 The reason for the European initiative, as detailed in the Explanatory Memorandum accompanying the Proposal, is that European citizens, and in particular rainbow families, encounter difficulties in exercising their freedom of movement. The Proposal for a Regulation thus aims to guarantee the recognition of parentchild relations not only for the strict purpose of exercising free movement – already guaranteed by the case law of the CJEU3 – but also for any other purpose. 1 COM (2022) 695 final. See https://eur-lex.europa.eu/legal-content/EN/TXT/ HTML/?uri=CELEX:52022PC0695 all websites quoted in the present article were last accessed on 13 June 2023 unless otherwise stated. 2 Here are her exact words: “Ladies and gentlemen, we will spare no effort to build a Union of equality. A Union in which you can be who you are and love who you want without fear of recrimination or discrimination. Because being yourself is not about ideology. It is your identity. And no one can ever take that away from you. That’s why I want to be clear – ‘LGBTQI-free zones’ are humanity-free zones. And they have no place in our Union. To ensure that we support the whole community, the Commission will soon propose a strategy to strengthen LGBTQI rights. As part of this, I will also advocate for the mutual recognition of family relationships in the EU. If you are a parent in one country, you are a parent in all countries”. 3 Judgment of the Court (Grand Chamber) of 14 December 2021, V.М.А. v. Stolichna obshtina, “Pancharevo” department, Case C-490/20, ECLI:EU:C:2021:1008; Order of the Court (Tenth Chamber) of 24 June 2022, Rzecznik Praw Obywatelskich, Case C-2/21, ECLI:EU:C:2022:502.

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Proposal for a European Regulation on Filiation Matters Save in very exceptional circumstances, the lack of continuity in space of the parent-child relationship is detrimental to the rights of children, since it may lead to a denial of rights deriving from the status of filiation in areas such as succession, maintenance, and parental responsibility. The solution adopted is apparently very simple, “If you are a parent in one country, you are a parent in all countries.”

II.

Context of the Proposal

After the mention in the Commission President’s speech on 20 September 2020, the issue was included in the Strategy for Equality of LGBTQI Persons 2020-20254 adopted on 12 November of the same year, and in the EU Strategy on the Rights of the Child adopted on 24 March 2021.5 A.

Terminology

Despite the explicit reference to the rights of children,6 the original focus on the rights of parents over children has significantly influenced the overall perspective adopted by the Proposal. The use of the term “parenthood” in the English version of the document – certainly the most influential version, given the role of English in communication among speakers of different native languages – was deliberate7 and testifies to a somewhat excessive focus on the rights of adults over a child. It may even evoke a retrograde proprietary concept of children, which has existed in the past and is evidenced by the regulation of filiation in several, mostly ancient, legal texts.8 In line with a more progressive approach,9 it is instead recommenda4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Equality Union: A strategy for equal treatment of LGBTIQ persons for the period 2020-2025, COM/2020/698 final. 5 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. EU Strategy on the Rights of the Child, COM/2021/142 final. 6 See Explanatory Memorandum to the Proposal, p. 2 and infra sub para III. 7 On the preliminary discussion of the terms “parenthood”, “parentage” and “filiation” see A. TRYFONIDOU, “Cross-Border Legal Recognition of Parenthood in the EU”, Study PE 746.632- April 2023, p. 12, available at https://www.europarl.europa.eu/ RegData/etudes/STUD/2023/746632/IPOL_STU(2023)746632_EN.pdf. 8 I. PRETELLI, “Il diritto di conoscere le proprie origini con particolare riferimento a figlie e figli di ascendenza multipla o complessa” (The Right of Children of Multiple Ancestry to Know Their Origins) in F. PESCE (ed), La surrogazione di maternità nel prisma del diritto. Problemi aperti e sfide future, 2022, pp. 171 et seq. 9 The Registry of the European Court of Human Rights deliberately uses the term “filiation” in its collection of the key themes in the implementation of Art. 8 of the European Convention on Human Rights. See https://ks.echr.coe.int/documents/d/echrks/filiation. The same term is used in Section 542 of the New York Family Court Act

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Cristina González Beilfuss/ Ilaria Pretelli ble, today, to use the term “filiation”, as it immediately brings to the fore the child’s perspective. It also avoids the risk of the right of the child to a family being understood as the right of an adult to become a parent. Since Recital 24 considers the terms “filiation”, “parenthood” and “parentchild relationship established in law” as equivalent, and thus mutually interchangeable, the way for change is already paved.10 There is growing awareness of the need to adopt, also by means of an accurate choice of terminology, a child’s perspective and it is hoped that this may eventually lead to an evolution in the language used in the English version of the proposed Regulation. Such a change would not be merely formal or cosmetic, so to speak, as it would contribute to removing all potential doubts as to the actual legal needs that the EU is seeking to address through its legislative initiative. 11 The change seems additionally justified by several linguistic innovations visible in the Proposal and, in certain cases, deriving from the evolution of legal terms brought by recent decisions of the Court of Justice of the European Union. Reference is to the new meaning of concepts as “decision on divorce”, “presumption of status”, “authentic acts with binding legal effects”, and “authentic acts with no binding legal effects”.12 B.

Legal Basis

The proposed Regulation was prepared in record time by the European Commission. As usual, the Commission consulted with stakeholders.13 It set up an expert group,14 conducted an impact assessment15 and carried out a public consultation.16 regulating “Orders of Filiation” and not, as in the UK, the more retrograde title “Parental Orders”. 10 Recital (24) states: “For the purposes of this Regulation, parenthood, also referred to as filiation, may be biologic, genetic, by adoption or by operation of law. Also for the purposes of this Regulation, parenthood should mean the parent-child relationship established in law, and should cover the legal status of being the child of a particular parent or parents.” See A. TRYFONIDOU, (note 7), p. 12, also referring to the suggestion made by I. PRETELLI, “Filiation between Law, Language, and Society” (May 2022), pp. 5-6, available at https://ssrn.com/abstract=4101805. 11 L. BORODITSKY, “How Language Shapes Thought”, Scientific American 304, no 2 (2011): 62–65. On the interrelation between law and language and on the importance of the latter for cross-border scientific communication I. PRETELLI, “Language as a Bridge Between Legal Cultures and Universal Justice”, General Reports of the XIXth Congress of the International Academy of Comparative Law, in M. SCHAUER/ B. VERSCHRAEGEN (eds), Springer, 2017, pp. 607-610. 12 See infra, paras. VII, VIII and IX. 13 See Explanatory Memorandum to the Proposal, p.8. 14 The authors were members of the Expert Group. For the composition of the group, see https://ec.europa.eu/transparency/expert-groups-register/screen/expertgroups/consult? lang=fr&groupID=3765. 15 Initial Impact Assessment - Ares (2021)2519673. On the different policy options considered see L. VÁLKOVÁ, The Commission Proposal for a regulation on the recognition

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Proposal for a European Regulation on Filiation Matters From the beginning however the overall direction was already determined and as simple as the one advocated in the Green Paper on civil status:17 to favour the continuity and permanence of a civil status situation, in this case filiation, without excessive questioning of its origin and legitimacy. The legal basis chosen is Article 81(3) TFEU, as the instrument envisaged is undoubtedly a “measures concerning family law with cross-border implications”: the purpose of the Regulation is to facilitate the recognition of filiation in all areas, beyond the right of free movement. This has several consequences. First, the proposed legal measure will not be binding on, and will not apply to, Denmark. Second, Ireland will not be bound either, unless it exercises its opt-in right by notifying its wish to participate. Third, the codecision procedure does not apply and the Parliament is merely consulted. Above all, the most decisive consequence is that it is necessary to obtain unanimity in the Council, which is unlikely to be achieved. C.

Methodology

The text purports to be neutral and to cover all filiations regardless of the origin of the parent-child relationship and regardless of the legal characterisation of the child's family (single, married or in a registered partnership, whether same-sex or not). On the other hand, like most EU legislation – and in particular their subsequent recasts – it appears to have been influenced by specific CJEU cases involving lesbian couples with children,18 taking into account decisions of the ECtHR on birth certificates or parental orders drawn up as a consequence of surrogacy agreements.19 To date, the barriers to freedom of movement arising from contested filiations that have been experienced have been caused by two typical public policy exceptions. One is characteristic of Member States where it is not possible for a same-sex couple to become parents of a child ope legis or by virtue of an order of filiation (thus either outside the adoption system, or not at all). The other is common in those (other) Member States where the sale or the donation of a woman’s eggs or the altruistic, gestational, or commercial surrogacy is prohibited. As opposed to biological or adopted children, the children whose birth was organised by of parenthood and other legislative trends affecting legal parenthood, Riv. dir. int. priv. e proc., 2022, pp. 884-885. 16 Contributions were open from 14 April 2021 to 12 May 2021. See https://ec.europa.eu/info/law/better- regulation/have-your-say/initiatives/12878-Situationsfamiliales-transfrontieres-reconnaissance-de-la- parentalite_fr. 17 Green Paper ‘Less bureaucracy for citizens: Promoting the free movement of public documents and the recognition of the effects of civil status records’, COM/2010/0747 final. 18 Supra note 3. 19 See the cases listed in the factsheet “Gestational surrogacy” of December 2022, available at https://www.echr.coe.int/Documents/FS_Surrogacy_ENG.pdf (last accessed 15 June 2023).

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Cristina González Beilfuss/ Ilaria Pretelli contractual arrangement – i.e., a contract between intentional parents, a fertility clinic or donors or the woman who has agreed to bear them – have experienced significantly greater obstacles in affirming their status filiationis outside the State where the arrangement was lawfully implemented. A EU Regulation would contribute significantly to preventing the limping status of children trapped in these conflicts of laws, by neutralising the aforementioned public policy exceptions. To ensure this result, the Proposal seeks to codify, mutatis mutandis, the CJEU’s jurisprudence on “European public policy”,20 built up to guarantee that EU rules regarded as essentials are not circumvented by means of national public policy exceptions. In this respect, the Proposal enacts rules considered essential within the EU – the rules on recognition of status filiationis established in a Member State – and, at the same time, prescribes that national public policy may not be relied upon if it ultimately aims at protecting national rules prohibiting same-sex parenthood. It also chooses to regulate all filiations, except intercountry adoptions,21 with the same rules. A different approach has been taken in France. There, the drafters of the French Project of a Private International Law Code have considered the specific needs of protection of children whose filiation has been preceded by contractual agreements – either between private parties or with the involvement of a fertility clinic. Four rules have been especially designed for as many kinds of filiation: biological; realised by means of an IVF with gamete donation; by means of a surrogacy contract (prohibited in France); or adoption.22 The French drafters recognise that children “of intention” might have specific needs that require specific rules to be addressed.23 At the supranational level, it must also be added that their needs cannot simply be met by private international law, as if this discipline could be conceived as a neutral and non-ideological field of law. In fact, and despite the attention paid to children's rights in the proposal, it remains difficult to draft rules of private international law in the absence of a common position on bioethical dilemmas related to assisted reproduction and gestational surrogacy. Are all techniques available to individuals or couples wishing to have children acceptable? In 20 See infra, para VII. The Court of Justice of the European Union has been able to control and limit the use of the public policy exception by Member States. See CJEU, 28 March 2000, D. Krombach v. A. Bamberski, C-7/98, para 23: “Consequently, while it is not for the Court to define the content of the public policy of a Contracting State, it is none the less required to review the limits within which the courts of a Contracting State may have recourse to that concept for the purpose of refusing recognition to a judgment emanating from a court in another Contracting State”. 21 See infra, para. III.A. 22 Filiation is regulated in Articles 59 to 70 of the Project which is available online at: https://www.justice.gouv.fr/sites/default/files/migrations/textes/art_pix/projet_code_ droit_international_prive.pdf (last accessed on 15 June 2023). For a general presentation of the project, see the dedicated section of this Yearbook, infra. 23 M.-L. NIBOYET, Pour une législation « sur-mesure » des filiations d'intention dans les relations privées internes et internationales, Mélanges en l'honneur de Philippe Théry, Les coutures du droit, Dalloz, Paris, 2022, pp. 417-430.

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Proposal for a European Regulation on Filiation Matters particular: can the female body be commodified to the benefit of sterile persons or couples? Aside from male gamete donation, which derives from a natural body function, egg donation and gestational surrogacy are invasive procedures and may cause stress or harm to the female body. The health risks to the egg donor, the woman carrying the child, and children born through IVF are not fully understood.24 In this complex and delicate global context, it is too simplistic to think that the grounds for invoking the public policy exception relate only, or even mainly, to anti-gay sentiments and defence of the traditional family. The stories of these women and their children25 invite one to be cautious when designing rules with the function of counteracting possible social discrimination. There is a balance to be found between the need to remedy the 24 The problem of egg donation practices came to global attention after a 17-year-old Indian girl, Sushma Pandey, died of complications following a procedure at Rotunda Clinic in Mumbai, India. See, as regards a 23 year-old women, S. TYAGI/ A.R. MRIDHA/ C. BEHERA, “Sudden death of an egg donor during ovocyte retrieval due to ovarian hyperstimulation syndrome”, Autops Case Rep. 2022; 12: e2021385, published online 2022 May 27 (doi: 10.4322/acr.2021.385); on the long-term consequences: J. SCHNEIDER/ J. LAHL/ W. KRAMER, “Long-term breast cancer risk following ovarian stimulation in young egg donors: a call for follow-up, research and informed consent”, RBMO, Commentary, 2017, pp. 480-485; R B. NESS/ D.W. CRAMER/ M.T. GOODMAN/ S.K KJAER/ K. MALLIN/ B.J. MOSGAARD/ D.M. PURDIE/ H.A. RISCH/ R. VERGONA & A.H. WU, “Infertility, fertility drugs, and ovarian cancer: A pooled analysis of case-control studies”, American Journal of Epidemiology, 2002, pp. 217-224; J. SCHNEIDER, “Fatal colon cancer in a young egg donor: a physician mother’s call for follow-up and research on the long-term risks of ovarian stimulation”, Fertility and Sterility, Vol. 2008, pp. e1-e5. As regards the gestation: M. BASCUÑANA GARDE, “Gestación subrogada: Aspectos emocionales y psicológicos en la mujer gestante”, Revista Internacional de Eticas Aplicadas, 2018, p. 49; K. LOZANSKI/ I. SHANKAR, “Surrogates as risk or surrogates at risk? The contradictory constitution of surrogates’ bodies in transnational surrogacy”, Social Theory & Health, 2019, pp. 40-56; M. AL ADIB MENDIRI, “Gestación subrogada desde una perspectiva biomédica: lo que el debate científico puede añadir a la discusión ética”, Revista Internacional de Eticas Aplicadas, 2018, pp. 13-19. As regards children conceived in vitro: C. BELLIENI, “Rischi per la salute dei figli nati da fecondazione in vitro”, in L. CORRADI (ed), Odissea embrionale. Fecondazione in vitro, eterologa e surroga di gravidanza: problemi di salute, giuridici e sociali, Mimesis. I. WOO/ R. HINDOYAN/ M. LANDAY/ J. HO & S. A. INGLES, “Perinatal outcomes after natural conception versus in vitro fertilization (IVF) in gestational surrogates: A model to evaluate IVF treatment versus maternal effects”, Fertility and Sterility, 2017, pp. 993-998. 25 M. BYDLOWSKI, Devenir mère, Odile Jacob, 2020; C.S. GUERZONI, “Gift narratives of US surrogates”, Italian Sociological Review, 2022, pp. 561–577; H. JACOBSON, “A limited market: The recruitment of gay men as surrogacy clients by the infertility industry in the USA”, Reproductive Biomedicine and Society Online, 2018, pp. 4-23; D.L. FORMAN, “Abortion Clauses in Surrogacy Contracts: Insights from a Case Study”, Family Law Quarterly, (Symposium on Assisted Reproductive Technology and Family Law), 2015, pp. 29-53; M. C. INHORN/ P. PATRIZIO, “Rethinking reproductive ‘tourism’ as reproductive ‘exile’”, Fertility and Sterility, 2009, pp. 904–906; U. NARAYAN, “The ‘gift’ of a child: Commercial surrogacy, gift surrogacy and motherhood”, in P. BOLING (ed.), Expecting trouble: Surrogacy, foetal abuse and new reproductive technologies, Westview Press, 1995, pp. 177-202.

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Cristina González Beilfuss/ Ilaria Pretelli impairment of individual self-fulfilment, resulting from infertility or (behavioural) sterility, and the use of someone else’s body for that purpose. In addition to their impact on the health, dignity and self-worth of the women and children involved, the adoption of liberal rules in this field may exacerbate existing social inequalities, especially if they do not categorically exclude the mutual recognition of certificates issued in third countries but recognised in a Member State.26 The spectre of colonialist exploitation and imperialist notions of culture and progress has appeared in certain analyses based on the observation of cases where women from the global south were hired for the benefit of fertility clinics or Western intended parents.27 Several Asian countries have introduced a series of legal reforms to address concerns resulting from the market liberalisation.28 On the other hand, and from an opposite though still feminist perspective, the legitimacy for States to limit women’s self-determination is also a major concern, as well as a possible new avenue for discrimination between children.29 However, the impartial and non-biased character of consent is difficult to assess.30 As regards egg sale and commercial surrogacy, there is a risk of preying on marginalised women in poor economic contexts, as experienced in Asiatic countries as India, Nepal and Thailand. Women’s freedom of consent to egg donation or com-

See infra, para. IV.C. See O.J. ALABI, “Socioeconomic dynamism and the growth of baby factories in Nigeria”, SAGE, https://doi.org/10.1177/2158244018779115, 2018; D. BANDELLI/ S. GENNARINI, & E. DI LEO, “Raising awareness on gestational surrogacy among vulnerable women in developing countries”, Working paper for Development Cooperation agencies, International Organisations and NGOs (https://c-fam.org/wp-content/uploads/RaisingAwareness-on-Gestational-Surrogacy-3.16.21.pdf); A. GUSEVA/ V. LOKSHIN, “Medical conceptions of control in the field of commercial surrogacy in Kazakhstan”, Salute e Società, 2019, pp. 26–43; L. HARRISON, Brown bodies, white babies. The politics of crossracial surrogacy, NYU Press, 2016; Y. P. HERNANDEZ, “Gestación subrogada: una revisión etnográfica para contribuir al debate en México”, Debate Feminista, 2018, pp. 85-109, https://doi.org/10.1016/j.fertnstert.2009.01.055 (last accessed on 18 June 2023); M.C. INHORN/ P. SHRIVASTAV, “Globalization and reproductive tourism in the United Arab Emirates”, Asia-Pacific Journal of Public Health, 2010, pp. 68–74; A. PANDE, Wombs in Labor: Transnational Commercial Surrogacy in India, New York, Columbia University Press, 2014; A. WHITTAKER, “From ‘Mung Ming’ to ‘Baby Gammy’: A local history of assisted reproduction in Thailand”, Reproductive Biomedicine and Society online, 2016, pp. 71-78. J. YANAGIHARA, “The practice of surrogacy as a phenomenon of ‘bare life’: An analysis of the Japanese case applying Agamben’s theory”, Current Sociology, 2021, pp. 231-248, M. J. RADIN, Contested Commodities, Cambridge, Harvard University Press, 2001. 28 See, below, T. BOLDBAATAR/ B. ENKHBOLD, “Surrogate Motherhood under Different Laws – Legal Arrangements and Challenges of Mongolia”, this Yearbook. 29 M. IACUB, L’empire du ventre, Pour une autre histoire de la maternité, 2004. 30 M. FABRE-MAGNAN, L’institution de la liberté, 2018. 26 27

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Proposal for a European Regulation on Filiation Matters passionate surrogacy, may also be impaired by stringent social or affective pressures.31 Unfortunately, the available data are often presented in a way that tends to confirm aprioristic views and depends on a person’s political leanings. Depending on the ideology adopted, the narrative changes dramatically. Researchers who accept no legal compromise that may possibly justify the commodification of women and children will present the life of the women and children involved in the process as grotesque and dramatic by focusing on existing “bad cases”. Researchers who accept the principle and pursue a legal regulation of the fertility market will describe the life of the persons involved in idyllic and fabulous terms focusing on specific examples of occasional happy endings.32 Against this background, the Proposal’s attempts to bypass the basic problem by drafting uniform solutions for cross-border cases. However, it should seek a compromise to meet the concerns of those cautioning against the use of private international law as an “enabler” with the effect of promoting an ultra-liberal approach.33 As shown by the initial reactions to the project, the Proposal is likely to be rejected, unless it is substantially amended. D.

Initial Reactions

Thus far, the Commission's draft has already raised concerns beyond the Eastern European states.34 The Dutch Senate has expressed the need to better assess the number of cross-border cases causing children to suffer from limping statuses in order to verify whether a legislative initiative is really necessary. It implicitly sug31 J. ESQUENAZI, “Réflexions autour des conditions d’une ‘GPA éthique’ – A propos de l’intégrité du consentement de la mère porteuse”, in Les techniques de procréation, LGDJ, Coll. LEJEP, 2021. 32 It is interesting to read the different views of two young women raised by intentional parents and born as a result of surrogacy arrangements: Jessica Kern advocating for banning surrogacy (http://theothersideofsurrogacy.blogspot.com/); and Melissa Stern, alias baby M. (In re Baby M, 537 A.2d 1227, 109 N.J. 396 (N.J. 02/03/1988), who authored the book Reviving Solomon: Modern Day Questions Regarding the Long-term Implications for the Children of Surrogacy Arrangements, 2010. 33 The role of private international law as “enabler” has been explored by H. MUIRWATT, in her works on “The Relevance of Private International Law to the Global Governance Debate” in H MUIR-WATT/ D FERNANDEZ ARROYO (eds), Private International Law and Global Governance, OUP, 2014, pp. 1, 6; and “Private International Law Beyond the Schism”, Transnational Legal Theory, 2011, pp. 364-368. 34 See, among Eastern countries, the Resolution of the Senate of the Czech Republic of 30th March 2023, n. 146, which requests the Government “to advocate narrowing of the scope of the Regulation […] so that surrogacy is excluded, and each Member State is allowed to refuse recognition of parenthood in cases where the cross-border element is applied intentionally in order to circumvent national legislation in the area of parenthood”. The Resolution is available at EUR-Lex - ST_8112_2023_INIT - EN - EUR-Lex (europa.eu), last accessed on 14 June 2023. See also, below, P. TWARDOCH, “Surrogacy Agreements from the Conflict-of-Laws Perspective Today and Tomorrow”, this Yearbook.

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Cristina González Beilfuss/ Ilaria Pretelli gests that other, non-legislative, solutions to the same problem would be preferable.35 Member States are not of the same view as regards the compliance of the Proposal with the principles of proportionality and subsidiarity. Their views seem to reflect the liberal or restrictive content of their substantive laws on filiation, with the main concern being the obligation that would result from the regulation to recognise children born out of surrogacy agreements performed or recognised in a Member State.36 Thus, Spain37 and Portugal38 regard the Proposal as respectful of the principle of subsidiarity, whilst the Italian Senate39 and the French Senate,40 are of the opposite view. The Resolution of the French Senate even questioned the compatibility between the division of competences provided for by the Treaties and the principle of subsidiarity, on the one hand, and the proposal for a regulation with direct effect aimed at imposing the “automatic” mutual recognition of all filiations established in each Member State, on the other. The most likely route to adoption of the Regulation will therefore be through enhanced cooperation under Article 20 TEU and Title III TFEU, which still requires the support of at least nine EU Member States. The stakes are therefore high. The text presented by the Commission is divided into nine chapters, with a total of 72 articles, and is accompanied by five annexes. The Preamble contains 99 Recitals. At first glance, the Proposal is impressive and may even seem courageous.41 However, in the final analysis, the approach is incomplete and biased, and does not do justice to the complexity of the subject.

35 Letter to the European Commission’s Vice-President for Inter-institutional Relations and Foresight by M.M. DE BOER of 24 March 2023 available at EUR-Lex ST_8033_2023_INIT - EN - EUR-Lex (europa.eu) last accessed on 14 June 2023. 36 See infra, para. VII. 37 See the informe 14/2022 of 14 March 2023 presented by the Spanish Parliament and available at EUR-Lex - ST_7892_2023_INIT - EN - EUR-Lex (europa.eu) last accessed on 14 June 2023. 38 See the note of Alexandra Leitão, presented by the Portugueuse Parliament on 11 March 2023, available at EUR-Lex - ST_7884_2023_INIT - EN - EUR-Lex (europa.eu) last accessed on 14 June 2023. 39 “Risoluzione approvata dalla Commissione sul progetto di atto legislativo dell'Unione Europea N. Com (2022) 695 Definitivo (Doc. XVIII-Bis, N. 2) sui profili di conformità ai principi di sussidiarietà e proporzionalità. Legislatura 19ª - 4ª Commissione permanente - Resoconto sommario n. 33 del 14/03/2023”, available at https://www.senato.it/japp/bgt/showdoc/19/SommComm/0/1372280/index.html?part=doc_d c. See also https://cne.news/article/2750-italian-senate-rejects-proposal-for-universalparenthood-certificate. 40 Resolution of 22 March 2023. https://www.senat.fr/leg/tas22-084.html. 41 See H.-P. MANSEL/ K. THORN / R. WAGNER, “Europäisches Kollissionsrecht 2022: Bewegung im internationalen Familienrecht”, IPRax, 2023-2, p. 109.

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Proposal for a European Regulation on Filiation Matters

III. Purpose As previously stated, the key EU policies referred to as the basis for the Proposal are, first, the “EU Strategy on the rights of the child”42 and, second, the “EU LGBTIQ Equality Strategy”.43 A.

The Objective of Strengthening “the Protection of Fundamental Rights and Other Rights of Children”

The Explanatory Memorandum declares that the objective of the Proposal is “to strengthen the protection of the fundamental rights and other rights of children in cross-border situations”. Some of these rights are explicitly mentioned: the right of children to an identity, to non-discrimination, to private and family life, to succession and maintenance rights. In line with all texts concerning children, the best interests of the child are named as a primary consideration. These references to fundamental rights are repeated in the text of the Proposal. Most of them are in the Recitals: the rights quoted at the beginning of the Memorandum are all mentioned in Recital (2); Recital (11) describes these rights as encompassing the right to have “a name, nationality (where governed by ius sanguinis), custody and access rights by their parents, maintenance rights, succession rights and the right to be legally represented by their parents”; Recitals (17) to (20) refer to the right to family life as enshrined in several codified rules that are also explicitly listed therein: Articles 7 and 24 of the Charter of Fundamental Rights of the European Union, Article 3 of the UN Convention on the Rights of the Child and Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950. Recital (66) explicitly mentions the right of the child to be heard.44 The latter is the only right of children to deserve a mention in the articles of the Regulation, namely in Article 15 and in the Articles defining the grounds for non-recognition of a foreign decision or an authentic act with binding legal effects (Articles 31(3), and 39(3)). In line with the occasio legis of the Commission’s initiative, a significantly greater emphasis has been given to Article 21 of the Charter and to the right not to be discriminated against on the grounds of sexual orientation. In the philosophy of the Proposal, homosexual couples, whether made up of two men or two women, are discriminated against by rules which deny them joint parental status over the same child on the assumption that a child can only have heterosexual parents (outside of adoption, or at all). The Proposal insists on the need to prevent this type of discrimination by referring to Article 21 of the Charter in five Recitals45 and in the four Articles regulating the public policy exception.46 See note 5. Available at https://commission.europa.eu/system/files/2021-09/ds082 1040enn_002.pdf (last accessed on 16 June 2023). 43 See note 4. 44 See infra, para. IV.D. 45 See Recitals 14, 20, 56, 75, and 90. 42

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Cristina González Beilfuss/ Ilaria Pretelli The main purpose here is to prevent Member States from having recourse to the public policy exception to deny status continuity to children certified as born to same-sex parents. As observed above, the rule seems to codify a judicial precedent of the CJEU. The court has long since reversed the use and function of the public policy exception in EU cases: far from being employed to maintain differences in the regulation of cross-border cases, it has become an instrument to ensure respect of EU rules regarded as “essential to the accomplishment of the tasks entrusted to the [EU] and, in particular, to raising the standard of living and the quality of life in its territory”.47 B.

Existing Violations to Children’s Rights

It is somewhat surprising that, notwithstanding the explicit reference to the EU Strategy on the rights of the child, which is taken as a basis for the Proposal, none of its rules seems to have been directly inspired by that document. As opposed to the EU LGBTIQ Equality Strategy – the influence of which is clearly visible in the many rules quoting Article 21 – it is hard to see a rule directly implementing the Strategy on the rights of the child. Rather, the references to the rights of children seem to have been taken from other EU sources. In the words of the Commission, the purpose of the strategy on the rights of the child should be to “support children [to] develop their potential as engaged, responsible citizens”.48 One of the primary goals is therefore to “tackle poverty, inequalities and discrimination to break the intergenerational cycle of disadvantage”.49 This is an ambitious goal considering that, according to the same document: “half of all children worldwide suffer some form of violence each year. Nearly three quarters of the world’s children between the age of 2 and 4 regularly suffer physical punishment and/or psychological violence at the hands of parents and caregivers. In Europe, 1 in 5 children will fall victim to some form of sexual violence, while children account for almost a quarter of victims of trafficking in the EU – the majority being girls trafficked for sexual exploitation. More than 200 million women and girls worldwide are survivors of female-genital mutilation [presumably with the complicity of their parents], including over 600.000 in the EU”.50 And there is more: 46 See Articles 22(2) on the applicable law, 31(2) on the recognition of court decisions, 39(2) on the recognition of authentic instruments with binding legal effect, and 45(2) on the acceptance of authentic instruments with no binding legal effect. 47 CJEU, 26 October 2006, Elisa María Mostaza Claro v Centro Móvil Milenium SL, Case No. C-168/05, ECLI:EU:C:2006:675, paras. 35-37. 48 Supra (note 5), p. 25. 49 Ibid. 50 Ibid (p. 11).

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Proposal for a European Regulation on Filiation Matters “An estimated 5.2 million children under 5 years die each year, mostly from preventable and treatable causes, many of which are driven by poverty, social exclusion, discrimination, gender norms and neglect of basic human rights.”51 In the light of this very alarming picture, it is surprising that the Proposal contains no mention of the possible risks of dangerous abuse within the market of fertility clinics. The duty of States to address these risks seriously would have required the introduction of appropriate safeguards to ensure that the needs of children are addressed and that they feel supported in developing “their potential as engaged, responsible citizens”. It may be worth recalling that Article 8 of the 1993 Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoption does consider the risks of child commodification and requires States to take: “all appropriate measures to prevent improper financial or other gain in connection with an adoption and to deter all practices contrary to the objects of the Convention” Research on the implementation of the 1993 Hague Convention has shown that these risks have unfortunately resulted in serious violations of the rights of too many children. Illegal acts have included: “the creation of “baby farms” or [illegal] paid pregnancies; the “collection of children” via criminal networks (through abduction, false foetal death certificates, purchasing children; the trade in children through orphanages which create a network for child herding; trade involving state representatives, for example by encouraging parents to entrust their child to a social service, while the child is put up for intercountry adoption”.52 Child “laundering”, “forced relinquishment or abandonment”, “child abduction after a civil war or after a natural disaster”, “falsification of birth certificates”, creation of “relinquishment documents”, “shady judicial acts”, “unclear role of adoption agencies and lack of professional matching”, and “processing of visa and passports” have also been experienced.53 In the Proposal, no such rule has been thought of, as if none of the risks of child trafficking and child commodification mentioned in the EU strategy could seriously be imagined in the framework of recognition of foreign filiations. These drifts are documented. The UN Special Rapporteur on the sale and sexual exploitation of children has reported on the existence of comparable risks in connection with surrogacy arrangements.54 More recently, the war in Ukraine has confirmed Ibid (p. 20). See, e multis, H. BOÉCHAT/ F. FUENTES, International Social Service, “The Grey Zones of Intercountry Adoption”, 17 June 2010, p. 8. 53 Ibid. 54 See the reports of the Special Rapporteur on the sale and sexual exploitation of children to the Human Rights Council 37th session, A/HRC/37/60 of 2018 51 52

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Cristina González Beilfuss/ Ilaria Pretelli the existence of risks of stranded new-borns.55 The introduction of specific guarantees and precise safeguards for children is therefore recommended. C.

The Right of Children to Know their Origins

In the framework of adoption, illicit practices “have in common […] the complete erasure of the child’s history and surroundings”.56 This eradication of children from the environment characterising their coming into the world is in open contrast with a fundamental right of the child: the right of children to know their origins. As the right to identity, this specific right of children, deserves at least a mention in the Proposal, if not a specific rule.57 The lack of any reference is indeed difficult to explain and truly impossible to justify. The right of the child to know his or her origins enjoys the same status of fundamental right as the other rights acknowledged by the 1989 UN Convention and distinctively quoted by the Recitals. It has been plainly recognised by the European Court of Human Rights in a coherent line of decisions.58 Moreover, this right plays a particularly important role in the life of children who are separated from their biological parents or have been raised by persons that do not share with them part of their DNA. During the course of their lives, these children enquire about the origins of their physical appearance, of their personality and in some cases, they may also need to enquire about potential health

(https://undocs.org/en/A/HRC/37/60) and to the General Assembly 74th session. A/74/162 of 2019 (https://undocs.org/en/A/74/162). 55 See S. MARINELLI/ A. DEL RIO/ M. STRACCAMORE/ F. NEGRO/ G. BASILE, “The armed conflict in Ukraine and the risks of inter-country surrogacy: the unsolved dilemma”, European Review for Medical and Pharmacological Sciences 2022, pp. 5646-5650, A. KÖNIG, Reproductive Entanglements in Times of War: Transnational Gestational Surrogacy in Ukraine and Beyond, Medical Anthropology, DOI: 10.1080/ 01459740.2023.2201682; A. GUSEVA, “Scandals, morality wars, and the field of reproductive surrogacy in Ukraine”, economic sociology_the european electronic newsletter, ISSN 1871-3351, Max Planck Institute for the Study of Societies (MPIfG), Cologne, Vol. 21, Iss. 3, pp. 4-10. 56 H. BOÉCHAT/ F. FUENTES (note 52), p. 8. 57 See Article 7 of the UN Convention on the Rights of the Child, and in European human rights law through the case law of the European Court of Human Rights, which recognises this right as an integral part of the right to privacy. It includes the right to access information that would enable one to trace one’s roots, to know the circumstances of one's birth and to have access to certainty of parental filiation. See S. BESSON, “Enforcing the child’s right to know her origins: contrasting approaches under the Convention on the Rights of the Child and the European Convention on Human Rights”, International Journal of Law, Policy and the Family, 2007, p. 138. 58 See the decisions of the European Court of Human Rights, 7 July 1989, Gaskin v. United Kingdom, App. no. 10454/83; 7th February 2002, Mikulic v. Croatia, App. No 53176/99, 13 July 2006, Jäggi v. Switzerland, App. no. 58757/00, 19 June 2018, Ebrü v. Turkey, App. No 30733/08.

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Proposal for a European Regulation on Filiation Matters issues or other genetic characteristics.59 In 2019, the Parliamentary Assembly of the Council of Europe adopted Recommendation 2156 (2019) on anonymous sperm and ovocyte donation, instructing states to strike a balance between the rights of parents, donors and children. However, it is the rights of the conceived person, who is in the most vulnerable position, that must be at the centre. It is to respect these rights that the text proposes to waive anonymity for all future gamete donations and to prohibit the use of anonymously donated sperm and ovocytes. The Resolution recommends that Council of Europe member states that allow sperm and egg donation create a national register of donors and donor-conceived persons, with a view to facilitating the exchange of information. The Resolution further recommends that a mechanism be put in place to ensure the cross-border exchange of information between national registers. It is hard to imagine that the EU could legislate and ignore this dimension of the issue, and it is therefore difficult to explain why an instrument attempting to regulate cross-border filiations, and which encompasses adoption, assisted reproduction techniques and, possibly, surrogacy, deliberately omits any reference to it. The inclusion of a reference to, and of explicit rules on, the right of children to know their origins has been voiced by several stakeholders and experts,60 and the French Senate has specifically referred to it.61

IV. Scope As usual in European Regulations, the first chapter of the Proposal deals with the material scope, including definitions of the terms used. It is then completed by provisions that determine the application of the instrument in space, and then in time. A.

Material Scope of Application

Perhaps superfluously, the Proposal contains two articles specifying the subject matter of the Regulation and its scope of application. Article 1 lists the matters of private international law which are the subject of the Proposal.62 This was perhaps unnecessary, since this enumeration is deduced both from the title of the Regulation and from the content of the text itself. Moreover, the text states that it establishes common rules on the “establishment” of filiation. Article 3, however, seems 59 See S. BESSON, (note 57), pp. 155-157; and, with reference to the Proposal A. TRYFONIDOU, (note 7), p. 99, I. PRETELLI, (note 10), pp. 13-15 and Id. (note 8), pp. 169-204. 60 Ibid. 61 Supra (note 40). 62 Namely, jurisdiction, applicable law, recognition or, where appropriate, acceptance of decisions or authentic instruments and the creation of a European parentage certificate.

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Cristina González Beilfuss/ Ilaria Pretelli to go much further, as the scope is described as including “all civil matters relating to parentage in cross-border situations”. This apparent contradiction is resolved by the definition of the term “establishment of parentage” as “the determination in law of the relationship between a child and each parent, including as a result of proceedings contesting previously established parentage” (Article 4(3)). This broader meaning is confirmed by Article 18 on the scope of the applicable law. The contestation of parenthood is thus well-covered by the text, but in an indirect way. The scant reference to contestation of an established filiation suggests that the Proposal’s main concern was not the regulation of disputes (months or years) after the initial establishment of parentage. However, the fact that the initiative followed up on von der Leyen’s political commitment to solve problems mainly affecting rainbow families should not make us forget the more traditional cases of determination and contestation of paternity. The effective resolution of such cases can be vital for less advantaged children, not least because it enables the award of maintenance. There is a well-known relationship between child poverty and single-parent households. EU action in the field of parenthood should not ignore this dimension of the issue, which is particularly important for the less privileged sections of society. In describing the material scope of application, Article 3 follows a familiar pattern, consisting of a positive definition (§1) accompanied by a list of excluded matters (§2). The fundamental concept of the positive definition is the notion of parenthood, which is understood as “the relationship established in law” (Art. 4.1). In the Memorandum and the Preamble, it is specified that filiation may be biological or genetic, may result from adoption or be established by operation of law, indicating that all filiation is covered, including that established by contract. The enumeration is, however, surprising, as it mixes legal concepts (adoption) with non-legal concepts (biological or genetic filiation). The forms of filiation (adoptive or natural) should be distinguished from the means of establishing parentage (ope legis, by unilateral act or court decision). Article 3(2) of the Proposal lists the excluded matters in a negative way. It is obvious that only parentage is covered, as the effects of parentage in matters of parental responsibility, maintenance obligations, succession and nationality are governed by other instruments or by national law. The establishment of parentage, however, will appear in the excluded areas as a preliminary issue, which perhaps should have been addressed in the text of the Proposal or at least in the Preamble. In the same direction, it is regrettable that the text of the Proposal and especially the Preamble in paragraph (30) are so restrictive as to exclude preliminary issues relating to the existence, validity or recognition of a marriage. Even if these matters are in themselves rightly excluded, it would be desirable that the preliminary question be resolved in the same way in the Member States participating in the European text in order to avoid the risk of contradictory solutions. According to several legal systems, the marital status of the mother is of crucial importance for the establishment of an alternative parent-child relationship. A uniform solution should be ensured. Another difficult exclusion is that of adoption. The French and Spanish texts of the Proposal exclude international adoptions. The English text is more precise in envisaging only “intercountry adoptions”. The Preamble confirms that 290

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Proposal for a European Regulation on Filiation Matters only adoptions in which the child and the adoptive parent(s) have their habitual residence in different States are excluded, whether or not they are governed by the 1993 Hague Convention (Paragraph 27). This solution is explained by the desire not to contribute to the circumvention of the rules of said Convention, which was designed to respect the rights of the child and avoid abusive practices. If the exclusion envisages only cross-border adoptions within the meaning of the Hague Convention, then it must be admitted that other international adoptions are covered and that the rules of the Proposal are applicable to them. A fairly common situation is that where a child to be adopted has a foreign nationality. The rules on jurisdiction and applicable law are in this case particularly inadequate, as the Proposal is overly focused on the needs of rainbow families where adoption is often used to regularise de facto situations and give rights to the parent's partner. As a result, it neglects other adoptions, where the primary objective is to give a family to a child who has been placed in a public institution. In this context, other elements should be taken into account. The European Parliament's resolution of 2 February 201763 demonstrates that the cross-border recognition of adoption orders should be accompanied by a scrupulous respect for the subsidiarity of adoption, which requires that the possibility of placing the child with his or her family members, even if they live in another Member State, should be considered first. Once again, it seems that the legislator has not had the needs of the less fortunate in mind. Two articles seem unnecessary in Chapter 1: Article 2.1, which, surprisingly, emphasises that the Regulation does not prevail over primary Union law, and Article 5, which emphasises that the Regulation does not affect national competences in family law matters. The fact that it appeared necessary to introduce provisions of this nature shows how controversial the subject is. Some fear losing the achievements of the Court's case law in the Pancharevo and Rzecznik Praw cases;64 others are concerned about the impact of the Proposal on substantive law. These risks, however, are non-existent. Even if it were so specified, a provision of secondary legislation could not override primary legislation, in particular the requirements of free movement and the rights deriving from it. Similarly, it is excluded that secondary law could modify the substantive law of filiation, which remains the competence of the Member States. B.

Scope in Space

The scope of application of the future Regulation in space is deduced from Article 1 and Article 3(3). The rules of jurisdiction are applicable without any personal condition, as soon as the court of a (participating) Member State is seized. In this context, the autonomous definition of the concept of court in Article 4(2) must be borne in mind, which includes any authority exercising judicial functions. The difficulty of the definition is well known and the debate concerning what is a European Parliament resolution of 2 February 2017 with recommendations to the Commission on cross-border aspects of adoptions (2015/2086(INL)). 64 See note 3. 63

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Cristina González Beilfuss/ Ilaria Pretelli “jurisdictional function” is not settled. Thus, an authority that merely applies the law without taking any decision or deciding any dispute cannot be considered to be exercising jurisdictional functions, which would exclude civil registrars who issue a birth certificate on the basis of the application of the law. On the other hand, one may hesitate, if the civil registrar intervenes in the performance of the legal act such as the recognition of paternity. Does he or she exercise jurisdictional functions [or not]? The case law of the Court in the Senatsverwaltung case65 testifies to this difficulty. This case concerned the recognition of an Italian out-of-court divorce and the issue at stake was whether the Italian registrar had exercised jurisdictional functions. The Court of Justice answered in the affirmative. Any authority that retains control over the pronouncement of a divorce, which implies, in the context of divorces by mutual consent, that it examines the conditions of the divorce in the light of national law and the reality and validity of the spouses’ consent to divorce, is exercising judicial functions and rendering decisions that circulate in the Union according to the rules on the recognition of judgments.66 The conflict rules are, as in all other European Regulations, universal rules: the designated law applies even if this law is not that of a Member State. As regards the application of the rules on the recognition of decisions and authentic instruments in matters of parentage, the text requires reciprocity and only decisions and authentic instruments originating in Member States are concerned. In this context, however, the Proposal is treading on unsteady ground. One of the characteristics of birth certificates is that they are issued as soon as a national is involved. If two Spanish nationals enter into a contract with a surrogate mother and a fertility clinic in California, and obtain, on that basis, a Californian court decision stating that they are the parents of the child born there, the Spanish authorities will then have to decide, under Spanish private international law rules, whether the decision can be recognised. At that stage, the foreseen Regulation would not apply. But once the Californian decision were recognised and the child declared to be the son or daughter of the Spanish parents, its filiation would have to be recorded in a Spanish authentic instrument, and the Spanish authorities would be obliged to issue a Spanish birth certificate and grant the child Spanish nationality. That birth certificate would then circulate under the rules of the foreseen Regulation undoubtedly. It is therefore illusory to think that it will be possible to make a clear distinction between European and non-European situations. This circumstance could encourage the adoption of common rules and include provisions on the recognition of decisions from third countries.67

65 Judgment of the Court (Grand Chamber) of 15 November 2022, Senatsverwaltung für Inneres und Sport, Standesamtsaufsicht, C-646/20, ECLI: EU:C:2022:879. 66 See The Marburg Group, Comments on the European Commission’s Proposal for a Council Regulation on jurisdiction, the applicable law, recognition of decisions and acceptance of authentic instruments in matters of parenthood and on the creation of a European Certificate of Parenthood, May 2023 at https://www.marburg-group.de, last accessed June 2023 (hereinafter the Marburg group), p. 12. 67 Until now, the Union has always avoided formulating common rules on the recognition of decisions of third States and has opted for accession to multilateral Conventions, notably the Hague Conventions. In this field, however, such rules do not yet

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Proposal for a European Regulation on Filiation Matters C.

Scope of Application over Time

The Proposal contains provisions on the entry into force and application of the Regulation and transitional provisions. The former follows a well-known pattern and distinguishes between the date of entry into force and several dates of application in order to allow time for the preparation of a proper application of the new rules. The transitional provisions are modelled on identical rules that can be found in other Regulations. The main idea is that the Regulation applies to situations after its entry into force (Art. 69.1). As usual, however, the possibility of an earlier application is open, designed to give the benefit of the new provisions to earlier decisions and authentic instruments. Nonetheless the wording of this paragraph 2 could have the opposite effect to that intended. Recognition presupposes that parentage was established in accordance with one of the laws designated as applicable under Chapter III, in a Member State whose courts had jurisdiction under Chapter II. However, as will be seen from the analysis of Chapter III, the conflict-of-laws rules are quite innovative, which implies an initial difficulty, insofar as it is not likely that the court of origin will have applied the law that would have been applicable under the provisions of the Regulation. Moreover, it will be very difficult in practice to check which law was applied, especially in the case of authentic instruments, which do not always refer to the legal basis of the instrument. If the objective is to facilitate recognition, one might think of introducing a compatibility clause that would allow the most favourable rules to be applied.

V.

Jurisdiction

Chapter II contains the rules of jurisdiction that should apply when an authority exercising judicial functions is seized. As already noted, an initial difficulty is the identification of these authorities, which will depend on the internal rules of each Member State. In particular, one case is likely to raise major difficulties: that of the voluntary recognition of paternity, which, in several States but not in all, presupposes that proceedings before an authority are conducted. The rules on jurisdiction are found in Articles 6 to 10. The other provisions of the Chapter are rules of application of the rules of jurisdiction which have been borrowed from other instruments, such as the rule on the seizing of a court (Art. 11), the rules on the verification of jurisdiction and admissibility (Arts. 12 and 13) and the rule on lis pendens (Art. 14). We will not return to this. However, Article 15 on the right of children to express their views deserves comment.

exist, and even if the Hague Conference were to result in a Convention on parentage, it would only be applicable on condition of reciprocity.

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General Rule of Jurisdiction

Article 6 lists six alternative fora, which obviously demonstrates the desire to promote access to justice. In principle, the rule seems adequate. At the same time, it is well known that having several alternative fora implies the risk of parallel proceedings and requires lis pendens rules. Article 14 resolves lis pendens by reference to the prior in tempore rule. This rule is in principle attractive because of its simplicity but could in some cases work against the interests of the child. A father who does not want to assume paternity (and especially not the economic consequences of it) could bring an action in a jurisdiction far from the child and thus make the paternity claim more difficult. A hierarchy of jurisdictional rules might be more convincing. In fact, there is a contradiction between Recital (39) of the Preamble, which states that in order to protect the interests of the child, the Member State of his or her habitual residence should have jurisdiction, and the introduction of alternative fora, available in all circumstances. Furthermore, it might be useful to distinguish according to the type of proceedings and the action taken. A special rule would be needed for the establishment of an adoption, for example. It does not seem appropriate that the adoption can be constituted by authorities other than those of the Member State of the adopted person’s habitual residence, especially when the adopted person is a child placed in a public institution. With regard to the criteria used, one might question the relevance of the place of birth, which in itself could be purely incidental. There is already the possibility of acting in the Member State of nationality and habitual residence of the child or of either parent at the time the court is seized, as well as in the Member State of the defendant’s habitual residence. The connection to the place of birth: seems to respond to the preoccupation of condoning reproductive tourism68, which is confirmed by the proposed conflict rules. If two women have travelled to Spain in order to have access to assisted reproduction techniques which are not available in the State where they have their habitual residence, it would be sufficient for the birth to take place in Spain for the Spanish authorities to have jurisdiction and for Spanish law to apply. Spanish law provides that the wife of the woman who gives birth may become the second mother of the child by making a declaration of intent before the registrar69. The proposed rules would thus guarantee the competence of the Spanish authorities and the application of Spanish law in this case. This solution will probably be met with scepticism, since this conduct could involve an element of fraud.70

Marburg group, (note 66) p. 18. See Art. 7.3 of the Ley 14/2006, de 26 de mayo, sobre técnicas de reproducción humana asistida. This rule was introduced in 2015, in Ley 19/2015, de 13 de julio, de medidas de reforma administrativa en el ámbito de la Administración de Justicia y del Registro Civil. 70 See supra (note 15). 68 69

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Proposal for a European Regulation on Filiation Matters B.

Subsidiary Jurisdiction, Subsidiary Rules and forum necessitatis

Article 7 of the Regulation provides for subsidiary jurisdiction in cases where jurisdiction could not be determined based on Article 6. The courts of the Member State in which the child is present would have jurisdiction in this circumstance, which would be justified in particular with regard to children who are nationals of third States, including refugee or internationally displaced children. However, a distinction should be made between cases where the forum praesentiae would be justified by the risk of a denial of justice because it would not be possible to determine the habitual residence and nationality of the child concerned and cases where this residence and nationality designate a third State whose courts would be available to take decisions on filiation. In the latter case, the forum praesentiae could turn out to be an exorbitant forum at the risk of creating limping situations.71 What is surprising, given the breadth of the criteria provided for as general and subsidiary criteria, is that the European legislator still considers it necessary to introduce a reference to the residual jurisdiction arising from the rules of jurisdiction provided for in the private international law of each State. It is difficult to imagine what other criterion could be provided for in domestic legislation that is not already included in the proposed rules. Moreover, a subsidiary jurisdiction rule still seems to be hardly compatible with the introduction of a forum necessitatis which is usually the closing clause of a comprehensive system of jurisdiction rules. C.

Incidental Questions

One provision that could be very useful, however, is the one contained in Article 10. This is a rule modelled on Article 16 of the Brussels II ter Regulation,72 which would allow a court that would not have jurisdiction under the proposed Regulation to decide an incidental question of parentage, but with effects limited to the proceedings in which the decision was taken. Filiation issues may indeed arise in the context of maintenance claims or in the course of succession disputes. In this context, it might be useful to have a rule like the one proposed. Let us take an example. According to Article 4 of the Succession Regulation,73 the succession is opened in the State of the last habitual residence of the deceased. If a question arises concerning the filiation status of a descendant of the deceased and the court with jurisdiction in matters of succession does not have jurisdiction in matters of filiation, the proceedings should be susSee Marburg Group, (note 66) p. 21. Council Regulation (EU) 2019/1111 of 25 June 2019 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility as well as international child abduction (recast), OJ L 178, 2.7.2019, p. 1-115. 73 See the Council Regulation No 650/2012 of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri= CELEX:32012 R0650, accessed on 27.7.2023. 71 72

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Cristina González Beilfuss/ Ilaria Pretelli pended and the parties should be referred to the courts vested with jurisdiction in that matter to decide the question. Article 16 allows the court with jurisdiction in the settlement of the succession to resolve the question of filiation, but with effect only for the succession dispute. With regard to maintenance disputes, coordination is easier because the Maintenance Regulation74 already provides that an action for maintenance may be brought before the court that has jurisdiction under the law of the forum to entertain an action relating to the status of a person, where the claim relating to a maintenance obligation is ancillary to that action. In this context, it appears that the criteria proposed in the proposed Regulation may be excessive, as there seems little justification for being able to act in the Member State of birth, for example. Nevertheless, it is very useful to have the possibility of raising the question of filiation before the authorities competent to decide the maintenance dispute, as the two issues are closely linked. D.

The Right of Children to Express their Views

The last provision of Chapter II has also been copied from the Brussels II ter Regulation. It concerns the right of the child to express his or her views and the corresponding obligation of the court to take those views into account. Although well intended, the right of the child to express his or her views is misplaced in matters of filiation as it will not be relevant in the majority of the cases that will require the application of the Regulation. In most cases, the decision to be taken does not involve considering anyone’s opinion. In particular, where filiation is based on a biological reality (insemination as a consequence of sexual intercourse), the judge’s role is limited to determining the facts; it is only in the case of adoption that the child's opinion becomes relevant.75

VI. The Applicable Law Chapter III contains rules on the applicable law. The general rule is set out in Art. 17 and applies to all situations that may arise, both to the establishment of filiation by operation of law at the time of birth, and to adoptions, voluntary acknowledgements of parenthood and disputes concerning parentage that may arise during a person’s life. The only special rule is that of Article 20 on the formal validity of unilateral acts of establishment. The remaining provisions are rules on the operation of the conflict rule. The Proposal reproduces the provisions on universal application, renvoi, non-unified

74 Art. 3 c Council Regulation (EC) 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations, OJ L 7, 10.1.2009. 75 See Marburg Group (note 66), p. 29.

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Proposal for a European Regulation on Filiation Matters systems and public policy known from other Regulations. The article on change of applicable law is more innovative and deserves comment. A.

General Rule

The connecting factor used in the only proposed conflict rule is the habitual residence of the woman giving birth at the time of the birth. Where this habitual residence cannot be determined, the law of the State of birth applies. This rule, which is very innovative and which, to our knowledge, has no equivalent in any system of European private international law, is easier to apply at the time of birth than a rule based on the child’s habitual residence or nationality. It must also however be recognised that it favours the establishment of parentage in the case of surrogate motherhood. The surrogate mother will, in most cases, have her habitual residence in a State that will allow the establishment of filiation on the basis of a contract. Paragraph 51 of the Preamble confirms that the law may even be applied in an anticipatory manner where filiation is to be established before birth. Verification of the habitual residence of the woman giving birth will also pose difficulties when she is located abroad and is open to manipulation. We know that in the past there have been surrogate mother movements linked to certain specific advantages, particularly in terms of the law on foreigners. Long before the war, there were surrogate mothers from Ukraine who went to Poland to give birth to a child within the European Union. The conflict rules of the future Regulation should not create incentives for these movements of surrogates. The rule is also ill suited to other situations. Let us consider a paternity claim brought by the child several years after his birth. Why go back to a law that may no longer have any relation to the current situation? As regards voluntary recognition of filiation by means of a unilateral act, the text lays down special rules on formal validity. In the same vein, there should be rules on material validity. If the aim is to encourage voluntary recognition, other connecting criteria should be allowed, beyond the sole habitual residence of the woman giving birth, at the time of the birth, because this law could have a restrictive approach. However, it should also be borne in mind that these recognitions may be fraudulent and motivated by the benefits that may derive from filiation in terms of the law on foreigners or on social security. The rule contained in Article 17(2) shows again the bias of the Proposal. The rule applies when the law of the State of the habitual residence of the woman who gives birth to the child or, failing that, the law of the State of birth, results in the establishment of filiation only in respect of one parent. In this case, it would be possible to apply the law of the nationality of that parent, the law of the nationality of the second parent or the law of the State of birth to obtain the establishment of this second parenthood. The provision is obviously intended to favour dual motherhood, as is very openly recognised in Paragraph (52) of the Preamble. The first motherhood would be attributed under the rule mater semper certa est, which is common to all legal systems, and the second could be attributed under the law identified by the three other connecting factors mentioned in the rule. Female cou-

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Cristina González Beilfuss/ Ilaria Pretelli ples who would like such an outcome could even consider giving birth in a State that recognises this dual motherhood. The proposed rule, far from being neutral, is a materially oriented rule that pursues a specific result. Leaving aside the question of whether it is legitimate, the rule is nevertheless technically flawed, as it is formulated in optional terms76 and with no guidance for deciding whether or not to implement it. It is also unclear whether the rule applies ex officio: the rule might imply the agreement of the second parent and thus only apply at the request of the second parent. Moreover, applying the law of the nationality of the second parent when it is precisely a question of establishing this second parent-child relationship lacks logic, as it presupposes that the latter parent has already been identified. More importantly, despite its formulation in general terms, the rule does not work in other scenarios. Consider, for example, the situation of a woman who divorces during gestation. Some legal systems will assume that the former husband is the father77 others, on the contrary, that he is not.78 If the law of the State of the woman’s habitual residence establishes only one parent-child relationship, should a second relationship be established under one of the other laws referred to in the Article? It is doubtful whether such a solution would be in the child's interest, especially in the case where the real father is not the husband, as the rule would prevent him from recognising the child directly, without first contesting the legally established paternity. One might even ask whether it would always be desirable to identify a second parent, when the first parent does not wish it, for example. And one would also need to ask what to do in the case where one of the named laws provides for more than two parents. Finally, there is a contradiction between the rule in Article 17(2) and the scope of the applicable law as described in Article 18. According to the latter provision, the applicable law governs the procedures for establishing or contesting parentage, the binding legal effect and/or probative value of authentic instruments, the standing of persons in the establishment and contesting procedures and the time limits in these procedures. It is very difficult to imagine how this provision will work when parentage is governed by the cumulative application of several laws. B.

The Rules on Change of Applicable Law and Public Policy

Article 19 concerns the conflit mobile and is at first glance a surprising provision, since the general conflict rule already determines the date on which the connection must be designated: the law of the habitual residence of the woman giving birth at the time of the birth is the applicable law. It is therefore difficult to see how the applicable law could change over time. It is likely that the conflict rule originally envisaged could have led to a change in the applicable law. This assumption is confirmed by Paragraph 54 of the Preamble, which shows that the rule was See Marburg Group (note 66), pp. 33-34 Art. 116 Spanish Civil Code. 78 § 1592(1) of the German Civil Code. 76 77

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Proposal for a European Regulation on Filiation Matters designed for a change of applicable law resulting from a change in the habitual residence of the woman giving birth. Such a situation however can no longer arise as a result of the final version of Article 17.1. Article 17.2, on the other hand, uses a connecting factor that may evolve by referring to the nationality of both parents without fixing it in time. iIt is nonetheless doubtful that a rule guaranteeing the continuity of filiation is useful. Since Article 17(2) is optional (since the law “may apply to the establishment of parentage”), the judge’s freedom is sufficient to take account of the specificities of the situation without the need for a rule preventing the conflit mobile.

VII. Recognition of Decisions and Authentic Instruments with Binding Effect Chapter IV provides for rules on the recognition of judgments and authentic instruments establishing filiation that have binding legal effect. These rules apply, subject to reciprocity, only in the case of decisions or documents issued in another Member State. The rules proposed in this Chapter for judgments correspond to the system known from the European Regulations and are based on mutual trust in the administration of justice in the Union. Recognition is automatic, no special procedure is required for the updating of civil status registers (Art. 24.2) and any interested party may request a decision that there are no grounds for refusing recognition (Art. 25). Recognition is facilitated by standardised certificates, which are set out in the Annex and must be issued, at the request of the interested party, by the State of origin. The grounds for recognition are not surprising either. Article 31 refers to the public policy clause, lack of service when the judgment was given by default and irreconcilability of judgments. On the other hand, the ground for nonrecognition in letter (c), which states that the decision may be refused at the request of any person claiming that the court decision is an obstacle to the exercise of his or her paternity or maternity if that person has not had the opportunity to be heard, seems ill conceived. As we have seen, the effects of filiation are outside the scope of the Regulation, and it is therefore difficult to understand the meaning of the term “exercise” of filiation. If the purpose of the rule is to confer a right to be heard on the holder of parental responsibility, this should be stated more precisely. That said, such a rule would probably be excessive, as the establishment of a parent-child relationship based on biological truth does not necessarily imply the acquisition of rights over the child. Finally, the ground for refusing recognition on the basis that the child has not had the opportunity to be heard is not applicable to all decisions, as has been noted, and should not be included. Chapter IV also deals with authentic instruments with binding effect which, following the model of the Brussels II ter Regulation, are assimilated to court decisions. One looks in vain for a complete definition of the concept in the text of the proposed Regulation. Authentic instruments are defined as those formally drawn Yearbook of Private International Law, Volume 24 (2022/2023)

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Cristina González Beilfuss/ Ilaria Pretelli up or registered as authentic instruments, the authenticity of which relates to the signature and the content of the instrument, and which have been established by a public authority or any other authority empowered to do so. However, the Regulation does not specify the content of the notion of “binding effect”. The Preamble cites notarial acts of adoption, which still seem to exist in some legislations, or administrative decisions establishing filiation following an acknowledgement of paternity. It thus seems that the text wishes to refer to acts of authority, which have a constitutive effect. Nevertheless, given the breadth of the definition of “jurisdiction” and the Senatsverwaltung case law, it seems doubtful whether it is necessary to introduce this category. In any case, the characterisation of authentic instruments with binding effect will pose difficulties. In principle, as the system is based on the production of a certificate issued in the state of origin, it will be up to the authority of origin to decide (Art. 37.2 of the Proposal). Article 71 also provides that Member States shall inform the Commission of the authorities empowered to draw up or register such documents. Authentic instruments with binding effect are recognised in other Member States if they have been formally drawn up or registered in a Member State whose courts have jurisdiction under Chapter II. In theory, these rules function as indirect rules of international jurisdiction. However, given the breadth of the proposed criteria for direct jurisdiction and, therefore, the fact that the proximity link may be weak, the effectiveness of this control is questionable. It is true that the situation is similar in the case of divorce, under the rules of Regulation 2019/1111, but the stakes are very different in these two cases. The privatisation of divorce may seem more acceptable because it involves two adults, and legal systems are no longer focused on defending the institution of marriage. It is quite different with filiation, particularly because of the bioethical dilemmas that cannot be ignored.

VIII. Non-Binding Authentic Instruments Most authentic instruments have no constitutive effect, but only a particular probative value. They establish a presumption iuris tantum that the persons named in the document are the parents of the child. This presumption can be challenged in court under the rules on jurisdiction and applicable law in the Regulation. The Regulation proposes that the probative value that the document would have in the Member State of origin should be extended to the other Member States and that in these States the document should therefore have the same or the most comparable probative value. This idea of applying the lex originis to the effects of the document implies that the effects of the document in the State of origin must be known precisely. In order to solve this difficulty, Annex III, which contains the form to be used to accompany these documents, provides fields for describing the probative value of the authentic instrument in the Member State of origin.79 79 The Marburg Group suggests however that it would be preferable to require Member States to provide such information and to publish it online. See Marburg group (note 66), p. 74.

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Proposal for a European Regulation on Filiation Matters The acceptance of the authentic instrument from one Member State in the other Member States is based on the production of the certificate and can only be refused if it is clearly contrary to public policy. Such a solution may cause some difficulties. First, the authentic instrument may be obtained following the recognition of a decision or legal situation from a third state. In this case, it is difficult to understand how the public policy exception could come into play, since it is not possible to know on what legal basis filiation was established. Second, one cannot exclude the possibility that there may be conflicting documents, for example if the child has several nationalities. The unification of the conflict rules is intended to ensure that filiation is the same in all participating Member States, but the application of the public policy clause or the operation of Article 17(2) could produce a divergent result. In such cases, it will need to be determined which document should prevail. However, the Regulation proposes no solution to this difficulty. The Preamble only states that the authority that is presented with two incompatible authentic instruments must decide, after having examined the circumstances of the case, which instrument should be given priority, which seems to be too subjective a rule.

XIX. The European Certificate of Parenthood The Regulation provides for a European certificate, which would be issued at the request of the child or his or her legal representative, for use in another Member State. Articles 46 to 57 are devoted to the certificate, named, in English, European Certificate of Parenthood. To a very large extent, these rules have been literally copy-pasted from Articles 62 to 73 of the Succession Regulation. It seems that the rationale behind this choice lies in the motto “never change a winning game”. There are, however, significant differences between the status of heir and that of a child. The term “heir” does not represent a civil status but rather a condition for receiving assets, credits and often also debts mortis causa. A filiation status is, at least in continental law countries, what identifies a person and her genealogy. The word “presumption” also has a different meaning in both texts. The presumption of a filiation “status” has always been a rebuttable presumption (iuris tantum) that the child born to a married woman was the result of sexual intercourse with her husband. Evidence that the parent-child relationship with the husband was inaccurate could be provided and would lead to the removal of the status. However, since the presumption is beginning to be applied to same-sex couples, it cannot possibly have that meaning. The word “evidence” is also difficult to interpret given the circumstances. A.

Procedural Aspects

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Cristina González Beilfuss/ Ilaria Pretelli States, like France or Spain, that are parties to the Convention (No 16) of the International Commission on Civil Status on the issue of multilingual extracts from civil status records, signed in Vienna on 8 September 1976. Again, like the certificate of succession, the certificate of parenthood is optional and, similarly, does not replace internal documents – such as birth certificates.80 However, once issued, it prevails over any other document attesting to a different truth as regards the parent-child relationship it “certifies”. This means that, instead of requesting a court decision or an authentic instrument attesting to a status filiationis different from the one resulting from the certificate, an interested party will need to request a withdrawal of the certificate, or a modification, as well as a temporary suspension of its effects. The competence for all these actions remains in the “state of origin” of the certificate. In the Commission’s view, there will be one and only Member State that will “establish filiation”.81 The Proposal provides that once issued by a Member State, no other Member State will be able to issue a certificate, even if competent to do so. This means that if a child of French nationality is born in Spain, although both states may issue a birth certificate naming the parents of said child, and although the courts of both states may be competent, only one will “establish filiation”. Once filiation is established in France, for instance, its authorities may issue the certificate, which will produce the same effects in all Member States, and which will prevent Spanish authorities from issuing a European certificate. Given the multiplication of fora provided for, the risk of having conflicting certificates or the race to a forum cannot be excluded. B.

Establishment of Filiation by Means of a Presumption, Evidence or with Binding Legal Effect

Copied mutatis mutandis from Article 69(2) of the Succession Regulation,82 Article 53(2) states: “[t]he Certificate shall be presumed to demonstrate accurately elements which have been established under the law applicable to the establishment of parenthood. The person mentioned in the Certificate as the child of a particular parent or parents shall be presumed to have the status mentioned in the Certificate.” There is, however, an ontological difference between the status of heir and 80 See Article 46(2) and (3) of the Proposal (note 1), identical to Article 62(2) and (3) of the Succession Regulation [“The use of the Certificate shall not be mandatory / The Certificate shall not take the place of internal documents used for similar purposes in the Member States.”]. 81 See Article 48 “The Certificate shall be issued in the Member State in which parenthood was established”. 82 Article 69(2) of the Succession Regulation reads as follows. “The Certificate shall be presumed to accurately demonstrate elements which have been established under the law applicable to the succession or under any other law applicable to specific elements. The person mentioned in the Certificate as the heir, legatee, executor of the will or administrator of the estate shall be presumed to have the status mentioned in the Certificate and/or to hold the rights or the powers stated in the Certificate, with no conditions and/or restrictions being attached to those rights or powers other than those stated in the Certificate.”

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Proposal for a European Regulation on Filiation Matters that of descendant. The first is a quality attached to a person in relation to a single succession; it is far from being exclusive (anyone can be an heir of multiple persons), can be waived, etc., and cannot be “established”. The certificate of succession is a means to claim specific rights to property or to the management of property. Once the succession is settled and closed, the certificate loses its function. Filiation, on the other hand, is a non-negotiable status, affecting the child’s identity and enjoyment of several fundamental rights. Despite the use of identical words, the meaning of “presumption of status” is thus far from being identical in the two certificates. This also appears when considering that the person applying for the certificate – the child or the legal representative of the child – needs to prove its status. The certificate of parenthood does not give the child or her parents a title to specific rights but contains non-rebuttable proof of the child’s identity. According to Article 49(3)(e): “The application shall contain […] the elements on which the applicant founds parenthood, appending the original or a copy of the document(s) establishing parenthood with binding legal effect or providing evidence of the parenthood;”.83 This and the other rules on the certificate seem to imply a distinction between presumption, evidence and binding legal effects of parenthood. In relation to the birth of a child, national authorities may issue several documents according to the circumstances of the child’s birth. When born as a result of a gamete donation to a married couple, the consent to ART from the spouse of the mother is an acknowledgement of paternity or co-maternity with binding legal effects. This seems to be the “document establishing parenthood with binding legal effects” foreseen by Article 49(3)(e). Evidence of parenthood is, rather, characteristic of biological filiations, where the birth from a mother is a fact ascertainable and the insemination by the father derived from the relationship he has with the mother. This presumption of paternity is rebuttable but requires a withdrawal or modification of the certificate. C.

Effects of the Certificate

Article 53 establishes that the certificate is presumed to attest faithfully to the elements that have been established under the applicable law. The use of the word presumption makes the content of the rule ambiguous. According to one interpretation, the certificate should merely attest to a presumption, but this is difficult to reconcile with the principle of effectiveness (“effet utile”) of community law. Rather, it may be noted that once issued, the certificate is binding in all Member States. As opposed to decisions and authentic instruments certifying a filiation but subject to grounds for non-recognition or acceptance, the certificate must Comp. with Article 65(3)(h) of the Succession Regulation, which reads: “the elements on which the applicant founds, as appropriate, his claimed right to succession property as a beneficiary and/or his right to execute the will of the deceased and/or to administer the estate of the deceased”. 83

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Cristina González Beilfuss/ Ilaria Pretelli always be accepted. No public policy exception is envisaged by the Proposal with regard to the certificate. There is undoubtedly the possibility to rectify, amend or request the withdrawal of the certificate, or suspend its effects, but the only authorities competent are those of the “state of origins”. It seems that the necessary conclusion to be drawn is that each Member State will be bound to record a filiation attested in another Member State by the certificate, despite its inaccurate appearance. It has been argued that the only possibility to refuse this conclusion consists in invoking Article 3(2)(i), which may be relied upon to argue that the certificate is not compatible with “the legal requirements for the recording of parenthood in a register of a Member State, and the effects of recording or failing to record parenthood in a register of a Member State”.84 It may also be argued that, if the applicable law is limited to establishing a presumption of paternity and the certificate would only serve to circulate such presumption, the added value of the European certificate would be questionable: the way to obtain the circulation of what the proposed Regulation defines as “an authentic instrument without binding effect” – which mainly refers to birth certificates – would be much simpler and would lead to the same result. It is however dubious that these interpretations would hold as they would substantially deprive the EU certificate of any valuable effect. It is therefore preferable to understand the certificate as the main and core innovation of the Proposal, requiring Member States to align with the original “establishment” of filiation that results from the EU certificate. This interpretation is also the one that led the Italian Senate to argue for the rejection of the Proposal.85 D.

Mutual Trust and Social Sustainability

With the introduction of the certificate, the European Union has the precious opportunity to intervene in matters of filiation without necessarily impairing the principles of subsidiarity and proportionality. Far from using private international law as an avenue for unregulated liberalisation, it should evaluate the possibility of using it as a compromise solution between the different and sometimes opposite concerns of Member States in filiation matters. By subjecting the recognition of foreign filiations to minimal standards – via the introduction of safeguards (e.g., a clause on “improper gains”)86 or the right of children to have access to their origins – it would offer a solution of compromise respectful of the best interests of children.

84 F. MARONGIU BUONAIUTI, “Recognition of Filiation Established in Other Member States pursuant to the European Commission’s Proposal and the Italian Position in Terms of Public Policy”, 5 May 2023, Universidad Carlos III de Madrid (oral presentation). 85 Supra (note 39). 86 Articles 8 and 32 of the 1993 Hague Convention of 29 May 1993 on Protection of Children and Co-operation in Respect of Intercountry Adoption.

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Proposal for a European Regulation on Filiation Matters There is a lesson to be learned from the story behind Article 56(6) of the Brussels II ter Regulation. In the previous system, Member States were obliged to blindly order the return of a child, whenever a return order had been pronounced by the State of the child’s previous habitual residence. Practice had however shown the inefficiency and unfairness of the rule, which was then abandoned– with the recast – in order to allow the reconsideration of that order by the forum in charge of enforcing it. Mutual trust serves purposes of procedural efficiency by avoiding a second look at the same instance. This second look may well be unnecessary, but only to the extent that the rules applied have a merely technical nature, as those conceived by experts – e.g., the ISO standards.87 Experience with child abduction cases has shown that, if the implementation of uniform rules affects, instead, fundamental rights of different nature, procedural efficiency may only come after doing justice for the individual. The purpose may be that of neutralising criminal activities such as human trafficking and violence against women. The best way to achieve a uniform implementation of fundamental rights is by attempting to agree on a solution considered to be the best one for the actual child. Although necessary and welcome, the remedy of Article 56(6) of the Brussels II ter Regulation runs the risk of being worse than the evil it is intended to prevent. The new rule does not ensure a real coordination between the authorities of the two Member States concerned.88 Rather than imposing mutual trust through a rigid division of competences between the State of origin and the State of destination, it should have been possible to pursue trust as an achievable goal by working through dialogue to reach a mutual understanding. This would require enhancing the collaboration of the two courts in the decision-making process.89 Mutual trust is something that the institutions of the EU should strive to achieve and not take for granted. Instead of imposing it as a dogma, it should be made the main objective to be pursued.

87 See the home page https://www.iso.org/standards.html characterising ISO standards as “a formula that describes the best way of doing something. It could be about making a product, managing a process, delivering a service or supplying materials – standards cover a huge range of activities. Standards are the distilled wisdom of people with expertise in their subject matter and who know the needs of the organizations they represent – people such as manufacturers, sellers, buyers, customers, trade associations, users or regulators.” 88 On Article 56(6) see C. GONZÁLEZ BEILFUSS, in C. GONZÁLEZ BEILFUSS L. CARPANETO/ TH. KRUGER/ I. PRETELLI/ M. ZUPAN, Jurisdiction, Recognition and Enforcement in Matrimonial and Parental Responsibility Matters – A Commentary on Regulation 2019/1111 (Brussels Iib), Elgar, 2023, pp. 467-468. 89 On the need to favour joint decisions in case of child abduction proceedings see I. PRETELLI, “Three Patterns, One Law - Plea for a Reinterpretation of the Hague Child Abduction Convention to Protect Children from Exposure to Sexism, Mysogyny and Violence against Women” in M. PFEIFFER et al. (eds), Liber Amicorum Monika Pauknerova, Praha: Wolters Kluwer, 2021, p. 391.

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X.

Final Remarks

The European legislator has had the courage to propose a regulation on a difficult subject, where the need for legislative intervention is increasingly felt. However, by focusing on the specific needs of rainbow families, it seems that the general perspective has been lost. Similarly, the need for in-depth prior studies, which would have been very useful in the absence of inspirational treaty rules, as in the case of parental responsibility, maintenance, matrimonial property regimes or succession, has been ignored. Haste is a bad advisor. Nonetheless, the fact that there is a text on the negotiating table opens a window of opportunity to move forward. Before that, it may be useful to widen the picture, look at the recent past and learn from the recast of the Brussels II bis Regulation, which was also driven by the need to nuance the imperative of mutual trust. It may also be useful to reflect upon the painful political lessons from Brexit and the war in Ukraine. The risk of a characterisation of the Proposal (and of the certificate) as an instrument of cultural invasion exists.90 These arguments may validate the criticisms of those who draw attention to the present transformation of the EU into an entity prone to techno-scientific governance of numbers, following a normalising logic, and enslaved by the needs of the market, imbued with imperialistic, or even colonialist views.91 Against this background, the scientific community should support the EU and orientate its effort towards being able to respond to the imperatives of solidarity. This means upholding all fundamental rights of children, women, LGBTIQA+ persons, and men not only as individual persons and families, but also in the collective dimension of peoples, and in the interest of a peaceful coexistence of future generations. Each population, within the EU, also has an own legal culture, and each culture should be equally capable of contributing, at its own pace, to the construction of a shared legal evolution and to shaping legal modernisation. The Proposal, as it stands, may put some European Member States in a “double bind”, a paradoxical injunction, where two imperatives contradict each other. The States prohibiting surrogacy and egg donation may not, at the same time, prohibit these practices at home and allow them abroad. The diversity that exists in comparative law with regard to egg donation and surrogacy – further complicated by the successive reforms experienced in States such as Greece and the UK – hinders the adoption of purely “geographical” private international law rules, which assume a neutrality of legislative solutions but simultaneously attempt to influence legislative evolution of national substantive family laws. To achieve this, the Commission will need to move away from the sclerotic postulate of mutual trust and start building a more solid foundation for mutual 90 See, below, H. LUKU, Free movement, Children’s Rights and national identity in the eu Parenthood Proposal, this Yearbook. 91 A. SUPIOT, La gouvernance par les nombres, Fayard, 2015. On the topic of filiation see, below, V. CALDERAI/ R. ZAMPERINI, Surrogacy Contracts and the (In)Alienability of Fundamental Rights a View from Italy, this Yearbook, recalling the foundations of the reproductive market in the Chicago School of law and economics and advising against the permeability of the EU to American neoliberal economic policies.

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Proposal for a European Regulation on Filiation Matters understanding of the existing concerns. This means identifying the specific and minimal requirements that legal orders may need to control. Is the consent of the women genuine? Is the right of the child to know his origins guaranteed? Have the political and social consequences of a liberalisation of the fertility market been duly measured? A transposition of the acquis communautaire onto the means of ensuring the right to be heard may find its way into the future regulation to ensure that all rights of the child recognised by the 1989 UN CRC Convention receive equal consideration when deciding on the recognisability of the legal bond attested to by a foreign authority between a child and her parents, in particular when all the parties are foreigners. What is at stake is the credibility of the European unifying project, and its motto: in varietate concordia.

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SURROGATE MOTHERHOOD UNDER DIFFERENT LAWS – LEGAL ARRANGEMENTS AND CHALLENGES OF MONGOLIA Tamir BOLDBAATAR*/ Batzorig ENKHBOLD**

I.

II.

III.

I.

International Surrogacy as a Global Issue and Related Controversies A. Types of Surrogacy B. Human Rights and Surrogacy C. Controversial Issues of Surrogacy D. The Hague Conference on Private International Law The Case of Mongolia A. Overview of the Surrogacy Legislation 1. Legislation on the Use of Donor’s Sperm and the Embryo Transfer 2. Legislation on Providing Services to the Surrogate Mother B. Current Situation and Debate on Surrogate Motherhood C. Cross Border Surrogacy D. Current Legislative Proposal 1. Prohibitions for Medical Staff (Article 8) 2. Type of Methods of Assisted Reproductive Technologies (Article 10) 3. Regulation of the Surrogate Mother and Intended Parents (Article 14) 4. Requirements of the Surrogate Mother (Article 15) 5. Requirements for the Intended Parents (Article 17) 6. Prohibitions in the Legal Relation of Surrogate Motherhood (Article 20) Conclusion

International Surrogacy as a Global Issue and Related Controversies

The concept of surrogate motherhood refers to the application of advancement of modern biotechnology and biomedically assisted reproductive techniques to the benefit of a sterile woman, a single man or an infertile couple. The practice con* Ph.D (NUM, Mongolia), LL.M (Mongolia, Japan), Senior Lecturer at the School of Law, National University of Mongolia. ** LL.M (ANU, College of Law), Treaty Law Expert, Counsellor at the Permanent Mission of Mongolia to the United Nations Office, World Trade Organization and other International Organizations at Geneva. The authors would like to thank Professor Gian Paolo ROMANO for his valuable comments and support.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 309-326 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Tamir Boldbaatar/ Batzorig Enkhbold sists in using a “surrogate” mother to give birth to a child who will be conferred at birth to one or more intended parents on the basis of a contract, following which they will also become the legal parents of such child. Bearing a child for another is not a recent concept. It was first introduced in the Bible (Genesis 30) “Rachel, who was childless, used her slave girl Bilha to bear a child for Jacob”. This type of surrogacy was probably practiced for centuries by people in various civilizations.1 A.

Types of Surrogacy

Many researchers have suggested terms and classifications of “surrogacy agreements”. For example, Professor Piotr Mostowik of Jagiellonian University in Cracow has suggested three distinctions: (a) a couple formed of a woman and a man contractually obtain the legal status of parents of a child of their genetic origin, regardless of the fact that another woman carried the child and gave birth to it, i.e., a form of “rental of a womb”); (b) one or more persons having a child in a similar manner using a gamete “donor”. In this case the “rental of a womb” is combined with in vitro fertilization (IVF) using either an egg or sperm of a donor; (c) a person or more contractually acquire the legal status of parent of a child despite the fact that, biologically, the child could not be related to the parent (if only one) or either of the parents.2 Professor Janusz Gajda of Jan Kochanowski University and Rafal Lukasiewicz Ph.D. of University of Rzeszow distinguishes according to the relation between mother and child: (1) a biological mother – a woman who gives birth to a child after pregnancy; (2) a genetic mother – a woman who may not or does not wish to give birth to the child but provides the egg necessary for IVF; (3) a sociological mother – a woman who wishes to be mother of a child and to raise it and obtains a legal recognition of the relationship with the child.3 Another distinction draws on the types of surrogacy: full and partial surrogacy. Both may use the technology of in vitro fertilization, which became available in 1978. Full surrogacy occurs when a surrogate is implanted with the sperm of the biological father and eggs of the biological mother or with those of donors. This has been termed gestational surrogacy. By contrast, partial surrogacy uses the sperm of father and the surrogate mother’s egg.4 This has been referred to as genetic surrogacy, because the child is genetically related to the surrogate mother, 1 J. SCHENKER, Legitimising Surrogacy in Israel: Religious Perspectives, in R. COOK/ S. DAY SCLATER/ F. KAGANAS (eds), Surrogate Motherhood: International Perspectives, 2003, p. 243. 2 P. MOSTOWIK, “May you live in interesting times.” General remarks, in P. MOSTOWIK (ed.), Fundamental Legal Problems of Surrogate Motherhood – Global Perspective, 2019, p.35. 3 J. GADJA/ R. LUKASIEWICZ, Principles of adoption system versus surrogate motherhood, in P. MOSTOWIK (ed.), Fundamental Legal Problems of Surrogate Motherhood – Global Perspective, 2019, p. 711. 4 C. SPIVACK, USA, in F. MONÉGER (ed.), Gestation pour autrui: Surrogate Motherhood, 2011, p.258.

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Surrogate Motherhood under Different Laws and in Mongolia and not to the intended mother. In this case, a pregnancy may also be obtained by artificial insemination. In the context of in vitro fertilization, embryos can now be tested for specific genes before implantation in the womb, which enables the intended parents to choose to be implanted only those embryos that have “acceptable” genes.5 According to the glossary revised by the International Committee for Monitoring Assisted Reproductive Technology (ICMART) and the World Health Organization, the gestational carrier (surrogate) is a woman who carries a pregnancy having concluded an agreement that she will give the offspring to the intended parents. Gametes can originate from the intended parents, if more than one, or one or more third persons.6 B.

Human Rights and Surrogacy

Everyone has a right to benefit from advanced technology as mentioned in Article 15.1(b) of the International Covenant on Economic, Social and Cultural Rights, which provides for the enjoyment of the benefits of scientific progress and its applications.7 However, development of the “surrogacy” market has provoked both legal and ethical dilemmas, as this jeopardizes the dignity of both mother and child. The concept of human rights and fundamental freedoms is broadly accepted. Therefore, in every field, human rights issues are the main reasons for protecting human beings from mistreatment. Human rights are of considerable importance in the context of new technologies, biomedicine and bioethics.8 There are several reports regarding the analysis of human rights, and legal and ethical issues on surrogacy. For example, the report “Surrogate Motherhood and Human Rights” by Claire de la Hougue and Caroline Roux mentions that unacceptable practices arise from this phenomenon, especially the exploitation of poor women, which is clearly contrary to the recognition of the inherent dignity of all members of the human family, to quote the Preamble of the Universal Declaration of Human Rights.9 Moreover, Maud de Boer-Buquicchio, the UN Special Rapporteur on the sale and sexual exploitation of children, highlighted that surrogacy arrangements cause sale or trafficking of children. Indeed, surrogacy is a legally, ethically and 5

D. BEYLEVELD/ R. BROWNSWORD, Human Dignity in Bioethics and Biolaw, 2001,

p.145. 6 “Fertility and Sterility” 2009, Issue 92. No.5., https://www.fertstert.org/action/ showPdf?pii=S0015-0282%2809%2903688-7 Accessed 15 May 2023. 7 https://www.ohchr.org/en/instruments-mechanisms/instruments/internationalcovenant-economic-social-and-cultural-rights. Accessed 26 April 2023. 8 R. O’CONNELL/ SJEF GEVERS, Fixed Points in an Changing Age? The council of Europe, Human Rights, and the Regulation of New Health Technologies, in M.L. FLEAR/ A.-M. FARRELL/ T.K. HERVEY/ TH. MURPHY (eds), European Law and New Health Technologies, 2013, p.48. 9 https://www.nomaternitytraffic.eu/wp-content/uploads/2017/09/2016-NoMaternity-Traffic-EN.pdf. Accessed 28 April 2023.

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Tamir Boldbaatar/ Batzorig Enkhbold socially complex issue; as such any attempt to commodify children contradicts basic international human rights norms. In particular, commercial surrogacy constitutes a sale of children and threatens to treat children like goods and pregnancy like a service. This fact has raised ethical considerations which violate the dignity of the child and as well as woman.10 There is also another issue of the rights of a child conceived with the help of a donor to have access to information that allows the child to identify the donor. For instance, in the future, the disclosure of the child’s origin, especially as a result of an anonymous embryo donation or donor eggs, could cause emotional distress to the child when it learns that it has, somewhere, biological parents who are at the origins of its birth. The Rose and Another v Secretary of State for Health case played a significant role in the removal of donor anonymity. In that case, Rose, an adult woman, and EM, another person, had both been conceived using donor insemination. They had sought access to information about their anonymous sperm donors as well as the introduction of a contact register, but the Secretary of State for Health of UK had rejected their requests. Therefore, they invoked Article 14 of the European Convention on Human Rights,11 that reads “the enjoyment of the rights and freedoms shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth, or other status.” As per this Article there should be no discrimination between donor offspring and adoptees or among donor offspring. Moreover, Article 8 of the European Convention on Human Rights states that “everyone has the right to respect for his private and family life, his home and his correspondence”. This implies the concept of personal identity, including the right to obtain information about one’s biological parents. C.

Controversial Issues of Surrogacy

Behind the increase in reproductive tourism, there are economic motives linked to the lower costs of surrogate procedures in certain countries. The main reason why reproductive tourism has become controversial is commercialization itself.12 Furthermore, this activity also attracts organized crime groups for the exploitation of women, and the practice may lead to the sale of children.13 On the other hand, from Human Rights Council discusses the right to privacy, and commercial surrogacy in the context of the sale of children 06 March 2018, available at https://www.ungeneva.org/ en/news-media/meeting-summary/2018/03/human-rights-council-discusses-right-privacyand-commercial. Accessed 15 May 2023. 11 I. TURKMENDAG, When Sperm Cannot Travel: Experiences of UK Fertility Patients Seeking Treatment Abroad, in M. FLEAR/ A.-M. FARRELL/ T.K. HERVEY/ TH. MURPHY (eds), European Law and New Health Technologies, 2013, p.364. 12 M. LANE, Ethical Issues in Surrogacy Arrangements, in R. COOK/ S. DAY SCLATER/ F. KAGANAS (eds), Surrogate Motherhood: International Perspectives, 2003, p.122. 13 https://www.ohchr.org/en/special-procedures/sr-sale-of-children/surrogacy, accessed 16 May 2023. 10

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Surrogate Motherhood under Different Laws and in Mongolia a sociological perspective, it is seen as a welcome solution to the problem felt by infertile couples. Assisted reproductive technology is considered a last resort method of having their own, and to a certain extent biological, child by infertile couples. Therefore, many states tend to regulate surrogate motherhood. However, surrogacy causes dilemmas of human values of individual, family, community and notions of rights and responsibilities.14 There are also discussions on whether the issue of commercial surrogate practices contradicts international conventions such as the Convention on the Elimination of All Forms of Discrimination against Women, Slavery Convention, Convention on the Rights of the Child, Convention against Transnational Organized Crime. One example is that surrogacy contradicts in particular Articles 7 and 9 of the Convention on the Rights of the Child - the violation of the child’s right to know his or her own parents, and not to separate the child from the parents against their will.15 From the viewpoint of the surrogacy contract, is such a contract one for services or for a sale? The existing dilemmas and controversial questions have led some international NGOs to stand against the proliferation of the surrogacy industry. The International Union for the Abolition of Surrogacy, for example, is working to implement an international prohibition of the commodification of the body, especially through surrogacy. The Union was founded to promote and protect the respect of childhood, women, dignity and human rights. On the other hand, an increasing number of international human rights, inter-governmental and nongovernmental organizations are actively working on surrogacy to protect the rights of the child, the surrogate, and the intended parents as well as focusing on the unification of different domestic regulations. One such organization is the Hague Conference on Private International Law. The regulations vary greatly, both depending on the states’ cultural, political and social environment, and because experience with the implementation of new surrogacy laws has prompted legal reforms to restrict access to the practice. In this respect, the organization’s role concerning the cross-border nature of surrogacy is becoming more crucial than ever. For example, due to the differences in the laws applicable to cross-border cases of surrogacy, there can be a risk of statelessness for children. This happens where the legal regime of the country of origin of the intended parents and that of the surrogate mother do not allow citizenship to be granted to the child.16 D.

The Hague Conference on Private International Law

The Hague Conference on Private International Law (HCCH) is a global intergovernmental organization actively working in the area of private international 14 Surrogate Motherhood: International Perspectives, R. COOK/ S. DAY SCLATER/ F. KAGANAS (eds), 2003, p.16. 15 A. WEDEL-DOMARADZKA, Surrogacy – A solution that brings new problems. International organizations and surrogate motherhood, in P. MOSTOWIK (ed.), Fundamental Legal Problems of Surrogate Motherhood – Global Perspective, 2019, pp. 615-616. 16 https://www.hcch.net/en/projects/legislative-projects/parentage-surrogacy, accessed 16 May 2023.

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Tamir Boldbaatar/ Batzorig Enkhbold law. Its main goal is to develop international conventions, protocols and soft law instruments. Since 2010, HCCH has been working on surrogacy – more intensively since 2011 based on the Convention on Protection of Children and Cooperation in respect of Intercountry Adoption of 1993. Furthermore, the HCCH is the main organization to establish international cooperation between the country of origin of intended parents and the country of origin of the surrogate, and for the unification of the different regulations on surrogacy issues throughout the world. This is an absolute priority of future work of HCCH.17 Consequently, since 2011, the working group has introduced key reports on surrogacy every year.18 The HCCH Expert’s Group on Parentage/Surrogacy met for the 12th time from 17 to 21 October 2022; the meeting was attended by 34 experts representing 23 Member States, one Member Regional Economic Integration Organization and two Observers. The Experts’ Group of the Parentage/ Surrogacy Project drafted the Final Report on “The feasibility of one or more private international law instruments on legal parentage” and submitted it to the HCCH Council on General Affairs and Policy (CGAP) in November 2022.19 The annual meeting of the HCCH Council on General Affairs and Policy was held from 7 to 10 March 2023. During the meeting, CGAP welcomed the above report. CGAP mandated the establishment of a Working Group on private international law matters related to legal parentage, including legal parentage resulting from an international surrogacy arrangement, and to define the aim of any new instrument in that matter by taking into account human rights, in particular children’s rights which are enshrined in the UN Convention on the Rights of the Child.20 The final report emphasized that legal parentage established in one State but not recognized in other States results in “limping legal parentage” and can create significant problems for children and their parents. Harmonizing PIL rules on legal parentage amongst states would reduce the risk of such limping legal parentage whilst respecting the diverse substantive rules on legal parentage of states.21 Lack of cooperation will result in the relocation of entities dealing with surrogacy from one country to another. The following issues are important for unification of legal processes such as birth registration, the acquisition of nationality, the establishment of parentage (especially cross-border recognition of legal parentage), the legal status of children and intended parents, child welfare etc. The Experts’ Group was mandated to prepare two separate binding legal instruments on legal parentage: (i) on legal parentage in general, which has been The Desirability and Feasibility of Further Work on the Parentage/Surrogacy Project (Prel. Doc. No. 3B of March 2014), p.21, available at https://assets.hcch.net/ docs/6403eddb-3b47-4680-ba4a-3fe3e11c0557.pdf., accessed 28 March 2023. 18 https://www.hcch.net/en/projects/legislative-projects/parentage-surrogacy, accessed 28 March 2023. 19 https://www.hcch.net/en/news-archive/details/?varevent=878, accessed 28 March 2023. 20 https://assets.hcch.net/docs/5f9999b9-09a3-44a7-863d-1dddd4f9c6b8.pdf, accessed 28 March 2023. 21 https://assets.hcch.net/docs/6d8eeb81-ef67-4b21-be42-f7261d0cfa52.pdf, accessed 28 March 2023. 17

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Surrogate Motherhood under Different Laws and in Mongolia referred to as a possible draft “Convention”, (ii) on legal parentage established as a result of an international surrogacy arrangement (ISA), which has been referred to as a possible separate draft “Protocol”.22 A separate draft Protocol is justified by the divergent domestic approaches to surrogacy arrangements such as banning the practice of surrogacy or permitting and explicitly regulating it, or neither prohibiting nor regulating it. Mongolia belongs to the “permitting and explicitly regulating surrogacy” group of countries. The Experts’ Group also revealed that, regarding the legal parentage of the intended parents, legislation may also vary from (i) establishing legal parentage at birth, to (ii) transferring legal parentage by judicial decision, and to (iii) re-establishing legal parentage by adoption, whenever the original legal parentage is not recognised by the State of destination of the child.23 The present practice, in Mongolia, consists in re-establishing a legal parentage granted abroad to a child born by ISA by adoption. However, article 2.8.5 of the “Regulation on providing services to surrogate mother”, which was adopted by the Health Minister in 2018, reads as follows: “a surrogate mother should not have any parental rights over the child, and the birth certificate of the baby should bear the names of the intended parents as parents”.

II.

The Case of Mongolia

A.

Overview of the Surrogacy Legislation

Surrogacy is allowed in the United Kingdom, Israel, Greece, Ukraine, Portugal, Cyprus, Russia, Georgia, Canada (except Quebec), the Republic of South Africa, Australia, Thailand, India and in some states in the United States of America. However, in 2018, the Government of India made commercial surrogacy illegal due to criticism of the “surrogacy industry”.24 Surrogacy legislation varies from country to country due to the different social and traditional features of each country’s society. Therefore, surrogacy can be considered comparatively.25 Surrogate arrangements are prohibited in France, Sweden, Hungary, Germany, Ireland, Final Report “The feasibility of one or more private international law instruments on legal parentage” by Parentage/Surrogate Experts’ Group, November 2022, p. 8 available at https://assets.hcch.net/docs/6d8eeb81-ef67-4b21-be42-f7261d0cfa52.pdf, accessed 30 March 2023. 23 Final Report “The feasibility of one or more private international law instruments on legal parentage” by Parentage / Surrogate Experts’ Group, November 2022, p. 25 available at https://assets.hcch.net/docs/6d8eeb81-ef67-4b21-be42-f7261d0cfa52.pdf, accessed 30 March 2023. 24 O. BOBRZYNSKA, Surrogate motherhood: Current Trends and the Comparative Perspective, in P. MOSTOWIK (ed.), Fundamental Legal Problems of Surrogate Motherhood – Global Perspective, 2019, pp. 647-651. 25 S. SPAULDING, Surrogacy and Japan: A case for Regulation, in UCLA Pacific Basin Law Journal, Volume 38, Issue 1, available at: https://escholarship.org/uc/item/ 56b7g9qh. Accessed 30 March 2023. 22

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Tamir Boldbaatar/ Batzorig Enkhbold Italy, China (mainland), Japan, Switzerland, Finland, Iceland, Latvia, Mexico (Queretaro), Slovenia, Singapore, Tunisia, Turkey, Pakistan, Saudi Arabia, Serbia and some jurisdictions within the United States of America (Arizona, Michigan, District of Columbia).26 Mongolia is at the crossroads of deciding whether or not the Law on the Support for Assisted Reproduction is necessary. The first child born in Mongolia through surrogacy was registered in 2003.27 This phenomenon currently has no comprehensive legal regulation. The Family Law of 1999 contains no provision on surrogacy. Similarly, no statutes expressly provide for criminal sanctions for such conduct. Therefore, in terms of criminal law, surrogate motherhood is not a crime. However, the 2015 Criminal Code states that trafficking of a born or adopted child shall be punishable.28 The Donors Law was adopted in 2000 and was twice amended, in 2012 and 2018. According to this law, the Agency on Transfer of Cell and Organs was established in March 2018 at the Health Centre.29 The provisions on surrogate motherhood were adopted through the 2018 amendment. According to the definition in Article 3.1.16 of the Donors Law, a surrogate mother is the woman who undertakes the obligation to receive the embryo of others by transfer, carry the baby possibly resulting from the practice and possibly give birth to a child”. Article 18.5 of the Donors Law stipulates that a woman who is unable to become pregnant naturally, carry a pregnancy to term or give birth to a child due to health conditions, diagnosed and attested by a medical report, may use a surrogate mother. This provision is the starting point of surrogacy arrangements in Mongolian legislation. To implement Article 18 of the Donors Law, in 2018, the Minister of Health of Mongolia issued the following rules to deal with surrogacy, namely: ‐ Regulation on the use of donor’s sperm and the embryo transfer (Annex 1 of the Health Minister’s Order A/500 – 7 December 2018); ‐ Regulation on providing services to surrogate mothers (Annex 2 of the Health Minister’s Order A/500 – 7 December 2018); ‐ Regulation on the model contract of surrogacy (Annex 3 of the Health Minister’s Order A/500 – 7 December 2018); ‐ Regulation on creating the registration data system of surrogacy (Annex 4 of the Health Minister’s Order A/501 – 7 December 2018). 1.

Legislation on the Use of Donor’s Sperm and the Embryo Transfer

Clinics, which provide medical service on assisted reproduction should not be allowed to provide intermediation services and find sperm donors for its clients. A. ANATOLIIVNA HERTS, Surrogate motherhood in Ukraine: method of fertility treatment, judges’ activism and doctrine, in P. MOSTOWIK (ed.), Fundamental Legal Problems of Surrogate Motherhood – Global Perspective, 2019, p. 421. 27 http://mongolnews.mn/Архив/bxg, accessed 29 March 2023. 28 See Article 16.6 of the Mongolian Criminal Code, 2015. 29 http://hdc.gov.mn/page/139/ Эс, эд, эрхтнийг шилжүүлэн суулгах үйл ажиллагааг зохицуулах алба [Agency on Transfer of Cell and Organs]. 26

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Surrogate Motherhood under Different Laws and in Mongolia Biological parents have a right to choose donors. Intended parents must be aged between 18 and 55 and only Mongolian citizens can be parties to the surrogacy arrangements. The sperm donor must be a male or female who freely and knowingly consents to the donation. In addition, there should be no genetic diseases within 4 generations of the donor’s bloodline. Male and female donors must be between the ages of 25 and 35. The donor should be chosen from within the bloodlines of the spouses. The donor cannot be a foreign national. The sperm donor should have neither legal nor financial responsibility over the child or nor possess any rights to claim that the child is his/hers. The child born by using a donor’s sperm irrespective of any abnormality (physical or mental), will be considered the legitimate child of the intended parents’ family. In case of death of one of the spouses before the birth of a child born by using a donor’s sperm, he or she will also be considered the legitimate child of the intended parents’ family.30 2.

Legislation on Providing Services to the Surrogate Mother

The reproductive clinic is also prohibited from serving as an intermediary between the intended parents and the surrogate mother. The biological parents have a right to choose the surrogate mother. Surrogacy is allowed only when the intended mother suffers from a physical impossibility or medical contraindication to carry out the pregnancy in her uterus. The surrogate mother must be a woman who freely and knowingly consents to be a surrogate mother and has concluded a contract with the intended parents and a copy of the contract must be attached to the medical file. The surrogate mother should be in good physical, emotional and reproductive health condition certified by the medical institution and have previously given birth to her own living and healthy child. If she has more than one child, the interval between the surrogacy and her last two pregnancies must not be less than 2 years. She should be between 25 and 35 years of age and cannot be considered the mother of the new-born child. The surrogate mother must transfer the new-born child to the intended parents in accordance with the contract. If the surrogate mother’s heath is at risk at any point during the pregnancy or during the delivery of the child, her health shall take precedence. If that is the case, the intended parents must pay all associated costs in accordance with the contract. In order to avoid any legal complications, the surrogate mother shall have no parental rights over the child, and the birth certificate of the baby shall bear the names of only the intended parents. A child born through assisted reproductive technology shall be presumed to be the legitimate child of the intended parents with all the attendant rights and obligations of parentage, maintenance and other rights and obligations as a naturally born child. In case of divorce between the Regulation on the Use of Donor’s Sperm and the Embryo Transfer (Annex 1 of the Health Minister’s Order A/500 – 7 December 2018) [Монгол Улсын Эрүүл Мэндийн сайдын тушаал – Журам батлах тухай, 2018.12.08, A/500, Донор бэлгийн эс ашиглах, үр хөврөлийг шилжүүлэн суулгах тухай журам / Нэгдүгээр хавсралт], available at https://moh.gov.mn/uploads/files/e2d58e27ef94b40bd3ed9c009571f68969f9b260.pdf, accessed 31 March 2023. 30

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Tamir Boldbaatar/ Batzorig Enkhbold intended parents before the delivery of the child, the new-born surrogate child should be considered their legal child. The intended parents are prohibited from transferring the embryo to another surrogate mother at any time during the pregnancy. If the surrogate mother becomes pregnant successfully and gives birth to a child, the remaining embryos may be transferred to the same surrogate mother after 2 years. Until then, the reproductive clinic should store the embryo according to the standard storage rules for later use.31 B.

Current Situation and Debate on Surrogate Motherhood

In Mongolia, five clinics are authorized to conduct reproductive services, namely the Unimed International Hospital, the Ojinmed Clinic, the “CLWH” Fertility clinic, the Regenerative Medical Center (RMC) and the Infertility and Reproductive Centre of the National Centre for Maternal and Child Health. Unimed International Hospital’s Sperm Transplantation Centre was established in 2011 and is the first complex reproductive infertility diagnosis and treatment centre in the country. This hospital follows the European Union and Mongolian standard guidelines and has German IVF treatment equipment.32 The Japanese specialist Dr. Osamu Kato formulated his in vitro fertilization stimulation protocols through clinical research and, after achieving some success, he established “Kato Ladies Clinic” in Tokyo in 1993. The Mongolian “Ojinmed Clinic” was established in 2015 as a branch of Kato Ladies Clinic.33 The South Korean “CLWH” Fertility clinic has provided in vitro fertilization treatment for the past 19 years. Their services are not only local but can also be extended to the patient’s home country by local physicians who follow up with the patients their visit to CLWH clinic in South Korea. As many Mongolian couples visit South Korea for this purpose, “CLWH” Fertility clinic opened a branch in Mongolia. This decision reduces the treatment period by performing the ovulation induction procedure in the patient’s home country and allows the intended parents to have a child in Mongolia without having to travel. In 2018, the Regenerative Medical Center (RMC) was established, and it follows the Japanese, American, and German ART technology.34 The National Centre for Maternal and Child Health is a Mongolian state hospital, which has an Infertility and Reproductive Centre. This centre performs Regulation on Providing Services to the Surrogate Mother (Annex 2 of the Health Minister’s Order A/500 – 7 December 2018) hereafter, Regulation [Монгол Улсын Эрүүл Мэндийн сайдын тушаал – Журам батлах тухай, 2018.12.08, A/500, Тээгч эхэд үзүүлэх тусламж үйлчилгээний тухай журам/ Хоёрдугаар хавсралт], available at https://moh.gov.mn/uploads/files/e2d58e27ef94b40bd3ed9c009571f68969f9b260.pdf, accessed 31 March 2023. 32 http://www.ivfmongolia.mn, accessed 15 May 2023. 33 https://www.ojinmed.mn/aboutus, accessed 15 May 2023. 34 https://rmc-mongolia.com/%D0%B1%D0%B8%D0%B4%D0%BD%D0%B8% D0%B9-%D1%82%D1%83%D1%85%D0%B0%D0%B9/%D1%82%D0%B0%D0%BD% D0%B8%D0%BB%D1%86%D1%83%D1%83%D0%BB%D0%B3%D0%B0/, accessed 14 May 2023. 31

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Surrogate Motherhood under Different Laws and in Mongolia gynaecological examinations and tests, male infertility screening according to national and international guidelines; for example, semen analysis for male infertility is performed according to the 2010 WHO guidelines.35 These clinics provide fertility treatment options through various forms of biomedical assistance such as: intra uterine insemination (IUI), ovulation induction with timed intercourse (OITI), in vitro fertilization (IVF), testicular sperm extraction (TESE), intra-cytoplasmic sperm injection (ICSI), assisted hatching, embryo vitrification and warming, and semen analysis. The main objective of some clinics is to develop medical tourism with the latest world-class equipment and technology; the “CLWH” Fertility clinic is one of them.36 Among these technologies, an embryo transfer in gestational surrogacy is one of the more popular, which consists of in vitro fertilization and implantation of the embryo/fertilized egg into the uterus of the surrogate mother who carries and delivers the baby. The following 2018-2022 statistics were obtained from the Ministry of Health.37 1. Number of people to whom an embryo was transferred – 1729 2. Number of surrogate mothers to whom an embryo was transferred – 99 3. Number of mothers who became pregnant through infertility treatment – 1057 4. Number of mothers who became pregnant through infertility treatment to whom a living child was born – 534 5. Children born alive to a surrogate mother – 27

35 https://ehemut.mn/index.php/introduction/structure/gynecology/urguidel, accessed 14 May 2023. 36 https://www.clwh.mn/page/1, accessed 14 May 2023. 37 Монгол Улсад үр шилжүүлэн суулгах аргаар хүүхэд төрүүлж байгаа талаарх өнөөгийн байдал, статистик тоо баримт болон “Эрүүл мэндийн сайдын 2018 оны A/500 дугаар тушаалын хэрэгжилт, тулгамдаж буй асуудал” 2022 оны тайлан, [The Report on current situation and statistics of delivery a child through embryo transfer in Mongolia and “The implementation of the Health Minister’s Order A/500, 2018 and current problem”, 2022].

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Tamir Boldbaatar/ Batzorig Enkhbold The table of the report of the Ministry of Health on embryo transfer in the first half of 2022: Age 31-34

35-39

40-45

152

208

331

205

45

941

Total number of people to whom an embryo was transferred

114

141

183

88

33

559

Number of mothers who became pregnant (FHR+) Number of children born

63

94

73

35

15

280

51

69

64

36

11

231

5

Sperm donors (IUI, IVF)

10

11

4

5

5

35

6

Egg donors

47

24

16

4

1

92

7

Number of surrogate mothers to whom an embryo was transferred

20

9

10

4

4

47

8

Number of children born alive by surrogacy

5

2

2

3

2

14

9

Total

462

558

683

380

116

2199

No

Category

1

The number of procedure for inlet/suckle of ovum

2

3

4

320

30

45

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Total

Surrogate Motherhood under Different Laws and in Mongolia During the first half of 2022, 14 children were born through surrogacy. Laws and rules are sometimes applied in ways that differ from how they are written. There are some problems in implementing the following regulations: a) Legislation on providing services to surrogate mother (Annex 2 of the Health Minister’s Order A/500 – 7 December 2018): ‐ lack of unified registration data system regarding surrogacy; ‐ Article 2.8.5 of the Regulation provides that a surrogate mother shall have no parental rights over the child, and the birth certificate of the baby shall bear the names of his/her intended parents. The intended parents become the sole parents of the child for all purposes, where it is determined at pre-birth stage. However, in practice, the initial registration of birth and issuance of the birth certificate is always made under the name of the surrogate mother, and afterwards the adoption process between the surrogate mother and the intended parents commences. b) Legislation on the use of donor’s sperm and the embryo transfer (Annex 1 of the Health Minister’s Order A/500 – 7 December 2018): ‐ According to Article 3.2.8 of the Regulation, the donor must be a Mongolian national. What if a former Mongolian national, who is now a foreign national by naturalization, wants to become a donor for his or her bloodline relatives? The relevant clinics submitted their proposal to the Ministry of Health to accept this possibility. C.

Cross Border Surrogacy

The main medical tourism destinations for Mongolians are South Korea, China, Japan, Thailand and India. Like many other low-to-middle income countries, Mongolia is seeing a significant outflow of patients to the above-mentioned countries. Mongolians seek care abroad because of a lack of faith in their domestic health system combined with the hope for treatment afforded by seemingly limitless options abroad. Another reason is the lack of advanced-technology interventions and reliable diagnostic services. Similarly, laboratory test results are not reliable in Mongolia. Therefore, this practice has negative economic impacts on the domestic economy, i.e. foreign currency outflow from Mongolia. For example, in each year between 2015-2018, 3100-3800 people applied for visas for medical purposes.38 Between 2019 and 2022, 74 citizens requested visas from the Embassies of South Korea and India for medical purposes and 11 couples obtained visas to South Korea for embryo transfer medical services.

38 https://www.researchgate.net/publication/275772739_Outbound_medical_tourism _from_Mongolia_A_qualitative_examination_of_proposed_domestic_health_system_and_ policy_responses_to_this_trend, accessed 17 May 2023.

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Tamir Boldbaatar/ Batzorig Enkhbold D.

Current Legislative Proposal

In 2017, several Parliament members proposed a draft law on Support for Assisted Reproduction, which aimed at regulating the procedure of surrogate motherhood.39 They emphasized that one of the important indicators of the population’s reproductive health is infertility. Therefore, reproductive technologies, in particular, surrogacy could be one solution for couples to have children of their own. The purpose of the draft is to authorize surrogate motherhood in Mongolia and is based on the freedom of individuals and on the prevalence of the human will to have a child. Furthermore, it authorizes only altruistic (non-commercial) surrogacy. A discussion on the legal regulation of surrogacy was held, however, a number of legislators were reluctant to approve this draft, mostly due to possible commercial abuses, which already occur quite often in some foreign countries. The drafters introduced the following proposals. The initial requirement is that the treatment for infertility and assisted reproductive technologies be implemented only in licensed healthcare institutions; this service should be based on freely-given consent of the parties. The draft specifies the imperative rights and obligations of the intended parents and the surrogate mother. 1.

Prohibitions for Medical Staff (Article 8)

The draft includes the following prohibitions for the medical staff of a healthcare institution: ‐ to receive additional payment from the donors or from their family members for transferring the donor’s embryo and cells; ‐ to advertise, to act as an intermediary, or to find a surrogate mother for its clients; ‐ to advertise about the transfer of embryos for commercial benefit; ‐ to perform an abortion without the written permission of the pregnant or the surrogate mother (who became pregnant by assisted reproduction), her doctors and her legal representatives; ‐ to change a human embryo, or cells and to use or store them for commercial purposes; ‐ to use the infertility treatment and assisted reproduction methods for commercial, non-scientific research or experimental purposes. 2.

Type of Methods of Assisted Reproduction Technologies (Article 10)

The following types of assisted reproduction technologies are permitted for infertility treatments: а) Intrauterine insemination b) In vitro fertilization and embryos transfer 39

322

http://forum.parliament.mn/projects/415, accessed 14 May 2023.

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Surrogate Motherhood under Different Laws and in Mongolia с) Use of a surrogate mother, who carries and gives birth to a child d) Other scientific methods that have been used often with good results The donor’s sperm should be used only for one pregnancy. 3.

Regulation of the Surrogate Mother and Intended Parents (Article 14) ‐ ‐ ‐ ‐ ‐

4.

The parties who intended to have a baby by surrogacy must be a married couple and should both possess full legal capacity; The intended parents shall initially choose a surrogate mother among their close relatives; if no such person is available, another surrogate mother can be chosen with the mutual written consent of the parties; The surrogate mother has the right to receive social benefits during pregnancy in the same way as other pregnant mothers and is entitled to equal right in labour relations. The parties must undergo a full medical and mental examination; Confidentiality must always be maintained, and the right to privacy of the surrogate mother must be protected. Requirements of the Surrogate Mother (Article 15)

The surrogate mother shall meet the following requirements: ‐ If the surrogate mother is married, her spouse’s written consent is required; ‐ The surrogate mother shall conclude the contract of surrogate motherhood with the intended parents and the clinic that will provide assisted reproduction services; ‐ The surrogate mother shall conclude a life insurance (accidental death) policy and other types of insurance contracts with the intended parents and an insurance company. 5.

Requirements for the Intended Parents (Article 17) ‐ ‐ ‐ ‐ ‐

The intended parents must be a married couple who has failed to achieve a pregnancy during 12 months or more of regular unprotected sexual intercourse and this is proven by a certificate of the medical institution; The intended parents must be a married couple between the ages of 23 and 55 who have signed a mutual written consent to have a child by a surrogate mother; The intended parents should have financial stability, sufficient income to pay a monetary reward and compensation according to the contract with the surrogate mother; The intended parents should be legally bound to accept custody of the child; The obligations of the intended parents according to the contract remain in force even after divorce;

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Tamir Boldbaatar/ Batzorig Enkhbold ‐

6.

A child born to a surrogate mother must be registered in the civil registry according to the Civil Registration Law and a birth certificate shall be issued. Prohibitions in the Legal Relation of Surrogate Motherhood (Article 20)

‐ ‐ ‐ ‐ ‐ ‐

to carry or force someone to carry an embryo for commercial purposes; the surrogate mother cannot at the same time be the ovum donor; to request payment in addition to that provided in the contract after the birth of a child; to refuse to transfer the new-born child to his or her intended parents; for the parties to select the gender of the child to be carried by the surrogate; to the intended parents to refuse to accept custody of the child, irrespective of any abnormality in in such child.

III. Conclusion A father’s bloodline is considered a top priority in Mongolia. Therefore, the gestational surrogacy with an intended mother’s own egg and a third party’s sperm or with third parties’ egg and sperm would not usually be practiced in Mongolia. Gestational surrogacy with the intended father’s own sperm and the intended mother’s egg would be the preferable type of surrogacy i.e. where the embryo is formed from the genetic material of the intended parents. If this is not possible, the intended parents select donors from among their close relatives. Intended parents prefer that the surrogate be selected from their families and relatives due to the genetic attachment. Traditionally, Mongolians are keen to avoid litigation, and prefer an out-of-court settlement or any other form of reconciliation. When surrogacy problems involve close relatives, they might never be litigated. Thus, there are no such incidents thus far. This is not the case only for Mongolians but is also a traditional feature for almost all Asian countries. Korean scholars, for example, are suggesting banning surrogacy contracts, because they violate good customs and other aspects of the social order. Moreover, the majority of Koreans have negative thoughts about surrogacy and oppose it.40 The country’s law neither bans nor specifically allows surrogate mothers as there is no specific statute on surrogacy. Several bills on surrogate arrangements have been submitted to the National Assembly. However, due to the colliding opinions of stakeholders the bills did not pass successfully.41 40 P. DONG-JIN, Surrogate Motherhood: Legislative Theoretical Research, in F. MONÉGER (ed.), Gestation Pour Autrui: Surrogate Motherhood, 2011, pp.114, 116. 41 https://www.surrogacycentregeorgia.com/surrogacy/surrogacy-in-korea/, accessed 14 May 2023.

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Surrogate Motherhood under Different Laws and in Mongolia Similarly, the Japanese people avoid any legal or judicial intervention in their everyday life as much as possible.42 Japan does not have a separate law to confirm whether to allow surrogacy contracts or to provide with whom a child born from a surrogate mother has a relationship (or define such a relationship). It is a similar situation to that of Korea.43 As mentioned above, several branches of Korean and Japanese fertility clinics currently operate in Mongolia. From this point, the following questions may arise. What has led to the increase in branches of Korean and Japanese fertility clinics in Mongolia? Is it because neither country allows surrogacy? Do the foreign fertility clinics intend to expand their medical tourism business in Mongolia? Does Mongolia really need a separate law to allow surrogacy? If not, how it should be regulated? In Mongolia, it is prohibited for an unmarried couple, a single individual or a same-sex couple to become intended parents and use a surrogate mother. Samesex marriage is not allowed under Mongolian law. Moreover, there is no regulation concerning registered co-habitants in Mongolia. This is highly influenced by legal, historical, traditional, and social specificities of Mongolia. Article 6.2 of the 1999 Family Law states that “a man shall have one wife and a woman shall have one husband”, thus, it clearly prohibits same-sex marriage. It also means that a marriage of a Mongolian national to a gay person in a foreign country shall not be recognized as a legal marriage in Mongolia. It is considered to be a violation of ordre public. As a result, at present in Mongolia, surrogacy arrangements are permitted but explicitly regulated by the Health Minister’s order. Considering the foregoing, the following conclusions can be drawn: ‐ For the intended parents, a number of important regulations need to be reflected in the draft law. For example, they cannot be intended parents if the couple previously were the adopters (guardians, caregivers) of a child but the adoption was cancelled or invalidated due to their fault (abuse of alcohol or narcotics; convicted of crimes against life, liberty and dignity of a person, sexual offences, public order) or they are under permanent nursing care due to their health conditions; ‐ If the surrogate mother has a full-time job, the consequences of pregnancy and birth for her employment must be regulated in the agreement of the parties. The agreement should provide for additional payments to be made to the surrogate mother in order to compensate her for any lost income; ‐ The draft law does not include any provision that deals with the intended parents’ death before the birth of a child. In that case, their close relatives can adopt the child if he or she is born. If they refuse to adopt, the child can be transferred to the surrogate mother’s care. And finally, if none of these solutions work, the child becomes a ward of the state;

R. IDA, Anonymity and Assisted Reproduction in Japan: Dialectic of Anonymity and the Well-being of the Child, in B. FEUILLET-LIGER/ K. ORFALI/ TH. CALLUS (eds), Who is my Genetic Parent? Donor Anonymity and Assisted Reproduction: a Cross-Cultural Perspective, 2011, p.216. 43 https://press.kookmin.ac.kr/news/articleView.html?idxno=101275, accessed 15 May 2023. 42

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Tamir Boldbaatar/ Batzorig Enkhbold There is no effective control of the clinics operating medically assisted reproduction. Therefore, it is of utmost importance to collect, analyse and share accurate and related data and to facilitate the monitoring and evaluation of surrogacy arrangements. In other words, it is necessary to create a system of oversight of personal information concerning the intended parents, children, surrogates and donors. ‐ It is necessary to provide criminal law regulations to avoid any risk of commercialization and exploitation of women for the surrogacy market. In addition, it is critical to create safeguards to prevent the sale of children in the framework of altruistic surrogacy and to monitor the financial aspects, and ethical standards of surrogacy. ‐ Psychological assessment of the surrogate mother is important. This assessment should cover a broad range of topics, for example, the surrogate mother’s motivation and relationship with her family and friends, the separation of the surrogate mother from the child, the relationship between the intended parents and surrogate mother, etc. ‐ The draft is silent on the procedure to obtain Mongolian citizenship status for a child born overseas using a surrogate. Finally, before adopting a new Law on the Support for Assisted Reproduction, Mongolia should consider the controversies surrounding surrogate motherhood, which are based on fundamental human rights and freedoms, such as the commercial surrogate practices that contradict international human rights instruments. There are international organizations that support the prohibition of surrogate motherhood, as their justification is based on moral and ethical norms. Surrogate mothers are usually from lower income families and there might be exploitation. Qualitative and quantitative research studies on surrogacy arrangements and their human rights impacts must be conducted thoroughly. ‐

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SURROGACY CONTRACTS AND THE (IN)ALIENABILITY OF FUNDAMENTAL RIGHTS A VIEW FROM ITALY ON CASE NO 38162/2022 OF THE CORTE DI CASSAZIONE Valentina CALDERAI*/ Rachele ZAMPERINI**

I. II.

III.

I.

Facts and Proceedings The Court’s Reasoning A. The Public Order Test Applied to Foreign Decisions Establishing Parenthood through Surrogacy B. Alternative Means of Recognition of Parenthood and Best Interests of the Child C. Balancing the Interests at Stake The Court’s Reasoning under Review A. Dignity 1. Objective Dignity 2. European Constitutionalism and the False Antithesis between Objective Dignity and Subjective Dignity B. Adozione in casi particolari – The Many Facets of an Ever-Evolving Child Protection Tool 1. The Original Provisions 2. New Paths of Interpretation 3. The Adozione in Casi Particolari Shortcomings

Facts and Proceedings

Italy imposes a total ban on surrogacy.1 Nevertheless, this provision collides with the factual reality of Italian citizens concluding surrogacy agreements in more *

Professor of Private Law and Comparative Private Law at the University of Pisa. Author of Section III A and co-author of Section IIIB. ** LL.M. (Leiden), Ph.D. candidate in Private Law at the University of Pisa. Author of Sections I and II and co-author of Section IIIB. 1 Article 12 (6), of Law No 40/2004 states that whoever, in any form, produces, arranges, or advertises the sale of gametes, embryos, or surrogacy, is punishable by imprisonment from three months to two years and a fine ranging from 600,000 to one

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 327-344 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Valentina Calderai/ Rachele Zamperini liberal jurisdictions where the market of reproductive services thrives on the desire for parenthood. The tension between law and practice emerges with remarkable strength regarding the (non-)recognition of filiation established abroad between children and their intended parents. Against this background, in December 2022, the Supreme Court of Cassation was called upon to decide this sensitive matter. The case that gave rise to the judgment concerned a same-sex Italian couple of registered partners who had entered into a surrogacy contract in Canada, and the child born under that contract. The child’s birth certificate mentioned only the biological father, while subsequently, the Supreme Court of British Columbia recognised both applicants as the child’s parents. Based on this decision, the couple asked the Italian registrar to rectify the birth certificate. The Italian registrar officer rejected the request. The couple challenged the refusal all the way to the First Section of the Supreme Court of Cassation. Given the complexity of the issue, the First Section Chamber referred the matter to the United Sections Chambers to decide, in light of the recent doctrines of the Supreme Court and the Constitutional Court, whether the refusal to recognise the effects of the foreign judgment was justified by the conflict with international public order, considering that adoption remains the only way to protect the relationship with the intended parent.2

II.

The Court’s Reasoning

The commented decision3 follows a path already marked out by its own, and the Constitutional Court’s previous judgments: first, it identifies the scope and content of the principle of public policy in the case at hand (A), and then it assesses the efficacy of the solution proposed as an alternative to the transcription of the foreign document in light of the principle of the best interests of the child (B). In million euros. To date, the prohibition concerns the intermediation of services (such as advertising, agency, legal assistance, clinical practice, or organisation) and no punishment is envisaged for the conduct carried out by surrogate mothers and commissioning couples. See infra, (note 5). 2 A matter is referred to the United Sections when there is a conflict between the orientations of the individual sections of the Court on that matter (Article 376 Code of Civil Procedure). The interpretation of the law that emerges from a ruling of the Court of Cassation in the United Sections acquires a particular authority, so much so that the individual sections of the Court cannot depart from it without prior authorisation of the United Sections. In this particular case, the ordinance by which the First Section referred the matter (Cassazione civile, 29 April 2020, No 8325 published in Familia 2020 p. 784 with a case note by F. AZZARRI) does not seem to conform to this rule since the United Sections of the Supreme Court had already ruled on the issue only three years earlier, See Cassazione civile Sezioni Unite, 8 May 2019, No 12193 published in Nuova Giurisprudenza Civile Commentata (NGCC) 2019, p. 737 (with a case note by U. SALANITRO); in Foro Italiano, 2019, p. 4027 (with a case note by G. LUCCIOLI). 3 See Cassazione civile Sezioni Unite, December 30th, 2022, No 38162 published in Famiglia e Diritto 2023, p 408 (with a case note by M. SESTA).

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Surrogacy Contracts and the (In)alienability of Fundamental Rights doing so, the Court resolves the main issue by a considered balancing of the two principles and, thus, of the interests at stake (C). A.

The Public Order Test Applied to Documents Establishing Parenthood through Surrogacy

Under the Italian Private International Law Act (Law No 218 of 1995), the recognition of foreign judgments is subject to the condition that the provisions thereof do not produce effects contrary to public order (Article 64). Foreign acts are therefore assessed to determine whether their effects are compatible with the fundamental principles of the legal system, as expressed in the Constitution and in international sources, as well as in the provisions that apply constitutional and international principles in internal legislation. The first part of the judgment then spells out the functions and content of public order. First, the Court observes how the public order principle function gradually evolved from ensuring the internal coherence of the Italian legal system to promoting the dissemination of core values recognised at the international and supranational levels.4 Under this broader concept of international public order, the Court identifies the two main parameters for assessing the conformity of the foreign act with the national system. The first is Article 12 of the Act on ART (Law No 40 of 2004), which criminalises any form of surrogacy, with sanctions aimed at all the parties involved, including the intended parents.5 The Court emphasised that this provision constitutes a norm of international public order because it protects the fundamental value of human dignity. Indeed, the criminal sanction works as an indicator of the extreme importance attached by the policymaker to the value protected. According to the Court, surrogacy violates the dignity of both women and children because it erases the relationship between the woman and the child she carries, reducing the former to a mere service of pregnancy and the latter to the final act of that service. The Court also pointed out that the law does not distinguish between different types of surrogacy. Indeed, the reduction of a woman’s body to a vessel for a life intended for others violates her dignity and limits her freedom, regardless of whether the agreement is gratuitous or involves the payment of a price. When assessing the public order clause, however, the child’s best interest must also be considered.6 The Court stressed that this principle requires that the

See above Cassazione civile, No 12193/2019 note 2. See above, (note 1). Italian case law, however, interprets the rule as punishing intermediation services only: see G. LUCCIOLI, Questioni eticamente sensibili: quali diritti e quali giudici. La maternità surrogata, in Consulta online, 2017, p. 325 et seq. V. CALDERAI, Ordine pubblico internazionalee Drittwirkung dei diritti dellinfanzia, Rivista di diritto civile 2022, p. 478 et seq. 6 For an insight into the origins and development of the best interests of the child principle in domestic law See E. LAMARQUE, Pesare le parole. Il principio dei best interests 4 5

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Valentina Calderai/ Rachele Zamperini child’s interest in the formal recognition of his or her relationship with the intended parents be protected. It does not, however, legitimise behaviour prohibited by the law. Thus, while it is necessary to transcribe the foreign judgment as is the case for the relationship with the biological parent, it is not permitted to do the same for the merely intentional parent.7 B.

Recognition of Parenthood and Best Interests of the Child

The Court then focuses on alternative legal tools to recognise legal parentage between the child and the intended parent, building upon its own decisions along with the relevant European Court of Human Rights case law.8 Under Article 8 ECHR, the right to respect private and family life includes the children’s primary interest in continuing a de facto parental relationship of caring and affection.9 It follows that, to protect the child’s right to family life without tacitly surrendering to the logic of the fait accompli, the establishment of parenthood should be based upon a factual assessment of the family life between the child and the intended parent.10 This aim is satisfied by a special form of adoption, “adozione in casi particolari” (Article 44(2) subparagraph d), of Law No 184 of 1983).11 Although the protection offered by adoption is not equivalent to full and automatic transcription, this solution nonetheless respects the standards of promptness and effectiveness required by Article 8, ECHR12 and, at the same time, allows for an assessment of the best interests of the child in concreto. Indeed, as held by the Constitutional Court, it is up to the legislator to ensure adequate protection for the interests of the children born to surrogate mothers and conferred to parents of intention.13 Rebus sic stantibus, the need to guarantee to the child born out of surof the child come principio del miglior interesse del minore, in Famiglia e diritto 2023, p. 365 et. seq. 7 See Corte costituzionale, December 18, 2017, No 272 published in NGCC 2018, p 540 (with case notes by A. GORGONI and by U. SALANITRO); in Corriere giuridico 2018, p. 446, (with a case note by G. FERRANDO). 8 For a comprehensive analysis of the ECtHR jurisprudence on the matter, see C. FENTON-GLYNN, Chapter 8, Children and the European Court of Human Rights, Oxford University Press, 2021. 9 ECHR, 24 January 2017, Paradiso and Campanelli v. Italy, App. No 25358/12, para. 140. 10 ECHR, 26 June 2014, Mennesson v France, App. No 65192/11, para. 81. 11 See Cassazione civile Sezioni Unite, June 30, 2016, No 19599 published in NGCC 2017, p. 372 (with a case note by G. PALMERI), where the Supreme Court first formulated this interpretation concerning children of women same-sex couples born via ART. 12 ECHR, April 2019, Advisory opinion concerning the recognition in domestic law of a legal parent-child relationship between a child born through a gestational surrogacy arrangement abroad and the intended mother, Request No P16-2018-001, para. 55. 13 See Corte costituzionale, March 9th, 2021, No 33 published in NGCC 2021, p. 919 (with a case note by E. BILOTTI) and p. 956 (with a case note by M.C. VENUTI); in

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Surrogacy Contracts and the (In)alienability of Fundamental Rights rogacy the same rights as other children is better ensured through adoption rather than through the automatic recognition of the legal status established abroad, since the adoption proceeding allows for a case-by-case factual assessment of the child’s best interests. Finally, and significantly, the Court clarifies that the negative assessment of the child’s interest in establishing the filial status with the intended parent cannot depend on the sexual orientation of the applicant. Indeed, a person’s sexual orientation should never have any bearing on the judgment concerning his or her fitness to assume parental responsibility.14 C.

Final Balancing of Interests

In light of these considerations, the Court affirms that foreign court orders - and a fortiori original birth certificates - should not be transcribed and that the (partial) refusal to recognize the effects of the foreign act is legitimate. Indeed, nonautomatic transcription corresponds to the rightful purpose of deterring surrogacy, which “intolerably offends the dignity of women”, “deeply undermines human relationships” , and “panders to an unacceptable commodification of the body, often to the detriment of the most economically and socially vulnerable women”.15 At the same time, the unfailing demand for legal recognition of the relationships between the children born of surrogacy and their intended parents shall be satisfied, when necessary, by the “adozione in casi particolari” .

III. The Court’s Reasoning under Review Like the general clause of good faith in English Common Law, human dignity has become a source of legal irritation,16 notwithstanding its relevance to European constitutionalism and international protection of human rights.17 Or perhaps Familia 2021, p. 405 (with a case note by A. MORACE PINELLI) and p. 421 (with a case note by N. CHIRICALLO). 14 Cf. Proposal for a Council Regulation on jurisdiction, applicable law, recognition of decisions and acceptance of authentic instruments in matters of parenthood and on the creation of a European Certificate of Parenthood, 2022/0402 (NLE), recital 14 15 See. above Corte Costituzionale, No 272/2017, note 7; cf. I. CORTI, Maternità per sostituzione e dignità umana, GenIUS, 2017, at p. 20 et seq.; A. SASSI/ S. STEFANELLI, Nuovi modelli procreativi, diritto allo status e principi di ordine pubblico, BioLaw Journal, 2019, at p. 356 et seq.; V. CALDERAI, Scritto sul corpo. Genealogia della surrogazione di maternità, in Giurisprudenza italiana, 2021, at p. 1527 et seq. I 16 G. TEUBNER, Legal Irritants: Good Faith in British Law or How Unifying Law Ends up in New Divergences, Modern Law Review, 1998, p. 11 et seq. 17 G. BOGNETTI, The Concept of Human Dignity in European and US Constitutionalism in G. NOLTE (ed.), European and US Constitutionalism (Cambridge, UK: Cambridge

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Valentina Calderai/ Rachele Zamperini because of this. Europe seems to be importing from American libertarianism the belief that human beings have a right to freely dispose of what they own, including personal freedom and social statuses, and that such liberty prevails over human dignity. The reduction of human dignity to freedom “irritates” the idea of dignity as an inalienable attribute of every human being embedded in post-war European Constitutions. This is fitting. If legal irritants, as Teubner maintains, are lasting factors of legal change, the debate on the significance of dignity may clarify the gist of the contention: the alienability or not of fundamental rights. A.

Dignity

From the vantage point of substantive law, the novelty brought about by the commented decision is not so much in the systemic connection drawn between human dignity and public policy as in the effort of semantic clarification of the concept of dignity, with potentially disruptive effects on a scholarly debate inured to the logic of the fait accompli. From its very inception, instead of repeating the mantra of the helplessness of domestic law and the prominence of the interest hic et nunc of the child (et pace for those to come), the judgment highlights what a Report of the U.N. Human Right Council has called the “systemic abusive practices”18 of the market for offspring: “[i]n surrogacy, it is not only the parental wishes, aspirations, and plans of the commissioning parents that are at stake. There are real people: women used as instruments for reproductive functions, with their inalienable rights annulled or suspended within contractual procedures, children exposed to a practice that determines uncertainties about their status and, therefore, their identity in society”.19 This move brings the advocates of fully-fledged transcriptions face to face with a dilemma: they may either insist on the search for the Holy Grail, the fair trade of surrogate motherhood, or analyse the market mechanism, starting from its primary legal infrastructures (the contracts for surrogacy services), following in the footsteps of the landmark judgment of the Spanish Tribunal Supremo.20 For University Press, 2005) 85; J. HABERMAS, The concept of human dignity and the realistic utopia of human rights, Metaphilosophy, 2010, p. 464 et seq.; G. RESTA, How to Do Things with Words Three Uses of Human Dignity, Rivista di filosofia del diritto, 2019, p. 67 et seq. 18 Human Rights Council, Report of the Special Rapporteur on the sale and sexual exploitation of children, including child prostitution, child pornography and other child sexual abuse material (A/HRC/37/60) para. 33 (https://www.ohchr.org/EN/Issues/Children/ Pages/Surrogacy.aspx accessed on 5.7.2023). Sex selection of the unborn, (selective) abortion on demand, absence of parental screening and public registries to guarantee the children’s right to know their origins are not occasional distortions, but, rather, the deliberate effect of a mechanism “designed to enforce contracts, obtain children for intending parents, maintain the industry’s profits, and intentionally reject most protections for children or surrogate mothers. These kinds of contract-based models lead to systemically abusive practices”. 19 Cassazione civile Sezioni Unite, 30 December 2022, No 38162 (note 3), para. 2. 20 Tribunal Supremo. Sala de lo Civil, STS 31 March 2022, No 1153 ECLI:ES:TS:2022:1153.

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Surrogacy Contracts and the (In)alienability of Fundamental Rights those willing to take this path, the research agenda is centred on the principle of human dignity “in its objective dimension”.21 1.

Objective Dignity

Dignity in its objective dimension means that the rights and interests affected by surrogacy agreements – physical integrity, personal freedom, health, intimacy, family statuses, prenatal life – are unavailable, thus inalienable and indefeasible, regardless of the economic situation of the perspective gestational mother, the authenticity of the self-determination process, or the absence of an economic consideration for the obligations she undertakes.22 The irrelevance of gratuitous obligations runs deep in civil law systems. The mere absence of an advantage in return for an act or promise does not satisfy the requirement, recognized by all legal orders, to preserve a space free from Geschäftlichkeit.23 The qualification that only “les choses qui sont dans le commerce [...] puissent être l’objet des conventions” (art. 1128 of the French Civil Code) or the requirement that the content of an obligation must be of a “commercial” nature (art. 1174 of the Italian Civil Code), in other words, do not dispense from assessing if what the promisor undertakes to give, do or not do, whether gratuitously or not, can be the subject of a legally enforceable claim. A compelling indication in this regard comes from the First Chapter (Dignity) of the Charter of Fundamental Rights of the European Union, which in art. 3 (Right to the integrity of the person), paragraph 2, prohibits in the fields of medicine and biology to treat the human body and its parts as such a source of financial gain, with implicit concession to acts of gratuitous disposition. Still, the extent of the prohibition and correlative permission must be assessed against the backdrop of a system that does not criminalize surrogacy as such but only commercial intermediation. One may ask whether the absence of consideration is an adequate response to the requirement for non-commodification, where the allegedly gratuitous agreement between the commissioning parents is prepared, programmed, performed, within the framework of for-profit organizations. Such agreement contains a range of contractual obligations: all of them, of course, in exchange for economic consideration. More radically, one may ask whether the acceptance bestowed on allegedly altruistic surrogacy is not the legacy of spurious analogies with prostitution and sexist stereotypes about motherhood as self-sacrifice and gift. It is not by chance, at any rate, that altruistic surrogacy across the world beats a retreat before the onward march of commercial surrogacy.24 The reason for Cassazione civile Sezioni Unite, 30 December 2022, No 38162 (note 3), para. 18. Ibidem. 23 U. BRECCIA, Le obbligazioni, Milano, 1991, p. 46. 24 J. SCHERPE and C. FENTON-GLYNN, Surrogacy in a Globalised World. Comparative Analysis and Thoughts on Regulation, in J. SCHERPE, C. FENTON-GLYNN, KAAN (eds) Eastern and Western Perspectives on Surrogacy, Cambridge, 2019, pp. 518 et seq., 577. On the potentially aberrant effects of law markets, see: R. MICHAELS, Make or 21 22

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Valentina Calderai/ Rachele Zamperini this regulatory setback are the massive transaction costs of altruism: absent economic incentives, not enough women would take on the risks and burdens of pregnancy; without effectual ex-ante enforcing mechanisms, too many prospective parents would choose to go abroad rather than submit to the discretion of an unknown woman and pervasive administrative checks. Interestingly, whereas vertical regulation cannot do as a proxy for trust in transactions between strangers, genuine altruism sidesteps legal regulation. Indeed, expectations, in these circumstances, do not have the quality of contractual expectation interests and are more fittingly considered as the counterpart of a pure, not enforceable promise. The super-ethical nature of truly altruistic surrogacy ultimately explains the existence of a market for gestational services. With minor adjustments, Adam Smith’s proverbial insight on the role of personal interest in the division of social work still applies. It is not from the benevolence of surrogates and intermediaries that we expect our offspring. Surrogate motherhood as we know it today cannot exist without an industry, a market, and enforceable obligations limiting the extent and exercise of fundamental rights. In this context, the appeal of the Italian Supreme Court to human dignity “in its objective dimension” is at once an exercise of humility and a profession of trust in the law: “Our system prohibits any form of surrogacy, on the assumption that only such a prohibition large is able, as a precaution, to avoid forms of abuse and exploitation of conditions of fragility”.25 2.

European Constitutionalism and the False Antithesis between Objective Dignity and Subjective Dignity

The previous remark points to the potential conflict between dignity as power and dignity as a limit to power.26 In the neoliberal imagery, self-determination owns the place acknowledged in the XIX century to freedom of contract. Johnson v Calvert, the California Supreme Court decision that almost invented the legal infrastructure of the market for offspring, as we know it today, is a paradigmatic expression of contemporary neo-contractualism.27 In the Court's opinion, the mere intention to be a parent would not succeed in establishing parenthood. Instead, a contractual declaration, i.e. a promise to be a parent assisted by consideration, is necessary to govern parental status.28 The ideological foundations go back to the Chicago Buy – a Public Market for Legal Transplants?, in H. EIDENMÜLLER (ed.) Regulatory Competition in Contract Law and Dispute Resolution, München, 2013, p. 27 et seq.; J. STARK, Law for Sale, Oxford, 2019, pp. 91 et seq., 126 et seq. 25 Cassazione civile Sezioni Unite, 30 December 2022, No 38162 (note 3), para. 18. 26 R. BROWNSWORD, Bioethics Today, Bioethics Tomorrow: Stem Cell Research and the Dignitarian Alliance (2003) Notre Dame J.L. Ethics & Pub. Pol’y pp. 15 et seq., 20. 27 Johnson v. Calvert, 5 Cal. 4th 84. 28 Ibid., p. 95: intentions that are voluntarily chosen, deliberate, express and bargained-for ought presumptively to determine legal parenthood. To find an equally strong assessment of freedom of contract one must go back to the case law (and the world) of

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Surrogacy Contracts and the (In)alienability of Fundamental Rights School’s analysis of family relationships. Within the framework of a thorough critique of the Welfare State, every facet of human existence is analysed through the lens of economic rationality, starting from family, “the most influential of all institutions”.29 Not surprisingly, one of the earliest applications of the paradigm is the 1960 study by Gary Becker, addressing the dynamics of fertility, where children are regarded as a source of “psychic income or satisfaction and [...] a consumption good”.30 Richard Posner drew the logical conclusion31: the free market for offspring is superior to vertical regulation because it allows the best families (i.e., those willing to pay more) to obtain first-rate children. In this framework of utter absorption of reproduction into production, self-determination changes its reference, thus its meaning: from a space of freedom and decision, inaccessible to public and private powers (habeas corpus), it becomes the catalyst of the expansion of rational economic calculus into life itself (rational choice). The tradition of Italian and European constitutionalism does not subscribe to this “absolutist, libertarian right”.32 Freedom of choice (even) in the sphere of intimacy is a value instrumental to individual rights that can be limited, as we experience every day, for the protection of general interests or personal and social rights. The direct references to human dignity in the Italian Constitution occur in connection with the principle of formal equality and non-discrimination (Art. 3), the workers’ right to an existence free from want (Art. 36), and the limits to private economic initiative (Art. 41). Indirectly, but certainly, human dignity bolsters the constitutional guarantee of “inviolable rights” (Art. 2), personal freedom (Art. 13), protection of individual life and safety (Art. 27), the proviso that mandatory health treatments can only be imposed by legislation, and the prohibition to legislatures “under all circumstances” to “violate the limits imposed by respect for the person” in the health field (Art. 32).33 The portrayal of “objective” and “subjective” dignity as separate and conflicting principles, in this context, is a gross simplification. We are dealing with distinct dimensions of a concept that has as a unitary reference the physical, mental, and moral integrity of human beings, considered both in themLochner v New York 198 U.S. 45 (1904). The Court was inspired by J.A. ROBERTSON, Embryos, Families and Procreative Liberty: The Structures of the New Reproduction, 59 Southern California Law Review, 1986, p. 936 et seq, as well as the criticism thereof by O. O’Neill, Autonomy and Trust in Bioethics, Cambridge 2002, p. 66 et seq. 29 G. BECKER, A Treatise on the Family, Cambridge (Mass.), 1993 (1983), pp. 1 et seq., 19. 30 ID., An Economic Analysis of Fertility, in Demographic and Economic Change in Developed Countries, Princeton 1960, pp. 209 et seq., 210. 31 E.M. LANDES & R. POSNER, The Economics of Baby Shortage, 7, J. Legal Stud. 323 (1978); R. POSNER, The Ethics and Economics of Enforcing Contracts of Surrogate Motherhood, 5 J Contemp. Health L. & Poly (1989), pp. 21 et seq., 22. 32 G. CALABRESI, Law and the Allocation of Body Parts, 55 Stanford L. Rev., 2003, pp. 2113 et seq., 2136. 33 S. RODOTÀ, Antropologia dell’homo dignus, Rivista critica del diritto privato, 2010, p. 547 et seq.

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Valentina Calderai/ Rachele Zamperini selves and as representatives of humankind (Gattungswesen).34 No possible contradiction exists between subjective dignity, which commands the respect of the right of the seriously ill patient to refuse life-sustaining treatments, and the objective dignity of mothers and their children, which prevents the recognition of surrogacy agreements. The idea of “health” in Art. 32 It. Const., as at once an “individual right” and a “collective interest”, testifies to this complexity. A hazardous clinical trial, performed without medical necessity and objective protection measures, would not become acceptable if carried out on volunteers, possibly paid. Likewise, the transformation of female bodies into an “utility”, for the benefit of their unborn”,35 which is rightly regarded as unacceptable and abhorrent in the laws prohibiting abortion at any stage of pregnancy, does not become acceptable if abortion on demand is imposed ex ante by contract. The question is not so much whether the body is in or out of “commerce”, as the body has been in commercio all along, as whether there are limits to the commerce of the body and familial statuses. These are issues of constitutional identity and cannot be addressed by the slavish imitation of models, which bestow on markets a broader role in the organization of society and ignore the principle of the horizontal effect of fundamental rights.36 Conversely, the constitutional limits to autonomy cannot justify an unrestrained and despotic limit on self-determination. Objective dignity, as an absolute limit to the disposition of rights, including fundamental rights, is at odds with freedom. Subjective dignity, as a similarly unchecked power to dispose of fundamental rights, is at variance with equality. The balance lies at the intersection of freedom as a claim to non-interference, Abwehrrecht, and the inviolability and inalienability of fundamental rights.37 As for the subjective dimension of dignity embodied in reproductive autonomy, the evidence from the past – marital ius in corpore, criminalization of contraception and abortion, interdictions on marriage based on race and sexual orientation, et cetera – justifies the acknowledged prominent position of the freedom to choose whether (or not) to have children, and how. Thus, reproduction attains the threshold of an absolute right to self-determination whenever the effects of its exercise are confined to the right- holder. Like any other freedom, though, whose 34 J. HABERMAS, Die Zukunft der menschlichen Natur. Auf dem weg einer liberalen Eugenik?, S 2001, p. 76 35 G. CALABRESI, An Introduction to Legal Thought: Four Approaches to Law and the Allocation of Body Parts, 55 Stab. L. Rev. (2003) p. 2113 et seq. at 2135. 36 S. GARDBAUM, The Horizontal Effect of Constitutional Rights, 102 Mich. L. Rev. (2003) p. 387 et seq.; M. TUSHNET, The Issue of state action/horizontal effect in comparative constitutional law, 1 Int. J. Const. Law (2003) p. 79 et seq. 37 The theory of inalienability of fundamental rights has been built in Italy on the theory and doctrine of compensation of non-pecuniary damages. See Cassazione civile, Sezioni Unite, 11 November 11 2008, No 26972 and the theoretical frame of reference was set by E. NAVARRETTA, Diritti patrimoniali e risarcimento del danno, Torino, 1999; EAD., Diritti inviolabili e Responsabilità civile, in Ann. Enc. dir., VII, Milano, pp. 343 et seq., 359.

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Surrogacy Contracts and the (In)alienability of Fundamental Rights extent and content depend on the function and actual circumstances of their operation, reproductive rights may be gaged against third-party interests. No right to reproductive freedom could justify the imposition through a contract of almost absolute control over the life and intimacy of the pregnant woman and the foetus. As for the inalienability of fundamental rights, dignity in its objective dimension stands out in the guarantees of a maximum length of the working day, weekly rest, and annual holidays – the Marxian “time necessary for the growth, development and healthy conservation” of the body38 – insofar as these rights pertain “beyond and before their qualification as a right, to the very being of the worker”.39 “Accordingly, workers cannot waive, for example, their rights to holiday and time off”. If workers’ rights materialise the constitutional idea of objective dignity, the latter is not so much about the conditions for a market to produce fair and sustainable, as well as efficient, results, as the choice between what is outside or inside the market: Art. 41 (2), of the Italian Constitution supports this conclusion, when it demands that private economic initiative “cannot develop so as to cause damage to human safety, freedom, and dignity”. We may recall by now that in many ancient and modern languages, the word labor means both childbirth and hard and tiring work, testifying to the common root of productive and reproductive work. What is as stake is the problem of conserving the conditions of natural life. To date, and until proven otherwise, the reasons for the “intolerable offense” to women’s dignity and the threat “to human relations” inherent in the market for surrogacy services40 lie in the Italian Constitution “as it protects the worker - a person - and not simply an owner of labour capacity who offers it on the market”41. B.

Adozione in casi particolari – The Many Facets of an Ever-Evolving Child Protection Tool

Following its precedents, the Italian Supreme Court has identified in the adozione in casi particolari the most appropriate legal framework to recognise the parental relationship between the children born from a surrogate mother and the intentional parent. This decision is the latest in a long series that helped reshape this institution into its current form, dramatically different from its original form. The fact that adoption is a form of protection, however, does not imply that it fits the needs of the children. To better understand this critical aspect of the decision, it is necessary to trace how this institute evolved to its current form. K. MARX, Il Capitale, I, Milan, 2013, p. 374. In the discussions within the Constituent Assembly the inalienability of constitutional workers’ rights is specifically linked to a model of society: A.C., II, 1561 et seq. BALLESTRERO, Orario di lavoro, Enciclopedia del Diritto, XXX, Milano 1980, p. 618 et seq. See also: Cassazione civile, 2 July 2020, No 13613. 40 See above Corte Costituzionale, No 272/2017, note 7. 41 L. MENGONI, La tutela giuridica della vita materiale nelle varie età dell’uomo, Rivista trimestrale di diritto e procedura civile, 1982, II, pp. 1117 et seq., 1121. 38 39

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Valentina Calderai/ Rachele Zamperini 1.

The Original Provisions

The Italian Law No 184 of May 4, 1983, The Right of the Child to a Family, provides for two forms of adoption: ordinary and special – the so-called adozione in casi particolari – (Article 44 et seq.). Ordinary adoption aims to give abandoned children a family after a preadoptive procedure (Article 8), upon the ascertainment by the Juvenile Court that they live in a state of abandonment due to the lack of care by parents or relatives (Article 7).42 Only married,43 heterosexual couples may apply to adopt a child, who will become a member of the new family while losing all legal ties with their biological parents (Article 27). By contrast, adoption in special circumstances provides a residual tool for children who would not otherwise qualify for full-fledged adoption, notwithstanding the absence of parental figures. This kind of adoption minor originally applied to the following very different situations: a) orphaned children adopted by biological relatives with whom they entertain a strong relationship. b) children adopted by the new spouse of the parent with whom they live. c) orphaned children with disabilities. d) children for whom the procedure for ordinary adoption has failed.44 The special adoption procedure is more expedited and less complex than that required by ordinary adoption, and in cases a), c), and d), it is open to unmarried couples and single persons. According to Article 57, the procedure requires an assessment of both the adoptive parent’s suitability and the correspondence of the adoption to the child’s best interest. Moreover, if a child is under parental responsibility, as typically in case b), the latter must consent to the adoption (Article 46). Furthermore, the two forms of adoption also differ in their effects. Instead of severing all ties with the original family, the special adoption does not cancel the kinship ties with the child’s family of origin (Article 55). In line with this aim, the original text prevents the creation of kinship relationships between the adopted child and the adoptive parent’s relatives. The ultimate purpose of this rule is to keep the original kinship relations alive while adding another interpersonal bond limited to the adoptee.45 42 The process for the declaration of adoptability is regulated in detail by Articles 8 – 21 of Law No 184/1983. 43 Article 6 Law No 184/1983 lists the civil status (only couples who have been married for at least three years may adopt) and age requirements (at least 18 years of age and no more than 45 years older than the child) to adopt, together with a limited number of exceptions (for example if one of the spouses dies during the adoption process, the surviving spouse may adopt as a single person). 44 Pursuant to Articles 22 – 24 of Law No 184/1983 the pre-adoptive placement is a period of cohabitation of the child with the prospective adoptive couple, at the end of which the competent authority verifies the positivity of the match and pronounces the adoption decision. 45 In fact, the text of Article 55 regulates the effects of the adoption decree by referring to the Civil Code dispositions on adult adoption, among which Article 300

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Surrogacy Contracts and the (In)alienability of Fundamental Rights 2.

New Paths of Interpretation

This special adoption regime responds to different and specific needs, such as assigning a legal status to a pre-existing de facto family situation (cases a) and b) or facilitating the adoption of those children for which full adoption seems unlikely or impossible (cases c) and d)).46The law’s original structure has however changed profoundly over the past forty years. Through several court decisions, two new interpretive paths have emerged, which are critical for understanding our subject. The first path extends the notion of the impossibility of pre-adoptive placement in Article 44(1), subpara. (d), to hypotheses originally not intended by the law. First, the courts have brought under the scope of Article 44(d) “semipermanently neglected” children, namely, non-abandoned children whose parents cannot properly exercise their parental responsibility. In these circumstances, the literal application of the law would have resulted in full adoption or alternative care measures, such as institutionalisation and foster care. However, as early as 2008, the judiciary held that these children were in a de facto impossibility of preadoptive fostering, paving the way for adoption under article 44(2) subpara. d). Indeed, this solution preserves the relationship between the children and their biological parents while guaranteeing them the stability of a new family that a temporary foster care placement cannot assure.47 The European Court of Human Rights (ECtHR), which repeatedly condemned Italy for using ordinary adoption as an alternative to parental care, strengthened this position. Absent an actual state of abandonment, the ECtHR maintained, the drastic and irreversible interruption of the relationship with the biological parents undermines the right to respect for family life of both adults and children.48 Accordingly, the extension of Art 44(2) subpara. d) to these children seemed to fit better with the ECtHR suggestion to apply a form of simple adoption instead of the ordinary one.49 At a later stage, after this initial opening of the notion of impossibility, Courts have extended the interpretation to include not only de facto but also de jure impediments to pre-adoptive placements. The Courts have in fact held that the

establishes that the adoptee retains all rights and duties towards his or her family of origin, subject to the exceptions laid down by law. 46 This is the case, for example, of older children who could turn 18 during the mandatory pre-adoptive placement with the adopters. 47 Quite interestingly, the Supreme Court has recently referred to the Constitutional Court a matter concerning the costitutionality of Article 27 Law No 184/1983: in the Supreme Court’s opinion, the provision violates the principle of equality as it does not allow the child adopted through ordinary adoption to maintain legal relationships with the family of origin, see Cassazione Civile, 5 January 2023, No 230, published in Famiglia e diritto, 2023 p. 397 (with a case note by M. RIZZUTI). 48 ECHR, Grande Chambre, 10 September 2019, Strand Lobben et al. v. Norway, App. No 37283/13 para 202-213; ECHR, 13 Ottobre 2015, S.H. v. Italy, App. No 52557/14 para 48-50. 49 ECHR, 21 January 2014, Zhou v. Italy, App. No 33773/11, para. 60.

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Valentina Calderai/ Rachele Zamperini ban on adoption imposed on same-sex couples amounted to a legal impediment,50 thus making it possible to protect the affective relationship between the child and the same-sex partner of the biological parent. In this way, the combination of the two purposes underlying special adoption – protecting the child’s interest in preserving relationships already established and dealing with hypotheses in which full adoption is not attainable – has led to the creation of an actual safety valve in the system. Actually, this interpretation, initially meant to assign legal status to the relationship with the social parent,51 has made it possible to recognise the parental relationship between the child born in Italy and the partner of the biological mother who has undergone a medically assisted procreation (PMA) abroad.52 Finally, and more recently, there has also been a consolidation of the jurisprudential orientation followed by the judgment under comment, according to which Art. 44 (2), subpara. (d), is also applicable to the same-sex partner of the biological father of a child born through surrogacy.53 The extension of the scope of Art. 44(2) has also had an impact on its effects. The doubts arose in particular as to the constitutional legitimacy of Article 55, a disposition, which prevented the establishment of the relationship between the adoptee and the adopter’s relatives, particularly in view of the situation of children born through surrogacy.54 Asked to decide on the matter, the Constitutional Court55 declared the provision incompatible with both the best interests of the child and the uniformity of familial status of all children (Articles 3 and 30 The law establishing same-sex civil partnerships (Law No 76/2016) explicitly excludes the possibility of extending to these unions the adoption law rules intended for married couples, thus excluding same-sex couples from both ordinary adoption and stepchild adoption. 51 “Social parent” is the term used to describe the partner of the biological parent who by virtue of a de facto relationship with the child becomes a parental figure; over time, Courts have identified a few tools to protect the relationship between the child and the social parent, see M. CINQUE, Quale statuto per il genitore sociale?, in RDC 2017, p.1475 et seq.; C. DIQUATTRO, La tutela del diritto del minore alla conservazione del rapporto affettivo con il genitore sociale, in Famiglia e diritto, 2020, p. 137 et. seq. 52 It is necessary to highlight the different treatment reserved to minors born abroad and those born in Italy from couples of women who have conceived them by means of PMA. If the child is born in Italy, adoption in special cases applies, see above Cassazione civile, decision No 19599/2016 (note 11). If, on the other hand, the child is born abroad, it is possible to proceed with the full transcription of the birth certificate since its effects are not contrary to public order, See, Cassazione civile, 3 April 2020, No 7668, in Corriere giuridico 2020, p. 1041, (with a case note by A.G. GRASSO). 53 If the intended parents are a heterosexual couple, the biological parent’s spouse can adopt through Article 44(2) subpara. (b). 54 The current situation of insufficient protection of the interests of children born via surrogacy has been pointed out by the Constitutional Court while calling on the legislator to intervene as soon as possible, see above decision No 33/2021 (note 13). 55 See Corte costituzionale, 28 March 2022, No 79 published in Famiglia e diritto 2022, p. 897 (with a case note by M. SESTA); in Foro italiano 2022, p. 2936 (with a case note by A. PALMIERI); in Familia 2022, p. 364 (with a case note by M. BIANCA). 50

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Surrogacy Contracts and the (In)alienability of Fundamental Rights Italian Constitution),56 without distinction between children born in or out of wedlock or among adopted children.57 According to the Court, the protection of the child’s identity and relationship with the biological parents - guaranteed by the preservation of family ties does not stand in the way of the establishment of new ties, all the more so in light of the ECtHR’s jurisprudence on Article 8.58 Indeed, the ECtHR has long held that any legal distinction between adoptive and biological parenthood violates the State’s positive obligation to protect the right to family life.59 Finally, by striking down Article 55, the Court has almost cancelled the differences between the two types of adoption, at least in terms of effects.60 3.

The Adozione in Casi Particolari Shortcomings

Today special adoption stands out as a sui generis regime that lends itself to very different ends: a child protection tool, an alternative to foster care or institutionalization, an instrument to cloak with a legal status a de facto bond with the social parent, as well as a means to establish a filiation relationship with the intended parent in PMA and surrogacy. Nevertheless, in civil law systems, case law is a second best, while awaiting legal reform. Without ad hoc legislative interventions, the special needs that characterise the different groups of children to whom the special adoption applies could be overlooked.61 Regarding surrogacy-born children, special adoption may be inadequate for three reasons. First, judicial proceedings are not tailored to the specific risks of human rights violations posed by surrogacy.62 As underlined by the UN Special 56 The most recent Family Law reform (Law No 219 of 2012) bases the concept of family on the child-parent relationship. as a result, the uniqueness of the status filiationis can be read as the direct translation of the right of the child not to be discriminated against on the basis of the status […] [of] the child’s parents (Art. 2(2) 1989 UN CRC) in connection with the constitutional principle of equality (Art. 3 It. Constitution). 57 See V. CALDERAI (note 5), p. 503 et seq. 58 ECHR, 28 Novembre 2011, Negrepontis-Giannisis v. Greece, App. No 56759/08; ECHR, 13 June 1979, Marckx v Belgium, App. No 683/74 59 See above ECHR, Marckx v Belgium, para. 45; See above ECHR, Mennesson v France (note 10) paras. 96-101. 60 Some scholars had envisaged this same result by way of a constitutionally oriented interpretation soon after the enactment of the 2012 Family Law reform: see L. LENTI, Vicende storiche e modelli di legislazione in materia adottiva, in P. ZATTI (ed.), Trattato di diritto di famiglia, Milano, 2002, at pp. 801-803; P. MOROZZO DELLA ROCCA, Il nuovo status di figlio e le adozioni in casi particolari, in Famiglia e diritto 2013, p. 838 et seq. 61 See, e.g., L. LENTI, (note 6o) p. 818 and P. MOROZZO DELLA ROCCA, Abbandono e semiabbandono del minore nel dialogo tra CEDU e corti nazionali, in NGCC, 2020 p.830 et. seq.; U. SALANITRO, Ladozione mite tra vincoli internazionali e formanti interni, Famiglia e diritto 2021, p. 1070 et seq. 62 Cf. See above ECHR, Paradiso and Campanelli v. Italy, (note 9) para. 202.

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Valentina Calderai/ Rachele Zamperini Rapporteur on the sale and exploitation of children, children run the risk of becoming victims of illegal practices, and the States must create safeguards to ensure the fundamental rights of children born through surrogacy arrangements.63 Contrary to this instruction, Article 57 of the Adoption Act does not allow the judge to investigate thoroughly the circumstances of the agreement.64 The judge must carry out an assessment concerning the family context in which the child is living but lacks the tools to rule out the possibility of human trafficking or the sale of children.65 Secondly, international surrogacy has implications concerning children’s rights both before and after birth.66 Indeed, the establishment of legal parentage with the intended parents has life-long consequences on the child’s right to identity and, more precisely, the right to access his or her origins.67 As the ECtHR acknowledges, the right to know one’s origins is an essential part of the right to identity,68 protected under Article 8 ECHR.69 This right involves not only the parents’ identity but also the conditions of birth, and it is especially significant for children whose biological parentage does not coincide with their social parentage, Prefatory note to ISS, Principles for the protection of the rights of the child born through surrogacy (Verona principles), 2021, available at https://iss-ssi.org/wpcontent/uploads/2023/03/VeronaPrinciples_25February2021-1.pdf accessed on 5.7.2023. 64 See UNICEF, Key Considerations: Childrens Rights & Surrogacy, February 2022, available at https://www.unicef.org/media/115331/file accessed on 5.7.2023, cf. K. WADE, The regulation of surrogacy: a children’s rights perspective, in Child Fam Law Quarterly, 2017, at p. 113. 65 See Optional Protocol to the CRC and the Sale of Children, Child Prostitution and Child Pornography A/RES/54/263 of 25 May 2000. Cf. D. SMOLIN/ M. DE BOERBUQUICCHIO, Surrogacy, Intermediaries, and the Sale of Children, in Research Handbook on Surrogacy, K. TRIMMINGS, et al. (eds.) Edward Elgar, 2023. 66 Certainly from the point of view of a receiving state, it is difficult to address issues about children’s welfare before birth, especially in the absence of instruments of international law that can establish common parameters for doing so, see HCCH, A study of legal parentage and the issues arising from international surrogacy arrangements, Preliminary Document No 3 C of March 2014 for the attention of the Council of April 2014 on General Affairs and Policy of the Conference pp. 5 – 24 available at https://www.hcch.net/en/projects/legislative-projects/parentage-surrogacy/ accessed on 5.7.2023. 67 Under Article 8 ECHR the child’s status filiationis is an essential element of the child’s right to privacy as it represents the legal recognition of the child-parent relationship, and, as such, is part of the child’s identity. See above ECHR, Mennesson v France (note 10) paras. 97-98. 68 Cf. Article 7(1) UN CRC: the child shall be registered immediately after birth and shall have the right from birth to a name, the right to acquire a nationality and, as far as possible, the right to know and be cared for by his or her parents and Art 8 States Parties undertake to respect the right of the child to preserve his or her identity, including nationality, name and family relations as recognized by law without unlawful interference; see above WADE, note 66, at p. 123. 69 ECHR, 13 February 2003, Odièvre v France, App. No 42326/98, para. 29; ECHR 25 September 2012, Godelli v Italy, App. No 33783/09 para. 52. 63

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Surrogacy Contracts and the (In)alienability of Fundamental Rights such as surrogacy-born children.70 As the ECtHR has pointed out, international surrogacy impairs the possibility of knowing one’s origins.71 Arguably, special adoptions does not fit the protection of the children’s right to identity, as it is based on the premise that the bonds between the children and their original families are not cancelled.72 Therefore, the law neither recognizes nor protects the child’s right to access his or her origins.73 In this way, the only possibility for children to know the conditions of their birth or to access information about their birth mother depends upon their parents’ choice.74 Finally, the establishment of the child’s status filiationis in special adoption is subject to several variables, such as the initiative of the would-be adoptive parent, or the biological parent’s consent. A crisis within the couple could thus affect both variables. On the one hand, under Article 46 of the Adoption Law, a parent exercising parental responsibility could oppose adoption by refusing his or her consent. According to the Supreme Court, the merit of the opposition must be assessed against the best interests of the children and rejected if it deprives them of an established relationship of care and affection with the adopting parent:75 an elegant and enlightened answer that nevertheless stretches the division of powers to its limits. On the other hand, the Italian legal system cannot mandate the establishment of adoptive parentage if the intentional parent ultimately refuses to pro-

70 I. PRETELLI, Filiation between Law, Language, and Society, (May 2022), pp. 13-15 Available at https://ssrn.com/abstract=4101805 or http://dx.doi.org/10.2139/ssrn. 4101805 last accessed on 25.7.2023; S. BESSON, Enforcing the child’s right to know her origins: contrasting approaches under the Convention on the Rights of the Child and the European Convention on Human Rights, in International Journal of Law, Policy and the Family 2007, p. 137 et. seq. 71 See above ECHR, Advisory opinion April 2019 (note 12), para. 41. 72 Article 28 of Adoption Law (No 184/1983) regulates the procedures for exercising the right to know his or her origins of the child adopted through ordinary adoption. 73 For the same reason the EU Regulation proposal on the recognition of parenthood between Member States has been highly criticised (see above note 13), see A. TRYFONIDOU, Cross-Border Legal Recognition of Parenthood in the EU, Policy Department for Citizens Rights and Constitutional Affairs Directorate-General for Internal Policies PE 746.632 April 2023, pp. 98-99. 74 M. DAMBACH/ N. CANTWELL, Child’s right to identity in surrogacy, in Research Handbook on Surrogacy, K. TRIMMINGS, et al. (eds) Edward Elgar, 2023; Cf. C. THOMALE, State of play of cross-border surrogacy arrangements – is there a case for regulatory intervention by the EU?, Journal of Private International Law, 2017, p. 469. 75 The biological parent could materially remove the child and prevent or interrupt the formation of that de facto family life with the intended parent. In this case, absent a de facto family life, the relationship between the child and the intended parent is protected neither under the child’s right to family life (Article 8 ECHR) nor under the parent’s right to family life, which would otherwise be stretched to protect an absolute right to parenthood. See ECHR, 24 March 2022, A.M. v Norway, App. No 30254/18; Cf. A. RENDA, Maternità surrogata all’estero e status del nato: le Sezioni Unite confermano l’intrascrivibilità e ribadiscono la via dell’adozione in casi particolari, in Corti supreme e salute, 2023, at p. 28.

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Valentina Calderai/ Rachele Zamperini ceed with adoption. The only available solution to this “particular contingency”76 is a remedy, a sort of promissory estoppel based on the contra factum proprium venire interdiction, which grants the child at least the effective judicial protection of the rights that Article 30(1), It. Constitution bestows on all children, regardless of a formally constituted familial status.77 The resulting situation of “limping legal parentage” seems sub-optimal,78 as it jeopardises the clear-cut, swift allocation of parental responsibility granted by automatic transcription.79 The objection however begs the question, as it presumes what should be demonstrated, i.e., that the status established abroad on the basis of a surrogacy agreement, decoupled from family life and affection, is sufficient title to parentage. Against this background, special adoption is a less-than-perfect, even clumsy instrument – yet it is the only instrument that allows for the consideration of vital issues of constitutional identity without “turning one’s back” on the children born of surrogate mothers.80 If only for this, it deserves to be praised.

Cassazione civile Sezioni Unite, 30 December 2022, No 38162 (note 3), para. 11. V. CALDERAI, Back to the basics. Indisponibilità dei diritti fondamentali e principio di dignità umana dopo Sezioni Unite n. 38162/2022, Giustizia insieme, available at https://www.giustiziainsieme.it/it/minori-e-famiglia/2695-back-to-the-basicsindisponibilita-dei-diritti-fondamentali-e-principio-di-dignita-umana-dopo-sezioni-unite-n38162-2022 accessed on 5.7.2023. 78 See HCCH, Final Report: The feasibility of one or more private international law instruments on legal parentage, Prel. Doc. No 1 of November 2022, at p. 8 cf THOMALE (note 74), at p. 468. 79 See above WADE, note 66. Cf. Under Article 18(1) CRC, parents are identified as having primary responsibility for the upbringing and development of the child and the best interest of the child must be their basic concern W. VANDENHOLE, Article 18: Common responsibilities of parents for the upbringing and development of the child, in Childrens Rights: A Commentary on the CRC and its Protocols, W. VANDENHOLE, Edgar Elgar, 2019, p 203 et. seq. 80 Cassazione civile Sezioni Unite, 30 December 2022, No 38162 (n. 3), para. 26 76 77

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FREE MOVEMENT, CHILDREN’S RIGHTS AND NATIONAL IDENTITY IN THE EU PARENTHOOD PROPOSAL Helga LUKU*

I.

II.

III.

IV. V.

Introduction A. The V.М.А. v Stolichna Obshtina, rayon “Pancharevo” Case B. The Rzecznik Praw Obywatelskich v K.S. and Others Case C. The Legal Framework Resulting from the CJEU Decisions The Parenthood Proposal– An Overview of its Central Elements and Provisions A. Jurisdiction B. Applicable Law C. Recognition of Decisions and Authentic Acts and Acceptance of Authentic Acts without Binding Legal Effects D. The EU Certificate of Parenthood Right to Free Movement, Children’s Rights and National Identity in the Context of the Parenthood Proposal A. The Parenthood Proposal and Free Movement Rights 1. Interaction of Judicial Cooperation in Family Matters and EU Fundamental Rights 2. Union’s Competence in International Family Law Matters B. To what Extent Does the Proposal Leave Space for Public Policy as Translating a Member State’s National Identity? 1. Potential Influence on the Substantive Law 2. Grounds for Refusal and the Balance of Interests C. Fraude à la loi & Public Policy and Best Interest of Children Trajectory of the Parenthood Proposal Conclusions

* PhD candidate in the field of European Law and Private International Law at the University of Antwerp, Belgium.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 345-366 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Helga Luku

I.

Introduction

The EU Commission proposal for a Regulation1 (“Parenthood Proposal”) aims to harmonise at the EU level the rules on international jurisdiction in matters relating to parenthood, the applicable law for the establishment of parenthood in crossborder situations, the recognition of a court decision and authentic instruments with binding legal effects establishing parenthood in other Member States, and the acceptance of authentic instruments with no binding legal effect. Harmonisation promotes legal certainty and predictability in the interest of European families in cross-border situations. The proposal seeks to help families – and rainbow families in particular – overcome the administrative burdens and obstacles met when seeking to have certain types of parenthood – aside from biological and adoptive recognised in another Member State. The proposal follows a declaration two years ago by the Commission President, von der Leyen, in her State of the Union address that “If you are a parent in one country, you are a parent in every country”.2 Member States have different substantive and conflict-of-law rules on the establishment and recognition of the parent-child relationship. These disparities can lead to a denial of the rights that a child derives from national law, such as their succession or maintenance rights, or their right to have any one of their parents act as their legal representative in another Member State on matters such as medical treatment or schooling. In order to be in full compliance with the UN Convention on the Rights of the Child, the Commission was incentivised to propose such a law, which, according to the latter, aims to protect the fundamental rights of children. This new proposal can be considered innovative because it embraces diversity and non-discrimination policies by enabling children who move within the Union to benefit from the rights that they derive from parenthood under national law (including the right to an identity, a name, nationality, custody and access rights by their parents, maintenance rights, succession rights, and the right to be legally represented by their parents), regardless of the nationality of the children or the parents,3 the method by which the child was conceived or born4 or the type of family of the child.5 Cases brought before the Court of Justice of the European Union (the CJEU), such as Pancharevo and Rzecznik Praw Obywatelskich, have illustrated the

The Parenthood Proposal for a Council Regulation of 7 December 2022 on jurisdiction, applicable law, recognition of decisions and acceptance of authentic instruments in matters of parenthood and on the creation of a European Certificate of Parenthood, COM(2022) 695, 7.12.2022. 2 State of the Union 2020 available at: https://state-of-the-union.ec.europa.eu/stateunion-2020_en (last accessed on 14.3.2023). 3 On the condition that the document that establishes or proves the parenthood is issued in a Member State. 4 Including conception through assisted reproductive technology. 5 Including the recognition of same-sex parenthood or parenthood established through adoption. 1

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The EU Commission Proposal for a Regulation on Parenthood multiple practical inconveniences and difficulties faced, especially by rainbow families, in the EU. A.

The V.М.А. v Stolichna Obshtina, rayon “Pancharevo” Case

The proposal was anticipated by a ruling of the CJEU in the case of Pancharevo6. This case deals with the recognition of the parent-child relations between a girl and two women: V.M.A., a Bulgarian national, and K.D.K., a United Kingdom national. After their marriage in Gibraltar in 2018, they had decided to have a child using a sperm donor. S.D.K.A. was born one year after the marriage. The child’s birth certificate, issued by the Spanish authorities, designated both women as mothers. The Bulgarian mother, V.M.A, applied to the competent Bulgarian authority to provide her with a birth certificate for her daughter, which is necessary, amongst other documents, for the issuance of a Bulgarian identity document. The Bulgarian authorities informed her that the model birth certificate had only one box for the 'mother' and another for the 'father' and that only one name could appear in each box. It refused to issue such a birth certificate on the grounds that no information was provided concerning the identity of the child's biological mother and that a reference to two female parents on a birth certificate was contrary to the public policy of the Republic of Bulgaria. It is worth recalling that Bulgaria does not permit marriage between two persons of the same sex. V.M.A. challenged this decision before the Administrative Court of the City of Sofia, which made a preliminary reference to the CJEU. The referred questions, in a broad sense, aim to clarify whether Member States are obliged by EU law, particularly Articles 20 and 21 of the Treaty on the Functioning of the European Union (TFEU) and Articles 7, 24 and 45 of the Charter of Fundamental Rights of the European Union (the Charter), to issue an identity document for a child (national of that Member State), whose birth in another Member State, is attested to by a birth certificate that has been drawn up by that Member State in accordance with the national law of such Member State. Additionally, a crucial issue that was submitted to the CJEU was how to strike a balance between the best interest of the child and the national and constitutional identity of the Member States. In response, the CJEU held that EU law imposes an obligation on Bulgaria, and all other Member States, to recognise the document issued by the Member State where the child was born, enabling the child to exercise the right of free movement and residence with each parent within the territory of the European Union. This decision was based on the assumption, as put forth by the referring court, that the child holds Bulgarian nationality. After the implementation of the judgment by the Sofia administrative court, which mandated the issuance of a birth certificate for the child, recognising her Bulgarian nationality, the Supreme Administrative Court of Bulgaria, in response to a cassation appeal, ultimately reversed the decision, asserting that the child 6 CJEU, 14 December 2021, V.М.А. v Stolichna obshtina, rayon “Pancharevo”, No ECLI:EU:C:2021:1008.

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Helga Luku should not be deemed a Bulgarian citizen, since the parent-child relationship could not be recognised in Bulgaria.7 B.

The Rzecznik Praw Obywatelskich v K.S. and Others Case

This case is similar to the former as it concerns a baby born in Spain by means of male gamete donation. Here too, Spain had been chosen by the couple due to its advantageous legal framework on artificial reproductive techniques, which allows the issuance of birth certificates attesting co-motherhood that do not distinguish between the mother who gave birth and the genetic mother. In the case Rzecznik Praw Obywatelskich8 the two women were of Irish and Polish nationality, respectively. As in the former case, the birth certificate mentioned both women as parents. As was the case in Bulgaria, the Polish authorities refused to recognise the child’s birth certificate. Similarly, the Irish authorities refused to recognise it, holding that the child was not of Irish nationality and was therefore not entitled to an identity card or passport. Thus, the child was deprived of Union citizenship and identity documents. In accordance with its judgment in Pancharevo, the CJEU ordered that, in the case of a minor child who is a citizen of the Union and whose birth certificate, issued by the authorities of a Member State, designates as that child’s parents two persons of the same sex, the Member State of which that child is a national (i) is obliged to issue to that child an identity card or a passport without requiring the prior transcription of a birth certificate of that child into the national register of civil status, and (ii) is obliged to recognise, as is any other Member State, the document from another Member State that permits that same child to exercise without impediment, with each of those two persons, his or her right to move and reside freely within the territory of the Member States. C.

The Legal Framework Resulting from the CJEU Decisions

In both cases, the CJEU opted for a functional recognition of the parentage relationship by having due regard to the rights of the Union citizens, protection of fundamental rights, and respect for the competence and national identity of the Member States.9 The cases share the same conclusion anticipated by the earlier 7 See the blog post by H. LUKU, The Supreme Administrative Court of Bulgaria’s final decision in the Pancharevo case: Bulgaria is not obliged to issue identity documents for baby S.D.K.A. as she is not Bulgarian (but presumably Spanish), available at https://conflictoflaws.net/2023/the-supreme-administrative-court-of-bulgarias-finaldecision-in-the-pancharevo-case-bulgaria-is-not-obliged-to-issue-identity-documents-forbaby-s-d-k-a-as-she-is-not-bulgarian-but-presuma/ (last accessed on 28.6.2023) 8 CJEU, 24 June 2022, Rzecznik Praw Obywatelskich v K.S. and Others, No ECLI:EU:C:2022:502. 9 J. MEEUSEN, Functional Recognition of Same-Sex Parenthood for the Benefit of Mobile Union Citizens – Brief Comments on the CJEU’s Pancharevo Judgment, 2022, available at https://eapil.org/2022/02/03/functional-recognition-of-same-sex-parenthood-for-

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The EU Commission Proposal for a Regulation on Parenthood judgment in Coman.10 In that case, the CJEU distinguished between the formal recognition of a same-sex couple registered in a Member State by another Member State and the mere recognition of the right to free movement derived from the marital (or comparable) status. This way, the Court ensured that Union citizens could exercise their right to free movement, as guaranteed in Article 21(1) TFEU, within the territory of the Member States, without requiring a full recognition of same-sex marriages, partnerships or parenthood for all other purposes. While the CJEU remains steadfast in its commitment to the right of free movement and fundamental rights enshrined in the Charter, it also recognises the importance of safeguarding the competences and national identities of Member States and seeks to avoid any potential accusations of disregard towards them. However, the CJEU's case law does not offer clear guidance on the demarcation line between the areas where recognition of a parent-child relationship established in a Member State is mandated by EU law and where such recognition is not obligatory.11 To address this ambiguity, the EU Commission has proposed a solution that would require Member States to recognise the parenthood of a child established in another Member State for all purposes.12 Guided by the principle of the best interests of the child, the Parenthood Proposal aims to eliminate the disparities among national systems regarding parenthood-related issues.

II.

The Parenthood Proposal – An Overview of its Central Elements and Provisions

Before starting with an analysis of the Parenthood Proposal, it is prudent to provide a concise summary of its contents. The proposal is divided into nine distinct chapters, each addressing a particular aspect of the subject matter. These chapters cover the scope and definitions of the proposal, as well as its jurisdiction, applicable law, recognition of court decisions and authentic instruments with binding legal effects, recognition of instruments with no binding legal effects, and the creation of a European Certificate of Parenthood. By examining the provisions of these chapters, it is possible to gain a comprehensive understanding of the proposal and the implications it carries for the recognition of parenthood across the EU.

the-benefit-of-mobile-union-citizens-brief-comments-on-the-cjeus-pancharevo-judgment/ (last accessed on 11.03.2023). 10 CJEU, 5 June 2018, Relu Adrian Coman and Others v Inspectoratul General pentru Imigrări and Ministerul Afacerilor Interne, ECLI:EU:C:2018:385. 11 A. WYSOCKA-BAR, Same-Sex Parenthood in a Cross-Border Landscape in Pancharevo, this Yearbook 2022/2021, pp.333-348.; P. KINSCH, European Courts and the obligation to recognise (partially) foreign same-sex marriages. On Orlandi and Coman, this Yearbook 2018/2019, pp.47-60. 12 Preamble of the Parenthood Proposal, §2.

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Helga Luku A.

Jurisdiction

Jurisdiction lies alternatively with the Member State of the habitual residence of the child, of the nationality of the child, of the habitual residence of the respondent (e.g. the person in respect of whom the child claims parenthood), of the habitual residence of each of the parents, of the nationality of each of the parents, or of the place of birth of the child.13 If the jurisdiction cannot be established on one of the general alternative jurisdictional grounds, particularly in cases of refugee children or children internationally displaced, the court of the Member State where the child is present should have jurisdiction. When courts of the Member States do not have jurisdiction pursuant to the aforementioned rules, residual jurisdiction should be determined, in each Member State, by the laws of that Member State. As a final option to remedy situations of denial of justice, this proposal also provides for a forum necessitatis, allowing a court of a Member State with which a case has a sufficient connection to rule on a parenthood matter, which is closely connected with a third State. It can be used to establish jurisdiction on an exceptional basis, such as where the proceedings prove to be impossible in that third State, e.g. in a civil war, or where the child or another interested party cannot reasonably be expected to bring proceedings in that third State. A choice-of-court clause or transfer of jurisdiction is excluded in order to avoid the commencement of the proceedings in Member States where rights concerning parenthood cannot be settled or can be waived.14 B.

Applicable Law

In order to avoid different decisions on parenthood depending on which Member State’s courts or other competent authorities establish parenthood, the proposal introduces common rules on the law applicable15 to the establishment of parenthood in cross-border situations. The applicable law provided in the Parenthood Proposal has a universal character, thus it applies whether it is the law of a Member State or the law of a third State. The law applicable to the establishment of parenthood should be the law of the State of the habitual residence of the person giving birth, at the time of birth. If it is not possible to determine the applicable law in accordance with the aforementioned rule in cases of a refugee mother or an internationally displaced mother, the law applicable should be the law of the State of birth of the child. In a more complicated situation, where that rule results in the establishment of parenthood as regards only one parent (e.g. the genetic parent in a same-sex couple), the court of the Member State which has jurisdiction under the Parenthood Proposal, may apply alternatively either the law of the Article 6 (general jurisdiction), Article 7 (jurisdiction based on the presence of the child), Article 8 (residual jurisdiction), Article 9 (forum necessitatis) of the Parenthood Proposal. 14 Explanatory Memorandum, COM(2022) 695 final, p.5. 15 Article 18 (applicable law) of the Parenthood Proposal. 13

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The EU Commission Proposal for a Regulation on Parenthood nationality of any of the parents or the law of the State of birth of the child, to establish the parenthood as regards the second parent (e.g. the non-genetic parent in a same-sex couple). If applying foreign law in a cross-border situation would be manifestly incompatible with the public policy of a Member State, the court and other competent authorities of the latter establishing parenthood should take into consideration public interest and disregard that law. However, when authorities of a Member State decide to set aside the law of another State in such exceptional cases, it should not be contrary to the Charter and particularly Article 21, which prohibits discrimination. In other words, the public policy exception cannot be applied to refuse the application of a provision of another Member State, when the latter provides for the possibility of parenthood as regards a same-sex couple merely on the grounds that the parents are of the same sex, since it will be considered discrimination on the grounds of sex, against Article 21 of the Charter.16 C.

Recognition of Decisions and Authentic Acts and Acceptance of Authentic Acts without Binding Legal Effects

On the basis of the principle of mutual trust, the Parenthood Proposal provides for the recognition17 of court decisions and authentic instruments establishing parenthood with binding legal effects issued in a Member State. Court decisions and authentic instruments establishing parenthood with binding legal effects issued in a Member State should be recognised in another Member State without any special procedure being required, including for updating the civil status records of the child. When invoking a court decision or an authentic instrument establishing parenthood with binding legal effect in another Member State, the interested party should produce a copy of the court decision or authentic instrument and the relevant attestation. The proposal introduces an exhaustive list of grounds for refusal of the recognition of parenthood, with the aim to facilitate the recognition of parenthood.18 One of the grounds for the refusal of recognition is public policy. It is explicitly stated that when assessing public policy grounds, the best interests of the child should be taken into consideration, with due regard to the preservation of genuine family links between the child and the parents. The court or other competent authorities should not refuse the recognition of parenthood established in another Member State, contrary to the Charter and particularly Article 21, which prohibits discrimination. Hence, Member State authorities cannot, on public policy grounds, refuse the recognition of a court decision or an authentic instrument 16 Article 21 of the Charter reads: “1. Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited. 2. Within the scope of application of the Treaties and without prejudice to any of their specific provisions, any discrimination on grounds of nationality shall be prohibited.” 17 Article 24 (recognition of a court decision), Article 31 (grounds for refusal of recognition), Article 36 (recognition of authentic instruments) of the Parenthood Proposal. 18 Explanatory Memorandum, COM(2022) 695 final, p.5.

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Helga Luku establishing parenthood through the adoption by a single man or establishing parenthood as regards same-sex parents, merely on the ground that the parents are of the same sex. The EU Commission proposal also provides the mechanism of acceptance19 of authentic instruments with no binding legal effect in the Member State of origin. As opposed to the case of authentic instruments with binding legal effect, those with no binding legal effect need to be accepted and not recognised because they do not have a binding legal effect and they do not establish parenthood, but they refer to its prior establishment by other means or to other facts. Thus, they have only evidentiary effects. It may be a birth certificate, a parenthood certificate, an extract of birth from the register or any other form. If someone wishes to use such an authentic instrument in a Member State different from that in which it was drafted, it should produce it with an attestation describing the evidentiary effects of the instrument. The acceptance of authentic instruments with no binding legal effect but with evidentiary effects may only be refused on public policy grounds, with the same limitations applicable to that refusal ground to court decisions and authentic instruments with binding legal effect, including compliance with the Charter. D.

The EU Certificate of Parenthood

Moreover, the proposal introduces for the first time an optional European Certificate of Parenthood20 (the “Certificate”), which is designed to facilitate the recognition of parenthood within the Union as it would be issued “for use in another Member State”. It must be issued in the Member State in which parenthood was established in accordance with the applicable law and whose courts had jurisdiction under the proposal. The Certificate is optional and it can be issued by the authorities of a Member State only if the child or the legal representative asks for it. Thus, the Certificate is an alternative instrument that may facilitate the process of recognition of parenthood within the Union, as it would be issued “for use in another Member State”.21 Moreover, the Certificate is issued through a uniform standard form, with the same contents and effects throughout the Union and it is available in all Union languages. However, considering the nature of this instrument, it will bring no innovation in the context of the struggle for recognition of parenthood within the Union except for the smoothness of the procedures.

Article 45 (acceptance of authentic instruments) of the Parenthood Proposal. Article 46 (creation of a European Certificate of Parenthood), Article 47 (purpose of the Certificate) of the Parenthood Proposal. 21 Explanatory Memorandum, COM(2022) 695 final, p.5. 19 20

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The EU Commission Proposal for a Regulation on Parenthood

III. Right to Free Movement, Children’s Rights and National Identity in the Context of the Parenthood Proposal As evident from the provisions of the Parenthood Proposal, the EU Commission extends its reach beyond the limits of protecting the children’s rights that derive from EU law, in order to ensure the protection of rights that originate from national laws, e.g. succession and maintenance rights, as well. This indicates the Commission’s commitment to equality and non-discrimination. However, while some view this proposal as a progressive step by the EU towards promoting acceptance of rainbow families in all Member States, it is important to acknowledge that different Member States possess varying cultural values, beliefs, ethics, morals, and political and economic systems that may affect their ability to adapt to unknown or unwanted legal institutions such as same-sex parenthood or surrogacy. A.

The Parenthood Proposal and Free Movement Rights

The areas of family law and civil status still fall under the exclusive jurisdiction of Member States. The main connection between EU law and family law is provided by Article 81 (3) TFEU, which establishes the competence of the Union to adopt measures on judicial cooperation in family matters having cross-border implications via a special legislative procedure, according to which the Council shall act unanimously after consulting the European Parliament. The TFEU confers upon the EU the power to enact conflict-of-laws rules aimed at enhancing judicial cooperation in civil matters with cross-border implications, and in accordance with this power, the European Commission has put forward the current legislative proposal under Article 81(3) TFEU, which is premised on the principle of mutual recognition of judgments and decisions in extrajudicial cases. The Parenthood Proposal seeks to advance the free movement of Union citizens and their families. However, the objectives of this proposal stretch far beyond that goal and encompass the protection of fundamental and other rights of children in cross-border situations. It goes without saying that the right of Union citizens to move and reside freely within the territory of the Member States, pursuant to Article 21 TFEU, cannot be exercised independently from their right to family life. Thus, Union citizens have the right to be accompanied by their family members, as defined in Directive 2004/38, in the host State and the refusal to allow them to do so would create an obstacle to free movement.22 It is explicitly mentioned in the O. and B. 22 Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (Text with EEA relevance), OJ L158/77, 30.04.2004.

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Helga Luku case23 that “the effectiveness of Article 21 TFEU requires that the Union citizen may be able to continue, on returning to the Member State of which he is a national, the family life which he led in the host Member State, if he and the family member concerned who is a third-country national has been granted a permanent right of residence in the host Member State”.24 Hence, the CJEU has confirmed in several judgments that the separation of family members constitutes an infringement of the free movement and the right to family life.25 Moreover, Union citizens’ genuine residence in the host Member State goes hand in hand with creating and strengthening family life in that Member State.26 Thus, Directive 2004/38 and the case law of the CJEU establish a derived right for third-country family members of the Union citizens, thereby facilitating the free movement of Union citizens and their family members and guaranteeing a genuine enjoyment of their rights as Union citizens. In the same vein, the CJEU has confirmed that free movement rights and family reunification should be guaranteed to members of all types of families. Regardless of whether Member States have legally recognised same-sex marriage, same-sex parenthood, surrogacy, etc., they must ensure the free movement rights of Union citizens, as guaranteed by the Treaty provisions. The landmark case of Pancharevo has served as a salient example of the recognition of the parent-child relationship for the sole purpose of permitting the child “to exercise without impediment with each of two parents, the right to move and reside freely within the territory of the Member States as guaranteed in Article 21(1) TFEU”. However, it remains ambiguous to what extent the parent-child relationship is recognised for the purpose of granting other rights, such as maintenance or succession rights.27 The adoption of the Parenthood Proposal would shed clarity on this matter by ensuring that the parent-child relationship is recognised for all purposes. Undoubtedly, the extension of rights beyond the boundaries of EU law raises significant questions concerning the legal competence of the EU to enact measures in this regard. These questions will be discussed subsequently in this text.

CJEU, 12 March 2014, O. v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v B., ECLI:EU:C:2014:135, § 55. 24 Ibidem. 25 CJEU, 11 July 2002, Mary Carpenter v. Secretary of State for the Home Department, ECLI:EU:C:2002:434, §38.; See also: CJEU, 7 July 1992, The Queen v Immigration Appeal Tribunal and Surinder Singh, ex parte Secretary of State for Home Department, ECLI:EU:C:1992:296; CJEU, 19 October 2004, Kunqian Catherine Zhu and Man Lavette Chen v Secretary of State for the Home, ECLI:EU:C:2004:639; CJEU, 8 March 2011, Gerardo Ruiz Zambrano v Office national de l’emploi, ECLI:EU:C:2011:124. 26 § 53-55 O. AND B. (note 23). 27 A. WYSOCKA-BAR (note 11). 23

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The EU Commission Proposal for a Regulation on Parenthood 1.

Interaction of Judicial Cooperation in Family Matters and EU Fundamental Rights

In its reasoning in Pancharevo, the CJEU also referred to other rights of children. It made a reference to the Grunkin and Paul case28, where it affirmed that current Article 21 TFEU precludes the authorities of a Member State, in applying national law, from refusing to recognise a child’s surname, as determined and registered in a second Member State in which the child – who, like his parents, has only the nationality of the first Member State – was born and has been resident since birth.29 Further, the CJEU referred to the Coman30 case, by emphasizing that the rights of EU citizens under Article 21(1) TFEU encompass the right to lead a normal family life with their family members, both in the host Member State and in their Member State of nationality upon return.31 Also, the CJEU referred to the provisions of the Charter, specifically Articles 7 and 24(2), which respectively provide for the right to private and family life, and the rights of the child, with particular regard to the paramount consideration of the child’s best interests.32 In my view, therefore, the CJEU maintained a cautious and impartial approach by consciously respecting the exclusive competences of the Member States to define substantive concepts of family law.33 Thus, the Court limited itself only to the children’s right to move and reside freely as a prerequisite for the enjoyment of fundamental rights, mentioned above. The Parenthood Proposal not only fills in the gaps left by the court's silence but also takes it a step further. The question may arise whether the wording of Article 81 confers on the EU the competence to enact legislation on the recognition of parenthood for all purposes, including the protection of children’s rights that derive from the parentchild relationship in national law. In other words, can the EU legislature regulate other rights than those that derive from Union law? A strictly literal interpretation of Article 81 TFEU does not readily confer the competence of the EU legislature to promulgate private international law provisions aimed at safeguarding children’s rights that do not flow from the Union legal system, but it does not exclude it either. However, it is also pertinent to analyse the provisions of the Charter to address the aforementioned questions.

CJEU, 14 October 2008, Stefan Grunkin and Dorothee Regina Paul, ECLI:EU:C:2008:559, § 44. 29 § 44 Pancharevo judgment (note 6). 30 CJEU, 5 June 2018, Relu Adrian Coman and Others v Inspectoratul General pentru Imigrări and Ministerul Afacerilor Interne, ECLI:EU:C:2018:385, § 32. 31 § 47 Pancharevo judgment (note 6). 32 § 59 Pancharevo judgment (note 6). 33 C. KOHLER, Unification of Private International Law in Family Matters in the European Union: Cultural Issues in I. Viarengo/ F.C. Villata (eds), Planning the Future of Cross Border Families, Oxford, Hart 2020, p. 8. 28

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Helga Luku Article 24 of the Charter (The rights of the child) provides: “1. Children shall have the right to such protection and care as is necessary for their well-being. They may express their views freely. Such views shall be taken into consideration on matters, which concern them in accordance with their age and maturity. 2. In all actions relating to children, whether taken by public authorities or private institutions, the child’s best interests must be a primary consideration. 3. Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents unless that is contrary to his or her interests.” Article 51 of the Charter (Field of application): “1. The provisions of this Charter are addressed to the institutions, bodies, offices and agencies of the Union with due regard for the principle of subsidiarity and to the Member States only when they are implementing Union law. They shall therefore respect the rights, observe the principles and promote the application thereof in accordance with their respective powers and respecting the limits of the powers of the Union as conferred on it in the Treaties. 2. The Charter does not extend the field of application of Union law beyond the powers of the Union or establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties.” It is worth noting that the Explanations relating to Article 24 of the Charter draw a direct link between the powers of the EU to legislate on civil matters (it can be assumed that this also includes family law matters) having cross-border implications, as part of the establishment of an area of freedom, security and justice, under Article 81 TFEU, including visiting rights, which will ensure that children maintain personal and direct contact with both of their parents, on a regular basis.34 A careful reading of the Explanation reveals that the term “notably” is used, suggesting that the scope of the provision is not limited to visiting rights. However, it does not explicitly state that the provision extends to all rights, including those that derive from the parent-child relationship in the national laws of Member States. Furthermore, Article 51 of the Charter, which defines its scope, explicitly specifies that the provisions of the Charter are intended for the institutions, bodies, offices, and agencies of the Union, with due regard to the principle of subsidiarity, and to the Member States solely when they are implementing Union law. Additionally, the second paragraph affirms that the Charter cannot expand the competences and duties that the Treaties assign to the Union and it cannot expand the field of application of Union law beyond the Union's established powers under the Trea34 Explanation on Article 24 – The rights of the child, Explanations relating to the Charter of Fundamental Rights, OJ C 303, 14.12.2007.

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The EU Commission Proposal for a Regulation on Parenthood ties.35 Moreover, in its case law, the CJEU has established that the requirement to respect fundamental rights defined in the context of the Union is only binding on the Member States when they act within the scope of Union law.36 2.

Union’s Competence in International Family Law Matters

In the doctrine, it is acknowledged that in civil law countries, international family law is a part of private international law, which in principle follows the same rules as private international law in general.37 The Lisbon Treaty expanded the competence of the EU to legislate on private international law, in the new Article 81 TFEU, enabling the EU to adopt measures for the approximation of Member States’ laws, without the requirement of such measures to be “necessary for the proper functioning of the internal market”. According to this provision, legislative action is particularly in its place when it is necessary for the proper functioning of the internal market, but there is nothing in Article 81 TFEU that prohibits/ limits the enaction of private international law rules with the objective of ensuring the protection of other rights, such as those which derive from the parent-child relationship in national laws of Member States. Article 81 TFEU effectively addresses the need of the Union to deal with the collateral effects of the free movement of persons as a component of the internal market.38 There is, however, an element which differentiates the adoption of private international law rules in civil and commercial matters from those in family matters, and that is the right of veto that Member States enjoy when it comes to family law issues. It is an alien element in the system of competences established by the Treaties, which illustrates the strong connection between international family law and national legal systems.39 Therefore, the EU legislature would act under the competences conferred by Article 81 (3) TFEU when adopting the Parenthood Proposal and the unanimity requirement preserves the right of the Member States to have their last word in issues concerning family law with cross-border implications. The potential (indirect) influence of the Parenthood Proposal on the substantive laws of the Member States will be examined in the subsequent paragraph.

35 Explanation on Article 51 – The rights of the child, Explanations relating to the Charter of Fundamental Rights, OJ C 303, 14.12.2007. 36 CJEU, 3 July 1989, Hubert Wachauf v Bundesamt für Ernährung und Forstwirtschaft, ECLI:EU:C:1989:321; CJEU, 18 December 1997, Daniele Annibaldi v Sindaco del Comune di Guidonia and Presidente Regione Lazio, ECLI:EU:C:1997:631. 37 D. MARTINY, Objectives and Values of (Private) International Law in Family Law, in J. MEEUSEN/ M. PERTEGAS/ G. STRAETMANS/ F.SWENNEN (eds), International Family Law for the European Union, Antwerp-Oxford 2007, p. 73. 38 A. LANG, Impact of the Regulations on the FreeMovement of Persons in the EU in I. Viarengo/ F.C. Villata (eds.), Planning the Future of Cross Border Families, Oxford, Hart 2020, p.355. 39 C. KOHLER (note 33), p. 7.

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To what Extent Does the Parenthood Proposal Leave Space for Public Policy as Translating a Member State’s National Identity?

National law, particularly family law, is rooted in the national legal cultures historically, politically and socially.40 Thus, its harmonisation has always been viewed in a sceptical way.41 Some authors argue that unification and even harmonisation of family law must be rejected, since they may lead to a loss of an important aspect of one’s culture.42 The proposal under consideration seeks to ensure recognition of parenthood irrespective of how the child is conceived or born, and irrespective of the child’s type of family. Thus, it applies to, amongst others43, same-sex parenthood, and surrogacy, which may encounter resistance from certain Member States.44 1.

Potential Influence on the Substantive Law

Prima facie, the rules of the Parenthood Proposal do not interfere with the national family law of the Member States. However, for illustrative purposes, it is instructive to consider a simple scenario in the context of the Parenthood Proposal. A same-sex couple conceives a baby via assisted reproductive technologies (via surrogacy arrangement) in a Member State that permits it. Their parenthood is established in accordance with the jurisdiction of the court of the State where the child is born (one of the alternatives in the Parenthood Proposal) and the applicable law will be the law of the State of birth of the child (also one of the alternatives). Then, the family moves to another Member State, which does not allow same-sex parenthood in its substantive family law. The rules of the Parenthood Proposal would allow them to ask for the recognition of their parent-child relationship, established according to the law of the State of birth of the child. Such recognition would confer legal rights to the parents and the child, including maintenance and 40 N. DETHLOFF, Arguments for the Unification and Harmonisation of Family Law in Europe, in K. BOELE-WOELKI (ed.), Perspectives for the Unification and Harmonisation of Family Law in Europe, Antwerp – Oxford – New York 2003, p. 59. 41 J. MEEUSEN, System Shopping in European Private International Law in Family Matters, in J. MEEUSEN/ M. PERTEGAS/ G. STRAETMANS/ F.SWENNEN (eds), International Family Law for the European Union, Antwerp-Oxford 2007, p. 270. 42 W. PINTENS, Europeanisation of Family Law, in K. BOELE-WOELKI (ed.), Perspectives for the Unification and Harmonisation of Family Law in Europe, Antwerp – Oxford – New York 2003, p.7. 43 COM(2022) 695 final, p.13. The proposal covers the recognition of the parenthood of a child irrespective of how the child was conceived or born - thus including children conceived with assisted reproductive technology - and irrespective of the child’s type of family - thus including children raised by a same-sex couple, children with one single parent, and children adopted domestically in a Member State by one or two parents. 44 See EU countries split over Commission’s plan to give parents cross-border rights, available at https://www.euractiv.com/section/non-discrimination/news/eu-countries-splitover-commissions-plan-to-give-parents-cross-border-rights/ (last accessed on 28.6.2023)

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The EU Commission Proposal for a Regulation on Parenthood succession rights, as provided for in the national laws applicable to maintenance and succession rights according to the relevant EU Regulations. Consequently, the host Member State bears the obligation of accommodating the established parentchild relationship and must ensure the availability and protection of such rights under its national legal framework. Some scholars have previously predicted that the development of conflictof-law rules in family law would create a kind of indirect substantive law, and it appears that this prediction is now coming to fruition.45 This means that the Parenthood Proposal does not formally affect national law, but it is likely to have a ripple effect on the societies of the Member States. Through its application, Member States will be exposed to the legal concepts of other States and in the long run, they may be inclined to slightly tweak their approach and reflect it in their substantive law.46 The Parenthood Proposal may indeed have an indirect impact on the substantive law of the Member States, but it is also necessary to understand whether and to what extent the parent-child relationship established abroad can be restricted by the Member States on public policy grounds considered to express their national identity. A central objective of the Parenthood Proposal is to ensure the recognition of parenthood, irrespective of the mode of conception or birth or the composition of the family unit. This endeavour, however, presupposes that Member States are willing to recognise same-sex partners as the two parents of a child and intentional parents using a surrogate mother, despite the existence of social and cultural norms embodied in their national identity. In Sayn-Wittgenstein47 and Bogendorff,48 the CJEU has ruled that the application, possession or use of a title of nobility based on which a Member State refuses to recognise one of its nationals’ surname as acquired in another Member State may be justified on public policy grounds, articulated as protection of national identity. Hence, the CJEU has demonstrated its commitment to balancing national identity with other fundamental principles. Pursuant to Article 4(2) TEU, the EU is required to respect the Member States' national identities, inherent in their fundamental political and constitutional structures. Accordingly, national identity covers not only constitutional structures that reflect constitutional identity

S. POILLOT PERUZZETTO, The exception of public policy in family law within the European legal system, in J. MEEUSEN/ M. PERTEGAS/ G. STRAETMANS/ F. SWENNEN (eds), International Family Law for the European Union, Antwerp-Oxford 2007, p. 289. 46 See S. GÖSSL/ M. MELCHER, Recognition of a status acquired abroad in the EU – A challenge for national laws from evolving traditional methods to new forms of acceptance and bypassing alternatives, Cuadernos de Derecho Transnacional 2022, pp. 1032-1034. 47 CJEU, 22 December 2010, Ilonka Sayn-Wittgenstein v Landeshauptmann von Wien, ECLI:EU:C:2010:806. 48 CJEU, 2 June 2016, Nabiel Peter Bogendorff von Wolffersdorff v Standesamt der Stadt Karlsruhe and Zentraler Juristischer Dienst der Stadt Karlsruhe, ECLI:EU:C:2016:401. 45

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Helga Luku but also cultural and historical ties of national identity.49 Likewise, the sixth recital of the preamble of the TEU announces respect for the Member States' history, culture, and traditions.50 Thus, the concept of national identity pertains to the features that distinguish one Member State from another and are largely influenced by their respective constitutional identity.51 Recognising parenthood established in another Member State may bring many modifications to legal regulations. Consequently, this may bring political and constitutional rearrangements, which are fundamentally an expression of cultural phenomena.52 The fourteenth recital of the Preamble of the Parenthood Proposal provides that public policy and national identity cannot justify the refusal to recognise a parent-child relationship between children and their same-sex parents for the purpose of exercising the rights that a child derives from Union law, thus, confirming the CJEU’s considerations in the Pancharevo case. However, the Preamble and Articles of the Parenthood Proposal are silent on whether public policy and national identity can be invoked in cases which go beyond the protection of the free movement right of Union citizens, such as the recognition of parenthood for all purposes. Thus, the national identity is not threatened when Member States are required to recognise such parenthood for the purpose of protecting the free movement right, under Article 21(1) TFEU53, but the CJEU does not extend this obligation to other rights other than those deriving from EU law. 54 2.

Grounds for Refusal and the Balance of Interests

The mutual recognition incorporated in the proposal implicitly obliges the Member States to disregard their national identity even when it is not dictated by the need to guarantee or protect the free movement right of Union citizens.55 Thus, it can be assumed that, if the issue concerned is related to family law, Member States can rely on the public policy exception, since it is the traditional mechanism to ensure the protection of national identity, in so far as it does not create obstacles to the free movement right. Public policy is a national concept, which means that it is determined by the Member States themselves. However, the EU still has some control over the way the Member States use or take recourse to the public policy Z. KÖRTVÉLYESI/ B. MAJTÉNYI, Game of Values: The Threat of Exclusive Constitutional Identity, the EU and Hungary, German Law Journal 18(7), 2017, pp. 17211744 (p.1725). 50 Ibidem. 51 L.F.M. BESSELINK, National and constitutional identity before and after Lisbon, Utrecht Law Review 6 (3), 2010, pp.36-49 (p. 47). 52 L.F.M. BESSELINK, (note 51), p.44. 53 §56 Pancharevo judgment (note 6). 54 §57 Pancharevo judgment (note 6). 55 It is already established under the CJEU case law that the free movement of Union citizens who are members of rainbow families is guaranteed and protected in EU law. The issue at stake concerns the recognition of parenthood “for all purposes”. 49

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The EU Commission Proposal for a Regulation on Parenthood exceptions.56 Free movement of persons and Union citizenship are an essential basis for European control over the way a Member State invokes public policy exceptions.57 Thus, Member States cannot refuse to recognise parenthood, even if it is contrary to their national laws, because they have an obligation to recognise it at least for the purpose of the rights derived from Union law. The Preamble of the Parenthood Proposal58 provides that the grounds for non-recognition should be kept to a minimum in light of the underlying aim of this Regulation to facilitate the recognition of parenthood and effectively protect children’s rights. Thus, Article 31 introduces an exhaustive list of grounds for refusal of recognition, and its first paragraph 31(1)(a), provides that: “recognition shall be refused if it is manifestly contrary to the public policy of the Member State in which the recognition is invoked, taking into account the child’s best interests”. Additionally, in the second paragraph 31(2), it emphasised that “point (a) of paragraph 1 shall be applied by the courts and other competent authorities of the Member States in observance of the fundamental rights and principles laid down in the Charter, in particular Article 21 on the right to non-discrimination.” When perusing this provision, the focus should be on interpreting the child's interests. The protection of children’s rights and interests is a fundamental principle of EU law, which recognises the importance of protecting and promoting the rights and well-being of children in all aspects of their lives. Article 24 of the Charter also ensures this, but it does not impose on the Member States how to implement or assess the best interests of a child in their national legal system. This was confirmed also in O., S., and L., where the CJEU held that Articles 7 (private and family life) and 24 (children’s rights) of the Charter cannot be interpreted as depriving the Member States of their margin of appreciation when examining applications for family reunification.59 The Preamble of the Parenthood Proposal provides that any reference to the “best interests of the child” should be interpreted in the light of Article 24 of the Charter and of Articles 3 and 12 of the United Nations Convention on the Rights of the Child60 as implemented by national law.61 56 CJEU, 28 March 2000, Dieter Krombach v André Bamberski, ECLI:EU:C:2000:164. 57 S. POILLOT PERUZZETTO (note 45), p. 288. 58 § 62 of the Preamble of the Parenthood Proposal. 59 CJEU, 6 December 2012, O and S v Maahanmuuttovirasto and Maahanmuuttovirasto v L, ECLI:EU:C:2012:776, § 79; P. RODRIGUES, Human rights and the Best Interests of the Child in European Family Reunification Law, in E. BERGAMINI/ C. RAGNI (eds), Fundamental Rights and Best Interests of the Child in Transnational Families, Cambridge- Antwerp- Chicago 2019, p. 64. 60 Article 3 of the UN Convention on the Rights of the Child: 1. In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best

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Helga Luku In the context of family law, the European Court of Human Rights (ECtHR) has also encountered cases that require a fair balance between competing interests, such as individual interests and public policy. The ECtHR has consistently held that in both contexts, the State is entitled to a margin of appreciation.62 In the case of Wagner v. Luxembourg,63 the ECtHR challenged the use of the public policy exception by using children’s best interests as a restraint. Therefore, according to the principles set out by the Court in its case law, where a family tie with a child is established, the State must act in a way that enables that tie to be developed and establish legal safeguards that render possible the child’s integration in his family.64 Moreover, the ECtHR maintains that the margin of appreciation will vary according to the circumstances, the subject matter and the context. In this respect, one of the relevant factors may be the existence or nonexistence of common ground between the laws of the Contracting States.65 Thus, from the human rights perspective, the scope of the margin of appreciation is wide when there is no consensus between the laws of States, especially in cases, which raise sensitive moral and ethical issues, given that States ensure a minimum standard of protection, as set forth by international instruments.66 Hence, the best interests principle does not imply an absolute obligation to recognise a parent-child relationship established abroad, as the Member States enjoy a margin of discretion based on ethical and

interests of the child shall be a primary consideration. 2. States Parties undertake to ensure the child such protection and care as is necessary for his or her well-being, taking into account the rights and duties of his or her parents, legal guardians, or other individuals legally responsible for him or her, and, to this end, shall take all appropriate legislative and administrative measures. 3. States Parties shall ensure that the institutions, services and facilities responsible for the care or protection of children shall conform with the standards established by competent authorities, particularly in the areas of safety and health, in the number and suitability of their staff, as well as competent supervision Article 12 of the UN Convention on the Rights of the Child: 1. States Parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child. 2. For this purpose, the child shall in particular be provided the opportunity to be heard in any judicial and administrative proceedings affecting the child, either directly, or through a representative or an appropriate body, in a manner consistent with the procedural rules of national law. 61 § 17 of the Preamble of the Parenthood Proposal. 62 ECHR, 22 June 2004, Pini and Others v. Romania, App. nos. 78028/01 and 78030/01, § 149. 63 ECHR, 28 June 2007, Wagner and J.M.W.L. v. Luxembourg, App. no. 76240/01. 64 § 119, ibidem. 65 §128, ibidem. 66 R. BARATTA, Recognition of a Foreign Status Filii: Pursuing the Best Interests Principle, in E. BERGAMINI/ C. RAGNI (eds), Fundamental Rights and Best Interests of the Child in Transnational Families, Cambridge- Antwerp- Chicago 2019, p. 185.

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The EU Commission Proposal for a Regulation on Parenthood legal principles and values. In the context of EU law, this can be translated as public policy.67 In light of the provisions outlined in the Parenthood Proposal, it is clear that Member States must prioritise the best interests of the child when addressing the recognition of certain forms of parenthood, before resorting to the public policy exception. However, the extent to which the Member States can use public policy justification, and conversely, the extent to which the EU institutions can require the Member States to disregard their hesitation and scepticism toward recognition of same-sex parenthood and surrogacy, with the aim to protect the child’s best interests, remains uncertain. In such an instance, it appears pertinent to cite Chabert’s words: “sous un vêtement unitaire, la notion de l’intérêt supérieur de l’enfant est une notion plurale qui demande une approche unitaire”.68 C.

Fraude à la loi & Public Policy and Best Interest of Children

It is well-established that the Member States have divergent national laws concerning the establishment of parenthood, as well as the refusal of legal parenthood. Moreover, substantial differences exist among Member States regarding the legitimacy of assisted reproductive techniques, surrogacy, adoption by a single parent, and adoption by same-sex parents. Given these differences in the national laws of the Member States, Union citizens have the opportunity to take advantage of more favourable and liberal laws to establish their parenthood and then seek recognition of that parenthood in any other Member State. From a legal perspective, the Parenthood Proposal may lead to allegations of fraude à la loi, as people who want to circumvent the domestic legal restrictions can easily establish their parenthood abroad and return to the host State (which may also be the State of their nationality) and require the recognition of that parenthood. A similar case was ruled on by the ECtHR in 2014 in Mennesson and Labassee,69 where two French couples of intended parents, travelled to the USA for the sole purpose of concluding a surrogacy agreement. After receiving the baby, they returned to France and applied for registration of the child’s birth certificate in the French civil register. The French authorities, suspecting the cases involved surrogacy arrangements, which were null and void on public-policy grounds under the French Civil Code, refused to enter the birth certificates in the French register of births. Although the French couples had committed fraud à la loi because they had intentionally avoided the application of French law, the ECtHR found a breach of Article 8 ECHR because a parent-child relationship is part of the child’s identity. As a result, the ECtHR reasoned that non-recognition of parenthood undermines the children’s identity within French society.70 Ibidem. See C. CHABERT, L'intérêt de l'enfant et les conflits de lois, PUAM, Aix-enMarseille 2001. 69 ECHR, 26 June 2014, Mennesson v. France, App. no. 65192/11. 70 § 96, ibidem. 67 68

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Helga Luku In such a case, the ECtHR had to strike a fair balance between the interests of individuals (in this case, children) and public policy, particularly in the light of fraude à la loi argument. The ECtHR maintained that as far as an essential aspect of an individual’s identity is at stake, the margin of appreciation afforded to the State needs to be reduced.71 This reduction is necessitated by the importance of the child’s best interests when the opposed interests are weighed, which underscores the paramount consideration of this principle as provided in the United Nations Convention on the Rights of the Child. Hence, according to the ECtHR, the protection of the best interests of children counteracts the public policy and fraude à la loi arguments, and should always be assessed as a prevailing principle, which includes the right of children to enjoy private and family life. Drawing from the case law of the ECtHR, it can be inferred that the protection of the child’s best interest may lead to an almost absolute compression of the margin of discretion of Member States when balancing their interests and the child’s best interest. Despite the fact that the EU’s legal framework for human rights protection is distinct from the European Convention of Human Rights, the ECtHR case law serves as an inspiration for the protection of fundamental rights for the CJEU. Hence, while the balancing exercise in the EU context remains ambiguous, certain scholars contend that non-recognition of the parent-child relationship would deprive the child of almost any legal protection and Article 24 of the Charter may impose on Member States the duty to “neutralise” fraude à la loi or public policy concerns if that is in the best interest of the child.72 Does that mean that the Member States are obliged to recognise the parent-child relationship even when the child is born as a result of cross-border commercial surrogacy, despite any public policy argument and despite their social, moral, and ethical convictions?73 Will it become a standard practice for EU citizens to be allowed to establish their parenthood in a Member State of their choice and have that parenthood recognised in the host Member State? It is therefore of utmost importance that the legislative and judicial authorities at both the national and European levels thoroughly consider these concerns.

§ 80, ibidem. F. DEANA, Cross-border continuity of family status and public policy concerns in the European Union. DPCE Online, [S.l.], v. 40, n. 3, Oct. 2019. Available at: https://www.dpceonline.it/index.php/dpceonline/article/view/787 (last accessed on 12.03 2023). 73 An acknowledgement of such a practice could potentially incentivize and facilitate cross-border commercial surrogacy arrangements, thereby exacerbating the potential for grave human rights abuses. 71 72

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The EU Commission Proposal for a Regulation on Parenthood

IV. Trajectory of the Parenthood Proposal The European Commission’s proposal for a regulation on the recognition of parenthood concerns a complex and multifaceted issue and it is likely that its adoption will face a long legislative trajectory. Since the current proposal concerns family law issues with cross-border implications, under Article 81(3) TFEU, the Council shall act unanimously via a special legislative procedure after consulting the European Parliament. Given the differing approaches and national identities of Member States, which are often associated with their respective conservative or liberal convictions, unanimous consent is not easily attainable. Nevertheless, if unanimity is not achievable, a group of Member States may still adopt the proposal through enhanced cooperation (as provided in Article 20 TEU). This method is not uncommon for Member States when they must establish legislation on family law matters, as demonstrated by the adoption of the Rome III74, matrimonial property75 and registered partnerships76 regulations. However, if the proposal is adopted through enhanced cooperation, it is uncertain whether it will achieve its objective of providing equal rights for all children. Furthermore, the participating Member States will likely include those that did not previously enforce stringent requirements for the recognition of parenthood in their national laws, even prior to the adoption of the Regulation through enhanced cooperation.

V.

Conclusions

The Parenthood Proposal constitutes a legal instrument aimed at facilitating the free movement of Union citizens with a principal objective to ensure that children in cross-border situations can enjoy the rights derived from parenthood under national law. These rights include, among others, succession, maintenance, custody, and the right of parents to act as legal representatives of the child for matters such as education and health. Additionally, it provides legal certainty and predictability. However, the Proposal’s adoption may encounter political resistance due to opposing views among the Member States on the balance between individual 74 Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation, OJ L 343, 29.12.2010. 75 Council Regulation (EU) 2016/1103 of 24 June 2016 implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes, OJ L 183, 8.7.2016. 76 Council Regulation (EU) 2016/1104 of 24 June 2016 implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of the property consequences of registered partnerships, OJ L 183, 8.7.2016.

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Helga Luku interests and the State’s interests, as well as divergences as to the understanding of the Union’s competences. The aim of the Parenthood Proposal to strengthen the protection of the rights of children that flow from national law raises questions about the EU Commission’s authority to address rights beyond those deriving from Union law. Article 81(3) of the TFEU confers powers to the EU bodies to enact conflict-of-laws rules in family matters with the objective, not only to ensure the protection of rights that derive from Union law but also rights that derive from a parent-child relationship in national laws of Member States. There is no indication within the reading and interpretation of that Article that suggests the opposite. However, it can be assumed that the recognition of parenthood for all purposes is likely to have an indirect impact on the substantive laws of Member States. Furthermore, the Parenthood Proposal's implementation has the potential to promote the recognition of parenthood throughout Europe, with limited scope for Member States to invoke public policy limitations for protecting their national identities. Hence, it is difficult to strike a fair balance between individual interests and States’ interests, as manifested in their national identity, as far as children’s rights are concerned. The safeguarding of the child's best interests is accorded primary importance and is likely to be prioritized above other rights. However, the notion of what constitutes the best interests of a child is fluid and open to interpretation, and the responsibility for assessing these interests lies with each respective Member State. Lastly, it might be overly optimistic to expect the achievement of the unanimity required for the adoption of this Proposal pursuant to Article 81(3) TFEU. In my view, adoption through enhanced cooperation may still be feasible, but most of the opposing Member States will be left outside its application, thereby undermining the objectives of this Proposal.

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SURROGACY AGREEMENTS FROM THE CONFLICT-OF-LAWS PERSPECTIVE TODAY AND TOMORROW Paulina TWARDOCH*

I. II.

III.

Introduction Characteristics of Surrogacy Agreements – Substantive Law A. Two Core Aspects 1. General Observation 2. The Pregnancy Aspect 3. The Establishment of Filiation Aspect B. Specific Questions Private International Law Solutions in Selected Legal Systems A. France B. Belgium C. Spain D. Ukraine E. Poland 1. Surrogacy Agreements as a sui generis Category 2. The Law of the State of the Surrogacy Procedure as the Applicable Law 3. Using the Concept of “Closed Legal Situation” 4. The Scope of the Applicable Law 5. Ordre Public Final Remarks

I.

Introduction

III.

While work on the Parentage/Surrogacy Project of the Hague Conference on Private International Law1 and on the proposal for an EU Regulation on parenthood * Associate Professor, University of Silesia in Katowice. The author has no conflicts of interest to declare. 1 See the Final Report of the Experts’ Group on the Parentage/Surrogacy Project (2022), https://assets.hcch.net/docs/6d8eeb81-ef67-4b21-be42-f7261d0cfa52.pdf (accessed: 14 April 2023). Concerning the work on that project – see in particular M.M. ALBORNOZ/ N. RUBAJA, “Los desafíos en la labor del Grupo de Expertos de la Conferencia de La Haya de Derecho Internacional Privado sobre filiación y gestación por sustitución”, in C. FRESNEDO DE AGUIRRE/ G.A. LORENZO IDIARTE (eds), Jornadas por el 130 Aniversario de los Tratados de Montevideo de 1889. Legado y futuro de sus soluciones en el concierto

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 367-396 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Paulina Twardoch matters2 is in progress, it is interesting to analyse the approach adopted or proposed in particular legal orders with regard to private law aspects of surrogacy, principally surrogacy agreements, in terms of conflicts of laws, especially current developments in that area. Accordingly, this article presents de lege lata or de lege ferenda solutions in French, Belgian, Spanish, Ukrainian and Polish legal systems, with special focus on the French and Polish legal orders. For the purpose of the conflict-of-laws analysis, the article provides for comparative observations on the institution of surrogacy agreements as shaped at the substantive law level. This examination encompasses, among others (in alphabetical order), legal systems of Armenia, Belarus, California, Colorado, Florida, Israel, Kazakhstan, Kyrgyzstan, New Hampshire, New York, Russia, Ukraine, Virginia and Washington, as well as the Irish draft legislation.

II. Characteristics of Surrogacy Agreements – Substantive Law A.

Two Core Aspects

1.

General Observation

A comparative analysis of the rules governing surrogacy agreements and of doctrinal characterisations of the latter3 shows that there are two main legal issues related internacional actual (Fundación de Cultura Universitaria 2019), pp. 663-681. See also the remarks by H. FULCHIRON, “La lutte contre le tourisme procréatif: vers un instrument de coopération internationale?”, Clunet, 2014, pp. 563-588. 2 Proposal for a Council Regulation on jurisdiction, applicable law, recognition of decisions and acceptance of authentic instruments in matters of parenthood and on the creation of a European Certificate of Parenthood, COM(2022) 695 final, 7 December 2022. 3 In particular: Art 15 of the Armenian Law on Reproductive Health and Reproductive Human Rights of 2002; Sections 7960-7962 of the California Family Code (FAM); Sections 19-4.5-101–19-4.5-114 of the Colorado Revised Statutes; Arts 1(1)(35) and 54 et seq. of the Kazakh Marriage and Family Code; Sections 581-102(i)-(j) and 581401 et seq. of the New York Family Court Act; Sections 26.26A.700 et seq. of the Revised Code of Washington (RCW); the Irish Health (Assisted Human Reproduction) Bill 2022, https://www.oireachtas.ie/en/bills/bill/2022/29/?tab=bill-text (accessed: 14 April 2023); M.M. ALBORNOZ/ M.M.A. VELARDE MÉNDEZ, “Aproximación a la gestación por sustitución” in M.M. ALBORNOZ (ed.), La gestación por sustitución en el derecho internacional privado y comparado (Universidad Nacional Autónoma de México 2020) 3-29; with respect to Belarus, Russia, Kyrgyzstan, Kazakhstan and Armenia: Н Анцух [N. ANTSUKH], Трансграничные проблемы правового регулирования суррогатного материнства [Cross-border Problems of Legal Regulation of Surrogacy] (Четыре четверти 2015) 23-34, 46-79; A.A. NOVIKOV, “Surrogate motherhood in Russia and the Commonwealth of Independent States: legislation, jurisprudence, and political discussion”, in P. MOSTOWIK (ed.), Fundamental legal problems of surrogate motherhood. Global perspective, Wydawnictwo Instytutu Wymiaru Sprawiedliwosci 2019, pp. 321-365;

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Surrogacy Agreements from the Conflict-Of-Laws Perspective to the conclusion, implementation and effects of such agreements: one relating to the pregnancy to be carried by the surrogate (more specifically to the bringing about of that pregnancy, carrying the foetus and giving birth to the resulting child), and the other, relating to the establishment of filiation between the intended parents and the child. Within the further discussion, these two main legal issues will be referred to as “the core aspects of surrogacy agreements”. 2.

The Pregnancy Aspect

As regards the first of the aforementioned core aspects of surrogacy agreements, that is the one relating to pregnancy, it should be noted that the surrogacy agreement involves a surrogate and a description of the service that she provides and that relates to pregnancy. In this regard, the agreement contemplates a series of obligations, examples of which we may synthesise as follows. First, the surrogate consents to:  “becoming pregnant through assisted reproduction” [see the definition of the surrogacy agreement laid down in Section 19-4.5-103(14) of the Colorado Revised Statutes (Colo. Rev. Stat.)];  “attempting to become pregnant, by use of an egg other than her own” [see the definition of “surrogacy agreement” in conjunction with the definition of “surrogacy” laid down in Section 2(1) of the Irish Health (Assisted Human Reproduction) Bill 2022]; or  “the use of artificial insemination or embryo implantation” for “conceiving, carrying and bearing a child” in performance of the agreement [see definition of surrogacy agreement in conjunction with the definition of surrogacy laid down in Article 2 of the Family Code of the Kyrgyz Republic (hereinafter: the Kyrgyz FC)]. Second, the surrogate’s performance consists of:  delivering “a live birth”, as a result of “bearing a child”, provided that the child is not “conceived by means of sexual intercourse” and that the person O.A. KHAZOVA, “Surrogacy in Russia” in J.M. SCHERPE/ C. FENTON-GLYNN & T. KAAN (eds) Eastern and Western Perspectives on Surrogacy, Intersentia 2019, p. 281-303; with respect to Israel: S. SHAKARGY, “La réglementation israélienne de la gestation pour autrui. Ça nous tient à coeur (mais seulement chez nous)!”, in V. BOILLET/ M. ROCA I ESCODA & E. DE LUZE (eds), La gestation pour autrui. Approches juridiques internationales, Helbing Lichtenhahn Verlag, Anthemis 2018, p. 109-20; A. WESTREICH, Assisted Reproduction in Israel. Law, Religion, Culture, Brill 2018, p. 10-21; Idem, “Surrogacy and egg donation in Israel: legal arrangements, difficulties, and challenges”, in P. MOSTOWIK (ed.), Fundamental legal problems of surrogate motherhood. Global perspective, Wydawnictwo Instytutu Wymiaru Sprawiedliwości 2019, p. 269-289; R. SCHUZ, “Surrogacy in Israel”, in J.M. SCHERPE/ C. FENTON-GLYNN & T. KAAN (eds), Eastern and Western Perspectives on Surrogacy, p. 166-178; with respect to Ukraine: A. ANATOLIIVNA HERTS, “Surrogate motherhood in Ukraine: method of infertility treatment, judges’ activism and doctrine”, in P. MOSTOWIK (ed.), Fundamental legal problems of surrogate motherhood. Global perspective, pp. 421-447; with respect to the USA: N. CAHN & J. CARBONE, “Surrogacy in the United States of America”, in J.M. SCHERPE/ C. FENTON-GLYNN & T. KAAN (eds), Eastern and Western Perspectives on Surrogacy, p. 308-327.

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–

– –

3.

acting as surrogate does not contribute the egg [see the definition of surrogacy agreement laid down in Section 581-102(i) in conjunction with the definition of “person acting as surrogate” laid down in Section 581-102(j) and the provision of Section 581-401(b) of the New York Family Court Act (FCT)]; “carrying a foetus after donor embryo transfer” and giving birth to the resulting child, provided that if there are two intended parents (who must be married to each other), both are genetically related to the child, and if there is one intended parent (which is a solution accessible only to a single woman), that parent is genetically related to the child [see the definition of surrogacy, in its new version,4 laid down in Article 55(9) of the Russian Federal Law on the Basics of the Protection of Citizens’ Health of 2011 (hereinafter: the Russian Law on Citizens’ Health)]; carrying and bearing the child resulting from the implantation in the surrogate’s uterus of an embryo conceived through the use of the spouses’ genetic material (see the definition of surrogacy and the description of “the subject matter of surrogacy agreements” proposed by Alla Anatoliivna Herts with regard to Ukrainian law);5 “carrying and bearing a child”, provided that the child is genetically related to at least one of the intended parents (see the definition of surrogacy proposed by Natalia Antsukh with regard to Belarussian law);6 or delivering a live birth, as a result of pregnancy (see the definition of surrogacy agreement proposed in the Mexican literature).7 The Establishment of Filiation Aspect

The other core aspect of surrogacy agreements relates to the establishment of the filiation of the child with regard to the intended parent or parents, while the child’s filiation with regard to the surrogate (and the latter’s spouse or partner, if relevant) is extinguished/excluded. Thus, as follows from Patrick Wautelet’s writings, the main intention of the parties to surrogacy agreements is to bring about the creation of the bond of filiation between the intended parents and the child.8 Sabrina Gauron-Carlin has 4 The new version was introduced by the Federal Law No 538-FZ of 19 December 2022 “On Amendments to Certain Legislative Acts of the Russian Federation” (Federal Law No 538-FZ). 5 A. ANATOLIIVNA HERTS (note 3), pp. 430, 432. 6 N. ANTSUKH (note 3), p. 31. 7 M.M. ALBORNOZ /M.M.A. VELARDE MÉNDEZ (note 3), p. 25-26; M.M. ALBORNOZ, “Gestación por sustitución transfronteriza y problemas recurrentes en torno a ella” in M.M. ALBORNOZ (ed.), La gestación por sustitución en el derecho internacional privado y comparado, Universidad Nacional Autónoma de México 2020, p. 74. 8 See P. WAUTELET, “La filiation issue d’une gestation pour autrui: quelles règles de droit international privé pour la Belgique?”, in G. SCHAMPS & J. SOSSON (eds), La gestation pour autrui: vers un encadrement?, Larcier 2013, p. 220 n 21, 231.

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Surrogacy Agreements from the Conflict-Of-Laws Perspective expressed a similar idea, by advocating that the ultimate goal of surrogacy is to legally fulfil the wish of the intended parent – or each of them, if they are two – to be a parent.9 In a similar vein, David Sindres argues that surrogacy agreements are entirely oriented towards the establishment of the bonds of filiation between the intended parents and the child.10 Analogously, according to Sharon Shakargy, “the raison d’être of a surrogacy agreement is not just the birth of a child, but also the creation of a parent-child relationship between the intended parents and the child […] alongside the severing of the parental relationship with the surrogate mother”.11 In this context, it should be noted that: – within the definition of surrogacy agreement laid down in Section 19-4.5103(14) Colo. Rev. Stat., the agreement’s content has been characterised as encompassing, apart from the already mentioned consent of the surrogate to become pregnant, the provision that “each intended parent is a parent of a child conceived under the agreement”; – within the description of the scope of the surrogate’s consent, the definition of surrogacy agreement, construed in conjunction with the definition of surrogacy laid down in Section 2(1) of the Irish Health (Assisted Human Reproduction) Bill 2022, indicates, apart from the attempt to become pregnant, the transfer of “the parentage of any child born as a result of the pregnancy”; – within the definition of surrogacy agreement laid down in Section 581102(i) of the New York FCT, the goal of the agreement has been characterised as including (together with a live birth) that the child will be the legal child of the intended parents; – the provision of Article 51(4) Subparagraph 2 of the Family Code of the Russian Federation (hereinafter: the Russian FC), in its new version,12 provides for registration of each intended parent – two, if the parties are a married couple, or one, if the commissioning party is a single woman - 13 as the

9 S. GAURON-CARLIN, “La gestation pour autrui: état des lieux en Suisse et réflexions prospectives”, SJ II 2019, p. 76. 10 D. SINDRES, “Le tourisme procréatif et le droit international privé”, Clunet, 2015, p. 473. 11 S. SHAKARGY, “Choice of law for surrogacy agreements: in the in-between of status and contract”, J. Priv. Int. Law, 2020, 16, pp. 143-144, p. 159. 12 The new version was introduced by the Federal Law No 538-FZ. 13 Even more specifically: two persons married to each other, at least one of whom is a citizen of the Russian Federation at the time of the conclusion of the surrogacy agreement, or a single woman who is a citizen of the Russian Federation at the time of the conclusion of the surrogacy agreement, who have/has agreed in writing to the implantation of an embryo in another woman’s body in order for her to carry and bear the resulting child. The requirement of citizenship of the Russian Federation does not apply if on 19 December 2022 the surrogate mother was already pregnant pursuant to the surrogacy agreement or had already given birth to the child in performance of such agreement.

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–

–

–

–

B.

child’s legal parent(s), albeit only with the consent to such registration given by the surrogate mother;14 under the provision of Article 54(4) of the Kyrgyz FC, a married couple who is a party to a surrogacy agreement, and more specifically, who has agreed in writing to the artificial insemination of another woman or to the implantation of an embryo in another woman’s body, is, in case of the birth of the resulting child, registered as the child’s legal parents in the Register of Civil Status Acts;15 the second part of the definition of surrogacy proposed by Alla Anatoliivna Herts says that the law holds the child to descend from the intended parents “on the grounds of an appropriate agreement” between the intended parents and the surrogate mother;16 pursuant to the provision of Article 123(2) of the Ukrainian Family Code (hereinafter: the Ukrainian FC), if a human embryo conceived by spouses (a man and a woman) as a result of assisted reproductive technologies has been transferred into another woman’s body, the spouses are the legal parents of the child; pursuant to the provisions of Article 52(5) of the Belarussian Marriage and Family Code, a woman who has concluded a surrogacy agreement with a surrogate mother is the mother of the resulting child, while the spouse of this first woman shall be held to be the child’s father; within the definition of surrogacy agreement proposed in the Mexican literature, the agreement’s objective has been described as including that the resulting child will have “the legal bonds of filiation” with the intended parent(s).17 Specific Questions

As for specific questions, surrogacy agreement regimes vary among states. In particular, there are differences as to the admissibility of traditional surrogacy agreements, as opposed to gestational surrogacy agreements. In traditional surrogacy agreements, the surrogate provides her own genetic material (egg), which means that the surrogate is both the woman who gives birth to the child, and the genetic It is worth adding that, pursuant to the provision of Art 52(3) Subparagraph 2 of the Russian FC, in its new version, when contesting maternity or paternity after such registration in the birth registry book, the married couple or the single woman (as the case may be) may not, nor may the surrogate mother, invoke the fact that the child was born following medically assisted reproduction involving a surrogate. See O.A. KHAZOVA (note 3), p. 302. 15 It is worth adding that pursuant to the provision of Art 55(3), Subparagraph 2 of the Kyrgyz FC, a married couple who has agreed to the implantation of an embryo in the surrogate mother’s body may not, and nor may the surrogate mother, invoke these circumstances when contesting maternity or paternity after the registration of the couple as the child’s legal parents in the Register. On those rules: A.A. NOVIKOV (note 3), p. 356. 16 A. ANATOLIIVNA HERTS (note 3), p. 430. 17 M.M. ALBORNOZ & M.M.A. VELARDE MÉNDEZ (note 3), p. 25-26; M.M. ALBORNOZ (note 7), p. 74. 14

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Surrogacy Agreements from the Conflict-Of-Laws Perspective mother of the child, whereas gestational surrogacy agreements provide that the embryo developing in the surrogate’s womb is the result of a medically assisted procedure realised with the egg of another woman.18 In some legal systems, both traditional and gestational surrogacy agreements are allowed, e.g. in Colorado19 and in the State of Washington,20 whereas e.g. in New York,21 Israel22 and Russia23 the law precludes traditional surrogacy agreements.24 Another question that is resolved differently in different legal systems concerns financial remuneration for the surrogate. Two kinds of surrogacy agreements exist: altruistic or compassionate agreements, and commercial agreements. In accordance with the concept adopted for the purpose of work within the Hague Conference on Private International Law, one may hold that the decisive criterion in this regard is whether the financial remuneration due from the intended parent(s) to the surrogate goes beyond the latter’s reasonable expenses associated with the fertilization, carrying and bearing the child. If so, the agreement is considered to be commercial. If there is no financial remuneration to be paid to the surrogate or if the remuneration due does not exceed the surrogate’s reasonable expenses, then the agreement is deemed altruistic. However, it should be mentioned that it is often difficult to draw the line between what is altruistic and what is commercial.25 Accordingly, e.g. Russian26 and Armenian27 laws allow both commercial and altruistic surrogacy agreements, whereas Virginia law explicitly states that a See the definitions laid down in the Glossary annexed to “A Preliminary Report on the issues arising from international surrogacy arrangements”, drawn up by the HCCH Permanent Bureau (2012), https://assets.hcch.net/docs/d4ff8ecd-f747-46da-86c3-61074e 9b17fe.pdf (accessed: 14 April 2023). See also M.M. ALBORNOZ & M.M.A. VELARDE MÉNDEZ (note 3), p. 10-11. 19 See Sections 19-4.5-101–19-4.5-114 Colo. Rev. Stat., where traditional surrogacy agreements are referred to as “genetic surrogacy agreements”. 20 See Sections 26.26A.700 et seq. RCW. As is the case under Colorado law, traditional surrogacy agreements are referred to, in this code, as “genetic surrogacy agreements”. 21 See Section 581-401(b) of the New York FCT. 22 See S. SHAKARGY, “La réglementation israélienne” (note 3), p. 115; WESTREICH, “Surrogacy” (note 3), p. 281. 23 See Art. 55(10), sentence 3 of the Russian Law on the Citizens’ Health, which states that a surrogate mother cannot be an egg donor at the same time. 24 As follows from the rule of Section 4(iii)(b)(III) of the Indian Surrogacy (Regulation) Act of 2021 (in force since 25 January 2022), which states that “no woman shall act as a surrogate mother by providing her own gametes”, traditional surrogacy agreements are also precluded under Indian law. On the previously proposed versions of the act: H Kaur, Laws and Policies on Surrogacy. Comparative Insights from India, Springer 2021, pp. 93-117, 125-133, 158-163, 170-174. 25 See the definitions laid down in the Glossary annexed to “Preliminary Report” (note 18). 26 See “Preliminary Report” (note 18), p. 16, n. 94; A.A. NOVIKOV (note 3), p.333-334; O.A. KHAZOVA (note 3), p. 290. 27 See Arts. 15(11) and (12) of the Armenian Law on Reproductive Health and Reproductive Human Rights of 2002. See also A.A. NOVIKOV (note 3), p. 355. 18

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Paulina Twardoch provision in a surrogacy contract providing for “compensation” to be paid to the surrogate is void and unenforceable,28 with “compensation” denoting “payment of any valuable consideration for services in excess of reasonable medical and ancillary costs”.29 Among aspects of surrogacy agreements that various legal systems deal with differently across, one should also note who the parties to the agreement are. In particular, depending on the legal system, the parties may be just the intended parent(s) and the surrogate (as is the case e.g. under Ukrainian,30 Kyrgyz31 Russian32 and Belarussian33 law), or the intended parent(s), the surrogate and the surrogate’s spouse/partner, if any (as is the case e.g. under New York,34 Virginia35 and New Hampshire36 law). Interestingly, under Armenian law, as Andrei A. Novikov explains, “not only intended parents, but also licenced medical organisations” may be parties to surrogacy agreements.37 It should also be noted, with some simplification, that according to rules, within particular legal systems, constituting the institution of surrogacy agreements, the establishment of the filiation of the child with regard to the intended parents and the extinguishment/the exclusion of the legal parentage of the surrogate (and of her spouse or partner, if relevant) may arise: 1) from an act of a public authority, such as a judicial decision (as is the case e.g. under Israeli law38) or the registration of the child’s birth (as is the case e.g. under Russian law39), or

See Section 20-162(A) of the Code of Virginia; see, also Section 20-160(B)(4). See Section 20-156 of the Code of Virginia. 30 See A. ANATOLIIVNA HERTS (note 3), p. 431. 31 See the definitions of surrogacy agreement and surrogacy laid down in Art. 2 of the Kyrgyz FC. 32 See the definition of surrogacy laid down in Art. 55(9) of the Russian Law on the Citizens’ Health. See also A.A. NOVIKOV (note 3), p. 331-2. 33 Interestingly, under the provision of Art. 21(1) of the Belarussian Act on Assisted Reproductive Technologies, only the intended mother (not both the intended parents) and the surrogate are parties to a surrogacy agreement; on that issue: A.A. NOVIKOV (note 3), p. 350. 34 See Section 581-401 of the New York FCT and the exceptions thereto specified in Section 581-403(a), where the requirement of the involvement of the surrogate’s spouse is excluded. 35 See the definition of “surrogacy contract” laid down in Section 20-156 of the Code of Virginia. 36 See the definition of “gestational carrier agreement” laid down in Section 168-B:1(X) of the New Hampshire Revised Statutes (N.H.Rev.Stat.). 37 See A.A. NOVIKOV (note 3), p. 355. 38 See: Responses received from Israel to the Questionnaire on the Private International Law issues surrounding the status of children, including issues arising from international surrogacy arrangements, drawn up by the HCCH Permanent Bureau (2013), https://assets.hcch.net/upload/wop/gap2014pd3il.pdf (accessed: 14 April 2023), answers to questions 26 and 27; S. SHAKARGY, “La réglementation israélienne” (note 3), pp. 113, 119 28 29

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Surrogacy Agreements from the Conflict-Of-Laws Perspective 2) by operation of law (as is the case e.g. under Ukrainian40 or Colorado41 law), or 3) from the surrogacy agreement itself (as is the case under Brazilian law42).

III. Private International Law Solutions in Selected Legal Systems A.

France

In France, surrogacy agreements are prohibited, but French nationals or residents have concluded such agreements abroad and have faced the problem of having their parentage, established abroad with regard to the resulting child, recognised in France. David Sindres addressed the issue of the law applicable to the surrogacy agreement itself (to be more specific: to its lawfulness). He indicated as relevant in this regard the conflict rule of Article 311-14 of the French code civil (hereinafter: c.c.), i.e. a (general) rule concerning filiation,43 although he had also considered the inclusion of surrogacy agreements in the conflict-of-laws category of “contract”.44 According to this provision, filiation is governed by the personal law of the mother on the day of the child’s birth or, if the mother is not known, by the personal law of the child. Since the main connecting factor used in Article 311-14 c.c. refers to “the mother”, the question arises as to how this notion should be understood for the purpose of applying the provision at issue in cases involving surrogacy. Sindres advocated that, in the context of surrogacy, the spirit of the conflict rule of Article 311-14 c.c. points towards giving preference to the interpretation pursuant to which the term “mother” used in this rule means “the surrogate mother”. As follows from Sindres’s argumentation, since the surrogate gives birth to the child, she is the potential mother whose identification is the least problematic, which is in (see therein about the constitutive character of a judicial decision establishing the filiation of a child born of surrogacy); Westreich, “Surrogacy” (note 3) 272. 39 See O.A. KHAZOVA (note 3), pp. 301-2, 304. 40 See Art. 123(2) of the Ukrainian FC. 41 See Section 19-4.5-109(1)-(2) Colo. Rev. Stat. 42 See Responses received from Brazil to the Questionnaire on the Private International Law issues surrounding the status of children, including issues arising from international surrogacy arrangements, drawn up by the HCCH Permanent Bureau (2013), https://assets.hcch.net/upload/wop/gap2014pd3br.pdf (accessed: 14 April 2023), answers to questions 26 and 27. 43 D. SINDRES, “Le tourisme procréatif” (note 10), p. 474; idem, “La gestation pour autrui: consécration progressive d’un droit à l’enfant ou fraude dans un contexte international ?”, Dr. famille, hors-série, 2020, No 18. 44 D. SINDRES, “Le tourisme procréatif” (note 10), p. 473; idem, “La gestation pour autrui” (note 43), No 18.

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Paulina Twardoch conformity with the idea behind the reference to “the mother” in Article 311-14 c.c. As that idea is to guarantee certainty, this reference is to be understood as pointing to a person easily identifiable on the day of the child’s birth. Importantly, as Sindres explained – invoking the judgment of the French Cour de cassation rendered on 11 June 199645 – the “mother” within the meaning of the provision of Article 311-14 c.c. may be the mother known only “as a matter of facts” (“la mère, seulement connue en fait”).46 In view of the foregoing, Sindres concluded that the law applicable to a surrogacy agreement, in principle, should be the national law of the surrogate on the day of the child’s birth.47 According to the proposition of Sabine Corneloup presented in 2009 and 2010, a surrogacy agreement could be governed cumulatively by the personal laws of “the women involved” and the law of the contract.48 Muriel Josselin-Gall advocated that when maternity is fragmented between the intended mother and the gestational mother, and – in the cases involving an external donor of female gametes – the genetic mother, then the term “mother” used in Article 311-14 c.c. is to be construed pursuant to French law and, thus, as denoting the mother who has borne the child, i.e. the gestational mother.49 Hugues Fulchiron and Christine Bidaud-Garon, in their analysis, published in 2015, of the issue of the law applicable to the establishment of the filiation of a child born of surrogacy, also indicated as relevant the provision of Article 311-14 c.c. For the interpretation, in such a context, of the notion of “the mother” as used in this provision, the authors distinguished three types of cases. The first type encompasses situations where the surrogate is not only the gestational, but also the genetic mother of the child. Depending on whether she is named in the birth certificate and if so, in what capacity, Fulchiron and Bidaud-Garon discussed several different solutions. The cases of the second type involve the surrogate who is only the gestational mother, while the genetic mother is a third woman whose role is

Cass, 1re civ. 11 juin 1996, n° 94-12.926. See C. LABRUSSE-RIOU, “De l'illicéité de la maternité de substitution”, Rev. crit. dr. int. privé 1991, pp. 711 et seq. 47 D. SINDRES, “Le tourisme procréatif” (note 10) 474; idem, “La gestation pour autrui” (note 43) Nos. 18-19. 48 S. CORNELOUP, “Le non-marchand en droit international privé” in E. LOQUIN/ A. MARTIN (eds), Droit et marchandisation. Actes du colloque des 18 et 19 mai 2009, Dijon Litec 2010, p. 389. 49 M. JOSSELIN-GALL, “Bioéthique” (2011, mise à jour datant de février 2020) Rép. Internat, No 53. On treating, by reference to French substantive law, the gestational mother as the mother for the purpose of applying the provision of Art. 311-14 c.c. in cases involving surrogacy – see also S. CORNELOUP (note 48), p. 391. A concept assuming that the mother (within the meaning of the said provision) should be identified on the basis of the mater semper certa est principle has also been described by G. KESSLER within his considerations of surrogacy – see G. KESSLER, “Le droit international privé à l'épreuve du renouveau de la filiation”, Clunet 2020, p. 100. However, the latter author has deemed the conflict-of-laws method inadequate in relation to surrogacy (ibid. 99, 102, 107, 111). 45 46

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Surrogacy Agreements from the Conflict-Of-Laws Perspective only to provide the gametes (une tierce femme). The third type encompasses cases where the intended mother is the genetic mother.50 No matter how complicated the reasoning carried out following the assumptions formulated by Fulchiron and Bidaud-Garon might be, the final result, in the authors’ views expressed in 2015, would almost always be the application of the law of the forum: either as the law normally applicable, or through recourse to the public policy exception against the foreign applicable law that provides for the intended parents being the parents of the child on the basis of the surrogacy agreement – a contract inadmissible under French law.51 Similarly, the resort to the public policy exception against the applicable law that validates the surrogacy agreement, resulting in the application of French law, was the scenario set forth by Sindres in his article of 2015, where he invoked in this context, as a principle forming part of the French international ordre public, the prohibition of surrogacy agreements.52 There has been, however, an important evolution in the French legal system in recent years. The judgments of the European Court of Human Rights (hereinafter: the ECtHR) in the cases of Mennesson v France53 and Labassee v France,54 and the advisory opinion delivered by the ECtHR on 10 April 201955 in response to the request of the French Cour de cassation, have played a crucial role in this regard.56 Following the ECtHR’s judgment and advisory opinion, the French Cour de cassation, on 4 October 2019, rendered, in the case of Mennesson, a judgment of great importance. According to that judgment,57 given the best interests of the child, the mere fact that the birth of the child, which occurred abroad, had its origin H. FULCHIRON & CH. BIDAUD-GARON, “Reconnaissance ou reconstruction ? À propos de la filiation des enfants nés par GPA, au lendemain des arrêts Labassée, Mennesson et Campanelli-Paradiso de la Cour européenne des droits de l’homme” Rev. crit. dr. int. pr. 2015, pp. 25, 28-31. 51 Ibid. pp. 28–32. 52 D. SINDRES, “Le tourisme procréatif” (note 10), pp. 477-478; cf. idem, “La gestation pour autrui” (note 43), No 23. See also the opinion of M. JOSSELIN-GALL (note 48), No 57, expressed in favour of the recourse to the public policy exception against a surrogacy agreement in the context of the judgments of the French Cour de cassation of 6 April 2011: Cass, 1re civ., 6 avril 2011, n° 09-66.486, ECLI:FR:CCASS:2011:C100369, Cass, 1re civ., 6 avril 2011, n° 10-19.053, ECLI:FR:CCASS:2011:C100370, Cass, 1re civ., 6 avril 2011, n° 09-17.130, ECLI:FR:CCASS:2011:C100371. See also the opinion of S. CORNELOUP (note 48), pp. 402-3, formulated in the context of the judgment of the Court of Appeal of Paris of 25 October 2007 (CA Paris, 1re, sect. C, 25 octobre 2007, N° 06/00507). 53 Mennesson v France App No 65192/11 (ECtHR, 26 June 2014). 54 Labassee v France App No 65941/11 (ECtHR, 26 June 2014). 55 Advisory opinion, request No P16-2018-001. About this opinion – see in particular H. HURPY, “La judiciarisation par défaut du lien de filiation des enfants nés d'une GPA transfrontière avec la mère d'intention. Renvoi préjudiciel et Protocole 16 à la CEDH”, Revue de l'Union européenne, 2019, pp. 486-494. 56 See also the subsequent judgment: D v France App No 11288/18 (ECtHR 16 July 2020). 57 Cass, ass. plén., 4 octobre 2019, n° 10-19.053, ECLI:FR:CCASS:2019:AP00648. 50

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Paulina Twardoch in a surrogacy contract, prohibited by the provisions of Articles 16-7 and 16-9 c.c., cannot, without disproportionately prejudicing the child’s right to respect for private life, be an obstacle to the transcription of the foreign birth certificate issued by the authorities of a foreign state, as regards the biological father of the child, nor to the recognition of the bond of filiation with the intended mother named in the foreign birth certificate. Moreover, that recognition should take place at the latest when the said relationship between the child and the intended mother has become a practical reality (s’est concretisé).58 In this judgment, given the absence, in the case at hand, of “another way of recognising the filiation” without a disproportionate interference with the children’s right to respect for private life, the Court ordered the transcription of the foreign act certifying that the child’s father and mother were: the intended father, who was the genetic father, and the intended mother – the genetic father’s spouse (cf. following the ECtHR’s decisions in the cases of Mennesson v France and Labassee v France, two previous judgments of the French Cour de cassation, delivered on 3 July 2015,59 had already been favourable to the transcription insofar as the intended father – the genetic father of the child – was concerned). In two judgments rendered on 18 December 2019, the French Cour de cassation ruled in favour of the transcription of a foreign birth certificate stating that the male partner of the child’s genetic father was, together with the latter, the child’s legal parent.60 As a side note, it is worth explaining that in the French legal system the transcription of a foreign birth certificate is not decisive in ascertaining the lawfulness of the filiation (“ne préjuge pas la liceité de la filiation”),61 the importance of this measure residing in the probative sphere.62 Changes in the French Court of Cassation’s approach to surrogacy agreements – in terms of the French international public policy – occurring up to and including the judgment of 4 October 2019, prompted questions in French doctrine as to whether two principles that were previously invoked against such agreements are still in force. These principles are: the inalienability of the human body and the inalienability of the civil status. Thus, Alain Sériaux has noted their “decline”.63 In 2020, Guillaume Kessler, when discussing the question of recognising bonds of filiation that have been validly established abroad, expressed the opinion that in view of the jurisprudence of the ECtHR and CJEU, it seems hardly

On that judgment H. FULCHIRON & CH BIDAUD, “Transcription dans l'affaire Mennesson aujourd’hui. Et demain ?”, Recueil Dalloz, 2019, pp. 2228-2234. 59 Cass, ass. plén. 3 juillet 2015, n° 14-21.323, ECLI:FR:CCASS:2015:AP00619, and Cass, ass. plén., 3 juillet 2015, n° 15-50.002, ECLI:FR:CCASS:2015:AP00620. 60 Cass, 1re civ., 18 décembre 2019, n° 18-11.815, ECLI:FR:CCASS:2019:C101111, and Cass, 1re civ., 18 décembre 2019, n° 18-12.327, ECLI:FR:CCASS:2019:C101112. 61 See S. GODECHOT-PATRIS, “V° Filiation – Fasc. 16: FILIATION. – Établissement de la filiation: mise en oeuvre des règles de conflit. – Effets de la filiation”, Juris Classeur Notarial Répertoire, 2020, No 83. 62 See D. SINDRES, “La gestation pour autrui” (note 43), Nos 7-9. 63 A. SÉRIAUX, “Maternités de substitution: grandeur et décadence de deux principes d'ordre public”, Droit de la Famille, 2019, pp. 21-24. 58

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Surrogacy Agreements from the Conflict-Of-Laws Perspective conceivable to oppose the recognition in France of such a bond, even though the latter would be incompatible with the values of the legal order of the forum.64 In the same year, Sara Godechot-Patris, addressed the question of whether a foreign law that allows the establishment of the bond of filiation between a child and the intended parents would be in conformity with the French international public order (that filiation being or not being confirmed in a foreign civil status act). She argues that in the current jurisprudential context, there is no doubt about the solution: the child’s right to respect for private and family life, as well as their best interests, should be an obstacle to the operation of the public policy exception, particularly in the presence of a situation that is already created”.65 However, the line of French jurisprudence presented above has been undermined by the law of 2 August 2021 on bioethics.66 In particular, the latter modified the provision of Article 47 c.c. by specifying that a civil status act issued abroad is eligible for transcription in France only if the reality that it confirms is in conformity with French law. Interestingly, by force of the same law, medically assisted procreation, available in France only for heterosexual couples at the time the law was enacted, has become available both to single women and to female couples.67 Another important step is the special rule regarding surrogacy carried out abroad (Article 63) that has been proposed in the draft of the French code de droit international privé (dated March 2022). Pursuant to this rule: “if an agreement on procreation or gestation for another has been concluded in a state that allows such an agreement, the filiation of the resulting child may be established by the judge according to the law of that state, if a party so requests. The judge makes sure in advance that the agreement has been concluded and performed in compliance with the provisions of the law of the state in question. In accordance with the principle of proportionality, the judge takes into account the aims pursued, the interests involved, and in particular the interest of the child, as well as the effects of applying that law in the French legal order”.68

G. KESSLER (note 48), p. 112. S. GODECHOT-PATRIS (note 59), No 83. 66 Loi n° 2021-1017 du 2 août 2021 relative à la bioéthique, JORF n°0178 du 3 août 64 65

2021. 67 The significance of that step for the transcription of foreign birth certificates of children born of surrogacy has been discussed by CH. BIDAUD, “La force probante des actes de l’état civil étrangers modifiée par la loi bioéthique: du sens à donner à l’exigence de conformité des faits à la réalité « appréciée au regard de la loi française »…”, Rev. crit. dr. int. privé 2022, pp. 42-46, including a potential scenario concerning the jurisprudence of the French Cour de cassation. 68 See Projet de code de droit international privé. Rapport du groupe de travail présidé par Jean-Pierre Ancel http://www.textes.justice.gouv.fr/art_pix/rapport_code_DIP_ mars_ 2022%20.pdf, p. 42 (accessed: 14 April 2023). The translation is mine.

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Paulina Twardoch This solution aims, in particular, to meet the requirements formulated by the ECtHR in the advisory opinion of 10 April 2019, and expresses an openness to accept a bond of filiation based on a foreign law that allows surrogacy. The method used in this regard does not consist in the recognition – at least in the strict sense of that notion – of such a bond. The rule gives the judge the power to establish, on her or his own, the filiation of the child by applying the foreign law, after having performed the test of proportionality.69 Given this openness, the draft also provides, as regards transcription, for the removal of the requirement that the reality confirmed in the foreign birth certificate be assessed under French law. To that end, the draft (Article 192) proposes the reinstatement of the provision of Article 47 c.c. in its previous version.70 B.

Belgium

In Belgian law, as in French law de lege lata, there is no special conflict rule concerning surrogacy. Thus, one must apply the general provision, laid down in Article 62 of the Belgian Loi portant le Code de droit international privé (hereinafter: Code DIP), that determines the law applicable to the establishment and contestation of filiation.71 In Belgian literature, the problem of a conflict-of-laws regime to be applied in the context of surrogacy has been addressed in particular within the discussion on the recognition of foreign birth certificates of children born as a result of surrogacy agreements.72 This is because Article 27 Code DIP, defining the conditions for the recognition of a foreign authentic instrument, requires the so-called conflict-of-laws test to be performed with regard to the validity of the legal relationship indicated in the authentic instrument in question. Such a test, in the case of a birth certificate, consists of verifying whether the filiation indicated in the birth certificate could be established under the rules of the law that would be applicable according to the provision of Article 62 of the Code DIP.73 According to the latter, 69 On that rule, see Projet de code. Rapport (note 66), pp. 43-44; D. FOUSSARD/ M.-L. NIBOYET & C. NOURISSAT, “Réflexions méthodologiques sur le projet de code de droit international privé”, Rev. crit. dr. int. privé 2022, pp. 499-500. 70 See Projet de code. Rapport (note 66), p. 44. 71 See P. WAUTELET, “La filiation” (note 8), pp. 214, 219, 220; J. MARY, “La filiation à la suite d’une gestation pour autrui réalisée à l’étranger”, in S. FRANCQ/ S. SAROLÉA (eds), Actualités européennes en droit international privé familial, Anthemis 2019, pp. 123, 125; J. MARY/ G. MATHIEU, “La filiation des enfants nés d’une gestation pour autrui à l’étranger: analyse du droit belge et français à la lumière de la jurisprudence de Strasbourg”, JDJ 2020, pp. 27-28, 30. 72 J. MARY/ G. MATHIEU (note 71), pp. 27-33. Another subject of analysis concerning conflicts of laws in the area of surrogacy, i.e. the question of a potential introduction into Belgian law of a special conflict-of-laws solution regarding the latter, has been given attention in particular by P. WAUTELET “La filiation” (note 8), pp. 213-237, in 2013. 73 See J. MARY (note 71) 125-128, especially n. 31; J. MARY/ G. MATHIEU (note 71), pp. 28-30. On the conflict-of-laws test performed in the context of surrogacy by the Trib.

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Surrogacy Agreements from the Conflict-Of-Laws Perspective the establishment and contestation of the bond of filiation are governed by the national law of the person whose paternity or maternity is under consideration. However, by referring to Articles 18 and 21 Code DIP, the provision of Article 27 in fine, provides two grounds for refusal of recognition of an authentic instrument: the circumvention of the law, and a manifest incompatibility with the Belgian international public order. With respect to the public policy exception, it is advocated in the literature that due to the absence, in Belgium, of any legislation concerning surrogacy, the content of the Belgian international public order is uncertain.74 Nonetheless, one may observe that Belgian jurisprudence adopts a rather favourable approach to the bonds of filiation that have been established abroad following recourse to the services of a surrogate mother.75 To be more specific, Belgian courts generally hold that the recognition of the foreign birth certificate of a child born of surrogacy is not contrary to the ordre public.76 There is even a certain tendency in favour of directly (in other words, automatically) recognising such a birth certificate as regards both bonds of filiation: not only that with the intended father, but also that with the intended mother. The direct recognition means that there is no need to resort to an adoption procedure.77 C.

Spain

In Spain, as in France, an explicit prohibition of surrogacy exists. The provision of Article 10 of the Act No 14/2006 of 26 May 2006 on assisted human reproduction techniques (hereinafter: Act 14/2006)78 deems surrogacy contracts to be null and void by operation of law and assigns the maternal filiation of a child born of surrogacy to the woman who has given birth to the child. In Spanish private international law, the question of the conflict-of-laws regime relevant in the context of surrogacy has been analysed in particular by Javier Carrascosa González. As there is no special conflict rule in this regard in Spanish law, the author advocates that the law applicable to the filiation of a child born of surrogacy be identified on the basis of the conflict rule of Article 9.4.I of

Fam. Namur (Family Court of Namur) in the judgment of 28 February 2018 (div. Namur, 2e ch.) – see P. WAUTELET, “Autour et alentour de la gestation pour autrui, laboratoire du droit international privé”, Journal des tribunaux 2018, pp. 740-741. 74 J. MARY (note 71) p. 131; J. MARY & G. MATHIEU (note 71) p. 29. 75 See J. MARY (note 71) p. 138–9. 76 J. SOSSON/ H. MALMANCHE, “État du droit belge en matière de procréation médicalement assistée et de gestation pour autrui”, in S. BERNARD & M. FARGE (eds) Les mutations contemporaines du droit de la famille, Presses universitaires de Grenoble 2019, p. 56. 77 See J. MARY/ G. MATHIEU (note 71), p. 31. 78 Ley 14/2006, de 26 de mayo, sobre técnicas de reproducción humana asistida, “BOE” núm. 126, de 27/05/2006.

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Paulina Twardoch the Spanish código civil (hereinafter: c.c.),79 concerning “the establishment and character of natural filiation” (la determinación y el carácter de la filiación por naturaleza; the natural filiation to be distinguished from the filiation by adoption). That approach has been confirmed by the Spanish Tribunal Supremo in its judgment of 31 March 2022.80 Thus, in the case of surrogacy, the filiation of the child should be established:  pursuant to the law of the child’s habitual residence at the time of the establishment of the filiation;  in the absence of the child’s habitual residence or if said law does not allow the establishment of the filiation, pursuant to the child’s national law at the time of the establishment of the filiation;  if the latter law does not allow the establishment of the filiation or if the child has neither habitual residence nor nationality, pursuant to Spanish substantive law. Contrary to certain other Spanish specialists in private international law,81 Javier Carrascosa González and Alfonso-Luis Calvo Caravaca hold that the provision of Article 10 of Act 14/2006 (prohibiting surrogacy and assigning the maternal filiation of a child born of surrogacy to the woman who has given birth to the child) is not an overriding mandatory rule.82 Thus, as the authors explain, it may apply with regard to cross-border situations only if Spanish law is in casu applicable under the conflict rule of Article 9.4.I c.c.83 Nonetheless, in their opinion, in such cases, a court may consider that the result of application of the provision of Article 10 of Act 14/2006, consisting of the assignment of maternity to the woman who has given birth to the child, would be, in a given case, detrimental to the best interests of the child, which are protected by the rule of Article 3 of the United Nations Convention on the Rights of the Child.84 The court is then obliged to set that result aside by virtue of the primacy of the Convention over Spanish provisions (of national origin) and apply a solution that aligns with the interests of the J. CARRASCOSA GONZÁLEZ, “Filiación natural” in A.-L. CALVO CARAVACA/ J. CARRASCOSA GONZÁLEZ (eds), Tratado de Derecho Internacional Privado, t. II, Tirant lo Blanch 2020, pp. 1873-1874. 80 Roj: STS 1153/2022, 31 marzo 2022, ECLI:ES:TS:2022:1153. On this judgment, see: JR DE VERDA Y BEAMONTE, “Nueva sentencia del TS, confirmando la doctrina de que la gestación por sustitución comercial es contraria al orden público”, Instituto de Derecho Iberoamericano, April 2022, https://idibe.org/tribuna/nueva-sentencia-del-ts-confirmandola-doctrina-la-gestacion-sustitucion-comercial-contraria-al-orden-publico/ (accessed: 14 April 2023). 81 See A.-L. CALVO CARAVACA & J CARRASCOSA GONZÁLEZ, “Gestación por sustitución y Derecho internacional privado. Más allá del Tribunal Supremo y del Tribunal Europeo de Derechos Humanos”, Cuadernos de derecho transnacional, 2015, pp. 54-55; CARRASCOSA GONZÁLEZ (note 79), pp. 1878-1879. 82 A.-L. CALVO CARAVACA & J. CARRASCOSA GONZÁLEZ, “Gestación por sustitución” (note 81) 58-9; J. CARRASCOSA GONZÁLEZ (note 79), pp. 1874, 1890. 83 A.-L. CALVO CARAVACA & J. CARRASCOSA GONZÁLEZ, “Gestación por sustitución” (note 80) 58-9; J. CARRASCOSA GONZÁLEZ (note 79), p. 1874. 84 Convention on the Rights of the Child, New York, 20 November 1989. 79

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Surrogacy Agreements from the Conflict-Of-Laws Perspective child in the case under assessment. The principle of the best interests of the child shall thus, in certain situations, preclude strict adherence to the wording of the provision of Article 10 of Act 14/2006.85 The judgment of 6 February 2014 explains the views of the Tribunal Supremo as regards the role of: 1) the provision of Article 10 of Act 14/2006 and 2) the principle of the best interests of the child.86 In that judgment, the Tribunal Supremo stated that the rules on surrogacy, specifically the provision of Article 10 of Act 14/2006, form part of the Spanish international public order (las normas aplicables a la gestación por sustitución o maternidad subrogada, en concreto el art. 10 de la Ley de Técnicas de Reproducción Humana Asistida, integran el orden público internacional español).87 It was also deemed by the Spanish Supreme Court that the principle of primary consideration for the best interests of the child shall serve to interpret and apply law, and fill legal gaps, but not to counter what is explicitly provided for in law. The Court added that this principle is not the only one that must be taken into account, since other legal values, such as, inter alia, the respect for the dignity and moral integrity of a surrogate mother, may compete with the best interests of the child, and thus must be weighed against such interests. In the judgment concerned here, the filiation determined, on the basis of a surrogacy agreement, in a foreign (California) registration decision (decisión registral) was held to be manifestly contrary to what is provided for in Article 10 of Act 14/2006, and, as such, incompatible with the Spanish ordre public. The Tribunal Supremo also held that, by assigning the status of parents to the couple who had concluded the surrogacy agreement, the foreign decision under assessment is contrary to the Spanish international public order because it is incompatible with the rules that regulate essential aspects of family relations, specifically filiation, and that are inspired by the constitutional values of human dignity. The Tribunal Supremo has recently confirmed its approach to surrogacy in the aforementioned judgment of 31 March 2022, concerning commercial surrogacy. This time, the cross-border case under assessment did not involve the question of recognition of an act of a foreign authority, but the question of establishing, in Spain, the maternal filiation of a child by possession of status. Thus, the conflict-of-laws reasoning was needed. In that context, the Tribunal Supremo, with the main emphasis on commercial surrogacy, has upheld its position that surrogacy 85 A.-L. CALVO CARAVACA & J. CARRASCOSA GONZÁLEZ, “Gestación por sustitución” (note 80) 86–7; J. CARRASCOSA GONZÁLEZ (note 79), pp. 1874-1876. 86 Roj: STS 247/2014, 6 febrero 2014, ECLI:ES:TS:2014:247. On this judgment: A.-L. CALVO CARAVACA & J CARRASCOSA GONZÁLEZ, “Gestación por sustitución en California. Comentario de la sentencia del Tribunal Supremo de 6 de febrero de 2014 (247/2014)” in M. YZQUIERDO TOLSADA (ed.), Comentarios a las sentencias de unificación de doctrina: civil y mercantil, vol 6, Dykinson 2016, pp.395-410; A.-L. CALVO CARAVACA & J CARRASCOSA GONZÁLEZ, “Gestación por sustitución” (note 81), pp. 67-93. 87 A.-L. CALVO CARAVACA / J. CARRASCOSA GONZÁLEZ consider the Court’s analysis on that point to be correct, albeit cum grano salis – see A.-L. CALVO CARAVACA/ J. CARRASCOSA GONZÁLEZ, “Gestación por sustitución en California” (note 85) 400; A.-L. CALVO CARAVACA / J. CARRASCOSA GONZÁLEZ, “Gestación por sustitución” (note 80) p. 70; J. CARRASCOSA GONZÁLEZ (note 77), p. 1890).

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Paulina Twardoch agreements infringe fundamental rights, not only those of the surrogate mother, but also those of the child, and, thus, are manifestly contrary to the Spanish ordre public. The judgment also states that the proper way for the intended mother to obtain the establishment of the filiation is by adoption (la vía por la que debe obtenerse la determinación de la filiación es la de la adopción). According to the Tribunal Supremo, this solution satisfies the best interests of the child, considered in concreto, as required by the ECtHR, and, at the same time, aims to safeguard fundamental rights that the latter also deems worthy of protection, such as the rights of surrogate mothers and of children in general. D.

Ukraine

Ukrainian law allows surrogacy.88 There is, however, no special conflict rule concerning surrogacy. Thus, certain propositions in this regard have been presented in Ukrainian literature. In particular, Inesa Shumilo and Olga Kovpyk advocate, as to (“contractual relations” resulting from) surrogacy agreements, for limited party autonomy.89 Accordingly, following the concept put forward with regard to Belarussian law by the Belarussian author Natalia Antsukh,90 Shumilo and Kovpyk propose that the parties may choose from among: 1) the law of the state of the surrogate mother’s permanent residence, 2) the law of the state of the intended parents’ permanent residence, 3) the law of the state of the child’s birth, and 4) the law of the state where the procedure of the implantation of the embryo takes place, all those laws being considered by the authors to be closely connected to the legal relationship of surrogacy. The arguments in favour of the need for limiting the choice of the applicable law in the context in question that have been advanced by Antsukh and endorsed by Shumilo and Kovpyk are the following:  the complexity and novelty of the assisted reproductive technology concerned;  a high probability that rules relevant to surrogacy that potentially exist in the laws of the states closely connected to the legal relationship of surrogacy are mandatory rules.91 Another Ukrainian author, Olga Rozghon, focuses on the issue of the law applicable to the establishment of the filiation of a child born of surrogacy. She proposes supplementing the current conflict-of-laws provision of Article 65 of the Ukrainian

As for the Ukrainian sources of law relevant to surrogacy: A. ANATOLIIVNA HERTS (note 3), pp. 422-423; І Анатоліївна Шуміло and О Сергіївна Ковпик [I. SHUMILO and O KOVPYK], “Правові та етичні проблеми транскордонного сурогатного материнства” [original translation: “Legal and Ethical Issues in Cross-border Gestational Surrogacy”], Юридичний науковий електронний журнал [Juridical Scientific and Electronic Journal], 2020, p. 185. 89 Ibid, p.186. 90 N. ANTSUKH (note 3), pp. 90-91, 120. 91 N. ANTSUKH (note 3), pp. 90-91, 120; Shumilo and Kovpyk (note 88) 186. 88

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Surrogacy Agreements from the Conflict-Of-Laws Perspective Act on Private International Law of 2005, which concerns filiation in general,92 with the rule pursuant to which the establishment of the filiation of a child born of surrogacy shall be governed by the law of the state where the procedure of the implantation of the embryo takes place, or by the law most closely connected to the situation, if such law is more advantageous to the child.93 E.

Poland

1.

Surrogacy Agreements as a Category sui generis

In view of the two core aspects described above (II.A), surrogacy agreements are of a hybrid nature. They have features of contracts for the provision of services94. However, their distinctiveness when compared to those contracts, as known in general contract law, lies in the fact that the service provided by a surrogate directly involves the latter’s body and includes a specific result in the form of bringing a child into the world. At the same time, surrogacy agreements have a strong family law dimension, involving the question of filiation. Importantly, the performances related to the bringing about and carrying of the pregnancy, and to giving birth to the resulting child, are oriented towards and subordinated to the main objective of the agreement, which is the establishment of filiation between the child and the intended parents or parent, and the extinguishment or exclusion of the legal parentage of the surrogate and of her spouse or partner, if relevant (see supra II.A.3). It is worth recalling here, as a side note, that the aforementioned 92 According to the provision of Art 65 of the Ukrainian Act on Private International Law of 2005 (as currently worded), the establishment and contestation of filiation are governed by the personal law of the child at the time of the birth. 93 О Володимирівна Розгон [O. ROZGHON], “Колізійне регулювання встановлення походження дитини при застосуванні сурогатного материнства” [“Conflict-of-laws Regulation of the Establishment of the Filiation of a Child Born of Surrogacy”] Альманах міжнародного права [Almanac of International Law] 2017, p. 130; Cf. the conflict rule proposed by N. ANTSUKH (note 3), pp. 89, 120 with regard to Belarussian law. According to that proposition, the establishment of maternity or paternity with regard to the child born of surrogacy should be governed by the law of the state where the procedure of embryo implantation takes place. 94 See the opinions presented by: D. SINDRES, “Le tourisme procréatif” (note 10), p. 473 according to which surrogacy contracts bring to mind contracts for the provision of services; M.M. ALBORNOZ / M.M.A. VELARDE MÉNDEZ, (note 3), pp. 19, 26 according to which the legal nature of surrogacy seems to correspond to that of a contract for the provision of services. On the relation between surrogacy agreements and contracts for the provision of services, see also: S. CORNELOUP (note 48), pp. 379, 389; for an interesting example from the Kazakh legal system, see A.A. NOVIKOV (note 3), p. 346. In Ukraine, general rules regulating contracts for the provision of services, laid down in Arts 901-907 of the Ukrainian Civil Code, apply also to surrogacy agreements. See M. ZENIV, “Macierzyństwo zastępcze w prawie ukraińskim” [“Surrogacy under Ukrainian law”], in P MOSTOWIK (ed.), Fundamentalne prawne problemy surrogate motherhood. Perspektywa krajowa [Fundamental legal problems of surrogate motherhood. National perspective] Wydawnictwo Instytutu Wymiaru Sprawiedliwości 2019, p. 234.

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Paulina Twardoch effects as to filiation may arise by operation of law, by force of an act of a public authority or by force of the agreement itself (see supra II.B). Given the above, surrogacy agreements should be characterised in Polish private international law as a category sui generis. In particular, neither the Rome I Regulation nor the provisions on filiation included in the Polish Ustawa z dnia 4 lutego 2011 r. Prawo prywatne międzynarodowe (Act on Private International Law of 4 February 2011; hereinafter: Polish PIL Act 2011) cover this hybrid agreement. Hence, the relevant conflict rule should be deduced from the generic rule, laid down in Article 67 of the Polish PIL Act 2011, aimed at filling gaps in private international law and referring to the principle of the closest connection. This concept will be developed further below, while here it should be emphasised that, due to the heterogeneity of substantive law solutions adopted in different legal systems with regard to surrogacy agreements, there shall be one applicable law relevant to both 1) the contractual side related to the bringing about and carrying of the pregnancy, and to giving birth to a child, and 2) the question of the filiation of the latter. It is also worth adding that the sought conflict rule should not be applicable where the method of the recognition of a foreign decision is to be applied. At the same time, as regards situations connected to Poland and Ukraine, Poland and Belarus, or Poland and the Russian Federation, it is important to stress that, given the nature of surrogacy agreements, described above, in the bilateral conventions binding Poland in relations with each of those states,95 there is no conflict rule indicating the law applicable to such agreements. More specifically, the conflict rules relevant to contractual obligations or filiation in each of these conventions do not determine that law. Thus, the rule of Article 67 of the Polish PIL Act 2011 also should apply to surrogacy agreements in cases connected to Poland and Ukraine, Poland and Belarus, or Poland and the Russian Federation. 2.

The Law of the State of the Surrogacy Procedure as the Applicable Law

Pursuant to the provision of Article 67 of the Polish PIL Act 2011, if neither the Polish PIL Act 2011, nor special provisions,96 nor ratified international conventions effective in the Republic of Poland, nor the law of the EU determine the law applicable to the relationship at issue, the law most closely connected with this relationship applies. In my opinion, for surrogacy agreements, it is the law of the state where the surrogacy procedure has been (is to be) carried out that should be applicable on the basis of that closest connection rule. 95 Convention between the Republic of Poland and Ukraine on Legal Aid and Legal Relationships in Civil and Criminal Matters, concluded in Kiev on 24 May 1993; Convention between the Republic of Poland and the Republic of Belarus on Legal Aid and Legal Relationships in Civil, Family, Labour and Criminal Matters, concluded in Minsk on 26 October 1994; Convention between the Republic of Poland and the Russian Federation on Legal Aid and Legal Relationships in Civil and Criminal Matters, concluded in Warsaw on 16 September 1996. 96 “Special provisions” as referred to in Article 67 of the Polish PIL Act denote conflict rules that are contained in other Polish normative acts, distinct from the Polish PIL Act.

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Surrogacy Agreements from the Conflict-Of-Laws Perspective With regard to that solution, the following remarks are relevant. Firstly, it should be noted that such public law aspects of surrogacy as the permissibility/prohibition and the course of surrogacy procedures (as medically assisted reproduction procedures) are interconnected with private law aspects of surrogacy, such as the (in)admissibility of surrogacy agreements, the limits of their admissible content, the performance97 and effects of such agreements. Importantly, medically assisted reproduction procedures, including surrogacy procedures, are governed by public law provisions in force in the state where the procedure is in casu carried out. Within the proposed solution, the legal system that plays the role of the law applicable to a surrogacy agreement, and hence that governs the aforementioned private law aspects of surrogacy, coincides per se with the legal system whose provisions govern the surrogacy procedure as a medically assisted reproduction procedure.98 The advantage of this element of the proposed solution is that the (private law) rules governing the (in)admissibility of surrogacy agreements, the limits of their admissible content, the performance and effects of such agreements, on the one hand, and the (public law) rules that govern the surrogacy procedure as a medically assisted reproduction procedure, on the other hand, belong to the same legal system. Thus, one may avoid complications that may follow from divergences or at least disharmony, in terms of those two categories of matters, between provisions belonging to more than one legal system. Secondly, as in international cases a surrogacy procedure is most often carried out in the state of which the surrogate is a national and where the surrogate has the habitual residence,99 the law of the place of that procedure usually coincides with the surrogate’s national law and with the law of the surrogate’s habitual residence. It should be noted in this regard that the personal law of the surrogate is strongly connected to her status of surrogate as such. This connection follows from the fact that aspects related to the surrogate’s body (such as the performance that, by its nature, involves the latter) and to the surrogate’s personal autonomy, hence aspects closely related to the very person of the surrogate, are of substantial relevance in the context of that status. Given the frequent coincidence of the laws, the legal system applicable under the proposed solution is likely to be close to the 97 See the remark of S. CORNELOUP (note 48), p. 389 according to which the activity of a surrogate as the provider of services under the surrogacy agreement is governed by “the territorial regime” of techniques of medically assisted procreation, which belongs to the public law sphere. 98 Cf. the conflict-of-laws reasoning of M. PAZDAN, „W poszukiwaniu prawa właściwego dla uznania dziecka urodzonego w następstwie procedury wspomaganej medycznie prokreacji” [“In Search of Law Applicable to Acknowledgment of Child Born Following Medically Assisted Procreation Procedure”], in M. PAZDAN/ M. JAGIELSKA/ E. ROTT-PIETRZYK/ M. SZPUNAR (eds), Rozprawy z prawa prywatnego. Księga jubileuszowa dedykowana Profesorowi Wojciechowi Popiołkowi [Deliberations on Private Law. Liber Amicorum in Honour of Professor Wojciech Popiołek] Wolters Kluwer 2017, p. 146, concerning the pre-conception acknowledgment of paternity provided for in Art. 751 of the Polish Kodeks rodzinny i opiekuńczy. 99 K. ROKAS, “L'assistance médicale à la procréation en droit international privé comparé”. Thèse pour le doctorat en droit privé, Université Panthéon-Sorbonne (Paris 1) 2016, https://www.theses.fr/2016PA01D051 (accessed: 14 April 2023), p. 194.

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Paulina Twardoch institution of surrogacy agreements also due to a strong connection with the status of the surrogate as such. Thirdly, adopting as the law applicable to surrogacy agreements the law of the state where the surrogacy procedure has been carried out is conducive to the fulfilment of international engagements of Poland, in particular to putting into effect the principle of primary consideration for the best interests of the child, especially in the spirit of the judgments and the advisory opinion of the ECtHR.100 It should be explained that, the forum state’s denial of a filiation legally established abroad with regard to the intended parent(s), especially the intended parent who is the child’s biological parent or the latter’s spouse/partner, and assignment of the parentage to the surrogate who does not want to be the child’s legal mother (as is usually the case), is likely to be incompatible with the best child’s interests in a given case. It is necessary to add here that adoption in Poland is a long process, and its duration entails uncertainty as to the status of the child. The transcription in Poland, on the other hand, if not refused, is simply the confirmation of the existence of the foreign civil status document, and not the confirmation or recognition of the existence or validity of the family relationship disclosed in that document.101 In this context, it should be noted that the proposed solution is conducive to respecting filiation legally established abroad between the child and the intended parent or parents.102 Importantly, if it is justified in view of the best interests of the child assessed in concreto, a rule of the law of the state of the surrogacy procedure may be set aside on the basis of the public policy exception provided for in Article 7 of the Polish PIL Act 2011. 3.

Using the Concept of “Closed Legal Situation”

Where filiation has been legally established abroad, another concept may also be considered as relevant, namely that of respecting the so-called “closed legal situation”. The concept of respecting “a closed legal situation” has been formulated in Polish doctrine by Maksymilian Pazdan, as one to be applied de lege lata on the basis of the provision of Article 67 of the Polish PIL Act 2011 and de lege ferenda as a distinct codified Savignian solution.103 It should be explained here that “a 100 See Labassee v France App No 65941/11 (ECtHR, 26 June 2014) paras. 78-79; Mennesson v France App No 65192/11 (ECtHR, 26 June 2014) paras. 99-100; Advisory Opinion (note 54) paras. 49, 52, 54–55; D.B. and Others v Switzerland Apps Nos 58817/15 and 58252/15 (ECtHR 22 November 2022), para 88. 101 See M.A. ZACHARIASIEWICZ, “Nowa ustawa o prawie prywatnym międzynarodowym a małżeństwa i związki osób tej samej płci” [“New Act on Private International Law and Same-Sex Marriages and Non-Marital Unions”], Problemy Prawa Prywatnego Międzynarodowego [Problems of Private International Law] 2012, pp. 92-93. 102 In accordance with what has been said in point III.E.1, the respecting referred to here does not concern the filiation established abroad by force of a decision to which the method of recognising foreign decisions applies. 103 See M. PAZDAN in ID, (ed.), System Prawa Prywatnego, t. 20 A, Prawo prywatne międzynarodowe [The System of Private Law, vol 20A, Private International Law]

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Surrogacy Agreements from the Conflict-Of-Laws Perspective closed legal situation” denotes a legal situation that has strong connections with the state of its origin, that is, with the state where the situation has been created.104 It is irrelevant in this regard whether the legal situation has been created with or without intervention of a public authority.105 Thus, a legal situation arising from operation of law may be “a closed legal situation” as well. Pazdan’s concept consists of applying to a closed legal situation the law applicable thereto pursuant to the conflict rule of the state of the origin of that situation, as the state with which that situation is (most) strongly connected.106 Since, in cases involving surrogacy agreements, the state where the surrogacy procedure has been carried out and where the filiation has been legally established is most often also the national state of the surrogate and the state of the surrogate’s habitual residence, the legal situation in question, that is, the legally established filiation, usually has strong connections with the state of its origin, as is required by the above mentioned definition of “a closed legal situation”. However, as most commonly, there are no specific conflict rules concerning the institution of surrogacy agreements, and as general conflict rules on filiation do not correspond to the specificity of that institution, the application of the relevant foreign conflict rule to the establishment of the filiation of the child born of surrogacy may be difficult. 4.

The Scope of the Applicable Law

The scope of the law applicable to a surrogacy agreement, as identified in point III.E.2, covers in particular the questions of: 1) the admissibility of concluding the surrogacy agreement; when assessing the admissibility of concluding the surrogacy agreement, one must examine: a) whether surrogacy agreements are known in the applicable law at all (cf. e.g. the provision of Article 16-7 of the French code civil, according to which any agreement on procreation or gestation on behalf of another person is void, and the provision of Article 10(1) of the Spanish Act 14/2006, which deems surrogacy contracts to be null by operation of law); and, if so, Wydawnictwo C.H. Beck 2014, p. 346. The concept has been developed by the author in his paper delivered during the seminar held on the 24 January 2022 at the Faculty of Law and Administration of the University of Silesia in Katowice and in the contribution: M PAZDAN, “Stany faktyczne zamknięte z kolizyjnoprawnego punktu widzenia”, [“Closed Legal Situations from Conflict-of-laws Point of View”], in J. HABERKO/ J. GRYKIEL & K. MULARSKI (eds.), Ius civile vigilantibus scriptum est. Księga jubileuszowa Profesora Adama Olejniczaka [Liber Amicorum in Honour of Professor Adam Olejniczak] Wydawnictwo C.H. Beck 2022, pp. 525-536. 104 M. PAZDAN (note 99), p. 526. 105 Ibid 526. 106 Ibid 535-6.

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Paulina Twardoch b) whether, under that legal system, a given kind of surrogacy agreement is admissible, in particular traditional or gestational (see supra II.B); c) what are, pursuant to that legal system, the categories of the persons between whom surrogacy agreements may be concluded, in particular, whether such an agreement may be concluded by: i. as the intended parent(s):  an individual, as opposed to a couple;  an unmarried couple (e.g. recent amendments to the Russian Law on the Citizens’ Health have excluded the admissibility of concluding surrogacy agreements by unmarried couples – see the new version of the definition of surrogacy, laid down in Article 55(9) of the above mentioned act, construed a contrario);  a same-sex couple (e.g. amendments allowing same-sex couples to enter into surrogacy agreements have been introduced in Israel107); ii. as the surrogate:  a married person;  a single person; 2) a potential requirement of the consent, for the conclusion of the surrogacy agreement, of the surrogate’s spouse (such a consent is required e.g. under Kazakh108 and Kyrgyz109 laws) and/or of the intended mother’s spouse (as is the case under Belarussian law110); 3) a potential requirement of the preauthorisation/preapproval of the surrogacy agreement by a specified public authority (see e.g. Section 51 of the Irish Health (Assisted Human Reproduction) Bill 2022111) or committee named by the State (such a requirement is provided for by Israeli law112); 4) the boundaries of the parties’ freedom in shaping the content of the surrogacy agreement; thus, the law applicable to the surrogacy agreement is relevant in particular to the question of whether the agreement may include a clause providing for financial remuneration, to be paid to the surrogate, that goes beyond the latter’s reasonable expenses associated with the surrogacy (e.g. according to an explicit rule laid down in Section 20-156 of the Code of Virginia, a proSee the press release of the Israeli Ministry of Health: Amendments to the Surrogacy Arrangements Law (2022) https://www.gov.il/en/departments/news/04012021-01 (accessed: 14 April 2023). 108 Art 56(2) of the Kazakh Marriage and Family Code. 109 Art 18(2), sentence 2 of the Kyrgyz Act on Reproductive Rights of Citizens and Guarantees for Their Implementation. 110 Art 21(1), sentence 2 of the Belarussian Act on Assisted Reproductive Technologies. 111 Pursuant to this bill, approving surrogacy agreements falls within the functions of the Assisted Human Reproduction Regulatory Authority [Section 78(2)(i)]. 112 According to the Embryo Carrying Agreement Act, it is a competence of the committee called the Board for Approval of Surrogacy Agreements. See S. SHAKARGY, “La réglementation israélienne” (note 3), p. 110. 107

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Surrogacy Agreements from the Conflict-Of-Laws Perspective

5) 6) 7) 8)

9)

vision in a surrogacy contract providing for “compensation” to be paid to the surrogate is void and unenforceable; as for the meaning of “compensation”– see supra II.B); that law also governs the impact of the prohibition of a given clause on the validity/effectiveness of the whole surrogacy agreement; the interpretation of the surrogacy agreement; the admissibility of concluding the surrogacy agreement through a representative; the principles governing the performance of the obligations resulting from the surrogacy agreement; the surrogacy agreement’s effect in terms of the establishment/exclusion/ extinguishment of the parentage of a given person with regard to the child (to be) born following the surrogacy agreement; thus, the scope of the law applicable to the surrogacy agreement covers solutions that are relevant to the assessment of such effects and that may be included in potential special rules113 regulating the question of the establishment/exclusion/extinguishment of the parentage of respective persons with regard to a child born following a surrogacy agreement114 – rules such as: – those of Section 19-4.5-109(1)-(2) Colo. Rev. Stat., of Section 581-406 of the New York FCT and of Article 123(2) of the Ukrainian FC, providing for the establishment of the filiation of such a child, by operation of law, with regard to the intended parent(s), and the exclusion115 of the legal bond of filiation between the child and the surrogate, and between the child and the surrogate’s spouse, or – that of Article 12(a) of the Israeli Embryo Carrying Agreement Act (Agreement Authorisation and Status of the Newborn Child), according to which the intended parents become the legal parents of the child for all intents and purposes as a result of a parentage order (rendered by a court),116 or – that of Article 10(2) of the Spanish Act 14/2006, which assigns the maternal filiation of the child born of surrogacy to the woman who has given birth to the child; a total or partial breach of obligations that follow from the surrogacy agreement; thus, the law applicable to the surrogacy agreement determines to what claims the nonbreaching party is entitled in such a case, and in particular, whether specific performance is an available remedy for the breach of a

113 Special in the sense that they are relevant specifically to children (to be) born following surrogacy agreements. 114 In accordance with the rule lex fori regit processum, this thesis does not concern procedural law rules. 115 In the case of the Colorado and New York provisions, such exclusion is provided for expressis verbis. 116 See S. SHAKARGY, “La réglementation israélienne” (note 3), p. 113; R. SCHUZ (note 3), p. 177.

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Paulina Twardoch given obligation117 (e.g. pursuant to the rule of Section 19-4.5-112(3) Colo. Rev. Stat., except as expressly provided in a surrogacy agreement or in the subsequent subsections, if the agreement is breached by the surrogate or one or more intended parents, the nonbreaching party is entitled to the remedies available at law or in equity; see also the rule of Section 19-4.5112(4), which excludes specific performance in particular as a remedy for breach by the surrogate of a provision in the agreement that the surrogate be impregnated or submit to medical procedures); the law applicable to the surrogacy agreement is also relevant to the assessment of a potential penalty clause inserted in the agreement; 10)the modification of the surrogacy agreement; 11)the termination of the surrogacy agreement, in particular the time limit within which a given party may terminate the agreement (e.g. the rule of Section 26.26A.765(1)(b) of the Revised Code of Washington provides in this regard that a woman acting as a genetic surrogate may withdraw consent to the surrogacy agreement any time before forty-eight hours after the birth of a child conceived by assisted reproduction under the agreement). As regards the law relevant to the consent of the surrogate to surrender, or of the intended parents to accept immediately upon birth the custody of the resulting child/all the resulting children, such as the consent in this regard required by New York118 and New Hampshire119 laws, the following remarks may be formulated. Pursuant to the rule of Article 2 of the Hague Convention of 1996 on Parental Responsibility and Measures for the Protection of Children, the Convention applies to children from the moment of their birth until they reach the age of 18 years. Admittedly, as clauses concerned here are to take effect on birth of the child, one may deem, at least prima facie, that a conflict rule of the Convention is relevant. However, conflict rules of the Convention refer to the habitual residence of the child. Thus, the identification, before the child’s birth, of the law applicable to a clause on parental responsibility on the basis of the Convention may be at least problematic, and even impossible. It appears that the technique of so-called absorption could come into play in this regard, consisting of including the question of the above mentioned consent within the scope of the law of the state of the surrogacy procedure as the law applicable to the surrogacy agreement. 5.

Ordre Public

According to the provision of Article 7 of the Polish PIL Act 2011, a foreign law shall not be applied if the effects of its application were to be contrary to fundamental principles of the Polish legal order. The question thus arises of what are the fundamental principles based on which a rule/rules of the law applicable to a surrogacy agreement may be set aside. 117 Again, in accordance with the rule lex fori regit processum, this thesis is not relevant to the procedural aspects of such claims/remedies. 118 See Section 581-403(i)(1)(ii) and (2)(i) of the New York FCT. 119 See Section 168-B:11 (IV)(a)(3) and (c)(2) N.H.Rev.Stat.

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Surrogacy Agreements from the Conflict-Of-Laws Perspective It is necessary to explain that there is no provision in Polish legislation that would explicitly determine the approach of Polish law to surrogacy agreements/procedures, nor any definition of such agreements/procedures. Admittedly, in 2019 a solution was introduced into the Polish Kodeks karny (Criminal Code; hereinafter: k.k.) in order, as stated in the explanatory memorandum, to impose a criminal sanction on surrogate mothers.120 Not only, however, does that provision, laid down in Article 211a paras. 2 and 3 k.k., not refer expressis verbis to surrogacy (agreements or procedure), nor to a surrogate, but, overall, it is very unclear. Given its wording, it is not possible to unequivocally deduce from said provision the inadmissibility of surrogacy agreements. Similarly, the explanatory memorandum is quite unclear. It appears that no fundamental principle may be inferred, for the purpose of recourse to the public policy exception, from that criminal law provision. The principle of the inadmissibility of surrogacy agreements may, however, in my opinion, be deduced from the ius cogens nature of the rules of the Polish Kodeks rodzinny i opiekuńczy (Family and Guardianship Code; hereinafter: k.r.o.) that regulate (the ways of) the establishment of filiation. Nevertheless, this principle does not seem to have the rank of ordre public. As Maciej Zachariasiewicz remarks, one may hold a principle to be of the rank of ordre public only if there is no doubt on its fundamental significance for the legal system of the forum121. Even assuming, however, that the principle of the inadmissibility of surrogacy agreements is fundamental within the meaning of Article 7 of the Polish PIL Act 2011 or that a principle of such a rank could be inferred from the provision of Article 211a, paras. 2 and 3 k.k., one should bear in mind that the principle of the primary consideration for the child’s best interests laid down in Article 3 of the United Nations Convention on the Rights of the Child is also part of the Polish ordre public. At the same time, in Polish law, there is an overriding principle of national origin: the imperative of protecting the child’s wellbeing.122 Thus, if competing in a given case with the principle of the inadmissibility of surrogacy agreements or with a principle deduced from the provision of Article 211a, paras. 2 and 3 k.k. (each of these principles treated, within the hypothesis concerned here, as having the rank of ordre public), the consideration for the child’s best interests, assessed in concreto, should prevail. Moreover, Polish authorities are bound by the European Convention on Human Rights and its interpretation given by the ECtHR. Accordingly, if recourse to the public policy exception is to be based on an ordre public principle of national origin, the rule of Article 8 of the Convention, as interpreted by the ECtHR, in particular in the judgments rendered in the cases of 120 The Act of 16 October 2019 on amendments to the Criminal Code and Code of Civil Procedure (OJ 2019, position 2128). The explanatory memorandum: https://www.sejm.gov.pl/Sejm8.nsf/druk.xsp?nr=3665 (accessed: 14 April 2023). 121 M. ZACHARIASIEWICZ, in M. PAZDAN (ed.), System Prawa Prywatnego, t. 20 A, Prawo prywatne międzynarodowe [The System of Private Law, vol 20A, Private International Law], Wydawnictwo C.H. Beck 2014, p. 492. 122 On this imperative, see the judgment of the Polish Constitutional Court of 28 April 2003 (K 18/02), https://trybunal.gov.pl/fileadmin/content/omowienia/K_18_02_ GB.pdf (accessed: 23 August 2023).

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Paulina Twardoch Mennesson v France and Labassee v France, and in the advisory opinion of 10 April 2019, concerning filiation legally established abroad in the context of surrogacy, shall prevent such a recourse insofar as the latter would violate the said Convention’s rule.123 Particularly interesting remarks in the context in question here have been presented by Mateusz Pilich. In his discussion of the effects of foreign surrogacy agreements in Poland, he has criticised the approach of certain Polish authors who a priori see surrogacy agreements as distorting the nature of parent-child relationships, depersonalising the child concerned and adversely affecting “the child’s interest in maintaining a permanent bond with the mother” (the latter to be understood as the woman who has given birth to the child).124 Pilich has, within his argumentation, drawn attention especially to the importance of genetic links for the identity of each individual human being and to the principle of the child’s welfare. He has also argued that “the creation of limping family relationships only in order to satisfy national legal egoism contravenes human dignity”.125 As for Polish jurisprudence, the question of surrogacy agreements in the context of the Polish ordre public has been analysed within cases regarding refusal to transcribe a foreign birth certificate into the Polish civil status register126 or to affirm Polish citizenship. The judgment of Wojewódzki Sąd Administracyjny w Warszawie (the Regional Administrative Court in Warsaw) of 30 September 2020 (IV SA/Wa 927/20), rendered in a case involving a foreign birth certificate that concerned a child born following a surrogacy agreement and that identified only the father, as a single parent, is particularly noteworthy in this regard. According to this judgment, the transcription of such birth certificate would be contrary to the mater semper certa est principle (Article 619 k.r.o.127) and to the principle of the 123 See the remarks of M. ZACHARIASIEWICZ, Klauzula porządku publicznego jako instrument ochrony materialnoprawnych interesów i wartości fori [Public Policy Exception as an Instrument of Protection of Substantive Law Interests and Values of Forum] (Wydawnictwo C.H. Beck 2018) pp. 342, 368, 372, about the limiting impact that the Convention may have on triggering the public policy exception if the latter is to be based on a fundamental principle of national origin. 124 See the overview of those assessments: M. PILICH, “Mater semper certa est? Kilka uwag o skutkach zagranicznego macierzyństwa zastępczego z perspektywy stosowania klauzuli porządku publicznego” [“Mater Semper Certa Est? Several Remarks on Effects of Foreign Surrogacy from the Perspective of Applying the Public Policy Exception”] (2018) 16 Problemy Współczesnego Prawa Międzynarodowego, Europejskiego i Porównawczego [Problems of Contemporary International, European and Comparative Law], p. 31. 125 M. PILICH (note 124), pp. 32–34. 126 As to the role of transcription in Polish legal system – see remarks in III.E.2. It is worth mentioning that the Polish Act on Civil Status Acts of 2014 contains, within the provisions regulating transcription, its own normative basis for the application of the public policy exception, i.e. the rule, laid down in Art 107 point 3, providing for refusal of transcription if the latter was to be contrary to fundamental principles of the Polish legal order. 127 Pursuant to this provision, the mother of a child is the woman who has given birth to said child.

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Surrogacy Agreements from the Conflict-Of-Laws Perspective nullity of surrogacy agreements, both considered by the Court to be fundamental in the Polish legal order.128 Meanwhile, firstly, mater semper certa est is an ordinary, albeit ius cogens, rule of the k.r.o., i.e. it does not have the rank of ordre public,129 and secondly, as signalled above, the rank of ordre public of the principle of the inadmissibility of surrogacy agreements is highly questionable. Nonetheless, even assuming that the latter does form part of the Polish ordre public, the principle should yield if recourse thereto in a given case were to be incompatible with the best interests of the child. In the judgment of 20 June 2018 (IV SA/Wa 1133/18) Wojewódzki Sąd Administracyjny w Warszawie addressed the question of refusal to affirm the Polish citizenship of a child who was born by a surrogate mother and whose foreign birth certificate, without indicating the mother, named two men as the fathers. The Court held that the Polish fundamental legal principles at stake in the case were: (i) that a child may have two parents at the most, who must be a woman and a man, and (ii) that a child shall not be an object of a contract, nor be deprived of the identity related to “the natural filiation”. On that basis, the Court denied the probative value of the aforementioned foreign birth certificate insofar as the paternal filiation was concerned, and thus ruled against affirming the Polish citizenship of the child. That reasoning, however, has been negated by Naczelny Sąd Administracyjny (the Supreme Administrative Court) in the judgment of 16 February 2022 (II OSK 128/19). In my opinion, when applying the conflict-of-laws method, it may be justified to resort to the public policy exception to oppose a rule of the foreign applicable law that would deem enforceable a contractual obligation restricting the personal liberty of the surrogate. In this regard, the constitutional principle of the personal liberty of an individual may be invoked (Article 41 of the Polish Constitution). As for filiation legally established abroad with regard to the intended parent (or parents, and especially the intended parent who is the child’s biological parent or his or her spouse or partner who wants to be the legal parent of the child), it must be noted that the best child’s interests, which should be of primary consideration, are likely to in casu require the said filiation to be respected (considering that the surrogate does not wishes to raise the child as her own, as is usually the case). If, however, in a given case, the best interests of the child, assessed in concreto, weigh against establishing the child’s filiation with the intended parent or parents, then, the application of the public policy exception, on the basis of the principle of primary consideration for the child’s best interests comes into play. In any case, the child should suffer no negative consequences of choices made by adults. 128 In a similar vein, see: the judgment of Wojewódzki Sąd Administracyjny w Warszawie of 14 April 2016 (IV SA/Wa 182/16), set aside by the Supreme Administrative Court’s judgment of 29 August 2018 (II OSK 2129/16). In the latter judgment, the Court emphasised that refusal to legally recognise the existence of the bond between a child and his or her biological parent negatively affects the situation of the child, and the child’s welfare is an overriding value. 129 In the opinion of M. PILICH, (note 124), p. 32 the strict alignment of the child’s filiation with the fact that the child has been borne by a given woman raises concerns when one considers the need for the legal protection of the child’s bonds with the genetic parents.

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Paulina Twardoch

IV. Final Remarks The near future will show what the outcome of the work on the HCCH Parentage/Surrogacy Project will be, inter alia, whether a resulting uniform instrument will use the conflict-of-laws method with regard to the establishment of the filiation of a child born following a surrogacy agreement, and if so, what connecting factor(s) will be employed. On the one hand, it would be desirable that the conflict-of-laws regime adopted in that instrument deals not only with the surrogacy agreement’s effect in terms of filiation, but rather with the entire institution of surrogacy agreements, since this solution would ensure the completeness of the approach to international surrogacy arrangement (ISA) cases and would be conducive to predictability as to the law applicable in this regard. On the other hand, given controversies surrounding surrogacy agreements throughout legal systems, it would likely affect the attraction for states of adhering to the act in question. Similarly, the fate of the proposal for an EU Regulation on parenthood, which covers the recognition of the parenthood of a child conceived with assisted reproductive technology,130 remains to be seen. However, judging from experience with other EU regulations on family law matters, one may anticipate that it will be difficult to reach unanimity within the Council, which is a condition for measures concerning family law with cross-border implications.131 Thus, it is highly probable that enhanced cooperation will be necessary. While awaiting uniform international rules covering private law aspects of cross-border surrogacy, one must apply relevant private international law solutions of national origin, in particular, those consisting of conflict rules concerning filiation in general, albeit interpreted with consideration for the specific nature of surrogacy agreements, or, as may soon be the case in France, conflict rules specifically addressing situations that involve surrogacy. In Poland, the special conflict rule proposed above as a solution de lege lata (supra III.E.2) within the concretisation, in relation to surrogacy agreements, of the principle of the closest connection of Article 67 of the Polish PIL Act 2011 may also be considered as the basis for a special codified solution that could be introduced in the future in the Polish PIL Act 2011. In such a case, that rule, as an explicit conflict rule, indicating as the applicable law the legal system of the state where the surrogacy procedure has been carried out, could be complemented by a substantive private international law rule (modelled to a certain extent on the rule proposed in Article 63 of the draft of the French code de droit international privé) that would (i) concern the establishment of the filiation on the basis of the applicable law that allows surrogacy agreements, and (ii) provide for the test of proportionality to be performed in concreto by the judge with regard to the competing interests of the persons involved, with particular attention to the interests of the child.

130 131

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See the Explanatory Memorandum to the proposal, Art 4. See Art. 81(3) of the Treaty on the Functioning of the European Union.

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RECENT DEVELOPMENTS IN INTERNATIONAL SUCCESSIONS ________________

THE NEW RIGHT OF COMPENSATION UNDER FRENCH INTERNATIONAL SUCCESSION LAW A PROVISION WITH AN UNCERTAIN FUTURE Georges KHAIRALLAH*

I. II.

V.

Introduction The Conditions for the Application of Article 913 of the Civil Code A. Conditions Relating to the Beneficiaries B. The Absence of a “Protective Mechanism” The Nature of Article 913, Paragraph 3 A. A Public Policy Provision? B. A Provision of a Different Nature The Implementation of Article 913, Paragraph 3 A. Reasoning Based on Public Policy B. Reasoning Based on a Special Conflict Rule Conclusion

I.

Introduction

III.

IV.

The provision that we will focus on in this contribution is Article 913 of the French Civil Code. It was previously composed of two paragraphs that set out the ordinarily available portion as well as the overall reserves of an estate. The Act of August 24, 2021 added a paragraph 3 to the provision, which applies to estates opening on or after November 1, 2021. Let us reread this paragraph 3 together: When the deceased or at least one of his children is, at the time of death, a national of a Member State of the European Union or usually resides there, and when the foreign law applicable to the succes*

Professor Emeritus of the University of Paris 2, Panthéon-Assas.

Yearbook of Private International Law, Volume 24 (2022/2023), pp. 397-405 © Verlag Dr. Otto Schmidt & Swiss Institute of Comparative Law

Printed in Germany

Georges Khairallah sion allows for no reserve mechanism to protect the children, each child or his heirs or successors may make a compensatory levy against the existing [assets][property] situated in France on the date of death, in order that such [assets][property] be reintegrated into the reserve rights granted to them by French law, within the limit of those rights. This provision deals with a “compensatory levy” which is intended to preserve the right to the reserved portion of the estate. While this was precisely the purpose of the law, the debate in Parliament concerning these new provisions was accompanied by a surprising confusion. We may never know whether this confusion was deliberate, in order to obtain parliamentary support for the provision, or whether it was the result of ignorance of the foreign laws concerning which members of Parliament claimed to be legislating. It has been argued that the new provision is intended to combat laws which allow a testator to bequeath all his property to his sons, thereby depriving his daughters of any succession rights, and more generally that the provision is intended to combat inequalities based on the sex of the heirs which are enshrined in certain foreign laws. However, there are no examples in comparative law of laws that specifically allow a person to bequeath all his property to his sons in order to deprive his daughters of it. In fact, such laws do not exist anywhere in the world. Those who point to laws that discriminate on the basis of the sex of the heirs by giving male heirs a greater share than female heirs, are clearly referring to laws that are inspired by religious law, and more specifically by Muslim law. But this represents a gross error. All the laws inspired by Muslim law provide for a reserved portion of the estates and benefit girls as much as boys. All these laws also state that distribution of assets under a will made in favor of an heir can only be implemented with the agreement of all the heirs (including the daughters of the deceased) given after the death of the testator. In reality – even if the proponents deny it – the new Act is essentially directed against Anglo-American laws (the various laws of the United Kingdom, the United States, Australia etc.), against Israeli law and also, against the laws of such Member States of the European Union that do not recognize rights to a reserved portion or which regulate them in such a way that the testator may deprive certain children of such rights, as is the case in certain Spanish provinces (Basque Country, Navarre, Aragon, etc.) and even in Ireland. The new provision uses the expression “compensatory levy”, which recalls the right of levy (“droit de prélèvement”) under Article 2 of the Law of 14 July 1819, which allowed an heir of French nationality to take from French assets the share of the estate to which he would have been enitled had the succession been subject to French law. For a long time, this provision had contributed to avoiding the need for case law to decide whether a foreign law which does not recognize reserved inheritance rights is contrary to international public policy. Indeed, if the foreign law deprived an heir of his reserved rights, and if this heir was of French nationality, he could claim on the assets situated in France the share of the estate of which he was deprived under the foreign law. After the annulment of this provision on 5 August 2011 by the Constitutional Council, the Court of Cassation 398

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The New Right of Compensation under French Law decided in its ruling of 17 September 2017 that foreign law that ignores the reserve is not for this reason alone contrary to international public policy, but it would be only if the absence of any reserved right under a foreign law leaves heirs in a precarious economic situation or need. For more than a year now, we have been constantly confronted with the conditions of application of the new provisions of Article 913 (II), their true nature (III) and their compatibility with the Succession Regulation (Regulation No 650/2012 of July 4, 2012, hereafter referred to as the “Regulation”), which, as I hardly need to remind you, takes precedence over national law. Let us begin with

II.

The Conditions for the Application of Article 913 of the Civil Code

A.

Conditions Relating to the Beneficiaries

Taken by themselves, although unconvincing, some conditions are easier to understand than others.  This applies to the conditions of nationality and residence: the deceased or one of his/her children must be a national or a resident of a Member State of the European Union.  Another condition is that only the children of the deceased or their heirs or successors may avail themselves of the provision. The spouse is excluded from the benefit of the provision even in cases where s/he is entitled to a reserved share under French law. Let us illustrate these two sets of conditions: An Englishman who resides in England leaves a bank account or real property in France. He dies after having submitted his estate to English law and bequeathed all his property to his wife. One of his children resides in France: this child can avail himself of the right of compensatory levy and, with him, the other children, even if they reside in the United Kingdom, Australia or China. If, instead of residing in France, this child resides in Poland, he and the other children of the deceased will also be able to avail themselves of the compensatory levy. That is the point about these two conditions of nationality or residence and of the beneficiaries of the levy. These are conditions whose relevance can be questioned, but at least they are understandable. B.

The Absence of a “Protective Mechanism”

Where things become complex is with respect to what the provision calls a “protective mechanism”. The provision refers to a foreign law of succession that “does not allow any protective mechanism for the children”. What does “protective mechanism” mean?

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Georges Khairallah During a public session of the debates on the provision in the Senate, the representative of the Government had quoted provisions of English law on succession to say that this law recognizes a protective reserve mechanism and stressed that the text of article 913 as it stands “allows a concrete and factual appreciation of the foreign law, which makes it possible to verify whether the child is protected or not in the case in question”. But, if, for this reason, English law, which is generally said not to recognize reserved inheritance rights, is considered to be compatible with the provisions of article 913, paragraph 3 – in other words, if the English “family provision” is regarded as a “protective mechanism” within the meaning of that provision – then it will be difficult to envisage when this text will apply. Indeed, there are analogous provisions with respect to maintenance rights after death in many common law jurisdictions, i.e. the foreign laws that the new provisions primarily address. However, the tendency is to argue that even the legislation of these countries does not provide for a “réserve” mechanism as that concept is understood in French law. Those who favor a strict and literal interpretation of the new provision maintain that it must be applied whenever the foreign law of succession does not expressly provide for the “réserve” as as that term is understood in French law. The wording of article 913 even seems to impose this strict interpretation, as an analysis of the provision shows. This brings me to the second point of this presentation.

III. The Nature of Article 913, Paragraph 3 It is tempting to analyze the new provisions of Article 913 as a new manifestation of the requirements of international public policy. I will check this analysis first and we will see that it cannot be retained, which leads us to look for other analyses. A.

A Public Policy Provision?

Many commentators haver perceived the new provision as a manifestation of public policy: public policy would then oppose the application of a foreign law that does not recognize reserved inheritence rights. This would be what some call a “special public policy clause”. In its opinion on what was at the time still the draft law, the Conseil d'Etat wrote that “the right to a compensatory levy (...) constitutes an exception to the normal application of a conflict of laws rule” and considered that these new provisions are likely to fall within the scope of Article 35 of the Regulation, which deals specifically with the requirements of public policy in this area. Reduced to an international public policy exception, the provision should mean that a foreign succession law that “does not allow for any protective mechanism for children” should be declared contrary to international public policy. In sum, Article 913 would be a provision that reverses the case law of the Court of 400

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The New Right of Compensation under French Law Cassation in its decision of 27 September 2017. Rather than following that opinion and considering that a foreign law which does not recognize reserved rights is not, in and of itself, contrary to international public policy, such law would now be deemed contrary to international public policy. In other termes, this would be an Act that contradicts the case law. However, in order for this analysis to be accepted, the new provisions of Article 913 would need to be compatible with the principles and rules governing any exception to international public policy and, more particularly, with the principle of “the relativity of public policy”. This relativity requires that the factual circumstances of each case be taken into consideration before the the law of the forum replaces the foreign law. However, Article 913 does not take these circumstances into account and declares itself applicable whenever the foreign law of succession “does not allow any reserve mechanism to protect the children”, with no nuance or regard for the material situation in which the children find themselves. Similarly, the disqualification of the foreign law on the grounds of conflict with public policy normally presupposes that the situation is close to the legal order of the forum. Where is this proximity to the French legal order to be found in the example given by Professor Paul Lagarde of an American whose succession is subject to Californian law and who leaves two children of American nationality who reside, respectively, in the United States and in Slovenia? These children will nevertheless be able to avail themselves of Article 913 for the sole reason that one of them is a resident of a Member State of the European Union. For more than a year now, the questions posed by notaries to the Paris Cridon have shown that this example is not simply an academic hypothesis and that Article 913 will be applied in cases that have no connection with the French legal system other than the fact that part of the assets belonging to the deceased are located in France. This is a far cry from a reasoning based on the international public policy exception. B.

A Provision of a Different Nature

If Article 913 is not the same as the public policy exception, what is the proper analysis? This provision goes back to the concept of the right of compensatory levy which had played a central role in the law of international successions for almost two centuries. It raises the same concerns in the area of the reserved inheritance rights as did the right of compensatory levy in Article 2 of the Law of 1819 in a more extensive manner. It would be reasonable to give the new Article 913 the same characterization or analysis as that given to Article 2 of the Law of 1819. Several analyses were proposed for this provision: a substantive rule of private international law; a rule of partition; a rule of devolution or even a rule of conflict of laws… It would be pointless to comment here on these various analyses, whose practical consequences are in fact very similar. Let us take the one which has prevailed and which seems to be closest to reality, that of seeing in Section 2 of the 1819 Act a rule of conflict of laws.

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Georges Khairallah In the treatise by H. BATIFFOL and P. LAGARDE, it is stated that the broad interpretation of Article 2 by the courts “has transformed the right of compensatory levy into a true conflict of laws rule”. If these new provisions constitute a conflict of laws rule, they will not fail to raise questions not only as to their constitutionality, but also, this time, as to their compatibility with the European Succession Regulation. This is what we will verify in the examination of their implementation.

IV. The Implementation of Article 913, Paragraph 3 How Should Article 913 be Applied? A.

Reasoning Based on Public Policy

If the legislator had reasoned in terms of an international public policy exception; in other terms, if he had decided that the foreign law which allows children to be deprived of their reserved rights is contrary to international public policy, we would have followed the same reasoning as for any foreign law contrary to public policy. This would imply: eviction of that law, substitution of French law, and devolution to the heirs considered to be réservataires under French law, to the exclusion of the surviving spouse, of their reserved share on assets situated in France, the amount of that share to be calculated based on the value of those assets alone. B.

Reasoning Based on a Special Conflict Rule

Reasoning based on the French law on reserved inheritance rights as designated by a conflict rule, such as new Article 913, paragraph 3, is quite another thing. (a) In the presence of a foreign succession law which “allows no reserve mechanism to protect the children”, the provision tells us that the children may ask to “be restored to the rights of a reserved share granted to them by French law”. Thus written, this provision requires the calculation of the reserve provided for by French law on the whole of the deceased's assets, regardless of whether the property is located in France or abroad. In other words, the basis of calculation will be the worldwide estate of the deceased, even if the compensatory levy is made only on the property located in France: if the calculation of the reserve on the worldwide [assets] of the deceased results in a value of 100 and if the French assets are worth 150, the levy will be 100; if the value of the French property is 50, the levy will be limited to 50. This is what the French legislator has decided. Except that the European Succession Regulation provides otherwise, since it makes both the available portion and the reserved share of the estate subject to the law governing the succession (Article 23(2)(h)). 402

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The New Right of Compensation under French Law (b) Such a calculation of the reserved share will necessarily result in the introduction of new heirs who will compete with those designated by the law governing the succession, which, by the same token, means a consequent reduction in the share that the law of succession assigns to the latter. If we apply California succession law, the only heir is the surviving spouse designated as the sole legatee by the deceased: as a consequence of Article 913, paragraph 3, the spouse is now in competition with the children with a reduction in the spouse’s own share of the succession since the estate will now have to be shared with other heirs, i.e., those designated by French law. This is what Article 913 provides. However, the Succession Regulation subjects “the vocation successorale of the beneficiaries and the determination of their respective shares” to the law governing the succession (Article 23(2)(h)). While the Regulation thus decides that the determination of the heirs and their shares is subject to the law governing the succession, Article 913 overturns this rule. c) This calculation of the reserve on the worldwide assets must take into account the deceased’s inter vivos gifts. This can only be done by a “clawing back” such gifts (rapport and réduction). However, the Succession Regulation subjects clawback of gifts to the law applicable to the succession (Article 23: “any obligation to restore or account for gifts, advancements or legacies when determining the shares of the different beneficiaries”). Thus, if the law governing the succession designated by the Regulation does not provide for the clawback of gifts, Article 913 will require that it be done. (d) Many questions that the European Regulation submits to the law governing the succession, assumed here to be foreign, will also need be subject to French under Article 913 paragraph 3 as requirements for the children's reserved rights. This is nothing other than a return to the method of cumulation, which is manifested here by the superposition of two conflict rules, the one enshrined in the Succession Regulation and the other imposed by the new provision of Article 913, paragraph 3, thereby designating two different laws – the foreign law of succession and the French law on the reserve – to govern both simultaneously the same question, that of the protection of the reserved rights of children. This is precisely what in private international law is called the cumulation of laws. (e) This cumulation results in the reserved share, and all the questions concerning its calculation as well as the effects arising from it, being subject to two laws. Once again, Article 913 collides head-on with the Succession Regulation: after stating twice in Articles 21 and 22 that the applicable law designated by these provisions governs the succession “as a whole”, the Regulation reaffirms this principle in Article 23, which states that “the law determined pursuant to Article 21 or Article 22 shall govern the succession as a whole”. These provisions mean that the Regulation presupposes a unitary succession subject to a single law, regardless of where the assets are located. It does not allow the same succession to be subject to more than one law. Admittedly, the Regulation itself exceptionally provides for a derogation of this principle of unity in its Articles 30 and 34, but Article 913, paragraph 3 is not covered by those provisions. Article 30 introduces special provisions imposing restrictions concerning or affecting the succession in respect of certain assets them. This will be the case in Yearbook of Private International Law, Volume 24 (2022/2023)

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Georges Khairallah particular for concepts such as preferential distributions (“attributions préférentielles”), which will be subject to the law of the location of the property regardless of the law governing the succession. But Article 30 does not allow for anything more. Recital No. 54 expressly states that it is prohibited to use to Article 30 in order to have recourse to a law which provides for a greater reserved share of the estate than that provided for in the law applicable to the succession. Thus, the provisions of Article 913 on reserved rights cannot benefit from the provisions of this Article 30. In its Article 34, the Regulation allows for the application of renvoi when this Regulation designates the law of a third State. And this reference may lead to a splitting up of the succession. The Regulation has found it necessary to make these two exceptions to the principle of the unity of the succession and the law of succession. However, these are only exceptions which must necessarily be interpreted strictly and it is unity that remains the principle. Moreover, and this is the essential point for us here, if these exceptions have the effect of causing a scission of the succession in the sense that the succession to certain property is subject to one law and the succession to other property is subject to another law, there is never a question of the succession to the same property being subject cumulatively to two laws, which is what Article 913, Paragraph 3, obliges us to do by the cumulation that it causes. This is why Article 913 is contrary to the Succession Regulation. Since the latter benefits from the principle of primacy the question is: What will we do with this new provision?

V.

Conclusion

In the fifteen months or so since the introduction of Article 913, Paragraph 3, we have been able to verify the difficulties in understanding its meaning, in verifying the modalities of its application and, above all, in measuring the extent to which it is contrary to both the spirit and the text of the Regulation. Most probably, it is also contrary to the French Constitution. The Court of Justice of the European Union or the Constitutional Council will, in all likelihood, be called upon to censure it. In the meantime, it exists and it will be difficult to ignore. At the same time, one cannot forget the principle of the primacy of European law and of the Constitution over a provision of domestic law. We are caught between a provision that takes precedence over the law (supranational or Constitutional) and a law that contradicts this rule. One might think that liability might be incurred if one refuses to apply Article 913. At the same time, liability could certainly be incurred if one contributes to the violation of the European Regulation or of the Constitution. An impossible equation. And a trap to avoid at all costs. To be avoided especially by the notary who is on the front line. He can be advised to leave the decision to the parties. All interested parties, i.e. the heirs or legatees designated by the foreign succession law and the children of the deceased if they meet the conditions for application of Article 913, paragraph 3, should be approached. They 404

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The New Right of Compensation under French Law can be called upon to find a solution among themselves. Since the succession is now open, the parties can agree on an amicable solution and will themselves indicate the practical details of the settlement of the succession, in particular the determination of the value of the estate on which the reserved rights and the question of the clawback are calculated. If no agreement is reached, the parties will need to apply to the court, which will examine their claims. This gives rise to the hope that the matter will be referred to the Constitutional Council or to the CJEU, which will then be called upon to decide whether or not this provision will survive. I began this discussion by citing the new paragraph of Article 913. I would like to conclude by reminding you that in March 2022, a draft Code of Private International Law was published, drawn up under the aegis of a commission made up of renowned judges, lawyers and law professors. As regards successions, the draft does not include the provisions of Paragraph 3 of Article 913 and, in the Report on this draft, it is written that this text “aims to safeguard, in the form of a right of compensatory levy, the hereditary reserved rights, a mechanism marked by a narrow nationalism at odds with the evolution of our private international law”.

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CHOICE OF ENGLISH SUCCESSION LAW AND GERMAN ORDRE PUBLIC Eva LEIN*

I. II.

III. IV. V. VI.

Introduction Background and Context of the Case A. Facts and Procedure B. German Succession Law and Forced Heirship in the European Context English Succession Law and Family Provision The Succession Regulation The Arguments in BGH, 29.06.2022 - IV ZR 110/21 Evaluation

I.

Introduction

In case BGH v. 29.06.2022 - IV ZR 110/211 the German Supreme Court has taken a decision with significant impact on the choice of English law as lex successionis and potentially with a broader general effect on the professio iuris in succession law. According to the court, the application of English law, which does not contain forced heirship rules for descendants, violates the German ordre public. German succession law is based on the idea that descendants should receive half of their legal share in an inheritance if the deceased made a will excluding them.2 A compulsory share is guaranteed by the German constitution, independent of the descendants’ needs.3 Despite the case showing strong links with the German territory, the decision is nonetheless surprising, considering the history of Art. 35 Succession

* Professor, University of Lausanne; Senior Research Fellow, British Institute of International and Comparative Law, London. 1 BGH, 29.06.2022 - IV ZR 110/21, BeckRS 2022, 17575, NJW 2022, 2547. 2 Para 2317, 2303 (1) BGB: “Ist ein Abkömmling des Erblassers durch Verfügung von Todes wegen von der Erbfolge ausgeschlossen, so kann er von dem Erben den Pflichtteil verlangen. Der Pflichtteil besteht in der Hälfte des Wertes des gesetzlichen Erbteils.” Bürgerliches Gesetzbuch, version of 2. Januar 2002 (BGBl. I 42, 2909; 2003 I 738), last amended 14. März 2023 (BGBl. 2023 I No 72). 3 Articles 14(1), 6(1) GG (Grundgesetz für die Bundesrepublik Deutschland, last amended 19. Dezember 2022 (BGBl. I 2478).

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Printed in Germany

Eva Lein Regulation4 and the divergence of opinions on the subject of foreign succession law and public policy expressed in German doctrine.5 The Proposal6 for a Succession Regulation still included an explicit rule that warranted against a violation of public policy when the applicable law did not automatically grant descendants of the de cujus a portion of the estate. Although the proposed provision did not obtain the necessary consensus to be inserted into the final text of the Regulation, the legislative context shows that the application of the public policy exception requires caution when the chosen lex successionis follows a different approach regarding compulsory shares in an estate.7

II.

Background and Context of the Case

A.

Facts and Procedure

The facts of the case in question, albeit not complex, are not as simple as they might seem at first glance: The plaintiff (born in 1974) and habitually resident in Germany is the adopted child of the deceased and brought an action against the defendant seeking information on the value of the deceased’s estate. This type of 4 Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession, OJ L201/107. 5 F. BAUER/ M. FORNASIER, in DUTTA/ WEBER/ BAUER, Internationales Erbrecht, 2. ed.., Munich 2022, Article 35 EuErbVO, Para 11; J. SCHMIDT, in: BeckOnline GrossKommentar (BeckOGK) (2022), Article 35 EuErbVO, Para 22.2; M. SOUTIER, Die Geltung deustcher Rechtsgrundsätze im Anwendungsbereich der Europäischen Erbrechtsverordnung, Köln 2015, p. 223 et seq: G. HOHLOCH, in FS Leipold, Tübingen 2009, p. 997, 1005; S. LORENZ, in A. DUTTA/S. HERRLER, Die Europäische Erbrechtsverordnung, 2014, Rn. 28; W. PINTENS, in M. LÖHNIG/D. SCHWAB/D. HEINRICH, Erbfälle unter Geltung der Europäischen Erbrechtsverordnung, Bielefeld, 2014, p. 1, 29: K. AYAZI, NJOZ 2018, p. 1041, 1045 et seq.; S. HERZOG, ErbR 2013, p. 2, 5; U. SIMON/M. BUSCHBAUM, NJW 2012, p. 2393, 2395; I. LUDWIG/D. BAETGE, juris PraxisKommentar-BGB, 9. ed. (2022), Article 35 EuErbVO, Paras 9, 17, 21; A. STAUDINGER/I. BEIDERWIEDEN, juris PR-IWR 6/2021, Anm. 2; see also A. DUTTA, in: Münchener Kommentar BGB, 8. ed., EuErbVO, Article 35 Para 8. 6 Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession, COM/2009/0154 final. According to the Proposal, a choice of the law of nationality of the deceased was not limited by public policy considerations of the forum stemming from protective forced heirship provisions. 7 Article 27 (2) of the Proposal (note 4): “In particular, the application of a rule of the law determined by this Regulation may not be considered to be contrary to the public policy of the forum on the sole ground that its clauses regarding the reserved portion of an estate differ from those in force in the forum.”

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English Succession Law and German Ordre Public claim is frequently brought under German law by any potential heir who was excluded from the succession.8 The de cujus (born in 1936) who died in 2018, was of British nationality, but had lived in Germany since the age of 29. By notarial will (made in 2015) he appointed the defendant as his sole heir and chose English law to govern his succession.9 The estate covers immovable and movable property situated in Germany. The adoption of the plaintiff took place in 1976 under old German adoption law which was in force before 1/1/1977. At that time, an adoption was subject to a notarial contract and subsequently confirmed by a court. At the time German adoption law permitted the contractual exclusion of forced heirship rights of an adopted child.10 At the same time, a child retained their right of inheritance vis-à-vis their natural parents and relatives.11 In the adoption contract (dated 30/10/1975) the deceased excluded any succession and forced heirship rights of the plaintiff and his descendants in relation to the adoptive spouse who passes away first.12 This contract was confirmed by the competent court on 20/5/1976. A later change in legislation, however, rendered the new German adoption law retrospectively applicable with effect from 1/1/1978 if the child was a minor at that time.13 The new legislation no longer permits an exclusion of forced heirship rights. 14 In its judgment of 10/7/2020, the LG Köln dismissed the plaintiff’s claim against the testamentary heir. As a result of the plaintiff's appeal, the OLG Köln amended the judgment and ordered the defendant to provide the requested information on the estate. The application of English law to the concrete case would not grant the adult child of the deceased any share in the estate and would therefore be manifestly incompatible with German public policy. The OLG applied German law instead. The BGH confirmed that judgment.

Cf. Articles 2314 (1), 2303 (1) BGB. The choice was made before the entry into force of the Succession Regulation 650/2012. 10 Para 1767 BGB (old text): “(1) In dem Annahmevertrag kann das Erbrecht des Kindes dem Annehmenden gegenüber ausgeschlossen werden. (2) Im übrigen können die Wirkungen der Annahme an Kindes Statt in dem Vertrag nicht geändert werden.” 11 Para 1764 BGB (old text): “Die Rechte und Pflichten, die sich aus dem Verwandtschaftsverhältnisse zwischen dem Kind und seinen Verwandten ergeben, werden durch die Annahme an Kindes Statt nicht berührt, soweit nicht das Gesetz ein anderes vorschreibt.” 12 The adoption contract contained the following wording (which was compatible with the old adoption legislation in Para 1767 (1) BGB (old text): “Die Erb- und Pflichtteilsrechte für das Kind und dessen künftige Abkömmlinge nach dem Erstversterbenden der annehmenden Eheleute werden ausgeschlossen.” 13 Article 12 Para 2 (1) and (2) AdoptG (Adoptionsgesetz, 2. July 1976 (BGBl. I 1749); BVerfG NJW 2003, p. 2600. 14 See Para 1741 BGB et seq. 8 9

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German Succession Law and Forced Heirship in the European Context

Forced heirship rules have particular significance in Europe. There is consensus between European jurisdictions that descendants of the deceased, their surviving spouse and to some extent their parents should be ex lege entitled to a compulsory portion of the estate. The idea of ensuring family solidarity by guaranteeing economic assistance and by retaining family assets in the close family is fundamentally enshrined in the tradition of European succession laws.15 The institutions of “réserve” or “Pflichtteil” also protect heirs from any abuse by the deceased. The national approaches differ as to how such share or portion of the estate should be attributed and how it is calculated (fixed share or pro rata16 of the legal share, and potentially capped17). In Austria, Germany, the Netherlands and several Eastern European jurisdictions, the compulsory portion for a descendant who was excluded from the succession by a will of the deceased takes the form of a monetary claim (Pflichtteilsmodell),18 whereas jurisdictions of the French tradition construe the compulsory share as a so-called Noterbrecht (cf. the notion of “héritiers réservataires”). In the latter case, the disregarded heirs acquire a position similar to that of a co-heir and are not just monetary creditors.19 A few jurisdictions leave it to the deceased to decide whether the Pflichtteil is paid out in monetary form (e.g. Denmark, Finland and Norway).20 Despite the Europe-wide consensus on compulsory shares it should, however, be noted that national laws on the “réserve” have recently undergone various reforms21, and that as a general trend forced share quotas were reduced. Stable social security nets across European jurisdictions render forced heirship rights less economically relevant than they historically used to be.22 Nonetheless, this area of succession law remains an extremely sensitive topic. In Germany, the right to a compulsory share in the deceased’s estate is anchored in the German constitution. Arts 14(1)(1) and 6(1) GG provide an institutional guarantee of the traditional core elements of German inheritance law. These include the irrevocable guarantee of the right to inherit and the right of the deceased’s children to receive a share in the estate. The Constitutional Court has 15 See also the arguments in OLG Köln, ZEV 2021, 698 and G. OTTE, Das Pflichtteilsrecht - Verfassungsrechtsprechung und Rechtspolitik, AcP 202 2002, p. 317, 335 et seq., 353 et seq. 16 E.g Germany, Greece, Austria, Switzerland. 17 E.g. Norway, Denmark. 18 See also A. PIECKENBROCK, Die Berücksichtigung von Pflichtteilen bei beschränkt Steuerpflichtigen – Folgen aus EuGH, IUrt. V. 21.12.2021 – C-394/20 – Finanzamt V, ISR 2023, p. 22, with further references. 19 See e.g. France, Spain, Italy, and in more detail A. PIECKENBROCK (note 18) p. 22 with further references. 20 Cf. A. PIECKENBROCK (note 18), p. 22, with further references. 21 E.g. in France (2006), Germany (2010), Austria (2015) and Switzerland (2023). 22 See also B. DAUNER-LIEB, Forum Familien- und Erbrecht 2001, p. 7, 79 et seq.; W. SCHLÜTER, Die Änderung der Rolle des Pflichtteilsrechts im sozialen Kontext, in: 50 Jahre Bundesgerichtshof, Festgabe aus der Wissenschaft, Band I, Bürgerliches Recht, Münich 2000, p. 1047, 1049 et seq.

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English Succession Law and German Ordre Public rendered two landmark decisions on the subject,23 in a reversal of previous case law which did not consider forced heirship provisions as part of the German ordre public.24 The particularly strong anchor in constitutional law also led a significant part of German doctrine to the conclusion that a public policy violation is to be affirmed where a descendant does not receive a minimum share in the estate that is independent of the concerned individual’s needs.25 On the other hand, it must be stressed that the free will of a testator is also subject to the same strong constitutional protection in Art. 14 (1) 1 GG. Furthermore, an important part of German doctrine does not support the application of Art. 35 Reg 650/2012 where foreign law contradicts German forced heirship rules, in particular where the disadvantaged descendant is an adult and economically independent.26 A more cautious approach was also adopted by the French Cour de Cassation. Despite the central role of forced heirship rules in the French legal system, the French Supreme Court does not consider the “réserve” as such as part of French international public policy but would only disregard a foreign succession law if it leaves descendants in a situation of economic instability or need.27

III. English Succession Law and Family Provision In English succession law there is no institution comparable to the German “Pflichtteil” granting descendants by law a compulsory portion of the deceased’s estate.28 Nonetheless, the statutory system of family provision imposes a restriction 23

BVerfG, 19. April 2005, 1 BvR 1644/00; BVerfG, 26. November 2018, 1 BvR

1511/14. RG JW 1912, 22; BGH 21.4.1993, XIII ZR 248/91, NJW 1993, 1920; OLG Hamm, ZEV 2005, 436; OLG Köln FamRZ 1976, 170, 172. 25 See eg. F. BAUER/ M. FORNASIER (note 5), Article 35 EuErbVO, Para 11; J. SCHMIDT (note 5), Article 35 EuErbVO, Para 22.2; M. SOUTIER (note 5), p. 223 et seq: G. HOHLOCH, p. 997, 1005; S. LORENZ (note 5), Para 28; W. PINTENS (note 5), p. 1, 29. 26 Against a public policy violation in case of adult descendants: K. AYAZI (note 5), p. 1041, 1045 et seq.; S. HERZOG (note 5), p. 2, 5; U. SIMON/ M. BUSCHBAUM (note 5), p. 2393, 2395; LUDWIG/ BAETGE (note 5), Article 35 EuErbVO, Paras 9, 17, 21; A. STAUDINGER/I. BEIDERWIEDEN, juris PR-IWR 6/2021, Anm. 2; see also A. DUTTA (note 5), Article 35 Rn. 8 (unless the concerned is otherwise in need of social security contributions). 27 Cass. civ., 27 September 2017, No 16-17198, ECLI:FR:CCASS:2017:C101005: “[…] une loi étrangère désignée par la règle de conflit qui ignore la réserve héréditaire n'est pas en soi contraire à l'ordre public international français et ne peut être écartée que si son application concrète, au cas d'espèce, conduit à une situation incompatible avec les principes du droit français considérés comme essentiels.” 28 For more detailed information on English succession law see M. TRULSEN, Pflichtteilsrecht und englische family provision im Vergleich, Tübingen 2004, 91 et seq.; L. WOLFF, Pflichtteilsrecht / Forced Heirship / Family Provision, Berlin 2011, p. 152 et seq.; 24

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Eva Lein on testamentary freedom in form of the Inheritance (Provision for Family and Dependants) Act 1975.29 This act enables a limited class of persons, who are financially dependent on the deceased, to claim reasonable financial provision against the deceased’s estate where a will does not make reasonable provision for them or does not provide for them at all. The 1975 Act is based on the idea of economic assistance and strikes a balance between testamentary freedom and a moral obligation of the testator to support spouses, descendants or others he knew to be reliant upon him, by granting them the right to request a provision that is needed for their maintenance.30 An order under the 1975 Act is strictly needs-based and at the discretion of the court. Instead of schematically attributing a compulsory portion of the estate to certain classes of persons, a court will thoroughly examine the circumstances of the concrete case. However, it is neither a decisive criterion whether the deceased behaved reasonably in their will nor whether the claimant is e.g. an estranged child who had no contact with the deceased.31 A claim for family provision can, in particular, be brought by the deceased’s spouse or civil partner and by their children, including adult children, or by other persons maintained by the deceased.32 What constitutes a reasonable financial provision varies between these classes of claimants33: generally, a provision for spouses or civil partners is assessed more generously; for all other applicants the court considers all the circumstances of the case and determines which financial provision would be reasonable in light of their maintenance needs.34 The provision is frequently paid out as a lump sum.35 As the claim is needs based, claimants cannot globally argue that it was unfair that they have not – but should have – received any, or a larger, portion of the deceased’s estate. Testamentary freedom remains one of the cornerstones of English succession law, and individuals may dispose of their assets after death by will in whatever manner they wish. Yet, the English courts have become more generous in the application of the 1975 Act and even granted family provision to es-

F. ODERSKY, Die Abwicklung Deutsch-englischer Erbfälle, Köln 2001, p. 38; M. HÖRDT, Pflichtteilsrecht und EU-ErbVO, Bern 2019, p. 363 et seq. 29 Available at https://www.legislation.gov.uk/ukpga/1975/63, quoted as “The 1975 Act”, accessed on 16.8.2023. 30 For the notion of maintenance see In re Dennis, deceased [1981] 2 All ER 140 at 145-146. 31 See also In re Dennis, deceased [1981] 2 All ER 140. 32 Article 1(1) of the 1975 Act. 33 See Article 2 of the 1975 Act. 34 See eg. Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17; Kaur v Estate of Karnail Singh & Ors [2023] EWHC 304 (Fam). 35 See Duxbury v Duxbury (Note) [1992] Fam 62. The level at which maintenance is provided for and its form is flexible and depends on the facts of each case. It is neither limited to subsistence nor necessarily to be provided for by way of periodical payments. Often, it will be more appropriate to pay a lump sum from which income and capital can be drawn over the years; see also Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17, at 15.

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English Succession Law and German Ordre Public tranged adult children of the deceased.36 Although adult children might not generally be entitled to financial provision if they can support themselves37, the neediness of the descendants remains the decisive criterion and a court intervention can be warranted in favour of adult children, e.g. if they can produce evidence of a limited earning capacity, financial difficulties and reliance upon benefits.38 However, it is a particularity of the English rules that the 1975 Act is based on the deceased’s domicile in the jurisdiction of England and Wales. Without this territorial link, a claim for family provision cannot be brought before the English courts. In situations such as the present case, where the deceased and his family were domiciled outside England, and English law only applies as lex successionis by virtue of a professio iuris, there is a de facto impasse, as no claim can be made.

IV. The Succession Regulation By virtue of its Art. 22, the Succession Regulation introduced the option to choose the lex successionis into European legal systems which was until then not universally permitted.39 The option for mobile EU citizens to plan their succession based on a professio iuris massively improved legal certainty, particularly in cases in which a person frequently changes their habitual residence or splits his or her time between different countries (see e.g. the cases of “Gran Canaria” or “Mallorca” pensioners). Recital 38 of the Regulation clarifies that the possibility of a professio iuris enables citizens to organise their succession in advance and guarantees legal certainty. At the same time, the Regulation limits the choice of the lex successionis to the law of a State of the deceased’s nationality to ensure a real connection with the chosen law and to prevent a choice made “with the intention of frustrating the legitimate expectations of persons entitled to a reserved share” (Recital 38). The limitation of the professio iuris to the sole law of the deceased’s (dual) nationality ensures predictability for those entitled to inherit. The decision of the European legislator to limit the choice in that way already constitutes a compromise: it outbalances the interest of testators in determining their succession according to their will and the legitimate interest of the descendants and spouses in predicting the course of the succession and in receiving a share in the estate.

See eg. Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17 ; Nahajec v Fowle [2017] WTLR 1071; 37 See again In re Dennis, deceased [1981] 2 All ER 140 at 145-146 38 See Re H (Deceased) [2020] EWHC 1134 (Fam). 39 No choice was allowed in France, Spain, Portugal – and also England (except for the question of interpretation of wills), Ireland, Sweden, Greece and Austria. A more progressive approach had been followed by the Netherlands (adoption of the Hague Convention of 1989), Finland, Italy and Germany (but choice of German law only for immovables situated in Germany). 36

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Eva Lein Against this backdrop, public policy considerations regarding forced heirship rules need to be treated with additional caution.40 While courts dealing with matters of succession must exceptionally have the option of disregarding certain provisions of a foreign law where, in a given case, applying such provisions would be manifestly incompatible with the public policy of their Member State, Recital 58 tempers the ordre public exception: the courts should not be able to set aside the law of another State if this would be contrary to the Charter of Fundamental Rights of the European Union. Moreover, the public policy provision in the Proposal to the Succession Regulation explicitly excluded situations where foreign rules on the reserved portion of an estate differed from the lex fori (Art. 27 (2) of the Proposal).41 Whilst this provision has not been retained, courts need to take extra care in assessing a public policy violation in a scenario involving forced heirship rules. A mere discrepancy between foreign substantive law and the rules of the lex fori cannot justify the application of Art. 35 SR.42 It should also be noted in this context, that there is great divergence in opinion across national laws on the question whether Art. 35 of the Regulation may be invoked, when foreign law does not provide a mandatory share for close relatives of the deceased or provides for a solution that grants them shares which are substantially narrower than those of the lex fori. A study commissioned by the Notaries of Europe43 showed a great variety of opinions in doctrine and court practice of the Member States and it was highlighted that there is a need for guidelines on the interpretation of the Regulation on this issue. The recommendation given by the Notaries of Europe is to clarify that “Art. 35 Regulation may not be used to protect the reserved mandatory shares of close relatives except in cases of demonstrated financial need and dependence on the deceased.”44 According to 40 For a detailed account of Article 35 of the Succession Regulation see, A. BONOMI, in A. BONOMI/ P. WAUTELET, Le Droit Européen des Successions, 2 ed, Brussels 2016, Article 35. 41 Article 27 of the Proposal: “Recourse to public policy must occur in exceptional circumstances only. Differences between the laws relating to the protection of the legitimate interests of the relatives of the deceased must not be used to justify its use, as this would be incompatible with the objective of ensuring the application of a single law to all of the succession property.” See also Recital (24) of the Proposal: “Considerations of public interest should allow courts in the Member States the opportunity in exceptional circumstances to disregard the application of foreign law in a given case where this would be contrary to the public policy of the forum. However, the courts should not be able to apply the public-policy exception in order to disregard the law of another Member State or to refuse to recognise or enforce a decision, an authentic instrument, a legal transaction or a European Certificate of Succession drawn up in another Member State when this would be contrary to the Charter of Fundamental Rights of the European Union, and in particular Article 21, which prohibits all forms of discrimination.” 42 See also A. BONOMI (note 40), Article 35, Paras 24-36; G. CONTALDI/ C. GRIECO, Article 35, in A.-L. CALVO CARAVACA/ A. DAVÌ/ H.-P. MANSEl (eds), The Succession Regulation / A Commentary, CUP 2016. 43 Available at https://www.notariesofeurope.eu/wp-content/uploads/2023/03/ MAPE-Recommendations-EN.pdf accessed on 16.8.2023. 44 Ibidem, Recommendation 12.

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English Succession Law and German Ordre Public the explanations given, the fact that a foreign succession law grants compulsory shares or other financial provision only to close relatives financially dependent on the deceased and based on their need “is still in line with the fundamental principles of justice and should not be considered a violation of Art. 35 Regulation.” The explanation continues, stating: “If the testator makes use of its limited right of choice under Art. 22 Regulation, and choses the law of its nationality, with the aim of reducing the mandatory shares in favour the testamentary heir, it makes use of its legitimate right of disposition over its assets upon death. This right should be respected and only corrected in cases of serious injustice.”45

V.

The Arguments in BGH, 29.06.2022 - IV ZR 110/21

In its decision, the BGH maintains the approach followed by the OLG Köln that the application of English law violates public policy if a descendant, in a case with strong links to the German territory, receives no compulsory share in a succession. The BGH confirms that the deceased could validly choose English law as lex successionis, even though he made this choice before the entry into force of the Succession Regulation46 which introduced the principle of choice of law into European Private International Law. In this respect, the court refers to the Regulation’s transition provisions, although it wrongly pointed to Art. 83(4) SR (it should have argued on the basis of Art. 83 (2) SR). The BGH concludes, however, that the validly chosen English law must be disregarded as its application would be manifestly incompatible with German public policy. The court first reiterates that a mere deviation of foreign law from German succession law principles as such does not suffice to affirm an ordre public violation. The application of English law would need to create an unacceptable result in the concrete case. 47 It further argues in accordance with the OLG Köln and based on the case law of the Constitutional Court, that the German rules on forced heirship are institutionally guaranteed by the German constitution and therefore part of German public policy. English law does not provide an entitlement to the estate that is independent of need and calculated on the basis of fixed quotas but is instead based on rules that not only require the deceased to be domiciled in England but also make a family provision dependant on the discretion of the court. The BGH did not consider it necessary to examine in detail in which circumstances adult children might receive a family provision, given that the deceased had “his domicile of choice” in Germany48 and a claim was already ex45 For instance, if the applicable foreign succession law directly or indirectly discriminates on the basis of gender, religion or sexual orientation. 46 Entry into force on 17.8.2015. 47 EuGH C-7/98, EU:C:2000:164, at 37; BGH 14.11.2018, XII ZB 292-15, NJW-RR 2019, 321 at 30; F. BAUER/M. FORNASIER (note 5), Article 35 EuErbVO, Para 5. 48 See also KG IPRspr 2007, No 163.

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Eva Lein cluded on that basis. Although a public policy violation in circumstances such as in the present case is controversially debated in Germany, 49 the majority opinion in German doctrine would confirm that the choice of English law violates the German ordre public. According to the BGH, this opinion would, at least in the present case, be justified as the facts present strong links with the German territory (hinreichend starker Inlandsbezug). Under these circumstances a compulsory share in the estate needs to be granted. Furthermore, according to the BGH, neither the recitals to the Succession Regulation nor the history of its creation warrant a different outcome. As the 1975 Act could not apply due to a lack of domicile of the deceased in England, the BGH found the contradiction of English law with the constitutionally guaranteed right to a portion of the estate to be so severe that the result in the concrete case would be unacceptable for the claimant.50 The testamentary freedom and respect of the testator ’s will would not justify an exclusion of the right to a compulsory share in the estate and the German rules were to be applied instead.

VI. Evaluation The law of succession remains an area where the wishes of the deceased and the predictability of the succession play a crucial role. Following the BGH decision, inheritance planning involving English law has become very difficult. It is a doubtful outcome that the choice of English inheritance law will de facto always be discarded, at least if the case is strongly connected to Germany. This is unfortunate. The public policy exception must be the absolute exception and last resort, to ensure that the freedom of choice of the testator is maintained, even more so given that the Succession Regulation already protects heirs by limiting the choice of the deceased to the law of the latter’s nationality.51 Jeopardizing this limited choice by discarding the application of English law is a massive step that will also make future legal advice extremely complicated. British nationals with a domicile of choice in Germany effectively can no longer be advised to choose English succession law. Despite the undeniable importance of forced heirship rules from the perspective of German law, this result seems unjustified. See above, notes 25 and 26. See BGH, at 23: “Wenn - wie hier - einem Kind des Erblassers nach ausländischem Recht ein Pflichtteil wegen des fehlenden ‘domicile’ des Erblasssrs in England kompensationslos versagt wird, oder dieser von nicht vorab festgelegten Kriterien, die nicht bedarfsunabhängig sind, abhängt und in das Ermessen des Gerichts gestellt wird, ist der Kern des Pflichtteilsrechts angetastet. Das ist mit dem deutschen ordre public unvereinbar […] If - as here - foreign law denies a child of the deceased a compulsory portion of the estate without compensation because of the deceased’s lack of ‘domicile’ in England, or if this depends on criteria which are not set out in advance and are not independent of need, and are placed at the discretion of the court, the core of the Pflichtteilsrecht is affected. This is incompatible with the German public policy.” 51 Article 22 SR and Recital 38. 49 50

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English Succession Law and German Ordre Public First, as shown above, it can be questioned if the incompatibility of English law with German public policy is “manifest” in a case involving an adult descendant. As stated above, opinions in German doctrine (and across Europe) differ wildly as to how the public policy exception is to be handled in cases involving forced heirship rules, and this is particularly true for adult children of the deceased that are economically independent. Reference was made above to the more nuanced case law of the French Supreme Court52 and the recommendation of the Notaries of Europe who argued that Art. 35 SR may not be used to protect the reserved mandatory shares of close relatives except in cases of demonstrated financial need and dependence on the deceased.53 This is more in line with the spirit of the 1975 Act than with the traditional continental approach. Also, the consequence of an ordre public violation is that a particular provision of a foreign law does not apply as its application would lead to unacceptable results in the concrete case. Here the case is somewhat different. The problem arising here is technically not the application of a foreign legal provision, but the fact that the plaintiff cannot bring any claim for family provision, due to the lack of domicile of the deceased in the jurisdiction of England and Wales. The court then effectively stops short in its analysis of the 1975 Act, only referring to the lack of domicile of the deceased in England. Yet, in cases of ordre public violations, it needs to be ensured that any discard of a chosen foreign law is limited to a minimum. Gaps are generally to be filled with other provisions of the chosen lex causae and the lex fori is only applied subsidiarily.54 The BGH mentions this point itself,55 but concludes that English law would not provide the plaintiff with a share of the estate that complies with the constitutional requirements in Arts. 14(1) and 6(1) GG. It therefore would not contain any equivalent provision or solution that could be referred to, and German law needs to apply instead. At this point, however, the court should have considered the English case law concerning family provision in cases of adult children and assessed a needs-based solution as provided in Art. 2 (b) of the 1975 Act. These provisions are a “functional equivalent” of the “réserve” and pursue objectives that are at the very core of continental forced heirship rules.56 This would have outweighed the interests of the plaintiff See Cass. civ., 27 September 2017, No 16-17198 (note 27). Available at https://www.notariesofeurope.eu/wp-content/uploads/2023/03/ MAPE-Recommendations-EN.pdf, Recommendation 12, accessed on 16.8.2023. 54 BGH, 11.10.2006 – XII ZR 79/04, BGHZ 169, 240, III 4c; 14.10.1992 – XII ZB 18/92, BGHZ 120, 29, II 6.; T. PFUNDSTEIN, Pflichtteil und ordre public, Munich 2010, Para 531; M. SOUTIER (note 5), 225 et seq. 55 BGH 29.6.2022, IV ZR 110/21, at 30. 56 This approach has also been supported in doctrine. See P. LAGARDE, in U. BERQUIST et al., Commentaire du réglement européen sur les successions, Dalloz 2015, Article 23, Para 38, who supports the view that the competent court of a State other than the one whose law governs the succession will have to try and use the same assessment criteria as the courts of the State whose law is applicable. See also A. BONOMI, La soumission de la succession au droit anglais : discussion de quelques questions controversies, in: A. BONOMI/ D. PIOTET/ PH. FRÉSARD (eds), Droit successoral international, Zürich 2019, p. 131 et seq., 150. 52 53

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Eva Lein and the will of the testator, which is also subject to the constitutional protection of Art. 14(1) GG.57 Another particularity of the case that was not mentioned in more detail, is the fact that the adoption contract of the plaintiff contained an exclusion of forced heirship rights after the death of the first spouse. Although the legislation permitting this exclusion has been amended with retrospective effect because the plaintiff was a minor at the time of the legislative change, it would not have been possible to invalidate that clause, had the plaintiff been an adult at the time the law changed. German law did maintain the exclusion from forced heirship rights for adopted adult children.58 Moreover, the BGH decision leaves various practical questions open, where the scenario at stake is not as closely linked to the German territory as the present case. While English law as lex successionis will be ruled out in consequence of the BGH decision where the deceased died domiciled in Germany and the case has further strong links to the German territory, uncertainty remains in other situations. One scenario would be a case in which German courts have jurisdiction based on the subsidiary jurisdiction rule in Art. 10 SR, whereas the deceased died last habitually resident in England. If a descendant with habitual residence in Germany brings a claim in Germany (based on the location of assets and e.g. on a former habitual residence of the deceased in the country), it is unclear how the court would assess the claim, as the 1975 Act would apply. Similarly, it is unclear what should happen in cases in which the deceased had assets in both countries and spent time in both. It remains vague what constitutes a „hinreichend starke Inlandsbeziehung“ that justifies an ordre public violation. In conclusion, the decision creates more questions than answers and triggers an imbalance to the detriment of the testator in all cases with a link to the jurisdiction of England and Wales. Contrary to the opinion of the BGH, an argument can be, and is made in legal practice across Europe, that cases of forced heirship rights of adult descendants that are economically independent constitute a category that needs careful reflection in the assessment of an ordre public violation. This issue requires further discussion and reflection and ultimately guidance from the CJEU.

57 For a detailed analysis of the 1975 Act and its non-applicability in a foreign jurisdiction, see A. BONOMI (note 56), p. 131 et seq., 150 et seq, 58 Article 12(1)(5) AdoptG: “Ist in dem Annahmevertrag das Erbrecht des Kindes dem Annehmenden gegenüber ausgeschlossen worden, so bleibt dieser Ausschluß unberührt; in diesem Fall hat auch der Annehmende kein Erbrecht.”

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REVOCATION OF THE WILL UPON MARRIAGE – ISSUES OF CHARACTERISATION, APPLICABLE LAW, AND RENVOI AN ITALIAN SUPREME COURT’S DECISION AND SOME REFLEXIONS ON THE POTENTIAL OUTCOME UNDER THE EUROPEAN SUCCESSION REGULATION Andrea BONOMI*

I. II. III.

V.

The Decision of the Corte di cassazione Revocation of a Will upon Subsequent Marriage Characterisation of the Issue of Revocation of a Will upon Marriage A. Characterisation under National Law B. Characterisation under the European Succession Regulation 1. Autonomous Characterisation 2. Characterisation as a Matter of Succession The Law Governing the Revocation of a Will upon Marriage A. The Applicable Law under the Italian PIL Act 1. Choice of Law by the Testator 2. Renvoi B. The Applicable Law under the ESR 1. The Law Applicable to the Succession or the Law Applicable to the Will 2. The Determination of the Law Applicable to the Succession (or of the Law that Would Have Applied to the Succession) Conclusion

I.

The Decision of the Corte di cassazione

IV.

In a recent case,1 the Italian Supreme Court (Corte di cassazione) was confronted with the challenging question of the characterisation of the issue of revocation of a will upon marriage of the deceased. In the same ruling, the Court was also called upon to address other interesting issues of cross-border succession law, in * Professor at the University of Lausanne ; co-director of the LL.M. in International Business Law. 1 Corte di cassazione (sezioni unite), 5 February 2021, No 2867, Riv. dir. int. priv. proc., 2021, p. 413 et seq.

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Printed in Germany

Andrea Bonomi particular the possibility of a tacit choice of the applicable law and the effects of renvoi from the English lex causae to the Italian lex fori. The case before the Court concerned the succession of an English citizen who had died in Italy on 19 December 1999. The deceased left immovable property situated in Italy as well as movable property. He had made a will in London on 29 October 1997, by which he left all his assets to his (seven) daughters and sons. He then remarried on 25 October 1999. The succession was outside the temporal scope of the European Succession Regulation2 (hereinafter also referred to as “ESR”), therefore the governing law was to be determined in accordance with the then applicable Italian rules of private international law, notably the Italian Private International Law Act of 19953 (hereinafter: “the 1995 PIL Act”). Article 46(1) of the 1995 PIL Act, designated English law as the law governing the succession, based on the last nationality of the deceased. Accordingly, the second wife, to whom had been bequeathed only a modest amount of money and who had been excluded from the succession of all other movable and immovable assets, claimed that the will had been revoked upon the testator’s subsequent marriage to her in accordance with English law, notably Section 18 of the Wills Act 1837. The court of first instance (Tribunal of Milan) accepted this argument and ruled that the will had been revoked upon marriage, in application of English law. The Milan Court of Appeal confirmed that the will had been revoked in application of English law. However, it characterized the matter of revocation upon marriage as one concerning the matrimonial property relations between the spouses, in line with the traditional characterisation of revocation upon marriage under English private international law.4 With respect to the rules on intestate succession (which became relevant as a consequence of the will’s revocation), the Court of appeal considered that English substantive law was applicable to the movable property of the deceased, whereas Italian substantive law governed the succession of the Italian immovables by virtue of a renvoi by English PIL to the law of the situs. Seized with competing claims by both the surviving spouse and some of the heirs, the Corte di cassazione corrected the second instance decision on two important points. First, the Court ruled that the question of revocation upon marriage must be characterised as a matter concerning successions and not as a matter of matrimonial property relations. English law was therefore applicable as the deceased’s national law, subject however to renvoi. This is the most interesting part of the decision. Second, the Court considered that there was no valid choice of the law governing the succession pursuant Article 46(2) of the 1995 PIL Act and therefore English law was applicable as the law of the nationality of the deceased 2 Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession, OJ L 201/107, 27.7.2012. 3 Legge No 218 of 31 May 1995, Riforma del sistema italiano di diritto internazionale privato, Gazzetta Ufficiale, No 128, 3 June 1995, available at www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:1995-05-31;218 accessed on 10.5.2023. 4 See infra, III, A.

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues at the time of death (Article 46(1) of the PIL Act). Third, the Court found that – with respect to the immovable property situated in Italy – Italian courts were required to take into account the partial renvoi of English law to Italian law as provided for by Article 13 of the 1995 PIL Act. As a result, under Italian substantive law, the will was not revoked as far as such immovable property was concerned, and the surviving spouse was therefore only entitled to a reserved share of such property.5 By contrast, insofar as movable assets were concerned, the will was revoked in application of English law, such assets being therefore subject to English law on intestate succession. The case raises several interesting and complex questions concerning the law of international successions, such as the characterisation of the question of revocation of a will upon a subsequent marriage and the admissibility of renvoi, in particular when it leads to a scission of the succession. While it is certainly interesting to examine how the Corte di cassazione addressed such issues in its decision, based on the application of the 1995 Italian PIL Act, we cannot escape the temptation to imagine the potential solution of a future similar case falling under the temporal scope of the European Succession Regulation.

II.

Revocation of a Will upon Subsequent Marriage

English law traditionally provides for revocation of a will in the event of a subsequent marriage, with some exceptions if the will was made in contemplation of the marriage (section 18 of the Wills Act 1837).6 A similar provision also exists in other common law jurisdictions,7 although not in all of them.8 Such ground for 5 Under Article 542 of the Italian Civil Code, when the deceased is survived by a spouse and children, the reserved share of the surviving spouse amounts to 1/4 (one fourth) of the estate. Such reserved share is calculated on an augmented estate, including the net estate at the time of death as well as all inter vivos gifts made by the deceased (Article 556 of the Italian Civil Code). 6 F. BARLOW/ R. WALLINGTON/ S.L. MEADWAY et al., Williams on Wills, The Law of Wills, LexisNexis 2014, 1st supplement to 10th ed., LexisNexis 2016, No 17.2 et seq., p. 192 et seq.; A. BURROWS, English private law, Oxford 2013, No 7.112, p. 442; C. SAWYER/ M. SPERO, Succession, Wills and Probate, Abingdon 2015, No 7.2, p. 121 et seq. 7 This is for instance the case in most provinces of Canada, such as British Columbia, Manitoba, Ontario and Saskatchewan. 8 Most U.S. states have abolished the rule on revocation upon marriage. Under para 2-301 of the Uniform Probate Code (enacted in a number of states), subsequent marriage does not revoke a premarital will, but, notwithstanding the provisions of the will, the surviving spouse is entitled to receive, as an intestate share, no less than the value of the share of the estate he or she would have received if the testator had died intestate as to that portion of the testator’s estate, if any, that is neither (i) devised to a child of the testator (but not of the surviving spouse) born before the testator married the surviving spouse nor (ii) devised to a descendant of such a child. A similar solution was applicable in some non-UPC states, such as New York (where, however, such rule has since been abrogated).

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Andrea Bonomi revocation is also unknown in most civil law jurisdictions; in particular it has no equivalent under Italian law. These differences among national laws become more understandable if one examines the overall legal context. Under English law, the function of the revocation of a will upon marriage is to ensure a strong protection of the surviving spouse.9 Since a will made prior to a marriage often makes no provision for the benefit of a future spouse, and English law does not provide the latter with the right to a reserved portion of the estate, a surviving spouse might have been unable – at least until the Inheritance (Family Provision) Act 1938 – to claim any rights against the deceased’s estate. Moreover, in the absence of a “matrimonial property regime” as that term is understood in civil law jurisdictions, the surviving spouse would similarly not be entitled to a share of the property acquired by the deceased during the marriage. Admittedly, the picture has changed significantly with the introduction of the so-called “family provision”. The possibility for the surviving spouse to apply for a reasonable financial provision which, under the Inheritance (Family and Dependents Provision) Act 1975, would be determined by the court in application of the quite generous “surviving spouse standard”, has significantly reduced the need for protection of a surviving spouse against a prior will.10 This need has not however completely disappeared. Indeed, although the financial provision which a surviving spouse may obtain from the court can be quite significant, it remains substantially less than the very extensive inheritance rights to which s/he would be entitled in the case of intestacy. This explains why the traditional rule of revocation upon marriage has been maintained in England, notwithstanding widespread criticism.11 By contrast, under Italian law, as well as in several other civil law jurisdictions, a broad protection of the surviving spouse is ensured by the concurrent application of the rules on matrimonial property regimes (community property of all marital assets under Italian law, subject to a “separation contract” between the spouses) and the rules on succession law granting the surviving spouse a significant reserved portion of the deceased’s estate.12

G. MILLER, International Aspects of Succession, Aldershot 2000, p. 192 et seq. Section 3(2) of the 1975 Act. A. BURROWS (note 6), No 7.230, p. 472; C. SAWYER/ M. SPERO (note 6), No 15.23.5, p. 348. See also the case Lilleyman c. Lilleyman, [2012] EWHC 821 (Ch). In several U.S. states, the entitlement of the surviving spouses to the “elective share” is regarded as the main reason for abolishing the revocation rule. 11 The English Law Reform Committee endorsed in 1980 the policy of revocation: see LAW REFORM COMMITTEE, The Making and Revocation of Wills, Report No 22, 1980; C. SAWYER/M. SPERO (note 6), No 7.2.1, p. 121. 12 See supra, note 5. 9

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues

III. Characterisation of the Issue of Revocation of a Will upon Marriage A.

Characterisation under National Law

The protective function of the rule on revocation of wills upon marriage, under English law, also has important implications on the characterisation of this issue for conflict-of-laws purposes. Indeed, the question of the revocation upon marriage is traditionally regarded as one of matrimonial relations between spouses and not as one of succession.13 It follows that, from the English perspective, the revocation rule will not apply as a part of the law governing the succession (law of the domicile of the deceased at the time of death and law of the situs of immovable property), but only if English law is the law of the testator’s domicile at the time of marriage. This matrimonial characterisation of the revocation by marriage is also accepted in some other common law jurisdictions,14 but not in all of them.15 By contrast, it is rejected in Italy and in other civil law jurisdictions. Indeed, in one of the most significant part of its ruling, the Corte di cassazione clearly opted for a characterisation of the issue of revocation upon marriage as pertaining to the law of succession, in accordance with the definition of such legal category under the Italian lex fori. The Court found that “[f]or the purpose of characterising the question as belonging to the law of succession, and thus to be addressed on the basis of Article 46 of the Law No 218 of 1995, it is not useful to object that according to English law such revocation does not fall under the law of successions, but under matrimonial law. The decisive characterisation of the preliminary question of revocation of the will as pertaining to the law of successions must be effected on the basis of the substantive rules of Italian law […] Therefore, in order to decide which conflictof-laws rule, among those provided for by Law No 218 of 1995, should govern the specific claim, the court should establish the meaning of the terms used to define legal categories on the basis of the lex fori, i.e. according to the classification criteria of Italian law, 13 In Re Martin, Loustalan v. Loustalan, [1900], p. 211. See also L. COLLINS/ J. HARRIS (eds), Dicey, Morris & Collins on The Conflict of Laws, London 2022, No 28090, p. 1529; J.J. FAWCETT/ J.M. CARRUTHERS (eds), Cheshire, North & Fawcett: Private International Law, Oxford 2008, p. 1276. 14 See Allison v Allison [1999] 3 W.W.R. 438 (BC) and In Re Micallef’s Estate [1977] 2 NSWLR 929 (NSW). The law of the testator’s domicile at the time of the marriage was also applied in Davies v. Collins, 2011 (Nova Scotia), but based on a characterisation of the issue as one of succession law. 15 In the United States, apparently, courts have generally applied the law of the deceased’s domicile at the time of death: see P. HAY/ P.J. BORCHERS/ S. SYMEONIDES, Conflict of Laws, St. Paul 2010, para 20.12, p. 1306 (with references to case law in note 5).

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Andrea Bonomi to which that conflict-of-laws rule belongs (and not in accordance with the lex causae, i.e., not on the basis of the interpretation criteria of the law designated by those conflict-of-laws rules)”.16 This decision is not surprising. In most jurisdictions, characterisation of an issue for conflict-of-laws purposes is normally based on the legal concepts and categories of the lex fori.17 Now, under Italian law and the law of other civil law jurisdictions, the revocation of a will is commonly regarded as a question pertaining to the law of successions. This is not only true for voluntary revocation of a will (resulting typically from a subsequent will or a codicil), but also in the case of revocation of the will by operation of law. Indeed, while revocation upon marriage is unknown in most civil law jurisdictions, revocation by operation of law is sometimes provided for (e.g., in the case of divorce under German and Swiss law).18 In such cases, civil law jurisdictions normally opt for a characterisation of that issue as one of succession law. Such characterisation is not based on the purpose of the rules on revocation, but on their effects: indeed, both the direct effect of revocation (setting aside the will) as well as its indirect consequences (the application of the law of intestacy) undoubtedly belong to the law of succession. This reasoning was followed by Swiss courts in a case finally decided in 2009. In that case, the deceased – a well-known English actor and filmmaker, who had died domiciled in Switzerland – had chosen, in his will, to submit his succession to English law by way of a “professio juris” (Article 90(2) of the Swiss PIL Act of 1987). He subsequently married in France and entered into a marriage contract governed by French law, without modifying his previous will. Some of his children, who were disfavoured by the dispositions included in the will, claimed that the will had been revoked by effect of the subsequent marriage. The Swiss court of first instance19 ruled that the revocation of the will upon marriage was a matter of succession law, and not of matrimonial law. Such characterisation was based on the concepts of the Swiss lex fori and in particular on the fact that the revocation of a will is regarded, under Swiss law, as a matter pertaining to succession. The court concluded that, since the deceased had submitted his succession to English law by a valid choice of law, the will was revoked in application of Article 18 of the Wills Act. This decision was upheld by the court of second instance,20 which noted that a characterisation of a will’s revocation as a succession matter should prevail, under Swiss law, not only for voluntary revocation (such as regulated by Article Para 9 of the decision, Riv. dir. int. priv. proc., 2021, p. 419. The alternative method of characterisation, based on the lex causae – i.e. on the categories of the law designated by the conflict-of-laws rules – is sometimes proposed by legal scholars but rarely adopted by the courts. 18 Para 1933 of the German Civil Code; Article 120 of the Swiss Civil Code. 19 Cour civile du Tribunal cantonal, Canton de Vaud, 5 January 2007, Not@lex, 2009, p. 161 et seq. 20 Chambre de recours, Canton de Vaud, 12 March 2008, Not@lex, 2009, p. 161 et seq., in particular para 8. 16 17

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues 509 of the Swiss Civil Code), but also for revocation upon divorce (Article 120 Swiss Civil Code), even though the relevant provision was not included in the section of the Civil Code dealing with succession, but in that concerning divorce. It should therefore also apply to other cases of revocation by operation of law, such as revocation upon marriage. Such characterisation of the issue as one of succession law was not challenged before the Swiss Federal Court, which eventually rejected the other challenges brought against the lower court’s decisions.21 A similar approach would probably also be followed in other civil law countries jurisdictions. Although we are not aware of court decisions in other civil law countries having dealt with the question of characterisation of revocation of a will upon marriage, this question is normally addressed and analysed by legal scholars as a matter belonging to the law of succession.22 B.

Characterisation under the European Succession Regulation

As mentioned above, the decision of the Corte di cassazione was rendered in a case decided in application of the Italian conflict-of-laws rules, which were applicable in the specific case because the deceased had died before the date of applicability of the ESR. Should the same characterisation of revocation upon marriage also prevail in future cases subject to the ESR? 1.

Autonomous Characterisation

This question is legitimate, because the characterisation method is very different under the national law of the Member States, on the one hand, and European regulations, on the other. In the Italian case, the characterisation was based on the legal categories of the lex fori, an approach that is widely followed in the national conflict-of-laws systems of most Member States. Similarly, the Swiss decisions mentioned above were also based on a characterisation under the (Swiss) lex fori. The approach is very different under the ESR and, more generally, under European law. Characterisation under the ESR is no longer a matter for the national law of the individual Member States but should reflect the “autonomous” approach that is followed by the Court of Justice of the EU when interpreting European Law. In such context, characterisation cannot be based on the lex fori of the individual Member State, because this might lead to contradictory results.23 Instead, an autonomous characterisation should prevail and reflect the “origins, Swiss Federal Court, 23 February 2009, 5A_437/2008. H. DÖRNER, Internationales Erbrecht, Art. 25, 26 EGBGB, in: C. A. HEINZE/ C. REYMANN/ M. SCHERMAIER et al. (eds), J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch, Einführungsgesetz zum BGB, Berlin 2007, paras 67 and 78. On the same line of reasoning, see also, with regard to the ESR, the French and German authors quoted below, notes 45, 47 and 50. 23 See Recital 37 of the ESR: “Harmonised conflict-of-laws rules should be introduced in order to avoid contradictory results.” 21 22

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Andrea Bonomi objectives and scheme” of each Regulation, as the Court of Justice of the EU routinely states in its preliminary rulings on the interpretation of European law.24 It follows that Italian courts, if seized in a future case of revocation of the will upon marriage falling under the ESR, could not simply rely on the important decision of the Corte di cassazione, because the methodological approach of that decision is no longer valid under European law. 2.

Characterisation as a Matter of Succession

Despite this methodological difference, it is suggested that the characterisation of the disputed issue would not change. Indeed, an autonomous approach to the characterisation of the question of the revocation of the will upon marriage under the ESR would almost certainly also lead to the conclusion that revocation of a will upon marriage is a matter of succession law, falling as such under the scope of application of the ESR as defined under Article 1(1) ESR (“succession to the estate of a deceased person”).25 This interpretation is supported by at least three considerations. a)

Repeated References to the Revocation of a Will under the ESR

First, the Regulation includes several textual indications that the revocation of a will should be characterised as a matter pertaining to succession, included as such in the material scope of the Regulation as defined in Article 1(1) ESR. The most prominent among the relevant provisions is Article 24 ESR, which determines the law applicable to the admissibility and substantive validity of dispositions of property upon death other than agreements as to succession. Article 24 paragraph 3 includes a specific reference to the “modification and revocation” of such dispositions upon death. Pursuant to this provision, “[p]aragraph 1 [of Article 24] shall apply, as appropriate, to the modification or revocation of a disposition of property upon death other than an agreement as to succession. In the event of a choice of law in accordance with paragraph 2, the modification or revocation shall be governed by the chosen law” (emphasis added). Articles 26(2) and 27(2) ESR also expressly refer to revocation of a disposition of property upon death.26 24 See, among many others, CJEU, 3 May 2007, Color Drack GmbH v Lexx International Vertriebs GmbH, ECLI:EU:C:2007:262, para 18; CJEU, 9 July 2009, Peter Rehder v Air Baltic Corporation, ECLI:EU:C:2009:439, para 31; CJEU, 25 February 2010, Car Trim GmbH v KeySafety Systems Srl, ECLI:EU:C:2010:90, para 47. 25 Under Article 1(1) ESR, the Regulation applies to the “succession to the estates of deceased persons,” but does not define this notion. Revocation upon marriage does not fall under one of the matters expressly excluded under Article 1(2), such as “the status of natural persons, as well as family relationships and relationships deemed by the law applicable to such relationships to have comparable effects” (Article 1(2)(a) ESR). 26 One might also mention Article 22(4) ESR, which does not govern dispositions of property upon death but the choice of the law governing the succession and states that

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues The fact that the question of the revocation of a will is dealt with in these provisions of the Regulation, indicates that such issue should be qualified as a matter pertaining to succession within the meaning of Article 1(1) ESR. Admittedly, by referring to the capacity and the formal validity of the revocation of a disposition upon death, Articles 26(2) and 27(2) ESR are only concerned with a voluntary revocation of a will (typically, by a subsequent will or a codicil made by the deceased), and not with a revocation by operation of law, such as revocation upon marriage. However, such limitation does not necessarily apply to Article 24(3) ESR, which is formulated in broader terms and determines the law governing the admissibility and substantive validity of “revocation of a disposition of property upon death”, without any qualification that might be interpreted as excluding revocation by operation of law. In any case, and whatever the exact scope of Article 24(3) ESR, the repeated references to the revocation of dispositions upon death within the text of the ESR indicate that all matters relating to revocation of a will should be characterised as a matter of succession, and thus fall within the material scope of the ESR. It is suggested that this is also true with respect to revocation by operation of law and, in particular, to revocation upon marriage. b)

A Broad Understanding of the Notion of “Succession”

This conclusion is reinforced by a second consideration, based on the approach taken by the Court of Justice of the EU in some cases concerning the determination of the scope of application of the ESR. Although the Court has not yet had the opportunity to rule specifically on the application of the ESR to questions concerning the revocation of a will, it has already been confronted with questions concerning the definition of the material scope of the ESR. To that end, it has also decided complex issues of characterisation of some “hybrid” rules, i.e., rules that are at the borderline between the law of succession and other areas of the law, such as real property or matrimonial property. In those decisions, the Court thus far has always opted for a broad understanding of what should be characterised as pertaining to succession and thus falling within the scope of the ESR. Thus, in the Kubicka case,27 the Court ruled that the acquisition of property rights with respect to assets of the estate by virtue of a legacy “by vindication” (i.e., a legacy that provides for immediate transfer at the time of death of the property rights over the bequeathed assets) is to be regarded as a matter pertaining to succession upon death, governed as such by the law governing the succession under Article 23 ESR. According to the decision, this question is not a matter concerning “the nature of property rights”, nor “the recording in a register of rights in immovable or movable property”, which are excluded from the material scope of the ESR (Article 2(1)(k) ESR). As a consequence, the authorities of a Member “[a]ny modification or revocation of the choice of law shall meet the requirements as to form for the modification or revocation of a disposition of property upon death.” 27 See CJEU, 12 octobre 2017, Kubicka, ECLI:EU:C:2017:755.

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Andrea Bonomi State (in the specific case, Germany) cannot refuse to recognise “the material effects of a legacy ‘by vindication’, provided for by the law governing succession as chosen by the testator in accordance with Article 22(1) [ESR] [in the specific case, Poland], where that refusal is based on the ground that the legacy concerns the right of ownership of immovable property located in that Member State, whose law does not provide for legacies with direct material effect when succession takes place”.28 By this decision, the Court opted for a broad interpretation of the notion of “succession” as opposed to “property rights”. Even more instructive is the preliminary ruling in the Mahnkopf case,29 where the Court held that a well-known provision of German law (§1371 of the German Civil Code), which prescribes, on the death of one of the spouses, a fixed allocation of the accrued gains of the deceased by increasing the surviving spouse’s share of the estate on intestacy,30 should be characterised as pertaining to “succession upon death” within the meaning of Article 1(1) ESR, and falling as such within the material scope of the Regulation, and not as belonging to the law of matrimonial property. This decision is particularly remarkable for at least two reasons, both of which are relevant for the purpose of the question, discussed here, of the characterisation of revocation of wills upon marriage. On the one hand, the Court opted for a very broad understanding of the legal category of “succession upon death” as opposed to the legal category of “matrimonial property”. Indeed, as stated in the request for preliminary ruling by the German court, §1371(1) of the German Civil Code “settle[s] questions relating to matrimonial property regimes after the death of one spouse by increasing the other spouse’s share of the estate on intestacy”. Based on such purpose of §1371 BGB, German courts and scholars had almost unanimously classified this provision as pertaining to matrimonial property rather than to succession.31 However, the Court took a different stance and ruled that: “[…] Paragraph 1371(1) of the BGB [the German Civil Code] concerns not the division of assets between spouses but the issue of the rights of the surviving spouse in relation to assets already counted as part of the estate. Accordingly, that provision does not appear to Ibidem, paras 66-67. See CJEU, 1 March 2018, Mahnkopf, ECLI:EU:C:2018:138. 30 German law provides for a legal (default) matrimonial property regime, based on which the gains accrued to the spouses during marriage should be compensated in the case of divorce. The compensation is normally based on a calculation of the actual gains accrued to each of the spouses during their marriage. However, in the case of death of one of the spouses, no calculation of the actual gains is required: §1371 BGB provides that the surviving spouse is automatically entitled to an increased share of 1/4 of the deceased’s estate. 31 See H. DÖRNER, Die Abgrenzung des Erbstatuts vom Güterstatuts, in: A. DUTTA/ S. HERRLER (eds), Die Europäische Erbrechtsverordnung, Münich 2014, p. 77 et seq.; P. MANKOWSKI, Das erbrechtliche Viertel nach §1371 Abs. 1 BGB im deutschen und europäischen Internationalen Privatrecht, Zeitschrift für Erbrecht und Vermögensnachfolge, 2014, p. 121 et seq. 28 29

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues have as its main purpose the allocation of assets or liquidation of the matrimonial property regime, but rather [the] determination of the size of the share of the estate to be allocated to the surviving spouse as against the other heirs. Such a provision therefore principally concerns succession to the estate of the deceased spouse and not the matrimonial property regime.”32 Although the Court refers to the “main purpose” of the German provision, its reasoning seems to focus more on its effects, i.e., on the fact that such provision determines “the size of the share of the estate to be allocated to the surviving spouse as against the other heirs”. If applied to the English rule providing for the revocation of the will upon marriage, this reasoning also leads to a characterisation of the issue as a matter of succession: indeed, whatever the rationale of the English rule (protection of the surviving spouse), it can hardly be contested that its effects (revocation of a will, application of the law of intestacy, increase of the size of the share of the estate to be allocated to the surviving spouse as against the other heirs) belong to the law of succession. On the other hand, by adopting an autonomous characterisation of the question, the Court was unimpressed by the fact that a different characterisation prevailed in the national legal system from which the disputed provision originated (German law). Therefore, it is likely that, if confronted with the question of revocation upon marriage under English law, the Court would not hesitate to opt for an autonomous characterisation (as succession law), even if this contradicts the traditional classification under English law (as matrimonial law). This is even more likely with respect to revocation of a will upon marriage, because – as mentioned above – that question has already been regarded as a matter of succession by the Supreme Court of at least one Member State (Italy). c)

Comparative Law Considerations

This leads to a third consideration that supports a characterisation of revocation upon marriage as a matter of succession law under the ESR. It is well known that the autonomous interpretation of notions of European law by the Court of Justice is often nourished by a comparative law methodology. This is particularly appropriate in areas such as private international law, where the Court cannot rely on a set of European substantive law rules. Therefore, the conceptions prevailing in the Member States may certainly have an influence on the solutions adopted by the Court. Thus, the fact that a great majority of the Member States bound by the ESR are civil law jurisdictions, and that in such jurisdictions the revocation of a will is commonly regarded as a matter of succession, would most probably also encourage the Court of Justice to adopt such characterisation.

32

Ibidem, para 40.

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IV. The Law Governing the Revocation of a Will upon Marriage The characterisation of revocation of a will upon marriage as a matter of succession law does not automatically answer the question of the determination of the law applicable to that issue. We will first examine this issue under the 1995 Italian PIL Act and thus comment on some other interesting aspects of the ruling by the Corte di cassazione, concerning the choice of the law governing the succession and renvoi. We will then try to answer this same question from the perspective of the ESR. A.

The Applicable Law under the Italian PIL Act

Under the 1995 Italian PIL Act, which was applicable in the case submitted to the Corte de cassazione, the characterisation of revocation upon marriage as a matter of succession led to the application of the conflict-of-laws rules of Article 46 of the Italian PIL Act. This provision is now superseded by the ESR but remains applicable in international succession cases where the deceased died before 17 August 2015. Under Article 46(1) of the Italian PIL Act, the succession is governed by the national law of the deceased at the time of death. However, if such law is a foreign one, such reference is to be interpreted as including its conflict-of-law rules: indeed, Article 13 of the Italian PIL Act provides that renvoi should be followed, both when the lex causae refers back to Italian law (renvoi au premier degré) and when it refers to the law of a third country (renvoi au deuxième degré). Moreover, the application of the national law can be excluded by the deceased by choosing to submit the succession to the law of the country of his/her last habitual residence (Article 46(2) of the PIL Act). In such event, renvoi is excluded. In its ruling, the Italian Corte di cassazione was faced with both the question of the deceased’s choice of law and the question of renvoi. 1.

Choice of Law by the Testator

One of the children of the deceased argued that, by establishing his last will in England in the form provided for by English law, the deceased had implicitly chosen to submit his succession to English law.33 This argument was rejected by the Corte di cassazione. The Court found that a choice of law pursuant to Article 46(2) of the Italian PIL Act required an 33 The intended goal of this submission is not clear. Indeed, the application of English law to the whole of the succession would have led to the revocation of the will with respect to both movable and immovable property, and to the application of the English law on intestate succession to both movable and immovable property, which was certainly not in the interest of the testamentary heirs.

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues “express declaration in testamentary form” made by the deceased to that effect, which was absent in the current case. It was therefore not possible simply to infer a tacit choice of English law based on the factual circumstances of the case. What if the will had included an express choice of English law to apply to the succession? Would such a choice, included in the will, have survived the application of the English rule on revocation upon marriage? This question was examined in the Swiss case mentioned above34, where the question of the revocation upon marriage only arose because the deceased – an English citizen domiciled in Switzerland – had validly chosen English law as the law governing his estate. Swiss courts found that the professio juris included in the will was not affected by the English rule on revocation upon marriage. As a result, English law was applicable to the will as the law chosen by the testator, which led to the revocation of the will (or, more precisely, to the revocation of the dispositions of property included in the will). Therefore, ironically, the inclusion of a choice of law in the will led… to the revocation of that same will.35 2.

Renvoi

In the absence of a choice of law, the characterisation of the issue of revocation upon marriage as a matter of succession led to the application of English law as the national law of the deceased (Article 46(1) of the 1995 PIL Act). However, since Article 13 of the same Act reserves renvoi, the Corte di cassazione was required to examine whether renvoi was actually admissible in the present case. a)

Renvoi Leading to a Scission of the Estate

It is well known that a scission of the estate can result from the application of the English conflict-of-laws rules in matters of succession, which provide that movable property is governed by the law of the deceased’s domicile at the time of death, whereas immovable property is subject to the law of the situs. Prior to the Corte di cassazione’s ruling, there had been discussion in Italy of whether renvoi under Article 13 of the 1995 PIL Act should also be followed when it leads to a scission of the estate, thus derogating from the principle of unity of succession, traditionally followed under Italian law.36 The relation between renvoi and the scission of the succession is particularly thorny. As is well known, the courts of some European countries have ruled in the past, in application of their national PIL rules, that renvoi should only be See supra, III, A, notes 19-21. On this question see also A. BONOMI, in: A. BONOMI/ P. WAUTELET, Le droit européen des successions, Bruxelles 2016, Article 22, para 73, p. 354 et seq. 36 L. FUMAGALLI, Rinvio e unità della successione nel nuovo diritto internazionale privato italiano, Riv. dir. int. priv. proc., 1997, p. 839; A. BONOMI, La loi applicable aux successions dans le nouveau droit international privé italien et ses implications dans les relations italo-suisses, RSDIE, 1996, p. 483. 34 35

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Andrea Bonomi followed when it leads to the unity of the succession.37 The same solution is also reflected in the Belgian PIL Code of 2004.38 In its ruling, however, the Corte di cassazione did not follow this trend and held that renvoi should be accepted, as prescribed by Article 13 of the 1995 PIL Act, even when it leads to a scission of the estate. The quest for uniformity between the law of the forum and the lex causae – which is one of the main goals of renvoi – should thus prevail over the principle of unity of succession. Thus, in this specific case, the Court came to the conclusion that, with respect to immovable property situated in Italy, English law referred back to Italian law, and therefore the succession to such property was eventually governed by Italian law. Contrary to the Court of Appeal’s ruling, the Corte di cassazione found that this conclusion was also valid with respect to the revocation of the will.39 As a result, the will was not revoked as far as immovable property situated in Italy was concerned. b)

“Single” or “Double” Renvoi

By so stating, the Court also implicitly answered another controversial question which may arise in the case of renvoi, in particular when the lex causae refers back to the law of the forum. In such cases, English courts traditionally follow a method which is called the “foreign court theory” (or “double renvoi”), which consists in considering not only the conflict-of-law rules of the lex causae (“règles de rattachement”), but also the rules of the foreign lex causae with respect to renvoi. The goal is to decide the case as it would be decided by the courts of the foreign country.40 By contrast, civil law jurisdictions, when they consider renvoi, look only to the conflict-of-laws rules of the lex causae and tend to ignore the foreign rules on renvoi (“single renvoi”): this is the case in several civil law jurisdictions, such as Austria, France and Germany.41 In its ruling, the Italian Supreme Court was obviously only interested in the English conflict-of-law rules and did not even mention the English courts’ approach to renvoi. The “referral back” resulting, for Italian immovables, from the English conflict-of-laws rule designating the lex situs was considered as sufficient to conclude that Italian law was applicable, even though English courts might have come to the opposite conclusion that Italian law as the lex situs referred back to English law. This was the position of the Spanish and French courts. In Spain, see Tribunal supremo, 15.11.1996, Lowenthal; 21.5.1999, Denney; 23.9.2002, François Marie James W. In France, see Cass., 20.6.2006, Wildenstein, Clunet 2007, p. 125, note H. GAUDEMETTALLON ; Cass. 11.2.2009, Riley, Rev. crit. dr. int. pr., 2009, p. 512, note B. ANCEL. 38 Code of Private International Law of 16 July 2004, para 78(2). 39 Para 15 of the decision, Riv. dir. int. priv. proc., 2021, p. 422. 40 See A. DAVÌ, Le renvoi en droit international privé contemporain, Collected Courses, 2012, p. 152 et seq. 41 For a comparative law overview, see ibidem, p. 148 et seq. 37

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues While this implicit choice of “single renvoi” by the Corte di cassazione certainly makes the application of renvoi easier, this is not entirely coherent with the goal of uniformity, which the Court itself mentions as the main rationale for renvoi. c)

Characterisation of the Issue for the Purpose of Renvoi (“Second Characterisation”)

There is another big question mark hanging over the Italian decision. When taking into account the English conflict-of-law rules for the purpose of renvoi, the Italian court should arguably have considered that, under English law, the question of revocation upon marriage is classified as pertaining to matrimonial law, governed as such by the law of the testator’s domicile at the time of death.42 While such matrimonial characterisation is certainly superseded, when an Italian court is determining the Italian conflict-of-law rules that should apply to the case, by a characterisation as succession under the concepts of the Italian lex fori (so-called “primary characterisation”), the English law characterisation becomes relevant when it comes to the application of renvoi. Indeed, renvoi depends on the conflict-of-laws rules of the foreign lex causae, the application of which hinges on the characterisation that prevails under the PIL system of the lex causae (so-called “second characterisation”): only this approach can ensure the uniformity of solutions between lex fori and lex causae that is sought by the admission of renvoi. Therefore, at this stage of its reasoning, the Italian court should have followed the matrimonial characterisation that the question of revocation upon marriage receives under English law. When discussing the issue of characterisation (under the lex fori or the lex causae), the Corte di cassazione admitted, in theory, that this approach would be correct,43 however, it omitted to follow it in the solution of the concrete case. Indeed, in the part of its ruling concerning renvoi, the Court only referred to the English conflict-of-law rules governing succession (lex domicilii at the time of death and lex situs), but it did not even mention that, under English law, the question of revocation upon marriage is classified as matrimonial and governed, as such, by the law of the testator’s domicile at the time of marriage.

42 In this sense, see also the French decision Cass. 15.5.2018, Rev. crit. dr. int. pr., 2019, p. 529, note P. LAGARDE (which gives priority to the Spanish nationality of the deceased over her French nationality, in order to determine whether the applicable Spanish law referred back to Franch law in a matter concerning immovable property situated in Spain). On this specific issue focuses the commentary of the Italian decision by S. TONOLO, Criticità e incertezze derivanti dall’applicazione del rinvio di qualificazione (Qualifikationsverweisung), Riv. dir. int. priv. proc., 2022, p. 23-42. 43 Indeed, after stating that the characterisation should be based on the Italian lex fori, the Court recognized that the English characterisation of the question of revocation of the will upon marriage as pertaining to the matrimonial relations between the spouses could only become relevant when the Italian conflict-of-laws rules led to the application of the foreign law (see para 9 of the decision, Riv. dir. int. priv. proc., 2021, p. 420).

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Andrea Bonomi If this different characterisation had been considered, the result might have been very different. Indeed, if the deceased’s domicile had been in England at the time of marriage as it was at the time of death (which seems likely because of the time proximity between the two events, although this important fact is not specified in the decision), there would be no renvoi to Italian law with respect to the question of revocation upon marriage. As a result, such question would be governed solely by English law and the will would have been revoked in its entirety.44 The renvoi to the Italian lex situs would only become relevant to determine the rules applicable to intestate succession in the Italian immovables. B.

The Applicable Law under the ESR

1.

The Law Applicable to the Succession or the Law Applicable to the Will

The determination of the law applicable to the revocation of a will upon marriage under the ESR is even more complex than under Italian PIL. Indeed, the Regulation includes not only general conflict-of-laws rules aimed at determining the law governing the succession (Articles 21 and 22 ESR, in conjunction with Article 34 on renvoi), but also – contrary to the Italian PIL Act – a special conflict-of-law provision on the admissibility and substantive validity of dispositions upon death (article 24 ESR). As mentioned above, this provision also includes a specific rule on revocation of a disposition upon death (Article 24(3) ESR); while this rule is certainly applicable to voluntary acts of revocation (typically by a subsequent will or codicil), its applicability to revocation by operation of law is disputed. In this framework, it is not clear which of these provisions governs revocation upon marriage. The Court of Justice has not yet had the opportunity to answer this question. In the literature, in particular in commentaries of the ESR, very few scholars address this issue, and when they do, they opt for diverging interpretations. At least three different opinions have been expressed in this regard. a)

The Law Governing the Succession

According to a first interpretation, the specific rule of Article 24(3) ESR is only applicable to voluntary revocation of a disposition upon death, but not to the revocation of a will by operation of law.45 Based on this premise, revocation upon marriage would fall under the general provisions of the ESR. Indeed, as stated in Article 23(1) ESR, “[t]he law determined pursuant to Article 21 or Article 22 shall govern the succession as a whole.” As such, this provision does not cover only the questions listed in its The Court of Appeal had come to this conclusion, however for the wrong reasons: indeed, it had apparently adopted the English characterisation in order to determine the relevant conflict-of-laws rule of Italian law. 45 This is the opinion of P. LAGARDE, in: U. BERGQUIST et al. (eds), Commentaire du Règlement européen sur les successions, Paris 2015, Art. 24, para 12. However, this author does not provide any further explanation for his interpretation. 44

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues paragraph 2, but also all other questions of succession law that do not fall under any other more specific provision of the ESR. This would be the case of revocation upon marriage. If we follow this approach, revocation upon marriage would be governed by either the law chosen by the deceased (Article 22) or, in the absence of a choice, the law of the State of the habitual residence of the deceased at the time of death (Article 21(1) ESR), subject to the exception clause (Article 21(2) ESR) and to renvoi (Article 34(1) ESR). This interpretation however is hardly convincing. On the one hand, Article 24(3) ESR specifically addresses the question of revocation of a will. As mentioned above, this provision is formulated in broad terms, and there is no indication that it is intended to apply only to voluntary revocation. Therefore, it is suggested that it should also apply to revocation by operation of law. On the other hand, the application to revocation upon marriage of the law of the deceased’s last habitual residence under Article 21(1) ESR leads, in the absence of a choice of law, to uncertainty as to the effects of the will. Indeed, a will that was valid when it was made, will be regarded as revoked by a subsequent marriage if the law of the testator’s last habitual residence so provides. Such uncertainty contradicts the rationale behind Article 24 ESR,46 which is to preserve the effectiveness of a will (and thus the legitimate expectations of the testator), even in the case of a change of habitual residence after the making of the will. b)

The Law Governing the (Voluntary) Revocation of a Will

According to a second interpretation, suggested without further explanation by the authors of one of the first books commenting on the ESR,47 revocation of a will upon marriage should be governed by the law that would have governed the succession on the day of the (alleged) revocation, i.e., at the time of marriage. Following this interpretation, the applicable law would be either the law chosen by the deceased (Article 22) or, in the absence of a choice, the law of the State of the habitual residence of the deceased at the time of revocation (Article 21(1) ESR), subject once again to the exception clause (Article 21(2) ESR) and to renvoi (Article 34(1) ESR). This interpretation is also unconvincing. It should be noted first that its supporters do not provide any reasons for their suggestion, and they also recognise that the ESR provides no indication in this respect. If one tries to find the rationale behind their proposal, two arguments might be put forward, but they are both inconclusive.

46 And more generally of all rules of the ESR concerning dispositions upon death, such as Articles 25 on succession agreements and 27 on formal validity. 47 G. KHAIRALLAH/ M. REVILLARD, Droit européen des successions internationales, Paris 2013, para 185.

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Andrea Bonomi A first argument might be based on the protective function of the rules of revocation upon marriage.48 However, such reasoning should rather lead to a characterisation of this issue as a matter of matrimonial law, instead of one of succession, and we have already seen why such characterisation should be rejected under the ESR.49 A second line of reasoning might be based on the reference made by Article 24(3) ESR to Article 24(1) ESR (“[p]aragraph 1 [of Article 24] shall apply, as appropriate, to the modification or revocation of a disposition of property upon death other than an agreement as to succession”). When applied to an act of voluntary revocation, this reference indeed implies that issues of its substantive validity should be governed by the law that would have governed the succession on the day on which the revocation was made. This solution is certainly “appropriate” – as required by Article 24(3) ESR – with respect to issues of “substantive validity” of the act of revocation; this includes such issues as capacity or representation of the person making the revocation, interpretation of the revocation, or whether the revocation was tainted by fraud, duress and mistake (see the definition of “substantive validity” under Article 26 ESR). Indeed, the application of the law that would have governed the succession at the time of revocation preserves the legitimate expectations of the testator with respect to the validity of his/her own act of revocation. However, according to a widespread opinion, this solution is not “appropriate” for the question of the “admissibility” of revocation (i.e., for the question of whether the disposition can be revoked and, if so, under which circumstances), since this relates to the inherent characteristics of the original will and its revocability by certain types of events. For similar reasons, this solution is also inappropriate for revocation of the will by operation of law, and, in particular, of revocation upon marriage. Indeed, these rules do not raise issues of substantive validity of the act of revocation (such as capacity, representation, fraud, etc.), but only issues of “admissibility” of revocation (e.g., is the will revoked by marriage, divorce, birth of child? If so, under what circumstances?). In particular, in the case of revocation by operation of law, since there was no deliberate act of revocation by the testator, there is no need to protect his/her legitimate expectations in the validity of such act. c)

The Law Governing the Original Will

According to a third interpretation, which in our opinion should be preferred, revocation of the will upon marriage should be governed by the law governing the original will under Article 24(1) ESR, in other words, the law which would have governed the succession at the time when the original will was made.50 Indeed, in See supra, II. See supra, III, B. 50 A. BONOMI (note 35), Art. 24, para 12, p. 412; F. BAUER/ J. WEBER, in: A. DUTTA/ J. WEBER (eds), Internationales Erbrecht, Munich 2021, Art. 24, para 23; A. DUTTA, Das neue internationale Erbrecht der Europäischen Union – Eine erste Lektüre der Erbrechtsverordnung , Zeitschrift für das gesamte Familienrecht, 2013, p. 10; A. DUTTA, in: 48 49

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues the case of revocation by operation of law, the reference made by Article 24(3) to Article 24(1) should be intended as designating the law governing the original disposition (i.e., the will to be revoked), This interpretation better reflects the rationale of Article 24(1), which consists in preserving the effectiveness of a will (and thus the legitimate expectations of the testator), even in the case of a change of his/her habitual residence after the making of the will. It is also consistent with Article 25 ESR, which – based on the same rationale – expressly provides that “the binding effects” of an agreement as to succession should be governed by the law which would have governed the succession on the day on which the agreement was concluded. As mentioned before, in the case of revocation by operation of law, since there is no deliberate act of revocation, there is no need to protect the testator’s legitimate expectations in the validity of such revocation. Therefore, the law governing the original will should be preferred to the law that would have governed the succession at the time of the alleged revocation. We emphasise that all three different interpretations mentioned above imply a reference to the law governing the succession under Articles 21 or 22 ESR. What differs is the relevant moment in time: while the first interpretation refers to the law which actually governs the succession at time of death, the second and the third refer to the law that would have governed the succession at a previous point in time, i.e., at the moment of marriage (second interpretation) or at the moment when the original will had been made (third interpretation). By contrast, the outcome does not change when the original will contains a valid choice of governing law within the meaning of Article 22 ESR: indeed, in such a scenario, the applicable law would in any case be the law chosen by the deceased. Thus, the three interpretations only lead to different results when there is no choice of law, and in particular when the deceased had his/her habitual residence in different countries at the time when he made his/her will, at the time of marriage and/or at the time of death. 2.

The Determination of the Law Applicable to the Succession (or of the Law that Would Have Applied to the Succession)

Whatever interpretation is chosen among the three we have examined, it will be necessary to determine the law applicable to the succession (or the law that would have applied to the succession at the time of the original will or at the time of Münchener Kommentar zum BGB, Internationales Privatrecht, Munich 2021, Art. 24 EuErbVO, para 17; C.F. NORDMEIER, EuErbVO: Neues Kollisionsrecht für gemeinschaftliche Testamente, Zeitschrift für Erbrecht und Vermögensnachfolge, 2012, p. 518. This interpretation also prevailed in Germany under the old Article 26 of the Introductory Law to the German Civil Code, a provision that inspired Article 24 ESR: see R. BIRK, in: Münchener Kommentar zum Bürgerlichen Gesetzbuch, Internationales Privatrecht, Munich 2006, Art. 26 EGBGB, para 95. Contra: J. RODRÍGUEZ RODRIGO, Article 24 – Dispositions of Property upon Death Other than Agreements as to Succession, in: A.-L. CALVO CARAVACA/ A. DAVÌ/ H.-P. MANSEL (eds), The EU Succession Regulation – A Commentary, Cambridge 2016, para 21, p. 378 et seq.

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Andrea Bonomi marriage). This requires the application of Article 22 ESR (choice of law by the deceased) or of Article 21 ESR (habitual residence of the deceased), in conjunction with Article 34 ESR (renvoi). a)

The Choice of Law by the Deceased

Article 22 allows for the choice of the governing law by the deceased. While Article 46(2) of the 1995 PIL Act authorized the choice of the law of his/her habitual residence, Article 22 ESR only refers to the law of his/her nationality (or of one of his/her nationalities). In the case decided by the Corte di cassazione, the deceased – as an English citizen – could have chosen English law.51 In the presence of such a choice of English law, renvoi would be excluded (Art. 34(2) ESR), as is also the case under the Italian PIL Act. Therefore, English law would have governed both the question of the revocation of the will (the will would thus be revoked in its entirety) and the subsequent intestate succession for the entire estate, despite the different conflict-of-law rules under English law and the scission that they may produce. As to the modalities of the choice, Article 22(2) ESR provides that the choice of law “shall be made expressly in a declaration in the form of a disposition of property upon death or shall be demonstrated by the terms of such a disposition”. Accordingly, an implied choice is also relevant – contrary to Article 46(2) of the Italian PIL Act as interpreted by the Corte di cassazione (see supra, III, A.1.) – provided that the intention of the testator to choose his/her national law is “demonstrated by the terms” of the will. As stated in Recital 39 ESR and confirmed by the Court of Justice of the EU, this is typically the case when the testator refers in the will to specific provisions of his/her national law”.52 Failing sufficient indications in the will, it seems that the choice cannot simply be inferred from the external factual circumstances. In particular, the fact that the testator specifically went to England to establish a will in conformity with the English requirements, as in the case decided by the Corte di cassazione, would probably be insufficient to assume that he intended to submit his succession to English law. 51 More precisely, the choice of law would be in favour of the law of the United Kingdom. Indeed, under the ESR, when a person chooses as the law governing the succession the law of a “State which comprises several territorial units each of which has its own rules of law in respect of succession,” he/she can only choose the law of that State as a whole, but cannot directly select the law of a specific territorial unit: A. BONOMI (note 35), Art. 36-38, para 11; F. BAUER/M. FORNASIER, in: A. DUTTA/ J. WEBER (note 50), Art. 22 para 14 and Art. 66, para 8; C.M. CAMIÑA DOMÍNGUEZ, Articles 36-38 – State with More Than One Legal System: Territorial Conflicts of Laws, in: A.-L. CALVO CARAVACA/ A. DAVÌ/ H.-P. MANSEL (eds) (note 50), paras 6 and 7. However, a choice of English law would need to be interpreted as the (valid) choice of the law of the United Kingdom. The law of the specific territorial unit within the UK (England and Wales, Scotland or Northern Ireland), which would eventually govern the succession, would need to be determined in application of Article 36 ESR. 52 See CJEU, 16 July 2020, E.E., ECLI:EU:C:2020:569, para 89.

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues It is worth noting, however, that, even in the absence of an (express or tacit) choice of law under Article 22 ESR, such a choice of law would be deemed to exist if the conditions of Article 83(4) ESR were satisfied. According to this provision, “[i]f a disposition of property upon death was made prior to 17 August 2015 in accordance with the law which the deceased could have chosen in accordance with this Regulation, that law shall be deemed to have been chosen as the law applicable to the succession”.53 It might be so, in a case like the one decided by the Corte di cassazione, if we assume – as it seems likely – that the testator’s will, established in England, had been made in conformity with English law. b)

Habitual Residence and Renvoi

In the absence of a(n) (express, implicit or presumptive) choice of law, the law applicable to the succession will normally be the law of the country of the deceased’s habitual residence (Article 21(1)) ESR.54 This is also of course very different from what is provided by Article 46(1) of the 1995 Italian PIL Act, which is still based on the application of the deceased’s national law. Another difference is that, while Italian PIL always refers to the time of death, the ESR refers to different moments in time in Articles 21(1) and 24: as mentioned above, this is particularly important when the question is one of revocation of a will. However, similar to Italian law, the Regulation also admits renvoi, in particular when the law of the habitual residence refers back to the lex fori (Article 34(1)(a) ESR). In the case decided by the Corte di cassazione, the deceased’s domicile, in the English sense of the word, was apparently in England (indeed the Court considered that English law referred back to Italian law only for immovable property situated in Italy), but there is no specific indication about the place of his habitual residence. Domicile, in the English sense of the word, and habitual residence, in the sense of European law, may well be situated in different countries. If the deceased’s habitual residence had been in Italy at the relevant moment in time, Italian law would have been applicable under Article 21(1) ESR and no issue of renvoi would have arisen. As a result, the will would have survived the testator’s subsequent marriage and his surviving spouse would only be entitled to the reserved share provided by the Italian law of successions. By contrast, if the deceased’s habitual residence had been in England at the relevant moment in time (see supra, IV, B.1.), we would have a situation of renvoi 53 The rationale of this quite remarkable provision is to avoid the situation where, because of the entry into force of the conflict-of-laws rules of the ESR (which are quite different from the conflict-of-laws rules that were previously applicable in many Member States of the EU), a succession might be “submitted to a law other than the law that the deceased and those interested in his or her succession would originally expect to apply”: see P. FRANZINA, Article 83 – Transitional Provisions, in: A.-L. CALVO CARAVACA/ A. DAVÌ/ H.-P. MANSEL (eds) (note 50), Art. 83, para 36. 54 Subject to the exception clause of Article 21(2), which however should only apply in quite rare cases.

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Andrea Bonomi similar to that under Italian PIL. Although the way Article 34 ESR should be interpreted is still controversial in many respects, the questions that would arise as well as the possible answers are probably quite similar to those under Italian PIL.  First, it seems plausible that renvoi will need to be followed even if this would lead to a scission of the estate (as might be the case if English law is the lex causae).55  Second, it seems also likely that the theory of “single renvoi” would prevail over “double renvoi” (or “foreign court theory”): indeed, “single renvoi” is followed, as mentioned, in the national PIL system of several Member States and is also favoured by several ESR commentators.56  Finally, it is suggested that the court of a Member State, when considering renvoi under Art. 34 ESR, should follow the theory of “second characterisation”, i.e., respect the characterisation of the disputed issue under the lex causae, even if it is different from the autonomous characterisation of that issue under the ESR: indeed, the existence and extent of renvoi depend on the foreign conflict-of-law rules. As mentioned above, this might lead, in a case similar to the one decided by the Corte di cassazione, to the conclusion that there is actually no renvoi, if the testator’s domicile at the time of marriage had been in England according to the English notion of domicile.57

V.

Conclusion

The ruling of the Italian Corte di cassazione is one of the rare decisions of a civil law jurisdiction applying the English traditional rule of revocation of a will upon marriage. In application of the Italian PIL Act of 1995, the Court opted for a characterisation of that issue as one pertaining to the law of successions, thus rejecting the matrimonial law characterisation that prevails in England. It seems very likely that, if confronted with such issue under the ESR, the Court of Justice of the EU, using an autonomous characterisation, would come to the same conclusion. However, characterisation is only a first step for the purpose of determining the applicable law. The Italian Corte di cassazione was also confronted with the questions of the admissibility of a tacit choice of the law by the deceased and with that of partial renvoi resulting from the English rules based on a scission. Similar questions would also arise under the ESR, although the answers might be different at least on some issues. A. BONOMI (note 35), Art. 34, paras 26-27. See F. BAUER/ M. FORNASIER (note 51), Art. 34, para 14 ; A. DUTTA, in: Münchener Kommentar zum BGB, Internationales Privatrecht, Münich 2020, Art. 34, para 3; A. BONOMI (note 35), Art. 34, para 17. However, in favour of double renvoi see A. DAVÌ, Article 34 – Renvoi, in: A.-L. CALVO CARAVACA/ A. DAVÌ/ H.-P. MANSEL (eds) (note 50), paras 23-26. 57 See supra, IV, A.2.c. This interpretation of Art. 34 ESR is also favoured by P. LAGARDE, in his note to Cass., 15.5.2018, Rev. crit. dr. int. pr., 2019, at 532 (supra, note 42). 55 56

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Revocation of the Will upon Marriage – Characterisation and other PIL Issues More interestingly, the Court of Justice, if confronted with a similar case under the ESR, would also need – in the absence of a choice of the governing law by the deceased – to clarify which is the relevant moment in time for the determination of the law applicable to revocation of a will (the time when the will was made, the time of marriage, or the time of death), an issue on which the opinion of commentators are still divided.

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NATIONAL REPORTS ________________

THE ENFORCEMENT OF FOREIGN JURISDICTION CLAUSES IN NIGERIA A CRITIQUE OF THE NIGERIAN COURT OF APPEAL’S RECENT RESTATEMENT Chukwuma OKOLI*

I. II. III.

V.

Introduction Three Different Approaches to Enforcement of Choice of Forum Clauses The Most Recent Case and Solution A. Context B. Decision on the Choice of Court Clause Critique A. Privity of Contract B. Ouster Clause C. The Bradon Test and Judicial Discretion D. Waiver and Submission Conclusion

I.

Introduction

IV.

International commercial parties usually provide for a choice of court agreement as a term of their contract. This is done to enhance predictability, certainty, neutrality, and commercial efficacy, and to reduce costs between the parties. Since a foreign choice of court agreement is a term of the contract, should a Nigerian court enforce such a term like any other between commercial parties? Or, on the contrary, should a foreign choice of court agreement be regarded as an ouster clause? Or does the Nigerian court retain the discretion to enforce such a clause? The issue of how to conceptualise a jurisdiction agreement has become a dilemma, since the decisions

* Assistant Professor at the University of Birmingham. I can be contacted at [email protected] or [email protected].

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Printed in Germany

Chukwuma Okoli of the Nigerian Court of Appeal and those of the Supreme Court diverge.1 This article analyses a recent decision of the Nigerian Court of Appeal on the concept of foreign jurisdiction clause.2

II.

Three Different Approaches to Enforcement of Foreign Choice of Court Clauses

The Nigerian Court of Appeal has often changed its approach to the enforcement of foreign choice of court agreements.3 In some decisions, it adopted the contractual approach that strictly treats a choice of court agreement like any ordinary commercial contract.4 This approach is good in that it promotes party autonomy, but the problem is that it ignores the procedural context of a choice of court agreement and might lead to injustice due to its rigidity. In other decisions, the Court of Appeal adopted the ouster clause approach that strictly refuses to enforce a foreign choice of court agreement.5 Though this approach might favour litigation in Nigeria, it undermines party autonomy dangerously, and international commercial actors are likely to lose confidence in a legal system that does not uphold party autonomy. A third, less extreme approach, is the middle ground of the discretionary approach called the Brandon test, which upholds a choice of court agreement except where strong reasons exist to refuse its enforcement. This has become the standard approach applied by the Nigerian Supreme Court.6

1 See generally C.S.A OKOLI, “Analysis of Choice of Court Agreements in Nigeria in the Year 2020” Dutch Journal of Private International Law, 2021, pp. 292 – 305; C.S.A. OKOLI/ R.F. OPPONG, Private International Law in Nigeria, Hart Publishing, Oxford, 2020, pp. 106-127; A YEKINI, “The Effectiveness of Foreign Jurisdiction Clauses in Nigeria: An Empirical Inquity”, Journal of Private International Law, 2023, pp. 67-91. 2 TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA). 3 For an analysis of three inconsistent decisions of the Nigerian Court of Appeal on enforcement of choice of forum clauses see C.S.A. OKOLI, (note 1), pp. 292-305. 4 Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699 (CA). See also Conoil Plc v Vitol SA (2018) 9 NWLR 463, 489 (Nweze JSC), 500-501 (Okoro JSC), 502 (Eko JSC). 5 A.B.U. v VTLS (2020) LPELR-52142 (CA). See also Conoil Plc v Vitol SA (2018) 9 NWLR 463, 489 (Nweze JSC); Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, 544-5 (Oputa JSC); LAC v AAN Ltd (2006) 2 NWLR 49, 81 (Ogunbiyi JCA as she then was called); Ventujol v Compagnie Française De L’Afrique Occidentale (1949) 19 NLR 32; Allied Trading Company Ltd v China Ocean Shipping Line (1980) (1) ALR Comm 146. 6 Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509.

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Enforcement of Foreign Jurisdiction Clauses in Nigeria

III. The Most Recent Case and Solution A recent complex case pitted against each other a United States of American (US) company and a Nigerian Bank, versus a Nigerian company, US Company and a natural commercial party.7 A.

Context

In this case, a US company (World Play LLC) sued four parties, namely a Nigerian bank (Polaris Bank Limited, which was previously Skye Bank Plc), another Nigerian Company (TOF Energy Limited), a US Company (TOF Energy Corporation), and Mr. Jyde Adelakun (both the chief executive officer of TOF Energy Corporation, and director and shareholder of TOF Energy Limited) in Lagos, Nigeria, for breach of an exclusive choice of court agreement in favour of US Courts. WorldPay LLC and TOF Energy Corporation, both US companies, had entered into a Bank Card Merchant Agreement with WorldPay LLC, as the processor, and TOF Energy Corporation, as the merchant. WorldPay LLC claimed that it was the victim of a sophisticated wire transfer fraud carried out by the TOF Energy Corporation under the direction of Mr. Jyde Adelakun. The proceeds of the fraud – about $5 million – were allegedly traced from TOF Energy Corporation’s account at Standard Chartered Bank, New York, USA to TOF Energy Limited’s accounts domiciled with Polaris Bank Limited in Lagos, Nigeria. Hence, WorldPay LLC sued in Lagos to recover the money from TOF Energy Co Ltd.’s accounts in Lagos. B.

Decision on the Choice of Court Clause

The trial court dismissed the defendants’ motion and assumed jurisdiction over the case. The defendants appealed. The Court of Appeal dismissed the appeal. With respect to the foreign jurisdiction clause, Affen JCA8 in his leading judgment (with which the other Justices unanimously concurred) dismissed the case on four grounds. First, he applied the privity of contract doctrine. Second, he held that the exclusive jurisdiction in favour of Ohio was an ouster clause of the jurisdiction of the Lagos High Court, which the Court will not enforce. Third, the defendants, having filed a statement of defence, had submitted to the jurisdiction of the Lagos High Court. This was irrespective of the fact that the defendants specifically stated that the Lagos State High Court had no jurisdiction over the case. Fourth, the claimants had shown strong cause why the foreign jurisdiction clause in favour of Ohio should not be enforced. See above (note 2). JCA means “Justice of the Court of Appeal.” Usually, three Judges sit at the Nigerian Court of Appeal. The Court of Appeal hears appeals from the High Court, Federal High Court and National Industrial Court, etc.) in Nigeria. Decisions of the Court of Appeal may go on appeal to the Nigerian Supreme Court, which has the final say judicially. 7 8

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Chukwuma Okoli

IV. Critique Affen JCA rightly observed that a foreign jurisdiction clause provides certainty and neutrality as between international commercial parties.9 It is however submitted that Affen JCA’s decision is wrong on the privity of contract doctrine, the ouster clause principle, the Brandon test and the discretionary approach, as well as on the submission to the jurisdiction of the Lagos State High Court, or waiver of the foreign choice of court agreement. A.

Privity of Contract

Affen JCA gave a general endorsement of the principle of party autonomy, which is part of Nigerian contract law and private international law. He stated that parties generally have the freedom of contract and are bound by the terms of their agreement; the Court will not rewrite the terms of the parties’ contract. The consequence of this, was that where the conditions for the formation of a contract are fulfilled, the court will give effect to the terms of the contract.10 Having based his decision on this contractual approach, he nonetheless held that the contract cannot be enforced based on the doctrine of privity of contract. This part of the judgment is worth quoting: However, it cannot escape notice that non-parties to the BCMA are sued along with the 2nd Appellant and reliefs sought against the Appellants and 2nd Respondent (jointly or severally). Under elementary principles of privity of contract, the 1st and 3rd Appellants and the 2nd Respondent can neither enforce the BCMA to which they are not parties nor be held liable under it. Whilst there is some force in the Appellant’s contention that it is impossible to establish the alleged fraudulent conversion without placing reliance on the terms and conditions of the BCMA, it is difficult in the extreme to think through the extent to which effect can be given to the exclusive foreign jurisdiction clause therein without doing violence to the principle of privity of contract in the light of alleged improprieties and reliefs sought especially against nonparties to the BCMA.11 As far as Nigerian contract law is concerned, this principle is correct.12 This principle has also been applied previously by the Nigerian Court of Appeal in the context of privity of contract as it relates to a jurisdiction clause.13 Ibid. at 41. Ibid. at 33-35 11 Ibid at 37-38. 12 Ikpeazu v African Continental Bank Ltd (1965) NMLR 376. 13 Unipetrol Nigeria Ltd v Prima Alfa Enterprises (Nig) Ltd 1986) 5 NWLR 532. 9

10

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Enforcement of Foreign Jurisdiction Clauses in Nigeria This aspect of Affen JCA’s decision is however open to question because it was not one of the issues before the Court of Appeal. It is trite in common law procedural adjudication that a Court cannot make a case for any of the parties. The parties in the case did not specifically raise this issue, so Affen JCA was wrong to have raised it without inviting the parties to argue their positions. B.

Ouster Clause

Affen JCA regarded the exclusive choice of court agreement in favour of Ohio as an ouster clause.14 In his words: Based on the above Supreme Court decision, I agree with the submission of learned counsel to the Claimant/Respondent that the choice of Ohio Court in Clause 23 of the above Agreement cannot oust the jurisdiction of this Honourable Court. In view of the above, I find and hold that this Court has jurisdiction to entertain this suit.15 This decision of the Court of Appeal in the case under consideration (Affen JCA) is consistent with its previous decision in the recent case of A.B.U. v VTLS, where it refused to enforce a choice of Court agreement in favour of the Commonwealth of Virginia based on the ouster clause principle.16 The Court of Appeal (Hussaini JCA) was of the view that, although the choice of court agreement in favour of the Commonwealth of Virginia (in the USA) was clear and unambiguous and had no vitiating circumstances surrounding it (such as fraud), the Court unanimously held that it would not apply the principle of pacta sunt servanda (agreements between parties should be respected). Hussaini JCA held as follows: By reason of Section 6(1)(2)(6)(b) of the Constitution of FRN, 1999 (as amended) the judicial powers vested in the Courts “extend to all matters between persons or between Government or authority and to any person in Nigeria, and to all actions and proceedings relating thereto, for the determination of any question as to the civil rights and obligations of that person”. Consequently, no person or group of persons by their own private treaty or arrangements can agree to oust the jurisdiction and provisions vested in the Courts by the Constitution. Even where such clauses are put in place in or as a contract with international flavour to rob the Courts of the land of jurisdiction in favour of another foreign forum, the Courts of the land are obliged to apply the blue pencil rule to severe [sic] those clauses from the contract or ignore same by virtue of the Constitutional provision which confer [sic] on the Court, the jurisdiction and power to entertain those cases.

TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (note 2) 38-41. Ibid at 40-41. 16 A.B.U. v VTLS, (2020) LPELR-52142 (CA) 14 15

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Chukwuma Okoli Talking about the jurisdiction of the Courts, the Court below, by virtue of Section 272 of the Constitution of Federal Republic of Nigeria 1999 (as amended) has jurisdiction to entertain cases such as recovery of debts, as in the instant case on appeal. It is for this reason that clauses in the likes of Articles 12 and 13 in the Articles of the Agreement should be ignored when determining the rights and liabilities between the parties herein in matters such as this and the trial Court took the right approach when it discountenanced same to reach the conclusion that it did. In any case, is it for the recovery of the sum of $18,103 (USD) only claimed by the Respondents, that parties herein are required, by that contract or agreement to submit themselves to a foreign forum in Virginia, USA for adjudication of their case, without consideration of the concomitant procedural difficulties attendant thereto, as for instance, of having to return the case to Nigeria, the place where the contract was concluded initially, to register the judgment obtained at that foreign forum, in Virginia, USA, to be enforced in Nigeria? I think the Courts in Nigeria, fully seized of the case, will in the exercise of its discretion refuse the request to refer the case to a foreign forum for adjudication. It is for all the reasons already expressed in this discourse that I hold the firm view that the trial Court was competent or is competent when it entertained and adjudicated over the recovery suit or action filed by the Respondent against the Appellant.17 An ouster clause is used to rob a court of its jurisdiction. Ouster clauses were popular during the Nigerian military regime to deprive the Nigerian civil courts of the existence of its jurisdiction in certain cases where the military government so determined. Many Nigerian judges construed such ouster clauses very narrowly by assuming jurisdiction.18 In Sonnar (Nig) Ltd v Partenreedri MS Norwind,19 Oputa JSC20 opined that as a matter of public policy the Nigerian Courts “should not be too eager to divest themselves of jurisdiction conferred on them by the Constitution and by other laws simply because parties in their private contracts chose a foreign forum […] Courts guard rather jealously their jurisdiction and even where there is an ouster clause of that jurisdiction by Statute it should be by clear and unequivocal words. If that is so, as is indeed it is, how much less can A.B.U. v VTLS (2020) LPELR-52142 (CA) 15-18. For earlier cases on the subject see Ventujol v Compagnie Française De L’Afrique Occidentale (1949) 19 NLR 32; Allied Trading Company Ltd v China Ocean Shipping Line (1980) (1) ALR Comm 146. 18 See generally Abacha v Fawehinmi (2000) 6 NWLR (Pt. 660) 228. 19 (1987) 4 NWLR 520. 20 JSC means “Justice of the Supreme Court.” The Supreme Court is the final appellate court in Nigeria. 17

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Enforcement of Foreign Jurisdiction Clauses in Nigeria parties by their private acts remove the jurisdiction properly and legally vested in our Courts? Our courts should be in charge of their own proceedings. When it is said that parties make their own contracts and that the courts will only give effect to their intention as expressed in and by the contract, that should generally be understood to mean and imply a contract, which does not rob the Court of its jurisdiction in favour of another foreign forum”.21 Recently, Nweze JSC interpreted the concept of an ouster clause to the effect “that our courts will only interrogate contracts which are designed to rob Nigerian courts of their jurisdiction in favour of foreign fora or where, by their acts, they are minded to remove the jurisdiction, properly and legally, vested in Nigerian courts”.22 A jurisdiction agreement has both negative and positive aspects. It imposes a positive obligation to sue in the chosen forum and a negative obligation not to sue anywhere else. The classification of a foreign choice of court agreement as an ouster clause fundamentally fails to appreciate the distinction between the existence of jurisdiction and the exercise of jurisdiction – a point which Affen JCA explicitly claimed to appreciate in his judgment.23 A Nigerian court may have jurisdiction as prescribed by the Constitution or enabling statute, but a foreign choice of court agreement gives the court jurisdiction to decide whether or not to stay proceedings in favour of a foreign forum. The fact that such proceedings are stayed and not dismissed means that a Nigerian court’s jurisdiction is not ousted. This is a point Affen JCA concedes in the latter part of his judgment in TOF (supra), which contradicts the ouster clause principle he applied in the case under consideration. Affen JCA cited the Supreme Court Justice, Oputa JSC as a basis for his ouster clause approach. However, the position taken by Oputa JSC, and Nweze JSC at the Nigerian Supreme Court are obiter dicta as they do not constitute the ratio decidendi of the Supreme Court. In other words, it is not the position of the Nigerian Supreme Court that foreign choice of court agreements are ouster clauses. It should be stressed that Oputa JSC’s obiter dictum is not binding on lower courts according to the Nigerian common law doctrine of stare decisis. In addition, Oputa JSC’s obiter dictum was in a concurring opinion. Indeed, the Supreme Court in Sonnar had unanimously given preference to the enforcement of a foreign jurisdiction clause except where a strong cause is advanced to the contrary.24 The majority

21 (1987) 4 NWLR 520, 544-5. See also LAC v AAN Ltd (2006) 2 NWLR 49, 81 (Ogunbiyi JCA as she then was). 22 Conoil Plc v Vitol SA (2018) 9 NWLR 463, 489. 23 TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA) 45-46. 24 Even Oputa JSC held thus: “Where a domestic forum is asked to stay proceedings because parties in their contract chose a foreign Court […] it should be very clearly understood by our courts that the power to stay proceedings on that score is not mandatory. Rather it is discretionary, which in the ordinary way, and in the absence of strong reasons to

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Chukwuma Okoli of the Supreme Court did not treat it as an ouster clause. It is incongruous to hold, on the one hand, that the Nigerian court would hold parties to their bargain in enforcing a foreign jurisdiction clause except where strong cause is shown to the contrary, and on the other hand, to treat a foreign jurisdiction clause as if it were an ouster clause. In Sonnar, the choice of court agreement was not enforced because strong cause was shown to the contrary – the proceedings would be time-barred in a foreign forum, and the claimant would not have access to justice. In addition, Tobi JSC – a Nigerian Supreme Court Justice – in analysing the concept of ouster clauses, further (and rightly) held that Section 6 of the 1999 Constitution, which confers jurisdictional competence on various Nigerian courts, should not be interpreted as ousting the jurisdiction of foreign courts in appropriate cases such as the enforcement of jurisdiction clauses.25 It is therefore submitted that the Court of Appeal’s (Affen JCA) decision on ouster clauses in the case under consideration was wrongly decided on the principles. C.

The Bradon Test and Judicial Discretion

Affen JCA, in the latter part of his judgment, held that in Nigeria, where there is enforcement of a foreign jurisdiction clause, there is a tension concerning whether to treat it as an ouster clause or enforce it strictly as a contract. He then held that the better approach is to treat the enforcement of a foreign jurisdiction clause not as an automatic right, but rather as a right over which the Nigerian court retains discretion.26 I am in full agreement with this analysis. Unlike arbitration clauses which are governed by statute in Nigeria (Arbitration and Mediation Act) 2023, foreign jurisdiction clauses are governed by common law. In the former case, there is no discretion; while in the latter, discretion is a requirement.27 Discretion has always been an element of common law enforcement of choice of court agreements. In fact, the enforcement of choice of court agreement is similar to the equitable doctrine of specific performance, where a common law judge retains discretion based on principles, although these notions are not the same [and should not be confused one with the other. That said, this aspect of his principle of discretion contradicts his decision concerning the ouster clause approach. In other words, the discretionary approach, in principle, is not consistent with the ouster clause approach. If a court retains the discretion to enforce a choice of court agreement, it contradicts the idea that a choice of court agreement is an ouster clause.

the contrary, will be exercised both judiciously and judicially bearing in mind each partie’s right to justice” – Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, 545. 25 Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509, 546. 26 TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA) 41-43. 27 Obembe v Wemabod Estates (1977) 5 SC 115, 131 (Fatayi-Willams JSC).

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Enforcement of Foreign Jurisdiction Clauses in Nigeria The fulcrum of the discretionary approach is the Brandon test. The Brandon test is a balanced one. It places the burden on the claimant to demonstrate strong cause as to why the choice of court should not be enforced. This Brandon test was applied in the ratio decidendi of the Nigerian Supreme Court in the enforcement of foreign choice of court agreements.28 The Brandon test is an offshoot of the decision of an English judge named Brandon. Brandon J, in The Eleftheria,29 delivered a brilliant decision on this subject, which provided comprehensive guidelines that the English court should consider in deciding whether to give effect to a foreign jurisdiction clause. Nigerian courts have regularly referred to the Brandon test and used it with approval in decided cases.30 The test is as follows (as it has been referred to and applied) in the Nigerian context: 1. Where claimants sue in Nigeria in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the Nigerian court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has discretion whether to do so or not. 2. The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. 3. The burden of proving such strong cause is on the claimants. 4. In exercising its discretion, the court should take account of all the circumstances of the particular case. 5. In particular, but without prejudice to (4), the following matters where they arise, may be properly regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the Nigerian and foreign courts. (b) Whether the law of the foreign court applies and, if so, whether it differs from Nigerian law in any material respects. (c) With what country either party is connected and how closely. (d) Whether the defendants genuinely desire a trial in the foreign country, or are only seeking procedural advantages. 28 Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509. 29 The Owners of Cargo Lately Laden on Board the Ship or Vessel ‘Elftheria’ v ‘The Elftheria’ (Owners), ‘The Elftheria’ [1969] 1 Lloyd’s Rep. 237. 30 See generally GBN Line v Allied Trading Limited (1985) 2 NWLR (Pt. 5) 74; Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509; Captain Tony Nso v Seacor Marine (Bahamas) Inc (2008) LPELR-8320 (CA); Beaumont Resources Ltd v DWC Drilling Ltd (2017) LPELR42814 (CA).

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Chukwuma Okoli (e) Whether the claimants would be prejudiced by having to sue in the foreign country because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in Nigeria; or (iv) for political, racial, religious, or other reasons be unlikely to get a fair trial; (v) the grant of a stay would amount to permanently denying the claimant any redress. In Nigeria, the only reported cases where the claimants have successfully relied on the Brandon test is where their claim is barred by statute of limitations in the forum chosen by the parties.31 Indeed, the burden is on the claimant to show strong cause as to why Nigerian proceedings should not be stayed in favour of the foreign choice of court agreement; where such strong cause is not shown, Nigerian courts will give effect to the choice of court agreement.32 As previously stated, this is the approach favoured by the Supreme Court in Nigeria in at least two decided cases.33 Affen JCA in this case approved the Brandon test.34 He also observed that in cases where third parties are not privy to the jurisdiction clause (privity of contract), exclusive jurisdiction of a non-chosen forum court, protection of weaker parties, and global lock down will also satisfy the strong cause test.35 The Court of Appeal (Affen JCA) held that strong cause was established in this case. Although Affen JCA was correct in stating that the discretion in applying the strong cause test must be exercised in a principled manner,36 it is submitted that he failed to apply this discretion properly in favour of the claimants. The factors pleaded by the claimants on strong cause was that the dispute had a close connection with Nigeria, some of the parties were resident in Nigeria and had Nigerian citizenship, the evidence was more readily available in Nigeria, and the defendants were seeking procedural advantages. Affen JCA did not consider any of these factors raised by the claimants. These factors, as stated by the claimants, did not constitute strong cause; they were merely procedural advantages. However, the Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Hull Blyth (Nig) Ltd v Jetmove Publishing Ltd (2018) LPELR-44115 (CA); Bupa Insurance Ltd v. Chakraverti & Anor (2021) LPELR-55940(CA). 32 Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509. 33 Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509. 34 TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA) 49-55. 35 Citing Akai PTY Ltd v People’s Insurance Company Ltd [1998] 1 Lloyd’s Rep 90; Continental Bank NA v Aeakoscompania Naviera SA & Ors [1994] 1 WLR 588; RDC Holdings Ltd v Game (International) Australia Ltd (2020) QSC 318; A Yekini “The Practicality of Enforcement of Jurisdiction Agreements in Nigeria” published on 17 December 2020 on www.afronomicslaw.org. Affen JCA’s dictum on the concept of protection of weaker parties (citing Yekini) in the Brandon test is a significant and welcome development because the Court of Appeal in Bupa Insurance Ltd v. Chakraverti & Anor (2021) LPELR-55940(CA) missed the opportunity to pronounce on it in a related case. 36 TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA) 52. 31

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Enforcement of Foreign Jurisdiction Clauses in Nigeria examples given by Affen JCA such as protection of weaker parties, privity of contract, global lock down and exclusive or mandatory jurisdiction of a non-chosen forum satisfy the strong cause test, but they were not present in this case. Moreover, as stated earlier, the claimants did not explicitly raise the point of privity of contract, so it was not material in the case. In summary, then, the Brandon test and the discretionary approach did not support Affen JCA’s refusal to decline jurisdiction in this case. D.

Waiver and Submission

Affen JCA rightly held that there was a difference between existence and exercise of jurisdiction. The right way to challenge the enforcement of a foreign jurisdiction clause is to ask for a stay, which a Nigerian court has the discretion to grant.37 The implication of this is that it is not right for the defendant to say the Nigerian court does not have jurisdiction, because this will deny the existence of the Nigerian court’s jurisdiction under the Nigerian Constitution and Statutes.38 Indeed, a stay means that if the chosen foreign court is or becomes inaccessible, the Nigerian Court can assume jurisdiction. It is also correct to state in Nigerian law that where a defendant files an unconditional statement of defence and argues the merits of the case, such a defendant is deemed to have submitted to the jurisdiction of the Nigerian court.39 This is a widely accepted principle of private international law. However, Affen JCA stretched the law to a wrong conclusion when he held that the defendant having filed a statement of defence, despite the original plea that the Lagos State High Court did not have jurisdiction, meant that the defendant had waived the right to rely on a choice of court clause, or submitted to the jurisdiction of the Court. The rationale for this decision was that the defendant adopted an incorrect approach by stating that the Lagos High Court lacked jurisdiction instead of asking for a stay. This reasoning is fundamentally flawed. Under Nigerian law, an express challenge to the jurisdiction of the Court, including conditional appearance (as in this case), cannot constitute waiver or submission.40 Affen JCA’s approach was unduly technical. The words used by the defendant may not have been precise or appropriate, but that was not a good reason for holding that they had not properly challenged the jurisdiction of the Lagos High Court.

Ibid at 45-49. Cf Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699(CA). 39 Barzasi v Visinoni (1973) NCLR 373, 380. See also Odua Investment Co Ltd v Talabi (1997) 10 NWLR (Pt. 523) 1; Ezomo v Oyakhire (1985) 1 NWLR (Pt. 2) 195; Adegoke Motors Ltd v Adesanya 1989) 3 NWLR (Pt. 107) 250. 40 Holman Bros (Nig) Ltd v Kigo Brothers (Nig) Ltd (1980) 8-11 SC 44. 37 38

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V.

Conclusion

The concept of enforcement of foreign jurisdiction clauses in Nigeria continues to assume critical importance in Nigerian private international law. It is important that Nigerian judges interpret the law correctly to bring certainty and predictability for litigants. Affen JCA in the case under consideration did not apply the concept of a foreign jurisdiction clause, although he appreciated some of its principles. This solution however is difficult to understand and to approve. The main reason for rejecting the solution is the confusion and lack of predictability it brings. From 2020 to date, there have been four Court of Appeal decisions on foreign jurisdiction clauses.41 At least one of these cases is currently on appeal to the Supreme Court,42 and more may come before the Supreme Court. Hopefully, the Supreme Court will improve predictability by referring to its previous decisions in the future. This will allow the Court to clarify the extent to which the Nigerian legal system implements choice of court rules in favour of foreign jurisdictions.

41 Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90; Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699(CA); A.B.U. v VTLS (2020) LPELR-52142 (CA); Bupa Insurance Ltd v. Chakraverti & Anor (2021) LPELR-55940(CA); TOF Energy Co Ltd & Ors v. Worldpay LLC & Anor (2022) LPELR-57462(CA). 42 Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90.

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FORUM ________________

“HOW TO LOCATE A CYBER TORT?” Yves EL HAGE*

I.

II.

III.

The Current Approach of the European Court of Justice A. Locating the Event Giving Rise to the Cyber Tort B. Locating the Damage Caused by the Cyber Tort First Alternative Approach – Locating According to the Parties’ Establishment A. The Publisher’s Country of Establishment B. The Victim’s Country of Establishment Second Alternative Approach – Locating According to the “Most Significant Impact” A. General Overview B. Concrete Implementation

Localisation is the “grammar” of private international law. Digital activities, however, are calling this fundamental process into question. How can a cyber tort be located? If it cannot be located, many rules for determining the applicable law or the competent courts can no longer be applied. At one time, it was feared that the impossibility of locating online activities would lead to the “death” of private international law.1 The adoption of transnational legislation then seemed necessary.2 Nevertheless, such legislation will not be forthcoming for some time to come, as the differences in legislation among countries are still significant, particularly when it comes to violations of privacy or intellectual property rights. The principle of party autonomy3 cannot solve all the problems. It is clear that by allowing the parties to choose the applicable law and the competent courts, it is no longer necessary to apply rules of private international law that require the University Jean Moulin Lyon 3 (Research Center of Private International Law). L. LESSIG, “The Zones of Cyberspace” (1996) 48 (5) Stanford Law Review 1403, 1407: “conflicts of law is dead”. 2 U. KHOL, Jurisdiction and the Internet, A Study of Regulatory Competence over Online Activity (CUP, 2007), 28: “More global law or a less global internet: a simple choice.” 3 CH. KOHLER, “L’autonomie de la volonté en droit international privé: un principe universel entre libéralisme et étatisme” (2013) 359 Collected Courses of The Hague Academy of International Law. * 1

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Yves El Hage tort to be localised. However, an agreement between the parties cannot often be reached, especially in the contentious context of cyber torts. In such a context, the parties may only have conflicting interests and it will be difficult for them to find common ground since the dispute has already arisen. The courts have therefore tried to locate cyber torts, despite the complexity, in order to implement the rules of private international law. This is particularly the case in the European Union, where the European Court of Justice has been trying for nearly twenty years to adapt the Brussels I recast Regulation4 (formerly the Brussels I Regulation) and the Rome II Regulation5 to cyber torts. These regulations give no specific guidance on how to implement their rules on cyber torts. The European Court of Justice, because it decided to maintain the application of the rules of these regulations in the case of cyber torts, has had to construct a set of interpretations, the consistency of many of which are now questionable. Yet the stakes are high. Disputes are frequent and have a considerable impact on the digital economy. In the absence of global legislation, the question of how to locate cyber torts needs a clear answer, as well as efficient to implement the rules of private international law. We will start with the example of the solutions found in European case law, and then examine two types of alternative approaches: first alternative approach, locate the cyber tort on the basis of the parties' domicile or establishment; second alternative approach, locate the cyber tort according to the place where the cyber tort in question has the most significant impact.

I.

The Current Approach of the European Court of Justice

In private international law, torts committed on the internet either in civil or commercial matters can be referred to as “cyber torts.” Examples include online infringements of personality rights and that of intellectual property rights. This localisation is not obvious, given the immateriality and ubiquity of these torts committed online. However, the location of the torts is the criterion used by certain rules of private international law to determine the applicable law (in Europe, see Article 4 (1) of the Rome II Regulation, which takes into account the location of the damage caused by the tort). The location of the tort is also often a criterion for determining the jurisdiction. This is the case provided in Article 7(2) of the Brussels I recast Regulation. Unfortunately, it is rare for these texts to specify how localisation is to be carried out when the tort is committed via internet. One reason for this is the principle of technological neutrality. The rules should be formulated 4 Regulation (EU) n° 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). 5 Regulation (EC) n° 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II).

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“How to Locate a Cyber Tort?” without regard to any particular technology, such that they can continue to be adapted regardless of technological developments.6 The European Court of Justice has attempted to fill this gap, in particular when it applies Article 7(2) of the Brussels I recast Regulation, which makes it possible to determine which court has jurisdiction in matters relating to tort or delict. We will take a closer look at its interpretation of this article in the context of cyber torts. A.

Locating the Event Giving Rise to the Cyber Tort

Under Article 7(2) of the Brussels I recast Regulation, a person domiciled in a Member State of the European Union may be sued in another Member State, “in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.” The place where the harmful event occurred is to be interpreted as the place of the event giving rise to the tort or the place of the damage, where these two places are geographically distinct,7 “since each of them could, depending on the circumstances, be particularly helpful in relation to the evidence and the conduct of the proceedings.”8 Regarding the place of the event giving rise to the tort, the European Court of Justice tends to locate it in the country where the publisher of the disputed digital content is established. For example, in the case of an online press publication that violates a person's privacy, if the person who decided to post the content online is domiciled in Germany, the place of the triggering event would be Germany. This solution has been adopted in the case of online violations of privacy9 and in the case of violations of intellectual property rights.10 This location is fictitious.11 It is not based on a simple, direct and neutral observation of the external facts. It is the result of a choice that artificially makes it possible to retain a certain location, whereas the location of the event that gives rise to a tort committed online is, in reality, much more complex. This complexity leads to a lack of clarity. One could interpret the place of the triggering event differently as referring to the place where the person posted the content online, the place(s) where the content is

On the principle of technological neutrality in private international law, see Y. EL HAGE, Le droit international privé à l’épreuve de l’internet (LGDJ, 2022), 113-119. See also V. GAUTRAIS, Neutralité technologique: rédaction et interprétation des lois face aux technologies (Montréal: Thémis, 2012). 7 Case 21/76 Bier [1976] ECR 1735 [24]. 8 Case C-251/20 Gtflix Tv ECLI:EU:C:2021:1036, [27]. 9 Joined Cases C-509/09 and C-161/10 eDate Advertising and Martinez [2011] ECR I-10302 [52]. 10 See case C-441/13 Hejduk ECLI:EU:C:2015:28, [24-26], for copyright infringement ; Case C-523/10 Wintersteiger ECLI:EU:C:2012:220, [34-38], for trademark infringement. 11 On fictional location in the context of digital activities, see El Hage (n 6), 121 et seq. 6

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Yves El Hage viewed, or even the place where the computer server that stores the content is located. Regarding the latter, the European Court of Justice has clearly refused to locate the triggering event on the basis of the location of the computer servers hosting the disputed content, because of their “uncertain location.”12 Servers are indeed a volatile element. Locating the event giving rise to the tort at the publisher's establishment, rather than where the server is located, can only be explained, indeed, by foreseeability reasons. B.

Locating the Damage Caused by the Cyber Tort

Since, in practice, the country in which the publisher is established often coincides with the country in which the defendant is domiciled, claimants tend to seek the jurisdiction of the court in the place where the damage has occurred. Determining the jurisdiction where the damage has occurred is, however, a much more complicated task. The “one size fits all” approach to locating the event giving rise to any tort is ruled out when it comes to locating the damage caused by a cyber tort. To locate the damage, the European Court of Justice adopts a sectoral approach, i.e. “tort-bytort”.13 It has in fact confirmed on several occasions that the location of the damage “may vary according to the nature of the right allegedly infringed”.14 The method for locating damage adopted for one sector (e.g., infringements of personality rights) does not always apply to others (e.g., infringements of intellectual property rights or acts of unfair competition). Here is what we can learn more precisely from European case law: 1) In case of copyright infringement, the damage is located in each country where the unlawful content is accessible (accessibility criterion), it being specified that the court thus seised can only rule on compensation for local damage (local jurisdiction); 15 2) In case of trademark infringement, the solution seems to be the same, but it is also necessary for the infringed right to be registered in the country where the content is accessible;16

See Wintersteiger (n 10), [36]. T. AZZI, “Compétence juridictionnelle en matière de cyber-délits: le cas des pratiques restrictives de concurrence” Revue critique de droit international privé (2018), 105, 114. 14 See cases Hejduk (n 10), [29]; C-618/15 Concurrence SARL ECLI:EU:C:2016:976, [30]; C-170/12 Pinckney ECLI:EU:C:2013:635, [32]. 15 See Pinckney (n 14) and Hejduk (n 10). 16 See Wintersteiger (n 10). See however T. AZZI, “Compétence juridictionnelle en matière de cyber-délits: l’incontestable déclin du critère de l’accessibilité (à propos de plusieurs arrêts récents)”, Revue critique de droit international privé (2020), 695, n° 12, according to whom, the criterion of the national public targeted may have been established 12 13

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“How to Locate a Cyber Tort?” 3) In case of violation of privacy, the damage is also determined by reference to the criterion of accessibility. Jurisdiction remains local. However, the European Court of Justice also allows the most significant damage to be taken into account, which is where the victim has the “centre of his interests”. The court at the centre of the victim's interests can rule on compensation for all the damage (global jurisdiction).17 It should be noted that the criterion of accessibility, which is widely accepted in this European case law, can lead to an excessive increase in the number of available competent courts, since websites are often accessible in every corner of the world. More particularly, this criterion, as implemented by the European Court of Justice, leads to a “mosaic” of jurisdictions, as each forum whose jurisdiction is based on accessibility only has local jurisdiction. This “mosaic approach”18 has obviously serious practical disadvantages: fragmentation of legal action for claimants and unpredictability of jurisdiction for defendants.19 On the one hand, the claimant must indeed conduct multiple legal proceedings before various national jurisdictions to obtain full compensation. On the other hand, the defendant cannot always predict before which national courts he may be sued, since this is an element that depends solely on the plaintiff's intentions. It is surprising, by the way, that such a strict territorial approach has been adopted in a digital environment which is supposed to be borderless…

II. First Alternative Approach – Locating According to the Parties’ Establishment The interpretation of the European Court of Justice is almost unanimously criticised, especially the mosaic approach used to locate the damage. We have just

in this field following the AMS Neve judgment, but without being certain: case C-172/18, ECLI:EU:C:2019:674. 17 See cases eDate Advertising (n 9); C-194/16 Bollagsupplyningen ECLI:EU:C:2017:766; Gtflix Tv (n 8). 18 It seems that this expression comes from German legal literature (in German, mosaikbetrachtung): A. DICKINSON, The Rome II Regulation: the law applicable to noncontractual obligations (Oxford University Press, 2008) 278, 3.300. This expression can be found in the writings of German scholars, in particular: U. MAGNUS & P. MANKOWSKI (ed.), Rome II Regulation - Commentary préc. (Verlag Dr. Otto Schmidt, 2019) 174. The expression is now commonplace in European legal doctrine. 19 For a critique of this “mosaic approach”, see Y. EL HAGE (n 6), 263 et seq. and T. LUTZI, Private International Law Online – Internet Regulation and Civil Liability in the EU (Oxford University Press, 2020), 104 et seq.

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Yves El Hage pointed out its flaws. But the tort-by-tort approach also deserves criticism.20 It leads indeed to highly specialised solutions, but also to inescapable difficulties in categorising the tort: the Gtflix Tv case provides a perfect illustration21. In this case, the denigrating comments published online could just as easily fall into the category of unfair competition as infringement of the personality rights of a legal person. That’s why it now seems essential to rebuild the system based on a single and simple criterion for locating cyber torts, unless litigants are to be left to suffer from a relatively obscure framework. A first approach would be to locate cyber torts based on the countries in which the parties are established – i.e., where they are domiciled or habitually reside. In other words, we need to “focus on the Parties”.22 We should no longer be attempting to locate the torts committed online, but, rather, the people involved, since they are “outside” the network and have a more certain location. It has therefore been suggested that “the appropriate approach may not consist in searching for the competent court in the ‘high seas’, but rather at ‘the harbours’ of internet communication”.23 However, we shall see that a criterion based on the establishment of one of the parties leads to an unbalanced solution. A.

The Publisher’s Country of Establishment

The first solution is to locate the cyber tort in the country of the content sender or publisher. This solution is somehow similar to the one advocated, with some modifications, in Tobias Lutzi's acclaimed book, Private International Law Online.24 It also echoes the country-of-origin principle often advocated by the European Commission, since it gives jurisdiction to the courts of the country of the person responsible for the content, which can be held as the country of origin of the digital service provided. Locating the cyber tort through the content publisher’s establishment is a simple and predictable solution. It would provide a high level of certainty for any individual or company operating online activities. This localisation method, there20 On the flaws in this tort-by-tort approach, see Y. EL HAGE, M. LEHMANN and E. PREVOST, “Roundtable on the Method of Localisation in Digital Space” (2022), 6 International Business Law Journal, 725, 734-736. 21 Gtflix Tv (n 8). On this case and the difficulties of classification, see Y. EL HAGE, “Compétence en matière de cyberdélits: le méli-mélo de la jurisprudence européenne” (2022), Dalloz, 1082, 1085-1086. 22 T. LUTZI (n 19), 148.

T. LUTZI, “Internet Cases in EU Private International Law – Developing a Coherent Approach” (2017) 66 International and Comparative Law Quarterly, 687, 712. The metaphor comes from Jiménez and Lodder, “Analyzing Approaches to Internet Jurisdiction Based on a Model of Harbors and the High Seas” (2015) 29 Int’l Rev. L. Computers & Tech. 266. 24 T. LUTZI (n 19), 184 and 156-157. The author defends a country-of-origin approach, which gives prominence to the place of the online content provider’s establishment, with a targeting-based exception for structurally weaker parties. 23

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“How to Locate a Cyber Tort?” fore, would best fit the needs of the digital economy. Such an advantage should not be ignored. In our view, however, giving jurisdiction to the courts of the content publisher faces two obstacles. First, it duplicates the jurisdiction of the courts of the defendant’s domicile, already enshrined in Article 4 of the Brussels I recast Regulation and by many other national or international rules across the world. Second, and above all, it would be far too favourable to the publisher of online content. The criterion is too easily manipulated. This criticism applies just as much to the determination of jurisdiction as it does to the determination of applicable law. Establishing offices in a country with less protective regulations would suffice to pollute the network with malicious content, while benefiting from the protection of local jurisdiction and laws. There is also a risk of a race to the bottom among countries to attract companies on their soil.25 B.

The Victim’s Country of Establishment

Another simple solution would be to locate the cyber tort in the country of the victim of the cyber tort. In France, this solution has been admirably advocated, in particular, although with some reservations, by Étienne Farnoux.26 This solution can also be found in the eDate Advertisting case.27 In this case, the European Court of Justice agreed to locate the most significant damage caused by a violation of privacy online in the country where the victim has its centre of interests. According to the Court, when the victim is a natural person, the centre of interests is generally located in the country where s/he resides habitually.28 In addition, the European General Data Protection Regulation confers jurisdiction on the courts of the victim’s place of habitual residence in the event of unlawful processing of personal data.29 The protection of rights of internet victims and weaker parties argues in favour of this location method.30 We are now all aware of the devastating effects that certain publications on the internet can cause, especially when they hurt peoM.-E. ANCEL, “La compétence législative à la croisée de deux logiques”, in Internet et le droit international, (A. PEDONE, 2013), 181, 194 ; Tristan AZZI, “Atteintes aux droits de propriété intellectuelle et conflit de lois” (2008) 33 Propriétés Intellectuelles 324, 334. See however T. LUTZI (n 19), 166-167. 26 E. FARNOUX, Les considérations substantielles dans le règlement de la compétence internationale des juridictions (LGDJ, 2022). 27 eDate Advertisting (n 9). 28 eDate Advertising (n 9) [49]. 29 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation), article 79. 30 On the need to protect weaker parties in the digital context, see I. PRETELLI, “A Humanist Approach to Private International Law and the Internet: A Focus on Platform Users as Weaker Parties” (2020/2021) 22, Yearbook of Private International Law, 201. 25

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Yves El Hage ple's privacy or reputation. Scholars of private international law are now fully alert to this sensitive issue. Giving jurisdiction to the victim’s country of establishment would ensure easy access to justice for all those whose rights have been violated on the Internet. Also, the application of the law of this country, while not always the most protective, would be the one with which the victim is most familiar. This time, however, such a solution is, in our opinion, way too unfavourable to online content publishers and cannot be generalised to all cyber torts, especially beyond online violations of reputation and privacy. It should not be applied, for example, in litigation relating to intellectual property rights or unfair competition, because it would be too unpredictable for all internet broadcasters and publishers. The reason is simple: the publisher of the content cannot always know the identity of the claimant before the dispute arises. In the course of their activities, they do not always know “where” any legal action will come from. It is true that a person acting in bad faith, aware of the reprehensible nature of his actions, knows (in general) the victim of his behaviour, but things are different for a person acting in good faith, who believed his actions to be lawful or who is simply being wrongly attacked. It is nonetheless important for persons engaged in online activities to be able to identify in advance the courts that will have jurisdiction in the event of a dispute. This is the only way for them to anticipate the cost of a potential lawsuit abroad – a cost that could influence their decision-making. Furthermore, a judgment handed down by a court that has accepted jurisdiction solely on the basis of the victim's domicile on its territory could be poorly received abroad. This jurisdiction, based solely on the victim's domicile, could be perceived as a forum actoris and therefore as an “exorbitant forum”,31 which could constitute an obstacle to the enforcement of the decision in certain countries.32 When applied to the determination of the applicable law, this criterion would be unpredictable for anyone conducting a business online. How can one be sure of the applicable law, given the potential multitude of claimants originating from every corner of the globe? It is true that victims’ rights would be more efficiently protected, since the law of the victim’s country is, for him/her, the most convenient one to invoke in front of a court. Nevertheless, the interests of content publishers, also, should not be completely ignored. Moreover, we should not forget that so-called victims are sometimes claimants bringing unfounded or insufficiently well-founded allegations. By the way, claimants are not always the weaker party in a cyber tort litigation context, at least from an economic point of view: by observing the case law in intellectual property infringement or unfair competition matters, it’s easy to notice that claimants are often very large companies trying to block the activities of smaller or start-up companies, or even individual businesses. Given this, should all claimants systematically benefit from the application of the law of their country?

31 D.P. FERNANDEZ ARROYO, “Compétence exclusive et compétence exorbitante dans les relations privées internationales” (2006), 323 Collected Courses of The Hague Academy of International Law 143-144. 32 Y. EL HAGE (n 6), 406 et seq. and 573 et seq.

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“How to Locate a Cyber Tort?” Again, when it comes to determining the applicable law, this criterion can also have more specific harmful consequences in the field of the press.33 Writing about a personality living in an authoritarian country would require compliance with that country's legal framework. Regrettably, numerous nations across the world still fall significantly short of upholding fundamental freedom of speech standards. Therefore, on the basis of public policy exception, jurisdictions would frequently be pushed to set aside the law of the victim’s country in order to protect fundamental rights and freedom of speech, which is not a satisfying method.

III. Second Alternative Approach – Locating According to the “Most Significant Impact” A single criterion for locating cyber tort should take account of all the interests involved: the interests of both parties, claimant and defendant, but also the interests of States and the emerging global community of internet users.34 One way of locating cyber tort, in many cases, would best satisfy all of these interests: locating the cyber tort in the country where it has had its “most significant impact.”35 This is the solution that we suggest.36 This criterion of the most significant impact does not necessarily require the creation of special rules of private international law for cyber tort. Existing general rules, where they are based on the location of the tort, could be implemented by the courts through this criterion. It could be applied to most cyber torts, regardless of the rights violated.37 33 On the law applicable to online privacy violations, see J. CARRASCOSA GONZÁLEZ, “The Internet – Privacy and Rights Relating to Personality” (2016) 378 Collected Courses of The Hague Academy of International Law. See also, Y. EL HAGE, “Les lacunes du droit secondaire : l’exemple des atteintes à la vie privée” in C. NOURISSAT & L. PAILLER (co-ed), Un système de droit international privé de l’Union européenne? (Larcier, 2023), 133; L. PAILLER, “Locating damage in Matters of Invasion of Privacy” (2022), 6 International Business Law Journal, 2022, 657. 34 Y. EL HAGE (n 6), 385 et seq. 35 This solution is similar to the “maximum result rule” from the “Transparency Proposal on Jurisdiction, Choice of Law, Recognition and Enforcement of Foreign Judgments in Intellectual Property”. This proposal was made following work carried out in 2009 at the University of Kyushu. On this proposal, see R. MATULIONYTE, “IP and Applicable Law in Recent International Proposals: Report for the International Law Association” (2012) 3, Journal of Intellectual Property, Information Technology and ECommerce Law, 263. 36 Y. EL HAGE (n 6), 416 et seq. 37 In case of trademark infringement, it is nevertheless necessary to check that the trademark has been registered in the country with the most significant impact. It should be noticed that, regarding multi-territorial infringements, the most recent academic studies and proposals tend to reduce the importance of the territoriality principle in intellectual property matters: see “Intellectual Property : Principles Governing Jurisdiction, Choice of Law, and judgments in Transnational Disputes” (2007) American Law Institute; “Principles for Conflicts of Laws in Intellectual Property” (2011) Max Planck Institute; “Transparency

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Yves El Hage This would make it possible to exclude, as far as possible, any tort-by-tort approach. A.

General Overview

Locating the cyber tort – i.e., both the event giving rise to it and the damage – according to its most significant impact means taking into account only the country most intensely affected by it. The idea is therefore to replace the mosaic approach with a more centralised approach, based on the country with the most significant impact.38 This country can be considered the closest to the situation.39 This proximity40 legitimises the intervention of the local courts and laws, in particular because it is the jurisdiction and the law of the national community most concerned by the potential social or economic repercussions of the tort.41 This localisation is therefore in the interest of States. We must not lose sight of the fact that torts often affect a more general interest than the particular interests of the parties. Unfair competition, for example, while targeting a particular competitor, may affect the proper functioning of the market as a whole and, in particular, the collective interest of consumers.42 Thus, because it is handed down by the judge and the law that seem most legitimate to intervene, the judgment can be better enforced abroad. This localisation is also in both parties’ interest, as it is balanced. It cannot be manipulated by the content publisher to escape the jurisdiction or the law of a territory where its actions have significant consequences. In this sense, it respects the victim’s rights. It is also predictable for the content publisher, who can generally foresee where its online activities will have the most significant impact.43 Lastly, such localisation is in the interest of the global community of internet users, as it does not encourage geo-blocking. The accessibility criterion used by the European Court of Justice, on the other hand, encourages geo-blocking. To avoid the jurisdiction or the laws of certain countries, digital publishers tend to block access to their websites to others. The result is a resurrection of national Proposal on Jurisdiction, Choice of Law, Recognition and Enforcement of Foreign Judgments in Intellectual Property” (2009) Transparency of Japanese Law Project, Kyushu University; “Principles on International Intellectual Property Litigation” (2010) Korean Private International Law Association. On these proposals, see R. MATULIONYTE (n 35). 38 On the different approaches possible in the case of multiple locations of the connecting factor: Y. EL HAGE (n 6), 415-416. 39 Y. EL HAGE (n 6), 431 et seq. 40 P. LAGARDE, “Le principe de proximité dans le droit international privé contemporain” (1986) 196 Collected Courses of The Hague Academy of International Law. 41 See L. USUNIER, La régulation de la compétence juridictionnelle en droit international privé (Economica, 2008), 179, n° 233. 42 M. AUDIT, S. BOLLÉE and P. CALLÉ, Droit du commerce international et des investissements étrangers (LGDJ, 3rd edn, 2019), 305, n° 352. 43 See below.

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“How to Locate a Cyber Tort?” borders online.44 Depending on their location, internet users no longer have access to the same content, which can be seen as contrary to the original, universal spirit of the internet. B.

Concrete Implementation

The question then arises as to how to identify, in concrete terms, the country where the cyber tort has its most significant impact. Many solutions are possible, but the best would be to take account of the place from which users come. The country with the most users in terms of number is the one where the illegal content has circulated most intensively: it is therefore in this country that the cyber tort has its most significant impact. Indeed, the impact of content spread online depends on the number of viewers. The bigger the number of viewers in a country, the bigger the impact in that country for the victim, but also, from a more social or economic perspective, for the local society itself. The largest national audience stands out from the other national audiences. And most of the time, websites have their largest audience in one particular country. This can be explained by the persistent cultural division of the world. People, depending on their national cultural particularities, tend to use websites and internet content that correspond to their particularities. That’s why, by the way, lots of online platforms are available in different national versions adjusted to local preferences. As a consequence, it should be easy to identify the country with the most significant impact. For example, if copyright infringing content is published on a website, and that website has 75% of its audience in Spain, then the cyber tort has its most significant impact in Spain. This cyber tort will be located in Spain and, in this way, the rules of private international law that require the tort to be localised (whether it’s more specifically the triggering event or the damage) will be implemented by courts. However, we still need to be able to measure the national audience of websites. Today, this is entirely possible and particularly reliable when measured on a national scale.45 Well-known tools – free or in exchange for payment – are available, and almost everyone who does business online uses them (the most famous of which is Google Analytics). Today, people can also obtain an estimate of the geographical audience of a site, even if that site is not their own, through certain online platforms.46 Reliable audience figures do exist and, as Dan Jerker B. Svantesson has long advocated,47 it would be relevant to use those figures to apply Y. EL HAGE (n 6), 280. Y. EL HAGE (n 6), 458 et seq. 46 See, for example, the website: www.similarweb.com. 47 D.J.B. SVANTESSON, “Time for the Law to Take Internet Geolocation Technologies Seriously” (2012), 8 Journal of Private International Law, 473; Private international law and the internet (3rd ed., Wolters Kluwer, 2016), 525: “the accuracy is already high enough [...] for the conclusion that is long overdue for courts to take notice of geo-location technologies.” See also P.A. DE MIGUEL ASENSIO, “Internet, jurisdiction” in Encyclopedia of Private International Law, (Edward Elgar Publishing, 2017) 989, 990: “The availability of geolocation technologies may [...] be relevant when applying 44 45

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Yves El Hage private international law. Technologies can sometimes provide solutions to technological issues. The criterion of the country with the most significant impact is sufficiently predictable for online content publishers. They can check the evolution of their geographical audience and adapt their behaviour according to the national audience that is most affected. Even before launching an activity and publishing content online, one can have an idea of the national audience, and most professionals and companies use market analysis to predict the main national audience that will be reached.48 This proposal is also distinguishable from a targeting test sometimes used, for example, in the United States. The purpose of this test is to identify the audience deliberately targeted by the website owner in order to determine the competent court. First, the intention of the sender of the content should be irrelevant; all that matters is the objective impact of the online publication. Second, the proposal is based on a simple element, the geographical audience, and not on a set of indicators. The targeting test requires a combination of several circumstantial indicators (domain name, language of the website, currency of payment, etc.) to be taken into account on a case-by-case basis. The cluster of clues method is too unpredictable and too often produces no results. A website with a “.com” domain name does not point to any particular country, nor does the language of the website, when it is in English, which is largely spoken throughout the world. In reality, the targeting test fails far too often, because the website is not deliberately aimed at any particular national audience.49 In pointing out a particular country, an analysis of a website’s national audience would actually be more effective than the use of a targeting test.50 This solution, certainly, is not perfect and, particularly when there is an equivalent number of users in several countries, it could be difficult to implement.51 Another location method is still to be found in that case. However, in practice, such a situation should not be the most common. In most cases, the location method we suggest will offer satisfying results or, at least, the least bad solution. Internet audience figures could be the way to reconcile, at last, the concept of localisation, in private international law, with the particularities of cyber-torts.

jurisdictional rules to internet activities, in particular when it’s necessary to establish if contents are directed to a territory or produce significant effects within it.” 48 Y. EL HAGE (n 6), 475-477. 49 Y. EL HAGE (n 6), 195 et seq. See also, for a critique of the targeting test, Y. EL HAGE, M. LEHMANN & E. PREVOST (n 20), 728-729. 50 For a comparison between the targeting test and the search for the country with the most significant impact, Y. EL HAGE (n 6), 455-456. 51 On the criticisms that can be made against this proposal and the response to these criticisms: Y. EL HAGE (n 6), 470 et seq.

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