A positive approach to Investor-State Dispute Settlement? IP and Climate Change

This blog post is by Dr. Abbe Brown

Introduction

Intellectual Property (“IP”) and climate change laws operate in different legal spaces.

For the former, the World Trade Organization’s TRIPS agreement imposes obligations on states to have IP laws. States pass IP laws which confer private rights, which are enforceable in national court.

For the latter, the UN’s Framework Convention on Climate Change provides that states should reduce emissions. There have been varying attempts to bring this about, notably the Kyoto Protocol of 1997 which imposed targets on states (which were not met) and the Paris Agreement of 2015, when states agreed to targets but it is left to states as to how this may come about. Technology, and transfer of technology, is mentioned repeatedly in all these documents, and there is now the Technology Mechanism.

Yet all this does not really engage directly with (to the extent to trying to solve) the fact that some of the technologies relevant to reducing emissions may be the subject of IP rights. Thus states have two obligations which are potentially inconsistent. Further, private entities have rights in respect of IP, which can enable them to control technologies, and private entities have no obligation to transfer technologies.

I explored some elements of this issue in a previous post on this blog on 2 May 2016. This post will develop this theme through the lens of national court actions, trade agreements and investor-state dispute settlement (“ISDS”).

National action

What if a US company which owns a UK patent for a wind turbine technology (which has proven very effective and is the best means of harnessing the wind, which is the most reliable means of delivering renewable energy), raises an infringement action when a competitor seeks to use this technology without consent? In other work (namely my book from 2012), I have argued that human rights and competition law could be used (in specific limited cases) such that there is no infringement.  A court in the UK jurisdictions might decide to follow this very novel argument, (subject to the slight caveat that both of these depend a great deal on the UK being a member of the EU and a party to the ECHR working alongside the Human Rights Act 1998).

I also argue in my book that if the court does so, this outcome could also be argued to be consistent with the UK’s obligations under the ECHR and TRIPS. Yet the link between the proposed national approach and another international agreement, the proposed Transatlantic Trade and Investment Partnership (“TTIP”), should also be considered.

TTIP

TTIP is a proposed trade agreement between the USA and the EU. Negotiations started in 2013. At the time of writing, its prospects of coming into effect might seem slim. From a US perspective, whilst Obama has been supportive, Trump is not, and Clinton’s enthusiasm is waning. In the EU, the finer points of EU law mean that support of both the EU and also Member States would likely be required for the agreement to come about. The EU Parliament is supportive at present, however France does not support it and Germany is uncertain. A further complexity comes, of course, from the fact that the UK now seems likely not to be part of TTIP, however the points which will be made below are also of potential relevance to the possible new swathe of international trade agreements which the UK might negotiate in the coming years.

So what is the problem with TTIP? Firstly, the secrecy of its negotiations (although Greenpeace and to an extent the EU have leaked some drafts and position papers: see here (PDF), here, and here). Secondly, and of interest to this post, concerns that trade is treated as more important than climate change and the environment (a view that continues after the July 2016 meeting and leaking of climate change (PDF),  sustainable development (PDF) and energy drafts). Thirdly, and a common theme across more recent trade agreements, if there is state interference with a private investment, the investor could complain and raise an ISDS claim that could lead to the state paying money to it.  This is an opportunity for direct private action, rather than the investor needing, for example, to persuade the USA to raise a WTO action.

TTIP and national action

Draft investment dispute proposals put forward by the EU provide that IP is a covered investment. If a state does not treat an investment fairly and equitably, or indirectly expropriates it, then the IP owner (in this example, a US patent owner) could raise an action. Would this innovative national court decision be fair and equitable treatment or indirect expropriation?

An analogy for the impact of a trade agreement on national IP decisions is being explored in a challenge by Eli Lilly to a decision of Canadian courts, in a dispute under the North American Free Trade Agreement. There, the Canadian court took what is said to be a new approach to the meaning of a term in patent law, which led to patents being revoked. Eli Lilly challenged Canada on the basis of expropriation and the lack of a minimum standard of treatment, including fair and equitable treatment (amongst other things). This dispute is ongoing and the interpretation of minimum standard of treatment under NAFTA is already unclear (as illustrated by the Bilcon dispute).

Two key issues are: the basis on which the national decision could be challenged: and also who would hear the challenge. The EU’s proposals (PDF) regarding investment are of interest here.

Firstly, how could a decision be challenged? The proposals provide that the court shall not affect the rights of parties to regulate within their territories through measures necessary to achieve legitimate policy objectives such as protection of the environment (art 2(1)), and that the availability of the process does not involve a commitment that the legal framework will not be changed (art 2(2)).  The parties are (again) to accord fair and equitable treatment to covered investments, and a list is provided as to what this means, which seems to be exhaustive. In particular, there shall not be fair and equitable treatment if a measure:

  • denies justice, is a fundamental breach of due process, is manifestly arbitrary or an abuse of power (art 3(2) (a)—(c), (e));
  • is in breach of a specific representation to induce an investment which was relied on and which created legitimate expectation, (art 3(4)); or
  • is in breach of what the services and investment committee might otherwise agree to be covered (art 3(2)(f), 3(3)).

Further a breach of any other international agreement (say TRIPS or the UNFCCC) does not mean that there is a breach of the provision of fair and equitable treatment (art 3(6)). In addition, parties shall not indirectly expropriate by a process whereby investors are substantially deprived of the fundamental attributes of property, including the right to use and enjoy, with this to be assessed on a case by case basis with regard to economic impact, object and content and duration (article 5 and Annex 1). There is no specific reference to human rights or competition here, although, speaking very broadly, many of the themes explored are similar to those which would be involved in the human rights and competition analysis at national level.

Secondly, process. One base for criticism of ISDS is that these disputes are heard before arbitration panels of trade lawyers and that decisions often conflict. The EU proposal includes a new type of court (section 3 art 1). There are detailed rules of procedure for security for costs, unfounded claims, consideration of ethics and arrangements for appeal and third party intervention and interestingly, qualifications of the judges (although there will still only be experts in international trade and public international law – there are no references to IP, climate change, human rights or competition) (section 3, arts 5, 6, 9, 10, 11, 17, 21, 23). The tribunal would apply TTIP and other rules of international law applicable between the parties (here, this may cover TRIPS and the UNFCCC agreements), as interpreted in line with the Vienna Convention on the Law of Treaties, and is to adopt prevailing approaches on national law (art 13 (1)-(4)). There are also proposals for how to arrange a system of precedent if difficulties arise (art 13(5)).

Criticisms continue. The EU proposal has been termed a zombie ISDS (PDF), whilst being critiqued for the noted narrow breadth of expertise of judges and also for basically trying to improve something which should not exist in any event.  Yet this final argument draws from the premise that national courts should determine national issues, whereas the IP and climate change discussion proceeds from the premise that this cannot work, because of the different allocations of power between states and private entities. Indeed, because of this it could be argued that ISDS – or perhaps a new form of ISDS – might provide an exciting model for a more holistic approach to dispute resolution.

Some rose-tinted foresighting

How could TTIP be further improved – both for itself and for other agreements? Substantively, it could provide that states and also investors must take steps to pursue protection of the environment and action against climate change, and that this is to be of equal (or greater?) importance than trade and economic gain –  or at least, that trade and environment policies should be mutually supportive . It could also provide that states should meet obligations imposed under UNFCCC instruments and that investors must assist them in  doing this – rather than refuse to share their IP.  It could be argued that this is highly unlikely to come about, but then again there has been significant innovation in the EU and US negotiations and also elsewhere, with for example tobacco based activity being excluded from ISDS in the Trans-Pacific Partnership (art 29.5).

From a different perspective, the agreement could provide that it would not be in breach of the minimum treatment and fair and equitable treatment obligation, or indirect expropriation provision, if decisions are made which are consistent with constitutions and with all or certain international obligations of a state. This would mean that decisions which national courts might properly make in a dispute could not be challenged by ISDS. This could support national courts in taking innovative but legitimate approaches to combining different sets of obligations which their country has accepted. Importantly it would also enable public and private perspectives to be considered together.  The approach does involve significant power being held by courts. Yet as long as they are permanent courts, with relevant diversity of expertise, this is perhaps preferable to parallel negotiations leading to results which can be ignored, as set out at the start of this blog post. It is also preferable to a trade panel being able to find that compensation should be paid to an investor for a human rights based decision of a national court. In the times of Brexit, the possibility of more trade agreements, and increasing concerns about climate change, this is, at the very least,  a useful thought experiment.

These thoughts were developed for “Warnings (?) from elsewhere: intellectual property, trade, climate change and the Transatlantic Trade and Investment Partnership” presented at the conference “Intellectual Property and Innovation Law Research Program Symposium: The Trans-Pacific Partnership: Intellectual Property and Trade” at the State Library of Queensland, Brisbane, Australia in June 2016. Many thanks to all involved and to all at Queensland University of Technology Intellectual Property and Innovation Law, in particular Matthew Rimmer, Angela Daly, Nic Suzor and Brooke Lee.

Advertisements

Gotta catch ’em all, but what about the law? Access to land and #PokemonGO

This post is by Malcolm Combe

Amidst all that is going on in the world just now, I bet you a Jigglypuff you will have heard someone talking about Pokémon. You might not exactly know what this is, but you can still be affected, as this church in Glasgow discovered. You might have been bemused by the idea of people wandering around, smartphone in hand, chasing imaginary creatures in the augmented reality world of Pokémon GO. Or you might be an avid fan, so much so that you can identify with those who crowded into New York’s Central Park when a Vaporeon popped up.

This advance into augmented reality is a fun development for many and, it appears, a profitable one for Nintendo. That being the case, as the app has been rolled out across the world (launching in its native Japan today, as reported by BBC News) it has not been without issues. That news report highlights the first Japanese accident associated with the game has already occurred, after someone fell down some real stairs whilst distracted by the game. As it rolls across reality, it is clear there are safety issues involved with immersing yourself in augmented reality: in Scotland it might be mountainous terrain, in Bosnia it might be landmines. Its augmented reality has also rolled over the legal reality of various jurisdictions. The reality of realty, that is to say the reality of property law, allows landowners to take steps to retain and regain exclusive possession of their land in many circumstances. What those steps are will depend which jurisdiction a Pidgey nests in.

Scotland

What can a Scottish landowner do? In principle, the owner of land can get an interdict (a court order prohibiting certain conduct, equivalent to an English injunction) to prevent someone encroaching on her land by, for example, building on it. Similar orders could be obtained if someone was to undermine it or periodically intrude on it by swinging the jib of a crane over it. What about someone who turns up uninvited to your land without such profound plans? All they want to do is catch a Pikachu and move on, (hopefully) leaving the land itself undamaged and any real animals on it undisturbed. Can they do that?

Access to land in Scotland has been much discussed and often misunderstood. A commonly expressed sentiment is that there is no law of trespass in Scotland. That is not quite right, but from the other end of the spectrum a landowner putting up a sign saying ‘TRESPASSERS WILL BE PROSECUTED’ is likely to be sorely disappointed if it comes to an attempt to do so. Such signs might well suggest a desire to instigate criminal action against uninvited guests, but that is normally a matter for a public prosecutor in Scotland, namely the local procurator fiscal, rather than a landowner. Meanwhile, there are some circumstances when being on land can be a criminal offence, particularly if you are part of a disorderly group or if you cause damage to property or wildlife, but a careful Pokémon hunter should be able to avoid such offences. Indeed, a one-time, harmless trespasser might not even be liable for civil damages to a landowner in Scotland, although that should not be taken as an invitation to strut anywhere with impunity. Scotland is also criss-crossed by a number of defined public rights of way, allowing people to travel from one public place to another without fear of landowner challenge.

Private Property
This sign located off the old Deeside Railway promises prosecution for trespass. Good luck with that.

That gives an idea of the underlying Scots law position. That position has actually been liberalised by recent reforms, making the legal terrain even friendlier for access takers. The key legislation that does that is Part 1 of the Land Reform (Scotland) Act 2003. It gives everyone – yes, everyone, that is exactly what the statute says – rights to cross land or to be on land for certain purposes, including recreational purposes, subject to certain exceptions based on the character of the land or the conduct that is undertaken.

Those access rights are not unchecked: they must be exercised responsibly. Activity is not responsible if it interferes with the rights of other people, which includes other access takers as well as the landowner: if one person is lazily approaching a Snorlax, perhaps you should think carefully before you barge past them. There are also certain things that can never be classed as responsible, such as ‘hunting, shooting or fishing’ or taking motorised access (unless doing that in a vehicle which has been constructed or adapted for use by a person who has a disability). Although the term ‘hunting’ is not defined, it is respectfully submitted that hunting relates to real animals as opposed to augmented reality imaginary creatures.

Some land is excluded from the scope of access rights entirely, regardless of the conduct of a purported access taker. Access rights are simply incompatible with certain features on or of excluded land, such as a building, the ‘curtilage’ immediately surrounding a building, or a reasonably sized garden next to a dwelling. From this, we can glean that the interior of the church mentioned above would not be included in Scotland’s liberal access regime. Other exclusions include longstanding attractions where a fee is payable for entry, like Blair Drummond Safari Park, a sports field when it is in use, or farmland where crops are growing. Anyone seeking entry to such should ideally obtain permission: the ‘gotta catch ’em all’ defence will not wash here. In fact, Farmers Weekly has already carried an article warning Pokémon Go players to keep clear of farms.

Assuming the land itself is not excluded from access rights, can playing an augmented reality video game be classed as recreation? Recreation is not defined, but the Scottish Outdoor Access Code‘s (PDF) explanation of the term (at paragraph 2.7) is that it includes:

  • pastimes (such as watching wildlife, sightseeing, painting, photography and enjoying historic sites);
  • family and social activities (such as short walks, dog walking, picnics, playing, sledging, paddling or flying a kite);
  • active pursuits (such as walking, cycling, horse riding, orienteering, caving, air sports and wild camping); and
  • participation in events (such as walking or cycling festivals, hill running races, and orienteering events.

It does not seem a massive stretch to include Pokémon chasing as analogous to some of these activities, most notably orienteering.

England

All in all, it seems Scotland has a regime that is quite conducive to catching ’em all. What would be the position of an English landowner? It would be fair to say that England is not traditionally viewed as having a liberal access regime. Crucially, in England the very act of being on another person’s land without permission can give the relevant landowner a claim in damages, but England has also witnessed some important statutory reforms that widen access rights away from the traditional (delimited) public footpaths and occasional voluntary agreements.

The Countryside and Rights of Way Act 2000 applies to mapped open access land, which includes mountains, moor, heath and down, and registered commons (making a much smaller proportion of the country available for access when contrasted with Scotland, in the region of 865,000 acres). That legislation confers the right to enter and remain on land for the purposes of open-air recreation, but that right is restricted by twenty exceptions listed in a schedule to the statute.  The overall effect of this scheme would allow someone to walk on land, accompanied by a dog (but no other animal) and stop for a picnic, but not use a metal detector, camp or bathe in non-tidal water.  What about gaming? There is an exception relating to ‘organised games’. Previous DEFRA guidance suggested ‘organised games’ included ‘those which use a set pitch or defined area of play, organised starts and finishes and associated infrastructure, and which involves the participation of a number of people or a competitive element.  On the other hand, we do not consider that a family group or a small group of friends engaging in an ad-hoc game of rounders or cricket, playing with a frisbee etc are “organised games”.‘ As such, Pokémon hunting might just be alright in the areas mapped as open land, and perhaps also in coastal areas by virtue of the Marine and Coastal Access Act 2009.

Important as those areas are, what about the substantial area of land not covered by such legislation? In those circumstances, players may have to hope their desired Pokémon appears on an existing village green (which might not actually need to be green at all), or will be relying on a sympathetic landowner to allow access.

Conclusion

Each legal system may have different insights to bring to this new legal situation. Of particular interest to the liberally minded are the Norwegian friluftsliv, which translates as the ‘open air life’, and the Swedish allemansrätten and Finnish jokamiehenoikeus, which translate as ‘every man’s right’. For those in favour of a stricter approach, that mindset seems to be evident in many states in the USA. Wherever you are, there will be some considerations for landowners and access takers to work through: putting up a sign berating all things Pokémon is all well and good, but will it be enforceable?

STAY OUT OF MY YARD
Image credit: @davidharvey

Of course, there are other legal issues that might need to be considered. There might be a new issue for the future: should there be a remedy for a landowner against the person who projects augmented reality apparatus onto her land? This would not quite be analogous with a traditional nuisance by a neighbouring landowner or the situation of a photo or political slogan being projected onto a landmark. Alternatively, might there be some kind of negligence if people are lured to an unsuitable location?

Those challenges are for another day. All in all, it might be an idea to embrace the technology and make the best of it. That is what my own university seems to be doing, after all.

Although the allegedly grown-up Malcolm Combe is a lecturer in the School of Law, he remembers fondly the carefree days when he would come home from school to watch a TV double-header of Pokémon then cult Channel 4 quiz show ‘Countdown’. He also went to see ‘Pokémon: the First Movie’ in the cinema with his wee sister. He is delighted to find his latent knowledge of things like Team Rocket and Charmanders are once again relevant, and even more delighted to have combined that with some legal analysis.

UPDATE: A Drowzee and a Caterpie have been sighted in the Law School office. Staff are understandably concerned.

Brexit and English Jurisdiction Agreements: A Look into the Post-Referendum Legal Landscape

This blog is by Dr. Mukarrum Ahmed from the University of Aberdeen’s Centre for Private International Law

The initial shock at the UK’s referendum vote must be replaced by a reasoned consideration of how best to respond in an uncertain situation. Will it really happen? When will it happen? Will the continuing EU play hardball in negotiations or will it seek to ensure that the UK becomes a good neighbour? What will the post-Brexit UK and EU look like? One decision for those entering into cross border commercial contracts in the post-referendum legal landscape is what to do about an English jurisdiction provision in the contract. The referendum result hasn’t itself changed anything legally, but it may be necessary to invoke these jurisdiction provisions of a contract in two or more years’ time, when the legal framework might be different.

Jurisdictional Principles

The jurisdiction of the English courts and the courts of other EU Member States in civil and commercial matters is currently governed by the Brussels I Regulation (Recast) or the Recast Regulation (EU Regulation 1215/2012). The Regulation provides that a choice of jurisdiction by the parties should be upheld and that judgments given by the courts of one Member State should be enforced in all other Member States. After Brexit, the Recast Regulation will in all probability cease to apply to the UK, which has led some lawyers in continuing EU Member States to promote the idea that commercial litigation that might have traditionally come to the English courts should instead be diverted to the other emerging European centres of international litigation. English lawyers are naturally perturbed by such a prospect. What the post-Brexit jurisdictional and enforcement landscape will look like is uncertain. Lawyers can debate enthusiastically whether judgments given in proceedings commenced before Brexit will continue to be enforceable after Brexit, whether the 1968 Brussels Convention will be restored, whether the pre-Brussels Convention bilateral treaties between the UK and individual Member States will revive, whether the UK has a right to adhere to the Lugano Convention or, if not, whether one or more of the existing Contracting States will block the UK’s doing so. Interesting though those debates will be, they do not reduce the uncertainty and offer scant help to those who must make a decision now.

The Starting Point on Jurisdiction

The first question is what the jurisdiction agreement in any particular contract is trying to achieve. If a fundamental objective of the jurisdiction clause is to provide a judgment that will be enforceable throughout the EU, then the uncertainties of the post-referendum world come into play (as illustrated in this earlier post by Dr. Jon Fitchen). There is a real risk that, with the departure of the Recast Regulation and the uncertainties over Lugano and other issues, an English judgment will not be readily enforceable in the continuing EU and vice versa. Possible responses where enforceability of a judgment in the continuing EU is an important factor are discussed below.

There are, however, many reasons for a choice of jurisdiction save for the enforceability of the resulting judgment within the continuing EU. For example, the party against whom enforcement is likely to be required may not have any accessible assets in the EU. Most obviously, the party might have assets in the UK or otherwise outside the EU, in which case the issues will be the same pre-Brexit as post-Brexit. In some instances, enforceability might not be a major issue. For instance, a party may have sufficient security against which to discharge its counterparty’s obligations within the jurisdiction. Or a party may conclude that it is more likely to be the sued rather than sue the counterparty. Or enforcement risk may simply not be a big factor for the particular counterparty. In these situations, a jurisdiction clause may fulfil a more defensive role of ensuring that the party can only be sued in a court in which it has confidence. If so, again the considerations may not have changed significantly as a result of the referendum vote. Post-Brexit, a jurisdiction clause in favour of the English courts may not require courts in EU Member States to defer to the English courts in quite the same way or for the same reasons as now, but the counter may be that, if so, the English courts will, contrary to the current position, be able to grant anti-suit injunctions to restrain a party from pursuing proceedings in an EU court. A party with any business, presence or assets in the UK cannot afford to ignore an injunction.

EU Enforceability: Solutions

If enforceability of a judgment throughout the continuing EU is important, there are four solutions in circumstances where, pre-referendum, jurisdiction would have been given to the English courts.

First, give jurisdiction to the courts of an EU Member State or a Lugano Convention Contracting State (Norway, Iceland and Switzerland). This depends upon being comfortable with proceedings in that court, including as to its procedures, costs, speed and outcomes. This is already sometimes done in, for example, security agreements where the security in question is located in another EU Member State.

Second, give non-exclusive jurisdiction to the English courts. This cautious approach hedges the parties’ choice of jurisdiction and allows the position to be reconsidered at the time when legal proceedings are commenced. If at that time enforcement remains important and an English judgment is enforceable in the EU, then the English courts can be used; if, however, an English judgment is not enforceable in the EU, it will allow the use of other courts. A variant of non-exclusive jurisdiction clauses is the asymmetric or unilateral jurisdiction agreement, which is commonly used in cross border finance contracts. This binds one party to sue exclusively in the primary non-exclusive forum, but allows the other party to commence proceedings in that court or in any other court of competent jurisdiction. The French Cour de cassation has cast some doubt on the validity of these clauses under Article 23 of the Brussels I Regulation in Mme X v Rothschild (26 September 2012) and Article 23 of the Lugano Convention in ICH v Credit Suisse (25 March 2015). However, the position has been somewhat ameliorated by the most recent Cour de cassation decision in Apple Sales International v eBizcuss (7 October 2015). Moreover, doubt as to a matter of EU law may be less significant if the UK is outside the EU because the English courts have traditionally enforced these clauses. It could, however, affect EU Member States’ courts’ approach to the jurisdiction clause, but that is in any event a matter of some uncertainty until finally resolved by the Court of Justice of the European Union.

Third, arbitration is a possibility. Arbitration is already commonly used if enforcement is important and the counterparty has assets in a location where an English judgment is not enforceable because of the extensive reach of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. All EU Member States are parties to the New York Convention, which provides for the enforcement in participating states of an arbitral award given in another participating state. An arbitration seated in a participating state, whether the UK, a continuing EU Member State or elsewhere, should therefore be able to give an award enforceable throughout the EU.

Fourth, parties could continue with whatever their current policy is. The massive uncertainties surrounding what Brexit will bring could be treated as meaning that the risks of change are as great as the risks of no change.

EU Enforceability: The Hague Convention on Choice of Court Agreements

There is another possible solution to the problem of enforceability of a judgment throughout the EU. This is to give the English courts exclusive jurisdiction. The potential benefits of this route arise because the EU is a party to the Hague Convention on Choice of Court Agreements. In addition to the EU, Mexico and most recently Singapore have signed and ratified the Convention, which is therefore currently of limited significance in global terms. The Convention does, however, provide that all Contracting States must give effect to exclusive jurisdiction agreements (Articles 5 and 6) and enforce the resulting judgment given by the chosen court (Article 8). The UK is not currently an individual Contracting State to the Convention because the Convention’s subject matter falls within the exclusive competence of the EU. There is divided academic opinion on the issue whether the UK is bound by this international treaty post-Brexit without any need for the UK to ratify the treaty afresh as it might be argued that the UK is only bound by the treaty while it is a Member State of the EU. Assuming the UK would not be bound, the UK would still be entitled to sign and ratify the Convention in order to bring it into force immediately on the UK’s leaving the EU or soon afterwards; the consent of the existing parties is not required. If the UK were to do so, a judgment given by an English court that has taken jurisdiction under an exclusive jurisdiction clause will again be enforceable throughout the EU. This position is not, however, without potential transitional wrinkles. Article 16 of the Convention states the Convention applies to exclusive jurisdiction agreements concluded after its entry into force for the state of the chosen court and that the Convention does not apply to proceedings instituted before its entry into force in the state of the court seised. The Convention has, however, already entered into force in the UK because of the EU’s ratification of the Convention.

Suppose that a contract contains an English exclusive jurisdiction clause but that, post-Brexit, a court in an EU Member State is seised of proceedings falling within the scope of that clause. What will the EU Member State’s court do, assuming that the Hague Convention on Choice of Court Agreements is not applicable?

Post-Brexit, so far as the continuing EU is concerned the English courts will (subject to any future contrary arrangements with the EU) be in the same position as any other courts outside the EU. The commercial expectation might be that the courts of EU Member States would give effect to the parties’ wishes, but it is not entirely clear that this will necessarily be the case. Article 33 of the Recast Regulation provides that courts in EU Member States may stay proceedings in favour of courts outside the EU if three conditions are met: first, the non-EU court was first seised; secondly, the non-EU court can give a judgment capable of enforcement in the EU Member State in question; and, thirdly, a stay is necessary for the proper administration of justice. If these three conditions are met, then the court in the EU Member State can stay, and might generally be expected to stay, proceedings in favour of the court outside the EU. But what if any of these conditions is not met (for example, because the court in the EU Member State was seised first)? It is arguable that, despite the fact that the agreement between the parties has been broken by one party starting proceedings in an EU Member State’s courts, the courts of EU Member States cannot stay their proceedings in favour of the non-EU court. Before Article 33 was added to the Recast Regulation, there was no explicit provision addressing the position of non-EU courts. There is evidence of some Member State court’s practice which gives effect to jurisdiction agreements in favour of non-EU courts under the guise of giving ‘reflexive effect’ to the Regulation’s provisions regarding jurisdiction clauses. However, as the Recast Regulation now specifically addresses the position of non-EU courts, the convenient legal fiction of the doctrine of reflexive effect may be harder to justify in principle.

Ultimately, the Court of Justice of the European Union will have to determine the most appropriate approach in these circumstances. Even if the courts of an EU Member State consider that they have no power to stay proceedings in favour of the English courts despite an exclusive jurisdiction clause in favour of the English courts, the English courts may not be without a pragmatic remedy. Under the Recast Regulation, the English courts cannot grant an anti-suit injunction to restrain a party from pursuing proceedings in the courts of another EU Member State bought in breach of the jurisdiction agreement (Case C-159/02 Turner v Grovit [2004] ECR I-03565). However, if the UK is no longer an EU Member State, its mutual trust constraints will no longer apply and the English courts would again be free to grant, and would generally grant, anti-suit injunctions ordering parties to stop legal proceedings brought in breach of contract. Failure to obey an injunction would constitute contempt of court, which could lead to a fine, imprisonment and, ultimately, sequestration of assets. A party with any presence or assets in the UK would have to comply with the injunction or reconcile itself to the loss of those assets. If, contrary to the assumption made above, the Convention was applicable, the courts of an EU Member State that are seised of proceedings in breach of an exclusive jurisdiction agreement should defer to the English courts according to Article 6 of the Convention. Moreover, the Convention’s system of qualified mutual trust may also permit the use of anti-suit injunctions, the damages remedy for breach of exclusive jurisdiction agreements and anti-enforcement injunctions where such relief furthers the objective of the Convention.

 

Article 50, the Articles of Union and using the Royal Prerogative to end the union between Scotland and England

This blog post is by Scott Styles.

The use of the prerogative power to invoke Article 50 of the TEU has been much discussed since the Brexit vote on 23 June 2016 (including this initial post on the matter and a follow-up post). The present author believes that only an Act of Parliament can be used to invoke Article 50 but if I am mistaken then a very interesting route to Scottish independence potentially opens up.

If the UK government were to persist in arguing that the Prerogative can be used to trigger Article 50 and that submission were to be upheld by the courts then that will logically lead to a conclusion that Westminster will not welcome: that the Prerogative can be used to dissolve the Union between Scotland and England.

To understand why we must look at the often overlooked legal mechanics of the union between Scotland and England because there is a strong analogy with the Articles of Union 1706 and the Acts of Union 1707 and the Treaty of Accession to the EC and the European Communities Act

Creating and Dissolving Unions: International Treaties and Acts of Parliament

The terms “Articles or Treaty of Union” on the one hand and “Acts of Union” tend to be used interchangeably by authors discussing the Union of Parliaments, for the understandable reasons that their substantive texts are the same, however legally they are quite different types of document. The Articles of Union signed on 2 July 1706 were an international treaty agreed between the two sovereign kingdoms of England and Scotland with the respective negotiating “teams”  acting under the prerogative. However, this 2 July treaty did not create the Union of Scotland and England  any more than the  accession treaty on 22 January 1972 between UK, Denmark and Ireland with the existing EC members signed by the then Prime Minster, Ted Heath, made the UK a member of the Common Market. The UK only became a member of the EC  after the European Communities Act 1972 had been passed  on 17 October 1972 and came into  effect on 1 January 1973. Likewise, Scotland and England were not conjoined until the passing of both the English and Scots Acts of Union which ratified the Articles of Union of 1706. This distinction between treaty and act is made very clear in the preamble to the 1707 (Scots) statute:

Whereas Articles of Union were agreed on the Twenty Second day of July in the Fifth year of Your Majesties reign by the Commissioners nominated on behalf of the Kingdom of England under Your Majesties Great Seal of England bearing date at Westminster the Tenth day of April then last past in pursuance of an Act of Parliament made in England in the Third year of Your Majesties reign and the Commissioners nominated on the behalf of the Kingdom of Scotland under Your Majesties Great Seal of Scotland bearing date the Twenty Seventh day of February in the Fourth year of Your Majesties Reign in pursuance of the Fourth Act of the Third Session of the present Parliament of Scotland to treat of and concerning an Union of the said Kingdoms

And Whereas an Act hath passed in the Parliament of Scotland at Edinburgh the Sixteenth day of January in the Fifth year of Your Majesties reign wherein ’tis mentioned that the Estates of Parliament considering the said Articles of Union of the two Kingdoms had agreed to and approved of the said Articles of Union with some Additions and Explanations And that Your Majesty with Advice and Consent of the Estates of Parliament for establishing the Protestant Religion and Presbyterian Church Government within the Kingdom of Scotland had passed in the same Session of Parliament an Act intituled Act for securing of the Protestant Religion and Presbyterian Church Government which by the Tenor thereof was appointed to be inserted in any Act ratifying the Treaty and expressly declared to be a fundamental and essential Condition of the said Treaty or Union in all times coming the Tenor of which Articles as ratified and approved of with Additions and Explanations by the said Act of Parliament of Scotland follows

If it is correct that the mere use of the Royal Prerogative is sufficient legal authority to trigger Article 50 of the TEU and so revoke and repeal the European Communities Act 1972 then it would seem to follow by analogy that the Royal Prerogative could be used to in the context of Scotland leaving the UK, because  it is submitted that if the Prerogative can be used to invoke Article 50 which is not an international treaty but part of the domestic law and so effectively repeal the European Communities act 1972 the same process could be used by the Scots government to revoke the Scots Act of Union of 1707.

This could be by the Scottish Government using the Prerogative power to revoke the international treaty (the Articles of Union) and thence by implied repeal revoke the Act of Union. This in turn naturally raises the question of whether the Scottish First Minister could use the Prerogative in this way.

In principle I do not see why this would not be possible.

First, the pre-1707 Scots monarch enjoyed the Prerogative and the Articles of Union were made under the prerogative.

Second, the post-devolution Scots monarch is bound by the advice she receives from the Scottish Government.

If the Scottish Parliament, after a referendum vote for independence, passed an Act instructing the First Minister to revoke the Articles of Union or if the First Minister were simply to use her right to advise the crown, the sovereign would be obliged to comply. Once the Articles are revoked, so too would the Act of Union be revoked. Thus Scotland could leave the Union without the permission of the Westminster Parliament and Westminster could not stop it!

Readers of this post will  be wondering how this works in terms of the devolution settlement. Is the constitution not a reserved matter under the Scotland Act 1998? Let us consider the relevant provisions of the 1998 Act, namely section 30 and Schedule 5.

SCHEDULE 5 Reserved matters

Part I General reservations

The Constitution

1 The following aspects of the constitution are reserved matters, that is—

(a) the Crown, including succession to the Crown and a regency,

(b) the Union of the Kingdoms of Scotland and England,

(c) the Parliament of the United Kingdom,

(d) the continued existence of the High Court of Justiciary as a criminal court of first instance and of appeal,

(e) the continued existence of the Court of Session as a civil court of first instance and of appeal.

2(1) Paragraph 1 does not reserve—

(a) Her Majesty’s prerogative and other executive functions,

(b) functions exercisable by any person acting on behalf of the Crown, or

(c) any office in the Scottish Administration.

Note that under paragraph 2(1)(a) the Prerogative is expressly declared not to be reserved. Therefore there seems nothing in law to prevent the Scottish Government exercising their Prerogative powers to revoke the Articles of Union and hence the Act of Union!

Perhaps those arguing in favour of the Prerogative’s role in the UK exiting the EU should think carefully about its potential role in Scotland exiting the UK, as the royal prerogative might be an equally powerful means for the Scots people to leave the UK. This analysis of the Prerogative would allow Scotland to leave the UK without the permission of the British Government and Parliament. A sovereign people would thus achieve their independence by means of the prerogative powers of their sovereign.

Article 50, the Prerogative and the Implied Repeal of Statutes

This blog post is by Scott Styles.

In my previous blog post I argued:

  1. Parliament is sovereign and only an Act of Parliament can repeal an existing Act of Parliament.
  2. The UK entered the European Union by the passing of the European Communities Act 1972.
  3. To trigger an Article 50 of the TEU withdrawal from the European Union is to begin a legal process which automatically ends 2 years later with the withdrawal of the UK from the EU.
  4. If the Article 50 request was made by the Prime Minister acting under the Royal Prerogative to negotiate and withdraw from international treaties this would be ultra vires (that is to say, beyond what is competent) for two reasons. First, it is inappropriate because the TEU is not an international treaty but rather a part of the domestic law of the UK Second, it would mean that the Government was by pure executive fiat de jure and de facto revoking the European Communities Act 1972 without having first obtained the necessary Act of Parliament.

I would now like to advance a further arguments in favour of this argument, based on the abolition of the principle of the implied repeal of statutes

The courts have made it clear in Thoburn v Sunderland City Council [2002] 2 WLR 247 that the old doctrine of “implied repeal” where two Acts of Parliament conflict, as found in Ellen Street Estates v Minister of Health [1934] 1 KB 590, no longer applies. In Thoburn Laws LJ set out a hierarchy of norms and made it clear that constitutional statues, one of which he expressly stated was European Communities Act 1972 was not subject to implied repeal by a subsequent act:

In the present state of its maturity the common law has come to recognise that there exist rights which should properly be classified as constitutional or fundamental […] And from this a further insight follows. We should recognise a hierarchy of Acts of Parliament: as it were “ordinary” statutes and “constitutional” statutes. The two categories must be distinguished on a principled basis. In my opinion a constitutional statute is one which (a) conditions the legal relationship between citizen and State in some general, overarching manner, or (b) enlarges or diminishes the scope of what we would now regard as fundamental constitutional rights. (a) and (b) are of necessity closely related: it is difficult to think of an instance of (a) that is not also an instance of (b).

If a subsequent Act of Parliament cannot repeal the European Communities Act 1972, how can it possibly be argued that the use of the Prerogative, a weaker source of law than an Act, can be used to impliedly revoke an Act of Parliament?

I therefore repeat my simple proposition: only a subsequent express revocation of the European Communities 1972 Act is sufficient legal authority to trigger Article 50.

Brexit and EU private international law: cross-border judgments – unintended consequences

This blog post is by Dr. Jonathan Fitchen.

The UK’s vote for Brexit has thrown up a huge range of complex legal problems concerning the disengagement of the UK from the European Union. One such problem concerns the effect of Brexit on existing private international law, also known as ‘conflict of laws’,  in the UK. These are issues of particular interest and concern to the School of Law, especially those in the University of Aberdeen’s Centre for Private International Law. This interest is not simply an academic one, as our colleagues have at various times directly advised on and participated in the development of the law in this area.

Private international law (PIL) deals with questions that arise when a civil case between private parties also involves a foreign element. PIL provides the answers to basic legal questions arising from the foreign element including:

Can I bring my case before my local court (or not)?

If I can do so, what law should be applied to the dispute by that court?

If I win, can I get my judgment enforced abroad?

Does any earlier or competing foreign litigation affect or stop my case?

The EU has put in place many PIL Regulations to replace the different complex national answers to these basic questions with harmonised answers (in different Regulations) applying across all (or very nearly all) EU Member States. These PIL Regulations simplify the otherwise very complex interactions of different systems of PIL (each with different approaches to, and answers for, the questions noted above) and also simplify many of the complex legal issues arising in PIL that affect the lives of ordinary private individuals and businesses in Scotland, England and Wales and Northern Ireland.

Given our present dependency in the UK on EU PIL Regulations, the effect of a ‘clean-break’ Brexit on PIL in England and Wales, in Scotland and in Northern Ireland will be profound: the EU PIL Regulations that provide many aspects of what we in the UK presently understood to be ‘our’ private international law will cease to apply unless positive legislative action is taken by the Scottish Government (PIL is a devolved matter) and by the Westminster Government to off-set this eventuality post Brexit. This might sound technical (it is) and abstract (it isn’t) but the basic point as it concerns the cross-border enforcement of ‘UK’ judgments in the rest of the EU can be simply illustrated with a before and after example.

Example

FACTS – An English company sells goods to a German company. The contract calls for the German company to collect the goods from the factory in England with payment due within one week of collection: though this arrangement has worked well in the past, this time the English company is not paid by the due date. The English company goes to the English court and wins a judgment that obliges the German company to pay it the money due and also its costs. The problem is that the goods and the German company are both in Germany.

NOW – The English Company can quickly and cheaply automatically enforce the English judgment against the German company using the EU’s Brussels Ia Regulation (Regulation 1215/2012): there is no need to go to court in Germany to ask permission to enforce because the EU Regulation means that the incoming UK judgment has to be treated as if it is an enforceable German one. The EU’s Brussels Ia Regulation has streamlined the enforcement process by presuming that the foreign (English) judgment is valid (etc.) and by reducing to an absolute minimum any possibility of the German company challenging the enforcement of the UK judgment in Germany.

AFTER BREXIT – The EU’s Brussels Ia Regulation will no longer technically apply to the English claim, nor to the overseas enforcement of the English Judgment as far as the other 27 EU Member States are concerned. If nothing has been done by the Scottish and Westminster Governments to avoid this prior to Brexit, it will be necessary for the English company to hire German lawyers to ask the German court to decide that the English judgment is capable of being recognised as a foreign judgment by the non-Brussels Ia PIL rules of the German legal system and then, assuming that the English judgment is so recognised, that it is then capable of actual enforcement in Germany. No part of this procedure will be automatic and neither will there be any presumptions that the English judgment is valid. It may well be possible that the enforcement of the English judgment will be obstructed by the un-harmonised German PIL enforcement law. Though post Brexit the precise outcome and legal costs of this example will vary from one EU State to another it is plain that enforcing such a judgment from the UK without the possibility of having recourse to the benefits offered by the EU’s PIL Regulations will take longer and cost more than it does at present.

So what is to be done?  

There is no simple solution to the basic problem that many important areas of ‘our’ PIL in the UK are currently contained in EU Regulations that will, unless action is taken by the Scottish and Westminster Governments, seemingly cease to apply immediately the UK leaves the EU. The seriousness of the issue extends much further than the business dispute in the example above as different EU PIL Regulations presently govern matters as diverse as:

  • cross-border family law (including parental responsibility for children and the payment of maintenance);
  • cross-border civil claims and commercial claims;
  • cross-border insolvencies;
  • what law will be applicable to cross-border disputes over contracts or over tort / delict claims.

If these numerous EU Regulations are allowed to cease to apply at the end of the day before Brexit, we will find ourselves thrown back on domestic civil procedure rules that assume that the EU PIL Regulations still apply when in fact they do not do so: if the legislators do not act to prevent it, the delays, costs and legal problems associated with this uncomfortable reality will become plain whenever a UK judgment concerning a matter formerly governed by an EU PIL Regulation is presented for enforcement elsewhere in the EU.

Some glimmers of hope?

It may be that the legislators in the UK will consult on this matter and then act to minimise the PIL risks of Brexit for their citizens. The Brexit negotiations could – if the matter is placed high enough up on the agendas of each side and is pursued with sufficient determination by the UK – lead to the UK being able to retain the benefits of some of the existing EU PIL Regulations on some sort of a reciprocal basis by also allowing those in the 27 State version of the EU the possibility of using their EU PIL ‘rights’ within the post-Brexit UK.

The UK will replace some EU PIL with PIL derived from Hague PIL Conventions that the UK is already a party to and these Conventions will apply between the UK and the EU (apart from Denmark, in some cases). These Conventions cover child abduction, inter-country adoption, parental responsibility, access, maintenance for children and spouses and exclusive choice of court agreements in commercial cases. There is also the longer term possibility that the ongoing work on the planned global Hague Judgments Convention will succeed (it has already had its first Special Commission in June 2016) and deal with the problem of getting UK judgments recognised in EU States and indeed elsewhere in the world.

What next?

The Scottish Government, the Westminster Government and the representatives in Northern Ireland need to appreciate the nature of the looming private international law problems and to formulate effective strategies to protect their citizens and businesses from the impending uncertainty. The University of Aberdeen’s Centre for Private International Law is looking forward to contributing to that task.

Addendum

The Centre for Private International Law has just published a working paper entitled “Respecting Reverse Subsidiarity is an excellent strategy for the European Union at The Hague Conference on Private International Law: currently being well deployed in the Judgments Project“, by Professor Paul Beaumont. It also considers some implications of Brexit. The final version of that paper will be published in a Polish review: Europejski Przegląd Sądowy, 2016, issue 10 (which translates as “European Judicial Review”).