Cross Border Contracts and Dispute Settlement

Cross Border Contracts and Dispute Settlement Professor Dr. Dr. h.c. mult. Helmut Rüßmann Former Judge at the Saarland Court of Appeals Cross Border Contract of Sale Buyer France Claim for Payment Germany Seller Cross Border Contract of Sale Buyer Japan Claim for Payment Germany Seller 1

Origin and Applicability of Norms l International Norms and Provisions w Bilateral and multilateral treaties and conventions w Legislative acts of a supranational lawmaker l National Norms and Provisions w Conflict rules to determine the applicable national law w Conflict rules for substantive law private international law w Conflict rule for procedural law lex fori Central Questions in Cross Border Disputes l Which law applies? l Which court decides? l How can cross border services of documents be effected? l Will a judgement in one country be recognised and enforced in the other country? l Which language is to be used in the court? w In briefs? w In the taking of evidence (documents)? l How can one get access to means of evidence in a foreign country? The Applicable Law l Uniform Law w UN-Convention on the International Sale of Goods (CISG) l Determination of the applicable national law w Conflict of laws (Private international law) w No worldwide uniform law on conflict of laws w Uniform law of the EU (except Denmark) w National law of the forum state l Jurisdiction of the forum state w No worldwide uniform law on jurisdiction w Uniform laws on jurisdiction for EU Member States and other European states w National law of the forum state 2

Uniform Laws l Two possible sources of uniform laws l International treaties w UN-Convention on the International Sale of Goods (CISG) - Vienna Sales Convention w Rome Convention on the applicable law on contracts on obligations Rome Convention l Supranational law in the European Union secondary European law w European Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters w European Regulation (EC) 593/2008 on the applicable law to contractual relations Rules on Jurisdiction in Germany l European Regulation (EC) 44/2001 (March 2002) w Defendant s domicile (Art. 2) w Place of performance (Art. 5 (1) ) w Choice of forum clause (Art. 23) l European Regulation (EU) 1215/2012 (January 2015) w Defendant s domicile (Art. 4) w Place of performance (Art. 7 (1) ) w Choice of forum clause (Art. 25) l Lugano Convention 2007 taking over the European Regulation (in force since 1 January 2011) l National law of civil procedure w Two functions of national rules on jurisdiction ( 13 ff. ZPO) Local jurisdiction International jurisdiction w Content of rules reflects international rules Cross Border Contract of Sale Denmark Buyer Claim for payment Germany Seller 3

German Seller Danish Buyer l International Jurisdiction w EC Regulation Denmark seems to be out. w Brussels Convention 1968 Defendant s domicile Danish courts Place of performance German courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Denmark and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with a change of the place of performance from Germany to Denmark. Article 1 (3) Brussels 1 Regulation l In this Regulation the term Member State shall mean Member States with the exception of Denmark. Article 5 Brussels Convention l A person domiciled in a Member State may, in another Member State, be sued: w 1. in matters relating to a contract, in the courts for the place of performance of the obligation in question;... w 2.... l European Court of Justice w The place of performance is to be determined by the applicable substantive law. 4

BGH Cooperation with the ECJ Second Appeal ECJ OLG LG AG Appeal Request for a Preliminary Ruling a must for the court of last instance a possibility for the instances before Obligations in a Sales Contract Creditor Debtor Delivery Payment Debtor Creditor Buyer Seller Independent and separate determination of the place of performance for the duty to deliver and the duty to pay Article 57 CISG l (1) If the buyer is not bound to pay the price at any other place, he must pay it to the seller: w a) at the seller s place of business l (2)... 5

Article 6 CISG l The parties may exclude the application of this Convention... In this case the applicable national sales law must be determined according to the rules of the applicable international private law of the forum state. Art. 3 (1) Rome Convention l A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract. Article 4 Rome Convention l To the extent that the law applicable to the contract has not been chosen in accordance with article 3, the contract shall be governed by the law of the country with which it is most closely connected.... l Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. 6

Art. 3 (1) Rome I Regulation l A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. Article 4 (1) Rome I Regulation l To the extent that the law applicable to the contract has not been chosen in accordance with article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows: (a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence;... German Civil Code l Article 270 Place of Payment l (1) Unless otherwise provided the debtor must transfer money at his own risk and expense to the creditor at the latter s residence. l (2)... (3) l (4) The provisions on the place of performance remain unaffected. l Article 269 Place of Performance l (1) Where no place of performance has been determined or is evident from the circumstances, in particular from the nature of the obligation, the performance must take place at the place where the debtor had his residence at the time when the obligation came about. 7

German Seller Danish Buyer l International Jurisdiction w EC Regulation Denmark seems to be out. w Brussels Convention No w Bilateral treaty between the EU and Denmark Defendant s domicile Danish courts Place of performance Danish courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Denmark and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with no change of the place of performance relating to jurisdiction. Article 5 Brussels I Regulation l A person domiciled in a Member State may, in another Member State, be sued: l 1. (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;... (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: w in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, w l 2.... Internet Sources of Information l Official Documentation of the EU http://eur-lex.europa.eu/ l Special Documentation of Prof Rauscher http://euzpr.eu/ l International Legal Assistance in Germany http://en.justiz.de/onlinedienste/ internationaler_rechtsverkehr/ 8

Cross Border Contract of Sale France Buyer Claim for payment Germany Seller German Seller French Buyer l International Jurisdiction w EC Regulation Defendant s domicile French courts Place of performance French courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) France and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with no change of the place of performance regarding the international jurisdiction. Article 5 Brussels I Regulation l A person domiciled in a Member State may, in another Member State, be sued: l 1. (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;... (b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be: w in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered, w l 2.... 9

Obligations in a Sales Contract Creditor Debtor Delivery Payment Debtor Creditor Buyer Seller Uniform and common determination of the place of performance for the duty to deliver and the duty to pay Place of Delivery l Actual taking over of the goods by the buyer l Taking over of the goods by a third party at a place where the risk passes to the buyer w Sale by dispatch (Article 31a) CISG, Article 447 German Civil Code) w Incoterms 2010 (in force since 1 January 2011) EXW FOB CF or CIF DAF, DES, DDU or DDP l Request for a preliminary ruling of the ECC by the German Supreme Court (BGH) BGH Cooperation with the ECJ Second Appeal ECJ OLG LG AG Appeal Request for a Preliminary Ruling a must for the court of last instance a possibility for the instances before 10

Judgement of the ECJ l Preferred: Direct determination of the place of delivery in the contract l Default: Actual taking over of the goods by the buyer l Decision 25 February 2010 C-381/08 Wording of the Court The first indent of Article 5(1)(b) of Regulation No 44/2001 must be interpreted as meaning that, in the case of a sale involving carriage of goods, the place where, under the contract, the goods sold were delivered or should have been delivered must be determined on the basis of the provisions of that contract. Where it is impossible to determine the place of delivery on that basis, without reference to the substantive law applicable to the contract, that place is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction. Cross Border Contract of Sale Switzerland Buyer Claim for payment Germany Seller 11

German Seller Swiss Buyer l International Jurisdiction w Lugano Convention 1988 Defendant s domicile Swiss courts Place of performance German courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Switzerland and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with a change of the place of performance from Germany to Switzerland. German Seller Swiss Buyer l International Jurisdiction w Lugano Convention 2007 Defendant s domicile Swiss courts Place of performance Swiss courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Switzerland and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with no change of the place of performance regarding jurisdiction. Cross Border Contract of Sale Buyer Israel Claim for payment Seller Germany 12

The First Glance l ZRHO - Rechtshilfe in Zivilsachen in Deutschland Legal assistance in civil matters in Germany http://en.justiz.de/onlinedienste/ internationaler_rechtsverkehr/ German Seller Israeli Buyer l International Jurisdiction w German Code on Civil Procedure Defendant s domicile Israeli courts Place of performance German courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Israel and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with a change of the place of performance from Germany to Israel. Article 29 Code on Civil Procedure l (1) In matters relating to a contract, including the existence and the validity of the contract, the courts for the place of performance of the obligation in question have jurisdiction to decide on the merits. l 2.... l Prevailing doctrine in Germany w The place of performance is to be determined by the applicable substantive law. 13

Obligations in a Sales Contract Creditor Debtor Delivery Payment Debtor Creditor Buyer Seller Independent and separate determination of the place of performance for the duty to deliver and the duty to pay Article 57 CISG l (1) If the buyer is not bound to pay the price at any other place, he must pay it to the seller: w a) at the seller s place of business l (2)... Article 6 CISG l The parties may exclude the application of this Convention... In this case the applicable national sales law must be determined according to the rules of the applicable international private law of the forum state. 14

Scope of Rome I Regulation l Article 1 Material scope (1) This Regulation shall apply, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters. l Article 2 Universal application Any law specified by this Regulation shall be applied whether or not it is the law of a Member State. Art. 3 (1) Rome I Regulation l A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. Article 4 (1) Rome I Regulation l To the extent that the law applicable to the contract has not been chosen in accordance with article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows: (a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence;... 15

German Civil Code l Article 270 Place of Payment l (1) Unless otherwise provided the debtor must transfer money at his own risk and expense to the creditor at the latter s residence. l (2)... (3) l (4) The provisions on the place of performance remain unaffected. l Article 269 Place of Performance l (1) Where no place of performance has been determined or is evident from the circumstances, in particular from the nature of the obligation, the performance must take place at the place where the debtor had his residence at the time when the obligation came about. Enforcement of the German Judgment l In Germany w No problem Assets of the Israeli defendant in Germany l In Israel w Treaty between Israel and Germany of July 20, 1977 on the Recognition and Enforcement of Judgments in Civil and Commercial Matters Binding and final judgment according to German law Jurisdiction of the German courts according to article 7 of the treaty l Defendant s domicile or place of business l No jurisdiction in the place of performance Cross Border Contract of Sale Buyer Japan Claim for Payment Germany Seller 16

The First Glance l ZRHO - Rechtshilfe in Zivilsachen in Deutschland Legal assistance in civil matters in Germany http://en.justiz.de/onlinedienste/ internationaler_rechtsverkehr/ German Seller Japanese Buyer l International Jurisdiction w German Code on Civil Procedure Defendant s domicile Japanese courts Place of performance German courts Choice of forum clause perhaps German courts l Applicable Law w United Nations Convention on the International Sale of Goods (CISG) Japan and Germany are member states. w Exclusion by the contract would in the absence of a choice of law clause lead to the application of the German civil code (BGB) with a change of the place of performance from Germany to Japan. Article 29 Code on Civil Procedure l (1) In matters relating to a contract, including the existence and the validity of the contract, the courts for the place of performance of the obligation in question have jurisdiction to decide on the merits. l 2.... l Prevailing doctrine in Germany w The place of performance is to be determined by the applicable substantive law. 17

German Civil Code l Article 270 Place of Payment l (1) Unless otherwise provided the debtor must transfer money at his own risk and expense to the creditor at the latter s residence. l (2)... (3) l (4) The provisions on the place of performance remain unaffected. l Article 269 Place of Performance l (1) Where no place of performance has been determined or is evident from the circumstances, in particular from the nature of the obligation, the performance must take place at the place where the debtor had his residence at the time when the obligation came about. Enforcement of the German Judgment l In Germany w No problem Assets of the Japanese defendant in Germany l In Japan w No treaty between Japan and Germany on the recognition and enforcement of judgments w Recognition and enforcement to be decided according to Japanese law w Does Japanese law know and recognise jurisdiction at the place of performance? Would Japan accept the determination of the place of performance by the CISG? Instituting Court Proceedings l Relevance for w Time barring within the statute of limitations w Lis pendens defence l Different regulations and models in different states l Lack of provision in the Brussels and Lugano Conventions l Solution in Regulation (EC) 44/2001 and in Regulation 20

Models of Instituting Proceedings Plaintiff Court Defendant Lis pendens Plaintiff Court Lis pendens Defendant Plaintiff Defendant Court Lis pendens Solution of ECJ for Brussels Convention l Court seised means effectuating lis pendens l Lis pendens to be determined not through autonomous interpretation of the convention, but through national laws of procedure of the member state in which the proceedings are brought l Consequence: No equal treatment of member states Spain ahead of Germany ahead of France Solution of Regulation (EC) 44/2001 l Autonomous Determination of lis pendens in Article 30: A court shall be deemed to be seised: 1. at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant, or 2. if the document has to be served before being lodged with the court, at the time, when it is received by the authority responsible for service, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have the document lodged with the court. 21

Scope of the Model l Direct application only within the regulation l Recommendation to adopt the model into the application of the German law on civil procedure as well w Equal treatment of states w No disadvantage for Plaintiff and Claimant since he is attacking in both proceedings Service of Documents l Purpose w To secure and prove due process and actual notice l Means w Handing over the document to the recipient w Handing over the document to persons closely related to the recipient w Depositing the document and giving notice of the deposition w Handing over to postal services and giving notice to the recipient w Public service l Qualification as an act of state International Judicial Assistance l Service of documents, information about the law, taking of evidence l Task of the executive power (administration), not the judiciary l Requesting state requested state l Channels to be used w Diplomatic channels w Consular channels w Direct communication between appointed (central) agencies w Direct communication between court administrations 22

Service of Documents in Foreign States l ZRHO source of information l Unregulated situation international courtesy l Bilateral treaties l Hague Convention on the service of documents (1965) l Regulation (EC) 1393/2007... on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters w Service by post through registered mail Article 14 EC-Regulation on Service l Designation of transmitting agencies l Designation of receiving agencies l Designation of a central body to help the agencies in case of difficulties l Transmission of documents between the agencies l Translation of documents l Receipt and service by the receiving agency l Service without the agencies Article 15 l Service by post Article 14 Taking of Evidence l ZRHO source of information l Unregulated situation international courtesy l Bilateral treaties l Hague Convention on the taking of evidence w Establishment of central bodies l Council Regulation (EC) 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters w Establishment of central bodies w Direct taking of evidence by the requesting court Article 17 23

Council Regulation on Taking of Evidence l Scope of the Regulation w Taking of evidence by the foreign court w Taking of evidence by the requesting court l Direct transmission between requesting court and requested court Article 2 l Establishment of central bodies Article 3 l Transmission, receipt, language l Taking of evidence by the requested court Article 10 to 16 l Direct taking of evidence by the requesting court Article 17 Recognition and Enforcement l European Regulation (EC) 44/2001 (March 2002) l European Regulation (EU) 1215/2012 (January 2015) l Lugano Convention 2007 (January 2011) l Bilateral treaties (for example Israel) l National law of civil procedure German National Law l Execution in Germany requires a German judgment upon the foreign judgment l Violation of German provisions of jurisdiction l Failure of service l Irreconcilable with a judgement or an action pending in the recognising state which was brought earlier l Irreconcilable with an earlier and binding judgement in another state l Contrary to public policy l Lack of reciprocity 24

Brussels I Regulation 2001 l Declaration of enforceability required l Contrary to public policy l Failure of service l Irreconcilable with a judgement in the recognising state l Irreconcilable with an earlier judgement in a Member State or a non-contracting state l Violation of provisions of jurisdiction giving exclusive jurisdiction or relating to insurance contracts or consumer contracts l Article 38(1) Exequatur Required A judgment given in a Member State and enforceable in that State shall be enforced in another Member State when, on the application of any interested party, it has been declared enforceable there. Brussels I Regulation 2015 l No declaration of enforceability required l Contrary to public policy l Failure of service l Irreconcilable with a judgement in the recognising state l Irreconcilable with an earlier judgement in a Member State or a non-contracting state l Violation of provisions of jurisdiction giving exclusive jurisdiction or relating to insurance contracts or consumer contracts 25

Exequatur Abolished l Article 39 A judgment given in a Member State which is enforceable in that Member State shall be enforceable in the other Member States without any declaration of enforceability being required. Central Questions in Cross Border Disputes l Which court decides? l Which law applies? l How to effect cross border services? l Will a judgement in one country be recognised and enforced in the other country? l Which language is to be used in the court? w In briefs? w In the taking of evidence (documents)? l How can one get access to means of evidence in a foreign country? International Commercial Arbitration l UNCITRAL Model Law on International Arbitration l UNCITRAL Rules on Arbitration l IBA Rules on the Taking of Evidence in International Commercial Arbitration l New York Convention on the Recognition and Enforcement of Arbitral Awards l Proceedings governed and handled by an Arbitration Institution (ICC, DIS, London Court of Arbitration) l Ad hoc proceedings 26

New York Convention l Lack of a valid arbitration agreement l Lack of proper notice of the proceedings l Lack of jurisdiction of the arbitration panel l Lack of proper composition of the arbitration panel l Lack of binding of the arbitral award l Subject matter could not be brought to arbitration in the country where the recognition is sought l Violation of public policy Arbitration l Agreement on arbitration w Arbitration clause w Proceedings to establish an arbitration panel Arbitration institution Ad hoc arbitration l Contract between parties and arbitrators w Constitution of the panel w Rules of procedure, costs and fees l Arbitral award and settlement w Effect w Execution w Control Controversy about Arbitration l Arbitration is power! (Heinrich Kronstein) l Arbitrare necesse est! w Election of competent arbitrators w Less complicated prosecution and execution of rights and claims in international disputes w Avoidance of disclosure of business and/or family secrets before the eyes and ears of a curious public w Timely settlement of the dispute w Less expensive settlement of the dispute 27

ICC Proceedings l Request for Arbitration l Proposal and Nomination of Arbitrators w Declaration of Independence l Place of Arbitration l Language of Arbitration l Terms of Reference l Hearing l Taking of Evidence l Arbitral Award and Settlement Thank you for your attention! 28