YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF
PRIVATE INTERNATIONAL LAW
VOLUME III – 2001

EDITORS

PETAR ŠARČEVIĆ PAUL VOLKEN

Professor at the Professor at the
University of Rijeka University of Fribourg

PUBLISHED IN ASSOCIATION WITH

SWISS INSTITUTE OF COMPARATIVE LAW
LAUSANNE, SWITZERLAND

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 ADVISORY BOARD

JÜRGEN BASEDOW RUI MANUEL GENS DE

Hamburg MOURA RAMOS
GENEVIÈVE BASTID-BURDEAU Luxembourg/Coimbra
Paris/The Hague YASUHIRO OKUDA
LAWRENCE COLLINS Sapporo
London GONZALO E.
HUANG JIN PARRA-ARANGUREN
Wuhan The Hague/Caracas
HANS VAN LOON SYMEON C. SYMEONIDES
The Hague Salem (Oregon)
FERENC MÁDL PIERRE WIDMER
Budapest Lausanne

ASSISTANT EDITOR AND

ADRESSEE FOR MANUSCRIPTS AND CORRESPONDENCE

ANDREA BONOMI
Swiss Institute of Comparative Law
Dorigny, CH – 1015 Lausanne

ENGLISH REVISION

SUSAN ŠARČEVIĆ
Faculty of Law, Rijeka
 TABLE OF CONTENTS
________________

Foreword ............................................................................................................ ix

Abbreviations..................................................................................................... xi

Doctrine
Harry DUINTJER TEBBENS
Judicial Interpretation of the 1988 Lugano Convention on
Jurisdiction and Judgments in the Light of its Brussels Matrix:
the Convergence Confirmed .......................................................................... 1
David GODDARD
Rethinking the Hague Judgments Convention:
A Pacific Perspective ..................................................................................... 27
Christoph BERNASCONI
Indirectly Held Securities: A New Venture for the
Hague Conference on Private International Law ........................................... 63
Bertrand ANCEL
The Brussels I Regulation: Comment ............................................................ 101

Private International Law Issues in World War II Era Litigation

Yasuhiro OKUDA
The Law Applicable to Governmental Liability for Injuries to
Foreign Individuals during World War II: Questions of Private
International Law in the Ongoing Legal Proceedings before
Japanese Courts ............................................................................................. 115
Kent ANDERSON
Issues of Private International Law and Civil Procedure Arising
out of the U.S. Civil Suits for Forced Labor during World War II:
To What Extent Do U.S. Conflict and Procedural Rules Obstruct
Private Liability for Wartime Human Rights Violations?.............................. 137
Jan VON HEIN
The Law Applicable to Governmental Liability for Violations of
Human Rights in World War II: Questions of Private
International Law from a German Perspective............................................... 185
National Reports
Gerhard HOHLOCH & Cecilie KJELLAND
The New German Conflicts Rules for Registered Partnerships ..................... 223

News from The Hague

J.H.A. VAN LOON
The Hague Conference on Private International Law –
Work in Progress (2000-2001)....................................................................... 237

Forum
Frank GERHARD
The Extraterritorial Judicial Penalty – New Instrument for the
Transnational Enforcement of Extraterritorial Injunctions?........................... 245

Texts, Materials and Recent Developments

Council Regulation (EC) No. 44/2001 of 22 December 2000 on
Jurisdiction and the Recognition and Enforcement of
Judgments in Civil and Commercial Matters (‘Brussels I’) ........................... 301
Council Regulation (EC) No. 1206/2001 of 28 May 2001 on
Cooperation between the Courts of the Member States in the
Taking of Evidence in Civil or Commercial Matters ..................................... 333
CHINESE SOCIETY OF PRIVATE INTERNATIONAL LAW:
Model Law of Private International Law of the People’s
Republic of China (Sixth Draft, 2000)........................................................... 349
James A.R. NAFZIGER
Oregon’s Conflicts Law Applicable to Contracts .......................................... 391

Book Review
Mario GIOVANOLI (ed.), International Monetary Law, Issues for
the New Millennium (Petar ŠARČEVIĆ) .......................................................... 419

Books Received .................................................................................................. 427

Index ................................................................................................................... 431

viii
 FOREWORD
________________

Our main goal, as stated in the first volume, is to make the Yearbook an
international podium for the intellectual exchange of scientific and practical ideas
between specialists of private international law. The intention is to include
contributions by scholars from all parts of the world. As readers will witness in this
volume, the Yearbook is becoming more international; however, contributions
from Africa are still missing. Hopefully this continent will also be represented in
the near future. Again we encourage contributions on new developments in private
international law in countries and regions around the globe. Discussions of
important court decisions are particularly welcome.
As earlier, we closely follow developments at the Hague Conference on
Private International Law. Regarded as a European institution not long ago, the
Hague Conference has grown into a worldwide organization with 55 Member
States and several applicant countries. Although its membership has greatly
expanded, this does not mean that conventions are automatically accepted and
ratified on a global scale. The fate of the future Judgments Convention shows that
conflicting interests on crucial issues often stand in the way of progress. Despite
the present deadlock, the mere fact that a forum has been convened to study the
problems and is attempting to reconcile differences, especially those between
common law and civil law countries, is of major importance. Bilateral dialogues,
such as those between EU and US experts, will certainly play a role in resolving
the issues at stake. Whether this will be achieved now or in the near future does not
diminish the value of such efforts.
For the first time, the same topic – forced labor during World War II – is
discussed by scholars from three different continents. As the reports show, there
has been much activity in this area on the judicial front in Germany, Japan and the
US. The disputes have also raised a number of difficult private international law
issues. In light of the pending cases and new decisions, such as that of 19 October
2001 by of the California Superior Court in Orange County, it appears that, after
more than 50 years, the courts will continue to be confronted with such issues.
National and state legislators continue to be active as well. The draft Model
Law of Private International Law of the People's Republic of China and Oregon’s
Conflicts Law Applicable to Contracts are published in the present volume.
Reports on new developments in other jurisdictions will be included in future
volumes. As regards the situation in Europe, concurrence between EU and national
legislation is still unresolved in the field of private international law. One of the
best examples is the new EC directive on jurisdiction and enforcement in family
matters, on the one hand, and the new German conflicts rules for registered
partnerships, on the other. We remain committed to informing readers, promptly
and accurately, about new developments that are shaping the future of private
international law. This, of course, is the purpose of the Yearbook.

Petar ŠARČEVIĆ Paul VOLKEN

 ABBREVIATIONS
________________

Am. J. Comp. L. American Journal of Comparative Law

Am. J. Int. L. American Journal of International Law
Clunet Journal de droit international
I.C.L.Q. International and Comparative Law Quarterly
I.L.M. International Legal Materials
id. idem
IPRax Praxis des internationalen Privat- und
Verfahrensrechts
OJ Official Journal
PIL Private International Law
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
Rev. crit. dr. int. pr. Revue critique de droit international privé
REDI Revista española de derecho internacional
Riv. dir. int. priv. proc. Rivista di diritto internazionale privato e processuale
Riv. dir. int. Rivista di diritto internazionale
RIW Recht internationaler Wirtschaft
RSDIE Revue suisse de droit international et européen =
Schweizerische Zeitschrift für internationales und
europäisches Recht
 DOCTRINE
________________

JUDICIAL INTERPRETATION OF THE

1988 LUGANO CONVENTION ON JURISDICTION
AND JUDGMENTS IN THE LIGHT OF ITS
BRUSSELS MATRIX:
THE CONVERGENCE CONFIRMED *

Harry DUINTJER TEBBENS**

I. Introduction
A. Interpretation of the Brussels Convention
B. Interpretation of the Lugano Convention
C. Outline of Article
II. Interpretation of the Lugano Convention: The Legal Framework
A. Protocol 2 on Uniform Interpretation
B. Reciprocal Declarations of EU and EFTA States
III. Practise of Lugano Convention Interpretation
A. Courts of European Union States
1. Tendency Towards Assimilation
2. The Peculiar Problem of lis pendens (I)
B. Courts of EFTA Member States
1. General Features of Case-Law
2. Supreme Court Cases Dealing Extensively with the Parallel
Brussels/Lugano Interpretation
a) Scope of Convention: Notion of ‘Civil and Commercial
Matters’
b) Scope of Convention: Bankruptcy Exception
c) Notion of ‘Maintenance Obligation’
d) Conditions for Recognition and Enforcement

*
This paper is the revised and updated text of a contribution made to a seminar in
Brussels on 8-9 November 1999 on recent developments and perspectives of private
international law and judicial cooperation in Community law, organised by the Academy of
European Law, Trier, for the Legal Service of the European Parliament.
**
The author is Head of Division, Legal Service, European Parliament, previously
Head of Unit, Research and Documentation Service, European Court of Justice, and is
Member of the Netherlands Standing Government Committee on Private International Law.
The views expressed in this paper are purely personal and do not necessarily reflect the
official position of the European Parliament.

Yearbook of Private International Law, Volume 3 (2001), pp. 1-25

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Harry Duintjer Tebbens

3. Significant Examples of Parallel Interpretation

a) The ‘Obligation in Question’ under Article 5(1)
b) Validity of Choice of Court Clause
c) The Problem of lis pendens (II)
4. Possible Incongruous Results
a) Commercial or Bankruptcy Action
b) Place of Pure Economic Loss
c) Notion of ‘Consumer Contract’
IV. The Court of Justice and the Lugano Convention
A. Multistate Employment Contracts
B. Discrimination in Civil Procedure
V. Concluding Remarks

I. Introduction
A. Interpretation of the Brussels Convention

Compared to other international conventions, a well-known distinctive feature of

the Brussels Convention on jurisdiction and the enforcement of judgments is that
its application is subject to the harmonising, if not unifying interpretation of the
European Court of Justice (ECJ). Pursuant to the Interpretation Protocol of 3 June
1971,1 at the request of national courts, the ECJ has given over one hundred
preliminary rulings concerning the interpretation of the Brussels Convention.
In its very first ruling on the Convention, the Court was cautious in its
approach to the question whether to interpret the terms of the Convention by
reference to national law (presumably the law of the court seized or the law
applicable to the substance of the case), or by an independent concept to be drawn
from the scheme and purpose of the Convention itself. It stated in Tessili2 that the
choice had to be made for each provision or term separately, having regard to the
need to give the optimal effet utile to the Convention.
In its later case-law it becomes clear that, but for a few notable exceptions,
the independent or ‘autonomous’ interpretation prevails. This is particularly clear
in the 1993 judgment in Mulox,3 where the Court held that only that interpretation
could ensure the uniform application of the Convention in all Member States, thus
offering the necessary legal certainty to litigants.
Having built up consistent case-law on numerous specific questions, the
Court decided in 2001 for the first time to give a simplified ruling under its Rules

1
Official Journal of the European Communities (OJEC) 1975, L 204, p. 28.
2
Tessili v. Dunlop [1976] ECR 1473, point 11.
3
Mulox IBC v. Geels [1993] ECR I-4075, points 10-11.

2 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

of Procedure concerning the interpretation of the exclusive head of jurisdiction for

rights in rem in immovable property.4 One might say that the national courts now
have, as it were, a common annotated version of the Brussels Convention as their
companion for its application.

B. Interpretation of the Lugano Convention

The situation is different regarding the 1988 Lugano Convention,5 which in

substance reproduces the scheme for jurisdiction and enforcement of judgments of
the Brussels Convention for a wider range of countries, in particular the EFTA
States.
No common interpretation mechanism comparable to the one attached to the
Brussels Convention exists for the Lugano Convention. During the negotiations,
neither the European Community Member States nor those of EFTA wanted to
confer jurisdiction to interpret this Convention to the European Court of Justice,
though for different reasons. The option to set up a distinct judicial body and
entrust it with this task was equally rejected.6
Finally, the solution adopted was to add a number of protocols and
declarations to the Convention with the purpose of reducing to the greatest extent
possible the risk that the Lugano Convention would be interpreted and applied
differently than the Brussels Convention.7

C. Outline of Article

This paper first examines these ‘second-best tools’ for interpreting the Lugano
Convention (II), before sketching in a bird-eye’s view the initial response of courts
to this challenge (III), in European Union States (A) and, in greater detail, in some
other Contracting States as far as their supreme courts are concerned (B). Attention
is then given to the European Court’s perception of the Lugano Convention (IV).
Finally, some conclusions are drawn about the practice of the Convention’s
interpretation (V).

4
Order of 5 April 2001, Case C-518/99 Gaillard v. Chekili, nyr, made under
Art. 104(3) Rules of Procedure.
5
OJEC 1988, L 319, p. 9.
6
See DUINTJER TEBBENS H., ‘Die einheitliche Auslegung des Lugano-
Übereinkommens’, in: REICHELT G. (ed.), Europäisches Kollisionsrecht - Die Konventionen
von Brüssel, Lugano und Rom, Frankfurt am Main etc. 1993, pp. 49-64, at pp. 49-50.
7
See the Jenard/Möller Report on the Lugano Convention, OJEC 1990, C 189,
p. 57, paras 111-119.

Yearbook of Private International Law, Volume 3 (2001) 3

 Harry Duintjer Tebbens

II. Interpretation of the Lugano Convention:

The Legal Framework
Set up by its drafters as a parallel instrument to the Brussels Convention, the
Lugano Convention follows the scheme and drafting of that Convention as closely
as possible, as well as its judicial interpretation by the European Court of Justice.8
Upon conclusion of the Lugano Convention, a number of differences remained;
however, several of them disappeared when the Brussels Convention itself was
modified in 1989 for the accession of Spain and Portugal.9

A. Protocol 2 on Uniform Interpretation

The very preamble of the Lugano Convention bears witness to this close
relationship by ‘taking into account the Brussels Convention’ and extending its
principles to the Lugano Contracting States. Moreover, Protocol 2 on the uniform
interpretation of the Convention is attached to the Lugano Convention and deemed
an integral part thereof by virtue of Article 65 of the Convention. The Protocol’s
preamble recalls the substantial link between both Conventions, in particular the
fact that the negotiations leading to the conclusion of the Lugano Convention were
based on the Brussels Convention, as interpreted by the European Court up to that
conclusion (on 16 September 1988).
Protocol 2 also states two aspects of the objective to achieve a uniform
interpretation: (i) as regards the Lugano Convention in and for itself, as well as (ii)
in relation to the corresponding provisions of the Brussels Convention (preamble,
last paragraph).

i) As to the internal uniformity of the Lugano Convention, Protocol 2

obliges in its Article 1 the courts of all Convention States ‘to pay due
8
See the Jenard/Möller Report (note 7), para. and the summary of ECJ case-law,
ibid., paras. 130 et seq.; STONE P.A., ‘The Lugano Convention on Civil Jurisdiction and
Judgments’, in: Yearbook of European Law 1988, p. 105 et seq.; TRUNK A., Die Erwei-
terung des EuGVÜ-Systems am Vorabend des Europäischen Binnenmarktes, Munich 1991,
p. 91 et seq.; MÖLLER G., ‘The Outlook for the System for the Free Movement of Judgments
created by the Brussels Convention’, in: Civil Jurisdiction and Judgments in Europe
(colloquium at the ECJ, March 1991), London etc. 1992, p. 215 et seq., pp. 217-220;
DUINTJER TEBBENS H., ‘The European Jurisdiction and Enforcement Conventions: interpre-
tation, concurrence and prospects’ in: Netherlands International Law Review 1993, p. 471 et
seq., 474-477.
9
See SCHMIDT-PARZEFALL T., Die Auslegung des Parallelübereinkommens von
Lugano, Tübingen 1995, p. 21; DROZ G., ‘La Convention de San Sebastian alignant la
Convention de Bruxelles sur la Convention de Lugano’, in: Rev. crit. dr. int. pr., 1990, p. 1
et seq.

4 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

account to the principles laid down by any relevant decision’ delivered

by courts of the other States parties to it. In order for the courts to be
able to discharge this duty the Protocol makes provision for an exchange
of information concerning the relevant case-law (Article 2).

ii) The external uniformity is also addressed in Article 2, but only

indirectly, by the range of judicial decisions to which the exchange of
information applies. Indeed, not only are the most important cases
concerning the Lugano Convention itself to be included in this
exchange, but also the rulings given by the European Court on the
interpretation of the Brussels Convention and the most important cases
decided by national courts involving the latter Convention.

A detailed examination of how this exchange of information is carried out by the

Registrar of the European Court as the central body under Article 2(2) is not
necessary here. It suffices to mention that the relevant data are collected and
selected by the Court’s Research and Documentation Service and sent periodically
in hard copy to the national authorities designated under Article 2. This includes
the original text of judgments without translation but with a short keyword
description in French and English. The coverage started in 1992 when the Lugano
Convention came initially into force between France, the Netherlands and Switzer-
land. As of 1997, the selected decisions are also placed on the Court’s website.10 In
addition, the documentation covering the first five years has been reproduced in
publications by the Swiss Institute for Comparative Law.11 This should enhance
their availability, especially for those for whom the exchange of information has
been primarily set up, viz. the judges of national courts who are obliged to take
proper notice of relevant decisions of their brethren under Article 1 of the Protocol.

B. Reciprocal Declarations of EU and EFTA States

Attached to the Final Act of the Diplomatic Conference adopting the Lugano
Convention are two Declarations that further provide body to the uniform
interpretation mechanism.
According to the Declaration of the Member States of the European
Communities, they consider as ‘appropriate’ that, when interpreting the Brussels

10
http://www.curia.eu.int, under ‘Research and Documentation’.
11
Under the slightly unbalanced title (leaving out any reference to the Brussels
Convention) of Collection of jurisprudence of the European Court of Justice and of the
highest courts of the States Parties concerning the Lugano Convention, Vols. I-V (Years
1992-1996), Zurich 1996-2000.

Yearbook of Private International Law, Volume 3 (2001) 5

 Harry Duintjer Tebbens

Convention, the European Court of Justice pay due account to the rulings
contained in the case-law of the Lugano Convention.12
In the Declaration given by the EFTA Member States, the latter invite their
courts to pay due account to the case-law of the European Court, as well as that of
the national courts of EC Member States, when interpreting provisions of the
Brussels Convention reproduced in the Lugano Convention.13
It should be noted that these Declarations are not strictly reciprocal: When
applying the Lugano Convention, the national courts of the European Union States
are not required to take into account the European Court’s rulings on the inter-
pretation of the Brussels Convention.14 This is probably because a statement to that
effect was considered superfluous since the Court’s rulings in preliminary re-
ference proceedings – in this area as in Community law proper – have a persuasive
authority in the legal order of the Member States, which is also reflected in the
interpretation of the Lugano Convention in those States.
After this summary presentation of the legal framework for the inter-
pretation of the Lugano Convention, we turn to an assessment of the relevant
judicial practice, particularly in relation to the body of existing case-law on the
Brussels Convention.

III. Practise of Lugano Convention Interpretation

Since the Lugano Convention entered into force for an initial group of three States
on 1 January 1992, a substantial number of cases applying the Convention has been
decided. A database kept at the European Court’s Research and Documentation
Service, containing reported as well as some unreported cases, listed some 350 in
2001.15
Our main interest is directed to those decisions of superior or supreme
courts that specifically and at some length deal with the parallelism between the
two Conventions and its effect on interpretation.
Although attention will be focused particularly on judgments of EFTA
States within this category of cases, it appears useful to first summarise briefly the
experiences of national courts of the European Union Member States with the
phenomenon of parallelism.
12
OJEC 1988, L 319, p. 37.
13
OJEC 1988, L 319, p. 40.
14
See MINOR J., ‘The Lugano Convention, some problems of interpretation’, in:
Common Market Law Review 1990, p. 507 et seq, at p. 512.
15
Despite the fact that Protocol 2 provides that the national authorities shall transmit
the relevant judgments to the central body, most cases are in fact taken from legal journals
and law reports.

6 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

A. Courts of European Union States

1. Tendency towards Assimilation

The case-law on the Lugano Convention in these States gives the general
impression that it is handled as if it were the Brussels Convention. Often the courts
briefly mention the fact that both Conventions are almost identical, or that the
particular article in issue is entirely identical in either text.16 They then proceed to
‘dress up’ their judgment in the way characteristic of their jurisdiction, referring to
the case-law of the Court of Justice, to domestic cases or legal writings concerning
the Brussels Convention or the Lugano Convention, as the case may be.
Thus the impression is one of clear convergence, even going towards
complete assimilation of both Conventions. There is, however, a built-in limit for
national courts that may or must refer to the Court of Justice for a preliminary
ruling when the interpretation of the Brussels Convention is at stake: They cannot
take that course if the issue to be clarified arises under the Lugano Convention,
even if the wording of the article(s) involved is completely identical.17
The tendency towards assimilation sometimes goes too far, for instance, in
cases that are decided under the Lugano Convention, but upon closer scrutiny of
the factual circumstances, it becomes clear that the Brussels Convention should
have been applied. Errors of this kind have occurred especially in EU Member
States where both Conventions entered into force on the same day.18 Surely, such
formal confusion of both instruments does little harm if the relevant rules are
strictly identical.

2. The Peculiar Problem of lis pendens (I)

The picture given above is of course a simplification, which does not apply to
some of the more complex cases. In one case, for example, the result reached by
the court was largely due to a marked difference between the two Conventions,
relating precisely to their interpretation. This case, Polly Peck International plc v.

16
For a recent example, see the House of Lords, judgment of 17 February 2000,
Agnew ao v. Lansförsäkringsbølagens, [2000] 1 All England Law Reports 737, [2000] 2
Weekly Law Reports 497.
17
This impossibility appears to be confirmed by the ECJ ruling in: Kleinwort Benson
v. City of Glasgow District Council, C-346/93 [1995] ECR I-615, concerning an
interregional jurisdiction conflict within the United Kingdom.
18
E.g., Portugal. Cf. the judgment of the Coimbra Appeal Court of 14 December
1993, in: Colectânea de Jurisprudência XVIII (1993), t. V., p. 51, purporting to apply the
Lugano Convention to a German judgment.

Yearbook of Private International Law, Volume 3 (2001) 7

 Harry Duintjer Tebbens

Citibank NA,19 decided by the English High Court, concerned a dispute between an
English company, on the one hand, and United States and Swiss companies, on the
other. The American and Swiss defendants argued that the Swiss courts had been
first seized with a claim involving the same parties and the same cause of action.
They invited the English court to decline jurisdiction in favour of the Swiss courts
under Article 21 of the Lugano Convention. However, the English plaintiff
contended that the English, not the Swiss court had been seized first. Thus the
court had to answer the question on which date the Swiss courts had been seized of
the action.
The court noted that the rule on lis pendens was identical in the Brussels
and Lugano Conventions and that the English court would be bound by rulings of
the European Court concerning the lis pendens rule in the Brussels Convention,
whereas the Swiss courts were merely required, under Protocol 2 of the Lugano
Convention, to pay due account to such rulings. Now, the European Court has
ruled in Zelger v. Salinitri (II)20 that the court first seized is the one where the
requirements for proceedings to become definitively pending are first fulfilled, and
that such requirements must be determined in accordance with the national law of
each of the courts concerned. Therefore, the English court might well have felt
obliged, in the case before it, to ascertain when those requirements had been met
under the relevant laws of Switzerland, in order to determine which court had been
first seized.
However, ‘after some hesitation’ the court came to the conclusion that it
should not do so. Instead, noting that the purpose of the Lugano Convention was to
avoid conflicts of jurisdiction, it observed that the Swiss court would be bound,
under Article 21, to decide whether it became seized of proceedings on the date
alleged by the American and Swiss companies, but it would not be bound by a
decision of an English court as to that date. The English court went on to say:

‘It follows that the only way in which a possible conflict can be
avoided is for the courts of this country to adjourn the application
until the Swiss courts have finally decided whether the District Court
of Zurich became seized of the proceedings in that jurisdiction on
8 February, and if the Swiss courts decide that the District Court of
Zurich was so seized, to decline jurisdiction. …[T]he courts of this
country should, I think, as a matter of comity, decline to answer a
question of Swiss law if it is one which must necessarily be decided
by the Swiss courts, albeit that under the protocol the Swiss court

19
Judgment of 14 October 1993 of the High Court, Chancery Division, [1994]
International Litigation Procedure 71.
20
Judgment of 7 June 1984, 129/83 [1984] ECR 2397.

8 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

would have to take into account, without being bound by, the
decision of this Court.’21

Besides the ‘comity’ invoked by the English court, it probably also had in mind an
element of practicality or convenience which would militate against it attempting
itself to come up with the correct answer under Swiss law, i.e., the English
procedural tradition of hearing expert evidence by both parties concerning the
content of foreign law.
As a matter of fact, the question turned out to be extremely delicate,
requiring an in-depth analysis of Swiss federal law relating to international civil
procedure,22 as well as a particular pre-contentious conciliation procedure in the
cantonal law of procedure in Zurich. This question, which divided not only the
parties to the dispute in Switzerland, but also academic writers in that country,23
kept the Swiss courts occupied up to the last instance.
The final answer of the Swiss Federal Supreme Court came four years later24
and was to the effect that the Swiss court had been seized after the English court.
As a result, after having suspended proceedings all that time, the English court
found itself in the odd situation of learning that it had been under no duty to
suspend pursuant to Article 21 after all.

B. Courts of EFTA Member States

1. General Features of Case-Law

Judicial practice in the Lugano States Parties outside the Brussels Convention
Membership is in keeping grosso modo with the interpretation of the latter
Convention, as was mentioned above in connection with the judicial practice in
countries where both the Brussels and the Lugano Convention are in force.25 This
can be concluded by examining the relevant decisions in the former countries,26

21
International Litigation Procedure [1994] at p. 80 (para. 29).
22
Federal Private International Statute of 18 December 1987, English translation in:
International Legal Materials 1990, p. 1244, Article 9 (cited in full in the English
judgment).
23
See infra at III.B.3 c) for the final Swiss judgment in this litigation, citing all
relevant literature.
24
Judgment of 26 September 1997, infra III.B.3 c).
25
See, e.g., JAYME E./KOHLER Ch., ‘Europäisches Kollisionsrecht 1989 – Die
Abendstunde der Staatsverträge’, in: IPRax 1999, p. 401 et seq, at p. 410; ID., ‘Europäisches
Kollisionsrecht 2000 – Interlokales Privatrecht oder universelles Gemeinschaftsrecht?’, in:
IPRax 2000, p. 454 et seq., at p. 463.
26
I.e., Austria, Sweden, Finland (before their transition to the Brussels Convention
at the end 1998/beginning 1999), Norway and Switzerland. No Icelandic decision appears as

Yearbook of Private International Law, Volume 3 (2001) 9

 Harry Duintjer Tebbens

included in the exchange of information set up under Protocol 2. The period

covered for the purpose of the present paper is 1992-2000.
Although the scope of this paper does not permit us to mention a large
number of cases, some supportive case-law materials can be found in the research
done under the auspices of the Standing Committee of the Lugano Convention, set
up under Article 3 of Protocol 2. In order to better fulfil its mission to examine the
functioning of the Convention and the development of the case-law reported under
the exchange of information system (Article 4(1) of the Protocol), in 1998 the
Standing Committee decided to have a study conducted of the case-law materials
distributed through the system from 1992 through 1998. A large majority of cases
examined in the Report on this case-law concerns decisions given by courts in
EFTA States and thus its conclusions would appear to be relevant in the present
context. Focusing on the interpretation of the thorny Article 5(1) concerning an
optional forum for contractual disputes, one of the conclusions of the Report stated
‘that the case-law on the Lugano Convention is developing in a similar manner to
that relating to the Brussels Convention, whilst sometimes allowing greater
clarification and a more in-depth research into the subject’.27
The last point brings out, rightly in our opinion, that it might very well
occur that a national court could be confronted with a situation governed by the
Lugano Convention but for which the corresponding case-law of the Court of
Justice under the Brussels Convention offers only scant guidance.28 This would
give the national courts an opportunity to further develop solutions that could be
valid for both Conventions, on the basis of the initial Brussels Convention
precedents. These conclusions are confirmed in a second report covering decisions
distributed by the central body in 1999.29

2. Supreme Court Cases Dealing Extensively with the Parallel

Brussels/Lugano Interpretation

Turning to Supreme Court decisions that give principled and extensive attention to
the interpretation of the Lugano Convention, we find that almost all of them were

yet to have been reported on the Lugano Convention. Poland acceded to the Convention
only as of 1 February 2000.
27
Report on the national case-law relating to the Lugano Convention drawn up in
performance of the task entrusted to the Spanish, Greek and Swiss delegations at the
5th session of the Lugano Convention’s Standing Committee (Interlaken, 18.9.1998)’, in:
IPRax 2001, p. 262 et seq., at p. 268.
28
An example is Agnew ao v. Lansförsäkringsbølagens (note 16) concerning the
duty of good faith as ‘obligation in question’ for the purpose of the contract forum in
Art. 5(1). See also the Swiss judgment discussed infra, III.B.4 c).
29
Second Report on National Case-law on the Lugano Convention, by H. Bull, G.
Musger and F. Pocar, part V (to be published in: IPRax).

10 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

handed down by the Swiss and Austrian highest courts in 1997 or 1998. Their
counterparts in the Nordic countries have surely dealt with this matter too;
however, in line with the more concise style of judgments prevailing in those
countries, rather than setting out the guiding principles or dogmatic underpinings
of the parallel interpretation, they simply apply it.30
Not purporting to give an exhaustive review of all such cases, this chapter
selects some illustrative ones. In the following presentation, the cases are grouped
by topic.

a) Scope of Convention: Notion of ‘Civil and Commercial Matters’

aa) In a case before the Swiss courts involving Swiss and Italian parties and the
State of Paraguay, the jurisdiction of the court depended on whether or not the
dispute had to be classified as a ‘civil and commercial matter’ under Article 1(1) of
the Lugano Convention.
In its judgment of 20 August 1998,31 the Swiss Federal Supreme Court held
that the ‘context’ of the interpretation of the Lugano Convention within Article
31(2)(a) of the Vienna Convention on the Law of Treaties was formed in particular
by the Contracting Parties, acknowledging the fact that the convention was
substantially linked to the Brussels Convention. In this connection, it referred to
the various passages in Protocol 2 and other texts (set out above, II) and to one of
its earlier decisions on the Lugano Convention in the Polly Peck case.32 The Court
then spelled out the preliminary rulings delivered by the ECJ (up to September
1988) on the concept of ‘civil and commercial matters’ and that Court’s insistence
on an independent construction of the concept.
It continued by saying that ‘there is no reason whatsoever not to follow this
line of interpretation for the purpose of applying the Lugano Convention’,33
recalling also that the main advantage of any ‘autonomous’ treaty interpretation
lies in it avoiding legal uncertainty. It was true that, by virtue of its basis in
Community law, the Brussels Convention has a fonctionnalisme communautaire to
it and that it could happen that the concurrent application, for example, of the
prohibition of discrimination on the ground of nationality in EC law, would
influence the interpretation of the Brussels Convention, preventing that
30
E.g., Swedish Supreme Court 23 February 1994, Nordic Water Products /
S. Håkanson, English translation in [1995] International Litigation Procedure 766, on the
scope of exclusive jurisdiction for patent claims, simply citing the relevant ruling of the
ECJ.
31
Banque Bruxelles Lambert (Suisse) a.o. / République du Paraguay et Sezione
speciale per l’assicurazione del credito all’esportazione, BGE (Federal Court Reports)
124 III 382.
32
Infra, III. B.3. c).
33
At BGE 124 III 395, letter e).

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 Harry Duintjer Tebbens

interpretation from being adopted by non-EC States. But, the Court added that such
situations would be rare and that it was proper to consider the territories of all the
Lugano Contracting States as a common judicial area that required the greatest
uniform application possible.
Thereupon the Swiss Court applied the criteria laid down by the ECJ for the
notion of civil and commercial matters.

bb) In an almost simultaneous judgment another chamber of the same Swiss Court
tackled the same issue in a dispute on export credit insurance. This judgment of 19
August 1998 34 equally adopts the approach that the Lugano Convention is to be
considered as international uniform law, requiring an autonomous interpretation,
which should be parallel to the Brussels Convention interpretation. The Court
concluded from Protocol 2 that case-law of the ECJ on that convention and
preceding the conclusion of the Lugano Convention was binding authority (‘als
verbindliche Entscheidungsgrundlage zu berücksichtigen’) for the interpretation of
the Lugano Convention, but that subsequent case-law of the ECJ according to the
EFTA Declaration (supra, II.B.) had (only) to be duly taken into account.
In fact, the court relied on such a subsequent ECJ ruling for its
interpretation of the notion of ‘civil and commercial matters’ in Sonntag v.
Waidmann.35 This ruling adopted a very broad interpretation by using a narrow
concept of a public authority’s exercise of its public prerogatives.
Remarkably enough, this Swiss judgment does not contain a reservation
concerning the possibility of the interpretation of the ECJ being too
communautaire, as distinct from the judgment mentioned under (i). The salient
point about this is that the Sonntag ruling it relied upon did in fact contain
reasoning influenced by Community law, in particular concerning the status of
teachers in a public or private school.36

b) Scope of Convention: Bankruptcy Exception

Another Swiss Supreme Court judgment of 23 December 199837 confirmed its

position favouring a uniform interpretation of the two Conventions. The case
concerned a claim for payment of commission arising out of a contract preceding
the opening of insolvency proceedings concerning the debtor.

34
Dresdner Forfaitierungs AG / Sezione Speciale per l’Assicurazione del Credito
all’Esportazione (SACE), BGE 124 III 436.
35
Judgment of 21 April 1993, C-172/91 [1993] ECR I-1963.
36
See para. 24 of Sonntag (previous note), citing the judgment of 3 July 1986, 66/85
[1986] ECR 2120, Lawrie-Blum/Land Baden-Württemberg, points 26-28.
37
Sorelec SA / Saleh Radwan, BGE 125 III 108.

12 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

Although the Court did mention that taking over the ECJ’s interpretation of
the bankruptcy exception could result in an undesirable influence of Community
law, it flatly dismissed this possibility without further explanation in the present
case.
The only ECJ case involving the meaning of the phrase on bankruptcy and
analogous proceedings in Article 1, paragraph 2(2) of the Brussels Convention,
Gourdain v. Nadler,38 had not resorted to any consideration of Community law
proper and, moreover, had not covered exactly the same issue as was before the
Swiss Court.

c) Notion of ‘Maintenance Obligation’

The Austrian Supreme Court 39 dealt with the issue whether an action by a woman
against her father seeking payment of a dowry (Heiratsgut) could be brought by
invoking the notion of ‘maintenance obligation’ in Article 5(2) of the Lugano
Convention. Citing Protocol 2 and the Declarations referred to earlier, the Court
affirmed – by apparently deducing from Article 1 of Protocol 2 – that courts of the
Lugano Contracting States are obliged to find, on their own motion and take into
account the important decisions handed down in other Contracting States, i.e., only
the decisions reported to the national authorities under the exchange of information
system. It added that the courts would have to discuss the merits of such decisions
– as regards the Convention’s interpretation – if they intended to deviate from their
essential reasoning, but that obiter dicta did not matter in this respect.
Having regard to the EFTA Declaration, the Court noted that ECJ case-law
dating from after the signature of the Lugano Convention merely had to be taken
into consideration, as opposed to pre-1988 case-law that constituted an ‘authentic
interpretation’ of Lugano provisions insofar as they were identical to Brussels
Convention provisions.
Turning to the notion of ‘maintenance obligation’, the Court found that
there were no national decisions or rulings of the ECJ on Article 5(2) of the
Conventions. Thus it took it upon itself to develop an independent interpretation of
that notion. Apparently, the two preliminary rulings given by the ECJ some months
before on that very notion40 had not come to the Court’s attention in time to be
considered in the judgment.
In any event, after carefully analysing the history of Article 5(2) of the
Brussels Convention and insisting that an autonomous notion was preferable over

38
Judgment of 22 February 1979, 133/78 [1979] ECR 733.
39
Judgment of 28 August 1997, Nr. 3 Nd 506/97, in: Zeitschrift für Rechtsver-
gleichung, internationales Privatrecht und Europarecht 1998, p. 39.
40
Judgments of 27 February 1997, C-220/95 [1997] ECR I-1147, Van den Boogaard
v. Laumen, and of 20 March 1997, C-295/95 [1997] ECR I-1683, Farrell v. Long.

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 Harry Duintjer Tebbens

one derived from national law, even if that would cause friction with the systematic
structure of the forum’s national law, the Court arrived at a broad interpretation of
‘maintenance obligation’. Although the Austrian provisions on dowry are found in
the chapter on marriage contracts, it was clear that they did not pertain to matri-
monial property.
This result appears to fully comply with the interpretation given by the
European Court. Moreover, the independent interpretation of the Austrian Court
allowed it to overcome certain dogmatic constraints inherent in its domestic law.

d) Conditions for Recognition and Enforcement

The Austrian Supreme Court’s judgment of 24 June 199841 also reveals that the
Court’s intention was to arrive at parallel interpretations of the Conventions to the
greatest extent possible.
The issue before it was whether the prohibition to review a foreign judg-
ment as to its substance (Articles 29 and 34(3) of the Conventions) extended to
situations where the court in the State addressed was asked to check whether the
person against whom enforcement is sought is the same as the judgment debtor.
The Court developed the same reasoning as in its judgment of 28 August
1997 (cited supra, under c) favouring an international and parallel approach and
stressing the importance of consulting national and ECJ decisions communicated
under Protocol 2. However, as it found none of these decisions helpful in resolving
the issue at stake, the Court held that it could also consider other decisions not (yet)
so communicated, provided that:

1) they arrive at a uniform interpretation of the Convention,

2) they are accessible to the national courts, without particular difficulty,
through sources other than the exchange of information scheme, and
3) there are no convincing substantive grounds not to adopt the essential
reasons of those decisions.

Applying these criteria, the Court then reviewed some German superior court
judgments in which the Brussels Convention was applied and cited German and
Austrian legal writers. Therefore, it appears that the accessibility referred to under
(ii) had a linguistic flavour, thus raising the question whether research of French or
English language sources (let alone other languages of Lugano States) would have
been conducted with the same thoroughness.
Finally, the Court checked that the German case-law and scholarly literature
on this point corresponded to the prevailing view in Austrian law on the
enforcement of judgments. This being so, it affirmed the possibility to verify the
identity of the respondent to the application for an enforcement order.
41
Case Nr. 3 0b 129/98m, in: Juristische Blätter 1998, p. 729.

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 Judicial Interpretation of the 1988 Lugano Convention

3. Significant Examples of Parallel Interpretation

Some of the cases applying the uniform interpretation approach deserve attention
because of the result achieved, more so than because of their treatment of
principles underlying that interpretation. A few of these cases are outlined below.

a) The ‘Obligation in Question’ under Article 5(1)

Ever since the well-known judgment of the ECJ in De Bloos,42 the question of
which obligation should be taken into account for the purpose of identifying the
forum having jurisdiction under Article 5(1) has reappeared in the context of
commercial agency contracts.
The question arose in a dispute before the Swiss Supreme Court between a
Danish principal and his Swiss agent.43 After the principal started to sell his
products through other Swiss merchants as well, the agent maintained that the
contract was a sole distributorship and claimed damages on that basis. The issue at
stake was whether the principal’s obligation to respect the distributorship
agreement was the sole obligation in question or whether the obligation to supply
the agent in Switzerland with products also came into play.
The court deemed itself bound by the pre-1988 case-law of the ECJ,
including the judgment in Shenavai,44 which had refused, in case of a plurality of
obligations forming the basis of the action, to allow a single localisation at the
place of performance of the characteristic obligation (which in the present case
would point to Switzerland where the agent performed his sales activities).
Moreover, the Court took due account of the post-1988 ECJ judgment in Stawa,45
where the European Court had explicitly confirmed its earlier case-law to the effect
that in principle each obligation is to be treated separately for the purpose of
Article 5(1).
However, the Court then cited at some length criticism in scholarly
literature, as well as Advocate General Lenz’s suggestion to change the established
case-law (but rejected by the ECJ). Although it conceded that this criticism
appeared worthy of consideration (beachtlich) in certain circumstances, the Court
noted that it did not feel compelled to interpret the notion of ‘obligation’ in Article
5(1) of the Lugano Convention differently than the European Court. In doing so, it
took into account the Stawa judgment and the need to ensure parallelism between
the Brussels and Lugano Conventions.

42
Judgment of 6 October 1976, 14/76 [1076] ECR 1497, De Bloos v. Bouyer.
43
Judgment of 9 March 1998, A. AG / B., BGE 124 III 188.
44
Judgment of 15 January 1987, 266/85 [1987] ECR 239, Shenavai v. Kreischer.
45
Judgment of 29 June 1994, Custom Made Commercial v. Stawa Metallbau, C-
288/92 [1994] ECR I-2913.

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 Harry Duintjer Tebbens

As for the substance, the Supreme Court maintained that the obligation
linked to the distributorship (not to the ensuing sales contracts) was the only
relevant obligation of the defendant principal and had to be performed at the seat in
Denmark.

b) Validity of Choice of Court Clause

A judgment rendered on 23 February 1998 by the Austrian Supreme Court is a

good illustration of the uniform interpretation approach.46 The case concerned a
transport contract between an Austrian company and a Turkish road carrier for
transport from Berlin to Uzbekistan. The Austrian plaintiff relied on a choice of
court clause for Vienna, thus raising the question whether the validity of the clause
was to be judged by Article 17 of the Lugano Convention or by Austrian national
law.
The Court noted first that the issue raised a disputed question in German
and Austrian legal literature: Does Article 17 (of both Conventions) require that, in
order to be applicable, the case must have a connection with a second Contracting
State, in addition to the forum state, such as, in particular, the fact that one of the
parties is domiciled in another Contracting State or that the choice of court clause
ousts the jurisdiction of a court or courts in such State. However, it added that legal
doctrine was not the only criterion; the principle of international harmony was
inherent in the interpretation of multilateral conventions and against that back-
ground one had to consider Protocol 2 and the relevant Declarations.
The Court recalled its earlier views47 on the duty of courts in Lugano
Contracting States to examine ex officio pertinent decisions from other Contracting
States and to cite objective reasons for not following such decisions.
As to the issue before it, the Court found that the ECJ had not given any
ruling on it, but it cited three national decisions in point, all involving the Brussels
Convention. Only one of them had fully discussed the issue;48 another one had
taken a position implicitly, and the third had done so by way of obiter dictum.
However, all three pointed towards requiring a connection with a second
Contracting State.
This convergence led the Supreme Court to prefer that solution for the sake
of avoiding any possible divergence in the Lugano and Brussels Contracting States,
despite the fact that two of the three precedents had not engaged in a full
discussion of the arguments representing the other approach to the question.

46
3 Ob 380/97x, in: Juristische Blätter 1998, p. 726, and in: Zeitschrift für Rechts-
vergleichung, internationales Privatrecht und Europarecht 1998, p. 159.
47
Supra, III. B. 2 c).
48
Oberlandesgericht Munich, 20 September 1989, in: IPRax 1991, p. 46, and in:
Europäische Zeitschrift für Wirtschaftsrecht 1991, p. 59.

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 Judicial Interpretation of the 1988 Lugano Convention

The striking feature of this judgment is that, instead of making its own
assessment of the best solution having regard for the substance of the issue, it
candidly prefers to follow the concurring available precedents. Hence, it favours
interpretative harmony over individual (procedural) justice. Between the lines of its
judgment, the Austrian Court seems to suggest that the other courts should have
examined the relevant views in scholarly literature in greater detail. This is rather
ironical in view of the fact that it itself did not discuss the merits of those views.
Moreover, the Court favoured the solution of a mere dictum in one of the decisions
in point, yet it had stated before that dicta were not pertinent.

c) The Problem of lis pendens (II)

In the above-mentioned litigation involving Polly Peck,49 the Swiss and English
courts were both seized with proceedings concerning the same dispute. The Swiss
proceedings turned on the question which procedural act was to be regarded as
bringing about the seizing of the Swiss court under Article 21 of the Lugano
Convention. At stake was whether the answer to that question should be derived
from a recently adopted rule of Swiss law or from the ruling of the ECJ in Zelger v.
Salinitri (II).50
The Court noted in its judgment of 26 September 199751 that the Lugano
Convention was intended to create a common uniform area for all litigants in the
EU and EFTA Member States, and that the interpretation of international uniform
law required the courts to be mindful of the fact that such law did not necessarily
conform to the institutions and dogmatic constructions of its domestic legal order.
It referred to the directives for interpretation laid down in Protocol 2 of the
Convention and highlighted the binding character of the pre-1988 case-law of the
ECJ on the Brussels Convention.
Turning to the question of the date of the seizing of a court for the purpose
of Article 21 of the Lugano Convention, the Court discussed extensively the ECJ
judgment in Zelger v. Salinitri (II), the lis pendens rule recently introduced in the
Swiss federal Private International Law Act (Article 9), as well as some national
case-law on Article 21 of the Brussels Convention. It decided not to follow the
opinion of a part of Swiss legal doctrine, according to which the Zelger judgment
is interpreted as implying that the question when a court is ‘definitively’ seized is
to be resolved entirely in accordance with the domestic law of that court. Instead it
held that the ECJ had given a partial autonomous interpretation in that judgment,
requiring a minimal commitment of the plaintiff to proceed with his action. Since
the Swiss federal rule did not require such a commitment in order for the court to

49
Supra, III.A.2.
50
Supra, note 20.
51
BGE 123 III 414.

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 Harry Duintjer Tebbens

be definitively seized, that rule had to be discarded in favour of the interpretation

adopted in the ECJ judgment.
The Court thus came to the conclusion that the later of the two possible
dates of seizing of the Zurich court was decisive for the application of Article 21
and that the English court had been seized earlier.
This judgment shows that the Court was willing to let the international
interpretation of lis pendens prevail over a more restricted harmonisation of
cantonal laws of procedure, which the Swiss federal statute attempted to achieve at
the national level.

4. Possible Incongruous Results

The various rulings presented above bear ample witness that the Swiss and
Austrian Supreme Courts attempted to achieve the greatest possible uniform
interpretation of both Conventions by following the body of rulings of the ECJ and,
lacking such guidance, the prevailing views expressed in national case-law.52
However, this approach does not always lead to the desired result. A few
rulings of national courts of last instance might not entirely correspond to the
ECJ’s actual or presumed position. As was observed,53 such discordance may not
be attributable to the specific nature of the Lugano Convention and could have
arisen in the context of the Brussels Convention as well. It should be added,
however, that in the framework of the Brussels Convention, the preliminary
reference mechanism could have ironed out the differences.
Three such ‘non aligned’ cases may be cited as examples.

a) Commercial or Bankruptcy Action

The Norwegian Supreme Court54 had to rule on the scope of the exception in
Article 1(2) concerning bankruptcy, winding-up of insolvent companies and
analogous proceedings. A Norwegian supplier filed a claim for the remaining debt
arising out of contracts it had performed before the defendant buyer, an Italian

52
On the Swiss jurisprudence, see DONZALLAZ, Y., ‘L’interprétation de la
Convention de Lugano (CL) par le Tribunal fédéral: étude de jurisprudence’, in: Revue de
droit suisse, 1999, I.1, p. 22 et seq., who (with dislike) calls the Swiss Federal Court a model
pupil of the ECJ’s case-law.
53
‘Report on the national case-law relating to the Lugano Convention drawn up in
performance of the task entrusted to the Spanish, Greek and Swiss delegations at the 5th
session of the Lugano Convention’s Standing Committee (Interlaken, 18.9.1998)’, in: IPRax
2001, p. 262 et seq., at p. 268.
54
Judgment of 18 January 1996, Norsk Hydro / Alumix s.p.a., in: Norsk Retstidende
1996, 25, English summary in: [1996] International Litigation Procedure 461.

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 Judicial Interpretation of the 1988 Lugano Convention

state-owned company (and others belonging to the same State enterprise), had been
ordered by a Italian decree to wind-up and not to pay its debts.
The Court simply stated that the relevant provision was identical in both
Conventions and, citing the Jenard Report and the ECJ ruling in Gourdain v.
Nadler,55 concluded that the purpose behind the bankruptcy exception was to have
proceedings concentrated in the country where the insolvency was opened and that
accordingly, in the present case, the Norwegian courts should not interfere with the
Italian proceedings. This was a majority decision, the minority being of the opinion
that the claim itself did not relate to bankruptcy and could be decided under the
contract forum of Article 5(1), albeit that eventually – at the enforcement stage –
an Italian court might not accept the applicability of the Lugano Convention.
However, a future Norwegian judgment should possibly be open to enforcement in
other Contracting States.
In our submission, the minority opinion sits better with the prevailing view
in national case-law and legal literature, according to which only typical
bankruptcy actions – like the one brought by the liquidator in Gourdain – come
under the exception, while ordinary commercial claims would not.56

b) Place of Pure Economic Loss

A second example is an Austrian decision of 24 February 199857 concerning the

place where an economic tort is committed for the purpose of identifying the
competent court under Article 5(3) of the Conventions. The Austrian plaintiff
brought action against the general manager of a German company, whose
malversations had left the plaintiff unpaid for goods sold and delivered to Germany
and resold there despite a retention of title clause. The Austrian courts would have
jurisdiction only if the tort could be considered to have been committed in Austria.
The Supreme Court referred to the authentic interpretation of the Lugano
Convention offered by the ‘methodical principles’ contained in the case-law of the
ECJ. Under the established case-law, the plaintiff had the option to sue either at the
place where the damage occurred or at the place of the event giving rise to that
damage. The defendant relied on the Marinari judgment of the ECJ58 to show that
the realisation of a pure economic loss in the patrimony of the plaintiff was not

55
See note 38.
56
See GAUDEMET-TALLON H., Les Conventions de Bruxelles et de Lugano, Paris
1996, p. 27, and cited case-law; DYER A., ‘Remarks on Bankruptcies and Money Judgments:
The Practice under the [Brussels] Convention’, in: Contemporary International Law Issues:
Conflicts and Convergence, The Hague 1996, p. 125 et seq., at p. 131.
57
1 0b 319/97m, in: Juristische Blätter 1998, p. 517, and in: Zeitschrift für Rechts-
verleichung, internationales Privatrecht und Europarecht 1998, p. 170.
58
Judgment of 19 September 1995, C-364/93 [1995] ECR I-2719, Marinari v.
Lloyd’s Bank.

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 Harry Duintjer Tebbens

sufficient to establish jurisdiction of the court at the latter’s domicile in Austria.

However, the Supreme Court rejected this reasoning and considered that the initial
loss, as distinct from further consequences occurring in a different state, had indeed
been suffered at the plaintiff’s domicile. In its view, the Marinari case did not
solve the question before the court because it did not concern pure economic loss.
When concluding that the courts of the place where the loss was suffered have
jurisdiction, the Court noted that the same solution had emerged in certain English
and Italian cases in which the Brussels Convention is applied.59
Although this Austrian decision appears to comply with the parallel
interpretation method, there may be a basic flaw in its treatment of the Marinari
case. In fact, one could argue that the loss was caused by the unauthorised reselling
of the goods in Germany, and that the diminution of the plaintiff’s patrimony was
the further consequence of the initial loss of property. In this analysis, the Marinari
judgment would be pertinent and should have directed the court to apply the
restrictive approach adopted in that judgment, viz., that only the place of the initial
damage is material for the purpose of Article 5(3) of the Conventions.

c) Notion of ‘Consumer Contract’

One of the first Lugano decisions of the Swiss Federal Supreme Court dealt with
the notion of ‘consumer contract’.60 A stamp collector domiciled in England was
sued in Switzerland for the balance due resulting from a long-standing relationship;
the claimant (a Swiss company) sold the defendant’s stamps at auctions and
advanced the expected price; the excess advance payments were periodically
reimbursed by the defendant. A complication arose because the defendant himself
was also a professional stamp dealer, but ran his business separately from his
private collection.
The Federal Supreme Court noted at the outset that the Lugano Convention
had to be interpreted by taking into account the principles of international treaty
law, as well as foreign legal scholarship and foreign judicial decisions on the
Lugano and the Brussels Convention.
After conducting an extensive survey of the concept of consumer contract
by consulting various legal sources, it finally held that the relationship between the
parties could be classified as such a contract. In so doing, the court had some
doubts because of certain particularities of the sales offers made on behalf of the
defendant; however, it decided to give the benefit of the doubt to the alleged
consumer.

59
The relevant judgments of the English Court of Appeal and the Italian Supreme
Court had been communicated through the exchange of information system referred to
supra, II.1.
60
Judgment of 4 August 1995, Corinphila / Jaeger, BGE 121 III 336.

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 Judicial Interpretation of the 1988 Lugano Convention

This judgment is a good example of the efforts made by courts in Lugano

States when confronted with a novel question, for which the ECJ case-law offered
no solid guidance at the time. From this point of view, the judgment should by no
means be criticised because of its result, although, of course, commentators may
chose to dissent.61
However, at the time the Swiss Court had to answer this question, certain
rulings of the ECJ did point towards a restrictive interpretation of the special
jurisdiction rules in Articles 13 et seq. of the Brussels Convention. In particular, in
Shearson Lehmann Hutton,62 it considered that the protective role of those
provisions implies that their application should not be extended to persons for
whom such protection is not justified, and that the Convention appears clearly
hostile towards conferring jurisdiction to the courts of the plaintiff’s domicile.63
Also, it is doubtful whether the collector in the case at hand had really been acting
‘for a purpose which can be regarded as being outside his trade or profession’
under Article 13(1) of the Lugano Convention.
Finally, the restrictive approach taken by the ECJ in respect of the scope of
special consumer jurisdiction was subsequently confirmed in its judgment in
Benincasa v. Dentalkit.64 Accordingly, though admittedly a posteriori, it appears
that the Swiss judgment is not completely in harmony with the interpretation given
to the same notion in the Brussels Convention.

IV. The Court of Justice and the Lugano Convention

Because of the lack of interpretative jurisdiction for the Lugano Convention
(supra, I.B.), the Court of Justice may only indirectly consider that Convention.

A. Multistate Employment Contracts

Rather soon after the conclusion of the Convention and well before its entry into
force, the ECJ had to interpret Article 5(1) of the Brussels Convention in an
employment dispute.65 A deputy project manager residing in France worked for a
61
Cf. the comment by VOLKEN P., in: Schweizerische Zeitschrift für internationales
und europäisches Recht 1996, p. 84 et seq.
62
Judgment of 19 January 1993, C-09/91 [1993] ECR I-139, Shearson Lehmann
Hutton v. TVB.
63
Ibid., para. 22.
64
Judgment of 3 July 1997, C-269/95 [1997] ECR I-3767.
65
Judgment of 15 February 1989, 32/88, [1989] ECR 341, Six Constructions /
Humbert.

Yearbook of Private International Law, Volume 3 (2001) 21

 Harry Duintjer Tebbens

contractor’s enterprise having an office in Belgium. His duties were exclusively

performed in several African and Middle-East countries. The dispute turned on the
question how to apply the criterion of the characteristic obligation laid down in
earlier ECJ case-law (i.e., to perform the work) when the employee performs all his
work outside EC territory.
In the version of the Brussels Convention relevant to the case, there was no
provision on labour contracts and the above-mentioned judge-made criterion did
not offer a solution either. However, the Lugano Convention innovated on this
point by providing a subsidiary rule conferring jurisdiction on the courts at the
place where the business engaging the employee was situated.66 This would make
the Belgian courts competent and, in fact, several Member States intervening in the
preliminary reference proceedings invited the Court to adopt that solution.
The ECJ declined to follow this approach, which, in their view, would not
take due account of the need to protect the weaker party, i.e., the employee;
namely, if the employer were the plaintiff, the forum provided under the Lugano
Convention would amount to an undesired forum actoris. Having ruled out
resorting to this solution, the Court had no choice but to conclude that the optional
forum of Article 5(1) was not available in any Convention State and that only the
general forum of the defendant’s domicile remained. (Since this was in a Middle-
East country in the present case, jurisdiction would under Article 4 not be governed
by the Convention at all, but by national law).
Therefore, somewhat paradoxically, the ECJ approach may lead to less
employee protection in cases where the employer had engaged the employee at a
place where it would be convenient for the latter to file a suit, in fact more
convenient than the employer’s domicile or principal establishment.
The Court’s rejection of the solution in the new rule of the Lugano
Convention may have been influenced not only by the judges’ concern for
employee protection, but also by the squarely negative position taken by the
Advocate General in this case. In his view, it was out of the question that the
Lugano Convention and the annexed Declaration directed at the European Court
(which he found ‘surprising’) should directly influence the interpretation of the
Brussels Convention.67
Surely, the Court was not obliged to follow the subsidiary rule of the
Lugano Convention: The Declaration only refers to case-law concerning that
Convention, which of course did not yet exist before its entry into force.
Nevertheless, the Court could have adopted the connecting factor of Article 5(1), in
fine, of the Lugano Convention; and yet, as a means of protecting the consumer,
could have confined its application to actions brought by, but not against, the
employee. This balanced solution was actually adopted in the Accession

66
Art. 5, first para., in fine.
67
Opinion of Advocate General Tesauro, paras. 7-8, [1989] ECR at p. 351.

22 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

Convention for Spain and Portugal to the Brussels Convention68 a few months after
the Six judgment.

B. Discrimination in Civil Procedure

Another opportunity for the Court to consider not so much the case-law concerning
the Lugano Convention but simply its existence – regarded as an ‘extension of the
principles of [the Brussels] Convention’, as it is called in the preamble of the
Lugano Convention – arose in a preliminary reference made under the EC Treaty
involving the scope of the prohibition of discrimination on grounds of nationality
(see Article 7, now Article 12 of the Treaty).
The case, Mund & Fester,69 concerned a rule of German civil procedure
which required that certain conditions be met for authorising conservatory seizure
of assets if the subsequent judgment had to be enforced in Germany, but which
deemed these conditions fulfilled if enforcement was to take place in another
country,70 thus making it easier to obtain seizure against foreign debtors than
against debtors residing in the country. The ECJ held that this rule was indeed
discriminatory against debtors residing in other EC Member States. In its reasons
the ECJ emphasised that all Member States were parties to the Brussels
Convention and could thus be regarded as forming a single entity for matters
covered by the Convention. As a result, the conditions for enforcing judgments
were substantially the same in all Member States.
Therefore, applying the discriminatory rule to secure claims against debtors
in other EC States was not justified, whereas it was justified if the ensuing
judgment would have to be enforced in a third country.
In so holding, the ECJ was silent on the fact that the Lugano Convention,
which had come into force by then, created substantially the same regime of
recognition and enforcement as contained in the Brussels Convention. The Court
could therefore very well have made a reservation for third countries belonging to
the Lugano Convention group. Although this was not strictly necessary, a note to
that effect would certainly have been supportive of the spirit of parallelism
between the two Conventions.
And indeed, a broader perspective than the mere dichotomy of Member
States and other States was adopted by national legislators who took account of the
impact of the Mund & Fester judgment. Several of those legislators in EC Member
States, inter alia, Germany, Netherlands and Austria, adapted their legislation that

68
Convention of 26 May 1989, OJEC L 285, p. 1, Art 4.
69
Judgment of 10 February 1994, C-398/92 [1994] ECR I-467, Mund & Fester v.
Hatrex Internationaal Transport.
70
§ 917(2) of the Zivilprozessordnung (text prior to the modifying Act of 6 August
1998).

Yearbook of Private International Law, Volume 3 (2001) 23

 Harry Duintjer Tebbens

was found incompatible with the judgment, with a view to excluding the
discrimination of debtors not only in other Member States, but also in other States
parties to the Lugano Convention.

V. Concluding Remarks
The preceding presentation shows that by and large the Brussels and Lugano
Conventions are interpreted uniformly and with due regard to the parallelism
existing between them. In current practice, judgments applying the Lugano
Convention frequently cite rulings of the European Court on the Brussels
Convention, as well as views of legal writers on that Convention. Sometimes
decisions of national superior or supreme courts are referred to as well, when no
guidance can be drawn from the ECJ. Citations in the other direction are less
frequent, but this may well be explained by the much larger body of case-law
involving the Brussels Convention.71
Protocol 2 of the Lugano Convention and the Declarations on uniform
interpretation have been implemented by the courts of EFTA States in a very
constructive manner. The particular focus placed on the Swiss and Austrian
supreme courts in this paper warrants special mention of their consistent approach
favouring a uniform interpretation of both Conventions. In some cases they seem
to have followed ECJ precedents even contre-coeur72 or preferred uniformity over
a choice based on a substantive assessment of the options.73
Though some have expressed less enthusiasm about this convergent trend,74
our conclusion is positive, recalling the scepticism with which the second-best
tools for uniform interpretation were received when the Convention was
concluded.75 Of course, there have been some instances where doubts can be
entertained about whether a Lugano Convention interpretation follows the line laid
down by the ECJ for the Brussels Convention.76 However, no clear-cut and
71
The database kept at the ECJ shows a ratio of roughly 5:1 for Brussels and Lugano
Convention decisions registered per year.
72
Supra, III.B.3 a).
73
Supra, III.B.3 b).
74
See DONZALLAZ Y. (note 52), at p. 29.
75
See STONE P.A. (note 8), at p. 117; PELLIS L., ‘All roads lead to Brussels: Towards
a Uniform European Civil Procedure’, in: Netherlands International Law Review 1990,
pp. 372 et seq., at p. 395; MCCAFFREY E.M., ‘The Lugano and San Sebastian Conventions:
General Effects’, in: Civil Justice Quarterly 1992, p. 12 et seq., at p. 25. For more optimistic
views see, e.g., MÖLLER G., (note 8), at p. 220; WAHL N., The Lugano Convention and
Legal Integration, Stockholm 1991, at p. 76; DUINTJER TEBBENS H., (note 6), at pp. 60-61.
76
Supra, III.B.4.

24 Yearbook of Private International Law, Volume 3 (2001)

 Judicial Interpretation of the 1988 Lugano Convention

deliberate deviation from that case-law by courts of non-EU States was detected,
not even where a ruling of the ECJ was supported, inter alia, by arguments drawn
from European Community law.77
The EFTA States have lived up to the criterion for a successful uniform
interpretation, which Droz aptly summarised as reciprocal esteem and good will of
the various courts involved.78
The national courts in EU-Member States have contributed to this success.
As for the European Court of Justice, it has not yet had the opportunity to draw
inspiration from solutions developed in the case-law on the Lugano Convention for
problems that had not yet arisen under the Brussels Convention. On the other hand,
at one or two occasions, the Court could have been somewhat more receptive to the
existence of an emerging judicial area for civil and commercial disputes larger than
the one coinciding with the membership of the European Union. This would have
been welcome, if only as a sign of encouragement for the courts of EFTA countries
in their efforts to ensure a convergent interpretation.
In the not-too-distant future the European Court will have to acknowledge
this wider dimension. Under Article 65 of the European Community Treaty and
following the transformation of the Brussels Convention into a Community
Regulation,79 a revised Lugano Convention is to be concluded by the Community
and/or the Member States, having regard to the special position of Denmark, with a
view to aligning it to that Regulation on the basis of the joint revision operation
undertaken in 1998-1999.80 This new Lugano Convention will become part of
Community law by virtue of Article 300(7) of the Treaty. As such, it will fall
within the general interpretative mission of the European Court under Article 234
(ex-Article 177) of the Treaty, or, possibly, the more restricted scope of its
intervention in regard to measures within Title IV (Article 68).
The Court can then build on the solid basis of convergent case-law already
in existence.

77
See the Sonntag judgment, supra III.B.2 a).
78
DROZ G., ‘La Convention de Lugano parallèle à la Convention de Bruxelles,
concernant la compétence judiciaire et l’exécution des décisions en matière civile et
commerciale’, in: Rev. crit. dr. int. pr. 1989, p. 1, at p. 12.
79
Regulation (EC) Nr. 44/2001 of the Council of 22 December 2000 on jurisdiction
and the enforcement of judgments in civil and commercial matters, in: OJEC 2001, L 12,
p. 1 (‘Brussels I Regulation’).
80
Recital No. 5 of Regulation No. 44/2001 (previous note).

Yearbook of Private International Law, Volume 3 (2001) 25

 RETHINKING THE HAGUE JUDGMENTS
CONVENTION: A PACIFIC PERSPECTIVE
David GODDARD*

I. Taking Stock
A. Clarifying the Goals of the Judgments Convention
B. Identifying the Core of the Convention
C. Drafting Provisions to Address the Core Issues
D. The Process for Completing the Convention
II. Whence a ‘Pacific Perspective’?
A. Elements of a Pacific Perspective
B. The Emphasis of a Pacific Perspective
C. New Rules Should Not Increase the Risks and Costs of Cross-Border
E-Commerce
D. The Importance of Widespread Ratification by the Region’s Trading
Partners
III. Priority Issues for the Judgments Convention
A. Key Benefits from the Judgments Convention – Reducing Barriers to Trade
B. Contract Disputes
1. The Benefit of Addressing Contract Disputes
2. Giving Effect to Forum Clauses
3. Default Jurisdiction in a Defendant’s Home Jurisdiction
4. Default Jurisdiction Based on Place of Performance, or Activity?
5. Summary – Contract Disputes
C. B2C and C2C Contracting
D. Tort Claims and Other ‘Imposed Obligation’ Claims
E. The Risk of Addressing Jurisdiction in ‘Stranger’ Claims
F. Restitution Claims
G. Trusts
H. The Black List
IV. The Core of the Convention
A. The Core
B. Other Topics

*
Barrister, New Zealand. The author was a member of the New Zealand delegation
which attended (as an observer) the first session of the Diplomatic Conference on the
Judgments Convention in June 2001, and participated in meetings of the Special
Commission in 1999 and in informal meetings in 1999 – 2001. The views expressed in this
paper are the personal views of the author, and do not represent the views of the New
Zealand Government.

Yearbook of Private International Law, Volume 3 (2001), pp. 27-62

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 David Goddard

V. Rules to Give Effect to the Core of the Convention – Some Suggestions

A. Drafting a ‘Choice of Forum’ Convention
B. Providing for Default Jurisdiction in Claims Between Contracting Parties
VI. Future Directions

I. Taking Stock
It seems timely, following the first session of the Diplomatic Conference on the
Judgments Convention in June 2001, to step back and reflect on the goals of the
Convention, and on progress towards those goals. The immediate product of that
meeting was an ‘Interim Text’ which poses as many questions as it answers.1
Consensus on many of the issues discussed proved elusive. A careful review of the
text shows that a great deal has been achieved: some very important questions have
been resolved, and in other areas substantial progress has been made in identifying
more clearly the issues that would need to be resolved in order to complete a wide
ranging convention of the scope envisaged by the project’s original framers. But it
is equally plain that we are still a long way from agreement on the text of a
convention, and that some very significant differences remain to be addressed.
The meeting which produced the Interim Text was followed by a meeting to
consider, among other matters, the Hague Conference’s future work programme.
The Chair of the second meeting put to Member States the question whether, in the
light of this result, the project should be pursued. The answer from each delegation
that spoke was strongly positive. But beneath that apparent consensus, there remain
real differences about what ‘the project’ should be – differences about its purpose,
about its scope, and about the relative importance of various aspects of the
proposed convention.

A. Clarifying the Goals of the Judgments Convention

If the project is to succeed – if we are to conclude a text, and see it widely ratified
and implemented – the starting point must be to achieve a measure of consensus on
what we are trying to achieve, and why.
This may sound trite: but work on the judgments convention to date has
largely assumed the need for a wide-ranging instrument which applies to all civil
and commercial disputes, with certain specific exclusions. The genesis of the
project was a conception of a world-wide judgments convention equal in
substantive scope to the Brussels and Lugano conventions: that has been the
implicit goal throughout. There has been some discussion about the need for such a
convention at a general level, but little or no empirical analysis of the nature and

1
The Interim Text is available at ftp://hcch.net/doc/jdgm2001draft_e.doc.

28 Yearbook of Private International Law, Volume 3 (2001)

 Rethinking the Hague Judgments Convention : A Pacific Perspective

number of cross-border cases which raise the type of jurisdiction or enforcement

issues with which the project is concerned. The focus has been on making
provision for civil and commercial disputes generally, rather than on identifying
particular areas where practical problems are especially common, or acute. This is
not a criticism of the initial approach: if a comprehensive convention could readily
be achieved, it would be very attractive indeed. But if significant difficulties are
encountered, as they have been, it becomes necessary to reassess the breadth of our
aspirations. Plainly some issues are more practically important than others. And
some are more difficult to tackle – technically, or politically, or both – than others.
Those categories may not be the same in a world-wide context, moreover, as
within Europe, or other regional groupings.
The objectives of a worldwide project on jurisdiction and judgments need to
be clarified in order to ascertain whether all the difficulties that have been
encountered to date really do need to be addressed. Participants in the project need
criteria for distinguishing between core issues that must be resolved, and issues
that are of secondary importance, but which may pose disproportionate difficulties.
This highlights the need for each of the participating countries to identify and
prioritise its goals for the convention, followed by discussion and agreement on
shared goals.
In this paper, I have been asked to provide a Pacific perspective on the
Judgments Convention. For the reasons explained above, it seems to me that any
national or regional perspective on the Convention needs to start from a clear
conception of its practical rationale. What are the economic and social benefits
which the convention would deliver, if successful? And how would it deliver
them? What risks does such a convention create? How can these risks be avoided,
or managed? So I will begin, in section II of this paper, by attempting to provide a
view from the southern reaches of the Pacific on why we need the convention.
In summary, it seems to me that the main objective for the project, from a
Pacific perspective, should be to conclude a convention that will be very widely
ratified within the region and by the region’s key trading partners, which:
(a) reduces the risks and costs associated with cross-border trade, by reducing
uncertainty and reducing litigation costs in relation to disputes between
businesses dealing across borders;
(b) enhances access to goods and services from other countries for the region’s
businesses and consumers, enabling them to participate more fully in the
global economy;
(c) does not impede access to e-commerce for the region’s businesses and
consumers. The potential benefits from the ‘weightless economy’, and the
promise it brings of some release from the ‘tyranny of distance’, are too
important to be undermined: any risk of doing so must be avoided.
I suspect that these goals will be common to many (if not most) other regions.
Other regions will probably have additional goals, reflecting differences in the
nature and extent of cross-border dealings in those regions. But these should prove
to be a common core.

Yearbook of Private International Law, Volume 3 (2001) 29

 David Goddard

B. Identifying the Core of the Convention

Once the project’s objectives are established, the next step is to identify clearly the
issues which must be addressed, if the convention is to achieve its central goals,
and those which – however desirable – are of less practical importance, and should
not be permitted to jeopardise the project. Section III of this paper explores, topic
by topic, the relative importance of various aspects of the current Interim Text for
the goals identified above.
This task requires us to identify the topics that might be addressed – such as
jurisdiction and enforcement of judgments in contract disputes, or tort claims, or
restitution claims, or prohibited grounds of jurisdiction – and a suggested approach
to each topic, at a level of principle. Whether the Convention should address a
particular topic is then determined by a matrix of factors:
(a) the economic and social benefits that could be obtained from addressing the
topic in the convention – in particular, the extent to which addressing the
topic will facilitate cross-border trade;
(b) the technical difficulty of addressing the topic;
(c) the political complexity of addressing the topic;
(d) the risk of unanticipated or undesirable consequences from addressing the
issue in the convention.
I suggest in section IV that applying this matrix leads to the conclusion that the
core of the convention – the subject-matter that must be addressed if it is to be a
practically successful instrument – is confined to claims arising out of or in
connection with contracts between businesses. The convention should:
(a) provide default rules permitting such claims to be brought in the
defendant’s habitual residence, or in the State where a branch, agency or
establishment which entered into the contract is situated;
(b) give effect to choice of court clauses in such contracts – with the chosen
court having jurisdiction, and the courts of other countries declining to
exercise jurisdiction (unless the choice is non-exclusive);
(c) provide for enforcement of judgments based on these heads of jurisdiction.
There are many other topics that it would be useful to address. We should continue
to explore the possibility of reaching agreement on a wider range of issues, and
reducing still further the costs and risks associated with cross-border activity. But
the need for world-wide solutions on these topics is less clearly demonstrated, and
in many cases achieving workable and widely endorsed solutions is more difficult.
If agreement cannot be reached reasonably readily on these secondary topics, this
should not be permitted to imperil achievement of the project’s core goals.
The case for restraint in relation to the scope of the convention can be put
still more strongly in some respects. Attempting to address some issues – such as
cross-border torts committed using electronic means – may actually run counter to

30 Yearbook of Private International Law, Volume 3 (2001)

 Rethinking the Hague Judgments Convention : A Pacific Perspective

one of the basic goals identified above, namely avoiding the risk of imperilling the
development of cross-border electronic commerce. If we are not confident that we
understand the implications of a proposed jurisdictional rule in the fast-evolving
world of information and communications technology (‘ICT’), we should not risk
undermining the economic promise of these developments. There are some issues
in respect of which our goals require us to be less ambitious.

C. Drafting Provisions to Address the Core Issues

Having clarified the convention’s goals, the core topics that must be addressed, and
appropriate approaches to those issues, we need to draft provisions giving effect to
those approaches. Much of this work has already been done – I would go so far as
to say that the Interim Text gets us 90% of the way there. But more work is needed
to perfect the relevant provisions. In section V of this paper I comment briefly on
these issues.

D. The Process for Completing the Convention

The Hague Conference needs to adopt a process which will enable delegations to
focus on the core issues – the ‘must haves’ – while continuing to explore the
possibility of reaching agreement on less critical topics. Section VI of this paper
concludes by exploring some avenues for completing work on the convention.

II. Whence a ‘Pacific Perspective’?

The first task for an author who has been asked to provide a Pacific perspective on
the Convention is to ask what distinctive features of his home country, and the
region, might give rise to a unique perspective in relation to the Convention.
Whence a distinct ‘Pacific’ perspective, which:
- is to some degree likely to be common to the many different countries of
the region?
- differs from a European perspective, or from a North American
perspective, or even from an Asian perspective?
I should make clear, at the outset, that I cannot and do not purport to speak for all
Pacific States – or even for the Government of my own country, New Zealand. Nor
is there any reason to expect that the region would have a single, homogenous view
on each and every issue relevant to the proposed convention. What I hope to do is
to identify some characteristics of the region which are likely to colour the views

Yearbook of Private International Law, Volume 3 (2001) 31

 David Goddard

of Pacific States in relation to the convention – and to explore where, in my

personal opinion, those observations might take us.
I should also note that in many contexts, a Pacific perspective would
encompass the large North American and Asian States that form the rim of the
Pacific ocean. But for the purposes of this Yearbook, other commentators have
been asked to address North American and Asian perspectives – I will focus on the
region of the Pacific that is sometimes referred to as Oceania.

A. Elements of a Pacific Perspective

What, then, is special about the Pacific – what shared characteristics of the States
in this region might influence their aspirations for the convention? The first clue is
found in the region’s name: while other regions such as Europe or North America
are named after land masses, ours is named for an ocean. A Pacific perspective is a
perspective of relatively small, distant, countries, with ocean borders.2 Populations
are tiny by world standards. Australia, far and away the largest Pacific nation,3 has
some 19.5 million inhabitants. My own country, New Zealand, has but 3.8 million.
These are large Pacific States – consider Fiji, with a population of approximately
850,000, New Caledonia with some 200,000, Samoa with around 180,000,
Vanuatu, with around 190,000, the Cook Islands with about 20,000, or self-
governing Niue with fewer than 2,000 residents.
And distances are vast: from Wellington, where I sit writing this article, the
nearest city with more than a million inhabitants is Sydney, almost 2,500 km away.
A circle with a 2,000 km radius drawn around Wellington would include some
4 million people. If I were sitting in Paris, and drew the same circle, it would
include most of the EU – and a population in excess of 300 million. Centred on
Toronto, a circle of this size would take in many large Canadian and US cities, and
a population in the hundreds of millions. Returning to the Pacific, that same circle,
centred on Apia, would encompass fewer than 1.5 million people.
The Pacific, then, is a region of small, distant countries, dependent for their
economic livelihood and for many of the amenities of modern life on trade across
the ocean that gives the region its name. It is no accident that this is the corner of
the world that gave us the phrase ‘the tyranny of distance’.4
The region’s geography explains why cross-border dealings have, until
recently, largely been confined to commercial dealings between businesses.
Consumers cannot drive across New Zealand’s borders! Employees do not cross
borders each day to go to work. It is not common for a tort committed in one
Pacific state to have effects in another. Private international law issues in the
2
This is immediately apparent from a glance at a map of the region.
3
As noted above, I am excluding the Pacific rim States for present purposes.
4
Taken from the title of a history of Australia published in 1966: see BLAINEY G.,
The Tyranny of Distance: how distance shaped Australia's history, Melbourne 1966.

32 Yearbook of Private International Law, Volume 3 (2001)

 Rethinking the Hague Judgments Convention : A Pacific Perspective

Pacific (outside the family law sphere) arise mainly in the context of commercial
transactions.
What do the firms engaged in cross-border trade look like, in the Pacific?
Small countries typically have small economies, populated primarily by small and
medium sized enterprises (‘SMEs’). There is something of a dilemma here. Small
domestic markets mean that for a firm to grow large, it needs to export. But
economic studies suggest that the fixed costs of exporting goods or services
(including costs of managing currency risk and legal risk) are significant, and that
those costs may be increased by distance.5 This creates a barrier to exporting by
smaller firms – and a strong incentive for small countries to work to reduce those
costs, where possible, to assist their SMEs to access export markets.
The Pacific is also a region that has been dependent primarily on
commodity exports – and has seen a decline in the value of those exports over time
which has had a significant impact on standards of living. New Zealand, for
example, has slipped from being one of the richest countries in the world in the
1950s to 15th in the OECD in terms of real per capita GDP in the 1970s, and 20th in
1999. Even Australia – which over the same period has had a far healthier
economy than New Zealand – has experienced growth rates below the OECD
median over the last 30 years. Attempts to increase volumes of traditional exports,
and to add more value to products in New Zealand, have had limited success in
arresting this relative decline.
One possible solution for Pacific economies, some suggest, lies in the
export of high value services to the rest of the world, using modern technologies.
The hope is that the Internet, and ICT developments generally, will overcome the
tyranny of distance, and enable businesses in New Zealand and other Pacific states
to compete on equal terms with firms in other countries despite our geographical
remoteness and the size of our domestic markets. A great leap in New Zealand’s
economic performance came with the introduction of refrigerated shipping in the
late nineteenth century. New Zealand Government policy statements a few years
back described the Internet as ‘the freezer ship of the 20th century’ – enabling us to
get our products (in this case, services and content) to markets on the far side of the
ocean, or the world.
Certainly the Internet has had a huge impact on access to information and
products of many kinds in the region. A huge range of software can be purchased

5
See SKILLING D., ‘The Importance of Being Enormous: Towards an Understanding
of the New Zealand Economy’ (unpublished paper, on file with author), citing inter alia
BALDWIN R. & KRUGMAN P., ‘Persistent Effects of Large Exchange Rate Shocks’, in:
Quarterly Journal of Economics 1989, pp. 635-654; BERNARD A.B. & BRADFORD JENSEN J.,
‘Why Some Firms Export’, in: NBER Working Paper 8349, July 2001; ROBERTS M. &
TYBOUT J., ‘An Empirical Model of Sunk Costs and the Decision to Export’, in: American
Economic Review, 1997, pp. 545-564. For the impact on trade of borders, over and above
the impact of distance, see HELLIWELL J.F., How Much Do National Borders Matter?,
Washington (DC) 1998.

Yearbook of Private International Law, Volume 3 (2001) 33

 David Goddard

over the Net. Music and texts can be downloaded – or ordered electronically, and
received by post a week or two later. A researcher in Wellington can access an
extraordinary wealth of data and can interact with colleagues more easily than ever
before. ICT developments over the last decade or so mean, from a practical
perspective, that:
- businesses in the region can learn about, and acquire, the tools
(software, information etc) that they need to operate more efficiently,
and to develop new products and implement new business methods;
- businesses can more readily identify new market opportunities world-
wide;
- businesses are better able to reach customers domestically (even within
countries, distances and physical barriers are significant in the Pacific,
and populations are dispersed, which poses problems for traditional
distribution methods) and internationally;
- businesses and researchers in the Pacific can collaborate with businesses
and researchers in other countries more effectively, and at lower cost;
- the region’s consumers have access to a much wider range of goods and
services than ever before, faster and at lower cost. Products (eg books or
software) that would never be found on the shelves of a local store can
be located and purchased in moments. Local competition, which may be
limited, is supplemented by competition from overseas suppliers, in
some cases dramatically reducing prices.
The reduction in the physical cost of doing business across borders in the
‘weightless economy’, and the ease of identifying new market opportunities
abroad, puts even more focus on the fixed costs associated with entering foreign
markets, and in particular the cost of managing legal and regulatory aspects of
cross-border trade.

B. The Emphasis of a Pacific Perspective

What does this tell us about a possible ‘Pacific perspective’ on cross-border legal
coordination? It is a perspective that emphasises the importance of trade across
borders. The drive to increase the volume and value of exports means that the
primary concern – though not the sole one – is to reduce transaction costs for
cross-border commercial activity, by increasing predictability and reducing the
costs of cross-border dispute resolution, and facilitating the management of risk
(for example through insurance). In particular, the goal is to reduce uncertainty and
unnecessary risk and cost for businesses (especially SMEs) trading across borders,
without compromising other important social goals such as consumer protection.
The deterrence of civil wrongs that have cross-border effects, and providing
compensation for those wrongs, is an important policy goal: however it is of less
practical significance, at least in the Pacific region. Physical torts with cross-border

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

effects are rare, for obvious reasons of geography. Even product liability claims
against overseas defendants are few and far between. Claims arising out of non-
physical torts – such as defamation claims, or claims for infringement of
intellectual property – more commonly raise cross-border issues. But the vast bulk
of cross-border disputes, at least in New Zealand, arise between parties to
commercial transactions. Increased trade, and the use of ICT to communicate
across borders, or to misappropriate content across borders, will undoubtedly
increase the frequency with which cross-border tort claims arise. But there is no
reason to expect that the ratio of contract cases to other cases will alter
significantly.
More fundamentally, the economic challenges faced by most countries in
the region mean that these are secondary concerns, compared with the overriding
goal of maintaining and increasing living standards through sustainable economic
growth. They are concerns that it would be good to address, if possible. But
addressing them should not be the primary goal of work on cross-border
coordination of rules on jurisdiction, and enforcement of judgments. Nor should
difficulties in addressing these concerns prevent the conclusion of a convention
which could deliver real benefits through facilitating cross-border trade.

C. New Rules Should Not Increase the Risks and Costs of Cross-Border
E-Commerce
An important facet of these goals which deserves separate mention is the
importance of ensuring that the legal environment for e-commerce is as predictable
and as consistent with other forms of cross-border dealing as possible – or at least,
that it is not appreciably less certain or more costly to do business on-line. A
related concern is to avoid a legal ‘balkanisation’ of the Internet in response to
differences in legal regimes. The future welfare of consumers, and the participation
of Pacific businesses in a world-wide knowledge economy, depends on
maintaining access to the widest possible range of online services for businesses
and consumers in the Pacific. A convention that put these potential benefits at risk
would be very much contrary to the interests of the region.

D. The Importance of Widespread Ratification by the Region’s Trading

Partners
One further element of the Pacific perspective which must not be overlooked is
that the convention will be useful only if it is ratified by a significant proportion of
the countries with which Pacific States conduct most of their trade. In practice, that
means that in addition to attracting widespread ratification within the region, the
convention needs to be ratified by our Asian neighbours (in particular Japan), and
by the United States. And while ratification by individual States within the

Yearbook of Private International Law, Volume 3 (2001) 35

 David Goddard

European Union would not have the same economic significance as ratification by
the United States or Japan, ratification by the entire EU would be a very important
step.

III. Priority Issues for the Judgments Convention

What are the implications of this perspective for the judgments convention? In
particular, what does it tell us about the scope of the convention – that is, about the
topics that should be addressed if the convention is to be useful in practice?
A ranking of topics would be useful – from the essential ‘core’
requirements, through the highly desirable, and on to the ‘nice if we can do it
without too much difficulty’ list. A simple matrix in respect of each topic sheds
some light on how it should be ranked. Factors that need to be reflected in that
matrix include:
(a) the economic and social benefits that could be obtained from addressing the
topic in the convention – in particular, the extent to which addressing the
topic will facilitate cross-border trade. This in turn depends on:
- the frequency with which the issue arises (or is likely to arise in the
future). The more common the issue, the more important it is for the law
to be clear on the point;
- the extent to which there is currently a ‘problem’, in the sense that rules
in relation to jurisdiction and enforcement of judgments are unclear or
inappropriate, or are the subject of significant conflicts, and give rise to
practical difficulties. There is no point expending time and resources if
an issue is not a problem in practice;
- the extent to which the convention can effectively address the current
problems in the field. However common or significant a problem may
be, if the convention is unlikely to provide a practical solution, there is
little to be gained from addressing the topic;
(b) the technical difficulty of framing a rule which is clear and simple, and
leads to appropriate outcomes. The technical difficulty, in other words, of
successfully addressing the issue. If an issue is of moderate importance, but
very complex, work on it is less likely to pay off than work on equally
important but more tractable issues. If there is real uncertainty about the
‘right’ approach to a particular issue, it may be better to refrain from
attempting an answer in the short term, and risking undesirable outcomes;
(c) the political complexities inherent in the issue. Where rules on jurisdiction
are politically sensitive, or where there are significant differences in the
substantive law that is likely to be applied depending on the place of trial, it
may be difficult to devise a rule which is not controversial, and does not

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

excite significant opposition. If the result of that opposition is likely to be

non-ratification by significant trading States, the issue might be better
avoided;
(d) the risk of undesirable outcomes if the convention adopts an inappropriate
rule. Some legal rules do little damage, even if they are not optimal – this is
especially true of default rules that apply to dealings between sophisticated
parties, who can adopt different rules if they want to depart from the default
rule. But other rules have the potential to cause serious economic or social
harm, if they are framed or applied inappropriately. Much greater caution is
required before making rules of the latter kind – the prerequisite to doing so
should be a high degree of confidence that we have accurately diagnosed
the problem, and identified an appropriate and durable solution.

A. Key Benefits from the Judgments Convention – Reducing Barriers to

Trade

I suggested above that the touchstone in identifying priority topics for the
convention should be its potential to facilitate trade, and reduce costs of doing
business across borders. The New York Convention of 1958 on the Recognition
and Enforcement of Foreign Arbitral Awards is an excellent example of an
international instrument which facilitates trade by reducing uncertainty and
reducing the costs of resolving cross-border disputes, thus facilitating the making
of credible commitments to distant trading partners. How might a convention on
jurisdiction and enforcement of judgments advance this goal?
It is important, when asking this question, to do so from the perspective of
firms engaged in day to day commercial activity, rather than the more limited
perspective of firms already engaged in cross-border disputes. Once disputes arise,
plaintiffs want broad jurisdictional rules which give them maximum choice, and
easy enforcement of judgments; defendants on the other hand prefer rules on
jurisdiction to be stringent and narrow, and favour a restrictive approach to
enforcement of judgments. These perspectives are not easy to reconcile. And when
it comes to ‘stranger claims’ – especially torts, including breach of IP rights – there
are some firms that are generally plaintiffs, and others that are more commonly
defendants. We should not be surprised to find that their views differ on the
jurisdictional rules for such claims. But when it comes to contracting, all
businesses agree that certainty is important, and that reducing the costs of resolving
disputes is important. They agree that it is desirable to have clear default rules that
apply if an issue is not dealt with in a contract, and to have the ability to contract
for a different result if that is more appropriate.

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 David Goddard

B. Contract Disputes

1. The Benefit of Addressing Contract Disputes

If the primary objective of the convention is to facilitate cross-border trade, the

obvious starting point when looking at its scope is the contractual relationships
which underpin that trade. And within that set of relationships, let us begin by
focusing on contracts between businesses: the special issues raised by consumer
contracts and employment contracts are examined in more detail below. Risks and
costs will be reduced if the Convention:
(a) enables parties engaged in cross-border contracting to predict in advance
where their disputes will be resolved, and to focus their expenditure on legal
advice about that jurisdiction;
(b) enables them to make credible commitments about where they can be sued,
and where an enforceable judgment can be entered against them;
(c) reduces the long run costs associated with disputes because it is simpler and
cheaper to resolve any difference about where a dispute will be heard, and
about whether the resulting judgment is enforceable elsewhere.
Contractual disputes are far and away the most common class of cross-border
claim. So the ‘frequency’ criterion in the decision matrix is certainly satisfied. The
next question is whether there is a problem in practice. This needs to be tackled in
two stages. First, are practical difficulties encountered in connection with
jurisdiction or enforcement of judgments in cases where there is a forum clause in
the contract? Will these difficulties be resolved if the convention provides for
jurisdiction in the chosen forum, and for the enforcement of resulting judgments?
Second, are practical difficulties encountered where there is no forum clause? If so,
how might the convention tackle these issues?

2. Giving Effect to Forum Clauses

It seems to me that there are real practical difficulties in relation to jurisdiction and
enforcement even where there is a forum clause, based on the caselaw and my
experience in legal practice. Most countries’ courts will accept jurisdiction based
on a forum clause, but in many common law countries it is possible to ask the
chosen forum not to exercise jurisdiction, on grounds of forum non conveniens.
Similarly while most (though not all) courts will decline jurisdiction if there is a
forum clause selecting the courts of another country, the national law of New
Zealand and many other countries treats this as a factor which is highly persuasive
but not decisive – so there is still room for doubt, and for tactical manoeuvring
involving considerable delay and cost.

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

Still more significant practical difficulties arise at the enforcement stage. Many
countries enforce foreign judgments where jurisdiction was founded on a forum
clause. But:
- this is not universally the case. In some States, enforcement depends on
the existence of a treaty with the State of the court of origin;6
- more importantly still, most countries will not enforce foreign
judgments for specific performance of a contract, or other forms of non-
money relief. A significant proportion of commercial disputes involves
non-money relief. As the economic importance of information and
technical know-how increases, this proportion seems likely to grow,
since the ‘value’ associated with confidential information and technical
processes can often only be preserved through mandatory orders
requiring the return of information or equipment, or preventing the
copying or dissemination of information. Yet enforcing non-money
orders made in one country in other countries poses a host of technical
and practical difficulties.
I have already mentioned the New York Convention on Arbitration, ratified by
some 125 countries at the time of writing.7 Does this widely ratified convention
mean that there is no problem in practice? If businesses can manage uncertainty in
relation to where disputes will be resolved simply by agreeing to arbitration, and
ensure that the resulting decision is enforceable in some 125 countries, do we need
a parallel convention in relation to court-based dispute resolution? There are two
principal reasons for pursuing such a convention, as a complement to the New
York convention:
(a) such a convention would enable the parties to agree to refer disputes to a
court rather than to arbitration, where that is more appropriate for their
dealings (for example, the parties may wish to preserve access to courts to
determine questions of law, and appeal rights, or court-based dispute
resolution may be expected to be less costly). Many domestic contracts do
not provide for arbitration for this very reason: the same option should be
available to parties in cross-border transactions, rather than forcing them to
agree to arbitration to achieve predictability in relation to dispute resolution;
(b) more importantly still, there are many situations in which claims are
brought to enforce clear obligations – to pay for goods, for example, or to

6
Such as Finland (see OLDORFF B., ‘Finland’ in: CAMPBELL D. (ed), International
Execution Against Judgment Debtors, New York 2001) or Vietnam (see Ordinance on the
Recognition and Enforcement of Foreign Judgments and Civil Decisions of Foreign Courts
of 17 April 1993, and Circular No 04-TTLN dated 24 July 1993 of the Ministry of Justice,
Supreme People’s Court, and Supreme People’s Procuracy).
7
For an updated list of current parties to the New York Convention, see
http://www.uncitral.org/english/status/status-e.htm.

Yearbook of Private International Law, Volume 3 (2001) 39

 David Goddard

return confidential information following the expiry of a contract – where

there is no dispute of substance between the parties. There is no point in
incurring the cost and delay involved in setting up an arbitral tribunal, then
taking steps to enforce the award. The plaintiff will want to go to court and
get an enforceable judgment, using a low cost summary procedure. A
convention on jurisdiction and judgments will reduce the cost of
enforcement procedures of this kind, by clarifying where such a claim can
be brought in order to maximise prospects of enforcement, and reducing the
opportunity for the defendant to delay enforcement through opportunistic
challenges to jurisdiction.
A further factor that should not be overlooked is the relative ease and low cost of
confirming that a State is a party to the convention, and will therefore respect
forum clauses and enforce judgments given by the chosen forum, as compared with
the current need to seek local legal advice on such issues. This is relevant both at
the stage of negotiating a contract, and when it comes to bringing a claim or
seeking enforcement of a judgment. Because national laws differ in some respects,
despite a high degree of convergence on this point, there is a non-trivial cost
associated with ascertaining the legal position in different countries, and modifying
contracts accordingly. The convention would reduce these costs.
For these reasons, it seems to me that a convention that gives effect to
forum clauses – effectively paralleling the New York convention – would make a
very valuable contribution to the goals identified above. It should be a high
priority.

3. Default Jurisdiction in a Defendant’s Home Jurisdiction

Would it be valuable to go further still, and provide in the convention for a default
jurisdiction that applied in the absence of a forum clause? Cross-border contracts
often fail to address questions of jurisdiction, and this seems likely to become more
common still. The number of relatively low value contracts entered into by less
sophisticated parties such as SMEs across borders is likely to increase
dramatically, as cross-border e-commerce develops, and these contracts are less
likely to address such issues. And where there is no forum clause, there are often
difficult issues both at the jurisdiction stage, and in connection with the
enforcement of resulting judgments.
The key question is how the convention might address this issue. There
would be little difficulty in reaching agreement that in the absence of a forum
clause, a defendant should be able to be sued in that defendant’s home jurisdiction
– its habitual residence, or the State in which the branch, agency or establishment
that made the contract is situated – with the resulting judgment enforceable in other
Contracting States. But would this achieve anything useful? It would have little or
no impact on direct jurisdictional practices: I am not aware of any country that

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

does not provide for the exercise of jurisdiction in respect of its habitual residents
under national law. And the State in which a defendant is habitually resident is the
State in which enforcement is most commonly sought, and is usually most
effective – so questions of enforcement in other States are relatively rare.
But there does appear to be some value in ensuring that a judgment given in
the defendant’s home jurisdiction can be enforced against assets situated else-
where, and that in personam orders (such as an injunction restraining disclosure of
confidential information) can be enforced wherever the defendant may relocate.
Providing for jurisdiction in the defendant’s home jurisdiction raises a series
of additional complexities that would be avoided if the convention were confined
to forum clauses. In particular:
- the Convention would need to address the question of whether other
Contracting States would decline to exercise jurisdiction under national
law, if another Contracting State is seized under this head of
jurisdiction;
- default provisions along these lines could confer jurisdiction under the
Convention on more than one State. For example, where a contract is
made through a branch in State A of a company incorporated in State B,
both State A and State B would have jurisdiction. The Convention
would need to provide priority rules for this situation.
But these are not insuperable difficulties. Articles 21 and 22 of the Interim Text set
out an approach to these issues which, though not free from difficulties, seems to
embody a solution that would, with a little refinement, be acceptable to most
delegations. And in this context, such provisions would be of limited practical
relevance, so should not be too hotly contested.
In the absence of any reliable empirical work on the relative importance of
this issue, and the extent to which real practical problems would be resolved by a
default rule of this kind, it is not self-evident that a default rule of this kind is
essential for the convention. My suspicion is that it would be very useful indeed,
and that we should strive very hard to resolve the additional complexities that such
a rule brings in its train. Rules along these lines almost certainly form part of the
core of the convention. But this conclusion is vulnerable to a clear demonstration
that the issue is of less practical importance than I have assumed, or that resolving
the associated questions (in particular, questions of lis pendens and declining
jurisdiction) is more difficult than I anticipate, and would create real barriers to
widespread ratification.

4. Default Jurisdiction Based on Place of Performance, or Activity?

The next question is whether the convention should go further still, and provide for
an additional default jurisdiction in contract disputes tied in some way to the
making or performance of the contract. Most States have a rule of this kind under

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 David Goddard

national law, permitting jurisdiction to be exercised in that State if a contract (or its
‘characteristic obligation’) is performed there, or if a breach occurs there, or if
significant activity was conducted in that State or directed to that State in the
course of making or performing the contract.8
It is difficult to see the value of such a rule, in the contractual context. In
particular, if there is a default forum in the defendant’s home jurisdiction, and
parties can contract for a different forum, it adds very little indeed.
If a party places significant value on being able to sue in the place of
performance, or some other place linked to the contract by virtue of activity
conducted in that place, that party can seek to contract for that jurisdiction, either
exclusively or as a supplement to the default jurisdiction.
If the contract is silent on the question of jurisdiction, I have suggested
above that there is some merit in having a default forum – but this need is met by
allowing proceedings to be brought in the defendant’s home jurisdiction. Does an
additional default jurisdiction based on contract-related activity (such as
performance) add anything of significance, from a practical perspective? The
starting point for considering this question must be that multiple fora are not in and
of themselves a good thing – there is no gain simply from adding another possible
forum to the list. Another default forum is valuable if and only if it is likely to be
more useful – more appropriate – than the existing default fora.
In some cases, the place (or places) where a contract is performed will have
advantages as a forum – access to evidence in relation to performance, for
example, or the ability to grant effective interim relief in relation to the subject-
matter of the contract. So sometimes an additional default forum along these lines
would be of some value. But these advantages are not always present, and the
advantage in relation to grant of interim relief does not depend on jurisdiction to
determine the substantive dispute being available under the convention, as well as
under national law.
There are real difficulties in providing for a meaningful jurisdiction of this
kind in the context of on-line contractual formation and performance. Despite
many lengthy discussions about where a contract should be treated as performed,
where for example software is purchased and downloaded online, no resolution has
been reached.9 No resolution has been reached because there is no meaningful
answer. There is no place which has the juridical advantages mentioned above, and

8
See for example Article 5(1) of the Lugano Convention, Article 5(1) of the
Brussels Regulation (Council Regulation (EC) No 44/2001 of 22 December 2000), or
Ord. 11 rule 1(1)(d) and (e) of the Rules of the Supreme Court of England and Wales.
9
See ‘Electronic Commerce and International Jurisdiction’, a report of an informal
meeting organised by the Hague Conference and the Canadian Ministry of Justice in Ottawa
from 28 February to 1 March 2000, Hague Conference Preliminary Document No. 12
(August 2000) available at ftp://hcch.net/doc/jdgmpd12.doc; GODDARD D., ‘Does the
Internet Require New Norms?’, in: International Law Forum du droit international 2000,
pp. 183-195, at 188-190.

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

thus no place which has special merit as a forum. While it is possible to deem some
place – the physical location of the buyer, or of the seller, or of some computer – to
be the place of performance, this is an artificial exercise that does not lead to an
additional forum of real practical value to the parties.
A slightly different and potentially helpful way of looking at this issue is to
think of the default jurisdiction in contract cases as a default term of the parties’
contract – the term that is implied by law, if they have not addressed the issue
expressly. Recasting the issue in this way enables us to draw on both legal and
economic scholarship in relation to the selection of default terms.
Traditional common law tests for implying a term require us to ask what the
parties would have agreed, had they turned their minds to the issue. Does it go
without saying that they would have consented to claims being brought in the
forum in question? This test is clearly satisfied by the default rule permitting
claims to be brought in the defendant’s home jurisdiction. It is difficult to imagine
contracting parties responding in the negative, if asked whether this was permitted,
in the absence of any express agreement to the contrary. But there is no other
forum I can think of which can be described with some specificity, and is self-
evidently appropriate and likely to command agreement in all cases.
Economic analysis also sheds some light on the selection of default terms.
In most cases, transaction costs will be reduced if the law specifies as default terms
the terms that would be agreed to by the majority of contracting parties, if
bargaining on the issue were costless and if they had full information. Transaction
costs are increased, on the other hand, if the law specifies a default term that is not
acceptable to most contracting parties – since more parties will need to contract out
expressly, or bear the cost of an inefficient allocation of risk. It is difficult to
identify terms in relation to jurisdiction which would be agreed in the majority of
cases. It is less difficult to conclude that most parties would not agree to a very
general ‘place of performance’ or ‘place of significant activity’ test, because such a
test would be seen as too vague, or the designated forum as not especially relevant.
Still less are the majority likely to agree to an arbitrarily selected ‘buyer’s forum’
or ‘seller’s forum’ term. An additional default jurisdiction of this kind is likely to
require more parties to include a forum clause in their contracts to achieve greater
certainty, or to achieve a more appropriate outcome – thus increasing the
transaction costs of cross-border contracting. This is directly counter to the goals I
have suggested for the convention.
There are circumstances in which it may be efficient for the law to specify
as a default term a term which would not be agreed to in the majority of cases. In
particular, it may be efficient to specify a term which will not be adopted in most
contracts where one party has superior information about the relevant risks, and
selection of a ‘penalty default’ will force disclosure of information that there would
otherwise be an incentive to withhold, resulting in inefficient allocation and pricing

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 David Goddard

of risk.10 To the extent that this line of reasoning is of assistance here (and its
relevance is debatable), it points towards an approach under which a contracting
party can say ‘I expect to be sued in my home jurisdiction – if you want to sue me
elsewhere, you should specify this so I can price for the associated risk’. It does not
support inclusion in the convention of any other default jurisdictions.
In summary, an additional default jurisdiction of this kind is of little
importance, and it is difficult to see how it can be specified other than in terms
which are highly indeterminate (or in some cases meaningless), or artificial. The
risk that it would be counterproductive is much greater than the prospect of such a
rule being beneficial.

5. Summary – Contract Disputes

In summary, appropriate provisions in relation to jurisdiction and enforcement of

judgments in contract disputes should be a high priority for the convention. The
convention should include:
(a) clear and simple default rules which permit claims under or in connection
with a contract to be brought in the defendant’s home jurisdiction, in the
absence of a forum clause;
(b) a provision permitting claims to be brought in a forum selected by contract,
with other courts deferring to the chosen court (unless of course the choice
is non-exclusive);
(c) provision for enforcement in other Contracting States of judgments
(including non-money judgments) given by a court with jurisdiction under
the convention.
This would give contracting parties the tools to manage jurisdictional risks. It does
not matter where they choose to litigate, or where those judgments end up being
enforced – the key is that they know what the position will be if they are silent on
the issue, and can select an alternative forum with certainty by contract, if they
wish to do so.
In discussing these issues I have however left to one side the aspects of
cross-border contracting which give rise to the most acute technical and political
difficulties. A great deal of time has been spent in discussions in the Hague in
relation to jurisdiction in disputes between businesses and consumers (‘B2C

10
See AYRES I. & GERTNER R., ‘Filling Gaps in Incomplete Contracts: an Economic
Theory of Default Rules’, in: (1989) 99 Yale Law Journal 87; TREBILCOCK M.J., The Limits
of Freedom of Contract, Cambridge (Mass.) 1993, pp. 120-124. The example that is
explored by AYRES and GERTNER is the restriction found in many common law jurisdictions
on recovery of damages for loss that is not reasonably foreseeable, such as loss of the
benefit of particularly lucrative downstream contracts, unless this unusual exposure has been
disclosed at the time of contracting.

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

contracts’ in the current jargon). In this context, and possibly also in relation to
contracts between individuals where neither party makes the contract in the course
of carrying on a business (often referred to as ‘C2C contracts’, perhaps less
appositely), the extent to which forum clauses should be given effect is highly
controversial – and attempts to steer a middle course are technically complex.
Similar concerns arise in relation to employment contracts.
To address these difficulties, we need to refine our examination of the
importance of ‘contract disputes’, looking more closely at the practical case for the
convention to address B2C disputes, and other “non-commercial” dealings such as
C2C contracts and employment contracts.

C. B2C and other “non-commercial” Contracts

How useful would it be for Pacific states for the convention to address jurisdictio-
nal rules in B2C contract disputes, bearing in mind the important and complex
issues associated with such rules?
The volume of B2C commerce across borders, especially in the Pacific, is
still tiny. It is dwarfed by B2B dealings both in value and in volume of
transactions. But it will undoubtedly grow in the future, especially as Internet
commerce develops.11 And reducing costs and risks for consumers is always
desirable. Enhancing the access of consumers to meaningful remedies in cross-
border contexts is also an important element in building consumer confidence in
electronic commerce – and in achieving the social and economic benefits that this
may bring.
So the answer is that there is some value in addressing jurisdiction in B2C
contract cases – though much less than in relation to B2B dealings – and that value
is increasing rapidly.
However there are two important qualifications to that positive response.
The first is that most consumer transactions do not involve large sums. A breach by
the seller – even one as fundamental as non-delivery of goods, or entirely defective
goods or services – will not justify taking court proceedings in one jurisdiction, let
alone taking proceedings in one jurisdiction then seeking to enforce the judgment
elsewhere. The reality is that only a tiny proportion of consumer transactions will
ever raise the cross-border enforcement issues with which the convention is
concerned – the main examples being high value personal injury claims against the
seller, or class actions. For the vast bulk of cross-border consumer dealings, online
or offline, the only relevant remedies in contract disputes will be the seller’s

11
For a survey of available data and projections, which suggests that B2B dealings
make up around 85% of e-commerce transactions by value, and that this sector is likely to
grow faster than B2C in the near future, see COPPEL J., ‘E-Commerce: Impacts and Policy
Challenges’ (OECD Economics Department Working Paper No 252, June 2000) available at
http://www.olis.oecd.org/olis/2000doc.nsf/linkto/eco-wkp(2000)25.

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 David Goddard

internal complaints process, or ADR mechanisms, supported by reputational

sanctions (including trust mark based systems).12
Second, the convention will not play an important role in encouraging consumer
confidence in electronic commerce. The contribution the convention can make to
reducing risk for consumers in dealing online is very limited:
- there will always be many countries that are not parties to the
Convention. The Convention will not assist a consumer dealing with
such businesses. Consumers will not consult a list of contracting states
(even one conveniently available on the Net!) before buying software
online – so they will not know which countries are safer to deal with
than others, and should assume that in every case it will be hard to
enforce local court orders against a foreign supplier;
- even where the consumer and the business are both in Contracting
States, the convention will almost never be relevant when it comes to
resolving disputes, as the cost of taking steps in two jurisdictions will be
prohibitive, in the context of a low value transaction;
- enforcement risk is tiny compared with more fundamental risks facing
consumers, such as identifying and locating the other party, or the
creditworthiness of that other party.
Put another way, any general confidence in electronic commerce that consumers
derived from the convention would be misplaced.
These two qualifications suggest that though there is undoubtedly a problem
in this field, it is unlikely that the convention could do much to remedy it. That
conclusion is reinforced by considering how the convention might attempt to
address B2C dealings – and the technical and political complexity of doing so. The
model suggested for B2B contract cases – a simple, clear default rule and an ability
to contract out – cannot be used for B2C dealings. Most countries limit, or exclude
entirely, the ability of consumers to enter into binding forum clauses. And certainly
there is room for concern about whether consumers understand the implications,
and practical significance, of forum clauses.
Nor, on the other hand, is there general acceptance that consumers should
always be permitted to bring proceedings in their home jurisdiction, and enforce
the resulting judgment world-wide. Views differ on whether such a rule is
beneficial to consumers, or to the many SMEs looking to the Internet to expand
their businesses across borders:

12
For a very useful discussion of these issues, see the report prepared by the OECD
of a recent conference organised by the OECD, the Hague Conference on Private
International Law, and the International Chamber of Commerce on ‘Building Trust In The
Online Environment: Business-To-Consumer Dispute Resolution’ at http://www.oecd.org/
dsti/sti/it/secur/act/online_trust/hague-adr-report.pdf.

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

(a) the concern, for small remote countries in particular, is that exporters of
goods and services based in larger countries – especially content providers –
might respond to any increased risk of being sued in unfamiliar and distant
countries which provide limited market opportunities by deciding not to
invest in compliance with local requirements, or the ability to defend
proceedings in that jurisdiction. The simplest way to do this is to decline to
provide goods or services to purchasers in those countries.13 This
‘balkanisation’ of the Internet has the potential to reduce access to services
for both consumers and for businesses;
(b) alternatively, costs may increase for users in small remote countries, as
suppliers of content price for the increased risk and cost of dispute
resolution;
(c) from the perspective of SME suppliers in all countries, but especially small
remote countries, being exposed to the risk and cost of defending
proceedings in many distant countries is an additional barrier to selling
goods and services over the Internet. The value of the Net, for SMEs, is that
it provides access to world-wide markets at relatively low cost: but if this
access brings with it significant legal risk, their ability to use it will be
impeded.
There is a plausible argument that these negative effects should not be exaggerated,
because the risk of liability is so small. But this is another way of saying that the
convention hardly ever matters in cross-border B2C cases.
There does not seem to be any objection to providing for claims by or
against consumers to be brought in the State in which the defendant is habitually
resident, and for enforcement of the resulting judgments elsewhere, at least where
there is no forum clause requiring proceedings to be brought in a different court.
The value of including such a rule in the convention is limited, since national law
will always (so far as I am aware) provide for this forum, and enforcement will
normally be sought in that forum. But it is not without significance. However this
immediately raises difficult questions in relation to the effect of a forum clause.
Should such a clause preclude access to the defendant’s home forum, even if the
clause is not given any broader effect?

13
There are limits to the ability of suppliers to identify the country in which an
Internet customer is based, and decline to deal with some countries’ residents. But a mix of
technological indicators and simple inquiry will enable the supplier to pinpoint the honest
and the unsophisticated – and this is enough to do most of the economic harm associated
with refusals to deal based on location. Commercial providers of geolocation services claim
a high degree of accuracy in identifying the country of origin of web users, and a report
prepared for the French court by a panel of experts in the recent Yahoo! litigation suggested
that the country in which an Internet user is located can be identified accurately in 90% of
cases: see ‘Putting it in its place’ in: The Economist, 11 August 2001, also available at
http://www.economist.com/displayStory.cfm?Story_ID=729808.

Yearbook of Private International Law, Volume 3 (2001) 47

 David Goddard

This leads into the more general issues of whether the convention should
provide for jurisdiction in the consumer’s habitual residence, in certain
circumstances, and the extent to which the convention should give effect to a
forum clause in a B2C contract.
The most that is likely to be found in any widely ratified convention, by
way of special provision for B2C contract disputes, is a default jurisdiction in the
consumer’s habitual residence that is available if certain conditions are met (e.g.
promotional activity by the business in, or directed to, that State), and provided
there is no forum clause designating a different court.
This approach could in principle be coupled with provisions:
- establishing a protective jurisdiction in the consumer’s habitual
residence that overrides any forum clause, if both that State and the State
in which the business is located (and where enforcement will ultimately
be required) consider that this is an appropriate policy outcome;
- giving effect to forum clauses in B2C contracts, if and only if the
consumer’s habitual residence considers that this is an appropriate
policy outcome.
Variations on these themes are found in the alternative Articles on jurisdiction in
consumer cases set out in the Interim Text. Such provisions would not be
valueless. Nor, however, are they of far-reaching practical importance. Such an
Article is desirable, other things being equal, but does not constitute a ‘must have’.
The difficulty that is being encountered in drafting a reasonably simple and clear
provision that embodies this sort of middle road suggests that the challenge of
framing such a provision may prove insuperable. Even if the various alternatives in
the Interim Text achieve an appropriate result, they are far from being clear and
accessible. And even their most ardent supporters could not describe them as
concise or elegant.
It is worth continuing to pursue this work: but if we cannot craft a provision
which is reasonably clear and accessible, and acceptable to most delegations, the
topic of jurisdiction in B2C contract claims might better be left for another day.
Many of the same issues arise in relation to other non-commercial contracts,
such as employment contracts and C2C contracts. There are real difficulties in
framing provisions that will be widely accepted. And in any event, the convention
will almost never be relevant. The practical value of addressing these classes of
contracts is not great. They should not be a priority topic.

D. Tort Claims and Other ‘Imposed Obligation’ Claims

The next candidate for inclusion in the convention is jurisdiction in tort claims
between non-contracting parties, and other claims for breach of obligations
imposed by law, rather than being voluntarily assumed by contract. How useful,

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

from a Pacific perspective, would it be for the convention to address jurisdiction in

such claims?
In the Pacific context, physical torts are rarely committed across borders.
The most common type of cross-border physical tort claim seems likely to be
product liability claims, as products are widely traded across borders in the region.
Yet such claims are extremely rare, even between countries like New Zealand and
Australia which trade together a great deal (there is a single trans-Tasman market
for goods, supported by mutual recognition laws), and recognise each other’s
judgments reasonably readily. For example, I am not aware of a single case of
enforcement being sought in New Zealand for a personal injury judgment given in
Australia, even though enforcement of money judgments from Australia is a
relatively simple and inexpensive process.14
Defamation claims, claims for infringement of intellectual property rights,
and other ‘non-physical’ cross-border wrongs are more common in the region. But
the number of such claims is small compared with the number of cross border
contract disputes, based on my experience in practice and a review of the New
Zealand caselaw. In New Zealand, for example, a (simple, and rather unscientific)
review of recent High Court decisions suggests that cross-border disputes between
contracting parties outnumber claims between strangers by more than 5 to 1.15 And
this statistic reflects the proportion of contentious cases: if (as seems likely, based
on experience in practice) contract cases are underrepresented in the judgments
databases because there is rarely a challenge to NZ jurisdiction where there is an
applicable forum clause, the ratio of contract cases to other cases would be much
higher still. I would be surprised if this ratio was significantly different in other
countries in the region – or for that matter in other parts of the world.
So the ‘frequency’ rating is relatively low. Do these cases pose problems,
though, when they do occur? Are there difficulties with existing jurisdictional
rules, and enforcement of resulting judgments? Plainly there are real difficulties –
and these are being exacerbated by the rise of the Internet and other forms of ICT

14
Since New Zealand has replaced tort claims for personal injury in almost all
contexts with a broad ‘no fault’ scheme, the reverse scenario is very unlikely to arise.
15
This admittedly imperfect review involved searching the Briefcase database,
which indexes virtually all High Court decisions (reported and unreported) for decisions
over the last decade which referred to the provisions of the High Court Rules relating to
service of proceedings out of NZ, and identifying the nature of the claim which was the
subject of the proceedings. Quite apart from questions concerning the coverage of the
database, it needs to be borne in mind that if there was no challenge to service out of the
jurisdiction the rule would not necessarily be referred to (so most cases where jurisdiction is
founded on a forum clause would not appear, since a challenge is usually pointless). The
review does however indicate the classes of case in which service out of NZ has proven
contentious.

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 David Goddard

which extend the reach of wrongdoers across borders.16 Both the conceptual basis
for exercise of tort jurisdiction, and the application of the relevant rules in the
context of the Internet and e-commerce generally, are hotly debated within many
countries. And conceptual frameworks and applicable rules differ significantly
from country to country.
This brings us squarely face to face with the complexity of making
provision for jurisdiction in cross-border tort cases. It seems to be generally
accepted that a tort claim should be able to be brought in the defendant’s home
jurisdiction – the defendant’s habitual residence, or the situation of a branch,
agency or other establishment whose activities gave rise to the claim. But as noted
above, this is not the most practically important of forums to provide for in the
convention, since it is usually available under national law, and the resulting
judgment can often best be enforced in the forum. And as recent experience in The
Hague demonstrates, it is very difficult to craft an appropriate and widely accepted
rule providing for special jurisdiction in tort cases, both technically and politically.
The technical complexity stems from several factors. Not least of these is
the intense debate about appropriate connecting factors for jurisdictional purposes
in connection with dematerialised torts. The courts of many countries, and
academic commentators, are still in the early stages of analysing and understanding
the implications for traditional tort jurisdiction tests of the Internet, and high
capacity and low cost communications generally. There is certainly no consensus –
or even widespread agreement – on appropriate jurisdictional rules in such cases.
Approaches based on ‘activity’ engaged in in the forum, or directed to the
forum, provide little guidance in practice – at least without an extensive caselaw to
flesh out their application in particular contexts. They have led courts to attempt to
develop a range of guidelines for evaluating the jurisdictional significance of
dealings with persons in the relevant forum of varying kinds and intensity, none of
which are readily reduced to provisions in a convention. Approaches that are more
familiar in many common law countries and Europe look to where the wrongful act
was done: but in the context of on-line dealings tests of this kind lead to arcane,
and somewhat sterile, debates about where services purchased online are supplied,
and where information obtained through ‘pull’ technologies rather than ‘push’
technologies has been provided. Tests based on where the effects of wrongful
conduct are felt lead to a multiplicity of available fora and many opportunities for
forum shopping by plaintiffs – but all attempts to impose limits on the availability
of these fora have proved to some extent arbitrary and controversial.
The political complexity stems from several sources. The principal source
of difficulty is that tort rules are mandatory rules which differ from country to
country, reflecting different values, different social choices, or different legal

16
An excellent collection of papers surveying the difficult issues that arise in cross-
border tort disputes can be found in MCLACHLAN C. and NYGH P. (eds.), Transnational Tort
Litigation: Jurisdictional Principles, Oxford 1996. See in particular the useful overview by
MCLACHLAN C. in Chapter 1.

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

techniques for pursuing similar policy goals. Some countries impose tort liability
for statements or acts which are not actionable in other countries. The approach to
awarding damages, and costs, varies enormously between countries. Different rules
exist in relation to recovery of economic loss, of legal costs, of punitive or
exemplary damages. And approaches to non-money relief – such as injunctions
restraining publication of defamatory statements – vary significantly between
countries. Concern about liability under the domestic tort law of country A
translates very swiftly into concern about providing for jurisdiction in country A,
and enforcement of the resulting judgment in other Contracting States. Some areas
where these concerns are particularly acute include:
- liability for speech/freedom of expression rules. Publication on the
Internet results in speech being accessible – and potentially actionable –
in many countries. Liability rules differ significantly between countries,
and raise sensitive issues at the intersection of freedom of expression
principles on the one hand, and on the other hand policy goals relating to
hate speech, protection of reputation, public order, and protection of
religious and cultural sensitivities;
- the boundaries of intellectual property protection, in particular
copyright. Differences in the scope of such protections, in the parties
liable for infringements, and in the defences available to infringement
claims, have raised concerns about increased exposure associated with
global distribution of content, in particular through the Internet. While
enhanced protection of intellectual property through reduced
enforcement costs can make an important contribution to the underlying
policy goals of intellectual property law, there is a concern that content
owners will invoke the laws of the most protective jurisdictions in which
copyright material can be accessed to prevent or deter legitimate uses of
that material in other countries;
- the extent to which infrastructure providers in the ICT sector are
protected from liability. In some countries, notably the United States,
legislation limits the exposure of infrastructure providers in respect of
content which they store or transmit.17 Similar protections are not
available elsewhere. The difference in substantive laws inevitably results
in increased focus on questions of jurisdiction, and on the possibility of
a judgment being enforced in a Contracting State for a liability that
would have been excluded under that State’s substantive laws.
Another source of political complexity stems from active lobbying by groups with
vested interests in extending liability in certain sectors, or in restricting liability in
certain sectors. In the absence of substantive limits on their liability in many

17
See section 512 of the US Copyright Act, enacted by the Digital Communications
Millennium Act 1998.

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 David Goddard

jurisdictions, for example, infrastructure providers hope to limit their exposure to

the exercise of jurisdiction in a wide range of States. On the other hand, content
providers seek to establish jurisdiction (and an option as to where to pursue their
claims) in as wide a range of fora as possible. Each group claims that acceptance of
its arguments is critical for the future of the on-line economy. The answer seems
likely to be more nuanced: governments the world over are striving to find an
appropriate balance in this area, and a period of experimentation and of differences
in approach seems inevitable. The challenge of addressing these issues even at the
domestic level suggests that it is implausible that a single world-wide solution will
be arrived at in the near future. Continuing differences in substantive laws will
ensure continuing sensitivity and controversy in respect of jurisdictional rules.
Still further political complexities arise from the intersection between some
of the novel channels that are being used to pursue claims in respect of human
rights violations, and the prohibited grounds of jurisdiction on the ‘black list’. This
is another issue that has yet to be resolved in a manner that commands widespread
support.
Moving on to other facets of the convention, another source of both
technical and political complexity stems from the inevitability of special
jurisdiction rules in tort providing for multiple fora in many cases – for example
where wrongful acts occur in several States, or where effects are felt in several
states (consider, for example, a defamation claim based on a publication on a
website). This means that the convention needs to contain priority rules which
determine which of the available convention fora will proceed to hear the claim,
and which will defer to that ‘priority forum’. (And the practical relevance of these
priority rules will be much greater than in the context of rules permitting contract
claims to be brought in the defendant’s home forum.) Significant steps have been
made towards resolving this issue in Articles 21 and 22 of the Interim Text. But it
remains an additional layer of complexity and political sensitivity which would, if
avoided, reduce the difficulties of finalising the convention, and the barriers to its
ratification.
It is also in the field of tort claims that the most difficult and controversial
issues arise in relation to the extent to which a judgment should be enforced. Many
States have expressed concern about the possibility of being required to enforce
non-compensatory or ‘excessive’ damages awards from other Contracting States.
The Interim Text addresses this issue in Article 33, and provides for partial
enforcement in such cases. The draft Article 33 may well provide the basis for a
workable compromise on this difficult issue. But if omission of tort claims from
the scope of the convention would enable that issue to be avoided, or reduce the
frequency with which the issue arose and thus the practical importance of the
relevant provision, that would undoubtedly be an advantage.
In summary, the social and economic benefits that could be achieved by
addressing jurisdiction in tort claims seem comparatively small, especially from a
Pacific perspective where cross-border physical tort cases are rare. The difficulties
associated with attempting to do so seem considerable. While further work is

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justified on some of the categories of claim that raise fewer technical or political
difficulties – such as personal injury claims, or damage to tangible property, where
the technology issues are less acute and policy approaches in most countries are
similar – none of these appear to be ‘must have’ topics.

E. The Risk of Addressing Jurisdiction in ‘Stranger’ Claims

The discussion of tort claims above raises a general issue of considerable

importance in framing this convention which was touched on earlier. ‘Imposed
obligations’ such as those created by tort law apply whether or not the parties are
in a contractual relationship. Typically the parties do not have the opportunity to
contract in respect of their interactions before the claim arises. Just as the parties
cannot contract in relation to the substance of the obligation, they will often not
have the ability to contract in relation to jurisdiction before the claim arises.
It seems to me that we should be wary of attempting to address the question
of jurisdiction in ‘imposed obligation’ cases between strangers in the convention,
unless we are very confident that the rules we are prescribing are appropriate.
There is the world of difference between default rules that can be contracted out of
at a relatively low cost, and mandatory rules, or rules that apply as between
strangers where contracting costs are prohibitive. The content of default rules in
the contractual context is important – but the consequence of getting them wrong is
in most cases simply an increase in transaction costs. The cost of getting
mandatory rules wrong, or stranger rules wrong, is inappropriate outcomes, and
significant economic distortions. Where a problem is not well understood, or where
there is real doubt about the appropriate outcome, the risk of making a mandatory
rule or a stranger rule is much greater than the risk of making a default rule. A
higher degree of caution and restraint is warranted.

F. Restitution Claims

Despite the practical importance of cross-border restitution claims in a world

where assets are easily moved from one country to another, the topic of restitution
has attracted little discussion by the Special Commission, or at the Diplomatic
Conference. The reason may be that European participants have assumed that
restitution claims were covered by the ‘torts’ article, consistently with the
European jurisprudence on the Brussels Convention18, while it has never occurred
to most other participants that a restitution claim is a ‘tort’, and that Article 10 of
the Interim Text should be considered in that light. As each group of participants
has been comfortable with its (inconsistent!) assumptions, the issue has not arisen
for debate.

18
See Kalfelis v. Schroder [1988] ECR 5565.

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 David Goddard

Putting this history (or its absence) to one side, how important is it, from a
practical perspective, for the convention to address jurisdiction in cross-border
restitution claims? Or, to be precise, in restitution claims between strangers – for if
contractual disputes are covered by the convention, that will catch restitutionary
claims arising out of contractual relationships, for example where a contract is
frustrated, or affected by a mistake as to its subject-matter, or where there is a
failure of consideration.
In the Pacific region, at least, cross-border restitutionary claims between
strangers remain rare compared with contract claims. But experience in practice
suggests they may be more common in this region than cross-border tort claims,
especially if tracing claims in respect of the proceeds of fraud or other wrongs are
included under the ‘restitution’ rubric. The frequency with which cross-border
enforcement issues arise in connection with restitution claims is likely to continue
to increase, moreover, as it becomes ever easier for funds to be moved between
jurisdictions, and converted into different forms.
Turning to the second element in our matrix, cross-border restitution cases
raise a number of difficult problems in practice, such as:
- problems in establishing jurisdiction in a State in which assets against
which recourse is sought are located, where no proprietary claim can be
made in respect of those assets, and where there is no other connection
between that State and the defendant or the substantive dispute. While
the courts of some States (such as Germany) exercise general
jurisdiction based on the presence of assets of the defendant in the State,
this is not the case in many other States;
- the need for access to effective interim relief, often in several
jurisdictions, none of which need have any connection with the
substantive dispute. Interim relief may be sought to freeze assets, to
prevent the defendant dealing with assets in other jurisdictions, or to
obtain disclosure of the whereabouts of assets. The extent to which
interim relief is available in support of foreign proceedings varies
considerably from country to country, and is very limited in many
common law countries;19
- the need, in many cases, for multiple proceedings in order to ensure that
effective relief is obtained against assets held in several jurisdictions.
Some (though not many) of these difficulties would be addressed by providing for
jurisdiction in the defendant’s home jurisdiction, and enforcement in all
Contracting States of the resulting judgment. Such a rule seems uncontroversial in
this context, as in others.
But the issues relating to interim relief would require a more complex set of
solutions. At the least, a provision would be required conferring jurisdiction on the
courts of Contracting States to grant interim relief in support of proceedings in

19
See eg Mercedes-Benz AG v. Leiduck [1996] 1 AC 284 (PC).

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

another Contracting State. It would be possible to go further, and require interim

relief to be granted in support of such proceedings. But even the less ambitious
approach has been strongly resisted by some delegations, and has proven
technically difficult to draft in a way which does not give rise to concerns that the
convention is intruding too far into domestic rules of procedure, and questions of
substantive law. It has been argued, with some force, that this is an issue better
addressed in domestic legislation – perhaps in the implementing legislation giving
effect to the convention that would be required in the common law states for which
this is a particularly acute problem.
The current problems in this field are of sufficient practical importance that
further work towards a widely acceptable solution is clearly justified. But if a clear,
effective and appropriate rule which is widely accepted cannot be crafted, this too
is an issue which is better left for another day, rather than permitting it to imperil
the core of the convention.

G. Trusts

If cross-border tort claims are rare in the Pacific, cross-border disputes concerning
express trusts of an ‘internal’ nature are rarer still. Nor is it easy to point to
significant problems that have been encountered in litigation of this kind, which
cry out for resolution in a multilateral convention. And while trusts are often used
for commercial purposes, it would be difficult to argue that addressing jurisdiction
and enforcement of judgments in relation to internal trust disputes – in particular,
trust disputes which cannot also be framed as contract disputes – will make a
meaningful contribution to reducing the costs of cross-border trade.
The importance of addressing this issue is, therefore, slight. The only reason
for persisting with work on this point appears to be that it is not very controversial
– as the relative absence of square brackets in Article 11 of the Interim Text attests.
However the absence of controversy in relation to jurisdictional rules masks the
fact that if default rules are prescribed for internal trust disputes, they will
inevitably point to multiple fora, requiring the convention to address the priority
issues discussed above in connection with tort claims. If this could otherwise be
avoided, the benefits of making provision for trust claims would not justify
embarking on that difficult topic.
In summary, internal trust claims are not part of the convention’s core. But
if it is relatively simple to reach consensus on providing for such claims, it may be
worthwhile to address this topic.

H. The Black List

So far we have been considering the importance of providing for the exercise of
jurisdiction in certain cases, and for the enforcement of the judgments which result.

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 David Goddard

How important is it for the convention to provide for a ‘black list’ of prohibited
grounds of jurisdiction, seen from a vantage point in the southern Pacific? The
goal of reducing uncertainty and unnecessary risk and cost for businesses trading
across borders would presumably be enhanced by limits on the exercise by foreign
States of exorbitant grounds of jurisdiction.
In the context of contract disputes, a black list is not very important at all.
By agreeing on a forum, the parties to a contract render the black list entirely
irrelevant. The chosen forum will be available, and all other courts in contracting
states will decline to hear the case without any need to refer to a black list. The
goal of reducing uncertainty is achieved by other means.
Even where there is no forum clause, a plaintiff deciding where to bring
proceedings:
- has some incentive to sue in a convention forum, to facilitate
enforcement;
- has some incentive not to sue in a court in a Contracting State with no
significant connection with either the defendant or the claim. There is no
point in choosing a court in a country that is not a convention forum,
unless the judgment can be enforced there (or elsewhere, under national
law). This will be enough to exclude many inappropriate fora, in many
cases.
Of course there will be some cases where the strategic benefit of suing in a forum
seen as ‘friendly’ to the plaintiff’s claim will outweigh these factors. And the
defendant will then be faced with the difficult choice of whether to appear and
defend the proceedings – and risk enforcement in many other countries under
national law, as well as in the forum, if the claim succeeds – or to let judgment be
entered by default, and be exposed to enforcement in the forum state.
But it must be borne in mind that the defendant could have avoided this
dilemma by contracting for a particular forum, or for arbitration: if the risk is an
important one, contracting parties have the tools to manage it. Because the parties
to a contract will have the ability to solve this problem for themselves, if the
convention provides for forum clauses to be effective, there is no compelling need
for the convention to go further and provide default rules prohibiting certain fora. It
seems to me that the first factor in the matrix identified earlier in this section – the
degree of benefit to be obtained from addressing the issue in the convention –
suggests there would be little point in having a black list in a convention that is
concerned solely with disputes between contracting parties. And when the
difficulty of settling the content of a black list is taken into account, this strongly
tips the balance against trying to do so, if the convention is so confined.
Outside the realm of contract cases, the black list is likely to be more
significant, for two reasons:
(a) there is not usually an opportunity to contract in relation to the forum for
resolving the dispute, before that dispute arises;

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 Rethinking the Hague Judgments Convention : A Pacific Perspective

(b) variations in the substantive law applied in different fora are much greater,
and can reflect very different policy choices.
There are some heads of jurisdiction which are difficult to justify on any principled
basis – such as the ‘tag’ jurisdiction exercised in New Zealand and many other
common law countries. If the convention ranges more widely than contract claims,
it seems sensible to exclude these heads of jurisdiction, if doing so is not likely to
be controversial. This would be consistent with the convention’s basic goals.
But where inclusion of a ground of jurisdiction on the black list is likely to
jeopardise ratification of the convention in any major trading State, we should only
buy that fight if there is clear, reliable, empirical evidence of the practical problems
caused by the relevant rule. Hard policy choices with significant practical
implications need to be founded on something more robust than abstractions and
anecdotes. While I have an open mind on this point, nothing I have seen in the
negotiation process to date establishes that the problem that an extensive black list
would be ‘solving’ is worth the risk of excluding a major trading partner from the
convention.

A Red Herring in Relation to the Black List

It is sometimes suggested that there is little benefit for other States in entering into
a convention with the United States unless there is an extensive ‘black list’ that
prevents US courts from exercising exorbitant grounds of jurisdiction – in
particular, general ‘doing business’ jurisdiction. There is no benefit in agreeing
white list grounds of jurisdiction with the United States, the argument runs,
because the US already takes a relatively generous approach to enforcing foreign
judgments. Thus other States should hold out for an extensive black list – and
refrain from entering into a convention with the US, if agreement on this issue
cannot be reached.
This analysis misconceives the basic policy goal of the convention, as
explained above. It is not about relations between States, with State A ‘gaining’ if
more of State A’s judgments are enforced elsewhere, and ‘losing’ if it has to
enforce more of the judgments granted by other States. It is about the costs to firms
of doing business across borders. Seen from this level, a convention with the US
that clarifies jurisdictional rules in contract cases, and simplifies enforcement of
judgments, is of real benefit to non-US businesses. As mentioned above, at present
there is abundant room for interlocutory wrangles over jurisdiction, and conflicting
judgments. And real difficulties arise in relation to enforcement of non-money
judgments. It is these inefficiencies which need to be addressed by the Convention.
If uncertainty and risk and legal costs are reduced, all traders in all participating
States will benefit. The prospect that uncertainty and risk might be reduced further
still by a more far-reaching – but unachievable – convention is not a sound reason
for rejecting significant achievable gains

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 David Goddard

IV. The Core of the Convention

A. The Core

The analysis in section 3 above suggests that the focus of the convention should be
on contractual activity, excluding B2C and C2C contracts. The primary benefit to
the Pacific region will come from a convention that applies to disputes between
parties to contracts (other than B2C and C2C contracts), which:
(a) provides simple, clear, appropriate default rules where there is no forum
clause. The only default rules that meet these criteria are rules providing for
jurisdiction in the defendant’s home jurisdiction – its habitual residence, or
the place where a branch, agency or establishment through which the
contract was made is situated;
(b) gives effect to forum clauses, ensuring that the chosen court will hear the
claim, other courts will not disregard the clause, and the resulting judgment
will be enforced in other Contracting States.
These are both the most valuable topics, and the most tractable. They should form
the core of the convention.

B. Other Topics

Well behind contractual disputes in terms of practical importance for Pacific States
come, in no particular order, the following types of cross-border dispute:
(a) tort claims between non-contracting parties, including intellectual property
infringement claims. Claims in relation to physical torts seem most likely to
be capable of being successfully addressed;
(b) restitution claims, including claims in connection with money taken
dishonestly or paid by mistake;
(c) B2C contract claims;
(d) disputes concerning trusts, to the extent this is not covered by the other
heads of jurisdiction.
It is certainly worth trying to achieve agreement on these – but not at the expense
of the core. The black list falls into much the same category, at least on the current
evidence.

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V. Rules to Give Effect to the Core of the Convention

– Some Suggestions
It seems logical to begin the process of preparing a draft convention by drafting the
provisions that would be required to address the core identified above. The
desirability and feasibility of addressing additional topics can then be examined by
looking at what would need to be added to the core draft if those topics were to be
covered – both in terms of additional jurisdictional provisions, and additional
provisions relating to procedure or enforcement.

A. Drafting a ‘Choice of Forum’ Convention

The simplest convention would focus on choice of forum clauses alone. It would
provide that where parties to a contract (other than a B2C or C2C contract) agreed
to refer a dispute (whether contractual or otherwise) to a particular court, that court
would have jurisdiction to decide the dispute. It would also provide that where
such a clause was exclusive, all other courts would decline jurisdiction. The
Interim Text goes further and provides that forum clauses are to be treated as
exclusive unless they expressly provide otherwise. This probably accords with the
expectations of most contracting parties, and does not appear to be controversial.
Article 4 of the Interim Text provides a good basis for this provision.
What else would be required in a convention confined to the topic of forum
clauses? There would be no need for any other Articles relating to jurisdiction. Nor
would there be any need for provisions in relation to:
- lis pendens and declining jurisdiction (on grounds such as forum non
conveniens). At most, the convention might confirm that the chosen
forum cannot decline to exercise jurisdiction;20
- prohibited grounds of jurisdiction;
- the ‘grey list’. At most, the convention would confirm that it did not
affect the exercise of jurisdiction based on national law, in cases where
there is no forum clause;
- appearance without protest (except to confirm that this did not amount to
a choice of forum for the purposes of the convention);
- authentic instruments;

20
While the possibility of multiple fora cannot be ruled out, if a contract provides for
claims to be brought in any of several States, this is most unusual. If the convention
provided that a chosen forum cannot decline to exercise jurisdiction unless another forum is
also chosen by the contract, and is seised, that should be sufficient to deal with even the
most exceptional cases.

Yearbook of Private International Law, Volume 3 (2001) 59

 David Goddard

- bilateralisation, or other provisions designed to limit the States whose

judgments would be enforced (see Article 42 of the Interim text). If the
parties have chosen the forum, they can hardly complain if its judgments
are given effect by other Contracting States;
- legal aid – this is much less of an issue in the commercial context;
- non-compensatory damages or grossly excessive damages: if the parties
have chosen the forum, they cannot reasonably object to its damages
rules. No such objection is available in proceedings to enforce an award
under the New York Convention – there is no case for a more restrictive
approach here.
Most of the Interim Text provisions in relation to the process for enforcement of
judgments could be carried across without modification. (The detailed provision
the convention would make for enforcement matters would be one of the principal
differences between the draft convention and the Hague Convention of 25 Novem-
ber 1965 on the Choice of Court, which has never come into force.) Provisions in
relation to substantive scope,21 territorial scope, and relationship with other
conventions would all be substantially simplified.
A draft convention along these lines could be finalised relatively easily, and
without much delay.

B. Providing for Default Jurisdiction in Claims Between Contracting

Parties

What would need to be added to the provisions described above in order to provide
for a default jurisdiction in claims arising under or in connection with a contract
(other than B2C or C2C contracts) in the defendant’s habitual residence, or in the
State where the relevant branch, agency or establishment is situated? Jurisdiction
provisions along the lines of Interim Text Articles 3 and 9 (without any reference
to ‘regular commercial activity’) would be required. The scope of this default
jurisdiction would need to be set out – either in these Articles, or in the provision
concerned with the substantive scope of the convention. Provisions in relation to lis
pendens and declining jurisdiction would also be required – Articles 21 and 22 of
the Interim Text would provide the starting point.
To avoid serious asymmetry and injustice, it would also be necessary to
provide that a court with jurisdiction under these rules had jurisdiction in related
counterclaims – a provision along the lines of Article 15 of the Interim Text would
be appropriate.
I doubt that any other additions would be essential. A defendant with its
habitual residence or a branch, agency or establishment in a State can hardly be

21
The matters in respect of which Article 12 of the Interim Text provides for
exclusive jurisdiction would be excluded from the scope of the convention.

60 Yearbook of Private International Law, Volume 3 (2001)

 Rethinking the Hague Judgments Convention : A Pacific Perspective

heard to complain about enforcement of judgments rendered by the courts of that

State, whether in that State or in other Contracting States. So there would be no
additional concern in relation to bilateralisation, or excessive or non-compensatory
damages.
This is a slightly more ambitious work programme. But it is still confined to
topics that are the subject of near consensus, and that are in my view eminently
resolvable with a little time and attention. One of the main reasons that more
progress was not made on these issues in June 2001 was the shortage of time – and
this was a product of the significant amount of time consumed by other, more
complex but less critical, issues.

VI. Future Directions

Finally, if we are to take a practical approach to this convention we need to adopt a
process that ensures we focus on perfecting the core, and do not jeopardise the core
through disagreement on other issues, or through spending large amounts of time
on less significant issues. We should be open to the possibility of a broader
agreement, if it proves achievable: but pursuit of this broader agreement must not
take place at the expense of achieving the core.
It seems to me that there are several approaches that might work. In each
case we should begin by perfecting the core, and preparing a draft convention
which would give effect to that core. Until this is done, we should not permit
ourselves the luxury of devoting scarce time and resources to less critical issues.
This would constitute stage one.
For stage two of this work there are three basic options. The Hague
Conference could:
(i) work on a wider range of topics, but drop back to the core if agreement on
these topics cannot be reached on a consensus basis; or
(ii) work on a wider list of topics, with a view to incorporating them in an
optional Chapter. Consensus might not be essential in relation to this
Chapter, which could contain both additional grounds of jurisdiction and a
black list of prohibited grounds; or
(iii) decide not to pursue a wider range of topics at present (ie dispense with a
stage two, and move straight to stage three).
Approach (ii) is at first sight appealing. It allows those countries that can reach a
more extensive agreement to piggyback on the core convention, and its
enforcement provisions, without compromising the core. It also provides a
‘pressure valve’ for addressing issues seen by a subset of participants as important
elements of a successful convention. On balance, however, I suspect it is less
desirable than approach (i), for two reasons:

Yearbook of Private International Law, Volume 3 (2001) 61

 David Goddard

(a) the chapter on enforcement may become more complex, and more
contested, if it also needs to accommodate enforcement of judgments based
on optional heads of jurisdiction. So the risk of States deciding not to ratify
the core because of concerns about enforcement provisions would be
increased;
(b) if topics are addressed inappropriately, it may be more difficult to revisit
them in later years than it would be if the territory remained untrodden.
The flexibility that approach (ii) would provide should not however be
underestimated. It merits careful consideration and further debate.
Stage three would take place five to seven years after the convention comes
into force. The Judgments convention is best seen as a continuing process of
rapprochement of jurisdictional practices, in the light of experience with the
convention and with cross-border dispute resolution generally. The core conven-
tion should provide for delegations to meet again in the future to review the
convention, with a view to addressing further topics. The importance of stage three
cannot be overstated. We should not attempt to resolve everything now, and risk
achieving nothing in practice. A staged approach is more likely to succeed, and
less likely to do harm, especially in fields we do not yet fully understand such as e-
commerce.
The next meeting in relation to the judgments convention is scheduled for
January 2002. Participants should attempt to reach agreement on the process to be
followed at that meeting. Work on identifying the core issues, and addressing
them, should follow – first policy decisions on outstanding issues, then detailed
drafting. Next would come work on possible additions. The second half of the
Diplomatic Conference would then:
- determine the core by consensus, building on preparatory work that
should largely have resolved these issues;
- explore what (if anything) can be added to that core by consensus;
- if approach (b) is adopted, settle the content of the optional chapter
(perhaps on some basis short of consensus).
The recent history of the judgments project has tested the enthusiasm and
commitment of many participants. It would be easy to give up, and conclude that
the issues are too difficult and the politics too intractable. But seen from this end of
the world at least, that would be a tragic waste: a waste of an important
opportunity, and a waste of a great deal of valuable work by some of the world’s
leading private international lawyers. We must not let competing conceptions of an
ideal convention prevent us from achieving a worthwhile one – one that meets a
real practical need, and contributes, albeit indirectly and in a small way, to
increasing prosperity and economic and social development. That is the real
challenge: if we keep it firmly in our sights, we will have a reliable guide for
settling our priorities, and for resolving our differences.

62 Yearbook of Private International Law, Volume 3 (2001)

 INDIRECTLY HELD SECURITIES:
A NEW VENTURE FOR
THE HAGUE CONFERENCE ON
PRIVATE INTERNATIONAL LAW
Christophe BERNASCONI*

I. Introduction
II. Purpose of the Project: Updating Conflict of Laws Principles to Reflect Market
Reality
A. Introduction
B. Indirect Holding System
C. Why Bother? An Example
D. Scope of the Project: Limited to Proprietary Rights
1. The Issues Covered
2. The Issues Not Covered
III. The Search for the Appropriate Connecting Factor
A. Introduction
B. ‘Looking-Through’ – An Inappropriate Substitute
C. PRIMA – A Modern Reflection of the Traditional Lex Rei Sitae Principle
IV. Application of PRIMA and How to Identify the Relevant Intermediary
V. The Pièce de Résistance: How to Locate the Relevant Intermediary?
A. Introduction
B. The Principles Agreed Upon
1. ‘Place of the Relevant Intermediary’ = ‘Place Where the Securities
Account Is Maintained’
2. The Need for ex ante Certainty and How To Achieve It
3. The Compromise Reached at the January 2001 Experts Meeting
C. The ‘Principal Rule’ in Intermediate Drafts
D. The Fall-Back Test
1. The Objective Balancing Test vs. The Single Factor or Cascade
Approach
2. Single Factor Fall-Back Tests, in Particular the ‘Legally Established’
Test
E. The ‘Black List’

*
Dr. iur. utr. (Fribourg), LL.M. (McGill). First Secretary at the Permanent Bureau of
the Hague Conference on Private International Law, in charge of the project on indirectly
held securities; the opinions expressed are strictly personal and not to be attributed to the
Hague Conference or to its Permanent Bureau.

Yearbook of Private International Law, Volume 3 (2001), pp. 63-100

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Christophe Bernasconi

F. Is There a Need for a ‘Super PRIMA’? The Case of a Fact Pattern Involving
Several Intermediaries
G. Existing Agreements
VI. The Insolvency Issue in Particular
A. Introduction
B. Respect of Validly Perfected Interests (Paragraph 1)
C. The Qualifications (Paragraph 2)
1. Draft UNIDROIT Convention on International Interests in Mobile
Equipment
2. The European Insolvency Regulation
D. Conclusion on the Insolvency Issue
VII. Conclusions

I. Introduction
The Hague Conference on Private International Law is exploring a new field of
activity: in May 2000, its Special Commission on General Affairs and Policy
recommended, among other things, that the Conference start working on a new
Convention on the question of the law applicable to proprietary aspects of
dispositions of securities held with an intermediary. The basic purpose of this
project is to provide financial markets with legal certainty for dealings in indirectly
held securities – dealings worth several billion US dollars a day. Agreement on a
convention that produces a uniform and rational rule for determining the
proprietary aspects of a transfer or pledge of indirectly held securities would bring
very important benefits to market users, market participants and the financial
system as a whole. Given the enormous economic and practical importance, the
project may also help to firmly engrave the name of the Hague Conference –
whose biggest success so far has been in the fields of family law (in particular
child protection) and judicial co-operation – on the commercial map too. The
importance of the project is also underlined by the fact that it is being developed on
the basis of a fast track procedure: a Working Group of Experts, which met in
January 2001 pursuant to a Recommendation made by the Special Commission on
General Affairs and Policy of May 2000, unanimously agreed that a Convention
could and indeed should be prepared on an accelerated timetable. During the first
part of the 19th Diplomatic Session of the Hague Conference, which was held in
June 2001, the Member States unanimously decided to add this topic to the agenda
of the organisation, with a view to adopt the Convention during the year 2002. In
other words, if the Convention is completed as planned, the work on this project
will have lasted approximately two years – a very short period to develop an
international instrument which raises difficult technical issues and which obviously
has to suit the needs and interests of business practice.

64 Yearbook of Private International Law, Volume 3 (2001)

 Indirectly Held Securities

This Article intends to describe the purpose, the basic features and the scope
of the project (II) and includes in particular an analysis of the principal legal
questions raised by the topic (III-VI).1 The comments reflect the status of work and
discussion as of July 2001.2

II. Purpose of the Project: Updating Conflict of Laws

Principles to Reflect Market Reality
A. Introduction

Traditionally, securities were held, traded and settled in a direct holding system in
which owners of securities had a direct relationship with the issuer – the investors
would either be recorded on the issuer’s register or be in physical possession of

1
The Article is mainly based on the three following documents: BERNASCONI Chr.,
The Law Applicable to Dispositions of Securities Held Through Indirect Holding Systems,
Preliminary Document No 1 of November 2000 for the attention of the Working Group of
January 2001 (hereinafter: BERNASCONI, Report); Report on the Meeting of the Working
Group of Experts (15 to 19 January 2001) and Related Informal Work Conducted by the
Permanent Bureau on the Law Applicable to Dispositions of Securities Held with an
Intermediary, prepared by the Permanent Bureau, Preliminary Document No 13 of June
2001 for the attention of the Nineteenth Session (hereinafter: Report on the Meeting of the
Working Group of Experts (15 to 19 January 2001); Tentative Text on Key Provisions for a
Future Convention on the Law Applicable to Proprietary Rights in Indirectly Held
Securities, Suggestions for further amendment of the text contained in Working Document
No 16 of the January 2001 experts meeting, submitted by the Permanent Bureau,
Preliminary Document No 3 of July 2001 for the attention of the Special Commission of
January 2002 (hereinafter: annotated July 2001 draft; see also the following footnote for
more comments on this document). All these documents are available on the website of the
Hague Conference on Private International Law (http://www.hcch.net), under the heading
Work in progress, sub-heading Indirectly held securities.
2
In July 2001, the Permanent Bureau submitted an annotated draft of key provisions
for a future Convention on the law applicable to proprietary rights in indirectly held
securities (see the reference in the previous footnote). This draft was submitted to all
Member States of the Hague Conference and to all observers who participated in the experts
Working Group meeting of January 2001, with a view to prepare as effectively as possible
the Special Commission meeting in January 2002. The Member States and observers, as
well as any interested parties, were invited to submit written comments to the Permanent
Bureau. On the basis of the comments received, a new draft will be prepared which should
then serve as the basic working document for the Special Commission meeting.

Yearbook of Private International Law, Volume 3 (2001) 65

 Christophe Bernasconi

bearer securities certificates.3 Within this traditional holding system, transfers of

securities had to be settled through the physical delivery of paper certificates and
instruments of transfer, making such transactions labour-intensive, time-consuming
and expensive. They were also risky, because the paper documents could be lost,
mislaid, stolen or counterfeited. The costs of protecting against such risks and of
delivering documents across long distances made the transfer of securities in a
direct holding system an expensive process. Furthermore, while in transit to the
transferee, the securities were not available for use or investment, causing what has
been referred to as ‘pipeline liquidity (or illiquidity) risk’.4
In the 1960s, a sharp increase in trading volumes overwhelmed the system.
The gigantic amount of paper that had to be physically moved around the globe
began to pose insurmountable logistical problems, eventually leading to what
became the famous ‘paperwork crisis’ on Wall Street in the late 1960s: for a while,
the New York stock exchange was forced to close one day a week in order to
process the backlog of paperwork!5 This provided the impetus for a number of
legal, regulatory and operational innovations to clearance and settlement systems.
One of the most important objectives of the restructured system was to immobilise
the vast amount paper, if not eliminate it altogether. This goal was achieved by
introducing the indirect or multi-tiered holding system.

B. Indirect Holding System

As its name suggests, this structure is made up of various tiers, often with an
increasing number of entities involved in each of the tiers, thus making the

3
In many cases, holders of registered securities will also be issued a certificate,
which may merely evidence ownership only or may be a document of title, delivery of
which is capable of creating proprietary rights in the securities.
4
See GOODE R., ‘The Nature and Transfer of Rights in Dematerialised and
Immobilised Securities’, in: ODITAH F. (ed.), The Future for the Global Securities Market:
Legal and Regulatory Aspects, Oxford 1996, pp. 108-109; GUYNN R.D., ‘Modernizing
Securities Ownership, Transfers and Pledging Laws’, A Discussion Paper on the Need for
International Harmonization, Capital Markets Forum, Section on Business Law, Internatio-
nal Bar Association 1996, p. 16, and the further reference there given (this paper is available
in pdf format on the Internet at http://www.dpw.com/iba/modernization.pdf).
5
Whereas in 1960 the average trading volume on the New York Stock Exchange
was around 3 million shares per day, by 1968 this had more than quadrupled to almost
13 million shares per day (Securities Industry Study, Report of the Subcommittee on
Commerce and Finance of the Committee on Interstate and Foreign Commerce, House of
Representatives, 1972, pp. 1 and 3). As a comparison, in 1999 the combined trading volume
on Nasdaq and the New York Stock Exchange averaged more than 2.8 billion shares every
single trading day (see http://www.dtcc.com/2000annual/clearance.htm).

66 Yearbook of Private International Law, Volume 3 (2001)

 Indirectly Held Securities

structure look like a pyramid.6 The top tier comprises national and international
central securities depositories (CSDs and ICSDs, respectively), where large pools
of securities of different issuers are immobilised or otherwise concentrated. Most
(if not all) of the issues of many governments and major corporations are held by
such institutions.7 In the case of certificated issues, the actual certificates

6
See GOODE R. (note 4), p. 22. For a practical example, see the comments below,
under C.
7
The oldest CSD was the Wiener Giro- und Cassenverein, founded in 1872 in
Austria, which was later followed by the German Kassenverein, now part of Clearstream
International (see below). The predecessor of Sicovam, the French CSD (which is now
called Euroclear France, see below), was established during World War II. Plans of the New
York Stock Exchange to set up a similar entity in the United States before World War I did
not materialise; it was only after the paperwork crisis that The Depository Trust Company
(DTC) was established. In September 1999, The Depository Trust & Clearing Corporation
(DTCC) was established as a new holding company that has as its subsidiaries DTC and the
National Securities Clearing Corporation (NSCC). Today, DTC is the world’s largest CSD,
holding nearly $ 20 trillion in assets for its participants and their customers. During 1999,
DTC processed more than 189 million book-entry deliveries valued at more than $ 94
trillion. Increasingly, DTC is servicing non-US issues as well as US issues, and non-US
participants as well as US participants. NSCC processes practically all broker-to-broker
equity and corporate and municipal bond trades in the US. For more information, see the
websites of DTCC (http://www.dtcc.com), DTC (http://www.dtc.org) and NSCC
(http://www.nscc.com).
The most important ICSDs are Euroclear and Clearstream (formerly Cedel). Founded in
1968 by the Brussels office of Morgan Guaranty Trust Company of New York following the
‘paperwork crunch’, the Euroclear System has become one of the world’s largest clearance
and settlement systems for internationally traded securities. The Euroclear System is
operated by the market-owned Euroclear Bank, which is governed by more than 1500 user
shareholders. In September 2000, Euroclear and Sicovam signed an agreement to fully
merge the two entities. This merger became effective in January 2001 by the exchange of
shares. Sicovam SA, now a wholly owned subsidiary of Euroclear Bank, adopted the name
Euroclear France. Similar mergers are currently implemented with CIK and Necigef, the
CSDs of Belgium and the Netherlands, respectively. In 2000, Euroclear Bank and Euroclear
France had a combined turnover of about 100 trillion euros, while the total value of
securities held in custody was over 7.4 trillion euros. For more information, see the website
of the Euroclear group (http://www.euroclear.com).
The European clearing house Clearstream International was formed from the merger of the
former Cedel International and Deutsche Börse Clearing. The new company is one of the
world’s largest international clearing and settlement organisation, having EUR 7 trillion in
assets under custody and handling in excess of 80 million transactions per annum. Cedel
stands for Centrale de Livraison de Valeurs Mobilières and was incorporated in 1970 as a
limited company under Luxembourg law by 66 financial institutions from eleven countries
as a neutral and independent capital markets infrastructure. It is owned by more than 90
financial institutions from Europe, the Americas and Asia. In 1999, Cedel International, the
parent company of the Cedel group, announced a merger with Deutsche Börse Clearing AG
to create Clearstream International. At the beginning of 2000, Cedel International

Yearbook of Private International Law, Volume 3 (2001) 67

 Christophe Bernasconi

evidencing or representing the securities are kept either in the vault of the CSD
itself or in the vault of the CSD’s custodian or subcustodian. Registered securities
held by the CSD are entered in the issuer’s records under the name of the CSD or a
nominee.8
The next tier consists of a limited number of financial institutions, brokers,
depositories and other professional investors who have direct contractual
relationships with the CSDs and who hold their interests in securities in book-entry
accounts with a CSD.9 These intermediaries are called the participants of the
CSD.10 These participants, in turn, hold in their accounts interests in or in respect of
securities either for themselves or for their customers, such as institutional or retail
investors or further intermediaries, and so forth until accounts are held for the
investors. As a result, there may be a variable number of tiers between the
investors at the bottom of the structure and the securities themselves located with
or registered in the name of the CSD (or its custodian, sub-custodians or
nominees). This structure allows the issuer to deal with a single entity, the CSD.11

contributed its entire clearing, settlement and custody business to Clearstream International
in return for a 50 % participation. Cedel International remains as a holding company
representing the interests of its shareholders. Under the new corporate structure, clearing and
settlement activities are conducted by two subsidiaries, Clearstream Banking Luxembourg
and Clearstream Banking Frankfurt. Clearstream International has over EUR 7 trillion in
assets under custody and expects to handle over 150 million transactions in 2001. During the
year 2000, Clearstream International acquired a 7% stake in Monte Titoli, the Italian CSD.
For more information, see the website of Cedel International (http://www.
cedelinternational.com).
8
In the United States, the shareholder records of large corporations whose shares are
publicly traded generally show a single entity – CEDE & CO. – as the registered owner of
approximately 83% of all shares listed on the New York Stock Exchange, 72% of all shares
traded on Nasdaq and 91% of all corporate debt securities listed on the New York Stock
Exchange. CEDE & CO. is the nominee name used by DTC, see THE AMERICAN LAW
INSTITUTE, NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS, Uniform
Commercial Code, Official Text – 2000, Revised Article 8 (1994 Revision), Prefatory Note,
p. 655 (hereinafter: U.C.C. 2000).
9
For more details on the holding pattern in Nordic countries in particular, see Art. 2,
para. 4 of the annotated July draft, with accompanying comments.
10
By way of example, DTC’s network links more than 11,000 broker/dealers,
custodian banks, and institutional investors, as well as transfer agents, paying agents, and
exchange and redemption agents for securities issuers. Euroclear has more than 2,000
participants located in more than 80 countries.
11
In some instances, for example, Daimler-Chrysler shares issues may be structured
so that the securities are held through two or more CSDs. See e.g., SCHEFOLD D.,
‘Grenzüberschreitende Wertpapierübertragungen und Internationales Privatrecht – Zum
kollisionsrechtlichen Anwendungsbereich von § 17a Depotgesetz’, in: IPRax 2000, p. 470,
note 18 and accompanying text.

68 Yearbook of Private International Law, Volume 3 (2001)

 Indirectly Held Securities

The CSD, in turn, deals with a limited number of large players, who in turn will
deal with a greater number of smaller participants, and so on through the pyramid.
The investors do not appear on any register of ownership maintained by or
on behalf of the issuer,12 nor do they have actual possession of certificates. The
records of a CSD show the securities held on behalf of its various participants, and
the records of each such participant show the securities held on behalf of their
individual customers.
Within an indirect holding system, it becomes apparent that it is the account
rather than the certificates that is the source of the investor’s entitlement.13 This, in
turn, has of course a major impact in determining the most appropriate connecting
factor.14
The efficiency of the indirect holding system is further improved by the
practice of most CSDs and intermediaries of holding securities in fungible pools.
Under this structure, participants or customers lose the right to call for delivery of
specific securities and have instead the right to call for securities of the issue, type
and quantity corresponding to their book-entry holdings.15 This concept of

12
However, rules of corporate law may entitle or require an issuer to obtain details
of the identity of persons entitled to, or interested in, securities – for example, for purposes
of voting or of ascertaining the level of particular holdings. Such rules do not form part of
the rules governing ownership and will not determine the position as regards proprietary
rights. Matters between the issuer and its members, such as voting rights, do not fall within
the scope of the Hague project and remain governed by the lex societatis.
13
See, e.g., GOODE R. (note 4), p. 23, and DE VAUPLANE H., De la détention
nationale à la détention internationale de titres: où sont les titres ?, Annexe au Rapport du
Conseil National du Crédit et du Titres, Problèmes juridiques liés à la dématérialisation des
moyens de paiement et des titres, Paris, May 1997, p. 157.
14
See the comments below, under III.
15
In a traditional direct holding pattern, the owner’s interest is a direct property
right: in the case of bearer securities, the owner has direct possession of the certificates, and
in the case of registered securities, the owner’s name is recorded on a register of the
securities maintained by the issuer or by a third party on the issuer’s behalf. The concept of
a direct property right, however, becomes difficult to apply in the context of indirect holding
systems. This is because under traditional legal principles commingling fungible property
terminates direct property rights of owners of the individual commingled items. According
to traditional principles which apply under both common law and civil law legal systems,
and whose origins are rooted in Roman law, a person who deposits property with a
depository retains whatever property rights that person has in the property, as long as the
deposited property is not commingled with similar property of the depository or of other
depositors. If, however, the property is commingled, the consequences will depend on the
precise terms on which deposits are made. The depositor may have only a contractual claim
for the return of the same amount and type of property initially deposited; alternatively, the
depositor whose property has been commingled may have some form of common or co-
proprietary interest with other depositors in the commingled bulk. For the reasons of
efficiency explained above, depositories that hold securities for investors generally do so
through commingled omnibus customers accounts. The effect of such commingling is to

Yearbook of Private International Law, Volume 3 (2001) 69

 Christophe Bernasconi

fungibility is critical to ensure liquidity of issues.16 Fungibility also reduces the

administrative costs associated with the custody of securities.
Today, the vast majority of actively traded securities are held through a
system of intermediaries. The system caters to the needs of a global marketplace: it
reduces the processing and settlement costs and risks of loss, theft and
counterfeiting associated with a direct holding system, and the transfer of interests
in securities by mere accounting entries on the books of one or more intermediaries
also allows for a rapid and efficient disposition of those interests, both
domestically and across borders. The fact that the settlement time frames have
shrunk and that these interests can be rapidly transferred enhances the efficiency of
the indirect holding system compared to a traditional direct holding structure. The
velocity of transactions has grown and continues to grow. The efficiency of the
indirect holding system is further enhanced by the practice of netting,17 under
which market participants are able to limit their credit exposure, and by the fact
that transactions within indirect holding systems are usually settled on the basis of
delivery versus payment (DVP).18

preclude the continuing existence of direct property rights of individual owners in the
specific securities held prior to the commingling and to give each investor either a mere
contractual right to the delivery of equivalent securities or co-ownership of the commingled
fund of securities, according to the terms of the agreement between the investor and the
depository. For an extensive legal analysis of these two models, see BERNASCONI, Report,
pp. 19-26.
16
Some CSDs and intermediaries also agree to hold interests for participants or
customers on a non-fungible, that is, identifiable basis. In Canada, securities held in such an
account and actually registered or in the process of being registered in the name of the
customer are known as ‘customer name securities’ in contrast to securities held on a pooled
basis, which are known as ‘customer pool fund securities’.
17
Netting is an agreed offsetting (compensation) of mutual positions or obligations
by trading partners or participants in a settlement system so that a large number of
individual positions or obligations are reduced to a smaller number of positions or
obligations, GUYNN R.D. / MARCHAND N.J., ‘Transfer of Pledge of Securities held through
Depositaries’, in: VAN HOUTTE H. (ed.), The Law of Cross-Border Securities Transactions,
London 1999, p. 55, note 21. Within a netting system, total buy and sell obligations for a
particular security are paired off into one net position. The debits and credits from these net
positions are likewise consolidated into one net money position for each firm. At the end of
the day, instead of making and receiving hundreds or even thousands of payments, firms
have only a single payment obligation. Netting is a technical and complex subject, a full
description of which is beyond the scope of this article. It is, however, an extremely
effective tool. For example, on the peak trading day in 2000, the value of transactions
processed by DTCC for the industry exceeded $722 billion; by netting all the transactions,
the clearing corporation was able to shrink the $722 billion in trades to a final payment
obligation of only $21.7 billion – a reduction of a staggering 97% (see http://www.
dtcc.com/2000annual/clearance.htm).
18
This means that cash and securities are exchanged simultaneously in electronic
book-entry form. The fact that DVP is simultaneous eliminates the risk of a seller delivering

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In sum, within an indirect holding system, the investor no longer has a

direct relationship with the issuer. Rather, the investor’s interest in respect of the
underlying securities is recorded on the books of an intermediary, which in turn has
its interest recorded with another intermediary and so on up the chain until some
intermediary either (i) is recorded as the registered owner on the books of the
issuer or the issuer’s official recordholder or (ii) holds the certificates or other
documents of title representing the securities.19 Thus, this indirect holding system
has one or more tiers of intermediaries between issuer and investor, and interests in
respect of underlying securities are recorded by book entries at various levels in the
chain. Transfers of such interests often occur through book entries without any
form of delivery, whether constructive or actual.20
In most jurisdictions, however, neither the substantive laws governing
securities transactions nor the rules determining the law applicable to such
transactions have been updated adequately to reflect this market reality. In other
words, in most countries the legal regime currently in place to cope with the
indirect holding system dates back, to a greater or lesser extent, to a time when
securities were still directly held in certificated form by investors. The concepts of
(physical) possession and delivery, however, do not operate satisfactorily in the
context of the modern indirect holding system, as there can be no actual possession
or delivery of the intangible property interests arising under that system.21

C. Why Bother? An Example

In order to assess both the importance and the usefulness of the Hague project, one
may consider the following example:22

securities without receiving payment from the purchaser, or of a purchaser making payment
without receiving securities from the seller.
19
This Article uses the term ‘intermediary’ as a general term including all the
various kinds of financial institutions through which the investors’ interests are held, for
example, brokers, nominee companies, banks and other custodians, settlement systems and
depositories.
20
For a more detailed presentation of the indirect holding system, see BERNASCONI,
Report, pp. 12 et seq. For a very instructive presentation of the commercial and legal
developments on both the money and the securities sides of transactions, see GUYNN R.D.
(note 4), pp. 16-21 and 21-25. See also GOODE R. (note 4), pp. 112-115.
21
See, e.g., UNIFORM LAW CONFERENCE OF CANADA (ULCC), Tiered Holding
System – Uniform Legislation Project, Report of the Production Committee, April 30, 1997,
drawn up by SPINK E. (Reporter), with updates presented on 1999 and 2000. The Report and
the updates are available on the ULCC’s website (http://www.ulcc.ca/en/cls/index.cfm?sec=
2&sub=2x).
22
For a schematic illustration of the example, see BERNASCONI, Report, p. 15.

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 Christophe Bernasconi

Australian Investor is a corporation formed in Sydney, Australia. It holds an

interest in respect of 500,000 Illinois Inc. shares through the indirect holding
system.
Illinois Inc. is incorporated in Illinois in the United States. Illinois Inc. has
5,000,000 shares outstanding. They are all held through DTC, which is
incorporated and has its principal place of business in New York. DTC keeps the
actual physical certificates representing the Illinois Inc. shares in its vault in New
York. Illinois Inc. maintains a share register in Newark, New Jersey, with a
registrar, NJ Registrar, located there. DTC’s nominee, Cede & Co., is recorded in
the share register as the registered owner of the 5,000,000 outstanding Illinois Inc.
shares.
Australian Investor’s ownership interest in respect of the 500,000 Illinois
Inc. shares is reflected by a book entry credited to an account entitled ‘Australian
Investor Account’ at its intermediary, French Bank, located in Paris.
French Bank, in turn, holds interests in respect of the Illinois Inc. shares
corresponding to Australian Investor’s interest, together with interests of other
customers of French Bank, through book entries credited to an account entitled
‘French Bank Omnibus Customers Account’ on the books of a European ICSD. In
total, French Bank holds for all its customers (including Australian Investor)
interests in respect of 1,200,000 Illinois Inc. shares.
European ICSD, in turn, holds interests corresponding to French Bank’s
interests in respect of the Illinois Inc. shares, together with interests of other
participants in the European ICSD system, through book entries credited to an
account entitled ‘European ICSD Omnibus Customers Account’ on the books of
the ICSD’s sub-custodian in the United States, California Subcustodian, located in
Los Angeles, California. In total, European ICSD holds for all its customers
(including French Bank) interests in respect of 2,500,000 Illinois Inc. shares.
California Sub-custodian, in turn, holds interests corresponding to European
ICSD’s interests in the Illinois Inc. shares, together with interests of other
customers of California Sub-custodian, through book entries credited to an account
entitled ‘California Sub-custodian Omnibus Account’ on the books of DTC. In
total, California Sub-custodian holds for itself and all its customers (including
European ICSD) interests in respect of 3,000,000 Illinois Inc. shares.
Each of the intermediaries in this indirect holding system holds interests in
securities on an unallocated, fungible or pooled basis – that is, on terms that none
of its account holders has an interest in any specific securities held by the
intermediary at a higher level. Thus, for example, French Bank’s custody
agreements provide that Australian Investor and French Bank’s other customers are
not entitled to any specific securities held in the ‘French Bank Omnibus Customers
Account’. Similarly, European ICSD’s Terms and Conditions specify that no
European ICSD account holder has any interest in any specific securities held by
European ICSD with sub-custodians or central securities depositories.

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In this situation, if Australian Investor wishes to provide its interests in the

Illinois Inc. shares to a credit provider under a pledge mechanism23 the contractual
aspects of which have been submitted by the parties to English law, the credit
provider needs to know before entering into the transaction which requirements
have to be fulfilled so as to ensure that the credit provider will receive a perfected
interest, i.e., an interest that will prevail over the interests of third parties
(including the interests of the liquidator should Australian Investor enter
insolvency).
In order to assess this question, the credit provider (collateral taker) needs to
ascertain which jurisdiction’s law will govern the proprietary aspects of the
transaction. In the current fact pattern there are a number of possibilities – among
others, is it:

(i) Illinois law, as the law of the place of incorporation of the

issuer of the underlying securities?
(ii) New Jersey law, as the law of the place of the register for the
underlying securities?
(iii) New York law, as the law of the place where the underlying
security certificates are kept?
23
In this article, the word ‘pledge’ is used as a generic term and includes not only
possessory security interests but also non-possessory forms of security interests (such as
mortgages and charges). It also covers title transfers by way of security. The term ‘pledge’ is
preferred to the alternative generic term ‘security interest’ because of the inevitable
confusion with ‘interest in securities’. The term ‘security interest’ is used in particular in the
Uniform Commercial Code (U.C.C.) of the United States; see Art. 1-201(37), which defines
a security interest as ‘an interest in personal property or fixtures which secures payment or
performance of an obligation’, and Art. 9 U.C.C., which sets out the actual rules on ‘security
interests’ in investment securities. This being said, we fully recognise that the term ‘pledge’
originally was limited to possessory interests in physical property only. Because of the
potential confusion surrounding the expression ‘security interest’ in an international (and
multilingual) context, we nevertheless prefer to use the term ‘pledge’ and deliberately
extend its traditional meaning so as to cover non-possessory interests as well.
Under a pledge, the collateral provider retains ownership of the securities pledged. In
today’s economy, however, there are numerous ways of raising money and obtaining
protection against credit exposure, and not all the ways of obtaining such protection utilise
the pledge mechanism: some use a title transfer mechanism, under which ownership of the
collateral is transferred to the collateral taker, who only has a contractual obligation to
redeliver equivalent securities. Examples of such title transfer arrangements include
‘repurchase agreements’, ‘buy/sell-back’ transactions, ‘securities loans’, and swap
transactions collateralised by means of a title transfer structure. Such title transfer
arrangements are widely used to fulfil a security function, and where they do so, they are to
be regarded as collateral transactions, even if – technically speaking – they do not create a
pledge over collateral. Again, to be clear, in the future Convention and in this article, the
term ‘pledge’ is used to include transfer by way of security even though this is a broader
definition than in some jurisdictions.

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 Christophe Bernasconi

(iv) New York law, as the law of the place of the national CSD?
(v) California law, as the law of the place of European ICSD’s
subcustodian?
(vi) the law of the place where European ICSD is located?
(vii) French law, as the law of the place of Australian Investor’s
intermediary?
(viii) English law, as the law chosen by collateral provider and
collateral taker in the pledge agreement?
(ix) English law, as the law of the place of the collateral taker
(creditor)?
(x) Australian law, as the law of the place of the collateral
provider (debtor)?

Given the great variety of possible answers and the huge value of the transaction
that is often at stake, one can easily assess the benefit that a Hague Convention on
this issue could generate: It would provide ex ante certainty and allow the
collateral taker to determine beforehand the legal order whose perfection
requirements it will have to fulfil to get a good, i.e., perfected interest.

D. Scope of the Project: Limited to Proprietary Rights

1. The Issues Covered

The proposed Convention will only deal with the identification of the appropriate
law to govern proprietary aspects of dealings in securities24 held with an
intermediary. These dealings include in particular a pledge, a title transfer by way
of security or an outright transfer (e.g., sale) of such securities.25 If an investor’s
interest in the securities is merely of a contractual nature, the Convention will have
no effect on this interest as such, but if, for example, the interest is provided as
collateral or transferred to a purchaser, the proprietary rights arising from the
transfer of purely contractual rights will be covered by the Convention. Also, the
Convention will not interfere with the nature of an investor’s interest in securities
held with an intermediary, nor impose any change on a State’s substantive law in
this regard. Consequently, the interests which an investor holds in the securities
under local law, prior to providing these interests as collateral or transferring them
to a purchaser, will not be altered by the proposed regime. The conflict of laws rule

24
For an extensive analysis of the term ‘securities’, see the Report on the Meeting of
the Working Group of Experts (15 to 19 January 2001), pp. 8-10.
25
See the comments in note 23.

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 Indirectly Held Securities

adopted should apply rationally and consistently to an investor’s interest

irrespective of the form the interest takes.26
More precisely, the Convention will identify the appropriate law to govern
proprietary aspects of a disposition of interests in securities, in particular:27 (a) the
legal nature of the rights derived from the credit of securities to a securities
account; (b) the legal nature and proprietary effects of a disposition of securities
held with an intermediary; (c) the requirements for perfection of a disposition of
securities held with an intermediary; (d) whether a person’s title to or interest in
securities held with an intermediary is overridden by or subordinated to a
competing title or interest;28 (e) the duties of an intermediary to a person who
asserts a competing claim to securities held with that intermediary;29 and (f) the
steps required for the realisation of a disposition of securities held with an
intermediary.

26
One may recall that there are always two components to a collateral transaction or
transfer of property: first, the contractual element, describing the parties’ obligations under
the transaction and, secondly, the proprietary element, dealing with the transfer of rights in
the property. Whatever the nature of the investor’s interest, the Convention will not
determine the law applicable to the contractual or other non-proprietary aspects of rights or
duties with respect to securities held with an intermediary (unless such interests are provided
as collateral or transferred to a purchaser, see the comments in the text). In particular, the
Convention will not determine the law applicable to the contractual rights and duties of
parties to a transaction in securities, the contractual rights and duties arising from relations
between an intermediary and an account holder, the rights and duties of an issuer of
securities, or the rights and duties of a registrar or transfer agent (see Art. 1, para. 2 of the
annotated July 2001 draft). The contractual aspects of an agreement under which a
disposition of securities is made are covered by separate conflict of laws rules. These rules
are usually straightforward and allow the parties to choose the applicable law. Within the
context of transactions in respect of indirectly held securities, these rules do not create
specific problems which would need to be addressed in the proposed Convention.
27
See Art. 4, para. 2 of the annotated July 2001 draft.
28
This should make clear that the applicable law governs all forms of dispute
between or among claims of any property interest to securities held with an intermediary.
This would include priority disputes among conflicting security interests. It would also
include issues commonly described as adverse claim issues or issues of the rights of bona
fide purchasers, such as whether the title or interest of a person who holds securities with an
intermediary is subject to or may be defeated by an assertion that some other claimant is in
fact the true owner of the securities or has some other form of claim to them.
29
This provides that the applicable law also determines the duties of an intermediary
to a person who asserts a competing claim. Because the indirect holding system is the
mechanism for settlement of enormous volumes of securities trading, many systems of
substantive law are designed to ensure that the settlement system cannot be disrupted by
assertions of claims by persons other than the person recorded on the intermediary’s records
as the account holder. The suggested language is intended to make clear that an inter-
mediary’s obligations with respect to such issues are governed exclusively by the law of the
intermediary’s jurisdiction.

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 Christophe Bernasconi

2. The Issues Not Covered

As we have seen, the Convention will not deal with the nature of an investor’s
interest and method of transfer. The proposed Convention will also not address the
substantive law issue of so-called ‘upper-tier attachment’ – that is, the problem
that arises where a person with an interest at a lower level in the chain of holdings
(for example, an investor or a person claiming to have acquired rights from an
investor) seeks to attach or otherwise claim an interest in securities or an interest in
securities held at a higher level where there is no record of that person’s
entitlement.30
Furthermore, the proposed Convention is not intended to alter the rules
governing the creation and issue of the underlying securities or the rights and
duties of the issuer as against direct holders of such securities and third parties.
Finally, it could be argued that the issues raised by indirect holding systems
for securities also apply where other property (for example, physical commodities)
is held in a similar way. However, it is not suggested that the scope of the proposed
Convention should extend beyond the securities area.
The delicate issue of the effects of a bankruptcy procedure on a transaction
whose proprietary aspects are governed by the substantive law designated by the
Convention deserves a more extensive comment and will be discussed below.31
To sum up, the proposed Convention should enable financial market
participants to ascertain readily and unequivocally which law will govern the
proprietary aspects of dispositions of interests in respect of securities held through
indirect holding systems. The proposed Convention is thus intended to provide
certainty and predictability on a limited but crucial aspect of such dispositions.
Also, the fact that the Convention addresses a very specific, well defined and
limited topic ensures that the project as such remains within clearly circumscribed
boundaries, which in turn makes the administration of the project more lenient and
predictable.

30
See, e.g., Fidelity Partners, Inc. v. First Trust Co., 1997 U.S. Dist. LEXIS 19287,
No. 97 Civ. 5184, 1997, WL 752725 (S.D.N.Y., Dec. 5, 1997). In this case, a judgment
creditor sought to execute against an interest in bonds held by a judgment debtor through an
indirect holding system; the bonds were payable in New York, but the judgment debtor’s
interest was recorded only on the books of an intermediary located abroad (Philippines). The
court refused to order execution in New York. Claims of this nature are often referred to as
‘upper-tier attachment’ claims. Whether such a claim has such a prospect of success will
depend on the substantive law of the jurisdiction in which the claim is asserted. Although
therefore the possibility of upper-tier attachment may be a problem that ought to be
addressed in some countries, as a matter of substantive law, it is not one with which the
proposed Convention can deal.
31
See below, under VI.

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III. The Search for the Appropriate Connecting Factor

A. Introduction

The traditional conflict of laws rule for determining the enforceability of a transfer
of property or a pledge of securities effected in the direct holding system is the lex
rei sitae (also referred to as the lex cartae sitae or the lex situs).32 Under this rule,
the validity of the transfer is determined by the law of the place where the security
is located.33 In the case of bearer securities, this is taken to be the law of the

32
See, e.g., DICEY & MORRIS, The Conflict of Laws, 13th ed., London 2000, pp. 915-
937; BATIFFOL H./ LAGARDE P., Traité de droit international privé, Paris 1983, Vol. II,
pp. 163-173; AUDIT B., Droit international privé, 3rd ed., Paris 2000, pp. 630-658; DE
VAUPLANE H. (note 13); the principle of the lex rei sitae in respect of collateral is enshrined
in the second para. of Art. 3 of the French Civil Code which provides that French law
governs the legal regime of real estate property (immeuble) located in France, even when
title to such property is held by a foreign person; this principle has been extended by the
French Supreme Court to movable property (Cour de cassation, Req. 19 March 1872,
Craven, in: Dalloz Pér. 74. I. 465, and in: Sirey 72. I. 238; see also Cour de cassation,
Req. 24 May 1933, in: Sirey 935. I. 253, note BATIFFOL H., and in: Rev. crit. dr. int. pr.
1934, p. 142, note J.P.N.); since then, the principle has been confirmed by the French
Supreme Court on several occasions (Cour de cassation, 1ère civ., 8 July 1969, Société
DIAC, in: Clunet 1970, p. 16, note DERRUPPÉ J.; Cour de cassation 1ère civ., 3 May 1973,
in: Clunet 1975, p. 74, note FOUCHARD Ph.); FIRSCHING K./VON HOFFMANN B.,
Internationales Privatrecht, 4th ed., Munich 1995, pp. 422-432; KREUZER K., ‘Die
Vollendung der Kodifikation des deutschen Internationalen Privatrechts durch das Gesetz
zum Internationalen Privatrecht der ausservertraglichen Schuldverhältnisse und Sachen vom
21.5. 1999’, in: RabelsZ 2001, pp. 442 et seq.; DUTOIT B., Commentaire de la loi fédérale
du 18 décembre 1987, 2nd ed., Basle & Frankfurt 1997, ad Art. 100. For further references,
see GUYNN R.D. (note 4), note 41. See also ROTT Th., Vereinheitlichung des Rechts der
Mobiliarsicherheiten, Tübingen 2000, pp. 3-5, with numerous comparative law references.
33
The lex rei sitae principle can be traced back to the work of the statutists, more
precisely to Magister ALDRICUS (late 12th/beginning 13th century), and, in particular, to
BARTOLUS (13th/14th century). The principle was first applied to immovables and those
movables which by their origin belong to the territory (res in territorio natae). In the 19th
century, SAVIGNY confirmed the rule, without retaining however the ‘origin’ qualification
suggested by the statutists. For a most recent reference to these issues, see KROPHOLLER J.,
Internationales Privatrecht, 4th ed., Tübingen 2001, p. 12 and in particular pp. 519-520.
Some authors have tried to trace the origin of the lex rei sitae rule back to Roman law. The
author of this article respectfully disagrees. In fact, it does not appear appropriate to refer to
Roman law when it comes to explain the origin of any PIL concept. The origin of PIL is to
be found neither in the writings of the great Roman jurists from Mucius Scaevola to
Modestin nor in the Byzantine law of the sixth century. PIL is a product of the Italian
universities of the 12th and in particular the 13th century. The corpus iuris civilis, which
either answers, or suggests an answer to practically every conceivable legal question – says
next to nothing on the subject of the application of foreign laws. PIL can only establish itself

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 Christophe Bernasconi

jurisdiction where the transferee (collateral taker or purchaser34) takes possession of

the securities certificate at the time of transfer. In the case of registered securities,
the lex rei sitae is either the law of the issuer’s jurisdiction or the law of the
jurisdiction where the securities records of the issuer or its official record holder
are located at the time of transfer.35 But how does the lex rei sitae apply to a system
where the securities are held through multiple tiers of intermediaries located in
different jurisdictions? Which of the several possibilities enumerated above is to be
regarded as ‘the’ lex rei sitae? Is there another connecting factor which is more
appropriate in these circumstances?

B. ‘Looking-Through’ – An Inappropriate Substitute

Historically, many jurisdictions have attempted to apply the traditional lex rei sitae
principle to indirectly held securities by ‘looking through’ the tiers of
intermediaries to the laws of one or more of the following: the jurisdiction of
incorporation of the issuer, the location of the issuer’s register or the location of the
actual underlying securities certificates (the ‘look-through’ approach). However,
there are severe conceptual, legal and practical difficulties potentially arising from
the application of this approach in the modern context of indirect holding patterns
for securities.
Where – as is often the case – a diversified portfolio of securities is
provided as collateral, the collateral taker would have to satisfy the laws of the
jurisdiction of each issuer, register and/or physical custodian of the securities. In
addition, in many jurisdictions it is uncertain exactly what the legal rule is when
applying the look-through approach: Is it the law of the place of the issuer, the
place of the register or the place of the underlying securities? Finally, even if the
collateral taker did know the relevant test, often it is not possible to obtain the
necessary information to ascertain how to apply the test. For example, a holding
through various tiers of intermediaries may not enable the collateral taker to

where respect is shown for foreign law, where there is an atmosphere of equality such as
pervaded legal thinking in the Italian city-states from the 12th century onwards. Roman
jurists were very far indeed from entertaining this conception. Their justifiable admiration
for their own law may have induced in many of them such a contempt for all foreign law,
including the Greek, that it never occurred to them to set up rules for the application of such
‘inferior’ productions.
34
The expression ‘purchaser’ is used without specifying whether it is limited only to
‘buyers’ or extends to other recipients of consensual transfers, e.g., a donee.
35
GUYNN R.D./MARCHAND N.J. (note 17), pp. 49 and 55. A third possibility is that,
where the certificate issued in respect of a registered security is treated as representing the
security (e.g., as being a negotiable instrument) the lex rei sitae will be the law of the
jurisdiction where the collateral taker takes possession of the certificate at the time of the
transfer.

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discover where the national central securities depositary actually stores the
certificates, if any exist. In some circumstances, the collateral taker may not be
able to point to a single jurisdiction, even if it had access to information, where the
underlying certificates of a single issue are kept in more than one jurisdiction.
Uncertainties as to the approach to be adopted and as to the effect of the
‘look-through approach’, if applicable, lead to significant expense for market
participants (including collateral providers, because the expense of investigating
perfection requirements is likely to be passed on to them by collateral takers).
Moreover, because the position in many cases cannot be satisfactorily determined,
there remains an element of risk, which, given the size of transactions involved and
the identity and importance of the relevant financial institutions, must prudently be
regarded as systemic in character. For these reasons, the look-through approach is
considered by many neither to provide the necessary certainty, nor to be
practicable in the modern context.

C. PRIMA – A Modern Reflection of the Traditional Lex Rei Sitae

Principle

Because of the deficiencies of the ‘look-through’ approach explained above, it is

necessary to develop another approach, one that reflects the reality of the indirect
holding system and follows the sensible legal principle that the law applicable to
proprietary matters should be the law of the place where the record of title is
maintained and where, therefore, orders in respect of the property can be
effectively enforced. In indirect holding systems based on fungible accounts, the
record of an investor’s title is maintained by the intermediary with whom the
investor has an immediate relationship and it will be on the books of the investor’s
immediate intermediary that any disposition of the investor’s interest in favour of a
collateral taker or purchaser will be recorded. This suggests an approach that looks
to the law of the place where that intermediary is located. This has become known
as the ‘place of the relevant intermediary approach’ or ‘PRIMA’.36

36
PRIMA has already been statutorily adopted in Belgium, Luxembourg, France,
Germany and the United States (see BERNASCONI, Report, pp. 50-52; for Germany, see the
references in ibid., note 75). It is presently also being considered for enactment in a number
of other jurisdictions (including, at least, Australia, Canada, Japan, Bermuda, the British
Virgin Islands and the Netherlands Antilles; see BERNASCONI, Report, pp. 53-54). At a
regional level, the EU Settlement Finality Directive of 1998 (Directive 98/26/EC of the
European Parliament and of the Council of May 1998 on settlement finality in payment and
securities settlement systems, OJEC 1998, L 166/45; referred to as the EU Settlement Final-
ity Directive) has adopted PRIMA in all EU Member States, although implementation has
not been entirely uniform. In some Member States, PRIMA has been adopted only in
relation to central banks, the European Central Bank and certain settlement system partici-
pants as collateral takers, while in others it has been adopted more broadly to protect
commercial counterparties as well (for more details, see IBA/CMF Bulletin No 2 of

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 Christophe Bernasconi

During the January 2001 experts meeting, the experts unanimously supported
PRIMA as the appropriate connecting factor to be included in the future Hague
Convention, and no support was given to the ‘look-through’ approach. In other
words, there is little doubt that PRIMA is the connecting factor to be embodied in
the future Hague Convention.37

October 1999). In the United Kingdom, PRIMA has been adopted narrowly in Regulation
23 of the Financial Services and Insolvency (Settlement Finality) Regulations 1999 SI
1999/2979. It only applies in respect of collateral provided to central banks in connection
with their functions, or to participants in certain designated clearing systems (intended to
cover the International Central Securities Depositories and national payments and securities
systems in EU Member States) in connection with their participation in that system.
However, Her Majesty’s Treasury (HMT) is currently attempting to extend the application
of PRIMA by amending Regulation 23. The first attempt was withdrawn in early April due
to concerns with the language used. In July, HMT published a Consultation Document on
Domestic and International Initiatives Concerning Conflict of Law Issues Relating to
Securities, which would amend Regulation 23 to apply PRIMA in all contexts where
securities are taken as collateral. The proposal is open for consultation until October 17,
2001 (see the document at http://www.hm-treasury.gov.uk/docs/2001/hague_condoc/).
Under the proposed Directive of the European Parliament and of the Council on financial
collateral arrangements (often referred to as the EU Collateral Directive), PRIMA is to be
applied as a general rule to all situations where securities held through indirect holding
systems are provided as collateral (see Art. 10 of the EU Collateral Directive as proposed by
the European Commission on 27 March 2001, COM (2001) 168 final, 2001/0086 (COD);
formerly Art. 11 of the Working Document on Collateral from the Commission to relevant
bodies for consultation, First Preliminary Draft Proposal for a Directive, Document number
C4/PN D(2000), dated 15 June 2000). See also the following note.
37
In substance, this position has now also been adopted by the textbook DICEY &
MORRIS, The Conflict of Laws, 13th ed., London 2000, in Rule 118, note 24-064: ‘If it is
accepted that the expectation of all parties to the transaction is that the investor has a
proprietary interest which is capable in principle of being assigned, and that the rules for
choice of law should seek where possible to accommodate this reasonable expectation, the
better view [that is, better than applying Art. 12 of the Rome Convention or traditional
common law choice of law rules] would be that the investor’s proprietary rights are located
at the place where his account with the depository is maintained, and that the law which
governs dealings with these rights is the law which governs his relationship with the broker.
This will be the law governing the relationship between investor and broker, under which
the rights of the investor arose, and it will often be the lex situs of the rights the investor has
against the broker. For present purposes it is submitted that choice of law rules designed in
the nineteenth century for the assignment of policies of life insurance and interests under
trusts should not be applied uncritically as the basis for regulating the assignment of
intangibles of a kind, and by processes, then unknown.’ [footnote omitted] The references in
this passage to ‘depository’ and ‘broker’ are perhaps not entirely clear. It seems reasonably
clear from the context in which the passage quoted appears, however, that both terms refer
to the intermediary with which the investor maintains the account (shortly before the
passage quoted, reference is made to investors maintaining an account with ‘an intermediary
or broker’).

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The major advantage of PRIMA is that the question of whether the

collateral taker receives a perfected interest will be governed by the law of one
jurisdiction even where a portfolio of securities of issuers from different countries
is involved. Furthermore, the application of PRIMA can be seen as an appropriate
extension of the lex rei sitae principle – the location of the collateral taker’s
interest in securities credited to a securities account is (and the beneficial owner-
ship of the securities themselves is most likely only recorded) where the securities
account is located. Against this background, PRIMA may legitimately be regarded
as an updated application of the traditional lex rei sitae principle. This applies even
to situations where certificates have been issued and are kept in the CSD’s vault
located in a different jurisdiction to that of the intermediary. It is true that in such a
situation, one might argue that the physical location of the certificates determines
the lex rei sitae. Such a deduction, however, can legitimately be challenged by
reference to the ultimate justification of the lex rei sitae principle, i.e., the applica-
tion of the law of the place where orders in respect of the property can be
effectively enforced. Within an indirect holding structure, this place can only be the
place of the relevant intermediary, i.e., the place of the account (see infra com-
ments under V.B.1., not the place of the location of the physical certificates, where
the investor is not even known and the transaction not recorded or reported.38
The principal attributes of PRIMA may be summarised as follows:

- PRIMA dictates that questions of creation, perfection (rights

against third parties) or completion, priorities and realisation of
interests in respect of securities, be governed by the law of the
place of the immediate intermediary on whose books the relevant
interest is recorded;
- PRIMA situates all of an investor’s interest with respect to a
portfolio of securities in one single jurisdiction, even where the
issuers and certificates evidencing such underlying securities are
situated in many different countries;
- PRIMA applies irrespective of whether a transfer is made by way
of sale or by way of a collateral transaction, and in the case of a
collateral transaction, irrespective of whether the transaction takes
the form of a pledge or of a transfer of title;
- PRIMA applies irrespective of the particular legal status of the
collateral provider or collateral taker;
- PRIMA applies irrespective of the jurisdiction in which the
collateral provider, the collateral taker or any intermediary is
formed or located;
- Where a collateral taker acts as the collateral provider’s
intermediary (that is, the collateral provider holds through the

38
See BERNASCONI, Report, pp. 27 et seq.

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 Christophe Bernasconi

collateral taker prior to the provision of collateral) and is also the

secured party, the law of the relevant intermediary will be the law
of the place of the collateral taker.

IV. Application of PRIMA and How to Identify the

Relevant Intermediary
In order to illustrate how PRIMA works, and in particular which intermediary is
the ‘relevant’ intermediary, one may consider the following example:39
An Australian Investor holds an interest in respect of 500,000 shares of
Illinois Inc. through its intermediary, French Bank. French Bank, in turn, holds
through European ICSD, which holds through California Sub-custodian, which
holds through DTC. DTC’s nominee, Cede & Co., is recorded as the registered
owner of the securities in the register maintained by NJ Registrar in New Jersey.
The physical share certificates representing the Illinois Inc. shares are kept by DTC
in a vault in New York.
Australian Investor wishes to borrow money with the Illinois Inc. shares to
be provided as collateral for the loan. Australian Investor seeks a loan from
London Bank, an international investment bank incorporated in the United King-
dom and based in London. London Bank, the collateral taker, does not hold its
interests in respect of Illinois Inc. securities through French Bank but rather holds
through a different intermediary, Swiss Bank, which is incorporated in Switzerland
and located in Zurich. In turn, Swiss Bank maintains an account entitled ‘Swiss
Bank Omnibus Customers Account’ on the books of European ICSD in which it
holds 100,000 Illinois Inc. shares for its customers.
When Australian Investor asks for the loan, London Bank requires that
Australian Investor move its interest in respect of the Illinois Inc. shares to Swiss
Bank, with the pledge to be recorded on the books of Swiss Bank. By moving the
shares to the books of an intermediary that London Bank trusts, London Bank is
avoiding any exposure to French Bank, in particular, to the possible consequences
of administrative error, wrongdoing or insolvency of French Bank (or the likely
influence that Australian Investor may have with French Bank). Thus, prior to the
pledge, Australian Investor’s interest in respect of the 500,000 Illinois Inc. Shares
would be debited to the ‘Australian Investor Account’ at French Bank and credited
to an ‘Australian Investor Account’ at Swiss Bank.
The transfer from French Bank to Swiss Bank of interests in respect of
500,000 Illinois Inc. shares will result on the books of European ICSD in a debit to
the ‘French Bank Omnibus Customers Account’ and a corresponding credit to the

39
The example is schematically depicted in BERNASCONI, Report, pp. 33-35.

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 Indirectly Held Securities

‘Swiss Bank Omnibus Customers Account’. Australian Investor pledges its interest
in the Illinois Inc. shares to London Bank under a pledge mechanism, the
contractual aspects of which are governed by English law. The pledge is
represented on the books of Swiss Bank by a debit to the ‘Australian Investor
Account’ of 500,000 in respect of the Illinois Inc. shares and a corresponding
credit to the new ‘Australian Investor Pledge to London Bank Account’. The
pledge does not result in any change on the books of European ICSD (because both
these accounts are accounts in the books of Swiss Bank and there is no change in
the ‘Swiss Bank Omnibus Customers Account’) or on the books of California Sub-
custodian or DTC.
After executing the Pledge Agreement in favour of London Bank,
Australian Investor again enters into a pledge agreement in respect of the same
500,000 Illinois Inc. shares with Italian Bank. The second pledge is valid under
Italian substantive law (the governing law chosen by Australian Investor and
Italian Bank in their pledge agreement).
Australian Investor then enters insolvency in Australia. The liquidator asks
the Australian court to rule on whether the pledges in favour of London Bank and
Italian Bank should be treated as valid and, if both pledges are to be treated as
valid, how they should be regarded as ranking against each other.
In this fact pattern, under PRIMA, proprietary issues, such as whether
London Bank received a perfected interest in respect of the Illinois Inc. shares and
whether London Bank has priority over the interest of Italian Bank, would be
governed by Swiss law, as the law of the place of Swiss Bank, the intermediary on
whose books the pledge in favour of London Bank is recorded.40

V. The Pièce de Résistance: How to Locate the

Relevant Intermediary?
A. Introduction

Once the relevant intermediary has been identified on the basis of the PRIMA rule,
one still has to determine where the relevant intermediary is actually located for
purposes of PRIMA. As a matter of fact, this question rapidly turned out to be the
authentic pièce de résistance of all the discussions relating to this project. The
crucial role of this question is hardly surprising and indeed had to be expected, as

40
This fact pattern was considered by experts in 28 jurisdictions surveyed by
Richard POTOK, Legal Expert to the Permanent Bureau for this project. The state of
confusion in the current law in many jurisdictions can be seen in the results. The multitude
of probable and possible answers under current law are shown in schematic form in Figure 1
(perfection of pledge) and Figure 2 (priorities) in Appendix B to the BERNASCONI Report.

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 Christophe Bernasconi

the determination of the intermediary’s actual location will eventually put the
PRIMA concept in a concrete form and lead to the designation of the law
applicable. The problem of how to locate the intermediary is therefore at the very
heart of the project. The discussion during the January experts 2001 meeting
showed that several aspects need to be distinguished. These aspects will be
addressed separately in the following comments.

B. The Principles Agreed Upon

1. ‘Place of the Relevant Intermediary’ = ‘Place Where the Securities

Account Is Maintained’

First, the experts agreed that the localisation of the relevant securities intermediary
should be linked to the place of the account to which the securities are credited.41 It
is indeed on the account that the collateral taker’s or transferee’s interest will be
recorded and where this interest may therefore eventually be enforced. As the
ultimate place to look at is the place of the account, some experts suggested that
any reference in the Convention to the place of the relevant securities intermediary
should be deleted and replaced by an explicit reference to the place of the securities
account. While this might be perceived as a welcome simplification, focusing
directly on the rationale underlying the main issue of the Convention, one may
equally wonder if the deletion of the only express reference to PRIMA would not
introduce an element of uncertainty and cause experts and practitioners to hesitate
as to which approach has actually been taken in the Convention. PRIMA has
become so widely accepted that experts and practitioners will presumably look for
an explicit reference to it in the Convention itself. Against this background, the
deletion of the reference to the place of the relevant intermediary may turn out to
be counter-productive and the ‘two stage approach’ may well be acceptable.

2. The Need for ex ante Certainty and How To Achieve It

Secondly, there was consensus among the experts on the need for ex ante certainty,
i.e., the need for the parties to a transaction to be in a position to establish
beforehand where the account is being maintained. This ex ante certainty is
essential to meet the needs of market participants, who need to know which law
applies to the proprietary aspects of the transaction and hence determines the
perfection requirements to be fulfilled. Initially, there was however no full
agreement among the experts on how to achieve this goal. Some delegations
wanted the test to be the jurisdiction of the law chosen by the parties to the custody
agreement or of the place specified by the parties to the custody agreement as the

41
See, however, infra note 46.

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location of the account; along with this principle, one delegation stressed that the
ability to designate the law applicable should not be subject to any requirement for
a connection between the place designated in the agreement and the other facts of
the transaction. Other delegations, however, explained that they could not accept a
test that would allow parties freely to choose the law applicable to the proprietary
aspects of a transaction and to invoke this choice against third parties. As a matter
of fact, it is worth noting that although some civil law jurisdictions allow for party
autonomy to apply to the proprietary aspects of a transaction, none of these
jurisdictions seems to allow for this choice to be invoked against third parties.42
Against this argument, one has however to point out that in the present
context use of the term ‘party autonomy’ is not appropriate, as it could imply that
the parties to the collateral transaction or sale could determine by agreement the
law governing the proprietary aspects of the transaction. This, however, has never
been suggested, not even in the domestic legislation of those jurisdictions which
were in favour of a test leading to the application of the law chosen or of the place
specified by the parties to the custody agreement.43 Against this background, it does
appear that it is not appropriate to refer to the concept of ‘party autonomy’ in the
context of the proposed provision on the determination of the place of the relevant
intermediary. Under this provision, the parties who are designating the law appli-
cable by localising the account are the investor (account holder) and its inter-
mediary. Under the concept of party autonomy, however, it would be the investor
and the collateral taker or transferee who would be offered the possibility to
choose the law applicable to the various aspects of their transaction. Such a choice,
however, is not what is being suggested in the future Convention: it simply offers
to the investor and its intermediary the possibility of localising their account.44 It
has to be stressed though that such a localisation does of course have a ‘reflex
effect’ (effet réflexe) on the actual transaction concluded between the investor and
the collateral taker or transferee, as it is the law that would be governing the
proprietary aspects of this transaction. But to refer to it under the heading of ‘party
autonomy’ would be misleading. In order to avoid further misunderstandings, the
author of the present article has suggested that the proposed solution be placed
under the heading ‘consensual approach’, as it reflects the agreement and under-
standing of the investor and its intermediary.

42
See, e.g., Art. 104 of the Swiss PIL Statute.
43
‘Party autonomy’ in the UCC, for example, refers only to the relation between the
investor and the intermediary, not the relation between the investor and the secured party.
44
Some experts have drawn a parallel with an investor choosing to do business with
an intermediary located in State A rather than with an intermediary located in State B, and
suggested that, although this ‘choice’ would lead to the application of a different law, it
would not be accurate to refer to it as an example of ‘party autonomy’.

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 Christophe Bernasconi

3. The Compromise Reached at the January 2001 Experts Meeting

As a result of the discussion, the following compromise emerged during the

January 2001 meeting: the parties to the custody agreement should be able to
designate an agreed place as the location of the account, but such an agreed
designation would not be conclusive unless it satisfies one of a number of specified
tests that indicate that the designated place is where the account is actually
maintained. This is in order to prevent third parties being prejudiced by the use of
an artificial designation which would conflict with the natural assumptions about
the location of the account. Only under those conditions would PRIMA be
regarded – and accepted – as a modern reflection of the traditional lex rei sitae
approach. Ignoring the lex rei sitae principle for the sake of an unrestricted
consensual approach would, however, be seen as having severe implications for
long-standing private international law traditions of several countries.
This compromise, it is submitted, bridges the position initially advocated by
those who favoured an unrestricted consensual approach (i.e., parties should be
allowed to designate any location of the account) with the position initially taken
by those who argued that no contractual liberty should be left to the parties in
relation to the issue of location, with only objective factors used. The precise
wording of the provision embodying this test still needs to be found. Again, the
following section reflects the status of discussion as of July 2001.

C. The ‘Principal Rule’ in Intermediate Drafts

In the light of the discussions mentioned above, the principal rule embodied in all
intermediate drafts for the future Convention is based on the consensual approach
with a nexus test as a reality check. It was in particular embodied in the draft
proposed by the Drafting Group at the January 2001 meeting (Article 4) and in a
new draft reflecting the results of the subsequent informal working process
(Article 5 of the annotated July 2001 draft). In the annotated July 2001 draft, the
relevant provision (Article 5) has the following structure. Paragraph 1 specifies that
the relevant intermediary is located ‘where the securities account with that
intermediary is maintained’. The draft then goes on to suggest two options for the
regulatory nexus test. Under the first option, the designation of an account location
is effective only if the intermediary’s maintenance of the account is subject to
regulatory supervision in the place so agreed. It has been suggested that in at least
some countries ‘custodial accounting rules’ exist that would satisfy this
requirement. Others, however, have suggested that regulatory structures may not
focus on the manner in which the intermediary maintains securities accounts, but
on the requirements that an intermediary must satisfy, such as capital requirements,
in order to engage in the business of maintaining securities accounts. Accordingly,

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the second option states the regulatory nexus test in terms of regulation of the
intermediary.45 46

D. The Fall-Back Test

If the principle rule – i.e., the consensual approach with a nexus test as a reality
check – does not work, either because there is no designation in the custody or
other agreement or because the nexus conditions embodied in the proviso are not
fulfilled, then a fall-back test is needed. It has to be mentioned though that this fall-
back test is intended to deal with a very small number of cases, as the bulk of the
cases will presumably fall within the scope of the principal rule.

45
The annotated July 2001 draft also contains a third option which takes a
completely different approach and allows the relevant intermediary to designate unilaterally
the place of the account. This approach is based on the idea that the facts needed to make
that determination may be knowable only to the intermediary that is maintaining the
account. Third parties may have no way of independently determining whether the nexus
test had been satisfied, even in cases in which the securities have been moved into a special
pledge account that the intermediary maintains for the pledgee. The third option responds to
this concern by giving complete protection to third parties who rely upon an intermediary’s
certification of the location of the account. In these broad terms, however, the third option
does not appear to be acceptable on a consensus basis, as it would allow the intermediary to
designate any possible location, including a location that is completely divorced from the
realities of the facts at stake and which is even inconsistent with the actual operation of the
account in practice. This is why the Permanent Bureau has added bracketed language to the
third option with a view to subject, similarly to the first two options, the intermediary’s
ability to designate a location to some ‘reality check’ requirements. This approach has not
been the subject of much discussion since the January 2001 experts meeting.
46
The annotated July 2001 draft also contains a specific proposal that departs from
the equation ‘place of the relevant intermediary’ = ‘place of the account’, and instead
suggests that the governing law is the law of the office or branch of the relevant
intermediary as determined by the appropriate test. The reasoning underlying this
‘branch/office approach’ is the following: Because an account is an intangible legal
relationship, it cannot, literally, have a geographical location. Rather, in speaking of the
location of an account, one typically has in mind particular activities that an intermediary
carries out in connection with maintaining the legal relationship of a securities account.
Against this background, it may well be that retaining the concept of geographical location
of an account causes more difficulties than it solves. However, the drawback of the
‘branch/office approach’ is that by dropping the reference to the account – i.e., to the place
where orders in respect of the property can be effectively enforced – it does not seem to be
based on the lex rei sitae principle anymore and would therefore be a rather dramatic
departure from longstanding principles. This might render this approach less attractive to all
those who believe that the lex rei sitae principle – although adapted to the new market
realities – should serve as the basic rule to assess proprietary rights in indirectly held
securities.

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 Christophe Bernasconi

1. The Objective Balancing Test vs. the Single Factor or Cascade Approach

In the most recent draft (i.e., the annotated July 2001 draft), the proposed Article 5,
paragraph 3, uses an objective balancing of factors test rather than a rule based on
a single specified factor or a cascade of single specified factors. The balancing test,
although not providing complete ex ante certainty, appears acceptable for two
reasons. First, the strength of the principal rule means that commercial parties will
be able to determine with certainty the law that will govern perfection in the great
majority of cases. Therefore, if the fall-back test applies, this will normally be
because the parties did not consider the issue of the location of the account; hence,
it appears appropriate that the question of its actual location be decided by
considering all the objective evidence. Secondly, the envisaged ‘black list’ (see
infra under E) makes clear the factors that are not to be considered and this will
provide far greater certainty than currently exists.
In the July 2001 proposal, the factors that may be considered in determining
the place of the relevant intermediary are: (a) the location of the office or branch
where the relevant intermediary treats the securities account as being maintained
for regulatory, accounting or internal or external reporting purposes; (b) the
location of the office or offices of the relevant securities intermediary with which
the account holder deals; (c) the terms of the custody agreement, account
agreement or any other agreement relating to the securities account between the
relevant securities intermediary and the account holder; (d) the terms of account
statements or other reports prepared by the relevant securities intermediary that
reflect the balance of the account holder’s interest in the securities account; and
(e) the State whose law governs the agreement establishing the securities account.
Letter (a) would simply reflect the main element embodied in the general
rule. Sub-paragraph (a) and its components would certainly seem to be an
important factor as part of a balancing test; what is less clear is whether the sub-
paragraph’s components would make sense as a single fall-back rule. For example,
using a test that looks to the place where the account is maintained for regulatory
purposes will not provide certainty in cases where there is more than one State that
has jurisdiction over it. Letter (b) may be useful in situations where other
documentation has not expressly designated the location of the account, but the
account holder regularly deals with a certain office or offices with respect to the
custodial services provided by the intermediary. Letters (c) and (d) permit
reference to the general terms of account agreements or statements. Both sub-
paragraphs can be expected to lead over time to a change in industry practice. As a
competitive matter, custodians will ensure that their account agreements and
account statements clearly indicate where the account is maintained to provide
certainty for their customers. Some experts questioned the inclusion of letter (c), as
this factor is already contained in the principle rule. There are, however, two
reasons for suggesting that it remains appropriate to refer to the same factors in
both places. First, if no place is designated in the custody or other agreement, the
terms of the agreement should still be relevant in evaluating the expectations of the

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parties as to the location of the account. Similarly, if a place has been designated in
the custody or other agreement but the conditions embodied in the principal rule
are not satisfied, the terms of the agreement between the parties might still be of
relevance in determining the location of the account. Letter (e) has provisionally
been included in the balancing test as one of the potential fall-backs proposed at
the January experts meeting. This test had the support of some delegations. As one
of the factors it would be an additional indication of a connection with a particular
place. As a single factor fall-back test, however, it seems unlikely to be acceptable
because it leads to an answer that may be divorced from the lex rei sitae rule.

2. Single Factor Fall-Back Tests, in Particular the ‘Legally Established’

Test

As mentioned above when considering the balancing test, the factors specified in
letters (a) and (e) do not seem appropriate as single factor tests. During the
informal process, some experts have made it clear that they would prefer the use of
a single fall-back test rather than a balancing test if a suitable single fall-back test
can be found. The challenge has been trying to find a test that provides a single
answer that is linked to the location where the account is actually maintained.
Experts continue to strive for such a solution and it is expected that new and
different suggestions will be considered as the process continues.
One suggestion that was discussed at the January 2001 meeting was to
locate the relevant intermediary at the place where that intermediary signing the
custody agreement was ‘legally established’. Proponents of this test have suggested
that it has the advantage of being clear cut. Others, however, have suggested that it
may pose problems due to the varying treatment under different legal systems of
the status of branches of multinational organisations, and have questioned whether
it will always be feasible to determine whether the contracting party is a branch or
the entity as a whole. In such cases, the application of the ‘legal establishment of
the signing party’ test could result in the law of the place of incorporation or
formation, statutory seat or central administration even though the securities
account is not located in that jurisdiction. It has been suggested that this difficulty
could be overcome, without abandoning the ‘legally established’ formula, by
additional wording making it clear that in cases where the intermediary is dealing
through a branch it is to be regarded for this purpose as legally established where
the relevant branch is located. This however would lead back to the problem of
identifying in each case which branch was the ‘relevant’ branch. Since there may
be factors pointing to connections with two or more branches, it does not appear
that the use of an expanded ‘legally established’ test of itself provides any greater
clarity or certainty.

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 Christophe Bernasconi

E. The ‘Black List’

Early in the process, it was suggested to expressly enumerate in the Convention

black-listed factors that should not be taken into account in determining the
location of the accounts. According to the annotated July 2001 draft, the following
factors shall not be taken into account in determining the location of the relevant
intermediary: (a) the places where certificates representing or evidencing securities
are located; (b) the place where any register of holders of securities maintained by
or on behalf of the issuer of the securities is located; (c) the place where the issuer
of the securities is organised or incorporated or has its statutory seat, central
administration, principal place of business or its registered office; (d) the place
where any intermediary other than the relevant intermediary is located; or (e) the
places where the technology supporting the bookkeeping or data processing for the
securities account is located. No reference is made to the relevant securities
intermediary’s place of formation or incorporation, statutory seat or principal place
of business. It was thought unlikely, but not inconceivable, that this would have
been of any relevance and that accordingly the best course was not to include it in
either list.

F. Is There a Need for a ‘Super PRIMA’? The Case of a Fact Pattern

Involving Several Intermediaries

Throughout the working process, various experts stressed that the Convention
should specifically address the situation where several intermediaries are involved
in a transaction, in particular where a collateral provider and collateral taker hold
through different intermediaries and the collateral is provided by way of title
transfer. Under such a holding pattern, the collateral provider’s (transferor’s
/seller’s) interest is not transferred directly to the collateral taker
(transferee/purchaser), since the collateral provider never holds an interest with the
same intermediary as the collateral taker. Instead, the collateral provider instructs
its intermediary to transfer interests to the collateral taker’s intermediary, with a
request to the latter to credit the collateral taker’s account.47 While the experts
referred to above agree that PRIMA will simplify the choice of law issue and
improve certainty at each level of the multi-tiered holding system by substituting a
single law (i.e., the law of PRIMA) for the multiple possibilities that must now be
considered at each level (e.g., law where certificates are located, law of issuer’s
incorporation, law of the forum, PRIMA, etc.), they also argue that PRIMA should

47
This fact pattern is generally referred to as the ‘page 37’ problem, by reference to
the page number of the BERNASCONI Report on which this problem is dealt with. See also
the Report on the meeting of the Working Group of Experts (15 to 19 January 2001), pp. 15-
16, and the annotated July 2001 draft, Art. 2, para. 1, definition of the relevant intermediary,
with accompanying comments.

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go further. They urge that, in the interests of clarity and simplicity, the Convention
should provide that a single law governs proprietary aspects of all stages of a
transfer between parties who use different intermediaries.
Other experts, including the author of the present article, have expressed
strong doubts about this proposal. They argue that while the simplicity of the
proposal might be attractive at first sight, it also poses serious problems. They are
not persuaded that it is necessary or desirable to have a sort of ‘Super-PRIMA’ that
trumps all the individual PRIMAs at each level of the multi-tiered holding system.
They believe that PRIMA should provide as much simplicity and certainty in the
world of book-entry holdings and transfers as the traditional lex rei sitae rule
provides for physical possession and transfers of bearer securities. In other words,
PRIMA should provide a single answer to what law governs the proprietary issues
arising out of book-entry holdings and transfers of securities at each level of the
multi-tiered holding system, i.e., the PRIMA at that level. But there is no need for a
‘Super-PRIMA’ to trump these individual PRIMAs. An additional problem
identified by these experts is that the parties involved in the early or middle stages
of such a transfer may not be aware of the ultimate transferee or the location of its
intermediary. Against this background, it would seem contrary to principle, and to
the certainty and predictability which the Convention aims to produce, that parties
in this position should be exposed to the effect of rules of property law of a
jurisdiction of which they are unaware. Moreover, the suggestion would appear to
have the result that the law governing the proprietary aspects of the earlier stages
of the transfer is fixed only retrospectively; at the time that each stage occurs it will
appear to be governed by one law, but this will be replaced by a different law when
it becomes clear that an ultimate transferee holding through an intermediary in a
different jurisdiction is involved. A further difficulty mentioned by the opponents
to the ‘single law’ proposal arises from the fact that some intermediate transfers
will be composite transfers of securities in the course of transmission to a number
of different ultimate transferees who hold through intermediaries in different
jurisdictions. In such a case it may not be possible to identify which securities are
attributable to which ultimate transferee, leaving the position on governing law
quite unclear.

G. Existing Agreements

All the tentative drafts of the Convention produced so far (including the annotated
July 2001 draft) do not specifically address the issue of pre-existing documentation
(account or custody agreements), i.e., agreements concluded before the Conven-
tion’s entering into force. As this is a very important question to a large segment of
the industry, it seems important to promote discussion of this issue also, even if at
this stage no draft provision is suggested. The following comments are merely
designed to highlight the issue and to generate reactions.

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 Christophe Bernasconi

The approach reflected in the comments above (in particular Article 5 of the
annotated July draft) should accomplish the objective of providing ex ante
certainty for future transactions. However, during the informal working process, it
has been suggested that, at least in some situations, it might be difficult to amend
pre-existing agreements and to bring them in line with the provisions of the
Convention. In other words, the certainty provided by the Convention may not
necessarily have a retroactive effect.
It has therefore been suggested that consideration be given to adding
provisions which would address this problem. One possibility could be to adopt –
for pre-existing agreements – the ‘conclusive certificate’ approach suggested by
some experts, even if that approach were not thought generally acceptable for
future agreements.48 Another possibility would be to provide that for the purposes
of Article 5, paragraph 2, where a pre-existing agreement does not contain an
explicit reference to the location of the account, certain other terms can be taken
into account as determining or indicating the location agreed by the parties. By
way of illustration, a statement that the intermediary is acting through a given
branch could be treated as an agreement, or as an indication of an agreement, that
the account is located at that branch; another example of such an ‘interpretative
clause’ could be to say that a choice of law clause shall be treated as an agreement
that the account is located in the jurisdiction whose law is selected.
Parties drafting agreements after the entering into force of the Convention
can be expected to comply with the requirement of the specific provision of the
Convention and to expressly specify the location of the account – this is why the
possibility of the ‘interpretative clause’ might indeed be regarded as exclusively
restricted to pre-existing agreements. During the informal working process,
however, it has been suggested that such a provision could be beneficial for new
agreements as well and that it should therefore apply generally. One may wonder,
however, if such an approach would not be viewed as reintroducing through the
back-door the concept of the ‘unlimited consensual approach’ (i.e., without reality
check) that had been excluded by consensus. For many civil law countries and for
all those who believe that the (modernised) lex rei sitae approach should be the
principle underlying the connecting factor embodied in the Convention, the idea of
an ‘interpretative clause’ that applies to new agreements too, may therefore not be
acceptable. Furthermore, if the second example of such an interpretative clause
mentioned above (i.e., a choice of law clause contained in the agreement) were
eventually adopted for new documentation as well, its relationship with the
existing paragraph 3, sub-paragraph (e), would presumably have to be examined.

48
See the comments in note 45.

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 Indirectly Held Securities

VI. The Insolvency Issue in Particular

A. Introduction

The delicate issue of the effects of a bankruptcy procedure on a transaction – in

particular a collateral transaction – whose proprietary aspects are governed by the
substantive law designated by the Convention deserves a more extensive
comment.49 At the outset, it should be noted that insolvency laws might have an
impact in two ways on the law applicable to the taking of securities as collateral.
First, insolvency laws might impact whether a proprietary interest has been
properly created and perfected. Secondly, insolvency laws might jeopardise the
effects of such interest within a bankruptcy procedure. In its current version (July
2001), the proposed Convention addresses both these issues in Article 6.50 It aims
at finding the delicate balance between preserving the effectiveness of an interest
perfected under the substantive law designated by the Convention, while not
vitiating rules in bankruptcy that affect secured parties.51

B. Respect of Validly Perfected Interests (Paragraph 1)

During the January 2001 meeting, a large number of experts endorsed the principle
that an interest validly perfected under PRIMA should be respected under the
provisions of specific insolvency laws. This is stated as a general principle in
Article 6, paragraph 1 of the annotated July 2001 draft. The general principle is

49
As a matter of fact, the crucial question with respect to a pledge is its efficacy in
the event of the debtor’s insolvency. This being said, States have always been very sensitive
to any possible intrusion into their domestic insolvency law regime. It is against this
background that in the BERNASCONI Report, p. 5, we suggested that the proposed
Convention should not interfere with national insolvency rules. This issue had not been
discussed in full detail during the informal discussions prior to the January meeting; the
matter was in fact deliberately left for discussion at the January 2001 experts meeting.
Further discussions on this core issue are needed.
50
This provision reads as follows: ‘(1) The opening of an insolvency proceeding
shall not affect the validity of proprietary rights in respect of indirectly held securities that
have been constituted and perfected in accordance with the law of the place of the relevant
intermediary. (2) Nothing in this Article affects the application of: (a) any rules of
insolvency law relating to the [ranking of categories of claim or to the] avoidance of a
transaction as a preference or a transfer in fraud of creditors; or (b) any rules of insolvency
procedure relating to the enforcement of rights to property which is under the control or
supervision of an insolvency administrator.’
51
The provision is currently drafted without specifying against whom the insolvency
proceedings are brought. This way, it covers any relevant insolvent debtor, including the
intermediary.

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 Christophe Bernasconi

subject to exceptions, the scope of which raises important policy issues which are
discussed further below. It was, however, generally agreed that the exceptions
should not be phrased so as to permit the insolvency court to apply a conflicts rule
different from PRIMA in identifying the law to govern proprietary issues such as
creation and perfection.
The approach taken in paragraph 1 is based on both the Council Regulation
(EC) No 1346/2000 on Insolvency Proceedings (Article 5(1)),52 and on the Draft
UNIDROIT Convention on International Interests in Mobile Equipment (Article
29(1) and (2).53

52
This Regulation (see this Yearbook 2000, pp. 241-264), which will enter into force
on 31 May 2002, has been adopted with a view to developing more uniform procedures that
will avoid incentives for the parties to transfer assets or judicial proceedings from one
Member State to another in order to obtain a more favourable legal position. The proposed
solutions rely on the principle of proceedings with universal scope, while retaining the
possibility of opening secondary proceedings within the territory of the Member State
concerned. The Regulation applies ‘to collective insolvency proceedings which entail the
partial or total divestment of a debtor and the appointment of a liquidator’ (Art. 1, para. 1). It
applies equally to all proceedings, whether the debtor is a natural person or a legal person, a
trader or an individual. However, it does not apply to insolvency proceedings concerning
insurance undertakings, credit institutions, investment undertakings which provide services
involving the holding of funds or securities for third parties, and collective investment
undertakings (Art. 1, para. 2). The courts with jurisdiction to open insolvency proceedings
are those of the Member State where the debtor has his centre of ‘main interests’ (Art. 3,
para. 1; in the case of a company or legal person, this is the place of the registered office, in
the absence of proof to the contrary). Secondary proceedings may be opened subsequently to
liquidate assets located in another Member State (Art. 3, para. 2; these secondary
proceedings are restricted to the assets of the debtor located in the other Member State). The
law of the Member State in which proceedings are opened determines all the effects of those
proceedings (Art. 4; conditions for the opening of the proceedings, their conduct and
closure, questions of substance such as the definition of debtors and assets, effects of
proceedings on contracts, individual creditors, claims, etc.). However, the in rem rights of
third parties in respect of the debtor’s assets located in another Member State are not
affected by the opening of an insolvency proceeding in another Member State (see further
comments on this issue in the text). Art. 5, para. 1 reads as follows: ‘The opening of
insolvency proceedings shall not affect the rights in rem of creditors or third parties in
respect of tangible or intangible, moveable or immoveable assets – both specific assets and
collections of indefinite assets as a whole which change from time to time – belonging to the
debtor which are situated within the territory of another Member State at the time of the
opening proceedings.’ One may add, however, that this immunisation is only partial, as the
liquidator may request secondary proceedings to be opened in the State where the assets are
located if the debtor has an establishment there. Finally, decisions by the court with
jurisdiction for the main proceedings are, in principle, recognised immediately in the other
Member States without further scrutiny (Art. 16).
53
Article 29 of this Draft Convention (as approved by the UNIDROIT Governing
Council at its 79th session, held in Lisbon from 10 to 13 April 2000) reads as follows:

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 Indirectly Held Securities

The creation, validity and scope of in rem rights are governed by their own
applicable law (in general, the lex rei sitae, or, in the specific context of indirectly
held securities, PRIMA). The fundamental policy pursued in paragraph 1 is to give
effect to a right created under the law of the State where the assets are ‘situated’
and hence can eventually be enforced. In other words, the system preserves legal
certainty of the rights over these assets. Rights in rem can only properly fulfil their
function if they are not more affected by the opening of insolvency proceedings in
other States than they would be by the opening of national insolvency proceedings.

C. The Qualifications (Paragraph 2)

In the annotated July 2001 draft, the principle stated in Article 6, paragraph 1 is
subject to two important qualifications embodied in paragraph 2. These
qualifications are based on the Draft UNIDROIT Convention on International
Interests in Mobile Equipment.

1. Draft UNIDROIT Convention on International Interests in Mobile

Equipment

Like Article 29, paragraph 3, of the Draft UNIDROIT Convention on International

Interests in Mobile Equipment, the February 2001 draft of Article 6, paragraph 2,
aims at: (1) preserving certain rules relating to insolvency proceedings such as the
ranking of categories of claims and avoidance rules, and (2) avoiding interfering
with rules about the enforcement of real rights or security interests pending
reorganisation.
The basic reasoning underlying sub-paragraph (a) is to preserve insolvency
rules which may declare that certain types of claims (e.g., wages and taxes) should
have priority over any other interest. Several experts stated that in their respective
jurisdictions such insolvency rules would have public policy character and hence
would have to prevail over any other interest. Another group of experts expressly
questioned this conclusion. Furthermore, to ensure that reorganisation proceedings
do not collapse (because, for example, a secured party seizes crucial assets), sub-

‘(1) In insolvency proceedings against the debtor an international interest is effective

if prior to the commencement of the insolvency proceedings that interest was
registered in conformity with this Convention. (2) Nothing in this Article impairs the
effectiveness of an international interest in the insolvency proceedings where that
interest is effective under the applicable law. (3) Nothing in this Article affects any
rules of insolvency law relating to the avoidance of a transaction as a preference or a
transfer in fraud of creditors or any rules of insolvency procedure relating to the
enforcement of rights to property which is under the control or supervision of the
insolvency administrator.’

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 Christophe Bernasconi

paragraph (b) is designed to subject the security interest to such procedures (e.g., a
stay).
A first group of experts agreed with the principles underlying Article 6.
Another group, however, questioned the qualifications in paragraph 2 and its effect
of submitting the interests in the pledge to the lex concursus. In their opinion, the
effects of paragraph 2 would be too far-reaching. Instead, these experts suggested
that the proprietary rights of the beneficiary in cases of insolvency should be
determined exclusively in accordance with PRIMA. This approach, which expands
the effects of PRIMA to the detriment of the lex concursus, is inspired by the
European Insolvency Regulation. During the January meeting and in subsequent
informal discussions, a number of experts have stressed that it was important to
ensure compatibility between the proposed Hague Convention and the European
Legislation. The general focus of the proposed Convention, however, should
remain on PRIMA and it may be worthwhile not to bee too ambitious on
insolvency issues so as not to lose sight of the principal aim of the project.

2. The European Insolvency Regulation

As already mentioned, Article 5, paragraph 1, of the European Insolvency

Regulation (EIR) excludes from the effects of the proceedings rights in rem of
third parties and creditors in respect of assets belonging to the debtor, which, at the
time of the opening of proceedings, are situated within the territory of another
Contracting State.54 Similar to the Draft UNIDROIT Convention, the EIR does not
‘immunise’ rights in rem against the debtor’s insolvency altogether.55 According to
Article 5, paragraph 4, the principle of protection embodied in paragraph 1 ‘shall
not preclude actions for voidness, voidability or unenforceability as referred to in
Article 4(2)(m).’56 Pursuant to the latter provision, these actions are governed by
54
See supra, note 52 and accompanying text. If the assets are situated in a non-
Contracting State, Art. 5 is not applicable.
55
It has to be noted that the EIR does not define what ‘rights in rem’ are. If it were
to impose such a definition, it would indeed run the risk of describing as rights in rem legal
positions which the law of the State where the assets are located does not consider to be
rights in rem, or of not encompassing rights in rem which do not fulfil the conditions of that
definition. Hence, the classification of a right as a right in rem must be sought in the national
law which, according to the general conflict of laws principles, governs rights in rem (i.e., in
general, the lex rei sitae, or in the context of indirectly held securities, the PRIMA
jurisdiction).
56
Furthermore, if the law of the State where the assets are located allows these rights
in rem to be affected in some way, the liquidator (or indeed any other person thus
empowered) may request secondary proceedings to be opened in that State if the debtor has
an establishment there. The secondary proceedings are conducted according to national law
and allow the liquidator to affect these rights under the same conditions as in purely
domestic proceedings.

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the lex concursus. So far, the system is comparable to the one embodied in the
Draft UNIDROIT Convention. Article 5, paragraph 4, however, has to be read in
conjunction with Article 13 of the EIR. Article 13 is indeed crucial, as it states that
the possibility of an action for voidness, voidability or unenforceability under the
lex concursus ‘shall not apply where the person who benefited from an act
detrimental to all creditors provides proof that: the said act is subject to the law of a
Member State other than that of the State of the opening of proceedings, and that
law does not allow any means of challenging that act in the relevant case.’
Hence, if prior to the opening of the debtor’s insolvency proceedings, a
collateral taker has fulfilled all the perfection requirements under PRIMA, and the
collateral taker’s interest is not subject to further challenge under the PRIMA
jurisdiction’s law, the collateral taker’s interest should be given full effect and not
be affected by the lex concursus. Accordingly, if the conditions for an actio
pauliana would be fulfilled under the lex concursus, but not under the PRIMA
jurisdiction (because, for example, the suspect period is shorter in the latter than in
the former), the collateral taker’s interest would remain protected. If, on the other
hand, the PRIMA jurisdiction’s law does allow for the act to be challenged, the
appropriate steps may be taken to set aside the acquisition or disposition of the
account right concerned.
Article 13 represents a defence against the overriding application of any
provision of the lex concursus invalidating the collateral taker’s interest in
circumstances where it is not possible to invoke a corresponding invalidating
provision under the law of the PRIMA jurisdiction. This mechanism is said to be
‘easier to apply than other possible solutions based on the cumulative application
of the two laws’ and to ‘uphold legitimate expectations of creditors or third parties
of the validity of the act in accordance to the normally applicable national law,
against interference from a different lex concursus’.57
For the collateral taker, this system enhances certainty and thus represents
an advantage: he only has to look at one single law for both the perfection
requirements and the extent of protection offered in case of the debtor’s insolvency
and his expectations would be respected.58

57
These quotations are from the Explanatory Report on the European Convention on
Insolvency Proceedings prepared by Prof. VIRGÓS (Spain) and Mr SCHMIT (Luxembourg). In
essence, the Regulation is a mere transcript of the Convention and hence the Explanatory
Report may still be consulted with benefit.
58
A similar solution is proposed in the Draft UNCITRAL Convention on
Assignment of Receivables in International Trade. In the case of investment securities held
through a securities intermediary, the characteristics and priority of the assignee in proceeds
are governed by PRIMA (Art. 24, para. 1, sub-para. b; Art. 31), except in two situations:
first, where the substantive provision of the PRIMA jurisdiction would be manifestly
contrary to the public policy of the forum State, and secondly, where non-consensual
preferential rights (such as wages and tax) are given priority in the forum State (Arts. 25
and 31).

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 Christophe Bernasconi

D. Conclusion on the Insolvency Issue

This brief analysis indicates that there seems to be agreement on the principle that
local insolvency rules should not be permitted to apply a principle different from
PRIMA to identify the law applicable to proprietary issues such as whether an
interest has been validly created and perfected. There is, however, no consensus as
yet as to the extent of any further protection which should be given to any rules of
the PRIMA jurisdiction against the application of differing rules of the insolvency,
for example, in relation to matters such as the invalidation of transactions on the
grounds of preference or fraud on creditors. Two concepts are proposed: one that is
guided by the aim of preserving the effects of the local insolvency law,59 and
another that aims at preserving the collateral taker’s interest by giving PRIMA the
greatest possible effect in the debtor’s insolvency procedure. No consensus has yet
been reached on this crucial question and further discussions are needed.

VII. Conclusions
As of today, financial market participants are not in a position to ascertain readily
and unequivocally which law will govern the proprietary aspects of dispositions of
interests in respect of securities held through indirect holding systems. The
exposures involved are extremely large, as each day indirectly held securities
worth hundreds of billions of dollars, Euro and yen are provided as collateral under
arrangements involving a cross-border element. The problem thus appears to be
extremely important for the international financial markets and urgently needs to
be addressed.
Against this background, the Hague Conference on Private International
Law is to be congratulated for having taken up this project. Also, in light of the
characteristics of the project, the adoption of new working methods – which
proved to be extremely valuable – is welcome, in particular the conducting of
numerous informal discussions with delegations, market participants, practitioners
and experts.60 This informal working process, whose results have been extensively

59
During informal discussions subsequent to the January meeting, a group of experts
stressed that the proposed Hague Convention should refrain from interfering with local
insolvency laws. As a result, they suggested that para. 2 should be deleted altogether and
that Art. 6 should be limited in stating the principle embodied in para. 1 only.
60
Given the tight agenda suggested by the Member States for this project and the
need to act on the basis of a ‘fast track’ procedure, the Permanent Bureau organised prior to
the January 2001 experts meeting a series of three telephone conference calls with 30-50
participating experts. The aim of these conference calls was to identify the main issues to be
tackled by the Working Group and to propose possible answers. Similarly, after the January
2001 experts meeting, the Permanent Bureau continued to discuss with legal experts on an

98 Yearbook of Private International Law, Volume 3 (2001)

 Indirectly Held Securities

reflected in official documents prepared by the Permanent Bureau,61 is crucial to

finalise the project within the envisaged timeframe. There is indeed no doubt that if
the goal of formally adopting the Convention during 2002 is to be realised, the
informal working process has to be continued. At the 19th Diplomatic Session of
the Hague Conference, whose first part was held in June 2001, the Member States
were extremely supportive of this informal working process, taking into account in
particular that the various conference calls provided a forum in which to identify
and – where necessary – to clarify potential concerns and to explore possible
solutions. There is no reason to believe that this support will cease, as long as the
informal work remains subject to the same strict conditions of transparency
applied until now. In this context, it is worth mentioning that during the Diplomatic
Session in June 2001, numerous delegations invited the Hague Conference, and in
particular its Permanent Bureau, to reflect on the possibility of adopting these new
working methods for other projects currently under preparation or to be tackled in
the future. On a personal note, we are convinced that the consensus principle,
which is now prevailing at the Hague Conference’s negotiation procedures, is only
workable if accompanied by extensive informal discussions between two ‘official’
meetings in the Hague. The steadily increasing number of Member States of the
Hague Conference appears to give even more impetus to this trend,62 as ‘official’
negotiations in a room packed with 200 experts are becoming more and more
difficult and unlikely to produce substantive results.
The second element allowing this project to be dealt with on a fast track
procedure is its limited scope. Not only is the future Convention limited to conflict
of laws issues (in other words, the Convention will not address issues of
jurisdiction and the effects of foreign judgments), but the subject matter of the
Convention is also rather limited, as it will only identify the appropriate law to

unofficial basis the tentative text prepared in January and to work closely with market
participants to ensure that the future convention incorporates a solution which is both
practicable and provides the required level of certainty. A fourth conference call was held in
April 2001 in order to discuss the numerous comments on a previous draft and new
suggestions submitted by a large number of experts. Around 45 experts from 15 different
States participated in this fourth call.
61
See in particular the Report on the meeting of the Working Group of Experts (15
to 19 January 2001), mentioned in note 1.
62
As of 6 August 2001, the following 54 States were Members of the Conference:
Argentina, Australia, Austria, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria,
Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland,
France, Georgia, Germany, Greece, Hungary, Ireland, Israel, Italy, Japan, Jordan, Republic
of Korea, Latvia, Luxembourg, The former Yugoslav Republic of Macedonia, Malta,
Mexico, Monaco, Morocco, Netherlands, Norway, Peru, Poland, Portugal, Romania,
Slovakia, Slovenia, Spain, Suriname, Sweden, Switzerland, Turkey, United Kingdom of
Great Britain and Northern Ireland, United States of America, Uruguay, Venezuela,
Yugoslavia.

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 Christophe Bernasconi

govern proprietary aspects of a disposition of interests in indirectly held securities.

The fact that the Convention addresses a crucial, but very specific, well defined
and limited topic ensures that the project as such remains within clearly
circumscribed boundaries, which in turn makes the administration of the project
more lenient and predictable. Here again, the future will tell us if there are some
lessons to be learned from a less ambitious, but more manageable approach to the
selection of topics to be taken up by the Hague Conference.

100 Yearbook of Private International Law, Volume 3 (2001)

 THE BRUSSELS I REGULATION:
COMMENT
Bertrand ANCEL∗

I. A Brief Historical Introduction

II. The Brussels I Regulation
A. Reinforced Grounds of Jurisdiction
1. Protective Rules of Jurisdiction.
a) Employment Contracts
b) Consumer Contracts
2. Jurisdiction in Matters Relating to Contracts.
B. Increased Mutual Trust.
1. Trust Imposed on the Judge of the State Addressed
a) Substantive Grounds for Non-Recognition
b) Procedural Grounds for Non-Recognition
2. Trust Imposed on the Judge Seized of the Action
a) Chronology of Concurrent or Related Actions
b) Inadmissibility of Forum Non Conveniens

I. A Brief Historical Introduction

Council Regulation (EC) No. 44/2001, of 22 December 2000, will enter into force
on 1 March 2002. Given that the true content of a law is revealed only by its appli-
cation, this paper should talk about the future. Nevertheless, it starts with a glance
at the past.
This brief historical note is justified as the purpose is to examine the
doctrine of the juge naturel.1 The idea is that the model of the movement of deci-
sions found in this doctrine could directly or indirectly help clarify the Regulation
adopted by the Council.
Not long ago, the doctrine of the natural judge was said to govern Swiss-
French relations in matters of jurisdiction and recognition of judgments, i.e., before
the Lugano Convention altered the traditional legal links between France and the

∗
Professor of law at the University Panthéon Assas (Paris II), rédacteur en chef of
Revue critique de droit international privé.
1
HOLLEAUX D., Compétence du juge étranger et effets des jugements, Paris 1970,
No. 201.

Yearbook of Private International Law, Volume 3 (2001), pp. 101-114

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Bertrand Ancel

cantons dating from the fifteenth century. The Convention of 15 August 18692 was
the most modern expression, if not the most true, of the model of natural judge in
bilateral relations. The central characteristic of this model is a close linkage be-
tween the notions of jurisdiction and the enforcement of foreign judgments. In
theory, every decision of a competent authority is due enforcement in an addressed
State. Based on a kind of division of judicial tasks between jurisdictions, this
doctrine aims to guarantee that every decision rendered and announced in con-
formity with aforementioned division will be recognized and given effect in all
countries participating in the division, with a reservation in the case of execution.
In cases where execution is demanded, the discontinuity between juris-
dictions requires, in addition to the condition of the original court’s competence, a
procedure for a local authority to order local agents to bring about, by coercion if
necessary, the concrete result required by the foreign judgment. Such procedure is
precisely to confirm that the executory judgment indeed originates in the juris-
diction designated by the rules creating the division of judicial tasks. The Conven-
tion of 1869 followed this doctrine, albeit with some requirements to assure that
the laws and rules of public order and administration in the addressed State are
respected and, in addition, that defendant’s rights and protection are safeguarded.
The latter condition reflected a concern with private interests and a preoccupation
with procedural justice, which could seem rather unusual within the context of the
natural judge’s doctrine. Meanwhile, as a corollary, the Convention granted power
to declare enforceability to either a judge (in France and some cantons) or an
administrative official (in other cantons). The latter alternative, which appears to
limit the judicial discretion over ultimate enforcement, is the closest to the original
model of natural judge.
This is clearly shown by the treaties which preceded that of 1869, that is to
say, the treaties of 1715 and 1777;3 these two provided in some sense that
executory capacity would only follow an essentially administrative procedure
aimed at confirming the origin of the decision and nothing more. There would be
no other formalities or required pleading to obtain enforceability.
Thus it would suffice to check that the judge of origin is the natural judge.
This was a decisive feature: it expresses the relationship between the State where
the judge of origin sits and the party against which the decision was taken. The
sovereignty of a State over individuals – personal ties of such party to its State – is
the key to the mechanism. As the agent of the sovereign State, the natural judge
may act against the interests of an individual by exercising the power to judge,
punish and constrain. At the same time, the decision will be recognized as a
sovereign act and will be supported in foreign countries by the paradigm of

2
For this Convention, see FLATTET G., ‘Un traité centenaire: la Convention franco-
suisse du 15 juin 1869 sur la compétence judiciaire et l’exécution des jugements’, in: Rev.
crit. dr. int. pr. 1969, p. 577.
3
FLATTET G. (note 2), p. 595.

102 Yearbook of Private International Law, Volume 3 (2001)

 Brussels I Regulation

sovereignty: foreign sovereigns have no interest in a relationship of allegiance

where they have no part; however, for the sake of reciprocal treatment, they do
have an interest in welcoming and, if necessary, actively executing foreign
decisions on their territory.
There is nothing more required than to register the foreign decision when its
origin is confirmed. This sovereignty of a State over its own people is powerful, by
definition, and its exercise is not subject to any form of restriction. Once accepted,
it is limitless in its power; it is a power that has no known limit.

II. The Brussels I Regulation

Does the Regulation of 22 December 2000 lean towards this model? Like the
Brussels and Lugano Conventions, it provides that decisions of other Member
States should be recognized and given effect in the addressed Member States,
without any special procedure being required. In addition, in respect of executory
judgments, it states in Article 41:

‘The judgment shall be declared enforceable immediately on

completion of the formalities provided for in Article 53 without any
review under Articles 34 and 35. The party against whom
enforcement is sought shall not at this stage of the proceedings be
entitled to make any submissions on the application.’

This suggests that, based on the official text of the foreign decision and a
certificate evidencing its nature and origin, the addressed State will declare a
judgment from another Member State enforceable on its territory, thus abandoning
the simplified procedure of exequatur under the Brussels and Lugano Conventions.
Albeit summary and ex parte, this was indeed a judicial procedure requiring a local
judge to ascertain that the foreign decision had been rendered in conformity with
the requirements of Articles 27 and 28 or, more precisely, that no ground for non-
enforceability existed. Nothing of this sort is in the Brussels I Regulation, which,
one may say, leads back to former French law and its system of pareatis,4 i.e., an
administrative act that the court officers of the addressed jurisdiction are obliged to
observe once presented with rogatory letters from the judge of origin; such
rogatory letters – like the certificate required by Article 53 of the Regulation –
should confirm the origin of the judgment.

4
LAINÉ A., ‘Considérations sur l’exécution des jugements étrangers en France’, in:
Revue critique de législation et de jurisprudence 1904, p. 95; HUDAULT J., ‘Les conflits de
juridictions dans le droit international privé des trois derniers siècles de l’Ancien Régime’,
in: Cours d’Histoire du droit privé du Moyen Age et des Temps Modernes, Paris 1971, p. 26.

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 Bertrand Ancel

Of course, the Regulation admits judicial contest, an appeal affording an

opportunity to observe the judicial maxim audi alteram partem and to hear both
parties to the case, but only against a decision that declares or refuses enforceabil-
ity. The same opportunity existed formerly under the regime of the natural judge;
this regime is known by those recourses to parliaments.
However, it is uncertain whether the rehabilitation of pareatis sets the stage
for an inevitable reappearance of the juge naturel doctrine. In fact, the coupling of
immediate recognition and pareatis – the declaration of enforceability (in the
language of the Brussels I Regulation) – is not necessarily linked to the natural
judge doctrine and the notion of sovereignty. It is rather the broad influence – not
the essence – of sovereignty that results in the choice of treatment for foreign
judgments. Another paradigm could replace the notion of sovereignty in its func-
tion of driving force behind the recognition and enforcement of judgments.
Under the Ancien Régime in France, pareatis fulfilled an internal function
more often than an international one;5 it was used to assure the prorogation of en-
forceability from one jurisdiction to another within the realm, where all juris-
dictions derived their powers from a single sovereign source. Sovereignty did not
intervene in this device of internal pareatis. A glance at the subsequent history of
French law makes the judicial politics set in motion by today’s Regulation
strikingly clear. Pareatis signals the dismantling of borders between jurisdictions.
Until 1 March 2002, sovereign States will survive in a judicial context which links
them in a federal fashion to the Union; afterwards they will disappear to make
room for a single or common judicial system within which even the executory
power of decisions will, in principle, circulate freely. The notion of sovereignty is
thus progressively effaced and replaced by a regime defining judicial competence
within a net of judicial courts of the same and equal quality. In this respect, the
Brussels I Regulation follows the outline of the Brussels and Lugano Conventions,
which already privileged a privatiste notion of judicial power. Of course, this
notion still maintains some division of jurisdictions; however, it combines a
number of elements – some of which are subjective (defendant’s rights or
protection of weak parties) and others objective (sound administration of justice or
procedural efficiency) – so as to offer a variety of solutions that differ according to
the type of litigation, and in principle, favour a private interests-oriented proce-
dural justice. As the motor driving the free movement of decisions within the
Community, it is necessary that these combinations of elements, incarnated in a set
of jurisdictional rules, be well balanced, stable and solid. Only then will the
objective – the effective judicial protection of plaintiffs within the Union – be
achieved in a manner that will also encourage every Member State to give full faith
and credit to a judgment from another Member State. If the rules of jurisdiction
were to leave any doubt about whether the original judge had treated a case fairly,
it would be unthinkable to reduce the requirements for the reception of foreign
judgments.
5
HUDAULT J. (note 4), eod. loc.

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 Brussels I Regulation

Consequently, it was understandable that the Brussels I Regulation chose

pareatis attempts to reinforce grounds of judicial competence (I); however, the
task is difficult and, since it was uncertain whether the unconditional support of
every Member State or their courts would be obtained in all circumstances, the
Regulation makes the best of a voluntary policy that requires reciprocal
confidence within the Union (II).

A. Reinforced Grounds of Jurisdiction

While following the general structure of the Brussels Convention on the matter of
judicial competence, the Regulation also adds (sometimes quite subtly) some
improvements, which could be regarded as lessons from the past as well as
concerns for the future. It is unnecessary and would be tedious to catalogue and
evaluate each of these in detail; thus it seems reasonable to select some areas where
improvement was clearly intended. These involve, on the one hand, devices of
‘unequal competence’ intended to protect the ‘weak party’, and, on the other, the
rule of special jurisdiction in matters relating to a contract (Article 5(1)), which has
been the subject of much, sometimes radical, criticism.

1. Protective Rules of Jurisdiction.

Two types of modifications are noteworthy. The first is a change of structure:

Chapter II (Title II of the Conventions) includes a section on individual contracts
of employment, which is inserted between the sections on insurance and
consumer contracts, and a section on exclusive judicial competence. The second
modification is less noticeable in terms of form, but has a significant impact on
consumer contracts.

a) Employment Contracts

Cases involving individual employment contracts are deleted from Article 5 and
moved to the section dealing with protective jurisdiction. This change is symbolic
or narrative. It is clearer than ever that salaried employees benefit from a system of
judicial competence favourable to them, tending to assure their access to justice
and to guarantee effective redress against violations of their rights. This
orientation, which guides judicial interpretation, is not new – it harks back to the
Convention of Donostia-San Sebastian of 1989 and even to the Convention of
Lugano of 1988; but it is emphasized. From now on, jurisdiction in employment
contracts is not covered by Article 2 or the related rules of Articles 5 and 6 (within
the exception of Article 5(5) which applies by virtue of the new Article 18). As a
result, links to actor sequitur forum rei are weakened.

Yearbook of Private International Law, Volume 3 (2001) 105

 Bertrand Ancel

Of course, the essence of the protective regime for salaried employees has
not been significantly altered; many elements intended to help 'weak parties' have
been borrowed from the sections on consumer and insurance contracts and are
already included in Article 5(1). Therefore, a salaried employee has the option of
using the forum rei (the courts of the Member State where the employer is
domiciled) or the forum laboris (the courts of the place where the work is perfor-
med). While an employer has no such option and must always file a complaint at
the forum rei, the salaried employee’s option is protected against the prorogation of
jurisdiction agreements, which will be effective only if concluded post litem natam
or ad augendam tutelam.
The most novel but not very significant change is the slightly increased
possibility for the rules of judicial competence to cross borders of the common
territory of Member States. This possibility is already available under the Brussels
Convention when a plaintiff salaried employee prefers the forum laboris over the
forum rei. The forum of the employee’s service is determined by the place in a
Member State where this service is habitually performed, or as Article 19 adds, by
the last place where it was habitually performed. However, if the employee does
not or did not habitually carry out his work in any one country, the forum laboris is
the place in a Member State where the business that engaged the employee is or
was situated. The latter solution is maintained even if the services are performed
outside the common judicial area on the territory of non-Member States. In a
territoriality stained matter, such a forum laboris challenges third States’
jurisdiction.
Article 18(2) could lead to a similar border-crossing issue by attaching to
employment contracts’ litigation an assimilation mechanism that already serves
successfully for insurance and consumer contracts. If an employer that is not domi-
ciled in the common judicial area installed a permanent operation centre in a
Member State, it is deemed, for the purpose of disputes arising out of the opera-
tions of the centre, to be domiciled in that Member State. As a result, the juris-
diction of its courts will be well founded both by means of forum rei or forum
laboris – the latter being the prevailing forum laboris of Article 19(2)(b). Without
doubt this is the most remarkable consequence of the creation of Section 5,
Chapter II. Though not a large change, it brings the regime of judicial jurisdiction
over individual contracts of employment closer to the other protective regimes.
But it is still not equivalent. In fact, the protective system of unequal
judicial competence enjoyed by salaried employees is not sheltered at the recogni-
tion and enforcement level by Article 35 of the Regulation, which updates
Article 28 of the Convention. Without such shelter, breaches of the rules of
Section 5 will be an obstacle to the free movement of judgments in other Member
States. Therefore, in contests against a decision declaring or denying enforceabil-
ity, the court of the addressed State does not proceed in the same manner if the
judgment dealt with an employment contract as he would if the matter involved an
insurance or consumer contract. It is true that the Brussels Convention already
made this expediency measure. Moreover, experience shows that, to date, the

106 Yearbook of Private International Law, Volume 3 (2001)

 Brussels I Regulation

examination was not indispensable and that, as a result, there is less reason to
weigh down the conditions for foreign recognition if, in the vast majority of cases,
the judgment will lead to a result favouring the plaintiff salaried employee. The
logic is astonishing, nevertheless, in so far as it devalues a judicial competence that
it proposes to reinforce.6
Finally, we may suspect that there is more partisanship or ideological
fervour than rationality behind Section 5’s conception of autonomous judicial
competence, if this formal modification in the system of jurisdiction is to have real
consequences.

b) Consumer Contracts

By virtue of Article 15 (replacing Article 13 of the Brussels Convention), unequal

competence is, for some contracts, granted to a consumer, the type of which has
not changed. These contracts are as previously sales of goods on instalment credit
terms or loans repayable by instalments, or any other form of credit, made to
finance the sales of goods (Article 15(1)(a) and (b)). On the other hand, subsection
c of this section alters Article 13 of the Convention, whence the rest of the section
is derived. Subsection c no longer restricts its range to other contracts providing
services or goods when their conclusion or premises occurred within the territory
of the Member State where the consumer is domiciled. The nature of the object of
the performance and the original links of the contract with the country of the
consumer are no longer conditions for protection.
Henceforth, the protective system still largely benefits consumers. It
applies as soon as a consumer is domiciled in a Member State and has concluded
a contract with a person who pursues commercial or professional activities in the
territory of a Member State, or whose activities are specially if not exclusively
directed toward the market of such Member State. The second branch of the latter
alternative could include electronic commerce. This is not only an aggiornamento
aiming to adjust the protection to the level of the temptations to which consumers
are exposed by the latest communication and marketing techniques; it is also an
important step toward a generalization of consumer protection. The Brussels I
Regulation firmly takes the position that unequal judicial competence is fair and
justified in favour of the ‘weak party’.

6
BRUNEAU Ch., ‘Les règles européennes de compétence en matière civile et
commerciale’, in: Juris-Classeur Périodique 2001, I, 104, n°20

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 Bertrand Ancel

2. Jurisdiction in Matters Relating to Contracts

There was a pressing need to redraft Article 5(1) of the Convention if not to
suppress it entirely , as some recommended.7 This Article grants a specific
judicial competence in contracts separate and as an alternative to that based on
the domicile of the defendant, by giving the plaintiff the option of access to ‘the
courts for the place of performance of the obligation in question’. This
formulation, according to the interpretation given by the Court of Justice,
generates serious difficulties both concerning the determination of the obligation
that is to be taken into account and concerning the determination of the location
of its performance. On the one hand, the analytical approach required by the
decision in de Bloos8 ignored the unity of contract and threatened to disperse
among several states the various contested issues concerning distinct obligations
under the contract. On the other hand, the reference to the law applicable to the
contract in order to determine the place of performance of the obligation under
Tessili9 requires a complicated and uncertain exercise which consists of resolving
the question of judicial competence by application of a law, the choice of which
presupposed that this question has been resolved. Furthermore, in practice, this
interpretation has produced mediocre results: disregarding procedural efficiency,
it responds only imperfectly to the principle of proximity which is supposed to
assure the sound administration of justice, and Mr. Droz has shown that where the
claim is for payment, either it offers a bad option, if according to the lex causae
the payment is moveable to the creditor’s domicile, or it obviates any option if the
payment is due at the debtor’s domicile. In the first case, the place of performance
of the obligation in question will be the forum actoris, anathema to the Brussels
system; in the second case, it will be the same as the forum rei, which, as a
practical matter, gives the same result as under Article 2.
The Regulation did not dare to completely reform this disappointing
system. Instead, it amended the system as if it did not wish to overrule the Court
of Justice, which, for its part, seems however recently to have expected a reform
or reformulation of Article 5(1) that could help it to escape the constraints of its
own unfortunate jurisprudence. Nonetheless, it is simply a modified Article 5(1)
that will govern jurisdiction in contractual matters in the future. This it will do in
accordance with a formula whose wording is relatively complicated – no model
of literary skill – but which should nonetheless reduce the uncertainty and

7
DROZ G., ‘Delendum est forum contractus’, in: Recueil Dalloz 1997, chr. 351;
HEUZÉ V., ‘De quelques infirmités congénitales de droit uniforme: l’exemple de l’article 5. 1
de la Convention de Bruxelles du 27 septembre 1968’, in: Rev. crit. dr. int. pr. 2000, p. 595;
see also, less radical, MUIR WATT H., ‘Peut-on sauver le for européen du contrat? ’, in:
Revue générale des procédures 1998, p. 371; ANCEL M.-E., La prestation caractéristique du
contrat, Paris 2001, No. 36.
8
European Court of Justice (ECJ), 6 October 1976, [1976] ECR 1497
9
ECJ, 6 October 1976, [1976]. ECR 1473

108 Yearbook of Private International Law, Volume 3 (2001)

 Brussels I Regulation

unforseeability that currently results from the jurisprudence of the Court of

Justice. The formula does not condemn the jurisprudence but intends to confine it
to a subsidiary role within a narrow perimeter, giving the revived Brussels Con-
vention rule a specific interpretation for two types of contracts:

‘…unless otherwise agreed, the place of performance of the

obligation in question shall be, 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 [and] in the case of the
provision of services, the place in a Member State where, under the
contract, the services were provided or should have been provided’
(Article 5(1)(b)).

One might say, then, that the place where the characteristic performance of the
contract has been (or should have been) executed is deemed to be the place of
performance of all other obligations freely assumed between the parties pursuant
to the contract and that, in order to determine this place, it is no longer necessary
to examine the applicable law, but it is sufficient to examine the contract itself.
The Tessili-de Bloos jurisprudence was not by this means entirely
replaced. It is possible that the contract itself does not allow an identification of
the place of execution of the characteristic performance and, in such a case, it is
tempting to turn back to the lex contractus for the determination. The difficulty is
reduced but not eliminated. At any rate, the simplification delivered by the
Regulation encounters limits that are inherent to the nature of contracts and the
will of the parties.
Curiously, only two types of contracts were considered. Sales of goods
and service contracts are doubtless the principal instruments of international
trade. But there are other types of contract in the field of the Regulation.
Moreover, it appears that the advantage of promoting the characteristic
performance is available in litigation in commercial matters only. Is the sale of
the Rembrandt that hangs on the wall of the seller’s living room to a private
individual buyer a ‘sale of goods’ (‘vente de marchandises’)? Does the mandate
to collect the rent given by a landlady to her husband or her brother result from a
service contract as defined in litt. b? It is doubtful that these sorts of contracts will
be covered; and this doubt will add to the inherent uncertainty of the categories
used by Article 5(1)(b) and the qualification of these types of contracts
thereunder. Consequently, a potentially large area remains open to the application
and to the disadvantages of the general rule inherited from the Brussels
Convention.10

10
ANCEL M.-E., Comment of decisions from French Cour de cassation, Civ. 1re,
8 February 2000 (3 judgments), 30 may and 27 june 2000 (2 judgments) and Com., 16 May,
20 June and 11 July 2000, in: Rev. crit. dr. int. pr. 2001, p. 148, p. 162.

Yearbook of Private International Law, Volume 3 (2001) 109

 Bertrand Ancel

Moreover, the general rule – if I do not misinterpret Article 5(1)(b) – could

be overridden by the parties’ own agreement concerning the place of performance
of the obligation in question. In this case, the characteristic performance will lose
its powers of consolidation over other contractual obligations and the analytical
approach of de Bloos will be applied. As underthe doctrine of the Court of Justice
in Tessili, the agreement of the parties renders the reference to lex causae useless.
In summary, the re-evaluation and re-balancing of the elements that
determine jurisdiction appears to have been quite timid. The new wording of
Article 5 manifests a significant effort to modify optional jurisdiction to enhance
predictability and simplicity; it also seeks to reconcile the requirement of
proximity for a sound administration of justice with the consolidation of litiga-
tion, which the objective of procedural efficiency demands. Only its application
to specific cases will demonstrate whether the Regulation can achieve these goals.
The Brussels I Regulation reinforces the unequal rules of competence to the bene-
fit of salaried employees and consumers in an apparently more assertive manner.
In this way it favours the protection of weak parties, without being divided by
various potentially contradictory objectives. Nevertheless, the reformatting of
these rules of competence does not guarantee that it will establish solid and
incontestable jurisdiction for all proceedings such that it justifies and legitimates,
at the international level, the decisions of judges thus empowered. And, as if to
offset potential weaknesses in jurisdiction and the resulting diminished authority
that could jeopardise the recognition of decisions abroad, the Regulation
establishes as part of its system a number of solutions that presuppose a
heightened reciprocal trust between Member States.

B. Increased Mutual Trust.

The Brussels I Regulation’s choice of the technique of pareatis, offered

immediately, without re-examining the analysis of the foreign judge, attests to the
high level of mutual trust expected between jurisdictions within the Union. This
represents a great step forward, which nevertheless represents no more than a first
step in a more ambitious program.
The mutual trust is already, if less intensely, indicated by conventional law
in Article 28, which prohibits the judge addressed from re-examining the
competence of the foreign judge. The irrebutable presumption of judicial
competence is linked to the origin of the decision: no European judge could be so
mistaken or so malicious as to hear and decide a claim arbitrarily. As soon as
there are reasonable grounds for jurisdiction and serious judges, fears of abuse
dwindle and mistrust gives way to trust. In the Regulation, this trust goes farther,
at a forced march. It is required not only of the judge of the State addressed, but
also of the judge seized of the action.

110 Yearbook of Private International Law, Volume 3 (2001)

 Brussels I Regulation

1. Trust Imposed on the Judge of the State Addressed

The requirement for trust manifests itself by a reduction of the permitted grounds
for rejecting a foreign judgment as enumerated in Article 34 (which replaces
Article 27 of the Brussels Convention).

a) Substantive Grounds for Non-Recognition

First, among requirements of substantive nature, the repeal of the rule of

Article 27(4) must be pointed out. This rule provided for an examination of the
choice of law made by the foreign judge to resolve a preliminary question
concerning the status of natural persons, matrimonial property or succession,
which is sometimes necessary before he can decide the principal issue. This
choice-of-law test in personal and family matters was widely accepted in the law
of recognition of judgments of the founding Members of the Community who
were the first signatories of the Brussels Convention of 27 September 1968. The
rule survived various redrafts of the treaty and even made it into the Lugano
Convention. Perhaps it was not really a problematic rule because it was not really
observed. In truth, inside the Community, it was falling into disuse. Following the
example of Council Regulation (EC) of 29 May 2000 on jurisdiction and
recognition and enforcement of judgments in matrimonial matters and in matters
of parental responsibility for children of both spouses (Brussels II), Brussels I
Regulation eliminates this rule thereby relieving the courts of the Member States
whose national system excluded the requirement from any scruples they might
have had concerning either ignoring or circumventing it.
Among the substantive grounds for non-recognition and non-enforcement,
it must also be noted that that of protecting the public order has been weakened.
Henceforth, the conflict with the public order in the Member State addressed
must be manifest. Actually this change is not revolutionary. It seems rather to lie
along the lines of a general evolution in the Union, even though it must be
remarked that many Member States appear to increasingly consider both
procedural and substantive issues which concern human rights and fundamental
liberties as immediately raising a question of public order. Thus the modification
of the wording of Article 27(1) can be supposed to encourage moderation as well
as an invitation to each State to realign its sensitivities in this field with the
canons of the Community public order…

b) Procedural Grounds for Non-Recognition

Second, concerning requirements of a procedural nature, the Regulation brings

precision to the requirements of notification in foreign default judgments.

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 Bertrand Ancel

Article 27(2) of the Convention that set this condition only defined it by
means of its satisfaction, without specifying its purpose. According to this
provision, the document that instituted the proceedings must have been served to
the defendant in sufficient time to enable him to arrange for his defence and in a
regular manner according to a timetable and form set by the law where the judge
seized with the action sits. If this double condition is met, there can be no doubt
that the default of the defendant manifests a refusal to defend his interests before
the court; such a voluntary default does not merit protection after the decision is
handed down and so cannot constitute grounds for non-recognition. Only an
involuntary default can raise suspicion and lead to the rejection of the decision in
the State addressed. But the failure to respect the timetable and form imposed by
the law of the foreign judge – which according to Article 27(2) leads to non-
recognition – can mask a voluntary default. There have been cases in which a
defendant took advantage of irregularities in the service of documents that
instituted the proceedings to obstruct the circulation of the decision.11 Formally,
the requirements of Article 27(2) were not satisfied; but in reality, such
conditions are met as soon as the defending party who knows of the proceedings
voluntary neglects them. Thus, the means do not fit well with the ends.
In addition it is quite odd to ask the court addressed to review the decision
of the foreign judge for the appropriateness of the latter’s authority to hear the
case: in cases of default, the judge seized of the action must, according to
Article 20 of the Convention, verify his own competence and stay the
proceedings until it can be determined if the defendant was in a position to
receive proper service. The power given to the court of the State addressed to
review this verification is exorbitant. This constitutes an expression of distrust,
which the Brussels I Regulation could have eliminated. The Regulation did not go
so far as to prohibit this review, but did limit the subject matter of the
investigation. Article 34(2) removed the condition requiring that notice be given
in accordance with the law of the foreign judge, preferring effective notice to
formal notice; thus it protects only such defendant who either was never made
aware of the proceedings or, having not been notified in a timely fashion, could
neither defend himself nor obtain any recourse against an unfavourable decision.
In such conditions, the review by the court addressed does not lead to a
reconsideration of the issues decided by the foreign judge. Undoubtedly, the
Regulation could have gone farther in trusting the foreign judge, but this already
represents significant progress.

2. Trust Imposed on the Judge Seized of the Action

If the rules of jurisdiction of Chapter II are solid, no European judge should be

afraid to exercise the powers these rules confer. There are, however, some hard
11
ECJ, 12 November 1992, [1992] ECR 5661, Minalmet.

112 Yearbook of Private International Law, Volume 3 (2001)

 Brussels I Regulation

cases where a conscientious judge may hesitate. There are even some
circumstances where he is specifically ordered, or permitted, to refuse to hear the
case.
This does not suggest however that the judge’s authority is too weak;
rather it may be that another judge, competent to judge under rules of jurisdiction
of equal value, is concurrently hearing the same claim, between the same parties
on the same facts, or that another judge must hear a different claim that is so
closely connected to the first that their resolution should be consolidated to
prevent the risk of irreconcilable judgments resulting from separate proceedings.
In such concurrent or interfering cases, so-called cases of lis pendens or of related
actions, the judge must or may have confidence in the rival court where the case
was first submitted.

a) Chronology of Concurrent or Related Actions

Article 30 will henceforth facilitate this exercise of trust through its ‘autonomous’
provision that determines the order in which cases are submitted. The purpose
here is to resolve a practical problem of chronology. Apparently, the Court of
Justice succeeded in overcoming this difficulty by referring judges of concurrent
or connected actions back to their respective national laws. This solution,
however, assumes that a judge will consult the law of the foreign judge to
determine the date that court was seized; but the variety and complexity of
national rules concerning the means of submission to a court in fact makes this
exercise delicate and uncertain. It was thus necessary to establish a ‘clear and
automatic mechanism’ of uniform determination of the date on which a case is
regarded as pending. Article 30 of the Regulation makes an attempt, in language
that is a bit complex, concentrating the whole process of submission on the day
when the first step was taken – on condition that the process was carried through
to its conclusion. By not using the later date on which service of documents has
been perfected, the Regulation forecloses the possibility of abusive later
submission, which might be simply tactical or unfair. Above all, the judge in a
related or lis pendens case benefits from this mechanism, and will be less likely to
hesitate to refer a file to the judge reviewing the concurrent or connected action.

b) Inadmissibility of Forum Non Conveniens

The Regulation relies on the trust of foreign judges more generally as well, if the
Explanatory Memorandum preceding the Regulation’s provisions is binding.
Paragraph 11 of that Exposé des motifs appears, for example, to condemn the

Yearbook of Private International Law, Volume 3 (2001) 113

 Bertrand Ancel

Court of Appeals’ use of the forum non conveniens doctrine a dozen years ago12 to
permit an English judge of the defendant’s domicile to decline jurisdiction in
favour of a court in a third State, not signatory of the Brussels Convention. This
discretionary decision by a judge whose competence was based on the
Convention was certainly already forbidden if it presented a risk of a Member
State’s court declining jurisdiction in favour of a court of another Member State.
Such discretion could destroy the predictability and security, which is at the heart
of the Brussels I system. Paragraph 11 of the Explanatory Memorandum is based
on the same consideration when it renders jurisdiction under Article 2 imperative
with regard to the judge seized: regardless of whether the most appropriate court
will be that of a Member State, ‘primary jurisdiction […] based on the
defendant’s domicile […] must always be available’. To the extent that the rules
of special jurisdiction and derogatory jurisdiction supplant primary jurisdiction,
they cannot be supposed to be less solid. The fragility of judicial competences
granted under the Brussels I Regulation is therefore averted less by the rationality
of their content than by the authority of the Council.
Thus the judge seized of the case need not show more circumspection than
the court of the State addressed concerning the quality and appropriateness of
fora defined by the Regulation. A regime of forced full faith and credit aims to
make up for the inevitable weaknesses and defects of some competences which,
combining and balancing multiple values and objectives, will never have the
monolithic structure of the old natural judge jurisdiction. The pareatis or
declaration of enforceability of Article 41 does not signal a revival of the juge
naturel doctrine, nor does it restore the device of recognition and enforcement
fuelled with a notion of sovereignty indifferent to private justice and interest. On
the contrary, it confirms the lessening of importance of the national sovereignties
inside a common judicial area and emphasizes consideration for effective judicial
protection of private interests within the Union.

12
Re Harrods (Buenos Aires) Ltd, [1992] Ch. 72 (C.A.); see GAUDEMET-TALLON H.,
‘Le forum non conveniens, une menace pour la Convention de Bruxelles? (A propos de trois
arrêts anglais récents)’, in: Rev. crit. dr. int. pr., 1991, p. 491; CHALAS C., L’exercice
discrétionnaire de la compétence juridictionnelle en droit international privé, Paris 2000,
No. 604.

114 Yearbook of Private International Law, Volume 3 (2001)

 PRIVATE INTERNATIONAL LAW
ISSUES IN WORLD WAR II ERA
LITIGATION
________________

THE LAW APPLICABLE TO GOVERNMENTAL

LIABILITY FOR INJURIES TO FOREIGN
INDIVIDUALS DURING WORLD WAR II:

Questions of Private International Law in the Ongoing

Legal Proceedings before Japanese Courts

Yasuhiro OKUDA∗

I. Introduction
II. Preliminary Analysis of Public International Law
A. Agreements on Reparation and the Practice in Japan
B. Compensation of Individuals under the 1907 Hague Convention Respecting
the Laws and Customs of War on Land
III. Law Applicable to Governmental Liability
A. Practical Implications of Analysis
B. Rules Governing Governmental Liability in General
C. Rules Governing Wrongs Committed during World War II
D. Article 11 of the Horei
1. Lex Loci Delicti
2. Cumulative Application of the Lex Fori to Requirements of Claims
3. Cumulative Application of the Lex Fori to Effects of Claims
IV. Conclusion
Post Scriptum

∗
Professor of the School of Law, Hokkaido University; Councilor of the Private
International Law Association of Japan. The author thanks Professor Kent Anderson for
revising the English text.

Yearbook of Private International Law, Volume 3 (2001), pp. 115-135

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Yasuhiro Okuda

I. Introduction
Although World War II ended in 1945, a chain of legal proceedings on govern-
mental liability has not stopped since 1952 when the Treaty of Peace with Japan
came into force. These proceedings can be divided into three groups:1 The first
group includes claims for damages filed by numerous Japanese individuals who
contended that the Japanese government was liable for waiver of claims against
foreign States for damages and losses under agreements after World War II.2 The
second group includes claims filed by numerous Koreans and Taiwanese who had
Japanese nationality as a result of the annexation of Korea and Taiwan and who
had worked in the Japanese army but could not receive old age pensions or
disability pensions. Having automatically lost their nationality in 1952, the plain-
tiffs claimed this was discriminatory because the pension laws required that
applicants have Japanese nationality.3 The third group includes many individuals of
various nationalities who claimed damages for violations of the law of warfare by
the Japanese army during World War II. These covered such events as the holo-
caust in Nanking; experiments on humans by Unit 731; forced prostitution of
Chinese, Korean, and Philippine women (so-called ‘comfort women’); forced labor
of Chinese and Korean men; and mistreatment of English, American, Australian,
New Zealand, and Dutch prisoners of war.4
1
See YAMADA M., ‘Saiban Jitsumu kara Mita Sengo Hosho’ [Post-War Com-
pensation from Perspective of Court Practice], in: OKUDA Y./KAWASHIMA S. et al., Kyodo
Kenkyu Chugoku Sengo Hosho [Study on Post-War Compensation of Chinese Civilians],
Tokyo 2000, p. 219 et seq.
2
As famous examples, see Tokyo District Court, 7 December 1963, in: Hanrei Jiho,
No. 355, p. 17; The Japanese Annual of International Law (hereinafter cited as JAIL), No. 8,
p. 212 (damages caused by the atomic bombs in Hiroshima and Nagasaki); Supreme Court,
13 March 1997, in: Saiko Saibansho Minji Hanreishu (hereinafter cited as Minshu), Vol. 51,
No. 3, p. 1233; Hanrei Jiho, No. 1607, p. 11 (damages caused by the detention and forced
labor of Japanese POWs in Siberia). See also Supreme Court, 27 November 1968, in:
Minshu, Vol. 22, No. 12, p. 2808; Hanrei Jiho, No. 538, p. 6; Supreme Court, 4 July 1969,
in: Minshu, Vol. 23, No. 8, p. 1321; Hanrei Jiho, No. 566, p. 33; Kyoto District Court,
22 November 1968, in: Hanrei Jiho, No. 566, p. 54.
3
See a case involving Taiwanese, Supreme Court, 28 April 1992, in: Hanrei Jiho,
No. 1422, p. 91; JAIL, No. 36, p. 182. See cases involving Koreans, Supreme Court, 5 April
2001, in: Saibansho Jiho, No. 1289, p. 7; Osaka High Court, 15 October 1999, in: Hanrei
Jiho, No. 1718, p. 30; Kyoto District Court, 27 March 1998, in: Shomu Geppo, Vol. 45,
No. 7, p. 1259; Tokyo High Court, 27 December 1999, in: Hanrei Jiho, No. 1659, p. 35;
Tokyo High Court, 29 September 1998, in: Shomu Geppo, Vol. 45, No. 7, p. 1355.
4
See Tokyo District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028,
p. 92; JAIL, No. 43, p. 216 (the holocaust in Nanking and experiments on humans by Unit
731); Tokyo District Court, July 16, 1998, in: Hanrei Taimuzu, No. 1046, p. 270 (murder of
a Chinese civilian by Japanese soldiers); Tokyo District Court, 9 October 1998, in: Hanrei
Jiho, No. 1683, p. 57; JAIL, No. 42, p. 170 (forced prostitution of Philippine women);

116 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

The results of these proceedings have not at all been favorable for the
plaintiffs. In one case involving comfort women, the court ordered the Japanese
government to pay damages amounting to slightly over 300,000 yen (about
3,000 US dollars) per person.5 In four other cases, victims of forced labor and
Japanese companies reached a settlement after the courts had ruled against the
former laborers.6 As for the Japanese government, it has enacted laws to pay
2,000,000 yen (about 20,000 US dollars) per person to ex-soldiers and Japanese
army workers from Korea and Taiwan.7 The government has also established a

Tokyo District Court, 30 November 1998, in: Hanrei Taimuzu, No. 991, p. 262; JAIL,
No. 42, p. 143 (mistreatment of Dutch POWs); Tokyo District Court, 26 November 1998,
in: Hanrei Taimuzu, No. 998, p. 92 (mistreatment of English, American, Australian, and
New Zealand POWs); Fukuoka High Court, 1 October 1999, in: Hanrei Taimuzu, No. 1019,
p. 155 (forced labor of a Korean); Tokyo District Court, 22 November 1996, in: Shomu
Geppo, Vol. 44, No. 4, p. 507 (forced labor of Koreans); Nagoya High Court, Kanazawa
Branch, 21 December 1998, in: Hanrei Taimuzu, No. 1046, p. 161 (forced labor of Korean
women); Yamaguchi District Court, Shimonoseki Branch, 27 April 1998, in: Hanrei Jiho,
No. 1642, p. 24 (forced prostitution and forced labor of Korean women); Tokyo High Court,
30 November 2000, in: Hanrei Jiho, No. 1741, p. 40 (forced prostitution of a Korean
woman); Tokyo District Court, 27 July 1995, in: Hanrei Jiho, No. 1563, p. 121 (murder of a
Korean man by Japanese soldiers). See also Tokyo District Court, 17 June 1999, in: Shomu
Geppo, Vol. 47, No. 1, p. 1; JAIL, No. 43, p. 192 (invalidation of military payment
certificate issued in Hong Kong); Tokyo District Court, 17 November 1980, in: Hanrei Jiho,
No. 991, p. 93 (invalidation of military payment certificate issued in Taiwan).
5
Yamaguchi District Court, Shimonoseki Branch, 27 April 1998, in: Hanrei Jiho,
No. 1642, p. 24. The court held that the Japanese government is liable for its failure to
legislate for compensation of comfort women. The Hiroshima High Court reversed this,
however, on 29 March 2001, holding that there is no liability for such legislation
(http://www.shikoku-np.co.jp/news/kyodo/200103/20010329000180.htm). See similar deci-
sions: Tokyo District Court, 9 October 1998, in: Hanrei Jiho, No. 1683, p. 57; JAIL, No. 42,
p. 170; Nagoya High Court, Kanazawa Branch, 21 December 1998, in: Hanrei Taimuzu,
No. 1046, p. 161.
6
See http://www5b.biglobe.ne.jp/~mujige/nittetu04.htm (settlement on 18 Septem-
ber 1997 in the case involving Korean workers against Nippon Steel Co.); http://
www.unityflag.co.jp/doc/649/0649_45f.html (settlement on 11 July 2000 in the case
involving Korean women against Fujikoshi Co.); http://www.unityflag.co.jp/doc/670/
0670_23a.html (settlement on 29 November 2000 in the case involving Chinese workers
against Kajima Co.). Regarding the settlement on 6 April 1999 in the case involving a
Korean worker against NKK Co., see TANIGAWA T., ‘Nippon Kokan Sosho Wakai to sono
Imisurumono’ [Impact of the Settlement in the Case against NKK Co.], in: Kikan Senso
Sekinin Kenkyu, No. 25, p. 50.
7
The laws for payment of ‘solatium’ [‘chouikin’, i.e., good-will payments rather
than technical indemnity] to Taiwanese domiciled in Taiwan are entitled ‘Taiwan Jumin
dearu Senbotsusha no Izokuto ni taisuru Choikinto ni kansuru Horitsu’ (Law No. 105, 1987)
and ‘Tokutei Choikinto no Shikyu no Jishi ni kansuru Horitsu’ (Law No. 31, 1988). The law
for payment of ‘solatium’ to Koreans and Taiwanese domiciled in Japan is entitled ‘Heiwa

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 Yasuhiro Okuda

fund to pay 2,000,000 yen per person to ex-comfort women, as well as providing
them with other assistance.8 However, many ex-soldiers, workers, and comfort
women have refused these offers, maintaining that they are insufficient to
compensate their losses and damages. In summary, most World War II victims
have lost their cases in the legal arena and have received no alternative remedy
from the Japanese government.
Why do these victims continue to sue the Japanese government in spite of
the results mentioned above? In this context it is important to mention the role of
Japanese attorneys, who not only represent the foreign victims in the legal
proceedings, but also finance the proceedings. Otherwise, from the practical point
of view, the foreign victims could not institute legal proceedings in Japan. For
example, the ‘Group of Attorneys for Claims of Chinese Victims’9 was founded in
1994 on the initiative of a few attorneys who by chance had discovered during a
visit to China that many Chinese victims wanted to sue the Japanese government
but lacked financial support and legal advice. Several hundred attorneys joined the
group, which financed eight cases before Japanese courts and also founded the
‘Group of Citizens to Support Claims by Chinese Victims’.10 The attorneys work
voluntarily on these cases in Japan and also fly to China, Germany, and the U.S.A.
at their own expense for research and exchanging views with foreign lawyers.11 It
seems that most other proceedings involving foreign victims were instituted in a
similar manner. The Japanese attorneys are willing to finance these cases because
they regard it as their moral duty. This thinking is very characteristic of Japanese
attorneys.
What law do the Japanese attorneys invoke in the grounds of claims filed by
World War victims? In cases involving waiver of claims against foreign States
under postwar agreements, they contend that the Japanese government is liable
above all pursuant to Article 29(3) of the Constitution on government expropria-
tion. In cases on ex-soldiers and workers of the Japanese army, the attorneys argue
that the nationality clause in the pension laws is contrary to Article 14(1) of the
Constitution and Article 26 of the International Covenant on Civil and Political

Joyaku Kokuseki Ridatsushato dearu Senbotsusha Izokuto ni taisuru Choikinto no Sikyu ni

kansuru Horitsu’ (Law No. 114, 2000).
8
The fund is named ‘Josei no tameno Azia Heiwa Kokumin Kikin’ and was
constituted on 19 July 1995. See the English page of this fund’s site (http://www.
awf.or.jp/index_e.html).
9
This group’s name in Japanese is ‘Chugokujin Senso Higaisha Baisho Seikyu Jiken
Bengodan’.
10
This group’s name in Japanese is ‘Chugokujin Senso Higaisha no Yokyu wo
Sasaeru Kai’.
11
YAMADA M. (note 1), p. 229 et seq. See also the English page of the site of the
‘Group of Citizens for Support of Claims by Chinese Victims’ (http://www.
osk.3web.ne.jp/~suopei/suopei-e/index_e.html).

118 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

Rights, both of which guarantee equality under the law. Other attorneys working
on cases involving violations of the law of warfare maintain primarily that the
victims are entitled to damages under the 1907 Hague Convention respecting the
Laws and Customs of War on Land. For the Korean and Taiwanese victims, the
Hague Convention is the only possible basis of their claims. The unlawful acts took
place in territories belonging to Japan at that time, and a State immunity doctrine
was then applied in Japan that exonerated the government from liability for acta
jure imperii. On the other hand, the attorneys representing the Chinese and
Philippine victims contend that the lex loci delicti applies to acts committed by
Japanese soldiers on the mainland of China and the Philippines.
Questions of private international law have played a major role in the legal
proceedings in the above-mentioned cases of World War victims. Since the
proceedings of the Chinese and Philippine victims were instituted later, at the time
this article was written only three of the reported decisions address questions of
private international law.12 However, as is evident in this article, there are many
problems in Japanese private international law that differ from similar situations in
other countries.13 Before analyzing the conflict of laws rules, an attempt is made to
preliminarily analyze questions of public international law (II). This analysis
shows that the agreements between Japan and other States place no obstacles in the
way of claims of individuals and that the 1907 Hague Convention cannot support
these claims. The main theme of this article is the law applicable to governmental
liability (III). The analysis begins with practical implications that could be directly
connected with the results of cases (A). Thereafter, rules on governmental liability
in general are considered (B) and rules on wrongs committed during World War II
(C). In addition, some questions arise concerning the interpretation of Article 11 of
the Horei (Japanese Statute on Applicable Law) (D). As a concluding remark, I
consider the necessity of establishing international uniform rules on civil liability
for war crimes (IV).

12
Tokyo District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028, p. 92;
JAIL, No. 43, p. 216; Tokyo District Court, 16 July 1998, in: Hanrei Taimuzu, No. 1046,
p. 270; Tokyo District Court, 9 October 1998, in: Hanrei Jiho, No. 1683, p. 57; JAIL,
No. 42, p. 170.
13
For a short essay on this theme in European languages, see YAMAUCHI K.,
‘Staatshaftung für Kriegsgeschädigte im japanischen IPR’, in: Festschrift für Otto Sandrock
zum 70. Geburtstag, Heidelberg 2000, p. 1057; OKUDA Y./YOKOMIZO D./TOUBKIN N.,
‘Chronique de Jurisprudence japonaise’, in: Clunet, 2001, p. 558 et seq. From the perspec-
tive of international law, see IGARASHI M., ‘Post-War Compensation Cases, Japanese Courts
and International Law’, in: JAIL, No. 43, p. 45.

Yearbook of Private International Law, Volume 3 (2001) 119

 Yasuhiro Okuda

II. Preliminary Analysis of Public International Law

A. Agreements on Reparation and the Practice in Japan

Signed by forty-eight Allied Powers and ratified by forty-five, the Treaty of Peace
with Japan entered into force in 1952. Article 14(a) of the Treaty recognized ‘that
Japan should pay reparations to the Allied Powers for the damage and suffering
caused by it during the war’. However, ‘it is also recognized that the resources of
Japan [were not then] sufficient, if it is to maintain a viable economy, to make
complete reparation for all such damage and suffering and at the same time meet
its other obligations....’ Therefore, Article 14(b) specified that except ‘as otherwise
provided in the present Treaty, the Allied Powers waive all reparations claims of
the Allied Powers, other claims of the Allied Powers and their nationals arising out
of any actions taken by Japan and its nationals in the course of the prosecution of
the war, and claims of the Allied Powers for direct military costs of occupation’.
Under this provision, most of the Allied Powers made agreements with
Japan on the basis of which Japanese economic assistance was provided to the
Allies as reparations in return for their waiver of war claims.14 These agreements in
fact often profited Japanese companies because the Japanese government paid
them to construct and deliver power plants, dams, waterworks, ships, and trucks to
the Allied Powers. In many cases, the war victims were compensated neither by
Japan nor by their home country.15
There are a few exceptions. The Japanese government delivered Japan’s
foreign assets to the International Committee of the Red Cross, which had them
liquidated and then distributed to various Allied nations that distributed them to
their prisoners of war pursuant to domestic schemes.16 Additional compensation
was granted to English war prisoners on 7 November 2000 and to Australian war
prisoners on 22 May 2001 by the respective home countries.17 Compensation
money delivered by the Japanese government to the Korean, Philippine, and Dutch
governments was distributed partly to war prisoners and other victims under their
national laws of the 1950s and 1960s.18 Compensation for property damages was
ordered by the arbitration court of Japan and the Allies under the Allied Powers

14
Fifty-four agreements between Japan and the Allies are listed in: ASAHI SHINBUN
SENGO HOSHO MONDAI SHUZAIHAN [Team of the Asahi Shinbun Reporting on Post-War
Compensation], Sengo Hosho towa nanika [What is the Post-War Compensation?], Tokyo
1994, p. 26 et seq.
15
Ibid., p. 17 et seq. and p. 36 et seq.
16
Ibid., p. 21 et seq.
17
http://www.cnn.co.jp/2000/WORLD/11/08/pow.compensation/ (England POW);
Asahi Shinbun, 23 May 2001, p. 23 (Australian POW).
18
TUKAMOTO T., ‘Rippou Shoukai – Kaidai’ [Introductory Note on Translations of
Foreign Laws], in: Gaikoku no Rippo, Vol. 34, No. 3-4, p. 4 et seq.

120 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

Property Compensation Act of 1951.19 However, the amount of money was not
sufficient to compensate foreign victims for their losses and damages.
The Japanese government has never maintained before Japanese courts that
the Peace Treaty’s waiver clause could be interpreted to include the waiver of
claims of individuals. Conversely, an official of the Foreign Ministry declared in
Parliament that the Agreement on Reparation between Japan and Korea was
intended to waive only the right to diplomatic protection and did not include claims
of individuals.20 The Japan Supreme Court delivered the same ruling in regard to
the Treaty of Peace with Japan concerning the waiver to assets of Japanese
nationals that remained abroad.21 Most scholarly writings agree with the Supreme
Court.22
Since the Japanese government waived their right to diplomatic protection,
Japanese individuals have had considerable difficulty receiving any compensation
for damages arising during the war. First, Japanese individuals cannot sue foreign
States in these matters before Japanese courts because the defendant States enjoy
foreign sovereign immunity from the jurisdiction of Japanese courts. Second, they
lack the financial assistance and legal advice to sue the defendant State before its
own courts. To my knowledge, Japanese victims have not filed claims at American
courts for damages suffered as a result of the atomic bomb, nor at Russian courts
for damages suffered as a result of forced labor in Siberia. On the contrary,
Chinese, Korean, and Philippine victims have been able to institute proceedings
before Japanese courts thanks to the financial assistance and volunteer work of
Japanese attorneys. This difference between Japanese and foreign victims should
be noted, as well as the fact that the agreements between Japan and other States do
not concern the claims of individuals.

19
HATANO R./HIGASHI J., Kokusai Hanrei Kenkyu Kokka Sekinin [Study of Case
Law on State Liability under International Law], Tokyo 1990, p. 845.
20
ASAHI SHINBUN SENGO HOSHO MONDAI SHUZAIHAN (note 14), p. 20. See also
ITO T., ‘Dainiji Sekai Taisengo no Nihon no Baisho Seikyuken Shori’ [Claims and Debts of
Japan after the Second World War], in: Gaimusho Chosa Geppo, 1994, No. 1, p. 112 et seq.
21
Supreme Court, 27 November 1968, in: Minshu, Vol. 22, No. 12, p. 2808; Hanrei
Jiho, No. 538, p. 6. See also Supreme Court, 4 July 1969, in: Minshu, Vol. 23, No. 8,
p. 1321; Hanrei Jiho, No. 566, p. 33; Supreme Court, 13 March 1997, in: Minshu, Vol. 51,
No. 3, p. 1233; Hanrei Jiho, No. 1607, p. 11.
22
OHNISHI Y., Case Comment, in: Minshoho Zashi, Vol. 61, No. 2, p. 311 et seq.;
HAGHINO Y., Case Comment, in: Kenpo Hanrei Hyakusen I, 3rd ed., Tokyo 1994, p. 217;
SAKURADA H., Case Comment, in: Gyosei Hanrei Hyakusen II, Tokyo 1979, p. 313;
MIYAZAKI S., Kokusai Ho ni okeru Kokka to Kojin [State and Individuals in International
Law], Tokyo 1963, p. 327 et seq.; NAKAGAWA J., ‘Sengo Hosho Sosho to Kokusai Ho’
[Litigation on Post-War Compensation and International Law], in: Hogaku Kyoshitsu,
No. 238, p. 43. Contra ASHIBE N., Case Comment, in: Hogaku Kyokai Zashi, Vol. 87, No. 2,
p. 286; HIROBE K., Case Comment, in: Juristo, No. 423, p. 199.

Yearbook of Private International Law, Volume 3 (2001) 121

 Yasuhiro Okuda

B. Compensation of Individuals under the 1907 Hague Convention

Respecting the Laws and Customs of War on Land

The foreign victims contend that the acts committed by the Japanese army violated
the law of nations embodied in the 1907 Hague Convention respecting the Laws
and Customs of War on Land and its annexed Regulations. The Hague Convention,
which was ratified by Japan in 1911 and entered into force in 1912, states in
Article 3: ‘A belligerent party which violates the provisions of the said Regulations
shall, if the case demands, be liable to pay compensation. It shall be responsible for
all acts committed by persons forming part of its armed forces.’ According to the
victims, Article 3 of the Hague Convention entitles them to claim damages directly
from the Japanese government, which is liable for acts committed by its own army
during World War II. Japanese courts have rejected this argument in all cases.23 For
example, in a claim filed by Dutch war prisoners and civilian internees, the Tokyo
District Court held on 30 November 1998:

‘It must be said that in general the basic purpose of treaty

interpretation is, above all, to ascertain the objective meaning of the
terms of the treaty. This being so, Article 3 of the Hague Convention
only stipulates that an offending State shall bear an international
responsibility to pay compensation. There is no provision regarding
issues such as how this compensation shall be effectuated and
whether individuals hold a right to claim compensation. No mention
is made about individuals. In the light of the Hague Convention as a
whole, there is no provision that might suggest that an individual can
be the subject of a claim for compensation and that an individual can
exercise such a right.’

The Court found this conclusion justified by research that is part of the preparatory
work of the Hague Convention, as well as by the subsequent practice of the
Contracting States.24
The view also prevails in most scholarly writings that Article 3 of the
Hague Convention concerns only reparations between States.25 Thus it follows that
the Hague Convention cannot support claims of individual victims.

23
Tokyo District Court, 27 July 1995, in: Hanrei Jiho, No. 1563, p. 121; Tokyo
District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028, p. 92; JAIL, No. 43,
p. 216; Tokyo District Court, 9 October 1998, in: Hanrei Jiho, No. 1683, p. 57; JAIL,
No. 42, p. 170; Tokyo District Court, 30 November 1998, in: Hanrei Taimuzu, No. 991,
p. 262; JAIL, No. 42, p. 143; Tokyo District Court, 26 November 1998, in: Hanrei Taimuzu,
No. 998, p. 92.
24
Tokyo District Court, 30 November 1998, in: Hanrei Taimuzu, No. 991, p. 262, at
p. 275 et seq.; JAIL, No. 42, p. 143, at p. 146.

122 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

III. Law Applicable to Governmental Liability

A. Practical Implications of Analysis

Acts of the Japanese army committed during World War II could violate not only
the law of nations but also the domestic law of the relevant States. Namely, the acts
may constitute a tort because indeed murder, rape, abduction, confinement, assault,
and so on all occurred. Generally speaking, acts of war do not constitute torts under
domestic law if the acts were justified by the law of warfare. This rule, however,
does not apply to acts of the Japanese army that resulted in damage and injury to
foreign civilians.26 Japanese law, however, had accepted a State immunity doctrine
(Kokka Mutouseki no Hori) at the time of the acts in question. According to this
doctrine, the Japanese government could not be held liable for acta jure imperii.27
Consequently, if Japanese law governs the acts committed by the Japanese army
during World War II and the State immunity doctrine covers these acts, the rules of
the Civil Code on tort liability are not applicable. In this context, Japan’s conflict
of laws rules come into play.
If the acts concerned are not governed by Japanese law but by a foreign law,
the Japanese government will not be exempted from tort liability. The State
immunity doctrine, which could also be applicable under a foreign applicable law,
is regarded as exempting its own government only. Even if Japanese law is
applicable, one must determine whether the State immunity doctrine applies to the
acts in question. First, one could argue that some of the acts committed during
World War II were not acts of the government, acta jure imperii, but acts of a
commercial nature, acta jure gestionis. Second, application of the State immunity
doctrine to acts committed abroad might not comply with the purpose and
objective of this doctrine. Third, the State immunity doctrine could be a procedural
rule that is not applicable to legal proceedings instituted after World War II.
Finally, the application of the State immunity doctrine to the acts concerned could
be contrary to ordre public from the perspective of intertemporal law.
25
YASUI K., ‘Genbaku Kogeki to Kokusaiho jyo no Songai Baisho’ [The Atom
Bomb and Compensation under International Law], in: Horitsu Jiho, Vol. 36, No. 2, p. 56;
HIROSE Y., Horyo no Kokusaiho jyo no Chii [Status of POWs under International Law],
Tokyo 1990, p. 45 et seq.; ASADA M., Case Comment, in: Juristo, No. 1091, p. 246;
KOTERA A., Expert Opinion, in: FUJITA H. et al.(ed.), Senso to Kojin no Kenri [War and
Rights of Individuals], Tokyo 1999, p. 83 et seq. Contra ABE K., Jinken no Kokusaika
[Internationalization of Human Rights], Tokyo 1998, p. 260 et seq.; SHIN H., ‘Kokusaiho
kara Mita Sengo Hosho’ [Post-War Compensation from Perspective of Public International
Law], in: OKUDA Y./KAWASHIMA S. et al.(note 1), p. 80 et seq.
26
It is likely to be undisputed that the alleged acts of the Japanese army in cases of
post-war compensation violated customary international law, as well as the 1907 Hague
Convention respecting the Laws and Customs of War on Land and its annexed Regulations.
27
For details of the State immunity doctrine, see below III. D. 2.

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 Yasuhiro Okuda

The question of prescription is also relevant in an analysis of the conflict of

laws rules. If Japanese law applies to this matter, the right to claim damages in
torts has been lost automatically by the fact that the twenty-year period of
prescription has elapsed. On the contrary, if a foreign law governs this question, it
is possible that the issue of the expiry of the period of prescription would have to
be raised by the defendant before the court. This appears to be true with respect to
the law of the Republic of China, according to which the Japanese government
could be exempted from liability for compensation only if it pleaded before the
courts that the period of prescription had elapsed. In such case, given the various
circumstances, one could argue that the abuse of rights doctrine does not permit the
Japanese government to rely on the argument of prescription.

B. Rules Governing Governmental Liability in General

Article 11(1) of Japan’s Conflict of Laws Act, the Horei, provides that the
requirements and effects of claims arising from unlawful acts are governed by the
law of the place where the facts giving rise to the claims occurred. This was ‘the
first legislation in the world that included a bilateral provision on the applicability
of the lex loci delicti commissi’.28 Until recently, the question whether Article 11 of
the Horei also applies when determining the law applicable to governmental
liability had not been discussed in the courts and was rarely mentioned in the
doctrine. The plaintiff’s attorneys, however, requested application of the lex loci
delicti. In former cases involving governmental liability, no one had doubted that
Japanese law was applicable because the acts of the civil servants concerned had
taken place inside the territory of Japan.
This question was dealt with perhaps for the first time in Japan by Professor
Takao Sawaki. Focusing on the application of the Governmental Liability Act
(Kokka Baisho Ho) of 1947, which contains special rules on governmental liability
and provides otherwise for the application of the Civil Code on tort liability, he
offered two possible solutions, without firmly advocating either. First, the
Governmental Liability Act could apply as part of Japanese law under Article 11 of
the Horei, because the Act is part of private law. However, Professor Sawaki found
this solution unreasonable, since the Act does not apply to unlawful acts committed
by Japanese civil servants abroad. Second, the Act could apply to all acts
committed by Japanese civil servants, irrespective of the law specified in
Article 11 of the Horei. Professor Sawaki doubted that the Civil Code could apply
mutatis mutandis under Article 4 of the Governmental Liability Act, even though
Article 11 of the Horei refers to a foreign law.29

28
KELLER M./SIEHR K., Allgemeine Lehren des internationalen Privatrechts, Zurich
1986, p. 358 (English translation by OKUDA Y.).
29
SAWAKI T., Case Comment, in: Shogai Hanrei Hyakusen, Tokyo 1967, p. 205.

124 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

Professor Sawaki’s comments are not convincing since they are concerned
only with the results of application or non-application of Japanese substantive
rules. According to the doctrine, it is generally understood that the law governing
relations with foreign elements as a whole should first be decided and then the
substantive rules to be applied as part of the applicable law. If Article 11 of the
Horei also determines the law applicable to governmental liability and refers to a
foreign law, the Japanese government could be liable under the foreign substantive
rules on tort. On the contrary, if governmental liability is governed by the lex fori
and not by lex loci delicti, the Civil Code of Japan could be applied on gounds
other than those in Article 11 of the Horei.30
Following Professor Sawaki, Professor Ryoichi Yamada similarly suggested
other possible solutions for determining the law applicable to governmental
liability; however, he too did not firmly adopt any approach. Professor Yamada
first addressed Article 6 of the Governmental Liability Act, which requires
reciprocity when the Act applies to foreign victims. Categorizing this provision as
public rather than private law, Professor Yamada believed it should apply directly
to relations with foreign elements. Next, he suggested that all provisions on the
status of aliens could be applied only if they are part of the law designated by the
conflict of laws rules. This would mean that the Governmental Liability Act should
be applied if Japanese law is applicable under Article 11 of the Horei. It could also
be argued that, according to an unwritten conflicts rule, an unlawful act by a civil
servant should be governed by the law of the State to which he belongs.31
It is unclear whether Professor Yamada addressed only Article 6 of the
Governmental Liability Act or whether he was addressing the Act as a whole. In
either case, his comments lead, similar to Professor Sawaki’s, to the exclusive
application of Japanese substantive rules. This raises the question whether it is
really impossible for Japanese courts to apply a foreign law to governmental
liability. As mentioned above, the Japanese government could be liable under a
foreign substantive rule on tort if Article 11 of the Horei determines the law
applicable to governmental liability and refers to a foreign law as the lex loci
delicti. A court could also create an unwritten rule specifying that a civil servant’s
unlawful act should be governed by the law of the State to which he belongs.
Accordingly, if a foreign civil servant committed an unlawful act in Japan, the
Japanese court would apply the foreign law of his home country.32

30
See also OKUDA Y., ‘Kokka Baisho Sekinin no Jyunkyoho ni kansuru Oboegaki:
Sengo Hosho no Keesu wo Chusin to site’ [Law Applicable to State Liability for Post-War
Compensation], in: The Hokkaido Law Review, Vol. 49, No. 4, p. 127.
31
YAMADA R., Kokusai Shiho [Private International Law], Tokyo 1992, p. 160
et seq.
32
See also OKUDA Y., ‘Kokusai Shiho kara Mita Sengo Hosho’ [Post-War
Compensation from Perspective of Private International Law], in: OKUDA Y./KAWASHIMA S.
et al. (note 1), p. 137.

Yearbook of Private International Law, Volume 3 (2001) 125

 Yasuhiro Okuda

As far as acta jure imperii are concerned, a civil servant is permitted to act
abroad only with prior agreement of the foreign State or if such acts are authorized
by the law of nations.33 The civil servant may exercise his powers according to
customary international law or an agreement between his home country and the
host country. Furthermore, his acts as a civil servant are subject to the domestic
law of his home country. Therefore, the government has an interest in applying its
own law to the issue of liability for acts of its civil servants. In principle, this
interest should be respected as it creates legal certainty for victims who can then
expect to apply the civil servant’s home law. Some victims may be nationals of the
civil servant’s home country who had sought but, contrary to the home law, were
denied ambassadorial protection. Other victims may be nationals of the host
country who had applied to the consul for a visa, but were rejected contrary to the
consul’s home law. In this way there is a certain legal relationship between the
victim and the civil servant’s home country, thus justifying applying the law of that
country.34

C. Rules Governing Wrongs Committed during World War II

In cases involving Chinese and Philippine victims of World War II, the Court
concluded that the Horei did not apply because the State immunity doctrine had
been applied at the time of the Japanese army’s unlawful acts. In its ruling of
9 October 1998 regarding Philippine victims, the Tokyo District Court held:

‘Whereas Article 11 of the Horei is supposed to determine the law

applicable to matters with foreign elements when there is a conflict
between private laws, it is quite doubtful that the Horei should be
applied to this case. This is because, as mentioned below, the alleged
offenses have a highly public character related to the governmental
acts of the State and because general private law was not applicable
to governmental acts of the State under the legal system of Japan at
the time of the offenses. Additionally, it would also be questionable
to include the alleged acts in the category of torts prescribed under
Article 11 of the Horei, since the Civil Code could not be applied to
governmental acts of the State. That is, governmental acts were out
of the range of civil liability under the Japanese legal system at that
time.’35
33
UGA K., Kokka Hosho Ho [State Liability Law], Tokyo 1997, p. 365.
34
OKUDA Y. (note 32), p. 138 et seq. Regarding this point I agree with the decision
of Austria’s Supreme Court (OGH), 17 February 1982, in: Österreichische Juristenzeitung
1982, p. 462. See the details of this case below at note 38.
35
Tokyo District Court, 9 October 1998, in: Hanrei Jiho, No. 1683, p. 57, at p. 77 et
seq.; JAIL, No. 42, p. 170, at p. 178 et seq.

126 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

The Court used similar reasoning in its decision of 22 September 1999 against
Chinese victims.36
The reasoning of the Court is not at all convincing. Obviously, Article 11 of
the Horei includes a bilateral rule for conflicts cases involving torts, under which
the applicable law of the lex loci delicti may refer to Japanese law or to a foreign
law. The provisions of the Horei were not enacted to bring about exclusive
application of Japanese law. Even if Japanese law is designated as applicable by
the Horei, it is up to the intertemporal law of Japan to decide whether the State
immunity doctrine or the Governmental Liability Act shall apply to the case. In
other words, the Horei refers to Japanese law as a whole and not directly to the
State immunity doctrine. Therefore, the reasoning of the Court does not justify not
applying Article 11 of the Horei.37
The Court also acknowledged that ‘the alleged offenses have a highly
public character related to governmental acts of the State’. Indeed, all acts of the
Japanese army were closely connected with the interests of the Japanese govern-
ment. One might conclude that this could justify application of the unwritten rule
that an unlawful act of a civil servant shall be governed by the law of the State to
which he belongs. According to this rule, Japan’s liability for wrongs committed
during World War II would be governed by Japanese law. However, this
conclusion ignores the interests of the Chinese and Philippine victims which
should also be respected when the decision on the applicable law is made. The
plaintiffs had no legal relationship with Japan until the offenses of the Japanese
army. Thus, they could not have foreseen the application of Japanese law. There-
fore, there is an important difference in the circumstances relating to the wrongs of
the Japanese army and the cases of general governmental liability mentioned
above. In the former cases it would be unfair to apply Japanese law, even though
this is the lex fori. Instead, the lex loci delicti, a neutral law for both parties, should
govern Japan’s liability for the acts of the Japanese army.38

36
Tokyo District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028, p. 92, at
p. 128 et seq.; JAIL, No. 43, p. 216, at p. 220 et seq.
37
OKUDA Y. (note 32), p. 129 et seq. See also OKUDA Y., ‘Sengo Hosho Saiban to
Savigny no Kokusai Shiho Riron (1) [Litigation on Post-War Compensation and Savigny’s
Doctrine on Private International Law (1)], in: The Hokkaido Law Review, Vol. 51, No. 3,
p. 251 et seq.
38
OKUDA Y. (note 32), p. 140 et seq. See also OKUDA Y., ‘Sengo Hosho Saiban to
Savigny no Kokusai Shiho Riron (2)’ [Litigation on Post-War Compensation and Savigny’s
Doctrine on Private International Law (2)], in: The Hokkaido Law Review, Vol. 51, No. 4,
p. 343 et seq. As mentioned above in note 34, regarding this point I agree with the decision
of Austria’s Supreme Court, OGH, 17 February 1982, in: Österreichische Juristenzeitung
1982, p. 462. In this case, an Austrian ambassador accidentally shot a French ambassador,
when both were hunting under the auspices of Yugoslavia’s president. The Court applied
Yugoslav law as the lex loci delicti to the question of the liability of the Austrian
government.

Yearbook of Private International Law, Volume 3 (2001) 127

 Yasuhiro Okuda

D. Article 11 of the Horei

1. Lex Loci Delicti

As mentioned above, Article 11(1) of the Horei provides that the lex loci delicti
shall govern tort liability. In the case of the Chinese victims, the question arises
which law applies as the lex loci delicti; namely, the law of the Republic of China,
the law of Manchukuo – the Japanese sponsored State – or the law of the People’s
Republic of China. The acts of the Japanese army took place on the mainland of
China, which was divided between the Republic of China and Manchukuo at that
time, and is now governed by the People’s Republic of China.
Manchukuo was established in 1932 in the northeast area of mainland
China. This is where Unit 731 of the Japanese Army confined many Chinese
civilians and conducted human experiments. As dramatized in the film ‘The Last
Emperor’, the Japanese government had designated the ex-emperor of China as
executive of Manchukuo, and he later rose to the State’s throne as emperor. In
other words, Manchukuo was a puppet government of Japan. Although the
Japanese government recognized it as an independent State in 1933, the League of
Nations soon declared the recognition premature. As a result, it should be
concluded that Manchukuo did not satisfy the requirements of an independent State
and its law should not be applied as the lex loci delicti.39
While the mainland of China is now governed by the People’s Republic of
China, the wrongs of the Japanese army took place when the law of the Republic of
China was in force in that territory. Since it cannot be said that the law of the
Republic of China was simply reformed by the law of the People’s Republic of
China, the latter cannot be regarded as the lex posterior to the former. Both laws
are from different jurisdictions, which could be applied independently as the lex
loci delicti. Thus, the law of the Republic of China should be applied as the lex loci
delicti because the wrongs of the Japanese army occurred when these laws were in
force.40

39
OKUDA Y. (note 32), p. 145 et seq. See also TABATA S., ‘Shonin to Kokunai
Saiban’ [Recognition of State and Litigation in National Courts], in: Hogaku Ronso,
Vol. 76, No. 1-2, p. 49. As to the premature recognition of the Manchukuo, see SHOJI Y.,
‘Manshukoku Fushonin no Hoteki Konkyo ni kansuru Ichikosatsu’ [Study on Legal
Grounds of Non-Recognition of the Manchukuo], in: Hogaku Kenkyu Nenshi (Tohoku
Gakuin University), No. 10, p. 1.
40
OKUDA Y. (note 32), p. 146 et seq. The Japanese courts applied the law of the
Republic of China as the lex loci celebrationis to all marriages contracted in the mainland of
China before the creation of the People’s Republic of China. Kyoto District Court,
9 December 1992, in: Hanrei Taimuzu, No. 831, p. 122; Tokyo High Court, 29 September
1988, in: Katei Saiban Geppo, Vol. 41, No. 4, p. 59; Tokyo District Court, 29 July 1987, in:
Katei Saiban Geppo, Vol. 41, No. 4, p. 71; Tokyo District Court, 20 November 1986, in:
Katei Saiban Geppo, Vol. 39, No. 2, p. 174.

128 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

Incidentally, there were many Chinese civilians who were confined in the
mainland of China and transported to Japan where they were forced to work for
Japanese companies. In these cases the question also arises as to which law should
be applied as the lex loci delicti, Chinese or Japanese law. The wrongs took place
both in China and in Japan, and also on the high seas during the transit by ship.
However, it was the Japanese government and companies that confined the
Chinese civilians and transported them to Japan. If the law of the destination is
applied as the lex loci delicti, the Japanese government and companies would be
able to choose the law applicable to their own liability. This would be unfair since
the lex loci delicti is applicable as a neutral law for both parties. In the cases of
forced labor of the Chinese civilians, Chinese law should apply as the lex loci
delicti.41

2. Cumulative Application of the Lex Fori to Requirements of Claims

The principle of lex loci delicti in Article 11(1) of the Horei is restricted by
paragraph 2, which provides that, ‘as to unlawful acts, the preceding paragraph
shall not apply where the facts occurring abroad are not unlawful under Japanese
law’. According to the prevailing view in the doctrine, this provision means that
the lex fori is to be applied cumulatively to all requirements of claims.42 Namely,
the claims of the Chinese and Philippine victims must satisfy the requirements of
both the lex loci delicti and Japanese law. In this context, the question arises as to
whether the State immunity doctrine is applicable to the acts concerned.
In the case involving Philippine comfort women, the Tokyo District Court
answered affirmatively on 9 October 1998:

‘Paragraph 6 of the supplementary provisions of the State Liability

Act of 1947 provides that the antecedent law shall apply to damages
arising from conduct committed before this Act came into force. At
the time of the Second World War, during which the alleged offenses
were committed, the State immunity doctrine was effective, so that

41
OKUDA Y. (note 32), p. 147 et seq. See also Matsuyama District Court,
8 November 1994, in: Hanrei Jiho, No. 1549, p. 109 (application of Italian law in the case
of a yacht transported from Italy to Japan); Osaka District Court, 6 December 1990, in:
Hanrei Taimuzu, No. 760, p. 246 (application of German law in the case of a car transported
from Germany to Japan).
42
YAMADA R. (note 31), p. 323; TAMEIKE Y., Kokusai Shiho Koghi [Lecture on
Private International Law], 2nd ed., Tokyo 1999, p. 377. Contra ORIMO Y., Kokusai Shiho
Kakuron [Private International Law, Individual Parts], 2nd ed., Tokyo 1972, p. 185 (cumula-
tive application should be restricted to the unlawfulness of acts according to the literal
interpretation of paragraph 2).

Yearbook of Private International Law, Volume 3 (2001) 129

 Yasuhiro Okuda

with regard to acta jure imperii, the Civil Code was not applicable
and the Japanese government was not liable to pay compensation.’

In other words, on the one hand, the administrative court dismissed the actions for
compensation against the government under Article 16 of the Administrative
Justice Act of 1890. On the other hand, the judicial court denied civil liability of
the government for acta jure imperii, but applied Article 715 of the Civil Code to
acta jure gestionis, making the government liable as employer of the civil servants.
The alleged offenses accompanied acts of war of the Japanese army and should be
characterized as acts connected with acta jure imperii or as acts of a highly public
character. Therefore, the liability of the Japanese government to pay compensation
for the offenses should be denied under the State immunity doctrine.43 The court
expressed a similar opinion in a decision of 22 September 1999 in a case involving
the holocaust in Nanking, the experiments on humans by Unit 731, and the
bombing of the non-military area of a Chinese city.44
There are several points at issue concerning the applicability of the State
immunity doctrine to cases involving war victims. First, it is doubtful that all acts
of the Japanese army during the World War II were acta jure imperii. In a yet to be
reported decision of 30 November 2000, the Court of Appeals of Tokyo held in the
case of a Korean comfort woman as follows:

‘From application mutatis mutandis of Article 715, paragraph 2 of

the Civil Code, one may conclude that as the supervisor of the
tortfeasors the Japanese government is liable for the unlawful acts of
the employers of the comfort women and the Japanese soldiers. This
is because the government was a party to the contracts with, or a
business partner of, the employers of the comfort women.’45

The same rule may apply in the forced labor cases where the Japanese government
acted as a contracting party and as a partner in the businesses of the Japanese com-
panies that confined and forced foreign civilians to work in Japan.46
Second, it is helpful to consider the purpose and objective of the State
immunity doctrine. Boissonade, the French scholar who originally drafted the
Japanese Civil Code, provided that public and private administrations were liable

43
Tokyo District Court, 9 October 1998, in: Hanrei Jiho, No. 1683, p. 57, at p. 78;
JAIL, No. 42, p. 170, at p. 180.
44
Tokyo District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028, p. 92, at
p. 129. This part of the decision is not translated in JAIL, No. 43, p. 216.
45
Tokyo High Court, 30 November 2000 (Case No. 5333/ne, 1999).
46
AKIYAMA Y., ‘Gyoseiho kara Mita Sengo Hosho’ [Post-War Compensation from
Perspective of Administrative Law], in: OKUDA Y./KAWASHIMA S. et al. (note 1), p. 61 et
seq.

130 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

for damages caused by their servants or employees. In particular, his draft

recognized State liability for all acts of civil servants. However, the wording of his
draft was altered by the Parliamentary Drafting Committee, as a result of which the
final version of the Civil Code of 1890 was silent about State liability. According
to the prevailing theory in the doctrine and case law, these circumstances justify
the decision not to apply the Civil Code to acta jure imperii, as a result of which
the Japanese government was not liable to pay compensation until enactment of the
State Liability Act of 1947.47
However, according to the preparatory work of the Parliamentary Drafting
Committee, the members exonerated the Japanese government from liability not
simply because the acts of civil servants were deemed acta jure imperii. In their
opinion, the ‘people’ should accept the effects of the State immunity doctrine since
it was the State’s duty to protect the rights and property of its people by means of
acta jure imperii.48 Thus, the State immunity doctrine should be excluded when
there is no such relationship between the State and the persons concerned. As
mentioned above, a civil servant may carry out acta jure imperii abroad only if the
foreign State grants prior approval or if the acts are authorized by the law of
nations. This applies both to protecting one’s own nationals and issuing visas to
foreigners. However, there was no such protective relationship between the
Japanese army and the Chinese and Philippines, who were the victims of the
offenses committed by the army in violation of the law of warfare. In this case, the
application of the State immunity doctrine does not comply with its purpose and
objective. Thus, the Japanese government should be liable for compensation under
the Civil Code.49
Third, taking account of the preparatory work of the Administrative Justice
Act of 1890, one sees that the jurisdiction of the administrative courts as to the
subject matter was regulated differently in several drafts of the Act. Some drafts
provided that the administrative courts had jurisdiction over compensation for acta
jure gestionis, while others denied it or conferred it upon the judicial courts. With
regard to acta jure imperii, some drafts did not mention jurisdiction in matters of
compensation, while others expressly denied it. In any case, no draft expressly
recognized it or conferred it upon the judicial courts. The final version of the Act
provided that the administrative courts should not accept actions for compensation.
This rule should be interpreted as denying jurisdiction to the administrative courts

47
On the views in the doctrine and case law, see UGA K. (note 33), p. 15 et seq.
48
OKUDA Y., ‘Kokka Baisho Sekinin to Horitsu Fusokyu no Gensoku’ [State Lia-
bility and Principle of Non-Retroactive Application of Law], in: The Hokkaido Law Review,
Vol. 52, No. 1, p. 16 et seq. The preparatory materials of the Parliamentary Drafting
Committee are reprinted in: HOMUDAIJIN KANBO SHIHO HOSEI CHOSABU (ed.), Horitsu
Torishirabe Iinkai Minpo Soan Zaisanhen dai 373 Jyo ni kansuru Iken [Law Research
Committee, Opinions on the Draft of Article 373, Title Property, Civil Code], Nihon Kindai
Rippo Shiryo Sosho, Vol. 16, Tokyo 1989.
49
OKUDA Y. (note 48), p. 47 et seq.

Yearbook of Private International Law, Volume 3 (2001) 131

 Yasuhiro Okuda

in matters of compensation for all acts of the government. As for the judicial
courts, under the Court Constitution Act of 1890 they had jurisdiction over ‘civil
matters’ and ‘criminal matters’ only. Thus it follows that at that time neither the
administrative courts nor the judicial courts had jurisdiction in matters of compen-
sation for acta jure imperii. As a result, the government was not liable for compen-
sation. In other words, the State immunity doctrine was a procedural rule.50
After World War II, the Administrative Justice Act and the administrative
court were abolished under Article 76(2) of the Constitution and paragraph 2 of the
supplementary provisions of the Court Act. As specified by Article 3(1) of the
Court Act, judicial courts have jurisdiction over all legal disputes, including, of
course, actions against the government for compensation as a result of acta jure
imperii. Accordingly, the State immunity doctrine should not apply to actions
brought after World War II. It is true that the principle of non-retroactive
application of lex posterior is stipulated in paragraph 6 of the supplementary
provisions of the State Liability Act; however, this provision applies to substantive
rules and not to procedural rules. As a result, since paragraph 6 of the supple-
mentary provisions of the State Liability Act prohibits retroactive application,
judicial courts have jurisdiction over ongoing actions of the war victims under the
existing Court Act and should apply the Civil Code in such cases.51
Finally, even if the State immunity doctrine is deemed to be substantive law
and is applied in cases where the government and foreign victims have had no
previous legal relations, the question arises as to whether applying the State
immunity doctrine would be contrary to ordre public from the perspective of inter-
temporal law. The principle of non-retroactive application is based on the policy
that legal relations already established between parties should be respected. In
other words, the Japanese government should expect that it will not be liable for
compensation under the law in force at the time of the acts committed by its civil
servants, and the victims should be aware that they are unable to claim compen-
sation under that law. This policy is reasonable in most cases.
However, this is not true in regard to cases involving wrongs of the
Japanese army during World War II. On the one hand, the war victims continue to
suffer physical and psychological pain even sixty years after the offenses had been
committed. On the other hand, the Japanese government has enacted laws that
grant remedies to former Japanese soldiers and the families of deceased soldiers, as
well as to victims of the atomic bomb. This discrimination causes additional pain
to the foreign victims. Thus, it can be said that the wrongs of the Japanese govern-
ment not only occurred in the past but continue to occur now. Furthermore, the acts
of the Japanese army, such as the holocaust in Nanking, the experimentation on

50
Ibid., p. 33 et seq. The drafts of the Administrative Justice Act are reprinted in:
GYOSEI SAIBANSHO (ed.), Gyosei Saibansho 50 nenshi [History of the Administrative Justice
Court in 50 Years], Tokyo 1941, p. 13 et seq.
51
OKUDA Y. (note 48), p. 50 et seq.

132 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

humans by Unit 731, the forced prostitution of Chinese, Korean and Philippine
women, and the forced labor of Chinese and Korean men, were all clear violations
of humanitarian law that the Japanese government either ordered or did not attempt
to prevent. Under these circumstances, the principle of non-retroactive application
of lex posterior should be excluded exceptionally, thus allowing the State Liability
Act to apply in the cases of the war victims.52

3. Cumulative Application of the Lex Fori to Effects of Claims

The principle of lex loci delicti in Article 11(1) of the Horei is further restricted by
paragraph 3, which provides that, ‘even if the facts occurring abroad are unlawful
under Japanese law, the victim shall not claim damages or any other remedy not
available under Japanese law’. According to the prevailing view in the doctrine,
this provision means that the lex fori should be applied cumulatively to measures
and amounts of damages.53 However, the plain meaning of Article 11(3) suggests
that it does not apply to matters of prescription governed exclusively by the lex loci
delicti. The preparatory materials of the Horei support this conclusion.54
Article 724 of the Japanese Civil Code provides that the right to claim
compensation for unlawful acts extinguishes if the victim does not exercise it
within three years after he comes to know of the damage and who caused it, or
after twenty years from the day the unlawful act was committed. According to case
law, this means that the period of prescription is three years and the period for the
invalidation of claims 20 years. In other words, a claim for compensation arising
from unlawful acts will be invalidated simply after twenty years have elapsed.55
Article 197(1) of the Civil Code of the Republic of China provides that the
right to claim compensation for unlawful acts extinguishes when the victim does
not exercise it within two years after he comes to know of the damage and who
caused it or after ten years from the day the unlawful act was committed. The
wording is very similar to the Japanese Civil Code. However, according to the
prevailing view in Chinese doctrine, the provision creates a period of prescription

52
Ibid., p. 52 et seq. On ordre public under intertemporal law in general, see
SZASZY I., Conflict of Laws in the Western, Socialist and Developing Countries, Leiden
1974, p. 376; HESS B., Intertemporales Privatrecht, Tübingen 1998, p. 396 et seq.
53
YAMADA R. (note 31), p. 324; SAKURADA Y., Kokusai Shiho [Private International
rd
Law], 3 ed., Tokyo 2000, p. 229.
54
OKUDA Y. (note 32), p. 159 et seq. Nobushige Hozumi, draftsman of the Horei,
mentioned only the need to apply the lex fori cumulatively to measures and amounts of
damages but not at all to prescription. See HOMUDAIJIN KANBO SHIHO HOSEI CHOSABU (ed.),
Hoten Chosakai Horei Ghiji Sokkiroku [Law Research Committee, Preparatory Work of the
Horei], Nihon Kindai Rippo Shiryo Sosho, Vol. 26, Tokyo 1986, p. 125.
55
Supreme Court, 21 December 1989, in: Minshu, Vol. 43, No. 12, p. 2209; Hanrei
Jiho, No. 1379, p. 76.

Yearbook of Private International Law, Volume 3 (2001) 133

 Yasuhiro Okuda

of two years and 10 years, i.e., the elapse of this period only confers the right to
reject payment. In other words, the defendant must raise the issue of prescription
before the court in order to be exempted from the liability to pay compensation.56
In light of the various circumstances in cases involving Chinese victims, the
Japanese government should not be allowed to invoke prescription on the grounds
of the abuse of rights principle. This is because these plaintiffs could not exercise
their claims for compensation before Japanese courts until 1995. There were
neither diplomatic nor factual relations between Japan and the mainland of China
until 1972. Moreover, a foreign minister of China declared for the first time in
1995 that the communiqué of 1972 between Japan and China intended to waive
reparations between both governments, however, not the compensation of indi-
viduals.57 On the other hand, even though fifty years have passed since the end of
World War II, it can easily be proven that the offenses committed by the Japanese
army caused injuries to the plaintiffs. For example, a film of the holocaust in
Nanking by John Magee entitled China Invaded clearly documents one plaintiff’s
injuries inflicted by the Japanese army. There are many reports showing that the
plaintiffs were confined and transported for human experiments by Unit 731 and
forced labor in Japan. Some plaintiffs have appeared before Japanese courts for
testimony.58 As a result, the Tokyo District Court recognized the plaintiffs as
victims of offenses committed by the Japanese army in a decision of 22 September
1999, although it denied their claims.59 In view of these circumstances, it follows
that invoking the right to reject payment on the grounds of prescription should not
be allowed because it would represent an abuse of this right.

IV. Conclusion
In regard to war compensation, the victims can bring actions only before courts of
the defendant State. Claims filed before courts of their home country or a third
country will be dismissed as these courts lack jurisdiction due to sovereign
immunity. As a result, the lex fori is always the law of the defendant State. If the
lex fori applies to war compensation, this is contrary to the administration of
justice: A defendant State could enact a law on war compensation, give this law

56
SUZUKI K., ‘Chugokuho kara Mita Sengo Hosho’ [Post-War Compensation from
Perspective of Chinese Law], in: OKUDA Y./KAWASHIMA S. et al.(note 1), p. 200.
57
Ibid., p. 205. See also YAMADA M. (note 1), p. 228.
58
YAMADA M. (note 1), p. 243 et seq. Regarding John Magee, see also http://www.
arts. cuhk.edu.hk/NanjingMassacre/NMMage.html.
59
Tokyo District Court, 22 September 1999, in: Hanrei Taimuzu, No. 1028, p. 92, at
p. 100. This part of the decision is not translated in JAIL, No. 43, p. 216.

134 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Injuries to Foreign Individuals in Japan

retroactive effect, and thus exclude victims’ claims that would otherwise be
recognized under the lex loci delicti.
Consequently, the lex loci delicti should be made an international uniform
rule for war compensation. This should then be supplemented by rules facilitating
access for foreign victims to the courts of the defendant State. In other words, the
home State of the victims and the defendant State should cooperate by providing
financial assistance and legal advice to the victims, thus making it possible for
them to have access to justice. This proposal results necessarily from the
experience of the legal proceedings of war victims before Japanese courts.60

Post Scriptum
On 13 July 2001, the Tokyo District Court ordered the Japanese government to pay
20 million yen (about 200,000 US dollars) in a Chinese forced labor case. This is
the first case where a foreign war victim (in this case his wife and children as
successors) has been awarded so much compensation. The Court justifies this
conclusion, however, reasoning that the Japanese government is liable for its
failure to protect this Chinese laborer, who had escaped from the coal mine and hid
out in Hokkaido for 13 years, unaware that the war had ended. On the contrary, the
Court denied liability for the abduction and the forced labor for reasons similar to
those in the decisions of other cases.61

60
Article 75(2) of the Rome Statute of the International Criminal Court provides that
the Court may make an order directly against a convicted person specifying appropriate
reparations to, or in respect of, victims, including restitution, compensation and rehabili-
tation. This provision seems to overcome difficulties for war victims to claim damages but
may be not enough for them to receive the full amount of compensation.
61
See http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nn20010713a3.htm; http://
www.asahi.com/english/national/K2001071301067.html

Yearbook of Private International Law, Volume 3 (2001) 135

ISSUES OF PRIVATE INTERNATIONAL LAW AND
CIVIL PROCEDURE ARISING OUT OF THE U.S.
CIVIL SUITS FOR FORCED LABOR DURING
WORLD WAR II:

To What Extent Do U.S. Conflict and Procedural Rules

Obstruct Private Liability for
Wartime Human Rights Violations?
Kent ANDERSON*

I. Introduction
II. Factual & Procedural History
A. European Litigation
B. Asian Litigation
III. Jurisdiction
A Personal Jurisdiction
B. Subject Matter Jurisdiction
1. State Courts
2. Federal Courts
a) Diversity Jurisdiction
b) Federal Question Jurisdiction
c) Alien Tort Claims Act
d) Foreign State Jurisdiction
e) Supplemental Jurisdiction
C. Forum Non Conveniens
D. Summary of Jurisdiction
IV. Procedural Bars and Defenses
A. Treaty Resolution
1. Japanese Peace Treaty
2. German Peace Treaties
B. Statute of Limitations
1. International Law Claims
2. Restitution and Tort Claims
3. State Law Specific Claims
4. Equitable Tolling

*
MA, JD (Wash.), MJur (Oxon.). Associate Professor, Hokkaido University School
of Law, Sapporo, Japan. From September 2001: Senior Lecturer, The Australian National
University, Faculty of Law. I wish to thank Andrew Clayton and Yasuhiro Okuda for their
comments and suggestions. As always, all errors are mine alone.

Yearbook of Private International Law, Volume 3 (2001), pp. 137-183

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Kent Anderson

C. Political Question (Non-justiciability)

D. Comity
E. Act of State Doctrine & Foreign Sovereign Immunity
F. Accord and Satisfaction & Preemption
G. Summary of Procedural Bars and Defenses
V. Choice of Substantive Law
A. International Law Claims
B. Tort Claims
C. Restitution Claims
D. State Law Specific Claims
E. Summary of Choice of Substantive Law
VI. Private International Law Implications on Settlement
VII. Conclusion
Addendum

I. Introduction
World War II was fought over fifty years ago in Europe and Asia, but much of its
final resolution is taking place today in the United States. The fact that a Belgian
Holocaust victim’s suit against her German slave masters and an Australian
prisoner of war’s (POW) claim against his Japanese prison guards are taking place
in American courts surprises few U.S. court watchers. Human rights lawyers
assert, ‘It is a tribute to the United States system of justice that our courts can
handle claims which originated over fifty years ago in another part of the world.’1
Yet, defendants are ‘bewildered and angry’ that U.S. courts are hearing these suits
and ‘blam[e] American trial lawyers for opportunistic greed’.2 Whether bewildered
or ecstatic, comparative and international lawyers have an interest in closely
following the resolution of the private international law and civil procedure
questions involved in these cases because these issues have been outcome
determinative, whether it be settlement or dismissal. Stated more broadly, how
U.S. courts treat the conflicts and procedural questions in the World War II era
lawsuits has serious implications for future international human rights litigation in
this forum.
This Essay develops a coherent framework for the private international law
and procedural issues arising in U.S. international human rights litigation derived
from an examination of the U.S. lawsuits against private entities for slave and

1
BAZYLER M.J., ‘Litigating the Holocaust’, in: 33 U. Richmond L. Rev. 1999, p. 603.
2
THARP M., ‘Past-due Bills for Japan: Should Wartime Laborers Collect?’, in: U.S.
News & World Rep., 7 Feb. 2000.

138 Yearbook of Private International Law, Volume 3 (2001)

 U.S. Civil Suits for Forced Labor during World War II

forced labor during World War II.3 The analysis of some issues varies based on the
different factual settings of forced and slave labor in Europe and Asia during
World War II.4 Thus, I begin by providing a broad sketch of the factual and
procedural history of the European and Asian suits. Next, Section III concentrates
on the primary question in pursuing this dispute in the United States-jurisdiction.
Section IV then assesses procedural questions, which have been dispositive in the
court-resolved cases to date. Section V speculates on the choice of substantive law
questions raised by the various claims, on which U.S. courts have yet to rule. In
Section VI, I consider to what extent private international law and civil procedure
rules impact the private and political resolution of international human rights
claims. Finally, I conclude by drawing lessons from the World War II era suits
regarding future international human rights litigation in the United States.
Specifically, I argue that liberal U.S. jurisdictional laws provide a forum for these
suits but restrictive procedural rules preclude their substantive claims from being
heard, which in turn results in only a limited temporal window available for
leveraging political and private settlements.

II. Factual and Procedural History

A. European Litigation

Lawsuits for forced and slave labor were the third wave of Holocaust era litigation
in the United States. The general trend began in earnest in 1996 with lawsuits
against several European banks for claims over World War II bank accounts of
Holocaust victims and has moved to cover, among other things, claims over

3
This Essay does not cover a number of related issues. It does not delve into
governmental liability because the Japanese and German governments have purposefully not
been named in the U.S. suits and because the issue is almost certainly nonjusticiable under
the political question doctrine discussed infra Section IV.C. or alternatively barred by the
Foreign Sovereign Immunities Act. See, e.g., Princz v. Federal Republic of Germany, 26
F.3d 1166, 1176 (D.C. Cir. 1994); Wolf v. Federal Republic of Germany, 95 F.3d 536, 544
(7th Cir. 1996). I also do not review the World War II era litigation in the U.S. courts
against European banks, insurance companies, or art collectors, because the issues in those
cases do not appear or are not central to the Asian litigation. Conversely, I do not review the
comfort women, Nanjing massacre, or Unit 731 issues pivotal in the Asian litigation.
4
This Essay uses the term ‘European litigation’ or ‘East Coast litigation’ to describe
the lawsuits against various entities for their use of forced and slave labor in the European
theater of World War II. ‘Asian litigation’ or ‘West Coast litigation’ is used to describe the
similar lawsuits over forced and slave labor in the Asian theater. The phrase ‘World War II
era litigation’ is used to refer to both the European and Asian litigation collectively.

Yearbook of Private International Law, Volume 3 (2001) 139

 Kent Anderson

insurance policies and suits for lost art works.5 The European labor cases included
a handful of state actions and over fifty federal suits, at least 42 of which were
class action lawsuits.6 Generally speaking, the plaintiffs in these cases were U.S.
citizens and aliens who were formerly forced and slave laborers in privately owned
factories in Germany and its occupied territories between 1942 and 1945. During
this period, as part of its war effort the German government encouraged and
organized the use of members of persecuted groups, as well as civilians from
occupied territories and prisoners of war as either expendable (i.e., slave) or invol-
untary (i.e., forced) workers.7 The defendants to the suits were the companies that
bid on and used these laborers and/or their subsidiaries, parent, and related entities.
The plaintiffs, in general, based their claims on (1) violations of inter-
national law against slavery and forced labor, (2) restitutionary claims for unjust
enrichment and quantum meruit, and (3) tort claims for assault, battery, infliction
of emotional distress, and false imprisonment.8 Defendants primarily relied upon
conflict of laws and procedural defenses, including (1) lack of personal jurisdic-
tion, (2) lack of subject matter jurisdiction, (3) forum non conveniens, (4) treaty
resolution, (5) statute of limitations, (6) political question non-justiciability,
(7) comity and foreign sovereign immunity, and (8) preemption and accord and
satisfaction.9
In September 1999, separate federal courts in New Jersey dismissed five of
the class action suits on their pleadings in Iwanowa v. Ford Motor Company and
5
For the most extensive review of the Holocaust litigation in American literature,
see BAZYLER M.J., ‘Nuremberg in America: Litigating the Holocaust in United States
Courts’, in: 34 U. Richmond L. Rev. 2000, p. 1 (noting modern Holocaust litigation began in
1996 and reviewing the various types of litigation, viz., bank cases, insurance cases, art
cases, forced and slave labor cases, and miscellaneous cases).
6
See In re Nazi Era Cases Against German Defendants’ Litigation, 198 F.R.D. 429,
2000 U.S. Dist. LEXIS 18148, *3-*4, app. A (D.N.J. Dec. 5, 2000) (hereinafter: In re Nazi
Era Cases I) (naming 49 of the federal cases and noting the others); BAZYLER M.J. (note 5),
App. A (listing all state and federal cases); U.S. Department of State, ‘Annex C & D to Joint
Statement on the Federal Foundation "Remembrance, Responsibility and the Future"’, 17
July 2000, at http://www.state.gov/www/regions/eur/holocaust/000717-js-annex.c.pdf
(noting in Annex C 42 cases in which plaintiffs’ attorneys participated in the Foundation
Agreement, infra note 12, and 13 cases in which plaintiffs’ attorneys did not participate in
Annex D).
7
See Iwanowa v. Ford Motor Co., 67 F. Supp. 2d 424, 432-33 (D.N.J. 1999). This
Essay incorporates the distinction between slave and forced labor used in the Foundation
Agreement discussed infra at note 12. However, as others have pointed out ‘slave’ is a
misnomer because slave masters valued their workers as property while German slave
workers were treated as a disposable and renewable resource. See BAZYLER M.J. (note 5),
n. 784 (citing FERENCZ B.B., Less than Slaves: Jewish Forced Labor and the Quest for
Compensation, 1979).
8
See, e.g., Burger-Fischer v. Degussa AG, 65 F. Supp. 2d 248, 252 (D.N.J. 1999).
9
See, e.g., ibid., at 250.

140 Yearbook of Private International Law, Volume 3 (2001)

 U.S. Civil Suits for Forced Labor during World War II

Burger-Fischer v. Degussa AG.10 Forty-nine of the remaining cases were voluntar-

ily dismissed with prejudice in December 2000.11 These dismissals were directly
tied to the settlement efforts among the German government, German industry
including most of the defendants, a majority of the plaintiffs, various non-
governmental organizations, and the United States and other governments. Their
agreement, known as the Foundation Agreement, stipulated the establishment of a
DM 10 billion ($5.1 billion) agency to provide compensation for former workers’
claims upon (1) the dismissal of all U.S. labor based lawsuits, (2) funding by the
German government and industry, and (3) proof of the individual claims.12 The
remaining labor cases that had not been voluntarily revoked were dismissed on the
same grounds as Iwanova and Burger-Fischer on 1 March 2001 in In re Nazi Era
Cases Against German Defendants Litigation.13 Thus, for the purposes of U.S.
courts the European cases have been conclusively resolved.14

B. Asian Litigation

While the European suits centered around the federal courts on America’s East
Coast, the thirty plus cases in the Asian litigation are focused on the state and
federal courts of California.15 The plaintiffs in these cases are predominately former
Allied POWs and civilians of Japanese occupied areas, rather than persecuted
domestic minority groups. The Asian defendants are a close replica of the Euro-
pean defendants and consist primarily of Japanese businesses and their subsi-
diaries, parents, and related companies. The defendants have asserted substantially
the same conflict of laws and procedural defenses.
The Asian litigation plaintiffs, however, have not made any claims based on
international law and have made additional state law specific claims under

10
Iwanowa, 67 F. Supp. 2d 424; Burger-Fischer, 65 F. Supp. 2d 248.
11
See In re Nazi Era Cases I, 2000 U.S. Dist. LEXIS 18148.
12
See Agreement between the Government of the United States of America and the
Government of the Federal Republic of Germany concerning the Foundation ‘Remem-
brance, Responsibility and the Future,’ 17 July 2000, at http://www.state.gov/www/regions/
eur/holocaust/000717_agreement.html (hereinafter: ‘Foundation Agreement’).
13
129 F. Supp. 2d 370, 2001 U.S. Dist. LEXIS 2018 (D.N.J. 1 Mar. 2001)
(hereinafter: In re Nazi Era Cases II).
14
The final Holocaust era cases were dismissed on 21 May 2001, and distributions
pursuant to the Foundation Agreement began shortly thereafter. See ‘German Companies
Ready to Release $1.3 Billion into Nazi-Era Labor Fund’, in: Japan Times, 24 May 2001,
p. 6.
15
For a list of the cases see BAZYLER M.J./SAXA-KANEKO D., ‘World War II-Era
Lawsuits Against the Japanese in U.S. Courts’, http://www.law.whittier.edu/sypo/final (last
visited 15 Feb. 2001) (hereinafter: BAZYLER M.J./SAXA-KANEKO D., Asian Litigation List)
(providing summary as of November 20, 2000, of 18 federal and 14 state cases).

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 Kent Anderson

California’s Civil Procedure Code and Business and Professional Code.16 The
lynchpin of these causes of action is section 354.6 of the Code of Civil Procedure
(‘Section 354.6’) which provides:

‘(b) Any Second World War slave labor victim, or heir of a

Second World War slave labor victim, Second World War forced
labor victim, or heir of a Second World War forced labor victim,
may bring an action to recover compensation for labor performed as
a Second World War slave labor victim or Second World War forced
labor victim from any entity or successor in interest thereof, for
whom that labor was performed, either directly or through a
subsidiary or affiliate. That action may be brought in a superior court
of this state, which court shall have jurisdiction over that action until
its completion or resolution.
(c) Any action brought under this section shall not be dismissed
for failure to comply with the applicable statute of limitations, if the
action is commenced on or before 31 December 2010.’

The statute was drafted with only the European laborers in mind. The bill’s
legislative history talks exclusively of ‘Nazi persecution’ and the statute’s
definitions of laborers only refer to those who worked for ‘the Nazi regime, its
allies and sympathizers, or enterprises transacting business in any of the areas
occupied by or under control of the Nazi regime or its allies and sympathizers’.17
Similarly the extension of the statute of limitations was explained with
reliance on German court decisions that reportedly held that claims under the
German peace treaties were tolled until 1997.18 Nonetheless, the plaintiffs have
taken advantage of the broad statutory language and brought suits predominately
against Japanese companies and related entities.
To date, the resolution of the California cases has diverged from their East
Coast cousins. First, a federal district court has dismissed almost half of the cases
on similar legal grounds as Iwanowa and Burger-Fischer, but this was of course

16
See, e.g., In re World War II Era Japanese Forced Labor Litigation, 114 F. Supp.
2d 939, 944 (N.D. Cal. 2000).
17
See Cal. Code Civ. Pro., § 354.6(a)-(b) (Deering 2000); S.B. 1245, 1999-2000
Sess. (Cal. 1999), enacted as 1999 Cal. Stat. ch. 216, §§ 1-2.
18
See Cal. Senate Rules Committee Report on S.B. 1245, 1999-2000 Sess. (Cal.
1999), available at http://www.leginfo.ca.gov/pub/99-00/bill/sen/sb-1201-1250/sb-1245-cfa-
19990526-154116-sen-floor.htm, (summarizing the 1946 Paris Treaty, London Debt
Agreement, and 2+4 Treaty, discussed infra, and finding, ‘The statutes of limitations
applying to claims arising out of the Second World War were therefore tolled until
7 November 1997, when the first of several German courts ruled that [the moratorium was
ended]’).

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 U.S. Civil Suits for Forced Labor during World War II

based on different factual findings regarding the relevant Asian Peace Treaty.19
Second, there have been no indications of a pending settlement by the defendant
Japanese businesses or Japanese government. In fact, both parties have stated their
intent to oppose the cases to their fullest.20 Third, one of the fiercest battles in the
Japanese-centered cases has been over whether the proper forum was the state or
federal courts.21 This issue arises in the Asian cases because, as partially reviewed
above, the California legislature has been enacting legislation to assist World
War II victims seeking redress as well as calling on Japan to ‘formally issue a clear
and unambiguous apology’ and ‘immediately pay reparations to the victims’ of,
among other things, forced labor.22 As a result, the defendants have been eager to
avoid and the plaintiffs eager to rely on California state courts.23
19
See In re World War II Era Japanese, 114 F. Supp. 2d at 949.
20
See, e.g., ‘Japan to Fight Ex-POWs’ Campaign for Redress’, in: Japan Times, 29
June 2000, p. 2 (noting statement of Japanese Ambassador to the United States that ‘Japan
has no option but to counter the campaign [for forced labor compensation] in court’.);
‘Japan’s Murky Past Catches Up’, in: The Economist, 8 July 2000 (noting Japanese industry
and government resolve to defend the cases).
21
See, e.g., Jeong v. Onoda Cememt Co., Ltd., 2000 U.S. Dist. LEXIS 7985 (C.D.
Cal. 18 May 2000).
22
See A.J.R. 27, 1999-2000 Sess. (Cal. 1999) (calling for apology and reparations);
Cal. Civ. Proc. Code, §§ 354.6 (extending statute of limitations for forced and slave
laborers); 354.5 (providing jurisdiction for insurance claims); Holocaust Victims Insurance
Act, Cal. Ins. Code, §§ 790-790.15 (allowing state Insurance Commissioner to suspend
insurer’s license for failing to pay Holocaust claims); 12967 (ordering research on Holocaust
insurance claims); 13800-02 (establishing a Holocaust Insurance Registry and extending
jurisdiction and statute of limitations to Holocaust survivors); Holocaust Reparations Act,
Cal. Rev. & Tax. Code, § 17155 (exempting Holocaust survivor compensation awards from
state taxation).
23
In addition to California, fifteen states have enacted legislation to assist Holocaust
plaintiffs. See BAZYLER M.J. (note 5), App. A (providing a list and summary of all
legislation). However, California is the only state to enact a statute such as Section 354.6 for
forced and slave labor claims and to extend the statute of limitations on these claims. A bill
to enact a statute essentially identical to Section 354.6 was introduced in Rhode Island, but it
failed to pass. See S.B. 2026, 2000 Sess. (R.I. 2000), status and bill text available at
http://www.state.ri.us/00SESSION/bills/00-2026.htm. Rhode Island’s House also passed a
resolution similar to California’s calling upon the United States, Germany, and German
industry to create a fund to compensate forced and slave laborers of World War II. See
House Res. 8119, 2000 Sess. (R.I. 2000), available at http://www.rilin.state.ri.us/billtext00/
housetext00/h8119. htm.
The most recent legislative activity comes from the U.S. House of Representatives where
one of the original sponsors of Section 354.6, now a U.S. representative and joined by 64
other representatives, introduced proposed federal legislation on 22 March 2001 that seeks,
in effect, to extend the statute of limitations in the World War II era suits and eliminate the
treaty resolution defense discussed below in section IV.A. See Justice for United States
Prisoners of War Act of 2001, H.R. 1198, 107th Cong. (sponsored by Rep. Mike Honda).

Yearbook of Private International Law, Volume 3 (2001) 143

 Kent Anderson

III. Jurisdiction
For many foreign observers, the most fundamental question regarding the United
States litigation over World War II era claims is on what basis are the courts
asserting authority over disputes between foreigners regarding foreign activities.
Under domestic law, U.S. courts may hear cases for monetary damages where they
have both personal jurisdiction over the parties and subject matter jurisdiction over
the claims.24 Personal jurisdiction relates to a court’s control over the parties and is
limited by constitutional protections of due process. On the other hand, subject
matter jurisdiction refers to a court’s power to hear or determine the claims of a
case, which is generally determined by specific statutory grants. While the standard
for personal jurisdiction is the same whether a claim is brought in the federal or
state courts, subject matter jurisdiction is complicated by different rules for federal
and state tribunals.

A. Personal Jurisdiction

The due process requirements for personal jurisdiction are notably broad and as a
practical matter have not obstructed any of the labor suits. Pursuant to the classical
statement of the rule for in personam jurisdiction, a court may exert jurisdiction
over a nonresident to the extent that that party has ‘minimum contacts’ with the
province and control over that party does not offend ‘traditional notions of fair play
and substantial justice’.25 Because in all of the World War II cases the actions on
which the complaints are based were conducted outside of the United States, the
defendants’ present contacts with the forum must be ‘substantial’ or ‘continuous
and systematic’.26 Consistent with this, it has long been held that the presence of a
subsidiary alone is not enough to subject a separate and distinct parent to personal
jurisdiction.27 The cases, however, have also found personal jurisdiction where the
defendants had no actual presence in the forum, but did have a direct agency
relationship with a local company.28 Whether a party satisfies this standard will be
determined on a case-by-case basis reviewing all the specific facts, but as a

The U.S. executive branch has opposed the bill. See ‘U.S. Cool to Bill on Ex-POW Claims’,
in: Japan Times, 3 March 2001, p. 3, available in LEXIS, News Library, Japan Economic
Newswire.
24
See Restatement (Second) of Judgments, § 1 (1982).
25
See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
26
See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16
(1984).
27
See Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 337 (1925).
28
See, e.g., Frummer v. Hilton Hotels Int’l, Inc., 19 N.Y.2d 533 (N.Y. 1967).

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 U.S. Civil Suits for Forced Labor during World War II

practical matter, the rules mean that courts may control almost any defendant doing
nearly any business with the forum no matter how tenuously connected with it.
In both the European and Asian portions of the U.S. World War II era
litigation, the named defendants are almost all large multinational companies along
with their subsidiaries and related companies. As multinational companies, it is
extremely likely that they satisfy the due process requirements for personal
jurisdiction. That is not to say, however, that personal jurisdiction will not limit
whom the plaintiffs may sue.29 Many of the plaintiffs’ lawyers in the European
litigation noted that, barring the settlement, they would have expanded their actions
to the over 500 firms that were subsequently identified as using forced and slave
labor during the war.30 However, the personal jurisdiction standard would most
likely only allow suits against those companies that have been successful enough to
grow beyond their country’s borders in the post-war years. As a result, the United
States forum is only a practical alternative for international human rights cases
against U.S. companies or large foreign entities.

B. Subject Matter Jurisdiction

1. State Courts

In addition to personal jurisdiction, the plaintiffs in international human rights

cases in the United States must establish that the specific court in which they bring
their cause has subject matter jurisdiction. Subject matter jurisdiction cannot be
created by consent, waiver, or estoppel.31 U.S. state courts generally have subject
matter jurisdiction to hear all cases except those specifically withheld from them
by state or federal constitutions.32 Thus, state courts have authority over restitution

29
See Cornell v. Assicurazioni Generali S.p.A, 2000 U.S. Dist. LEXIS 11004
(S.D.N.Y., 7 Aug. 2000) (dismissing Holocaust insurance case against Austrian insurer for
lack of personal jurisdiction); Cornell v. Assicurazioni Generali S.p.A, 2000 U.S. Dist.
LEXIS 2922 (S.D.N.Y., 16 Mar. 2000) (dismissing Holocaust insurance case against French
insurer for lack of personal jurisdiction). But see Stahl v. Victoria Holdings AG, 2000 U.S.
App. LEXIS 11358, *3 (9th Cir. 18 May 2000) (reversing dismissal of WII era case against
European insurance companies for lack of personal jurisdiction connections and remanding
for a hearing on the plaintiffs’ ‘novel “enterprise” theory of jurisdiction.’).
30
See FISHER B.A., ‘Japan’s Postwar Compensation Litigation’, in: 22 Whittier L.
Rev. 1999, pp. 35, 37-38 (the author was a plaintiffs’ attorney in both the European and
Asian litigations).
31
See Insurance Corp. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702
(1982).
32
See, e.g., Cal. Const., art. XI, § 10; U.S. Const., Amend. X (providing ‘powers not
delegated to the United States by the Constitution, nor prohibited by it to the States, are
reserved to the States respectively, or to the people’).

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 Kent Anderson

and tort claims such as those raised by the plaintiffs in both the European and
Asian litigations. Moreover, California’s Section 354.6 expressly provides its state
courts with original jurisdiction over whatever claims fall within its definition.33
Though rarely relied upon due to a variety of substantive problems
including those reviewed below; in principle, state courts also have concurrent
power to hear claims based on violations of international law.34 However, in the
Asian litigation the plaintiffs have been particularly careful not to plead these
causes of action because in doing so they might give the federal courts
jurisdiction.35 Evaluating the exact benefits of state courts versus federal courts is a
complex and multifactor calculation that counsel for plaintiffs and defendants will
necessarily conclude differently. Nonetheless, given the climate in California
where the legislature has condemned the Japanese government and called for it and
Japanese businesses to compensate former forced and slave laborers, the plaintiffs’
attempts to limit subject matter jurisdiction to the state courts seems
understandable.

2. Federal Courts

In contrast to state courts, U.S. federal courts are courts of limited, not general,
jurisdiction and, thus, it is much more difficult to establish their subject matter
jurisdiction over a suit.36 There are two primary bases for federal subject matter
jurisdiction-diversity of litigants’ residence and questions of federal law. In

33
See Cal. Code. Civ. Pro., § 354.6(b). Concerning what exactly those
substantive claims are see infra section V.D. Section 354.6’s extension of subject matter
jurisdiction might arguably be challenged as unconstitutional for violating, inter alia, the
foreign affairs power. Section 354.5 of the California Code of Civil Procedure, which gives
jurisdiction over World War II era insurance claims and extends the statute of limitations
until 2010, has recently been questioned on this ground. See Gerling Global Reins. Corp. of
Am. v. Quackenbush, 2000 U.S. Dist. LEXIS 8815, *4 n.2 (E.D. Cal. June 9, 2000), aff’d on
different grounds, sub nom., Gerling Global Reins. Corp. of Am. v. Low, 2001 U.S. App.
LEXIS 1724, *5 (9th Cir. Feb. 7, 2001) (dismissing challenge of Section 354.5 for lack of
ripeness).
34
See U.S. Const., Article III, amend. X; Gulf Offshore Co. v. Mobil Oil Corp., 453
U.S. 473 (1981) (holding unless Congress expressly makes federal jurisdiction exclusive,
federal and state courts have concurrent jurisdiction to try federal law claims). This of
course raises the unresolved question of whether an individual has a private right of action
under international law discussed below in Section III.B.2.b.
35
See, e.g., In re World War II Era Japanese, 114 F. Supp. 2d at 942 (noting
‘plaintiffs’ attempts to plead only state law claims’); Jeong, 2000 U.S. LEXIS 7985, at *2
(conspicuously failing to plead international law claims).
36
See Aldinger v. Howard, 427 U.S. 1, 15 (1978); 13 WRIGHT C.A. et al., Federal
Practice and Procedure, St. Paul Minn. 1984 & Supp. 2000, § 3522 (summarizing cases).

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 U.S. Civil Suits for Forced Labor during World War II

addition, the World War II era cases raise two other rarely used bases for federal
court control.

a) Diversity Jurisdiction

Federal courts have concurrent ‘diversity jurisdiction’ with the state courts for state
law claims between citizens of different states (including foreign states) where the
amount in controversy exceeds $75,000.37 However, the diversity of the parties
must be complete, that is, none of the defendants may be from the same state as
any of the plaintiffs.38 This requirement of complete diversity is a difficult standard
to meet in cases such as the World War II era lawsuits where numerous class
action plaintiffs are simultaneously suing a huge number of primary defendants
and a variety of their subsidiaries and related entities.39 This was clearly shown in
Jeong v. Onoda Cement Company, Ltd. where the Japanese defendants sought to
remove the class action from a California state court to the federal courts based on
diversity jurisdiction.40
In Jeong, there was no diversity of the parties on the face of the complaint
since one of the named defendants was a California company. Because this
company was only a recently acquired subsidiary of one of the primary Japanese
defendants though, the defendants asserted that it had been fraudulently named
merely to destroy diversity jurisdiction or alternatively that it was the alter ego of
its foreign parent and so it should be considered a non-resident for jurisdictional
purposes.41 The court refused to accept either argument. It denied the alter ego
rationale as a factual matter and found that the broad language of Section 354.6,
which covers ‘any entity or successor of interest thereof, for whom that labor was
performed, either directly or through a subsidiary or affiliate’, seemed to allow the
joining of even remotely related subsidiaries.42 Other courts hearing the World

37
28 U.S.C. § 1332(a) (2001).
38
See Strawbridge v. Curtiss, 7 U.S. (2 Cranch) 267, 267 (1806).
39
Diversity jurisdiction was not addressed in the consolidated case dealing with the
majority of the Asian suits. See In re World War II Era Japanese, 114 F. Supp. 2d 939
(conspicuously not addressing diversity jurisdiction).
40
See Jeong, 2000 U.S. LEXIS 7985, at *3-*14.
41
See ibid.; LEUNG S., ‘Suit Will Test State Law on War Labor’, in: Wall Street J.,
27 Oct. 1999 (reviewing the 1990 acquisition of the California company by the Japanese
defendant and noting that during World War II the U.S. subsidiary was in fact operating
solely in the United States and contributed to the war effort against Japan).
42
See Jeong, 2000 U.S. LEXIS 7985, at *3-*14 (emphasis in original). But cf.
Gerling Global Reins. Corp. of Am. v. Nelson, 123 F. Supp. 2d 1298, 1304 (N.D. Fla. 2000)
(ruling comparable Florida statute unconstitutional specifically because it seemed to allow
the joining of even remotely related subsidiaries).

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 Kent Anderson

War II era lawsuits have been more willing to find diversity, but these cases have
been on the East Coast where it has been primarily the plaintiffs who sought and
the defendants who did not object to the diversity basis.43 In other words,
depending upon the plaintiffs’ objectives in going to or avoiding federal court, they
should be able to create or evade diversity jurisdiction by carefully constructing
their complaint and whom it names as parties.

b) Federal Question Jurisdiction

When diversity jurisdiction cannot be found, the federal court may also take
subject matter jurisdiction where the claims raise questions of federal law. That is,
‘federal question jurisdiction’ is met where a cause of action ‘aris[es] under the
Constitution, laws, or treaties of the United States’.44 The analysis of whether the
World War II era litigation implicates such federal law issues, however, differs
between the European and Asian cases. This is because the plaintiffs in the East
Coast lawsuits have sought to base jurisdiction upon it, while the plaintiffs in the
West Coast cases have purposefully and carefully sought to avoid it.
In the Asian litigation, the plaintiffs have not alleged any claims based on
violations of federal law, and federal question jurisdiction only exists where a
federal claim is ‘presented on the face of the plaintiff’s properly pleaded
complaint’.45 Nevertheless, defendants have the right to remove a case from the
state courts to the federal courts where the suit alternatively could have been
brought in a federal court.46 They may not, however, remove the case if the federal
question only arises as part of a defense and not as a basis on the plaintiff’s
properly pleaded complaint.47
Relying on this rule, the court in the Jeong case denied the defendants’
attempt to remove that suit to the federal forum. The court found that the federal
law questions they asserted did not develop as affirmative claims but only arose as
defenses.48 Specifically, the defendants argued that the Japanese Peace Treaty and
the War Claims Act, both reviewed below, were federal remedies that preempted
any relief based on the plaintiffs’ state law causes. The court found though that
only where a federal law ‘completely’ preempts or ‘supplants’ state law claims will
it cease to be a mere defense and support federal issue jurisdiction.49 Therefore, it
concluded that ‘because neither the Treaty nor the Act gave any forced labor
43
See Iwanowa, 67 F. Supp. 2d at 470; Burger-Fischer, 65 F. Supp. 2d at 250.
44
28 U.S.C. § 1331.
45
Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).
46
28 U.S.C. § 1441(a).
47
See Rivet v. Regions Bank of La., 522 U.S. 470, 475 (1998).
48
See Jeong, 2000 U.S. Dist. LEXIS 7985, at *15-*20.
49
See ibid., at *15-*16.

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victim a right to bring a suit for compensation in the federal court’, the federal
issues raised by the claims were merely defenses upon which federal jurisdiction
could not be supported.
Shortly after this opinion, the court hearing the remainder of the
consolidated Asian cases accepted the Jeong conclusion and yet still found a basis
for federal question jurisdiction.50 In In re WWII Era Japanese Forced Labor
Litigation, the court held that the lawsuit raised questions of the ‘federal common
law of foreign relations’ upon which general subject matter jurisdiction could
hang.51 The court explained federal common law of foreign relations is implicated
where causes of action, including private party claims, ‘necessarily require
determinations that will directly and significantly affect United States foreign
relations’.52 Applying this rule to the Asian lawsuits, the court found that because
the claims arise out of war and unavoidably involve the policy choices made in
settlement, the complaints, ‘on their face, implicate the federal common law of
foreign relations and, as such, give rise to federal jurisdiction’.53 Accepting this,
defendants in future cases alleging international human rights violations during war
and asserted after a negotiated peace appear to have a foundation for removing
state lawsuits into the federal courts.
In the European cases, because it was the plaintiffs and not the defendants
who sought to be in the federal courts, the analysis of whether general federal
question jurisdiction existed was quite different. The plaintiffs in these cases
asserted general federal question jurisdiction based on their international law
claims. International law, whether pursuant to treaties or as customary law, is law
of the federal United States, not the separate states.54 Therefore, some courts have
simply found that if a plaintiff in the World War II era litigation has relied on
international law in making its claims the court has federal question jurisdiction.55

50
See In re World War II Era Japanese, 114 F. Supp. 2d at 943-44, n.1.
51
Ibid. (noting also and quoting Poole v. Nippon Steel Corp., No. 00-0189 (C.D.
Cal. 17 March 2000) in which another federal district court found that the Asian litigation
satisfied federal question jurisdiction by ‘presenting substantial issues of federal common
law dealing with foreign policy and relations’).
52
See Republic of Philippines v. Marcos, 806 F.2d 344, 352 (2d Cir. 1986); Torres
v. Southern Peru Copper Corp., 113 F.3d 540, 543 (5th Cir. 1997).
53
See In re World War II Era Japanese, 114 F. Supp. 2d at 943.
54
See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 415 (1964) (holding the
federal courts have jurisdiction over cases arising under international law); Filartiga v.
Pena-Irala, 630 F.2d 876, 886 (2d Cir. 1980). But cf. BRADLEY C.A./GOLDSMITH J., ‘The
Current Illegitimacy of International Human Rights Litigation’, in: 66 Fordham L. Rev.
1997, pp. 319 et seq. (1997) (arguing that international customary law must be incorporated
into federal law).
55
See, e.g., Bodner v. Banque Paribas, 114 F. Supp. 2d 117, 127 (E.D.N.Y. 2000).

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Other courts, however, have looked beyond this superficial question and
noted that whether international law based jurisdiction exists is necessarily
dependant upon whether international law gives rise to claims that a plaintiff may
personally assert.56 Stated differently, the courts reason that if plaintiffs do not have
an international law claim upon which private rights of action exist, they have no
cause of action on which to rest federal issue jurisdiction. The issue is further
complicated because there are different standards for U.S. citizen plaintiffs and
alien plaintiffs regarding whether a private right of litigation and corresponding
jurisdiction exists. Jurisdiction for international claims by aliens is slightly more
straightforward since it is covered by a specific statute discussed below. On the
other hand, whether citizens have private rights of action under international law is
an extremely complex and unsettled area of the law, which incidentally the courts
hearing the World War II era claims have largely avoided.57
A citizen’s private rights of action under international law technically may
be founded on either treaty law or customary law. However, with regards to treaty
law, this proposition has been all but foreclosed by the failure of the United States
to ratify self-executing human rights treaties.58 Self-executing treaties are
enforceable in courts without enacting legislation, however, the vast majority of
treaties are non-self-executing under which individuals have no right to sue.59
Regarding whether citizens hold a private right of action under customary
international law, no consensus may be drawn from the decisions to date.60 Most
commonly, the federal courts have avoided the question by relying on another
basis for federal subject matter jurisdiction or by dismissing on other grounds.61
Thus, whether a U.S. court has general federal question jurisdiction over citizens’
complaints based on international law continues to be an open question.

56
See, e.g., Tel-Oren v. Libyan Arab Republic, 726 F.2d 744, 811 (D.C. Cir. 1984)
(Bork, J., concurring). See also BILENKER S.A., ‘In re Holocaust Victims’ Asset Litigation:
Do the U.S. Courts have Jurisdiction over the Lawsuits Filed by Holocaust Survivors
Against the Swiss Banks?’, in: 21 Maryland J. Int’l L. & Trade 1997, pp. 251, 260-70
(reviewing the issue).
57
Given the private international law focus of this essay, I do not fully address the
issue of whether individuals have a private right of action under public international law.
For a more comprehensive treatment of that question see, e.g., BRADLEY C.A., ‘Customary
International law and Private Rights of Action’, in: 1 Chicago J. Int’l L. 2000, P. 421.
58
See ibid. pp. 422, 425; BILENKER S.A. (note 56), pp. 262-67.
59
See, e.g., Foster v. Neilson, 27 U.S. (2 Pet.) 253, 313-14 (1829); Goldstar
(Panama) v. United States, 967 F.2d 965, 968-69 (4th Cir. 1992).
60
See, e.g., Princz v. FRG, 26 F.3d at 1176 (rejecting basis); Forti v. Suarez-Mason,
672 F. Supp. 1531, 1544 (N.D. Cal. 1987) (accepting basis).
61
See Burger-Fischer, 65 F. Supp. 2d at 273 (avoiding issue and relying on diversity
jurisdiction); Tel-Oren, 726 F.2d at 823 (Robb, J., concurring) (holding case not justiciable
under political doctrine and declining to review jurisdiction issue).

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 U.S. Civil Suits for Forced Labor during World War II

c) Alien Tort Claims Act

In contrast, pursuant to the Alien Tort Claims Act (ATCA) the United States has
provided the federal courts with subject matter jurisdiction over foreigners’ claims
based on international law since 1789.62 Originally drafted to combat pirates, since
1980 U.S. lawyers have increasingly relied on the law to establish U.S. courts’
jurisdiction over claims of international human rights violations.63 The ATCA
provides: ‘The [federal] district court shall have original jurisdiction of any civil
action by an alien for a tort only, committed in violation of the law of nations or a
treaty of the United States.’ Given this specific grant of authority it is generally
accepted that the federal courts can hear lawsuits by aliens for tort claims based on
international law.64
More problematic has been (1) whether the jurisdictional grant of the
ATCA also creates a private right of action for violations of international law; and
(2) whether the specific cases of slave and forced labor alleged in the World War II
litigation violated customary international law. Given the private international law
focus of this Essay, I only touch upon the responses to date of these questions.65
Regarding the first issue, there is a split of authority with a strong majority of
federal courts, including the court in Iwanowa, finding that the ATCA creates a
private right of action along with jurisdiction, and a small minority denying any
private rights of action.66 Interestingly, because this majority is more clearly
developed than any judicial position regarding the comparable issue of a U.S.
citizen’s private rights based on international law, American law seems to produce
the ironic result of giving foreigners stronger claims in international human rights
litigation than nationals. Regarding the second issue, the court in Iwanowa held

62
See Judiciary Act of September 24, 1789, § 9, 1 Stat. 73, 77, codified at 28 U.S.C.
§ 1350.
63
See BAZYLER M.J. (note 1), pp. 605-06 (citing the 1980 case Filartiga, 630 F.2d
876, as establishing the approach).
64
See, e.g., Kadic v. Karadzic, 70 F.3d 232, 236, 238 (2d Cir. 1995) (finding
jurisdiction over ‘suits alleging torts committed anywhere in the world against aliens in
violation of the law of nations’). See also MCDONALD K., ‘Corporate Civil Liability under
the U.S. Alien Tort Act for Violations of Customary International Law during the Third
Reich’, in: St. Louis-Warsaw Transatlantic L. J. (1997), p. 167 et seq. (reviewing ATCA for
World War II era labor claims).
65
For greater development of these issues see, e.g., RAMASASTRY A., ‘Secrets and
Lies? Swiss Banks and International Human Rights’, in: 31 Vanderbilt J. Transnat’l L.
1998, p. 325; BRADLEY C.A./GOLDSMITH J. (note 54), pp. 319, 357-363.
66
Cf. Iwanowa, 67 F. Supp. 2d at 443; Abebe-Jira v. Negewo, 72 F.3d 844, 848
(11th Cir. 1996); Kadic, 70 F.3d at 236; In re Estate of Ferdinand Marcos, Human Rights
Litig., 25 F.3d 1467, 1475 (9th Cir. 1994); Tel-Oren, 726 F.2d at 780 (Edwards, J.,
concurring); Xucax v. Gramajo, 886 F. Supp. 162, 179 (D. Mass. 1995); Paul v. Avril,
812 F. Supp. 207, 212 (S.D. Fla. 1993); Tel-Oren, 726 F.2d at 810-26 (Bork, J., concurring).

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that ‘case law and statements of the Nuremberg Tribunals unequivocally establish
that forced labor violates customary international law’.67 Subject to a hearing of the
specific facts of the case, this conclusion should also apply to forced and slave
labor claims in the Asian lawsuits. Thus, the ATCA provides foreigners with a
basis for federal subject matter jurisdiction in international human rights cases that
assert forced and slave labor claims in violation of international law.

d) Foreign State Jurisdiction

The defendants in the Asian litigation have inventively suggested another route to
the federal courts – 28 U.S.C. § 1330, which gives federal jurisdiction over
‘foreign states’. Generally speaking, the governments of Japan, Germany, or
anywhere else have not been named in the World War II era litigation; in fact, the
whole essence of the suits is that they are against the private companies that used
forced and slave labor. The Asian defendants, however, assert that during the war
they were agents or instrumentalities of the state, and as a result, they may remove
the lawsuits to federal court as well as assert foreign sovereign immunity
defenses.68
Specifically, one of the Japanese defendants submitted that it was ‘essential-
ly nationalized’ between 1944 and 1945 under the Munitions Company Law.69 The
court in Jeong rejected this as a factual matter stating that they had failed to meet
the burden of showing that the plaintiff’s claims related solely to that period while
the defendant was allegedly nationalized.70 The court, however, did not foreclose
this route of jurisdiction and defense. Rather, it merely noted that it would be
factually difficult to establish, which was ‘an unfortunate consequence of the
California legislature’s decision to attempt to revive 55-year old claims’.71 Because
states frequently nationalize industries as part of the economic efforts in the prose-
cution of war, this unanswered question of jurisdiction and defense appears to
remain an option for defendants and an obstacle for plaintiffs in future forced labor
lawsuits.

67
Iwanowa, 67 F. Supp. 2d at 441.
68
See Jeong, 2000 U.S. Dist. LEXIS 7985, at *21-*33.
69
Ibid., at *25.
70
Ibid. at *30-*33.
71
Ibid. at *33, n.14. Regarding the defense of a nationalized or denationalized
agency or instrumentality of a foreign state see generally, SIMMONS R.J., ‘Nationalize and
Denationalized Commercial Enterprises under the Foreign Sovereign Immunities Act’, in:
90 Columbia L. Rev. 1990, p. 2278.

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 U.S. Civil Suits for Forced Labor during World War II

e) Supplemental Jurisdiction

If a party can establish subject matter jurisdiction as a federal question, under the
ATCA, or as a foreign state, the federal court also has the right to hear any
additional state claims raised.72 The state claims must be so related to the federal
causes that they form part of the same case or controversy, which means that they
‘derive from a common nucleus of operative facts’ or ‘would normally be expected
to be tried in a single judicial proceeding’.73 Relevant to the state claims in the
labor litigation, a federal court commented on the inclusion of state causes of
action in one of the World War II era bank suits that: ‘It is patently obvious that
both conditions, as well as considerations of judicial economy, favor the assertion
of supplemental jurisdiction [in these cases].’74

C. Forum Non Conveniens

Assuming arguendo that jurisdiction existed, the defendants in all the World
War II era litigation asked the courts to dismiss the suits as a discretionary measure
under the doctrine of forum non conveniens. Pursuant to this doctrine a court may
dismiss a case, over which it has jurisdiction, in favor of another, more appropriate
forum.75 The rationale behind the policy is to avoid inflicting hardship on the
defendant and the court which may result from forum shopping possible under
jurisdiction rules.76 The standard places a strong presumption in favor of plaintiff’s
selected forum, but allows for dismissal where (1) there is an adequate alternative
forum and (2) private and public interests favor the foreign forum.77
At first blush, the World War II era labor litigation would appear to be a
prime candidate for forum non conveniens. The courts, however, have been
hesitant. None of the decisions in the World War II era litigation cases have ad-
dressed the issue, but a federal court reviewed and denied the defense in the related
case of Bodner v. Banque Paribas concerning World War II era French bank
liability for Holocaust accounts.78 The court in Bodner began by reiterating the
strength of the presumption in favor of the local court when a plaintiff is a local

72
28 U.S.C. § 1367(a).
73
See United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966).
74
Bodner, 114 F. Supp. 2d at 127 n.7.
75
See Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981).
76
SCOLES E.F./HAY P., Conflict of Laws, 2d ed., St. Paul Minn. 1992, § 11.9.
77
See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947).
78
See Bodner, 114 F. Supp. 2d at 131-33. See also Burger-Fischer, 65 F. Supp. 2d
at 254 (declining to address issue).

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resident.79 In the World War II era labor litigation, plaintiffs are split between
foreigners and American residents, but the presumption applies even where
plaintiffs are mixed in class actions and would appear especially compelling in the
case of former POW citizens.
The key regarding the adequate alternative forum factor is not simply
whether there is another court where the lawsuit may be brought, but whether a
U.S. court deems that forum adequate. Courts have found that differences under
foreign law, such as the lack of punitive damages, no contingent-fee lawyers, and
substantive law more favorable to the defendant, should not be given substantial
weight in determining whether an alternative court is adequate.80 Nonetheless, in
Bodner the court held that the lack of similar remedies and class action procedure
in the alternative forum meant that the European venue (France, specifically) was
not an adequate court and, therefore, forum non conveniens could not be granted.81
This conclusion may be criticized, but given the inconsistency of existing case law
on the subject and the fact-specific nature of the inquiry, the decision seems to lack
significant precedential value whatever its outcome. In the World War II era labor
cases, the fact that these issues have been or are being litigated throughout Europe
and Asia suggests that there is an alternative forum. Whether a U.S. court will find
those forums adequate is difficult to predict given the different views on the
cognoscibility of claims where the foreign systems lack punitive damages, class
action procedures, contingency-fee lawyers, and other substantive law benefits.
Despite the court’s preemptive conclusion in Bodner, it went on to review
whether private and public interests favored foreign forums over U.S. courts.82 First
considering the private factors, the court found that the plaintiffs would have both
physical difficulty traveling abroad and financial difficulty securing representation
due to the lack of a contingency-fee system. On the other side, the court dismissed
or discounted any inconvenience the foreign defendants might encounter reasoning
that they were large companies doing business globally who would not be
financially burdened by defending in the United States particularly with modern
technology such as faxes, email, and the internet. The court continued that the
location of evidence and witnesses was an indeterminative factor since most of the
foreign evidence had already been collected and was largely available in the United
States.
In reviewing the public factors, the court reiterated that there was a strong
public interest in providing a forum for citizens. This type of governmental interest

79
Bodner, 114 F. Supp. 2d at 131. Accord Piper, 454 U.S. at 255-56; Derenis v.
Coopers & Lybrand Chartered Accountants, 930 F. Supp. 1003, 1009 (D.N.J. 1996) (U.S.
residents’ selection of local forum entitled to deference even in class action).
80
See Piper, 454 U.S. at 247; SCOLES E.F./HAY P. (note 76), pp. 376-81, 377 n. 4
(providing citations and summarizing).
81
See Bodner, 114 F. Supp. 2d at 132.
82
See ibid., at 132-33.

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rationale might arguably be extended to those foreigners with ATCA or Section

354.6 claims, since these statutes suggest that the legislatures specifically sought to
provide a forum for these cases.83 The court in Bodner concluded its analysis by
dismissing the significance or challenge of applying a foreign substantive law, such
as France’s. The court’s treatment, however, completely failed to consider a
number of other factors often weighed by other courts such as the alternative
forum’s competing interest in hearing the case and any negative factors in hosting
the case such as the overburdening of local courts.84 As a result, the Bodner court’s
analysis appears outcome driven. Nonetheless, the strong presumption in favor of
local plaintiffs and the arguable governmental interest in providing a forum for
foreigners with ATCA and Section 354.6 claims suggest that forum non conveniens
may be a doubtful means of escaping jurisdiction for defendants in international
human rights lawsuits.

D. Summary of Jurisdiction

Jurisdiction in the United States is a complex issue, particularly in regard to

international human rights cases. Personal jurisdiction restricts the reach of U.S.
courts by incorporating constitutional due process requirements, but this is notably
broad and generally captures any person doing business in America. The limitation
is not meaningless with regards to the World War II era litigation though, as it will
likely prevent a court from asserting jurisdiction over any defendant that has not
been successful enough to expand beyond its own borders.
Subject matter jurisdiction refers to the power of the court to hear a specific
complaint. The essence of the World War II era labor suits is restitutionary and
tortious, which are subjects clearly within the state courts’ authority. State courts
also have subject matter jurisdiction over those unique state statutes such as
Section 354.6 and arguably international law based claims. The federal courts will
have concurrent jurisdiction over all these state law areas where there is diversity
among the parties and over $75,000 in controversy. This provided a clear basis for
federal jurisdiction in a number of the European labor suits, but was contested
vigorously by plaintiffs in the Asian litigation. The one decision to date on the
subject suggests that multinational corporations with numerous U.S. subsidiaries
may make diversity jurisdiction difficult to establish.
The federal courts also have subject matter jurisdiction over claims based
on federal law, including international law. Because the forced and slave labor

83
See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 103-108 (2d Cir. 2000)
(denying forum non conveniens request in ATCA case for human rights violations); Jota v.
Texaco, Inc., 157 F.3d 153, 159 (2d Cir. 1998) (noting district court on remand should
consider Congress’ intent in providing a forum for aliens in the forum non conveniens
balance in an ATCA suit).
84
See, e.g., Stangvik v. Shiley, 819 P.2d 14, 17-18 (Cal. 1991).

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actions are predominately tort and restitution suits, federal question jurisdiction has
been largely based on claims of violations of customary international law against
slave labor. This is an extremely problematic basis for jurisdiction of U.S. citizens,
but more successful for foreigners who may rely on the ATCA. Once federal
question jurisdiction is established, state law claims may be heard based on
supplemental jurisdiction.
Even where a court has jurisdiction, it may decline to hear a case based on
the doctrine of forum non conveniens. This, however, is a difficult standard to
satisfy particularly where the plaintiff is a U.S. national or the jurisdictional statute
specifically extends to aliens. The net result is (with the ironic and uncertain
exception of a U.S. citizen’s non-diverse complaint based on international law)
U.S. courts will take jurisdiction over almost all forced and slave labor lawsuits
and these cases will eventually be heard in the federal courts.

IV. Procedural Bars and Defenses

As noted above, most of the U.S. decisions on the World War II era labor litigation
have been based on procedural law. The few cases that have passed the litany of
procedure obstacles have yet to be heard on their merits. As a result, the courts
have provided very little guidance on the vast number of arguments the defendants
have made. Despite this, navigating these decisions is the key to the viability or
impossibility in the United States of international human rights lawsuits for
wartime forced and slave labor.

A. Treaty Settlement of Claims

Civil procedure in America follows lex fori.85 Civil Procedure Rule 12(b)(6)
requires a court to dismiss a lawsuit for failure to state a claim upon which relief
may be granted. In both the Asian and European litigation, the defendants have
asserted that the plaintiffs have failed to state a claim, because the peace treaties
finalizing the war settled finally all disputes for damages by nationals of the Allied
nations against nationals of the Axis countries. The courts’ analysis of the legal
issues on both coasts is strikingly similar, but due to the different peace treaties the
issues must be treated separately.

85
See Restatement (Second) of Conflict of Laws, § 122 (1969) (‘A court usually
applies its own local law rules prescribing how litigation shall be conducted even when it
applies the local law rules of another state to resolve other issues in the case.’).

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1. Japanese Peace Treaty

In 1951, the United States, 47 other allies, and Japan signed the Treaty of Peace
with Japan.86 Article 14(b) of the treaty provided:

‘Except as otherwise provided in the present Treaty, the Allied

Powers waive all reparations claims of the Allied Powers, other
claims of the Allied Powers and their nationals arising out of any
actions take by Japan and its nationals in the course of the
prosecution of the war, and claims of the Allied Powers for direct
military cost of occupation.’

The court in In re WWII Era Japanese Forced Labor Litigation concluded that on
its face this was a ‘waiver clause … plainly broad enough to encompass the
plaintiffs’ [forced labor] claims’.87
The court rested on this conclusion, but went on in dicta to examine the
background of the treaty. The court particularly noted comments by U.S.
negotiators of the treaty and the Senate ratification debate. At a time when the
United States was confronting the beginnings of the Cold War and yet still aware
of the effect of World War I reparations on Germany’s interwar development, chief
U.S. negotiator John Foster Dulles explained the rationale of the treaty:

‘[I]f the treaty validated, or kept contingently alive, monetary

reparations claims against Japan, her ordinary commercial credit
would vanish, the incentives of her people would be destroyed[,] and
they would sink into a misery of body and spirit that would make
them easy prey to exploitation.’88

More directly the Senate Foreign Relations Committee in recommending

ratification of the treaty noted that the treaty provisions ‘do not give a direct right
of return to individual claimants except in the case of those having property in
Japan[;] United States nationals, whose claims are not covered by the treaty
provisions … must look for relief to the Congress of the United States.’89 In fact,
Congress followed this with a compensation scheme – the War Claims Act –

86
[1952] 3 U.S.T. 3169, T.I.A.S. 2490 (1951).
87
In re World War II Era Japanese, 114 F. Supp. 2d at 945.
88
Ibid. at 946 (quoting U.S. DEPT. OF STATE, Record of Proceedings of the Con-
ference for the Conclusion and Signature of the Treaty of Peace with Japan, 82-83 (1951)).
89
Ibid. (quoting Japanese Peace Treaty and Other Treaties Relating to Security in
the Pacific, S. Rep. No. 82-2, 82d Cong., 2d Sess. 13-14 (1952)).

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providing for POWs and others.90 Based on all of this, the court in In re WWII Era
Japanese held ‘the history of the Allied experience in post-war Japan, the drafting
of the treaty[,] and the ratification debate … [all lead to] finding a waiver’.91
The court did not stop there. It continued by dismissing plaintiffs’ various
counter-arguments.92 The plaintiffs asserted that the treaty did not cover their
forced labor claims since their work was for private companies and, thus, not
arising out of the ‘prosecution of war’. The court found that such distinction was
not possible. The plaintiffs asserted that the treaty was an unconstitutional
settlement of claims by a sovereign. The court found that Dames & Moore v.
Regan93 clearly held that the U.S. government could settle claims of its nationals
against foreign governments and their nationals. The plaintiffs asserted that Article
26 of the Peace Treaty was a most favored nations clause that should revive their
claims. The court found, without addressing whether any later treaty in fact gave
better treatment to another country, that any rights arising out of the MFN clause
would accrue in the governments, not individuals. In short, the court held that the
treaty conclusively settled all possible claims by any Allied national in United
States courts.94 This, of course, did not preclude the claims of any Chinese or
Korean nationals whose countries did not sign the 1951 Peace Treaty.95

90
See War Claims Act of 1948, 50 U.S.C. app. §§ 2001-2016 (creating War Claims
Commission and providing compensation for U.S. POWs, civilian internees, and injured
government workers).
91
In re World War II Era Japanese, 114 F. Supp. 2d at 947.
92
See ibid., at 948.
93
453 U.S. 654, 679-80 (1981).
94
See In re World War II Era Japanese, 114 F. Supp. 2d at 948-49. This conclusion
is also supported by an unreported 1988 case from the federal court for the Middle District
of Florida. See Aldrich v. Mitsui & Co., No.87912 Civ. J12, (M.D. Fla., Jan. 28, 1988)
(dismissing U.S. POW’s forced labor suit against Japanese businesses based on preemption
by Treaty of Peace with Japan); Jeong, 2000 U.S. Dist. LEXIS 7985, at *16 (noting and
distinguishing Aldrich); FENNER P., ‘Prisoner of War’s Case Is on Appeal’, in:
St. Petersburg [Florida] Times, 12 April 1988, p. 2 (noting dismissal based on treaty and
intended appeal to Eleventh Circuit arguing plaintiff is not seeking ‘damages’ but rather
seeks ‘compensation for his labor’).
95
In re World War II Era Japanese, 114 F. Supp. 2d at 942; Shang-Ting Sung v.
Mitsubishi Corporation, No. 2:00-3175 (N.D. Cal., filed Feb. 22, 2000) (Chinese nationals
class action); Suk Yoon Kim v. Ishikawajima Harima Heavy Industries Co., Ltd., No. 3:99-
5303 (N.D. Cal., filed Oct. 22, 1999) (Korean nationals class action); Jae Sik Choe v.
Nippon Steel Corp., No. 3:99-5309 (N.D. Cal., filed 22 Oct. 1999) (Korean nationals class
action); Sa Son ‘Sindo’ Sin v. Mitsui & Co., Ltd., No. 8:00-436 (N.D. Cal., filed 30 March
2000) (Korean nationals class action).

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 U.S. Civil Suits for Forced Labor during World War II

2. German Peace Treaties

The extensive diplomatic history of the peace treaties with Germany resulted in
much less straightforward reasoning though essentially the same conclusion as the
Asian litigation. The courts in Iwanowa and Burger-Fischer both concluded that
the treaties left no personal claims upon which relief could be granted. The
fundamental holding of both decisions was that war reparations included private
civil claims and those claims were conclusively settled by the post-war treaties.
After a painstakingly detailed review of the treaties,96 however, the opinions
differed on exactly which treaty settled the matter.
Arguably five treaties covered settlement between Germany and the Allies
for World War II. First, the 1945 Potsdam Agreement signed by the United States,
United Kingdom, and Soviet Union covered all reparations of the German State
and private entities and was designed to reduce Germany to a ‘pastoral economy’.97
Second, the Paris Treaty of 1946 required Germany to pay reparations to 18
nations covering ‘all [their] claims and those of [their] nationals against the former
German Government and its Agencies, of a governmental or private nature arising
out of war’.98 Third, in 1953, 35 nations and West Germany agreed in the London
Debt Agreement to defer and restructure all ‘claims arising out of World War [II]
by countries which were at war with or were occupied by Germany during that war
and by nationals of such countries, against the Reich or agencies of the Reich’.99
Fourth, between 1952 and 1954 the United States, United Kingdom, and France
agreed in the Transition Agreement that ‘they will at no time assert any claim for
reparation against the current production of the Federal Republic’ and yet ‘the
[remaining] problem of reparations shall be settled by the peace treaty between
Germany and its former enemies’.100 Lastly, in 1990 the United States, United
Kingdom, France, and Soviet Union on one side and East and West Germany on

96
The Iwanowa opinion runs 120 pages and the Burger-Fischer decision 78. See
BAZYLER M.J. (note 5), pp. *209, *226.
97
See Protocol of the Proceedings, Berlin (Potsdam) Conference, Aug. 2, 1945, 3
Bevans 1207, art. B(111).
98
See Agreement on Reparations from Germany, Establishment of Inter-Allied
Reparations Agency and Restitution of Monetary Gold, 14 Jan. 1946, 61 Stat. 3157, T.I.A.S.
1655, Part I, Article 2.A.
99
See Agreement on German External Debts, 27 Feb. 1953, 4 U.S.T. 444, 333
U.N.T.S. 3, Article 5(2)
100
See Convention on the Settlement of Matters Arising out of the War and the
Occupation, signed at Bonn on 26 May 1952, as amended by Schedule 4 to the Protocol on
the Termination of the Occupation Regime, signed at Paris on 23 Oct. 1954, 332 U.H.T.S.
219, Ch. 6, Article 1.

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the other entered the conclusive peace treaty known as the ‘2+4 Treaty’, which
provided for no further reparations.101
The courts in both Iwanowa and Burger-Fischer agreed that all civil claims
were covered by the reparations provided for in the Paris Treaty.102 However,
Burger-Fischer found the Transition Agreement settled all claims barring further
settlement in a final peace treaty, while Iwanowa found that the London Agree-
ment controlled until a final settlement and even then personal claims could only
be asserted at the governmental level.103 Regardless of the courts’ reasoning for the
interim period, they agreed that the 2+4 Treaty terminated any deferment of or
possibility for further reparations.104 In short, following the 1990 Peace Treaty both
courts agreed there were no possible personal civil claims against Germany or its
nationals and as a result the labor lawsuits did not state claims on which relief
could be granted.
The European and Asian litigation decisions are consistent in finding that
the peace treaties among the Allies and Axis powers settle the issue of reparations.
Further, these opinions agree that reparations provided for by the various treaties
included all private civil claims against private entities arising during the war
years. The courts also were uniform in their methodology, largely basing their
holdings on treaty interpretation covering both plain language and contextual
approaches. Furthermore, the more subtle underlying rationale for these holdings
appears consistent, namely the political nature of and need for finality in peace
treaties. Thus, despite the courts’ different factual findings, the precedential
message regarding the comprehensiveness and finality of peace treaty reparations
appears conclusive.

B. Statute of Limitations

Civil Procedure Rule 12(b)(6) may also block a claim that is brought outside the
statute of limitations.105 Traditionally U.S. conflicts law treated statutes of
limitations as procedural and applied the local rules.106 More recently, the trend has
been to apply the local rule but allow for application of the substantive law’s

101
Treaty on the Final Settlement with Respect to Germany, 12 Sept. 1990, 29 I.L.M.
1196.
102
Iwanowa, 67 F. Supp. 2d at 460; Burger-Fischer, 65 F. Supp. 2d at 277.
103
Iwanowa, 67 F. Supp. 2d at 461; Burger-Fischer, 65 F. Supp. 2d at 280.
104
Ibid., at 455; Burger-Fischer, 65 F. Supp. 2d at 279. See also Princz v. BASF
Group, 1995 U.S. Dist. LEXIS 22104, *12-*14 (D.D.C. 1995) (providing in stipulated
dismissal with prejudice of World War II era slave labor case that treaties resolved issues).
105
See, e.g., Cito v. Bridgewater Township Police Dep’t, 892 F.2d 23, 25 (3d Cir.
1989).
106
See Restatement (Second) of Conflict of Laws, § 142.

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 U.S. Civil Suits for Forced Labor during World War II

limitation period in exceptional circumstances.107 Under either approach, the

applicable statute is determined by the type of substantive law claim. Thus, in the
World War II era litigation there were different limitation periods for the
international law claims, the tort claims, the restitutionary claims, and the state law
specific claims. Furthermore, the plaintiffs asserted that even if the limitations had
expired they were equitably tolled.

1. International Law Claims

Claims based on the ATCA or customary international law, to the extent they exist
at all, do not have a specific statute of limitations. When federal claims do not have
limitation rules, the courts apply ‘the most closely analogous statute of limitations
under state law’.108 Because these causes of action are limited to tort claims arising
under international law, the most analogous state law would likely be the tort
limitation periods reviewed below. The general rule to apply the most similar state
law, however, also contains an exception that allows the application of another
federal limitation period where that ‘clearly provides a closer analogy’.109
In Iwanowa, the court found this exception applicable. In particular, the
court relied on the ten-year limitations period contained in the Torture Victim
Protection Act of 1991, a statutory note attached to the ATCA. In applying this
period the court found that in the European case the statute had been tolled against
German defendants until conclusion of the final peace treaty, the 2+4 Treaty, on
15 March 1991.110 The court held, however, that the various treaties did not toll the
limitations against non-German entities so these presumably expired ten-years
from 1949.111 Pursuant to these conclusions, claims in the European litigation based
on international law were timely to the extent that they were filed against German
defendants before 14 March 2001. Applying this approach to the Asian cases and
the conclusions made there regarding the Japanese Peace Treaty, the statute of
limitations on any international law claims in those cases lapsed on 27 April 1962,
ten-years after the treaty came into force.

107
See SCOLES E.F./HAY P. (note 76), p. 59 (reviewing, inter alia, the 1988 revision
of the traditional Restatement rule).
108
See Del Costello v. International Board of Teamsters, 462 U.S. 151, 152 (1983).
109
See Ree v. United Transp. Union, 488 U.S. 319, 324 (1989).
110
See Iwanowa, 67 F. Supp. 2d at 465-66.
111
See ibid., at 463, 466-67.

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2. Restitution and Tort Claims

The limitations period for restitutionary and tortious claims is determined by state
law whether that be as a matter of forum law or under the exception in which some
state’s may follow the rules associated with the substantive law.112 Because of
possible state variety, this section discusses the statutes of limitations for restitution
and tort claims generally and specifically looks at the laws of New York, New
Jersey, and California where the majority of the World War II era litigation was
filed. The statute of limitations for restitution claims is six years in New Jersey, six
years in New York, and two years in California.113 The statute of limitations for tort
claims is two years in New Jersey, one year in New York, and one year in
California.114 As reviewed above and applied to the state law claims in Iwanowa,
these limitation periods presumably began to run from the effective date of the
peace treaties settling all reparations.115 Therefore, at the very latest the Asian
litigation restitution and tort claims expired on 27 April 1958, and the European
litigation claims on 14 March 1997. No known World War II era labor litigation
cases were filed in U.S. courts that would pre-date either deadline.116

3. State Law Specific Claims

Section 354.6 seeks to extend the statute of limitations for World War II era labor
claims to 31 December 2010. Generally speaking, the purpose of statutes of
limitations is ‘to promote justice by preventing surprises through the revival of
claims that have been allowed to slumber until evidence has been lost, memories

112
As a derivate of substantive law this may be the law of a foreign country,
however, only the substantive law of the United States is reviewed here. The court in
Iwanowa did find that the German statute of limitations was applicable under the exception
and that claims were barred under this three-year rule as well. See Iwanowa, 67 F. Supp. 2d
at 476-82.
113
See N.J. Stat. Ann., § 2A:14-1 (West 2000); N.Y. C.P.L.P. § 213 (Consol. 2000);
Cal. Civ. Proc. Code, § 339 (West 2001)
114
See N.J. Stat. Ann. § 2A:14-2; N.Y. C.P.L.P. § 215; Cal. Civ. Proc. Code § 340.
115
See, e.g., Iwanowa, 67 F. Supp. 2d at 152 (dismissing restitution claims for
failure to file within six years of 2+4 Treaty). Cf. Sampson v. Federal Rep. of Germany,
975 F. Supp. 1108, 1122-23 (E.D. Ill. 1997) (denying in dicta Holocaust survivor’s claims in
contract, restitution, and tort law as barred by various state statute of limitations).
116
See BAZYLER M.J. (note 5), App. A (noting no slave labor and related claims
cases in the European litigation filed before 14 March 1997); U.S. Dept. of State,
Annex C & D to Foundation Agreement (note 6) (same); BAZYLER M.J./SAXA-KANEKO D.,
Asian Litigation List (note 15) (noting no World War II era lawsuits against Japanese filed
before 27 April 1968)

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have faded, and witnesses have disappeared’.117 Nonetheless, the Supreme Court
has noted that statutes of limitations are not fundamental rights and are necessarily
arbitrary.118 Subsequently, other courts have upheld legislatures’ revival of causes
of action otherwise barred by a statute of limitations.119 Thus, Section 354.6 appears
facially valid.
It is arguable, however, that Section 354.6 is only applicable to the
European litigation and not to the Asian litigation. As noted above, the statute was
drafted in broad terms but only referred to the European lawsuits. This is
particularly relevant to the statute of limitations because, according to the legis-
lative history, the basis for the 2010 expiration date was derived from German
courts’ findings that European claims were tolled until the conclusion of the 2+4
Treaty.120 In contrast, the Japanese treaties were concluded forty years earlier, thus,
the lifting of the bar seems more capricious and ‘unjust’.121 In countering these
arguments, however, plaintiffs may point to section 2 of the enacting legislation
which suggests a broad reading of the statute by providing: ‘It is the intent of the
Legislature … to enact additional public policy in any other case of proven patterns
of slave labor employed by firms presently doing business in California.’122 As a

117
Cal. Senate Judiciary Committee Report on S.B. 1245, 1999-2000 Sess. (Cal.
1999) p.7, available at http://www.leginfo.ca.gov/pub/99-00/bill/sen/sb-1201-1250/sb-1245-
cfa-19990519-144254-sen-comm.htm. See also Order of R.R. Tels. v. Railway Express
Agency, Inc., 321 U.S. 342, 348-49 (1944); Jeong, 2000 U.S. Dist. LEXIS 7985, at *33
(‘Defendant’s difficult in investing [possible facts] is, perhaps, an unfortunate consequence
of the California legislature’s decision to revive 55-year old claims. Over that span of years,
documents naturally will be lost, witnesses will die or forget facts, and languages may even
evolve to the point where translations becomes difficult.’)
118
See Chase Securities Corp. v. Donaldson, 325 U.S. 304, 314 (1945).
119
See, e.g., ibid.; Campbell v. Holt, 115 U.S. 620 (1885); Lent v. Doe, 47 Cal. Rptr.
2d 389, 390 (Cal. Ct. App. 1995) (upholding revival of claim for childhood sexual abuse
that otherwise was barred by limitations period).
120
See Cal. Senate Rules Committee Report on S.B. 1245 (note 18), p. 4 (‘This
legislation . . . merely codifies the position taken by recent German court rulings, that the
moratorium imposed by the London Agreement no longer bars the assertion of claims by
victims of National-Socialist persecution against their persecutors.’). This legislative finding
that the claims were tolled until 7 November 1997, is directly contrary to Iwanowa and
substantial U.S. case law which holds that in the United States treaties are effective from
enactment. See Iwanowa, 67 F. Supp. 2d at 465-66.
121
See Cal. Senate Judiciary Committee Report on S.B. 1245 (note 117), p. 7 (‘The
theory [of statute of limitations] is that even if one has a just claim it is unjust not to put the
adversary on notice to defend within the period of limitation and the right to be free of stale
claims in time comes to prevail over the right to prosecute them.’) (emphasis added and
citations omitted).
122
1999 Cal. Stat. ch. 216, § 2. The legislative history notes that this section
encourages ‘turning California into an international court of justice’. See Cal. Senate
Judiciary Committee Report on S.B. 1245 (note 117). Taking this rationale to the extreme

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statutory matter, the issue boils down to whether the phase ‘the Nazi regime, its
allies and sympathizers’ should include Japan and other parties not in the World
War II European theater. Baring acceptance of this argument and for the European
cases regardless, Section 354.6 appears to effectively extend the limitations period
56 years for the Asian litigation and 15 years for the European litigation.

3. Equitable Tolling

The plaintiffs to these suits posit that even if the claims are technically time barred
the limitations period should be equitably tolled. Equitable tolling was developed
in the fraud context and stops the statue of limitations from running where a
defendant has actively misled a party.123 The misrepresentation asserted in these
cases is the denying of the use and liability for forced and slave labor by the
defendants. In the related World War II era insurance cases, the courts have
allowed equitable tolling counter-arguments finding that the defendants may have
‘deceptive[ly] and unscrupulous[ly] depriv[ed] both assets and information
sustaining plaintiffs’ and their ancestors’ rights to these [insurance] assets’.124 The
court in Iwanowa was unwilling to accept the argument in the European labor
litigation, however. The court found any statements made to the plaintiffs
regarding their claims were after the statute had already expired and no proof was
otherwise provided of the defendants actively misleading the plaintiffs.125 Similarly,
in the legislative history to the enactment of Section 354.6 it was noted that though
justification for equitable tolling existed to support a statute on World War II era
insurance claims, ‘similar justification for the delay in bringing the actions to
recover [for WWII era labor] compensation does not appear to exist’ and there is
no ‘documentation of repeated attempts to receive compensation that were either
systematically denied or delayed as a result of the potential defendants’ conduct’.126
Correspondingly, it is unlikely any statutes of limitations have been equitably
tolled in the Word War II era labor cases.

one might argue that African-American descendants of slave laborers in the U.S. South
might bring suits under this statute against those businesses in California that formerly used
slaves. See GHANNAM J., ‘Repairing the Past’, in: American Bar Association J., Nov. 2000,
pp. 38, 40 (reviewing recent claims by African-Americans for both government reparations
and civil restitution for pre-Civil War slave labor and comparing the claim to those in the
European and Asian litigations); DUBOSE J., ‘Racial Reparations Due, Says Lawmaker’, in:
Atlanta J. Const., 24 Feb. 2001, p. A-1 (same); SHEPARD P., ‘We Too Built This Country’,
in: Japan Times, 25 Feb. 2001, p. 11 (same), from Associated Press Wire, 10 Feb. 2001.
123
See, e.g., Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1387
(3d Cir. 1994).
124
See Bodner, 114 F. Supp. 2d at 135-36.
125
See Iwanowa, 67 F. Supp. 2d at 467-68.
126
See Cal. Senate Judiciary Committee Report on S.B. 1245 (note 117), p. 7.

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C. Political Question (Non-Justiciability)

Another threshold question that may be addressed even before establishing

jurisdiction is whether a matter raises a non-justiciable political question.127 The
political question doctrine provides that courts shall decline to hear cases that
involve concerns more appropriately treated by the political branches of
government.128 The doctrine is not founded on the text of the Constitution, but is
based on the basic ideals of separation of powers and limitation of the judiciary.129
The Supreme Court has summarized:

‘The conduct of foreign relations of our Government is committed

by the Constitution to the executive and the legislative – the
‘political’ departments of the government, and the propriety of what
may be done in the exercise of this political power is not subject to
judicial inquiry or decision.’130

Nonetheless, not every case or controversy that involves foreign affairs or foreign
relations raises a non-justiciable political question.131 Therefore, to determine
whether an issue is within the political question doctrine the Supreme Court has
created a six factor test where if any one factor is ‘inextricably’ intertwined in a
matter the court should refrain from hearing the case.132 The factors include: (1) a
textually demonstrable constitutional commitment of the issue to a political depart-
ment; (2) a lack of judicially discoverable and manageable standards for resolving
the issue; (3) an impossibility of deciding the issue without making a policy deter-
mination typically outside judicial discretion; (4) an inability to resolve the issue
without expressing a lack of respect to the political departments; (5) an unusual
need for unquestioning adherence to a political decisions already made; or (6) a
potential for embarrassment from multifarious pronouncements by various depart-
ments on one question.
The three courts in the World War II era litigation that have addressed the
issue have all held that the lawsuits raise a number of these factors. Burger-Fischer
found ‘[t]o a greater or lesser extent all of the above indicia are present in the
instant case’.133 Iwanowa found ‘at least four of the factors are inextricable from

127
See In re Nazi Era Cases II, 2001 U.S. Dist. LEXIS 2018, *9 n.6.
128
See Atlee v. Laird, 347 F. Supp. 689 (E.D. Pa. 1972), aff’d 411 U.S. 911 (1973)
(reviewing the history of the political question doctrine).
129
See, e.g., Powell v. McCormack, 395 U.S. 486, 516-17 (1969).
130
Oetjen v. Central Leather Co., 246 U.S. 297 (1918).
131
See Baker v. Carr, 369 U.S. 186, 211 (1962).
132
Ibid., at 217.
133
See Burger-Fischer, 65 F. Supp.2d at 282, 282-85. See also Princz v. BASF, 1995
U.S. Dist. LEXIS 22104, at *14-*15 (accepting this defense in stipulated dismissal with

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 Kent Anderson

[the plaintiff’s] claims’, specifically the first, second, fourth, and sixth factors.134 In
re Nazi Era Cases II found ‘prominent on the surface of this case are the fourth
factor and the sixth factor’.135 The gist of all three courts’ reasoning was best
summarized in Burger-Fischer:

‘Major policy determinations are implicated in the determination of

the size and in the allocation of reparations. They are not the subject
of judicial discretion. For a court now, in the light of the diplomatic
history of the last fifty-five years, to structure a reparations scheme
would be to express the ultimate lack of respect for the executive
branch which conducted negotiations on behalf of the United States
and for the Senate which ratified the various treaties which emanated
from these negotiations. These are decisions which were made in the
face of serious foreign policy concerns. An attempt by a court to
undo them would create the ‘embarrassment for multifarious
pronouncements by various departments’ on one question.’136

Other commentators have criticized the courts’ reliance on the political question
doctrine in the World War II era cases asserting that the courts erroneously treated
these private claims as public reparations matters.137 This argument, however,
seems to disregard the courts’ earlier holdings that even private claims arising from
World War II are ‘reparations’ under the various peace treaties and as such were
dealt with in those agreements.138 The courts have responded to this argument even
more plainly stating: ‘The issue is not how Plaintiff has styled his suit [whether as
a private or a public claim], but instead what the underlying controversy is. At the
heart, the underlying dispute here is one arising from atrocities committed by
supporters of and collaborators with [a foreign government during a war].’139
The detractors also note that the U.S. executive branch’s failure to file
amicus curae briefs in the European litigation suggests that no political questions
were raised. Subsequent events have proven this assertion plainly wrong. The U.S.
State and Justice Departments originally declined to file a statement of position in
the European litigation, but that silence should not have be interpreted as tacit
assent to the non-political nature of the issues. As both the State and Justice

prejudice); Kelberine v. Société Internationale, 363 F.2d 989, 995 (D.C. Cir. 1966)
(dismissing an early World War II era labor lawsuit based on political question doctrine).
134
See Iwanowa, 67 F. Supp. 2d at 485, 485-89.
135
See In re Nazi Era Cases II, 2001 U.S. Dist. LEXIS 2018, *39.
136
Burger-Fischer, 65 F. Supp.2d at 284-84 (internal citations omitted).
137
See, e.g., BAZYLER M.J. (note 5), pp. *223-*26, *229-*32.
138
See Section IV.A (reviewing courts’ holdings that civil labor claims were
included in reparations matters settled by various peace treaties).
139
In re Nazi Era Cases II, 2001 U.S. Dist. LEXIS 2018, *14-*15 (emphasis added).

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Departments later clarified, their silence in the European litigation was a ‘policy’
decision due to the ‘very delicate stage’ of negotiations for a settlement at that
time.140 Furthermore, these divisions of the executive branch have subsequently
participated in both the Asian and European litigation and stated before Senate
Judiciary Committee hearings that reparations include civil claims and the peace
treaties resolved these matters.141 Thus, international human rights claims arising
from a war that has been settled by a comprehensive peace treaty that the United
States has ratified will largely fall within the political question doctrine, and as
such will not be justiciable in U.S. courts.

D. Comity

Falling somewhere between the political question and forum non conveniens
principles is the doctrine of comity. Comity is a discretionary policy that allows,
but does not require, a U.S. court to decline hearing a case that involves the
judicial, executive, or legislative acts of a foreign state.142 In other words, comity
encourages or allows a court to dismiss a matter that has been or already is being
addressed by another nation’s courts or government.143 The rationale is to en-
courage international cooperation and reciprocity while discouraging conflicting
and limited territorial decisions.144
The courts in the World War II era litigation have rested on this doctrine as
an alternative basis for dismissal. In Iwanowa, the court relied solely on Germany’s

140
See ‘Former U.S. World War II POWs: A Struggle for Justice’: Hearing before
the Comm. on Judiciary of U.S. Senate, 106th Cong. 585, at 8, 9, 10 (statements of David
W. Ogden, Acting Assistant Attorney General, Civil Division, U.S. Department of Justice,
and Ronald J. Bettauer, Deputy Legal Advisor, U.S. Department of State). Cf. Kadic, 70
F.3d at 250 (noting the U.S. State Department declined to comment on that case because it
believed the political question doctrine did not apply in this case).
141
See ibid., at 9-10, 14-15 (referring to the Japanese Peace Treaty but applicable by
analogy to the German peace treaties); In re Nazi Era Cases I, 2000 U.S. Dist. LEXIS
18148, *19-*24; In re World War II Era Japanese, 114 F. Supp. 2d at 947-48; In re Nazi
Era Cases II, 2001 U.S. Dist. LEXIS 2018, *22-*24. See also Foundation Agreement (note
12), Article 2(1), Article 3(4), Annex B (requiring United States to file Statements of
Interest and otherwise oppose any challenges to Germany’s sovereign immunity in all
pending and future European litigation).
142
See, e.g., Hilton v. Guyot, 159 U.S. 113, 164-65 (1895)
143
See, e.g., Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909,
937 (D.C. Cir. 1984).
144
See Spatola v. United States, 925 F.2d 615, 618 (2d Cir. 1991). See also
ANDERSON K., ‘What Can the United States Learn from English Anti-Suit Injunctions’, in:
25 Yale J. Int’l L. pp. 195, 226-31 (2000) (reviewing the rationale for comity in the anti-suit
injunction context).

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executive branch response to the labor claims in refraining from issuing a decision
that might contradict that government’s official position.145 The U.S. court’s
approach appears perhaps unnecessarily cautious since at the same time the
German judicial branch (i.e., the courts) reportedly had both supported and
contradicted the government’s position.146 In In re Nazi Era Cases II though,
another U.S. court was able to rest its comity concerns more solidly on a recent and
seminal German decision holding that the Foundation Agreement was constitutio-
nal and created the exclusive remedy for war laborers.147 Though comity has not yet
been the basis of a decision in the Asian litigation, the principle also appears
applicable in that context where the Japanese government and courts have dealt
with the issue even more consistently – if negatively – than their German
counterparts.148

E. Act of State Doctrine & Foreign Sovereign Immunity

Both the act of state doctrine and the Foreign Sovereign Immunity Act (FSIA)
provide foreign governments with defenses to lawsuits brought in U.S. courts. The
act of state doctrine stipulates that U.S. courts will not judge a foreign state for acts
done within its own territory.149 Under the FSIA, foreign states are immune from
most suits in the United States.150 In the World War II era labor litigation, the key
issue for both of these procedural defenses was whether the private defendants may
be considered foreign state actors. As noted above, some of the defendants argued
that they were government agencies or instrumentalities to the extent that they

145
Iwanowa, 67 F. Supp. 2d at 489-91. But cf. Bodner, 114 F. Supp. 2d at 129-30
(denying comity argument in World War II era insurance cases against French defendants
because no French cases on the same issue had been filed and no governmental
compensation plan had been created).
146
See BAZYLER M.J. (note 5), No. 953 (citing various German decisions).
147
See In re Nazi Era Cases, 2001 U.S. Dist. LEXIS 2018, *57-*58 (citing 30 Nov.
2000 decision of Bundesgerichtshof (III ZB 46/00)).
148
See, e.g., OKUDA Y., ‘Law Applicable to Governmental Liability for Damages to
Foreign Individuals during Second World War’, in this Yearbook, n. 14-15 (citing ITO T.,
‘Dainiji sekai taisen go no nihon no baisho seikyuken shori [Claims and Debts of Japan after
the Second World War]’, in: Gaimusho chosa genppo 1994, no. 1., p. 111 et seq.; Supreme
Court [of Japan], 4 Nov. 1969, 566 Hanrei jiho 33); IGARASHI M., ‘Post-War Compensation
Cases, Japanese Courts and International Law’, in: 43 Japanese Annual of Int’l L. 2000, pp.
45, 73; FISHER B.A. (note 30), pp. *42-*43; ‘Japan to Fight Ex-POWs’ Campaign for
Redress’, in: Japan Times, 29 Jun. 2000, p. 2 (statement of Japanese Ambassador to United
States that 1951 Peace Treaty provided final and complete resolution of all claims).
149
See, e.g., Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964); Underhill
v. Hernandez, 168 U.S. 250, 252 (1897).
150
See 28 U.S.C. §§ 1330, 1602-1611; Princz v. FRG, 26 F.3d at 1176.

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 U.S. Civil Suits for Forced Labor during World War II

were nationalized or used forced and slave labor pursuant to official compulsion
under the law. The FSIA expressly applies to any ‘political subdivision of a foreign
state or an agency or instrumentality of a foreign state’, which can include a
separate legal person, a majority of which is owned by the foreign state.151 Whether
any of the defendants in the World War II era litigation satisfy this standard,
however, is a factual issue that has not been decided and is not abundantly clear. At
the very least, the court in Jeong left open the possibility that defendants might be
able to establish their status as agents of the state and rely on these defenses.152

F. Accord and Satisfaction & Preemption

The defenses of preemption and accord and satisfaction, as applicable in these

cases, both refer to the idea that the government by providing and the plaintiffs by
accepting administrative remedies for their injuries are blocked from also seeking
judicial redress. These defenses were raised in the World War II era labor
litigation, but have not yet been addressed by the courts. The logic of the defenses
is multipart. First, pursuant to the various peace settlements each country took
responsibility for compensating its injured nationals. Second, each state developed
an administrative remedy to compensate victims of various war injuries. Third,
under the preemption defense, those administrative programs created an exclusive
remedy under which nationals could make claims for injuries occurring during the
war.153 Under the accord and satisfaction defense, anyone who accepted
administrative remedies thereby agreed to forego any judicial remedy.154
The preemption defense was addressed indirectly in Jeong with regards to
jurisdiction and in more detail in the U.S. Department of State’s response to Senate
Judiciary Committee questions.155 Speaking directly to the Asian claims, these
sources noted that the peace treaty contemplated the creation of a scheme covering
compensation for ‘damage and suffering’ inflicted by Japan and its nationals
‘during the war’. 156 This plan was funded by the seizure and liquidation of $4
billion worth of public and private property located outside of Japan and formerly

151
28 U.S.C. § 1603(a)-(b).
152
See Jeong, 2000 U.S. Dist. LEXIS 7985, at *31-*33, n.14. Cf. Bodner, 114 F.
Supp. 2d at *130 (denying act of state doctrine in World War II era French insurer cases
because defendants were private parties)
153
See Olson v. General Dynamics Corp., 960 F.2d 1418, 1423 (9th Cir. 1991)
(preemption by ERISA).
154
See Bowater North Am. Corp. v. Murray Machinery, Inc. 773 F. 2d 71 (6th Cir.
1985) (discussing accord and satisfaction requirements).
155
See Jeong, 2000 U.S. Dist. LEXIS 7985, at *14-*20; ‘Former U.S. World War II
POWs: A Struggle for Justice’ (note 140), at 50-51.
156
See Treaty of Peace with Japan (note 87), Article 14, sec. 1-2; Article 16.

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owned by the Japanese government and Japanese companies and individuals. The
distribution was made to U.S. citizens (namely, military POWs, civilian internees,
and government related employees) pursuant to the War Claims Act, which
expressly rejected any recourse to the courts.157 Similar developments also covered
claimants from the European theater.158
Thus, the argument goes, Congress purposefully and consciously intended
the administrative remedies to preempt any resort to judicial remedies. The accord
and satisfaction defense follows the same rationale but only effects those parties
who applied for and received compensation pursuant to the War Claims Act.159
These arguments might also be relevant to certain alien defendants. Germany,
Canada, United Kingdom, Australia, New Zealand, Isle of Mann, and various other
countries have established compensation schemes that explicitly cover forced and
slave labor claims.160 As a practical matter, however, these arguments are largely

157
See War Claims Act of 1948, 50 U.S.C. app. §§ 2001-2016. Compensation under
the War Claims Act was limited to $1.00 per day for missed meals and $1.50 per day for lost
wages. See ‘Former U.S. World War II POWs: A Struggle for Justice’ (note 140), at 2. The
State Department notes, however, that in year 2000 dollar payment amounts would be
$20,646. See BURRESS C., ‘State is Ground Zero for World War II Lawsuits’, in: S.F.
Chronicle, 22 April 2001, p. A-1. This amount compares favorably with the amount
available under the Foundation Agreement and other compensation plans, and the amount
reportedly sought in private settlement. See infra notes 159, 160.
158
Not all victims, however, were covered by at least one of the various national
schemes. See Princz v. FRG, 26 F.3d at 1168 (noting U.S. citizen’s non-coverage by
German and U.S. systems).
159
Consistent with the accord and satisfaction defense, compensation under the
Foundation Law is reduced by the amount of money the party has received under other
compensation schemes and limited to DM 15,000 ($7,000) for slave laborers and DM 5,000
($2,300) for forced laborers. See In re Nazi Era Cases I, 2000 U.S. Dist. LEXIS 18148, *12-
*14, n.11 (citing Gesetz zur Errichtung einer Stiftung ‘Erinnerung, Verantwortung und
Zunkunft’, §§ 9, 15(2)).
160
See In re Nazi Era Cases I, 2000 U.S. Dist. LEXIS 18148 (reviewing German
compensation scheme); ‘Britain to Compensate POWs’, in: Japan Times, 9 Nov. 2000
(noting £10,000 payments to POWs of Japan (but not Germany or Italy) by United Kingdom
and British POWs’ concurrent withdrawal of WWII era claims filed in Japan, and
compensation made by Canada and Isle of Mann to its Asian veterans); WRIGHT L., ‘55
Years On, POWs Set to Get Compo’, in: Canberra Times, 21 May 2001, p. A-1 (noting
POWs and civilian internees of Japan (but not Germany or Italy) to receive AUD$25,000
tax free payments and compensation made by New Zealand). It is arguable that these
payments are merely a ‘honorarium’ and as such do not effect an accord or preemption. See
‘Former U.S. World War II POWs: A Struggle for Justice’ (note 140), at 3-4 (statement of
Senator Jeff Bingaman characterizing Canadian payments as non-prejudicial to
compensation claims). Senator Bingaman introduced a similar ‘honorarium’ bill calling for
$20,00 payments to POWs who were forced into labor, but the bill did not emerge from
committee. See S.1806, 106th Cong. (1999), status available at http://thomas.loc.gov/
Perhaps coincidentally $20,000 also appears to be the amount POWs are seeking in

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untested and the strength of other procedural defenses likely will ensure that they
remain undeveloped.

G. Summary of Procedural Bars and Defenses

American civil procedural rules construct a minefield difficult to navigate in most

international human rights litigation. In the World War II era labor lawsuits, the
case law to date suggests that peace treaty resolution, statute of limitations, and the
political question doctrine will all result in nearly insurmountable obstacles for
claims. Assuming these are cleared, the second line procedural defenses include
comity, the act of state doctrine, foreign sovereign immunity defenses, preemption,
and accord and satisfaction. These ramparts are mostly untested and appear much
less stable, nonetheless, their presence alone adds to the cost and difficulty in
trying these cases and the defendants’ overall confidence in their position. The end
result is America’s broad jurisdiction policies will allow into court most claims for
forced and slave labor during wartime, but the country’s narrower procedural rules
will likely keep these cases from being heard on their merits.

V. Choice of Substantive Law

Because the courts hearing the World War II era litigation have largely held based
on procedural matters and because procedural rules in America are automatically
lex fori, little discussion of the choice of law rules for forced and slave labor claims
has occurred. Some general conclusions, however, may still be drawn.161

A. International Law Claims

World War II era plaintiffs making claims under the ATCA pleaded international
law as a substantive law choice. No consensus has developed among the courts,
however, as to whether the applicable law in an ATCA claim is international law

settlement from the Asian litigation defendants. See AMEDORI C., ‘Amends Overdue for
Bataan Death March’, in: Japan Times, 26 Aug. 2000, p. 21 (reprinted from The Baltimore
Sun).
161
As background, private international law in the United States provides that state
courts and federal courts sitting in diversity will apply local conflict of laws rules. See Van
Dusen v. Barrack, 375 U.S. 612, 645-46 (1964); Restatement (Second) of Conflict of Laws,
§ 6(1). Characterization of conflict terms is based on local rules and local law subject to the
applicable law. See Restatement (Second) of Conflict of Laws, § 7. Renvoi is generally only
applied as an exception. See ibid., § 8.

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or municipal law, such as lex fori or lex loci.162 This of course is closely related to
the confusion over whether individuals even have a private right of action under
international law. To the extent the courts find that under the ATCA the applicable
law is municipal law, the analysis of tort and restitution claims reviewed below
arises. To the extent the courts hold that international law standards apply, further
resolution is not problematic. No conflicts arise in the application of international
law, because its entire premise is that it is singular and uniform. As a practical
matter, variations may occur in how different states’ courts interpret international
law, including whether they find private rights of action under that law. U.S. courts
may take notice of these diverging foreign courts’ interpretations; however,
because the implementation of international law is a procedural matter following
lex fori, they are not bound by any differences.163

B. Tort Claims

As is well known, the Restatement (Second) of Conflict of Laws and most

American jurisdictions follow a most significant relationship approach to choice of
tort law.164 In applying the most significant relationship test, the courts consider: (1)
the place where the injury occurred; (2) the place where the conduct causing the
injury occurred; (3) the domicile, residence, nationality, place of incorporation, and
place of business of the parties; and (4) the place where the relationship, if any,
between the parties was centered.165 For a large portion of the World War II labor
cases, the place of the injury, the tortious conduct, and where the relationship of
the parties was centered was Japan and Germany. Further, the defendants’ places
of incorporation are predominately Japan and Germany. This strongly suggests that
the tort law of Japan should be applied in much of the Asian litigation and German
law in the European litigation.166 Moreover, many of the plaintiffs and defendants

162
See Fliartiga, 630 F.2d at 889 (requiring district court to do a traditional choice
of law analysis to determine the applicable law); Wiwa, 226 F.3d at 105 (noting the issue is
unresolved); Tel-Oren, 726 F.2d at 777, 781-82 (Edwards concurring) (suggesting
applicable law for ATCA claim is lex loci delicti); In re Estate of Marcos, 978 F.2d at 503
(approving lower court’s application of lex loci delicti for ACTA claim); Forti, 672 F. Supp.
at 1531 (stating applicable substantive law for ATCA claim is international law); Xuntax v.
Gramjo, 886 F. Supp. 162 (D. Mass. 1995) (finding both international law and municipal
law may be applied as substantive law for ATCA claim).
163
See Beard v. Green, 523 U.S. 371, 375 (1998).
164
See Restatement (Second) of Conflict of Laws, § 145.
165
Ibid. § 145(2).
166
In Iwanowa, under a governmental interest analysis for the applicable statute of
limitations the court applied German law. See Iwanowa, 67 F. Supp. 2d at 476-77. Further,
the court noted that if called upon it would have applied German substantive restitution law

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in the World War II era litigation appeared to agree on this fact as its application
has been pleaded and consented to in a number of cases.167 It is unclear from the
remaining cases under which tort law the plaintiffs sought relief, but it is doubtful
that a U.S. court, whether state or federal, would apply American tort law given the
tenuous connection of the United States to most of these claims.168
A more difficult question is what law should be applied to claims con-
cerning acts and injuries in territories occupied by Japan and Germany, particularly
where the plaintiffs are or were domiciled, resident, or citizens of these territories.
That is, what tort law should be applied in those lawsuits for forced and slave labor
committed in Manchuria, Korea, Poland, Czechoslovakia, and so forth? In these
cases the significant relationship factors lead to application of the occupied
territories’ law. Occupied territories’ law, in turn, generally means the law at the
time of the forced labor, i.e., the occupiers’ law.169 In Kalmich v. Bruno, however,
the Seventh Circuit noted that it would apply present, or at least post-occupation,
Yugoslav law for torts committed in that territory during German occupation.170
Thus, pursuant to this approach and given the flexibility of the most significant
relationship rule, the courts have the ability to apply either the occupiers’ or the
pre- or post-occupation law. With this option and given genuine concerns about
applying the law of an illegitimate or unrecognized regime, one might expect U.S.
courts to more often than not apply the law of the pre- or post-war states.

C. Restitution Claims

Similar to tort law, the Restatement and a majority of states apply a most
significant relationship test for the choice of restitution law.171 In making that
determination, the courts consider five factors: (1) the place where a relationship
between the parties was centered; (2) the place where the benefit was received;
(3) the place where the act resulting in the enrichment was done; (4) the domicile,

under a governmental analysis. See ibid., at n. 69. See Xuncax, 886 F. Supp. at 195-196
(applying foreign tort law in ATCA claim under most significant connection analysis).
167
See, e.g., ibid. at 476 n. 69 (noting the parties conceded that German, not New
Jersey, substantive law controlled); Burger-Fischer, 65 F.3d at 252, 254 (pleading under
German tort law in both the Siemens and Degussa cases).
168
The due process limitations to application of American law is reviewed infra in
Section V.D.
169
New statutes are generally applied prospectively unless contrary legislative intent
is noted otherwise. See, e.g., Union Pacific R.R. v. Laramie Stock Yards, 231 U.S. 190, 199
(1913).
170
See Kalmich v. Bruno, 553 F.2d 549, 552 (7th Cir. 1977) (noting pursuant to a
most significant relationship analysis that the law of the place where the tort occurred, i.e.,
Yugoslavia under German occupation, should apply).
171
See Restatement (Second) of Conflict of Laws, § 221.

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residence, nationality, or place of incorporation of the parties; and (5) the place
where the physical thing that related to the enrichment was situated.172 Paralleling
the analysis for tortious acts, in the World War II era labor cases all of these factors
with the possible exception of the domicile and residence of the parties point
towards the law of Germany, Japan, or the areas these states occupied. Reflecting
at least the possibility of the application of the law of a defendant’s domicile, the
court in Iwanowa considered not only Germany restitutionary law but also
Michigan and Delaware law where one of the defendants, Ford, was based and
incorporated.173 Nevertheless, the court suggested in a note, which founded its
analysis concerning the applicable statute of limitations, that German law had the
most significant relationship to the case.174 Thus, as with tort law the choice of law
rules suggest Japanese or German law should apply to most restitution claims
though there remains the strong possibility of the application of the domestic law
of the previously occupied territory.

D. State Law Specific Claims

From a choice of laws perspective, California’s Section 354.6 first raises a

characterization and interpretation question. It is unclear from the plain language of
the statute whether Section 354.6 is merely a jurisdictional and statute of
limitations law or whether it creates independent substantive rights. The legislative
history is ambiguous regarding the legislature’s intent on this issue, but the
statute’s placement in the civil procedure code rather than the state’s civil code,
which generally covers substantive obligation matters such as restitution and torts,
suggests that the statute does not create new rights but merely provides a forum for
existing rights. If the courts read the statute to only relate to jurisdiction and
limitations, then no choice of law issue arises beyond the tort and restitution
considerations outlined above.
The plaintiffs in the Asian litigation, however, have interpreted the section
to create new independent rights upon which they have sought damages.175 There is
some support for this reading because Section 354.6(3) gives ‘compensation’ a
definition independent of the otherwise applicable tort or restitution law.176 If the
172
See ibid. § 221(2).
173
See Iwanowa, 67 F. Supp. 2d at 470-72.
174
See ibid., at 476-77, n. 69.
175
Analysis of the applicable law under the ATCA might by analogy provide some
guidance to this question, but as reviewed above there is no consensus whatsoever regarding
the applicable law under the ATCA. See note 162 and accompanying text.
176
Damages are usually measured consistent with the applicable substantive law. See
Restatement (Second) of Conflict of Laws, §§ 171, 207. Section 354.6(3) provides:
‘Compensation means the present value of wages and benefits that individuals should have
been paid and damages for injuries sustained in connection with the labor performed.

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courts accept the plaintiffs’ construction and characterize Section 354.6 as an

independent cause of action, then they would presumably make and apply new
California common law to determine whether liability exists. This is turn may give
rise to due process challenges of the law under the Fourteenth Amendment.
Due process limits application of lex fori as a choice of laws rule where the
matter has no substantive contact with the forum state.177 The analysis is similar to
the due process restrictions for personal jurisdiction, however, the tests and the
specific application are subtly but significantly different.178 The Supreme Court
standard for whether the application of state law violates due process provides:
‘[The] State must have a significant contact or significant aggregation of contacts,
creating state interests, such that choice of its law is neither arbitrary nor
fundamentally unfair.’179 Consistent with this, a federal district court recently found
a violation of the due process clause by part of Florida’s Holocaust legislation
package, which extended the limitations period against and the obligations of ‘any
parent, subsidiary, or affiliated company’ of a Florida insurer that issued World
War II era insurance contracts.180
In cursorily considering whether Section 354.6 might violate the due
process protections if substantively applied to the World War II era litigation, it
would appear that none of the facts underlying the claims have a connection with
California, that the defendants largely have no connection with California or are
subsidiaries with no connection to the forced and slave labor. On the other hand,
some of the plaintiffs have become residents of California since the underlying
events occurred and some of the defendants indirectly or directly conduct business
in California. The test is fact-intensive and applied on a case-by-case basis;
therefore, it is impossible to make conclusive predictions. Nevertheless, the
connections of California with the events and parties are questionable enough to
give serious consideration to the argument that applying California substantive

Present value shall be calculated on the basis of the market value of the services at the time
they were performed, compounded annually to date of full payment without diminution for
wartime or postwar currency devaluation.’
177
See Home Ins. Co. v. Dick, 281 U.S. 397, 408 (1930). See also SCOLES
E.F./HAY P. (note 76), §§ 3.20-3.29 (reviewing and summarizing the due process limitations
on choice of law rules).
178
See SCOLES E.F./HAY P. (note 76), §§ 3.27-3.29 (reviewing differences in the
tests and outcomes based on the tests).
179
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985) (finding application of
lex fori violated due process in a class action suit where 3% of class members were from and
1% of the claims arose inside the forum state and quoting Allstate Ins. Co. v. Hague, 449
U.S. 302, 312-13 (1981)).
180
See Gerling Global Reins. Corp. of Am. v. Nelson, 123 F. Supp. 2d 1298, 1304
(N.D. Fla. 2000).

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law, whether its common law under the statute itself or its codified law such as the
claims under California’s Business and Professional Code, violates due process.181

E. Summary of Choice of Substantive Law

American choice of law rules tend to suggest that Japanese, German, or

conceivably international law would be applied to the substantive law issues in the
World War II era litigation. However, the flexible approach under the dominant
choice of law framework in the United States would allow for selection of other
connected laws such as the laws of the areas formerly occupied by aggressor
nations. This conclusion also has a pragmatic appeal to the extent that courts find
the occupation was illegitimate, unrecognized, or in violation of public internatio-
nal law. Little suggests that substantive American law should be applied. However,
given the flexibility of U.S. choice rules, U.S. courts’ frequent failure to consider
conflicts issues, and the emotional appeal of U.S. citizens seeking redress for
acknowledged harms, that possibility cannot be excluded. If it does occur, recent
case law suggests that defendants, at the least, might challenge such application as
violating due process protections.

VI. Private International Law Implications on

Settlement
The European lawsuits for forced and slave labor alone covered anywhere from
700,000 to 2.3 million potential class members.182 This litigation included over fifty
federal cases and a handful of state suits.183 It also involved well over a hundred
named attorneys.184 The exact amount of damages claimed by all of the lawsuits is
incalculable, but almost all sought tortious, restitutionary, and punitive damages as
well as attorneys’ fees and costs. In a related case, a single World War II victim

181
Cf. Gerling Global Reins. Corp. v. Low, 2001 U.S. App. LEXIS 1724, *41-*43
(9th Cir. Feb. 7, 2001) (remanding to district court to review whether California Holocaust
Victim Insurance Relief Act of 1999 violates due process protections). See also In re Nazi
Era Cases II, 2001 U.S. Dist. LEXIS 2018 at *8 n.5 (citing Gerling v. Nelson and stating
‘the Court notes in passing that the California statute upon which plaintiff relies [Section
354.6] is of exceedingly questionable constitutionality’).
182
See BAZYLER M.J. (note 5), p. *192, n. 786 (providing citations).
183
See In re World War II Nazi Era Cases I, 2000 U.S. Dist. LEXIS 18148, at *3-*4,
app. A; U.S. Dept. of State, Annex C & D to Foundation Agreement (note 6).
184
Ibid.

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sought over $40 million for his claims alone.185 Thus, it is not surprising that the
parties eventually agreed to settle for DM 10 billion (US$5.1 billion).186
The World War II era lawsuits and their settlement most closely resemble
mass tort litigation in American courts – the number of parties and the amounts
involved are simply enormous.187 Settlement in America accounts for the vast
majority of contested cases and is generally about a meeting of the minds on a
dispute’s likely outcome, adjusted for risk and less saved expenses.188 In mass tort
cases, however, settlement is often not about likely outcome, but rather about the
possible outcome. With large plaintiff classes, punitive damages, extensive pre-
trial discovery, civil juries of laypeople, potential for multiple and lengthy appeals,
and other factors contributing to a double punch of unpredictability and potentially
enormous damages, defendants often settle to avoid the possible outcome rather
than based on a rational estimate of the likely results.189 Nevertheless, settlement
negotiations take place in the shadow of the law including the rules of private
international law and civil procedure.190 Thus, the more clearly cut the legal
questions and resolutions are, the more likely the parties will be able to come to an
agreement on the value of the ‘possibility’ factor.
This same analysis may be made in economic terms. Settlement generally
occurs where the parties’ risk-adjusted approximation of the litigated verdict

185
See D’Amato v. Deutsche Bank, 2001 U.S. App. LEXIS 78, *2 (2d Cir. 4 Jan.
2001).
186
The parties to the Asian lawsuits have not settled any U.S. claims and no known
negotiations are underway.
187
Others have made the same conclusion, see BROWN D., ‘Litigating the Holocaust:
A Consistent Theory in Tort for the Private Enforcement of Human Rights Violations’, in:
27 Pepperdine L. Rev. 2000, pp. 553, 584-589 (noting that while cases such as Burger-
Fischer ‘at first blush, appear to impose unseasonable burdens upon defendants, such
scenarios would not be unusual considering the cacophonous state of modern tort law’ and
going on to compare Burger-Fischer with mass tort lawsuits such as those against dram
shops, tobacco companies, and gun manufacturers).
188
See, e.g., OSTROM B.J./ KAUDER N.B., Examining the Work of State Courts 1994,
28 (noting all but 4% of civil cases in state courts settle).
189
For a discussion of a variety of issues involved in settlement of mass tort lawsuits
see, Symposium, ‘Mass Torts and ‘Settlement Class Actions’’, in: 80 Cornell L. Rev. 1995,
p. 811; ‘Symposium on Mass Torts’, in: 31 Loyola L.A. L. Rev. 1998, p. 437. Some have
cynically or critically referred to such lawsuits that capitalize on the possibilities with an
objective of settlement as ‘blackmail’ and ‘extortionist’. See, e.g., Castano v. The Am.
Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996). Such characterizations are incorrect and
unfortunate, however, because the raison d’être of these lawsuits is that they are possible
under the law, rather than outside of the law.
190
See MNOOKIN R.H./ KORNHAUSER L., ‘Bargaining in the Shadow of the Law: The
Case of Divorce’, in: 88 Yale L. J. 1979, P. 950 (discussing the impact of legal rules on
negotiations and bargaining outside judicial proceedings).

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amount less litigation costs converge.191 The greater the risk or approximation of
verdict amount, the wider the divergence on the total estimations of litigation
value, and the less likely settlement will occur. Information is a key element in
determining both a party’s approximated verdict amount and its risk adjustment.
The more information the parties have the more accurate their approximations and
the lower their risk adjustments. As a result, the more likely the parties’ total
estimation of litigation value less litigation costs will converge and settlement will
happen.
Private international law and civil procedure rules applicable in
international human rights cases are one critical source of information to the
parties. The more definitive and predictable these rules are the more likely the
parties will be able to settle on mutually acceptable terms. The courts and the U.S.
State and Justice Departments, however, purposefully refrained from clarifying
these rules during part of the European litigation.192 Their stated justification was
that they did not want to derail settlement negotiations.193 As one commentator
noted with apparent approval:

‘Judge Korman [in the WWII era Swiss bank litigation] did
something brilliant. He did nothing. Rather than ruling on the
[private international law and procedure] motions, he sat on them for
close to one year and waited for the parties to reach a settlement.
Judge Michael Mukasey in Manhattan borrowed Judge Korman’s
approach from the Swiss bank cases. In response to the insurance
companies motion to dismiss [the WWII era insurance litigation on
conflict and procedural grounds], he has not ruled on the motions,
hoping the matter will settle instead.’194
191
See POSNER R.A., Economic Analysis of Law, 5th ed., New York 1998, pp. 588-
589, § 21.5. Thus, where d represents defendant and p plaintiff, and where L equals litigation
costs, S equals settlement costs, R(V) equals total estimation of litigation value (i.e., Risk
adjustment times approximation of Verdict amount); settlement will occur where: R d (V)-L
d +S d <R p (V)+L p -S p, or R d (V) –R p (V)<(L d +L p)-(S d +S p). See ibid., p. 609.
192
See ‘Former U.S. World War II POWs: A Struggle for Justice’ (note 140), at 8-9,
47 (noting U.S. State and Justice Departments’ failure to participate in early European
litigation); BAZYLER M.J. (note 1), pp. 608, 611 (noting courts failure to rule on conflict and
procedural motions).
193
Ibid. I am not unsympathetic to the political and public pressures that called for
encouraging a settlement or discouraging a dismissal. These pressures were strong enough
to activate a variety of officers including banking officials, insurance officials, state
legislatures, and Congress. Nevertheless, my argument here is that a settlement would have
been more forthcoming by clarifying, rather than avoiding, the conflict and procedural
questions at issue. Furthermore, I less strenuously submit that it is the duty of the courts,
though perhaps not the judicial officers in the government, to resolve legal disputes and not
convolute that process to achieve political settlements.
194
BAZYLER M.J. (note 1), pp. 608, 611.

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Such dilatory court practice aimed solely at forcing the parties to settle privately
has been described as creating a ‘bankrupt’ legal system in other contexts.195
Furthermore, it was only after two federal courts in Iwanowa and Burger-Fischer
ruled on the conflicts and procedural rules that settlement was achieved. In short,
private international law and procedure rules impact resolution of international
human rights disputes whether it be judicial dismissal, or private and political
settlement. As a result, it is incumbent upon us to elucidate and define these rules
where the opportunity or, in the case of the courts and administrative officers, duty
presents itself.196

VII. Conclusion
What lessons may international human rights lawyers take from the World War II
era lawsuits regarding the feasibility of claims for private liability for forced
wartime labor? First, the broad jurisdictional rules of the United States will provide
a forum for these suits. Second, America’s stricter procedural rules will likely
block most serious attempts at trying these matters on the merits. The temporal
window between these two conclusions, however, is crucial. Wide jurisdiction
rules provide a forum from which claimants may leverage the potential liability of
the litigation along with whatever political and public pressure they may generate.
The rules of procedure provide a measure of confidence to defendants, but reliance
on them opens these parties to whatever negative extra-legal pressure the plaintiffs
may produce prior to the defenses being decided by a court and the ever-present
risk in America that they may lose their seemingly strong arguments.
It is on this stage that settlement negotiations are conducted. It is suggested
here that diligent and neutral elucidation of the private international law and civil
procedure rules involved in these lawsuits can promote the settlement of the cases.

195
See CHIRA S., ‘If You Insist on Your Day in Court, You May Wait and Wait and
Wait’, in: N.Y. Times, 1 Sept. 1987, p. 4 (criticizing Japanese judicial practice that results in
litigation delays and thereby encourages parties to settle extra-judicially).
196
As Benjamin Cardozo, one of America’s most eminent judges, stated:
‘[O]bscurity of state or of precedent or of customs or of morals, or collision between some
or all of them, may leave the law unsettled, and cast a duty upon the courts to declare it.’
CARDOZO B., The Nature of the Judicial Process, New Haven-London 1921, p. 128
(emphasis added). It is notable that one of the conditions of the Foundation Agreement
among Germany, the United States, German industry, the European litigation lawyers, and a
variety of others is that: ‘The United States shall [in all the known European litigation]
inform its courts thought a Statement of Interest that it would be in the foreign policy
interests of the United States for the Foundation to be the exclusive remedy and forum for
resolving such claims asserted against German companies and that dismissal of such cases
would be in its foreign policy interest.’ See Foundation Agreement (note 12), Article 2(1).

Yearbook of Private International Law, Volume 3 (2001) 179

 Kent Anderson

The more information the parties obtain the more easily they may value the
vagaries of potential and possible liability, on the one hand, and political and
public pressure, on the other. The more easily and consistently the parties value the
lawsuits the more likely a mutually acceptable settlement will be forthcoming.
Thus, conflict and procedural rules have been outcome determinative in the
settlement and dismissals of the World War II era cases to date. The lesson for
international human rights lawyers from the U.S. courts’ treatment of the private
international law and civil procedure issues arising in the civil litigation of forced
and slave labor claims during World War II is that opportunity exists but it is a
complex and not necessarily legal equation that must be exercised in a limited
timeframe.

180 Yearbook of Private International Law, Volume 3 (2001)

 U.S. Civil Suits for Forced Labor during World War II

Addendum
As noted above, as of early 2001 the only WWII era labor suits that remained in
U.S. courts were those Asian litigation cases filed by Korean, Chinese, and
Philippine nationals.197 Between September 14 and 17, 2001, three decisions were
issued by the federal and state courts in California that largely, but not completely,
resolved these cases. On September 14, a California state court denied defendants’
motion to dismiss Korean plaintiffs’ claims based on private international law and
civil procedure rules in the continuation of the Jeong case reviewed above.198 On
September 17, however, a federal court in California granted defendants’ motion to
dismiss class action complaints by Korean, Chinese, and Filipino plaintiffs in two
separate opinions in the continuation of In re WWII Era Japanese Forced Labor
Litigation.199
Taken together these three opinions add in a variety of areas to the
framework created above. Regarding jurisdiction, In re WWII Era Japanese III
added support to the Iwanova holding that forced labor violates international law
and, therefore, may be a basis for federal subject-matter jurisdiction under the
ATCA.200 Regarding peace treaties’ resolution of personal claims arising out of
war, In re WWII Era Japanese II found that Filipino forced laborers’ claims were
also waived by article 14(b) of the 1951 Japan Peace Treaty since the Philippines
ratified that agreement in 1956.201 The court in In re WWII Era Japanese III did not
interpret the peace agreements between Japan and China, and Japan and Korea, but
it did find that the 1951 Peace Treaty did not preempt Chinese and Korean
nationals from seeking redress in U.S. courts despite being the ‘supreme law of the
land’ in the United States.202

197
See In re WWII Era Japanese, 114 F. Supp. 2d at 942.
198
Jeong v. Onoda Cement Co. Ltd., Case No. BC217805 (L.A. Sup. Ct. , Sep. 14,
2001), available at http://www.lieffcabraser.com/pdf/OrderJSL.pdf (hereinafter Jeong II).
199
In re WWII Era Japanese Forced Labor Litigation (Order No. 9), 2001 U.S. Dist.
LEXIS 14641 (N.D. Cal. Sep. 17, 2001) (hereinafter In re WWII Era Japanese II); In re
WWII Era Japanese Forced Labor Litigation (Order No. 10), 2001 U.S. Dist. LEXIS 14640
(N.D. Cal. Sep. 17, 2001) (hereinafter In re WWII Era Japanese III).
200
See In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *54-*58. See
also In re WWII Era Japanese II, 2001 U.S. Dist. LEXIS 14641, at *20 (same).
201
See In re WWII Era Japanese II, 2001 U.S. Dist. LEXIS 14641, at *10-*13.
202
See In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *15-*22. See
also In re WWII Era Japanese II, 2001 U.S. Dist. LEXIS 14641, at *17-*18 (holding 1951
Peace Treaty is ‘supreme Law of the Land’ and consequently that ‘[w]hether waiver of the
Filipino plaintiff’s claims violates the constitutional law of the Philippines (as opposed to
American constitutional law) is beside the point’); Jeong II (note 198), at 4-12 (holding
1951 Peace Treaty is not supreme law of land in matter between Korean national and
Japanese business; but, since determination pursuant to the 1965 Japan-Korea Peace

Yearbook of Private International Law, Volume 3 (2001) 181

 Kent Anderson

Falling within the choice of substantive law rubric, the federal court found
that application of Section 354.6 was unconstitutional as a violation of the foreign
affairs power of the federal government.203 Specifically, because application of
Section 354.6 ‘will affect international relations in a persistent and subtle way,
have a great potential for disruption or embarrassment of the United States, and
trigger more than some incidental or indirect effect in Japan,’ it overstepped the
legislative authority of California as one of the several states.204 The state court in
Jeong II had left this issue open; 205 thus, it is likely that defendants in that case will
be able to use the federal court’s decision to seek a dismissal.
Finally, the cases added insight to the statute of limitation issues, which the
courts handled substantially as outlined above. Because Section 354.6 was found
unconstitutional, its extension of the applicable statutes of limitation for the inter-
national, tort, and restitution claims was ineffective. Thus, the court first followed
Iwanova in finding a ten-year limitation period for international claims and dis-
missed those causes for being brought too late.206 Next, without making the choice
of law determination regarding the applicable limitation law, the federal court
found that all tort and restitution claims were filed after all possible limitation
periods under Californian, Japanese, and Korean law.207 Interestingly, the court
partially relied on Japanese court decisions concerning WWII era labor claims for
support of this determination.208 The court also followed Iwanova and the
legislative history of Section 354.6 in finding that as a factual matter there was no
basis for equitable tolling of the limitation periods.209
Given the decisions of the federal court any precedential value of Jeong II is
questionable, but Jeong II also speaks to two other aspects of the framework for
private international law and civil procedural issues. First, the California state court
determined that the Korean plaintiffs’ claims would not be dismissed as a matter of
preemption or accord and satisfaction because the 1951 Peace Treaty and the U.S.
compensation scheme did not cover Korean nationals.210 The court did not raise the
issue, but it is also believed that these parties’ claims have not been preempted or
satisfied by Korean or Japanese legislation or settlements.

Agreement is inconclusive, Korean plaintiffs’ claims could not be said to be preempted by

that agreement).
203
See In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *22-*53.
204
See ibid., at *53 (citing Zschernig v. Miller 389 U.S. 429, 434-35, 440 (1968))
(internal punctuation omitted).
205
Jeong II (note 198), at 4 n.3.
206
See In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *59-*66.
207
See ibid., at *66-*69.
208
Ibid., at *69.
209
See ibid., at *63-*66.
210
Jeong II (note 198), at 12-15.

182 Yearbook of Private International Law, Volume 3 (2001)

 U.S. Civil Suits for Forced Labor during World War II

Second, in direct contrast to Iwanova, Burger-Fischer, and In re Nazi Era

Cases II, the California court found that the Korean labor cases were not precluded
under the political question doctrine.211 The court distinguished the European litiga-
tion decisions by asserting that in those cases ‘compensation or reparations had
been provided for in the Treaties or Agreements at issue.’212 It is unclear from the
opinion, but it seems the essence of the court’s rationale was that though Japan and
Korean may have entered into agreements regarding reparations, those were not
agreements of the United States and, thus, United States foreign relations are not
implicated by judicial decisions concerning those foreign agreements. As the
federal court in In re WWII Era Japanese III makes clear, however, this rationale
fails in that U.S. court determinations about disputes between foreign parties
covered by foreign treaties and agreements may indeed impact U.S. foreign
relations by causing ‘unavoidable judicial criticism’ of foreign governments and
directly interfering with diplomatic negotiations between the foreign states at
issue.213
The federal decisions do not have direct binding authority on the California
state proceeding and plaintiffs’ attorneys in the federal lawsuits state that they plan
to appeal the district court’s decisions; thus, as of this writing the WWII era labor
litigation arguably still remains partially active.214

211
See ibid., at 17-18.
212
Ibid., at 17.
213
See In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *44-*46.
214
KANG K.C., ‘Allowing Suits by Forced Laborers Voided’, in: L.A. Times, 20 Sep.
2001, p. 2-1. In a strikingly similar case, after a federal district court ruled a California
statute directed against Holocaust era insurers was likely unconstitutional as a violation of
the federal government’s power over foreign affairs, the Ninth Circuit Court of Appeals
overturned the decision and remanded for more hearings. See Gerling Global Reins. Corp.
of Am. v. Low, 240 F.3d 739, 2001 U.S. App. LEXIS 1724, *34-*40 (9th Cir. Feb. 7, 2001).
But see In re WWII Era Japanese III, 2001 U.S. Dist. LEXIS 14640, at *50, *52
(distinguishing Gerling).

Yearbook of Private International Law, Volume 3 (2001) 183

 THE LAW APPLICABLE TO GOVERNMENTAL
LIABILITY FOR VIOLATIONS OF HUMAN
RIGHTS IN WORLD WAR II

Questions of Private International Law

from the German Perspective

Jan VON HEIN*

I. Introduction
II. Reparations and Individual Claims: A Mutually Exclusive Relationship?
III. Basic Features of German Substantive Law
A. Governmental Liability in General
B. Special Substantive Rules Dealing with Compensation for Wrongs Inflicted
during Wartime
1. Federal Compensation Act
2. Law on the Creation of the Foundation ‘Remembrance,
Responsibility and the Future’
IV. The Law Applicable to Governmental Liability
A. German Choice-of-Law Rules for Torts: A Survey
1. Basic Rule for Torts in General: Lex Loci Delicti
2. Content of the Lex Loci Delicti in Annexed and Occupied Territories
3. Deviations from the Lex Loci Delicti
B. Special Rules for Governmental Liability: The Current State of the
Discussion in Germany (with a Side Reference to Austria)
1. Characterisation of War-Related Human Rights Violations
2. Public International Law: Lack of Jurisdiction to Prescribe
3. Private International Law: Most Significant Relationship with the
Law of the State Claimed to Be Liable
a) A General Rule
b) Depending on an Established Connection Between the
Perpetrating State and Victim: The Case of the
Ambassadors’ Hunting Party
4. Dépeçage between the Law Applicable to the Liability of Civil
Servants and the Issue of Assumption

*
Dr. iur.; Max-Planck-Institute for Foreign Private Law and Private International
Law, Hamburg. The manuscript was completed on 18 May 2001.

Yearbook of Private International Law, Volume 3 (2001), pp. 185-221

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Jan von Hein

5. Interdependence of State Immunity and the PIL of Governmental

Liability
a) State Immunity v. Conflicts Justice: Two Different
Approaches?
b) Restrictions of Absolute State Immunity
c) Conclusion to 5
V. Limitations of Substantive Provisions
VI. Recognition and Enforcement of Foreign Judgments
VII. Conclusion**

**
Abbreviations of journals and periodicals:
AG = Die Aktiengesellschaft
AuR = Arbeit und Recht
AVR = Archiv des Völkerrechts
Beiträge = Beiträge zur nationalsozialistischen Gesundheits- und Sozialpolitik
BerDGesVR = Berichte der Deutschen Gesellschaft für Völkerrecht
BGBl. = Bundesgesetzblatt
BGHZ = Entscheidungen des Bundesgerichtshofs in Zivilsachen
Blätter = Blätter für deutsche und internationale Politik
BVerfGE = Entscheidungen des Bundesverfassungsgerichts
IECL = International Encyclopedia of Comparative Law
IPRE = Österreichische Entscheidungen zum internationalen Privatrecht
IPRspr. = Die deutsche Rechtsprechung auf dem Gebiete des Internat. Privatrechts
JBl. = Juristische Blätter
JZ = Juristenzeitung
KJ = Kritische Justiz
Mich. J. Int’l L. = Michigan Journal of International Law
NJW = Neue Juristische Wochenschrift
NZA = Neue Zeitschrift für Arbeitsrecht
Rev. Hell. = Revue Hellénique de Droit International
RGBl. = Reichsgesetzblatt
RGZ = Entscheidungen des Reichgerichts in Zivilsachen
VersR = Versicherungsrecht
WM = Wertpapier-Mitteilungen
ZEuP = Zeitschrift für Europäisches Privatrecht
ZfRV = Zeitschrift für Rechtsvergleichung
ZRP = Zeitschrift für Rechtspolitik
ZVglRWiss. = Zeitschrift für Vergleichende Rechtswissenschaft
ZVR = Zeitschrift für Verkehrsrecht

186 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

I. Introduction
The subtitle of this article might strike a reader unfamiliar with the subject as
strange: Governmental liability, violations of human rights and the laws of war are
traditionally regarded as belonging to the realm of public international law rather
than the conflict of laws. The classic approach to dealing with wrongs inflicted on
a population during wartime is for the State that has been attacked to bring actions
for damages against the aggressor after the war has ended, viz. reparations.1 Yet we
are confronted with the phenomenon that, more than fifty-five years after the end
of World War II, private litigation involving claims for war-related human rights
violations is mushrooming all over the world.2 Several German courts have been
and still are dealing with claims against the Federal Republic of Germany (F.R.G.),
especially with regard to compensation for forced labour.3 Since the torts under-
lying these actions have often been committed abroad, i.e., in the countries occu-
pied or annexed by the Reich, the question arises as to which law should govern
these claims.4

1
Cf. Bundesgerichtshof (Federal Supreme Court), 26 September 1966, in: IPRspr.
1966–67, No. 14 (sub 1).
2
Professor D. BLUMENWITZ (University of Würzburg) speaks of a ‘a wave of new
claims for reparations due to the current trend towards a ‘privatisation’ of international legal
relations’ (my translation), ‘Blumenwitz: Die Forderungen ufern aus’, in: DIE WELT online,
23 March 2000 <http://www.welt.de/daten/2000/03/23/0323de158374.htx>, visited 27 July
2000; on this paradigm shift see Professor Chr. WOLF (University of Hannover),
‘Menschenrechtsschutz durch Zivilprozess – eine Aufgabenbeschreibung’, at <http://
www.jura.uni-hannover.de:8080/wolf/forschung/forsch2.htm>, visited 7 January 2001.
3
See Bundesverfassungsgericht (Federal Constitutional Court) 13 May 1996, in:
BVerfGE, Vol. 94, p. 315; Bundessozialgericht (Federal Social Court) 18 June 1997, in:
NJW 1998, p. 2309; Oberverwaltungsgericht Münster (Supreme Administrative Court of
North-Rhine-Westphalia) 19 November 1997, in: NJW 1998, p. 2302; Oberlandesgericht
Köln (Regional Court of Appeals Cologne) 3 December 1998, in: IPRax 1999, p. 251 =
NJW 1999, p. 1555 = WM 1999, p. 242 = VersR 2000, p. 590 = IPRspr. 1998, No. 44;
Landgericht (Regional Court) Bremen 3 December 1992, in: JZ 1993, p. 633; Landgericht
Bonn, 2 July 1993, in: RANDELZHOFER A./DÖRR O., Entschädigung für Zwangsarbeit, Berlin
1994, p. 113. On the dimension and function of forced labour in national-socialist Germany
see BENZ W., ‘Zwangsarbeit im nationalsozialistischen Staat’, in: Dachauer Hefte 16
(2000), pp. 3-17; SCHRÖDER R., ‘Zwangsarbeit: Rechtsgeschichte und zivilrechtliche
Ansprüche’, in: Jura 1994, pp. 61-72 (part I), pp. 118-130 (part II), at pp. 62-64, both with
many further references.
4
But see PHILIPP W., ‘Darf der Vorstand zahlen?’, in: AG 2000, pp. 62-69, at p. 64,
who states that ‘all incidents occurred in Germany’ (my translation). This, with due respect,
is plainly wrong. On the question which law applied in the annexed territories, see infra
IV.A.2.

Yearbook of Private International Law, Volume 3 (2001) 187

 Jan von Hein

This fundamental problem has so far received only scant attention by the
German courts.5 Although the issue of forced labour claims will probably lose
importance as a practical matter before German courts as a result of the recent
enactment of the German Law on the Creation of the Foundation ‘Remembrance,
Responsibility and the Future’ (hereinafter: Foundation Law),6 the main purpose of
this article is to further elucidate the choice-of-law aspects of this issue (see infra
IV). First of all, the problem deserves historical interest in its own right. Secondly,
the arguments exchanged in the German debate may be helpful to lawyers in other
countries facing similar legal challenges.7 Thirdly, the question which law should
apply to claims for compensation for human rights violations is not restricted to
cases that arose in World War II; on the contrary, recent and ongoing armed
conflicts furnish ample evidence of the practical importance of this issue.8 Finally,
not all claimants chose to take the F.R.G. to its own courts.
In 2000, the F.R.G. was ordered by the Greek Supreme Court, the Areopag,
to pay damages to the victims of the massacre committed by German troops in
Distomon, Greece, in 1944.9 Proceedings in the same case were unsuccessful in

5
See, however, the brief discussion of the problem in Oberlandesgericht Köln
(note 3).
6
Gesetz zur Errichtung einer Stiftung ‘Erinnerung, Verantwortung und Zukunft’,
2 August 2000, in: BGBl. 2000, part I, p. 1263, in force since 3 August 2000; see infra III B
2. For a survey, see HAHN H.-J., ‘Individualansprüche auf Wiedergutmachung von
Zwangsarbeit im Zweiten Weltkrieg’, in: NJW 2000, pp. 3521-3526. The first reported
decisions applying the new law are: Bundesgerichtshof, 30 November 2000, in: NJW 2001,
p. 1069; Oberlandesgericht Hamm, 27 October 2000, in: NJW 2000, p. 3577; see also
Landgericht Nürnberg-Fürth, 18 January 2001 – 9 O 2180/00 <http://www.justiz.bayern.de/
olgn/prziv183.htm>.
7
On the discussion in Japan see YAMAUCHI K., ‘Staatshaftung für Kriegsgeschädigte
im japanischen IPR’, in: Festschrift für Otto Sandrock zum 70. Geburtstag, Heidelberg
2000, pp. 1057-1064, and OKUDA Y., in this Yearbook, pp. 115-135.
8
See FISCHER G., ‘Schadensersatzansprüche für Menschenrechtsverletzungen im
Internationalen Privat- und Prozeßrecht’, in: Festschrift für Walter Remmers, Köln 1995,
pp. 447-464; HESS B., ‘Staatenimmunität bei Menschenrechtsverletzungen’, in: Festschrift
für Rolf A. Schütze zum 65. Geburtstag, München 1999, pp. 269-285, at p. 283 et seq.
9
Greek Areopag, 4 May 2000, in: KJ 2000, p. 472 (German translation), affirming
Court of First Instance of Livadia, 30 October, 1997 (Prefecture of Voiotia v. Federal
Republic of Germany), in: Rev. Hell. 1997, p. 595 (English translation) with a note by
GAVOUNELI M.; the decision of the Livadia court is also reported by BANTEKAS I., in:
Am. J. Int. L. 1998, pp. 765-768; for German comments on the Distomon litigation, see
BRODESSER H.-J./FEHN B. J./FRANOSCH T./WIRTH W., Wiedergutmachung und Kriegsfolgen-
liquidation: Geschichte – Regelung – Zahlungen, München 2000, p. 183 et seq.; HESS B.
(note 8), p. 277; KÄMMERER J. A., ‘Kriegsrepressalie oder Kriegsverbrechen?’, in: AVR
1999, pp. 283-317; PAECH N., ‘Wehrmachtsverbrechen in Griechenland’, in: KJ 1999,
pp. 380-397; SCHMINCK-GUSTAVUS Chr., ‘Nemesis’, in: KJ 2001, pp. 111-117. From an
historian’s point of view, cf. RONDHOLZ E., ‘Schärfste Maßnahmen gegen die Banden sind

188 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

Cologne.10 While the appeal against the German judgment is still pending before
the German Bundesgerichtshof,11 the plaintiffs attempted to execute the Greek
judgment in Athens by seizing the local German school and the Goethe Institute.12
These efforts were stalled by a temporary injunction of an Athens court because
the Greek Justice Department has so far refused to grant the permission required
under Greek law for the seizure of property belonging to a foreign State.13
In the United States, class actions against German companies were filed by
former slave labourers.14 Past decisions and pending proceedings involving war-
time torts raise the question whether pertinent judgments against the F.R.G. (or a
German company) could be recognised and enforced in Germany (see infra VII).
Moreover, these actions created the political pressure resulting in the enactment of
the German Foundation Law.15 The German Parliament must still vote to declare
‘legal peace’ before payments can begin. At the moment, it is not yet entirely clear
whether U.S. Courts will consider themselves bound by the parallel German-
American Forced Labour Agreement and the statement of interests issued by the
U.S. State Department.16 Although the statement of interests recommends that

notwendig…’, in: Beiträge 14 (1997), pp. 130-170; ID., ‘Tausend unbekannte Lidices’, in:
Blätter 1993, pp. 1509-1519, at p. 1515 et seq.
10
Oberlandesgericht Köln, 27 August 1998 – 7 U 167/97, unreported, available on
demand at <http://www.olg-koeln.nrw.de>.
11
Reference: III ZR 245/98; see Bundesgerichtshof, official press release
No. 34/2001, at: <http://www.bundesgerichtshof.de> (visited 3 May 2001); on the pending
proceedings, see SCHMINCK-GUSTAVUS Chr. (note 9), p. 115 et seq.
12
See ANTONAROS E., ‘In Griechenland könnte deutsches Eigentum zwangs-
versteigert werden’, in: DIE WELT online, 4 July 2000, at: <http://www.welt.de/daten/
2000/07/04/0704eu177589.htx>.
13
AP, ‘Beschlagnahme deutschen Eigentums weiter blockiert’, at: <http://www.
news.lycos.de/news/de/textidx.asp?cat=Politik&Partner=&Text=/apdata/de/Politik/2000072
41931MAW0184.htm>.
14
Cf., e.g., Burger-Fischer et al. v. Degussa AG, Vogel et al. v. Degussa AG,
Lichtman v. Siemens AG, Klein et al. v. Siemens AG, 65 F.Supp.2d 248 (U.S. Dist. N.J.
1999); Iwanowa v. Ford Motor Company and Ford Werke A.G., 67 F.Supp.2d 424 (U.S.
Dist. N.J. 1999). On these judgments, see DOEHRING K., ‘Zwangsarbeit und Reparationen’,
in: AG 2000, pp. 69-71; REINISCH A., ‘NS-Verbrechen und "political questions": Können
deutsche Unternehmen von ehemaligen Zwangsarbeitern vor US-Gerichten verklagt wer-
den?’, in: IPRax 2000, pp. 32-39; SAFFERLING C.J.M., ‘Zwangsarbeit vor amerikanischen
Gerichten’, in: NJW 2000, pp. 1922-1924. On Californian Legislation designed to facilitate
the adjudication of forced labour claims see GEBAUER M./SCHULZE G., ‘Kalifornische
Holocaust-Gesetze zugunsten von NS-Zwangsarbeitern und geschädigten Versicherungs-
nehmern und die Urteilsanerkennung in Deutschland’, in: IPRax 1999, pp. 478-484. See also
ANDERSON K., in this Yearbook, pp. 137-183.
15
Supra note 6.
16
Agreement between the Government of the United States of America and the
Government of the Federal Republic of Germany concerning the Foundation

Yearbook of Private International Law, Volume 3 (2001) 189

 Jan von Hein

pending lawsuits should be dismissed, Judge Shirley Wohl Kram of the U.S.
District Court in Manhattan refused to comply with the statement unconditionally.
Instead, she ordered on 11 May 2001 that the victims’ suits could be reinstated if
the German parliament did not make certain changes to the Foundation Law.17 The
U.S. Court of Appeals for the Second Circuit, however, ruled on 17 May 2001 that
the District Judge had exceeded her judicial authority: Kram lacked the power ‘to
require such actions of the legislature of a foreign sovereign’.18 Therefore, it is
hoped that the German parliament will soon be able to declare the ‘legal peace’
that must be established before the foundation can start making payments.
Apart from these well-known cases, actions filed by individual victims have
attracted less attention. For example, a 76 year-old French former slave labourer is
currently suing the F.R.G. before an industrial tribunal in Paris for compensation.19
Before dealing with the conflicts issues, it is necessary to examine two
aspects of the legal background. Firstly, some brief preliminary remarks on the
public international legal framework are important to grasp the full dimension of
the problem (see infra II). Secondly, a basic knowledge of the German substantive
law applicable to governmental liability is indispensable to understand the
positions taken by German courts and scholars on the conflicts aspect of this issue
(see infra III).

II. Reparations and Individual Claims: A Mutually

Exclusive Relationship?
The question which law should govern individual claims for human rights
violations can only arise if such claims are not excluded by rules of public
international law. There is no doubt that the enslavement of a vanquished popula-
tion was a flagrant violation of valid rules of the law of nations as it already stood

‘Remembrance, Responsibility and the Future’, 17 July 2000, for the text of the Agreement
and further materials, visit <http://www.us-botschaft.de/dossiers/holocaust>; on this issue,
see the decision of the District Court N.J., Bassler J., at 2000 WL 1876641 and SEBOK A.,
‘Unsettling the Holocaust – The strange legal status of the Nazi forced labor agreement’,
<http://www.europe.cnn.com/2000/LAW/08/columns/fl.sebok.nazi.08.29>.
17
‘Germans Dispute Judge’s Order on Pay to Victims of Nazis’, <http://www.
nytimes.com>, 12 May 2001.
18
AP, ‘Ruling in Nazi Slave Labor Case’, <http://www.nytimes.com>,
18 May 2001; FRITSCH J., ‘One Step Closer to Reparations for Nazi Victims’, <http://www.
nytimes.com>, 18 May 2001.
19
‘Früherer Zwangsarbeiter verklagt Deutschland’, in: Süddeutsche Zeitung,
8 December 2000, p. 8. On the repression of the French Résistance, see MEYER A., ‘…daß
französische Verhältnisse anders sind als polnische’, in: Beiträge 14 (1997), pp. 43-91.

190 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

in World War II.20 It is also unanimously accepted that the F.R.G. is the successor
to the Reich and as such liable for violations of human rights that occurred during
World War II.21 The F.R.G., however, has taken the official stance that individual
claims for compensation raised by slave labourers or by victims of war-related
massacres should be characterised as a kind of reparations.22 According to
customary international law as interpreted by the F.R.G., pertinent claims could be
filed only by the States of which the claimants were nationals, but not by the
individual victims themselves.23 Apart from customary international law, this
argument was based on Article 5(2) of the London Agreement on German External
Debts (hereinafter: the London Agreement).24 Pursuant to this provision, the
consideration of World War II claims of countries that were at war with or were
occupied by Germany during that war and claims of nationals of such countries
against the Reich and agencies of the Reich shall be deferred until the final
settlement of the problem of reparations.

20
See, e.g., Burger-Fischer (note 14), pp. 255, 272 et seq.; Iwanowa (note 14),
p. 440; Landgericht Stuttgart, 24 November 1999, in: IPRax 2001, p. 240, at p. 243, with a
note by OBERHAMMER P./REINISCH A., ‘Zwangsarbeiter vor deutschen Gerichten’, in: IPRax
2001, pp. 211-218; BRODESSER H.-J./FEHN B. J./FRANOSCH T./ WIRTH W. (note 9), p. 194 et
seq.; BRÜGMANN C., ‘"Wiedergutmachung" und Zwangsarbeit – Juristische Anmerkungen
zur Entschädigungsdebatte’, in: Dachauer Hefte 16 (2000), pp. 177-189, at p. 185; on claims
raised by former prisoners of war, cf. Oberverwaltungsgericht Münster (note 3).
21
See the decisions cited in note 3 and Oberlandesgericht Köln (note 9), p. 18.
22
Cf. the arguments advanced by the FRG in Oberlandesgericht Köln (note 9), p. 5
et seq. (concerning Distomon) and in Landgericht Bonn, 5 November 1997 – 1 O 134/92 as
well as in Landgericht Bremen, 2 June 1998 – 1 O 2889/90 (the two latter decisions – both
concerning slave labour – can be downloaded at <http://alf.zfn.uni-bremen.de/zwangsar/
dokumentation>); this is still the position taken in the treatise edited by the former and cur-
rent officials of the German Ministry of Finance BRODESSER H.-J./FEHN B. J./FRANOSCH T./
WIRTH W. (note 9), p. 194 et seq.; DOEHRING K. (note 14); HAHN H.-J. (note 6), p. 3521 et
seq. On this line of reasoning, see the critical discussion in BRÜGMANN C. (note 20), p. 185
et seq.; FRAUENDORF L., ‘Die Entschädigung von NS-Zwangsarbeit – ein aktuelles Problem’,
in: ZRP 1999, pp. 1-6, at p. 4 et seq.; HESS B., ‘Entschädigung für Zwangsarbeit im "Dritten
Reich"’, in: JZ 1993, pp. 606-610, at p. 606 et seq.; ID., ‘Entschädigung für NS-
Zwangsarbeit vor US- und deutschen Zivilgerichten’, in: AG 1999, pp. 145-154, at p. 151;
KISCHEL U., ‘Wiedergutmachungsrecht und Reparationen’, in: JZ 1997, pp. 126-131;
KÜPPER H., ‘Die neuere Rechtsprechung in Sachen NS-Zwangsarbeit’, in: KJ 1998, pp. 246-
254, at pp. 248-251; PAWLITA C., ‘Verfolgungsbedingte Zwangsarbeit im Nationalsozialis-
mus’, in: AuR 1999, pp. 426-436, at p. 430; TOMUSCHAT Chr., ‘Rechtsansprüche ehemaliger
Zwangsarbeiter gegen die Bundesrepublik Deutschland?’, in: IPRax 1999, pp. 237-240, at
p. 239 et seq., all with numerous further references.
23
See the references in note 22.
24
London Agreement on German External Debts, 27 February 1953, BGBl. 1953,
part II, p. 331.

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 Jan von Hein

The German Constitutional Court, however, ruled in a ground-breaking

decision in 1996 that the diplomatic protection afforded the victims under
customary international law does not exclude their individual (delictual) claims
under the national law of the State that committed the human rights violations in
question.25 The private claims of individual victims against the aggressor are con-
current with those of the State of which they are nationals.26 Only the latter claims
are based on public international law.27 The position taken by the Constitutional
Court on the justiciability of individual claims was affirmed by the Federal Labour
Court in 2000.28 This latter decision deals with claims against companies that
employed slave labourers, not with claims against the F.R.G. With regard to the
problem of ‘exclusiveness’, however, it rightly asserts obiter that it does not make
a difference whether the claims are directed against the F.R.G. as the successor to
the Reich or against private individuals.29 The decision of the Federal Labour Court
ended a series of contradictory judgments of lower labour courts.30
The Constitutional Court did not elaborate what it meant by the national law
of the perpetrating State (‘das nationale Recht des verletzenden Staates’).31 Does
this expression refer directly to the substantive law of the perpetrating State or does
it encompass rules of private international law?32 On the one hand, the Constitutio-
nal Court probably thought mainly of German substantive law when it formulated
its 1996 judgment, which is indicated by its reference to the Federal Compensation

25
Bundesverfassungsgericht (note 3), p. 330 et seq. The Bundesgerichtshof (note 1)
had already decided in 1966 that contractual claims are not excluded by reparations.
26
Bundesverfassungsgericht (note 3), p. 330.
27
Bundesverfassungsgericht (note 3), p. 331.
28
Bundesarbeitsgericht (Federal Labour Court), 16 February 2000, in: NZA 2000,
p. 385, at p. 386. On the decision of the Federal Labour Court, see the critical note by
SEIFERT A., in: AuR 2000, p. 228 et seq. The 1996 decision of the Bundesverfassungsgericht
has also been affirmed by Landgericht Bonn (note 22), sub A.I.4. and Landgericht Bremen
(note 22), sub 2.3. in cases concerning governmental liability and by the Landgericht
Stuttgart (note 20), p. 242 et seq., in a case concerning a private company.
29
Bundesarbeitsgericht (note 28), p. 386.
30
Landesarbeitsgericht Hessen (Regional Labour Court of Appeals Hesse), 16 July
1999, in: AuR 1999, p. 450; Landesarbeitsgericht München, 2 August 1999, in: AuR 1999,
p. 449; Landesarbeitsgericht Nürnberg, 18 August 1999, in: AuR 1999, p. 405 (headnote);
Arbeitsgericht (Labour Court) Koblenz, 7 July 1999, in: NJW 1999, p. 2838 (a judgment
which contains [at p. 2839, sub 8] language and arguments rightly condemned as
‘incomprehensible’ by SAFFERLING C.J.M. [note 14], p. 1923, note 10 and as ‘scandalous’ by
KLIMPE-AUERBACH W., ‘Keine Aufrechnung von Zwangsarbeit’, in: AuR 1999, p. 436);
Arbeitsgericht Hannover, 5 August 1999, in: AuR 1999, p. 451. Further unpublished
decisions are reported by PAWLITA C. (note 22).
31
Bundesverfassungsgericht (note 3), p. 330 et seq.; Bundesarbeitsgericht (note 28),
p. 386.
32
Cf. the doubts expressed by the Landgericht Stuttgart (note 20), p. 246.

192 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

Act.33 On the other hand, the court was well aware that the applicability of German
substantive law could not be taken for granted, which is demonstrated by its dis-
cussion of the principle of territoriality and the spatial scope of German public law
in annexed Poland.34 Especially interesting is its rather cryptic reproach to the
lower court: ‘The regional court did not consider whether the cases before us, in
which German sovereign power was exercised on foreign territory, suggest that the
Federal Republic of Germany cannot invoke the potential inapplicability of
German law.’35 The post-1996 decisions of German lower courts on governmental
liability for war-related torts start by determining the applicable law.36 This
approach is correct. In the context of its decision, the Constitutional Court applied
‘national law’ as opposed to public international law. Since private international
law is also a part of the ‘national law’ of a given State and not of public inter-
national law,37 the notion ‘national law’ should be interpreted as comprising
conflicts rules as well.
Nonetheless, it should be kept in mind that the 1996 decision does not
question the right of States to waive individual tort claims of their nationals.38
Consequently, the Constitutional Court left open the possibility of individual
claims being excluded by bi- or multilateral agreements.39 Therefore, courts still
faced the problem whether individual claims were barred by Article 5(2) of the
London Agreement.40 The Supreme Administrative Court of North-Rhine-
Westphalia answered this question in the negative in 1997.41 The court argued that
the condition set forth in Article 5(2) of the London Agreement, namely the final
settlement of the question of reparations, had been met by the so-called Two-Plus-
Four Treaty concluded between the former Allies, the F.R.G. and the German
Democratic Republic (GDR) in September 1990 to pave the way for German

33
Bundesverfassungsgericht (note 3), p. 331; see also Oberlandesgericht Hamm
(note 6), p. 3579. On this act see infra III.B.2.
34
Bundesverfassungsgericht (note 3), pp. 323-325.
35
Bundesverfassungsgericht (note 3), pp. 324 et seq.
36
Oberlandesgericht Köln (note 3), p. 253; ID. (note 9), p. 18; cf. for claims against
the Dresdner Bank Landgericht Frankfurt am Main 27 April 2000 – 2-19 O 161/99,
<http://www.landgericht.frankfurt-main.de/ZS_Entsch_Lang(PKHKH).htm>.
37
Bundesverfassungsgericht, 4 May 1971, in: BVerfGE, Vol. 31, p. 58, at p. 73; for a
discussion and further references see VON HEIN J., Das Günstigkeitsprinzip im Interna-
tionalen Deliktsrecht, Tübingen 1999, p. 47.
38
Bundesverfassungsgericht (note 3), p. 330. On the pertinent treaties see, e.g.,
HESS B. 1993 (note 22), p. 607; PAWLITA C., P. 432 et seq. (note 22); Burger-Fischer
(note 14), pp. 266-269; Iwanowa (note 14), p. 468. For a critique see SAFFERLING C.J.M.
(note 14), p. 1924; SCHRÖDER R. (note 3), p. 71.
39
Bundesverfassungsgericht (note 3), p. 333 et seq.
40
Supra note 24.
41
Oberverwaltungsgericht Münster (note 3).

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 Jan von Hein

reunification.42 The court conceded that the Two-Plus-Four Treaty does not
constitute a peace treaty as this term is commonly defined.43 It also pointed out that
the Treaty did not explicitly mention the subject of reparations.44 Nevertheless, the
court interpreted the Two-Plus-Four Treaty as being intended to be the final word
on the German question and related matters of occupation.45 Thus, the court
considered it evident that there will never be a comprehensive peace treaty in the
traditional sense.46 Therefore, according to the court, the question of reparations is
settled and individual claims are no longer barred by Article 5(2) of the London
Agreement.47
However, some important caveats have to be added to this controversial
decision. First of all, the German government still clings to the official stance that
the Two-Plus-Four Treaty had no impact whatsoever on the moratorium fixed in
the London Agreement,48 a position that enjoys considerable academic support.49
This attitude is not expected to change, unless this question is authoritatively and
formally settled.50 It should be mentioned that the subject of formal reparation

42
Vertrag über die abschließende Regelung in bezug auf Deutschland, 12 Septem-
ber 1990, in: BGBl. 1990, part II, p. 1318.
43
Oberverwaltungsgericht Münster (note 3), p. 2303. The Federal German govern-
ment did everything it could not to conclude a peace treaty precisely because it wanted to
avoid resuscitating the question of reparations, see DOLZER R., ‘Reparationspflicht ohne
Ende?’, in: NJW 2000, p. 2480 et seq., at p. 2481; OBERHAMMER P./REINISCH A. (note 20),
p. 214.
44
Oberverwaltungsgericht Münster (note 3), p. 2302.
45
Oberverwaltungsgericht Münster (note 3), p. 2302.
46
Oberverwaltungsgericht Münster (note 3), p. 2303.
47
Oberverwaltungsgericht Münster (note 3), p. 2302; concurring: Landgericht Bonn
(note 22), sub A.I.5; Landgericht Bremen (note 22), sub 2.4; Landgericht Stuttgart (note 20),
p. 245 et seq.; Landgericht Berlin, 1 February 2000, NJW 2000, p. 1958 (inferring that the
three-year period fixed by the statute of limitations started to run in 1990); BRÜGMANN C.
(note 20), p. 187; FRAUENDORF L. (note 22), p. 5; PAECH N. (note 9), p. 391; PAWLITA C.
(note 22), p. 430; cf. also SCHRÖDER R. (note 3), p. 126.
48
Cf. the arguments advanced by the F.R.G. in Oberlandesgericht Köln (note 9),
p. 6.
49
See BRODESSER H.-J./FEHN B. J./FRANOSCH T./ WIRTH W. (note 20), p. 186;
HAHN H.-J. (note 6), p. 3521 et seq.; HESS B. 1999 (note 22), p. 151; but cf. DOLZER R.
(note 43), p. 2481, who argues that, according to the principle of good faith and fair dealing,
the F.R.G. should be entitled to regard the 2+4 Treaty as the final settlement of reparation
claims.
50
Cf. GEBAUER M./SCHULZE G. (note 14), p. 481, note 40 (‘an open question’). The
Federal Constitutional Court, however, does not seem to be eager to pick up this issue
because it does not involve the interpretation of customary international law, cf. Bundes-
verfassungsgericht (note 3). Under German constitutional law, international treaties have to
be interpreted by the ordinary courts, ibid.

194 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

claims was officially raised by the U.S. in the negotiations concerning the Forced
Labour Agreement.51 This unexpected threat led to surprised, not to say frightened
reactions among German politicians.52 Eventually, Article 3 of the Forced Labour
Agreement provided that the U.S. ‘will not raise any reparation claims’ against the
F.R.G.53 This pactum de non petendo and the circumstances surrounding its genesis
lend support to the thesis that, at least from the American point of view, reparation
claims were not already definitively settled in the Two-Plus-Four Treaty. More-
over, it is doubtful whether anything at all can be deduced from the Two-Plus-Four
Treaty as far as non-signatory States are concerned.54
With these reservations, the decisions of the Federal Constitutional Court
and those of the Supreme Administrative Court of North-Rhine-Westphalia opened
the door to the private litigation of war-related claims in German courts.

III. Basic Features of German Substantive Law

A. Governmental Liability in General

The German substantive law of governmental liability can only be understood in an

historical perspective.55 From the theoretical point of view, there are four models
for determining compensation for an illegal and culpable act of a civil servant.56

(1) First, it is possible to make only the civil servant liable for the consequences
of his act. The State is not implicated.

51
Cf. DOLZER R. (note 43); HAHN H.-J. (note 6), p. 3522; see also ‘Vorschlag der
USA im Streit um Reparationen’, in: Süddeutsche Zeitung, 13 May 2000, p. 5.
52
See ‘Heye: Reparationsfrage ist für Berlin geklärt’, in: Süddeutsche Zeitung,
11 March 2000, p. 5.
53
Supra, note 16.
54
Cf. the skepticism expressed in Oberlandesgericht Köln (note 9), p. 16 et seq.,
with regard to Greece; but cf. Landgericht Stuttgart (note 20), p. 246, with regard to Poland.
55
OSSENBÜHL F., Staatshaftungsrecht, 5th ed., München 1998, p. 6. For descriptions
of German law in English see DEPENHEUER O., ‘Governmental Liability in Germany’, in:
Comparative Studies on Governmental Liability in East and Southeast Asia, ed. by YONG
ZHANG, Den Haag/London/Boston 1999, pp. 173-199; EÖRSI G., ‘Private and Governmental
Liability for the Torts of Employees and Organs’, in: IECL, Vol. XI, Ch. 4,
Tübingen/Den Haag/Paris 1975, paras. 212-223; RÜFNER W., ‘Basic Elements of German
Law on State Liability’, in: Governmental Liability: A Comparative Study, ed. by
BELL J./BRADLEY A. W., London 1991, pp. 249-274, reviewed by NEITZEL J., in: RabelsZ
1995, pp. 169-174, at p. 172 et seq.
56
Cf. OSSENBÜHL F. (note 55), p. 7.

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 Jan von Hein

(2) The opposite model consists of the direct liability of the State for a tortious
act committed by an official while exonerating the latter from responsibility
towards the injured party (direct governmental liability).

(3) Thirdly, the civil servant and the State are both liable (cumulation).

(4) A fourth model uses the personal liability of the official as a starting point;
however, the State then assumes this liability (assumption). This derivative
form of governmental liability is called Amtshaftung in German.

In nineteenth century Germany, the first model was widely preferred because the
relationship between the State and its officials was classified as a kind of private
mandate.57 Consequently, the State as mandator could not be held accountable for
the torts the mandatory – the civil servant – committed contra mandatum.58 This
theory left its traces in the German Civil Code, the Bürgerliches Gesetzbuch
(BGB), which came into force in 1900.59 § 839(1), 1st sentence BGB provides that
an official who intentionally or negligently violates his official duty towards a third
party must compensate this party for the resulting damage. The position of this
provision in the code reflects a characteristic ambivalence of the German law: On
the one hand, the rule was placed in the chapter dealing with torts in general
(§§ 823 et seq. BGB); on the other, the liability of an official should not be
governed by the general rules on torts, but by the special provision in § 839 BGB.
Apart from that, at the end of the nineteenth century, the opinion gained
ground that the traditional mandate theory was utterly unsatisfactory.60 However,
the federal legislator lacked the competence to introduce a direct or even a
derivative form of governmental liability.61 As a result, Article 77 of the Introduc-
tory Law to the Civil Code (EGBGB 1900) left the matter to the states, which
subsequently enacted laws providing for the assumption of an official’s liability by
the respective state.62 In 1919, Article 131 of the Weimar Constitution (WRV)
adopted this derivative form of governmental liability for the entire Reich. It also
provided that the ordinary (civil) courts, not the administrative courts were
competent to deal with cases involving governmental liability (Article 131,
3rd sentence WRV). In spite of the disrespect of the national socialist regime for the
Weimar Constitution, Article 131 WRV continued to be applied by German courts

57
OSSENBÜHL F. (note 55), p. 7 et seq.
58
OSSENBÜHL F. (note 55), p. 7 et seq.
59
Bürgerliches Gesetzbuch, 18 August 1896, in: RGBl. 1896, part I, p. 195, in force
since 1 January 1900, as amended.
60
Cf. OSSENBÜHL F. (note 55), p. 8.
61
OSSENBÜHL F. (note 55), p. 8 et seq.
62
OSSENBÜHL F. (note 55), p. 9.

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 Governmental Liability for Violations of Human Rights

during the Third Reich.63 In 1949, this provision was replaced by the nearly
identical Article 34 of the German Grundgesetz (Basic Law, i.e., Constitution). As
a matter of intertemporal law, however, Article 131 WRV remains applicable to
torts committed by officials in World War II. 64

B. Special Substantive Rules Dealing with Compensation for Wrongs

Inflicted during Wartime

1. Federal Compensation Act

With regard to torts relating to national socialist persecution, the common

provisions applicable to governmental liability are superseded by special
substantive rules that fall into two categories.65 While one set of rules aims to
compensate victims of National Socialism for deprivations of their life, liberty,
health or career, a second set deals with the restitution of assets confiscated by the
national socialist regime. The first type of rules is found in the Federal Compensa-
tion Act (Bundesentschädigungsgesetz–BEG),66 the second type in the Federal
Restitution Act.67 Claims of slave labourers or victims of massacres such as those
committed by German troops in Distomon or Kalavrita clearly have to be classified
as claims for compensation.68 The BEG does not, however, contain a comprehen-
sive legal solution for all groups of victims. On the contrary, it is limited both in its
personal and territorial scope. Compensation under the BEG is restricted to persons
who suffered as a result of persecution by the Nazis on certain grounds, such as
race, religion or Weltanschauung (§ 1 BEG). Forced labour as such does not

63
Reichsgericht (Supreme Court of the German Empire), 17 November 1936, in:
RGZ, Vol. 152, p. 385 et seq.; 17 February 1939, in: RGZ, Vol. 160, p. 193, at p. 196;
KÄMMERER J.A. (note 9), p. 310.
64
Oberlandesgericht Köln (note 3), p. 253; Landgericht Bremen (note 22), sub 2.3;
TOMUSCHAT Chr. (note 22), p. 238. This is frequently overlooked, e.g., by Oberver-
waltungsgericht Münster (note 3), p. 2305.
65
For a survey of German compensation law and policies after World War II, see
BRÜGMANN C. (note 20), pp. 180-184; HESS B., Intertemporales Privatrecht, Tübingen
1998, pp. 260-262; ID. 1999 (note 22), p. 150; KÜPPER H. (note 22), pp. 246-248;
PAWLITA C. (note 22), pp. 427-429; SCHRÖDER R. (note 3), pp. 68-72.
66
Bundesentschädigungsgesetz, 29 June 1956, in: BGBl. 1956, part I, p. 562, as
amended.
67
Bundesrückerstattungsgesetz, 19 July 1957, in: BGBl. 1957, part I, p. 734,
reenacted 24 March 1958, in: BGBl. 1958, part I, p. 141, as amended.
68
Cf. HESS B., in AG 1999 (note 22), p. 150 (concerning forced labour).

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 Jan von Hein

constitute a ground for a claim under the BEG.69 Even more restrictive is the
territorial limitation of the BEG, which is applicable only to German nationals and
stateless persons (§§ 4, 167 et seq. BEG, Article VI BEG-Schlußgesetz).70 The
indemnification of foreign nationals was dealt with in various lump sum
agreements concluded between the F.R.G. and other nations.71 The provisions of
the BEG are leges speciales which supersede the general rules on governmental
liability.72

2. Law on the Creation of the Foundation ‘Remembrance, Responsibility

and the Future’

As mentioned in the introduction, claims of former forced and slave labourers are
now governed exclusively by the Foundation Law.73 § 11(1) of the Foundation Law
provides:

‘Eligible under this Law are:

1. Persons who were held in a concentration camp as defined in
Section 42, Paragraph 2 of the German Federal Compensation Act or
in another place of confinement outside the territory of what is now
the Republic of Austria or a ghetto under comparable conditions and
were subjected to forced labor;
2. Persons who were deported from their homelands into the territory
of the German Reich (according to the borders of 1937) or to a
German-occupied area, subjected to forced labor in a commercial
enterprise or for public authorities there, and held under conditions
other than those mentioned in Number 1, or were subjected to
conditions resembling imprisonment or similar extremely harsh
living conditions; this rule does not apply to persons who because
their forced labor was performed primarily in the territory of what is

69
Cf. HESS B., in AG 1999 (note 22), p. 150, who calls this a fundamental lack of
justice (‘nachhaltige Gerechtigkeitslücke’); KÜPPER H. (note 22), p. 247; SAFFERLING C.J.M.
(note 14), p. 1923; SCHRÖDER R. (note 3), p. 72.
70
BEG-Schlußgesetz, 14 September 1965, in: BGBl. 1965, part I, p. 1315.
71
Cf. BRÜGMANN C. (note 20), p. 182; HESS B., in AG 1999 (note 22), p. 150;
KÜPPER H. (note 22), p. 249; SCHRÖDER R. (note 3), p. 72, all with further references. As a
recent example, see the so-called Princz settlement between the FRG and the USA,
19 September 1995, 1995 FCSC Ann. Rep. 11 et seq. SAFFERLING C.J.M. (note 14), p. 1924
criticizes lump sum agreements for what he perceives as their ‘arbitrariness’ with regard to
the individual claims of the victims. This criticism neglects that an expeditious out-of-court
settlement is often in the best interest of the aged victims.
72
Oberlandesgericht Köln (note 3), p. 253.
73
See supra, note 6.

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 Governmental Liability for Violations of Human Rights

now the Republic of Austria can receive payments from the Austrian
Reconciliation Foundation;
3. Persons who suffered property loss as a consequence of racial
persecution with essential, direct, and harm-causing collaboration of
German businesses as defined by the laws on indemnification and
who could not receive any payment or could not file their claims for
return or compensation by the deadline because they either did not
meet the residency requirements of the Federal Compensation Act or
had their domicile or permanent residence in an area with whose
Government the Federal Republic did not maintain diplomatic
relations, […].’

§ 16 (1) of the Foundation Law provides:

‘Payments from public funds, including social security, and from

German business enterprises for injustice suffered under National
Socialism as defined in § 11 may be claimed only under the terms of
this Law. Any further claims in connection with National Socialist
injustices are excluded. This applies also to cases in which claims
have been transferred to third persons by operation of law, transition,
or a legal transaction.’

The exclusion of other claims is constitutional.74 Given the considerable legal

difficulties plaintiffs faced under the law as it stood before August 2000, the
Foundation Law on the whole improves the situation of the victims.
§ 11(1) of the Foundation Law defines not only the personal, but also the
spatial scope of the Law: If, for example, a person was deported to a German-
occupied area and subjected to forced labour there, his or her claims are governed
exclusively by the Foundation Law, regardless of the substantive law that would
otherwise apply under ordinary choice-of-law rules. In this respect, the Foundation
Law is a loi d’application immédiate, a mandatory rule in the international sense.
For the reasons cited in the introduction, the ordinary choice-of-law rules are
analysed below; however, the reader should always keep in mind that the issue of
forced labour has now been settled in the Foundation Law. Moreover, it should be
noted that claims such as those filed by the Distomon victims are not covered by
the Foundation Law.

74
See the decisions cited in note 6.

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 Jan von Hein

IV. The Law Applicable to Governmental Liability

A. German Choice-of-Law Rules for Torts: A Survey

1. The Basic Rule for Torts in General: Lex Loci Delicti

The German private international law of torts has only recently been codified in a
comprehensive fashion.75 As a matter of intertemporal law, however, the pre-1999
conflicts rules remain applicable to torts committed before 1 June 1999.76 The
original EGBGB contained only one conflicts rule concerning torts, Article 12
EGBGB 1900, which was a special provision on public policy.77
Article 12 EGBGB 1900 shielded Germans who were sued at home for torts
committed abroad from higher liability under foreign law by fixing the amount the
plaintiff could receive under German law as an insurmountable ceiling. It was
generally accepted that this rule presupposed that torts should, in general, be
governed by the lex loci delicti.78 Although Article 12 EGBGB 1900 was

75
Gesetz zum Internationalen Privatrecht für außervertragliche Schuldverhältnisse
und für Sachen, 21 May 1999, in: BGBl. 1999, part I, p. 1026, in force since 1 June 1999.
An introduction to the new law in English is given by HAY P., ‘From Rule-Orientation to
Approach in German Conflicts Law – The Effect of the 1986 and 1999 Codification’, in:
Am. J. Comp. L. 1999, pp. 633-649. For French readers, the article is recommended by
SONNENBERGER H.-J., ‘La loi allemande du 21 mai 1999 sur le droit international privé des
obligations non contractuelles et des biens’, in: Rev. crit. dr. int. pr. 1999, pp. 647-668.
76
See Landgericht Frankfurt (note 36) for claims of former inmates of concentration
camps against the Dresdner Bank; on the intertemporal aspects of the new law in general,
see HELDRICH A., in: PALANDT O., Bürgerliches Gesetzbuch, 60th ed., München 2001, Vor
Art. 38 EGBGB, para. 1; HOHLOCH G., in: ERMAN W., Handkommentar zum Bürgerlichen
Gesetzbuch, 10th ed., Münster/Köln 2000, Vol. 2, Art. 40 EGBGB, para. 19.
77
The reform of 1986 turned the provision into Article 38 EGBGB without changing
its content. The 1999 reform replaced it with a more flexible and non-chauvinistic public
policy exception (Article 40(3) EGBGB). On this new provision, see KROPHOLLER J./
VON HEIN J., ‘Spezielle Vorbehaltsklauseln im Internationalen Privat- und Verfahrensrecht
der unerlaubten Handlungen – Weniger ist mehr’, in: Festschrift für Hans Stoll (forthcoming
in 2001), with numerous further references.
78
Bundesgerichtshof, 5 October 1976, in: NJW 1977, p. 496, at p. 497 = IPRspr.
1976, No. 17; 8 January 1981, in: BGHZ, Vol. 80, p. 1, at p. 3 = IPRspr. 1981, No. 24;
7 July 1992, in: BGHZ, Vol. 119, p. 137, at p. 139 (= IPRspr. 1992, No. 58); HELDRICH A.,
in: PALANDT O., Bürgerliches Gesetzbuch, 58th ed., München 1999, Art. 38 EGBGB, para. 1;
VON HOFFMANN B., in: VON STAUDINGER J., Kommentar zum BGB mit EGBGB und
Nebengesetzen, 13th ed., Berlin/New York 1998, EGBGB/IPR, Art. 38 EGBGB, para. 111;
KREUZER K., in: Münchener Kommentar zum BGB, 3rd ed., München 1998, Vol. 10, Art. 38
EGBGB, para.12; LÜDERITZ A., in: SOERGEL H. Th., Bürgerliches Gesetzbuch mit EGBGB
und Nebengesetzen, 12th ed., Stuttgart 1996, Art. 38 EGBGB, para. 3; WENGLER W.,
Internationales Privatrecht, Berlin/New York 1981, Vol. 1, p. 454.

200 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

regrettably chauvinistic,79 it at least represented – in its implicit recognition of the

lex loci delicti – progress compared with the view held by VON SAVIGNY, who had
advocated exclusive application of the lex fori to torts because of the ‘mandatory,
strictly positive’ nature of delictual provisions.80 As in ordinary tort cases, the
Bundesgerichtshof extended the protection of Article 12 EGBGB 1900 to
companies sued by former slave labourers.81
Even in ordinary tort cases where Article 12 EGBGB 1900 could not be
invoked, the application of foreign law by German courts was seriously diminished
by the definition of locus delicti given by the German courts. Ever since an 1888
decision by the Reichsgericht, German courts considered the place of a tort as
comprising both the place of acting and the place of injury.82 German judges
usually did not hesitate to find at least one spatial connection of the case with
Germany, which could be classified either as the place of acting or of injury.83 If
the plaintiff did not make a choice between the place of acting and the place of
injury, the court would have to determine ex officio which of the two (or more)84
laws in question was more favourable to the victim.85 This inquiry very often led to
German substantive law.86 The recent reform codified the principle of lex loci
delicti in Article 40(1) EGBGB 1999: The law of the place of acting is to be
applied unless the victim chooses the law of the place of injury.

2. Content of the Lex Loci Delicti in Annexed and Occupied Territories

Determining the lex loci delicti is complicated by the fact that German law was put
into force in the annexed territories.87 For example, the Polish towns of Auschwitz

79
Cf. HAY P. (note 75), p. 637.
80
VON SAVIGNY F.C., System des heutigen römischen Rechts, Vol. VIII, Berlin 1849,
pp. 278-280.
81
Bundesgerichtshof, 12 December 1957, in: VersR 1958, p. 109 = IPRspr. 1956–
57, No. 40.
82
Reichsgericht, 20 November 1888, in: RGZ, Vol. 23, p. 305. For an extensive
discussion of the genesis of the so-called theory of ubiquity, cf. VON HEIN J. (note 37),
pp. 40-46.
83
Cf. VON BAR Chr., ‘Grundfragen des Internationalen Deliktsrechts’, in: JZ 1985,
pp. 961-969, at p. 962-964.
84
Cf. Reichsgericht, 16 May 1925, Das Recht, Vol. 29 (1925), No. 1274 (p. 404),
ordering the lower court to compare the laws of Germany, Mexico and New York.
85
On the determination of the more favorable law, see VON HEIN J. (note 37), pp. 78-
87, 222-251.
86
VON BAR Chr. (note 83) calls this a ‘lex-fori approach in disguise’ (my translation).
87
On this problem, see Bundesverfassungsgericht (note 3), p. 324; Landgericht
Frankfurt am Main, 10 June 1953 – 2/3 O 406/51 (Wollheim ./. IG Farben), p. 27 (a copy of

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 Jan von Hein

and Monowitz and their adjacent concentration camps were situated outside the
frontiers of Germany as they stood in 1937, but were integrated into the Reich
(District Kattowitz in the Province Silesia) by virtue of a decree in 1939.88 While
the 1939 decree did not totally abolish Polish civil law, a 1941 ordinance intro-
duced the German Civil Code into the annexed eastern territories.89 It is unani-
mously accepted that the annexation of Poland was legally null and void under
public international law.90 Nevertheless, the Regional Courts in Frankfurt/Main and
in Stuttgart have expressed the opinion in forced labour cases that, as a matter of
fact, German civil law constitutes the lex loci delicti applicable to torts committed
by companies in Poland in World War II.91 This is in keeping with the view of the
Federal Supreme Court and of eminent German scholars that, for the purposes of
private international law, it is the factual observance of rules in a given territory
that should count rather than their valid enactment under public international law.92
On the other hand, the Federal Supreme Court ruled in a 1957 forced labour case

the original decision can be downloaded at <http://alf.zfn.uni-bremen.de/zwangsar/

dokumentation>; on this historic lawsuit, see [in detail] BENZ W., ‘Der Wollheim-Prozeß.
Zwangsarbeit für die IG Farben in Auschwitz’, in: Wiedergutmachung in der Bundesre-
publik Deutschland, ed. by HERBST L./GOSCHLER C., Munich 1989, pp. 303-326 and [in a
nutshell] SCHRÖDER R. [note 3], p. 69); ID. (note 36); Landgericht Stuttgart (note 20), p. 246.
88
Erlaß des Führers und Reichskanzlers über Gliederung und Verwaltung der
Ostgebiete, 8 October 1939, in: RGBl. 1939, part I, p. 2042.
89
§ 1 of the Ost-Rechtspflegeverordnung, 25 September 1941, in: RGBl. 1941,
part I, p. 597.
90
Bundesverfassungsgericht (note 3), p. 324; Landgericht Frankfurt (note 87), p. 27;
ID. (note 36); Landgericht Stuttgart (note 20), p. 243; RANDELZHOFER A./DÖRR O., p. 13 et
seq.; TOMUSCHAT Chr., p. 237 (both note 3).
91
Landgericht Frankfurt (note 87), p. 27; ID. (note 36); Landgericht Stuttgart
(note 20), p. 246.
92
Bundesgerichtshof (note 1), sub 2 (concerning the application of German company
law to a company having its seat in Alsace, France during 1943-45); ENGEL Chr., ‘Die
Bedeutung völkerrechtlicher Anerkennungen für das Internationale Privatrecht’, in:
Festschrift für Dietrich Rothoeft, München 1994, pp. 87-96; KEGEL G., in: SOERGEL
(note 78), Before Art. 3 EGBGB, para. 190; KEGEL G./SCHURIG K., Internationales
Privatrecht, 8th ed., München 2000, § 1 IV 1 a and § 1 IV 2 b; KROPHOLLER J., Internatio-
nales Privatrecht, 4th ed., Tübingen 2001, § 8 II 2; SONNENBERGER H.-J., in: Münchener
Kommentar (note 78), Einl. IPR (General Introduction), para. 118. But see the reservations
expressed by WENGLER W., ‘Fragen der Faktizität und Legitimität bei der Anwendung
fremden Rechts’, in: Festschrift Hans Lewald, Basle 1953, pp. 615-632; ID. (note 78), Vol. I,
pp. 287-290. Cf., moreover, the skepticism in Bundesverfassungsgericht (note 3), p. 324
(concerning administrative law). For cases after World War II see the discussion in
BAADE H. W., ‘Operation of Foreign Public Law’, in: IECL, Vol. III, Ch. 12, Tübingen/
Dordrecht/Boston/Lancaster 1991, para. 21.

202 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

that the lex loci delicti applicable to a tort committed by a company in Western
Galicia (Poland) was Polish law, subject, however, to Article 12 EGBGB 1900.93
Although respect for factual observance may be a sound rule in general, it is
highly doubtful whether it can be applied to claims against the Reich (i.e., the
F.R.G.) as opposed to claims against private parties. The rationale for giving
priority to factual observance over the legal validity of civil law rules is to protect
the legitimate expectations of private parties: Marriages, incorporations of com-
panies, contracts etc. should not be considered void ex post because the parties per-
forming those acts could not avoid complying with rules that had been enacted
illegally at the time.94 Within the paradigm of lex loci delicti, the annexing State,
however, is not entitled to the protection of legitimate expectations insofar as these
are based on rules that the aggressor itself enacted in the annexed territory. The
aggressor should not be allowed to create an illegal situation and then to rely on it.
But even if the view is taken that the lex loci delicti applicable to torts in the
annexed territories should be the pre-annexation civil law of those countries, the
question arises whether governmental liability is subject to the lex loci delicti at all.
Under German private international law, lex loci delicti is not an absolute rule; on
the contrary, it is restricted by numerous exceptions that will be described below.

3. Deviations from the Lex Loci Delicti

A deviation from the lex loci delicti was introduced in a 1942 Decree Law:95
German law should apply to non-contractual claims for damages that arose from
torts committed by a German to a German abroad (§ 1, para. 1 of the 1942 Decree
Law). This rule was created to ensure that members of the German military did not
have to face claims emanating from an unknown lex loci delicti if both the
tortfeasor and the victim were German. Despite its unsavoury origin, this provision
was still regarded as being good law by German courts after 1945.96 It was replaced
by a similar provision in 1999 (Article 40(2) EGBGB 1999), which replaced com-
mon nationality by common habitual residence, thus codifying an earlier develop-

93
Bundesgerichtshof (note 81). Western Galicia, however, was not formally annexed
as part of the Reich, but ruled as part of a ‘Generalgouvernement’ under Governor Hans
Frank (see the maps in: KINDER H./HILGERMANN W., dtv-Atlas zur Weltgeschichte, 16th ed.,
München 1981, Vol. 2, p. 154).
94
See the convincing arguments advanced by Bundesgerichtshof (note 1), sub 2 and
by BAADE H. W. (note 92).
95
Verordnung über die Rechtsanwendung bei Schädigungen deutscher Staats-
angehöriger außerhalb des Reichgebiets, 7 December 1942, in: RGBl. 1942, part. I, p. 706.
96
Bundesgerichtshof (Federal Supreme Court) 2 February, 1961, in: BGHZ, Vol. 34,
p. 222 = IPRspr. 1960–61, No. 47a; 8 March, 1983, in: BGHZ, Vol. 87, p. 95 = IPRspr.
1983, No. 31.

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 Jan von Hein

ment in German jurisprudence.97 Although the 1942 Decree Law was probably not
intended by the historic legislator to apply to claims of victims of National
Socialism, nothing in the language of the Act prohibits such application.98 Conse-
quently, tortious claims by German victims against German companies for com-
pensation for forced labour are governed by German substantive law, regardless of
where the tort was committed.99 The Bundesgerichtshof applied the 1942 Decree
Law not only to claims against private parties, but also to claims against the
government.100
Moreover, the victim and the tortfeasor could – explicitly or tacitly – agree
on the applicable law after the tort had been committed.101 This restrictive
recognition of party autonomy was also codified in 1999 (Article 42 EGBGB
1999).102
While the above-mentioned rules of the 1999 reform law more or less
codified what had previously been recognised as existing law, Article 41(2) No. 1
EGBGB 1999 introduced the possibility of making conflicts in tort ‘accessory’ to a
pre-existing legal or factual relationship between the parties. Although such a
solution had gained ground among German scholars since the late 1960’s,103 it had
consistently been rejected by German courts prior to the 1999 reform.104 Apparently
influenced by this scepticism, the legislator did not codify an accessory choice of
law as a hard-and-fast rule, but merely as a guideline for the court when exercising
its discretion regarding the principle of proximity (Article 41(1) EGBGB 1999).

97
Bundesgerichtshof, 7 July 1992 (note 78).
98
See Landgericht Frankfurt (note 87), p. 27.
99
Ibid.
100
Bundesgerichtshof 22 October 1981, in: VersR 1982, p. 185 = IPRspr. 1981,
No. 28 (in a case involving an accident in a NATO school in the Netherlands).
101
Landgericht Frankfurt (note 87), p. 27.
102
See VON HEIN J., ‘Rechtswahlfreiheit im internationalen Deliktsrecht’, in: RabelsZ
2000, pp. 595-613.
103
See the fundamental analysis by KROPHOLLER J., ‘Ein Anknüpfungssystem für das
Deliktsstatut’, in: RabelsZ 1969, pp. 601-653, at pp. 625-634; for a survey of the state of the
discussion before the 1999 reform, see VON STAUDINGER J./VON HOFFMANN B. (note 78),
Art. 38 EGBGB, paras. 135-144.
104
See Bundesgerichtshof, 28 March 1961, in: VersR 1961, p. 518; ID., 7 July 1992
(note 78), pp. 145-147; ID., 28 January 1996, in: BGHZ 132, p. 105 = IPRspr. 1996,
No. 142; Oberlandesgericht Karlsruhe, 23 November 1993, in: IPRspr. 1994, No. 46.

204 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

B. Special Rules for Governmental Liability: The Current State of the

Discussion in Germany (with a Side Reference to Austria)

1. Characterisation of War-Related Human Rights Violations

According to the prevailing view in Germany, governmental liability for sovereign

or public acts is subject to the substantive law of the State claimed to be liable
rather than to the ordinary rules of private international law for torts.105
Consequently, the first question that arises is which law shall apply when
characterising the act giving rise to a claim based on governmental liability. Law A
might characterise a certain act as a sovereign or public act (actum iure imperii),
while law B might qualify the same act as merely resulting in an ordinary case of
private tortious liability (actum iure gestionis). A case in point is the liability of a
negligent teacher for an accident of one of his or her students while the class is
travelling abroad.106 Whereas German substantive law would characterise the
teacher’s duties as being of a sovereign or public nature, thus potentially giving
rise to governmental liability,107 other European substantive laws would regard the
case as a purely private one for which no special conflicts rules are required.
Within the framework of the Brussels Convention, an autonomous characterisation
is mandatory.108 In German conflict of laws, which follows public international law
on state immunity,109 characterisation has to be carried out pursuant to the lex
fori.110 It is widely accepted, however, that the characterisation of a certain act does
not merely reflect the structures and boundaries established in German substantive
law. Characterisation is rather seen as a specific choice-of-law process that follows
functional teleological criteria.111 With regard to the distinction between public and

105
See the detailed references infra. For private acts (acta iure gestionis), the rules
described supra sub A. apply, see ERMAN W./HOHLOCH G. (note 76), Art. 40 EGBGB,
para. 58; MünchKomm/KREUZER K. (note 78), Art. 38 EGBGB, para. 277; KROPHOLLER J.
(note 92), § 53 IV 7 c; PALANDT O./HELDRICH A. (note 76), Art. 40 EGBGB, para. 16;
SOERGEL H. Th./LÜDERITZ A. (note 78), Art. 38 EGBGB, para. 70; VON STAUDINGER J./
VON HOFFMANN B. (note 78), Art. 38 EGBGB, para. 228b.
106
Cf. ECJ, 21 April 1993 – 172/91 (Sonntag v. Waidmann), in: ECR 1993, I-1963;
on this case, see HESS B., ‘Amtshaftung als "Zivilsache" im Sinne von Art. 1 Abs. 1
EuGVÜ’, in: IPRax 1994, pp.10-17 and the note by KUBIS S., in: ZEuP 1995, pp. 853-863.
107
Cf. Bundesgerichtshof, 16 September 1993, in: BGHZ, Vol. 123, p. 268.
108
ECJ (note 106), para. 25; HESS B. (note 106), p. 11 et seq.; KROPHOLLER J.,
Europäisches Zivilprozeßrecht, 6th ed., Heidelberg 1998, Art. 1, para. 8; KUBIS S. (note 106),
p. 857.
109
SEIDL-HOHENVELDERN I./STEIN Th., Völkerrecht, 10th ed., Köln 2000, para. 1476.
110
VON STAUDINGER J./VON HOFFMANN B. (note 78), Art. 38 EGBGB, para. 228c.
111
KROPHOLLER J. (note 92), § 17.

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 Jan von Hein

private governmental acts, it is the nature and appearance of an act that should
count rather than its purpose.112
In regard to torts committed by German troops (including the SS and other
special units) such as the massacre in Distomon, it is quite clear that those acts
must be characterised as acta iure imperii, although they violated international
law.113 It is a different question whether the F.R.G. can invoke its sovereign
immunity if it is sued for compensation in a foreign court (see infra 5.b).
Torts involving forced labour are harder to characterise because the victims
did not always perform their work in governmental institutions, but were often
leased to private enterprises.114 Thus, the question arises whether this commercial
context leads to a characterisation of the relevant torts as acta iure gestionis. In
order to convince the court of this classification, the plaintiff in Princz v. F.R.G.
argued that the national socialist regime ‘leased slaves for money to German
industrial concerns who in turn utilised the slaves for commercial interests’.115 The
German government countered ‘that private parties do not take or hold
prisoners’.116 The District Court did not decide the issue.117 A distinguished German
public lawyer took the opposite view that not only the acts of the Reich but also
those of the companies should be characterised as acta iure imperii since they were
acting as agencies of the Reich, not as private parties.118 This theory is implicitly

112
Bundesverfassungsgericht, 30 April 1963, in: BVerfGE Vol. 16, p. 27, at p. 62 et
seq.
113
Oberlandesgericht Köln (note 9), p. 11 et seq.; KÄMMERER J.A. (note 9), p. 310 et
seq.; PAECH N. (note 9), p. 385 et seq.; cf. also Oberster Gerichtshof (Austrian Supreme
Court), 11 April 1995, in: IPRax 1996, p. 41 with an affirmative note by SEIDL-
HOHENVELDERN I., ‘Staatenimmunität bei Kriegshandlungen’, p. 52 et seq. (bombardments
by Yugoslav aircraft characterized as acta iure imperii).
114
See, e.g., WAGNER B.C., ‘Häftlingsarbeit für die IG-Farbenindustrie in
Auschwitz-Monowitz’, in: Dachauer Hefte 16 (2000), pp. 136-158. On the question which
law should apply to delictual claims of slave labourers against their private employers, see
Bundesgerichtshof (note 81); Landgericht Frankfurt (note 87), p. 27; ID. (note 36); cf. also
Burger-Fischer (note 14), p. 272 (applying governmental interest analysis).
115
Princz v. FRG, 26 F.3d 1166 (D.C. Cir. 1994), at p. 1172; on this case, see the
notes by HEIDENBERGER P., ‘Die Praxis von US-Gerichten zur Staatenimmunität
Deutschlands’, in: ZVglRWiss. 1998, pp. 440-453; REIMANN M., ‘A Human Rights
Exception to Sovereign Immunity: Some Thoughts on Princz v. Federal Republic of
Germany’, in: 16 Mich. J. Int’l L. pp. 403-432 (1995); ZIMMERMANN A., ‘Sovereign
Immunity and Violations of International Jus Cogens – Some Critical Remarks’, in: 16
Mich. J. Int’l L. pp. 433-440 (1995).
116
Ibid.
117
Ibid.
118
DOEHRING K. (note 14), p. 69.; cf. also the classification of the Ford Werke A.G.
as de facto state actors in: Iwanowa (note 14), p. 445 et seq., with detailed references to
German jurisprudence of the 1960’s and 1970’s.

206 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

based on the assertion that companies were forced to accept slave labourers; this,
however, has long since been refuted by historians.119 Classifying private
companies as State actors would lead to the logical consequence that the liability of
both the State and the companies should be governed by German substantive law
rather than the lex loci delicti.120
German courts, however, have preferred a more analytical approach in
recent judgments. They have construed the tripartite relationship between the
victim, the government and the respective private ‘employer’ as being public in
nature insofar as claims of slave labourers against the State are concerned, but as
private in nature in regard to relationships between slave labourers and their
‘employers’.121 For the purpose of characterisation, it does not matter that both the
public and private relationships of the victims with the German State and their
employers were legally null and void.122 It is precisely this illegality which gives
rise to delictual claims.

2. Public International Law: Lack of Jurisdiction to Prescribe

German courts have consistently applied the law of the State claimed to be liable –
usually federal German law – to governmental liability cases without considering

119
See, e.g., BENZ W., p. 11 et seq.; SCHRÖDER R., P. 72 (both note 3, with further
references).
120
See GEBAUER M./SCHULZE G. (note 14), p. 481, note 33. Against that, cf.
Landgericht Frankfurt (note 87), p. 27; ID. (note 36); Bundesgerichtshof (note 81).
121
Bundesarbeitsgericht (note 28), p. 387; Oberverwaltungsgericht Münster (note 3),
p. 2305; Landgericht Bonn (note 22), sub A.I.2.a); Landgericht Stuttgart (note 20), p. 245;
see also HESS B., in: AG 1999 (note 22), p. 151 in note 97; PAWLITA C. (note 22), p. 430 et
seq.; SEIFERT A. (note 28), p. 228; this point of view is implicitly shared by
Oberlandesgericht Köln (note 3).
122
On the evident illegality of slave labour in spite of its being formally justified by
national socialist ‘law’ see unanimously Oberlandesgericht Köln (note 3), p. 253;
Landgericht Bremen (note 3), p. 634; ID. (note 22), sub 2.3; Landgericht Bonn (note 22), sub
A.I.1.; Landgericht Stuttgart (note 20), p. 243; BRÜGMANN C. (note 20), p. 186;
FRAUENDORF L. (note 22), p. 4; HESS B. (note 65), p. 412 et seq. (who considers this a case
of intertemporal public policy); KÜPPER H. (note 22), p. 250; SCHRÖDER R. (note 3), p. 120
et seq. However, for a positivist assertion of the legality of slave labour in the Third Reich,
see RANDELZHOFER A./DÖRR O. (note 3), p. 41; TOMUSCHAT Chr. (note 22), p. 238. Some
authors argued that a valid contract of employment must exist in order to support the
victims’ claims against the German pension system, e.g., SEIFERT A. (note 28), p. 228; a
‘quasi-contractual relationship’ was advocated by PAWLITA C. (note 22), p. 431; but see now
Bundesarbeitsgericht (note 28), authoritatively denying a valid contract of employment;
likewise Landgericht Stuttgart (note 20), p. 244 et seq.; on the content of national socialist
labour law see the instructive description in Bundesarbeitsgericht (note 28), p. 387 et seq.;
SCHRÖDER R. (note 3), pp. 64-68.

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 Jan von Hein

the lex loci delicti.123 Major German scholars agree with these judgments because
of what they deem to be a lack of jurisdiction to prescribe under public
international law: Pursuant to the principle of state sovereignty as recognised by
customary international law, no State may judge acta iure imperii of another.124
Consequently, these acts are not characterised as torts for the purposes of private
international law.125 The Cologne Court of Appeals recently adopted this view in
cases involving claims for forced labour and for the massacre in Distomon.126
In the reasons given for the legislative draft of the 1999 reform act, the
federal government explains:

‘The connection to the place where the tort was committed does not
encompass the extracontractual liability of States and their officials
towards private parties (governmental liability). According to the
clearly dominant view, the substantive law of the State claimed to be
liable is to be applied.’127

3. Private International Law: The Most Significant Relationship with the

Law of the State Claimed to Be Liable

a) A General Rule

Other approaches are more nuanced: Instead of merely relying on the principle of
legislative immunity, they invoke arguments of conflicts justice in order to justify

123
Explicitly Landgericht Rostock, 19 May 1995, in: IPRax 1996, p. 125 = IPRspr.
1995, No. 37 (concerning the liability of a captain of a GDR-owned ship for frustrating an
attempted flight of the plaintiff: law of GDR, not FRG applied); see obiter Bundes-
gerichtshof, 10 November 1977, in: IPRspr. 1977, No. 29 (p. 79). A detailed survey of cases
in which German courts have applied German law to governmental liability, usually without
even discussing the conflicts aspect, is given by SCHURIG K., ‘Internationalrechtliches zum
Staatshaftungsgesetz’, in: JZ 1982, pp. 385-391, at p. 386 and SOERGEL H. Th./LÜDERITZ A.
(note 78), Art. 38 EGBGB, para. 69.
124 th
VON HOFFMANN B., Internationales Privatrecht, 6 ed., Munich 2000, § 3
para. 18 (legislative immunity); VON STAUDINGER J./VON HOFFMANN B. (note 78), Art. 38
EGBGB, para. 228a; WENGLER W., p. 441 (note 78).
125
ERMAN W./HOHLOCH G., Art. 40 EGBGB, para. 58; PALANDT O./HELDRICH A.,
Art. 40 EGBGB, para. 15 (both note 76).
126
Oberlandesgericht Köln (note 3), p. 253 (forced labour); ID. (note 9), p. 18
(Distomon).
127
Entwurf eines Gesetzes zum Internationalen Privatrecht für außervertragliche
Schuldverhältnisse und für Sachen, Begründung, in: DEUTSCHER BUNDESTAG (German
Federal Parliament), Drucksachen (Materials), No. 14/343, p. 10 (1 February 1999) (my
translation).

208 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

the development of special connecting factors for governmental liability.128

According to a paradigm developed by KEGEL, which continues to exert a
considerable influence on German legal thinking, justice in the conflict of laws
requires the striking of an optimal balance between three competing interests: the
interests of the parties (Parteiinteressen), the interests of predictability and legal
security (Verkehrsinteressen) and, finally, the interest of maintaining the legal
order (Ordnungsinteresse).129 The Ordnungsinteresse comprises various elements,
such as decisional harmony (avoidance of ‘limping’ marriages etc.), a preference
for applying ‘real’ law instead of creating special substantive law for international
situations and, finally, enforceability of judgments.130
SCHURIG has suggested that the interest of a given State to determine its
own administrative organisation should be recognised as a kind of Ordnungs-
interesse, which includes the power to prescribe the legal consequences of mis-
takes made by its officials.131 This is justified by the close interdependence of
administrative law and the liability arising from its erroneous application.132
Accordingly, the lex loci delicti is discarded. From a doctrinal point of view, this
approach may be classified as a correction of the lex loci delicti by an unwritten
principle of proximity.133 In the reasons given for the legislative draft of the 1999
reform act, the federal government refused to take sides in the doctrinal
controversy between the camps of public and private international scholars:

‘Even if in a given case claims for governmental liability were to be

characterised as delictual [within the meaning of Article 40 et seq.
EGBGB 1999], Article 41 EGBGB [1999, which establishes that a
significantly closer connection with the law of another State takes
precedence over the lex loci delicti] would allow deviations from the
lex loci delicti.’134
128
On the concept of conflicts justice see KEGEL G./SCHURIG K. (note 92), § 2 I.
129
This idea was presented for the first time by KEGEL G., ‘Begriffs- und Interessen-
jurisprudenz im Internationalen Privatrecht’, in: Festschrift Hans Lewald, Basel 1953,
pp. 259-288; for the current state of the doctrine, see KEGEL G./SCHURIG K. (note 92), § 2 II.
For a detailed critique, see FLESSNER A., Interessenjurisprudenz im internationalen Privat-
recht, Tübingen 1990.
130
KEGEL G./SCHURIG K.(note 92), § 2 II 3.
131
SCHURIG K. (note 123), p. 387 et seq.; KROPHOLLER J. (note 92), § 53 IV 7 c; for
a detailed analysis, see MUELLER H., Das Internationale Amtshaftungsrecht, Frankfurt/Main
1991, pp. 148-176.
132
BINDER H., ‘Zur Auflockerung des Deliktsstatuts’, in: RabelsZ 1955, pp. 401-499,
at p. 483.
133
Cf. VON BAR CHR., Internationales Privatrecht, Vol. 2, München 1991, para. 685:
‘closest connection’.
134
Begründung (note 127), p. 10. As a matter of intertemporal law, it should be
noted that the courts were authorized to deviate from the lex loci delicti in cases involving

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 Jan von Hein

A similar approach operates within the paradigm of lex loci delicti, but localises
the place of acting not within the country where the respective official actually
committed the tort, but rather within the State claimed to be liable as the ‘centre of
gravity’.135 Departing from the principle of applying the law more favourable to the
injured party,136 the victim is not allowed to choose the law of the place of injury
because of this significantly closer connection of the tort with the place of acting.137

b) Depending on an Established Connection Between the Perpetrating State

and Victim: The Case of the Ambassadors’ Hunting Party

Taking recourse to the principle of proximity to justify application of the

substantive law of the State claimed to be liable creates a problem because this
requires exercising judicial discretion rather than a mechanical subsumption under
a hard-and-fast rule. Therefore, the question arises whether the principle of
proximity really mandates application of the substantive law of the State claimed to
be liable, without taking into account the specific facts of a given case. Contrary to
the prevailing German view, the Austrian Supreme Court has considerably reduced
the scope of the law of the State claimed to be liable.
In 1982, the Austrian Supreme Court had to decide the following case:138
While attending an ambassadors’ hunting party in former Yugoslavia, the Austrian
ambassador accidentally shot and fatally wounded his French colleague. The court
characterised the participation of the Austrian Ambassador in the hunting party as
being of an official, not of a private nature since it was part of his ambassadorial
duties to attend such functions (the ambassadors had been invited by the late

governmental liability even before the codification of Article 41 EGBGB, see, e.g.,
Oberlandesgericht Köln (note 3), p. 253; ID. (note 9), p. 18; Landgericht Rostock (note 123);
on the recognition of a principle of proximity in the pre-1999 German PIL of torts see
VON HEIN J. (note 37), p. 20.
135
SOERGEL H. Th./LÜDERITZ A. (note 78), Art. 38 EGBGB, para. 69.
136
See supra A.1.
137
SOERGEL H. Th./LÜDERITZ A. (note 78), Art. 38 EGBGB, para. 69; likewise on
other grounds VON STAUDINGER J./VON HOFFMANN B. (note 78), Art. 38 EGBGB,
para. 228a. But see GRASMANN G., ‘Kollisions- und fremdenrechtliche Fragen bei
Amtspflichtverletzungen’, in: JZ 1969, pp. 454-459, at p. 458 (defending the victim’s right
to choose between the two laws).
138
Oberster Gerichtshof, 17 February 1982, in: JBl. 1983, p. 260 = IPRE, Vol. 1,
No 89. On this case, see the notes by SCHLEMMER H., ‘Amtshaftung in Auslandsfällen’, in:
ZVR 1986, pp. 97-100; SCHURIG K., ‘Eine neue Entwicklung im österreichischen
internationalen Amtshaftungsrecht’, in: JBl. 1983, pp. 234-238 and the footnote by
SCHWIMANN M., in: IPRE, Vol. 1, P. 181. The case is also discussed by HESS B.,
Staatenimmunität bei Distanzdelikten, Munich 1992, pp. 17-19 (reviewed by KISCHEL U., in:
RabelsZ 1995, pp. 164-168).

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 Governmental Liability for Violations of Human Rights

Yugoslav President Tito).139 From the point of view of private international law, the
French ambassador was shot by an actum iure imperii. Departing from a 1958
judgment in which it had ruled that governmental liability claims for sovereign acts
were subject exclusively to Austrian law,140 the court now decided that the extent of
governmental liability for a tort committed by an Austrian official abroad should
be governed by the lex loci delicti, provided there is no closer connection to
Austria. According to the Supreme Court, a closer connection within the meaning
of § 48(2) of the Austrian Code on Private International Law (IPRG)141 requires a
pre-existing relationship between victim and tortfeasor which is governed by
Austrian public law.142 The court thus applied the rule known as an ‘accessory’
choice of law in torts.143 In this case, the court denied the existence of such a
relationship: In attending the hunting party, the French ambassador merely fulfilled
his own public duties towards the French Republic (and possibly towards his host
country), not towards Austria; the harmful contact with the Austrian official was
by no means intended by the victim.
If one applies the criteria developed by the Austrian Supreme Court to war-
related human rights violations,144 it is evident that the victims of a massacre such
as that committed in Distomon did not voluntarily enter into a pre-existing
relationship with the soldiers which was governed by German public law.145 Forced
labourers were subjected to some kind of factual relationship by way of brute
force, but this ‘relationship’ was not legally valid.146 Prima facie, the lex loci delicti
should apply, unless one considers a merely factual relationship sufficient to
establish a significantly closer connection.147

139
Oberster Gerichtshof (note 138), p. 261 et seq.
140
Oberster Gerichtshof, 10 September 1958, in: JBl. 1959, p. 599, with an affirma-
tive note by SCHWIMANN M., ‘Internationale Zuständigkeit und anzuwendendes Recht in
Amtshaftungssachen’, pp. 585-589.
141
Bundesgesetz über das internationale Privatrecht, 15 June 1978, in: Österreichi-
sches Bundesgesetzblatt (Austrian Federal Official Gazette) No. 304/1978, as amended. As a
matter of intertemporal law, the provision was formally inapplicable, but was treated as the
codified expression of previously existing unwritten law.
142
Oberster Gerichtshof (note 138), p. 261 et seq.
143
See supra A.3.
144
Although this is an Austrian decision, a reception of this judgment is technically
possible because the Austrian and German private international laws of torts are very
similar; cf. HESS B. and SCHURIG K. (both note 138).
145
Cf. the example given by SCHURIG K. (note 138), P. 237: unauthorized use of
weapons against third parties by police officers in a foreign country.
146
See supra note 122.
147
Cf. Article 41(2), No. 1 EGBGB 1999; Begründung (note 127), p. 13; cf. also the
critical remarks by HAY P. (note 75), p. 643.

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 Jan von Hein

Yet one has to take into account the difficulties caused by such an approach.
First of all, the 1982 decision was severely criticised in Austria.148 HESS, who
recommended the reception of this approach in Germany in 1992149 (a proposal that
was rejected)150 seems to have returned to the prevailing view of applying the law
of the State claimed to be liable.151 Secondly, the Supreme Court itself did not
deviate from the traditional Austrian (and German) view concerning the PIL of
governmental liability until 1982.152 Serious problems of intertemporal law arise
when applying retroactively the rationale of a 1982 decision to incidents that
occurred almost forty years ago. These doubts are reinforced by the fact that
German jurisprudence consistently refused to follow any suggestions of an
‘accessory’ choice of law in torts prior to the 1999 reform.153 Finally, the 1982
decision is only convincing within its frame of reference, i.e., based on the premise
that the same conflicts rules should apply to acta iure imperii as to ordinary tort
cases between private parties, namely the lex loci delicti, corrected by the principle
of proximity. It is precisely this premise that is controversial. If one agrees with the
prevailing view that acta iure imperii cannot be characterised as torts within the
meaning of PIL rules,154 any recourse to Article 41(2) No. 1 EGBGB 1999, § 48
IPRG or similar provisions fails.

4. Dépeçage Between the Law Applicable to the Liability of Civil Servants

and the Issue of Assumption

As shown in the survey on German substantive law,155 the derivative construction

of governmental liability leads to a certain ambivalence of characterisation:156 First,
the liability of the official has to be determined according to a provision in the civil
code (§ 839 BGB); then, this personal liability is assumed by the State under a
constitutional rule (Article 131 WRV, today Article 34 GG). This two-step
approach led BEITZKE to advocate a corresponding dépeçage in the PIL of

148
SCHLEMMER H. and SCHWIMANN M. (both note 138).
149
HESS B. (note 138).
150
MünchKomm/KREUZER K. (note 78), Art. 38 EGBGB, para. 277, in foot-
note 1056.
151
See HESS B. (note 8), p. 277 (arguing that Greek judgments in the Distomon case
could not be recognized), p. 283.
152
See its ‘orthodox’ 1958 decision (note 140).
153
See the references in note 104.
154
See supra sub 2.
155
See supra sub III.A.
156
SCHURIG K. (note 138), p. 234 speaks of a ‘grey zone between public and civil
law’.

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 Governmental Liability for Violations of Human Rights

governmental liability.157 The first step would require determining the law
applicable to the tort committed by the official under common PIL rules;158 taking
the second step, German substantive law would decide whether the State assumes
this liability.159 This approach had an impact on the 1982 decision of the Austrian
Supreme Court discussed above.160 A similar solution seems to be advocated by
KEGEL and HAY, who maintain that the liability of a State should be governed by
its own substantive law; however, the question whether an official acted illegally
should be judged by the lex loci delicti, subject to a significantly closer connection
and Article 38 EGBGB 1986 (= Article 12 EGBGB 1900).161
As a practical matter, this dépeçage did not lead to results at variance with
the orthodox view, since Article 12 EGBGB 1900 ensured that the personal
liability of the official could not exceed the risks he had to face under § 839 BGB.
However, the clearly prevailing view did not accept any kind of dépeçage: The
personal liability of the official for acta iure imperii was (and is) subject to the
same law that governs the liability of the government.162 In the reasons given for
the legislative draft of the 1999 reform act, the federal government states:

‘The subsidiary personal liability of the official is submitted to this

law as well, since governmental and personal liability cannot be
separated from each other […].’163

In spite of the legal ambivalence of German substantive rules on governmental

liability, which KROPHOLLER traces back to historical contingencies, in his opin-
ion, claims of the injured party against the State form an integrated whole.164 For

157
BEITZKE G., Note to Bundesgerichtshof, 26 April 1976, in: ZfRV 1977, pp. 136-
139, at p. 136.
158
BEITZKE G. (note 157), p. 136.
159
BEITZKE G. (note 157), p. 136.
160
See the reference in Oberster Gerichtshof (note 138), p. 261.
161
KEGEL G. , Internationales Privatrecht, 7th ed., München 1995, § 18 IV 1 c
th
(the 8 ed. [note 92] drops the reference to the abolished Article 38 EGBGB 1986); HAY P.,
‘Zivilrechtliche Eigenhaftung staatlicher Mitarbeiter für DDR-Unrecht’, in: IPRax 1996,
pp. 95-99, p. 98.
162
Landgericht Rostock (note 123); VON BAR Chr. (note 133), para. 685; ERMAN
W./HOHLOCH G. (note 76), Art. 40 EGBGB, para. 58; KROPHOLLER J. (note 92), § 53 IV 7 c;
MUELLER H. (note 131), p. 175; MünchKomm/KREUZER K. (note 78), Art. 38 EGBGB,
para. 277; PALANDT O./HELDRICH A. (note 76), Art. 40 EGBGB, para. 15; SCHURIG K.
(note 138), p. 235; SOERGEL H. Th./LÜDERITZ A. (note 78), Art. 38 EGBGB, para. 69;
VON STAUDINGER J./VON HOFFMANN B. (note 78), Art. 38 EGBGB, para. 228d;
WENGLER W. (note 78), p. 441.
163
Begründung (note 127), p. 10.
164
KROPHOLLER J. (note 92), § 53 IV 7 c.

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 Jan von Hein

this reason, one should strive for a uniform connection instead of splitting up a
claim into an official’s personal liability subject to common choice-of-law rules for
torts, on the one hand, and a separate assumption of liability by the State, on the
other.165 These arguments reflect a general scepticism towards dépeçage that is
common in German legal thinking.166
The parallel drawn by BEITZKE fails to convince for the following reasons:
Although it is true that the historic legislator submitted officials to a personal
liability, this liability was not based on the substantive rules generally applicable to
torts, but on a specific provision tailor-made for civil servants (§ 839 BGB).167
Secondly, this personal liability has a mere conceptual value because, as a practical
matter, liability is assumed by the State. Moreover, governmental liability is
traditionally not considered part of the ‘civil law’ within the meaning of the
Weimar Constitution and the Basic Law.168 Even if one is prepared to accept
BEITZKE’s starting point, which is based solely on German substantive law, those
factors militate against the conclusion that cases giving rise to governmental
liability should be treated like any other tort in PIL. Apart from that, international
decisional harmony in the conflict of laws requires a characterisation based on
functional criteria resulting from a comparative analysis rather than on historical
peculiarities, in this case the muddle of legislative jurisdiction in nineteenth
century Germany.169

5. Interdependence of State Immunity and the PIL of Governmental

Liability

a) State Immunity v. Conflicts Justice: Two Different Approaches?

If one rightly rejects the dépeçage approach, this leaves the arguments advanced by
the public international camp, namely state immunity (see supra 2), on the one
hand, and those of the private international camp, i.e., conflicts justice, the most
significant relationship etc. (see supra 3). Taking a closer look, however, it is
doubtful whether the above-mentioned approaches are substantially different.

165
KROPHOLLER J. (note 92), § 53 IV 7 c.
166
Cf. VON HOFFMANN B. (note 124), § 6, para. 44; KEGEL G./SCHURIG K. (note 92),
§ 2 II 3 b; KROPHOLLER J. (note 92), § 18 I 1.
167
Cf. SCHURIG K. (note 138), p. 235.
168
See Bundesverfassungsgericht, 19 October 1982, in: BVerfGE, Vol. 61, pp.149-
208, at p. 201.
169
Since he refuses to accept a functional (public-law) characterisation of
governmental liability, MUELLER H. (note 131), p. 127, eventually gives up and settles with
classifying the area as a perpetual ‘grey zone’ between public and private law. This is hardly
convincing.

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 Governmental Liability for Violations of Human Rights

Without a doubt, organisational interests and the interdependence of administrative

law and governmental liability are factors that should be taken into account when
devising a proper conflicts solution; however, the approaches focusing exclusively
on the Ordnungsinteresse of the State claimed to be liable fail to give explicit
reasons why such interests should prevail over those of the injured party.170 Since
such an eminent scholar as KAHN-FREUND has supported the general thesis that, in
conflicts of torts, the victims ‘should be able to rely on the social order of the
country in which they are exposed to risk’,171 giving preference to the interests of
the State claimed to be liable deserves a closer look.
The only possible explanation for this preference – which can be deduced
from the classification of the State’s interest as an Ordnungsinteresse – is the
desire to achieve a ‘real’ and ‘enforceable’ decision. Since States usually lack
jurisdiction to adjudicate governmental liability claims against foreign nations,172
such judgments cannot be enforced in the State ordered to pay damages.173 The fact
that courts are (ab)used to create political and diplomatic pressure on elected
foreign governments or to hand down merely symbolic judgments should be
regarded with scepticism.174 The reason for the lack of a ‘real’ and ‘enforceable’
decision in governmental liability matters, however, is precisely the sovereignty,
i.e., immunity of the State claimed to be liable. In the end, both approaches are
founded on the same axiom, viz. absolute state immunity for sovereign or public
acts (acta iure imperii).

b) Restrictions of Absolute State Immunity

Taking a close look at public international law, one finds that state immunity is
perhaps not as absolute as it used to be. Article 11 of the European Convention on
State Immunity (ECSI) provides:175

170
See the critique by VON STAUDINGER J./VON HOFFMANN B. (note 78), Art. 38
EGBGB, para. 228a.
171
KAHN-FREUND O., ‘Delictual Liability and the Conflict of Laws’, in: Recueil des
Cours, Vol. 124 (1968-II), pp. 1-166, at p. 44; cf. VON HEIN J. (note 37), pp. 191-194, with
many further references.
172
KROPHOLLER J. (note 92), § 53 IV 7 c; MUELLER H. (note 131), p. 161 et seq.
173
HESS B. (note 8), p. 285.
174
HESS B. (note 8), p. 284 et seq.; cf. also the (unnecessary) strong language used
by the Arbeitsgericht Koblenz (note 28), p. 2838 et seq., sub 7.
175
European Convention on State Immunity, Basle, 16 May 1972, in: BGBl. 1990,
part II, pp. 35-51.The Convention is in force in the F.R.G. since 16 August, 1990, in
relations with Belgium, Luxemburg, the Netherlands, Austria, Switzerland, the United
Kingdom and Cyprus (BGBl. 1990, part II, p. 1400).

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 Jan von Hein

‘A Contracting State cannot claim immunity from the jurisdiction of

a court of another Contracting State in proceedings which relate to
redress for injury to the person or damage to tangible property, if the
facts which occasioned the injury or damage occurred in territory of
the State of the forum, and if the author of the injury or damage was
present in that territory at the time when those facts occurred.’

A typical case where this provision applies is a traffic accident caused by a

diplomat.176 It is doubtful whether the exception from the principle of state
immunity laid down in Article 11 of the ECSI can be extended to war-related
torts.177 Apart from that, one should bear in mind that Article 11 of the ECSI is a
rather recent rule, which is deemed by the prevailing view in Germany not to
reflect customary international law, at least not as it stood in the 1940’s.178
Although this may change in the future (the cause célèbre is, of course, the Letelier
case),179 applying such a modification retroactively to events that took place more
than fifty years ago raises serious concerns. It should be noted that Article 35(3) of
the ECSI bars retroactive application of the Convention.
According to another line of reasoning, a State that commits severe
violations of human rights should be deemed to have implicitly waived its
immunity.180 Although such a development of public international law may be
desirable in the future,181 even its proponents – at least in Germany – readily
concede that their position does not reflect the actual content of the contemporary

176
Cf. KÄMMERER J.A. (note 9), p. 309; MUELLER H. (note 131), p. 95.
177
See KÄMMERER J.A. (note 9), p. 309: ‘The provision is not made for the occupatio
bellica’ (my translation).
178
DAMIAN H., Staatenimmunität und Gerichtszwang, Berlin/Heidelberg 1985,
p. 114; GEIMER R., Internationales Zivilprozeßrecht, 3rd ed., Köln 1997, para. 585; HESS B.
(note 138), p. 293; KÄMMERER J.A. (note 9), p. 309; VON STAUDINGER J./VON HOFFMANN B.
(note 78), Art. 38 EGBGB, para. 228c.
179
Letelier v. Republic of Chile, 488 F.Supp. 665 (D.D.C. 1980); on the final
settlement of this case, see HESS B., ‘Staatenimmunität und völkerrechtlicher Rechtsschutz
bei politischem Mord – Die Beilegung der Letelier-Affäre vor einer US-chilenischen
Schiedskommission im Januar 1992’, in: IPRax 1993, pp. 110-114.
180
DOEHRING K./RESS G., ‘Diplomatische Immunität und Drittstaaten’, in: AVR
1999, pp. 68-98, at pp. 84-87; KOKOTT J., ‘Mißbrauch und Verwirkung von
Souveränitätsrechten bei gravierenden Völkerrechtsverstößen’, in: Festschrift für Rudolf
Bernhardt, Berlin/Heidelberg 1995, pp. 135-151, at p. 148 et seq.; ID., ‘Grund- und
Menschenrechte als Inhalt eines internationalen ordre public’, in: BerDGesVR, Vol. 38
(1998), pp. 71-114, at p. 84 et seq.; PAECH N. (note 9), pp. 393-396.
181
But cf. the concerns raised by HESS B. (note 8), p. 280 et seq.; KÄMMERER J.A.
(note 9), p. 308; ZIMMERMANN A. (note 115), p. 439 et seq.

216 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

law of nations.182 Moreover, the theory of an implied waiver was rejected by the
majority in the forced labour case of Princz v. Germany.183 In the Distomon case,
however, the Greek Areopag combined the exception to state immunity codified in
Article 11 of the ECSI – to which Greece is not a signatory – with the waiver
emanating from a violation of international ius cogens and declared the result to be
an expression of customary international law.184 This would be a bold decision even
in contemporary international law.185 It is hardly convincing that this position
accurately reflects the customary international law of state immunity of the
1940’s.186

c) Conclusion to 5

Thus, Germany enjoys immunity in foreign courts even with regard to war-related
human rights violations.187 If victims are not satisfied with the efforts of their
government to press the F.R.G. for reparations, they must either sue their
government in their courts or bring an action against the F.R.G. before German
courts. A Greek observer explains quite frankly: ‘[T]he private citizens who
decided to bring this case [Distomon] to court did so in an effort to circumvent the
less flexible mechanism of diplomatic protection and thus compel the Greek State
into action, beyond the tangled web of diplomatic niceties.’188 Similar motivations
of the plaintiffs led the Burger-Fischer and the Iwanowa courts to dismiss the
forced labour cases before them under the political questions doctrine in order to
protect the U.S. Government from illegitimate judicial pressure.189 It should be

182
See explicitly KOKOTT 1998 (note 180), p. 84; likewise DOEHRING K./RESS G.
(note 180), p. 87.
183
Princz (note 115).
184
Areopag (note 9), pp. 472-474.
185
Cf. (on the prior judgment of the District Court in Livadia) BRODESSER H.-J./
FEHN B. J./FRANOSCH T./ WIRTH W. (note 9), p. 184; HESS B. (note 8), p. 277;
KÄMMERER J.A. (note 9), p. 309.
186
Cf. (on the prior judgment of the District Court in Livadia) BRODESSER H.-J./
FEHN B. J./FRANOSCH T./ WIRTH W. (note 9), p. 184; HESS B. (note 8), p. 277;
KÄMMERER J.A. (note 9), p. 309.
187
BRODESSER H.-J./FEHN B. J./FRANOSCH T./ WIRTH W. (note 9), p. 184; HESS B.
(note 8), p. 277; KÄMMERER J.A. (note 9), p. 309.
188
GAVOUNELI M. (note 9), p. 603.
189
Burger-Fischer and Iwanowa (note 14).

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 Jan von Hein

mentioned that the Greek government has distanced itself from the attempts to
seize German property in Athens.190
Since only German courts can hand down a judgment that would be
enforceable against the F.R.G. in cases involving governmental liability for acta
iure imperii,191 it is reasonable that the courts should apply German substantive
rules. Although German PIL does not generally require German courts to apply
German law, taking recourse to the lex fori in the above-mentioned cases has the
advantage of facilitating an expeditious solution since the court can apply the law it
knows best. This is often in the best interest of the aged victims. Apart from that, it
ensures that all victims are treated equally regardless of the more or less accidental
question whether they suffered harm in an annexed or occupied country or were
deported to Germany. Moreover, in all reported German cases, the victims tried to
base their claims on German law rather than on a foreign lex loci delicti.

V. Limitations of Substantive Provisions

TOMUSCHAT has argued in favour of a ‘general presumption’ that the national law
of torts of a State does not aim at protecting foreign nationals victimised by acts of
war.192 Apart from the fact that the enslavement and the intentional massacring of
civilians do not qualify as regular acts of war,193 it should be emphasised that the
nationality of the victim is not a factor that would per se exclude the application of
German provisions on governmental liability.194 Until 1993, however, foreign
victims could only file a claim against the German government if the condition of

190
Cf. ANTONAROS E., ‘Athen distanziert sich von Forderung nach Zwangs-
versteigerung’, in: DIE WELT online, 13 July 2000, at: <http://www.welt.de/daten/2000/
07/13/0713eu179379.htx?print=1>.
191
See infra sub VI.
192
TOMUSCHAT Chr. (note 22), p. 239, asserting that this ‘rule’ can be found in the
jurisprudence of most nations, as far as he can see (without providing references); but cf. the
skepticism expressed against this assertion by Landgericht Stuttgart (note 20), p. 243.
193
On forced labour, see the references in note 20; on the Distomon massacre see the
detailed discussion by KÄMMERER J.A., PAECH N. and SCHMINCK-GUSTAVUS Chr. (all
note 9).
194
Cf. the concise statement by KÄMMERER J.A. (note 9), p. 310 with regard to the
Distomon massacre: ‘Neither the language nor the purpose nor the systematic context of the
[German] rules concerning governmental liability […] indicate that these provisions should
not apply if […] the victim is not German’ (my translation).

218 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

reciprocity was met (§ 7 of the Act on the Liability of the Reich for its Officials).195
It is highly questionable, though, whether this provision is applicable to war-
related torts.196 Even if these objections are met, plaintiffs whose claims are not
covered by the Federal Compensation Act face considerable difficulties under
German substantive law. First, the general rules on governmental liability (§ 839 of
the Civil Code) are to a large extent superseded by special provisions on war-time
torts (see supra III. B.). Secondly, the relationship of domestic governmental
liability law to the public international laws of war raises intricate problems. In the
Distomon case, the Cologne Court of Appeals ruled that the obligations imposed
by the laws of war on German soldiers (and violated by them) had been directed
solely towards the Greek State instead of towards individual Greek citizens.197
Therefore, the claims of the victims were dismissed. But this formalistic approach
has rightly been criticised by German authors as not giving enough weight to the
legal duties towards the occupied population that the Reich had to comply with as
the occupier.198 Eventually, after all legal obstacles have been overcome, the statute
of limitations remains, which, in German conflict of laws, is characterised as a
matter of substantive rather than procedural law.199 Claims based on § 839 BGB are
usually barred after three years. Due to the war, the difficulties of re-establishing a
functioning court system in post-war Germany and the moratorium fixed in the
London Agreement, there are numerous arguments for a tolling of the statute of
limitations. Discussing all technical possibilities of computing the period of
limitation would furnish enough material for another article on substantive law.200
Moreover, one would have to closely analyse whether serious human rights
violations are subject to ordinary provisions on prescription at all.201

195
Gesetz über die Haftung des Reichs für seine Beamten, 22 May 1910, in: RGBl.
1910, part I, p. 798; on this provision and the 1993 reform see VON STAUDINGER J./
VON HOFFMANN B. (note 78), Art. 38 EGBGB, paras. 229, 229a.
196
The Cologne Court of Appeals (note 3), p. 253, decided that the condition of
reciprocity is inapplicable to claims for compensation for forced labour. With regard to the
massacre in Distomon, the question is less clear: KÄMMERER J.A. (note 9), p. 311 rejects the
claims because of a lack of reciprocity; the Cologne Court of Appeals (note 9), p. 21 did not
decide this question because it dismissed the claims on other grounds.
197
Oberlandesgericht Köln (note 9), pp. 18-21; obiter approved by Landgericht
Stuttgart (note 20), p. 243.
198
KÄMMERER J.A. (note 9), p. 311; PAECH N. (note 9), p. 386 et seq.
199
KROPHOLLER J. (note 92), § 41 II 1.
200
For a comprehensive treatment of this subject see OBERHAMMER P./REINISCH A.
(note 20), pp. 215-218, with detailed references.
201
See SEIDL-HOHENVELDERN I./STEIN Th. (note 109), para. 1881 (no statute of
limitations for war crimes).

Yearbook of Private International Law, Volume 3 (2001) 219

 Jan von Hein

VI. Recognition and Enforcement of Foreign

Judgments
Judgments on governmental liability claims against another State for acta iure
imperii cannot be recognised under the Brussels Convention, which is restricted to
civil and commercial matters (Article 1).202 Under domestic German law, it is an
unwritten, but generally accepted requirement for the recognition of a foreign
judgment that the foreign State had jurisdiction to adjudicate the claim.203 Although
ordinary civil courts adjudicate governmental liability claims in Germany because
of the specific assignment in Article 34 of the Basic Law, this does not mean that
governmental liability is characterised as a civil matter for the purposes of
recognition and enforcement of foreign judgments.204 Judgments that violate
German State immunity, such as the verdict of the Areopag against the F.R.G.,205
will not be recognised in Germany.206 Even observers who have confessed their
sympathy for the judgment of the Greek court in the Distomon case have called its
enforcement ‘improbable’ or ‘beyond reality’.207
As regards forced labour claims, an additional problem arises: Since the
Foundation Law has been classified as a loi d’application immédiate, a mandatory
rule in the international sense (see supra III.B.2), could a foreign judgment
granting a claim that would be excluded in a German court by virtue of § 16 of the
Foundation Law be recognised in Germany? If the defendant is a corporation, the
recognition of such a judgment cannot be denied on grounds of state immunity.208
Nevertheless, disrespect for German mandatory rules may in certain cases be
regarded as a violation of German public policy (§ 328(1) No. 4 of the German
Code of Civil Procedure).209 As the parallel Agreement between the U.S. and the
F.R.G. shows,210 the Foundation Law was meant to settle the issue of forced labour

202
Cf. KROPHOLLER J. (note 108).
203
GEIMER R. (note 178), paras. 533-537a, 2894; VON HOFFMANN B. (note 124), § 3
para. 159; KROPHOLLER J. (note 92), § 60 IV 1.
204
SCHACK H., Internationales Zivilverfahrensrecht, 2nd ed., München 1996,
para. 819.
205
Areopag (note 9).
206
On the prior judgment of the District Court in Livadia, see HESS B. (note 8),
p. 277.
207
Cf. GAVOUNELI M. (note 9), p. 606 (‘improbable’); SCHMINCK-GUSTAVUS Chr.
(note 9), p. 115 et seq. (‘außerhalb der Realität’).
208
On the question whether companies have to be classified as de facto state actors,
see supra IV.B.1.
209
BECKER M., ‘Zwingendes Eingriffsrecht in der Urteilsanerkennung’, in: RabelsZ
1996, pp. 691-737, with numerous further references.
210
See supra note 16.

220 Yearbook of Private International Law, Volume 3 (2001)

 Governmental Liability for Violations of Human Rights

claims once and for all. Any further actions and judgments in this sensitive area
would cast a doubt on the legal security that both governments and the
corporations participating in the Foundation hoped to achieve. It is thus a
legitimate tenet of German public policy not to have this project frustrated by
foreign judgments that refuse to respect the compromise reached in the Foundation
Law and the parallel German-American Agreement. Accordingly, such decisions
would not be recognised in Germany.211

VII. Conclusion
The article has shown that the contribution of private international law to the field
of compensation for wartime torts is limited by restraints of public international
law. In Germany, the view clearly prevails that governmental liability claims
relating to acta iure imperii are subject to the substantive provisions of the State
claimed to be liable rather than to the lex loci delicti. After litigation in forced
labour cases revealed that the German compensation laws were obviously deficient
vis-à-vis this specific group of victims, substantive law was improved by creating
the Foundation Law. As far as other groups of victims are concerned, German
substantive law in principle enables the courts to reach adequate solutions. The
very restrictive interpretation given by the Cologne Court of Appeals to § 839 of
the Civil Code in the Distomon case has received the criticism it deserved, and it is
hoped that this will not be the last word of German courts on this issue.212 On the
whole, however, in spite of the current trend towards a privatisation of
transnational war tort litigation, it seems that politically balanced and expeditious
out-of-court settlements are to be preferred to individual actions.

211
Generally speaking, on the controversial question whether American class action
settlements as such may be characterized as recognizable foreign judgments under § 328 of
the German Code of Civil Procedure, see HESS B., ‘Die Anerkennung eines Class Action
Settlement in Deutschland’, in: JZ 2000, pp. 373-382; OBERHAMMER P./REINISCH A.
(note 20), pp. 211-213; for a comprehensive German treatment of the class action in general,
see BAETGE D./EICHHOLTZ S., ‘Die Class Action in den USA’, in: BASEDOW J./HOPT K.-J./
KÖTZ H./BAETGE D., Die Bündelung gleichgerichteter Interessen im Prozeß, Tübingen 1999,
pp. 287-361.
212
On the pending proceedings before the Bundesgerichtshof, see supra note 11.

Yearbook of Private International Law, Volume 3 (2001) 221

 NATIONAL REPORTS
________________

THE NEW GERMAN CONFLICTS RULES FOR

REGISTERED PARTNERSHIPS
Gerhard HOHLOCH* & Cecilie KJELLAND**

I. Background
II. Intent of the New Conflicts Rules
III. The Conflicts Rules of Article 17a EGBGB
A. The Formation of a Partnership and its Dissolution
1. Main Rule
2. Incidental Questions
B. Legal Effects of a Registered Partnership
1. General Effects
2. Property
3. Maintenance
4. Succession
5. Name
6. Concurrent Registered Partnerships
7. New Rules of Civil Procedure for Registered Partnerships
8. Recognition of Foreign Decisions on Registered Partnerships
IV. Summary

I. Background
When the coalition partners – the Social Democrats and the Greens – signed an
agreement establishing the present German Government in 1998, one of the
elements of that agreement was a proposal to initiate legislation to legalize
registered partnerships1 for same-sex-couples. After readings by several

*
Professor at the University of Freiburg, Germany.
**
Assistant Professor at the University of Freiburg, Germany.
1
In German, a civil union between two persons of the same sex based on the Gesetz
zur Beendigung der Diskriminierung gleichgeschlechtlicher Gemeinschaften: Lebens-

Yearbook of Private International Law, Volume 3 (2001), pp. 223-235

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Gerhard Hohloch & Cecilie Kjelland

committees2, the Government draft originating from those political parties served
as the basis for the draft of the new legislation on registered partnerships3.
As proposed by the Legal Comittee of the German Bundestag, the registered
partnership was intended to be an independent institution in the field of family law
for two persons of the same sex.4 The purpose of the new Act is to create the legal
framework to make it possible for same-sex couples to enter into a legally
recognized civil union for life. For constitutional reasons, a clear distinction is
made in the legislative materials between registered partnerships and the institution
of marriage. Nevertheless, the similiarities are obvious, especially in regard to the
formation of the partnership and maintenance obligations of the partners during
and after dissolution of the union.
The Law 16 February 2001 on registered partnerships between two persons
of the same sex (hereinafter: Registered Partnership Act) regulates the rights and
obligations of same-sex couples in the field of civil law (§§ 1-19 LPartG5). The
complete German legislation on registered partnerships also includes several rules
and amendments to other laws containing important details.6 One of those amend-
ments is the new conflicts rule in Article 17a of the Introductory Law to the
German Civil Code (EGBGB).7 Based on structure of the conflicts rules on marria-
ge in EGBGB (§§ 13-18 EGBGB), the provision contains rules governing the
formation and general legal effects of registered partnerships, as well as property
relations, maintenance and dissolution.
The rules on international jurisdiction (recognition and jurisdiction) are laid
down in § 661 of the German Code of Civil Procedure (ZPO).
Dealing with the two provisions mentioned above (Article 17a EGBGB and
§ 661 ZPO), the present article presents a brief survey of the new German conflicts
rule for registered partnerships and the rule on international jurisdiction.

partnerschaften of 16 February 2001 is called an eingetragene Lebenspartnerschaft. This

institution is designated by the term registered partnership in the present article.
2
Legislative Materials are found in the Parliamentary Materials = Drucksachen des
Deutschen Bundestags (hereinafter: BT-Drucks.), on the Internet at: http://dip.bundestag.de/
parfors/parfors.htm; see especially BT-Drucks. 14/4545; 14/4550; 14/3751 and 738/00.
3
BT-Drucks 14/3751; the final draft was made by the Legal Committee of
Parliament, see Stenographischer Bericht, 14. Wahlperiode, 115. Sitzung, S. 10975 B; 121.
Sitzung, p. 11543 C. Details in the Legal Committee's Report of 9.11.2000, BT-Drucks.
14/4550.
4
BT-Drucks. 14/4545, p. 2.
5
The main substantive rules are laid down in §§ 1-19 LPartG (Lebenspartnerschafts-
gesetz = Registered Partnership Act).
6
The second and the third parts of the new law (Articles 2 and 3) consist of relevant
amendments to the German BGB.
7
Introductory law to the German BGB; Arts. 3-46, consisting of the German conflict
of laws rules.

224 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

II. Intent of the New Conflicts Rules

The new Article 17a EGBGB contains the conflicts rules for registered
partnerships of two persons of the same sex. The substantive law on registered
partnerships was adopted by the German Bundestag on 10 November 2000 and
entered into force on 1 August 2001. Article 17a EGBGB was adopted in the form
of an amending law on 10 November 2000. Unlike the solution adopted in
Denmark and Norway, the German solution does not apply the rules of internatio-
nal marriage law to registered partnerships;8 as a result the new conflicts rules also
apply to partnerships registered in Germany in which the partners are alien
residents. This would not have been the case otherwise because German internatio-
nal marriage law mainly follows the principle of nationality.9
Another factor that the lawmakers may have taken into account is the
special constitutional position of marriage and the family, which are safeguarded
by the State pursuant to Article 6(1) of the German Constitution (Grundgesetz).
Thus the majority of opponents argued that legalizing registered partnerships10
would unlawfully extinguish the special protection extended to marriage and was
thus unconstitutional. This view was not upheld by the Federal Constitutional
Court, which, in its decision of 18 July 2001,11 rejected the request of the German
states of Bavaria and Saxony to issue an interim court order to prevent the Act
from entering into force on the ground of incompatibility with Article 6 of the
Constitution.12 With no more obstacles in its way, the Registered Partnership Act
entered into force one week later. However, as emphasized above, the German
lawmakers took care to draw a clear distinction between marriage and registered
partnerships. Accordingly, the German Registered Partnerships Act is an auto-
nomous law with a minimum of direct references to the general marriage law.13

8
In BT-Drucks. 14/3751, p. 60.
9
E.g., in Arts. 13(1) and 14(1) EGBGB.
10
Especially politicians of the conservative Christian Party (CDU/CSU).
11
Federal Constitutional Court (BVerfG), 1 BvQ 23/01, of 18 July 2001, Absatz-Nr.
(1-36); http://www.bverfg.de/.
12
Furthermore, on 9 August 2001 the Federal Constitutional Court rejected a private
complaint against the State of Bavaria for failing to comply with the Registered Partnerships
Act by neglecting to set up a registration for would-be partners by 1 August 2001, the date
the Act entered into force. http://www.bverfg.de/entscheidungen/ frames/2001/8/9.
13
This differs from Scandinavian legislation which refers mainly to the legal effects
of marriage. See, e.g., the Danish Registered Partnership Act (lov om registreret
partnerskab) of 06.07.1989, No. 372, § 2(1): ‘The first Chapter of the Marriage Act and
§§ 12 and 13 paras. 1 and 2(1) shall also apply to the registration of a partnership....’, and
§ 3: ‘The registration of a partnership, with the exception of the situations specified in § 4,
shall have the same legal effects as a marriage.’ See also the Swedish Act: 1993: 1117 and
the Norwegian Act of 04.30.1993, No. 40.

Yearbook of Private International Law, Volume 3 (2001) 225

 Gerhard Hohloch & Cecilie Kjelland

This is also true in regard to the new conflicts rules; a general reference to the rules
on international marriage law would probably have been too risky because of the
constitutional position of marriage.14
The scope of the German Registered Partnership Act and thus Article 17a
EGBGB is restricted to relationships between two persons of the same sex. This is
clearly stated in § 1 LPartG. Although the Act itself says nothing about a
homosexual relationship between those two persons, this does not mean that other
persons of the same sex living in the same household may register as a partnership,
as is the case in France or in the Netherlands.15 Nor is it to be confused with
Scandinavian legislation governing the property relations of unmarried
heterosexual cohabitees.16 Nevertheless, it is presumed that a homosexual
relationship exists between the two partners. In the preparatory materials, as well
as in the title of the Act, it is clearly stated that the purpose of the Registered
Partnership Act is to enable same-sex couples to register their partnership
publically.17
Formulated as a bilateral conflict rule (allseitige Kollisionsregel), Article
17a EGBGB generally refers to the applicable law in the broad sense, i.e.,
including its conflicts rules (Gesamtverweisung). In this respect, Article 17a(1),
sentence 1 is an exception because it accepts the application of foreign substantive
rules in cases where the institutions are similar to the German registered
partnership. As stipulated in Article 4 EGBGB, the German conflicts rules
generally accept renvoi; this is also the general rule when a foreign law is
applicable under Article 17a. However, as we will see, the main conflicts rule for
registered partnerships in Article 17a(1), sentence 1, contains an exception to this
general rule. Since the application of the substantive rules of a foreign law is
admissible under Article 17a, a reference back to German law by the conflicts rules
of the first applicable law is not questioned in matters governed by Article 17a(1),
sentence 1 EGBGB.
Furthermore, Article 17a EGBGB does not apply to all matters relating to
registered partnerships. Accordingly, other conflicts rules apply whenever the
matter in question is not governed by Article 17a. For example, the conditions for

14
Art. 6(1) of the German Constitution. The decision of the Federal Constitutional
Court of 18 July 2001 is an interim order; the final decision is expected in February 2002.
15
In the Netherlands: the original Registered Partnerships Act of 07.05.1997,
No. 324; in France the Act adopted on 13 October 1999.
16
In Sweden (1987:232) and Norway (1991-7-4, No. 45); in addition to Registered
Partnership Acts, legislation has been enacted to regulate the distribution of property after
the dissolution of a union between two unmarried cohabitees. In Norway, those rules can
also be applied after the dissolution of a non-sexual cohabitation. Such Acts are intended to
prevent the unjust distribution of property of persons cohabiting for a long time, regardless
of their sexuality. In Sweden there is a special Act regulating the property relations of non-
registered cohabiting homosexuals, 1987: 813.
17
BT-Drucks. 14/3751, p. 1, 14/4545, p. 2, 14/4550, p. 5.

226 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

renting appartments are not governed by Article 17a, but by the general rules of
international contract law.18 Similarly, conflicts issues relating to the rights and
obligations of parents are resolved in accordance with the conflict of laws rules for
parent-child-relationships.19

III. The Conflicts Rules of Article 17a EGBGB

The text of Article 17a EGBGB reads as follows:

‘Registered Partnership
1. The formation of a registered partnership, its general and property
effects, as well as its dissolution are governed by the substantive
provisions of the State where the partnership is registered. Matters
relating to maintenance and succession shall be governed by the law
designated as applicable by the general rules. If the partnership fails
to qualify for statutory rights to maintenance or succession under
these rules, the first sentence of this Article shall apply accordingly.
2. Art. 10 para. 2 shall apply accordingly. If the general effects of the
partnership are governed by the law of another State, movable
property in Germany shall be governed by § 8 para. 1 of the
Registered Partnership Act in connection with § 1357 BGB if those
rules are more advantageous than the foreign law for a third person
acting in good faith.
3. If a partnership between the same persons is registered in different
States, the effects specified in para. 1 shall be determined on the
basis of the last partnership entered into, from the time of its
registration.
4. The effects of a partnership registered abroad shall not exceed
those arising under the provisions of the BGB and the Registered
Partnership Act.’20

18
Art. 27 EGBGB et seq.; cf. BT-Drucks. 14/3751 p. 60.
19
Arts. 18 -24 EGBGB.
20
‘Eingetragene Lebenspartnerschaft:
1. Die Begründung, die allgemeinen und die güterrechtlichen Wirkungen
sowie die Auflösung einer eingetragenen Lebenspartnerschaft unterliegen
den Sachvorschriften des registerführenden States. Auf die unterhaltsrecht-
lichen und die erbrechtlichen Folgen der Lebenspartnerschaft ist das nach
den allgemeinen Vorschriften maßgebende Recht anzuwenden; begründet
die Lebenspartnerschaft danach keine gesetzliche Unterhaltsberechtigung

Yearbook of Private International Law, Volume 3 (2001) 227

 Gerhard Hohloch & Cecilie Kjelland

A. The Formation of a Partnership and its Dissolution

1. Main Rule

According to Article 17a(1) EGBGB, the capacity to enter into a partnership is

governed by the law of the State where the partnership was registered (lex loci
celebrationis). This is because the basic requirements for registering a non-marital
partnership and its legal effects vary greatly from State to State. As stipulated in
Articles 13-17 EGBGB, the main connecting factor in German legislation on
international marriage is the nationality of the partners, and subsidiarily, their
habitual residence. Applying this rule to registered partnerships would make it
difficult for foreigners residing in Germany to register21. For example, in the Scan-
dinavian countries and in the Netherlands, the conflicts rules for marriage law also
apply to partnerships between persons of the same sex. Consequently, in those
countries, partners may register their partnership only if at least one of them has a
connection with the State of registration. For their part, German lawmakers opted
not to impose such a limitation and also refrained from making residence or
domicile in Germany a requirement for registration.22
The fact that the German rule imposes no requirements of nationality,
residence or domicile makes it possible for partners without any connection to
Germany to register, thus opening the door to ‘registration tourism’. This risk,
however, is reduced by the fact that, in most cases, the partnership entered into by
such persons would not generate legal effects in their home countries.

oder kein gesetzliches Erbrecht, so findet insoweit Satz 1 entsprechende

Anwendung.
2. Art. 10 Abs. 2 gilt entsprechend. Unterliegen die allgemeinen Wirkungen
der Lebenspartnerschaft dem Recht eines anderen Staates, so ist auf im
Inland befindliche bewegliche Sachen § 8 Abs. 1 des Landespartnerschaft-
gesetzes in Verbindung mit § 1357 des Bürgerlichen Gesetzbuches anzu-
wenden, soweit diese Vorschriften für gutgläubige Dritte günstiger sind als
das fremde Recht.
3. Bestehen zwischen denselben Personen eingetragene Lebenspartner-
schaften in verschiedenen Staaten, so ist die zuletzt begründete Lebenspart-
nerschaft vom Zeitpunkt ihrer Begründung an für die in Abs. 1 umschriebe-
nen Wirkungen und Folgen maßgebend.
4. Die Wirkungen einer im Ausland eingetragenen Lebenspartnerschaft
gehen nicht weiter als nach den Vorschriften des Bürgerlichen Gesetzbuches
und des Lebenspartnerschaftsgesetzes vorgesehen.’
21
In Denmark and Norway, the basic connecting factor of the conflicts rules on
marriage is the domicile of choice; consequently, this also applies in respect of same-sex
partnerships (Partnerskap).
22
E.g., in Denmark, Norway and Sweden (§ 2 of the respective Registered Partner-
ship Act); exceptions are made for nationals of other Scandinavian States.

228 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

Since the requirements to enter into a partnership in Germany are governed

exclusively by the law of the State where the partnership was registered, this
includes the requirements of form as well.23 The basic German rule of international
marriage law contains the same requirement,24 as a result of which the result would
probably have been the same if that rule would have been applied to questions of
form in respect of registered partnerships.
It is important to note that the conflicts rules of Article 17a EGBGB apply
only if the foreign partnership in question is similar to the German institution.25 The
German rules of private international law apply only to basic institutions existing
in German substantive law. Thus it follow that, like the German Registered Part-
nership Act, Article 17a EGBGB applies only to partnerships between persons of
the same sex. As pointed out in the preparatory materials, the purpose of the Act is
to eliminate discrimination against same-sex couples.26
As regards classification, Article 17a EGBGB also applies in cases where
the foreign institution is not identical to the German registered partnership;
however, it must be similar. In this respect, the scope of application of Article 17a
EGBGB is similar to that of Article 13 EGBGB for marriage. Hence, a foreign
institution is deemed similar if it satisfies the essential elements of the definition in
Article 17a EGBGB.27 Furthermore, foreign substantive rules designated as appli-
cable under Article 17a shall apply only if they regulate partnerships similar to the
German institution.
The dissolution of a partnership is also governed by the law of the State of
registration (Article 17a(1), sentence 1 EGBGB). This means that a dissolution rule
exists for every registered partnership. For example, like its formation, the dis-
solution of a partnership between two Italian women registered in Germany would
be governed by the German substantive rules on dissolution (Article 17a(1)). If the
conflicts rules were applied in this case, the dissolution would be governed by
Italian law because the partners have the same nationality (Article 17(1) EGBGB
refers to Article 14(1) No. 1 EGBGB). Since registered partnerships between
same-sex-couples are unknown in Italian law, dissolution of the partnership would
be impossible under Italian law. Consequently, applying the law of the State of
registration to the dissolution of a partnership eliminates the danger of a lacuna in
the law, thus ensuring that dissolution is possible.

23
In BT-Drucks. 14/3751, p. 60.
24
Art. 13 EGBGB.
25
Gesetz über die eingetragene Lebenspartnerschaft, 16.2.2001, BGBl 2001 I 266.
26
BT-Drucks. 14/3751, p. 1.
27
More detailed WAGNER R., ‘Das neue Internationale Privat- und Verfahrensrecht
zur eingetragenen Lebenspartnerschaft’, in: IPRax 2001, pp. 283-284.

Yearbook of Private International Law, Volume 3 (2001) 229

 Gerhard Hohloch & Cecilie Kjelland

2. Incidental Questions

Incidental questions relating to a registered partnership are to be decided separately

in order to guarantee that the solution leads to the best results in the particular
situation. This is especially true when one of the applicants is married or registered
in another partnership. There is no special procedure as in German family law
where it is easy to determine whether the requirements for the capacity to marry
are fulfilled.28 This is a logical consequence of the fact that the requirements for
entering into a registered partnership are determined by the law of the State of
registration. Of course, it would be difficult to ascertain the requirements of a
foreign law because most foreign jurisdictions do not recognize registered
partnerships.

B. Legal Effects of a Registered Partnership

1. General Effects

Pursuant to Article 17a(1) EGBGB, the general legal effects of a registered

partnership are governed by the law of the State where the partnership was
registered. Under the German Registered Partnership Act, the general effects
consist mainly of mutual responsibility, care and general maintenance.29 Moreover,
the Registered Partnership Act specifies that the registered partners and their
respective families are to be regarded as family members,30 thus guaranteeing them
certain rights arising under various other German laws. For example, a partner has
the right to be informed about the illness or death of his/her partner, to claim
certain social benefits or to refuse to testify against the partner.
According to Article 17a(1), the general effects of partnerships registered in
Germany are governed by the rules of the German Registered Partnership Act
mentioned above. No mention is made of the possibility of a choice of law by the
partners. When a foreign law applies or when the partnership is registered abroad,
the effects of the applicable foreign rules shall not exceed those prescribed by the
German Registered Partnership Act in the same circumstances.31

28
Art. 1309 BGB.
29
LPartG § 2.
30
LPartG § 11.
31
Art. 17a(4) EGBGB.

230 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

2. Property

The property regime is generally governed by the law of the State of registration as
well (Article 17a(1), sentence 1 EGBGB). In light of the diversity in the
substantive rules of different States, this solution is deemed most reasonable.
Moreover, the registered partners will undoubtedly regard the law of the State of
registration as the one most likely to apply.32
Although the partners are not permitted to choose the law to govern their
property regime, they may register their partnership in another State, thus making
their property relations subject to that law, the law of the last registration (Article
17a(3) EGBGB).33
As mentioned above, the application of foreign law is restricted by Article
17a(4) EGBGB, which provides that the legal effects of a partnership registered
abroad can never exceed those arising under German law for a registered partner-
ship in Germany.34 For example, there are greater possibilities to establish a pro-
perty regime under Dutch law, which recognizes a kind of joint ownership that can
be stipulated prior to registration. On the other hand, German law provides a type
of compensatory property regime specifically for registered partners. This, how-
ever, must be agreed upon by the partners in a partnership contract. In the absence
of such a contract, German law treats the property of the partners as two separate
regimes, as a result of which they have no right to claim compensation. According-
ly, if a partnership registered in Amsterdam is dissolved before a German court, the
property of the partners would be regarded as two separate regimes. Pursuant to
Article 17a(4) EGBGB, the Dutch system of joint ownership could not be recog-
nized by the German court. In order to be eligible for compensation rights, the
partners would have to register their partnership in Germany and conclude a
partnership contract under German law.

3. Maintenance

Matters relating to the maintenance of registered partners are governed by the law
designated by the general conflicts rules for maintenance (Article 17a(1), sentence
2 EGBGB). This is a reference to Article 18 EGBGB, which basically provides

32
Cf. BT-Drucks. 14/3751, p. 60.
33
Replacing another registration with a new registration is, of course, limited. If the
foreign institution is not similar to the German ‘Lebenspartnerschaft’, the new registration
cannot replace the latter. Cf. SÜß R., ‘Notarieller Gestaltungsbedarf bei eingetragenen
Lebenspartnerschaften mit Ausländern’, in: Deutsche Notarzeitschrift 2001, p. 170.
34
E.g: A man cohabiting in a partnership registered in Copenhagen cannot be
granted permission by a German court to adopt his partner's child, although this would be
possible under Danish law. The German registered partnership cannot be regarded as a legal
basis for adopting a child.

Yearbook of Private International Law, Volume 3 (2001) 231

 Gerhard Hohloch & Cecilie Kjelland

that the rules of the Hague Convention on the law applicable to maintenance35 shall
apply, which generally refer to the law of the habitual residence of the obligee.
This solution takes account of the interests of third persons who may also be
entitled to maintenance from the obligor. If there is no registered partnership or
similar institution in the applicable law, the rules on marital maintenance should be
consulted. If the partner would have no maintenance rights under these rules, the
substantive rules of the State of registration apply (Article 17a (1), sentence 2).
This, however, applies only to statutory maintenance claims between the two
partners. Here the rules designated as applicable by the general conflicts rules on
maintenance are not to be replaced by the rules of the State of registration, which
are applicable only in a complementary role in the form of an adjustment aid.36

4. Succession

Like the rules on maintenance, succession matters are governed by the law
designated by the general conflicts rules for inheritance (Article 17a (1), sentence
2).37 Accordingly, the law applicable to matters of succession between the partners
would mainly be the law of the State of the deceased partner's nationality. Again,
this takes account of third persons with an interest in the deceased partner's estate.
As in the rules on maintenance, the substantive law of the State of registration
applies if the rules of the otherwise applicable law do not recognize succession
rights for same-sex couples. This applies, however, only in respect of the statutory
rules of succession. In most cases this means that a German court cannot award
inheritance to the surviving partner of a partnership registered in a State that grants
no succession rights to registered partners.

5. Name

Since Article 17a(1), sentence 1 EGBGB does not designate the law applicable to
the name, the law of the partner's nationality shall apply38. Article 17a(2) EGBGB
refers to Article 10(2) EGBGB that applies to married couples. When it comes to

35
Hague Convention on the Law Applicable to Maintenance Obligations, of
2 October 1973; it entered into force in Germany on 1 April 1987.
36
Cf. the legislator in BT-Drucks. 14/3751, p. 60.
37
Basically Art. 25 EGBGB; this rule determines the applicable law in respect of the
statutory right of succession. Art. 26 EGBGB contains the conflicts rules for testamentary
wills. The rule is based on the Hague Convention on choice of law concerning the form of a
last will; Hague Convention on the Conflicts of Laws relating to the Form of Testamentary
Dispositions, of 5 October 1961, entered into force in Germany on 1 January 1966.
38
Generally Art. 10(1) EGBGB, which refers to the applicable law, including its
conflicts rules.

232 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

the choice of law applicable to the name, married couples have several options:
They can choose the law of the State of which only one of the partners is a
national, or they can choose German law, if one of the partners has his/her habitual
residence in Germany.39

6. Concurrent Registered Partnerships

Since a partnership may be registered in more than one State, it could occur that
several laws apply simultaneously. To avoid this problem, Article 17a(3) EGBGB
provides that, in such cases, the law of the State where the partnership was last
registered shall apply in respect of the effects specifed in Article 17a(1) EGBGB.
This law then applies in respect of general legal effects, property, maintenance and
succession.

7. New Rules of Civil Procedure for Registered Partnerships

The new legislation on registered partnerships made it necessary to adopt

corresponding rules of civil procedure to regulate international jurisdiction in cases
concerning ascertainment of the existence or non-existence of a registered partner-
ship, its dissolution, maintenance and other property claims, etc. Those cases are
listed in § 661(1) of the German Code of Civil Procedure (ZPO), which constitutes
a new independent section in Part VI containing procedural rules for family cases.
The family courts have jurisdiction over matters relating to registered partnerships,
and the general procedural rules for family cases apply. Accordingly, as specified
in § 606a ZPO, the general jurisdiction of German courts in marital matters applies
by analogy to cases involving registered partnerships.
However, since the institution of registered partnership is still not legalized
in most States, there is an exception to the general rule in § 606a ZPO, as this rule
would significantly reduce the jurisdiction of German courts if it were the only rule
to apply in such matters. This is because of the rule in § 606a(1), No. 4 ZPO, as a
result of which German courts would not have jurisdiction in the absence of
habitual residence, if the decision would obviously not be recognized in any of the
States of which the partners are nationals. Logically, this means that the chances of
a German decision being recognized would be small in a large number of cases. To
avoid such results, § 661(3), sentence 1(a) ZPO provides that German family
courts have exclusive jurisdiction when at least one of the partners is habitual
resident in Germany. This disregards the problem of recognition by the State(s) of

39
Art. 10(2), alternatives 1, 2 EGBGB. For details see HOHLOCH G., in ERMAN W.,
‘Handkommentar zum Bürgerlichen Gesetzbuch’, 10th ed., Münster 2000, Art. 10 EGBGB,
No. 19 et seq.

Yearbook of Private International Law, Volume 3 (2001) 233

 Gerhard Hohloch & Cecilie Kjelland

which the partners are nationals, thus evading the possibility of a limping
relationship.
Furthermore, German courts are always competent in cases where the
partnership was entered into before a German public registrar (Standesbeamter)
pursuant to § 661(3), sentence 1(b) ZPO40. Like the legislation on partnerships in
the Scandinavian countries,41 this rule ensures that a German court may rule on the
dissolution of any partnership registered in Germany.

8. Recognition of Foreign Decisions on Registered Partnerships

Like the recognition of other foreign decisions, the recognition of foreign decisions
in matters relating to registered partnerships is regulated by § 328 ZPO, provided
the matter is not regulated by an international convention of which Germany is a
signatory.42 Pursuant to § 328(1), No. 1 ZPO, a foreign decision will generally be
recognized in Germany if the State where the decision was made has jurisdiction
over the matter under German international procedure law. As seen above, the
general jurisdictional rules for marriage that generally apply to registered
partnerships are subject to restrictions specified in § 661(3), sentence 1(a) and (b)
ZPO. As a result, the jurisdiction of German courts is broader than in marriage
cases. Moreover, sentences 2 and 3 of the new § 661(3) restrict the second para. of
§ 606a as follows: § 661 (2) sentence 1 ZPO does not apply in cases dealing with
the recognition of foreign decisions on registered partnerships. This is a logical
consequence of the fact that German courts have jurisdiction regardless of whether
the decision would be recognized by the State(s) of the partners’ nationality
(Article 661(1)(a) ZPO). Furthermore, when § 606a(2) sentence 2 ZPO applies, the
law of the partners' nationality is replaced by that of the State of registration. This
is in keeping with other legislation on registered partnerships that designates the
law of the State where the partners are registered as applicable instead of the law of
their nationality. In general, this rule permits the recognition of a foreign decision
by a German court whenever the decision is recognized by the State(s) of which

40
Analogous to a public registrar, other public offices must be established and
authorized to register partnerships. The law of 16 February 2001 contains no procedural
rules as they rules were rejected by the Bundesrat. Each Bundesland has enacted a state law
setting forth administrative rules. Among others, Bavaria, whose political majority did not
approve the Registered Partnership Act, has authorized the public notary (Notar) to register
partnerships, instead of the public registrar.
41
The Danish and Norwegian Registered Partnership Acts §§ 5; the Swedish
Registered Partnership Act, Chapter 2, § 4.
42
None exist as far as multilateral agreements are concerned (eventually with the
exception of the EheEuGVVO (Council Regulation (EC) No. 1347/2000, see, infra note 43);
eventual bilateral agreements are not dealt with here.

234 Yearbook of Private International Law, Volume 3 (2001)

 The New German Conflicts Rules for Registered Partnerships

the partners are nationals. This is a logical consequence of the priority accorded to
the State of registration in the conflicts rules for registered partnerships.
In this context the question arises whether the new EU Regulation on
recognition and jurisdiction in matters concerning marriage,43 which entered into
force on 1 March 2001, can be applied by analogy to registered partnerships.
Article 14 of the Regulation provides for the automatic recognition by courts of
other Member States in several matters relating to marriage and divorce. No men-
tion is made in the legislative materials about the possibility of applying the
Regulation by analogy to registered partnerships. The Regulation itself is silent
about such a possibility, although the institution of registered partnership had
already been recognized in Denmark and Sweden, and was later recognized in
France and the Netherlands as well. Whereas the application of the Regulation by
analogy would be in keeping with the general purpose to facilitate the recognition
of decisions within the EU, this is hardly imaginable in light of the diverse views
and strong feelings on this subject in the various Member States.

IV. Summary
The initiation of the German Registered Partnership Act, which entered into force
on 1 August 2001, was strongly criticized, especially because of its eventual
incompatibility with Article 6 of the German Constitution, which places marriage
and the family under special protection of the State. Article 17a EGBGB is the
main choice-of-law rule for matters relating to registered partnerships under the
Registered Partnership Act. The Article is placed systematically together with the
conflicts rules for family matters and also partly refers to those rules. The main
rule, however, designates the law of the State of registration as the applicable law,
for example, in matters concerning the formation and dissolution of the
partnership. The reasoning behind this is largely practical: To date, partnerships
between persons of the same sex have been recognized and legally regulated by
only a small number of States; hence, the number of foreign decisions anticipated
in such matters is also small. Until now, legislation regulating similar institutions
in Europe has been adopted in Germany, Scandinavia, the Netherlands, Belgium
and France.

43
Council Regulation (EC) No. 1347/2000 on jurisdiction and the recognition and
enforcement of judgments in matrimonial matters and in matters of parental responsibility
for children of both spouses, in: O.J. of the European Communities, L 160, 30 June 2000,
pp. 23 et seq., and in this Yearbook 2000, pp. 265 et seq.

Yearbook of Private International Law, Volume 3 (2001) 235

 NEWS FROM THE HAGUE
________________

THE HAGUE CONFERENCE ON PRIVATE

INTERNATIONAL LAW

WORK IN PROGRESS (2000-2001)*

J. H. A. VAN LOON**

I. Nineteenth Session of the Hague Conference (1): Jurisdiction and Enforcement of

Foreign Judgments in Civil and Commercial Matters
II. Nineteenth Session (2): Future Work Programme
III. Towards a Convention on the Law Applicable to Dispositions of Securities Held
through Indirect Holding Systems
IV. Workshop Promoting Judicial Co-operation with the Russian Federation; Promotion
of Wider Adherence to and Better Application of Hague Conventions
V. Special Commission on the Practical Operation of the Intercountry Adoption
Convention
VI. Special Commission on the Operation of the Child Abduction Convention
VII. Meeting of INCADAT Correspondents
VIII. Membership of the Hague Conference

I. Nineteenth Session of the Hague Conference (1):

Jurisdiction and Enforcement of Foreign Judg-
ments in Civil and Commercial Matters
Following the decision of the Special Commission on General Affairs and Policy
of the Conference which took place in May 2000, an informal process started after
the summer of 2000 to prepare the first round of diplomatic negotiations on a
global Convention on jurisdiction of the courts and recognition and enforcement of
*
For earlier reviews, see this Yearbook, Vol. I (1999), pp. 205-214, and Vol. II
(2000), pp. 169-178.
**
Secretary General of the Hague Conference on private international law.

Yearbook of Private International Law, Volume 3 (2001), pp. 237-244

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 J. H. A. van Loon

judgments in civil and commercial matters. Informal meetings took place in

Washington, DC, from 30 October to 1 November 2000, on the invitation of the
United States of America; Basle, 13-15 December 2001, on the invitation of the
Swiss Government; Ottawa, 26 February to 2 March 2001, on the invitation of the
Government of Canada; Edinburgh 23-26 April 2001, on the invitation of the
Government of the United Kingdom and the Scottish Executive Commission.1 In
addition, the Hague Conference co-organised with the Organisation for Economic
Co-operation and Development (OECD) and the International Chamber of Com-
merce (ICC) a joint conference on alternative means of dispute resolution (The
Hague, 11-12 December 2000),2 and, held an experts meeting on the intellectual
property aspects of the future Convention in Geneva, on 1 February 2001, in
connection with the Forum on Private International Law and Intellectual Property
convened by the World Intellectual Property Organisation (WIPO).3 Progress was
made on several important aspects of the draft Convention, including provisional
and preventive measures taken by the courts, jurisdiction in matters relating to
patents and trademarks, jurisdiction to protect weaker parties such as consumers
and workers, and other aspects. These preparatory meetings indeed facilitated the
work of the Diplomatic Conference, which otherwise might have had great
difficulty picking up from where it left matters in October 1999.
The mandate of the Diplomatic Session, Part One, was to discuss proposals,
but without decisions being made at that Session, unless consensus or near
consensus was reached. An enormous amount of work was done during the
Session, partly also in smaller group meetings, in Commission II, chaired by Mr
T.B. Smith from Canada, assisted by Professor Nygh and Judge Fausto Pocar,
Rapporteurs, and substantial progress was made in quite a number of areas. On the
other hand, several critical areas remained unresolved. This was not really sur-
prising since the Convention touches on politically and economically sensitive
questions, including new ones resulting from the recent revolution in worldwide
trade as a result of e-commerce and the Internet. An extensive annotated document
summarising the outcome of the meeting was published as ‘Summary of the
Outcome of the Discussion in Commission II of the First Part of the Diplomatic
Conference’.4 It was decided at the end of the meeting that the Commission on
1
See ‘Informational note on the work of the informal meetings held since October
1999 to consider and develop drafts on outstanding items’, Preliminary Document No. 15
drawn up by the Permanent Bureau for the attention of the Nineteenth Session of June 2001.
2
See report prepared by the OECD, ‘Building trust in the on-line environment:
Business to consumer dispute resolution’, http://www.oecd.org/dsti/sti/it/secur/act.
3
See ‘Report of the experts meeting on the intellectual property aspects of the future
Convention on jurisdiction and foreign judgments in civil and commercial matters’, Geneva,
1 February 2001, Preliminary Document No. 13 of April 2001 for the attention of the
Nineteenth Session of June 2001, see also Hague Conference (HCCH) website at: ftp://hcch.
net/doc/jdgmpd13.doc.
4
See HCCH website at: ftp://hcch.net/doc/jdgm2001draft_e.doc.

238 Yearbook of Private International Law, Volume 3 (2001)

 The Hague Conference on Private International Law

General Affairs and Policy of the Conference would reconvene early in 2002 to
decide on the future of the negotiations.

II. Nineteenth Session (2): Future Work Programme

Commission I of the Session, chaired by Madame Jametti Greiner of Switzerland,
endorsed the Conference’s work on the law applicable to proprietary rights in indi-
rectly held securities and gave the green light for finalisation of that project (see
infra, section III). Another important decision made was to go ahead with prepara-
tions for a new worldwide Convention on the recovery of maintenance. Moreover,
the Conference will complete a report on transfrontier parent/child contact.
The Nineteenth Session also decided that the following topics be retained in
the Conference’s agenda for future work:

1) questions of private international law, raised by the information

society, including electronic commerce, and, without priority:
2) the conflict of jurisdictions, applicable law and international judicial
and administrative co-operation in respect of civil liability for
environmental damage,5
3) jurisdiction, and recognition and enforcement of decisions in matters
of succession upon death,
4) jurisdiction, applicable law, and recognition and enforcement of
judgments in respect of unmarried couples,6
5) the law applicable to unfair competition,7 and
6) the law applicable to assignment of receivables.

5
See BERNASCONI Ch.: ‘Civil Liability Resulting from Transfrontier Environmental
Damage: A Case for the Hague Conference?’ (Prel. Doc. No. 8 for the attention of the
Special Commission of May 2000 on general affairs and policy of the Conference, also
accessible on the HCCH website, at: ftp://hcch.net/doc/gen_pd8e.doc); Id., in this Yearbook,
pp. 63-100.
6
See ‘Private International Law Aspects of Cohabitation Outside Marriage and
Registered Partnerships’, drawn up by the Permanent Bureau (Prel. Doc. No. 9 for the
attention of the Special Commission of May 2000 on general affairs and policy of the
Conference, also accessible on the HCCH website, at: ftp://hcch.net/doc/gen_pd9e.doc).
7
See ‘Note on Conflicts of Laws on the Question of Unfair Competition: Review
and Update’, drawn up by the Permanent Bureau (Prel. Doc. No. 5 for the attention of the
Special Commission of May 2000 on general affairs and policy of the Conference, also
accessible on the HCCH website, at: ftp://hcch.net/doc/gen_pd5e.doc).

Yearbook of Private International Law, Volume 3 (2001) 239

 J. H. A. van Loon

III. Towards a Convention on the Law Applicable to

Dispositions of Securities Held through Indirect
Holding Systems
At the Special Commission on General Affairs and Policy of the Conference held
in May 2000, it was decided that the Hague Conference should, in an accelerated
procedure, start work on a technically limited, but from a global banking point of
view, very important topic of private international law. Worldwide financial
markets increasingly depend on intermediaries interposed between investors and
creditors. Trillions of dollars or Euros of securities are held through these financial
intermediaries, but in novel ways, which make it difficult or even impossible to
link the investor with a particular tangible asset. Yet, parties to a financial trans-
action must be able to determine in advance with certainty and without undue
costs, which law will apply to their rights and obligations. Fortunately there is a
growing consensus that within these indirect holding systems, the records of the
immediate intermediary on which the entries effecting the pledge or transfer are
made can be seen as the most reasonable ‘location’ of the interest pledged or trans-
ferred, the so-called PRIMA rule (‘place of the relevant intermediary approach’).
With this topic the Hague Conference adds a new dimension to its work in
the field of commercial law, allowing the Conference to build up expertise in a
new area. First Secretary, Mr Christophe Bernasconi drew up a widely acclaimed
Report in preparation of the work by the Conference, which constituted the
scientific basis for its first meeting on this new topic.8 A Working Group chaired
by Mrs Kathryn Sabo from Canada, met in The Hague in January 2001 and was
able to draw up a preliminary set of articles, which reflect the PRIMA rule.9
Thanks to the intense collaboration, which has developed between the Permanent
Bureau and a large number of experts in the field, it has been possible, moreover,
to make further progress since January through an informal process, which led to
the preparation of several intermediate drafts of key provisions for the future

8
See ‘Report on the Law Applicable to Dispositions of Securities Held Through In-
direct Holding Systems’, prepared by BERNASCONI Ch. (Prel. Doc. No. 1 of November 2000
for the attention of the Working Group of January 2001), also accessible on the HCCH
website at: http://www.hcch.net/e/workprog/coll_sec_pd1.pdf.
9
See ‘Report on the meeting of the Working Group of Experts (15 to 19 January
2001) and related informal work conducted by the Permanent Bureau on the law applicable
to dispositions of securities held with an intermediary’, HCCH website at: ftp://hcch.net
/doc/scrpte_jan01.doc, see also ‘Tentative text on key provisions for a future Convention on
the law applicable to proprietary rights in indirectly held securities - ‘annotated July 2001
draft’ - Suggestions for further amendment of the text contained in Working Document
No. 16 of the January 2001 experts meeting’, (Prel. Doc. No. 3 of July 2001 for the attention
of the Special Commission of January 2002), HCCH website at: ftp://hcch.net/doc/
sec_pd03e.doc.

240 Yearbook of Private International Law, Volume 3 (2001)

 The Hague Conference on Private International Law

Convention. A Special Commission will meet in January 2002 to draw up a

preliminary draft Convention, with a view to adopting the final text of the
Convention later in 2002.

IV. Workshop Promoting Judicial Co-operation with

the Russian Federation; Promotion of Wider
Adherence to and Better Application of Hague
Conventions
A seminar on EU-Russia judicial co-operation, organised by the Finnish
Government in the summer of 1999 inspired representatives at the Finnish Ministry
of Justice and Members of the Permanent Bureau to propose to the Finnish
Government that a special workshop be held of legal experts from the Russian
Federation, Finland, and other interested European countries (which were France,
Germany, the Netherlands, Portugal and Sweden), to study in greater depth
possibilities for closer co-operation in matters of private international law. This
workshop took place at The Hague, at the Ministry of Justice of the Netherlands,
from 7-9 September 2000.
Within a time-span of only one and a half days, intense discussions took
place on the possibility for the Russian Federation to join a number of existing
Hague Conventions, as well as to participate in current and future work of the
Hague Conference. Hospitality was provided by the Ministry of Justice of the
Netherlands and the meeting was opened by the Minister of Justice of the Nether-
lands, Mr Korthals. The Finnish Government had arranged for a simultaneous
translation in English and Russian. The seminar led to tangible results. On the eve
of the seminar the Russian Ambassador in The Hague signed the Hague Conven-
tion on Protection of Children and Co-operation in Respect of Intercountry
Adoption, and on 1 May 2001 the Russian Federation deposited its instruments of
accession to the Hague Convention on the Service Abroad of Judicial and Extraju-
dicial Documents in Civil or Commercial Matters and the Hague Convention on
the Taking of Evidence Abroad in Civil or Commercial Matters.
The workshop with the Russian Federation is just one example of a broad
range of activities of the Conference and its Secretariat aimed at promoting wider
use and better application of the Hague Conventions. Part of this work takes place
at The Hague, part of it consists of travelling abroad by Members of the Secretariat
and providing ‘on the spot’ technical assistance. At The Hague, the completion of a
rich and highly accessible database on case law on the Child Abduction Conven-
tion goes on (see infra, section VI), and subject to the additional financial resour-
ces, setting up of a database with statistical information on this and other
Conventions is also planned. As regards ‘on the spot activities’ by the Secretariat,

Yearbook of Private International Law, Volume 3 (2001) 241

 J. H. A. van Loon

given its limited financial resources, the Permanent Bureau depends here to a large
extent on funding by particular Governments or on programmes developed by
others. An example is the TAIEX Programme of the European Union for Eastern
Europe, which has provided a context for participation in various seminars in
Eastern Europe. While the Secretariat is convinced of the extreme usefulness of
these various forms of technical assistance, its dependence on external funding or
initiatives make a rational and focused planning of these support activities very
difficult. Yet, there is no doubt that this work should continue, and the Secretariat
is seeking the assistance of its Member States in its attempt to formulate a more
explicit strategy for its activities in administering, monitoring, and supporting
Hague Conventions.

V. Special Commission on the practical operation of

the Intercountry Adoption Convention
From 28 November to 1 December 2000 a Special Commission took place at
The Hague to review the practical operation of the Hague Convention of 29 May
1993 on Protection of Children and Co-operation in Respect of Intercountry
Adoption. While a Special Commission meeting had been held in 1994, before the
Convention had entered into force, with a view to facilitating future implementa-
tion of the Convention, this was the first meeting of a Special Commission to
review the operation of the Convention in practice. The Convention has attracted
unprecedented interest and support and is now in force among 42 States. Nearly
58 States were represented at the meeting by 150 experts, which was officially
opened by the Minister of Justice of the Netherlands, Mr Korthals and was chaired
by Mrs Alegría Borras from Spain. Three preliminary documents had been drawn
up and circulated by Deputy Secretary General, Mr William Duncan. One of the
highlights of this meeting was the signing, during the meeting, of the Convention
on behalf of China by the Chinese Ambassador at The Hague.
The Special Commission reached agreement on a large number of recom-
mendations, and in addition, adopted a model form for a medical report on the
adopted child, all of which are included in an extensive Report, which was
published in April 2001.10 Intense discussions took place on the legal and ethical
question of improper financial gain, costs and expenses, which may be involved in
intercountry adoption, including donations and contributions, and the Special Com-
mission drew up a series of guidelines which should govern these delicate matters.

10
See Report and Conclusions of the Special Commission on the practical operation
of the Hague Convention of 29 May 1993 on Protection of Children and Co-operation in
Respect of Intercountry Adoption, 28 November-1 December 2000, drawn up by the Perma-
nent Bureau, also accessible on the HCCH website at: ftp://hcch.net/doc/scrpt33e2000.doc.

242 Yearbook of Private International Law, Volume 3 (2001)

 The Hague Conference on Private International Law

Recognising that the Convention is founded on universally accepted principles, the

Special Commission recommended that States Parties, as far as practicable, apply
the standards and safeguards of the Convention to the arrangements for
intercountry adoption which they make in respect of non-Contracting States.

VI. Special Commission on the operation of the Child

Abduction Convention
From 22 to 28 March 2001 the Fourth Special Commission took place on the
practical operation of the Convention of 25 October 1980 on the Civil Aspects of
International Child Abduction. The event attracted overwhelming interest and a
record number of 200 participants who could barely find a seat in the Academy
Building. Preparations for this meeting by Deputy Secretary General, Mr William
Duncan, had started three years ago. The Central Authorities designated by the
now almost seventy States Parties had been asked to provide statistics and to reply
to a Questionnaire, which resulted in a wealth of information being available upon
which solid recommendations could be built. A novel feature of this meeting was
that it had a double focus: it started with an examination of the co-operation among
Central Authorities and then centered discussions on the role of the courts and on
international co-operation among courts. The first part was chaired by Mr Peter
Pfund from the United States of America, Special Adviser, Office of Children’s
Issues, Bureau of Consular Affairs at the United States Department of State, and
the second part was chaired by Mrs Catherine McGuinness, Member of the
Supreme Court of Ireland.
The Special Commission adopted no less than fifty-eight Conclusions and
Recommendations to further improve the practical operation of the Convention.11
Several of these Recommendations encourage the Permanent Bureau to continue
with initiatives taken by it, such as the database on case law for the Child
Abduction Convention, and to start new projects such as the establishment of a
Good Practice Guide.

VII. Meeting of INCADAT correspondents

Development has continued on a database of significant case law arising out of the
1980 Hague Convention. The International Child Abduction Database
(INCADAT) represents an innovative step in the realms of private international

11
See HCCH website at: ftp://hcch.net/doc/concl28sc4_e.doc.

Yearbook of Private International Law, Volume 3 (2001) 243

 J. H. A. van Loon

law and assists in the possibility for consistent interpretation of the Convention.
Judges, Central Authorities, practitioners, academics and other interested persons
are able to access the on-line database free of charge (available at
www.incadat.com). As of September 2001 the database contained an up-to-date
collection of approximately 400 summaries, in English and French, of leading
decisions from 22 Contracting States. INCADAT now contains over 2,000 web
pages of legal analysis and approximately 5,000 web pages of legal decisions. By
September 2001 users had performed over 3,400 search sessions and registered
more than 114,000 ‘hits’ on the individual web pages.
It is the intention of the Permanent Bureau that the database should contain
a representation of case law from all States Parties to the 1980 Convention. To this
end the Permanent Bureau has begun to form a network of correspondents from
those Contracting States interested in contributing to the database. In order to assist
in the further development and progress of INCADAT, the Permanent Bureau
convened a meeting of persons who are acting as INCADAT correspondents or
who are otherwise supervising or assisting in the provision of case law for
INCADAT in their respective countries. The object of the September 2001
INCADAT Correspondent Meeting was to widen the coverage of INCADAT and
to ensure consistency and quality in the reporting of cases. Nearly 30
correspondents from 19 Contracting States were represented at the meeting. The
participants at the meeting expressed overwhelming endorsement of the project and
of the role it can play in furthering the consistent interpretation of the Convention.
Many useful suggestions were made which will ensure that the database reflects as
best as possible the different legal traditions of the diverse range of Contracting
States.

VIII. Membership of the Hague Conference

During the year 2001 membership of the Organisation has continued to grow, and
no less than eight States have joined the Conference: Brazil, Georgia, the
Hashemite Kingdom of Jordan, Peru, the Federal Republic of Yugoslavia, Belarus,
Bosnia and Herzegovina and Sri Lanka. Moreover, the following States were
admitted as new Members: Albania, Lithuania, Panama, South Africa and Ukraine.

244 Yearbook of Private International Law, Volume 3 (2001)

 FORUM*
________________

THE EXTRATERRITORIAL JUDICIAL PENALTY –

NEW INSTRUMENT FOR THE TRANSNATIONAL
ENFORCEMENT OF EXTRATERRITORIAL
INJUNCTIONS? **

Frank GERHARD***

I. Introduction
II. The Extraterritorial Judicial Penalty under International Law
A. Admissibility of the Extraterritorial Judicial Penalty under International Law
1. Jurisdiction to Enforce in Matters of Private Law
2. Prohibition of the Extraterritorial Exercise Stricto Sensu of the
Jurisdiction to Enforce
3. Admissibility of the Intra-Territorial Exercise of the Jurisdiction to
Enforce with Extraterritorial Effects: The Extraterritorial Judicial
Penalty
B. Jurisdiction to Pronounce an Extraterritorial Judicial Penalty under
International Law
1. Thesis of a Third Type of Jurisdiction in General
2. Thesis of a Third Type of Jurisdiction in Matters of Taking Evidence
Abroad
3. Jurisdiction to Pronounce an Extraterritorial Judicial Penalty is
Ancillary to the Jurisdiction to Prescribe
C. Main Fields of Application of the Extraterritorial Judicial Penalty

*
This section contains summaries of books recently published by young authors in
languages other than English.
**
This article summarizes some ideas expressed in Frank GERHARD, L'exécution for-
cée transfrontière des injonctions extraterritoriales non pécuniaires en droit privé, Etudes
suisses de droit international, Vol. 112, Zurich [Schulthess] 2000 (1-658 pp.), for which the
author received the Prof. Walther Hug prize.
***
Dr. iur., Attorney-at-law, Homburger, Zurich, Switzerland. E-mail: frank.gerhard
@homburger.ch

Yearbook of Private International Law, Volume 3 (2001), pp. 245-300

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Frank Gerhard

III. The Extraterritorial Judicial Penalty in EC Regulation No. 44/2001

A. Definition of Judicial Penalty
1. Need for an Interpretation
2. Various Methods of Interpretation
a) Grammatical Interpretation
b) Historical Interpretation
c) Autonomous Interpretation
d) Contextual Interpretation
3. Conclusion
B. Jurisdiction to Pronounce a Judicial Penalty
1. Apparent Contradiction: Article 22(5) and Article 49 of the
Regulation
2. Scope of Article 22(5) of the Regulation in Connection with the
Judicial Penalty
a) Purpose of Article 22(5)
b) Consequences of Qualifying the Judicial Penalty as an
Enforcement Measure
c) Jurisdiction to Pronounce a Judicial Penalty Coincides with
the Jurisdiction to Prescribe
3. Distinction Between Proceedings on the Merits and Enforcement
Proceedings
a) Criterion of Functionality
b) Function of the Rules of Jurisdiction of the Regulation
c) Conclusion
C. Judicial Penalty in the State of Recognition
1. Enforcement Abroad of a Judicial Penalty Issued in the State of
Origin
a) The Amount of the Judicial Penalty Must be Finally
Determined
b) Influence of the Ancillary Character of the Judicial Penalty
c) Recognition of a Judicial Penalty Rendered in Connection
with an Arbitral Award
2. Issuance of a New Judicial Penalty in the State of Recognition
a) Arguments Pro Inherent to the Regulation
b) Differences Between the Substantive Laws of the State of
Origin and the State of Recognition
c) Differences Between the Enforcement Laws of the State of
Origin and the State of Recognition: Recognition of the
English Freezing Injunction
3. Public Policy of the State of Recognition in the Enforcement
Proceedings
a) Distinction
b) Injunction Incompatible with the Public Policy of the State
of Recognition
c) Injunction Incompatible with the Public Policy of a Third
Party State

246 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

I. Introduction
The idea of transnational enforcement is at least a contradiction, if not a provoca-
tion. Enforcement is one of the core attributes of sovereignty: The courts of a State
have exclusive jurisdiction and its laws are exclusively applicable when it comes to
deciding enforcement measures on the territory of that State; conversely, its courts
have no power to intervene and its laws are not applicable in enforcement pro-
ceedings abroad. Therefore, enforcement is not really an international matter. It is
like citizenship: Both are consequences of the principles of sovereignty and territo-
riality and are thus subject to the exclusive jurisdiction of a single State.
Notwithstanding the foregoing, this article attempts to demonstrate that the use of
the judicial penalty in connection with extraterritorial non-monetary injunctions1
renders this contradiction apparent and that transnational enforcement is a reality
or is at least desired in the European Judicial Area.
This article is divided in two parts. First, it examines the judicial penalty
under international law, in particular the admissibility of the extraterritorial judicial
penalty, the jurisdiction to pronounce such a penalty and its main fields of applica-
tion. Second, it examines the judicial penalty under EC Regulation No. 44/2001 on
the jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters, in particular its definition, the jurisdiction to pronounce an
extraterritorial judicial penalty and its recognition abroad. This article aims to
develop a system of free circulation of the judicial penalty in Europe, provided the
amount has been finally determined in the State of origin, thus favoring enforce-
ment of the rights of creditors permitting them to choose between foreign enforce-
ment of the injunction itself or and foreign enforcement of the judicial penalty
accompanying such injunction.

1
This article does not examine the right to specific performance and the various
judicial penalties available under national law. See GERHARD F. (note **), Part 2, No. 318-
676, where the judicial penalties in the main European countries are dealt with: France
(astreinte), United Kingdom (contempt of court), Benelux (astreinte and/or dwangsom),
Germany (Zwangsgeld and Ordnungsgeld) and Switzerland (various judicial penalties pur-
suant to the cantonal codes of civil procedure; astreinte of the canton of Geneva; and crimi-
nal fine pursuant to Article 292 of the Swiss Criminal Code). The main instruments of unifi-
cation and harmonization of substantive law are also examined in detail: UNIDROIT Princi-
ples of International Commercial Contracts of 1994; European Principles of Contract Law of
1997; United Nations Convention on Contracts for the International Sale of Goods (CISG)
of 11 April 1980, as are instruments of procedural law: Project Storme, Approximation of
the Judiciary Law in the European Union, 1994; common project of UNIDROIT and the
American Law Institute for the adoption of Transnational Rules of Civil Procedure of 1
April 1999; UNIDROIT Principles of International Commercial Contracts of 1994.

Yearbook of Private International Law, Volume 3 (2001) 247

 Frank Gerhard

II. The Extraterritorial Judicial Penalty under

International Law
A. Admissibility of the Extraterritorial Judicial Penalty under
International Law

Although it is generally acknowledged that a court may issue an injunction that

will be effective abroad, this does not mean that the same court may also exercise
its coercive power to enforce that order. Therefore, it is necessary first to define the
concept of jurisdiction to enforce in matters of private law and distinguish its vari-
ous forms (1), then determine whether international law accepts the exercise of
such jurisdiction abroad (2), or its intra-territorial exercise, but with extraterritorial
effects (3).

1. Jurisdiction to Enforce in Matters of Private Law

International law traditionally distinguishes between jurisdiction to prescribe and

jurisdiction to enforce.2 Jurisdiction to prescribe in private matters is defined as the
power of a State to prescribe individual or general rules in matters of private law
by legislation, executive decree or a court judgment3 that regulates the conduct4 or
affect the rights of persons.5 Besides this indirect intervention by the State in rela-

2
It should be noted that the Restatement (Third) of the Foreign Relations Law
(1987) adds a third element, the jurisdiction to adjudicate, which we consider a sub-cate-
gory of the jurisdiction to prescribe. See also BROWNLIE I., Principles of Public Internatio-
nal Law, 4th ed., Oxford 1990, p. 298; HIGGINS R., ‘Legal bases of jurisdiction’, in:
OLMSTEAD, C.J. (ed.), Extraterritorial application of the laws and responses thereto, Oxford
1984, pp. 4-13, at 4; STERN B., ‘Quelques observations sur les règles internationales
relatives à l'application extraterritoriale du droit’, in: Annuaire français de droit inter-
national 32 (1986), pp. 9-52, at 11, note 10: ‘La nouvelle distinction introduite dans la
dernière version du Restatement entre jurisdiction to prescribe, jurisdiction to adjudicate et
jurisdiction to enforce ne semble pas vraiment pertinente.’
3
See STERN B. (note 2), p. 11. The Restatement (Third) of the Foreign Relations
Law (1987), § 401(b) defines the jurisdiction to prescribe as ‘the capacity of a State to make
its law applicable to activities, relations, or status of persons, or the interests of persons in
things whether by legislation, by executive act or order, by administrative rule or regulation,
or by determination of a court [...]’.
4
See, in particular, MANN F. A., ‘The Doctrine of Jurisdiction in International Law’,
in: Recueil des Cours, Vol. 111, 1964-I, pp. 1-162, at 99, who regards jurisdiction as ‘the
State's right under international law to regulate conduct in matters not exclusively of do-
mestic concern’.
5
See, in particular, BEALE D., ‘The Jurisdiction of a Sovereign State’, in: Harvard
Law Review (HLR) 36 (1923), pp. 241 et seq., who defines (extraterritorial) jurisdiction as

248 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

tions between individuals, which consists in laying down norms to regulate their
conduct, the State can also intervene directly in relations between individuals. The
most characteristic example of this is the assistance a State provides to a creditor
by intervening with its coercive power in cases where the latter was unsuccessful
in obtaining payment from a debtor. At this stage, the State intervention becomes
not only normative but also executive. Furthermore, the State adds an element that
does not exist when it only exercises its jurisdiction to prescribe: It publicizes the
strictly private relations between the individuals, transforming the bilateral rela-
tionship into a tripartite one, as a result of which execution is no longer an exclu-
sive matter of the parties. Therefore, jurisdiction to enforce in matters of private
law is defined as the authority of a State to enforce a general rule or a decision by
executive acts that can lead to the use of coercive power by the State.6
Only issues are addressed that relate to the extraterritorial exercise of the
jurisdiction to enforce, i.e., when it is aimed at acts performed or at persons or
assets situated outside the territory of the State exercising such jurisdiction. Such
extraterritorial exercise of the jurisdiction to enforce may be either extraterritorial
stricto sensu (direct) or intra-territorial but with effects abroad (indirect). The exer-
cise is extraterritorial stricto sensu when the State acts directly on foreign territory.
On the other hand, the exercise is intra-territorial with effects abroad when the
measures taken by State are initiated on its own territory but are to be carried out in
the foreign State with its compliance. A judicial penalty accompanying an extrater-
ritorial injunction aimed at a specific act or forbearance in a foreign territory is a
perfect example: If the recipient of the judicial penalty refuses to comply with the
injunction, the judicial penalty will be enforced in respect to his assets located in
the territory of the State of origin. Even the threat of quasi-criminal (e.g., the
English contempt of court) or criminal7 (e.g., the fine in Article 292 of the Swiss
Criminal Code) sanctions will usually suffice to bring about compliance with the
injunction, irrespective of its place of performance. When issued in an appropriate
case, for example, when the debtor resides in the territory of the State of origin,
such injunction is not mere brutum fulmen.8 However, the efficiency of an

‘[...] the power of a sovereign to affect the rights of persons, whether by legislation, by
executive decree, or by judgment of a court’.
6
See STERN B. (note 2), p. 11. The definition given by the Restatement (Third) of
the Foreign Relations Law (1987), § 401 (c) is similar: ‘The authority of a State to induce or
compel compliance or to punish non-compliance with its laws or regulations, whether
through the courts or by use of executive, administrative, police or non-judicial action.’
7
Criminal jurisdiction extends also to acts performed abroad. Execution of the sanc-
tion depends on the personal jurisdiction of the State of origin or on the possibility to obtain
extradition of the debtor. See SCHLOSSER P., EuGVÜ. Europäisches Gerichtsstands- und
Vollstreckungsübereinkommen mit Luganer Übereinkommen und den Haager Übereinkom-
men über Zustellung und Beweisaufnahme, Munich 1996, ad Article 43, No. 7.
8
See PLINIUS, Hist. nat., II, 113, as expressed sometimes by English courts. See
Norris v. Chambers, [1861] 3 De G.F. & J. 583, at 584-585; Royal Exchange Assurance v.

Yearbook of Private International Law, Volume 3 (2001) 249

 Frank Gerhard

extraterritorial injunction may become doubtful when the debtor does not reside in
the territory of the State of origin or if, at the time of the issuance of the order or in
the future, he does not own attachable assets in that territory or if the injunction
cannot be recognized abroad.9 In such cases, only foreign recognition of the judi-
cial penalty itself would make the extraterritorial injunction fully effective, i.e.,
irrespective of the defendant's domicile or the location of his assets.

2. Prohibition of the Extraterritorial Exercise Stricto Sensu of the

Jurisdiction to Enforce

In the Lotus case, the Permanent Court of International Justice has not only distin-
guished between the jurisdiction to enforce and the jurisdiction to prescribe, but
has also clearly prohibited the extraterritorial exercise stricto sensu of the jurisdic-
tion to enforce:10
‘The first and foremost restriction imposed by international law upon
a State is that – failing the existence of a permissive rule to the con-
trary – it may not exercise its power in any form in the territory of

Compania Naviera Santi S.A., [1962] 1 Lloyd's Rep. 410, at 420; E.D. & F. Sugar (Man)
Ltd. v. Haryanto (No. 2), [1991] 1 Lloyd's Rep. 429, at 439.
9
However, it is unlikely that the court will not pronounce an injunction because of
such risk; the court is not bound to ‘contemplate the possibility that the [order] will not be
obeyed’, see Castanho v. Brown & Root (U.K.) Ltd, [1981] Law Reports, Appeal Cases,
London (AC) 557, at 574, per Lord Scarman and the case law cited therein. Furthermore,
‘[the injunction] can be enforced by sequestration against [the defendant's] assets here.
There is no evidence that it has any assets here today: but that does not matter. It may have
assets here tomorrow’, see Hospital for Sick Children (Board of Governors) v. Walt Disney
Productions, [1967] 1 All ER 1005, at 1011, per Lord Denning. However, the risk of ineffi-
ciency of an injunction can be taken into account by the court when it assesses whether or
not to pronounce this measure, see Locabail International Finance Ltd. v. Agroexport,
[1986] 1 The Weekly Law Reports (WLR) 657, at 665 (CA). On this issue, see also claims
before Austrian courts aiming at prohibiting the Czechoslovakian State to build nuclear
power plants near to the Austrian-Czechoslovakian border, Oberster Gerichtshof (OGH), 23
February 1988, in: Juristische Blätter (JBl) 110 (1988), p. 459, critical comment by BÖHM,
P. (confirms the jurisdiction of the Austrian court and holds that the judicial penalty could
‘probably’ be enforced in Austria); contra, in a similar case, OGH Linz, 2 March 1989, in:
JBl 112 (1990), p. 260 (holds that the judicial penalty could not be enforced in Austria due
to the enforcement immunity of the foreign State). See also the German Bundesverfassungs-
gericht (BVerfG), 12 March 1986, in: BVerfGer 72 (1986), pp. 78-79 (injunction request
made in Germany against nuisances caused by the airport of Salzburg).
10
Permanent Court of International Justice (CIJ), Lotus case, 7 November 1927, in:
Series A, No. 10 (1927), pp. 18-19; see also European Court of Justice (ECJ), J.R. Geigy v.
Commission, Case 52/69, 14 July 1972, [1972] European Court of Justice Reports (ECR),
pp. 787 et seq.

250 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

another State. In this sense a jurisdiction is certainly territorial; it

cannot be exercised by a State outside its territory except by virtue of
a permissive rule derived from international custom or from conven-
tion.’

Unlike the statement on the extraterritorial exercise of the jurisdiction to pre-

scribe,11 to our knowledge this statement has not been the subject of a controversy
in the numerous comments generated by the Lotus case. It merely reflects the sov-
ereignty of States. Since a sovereign State has a monopoly over the use of physical
force on its own territory and since the international community consists of numer-
ous sovereign States, each State has – positively – exclusive jurisdiction to perform
physical acts in its own territory and – negatively – cannot perform coercive meas-
ures or official acts in the territory of another State, without the consent of the State
in whose territory such acts are to be performed. The correlation of this exclusivity
– the principle of non-intervention – is clearly defined in Article 2(4) of the United
Nations Charter:

‘All Members shall refrain in their international relations from the

threat or use of force against the territorial integrity or political inde-
pendence of any State, or in any other manner inconsistent with the
purposes of the United Nations.’

Therefore, the monopoly of the State dominates the international regime of en-
forcement proceedings,12 excluding the application of conflicts rules in this matter13
and prohibiting the use of coercive measures beyond national borders.
However, coercive acts in foreign territories that are prohibited by interna-
tional law must have a tangible character. The main criterion to be taken into con-
sideration is the physical presence of agents or officials in the foreign territory.
These tangible acts can be acts that require the use of physical force, such as the

11
Ibid., p. 19. The Court suggested that the State's jurisdiction to prescribe is free
from any restriction whatsoever under international law.
12
A certain traditional doctrine considers enforcement measures and provisional
measures a single category that is functionally homogeneous, subject to a strict territoriality
due to the State monopoly in the use of physical force. For a unitary treatment of provisional
measures and enforcement measures, see Cour de cassation, chambre civile, Paris (Cass.
civ.), 2e Ch., 29 February 1984, in: Rev. crit. dr. int. pr. 74 (1985), pp. 545-555, comment
SINAY-CITERMANN, A.; Revue de droit international et de droit comparé (Rev. dr. int. et dr.
comp.) 62 (1985), pp. 405 et seq., comment SACE, J..
13
The conflict of law rules are absorbed by the conflicts rules on jurisdiction, see
VAREILLES-SOMMIERES P., ‘La compétence internationale des tribunaux français en matière
de mesures provisoires’, in: Rev. crit. dr. int. pr. 85 (1996), p. 400.

Yearbook of Private International Law, Volume 3 (2001) 251

 Frank Gerhard

arrest or kidnapping of persons14 or the freezing or seizure of assets. They can also
be acts that require the use of State prerogatives, however, without the use of
physical force, such as celebrating marriages, collecting taxes, conducting investi-
gations, hearing witnesses or any other measures intended to gather evidence, if
such acts require the physical presence of a State agent in the foreign territory, as
well as the servicing of judicial or non-judicial documents abroad.15 Whether the
State exercises these activities through persons in or outside its own administration
is irrelevant as far as the principles of international law are concerned. The per-
formance of such acts abroad may even constitute a criminal act in some coun-
tries.16 Whether or not these acts amount to a State intervention is to be determined
according to the law and practice of the State where the acts are to be performed,
not according to the principles of the State exercising its jurisdiction.17
Since international law prohibits a State from exercising its jurisdiction to
enforce outside its own territory, this prohibition can be lifted only by the consent
of the State in whose territory such act is to take place, provided such consent is
not contrary to jus cogens.18 For instance, it is unlikely that a State would generally
waive its right to exercise its jurisdiction to enforce within its own territory; how-
ever, it could opt to waive this right in a specific case.19 Therefore, international
treaties could limit the exclusivity of a State's jurisdiction to enforce within its own
territory by granting another State the right to extraterritorial enforcement of its
own rules of law.20

14
Treaties on extradition enable compliance with international law in these situa-
tions.
15
E.g., the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad
in Civil and Commercial Matters and the Hague Convention of 15 November 1965 on the
Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters;
both entered into force in Switzerland on 1 January 1995 and enable the compliance with
international law.
16
In Switzerland, e.g., Articles 271 and 273 of the Swiss Criminal Code.
17
E.g., Swiss law considers the taking of evidence a State activity, whether per-
formed by the parties or by a governmental authority. The taking of evidence is a broader
notion in the United States, where the taking of evidence by the parties in connection with
discovery proceedings is not regarded as a State activity. See, e.g., In re Anschütz & Co.
GmbH, 754 F.2d 602, 611-612 (5th Cir. 1985). In general, see VOLKEN P., Die internationale
Rechtshilfe in Zivilsachen, Zurich 1996, pp. 126-138.
18
See JACQUET J.-M., ‘La norme juridique extraterritoriale dans le commerce
international’, in: Clunet 111 (1985), p. 382.
19
See, in particular, COMBACAU J./SUR S., Droit international public, 2nd ed., Paris
1995, p. 316; STERN B. (note 2), p. 27.
20
E.g., the Convention applying the Schengen Agreement of 14 June 1985 regarding
the progressive abolition of controls at common borders (entered into force on 1 December
1995) provides for cooperation of police forces and grants foreign police forces the right to
intervene on the territory of another State (Articles 40 and 41).

252 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

3. Admissibility of the Intra-Territorial Exercise of the Jurisdiction to En-

force with Extraterritorial Effects: The Extraterritorial Judicial Penalty

Extraterritorial injunctions are the result of the application of national rules relating
to persons and assets situated abroad and acts performed abroad. Such injunctions
can be enforced after being recognized abroad; this hypothesis is of some practical
importance21 but does not interest us here. In numerous cases, cooperation of the
foreign judicial authorities is not even necessary: An extraterritorial injunction can
be enforced in the territory of the State of origin, provided it is accompanied by a
judicial penalty. Such intra-territorial exercise of the jurisdiction to enforce in cases
where the persons, assets or acts affected are located abroad does not constitute an
illegal use of a State's jurisdiction to enforce.22 Expressly prohibiting a judicial

21
In connection with the Brussels Convention of 27 September 1968 on the Jurisdic-
tion and Enforcement of Judgments in Civil and Commercial Matters, the SCHLOSSER Re-
port, in: Official Journal of the European Communities (OJ), 5 March 1979, C 59/71-144,
No. 211, states that the court must apply the same measures of enforcement as those which
would be authorized if its own injunctions would be disregarded. On the recognition and
enforcement in the United States of injunctions to act or to refrain from performing a par-
ticular act, see BUZARD D. A., ‘U.S. Recognition and Enforcement of Foreign Country In-
junctive and Specific Performance Decrees’, in: Droit et pratique du commerce
international (DPCI) 1990, pp. 270-292. Exequatur in the United Kingdom would not be
possible outside the scope of application of the Brussels Convention; foreign orders in
personam are enforced only if the order compels payment of a sum of money, see, in
particular, CHESHIRE G. C./NORTH P. M./FAWCETT J. J., Private International Law, 12th ed.,
London, Dublin, Edinburgh 1992, p. 367; DICEY A. V./MORRIS J./COLLINS L., Dicey and
Morris on the Conflict of Laws, 12th ed., London 1993 (and Suppl. 1994), Vol. I, p. 462.
22
For authors of private international law, see in particular GÄRNTER J., Probleme
der Auslandsvollstreckung von Nichtgeldleistungsentscheidungen im Bereich der Europäi-
schen Gemeinschaft, Munich 1991; GEIMER R., ‘Verfassung, Völkerrecht und
internationales Zivilverfahrensrecht’, in: Zeitschrift für Rechtsvergleichung (ZfRV) 33
(1992), pp. 321-347, at 333-335; GEIMER R., Internationales Zivilprozessrecht, 3rd ed.,
Cologne 1997, No. 400 and No. 3223; GOTTWALD P., ‘Grenzen zivilgerichtlicher
Massnahmen mit Auslandswirkung’, in: LINDACHER W./PFAFF D./ROTH G./SCHLOSSER
P./WIESER E. (ed.), Festschrift für Walther J. Habscheid, Bielefeld 1989, pp. 119-130, at
124; GOTTWALD P., ‘Die internationale Zwangsvollstreckung’, in: IPRax 1991, pp. 285-291,
at 291; HESS B., Staatenimmunität bei Distanzdelikten. Der private Kläger im Schnittpunkt
von zivilgerichtilichem und völkerrechtlichem Rechtsschutz, Munich 1992, p. 367; KOCH H.,
‘Neuere Probleme der internationalen Zwangsvollstreckung einschliesslich des
einstweiligen Rechtsschutzes’, in: SCHLOSSER P. (ed.), Materielles Recht und Prozessrecht
und die Auswirkung der Unterscheidung im Recht der Internationalen Zwangsvollstreckung,
Bielefeld 1992, pp. 171-207; KOCH H., ‘Internationaler Unterlassungsrechtsschutz zwischen
materiellem Recht und Prozessrecht’, in: BASEDOW J./EINHORN T./GIRSBERGER D./MEIER
I./SCHNYDER A.K. (ed.), Private Law in the International Arena – Liber Amicorum Kurt
Siehr, The Hague, Zurich 2000, pp. 341-360, at 357-359; LINDACHER W., ‘Internationale
Unterlassungsvollstreckung’, in: SCHILKEN E./BECKER-EBERHARD E./GERHARDT W. (ed.),
Festschrift für Hans Friedhelm Gaul, Bielefeld 1997, pp. 399-409; MANKOWSKI P., ‘Für

Yearbook of Private International Law, Volume 3 (2001) 253

 Frank Gerhard

penalty from being issued simultaneously with an extraterritorial injunction would

place clear limitations on the different jurisdictions. Although this might seem
tempting, a whole range of arguments supports the admissibility of the intra-territo-
rial exercise of the jurisdiction to enforce with extraterritorial effects. A strict ter-
ritorial jurisdiction to prescribe would make it necessary to initiate proceedings in
all jurisdictions where action is sought. Similarly, recognizing the exclusive juris-
diction of a State to enforce in the territory where the act or forbearance must
effectively take place could lead to fragmentation of the enforcement proceedings,
particularly in regard to obligations to refrain from a particular act. Accordingly,
even though an extraterritorial injunction is issued, it would be necessary to issue a
separate judicial penalty in each country. In addition to being a burden on the par-
ties, this procedure has another important disadvantage: It often occurs that the
debtor owns attachable assets only in the State where the proceeding on the merits
is pending. In such cases, it would be necessary to recognize the judicial penalty
pronounced abroad at the place where the act or forbearance is to take place in the
State of origin.23 Therefore, this would result in a back and forth between the court
of origin and the court of enforcement, which would be contrary to principles basic

einen Wegfall des Fortsetzungszusammenhangs bei der Unterlassungsvollstreckung’, in:

Wettbewerb in Recht und Praxis (WRP), 1996, pp. 1144-1148, at 1148; MATSCHER,
‘Überlegungen über einen einheitlichen Begriff der inländischen Gerichtsbarkeit in
Zivilrechtssachen’, in: FISCHER P./KRÖCK H. F./VERDROSS A. (ed.), Völkerrecht und
Rechtsphilosophie, Internationale Festschrift für Stephan Verosta, Berlin 1980, pp. 299-
309; MEIER I., ‘"Swiss-Worldwide-Mareva" im Scheidungsprozess?’ in: MEIER I./SIEHR K.
(ed.), Rechtskollisionen – Festschrift für Anton Heini, Zurich 1995, pp. 277-284, at 277;
PFEIFFER T., ‘Internationale Zusammenarbeit bei der Vornahme innerstaatlicher
Prozesshandlungen’, in: GILLES P. (ed.), Transnationales Prozessrecht: Deutsche
Landesberichte zur Weltkonferenz für Prozessrecht in Taormina, Sizilien 1995, Baden-
Baden 1995, pp. 77-117, at 89-91; REMIEN O., Rechtsverwirklichung durch Zwangsgeld:
Vergleich, Vereinheitlichung, Kollisionsrecht, Tübingen 1992, p. 304; SCHACK H., Interna-
tionales Zivilverfahrensrecht, 2nd ed., Munich 1996, p. 335; SCHLOSSER P., ‘Extraterritoriale
Rechtsdurchsetzung im Zivilprozess’, in: PFISTER B./WILL M. (ed.), Festschrift für Werner
Lorenz, Tübingen 1991, pp. 497-512, at 505; STUTZ A., Die internationale Handlungs- und
Unterlassungsvollstreckung unter dem EuGVÜ, Konstanz 1992, p. 17, TREIBMANN B., Die
Vollstreckung von Handlungen und Unterlassungen im europäischen Zivilrechtsverkehr,
Munich 1994, p. 101.
With more qualifications, see STÜRNER R., ‘Das grenzübergreifende Vollstreckungs-
verfahren in der europäischen Union’, in: GERHARDT W./DIEDRICHSEN U./RIMMELSPACHER
B./COSTEDE J. (ed.), Festschrift für Wolfram Henckel, Berlin, New York 1995, pp. 863-875,
at 870; STÜRNER R., Zwangsvollstreckung-, Konkurs und Vergleichsrecht, Vol. I: Einzelvoll-
streckungsrecht, 12th ed., Heidelberg 1995, No. 57.13, who advocates the subsidiary use of
the intra-territorial exercise of the jurisdiction to enforce, such use being justified only if the
enforcement at the place of performance is not possible; however, it is not very clear
whether STÜRNER views it as a violation of international law or of international comity.
23
See REMIEN O. (note 22), p. 301.

254 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

to a sound administration of justice. Finally, in some cases, imposing an intra-ter-

ritorial sanction in the State of origin would favor performance of the obligation
due, if, for example, the State of recognition where the act is to be performed
recognizes payment of damages but does not permit specific performance in such
claims. This could be relevant, particularly when both civil law and common law
countries are involved.24
The act of a State exercising its jurisdiction to enforce in its territory but
with extraterritorial effects is characterized by two successive phases: first, issuing
the extraterritorial injunction accompanied by the threat of legal sanctions, espe-
cially a judicial penalty and; second, in cases of non-compliance, execution of the
threatened sanction with a mere national effect. It could often be difficult to local-
ize the effects of an indirect means of enforcement. On the other hand, the mere
threat of legal sanctions frequently suffices to obtain compliance with an injunction
by a debtor domiciled abroad, for example, by inducing a foreign company to act
or to refrain from acting in the territory where it is domiciled. Such injunctions are
not extraterritorial enforcement measures: As long as the State applies its rules of
law only extraterritorially, the sovereignty of the foreign State is protected because
it has the possibility to ignore the injunctions at the stage of recognition.25 Such
injunctions accompanied by the threat of legal sanctions cannot be considered a
tangible act of enforcement: Ordering is not coercing! Direct coercion only cannot
take place in the foreign territory; as long as the purpose of imposing fines is to
compel acts falling under the law applicable on the merits, this is a necessary con-
sequence of the action taken by the State of origin to exercise its jurisdiction to
prescribe: To refuse a State the power to order such a sanction simultaneously with
its injunction would deprive its jurisdiction to prescribe of all meaning. Although
the jurisdiction to order or prohibit the performance of an act abroad has been
sporadically contested by reference to international law and the sovereignty of
foreign States,26 this limitation goes far beyond the requirement of international law
which sets direct limits only on the extraterritorial exercise stricto sensu of the
jurisdiction to enforce. It goes without saying that by sending its public force – or
judicial officials – abroad to directly enforce a judgment, a State would infringe the
territorial sovereignty of the foreign State. Nevertheless, as in the Lotus case, ‘it
does not, however, follow that international law prohibits a State from exercising
jurisdiction in its own territory in respect of any case which relates to acts which
have taken place abroad and in which it cannot rely on some permission of inter-
24
On the right to obtain specific performance in the main European countries, see
GERHARD F. (NOTE **), No. 606 et seq.
25
See STERN B. (note 2), p. 15.
26
See BEALE D., A Treatise of the Conflict of Laws, Vol. I, New York 1929, p. 421;
BEALE D. (note 5), pp. 292-294, who was against the jurisdiction of the courts to order the
performance of an act abroad (but not against ordering non-performance of an act abroad);
despite the allusion to the sovereignty of the foreign State, his position is explained instead
by opportunity considerations, i.e., the prevention of a conflict with the local laws.

Yearbook of Private International Law, Volume 3 (2001) 255

 Frank Gerhard

national law’.27 In the second phase, if the person abroad to whom the judicial
penalty is addressed does not comply with the extraterritorial injunction, the State
of origin shall pronounce and enforce legal sanctions. Limited to its own territory,
these sanctions may by definition have an indirect extraterritorial effect only. Since
their application will be limited to the territory of the State of origin, the sanctions
can be tangible and direct, for example, the enforcement of a judicial penalty.
The technique of a State exercising its jurisdiction to enforce in its own
territory but with effects abroad has long been disregarded in continental Europe.28
However, a gradual change has taken place in recent years,29 thus obliging us to
reconsider the question of a State's jurisdiction to enforce in international law.30 A
rather spectacular example is the development of the Mareva injunction in English
law. Its apparent weakness – the lack of effect in rem – is the reason for its great
impact at international level. While such an injunction could originally be granted
only in respect of property in England, it can now be granted worldwide.31 Since
the desired effect cannot be obtained directly due to the phenomenon of State
sovereignty, it is obtained indirectly by the threat of legal sanctions in cases of

27
CIJ, 7 November 1927, in: Series A, No. 10, pp. 18-19. This view is largely sup-
ported in the doctrine; see authors mentioned in note 23.
28
This technique was already mentioned in English case law in 1750, in Penn v.
Lord Baltimore (1750) 1 Ves. Sen. 444, where the Chancellor, Lord Hardwicke, ordered the
defendant to draw the borderline between the provinces of Pennsylvania and Maryland,
which, however, were not under the jurisdiction of English courts. Lord Hardwicke ex-
plained that his decision had only an in personam effect; referring to a previous case re-
garding the setting of the borderline for land located in Ireland, he declared: ‘I could enforce
it by process of contempt in personam and sequestration, which is the proper jurisdiction of
this court’ (at 454). See also Attorney General v. Barker & Another, [1990] 3 All ER 257, at
260; Hospital for Sick Children (Board of Governors) v. Walt Disney Productions, [1968] 1
Ch.D. 52 (CA) and the opinions of Lord Denning, MR, at 69B, Salmon LJ, at 77B-C and
Harman LJ, at 71C-D. This rule is also valid for real estate located abroad, see British South
Africa Co. v. Companhia de Moçambique, [1892] 2 QB 358, at 364. However, the English
courts have not yet applied the sequestration to assets located abroad, see MacKinnon v.
Donaldson, Lufkin and Jeanrette Securities Corporation, [1986] Ch.D. 482, at 494; British
South Africa Co. v. de Beers Consolidated Mines Ltd, [1910] 2 Ch.D. 502.
29
See MUIR-WATT H., ‘Extraterritorialité des mesures conservatoires in personam (à
propos de l'arrêt de la Court of Appeal, Credit Suisse Fides Trust v. Cuoghi)’, in: Rev. crit.
dr. int. pr. 87 (1998), pp. 27-50, at 29.
30
According to GEIMER R. (note 22), pp. 333-335, the question of the intra-territorial
exercise of the jurisdiction to enforce with extraterritorial effects will be one of the main
challenges of the future of international litigation.
31
This change was brought about by the decision in Babanaft International Co. SA
v. Bassatne, [1989] 2 WLR 232 (CA). A worldwide order can also be made if the proceeding
on the merits is pending abroad. Examples are Republic of Haiti v. Duvalier, [1990] 1 QB
202 (CA) and Credit Suisse Fides Trust SA v. Cuoghi, [1997] 3 All ER 724 (CA). On the
progressive extension of the Mareva injunction, see GERHARD F. (note **), No. 295.

256 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

non-compliance, which is not prevented by the existence of a State borderline. The

possibility of using a substitute method of direct enforcement when the latter is not
possible or not opportune may reveal some interesting potential in the matter of
transnational litigation, which has not yet been assessed in detail. The indirect
pressure obtained by threatening legal sanctions in the State of origin against a
defendant who is subject to a foreign jurisdiction enables the performance or
prohibition of an act on the territory of a foreign State, although it is beyond the
reach of the imperium of the judge of origin. This circumvention of the
territoriality principle seems to be a new form of the conflict of laws,32 which
would come into play if the legal sanctions could be enforced abroad.

B. Jurisdiction to Pronounce an Extraterritorial Judicial Penalty under

International Law

1. Thesis of a Third Type of Jurisdiction in General

The question arises as to whether a third type of jurisdiction exists in addition to

the jurisdiction to prescribe and the jurisdiction to enforce. Is there some type of
jurisdiction between these two, which could serve as a basis for issuing extraterri-
torial judicial penalties? International law sets only indirect limits to the jurisdic-
tion to prescribe.33 There is nothing like direct limits34 or, conversely, the total
absence of limits35 or the positive existence of an unlimited jurisdiction to pre-
scribe.36 On the contrary, international law clearly prohibits a State from exercising
stricto sensu its jurisdiction to enforce on foreign territory. The Lotus case is un-
equivocal on this point. But what, if any, limits are set by international law in cases
where a State exercises jurisdiction to enforce in its own territory but with extrater-
ritorial effects? Instinctively, a State's provisions regulating acts of private persons
or assets located abroad are admissible only with extreme caution, even if the State
uses its coercive power in its own territory, without sending its agents abroad.
However, from the offset, the direct limits set by the Lotus case to the extraterrito-
rial exercise stricto sensu of the jurisdiction to enforce cannot be applied to the
intra-territorial exercise of such jurisdiction. In the latter case, the tangible acts of
enforcement are performed in the territory of the State of origin, not in the territory
of another State. Therefore, the issue is whether a State having jurisdiction to

32
This phenomenon is described for the first time by MANN F. A., ‘The Doctrine of
International Jurisdiction Revisited after Twenty Years’, in: Recueil des Cours 1984 III (vol.
186), pp. 9-116, at 45 under the name of ‘conflict of enforcement jurisdiction’.
33
See GERHARD F. (note **), No. 80-88.
34
Ibid., at No. 50-56.
35
Ibid., at No. 75-79.
36
Ibid., at No. 61-71.

Yearbook of Private International Law, Volume 3 (2001) 257

 Frank Gerhard

prescribe can automatically issue an extraterritorial judicial penalty, even if the in-
junction has an impact on persons, assets or acts abroad,37 or whether imposing
legal sanctions with indirect extraterritorial effects requires a third type of jurisdic-
tion that would be more closely connected with the territory of the court seized
than required by the jurisdiction to prescribe but not as closely connected as
required by the jurisdiction to enforce.

2. Thesis of a Third Type of Jurisdiction in Matters of Taking of Evidence

Abroad

The thesis that a third type of jurisdiction exists in international law has been
developed in connection with injunctions ordering the disclosure of documents
located abroad.38 The idea was launched after the famous transatlantic judicial
conflict39 of the 1980's between the United States and the main European export
countries. The conflict came about as a result of numerous extraterritorial injunc-
tions issued by United States authorities ordering the disclosure of documents
located abroad, namely in France, Germany and Switzerland.40 Accordingly, this
jurisdiction is defined as the power of an authority to order, under the threat of
monetary sanctions, the disclosure of documents or the hearing of witnesses
located or domiciled abroad, directly without resorting to judicial cooperation.41

37
See BROWNLIE I. (note 2), p. 309 and the Swiss Government, in: Annuaire suisse
de droit international (ASDI) 37 (1981), p. 248: ‘La distinction ... entre la compétence légi-
slative et la compétence en matière d'enforcement, soit entre la législation extraterritoriale et
l'application extraterritoriale de cette législation ne sera pas reprise ici. Avec Brownlie, il
faut admettre que l'une des deux compétences est fonction de l'autre et que leurs limites
coïncident.’ However, it appears that there is some confusion as to the words ‘application’
and ‘enforcement’, which are not identical in meaning. See MANN F. A. (note 32), p. 35, at
note 50.
38
See KAUFMANN-KOHLER G., ‘Conflits en matière d'obtention de preuves à
l'étranger’, in: ASDI 41 (1985), pp. 110-120, at 117, at note 30, who proposes the creation of
a jurisdiction of a third type, and in particular MÖSSLE K., Extraterritoriale Beweisbeschaf-
fung im internationalen Wirtschaftsrecht, Baden-Baden 1990, pp. 334-342, who has made
this concept the topic of his doctoral thesis.
39
Named after SCHLOSSER P., Der Justizkonflikt zwischen den USA und Europa,
Berlin 1985, and STÜRNER R., ‘Der Justizkonflikt zwischen USA und Europa’, in:
HABSCHEID W. J. (ed.), Der Justizkonflikt mit den Vereinigten Staaten von Amerika,
Bielefeld 1986, pp. 3-63.
40
These three countries have vigorously condemned this practice, which they con-
sider contrary to international law; see amicus curiae of France, in: International Legal
Materials (ILM) 25 (1986), pp. 1519 et seq., at 1524, of Germany, in: ILM 25 (1986),
at 1539, and of Switzerland, in: ILM 25 (1986), at 1549 rendered in the Aerospatiale case.
41
See, in particular, MÖSSLE K. (note 38), pp. 200-201 and pp. 334-342.

258 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

This jurisdiction must be established on its own in accordance with the principle of
the reasonable connection and thus can differ from the jurisdiction to prescribe.42
According to MÖSSLE, three main arguments plead for a special concept of
jurisdiction requiring the parties or third parties to disclose evidence located
abroad. The first is based on the chronology of the judicial procedure: Jurisdiction
over the taking of evidence is often exercised before the judge on the merits is
seized, for example, in connection with a preliminary investigation or during pre-
trial discovery. At this stage, the jurisdiction of the judge ordering the taking of
evidence is often not yet definite or has not even been assessed at all. Issuing an
extraterritorial injunction for the taking of evidence abroad is often used as a
means of establishing facts that could justify exercising one's jurisdiction to adju-
dicate.43 Therefore, jurisdiction over the taking of evidence can often not be derived
merely from the jurisdiction to adjudicate, since the latter has not necessarily been
determined when the former is exercised. Second, according to its advocates, a
specific jurisdiction in evidentiary matters is justified by the fact that the criteria
underlying the jurisdiction to prescribe – such as minimum contacts in the United
States – do not necessarily suffice to justify jurisdiction in evidentiary matters.
Jurisdiction over a person based on his/her contacts with the forum is determined
by the intensity of these contacts; jurisdiction over evidence is determined by the
place where the evidence is located and by the control exercised over that evidence
by the addressee of the injunction. Therefore, in the transatlantic judicial conflict, it
was the extraterritorial application of the provisions on discovery rather than the
generous acknowledgment of their jurisdiction by US courts that aggravated the
European States. For example,44 a US bank with its registered seat in New York is
subject to the personal jurisdiction of the New York courts; the question, however,
whether a New York court may request that same bank to disclose documents
located outside the United States is different. This question is even more justified if
the documents concern a third party (e.g., a client of a foreign subsidiary of the
bank) and involve activities abroad, and if disclosure is ordered in proceedings in
which the bank itself is merely a witness, not a party (e.g., an antitrust investigation
against a client of the bank). Here, the issue is whether the contacts of the bank
with the United States, albeit intense, are sufficient to legitimate the jurisdiction of
US courts over evidence controlled by the bank. This must be distinguished from
the issue whether the contacts of the bank with the United States suffice when the
bank itself is party to the proceeding. Finally, even if the lex fori is applicable to
the merits and this is certain at the stage of the gathering of evidence, it would not
be appropriate to automatically recognize the jurisdiction of the court seized to

42
See MÖSSLE K. (note 38), pp. 337-339 (on the differences from the jurisdiction to
adjudicate) and pp. 339-341 (on the differences from the jurisdiction to prescribe).
43
E.g., in connection with the jurisdictional discovery.
44
Adapted from United States v. First National City Bank, 396 F.2d 897 (2d Cir.
1968), discussed by MÖSSLE K. (note 38), pp. 402-405.

Yearbook of Private International Law, Volume 3 (2001) 259

 Frank Gerhard

order the taking of evidence abroad as well. This is valid in particular in respect of
relations with third parties, and, in general, when the activities specified in the
order and the jurisdiction to prescribe do not coincide. The issue of transfer prices
can best illustrate this dichotomy.45 The subsidiary of a company domiciled abroad,
but itself present on the territory of the forum, is subject to the tax jurisdiction of
the forum. However, in order to assess the amount of tax owed by the subsidiary, it
is sometimes necessary to determine whether the transfer prices charged by the
parent company to its subsidiary are unreasonably high, so as to intentionally
reduce the subsidiary's profit because the latter is domiciled in a country with a
high tax rate. If the jurisdiction to adjudicate and the jurisdiction over the taking of
evidence coincide, and application of the tax law of the State of origin is
legitimated by the fiscal authority of the State in respect of persons residing in its
territory, this would automatically justify requesting the parent company to
disclose the transfer prices charged to other extra group companies domiciled
abroad. Such jurisdiction runs the risk of being exorbitant, since the services
performed by the parent company for third party companies abroad do not have
any reasonable connection with the State of origin; this would legitimate a distinct
jurisdiction for the taking of evidence as well.

3. Jurisdiction to Pronounce an Extraterritorial Judicial Penalty is Ancillary

to the Jurisdiction to Prescribe

This is not the place to discuss the merits of the system developed in detail by
MÖSSLE.46 We prefer to examine whether this system can be applied to extraterrito-
rial injunctions based on substantive law, accompanied by a judicial penalty. Our
denial is based on three arguments. The first argument proposed in favor of a third
type of jurisdiction over evidentiary matters is by definition not applicable to ex-
traterritorial injunctions based on substantive law. Contrary to measures ordered in
evidentiary matters, the latter are not issued until the jurisdiction has been clearly
established. Therefore, even if creating a third type of jurisdiction for the taking of
evidence could be justified at the very beginning of the procedure, it is no longer
justified once the judge competent to decide on the merits has been seized. Second,
the judicial activity relating to the act of exercising the jurisdiction to enforce in
one's own territory is ineluctably connected with the jurisdiction to prescribe: The
enforcement of an injunction does not occur in proceedings prior or parallel to the

45
Adapted from United States v. Toyota Motor Corp., 561 F.Supp. 354 (C.D.Cal.
1983); 569 F.Supp. 1158 (C.D.Cal. 1983), discussed by MÖSSLE K. (note 38), p. 433.
46
E.g., SCHLOSSER P. (note 22), p. 510, criticizes the concept and favors the tradi-
tional solution, qualifying the jurisdiction for the taking of evidence as ancillary to the juris-
diction to prescribe. If a State shows sufficient interest in accepting a case, it will have
sufficient interest to obtain the necessary evidence to decide it, subject of course to
compliance with the sovereignty of the foreign countries.

260 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

one that led to its issuance; it comes about only if there is no voluntary compliance
with the injunction and is therefore a mere consequence of the procedure on the
merits. On the other hand, the taking of evidence occurs often in proceedings prior
or parallel to the procedure on the merits because the latter is not yet pending or
because the persons involved are not the same. Finally, the criterion of the persons
involved makes it possible to distinguish between extraterritorial injunctions ren-
dered in evidentiary matters and injunctions (extraterritorial as well) based on
substantive law. The parties involved in an extraterritorial injunction based on
substantive law are the same as those in the proceeding on the merits, whereas
extraterritorial injunctions rendered in evidentiary matters are often addressed to
third parties. In such case, the mere possession of evidence or the quality of a wit-
ness is not necessarily sufficient to create a reasonable connection between the
forum and the addressee of the injunction, and such connection is necessary to
legitimate the court's jurisdiction to order a particular act abroad.
Therefore, a third type of jurisdiction may be appropriate in matters relating
to the taking of evidence but cannot serve as a dogmatic basis for exercising the
jurisdiction to enforce in one's own territory but with extraterritorial effects. This
conclusion is also supported by another argument. Those attempting to justify the
need for a third type of jurisdiction in evidentiary matters point to the fact that such
injunctions are based on procedural law. However, the conflict of laws reasoning
has traditionally never played a relevant role in this matter: The application of the
lex fori to procedural rules is considered one of the oldest principles of private
international law and is recognized worldwide.47
Furthermore, the lex fori dogma leaves little space for the conflicts
reasoning:48 When recognizing his jurisdiction, the judge implicitly decides in
favor of applying his own set of procedural rules, including those on discovery.
Foreign interests, such as those of the State where the evidence is located49 or those

47
See, in general, JAECKEL F., Die Reichweite der lex fori im internationalen
Zivilprozessrecht, Berlin 1995; on the rules applicable to evidence, see KNOEPFLER
F./SCHWEIZER P., Précis de droit international privé, 2nd ed., Bern 1995, No. 657-667;
KOBERG A.-K., Zivilprozessuale Besonderheiten bei Sachverhalten mit Auslandberührung,
St. Gallen 1992, pp. 315 et seq.; GEIMER R. (note 22), No. 319-323; COESTER-WALTJEN D.,
Internationales Beweisrecht, Ebelsbach 1983, No. 102.
48
On a dogmatic attempt to apply the conflict of laws reasoning to the procedural
rules, see MEIER I., ‘Abgrenzung von Privatrecht und Prozessrecht im IPR-Gesetz’, in: Insti-
tut für Zivilprozessrecht (IZP), text presented at the seminar held 26 October 1990 by the
HSG-Weiterbildungsstufe, St. Gallen, pp. 1-111.
49
The German Bundesfinanzhof answered a Swiss company that was taxable in Ger-
many and that invoked the application of Article 273 of the Swiss Criminal Code: ‘Ihr Ver-
halten ist allein nach deutschem Recht, hier nach den Vorschriften des deutschen Steuer-
rechts, zu würdigen. Etwaige Auswirkungen der schweizerischen Strafvorschrift braucht
kein anderer Staat gegen sich gelten zu lassen.’ in: Recht der internationalen Wirtschaft
(RIW) 1981, p. 498.

Yearbook of Private International Law, Volume 3 (2001) 261

 Frank Gerhard

relating to discovery,50 will not be taken in consideration as they would be in

traditional conflicts reasoning, either directly when determining the applicable law
or indirectly by the adjustment provided, for example, by the theory of the loi
d'application immédiate.51 The scope of their application depends on the lex fori
and may differ substantially depending on the applicable law. The absence of a
subsequent adjustment for injunctions in evidentiary matters may also explain the
attempt to balance interests earlier in the proceeding, for example, when
determining jurisdiction, an option that is not justified in the case of injunctions
based on substantive law subject to adjustments provided by the conflict of laws
rules.
Consequently, the limits set by international law to the intra-territorial exer-
cise of the jurisdiction to enforce do not differ from those it sets to the jurisdiction
to prescribe. This is at least the indication provided by the Lotus case.52 The
Restatement (Third) of the Foreign Relations Law (1987) also refers to this princi-
ple when it states that ‘a state may employ judicial or non-judicial measures to
induce or to compel compliance or punish non-compliance with its laws or regula-
tions, provided it has jurisdiction to prescribe in accordance with §§ 402 and
403’.53 Thus, exercising the jurisdiction to enforce in one's own territory with
extraterritorial effects is ancillary to the jurisdiction to prescribe.

C. Main Fields of Application of the Extraterritorial Judicial Penalty

In continental Europe, the courts do not hesitate to pronounce a judicial penalty

when they issue an extraterritorial injunction, especially when the debtor is domi-
ciled in the forum.54 In France, it is a long-established practice for the courts to
pronounce astreintes with extraterritorial injunctions, for example, to order restitu-

50
When debating Article 7 of the Rome Convention on the Law Applicable to the
Contractual Obligations, German authors feared that this provision would make it more
difficult for defensive measures to be taken in Germany against foreign requests for the
disclosure of documents, in particular, emanating from US courts. In the event that the
holder of a Swiss bank account filed claims against her own bank in Switzerland to prohibit
it from delivering documents requested by a subpoena delivered by an American authority,
the issue is raised whether the US law on discovery would apply by taking account of the
mandatory law of a third-party country, despite the fact that the contract between the holder
of the account and the bank is governed by Swiss law. This seems highly improbable. On
this issue, see MÖSSLE K. (note 38), p. 275.
51
Articles 18 and 19 of the Swiss Federal Private International Law Act (PILA).
52
See supra note 27.
53
Restatement (Third) of the Foreign Relations Law (1987), Introductory Note be-
fore § 431 (1).
54
See Article 2(1) of the Brussels Convention. On the extraterritorial potential of
this rule and its limits, see GERHARD F. (note **), No. 138-142.

262 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

tion of securities located abroad,55 the representation of a child by his father

abroad,56 the restitution of a child to France from Spain,57 or the payment of money
abroad,58 the performance of auditing work in a German company,59 the publication
of a French court order – after being translated into German – in a newspaper
published in Germany.60 It seems that issuing transnational enforcement has not
really bothered the French courts; most of the time, French courts accompany their
injunctions with an astreinte, without questioning their jurisdiction to do so.61 The
German Bundesgerichtshof has stated that an injunction ordering an act abroad
under the threat of enforcing legal sanctions in Germany does not violate the
sovereignty of foreign States when the debtor is domiciled in Germany.62 For
example, German courts ordered a fence to be put around real estate in Spain63 and
a German company was order to refrain from specific acts of unfair competition
abroad.64 The case law of the Netherlands also reveals numerous examples of
extraterritorial injunctions accompanied by a dwangsom, for example, to protect
intellectual property rights65 and the environment.66 Noteworthy is also a
prohibition issued under the threat of a dwangsom to refrain from doing business

55
Trib. civ. Seine, 9 July 1963, in: JCP 1963, II, p. 134, comment LEVEL B. (order
given to a French bank to restitute securities located in London); Court of Appeals (CA)
Paris, 21 December 1962, in: Gazette du Palais (Gaz. Pal.) 1963, I, p. 99; Clunet (90) 1963,
p. 424, comment BREDIN Y.
56
Tribunal de Grande Instance (TGI) Paris, 25 June 1982, in: Gaz. Pal. 1982, II,
p. 396.
57
Ibid.; the court even mentions that the astreinte could be enforced against assets of
the defendant located in France.
58
Trib. civ. Seine, 16 November 1938, confirmed by Paris CA, 24 April 1940, in: S.
1942, II, p. 29, comment NIBOYET J.P.
59
Ch. mixte, 6 July 1984, in: JCP 1985, II, No. 20338.
60
TGI Paris, 23 June 1976, in: Rev. crit. dr. int. pr. 77 (1978), p. 132, comment
GAUDEMET-TALLON H.
61
See however, TGI Quimper (réf.), 22 October and 6 November 1992, in: Gaz. Pal.
1993, I, p. 238.
62
BGH, 2 October 1956, in: Entscheidungen des BGH in Zivilsachen (BGHZ) 22,
pp. 1 et seq., at 13: ‘da das vom deutschen Gericht erwirkte Urteil nur Wirkung im Inland
erzeugt, bleibt die ausländische Souveränität unangetastet’; see Reichsgericht, 20 January
1894, in: RGZ 32, p. 414.
63
OLG Stuttgart, 26 September 1983, in: Zeitschrift für internationales Zivilprozess-
recht (ZZP) 97 (1984), pp. 487-492, comment MÜNZBERG W.
64
HansOLG Hamburg, 15 May 1987, in: Zeitschrift für gewerblichen Rechtsschutz
und Urheberrecht, Internationaler Teil (GRUR Int.) 1987, p. 105.
65
On the development of Dutch cross-border injunctions in intellectual property
matters, see GERHARD F. (note **), No. 222-225.
66
Ibid., at No. 249-257.

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 Frank Gerhard

abroad under a particular company name67 or an order addressed to a model to

perform at a fashion show in Dusseldorf.68
The same practice exists when the debtor is not domiciled in the forum; in
such cases it is based on special jurisdictional rules such as the place of per-
formance for contracts,69 the place where the harmful event occurred in the case of
torts70 or the domicile of another defendant when there are several defendants.71 For
example, the German Bundesgerichtshof prohibited an English company, under the
threat of an Ordnungsgeld, from publishing unfair advertisements in Swiss news-
papers distributed in Germany;72 similarly, an English company was prohibited
from doing business in Germany because it did not have the necessary authori-
zations.73 In the Netherlands, the courts issue extraterritorial injunctions accompa-
nied by a dwangsom in intellectual property issues, irrespective of the domicile of
the defendant.74
The extraterritorial judicial penalty is applied mainly in matters relating to
absolute rights that are protected by either substantive or procedural law. Among
those rights, the extraterritorial protection of intellectual property rights, particu-
larly patent rights, has experienced the greatest development in the past 15 years.75
The protection of environmental rights has also become one of the favorite rights
for which extraterritorial enforcement is sought as a result of different standards of
protection under national laws.76 Finally, competition and personality rights are

67
KG Amsterdam, 3 June 1930, in: Nederlandse Jurisprudentie (NJ) 1931, p. 196.
68
Arr. Rb. Rotterdam, 1 August 1986, in: Kort Geding (KG) 1986, No. 683.
69
Article 5(1) of the Brussels Convention. On the extraterritorial potential of this
rule and its limits, see GERHARD F. (note **), No. 152-156.
70
Article 5(3) of the Brussels Convention. On the extraterritorial potential of this
rule and its limits, see GERHARD F. (note **), No. 143-151.
71
Article 6(1) of the Brussels Convention. On the extraterritorial potential of this
rule and its limits, see GERHARD F. (note **), No. 157-163.
72
BGH, 23 October 1970, in: GRUR 1971, pp. 153-156, comment DROSTE W.
73
BGH, 2 November 1995, in: IPRax 1997, pp. 36-38, comment ROHE M., ibid.,
pp. 14-21.
74
See GERHARD F. (NOTE **), No. 234.
75
Ibid., at No. 216-247. More recently, see GRABINSKI K., ‘Zur Bedeutung des
Europäischen Gerichtsstands- und Vollstreckungsübereinkommens (Brüsseler Überein-
kommens) und des Lugano-Übereinkommens in Rechtsstreitigkeiten über Patentverletzun-
gen’, in: GRUR Int. 2001, pp. 199-213; OTTE K., ‘Internationale Zuständigkeit und Territori-
alprinzip – Wo liegen die Grenzen der Deliktszuständigkeit bei Verletzung eines europäi-
schen Patents?’, in: IPRax 2001, pp. 315-320; PANSCH R., ‘Der Gerichtsstand der unerlaub-
ten Handlung bei der grenzüberschreitenden Verletzung gewerblicher Schutzrechte’, in: The
European Legal Forum (EuLF) 2000/01, pp. 353-362;
76
Ibid., at No. 249-257.

264 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

among those that have always been sensitive to extraterritorial protection,77 a trend
that will continue to increase with the rise of information electronic networks.

III. The Extraterritorial Judicial Penalty in

EC Regulation No. 44/2001
A. Definition of Judicial Penalty

1. Need for an Interpretation

In keeping with Article 65 of the Treaty of Amsterdam, the EC Council trans-

formed the 1968 Brussels Convention on the Jurisdiction and Enforcement of
Judgments in Civil and Commercial Matters into a Regulation,78 which was
adopted on 22 December 2000 and will enter into force on 1 March 2002.79 The
Regulation will be applicable in all Member States, with the exception of
Denmark.80 The text of the Regulation takes over the text of the Brussels Conven-
tion with some amendments. Article 4981 of the Regulation, which provides for a
periodic payment by way of a penalty, reads as follows:

‘A foreign judgment which orders a periodic payment by way of a

penalty shall be enforceable in the Member State in which enforce-
ment is sought only if the amount of the payment has been finally
determined by the courts of the Member State of origin.’

The French version uses the term astreinte, the German text Zwangsgeld and the
Italian text penalità. It seems that the Regulation uses terms clearly anchored in
national law (astreinte, Zwangsgeld) or generic terms, isolated (penalità) or
descriptive (periodic payment by way of a penalty). This diversity in wording is not

77
Ibid., at No. 258-264 and No. 265-271.
78
Council Regulation (EC) No. 44/2001 of 22 December 2000 on the jurisdiction
and the recognition and enforcement of judgments in civil and commercial matters, in: OJ,
16 January 2001, L-12/1-23. See HAUSMANN, R., ‘Die Revision des Brüsseler Überein-
kommen von 1968’, in: EuLF 2000/01, pp. 40-62; KAUFMANN-KOHLER G./RIGOZZI A., ‘Le
Règlement "Bruxelles I": vers un renforcement de l'espace judiciaire européen’, in:
Jusletter, 5 February 2001.
79
See Article 76 of the Regulation.
80
The Brussels Convention will still be applicable between Denmark and the Mem-
ber States (see paras. 21 and 22 of the Preamble and Article 1(3) of the Regulation).
81
Article 49 of the Regulation has the same wording as Article 43 of the Brussels
Convention.

Yearbook of Private International Law, Volume 3 (2001) 265

 Frank Gerhard

surprising since the judicial penalty is not known in all European countries.82 In
addition, whereas the terms astreinte and Zwangsgeld are drawn directly from the
respective national statutes, the Italian penalità seems too broad and the English
periodic payment by way of a penalty too narrow since the latter covers only
‘periodic payments’. Therefore, at this stage we prefer to use the term judicial
penalty.
The corresponding article of the Brussels Convention was not received with
enthusiasm, nor by potential parties and nor by the authors.83 This is undoubtedly
because the creditor will always bring action before the judge of the place where
the debtor's assets are located or because the creditor will request recognition of the
injunction abroad, perhaps in several jurisdictions simultaneously. However, the
provision may develop quickly with the increased use of extraterritorial injunc-
tions, as a result of the explosion of new communication technologies and glo-
balization of the marketplace. Until now, the only controversy discussed by authors
is the issue whether Article 49 of the Regulation also covers cases in which the
State is the beneficiary of a judicial penalty.84 85

82
See GERHARD F. (note **), Part 2, No. 318-676, for an analysis of the judicial
penalty in the main European countries.
83
In addition to comments in reference books, only REMIEN O. (note 22), pp. 314-
326 analyzes this provision in detail.
84
I.e., the English contempt of court, the German Zwangsgeld and Ordnungsgeld, as
well as the fines specified in some Swiss cantonal codes of civil procedure. The French and
the Benelux astreintes are payable to the creditor of the main obligation.
85
Pro: see, e.g., GÄRNTER J. (note 22), p. 217; GOTTWALD P. (note 22), p. 291; KOCH
H. (note 22), p. 200; KROPHOLLER J., Europäisches Zivilprozessrecht. Kommentar zum
EuGVÜ, 6th ed., Heidelberg 1998, ad Article 43, No. 1; LINDACHER W. (note 22), pp. 399-
409; REMIEN O. (note 22), p. 319, SCHLOSSER P., (note 7), ad Article 43, No. 8, STÜRNER R.
(note 22), pp. 867, 870 and 872.
Contra: see, e.g., DONZALLAZ Y., La Convention de Lugano du 16 septembre 1988
concernant la compétence judiciaire et l'exécution des décisions en matière civile et com-
merciale, Vol. 2, Bern 1997, No. 2221; GEIMER R./SCHÜTZE R. A., Europäisches Zivilverfa-
hrensrecht. Kommentar zum EuGVÜ und zum Lugano-Übereinkommen, Munich 1997, ad
Article 43, No. 2; MEZGER E., ‘Über einige Lücken des EuGVÜ (Brüssel 1968) und des
deutschen Ausführungsgesetzes’, in: LÜKE G./RESS G./WILL M. R. (ed.), Rechtsver-
gleichung, Europarecht und Staatenintegration. Gedächtnisschrift für Léontin-Jean
Constantinesco, Berlin 1983, pp. 503-515, at 507; SCHACK H. (note 22), No. 977;
TREIBMANN B. (note 22), p. 165.

266 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

2. Various Methods of Interpretation

a) Grammatical Interpretation

The only purpose of Article 49 of the Regulation is to specify the conditions for
enforcing a judicial penalty abroad: The courts of the State of origin must have
finally determined the amount of the penalty. This condition is logical and neces-
sary since the Regulation itself only requires that a judgment be enforceable in the
State of origin in order to be enforceable in another Member State.86 For instance, a
French astreinte provisoire is enforceable without being final and could therefore
be recognized abroad without this supplementary condition. However, Article 49
does not answer the question whether a judicial penalty whose beneficiary is the
State falls within its scope of application. Nothing excludes it: All language ver-
sions of the EC Regulation are equally authentic, and the Regulation expressly
provides for Zwangsgeld, whose beneficiary is the State, whereas the more elabo-
rate English text does not specify the beneficiary of the penalty.

b) Historical Interpretation

The JENARD Report prepared in connection with the Brussels Convention indicates
that Article 43 of the Convention had its roots in the draft Benelux Treaty of 24
November 1961 on jurisdiction, bankruptcy, enforcement of judicial decisions and
arbitral sentences and of authentic instruments,87 as well as in the Treaty between
the Federal Republic of Germany and the Netherlands of 30 August 1962 on re-
cognition and enforcement of decisions and other instruments in civil and commer-
cial matters.88 The draft Benelux Treaty merely states that the part of a judgment
that imposes a dwangsom or an astreinte shall also be part of the exequatur in the
State of recognition. The Treaty between the Federal Republic of Germany and the
Netherlands provides in a unilateral provision that Dutch decisions imposing a
judicial penalty may also be enforced in Germany, provided the Dutch court has
determined the amount of the penalty in a final decision. However, the German
Zwangsgeld and Ordnungsgeld are not dealt with. Hence, both texts grant
enforcement (by a bilateral or unilateral rule) to judicial penalties only when the
creditor is the beneficiary. On the contrary, the SCHLOSSER Report prepared in
connection with the Brussels Convention leaves the question expressly open.89
Finally, the JENARD Report does not even mention the issue.

86
Article 38(1) of the Regulation.
87
Tractatenblad (Trb.) 1961, No. 163.
88
BGBl. 1965 II, p. 27, p. 1155; Trb. 1963, No. 50.
89
SCHLOSSER Report (note 21), No. 213.

Yearbook of Private International Law, Volume 3 (2001) 267

 Frank Gerhard

Article 49 of the Regulation does not differ much from these earlier provi-
sions; it provides for a bilateral rule, whose effect is tangible only if the judicial
penalties of all Member States fall under the definition of judicial penalty set out in
the Regulation. The legislative history and documents on which the provision is
based do not shed light on the question whether a judicial penalty payable to the
State is enforceable abroad.

c) Autonomous Interpretation

A comparative law analysis90 of the judicial penalty reveals some elements

common to all judicial penalties. Judicial penalty may be defined as (i) an act of
authority with a repressive character, (ii) pronounced in civil proceedings, and (iii)
aiming at the enforcement of a judgment rendered in civil and commercial matters.
First, all judicial penalties can be regarded as an intervention of the imperium of
the judge91 into relations between private persons. They always aim to preserve the
private interests of the creditor, on the one hand, and to ensure the enforceability of
judicial decisions, on the other hand. Thus it can be said that they are of general
interest and serve the interest of the social order.92 Furthermore, all judicial penal-
ties have a repressive character. They take account of the fault of the debtor in one
way or another, either positively as a condition for their issuance or negatively as a
condition for their suppression or reduction.93 This double qualification leads us to
conclude that the character of an act of authority is independent of the identity of
the beneficiary, such identity being random and a consequence of the political
majority at the time the particular statute was enacted rather than a legal argument.
No legal system makes the character of the judicial penalty as an act of authority
dependent on its allocation to the State. The French astreinte is an example:
Although payable to the creditor, it is without doubt an act of authority anchored in
the imperium of the judge.94 Furthermore, the recovery of the judicial penalty – ex
officio or upon request – has no impact on its legal nature: The German
Zwangsgeld is payable to the State; however, it is collected only upon the initiative
of the creditor.95 In other words, national peculiarities are not an obstacle to the free
circulation of the judicial penalty, as specified by the Regulation. Second, with the
exception of the fine specified in Article 292 of the Swiss Criminal Code, all judi-
cial penalties are civil in character and are pronounced by a civil judge at the end

90
See GERHARD F. (note **), No. 318-676.
91
Ibid., at No. 650-660.
92
MOREAU-MARGREVE I., ‘L'astreinte’, in: Annales de la Faculté de droit de Liège
27 (1982), pp. 11-103, at 88.
93
See GERHARD F. (note **), No. 586-589 and No. 670-672.
94
Ibid., at No. 326.
95
Ibid., at No. 494.

268 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

of civil proceedings, although all of them take account of fault on the part of the
debtor and have a certain repressive character. They clearly differ from penal
sanctions pronounced at the end of a criminal trial.96 Finally, the purpose of all
judicial penalties is to enforce judgments rendered in civil and commercial matters,
even if they are not part of the enforcement proceedings as such.97

d) Contextual Interpretation

Taking account of the elements mentioned in the autonomous interpretation, we are

in a better position to address the view of some authors98 that judicial penalties
payable to the State are excluded from the scope of application of the Regulation
because they are not ‘civil and commercial matters’, as specified by Article 1(1) of
the Regulation. First, the European Court of Justice has opted for an autonomous
interpretation of the ‘civil and commercial matter’ under the Convention,99 favoring
equality and uniformity of the rights and obligations under the Convention. The
decisive criterion is whether the authority has acted jure gestionis or imperii.100
Furthermore, the case law of the ECJ shows that the ‘civil and commercial matter’
must be broadly construed101 so as to enhance the scope of application of the Con-
vention. Therefore, the view that a judicial penalty payable to the State is not a
‘civil and commercial matter’ is misleading: The collection of such judicial penalty
in the State of recognition is not justified by the fiscal interests of the State of ori-
gin, but rather by the interest to ensure enforcement of the creditor's rights.102 The
condition of Article 1(1) of the Regulation is met as soon as the underlying deci-
sion is rendered in a ‘civil or commercial matter’; the judicial penalty has an ancil-
lary character, all the more so because the fact that it is payable to the creditor or to
the State depends on political majorities and not on the intention to make it an
instrument of public or private law. Second, the repressive character of the judicial
penalty is not conclusive to qualify it as an instrument of public law, since it is
common to all judicial penalties covered by the Regulation. Criminal sanctions that

96
Ibid., at No. 586-589.
97
Ibid., at No. 585.
98
See DONZALLAZ Y. (note 85), No. 2221; GEIMER R./SCHÜTZE R. (note 85), ad Arti-
cle 43, No. 2; MEZGER E. (note 85), p. 507; SCHACK H. (note 22), No. 977; TREIBMANN B.
(note 22), p. 165.
99
ECJ, LTU v. Eurocontrol (Eurocontrol I), 14 October 1976, C-29/76, [1976] ECR,
p. 1541; ECJ, Bavaria Fluggesellschaft and Germanair v. Eurocontrol (Eurocontrol II), 14
July 1977, C-9/77 and C-10/77, [1977] ECR, p. 1517.
100
ECJ, The Netherlands v. Rüffer, 16 December 1980, C-814/79, [1980] ECR,
p. 3807.
101
ECJ, Volker Sonntag v. Hans, Elisabeth and Stefan Waidmann, 21 April 1993, C-
172/91, [1993] ECR, p. 1963, No. 21.
102
See LINDACHER W. (note 22), p. 407.

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 Frank Gerhard

transform the breach of the obligation into a crime only are not covered by Article
49. Therefore, the only pertinent distinction is the nature of the procedure in which
the sanction is pronounced:103 If the judicial penalty is pronounced at the end of a
civil procedure, it may be exported. Therefore, only fines based on Article 292 of
the Swiss Criminal Code are excluded from the scope of application of Article 49
of the Regulation, respectively Article 43 of the Lugano Convention, since
Switzerland is not a member of the EU.104 Finally, Article 49 can be considered a
lex specialis in comparison with Article 1(1) of the Regulation. In 1968, when the
Brussels Convention was enacted, the French astreinte already had the character of
an act of authority because it had been distinguished from damages as early as
1959.105 Thus, if all judicial penalties have the character of an act of authority, there
is no reason to exclude those payable to the State from free circulation.

3. Conclusion

To promote the free circulation of judicial decisions in the European Union, we

advocate enforcement abroad of judicial penalties rendered at the end of civil pro-
ceedings, thus aiming to enforce decisions falling within the scope of the Regula-
tion, even though they represent an act of public authority and have a repressive
character. Neither the identity of the beneficiary nor the means of collection should
be decisive. Any other conclusion would create an imbalance in the European
system of jurisdiction and recognition of foreign judgments laid down by the
Regulation: Non-monetary judgments accompanied by a judicial penalty similar to
a private fine would carry more weight than judgments accompanied by a judicial
penalty payable to the State. The former penalty could be determined by a single
judge and then recognized on the whole European territory, whereas the latter
penalty would only have a territorial effect. This would force the creditor to request
recognition abroad of the non-monetary judgment itself and thereafter to request its
enforcement in each separate jurisdiction.
Consolidating jurisdiction serves justice better; it is faster and cheaper and
would avoid a new type of forum shopping or even forum running towards
countries where the debtor's assets are located or countries that issue penalties
similar to private fines, which would be the only ones recognized abroad under
Article 49 of the Regulation.

103
See REMIEN O. (note 22), p. 318.
104
See GERHARD F. (note **), No. 813.
105
See judgment by the Cour de cassation, 1ère Ch., 20 October 1959, in: D. 1959,
p. 536, comment HOLLEAUX D.; in: S. 1959, p. 225; in: JCP 1960, II, No. 11449, comment
MAZEAUD P.; see GERHARD F. (note **), No. 324.

270 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

B. Jurisdiction to Pronounce a Judicial Penalty

1. Apparent Contradiction: Article 22(5) and Article 49 of the Regulation

Under international law, exercising the jurisdiction to enforce in one's own territory
is considered ancillary to exercising the jurisdiction to prescribe.106 Accordingly, a
judge who has jurisdiction to issue an extraterritorial injunction may also issue a
penalty in connection with the injunction, even though it affects persons, assets or
acts abroad. The Regulation, however, seems to adopt a contradictory position with
respect to such transnational enforcement and, consequently, to the jurisdiction to
pronounce a penalty in connection with an extraterritorial injunction. On the one
hand, the Regulation seems to advocate the principle of unity of the individual
enforcement proceedings: Article 22(5) and Articles 38 to 40 of the Regulation
seem to plead for clearly separating the proceedings on the merits (Erkenntnisver-
fahren) – to be conducted in the State of origin – and the enforcement proceedings
(Vollstreckungsverfahren) – to be conducted in the State of recognition. However,
on the other hand, the Regulation seems to admit the concept of transnational en-
forcement within the European Union by making a distinction between issuing the
judicial penalty in the State of origin and enforcing it in the State of recognition.
Allowing this gap in the enforcement proceedings – as under international law –
seems to cause some concern from the point of view of Article 22(5) of the Regu-
lation: Issuing a judicial penalty could be qualified as ‘proceedings concerned with
the enforcement of judgments’, as set out in Article 22(5) of the Regulation; this
would result in granting the courts of enforcement exclusive jurisdiction to issue
such penalties. Regarding Article 49 as a ‘sin’ of the lawmaker, some authors
advocate a strict interpretation of the possibilities it offers.107 However, one could
also understand this provision as a norm inviting the Member States to cooperate in
the context of a transnational enforcement. This would permit the creditor to
choose between two possibilities: 1) enforcement entirely in the State of
recognition (issuing the judicial penalty, determining its amount, and execution) in
accordance with the principle of the unity of the enforcement proceedings, and 2)
transnational enforcement divided between the State of origin (issuing the judicial
penalty and determining its amount) and the State of recognition (execution). We
clearly favor the second solution, as discussed below.

106
See supra, I. B. 3.
107
E.g., SCHACK H. (note 22), No. 976.

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 Frank Gerhard

2. Scope of Article 22(5) of the Regulation in Connection with the Judicial

Penalty

a) Purpose of Article 22(5)

Article 22(5) states that ‘in proceedings concerned with the enforcement of judg-
ments, the courts of the Member State in which the judgment has been or is to be
enforced shall have exclusive jurisdiction, regardless of domicile’.108 In Article
22(5) the sovereignty principle is realized in the enforcement proceedings in the
sense that the courts of the place of enforcement have exclusive jurisdiction to
order enforcement measures to take place in their territory. They do not have to
accept instructions from foreign courts addressed to the national enforcement au-
thorities. Accordingly, if the judicial penalty would qualify as an act of enforce-
ment pursuant to Article 22(5), the courts of the State in which the judgment has
been or is to be enforced would have exclusive jurisdiction.

b) Consequences of Qualifying the Judicial Penalty as an Enforcement

Measure

Qualifying the judicial penalty as an enforcement measure under Article 22(5) has
had some positive echo. In France, MEZGER denies the enforcement in France of a
Zwangsgeld and an Ordnungsgeld rendered by a German judge pursuant to §§ 888
and 890 ZPO because the German judge regards them as enforcement measures.109
In Switzerland, DONZALLAZ qualifies the French astreinte as an enforcement
measure and grants jurisdiction to the court ordinarily designated competent by the
cantonal law pursuant to Article 22(5).110 Finally, the Oberlandgericht of
Nuremberg also followed this interpretation when revising a judgment ordering an
auditor in Rome to establish a balance of operations based on the books of a debtor
domiciled in this city.111 These interpretations are all based on a qualification lege
fori of enforcement pursuant to Article 22(5), although an autonomous interpreta-
tion of this matter would be appropriate.

108
The wording is exactly the same as in Article 16(5) of the Brussels Convention.
109
MEZGER E. (note 85), p. 507.
110
DONZALLAZ Y. (note 85), No. 6402.
111
OLG Nuremberg, 5 April 1974, in: Die deutsche Rechtsprechung auf dem Ge-
biete des Internationalen Privatrechts im Jahre 1974 (IPRspr.), No. 188. TREIBMANN B.
(note 22) also qualifies the issuance of a penalty as the beginning of the enforcement pro-
ceedings, p. 99. However, the Kammergericht, in a decision of 4 September 1998, in: IPRax
2001, pp. 236-238 (comment by MENNICKE P., ‘Vollziehung einer Unterlassungsverfügung
durch Zustellung in einem anderen Vertragsstaat des EuGVÜ’, ibid., pp. 202-206) clearly
qualifies the service abroad of an extraterritorial injunction with a penalty as not being the
beginning of the enforcement proceedings.

272 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

c) Jurisdiction to Pronounce a Judicial Penalty Coincides with the

Jurisdiction to Prescribe

Even if the mere issuance of a judicial penalty would already fall within the scope
of the proceedings relating to the enforcement of judgments under Article 22(5),
this would not prevent it from being issued by the judge on the merits since the
‘courts of the Member State in which the judgment has been or is to be enforced’
must still be determined. There are three possible solutions: 1) the courts of the
State where the application for the judicial penalty was filed, 2) the courts of the
State where the judicial penalty must be enforced, and 3) the courts of the State
where the obligation specified in the underlying order must be performed. It could
occur that the same courts have jurisdiction in all three instances. While the first
solution coincides with the jurisdiction on the merits, the other two solutions must
be discarded, as discussed below.
Granting exclusive jurisdiction to the courts of the State where the judicial
penalty is to be enforced could lead to practical difficulties, making it necessary to
determine whether the debtor owns assets in this State before filing the application
for a judicial penalty. Moreover, the contradiction with Article 49 would not be
resolved: Exporting a judicial penalty would be meaningless since the penalty
could be pronounced only in a State where the debtor owns assets, thus making
enforcement possible. Accordingly, Article 49 would simply be a dead provision.
Furthermore, since the judicial penalty would not be exportable, it must be
pronounced separately in each State where the debtor owns assets. This would not
only lead to a fragmentation of the enforcement proceedings, but it would also
require the judicial penalty to be issued simultaneously in all these States: If it
would be issued later in one State, this would be useless because such a penalty
cannot sanction an act that took place before it was issued. In addition, fragmenta-
tion of jurisdiction under Article 22(5) would lead to another harmful consequence:
A single violation affecting the territory of one State would enable a judicial
penalty to be issued independently in several States.112 The debtor would not only
be involved in multiple proceedings, but it would also be difficult for each judge to
determine the appropriate amount of the penalty, which is set in proportion to the
debtor's fault. The judge would have to take into account the other proceedings
pending abroad, which in practical terms would be difficult because they are not
coordinated. Finally, such interpretation would result in two different definitions of
one concept in the same sentence of Article 22(5), depending on whether reference
is made to ‘proceedings concerned with the enforcement of judgments’ or to
‘courts of the Member State in which the judgment has been or is to be enforced’.
In the first instance, a broad definition would be used, since it deals with the
issuing of a judicial penalty. In the second instance, a narrow definition is

112
REMIEN O. (note 22), p. 325, note 71.

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 Frank Gerhard

preferable because it concerns the jurisdiction of the courts where the measure is to
be effectively enforced against the assets of the debtor.113
The jurisdiction of the place of performance of the obligation specified in
the underlying order would also have to be disregarded. First, such a limitation is
found neither in Article 22(5) nor in Article 49. Second, the criterion of the place
of performance would be hypothetical because the place of enforcement of an
obligation can be determined only in cases of direct enforcement. However, direct
enforcement is not appropriate when the order concerns the enforcement of an
obligation of an exclusively personal character (intuitu personae) or one requiring
the addressee to refrain from a particular act. The judicial penalty is precisely the
enforcement measure par excellence for these kinds of obligations. Finally, the text
of the Regulation itself does not refer to the place of performance of the obligation;
this is not desirable because the forum and/or the assets could be located in another
Member State than in this hypothetical place.
In the European Union, as in international law, the jurisdiction to pronounce
a judicial penalty must coincide with the jurisdiction to prescribe, thus raising the
question how this is achieved in the Regulation.

3. Distinction Between Proceedings on the Merits and Enforcement

Proceedings

a) Criterion of Functionality

The Regulation does not provide a definition of proceedings on the merits, and the
description of the enforcement proceedings is vague. However, the consequences
of this distinction are material: Only proceedings on the merits are subject to the
rules on jurisdiction in Chapter II. Furthermore, only decisions rendered in pro-
ceedings on the merits may be enforced abroad; decisions rendered in enforcement
proceedings may not be recognized abroad.114 Hence, enforcement measures pro-
vided by national law can be put into one or the other category only by reference to
the function of the rules on jurisdiction. In this regard, the definition provided by
GULDENER may serve as a general rule:115

‘Das Ziel des Erkenntnisverfahrens (Zivilprozess im engeren Sinne)

ist es, Rechtsgewissheit im Einzelfall herzustellen; Ziel des Voll-
streckungsverfahrens ist die zwangsweise Verwirklichung des
rechtsgemässen Zustandes.’
113
Ibid., at p. 324.
114
‘Exequatur sur exequatur ne vaut pas’, i.e., the decision recognizing a foreign
judgment may not be recognized abroad.
115
GULDENER M., ‘Zwangsvollstreckung und Zivilprozess’, in: Revue de droit suisse
(RDS) 74 (1955), Vol. 1, p. 20.

274 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

b) Function of the Rules of Jurisdiction of the Regulation

Aiming to achieve predictability, the rules of jurisdiction laid down in the Regula-
tion are based on the principles that jurisdiction is generally determined by the
defendant's domicile in a Member State (Articles 2-21) and that jurisdiction must
always be recognized on this ground,116 except in a few well-defined situations in
which the subject matter of the litigation (Article 22) or the autonomy of the parties
(Articles 23-24) warrants a different connecting factor.117 The plaintiff's domicile is
not relevant when applying the rules of jurisdiction laid down in the Regulation.118
The defendant's rights are deemed to be protected in the proceedings on the merits;
therefore, mutual trust in the administration of justice in the Community legiti-
mates very liberal rules on recognition and enforcement, i.e., judgments rendered
in a Member State should be automatically recognized abroad without the need for
any procedure.119
However, these factors are no longer determinant in the enforcement pro-
ceedings; instead the intention is to respect the sovereignty of third-party States
and practical concerns.120 The importance of respecting the sovereignty of third-
party States is evidenced by the German text of Article 22(5) of the Regulation,
which states that jurisdiction is exercised by ‘... die Gerichte des Vertragsstaates,
in dessen Hoheitsgebiet121die Zwangsvollstreckung durchgeführt werden soll oder
durchgeführt worden ist’. Furthermore, reference is made at other places in the
Regulation to the jurisdictional rules of national law. For example, in Article 31,122
the term ‘courts of a Member State’ is used, and not ‘Hoheitsgebiet’. Finally, the
JENARD Report also stresses the importance of the concept of sovereignty when
defining the enforcement matter as ‘les contestations auxquelles peuvent donner
lieu le recours à la force, à la contrainte, ou à la dépossession de biens meubles et
116
The general principle remains the rule actor sequitur forum rei (Article 2), which
is inspired by the aim to protect the defendant's interests. See ECJ, Klomps v. Michel, 16
June 1981, C-166/80, [1981] ECR, p. 1593; ECJ, Sté Jakob Handte et Cie v. Sté Traitements
mécano-chimiques des surfaces, 17 June 1992, C-26/91, [1992] ECR, p. 3967, No. 14. Arti-
cle 60 of the Regulation now provides that a company or other legal person or association of
natural or legal persons is domiciled at the place where it has its (i) statutory seat, or (ii)
central administration, or (iii) principal place of business.
117
See para. 11 of the Preamble of the Regulation.
118
ECJ, Société Groupe Josi Reinsurance Co SA v. Universal General Insurance Co,
13 July 2000, C-412/98, [2000] All ER (E.C.), p. 653.
119
Article 33 of the Regulation; e.g., the jurisdiction of the court of the State of ori-
gin may not be reviewed by the court of recognition.
120
GEIMER R./SCHÜTZE R. (note 85), ad Article 16, No. 267-268.
121
Which means ‘sovereign territory’. The English text reads only ‘...the courts of
the Member State in which the judgment has been or is to be enforced’.
122
Article 31 of the Regulation has the same wording as the present Article 24 of the
Brussels Convention.

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 Frank Gerhard

immeubles en vue d'assurer la mise en oeuvre matérielle des décisions, des

actes’.123 The adoption of a coercive measure is an act of sovereignty par
excellence. The European Court of Justice also insists on this element of foreign
sovereignty when applying Article 22(5). In Reichert II, it mentions that the main
reason for the exclusive jurisdiction of the courts of the State of enforcement is the
fact that only the courts of the State where the enforcement is to take place shall
implement the provisions applicable to the enforcement authorities.124 In addition,
practical reasons also favor granting exclusive enforcement jurisdiction to the
courts where the coercive measures are to be effectively implemented, namely, at
the place where the defendant is domiciled or at the place where the assets to be
seized are located. These are the only reasons justifying circumvention of the
ordinary rules of jurisdiction, generally considered as equitable and in the interest
of the parties.125 Conducting the enforcement proceedings at a place that has only a
minimum connection with the parties or the object of the dispute would not be
favorable to the parties. This would result in proceedings on the merits at such
location because, in recognition and enforcement proceedings, only limited
objections can be raised against the jurisdiction admitted in proceedings on the
merits. The restrictive subject matter of the enforcement proceedings could also
legitimate an enforcement jurisdiction that is only remotely connected with the
parties or the object of the dispute; such approach is not found in the ordinary rules
of jurisdiction in Chapter II of the Regulation.
There is a special jurisdictional rule for enforcement proceedings: Article
39(2) of the Regulation states that ‘the local jurisdiction shall be determined by
reference to the place of domicile of the party against whom enforcement is sought,
or to the place of enforcement’. This rule is not included in Chapter II on jurisdic-
tion but in Chapter III on recognition and enforcement. Pursuant to the Regulation,
the recognition and enforcement rules come into play only if a judgment rendered
in another Member State is declared enforceable,126 whereas the jurisdictional rules
of Chapter II apply when the defendant is domiciled in a Member State.127
However, the recognition procedure is clearly part of the enforcement procedure: It
is a precondition to the enforcement of a foreign judgment and thus enforcement

123
JENARD Report, in: OJ, 5 March 1979, C-59/1-65, No. 83.
124
ECJ, Reichert v. Dresdner Bank (Reichert II), 26 March 1992, C-261/90, [1992]
ECR, p. 2149, No. 26.
125
See KAUFMANN-KOHLER G., ‘Commandement de payer, mainlevée provisoire,
action en libération de dette et convention de Lugano. Réflexions à l'occasion d'un arrêt du
Tribunal fédéral’, in: La Semaine judiciaire (SJ) 1995, pp. 537-562, at 560.
126
ECJ, Owens Bank Ltd v. Fulvio Bracco et Bracco Industria Chimica SpA, 20
January 1994, C-129/92, [1994] ECR, p. 117, No. 25.
127
Article 4 e contrario of the Regulation.

276 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

jurisdiction must exist in such country as well. This is another reason for placing
the rule of Article 22(5) in Chapter III rather than in Chapter II of the Regulation.128

c) Conclusion

The logical conclusion of the foregoing can be summarized in three points. First,
the exclusive jurisdiction clause of Article 22(5) is to be construed restrictively,
compared with the general jurisdiction of Article 2(1)129 and all other jurisdictional
rules of the Regulation.130
Second, the definition of enforcement in the JENARD Report cited above
means that coercive measures are deemed to have a direct impact on a given situa-
tion, thus justifying granting jurisdiction to the authorities of the place where such
measures are to be implemented. However, this rule is mandatory only if physical
force is exercised. If enforcement is sought by an indirect enforcement measure, its
success does not necessarily depend on its being issued by the authority where the
measure is to be effectively enforced at a later time. In fact, ‘enforcement’ takes
place in two steps: Threat and issuance of an indirect enforcement measure are to
be followed, if any, by implementation, which in turn can lead to a direct or coer-
cive enforcement measure. This scission also explains why the mere issuance of an
extraterritorial indirect enforcement measure does not violate the sovereignty of the
State where the debtor is domiciled or where the assets to be seized are located.
This measure is similar to a decision that merely orders a direct or coercive en-
forcement measure against a debtor or assets located abroad:131 The sovereignty of

128
ECJ, Owens Bank Ltd v. Fulvio Bracco et Bracco Industria Chimica SpA, 20
January 1994, C-129/92, [1994] ECR, p. 117, submissions of Advocate General LENZ,
No. 46.
129
ECJ, A.S. Autoteile Service GmbH v. Mahlé, 4 July 1985, C-220/84, [1985] ECR,
p. 2267, No. 14-17.
130
ECJ, Reichert v. Dresdner Bank (Reichert II), 26 March 1992, C-261/90, [1992]
ECR, p. 2149, No. 25.
131
ECJ, de Cavel v. dame de Cavel (de Cavel I), 27 March 1979, C-149/78, [1979]
ECR, p. 1055 (jurisdiction of the French court to attach pieces of furniture located in the
apartment of the husband and wife in Germany and to attach assets and bank accounts of the
wife in two banks in Germany); ECJ, Denilauler v. S.N.S Couchet Frères, 21 May 1980, C-
125/79, [1980] ECR, p. 1553 (jurisdiction of the French court to issue a ‘saisie-conserva-
toire’ (prejudgment attachment) freezing the defendant's bank account in Frankfurt); ECJ,
Brennero v. Wendel, 27 November 1984, C-258/83, [1984] ECR, p. 3971 (jurisdiction of the
Italian court to order a ‘sequestro conservativo’ on assets located in Germany); ECJ, Van
Uden v. Deco-Line, 17 November 1998, C-391/95 [1998] ECR, p. 7091 (jurisdiction of the
Dutch court of the domicile of the plaintiff not competent on the merits to order interim
payment of a contractual monetary consideration in kort geding proceedings against a Ger-
man company, provided a real connection exists between the subject-matter of the measures
sought and the country to whose courts application for those measures is made, and

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 Frank Gerhard

the foreign State is protected by its recognition rules and by the fact that enforce-
ment will take place pursuant to the rules applicable at the place where the coercive
measure is to be effectively implemented.132 Therefore, the jurisdiction to issue an
indirect means of enforcement must coincide with the jurisdiction to prescribe
within the European Union as well.
Finally, the foregoing shows that, at least in the European Union, a judicial
penalty cannot be qualified as an enforcement measure or as ‘proceedings con-
cerned with the enforcement of judgments’ pursuant to Article 22(5) of the Regula-
tion. As in the Roman system, it is to be qualified as an ancillary order that may
precede a direct enforcement measure aiming at recovering the amount of the judi-
cial penalty itself. Therefore, Article 22(5) does not apply to judicial penalties.
Accordingly, the court having jurisdiction on the merits also has jurisdiction to
issue such a penalty, even though it accompanies an extraterritorial injunction.133 In
fact, the courts of the Member States have already rendered such extraterritorial
judicial penalties.134 Consequently, if the defendant owns assets in the State of ori-
gin, the judicial penalty can be enforced without further condition, although the
underlying injunction is not recognized in the State where the obligation to act or
to refrain from acting is being performed. In addition, the jurisdiction to pronounce
an extraterritorial judicial penalty implies that an injunction to be enforced in a
foreign State may be accompanied by a judicial penalty even though the institution
of judicial penalty is unknown in the foreign State. Finally, Article 49 means that
the court which has jurisdiction on the merits (although it is based on Article 31 of
the Regulation or present Article 24 of the Brussels Convention) and which has
pronounced a judicial penalty shall also have jurisdiction to determine the final
amount of that penalty.135

provided such order guarantees repayment to the defendant of the sum awarded if the
plaintiff is unsuccessful on the merits, or it relates to specific assets of the defendant located
or to be located within the confines of the territory of the issuing court); ECJ, Mietz v.
Intership Yachting Sneek BV, 27 April 1999, C-99/96, [1999] ECR, p. 2277 (an order issued
by a judge not competent on the merits which does not guarantee the repayment to the
defendant of the sum awarded if the plaintiff is unsuccessful on the merits, or it relates to
specific assets located or to be located within the confines of the territory of the issuing
court cannot be enforced abroad under Chapter III of the Convention).
132
See, e.g., GAUDEMET-TALLON H., Les conventions de Bruxelles et de Lugano.
Compétence internationale, reconnaissance et exécution des jugements en Europe, 2nd ed.,
Paris 1996, No. 101; GOTHOT P./HOLLEAUX D., La Convention de Bruxelles du 27
septembre 1968: compétence judiciaire et effets des jugements dans la CEE, Paris 1985,
No. 158; KOCH H. (note 22), p. 200.
133
REMIEN O. (note 22), p. 326; SCHLOSSER P. (note 7), ad Article 16, No. 26;
TREIBMANN B. (note 22), p. 115.
134
See supra I. C. 1.
135
Arr. Rb. Rotterdam, 4 February 1983, in: NJ 1985, No. 417, p. 319.

278 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

C. Judicial Penalty in the State of Recognition

This section covers two hypothesis: (1) the foreign order is accompanied by a judi-
cial penalty, the amount of which has been finally determined in the State of origin,
and the enforcement of the penalty is to take place pursuant to Article 49 of the
Regulation, or (2) the foreign order is rendered in a State where the judicial penalty
is unknown or is accompanied by a judicial penalty, the amount of which has not
been finally determined, and the enforcement of the order is to take place by issu-
ing a new penalty in the State of recognition. In the first group of cases, the extent
to which the public policy exception could constitute an obstacle to recognition
should also be examined (3).

1. Enforcement Abroad of a Judicial Penalty Issued in the State of Origin

a) The Amount of the Judicial Penalty Must be Finally Determined

This requirement arises because of the difference in French law between astreinte
provisoire and astreinte définitive.136 It was necessary to make this point clear in
the Regulation, since the general rule merely says that a decision rendered in a
Member State and enforceable in that State shall also be enforceable in another
Member State.137 Thus, it is not sufficient if the amount of the penalty is merely
determinable, for example, by multiplying the number of violations by the amount
stipulated for each violation.138 The amount of payment must be explicitly set out in
the decision to be enforced.139
This means, e contrario, that the enforcement court cannot determine the
amount of the judicial penalty. This is important with respect to the astreinte of the
Benelux countries, which is final and enforceable as soon as it is pronounced;
however, the amount has not yet been finally determined, and therefore it cannot
be enforced abroad pursuant to the Regulation, although it is enforceable under the
Benelux Uniform Law.140 For instance, the Paris Court of Appeals refused to en-
force a Belgium astreinte under Article 43 of the Brussels Convention because the
amount of the penalty had not been finally determined, although the astreinte was

136
See GERHARD F. (note **), No. 362-363.
137
Article 38(1) of the Regulation. In the Denilauler case (note 131), the ECJ stated
that provisional measures are enforceable abroad, subject to some conditions.
138
See SCHLOSSER Report (note 21), No. 213.
139
See namely GOTHOT P./HOLLEAUX D. (note 132), No. 365; KROPHOLLER J. (note
85), ad Article 43, No. 1; see also SA La Médicale Equipex v. Soc. Farmitalia Erba SRL
Fice, Versailles, CA, 25 January 1989, in: Dalloz 1989 I.R., p. 64; Richard v. Europroducts,
Civ. Arlon (1ère ch.), 27 December 1996, in: Journal des Tribunaux (J.T.) 1997, p. 781.
140
Article 3, 2nd sentence of the Uniform Law.

Yearbook of Private International Law, Volume 3 (2001) 279

 Frank Gerhard

enforceable under Belgium law.141 The court simply stated that the plaintiff could
not avail itself of the less stringent requirement of the State of origin but had to
comply with the condition specified in Article 43 of the Convention. If the judg-
ment whose enforcement is sought also imposes interest payments, the enforce-
ment court may set the final amount of interest due; however, on the basis of an
astreinte that has been pronounced but whose amount has not been finally deter-
mined, it is not possible to determine from the application for its recognition
whether or not the astreinte is actually due. This is because the execution of the
underlying order cannot be deducted from the penalty itself. As an intermediary
solution, SCHLOSSER proposes that a distinction be made between a penalty ancil-
lary to an obligation to perform and a penalty ancillary to an obligation to refrain
from performance. The enforcement judge could finally determine the amount of
the former on the basis of information provided by the plaintiff; however, for rea-
sons of legal security and protection of the defendant's rights, the amount of the
latter should not be finally determined by relying on declarations by the plaintiff.142
The position of the Paris Court of Appeals may seem erroneous, not because a
plaintiff who may avail itself of national law in an internal setting should also be
able to do so in a transnational setting,143 but because the French requirement speci-
fied in Article 49 of the Regulation constitutes an unjustified restriction of one of
the fundamental freedoms of the Treaty of Amsterdam.144 These freedoms are also
applicable in private law, namely in matters of civil procedure.145 However, the
requirement that the amount of the judicial penalty be finally determined is justi-
fied by the intention to protect the debtor and by the need for legal security.146 This

141
Sàrl Hugo Boss v. Société BVBA Boss Invest, Paris, 1ère Ch. civile, 7 July 1992,
in: D. 1992 I.R., p. 226, commented by REMIEN O. in: European Review of Private Law
(ERPL) 2 (1994), pp. 399-408. The Paris Court of Appeals has subsequently confirmed its
position in Eurosensory v. Tieman et BEE, 28 January 1994, in: Revue de droit de la pro-
priété intellectuelle (RDPI) 1995, p. 18.
142
SCHLOSSER P. (note 7), ad Article 43, No. 5.
143
DONZALLAZ Y. (note 85), No. 2219.
144
See REMIEN's comments to the decision Hugo Boss, (note 141), in: ERPL 2
(1994), pp. 404-405.
145
EHRICKE U., ‘Artikel 12 I (ex 6 I) EG-Vertrag und das nationale Zivilprozessrecht
– Bilanz und Perspektiven’, in: IPRax 1999, pp. 311-323; SCHLOSSER P., ‘Die europäische
justizielle Infrastruktur ohne Diskriminierung’, in: Zeitschrift für Europäisches Privatrecht
(ZEuP) 1995, pp. 250-257 and the sizeable case law of the ECJ rendered on the cautio judi-
catum solvi, e.g., Stephen Austin Saldanha et MTS Securities Corporation v. Hiross Holding
AG, 2 October 1997, C-122/96, [1997] ECR, p. 5325, and on the freezing of assets in cases
of enforcement of a foreign judgment, e.g., Firma Mund und Fester v. Firma Hatrex Inter-
national Transport, 10 February 1994, C-398/92, [1994] ECR, p. 467.
146
This requirement, however, could be questionable if the national laws of both the
State of origin and the State of enforcement do not require the amount of the penalty to be
finally determined.

280 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

requirement has two consequences for the Benelux countries. First, the Regulation
has made it more difficult to enforce the astreinte within the Benelux countries.147
Second, if foreign recognition of the Benelux astreinte is sought, the creditor must
first request the court of the State of origin to determine the amount of the
astreinte.148
If the amount of the judicial penalty must be finally determined, does this
mean that the penalty is finally payable? Article 49 requires only that the amount
of the penalty be finally determined, not that the penalty is finally payable.
According to KROPHOLLER, this only means that the amount due must result from
the foreign order itself.149 Even if the text of Article 49 could lead one to think that
the penalty is finally payable to the beneficiary, the debts incurred are not irrevo-
cable. The final amount of the penalty can be determined, although there is still a
possibility to appeal the underlying judgment. The scope of the ‘final determina-
tion’ shall not extend beyond the final determination of the ‘amount’ of the
penalty, regardless of the possibility to void the underlying order and to request
reimbursement of the sum paid on the basis of unjust enrichment. Any other
construction would unduly extend the text of the Regulation, which only requires
that the foreign order be enforceable.150

b) Influence of the Ancillary Character of the Judicial Penalty

The ancillary character of the judicial penalty means that the enforcement request
must be accompanied by the document mentioned in Articles 34, 53 and 54 of the
Regulation,151 both with respect to the judicial penalty and the underlying order.
Therefore, the ancillary character of the judicial penalty means that the underlying
order must also be enforceable under the rules of the Regulation.152 But how should

147
Civ. Bruxelles, 31 October 1973, in: Rechtskundig Weekblad (RW) 1973-1974,
col. 882. See DE BOER M. B., ‘Osservazioni sull'Astreinte nel diritto processuale civile olan-
dese’, in: Rivista di diritto processuale 1996, p. 805.
148
Trib. Arr. Rotterdam, 4 February 1983, in: NJ 1985, No. 417; Ger. Hof. Leeuwar-
den, 7 April 1982, in: NJ 1983, No. 406; Arr. Rb Haarlem, 26 March 1991 and Ger. Hof.
Amsterdam, 27 February 1992, in: NJ 1993, No. 453; Ger. Hof Den Haag, 21 May 1992, in:
NJ 1993, No. 238. The possibility of this decision is provided by the Exposé des motifs
communs, ad Article 3, in: Jur. Benelux 2 (1980-1981), pp. 115 and 122.
149
KROPHOLLER J. (note 85), ad Article 43, No. 1.
150
Article 38 of the Regulation.
151
Sàrl Hugo Boss v. Société BVBA Boss Invest, Paris, 1ère Ch. civile, 7 July 1992,
in: D. 1992 I.R., p. 226.
152
See KAYE P., Civil Jurisdiction and Enforcement of Foreign Judgements, Oxon
1987, No. 1358; REMIEN O. (note 22), p. 318; STAUDER D., ‘Die Anwendung des EWG-
Gerichtsstands- und Vollstreckungsübereinkommens auf Klagen im Gewerblichen Rechts-

Yearbook of Private International Law, Volume 3 (2001) 281

 Frank Gerhard

the enforcement judge decide a request to enforce a foreign judicial penalty, the
amount of which has been finally determined, if the underlying injunction orders a
specific act in a third-party State where enforcement of the underlying order is
impossible because that State only recognizes a direct means of execution? Noth-
ing should prevent the enforcement judge from recognizing the judicial penalty
because the enforcement proceedings are governed by the lex fori executionis153 and
thus the particular mode of execution admitted by that law has exclusive applica-
tion.154 However, how should he decide if performance of the order could not be
obtained in the third-party State because of rules protecting the personality of the
defendant or because the underlying order violates the public policy of the State of
enforcement? A recognition judge requested to render a judicial penalty could also
be confronted with such issues, which are dealt with below.155

c) Recognition of a Judicial Penalty Rendered in Connection with an Arbitral

Award

The ancillary character of a judicial penalty also has an impact on the enforceabil-
ity abroad of a penalty pronounced in connection with an arbitral award. There are
in fact three situations: (i) The penalty is rendered and finally determined by the
arbitral tribunal itself; (ii) the penalty is rendered by the arbitral tribunal and finally
determined by a judge as part of the enforcement proceedings; or (iii) the penalty is
rendered and finally determined by the judge if the arbitral tribunal has no juris-
diction to issue such a penalty.
The first hypothesis – when the arbitral tribunal issues and determines the
amount of the penalty – is possible under Belgium156 and Dutch law.157 Such a

schutz und Urheberrecht’, in: GRUR Int. 1976, pp. 465-477 and pp. 510-520, at 475;
TREIBMANN B. (note 22), pp. 151-152.
153
See GERHARD F. (note **), No. 752; BUCHER A., Droit international privé suisse,
Tome I/1; Partie générale – Conflits de juridictions, Basel/Frankfurt a. M. 1998, No. 389-
394; GEIMER R. (note 22), No. 369 and No. 3237-3239; GOTTWALD P. (note 22), p. 285;
KNOEPFLER F./SCHWEIZER P. (note 47), No. 628-633; LINDACHER W. (note 22), p. 403;
LOUSSOUARN Y./BOUREL P, Droit international privé, 5th ed., Paris 1996 No. 509; MUIR-
WATT H., ‘Effets en France des décisions étrangères. Contenu de l'efficacité internationale’,
in: Juris-classeur de droit international, Paris, édition techniques, 1990, fasc. 584-6,
No. 134; SCHACK H. (note 22), No. 957; SZASZY, International Civil Procedure, Leyden
1967, p. 228.
154
CHESHIRE G. C./NORTH P. M./FAWCETT J. J. (note 21), p. 106.
155
See infra II. C. 2. and II. C. 3.
156
Art. 1709bis of the statute of 19 May 1998 amending the Belgium Judicial Code;
see GERHARD F. (note **), No. 497.
157
Art. 1056 of the Dutch Code of Civil Procedure; see GERHARD F. (note **),
No. 498.

282 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

penalty would clearly not be enforceable under Article 49 Regulation, since it is

rendered by an arbitral tribunal; no arbitral award may be enforced abroad pursuant
to the Regulation, regardless of the subject matter.158 The second hypothesis – when
the penalty is imposed by the arbitral tribunal and the amount is fixed by the court
– is known under the UNIDROIT Principles of International Commercial
Contracts,159 in France160 and possibly in Switzerland.161 In these countries, the view
is held that the task of the arbitrators ends at the latest with the issuance of the
award, which may be accompanied by a penalty. However, the arbitrator has no
power to determine the amount of the penalty. In view of the ancillary character of
such judicial penalty, it also cannot be recognized abroad under Article 49 of the
Regulation since it aims at enforcing an arbitral award, which is expressly
excluded from the Regulation.162 Finally, the third hypothesis – when the court
issues and fixes the amount of the penalty163 – would also not be enforceable under
the Regulation because it is still ancillary to an underlying arbitral award.

2. Issuance of a New Judicial Penalty in the State of Recognition

a) Arguments Pro Inherent to the Regulation

The enforcement judge's jurisdiction to pronounce a judicial penalty to enforce a

judgment whose recognition is sought is a fundamental element of the system of
transnational enforcement we are pleading for; here the plaintiff can choose in
which State he will request the enforcement measure to be issued. Although such
jurisdiction is recognized under international law, the question arises as to whether
it is recognized under the Regulation, which expressly provides for the recognition
and enforcement of the foreign judicial penalty. This issue arises in two situations.
The judge having competence to decide on the merits did not issue a judicial
penalty because he felt it unnecessary to do so, because he was not requested to do
so by the parties or because his own national law did not permit him to do so. The

158
Art. 1(2)(d) of the Regulation, see also DONZALLAZ Y. (note 85), No. 2220, who
states that a judicial penalty must be rendered by a judicial authority in order to be enforce-
able abroad.
159
Art. 7.2.4 of the UNIDROIT Principles.
160
See the case law and the authors cited by GERHARD under No. 350-351.
161
See GERHARD F. (NOTE **), No. 549-551 and LEVY L., ‘Les astreintes et
l'arbitrage international en Suisse’, in: Bulletin de l'Association suisse de l'arbitrage (ASA)
2001, pp. 21-36.
162
Art. 1(2)(d) of the Regulation.
163
E.g., United Kingdom (Section 66 (1) Arbitration Act). See GERHARD F.
(note **), No. 402.

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 Frank Gerhard

second possibility is that the judge competent to decide on the merits ordered a
judicial penalty, but its amount was not or had not yet been finally determined.
The first argument to deny the enforcement judge the power to issue a new
judicial penalty is based on the clear separation of the proceedings on the merits
and the enforcement proceedings.164 Some courts165 and authors166 have argued that,
if enforcement of a foreign judgment is sought which does not contain a judicial
penalty and the enforcement judge pronounces a judicial penalty, this would be
adding an element to the judgment because the penalty grants the plaintiff a sup-
plementary monetary claim.167 However, the possibility to grant a supplementary
claim in the recognition proceedings is strictly prohibited by the Regulation168 and
by the jurisprudence of the European Court of Justice, which has opted for the
theory of the approximation of effects (Wirkungsangleichung).169 According to
DROZ' formula,170 ‘a foreign judgment should not have more far-reaching effects in
the State of recognition than in the State of origin; in addition, it should neither
have, in the State of recognition, more far-reaching effects than domestic judg-
ments’. We submit that issuing a judicial penalty in the State of recognition –
although such penalty was not issued in the State of origin – does not violate this
theory. It changes neither the nature nor the content of the order whose recognition
is sought. Furthermore, it does not grant the plaintiff more rights than he is already
entitled to; it only favors enforcement of the underlying order. The mere fact that
the beneficiary of the judicial penalty in France and in the Benelux is the creditor
and not the State is a peculiarity of national law and, as such, does not suffice to
regard the judicial penalty as a supplement to the decision on the principal

164
Based on the scission provided by Articles 22(5) and 38 of the Regulation.
165
TGI Paris, Dietrich Garski v. Brigitte Bolelli and Société Unger Flugreisen v. Sté
Diallo Voyages, orders of 26 February 1980, in: Gaz. Pal. 1980, I, p. 308, comment MAURO;
Rev. crit. dr. int. pr. 69 (1980), pp. 782-787, comment GAUDEMET-TALLON H., who ap-
proves the decision.
166
See, among others, DE LEVAL G./VAN COMPERNOLLE J., ‘Les problèmes posés par
l'exécution de l'astreinte’, in: Dix ans d'application de l'astreinte, Colloque par le
C.I.E.A.U., Bruxelles 1991, pp. 237-284, at 242.
167
Since the English contempt of court, the German Zwangsgeld and Ordnungsgeld
and the various fines of the Swiss cantonal codes of civil procedure are payable to the State,
this argument is moot for these judicial penalties; see STUTZ A. (note 22), pp. 169 and 180.
168
See Article 38 of the Regulation. On complements to judgments, see
DONZALLAZ Y. (note 85), No. 3389-3422.
169
See, e.g., ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR,
p. 645. On the various enforcement theories, see MÜLLER B., Anerkennung und
Vollstreckung ausländischer Entscheidungen im Bereich des Schuldrechts, Zurich 1994,
pp. 200-213.
170
See DROZ G., Compétence judiciaire et effets des jugements dans le Marché Com-
mun, Paris 1972, No. 448.

284 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

matter.171 Although such penalty creates a new claim that is neither contained in nor
derived from the underlying order, it is not based on substantive law and does not
constitute an unlawful interference in the jurisdiction of the judge competent to
decide on the merits. It is based on the lex fori of the State of recognition, which is
not prevented from putting a new burden on the debtor.172
The second argument to deny the enforcement judge the jurisdiction to issue
a new judicial penalty is based on the text of Article 49 itself. If the State of origin
has jurisdiction to pronounce a judicial penalty and is also competent to determine
its amount, it would only take one more step to conclude that such jurisdiction is
exclusive.173 One could even be ‘shocked’174 that the judge of the State of
recognition could pronounce an entirely new judicial penalty because the final
amount must be determined in the State of origin. However, the text of Article 49
does not support this construction in favor of exclusive jurisdiction by the State of
origin. Its only purpose is to prevent the enforcement judge from recognizing a
foreign judicial penalty, whose amount is not finally determined, and from
determining the amount of the penalty himself.175 Consequently, Article 49 is not a
jurisdictional rule directed to the judge who decides on the merits, but a rule of
recognition directed to the enforcement judge. This is evidenced by the fact that the
provision is in Chapter III of the Regulation entitled ‘Recognition and
Enforcement’. This construction allows us to take account of the differences
between national judicial penalties: The amount of the French astreinte is finally
determined by the court, whereas the Benelux astreinte is not.176 Article 49 has the
effect of eliminating the uncertainty regarding which judge is to determine the
amount of a judicial penalty that has already been issued.177 In this sense, it is a
‘coordination’ norm. Therefore, the Regulation does not prevent the judge of the
State of recognition from pronouncing a new judicial penalty. Any solution to the
contrary forcing the creditor to apply for a judicial penalty in the State of origin
would not only contradict the statement that the judicial penalty does not qualify
under Article 22(5), but would also slow down judicial implementation of the
creditors’ claims. Furthermore, the risk that the enforcement judge would refuse to
recognize the judicial penalty if it were an English contempt of court or a German

171
See STUTZ A. (note 22), p. 76.
172
Ibid., at 74.
173
E.g., DE LEVAL G./VAN COMPERNOLLE J. (note 166), p. 242.
174
According to the words used by GAUDEMET-TALLON H. (note 132), pp. 786-787.
175
See STUTZ A. (note 22), p. 76.
176
See JENARD Report (note 123), ad Article 43; SCHLOSSER Report (note 21),
No. 212, who cites the example of an English judgment that can be enforced in Germany by
means of a Zwangsgeld. See also SCHLOSSER P., ‘Grenzüberschreitende Vollstreckung von
Massnahmen des einstweiligen Rechtsschutzes im EuGVÜ-Bereich’, in: IPRax 1985,
pp. 321-322, at 322.
177
See DROZ G. (note 170), No. 587.

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 Frank Gerhard

Zwangsgeld is not negligible either. However, the issue whether a judicial penalty
rendered by the enforcement judge could sanction violations that occurred prior to
its recognition is still open. We do not think so. A precondition to the enforcement
of any judicial penalty is that the debtor has been informed about it;178 a judicial
penalty pronounced by the enforcement judge may only address violations that
occurred after its notification. But what if a judicial penalty has already been
pronounced or its amount determined in the State of origin? Issuing a new judicial
penalty in the State of recognition would not be justified, since Article 49 allows
the recognition of a judicial penalty that has already been determined in the State
of origin. Would the enforcement judge at least be authorized to do so? We do not
think so either. The coordination function of Article 49 would again be decisive;
any other solution would put the debtor at risk of being made subject to several
different judicial penalties, all exportable, but all sanctioning the same underlying
decision. The State that issued the judicial penalty first would have exclusive
jurisdiction. However, the possibility to wait for a violation in the State of origin,
to apply to have the amount of the judicial penalty determined there and then to
apply for enforcement in the State of recognition would not prevent the creditor
from applying for enforcement of the underlying decision itself in the State of
recognition and seeking a new judicial penalty there pursuant to the law of that
State.179 It is in the interest of the creditor to have this alternative available in the
enforcement proceedings. For instance, it could be faster than applying for
recognition of the judicial penalty rendered in the State of origin or if
imprisonment is stipulated as an enforcement measure in the State of origin.
Although the Regulation does not provide for the right to enforcement, the
right to obtain a judicial penalty could nevertheless be inferred from the
Amsterdam Treaty, in particular from the principle of equal treatment set forth in
Article 12.180 Apart from Article 47, the Regulation does not contain special provi-
sions on enforcement measures for foreign judgments distinct from the procedure

178
See GERHARD F. (note **), No. 667.
179
See, e.g., OLG Karlsruhe, 19 December 1994, in: Zeitschrift für Zivilprozessrecht
International, Jahrbuch des Internationalen Zivilprozessrechts (ZZPInt) 1 (1996), pp. 91-95,
comment ZUCKERMANN A.A.S./GRUNERT J., ibid, pp. 96-102.
180
The principle of equal treatment and the discrimination prohibition on the basis of
citizenship has been applied many times by the ECJ in connection with national procedural
laws. See ECJ, Hubbard v. Hamburger, 1 July 1993, C-20/92, [1993] ECR, p. 3777 (§ 110
German Code of Civil Procedure requiring a cautio judicatum solvi for an English executor
is contrary to the free circulation of services); ECJ, Data Delecta v. MSL Dynamics, 26
September 1996, C-43/95, [1996] ECR, p. 4661 (extension of the Hubbard rule to legal
entities); ECJ, Stephen Austin Saldanha et MTS Securities Corporation v. Hiros Holding
AG, 2 October 1997, C-122/96, [1997] ECR, p. 5325 (application of the Hubbard rule to
persons with double citizenship, one from a Member State and the other from a third-party
State). On the application of Article 12 of the Amsterdam Treaty to national rules of civil
procedure in general, see EHRICKE U. (note 145), pp. 311-323.

286 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

for obtaining an order authorizing enforcement (exequatur). These questions are to

be answered by the law of the State in which execution is sought, the lex fori
executionis.181 Furthermore, we have seen that the ECJ has opted for the theory of
the ‘approximation of the effects’ of a foreign judgment.182 Therefore, unequal
treatment based on the origin of the order – foreign or domestic – is not acceptable
after the exequatur has been granted. This discrimination prohibition applies not
only to the orders themselves but also to the persons entitled by those orders. The
Regulation, in connection with the Amsterdam Treaty, must treat domestic and
foreign orders equally. In the Mund & Fester case,183 the ECJ declared § 917(2) of
the German Code of Civil Procedure incompatible with EC law, because it recog-
nizes the mere fact that a judgment is to be enforced abroad as sufficient to legiti-
mate the issuance of a prejudgment attachment. The ECJ stated that this provision
contains a hidden form of discrimination contrary to Article 6 of the Rome Treaty
(now Article 12, Amsterdam Treaty), which is not justified by objective circum-
stances. According to the Court, it discriminates against foreign defendants
because most judgments to be enforced abroad concern a foreign defendant.
Furthermore, in a common market, it is no longer a valid reason to believe that
enforcement abroad would be more difficult or even impossible only because it
takes place abroad: The enforcement conditions and the risks associated therewith
should be considered the same in all Member States. This jurisprudence is also
applicable conversely, i.e., to the import of foreign judgments; in most cases, the
plaintiff will indeed be a foreigner. Therefore, although a foreign plaintiff will not
be able to use the (more efficient) enforcement measures of the State of origin,184 he
will be entitled to request that the rules of enforcement of the lex fori of the State
of recognition be applied to the enforcement of his judgment.185 If the State of
recognition provides for a judicial penalty, it will be obliged to pronounce it pursu-
ant to Article 12 of the Amsterdam Treaty.

181
The ECJ allows the Member States to decide on the modalities of the enforcement
proceedings and on restricting the enforcement proceedings to a certain type of judgments;
see ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR, p. 645.
182
See, e.g., ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR,
p. 645.
183
ECJ, Firma Mund & Fester v. Firma Hatrex International Transport, 10 Fe-
bruary 1994, C-398/92, [1994] ECR, p. 467.
184
See GERHARD F. (note **), No. 761-770. A good illustration of this point is found
in the Preziosi case decided by the Supreme Court of Sweden, in: Nytt juridiskt arkiv
(1995), p. 495, reported by PÅLSSON L., ‘Interim Relief under the Brussels and Lugano
Conventions’, in: BASEDOW J./EINHORN T./GIRSBERGER D./MEIER I./SCHNYDER A.K. (ed.),
Private Law in the International Arena – Liber Amicorum Kurt Siehr, The Hague, Zurich
2000, pp. 621-638, at 637.
185
See KERAMEUS K. D., ‘Enforcement in the International Context’, in: Recueil des
Cours 1997 I (vol. 264), pp. 179-410, at 393.

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 Frank Gerhard

b) Differences Between the Substantive Laws of the State of Origin and the
State of Recognition

It may occur that the substantive laws of the State of recognition do not provide for
specific performance of a claim granted by the State of origin: The substantive law
applied by the State of origin could be contrary to the substantive law or even the
public policy of the State of recognition. What happens if the enforcement
requirements in the State of recognition are more stringent than those of the sub-
stantive law applicable to the merits? In other words, the question is whether the
EC Regulation obliges the Member States to provide enforcement measures for the
enforcement of foreign judgments, if the national law of the State of recognition
does not provide for specific performance in such cases. For example, can a
German judgment ordering specific performance of a strictly personal obligation to
perform or to refrain from performing a certain act be enforced in Italy or Spain,
although these countries do not have indirect means of enforcement, but only allo-
cate damages in cases of non-compliance?186 Or can such a judgment rendered in
Italy or in Spain be enforced in Germany by issuing a Zwangsgeld, although such a
judicial penalty does not exist in the State of origin? It should be noted that
German law sets almost no restrictions on ordering specific performance; limita-
tions occur only at the stage of enforcement.187 How should a judge react when
confronted with an application for specific performance in a situation in which an
order could not be issued under his own law?188 Is he obliged to pronounce a
contempt of court, for example, or an astreinte?189 Or do national limitations to the
scope of application of such enforcement measures190 prevent the enforcement of an
order abroad that is unknown to the law of the State of recognition?
The EC Regulation does not give clear answers to these questions. Article
38(1) of the Regulation states that a judgment rendered 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. The
decision must not necessarily be final and conclusive or become res judicata.191
186
Italy: Art. 2933 Codice civile and Art. 612 ss Codice di procedura civile; Spain:
Art. 924-925 Ley de enjuiciamento civil (LEC); entered into force on 8 January 2001.
187
§ 888 (2) ZPO; see GERHARD F. (note **), No. 468.
188
E.g., obligation to perform an artistic or a scientific work, obligation to re-employ
en employee fired without cause after a strike, obligation to perform an agreement for the
constitution of a partnership, etc.
189
E contrario, such an issue would never arise in Germany, the country that most
commonly accepts the issuance of a decree for specific performance; see GERHARD F.
(note **), No. 468 et seq. and No. 606 et seq.
190
Assuming that the foreign judgment ordering specific performance has passed the
hurdle of public policy, we examine only the issue of enforcement law here. For the issue of
public policy, see infra II. C. 3.
191
See JENARD Report (note 123), No. 44.

288 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

The Regulation seems to provide for the obligation to enforce, however, without
determining the type and scope of enforcement.192 In addition, one must take
account of the aim of the Regulation, which, as confirmed by the ECJ under the
Brussels Convention,193 is to grant a foreign judgment the same effect in the State
of recognition that it has in the State of origin, even though the courts of the State
of recognition are not empowered to issue decisions having the same effect,194
provided it can at most produce the same effects in the State of recognition as a
domestic judgment.195
The French astreinte is a general enforcement measure,196 save for certain
obligations that require personal involvement of the debtor.197 Since restrictions on
the astreinte coincide with those placed on specific performance, this could prevent
the enforcement of such a judgment in France. Both the Civil Jurisdiction and
Judgments Act 1982 and the Civil Jurisdiction and Judgments Act 1991, which
incorporate the Brussels and the Lugano Conventions into national law in the
United Kingdom, provide for registration instead of exequatur of the foreign judg-
ment. This registration gives the foreign judgment the same force and effect as if
the judgment had been originally rendered by the registering court.198 Provided the
foreign judgment passes the hurdle of public policy, it will be enforced in the
United Kingdom by contempt of court.199 Having a dual character, this institution is
not only an enforcement measure for orders for specific performance but also a
sanction for willful disobedience to a court order.200 According to the Benelux Uni-

192
The ECJ already read this obligation into the Brussels Convention; see ECJ,
Firma Mund & Fester v. Firma Hatrex International Transport, 10 February 1994, C-
398/92, [1994] ECR, p. 467, submissions of Advocate General TESAURO, in: Rev. crit. dr.
int. pr. 83 (1994), p. 390. For the indirect enforcement measures, see SCHLOSSER P. (note 7),
ad Article 43, No. 6; see also, OLG Karlsruhe, 19 December 1994, in: ZZPInt 1 (1996),
pp. 91-95, comment ZUCKERMANN A.A.S/GRUNERT J., ibid. pp. 96-102.
193
ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR, p. 645.
194
Ibid.
195
Theory of the approximation of effects.
196
See GERHARD F. (note **), No. 333.
197
E.g., the obligation to perform an artistic or a scientific work: see the famous
cases Rosa Bonheur (Paris Court of Appeals, 4 July 1865, in: S. 1865, II, p. 233, D. 1865, II,
p. 201) and Lady Eden (Cass. civ., 14 March 1900, in: D. 1900, I, p. 497) for the obligation
to deliver a painting, or the obligation to re-employ organized employees fired without
cause; see in general, GERHARD F. (note **), No. 341 et seq.
198
Article 4(3) of the Civil Jurisdiction and Judgments Act.
199
This had already been noted by SCHLOSSER Report (note 21), No. 212. See also
DICEY A. V./MORRIS J./COLLINS L. (note 21), p. 491; O'MALLEY S./LAYTON A., European
Civil Practice, London 1989, No. 10.52 and 10.60.
200
See BORRIE G./LOWE N., The Law of Contempt, 3rd ed., London 1996, p. 558;
Phonographic Performance Ltd v. Amusement Caterers (Peckham) Ltd [1963] 3 WLR 898,

Yearbook of Private International Law, Volume 3 (2001) 289

 Frank Gerhard

form Law, the astreinte is not considered an enforcement measure, but an institu-
tion of substantive law, i.e., an ancillary order issued simultaneously with the prin-
cipal order201 and by the same judge.202 Therefore, a Belgium enforcement judge
cannot issue an astreinte simultaneously with a foreign judgment.203 In Germany,
there is no general measure of indirect enforcement.204 The choice of an enforce-
ment measure depends on the numerus clausus of the order to be enforced, which
is defined by its content. For instance, even if German substantive law does not
restrict the possibility to obtain an order for specific performance, enforcement law
sets some limitations, namely for orders enjoining a strictly personal conduct
(unvertretbare Handlung pursuant to § 888 ZPO).205 The fundamental liberties
specified in § 888(2) ZPO set some limits in matrimonial matters and to the obli-
gation to perform services. However, since foreign judges are less willing to
pronounce an order for specific performance, it is difficult to imagine a foreign
order that would not be enforced in Germany.206 Finally, the Swiss judicial penalty
of Article 292 of the Swiss Criminal Code also has a dual character in that it aims
to compel performance by the debtor and also to punish him in the event he fails to
comply with the order. Due to its criminal character, the fine specified in Article
292 can be imposed only if the particular act or forbearance falls within the scope
of application of the Swiss Criminal Code,207 i.e., it applies even though the debtor
is ordered to refrain from a certain act abroad, provided the debtor is domiciled in
Switzerland.208
Neither Article 12 of the Amsterdam Treaty, nor Article 38 et seq. of the
Regulation, nor relevant national legislation requires courts of the State of recogni-
tion to treat foreign titles, i.e., usually foreign creditors, more favorably than

900 (Ch.D.), [1964] Ch 195, 198; Jennison v. Baker [1972] 2 QB, 52, 69. See GERHARD F.
(note **), No. 377.
201
See BALLON G. L., ‘De nieuwe wet op de dwangsom’, in: RW, 43 (1979-80),
p. 2020, No. 3.1.
202
See Civ. Namur (réf.), 31 July 1996, in: J.T. 1997, p. 101.
203
See namely GOTHOT P./HOLLEAUX D. (note 132), No. 357; DE LEVAL G./VAN
COMPERNOLLE J. (note 165), p. 241.
204
See STÜRNER R. (note 22), No. 6.63; see GERHARD F. (note **), No. 469.
205
On the other hand, the enforcement of an order to refrain from a particular act
(Unterlassung pursuant to § 890 ZPO) and an order to act that is not strictly personal (ver-
tretbare Handlung pursuant to § 887 ZPO) will always be possible.
206
See STUTZ A. (note 22), p. 180. For an example, see LG Munich II, 13 January
1986, in: GRUR Int. 1987, p. 597, comment STAUDER D. (issuance of an Ordnungsgeld
accompanying an Austrian judgment that had been recognized).
207
Articles 3-7 of the Swiss Criminal Code.
208
According to the ubiquity theory, Article 7 of the Swiss Criminal Code; see
GERHARD F. (note **), No. 715; MEIER I. (note 22), p. 279; Decision of the Swiss Supreme
Court, in: ATF 99 IV 326. Contra: MÜLLER B. (note 169), pp. 249-250.

290 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

domestic creditors in similar cases: Limitations on extending the effects of foreign

judgments are set by the lex fori of the State of recognition. Anything to the
contrary would amount to a discrimination of a Member State against its own citi-
zens (Inländerdiskriminierung). In this sense, the creditor of a domestic judgment
would be limited by national law when seeking a judicial penalty, whereas the
creditor of a foreign judgment would not be subject to limitations and could
generally obtain the judicial penalty. This imbalance could be a new reason for
forum shopping in countries like France or the Benelux countries. While their
astreintes have well known advantages for creditors, including the possibility to be
enforced abroad, they restrict, either totally or in part, the issuance of an astreinte
accompanying foreign judgments. Only the United Kingdom and Switzerland (in
regard to the fine specified in Article 292 of the Swiss Criminal Code) enable
complete free circulation of non-monetary judgments in Europe by treating foreign
and national judgments equally and granting the creditor the right to enforce.
France limits the scope of application of the astreinte to substantive law.209 The
Benelux countries even prohibit issuing an astreinte favoring a foreign judgment.
Although Germany sets no restrictions to orders for specific performance,
limitations occur later on during the stage of enforcement. Finally, countries like
Italy or Spain provide only for damages, at least for orders to refrain from an act.210

c) Differences Between the Enforcement Laws of the State of Origin and the
State of Recognition: Recognition of the English Freezing Injunction

The type of order made by the foreign court sometimes differs substantially from a
similar order available under the lex fori. For example, in the European continental
countries, the freezing of assets in support of monetary claims is achieved by
measures in rem (saisie-conservatoire in France, Arrest in Germany, séquestre/
Arrest in Switzerland or sequestro conservativo in Italy). On the other hand, in the
United Kingdom, assets are frozen in support of monetary claims by a measure in
personam, i.e., a personal order addressed to the debtor ordering him not to with-
draw or dispose of his assets, regardless of their location, accompanied by the
threat of contempt of court (freezing injunction or Mareva injunction).211 A Mareva
injunction does not create any priority, lien, charge, or security in those assets in
favor of the applicant or any other party. Assuming the general conditions of
enforcement are met (namely if the defendant was heard before the order was
209
See GERHARD F. (note **), No. 871.
210
See STUTZ A. (note 22), p. 119.
211
The legal basis for the freezing injunction is now in rule 25.1 (1)(f) of the Rules
of Civil Procedure, which entered into force on 26 April 1999. Previously, the freezing
injunction was known under the Mareva injunction, named after one of the first cases in
which it was ordered, Mareva Compania Naviera SA v. International Bulkcarriers SA,
[1975] 2 Lloyd's Rep. 509.

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 Frank Gerhard

made),212 the question arises whether the judge of the State of recognition must
transpose the Mareva injunction by issuing a provisional measure restricting the
debtor from withdrawing or disposing of his assets,213 accompanied if necessary by
a judicial penalty, thus favoring the nature in personam of the foreign order and
reflecting the type of enforcement that would be ordered in the State of origin.214
The other possibility is to transpose the Mareva injunction by issuing an attach-
ment order with effect in rem.215 Although this would modify the nature in per-
sonam of the foreign measure, it would reflect the type of enforcement ordered in
the State of recognition for monetary claims according to the lex fori, and the pur-
pose would be the same as that of the foreign order, i.e., provisional seizure of the
assets.216 The dilemma is increased by the fact that the Mareva injunction produces
a certain in rem effect on third parties: A third party notified of a Mareva injunc-
tion is bound to do whatever he reasonably can to preserve the defendant's assets.

212
ECJ, Denilauler v. S.N.S Couchet Frères, 21 May 1980, C-125/79, [1980] ECR,
p. 1553.
213
E.g., pursuant to Article 223(1) of the Code of Civil Procedure of the canton of
Zurich.
214
See BERNET M., ‘Englische Freezing (Mareva) Orders – Praktische Fragen der
Anerkennung und Vollstreckung in der Schweiz’, in: Europa Institut Zurich (EIZ), 5th
Seminar on International Litigation, Zurich, 12 June 2001, pp. 1-32, No. 57; BLOCH A./
HESS M., ‘Discussion of the protective measures available under Swiss law (attachment and
provisional protective measure) with particular regard to the recognition and enforcement of
an English Mareva (‘freezing’) injunction in Switzerland’, in: Revue suisse de droit des
affaires (RSDA) 1999, pp. 166-180, at 176; KOCH H., ‘Durchsetzung einer "world-wide
Mareva order" in Deutschland?’, in: SCHLOSSER P. (ed.), Materielles Recht und Prozessrecht
und die Auswirkung der Unterscheidung im Recht der Internationalen Zwangsvollstreckung,
Bielefeld 1992, pp. 257-258 (at least for the freezing of tangible assets); MEIER I.,
‘Besondere Vollstreckungstitel nach dem Lugano-Übereinkommen’, in: SCHWANDER I.
(ed.), Das Lugano-Übereinkommen, St. Gallen 1990, pp. 157-211, at 182; SCHLOSSER P.
(note 7), ad Article 39, No. 5; STOLL D., ‘Die britische Mareva-Injunction als Gegenstand
eines Vollstreckungsbegehrens unter dem Lugano-Übereinkommen. Anmerkung zu einem
bemerkenswerten Entscheid des Bezirkgerichts Zürich’, in: Revue suisse de jurisprudence
(RSJ) 1996, pp. 104-110, at 109.
215
E.g., pursuant to Article 271 para. 1 ciph. 4 of the Swiss Federal Debt En-
forcement and Bankruptcy Act.
216
See ALBRECHT C., Das EuGVÜ und der einstweilige Rechtsschutz in England und
der Bundesrepublik Deutschland, Heidelberg 1991, p. 174; ALBRECHT C., ‘Artikel 24
EuGVÜ und die Entwicklung des einstweiligen Rechtsschutzes in England seit 1988’ in:
IPRax 1992, pp. 184-187, at 187; GASSMANN R., Arrest im internationalen Rechtsverkehr.
Zum Einfluss des Lugano-Übereinkommens auf das schweizerische Arrestrecht, Zurich
1998, pp. 112-113; KOCH H. (note 214), pp. 257-258 (at least for the freezing of bank
accounts); KOCH H., ‘Grenzüberschreitender einstweiliger Rechtsschutz’, in: HELDRICH A./
KONO T. (ed.), Herausforderungen des internationalen Zivilverfahrensrechts, Tübingen
1994, pp. 85-102, at 100.

292 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

If he assists in their disposal or in any transactions prohibited by the court order, he

will be guilty of contempt of court as well.217 In addition, it should be noted that it
is difficult to distinguish between what is called in German Erkenntnisverfahren
and Vollstreckungsverfahren, i.e., between parts of the foreign judgment that affect
the substance of the case and those relating to its enforcement. This is especially
true in cases involving measures to freeze assets.218
In Germany, the Oberlandgericht Karlsruhe219 enforced a Mareva injunction
according to the rules on injunctions by issuing an Ordnungsgeld pursuant to § 890
ZPO. The Court stated that the enforcement violated neither German public
policy220 nor the proportionality principle applicable to restrictions of personal
freedom and to assets of the debtor, since the English injunction had been issued in
accordance with an agreement between the parties.221 However, the unspecified
character of the Mareva injunction prevented the judge from ordering either of two
traditional German instruments, an Arrest222 or a restraint of alienation order,223
which would grant the Mareva injunction effet utile in Germany. Therefore, only
by issuing a negative injunction accompanied by an Ordnungsgeld pursuant to §
890 ZPO was it possible to circumvent the requirement of German public policy to
specify and identify the assets to be attached.224 When enforcing a foreign court
order that does not meet all the requirements of the principle of specificity of title
under German law, the Court maintained that the responsibility for enforcement
should remain with the German courts throughout, thus guaranteeing that a judicial
procedure would be initiated if the order was violated. In Switzerland, STOLL cites
a decision of the President of the District Court of Zurich dated 22 September
1994, probably the first decision recognizing and enforcing a Mareva injunction in
Switzerland. After granting the exequatur, the President refused to issue a ‘surety
attachment order’ under Article 39(2) of the Lugano Convention, but granted an
attachment order based on the foreign domicile of the debtor pursuant to Article
271 para. 1 ciph. 4 of the Swiss Debt Enforcement and Bankruptcy Act. Although
the canton of Zurich had admitted the new ‘surety attachment order’, which was
deemed to ensure full implementation of Article 39 of the Lugano Convention in

217
See Z Limited v. A-Z, [1982] QB 558, at 573.
218
For another example regarding an order for sequestration made in Italy and en-
forced in Sweden, see the Preziosi case reported by PÅLSSON L. (note 184), p. 637.
219
OLG Karlsruhe, 19 December 1994, in: ZZPInt 1 (1996), pp. 91-95, comment
ZUCKERMANN, A.A.S/GRUNERT, J., ibid., pp. 96-102; see also GRUNERT J., ‘Die World-wide’
Mareva Injunction: eine Zwischenbilanz, Baden-Baden 1998, pp. 186-193.
220
Article 27(1) of the Brussels Convention.
221
‘Volenti non fit injuria.’
222
§§ 916 et seq. ZPO.
223
Veräusserungs- or Verfügungsverbot in accordance with § 938 (2) ZPO.
224
BGH, 4 March 1993, in: Neue juristische Wochenschrift 1993, pp. 1801-1803.

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 Frank Gerhard

Switzerland,225 the Court refused to pronounce such measure because the object of
the Mareva injunction was not the payment of a certain amount of money, but a
prohibition to dispose of the assets. Issuing a ‘surety attachment order’ based
specifically on the Lugano Convention was possible only in connection with a
judgment ordering the payment of a sum of money.226 As an alternative, in a
decision of 5 October 1999,227 the Swiss Supreme Court mentions a decision of the
President of the Cantonal Court in Zug, in which the latter recognized an English
Mareva injunction by issuing a provisional protective measure under cantonal law
prohibiting the defendant to withdraw or dispose of his assets in Switzerland.
First, we recall that according to the Regulation, the State of recognition
must recognize and enforce a foreign judgment, provided of course that all precon-
ditions are fulfilled.228 A solution to this transposition of a foreign measure into a
measure of national law can be found in the theory of the approximation of effects
used by the ECJ when recognizing foreign judgments: a foreign judgment should
not have, in the State of recognition, effects more far-reaching than it has in the
State of origin and than a domestic judgment has in the State of recognition.229
Since it is not possible to have assets seized in England on the basis of a Mareva
injunction, the same must apply when such injunction is transposed into a foreign
order. This means that the Mareva injunction must be transposed abroad by a
provisional protective measure and not by a measure in rem. In addition, it must be
recalled that the judge recognizing and enforcing a Mareva injunction is not actu-
ally enforcing the principal (monetary) order but only a (non-monetary) injunction.
The consequences thereof, in Switzerland especially, are even more clear since the
enforcement of non-monetary orders is governed by cantonal law.230 Therefore,
measures in rem such as the attachment order cannot be taken into account because
they are all anchored in the Swiss Federal Debt Enforcement and Bankruptcy Act.

225
The implementation of Article 39 of the Lugano Convention has been widely
discussed in Switzerland, see ATTESLANDER-DÜRRENMATT A., in: Pratique Juridique
Actuelle (PJA), 2001, pp. 180-197; CAMBI FAVRE-BULLE A., ‘La mise en oeuvre en Suisse
de l'art. 39 al. 2 de la Convention de Lugano’, in: RSDIE 1998, pp. 335-370. See also the
summary of various opinions in the judgment of the Swiss Supreme Court published in:
ATF 126 III 438, at 440 et seq.
226
See LEUENBERGER C., ‘Lugano-Übereinkommen: Verfahren der
Vollstreckbarerklärung ausländischer "Geld"-Urteile’, in: PJA 1992, pp. 965-973; Circular
of the Supreme Court of the canton of Zurich of 13 November 1991, in: Blätter für zürcheri-
sche Rechtssprechung (ZR) 90 (1991), No. 35, para. 6.
227
ATF 125 I 412.
228
See Article 33 in connection with Article 38 of the Regulation.
229
See ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR, p. 645 and
supra note 171.
230
See ATTESLANDER-DÜRRENMATT A. (note 225), p. 189; BERNET M. (note 214),
No. 57, GERHARD F. (note **), No. 879; WALTER G., Internationales Zivilprozessrecht der
Schweiz, Bern, Stuttgart, Vienna 1998, p. 432.

294 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

The exclusion of the measures in rem provided by the Swiss Federal Debt
Enforcement and Bankruptcy Act is even more justified since the legislator did not
adapt the Act to the Lugano Convention at its last revision in 1997.231 However,
this, of course, means that the third-party effect of the injunction that operates in
England does not operate in the State of recognition unless the injunction has been
duly enforced against such third-party, for example, a bank, as well.232 However, in
order to avoid the risk to have to pay twice, it is highly probable that a third party
that has merely received notice of an enforceable Mareva injunction will also
refrain from making payments from funds blocked by the Mareva injunction, even
in the absence of the threat of sanctions. This behavior would be even more pro-
bable if the bank has a presence in England or Wales. In any event, the Mareva
injunction does not lose its function and effect by being transposed into a provi-
sional protective measure. Against the defendant, such provisional measure will be
accompanied by the threat of fines pursuant to Article 292 of the Swiss Criminal
Code. We believe that such a provisional protective measure restraining disposal of
the property can also be addressed to third parties in possession of the disputed
property by virtue of a right in rem or a contractual right because the enforcement
judge has to take the appropriate measures to protect the alleged claim.233 In this
respect, the Obergericht of the canton of Zurich even accompanied such order
against a third party by the threat of fines pursuant to Article 292 of the Swiss
Criminal Code. Such a threat of sanction against third parties is controversial. One
might argue that it is not possible because the third parties have not been heard in
the English proceedings since they are not parties thereto and therefore such an
order cannot not be recognized and enforced against them.234 On the other hand,
following the reasoning of the Obergericht of the canton of Zurich, one might
argue that this extension of the measure is actually not only the enforcement
thereof, but the application of the appropriate device made by the recognition judge
pursuant to national law to implement the full effect of the foreign measure on its
national territory.235

231
See BERNET M. (note 214), No. 57; GERHARD F. (note **), No. 877.
232
According to the Babanaft Provisio, named after the case Babanaft International
Co. SA v. Bassatne, [1989] 2 WLR 232 (CA).
233
See Obergericht of the canton of Zurich, 29 September 1999, reported by BERNET
M. (note 214), No. 65-67.
234
This is the requirement set by the ECJ in Denilauler v. S.N.S Couchet Frères, 21
May 1980, C-125/79, [1980] ECR, p. 1553. See, e.g., BLOCH A./HESS M. (note 214), p. 176;
GERHARD F. (note **), No. 875.
235
See BERNET M. (note 214), No. 68-69.

Yearbook of Private International Law, Volume 3 (2001) 295

 Frank Gerhard

3. Public Policy of the State of Recognition in the Enforcement Proceedings

a) Distinction

Under the EC Regulation, the judicial penalty is an ancillary pronouncement, thus

resulting in a double examination of the violation of public policy in cases involv-
ing judicial penalties. First, a distinction must be made between recognition and
enforcement of the underlying order – for example, an injunction restraining the
defendant from acting or ordering him to act – and recognition and enforcement of
the judicial penalty itself. However, if the underlying order violates public policy,
this in itself suffices to prevent enforcement of the judicial penalty.236 Assimilating
the judicial penalty to damages237 would lead to a distortion of the principles of
recognition and enforcement of foreign judgments. Second, the fact that the State
of recognition does not recognize the judicial penalty as an instrument for
enforcing non-monetary judgments238 does not constitute in our opinion a strong
enough argument to warrant refusing its recognition.239 Such refusal would violate
the principles laid down in Article 49 of the Regulation. In addition, it should be
noted that the Amsterdam Treaty itself provides for a judicial penalty in cases of
non-compliance with judgments of the Court of Justice.240 Finally, in Switzerland,
this would result in the creation of a cantonal public policy, since enforcement of
non-monetary judgments is governed by cantonal law; however, this would violate
the rule requiring public policy to be uniform on the territory of each State.241
Accordingly, it would be admissible to recognize, for example, a French astreinte
accompanying a monetary judgment242 or an obligation to act that is not strictly
personal (non intuitu personae), even if the issuance of an indirect means of
enforcement in these instances is not known in the State of recognition.243 In
Switzerland, for example, the first judgment would typically be enforced by
applying the debt enforcement procedure of the Swiss Federal Debt Enforcement
and Bankruptcy Act; the second judgment would be enforced in most cantons

236
See KAYE P. (note 152), No. 1358; REMIEN O. (note 22), p. 318; STAUDER D.
(note 152), pp. 465 and. 475; TREIBMANN B. (note 22), pp. 151-152.
237
E.g., DROZ G. (note 170), No. 587.
238
E.g., Italy and Spain provide for damages only in the event of a violation of an in-
junction that is strictly personal or an injunction prohibiting a particular conduct.
239
See REMIEN O. (note 22), p. 326; STÜRNER R. (note 22), p. 871; TREIBMANN B.
(note 22), p. 152.
240
See Article 171 of the EC Treaty. For example, the ECJ has sentenced Greece to
the payment of a judicial penalty of Euro 20,000 daily as of 4 July 2000 until the gorges of
Koupoupitos on the island of Creta are completely cleaned up.
241
See, in particular, KNOEPFLER F./SCHWEIZER P. (note 47), No. 360.
242
See GERHARD F. (note **), No. 340.
243
Ibid., at No. 335.

296 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

typically by issuing a replacement order to be performed by a third person at the

expense of the debtor.

b) Injunction Incompatible with the Public Policy of the State of Recognition

Article 34(1) of the Regulation states that a judgment shall not be recognized if
such recognition is manifestly contrary to the public policy in the Member State in
which recognition is sought. The adverb ‘manifestly’, which is usually found in
provisions on recognition and enforcement,244 was added in the Regulation. Public
policy will very rarely be opposed to the recognition of a foreign judgment ren-
dered in a Member State.245 The ECJ has expressly stated that the public policy
clause is to play a role only in exceptional cases.246 Finally, it should be noted that,
in each individual case, an assessment of the foreign judgment's compatibility with
the public policy of the State of recognition will be made by taking account of the
effects of the recognition or enforcement of the foreign judgment: It is not the
foreign judgment itself but rather the effects of its recognition that are to be exam-
ined as to their conformity with the public policy of the State of recognition.247 As
long as the ECJ has made no decision in this matter, the relevant public policy is
national, not community-wide. Moreover, many authors deny the ECJ the compe-
tence to decide this question, which in their opinion is a national question per se.248
It should be recalled that the Regulation covers matters that rarely violate
the public policy of foreign States; the underlying ideas of the Member States are
basically the same in ‘civil and commercial matters’, which are not public policy
sensitive like family matters, for example.249 The recognition of a foreign decision
cannot be refused on the sole ground that its content is unknown in the substantive
law of the State of recognition. Such a position would violate the interdiction of the
révision au fond. Therefore, a court may not refuse to recognize a foreign judgment
on the ground that its own national law provides merely for damages, not for

244
See, e.g., Article 27(1) of the PILA.
245
See JENARD Report (note 123), No. 44.
246
ECJ, Hoffmann v. Krieg, 4 February 1988, C-145/86, [1988] ECR, p. 645, No. 21,
confirmed in ECJ, Bernardus Hendrikman and Maria Feyen v. Magenta Druck & Verlag
GmbH, 10 October 1996, C-78/95, [1996] ECR, p. 4943, No. 23.
247
See JENARD Report (note 123), No. 44, who argues that such a control would lead
to a révision au fond, which is prohibited by the Brussels Convention (Article 34(3)).
248
See, in particular, in Switzerland, DONZALLAZ Y. (note 85), No. 2808; in France,
GAUDEMET-TALLON H. (note 132), No. 355; in Germany, KROPHOLLER J. (note 85), ad Arti-
cle 27, No. 4; in the United Kingdom, O'MALLEY S./LAYTON A. (note 199), No. 27.14.
249
Which is expressly excluded from the scope of application of the Regulation, see
Article 1(1)(a).

Yearbook of Private International Law, Volume 3 (2001) 297

 Frank Gerhard

specific performance.250 The principle nemo praecise potest cogi ad factum has
been seriously eroded in countries where it served as a basis for their legislation.
Thus it cannot be considered an element of national public policy. On the same
level, Swiss jurisprudence has stated that a mere divergence from Swiss law or
even a false application of the law by the foreign judge does not justify invoking
the public policy exception;251 a violation of the essential principles of the State of
recognition is necessary.252 For instance, adapting an example suggested by
STÜRNER,253 the question arises as to whether an injunction issued by a German
judge and addressed to the editor of a Swiss newspaper distributed in Germany
ordering him to retract a statement is compatible with Swiss public policy; under
Swiss law only the right to publish a reply or a claim for damages is available. This
issue must be resolved at latest at the time of recognition in Switzerland of the
German Zwangsgeld and/or the injunction itself.
On the other hand, a judicial penalty accompanying an injunction ordering a
particular act that is prohibited in the State of recognition or, more frequently,
accompanying an injunction prohibiting a certain act that has been expressly
authorized by a judicial or legislative order in the State of recognition would not
meet the public policy test. Nor would the injunction itself. Relevant examples
include extraterritorial injunctions rendered in environmental matters prohibiting a
certain activity of the debtor that has been duly authorized in the State of origin.
For example, although the exploitation of a nuclear plant has been duly authorized
in the State of recognition, an extraterritorial injunction is issued prohibiting it
because of emanations on the territory of the State of origin.254 In the recognition
procedure, the act of authorization of the State of recognition will carry more
weight than the foreign judgment or an ancillary enforcement measure.255 This
solution is logical: A State will not grant greater protection against emanations to

250
See, in particular, for France, BERAUDO J.-P., ‘Convention de Lugano du
16 septembre 1988, Reconnaissance des décisions juridictionnelles; exécution des décisions
judiciaires, actes authentiques et transactions judiciaires’, in: Juris-classeur Europe, vol. 6,
Fasc. 3102/635-4, Paris 1991, para. 23; for Germany, TREIBMANN B. (note 22), p. 151; for
the United Kingdom, where this issue is historically important, DICEY A.V./MORRIS J./
COLLINS L. (note 22), pp. 495-496; O'MALLEY S./LAYTON A., (note 199), No. 10.59, 10.60
and 51.69, note 59; see also SCHLOSSER Report (note 21), No. 212.
251
See decisions of the Federal Supreme Court, in: ATF 118 Ia 123; 116 II 630; 111
Ia 14.
252
Ibid.
253
STÜRNER R. (note 22), p. 870.
254
On issues raised in connection with cross-border pollution, see GERHARD F.
(note **), No. 249 et seq.
255
See SIEHR K., ‘Grenzüberschreitender Umweltschutz, Europäische Erfahrungen
mit einem weltweiten Problem’, in: RabelZ 45 (1981), pp. 377-398, at 388.

298 Yearbook of Private International Law, Volume 3 (2001)

 Extraterritorial Judicial Penalty

foreigners than to its own citizens256, subject however to a possible compensation

for damages.257 It remains open whether the State of origin may file a claim for
damages against the State of recognition that has authorized the controversial
activity, if such activity causes substantial damages on the territory of foreign
States.258

c) Injunction Incompatible with the Public Policy of a Third Party State

A foreign extraterritorial injunction, perhaps even worldwide, can violate the pub-
lic policy not only of the State of recognition but also of a third State, either addi-
tionally or exclusively. In such cases, the question arises whether the court of rec-
ognition is bound by a violation of the public policy of the third State or whether
this could even constitute a violation of the public policy of the State of recogni-
tion. Let us assume that upon the request of an important landowner, a Dutch court
enjoins a German paper plant to cease burning wood, which produces toxic fumes
whose sulfur content is above the Dutch tolerance. In cases of rain, the landowner
is prevented from exploiting the border zone, thus reducing the value of his prop-
erty significantly. The injunction is accompanied by a dwangsom, the Dutch judi-
cial penalty. The German plant owner does not comply with the injunction. He has
no assets in the Netherlands and knows that neither the injunction nor the accom-
panying judicial penalty will be recognized in Germany because the competent
environmental authority has duly authorized the activity of the paper plant. The
claimant is aware of this as well; however, he also knows that the owner of the
German plant has a bank account in Switzerland. Therefore, he seeks enforcement
of the dwangsom, which in the meantime has accrued to 1 million Euro, before the
district court in Zurich. Is the Swiss court obliged to grant exequatur because it
does not concern Swiss public policy or must the Swiss court refuse to grant en-
forcement, arguing that the Dutch decision is contrary to German public policy?
Two aspects must be examined. First, in our opinion, a judge can not refuse
enforcement of a foreign judgment even if this judgment violates the public policy
of a third State: Public policy serves only to protect the essential values of the State

256
See KLOEPFER M./KOHLER C., Kernkraftwerk und Staatsgrenze, Völkerrechtliche,
verfassungsrechtliche, europarechtliche, kollisions- und haftungsrechtliche Fragen grenz-
naher Kernkraftwerke, Berlin 1981, p. 174; SCHACK H., ‘Das Internationale Prozessrecht in
umweltrechtlichen Streitigkeiten’, in: Bericht der deutschen Gesellschaft für Völkerrecht
(BerDtGes VR) 32 (1992), pp. 315-357, at 344.
257
KOHLER C., ‘Zivilrechtliche Schadenersatz- und Unterlassungsklagen – Gerichtli-
che Zuständigkeit und Verfahrensfragen (Recht der Europäischen Gemeinschaften)’, in:
BOTHE M./PRIEUR M./RESS G. (ed.), Rechtsfragen grenzüberschreitender Umweltbelastun-
gen, Berlin 1984, pp. 159-171, at 167.
258
See SIEHR K. (note 255), p. 389.

Yearbook of Private International Law, Volume 3 (2001) 299

 Frank Gerhard

of recognition.259 However, and this is the second aspect of the question, does the
respect of members of the international community for the sovereignty of other
States and for the rights arising therefrom constitute part of the ‘essential values’ of
that State? If the answer is yes, the Swiss enforcement judge could refuse to recog-
nize the Dutch judicial penalty. However, the public policy exception may inter-
vene only if there is a sufficient connection between the foreign law or the situation
created abroad, on the one hand, and the State of recognition, on the other.260 This
is the famous requirement of the Binnenbeziehung or Inlandsbeziehung, i.e., the
sufficient connection. The mere existence of assets in Switzerland might not meet
this requirement.261 A sufficient connection exists, for example, if a party is a Swiss
citizen or has its domicile in Switzerland, or if the contract was concluded in
Switzerland or is to be performed there, if the tort has been committed or produced
effects in Switzerland or if Swiss law is applicable to the claim.262 In casu, none of
the elements that could constitute a sufficient connection exists; therefore the pub-
lic policy exception would probably not apply.

259
See GEIMER R. (note 22), No. 2969.
260
See, in particular, KNOEPFLER F./SCHWEIZER P. (note 47), No. 365.
261
However, the Dutch creditor will obtain an attachment up to this sum since he has
a court judgment enforceable according to Article 271 para 1 ciph. 4 of the Swiss Federal
Debt Enforcement and Bankruptcy Act.
262
On the sufficient connection, see the commentaries on Article 271 para. 1 ciph. 4
of the Swiss Federal Debt Enforcement and Bankruptcy Act, e.g., GANI L., ‘Le "lien
suffisant avec la Suisse" et autres conditions du séquestre lorsque le domicile du débiteur est
à l'étranger’, in: RSJ 92 (1996), pp. 227-232, at 230; MEIER-DIETERLE, F.C., ‘Der
"Ausländerarrest" im revidierten SchKG – eine Checkliste’, in: PJA 1996, pp. 1416 et seq.,
at 1422; MUMENTHALER B., ‘Le séquestre des biens du débiteur domicilié à l'étranger selon
l'art. 271 al. 1 ch. 4 LP – le lien suffisant de la créance avec la Suisse’, in: PJA 1999,
pp. 302-306, passim. In Germany, the Bundesgerichtshof requires a sufficient connection as
a precondition praeter legem of the forum patrimonii pursuant to § 23 ZPO; see BGH, 2
July 1991, in: BGHZ 115, p. 90.

300 Yearbook of Private International Law, Volume 3 (2001)

TEXTS, MATERIALS AND RECENT
DEVELOPMENTS
________________

COUNCIL REGULATION (EC) No. 44/2001

of 22 December 2000
ON JURISDICTION AND THE RECOGNITION AND ENFORCEMENT
OF JUDGMENTS IN CIVIL AND COMMERCIAL MATTERS*

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in

particular Article 61(c) and Article 67(1) thereof,
Having regard to the proposal from the Commission,1
Having regard to the opinion of the European Parliament,2
Having regard to the opinion of the Economic and Social Committee,3

Whereas:

(1) The Community has set itself the objective of maintaining and developing an
area of freedom, security and justice, in which the free movement of persons
is ensured. In order to establish progressively such an area, the Community
should adopt, amongst other things, the measures relating to judicial
cooperation in civil matters which are necessary for the sound operation of
the internal market.

(2) Certain differences between national rules governing jurisdiction and

recognition of judgments hamper the sound operation of the internal market.
Provisions to unify the rules of conflict of jurisdiction in civil and
commercial matters and to simplify the formalities with a view to rapid and
simple recognition and enforcement of judgments from Member States bound
by this Regulation are essential.

*
This text is published in OJ of the European Communities, L 012, 16 January
2001, pp. 1-23.
1
OJ C 376, 28.12.1999, p. 1.
2
Opinion delivered on 21 September 2000 (not yet published in the OJ).
3
OJ C 117, 26.4.2000, p. 6.
 Texts, Materials and Recent Developments

(3) This area is within the field of judicial cooperation in civil matters within the
meaning of Article 65 of the Treaty.

(4) In accordance with the principles of subsidiarity and proportionality as set out
in Article 5 of the Treaty, the objectives of this Regulation cannot be
sufficiently achieved by the Member States and can therefore be better
achieved by the Community. This Regulation confines itself to the minimum
required in order to achieve those objectives and does not go beyond what is
necessary for that purpose.

(5) On 27 September 1968 the Member States, acting under Article 293, fourth
indent, of the Treaty, concluded the Brussels Convention on Jurisdiction and
the Enforcement of Judgments in Civil and Commercial Matters, as amended
by Conventions on the Accession of the New Member States to that
Convention (hereinafter referred to as the ‘Brussels Convention’)4. On 16
September 1988 Member States and EFTA States concluded the Lugano
Convention on Jurisdiction and the Enforcement of Judgments in Civil and
Commercial Matters, which is a parallel Convention to the 1968 Brussels
Convention. Work has been undertaken for the revision of those
Conventions, and the Council has approved the content of the revised texts.
Continuity in the results achieved in that revision should be ensured.

(6) In order to attain the objective of free movement of judgments in civil and
commercial matters, it is necessary and appropriate that the rules governing
jurisdiction and the recognition and enforcement of judgments be governed
by a Community legal instrument which is binding and directly applicable.

(7) The scope of this Regulation must cover all the main civil and commercial
matters apart from certain well-defined matters.

(8) There must be a link between proceedings to which this Regulation applies
and the territory of the Member States bound by this Regulation. Accordingly
common rules on jurisdiction should, in principle, apply when the defendant
is domiciled in one of those Member States.

(9) A defendant not domiciled in a Member State is in general subject to national

rules of jurisdiction applicable in the territory of the Member State of the
court seised, and a defendant domiciled in a Member State not bound by this
Regulation must remain subject to the Brussels Convention.

4
OJ L 299, 31.12.1972, p. 32; OJ L 304, 30.10.1978, p. 1; OJ L 388,
31.12.1982, p. 1; OJ L 285, 3.10.1989, p. 1; OJ C 15, 15.1.1997, p. 1. For a
consolidated text, see OJ C 27, 26.1.1998, p. 1.

302 Yearbook of Private International Law, Volume 3 (2001)

 Council Regulation (EC) No. 44/2001

(10) For the purposes of the free movement of judgments, judgments given in a
Member State bound by this Regulation should be recognised and enforced in
another Member State bound by this Regulation, even if the judgment debtor
is domiciled in a third State.

(11) The rules of jurisdiction must be highly predictable and founded on the
principle that jurisdiction is generally based on the defendant's domicile and
jurisdiction must always be available on this ground save in a few well-
defined situations in which the subject-matter of the litigation or the
autonomy of the parties warrants a different linking factor. The domicile of a
legal person must be defined autonomously so as to make the common rules
more transparent and avoid conflicts of jurisdiction.

(12) In addition to the defendant's domicile, there should be alternative grounds of

jurisdiction based on a close link between the court and the action or in order
to facilitate the sound administration of justice.

(13) In relation to insurance, consumer contracts and employment, the weaker

party should be protected by rules of jurisdiction more favourable to his
interests than the general rules provide for.

(14) The autonomy of the parties to a contract, other than an insurance, consumer
or employment contract, where only limited autonomy to determine the
courts having jurisdiction is allowed, must be respected subject to the
exclusive grounds of jurisdiction laid down in this Regulation.

(15) In the interests of the harmonious administration of justice it is necessary to

minimise the possibility of concurrent proceedings and to ensure that
irreconcilable judgments will not be given in two Member States. There must
be a clear and effective mechanism for resolving cases of lis pendens and
related actions and for obviating problems flowing from national differences
as to the determination of the time when a case is regarded as pending. For
the purposes of this Regulation that time should be defined autonomously.

(16) Mutual trust in the administration of justice in the Community justifies

judgments given in a Member State being recognised automatically without
the need for any procedure except in cases of dispute.

(17) By virtue of the same principle of mutual trust, the procedure for making
enforceable in one Member State a judgment given in another must be
efficient and rapid. To that end, the declaration that a judgment is enforceable
should be issued virtually automatically after purely formal checks of the
documents supplied, without there being any possibility for the court to raise

Yearbook of Private International Law, Volume 3 (2001) 303

 Texts, Materials and Recent Developments

of its own motion any of the grounds for non-enforcement provided for by
this Regulation.

(18) However, respect for the rights of the defence means that the defendant
should be able to appeal in an adversarial procedure, against the declaration
of enforceability, if he considers one of the grounds for non-enforcement to
be present. Redress procedures should also be available to the claimant where
his application for a declaration of enforceability has been rejected.

(19) Continuity between the Brussels Convention and this Regulation should be
ensured, and transitional provisions should be laid down to that end. The
same need for continuity applies as regards the interpretation of the Brussels
Convention by the Court of Justice of the European Communities and the
1971 Protocol5 should remain applicable also to cases already pending when
this Regulation enters into force.

(20) The United Kingdom and Ireland, in accordance with Article 3 of the
Protocol on the position of the United Kingdom and Ireland annexed to the
Treaty on European Union and to the Treaty establishing the European
Community, have given notice of their wish to take part in the adoption and
application of this Regulation.

(21) Denmark, in accordance with Articles 1 and 2 of the Protocol on the position
of Denmark annexed to the Treaty on European Union and to the Treaty
establishing the European Community, is not participating in the adoption of
this Regulation, and is therefore not bound by it nor subject to its application.

(22) Since the Brussels Convention remains in force in relations between

Denmark and the Member States that are bound by this Regulation, both the
Convention and the 1971 Protocol continue to apply between Denmark and
the Member States bound by this Regulation.

(23) The Brussels Convention also continues to apply to the territories of the
Member States which fall within the territorial scope of that Convention and
which are excluded from this Regulation pursuant to Article 299 of the
Treaty.

5
OJ L 204, 2.8.1975, p. 28; OJ L 304, 30.10.1978, p. 1; OJ L 388,
31.12.1982, p. 1; OJ L 285, 3.10.1989, p. 1; OJ C 15, 15.1.1997, p. 1. For a
consolidated text see OJ C 27, 26.1.1998, p. 28.

304 Yearbook of Private International Law, Volume 3 (2001)

 Council Regulation (EC) No. 44/2001

(24) Likewise for the sake of consistency, this Regulation should not affect rules
governing jurisdiction and the recognition of judgments contained in specific
Community instruments.

(25) Respect for international commitments entered into by the Member States
means that this Regulation should not affect conventions relating to specific
matters to which the Member States are parties.

(26) The necessary flexibility should be provided for in the basic rules of this
Regulation in order to take account of the specific procedural rules of certain
Member States. Certain provisions of the Protocol annexed to the Brussels
Convention should accordingly be incorporated in this Regulation.

(27) In order to allow a harmonious transition in certain areas which were the
subject of special provisions in the Protocol annexed to the Brussels
Convention, this Regulation lays down, for a transitional period, provisions
taking into consideration the specific situation in certain Member States.

(28) No later than five years after entry into force of this Regulation the
Commission will present a report on its application and, if need be, submit
proposals for adaptations.

(29) The Commission will have to adjust Annexes I to IV on the rules of national
jurisdiction, the courts or competent authorities and redress procedures
available on the basis of the amendments forwarded by the Member State
concerned; amendments made to Annexes V and VI should be adopted in
accordance with Council Decision 1999/468/EC of 28 June 1999 laying
down the procedures for the exercise of implementing powers conferred on
the Commission6,

HAS ADOPTED THIS REGULATION:

6
OJ L 184, 17.7.1999, p. 23.

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CHAPTER I
SCOPE
Article 1
1. This Regulation shall apply in civil and commercial matters whatever the
nature of the court or tribunal. It shall not extend, in particular, to revenue,
customs or administrative matters.
2. The Regulation shall not apply to:
(a) the status or legal capacity of natural persons, rights in property arising
out of a matrimonial relationship, wills and succession;
(b) bankruptcy, proceedings relating to the winding-up of insolvent
companies or other legal persons, judicial arrangements, compositions and
analogous proceedings;
(c) social security;
(d) arbitration.
3. In this Regulation, the term ‘Member State’ shall mean Member States with
the exception of Denmark.

CHAPTER II
JURISDICTION

SECTION 1
GENERAL PROVISIONS

Article 2
1. Subject to this Regulation, persons domiciled in a Member State shall,
whatever their nationality, be sued in the courts of that Member State.
2. Persons who are not nationals of the Member State in which they are
domiciled shall be governed by the rules of jurisdiction applicable to
nationals of that State.

Article 3
1. Persons domiciled in a Member State may be sued in the courts of another
Member State only by virtue of the rules set out in Sections 2 to 7 of this
Chapter.
2. In particular the rules of national jurisdiction set out in Annex I shall not be
applicable as against them.

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Article 4
1. If the defendant is not domiciled in a Member State, the jurisdiction of the
courts of each Member State shall, subject to Articles 22 and 23, be
determined by the law of that Member State.
2. As against such a defendant, any person domiciled in a Member State may,
whatever his nationality, avail himself in that State of the rules of jurisdiction
there in force, and in particular those specified in Annex I, in the same way as
the nationals of that State.

SECTION 2
SPECIAL JURISDICTION

Article 5
A person domiciled in a Member State may, in another Member State, be sued:
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:
- 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,
- in the case of the provision of services, the place in a Member State
where, under the contract, the services were provided or should have
been provided,
(c) if subparagraph (b) does not apply then subparagraph (a) applies;
2. in matters relating to maintenance, in the courts for the place where the
maintenance creditor is domiciled or habitually resident or, if the matter is
ancillary to proceedings concerning the status of a person, in the court which,
according to its own law, has jurisdiction to entertain those proceedings,
unless that jurisdiction is based solely on the nationality of one of the parties;
3. in matters relating to tort, delict or quasi-delict, in the courts for the place
where the harmful event occurred or may occur;
4. as regards a civil claim for damages or restitution which is based on an act
giving rise to criminal proceedings, in the court seised of those proceedings,
to the extent that that court has jurisdiction under its own law to entertain
civil proceedings;
5. as regards a dispute arising out of the operations of a branch, agency or other
establishment, in the courts for the place in which the branch, agency or other
establishment is situated;

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6. as settlor, trustee or beneficiary of a trust created by the operation of a statute,

or by a written instrument, or created orally and evidenced in writing, in the
courts of the Member State in which the trust is domiciled;
7. as regards a dispute concerning the payment of remuneration claimed in
respect of the salvage of a cargo or freight, in the court under the authority of
which the cargo or freight in question:
(a) has been arrested to secure such payment, or
(b) could have been so arrested, but bail or other security has been given;
provided that this provision shall apply only if it is claimed that the
defendant has an interest in the cargo or freight or had such an interest at
the time of salvage.

Article 6
A person domiciled in a Member State may also be sued:
1. where he is one of a number of defendants, in the courts for the place where
any one of them is domiciled, provided the claims are so closely connected
that it is expedient to hear and determine them together to avoid the risk of
irreconcilable judgments resulting from separate proceedings;
2. as a third party in an action on a warranty or guarantee or in any other third
party proceedings, in the court seised of the original proceedings, unless these
were instituted solely with the object of removing him from the jurisdiction
of the court which would be competent in his case;
3. on a counter-claim arising from the same contract or facts on which the
original claim was based, in the court in which the original claim is pending;
4. in matters relating to a contract, if the action may be combined with an action
against the same defendant in matters relating to rights in rem in immovable
property, in the court of the Member State in which the property is situated.

Article 7
Where by virtue of this Regulation a court of a Member State has jurisdiction in
actions relating to liability from the use or operation of a ship, that court, or any
other court substituted for this purpose by the internal law of that Member State,
shall also have jurisdiction over claims for limitation of such liability.

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SECTION 3
JURISDICTION IN MATTERS RELATING TO INSURANCE

Article 8
In matters relating to insurance, jurisdiction shall be determined by this Section,
without prejudice to Article 4 and point 5 of Article 5.

Article 9
1. An insurer domiciled in a Member State may be sued:
(a) in the courts of the Member State where he is domiciled, or
(b) in another Member State, in the case of actions brought by the
policyholder, the insured or a beneficiary, in the courts for the place
where the plaintiff is domiciled,
(c) if he is a co-insurer, in the courts of a Member State in which proceedings
are brought against the leading insurer.
2. An insurer who is not domiciled in a Member State but has a branch, agency
or other establishment in one of the Member States shall, in disputes arising
out of the operations of the branch, agency or establishment, be deemed to be
domiciled in that Member State.

Article 10
In respect of liability insurance or insurance of immovable property, the insurer
may in addition be sued in the courts for the place where the harmful event
occurred. The same applies if movable and immovable property are covered by the
same insurance policy and both are adversely affected by the same contingency.

Article 11
1. In respect of liability insurance, the insurer may also, if the law of the court
permits it, be joined in proceedings which the injured party has brought
against the insured.
2. Articles 8, 9 and 10 shall apply to actions brought by the injured party
directly against the insurer, where such direct actions are permitted.
3. If the law governing such direct actions provides that the policyholder or the
insured may be joined as a party to the action, the same court shall have
jurisdiction over them.

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Article 12
1. Without prejudice to Article 11(3), an insurer may bring proceedings only in
the courts of the Member State in which the defendant is domiciled,
irrespective of whether he is the policyholder, the insured or a beneficiary.
2. The provisions of this Section shall not affect the right to bring a counter-
claim in the court in which, in accordance with this Section, the original
claim is pending.

Article 13
The provisions of this Section may be departed from only by an agreement:
1. which is entered into after the dispute has arisen, or
2. which allows the policyholder, the insured or a beneficiary to bring
proceedings in courts other than those indicated in this Section, or
3. which is concluded between a policyholder and an insurer, both of whom are
at the time of conclusion of the contract domiciled or habitually resident in
the same Member State, and which has the effect of conferring jurisdiction on
the courts of that State even if the harmful event were to occur abroad,
provided that such an agreement is not contrary to the law of that State, or
4. which is concluded with a policyholder who is not domiciled in a Member
State, except in so far as the insurance is compulsory or relates to immovable
property in a Member State, or
5. which relates to a contract of insurance in so far as it covers one or more of
the risks set out in Article 14.

Article 14
The following are the risks referred to in Article 13(5):
1. any loss of or damage to:
(a) seagoing ships, installations situated offshore or on the high seas, or
aircraft, arising from perils which relate to their use for commercial
purposes;
(b) goods in transit other than passengers' baggage where the transit consists
of or includes carriage by such ships or aircraft;
2. any liability, other than for bodily injury to passengers or loss of or damage
to their baggage:
(a) arising out of the use or operation of ships, installations or aircraft as
referred to in point 1(a) in so far as, in respect of the latter, the law of the
Member State in which such aircraft are registered does not prohibit
agreements on jurisdiction regarding insurance of such risks;
(b) for loss or damage caused by goods in transit as described in point 1(b);

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3. any financial loss connected with the use or operation of ships, installations
or aircraft as referred to in point 1(a), in particular loss of freight or charter-
hire;
4. any risk or interest connected with any of those referred to in points 1 to 3;
5. notwithstanding points 1 to 4, all ‘large risks’ as defined in Council Directive
73/239/EEC7, as amended by Council Directives 88/357/EEC8 and
90/618/EEC9, as they may be amended.

SECTION 4
JURISDICTION OVER CONSUMER CONTRACTS

Article 15
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, without prejudice to Article 4
and point 5 of Article 5, if:
(a) it is a contract for the sale of goods on instalment credit terms; or
(b) it is a contract for a loan repayable by instalments, or for any other form
of credit, made to finance the sale of goods; or
(c) in all other cases, 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.
2. Where a consumer enters into a contract with a party who is not domiciled in
the Member State but has a branch, agency or other establishment in one of
the Member States, that party shall, in disputes arising out of the operations
of the branch, agency or establishment, be deemed to be domiciled in that
State.
3. This Section shall not apply to a contract of transport other than a contract
which, for an inclusive price, provides for a combination of travel and
accommodation.

7
OJ L 228, 16.8.1973, p. 3. Directive as last amended by Directive
2000/26/EC of the European Parliament and of the Council (OJ L 181, 20.7.2000,
p. 65).
8
OJ L 172, 4.7.1988, p. 1. Directive as last amended by Directive 2000/26/EC.
9
OJ L 330, 29.11.1990, p. 44.

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Article 16
1. A consumer may bring proceedings against the other party to a contract either
in the courts of the Member State in which that party is domiciled or in the
courts for the place where the consumer is domiciled.
2. Proceedings may be brought against a consumer by the other party to the
contract only in the courts of the Member State in which the consumer is
domiciled.
3. This Article shall not affect the right to bring a counter-claim in the court in
which, in accordance with this Section, the original claim is pending.

Article 17
The provisions of this Section may be departed from only by an agreement:
1. which is entered into after the dispute has arisen; or
2. which allows the consumer to bring proceedings in courts other than those
indicated in this Section; or
3. which is entered into by the consumer and the other party to the contract,
both of whom are at the time of conclusion of the contract domiciled or
habitually resident in the same Member State, and which confers jurisdiction
on the courts of that Member State, provided that such an agreement is not
contrary to the law of that Member State.

SECTION 5
JURISDICTION OVER INDIVIDUAL CONTRACTS OF EMPLOYMENT

Article 18
1. In matters relating to individual contracts of employment, jurisdiction shall be
determined by this Section, without prejudice to Article 4 and point 5 of
Article 5.
2. Where an employee enters into an individual contract of employment with an
employer who is not domiciled in a Member State but has a branch, agency or
other establishment in one of the Member States, the employer shall, in
disputes arising out of the operations of the branch, agency or establishment,
be deemed to be domiciled in that Member State.

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Article 19
An employer domiciled in a Member State may be sued:
1. in the courts of the Member State where he is domiciled; or
2. in another Member State:
(a) in the courts for the place where the employee habitually carries out his
work or in the courts for the last place where he did so, or
(b) if the employee does not or did not habitually carry out his work in any
one country, in the courts for the place where the business which engaged
the employee is or was situated.

Article 20
1. An employer may bring proceedings only in the courts of the Member State
in which the employee is domiciled.
2. The provisions of this Section shall not affect the right to bring a counter-
claim in the court in which, in accordance with this Section, the original
claim is pending.

Article 21
The provisions of this Section may be departed from only by an agreement on
jurisdiction:
1. which is entered into after the dispute has arisen; or
2. which allows the employee to bring proceedings in courts other than those
indicated in this Section.

SECTION 6
EXCLUSIVE JURISDICTION

Article 22
The following courts shall have exclusive jurisdiction, regardless of domicile:
1. in proceedings which have as their object rights in rem in immovable
property or tenancies of immovable property, the courts of the Member State
in which the property is situated. However, in proceedings which have as
their object tenancies of immovable property concluded for temporary private
use for a maximum period of six consecutive months, the courts of the
Member State in which the defendant is domiciled shall also have

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jurisdiction, provided that the tenant is a natural person and that the landlord
and the tenant are domiciled in the same Member State;
2. in proceedings which have as their object the validity of the constitution, the
nullity or the dissolution of companies or other legal persons or associations
of natural or legal persons, or of the validity of the decisions of their organs,
the courts of the Member State in which the company, legal person or
association has its seat. In order to determine that seat, the court shall apply
its rules of private international law;
3. in proceedings which have as their object the validity of entries in public
registers, the courts of the Member State in which the register is kept;
4. in proceedings concerned with the registration or validity of patents, trade
marks, designs, or other similar rights required to be deposited or registered,
the courts of the Member State in which the deposit or registration has been
applied for, has taken place or is under the terms of a Community instrument
or an international convention deemed to have taken place. Without prejudice
to the jurisdiction of the European Patent Office under the Convention on the
Grant of European Patents, signed at Munich on 5 October 1973, the courts
of each Member State shall have exclusive jurisdiction, regardless of
domicile, in proceedings concerned with the registration or validity of any
European patent granted for that State;
5. in proceedings concerned with the enforcement of judgments, the courts of
the Member State in which the judgment has been or is to be enforced.

SECTION 7
PROROGATION OF JURISDICTION

Article 23
1. If the parties, one or more of whom is domiciled in a Member State, have
agreed that a court or the courts of a Member State are to have jurisdiction to
settle any disputes which have arisen or which may arise in connection with a
particular legal relationship, that court or those courts shall have jurisdiction.
Such jurisdiction shall be exclusive unless the parties have agreed otherwise.
Such an agreement conferring jurisdiction shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have established
between themselves; or
(c) in international trade or commerce, in a form which accords with a usage
of which the parties are or ought to have been aware and which in such
trade or commerce is widely known to, and regularly observed by, parties

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to contracts of the type involved in the particular trade or commerce

concerned.
2. Any communication by electronic means which provides a durable record of
the agreement shall be equivalent to ‘writing’.
3. Where such an agreement is concluded by parties, none of whom is
domiciled in a Member State, the courts of other Member States shall have no
jurisdiction over their disputes unless the court or courts chosen have
declined jurisdiction.
4. The court or courts of a Member State on which a trust instrument has
conferred jurisdiction shall have exclusive jurisdiction in any proceedings
brought against a settlor, trustee or beneficiary, if relations between these
persons or their rights or obligations under the trust are involved.
5. Agreements or provisions of a trust instrument conferring jurisdiction shall
have no legal force if they are contrary to Articles 13, 17 or 21, or if the
courts whose jurisdiction they purport to exclude have exclusive jurisdiction
by virtue of Article 22.

Article 24
Apart from jurisdiction derived from other provisions of this Regulation, a court
of a Member State before which a defendant enters an appearance shall have
jurisdiction. This rule shall not apply where appearance was entered to contest
the jurisdiction, or where another court has exclusive jurisdiction by virtue of
Article 22.

SECTION 8
EXAMINATION AS TO JURISDICTION AND ADMISSIBILITY

Article 25
Where a court of a Member State is seised of a claim which is principally
concerned with a matter over which the courts of another Member State have
exclusive jurisdiction by virtue of Article 22, it shall declare of its own motion that
it has no jurisdiction.

Article 26
1. Where a defendant domiciled in one Member State is sued in a court of
another Member State and does not enter an appearance, the court shall

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declare of its own motion that it has no jurisdiction unless its jurisdiction is
derived from the provisions of this Regulation.
2. The court shall stay the proceedings so long as it is not shown that the
defendant has been able to receive the document instituting the proceedings
or an equivalent document in sufficient time to enable him to arrange for his
defence, or that all necessary steps have been taken to this end.
3. Article 19 of Council Regulation (EC) No 1348/2000 of 29 May 2000 on the
service in the Member States of judicial and extrajudicial documents in civil
or commercial matters10 shall apply instead of the provisions of paragraph 2 if
the document instituting the proceedings or an equivalent document had to be
transmitted from one Member State to another pursuant to this Regulation.
4. Where the provisions of Regulation (EC) No 1348/2000 are not applicable,
Article 15 of the Hague Convention of 15 November 1965 on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or Commercial
Matters shall apply if the document instituting the proceedings or an
equivalent document had to be transmitted pursuant to that Convention.

SECTION 9
LIS PENDENS - RELATED ACTIONS

Article 27
1. Where proceedings involving the same cause of action and between the same
parties are brought in the courts of different Member States, any court other
than the court first seised shall of its own motion stay its proceedings until
such time as the jurisdiction of the court first seised is established.
2. Where the jurisdiction of the court first seised is established, any court other
than the court first seised shall decline jurisdiction in favour of that court.

Article 28
1. Where related actions are pending in the courts of different Member States,
any court other than the court first seised may stay its proceedings.
2. Where these actions are pending at first instance, any court other than the
court first seised may also, on the application of one of the parties, decline
jurisdiction if the court first seised has jurisdiction over the actions in
question and its law permits the consolidation thereof.

10
OJ L 160, 30.6.2000, p. 37.

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3. For the purposes of this Article, actions are deemed to be related where they
are so closely connected that it is expedient to hear and determine them
together to avoid the risk of irreconcilable judgments resulting from separate
proceedings.

Article 29
Where actions come within the exclusive jurisdiction of several courts, any court
other than the court first seised shall decline jurisdiction in favour of that court.

Article 30
For the purposes of this Section, 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.

SECTION 10
PROVISIONAL, INCLUDING PROTECTIVE, MEASURES

Article 31
Application may be made to the courts of a Member State for such provisional,
including protective, measures as may be available under the law of that State,
even if, under this Regulation, the courts of another Member State have
jurisdiction as to the substance of the matter.

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CHAPTER III
RECOGNITION AND ENFORCEMENT
Article 32
For the purposes of this Regulation, ‘judgment’ means any judgment given by a
court or tribunal of a Member State, whatever the judgment may be called,
including a decree, order, decision or writ of execution, as well as the
determination of costs or expenses by an officer of the court.

SECTION 1
RECOGNITION

Article 33
1. A judgment given in a Member State shall be recognised in the other Member
States without any special procedure being required.
2. Any interested party who raises the recognition of a judgment as the principal
issue in a dispute may, in accordance with the procedures provided for in
Sections 2 and 3 of this Chapter, apply for a decision that the judgment be
recognised.
3. If the outcome of proceedings in a court of a Member State depends on the
determination of an incidental question of recognition that court shall have
jurisdiction over that question.

Article 34
A judgment shall not be recognised:
1. if such recognition is manifestly contrary to public policy in the Member
State in which recognition is sought;
2. where it was given in default of appearance, if the defendant was not served
with the document which instituted the proceedings or with an equivalent
document in sufficient time and in such a way as to enable him to arrange for
his defence, unless the defendant failed to commence proceedings to
challenge the judgment when it was possible for him to do so;
3. if it is irreconcilable with a judgment given in a dispute between the same
parties in the Member State in which recognition is sought;
4. if it is irreconcilable with an earlier judgment given in another Member State
or in a third State involving the same cause of action and between the same
parties, provided that the earlier judgment fulfils the conditions necessary for
its recognition in the Member State addressed.

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Article 35
1. Moreover, a judgment shall not be recognised if it conflicts with Sections 3, 4
or 6 of Chapter II, or in a case provided for inArticle 72.
2. In its examination of the grounds of jurisdiction referred to in the foregoing
paragraph, the court or authority applied to shall be bound by the findings of
fact on which the court of the Member State of origin based its jurisdiction.
3. Subject to the paragraph 1, the jurisdiction of the court of the Member State
of origin may not be reviewed. The test of public policy referred to in point 1
of Article 34 may not be applied to the rules relating to jurisdiction.

Article 36
Under no circumstances may a foreign judgment be reviewed as to its substance.

Article 37
1. A court of a Member State in which recognition is sought of a judgment
given in another Member State may stay the proceedings if an ordinary
appeal against the judgment has been lodged.
2. A court of a Member State in which recognition is sought of a judgment
given in Ireland or the United Kingdom may stay the proceedings if
enforcement is suspended in the State of origin, by reason of an appeal.

SECTION 2
ENFORCEMENT

Article 38
1. 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.
2. However, in the United Kingdom, such a judgment shall be enforced in
England and Wales, in Scotland, or in Northern Ireland when, on the
application of any interested party, it has been registered for enforcement in
that part of the United Kingdom.

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Article 39
1. The application shall be submitted to the court or competent authority
indicated in the list in Annex II.
2. The local jurisdiction shall be determined by reference to the place of
domicile of the party against whom enforcement is sought, or to the place of
enforcement.

Article 40
1. The procedure for making the application shall be governed by the law of the
Member State in which enforcement is sought.
2. The applicant must give an address for service of process within the area of
jurisdiction of the court applied to. However, if the law of the Member State
in which enforcement is sought does not provide for the furnishing of such an
address, the applicant shall appoint a representative ad litem.
3. The documents referred to in Article 53 shall be attached to the application.

Article 41
The judgment shall be declared enforceable immediately on completion of the
formalities in Article 53 without any review under Articles 34 and 35. The party
against whom enforcement is sought shall not at this stage of the proceedings be
entitled to make any submissions on the application.

Article 42
1. The decision on the application for a declaration of enforceability shall
forthwith be brought to the notice of the applicant in accordance with the
procedure laid down by the law of the Member State in which enforcement is
sought.
2. The declaration of enforceability shall be served on the party against whom
enforcement is sought, accompanied by the judgment, if not already served
on that party.

Article 43
1. The decision on the application for a declaration of enforceability may be
appealed against by either party.
2. The appeal is to be lodged with the court indicated in the list in Annex III.

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3. The appeal shall be dealt with in accordance with the rules governing
procedure in contradictory matters.
4. If the party against whom enforcement is sought fails to appear before the
appellate court in proceedings concerning an appeal brought by the applicant,
Article 26(2) to (4) shall apply even where the party against whom
enforcement is sought is not domiciled in any of the Member States.
5. An appeal against the declaration of enforceability is to be lodged within one
month of service thereof. If the party against whom enforcement is sought is
domiciled in a Member State other than that in which the declaration of
enforceability was given, the time for appealing shall be two months and
shall run from the date of service, either on him in person or at his residence.
No extension of time may be granted on account of distance.

Article 44
The judgment given on the appeal may be contested only by the appeal referred to
in Annex IV.

Article 45
1. The court with which an appeal is lodged under Article 43 or Article 44 shall
refuse or revoke a declaration of enforceability only on one of the grounds
specified in Articles 34 and 35. It shall give its decision without delay.
2. Under no circumstances may the foreign judgment be reviewed as to its
substance.

Article 46
1. The court with which an appeal is lodged under Article 43 or Article 44 may,
on the application of the party against whom enforcement is sought, stay the
proceedings if an ordinary appeal has been lodged against the judgment in the
Member State of origin or if the time for such an appeal has not yet expired;
in the latter case, the court may specify the time within which such an appeal
is to be lodged.
2. Where the judgment was given in Ireland or the United Kingdom, any form
of appeal available in the Member State of origin shall be treated as an
ordinary appeal for the purposes of paragraph 1.
3. The court may also make enforcement conditional on the provision of such
security as it shall determine.

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Article 47
1. When a judgment must be recognised in accordance with this Regulation,
nothing shall prevent the applicant from availing himself of provisional,
including protective, measures in accordance with the law of the Member
State requested without a declaration of enforceability under Article 41 being
required.
2. The declaration of enforceability shall carry with it the power to proceed to
any protective measures.
3. During the time specified for an appeal pursuant to Article 43(5) against the
declaration of enforceability and until any such appeal has been determined,
no measures of enforcement may be taken other than protective measures
against the property of the party against whom enforcement is sought.

Article 48
1. Where a foreign judgment has been given in respect of several matters and
the declaration of enforceability cannot be given for all of them, the court or
competent authority shall give it for one or more of them.
2. An applicant may request a declaration of enforceability limited to parts of a
judgment.

Article 49
A foreign judgment which orders a periodic payment by way of a penalty shall be
enforceable in the Member State in which enforcement is sought only if the
amount of the payment has been finally determined by the courts of the Member
State of origin.

Article 50
An applicant who, in the Member State of origin has benefited from complete or
partial legal aid or exemption from costs or expenses, shall be entitled, in the
procedure provided for in this Section, to benefit from the most favourable legal
aid or the most extensive exemption from costs or expenses provided for by the
law of the Member State addressed.

Article 51
No security, bond or deposit, however described, shall be required of a party who
in one Member State applies for enforcement of a judgment given in another

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Member State on the ground that he is a foreign national or that he is not domiciled
or resident in the State in which enforcement is sought.

Article 52
In proceedings for the issue of a declaration of enforceability, no charge, duty or
fee calculated by reference to the value of the matter at issue may be levied in the
Member State in which enforcement is sought.

SECTION 3
COMMON PROVISIONS

Article 53
1. A party seeking recognition or applying for a declaration of enforceability
shall produce a copy of the judgment which satisfies the conditions necessary
to establish its authenticity.
2. A party applying for a declaration of enforceability shall also produce the
certificate referred to in Article 54, without prejudice to Article 55.

Article 54
The court or competent authority of a Member State where a judgment was given
shall issue, at the request of any interested party, a certificate using the standard
form in Annex V to this Regulation.

Article 55
1. If the certificate referred to in Article 54 is not produced, the court or
competent authority may specify a time for its production or accept an
equivalent document or, if it considers that it has sufficient information
before it, dispense with its production.
2. If the court or competent authority so requires, a translation of the documents
shall be produced. The translation shall be certified by a person qualified to
do so in one of the Member States.

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Article 56
No legalisation or other similar formality shall be required in respect of the
documents referred to in Article 53 or Article 55(2), or in respect of a document
appointing a representative ad litem.

CHAPTER IV
AUTHENTIC INSTRUMENTS AND COURT SETTLEMENTS
Article 57
1. A document which has been formally drawn up or registered as an authentic
instrument and is enforceable in one Member State shall, in another Member
State, be declared enforceable there, on application made in accordance with
the procedures provided for in Articles 38, et seq. The court with which an
appeal is lodged under Article 43 or Article 44 shall refuse or revoke a
declaration of enforceability only if enforcement of the instrument is
manifestly contrary to public policy in the Member State addressed.
2. Arrangements relating to maintenance obligations concluded with
administrative authorities or authenticated by them shall also be regarded as
authentic instruments within the meaning of paragraph 1.
3. The instrument produced must satisfy the conditions necessary to establish its
authenticity in the Member State of origin.
4. Section 3 of Chapter III shall apply as appropriate. The competent authority
of a Member State where an authentic instrument was drawn up or registered
shall issue, at the request of any interested party, a certificate using the
standard form in Annex VI to this Regulation.

Article 58
A settlement which has been approved by a court in the course of proceedings and
is enforceable in the Member State in which it was concluded shall be enforceable
in the State addressed under the same conditions as authentic instruments. The
court or competent authority of a Member State where a court settlement was
approved shall issue, at the request of any interested party, a certificate using the
standard form in Annex V to this Regulation.

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 Council Regulation (EC) No. 44/2001

CHAPTER V
GENERAL PROVISIONS
Article 59
1. In order to determine whether a party is domiciled in the Member State
whose courts are seised of a matter, the court shall apply its internal law.
2. If a party is not domiciled in the Member State whose courts are seised of the
matter, then, in order to determine whether the party is domiciled in another
Member State, the court shall apply the law of that Member State.

Article 60
1. For the purposes of this Regulation, a company or other legal person or
association of natural or legal persons is domiciled at the place where it has
its:
(a) statutory seat, or
(b) central administration, or
(c) principal place of business.
2. For the purposes of the United Kingdom and Ireland ‘statutory seat’ means
the registered office or, where there is no such office anywhere, the place of
incorporation or, where there is no such place anywhere, the place under the
law of which the formation took place.
3. In order to determine whether a trust is domiciled in the Member State whose
courts are seised of the matter, the court shall apply its rules of private
international law.

Article 61
Without prejudice to any more favourable provisions of national laws, persons
domiciled in a Member State who are being prosecuted in the criminal courts of
another Member State of which they are not nationals for an offence which was
not
intentionally committed may be defended by persons qualified to do so, even if
they do not appear in person. However, the court seised of the matter may order
appearance in person; in the case of failure to appear, a judgment given in the civil
action without the person concerned having had the opportunity to arrange for his
defence need not be recognised or enforced in the other Member States.

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Article 62
In Sweden, in summary proceedings concerning orders to pay
(betalningsföreläggande) and assistance (handräckning), the expression ‘court’
includes the ‘Swedish enforcement service’ (kronofogdemyndighet).

Article 63
1. A person domiciled in the territory of the Grand Duchy of Luxembourg and
sued in the court of another Member State pursuant to Article 5(1) may refuse
to submit to the jurisdiction of that court if the final place of delivery of the
goods or provision of the services is in Luxembourg.
2. Where, under paragraph 1, the final place of delivery of the goods or
provision of the services is in Luxembourg, any agreement conferring
jurisdiction must, in order to be valid, be accepted in writing or evidenced in
writing within the meaning of Article 23(1)(a).
3. The provisions of this Article shall not apply to contracts for the provision of
financial services.
4. The provisions of this Article shall apply for a period of six years from entry
into force of this Regulation.

Article 64
1. In proceedings involving a dispute between the master and a member of the
crew of a seagoing ship registered in Greece or in Portugal, concerning
remuneration or other conditions of service, a court in a Member State shall
establish whether the diplomatic or consular officer responsible for the ship
has been notified of the dispute. It may act as soon as that officer has been
notified.
2. The provisions of this Article shall apply for a period of six years from entry
into force of this Regulation.

Article 65
1. The jurisdiction specified in Article 6(2), and Article 11 in actions on a
warranty of guarantee or in any other third party proceedings may not be
resorted to in Germany and Austria. Any person domiciled in another
Member State may be sued in the courts:
(a) of Germany, pursuant to Articles 68 and 72 to 74 of the Code of Civil
Procedure (Zivilprozessordnung) concerning third-party notices,
(b) of Austria, pursuant to Article 21 of the Code of Civil Procedure
(Zivilprozessordnung) concerning third-party notices.

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 Council Regulation (EC) No. 44/2001

2. Judgments given in other Member States by virtue of Article 6(2), or Article

11 shall be recognised and enforced in Germany and Austria in accordance
with Chapter III. Any effects which judgments given in these States may
have on third parties by application of the provisions in paragraph 1 shall also
be recognised in the other Member States.

CHAPTER VI
TRANSITIONAL PROVISIONS
Article 66
1. This Regulation shall apply only to legal proceedings instituted and to
documents formally drawn up or registered as authentic instruments after the
entry into force thereof.
2. However, if the proceedings in the Member State of origin were instituted
before the entry into force of this Regulation, judgments given after that date
shall be recognised and enforced in accordance with Chapter III,
(a) if the proceedings in the Member State of origin were instituted after the
entry into force of the Brussels or the Lugano Convention both in the
Member State or origin and in the Member State addressed;
(b) in all other cases, if jurisdiction was founded upon rules which accorded
with those provided for either in Chapter II or in a convention concluded
between the Member State of origin and the Member State addressed
which was in force when the proceedings were instituted.

CHAPTER VII
RELATIONS WITH OTHER INSTRUMENTS
Article 67
This Regulation shall not prejudice the application of provisions governing
jurisdiction and the recognition and enforcement of judgments in specific matters
which are contained in Community instruments or in national legislation
harmonised pursuant to such instruments.

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Article 68
1. This Regulation shall, as between the Member States, supersede the Brussels
Convention, except as regards the territories of the Member States which fall
within the territorial scope of that Convention and which are excluded from
this Regulation pursuant to Article 299 of the Treaty.
2. In so far as this Regulation replaces the provisions of the Brussels
Convention between Member States, any reference to the Convention shall be
understood as a reference to this Regulation.

Article 69
Subject to Article 66(2) and Article 70, this Regulation shall, as between Member
States, supersede the following conventions and treaty concluded between two or
more of them:
- the Convention between Belgium and France on Jurisdiction and the
Validity and Enforcement of Judgments, Arbitration Awards and
Authentic Instruments, signed at Paris on 8 July 1899,
- the Convention between Belgium and the Netherlands on Jurisdiction,
Bankruptcy, and the Validity and Enforcement of Judgments, Arbitration
Awards and Authentic Instruments, signed at Brussels on 28 March 1925,
- the Convention between France and Italy on the Enforcement of
Judgments in Civil and Commercial Matters, signed at Rome on 3 June
1930,
- the Convention between Germany and Italy on the Recognition and
Enforcement of Judgments in Civil and Commercial Matters, signed at
Rome on 9 March 1936,
- the Convention between Belgium and Austria on the Reciprocal
Recognition and Enforcement of Judgments and Authentic Instruments
relating to Maintenance Obligations, signed at Vienna on 25 October
1957,
- the Convention between Germany and Belgium on the Mutual
Recognition and Enforcement of Judgments, Arbitration Awards and
Authentic Instruments in Civil and Commercial Matters, signed at Bonn
on 30 June 1958,
- the Convention between the Netherlands and Italy on the Recognition and
Enforcement of Judgments in Civil and Commercial Matters, signed at
Rome on 17 April 1959,
- the Convention between Germany and Austria on the Reciprocal
Recognition and Enforcement of Judgments, Settlements and Authentic
Instruments in Civil and Commercial Matters, signed at Vienna on 6 June
1959,

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 Council Regulation (EC) No. 44/2001

- the Convention between Belgium and Austria on the Reciprocal

Recognition and Enforcement of Judgments, Arbitral Awards and
Authentic Instruments in Civil and Commercial Matters, signed at Vienna
on 16 June 1959,
- the Convention between Greece and Germany for the Reciprocal
Recognition and Enforcement of Judgments, Settlements and Authentic
Instruments in Civil and Commercial Matters, signed in Athens on 4
November 1961,
- the Convention between Belgium and Italy on the Recognition and
Enforcement of Judgments and other Enforceable Instruments in Civil and
Commercial Matters, signed at Rome on 6 April 1962,
- the Convention between the Netherlands and Germany on the Mutual
Recognition and Enforcement of Judgments and Other Enforceable
Instruments in Civil and Commercial Matters, signed at The Hague on 30
August 1962,
- the Convention between the Netherlands and Austria on the Reciprocal
Recognition and Enforcement of Judgments and Authentic Instruments in
Civil and Commercial Matters, signed at The Hague on 6 February 1963,
- the Convention between France and Austria on the Recognition and
Enforcement of Judgments and Authentic Instruments in Civil and
Commercial Matters, signed at Vienna on 15 July 1966,
- the Convention between Spain and France on the Recognition and
Enforcement of Judgment Arbitration Awards in Civil and Commercial
Matters, signed at Paris on 28 May 1969,
- the Convention between Luxembourg and Austria on the Recognition and
Enforcement of Judgments and Authentic Instruments in Civil and
Commercial Matters, signed at Luxembourg on 29 July 1971,
- the Convention between Italy and Austria on the Recognition and
Enforcement of Judgments in Civil and Commercial Matters, of Judicial
Settlements and of Authentic Instruments, signed at Rome on 16
November 1971,
- the Convention between Spain and Italy regarding Legal Aid and the
Recognition and Enforcement of Judgments in Civil and Commercial
Matters, signed at Madrid on 22 May 1973,
- the Convention between Finland, Iceland, Norway, Sweden and Denmark
on the Recognition and Enforcement of Judgments in Civil Matters,
signed at Copenhagen on 11 October 1977,
- the Convention between Austria and Sweden on the Recognition and
Enforcement of Judgments in Civil Matters, signed at Stockholm on 16
September 1982,
- the Convention between Spain and the Federal Republic of Germany on
the Recognition and Enforcement of Judgments, Settlements and

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Enforceable Authentic Instruments in Civil and Commercial Matters,

signed at Bonn on 14 November 1983,
- the Convention between Austria and Spain on the Recognition and
Enforcement of Judgments, Settlements and Enforceable Authentic
Instruments in Civil and Commercial Matters, signed at Vienna on 17
February 1984,
- the Convention between Finland and Austria on the Recognition and
Enforcement of Judgments in Civil Matters, signed at Vienna on 17
November 1986, and
- the Treaty between Belgium, the Netherlands and Luxembourg in
Jurisdiction, Bankruptcy, and the Validity and Enforcement of Judgments,
Arbitration Awards and Authentic Instruments, signed at Brussels on 24
November 1961, in so far as it is in force.

Article 70
1. The Treaty and the Conventions referred to in Article 69 shall continue to
have effect in relation to matters to which this Regulation does not apply.
2. They shall continue to have effect in respect of judgments given and
documents formally drawn up or registered as authentic instruments before
the entry into force of this Regulation.

Article 71
1. This Regulation shall not affect any conventions to which the Member States
are parties and which in relation to particular matters, govern jurisdiction or
the recognition or enforcement of judgments.
2. With a view to its uniform interpretation, paragraph 1 shall be applied in the
following manner:
(a) this Regulation shall not prevent a court of a Member State, which is a
party to a convention on a particular matter, from assuming jurisdiction in
accordance with that convention, even where the defendant is domiciled
in another Member State which is not a party to that convention. The
court hearing the action shall, in any event, apply Article 26 of this
Regulation;
(b) judgments given in a Member State by a court in the exercise of
jurisdiction provided for in a convention on a particular matter shall be
recognised and enforced in the other Member States in accordance with
this Regulation. Where a convention on a particular matter to which both
the Member State of origin and the Member State addressed are parties
lays down conditions for the recognition or enforcement of judgments,
those conditions shall apply. In any event, the provisions of this

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 Council Regulation (EC) No. 44/2001

Regulation which concern the procedure for recognition and enforcement

of judgments may be applied.

Article 72
This Regulation shall not affect agreements by which Member States undertook,
prior to the entry into force of this Regulation pursuant to Article 59 of the
Brussels Convention, not to recognise judgments given, in particular in other
Contracting States to that Convention, against defendants domiciled or habitually
resident in a third country where, in cases provided for in Article 4 of that
Convention, the judgment could only be founded on a ground of jurisdiction
specified in the second paragraph of Article 3 of that Convention.

CHAPTER VIII
FINAL PROVISIONS
Article 73
No later than five years after the entry into force of this Regulation, the
Commission shall present to the European Parliament, the Council and the
Economic and Social Committee a report on the application of this Regulation.
The report shall be accompanied, if need be, by proposals for adaptations to this
Regulation.

Article 74
1. The Member States shall notify the Commission of the texts amending the
lists set out in Annexes I to IV. The Commission shall adapt the Annexes
concerned accordingly.
2. The updating or technical adjustment of the forms, specimens of which
appear in Annexes V and VI, shall be adopted in accordance with the
advisory procedure referred to in Article 75(2).

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Article 75
1. The Commission shall be assisted by a committee.
2. Where reference is made to this paragraph, Articles 3 and 7 of Decision
1999/468/EC shall apply.
3. The Committee shall adopt its rules of procedure.

Article 76
This Regulation shall enter into force on l March 2002.
This Regulation is binding in its entirety and directly applicable in the Member
States in accordance with the Treaty establishing the European Community.

Done at Brussels, 22 December 2000

[Annexes omitted]

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 COUNCIL REGULATION (EC) No. 1206/2001
of 28 May 2001
ON COOPERATION BETWEEN THE COURTS OF THE MEMBER
STATES IN THE TAKING OF EVIDENCE IN CIVIL OR COMMERCIAL
MATTERS*

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in

particular Article 61(c) and Article 67(1) thereof,
Having regard to the initiative of the Federal Republic of Germany,1
Having regard to the opinion of the European Parliament,2
Having regard to the opinion of the Economic and Social Committee,3

Whereas:

(1) The European Union has set itself the objective of maintaining and
developing the European Union as an area of freedom, security and justice in
which the free movement of persons is ensured. For the gradual establishment
of such an area, the Community is to adopt, among others, the measures
relating to judicial cooperation in civil matters needed for the proper
functioning of the internal market.

(2) For the purpose of the proper functioning of the internal market, cooperation
between courts in the taking of evidence should be improved, and in
particular simplified and accelerated.

(3) At its meeting in Tampere on 15 and 16 October 1999, the European Council
recalled that new procedural legislation in cross-border cases, in particular on
the taking of evidence, should be prepared.

(4) This area falls within the scope of Article 65 of the Treaty.

(5) The objectives of the proposed action, namely the improvement of

cooperation between the courts on the taking of evidence in civil or
commercial matters, cannot be sufficiently achieved by the Member States
and can therefore be better achieved at Community level. The Community
may adopt measures in accordance with the principle of subsidiarity as set out

*
This text is published in OJ of the European Communities, L 174 , 27 June 2001,
p. 1-24.
1
OJ C 314, 3.11.2000, p. 2.
2
Opinion delivered on 14 March 2001 (not yet published in the OJ).
3
Opinion delivered on 28 February 2001 (not yet published in the OJ).
 Texts, Materials and Recent Developments

in Article 5 of the Treaty. In accordance with the principle of proportionality,

as set out in that Article, this Regulation does not go beyond what is
necessary to achieve those objectives.

(6) To date, there is no binding instrument between all the Member States
concerning the taking of evidence. The Hague Convention of 18 March 1970
on the taking of evidence abroad in civil or commercial matters applies
between only 11 Member States of the European Union.

(7) As it is often essential for a decision in a civil or commercial matter pending

before a court in a Member State to take evidence in another Member State,
the Community's activity cannot be limited to the field of transmission of
judicial and extrajudicial documents in civil or commercial matters which
falls within the scope of Council Regulation (EC) No 1348/2000 of 29 May
2000 on the serving in the Member States of judicial and extrajudicial
documents in civil or commercial matters4. It is therefore necessary to
continue the improvement of cooperation between courts of Member States in
the field of taking of evidence.

(8) The efficiency of judicial procedures in civil or commercial matters requires

that the transmission and execution of requests for the performance of taking
of evidence is to be made directly and by the most rapid means possible
between Member States' courts.

(9) Speed in transmission of requests for the performance of taking of evidence

warrants the use of all appropriate means, provided that certain conditions as
to the legibility and reliability of the document received are observed. So as to
ensure the utmost clarity and legal certainty the request for the performance
of taking of evidence must be transmitted on a form to be completed in the
language of the Member State of the requested court or in another language
accepted by that State. For the same reasons, forms should also be used as far
as possible for further communication between the relevant courts.

(10) A request for the performance of the taking of evidence should be executed
expeditiously. If it is not possible for the request to be executed within 90
days of receipt by the requested court, the latter should inform the requesting
court accordingly, stating the reasons which prevent the request from being
executed swiftly.

4
OJ L 160, 30.6.2000, p. 37.

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 Council Regulation (EC) No. 1206/2001

(11) To secure the effectiveness of this Regulation, the possibility of refusing to

execute the request for the performance of taking of evidence should be
confined to strictly limited exceptional situations.

(12) The requested court should execute the request in accordance with the law of
its Member State.

(13) The parties and, if any, their representatives, should be able to be present at
the performance of the taking of evidence, if that is provided for by the law of
the Member State of the requesting court, in order to be able to follow the
proceedings in a comparable way as if evidence were taken in the Member
State of the requesting court. They should also have the right to request to
participate in order to have a more active role in the performance of the taking
of evidence. However, the conditions under which they may participate
should be determined by the requested court in accordance with the law of its
Member State.

(14) The representatives of the requesting court should be able to be present at the
performance of the taking of evidence, if that is compatible with the law of
the Member State of the requesting court, in order to have an improved
possibility of evaluation of evidence. They should also have the right to
request to participate, under the conditions laid down by the requested court
in accordance with the law of its Member State, in order to have a more active
role in the performance of the taking of evidence.

(15) In order to facilitate the taking of evidence it should be possible for a court in
a Member State, in accordance with the law of its Member State, to take
evidence directly in another Member State, if accepted by the latter, and
under the conditions determined by the central body or competent authority
of the requested Member State.

(16) The execution of the request, according to Article 10, should not give rise to
a claim for any reimbursement of taxes or costs. Nevertheless, if the requested
court requires reimbursement, the fees paid to experts and interpreters, as well
as the costs occasioned by the application of Article 10(3) and (4), should not
be borne by that court. In such a case, the requesting court is to take the
necessary measures to ensure reimbursement without delay. Where the
opinion of an expert is required, the requested court may, before executing
the request, ask the requesting court for an adequate deposit or advance
towards the costs.

(17) This Regulation should prevail over the provisions applying to its field of
application, contained in international conventions concluded by the Member

Yearbook of Private International Law, Volume 3 (2001) 335

 Texts, Materials and Recent Developments

States. Member States should be free to adopt agreements or arrangements to

further facilitate cooperation in the taking of evidence.

(18) The information transmitted pursuant to this Regulation should enjoy

protection. Since Directive 95/46/EC of the European Parliament and of the
Council of 24 October 1995 on the protection of individuals with regard to
the processing of personal data and on the free movement of such data5, and
Directive 97/66/EC of the European Parliament and of the Council of 15
December 1997 concerning the processing of personal data and the protection
of privacy in the telecommunications sector6, are applicable, there is no need
for specific provisions on data protection in this Regulation.

(19) The measures necessary for the implementation of this Regulation should be
adopted in accordance with Council Decision 1999/468/EC of 28 June 19997
laying down the procedures for the exercise of implementing powers
conferred on the Commission.

(20) For the proper functioning of this Regulation, the Commission should review
its application and propose such amendments as may appear necessary.

(21) The United Kingdom and Ireland, in accordance with Article 3 of the
Protocol on the position of the United Kingdom and Ireland annexed to the
Treaty on the European Union and to the Treaty establishing the European
Community, have given notice of their wish to take part in the adoption and
application of this Regulation.

(22) Denmark, in accordance with Articles 1 and 2 of the Protocol on the position
of Denmark annexed to the Treaty on European Union and to the Treaty
establishing the European Community, is not participating in the adoption of
this Regulation, and is therefore not bound by it nor subject to its application,

HAS ADOPTED THIS REGULATION:

CHAPTER I
GENERAL PROVISIONS
5
OJ L 281, 23.11.1995, p. 31.
6
OJ L 24, 30.1.1998, p. 1.
7
OJ L 184, 17.7.1999, p. 23.

336 Yearbook of Private International Law, Volume 3 (2001)

 Council Regulation (EC) No. 1206/2001

Article 1
Scope
1. This Regulation shall apply in civil or commercial matters where the court of
a Member State, in accordance with the provisions of the law of that State,
requests:
(a) the competent court of another Member State to take evidence; or
(b) to take evidence directly in another Member State.
2. A request shall not be made to obtain evidence which is not intended for use
in judicial proceedings, commenced or contemplated.
3. In this Regulation, the term ‘Member State’ shall mean Member States with
the exception of Denmark.

Article 2
Direct transmission between the courts
1. Requests pursuant to Article 1(1)(a), hereinafter referred to as ‘requests’,
shall be transmitted by the court before which the proceedings are
commenced or contemplated, hereinafter referred to as the ‘requesting court’,
directly to the competent court of another Member State, hereinafter referred
to as the ‘requested court’, for the performance of the taking of evidence.
2. Each Member State shall draw up a list of the courts competent for the
performance of taking of evidence according to this Regulation. The list shall
also indicate the territorial and, where appropriate, the special jurisdiction of
those courts.

Article 3
Central body
1. Each Member State shall designate a central body responsible for:
(a) supplying information to the courts;
(b) seeking solutions to any difficulties which may arise in respect of a
request;
(c) forwarding, in exceptional cases, at the request of a requesting court, a
request to the competent court.
2. A federal State, a State in which several legal systems apply or a State with
autonomous territorial entities shall be free to designate more than one central
body.
3. Each Member State shall also designate the central body referred to in
paragraph 1 or one or several competent authority(ies) to be responsible for
taking decisions on requests pursuant to Article 17.

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CHAPTER II
TRANSMISSION AND EXECUTION OF REQUESTS

SECTION 1
TRANSMISSION OF THE REQUEST

Article 4
Form and content of the request
1. The request shall be made using form A or, where appropriate, form I in the
Annex. It shall contain the following details:
(a) the requesting and, where appropriate, the requested court;
(b) the names and addresses of the parties to the proceedings and their
representatives, if any;
(c) the nature and subject matter of the case and a brief statement of the facts;
(d) a description of the taking of evidence to be performed;
(e) where the request is for the examination of a person:
- the name(s) and address(es) of the person(s) to be examined,
- the questions to be put to the person(s) to be examined or a statement of
the facts about which he is (they are) to be examined,
- where appropriate, a reference to a right to refuse to testify under the
law of the Member State of the requesting court,
- any requirement that the examination is to be carried out under oath or
affirmation in lieu thereof, and any special form to be used,
- where appropriate, any other information that the requesting court
deems necessary;
(f) where the request is for any other form of taking of evidence, the
documents or other objects to be inspected;
(g) where appropriate, any request pursuant to Article 10(3) and (4), and
Articles 11 and 12 and any information necessary for the application
thereof.
2. The request and all documents accompanying the request shall be exempted
from authentication or any equivalent formality.
3. Documents which the requesting court deems it necessary to enclose for the
execution of the request shall be accompanied by a translation into the
language in which the request was written.

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 Council Regulation (EC) No. 1206/2001

Article 5
Language
The request and communications pursuant to this Regulation shall be drawn up in
the official language of the requested Member State or, if there are several official
languages in that Member State, in the official language or one of the official
languages of the place where the requested taking of evidence is to be performed,
or in another language which the requested Member State has indicated it can
accept. Each Member State shall indicate the official language or languages of the
institutions of the European Community other than its own which is or are
acceptable to it for completion of the forms.

Article 6
Transmission of requests and other communications
Requests and communications pursuant to this Regulation shall be transmitted by
the swiftest possible means, which the requested Member State has indicated it can
accept. The transmission may be carried out by any appropriate means, provided
that the document received accurately reflects the content of the document
forwarded and that all information in it is legible.

SECTION 2
RECEIPT OF REQUEST

Article 7
Receipt of request
1. Within seven days of receipt of the request, the requested competent court
shall send an acknowledgement of receipt to the requesting court using form
B in the Annex. Where the request does not comply with the conditions laid
down in Articles 5 and 6, the requested court shall enter a note to that effect
in the acknowledgement of receipt.
2. Where the execution of a request made using form A in the Annex, which
complies with the conditions laid down in Article 5, does not fall within the
jurisdiction of the court to which it was transmitted, the latter shall forward
the request to the competent court of its Member State and shall inform the
requesting court thereof using form A in the Annex.

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 Texts, Materials and Recent Developments

Article 8
Incomplete request
1. If a request cannot be executed because it does not contain all of the
necessary information pursuant to Article 4, the requested court shall inform
the requesting court thereof without delay and, at the latest, within 30 days of
receipt of the request using form C in the Annex, and shall request it to send
the missing information, which should be indicated as precisely as possible.
2. If a request cannot be executed because a deposit or advance is necessary in
accordance with Article 18(3), the requested court shall inform the requesting
court thereof without delay and, at the latest, within 30 days of receipt of the
request using form C in the Annex and inform the requesting court how the
deposit or advance should be made. The requested Court shall acknowledge
receipt of the deposit or advance without delay, at the latest within 10 days of
receipt of the deposit or the advance using form D.

Article 9
Completion of the request
1. If the requested court has noted on the acknowledgement of receipt pursuant
to Article 7(1) that the request does not comply with the conditions laid down
in Articles 5 and 6 or has informed the requesting court pursuant to Article 8
that the request cannot be executed because it does not contain all of the
necessary information pursuant to Article 4, the time limit pursuant to Article
10 shall begin to run when the requested court received the request duly
completed.
2. Where the requested court has asked for a deposit or advance in accordance
with Article 18(3), this time limit shall begin to run when the deposit or the
advance is made.

SECTION 3
TAKING OF EVIDENCE BY THE REQUESTED COURT

Article 10

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General provisions on the execution of the request

1. The requested court shall execute the request without delay and, at the latest,
within 90 days of receipt of the request.
2. The requested court shall execute the request in accordance with the law of
its Member State.
3. The requesting court may call for the request to be executed in accordance
with a special procedure provided for by the law of its Member State, using
form A in the Annex. The requested court shall comply with such a
requirement unless this procedure is incompatible with the law of the
Member State of the requested court or by reason of major practical
difficulties. If the requested court does not comply with the requirement for
one of these reasons it shall inform the requesting court using form E in the
Annex.
4. The requesting court may ask the requested court to use communications
technology at the performance of the taking of evidence, in particular by
using videoconference and teleconference. The requested court shall comply
with such a requirement unless this is incompatible with the law of the
Member State of the requested court or by reason of major practical
difficulties. If the requested court does not comply with the requirement for
one of these reasons, it shall inform the requesting court, using form E in the
Annex. If there is no access to the technical means referred to above in the
requesting or in the requested court, such means may be made available by
the courts by mutual agreement.

Article 11
Performance with the presence and participation of the parties
1. If it is provided for by the law of the Member State of the requesting court,
the parties and, if any, their representatives, have the right to be present at the
performance of the taking of evidence by the requested court.
2. The requesting court shall, in its request, inform the requested court that the
parties and, if any, their representatives, will be present and, where
appropriate, that their participation is requested, using form A in the Annex.
This information may also be given at any other appropriate time.
3. If the participation of the parties and, if any, their representatives, is
requested at the performance of the taking of evidence, the requested court
shall determine, in accordance with Article 10, the conditions under which
they may participate.
4. The requested court shall notify the parties and, if any, their representatives,
of the time when, the place where, the proceedings will take place, and,
where appropriate, the conditions under which they may participate, using
form F in the Annex.

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5. Paragraphs 1 to 4 shall not affect the possibility for the requested court of
asking the parties and, if any their representatives, to be present at or to
participate in the performance of the taking of evidence if that possibility is
provided for by the law of its Member State.

Article 12
Performance with the presence and participation of representatives of the
requesting court
1. If it is compatible with the law of the Member State of the requesting court,
representatives of the requesting court have the right to be present in the
performance of the taking of evidence by the requested court.
2. For the purpose of this Article, the term ‘representative’ shall include
members of the judicial personnel designated by the requesting court, in
accordance with the law of its Member State. The requesting court may also
designate, in accordance with the law of its Member State, any other person,
such as an expert.
3. The requesting court shall, in its request, inform the requested court that its
representatives will be present and, where appropriate, that their participation
is requested, using form A in the Annex. This information may also be given
at any other appropriate time.
4. If the participation of the representatives of the requesting court is requested
in the performance of the taking of evidence, the requested court shall
determine, in accordance with Article 10, the conditions under which they
may participate.
5. The requested court shall notify the requesting court, of the time when, and
the place where, the proceedings will take place, and, where appropriate, the
conditions under which the representatives may participate, using form F in
the Annex.

Article 13
Coercive measures
Where necessary, in executing a request the requested court shall apply the
appropriate coercive measures in the instances and to the extent as are provided for
by the law of the Member State of the requested court for the execution of a
request made for the same purpose by its national authorities or one of the parties
concerned.

Article 14

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Refusal to execute
1. A request for the hearing of a person shall not be executed when the person
concerned claims the right to refuse to give evidence or to be prohibited from
giving evidence,
(a) under the law of the Member State of the requested court; or
(b) under the law of the Member State of the requesting court, and such right
has been specified in the request, or, if need be, at the instance of the
requested court, has been confirmed by the requesting court.
2. In addition to the grounds referred to in paragraph 1, the execution of a
request may be refused only if:
(a) the request does not fall within the scope of this Regulation as set out in
Article 1; or
(b) the execution of the request under the law of the Member State of the
requested court does not fall within the functions of the judiciary; or
(c) the requesting court does not comply with the request of the requested
court to complete the request pursuant to Article 8 within 30 days after the
requested court asked it to do so; or
(d) a deposit or advance asked for in accordance with Article 18(3) is not
made within 60 days after the requested court asked for such a deposit or
advance.
3. Execution may not be refused by the requested court solely on the ground
that under the law of its Member State a court of that Member State has
exclusive jurisdiction over the subject matter of the action or that the law of
that Member State would not admit the right of action on it.
4. If execution of the request is refused on one of the grounds referred to in
paragraph 2, the requested court shall notify the requesting court thereof
within 60 days of receipt of the request by the requested court using form H
in the Annex.

Article 15
Notification of delay
If the requested court is not in a position to execute the request within 90 days of
receipt, it shall inform the requesting court thereof, using form G in the Annex.
When it does so, the grounds for the delay shall be given as well as the estimated
time that the requested court expects it will need to execute the request.
Article 16
Procedure after execution of the request
The requested court shall send without delay to the requesting court the documents
establishing the execution of the request and, where appropriate, return the

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documents received from the requesting court. The documents shall be

accompanied by a confirmation of execution using form H in the Annex.

SECTION 4
DIRECT TAKING OF EVIDENCE BY THE REQUESTING COURT

Article 17
1. Where a court requests to take evidence directly in another Member State, it
shall submit a request to the central body or the competent authority referred
to in Article 3(3) in that State, using form I in the Annex.
2. Direct taking of evidence may only take place if it can be performed on a
voluntary basis without the need for coercive measures. Where the direct
taking of evidence implies that a person shall be heard, the requesting court
shall inform that person that the performance shall take place on a voluntary
basis.
3. The taking of evidence shall be performed by a member of the judicial
personnel or by any other person such as an expert, who will be designated,
in accordance with the law of the Member State of the requesting court.
4. Within 30 days of receiving the request, the central body or the competent
authority of the requested Member State shall inform the requesting court if
the request is accepted and, if necessary, under what conditions according to
the law of its Member State such performance is to be carried out, using form
J. In particular, the central body or the competent authority may assign a
court of its Member State to take part in the performance of the taking of
evidence in order to ensure the proper application of this Article and the
conditions that have been set out. The central body or the competent authority
shall encourage the use of communications technology, such as
videoconferences and teleconferences.
5. The central body or the competent authority may refuse direct taking of
evidence only if:
(a) the request does not fall within the scope of this Regulation as set out in
Article 1;
(b) the request does not contain all of the necessary information pursuant to
Article 4; or
(c) the direct taking of evidence requested is contrary to fundamental
principles of law in its Member State.
6. Without prejudice to the conditions laid down in accordance with paragraph
4, the requesting court shall execute the request in accordance with the law of
its Member State.

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SECTION 5
COSTS

Article 18
1. The execution of the request, in accordance with Article 10, shall not give
rise to a claim for any reimbursement of taxes or costs.
2. Nevertheless, if the requested court so requires, the requesting court shall
ensure the reimbursement, without delay, of:
- the fees paid to experts and interpreters, and
- the costs occasioned by the application of Article 10(3) and(4).
The duty for the parties to bear these fees or costs shall be governed by the
law of the Member State of the requesting court.
3. Where the opinion of an expert is required, the requested court may, before
executing the request, ask the requesting court for an adequate deposit or
advance towards the requested costs. In all other cases, a deposit or advance
shall not be a condition for the execution of a request. The deposit or advance
shall be made by the parties if that is provided for by the law of the Member
State of the requesting court.

CHAPTER III
FINAL PROVISIONS

Article 19
Implementing rules
1. The Commission shall draw up and regularly update a manual, which shall
also be available electronically, containing the information provided by the
Member States in accordance with Article 22 and the agreements or
arrangements in force, according to Article 21.
2. The updating or making of technical amendments to the standard forms set
out in the Annex shall be carried out in accordance with the advisory
procedure set out in Article 20(2).

Article 20
Committee
1. The Commission shall be assisted by a Committee.

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2. Where reference is made to this paragraph, Articles 3 and 7 of Decision

1999/468/EC shall apply.
3. The Committee shall adopt its Rules of Procedure.

Article 21
Relationship with existing or future agreements or arrangements between Member
States
1. This Regulation shall, in relation to matters to which it applies, prevail over
other provisions contained in bilateral or multilateral agreements or
arrangements concluded by the Member States and in particular the Hague
Convention of 1 March 1954 on Civil Procedure and the Hague Convention
of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial
Matters, in relations between the Member States party thereto.
2. This Regulation shall not preclude Member States from maintaining or
concluding agreements or arrangements between two or more of them to
further facilitate the taking of evidence, provided that they are compatible
with this Regulation.
3. Member States shall send to the Commission:
(a) by 1 July 2003, a copy of the agreements or arrangements maintained
between the Member States referred to in paragraph 2;
(b) a copy of the agreements or arrangements concluded between the Member
States referred to in paragraph 2 as well as drafts of such agreements or
arrangements which they intend to adopt; and
(c) any denunciation of, or amendments to, these agreements or
arrangements.

Article 22
Communication
By 1 July 2003 each Member State shall communicate to the Commission the
following:
(a) the list pursuant to Article 2(2) indicating the territorial and, where
appropriate, the special jurisdiction of the courts;
(b) the names and addresses of the central bodies and competent authorities
pursuant to Article 3, indicating their territorial jurisdiction;
(c) the technical means for the receipt of requests available to the courts on
the list pursuant to Article 2(2);
(d) the languages accepted for the requests as referred to in Article 5.
Member States shall inform the Commission of any subsequent changes
to this information.

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Article 23
Review
No later than 1 January 2007, and every five years thereafter, the Commission
shall present to the European Parliament, the Council and the Economic and Social
Committee a report on the application of this Regulation, paying special attention
to the practical application of Article 3(1)(c) and 3, and Articles 17 and 18.

Article 24
Entry into force
1. This Regulation shall enter into force on 1 July 2001.
2. This Regulation shall apply from 1 January 2004, except for Articles 19, 21
and 22, which shall apply from 1 July 2001.

This Regulation shall be binding in its entirety and directly applicable in the
Member States in accordance with the Treaty establishing the European
Community.

Done at Brussels, 28 May 2001

[Annexes omitted]

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 CHINESE SOCIETY OF PRIVATE INTERNATIONAL LAW

MODEL LAW
OF PRIVATE INTERNATIONAL LAW
OF THE PEOPLE'S REPUBLIC OF CHINA *

(Sixth Draft, 2000)

CHAPTER I
GENERAL PRINCIPLES

Article 1
Purposes and Basic Principles
This law is formulated with a view to safeguarding the legitimate rights and
interests of the parties in international civil and commercial contacts on the basis
of equality and mutual benefits, solving international disputes thereof in a fair and
reasonable manner, and promoting the development of international civil and
commercial relations.

Article 2
Scope of Application and Subject Matters
This law provides the jurisdiction, application of law and the judicial assistance
including recognition and enforcement of foreign judgments and arbitral awards in
international civil and commercial relations.
International civil and commercial relations refer to the civil and commercial
relations in which one or both parties are foreign natural persons, stateless person,
foreign legal person, other foreign organization, foreign state, international
organization, or the domicile, habitual residence or seat of business are located in
different countries, or the subject matter is located in abroad, or the legal facts that
bring about the formation, modification, and termination of such relations occur
abroad.

*
This model law drawn up by Chinese Society of Private International Law is
academic in nature and can be used only for reference by the legislative and judicial bodies
or other government departments working for foreign affairs and the colleges and schools of
law and legal science research institutes as well. English translation by the Chinese Society
of Private International Law headed by Professor Han Depei, Research Institute of
International Law of Wuhan University, China.
 Texts, Materials and Recent Developments

Article 3
Foreigners’ Legal Status
Unless otherwise provided by law, a foreigner who engages in international civil
and commercial activities within the territory of the People’s Republic of China
(the PRC) shall enjoy national treatment, whose legitimate rights and interests are
protected by the law of the PRC.
In case a foreign state unfairly restricts in its territory the civil and
commercial rights of a party of the PRC, the latter shall impose reciprocal
measures on a party of that country who is within the territory of the PRC.

Article 4
Territorial Principle
Any person who engages in international civil and commercial activities within the
territory of the PRC shall observe this law and other relevant laws of the PRC.

Article 5
Settlement Criteria of International Civil and Commercial Issues
Unless otherwise provided by law, any court or arbitral institution of the PRC that
hears an international civil and commercial case, or any administrative body of the
PRC that handles an international civil and commercial matter, shall abide by this
law.

Article 6
Superiority of International Treaties
If any international treaty concluded or acceded to by the PRC contains provisions
differing from those in this law, the provisions of the international treaty shall
apply, unless the provisions are ones on which the PRC has announced
reservations.

Article 7
Gap-filling of International Practice
In case the law of the PRC or the international treaties concluded or acceded to by
the PRC have no provisions concerning jurisdiction, application of law and
judicial assistance in civil and commercial matters, the international practice may
apply.

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Where, according to this law, the applicable law is the law of the PRC, but the
PRC law and the international treaties concluded or acceded to by the PRC have
no provisions for the relevant matters, international practice may also apply.

Article 8
Renvoi
The applicable law provided under this law means the current, effective civil and
commercial substantive law and does not include conflict rules unless otherwise
provided by this law.
In matters concerning personal or family status, a reference back (Renvoi) to
the PRC law by foreign conflict rules shall be accepted.

Article 9
Qualification
The qualification of international civil and commercial relations shall be governed
by the law of forum. In case the issue cannot be decided properly under the law of
forum, the issue can be decided by reference to a law which may be chosen to
apply.

Article 10
Determination of Connecting Points
The determination of a connecting point, with the exception of the nationality of a
natural person, shall be governed by the law of forum.

Article 11
Construction of Lex Causae
The construction of an applicable law shall be governed by the law and rules of
construction of the country to which the applicable law belongs.

Article 12
Ascertainment of Foreign Law
Where a court or an arbitral institution hears an international civil and commercial
case, or an administrative body of the PRC handles an international civil and
commercial matter, it may request a party to produce or prove the foreign law
which shall be applied under this law, or it may ascertain its contents ex officio. In

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case the ascertainment proves impossible or there is no pertinent rules of law after
ascertainment, the law analogous to that foreign law or the law of the PRC shall
apply.

Article 13
Evasion of Law
Where the parties intentionally evade the mandatory or prohibitive provisions of
law of the PRC, the law intended by the parties shall not apply.

Article 14
Public Order
The application of a foreign law designated to govern in accordance with this law
shall be excluded if such application produces a result which is manifestly
incompatible with the public order of the PRC, and the analogous law of the PRC
may apply.

Article 15
Preliminary Questions
Where the resolution of the principal issue in an international civil and commercial
case or matter depends upon the resolution of a preliminary issue, the law
applicable to the civil and commercial relation in which the preliminary issue was
involved shall be determined by the nature of the civil and commercial relation in
accordance with this law.

Article 16
Interregional and Interpersonal Conflicts
In case a law of a country shall be applied under this law, and different laws are
enforced in the different districts of that country, or different people of that
country are governed by different laws, the applicable law shall be determined by
the rules of that country regulating domestic conflict of laws. In case no such rules
can be found in the law of that country, the law having the closest connection with
the international civil and commercial relation shall be directly applied.

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Article 17
Intertemporal Conflict of Laws
In case a law of a country shall be applied under this law, if the applicable law
changes later, it has no retrospective effect unless otherwise provided by law.

Article 18
Procedural Issues
Unless otherwise provided by this law, a procedural issue is governed by the law
of forum.

CHAPTER II
JURISDICTION

SECTION 1
GENERAL JURISDICTION

Article 19
Scope of Application
Judicial jurisdiction shall be exercised in accordance with this law, when an
international civil and commercial case is heard within the territory of the PRC.

Article 20
General Jurisdiction
Subject to the exclusive jurisdictions provided in this law or to the choice of the
parties, the courts of the PRC shall have jurisdiction over a defendant in any case
whose domicile or habitual residence is located within the territory of the PRC.

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SECTION 2
SPECIAL JURISDICTION

Article 21
Status and Capacity
The courts of the PRC shall also have jurisdiction over an action arising from the
status and capacity of a natural person, if the defendant does not live within the
territory of the PRC whereas the domicile or the habitual residence of the plaintiff
is situated within the territory of the PRC.

Article 22
Declaration of Disappearance or Death
The courts of the PRC shall have jurisdiction over an application for a declaration
of disappearance or a declaration of death, if the domicile or the habitual residence
of the applicant is situated within the territory of the PRC.

Article 23
Real Rights
The courts of the PRC shall have jurisdiction over an action arising from a dispute
in respect of real rights, if the property is located within the territory of the PRC.

Article 24
Branches
The courts of the PRC shall have jurisdiction over an action arising from
commercial activity, if the branch or representative entity of the defendant is
situated within the territory of the PRC, and the dispute resulted directly from the
activity of that branch or representative entity.

Article 25
Trusts
The courts of the PRC shall have jurisdiction over an action arising from a dispute
in respect of a trust, if the place where the trust is managed, or the place where the
trust property is located, or the domicile or the habitual residence or the seat of
business of the trustee is located within the territory of the PRC.

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Article 26
Bankruptcy
The courts of the PRC shall have jurisdiction over an action arising from a
bankruptcy, if the place where the bankrupt has its principal business
establishment or the place where the bankrupt’s property for liquidation is located
is within the territory of the PRC.

Article 27
Contracts
The courts of the PRC shall have jurisdiction over an action arising from a
contractual relation, if the domicile, the habitual residence or the business
establishment of the defendant, or the place where the contract is concluded, or the
place where the contract is performed or the place where the subject matter of the
contract is located is within the territory of the PRC.

Article 28
Insurance Contracts
Unless otherwise provided in this chapter, the courts of the PRC shall have
jurisdiction over an action arising from a dispute in respect of a insurance contract,
if the domicile or the habitual residence of the policy-holder, or the domicile or the
seat of business of the major insurer in a multiple insurance, or in a liability
insurance the place where the accident occurs or the place where the insured
subject matter is located is within the territory of the PRC.

Article 29
Negotiable Instruments
The courts of the PRC shall have jurisdiction over an action arising from a dispute
in respect of a negotiable instrument, if the place where the negotiable instrument
is executed or delivered is within the territory of the PRC.

Article 30
Employment Contracts
The courts of the PRC shall have jurisdiction over an action arising from an
employment contract, if during the employment or within a reasonable time after
the employment is ceased, the domicile, habitual residence or the working place of
the employee is situated within the territory of the PRC.

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Article 31
Consumers’ Rights and Interests
The courts of the PRC shall have jurisdiction over an action arising from a dispute
in respect of consumer rights and interests, if the domicile or the habitual residence
of the consumer is situated within the territory of the PRC.

Article 32
Torts
The courts of the PRC shall have jurisdiction over an action arising from a tortious
act, if the place where the act is committed or the results of the act occur is within
the territory of the PRC.

Article 33
Transportation Accidents
The courts of the PRC shall have jurisdiction over an action arising from a claim
for damages in respect of a railway, road, waterway or airway accident, if the place
where the vehicle or the vessel concerned first arrives, or the place where the
vessel responsible for such injury is detained, or the place where the aircraft
concerned first landed, is within the territory of the PRC.

Article 34
Salvage Expenses
The courts of the PRC shall have jurisdiction over an action arising from a claim
with respect to salvage expenses of a vessel or cargo, if the place where the
salvage takes place, or the place where the salvaged vessel first arrives, or the
place where the salvaged vessel is detained, or the place where the salvaged cargo
is seized, is within the territory of the PRC.

Article 35
General Average
The courts of the PRC shall have jurisdiction over an action arising from general
average, if the place where the vessel concerned first arrives, or the place where
the general average is adjusted, or the place where the voyage ends, is within the
territory of the PRC.

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Article 36
Arrest of Ship
The courts of the PRC shall have jurisdiction over an action directly related to an
arrest of a ship as a result of commercial activity, if the place where the ship is
arrested is within the territory of the PRC.

Article 37
Product Liability
The courts of the PRC shall have jurisdiction over an action arising from the
damages concerning product liability, if the place where the damage occurs, or the
place where the product is manufactured, or the place where the product is sold, is
within the territory of the PRC.

Article 38
Environmental Pollution
The courts of the PRC shall have jurisdiction over an action arising from damages
as a result of environmental pollution, if the place where the damage of the
pollution occur is within the territory of the PRC.

Article 39
Unfair Competition

The courts of the PRC shall have jurisdiction over an action arising from damages
suffered as a result of unfair competition, if the place where the act of unfair
competition is conducted or the place where the damage occurs is within the
territory of the PRC.

Article 40
Unjust Enrichment and Voluntary Service
The courts of the PRC shall have jurisdiction over an action arising from the
obligation dispute of unjust enrichment or voluntary service, if the place where the
obligation arises is within the territory of the PRC.

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Article 41
Divorce
The courts of the PRC shall have jurisdiction over a divorce action, if a party
having a domicile or habitual residence in another country has the nationality of
the PRC, and that country where his domicile or habitual residence is located
declines or fails to provide judicial remedies.

Article 42
Adoption
The courts of the PRC shall have jurisdiction over an action arising from the
formation and the validity of an adoption, if the place where the adoption is
formed is within the territory of the PRC.
The courts of the PRC shall have jurisdiction over an action arising from the
dissolution of an adoption, if the domicile or the habitual residence of the adopter
or the adopted is within the territory of the PRC, or the adopted has the nationality
of the PRC.

Article 43
Guardianship
The courts of the PRC shall have jurisdiction over an action arising from a
guardianship dispute, if the domicile or the habitual residence of the ward is
located within the territory of the PRC.

Article 44
Maintenance
The courts of the PRC shall have jurisdiction over an action arising from a
maintenance dispute, if the domicile or habitual residence of the supported person
is located within the territory of the PRC.

Article 45
Succession
The courts of the PRC shall have jurisdiction over an action arising from a
succession dispute, if the domicile or the habitual residence of the deceased, or the
place where the main assets locate is within the territory of the PRC.

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SECTION 3
EXCLUSIVE JURISDICTION

Article 46
Exclusive Jurisdiction
Unless otherwise provided by law, the courts of the PRC shall have jurisdiction
over the following actions:

(1) those arising from a dispute concerning an immovable located within the
territory of the PRC;

(2) those arising from a dispute concerning operations in a harbor located within
the territory of the PRC;

(3) those arising from the validity of incorporation, or the dissolution or

liquidation of a legal person or other organization, or the internal affairs
between the legal person and shareholders or between the shareholders and
directors or between the managers themselves, if the place of registration of
that legal person or organization, or its principal business establishment is
located within the territory of the PRC;

(4) those arising from a dispute concerning the validity of an intellectual property
the registration formalities of which need to be completed within territory of
the PRC;

(5) those arising from a dispute concerning a Chinese-foreign equity joint

venture contract, a Chinese-foreign cooperative enterprise contract, or a
contract of Chinese-foreign cooperative exploration and development of
natural resources, which is performed within the territory of the PRC.

SECTION 4
JURISDICTION BY PARTIES’ AGREEMENT

Article 47
Jurisdiction by Agreement
The parties to a dispute of foreign-related contract or to a dispute of foreign-related
property rights and interests may, by written agreement concluded before or after
the occurrence of the dispute, choose a PRC court or a foreign court to exercise

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jurisdiction over the dispute relating to that contract or the property rights and
interests.
The court chosen by such agreement shall be factually connected with the
dispute.
The jurisdiction by agreement is exclusive. However, the choice of
jurisdiction of a court by agreement shall not violate the provisions of exclusive
jurisdiction under this law.

SECTION 5
OTHER PROVISIONS RELATED TO JURISDICTION

Article 48
Voluntary appearance of the Defendant
In case a defendant in a foreign-related civil and commercial action does not
challenge the jurisdiction of a court of the PRC but voluntarily appears in the
proceedings, and argues the merits of the case or lodges a counter-claim, he shall
be deemed to have admitted that the court has jurisdiction over the case, subject to
the provisions of exclusive jurisdiction of this law.
The defendant has the right to contest jurisdiction no later than at the time of
the first defense on the merits.

Article 49
Arbitration Jurisdiction
Where the parties, by a written arbitration agreement, agree to submit disputes that
occurred or will occur in the future with respect to a foreign-related contract or
other foreign-related commercial affairs to an arbitral institution or an arbitral
tribunal for decision, it will not be restricted by various provisions of judicial
jurisdictions under this law.
In case there exists an arbitration agreement and one party still initiates an
action in a PRC court, the court shall at the request of the defendant instruct the
party to submit the dispute to arbitration, unless the arbitration agreement is void,
inoperative or incapable of being performed.
A PRC court may not exercise its jurisdiction over a protest to the validity of
an arbitration agreement, except that the protest to the validity of an arbitration
agreement is related to a case which is heard by a Chinese arbitral institution or the
location of the arbitration is within the territory of the PRC.

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Article 50
Discretionary Jurisdiction
A PRC court may exercise its jurisdiction over an action which is not expressly
provided under this law, if the court considers that the case has proper connections
with the PRC and it is reasonable to exercise the jurisdiction.

Article 51
Forum Non Conveniens
A PRC court may at the request of the defendant decide not to exercise its
jurisdiction over an action which is under the jurisdiction of the court of the PRC
under this law, if the PRC court considers the actual exercise of jurisdiction will
result in obvious inconvenience to the parties and to the adjudication of the case,
and another court is more convenient for the adjudication of the case.

Article 52
Necessity Jurisdiction
A PRC court may exercise its jurisdiction over an action initiated by the plaintiff,
if it is evident that no other court may provide judicial remedy.

Article 53
Jurisdictional Immunity
A PRC court shall not take cognizance of an action against a foreign state, an
international organization or a foreigner, if, in accordance with the international
treaties concluded or acceded to by the PRC and with the law of the PRC, the
foreign state, the international organization or the foreigner is immune from the
judicial jurisdiction of the PRC courts.
In case a foreign court restricts the legitimate immunity of the PRC or its
citizens, a PRC court may impose reciprocal restrictions upon the foreign state or
its citizens.

Article 54
Parallel Proceedings
Unless otherwise provided by the international treaties concluded or acceded to by
the PRC, where a foreign court has rendered a judgment over an action between
the same parties on the same subject-matter or the action is pending before the
court, a PRC court may not exercise its jurisdiction if it predicts the foreign

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judgment can be recognized in the PRC. However, a PRC court may exercise its
jurisdiction over the action if the PRC court seizes the case first, or the legitimate
interests of the parties cannot be safeguarded if the PRC court does not exercise
the jurisdiction.

Article 55
Non-substantive Jurisdiction
The exercise of jurisdiction by a foreign court over the merits of a case does not
exclude a PRC court from taking protective or other temporary measures on assets
related to the case, nor does it exclude a PRC court from exercising its jurisdiction
over the recognition and enforcement of the judgment of the case.

Article 56
Counter-Claims
A PRC court having jurisdiction over the claim of the plaintiff shall have
jurisdiction over the counter-claim brought by the defendant in the same case.

Article 57
Continuous Jurisdiction
The jurisdiction over a case enjoyed by a PRC court shall remain effective in all
subsequent proceedings arising out of the original cause of action of the case.

Article 58
Due Process
A PRC court having jurisdiction over an action under this law shall lawfully and
effectively serve the documents concerning the action to the defendant during the
proceedings, and give him reasonable notices and opportunities to defend himself.

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CHAPTER III
APPLICATION OF LAW

SECTION 1
NATIONALITY, DOMICILE, HABITUAL RESIDENCE AND SEAT OF BUSINESS

Article 59
Acquisition and Loss of Nationality
Acquisition and loss of nationality of a natural person shall be governed by the law
of the country involved at the time when the nationality is in question.

Article 60
Conflict of Nationalities
In case a natural person has two or more foreign nationalities, the national law
shall be the law of his domicile or habitual residence. In case a natural person has
no domicile or habitual residence in all the countries of his nationalities, the
national law shall be the law of the country with which he has the closest
connection.
The PRC does not recognize dual or multiple nationality of a Chinese citizen.
The law of the PRC shall be the national law of a natural person with the PRC
nationality.
In case a natural person has no nationality or his nationality cannot be
ascertained, the law of his domicile shall apply instead of his national law. In case
the domicile of a natural person is unknown or cannot be ascertained, the law of
his habitual residence shall apply instead of the law of his domicile. In case the
habitual residence of the natural person is unknown or cannot be ascertained, the
law of the place where he is living shall apply instead of his national law.

Article 61
Domicile and Habitual Residence of Natural Person
A natural person has his domicile in the place in which he is living with the
intention of staying permanently. The domicile of a person who has no capacity or
a limited capacity shall be the same domicile as the domicile of his legal agent or
guardian.
A natural person’s habitual residence is the place where he resides regularly.

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Article 62
Conflict of Domiciles
In case a natural person has two or more domiciles simultaneously and one of them
is within the territory of the PRC, his domicile shall be the one within the territory
of the PRC. In case all the domiciles are situated abroad, his domicile shall be the
one which has the closest connection with the civil or commercial relation from
which the dispute arises.
In case a natural person’s domicile is unknown or cannot be ascertained, his
habitual residence is deemed to be his domicile.
In case a natural person’s habitual residence is unknown or cannot be
ascertained, his present residence is deemed to be his domicile.

Article 63
Domicile of Legal Person
The domicile of a legal person or other organization is at the place of its principal
business establishment.

Article 64
Seat of Business and Related Conflict
The seat of business of a natural person or of a legal person or of other
organization is at the place where the business is managed. In case the natural
person, legal person or other organization has two or more seats of business, the
seat of business shall be the one that has the closest connection with the civil and
commercial relation from which the dispute arises.
In case the natural person, legal person or other organization has no seat of
business, the domicile or habitual residence shall be regarded as the connecting
point.

SECTION 2
CAPACITY FOR RIGHTS AND CAPACITY TO ACT

Article 65
Capacity for Rights of Natural Person
A natural person’s capacity for rights is governed by the law of his domicile or
habitual residence.

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Article 66
Declaration of Disappearance or Death
The declaration of disappearance or of death is governed by the law of the
domicile or habitual residence of the declared person. However, the court of the
PRC may also make such declaration according to the law of the PRC, if the
person’s assets are in the territory of the PRC, or if the legal relation should be
decided according to the law of the PRC.

Article 67
Capacity to Act of Natural Person
The capacity to act of a natural person is governed by the law of his domicile or
habitual residence.
If a foreigner does a legal act in the territory of the PRC for which he would
have no capacity to act or a limited capacity to act under the law of his domicile or
habitual residence, he is deemed to have capacity to act in so far as he would be
capable under the law of the PRC, except the legal act relating to family and
inheritance or concerning real rights in immovable property.

Article 68
Capacity for Rights of Legal Person
The capacity for rights of a legal person or other organization is governed by the
law of the place where it is set up or its principal business establishment is
situated.

Article 69
Capacity to Act of Legal Person
The capacity to act of a legal person or other organization is governed by the law
of the place where it is set up or its principal business establishment is situated
and, in addition, by the lex loci actus.

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SECTION 3
FORMS OF JURISTIC ACT AND AGENCY

Article 70
Form of Juristic Act
The form of juristic act is governed by the lex loci actus or the law applicable to
the juristic act itself. The parties may also choose another law as the law applicable
to the juristic act. But concerning the disposing of immovable property, the form
of the juristic act is governed by the law of the place where the property is situated.

Article 71
Entrust Agency
Under entrust agency, the relation between the principal and the agent is governed
by the law expressly chosen by the parties. In absence of such choice of law, the
law of the place where the agent’s seat of business is located when the relationship
is formed shall apply. In case the agent has no seat of business, the law of the place
of his domicile or habitual residence shall apply.
The relationship between the principal and the third party as well as between
the agent and the third party shall be governed by the law of the place where the
agent’s seat of business is situated when he carries the agency out. The lex loci
actus of the agency is applicable if the agent has no seat of business or the agency
is carried out in a site other than the place of the seat of business.

Article 72
Statutory and Designated Agency
The statutory agency and designated agency are governed by the law of the place
where the agency act occurs or the law of the place where the domicile or habitual
residence of the agent is situated when the agency is carried out.

SECTION 4
LIMITATION OF ACTION

Article 73
Limitation of Action
The limitation of action is governed by the law applicable to the civil or
commercial relation.

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SECTION 5
PERSONAL RIGHTS

Article 74
Rights of Personality
Right of personality is governed by the law of the domicile or habitual residence of
the parties.

Article 75
Rights of Status
Right of status is governed by the law of the domicile or habitual residence of the
party unless otherwise provided by this law.

SECTION 6
REAL RIGHTS

Article 76
Classification of Movables and Immovables
The classification between the movables and immovables is governed by the law
of the place where the property is located.

Article 77
Real Rights in Immovables
Real rights in immovables are governed by the law of place where the immovables
are located

Article 78
Validity of the Immovable Property Document
The validity of the immovable property document is governed by the law of the
place where the immovable property is located or the place where the document is
issued.

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Article 79
Acquisition or Loss of Real Rights in Movables
The acquisition or loss of real rights in movables is governed by the law of the
place in which the movables are situated when the acquisition or the loss occurs.

Article 80
Assignment of Title of Tangible Movables
The assignment of title in transaction of tangible movables is governed by the law
chosen by the parties. Failing such choice, the lex situs at the time when the goods
are under the buyer’s control shall apply. Before buyer’s control, the assignment of
the tile in transaction is governed by the lex situs at that time.

Article 81
Content of Real Rights in Movables
The content and exercise of real rights in movables are governed by the lex situs
with the proviso that the exercise does not violate the lex loci actus.

Article 82
Certificates of Real Rights in Movables
The certificates of real rights in movables are governed by the law designated on
them. Failing such designation, the lex loci actus which is effective at the time
when the holder uses the certificates shall apply.

Article 83
Commercial Securities
The commercial securities are governed by the law designated on them. Failing
such designation, the law of the place where the seat of business of the
establishment issuing the securities is situated shall apply.

Article 84
Ownership of Ships
The acquisition, transfer and extinguishment of the ship ownership are governed
by the law of the flag.

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Article 85
Mortgage of Ships
The mortgage of the ship is governed by the law of the flag. Before and during the
period of bareboat charter, the establishment of the ship mortgage is governed by
the law of the place where the ship was registered originally.

Article 86
Possessory Lien of Ships
The possessory lien of the ship is governed by the law of the place where the lien
is established.

Article 87
Maritime Lien
The maritime lien is governed by the lex fori.

Article 88
Right Rights in Aircrafts and Other Transportation Vehicles
The real rights in the aircraft or other transportation vehicles are governed by the
law of the place of registration.

Article 89
Real Rights in Movables in Transit
Real rights in movables in transit are governed by the law of the place of
destination.

Article 90
Real Rights in Common
Real rights in common are governed by the law chosen by the parties. Failing such
choice, the lex situs shall apply.

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Article 91
Trusts
The trust is governed by the law expressly chosen by the settlor in the written
documents establishing or evidencing the existence of the trust property.
Failing choice of law by the settlor, or failing provision of trust in the chosen
law, the law of the place with which it has the closest connection shall apply. In
general, the law of the place of the trust management designated by the settlor, or
the law of the place of the trust property, or the law of the place where the trustee’s
habitual residence is situated, or the law of his seat of business, or the law of the
place where the aim of the trust is fulfilled may be regarded as the law of the place
with the closest connection.

SECTION 7
INTELLECTUAL PROPERTY

Article 92
Scope of Intellectual Property
The scope of intellectual property shall be decided in accordance with relevant
international treaties concluded or acceded to by the PRC and the relevant law of
the PRC.

Article 93
Patents
The existence, content and validity of the patent right are governed by the law of
the place of application.

Article 94
Trademarks
The existence, content and validity of the trademark right are governed by the law
of the place of registration.

Article 95
Copyrights
The existence, content and validity of the copyright are governed by the law of the
place where the right is claimed.

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Article 96
Other Intellectual Property
The existence, content and validity of other relevant rights included in the scope of
intellectual property are governed by the law of the place where the rights are
registered or claimed.

Article 97
Intellectual Property Contracts
Intellectual property contracts are governed by the provisions of this law relating
to contracts.

Article 98
Job-related Intellectual Property
The intellectual property acquired by the employee in his terms of reference is
governed by the law regulating the employment contract.

Article 99
Torts in Intellectual Property
The legal remedy for torts in intellectual property is governed by the law of the
place where the protection is sought.

SECTION 8
LAW OF OBLIGATIONS

Subsection I
Contracts

Article 100
Party Autonomy
Contracts are governed by the law the parties agreed on and explicitly chose
except as otherwise stipulated by the PRC law and by the treaties concluded or
acceded to by the PRC. The choice of law shall not be contrary to the mandatory
or prohibitive provisions of the lex patriae.
Parties to a contract can make a choice of law when or after the contract is
concluded but before the court holds hearing. And after the contract is concluded,

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parties can also vary the law chosen at the time of the conclusion of the contract.
The variation has retrospective effect, but without any prejudice to the rights and
benefits of the third party.
Parties can decide whether the law they chose is applied to the whole
contract, or only to one or several parts of the contract.

Article 101
The Closest Connection
Failing choice of the law, the contract is governed by the law of the place with
which it has the closest connection. Generally, the law of the closest connection
with the following contracts is decided in accordance with the following
provisions:

(1) The contract of international sale of goods is governed by the law of the place
where the seller’s seat of business is located at the time of the conclusion of
the contract. If the contract was concluded at the buyer’s seat of business, or
the contract provides expressly that the seller must perform his obligation of
delivering the goods at the buyer’s seat of business, or the contract was
concluded on terms determined mainly by the buyer and in response to an
invitation directed by the buyer to person invited to bid, the law of the place
of the buyer’s seat of business shall apply.

(2) The transportation contract is governed by the law of the place of the carrier’s
seat of business.

(3) The insurance contract is governed by the law of the place of the insurer’s
seat of business.

(4) The contract of payment or its settlement is governed by the law of the place
where the payment or settlement is carried out. The using of currency is
governed by the law of the issuing state or region.

(5) The contract of supplying sets of equipment is governed by the law of the
place where the equipment is installed and operated.

(6) The contract relating to immovables is governed by the lex situs.

(7) The lease contract of movables is governed by the law of the place of the
lessor’s seat of business.

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(8) The contract of technology transfer is governed by the law of the place of
transferee’s seat of business.

(9) Technology development contract, technical consulting contract and technical

service contract are governed by the law of the place of the entrusting party’s
seat of business.

(10) Contract to transfer the right of using trademark is governed by the law of the
place of transferor’s seat of business.

(11) The copyright transfer contract is governed by the law of the place of the
owner’s domicile or habitual residence.

(12) The contract of processing or the contract of installation on order, and other
such kind of contracts are governed by the law of the place of the processor’s
or the acceptor’s seat of business.

(13) The contract of project construction is governed by the law of the place
where the project is located.

(14) The employment contract is governed by the law of the place where the work
is carried out.

(15) The contract of bank loan or guaranty is governed by the law of the place
where the loaning bank or the guaranty bank is located respectively.

(16) The contract of common loan or guaranty is governed by the law of the place
of the domicile, habitual residence or the seat of business of the lender or
guarantor.

(17) Contracts to issue or sell or transfer bonds are governed by the law of the
place of issuing or selling or transferring bonds respectively.

(18) The consumer contract is governed by the law of the place of the consumer’s
domicile or habitual residence.

(19) The donation contract is governed by the law of the place of the donator’s
domicile or habitual residence.

(20) The trust contract is governed by the law of the place of the trust management
assigned by the settlor, or by the law of the place where the trust property is
located, or by the law of the trustee’s habitual residence or seat of business,
or the law of the place where the aim of the trust is fulfilled.

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(21) The entrust contract is governed by the law of the place of the trustee’s
domicile, habitual residence or seat of business.

(22) The warehouse safekeeping contract is governed by the law of the place of
the warehouse safeguard’s seat of business.

(23) The exchange business contract is governed by the law of the place where the
exchange is located.

(24) The auction contract is governed by the law of the place where the auction is
held.

If the above contracts apparently have a closer connection with another state or
region, the law of that state or region shall apply.

Article 102
Exclusive Application of Chinese Law in Contracts
The following contracts, performed within the territory of the PRC, concluded
between Chinese and foreign natural persons or legal person and other
organization, shall be governed by the PRC law:

(1) the Chinese-foreign equity joint venture contract;

(2) the Chinese-foreign cooperative enterprise contract;

(3) the contract of Chinese-foreign cooperative exploration and development of

natural resources ;

(4) the contract of Chinese-foreign cooperative development of housing and

land;

(5) the contract for a foreign natural person, legal person or other organization to
contractually manage the PRC enterprises within the territory of the PRC.

Article 103
Forms of Issuing Negotiable Instruments
The form of issuing bill of exchange, promissory note and check is governed by
the law of the place where the negotiable document is issued. But the items of
check at the time of the issue may also be governed by the law of the place of
payment, if agreed by parties to it.

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Article 104
Endorsement, Acceptance, Payment and Warrant of Negotiable Instruments
The endorsement, acceptance, payment and warrant of a negotiable instrument is
governed by the lex loci actus.

Article 105
Recourse Right on Negotiable Instruments
The time limits of exercising the recourse right on a negotiable instrument is
governed by the law of the place where the instrument is issued.

Article 106
Time Limits of Presentation
The time limits within which the instrument shall be presented, the way in which
proof of refusal to accept or to pay is drawn up and the time limits for drawing up
the proof of refusal to accept or to pay are governed by the law of the place of
payment.

Article 107
Preservation of Negotiable Instruments’ Rights
Where the negotiable instrument is lost, the procedure for the loser to claim for
preserving the instrument rights is governed by the law of the place of payment.

Article 108
Salvage
Unless otherwise agreed by the parties, the salvage of the sea operated inside a
country’s territory waters or inland waters is governed by the law of the place of
operation; the salvage on the high seas is governed by the law of the flag of the
salvaging ship; the salvage between two ships with the same nationality is
governed by the law of the flag common to them.

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Article 109
Adjustment of General Average
The adjustment of general average is governed by the rules agreed by the parties to
it. Failing such agreement, the law of the place of the adjustment shall apply.

Article 110
Contract and International Treaties
If the international treaties concluded or acceded to by the PRC have direct
provisions governing issues concerning contract, they shall apply to the contracts
concluded between the natural person, legal person and other organization of the
PRC and the natural person, legal person and other organization of the contracting
state.

Article 111
Choice of International Practice and International Treaties
In a contract, the parties may choose the international practice as well as the
international civil and commercial treaties to apply.

Subsection II
Torts

Article 112
Torts
The tortious act is governed by the law of the place of the act, which includes the
law of the place where the tortious act is committed and the law of the place where
the results of the act occur. In case different stipulations exist between the law of
the place where the tortious act is committed and the law of the place where the
results of the act occur, the one more favorable to the injured party shall apply.

Article 113
Closer Connection
Where the whole process of a tort shows that the domicile, habitual residence,
nationality, seat of business of the parties or the place in which other connecting
points are centered has a closer connection with the tortious incident, the law of
the place which has the closest connection shall apply.

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Article 114
Common Lex Patriae
Where the injuring party and the injured party have the same nationality or have
domicile or habitual residence in the same country or district, the law of the same
nationality, or that of the domicile or habitual residence in the same country or
district may also apply.

Article 115
Torts Related to Previously Existed Civil and Commercial Relationship
The law governing the civil and commercial relationship previously existed
between the injuring party and the injured party may also apply, if the application
of the law is more favorable to the injured party.

Article 116
Application of the Lex Fori
The injuring party and the injured party may agree to choose the law of the forum
as the applicable law after the occurrence of the tortious act, but the parties shall
not choose the law other than the law of the forum as the applicable law.

Article 117
Restrictive Double Requirements
Where the law of a foreign country or district is the law applicable to a tortious act
committed outside the territory of the forum country, and it contradicts the
provisions stipulated by the law of the PRC on the determination and the limitation
of liability for torts, the law of the foreign country shall not apply.

Article 118
Traffic Accidents
Claims for damages arising from a traffic accident, which involves vehicles,
whether motorized or not, and is connected with traffic on a public highway, on a
ground open to the public or on a private ground to which certain persons have a
right of access, shall be governed by the law of the place where the accident
occurs.Where the vehicle involved in an accident is registered in a country other
than that where the accident occurs, the law of the country of registration is
applicable for the determination of the injuring party’s liability towards the
following persons involved in the accident:

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(1) the driver, the owner of the vehicle or any other person having control of or
interest in the vehicle regardless of the locality of their domicile or habitual
residence,
(2) a victim who is a passenger and whose domicile or habitual residence locates
outside the country where the accident occurs,
(3) a victim injured outside the vehicle that is involved in the accident and whose
domicile or habitual residence is in the country of registration.

Article 119
Maritime Torts
A tortious act occurred in the territory water or inland water of a country, whether
or not the effect of such act exists only within the vessel or beyond, shall all be
governed by the law of the place where the tortious act is committed. Where the
effect of the act exists only within the vessel, the law of the flag may also apply.
A tortious act occurred on the high seas shall be governed by the law of the
place where the court hearing the case locates. However, where the effect of the
act exists only within the vessel, the law of the flag shall apply.
Claims for damages arising from collision of vessels having the same
nationality shall be governed by the law of the flag, no matter where the collision
occurs.

Article 120
Aircraft Torts
A tortious act occurred in an aircraft shall be governed by the law of the country
where the aircraft is registered.
Claims for damages arising from an air accident which causes passenger casualties
or property damage shall be governed by the law of the place where the aircraft is
registered, or by the law of the place where the tortious act is committed.
Claims for damages arising from an air accident which causes casualties or
property damage on the ground shall be governed by the law of the place where
the accident occurs.
Claims for damages arising from an aircraft collision shall be governed by the
law of the place where the non-negligent aircraft is registered. Where both aircrafts
are negligent, the law of the place where the court hearing the case locates shall
apply.

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Article 121
Product Liability
Claims for damages relating to product liability shall be governed by the law of the
place where the tortious act is committed, if that is also the place of the domicile or
the habitual residence of the person directly injured, or the place of principal
establishment or the seat of business of the person claimed to be liable, or the place
where the product was acquired by the person directly injured.
The law of the domicile or habitual residence of the person directly injured
may also apply, if that place is also the place of the principal establishment or the
seat of business of the person claimed to be liable, or the place where the product
was acquired by the person directly injured.

Article 122
Unfair Competition
Claims for damages arising from unfair competition shall be governed by the law
of the place where the result of the tort occurs.

Article 123
Environmental Pollution
Claims for damages arising from environmental pollution shall be governed by the
law of the place where the result of the tort occurs.

Article 124
Nuclear Torts
Claims for damages arising from loss of control of a nuclear facility or from the
transportation of nuclear substances shall be governed by the law of the place
where the result of the tort occurs.

Article 125
Defamation
In an action for damages based on defamation by the media through big or small
character posters, printed materials, radio broadcast, television, internet or any
other public dissemination media, the plaintiff may choose the law of the place
where the injured party has his domicile or habitual residence, or the law of the
place where the injuring party has his domicile or habitual residence, or the law of

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the place where the dissemination act takes place, or the law of the place where the
result of the tort occurs, as the applicable law.

Article 126
Civil Fraud
Claims for damages based on an act of civil fraud shall be governed by the law of
the place where the result of the tort occurs.

Article 127
Scope of Tort Applicable Law
The law governing a tortious act determines the nature of the tortious act, the liable
person and his capacity for liability, the basis and the extent of the liability, the
basis of liability attribution, the person entitled to apply for damages, the means
and scopes of damages, and the assignment and succession of the right to damages.

Article 128
Exemption and Limitation of Liability
The exemption and limitation of liability shall also be governed by the law of the
place where the court hearing the case locates in addition to the law governing the
tortious act.

Subsection III
Unjust Enrichment and Voluntary Service

Article 129
Unjust Enrichment
Unjust enrichment shall be governed by the law of the place where the unjust
enrichment occurs.
Where the unjust enrichment arises from a civil or commercial relationship,
the law governing such relationship may also apply.

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Article 130
Voluntary Service
The voluntary service shall be governed by the law of the place where the act of
voluntary service is carried out.

SECTION 9
MARRIAGE AND FAMILY

Article 131
Marriage
The essential validity and the legal effects of a marriage shall be governed by the
law of the place where the marriage is celebrated.
A marriage validly celebrated abroad is recognized in the PRC unless the
parties intentionally evade the mandatory or prohibitive provisions of Chinese laws
according to Article 13 of the this law.
The form of a marriage celebration shall be valid when it complies with the
law of the place of celebration, or the national law of any of the parties, or the law
of the domicile or habitual residence of any of the parties.
Marriages between foreigners with the same or different nationalities in the
territory of the PRC can, according to the international treaties concluded or
acceded to by the PRC or according to the principle of reciprocity, be proceeded
by the consular of the state to which any of the parties belongs in accordance with
the law of that state.

Article 132
Divorce
The prerequisites and effects of a divorce shall be governed by the law of the place
where the court hearing the case locates.
Divorce by mutual consent shall be governed by the law of either party’s or
both parties’ nationality, domicile, or habitual residence, which is expressly
selected by the parties. In the absence of such a choice of law, the law of the place
where the divorce registration authority or other competent authorities locate shall
apply.

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 Texts, Materials and Recent Developments

Article 133
Personal Relation between Husband and Wife
The personal relation between husband and wife shall be governed by the national
law which the spouses have in common, and, in its absence, by the law of the place
where both spouses have their domicile, and in its absence, by the law of the place
where both spouses have their habitual residence, and, in its absence, by the law of
the place of marriage celebration or by the law of the place where the court hearing
the case locates.

Article 134
Property Relation between Husband and Wife
The property relation between husband and wife shall be governed by the law
agreed on and expressly selected by the parties. In the absence of such a choice of
law, the provision of the preceding article shall be applied. But so far as the
immovable property is concerned, the law of the place where the immovable
property is situated shall be applied.

Article 135
Personal Relation between Children and Parents
The personal relation between children and parents shall be governed by the law of
the domicile which they have in common, or by the law which is more favorable to
protect the interests of the weaker party, which includes the national law of any of
the party, the law of the domicile or habitual residence of any of the party.

Article 136
Property Relation between Children and Parents
The property relation between children and parents shall be governed by the
provision of the preceding article. But so far as the immovable property is
concerned, the law of the place where the immovable property is situated shall be
applied.

Article 137
Recognition of Illegitimate Child
Recognition of an illegitimate child shall be governed by the law more favorable to
the existence of the recognition, including the national law of the child or the
parent, or the law of the domicile or habitual residence of the child or the parent.

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 Model Law of the People’s Republic of China

Article 138
Adoption
The prerequisites for an adoption shall be governed by the law of the domicile or
habitual residence of the adopter and the adopted child respectively at the time of
adoption.
The effects of an adoption shall be governed by the law of the domicile or the
habitual residence of the adopter at the time of adoption.
The termination of an adoption shall be governed by the law of the domicile or the
habitual residence of the adopted child at the time of adoption or by the law of the
forum where the case concerning the termination of the adoption is heard.

Article 139
Guardianship
The institution, alteration and termination of a guardianship shall be governed by
the law of the nationality, the domicile, or the habitual residence of the ward.

Article 140
Maintenance
Maintenance shall be governed by the law most favorable to the supported person,
which includes the national law or the law of the domicile or habitual residence of
the supported person.
Maintenance between former spouses after divorce shall be governed by the
law applicable to the divorce.

SECTION 10
SUCCESSION

Article 141
Statutory Succession
In intestate succession, the movable shall be governed by the law of the domicile
or habitual residence of the deceased at the time of his death. The immovable shall
be governed by the law of the place where the immovable is situated.

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Article 142
Capacity of Making Wills
The capacity of making a will shall be governed by the national law or the law of
the domicile or habitual residence of the testator at the time when the will is made.
In case according to the provision of the preceding paragraph the testator has
no capacity to make a will but he has such capacity according to the law of the
place where he makes the will, he is deemed to have the capacity to make the will.

Article 143
Form of Wills
The form of a will shall be valid if it accords with any of the following laws:

(1) the law of the place where the testator makes the will at the time when the
will is made;

(2) the national law of the testator at the time when the will is made or when the
testator dies;

(3) the law of the domicile of the testator at the time when the will is made or
when the testator dies;

(4) the law of habitual residence of the testator when the will is made or when
the testator dies;

but so far as the immovable property is concerned, the law of the place where the
immovable property is located shall apply.

Article 144
Contents and Effects of Wills
The contents and effects of a will shall be governed by the law expressly chosen
by the testator, including his national law, or the law of his domicile or habitual
residence at the time of making the will or at the time of his death. In the absence
of such choice of law, the above-mentioned law most favorable to the formation of
the will shall apply.

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Article 145
Determination of Estate by Escheat
The determination of estate by escheat shall be governed by the national law of the
deceased at the time of his death.
Notwithstanding the provision of the preceding paragraph, if there is the heir
in accordance with the law of the place of the domicile or the habitual residence of
the deceased at the time of his death, the estate shall not be disposed as estate by
escheat.

Article 146
Disposition of the Estate by Escheat
The disposition of the estate by escheat shall be governed by the law where the
estate is situated at the time of the deceased’s death.

Article 147
Administration of Estate and Discharge of Inherited Obligation
The administration of estate and the discharge of inherited obligation shall be
governed by the law of the state where the estate is situated.

SECTION 11
BANKRUPTCY

Article 148
Bankruptcy
The bankruptcy is governed by the law of the place where the bankrupt’s principal
business establishment is located or the bankrupt’s property is situated.

Article 149
Appraisal of Bankrupt’s Property
The appraisal of the value of the bankrupt’s property is governed by the lex situs.

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Article 150
Liquidation of Bankruptcy
The liquidation of bankruptcy is governed by the lex fori.

SECTION 12
ARBITRATION

Article 151
Arbitration Agreement
The validity of an arbitration agreement, except the parties’ capacity, shall be
governed by the law chosen by the parties. In absence of the choice of law, the
law of the place where the arbitration takes place or the award is made shall apply.
Failing the parties' choice of law and when the place of arbitration or of award-
making is not determined, the lex causae of the disputes, notably the law
applicable to the main contract or the law of the PRC shall apply.

Article 152
Procedure of Arbitration
The procedure of arbitration shall be governed by the procedural rules agreed upon
by the parties, which shall not be contrary to the mandatory or prohibitive
provisions of the law where the arbitration takes place or the award is made. In the
absence of the agreement, procedural rules determined by the arbitral tribunal shall
apply.

CHAPTER IV
JUDICIAL ASSISTANCE

Article 153
General Provision
Upon the request of a foreign court or other competent authority, a PRC court may
on its behalf or help to serve legal documents, make investigation and obtain
evidence or take other actions in accordance with the international treaties
concluded by the foreign country and the PRC or acceded to by both countries, or
according to the principle of reciprocity.

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Article 154
Application of Law
The service of legal documents, the investigation and obtaining of evidences or
taking other actions shall be carried out by a PRC court in accordance with the
procedure stipulated by the law of the PRC. Where a special procedure is
requested by a foreign court or other competent authority, such special procedure
may be conducted, provided it does not violate the law of the PRC.

Article 155
Translation Requirements
A requesting letter in which a foreign court or other competent authority requests a
PRC court to provide judicial assistance and the appendixes to the letter shall be
submitted with the Chinese version or the version of another language specified in
the international treaties.

Article 156
Public Order
In case any matter of the assistance requested by a foreign court or other
competent authority is to the prejudice of the sovereignty, security of the PRC or
violates the public order of the PRC, the court of the PRC shall refuse the
assistance.

Article 157
General Provisions on Recognition and Enforcement of Foreign Judgments
In case there exists a treaty dealing with mutual recognition and enforcement of
foreign judgments concluded or acceded to by a foreign country and the PRC, or
based on the principle of reciprocity, a judgment, order, decision or written
conciliation statement of a foreign court may be recognized and enforced in the
PRC upon the request of the foreign court or a party concerned, unless otherwise
stipulated by the this law or international treaties concluded or acceded to by the
PRC.
A judgment by a foreign court mentioned in the provision of preceding
paragraph refers to a judgment rendered by the foreign court in civil and
commercial cases concerning property interests and personal rights, or a judgment
rendered by a foreign court in respect of damages awarded in criminal cases.

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 Texts, Materials and Recent Developments

Article 158
Indirect Jurisdiction
The foreign court rendering a judgment shall be considered to have jurisdiction
over the case in any of the following circumstances:
a. at the time when the action was instituted, the defendant has his domicile or
habitual residence in the territory of the foreign country;
b. the defendant has in the foreign country his representative establishment at
the time when the action arising from his business was instituted; or the
defendant has a branch in the territory of the foreign country and the action
arises out of the business of the branch;
c. in a case relating to a contract or property interests, the defendant has
accepted explicitly and in writing the jurisdiction of the foreign court; or after
the commencement of the proceedings, the defendant voluntarily appeared to
respond in the proceedings and to argue on the merits without contesting the
jurisdiction of the court;
d. in a case concerning a contract which has been concluded in the territory of
the foreign country, or which has been performed or shall be performed
therein;
e. in a case relating to the ownership of tangible property or other real rights,
the movable or immovable being the subject matter of the proceedings or the
security of the obligation is located in the territory of the foreign country at
the time when the action was instituted;
f. in a tort case not relating to any contract, the injuring act or the result
therefrom occurs in the territory of the foreign country;
g. in a succession case, the domicile or habitual residence of the deceased or the
estate is located in the territory of the foreign country at the time of his death;
h. in a case where a counterclaim is raised, the foreign court rendering a
judgment has jurisdiction over the original claim.
The jurisdiction exercised by a foreign court which contradicts with the exclusive
jurisdiction specified by the law of the PRC shall not be recognized.

Article 159
Reasons for Refusing Recognition and Enforcement
A judgment rendered by a foreign court shall not be recognized or enforced in any
of the following cases:
a. the court rendering the judgment has no jurisdiction over the case under the
provisions of the international treaties concluded or acceded to by both the
foreign country and the PRC or under the provisions of the preceding article
of this law;

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b. the judgment requested for recognition and enforcement has not come into
force or is not enforceable pursuant to the law of the country where the
judgment was rendered;
c. in the proceedings where the judgment was rendered the losing party has not
been legally summoned, or the party procedurally incapable of action has not
been properly represented;
d. a PRC court has rendered a legally effective judgment concerning a case over
an action between the same parties based on the same facts and on the same
subject matter, or has recognized a legally effective judgment rendered by the
court of a third state over the same case;
e. a case over an action between the same parties based on the same facts and
on the same subject matter is pending before a PRC court;
f. the judgment requested for recognition and enforcement would prejudice the
sovereignty, security of the PRC or violate the public order of the PRC.

Article 160
Required Documents
The party seeking the recognition and enforcement of a judgment of a foreign
court shall produce an application form and the following documents:
a. a certified copy of the judgment, and in case the copy does not clearly specify
that the judgment is legally effective and is enforceable, it should be
accompanied by a certificate issued by the relevant court for that purpose;
b. a certificate evidencing that the losing party has been legally summoned;
c. a certificate evidencing that the party procedurally incapable of action has
been properly represented;
d. the certified Chinese version of the application form and documents
mentioned above or the version of another language specified in international
treaties.
In case of need, A PRC court may require the party making the application or the
foreign court to produce the supplementary materials within the required time.

Article 161
Necessary Review
A PRC court shall examine the foreign judgment requested for recognition and
enforcement under the provisions of the present chapter, but not the correctness of
the fact-finding or the appropriateness of the application of law.
The party or other interested parties against whom the judgment is rendered may
raise an objection against the recognition and enforcement of the judgment.

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Article 162
Procedure of Recognition and Enforcement
The recognition and enforcement of a foreign judgment shall be conducted by a
PRC court in accordance with the procedure stipulated by the law of the PRC.

Article 163
Means of Recognition and Enforcement
Where a PRC court, after examining the foreign judgment, considers that the
judgment does not fall into any circumstance for the refusal of its recognition or
enforcement, the court shall order the recognition of its force, and where its
enforcement is necessary, issue a writ of enforcement and enforce the judgment.

Article 164
Recognition and Enforcement of Foreign Arbitral Awards
Where a party applies for the recognition and enforcement of a foreign award, a
PRC court shall deal with it in accordance with the “Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (1958)” or the bilateral
treaties concluded by the PRC. As to foreign arbitral awards made in the territory
of non-contracting states and states which have not concluded the bilateral treaties
with the PRC, their recognition and enforcement shall be carried out on the
principle of reciprocity.

CHAPTER V
SUPPLEMENTARY PROVISIONS
Article 165
Relation between the New Law and Old Laws
This law shall prevail over any other laws previously stipulated by the PRC
concerning the jurisdiction, application of law, and judicial assistance of foreign-
related civil and commercial relationship.

Article 166
Irretrospective Effect
This law shall have no retrospective effect except unsettled matters.

390 Yearbook of Private International Law, Volume 3 (2001)

 OREGON’S CONFLICTS LAW
APPLICABLE TO CONTRACTS

James A.R. NAFZIGER*

On 21 May 2001, the Governor of the State of Oregon signed into law a bill on
Conflicts Law Applicable to Contracts.1 The new statute, which both chambers of
the Oregon legislature had approved unanimously,2 represents the first phase of a
project undertaken by the Oregon Law Commission to codify choice of law.3 This
is the first such codification of choice-of-law rules by a legal system in the
common-law tradition and the second within the United States.4
This summary introduces a background Report that accompanied the draft
bill on its presentation to the state legislature (Annex I), the legislation itself
(Annex II), and Comments on it (Annex III). The Comments and Reports
constitute the principal preparatory and explanatory documentation (travaux
preparatoires) in the legislative file. As such, they form part of the legislative
history of the law and will provide authoritative guidance for its application and
interpretation.5
The Report describes the purpose of the codification project, the structure of
the new law, and its key elements. This document was intended to assist
lawmakers in their review of the draft bill. The Comments provide additional

*
Thomas B. Stoel Professor of Law, Willamette University College of Law, and
President of the American Branch of the International Law Association. Professor Nafziger
serves as Reporter of the Oregon Law Commission’s project to codify choice-of-law rules.
1
Conflicts Law Applicable to Contracts, ch. 164, 2001 Oregon Regular Session
Laws. The effective date of the legislation is 1 January 2002.
2
The vote in the Oregon House of Representatives was 57-0, with three excused
absences. The vote in the Oregon Senate was 27-0, with three excused absences.
3
See NAFZIGER J., ‘Oregon’s Project to Codify Choice-of-Law Rules’, in: La. L.
Rev. 2000, vol. 60, p. 1189.
4
The first codification of choice-of-law rules in the United States occurred in the
country’s only civil-law or mixed jurisdiction, Louisiana. See RabelsZ 1993, vol. 57, p. 508;
IPRax 1993, vol. 13, p. 56; Rev. crit. dr. int. pr. 1992, vol. 81, p. 223. For commentary by
the Reporter of the codification project, see SYMEONIDES S., ‘Private International Law
Codification in a Mixed Jurisdiction: The Louisiana Experience,’ in: RabelsZ 1993, vol. 57,
p. 460; SYMEONIDES S., ‘Louisiana’s New Law of Choice of Law for Tort Conflicts: An
Exegesis,’ in: Tul. L. Rev. 1992, vol. 66, p. 677; SYMEONIDES S., ‘Les grands problèmes de
droit international privé et la nouvelle codification de Louisiane,’, in: Rev. crit. dr. int. pr.
1992, vol. 81, p. 223; SYMEONIDES S., ‘Problems and Dilemmas in Codifying Choice of Law
for Torts: The Louisiana Experience,’ in: Am. J. Comp. L. 1990, vol. 38, p. 431.
5
In formulating a method of statutory analysis, the Oregon Supreme Court has
confirmed that legislative history is determinative if the intent of the legislature is not clear
from the statute’s text and context. The context includes other provisions of the same statute
and other related statutes. PGE v. Bureau of Labor and Industries, 859 P.2d 1143, 1146 (Or.
1993).
 Text, Materials and Recent Developpements

background and explanation of individual provisions in the legislation. Several

points in the Report merit reiteration or further elaboration as part of this summary,
in view of two substantive amendments to the draft bill after it was completed.
The main purpose of the legislation was to provide a clear, comprehensive
set of choice-of-law rules to replace a jumble of rather ambiguous and unstable
jurisprudence that had been generated by Oregon courts.6 Although the Oregon
Supreme Court pioneered in the modern choice-of-law movement in the United
States away from territorialist rules,7 the resulting experiment, over a period of 35
years, cannot be considered a complete success. Typically, after examining
significant contacts and sometimes governmental interests, the courts simply
applied the local law – ‘doing what comes naturally’.8 The actual, though unstated,
rule has therefore been to apply the lex fori with some exceptions. Oregon’s own
courts have derided the prescribed methodology or at least have maintained a
skeptical attitude toward it.9
An ancillary purpose of the draft codification was to overcome the lex fori
orientation of judicial decisions while at the same time protecting Oregon interests,
especially those of its residents, to the greatest extent possible. It was clear that
Oregon needed choice-of-law rules that accommodate a larger, even global,
process of dispute resolution.10 Accordingly, the Oregon Law Commission’s Study

6
For a summary, see NAFZIGER J. (note 3), pp. 1192-98, 1205-1225.
7
One of the earliest and most important state court decisions during the early days
of this movement was Lilienthal v. Kaufman, 395 P.2d 543 (Or. 1964). Later, the Oregon
courts adopted a hybrid methodology for resolving conflicts that nominally applies the rules
established by the AMERICAN LAW INSTITUTE in its Restatement of the Law, Second,
Conflict of Laws 1971, with particular reliance at times on an analysis of governmental
interests in having courts give effect to purported policies underlying conflicting laws. The
new law is intended to replace this approach, including rules of the Second Restatement.
8
Erwin v. Thomas, 506 P.2d 494, 496-97 (Or. 1973) (applying Oregon law when the
ostensible conflict was between the laws of two jurisdictions, neither of which was deemed
to have an ‘interest’ in having its law applied). Earlier, however, the Oregon Supreme Court
had acknowledged the danger of state chauvinism. Casey v. Manson Constr. & Eng’g Co.,
428 P.2d 898 (Or. 1967).
9
For example, the Oregon Court of Appeals wrote as follows about the
jurisprudential task it faced in Fisher v. Huck, 624 P.2d 177, 178 (Or. App. 1981):
‘When any court embarks on a determination of the "relevant policies of
other interested states and the relative interests of those states in the
determination of the particular issue" [Restatement (Second) § 6], the
endeavor, in many instances, is like skeet shooting with a bow and arrow: a
direct hit is likely to be a rarity, if not pure luck. With that chance of success
in mind, we nock the arrow and draw the string.’
10
A well-respected proponent of a transnational approach to conflicts, leading to a
jus commune to govern private international law, was the late Friedrich K. (Fritz) Juenger.
See, e.g., JUENGER F., Choice of Law and Multistate Justice, Dordrecht 1993.

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 Oregon’s Conflicts Law applicable to Contracts

Group, which supervised the drafting project, discussed several models of conflicts
legislation. These included primarily the Rome Convention of the European
Union,11 German law,12 Swiss law,13 a Puerto Rican draft law,14 and the Louisiana
law.15 Although the new Oregon statute does not conform closely with any of these
models, it does adopt or modify some of their rules and, perhaps as importantly,
encourages greater openness to foreign law and sensitivity to the needs of the
interstate and international orders, including foreign choice-of-law rules.
The law’s definitional section, though brief, is essential because of the
complexity of the terms ‘law’ and ‘state’ within the United States constitutional
and political system. Accordingly, the two corresponding definitions, taken
together, recognize a broad range of applicable legal sources and pertinent
jurisdictions (‘states’).
The authority that the definitions identify may be international (or regional),
federal, state (in the sense of a constituent state of the United States), territorial,
tribal, or Native Hawaiian. The Comments confirm this openness and eclecticism.
For example, they suggest that the Unidroit Principles on International Commercial
Contracts16 might be chosen to govern international contracts, at least.17 The
Unidroit Principles, by articulating and developing the lex mercatoria,18 are a
promising means of helping ensure that Oregon-related practice truly does fit into a
global system of dispute avoidance and resolution. Another means of
accomplishing the same purpose of the codification is to be found in the
identification of international law as an authoritative source.19 This provision

11
EEC Convention on the Law Applicable to Contractual Obligations, 1980 O. J. (L
266) 1.
12
See Bundesgesetzblatt 1999, vol. I, p.1026, 1986, vol. I, p. 1142; I.L.M. 1988,
vol. 27, p. 1.
13
Bundesblatt 1988 I 5.
14
See ACADEMIA PUERTORREQUEÑA DE JURISPRUDENCIA Y LEGISLACIÓN/PUERTO
RICAN ACADEMY OF JURISPRUDENCE AND LEGISLATION, Proyecto para la Codificación del
Derecho internacional privado de Puerto Rico/A Project for the Codification of Puerto
Rican Private International Law (SYMEONIDES S./VONMEHREN A., rapporteurs), San Juan
1991. For discussion, see SYMEONIDES, S, ‘Revising Puerto Rico’s Conflicts Law: A
Preview’, in: Colum. J. Transnat’l L. 1990, vol. 28, p. 413.
15
See note 4.
16
INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW (Unidroit),
Principles of International Commercial Contracts, in: I.L.M. 1995, vol. 34, p. 1067.
17
Comments § 7(3), in Annex III.
18
See WEINTRAUB R.J., ‘Lex Mercatoria and the UNIDROIT Principles of
International Commercial Contracts’, in: BORCHERS P.J./ZEKOLL J., International Conflicts
of Laws for the Third Millennium: Essays in Honor of Friedrich K. Juenger, Ardsley 2001,
p. 141.
19
Conflicts Law Applicable to Contracts § 1(1), in Annex II.

Yearbook of Private International Law, Volume 3 (2001) 393

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confirms Oregon’s long-standing commitment to apply general international law as

rules of judicial decision.20
Article 9 of the new law establishes a general or default rule for choosing
the ‘appropriate law’ to govern matters not otherwise addressed by specific rules.
This choice involves three simple steps: identifying all states, broadly defined, that
have any of several stipulated connections with the transaction or the parties;
identifying the policies underlying conflicting laws of those states that are relevant
to these issues; and, most importantly, evaluating the relative strength and
pertinence of these policies in accomplishing several stipulated objectives of
material justice.21 No consideration is to be given to such concepts as
‘significance’ of relevant connections or governmental ‘interests’. Instead, Article
9 provides a litmus of considerations that are deliberately articulated as
progressives measures for administering justice. The compatibility and mutuality
of these considerations obviate the need to prioritize them.
The Oregon legislature made only two substantive amendments to the draft
legislation,22 both of which are of uncertain but probably minor significance.23 One
of the amendments deleted a presumption in the draft bill, as to insurance
contracts, that would have required the application of the law of the state that is the

20
The Oregon Supreme Court observed in Peters v. McKay, 238 P.2d 225, 231 (Or.
1951): ‘In essence, the rule appears to be that international law is a part of the law of every
state which is enforced by its courts without any constitutional or statutory act of
incorporation by reference, and while a court may be without jurisdiction to enforce
international law in a given case by reason of some controlling statute, nevertheless, relevant
provisions of the law of nations are legally paramount whenever international rights and
duties are involved before a court having jurisdiction to enforce them’ (footnote omitted).
Furthermore, the Oregon Supreme Court commented in the same case that ‘[i]t is firmly
established that courts, in construing a statute, will indulge a strong presumption that the
legislature did not intend to violate international law and will read into a statute such
qualification or exception as may be necessary to avoid apparent conflict’.
21
These considerations are as follows:
‘(a) Meeting the needs and giving effect to the policies of the interstate and
international systems; and
(b) Facilitating the planning of transactions, protecting a party from undue
imposition by another party, giving effect to justified expectations of the
parties concerning which state’s law applies to the issue and minimizing
adverse effects on strong legal policies of other states.’
22
Several generally stylistic changes, such as substituting ‘Oregon’ for ‘this state’,
were also made. The Comments in Annex III incorporate the two amendments whereas the
version of the Comments that was included in the legislative file, prior to enactment of the
legislative bill, refers to the proposed amendments in two footnotes to what were then only
legislative committee recommendations.
23
There was no discussion of these amendments on the floor of the legislature. Both
amendments resulted from discussions with members of the House Judiciary subcommittee.

394 Yearbook of Private International Law, Volume 3 (2001)

 Oregon’s Conflicts Law applicable to Contracts

principal location of a risk. This presumption would have been subject to party
autonomy, other provisions of the law, and existing insurance-related statutes.24
(Oregon statutory law already provides, for example, that all insurance policies
delivered or issued for delivery in Oregon must be construed according to Oregon
law.)25 The presumption in the original bill therefore would have been of only
limited effect. The legislature, however, preferred not to establish a specific rule to
govern those instances where both existing law and the new law may be silent on
the appropriate law to govern insurance contracts. Although the deleted
presumption would have broadened the choice of law beyond the statutory
requirements to apply local law, the result of the amendment is to retain the current
practice, established by the case law, of relying primarily on the application of
Oregon law in instances where the parties to an insurance contract do not choose
their own law. Such instances are apt to be unusual, given the normal practice of
including choice-of-law clauses in insurance contracts and the general acceptance
of such clauses by the courts.
The second of the substantive amendments to the draft bill exempts
financial institutions, as defined by a recently enacted federal law,26 from coverage
by the Oregon legislation. The intended scope of the federal definition is, however,
narrow. It explicitly applies only as part of a regulatory scheme to protect
consumers against unwarranted access by financial institutions to personal
information by fraudulent means or false pretenses.27 It would be peculiar, in the
federal system of the United States, for a state legislature to adopt a federal
24
Or. Rev. Stat. Tit. 56, passim (1999).
25
Or. Rev. Stat. § 742.018 (1999). Any conditions, stipulations or agreements to the
contrary are invalid. OR. REV. STAT. § 742.018 (1999). There are only three exceptions:
reinsurance, wet marine policies and transportation insurance policies. OR. REV. STAT.
§ 742.001 (1999).
26
Pub. L. 106-102, Title V, § 510, 12 Nov. 1999, 113 Stat. 1446 (1999) (to be
codified at U.S.C. § 6801). The new law, of which the section including the definition is one
part, addresses two topics: disclosure of nonpublic personal information and fraudulent
access to financial information. The definition, at 15 U.S.C.A. § 6827 (West Supp. 2001),
provides as follows:
‘The term "financial institution" means any institution engaged in the
business of providing financial services to customers who maintain a credit,
deposit, trust, or other financial account or relationship with the institution....
The term "financial institution" includes any depository institution..., any
broker or dealer, any investment adviser or investment company, any
insurance company, any loan or finance company, any credit card issuer or
operator of a credit card system, and any consumer reporting agency that
compiles and maintains files on consumers on a nationwide basis...’
[subheadings, clarifications and exceptions omitted].
27
The statute makes clear that the definition of a ‘financial institution’ is ‘[f]or
purposes of a subchapter protecting customer information of such institutions’. 15 U.S.C.A.
§ 6801 (West Supp. 2001).

Yearbook of Private International Law, Volume 3 (2001) 395

 Text, Materials and Recent Developpements

definition without its built-in limitations. The incorporation of the federal

definition is therefore best read as a reiteration or recognition of the applicability of
the federal law.
If, however, the scope of the reference to the federal definition of financial
institutions in the Oregon statute is read more broadly than was intended by
Congress when it defined the term, very little follows. The activities and
transactions of operating financial institutions in Oregon and protecting Oregon
parties affected by them are generally regulated by Oregon law. In situations
beyond the scope of state regulation, the lex fori presumption of Oregon
jurisprudence would also lead to the application of local law. Thus, financial
institutions preferring foreign law to be applied in situations not specifically
regulated under Oregon law, might have been better served by the new law than by
an exemption. With respect to both substantive amendments of the draft bill, the
choice-of-law rules in the Uniform Commercial Code (U.C.C.), as enacted by
Oregon and subject to on-going revisions, will be significant.
It is expected that Oregon’s new law will itself shape the content of the
common law methodology applicable to any residual conflicts not specifically
covered by the law itself. One of the purposes of the legislation was to displace the
cumbersome methodology prescribed by the Second Restatement of Conflict of
Laws that Oregon courts adopted for guidance.28 Similarly, the new law avoids any
references to governmental interests. If neither the Second Restatement nor interest
analysis any longer apply, courts may be inclined to consult the new statute for
guidance in deciding any cases not falling strictly within its scope. In an
increasingly global context, the lex mercatoria, as articulated in the Unidroit
Principles,29 may also be instrumental.
In sum, Oregon’s new Conflicts Law Applicable to Contracts is a
comprehensive framework of rules for determining the appropriate law, as a matter
of material justice, in multijurisdictional contracting and dispute resolution. The
legislation will operate alongside scattered federal and state authority already on
the books, such as rules already governing commercial transactions and financial
institutions. It is likely, too, that Article 9 (the general or default rule) and other
provisions of the new law will perform an additional function of defining the rules
for judicial resolution of any residual conflicts related to contracts that lie beyond
the letter of the statute itself.
This set of rules should both constrain unnecessary legislation and provide
better guidance to courts in resolving any choice-of-law issues that do merit
adjudication. Alternative (non-judicial) methods of dispute resolution may also
help avoid litigation of conflicts issues.30 Meanwhile, it may be expected that

28
Note 7.
29
Note 16.
30
See NAFZIGER J, ‘Making Choices of Law Together’, in: Willamette L. Rev. 2001,
vol. 37, p. 209.

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choice of law in Oregon will no longer be shaped by the dead hand of the past,
clutching local law in the face of an unstable methodology. Instead, Oregon’s new
Conflicts Law Applicable to Contracts offers a guiding hand toward stability of
expectations and material justice. Choosing the appropriate law on the basis of the
new rules will soon be ‘doing what comes naturally’.31

Annex I: Report

I. Introductory Summary
This report accompanies a proposed bill to codify choice of law for Oregon-related
contracts. The proposed codification provides rules and principles to determine
which law or laws should govern issues that may arise in Oregon-related contracts
involving transactions or relationships across state or national lines. The proposal
is a year-long project of the Oregon Law Commission. The Commission’s Reporter
worked closely with a Study Group on Conflict of Laws that met seven times and
included two members of the Oregon Legislature and the Deputy Legislative
Counsel, ex officio, seven academic specialists from the three Oregon law schools,
two judges, and four experienced attorneys.32
The bill specifies contract-related issues to which Oregon law applies; other
issues to which either Oregon law or another law applies, according to the
particular rule, unless the parties agree otherwise; and a detailed procedure for
determining the applicable law when no rule has been specified by a statute or by
the parties.

31
506 P.2d 496-47 (note 8).
32
The members of the Study Group have been: J. Michael Alexander, Wallace
Carson, Mildred Carmack, Jonathan Hoffman, Maurice Holland, Douglas Houser, Hans
Linde, Donald Large (replaced by Gilbert Carrasco), James Nafziger, Eugene Scoles,
William Snouffer, Symeon Symeonides, Dominick Vetri; Ex officio: Rep. Lane Shetterly,
Chair, Oregon Law Commission; Sen. Kate Brown; and David Heynderickx, Oregon
Legislative Counsel’s Office. Dominick Vetri has served as Chair of the Study Group and
James Nafziger as its Reporter. In addition, Susan Grabe served as a liaison with the Oregon
State Bar, in order to ensure full participation in the project by the Bar and to enlist the
interest, expertise, criticism and suggestions of Bar committees and members.

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II. Explanation
Whenever a transaction or relationship transcends interstate or international
boundaries, a question of the applicable law may arise. If, for example, the parties
to a contract are domiciled in different states or their contract is negotiated and
signed in one state but is to be performed in another, they may have to determine
which of two or more divergent laws should govern issues in any dispute that may
arise between them. If a dispute arises, a court of law, arbitral tribunal or other
authoritative body may also have to decide which law applies. Potential conflicts,
which are inherent in both the federal and international systems, may involve three
general types of issues: adjudicative jurisdiction over parties or things in dispute;
choice of law, that is, the determination of which of more than one state’s or
country’s laws governs an issue; and enforcement of foreign judgments. Ancillary
issues include, for example, pleading and proof of foreign law and inconvenience
of the forum.
As with most aspects of civil procedure, statutory law largely prescribes the
rules of adjudicative jurisdiction and enforcement of foreign judgments. That is
because of the importance attached to ensuring that procedural rules be as stable
and clearly expressed as possible. Choice of law is, however, an exception to this
body of statutory law. It is largely governed by a mixture of judge-made formulas
and a few generally worded statutes that are addressed to particular topics. The
resulting approach varies widely from one country to another and among the
American states. The Reporter’s Memorandum to the American Law Institute
Project on the Federal Judiciary Code notes as follows:

‘Choice of law by state courts is unruly and, in all but the rarest
cases, essentially unregulated by the United States Supreme Court.
The default tends to be the application of the law of the forum, and
there are dramatic differences among states on frequently litigated
issues of substantive liability.’

Even when the choice of law is prescribed by statute, as, for example, in the
Uniform Commercial Code, the choice-of-law rule is usually so broadly expressed
as to require substantial judicial interpretation.
In Oregon, jurisdictional and enforcement issues are largely resolved,
respectively, by long-arm statutes and reciprocal enforcement statutes, as well as
uniform laws such as those governing interstate cooperation in matters of family
law. Interpretative issues may arise, and some topics of enforceability are not
specifically covered by statute – for example, tax judgments, fines or other
penalties, and family support decrees – but common law plays a relatively
insignificant role in resolving issues of jurisdiction and enforcement of judgments.
By contrast, choice of law is still largely the product of judicial decisions
and is expressed in a variety of often vague formulations. Statutory choice-of-law

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rules govern some legal subjects in Oregon, such as commercial transactions,

limitation of judicial actions, unclaimed property, child custody, family support,
wills and gifts, environmental cleanup assistance, and transboundary pollution. But
the choice-of-law approach to govern issues of contract, tort, product liability,
property, and other significant topics of litigation is expressed in non-statutory
formulations.
Courts and academic commentators have created a myriad of such
formulations. Oregon courts nominally follow a combination of two approaches:
governmental interest analysis and the most significant relationship provisions set
forth in the American Law Institute’s RESTATEMENT (SECOND) OF THE LAW OF
CONFLICT OF LAWS. In practice, however, the approach taken by Oregon courts to
resolving conflicts issues has not been highly disciplined. The result is a confusing,
rather erratic line of decisions in which the courts have consulted a matrix of
factors and generally selected those that would rationalize the application of
Oregon law. As a result, Oregon courts have usually applied the law of the
(Oregon) forum (lex fori).

III. The Objective of the Project

In response to the unsatisfactory state of existing law, this bill seeks to establish
concrete, stable rules to resolve issues transcending jurisdictional boundaries. The
Study Group rejected two alternative approaches to the necessary legislation. The
first of these alternatives would have simply reiterated one or another stated
methodology or a combination of them, presumably involving governmental
interest analysis and most significant relationship assessment. The second rejected
alternative would have been simply to codify the actual methodology of Oregon
courts in routinely applying the law of the forum (lex fori) except in unusual
circumstances. Instead, the Study Group decided to consult a variety of alternative
models in order to fashion a set of concrete rules to govern specific issues,
followed by a general default rule.
Having achieved consensus on this approach, the Study Group examined
provisions for choice of law in other legislation and academic formulations (see
VI, below). The Reporter then began drafting new legislation. Seven drafts reflect
an evolution of thinking from the initial framework of borrowed legislation to the
final version (VII, below) that has taken full account of a broad range of interests
in formulating the choice-of-law rules. The final draft therefore accommodates a
variety of interests that may be implicated in the resolution of multijurisdictional
disputes before Oregon courts, arbitral tribunals, and other authoritative bodies.
During the Study Group’s meeting and drafting process the following issues
required the most deliberation: What types of contracts or contract-related issues
should always be governed by Oregon law? What law should govern insurance

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contracts? What limitations should be imposed on party autonomy (that is, on a

choice of law by the parties to a contract)? What law should apply in the absence
of an effective choice by the parties? In such a case, what should be the objective
of a general default rule and what should be the normative standard for that rule?
What presumptive rules should be applied for specific types of contracts or
contract-related issues not otherwise covered by specific provisions in the proposed
legislation? What should be the requirement or requirements for applying a general
rule instead of a presumptive rule?
The Study Group proceeded on the premise that the courts of Oregon, as a
justice-administering state, have a responsibility to achieve both conflicts justice
and material or substantive justice. A creditable choice-of-law approach therefore
would embrace conflict-resolving values, such as simplicity, predictability, and
party autonomy, as well as substantive values that animate domestic dispute
resolution, such as systemic needs and policies, fairness, and equity. The proposed
bill manifests the objectives of conflicts justice and material or substantive justice
by setting forth both a detailed set of rules and a general rule that requires the
application of the best available or most appropriate law, as defined by criteria of
substantive justice. The general rule therefore adopts a substantive approach to
choice of law. Thus, the Act seeks to maximize material justice without sacrificing
fundamental, traditional values of conflicts justice. In taking this approach, the bill
follows a trend toward equity analysis for choosing the appropriate law in a
multijurisdictional context.

IV. Statement of the Current Problem in the Law

In order to understand the need to codify detailed rules for choice of law in
Oregon, as this bill proposes to do, it is important to define the current problem in
the law. A brief history of Oregon jurisprudence in this sphere will therefore be
instructive.
Under the common law, a territorialist approach dominated choice-of-law
analysis until the mid-twentieth century. This approach, which was adopted in
1934 by the American Law Institute’s first RESTATEMENT OF THE LAW OF
CONFLICT OF LAWS as well as by Oregon courts, was based on the vested-rights
theory. According to that theory, rights vest and the governing law is determined
on the basis of the location of a single connecting factor, such as the place or
wrong in a tort case or the domicile of parties in a family dispute. Thus, for
example, whenever a business transaction involves more than one jurisdiction, the
location of a single, central element of the transaction, such as the making of a
contract, controlled the choice of law.
This vested-rights approach led to the formulation of rather rigid,
jurisdiction-selecting rules. Particularly significant and controversial have been the

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territorialist rules governing torts and contracts: law of the place of wrong (lex loci
delicti) and law of the place of contracting (lex loci contractus). From a
territorialist perspective, in resolving contract-related issues – the first phase of the
Oregon Law Commission’s project – it is necessary to identify either the place of
making or place of performance of the contract and sometimes both.
Although territorialist rules continue to be applied by courts and other
decision-makers in a few states and to dominate analysis in contexts other than
torts or contracts in all states, they are of relatively little importance today in
resolving torts and contracts-related disputes. Complex modern approaches have
generally replaced the simple rules of the first RESTATEMENT, often to the
consternation of busy attorneys and judges.
During the last four decades, Oregon courts have participated in the
nationwide trend away from traditional, jurisdiction-selecting rules. The new
approaches replace jurisdiction-selecting rules with rule-selecting criteria. These
approaches, and rules fashioned from them, characteristically require a more
functional comparative analysis of significant features in the conflicting laws
themselves. Courts therefore are no longer blind to the policies underlying
conflicting laws in the interest of simply finding the ‘right’ jurisdiction regardless
of the content of its law. Unfortunately, these modern approaches are so flexible
that the selection of one rule-selective approach over another is less important than
the court’s discretion to use whatever factors and considerations it can find to
justify a desired result.
In 1964, the Oregon Supreme Court’s nationally pioneering, though
controversial, opinion in Lilienthal v. Kaufman broke with territorialism and
adopted one of the modern approaches, government interest analysis. Subsequent
opinions, at first in tort cases but later in contract cases, adopted the ‘most
significant relationship’ test, as outlined in the RESTATEMENT (SECOND) OF THE
LAW OF CONFLICT OF LAWS. In practice, however, Oregon courts have tended to
depart from either of these prescribed methodologies although they continue to
apply important elements of the RESTATEMENT (SECOND) in particular. Thus,
although the courts have usually described the applicable methodology to be some
variant of the RESTATEMENT (SECOND), the overall approach that the courts take
has been more of a hybrid of gravity of contacts balancing, governmental interest
analysis, and policy-directed features of RESTATEMENT (SECOND) methodology.
Generally, the following characteristics of Oregon’s approach emerged during the
first two decades of judicial experimentation after Lilienthal:

1. As in most states, Oregon courts continued to apply traditional, territorialist

rules to resolve issues other than those involving contracts and torts.
2. In contract cases a forum preference that is characteristic of all modern
approaches, especially in Oregon, dominated decisions. Thus, Oregon law
(lex fori) would apply in most cases.
3. Appellate courts adopted an eclectic and rather indeterminate approach in
contract cases. In the well-known words of Lilienthal v. Kaufman, Oregon

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courts continue to ‘refrain from making any pronouncements which might

in the future restrain [them] from taking [a new course]’.
4. Leading decisions have been difficult to reconcile with each other.
5. Oregon courts followed a small number of statutory directives on choice of
law.

More recently, Oregon conflicts decisions generally confirm the homeward trend
of applying Oregon law in most cases. The normal methodology involves a two-
step test. Accordingly, courts determine, first, whether there is an actual conflict
before proceeding to the second step of asking which legal system has the most (or
more) significant relationship to a particular case or issue in it. Although the courts
fairly consistently phrase the test that way, they have typically undertaken the first
step only to determine whether there is an ostensible conflict. After all, if the
analysis is to rely on some sort of most significant relationship or governmental
interest analysis, the court could hardly conclude in the first step that there is an
‘actual’ conflict before determining, in the second step, where the most significant
relationship or interests lie.
Oregon’s complicated choice-of-law approach has been plagued by
problems of application. Courts combine methodologies in hybrid or kaleidoscopic
fashion. They also indiscriminately cite cases, without sufficient regard to
variations among them and the importance of considering each issue by itself. The
resulting opinions are often confusing even though they typically lead to the
application of the law of the forum.

V. History of the Project

In 1998, the Oregon Law Commission began to develop legislative initiatives and
invited outside proposals for law reform projects. In response, the Reporter
submitted a proposal in May 1998 to draft choice-of-law rules. This proposal to the
Oregon Law Commission (see Annex I) noted the observation of Willis Reese, a
distinguished conflicts expert who served as Reporter of the SECOND
RESTATEMENT, that Oregon has the most confusing choice-of-law approach in the
country. The proposal also cited the need for a more stable, concrete set of rules to
guide judicial and other decision-makers. Following the examples of numerous
foreign legal systems and the state of Louisiana, the proposal suggested that the
Oregon Law Commission initiate a project to prepare a draft statute on choice of
law for consideration by the Oregon Legislature. The Commission decided in
September 1998 to undertake the project.
On the Commission’s request, the Reporter met in December 1998 with two
members of the Commission, Chief Justice Wallace Carson of the Oregon Supreme
Court and Professor Dom Vetri of the University of Oregon School of Law, to

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begin planning the project. Because the Oregon Legislature was to convene the
following month in its biennial session, it was too late to draft legislation for
review by the 1999 session. Instead, the planning committee proposed the
establishment of a study group that would meet for the first time in the early part of
2000. Accordingly, the Study Group on Conflict of Laws was organized on the
basis of expertise, practical experience and representation of bench and bar.
The Study Group met seven times, on 21 January, 28 April, 1 June, 29 June,
11 August, 12 September, and 4 October. All meetings were held at the Willamette
University College of Law. Also, a public meeting was held at the Oregon State
Bar headquarters, 30 October 2000. Between meetings, members of the Study
Group communicated with the Reporter and other members by e-mail, list serv,
and written memos. Numerous attorneys communicated ideas and questions to the
Reporter as well. The drafting process was assisted by a drafting committee that
included David Heynderickx, Hans Linde, Symeon Symeonides, and the Reporter.
The Reporter prepared a study (Annex II) of Oregon’s choice-of-law
process in time for the 28 April meeting. This study analyzed modern Oregon case
law during two periods of development: 1974-1986 (‘the formative period’) and
1986-2000. Revised versions of two paragraphs in the introductory (‘Background’)
section of that report are incorporated in this report. An annex to the Reporter’s
study summarized each state court decision that has addressed choice-of-law issues
during the period 1986-2000 and a sampling of relevant federal cases applying
Oregon choice-of-law methodology during the same period of time. Particular
attention was given to the consistency or not of the methodology actually applied
in a case with the stated methodology. This analysis revealed profound
inconsistencies and methodological variations from case to case. During the
formative period, Oregon appellate courts nearly always applied the law of the
forum to resolve conflicts of law. In more recent years, the courts have continued
to apply Oregon law in most cases, though to a slightly lesser degree than during
the formative period.
At its 28 April meeting, the Study Group confirmed the need for legislation
that would establish governing rules for choice-of-law issues in Oregon as clearly
and concretely as possible. Bearing in mind the possibility that the 2001 legislative
session might be able to review the draft legislation, the Study Group decided to
limit its agenda in 2000 to a formulation of choice-of-law rules to govern contract-
related issues not otherwise covered by the Uniform Commercial Code.

VI. Review of Legal Solutions Existing or Proposed

Elsewhere
After reviewing Oregon case law, as summarized in the report prepared for the 28
April meeting (Annex II), the Study Group consulted a broad range of contract-

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related provisions for resolving conflicts issues that have been adopted by other,
mostly foreign legal systems; formulated by legal scholars; or found in the
RESTATEMENT (SECOND) OF THE LAW OF CONFLICT OF LAWS. The Study Group
was greatly assisted by lists of alternative provisions that Symeon Symeonides had
prepared as Reporter of Louisiana’s choice-of-law codification project and as Co-
Reporter of Puerto Rico’s project. Commentaries prepared by Dean Symeonides on
the Puerto Rico draft were particularly helpful. The project’s comparative analysis
therefore focused primarily on the RESTATEMENT (SECOND), Louisiana, Puerto
Rico and German laws, and European regional law. In particular, the Puerto Rico
draft, which the Study Group adopted as a basis for detailed discussion and
drafting, helped us to sharpen the Study Group’s focus, identify issues, and
generally organize the drafting process.

VII. The Proposal

[see Annex III]

VIII. Conclusion
The proposed legislation to codify choice-of-law rules to govern contract-related
issues is the product of thorough deliberation, consultation with knowledgeable
specialists and other interested parties, and an extensive process of drafting and
redrafting. It is a substantial improvement over the case law of which it takes
account but which it would largely replace. The legislation will serve a broad range
of interests that were represented on the Oregon Law Commission’s Study Group
on Conflict of Laws or that were otherwise expressed during the drafting process.
The bill conforms with the advice of experts, is methodologically sound, and will
greatly facilitate the resolution of multijurisdictional disputes in Oregon.
Enactment of the proposed legislation would revive Oregon’s leadership in
conflicts law, as demonstrated by appellate courts over a generation ago, and
would help put Oregon in the forefront of a trend toward codification of conflicts
law.

Respectfully submitted,

James A.R. Nafziger

Reporter

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ANNEX II :
CONFLICTS LAW APPLICABLE TO CONTRACTS

DEFINITIONS

SECTION 1
DEFINITIONS

For the purposes of sections 1 to 10, chapter 164, Oregon Laws 2001:
(1) ‘Law’ means any rule of general legal applicability adopted by a state,
whether that rule is domestic or foreign and whether derived from
international law, a constitution, statute, other publicly adopted measure or
published judicial precedent. Except for references to the law of Oregon,
‘law’ does not include rules governing choice of law.
(2) ‘State’ means the United States, any state of the United States, any territory,
possession or other jurisdiction of the United States, any Indian tribe, other
Native American group or Native Hawaiian group that is recognized by
federal law or formally acknowledged by a state of the United States, and
any foreign country, including any territorial subdivision or other entity
with its own system of laws.

APPLICABILITY

SECTION 2
APPLICABILITY

Applicability. Sections 1 to 10, chapter 164, Oregon Laws 2001, govern the choice
of law applicable to any contract, or part of a contract, when a choice between the
laws of different states is at issue. Sections 1 to 10, chapter 164, Oregon Laws
2001, do not apply if another Oregon statute expressly designates the law
applicable to the contract or part of a contract. Sections 1 to 10, chapter 164,
Oregon Laws 2001, do not apply to any contract in which one of the parties is a
financial institution, as defined by 15 U.S.C. 6827, as in effect on the effective date
of this law.

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CONTRACTS GOVERNED BY OREGON LAW

SECTION 3
SPECIFIC TYPES OF CONTRACTS GOVERNED BY OREGON LAW

Notwithstanding any other provision of sections 1 to 10, chapter 164, Oregon Laws
2001, but subject to the limitations on applicability imposed by section 2, chapter
164, Oregon Laws 2001, the law of Oregon applies to the following contracts:
(1) A contract for services to be rendered in Oregon, or for goods to be
delivered in Oregon, if Oregon or any of its agencies or subdivisions is a
party to the contract. The application of Oregon’s law pursuant to this
subsection may be waived by a person authorized by Oregon’s law to make
the waiver.
(2) A contract for construction work to be performed primarily in Oregon.
(3) A contract of employment for services to be rendered primarily in Oregon
by a resident of Oregon.
(4) (a) A consumer contract, if:
(A) The consumer is a resident of Oregon at the time of contracting;
and
(B) The consumer’s assent to the contract is obtained in Oregon, or
the consumer is induced to enter into the contract in substantial
measure by an invitation or advertisement in Oregon.
(b) For the purposes of this subsection, a consumer contract is a contract
for the supply of goods or services that are designed primarily for
personal, familial or household use.

RULES GOVERNING FORM OF CONTRACT,

CAPACITY TO CONTRACT AND CONSENT

SECTION 4
VALIDITY OF FORM

A contract is valid as to form if the contract meets the requirements prescribed

either by the law chosen by the parties under sections 7 and 8, chapter 164, Oregon
Laws 2001, the law applicable under section 3, 9 or 10, chapter 164, Oregon Laws
2001, or the law of the state from which any party or the party’s agent has assented

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to the contract unless that state has no other connection to the parties or the
transaction.

SECTION 5
CAPACITY TO CONTRACT

(1) A party has the capacity to enter into a contract if the party has that capacity
under the law of the state in which the party resides or the law applicable to
this issue under section 3, 9 or 10, chapter 164, Oregon Laws 2001.
(2) A party that lacks capacity to enter into a contract under the law of the state
in which the party resides may assert that incapacity against a party that
knew or should have known of the incapacity at the time the parties entered
into the contract. If a party establishes lack of capacity in the manner
provided by this subsection, the consequences of the party’s incapacity are
governed by the law of the state in which the incapable party resides.

SECTION 6
CONSENT

(1) A party has consented to a contract if the law applicable under section 3, 9
or 10, chapter 164, Oregon Laws 2001, so provides.
(2) In a consumer contract or employment contract, the consumer or employee
whose assent to a contract was obtained in the state of the party’s residence,
or whose conduct leading to the contract was primarily confined to that
state, may invoke the law of that state to establish that the party did not
consent to the contract or that the consent was not valid by reason of fraud
or duress.

CHOICE OF LAW MADE BY PARTIES

SECTION 7
CHOICE OF LAW MADE BY PARTIES

(1) Except as specifically provided by section 3, 4, 5, 6 or 8, chapter 164,

Oregon Laws 2001, the contractual rights and duties of the parties are

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governed by the law or laws that the parties have chosen. The choice of law
may extend to the entire contract or to part of a contract.
(2) The choice of law must be express or clearly demonstrated from the terms
of the contract. In a standard-form contract drafted primarily by only one of
the parties, any choice of law must be express and conspicuous.
(3) The choice of law may be made or modified after the parties enter into the
contract. Any choice of law made or modified after the parties enter into the
contract must be by express agreement.
(4) Unless the parties provide otherwise, a choice of law or modification of that
choice operates retrospectively to the time the parties entered into the
contract. Retrospective operation under the provisions of this subsection
may not prejudice the rights of third parties.

SECTION 8
LIMITATIONS ON A CHOICE OF LAW BY THE PARTIES

(1) The law chosen by the parties pursuant to section 7, chapter 164, Oregon
Laws 2001, does not apply to the extent that its application would:
(a) Require a party to perform an act prohibited by the law of the state
where the act is to be performed under the contract;
(b) Prohibit a party from performing an act required by the law of the state
where it is to be performed under the contract; or
(c) Contravene an established fundamental policy embodied in the law
that would otherwise govern the issue in dispute under section 9,
chapter 164, Oregon Laws 2001. For purposes of subsection (1)(c) of
this section, an established policy is fundamental only if the policy
reflects objectives or gives effect to essential public or societal
institutions beyond the allocation of rights and obligations of parties to
a contract at issue.

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LAW APPLICABLE IN THE ABSENCE OF

AN EFFECTIVE CHOICE BY THE PARTIES

SECTION 9
GENERAL RULE

To the extent that an effective choice of law has not been made by the parties
pursuant to section 7 or 8, chapter 164, Oregon Laws 2001, or is not prescribed by
section 3, 4, 5, 6 or 10, chapter 164, Oregon Laws 2001, the rights and duties of the
parties with regard to an issue in a contract are governed by the law, in light of the
multistate elements of the contract, that is the most appropriate for a resolution of
that issue. The most appropriate law is determined by:

(1) Identifying the states that have a relevant connection with the
transaction or the parties, such as the place of negotiation, making,
performance or subject matter of the contract, or the domicile,
habitual residence or pertinent place of business of a party;
(2) Identifying the policies underlying any apparently conflicting laws of
these states that are relevant to the issue; and
(3) Evaluating the relative strength and pertinence of these policies in:
(a) Meeting the needs and giving effect to the policies of the
interstate and international systems; and
(b) Facilitating the planning of transactions, protecting a party from
undue imposition by another party, giving effect to justified
expectations of the parties concerning which state’s law applies
to the issue and minimizing adverse effects on strong legal
policies of other states.

PRESUMPTIVE RULES

SECTION 10
PRESUMPTIVE RULES FOR SPECIFIC TYPES OF CONTRACTS

(1) To the extent that an effective choice of law has not been made by the
parties pursuant to sections 7 or 8, chapter 164, Oregon Laws 2001, or is not
prescribed by sections 3, 4, 5 or 6, chapter 164, Oregon Laws 2001,
contracts described in subsection (2) of this section are governed by the law
of the state specified in subsection (2) of this section unless a party

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demonstrates that the application of that law would be clearly inappropriate

under the principles of section 9, chapter 164, Oregon Laws 2001.
(2) (a) Contracts involving the occupancy of real property, the land use of
property or the recording of interests in real property are governed by
the law of the state where the property is situated.
(b) Contracts for personal services are governed by the law of the state
where the services are to be primarily rendered pursuant to the
contract.
(c) Contracts for franchises, as defined in ORS 650.005, except for
licensing clauses in such contracts, are governed by the law of the state
where the franchise is to operate pursuant to the contract.
(d) Licensing contracts and licensing clauses in contracts for franchises, as
defined in ORS 650.005, are governed by the law of the state where
the licensor has its place of business or residence with the closest
connection to the transactions between the parties. For purposes of this
subsection, ‘licensing’ means a grant of a privilege, created by
contract, that allows one party, the licensee, to use the property or right
of another party, the licensor.
(e) Agency contracts are governed by the law of the state where the
agent’s duties are to be primarily performed.

MISCELLANEOUS

SECTION 11

(1) Except as provided in subsection (2) of this section, sections 1 to 10,

chapter 164, Oregon Laws 2001, apply to all contracts, whether entered into
before, on or after the effective date of this law, unless that application
would violate constitutional prohibitions against impairment of contracts.
(2) Sections 1 to 10, chapter 164, Oregon Laws 2001, do not apply to any
choice of law that is at issue in an action or proceeding commenced before
the effective date of this law.

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 Oregon’s Conflicts Law applicable to Contracts

SECTION 12

The unit and section captions used in this law are provided only for the
convenience of the reader and do not become part of the statutory law of Oregon or
express any legislative intent in the enactment of this law.

ANNEX III : COMMENTS

(References to sections are to sections in the Act, not to numbered subsections in
the Comments)

SECTION 2

1. Several Oregon statutes contain choice-of-law rules or rules for avoiding a

conflict of laws. The legal subjects include arbitration and conciliation (OR.
REV. STAT. § 36.508); commercial transactions (OR. REV. STAT. §§
71.1050, 72A.1050, 74A.5070, 75.1160, 78.1100, 79.1030 (1999));
insurance (OR. REV. STAT. TIT. 56); limitation of judicial actions (OR. REV.
STAT. § 12.430-50 (1999)); unclaimed property (OR. REV. STAT. §§ 98.304,
98.348, 98.424 (1999)); premarital agreements (OR. REV. STAT. § 108.710
(1999)); child custody (OR. REV. STAT. §§ 109.711, 109.714, 109.777,
109.781, 109.831 (1999)); marital property (OR. REV. STAT. §§ 112.715,
112.725 (1999)); family support (OR. REV. STAT. §§ 110.321, 110.348,
110.411 (1999)); wills and gifts (OR. REV. STAT. §§ 112.230, 112.255,
126.809 (1999)); environmental cleanup assistance (OR. REV. STAT. §
465.480 (1999)); transboundary pollution (OR. REV. STAT. § 468.080
(1999)); statutes of limitation (OR. REV. STAT. §§ 12.410-480 (1990)); and
foreign adoptions (OR. REV. STAT. § 109.385(1999).
2. This Act does not intend to revise these rules or any other such rules of
Oregon statutory law. Rather, it provides a means for resolving contract-
related conflicts issues not otherwise addressed by Oregon statutes. This
Act does not apply as statutory law to any contract in which one of the
parties is a financial institution, as defined by 15 U.S.C. 6827.

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 Text, Materials and Recent Developpements

SECTION 3

1. Section 3 provides that Oregon law governs issues related to several

specified types of contracts. To that extent, the section reflects a strong
inclination of Oregon courts, in resolving conflicts, to apply the law of the
forum (lex fori). This has been the practice since the seminal opinion in
Lilienthal v. Kaufman, 395 P.2d 543 (Or. 1964). Published decisions since
Lilienthal confirm the homeward trend.
2. The required application of Oregon law is, however, limited to four types of
contracts, in order to ensure the application of Oregon legal policies to local
employees, consumers, local construction, and state government agencies.
3. This section overrides other provisions in the Act. Thus, for example, a
contract falling within this section would be governed by Oregon law
regardless of the exercise of party autonomy under Section 7. Sections 4
(‘Validity of form’), 5 (‘Capacity to contract’), and 6 (‘Consent’) do,
however, provide alternative choices besides Oregon law.
4. The Act does not allow parties to consumer contracts to opt out of local law
in order to apply a more favorable rule of decision from another interested
jurisdiction. This reflects the view that the Oregon legislature and
administrative agencies are in the best position to determine the extent of
protection that should be afforded to Oregon consumers. It would be
inequitable, for example, to permit a party unilaterally to choose another
state’s law simply because it would be more protective than Oregon law.

SECTIONS 4-6
(to be located at the end of Section 6)

Sections 4-6 adopt and extend the principle of validation. Accordingly, they
authorize the application of any of several alternative choice-of-law rules that
would validate the contract as to its form, the capacity of parties to consent to enter
into a contract, and the consent of parties to the contract. Thus, for example, if one
party to a contractual dispute contends that the contract is invalid, a determination
of its validity will be upheld as long as such a contract would be valid under the
law of any of the states to which the section refers.

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 Oregon’s Conflicts Law applicable to Contracts

SECTION 7

1. Section 7 encourages parties to a contract to exercise choice-of-law

autonomy. Within the terms of the Act, therefore, parties are encouraged to
choose the law they wish to apply to their contract when they enter into it.
Subsection 7(1) makes clear that the exercise of party autonomy within this
Act extends only to contractual rights and duties of the parties and not to
non-contractual rights and duties such as those arising out of the law of torts
and property.
2. The parties’ choice of law may govern an entire contract or only a part of it.
The reference to their choice of ‘law or laws’ makes clear that, in some
circumstances, they may engage in dépeçage so as to choose different laws
to govern different aspects, topics or potential issues related to their
contractual relationship.
3. In exercising this autonomy, parties may select model rules or principles.
For example, parties to an international contract may choose to have it
governed by the Unidroit Principles of International Commercial Contracts.
4. The parties’ choice of law need not be in writing. An otherwise valid oral
contract might include a choice-of-law provision to which the parties have
agreed. In exceptional cases, even if a contract does not contain an express
choice-of-law clause, it may be apparent or clearly demonstrated from the
terms of a contract that the parties intended a particular law to govern it or a
part of it. Although some authority from other jurisdictions permits a court
to find an implied choice-of-law provision derived from either the conduct
of the parties, their prior dealings, or extrinsic or parol evidence, the Act
does not accept such premises for choice of law. Instead, the Act
encourages parties expressly to designate the law or laws to govern their
transaction, relationship, or specific aspects of either.
5. Subsection 3 enables the parties to make or modify their choice of law any
time after they enter into the contract. A later choice must be express; it
therefore cannot be construed from the terms of the contract.
6. In order to discourage adhesion clauses for choice of law, where the parties
have materially unequal bargaining power, this section of the Act requires
that a choice-of-law provision in a standard-form contract must be express
and conspicuous. The word ‘conspicuous’ has been used in commercial
transactions under the Uniform Commercial Code, ORS 71.2010, and
interpreted by the courts in that context for many years.
7. The parties’ choice of law will operate retrospectively to the time the parties
entered into their contract even if they designate a choice of law after the
contract has been made. If the parties do not want to have a choice-of-law
clause operate retrospectively, they must so provide. The retrospective

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 Text, Materials and Recent Developpements

effect of the parties’ choice of law cannot be allowed to prejudice the rights
of third parties, however.

SECTION 8

1. Although courts only rarely invalidate choice-of-law clauses, some judicial

decisions have created a narrow exception. This ‘public policy’ exception
permits courts to invalidate the parties’ choice of law in extraordinary
circumstances. Courts have had difficulty, however, in articulating a
consistent set of principles to govern this exception. Some states will not
enforce a choice-of-law clause whenever application of that law would
violate a ‘basic’ or ‘mandatory’ public policy of the forum. Unfortunately,
these terms do not provide sufficient guidance to courts, making it difficult
for them to render principled judgments as to when a choice-of-law clause
should be disregarded.
2. This section makes clear that the basis for circumventing the parties’ choice
of law must be an established legal policy, that is, a legal policy which is
already operative rather than merely purported or unarticulated until a
particular dispute arises. In some circumstances, the legal policy that is
advanced for circumventing a choice-of-law clause may be ‘established’ but
not be ‘fundamental’; in other cases, it may be ‘fundamental’ but not
‘established’ authoritatively. Under this Act the parties’ choice of law must
be accepted unless the chosen law would violate both a ‘fundamental’ and
‘established’ policy which has been embodied in the law that would
otherwise govern an issue in a particular dispute under § 9 of the Act. As
narrowly defined, an ‘established’ policy is ‘fundamental’ only if it relates
to the public at large; a benefit limited to one or more parties in a particular
dispute is insufficient.

SECTION 9

1. Background. Until the last half of the twentieth century, courts generally
applied rigid, territorialist rules to resolve choice-of-law issues, as
crystallized in the first RESTATEMENT OF THE LAW OF CONFLICT OF LAWS.
Those rules compelled a choice of law on the basis of a single jurisdictional
connection, for example, the place where a contract was entered into (lex
loci contractus).

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 Oregon’s Conflicts Law applicable to Contracts

Territorialist rules have generally served, or have been thought to serve,

several important functions. These include simplicity, predictability, ease of
judicial administration, and avoidance of forum shopping.
Application of territorialist, jurisdiction-selecting rules has created
many problems. For example, they often produce unjust results when
geographical circumstances governing a choice of law have been accidental,
where lawmakers and courts in the indicated jurisdiction would have had no
expectation that the local law would govern a particular multijurisdictional
issue, or where the indicated jurisdiction has relatively little functional
connection with the critical event, transaction, or parties to a case.
In response to these kinds of defects in territorialist rules, judicial
thinking throughout the United States, including Oregon, began to shift in
the second half of the last century from a selection of the appropriate
jurisdiction, whose law would then be applied, to a selection of the
appropriate law, as determined by an analysis of its intended scope,
function(s), salience to the governing authority, and relative value. The new
jurisprudence therefore embraces a number of approaches rather than
simple rules.

2. The appropriate law approach. An underlying premise of the modern

approaches to choice of law is that judicial experience in applying them not
only would replace the mechanical application of territorialist rules but
would eventually lead courts to formulate new sets of rules based on their
experience. Accordingly, the Act as a whole seeks to establish both specific
and general rules to resolve choice-of-law issues in contract cases. The Act
builds upon Oregon judicial experience but advances the law substantially
by setting forth concrete rules addressed to specific types of contracts or
provisions in a contract, and, where a specific rule or the provision for party
autonomy does not apply, by adopting a default or general rule for
identifying the appropriate law, as defined by criteria of substantive justice.
Nothing in the Act is to be interpreted to constrain courts from applying its
rules by analogy.
To determine the appropriate law, the default or general rule set forth
in this section adopts a substantive approach to choice of law that carefully
examines the consequences of choosing one rule of law over another. Thus,
the Act seeks to maximize material justice without sacrificing principles of
conflicts justice such as simplicity, predictability, and party autonomy.
The inquiry that the default or general rule prescribes is issue-specific.
Accordingly, the most appropriate body of law to govern one issue is not
necessarily the same body of law that should govern other issues.
The prescribed approach involves three steps:

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 Text, Materials and Recent Developpements

a. Identification of states that appear to have a relevant connection

with the transaction or the parties. The most important of the
relevant connections are listed, although the ‘such as’ language
introducing the list indicates the possibility that other
considerations may be relevant. For example, the growth of
Internet commerce may require an identification of additional
connections as the technology evolves.
It is not enough to identify a state which has one or more
generalized connections with the parties to a contract or the
underlying transaction. Rather, it is critical to determine whether
a connection is relevant to a particular issue. In other words, this
section lists potentially relevant connections, but whether a
connection is actually relevant depends on each particular issue.
b. Identification of the policies underlying any conflicting laws of
those states whose connections are relevant to a particular issue.
The choice of ‘policies’ rather than ‘governmental interests’ is
deliberate. Most laws governing private transactions and disputes
concern the interests of private parties, and may be adopted at
their behest, rather than interests of a state or government.
Oregon law may sometimes work in the interest of Oregon
parties, but sometimes the law of another relevant state would be
more favorable to them. Thus, the statute does not assume that
Oregon inevitably has a state ‘interest’ in applying Oregon law in
a multijurisdictional context, except for the subjects listed in § 3
of the statute.
The conflict must be patent from an examination of two or more
ostensibly applicable laws. The concluding language of this
subsection underscores the point that the only material conflict is
between laws relevant to a particular issue in a dispute between
contracting parties.
c. Evaluation of the relevant strength and pertinence of the policies
identified in subsection 2 in meeting the needs and giving effect
to the policies of the interstate and international systems and to
four fundamental values of contract law that are specified in
subsection 3(b). Oregon statutory law already acknowledges the
importance of meeting the needs and giving effect to the policies
of the interstate and international systems. The state’s adoption of
many uniform laws is a salient example. One of these laws, for
example, provides that, in its application and construction,
‘consideration must be given to the need to promote uniformity
of the law with respect to its subject matter among states that
enact it’. ORS § 109.831 (child custody jurisdiction and

416 Yearbook of Private International Law, Volume 3 (2001)

 Oregon’s Conflicts Law applicable to Contracts

enforcement). The Unidroit Principles of International

Commercial Contracts provide guidance for achieving greater
uniformity in international transactions.
In evaluating the relative strength and pertinence of conflicting
policies, what matters is not the subjective expectations of the
parties nor their relative bargaining power, but rather the ability
of a particular policy to give effect to the specified values. In this
analysis, general principles and custom may provide substantial
guidance.

SECTION 10

1. Section 10 establishes that, with respect to certain specified types of

contracts, the appropriate law is presumed to be the law prescribed,
respectively, by each provision of subsection (2) unless parties to a contract
have chosen their own law under sections 7 and 8 or sections 3, 4, 5 or 6
prescribe the application of another law. Subsection (1) provides,
furthermore, that the presumed law does not apply if a party demonstrates,
under the default or general rule of section 9, that such application would be
clearly inappropriate.
2. Under § 2 of this Act, provisions for choice of law in Oregon’s insurance
code remain effective. For example, OR. REV. STAT. § 742.018 establishes
that ‘[n]o policy of insurance shall contain any condition, stipulation or
agreement requiring such policy to be construed according to the laws of
any other state or country. Any such condition, stipulation or agreement
shall be invalid’.
3. The court’s decision on the applicable choice of law is an issue of law.
Thus, if a party disputes a presumptive rule under this section, a
determination of its applicability is for the court, not the jury.

SECTION 11

Section 11 establishes a uniform choice-of-law regime in Oregon applicable to all

contracts, regardless of when they may have been made. The only exceptions
would occur if the application of a choice-of-law rule would unconstitutionally
impair a contract or if the choice of law is at issue in an action or proceeding
commenced before the effective date of the Act. Both exceptions contemplate the

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 Text, Materials and Recent Developpements

unusual situation where, by applying the Act to existing contracts as of its effective
date, a provision or provisions of the Act would unfairly or unmanageably change
contractual intent or expectations to the injury of a party or parties to a contract.

418 Yearbook of Private International Law, Volume 3 (2001)

 BOOK REVIEW
________________

Mario GIOVANOLI (editor), International Monetary Law, Issues for the New
Millennium, Oxford (Oxford University Press) 2000, pp. v-li, 538.

In the introduction M. GIOVANOLI describes the book as a collection of essays

written by MOCOMILA members ‘analysing some of the dynamic forces in the
field of international monetary law at the dawn of the new millennium and
presaging some of the future evolution’.1 MOCOMILA (Committee on
International Monetary Law) is one of the 20 committees of the International Law
Association. Founded in Brussels in 1873, ILA is currently the umbrella
organization of 53 national branches throughout the world, making it one of the
most prominent organizations in the fields of both public and private international
law and of comparative law as well.
This well-organized book contains 27 chapters divided into five main parts:
1) international financial architecture, 2) impact of the European Monetary Union,
3) central banks, supervisory authorities and deposit insurance, 4) impact of
technological developments, and 5) international monetary obligations.
Unfortunately it is impossible to deal with all 27 chapters, each of which is written
by a different author. The chapters discussed here deal primarily with private
international law issues.

I. International Financial Architecture

Part I consists of the following chapters, all of which provide valuable insight into
the current developments in international monetary law: ‘A New Architecture for
the Global Financial Market: Legal Aspects of International Financial Standard
Setting’ (Mario GIOVANOLI), ‘International Jurisdiction over International Capital
Flows and the Role of the IMF: Plus Ça Change…’ (Cynthia CRAWFORD
LICHTENSTEIN), ‘The Changing Roles of the Bretton Woods Institutions: Evolving
Concepts of Conditionality’ (Andre NEWBURG), ‘The Prevention and Resolution of
International Financial Crises: A Perspective from the International Monetary
Fund’ (François GIANVITI), and ‘Monetary Sovereignty Today’ (Tullio TREVES).

1
M. GIOVANOLI, ‘About MOCOMILA: Fifty Years of Contributions to International
Monetary Law’, p. v.

Yearbook of Private International Law, Volume 3 (2001), pp. 419-426

© Kluwer Law International & Swiss Institute of Comparative Law
Printed in the Netherlands
 Book Review

GIOVANOLI’s well-elaborated essay is not intended to ‘analyse the content

or substance of the desirable framework of rules ensuring international financial
stability’ but to shed light ‘on the legal aspects of the international standards
aiming at establishing a sound legal framework, on the procedural aspects of
standard setting’ (4).2 Three main questions are posed: Who is involved in this
rule-making process? What is the legal character of these rules? How are these
rules to be implemented? In the new international financial system a great number
of institutions, entities and bodies are either directly or indirectly involved in the
rule-making process of setting international financial standards (11). An extensive
list is provided, including websites. As for the implementation of these rules, there
is a problem of legitimacy and fair representation because, in the author’s opinion,
it is necessary to recognize the legitimate interest of all countries participating in
the consultation process. In particular, he pleads for considerably improved
coordination when setting standards in this field. While the creation of the
Financial Stability Forum (FSF) in 1999 is regarded as a major step forward,
GIOVANOLI questions whether the FSF will have the necessary authority to
organize a rational division of labor among all those involved in the work of
standard setting.
As regards the legal nature of these rules, it is a well-known fact that, in the
field of international monetary law, most international rules, guidelines, standards
and other arrangements governing cross-border financial relations are not legally
binding but are soft law. According to the author, it is crucial that these soft law
standards be adopted and implemented by national authorities. In fact, in his
opinion, this is the Achilles’ heel of international financial standards. Thus it is
significant that the FSF is preparing an overall strategy for the implementation of
such standards.
Raising the question whether soft law standards should be strengthened
through hard law, he suggests that there might be a third way. In his words: ‘The
relationship between soft law and legally binding rules (statutory law in domestic
jurisdictions, formal treaties at the international level) often appears to be an
evolutionary process and soft law arrangements may be seen as “way stations on
the road to the conclusion of a treaty”‘ (52). In closing he concludes that it is
indispensable to establish the necessary legal safeguards ‘[i]f the new century and
millennium are to see the development of an open world, globally integrated’ (58-
59).
The starting point in the chapter on monetary sovereignty by TREVES is the
widely accepted rule that states have sovereignty over their currency policy. Citing
the well-known dictum of the Permanent Court of International Justice (in the
Serbian and Brazilian Loan cases) that the state is entitled to regulate its own
currency, the author remarks that ‘state sovereignty belongs to the area of fact and
not to the area of law’. Thus he questions ‘whether the use of a state’s currency

2
The page numbers cited throughout the text refer to the book being reviewed.

420 Yearbook of Private International Law, Volume 3 (2001)

 Book Reviews

beyond the reach of its enforcement power, the applicability of the lex monetae
notwithstanding, may diminish the ability of a state to pursue the purpose of its
monetary law’ (113).
In his opinion, the Euro is ‘probably the most profound limitation to
monetary sovereignty ever to have been agreed by sovereign states’ (116). Further
evidence of the erosion of monetary sovereignty can be seen in what he refers to as
‘xeno-currencies’, i.e., deposits denominated in a currency different from that of
the state where the deposit is made’ (117). As a result, states are unable to
effectively control and regulate ‘credit in its currency outside its territory’ (117),
thus depriving the state of the currency of one aspect of its monetary sovereignty.
At the same time he also admits that the state of the currency is not without
instruments for exercising its power on deposits abroad denominated in its
currency because final payment always requires banking operation in the country
of the currency. We fully agree with TREVES when he stresses that, regardless
whether we are dealing with agreed, customary or xeno currency, the sovereignty
of the state of the currency and therefore also the lex monetae rule can be asserted.

II. Impact of the European Monetary Union

Part II contains seven chapters and is divided into two sections: Transition to the
Euro and External Relations of the EMU. The chapters of the first subpart include:
‘European Monetary Law: The Transition to the Euro and the Scope of Lex
Monetae’ (Bertold WAHLIG), ‘The New Monetary Law of the European Union’
(Jean-Victor LOUIS), ‘Legal Consequences of the Single Currency’ (Antonio SÁINZ
DE VICUÑA) and ‘First Experiences with the Euro in Germany’ (Bernhard
KEMPEN). The second section consists of the following chapters: ‘European Union
Exchange Rate Policy?’ (Hugo J. HAHN), ‘Representation of the EC in the IMF’
(Erik DENTERS), ‘The Exchange Rate Regime between “Euroland” and Other
European Countries (with a Postscript on Norway)’ (Per CHRISTIANSEN).
Not underestimating the importance of the European Monetary Union and
its impact, these interesting chapters cannot be dealt with in this review, which is
concerned primarily with private international law issues. Nevertheless, WAHLIG’s
article should be mentioned as it discusses the scope of the lex monetae. Whereas
the rule in Article 147 of the Swiss Private International Law Act states that
‘currency is defined by the law of the issuing state’, in the case of the Euro we are
‘no longer dealing with the monetary law of an individual country but with the
monetary law of the European Community’ (123). The participating states have
agreed ‘to transfer their monetary sovereignty to the Community as a supranational
confederation of states’ (123-4). The transition from the national currencies to the
single currency is explained in detail. On the other hand, the replacement of
national currencies by the Euro does not include the ECU, which is neither ‘a

Yearbook of Private International Law, Volume 3 (2001) 421

 Book Review

currency in the legal sense nor a currency of the participating Member States but
rather a unity of account’ (135) or, better to say, a composite currency with the task
of stabilizing the effects of exchange rate fluctuations.

III. Central Banks, Supervisory Authorities and

Deposit Insurance
Part III contains five chapters on the role of central banks and their authorities.
Since the topics discussed do not deal with private international law issues, only
the titles and authors are mentioned: ‘Central Bank Independence and
Accountability in the Light of EMU’ (René SMITS), ‘Central Bank Reform: The
Reserve Bank of New Zealand’ (David E. FLINT), ‘The Role of the Central Bank in
a Crisis Environment: The Experience of Hong Kong and Taiwan, 1997-9’ (YU
Syue-Ming), ‘International Harmonization of Regulatory and Supervisory
Frameworks’ (Klaus Peter FOLLAK), ‘Deposit Insurance Schemes: Reconciling
Market Discipline with Financial Stability’ (Javier ARRIGUNAGA GÓMEZ DEL
CAMPO).

IV. Impact of Technological Developments

The chapters in Part IV deal with electronic money from the North American and
Japanese points of view and with real-time gross settlement systems for large-value
credit systems. While none of these chapters deals with conflicts issues in the event
of an international dispute, they provide a valuable description of the relevant
systems and their underlying legal principles. The three chapters include: ‘Core
Legal Principles across Major Large-value Credit Transfer Systems’ (Thomas C.
BAXTER, Jr. and Stephanie HELLER), ‘Electronic Money: A North American
Perspective’ (Bradley CRAWFORD QC and Barry SOOKMAN) and ‘Electronic
Money in Japan’ (Hideki KANDA).

V. International Monetary Obligations

Devoted primarily to private international law issues, each of the seven chapters in
Part V will be discussed briefly. The topics covered here are classic in the sense
that they have long been a focal point of research by members of MOCOMILA.

422 Yearbook of Private International Law, Volume 3 (2001)

 Book Reviews

In Chapter 21 ‘Interference of Public Law in the Performance of

International Monetary Obligations’ by William BLAIR, an international monetary
obligation is defined as ‘one which is not purely domestic to a particular country,
either because the parties to the obligation are from different countries, or because
the obligation is denominated in the currency of a different country’ (395). BLAIR
focuses on situations where ‘the law of a particular country is invoked to prohibit
or curtail the repayment of an international financial obligation’ (396). According
to the author, international creditors have used various legal techniques to avoid
negative effects from unilateral actions by the debtor’s state (397). For example, in
cases where a legal barrier has been imposed on the repayment of a financial
obligation, American courts raise the question ‘where the obligation was located’
(398). This is in accordance with the act of state doctrine, which says that a state is
not entitled to ‘exercise jurisdiction over assets outside its territory’. On the other
hand, English courts first inquire about the governing law and then the place of
performance of the obligation concerned. If repayment is illegal at the place of
performance, the obligation will not be enforced (398). Furthermore, as the author
points out, four issues are interconnected: act of state, situs, the governing law and
the place of performance.
BLAIR analyses several other factual situations in detail: moratorium,
prohibition on payment, exchange controls and Article VIII 2(b) of the IMF
Agreement, expropriation, court orders and freezes imposed pursuant to sanctions.
As regards expropriation, a distinction is made between cases where a foreign bank
has closed a branch office and is liable to repay money on deposit at that branch
and those where the expropriation of a branch office is ‘valid under the lex situs’
and ‘has the effect of transferring or extinguishing the deposit’, thus precluding
‘any claim against the bank’s head office’ (407).
In regard to freezes imposed pursuant to sanctions, we agree with BLAIR
that sanctions ‘may affect international monetary obligations in a number of ways’
(410). As his contribution shows, it is questionable whether UN sanctions
imposing freezes on bank accounts achieve the intended global effect. Experience
has shown that there are numerous abuses in the implementation and enforcement
of such sanctions. Like some other matters relating to international financial
transactions, international discipline has yet to be achieved.
Chapter 22, ‘Foreign Currency Obligations in Domestic Law’ by Jacob
DOLINGER, deals with the evolution of statutory foreign currency obligations in
Brazilian law. Since 1933 Brazil has had a legal prohibition declaring any
stipulation of payment in gold or a foreign currency null and void. Analyzing the
Brazilian court practice, the author shows that today the courts do not agree on
whether to accept the validity of a foreign currency clause. In light of the high
inflation in Brazil, this is especially true when foreign currency clauses are used as
a corrective price index. Nonetheless, the Provisional Presidential Measure of 1995
provides that ‘a payment of pecuniary obligations enforceable in Brazil shall be
done in REAL [Brazilian national currency], at its nominal value’ (422).

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 Book Review

Discussing foreign exchange obligations from the comparative point of

view, DOLINGER comes to the conclusion that in cases of foreign currency
obligations involving depreciation of the national currency, the ‘best approach is
the ad hoc one, which avoids definite rules and makes the date of conversion
dependent upon the precise facts of each case’ (432).
In Chapter 23 ‘The Scope of Lex Monetae in International Transactions: A
United States Perspective’, Michael GRUSON raises the question whether ‘a court,
when enforcing a contract which by its terms is performable in a currency other
than the currency of the forum, [must] give effect to the monetary laws of the
country in which that currency is legal tender’ (433). Discussing this issue from the
US point of view, GRUSON concludes ‘that no US federal court and no New York
state court has had the opportunity to decide whether it would apply the foreign
monetary laws of a foreign currency to an agreement governed by the law of a state
of the United States but to be performed in such foreign currency (444). While he
does not deny the possibility that US courts could apply the lex monetae doctrine
as a mandatory conflict of laws rule, he finds that changes in connection with the
introduction of the Euro in New York, Illinois and Californian legislation make its
application questionable. In his opinion, ‘New York, California and Illinois would
have been better advised if they had adopted a statue recognizing lex monetae as a
mandatory conflict of laws rule’ (445, note 70). In regard to the application of lex
monetae as a third-country public policy, he comes to the conclusion that, pursuant
to section 187(2) of the Restatement of Conflict of Laws, a US court would
probably give effect ‘to the monetary laws of the country of the contract currency
defining legal tender if the place of performance of the agreement in question were
in that country’ (450-451).
In his opinion, lex monetae is a ‘sound legal concept’ (456). Contrary to the
Swiss PIL Act, which makes a clear distinction between lex monetae, lex causae
and the statute of payment, the author regards the lex monetae principle ‘as a
mandatory exception to the conflict of laws rule that parties to a contract are free
(with certain limitations) to stipulate the law governing their agreement’ (456).
However, he leaves no doubt that ‘a US court would in a proper case apply the lex
monetae doctrine to a contract in which the law of the contract differs from the law
of the currency’ (456).
Chapter 24 by Luca G. RADICATI DI BROZOLO focuses on conflicts
problems: ‘Conflict of Laws Issues of International Payments’. According to the
author, legal scholarship and court decisions are rather scarce in this field. The
analysis is limited to two types of payment transactions: credit transfers initiated by
the debtor and debit transfers initiated by the creditor. Both can be performed
either as paper-based or electronic computer-based transactions.
From the author’s point of view, private international law has a ‘central role
in the context of international payments’ (460) because no set of international
rules, not even the UNCITRAL Model law on international credit transfers of 1992
regulates this subject matter sufficiently enough to eliminate conflicts problems.
Since rules on conflicts of jurisdiction are national and vary from state to state, it is

424 Yearbook of Private International Law, Volume 3 (2001)

 Book Reviews

not surprising that there is no single solution for jurisdictional problems in this
area. The analysis is restricted to the Brussels Convention on jurisdiction and the
enforcement of judgments in civil and commercial matters of 27 September 1968
and the ‘parallel’ Lugano Convention of 16 September 1988, which provide for a
choice between the domicile of the defendant and the place of performance of the
obligation in question. This in itself allows plenty of room for jurisdictional
disputes because ‘the place where an obligation is to be performed varies
considerably from one legal system to another’ (464). To avoid such conflicts, the
author suggests that, in the context of international payments, it would perhaps be
best to limit the forum to that of the defendant.
The second part of the article focuses on the conflict of laws rules proposed
by UNCITRAL and the Rome Convention of 19 June 1980 on the law applicable
to contractual obligations. According to the author, none of these rules is suitable
to meet the special requirements of international payment transactions.
Furthermore, in his opinion, no single law is likely to be ‘unanimously recognized
as the most suited to govern payments’ (473). Not surprisingly, RADICATI DI
BROZOLO raises the question whether it would be better to harmonize conflicts
rules or substantive law. Opting for the latter solution, he favors the harmonization
of substantive law by means of international conventions.
Written by John L. TAYLOR, Chapter 25 is entitled ‘The Governing Law in
Legal Agreements used by the European Bank for Reconstruction and
Development in its Banking Questions’. As the title indicates, this chapter sheds
light on considerations taken into account by the EBRB when selecting the law to
govern its agreements. As a rule, the contractual approach was chosen by the
EBRB in accordance with the general practices in project financing, the aim being
to make its project financing agreements comprehensive and self-containing. The
decision was also taken not to chose the local laws of the borrower since they were
usually new and thus ‘more suited to a command economy’ (485). As for loan and
guarantee agreements concluded by the EBRD with sovereigns, they were
governed by public international law, which is the usual practice of similar
international banking institutions.
As regards non-sovereign operations in respect of loan and guarantee
agreements, the EBRD practice has been to submit such agreements to English law
and in rare occasions to New York law. English law has also been agreed to govern
in instances where the EBRD was involved in underwriting operations. On the
whole, it can be said that this chapter provides interesting insight into the decision-
making process of the EBRD when determining the governing law of legal
agreements.
In Chapter 26 ‘Money and Arbitration’, Dominique B. CARREAU deals with
the problem of the currency of the contract and the mandatory nature of the lex
monetae principle. In his opinion, ‘arbitrators are in a position not markedly
different from that of domestic judges’ (493). Accordingly, arbitrators must honor
the parties’ choice of the currency of the contract and give effect to the monetary

Yearbook of Private International Law, Volume 3 (2001) 425

 Book Review

decisions of the state whose currency has been contracted. In view of their binding
nature, the monetary decisions of that state must prevail.
Among other things, the question is raised whether currency amounts in a
judgment may be expressed in a foreign currency. While France belongs to the
countries whose judgments can be rendered only in the national currency, the
author remarks that it is questionable whether this practice will be retained when
the Euro becomes the sole currency enjoying legal tender status after 1 January
2002. The U.S. also belongs to these countries; however, court decisions are cited
showing that a decision may be rendered in a foreign currency in exceptional cases.
In the United Kingdom, decisions may be rendered in a foreign currency ever since
the decision of the House of Lords in Miliangas v. George Frank (Textiles) Ltd.
[1976] AC 443. In Italy it is also possible to render decisions in a foreign currency.
This was confirmed by the Italian Supreme Court, which stated that the
enforcement judge ‘could not modify the arbitral award rendered in that national
and international currency by exchanging it into Italian currency’ (498). In regard
to the cogent nature of the lex monetae principle, the author concludes that, ‘in
monetary matters, international arbitrations do not enjoy any greater discretion
than domestic courts’ (502).
Chapter 28 by Franz ZEHETNER, entitled ‘The Euro and the Future of Index
Clauses’, is devoted to the use of index clauses in international commercial
transactions. Above all it deals with the problem of converting currencies of the
Member States of the European Monetary Union into Euro and the impact of such
conversions on existing index clauses. Since it deals primarily with substantive law
solutions, it is not discussed further.
Finally, the excellent organization of this book deserves praise. In addition
to the highly informative contributions on a wide range of topics relating to
international monetary law, the book also serves as a reference tool. GIOVANOLI’s
introduction also contains three annexes providing information on the chairmen of
MOCOMILA, the present members of MOCOMILA and observers, and former
members of MOCOMILA, as well as a bibliography of the contributors.
Particularly useful are the table of cases (xxvii-xxxv), table of legislation (xxxvii-
xlvii) and table of treaties, conventions and other instruments (xlvii-li). In closing it
is a pleasure for me to recommend this excellent book to all those interested in
monetary law, in its broadest sense.

Petar ŠARČEVIĆ

426 Yearbook of Private International Law, Volume 3 (2001)

 BOOKS RECEIVED
________________

ANCEL Bertrand/LAQUETTE Yves, Les grands arrêts de la jurisprudence française

de droit international privé, 4th ed., Paris (Dalloz) 2001, pp. 820.
AUDIT Bernard, Droit international privé, 3rd ed., Paris (Economica), 2000,
pp. VIII – 973.
BARNETT Peter, Res Judicata, Estoppel, and Foreign Judgments, Oxford (Oxford
University Press) 2001, pp. li – 346.
BRAUN Heiner, Joint Ventures im amerikanischen und deutschen internationalen
Privatrecht: Inhalt und Grenzen des Vertragsstatuts, Frankfurt a.M.- Bern
(P. Lang), 2000, pp. 181.
BUCHER Andreas/BONOMI Andrea, Droit international privé, Bâle-Genève-
Munich (Helbing & Lichtenhahn) 2001, pp. XXI – 356.
CADUFF Jlona, Die Feststellung des anwendbaren Rechts im Prozess (Art. 16
IPRG): ein Leitfaden für die Abwicklung von Verfahren mit internationalen
Sachverhalten, St. Gallen-Lachen (Dike Verl.) 2000, pp. XXX – 207.
CALVO CARAVACA Alfonso-Luis, Conflictos de leyes y conflictos de jurisdicción
en Internet, Madrid (Colex) 2001, pp. 172.
CANNONE Andrea, L’affidamento dei minori nel diritto internazionale privato e
processuale, Bari (Cacucci) 2000.
Cheshire and North’s Private international law, 13th ed., London (Butterworths),
1999, pp. CXVIII – 1069.
DUTREY GUANTES Yolanda, El contrato internacional de factoring, Madrid
(Universidad Complutense), 2000, pp. 368.
FERNÁNDEZ ARROYO Diego P., Derecho Internacional Privado Interamericano.
Evolución y perspectivas, Buenos Aires (Rubinzal – Culzoni) 2001, pp.
117.
FERNÁNDEZ CAMPOS José Carlos, Sistema del Comercio Internacional, Madrid
(Civitas) 2001, pp. 384.
FERRARI Franco, Il factoring internazionale: commento alla Convenzione Unidroit
sul factoring internazionale (con la collab. di Francesco CORTESI,
Alessandro RIZZIERI, Marco TORSELLO), Padova (CEDAM) 1999.
GEISLER Stephan, Die engste Verbindung im Internationalen Privatrecht, Berlin
(Duncker & Humblot) 2001, pp. 365.
GIOVANOLI Mario (ed.), International Monetary Law. Issues for the New
Millennium, Oxford (Oxford University Press) 2000, pp. li – 538.
 Books Received

HARTENSTEIN Olaf, Die Privatautonomie im Internationalen Privatrecht als

Störung des europäischen Entscheidungseinklangs: neueste Entwicklungen
in Frankreich, Deutschland und Italien, Tübingen (Mohr Siebeck) 2000.
HUGUENIN Anne-Sylvie, L'application du contrôle des changes étranger par le
juge national : étude comparée de l'article VIII (2)(b) des Statuts du F.M.I.,
de la théorie américaine de l'Act of State et de la loi suisse de droit
international privé, en particulier les articles 13 et 19 LDIP, Zurich
(Schulthess) 2000.
KOPPENSTEINER Hans-Georg (ed.), Österreichisches und europäisches
Wirtschafts-privatrecht. Teil 7, Internationales Privatrecht, Wien (Verl. der
Österreichischen Akademie der Wissenschaften) 2000, pp. 214.
NELLE Andreas, Anspruch, Titel und Vollstreckung im internationalen
Rechtsverkehr, Tübingen (Mohr Siebeck) 2000, pp. XXXII – 625.
NEMETH Kristin, Kollisionsrechtlicher Verbraucherschutz in Europa: Art 5 EVÜ
und die einschlägigen Verbraucherschutzrichtlinien, Wien (Manz) 2000.
RAMMELOO Stephan, Corporations in Private International Laws. A European
Perspective, Oxford (Oxford University Press) 2000, pp. xlvii – 349.
SACCHETTI Lamberto, Il nuovo sistema dell'adozione internazionale: legge 31
dicembre 1998, n. 476, Rimini (Maggioli) 2001.
SANCHO VILLA Diana, La transferencia internacional de la sede social en el
espacio Europeo, Madrid (Eurolex) 2001, pp. 364.
SCHNYDER Anton K./LIATOWITSCH Manuel, Internationales Privat- und
Zivilverfahrensrecht, Zurich (Schulthess) 2000, pp. XXXV – 321.
SIEHR Kurt, Internationales Privatrecht. Deutsches und europäisches
Kollisionsrecht für Studium und Praxis, Heidelberg (Müller) 2001,
pp. LXX – 648.
SOUTO Cláudio, Introdução crítica ao direito internacional privado, 2nd ed., Porto
Alegre (Fabris) 2000, pp. 224.
SPÜHLER Karl (ed.), Aktuelle Probleme des nationalen und internationalen
Zivilprozessrechts, Zurich (Schulthess) 2000, pp. 131.
UHL Laurenz, Internationale Zuständigkeit gemäss Art. 5 Nr. 3 des Brüsseler und
Lugano-Übereinkommens, ausgeführt am Beispiel der Produktehaftung
unter Berücksichtigung des deutschen, englischen, schweizerischen und
US-amerikanischen Rechts, Frankfurt a.M.-Bern (P. Lang), 2000, pp. 271.

428 Yearbook of Private International Law, Volume 2 (2000)

 Books Received

WALTER Gerhard/BAUMGARTNER Samuel P. (eds.), Recognition and enforcement

of foreign judgments outside the scope of the Brussels and Lugano
Conventions, The Hague (Kluwer Law International) 2000, pp. XII – 580.
WEBER Peter Johannes/WEBER Marc/SEITZ Riccardo/KÜNZLE Hans Rainer (eds.),
Liber discipulorum et amicorum, Festschrift für Prof. D. Kurt Siehr zum 65.
Geburtstag, Zurich (Schulthess) 2001, pp. VI – 321.
WEINTRAUB Russell J., Commentary on the conflict of laws, 4th ed., New York
(Foundation Press) 2001, pp. XVIII – 810.

Yearbook of Private International Law, Volume 2 (2000) 429

 INDEX
________________

Accessory choice-of-law China

torts 204, 211-212 See ‘People’s Republic
Act of State doctrine 168-169, 423 of China’
Acta iure imperii Choice of forum
torts committed during World Lugano Convention 16-17
War II 126, 130-133, 205-206, Hague draft on jurisdiction
208, 212, 215, 218 38-40, 46-47, 59-60
judicial penalties 269 Comity doctrine 167-168
Actor sequitur forum rei Consumer contracts
Hague draft 40-41, 60-61 Lugano Convention 20-21
Astreintes 262-263, 266-268, 279-281 ‘Brussels I’ Regulation 107
Austria Contracts
Lugano Convention Brussels Convention 10
13-14, 16-17, 19-20 Lugano Convention 10, 15-16
governmental liability 210-212 ‘Brussels I’ Regulation 108-110
Bankruptcy Hague draft on jurisdiction
Lugano Convention 38-45
12-13, 18-19 applicable law (Oregon)
interests in securities 76, 93-98 391-418
EC-Regulation No. 1346/2000 Currency 422-426
94 (note 52), 96-97 Dépeçage 212-214
Unidroit draft on mobile Discrimination on grounds of nationality
equipment 94-96 EC Treaty 23-24
Brazil Doing-business jurisdiction 42, 50, 57,
foreign currency obligations 145, 155
423-424 Due process
Brussels Convention on Jurisdiction and ‘Brussels I’ Regulation 111-112
the Recognition and Enforce- personal jurisdiction (US courts)
ment of Judgments in Civil 144, 155
and Commercial Matters and application of lex fori 175
(27 September 1968) 1-25 E-commerce 29, 35, 45-48
interpretation 2-3, 7 EC-Regulation No. 1347/2000 (‘Brus-
contracts 425 sels II’) on jurisdiction and the
employment contracts 21-23 recognition and enforcement of
lis pendens 8, 113 judgments in matrimonial mat-
enforcement proceedings ters and in matters of parental
271-278 responsibility for children of
and ‘Brussels I’ Regulation both spouses (29 May 2000)
103-114 111
Characteristic performance EC-Regulation No. 44/2001
‘Brussels I’ Regulation 109 (‘Brussels I’) on jurisdiction and
Characterisation the recognition and enforcement
human rights violations of judgments in civil and
205-207 commercial matters
registered partnership 229 (22 December 2000)
judicial penalties 265-270 25, 101-114, 265-300, 301-332
 Index

interpretation 267-270 Foreign sovereign immunity

civil and commercial matters Japan 121, 134
269-270 United States 152, 168-169
arbitral proceedings 282-283 Forum non conveniens
contracts 108-110 Hague draft 38
consumer contracts 107 ‘Brussels I’ Regulation 113-114
employment contracts 105-107 US courts 153-155
jurisdiction for enforcement Forum shopping 270, 291
proceedings 271-278 Germany
lis pendens 113 World War II era litigation
grounds for non-recognition 185-221
106, 296-300 law applicable to torts 200-202
enforcement 103-105 governmental liability 185-221
judicial penalties 265-300 registered partnership 223-235
EC-Regulation No. 1206/2001 on co- Governmental liability
operation between the courts of Japan 115-135
the Member States in the taking Germany 185-221
of evidence in civil and com- applicable law 123-134,
mercial matters (28 May 2001) 200-218, 205-217
333-347 Greece
EFTA States torts in World War II 188-189
Lugano Convention 3, 9-21 Hague Conference on Private
Employment contracts International Law
Brussels Convention 21-23 draft convention on judgments
‘Brussels I’ Regulation 105-107 27-62, 237-239
England draft convention on securities
Lugano Convention 7 63-100, 240-241
Mareva injunction work in progress 237-244
256, 291-295 Hague Convention Respecting the Laws
European Bank for Reconstruction and and Customs of War on Land
Development 425 (1907) 119, 122
European community law Hague Convention on the Service
non-discrimination on grounds of Abroad of Judicial and Extra-
nationality 23-24, 286-287 Judicial Documents in Civil and
European Convention on State Immunity Commercial Matters (15 Novem-
(16 May 1972) 215-217 ber 1965) 241, 252 (note 15)
European Court of Justice Hague Convention on the Taking of
Brussels Convention 2, 4, 21- Evidence Abroad in Civil and
24, 108-110, 269, 276, 284 Commercial Matters (18 March
Lugano Convention 1970) 241, 252 (note 15)
5-6, 21-24 Hague Convention on the Civil Aspects
European Monetary Union 421 of International Child Abduction
Exorbitant jurisdiction 56-57 (25 October 1980) 243-244
Extraterritorial injunctions 245-300 database (INCADAT) 243-244
Financial standards 419 Hague Convention on Protection of
Forced and slave labor (World War II) Children and Co-operation in
137-183 respect with Intercountry

432 Yearbook of Private International Law, Volume 2 (2000)

 Index

Adoption (29 May 1993) 241, recognition 279-283

242-243 Juge naturel, doctrine of -
Hague (draft) Convention on Jurisdiction 101-103, 114
and Foreign Judgments in Civil Jurisdiction
and Commercial Matters Lugano Convention
27-62, 237-239 13-14, 15-16
contracts 38-45 Hague draft 27-62, 237-239
consumer contracts 45-48 ‘Brussels I’ Regulation 105-110
choice of forum 38-40 US courts 144-156, 181
torts 48-53 torts in World War II 144-156,
restitution claims 53-55 181
trusts 55 registered partnerships
exorbitant jurisdiction 56-57 (Germany) 233-234
forum non conveniens 38 exclusive jurisdiction 247, 254,
Hague (draft) on Indirectly Held 272, 273, 276, 285
Securities 63-100, 240-241 judicial penalties 271-278
scope of application 74-76 jurisdiction to prescribe and to
connecting factor 77-92 enforce 207-208, 248-262
insolvency 93-98 Lex cartae sitae 77-78
Harmony of decisions 16, 214 Lex concursus 96, 97
Horei 119, 124-129, 133 Lex fori
Human rights violations cumulative application in torts
52, 133, 137-183, 185-221 (Japan) 129, 133
Indirectly held securities procedural rules 156, 261
Hague draft 63-100 due process limitations 175
Insolvency proceedings acta iure imperii (Germany)
see ‘Bankruptcy’ 218
International law contracts (Oregon) 392, 396
claims because of violation of - Lex loci celebrationis
146, 149, 161, 171-172 Japan 128 (note 40)
compensation claims 190-191 Germany 228
jurisdiction to prescribe and to Lex loci delicti
enforce 207-208, 248-262 Japan 124, 127, 128-129
judicial penalties 248-265 Germany 200-202
International Law Association 419 torts in World War II 119, 135
International monetary law 419-426 in occupied territories 128-129,
International monetary obligations 173, 202-203
422-426 Lex monetae 421, 424-426
Interpretation Lex rei sitae
Brussels Convention 2-3, 7 securities 77-82, 86, 95
‘Brussels I’ Regulation 267-270 Lis pendens
Japan Lugano Convention 7-9, 17-18
torts in World War II 115-135 ‘Brussels I’ Regulation 113
Horei 119, 124-129, 133 Loi d’application immédiate 220, 262
Judicial penalties 245-300 Lotus case 250-252, 257
under international law 248-262 Lugano Convention on Jurisdiction and
jurisdiction 271-278 the Recognition and Enforce-

Yearbook of Private International Law, Volume 2 (2000) 433

 Index

ment of Judgments in Civil and torts (Germany) 204

Commercial Matters (16 registered partnership 230, 231
September 1988) 1-25 Peace treaties
interpretation 1-25 with Japan 116, 120-121,
civil and commercial matters 157-158
11-12 with Germany 159-160,
bankruptcy 12-13, 18-19 193-195
maintenance obligations 13-14 Penalty
contracts 15-16, 425 See ‘Judicial penalty’
consumer contracts 20-21 People’s Republic of China
torts 19-20 model PIL law 349-390
choice-of-forum 16-17 Pledge
lis pendens 7-9 of securities 73
recognition and enforcement 14 Political question doctrine (non-
and the ‘Brussels I’ Regulation justiciability)
103-114 165-167, 183
Mandatory rules Prescription
torts 50 Japan 124, 133
monetary law 424, 425 United States 160-164, 182
Maintenance Germany 218-219
registered partnership 231-232 PRIMA (place of location of the relevant
Mareva injunction 256, 291-295 intermediary) 79-92
Monetary sovereignty 420 Property regime
Most significant relationship registered partnership 231
torts (United States) 172-173 Property rights
restitution claims 173-174 securities 69 (note 15), 74-76
governmental liability Proximity, principle of - 204, 209, 212
(Germany) Public international law
208-212 See ‘International law’
Name Public policy
registered partnership 232-233 bankruptcy 95
New York Convention on the Recogni- ‘Brussels I’ Regulation 111
tion and Enforcement of Foreign State immunity 123, 132
Arbitration Awards (10 June - and mandatory rules 220
1958) 37, 39 recognition of judicial penalties
Norway 296-300
Lugano Convention 18-19 Recognition and enforcement of foreign
Offsetting 70 (note 17) judgments
Oregon Lugano Convention 14
law applicable to contracts Hague draft 27-62, 237-239
391-418 ‘Brussels I’ Regulation
Pacific countries 103-105, 111-112, 279-300
and the Hague draft 27-62 Germany (torts) 220-221
Partnership Germany (registered partnership)
see ‘Registered partnership’ 234-235
Party autonomy - of judicial penalties 279-283
securities 84-85 Registered partnership

434 Yearbook of Private International Law, Volume 2 (2000)

 Index

Germany 223-235
dissolution 229 Switzerland
jurisdiction 233-234 Lugano Convention 8-9, 11-13,
recognition of foreign decisions 15-16, 17-18, 20-21
234-235 Taking of evidence abroad 258-260
Renvoi Torts
Germany 226 Lugano Convention 19-20
Restatement of the Law, Second, of the Hague draft on jurisdiction
Conflict of Laws (1971) 48-53
396, 399-402, 404, 414 committed during World War II
Restatement of the Law (Third) of the 115-221
Foreign Relations Law (1987) United States 162, 172-173,
248-249, 262 182
Restitution claims Germany 200-204
Hague draft on jurisdiction See also ‘Human rights
53-55 violations’
United States 162 Trusts
Rome Convention on the Law Hague draft on jurisdiction 55
Applicable to Contractual UNCITRAL Model law on international
Obligations (19 June 1980) credit transfers (1992) 424-425
assignment of receivables UNIDROIT
80 (note 37) (draft) Convention on
monetary obligations 393, 425 International Interest in Mobile
Securities Equipment 94-96
Hague draft 63-100, 240-241 Principles of International
indirect holding system 66-73 Commercial Contracts 283, 393
intermediaries 71, 79-92 Uniform Commercial Code 396
Security interests 73 (note 23) United States
Slave labor World War II era litigation
See ‘Forced labor’ 137-183, 189-190
Soft law personal jurisdiction of US
financial standards 420 courts 111-112
State immunity doctrine jurisdiction of State and Federal
Japan 119, 123, 129 courts 145
Germany 214-217 Oregon (contracts) 391-418
Statute of limitation Louisiana 391 (note 4)
see ‘Prescription’ Unjust enrichment
Succession see ‘Restitution’
registered partnership 232 World War II victims 115-221

Yearbook of Private International Law, Volume 2 (2000) 435