7/31/2022 Asymmetric Jurisdiction Clauses Vis-À-Vis Dispute Resolution in the UK: What in 2022 in the Aftermath of Brexit?Read NowThis article is authored by Arushi Bhagotra, Fourth Year Student of Law, National Law Institute University, Bhopal.
Background In an asymmetric jurisdiction, the parties submit to the jurisdiction of one or more designated courts, but some parties’ submissions are exclusive while others are not. Therefore, provisions of an asymmetric jurisdiction clause (“AJC”) might be interpreted as either granting a certain Court exclusive jurisdiction over a dispute or delegating that authority to that Court. Currently, the freedom to choose any Court to hear the dispute by the party with more extensive jurisdiction raises a few key questions, including whether such a Court will be stricto sensu ‘any Court’ or a Court of ‘competent jurisdiction’ and how the capability of a Court in a transnational dispute with multiple domestic procedural rules will be determined. The Brussels Regulation (Recast) and the 2005 Hague Convention are two of the main pieces of EU law that an AJC is based on. However, as a result of Brexit, the United Kingdom can no longer rely on the Brussels legislation after December 2020. Therefore, Parties are prevented from using the Hague Convention. In the event that the UK does not ratify the 2007 Lugano Convention, parties are attempting to establish jurisdiction and reciprocal recognition of judgments under the Hague Convention on Choice of Court Agreement. Asymmetric clauses are most likely recognised under the Lugano Convention as exclusive choice of court agreements because the United Kingdom (“UK”) has applied to accede to this Convention, which is broadly comparable to the Brussels Recast Regulation and to which the UK government has applied to accede. It is still uncertain whether or when the UK will really accede to it because all signatories must agree, and the European Union (“EU”) hasn’t done so yet. Asymmetric jurisdiction provisions are acceptable under the Brussels Recast Regulation as an exclusive jurisdiction clause, according to English courts' rulings in the instances of Etihad Airways PJSC and Commerzbank Aktiengesellschaft. However, given that the Brussels Recast Regulation no longer applies in the UK as a result of Brexit, this only has immediate impact for actions that begin on or before December 31, 2020. There are certain areas of doubt in the current system for exclusive jurisdiction clause enforcement in the UK and across the EU, but overall, it is reliable enough to be employed. This article looks at the current position of the UK in regard to AJCs, covering the issues surrounding enforceability and examines a feasible road ahead. The current position of the UK and the enforcement conundrum Uncertainty surrounds the Hague Convention's applicability to jurisdiction agreements made prior to January 1, 2021. The EU and its member states have suggested that they may not, but the UK has stated that it will implement such accords as if the Hague Convention applied. Uncertainty and concurrent legal actions may result from this. Additionally, temporary remedies like an injunction will not be subject to execution under the Hague Convention. The parties may decide to restate their agreement at this time to make sure it is covered by the Hague Convention in order to prevent this confusion. Contracting parties will no longer be able to depend on treaty-based enforcement of their English judgements throughout the EU, Switzerland, Iceland, and Norway as of January 1, 2021, without the Hague Convention, as these countries are not signatories to the Hague Convention. In general, it is likely that decisions made in business disputes other England will be upheld in member nations, and vice versa. Since the courts could recognise and enforce each other's judgements until fairly recently, there is no reason to believe that since Brexit the various courts' rulings are any less secure. However, recognition won't happen automatically. It could be necessary to start new legal action to enforce the verdict. Before determining whether to file procedures, it will likely take considerably longer and cost more money. It may also be essential to pay for local enforcement guidance. Potential claimants may be discouraged from pursuing their claims by the uncertainty. Possibility of Optional Arbitration Clauses Similar to asymmetric jurisdiction agreements, optional arbitration clauses are untested in many countries, therefore it is unclear what stance the courts there will likely adopt. The courts of some jurisdictions may decline to enforce an optional arbitration clause or any judgement or award made in reliance thereon, either on the basis of public policy considerations or on the ground that it is a conditional agreement and thus in some way violates Article II of the New York Convention, even though such clauses are permissible under English law, as in the case of NB Three Shipping. In ZAO Russian Telephone Company, a London arbitration clause with a unilateral option to litigate contained in an English law governed contract was found to be invalid by the Supreme Arbitrazh Court of Russia. Interestingly, in France, notwithstanding the Rothschild case, such optional arbitration clauses have been upheld in the case of Société Générale SA. The Way Forward In accordance with the Brussels Convention, the Lugano Convention, the common law, or some combination of them, English courts may stay their legal actions in favour of another nation decided upon by the parties. The ways in which that agreement is expressed and the permitted exceptions may differ slightly from the existing situation. Likewise, EU Member States will undoubtedly continue to accept exclusive jurisdiction clauses designating the English courts, whether the UK is a Brussels Convention state, a Lugano Convention state, or simply a non-Member State within the scope of the Brussels Regulation. Instead of a global convention, this may be accomplished through their own domestic conflict of law laws. If the UK just joins the other non-member states, it may result in more room for delay strategies. However, the UK will probably once more be allowed to deploy anti-suit injunctions if its negotiating position is outside the Brussels rules. By the Brussels Regulation, as mentioned above, this potent tool to force compliance with an exclusive jurisdiction provision was substantially taken out of the English courts' legal toolbox. The UK may ask for a special status as a non-Member State under the Brussels Regulation system if it wants a situation that is similar to the status quo. The Lugano Convention might be a close substitute if this is not politically possible, maybe because it would necessitate acknowledging the Court of Justice of the European Union's ongoing supremacy. However, the EU might not be open to letting the UK stick with the current system or anything similar. The UK might then elect on its own to ratify the Hague Choice of Courts Convention and rely on its past participation in the Brussels Convention. This results in a system that incorporates a reasonable amount of reciprocity, particularly for agreements involving exclusive jurisdiction. It is anticipated that the domestic legislation concerning the recognition of judgments in EU member states will be enforced if the UK is unable to establish a trustworthy reciprocal arrangement that recognises and implements AJCs. Without the Brussels Recast Convention or its equivalent, it is conceivable that many EU member states will uphold English judgments. This is not guaranteed, and international rulings that are implemented for consistency are probably just going to be superficial. Uncertainty over the post-Brexit strategy is also brought on by the uneven attitude taken by EU nations to date. In any case, this ambiguity highlights how crucial it is to make sure covenants to pay are added moving forwards to local law security papers. This precaution would not, however, totally eliminate the requirement to determine the terms of the principal credit arrangement under the applicable legislation, which is typically English law. Determining whether a proper default has actually happened and, if so, whether that default authorises the lenders to enforce their local law security are only two examples of such requirements. To be clear, it should be underlined that these concerns with cross-border security enforcement will only materialise if a legal challenge to financial documents is successful and results in the cross-border enforcement of security. Under financing documents, parties are allowed to settle problems amicably and regularly, with judicial action serving as a last resort. Another situation where the lack of the Recast Brussels Regulation or any successor agreement will have no bearing is when security is frequently implemented outside of court without the necessity for any kind of legal action or procedure. Although the use of unequal jurisdiction provisions reflects market practise, the latest Loan Market Association Guidelines and the new post-Brexit framework may make this conventional method more problematic than helpful. This problem could be solved by symmetric jurisdiction provisions because they are enforceable under the Hague Convention. The benefits of being able to employ the Hague Convention by choosing such symmetric provisions over depending on the various laws and legal systems in the 27 EU nations may outweigh the drawbacks of using symmetric jurisdiction clauses.
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This article is authored by Pritha Lahiri, a Fourth Year Student at Institute of Law, Nirma University.
Introduction The Investment Treaty regime is centred on adjudicating investment disputes through International Investor-State arbitration. Over the past few decades, international investment law has developed dramatically, giving rise to numerous legal problems. One of those concerns is particularly seen in how European Union ("EU") legislation and the Energy Charter Treaty ("ECT") interact. In particular, when it comes to Article 26 (the ECT's dispute resolution process) and its application in the intra-EU context, the relationship between the ECT and EU law is marked by complexity and legal uncertainty. Since the Achmea decision in 2018, the Court of Justice of the European Union ("CJEU") has been in the spotlight, and in 2021, the Komstroy decision brought its attention to a new level. In light of these developments, the present article analyzes the muddy waters of the EU Law and the ECT. It further discusses the future developments that can be expected out of the ruling by the CJEU. The Energy Charter Treaty: A background The ECT is a multilateral investment treaty signed in the year 1994. It was passed to promote investments in the energy industry, specifically by granting investment protection rights to energy investors in foreign states. The European Union, its member states, and other non-member states are among those who have signed it. One of the critical aspects of the ECT is that it gives individual investors the right to commence an arbitration proceeding against a host state under Article 26 of the treaty if one of the provisions is breached. As a result, Article 26 offers investors a very effective procedure for resolving disputes outside the purview of national courts. Being a multilateral treaty, the ECT's provisions have been enforced consistently among its signatories, making it one of the most frequently invoked investment protection agreements concerning international investment disputes, including the EU. Due to claims that such arbitration processes undermine the judicial independence of the EU legal system as enshrined in the constitutional framework of the EU Treaties, the topic of investor-State dispute settlement inside the EU has gained attention. In its recent judgement in Komstroy, the CJEU) imprinted the same rationale and limited the effects of international tribunals on internal EU governance. In doing so, however, it sidelined the International Law principles regarding treaty interpretation. The Beginning of the End: Early signs of conflict The Achmea Ruling The CJEU ruled that the arbitration clause under Article 8 of the Netherlands-Slovak Bilateral Investment Treaty ("BIT") is incompatible with EU law and order, making it obsolete. This case is known for completely disregarding the rules of public international law while upholding the supremacy of EU law. The CJEU additionally noted that because these issues are referred to tribunals outside the EU's authority, arbitration proceedings under the BIT may impair the effectiveness of EU legislation. Although the Vienna Convention on the Law of Treaties (“VCLT”) is the international instrument that governs the conclusion, interpretation, validity, and invalidity of treaties, the CJEU surprisingly did not make a peep about it. Additionally, despite the fact that the New York Convention governed the dispute, the CJEU made no mention of the convention. European Commission's Intervention The European Commission has represented itself as an amicus-curiae before domestic courts and arbitral tribunals in nearly all intra-EU disputes, including those arising from BITs and ECTs, which has exacerbated the issue. It has also lately started infringement proceedings against EU members like Sweden, Portugal, Romania, Luxembourg, and Austria for failing to terminate the intra-EU BITs. The Komstroy Ruling: A Rippling Implication on the ECT This case involves a dispute over an energy contract under the ECT between Komstroy and a few state-owned companies in Moldova (SOEs). The United Nations Commission on International Trade Law (“UNCITRAL”) Rules were then followed to initiate arbitration, which was later contested at the Paris Court of Appeal. The Parisian Court subsequently asked the CJEU for a preliminary ruling on the matter. The main issue was whether Intra- EU arbitration under Article 26 of the ECT is in sync with the EU legal system. In assessing the issue, the CJEU relied on the judgment of Achmea and held that it has jurisdiction under Article 267 TFEU due to the following reasons- i) ECT is an integral part of the EU legal order because EU is a signatory to the ECT ii) Since the seat of arbitration was in Paris, the law of the land would be European Law and iii)To prevent differences in the future regarding the interpretation and in the interest of the EU legal order. By exercising its jurisdiction under Article 267, the CJEU, in a landmark move, ruled that Article 26 of the ECT is incompatible with the EU Law. The CJEU confirmed its jurisdiction to interpret the ECT, although the underlying award involved the application of the ECT to a dispute between an investor from a non-EU country (Ukraine) and another non-EU country (Moldova), failing to address the VCLT principles, which is the fundamental source when it comes to the interpretation of treaties. Ironically, Article 3(5)of the Treaty on European Union, which outlines the EU's founding principles, and Article 216 of the Treaty on the Functioning of the European Nation, which addresses the EU's organizational structure, both demonstrate that the EU is committed to upholding and working to develop international law and that the international agreements it has made are legally binding. Even though this decision suggests that investor-state arbitration should no longer be used to resolve intra-EU disputes under the ECT, the other non-EU ECT Parties and their courts (on issues relating to the recognition or enforcement of ECT arbitral awards), as well as the arbitral tribunals established to consider the ECT itself, may not be impacted by the Komstroy judgement per se. This is primarily due to the fact that the International Centre for Settlement of Investment Disputes ("ICSID") or the UNCITRAL Arbitral Tribunals established for dispute resolution under Article 26 of the ECT are mandated to apply PIL rules and construe the ECT in accordance with Article 31 VCLT (General Rules of Treaty Interpretation). Public International Law versus autonomy of the EU: A Tale of Regime Clash? The rulings in Achmea and Komstroy make it abundantly obvious that the principles of autonomy, consistency, uniformity, and supremacy of EU law—and, by extension, the CJEU's final interpretive power —apply at all times. The CJEU has previously felt that to safeguard its absolute power against the impacts of public international law, it was necessary to depend on the most fundamental elements of EU law. A decade prior, in the landmark Kadi case involving the purported supremacy of UN Security Council Resolutions based on Article 103 of the UN Charter, the CJEU made it abundantly clear that a foreign treaty cannot impact the independence and supremacy of the EU legal order. The CJEU has also shown a similar attitude toward the WTO Appellate Body and the European Court of Human Rights (ECHR). Contrarily, the concepts of EU primacy and autonomy are of little or no significance when viewed through the broader prism of Public International Law. International Law accords nation-states equal treatment. The preamble of the VCLT reflects this understanding by stating that while interpreting a treaty, it should take into consideration the principles of international law enshrined in the Charter of the United Nations -“equal rights and self-determination of peoples, of the sovereign equality and independence of all States, of non-interference in the internal affairs of States, of the prohibition of the threat or use of force and universal respect for, and observance of, human rights and fundamental freedoms for all." Such opposite notions conclude that the vertical, supremacy- and autonomy-driven EU legal structure and the horizontal nature of public international law do not mesh. Intra-Eu ECT Arbitrations: What is Next? The Komstroy ruling has left open a myriad of challenges which are as follows:
Given that intra-EU investment arbitration awards are based on arbitration terms that violate EU law, the Commission is unlikely to find them compatible with the internal market in the wake of Komstroy. Way Forward The Komstroy decision is just the tip of an iceberg that could eventually weaken intra-EU treaty arbitrations under the ECT. There is no "one size fits all" solution, although the following suggestions can be given in relation to the conflict resolution process: First and foremost, the investment should be set up in a way that, even if a disagreement emerges with an EU Member State, it is not viewed as an intra-EU dispute. This can be accomplished by making an investment through a subsidiary in a non-EU country that has BIT agreements with EU member states. Secondly, either UNCITRAL or ICSID arbitration should be selected as the arbitral tribunal. This is because the CJEU will not have an impact on these tribunals due to these being autonomous of EU legislative orders. These tribunals have, Kompetenz- Kompetenz, i.e., the ability to decide on jurisdictional questions, and they draw their authority from international treaties and the PIL mechanism containing a state's offer to arbitrate (such as the ECT), not from EU Law. Thirdly, it is advisable that the location of the arbitration tribunal in the event of an arbitration dispute under a BIT or the ECT be outside of the EU. By doing this, CJEU will not be able to influence the awards. Finally, the European Commission could be given the authority to negotiate the question of the intra-EU applicability of Article 26 ECT in the ongoing modernization of the ECT as a final potential option to resolve the dispute between the EU and the ECT. This will address the current dispute over jurisdiction and result in a uniform application of the ECT's provisions to all signatories. Final Thoughts The Komstroy ruling yet again has europeanised the dispute even when ECT is an international treaty, and the CJEU should have applied the rules of Public International Law. The problem may have origins in the EU's legal structure, which is not aligned with International Law. While there is no uncertainty that the CJEU views the ECT as being inapplicable for intra-EU disputes, and as a result, no arbitation proceedings may be brought by an investor from another EU member state against an EU member state, determining whether there will be an epilogue from member states, arbitral tribunals, domestic courts, and ultimately from the CJEU is still up in the air. 7/3/2022 Climate Change Armed Conflict and the Environment: A ‘Double’ Humanitarian Crisis in East AfricaRead NowThis article is authored by Sampurna Mukherjee and Vikrant Sharma who are Fourth Year B.A.L.L.B Students at Symbiosis Law School, Pune.
The relationship between ‘Climate Change’ and ‘Armed Conflict’ has remained inconspicuous for the longest time. In a multipolar globalised world deeming ‘human security’ i.e. freedom from fear and freedom from want as the two most important components in this concept, to be the raison d'être behind an individual’s existence and political organisation, this interface between climate change and armed conflict is no longer speculative. While aiming for environmental protection, earlier international humanitarian laws did not envisage a relationship between climate change and armed conflict, that has been exploited later on which would be seen in this piece. These laws state, while engaging in armed conflict, unnecessary and excessive destruction of the environment was forbidden, unless there were precise and justifiable military reasons to do so. The recent conflicts seen in Cabo Delgado and Tigray demonstrate the conjoint impact of climate change and armed conflict on environmental degradation, protected only partially by the earlier humanitarian laws on armed conflict and environmental protection. Article 3 of the third Geneva Convention applicable to Prisoners of War, 1949, provides that when an armed conflict has occurred in a ‘local or municipal territory’, there are human rights guarantees against violence to life, person and personal dignity to all inactive participants in the hostility. This is significant in light of the grave circumstances plaguing Cabo Delgado, including massive displacement, child marriages, deplorable conditions of poverty and hunger that is on the rise as well as crimes committed against the human body and property. Cabo Delgado has a history of being struck periodically by natural calamities from its own unique geographically vulnerable location and man-made activities of deforestation and intensive oil gas and mining activities. The armed conflict in Northern Mozambique's Cabo Delgado in began 2017 between the Islamist Extremist group Al- Shabab, the Mozambican armed security forces, and the private militia engaged by the government. After Cyclone Kenneth struck in 2019, the area, known for its vulnerability to climate change, was ravaged further. The already fragile conditions deteriorated further as a result of the pandemic. However, the circumstances are not very different in Tigray that is located 3000 kms away, a parallel drawn for the purpose of comparison between the two, in similar predicaments in so far as the applicable laws are concerned. Ethiopia’s Tigray region has similarly grappled with the consequences of climate change and armed conflict. Battling locust infestations, land degradation and rising water levels has potentially propagated the armed conflict further in the absence of governmental action, and exacerbated the ongoing armed conflict between the Tigray People’s Liberation Front (TPLF) and the Ethiopian federal government. The environmental challenges had contributed to local support to the rebel group, after reports of deliberate starvation, poverty, lack of education and health emergency, with hopes of getting access to basic resources and monetary compensation, by the TPLF. With the recent retreat of the TPLF after looming ‘civil war concerns’, the consequences of climate change incessant food insecurity induced hunger, reliance on rain-fed agriculture, frequent droughts and floods in the light of rapid population growth and increasing temperatures on the armed conflict, that additionally contributed to the ability to advance beyond the Tigray region and close in on the capital of Ethiopia, cannot be undermined in leading to another ‘armed conflict’ if the case arises in future. Armed conflicts have repeatedly capitalized on the vulnerability of climate-related risks for military gains. Environmental protection is an integral part of the existing human rights law, since there are immense implications on the civilians co-existing with the natural environment. However, the ambiguous protection can also be used to hinder environmental protection. It has been found that there is direct relationship between natural and man-made climate change related risks and an affinity to support armed conflict miscreants, something that maybe absent if there are adequate safeguards, both national and international put in place, for security human security for the civilians and the environment. In other words, the rise of climate change risks only exacerbates chances of a armed conflict, that not only has a detrimental the civilians but also the environment and its components at large, as seen in the twin instances above. It can be difficult to determine if the destruction of the environment is conclusively barred by treaty or customary law because the directness of the military impact, including whether it is wanton or of nominal military value, whether reasonably connected as per the ‘imperative demands’, and the remoteness in the chain of causation are taken into account to determine if a violation took place. For example, Protocol I of 1977 specifically prohibits acts that can cause long-term damage to the environment in an international armed conflict. The Rome Statute, with hardly 100+ parties, declares it a war crime to intentionally cause ‘wide-spread, long term and severe damage’ to the environment. However, the same section places a caveat on this, stating that the destruction caused must be ‘clearly excessive’ with respect to the military gains anticipated from the act causing it. Hence, not only some of the standards are contradictory and at best found to be open to debate and confusing, it does lead to an unavoidable laxity, unsupported and confounding to the legal framework and contents at hand. The intense militarisation through armed conflict and the capability of climate change to affect civilians requires sufficient safeguards, with an ancillary focus on stable governance, to name one. While the current laws could protect the environment, their limitations restrict enforceability owing to the ‘international’ state of affairs, which the interchange between international humanitarian law and international environmental law, that was held to be not mutually interchangeable in the present circumstances, garners attention but not appropriate and proportionate action. It is only logical that the next step should provide comprehensive protection to the environment as an asset shared by humanity, regardless of which party wins an armed conflict for all the stakeholders overall. |
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