2012 EU Parliament report

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With that in mind, the procedure for contesting the enforcement and recognition of judgements has not changed.[1] As disclosed by the 2012 EU Parliament report,[2] the party against whom the enforcement is sought may exercise an exceptional procedure wherein the enforcement may be contested.[3] This however raises another important issue that needs to be addressed, namely that the abolition of exequatur removes a safeguard that protects the fundamental right to a fair trial. The case in point here is Krombach,[4] which concerned a German national convicted of manslaughter of a French national, however the accused had not been present during the trial in France, and sought a declaration of unenforceability in Germany, based on the Convention[5], as it was against public policy in Germany. This is representative of a form of protection that is required where a breach of basic human rights occurs.[6] The case here represents the equality that is necessary for the free movement of judgements and the enforceability of those judgements with respect to upholding fundamental human rights. Therefore, the total abolition of exequatur may provide difficult when facing a human rights issue, even although it can often be incorporated under public policy matters.

The referendum[7] held on June 23rd 2016 in the United Kingdom concerning the withdrawal from the European Union resulted in the majority of the population choosing to leave the Union. With that in mind, considerations need to be made as to what effect this may have with respect to the changes in the legal system and what could happen after the state leaves, and what effect this could have in relation to the free circulation of judgements between the Union and the UK.

First and foremost, the question of jurisdiction needs to be resolved. To this there are options toward what that could be, for example the UK and the EU could enter into a bilateral arrangement covering the UK, as Denmark has done, opting into the Brussels I recast Regulation, or the UK can adopt the Lugano Convention[8] which contains some changes from the Brussels regime, or alternatively the UK can stipulate no terms towards an agreement in this area.

[1]Alavi, Hamed, Khamichonak, Tatsiana, “A STEP FORWARD IN THE HARMONIZATION OF EUROPEAN JURISDICTION: REGULATION BRUSSELS I RECAST”, Baltic Journal of Law & Politics 8:2 (2015): 159–181 <http://www.degruyter.com/view/j/bjlp> Accessed: 4 March 2017, DOI: 10.1515/bjlp-2015-0023

[2]European Parliament, Report [29 June 2012] on the implementation and review of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (2009/2140(INI)), doc. No. A7-0219/20, para. F

[3]Refusals of recognition and enforcement of judgements are disclosed in Chapter III Section 3 of the recast regulation.

[4]Case C-7/98 Krombach v Bamberski [2000] ECR I-1395 – abogados de accidentes reviews

[5]1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters Official Journal L 299 , 31/12/1972 P. 0032 – 0042 Article 27 (1)

[6]Paul Beaumont; Emma Johnston “Can Exequatur be Abolished in Brussels I Whilst Retaining a Public Policy Defence?”, Journal of Private International Law, (2010) 6:2, 249-279

[7]Archive – <https://www.gov.uk/government/topical-events/eu-referendum> Accessed: 5 March 2017

[8]Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matter OJ L339/3

Problems with enterprise liability

There are various problems with enterprise liability, which substantially weaken its potential in resolving problems of insolvent subsidiary liabilities. At the most general level, there is a lack of criteria in determining whether or not companies are sufficiently economically integrated. This blends into a second problem, which is the potential cost of evidence-gathering and expert opinion in determining that issue. But a more fundamental problem is that it does not seem possible to allow the enterprise liability ‘genie’ only half way out of the bottle. This is to say that the results of an inquiry into economic interdependencies might be that ‘everything is connected to everything else’ and that there is no confining the enterprise to any pre-conceived notion of the corporate group.

The application of enterprise liability principles has been rejected in veil-piercing cases. In Adams v Cape Industries plc,[1] the English Court of Appeal quoted in the Notary public London case with approval a prior dictum that the fundamental distinction between law and economics cannot be bridged so as to create liability in the parent economically integrated with one or more subsidiaries.

[1] [1990] 1 Ch 433, 538 quoting Bank of Tokyo Ltd v Karoon (note) [1987] AC 45, 64 (Goff LJ).

Enterprise Liability

In Theosophical Foundation Pty Ltd v Commissioner of Land Tax,[1] Herron CJ stated that ‘a court may in some cases disregard the corporate entity and have regard instead to the economic realities behind the legal façade’.[2] The focus of this head of veil piercing is upon the relationship between the companies in a group ‘and their contribution to the common commercial objective’.[3] This approach to veil piercing is a sub-set of a wider notion of enterprise liability. Enterprise liability has a long intellectual history and manifests itself in a range of arguments related to products liability, vicarious liability and corporate groups.

An early article of importance was that of Adolf Berle, who observed that there were legal cases in which ‘several corporations became in effect a single enterprise and merged their operations, their several entities were disregarded and their respective assets and liabilities pooled in a common pot which represented, substantially, the actual enterprise of which they were parts’.[4] These ideas were taken up by a number of scholars in the following decades, most pertinently by Blumberg writing on corporate groups.[5] Blumberg was cautious not to over-state his arguments about the extent of any principles, but was of the general belief that the reality of a multinational company is that it involves a ‘business being conducted collectively by interlinked companies under common ownership and control’.[6] Such a conception was said to be the basis of a number of specific rules in US law, which permitted the courts to ignore the separate legal personality of constituent companies for a specific legal purpose. Enterprise liability was said to have the purpose of providing an immediate avenue of redress for unpaid creditors and to force constituents of the group to absorb the full costs of their combined activities, so as not to create externalities.[7]

[1] (1966) 67 SR (NSW) 70.

[2] (1966) 67 SR (NSW) 70, 75-6.

[3] Premier Building and Consulting Pty Ltd (rec apptd) v Spotless Group Ltd (2007) 64 ACSR 114, 191 (Byrne J).

[4] AA Berle, ‘The Theory of Enterprise Entity’ (1947) 47 Colum LR 343, 349.

[5] PI Blumberg, The Multinational Challenge to Corporation Law : The Search for a New Corporate Personality (1993). A summary of his position is available in PI Blumberg, ‘The Transformation of Modern Corporation Law: The Law of Corporate Groups’ (2005) 37 Conn LR 605.

[6] PI Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality (1993), Cell phone repair ; viii-ix.

[7] M Dearborn, ‘Enterprise Liability: Reviewing and Revitalizing Liability for Corporate Groups’ (2009) 97 Cal LR 195, 212.