Making use of relevant case law (where available) explain and

discuss how, and to what extent, the old Brussels Convention and
the new Council regulation 44/2001 have affected and altered
traditional rules of English Conflict of Laws in relation to issues of
jurisdiction arising from specific in personam contracts

The conflict of laws is slowly being changed in the UK, which is

due to the Brussels Convention and the new Council Regulation
44/2001 because jurisdiction is being limited for domestic systems
and the introduction of regulations on areas such as protection of
the individual of in personam contracts.

The Convention’s rules on jurisdiction are not only more clearly

delineated; they are also better attuned to the protection of
fundamental values. While the US Supreme Court tends to treat
all litigants alike, the Convention is more discerning: for instance,
it bestows jurisdictional privileges upon certain weaker parties,
such as support claimants, policyholders and consumers, who are
allowed to sue in their home states. By the same token, contrary
to US precedent the Convention severely restricts the use of
forum-selection clauses against such parties. It also prohibits the
use of the exorbitant member state jurisdictional bases
enumerated in article 3(2) of the Brussels Convention.

However in relation to insolvency laws it has been argued that the

conflict of laws and forum shopping is being increased, rather
than limited to protect the weaker party. In cross-border
insolvency actions it is usually two companies that are at
loggerheads, which may explain the different protections or this
may be the new route to protect competition. Therefore this
discussion will consider in personam rights, as this is important to
the Convention and Regulation. It will then consider the Centros
Decision and some of the new insolvency proceedings which
allows for there to be a choice of law in a company to company
contract, i.e. there is a conflict in jurisdiction and it allows for the
weaker law to apply if it promotes competition or in the case of
insolvency the creditor to apply the harshest laws. Then it will
consider this in relation to in personam contracts, i.e. personal
contracts, where the consumer is being protected from the
imbalances created by resources. Then it will consider how the
Convention and Regulation are impeding the conflict of laws of in
personam contracts or whether the new insolvency cases, albeit
company to company based, is re-opening the conflict of
jurisdictions and allowing for forum shopping.

In Personam Contracts, the Brussels Convention and

Regulation 44/2001:

In Personam Rights: ‘law directed at somebody: made about or

directed at a person rather than at property’.

Martin considers the debate concerning the nature and

understanding of equitable rights and the interests of the
beneficiary that are essentially in personam in nature. This
question that arises in conflict of laws, contracts and jurisdiction
that has arisen is the encroachment of equity on property rights
and law; which affords the beneficiary with equitable rights of
ownership . This causes problems with EU competition law is that
has created a conflict with in personam contracts and consumer
rights that are provided under the old Brussels Convention and
Regulation 44/2001, i.e. it provides that the jurisdiction that should
be used is that which is most favourable to the weaker party in
insurance, consumer and employment contracts, i.e. in most
cases this is not the company.

Therefore blocking the ability for companies to regime shop;

hence blocking open markets and free competition.

Martin further presents the problem that faces investigation into

the nature of equitable rights and determining whether equity is
validly doing what is just, i.e. dealing with the deficiencies and
injustices at common law or dealing with contracts that are not
based upon property but something less tangible such as life
assurance. The problem with the old Brussels Convention and the
Council Regulation 44/2001 is that it is tied up in the language of
consumer protection, which seems not necessarily dealing with
competition and open market rules that the Conflict of Laws and
the basic freedoms of the EU.

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.

This seems to be in opposition to the current movement of the

EU’s promotion of the race to the bottom and regime shopping. It
is also in opposition to the open market and conflict of laws
principles in English law, i.e. it hinders competition rather than
promotes it. Yet the protections are important because the parties
that the Brussels Conventions and the Council Regulation
44/2001 are in a position of inherent weakness and to put this
party in the same position as a company would be unfair because
the knowledge and resources are greatly imbalanced. Within UK
and USA law the traditional approach is to treat all parties the
same and to allow the choice of the most favourable law; however
these is restricting this choice in respect to in personam contracts,
which some would argue is contrary to an open market and
competition principles governing the EU.

Centros Decision:

This decision was based around the requirements of registration

and trade within Denmark, which raised an issue of conflict
between the laws of the UK, Ireland and the Netherlands whereby
a properly registered foreign company is to be recognized;
whereas Nordic law depends upon registration and whether
refusal of registration was permissible to stop the circumvention of
national law. The ECJ decided that this refusal went against the
principles of competition law, which resulted in regional
competition law outweighing domestic law therefore undermining
the sovereignty of the state. The aim of the two Danish nationals
by registering their company Centros in the UK and then
transferring to Denmark was purely to circumvent the fee
associated with registration. The question was whether the
Danish court could refuse registration in Denmark because the
aim was to defraud the Danish state; the ECJ advised that
refusing registration was imposing an obstacle of the basic
freedoms that make up company law. This case basically has
caused competition law to become prevalent over national
concerns. In fact it has possibly weakened the regulations of
company law so that social and cultural policies will soon be
under fire. This seems to be falling under the trap of companies
for regime shopping, i.e. the weaker the regulation the higher the
investment.

Insolvency Cases:
While forum shopping is to be deprecated, it may be legitimate
and possible to show that a debtor’s COMI is within a jurisdiction
where there is an advantage to be gained… There are now a
number of well-publicised decisions in which the High Court has
determined the location of a debtor’s COMI and has then gone on
to open, or to refuse to open, main proceedings in England and
Wales.

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The centre of the debtor’s main interest (COMI) was formulated to

hinder conflict of laws and forum shopping in the EU Council
Regulation 1346/2000, but as the recent cases have seen the
notion of COMI has not forced jurisdiction to be pre-decided but
opened up insolvency law to a conflict of laws in the favour of the
creditor. This has been mirrored in the avenue taken with respect
to consumer contracts under the Brussels Convention and the
Regulation. Therefore rather than hindering the conflict of laws it
is allowing it but just in the favour of one party. This will be
illustrated in the following insolvency cases.

In Brac Rent-a-Car English Courts were forced to give jurisdiction

because of COMI, even though under the Insolvency Act 1986
there was no standing because the company in question did not
fall under the definition of a company for its proceedings. It
allowed the proceedings of Article 3(1) of the insolvency directive
which broadly defines what COMI as:

The courts of the Member State within the territory of which the
debtor’s centre of main interests is situated shall have jurisdiction
to open insolvency proceedings. In the case of a company or
legal person, the place of the registered office shall be presumed
to be the centre of its main interests in the absence of proof to the
contrary.

In the case of Re: Daisytek the notion of COMI was retested

where an English company had subsidiaries in France and
Germany and if ran from the UK the COMI would undoubtedly be
held in the UK; however this case highlighted that the French and
German courts under COMI may not hold this a the subsidiaries
are located in France and Germany. Also it allows the creditors to
regime shop for the harshest regime. The case of Mazur Media is
a another example of the use of COMI for the creditor’s benefit
where the creditor was located in the UK but the debtor in
Germany and it was held that the creditor could claim that the
debtor’s COMI was in the UK because of the location of the
creditor. This creates an ideal situation for the creditor to impress
their interests on the debtor and create an unfair advantage, i.e.
another example of regime shopping which arguably this directive
was meant to inhibit, but has in fact made easier therefore
creating a situation where creditors can use the competitiveness
of legal regimes to maximize the amount of debt returned, without
thought to the social situation of the debtor. Therefore this follows
that the conflict of laws to flourish and as it has been seen that
insolvency law can apply to the private individual, i.e. a personal
contract; hence the Regulation and Convention are being
outmoded:

Within the European Union, the recent Centros decision has

drawn attention to a similar debate. Significantly, the battle-horse
of global competition is spurred on in this and other fields by law
and economics scholars, whose agenda is geared to ‘putting the
“private” back into international law’ by means of party choice.
Thus, it is suggested that regulatory competition through exit (or
party choice of foreign law) could be to be the optimal mode of
global governance in such fields as securities, anti-trust,
insolvency, banking or environmental protection.
EU and the Protection of in personam Contracts:

The current EU protections to consumer, employee and insurance

contracts as already noted opposes newer regulations and
approaches, because it is being argued that the conflict of laws is
the best choice for fairness. In respect to insolvency cases which
may be a personal contract or not the conflict of laws and choice
of law are prevailing; hence the limitations on in personam
contracts and the lack of choosing jurisdiction is being eroded.
Yet the Convention and Regulation still stand, where the harshest
jurisdiction is imposed in favour of the weaker party.

The Brussels Regulation follows the Brussels Convention in that

an EU based supplier of goods and services must, in general (and
unless the contract says otherwise), sue a customer in the
customer’s own country or in the country in which the goods are
delivered or services performed. However, consumers are placed
in a more advantageous position: a consumer (a customer buying
goods or services “for a purpose which can be regarded as being
outside his trade or profession”) can choose (whatever the
contract says) to sue either in the consumer’s own courts or those
of the supplier, while the supplier can only sue in the consumer’s
home jurisdiction. This provision is clearly designed to ensure that
consumers are not disadvantaged in participating in cross-border
transactions, such as those conducted over the internet, mobile
phones or through digital television.

The reasoning behind the Convention and Regulation are

important; therefore makes sense in respect to limiting
jurisdiction. Yet as with the Insolvency Proceedings there is a
choice, which is in the hands of the weaker party so there is a
conflict of laws but it is lopsided and creates the same problem as
with the Insurance Cases on party has a choice but the other
does not. This is an imbalance and unfair, which makes decisions
as Centros more persuasive, which is to allow true choice of law
and only in personam contracts. In the case of Kuwait Oil Tanker
v UBS it was held that enforcement of a debt by the courts
against a third party such as a bank, is not a personal right but a
property right as this was not a personal or beneficial interest then
the jurisdiction of the home courts apply; therefore adding further
limitation to the conflict of laws in respect to in rem rights. In this
case it puts the injured party at an unfair disadvantage therefore
there needs to be some form of protection, but also equality for
the parties so it is necessary in the interests of justice third party
enforcements be dealt with separately. In the long run the
approach under the Convention and Regulation is best route,
because by offering choice of law to the consumer and giving
jurisdiction to the consumers home country in the case of the
consumer is the defendant offers protection to the least resourced
party, i.e. equality of arms. The case of Owusu supports this
because he wanted jurisdiction in his home country under the
Brussel’s convention and Regulation 44/2001. He was injured in a
Jamaican hotel where he was staying, i.e. a consumer.

Therefore his home jurisdiction was protected under the

convention and as it was outside of the EU under the convention
it was doubly obliged to deny jurisdiction in Jamaica. This goes
against the traditional response of UK courts, where jurisdiction is
decided on the best forum rather than the wishes and
domiciliation of the consumer, which has been criticized:

The English courts have developed an effective system of

regulating jurisdiction in international disputes arising out of a
desire to ensure that disputes are dealt with in the most
appropriate forum… This has been a very effective means of
controlling forum-shoppers. The courts have now been deprived
of that flexibility. The ECJ’s ruling means claimants will now be
able to ensure that claims are brought before the English courts
by bringing proceedings against at least one party domiciled in
England-regardless of the merits of the claim against that party.
The English courts will be forced to hear cases which would be
more appropriately dealt with elsewhere.

This is supported by the choice offered to consumers and the use

of COMI by creditors and the question arises is this right; maybe
not in the case of creditors but certainly for consumers who do not
have the protections that sellers have.