JUNE 2013 8th EDITION
BLC News
2
Letter from the Editors Dear Readers,
Free Movement of Persons Access to Justice
Welcome to the summer edition of Obiter Dicta, providing you with an wealth of legal news from 24 around Europe; enough to keep you 6
Commercial Law Updates
46
Special Interests
74
CEEMC
21
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occupied during the summer months of Central European monsoons, British heat waves and Scandinavian chill.
from current students, BLC alumni and course tutors. If you have any comments on anything you read here, please feel free to contact us.
This bumper edition contains contributions
Have a nice summer.
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BLC NEWS AND EVENTS
The BLC year in Obiter Dicta
Dr Jonathan Morgan with graduates of the Warsaw diploma course at their March 2013 graduation ceremony
The academic year has come to an end. Examinations are over and for most second year BLC students, the final act will be to receive their graduation certificates confirming that they have successfully completed the Diploma in English and European Law; an academic program that is entering its 21th year! In this edition of OD we will as usual continue to bring our readers up to date with BLC activities.
As is usual with the Obiter Dicta, there are articles written by both current students and alumni of the British Law Centre, covering legal topics and regions that emphasise the subtleties and uniqueness of how the BLC as an organization brings together such a diverse range of peoples and interests. In the free movement section, you can read about Advocate General
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The BLC year in Obiter Dicta
BLC NEWS AND EVENTS
Sharpston’s apparent campaign to make it easier for students to study in other Member States, alongside an article on Bulgaria’s compliance with
EU
regulations
allowing free movement and
establishment
for
lawyers. In the Access to Justice BLC students at the Bratislava Centre receiving their graduation certificates
section, you can learn more about the current challenges
facing
UK
lawyers and their clients, with biting cuts in legal aid and closures of courts followed by how the Czech legal system is getting with the times and facilitating mediation as a method of dispute resolution. In the Business section there are articles on insurance, company law, and taxation of e-books and liability of internet service providers; so plenty to keep you entertained. Current BLC students will also be able to see extracts from two of the student theses submitted this year, both serving as an advertisement to students that they can choose to write a dissertation under supervision instead of sitting an examination in a particular subject. As usual, Obiter Dicta contains reports on this year’s CEEMC moot competition, held in Brno. For current BLC students, competing in the CEEMC provides an option for students as a replacement for sitting the EU law module examination.
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Criminal Trial at the University of Warsaw All stand to hear the case of Regina-v-Jan Gburek before Her Honour Judge Joanna Korner‌.. These were the words that greeted the audience of BLC students and
BLC NEWS AND EVENTS
members of the Warsaw Bar, when a delegation of the Honorary Society of the Inner Temple visited Warsaw in March in an event co-organised by the BLC, the Warsaw Bar and the firm JS Legal. Prosecution, defence counsel and witness roles were taken by other members of the Inner Temple delegation to help them to demonstrate cross examination techniques which are so essential to the English common law trial. Members of the audience were then asked to decide on the guilt of the defendant, as the fictional jury. The Warsaw Bar was the venue for the second day of the visit, where a smaller group
of
qualified
Advocates participated series
of
in
a
intensive
workshops conducted by the Inner Temple. The
workshops
concentrated on the importance of preparation and case management, with participants divided into small groups acting for both prosecution and defence. The event culminated in a recreation of the trial of Jan Gburek with workshop participants taking the roles of the defence and prosecution counsel and the Inner Temple playing the defendant and witnesses. Demonstrating the vital importance of evidence and advocacy
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skills, in particular the role played by examination in a live trial, the jury found Mr Gburek guilty on the first trial and not guilty on the second!!! The event was witnessed by the British Ambassador to Poland, His Excellency Robin Barnett, himself a trained barrister. The event was a great success with participants highly appreciative of the practical legal skills that they learnt, expressing the hope that this would be not be the last of such practical legal training events.
delegates from the Inner Temple with the British Ambassador and organisers
Upcoming Events The BLC will be organising a series of legal workshops to be held in Warsaw at various times during the 2013-2014 academic year. If you are interested in participating in such an event please feel free to contact us at britishlawcentre@gmail.com
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Free Movement of persons
This section contains student contributions relating to the free movement of persons in the EU. For the current edition students have written about the freedom of establishment, the legality of the UK right to reside test for EU nationals and EU student access.
Recent Amendments to the Bar Act Will Open Professional Opportunities for EU Attorneys in Bulgaria Delyana Ivanova BLC Alumnus, Sofia The last amendments of the Bulgarian Bar Act (published at the local State Gazette on December 07, 2012) finally brought the national legislation into full compliance with the European regulatory standards on the advocates’ profession. Bulgarian law can no longer be suspected of being discriminatory in respect to attorneys-at-law from other EU countries as the new statutory provisions introduce equitable access of individual professionals as well as their law firms (and other professional associations) to the local market of attorney services. One of the main contributions of the new legislative amendments is the improvement of the definition for “European Union attorney”. As a rule, attorneys-at-law who have obtained advocate’s eligibility in an EU, EEA country or in the Swiss Confederation (referred below as “EU attorneys”) may offer their professional services in Bulgaria under the professional title obtained at the country of their qualification (such as “avocat” in Romania, “advokat” in the Czech Republic, “solicitor” in the UK, etc.). However, while practicing the attorney’s profession in Bulgaria they are not allowed to use the general tile “EU attorney”.
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EU attorney may wish to permanently provide professional services in Bulgaria. This requires a mandatory registration at the Supreme Bar Council and a binding consent from a local attorneyat-law for professional collaboration in case of litigation cases. If an EU attorney wants to have professional eligibility comparable to the local attorneys’, he needs to register at some of the local
Bar chambers after having practiced in the country for the period of three years (actually and uninterruptedly) and after successfully passing certain local exams. This regime was the main alternative for practicing the profession in Bulgaria so far and it was criticized by the European Commission for being discriminatory as it creates administrative barriers for the freedom to provide services contrary to Art. 56 and 57 TFEU. This deviation from the mandatory community provisions was corrected with the last amendments at the Bar Act that introduced detailed rules for temporary professional occupation of EU attorneys. No registration requirements are set under this regime. The EU attorney needs to only notify the local Bar Chamber for his intent to perform certain professional acts accompanied with evidentiary proof for his advocate’s eligibility, his professional indemnity insurance and consent from accompanying Bulgarian attorney, in case of litigation. Upon the formal submission of the above 7
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documents
the
EU
8
attorney
immediately obtains a certificate which enables him to continue with his professional engagement. The
regime
for
temporary
provision of professional services exists
alongside
opportunity professional
for
the
previous permanent
establishment.
Together they transpose to the fullest extent the requirements for the free movement of services in terms of advocates’ profession. The other significant change at the Bar Act is the abolishment of restrictions for settlement of EU professional
associations
in
Bulgaria. The new version of the Act gives “green light” for law firms, partnerships and other form of professional associations in EU countries to expand their business on the local market by registering their local subsidiaries (with or without the participation of Bulgarian attorneys). Most importantly, the local subsidiaries are entitled to take over their parent’s recognizable corporate/professional name as an indication of experience, expertise, know-how and good will. This legislative solution provides equal opportunities for national and EEA attorneys’ groups to exercise the profession in Bulgaria which guarantees the freedom of professional settlement in line with Art. 12 of Directive 98/5/EC. The details of the amendments discussed above are in some parts ambiguous and supposedly bring in uncertainty on how they should be applied in practice. However, those changes demonstrate a considerable step towards synchronizing Bulgarian law in the field of attorneys’ profession regulation with the mandatory EU standards.
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Is Advocate General Eleanor Sharpston secretly trying to make undergraduate EU law examinations easier? Ruairi O’Neill BLC tutor
All the evidence suggests that she is! The eminent UK Advocate General to the Court of Justice of the EU and friend of the BLC delivered an Opinion in February 2013 calling for the abolition of a very straightforward rule of EU law that says students must show three years of continuous lawful residence in the host Member State before being eligible for state funding for university education.
Any lecturer of European law reading this post knows only too well that end of term examinations that include a question on the free movement of persons within the European Union may also include an issue relating to students. Whatever the factual variables are, the correct answer, as outlined in the subsequent examiners’ report, will invariably begin by stating that students are European citizens with a general right of free movement under Article 21 TFEU – which includes the right to take up an educational course in another Member State – but that they do not have an automatic right to equal treatment in access to social benefits under Article 24(2) Directive 9
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2004/38. It will then move on to affirm that, following the judgments of the CJEU in Case C209/03 Dany Bidar –Allen & Overy’s famous London trainee – and Joined Cases C-11/06 and C12/06 Morgan and Bücher, a student must show a degree of integration into the host Member State before becoming eligible for state-sponsored student funding benefits. This is usually attested
by
three
years’
continuous
residence. This is about as straightforward as it gets, and EU lecturers like to add it to exam questions so that the weaker students can simply recite the well-trodden formality of asserting this answer plan, without the need for them to recourse to any vague questions about national law conforming with the Citizenship Directive or about EU citizen rights and equal treatment.
AG Sharpston evidently thinks that a change is needed, if not for the sake of students who sit examinations then certainly for the millions who study in another Member State: she asserted in her Opinion in Joined Cases C-523/11 and C-585/11 Prinz and Seeberger
that
constitutes a
the
three-year
restriction
on the
rule free
movement of citizens, as such a residence requirement likely discourages EU citizens from exercising their rights to free movement and pursue secondary education there prior to applying for funding for third-level education. She claims that the rules relating to access to student finance are too rigid to satisfy the integration objective, as students could very well have integrated before fulfilling three years’ residence. She also asserts that the economic objective – the well-known aversion to migrants becoming an unreasonable financial burden – is being applied overly rigidly and must depend on an assessment of the actual or potential risks; a test for this assessment she expects the CJEU to provide for national judges who must decide on the legality of these provisions in any given case.
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If this Opinion is accepted by the CJEU, it could very well result in massive continent-wide movements of EU migrant students looking for a bargain on student finances. An unintended consequence may also be the acceleration of the UK’s imminent departure from the Union as it struggles to protect its prohibitively expensive student loan system from well -informed
young
Europeans.
One
consequence that is inevitable, and indeed it is quite possible that it is intentional, will be that EU migrant students
will
now
have
enough
confusing case-law applicable to them that they will warrant an entire question to
themselves
in
end-of-term
examinations. This leaves the battered lecturer of EU law scouring the continent for an easy topic; something to give those weaker students a chance to pass their examinations, especially since they will now have access to student finance! If AG Sharpston had her way, EU law would be clear and easily understood by the man on the Omnibus, and people would know what their rights are. How awful that would be for lawyers and lecturers.
The Lawyer’s Motto: “Insofar as manifestations of functional deficiencies are agreed by any and all concerned parties to be unperceivable, and are so stipulated, it is incumbent upon said heretofore mentioned parties to exercise the deferment of otherwise pertinent maintenance procedures” In Other Words, if it ain’t broke, don’t fix it.
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Making Inconsistency Respectable: A Critical Analysis of the Decisions of the Court of Justice of the European Union Concerning Freedom of Establishment Alexander Buzdrev BLC Student, Sofia
The facilitating of trade and the removal of barriers to people’s freedom to establish their business and invest their capital has its basis in Articles 49-55 of the TFEU. This fundamental to every European citizen and corporation freedom has been restricted to a different extent by various national legislative frameworks. Despite the efforts of the EU to implement a program of company law harmonization, many differences remain. These differences may lead to complications in identifying the home state of a company (i.e. the law applicable), because Member States apply different theories to identify the nationality of a company, such as the real seat theory and the incorporation theory. To counterbalance the negative aspects of a rather patchy EU legal framework, the decision-taking process of the ECJ has been influenced by the desire to ensure the direct effect of Articles 49-55 of the TFEU, but unexpected and in hindsight inconsistent judgments have blurred the outcome. The case 81/87 The Queen v HM Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust plc [1988] ECR 5483 is a milestone case concerning the freedom of establishment. In that case the Daily Mail and General Trust Plc, a company incorporated in England and being resident there, intended to transfer its residence to the Netherlands by establishing the seat of its central management. The company did not want to lose its legal personality or cease to be a company incorporated in the UK. However such transfers required the consent of the Treasury. Because of the fact that in the Netherlands the company would have had to pay tax only for the capital gains accrued after the transfer of its residence, it seemed clearly that the transfer had been undertaken only for tax evasion purposes. The Daily Mail complained in the High Court, after the Treasury did not grant the company transfer permission. Macpherson J. took the issue to the ECJ in order to define whether Articles 43 and 48 EC Treaty precluded a member state from obstructing the transfer of the de facto head office from a member state. The ECJ concluded that this issue falls outside the scope of the Treaty provisions on freedom of establishment.
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As a principle, European Community promoted the freedom of establishment and the elimination of barriers to the free movement in order to provide entrepreneurs with the opportunity to make use of larger markets. Hence, the concession of the Court from its principles was rather unforeseen, especially
in
a
case
that
involved
administrative measures of tax law. After all, one of the goals of the European Community is the establishment of common market in
Joke: Old lawyers never die; they just lose their appeal.
Europe, which has as few obstacles as possible. Therefore, it seems justified that companies operating on this market should be able To avail themselves of the benefit, resulting from different taxations. Another aspect of this case concerns that Daily
Mail was a company that has transferred its
real seat, but there was neither a transfer of the statutory seat nor a modification of the national applicable law. The consent of the Treasury was needed for undertakings that wanted to transfer its central management and control out of the UK while still maintaining its legal personality and status as a UK company. Hence, the Court stated the Treaty does not confer companies a right to transfer its central administration to another Member state, while retaining at the same time its status as a company incorporated in the first Member state. In 1999, the ECJ broke new grounds with its decision in the case C-127/97 Centros Ltd v Erhvervsog Selskabsstyrelsen [1999] ECR, I-1459. The case was about a Danish couple that incorporated a company in the UK, but did not exercise any business activity there. At that time, the Danish corporate legislation required a minimum capital investment of approximately 17000 Pounds from newly established limited companies. Therefore, the Danish entrepreneurs attempting to avoid these stringent rules established a company in the UK, where the minimum capital investment rules prompted for no more than 1 Pound and then opened a branch in Denmark. However, the Danish authorities refused to register the branch in the Registrar on the grounds of prevention of fraudulent behavior of its nationals and the notion of creditor protection. The branch constituted de facto a primary establishment, whereas the company did not exercise any day-to-day trading in its home state. Thus, the company has actually transferred its real seat, but 13
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has not changed the law applicable, because the UK uses the registered office as the connecting criteria. Hence, the company retained its corporate status as a legal person incorporated under the UK regime and retained the rights provided by the Treaty Articles. The ECJ did not render the actions of the Danish authority contrary to Community law prima facie, but observed that they should satisfy the so-called Gebhard justification test. The test imposes four cumulative conditions in order to validate restrictive actions - they must be: (a) applied in a nondiscriminatory manner, (b) justified by imperative requirements in the general interest, (c) suitable for securing the attainment of the objective which it is designed to promote, and (d) must not go beyond what is necessary in order to attain it. The Court disregarded the notion of creditor protection, because if the company had an active day-to-day trading in the UK, it would have its branch registered in Denmark, but this would not change the situation for its creditors, who would be exposed to the same risks. The Court went even further by stating that the company did not abuse any national or Community law, but merely exercised its freedom of establishment. It seems that a company may be able to choose the corporate law it finds most convenient. In case of a fraud or abuse it could not prevent the application of foreign mandatory rules (however these 14
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the
Gebhard test). The response to the judgment in Centros, particularly in Austria and Germany has been negative, because
it
inconvenient
signalized
an
tendency
where English company law could replace for example Danish, German or Austrian law, because it is more lenient than the others. The outcome
of
Centros
had
impact on those Member states, which have adopted the real seat doctrine. This theory asserts that the law prevailing in the jurisdiction in which the corporation has its real seat - where its central
management
and
control is located - is the law most fitted to govern the affairs of that company. The jurisdictions adopting one or other form of reference to the real seat include France, Germany, Belgium, Spain, Bulgaria, Luxembourg, Greece and Portugal. On the other hand, the UK law determines the status of a corporation according to the law of the place where the company has been incorporated. Hence, a company has legal personality, if the law of the country where it has been registered grants the company legal personality. The inconsistent approach of the ECJ can be observed by comparing Daily Mail with Centros. The absence of legislative harmonization, which had been used by the Court in Daily Mail as a reason 15
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for declaring Article 43 (now 49 TFEU) to be inapplicable to the facts of that case, was deemed in paragraph 28 of Centros to be irrelevant, and indeed gave the Court occasion to point to the availability to Member states of the option of adopting EC harmonizing legislation in this area of company law. Centros reflected the willingness to break down the remaining constraints to the free movement of companies in the Community and to open the door to competition among national rules as an alternative approach to ensure the completion of the internal market or even for a “race to the bottom”, something that happened in United States, triggered by legislation in the state of Delaware. The US model has implemented the incorporation theory,
thus
enabling
a
company incorporated in one state to move its entire activity to
another.
In
this
way,
companies can easily avoid the harsh regulations of a given state, in which the company plans to conduct trade activity, by
choosing
a
place
of
incorporation with the laxest or most favorable company law. Taking in account the critical analyze of all previous case law, one issue remained unresolved until
2008,
milestone
when case,
another C-210/06
Cartesio Oktató Szoláltató bt [2008] ECR I-9641, was decided. This is the issue of whether a Member state can adopt measures which impede the transfer of a company incorporated on its territory without restricting its right to freedom of establishment. The case concerned a 16
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Hungarian limited partnership, which wanted to transfer its seat to Italy, while maintaining its legal status of a company governed by Hungarian law. The company applied for registration of the transfer in the Hungarian registry of commerce, but subsequently the Hungarian court dismissed the application on the basis that a cross-border transfer of a Hungarian company required the dissolution of it and a subsequent incorporation in the host Member state, in this case – Italy. From the Court of Appeal the case went on to be decided by the ECJ. It held that Articles 49, 54 TFEU “are to be interpreted as not precluding legislation of a Member state under which a company incorporated under the law of that Member state may not transfer its seat to another Member state whilst retaining its status as a company governed by the law of the Member state of incorporation.� The Court scrutinized two of its Daily Mail observations in a joint manner and came out with the conclusion that, as long as companies continue to satisfy the conditions set by national legislation for their existence, the Member state of origin cannot prohibit companies from establishing operations in other Member states. Thus, the lacuna between Member states adhering to the real seat doctrine and those, following the incorporation theory was left open. Apparently, companies established under the real seat theory have to keep their central administration in the home Member state, so it reconciles with the location of the registered office, as a precondition for existence, while being able to exercise freedom of secondary establishment, through setting up of agencies, branches or subsidiaries in other Member states. On the other hand, companies established under the incorporation theory, would be able to exercise the same freedom of secondary establishment, while at the same time moving their central administration to a another Member state, different from the one, where they are incorporated. Furthermore, after Cartesio, a new gap has been opened between a home and a host Member state. While the home Member state is free to restrict the freedom of companies to
What type of clothing is most popular with lawyers? A lawsuit
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exercise an outbound movement of its central administration, the host Member state can apply such restrictions to incoming companies only in exceptional circumstances. The Court judgment meant that at the current stage Community law did not confer companies a right to transfer the registered office and the central administration while remaining governed by the law of the state of incorporation. Nevertheless, the companies can freely transfer both the registered and head office without dissolution only with a change of the applicable national law, thus demarcating from its Daily Mail approach. Case-by-case analysis shows that the ECJ has not consistently adhered to the objectives set out in the Treaty of Rome, including the freedom of establishment. Undoubtedly, only the Commission has the capacity of introducing a Pan-European reform that could deal with the issues thoroughly and provide unrestricted corporate mobility. However, the European institutions have put aside the adoption of Directive on the cross-border transfer of registered office, as outlined in the Impact assessment from December 2007, thus implying that a possible reform is neither desirable, nor necessary. The Cross-Border Merger Directive gives to some extent the option for limited liability companies to transfer its registered office, but through an implicated and costly process. Progress has been made in 2012, when the European Parliament adopted a resolution making recommendations to the Commission on a 14th company law directive on the cross-border transfer of company seats, followed by a 2013 Public consultation, which results are not yet published. It remains to be seen whether the EU bodies will support the proposal after all, and thus enable an unrestricted freedom of establishment to the EU enterprises. Such initiative would provide a financial incentive for SMEs to operate outside the country of incorporation, enhance their competitiveness on foreign markets and boost growth of the Single Market. 18
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The UK’s “right to reside” test and EU law Dr Steve Terrett Deputy Director, British Law Centres
The UK appears set for a show-down with the EU as regards the legality of its “right to reside” test, which makes the entitlement to certain social security benefits – namely, Child Benefit, Child Tax Credit, State Pension Credit, Income-based Allowance for Jobseekers, Income-based Employment and Support Allowance – conditional upon the recipient (not being a UK national) having already acquired a “right to reside” under British law. The Commission considers that the UK’s rules are contrary to Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29th April 2004 on the coordination of social security systems, together with Article 21 of the TFEU (concerning EU citizenship). Article 4 of the aforementioned Regulation states as follows: Article 4: Equality of treatment Unless otherwise provided for by this Regulation, persons to whom this Regulation applies shall enjoy the same benefits and be subject to the same obligations under the legislation of any Member State as the nationals thereof. The UK considers that Article 1 of the same Regulation (which defines the “residence” of a person to whom the Regulation applies as meaning “the place where a person habitually resides”) entitles it to make the aforementioned benefits conditional upon having acquired the right of habitual residence under British law. An illustrative example of how the UK’s rule applies in practice may be seen from situation described by the Commission as regards an EU national (non-UK citizen) who came to the UK from Italy, where she had lived since 1989, to work for an Italian company. She worked in the UK from April 2007 until April 2009 when she was made redundant. All throughout her employment in the UK, she paid taxes and national insurance contributions, yet her claim for income-based jobseekers' allowance was refused on the grounds that she did not have a right to reside in the UK. In the Commission’s opinion, if the UK had properly applied EU social security coordination rules, those citizens confirmed as habitually resident in the UK would enjoy the same protection as habitual residents in other EU Member States. The Commission also cited statistics showing that 64% of 42,810 EU nationals applying for benefits in Britain between 2009 and 2011 were 19
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refused, and that this constitutes evidence of indirect discrimination against other EU Member States nationals. The Commission began infringement proceedings against the UK, wrote a “reasoned opinion” outlining its arguments and gave the UK 2 months within which to remedy this alleged breach of EU law. However, the UK staunchly defends its current policy and considers that the demands of the “right to reside” test – i.e. that immigrants from the EU are required to prove that they are employed or actively seeking work, or are a student,
self-employed
or
independently
wealthy – are legitimate methods to prevent unemployed people moving to the UK from other EU states simply in order to claim unemployment benefits, pension credit and housing benefit. The government’s Secretary of State for Work and Pensions, Iain Duncan Smith, said that the UK intended to fight the Commission “every step of the way” in order to avoid the alleged cost to taxpayers of £155 million a year that results from “benefits tourism”. Having failed to alter UK law within 2 months from the date of the reasoned opinion (indeed, for a much longer time, since the Commission’s reasoned opinion was delivered in September 2011), the Commission resolved to initiate proceedings before the CJEU. On the same day, the Commission also initiated proceedings against Spain over the refusal of some Spanish hospitals to recognise the European Health Insurance Card, which entitles EU citizens to free healthcare in public hospitals. In times of economic crisis, it would seem, the EU Member States are increasingly willing to engage in flagrant breaches of EU law in order to save pounds or euros. Indeed, it seems that the “right to reside” policy forms merely part of the UK government’s package of measures designed to focus on the extent of rights granted to immigrants. The most recent Queen's Speech included reference to proposed legislation designed to make short-term migrants pay for national health (NHS) care, to compel landlords to check the immigration status of people to whom they rent properties (so as to prevent illegal immigrants entering into leases) and to prevent illegal migrants from obtaining driving licences. Watch this space for likely for likely further litigation between the Commission and the UK! 20
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2013 CEEMC BNRO REPORT Denise Ashmore
Central and East European Moot Court
BLC Director
The 19th CEEMC took place in April in Brno, co-organised by the Masaryk Law Faculty and hosted by both the Supreme Administrative and the Supreme Court of the Czech Republic. Teams had to deal with complex issues of European Criminal law and the policy choice facing an EU Member State as to whether to exercise a negotiated right to opt-out
of
measures
on
criminal justice and the impact that this would have upon the European
Union
and
the
uniformity of rights protected
AG Sharpston with the Presi dent of the Czech Suprem e Administrat ive Court
by the European Convention on Human Rights and the EU Charter of Fundamental Freedoms. 21
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Sculpture in from of the Czech Supreme Administrative Court The final confrontation took place between a team from St Kliment Ohridski University from Sofia, Bulgaria and for the first time at the CEEMC their opponents came from Georgia (Free University of Tbilisi). Both teams survived some
challenging
questions from the bench with the team from
Sofia
being Winners
named of
CEEMC 2013.
22
finally the the
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The team from St. kliment Ohridski University, Sofia; the winners of the 2013 CEEMC Tamar Jikia from Tbiisi carried away the Slynn of Hadley Best speaker prize and will be joined at Luxembourg by Neza Slubic from Ljubljana whose team also
received
the
Clifford
Chance Best Written Pleadings award. Congratulations to all teams and participants and we hope that you will encourage your colleagues to participate in the 20th anniversary competition in April/ May 2014. More details on CEEMC can be found at www.ceemc.co.uk
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Access to Justice
In this section contributors are given the opportunity to write about justice-related issues. The current edition contains articles covering mediation in individual Member States, justice reforms in the UK and the EU accession to the European Convention of Human Rights
Transposition of the European Directive on Mediation in the Czech Republic Dorota Steinbergerova BLC Alumnus, Bratislava Introduction On 21 May 2008 the European Communities adopted the Directive 2008/52/ EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters (hereinafter referred to as “the Directive�) aiming to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a balanced relationship between mediation and judicial proceedings. The Directive is applicable in cross-border disputes concerning civil and commercial matters except as regards rights and obligations which are not at the parties` disposal under the relevant applicable law. From its scope are excluded, in particular, revenue, customs or administrative matters or the liability of a Member State for acts and omissions in the exercise of the state authority. This article describes legal regulation of mediation in the Czech Republic which was adopted last year in order to comply with the Directive. Legal Regulation of Mediation in the Czech Republic: the Mediation Act The Act No. 202/2012 Coll. on Mediation and Change of Some Laws
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(Mediation Act) transposing the Directive entered into force on 1 September 2012. It applies to civil, commercial, family, labour and administrative matters and therefore its scope is broader than the scope of the Directive. The Mediation Act defines mediation as a procedure in settling a conflict with the participation of a mediator who helps the parties reach an amicable settlement of their conflict. Mediation, which has some advantages over judicial proceedings (the mediation process is faster and cheaper than judicial proceedings as well as being informal and confidential) can be provided by a natural person who is registered in the Register of Mediators held by the Ministry of Justice of the Czech Republic. Initiation and End of Mediation At the beginning of mediation the parties and the mediator must conclude a contract stating the basic elements of the upcoming mediation. According to the Mediation Act, the contract must contain at least the designation of the parties to the conflict, the name and the address of the place of business of the mediator, definition of the conflict which is the subject of mediation, the amount of the fee of the mediator or an arrangement that the mediation will be provided free of charge, and the time for which the mediation is going to take place or an arrangement that the mediation will be performed for an indefinite period. Successful mediation ends with a mediation agreement. Such an agreement contains, besides the statutory requirements (signatures of the parties, the date of its conclusion and the signature of the mediator), the amicable settlement of the conflict. Effect of Mediation on Limitation and Prescription Periods During the time of mediation any limitation or prescription periods shall not run. In other words, should parties decide to settle their conflict through mediation, they shall not be subsequently prevented from judicial proceedings or arbitration in relation to that conflict by the expiry of limitation or prescription periods during the mediation process. To comply with Article 8 of the Directive the Media25
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tion Act states that limitation and prescription periods do not run even if the mediation is held in a different Member State under the legal regulations of that Member State. Confidentiality of Mediation The Mediation Act imposes on the mediator several duties, the most important being the obligation of confidentiality. The Act states that the mediator shall maintain confidentiality of all facts he has learned in connection with the preparation and performance of mediation. The mediator may be relieved of this obligation only by all the parties to the conflict or by their legal successors. However, in some cases the mediator is not bound by the obligation of confidentiality. The Mediation Act states that the mediator is not bound by this obligation in the judicial proceedings if the subject matter of the proceedings is a dispute between him / her and a participant of mediation and the dispute arose out of providing mediation services. Furthermore, the mediator is not bound by the obligation of confidentiality to the extent necessary for his / her defense within performance of the state supervision over his / her mediation activities or in disciplinary proceedings. The obligation of confidentiality is imposed also on the persons participating in ensuring the preparation and course of mediation. The provision of the Mediation Act as concerns the obligation of confidentiality reflects Article 7 of the Directive stating that, unless the parties agree otherwise and with two exceptions stated in this Article, neither mediators nor those involved in the mediation process shall be compelled to give evidence in judicial proceedings or arbitration regarding information arising out or in connection with a mediation process. However, Member States shall not be prevented from enacting stricter measures to protect the confidentiality of mediation. Enforceability of a Mediation Agreement As stated above, the successful mediation ends with conclusion of a mediation agreement. The Directive states in Article 6 that the parties of the dispute, or one of them with the explicit consent of 26
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the others, may request that the content of a written agreement resulting from mediation be made enforceable unless either the content of that agreement is contrary to the national law or the national law does not provide for its enforceability. Since a mediation agreement has, under Czech law, a status like any other contract concluded pursuant to the Civil Code or the Commercial Code, there have had to be established no special rules for making a mediation agreement enforceable and therefore there has been no need to reflect Article 6 of the Directive in the Mediation Act. Thus, a mediation agreement which is not contrary to Czech law may be made enforceable by a court if it is confirmed as a court settlement. Another possibility of making a mediation agreement enforceable is its incorporation into a notarial or executory deed with direct enforceability. Relation of Mediation to Judicial Proceedings The initiation of mediation does not affect the right of the parties to demand protection of their rights through judicial proceedings. However, according to the new legal regulation in the Czech Civil Procedure Code, a court is entitled, if this is expedient and appropriate, to order the participants of the proceedings a first meeting with a registered mediator for three hours and interrupt proceedings for a period of up to three months. This provision reflects Article 5 of the Directive stating that a court may, when appropriate and having regard to all the circumstances of the case, invite the parties to use mediation in order to settle the dispute, or the court may invite the parties to attend an information session on the use of mediation. Once a court orders a first meeting with a mediator, the participants have no right to appeal against such a decision and must attend the meeting. This first meeting constitutes a session where the media27
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tor informs the participants of the advantages of mediation. If the meeting is successful and the participants decide to proceed with the mediation, they conclude a contract on the performance of mediation. Conclusion The use of mediation as one form of alternative dispute resolution has been harmonized by the European Union by adoption of the Directive which has been transposed into the Czech law by the Mediation Act. The Mediation Act regulates the basic aspects of mediation such as the initiation and end of mediation, the effect of the mediation process on the running of limitation and prescription periods, rights and obligations of the mediator, especially his / her obligation of confidentiality, and the relation of mediation to judicial proceedings. The mediation process itself is not regulated by law because mediation is unlike judicial proceedings and is rather, based on informality. Settling of the conflict by use of mediation shall be more advantageous for the parties than going to a court because the mediation process is faster than judicial proceedings, cheaper as the parties do not pay court fees, the mediation is not so stressful and it is informal. The course of mediation is in the parties` hands and the mediation process results in conclusion of an agreement acceptable by all the parties. It is desirable that as a result of the new Czech legal regulation of mediation the public will become more familiar with this method of dispute resolution and will use it more often. 28
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Accession of the European Union to the European Convention of Human Rights: an update Ruairi O’Neill BLC tutor
Secretary General Thorbjørn Jagland of the Council of Europe referred to it as “the missing link” in the European system of fundamental rights protection. What he is referring to is the publication on 5 April 2013 of the Draft Agreement on Accession of the European Union to the European Convention of Fundamental Rights. The Agreement represents another step in the long process of EU accession to the European Convention of Human Rights; one that was kick-started more recently by Article 6 of the TFEU bringing with it the legal obligation for the EU to ratify the European Convention. The next step will be for the Court of Justice of the EU to give an opinion on the compatibility of the Agreement with EU law, as ratification of the ECHR is still an international agreement between the EU and other parties, which must follow the procedure for ratification under Article 218 TFEU. Then, should the CJEU declare the Draft Agreement compatible with EU law, the next steps will be unanimous approval in the Council followed by approval of all Member States in accordance with their national constitutional requirements (under Article 218(8) TFEU). If this all goes to plan, the remaining obstacle will then be ratification of the Agreement to allow the EU to become a party to the ECHR by all Contracting States of the Council of Europe. Dealt with within the context of a 29
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wider package of legislative measures, the Draft Agreement will have to be followed by a Declaration by the EU, a new Rule added to the Rules of Procedure of the Council of Europe’s Committee of Ministers to allow them to exercise supervision over the execution of judgments and friendly settlements to which the EU is a party, and a draft explanatory report to the Accession Agreement. Substantively, the package will require the EU to accede to the European Convention and those additional protocols to the Convention that are common to all Member States of the EU (Protocol 1 on the right to property and Protocol 6 on the abolition of the death penalty in times of peace). Why will there be changes? Even though the EU is not party to the ECHR, as all Member States of the EU are bound by the Convention, the European Court of Human Rights (‘ECtHR’) does have experience dealing with EU law, whether directly or indirectly. In the past this has been because Member States (‘MS’) retain responsibility for their actions which fall within the ratione materiae of the ECHR, even when those actions are a result of implementation or application of EU law. Under the current arrangement it is possible to make an application to the ECtHR against a MS for implementing EU law, even when the MS has no margin of discretion when implementing the particular EU law. Specifically when the MS has no margin of discretion, the ECtHR applies what is known as the Bosphorous presumption: this is a presumption that EU law provides at least the same level of protection as the ECHR which can only be rebutted if the guarantee of ECHR rights are shown to be ‘manifestly deficient’ in the present case. There are two problems with the current regime of protection of rights under the ECHR when it comes to the EU. The first is that, as a result of the Bosphorous presumption, the EU is prima facie in a privileged position in relation to Member States; the ECtHR will not normally review MS’ implementation of EU law. The second is that, as the EU is not party to the ECHR, the ECtHR has no authority to review acts adopted by the EU institutions themselves. What will change? Responsibility Article 3 of the Draft Agreement provides that the EU will only be liable for breaches of the
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Convention by EU institutions acting within the competences provided by the Treaties. Article 4 then says that Member States will continue to be responsible in situations where implementation of EU law falls within the material scope of the ECHR, though the EU can be added as a corespondent. The fact that the Draft Agreement retains the existing rule that MS retain primary responsibility for breaches of the Convention caused by implementing EU law could be seen as evidence, both of the multi-layered and dynamic nature of EU law and the interdependence of national courts when applying EU law, and the Court of Justice of the EU when exercising its exclusive
competence
to
interpret EU law. The co-respondent mechanism added by the Draft Agreement is clearly designed to protect the autonomy of the EU legal order. Article 4 states that: ‘[w]here an application is directed against one or more Member States of the
European
Union,
the
European Union may become a co-respondent to the proceedings in respect of an alleged violation notified by the Court if it appears that such allegation calls into question the compatibility with the Convention rights at issue of a provision of European Union law, including decisions taken under the TEU and under the TFEU, notably where that violation could have been avoided only by disregarding an obligation under European Union law.’ By defining the rule in such a way, the ECtHR will be spared from having to make judgments as to the distribution of competences between the EU and Member States. As the co-respondent mechanism is based on ECHR breaches caused by the application of an EU law, in those rare situations where the CJEU will not have had an opportunity to assess this compatibility issue, the ECtHR will permit the CJEU to submit an opinion regarding the compliance of the relevant EU law. In this way, the corespondent mechanism effectively abolishes the Bosphorus presumption of presumed compliance.
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The general effect of these changes will be that the European system of human rights’ protection will become ever
more
interwoven.
Further, the CJEU formally assumes a position in the judicial hierarchy akin to a national court in the context of international human rights protection. This will no doubt lead
to
increased
judicial
discourse between the CJEU and the ECtHR, and this in turn may not be to the liking of some EU Member State governments that are hostile to the idea of supranational judicial oversight.
Did you know that when the EU accedes to the European Convention of Human Rights, it will not be ratifying Protocol 13 on the abolition of the death penalty in all circumstances? The EU can only ratify Protocols to the ECHR that have been already ratified by all existing Member States, and Poland is yet to do so. While Polish law prohibits the death penalty as a punishment for all crimes, it still hasn't ratified the Protocol. So neither will the EU!
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Geopolitics A side-effect of accession will mean that the EU as an organisation will become a party to the ECHR on the same basis as the other Contract Parties. The first, potentially most far-reaching, outcome of this remarkable development is that the EU (as provided for in Article 70 of the Draft Agreement) will be able to initiate proceedings against other Contracting Parties, and vice versa. While at present inter-state proceedings are extremely rare before the ECtHR, there is nothing that would preclude the EU, or a belligerent Contracting Party, using the EU’s membership as an instrument of foreign policy. This will depend, among other things, upon the maturity of the EU Common Foreign Policy, cultivated in the shadows at present by the High Representative for Foreign Affairs, Baroness Catherine Ashton. Additionally, membership of the Committee of Ministers when electing judges and participation in the Parliamentary Assembly of the Council of Europe in situations such as the supervision of judgments of the ECtHR, will give the EU an voice equal to the other 47 current members of the Council of Europe. This could in turn lead to some interesting results in the context of further integration within the EU itself. Up until now, the Court of Justice has been seen as the leading 33
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institution of the EU when it comes to promoting integration. Recently however, the CJEU has shown itself to be unwilling to extend the application of the EU Charter of Fundamental Freedoms to guarantee a de minimus level of fundamental rights protection to every EU citizen, irrespective of whether or not they have exercised free movement. In the event (once the EU has acceded to the ECHR) that, following its reorganization in 2014, the European Commission is able to wrestle from the European Council some control over the EU seat at the Council of Europe, it may be able to use some of that power to harmonize and increase the horizontal application of fundamental rights within the scope of the ECHR, thus bypassing the restrictive scope of Article 51(1) of the EU charter. This may come in handy within, for example, the field of the Common European Asylum System, where the European Commission or Parliament may desire greater levels of protection (perhaps within the scope of Article 8 family rights or Article 6 ECHR effective judicial review mechanisms or transparency in asylum applications or family reunification applications) than that demanded by the Council of the EU. This could put the Commission back in the driving seat in terms of its primary raisons d’être as Guardian of the Treaties. Even if this outcome does not transpire, there is certain to be further development of a basic standard of human rights protection across the EU; one that will be applicable across all levels of judicial protection, and one that may not be entirely limited to the competences of the European Union. Whether that applicable standard will be decided on in Brussels, Strasbourg, or even London, is something that remains to be seen. For now, the publication of the draft Agreement on Accession is a decent step in the right direction, on what has proven to be a very long road.
New BLC Centre starting in 2013 We are very pleased to announce that from 2013 there will be a new BLC Centre providing the Diploma in English and European Law. Not only was the Masaryk University, Brno, Czech Republic, the host of this year’s CEEMC, but it will also be the next BLC Centre to open, starting in October 2013. You can find out more by going to the Masaryk University website or by clicking here. 34
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Here's a how-de-doo, Here's a state of things* Oh for a Lord Chancellor who acts as Equity’s guardian in the current government legal reform... Denise Ashmore BLC Director
Ideal candidate sought for the newly created post of British Chancellor of Justice (fictional). Suitable candidates should be clergyman (optional since 16th century), qualified lawyer (optional) , politician (essential), candidates basic bookkeeping skills preferred. … .term of appointment (variable)…. In the UK the speed and extent of reform over the last 10 years has been extraordinary and the impact it has exerted upon the structure, legal profession and citizens even more so. As a result, not surprisingly, legal reform has been the subject of a plethora of articles, books, conferences which have analysed and considered a range of subjects, including a discussion of the detail, impact and need for such full-scale reform. It has certainly acted as a call to arms for the legal profession… with go slows, strikes and public campaigns, (actions currently mirrored in some other EU member states) although in the UK none of these seem to have acted as a deterrent to a determined government. Another article in this OD edition discusses one of those reforms to the system of legal aid, looking at the potential impact this will have on both access to justice directly and through the quality of legal services provided. Arguably some of these reforms will also bring the UK into conflict with its UK’s accepted obligations detailed in the European Convention on Human Rights (ECHR). Adopting the style of the comic opera centring on the battle of legal reform, however let us direct our attention to a leading actor in these reforms; the Lord Chancellor. He has changed his costume many times over the last centuries but in the 21st century seems to be moving even further away from his historical roots as a clerical Lord Chancellor, a guardian of Equity and the “Keeper of the Kings Conscience”. SCENE ONE- THE DEMISE OF THE LORD CHANCELLOR!!! The Lord Chancellor has remained centre stage since the 11th Century in his role as highly influential senior counsellor. In the past this role has placed him at the forefront of legal reform, 35
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such as when executing orders of such famous English monarchs as Henry VIII, whose reign is renowned for the impact it had upon the path to be followed by the UK in the development of its legal system independently of continental neighbours and the influence of the Catholic church. Might the reforms undertaken over the last 50 years by the modern Lord Chancellors be viewed in historical hindsight in a similar way? Students of British Law will know that the position of Minister of Justice is somewhat of a novelty in the English legal system. The responsibilities of the Minister of Justice, known from other legal systems, were traditionally exercised in part by the Lord Chancellor; as part of his responsibilities as a member of the executive, the legislative and the judiciary, this triumvirate neatly reflected in his tricorne headware . However the UK implementation of the European Convention on Human Rights (ECHR) through the Human Rights Act 1998 cast a blinding spotlight on the potential breaches inherent in the Lord Chancellor’s role and in particular on its apparent failure to adhere to the constitutional principle of a separation of powers (BLC students might here recall that the impact of much of this apparent conflict was reduced in practice by using a number of constitutional conventions. Nonetheless, it might therefore be argued that the government took a logical step when deciding to abolish the position of Lord Chancellor in 2003… Unfortunately that decision (whether taken in haste or without sufficient prior research and consideration) overlooked the chaos that would result as the Lord Chancellor was the holder of a number of ‘protected’ historical functions contained in a myriad of statutes and which could only be transferred by an Act of Parliament. An arguably more measured approach followed in 2005, hand in hand with other constitutional reforms, when the decision was taken for the title of Lord Chancellor to be retained, but for responsibilities to be re-allocated between the Lord Chief Justice (judicial), Lord Speaker (legislative) and the new post of Minister of Constitutional Affairs (executive). Even then, it still took at least one more year for the Ministry to identify and deal with the re-allocation of the 36
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Chancellor’s various functions. Once complete the Ministry of Constitutional Affairs was also abolished and in 2007 its functions were subsumed by the newly created Secretary of State for Justice, let us give him a title for short of JUST, our current holder of the post of Lord Chancellor. SCENE TWO – CURRENT REFORM BATTLES So how has the changing script of JUST, our leading actor influenced the current legal reforms which have so radicalised the legal profession? Little doubt exists that a Justice Secretary’s personal experience and qualifications must affect his sympathies and experience, regardless of the consultations undertaken and the advice received from his staff and colleagues. The current Lord Chancellor / Justice Secretary (Chris Grayling) is the first to have no legal qualifications since the 17th century, so is it a coincidence that the ever increasing pace of legal reforms now raises the most strident protests? In 2013 the eye of the legal reform battle centres upon an apparent deconstruction of the legal aid system. Here we see JUST attacking and brandishing the weapon of the cost to the public purse and remaining
undeterred
by
the
counter attack of his opponents pointing out that this will result in the loss of the right of public access to justice. JUST also continues with the programme of closure of local country and magistrate courts which remain a scene of minor skirmishes. How are the protest scenes being staged? Actions in the last two months alone include:·
a boycott by some 400 barristers of the courts and trials scheduled in April 2013,
·
a decision by representative group of the Welsh Barrister vote to refuse to enter into the system of criminal legal aid contracts currently proposed by the Ministry of Justice 37
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a protest march in London involving hundreds of lawyers with participants carrying a coffin with the notice “RIP Legal Aid”.
·
petitions
The impact upon the legal profession has of course already been felt in areas of civil legal aid, where legal aid in divorce and personal injury matters is generally no longer available, leading to redundancies in law firms and a suggestion from junior lawyer associations that legal trainees and junior lawyers would do well to carefully consider their career choices. Successful in the campaign to reduce the availability (and of course public cost) of civil legal aid JUST turns his attention to criminal legal aid and announces his intention to cut the criminal legal aid budget by two thirds. In an aside JUST acknowledges that potential casualties of this reform are likely to include criminal legal practices which might be reduced to one quarter of their current numbers. Do we already know the next field of battle in our play of legal reform? Yes, it appears that the next scene is already being written. We are told that JUST’s agenda includes a possible privatisation of the courts, converting the current Courts and Tribunals service into a commercially run enterprise, funded in part by an massive increase in court fees related to the value of claims. Perhaps recognising that it would be useful to make the courts more commercially attractive and viable perhaps, the programme of court closures continues. JUST, not surprisingly, introduces this as yet another money saving device necessary in the current economic climate. SCENE THREE- THE LEADING ACTORS Lawyers with legal aid practices have made the most opposing speeches in our play to date, knowing that they are facing an inexorable change in their own position and future careers. Not many speeches have yet been made by their colleagues in large commercial or international commercial law practices, whose clients, of course, rarely need to be funded by legal aid. 38
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However the same clientele (which has recently featured battling Russian oligarchs choosing the English courts as a forum for their dispute) may not react positively to the announcement of the court
fees
increase
making them indirect sponsors of JUST’s court privatisation Will
scheme.
they
be
happy
being
primary
contributors
to
the
financial profile of a privatising
Court
and
Tribunal Service to make it
a
more
attractive
investment opportunity for third parties? What of the judiciary and its support for the reform plans? A former Lord Chief Justice, Lord Woolf, whose own report led to extensive civil procedural reforms, is certainly not a supporter, concerned that they will lead to a “factory of mass produced justice” adding that the “long term effects of this will be very serious and once the damage is done it will be very, very hard to put right”. Similar reservations have been expressed by judicial colleagues including the current President of the Supreme Court, Lord Neuberger. None of this seems to have had any visible impact upon the steam roller of reform where JUST’s hand remains firmly on the tiller with the accelerator fully pressed to the ground. To the contrary JUST appears to have no qualms in acknowledging that the momentum for reform is financially led, stating “It is not free money… we must ensure we get the very best value for every penny spent” so representing the current political need for short term savings as both a laudable and practical aim. SCENE FOUR/ FINAL ACT? A question is posed by our play’s narrator to JUST, his supporters and his opponents? What is the purpose of a legal system? Might it include the following?
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1. To provide a forum for resolution of disputes funded and supported by the public purse? 2.
To ensure equality of justice to citizens irrespective of social and/or economic position?
What were the qualities of the current English common law legal system which enabled it to continue to trace its roots to the Magna Carta and the 11th century? Which of these qualities remain fundamental in a democratically elected society and so should be sacred and protected? Perhaps in hindsight the significance of the Lord Chancellors tricorne hat (reflecting a foot in each of the legislative, executive and judicial camps) when combined with the earlier convention of appointing a lawyer to the post, can now be seen to have subtle advantages that are no longer available to the current Justice Secretary, whose reforms appear predominantly fuelled by the need to balance his books. Earlier Chancellors, it seems, could claim to have an overview of our complex legal system, which equipped them to take decisions with an eye not only focused upon current political, economic and social demands but were also taken in context, so ensuring that any reforms retained the best of the existing system and were also the most appropriate for the future. Perhaps even more essential would be a guarantee that both eyes remain centred upon the demands of Conscience and Equity. So how JUST is JUST? Although the title of Lord Chancellor remains‌do we have anything left of its substance? It would be a paradox indeed, if the UK enactment of Human Rights forcing the change in the role of the Lord Chancellor has led to an actual reduction in the very same rights that it seeks to protect! CURTAIN FALLS‌. FOR NOW *(title quote from comic opera by Gilbert and Sullivan) 40
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Legal Aid Reforms in the UK: Can We Still Claim to Have Access to Justice? Cerian Griffiths BLC tutor
Since the introduction of the Legal Aid and Advice Act in 1949, litigants in certain areas of the law have been given the right to free legal representation. This right has largely been limited to criminal law, defamation law, judicial review and areas of family law such as proceedings involving child protection by the state. Legal aid is of course a drain on the state’s resources. In 2009 legal aid cost the country £2 Billion and so to some extent, it is an easy target for the government to tap into during the economic depression. The Lord Chancellor, Chris Grayling has introduced radical plans to overhaul the legal aid system. Essentially these plans involve holding up legal aid work for tender so lawyers will have to out bid each other, trying to undercut their rivals. The logical outcome of this plan will be that only those lawyers who are willing to work for very low pay will receive legal aid contracts. The Lord Chancellor has sought to justify this policy by claiming it will increase competition between lawyers and save the state a large proportion of the legal aid budget. What Mr Grayling has failed to consider however is that OBITER
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ordinarily competition in any market plays a number of roles, one of which is the reduction of costs but the other is to improve the quality the service available for consumers. The Lord Chancellor does not consider the recipients of legal aid to be consumers worthy a high quality of legal service, Mr Grayling is considering only the potential costs saved. Predictably these proposals have been received very badly by the legal profession but not purely because of the financial ramifications to lawyers personally. It has long been agreed that not all litigants can receive legal aid and nor should they if they can afford legal representation. Moreover, legal costs play an important role in curbing excessive or malicious litigation. On the other hand the system is designed so as not to prevent access to justice for those who cannot afford legal representation. Again, this can not reasonably be extended to all area of law such as the recovery of smaller debts or other civil claims. In these instances court encourage ‘litigants in person’, for those bringing or responding to smaller civil claims to represent themselves rather than to hire lawyers. Courts then act to help these litigants in person as much as possible through advising them what information they need to put before the court and through assisting in the cross examination of witnesses if needed. In many ways these courts are closer to the inquisitorial system found through Europe rather than the lawyer-led adversarial system of England. For such smaller civil claims this system is an appropriate compromise as often these disputes regard a
In the 12 months up to October 2011, £52m of legal aid was spent on expert reports and this consultation is designed to tackle the costs and delays brought about through poorquality evidence. The UK Ministry of Justice has now admitted that “much of the evidence provided by so-called experts is ‘not up to scratch’ and will be driven out of the family courts by new reforms. 42
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small amount of money. Such a system is not appropriate for the areas of law currently covered by legal aid including: criminal law, judicial review and parts of family law. The striking similarity between these areas of law is that these areas of litigation will always involve government lawyers. In criminal law, the defendant is prosecuted by the state (increasingly by barristers who are solely working for the government). In judicial review cases the respondent will always be representing either the state or one of its agents and in public family law the parents or guardians of children are often faced with an army of litigants not only representing the state but also various child protection agencies. Mr Grayling may well argue that he is not removing legal aid per se,
but
is
allowing
rather further
competition between lawyers.
The
devastating impact of such measures appear to have escaped the government’s attention however. By holding out such work to
tender,
criminal
defendants and those needing legal aid will no longer have any choice of lawyer and will be assigned a lawyer who is willing to work for very little. These will not be the best lawyers, these will be lawyers who are less qualified, less experienced, and less able to represent their clients. The lawyers representing the government will be the best in the country. Mr Grayling is happy for those involved in actions against the state to be represented by whoever will be paid the least but when it comes to defending the government, sending people to prison or taking their children away from them Mr Grayling will only want the best. The consequence of this is that whilst technically legal aid still exists, those requiring legal assistance will be at such a disadvantage that they may as well be litigants in person as at least then the court would try to assist them.
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A further consideration which is beyond the Lord Chancellor’s attention is the false economy of his plans.
These
proposals
will result in increasing numbers of people acting as litigants in person and whilst Mr Grayling may give
scant
thought
to
justice, judges will not. The result will be that trials will be twice as long as
judges
struggle
to
ensure that litigants in person receive as fair a trial
as
possible.
Subsequently, instead of paying for legal aid, the state will have to pay for court costs such as the court building itself, court staff and judges (who earn considerably more than lawyers themselves). A real concern that is being voiced by lawyers in response to these proposals is that there will be less scrutiny of the government and its decisions. Judicial review is the process by which people can question the decisions made by the government and it plays an integral role in ensuring the accountability of the government and the quality of democracy in general. By ensuring that those bringing judicial review claims have poorer quality legal representation, Mr Grayling is reducing the scrutiny of government actions which the majority of the legal profession believe is only the first step in a raft of legislation which will dramatically impact on the democratic health of the nation. Whilst it is not yet certain that these proposals will be put into effect, the impact of such measures would damage access to justice, the legal profession and democracy itself. It remains to be seen whether Mr Grayling will listen to the protestations of lawyers across the country. 44
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Subscribers’ contributions and further information
In this feature, we are keen to publish a selection of your comments and opinions on some of the more controversial issues in this edition of Obiter Dicta. Whether you agree or disagree with the approach taken by the author of an article, or if you have a different opinion of the situation altogether, we would like to hear from you! In particular, we would welcome your opinions on the following issues contained in this edition of Obiter Dicta: Is the UK’s desire to increase the use of “secret courts” (see http://www.guardian.co.uk/ law/2013/jun/14/what-are-secret-courts) matched by similar legal developments in your country? In light of recent scandal surrounding accusations that the UK spied on G-20 delegations during a conference in London, how does the law in your country regulate the gathering and use of state intelligence? Are the concerns on restrictions to access to justice in the UK reflected in your own systems? Please send your comments to blcobiterdicta@gmail.com
Juris Angliae Scientia Ltd 10 West Road Cambridge England Find us online at www.britishlawcentre.co.uk Phone: +48 22 52 7278 E-mail: britishlawcentre@gmail.com
Juris Angliae Scientia Ltd is a charitable foundation set up in 1992 with the objects of promoting education links between the United Kingdom and Poland. JAS has functioned as the engine for promoting and supporting the activities of the BLC, initially in Poland widening to other parts of Central and Eastern Europe. The current managing committee includes Prof. W.R. Cornish, Prof. R. Fentiman, Dr J. Morgan (Law Faculty, University of Cambridge) and Prof R. Nolan (University of York) with Lord Robert Cornwath, Justice of the Supreme Court holding the Chair of the Members of JAS Ltd.
Footnotes to articles are not included in Obiter Dicta. If you wish to read any article inclusive of footnotes please contact the editor via the contact details provided. 45
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In this section we bring you commercial and business news from across the EU. Contributions include an article on EU liability for ISPs, a review of shareholder primacy in the UK, consumer protection and the taxing of e-books.
Commercial law update
Liability of Intermediary
Internet Service Providers in European Union Law Anna Karwowska 2nd year BLC Student, Warsaw Centre The role of the Intermediary Service Providers
The first days of the Intermediary Service Providers (hereinafter "ISPs") date back to 1990, when Massachusetts-based platform “The World� became the first commercial ISP. As a result of its popularity, commercial ISPs sprang up providing data storage to anyone willing to pay for the service. Today, we cannot imagine our lives without Facebook, Youtube or eBay. Intermediary Service Providers are responsible for the products we buy, things we do with our free time and how we communicate.
However, Internet users also contribute to the ISPs services by providing data, information and files, which are stored afterwards by ISPs. Despite the obvious benefits for other users, such activity may also constitute infringements, i.e. defamation, copyright and trade mark infringements or fraud. As ISPs play diverse roles, the article is narrowed down to the most controversial hosting ISPs providing web-hosting services, such as email, virtual machines, clouds, or entire physical servers where customers can run their own custom software. Liability of ISPs in the in the Directive on electronic commerce
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Intermediary
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47
Providers’
liability for the activities of its users is generally based on a knowledge of the users’ activity. According to Directive 2000/31/EC on electronic commerce (particularly Article 14 and 15 of the Directive), if the ISP does not know or is unaware of the behaviour of its user, it is not liable for the information stored at the request of the user of the service. Only
upon
obtaining
such
knowledge or awareness, ISP shall act expeditiously to remove or to disable access to the information. The point is that the Directive neither imposes on ISP any obligation to monitor the information stored, nor a general obligation actively to seek facts or circumstances indicating illegal activity.
Liability of ISPs in the in the view of the domestic courts in Europe Despite the wording of the Directive on electronic commerce, some courts in Europe tend to impose on intermediaries a proactive duty to filter out infringing activity or content. Such duty may consist in preventing recurring infringing activity (André Rau v. Google and Aufeminin.com) or even introducing filtering system (Twentieth Century Fox et al. v. British Telecommunications (BT) PLC).
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The landmark case marking the first time an ISP to block a content of such a site is Twentieth Century Fox et al. v. British Telecommunications (BT) PLC (also known as a Newzbin case). Newzbin, the Internet’s premier Usenet indexer, operated by locating and categorizing illicit copies of movies and displays the titles in its indexes, providing users who search for such items a facility to download the items with one click. Following legal action brought in the United Kingdom by Hollywood film studios, the UK High Court ruled that since
Newzbin
was
deliberately
indexing
copyrighted content, the main UK ISP shall block some of their customers’ access to an unauthorized content sharing platform. The “Website blocking” judgment delivered by the UK High Court judgment in this case was widely criticised as very dangerous. Peter Bradwell, copyright campaigner at the Open Rights Group, underlined that: “These judgments won't work to stop infringement or boost creative industries. And there are serious risks of legitimate content being blocked and service slowdown. If the goal is boosting creators' ability to make money from their work then we need to abandon these technologically naive measures, focus on genuine market reforms, and satisfy unmet consumer demand." Similar rulings have been delivered in France and Germany, where ISPs are generally held to take all
reasonable
means
to
bring
infringing activity to an end. In André Rau v. Google and Aufeminin.com, the Court of Appeal of Paris held that as a soon as it was put on notice of infringing content or activity, a hosting provider had the duty to implement all possible means to take down such content
and
avoid
its
future
dissemination. In the Zadig Productions v. Google 48
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49
Video case (later confirmed by the similar ruling in YouTube v. SPPF), the Paris court held that hosting providers had the duty to implement all reasonable means to prevent the recurrence of content already notified as infringing. The court ruled that despite being a host and having complied with all takedown notices, Google was liable for the new “postings” of an infringing video since it had failed to implement all technical means to avoid its further distribution. The issue of presumption was discussed in Ricardo v. Rolex and eBay v. Rolex, involving the massive sale of “fake Rolex” on eBay. Here, the German Federal Court of Justice held eBay liable for having failed to take effective measure to prevent the recurrence of clearly infringing offers on its site. The court stated that offers, including the word “fake” or “counterfeit” in their description, as well as offers with suspiciously low price, should raise a red flag that the goods are likely to be counterfeit. Therefore, eBay should filter out “obviously infringing” goods. Liability of ISPs in the view of the European Court of Justice In contrast to the domestic European courts approach, the European Court of Justice (hereinafter "ECJ") has held that member states are prohibited from imposing any general monitoring obligation upon service providers (which is in accordance with Article 15 of the Directive on electronic commerce). The case of Scarlet v. SABAM was hailed as a victory for Internet freedoms and is of very high importance, especially for the ongoing debate around copyright enforcement online. The ECJ had to answer the question whether Scarlet, an ISP, can be required to implement and pay for a filtering system to filter out copyright infringing files. SABAM, which is the Belgian copyright
49
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PAGE
society,
50
had
sought an order requiring Scarlet to bring copyright infringements
by
its
subscribers to an end by blocking the transmission of
files
containing
musical works through peer-to-peer software. In order to block infringing transmissions,
Scarlet
would have to install and maintain a filtering system scanning all electronic communications of all its subscribers passing via its services. The ECJ held that an injunction that would require either an ISP to install at his own expense, for an unlimited period of time or a filtering system involving the active observation of all electronic communications passing via their services, in order to prevent any future infringement of any of the rights held by the claimants, would be against the provisions of the Directive on electronic commerce. Another widely discussed case is SABAM v. Netlog, where the ECJ confirmed that general filtering systems installed for the prevention of copyright infringements are disproportionate. In the Netlog case, Belgian copyright society, SABAM, demanded from Netlog, an online social network provider, to implement a general filtering system to prevent the unlawful use of musical and audio-visual work by the users of its network. Analogically as in Scarlet v. SABAM, the implementation of a general filtering system would have obliged Netlog to perform an active observation of the files stored or exchanged by their users on their networks in order to determine where this sharing was done unlawfully, with the aim of taking down or blocking such files. The European Court of Justice confirmed in the Netlog case that the implementation of general filtering systems collides with the prohibition on imposing a general obligation to monitor on service providers contained in the Directive on electronic commerce. In addition, the ECJ ruled that general filtering systems intended to protect copyright challenged several fundamental rights protected under the Charter of Fundamental Rights of the European Union. 50
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Impact of the European Court of Justice view of the liability of ISPs on the European law Since the outcome of Scarlet v. SABAM and SABAM v. Netlog were very successful for ISPs, some say that both cases have been decided at a time when the tide may be turning against the power of copyright lobbies in Europe for the benefit of another powerful lobby with its own interests, that is the telecommunications companies such as Scarlet or Netlog, which provide Internet access to users. On the other hand, many supporters of the cases underline its fundamental importance for the future of the internet and the development of a strong digital single market (vide statement of Malcolm Hutty, president of EuroISPA, a service providers’ lobbying group). Nevertheless, ECJ did not have doubts that general filtering systems intended to protect copyright undermine provisions of the Charter of Fundamental Rights of the European Union (“EU Charter”). European Court of Justice stated that imposing a general filtering obligation does not respect the requirements of the EU Charter, that is fair balance between the right to intellectual property (Article 17 of the EU Charter), on the one hand, and the freedom to conduct business (Article 16 of the EU Charter), the right to protection of personal data (Article 8 of the EU Charter) and the freedom to receive or impart information (Article 11 of the EU Charter), on the other.
SPANISH HOLIDAYS- Too much sun, sea and sangria? It seems that there are just too many English holiday makers getting ill whilst on holiday for the Spanish to afford to operate the European Health Insurance system (EHIS). Rather than the free medical treatment guaranteed by possessors of the EHIS card, they are told to reclaim costs on their insurance leading to an action against Spain being initiated by the European Commission.
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The New Forum of Consumer Protection in Hungary The Financial Arbitration Board Katalin Orosz BLC Alumnus, Budapest
The Financial Arbitration Board (hereinafter the FAB) is the Hungarian forum for alternative dispute resolution, which started to operate on 1st July 2011 as the Hungarian member of FINNET. According to the Act CLVIII of 2010 on the Supervisory Authority of Financial Organisations, the FAB is competent in settlement of “financial consumer disputes�, namely the disputes arising between the consumers and organizations being supervised by the Hungarian Financial Supervisory Authority (hereinafter: the HFSA), such as banks, insurance companies, financial enterprises, investment suppliers, etc., in connection with the conclusion, existence and performance of the financial service contract. With the help of FAB the consumers have a chance to settle their disputes out of court in a short 90-days term, without paying any fee for the procedure. The speciality of this panel is the fact that it works as a separated professional division within the HFSA, without infringing the basic principle of independence prescribed by the Commission Recommendation 98/257/EC of 30 52
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53
March 1998. The main aim of the procedure is to conclude a compromise between the consumer and the concerned financial institutions. If it is not possible, the FAB makes a decision to guarantee the quick, single and effective enforcement of consumer’s rights. Who has right to initiate the procedure of FAB? The initiator of the procedure of FAB may only be consumers, who should be natural persons, acting out of their professional or economical activity. Of course there is no obstacle to be represented by another person. The FAB was established exclusively to protect the consumer rights against the financial institutions, using general contract terms and conditions, which means that the entrepreneurs, companies, legal entities, corporations without legal entity and condominium buildings cannot request for the decision of FAB. The other condition of the procedure is the consumer’s declaration, that he or she had attempted to clarify the facts of the case with the contracting institution, but this attempt was not successful. It should also be mentioned that the case cannot be trialled if the consumer initiated an intermediary or court procedure with the same problem. How are the different kind of disputes resolved by the same body?
The members of the FAB are public servants, holding a law or an
economics
degree.
For
lawyers it is necessary to have bar exams, practice in any special field of law, and knowledge of financial intermediary system. In comparison with the general Arbitration Board, where one arbitrator tries to solve all kind of problem arising between the consumer and the other party, the FAB always acts in 3-person groups, consisting of an economist, and lawyers. All groups have a president who is required to be a lawyer. These public servants do all their best to resolve the financial consumer disputes and to decide, which party has the stronger claim.
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54
Sometimes – especially with disputes in connection with insurance contracts – the FAB cannot resolve the problem, because special knowledge of medicine or other professional area is needed to decide the case. As the procedure is too short in consumers’ of interest, there is no possibility to appoint an expert to obtain an independent professional opinion. In such cases, on condition that the parties cannot reach an agreement, the FAB terminates the procedure without making a decision, which does not affect the consumer’s right to prove his/her allegation before the court. How does the FAB proceed? The procedure starts with the consumers’
petition,
which
describes the conflict and asks the FAB to decide it in their favour, designating the best solutions
for
consumers submit
them.
also
those
need
The to
documents,
which can be used as evidence of their arguments. First of all he FAB checks if there is any obstacle of starting the procedure. If the petition lacks the needed details, or the complaint is incomprehensible, the FAB asks the consumer to complete the claim or the documents. The 90-days term starts when the complete petition arrives to the FAB. It is in consumers’ interest, that there is no special deadline for submitting the petition, so consumers can enforce their rights within the general period of limitation prescribed by the contract or by law. If the petition was not rejected, it is sent to the involved party with the order to answer all consumer’s and FAB’s questions within 8 calendar days in written form. This short term also serves the interests of consumers, but it puts a really heavy burden on the contracting company, as it is not so easy to examine the precedent of the case, to procure the relevant documents, to ask the opinion of the competent in-house division, to advise the business representatives to state their views, or to contact the partner company if the conflict is about a common product or service. Financial organisations try to do their best to fulfil their obligation of cooperation 54
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55
required by the law. In case the company perceives any mistake or breach of contract, the performance or a proposal of settlement is expected in order to close the case, acceptable for both parties. And – the most important thing is that – the involved company has to declare in its answer, whether it accepts the decision of the FAB as an order by which the company would be bound. It means, that however the law tried to create a strong protection for the consumers, the effect of the FAB’s decision depends on the intention of institutions, using the general terms and conditions created by themselves. The FAB also informs the parties about the day of hearing, when the parties have to appear before the FAB in person or by a representative. The hearing shall be scheduled for a day within 60 days from the arriving of the submission, and the whole procedure has to be finished within 90 day. During the hearing both parties have possibility to explain and prove their cases. The FAB tries to explore their viewpoints by asking relevant questions, explain their tasks and liabilities. Sometimes the written documents prove that the involved financial organisation acted according to the terms of contract, but due to the circumstances the FAB still try to reach a settlement by slightly squeezing, supposing that the reason of dispute is that the consumer did not get the appropriate or needed information, or the organisation had made some administrative mistakes which influenced the consumer’s decision or act. The number of cases before FABare rising, as the law requires the financial companies to inform each claimant about the possibility to turn to the FAB, and to provide them with contacts of the FAB which makes all possible steps to help the consumer. How could a financial consumer dispute end? If the consumer and the contracted institution come to an agreement which is in accordance with the provisions of law, the FAB confirms the agreement, which means that both parties are bound 55
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by it. If the organisation does not perform its tasks, the FAB makes it public, marking the name of the financial organisation which brought the agreement. The same consequences are used in cases when the financial institution declared not to accept the decision of the FAB as an order, but the circumstances show exactly the institution’s attitude leads to the dispute. In this case the FAB gives a recommendation, which should be implemented within 60 days from receiving it in written form. If the included company accepts to be bound by the decision, and the FAB decides that the company brought the law or the contract, it makes a decision which is enforceable. Despite the diligence and effort of the FAB, of course there are not few cases when the FAB decides that there is no ground for the claim, or it is not possible to end the procedure because of lack of special knowledge (for example in medical insurance cases, or if the dispute is about technologic parameters of the insured building). In such cases the FAB terminates the procedure, pronouncing that the claim is not grounded. What is the difference between the general mediator body and the FAB? Until the end of June 2011, consumers could initiate the procedure of the territorial general Arbitration Board, which procedure was also free of charge. These out-of court organs still exist, and try to resolve conflicts, except the financial consumer disputes. The difference is that the decisions of the Arbitration Board had no deterrence. Contrarily, in the FAB’ procedure the non-performance or the breach of cooperation obligation could lead not only to public “shame wall”, but even to a procedure of the Hungarian Financial Supervisory Authority, and eventually to a penalty. That is, what made the FAB so successful and popular during the 2 years of its functioning, and that is, why it started to be called a “hungaricum”, as for the moment it seems to be the only consumer protecting forum in European Union, which is run by the state’s supervisory authority and in this position protects the consumers rights in a more effective way. 56
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Companies Act 2006, s. 172 and its impact on social responsibility of UK companies Marcin Krzemień BLC Student, Warsaw This extract is taken from the Company law thesis written by a current BLC student in Warsaw. The thesis is a possible option for second–year BLC students as an alternative to sitting the exam in the particular subject. This essay aims to find out whether the CA 2006, s. 172 has the potential to affect the position of corporate social responsibility in the English company law model. The work is based on detailed interpretation of s. 172 conducted in the light of international developments in the field of CSR and on chosen academic texts. In the author’s opinion s. 172 does little to boost company accountability with respect to stakeholders and reinforces shareholders as the primary beneficiary of a company. Maximisation of shareholder value remains the paradigm characterizing UK company law – other stakeholders have virtually no tools to affect a company’s conduct. However, at the same time it has to be underlined that CA 2006, s.172 does – for the first time – codify the directors’ duties aimed at wide group of stakeholders and may in some, albeit limited, cases have perceptible impact on the directors’ actions. The concept of corporate social responsibility (CSR) according to which companies have certain obligations to the communities they affect is now widely recognized but still controversial. CSR does have opponents of excessive regulation who claim that entities which have the primary goal of profit maximizing and which pay taxes should not be disturbed beyond the necessary minimum. It is therefore nothing strange that international debate on CSR is developing and rather heated. On an international level, there has been interesting legal development going on, with the UN Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises at the helm. These documents call for greater accountability of corporations, especially in environmental and human-rights matters. As far as the EU level is concerned, the Union has not yet published any binding law related to CSR. So far the most important document is the Communication published by the Commission in October 2011. It defined CSR as “the responsibility of enterprises for their impacts on society”. In the author’s opinion it is a short and fitting description. 57
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CA 2006, s. 172 provides that a director has a duty to promote the success of the company. “In doing so”, in the words of the act, a director must “have regard” to various factors, among them: impact that the company has on the environment (d) and ethics (e). What section 172 postulates may indeed seem as a “dramatic shift” from the previous common law
shareholder
surprisingly,
primacy
implementation
approach
but,
of
postulates
these
not
remains an issue. CA 2006 leaves the readers clueless as to what ‘success of the company’ means and in which way the directors need to ‘have regard‘ to the said external factors. These ambiguities have been pointed out on more than one occasion. It should be indicated that some scholars have argued that ‘success’ as per s. 172 means simply the same as the company’s business objectives. Kershaw on the other hand suggests that ‘success’ should be understood as increasing long-term value for the shareholders. It is however undisputable that ‘promoting the success of the company’ is a shift from the pre-2006 approach where directors were obliged to act in the ‘company’s best interests’. Under the new regime, they have to act to the “benefit of the company’s members as a whole”. This is just another way to describe the interests of the shareholders. In other words - the new
approach
means
that
directors no longer foster the interests of a company as a separate entity but rather the ones
of
the
‘shareholder
constituency’. One may argue whether
this
shift
is
really
appreciable but clearly it is not one benefiting other stakeholder groups as it reinforces shareholders as the primary beneficiary of the s. 172 duty. From the CSR perspective, it is necessary to analyze the “having regard” part of s. 172 as it can 58
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59
give us guidance on the degree of attention that the directors actually need to pay to various groups of stakeholders. A director only needs to have regard to the factors listed in points a) to f) of s. 172. This means that such a person need not fulfill any additional requirements with respect to involving stakeholders in the decision-making process. It has been argued that with s. 172 formulated in such manner, consideration of the external factors can be limited to a “ticking the box exercise”. Therefore, on the basis of the above it may be easily concluded that under CA 2006 it is enough for a director to pay a minimal level of attention to the factors listed in s. 172. S. 172 explicitly provides that a director ‘must act in the way he considers, in good faith, would be most likely to promote the success of the company’. Scholars analyzing s. 172 have been unanimous in interpreting the duty to promote success as a primarily subjective one. As long as a director is able to show good faith and that he honestly believed that he had been acting to promote the company’s success, it is very hard to challenge his conduct. The case often referred to is Welfab Engineers [1990]. In this case (decided under pre-2006 law) the directors sold a company to a low bidder in order to keep the jobs of themselves and the company’s employees. The court has found no misconduct in such behaviour. With the new duty to promote success being formulated in a similar manner – inheriting the subjective character – challenging a director for noncompliance with the duty to promote success of the company might be difficult.
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Finally, the fact that the ‘regard list’ from s. 172 is non-exhaustive hinders, in the author’s opinion, its significance. Non-exhaustiveness of the list gives the impression that it has a primarily educational, exemplary meaning. Instead of giving the directors clear-cut CSR managementrelated objectives, CA 2006 serves them with a non-exhaustive list of factors to be taken into consideration. On this basis, it can be inferred that s. 172 is not a list of core directors’ duties related to CSR but rather guidance, a signpost warning them from taking an approach to management aimed solely at short-term profit maximizing. Therefore, the hard- law importance of s. 172 is being diminished. On a more positive note, CA 2006 s. 172 does seem to emerge as useful support for the companies genuinely willing to implement CSR solutions and a more stakeholder-friendly approach. First of all, it has been suggested that in some cases s. 172 may indeed be of practical value to the directors supporting the pluralist company model. Where a stakeholder-friendly approach is being challenged by the shareholders, the affected director may bring up s. 172 obligations as a defence. In such a scenario, the provision would act as a shield to a director trying to protect the external stakeholders’ interests. Of course, there are also no barriers if a company would like to extend the directors’ duties towards stakeholders beyond what is written in section 172 by incorporating them into the company constitution. On the basis of all the above it is submitted that s. 172 is not an instrument that could be utilized by the stakeholders of UK companies on a day-to-day basis. S. 172 as such is hardly of any use to parties who are not associated with the company. There have been attempts – based on s. 172 - of challenging a company’s human-rights related conduct by external shareholders. In R. (on the application of People & Planet) v HM Treasury [2009] they have failed. It has been suggested that only creditors (in a situation where a company has problems with solvency) and employees – the group who may have a long-term interest in the business of the company – can practically benefit from implementation of s. 172. However, in the author’s opinion the CA 2006 act, with the s. 172 at the forefront, needs to be viewed in a broader context. One must not forget that for the time being CSR is still a sprouting concept based primarily around voluntary practices, soft-law and self-regulation. An example of such initiatives is the UN Global Compact or the Equator Principles. Currently the UN GC includes 60
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61
over 250 companies from the UK. These companies have voluntarily implemented a set of rules from the area of human rights, labour, environment and anti- corruption. The Equator Principles constitute a scheme of self-regulation which has so far been implemented by over 70 world’s leading financial institutions. The EP are based around the risk management system incorporated by the International Finance Corporation and require that its signatories assess their investments’ impact on environment and local communities. S. 172 fits quite nicely in this climate. While looked at in the context of the abovementioned initiatives and the EU position on corporate social responsibility, it can be interpreted as an encouragement for the directors to pay “due account” to the companies’ external stakeholders. An encouragement which – when added to the growing stakeholder and customer pressure and the generally CSR-friendly business atmosphere may prove workable. Of course, one may ask if it is the role of company law to encourage good practices. It may be argued that existence of a provision such as s. 172 – having more educational than practical value – is harmful for the perception of company law in general. In the author’s opinion this would be an overstatement. To conclude, s. 172 encouraged a heated debate on CSR and directors’ duties but so far has not affected the face of UK company law. The ambiguities on one hand and ambitious content on the other mean that the situation for s. 172 can really go both ways - depending on what the government’s and business’s attitude to CSR is. One side of the coin is that s. 172, while not very practical for the time being, may prove to have great educational value for the directors and must wait for better times and courageous decisions from the courts when it comes to its enforcement. On the other hand, it is a provision which is arguably ‘toothless’ in terms of enforcement and a law without remedy. It is as if the UK legislator has sat on a fence, waiting for the wind to blow from one of two sides. Clearly, maximization of shareholder value remains the main paradigm of the UK company law but it has been moderated (not necessarily by the 2006 Act) and interest of chosen stakeholder groups (workers, creditors) will be taken into consideration when necessary. Nevertheless, it is still the shareholders who are at the foreground of the companies’ interest with the other parties playing marginal roles. In the author’s opinion stakeholder pressure and CSR practices will be fuelled by other developments – e.g. stronger disclosure and reporting duties, labour and environmental law. So far, CA 2006, s. 172 has been just a pretty ‘poster’ for changes. 61
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Solvency II: The Never Ending Story? Michał Roszczynialski BLC 2008 Alumnus, Gdańsk
The global insurance market is still changing. This process concerning methods of risk management, accounting standards, financial instruments as well as legislation at the EU and member state level. EU authorities stated that the regulations which have been functioning in the EU are no longer meeting the new challenges connected with the solvency of insurance companies. In order to develop an insurance supervision system the European Commission began work on establishing a new solvency system for insurance activity, Solvency II, in 2001. The result of these activities was directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009, on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). Unfortunately, the range of the changes and the exceptionally complex matter of this directive caused many problems regarding the implementation of Solvency II, not only for authorities, but also insurance companies. The Solvency II directive came into force on the 6th of January 2010. It should be emphasized that in accordance with Article 309 of the directive, full transposition should take place by the end of October 2012. However, at present this transposition is not complete, meaning that the authorities (mainly the Member States) may be liable for the lack of the implementation at the domestic level. Having regard to the above, the European Parliament adopted the so called quick-fix directive, which amended the date of the transposition of the directive Solvency II (30 June 2013). Solvency II system has a three-level structure, in accordance with the requirements of the process designed by Alexandre Lamfalussy (forerunner to the European Central Bank). First level legislation constitutes the Solvency II directive. Second level legislation contains the implementing measures which, since 2011 due to EU “new architecture” of financial supervision, were replaced by delegated acts on the basis of Article 290 of the Treaty on the Functioning of the European Union. It means that the Lisbon Treaty which came into force on the 1st December 2009, providing a new hierarchy of the secondary EU law influenced on Solvency II directive. The Solvency II directive has 25 compulsory delegations for the European Commission to issue second level OBITER
DICTA
62
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63
legislation, and 14 articles contain optional delegations. It shows the complexity of this new system. Details of the Solvency II are regulated at the third level legislation. Some of these provisions are non-binding guidelines which will apply on the basis of the self-discipline of supervision authorities in accordance with the principle “comply or explain” (comply solutions or if not, explain why you can’t comply these rules). These non-binding guidelines are issued by EIOPA (European Insurance and Occupational Pensions Authority), which also prepared ORSA guidelines (Own Risk and Solvency Assessment). At level 3 of the Solvency II system, according to the new architecture of financial supervision, the European Commission has the right to issue binding technical standards (BTS) or implementing technical standards (ITS). These regulations of the European Commission are directly applied in Member States. The Solvency II system replaces 13 existing EU directives demonstrating the importance and complexity of this legislation. The Solvency II programme is divided into three pillars (concerning capital requirements, governance and supervision, disclosure). Capital requirements are connected with two thresholds- Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR). SCR is calculated using either a standard formula or, with regulatory approval, an internal model. MCR is calculated as a linear function of specified variables; it cannot fall below 25%, or exceed 45% of an insurer's SCR. Governance and supervision include a risk management system, Own Risk and Solvency Assessment (ORSA) and supervisory review and intervention. The final pillar of disclosure requires publications of details of the risks, capital adequacy and risk management, from the insurers. Furthermore this pillar puts emphasis on transparency and open information. This leads to impose more discipline on the insurers. The key objectives of Solvency II system are laudable: protection of policyholders across the EU, modernisation and harmonisation of supervisory regime. On the other hand the Solvency II will influence activities of insurers in respect to their finances. The Solvency II means for insurers new corporate governance, compliance, actuarial methodology (including IT systems), additional reporting, in a word... additional costs. Gregor Poznak - Secretary General of AMICE (Association of Mutual Insurers and Insurance Cooperatives in Europe) at a conference in Poland stated that: “Solvency II threatens to change market structures by leading to consolidation and (directly or indirectly) to the disappearance of small and/or mutual insurers”. On the 28th of January 2013, EIOPA begun to study the effects of potential regulatory solutions for long-term insurance products for the entry into force of Solvency II. The main objective of the 63
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64
study is to assess the impact of the implementation of Solvency II on the policyholders, insurers, regulators and the financial system. It seems that this study can be challenging for insurance companies due to the delay in the publication of detailed methodology, which includes 13 scenarios. Peter Ott, European Head of Solvency II at KPMG has expressed concern over the time frame of the study (only 9 weeks). It is hoped that the study accurately describe the activities of insurers and will not affect the further extension of work on the Solvency II solutions. In Poland, the Ministry of Finance is working on preparing a new act on insurance and reinsurance activity, which will implement the provisions of the Solvency II directive to the Polish legal system. The Ministry of Finance presented assumptions for that draft act and submitted it for consultation (March 2011 and January 2012). However, the uncertainty about the final shape of the Solvency II system causes the extension of the legislative work in all EU countries. First of all this specific “stalemate” is troublesome for the insurers, who do not know the new reality in which they will have to operate.
“In order for a state to remain inclusive it must not just express a commitment to the rule of law: it must provide effective mechanisms through which its citizens have genuine access to the courts. Only then can they begin to have equality before the law; only then can they hold the powerful to account; only then can they render their legal rights a true reality rather than words on paper. If all members of society cannot gain genuine access to the courts,
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Print it or tax it – current treatment of e-books for the purposes of VAT in the European Union Katarzyna Krześnicka BLC Student, Warsaw
In the United States in 2012 e-books had 31% of book market - as reports Enders Analysis in "Digital Europe: Diversity and Opportunity". During the same year, in most EU countries e-books sales amounted to 0.3% of all book sales. The present VAT rules on e-books do not help to change the statistics. According to art. 98 of Council Directive 2006/112/EC of 28th of November 2006 on the common system of value added tax the Member States may apply one or two reduced rates to supplies of goods or services in the categories set out in Annex III. One of such categories is supply, including on loan by libraries, of books, newspapers and periodicals, other than material wholly or predominantly devoted to advertising. However, it does not mean that all kind of publications can be subjected to preferential rate. The Council Implementing Regulation (EU) No 282/2011 of 15 th of 65
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March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax states that providing the digitised content of books and other electronic publications is treated as “electronically supplied service” (art. 7 of the regulations). To such services reduced rates cannot apply (art. 98 of the Directive 112). Despite this approach, two member countries decided to introduce reduced rates. In France the VAT rate for e-books is 7%, in Luxembourg, 3%. For this reason, in February 2013 the European Commission referred France and Luxembourg to the European Court of Justice. An official press release by Commission stated: “EU law is very clear on which goods and services are eligible for a reduced VAT rate.… Infringement of the VAT rules for e-books distorts the single market and runs counter to the fundamental EU principle of fair tax competition”. This decision met with discontent within the e-publishing industry which views current VAT treatment of e-books in the EU as discriminatory. Competing in price with regular paper books that enjoy the preferential treatment means they have to keep pouring money into their business. The current treatment of e-books is against another fundamental principle of the common VAT system, the rule of fiscal neutrality, which precludes Member States from differentiation in tax arrangements for similar goods and services. Such goods and services which are in competition with each other must be subject to the uniform VAT rate (see Case C-267/99 Adam [2001] ECR I7467, paragraph 36). It is apparent that digital and paper books are similar – what one buys is their content and in both versions this content is the same. The difference is artificially made by EU legislation, stating that selling e-books is not treated as providing goods but as providing services. Such approach keeps up appearances that their differential VAT treatment is justified but ignores the technical development of online distribution of goods. The change in taxation of e-books will have great impact not only on the e-publishing business, but also on popularisation of readership, especially among young people that are usually fond of technical novelties in every field. According to the data published by the Polish National Library in 2010 56% of Polish didn’t read even a single book during the previous year. In Poland the regular VAT rate is 23% and the rate for supply of books – 5%. In result even though the production and supply of e-books is cheaper than paper books their price is the same or only slightly lower. For the development of the knowledge society it is crucial to make all kind of books, also those digital, cheap and widely available. 66
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The EC informed member states that it is to make proposals on reduced rates for e-books that are supposed to take into account the suggestions from publishing industry and technical development in this area. The proposals are to be published by the end of 2013. Meanwhile the Commission took seriously its role of a guardian of the Treaties. It is possible that France and Luxembourg first will be forced to change their law on e-books by the CJEU to see then the Directive 112 changed – after what their previous rules can be restored.
Thoughts on the English Legal System Is the introduction of a doctrine of good faith into English Contract law inevitable? English contract law has long been a bastion of the liberal tradition. Parties can contract, agreeing to almost any terms they choose no matter how one-sided or unfair those terms may appear (with some exceptions such as illegality). This is greatly out of step with the majority of other countries which allow some form of ‘good faith’ to be implied into most contracts. Thus far English law has held back any calls to introduce such a doctrine but the recent case of Yam Seng Pte Ltd v. International Trade Corporation Ltd [2013] EWHC 111 (QB) may signal a turning tide on the resistance. The judicial feeling in this case did not go so far as to suggest the introduction of a doctrine of good faith but did apply the argument that the implied term of good faith had been presumed by the parties and that the parties had a shared understanding that acting in good faith was a term of the contract. Could this be the first significant weakening of the English law’s hold against good faith?
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Extract from a BLC student’s thesis on the International Carriage of Goods by Sea Maria Beladićova BLC Student, Bratislava
This extract is taken from the international trade law thesis written by a current BLC student in Bratislava. The thesis is a possible option for second–year BLC students as an alternative to sitting the exam in the particular subject. The regulation of International Carriage of Goods by Sea, not only in four concurrent sets of Rules, but also in harmonising regulations such as the EU Brussels/Rome Regulations, suggests neither consistency nor international agreement, is this a victory of substance over form? It certainly adds another unknown to the international sales contract. This (paper concentrates on the long-lasting efforts to harmonise or even unify the regulation of international carriage of goods by sea that can be seen as a part of international sales contract law. These efforts have been performed on the international level as well as on the regional EU level. However, in spite of these efforts or maybe because of them it is rather doubtful that the expected effect – simplification (clear and uncomplicated „form“) of international carriage of goods by sea and subsequently of international sales contract law – has been attained. Regulation of international carriage of goods by sea on international level The efforts aimed at harmonising the regulation of international carriage of goods by sea on international level started a lot sooner, but the first “worldwide” successful harmonisation was the adoption of the Hague Rules (International Convention for the Unification of Certain Rules of Law Relating to Bills of Landing) in 1924. The Hague Rules were later amended by two protocols (1968, 1979) resulting in the creation of the Hague-Visby Rules. Furthermore, in 1978 the UN Conference adopted the Hamburg Rules (The United Nations Convention on the Carriage of Goods by Sea). The Hague Rules, the Hague-Visby Rules and the Hamburg Rules are clearly a uni-modal regulations by nature, i.e. they regulate only one form of transport – carriage of goods by sea. However, the character of the goods transportation has changed rapidly over the last century and nowadays the carriage of goods could be defined as multimodal, since it, in principle, includes the combination of OBITER
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various forms of transport, e.g. road-sea, train-sea, etc. The international community has responded to this change by adopting a new set of rules - the Rotterdam Rules (The United Nations Convention on the Contracts for International Carriage of Goods Wholly or Partly by Sea). The Rotterdam Rules adopted in 2008 have not entered into force yet.
Regulation of carriage of goods by sea on regional EU level The main goal of the EU from its very beginning has been the creation of the single market and the constituent part of any market is the carriage of goods. The vast majority of EU member states are coastal states and have direct access to the sea, so the carriage of goods by sea is very frequent method to transport goods within the EU. Moreover, most of the goods exported out of the EU and imported to the EU are transported by sea as well. On the EU level there are two main sets of harmonising rules concerning contractual obligations the constituent element of the carriage of goods by sea. The Rome set - Regulation (EC) No 69
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593/2008 of the European Parliament and of the Council of 17 th June 2008 on the law applicable to contractual obligations (“Rome I”) - concerns the applicable law and the Brussels set - 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”) - concerns the jurisdiction. Assessment of the present regulation of the international carriage of goods by sea All aforementioned sets of rules - Hague Rules, Hague-Visby Rules, Hamburg Rules, Rotterdam Rules, Rome I, Brussels I - are an expression of the harmonisation efforts which follow the aim to provide the relevant actors with one set of rules that would be applicable “all over the world”. The application of harmonised set of rules is very advantageous: it eliminates the potential conflicts that are pretty frequent if various legal regulations are used; it can help to reduce the transaction costs and in addition, it can assist very effectively in preventing or at least can contribute to diminishing the forum shopping. However, when assessing the practical implications of the existence of all the abovementioned sets of rules the outcomes are a little bit scary. Firstly, the status of particular states in respect to these sets of rules is really varied, e.g. Italy ratified the Hague Rules (later denounced them) and then ratified the Hague-Visby Rules; France ratified the Hague Rules (no denunciation took place) and also the Hague-Visby Rules and in 70
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addition signed the Hamburg Rules as well as the Rotterdam Rules, though not ratified either of them yet; the USA ratified the Hague Rules and later signed the Hamburg Rules as well the Rotterdam Rules, though not yet ratified either of them yet. Secondly, the ratification process in each state may have its peculiarities when adopting international treaties that may result in the modification of the international treaties (e.g. the UK adopted more generous version of the Hague-Visby Rules covering also carriage of living animals). Thirdly, there are influential states from
the
viewpoint
of
the
international trade as well as the sea power (e.g. China) which have not yet ratified any set of rules, instead devising their own national rules that are often inspired, at least partly, by the aforementioned sets of rules. Fourthly, Rome I and Brussels I are, as EU regulations, directly applicable in all EU member states (except of Denmark). On the basis of provided overview the outcome of the assessment of the sea carriage on international level is pretty unambiguous: there are four main sets of rules (Hague Rules, HagueVisby Rules, Hamburg Rules, Rotterdam Rules) including numerous modifications of them (e.g. the UK) plus regionally binding (e.g. Rome I) and nationally binding (e.g. China) sets of rules and simultaneously none of them are of leading nature, so the actors of international carriage of goods by sea must be familiar with all of them. Conclusion The existence of clear rules on the regulation of international carriage of goods by sea is very important, since the vast majority of goods are transported from the producer to the consumer by sea. However, the existence of various sets of simultaneously applicable rules (too much „substance“) could very easily lead to the disorganised, chaotic regulation of international carriage of goods by sea, i.e. the clear opposite of all the efforts aiming at simplification (clear and 71
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uncomplicated „form“) of this regulation, because it could happen very easily that it would not be clear what set of rules to use or even that the simultaneously applicable rules would be in serious conflict. In conclusion, it seems that recent efforts aimed at adoption of multimodal carriage regime could help to clarify the situation, e.g. the Rotterdam Rules seek to create more general regime (referring also to other international conventions on the carriage by air, road, rail or inland waterway). Although, there are many issues that must be addressed when adopting any new regime on the international carriage of goods by sea, especially the relations to the existing regimes in this sphere, i.e. regimes based on international conventions (e.g. the Hague Rules), regimes based on regional levels (e.g. Rome I) and regimes based on national legislation (e.g. China), in order to simplify and clarify the international carriage of goods by sea.
Junior barristers will be paid as little as £14 a day – well below the minimum wage – under the government’s proposed criminal legal aid cuts, the House of Commons justice committee was told by Criminal Bar Association chair Michael Turner QC. Law Society president Lucy Scott-Moncrieff echoed that call, branding the government’s current plans ‘bonkers’. 72
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BLC Information
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This section contains articles on highly specialized topics that are of specific interest to contributors. The current edition contains articles on medical malpractice in Poland, energy transmission corridors and new rules on spatial planning in Bulgaria.
Special interest section
No-fault Liability for Medical Malpractice in Poland Marcin Wielgolaski BLC Poznań Alumnus Following the amendment of the Patients’ Rights and Patients Ombudsman Act in 2011 Poland made a step towards creating a framework for patients’ injury compensation not based on tort liability. In this text I will explore some of issues with tort liability as a basis for medical malpractice cases as well as the main features of the Polis nofault ( strict liability) system. A Broad look at medical malpractice in Europe/US Modern health care is a high risk enterprise. Errors occur with a high probability rate. The numbers are hard to pinpoint and differ between countries but some reports state that in up to 10% of hospital patients in the EU where affected by medical errors. Neither medicine nor they practitioners are infallible. Doctors must be seen as craftsmen and (like in other crafts) there can be good and bad ones. When mistakes are made the damage is often very severe and concerns most valuable possessions health and well-being. On the patients’ level there is a steady rise in awareness. On the one hand this concerns basic patients’ rights and on other the fallibility of doctors. Over the years this has led all across Europe to a rise in medical malpractice litigation. However, this has not been accompanied by an equivalent rise in successful malpractice claims. The root cause being the OBITER
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difficulty in establishment of civil liability in this type of cases. This empirical data stands to reason if we consider the particularities of malpractice liability even across several systems. In 2004 a study commissioned by the European Commission compared the civil liability systems of France, Germany, Italy, Spain, Sweden and the United States. Regarding medical malpractice the study pointed out relevant similarities: Liability for medical malpractice blurs the line between contract law and tort law. There mere fact that the patient is or must be accepted for treatment creates a patient-physician relationship with implied duties equivalent to a binding contract. The violation of one of these duties is dealt with like a tort. In effect health care providers can’t impose contractual barriers against litigation. Furthermore, the physician or hospital/other health care provider is vicariously liable for the actions of their employees. As a general rule the provider is not exempt from liability if she/he proves careful selection and control of the employee (the Germany system differs in this point). Fault Fault in the form of at least negligence on the part of the physician or other medical personnel is required as a basis for liability. As a general rule no strict liability is introduced and there are no general assumptions as to the fault of the medical personnel. Which is not the same as 75
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to say that the plaintiff has to establish fault every time; since the study some elements of strict liability were introduced into EU member countries via the Product Liability Directive 85/374/ECC. However the scope of this directive applies more to pharmaceuticals and other medical product use and not to “classical� malpractice of physicians. Proof Most of the aforementioned systems place the burden of proof of all essential elements on the patient. The elements are the same across the board: negligence (fault), damage and the causal link between them. Medical malpractice cases are very complex factually. On top of that during treatment the patient is totally dependent on the knowledge and expert decisions of the physicians. There is simply very little room to second guess or check what the medical staff does. As a result the patient who is by now is the injured plaintiff has very little direct evidence to make a solid case. Bearing that in mind most civil systems in the study recognize that the injured party must have special protection. The courts (even in civil law countries) have therefore sought to alleviate the burden of proof. Compensation and damage The injured patient is under most legal systems entitled to full compensation of his pecuniary and non-pecuniary loss (indemnification for pain and suffering, lasting impairment and loss of quality of life). As a rule there are no limits to the maximum amount of damages claimed. The US system is very specific in this context because compensation can also encompass punitive damages and this leads to a much higher amount of damages awarded to the plaintiffs. The alternative to tort Obtaining a remedy for damage caused by malpractice under a tortious system can be difficult. Regardless of doctrines like prima facie evidence and res ipsa loquitur the burden of proof for the plaintiff in medical malpractice cases is only lightened not reversed. Worse still, the factual complexity will almost always require expert witness testimony just to establish subtle points of 76
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standards of care. Expert witness will have to be physicians and not always will they be impartial in putting fault on their colleges. Moreover, it is a lengthy process - between 2001 -2009 it took an average 4 years before Polish courts to obtain a judgment. It is also helpful to point out the other side of the coin – tort litigation can destroy a physician’s professional reputation with very adverse financial consequences and “(…) serves primarily to induce unnecessary and wasteful modes of defensive medicine designed to decrease doctors’ likelihood of being sued rather that patients’ likelihood of being cured“. The alternative is a no-fault system. Where accountability does not depend on negligence (culpa) Elimination of the legal contest over the crucial tort issue whether or not a doctor was at fault would remove one major source of litigation. This would spare some of the emotional and legal conflict and focus rather on the issues of compensation and prevention. Such a system was developed as a major framework for compensating patients injuries under The Swedish Patient Injury Act. The Polish no-fault system Modeled on the Swedish Patient Injury Act, the Polish no-fault system was introduced as of 1 January 2012 by the amendment of the 2006 Patients rights and Patients Ombudsman Act (Dz.U. 2009 No 52 item 417 - hereafter “the Act”). It is worth pointing out that this remedy is optional. The injured patient can bring its claim before a court relying on general rules of tortious liability. The scope of protection established by the Act is narrower than in tort. The Act protection encompasses only patients of hospitals or their inheritors (Article 67a (2) and 67b). It stipulates three categories of “medical events” which can entitle to compensation if they resulted in direct injury to a patient or caused infection by a biological agent (Art. 67a(1)): 1) diagnosis which in effect contributed to the injury, 77
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2) treatment, including surgery, 3) application of medicinal product or a medical device. The whole procedure is out-of-court. Under the Act claims are brought to one of several regional commissions (komisje wojewodzkie). The commissions are composed of candidates put forward by professional associations of doctors/nurses/laboratory specialists, by attorneys and legal advisers associations (both titles are the equivalent of solicitor in common law) and by nongovernment organizations involved in patients’ rights protection. The Minister of Health and Patients Ombudsman also have the right to put forward candidates. It was hoped that this composition can help to make decision in malpractice cases with greater efficiency and with more regard to medical science than in a non-specialized court. On top of that the commission has always the option to call expert witness (Art.67i (7)). The sole aim of the commission is to establish if the “medical event” happened. According to Act the claimant
must
only
establish
probability on his part (Art. 67d (2)). This is a clear advantage to the tort
liability
commission
system. must
ex
The officio
establish the relevant facts and make a decision in a fixed amount of time (4 months from the moment the claim is lodged). One of the weak points of the system is the short limitation period – 1 year which starts running from the moment the injured person became aware of the damage but not more than 3 years from the event ( Art. 67c (3)). In contrast the Civil Law Act from 1964 has a 3 to 10 years limitation period. The second weakness is the compensation system. The proceedings before the commission end with the decision regarding the “medical event”. If it is found that such an event occurred the case is then transferred to an insurance carrier or (if for some reason there is no insurance) directly to the hospital. The Act requires the insurer or the hospital to come forward with a compensation 78
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proposal. The Act also caps the maximum amount of damages awarded. In contrast with the tort the damages tend to be very low (for example the total sum of 300 000 zł – equivalent of £60 000 - can be awarded for pecuniary and non-pecuniary loss if the “medical event” resulted in death while in tort this can be more than three times higher). More so the method of calculating exact damages isn’t patient friendly and the full competitions rule doesn’t apply. More often than not the claimant will find that he is not entitled to 100% of the sum. All in all the compensation system was clearly designed with the insurer in mind rather than the patient. The claimant can refuse to agree to the proposal however and is free to bring a case before court. He can also agree and waive his rights to court proceedings. In conclusion, the no-fault system is a real and functioning alternative, providing effective remedies for the injured patient or his next of kin. While it will not dismantle the present tort system it has its place in dealing with medical malpractice cases quickly with clear focus on compensation and prevention. 79
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Transmission Line Corridor's Draft - No Way Out? Krzysztof Jagiełło BLC Student, Warsaw
A heated discussion about a legislative proposal regarding transmission line corridors arouse in Poland recently. The draft is supposed to come into force early 2013 and introduce fundamental solutions for companies engaged in transmission activities. Reasons for the draft The mentioned arguments for the draft were: -
introduction of a legal basis for present and future energy line devices
-
supporting the investments with a legal framework
-
Finding a solution for a case scenario in which a single land owner is in a position of blocking a line investment.
The draft shall also facilitate the planned atom power stations, clarify the legal status of the "old" infrastructure and answer the challenges of connection of new renewable energy sources (windfarms). 80
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The governing principle of the act is a complex regulation of all line investments, irrespective of their dimension, age and purpose. The transmission corridor will be used by any entrepreneur, in accordance with the Third Party Access Rule. The present difficulty encountered by the companies was the obligation of obtaining several administrative decisions for the same line - the infrastructure necessary for energy transmission is led through various lands covered by different local plans of spatial development or white stains due to the fact that only 22% of Poland's territory is regulated by these. In the absence of the aforementioned plans, companies have to obtain local decisions in each province, which in addition to court proceedings against any single landowner who didn't agree with settlement makes the investment proceeding lengthy and very expensive. The draft The proposed legislation shall specify: the rules governing new transmission line corridors, the setting up of the corridors for present transmission devices, coverage of the real estates with the transmission line servitude with compensatory issues connected and will contain several procedural "short cuts". The fundamental part of the investment will be built upon the decision about the transmission line corridor placement (thereinafter: corridor decision), which may include a construction permission. The real estates concerned by the decision will be put into a freezing period until the issuance of the corridor decision. The decision shall be binding towards other administrative acts during the investment and limit the land owner's right using the necessity criteria. The corridor as defined by Article 3 Point 1 means :"a legally excluded area unattainable for the placement and rightful exploration of the transmission infrastructure" Areas towards which the entrepreneur possesses no legal title, will be covered with transmission line servitude ,, under which an access to the infrastructure on the real estate is established, without the transfer of the property title.. Issuance of the corridor decision will be connected with compensation, established in a second decision of the administrative body of the 1st instance. The estimation of compensation becomes separate and independent from the corridor decision proceeding. The established rule provides that the investment occurs without any ownership changes over the real estates affected. There is however a possibility of the real estate's purchase, via a claim towards the transmission company if the real estate has either become inaccessible or has lost their prior purpose. The precise localisation (stating all real estates effected) of the investment will be laid down in the corridor decision, instead of prior localisation in local plans of spatial 81
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development or decisions about placement of social investments, (where no local plan has been enacted). The beginning of the proceeding and the issuance of final corridor decision shall be reflected in the land and mortgage register (ksiega wieczysta). The
judge
may
rule
a
construction estoppel, after the construction started;
works
however
have in
his
discretion is the conditionality of the estoppel upon a caution. E An appeal against the decision is to be regarded as qualified (e.g.: a condition of charges against the decision, evidential support of the charge- Article 19 para. 2) unlike in administrative law, where
a
letter
expressing
discontent of an act will suffice. Chapter IV regulates the present infrastructure
issues.
The
entrepreneur may fill a motion for issuance of a corridor decision for present infrastructure. Article 66 puts an obligation upon entrepreneurs receiving a corridor decision towards lands to which he has no legal title. This provision shall force the entities to clarify the legal position of the old devices. On the other hand, the article reassures the land owners, that they receive compensation. However this clarifying obligation has a 20 years period of fulfilment (after the act comes into force), to help the transmission companies by not overwhelming them with sudden retributions. The final corridor decision covers the real estates mentioned (also perpetual usufruct) in the motion with transmission line servitude and becomes legal title for the entrepreneur to manage the real estates for constructional purposes. His rights and obligations under the transmission line servitude are contained in Article 40. The catalogue of rights is deemed to be open. . The act contains also a catalogue of bans for landowners which have effect in the corridor area (Article 43). 82
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There is a negotiation obligation between the parties (Article 46 para. 2-4) regarding the amount of compensation. In case of failure to comply with the former, the 1st instance authority issues a decision specifying the amount of compensation. The corresponding issue was the fact, that an establishment of the energy infrastructure (enterprise effect) often increased the value of the land (anticipatory value), which at same time increased the compensation - e.g. the connection of an remote house to electricity line was reflected by a higher market value and therefore enabled the owner to claim for higher damages „chasing its tail�. Therefore a distinction into distribution and transmission network has been laid down as well as between exploration and safety sphere in the corridor. The pattern is the Swedish solution. The amount will be estimated pursuant to a logarithm (Articles 47-58) if the landowner hands over the property within 14 days after the construction permission or the decision, the compensation will be increased by 5 % (Article 50). If the party will not consent to the amount of compensation, it still has access to the court within 45 days of the deliverance of the decision. Impacts and criticism: The compensation for transmission line servitude stemming from the draft has found a rather sceptical reception: Agata Kaczor criticises the structure of compensation for "old� infrastructure. According to her statement a single compensation in this case will always be under the market value of the real estate. The "handing over of property" under Article 50 is confusing, since it is unknown whether the provision regards a factual handing over of the real estate or simply an act of will of the land owner that he accepts given terms. The conditionality of the 5 % grant upon the issuance of a construction permission (whether single or integrated into the corridor decision) makes the compensation caused by old line devices virtually impossible.
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One of the main disadvantages of the compensation is the limitation of the compensation for noncontractual use of the property. Agata Kaczor considers the draft as an unnecessary legal repetition of the transmission line servitude and asks the question whether the same aim could not be achieved by current legal constructions and their established court practice. Jerzy Krotoski and Szymon Kołodziejczyk undermine the constitutionality of the draft. The corridor
establishment
is
similar to the principle of expropriation; the ban of ownership infringes
activities the
equality
principle, from Civil Law, under which the parties have equal rights and obligations. The
compensation
under
chapter 8 doesn't depend upon which
the
market doesn't
value, fulfil
constitutional requirements. The recipients of the compensation exclude other ownership claims. The authors consider the procedure as a legalisation of unlawfully built infrastructure by stateowned companies. In their article several procedural issues have been raised. Land owners may remain unaware about a pending proceeding due to deliverance of the decision on addresses contained in an often non-updated register. Estoppel caution for entities wishing to hinder construction works may constitute an unavailable sum and close their right to court. . The authors also point out that it remains undecided by the draft, what happens with already launched servitude proceedings due to the lack of suspension possibility within the procedure. The estimated financial consequences of the legislative proposal paid by transmission companies from all sectors for "old" line infrastructure amounts to 19 billion PLN and will be reflected by an increase in energy tariffs from 5-8 % depending on the purpose of the infrastructure. This amount is said to be much under the costs coming from current legislation, since exclude the payments for external expertise, representation costs, appeal procedure or even documentation costs (200 PLN for each real estate, with 19 mln real estates concerned). Tax impacts will amount to approximately 1.62 billion PLN. 84
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Conclusions The proposal plays a main role in the interest triangle, consisting of a transmission company, effected land owner and society interested in energy accessibility. The draft however seems to be not a fair balance in the middle of the triangle but a point close to the edge of the transmission companies. Several shortcuts may disadvantage landowners who will not be in a position to protect their rights. Situations in which relatively new solutions (transmission line servitude from 2008) are deemed to be not sufficiently effective and constitute basis for further legislation are definitely a negative publicity of the legislator. The 5% limitation of non-contractual use claim mentioned by Agata Kaczor, connected with dubious informative obligations under the Act and undecided matters of the servitude proceedings rightfully pointed out in Rzeczpospolita (by Jerzy Krotoski and Szymon Kołodziejczak) open many windows for energy companies. Not unlikely the landowner will be surprised, by the fact that his rights will be limited, especially in case of elderly people. A more complex informative approach should be adopted. Additionally the qualified appeal against the corridor decision within 7 days is a very illusive right of the land owner, who may not be able to acquire legal advice or obtain
necessary
documents,
before
challenging the decision, neither has certain „veto� towards the extent to which his property will be accessible. The catalogue of suggested rights of the entrepreneur on the real estates is not closed, which decreases the position of the land owner. In addition, this issue might be problematic in terms of sale agreements, since the catalogue could vary from one property to another. The compensation scheme contains several disadvantages. First of all, landowners might have decided for payment in instalments, which could avoid the inflation of a single payment, not prevented by the act. Secondly, the value of a real estate may vary in time, (an increase in market prices is to be expected generally in CEE countries after purchase limitation for foreigners have expired), and the scheme doesn't clarify on possible compensation amendments in such cases. 85
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The principle by which the compensation is not dependent upon the market value is quite uncertain, so is the challenge of the aforementioned in court – will the compensation which doesn't reflect the market value be changeable by external experts who have to abide by the act? Will the courts have really “something to add”? The need for regulation of the transmission infrastructure is significant. The majority of the transmission line elements are over 40 years old and will have to be replaced accordingly to new standards. New renewable energy resources will have to be connected to the transmission system and future atom power stations will also require such an installation (with 2000 km of the electricity lines planned). The legislator luckily attempted to signalise the issue by the draft. Each "special act" contains some constitutional uncertainty. A scenario in which enactment of "special acts" becomes a suitable solution and decreases citizens’ faith in law. The results presented by the draft still await a constitutional check by the Polish Constitutional Tribunal. Any regulation decreasing ownership rights has significant social responsibility and should be subject to a broad judicial review. Unfortunately too much emphasis has been given to short-cuts, presuming the legality and reasonability of all provisions in an administrative decision.
WHAT CONSTITUTES A PERFECT JURY… Certainly not the jury in this 2013 case who, after hearing all the evidence, defence and prosecution submissions and judicial summing up, asked the judge a number of questions including the following, during their subsequent deliberation … C an a jury come to a verdict based on a reason that was not presented in court and has no facts or evidence to support it, either from the prosecution or defence? Not surprisingly perhaps, this jury then had to be discharged without giving a verdict when they could not reach agreement….
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Recent Amendments to the Regulation of Spatial Planning in Bulgaria Vania Giorgeva BLC Student, Sofia
During the last year the Bulgarian Spatial Planning Act (“SPA”) was subject to many amendments, the most significant of which were adopted on the 26th of November of last year (State Gazette issue No 82/ 2012). The amendments refer to: (i) strategic spatial planning and the strategic regional development; (ii) optimization of the state and municipal administration; (iii) procedures necessary to be followed with regard to the spatial planning; (iv) administrative control; (v) requirements for the construction supervision companies; (vi) legalization of tolerable and unlawful construction, which were admissible at the moment of their erection; (vii) other amendments. Strategic spatial planning and the strategic regional development The strategic planning of the spatial development encompasses the elaboration and up-dating of the system of documents for spatial planning at national, regional and municipality levels, namely:
National concept for spatial planning;
Regional scheme for spatial planning;
Regional scheme for spatial planning of a district;
Concept of spatial planning of municipality (“System of Documents for Spatial Planning”).
These determine the strategies for integral spatial planning of the country. The elaboration and up-date of these documents is made with a view to the territory potential of the land and upon observation of the principles for balance and stable territory development. Before the amendments, the strategic spatial planning was governed by the Spatial Planning Act. Now, the regulation of the matter is moved to the Regional Development Act. In this manner, the strategic spatial planning and strategic regional development, as elements of one and the same process, are regulated by one and the same act – the Regional Development Act. As a result, this act governs the public relations, related to the elaboration, approval, financing and up-dating of the documents for strategic spatial planning and regional development, as well as the issues related to the supervision and assessment of their performance. 87
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The System of Documents for Spatial Planning will be in force from 2012 until 2020. Afterwards, new System of Documents for Spatial Planning will be elaborated or the existing will be up-dated. The reform aims to simplify the procedures related to the spatial planning, as well as to strengthen the strategic planning. Thus, the provisions of a document of higher level are mandatory for documents of lower level. For example, the Concept of spatial planning of a particular municipality must be in compliance with the Regional scheme for spatial planning of the district where the municipality is located. Equally, the permits and authorization for a particular construction must comply with the Concept of spatial planning of the municipality. This will procure that each construction will be in accordance with the integral strategy for spatial planning. Amendments in relation to Resolution 560/29 July 2010 of the Council of Ministers The Council of Ministers adopted Resolution 560 of 29 July 2010 for approval of a plan for reformation of the measures for optimization of the state administration. This imposed the necessity of some amendments in the SPA. In particular, these concern the administrative control of spatial planning and construction, the registration and monitoring of the landslips and landslides of the territory of Republic of Bulgaria and the simplification of the administrative services performed by the Ministry of the Regional Development and Public Works. Improvement to the procedures regarding the spatial planning According to the Bulgarian Law, the potential of construction on land is set in the prescriptions of the general zoning plan and detailed zoning plan, both of which have to be in compliance with the prescriptions of the System of Documents for Spatial Planning. The general zoning plan determines the prevailing designation and planning of the land. Usually, there is one general zoning plan for the territory of the whole municipality or, in case of large municipalities, for part of it. The detailed zoning plan determines the specific designation and planning of separate land plot or group of land plots, i.e. what are exactly the parameters of the construction to be erected. It must be in compliance with the general zoning plan. a)
Outside the bordering of urbanized territory
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The general zoning plan becomes mandatory precondition in order to construct outside urbanized territory.
Before the amendments, construction located outside the bordering of urbanized territory could have been implemented only on basis of detailed zoning plan (alongside the required permissions and authorization for the construction). According to the amendments, which will enter into force at the beginning of 2016, outside the bordering of urbanized territory the construction can be permitted (i) after observation of the prescriptions of the general zoning plan and (ii) on the basis of an effective detailed zoning plan. . As a consequence of this provision, all of the municipalities in Bulgaria will have to elaborate and approve all general zoning plans for their territory, otherwise they will be sanctioned. Once there is an approved general zoning plan, the investors can initiate the elaboration of detailed zoning plans for their projects. However, there are some exceptions to this rule, which are explicitly indicated in the SPA (e.g. projects of national and regional significance), which can be permitted on the basis of a detailed zoning plan, without the necessity of a general zoning plan. b)
Urbanized territory
The amendment is not significant regarding to construction within the urbanized territory. The approved detailed zoning plan is considered as general zoning plan if the latter is not approved, subject to certain conditions. c)
Effect of the general zoning plan on the approved detailed zoning plans ยง
The detailed zoning plans, which are approved until the entry into force of the new general zoning plan or its amendment remains in force; 89
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The drafts of detailed zoning plans, which elaboration is permitted in observation of the SPA but not approved at the entry into force of the general zoning plan must be amended so that they are in compliance with the new general zoning plan;
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The new general zoning plan invalidates the effective detailed zoning plans in their parts where the general zoning plan provides for construction of public property projects. Within 6 months of the entry into force of the general zoning plan the
procedure for corresponding amendments in the detailed zoning plan must be initiated ex officio. Improvements in the administrative control According to the SPA, constructions are categorised in 6 categories depending on the characteristics, significance, complexity and the risks upon operation, the first category construction being the most complex. The control functions (such as suspension of the implementation of the construction, removal of unlawful construction etc) for all categories are 90
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exercised simultaneously by the municipality administration and the Directorate for National Construction Supervision. With the amendments the control functions and powers of the municipality administration and the Directorate for National Construction Supervision are more clearly determined and distinct from each other. The Directorate for National Construction Supervision municipality implements control functions for constructions from 1st to 3rd category, whereas the control for constructions from 4th to 6th category is exercised by municipality. Requirements for the construction supervision company The SPA is amended as regard to the requirements for the companies which perform construction supervision. So far these companies must have obtained a requisite licence. With the amendments, this activity can be performed only on basis of registration in the respective registry. The amendments are imposed in order to implement the requirements of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on Services in the Internal Market, which set out principles for reduction of permission, license and registration regimes and simplify the administrative procedures. The responsibilities and the obligations of the registered companies are more clearly identified and the sanctions for non-performance are increased. In case of violation of its obligations, the construction supervision company cannot perform its activity for the period of one year. If the construction supervision company violates its obligation again, then the registration is revoked. Additionally, property sanctions are imposed to the companies for the violations. Legalization of tolerable and unlawful construction The amendments will allow the legalization upon certain conditions of the constructions, built in the period from April 1987 to July 2003, for which there is no construction documentation (permits and authorizations necessary for construction) i.e. which are unlawful under the meaning of the effective SPA. So far, they were subject to removal and were forbidden for exploitation, however, such sanctions were rarely imposed in practiced. ยง
Tolerable constructions (erected between April 1987 to March 2001)
In order to be tolerable, the construction must have been admissible at the moment when constructed or under the effective SPA. No further certification or registration is necessary for 91
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exploitation of the construction. However, in order to dispose of the construction, the owner has to obtain a certificate that the construction is tolerated by the municipal administration. ยง
Unlawful construction, which can be legalized (erected between March 2001 to July 2003)
The owners of unlawful constructions, which were admissible at the moment of their erection, can apply for legalization until 26 November 2013. The procedure for legalization of the construction consists of: (i) approval of the investment design, (ii) adjustment of the construction to be in compliance to the approved investment design, (iii) payment of fines and penalties and (iv) issue of act of legalization. If a part of the construction is not completed, then it is subject to permission on a general basis. If the applications for legalization of the constructions are not submitted within the said timeframe or in case of refusal by the authorities, then the constructions are subject to removal. Other amendments The rest of the amendments can be summarised as follow:
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Supplementation to the rights, obligations and the responsibilities for the participants in the construction process;
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The powers of the local government and the local administration are increased;
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The provisions referring to the spatial planning, investment design, construction and entering into exploitation which lead to contradictory administrative and court practice are clearly determined in order to avoid discrepancies in the implementation;
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The provisions referring to the contestation of an administrative act concerning the spatial planning are supplemented so that the rights of the claimants are more precisely specified;
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Further amendments and supplements are made in order to synchronize the provision of the SPA with the effective European and Bulgarian legislation..
Followers of EU law and fundamental rights no doubt remember C– Case C402/05 P Kadi. This was when the CJEU decided that it had the power to review the lawfulness of EU acts implementing UN Security Council sanctions, on the grounds that MS obligations in international law cannot undermine the rights enshrined in EU Treaties. The immediate effects of the judgment included the UN sending Mr Kadi reasons why he was being detained and his assets frozen, with the European Commission issuing a fresh Regulation implementing the sanctions; this time littered with recitals confirming the supremacy of fundamental rights. But Mr Kadi is back, challenging the new regulation and appealing the judgment of the General Court. His case has already made its way to the desk of Advocate General Bot, who in Case T-85/09 [2010] ECR II – 5177 does not appear overly sympathetic to Kadi’s cause—or terrorism generally; unsurprising for a former prosecutor. While he doesn't ask the CJEU to overrule its judgment in Kadi I, he is more cautious about the Courts ability to judicial review international acts. His view is that UN terrorist black lists represent a significant level of national cooperation at the international level, which may be undermined by justice-seeking EU judges. There should therefore be a presumption that any implementing measures taken are appropriate. Stay tuned to what the CJEU makes of this…. 93
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