Striking-out a Defence for being ‘Equivocal’

In a contract claim, if the Defence to an allegation of breach, is predicated upon dishonesty by the claimant, e.g. where an insurance company (Defendant) has refused indemnity, then logically the Defence cannot be based upon innocence. That however, is fatal, if the Defence as drafted, is ‘equivocal’. Consequently, the Defence is at risk of being struck-out under CPR, r. 3.4(2).

Axiomatically, this principle and litigation risk applies to every kind of civil claim based upon fraud or intentional wrongdoing where the statement of case as drafted, allows for the possibility of an innocent explanation. That is the achilles heel in such a claim.

In Mullarkey & Ors v Broad & Anor [2007] EWHC 3400 (Ch), Mr Justice Lewison explained the litigation risk as follows: 

‘Pleading and proving intentional wrongdoing

41.   In Belmont Finance Corporation Ltd. v. Williams Furniture Ltd. [1979] Ch. 250, 268 Buckley L.J. said:

An allegation of dishonesty must be pleaded clearly and with particularity. That is laid down by the rules and it is a well-recognised rule of practice. This does not import that the word ‘fraud’ or the word ‘dishonesty’ must be necessarily used. The facts alleged may sufficiently demonstrate that dishonesty is allegedly involved, but where the facts are complicated this may not be so clear, and in such a case it is incumbent upon the pleader to make it clear when dishonesty is alleged. If he uses language which is equivocal, rendering it doubtful whether he is in fact relying on the alleged dishonesty of the transaction, this will be fatal; the allegation of its dishonest nature will not have been pleaded with sufficient clarity.” …

43.   In Paragon Finance plc v D B Thakerar & Co he said on the question of pleading:

“It is well established that fraud must be distinctly alleged and distinctly proved, and that if the facts pleaded are consistent with innocence it is not open to the court to find fraud.”’

See also my December blog ‘Striking-Out a Hopeless Defence’ .

My article ‘Judicial Early Neutral Evaluation and the New Normal’ was also published by Trusts & Trustees (Oxford University Press) in December 2020: Trusts & Trustees | Oxford Academic (oup.com)

Abstract

The author’s premise is that in claims allocated to the multi-track, Judicial-Early Neutral Evaluation (‘JENE’) is the new normal. He discusses: the rationale; jurisdiction; and powers of the court to order JENE; its benefits; and the procedure. He concludes that, except where a claim involves the interests of minors and unborn beneficiaries, use of this case management tool is likely to become increasingly routine at the first case management conference where, for example, one party has proposed JENE, and the other has refused consent because he prefers mediation. Whereas mediation requires consent, JENE does not, and the court has the power at the first Case Management Conference to order a stay during which the parties must: (i) take stock and (ii) each carry out a reality check, i.e. before substantial costs are incurred in preparing for trial. Therefore, in an appropriate case, where a binary outcome on liability can open the door to settlement in relation to quantum, relief, and costs, JENE should be considered.

To view the article please visit the ‘Publications’ page at www.ihtbar.com

During the first quarter of this year I am planning to write an in-depth article about duties and powers of executors and trustees in relation to property and investments, which will be co-authored with a leading trust law academic at Cambridge University.

My new book, the ‘Contentious Trusts Handbook’ contains a practice note contributed by the distinguished Art Historian, Pandora Mather Lees (www.artonsuperyachts.com), entitled, ‘Art & Heritage Assets – Duties of Trustees’, see:

Contentious Trusts Handbook – Law Society Bookshop

Wildy & Sons Ltd — The World’s Legal Bookshop : Islam, Carl

In addition to my mainstream private client litigation work, I also undertake commercial contract and tort disputes, and am currently researching substantive aspects of art and antiquities law for a new book I am planning to write for publication in 2023 provisionally entitled‘Fiduciary Duties, Art and Cultural Heritage’.

For more information please visit the ‘Art & Antiquities Dispute’ page at www.ihtbar.com

Striking out a hopeless defence

CPR, r. 3.4(2) states:

‘The court may strike out a statement of case if it appears to the court –

(a)    that the statement of case discloses no reasonable grounds for … defending the claim;

(c)    that there has been a failure to comply with a rule, practice direction or court order.’

The power may be used by the court of its own ‘initiative’, and in a hopeless case the court can exercise the power at the first CMC, i.e. without requiring an application to be made for striking-out prior to the CMC.

The power is exercisable for failure to comply with CPR, r.16.5 (Content of defence).

A related use of the power is where it is alleged that a statement of case, even if its contents are assumed to be true, does not amount to a sustainable defence as a matter of law.

In Monsanto plc v. Tilly [2000] Env LR,Stuart-Smith LJ said that r.24.2 ‘gives a wider scope for dismissing a defence . The court should also look to see what will happen at the trial and, if the case is so weak that it has no reasonable prospects of success, summary judgment should be entered.’

Some allegations will be factually weak and aptly described as disclosing no reasonable grounds within the meaning of r. 3.4.

Procedural judges are under a duty to narrow the issues as part of their case-management functions under Part 1, and have the power to treat an application to strike out as one for summary judgment in order to dispose of issues or claims that do not deserve full investigation at trial (Three Rivers District Council v. Bank of England (No.3) at [88].

Therefore, because the power to strike-out is exercisable by the court of its own initiative, so is the corollary power to summarily dismiss a hopeless Defence.

Judicial Early Neutral Evaluation

My article about ‘Judicial Early Neutral Evaluation and the New Normal’ has been published today by Trusts & Trustees (Oxford University Press): Trusts & Trustees | Oxford Academic (oup.com)

Abstract

The author’s premise is that in claims allocated to the multi-track, Judicial-Early Neutral Evaluation (‘JENE’) is the new normal. He discusses: the rationale; jurisdiction; and powers of the court to order JENE; its benefits; and the procedure. He concludes that, except where a claim involves the interests of minors and unborn beneficiaries, use of this case management tool is likely to become increasingly routine at the first case management conference where, for example, one party has proposed JENE, and the other has refused consent because he prefers mediation. Whereas mediation requires consent, JENE does not, and the court has the power at the first Case Management Conference to order a stay during which the parties must: (i) take stock and (ii) each carry out a reality check, i.e. before substantial costs are incurred in preparing for trial. Therefore, in an appropriate case, where a binary outcome on liability can open the door to settlement in relation to quantum, relief, and costs, JENE should be considered.

To view the article please visit the ‘Publications’ page at www.ihtbar.com

In the new year I am planning to write an in-depth article about duties and powers of executors and trustees in relation to property and investments, which will be co-authored with a leading trust law academic at Cambridge University.

My new book, the ‘Contentious Trusts Handbook’ contains a practice note contributed by the distinguished Art Historian, Pandora Mather Lees (www.artonsuperyachts.com), entitled, ‘Art & Heritage Assets – Duties of Trustees’, see:

Contentious Trusts Handbook – Law Society Bookshop

Wildy & Sons Ltd — The World’s Legal Bookshop : Islam, Carl

I am currently researching substantive aspects of art and antiquities law for a new book I am planning to write for publication in 2023 provisionally entitled‘Fiduciary Duties, Art and Cultural Heritage’.

Like all of my previous books, this is being researched and will be written in my free time, i.e. during evenings and at the weekend.

A specific question I am addressing is whether, and to what extent there is a bridge between:

(i)     the existence of fiduciary duties in International Law; and

(ii)     the jurisdiction and powers of the English court to award equitable remedies for breach of fiduciary duty in relation to dealings with art and antiquities.

In other words, where there is a lacunae in international law, or a treaty is ineffective, can or does equity give ancillary teeth to international humanitarian law?

In ‘A Fiduciary Theory of Jus Cogens’ , The Yale Journal Of International. Law [Vol 34:331-386], Evan J Criddle and Evan-Fox Decent developed a fiduciary theory of jus cogens [i.e. norms that command peremptory authority, superceding conflicting treaties and customs in international law], arguing that, ‘States must honor peremptory norms as basic safeguards of dignity because they stand in a fiduciary relationship with all persons subject to their power and therefore bear specific duties to guarantee equal security under the rule of law … [and] that this fiduciary model of state sovereignty advances international human rights discourse beyond vague notions of “public policy”, “international consensus”, and “normative hierarchy” toward a more theoretically defensible and analytically determinate account of peremptory norms.’

This was the first step. Following in their footsteps I need to unpack the fiduciary model’s consequences for future litigation to enforce alleged jus cogens violations, including the following threshold concerns:

·       standing;

·       sovereign immunity;

·       causes of action available under English private law;

·       compulsory jurisdiction;

·       forums;

·       the availability of equitable remedies; and

·       recognition and enforcement of English court orders in trans-national litigation.

This rests upon the development of a practical theory of fiduciary government relevant to art, cultural heritage, and diplomacy, that has teeth. That has is roots in classical jurisprudence and the development of the philosophy of equity – which is where I will begin my journey.

‘The fiduciary duties that are enshrined in international law parallel private law fiduciary duties in important respects. Under international law, fiduciaries are obligated to carry out their commissions faithfully, manifesting due care and partiality to their beneficiaries interests. International law prohibits fiduciaries from abusing their positions of trust and confidence to secure special benefits from the cells at the expense of their beneficiaries. The South West Africa cases affirmed that fiduciaries under international law there a freestanding legal obligation to submit to international supervision. And the Nauru settlement suggests that the violation of fiduciary duties under international law may support traditional fiduciary remedies, including compensation and restitution.’ The Oxford Handbook of Fiduciary Law 2019page 363.

Therefore, if an agent of an occupying power expropriates art and antiquities from an occupied state, and the artefacts are subsequently acquired by the museum, is the museum liable for restitution on the grounds of unconscionable receipt?

Under US law, the fiduciary duties owed by diplomats are enshrined in multiple bodies of law and are enforced through a variety of mechanisms. Like other public officials, diplomats subject common law fiduciary duties. The US State Department has also adopted regulations prohibiting diplomatic officers from engaging in certain activities that would violate the duty of loyalty, such as helping a foreign state evade US sanctions. When diplomats violate their fiduciary duties, the State Department can recall them from their posts, suspend or terminate their employment, and expose them to civil or criminal liability in the receiving state by withdrawing diplomatic immunity. In some cases, diplomats may even face criminal liability for violating the fiduciary duties, see further the Oxford Handbook of Fiduciary Law at page 361.

For more information please visit the ‘Art & Antiquities Dispute’ page at www.ihtbar.com or google ‘Art Disputes’ or ‘Art Dispute Barrister’ and click on the link to the page.

BREXIT deadlock – creative fiduciary solution?

Creative solution? – Link the dispute resolution mechanism to a right to terminate the trade agreement

Parking ‘fish’, let’s assume that the primary fiduciary constraints are:

·       Level playing field i.e. standards – EU [‘LPF’]

·       Sovereignty – UK [‘UKS’].

Does a creative solution exist in the form of a termination provision i.e. for inclusion in the trade agreement?

How would this work?

The trade agreement needs to legislate for a dispute resolution process – let us assume that the inclusion of a trade dispute mechanism [‘TDM’] has already been agreed in principle, because it must have been.

What does the TDM need to provide to reconcile LPF with UKS?

The answer is simple, so I assume that for political reasons this has already been exhaustively discussed and dismissed on both sides. However, I am not a trade lawyer. My field is will ,trust, inheritance, and fiduciary disputes, so I have no idea. I am simply asking a question – ‘has this solution been dismissed in all its various forms by the parties? ‘ Is so, why, i.e. what is the legal problem? Because as far as I am aware, there is no legal impediment to agreement.

The obvious and simple solution is that the TDM operates as follows:

1.  If there is a dispute about non-compliance by the UK with standards (i.e. if our standards are lower than those of the EU – LPF), the impact of compliance for the UK i.e. actual / potential future loss of paying tariffs v. compliance needs to be assessed by the UK Government.

2.  If the UK Parliament decide that the cumulative economic impact of a series of non-compliances results in an economic impact threshold being reached [‘EIT’], they may vote to instruct the Government to terminate the Trade Agreement, and if the termination mechanism is triggered penalties would not be payable – that is fair.

3.  Before a decision is made in the UK Parliament, the issue shall be mediated, with the political decisions being made by the UK Prime Minister and the President of the EU Commission.

4.  If mediation does not result in an amicable resolution of the dispute within e.g. one year, then the vote may be put to Parliament.

This solves the LPF problem because prior to termination Britain will agree to comply with the LPF.

Non-compliance is academic if our standards are in fact higher (and that can be provided for in the drafting of the termination clause).

It is also a practical solution for the UK Government because Britain can pull-out of the trade agreement (i.e. withdraw) if in the future the cumulative economic impact of compliance is not in our national economic interest overall.

The problem is how to devise an economic formula for determination of the EIT, and what the EIT will be, which cannot be worked out in a few days.

So:

·       If there is trade agreement, the parties must perform their respective obligations under its terms in good faith (see International Law below).

·       If there is a material breach of any term, that will naturally generate legal consequences, e.g. tariffs.

·       If in the long term, the cumulative economic impact of tariffs for breach exceeds the overall economic benefits of preferential access to the European single market, the legal tools exist for incorporating a unilateral exit strategy into the terms of the treaty, so that the UK is not left in perpetual lock-step. See International Law below.

Whilst this is an oversimplification, and I know nothing about the detailed issues under discussion, and the devil is of course always in the detail, it is reasonable to conclude that if a trade deal is not agreed that failure cannot be blamed upon a lack of legal tools. It would be a failure of political statecraft, i.e. because of lack of will.

What then is the paramount fiduciary duty of the UK Government?

Examined through the prism or lens of a public fiduciary duty owed by a Government to its citizens, the issue can be reframed as the question – ‘is a trade deal likely to increase or decrease the flourishing of our society as a whole?’

That begs further questions including;

·        What do we mean by ‘flourishing’.

·        How can flourishing be measured and what are the tests.

Since the concept of human flourishing has philosophical underpinnings, it is not purely a question of law, business, and economics – it is a much wider question.

The answer to that question will determine the direction in which our society will develop.

The question therefore is, if there is a choice between a deal or nor deal, in which direction do we need as a society to travel, in order to flourish?

Since we live in a globalized world, the answer is a political no-brainer.

That I would argue, is the paramount fiduciary real-politik of BREXIT.

To read my recent blog about what trading on WTO terms means for the UK please visit:

What would trading on WTO terms mean for the UK | Carl’s Wealth Planning Blog

See also:

Negotiating BREXIT through a ‘fiduciary’ prism | Carl’s Wealth Planning Blog

Toward a practical theory of fiduciary government | Carl’s Wealth Planning Blog

International Law

Extracted from www.diplomaticlawguide.com

Withdrawal

Denunciation and withdrawal are used interchangeably to refer to a unilateral act by which a nation that is currently a party to a treaty ends its membership in that treaty.

In the case of multilateral agreements, denunciation or withdrawal generally does not affect the treaty’s continuation in force for the remaining parties.

‘The Vienna Conventionlimits the grounds for termination and suspension in the abstract and accords exclusivity to the grounds which are mentioned in the VCLT. Yet, for the scope of its application, it acknowledges in Art.54 VCLT that the parties generally have the right to provide for denunciation and withdrawal in the representative treaties or by agreement of the parties. But even if a treaty grants no express possibility of denunciation or withdrawal, there is a possibility for implicit regulation, which is described in Art 56 VCLT. This, however, only applies if the treaty provides neither for the termination nor (cumulatively) for denunciation or withdrawal. In these cases, the provision contains a general presumption against such an implicit right which can be rebutted in two circumstances: first, where it can be established that the parties intended to admit such a possibility; second: where the nature of the treaty might imply such a right. Both refer to a special way of interpreting the treaty. It has been contended that the two options can be termed as subjective in the case of the intention of the parties and objective in the case of the nature of the treaty … In essence, Art 56 VCLT alters the ordinary process of interpretation as to its means which has potentially an intertemporal effect. Art 56(1)(a) seems to be fixed in time and alters some of the methods of interpretation such as the travaux. Most importantly the determination of the interpretative question is tied to the original meaning. The VCLT here uses the static approach. Art 56(1)(b) introduces an alternative means of interpretation: it resorts to the “nature of the treaty”. The inferences we draw from the nature of treaty can change, similar to the object and purpose of the treaty. Yet, it can be assumed that the nature of a treaty remains stable most of the time.’(‘Static and Evolutive Treaty Interpretation’ by Christian Djeffal page 194).

Breach

Article 26 contains the fundamental principle of the law of treaties: pacta sunt servanda:

‘Every treaty in force is binding upon the parties to it and must be performed in good faith.’ 

‘Pacta sunt servanda embodies a rule that is an elementary and universally agreed principle fundamental to all legal systems, and is of prime importance for the stability of treaty relations … It goes without saying that if a party to a treaty does not perform it, that will to the extent of the non-performance, be a breach of its international obligations to the other party or parties … [Furthermore under] Article 27: a party may not invoke the provisions of its internal (i.e., domestic) law as justification for its failure to perform a treaty. Thus if a new law, or modification to existing law, is needed in order to carry out the obligations on the state by the time it consents to be bound by the treaty, a negotiating state should ensure that this is done at least by the time that the treaty enters into force for it. If this is not done, not only will the state risk being in breach of its treaty obligations, but it will also be liable in international law to another party if, as a result, that party, or its nationals, is later damaged … A state cannot plead a change of government to excuse failure to implement a treaty. Since the treaty is entered into on behalf of the state, the new government must also perform the treaty. Nor is it at all easy to plead successfully that a treaty is invalid because its consent to be bound was expressed in violation of its own law.’  (Modern Treaty Law and Practice by Anthony Aust, Third edition, pages 160 to 162).

Sir Humphrey Waldock in his ‘Second Report [to the ILC] on the Law of Treaties [1963] VBILC, vol 11, 36 (draft Art 17) stated that a treaty ‘shall continue in force indefinitely [if it is] (c) … a treaty of disarmament, or for the maintenance of peace’… in other words that Art 56(1) does not apply to such a treaty.

Therefore where a state unilaterally notifies withdrawal from a treaty:

(i)    for reasons which fall outside the scope of an express termination clause; or

(ii)   where the treaty does not contain a termination clause,

if the treaty is ‘a treaty of disarmament, or for the maintenance of peace’ because Art 56(1) does not apply, an act of unilateral withdrawal from the treaty would be a breach of the VCLT, and therefore constitute a violation of international law, entitling the innocent party to refer the breach to the International Court of Justice for a decision under Art 66.

That does not apply to trade agreements.

Dispute settlement

When a treaty is denounced and a dispute arises on the legality of the denunciation, a clause on the settlement of the dispute contained in the treaty is not considered to be terminatedFisheries Jurisdiction cases (Jurisdiction), ICJ, Reports, 1973, p.16, at 29 and p.60 at 29.

In principle, the dispute will have to be channelled through the procedural provisions of the VCLT (articles 65-68) which provide:

‘Article 65     Procedure to be followed with respect to invalidity, termination, withdrawal from or suspension of the operation of a treaty 

1.  A party which, under the provisions of the present Convention, invokes either a defect in its consent to be bound by a treaty or a ground for impeaching the validity of a treaty, terminating it, withdrawing from it or suspending its operation, must notify the other parties of its claim. The notification shall indicatethe measure proposed to be taken with respect to the treaty and the reasons therefor.

2.  If, after the expiry of a period which, except in cases of special urgency, shall not be less than three months after the receipt of the notification, no party has raised any objection, the party making the notification may carry out in the manner provided in article 67 the measure which it has proposed. 

3.  If, however, objection has been raised by any other party, the parties shall seek a solution through the means indicated in Article 33 of the Charter of the United Nations.

4.  Nothing in the foregoing paragraphs shall affect the rights or obligations of the parties under any provisions in force binding the parties with regard to the settlement of disputes.

5.  Without prejudice to article 45, the fact that a State has not previously made the notification prescribed in paragraph 1 shall not prevent it from making such notification in answer to another party claiming performance of the treaty or alleging its violation.

Article 66 Procedures for judicial settlement, arbitration and conciliation

If, under paragraph 3 of article 65, no solution has been reached within a period of 12 months following the date on which the objection was raised, the following procedures shall be followed:

(a)     any one of the parties to a dispute concerning the application or the interpretation of article 53 or 64 may, by a written application, submit it to the International Court of Justice for a decision unless the parties by common consent agree to submit the dispute to arbitration;

(b)     any one of the parties to a dispute concerning the application or the interpretation of any of the other articles in part V of the present Convention may set in motion the procedure specified in the Annex to the Convention by submitting a request to that effect to the Secretary-General of the United Nations.

 Article 67      Instruments for declaring invalid, terminating, withdrawing from or suspending the operation of a treaty

1.  The notification provided for under article 65, paragraph 1, must be made in writing.

2.  Any act of declaring invalid, terminating, withdrawing from or suspending the operation of a treaty pursuant to the provisions of the treaty or of paragraphs 2 or 3 of article 65 shall be carried out through an instrument communicated to the other parties. If the instrument is not signed by the Head of State, Head of Government or Minister for Foreign Affairs, the representative of the State communicating it may be called upon to produce full powers. 

Article 68      Revocation of notifications and instruments provided for in articles 65 and 67 

A notification or instrument provided for in article 65 or 67 may be revoked at any time before it takes effect.

What would trading on WTO terms mean for the UK

What would trading on WTO terms mean for the UK | LinkedIn

If you think you understand what this means then I recommend that you read the eye-opening report written by experts – Catherine Barnard and Anand Menon.

What-would-trading-on-WTO-terms-mean-Long-Guide.pdf (ukandeu.ac.uk)

Please note as demonstrated in the Diplomatic law Guide, which I wrote 4 years ago, see the section ‘The economic dangers of political wishful thinking?’ on the BREXIT page at:Diplomatic Law Guide – by Carl Islam LLM(Exon)(International Business Law)(see extracts below):

In theory 124 trade agreements (to be negotiated) x 5 years each = 620 years.

[Obviously it won’t take that long, however, 5 years (2 years for agreement and three for ratification and implementation), is the documented norm for a comprehensive trade agreement].

Hypothetically, all124 could be negotiated within 5 years (if negotiated in parallel).

How many trade negotiators does the UK [have] to resource this?’ – Not enough (see below).

Meanwhile watch out for the TRQ’s! because we are in for a very rough economic ride in the brave new world of international trade, and I speak as a lawyer who in his late twenties and early thirties negotiated major contracts with state entities in China and India www.ihtbar.com

The UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit, according to two leading European Union law specialists.

The ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years, claim the lawyers who acted for Gina Miller in the historic case that forced the government to seek parliament’s approval to leave the EU.

It has been claimed that the UK could simply move to WTO terms if there is no deal with the EU. But Anneli Howard, a specialist in EU and competition law at Monckton Chambers and a member of the bar’s Brexit working group, believes this isn’t true.’

“No deal means leaving with nothing,” she said. “The anticipated recession will be worse than the 1930s, let alone 2008. It is impossible to say how long it would go on for. Some economists say 10 years, others say the effects could be felt for 20 or even 30 years:even ardent Brexiters agree it could be decades. …

Firstly, the UK must produce its own schedule covering both services and each of the 5,000-plus product lines covered in the WTO agreement and get it agreed by all the 163 WTO states in the 32 remaining parliamentary sitting days until 29 March 2019. A number of states have already raised objections to the UK’s draft schedule: 20 over goods and three over services.

To make it more complicated, there are no “default terms” Britain can crash out on, Howard said, while at the same time, the UK has been blocked by WTO members from simply relying on the EU’s “schedule” – its existing tariffs and tariff-free trade quotas.

The second hurdle is the sheer volume of domestic legislation that would need to be passed before being able to trade under WTO rules: there are nine statutes and 600 statutory instruments that would need to be adopted.

The government cannot simply cut and paste the 120,000 EU statutes into UK law and then make changes to them gradually, Howard said. “The UK will need to set up new enforcement bodies and transfer new powers to regulators to create our own domestic regimes,” she said.

“Basic maths shows that we will run out of time but any gap in our system will create uncertainty or conflict,” said Howard. “Some of these regimes carry penalties such as fines – even criminal offences in some sectors.”

Unless there is an extension to article 50, both these hurdles will need to be crossed by 29 March. This, said Howard, was an impossible task. “Negotiating and ratifying the international free trade deals with the rest of the world alone could take over seven years,” she said.

“A no-deal Brexit could double prices for some products like meat and dairy. There is also a greater risk of trade disputes and sanctions, resulting in reduced market access for UK businesses.

“It’s not just about money,” she said. “We are dependent on imports for a lot of things that we don’t make any more or don’t make enough of, or simply cannot make as they are patented or subject to rules of origin – like lifesaving drugs, radioactive isotopes, chemicals (such as helium for MRI scans), medical equipment, chemicals, electricity, petrol, even milk. Shortages and delays could cause panic buying or even civil unrest.””

See: https://www.theguardian.com/politics/2019/jan/27/uk-cannot-simply-trade-on-wto-terms-after-no-deal-brexit-say-experts.

Report by Catherine Barnard and Anand Menon

What-would-trading-on-WTO-terms-mean-Long-Guide.pdf (ukandeu.ac.uk)

·       ‘There is a difference between ‘WTO rules’ and ‘WTO terms’. WTO rules govern all trading relations between the UK and the EU, including the single market, customs union, any other form of free trade agreement or even ‘no deal’. Agreements can go beyond WTO rules in some areas, but not in others. The rules remain the foundation for any arrangement. WTO terms means particular conditions that countries have agreed in the WTO, such as their individual ‘commitments’ (pledges) on tariffs, agricultural subsidies or opening up of services markets. Its meaning is therefore much narrower than WTO rules.’

·       Negotiations over tariff quotas Sorting out the 100 or so ‘tariff quotas’ (or tariff-rate quotas—TRQs) is the most complicated part of the UK establishing its own schedules of commitments in the WTO. Among WTO members, the method proposed jointly by the UK and the EU is controversial. The quotas allow limited quantities of a product to be imported at a low tariff or duty free, while anything outside the quota is charged a much higher duty.

For example – New Zealand lamb:

The present tariff quota for New Zealand lamb imports into the EU (currently including the UK) is around 230,000 tonnes. Inside the quota, imports are duty free. Outside of this quota, a mixed tariff is charged: up to 12.8% of the price, plus up to €902 to €3,118 per tonne. That is fairly complicated, but the bottom line is that it is much more expensive.After Brexit, what should the UK’s tariff quota for lamb (or any other product) be? And what about the EU27? The UK and the EU have jointly proposed in the WTO that their quotas should be split in a way that keeps the same total — so for New Zealand lamb, that is still 230,000 tonnes. The UK and EU say that the share each gets should be in proportion to the percentages that ended up in the UK and the EU27 on average in 2013–15 using EU data. The result is a 50:50 split — about 115,000 tonnes in each quota. New Zealand and a number of other countries have complained that this method weakens the trading rights that they negotiated in the WTO because it reduces the quotas’ commercial value. While the UK is a member of the EU and its customs union, New Zealand can choose to sell anywhere in the EU where the prices are more profitable. Splitting the quotas in the proposed way limits exporting countries’ flexibility to choose between selling to the UK and, say, Germany, wherever is more profitable. There are other objections too. [See the Diplomatic Law Guide Brexit page].

What would ‘trading on WTO terms’ mean for the UK? Sorting out the tariff quotas means difficult negotiations. They ought to be sorted out in practice — if not legally — by March 2019, unless the UK and the EU continue with a customs union beyond Brexit day (which they will if the transition period and proposed ‘backstop’ apply).

The sting in the tariff-quota tail – New Zealand may be unhappy with the proposal for splitting quotas on lamb and other products, but for UK and EU farmers it is, in fact, much worse.

The tariff quotas mean that, with no deal between the UK and the EU, trade between them in some agricultural products would dry up completely.

In others, it would be severely reduced.

None of the WTO tariff quotas takes into account current trade between the UK and the rest of the EU.

For example, over 80,000 tonnes of lamb is exported duty free and quota free from the UK into the EU27 and about 11,000 tonnes goes from the EU to the UK. All of the lamb quotas, except some tiny amounts, are reserved for specified countries. None is for the UK or the EU27, since they currently trade within the single market. Under present proposals and without a UK-EU trade deal, after Brexit the EU and the UK could only trade lamb duty free with each other through left-over tariff quotas opened to unspecified countries. The amounts available to unspecified countries can be tiny. For lamb, for example, this amounts to just 400 tonnes out of the total EU28 quota of about 281,000 tonnes.

·       The UK currently exports 80,000 tonnes to the EU27. After Brexit the EU27’s quota available to the UK and others is only a proposed 378 tonnes. The UK currently imports 11,000 tonnes duty free from Ireland, France and other EU members. After Brexit, those EU countries could only export duty free to the UK through a miniscule 22-tonne UK tariff quota available for all-comers.

·       However, a UK-EU customs union would avoid this bottleneck.

· An under-reported fact is that the UK already has free trade agreements with many countries, both big and small, via the EU. There are a number of questions for the UK.

·       Should it try to sort out existing agreements first (which would be quicker) and then embark on new agreements with the same countries? Or should it start from scratch with new agreements (which would take much longer)?

·       According to the EU’s latest information, it has free trade agreements: – in place with 35 countries (including Iceland, Norway, Switzerland, South Korea and Mexico). Switzerland’s deal, by contrast, is not one agreement but a large set of agreements accumulated gradually over decades; – partly in place with 48 countries, and with many provisionally applied, for example, because they have not yet been fully ratified (including with Canada, Colombia, Ecuador, Peru and Ukraine); – pending with 22 countries (including Japan, Singapore and Vietnam); and – under negotiation with 21 countries, half of them suspended or paused (including with the US and India, and recently launched new talks with Australia and New Zealand). The UK will lose the benefits derived from all of these deals unless it can reach agreement with each of the countries to roll them over for the UK.

·       This is more complicated than it sounds.

·       What would ‘trading on WTO terms’ mean for the UK?

·       First, the other countries would obviously have to agree.

·       Many have said that they want to reach a deal with the UK in principle, but they would also have to agree on the details, which is an entirely different task with no guarantee of success.

·       [NB WTO members vote by unanimity. It only takes one objection to block agreement i.e. because of TRQ’s – this could be political e.g. by Russia through a proxy state, see my blog: July | 2020 | Carl’s Wealth Planning Blog].

·       Second, many of the details in the EU agreements refer to or recognise EU rules, regulations, standards, institutions and legal procedures for goods, services and intellectual property. When rolled over to UK agreements, these references would have to be converted to their UK equivalents.

·       And if the UK wants to deviate from those EU arrangements — one of the purposes of Brexit, after all — then this would have to be renegotiated with each of the trade partners.

·       Third, many of the free trade agreements also include the tariff quotas discussed above.

·       The issues raised in the WTO about sorting out tariff quotas are likely to arise in these bilateral talks as well.

·       Fourth, one of the problems with free trade agreements is ‘rules of origin’.

·       Rules of origin — ‘Made in the United Kingdom’.

·       To understand the problem of rules of origin, let’s look at the free trade agreement between the EU and South Korea.

In that agreement, rules of origin take up 65 (excruciating) pages of the 1,400-page document. One of the points of the EU-South Korea agreement is to allow the EU and South Korea to trade goods with no or minimal barriers, including no tariffs. To qualify for duty-free access to the South Korean market, or for recognition of standards under the agreement, a product has to be shown to have been ‘made in the EU’. The same goes for South Korean products entering the EU: they have to be ‘made in South Korea’. Under any future UK-South Korea deal, British products would have to be declared ‘made in the UK’. These rules vary according to the product. They can say something like ‘if over 55% of the value has been added in the EU’, then that is enough to be considered made in the EU. That 55% is broadly speaking the requirement for cars under the EU-South Korea agreement, for example. A Land Rover or Mini exported from the UK before Brexit qualifies for reduced tariffs because the 55% EU content in the car’s value comes from components from anywhere in the EU. After Brexit, under a rolled over agreement, the 55% requirement would be for UK content alone, a much tougher ask.Parts sourced from Germany, France or Spain would no longer count. Under present manufacturing methods, that would be almost impossible and so the car would not count as ‘made in the UK’.

·       In other words, simply rolling over existing EU free trade agreements on current terms would make them much less valuable to the UK.

·       One solution would be for the Land Rover or Mini to continue to be considered ‘made in the EU’ (not just the UK) even though the free trade agreement is between the UK and South Korea. But getting there would be far from simple. It requires an agreement on what is called ‘diagonal cumulation of origin’. The car could be declared ‘made in the EU’ and qualify for free trade with South Korea if 55% of its value comes from components made in the UK or the EU27. The parts could still criss-cross between the EU27 and the UK before everything is assembled into a complete car and shipped to South Korea. Clearly, the EU would have to be brought into this part of the UK-South Korea talks.

·       And that is just one product.

·       The same would have to be done for most, if not all, of those 65 pages of rules of origin for all the other products in the present EU-South Korea agreement. But that is just one deal.

·       There are over 100 EU free trade agreements wholly or partly in place, or pending.

·       The UK would probably have to handle them in phases.

·       In practical terms, it is unlikely to have enough staff to do them all at the same time while they are also working on all the other aspects of the Brexit negotiations.

·       The reality of US trade — 20 or so additional agreements For many, Brexit’s big prize is improving trade relations with the United States. The US and the EU have tried and failed to negotiate a free trade agreement. A key question is what the UK would be able to offer the US that the EU cannot in order to strike a deal. Over the years, the US and the EU have accumulated about 20 smaller bilateral trade agreements (the exact count depends on what is meant by ‘trade’). These include mutual recognition pacts — where each side recognises that the other’s standards and methods of assessing whether the products conform as being the same or equivalent to its own. They also have agreements to protect ‘geographical indications’ — the names identifying the origin and characteristics of products, such as Bordeaux or Cognac — for some wines and spirits. If the UK wants to preserve the benefits of those agreements, for example on standards and regulations, or to keep some names protected in the US, then it will have to renegotiate those agreements — although Scotch Whisky will remain protected because it is already registered in the US. Negotiating beyond these is unlikely to be easy. The US-EU trade talks stalled on issues such as services, how to deal with safety and health standards, and procedures for handling disputes between companies and governments. The crunch issue with things like food safety is different approaches. The EU prefers avoiding risk when the impact is uncertain, whereas the US emphasises what is known scientifically — think of the famous differences over chlorine-washed chicken, hormones in meat and other food safety standards. All of these are controversial in the UK as well as the rest of the EU, meaning UK-US talks could fail too on the same grounds. Some experts warn that a UK-US deal would require the UK to adopt an approach on food safety and animal and plant health closer to the US’s, and this might cause difficulties for producers wanting to export to the EU with its different approach. There are also fears that the US will want more private sector competition in health services. And there is more. The latest revision of the agreement between Canada, Mexico and the US includes a clause that appears to prevent signatories from negotiating an agreement with China. Some see this as a precedent the US could insist on when negotiating with other countries, including the UK. But one of the UK government’s Brexit objectives is a deal with China, as one of the world’s fastest-growing economies. We will not know for sure about any of this until any talks actually take place.

·       WTO terms provide a basic floor for world trade. However, their inadequacies provide incentives for countries to go further and seek preferential access and the tackling of issues inadequately covered through WTO rules. This may undermine, to a degree, the multilateral system, but this has been the direction of travel for some years. In this situation, the UK will want to seek, as other members do, the closest relationship possible with the EU given political constraints. No deal Brexit is clearly an unsatisfactory solution and falling back on WTO terms suboptimal politically, economically and socially.’

In the event of no-deal the task of catching up with the EU, let alone overtaking it is herculean, and in the real world will take years to accomplish, see my website the Diplomatic Law Guide: Brexit – Diplomatic Law GuideBREXIT page about half way down

‘The economic dangers of political wishful thinking?’

 In theory 124 trade agreements x 5 years each = 620 years.

Hypothetically, all 124 could be negotiated within 5 years (if negotiated in parallel).

How many trade negotiators does the UK need to resource this?

‘The EU typically sends 20 commission negotiators to any round of trade talks, backed up by between 25 and 40 technical experts, she wrote in the FT earlier this year. The UK has 40 trade negotiators, compared with the 550-strong trade department in Brussels’: https://www.theguardian.com/business/2016/aug/17/brexit-trade-deals-gruelling-challenge-taking-back-control.

Assuming that each UK negotiating team will include at least around 25 negotiators (plus technical experts), 124 x 20 = 2,480 negotiators.

One former EU trade negotiator Miriam Gonzalez Durantez, estimated more precisely (17 August 2016) that for the progressive negotiation of priority agreements (i.e. not all 124) the UK would need an operational cadre of least 500 negotiators.

How many do we have?

‘Lord Price, the minister for trade and investment, has said that the Government has about 40 trade negotiators, compared with the 550 employed by the EU. [This has of course since been increased through recruitment but by how much? And are they experienced trade negotiators?]

Yet even these figures may exaggerate the number of people qualified to go into the room for Britain and agree trading deals for a post-EU era. Lee-Makiyama estimates that there cannot be more than 200 actual negotiators in the world as a whole.

This shortfall will require the civil service to look far and wide, and is indicative of the kind of skills shortages Whitehall will struggle with in the years ahead. Dealmakers have to know what strategy they will use, if they will scope out the negotiation, what they will scope, and how they will do it. They must have an idea of what they want to propose, in what order, and which sections of a trade deal they want to debate first. Developing an understanding of how to do this can take years.

“Even the European Commission has been accused of not being able to draft” proper agreements, Lee-Makiyama says. “This is why all the European free trade agreements include language copied and pasted from the US agreements.”

Part of the arsenal of any good negotiator is a formidable contacts book. Given the small number working in this area, negotiators tend to know each other, and those personal relationships can be as important as their technical abilities. Homegrown British negotiators would lack the access of their more seasoned adversaries.’

Government faces worldwide hunt for trade negotiators, experts warn: http://www.telegraph.co.uk/business/2016/07/03/government-faces-worldwide-hunt-for-trade-negotiators-experts-wa/

‘“Serious multilateral negotiating experience is in short supply in Whitehall …

Why do these agreements take so long? The last generation of trade agreements was focused mainly on removing tariffs. Multilaterally, the single biggest recent event at the increasingly ineffectual World Trade Organisation has not been the conclusion of a successful round, but, rather, China’s accession in 2001. The next generation of bilateral agreements, of which Ceta is the template, is complex. They reflect the realities of modern commerce and go beyond trade, touching upon behind-the-border issues such as standards, regulation and opening government contracts to competitive bidding. This complexity means that the deals take years to negotiate and conclude. In our amped up media environment, there are special interests making noise at each step in the process, ensuring that trade and investment deals are a marathon, not a sprint.

The EU’s chief negotiator, Michel Barnier, has stated that the ratification process alone for a UK-EU deal would take six months. Based on the experience of Ceta it will certainly be longer.

An interim deal is surely now the target – but it seems impossible to achieve without UK flexibility on freedom of movement and the role of the European courts. This means that a reversion to WTO rules and the common tariff schedules is the most likely scenario for the UK. Estimates are that this will mean a 4% drop in UK GDP versus a 1% loss in the EU, due mainly to the relative sizes of their economies. While it would be diminished by the loss of one of its most dynamic members, the EU can take the hurt. It has no choice but to do so.

In addition to paving the way for similar deals across the Union which could lead to its fragmentation, a sweetheart deal with the UK would be a missed opportunity to extract industries back to the continent – banking, autos and aerospace to name a few. The Brexit camp seems to be divided into two groups – those who believe that an interim deal is possible and those who are not only resigned to a WTO outcome, but have actually convinced themselves that the UK will be as strong or stronger as a result. This view is held despite the higher tariffs, a loss of passporting rights for UK financial institutions and the disappearance of agricultural subsidies such an outcome will represent.’

As a trade negotiator, I’m shocked at Brexiters’ ignorance: https://www.theguardian.com/commentisfree/2017/jan/08/trade-negotiator-shocked-at-brexiters-ignorance

Are the UK’S plans so ambitious as to prove unrealistic?:

https://economic-research.credit-agricole.com/medias/Persp17_019_UK_Brexit_20170120_EN_r.pdf

In which case what are the dangers of political wishful thinking?

‘British Brexit negotiators risk signing trade deals that are damaging, politically-motivated and “unlikely to have many economic benefits”, according to the expert who is training the Government’s officials on negotiations.

Steve Woolcock, a professor at the London School of Economics, who leads the advanced trade negotiation course that has been attended by more than 60 officials from Liam Fox’s Department for International Trade, said the risk of rushing into politically motivated deals within two years of triggering Article 50 could damage British industry.

“The greatest danger in trade policy at the moment is that there’s a political imperative to conclude agreements with other countries to show that Brexit works,” Mr Woolcock told the Times.

“These are unlikely to have many economic benefits or enable the UK to keep up with other preferential trade agreements,” he added.

Mr Woolcock’s warning comes as Prime Minister Theresa May prepares to trigger Article 50 on Wednesday, officially kick-starting Britain’s two-year timeframe to negotiate its formal exit from the EU.

“At a political level there is still no recognition of the difficulties,” Mr Woolcock said, adding that the Brexit debate is currently far too focused on tarrifs.

“All the debate was about tariffs. But tariffs are a minor aspect of doing business internationally today,” he said.

“The problem is on regulatory issues. The UK has to negotiate some kind of arrangement that can help to continue to ensure that UK regulatory standards will still be seen as equivalent. Without that it’s too easy for the EU to simply say ‘no, that doesn’t apply anymore’.”’

Britain risks rushing into ‘politically-motivated’ trade deals ‘unlikely to have many economic benefits’ – The man training our politicians to negotiate Brexit, says that we risk missing the point: http://www.independent.co.uk/news/business/news/brexit-talks-negotiators-ukeu-trade-political-motivations-economy-benefits-deals-a7651741.html

Trust Litigation after BREXIT

Trust Litigation after BREXIT | LinkedIn

·       PIL after a No-Deal BREXIT

·       Trusts

PIL AFTER A NO-DEAL BREXIT

If there is no deal the Brussels 1 Regulation will not apply from midnight on 31.12.2020, and no arrangement for another private international law convention to fill the vacuum will have been agreed. Therefore, the Lugano Convention, unless agreed i.e. as a term of a future trade agreement cannot fill the void.

In a contract or tort action ‘in personam‘ (i.e. against a person) the English court will therefore only have jurisdiction in three situations:

(i)     where the defendant has been served with the statement of claim whilst in England;

(ii)     where a person who might otherwise be excluded, submits to the jurisdiction; or

(iii)    if the case comes within CPR, r. 6.20, where discretionary leave is granted for service of proceedings outside of the jurisdiction.

The doctrine of Forum non conveniens will also apply, with the result that applications for stays are likely to increase, adding to the costs and risks of litigation.

The instruments that currently determine governing law, Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) and Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II), have been implemented in UK domestic law and will continue to apply post-Brexit.

However, certain matters necessarily fall outside the ambit of either Rome I or Rome II, including:

(i)     issues relating directly to property, i.e. ownership;

(ii)    a person’s legal capacity; and

(iii)    trusts.

Succession to moveable property in England is governed by the lex situs (location of the property) rule of the country where the property is located.

In the case of a dispute as to title to moveable property, e.g. where a painting has been stolen and the court is called upon to determine which country’s laws on passing of title and limitation periods apply, the lex situs rule is relevant, i.e. the law of the country where the object was situated on the date of the event which is alleged to have affected title to it.

As a general rule, in English law, proceedings are governed by the law of the forum. This applies amongst other things to the admissibility of evidence, and choice of court. At common law, the question of limitation of actions has traditionally been treated as being a procedural question. However, the Foreign Limitation Periods Act 1984 categorized it as a substantive issue (with the exception of public policy matters), which was re-affirmed in the Rome Regulations.

TRUSTS

Introduction

The choice of law rules for England and Wales, Northern Ireland and Scotland are set out comprehensively in the Hague Convention on the Law Applicable to Trusts and on their Recognition (the ‘Convention’), as implemented and extended by the Recognition of Trusts Act 1987 (‘RTA 1987’). Preliminary issues relating to the validity of wills or transfers of assets to trustees fall outside the scope of the Convention.

In practice, three questions typically arise:

(i)     technically, does the English Court have jurisdiction to entertain the claim;

(ii)     which legal system will the Court apply to resolve the dispute on the merits; and

(iii)    will the English Court recognise and enforce a judgement.

The convention:

(i)     harmonises the choice of law rules applicable in contracting states (and other states subsequently acceding to or implementing the Convention); and

(ii)     expressly provides for the recognition of trusts falling within its scope.

Section 1(1) of the RTA 1987 states that ‘The provisions of the Convention set out in the Schedule … shall have the force of law in the United Kingdom’.

Under English law, questions involving the administration of a trust and the personal liability of the trustees to the beneficiaries for breach of trust are governed by the law applicable to the trust (Article 8 of the Convention as implemented by section 1(1) of the RTA 1987). 

The applicable law is either the law chosen by the settlor (Article 6) or, if there is no choice, the law of the country with which the trust is most closely connected (Article 7).

Preliminary issues

‘In the case of a voluntary testamentary or inter vivos trust, there is an important preliminary issue to be faced, namely whether the instrument which creates the trust, i.e. the will or settlement, is valid according to the relevant governing law. Article 4 of the Convention makes it quite clear that this preliminary issue as to validity falls outside the scope of the Convention. The relevant choice of law rules will be those governing, for example, the formal or essential validity of wills or, in the fairly rare cases where there is a settlement, those governing the validity of contracts or deeds. In the case of a testamentary trust it will also be for the law governing the validity of the will to determine, for example whether the testator is required to leave a fixed portion of his estate to his or her spouse or children rather than on trust for other beneficiaries … Not only does a voluntary trust depend on there being a valid instrument of creation, it is also necessary that the transfer of the trust assets is valid. This further preliminary issue is also excluded from the Convention by reason of Article 4, as being an act “by virtue of which assets are transferred to the trustee”. The choice of law issue as to whether a trustee has effective legal title to the assets to hold them for the beneficiaries will normally be governed by the general rules applicable to the transfer of property, e.g. the law of the situs in the case of tangible movables and of immovables. If the instrument of creation of the trust is valid under its governing law, the trust will, nevertheless, fail if the law of the situs does not permit the transferee to alienate the property at all, but once the property can be alienated in some way it is for the law applicable to the trust to govern the validity and effect of the declaration of trust.’ (‘Cheshire, North & Fawcett – Private International Law, 15th Edition, Torremans et al p.1385).

Capacity

Capacity to make an inter vivos gift is governed by the law of domicile of the donor at the time of the gift. In the case of real property, the lex situs will determine what level of capacity applies.

Under English law, in order to put property into trust the settlor must not be:

(i)     a person who lacks capacity in accordance with the Mental Capacity Act 2005;

(ii)     a minor; or

(iii)    someone who is legally disbarred from owning or disposing of legal or equitable title to property.

Validity and enforceability

In Akers & Ors v. Samba Financial Group (Rev 1) [2017] UKSC 6, at [17],[18],[20],[24] to [28],[32] to [34], and [36] to [40], Lord Mance stated the following principles:

(i)     At common law, the nature of the interest intended to be created by a trust depends on the law governing the trust.

(ii)     The governing law determines whether the intention is to give a beneficiary either an equitable proprietary interest in an asset held on trust, or a mere right against the trustee to perform whatever functions the trust imposes upon him with regard to the use and disposal of the foreign asset and income derived from it.

(iii)    Where the intention is to create an equitable proprietary interest, then the common law position is as stated in Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] AC 669, per Lord Browne-Wilkinson:

‘Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice.’

(iv)   The initial inquiry is whether an equity subsists, which it will prima facie do at common law, so long as the relevant property (original or substitute) does not pass into the hands of a transferee for value of the legal interest without notice of the equity.

(v)    In addition, where under the lex situs of the relevant trust property, the effect of a transfer of the property by the trustee to a third party, is to override any equitable interest which would otherwise subsist, that effect should be recognised as giving the transferee a defence to any claim by the beneficiary, whether proprietary or simply restitutionary.

(vi)   The English Courts have regularly stated their willingness to enforce in personam trusts in respect of property abroad. As the Earl of Selborne LC said in Ewing v. Orr Ewing [1883] LR 9 App Cas 34, ‘The Courts of Equity in England are, and have always been, Courts of conscience, operating in personam and not in rem; and in the exercise of this personal jurisdiction they have always been accustomed to compel the performance of contracts and trusts as to subjects which were not either locally or ratione domicilii within their jurisdiction.’

(vii)   The English Court has exercised such jurisdiction, applying the principles of English law to enforce trusts relating to foreign property, even though the lex situs did not recognise such principles.

(viii)  Peter Gibson LJ, giving the lead judgment, applied the Earl of Selborne’s words in Ewing and endorsed the statement by Parker J in Deschamps v. Miller [1908] 1 Ch 856, that the Court would act where there was ‘some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct which, in a view of a Court of Equity in this country, would be unconscionable’ and that whether it would do so did not depend ‘on the law of the locus of the immovable property’.

(ix)   Peter Gibson LJ also recognised that the lex situs can, under the principle recognised in Macmillan v. Bishopsgate, have a significance in the case of a third-party transfer. He said, at (p 38), that the English Court had

‘not unnaturally regarded English law as applicable to the relationship between the parties before it in the absence of any event governed by the lex situs destructive of the equitable interest being asserted.’

(x)    The English Court will accept jurisdiction and apply English law as the applicable law, even though the suit relates to foreign land.

(xi)   However, if the equity which is asserted does not exist between the parties to the English litigation (e.g. where there has been a transfer of the property to a third party with notice of an equity but by the lex situs governing the transfer the transfer extinguished the plaintiff’s equity), the English Court cannot give relief against the third party even though he is within the jurisdiction.

(xii)   These authorities were recently and instructively examined by Roth J in Luxe Holding Ltd v. Midland Resources Holding Ltd[2010] EWHC 1908 (Ch) who engaged in the following analysis:

‘It is trite but nonetheless important to recall that equity acts in personam … Unless precluded by authority, it seems to me that as a matter of principle where the parties have expressly chosen English law and the exclusive jurisdiction of the English Court, they have voluntarily subjected themselves to the English system of remedies.’

(xiii)  After considering British South Africa Co v. De Beers Consolidated Mines Ltd and Lightning v. Lightning Electrical Contractors Ltd, Roth J continued:

‘I do not consider that the reasoning in Lightning is confined to the particular case of a resulting trust. On the contrary, it seems to me of general application.’

(xiv) Therefore, in the eyes of English law, a trust may be created, exist and be enforceable in respect of assets located in a jurisdiction, the law of which does not recognise trusts in any form.

(xv)  To regard a trust as falling outside the Convention under article 4, simply because its assets consist of assets in a jurisdiction which does not recognise a division between legal and equitable proprietary interests, is wrong.

(xvi) There is nothing in the Convention to suggest that it was intended to be inapplicable to a trust simply because the trust was in respect of assets in a jurisdiction which does not recognise some form of separation of legal and equitable interests. Rather, the contrary – since one object of the Convention was to provide for the recognition of trusts in jurisdictions which did not themselves know the institution.

In ‘The Hague Trusts Convention after Akers v. Samba’, Trusts & Trustees, Vol 24, No.4, May 2018, Professor Jonathan Harris QC, concluded that, ‘clarification as to the applicability and application of the Hague Trusts Convention at Supreme Court level will have to wait for another day. In the meantime, their Lordships obiter remarks on the scope and application of the Convention arguably raise as many questions as they answer. [In particular]:

(i)     The scope of Article 4 on preliminary matters excluded from the ambit of the Convention remains elusive.

(ii)     It remains unclear precisely what the role of the law of the situs is.

(iii)    It is clear from the judgements that article 15 is not the favoured route to determine the effects of the transfer of property held on trust to a third party. But the judgements otherwise provide little guidance as to the proper ambit of Article 15.

(iv)   Perhaps above all, the Supreme Court proceeded to determine the case entirely on the basis of English domestic law.’    

Transfer of trust assets

The choice of law issue as to whether a trustee has effective legal title to the assets to hold them for the beneficiaries will normally be governed by the general rules applicable to the transfer of property, e.g. the law of the situs in the case of tangible movables and immovables. (See Torremans, pp. 1267 to 1278).

Exclusive jurisdiction clauses

(i)     The effectiveness of an exclusive jurisdiction clause in a trust deed was decided in Crociani v. Crociani [2014] UKPC 40.

(ii)     Lord Neuberger stated at [33] to [37] that:

(a)    in the context of contractual exclusive jurisdiction clauses, the approach of the Court to a claim brought in another jurisdiction was authoritatively described by Lord Bingham of Cornhill in Donohue v. Armco Ltd [2001]

‘If contracting parties agree to give a particular Court exclusive jurisdiction to rule on claims between those parties, and a claim falling within the scope of the agreement is made in proceedings in a forum other than that which the parties have agreed, the English Court will ordinarily exercise its discretion … [But] where parties have bound themselves by an exclusive jurisdiction clause effect should ordinarily be given to that obligation in the absence of strong reasons for departing from it. Whether a party can show strong reasons, sufficient to displace the other party’s prima facie entitlement to enforce the contractual bargain, will depend on all the facts and circumstances of the particular case.’

(b)    The defendant to such a claim has a contractual right to have the contract enforced and his right specifically to enforce his contract can only be displaced by strong reasons being shown by the opposite party why an injunction should not be granted. Thus, where a claim has been brought in a Court in breach of a contractual exclusive jurisdiction clause, the onus is on the claimant to justify that claim continuing, and to discharge the onus, the claimant must normally establish strong reasons for doing so.

(c)    In the case of a clause in a trust, the Court is not faced with the argument that it should hold a contracting party to her contractual bargain … The Court [has] a power to supervise the administration of trusts, primarily to protect the interests of beneficiaries, which represents a clear and … significant distinction between trusts and contracts.

(d)    Accordingly, the Board considers that, while it is right to confirm that a trustee is prima facie entitled to insist on and enforce an exclusive jurisdiction clause in a trust deed, the weight to be given to the existence of the clause is less (or the strength of the arguments needed to outweigh the effect of the clause is less) than where one contracting party is seeking to enforce a contractual exclusive jurisdiction clause against another contracting party.

Jurisdiction and the enforcement of foreign judgments in transnational trust litigation

Prior to BREXIT (i.e. midnight 31.12.2020) two principal sets of jurisdictional rules existed:

(i)     the harmonised rules contained in the relevant European regulation (and Conventions); and

(ii)     the common law rules.

The European harmonised rules were the first point of reference.

(i)     The application of the common law rules was residual.

(ii)     The European harmonised rules apply:

(a)    to disputes between domiciliaries of member states; and

(b)    in civil and commercial matters, if the defendant is domiciled in a member state, and in some cases, irrespective of where the parties are domiciled.

The recast regulation on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (the ‘Regulation’) provides a set of uniform jurisdictional rules for European member states.

The Regulation does not apply to:

(i)     capacity;

(ii)     natural persons;

(iii)    matrimonial property rights;

(iv)   wills and succession;

(v)    bankruptcy and insolvency; and

(vi)   arbitration.

A settlor, trustee or beneficiary of a trust created:

(i)     by the operation of a statute;

(ii)     by a written instrument; or

(iii)    orally, and evidenced in writing,

may be joined as a party to proceedings brought in the Courts of the country where the trust is domiciled (Regulation, Article 7(6)). (See Blackstone’s Civil Practice paragraph 16.33).

From midnight on 31.12.2020, in England, the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 (the ‘CJJEUR’) will come into force in the event of ‘no-deal’.

This contains saving provisions, which means that English Courts will continue to apply the Regulation to:

(i)     judgments obtained from other EU Member States before the date of exit; and

(ii)    questions of jurisdiction where proceedings were commenced before that date.

However, it is not known whether or not that practice will be reciprocated across the EU.

Negotiating BREXIT through a ‘fiduciary’​ prism

Over three years ago I wrote the following post – ‘What is the European Single Market?’ : What is the European Single Market? 

I concluded that the executive, or to use my term ‘fiduciary’ duty of the European Commission, which is collegiate, is market efficiency, which depends upon the integrity of the Union, and drew attention to the fact that,

‘EU legislation in its entirety amounts to some 13 per cent of our laws according to the House of Commons library, and single market rules are a proportion of that. Within even that smaller proportion, we would have little option but to keep most of it anyway.

First, some of it is where the EU has set standards that have since become world standards, as frequently happens. Second, sectors such as chemicals, aviation, pharmaceuticals and agriculture will still be dependent on EU rules that apply to their supply chains. Thirdly, some EU rules are the simple application in the single market of world level agreements in the WTO, UN agencies and so on. Fourthly, most rules are not controversial and there would be no particular gain from changing them. All in all, the extra “sovereignty” to do our own thing would, in practice, be limited, and not worth the economic damage of leaving the single market.’

So for Europe, the issue has never been, and is not Britain’s sovereignty, it is the existential issue of market efficiency, because efficiency depends upon integration, and integration determines economic power. In other words, the policy and behaviour of the EU is founded upon their rational economic self-interest as a trading block.

I am not sure that on this side of the Channel that has been, and is, understood by the public, and it may be too late to find a way of collaborating in our mutual ‘fiduciary’ interests.

It appears that the negotiations were never conducted through the prism or lens of a mutual ‘fiduciary’ economic relationship, i.e. they were positional and confrontational.

A mutual fiduciary issue is Private International Law. If there is no deal the Brussels 1 Regulation will not apply from midnight on 31.12.2020, and no arrangement for another private international law convention to fill the vacuum will have been agreed. This will be discussed in my next blog.

For more blogs please google ‘Carl’s Wealth Planning Blog’: Toward a practical theory of fiduciary government | Carl’s Wealth Planning Blog

Toward a practical theory of fiduciary government

My next book is provisionally entitled,‘Fiduciary Duties, Art and Cultural Heritage’ which in my free time I have already started to research, and am planning to complete for publication in 2023.

A specific question I am addressing is whether, and to what extent there is a bridge between:

(i)     the existence of fiduciary duties in International Law; and

(ii)     the jurisdiction and powers of the English court to award equitable remedies for breach of fiduciary duty in relation to dealings with art and antiquities.

In other words, where there is a lacunae in international law, or a treaty is ineffective, can or does equity give ancillary teeth to international humanitarian law?

In ‘A Fiduciary Theory of Jus Cogens’ , The Yale Journal Of International. Law [Vol 34:331-386], Evan J Criddle and Evan-Fox Decent developed a fiduciary theory of jus cogens [i.e. norms that command peremptory authority, superceding conflicting treaties and customs in international law], arguing that, ‘States must honor peremptory norms as basic safeguards of dignity because they stand in a fiduciary relationship with all persons subject to their power and therefore bear specific duties to guarantee equal security under the rule of law … [and] that this fiduciary model of state sovereignty advances international human rights discourse beyond vague notions of “public policy”, “international consensus”, and “normative hierarchy” toward a more theoretically defensible and analytically determinate account of peremptory norms.’

This was the first step. Following in their footsteps I need to unpack the fiduciary model’s consequences for future litigation to enforce alleged jus cogens violations, including the following threshold concerns:

·       standing;

·       sovereign immunity;

·       causes of action available under English private law;

·       compulsory jurisdiction;

·       forums;

·       the availability of equitable remedies; and

·       recognition and enforcement of English court orders in trans-national litigation.

This rests upon the development of a practical theory of fiduciary government relevant to art, cultural heritage, and diplomacy, that has teeth. That has is roots (i.e. foundational principles) in classical jurisprudence and the development of the philosophy of equity – which is where I will begin my journey.

For more information please visit the ‘Art & Antiquities Disputes’ page at www.ihtbar.com or google ‘Art Dispute Barrister’ which appears on page 1 of Google worldwide (and today is at the top).

My book the Contentious Trusts Handbook 2020, 1st Edition which is available to view in the Library at Lincoln’s Inn also contains a practice note contributed by the distinguished Art Historian, Pandora Mather Lees (https://www.artonsuperyachts.com/), entitled, ‘Art & Heritage Assets – Duties of Trustees’.

For more information about the Library please visit: Library & Archives – Lincoln’s Inn

To purchase the book, which costs £100 and runs to 400 pages, please visit:

Wildy & Sons Ltd — The World’s Legal Bookshop : Islam, Carl

Contentious Trusts Handbook – Law Society Bookshop

My article ‘Judicial Early Evaluation – The new normal’ is scheduled for publication in the forthcoming issue 7 (2020) of Trusts & Trustees (Oxford University Press), which is distributed worldwide: https://academic.oup.com/tandt/

My next article, which I am planning to co-author with a leading trust law academic in 2021 is about ‘Trustees duties and powers in relation to property and investments – A restatement.’

Wishing all readers a joyous Christmastime and a Happy, Healthy, and Prosperous New Year.

Carl Islam

1 Essex Court, Middle Temple, London, www.ihtbar.com; www.1ec.co.uk;

carl@ihtbar.com

Contentious Trusts Handbook (2020) 1st Edition

The Contentious Trusts Handbook 2020, 1st Edition is available to view in the Library at Lincoln’s Inn.

For more information about the Library please visit: Library & Archives – Lincoln’s Inn

To purchase the book, which costs £100 and runs to 400 pages, please visit:

Wildy & Sons Ltd — The World’s Legal Bookshop : Islam, Carl

Contentious Trusts Handbook – Law Society Bookshop

For more information about the book please visit: www.ihtbar.com

My article ‘Judicial Early Evaluation – The new normal’ is scheduled for publication in the forthcoming issue 7 (2020) of Trusts & Trustees (Oxford University Press), which is distributed worldwide.

My next article, which I am planning to co-author with a leading trust law academic in 2021 is about ‘Trustees duties and powers in relation to property and investments – A restatement.’

My next book is provisionally entitled. ‘Fiduciary Duties, Art and Cultural Heritage’ which in my free time I have already started to research, and am planning to complete for publication in 2023.

Have you heard the news!

The word is (and I don’t know how it got around as Leicester is still effectively in Lockdown), that – Santa Claus is coming to town!!

so gather round!

The small print bit

As a lawyer I should point out that ‘He’s making a list

And checking it twice – Apparently he’s Gonna find out Who’s naughty and nice.

Now Christmas wouldn’t be Christmas without Michael Bublé, and by the time I have finished wrapping up presents today I think I will have earned the right to become a Canadian.

Wrapping Present I – To boldly go where Christmas wrappers have gone before

Background music

Michael Bublé ‘Christmas’ CD Track 1 – ‘It’s beginning to look a lot like Christmas’….

Well it is. Even my office yucca plant has an illuminated star this year.
That’s because everyone at 1 Essex Court is a star!

Wrapping paper is all around, and all I want for Christmas is someone who can find where the scotch tape starts.

How do they do cope up at the North Pole?

Do Santa’s helpers receive counselling from a psychotherapeutically trained elf after wrapping the third present?

Is ‘dreaming of a white Christmas’ a state of mind induced by hypnosis?

When I next watch ‘Santa Clause the Movie’ (starring the late and great Dudley Moore) I will sit on the edge of my seat, pen and paper in hand, and jot down the name of the first elf who so much as gets out a pocket watch dangling from a chain, and starts to sway it from side to side.

Time to confront my fears and wrap – and at this point Bublé is absolutely on the money –‘I don’t care about those presents underneath the Christmas Tree’. Well not all of them of course! [we are now on Track 5 – ‘All I want for Christmas’], and I beg to differ Michael when you sing ‘I don’t want a lot for Christmas’ – get real.

As I lovingly wrap my first Christmas gift – a signed copy of the first edition of the ‘Contentious Trusts Handbook’ (which is very reasonably priced at £100.00), forcing back a tear as I imagine the joy when the present is unwrapped on Christmas day, I have a ‘jingle bells’ moment.

What if my readers could go,

Dashing through the snow

In a one-horse open sleigh

O’er the fields,

reading about trust litigation‘all the way’?

See: Recent-Acquisitions-December-2020.pdf (lincolnsinn.org.uk)

Wrapping Present II – The search for the scotch…

Background music

Michael Bublé ‘Christmas’ CD Track 8 – ‘Have yourself a merry little Christmas’….

I’ve lost the scotch tape! – not kidding.

5 minutes later…how do I get this ‘20% off’ sticker off the gift box without leaving the slightest trace of a mark?

If I see any more wrapping paper I really am going to believe that reindeer know how to fly. And what do you do with the left-over wrapping strips? The bin (for collecting paper to be re-cycled) is starting to glitter… At this rate I’ll be able to see it in the dark.

According to MB – ‘all is calm and all is bright’.

Wrapping Present III – The final frontier:  ‘WARP PHASERS fire everything we’ve got!’ – sorry just had a Star Trek moment

Background music

Michael Bublé ‘Christmas’ CD Track 15 – ‘Feliz Navidad Prospero Ano y Felicidad’  …

All done for another year,

… and my gift to you this Christmas?

This post, which really was written whilst wrapping up Christmas presents. Now that’s what I call writing. If only the public knew how we authors have to suffer for our art.

For editorial reasons only 3 presents of varying shapes and sizes are referred to in this blog, and please note that for ‘elf’ and safety reasons, no elves were harmed during the wrapping of these presents. Although I’m not sure if I’ll ever play the violin again. Still its Christmas, so remember to…

‘Have yourself a merry little Christmas

Let your heart be light

From now on

our troubles will be out of sight ’

‘Here were are as in olden days

happy golden days of yore

Faithful friends who are dear to us

gather near to us once more

Through the years we all will be together

If the Fates allow

Hang a shining star upon the highest bough

And have yourself a merry little Christmas now.’

Wishing all readers of my posts this year a very Merry Christmas and a Happy and Prosperous New Year,

Joyeux Noël et bonne année,

Frohe Weihnachten und glückliches neues Jahr,

Buon Natale e felice anno nuovo,

Feliz Navidad, próspero año y Felicidad.

Carl

Legal disclaimer

Whilst the author of this blog does believe in Santa Clause he entirely reserves the right to put any presents on e-bay, and please do not send him any more mince pies!

Happy Holidays and Merry Christmas one and all wherever you are.