International Law Cases

Solution Case 1:

1. Jurisdiction

Question 1: Where can N sue G? Are Brazilian or German courts competent to decide the case? What happens if N brings the law suit in front of courts in Brazil or in Germany, respectively?

a. Germany If N brings the law suit in front of a court in Germany the German judge will look at the German International Procedural Law to determine whether German courts have jurisdiction over this case. The EU has unified this area with the Regulation (EC) 1215/2012, commonly referred to as the “Brussels Ia Regulation”. Pursuant to Art. 25 I of this Regulation, an agreement by the parties that a certain member state of the EU shall have jurisdiction over their contractual relationship is in principle recognised and valid. Besides, had the parties not agreed on the competent courts, the Brussels Ia Regulation would state that the courts at the statutory seat or central registration of the defendant (=G) are competent (Art. 4 I, 63 Brussels Ia Regulation). Therefore, German courts have jurisdiction. N can sue G in Germany.

b. Brazil If N brings the law suit in front of a court in Brazil the Brazilian judge will look at the Brazilian International Procedural Law to determine whether courts in Brazil have jurisdiction over this case. Of course, the Brazilian courts are not bound by European law. Pursuant to Art. 88 II of the Código Processo Civil (the Brazilian Civil Procedure Code), Brazilian courts have jurisdiction if the place of performance under the contract is in Brazil. N and G have agreed that the power plant shall be built in São Paulo. Therefore, the Brazilian courts are competent to decide this case. In principle, Art. 111 Brazilian Civil Procedure Code acknowledges an agreement by the parties on a foreign court. However, the prevailing view of Brazilian courts is that such a prorogation is not exclusive so that Brazilian courts are also competent to decide the case. As a result, N is able to file a law suit also in Brazil.

2. Applicable Law

Question 2: Which law applies to the contractual relationship between N and G? You will note that this a question to be strictly separated from question 1. German courts will not automatically apply the Bürgerliches Gesetzbuch, and the courts in Brazil will not automatically apply the Código Civil. Courts may also apply the law of another country.

a. Germany If N brings the law suit in front of a court in Germany, (unless there is a unified international law such as the CISG) the German judge will look at German Private International Law (=conflict of laws) to determine the law applicable to N’s and G’s contract. Again, the EU has unified Private International Law for certain contracts with the Regulation (EC) 493/2008, commonly referred to as the “Rome I Regulation”. Art. 3 I of this Regulation allows the parties in principle to freely choose the applicable law. Therefore, N’s and G’s agreement on German law is valid. Besides, had the parties not made a choice of law, Art. 4 I (b) of the Rome I Regulation would classify this as a service contract. Service contracts are governed by the laws of the country where the service provider has its statutory seat or principal place of business. In this case, this is G. G has his business in Germany. Therefore, German law applies to this case.

b. Brazil If N brings the law suit in front of a court in Brazil the Brazilian judge will look at the Brazilian International Private Law to determine the applicable law. Brazilian International Private Law is contained in the Brazilian Introductory Act to the Brazilian Civil Code. Art. 9 I of this Act states that an international contract shall be governed by the laws of the state where the contract was entered into. G and N signed their construction contract in São Paulo. Therefore, the contract is governed by Brazilian law. In contrast to the Rome I Regulation, Brazilian International Private Law does not acknowledge a choice of law. Despite the agreement by N and G on German law, Brazilian law governs the contract. This means that there is a defective choice of law because it is accepted by Germany but not by Brazil

3. Application of the law

Question 3: What does the applicable law (=substantive law) say? Once we have determined which law applies, e.g. German law, we have to apply it to the case, i.e. to determine whether N has a claim for default of € 1.5 million against N, e.g. pursuant to s. 280 of the German Civil Code.

4. Enforcement

Question 4: Assuming N has successfully sued G in front of a court in São Paulo and obtained a title (a judgment), how and where can this be enforced? Of course, a judgment by a Brazilian court can be enforced in Brazil using Brazilian authorities but this is only relevant for G if he has assets in Brazil which may be subject to enforcement. In Germany, a judgment by a non-EU-state may be enforced under the conditions of s. 723, 328 I of the German Civil Procedure Code (Zivilprozessordnung - ZPO). Since from a German perspective (“mirror principle”), the Brazilian courts did not have jurisdiction, the Brazilian judgment will most probably not be enforceable in Germany.

The Result:

G risks to be sued in Germany and in Brazil. Depending on certain facts, he even risks two law suits at the same time. In addition, since Brazil and Germany each apply their own International Private Law, they will come to contradicting decisions as to the applicable law. The applicable law (substantive law) itself might also differ. This is the result of internationally different rules on jurisdiction, conflict of laws and the substantive law itself.

Introduction Case:

The Brazilian energy supply company Neymar S.A. (N) mandates the German plant construction company Götze AG (G) to build a coal-fired power station in São Paulo, Brazil. The plant construction contract signed by both parties in São Paulo contains the following clause: “This contract shall be governed by German law. Exclusive place of jurisdiction shall be Munich, Germany.” Due to organisational problems in G’s organisation, the plant is only finished six months after the date agreed in the contract. Therefore, N threatens to sue G for damages for default (late performance) in the amount of € 1.5 million. You happen to be the one who had negotiated and finalised the contract. Your boss, the CEO of G, now approaches you for a first legal assessment.

Case 2: Shōchū (焼酎)

The Japanese Liquor Tax Law established a system of internal taxes applicable to all liquors at different tax rates depending on which category they fell within. The tax law at issue taxed shōchū at a lower rate than certain other products such as vodka, whisky, brandy, gin or rum. In 1994, the (then) European Communities considered this a violation of GATT rules and requested consultations with Japan under the GATT concerning these internal taxes which were later joined by the USA and Canada. When the parties weren‘t able to reach a mutually accepted solution, the European Communities, Canada and the USA requested the WTO‘s Dispute Settlement Body to establish a panel.

1. How do you think did the Dispute Settlement Panel (and subsequently the Appellate Body) decide?

2. The Swedish citizen Freja (F) who lives in Kyoto is very unhappy that she has to pay so much more for her favorite vodka as compared to shōchū. Can she take action against this?

National treatment, Art. III GATT:

„1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.

2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.” Interpretation Note to Art. III:2 GATT : „A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions of the second sentence only in cases where competition was involved between, on the one hand, the taxed product and, on the other hand, a directly competitive or substitutable product which was not similarly taxed.“

Case 3: Dassonville The Belgian citizen Gustave Dassonville (D) imports Scotch whisky via France. Belgian law requires that such Scotch whisky can only be sold in Belgium if accompanied by a certificate of origin. However, in France, it was impossible to obtain a certificate of origin because French law did not require such a certificate. D therefore imported the whisky from France without such certificate and was subsequently prosecuted. The Tribunal de Première Instance de Bruxelles referred the case to the European Court of Justice asking whether this is a restriction of free trade (now Art. 34 TFEU). The Procureur du Roi argued that the Belgian requirement for a certificate aims at the protection of consumers, not the restriction of trade

Case 4: Tünnes & Schäl & Umberto Tünnes (T) studies medieval literature in Cologne. To get a better feeling for Dante Alighieri’s Divina Commedia he would like to spend a semester in Florence, Italy. He soon finds a nice small apartment in the centre which the landlord, Umberto (U), is willing to rent out to him. Since U has some doubts whether T will be able to pay the monthly rent he asks for further security. T talks to his rich friend Schäl (S) with whom he shares a flat in the Belgian Quarter in Cologne. S agrees to guarantee towards U the fulfilment of all of T’s obligations under the tenancy contract (Mietvertrag) . Neither contract contains a choice of law. On the last day of his time in Florence, T throws a huge party in the course of which the flat is substantially damaged. T is horrified and leaves Italy early on the next morning.

1. U demands payment of the damages from T. Under which law?

Rome 1 Regulation

Rome 1 Articel 1.1 in civil and commercial matter (yes)

Rome 1 Articel 1.2 none of the following named than rome 1 applies

Rome 1 Article 3 have not choosen any law

Rome 1 Articel

Under German law

2. When U realises that T is not able to settle the bill he approaches S for payment. But again, under which law?

Under German Law

Case 5: The Château Brigitte (B) is a great connaisseuse of French wines. She is particularly fond of the 2005 Château Margaux Premier Grand Cru. After informing herself on Château Margaux’s (M) website (which is available in English) she travels from her home town Munich to France to make her dream come true. Following a lengthy and very informative discussion with the Château’s sales director she buys three bottles of the 2005 Premier Grand Cru for € 6,450 per bottle. Back at home she is very disappointed since in her view the wine shows hints of a rotten egg aroma. She calls M to return the two other bottles and get the purchase price back. M refuses. The Château’s website provides information on the wine, vintage, prices and directions for visitors from Spain, Italy, Switzerland, Germany and Belgium. It also offers the possibility to order wine online providing its IBAN/BIC.

Which law governs the purchase contract between B and M?

Case 6: Burn Baby Burn Audrey (A) is an It-Girl interested in arts, drinks and architecture. She shares a flat in Hamburg-Ottensen with her best friend Catherine (C). One Saturday, she takes a shower and dries her hair with her new hairdryer which she had just bought on a weekend trip with a few friends in Budapest. Actually, it was a Polish product, made by a company in Krakow. They had just brought it on the market but limited to Eastern Europe only. As she dries her hair, all of a sudden a flame comes out of the hairdryer and ignites the curtains of her bedroom. Alarmed by A’s intense screaming, C comes running to help her. She tries to extinguish the flames but unfortunately suffers severe burns. It later turns out that the flame was caused by a defective overheat control device. Knowing this, C would like to sue the Polish company for damages at the Landgericht Hamburg.

But under which law …?

The German company Barman GmbH (B) with its headquarters in Osnabrück produces convertible cars. For its new model “Giacinto” it requires electric motors for the soft tops. The Head of Procurement of B therefore approaches the Spanish company Stool SA (S) in Barcelona with whom B had no previous business connection. At the beginning of November, the Head of Procurement of B travels to Barcelona to talk about a possible deal. B and S orally agree on the conditions of a purchase contract for 10,000 motors. This includes an agreement on Osnabrück as the exclusive place of jurisdiction. To get started with the production, B and S also agree that on 15 November, B would collect a set of motors at its costs in Barcelona. The signing of a written purchase contract is scheduled for December. When the first motors are installed, it turns out that they have a construction defect which leads to a delay in production for several weeks. In the following, S and B get into a heavy dispute on the responsibility for the problems so a written contract is never signed. Finally, B sues S at the Landgericht Osnabrück for damages. S is not willing to travel to “such a boring petit-bourgeois village like Osnabrück” or to “squander any money on an incompetent German lawyer”. Is the Regional Court Osnabrück competent to decide the case?