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The Conflict of Laws in New Zealand: News and Comment

The Law Commission’s Review of the Property (Relationships) Act 1976

By Maria Hook (University of Otago)

The Law Commission recently released its final Report on the review of the Property (Relationships) Act 1976 (Review of the Property (Relationships) Act 1976 – Te Arotake i te Property (Relationships) Act 1976). The Report proposes significant changes to New Zealand’s current conflict of laws rules relating to relationship property contained in ss 7 and 7A of the Act. In a nutshell, the Commission recommends that:

– the unilateral choice of law rule in s 7 be replaced with a multilateral choice of law rule that applies “the law of the country to which the relationship had its closest connection”;
– this multilateral choice of law rule be subject to any agreement by the parties to apply foreign law, which is defined to include implied choice of law agreements and even substantive agreements made in accordance with foreign law;
– where the Act applies pursuant to these rules, the court’s subject-matter jurisdiction extend to both movable and immovable property wherever located (and that this include the power to make in personam orders in relation to property situated outside New Zealand); and
– the Family Court have jurisdiction to determine claims governed by foreign law.

I do not wish to provide a summary of the Commission’s reasoning here, which is to the point and well worth a read (see Chapter 19). Rather, I would like to share some of my initial thoughts on the recommendations. The proposed approach is an improvement on ss 7 and 7A, which are fraught with problems, and the Commission is to be applauded for making considered use of this opportunity for reform. But in my view the Commission’s recommendations reflect some controversial policy decisions, which will benefit from further discussion.

This post aims to make a modest start on this discussion. Many of the thoughts here expressed are developed in greater depth in an article in the Journal of Private International law, to be published this month, which examines New Zealand’s approach to couples’ property as a matter of first principles (Maria Hook “A First Principles Approach to Couples’ Property in the Conflict of Laws” (2019) 15(2) Journal of Private International Law 1 (forthcoming)).

The values underpinning conflict of laws rules on couples’ property
The Report offers two principal rationales for the proposed approach: the importance of meeting the parties’ reasonable expectations (paras 19.15, 19.17, 19.31, 19.34, 19.55); and the inexpensive, speedy, simple and just resolution of disputes (paras 19.9, 19.38). These principles are worth unpacking further. For example, what does it mean to say that application of the law with the closest connection to the relationship meets the parties’ “reasonable expectations”? Is it that the law with the closest connection is the law that a reasonable person in the parties’ position would have assumed to be applicable? To what extent is this assumption shaped by the respective parties’ interests in having a particular law applied? What are those interests, and how do we reconcile them where they diverge? Are we concerned with parties’ personal feelings of connectedness to any given country, and/or the legal system with which the parties jointly identify? Do socio-political factors play a role as well, so that we recognise the relationship as a social construct? Should we give effect at all to the interests of the wider community within which the relationship is embedded (and hence move away from a strict focus on the parties’ expectations, recognising instead that the expectations must be “reasonable” or legitimate)?

The Commission has provided some clues on these questions. It recommends a presumption that the law with the closest connection be the law of the last place of shared residence, and then lists a number of factors that a court may take into account when determining whether the presumption is displaced. The proposed factors include, for example, “the social and personal connections the partners have with the proposed country”, and the place where any immovable property is located. But the Commission has provided little guidance on why these particular factors are relevant, or how they are to be weighed. In order to work out these questions, it is necessary to ask – as a matter of first principles – what a meaningful connection looks like in the context of these types of disputes. In my view, engaging with this question may well offer more predictability and certainty than a rebuttable presumption in the form proposed by the Law Commission.

The issues covered by the proposed conflict of laws rules
Asking this question also helps to define the appropriate scope of the proposed conflict of laws rules: what are the kinds of issues that the rules should apply to? I have two main concerns about the Commission’s proposal in this regard.

The first concern is that the scope of the proposed multilateral choice of law rule is unclear. The Commission has proposed that, in the absence of choice, the law to be applied “to property disputes between partners” be the law of the country to which “the relationship” had its closest connection. The Report clarifies that the focus is on the relationship as opposed to the individual parties (para 19.34). But this still leaves important questions unanswered. Does the rule apply only to claims that plead rights to relationship or matrimonial property, or does it also extend to, for example, common law and equitable claims between partners, or to claims relying on a court’s statutory discretion to redistribute property upon the dissolution of a relationship (see, eg, Matrimonial Causes Act 1973 (England and Wales))? What about claims that do not distinguish between relationship property and maintenance? Does the rule really only apply where there is a “dispute” between the partners?

These questions are difficult questions of characterisation. Courts routinely have to engage in characterisation when faced with conflict of laws problems, so perhaps it is appropriate that at least some of these questions be left to the courts to work out. However, characterisation necessarily requires an engagement with the values underpinning the rule – which brings me back to my comment in the previous section: that we need to ask as a matter of first principles what a meaningful connection looks like in the context of claims relating to couples’ property.

The second concern is with the remaining two conflict of laws rules proposed by the Commission, relating to subject-matter jurisdiction and party choice. The concern is that the scope of these rules is too narrow because, curiously, they are expressed to be unilateral in nature. Thus, the rule on subject-matter jurisdiction provides that the court’s jurisdiction extends to immovable and movable property wherever located, but it applies only once the court has determined that New Zealand is the governing law (see R132). So where the proposed multilateral choice of law rule points to foreign law being applicable, there is nothing in the proposed rules that says that the court has universal subject-matter jurisdiction. Conversely, party choice seems to be relevant only to the extent that the parties have agreed to select foreign law (R134). There is nothing in the proposed rules that says that the court should give effect to a choice of New Zealand law. In both cases the rules proceed from the assumption that New Zealand law (and, more specifically, the Act) has already been identified as being applicable. This is despite the Commission’s rejection of unilateralism more generally in the context of s 7.

The reasoning behind these limitations is not clear. Insofar as subject-matter jurisdiction over foreign property is concerned, there is no reason why a court should have lesser powers under foreign law than New Zealand law (ie the Act). Surely the scope of the court’s subject-matter jurisdiction should be the same, regardless of whether New Zealand law or foreign law is applicable. Indeed, the Commission notes that it sees the proposed inclusion of foreign immovables as consistent with the decision of British South Africa Co v Compania de Moçambique [1893] AC 602 (HL) (see fn 37). But given that there is conflicting authority on this point (Burt v Yiannakis [2015] NZHC 1174, [2015] NZFLR 739 (HC), [55]ff, [73], cf [46]-[47]; Schumacher v Summergrove Estates Ltd [2013] NZHC 1387, [17]), it would be dangerous to assume that a New Zealand court tasked with determining a claim pursuant to foreign law would decide that it has jurisdiction to take into account foreign immovables. In other words, this is a point that would very much benefit from legislative clarification, so its express exclusion from the proposal at least requires justification.

Insofar as the second unilateral “hangover” is concerned, the parties’ ability to select the applicable law, there is again no obvious benefit to restricting the scope of the rule to foreign law. On the contrary, there is every reason why parties should be able to select the law of New Zealand (and hence the new Act) as being applicable, and to subject this choice to the same requirements of formation and validity as choices of foreign law. In fact, parties are currently able to do so under s 7A(1).

The concept of “foreign law agreements”
The conflict of laws often recognises the parties’ ability to choose the law applicable to their relationship. This choice is made, and given effect, in the form of a “choice of law agreement”. If the choice is valid, the chosen law then applies to determine the parties’ substantive rights and obligations. The Commission’s proposal seems to recommend the introduction of a new type of choice of law agreement, a “foreign law agreement”, which is expressed to include substantive agreements made “in accordance with the law of another country with respect to the status, ownership and division of some or all of their property” (R135). This is in addition to express and implied choice of law agreements. All three types of agreement are subject to the same “procedural requirements” of validity, that is, they must be in writing, signed by both partners and meet the legal requirements of a valid agreement under either the putative law or the law of the country with which the relationship has its closest connection (R137).

In my view, there is no need for an express reference to substantive agreements made pursuant to foreign law, which risks conflating questions of choice of law and substantive law. The reference seems to have been prompted by a concern that the current rules are unclear whether a court can uphold a substantive agreement made pursuant to foreign law that fails to satisfy the contracting out provisions in Part 6 of the PRA (see para 19.48). A more appropriate solution to this concern would be to clarify the meaning and effect of implied choice of law agreements (or, indeed, of the proposed multilateral choice of law rule, to the extent that this rule may identify foreign law as being applicable to the partners’ relationship).

Thus, the rules could specify that entry into a substantive agreement in accordance with the law of a particular country is one of the circumstances in which parties are taken to have made an implied choice of law. The chosen law would then apply to determine the existence and validity of the substantive agreement, rather than the “procedural requirements” set out in R137. Hence, there would be no unnecessary conflation of choice of law and substantive law. If there is a concern that substantive agreements should not be enforced unless they fulfil certain minimum requirements (for example, a requirement that they are in writing), then the appropriate course of action would be to introduce overriding mandatory rules to that effect. Conversely, if there is a concern that courts might treat the new equivalent of Part 6 as having overriding mandatory force (see para 19.48), then Parliament could clarify that the new rules do not apply to substantive agreements governed by foreign law.

(Similar observations apply to the Commission’s treatment of implied choice of law agreements, which seems to apply the “procedural requirements” of validity outlined in R137 to the substantive agreement giving rise the implied choice: see M Hook The Choice of Law Contract (Hart, 2016) at 179 on the often tricky relationship between implied choice and rules of formality.)

Choice of law agreements – safeguards
The freedom to select the applicable law is a powerful principle that should be accompanied by effective safeguards to protect vulnerable parties and relevant public policy interests. One of the main reasons for reforming ss 7 and 7A, in my view, is that s 7A does not provide sufficient safeguards in this regard. Unfortunately, the Commission’s proposal offers no substantial improvement on the status quo.

First, the proposed rules recognise – or continue to recognise – the power to make an implied choice of law (cf para 19.47, where the Commission notes that s 7A does not currently recognise implicit choices of law; but see Bergner v Nelis HC Auckland CIV-2004-404-149, 19 December 2005 at [24]; The Choice of Law Contract at Ch 7 s V.B.2). This means a party may be treated as having entered into a choice of law agreement in circumstances where the party did not have an opportunity to make a deliberate or well-informed choice. Courts have traditionally taken a very generous approach to inferring choice of law agreements. I have argued elsewhere that that approach is misconceived as a matter of contract law (See The Choice of Law Contract at Ch 6), but there is nothing in R135 to suggest that courts ought to break with the traditional approach and exercise restraint in inferring choices of law.

The Commission’s preference for recognising implied choices of law seems to be motivated by a concern that substantive agreements that are made in accordance with a particular foreign law, but that do not contain an express choice of law clause, may turn out to be unenforceable under ordinary choice of law rules (see para 19.60). If it is indeed desirable that substantive agreements (cf “foreign law agreements”, R135c) should be upheld in accordance with the law by reference to which they were made, it is the objective choice of law rule – the rule identifying the law in the absence of choice – that can be used to achieve this result. In other words, the law by reference to which the agreement was made will be the applicable law by virtue of being the law of the country with the closest connection to the relationship.

Second, R135 recommends that the choice of law agreement be valid if it satisfies either the putative chosen law or the law of the country with which the relationship has its closest connection. This lex validitatis approach makes it more difficult for a party to argue that the choice of law agreement is invalid. The rule favours the validity of the agreement, because even if it is invalid under the putative chosen law, it may still be valid (and hence enforceable) under the law of the country with which the relationship has its closest connection, and vice versa. In essence the rule allows for “double dipping”.

Third, the only direct rules of validity prescribed in R137 are that the agreement be in writing and signed by both partners. These rules do not go far enough. That is because the substantive law applicable to the choice of law agreement (ie the putative chosen law or the law of the country with which the relationship has its closest connection) ordinarily provides only general rules of agreement. In particular, substantive law rules dealing specifically with substantive agreements relating to couples’ property (such as the rules in Part 6 of the Act) do not usually apply to choice of law agreements, because choice of law agreements are not substantive agreements (for example, a choice of law agreement is not an agreement “with respect to the status, ownership, and division” of property” within the meaning of s 21 – unless, of course, the agreement is a substantive “foreign law agreement” as envisioned in R135c). Therefore, questions that are specific to the choice of law agreement must be resolved directly by the New Zealand conflict of laws. For example, it is unlikely that the applicable law could be used to impose a requirement that the parties obtain independent legal advice as to the meaning and effect of the choice of law agreement (see The Choice of Law Contract at 113, Ch 7 s VIII.B). Similarly, the applicable law often provides no rules relating to the parties’ capacity to enter into a choice of law agreement (see The Choice of Law Contract at Ch 7 s VI).

In my view, these are important matters that the New Zealand conflict of laws should regulate. Given the potentially far-reaching implications of choice of law agreements, it is concerning the parties would be able to enter into such an agreement without having obtained any legal advice as to its meaning or effect, or without needing to satisfy any requirements of legal capacity. For example, a stay-at-home partner could be bound by a choice of foreign law that has the effect of keeping the partners’ property entirely separate, when under the law of the country most closely connected to the relationship the partners’ property would have been shared equally. Such a choice should only be available if the partners were aware that the choice of foreign law would affect their respective entitlements in this way.

(To be clear, my argument here is not that the New Zealand conflict of laws should prescribe rules of validity for substantive “foreign law agreements” (see above). So there is no concern in this context, as the Commission suggests, that such rules “would impose a significant burden on the partners” and “invalidate many agreements that had been made pursuant to the law of the nominated country, undermining the autonomy of partners who enter into an agreement in good faith” (para 19.60)).

Fourth, the proposed rules do not provide for a power to set aside the choice of law agreement on grounds of procedural or substantive unfairness. Rather, any injustice will have to be cured in accordance with the general public policy exception, which imposes a high threshold (R139). Whether such a power is desirable is a difficult question (see The Choice of Law Contract at Ch 8 s III). There would be a real concern, for example, that the rule would lead to time-consuming mini-trials on the validity of choice of law agreements. But it is an option that is at least worth discussing, and its absence underscores the overall laissez-faire approach of the proposed rules.

Choice of non-State Law in International Commercial Contracts: A New Zealand Perspective

By Jeanne-Marie Bonnet (LLB student at the University of Otago)

In early 2015, Members of the Hague Conference on Private International Law formally adopted their Principles on Choice of Law in International Commercial Contracts (the “Hague Principles”), a normative soft-law instrument designed to promote party autonomy in contracting relationships. As a normative instrument, the Hague Principles provide a blueprint approach to the proper law of contract through codifying general global practice and effectively equating arbitration and litigation proceedings. The Hague Principles propose pragmatic solutions to conflict of law issues through codifying international “best practice” for commercial contracts (see the foreword to the Hague Principles at 7).

Nevertheless, “best practice” may well be a judgment call with a distinctly European flavour (see Gilles Lhuilier “Les Principes sur le Choix de la Loi applicable aux Contrats Commerciaux Internationaux de la Conférence de La Haye: L’Emergence des ‘Best Practices‘” (2016) Int’l Bus. L.J. 103 at 103). The Hague Principles present an unprecedented approach to the selection of non-State law as the proper law in litigation. This approach has been heavily criticised for being uncertain, as well as creating potentially inconsistent outcomes when interacting with tacit choice of law and dépeçage (see Brooke Marshall “The Hague Choice of Law Principles, CISG, and PICC: A Hard Look at a Choice of Soft Law” (2018) 66 Am. J. Comp. L. 175 at 196-202). This post will focus generally on whether the possibility of selecting non-State law would be a worthwhile change to the New Zealand approach to the conflict of laws. It suggests that maintaining the status quo is likely the most desirable response in this case, given the novelty of the Hague Principles and the lack of precedent that exists regarding their interpretation and application.

1 Selection of non-State law
The New Zealand approach to proper law is summed up in Vita Foods Products Inc v Unus Shipping Co Ltd [1939] AC 277 (PC). Where party intention as to the proper law is bona fide and legal, and there are no public policy concerns as to the choice of law, the selected law shall govern the contract. Additionally, New Zealand has some overriding mandatory rules which curb party autonomy in choosing the proper law, such as s 137 of the Credit Contracts and Consumer Finance Act 2003.

Selection of non-State law as the proper law for litigation is globally unprecedented (see Marta Pertegás and Brooke Adele Marshall “Party Autonomy and its Limits: Convergence through the New Hague Principles on Choice of Law in International Commercial Contracts (2014) 39 Brook. J. Int’l L. 975 at 996). New Zealand recognises the ability of parties to select non-State law in cases of arbitration under the Arbitration Act, and also party ability to incorporate non-State rules into a bargain (see CMV Clarkson and Jonathan Hill The Conflict of Laws (4th ed, Oxford University Press, Oxford, 2006) at 209). Nevertheless, New Zealand shares in the global reluctance to recognise non-State rules as the proper law in litigation. This reluctance still exists, and is evident in the drafters of the Rome I Regulation rejecting non-State law as possible proper law to be selected by parties (compare Article 3 of the Rome I Proposal to Article 3 of the Regulation eventually adopted).

2 Article 3 of the Hague Principles
Article 3 proposes broader party autonomy in permitting the selection of non-State rules or principles as the proper law, effectively giving equal status to codified domestic law (“hard law”) and non-State law for the first time in cases of litigation

While there has been criticism that this broad drafting could lead to the selection of non-neutral laws such as sharia or halakha as the proper law, in my opinion this is unlikely given their continual rejection in current arbitration (see Michael Douglas and Nicholas Loadsman “The Impact of the Hague Principles on Choice of Law in International Commercial Contracts” (2017) 19(1) Melbourne Journal of International Law 1 at 9; Brooke Marshall “Reconsidering the Proper Law of the Contract” (2012) 13 Melbourne Journal of International Law 505 at 536; and Clarkson and Hill at 209). Furthermore, these laws may be too vague to fall within Article 3 requirements of being “generally accepted.”

Choice of codified soft law
The commentary to the Hague Principles gives examples of potential non-State law selections as including the United Nations Convention on Contracts for the International Sale of Goods (the CISG) and the UNIDROIT Principles of International Commercial Contracts (the UPICC). New Zealand, as a party to the Vienna Convention, adopted the CISG in 1995. Obligations under the Convention have already been domestically incorporated through schedule 4 of the Contract and Commercial Law Act (previously through the Sale of Goods (United Nations Convention) Act 1994), meaning that parties are already able to select the CISG as the proper law in commercial contracts. As such, this essay will focus on parties’ new options for selection of non-State law, in particular using the example of the UPICC. In my opinion, the main barrier to using instruments like the UPICC as the proper law is lack of precedent when interpreting and applying its principles.

The UPICC contain imprecise and abstract terms such as “reasonableness” and “good faith.” While not uncommon in contracts, there is no precedent as to how these terms (or any of the other rules contained in the UPICC) should be interpreted as the proper law in the context of litigated disputes. The uncertainty as to the meaning of these terms may well be part of the reason why the express example of allowing selection of the UPICC was rejected at the drafting stage of the Rome I Regulation, although it was left open for parties to incorporate some of these elements into their contracts (see Clarkson and Hill at 209).

A further issue with many of these terms is that they are previously unknown to, or not usually employed in, common law jurisdictions (or even non-French jurisdictions in general – see Michael Bonell “The Law Governing International Commercial Contracts and the Actual Role of the UNIDROIT Principles” (2018) 23(1) Uniform Law Review 15 at 22; and Ingeborg Schwenzer “Global Unification of Contract Law” (2016) 21 Rev. dr. unif. 60 at 67). In fact, the UPICC may not be a good fit with common law jurisprudence per se and have generally not been warmly accepted in the UK. For example, according to Hoffmann LJ in Chartbrook Limited v Persimmon Homes Limited [2009] UKHL 38 at [39], the UPICC rules are a reflection of the French philosophy of contract law rather than English (and therefore common law) values. Moreover, even the drafting style of the UPICC is a reflection of civil law rather than common law codes.

The use of UPICC as the proper law of a contract may therefore not align with the New Zealand common law context or ideals upheld in the domestic approach to the law of contract. The public policy exception will likely not be able to remedy unsatisfactory situations when New Zealand values are not given effect to in these cases, as the terms parties choose to govern themselves are unlikely to “shock the conscience” of a reasonable New Zealander (according to the test laid down in Reeves v OneWorld Challenge LLC [2006] 2 NZLR 184 at [67] and affirmed in New Zealand Basing Ltd v Brown [2017] NZLR 93 (CA) at [62]).

Furthermore, New Zealand courts would have limited access to precedent or interpretive resources since New Zealand is not a part of the UNIDROIT organisation and has not acceded to the UPICC. Even if New Zealand were a part of all the relevant organisations, if the UPICC were chosen as the proper law necessary precedent does not exist for New Zealand to look to in complex cases (see Geneviève Saumier “The Hague Principles and the Choice of Non-State Rules of Law to Govern an International Commercial Contract” 40 Brook. J. Int’l L. 1 at 26). Generally, the UPICC are used to orientate courts as to admissible practices in international commercial contracts. The New Zealand view on the UPICC is likely summed up in Hideo Yoshimoto v Canterbury Golf International Limited [2001] 1 NZLR 523 (CA), where they are viewed as simply a restatement of global practice and an interpretive tool for international commercial law instruments such as the CISG (see the comments of Thomas J at [89]). The UPICC were never intended to be anything more than a codification of the best approach to international contract law, and are therefore not equipped to act as the operative proper law. While a useful normative instrument (for example when reforming and drafting legislation) the UPICC are not suited to governing contracts.

Choice of non-codified soft law
The issues of precedent and interpretation are magnified in the context of non-codified non-State law. Despite the Hague Principles expressly giving examples of codified non-State law in the commentary to Article 3, the possibility remains for non-codified rules to be chosen by parties. Prima facie, a set of non-codified rules of law such as the lex mercatoria can meet the requirements of Article 3 through being a “neutral and balanced sets of rules” which are “generally recognised” in certain regions. However, in a New Zealand context this will likely be a step too far into legal uncertainty.

According to Roy Goode (in “Usage and its Reception in Transnational Commercial Law” (1997) 46 ICLQ 1 at 2), the lex mercatoria is “by nature uncodified, non-statutory and non-conventional.” Uncodified rules are necessarily less certain than codified non-State rules, since principles are difficult to clearly articulate and will likely vary in interpretation between jurisdictions. The difficulty with principles such as these is that they do not represent the commitment of institutions to promulgate specific, unambiguous and desirable behaviours or norms (Goode at 5). Codified rules find success through uniformity of approach. For example, the success of the CISG as a global instrument is largely due to global efforts and vigilance in maintaining uniformity of interpretation and application (see Larry DiMatteo “The Scholarly Response to the Harmonization of International Sales Law” (2012) 30 J.L & Com. 1 at 21). In contrast, non-codified soft law often develops spontaneously in an ad hoc manner. In my opinion, these characteristics make non-codified soft law too uncertain. They pose a great risk of producing inconsistent and unsatisfactory results. This risk is likely why even under the broad freedoms afforded by legislation such as the Rome I Regulation, parties are prohibited from selecting uncodified principles such as the lex mercatoria.

Saumier (at 28-29) argues that there is minimal risk in adopting this broader freedom for party autonomy, and that courts will be well-equipped to deal with this additional aspect in contracting disputes. This argument may well be stronger in a common law context, where courts frequently deal with uncodified principles of law. However, despite New Zealand courts often dealing with unwritten rules, in my opinion they are not well-placed to deal with principles such as the lex mercatoria. Principles such as the lex mercatoria develop less gradually or predictably than case law precedent, meaning that experience in interpreting an evolving common law is not directly applicable or helpful. Selection of non-codified non-State law would therefore be an added complication to the complexity of conflict of law disputes which New Zealand may not be well-suited to deal with.

3 General fit within New Zealand conflict of laws
In order for adoption of the Hague Principles to be worthwhile, the potential uncertainty that Article 3 would introduce into the legal system must be offset by advantages. Besides giving greater effect to party autonomy, in my opinion it is difficult to see any benefit this selection of proper law would bring to the New Zealand jurisdiction. New Zealand would likely only adopt the Hague Principles in order to bring the domestic approach to conflict of laws into alignment with that of other nations, and as such any inconsistencies with the selection of non-State law would be counter-balanced with benefits of a global harmonised approach to private international law.

However, in my opinion there is little reason to believe that this harmonisation would occur. In the short term, New Zealand’s law will only be analogous with that of Paraguay (Paraguay is the only country that has yet adopted the Hague Principles, using them largely unchanged as a basis for their new law on international contracts: see Ley No. 5393 sobre el derecho aplicable a los contratos internacionales, enero 20, 2015, GACETA OFICIAL DE LA REPUBLICA DEL PARAGUAY [G.O.] 13 (2015)).

In the longer term, even if the Hague Principles were to be widely adopted, in my opinion complete harmonisation is unlikely to occur. As already mentioned, part of the success of the CISG is that the Convention’s application and interpretation is vigilantly watched over by various bodies to maintain consistency and uniformity. This is only possible because of the CISG’s status as a convention (see Schwenzer at 74). The Hague Principles were never designed to have this status since their purpose is only to provide a blueprint of desirable commercial practice. Therefore, over time if States were to domestically adopt parts of the Hague Principles, this incorporation would only result in a harmonised approach across jurisdictions for a very brief and limited time. Eventually, divergence in interpretation and application would occur, since there is no mechanism for ensuring a consistent, rigid and unified approach to and application of the Hague Principles. The Hague Principles would be subtly changed by State courts through continual interpretation within existing jurisdictional and structural norms, leading to greater fragmentation of international contract law rather than harmonisation (see Schwenzer at 70-71).

Allowing selection of non-State law as the proper law would also mean that New Zealand must abandon well-established conflict of laws precedents in the area of contract law. New Zealand already derives much of its approach to issues of private international law from its common law neighbours. Given that New Zealand has never been a pioneer in this area, in my opinion adoption of the Hague Principles’ broad approach to party autonomy is likely a step too far into legal uncertainty.

4 Conclusion
Currently, selection of proper law in New Zealand must be legitimate, in good faith and legal. At first glance, the Hague Principles’ promulgation of the ability to select non-State law as the proper law does not undermine these principles. Non-State law can be all these things. However, the ability to select non-State law as the proper law introduces great uncertainty into the New Zealand conflict of laws setting.

The step towards allowing non-State law to govern litigated disputes will force New Zealand to develop precedent, given the absence of available interpretive resources and sources of authority to draw on. Moreover, given that New Zealand is not often a forerunner in the field of private international law, it may not be beneficial for New Zealand to adopt this approach and “fly blind” into the judicial future. In fact, in light of the judicial tendency noted by Petra Butler (in “CISG and International Arbitration – A Fruitful Marriage?” (2014) 17 Int’l Trade & Bus. L. Rev. 322 at 356) of courts to ignore the international element in uncertain or difficult cases and favour domestic law, blindly attempting to navigate the unchartered waters of the Hague Principles without precedential guide may lead to undesirable developments in the New Zealand conflict of laws context. This is a real risk given that the Hague Principles are so new and there is almost no precedent as to their use, scope and interpretation.

Given the increased internationalisation of global commerce, the goal of the Hague Principles in harmonising international commercial contracting is likely necessary and appropriate. However, for New Zealand, Article 3 presents a stark change to the proper law’s status quo. Moving forward, the most appropriate response is likely a cautious one. In my opinion, it would be best to observe the adoption of the Hague Principles in other common law jurisdictions before following suit.

Commerce Commission v Viagogo AG: without notice injunctions against foreign defendants

By Jack Wass, Stout Street Chambers

Introduction

The New Zealand courts have no inherent jurisdiction over foreign defendants; a plaintiff must first serve the proceedings on the defendant in accordance with the High Court Rules. But it may be difficult or impossible to serve the defendant, particularly where they are obstructive or hard to locate. If a plaintiff requires urgent intervention from the Court, to freeze assets or to prevent the defendant committing harmful conduct, the court has the power to make an order “without notice” – in other words, before the defendant is served.

How can these principles be reconciled where the plaintiff seeks urgent interim relief against a foreign defendant?

The Commerce Commission has received hundreds of complaints about the online ticket agency Viagogo. It brought proceedings alleging that Viagogo violates the Fair Trading Act 1986. Viagogo is a company incorporated in Switzerland, operating through a website in New Zealand but with no physical presence here. The Commerce Commission sought an interim injunction preventing Viagogo from making certain misleading representations while the substantive case proceeds.

Viagogo has not yet been served, and it will apparently take six months to serve it through consular channels in Switzerland. It is aware of the proceedings, however, and sent a lawyer to the hearing. The interim injunction hearing thus proceeded on a “Pickwick basis”, which means that the defendant is permitted to make submissions even though formally it has not been served.

In a judgment released on 18 February 2019 (Commerce Commission v Viagogo AG [2019] NZHC 187), Courtney J held that the High Court had no jurisdiction to make an interim injunction. Even if the Fair Trading Act 1986 applied to Viagogo, the Court’s jurisdiction over a foreign defendant depends on service. The Court could not make any orders against Viagogo until it had been formally served in Switzerland. If the circumstances were truly urgent, the plaintiff could request permission for “substituted service” through alternative means (which would often be email). Otherwise the Court had no jurisdiction.

The practical implications of this approach are obvious, and the case gives rise to a number of interesting questions:

(1) Why is the Commission required to serve the proceedings through consular channels in Switzerland?
(2) It is right that the Court cannot grant interim relief without notice against foreign defendants?
(3) Can this problem be avoided by ordering substituted service?

Service of proceedings in Switzerland

A layperson may find it incredible that it would take six months to serve documents on Viagogo. The reason is that service is a formal process – an exercise of sovereignty – that must be completed in compliance with the law of the place where the defendant is located.

Under the High Court Rules, proceedings are usually served by “personal service”, where the documents are physically handed to the defendant in the manner familiar from television shows. Where the defendant is a company, the plaintiff could ordinarily serve them by leaving the documents at their registered office or even a branch. However it is also possible to serve a foreign defendant through any method of service that is permitted by the law of the place of service, or through official channels.

Rule 6.32(4) makes it clear, however, that service will be invalid if it is “effected contrary to the law of the country where service is effected.” Unlike New Zealand, many European countries regard service as an official act that cannot be completed by private lawyers or process servers. Valid service can only be effected through certain official channels.

Switzerland is such a country. Where there is no international agreement in place (and in this case there is not, because New Zealand has not ratified the Hague Service Convention 1965), then a plaintiff can only serve proceedings through consular channels (see Federal Office of Justice International Judicial Assistance in Civil Matters, 11 (https://www.rhf.admin.ch/dam/data/rhf/zivilrecht/wegleitungen/wegleitung-zivilsachen-e.pdf)). It is illegal to serve documents within Switzerland by any other means, including by post, under Article 271 of the Swiss Criminal Code.

It is presumably for this reason that the Commission conceded that Viagogo could only be served through consular channels.

One alternative should be kept in mind. A plaintiff is not restricted to suing a multinational company at its place of incorporation, but may also serve the proceedings on a branch office in a third country. This is because a company is regarded as being “present” wherever it has a fixed place of business. Where the third country has less restrictive rules about service of process, it may be much easier to serve the defendant in this way.

Can the Court grant interim relief without notice against foreign defendants?

The question of whether the New Zealand courts have jurisdiction to grant interim injunctions against foreign defendants before service is vexed.

This issue arises most often in the context of freezing orders (formerly known as Mareva injunctions), where the plaintiff wishes to freeze assets to prevent them being dissipated before judgment. The New Zealand courts often grant freezing orders without notice against foreign defendants, as do the English courts, although according to the approach adopted in Viagogo they have no jurisdiction to do so.

I discussed this issue in a blog post published in September 2018 (https://blogs.otago.ac.nz/conflicts/2018/09/29/does-the-court-have-jurisdiction-to-grant-interim-relief-without-notice-against-foreign-defendants/). In Discovery Geo Corporation v STP Energy Pte Ltd [2013] 3 NZLR 122, Kós J doubted whether the Court had any jurisdiction to grant an interim injunction until the defendant had been served, and the position appears to be the same in Australia (ANZ Grindlays Bank plc v Fattah (1991) 4 WAR 296.

A different approach was taken by the High Court in Equipment Finance Ltd v C Keeton Ltd (1999) 13 PRNZ 319. The Court found that it was sufficient for the plaintiff to establish ‘interim jurisdiction’ against non-resident defendants that they could properly be named as parties to the substantive action and the applicant would have the right to serve them outside the jurisdiction in due course, and there is a good arguable case that New Zealand will be the appropriate forum. While the defendants retain the right to object to jurisdiction on the usual grounds, this does not deprive the court of the ability to grant interim relief in the meantime.

On these authorities there is a direct clash between pragmatism and principle. The service rules recognise that the New Zealand courts have no inherent jurisdiction to regulate the conduct of overseas defendants; to join a foreign defendant to proceedings is an extraterritorial exercise of sovereignty that should not be permitted without express statutory authority. On the other hand, the Equipment Finance approach recognises that it may not be possible to serve a foreign defendant in time, particularly where the circumstances are urgent, and protects the defendant’s position by requiring the plaintiff to demonstrate that it has a good arguable case that service out of the jurisdiction will be permitted in due course, and that New Zealand will be the appropriate forum (see for a useful discussion Tim Stephens and Sarah Armstrong Injunctions and Other Relief (NZLS Seminar, October/November 2018) at 50).

In the absence of legislative reform, this remains an issue that justifies the consideration of the Court of Appeal. At the moment the only judgment from that Court is Advanced Cardiovasvular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186, which involved a very different situation – an application for summary judgment, not an interim measure. The question must be analysed in the specific context of urgent interlocutory relief, particularly where prior notice to the defendant may compromise the effectiveness of the Court’s order.

Can the Court avoid this problem by ordering substituted service?

Rule 6.8 of the High Court Rules provides that if reasonable efforts have been made to serve a document by a method permitted under the Rules, the Court may direct that the document be brought to the attention of the defendant by other means, and be treated as being served. This mechanism is frequently used in the domestic context where the defendant is deliberately evading service; defendants will commonly be served by email or social networking site.

Substituted service will be no comfort to a plaintiff who wishes to obtain an order before the defendant is warned about the application, but could it be used in a case like Viagogo?

In Exportrade Corp v Irie Blue New Zealand Ltd (2013) 21 PRNZ 680, the Court of Appeal confirmed that substituted service was available on foreign defendants. The plaintiff would still need to show that the usual grounds for service were made out (either service without leave under Rule 6.27 or service with leave under Rule 6.28). It was not entirely clear from the Court’s judgment whether such service would be treated as service in New Zealand or outside New Zealand. This was clarified in 2017, when clause (2) was added to Rule 6.18:

(2) If a direction is given under subclause (1)(a) in respect of a document, the document must be treated as having been served at the place—
(a) at which the document is likely to have come to the attention of the person to be served; or
(b) where that person was or is likely to have been on the happening of the event or the expiry of the time specified under subclause (1)(a)(ii).

The Rules Committee explained that this amendment was not intended to affect the conditions for service out of the jurisdiction under Rules 6.27 and 6.28, but to clarify where the defendant is treated as having been served (Circular 105 of 2015). It means that a foreign company will almost always be treated as having been served in its place of incorporation or place of business.

English cases have suggested that substituted service may be used in the context of without notice applications. In Cecil v Bayat [2011] 1 WLR 3086 at [68] the Court of Appeal assumed that the courts had the power to grant an injunction without notice, and implied that substituted service may be appropriate to enable the injunction to be promptly served on the defendant (see also BVC v EWF [2018] EWHC 2674 (Admin) where substituted service was directed against a defendant in Switzerland).

It is doubtful whether substituted service should be used in this way as a matter of principle. The purpose of the rule is to enable the Court to deal with defendants who are evading service or cannot be located by any of the usual methods; it is not a means of avoiding jurisdictional rules. New Zealand law recognises that service should not be effected contrary to foreign law out of respect for the territorial sovereignty of the foreign state, and it is not appropriate to use substituted service to circumvent those rules. The UK Supreme Court has confirmed that substituted service cannot be ordered in a manner contrary to the law of the country where service will take place (Abela v Baadarani [2013] 1 WLR 2043).

The amendment to the High Court Rules makes this clear. Substituted service on a Swiss corporation who has no employees in New Zealand will be treated as having taken place in Switzerland. Since Swiss law prohibits service by any means other than consular channels, any form of substituted service would be invalid. It follows that substituted service is not an available solution to the problem created by Viagogo.

New Zealand Yearbook of International Law: Call for Papers

Posted on behalf of Jan Jakob Bornheim

The New Zealand Yearbook of International Law (Brill) is an annual, internationally refereed publication. The Editors call for both short notes and commentaries, and longer in-depth articles, for publication in Volume 16 of the Yearbook (2018), which will be published in 2019.

Notes and commentaries should be between 3,000 to 7,000 words. Articles may be from 8,000 to 15,000 words.

The Editors seek contributions on any current topic in public or private international law. The Editors particularly encourage submissions that are relevant to the Pacific, the Southern Ocean and Antarctica, and New Zealand.

Submissions will be considered on a rolling basis. However, the closing date for submissions for Volume 16 is 31 May 2019.

Contributions must be original unpublished works and submission of contributions will be held to imply this. Manuscripts must be word-processed and in compliance with fourth edition of the Australian Guide to Legal Citation. The Guide is available online at: http://law.unimelb.edu.au/mulr/aglc/about.

Submissions should be provided in English, using MS Word-compatible word processing software, and delivered by email to the General Editor at janjakob.bornheim@canterbury.ac.nz.

Jurisdiction over foreign land

By Jack Wass (Stout Street Chambers)

Immovable property, including land, gives rise to particular problems in the conflict of laws. Since the House of Lords’ judgment in British South Africa Co v Companhia de Moçambique [1893] AC 602 (HL), the English courts have disclaimed jurisdiction to determine title to or possession of foreign land, even where the defendant has been properly served. This rule is then subject to two ‘exceptions’: the court will act on the conscience of a defendant to enforce contractual or equitable obligations in personam relating to foreign land, and the court will retain jurisdiction where the question of title arises incidentally in the course of the administration of an estate.

New Zealand courts have assumed that the Moçambique rule forms part of our law. Despite what Lord Wilberforce described in 1978 as a ‘massive volume of academic hostility to the rule as illogical and productive of injustice’ (Hesperides Hotels Ltd v Muftizade [1979] AC 508 at 536), it survives in England in attenuated form. In Schumacher v Summergrove Estates Ltd [2014] 3 NZLR 599, the Court of Appeal was not required to determine whether it should be abolished in New Zealand – because the in personam exception applied – but noted academic criticism of the rule in terms suggesting that the Court might be sympathetic to its abolition.

The scope and continuing justification for the Moçambique rule came before the High Court in Foster v Christie [2018] NZHC 3103. The plaintiff and her mother had owned land in New Zealand as joint tenants. The mother severed the tenancy (replacing it with a tenancy in common), and then died in Ireland. The effect of severing the tenancy was to deprive the plaintiff of her mother’s share of the property, which would have otherwise passed to her by survivorship. She was also excluded from the will. The plaintiff alleged that her sister had procured her mother to sever the tenancy by undue influence. There were also separate causes of action relating to the mother’s capacity and funds in a New Zealand bank account.

Associate Judge Andrew found that the latter two causes of action were within the jurisdiction of the Irish courts, and that Ireland was the appropriate forum for their trial. The principal question was whether the Irish courts had jurisdiction over the claim relating to New Zealand land.

For this purpose, the court had to decide whether the claim came within the scope of the Moçambique rule: the New Zealand courts would not recognise a foreign court asserting jurisdiction over land in New Zealand, unless the in personam exception applied. In other words, if the claim was one that New Zealand law regarded as exclusively within the jurisdiction of the New Zealand courts, then it could not decline jurisdiction; if it was not caught by the Moçambique rule, then there was no objection to referring the matter to Ireland if that country was otherwise the appropriate forum.

The issue arose in a particularly acute fashion because the Judge found that Ireland was otherwise the appropriate forum for the undue influence claim to be litigated; if the Moçambique rule did not apply, then he would have exercised his jurisdiction to send the whole case to Ireland: [79]. On the facts, the Judge found that the Moçambique rule did apply. The real issue was whether the severance of the joint tenancies could be set aside, and that was claim in rem; the allegation of undue influence was just an element of that central issue: [55]. That was supported by the relief claimed: to set aside the severance, to restore the plaintiff’s position as legal and beneficial owner, and to have the District Land Registrar amend the title accordingly: [63].

Whatever the precise ambit of the Moçambique rule, the Judge’s conclusion is sound. This was not a case like Schumacher, where the plaintiff asserted an equitable interest in Irish land that would be vindicated by the declaration of a constructive trust. The plaintiff in this case sought to restore legal and beneficial title that would be good against the world.

Two particular justifications have been advanced for the Moçambique rule. One is based on the principle of comity, or the respect given under international law by each country’s courts for the legitimate domain of other countries’ legal systems. Since land is inherently local, the risks of conflict are obvious where courts of one country purport to determine – let alone transfer – legal title of foreign land. The second is the principle of effectiveness: the courts strive to avoid making orders that would be futile, and any order in relation to foreign land would require the recognition and implementation by foreign authorities.

Assessed by reference to those justifications, the Associate Judge’s conclusion is readily justifiable. It remains to be seen whether the Court of Appeal would be prepared to entertain the prospect of abolishing the Moçambique rule entirely, and leaving concerns about the assertion of jurisdiction over foreign land entirely to an enquiry into the appropriate forum. I will explore that issue in my next post.

Israeli judgment against New Zealand activists for Lorde’s “boycott” of Israel

Last year the New Zealand singer Lorde cancelled a concert in Tel Aviv following an open letter by two New Zealand-based activists urging her to take a stand on Israel’s illegal occupation of Palestine. A few weeks later, the two activists – Justine Sachs and Nadia Abu-Shanab – found themselves the subject of a civil claim brought in the Israeli court. The claim was brought by the Israeli law group Shurat HaDin, on behalf of three minors who had bought tickets to the concert, pursuant to Israel’s so-called Anti-Boycott Law (the Law for the Prevention of Damage to the State of Israel through Boycott). The Anti-Boycott Law provides that a person who makes a public call to boycott Israel commits a civil wrong and may be sued for damages (s 1). According to newspaper reports, Shurat HaDin claimed that the defendants’ call for boycott harmed the teenagers’ “artistic welfare”.

A few days ago, the Magistrates Court in Tel Aviv released a judgment upholding the claim and ordering the activists to pay NZ$18,000 in damages (plus costs). Counsel for Shurat HaDin has announced that they “will enforce this ruling in New Zealand, and go after [the defendants’] bank accounts until it has been fully realized”. The judgment has attracted world-wide attention. But the defendants, Sachs and Abu-Shanab, are adamant that they will not pay up, saying that “Israel has no right to police the political opinions of people across the world”, and that the claim “is a stunt of which the sole intention is to intimidate Israel’s critics”.

In this post, I want to offer some preliminary thoughts on the conflict of laws issues raised by the Israeli judgment. In particular, the post addresses – from a perspective of the New Zealand conflict of laws – the concern that the judgment represents some kind of jurisdictional overreach, before discussing the enforceability of the judgment in New Zealand or elsewhere.

Jurisdiction of the Israeli court to determine claim against New Zealand-based activists, in accordance with Israeli law

New Zealanders were quick to criticise the Israeli judgment as an illegitimate arrogation of power to police political opinions worldwide. Professor Gillespie from Waikato University, for example, described the judgment as “political theatre”, designed to cause fear that “if you’re critical of Israel, no matter where you are in the world, you could be sued”. The Free Speech Coalition tweeted that “[i]t is important that overseas threats of prosecution don’t lead to a chilling effect on speech within New Zealand” and that “the New Zealand campaigners should disregard this attempt at political censorship”. And Sam Bookman, in The Spinoff, wrote that it was “bizarre that two kiwis have become the first successful application of a law that was designed to silence critics and satisfy the needs of an increasingly authoritarian politician”. Even the Israel Institute of New Zealand spoke out against the judgment.

It should be noted that the claim in question was a civil claim brought by a private party seeking compensatory damages. It was not a criminal action brought by the Israeli government seeking to impose a fine or penalty, as suggested in some of the reporting on the matter. This point is worth emphasising because it means that, for the Israeli court, the question of whether or not it had jurisdiction to grant judgment against the New Zealand-based activists was a question of Israeli private international law. Notably, the Act is silent as to its cross-border scope (although the original draft Bill expressly contemplated its application to various groups of defendants, including foreign nationals). So the Israeli Parliament had left this question to the Israeli courts to resolve, in accordance with general rules and principles of Israeli private international law (see Arie Peled “The Israeli Anti-Boycott Law: Should Artists be Worried?” (2014) 32 Cardozo Arts & Entertainment Law Journal 751 at 769ff).

I am not an expert in Israeli private international law, and I do not have access to the decision, so I cannot comment on the validity of the Court’s decision as a matter of Israeli law (although I wonder whether the result would have been the same if the claim had been defended). What I wish to do instead, in light of the suggestions that the judgment amounts to a jurisdictional overreach, is to ask whether Israeli private international law here produced an outcome that infringed New Zealand notions of international comity or conflicts justice. In other words, is the judgment inconsistent with what New Zealand private international law would consider an appropriate or legitimate exercise of cross-border jurisdiction? In answering this question, it is helpful to distinguish between the court’s personal jurisdiction over the defendants, on the one hand, and its application of the Israeli Act to the defendants’ conduct, on the other.

Personal jurisdiction: First, the fact that the Israeli court exercised personal jurisdiction over the defendants is not in itself problematic. By comparison, New Zealand courts readily assume personal jurisdiction over foreign-based defendants, provided there is a sufficient connection of the claim to New Zealand (rr 6.27 and 6.28, High Court Rules). If the defendant is outside of New Zealand at the time of service of the claim, the court will exercise restraint in assuming jurisdiction over the defendant (Wing Hung Printing Co v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 (CA) at [27]-[30]), but the exercise of jurisdiction over foreign defendants is no longer considered exorbitant as a matter of principle. The greater the connection of the action to New Zealand, the more appropriate it is for the court to assume jurisdiction. The claim in this case alleged harm to Israeli individuals, as a result of the defendants’ plea that Lorde cancel her concert in Israel. Hence, there was a meaningful link between the action and Israel; and so, from a New Zealand perspective, it would be difficult to characterise the extent of the Israeli’s exercise of personal jurisdiction as exorbitant.

Application of Israeli law: The second issue, however, is not as clear-cut. Did the application of the Israeli Act to the defendants’ conduct go against New Zealand notions of comity or conflicts justice? A good starting point for this inquiry may be to look to public international law, and to ask whether Israel exceeded its prescriptive jurisdiction in applying domestic law (ie the Act) to foreign facts (ie the conduct of the New Zealand-based activists). But public international law merely defines the very outer limits of Israel’s prescriptive jurisdiction. It is private international law that helps us determine the proper reach of domestic law, using principles of subject-matter jurisdiction and choice of law. Is it unusual then, by reference to such principles commonly applicable in New Zealand (and elsewhere), that Israeli private international law led to the Act being applicable in this case?

At first sight, the answer may appear to be ‘no’. According to Israeli substantive law, claims under the Act are treated as civil wrongs (ie torts). If the same characterisation was applied for the purposes of private international law, a court might simply apply ordinary choice of law rules governing torts (see Peled “The Israeli Anti-Boycott Law”). The content of these rules differs from country to country, although the most common connecting factors are the locus delicti and the locus damni. Based on such choice of law rules, it would not be far-fetched to argue that Israeli law was the law applicable to the alleged wrong, given that the relevant harm here occurred in Israel. Thus, if the matter was characterised as tortious, it is difficult to see how New Zealanders could feel put out by the Israeli court’s application of Israeli law to the activities of New Zealand-based defendants.

But it is doubtful that claims under the Act should be characterised as ordinary civil wrongs for the purposes of private international law. Common law principles of characterisation require the court to consider the function of the substantive law in question, and to look beyond domestic forms or categorisations (see L Collins (ed) Dicey, Morris and Collins on the Conflict of Laws (15th ed, Sweet & Maxwell, 2014) at para 2-039). The purpose of the process of characterisation is to identify the law that can most appropriately govern the issue, in light of the foreign connections of the claim (see Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at [36]).

The key function of the Israeli Act is to proscribe conduct calling for the boycott of Israel. Claims under the Act thus differ from ordinary civil wrongs, such as the general economic torts, in that they are intrinsically linked to Israel. They are concerned with economic, cultural and academic damage caused by a boycott of Israel, rather than the boycott of any country. Forum laws that are specifically dedicated to the protection of domestic interests are not ordinarily suited to multilateralism (ie the application of a multilateral choice of law rule such as the lex loci delicti rule). This means that their scope is determined unilaterally. In the eyes of New Zealand private international law, what would be an appropriate unilateral delimitation of a statute in the nature of the Israeli Act?

This is not an easy question (not least because it involves an unlikely hypothetical scenario of New Zealand facing calls for political boycott). What is clear is that countries ordinarily avoid giving universal effect to their domestic laws: domestic laws do not apply to the entire world. So it would be necessary to impose some limitations on the court’s subject-matter jurisdiction. That is because it would be contrary to the interests of foreign states and parties to apply domestic law to conduct that lacks sufficient connection to the forum, in order to uphold distinctly domestic policies. The more forum-centred the policy, and the greater the interference with the defendant’s freedoms, the closer should be the connection to the forum before its law can be applied. (Compare, for example, the critical response to the broad application of US competition law by US courts on the basis of the so-called “effects doctrine”)

In my view, from a perspective of the New Zealand conflict of laws, application of the Israeli Act to the New Zealand activists raises legitimate concerns. The defendants’ call for boycott appeared in The Spinoff, a New Zealand publication. It was targeted at Lorde, a New Zealand singer. The Act imposes liability for an expression of political opinion, amounting to a significant interference with the defendants’ basic freedoms. The interference goes beyond the kind of interference ordinarily associated with civil wrongs (compare, for example, the torts of defamation or inducing breach of contract). Presumably the justification for extending liability to the New Zealand activists was that the harm was suffered in Israel. But the actionable harm, too, appears to be of a highly political nature (the teenagers apparently claimed that they suffered “damage to their good name as Israelis and Jews”). In these circumstances, when measured against New Zealand principles of subject-matter jurisdiction, the fact that the harm was suffered in Israel should not be sufficient to justify the application of the Israeli Act to New Zealand-based defendants.

Enforceability of the Israeli judgment in New Zealand

Counsel for Shurat HaDin apparently intends to enforce the Israeli judgment in New Zealand, pointing to reciprocal arrangements between New Zealand and Israel for the enforcement of foreign judgments. To the best of my knowledge, there is no such arrangement in place between the two states, which means that Shurat HaDin will have to rely on New Zealand’s common law rules on the enforcement of foreign judgments. These rules require Shurat HaDin to bring separate proceedings against the activists in New Zealand seeking enforcement of the Israeli judgment. In other words, the Israeli judgment has no direct effect in New Zealand.

A claim for enforcement will only succeed if it satisfies New Zealand rules on the enforcement of foreign judgments. These rules require that the Israeli court must have had personal jurisdiction over the defendants. Crucially, whether or not the Israeli court had personal jurisdiction over the defendants must be determined in accordance with New Zealand – not Israeli – rules of jurisdiction (Von Wyl v Engeler [1998] 3 NZLR 416 (CA)). However, New Zealand rules of personal jurisdiction apply much stricter standards when determining the jurisdiction of foreign courts (as opposed to the jurisdiction of the New Zealand court). They require that the defendants were present in the foreign country (ie Israel) at the time of being served with the original (is Israeli) proceedings, or that they submitted to the foreign (ie Israeli) court’s jurisdiction by taking a step in the proceeding (Von Wyl). It is not sufficient, as it would have been for the purposes of a claim in the New Zealand court (see above), that the claim had a real and substantial connection with Israel.

I am not familiar with the background to the case, but it appears that neither of these requirements – presence or submission – is satisfied here. In short, based on New Zealand law, the Israeli court probably lacked personal jurisdiction over the defendants, with the result that the judgment will not be enforceable here.

Even if the Israeli court was found to have had personal jurisdiction over the defendants (for example, because the defendants somehow submitted to the Israeli court’s jurisdiction), there is a good argument that the defendants would have a defence to enforcement on the basis that the Israeli judgment is contrary to public policy.

It is true that the defence of public policy imposes a high threshold. According to the Court of Appeal, enforcement would have to “shock the conscience” of a reasonable New Zealander, or “be contrary to New Zealand’s view of basic morality or a violation of essential principles of justice or moral interests in New Zealand” (Reeves v One World Challenge [2006] 2 NZLR 184 (CA) at [67], [104]). In Basing v Brown [2016] NZCA 525, [2017] 2 NZLR 93, the Court of Appeal seemed to require a breach of an “absolute” value, holding that application of Hong Kong law to determine the enforceability of a mandatory retirement age was not contrary to public policy – even though, based on the Human Rights Act 1883 (NZ), forced retirement would have breached the plaintiffs’ right to be free from age discrimination. (The decision was overturned by the Supreme Court on different grounds)

But, as I have argued before, New Zealand courts should take account of relevant connections to New Zealand when determining whether the defence of public policy can be invoked (Maria Hook and Jack Wass “The Employment Relations Act and its effect on contracts governed by foreign law” [2017] New Zealand Law Journal 80). Here, the judgment implicated conduct by New Zealand-based activists that was closely connected to New Zealand, in the form of the publication of an open letter by The Spinoff. The target of the letter, too, was a New Zealander. Based on New Zealand standards, publication of the letter amounted to an exercise of the right to freedom of expression, and it may be doubted whether the damages imposed were truly “compensatory” in nature. In these circumstances, the defence of public policy should be available. In fact, it has been argued that enforcement of a foreign judgment in such a case could amount to an interference by the New Zealand courts with the defendants’ right to freedom of expression, engaging the New Zealand Bill of Rights Act (see William Young J in Reeves at [90]).

Enforceability of the Israeli judgment in countries other than New Zealand

If the judgment is not enforceable in New Zealand, it is likely that its practical implications for the defendants will be limited. Of course, if the defendants were to travel to Israel or acquire assets there, Shurat HaDin could take steps to enforce the judgment locally. Counsel for Shurat HaDin has also indicated that they may seek to enforce the judgment in a third country, like the United States.

It is possible that US rules for the enforcement of foreign judgments would be easier to satisfy than those of New Zealand. In particular, in order to determine whether the Israeli court had personal jurisdiction over the defendants, some US courts would ask whether the defendants had sufficient “minimum contacts” with Israel. This inquiry is focused on American requirements of due process and may prove to be a relatively flexible tool (thus, it may be sufficient that the defendants intended to harm the plaintiffs in the forum state: Calder v Jones 465 US 783 (1984)). A defence of public policy, too, may be more difficult to satisfy, given that US lawmakers are currently considering their own Israel Anti-Boycott legislation. But even so, if the defendants do not have assets in the United States, and if any travel to the country involves only a temporary stay, it would prove challenging for Shurat HaDin to take effective enforcement action against the defendants there.

Does the court have jurisdiction to grant interim relief without notice against foreign defendants?

By Jack Wass (Stout Street Chambers)

Principle and expediency sometimes collide in the conflict of laws. This note discusses one example: where the court is asked to grant interim relief – such as a freezing order – on a without notice basis against a foreign defendant.

It is a basic principle of New Zealand private international law that the court has no inherent jurisdiction over defendants who are beyond the territorial jurisdiction of the court. While the court has inherent jurisdiction to regulate the conduct of persons within the territory, personal jurisdiction over foreign defendants derives from service of originating process. Proceedings may only be served outside the jurisdiction with statutory authority. This authority is found in delegated form in rules 6.27 and 6.28 of the High Court Rules.

Since the 1970s, the English and New Zealand courts have recognised a power to grant freezing orders – a form of interim relief originally known as Mareva injunctions – where there is cause to suspect that a (prospective) judgment debtor may dissipate their assets, and thus frustrate the plaintiff’s ability to enforce their judgment. The freezing order is a personal remedy (in other words, it acts in personam and not in rem).

The earliest cases (Mareva Compania Naviera SA v International Bulk Carriers SA [1975] Lloyd’s Rep 509 (CA) and Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093 (CA) in England, and Hunt v BP Exploration Company (Libya) Ltd [1980] 1 NZLR 104 (HC) in New Zealand) involved assets in New Zealand and a defendant overseas. Applications for freezing orders are usually made on a without notice (or ex parte) basis – that is to say, the court is asked to make an order before the application is served on the defendant, so that the defendant is not given the opportunity to dispose of the assets in the meantime. The New Zealand courts routinely make freezing orders against foreign defendants on a without notice basis (for a recent example, see Kuyt v Kuyt [2018] NZHC 619).

On its face, this is difficult to reconcile. If the court has no inherent jurisdiction over foreign defendants, and its power to regulate their conduct depends on service in accordance with statutory authority, how does the court have jurisdiction to freeze a person’s assets before the proceedings have been served?

The position in Australia seems to be that the court has no power to grant a freezing order where the defendant to the substantive proceedings is outside the jurisdiction until they have been served with originating process, at least where the substantive proceedings will be heard in Australia (ANZ Grindlays Bank plc v Fattah (1991) 4 WAR 296). Kós observes that ‘it remains essential that the defendant is properly made a party to the proceedings’ (‘Freezing and seizing orders’ in Blanchard (ed) Civil Remedies in New Zealand (2 ed, Thomson Reuters, 2011) at 304). And in Discovery Geo Corporation v STP Energy Pte Ltd [2013] 2 NZLR 122, which involved an application for interim relief in support of an arbitration that would have operated in the same way as a freezing order, Kós J doubted whether the court would have jurisdiction until the applicant had been served, and any protest to jurisdiction determined.

This question as analysed in Equipment Finance Ltd v C Keeton Ltd (1999) 13 PRNZ 319 (HC). The court held that it would be sufficient to establish ‘interim jurisdiction’ against non-resident defendants that they could properly be named as parties to the substantive action and the applicant would have the right to serve them outside the jurisdiction in due course, and there is a good arguable case that New Zealand will be the appropriate forum. While the defendants retain the right to object to jurisdiction on the usual grounds, this does not deprive the court of the ability to grant interim relief in the meantime. This approach is implicitly endorsed by rules 32.2(1), which empowers the court to grant without notice freezing orders without distinguishing between resident and non-resident defendants. Indeed the ability to grant effective interim relief has become particularly important now that rule 32.5 expressly empowers the court to grant interim relief in support of foreign proceedings (where the New Zealand court will never assume jurisdiction over the substance of the dispute).

A separate question arises where the defendant has been served, but has filed a protest to jurisdiction. There is a line of New Zealand authority holding that the court has no jurisdiction to grant interim relief – of any kind – where a protest to jurisdiction is intimated or outstanding. The first case in this line concerned an application for summary judgment, where the substantive nature of the application necessarily assumes jurisdiction (Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA)). Nevertheless, the principle was expressed to apply to interlocutory applications generally and has been so applied by the High Court in subsequent cases (see eg Rimini Ltd v Manning Management and Marketing Ltd [2003] 3 NZLR 22 (HC)).

As Goddard & McLachlan have argued, this does not follow as a matter of principle, since interim relief does not necessarily presume jurisdiction over the substance, and it has the potential to seriously undermine the utility of freezing orders against foreign defendants (Goddard & McLachlan Private International Law: Litigating in the Trans-Tasman Context and Beyond (NZLS, 2012) at 95). It is open to the Court of Appeal to clarify the scope of the principle recognised in Advanced Cardiovascular, and to preserve the utility of without notice interim relief.

Where the parties have failed to plead foreign law, when can the court apply New Zealand law in default?

By Jack Wass (Stout Street Chambers)

This is the second of two posts about the pleading and proof of foreign law.

In general, parties can choose whether or not to plead foreign law; where it suits them to do so, they can choose not to plead foreign law and rely on New Zealand law in default. In my previous post, I explained that where the parties had chosen not to rely on foreign law, the court should not conduct its own enquiry into the content of that law; it must apply New Zealand law if it applies any law.

However, in recent years there has been a growing acceptance that there are circumstances in which the parties and the court cannot simply fall back on New Zealand law.

The cases fall into three categories:

(a) Where, on proper analysis, one party’s claim positively relies on the content of foreign law, and they have failed to prove it;

(b) Where the case so obviously raises a question of foreign law that it is necessary as a matter of case management that the parties plead to it; and

(c) Where New Zealand law is inherently local and it would be too strained or artificial to extend it to the foreign facts in issue.

The first category can be broken down further into three situations:

(a) Where the parties have proved the content of foreign law on some issues but not others, the courts can sometimes apply the law of the forum to ‘plug the gaps’. But in other cases the English courts have refused to do this, so that parties omit to plead the law applicable to all issues at their peril (Global Multimedia International Ltd v Ara Media Services [2006] EWHC 3107 (Ch); Tamil Nadu Electricity Board v St CMS Electricity Co Ltd [2008] 2 Lloyd’s Rep 484; cf Balmoral Group Ltd v Borealis UK Ltd [2006] 2 CLC 220 and Law Debenture Trust Corp plc v Elektrim SA [2009] EWHC 1801 (Ch)).

(b) In other cases, a party may have proved the primary rule (for example, by adducing a copy of the statute) but failed to prove the rules of interpretation necessary to resolve an ambiguity in its construction. Again, in some cases the courts will apply New Zealand rules of interpretation in default (Koops v Den Blanken (1999) 18 FRNZ 343 (CA)) but in other cases the court will be left in such uncertainty that further evidence is required (Cheon v Attorney-General HC Auckland CIV-2007-404-7669 at [49]).

(c) Third, the primary rules may empower the decision-maker to exercise a discretion. Where there is no evidence of the principles that would apply to the exercise of the discretion, the court is left in a difficult position. The notorious example is the High Court of Australia’s decision in Neilson v Overseas Projects Corp of Victoria Ltd (2005) 223 CLR 331, where the majority found that the statute had to be interpreted as if it were a domestic statute, while the dissenters found that the failure to prove the principles that would govern the exercise of the discretion meant that the primary rule could not be applied at all.

In the second category of case, the judge may decide that the case so clearly raises a question of foreign law that it would not be fair or consistent with the overriding principles of civil procedure to allow the parties to fall back on the law of the forum (Belhaj v Straw [2014] EWCA Civ 1394, [2015] 2 WLR 1105); this is an exception to the usual rule.

The third category is where the New Zealand law in question is inherently local or creates a special institution, so that it cannot be extended to the foreign facts. Where a general body of rules is concerned (such as tort, or contract, or restitution), it will usually be possible to treat the case as if it were a domestic case and apply New Zealand law accordingly. But where the law in question is purely local, that might not be appropriate. As the Federal Court of Canada put it, the cases demonstrate:

… reluctance of the judges to dispose of litigation involving foreign people and foreign law on the basis of provisions of our legislation peculiar to local situations or linked to local conditions or establishing regulatory requirements. Such reluctance recognizes a distinction between substantive provisions of a general character and others of a localized or regulatory character… (The Ship Mercury Bell v Amosin (1986) 27 DLR (4th) 641 (FCC)).

Particular problems arise with statutory regimes. In Shaker v Al-Bedrawi [2003] Ch 350 (EWCA), the plaintiff’s claim depended on the status of a distribution. That in turn depended on technical company rules about the maintenance of reserves and the extent to which distributions could be made out of profits. The English Companies Act could not be applied literally, since it only extended to English companies, and it was not possible to ‘adapt’ the law to apply in the circumstances. It followed that because the claimant had failed to prove the content of Pennsylvanian law, the English companies legislation could not apply (although English common law rules of company law could, to the extent that they had survived the passing of the Act).

To similar effect, in Damberg v Damberg (2001) 52 NSWLR 492 the New South Wales Court of Appeal refused to presume that German tax law was the same as Australian law, with the consequence that the claim simply failed.

The ambit of this limitation remains uncertain, and the criteria for assessing whether a particular rule is ‘inherently local’ or creates a ‘special institution’ are yet to be settled. In the meantime, the safest course is to ensure that all of the necessary rules are proved. If there is any doubt about what law will apply at trial, and evidence cannot be briefed to account for that contingency, then a preliminary determination on choice of law may be necessary.

Where the parties have failed to plead foreign law, can the Court determine foreign law for itself?

By Jack Wass (Stout Street Chambers)

A judge in domestic litigation is deemed to know New Zealand law. While judges will be guided by the submissions of counsel, they determine the content of New Zealand law for themselves. Foreign law is different: a New Zealand judge cannot be assumed to know anything about the content of foreign law, or even when it should displace the New Zealand rules that would otherwise be applied. It follows that foreign law must be pleaded and it must be proved. The deployment of foreign law is an intrinsically tactical and party-driven process characteristic of New Zealand’s adversarial civil procedure.

The approach of New Zealand private international law may be summarised in five propositions:

(a) Foreign law is a question of fact that must be established to the satisfaction of the judge; the court generally cannot take judicial notice of foreign law.

(b) The content of foreign law must be established by evidence. This may be the evidence of expert witnesses, or (where permitted by s 144 of the Evidence Act 2006) documentary evidence, or by a combination of them.

(c) The judge must assess and weigh those sources, including the underlying authorities on which the experts rely, the objective being to determine how the dispute would be decided if it were heard in the courts of that country.

(d) Ordinarily, the court will only consider foreign law where the parties have chosen to plead it and thus put it in issue; it follows that the party who seeks to rely on foreign law bears the burden of establishing it.

(e) Where the parties have chosen not to plead foreign law, or have failed to prove its content, then the court will ordinarily apply New Zealand law.

In these posts, I will highlight the difficult issues at the margins of the last two propositions. What are the limits of the “ordinary” rules?

The challenge that judges face where the parties have failed to plead or prove foreign law – proposition (d) – is illustrated by a pair of cases decided by Associate Judge Bell.

Air Tahiti Nui SAEML v Pounamu International Ltd [2001] NZCCLR 16 (HC) concerned a consultancy agreement governed by the law of French Polynesia. The Judge noted that because the parties had failed to plead or prove French Polynesian law, he was required to apply New Zealand law. Although this could create an injustice where the parties’ rights and obligations were different under French Polynesian law, this was the risk that the parties took.

The Judge had been faced with the same situation in Industrial Group Ltd v Bakker HC Auckland CIV-2009-404-6432, 12 April 2010, where the parties submitted copies of the South Australian legislation but nothing more. By contrast, the Judge found in that case that it would be ‘not be safe’ to apply New Zealand law in default, because of the risk of an injustice arising from differences with New Zealand law. Having apparently undertaken his own research into South Australian law, he concluded that under both laws there was an arguable dispute justifying the statutory demands being partially set aside. Although the judgment was set aside on other grounds, the Court of Appeal praised the Judge’s analysis of the (South Australian) legal issues: [2011] NZCA 142, (2011) 20 PRNZ 413 at [8].

What approach was correct?

In Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 NZLR 289 (PC), the Privy Council noted that ss 39 and 40 of the Evidence Act 1908 (replaced by s 144 of the Evidence Act 2006) allowed the court to assess the content of foreign law by referring to sources itself, without the benefit of expert evidence. Shortly after, the Court of Appeal held that a judge could inform him or herself from sources ‘whether they have been put before it by counsel or consulted by the members of the court on their own initiative and [in an appeal] whether or not the court below has had the opportunity of considering them’ (Skye Court Pty Ltd v Mason CA6/03, 18 June 2003 at [10]).

Whatever the position may have been under ss 39 and 40 (which were expressed in different terms), we doubt that the court’s powers now go that far. While s 144 dispenses with the need to prove foreign law through the medium of an expert, evidence of foreign law must still be produced by the parties. Section 144 empowers the parties to ‘offer’ certain material, and says nothing about the court’s power to research the law on its initiative. It is unlikely, therefore, that courts are permitted to decide a case on the basis of authorities identified in the course of their own research, not cited or relied upon by the parties. Quite apart from the formal position under s 144, that would give rise to natural justice considerations.

At the same time, the idea prevailing in England that a judge will be tainted by even contemplating sources outside the four corners of the expert’s brief is unrealistic, and where the judge considers that further sources may be available, he or she would be free to seek the parties’ submissions on them, who can thus put them in evidence. And where the parties have relied, for example, on a judgment or a textbook, the court is and must be free to conduct their own assessment of the evidence in context.

With sympathy for the position that judges are placed in when faced with a case that clearly raises issues of foreign law that have not been adequately pleaded or proved, the court cannot remedy that defect as they could with a question of New Zealand law. Notwithstanding the clear and accurate way that Associate Judge Bell appears to have analysed South Australian law, the conservative approach he adopted in Air Tahiti Nui was correct.

Upcoming events

Just a brief announcement about a couple of upcoming conflicts-related events:

On 13 February, Professor Jürgen Basedow (Max Planck Institute for Comparative and International Private Law, Hamburg) will give a public lecture at VUW Law School offering a European perspective on the legal challenges posed by Brexit. This will be followed by a response from a common law perspective, by Professor Mary Keyes (Griffith University, Queensland). See here for details.

On 15 February, the Supreme Court will hear argument in Eilenberg v Gutierrez SC 78/2017, concerning the court’s jurisdiction to enforce foreign maintenance judgments. The Court of Appeal ([2017] NZFLR 471, [2017] NZCA 270) found that pt 8 of the Family Proceedings Act 1980 does not exclude the Court’s inherent jurisdiction to enforce arrears owing under foreign maintenance judgments at common law: see Jack Wass [2017] NZLJ 410 for analysis of the Court of Appeal’s decision. On 26 September 2017, the Supreme Court gave leave to appeal on this question, and on the question of whether enforcement of the Mexican judgment would be contrary to public policy (which had not been considered by the Court of Appeal).