#10023 - Seminar 10 - Conflict of Laws

SEMINAR 10: RULE AGAINST PENAL, REVENUE AND OTHER PUBLIC LAWS

NOTE

1. A rule of foreign law, picked out by our choice of law rules, may still be denied application on the ground that it is

1. foreign penal, revenue or public law OR

2. Contrary to our public policy

2. It can only ever be English public policy that overrides it, and it’s to be decided by an English judge

DICEY RULE 3

1. English courts have no jurisdiction to entertain an action for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State

2. EXPRESSLY SUPPORTED: Guinea v RBS (CA)

RECOGNITION v ENFORCEMENT

1. Enforcement can be direct or indirect.

2. Indirect enforcement = where the foreign state (or its nominee) seeks a remedy, not based on a foreign penal, revenue or other public law, but which in substance will enforce such a law (QRS v Frandsen was seen as an example of this)

3. Recognition is where a foreign law is relevant to a matter in issue, where giving effect to it would not lead to the enforcement of a foreign penal, revenue, or other public law (Iran v Barakat is an example of this). Thus the claim (which relies on considering the foreign law) will be enforced

NOT AFFECTED BY BRUSSELS 1

1. QRS v Frandsen – rule applies whether jurisdiction under CL or Brussels I BUT

2. Remember, a lot of the time if it’s revenue, public law or penal it’ll fall outside the scope of civil and commercial matters

WHY DON’T WE ENFORCE FOREIGN LAWS

1. Government of India v Taylor – Lord Keith: it’s an extension of the sovereignty of the foreign state

PENAL LAWS

1. Rule

• USA v Inkley - Judgment won’t be enforced if it enforces State A’s penal, public law, even if only directly

2. What is penal?

• One which imposes a fine etc on a lawbreaker that’s made payable to the State

• Huntington v Attrill – defined penal laws as being broader than crimes. It’s where there could be a pecuniary punishment at the behest of the State

3. General Test

• Huntington v Attrill

• This case says that English law decides if it’s penal:

1. money taken goes to sate = usually penal

2. money taken goes to individual = usually not penal

4. Punitive and Exemplary Damages

• SA Textiles v Sun – are enforceable - even though they are imposed by court to punish D, are in fact compensatory

REVENUE LAW

1. Won’t be enforced

• Government of India v Taylor – this applies to REVENUE as well

2. Test?

• basically if it’s a tax BUT

3. What’s a Tax

• Buchanan v McVey – where it includes a non-contractual payment of money or gratuity to a government body. It this case, that included a profits levy

4. Briggs’ Choice Argument

• Briggs proposes that you have to consider whether the person had any choice. If they did, it probably won’t be a tax, despite going to the State. It would be a contractual obligation

5. Rossano v Manufacturers

• Briggs this case support the view that if judgment in the action would increase the likelihood that a tax would be paid, the action is prohibited. Criticizes this view and says its motivated by a distaste for taxes

6. QRS v Fransden

• FACTS: A director stripped the assets of a company and was being pursued for this. The action was dismissed by the CA on the grounds that sums recovered would be used to discharge a corporation tax liability

• BRIGGS: says this basically licensed theft from a company. He said this is ‘the very antithesis of law’

7. A better approach

• Re Norway’s Application HL – this case shows a better approach, whereby, a foreign tax authority was allowed to obtain an order for the taking of evidence in England, even though the entire purpose of the application was to assist the foreign state in collecting taxes

• Briggs – shows that the House of Lords wasn’t horrified by the idea of a foreign state collecting taxes

8. Arguably Overturned?

• HMRC v Sunico – the decision in QRS v Fransden and Rossano could be viewed as being inconsistent with this case

• HMRC were allowed to bring proceedings for a civil wrong in Denmark, despite the fact it would lead to the payment of English VAT (ie. it wasn’t against Art 1) BUT

• Contrary view: this may not have been contrary to ordre public in Denmark. In any event, English courts would still not enforce a foreign revenue law just because of this judgment

9. Hypothetical Situations from Briggs

• person brings payment on an invoice that includes VAT should be allowed, person choose this

• employee brings action for unpaid wages (income tax still payable on)

10. So Better Test?

• was the right upon which the action brought a promise to pay money or a tax law

• if the action can be pleaded and sustained without mention of tax law, it cannot involve the enforcement of a revenue law

• ME: What about TV licence – how much scope is there for ‘choice’ here – surely there’s always a choice with taxation (ie. income tax = stay below the statutory minimum; council tax = don’t be a home-dweller)

• Briggs draws a link with Iran v Barakat here as how the law has disentangled what’s really being pursued in the action (in that case it was property rights, rather than enforcement)

11. Whether it’s brought by government or not

• Briggs - if a person is obliged to pay utility charges to a private individual, this is ‘quasi-revenue’, so it justifies and shows why the other public laws approach is good

PUBLIC LAW

1. Rule

- USA v Inkley - generally not enforceable

2. What is a Public Law?

• Government of India v Taylor – Lord Keith it’s an assertion of sovereign authority by one State over another

3. General Test

• if reparation goes to aggrieved private party = enforceable

• if it’s vindication of a government interest = unenforceable BUT

4. Therefore

• Even if money is formally payable to the State, judgment is enforceable if it is in substance a claim for damages on behalf of private party APPROVED:

• Robb Evans (Australian case) – followed in UK CASE:

• Manterfield

OTHER PUBLIC LAWS CONTINUED

1. Uncertainty

• Dicey, Morris and Collins- indicate uncertainty in this area in terms of disagreement amongst the UK judiciary FOR EXAMPLE:

2. AG of New Zealand v Ortiz

• Lord Denning recognised that some laws will not be either penal or revenue and will be ‘other public laws’ that should not be recognised BUT

• Staughton J, at first instance, was not sure that public laws wouldn’t be enforced

• Hence USA v Inkley followed by saying public laws not enforceable

3. AG v Heinemann

• Australian High Court refused to enforce British public laws (ie. restrain publication of Spycatcher – which contained information about British sercurity services)

• Mance CJ said this would require the enforcement of a ‘governmental interest’ and thus shouldn’t be enforced

4. Guinea v RBS

• Lord Hoffman said, referring to AG v Heinemann, that there had to be consideration of whether ‘the central interest’ of the state in bringing the action is governmental in nature

• This is a governmental interest view again

RECOGNITION OR ENFORCEMENT

1. Dicey Morris Collins

- suggest their rule only relates to enforcement, not recognition

2. AG of New Zealand v Ortiz

• Lord Denning MR said that if a foreign penal, revenue or other public law does not require enforcement and is relevant to an issue in question, it can be recognised

3. Iran v Barakat EWCA

• Iran could rely on the penal law rule against removing artifacts from Iran belonging to the State

• The Iranian law contained penalties for illegal export, but Iran was relying on provisions which vested title in the State, which were not penal

• So, the mere fact that a law contains criminal penalties does not render penal all the other provisions of the law

• EXPLANATION: it wasn’t government seizure of property. It wasn’t about enforcement. It was about the history of an accomplished fact, with the claim being based on a property right – so it was a patrimonial claim which a private individual could have brought. So, the State had ownership authority due to an obligation that could be assumed by or imposed on individuals generally, as opposed to a sovereign power afforded only to the state ALSO

• CA said obiter that had it been a public policy rule, they might have still enforced as this was a common public policy motivation amongst states ie. preventing wrongful dealing in property which was part of cultural heritage of states

4. Re Emery’s Investment Trusts

• Briggs – he says this case highlights how English private International Law only prevents enforcement of such laws, doesn’t deny them recognition

5. Where they won’t even be recognised?

• Briggs - where a foreign law is particularly offensive to English public policy it won’t be recognised (Kuwait Airways – based on Iraqi laws purporting to seize Kuwaiti assets in time of war in defiance of UN sanctions were denied recognition)

ROSSANO v MANUFACTURERS (McNair J QBD)

1. Unfair Judgment

• even where a claimant was able to get a judgment in his favour, wasn’t able to recover the money that was necessary to pay tax liabilities incurred

2. What can be said

- this is an example of indirect enforcement

3. Briggs

• example of the situation whereby a person won’t be able to recover money if it could increase the likelihood that a tax would be paid

4. Can separate

- Court was willing to separate the tax liability from the debt though

ACTA JURE IMPERII

1. This means acts done by virtue of sovereign authority. It’s a commonly used conflict of laws term.

2. This was the approach proposed for identifying other public laws by Lord Denning in Ag of New Zealand v Ortiz

WHERE DOES INDIRECT ENFORCEMENT APPLY?

1. Where a foreign state (or nominee) seeks a remedy, which in substance is designed to give a penal, revenue or other public law...