ADO Den Haag v United Vansen: Absence of an express choice of law under Article 4 Rome I Regulation

This post was contributed by Dr Emmanuel Maganaris, Module Convenor for Conflict of laws.

gavel-books-240The case of ADO Den Haag v United Vansen (PRC) is a good example of the application of Article 4(1) of the Rome I Regulation. ADO Den Haag NV (domiciled at The Hague, Netherlands) are the corporate vehicle of a Dutch Premier League club. They have sued United Vansen International Sports Co. Ltd (domiciled at Beijing, China) as the latter had not paid a deposit on the premium due for the shares it acquired in the club.

The main issue was whether the Dutch courts have jurisdiction on the issue. As the defendant was domiciled outside of the EU the Court applied Dutch residual rules of private international law. These grant it jurisdiction essentially in respect of urgent proceedings of attachment.

What is interesting is the consideration by the court of the applicable law with reference to Rome I. The share purchase agreement seemingly did not contain a choice of law, either implicit or explicit.  It is reminded that Rome I provides for specific rules to be used when the parties have not made an express choice (Article 4). In summary:

  • Eight rules deal with specific types of agreement. One example is that sale of goods is governed by the law of the country of the seller’s habitual residence. For companies, habitual residence is defined as the place of central administration. For a natural person acting in the course of business, it is their principal place of business.
  • In cases that are not covered by the eight rules, Rome I has the same rules as the Rome Convention: The agreement is governed by the law of the country of habitual residence of the party required to effect “characteristic performance” of the contract.
  • Notwithstanding the two points above, if it is clear from all the circumstances of the case that an agreement is manifestly more closely connected with the law of a different country, then the law of that country will be applied.

In the present case none of the standard contracts of Article 4(1) Rome I applies [there is some discussion in scholarship whether a contract for the sale of goods in relation to Article 4(1) a covers share purchases], which means that the ‘characteristic performance’ test of Article 4(2) becomes relevant. As such, the Court declared unequivocally that the characteristic performance was the transfer of the share premium. The relevant connecting factor of the party that was required to carry out that performance was habitual residence. As a consequence, in this instance, Chinese law appeared to be the applicable law.

Nevertheless the Dutch court has finally settled for Dutch law after all. It reached that conclusion by utilizing the escape clause of Article 4(3). It held that all the circumstances of the case indicated that Dutch law was more closely connected. That was because the agreement originated in The Netherlands, the performance, in the form of transfer of the sums into a Dutch bank account had to be carried out in The Netherlands, and the transfer of the premium would benefit a Dutch company. Although the judgment did not provide much detail on the contract, it would appear that in finally opting for Dutch law, the court did make proper application of the rather strict conditions of Article 4(3).

 

Relevant case law:  ADO Den Haag v United Vansen (PRC) (in Dutch) https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:N

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s