24 January 2006

Actio Negatoria, Coase (and Solomon) at the ECJ: Opinion in CEZ (C-343/04)

A reference by one of the courts most eager to refer under the Brussels-I Convention/Regulation (The Austrian Oberster Gerichtshof), has lead to a hugely interesting Opinion of Advocate General Poiares Maduro, that manages to combine insights from history of law, law and economics and the odd biblical reference. The case, Land Oberoestereich v. CEZ (C-343/04), shows once again that the academic debate on whether to develop a European civil code (and if so, how) would do well to take more notice of the fascinating and tangible work in delivering buildingblocks for a European private law, that is taking place in the perhaps less glamorous context of the civil procedure law of the Brussels Convention and Regulation.

The CEZ case concerns claims of alleged pollution by a Czech nuclear plant (CEZ), brought by an Austrian regional government in its capacity of landowner. This fact-pattern closely resembles the early Bier case (French mines / Dutch downstream agriculture), in which the Court of Justice had held that art. 5(3) of the Brussels Convention (jurisdiction in matters relating to a tort) gave jurisdiction both to the courts of the place where the tort occurred and of the place where the damage occurred. This course of action would, in fact, not have been open to the Austrian claimant as the defendant was not domiciled in a contracting state to the Convention; a requirement for the applicability of art. 5(3). The Austrian claimant, however, chose to argue for jurisdiction for the Austrian courts on the basis of art. 16(1) (a) of the Convention, which provides that the courts of the contracting state in which property is located have exclusive jurisdiction in proceedings which have as their object rights in rem in immovable property. This jurisdictional argument was based to a large extent on Austrian substantive law, which treated the complaint as an actio negatoria or 'Eigentumsfreiheitsklage'; an action "designed to ensure that immovable property is left free from interference". The claimant's argument that this action, seeking an injunction ordering CEZ to stop excessive pollution, should indeed be qualified as a claim which has as its object 'rights in rem in immovable property', forms the subject of the reference decision and the Advocate General's Opinion of 11 January 2006.

The Opinion begins by asking why the Convention grants courts of the location of property exclusive jurisdiction under art. 16. The answer, it is suggested, has to be found in traditional arguments of state sovereignty implicated in property law, as alternative arguments (basically proximity-based justifications) can serve only to indicate the suitability of this forum, but not the need for exclusivity.

Part II of the Opinion establishes a general distinction between actions in rem and actions in personam. It is important to note that legal concepts used in the Convention, such as 'contract', 'tort', but also 'actions in rem', have generally been held to have an autonomous meaning; that is, their content is not based on similar notions in national legal systems. Other cases have illustrated the difficulties inherent in constructing such concepts in a purely 'autonomous' way (see the line of cases on the concept of 'civil and commercial matters', from Eurocontrol (C-29/76) to Blijdenstein (C-433/01)), and this case is no exception. Interestingly, this part of the Opinion begins with an affirmation that "The autonomous notion of 'proceedings which have as their object rights in rem' was not created in a legal vacuum" (par. 44). This statement is a prelude to an extensive discussion of the distinction in the various national legal systems ("long-standing divergent legal traditions") and in legal theory.

The basic question from a substantive law point of view (and as applied to the CEZ case) is whether interferences with neighbouring property (nuisance) should be classified as part of the law of obligations or part of the law of property. The distinction between liability rules and property rules, as known in Law & Economics, is relevant here. Some legal systems focus on the conduct of the person responsible for the interference and classify the action as part of the law of obligations. The typical claim here (although there are exceptions) is for damages. Other systems, such as the Austrian, locate the action within the law of property, and do so through adoption of the classic Roman law actio negatoria. As Peter van Es explains in a recent PhD-thesis ('De Actio Negatoria', 2005 in dutch), what is alleged in such a claim is the fact that someone (the polluter in this case) does not have a right to undertake the harmful activities (hence the negation in the name), for example because he has never been granted this right by the owner of the damaged property. This action would, if succesful, typically lead an injunction to cease the damaging activities.

The Opinion admits that this latter approach may seem counterintiuitive to lawyers unfamiliar with property law in legal systems throughout Europe and suggests that this might be due to increasing aversion to an "outmoded" traditional conception of ownership as "the legal relationship of domination between a person and a thing", in favour of "more interpersonal legal concepts" (par. 55). It is then stated:

"The reality, however, is that such 'archaic' legal notions from the law of property and the actions arising thereunder to put an end to interference in immovable property that is not justified by any prior right over it exist and are very well established in legal systems throughout Europe. One cannot ignore this substantive legal reality. (...) The Convention, in light of its purpose of allocating jurisdiction, has to respect the institutional choices, even if imperfect, made by legal systems, at the domestic level, on how to regulate in substance the protection of immovable property. Bringing all remedies arising from property law and actions for damages under the umbrella of matters relating to tort under art. 5(3) of the Convention would constitute an interference with such choices. (...) I do not think that the Court ought to interfere in such a way with well-established legal traditions." (paras. 56, 58 and 59)

This is a far cry from a purely autonomous construction of Convention concepts. It is true that the Opinion asserts that classification under domestic law is strictly speaking "irrelevant", but it's call for "an objective consideration of the [subtantive law action] against the background of the legal system to which it belongs" cannot be read otherwise than as granting a large measure of influence to national law constructs. While the present formulation of the approach may not yet be ideal, experience in other areas of the Convention shows that this semi-autonomous interpretation may be the most suitable road to the further development of European jurisdiction law.

Moving to the concrete qualification of the claim at issue, the Opinion considers that the crucial question is whether the action "directly seeks to establish limits on ownership arising from relations between neighbouring estates". It would seem that this is the case with the actio negatoria under Austrian law. As van Es has also noted in his PhD, however (at par. 18.2.2), such an action as much leads to a limitation of the rights of the owner of the damaged property as it leads to an increase in the property rights of the interfering owner. "This brings us, therefore, into the domain of concurrent exlcusive jurisdictions", as the Opinion acknowledges (par. 76).

With concurrent exclusive jurisdiction therefore potentially being granted to courts in two countries, the Opinion notes that there is a risk of "cost externalisation from one State to another" (par. 92). This would occur when either court hearing the claim would not grant sufficient weight to the costs and benefits arising out of the interfering activity in the other state. The Opinion therefore calls for these courts to "pay special attention to the transnational character of the situation", with reference to "the spirit of coordination and cooperation which imbues the Convention" (par. 93). This is, with respect, quite a novel interpretation of the oft-cited principle of mutual trust, which the Court has held to lie at the basis of the Convention, which goes much further than the mere need to take into account foreign countries' notions of 'public policy'. This new, far more 'substantive' dimension to the principle has obvious normative appeal and mirrors suggestions in recent conflict of laws literature with respect to choice of law (see for example: Guzman, Choice of Law: New Foundations, Georgetown Law Journal 2002). If accepted by the ECJ, wider implications for various areas of transnational litigation within Europe cannot be excluded.

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