Dispute Resolution

The law of Europe regarding the subject of civil litigation is subdivided in this Chapter into three principal headings: (i) procedural rules in each European country which govern the manner in which such litigation is conducted in national courts; (ii) treaties which involve the cross-border service of process, collection of evidence and enforcement and recognition of civil judgements; and (iii) matters which come before the ECJ, the CFI or the ECHR. (This chapter deals only with civil litigation involving private litigants, not with situations where a government is a party and not with quasi-judicial proceedings, such as before administrative agencies, or situations involving special courts, such as constitutional courts, tax courts, labour courts, patent courts, admiralty courts and customs courts). For issues involving litigation and cross-border bankruptcy situations, please see Chapter on "Insolvency".

There are no EU Regulations, Directives or Decisions on the conduct of litigation as such but, since EU law is a fundamental and integral part of the substantive law of all EU member countries, EU law plays a significant role in much national litigation, whether or not referenced as EU Secondary Legislation or referenced by national versions of EU Secondary Legislation.

National Procedures. All European countries have national courts which exercise jurisdiction over civil disputes and do so on the basis that no disadvantage is imposed on any litigant merely because of being from outside the forum jurisdiction. Jurisdiction is variously based upon subject matter (the type of dispute), the location where a defendant is domiciled and/or the amount in controversy. For example, the particular French court with jurisdiction to decide civil disputes may be the "Tribunal d'Instance" (minor disputes), or the "Tribunal de Grande Instance" (larger disputes and those involving certain real estate companies) or the "Tribunal de Commerce" (most commercial disputes).

All European countries have written codes of procedure and evidence. When examined as a whole, or when examined with respect to each stage of a given litigation procedure (commencing the action, challenging a pleading, seeking an injunction, seeking to exclude evidence, obtaining determinations on the merits, etc.) the rules are remarkably similar.

Courts in European countries will usually uphold agreements between parties which specify that they will arbitrate their disputes rather than have them tried in court and will also usually uphold agreements to have a court in a particular jurisdiction be the exclusive forum for a dispute. However, when a consumer is a party to a contract, most countries require that the consumer have the right for the dispute to be resolved in their country of residence at the time the agreement is made (following Regulation 44/2001, Articles 15 and 16).

Statutory periods of limitations vary from country to country but fall well within a predictable range for most normal business situations, such as, for example, personal injury claims and most types of breach of contract claims.

Once an action has been timely commenced, the defendant must be given formal notice of the proceedings and an opportunity to appear and defend. In certain situations, notice is given through a court officer or agency, such as the "huissier de justice" in France, the "huissier de justice" or "gerechtsdeurwaarder" in Belgium, the "Gerichtsvollzieher" in Germany, the "stsvningsmand" in Denmark, the "ufficiale giudiziario" in Italy or the "dorucitel pfedvolanf in the Czech Republic.

Pre-judgement attachments are permitted in European countries. In the UK, for example, such a procedure is set out in Part 25 of the Court Rules ("freezing injunctions"). In Germany they are available pursuant to Article 845 of the Zivilprozessordnung (ZPO) (German Code of Civil Procedure). All European countries have some form of injunctive relief in connection with litigation, in order to retain the status quo pendente lite or otherwise to prevent irremediable harm. For example, in Italy, an injunction ("di fare o di non fare") may be imposed by a judge.

Pre-trial discovery in European civil litigation also called "disclosure"

is usually limited to documentary exchanges and written statements

(affidavits, sworn declarations). There is no oral disclosure by party or

non-party witnesses prior to the proceedings to determine the case on the

merits, except where a judge may permit live testimony in connection with

some specific pre-trial proceedings, such as deciding whether to grant or

deny an injunction.

Some countries have "blocking statutes", which limit discovery within those countries for use outside those countries. For example, French Law No. 80-538 of 16 July 1980 protects French defendants from being required to supply documents or to make oral statements in France ("US-style depositions") in connection with foreign litigation or administrative proceedings, except in accordance with the Hague Evidence Convention (discussed below).

Once the action has been properly commenced, there are small procedural differences from country to country in the way in which the case proceeds through the various stages of isolating the relevant facts and matching them up with the applicable legal theories and laws, for ultimate decision by the judge (or panel of judges). Lay juries are not much used in European countries, for instance in the UK only to decide factual matters involving libel and slander. Judges are the main triers of facts in all courts in Europe.

All European countries have rules designed to protect the probative integrity of evidence (rules of hearsay, rules of evidence, rules about cross-examination of live witnesses, rules about authentication of documents). All allow the entry of judgements by default when a party fails to appear or to defend properly and all have specific procedures for appeals from judgements, whether by default or on the merits.

In all European countries, the principal burden of preparing the case falls to the attorneys for the litigants. In France (as in other civil law countries), there is an important stage in the proceedings called the "expertise", in which the court appoints an independent expert to work with the attorneys in organising the relevant facts and applicable legal theories, before they are presented to the judge for final determination (French Code of Civil Procedure, "Nouveau Code de Procedure Civile" ("NCPC"), Articles 143-178, 232-284). While this can be an important feature of French civil litigation, in fundamental terms it is not much different than what happens in other systems, such as by referrals of matters to discovery masters or by the judge, in various case management hearings, requiring the litigants to pass through variously well designed procedural stages whereby the litigants themselves must focus their facts and their pleadings, so that cases may be expedited, decided consistently and with a minimum waste of judicial time. In any event, the French system of "expertise" accounts for less than 10% of the disposition of French civil litigation matters, in terms of numbers of cases. There is a similar mechanism in Germany under Articles 402 et seq. of the ZPO.

The Woolf Reforms in England and Wales are a representative example of a European trend towards transparency and economy in matters of civil litigation. For one thing, the Reforms (effective 26 April 1999) simplified the traditional procedures for pleading and removed much of the mystery, such as by replacing specialised terms like "Mareva Injunction" and "Anton Pillar Order" with functionally descriptive terms ("freezing injunction"; "search order"). The Reforms also simplified the rules for case management and were based upon certain guiding premises, including dealing with each case in ways which are proportionate to the amount of money involved, to the importance of the case, to the complexity of the issues and to the financial position of each party. Other European litigation systems work in much the same way.

No European country has courts which award punitive damages but all European countries have rules of litigation which impose most (or all) the costs of litigation upon the losing party. There are detailed rules for allocation of costs in the situation where each side both prevails and loses, as to various specific issues in the litigation. No European country has "class actions" in the American sense, but some allow "group actions" whereby similarly situated plaintiffs can pursue their claims in a common action, in one court. For example, in Germany certain actions may be brought outside of the ZPO by certain consumer and worker groups in a so-called "Verbandsklage" (group complaint), under Article 13 of the UWG/Unfair Competition Act and/or in cases of contract terms in breach of Article 305 of the German Civil Code (on standard contract terms). In Switzerland, such actions (regarding employment matters) are possible under Article 7(1) of the GIG/Gleichstellungsgesetz/LEg/Loi sur l'egalite entre hommes et femmes (equal status law) of 24 March 1995. Group actions in the UK are governed by Part 19 of the Civil Procedure Rules.

The following charts set forth in simplified format the basic structural organisation of the civil courts in Germany and in France (taking into account the changes to the NCPC in 1998). While ostensibly different, the two systems operate in a very similar fashion, although terminology and traditions in the two systems are quite different. The apparent differences in the flow charts come about partly because the German system is federal (whereas the French one is unitary) and partly because under the French system it has been decided to retain a variety of lower courts with special scopes of original jurisdictions, which have no exact counterpart in the German system, such as the French "conseil des prud'hommes" [French Labour Code Articles L. 511 -1, 512-1, 513-1J = "court of men of experience and integrity" (a special court dealing with labour disputes which actually is not much different than a German "Arbeitsgericht" = "labour court").

Bundesverfassungsgericht (Karlsruhe)

[Federal Constitutional Court, Karlsruhe] '

The Federal Constitutional Court may also be reached via a separate hierarchy of local constitutional courts ("Landesverfassungsgerichte") in some of the German states ("Lander").

In the case of tax and administrative jurisdiction, there is also a stage called "Widerspruchsverfahren" (proceedings to protest [administrative action]) which gives the private party affected by an act of administration the possibility to have the decision reviewed within the agency, prior to turning to the courts.

It is sometime asserted that civil law and common law jurisdictions operate very differently, such as regards litigation matters. Upon closer examination and comparison, this is not an accurate summary of the overall situation, even though there are differences as to the role of written versus oral evidence and case presentation and differences as to the manner in which the final decision in the case is reached. Both systems follow detailed written rules of procedure and follow detailed written rules of substantive law (apply codified law) and both systems allow judges various degrees of discretion to determine and apply the facts they deem relevant ("fact finding") and to fashion appropriate remedies, even in the absence of a specific code provision or disposition. For instance, in the Hypromat France v. Soginorpa case referred to in the Chapter on Franchising, the French Judge used ample discretion to decide that an award in a certain amount should be borne one-third by the franchisee and two-thirds by the franchisor. There is no French statute or code mandating that specific result.

In Germany, there is a long tradition of judges fashioning law to fit given factual situations, by interpreting with wide discretion certain general provisions of the German Civil Code (Biirgerliches Gezetzbuch = BGB), such as BGB 138 (transactions "offending good morals" are void), BGB 242 (obligations are to be performed "in good faith") and BGB 826 (reparation for conduct which "offends good morals" and injures another).

Treaties. All EU countries are signatories to the Hague Service Convention (1965) (on the international service of judicial and extra-judicial documents in civil and commercial matters) and the Hague Evidence Convention (1970) (on obtaining international judicial assistance in gathering evidence internationally in civil and commercial matters).

The Brussels and Lugano Conventions, respectively, provide for the mutual recognition and enforcement of final money judgements between member countries of the EU and of the European Free Trade Association (EFTA) (signatories including for example Norway, Switzerland and, since 1 February 2000, Poland). The Brussels Convention on jurisdiction and the enforcement of judgements in civil and commercial matters was signed on 27 September 1968. The rules of the Convention were extended to the EFTA countries by the Lugano Convention, signed on 16 September 1988. Regulation 44/2001 follows the terms of these conventions and, in effect, substantially replaces them for EU member countries. (The relations

between Denmark and the other EU member countries bound by the Regulation remain governed by the 1968 Brussels Convention and its 1971 Protocol, rather than by the Regulation.)

The Regulation applies in many civil and commercial matters but does not apply to various revenue, customs or administrative matters or to arbitrations, bankruptcies and various matters affecting individuals (such as legal capacity, matrimonial status, wills and decedents estate, social security).

The general principle under the Regulation (and conventions) is that in personam jurisdiction is exercised by the country in which the defendant is domiciled, regardless of defendant's nationality. Domicile is determined in accordance with the domestic law of the country where the court has taken jurisdiction over the case, which also applies its own country's rules of private international law (conflict of laws rules). In the case of business entities, their domicile is determined by the law of the country where they have their statutory seat, central administration or principal place of business.

The general rule regarding recognition and enforcement of judgements is that there is to be automatic recognition throughout the EU of a final judgement rendered in any member country and EFTA country, although if a party against whom judgement has been given contests recognition provision is made for a special procedure to be followed in order to obtain a declaration of enforceability.

Some recent ECJ and other cases involving the Brussels or Lugano Conventions (and the issue and country to which they mainly related in the cases mentioned) indicate how this works in practice. Regina v. Unit-Centre (Case 2001/37 decided 15 December 1999) 2 All E. R. [2000] 667-678 (UK, patent infringement case, Brussels Convention); Fonderie Meccaniche v. Wagner (Case 2001/17, decided 9 June 2000) Giurisprudenza italiana (Recentissime) [2000] pages 181-182 (Italy, good faith during precontractual negotiations, Brussels Convention); Fischer v. Meier (Case 2001/19, decided 26 October 2000) Entscheidungen des schweizerischen Bundesgerichts [2000] volume 126 III, pages 540-543 (Switzerland, grounds for refusal of recognition and enforcement, Lugano Convention). See also, Regulation 1348/2000 (entered into force on 31 May 2001) regarding service in EU member countries of judicial and extrajudicial documents in civil and commercial matters.

Cases Before the ECJ, CFI and ECHR. The Court of First Instance (CFI) was established in 1989 with original jurisdiction in three areas, disputes between the EU and its staff, actions against the EC in connection with the European Coal & Steel Community and in certain cases involving the EU antitrust and competition rules.

The European Court of Human Rights (ECHR) was established in 1958 and, as its name implies, has jurisdiction over cases claimed to arise under the European Convention on Human Rights.

The European Court of Justice (ECJ) is by far the most important of the courts mentioned here and is also the oldest (established in 1952). Acting under Article 234 of the EU Treaty and its authority to render "preliminary opinions", it has fashioned a comprehensive body of pan-EU law on a broad array of legal issues. Examples of its rulings are mentioned in the relevant chapters of this book.

Avoidance of litigation as a dispute resolution mechanism is preferred in Europe and there are numerous alternative procedures, such as mediation, conciliation and arbitration, such as before the ICC ("International Chamber of Commerce", in Paris) and ICSID (please see definition in the Chapter on "European Legal Terms"). Certain types of disputes must be arbitrated before access to a court of law is permissible. Please see page 20 in the Chapter on "Employment Law".

Interesting Europe-facts: The four Inns of Court in London are not inns and are not courts but are buildings where British barristers have their offices ("chambers"). The four Inns are: Gray's Inn (named after the de Gray family which owned the land there in the Middle Ages); Inner Temple (the oldest of the Inns of Court); Lincoln's Inn (named after Henry de Lacy, third Earl of Lincoln in the 14th century); and Middle Temple (as in the case of Inner Temple, built on land owned by the Knights Templar in the 13th century).

I + Some special Luxembourg employment terms and abbreviations:

FEP-FITC: Federation of Private Sector Staffs/Independent Federation of Employees & Managers ("Federation des Employes Prives/Federation Independante des Travailleurs et des Cadres").

NGL: Neutral Union of Luxembourg Workers ("Neutral Gewerkschaft Letzebuerg").

OGB-L: Independent Trade Union Confederation of Luxembourg ("Onofhangege Gewerkschaftsbond Letzebuerg").

RMG: Guaranteed minimum income ("revenu minimum garanti")

superprivilege du salarie: gives employees an absolute priority against other preferential claims.

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