Commercial Law International

By: Rechtsanwalt (Attorney) Carsten Lexa, LL.M.

The Internet is an “essential” part of life, the Federal Court of Justice in Karlsruhe (Germany) ruled on Thursday, January 24^th 2013. As a result, people have the right to claim compensation from service providers if their Internet access is disrupted.

The case was brought to the court by a man who was unable to use his DSL connection, which also offered a telephone and fax line, for two months from late 2008 to early 2009.

The man had already received compensation for the cost of having to use a mobile phone. But he also wanted to be compensated for not being able to use the Internet. According to him, he suffered from the loss of something “essential”, and that “something essential” was the ability to use the internet as such. Under German law the loss of use of essential material items can be compensated.

“The Internet plays a very important role today and affects the private life of an individual in very decisive ways.” a court spokeswoman told Germany’s ARD television. According to the court, the loss of use of the Internet is comparable to the loss of use of a car.

But high sums cannot be expected as compensation based on this ruling. For example if a car is damaged und must be repaired in a garage, the car owner can demand from the liable party approximately 40% of the cost for a rental car for the time period of the downtime. According to the court, such percentage of the monthly cost for the Internet connection must be taken as a basis for compensation if the Internet access is disrupted.

For inquiries please contact the author: kontakt@kanzlei-lexa.de

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By: Carsten Lexa

The German Federal Constitutional Court in Karlsruhe dismissed motions on Wednesday that sought to block the Euro Zone’s permanent bailout fund, the European Stability Mechanism, or ESM.

The ESM is designed to handle bailouts and work in tandem with the European Central Bank to buy the bonds of countries, such as Italy and Spain, that are straining under high interest rates.

Nonetheless, the Court placed a €190 billion ($240 billion) cap on German liabilities, unless Parliament agrees to provide additional guarantees.

The court decision came against expectations that the Federal Constitutional Court would not allow a permanent bailout fund, because such a fund would help finance states, which is not acceptable under the European Treaty. However, the Federal Constitutional Court has a long history of not interfering with the political decisions regarding Europe, as long as these decisions are not completely “out of this world”, meaning as long as there is at least a minimum of sense behind the political decision.

The reactions on this court decision were mixed. Although the international markets were up because of the expectation of more liquidity that will be “pumped” into the markets and most of the politicians in Germany and other countries around the world showed strong signs of relief, a lot of economists are not satisfied with the ruling. The biggest fear is that of a “transfer union”, in which money is transferred from “strong” countries (strong in an economic sense) like Germany to “weak” countries like Greece or Spain. Such a transfer union will not eliminate the problems of the weaker countries, but might worsen the problems in countries that still have strong economies.

For inquiries please contact the author: kontakt@kanzlei-lexa.de

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By: Carsten Lexa, LL.M.

A group of German insurers will help shipowners in cases of war risks. For the first time, shipowners in Germany can get insurance against war risks. Shipowners will be able to insure their cargo ships against the consequences of martial conflict and pirate attacks.

Normally, German shipowners insure their cargo ships against these risks in London or Oslo. This is about to change. The consortium “German War Cover” will offer insurance policies based on German law in German language.

The consortium is let by the company “Lampe & Schwartze” in Bremen, in the northern part of Germany. For each ship the maximum coverage is 55 millions Euro. The consortium can also provide experts that are skilled in negotiating with pirates. The members of the consortium are not officially known. According to the Financial Times Deutschland involved might be Gothaer, R*V, Nünberger, Württembergische, Siat and Great Lakes.

Lampe & Schwartze does not act as an broker or an agent, but as a so called “Managing Agent”: Their experts assess the risks involved, determine prices, collect the premiums and and pay out in cases of losses. But they do not assume risks.

Regarding the question, which region in the world must be rated as a war zone, the consortium will stick to the decisions of the Joint War Comittees in the London insurance market Lloyd´s.

For inquiries please contact the author: kontakt@kanzlei-lexa.de

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By: Carsten Lexa, LL.M.

The Incoterms (“International Commercial Terms”)  are a series of international sales terms, published by the International Chamber of Commerce (ICC) and widely used in international commercial transactions.  These sales terms that govern delivery duties, transportation duties, duties regarding customs clearance and regarding transfer of risk have been revised. They will be published officially at the end of September 2010 and will become valid on January 1st, 2011. Here is what is new:

1. Four sales terms have been removed – DAF (“delivered at frontier”), DES (“delivered ex ship”), DEQ (“delivered ex quay”)  and DDU (“delivered duty unpaid”) will be replaced by two new terms, DAP (“delivered at place”) and DAT (“delivered at terminal”). Therefore, there will be eleven sales terms altogether, compared to thirteen sales terms with the Incoterms 2000.

2. There will be more clear distinctions between the so called “blue terms” for shipping by ship and the terms for multimodal shipping. The explanations for the sales terms will provide indications which sales terms to use for which mode of transportation (multimodal terms: EXW, FCA, CPT, CIP, DAP, DAT, DDP; blue terms: FAS, FOB, CFR, CIF).

3. The sales terms FOB, CFR and CIF have been adjusted or additional explanation have been provided. The point is for example that regarding FOB the transfer of risk has been happened formerly on if the goods had passed the vertical of the ship´s rail – it was similar with CFR and CIF. Now it is made clear that the transfer of risk does only happen if the goods have been set down on the ship. Another small part of the risk has been transfered to the supplier.

4. Additionally, the new sales terms now contain suggestions that in modern container traffic the sales terms CFR and CIF are barely helpful, because the circumstances in modern container ports no longer do justice for the determination of the transfer of risk by means of the loading of the ship (now: set down of the goods on the ship). It is recommended to use in container traffic the sales terms CPT or CIP (in these cases the transfer of risk happens in case of surrendering the goods to the carrier).

5. The new set of sales terms will also take  more strongly into account “supply chain security” and electronic documents.

For inquiries please contact the author: kontakt@kanzlei-lexa.de

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From us here at Commercial Law International: Have a Happy Earth Day.

Let’s all work together for a prosperous and sustainable future.

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By Charles Wanguhu

Well with Ash rising over European skies causing all kinds of travel chaos, it is quite suprising and hard to fathom the impact of one volcano is having on the continent of europe and over its neighbours.

At the Jomo Kenyatta International Airport in Nairobi a stink has engulfed the main cargo centre where once freshly cut flowers and vegetables are now rotting. As of sunday a $12 Million stockpile worth  of vegetables and roses had piled in cold rooms at the airport.

But more suprising is the impact its having on Naivasha a small lakeside town  is all the more uprising. The flower industry is the main employer in the town with an approximate 50,000 employees. With one flower farmer forced to throw 6.5 tonnes of roses into a compost pit and losses being compounded day by day, nerves are already setting in with fears of unemployment rising.

The only hope is that the European airspaces will clear by the peak period of Mothers day. We all are as citizens of the world  really  interconnected.

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By: Ainsley Brown

Four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek by all accounts gain compensation in South Africa.

A South African court has ruled recently that the farmers have the right to seek out and seize Zimbabwean government property in South Africa. The North Gauteng High Court ruled that the judgment in favour of the farmers handed down in December 2008 by a Southern African Development Community (SADC) tribunal was fully enforceable in South Africa. With this ruling the High Court made it clear, if there was any doubt, that as a signatory of the SADC treaty South Africa has an obligation to uphold and enforce judgments coming from a SADC tribunal.

The ruling clears the path for non-diplomatic property owned by the government of Zimbabwe to be subject to a writ of attachment, seized, and possibly sold to satisfy the judgment. Additionally, it also clears the path for similar moves by other white farmers.

But why South Africa? Zimbabwe is also a signatory of SADC, why not enforce the tribunals judgment there?

The simple answer is that for these farmers South Africa wasn’t so much a matter of choice but one of necessity. In fact the same could be said of the use of the SADC tribunal. The framers only tuned to the tribunal when it was clear that they could not get justice at home – the Zimbabwean judges being either complicit or too afraid to stand up to the Mugabe regime.

The SADC tribunal’s ruled in December 2008 that the farm seizures were racist and were an act of thief. It ordered the government to compensate those farmers that had lost their property and to leave those farmers remaining unmolested to continue their farming activities.

This was a great victory for the farmers, well so they thought until they tried to get the tribunal’s judgment registered and enforced in Zimbabwe. There they encountered the usual judicial opposition, this time with a judge dismissing their application because of the enormity of reversing the President’s land seizures.

Imagine that a judge dismissing your case because of the enormity/implications for an illegal government policy; just imagine. To that I have these words and I shall say them thrice: Rule of Law, Rule of Law, Rule of Law.

Fortunate for the farmers the High Court in South Africa knows and will fully up hold the Rule of Law.

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By: Ainsley Brown

The European Union (EU) and Vietnam have now officially stated free trade talks after Karel De Gucht, the EU Trade Commissioner, met with the Vietnamese Prime Minister, Nguyen Tan Dung in Hanoi.

The talks come after the successful conclusion of the 2 year in the making deal signed with South Korea in October of last year. This deal along with the settlement of the long running Banana Wars and the provisional trade deals with Columbia and Peru that are to be finalized at an EU-Latin American summit in May represents a strategic shift  in EU trade policy. In seeking out bilateral talks, the EU is clearly signaling its frustration and it unwillingness to wait for the long protracted and stalled multilateral Doha Round of trade talks in the World Trade Organization (WTO) to be rekindled.

The EU views the fast growing Vietnamese economy as one with consistent and continued growth potential – potential that has to be foster and leveraged to its advantage. Trade between the EU and Vietnam has grown at a rate of 12% from 2004 to 2008 with overall trade being worth €12 billion in 2008.

It will be interesting to see how the EU’s recent decision to continue duties on imports of Vietnamese shoes will affect the tone of the negotiations from the outset?

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By: Ainsley Brown

The safety of the people is not the supreme law

While terrorism, terror financing and constitutional principles such as the rule of law and Parliamentary supremacy are not the usual subjects covered here at Commercial Law International, this seeming break from tradition is in fact not such a stretch.

As our moniker indicates Commercial Awareness is Global – it is important to note and as will soon become clear, coverage of this case in no way departs from this.

This landmark ruling is instructive for the “normal” subjects covered on this blog because it illustrates the legal limits imposed on the state – read the government – as it pertains to its ability to interfere with the assets of an individual (natural or juridical). These limits are even justified, as their Lordships have ruled, when combating the scourge of international terrorism. As the Deputy President of the Court, Lord Hope of Craighead, put it: “Even in the face of the threat of international terrorism, the safety of the peoples is not the supreme law.” In other words the government of the day only has as much power as Parliament has allowed it to have; the will of Parliament being express of course in the laws its passes.

The offending powers struck down by their Lordships are the Terrorism (United Nations Measures) Order 2006 and the Al-Qaeda and Taleban (United Measures) Order 2006. The Orders were issued by the then Chancellor of the Exchequer and now Prime Minister Gordon Brown in response to United Nations (UN) Resolutions passed in response to the September 11th attracts. The Resolutions sought global co-operation on combating the financing of international terrorism.

Unlike in many other countries the United Kingdom under its UN obligations did not pass legislation in order to give effect to the Resolutions. Instead, the Chancellor issued these Orders, empowering Her Majesty’s Treasury (Treasury) to seize the assets of suspected terrorist, Al-Qaeda and or Taleban members or supporters. The seizures could take place on mere suspicion without an hearing and would not be under scrutiny of the courts through judicial review.

The case was the first to be heard in the newly minted Supreme Court when it opened last year. The appeal was brought by five men whom successfully argued their case in the High Court that the Orders were unfair and breached their fundamental right guaranteed by the laws of Britain; however, they were later over turned by the Court of Appeal.

The question before their Lordships though a simple one was non the less a profound one. And it was this when Parliament empowered the Treasury to make orders did it in turn give the Treasury the power to “interfere so profoundly with individuals fundamental rights without parliamentary scrutiny[?]”

With word such as “oppressive,” “paralysing” and “draconian” peppering the decision, their Lordships answered the question with a resounding NO!

In a nation such as Britain, with a “unwritten constitution” it must always be remembered that Parliament is supreme and it is only through Parliament that the government has the exercise power. Moreover, when such power involves the interference with an individual’s basic rights such authorization cannot be implied but must be explicit. In any democratic-capitalistic society access to the courts and property rights are sacrosanct. As Lord Phillips of Worth Matravers, the President of the court put it: “Access to the court to protect one’s rights is the foundation of the rule of law.” And without the rule of law there can be no liberal-democracy.

For those that would say that this ruling is just another example of judges legislating from the bench in breach of Parliamentary supremacy, Lord Philips has a stern rebuke. His Lordship countenanced with “on the contrary it upholds the supremacy of Parliament in deciding whether or not measures should be imposed that affect the fundamental rights of those in this country” without explicit grant by Parliament.

It is important to not that Supreme Court are not saying that these laws are in and of themselves illegal – not at all. However, what their Lordships are saying is that if the government of the day wants exercise such extensive powers they much first seek and then be granted Parliamentary approval. Lord Hope put it best: “If the Executive considers that such far-reaching measures are necessary or expedient for combating terrorism or honouring the United Kingdom’s international obligations it must obtain approval for them form Parliament.”

In response to the judgment the Gordon Brown’s is rushing through Parliament the Terrorism Asset-Freeze (Temporary) Provision Bill which is expected to have retrospective effect and by and large mirror the quashed Orders. If all goes to plan the Bill will become law some time this week.

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By Charles Wanguhu

In the current financial crisis the role of offshore havens have been placed in the spotlight and quite rightly so. The lack of transparency in their dealings has meant that these centres have not only been used for tax evasion, money laundering, but also as bases for special purpose entities. The role of British offshore havens has of late been highlighted with regards to the ownership of football clubs.

The Riddle of Leeds Football Club ownership has played out quite interestingly in the Royal Court of Jersey.  In January this year the Leeds Chairman Ken Bates told the court that he jointly owned the club’s holding company, Forward Sports Fund. However in an affidavit sworn for the same court in May, Bates states that he did not own any shares in Forward and that the previous statement was “incorrect” and “an error” on his part.

An interesting point to note is that Forward Sports Fund is a Cayman Islands-registered outfit, with its administrators in the very transparent capital of Switzerland. Château Fiduciaire the administrators/trustees on being pushed to reveal the beneficial owners of Forward indicated that;

“Understandably, it is not the policy of this company, a fully regulated Swiss fiduciaire, to release information on ultimate ownership without an appropriate court order, valid in Switzerland.”

The ownership of Leeds United has been routed via a network of offshore companies ever since Ken Bates arrived at Elland Road club in 2005. Bates in his affidavit states that:

The real owners

“Neither I, Mark Taylor or Shaun Harvey are able to confirm who the ultimate beneficial owners of Forward are.”

The above not only makes a mockery of the Football associations “fit and proper test” of Club owners but just goes to show the lack of transparency in football administration.

A similar tale is being played out at league two Nott’s county club with the shareholding behind the Qadbak investment trust that now owns the club remaining unclear. A Pakistani businessman has come out to deny any shareholding in the club despite the club declaring that he was one of the key backers of the club. Qadbak, is surprise suprise registered in the British Virgin Islands.

As it stands Leeds football club is owned by the shareholders of a company registered in the Cayman Islands, administered in Geneva by trustees who pending a court order valid in Switzerland will not reveal the ultimate beneficial owners.

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