“For there is no defense for a man who, in the excess of his wealth, has kicked the great altar of Justice out of sight.”
It is a rarity for practitioners of business law to invoke human rights in litigation. But including a human rights angle in a business litigation in Europe can be surprisingly effective, specifically in the context of financial inequalities between the parties.
In Europe, human rights are governed by the European Convention on Human Rights (ECHR). Amongst other guarantees, the ECHR safeguards a right of access to justice. Specifically, Article 6.1 of the ECHR provides: “In the determination of his civil rights and obligations . . . , everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.”
While a right of access to justice is typically thought of as being limited to criminal cases, it can also be effectively employed in civil cases in Europe. Specifically, commercial litigants can bring an Article 6.1 claim before the European Court of Human Rights (ECtHR) to argue that their access to justice has been infringed upon. And because in such cases compensatory remedies are available, such claims can serve to provide complete relief.
What makes this relevant to U.S. litigants is the fact that the ECHR—premised on the belief that human rights are universal—secures to everyone within its jurisdiction (European nationals as well as foreigners) the rights and freedoms defined in the ECHR.
In addition, the ECHR, contrary to other international human rights treaties, includes corporations within its protection. (Notably, this is not the result of case law; rather, it follows directly from the text of the convention. Article 1, Protocol 1 states as follows: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions.”)
For that reason, U.S. business litigants finding themselves in court in Europe enjoy the protection of Article 6.1 guaranteeing access to justice, and they may find Article 6.1 to be particularly useful in cases in which legal costs or financial inequalities are at issue, specifically in the context of orders to pay, as well as arbitration. Specifically, there have been several cases in the past few years in which the ECtHR has held that the imposition of an order to pay or guarantee the opponent’s legal costs has prevented the litigant from accessing justice, thus effectively vacating the orders to pay.
Payment orders (where a court has imposed an order to pay or guarantee an opponent’s legal costs by way of bonds either in first instance proceedings or on appeal) typically take into consideration not only the financial capacity of the plaintiff or appellant but also practical cost recovery challenges, the latter of which foreign litigants may find themselves exposed to. And there are a few specific cases in which business litigants may find relief when faced with such a situation. In the case of Garcia Manibardo v. Spain (February 15, 2000), an insurance company sought the return of 18 million euros paid to the plaintiff under an insurance policy following the death of her husband in a car accident. The lower court ruled against the plaintiff. The plaintiff appealed. However, because the plaintiff failed to post a guarantee corresponding to the total amount paid by the insurance company, the appeal was dismissed. The ECtHR ruled that the requirement that the plaintiff post a guarantee was entitled to an appeal and that the requirement to post the fairly large guarantee violated her right of access to justice. Relying on this precedent, a business litigant could argue that a client cannot be ordered to deposit or guarantee the total amount received prior to litigation (in application of a contract, insurance, etc.), especially where the guarantee is a significant amount.
Excessive Fees Violate Rights
The ECtHR also held in Kreuz v. Poland (June 19, 2001) that excessive court fees can violate a petitioner’s right of access to a court. In that case, the ECtHR confirmed that any order (including an order to pay or guarantee legal costs) will be compatible with the ECHR’s guarantee of access to justice under Article 6.1 only if it pursues a legitimate aim and there is a reasonable proportionality between the means employed and the legitimate aim sought. Bearing those factors in mind, the court held that as a result of the excessive fees, the applicant had no choice but to waive his claim, and his case was never heard by a court as a result. In the court’s opinion, the a priori cost requirement “impaired the very essence of his right of access.”
By contrast, in an earlier case, Tolstoy Miloslavsky v. United Kingdom (July 15, 1995), the ECtHR rejected the petitioner’s claim challenging a court order to deposit the legal costs of the opposing party in order to appeal. The ECtHR reasoned that, given the fact that the petitioner had appealed this cost order and had been allowed to submit evidence and arguments over the course of six days before the appeals court, it was “undisputed that the applicant enjoyed full access to court.”
Using this line of jurisprudence, a litigator whose client has been ordered to guarantee legal costs may be able to argue that such a demand impairs the client’s ability to argue his case in court in the first instance (or on appeal) unless the client has given extensive (e.g., six days’ worth of) testimony and evidence. In addition, given the ECtHR’s general influence in Europe, a litigator should feel free to point out this ECtHR jurisprudence to the local courts to make these points.
Similar considerations apply in other situations too. For example, in commercial arbitration (this article does not address investment arbitration), it may be possible to render certain arbitration clauses or proceedings unenforceable in European jurisdictions by arguing that they are abusive or unfair because of the impecuniosity of one of the parties, although the success of such arguments may depend on which European jurisdiction parties are in.
The German Federal Court of Justice has ruled that arbitration agreements may be “inoperative or incapable of being performed” if the complaining party lacks sufficient funds to bear the cost of the arbitration and where the other party refuses to advance the costs. (It should be noted that this wording is identical to the provision of Article II of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.) Similarly, the French Supreme Court has held that the refusal of the arbitral tribunal to consider the counterclaims of a party that failed to pay the advance on costs may infringe the right of access to a judge and the principle of fair and equal treatment of the parties.
The English courts have adopted an opposite position, preserving the binding effect of arbitration clauses even in the face of financial inequalities.
As of yet, the ECtHR has not decided the question directly. However, in recent cases, the ECtHR has suggested that the applicability of Article 6.1 depends on whether the arbitration is voluntary or compelled. The ECtHR has suggested that in compulsory arbitration (such as in the case of professional athletes who have no choice but to submit themselves to the jurisdiction of arbitration), strict adherence to Article 6.1 is required.
For that reason, in the event arbitration is imposed on the parties as a matter of industry practice or in contracts with consumers, there will be strong grounds for a denial of justice claim based on the client’s impecuniosity. From a practical standpoint, practitioners should be attentive to the issue of impecuniosity—not only when drafting arbitration clauses (and they may consider anticipating such a possibility by specifying that evidenced impecuniosity of the claimant shall render the arbitration clause inoperative) but also when representing a client who may for various reasons find himself in such a situation of impecuniosity (for instance, when acting in bankruptcy proceedings).