UK: European Business Law Update: Spring 2011

Last Updated: 23 May 2011
Article by Susan Dion, Mathieu Doublet and Dorothy McMahon

Claimants Take Heed

Gulf International Bank BSC v. Ekttitab Holding

Company KSCC and Another [2010] EWHC B30 (Comm)

This recent case teaches a salutary lesson. The Commercial Court held that where the claimant failed to file a Certificate of Service within 21 days of service of the Particulars of Claim (in the absence of an acknowledgment of service being filed by each defendant by then), and in addition failed to serve a response pack with the Particulars of Claim, that judgment in default as entered by the claimant should be set aside.

CPR (Rule) 7.8(1) unambiguously requires a response pack to be served with the Particulars of Claim which must include a form defending the claim, a form admitting the claim and a form acknowledging service.

Rule 6.17(2)(b) states that the claimant may not obtain judgment in default under Rule 12 unless a Certificate of Service has been filed. In this case, the claimant entered judgment in default in breach of this rule. The claimant's counsel submitted that a witness statement had been served which proved service, and thus, the defect in not filing a Certificate of Service had not caused any prejudice. It was noted that the court's indulgence may have been appropriate had this been the only defect.

The second matter was the breach of the similarly mandatory Rule 7.8, which the court held to be of even greater significance. The response pack "highlights the procedural steps which must be taken to prevent judgment being obtained in default." As judgment in default was obtained in the absence of acknowledgment of service, it was crucial that this form which should have been included with the papers that were served, was not. Mr. Justice Simon considered that it was "particularly important when dealing with defendants who are not represented by English solicitors (as these defendants were not at the time), and whose understanding of English procedural law may be less than those who habitually practise in the English Court, that the means of avoiding a default judgment should be made available." This is not to say that careful attention should only be paid to the above Rules where the defendant is foreign.

The court's discretion being unconditional, and the purpose of such discretion being to avoid injustice, on both grounds, but particularly the second, the judgment was set aside. In addition, Mr. Justice Simon found that as a result of the claimant's failure to comply with the pre-action protocol, as no letter before action had been sent to the defendants setting out the essence of the case, the claimant was ordered to pay the defendants' costs.

EC Evaluates EU Directive on Telecommunications Data Retention

On 18 April 2011, the European Commission (EC) adopted an evaluation report of the Data Retention Directive (Directive) outlining the lessons learned since its publication in 2006.

The Directive requires Member States to ensure that telecommunications operators retain certain categories of data (for confirming identity and details of phone calls made and e-mails sent, excluding the content of those communications) for the purpose of the investigation, detection and prosecution of serious crime, as defined by national law. The data must be retained for a minimum of six months to a maximum of two years (to be decided by the Member State in transposing the Directive into national laws).

The report concludes that retained telecommunications data play an important role in protecting the public against harm caused by serious crime. However, transposition of the Directive has been uneven, and the remaining differences between the legislations of Member States create difficulties for telecommunication service providers.

The Directive also does not in itself guarantee that data are stored, retrieved and used in full compliance with the right to privacy and protection of personal data, and this has led courts to annul the legislation transposing the Directive in some Member States.

The report analyses how Member States have transposed the Directive and it assesses the use of retained data and the impact on operators and consumers.

Main Report Findings

Most Member States take the view that EU rules on data retention remain necessary for law enforcement, the protection of victims and the criminal justice systems. As criminal investigation tools, the use of data related to phone numbers, IP addresses or mobile phone identifiers have resulted in convictions of offenders and acquittals of innocent persons. Member States differ in how they apply data retention. For example, retention periods vary between six months and two years, the purposes for which data may be accessed and used, and the legal procedures for accessing the data, vary considerably. Given that the Directive only seeks to partially harmonise national rules, it is not surprising that a common approach has not emerged in this area. The overall low level of harmonisation can however create difficulties for telecommunication service providers, and in particular, smaller operators. Operators are reimbursed differently across the EU for the cost of retaining and giving access to data. The EC will consider ways of providing more consistent cost reimbursement. Data retention represents a significant limitation on the right to privacy. Whilst there are no concrete examples of serious breaches of privacy, the risk of data security breaches will remain unless further safeguards are put in place. The EC will therefore consider more stringent regulation of storage, access to and use of retained data. Building on this evaluation, the EC will prepare a proposal to amend the Directive. Over the coming months, it will consult law enforcement authorities, the judiciary, data protection authorities, industry and civil society on options for a future legal framework. The results of the consultation will feed into an impact assessment as a basis for the future proposal.

New EU Telecoms Rules Promoting Net Neutrality Enter into Force 25 May 2011

New EU telecoms rules applicable from 25 May 2011 on transparency, service quality and choice for consumers are intended to promote the concept on "net neutrality" in Europe. The essence of the net neutrality debate concerns preserving the openness of the Internet, promoting high quality services to all, encouraging innovation while respecting such fundamental rights as the freedom of expression and freedom to conduct business.

Much of the debate centers on the issues of quality of service, transparency and traffic management, in particular the blocking or degrading by some operators of certain services that compete with their own services. Blocking can take the form of either making it difficult to access or restricting certain services or websites on the Internet. For example, some mobile Internet operators block voice over internet protocol (VoIP) services. Throttling, which is employed to manage Internet traffic and minimize congestion, may be used to slow down certain types of traffic and so affect the quality of content, such as video streaming provided to consumers by a competitor.

There is no set definition of net neutrality, but it will be a legal requirement under EU law as from 25 May 2011 that Member States' telecoms regulatory authorities promote the ability of Internet users "to access and distribute information or run applications and services of their choice." (Article 8(§4)(g) of the telecoms Framework Directive 2002/21/EC, as amended by Directive 2009/140/EC).


Consumers are entitled to make informed choices about their Internet provider, on the basis of adequate information about possible restrictions on access to particular services, actual connection speeds and possible limits on Internet speeds. Consumers have been complaining to their National Regulatory Authorities of discrepancies between advertised and actually delivered connection speeds.

There will be an obligation for telecoms providers under the new EU telecoms rules applicable from 25 May 2011 to ensure that consumers are informed – before signing a contract – about the precise nature of the service to which they are subscribing, including traffic management techniques and their impact on service quality, as well as any other limitations, such as bandwidth caps or available connection speed (article 21 of the Universal Service Directive).

Switching Internet Service Providers

The new telecoms rules on number portability will require that consumers be able to change their operators and keep their numbers within one working day. Operators will also have to offer the possibility of a subscription of a maximum duration of 12 months. The new rules also make sure that conditions for contract termination do not represent a disincentive to switching (article 30 (6) of the Universal Service Directive).

Service Quality

National regulators, after consultation with the EC, are entitled to set minimum quality of service requirements for network transmission services, thus ensuring a high level of quality of service (article 22(3) of the Universal Service Directive).

The above provisions must be transposed into Member States' national law by 25 May 2011. The EC has stated that it will examine any behavior related to traffic management that might restrict or distort competition under articles 101 and 102 TFEU (EU competition rules), and that if deemed necessary, on the evidence of the Body of European Regulators for Electronic Communications' (BEREC) investigation into the implementation of the telecom framework provisions, it will issue additional guidelines on net neutrality by the end of 2011.

New French Arbitration Law Reform

In France, on 1 May 2011, the law relating to domestic and international arbitrations was reformed, when a decree (No: 2011-48 of 13 January 2011), in the form of new articles 1442 to 1527 of the Civil Procedure Code (CPC), came into force. The French arbitration community hopes this reform will enhance the clarity and strengthen the rules relating to arbitration (which have not been altered significantly for the last 30 years), maintain the legal French arbitration-friendly tradition and reinforce the position of Paris as a leading arbitration centre. This new law will change the way international arbitrations are conducted in France.

International Arbitrations are Not Confidential

Under the new French law, international arbitration will not be a confidential process, unless the parties have agreed otherwise. Should the parties therefore wish to maintain the confidentiality of the arbitration, suitable wording should be inserted in the arbitration clause, or if the arbitration clause does not so provide, a separate agreement should be entered into by them to that end.

No Formality Required for Arbitration Agreement

Pursuant to the new article 1507 of the CPC, there are no formalities applicable to the validity of the arbitration agreement as regards international arbitrations. Arbitration clauses, if they are incorporated by reference to standard terms, or even oral arbitration clauses, will therefore be deemed valid, provided the parties can show they intended to be bound by such arbitration agreements.

Autonomy of the Arbitration Clause

The autonomy of the arbitration clause is confirmed in article 1447 of the CPC. This means for example, that both the arbitration clause and underlying contract can be subject to different laws. Further, the validity of the arbitration clause is not contingent on the validity of the underlying contract.

Supportive Role of the Courts

The president of the Tribunal de Grande Instance of Paris has jurisdiction to deal with matters relating to the constitution and composition of the tribunal (1452-1455 of the CPC), the removal, resignation or incapacity of arbitrators and extension of time limits concerning the duration of the arbitration proceedings (1463-2 of the CPC).

The French courts have jurisdiction over arbitrations (1) taking place in France; (2) subject to French arbitration procedural law; and (3) where the parties have expressly chosen the French courts to decide upon issues relating to arbitration procedure. Under the terms of the new article 1505 of the CPC, French courts will also have jurisdiction in circumstances where a party faces a denial of justice, even if there is no connection whatsoever between France and the arbitration (for example, where the courts are asked to act as appointing authority).

Powers of Arbitral Tribunal

The arbitral tribunal may order a party to produce documents subject to a penalty (1467 of the CPC). It is also empowered to order any provisional or conservatory measures deemed necessary (e.g. an injunction requesting a party to transfer goods to another warehouse due to the possibility of deterioration). However, there is an exception concerning conservatory attachments (e.g. freezing injunction over a party's bank account) which remain within the exclusive jurisdiction of the courts (1468 of the CPC). With regard to production of documents from third parties, only domestic courts have such jurisdiction.

Challenge of the Award

The time limit to set aside an award is one month, running from the date when the award has been served (1519 of the CPC). If a party fails to make this challenge within the prescribed time limit, the courts' decision to enforce the award cannot be appealed.

The parties to an arbitration seated in France may waive their right to bring an action to set aside the award by express agreement. In this instance, the parties have the right to appeal against the court's decision concerning the enforcement of the award, if they have lodged their appeal within a month of the service of the court's decision granting the enforcement of the award (1522 of the CPC).

Interestingly, the new law provides that an action to set aside an award or an action against a court's decision to grant the enforcement of the award does not result in an automatic stay of enforcement. However, an application for a stay can be made before the president of the Tribunal de Grande Instance in circumstances where a party's rights could be severely prejudiced (article 1526 of the CPC).

This reform codifies existing case law that has been applied in France for the past 30 years and modernises French Arbitration laws, which should enable Paris to remain a preferred international arbitration centre.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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