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World Watch – International Law and New Zealand 

13 April 2021

Being a small and geographically remote country requires New Zealand to exercise a particular kind of tenacity: for business – the diligence to stay up with market and regulatory trends, the agility to seize opportunities as they arise and, finally, the resilience to roll with the punches; and for government – the courage to forge foreign policy and to conduct diplomatic relations in a manner that is true to our values and advances our broad array of interests.

World Watch – International Law and New Zealand identifies recent developments in cross-border dispute resolution, both through the courts and international arbitration, legislative and regulatory changes, and new international treaties or treaty developments relevant to New Zealand.

We take a deliberately wide approach because the world is so inter-connected; a prime example being what Anu Bradford described in 2012 as the “Brussels effect” – the ability of the EU through its economic and political heft to export its regulations around the globe.

Chapter 1

Cross border dispute resolution

Global regulatory developments – increasingly in responsible business, risk management and business integrity – have ripple effects in international disputes: New Zealand is both a leader and a follower across law reform and judicial expectations.
Nicola Swan, Partner



Litigation: private and public international law

Offshore parent company liable for subsidiary’s actions

The UK Supreme Court unanimously held in February 20211 that it has jurisdiction to consider whether UK-domiciled Royal Dutch Shell (Shell) could be liable for environmental damage allegedly caused by its Nigerian subsidiary in the Niger Delta.

The effect of the judgment is that the claimants – a group of about 45,000 Nigerian farmers and fishermen – can bring a case in the English High Court against Shell for the pollution caused by oil spills to their land, wells and waterways. 

Shell had argued that it could not be held liable as it did not owe the plaintiffs a duty of care, including because it did not exercise formal control over its subsidiary’s operations or actions. 

However the Supreme Court upheld the dissenting judgment of Lord Justice Sales in the Court of Appeal, and held that Shell’s vertical organisational structure meant it could be regarded as a single commercial undertaking, which could lead to a finding of a breach of Shell’s duty of care.  The relevant issue was the extent to which the parent company was a de facto manager of the subsidiary’s relevant activity. Depending on the status of other jurisdictional objections which were still live, the claim could proceed to a full trial.

Practical implications

 

This decision is a milestone for claimants seeking to hold multinational businesses responsible for subsidiary conduct. It sounds a note of caution for New Zealand companies operating internationally, particularly those that play an active role in the management and activities of their subsidiaries.

 

Read the Supreme Court judgment here. 

1 [Okpabi & others v Royal Dutch Shell Plc and another [2021] UKSC 3]

International fisheries law: NZ court declines jurisdiction in favour of US

The Auckland High Court in August 2020 declined jurisdiction in a dispute arising from a collision between two US flagged tuna boats in the South Pacific, saying the case was more “closely connected” to the United States than New Zealand.

Both vessels came to New Zealand for repairs. One – the Koorale, owned by M&F Fishing Inc (M&F) – was still in New Zealand at the time of the hearing. The other, the American Eagle, owned by AETM, was back at sea.

Both companies had filed proceedings against each other seeking compensation for the collision, and had also applied to limit their liabilities - AETM in New Zealand and M&F in the US. Then, in December 2019, M&F sought a stay on both proceedings on the basis that they should appropriately be heard in the US.

A motivating factor in M&F’s action was that New Zealand is a signatory to the Convention on Limitation of Liability for Maritime Claims (LLMC) and the US is not. Were the claim to be heard in New Zealand under the LLMC, AETM’s liability would be capped at about US$2m.

M&F estimated its loss on the Koorale at over US$10m and provided evidence that it could not continue as a going concern unless it was able to fully recover its losses. But the Court ruled that this was not a pertinent consideration as the “key issue” was whether justice would be served.  

The New Zealand High Court stayed the proceedings, and held that Florida was the more appropriate forum for the case to be heard.

Justice Whata held that, while the common law courts would traditionally not stay proceedings simply because foreign nationals were involved, the New Zealand connection here was demonstrably weak and there were clear advantages and no material disadvantages to having the matter heard in Florida.

Factors the Court found to be relevant were that both boats were under the US flag and owned by American companies, and that only two witnesses were likely to be required from New Zealand against several from the US. 

It was also more convenient to hear the case in Florida, with the Judge noting ruefully that this did not need to be proven through an itemised breakdown of travel and other costs as “New Zealand’s actual and renowned isolation is a matter amenable to judicial notice”.

Click here to read the judgment.

[American Eagle Fishing LLC v The Ship "Koorale" [2020] NZHC 1935 (5 August 2020)]

Reciprocal enforcement: NZ refuses to intervene in Chinese court decisions

The New Zealand courts have heard two recent applications to overturn, or grant relief from, a decision of a Chinese court. In both cases, the application was declined.

A: Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2470

The New Zealand High Court rejected an argument that a judgment from the Higher People’s Court of Hebei Province in China could not be enforced in New Zealand because Chinese courts are not independent so do not qualify as “courts” for the purpose of New Zealand’s rules on the enforcement of foreign judgments. 

The case was brought by Mr Shi whom the Higher People’s Court had found was liable as guarantor for a debt owed to Hebei Huaneng Ltd and which Hebei Huaneng was seeking to recover from him in New Zealand.

Apart from acknowledging the significant practical problems which would arise if New Zealand declined to enforce the decisions of Chinese courts, the Judge rejected the suggestion that the Higher People’s Court did not perform a judicial function, or was subject to improper interference from other branches of the state.  

The relevant question was whether justice was done in the particular case and there was no suggestion that this had not occurred.

The Judge directed that his decision be served on Crown Law to provide the Attorney-General with an opportunity to intervene should that be considered desirable or necessary.  

Click here to read the judgment.




B: Lu v Industrial and Commercial Bank of China (NZ) Ltd [2020] NZHC 402

The plaintiffs, who were Chinese citizens, sought an anti-suit injunction in the New Zealand High Court to prevent the Commercial Bank of China from pursuing freezing orders in China for debts owed to it in relation to a mortgage over New Zealand property. 

Fitzgerald J refused to intervene and issue the anti-suit injunction, saying it was a serious step to restrain someone from bringing a proceeding in another country and that a high standard was required, such as where a party would not have a fair trial or the proceedings would be doomed to fail.  

In a case like this, it was normal for a creditor to pursue a debtor in the jurisdiction where the debtor had assets and there were legitimate advantages in obtaining a judgment in China which could be enforced against the plaintiffs directly. 

These factors, and the fact that the Bank had a “very strong” claim, meant there was no basis for the injunction to be granted. 

Click here to read judgment.

One of the key features of private international law is its ability to secure enforcement of domestic judgments across borders.
Julian Brown, Senior Associate



Arbitration

UK Court allows interim orders against non-parties

The UK Court of Appeal has overruled the decision of the High Court to find that third parties to an arbitration seated in another jurisdiction can be ordered to give evidence under section 44 of the Arbitration Act 1996 (UK). 

The case arose from a New York-seated arbitration relating to the alleged payment of bribes by the first and second respondents in relation to the development of an oil field. The third respondent, who negotiated the payments, had been refusing to testify on the basis that it was not a party to the arbitration agreement.

Practical implications

 

The court’s decision demonstrates that the UK courts are willing to make orders in support of arbitration, even where the ruling concerns individuals that were not party to the original arbitration agreement. The decision will be used by New Zealand, Singapore and Hong Kong arbitration practitioners to seek court orders in support of arbitrations seated in those jurisdictions, as they have similar legislation to the UK Arbitration Act 1996.

 

Click here to read the judgment.

[A v C [2020] EWCA Civ 409]

UK Supreme Court agonises over correct governing law of arbitration agreements

The question before the UK Supreme Court in Enka v Chubb is a recurring one in cross-jurisdiction arbitrations – which law should apply as the governing law of an arbitration where this is not specified in the arbitration agreement. 

Enka, an engineering company, was a subcontractor in construction work at a Russian power plant. Through an assignment by the head-contractor, the owner was insured by Chubb Russia. A fire broke out at the plant, and it was alleged Enka caused it. The owner made an insurance claim and, as part of that settlement, the right to sue Enka through the subcontract was passed on to Chubb Russia as the insurer.

The subcontract contained an arbitration agreement that provided for a London-seated arbitration. While the subcontract specified Russian law as the governing law in relation to certain of its substantive provisions, it did not specify a governing law for the arbitration.

The Court held that, where there is no express or implied choice of governing law in the main contract (as opposed to the arbitration agreement), as in this case, the default “rule” was that the governing law of the arbitration agreement was that most closely connected to it. 

The majority said that in general this would be the seat of arbitration (in this case, London), while the minority held that this would generally be the governing law of the main contract.

Practical implications

 

The question of an arbitration agreement’s governing law can have very significant consequences for parties involved in a commercial dispute – potentially deciding whether claims are upheld or not. This judgment is of practical relevance for any New Zealand company operating across borders and highlights the importance of expressly stating both the choice of governing law of the substantive contract as well the governing law of the arbitration agreement.

 

Click here to read the judgment.

[Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38]

The UK Supreme Court’s (split) decision in Enka v Chubb shows just how difficult it is to get a cross-border arbitration clause right and how expert practitioners could take different views of what the default governing law of the dispute should be.

Chapter 2

International regulatory developments

EU Due Diligence Directive

The European Parliament on 10 March 2021 adopted a report calling on the European Commission to propose legislation that imposes mandatory human rights and environmental due diligence on all limited liability companies doing business in the EU (regardless of where they’re domiciled) and on all but the smallest EU companies.

Affected companies (which could include New Zealand companies trading with the EU) would be required to:

  • identify their human rights, environmental and governance risks
  • establish a due diligence strategy across their suppliers and value chain which would ensure through a mix of contractual clauses and codes of conduct that legal obligations are complied with, and
  • establish grievance mechanisms to provide stakeholders with opportunities to raise concerns.

These requirements draw heavily on the UN Guiding Principles on Business and Human Rights (UNGPs), which are increasingly used by companies to manage human rights risks in business.

The draft law would create exemptions for small enterprises that meet at least two of three criteria – ten employees or fewer, a balance sheet of EUR350,000 or less, and/or net turnover of EUR700,000 or less.

The European Commission will introduce its proposal for a European Directive on mandatory due diligence this year which would then need to be implemented into Member States’ national laws.

Click here to read the briefing document.

Disclosure requirement created by Australia’s anti-slavery law

Organisations with consolidated annual revenues in Australia of more than AU$100m per year must now publish an annual Modern Slavery Statement. 

The requirement was legislated in the Australian Modern Slavery Act 2018. It took effect on 31 December 2020 for entities with a financial year ending 31 March 2020, and on 31 March 2021 where the entity’s financial year ended 30 June 2020. 

The Australian legislation follows similar legislation enacted in the UK in 2015 (the UK Modern Slavery Act). It requires larger businesses to publicly disclose their risks of modern slavery in their operations, subsidiaries and their supply chains, and the steps they have taken to manage these risks. As in the UK, annual Modern Slavery Statements are published on an online register.

Read our commentary

EU on the balance between national security and privacy

The Court of Justice of the European Union (CJEU) ruled on 6 October 2020 that the national security laws of the UK, France and Belgium contravened the EU Privacy and Electronic Communications Directive (2002/58) and the EU Charter of Fundamental Rights.

The ruling had been sought by the national courts of those three jurisdictions because they each had national surveillance laws that required telecommunications companies and service providers to store large amounts of metadata on an ongoing basis for collection or other access by security and intelligence agencies.

This data was stored automatically and regardless of whether the persons concerned were suspected of any illegality and included the date, time, duration and type of communication as well as the telephone number of the caller and the receiver, and their IP addresses.

The CJEU said general and indiscriminate retention of traffic and location data is only allowed in limited circumstances, such as where there is a threat to national security that is genuine, serious and present or foreseeable. 

Read the press statement here

Increasing numbers of New Zealand businesses are caught directly and indirectly by UK and Australian modern slavery legislation, requiring companies to identify and assess the likelihood that their own operations and those of their key suppliers could pose risks of forced labour, human trafficking, or child labour.
Nicola Swan, Partner

Chapter 3

Foreign courts on international obligations

Supreme Court of Canada makes headwinds on human rights grounds

Last year the Supreme Court of Canada held that a claim by former Eritrean nationals against the parent company (Nevsun) of the owner of an Eritrean mine could continue. Nevsun is based in Canada. The lead plaintiffs were Eritrean refugees in Canada who alleged that the workers at the mine were conscripted into a forced labour regime through Eritrea’s military service, and were subjected to inhuman and degrading treatment. The workers claimed that this treatment breached both domestic law and international law, for which they should be entitled to damages.   

The majority of the Court held that the claim could continue, dismissing Nevsun’s argument that there was no basis for a domestic court to award damages for breaches of international law, or for a corporation to be held liable for breaches of international law. The majority commented that international law could develop to establish corporate liability. It also dismissed an argument that the claim was barred because it required the Canadian courts to decide the legality of the acts of a foreign government. Canadian law, said the majority, does not bar that type of claim.

The parties reached a settlement late last year, but this decision has significant implications for the role of international law when domestic courts are dealing with cases involving allegations of human rights breaches.

To learn more, read the judgment.

Persons displaced by climate change considered by domestic and international courts

The Bordeaux Court of Appeal last year blocked the deportation of a Bangladeshi man on the basis that high levels of air pollution in Bangladesh would exacerbate his asthma and risk causing an early death.

The decision highlights the increasing pressure on domestic courts to deal with “climate refugees” and echoes the criteria applied by the UN Human Rights Committee in 2019 when it considered the application of a Kiribati national, Ioane Teitiota, whose asylum application had been rejected by New Zealand. Despite finding against Ioane Teitiota, the Committee noted that climate change “may expose individuals to a violation of their rights under articles 6 or 7 of the [International Covenant on Civil and Political Rights], thereby triggering the non-refoulement obligations of sending States” whereby states cannot send back a person to their home country where they would face torture, cruel, inhumane or degrading treatment.

The Committee’s decision suggests that future applications involving damage from projected sea level rise may be granted.  

Click here to read the decision (in French)

UK Supreme Court overturns block against Heathrow third runway

The UK Supreme Court has unanimously overturned a Court of Appeal finding that the UK Airports National Policy Statement (ANPS) allowing the construction of a third runway at Heathrow was “of no legal effect” as it did not take account of the Paris Agreement.

The case was brought by Heathrow Airport Ltd (HAL). The runway project was supported by the Government, which had formally adopted the ANPS on 26 June 2018, at which time it had ratified the Paris Agreement and also had in place carbon budgets under the Climate Change Act 2008 which were already more demanding than the limits the UK had committed to under the Paris Agreement.

The Supreme Court ruled that the Government’s ratification of the Paris Agreement did not constitute “Government policy” in the sense required by ANPS which assumed “carefully formulated written statements of policy which have been cleared by the relevant departments on a Government-wide basis”.

The Court also reiterated that, under English law, international treaties were binding only as a matter of international law, and not automatically in the domestic sphere.

The court said, “Treaty commitments continue whether or not a particular Government remains in office and do not constitute a statement of “Government policy” for the purposes of domestic law”.

To learn more, read the judgment

Dutch Supreme Court requires Government action on climate change

The Dutch Supreme Court last year upheld the decisions of two lower courts to find that the Dutch Government’s climate change response was in breach of the European Convention on Human Rights (ECHR) as incorporated into Dutch law.

The case – Urgenda Foundation v State of Netherlands – was taken by an environmental group, claiming that the trajectory of the Netherlands emissions profile was inconsistent with the State’s legal obligations to Dutch citizens under the Dutch Civil Code and the ECHR.

The Court agreed, and also required the Government to bring its greenhouse gas emissions to 25% below 1990 levels by the end of 2020.

The Government had argued that policy decisions on emissions reductions were not a matter on which the courts should intervene and that it was already taking sufficient action on climate change relative to other EU states. However it has largely accepted the ruling and has implemented a range of policies to achieve the required reduction. 

Click here to read the judgment (English translation)

French Court considers French climate action 

In the wake of the Urgenda judgment, the French Administrative Court in Notre Affaire à Tous and Others v. France has found that the French Government could be held responsible if it failed to meet its emissions reduction targets. 

The claim, brought by four NGOs, was based on the French Environmental Charter and Code, EU law, and international law, including the Paris Agreement. The claimants sought orders recognising the State’s failure to take sufficient action on climate change, and compelling the State to repair the “ecological damage” caused by its inaction.

The Court held that the State could be held legally accountable if it did not achieve its reduction targets and gave the Government two months to come back with an emissions reduction plan – at which stage, the Court will consider whether further steps are necessary.

It also ordered the State to pay symbolic damages (one euro) in compensation for the “moral prejudice” resulting from the State’s lack of action on climate change. 

Click here to read the decision (in French)

International climate change litigation continues to grow in volume and sophistication, targeting both governments and business.
Nicola Swan, Partner

Chapter 4

International treaties

Budapest Convention on Cybercrime

The New Zealand Government confirmed on 18 February 2021 that it will join the 65 member Council of Europe Convention on Cybercrime (the Budapest Convention). This decision follows a recommendation by the Royal Commission of Inquiry into the Christchurch terror attack. 

The Convention strengthens international cooperation by creating a common framework for tackling cybercrimes and obtaining electronic evidence.

New Zealand’s laws already largely align with the requirements of the Convention, but some changes will be necessary:

  • a new system of preservation orders to require that electronic evidence is held for a specified time so that it will be available on application for a court to consider
  • a new system of confidentiality orders which will ensure that certain types of warrants (e.g. a warrant for wiretapping) do not reveal the existence of an investigation
  • amending existing powers as to production orders and surveillance device warrants, and
  • amending existing cybercrime offences.

The Convention will be submitted to the House for Parliamentary Treaty Examination before legislation is drafted to implement the Convention.

To learn more, read the Ministerial statement

International Crimes and International Criminal Court Amendment Act 2019

New Zealand passed the International Crimes and International Criminal Amendment Act 2019 (the ICC Amendment Act) to implement recent changes to the treaty establishing the International Criminal Court (the Rome Statute).

The Act implements recent amendments to the Rome Statute and makes it a war crime to use:

  • poison or poisoned weapons
  • asphyxiating, poisonous, or other gases, and analogous liquids, materials, or devices
  • expanding bullets
  • weapons that use microbial agents, biological agents, or toxins
  • weapons that injure by fragments that are undetectable by X-rays
  • blinding laser weapons, and
  • intentional starvation in non-international conflicts.

The ICC Amendment Act means that proceedings can now be brought in New Zealand for these offences.

Click here to read the Act

Accession of Tonga and Palau to the New York Convention

The Republic of Palau and the Kingdom of Tonga last year became the 163th and 164th states respectively (and the fifth and sixth in the Pacific region), to accede to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention).

The New York Convention, regarded as the foundation of modern international arbitration, requires courts of contracting states to give effect to arbitration agreements and to recognise and enforce awards made in other states, subject to specific limited exceptions.

This provides businesses trading with member countries confidence that commercial obligations can be enforced and reduces the level of commercial risk in relation to the resolution of disputes.

International space law: the Artemis Accords

The Artemis Accords are a non-binding political commitment to “increase the safety of operation, reduce uncertainty, and promote the sustainable and beneficial use of space for all humankind”.1

They establish rules and norms of behaviour for space operations and were initiated, drafted and promoted by NASA (the United States National Aeronautics and Space Administration).  The Accords were signed on 13 October 2020 by NASA and representatives of eight other space agencies (in Australia, Canada, Italy, Japan, Luxembourg, the United Arab Emirates and the UK).

The Accords serve as a preamble to bilateral agreements that each participating nation will sign with the US. These will lay out each country’s contribution to the Artemis programme.

The Accords aim to:

  • reinforce core tenets of international space law – such as engaging in space activities for "peaceful purposes" and "in accordance with relevant international law"
  • encourage transparency, interoperability, the sharing of scientific data and mitigation planning regarding space debris, and
  • promote lunar heritage protection, space resource extraction, and the "deconfliction" of space activities (by providing detailed guidance on the establishment and operation of "safety zones" around lunar installations).


Until now, international space law has largely been developed within the United Nations' Committee on the Peaceful Uses of Outer Space (COPUOS) and via multilateral treaties (and other instruments).

The Accords, by contrast, were US-led and privately negotiated.

It remains to be seen to what extent this signifies a move away from multilateralism in space law-making, creating scope for states to negotiate agreements with like-minded allies, rather than compromise in the COPUOS. New Zealand has a greater interest in this area than ever, given our rapidly developing aerospace industry, making the safety of space operations of particular importance.

Click here to read the Accords

1 The Artemis Accords: Principles for Cooperation in the Civil Exploration and Use of the Moon, Mars, Comets and Asteroids, §1.

2 Agreement Governing the Activities of States on the Moon and Other Celestial Bodies 1363 UNTS 22 (opened for signature 18 December 1979, entered into force 11 July 1984).

3 Moon Agreement, art 11.

International treaties are the most common means of creating international rules that govern the conduct of States. In an interconnected world, these rules affect almost every area of commerce, from international sales to the commercialisation of space.
Tracey Epps, International Trade Consultant

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