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Among international lawyers in Israel, Belgium often does not get the attention that it deserves. Based on recent news reports indicating that the Belgian government is in the process of establishing a new court, to be known as the Brussels International Business Court (the “BIBC”), that situation might change.
This post explains why the establishment of the BIBC should be of interest to the many Israeli companies (and other non-Belgian companies) involved in business in Belgium. For the reasons described in Part II, we do not recommend to Israeli clients that the BIBC be high on the list of dispute resolution options.
Part I – Overview
For starters (from an Israeli perspective), the level of commerce between Israel and Belgium is often underestimated. In 2016, among EU Member States, Belgium was the second largest destination for export from Israel as well as the second largest source for import into Israel (following Germany). See http://itrade.gov.il/belgium-english/israel-belgium-trade-statistics-2016/ The diamond industry is one – but only one – of the major sectors in such commerce.
And Israeli companies frequently find themselves involved in legal disputes in Belgium and/or with Belgian companies.
One of the reasons that the recent announcement of the creation of the BIBC has attracted attention is that the court will, according to press reports, operate in English. If those reports are correct, the BIBC would be the first European court established outside the United Kingdom to adjudicate disputes and render judgments in English.
Another feature of the BIBC that has attracted much attention is that (according to reports), although the new Belgian tribunal will be called a “court,” judgments from the BIBC will not be appealable.
When focusing on the combination of these two features – adjudication in English and lack of appealability – it appears that the BIBC will be an “arbitration-like” tribunal. In fact, according to one report, a Belgian official stated “If we are to make Brussels a hub for international business, those concerned must be able to resolve their legal disputes without going overseas or resorting to private arbitration.”
Another major issue concerning the newly-announced court is that of its jurisdiction scope. Although several European law firms have reported on the announcement of the establishment of the BIBC, we have not seen any such firm raise the issue of the jurisdictional scope of the BIBC. According to a Reuters report, parties will have to agree in advance to let the court adjudicate their differences.
If the Reuters report is accurate, the consent-only feature is another that will make the BIBC arbitration-like.
It should come as no surprise that Belgium wishes to compete in the field of international commercial dispute resolution, in this manner. European business people know well that the two largest centers in Europe for international commercial arbitration are London and Paris, and smaller European countries have long had an interest in “spreading the wealth” in the field of international commercial DR.
One such country is Sweden, with a population smaller than that of Belgium and with a GNP that is also below that of Belgium. But Sweden has long benefitted economically from cases before the Arbitration Institute of the Stockholm Chamber of Commerce, which has been a significant player in the European commercial dispute resolution field for many decades.
It is, therefore, natural for a country like Belgium to come up with a creative way to try to capture part of the market. (Although many reports indicate that the genesis of the BIBC is a desire to resolve various conflicts generated by Brexit, our educated guess is that the idea of the BIBC would have, at one point or another, arisen even absent Brexit).
Part II – The (most noticeable) Problems
Determining the Applicable Law:
Given the nature of international commercial dispute resolution, it is not surprising that one or more announcements concerning the establishment of the BIBC addressed the issue of choice of law. According to one of the reports,
The parties in a case in front of the BIBC will be free to choose the applicable law. The judges will be entitled to call on amicus curiae, i.e. an impartial adviser to a court of law in a particular case. These amicus curiae will provide legal advice and information regarding the case in order to assist and enlighten the judges. If the parties do not decide on the applicable law, the judges will be free to decide for them.
Under such a system, predictability seems elusive. There would, of course, be easy cases – such as, for example, if the parties’ agreement provides expressly for New York law to govern their contract. In such a case, presumably the BIBC would not allow either party to escape from that commitment, and the court would apply New York law.
However, what if the contract were to be silent as to applicable law? Once a dispute arises, frequently the parties are unable to arrive at an agreement as to the applicable law. Therefore, based on the above-quoted description of the BIBC, the issue of the applicable substantive law will be determined by that court.
Of course, national courts routinely determine the law applicable to commercial disputes before them. But unlike the typical court, the decisions of the BIBC will not be appealable. In other words, non-Belgian business people who might become involved in litigation before the BIBC need to realize that a court that is not subject to any judicial review will be determining the applicable law. Although the “risk” inherent in having such a determination made by a tribunal from which there is no appeal is similar to the risk in having such a determination made by an arbitrator, at least in the context of institutional arbitration, there are written rules concerning choice of law. (For example, the rules of the Israeli Institute of Commercial Arbitration require the issue of choice of law to be raised as early in the case as possible.)
And in this context, it is noteworthy that none of the reports that we have seen indicate whether Belgian choice-of-law principles will form the “default” principles for the BIBC’s determining choice of law.
Although we are not admitted to practice in Belgium, it is our understanding that Belgian principles of choice-of-law in the commercial setting can differ significantly from what Israeli clients (and, for that matter, most clients who are more at home in common law jurisdiction) are used to.
In evaluating any potential forum for dispute resolution, the issue of cross-border enforceability (whether of a court judgment or of an arbitral award) needs to be considered. On this issue, it is not clear whether the BIBC would be better or worse than arbitration.
Arbitral awards can be recognized and enforced pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the “New York Convention“). Approximately 150 countries are parties to the New York Convention. Although Belgian court judgments can be enforced in many European countries, Belgium is not (to our knowledge) a party to any bilateral treaty concerning enforcement with any non-European country. Therefore, taking the hypothetical case in which an Israeli company and an Indian company agree to resolve disputes before the BIBC, if the Israeli company obtains a judgment from that court against the Indian company, it is far from clear that enforcing such judgment in India would be clear sailing.
The choice-of-law issue and enforceability issue are not minor concerns. Therefore, for the foreseeable future, to the extent that the BIBC is proposed as a dispute resolution option, our advice to Israeli diamond dealers as well as to other companies involved in business in Belgium or with Belgium entities would be to proceed with caution.