The Review of Regulation 44/2001 in the Field of Protective Measures and Property Registries

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January 1, 2011 /

  1. The Green Paper on the Review of Council Regulation 44/2001 and an accompanying European Commission report have recently been published. The document has been submitted to a public consultation covering all this documentation, with the pertinent contributions, the working foundation for the possible review, together with what is known as the Heidelberg Report, a report conducted on behalf of the Commission in 2008 which analyzes the operation of the Regulation and considers the possible ways of improving it.Considering points of interest to property registration authorities in connection with Regulation 44/2001, we must recall that the Regulation distinguishes between recognition and enforcement. While registration authorities commonly accord direct recognition to judgments affecting legal capacity, family procedures and succession law, only very infrequently do they grant recognition under the Regulation when the matter at issue refers to compliance with pecuniary obligations. In addition, when such matters concern the definition of real rights in immovable property or registration validity, exclusive jurisdiction is stated to belong to the courts for the situs. Nevertheless, the possibility of direct recognition under Regulation 44/2001 is also reflected in European Court of Justice case-law (the Reichert case, action paulienne, and the Gaillard case, action to cancel a purchase).The registration system does have a fundamental role to play in the field of enforcement. This too is an internal competence of each State, but it is linked to Regulation 44/2001, fundamentally through the protective measures that are provided for in the Regulation or intended for enforcement in another State.The Green Paper considers three issues especially pertinent to property registration: the possible review of the system of exclusive jurisdiction and its effects on registration matters, specifically the case of the renting of office space; the possible elimination of the exequatur procedure and streamlining of recognition requirements, with their effect on registration recognition; and the modification of the system of protective measures, with its impact also on the action of European Union registrars. This latter is the issue that I shall address.
  2. When ordered by a court of a country other than the country of registration, the protective measures to which Regulation 44/2001 refers involve a previous declaration of enforceability and a direct relationship between the judge at the forum and the registry official in the country of registration, although this may not always be so (For example, the Heidelberg Report refers to the direct registration of an Austrian judicial mortgage in the German property registration system, once the defect of failure to notify the party concerned had been corrected, although the explanation of this situation may lie in the proximity of the two judicial systems).Generally, however, these protective measures are provisional measures whose effectiveness entails some kind of communication from the forum to the registrar (often on the basis of exclusive jurisdiction under articles 22.1 and 22.3 of the Regulation). Measures may, however, be taken at their source by:
    • the court hearing the primary matter, when this is the court for the situs of the property;
    • the court hearing the primary matter, when this is not the court for the situs of the property;
    • the court to which article 31 of the Regulation refers (a court that is not hearing the primary matter); here some thread of a territorial connection is required between this court and the measure, pursuant to European Court case-law; and
    • the court for the situs of the primary matter or the place of enforcement in the event referred to in article 47 of the Regulation (once there is a judgment on the substance of the matter, either before or after the recognition or declaration of enforceability).
  3. On the subject of protective measures, the Report accompanying the Green Paper refers to the few cases where information could be gathered about national jurisdictions. Based on this content and on registration practice, the following difficulties may be identified as facing the transposition of such measures when they are to be complied with in another State’s registries:
    • differences in the nature of measures, i.e., personal or real; English law’s Mareva injunction is cited as a paradigmatic case of personal action whose registration would be problematic;
    • the need to find equivalent concepts in the legislation of the place of application, so the measure can be reflected properly in the registration system; this difficulty has been observed in Spanish jurisprudence, as will be discussed below;
    • and the special territorial connection with the court of the country of the situs when the measure affects immovable property.
  4. The European Court has gradually created a body of doctrine on the protective measures to which Regulation 44/2001 refers, on the basis of the definition of “protective measure” as an autonomous concept of Community law, a measure that endeavours to ensure a de facto or de jure situation to safeguard rights whose recognition is requested of the judicial authorities hearing the matter at issue. This doctrine may be summarised thus:
    • Article 31 does not cover measures aimed at obtaining information (St Paul Diary case).
    • Nor does article 31 cover measures taken at a party’s request without the debtor’s having been a party to the proceedings, fundamentally to produce a surprise effect (Denilauler case).
    • Case-law requires a real connection between the object of the measure under article 31 and the territorial jurisdiction of the court ordering the measure (Van Uden case, Mietz case). This point is of special significance in the realm of property registration.
    • These measures do not include measures meant to ensure the result of action paulienne (Reichert case). This position may be criticised, inasmuch as it attempts to ensure the result of a procedure having an impact on property. In addition it contrasts with the European Court’s own case-law, which excludes such events from exclusive jurisdiction under article 22 and considers them subject to the Regulation 44 procedure.
  5. Review Outlooks.
    First; General Approach.The Green Paper does not address any treatment of protective measures that could affect the enforcement procedure, either through the harmonisation of certain aspects or through the definition of a 28th regime. The Commission has concerned itself with these topics in recent documents, such as the Green Paper on the transparency of debtors’ assets and the Green Paper on the attachment of bank accounts. Also, certain elements in the enforcement field have been harmonised in matters such as intellectual property. However, the impact of these issues on sensitive procedural aspects such as creditor priority means that the situation is not yet ripe for an approach to enforcement from the standpoint of the European space of freedom, security and justice.Second; The Green Paper’s Position.

    On the basis of the corpus of European Court doctrine, the Green Paper and the Report put forward different lines of action in connection with the introduction of possible reforms in this matter:

    • the possibility of including measures intended to obtain information under article 31;
    • the possibility that measures taken at a party’s request might also be covered by article 31, as measures necessary to ensure enforcement by means of the surprise effect, although the need to notify the debtor of the measures is acknowledged;
    • the non-requirement of some real connection (to which the European Court refers) with the court that ordered the measure and the object of the measure as a prior condition for article 31 to come into play, thus explicitly favouring a sort of forum shopping in the field of protective measures;
    • the possibility that the measure taken under article 31 may be modified or cancelled on the order of the judicial authority hearing the primary matter; and
    • the need to adapt the case in article 47 with a view to the possible elimination of the exequatur procedure, along the lines drawn by Regulation 4/2009.

    Third; The View from the Property Registration Stance.

    In general, any possible reviews would tend to seek greater flexibility in the scope of the measures covered by article 31, favouring the lender’s position. However, they must be viewed with precaution from the standpoint of property registration; the registration system must strive to disclose situations that are certain and unyielding. This is required by the registration system’s own nature and is also in accordance with the recommendations of the White Paper on the European mortgage market.

    Therefore, the following aspects ought to be taken into account when considering possible reforms:

    • the need for the debtor always to be notified of the measure taken so as not to be left defenceless;
    • explicit regulation of jurisdictions and of the relationship between courts in accordance with the rule of clarity in the definition of jurisdiction in Regulation 44 (established by European Court case-law), the rule of respect among courts and the uncomfortable acceptance of forum shopping in a field such as this, so tightly linked to real rights in immovable property. In this sense, the rule of territorial connection established by the European Court of Justice in cases such as the Van Uden case and the Mietz case seem especially apropos in matters of protective measures seeking registration.
    • the necessary coordination among courts, seeking formulas for inter-court connection, whereas the European legal area contains increasing numbers of means (European Judicial Network, e-justice);
    • use of property registration system information on the legal situation of the debtor’s assets, as outlined by the Green Paper on the transparency of debtors’ assets.
  6. Spanish Case-law.Here I shall refer particularly to Spanish registration case-law on the protective measures called for in Regulation 44/2001, in order to identify the difficulties in connection with the free circulation of protective measures.Sundry decisions by the Spanish Directorate-General of Registries and Notarial Affairs (12-5-92, 23-2-04, 20-11-06) make no argument about the enforceability of a non-national judgment ordering protective measures vis-à-vis the registry once exequatur has been granted, but they state that the ordered guarantee must abide by the procedure called for in internal legislation. In practice this means the internal judicial authority must do the work of adapting the guarantee to the country’s registration law as regards guarantees and registration procedure, because:
    • a broad-reaching concept of “real right” is recognized and is thus subject to internal law, which covers registry disclosure of protective measures, even if this is an autonomous concept of Community law;
    • law and order bear a relationship with the system of real rights in immovable property; and
    • the rule of inter-court communication and cooperation is invoked.

Consequently, this case-law points up the difficulties hampering the freedom of circulation of protective measures pertaining to immovable property without proper cooperation among courts. Such difficulties are understandable, in view of how this issue affects the creditor priority system and how it is linked to the system of ownership of and real rights in immovable property, which is in turn linked closely to internal law.