Edited by Jürgen Basedow, Giesela Rühl, Franco Ferrari and Pedro de Miguel Asensio
Chapter E.16: Evasion of laws (fraus legis)
The prohibition on fraudulent action, acting in fraudem legis, dates from ancient times (Heinrich Honsell, ‘In fraudem legis agere’ in Dieter Medicus (ed), Festschrift für Max Kaser zum 70. Geburtstag (CH Beck 1976) 111–26), if evading mandatory rules through the manipulation of facts or incorrect behaviour. It was a substantive law principle and applied in certain cases of abuse of strict law. When countries began to codify their national law around 1800, they refrained from enacting a general clause of abuse or evasion of law. Although some early codes provided that any right of property (→Property and proprietary rights) may not be exclusively exercised to the detriment of third parties (eg I. 8. § 27 Prussian ALR, § 1295 (2) Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch of 1 June 1811, JGS No 946/1811, as amended) and § 480 of the ABGB of the Swiss Canton of Aargau of 1847–55 (Allgemeines bürgerliches Gesetzbuch für den Kanton Aargau, 1847 et seq), it was the Swiss Civil Code (Schweizerisches Zivilgesetzbuch of 10 December 1907, AS 24 233, as amended) which generally provided in art 2(2) that the ‘manifest abuse of right is not protected’.
II. Private international law: legislation
Whether the principle of abuse of law or fraude à la loi (fraus legis, Gesetzesumgehung, frode alle legge, fraude de ley, abus de droit, Rechtsmissbrauch, misbruik van rechten) can also be applied to private international law would appear doubtful. There are markedly few private international law statutes with an expressly formulated prohibition of evasion of law. The most modern example is art 18 of the Belgian Private International Law Act (Wet houdende het Wetboek von internationaal privaatrecht/Code de droit international privé of 16 July 2004, BS 27 July 2004, p 57344, 57366), which reads:
[f]or the determination of the applicable law in a matter where parties may not freely dispose of their rights, facts and acts committed with the sole purpose to evade the application of the law designed by the present statute are not taken into account.
III. Private international law: literature
It is interesting to see that most literature on evasion of law or fraude à la loi is of French origin or from countries with a Francophone tradition in private international law. Since the French case of Bauffremont (see IV.1(a)(1) below) voluminous books on fraude à la loi in domestic law and private international law have been published in →France, whereas before this case no books on private international law addressing this problem were to be found (Jean Jacques Gaspard Foelix, Traité de droit international privé (Joubert 1843); Armand Lainé, Introduction au droit international privé contenant une étude historique et critique de la théorie des statuts (Pichon 1888 and 1892); Nicola Rocco, Dell’uso e autorità delle leggi del Regno delle Due Sicilie (Guttemberg 1837)). In private international law treatises from →Germany or the →UK there is hardly any discussion of ‘Gesetzesumgehung’ or ‘evasion of law’. For all that the concept exists in German- or English-speaking countries, it is largely dealt with in cases of →public policy or ordre public, with one important exception – the evasion of foreign laws.
Evasion of law in private international law is committed either if law is used for purposes for which it is not designed (evasion, Gesetzeserschleichung) or if the application of law is avoided by intentionally not fulfilling the necessary requirements for application (avoidance, Gesetzesvermeidung). The problem of law evasion is essentially one of the true construction of legal norms, in most cases a problem of interpretation of mandatory legal provisions.
IV. Private international law: practical examples
1. Marriage, registered partnership, divorce and dissolution of family union
(a) Marriage abroad
→Marriages may be celebrated abroad in order to escape the formal mandatory requirements of secular marriage at home or to avoid substantive prohibitions of local law with respect to minimal age, bigamy or →same-sex marriages. This form of ‘location shopping’ started in the 19th century with the French case of Princess Bauffremont (Cass.fr. 18 March 1878, (1878) 5 Clunet 505) and the Austrian/Hungarian problem of ‘marriages of p. 699Hungarian Siebenbürgen’ (Wilhelm Fuchs, Die sogenannten Siebenbürgischen Ehen und andere Arten der Wiederverheiratung geschiedener österreichischer Katholiken (Manz 1889) 21 ff). In these cases, the partner to a marriage who had been separated at home but could not be divorced, changed their →nationality and if necessary their denomination (from Catholicism to Protestantism), obtained a divorce in a foreign country and married another person in their home country. In →Austria, however, the remarriages were recognized and ‘Gesetzesumgehung’ denied because, as was said, everyone is entitled to change nationality or denomination (Wilhelm Fuchs, Die sogenannten Siebenbürgischen Ehen und andere Arten der Wiederverheiratung geschiedener österreichischer Katholiken (Manz 1889) 184 ff).
(2) Tønder marriages
The position may be different with substantive marriage requirements. Many years ago, a single Spanish man wished to marry a divorced German Protestant woman. Under German law the couple could not marry because the applicable Spanish law did not recognize the woman’s German divorce. The man was prevented by Spanish law from marrying a woman who in the eyes of Spanish law was still married. The couple married in →Denmark (the city of Tønder), returned to →Germany and requested registration of their Danish marriage. Ultimately the German Constitutional Court ordered the registration on the grounds that, once a marriage is dissolved, the divorced persons may remarry even if the divorce is not recognized abroad (Federal Constitutional Court of Germany (BVerfG), 4 May 1971, 31 BVerfGE 58), while the Swiss Federal Court reached the same conclusion one month later (Dal Bosco v Walther, 3 June 1971, 97 I BGE 389). Special legislative provisions were subsequently introduced in Germany and Switzerland similarly providing that marriage cannot be declined if there is a local divorce of the previous marriage or a foreign divorce has been recognized in Germany or →Switzerland (art 13(2) no 3 Introductory Act to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuche of 21 September 1994, BGBl. I 2494, as amended, henceforth EGBGB), art 43(3) Swiss Private International Law Act (Bundesgesetz über das Internationale Privatrecht of 18 December 1987, 1988 AS 1776, as amended, henceforth Swiss PILA)).
(3) Marriages of same-sex partners
Today same-sex partners who wish to marry but cannot do so at home locate their →marriage in a country where same-sex marriages are allowed and return as a married couple to their home country and apply for registration of their foreign marriage in the local civil register. In some countries such foreign same-sex marriages, while unknown under domestic law, are recognized and registered but the effects of such marriages are limited to the effects of a registered partnership (see eg art 17b (4) EGBGB; art 45 (3) Swiss PILA). In other countries such marriages may be void because they violate the national requirement of partner heterosexuality, and no evasion principle is necessary.
(b) Divorce abroad
(1) Ex parte divorces or by consent
In the past spouses who could not be divorced under their local domestic law went abroad to obtain a divorce judgment, returned and applied for recognition of the foreign divorce decree at home. This happened in France (see case Bauffremont, IV.1(a)(1) above), in Austria (see marriages of Siebenbürgen, IV.1(a)(1) above) and also in New York (see Rosenstiel v Rosenstiel, 16 N.Y.2d 64 (CA 1965) and NY Domestic Relations Law § 170 of 1966 extending the grounds of divorce and no longer upholding the sole ground of adultery).
(2) Home country divorce
Today marriage partners seek a divorce jurisdiction where they may obtain a divorce more cheaply and quickly than at home. This happened with refugees resident in Switzerland but applying for divorce in →Hungary (Swiss Federal Court, 26 March 1987, 113 II BGE 102).
Another form of ‘evasion’ of local law may occur with marriages which may be terminated unilaterally by repudiation. If the wife is repudiated abroad and the wife raises no objection to the termination of marriage, then the foreign termination is recognized (see art 65(2)(c) Swiss PILA against Federal Court, 8 February 1962, 88 I BGE 48, decided before the Swiss PILA of 1987 was enacted).
(c) Di1vorce at home
The classical case of ‘fraude à la loi’ in divorce cases is the case of De Ferrari c Dame de Ferrari (Cass.fr. 6 July 1922, (1922/23) 18 Rev.crit.p. 700DIP 444 with note by Antoine Pillet = (1922) 49 Clunet 714 and André Morillot, ‘De la conversion en divorce d’un régime de separation de corps consensuel établi à étranger’ (1922) 49 Clunet 545–8 = Bertrand Ancel and Yves Lequette (eds), Les grands arrêts de la jurisprudence française de droit international privé (5th edn, Dalloz 2006) no 12). The French woman Madame Gensoul married the Italian man De Ferrari in 1893. By this marriage Madame De Ferrari lost her French →nationality and became Italian. Six years later, in 1899, the Tribunale di Genova recognized and certified (by ‘omologazione’) that the De Ferrari spouses separated by mutual consent (art 158 Italian Civil Code (Codice Civile of 1865; edizione straordinaria)) and that they might live apart. Madame De Ferrari returned to France and recovered French nationality by a decree of the French President according to art 18 French Civil Code (Code Civil of 21 March 1804; henceforth French CC). In 1916 she relied upon art 14 French CC and brought a lawsuit against her husband requesting conversion of the separation into a divorce according to art 310 French CC, version of 1908. While the Tribunal civil de Lyon and the Cour d’appel de Lyon converted the separation into a divorce (Tribunal civil de Lyon, 29 July 1916 and Cour d’appel de Lyon, 26 June 1917 (1922/23) 18 Rev.crit.DIP 444 and 448), the Cour de cassation declined to confirm these judgments. The Court held that art 310 applies only if there has been a contentious separation because of marital misconduct, and this form of separation cannot be substituted by a foreign separation by consent. The decision is significant because not the lex fori but rather foreign law governing the marriage was intended to be evaded.
2. Establishment of parent–child relationship
H, a Jewish French citizen, passed away intestate in Switzerland with his partner F and her Swiss child A, not recognized by the deceased and some relatives. A had no share in the estate because paternity had not been, and could no longer be, established under Swiss law because a paternity suit can only be brought within a short time after reaching the age of majority. Child A turned to courts in Israel, requested confirmation of his Israeli →nationality, and filed a paternity suit against the administrators of his father H’s estate. Child A established paternity by a DNA test provided by Swiss authorities to the Israeli court under international legal assistance. The Israeli court decision which also confirmed the plaintiff’s Israeli nationality was recognized in Switzerland, so that A could participate in his father’s estate (Swiss Federal Court, 6 April 2004, 130 III BGE 723). The Swiss Federal Court decided not to withhold recognition of the Israeli judgment on the grounds of evading Swiss substantive law with respect to time limits of paternity suits (art 308a Swiss Civil Code version before 1978 (AS 1977, 237), the same art 263 (1) Swiss Civil Code, current version). A ‘fraude à la loi’ or ‘Gesetzesumgehung’ was denied because art 70 Swiss PILA fixes recognition jurisdiction ‘favore recognitionis’ with the courts at the child’s habitual residence as well as with the courts of its nationality and the courts of its parents’ habitual residence or nationality. No other recognition requirement was violated and the Swiss limitation of paternity suits was not to be considered a provision of Swiss public policy.
(b) Surrogate mothers and adoption
In certain countries (eg →France, →Germany and →Switzerland), surrogate mothers are not allowed to bear a child registered before the birth as a child of the ordering parents with whom the surrogate mother had concluded the →surrogacy contract. At times a couple may make use of surrogacy in those foreign countries where surrogacy or gestational contracts are permissible if the wife is incapable of bearing a child for whatever reason. At times this behaviour is deemed a fraude à la loi, eg in the French cases decided by the Cour de cassation on 13 September 2013 ((2014) 141 Clunet 133), with annotation by Johanna Guillaumé. A French man X concluded a gestational contract with an Indian woman in →India (Mumbai) under which she was to register his paternity of the twins she was imminently giving birth to. On 29 July 2009 the Frenchman acknowledged the children in France before their birth in 2010. In May 2010 he applied for the Indian birth certificate to be transcribed into the French personal register. This was refused because gestational contracts are prohibited under art 16-7 French CC and this prohibition is ‘d’ordre public’ (art 16-9 French CC). The Frenchman’s recognition of the twins constituted a ‘fraude à la loi’ and should be annulled according to art 336 French CC. The Swiss Federal Court decided on p. 70121 May 2015 (141 III BGE 312) that the recognition of a child by the non-genetic partner of a Swiss same-sex couple in California is invalid because surrogacy is prohibited in Switzerland and non-genetic parents can establish a parent–child relationship only by →adoption.
The policy followed in these cases may be changed in the future because the ECtHR decided on 26 June 2014 (Affaires Labassee et Mennesson c France App nos 65941/11 and 65192/11 (ECtHR, 26 June 2014), (2014) 141 Clunet 1265 with note by Johanna Guillaumé), that the non-recognition of a parent–child relationship between the child and its genetic father violates art 8 ECHR (European Convention of 4 November 1950 for the Protection of Human Rights and Fundamental Freedoms, 213 UNTS 221).
3. Child abduction
Children are frequently abducted to the home country of the abducting parent in the hope that courts in their home country will not order return of the abducted child to the country of origin and will award custody (→Guardianship, custody and parental responsibility) to the abducting parent. In many cases this hope is fulfilled, particularly if the return proceedings are commenced too late (art 12(2) Hague Child Abduction Convention (Hague Convention of 25 October 1980 on the civil aspects of international child abduction, 1343 UNTS 89)) or some grounds for not returning the child have arisen under art 13 Hague Child Abduction Convention.
4. Law of succession
(a) Choice of law by the testator
→Choice of law in →succession cases may give rise to the objection of evasion of law. This occurred in the famous Swiss case Hirsch v Cohen (Swiss Federal Court, 17 August 1976, 102 II BGE 136). In Zürich the British subject Albert Cohen died, born in Germany, resident in England since 1936, British national since 1947 and domiciled in Zürich from 1953 until his death in 1973. Mr Cohen left his second wife and his daughter, Evelyn Hirsch-Leapman, of his first marriage. In his will Mr Cohen made two provisions, choosing English law as the law applicable to the succession and naming his wife as the sole heir. Evelyn Hirsch-Leapman contested the validity of the will, arguing that the choice of English law was an evasion of Swiss succession law and claiming at least her reserved share she had under Swiss inheritance law. All instances rejected the suit. The District Court (Bezirksgericht) Zürich, both the Court of Appeal (Obergericht) of the Canton Zürich and the Federal court confirmed the validity of the choice of law under the existing Swiss private international law (art 22(2), 32 NAG (Bundesgesetz of 25 June 1891 betreffend die zivilrechtlichen Verhältnisse der Niedergelassenen und Aufenthalter, Loi fédérale sur les rapports de droit civil des citoyens établis ou en séjour, at: Alexander N Makarov, Quellen des imternationalen Privatrechts, Nationale Kodifikationen (3rd edn, Mohr Siebeck 1978) 218 ff), denied an evasion and rejected Evelyn Hirsch-Leapman’s lawsuit. This decision has been confirmed by the new Swiss PILA of 1987 which in art 90(2) provides that foreigners living in Switzerland may choose their national law as the law of succession.
(b) Recital (26) of the Succession Regulation of 2012
Recital (26) of the Succession Regulation (Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession,  OJ L 201/107; →Rome IV Regulation) reads: ‘[n]othing in this Regulation should prevent a court from applying mechanisms designed to tackle the evasion of law, such as fraude à la loi in the context of private international law.’ The meaning of this Recital is unclear.
(1) Choice of national law
The choice of the law of →nationality as applicable law (art 22) cannot be held as an evasion of the law of habitual residence (art 21). The choice is not restricted to ‘proper’ reasons.
(2) Change of habitual residence
The change of habitual residence is also no evasion of the law at the former habitual residence. A man, after retirement in Germany where he had lived for the previous 30 years, moved finally to England where he died shortly after his arrival. The →succession was governed by English law at the deceased’s new habitual residence rather than his former residence in Germany.
5. p. 702Contracts
(a) Substance: free choice
In the past but still in the 20th century, scholars and courts were afraid of unlimited →choice of law by parties to a contract, seeking to prevent the evasion of the objectively applicable law. According to their opinion there must be some objective contact with the chosen law in order to be a valid choice. However, this attitude has changed completely and modern codifications of international contract law do not require this ‘relation test’ and unlimited choice is allowed albeit with six important exceptions.
(1) Article 3(3) Rome I Regulation
In the case of a completely local contract (‘all elements relevant to the situation . . . are located in a country’) the parties are not allowed to escape the provisions of the local law ‘which cannot be derogated from by agreement’ (art 3(3)). This limitation is long-established. In a purely local contract (eg sale of goods (→Sale contracts and sale of goods) between local people on local products) the parties are not allowed to exclude local mandatory rules (eg on unfair trade terms).
(2) Weaker parties
The second exception concerns contracts of weaker parties (consumers and employees) which should be protected by prohibiting a choice less favourable than the law applicable without such a choice. Such exceptions are provided in arts 6(2) and 8(1) Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I),  OJ L 177/6; →Rome Convention and Rome I Regulation (contractual obligations)). According to these provisions, a choice may not have the result of depriving the consumer or employee of the protection afforded by the law which would have been applicable on the basis of non-choice.
(3) Restricted choice
In some cases the parties can only choose a limited number of laws mentioned in private international law regulations or statutes. Such a list can be found for certain kinds of insurance contract in art 7(3) Rome I Regulation and in other regulations or conventions on matters of maintenance (art 7 and 6 Hague Maintenance Protocol 2007 (Hague Protocol of 23 November 2007 on the law applicable to maintenance obligations,  OJ L 331/19)), on divorce (art 5 →Rome III Regulation (Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation,  OJ L 343/10) and on succession (art 22 Succession Regulation). In some national acts on private international law any choice is forbidden for some contracts (eg consumer contracts: art 120(2) Swiss PILA) but there is consensus that a law more favourable to the consumer may be chosen (Zürich Commentary on private international law, art 120 Swiss PILA, marginal notes 59–61).
(4) Article 3(4) Rome I Regulation
Another exception seeks to preserve the European minimum protection standard from being diminished by choice of the law of a third country outside the EU and European Economic Area (EEA). This form of exception is mentioned in art 3(4) Rome I Regulation. The minimum standards are provided in national implementation statutes implementing the consumer directives mentioned in art 46b(3) EGBGB. Article 6(2) of the Unfair Terms Directive (Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts,  OJ L 95/29), eg, provides that
Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.
The ECJ decided similarly in the case Ingmar with respect to payments of compensation to be paid to a commercial agent after termination of the agency (ECJ, Case C-381/98 Ingmar GB Ltd v Eaton Leonard Technologies Inc  ECR I-9305).
(5) Article 9 Rome I Regulation
Finally contracting parties cannot escape the application of →overriding mandatory provisions of safeguarding public interests mentioned in art 9 Rome I Regulation and which apply irrespective of any choice of law by the parties.
(6) Public policy: art 21 Rome I Regulation
International mandatory provisions of the forum may be applied by the judge of the forum when the result of application of foreign law (→Foreign law, application and ascertainmentp. 703) manifestly violates public policy of the forum and the case has sufficient connections (proximité) with the forum state.
(b) Formalities: locus regit actum
Many European countries are members of the International Union of Notaries (UINL, Union Internationale du Notariat Latin). Although the qualification of notaries may vary between Member States (eg complete legal studies in →Germany, some legal studies in most Swiss cantons), all of them differ from notaries in common law countries, who are mere private persons of good standing empowered to certify due signature of documents. As in some UINL Member States notary fees are rather low, clients needing notarial documentation (certification or notarization) go to these foreign notaries, have their business documented abroad and apply at home for registration of these documents drawn up by foreign notaries. Naturally local notaries condemn this conduct as evasion of local law by turning to their foreign colleagues rather than local notaries. However, this view is incorrect as pointed out by the German Federal Court of Justice (BGH) on 17 December 2013 (2014) RIW 156. According to the old rule of locus regit actum, formalities are governed either by the lex causae or by the law at the place of contracting. The reason why German courts require a certain standard of equivalence to German standards is the need for certain transactions to be recorded in the appropriate German registers.
6. Establishment of companies
Company promoters frequently utilize the freedom of establishment (art 49 TFEU (Treaty on the Functioning of the European Union (consolidated version),  OJ C 326/47)) to form companies abroad and conduct business at home. This may be for tax purposes or to avoid a domestic minimum share capital requirement for limited liability companies. The ECJ considered such a situation in the Centros judgment (Case C-212/97 Centros Ltd v Erhvervs- og Selskabsstyrelsen  ECR I-1459). A Danish couple, the Brydes, established the Centros Limited Company in the UK seeking to establish a UK company for GBP 100 and avoid the Danish minimum capital of 200,000 Danish Kroner. They registered in the UK without intending to conduct business there, and applied for registration of a branch in →Denmark. The Danish courts affirmed the registrar who declined to register such a branch on the grounds that the Brydes wished to evade the Danish minimum capital requirement. The Danish court of last resort referred the matter to the ECJ for clarification under the EC and the freedom of establishment principle. The ECJ held that the Brydes were correct. They utilized the European freedom of establishment and formed a company in the UK as a Member State. They were entitled to do this even without trading in the UK but rather exclusively in Denmark as another Member State. Creditors are not defrauded because they know that the limited company is British, and if Denmark wishes to sanction the company, it may do so but without denying registration of a branch in Denmark. Since this judgment it is clear that companies may be established in any Member State without being obliged to trade in that state. Promoters may establish such companies abroad in a foreign form in order to evade burdensome domestic establishment requirements. This is justified under the freedom of establishment, but there are limits regarding artificial arrangements intended to escape the normally payable national tax (ECJ, Case C-196/04 Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue  ECR I-7995).
7. Selection of forum
(a) Divorce cases
The problem of evasion is often connected with the problem of forum shopping (→Forum (and law) shopping) and the claimant’s intention to evade a certain law applied by one forum while suing in another forum perceived as more advantageous. In the past married spouses forum shopped to escape the domestic prohibition of divorce (→Divorce and personal separation) and dissolve their →marriage in a foreign forum (case Bauffremont and 97 I BGE 389, supra IV.1(a)). Today a divorce may be obtained everywhere and parties continue to use a ‘divorzio rapido’ abroad to escape a burdensome domestic divorce procedure and have the foreign divorce easily recognized at home now that recognition jurisdiction is no longer an obstacle to recognition between EU Member States of art 24 Brussels II Regulation (Council Regulation (EC) No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and p. 704enforcement of judgments in matrimonial matters and in matters of parental responsibility for children of both spouses,  OJ L 160/19)).
(b) Forum conveniens
Today claimants seek English forums for their libel suits (Trevor C Hartley, ‘“Libel Tourism” and the Conflict of Laws’ (2010) 59 ICLQ 25–38) and for divorce cases in view of collateral effects of divorce which may be more advantageous to a divorced wife. They also seek American forums for →product liability suits in order to benefit from punitive damages (Piper Aircraft Co v Reyno, 454 U.S. 235 (1981)). Alternatively tort victims choose English courts of the parent company in order to escape the liberal local legislation with respect to asbestos problems (Lubbe v Cape Plc  1 WLR 1545 (HL)). These cases were not solved by the means of evasion or fraude à la loi because there were competing forums and any of them could be selected. The cases were solved by the →forum non conveniens exception (Piper case) or by rejecting the defendant’s plea of forum non conveniens (Lubbe case).
Since 2002 the Insolvency Regulation (Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings,  OJ L 160/1) has been in force in many Member States and then became effective in new Member States. This Regulation determines jurisdiction for opening primary and secondary insolvency proceedings, determines the law applicable to these proceedings and deals with the recognition of foreign insolvency proceedings of a Member State. Substantive law of insolvency has not been unified. The result of this situation was a growing ‘insolvency tourism’ particularly from continental Europe to the UK, because a discharge of existing debts could be more easily obtained in England than in continental EU Member States (see Philipp M Reuss, ‘Forum Shopping’ in der Insolvenz. Missbräuchliche Dimension der Wahrnehmung unionsrechtlicher Gestaltungsmöglichkeiten (Mohr Siebeck 2011) 71 ff; Jan-Henning Wyen, Rechtswahlfreiheit im europäischen Insolvenzrecht (Mohr Siebeck 2014) 105 ff). Debtors domiciled on the Continent transferred or sought to transfer their ‘centre of main interest’ (COMI) to the United Kingdom, applied for opening insolvency proceedings in the UK and finally obtained a discharge which they used as defence in continental proceedings against creditor payment claims. This discharge has been recognized as granted at the debtor’s COMI (see German Federal Court of Justice (BGH), 18 September 2001, (2002) ZIP 365, with respect to a French COMI of a debtor previously domiciled in Germany). In later cases, however, the establishment of a COMI abroad was doubtful and the foreign discharge was not recognized (Regional Court (LG) of Cologne, 14 October 2011, (2011) NZI 957 with annotation by Peter Mankowski, ‘Amtsgericht Göttingen 10 December 2012’  NZI 206, with respect to English discharges of German debtors). Whether these German judgments are correct would seem to be doubtful. The creditors should have raised their doubt about the debtor’s COMI in England and should have denied jurisdiction of English courts. Absent this, the English discharge is a good defence also in other Member States. The Regulation (EU) 2015/848 of the European Parliament and the Council of 20 May 2015 on insolvency proceedings (recast) (2015) OJ L 141/19 emphasizes in recitals 29–31 that authorities siezed of curfew insolvency proceedings should try to prevent fraudulent or abusive forum shopping by moving the COMI.
9. Other forms of ‘manipulation’
Private parties could be tempted to evade mandatory national or supranational law by arbitration. They could conclude an arbitration agreement and during the arbitration not raise the issue of mandatory rules and obtain an award evading such rules. However, this is impermissible in the EU with respect to mandatory EU antitrust law (now art 101 TFEU). The ECJ so held in Eco Swiss (ECJ Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV  ECR I-3055). Such an award has to be submitted to a state court in order to determine whether European antitrust law has been violated by the award (see Katharina Hilbig, Das gemeinschaftsrechtliche Kartellverbot im internationalen Handelsschiedsverfahren (CH Beck 2006) 174 ff).
(b) Law of aliens
→Nationality may be changed for purposes of p. 705private international law, such as in the affair Bauffremont (see IV.1(a)(1) above). Nationality may also be changed or acquired for purposes of international law or the law of aliens (→Aliens law (Condition des étrangers, Fremdenrecht)). As the law of aliens is also part of French private international law, the cases of fraude à la loi with respect to substantive law of aliens also form part of international evasion of law. In other countries this kind of evasion has to be dealt with differently because substantive law is directly evaded and not indirectly by international manipulations with respect to applicable law and jurisdiction of courts.
(c) Flags of convenience
For several decades seagoing ships fly foreign flags of convenience by registration in their open registers (particularly Panama, Liberia, Honduras and the Bahamas) in order to escape local rules on prohibition (during the time of prohibition in the →United States), on crew requirements (eg doctors or officers), on mandatory certification or on minimum wages for the crew (→Flag).
(d) Other cases of public international law
The prohibition of abuse of law is also known in public international law (→Public international law and private international law). In certain judgments of the ICJ and the International Court of Arbitration the term ‘abus de droit’, ‘abuse of rights’ was used (eg ICJ 5 February 1970 – Barcelona Traction (1970 I.C.J. Rep. 3 ff, 17); Trail Smelter Arbitration, (1949) 3 Reports Int.Arb.Awards 1903 ff).
Finally the UN Convention on the Law of the Sea (UNCLOS, United Nations Convention of 10 December 1982 on the Law of the Sea, 1833 UNTS 396) of 1982 provides in art 300 that the contracting states should exercise ‘the rights, jurisdiction and freedoms . . . in manner which would not constitute an abuse of rights’. That is what the general principles of law recognized by civilized nations (see art 38(1)(c) ICJ Statute (Statute of the International Court of Justice of 26 June 1945, 15 UNTS 355)) already determine as a rule of public international law: sic utere iure tuo ut alienum non laedas.
‘Where there is law, there may be also avoidance of law or evasion of law’. Avoidance of law is legally recognized. You may avoid burdensome →succession law (with reserved shares of close relatives) by transferring your centre of living to a country more suitable to your estate planning. But questions of permissibility arise when money (→Money and currency) is simply invested in countries where relatives have no reserved share, where it is sought to escape local law by choosing the law of another country without the burdensome protection of consumers. The first reaction to these ‘manipulations’ will be: abuse of law, Rechtsmissbrauch, fraude à la loi and frode alla legge. But the lawfulness of such conduct remains to be decided.
1. No evasion
In many cases of supposed ‘evasion’, there are circumstances which permit the ‘evading’ party to engage in such evading conduct, eg by choice of jurisdiction, →choice of law, alternative application of laws or by freedom of establishment.
2. Evasion: remedies
There are several →remedies which may prevent or stop evasion of law, which include special remedies or more general ones which may be used as prevention or defence.
(a) Special remedies
(1) Local law applies
Some people seek to evade local law by performing an act abroad expecting that the act will be recognized at home. This happens when a local person of local →nationality turns to Islamic faith, marries another wife in a country with Islamic family law and hopes that his bigamy will be recognized at home. However, he will be disappointed as for local people of local nationality national law applies in some countries even if they are resident abroad and these countries do not recognize religious law for nationals: Swiss Federal Court 6 November 1991 ((1992) ZZW 178): Bigamy case.
(2) Limitation of autonomy
→Party autonomy is restricted in order to protect weaker parties, particularly insured persons, consumers and employees. With respect to choice of court agreements, under arts 15(1), 19(1) and 23(1) Brussels I Regulation (recast) (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast),  OJ L 351/1; →Brussels I (Convention and Regulation)) such agreements are permitted only if entered into ‘after the dispute has arisen’. Also Rome I Regulation restricts choice-of-law agreements and does not permit the choice of law of a country which p. 706may deprive the consumer or the employee of the protection afforded them by mandatory rules of the objectively applicable law (arts 3(4), 6(2) and 8(1) Rome I Regulation). With insurance contracts only those laws may be chosen as mentioned in art 7(3) Rome I Regulation, and, naturally, no overriding mandatory rules applicable under arts 9 and 21 may be derogated by the parties. In tort cases a choice of law is only allowed when all the parties are pursuing commercial activities (art 14(1)(b) →Rome II Regulation (Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II),  OJ L 199/40)).
(3) Rapid sanction of evasion
If there has been evasion of local law, it should be sanctioned promptly. This is achieved in →child abduction cases between the more than 90 state parties to the Hague Abduction Convention of 1980 and, effectively, between 28 EU Member States because the return order of the country of origin is directly enforceable in the Member State to which the child has been abducted (arts 12(8) and 42 Brussels II Regulation). This was also confirmed by the ECtHR in the case Povse v Austria ((2013) FamRZ 1793) as not violating the ECHR. The ECtHR ruled that any defences of the abductor may be brought to the attention of the court in the country of origin.
(b) Ordre public and public policy
(1) Elimination of foreign law
There is hardly any case in which foreign law applicable in local courts had to be eliminated because of violation of local →public policy. In former times such elimination might have been necessary because entrepreneurs intended to evade some law protecting consumers (German Federal Court of Justice (BGH), 19 March 1997, 135 BGHZ 124, concerning timeshare contracts on immovable property located on Gran Canary subject according to a choice-of-law clause to the law of the Isle of Man). Today such cases are resolved by art 6 Rome I Regulation, which according to art 6(5)(c) also applies to timeshare contracts. But it should be noted that forum public policy can only eliminate foreign law as violating public policy of the forum. However, public policy exception does not work if local law rather than foreign law is applicable.
(2) Elimination of foreign decisions
More important is the attenuated public policy clause of international civil procedure with respect to the recognition and enforcement of foreign decisions. This remedy of non-recognition was adopted by French courts (Cass.fr. 6 July 1922, supra IV.1(c)). Other countries recognized foreign judgments because they considered foreign judgments allowing a divorce (→Divorce and personal separation), although prohibited at home, to be not violating local public policy (Siebenbürgen marriages, Rosenstiel v Rosenstiel, see IV.1(b)(1) above). The same is true with foreign paternity suits permitting such suits for a longer period than in Switzerland (Federal Court, 6 April 2004, see IV.2(a) above).
(c) Substitution of local requirements
If it is impossible to eliminate foreign court decisions by which an applicant wants to sneak into the lex fori, such fraud can be eliminated by specific statutes (eg § 33a German Social Code, first volume (Erstes Buch Sozialgesetzbuch (SGB I) of 11 December 1975, BGBl. I 3015, as amended) or by requiring that the foreign decision cannot substitute local requirements necessary for the desired result (De Ferrari case of the French Cass.fr. 6 July 1922, supra IV.1(c)).
(d) Abuse of law?
Hitherto there has been hardly any evasion case which could not be resolved by traditional private international law means. If an evasion seems to occur, it may be recognized by the lex fori, even if the evasion involves introducing a second ship register, or alternatively it may promote changes of the lex fori as happened in New York where other grounds of divorce were introduced in 1986 after the decision in Rosenstiel v Rosenstiel (see IV.1(b)(1) above).
VI. Open questions
1. Must evasion be fraudulent?
The expression ‘fraude à la loi’ in particular gives the impression that fraud and intentional evasion of law are necessary for culpability. But this is subject to serious doubt. Evasion of internationally mandatory rules is prohibited in private international law and these rules have to be respected even by an innocent party acting in good faith. Nevertheless, fraud or intention to evade may indicate that a certain p. 707conduct involves the creation of ‘wholly artificial arrangements which do not reflect economic reality’ (Case C-196/04 Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue  ECR I-7995, no 55). To this extent although fraudulent behaviour helps to discover an evasion of law, there may nonetheless be ‘fraude à la loi sans fraude’, ie evasion without any fraudulent behaviour (Alexandre Ligeropoulo, Le problème de la fraude à la loi (Sirey 1928) 60).
2. Effect of evasion
There is no indication of the effect of evasion. However, it appears normal that the evasion fails and that the evaded law applies or that the judgments acquired by evasion will not be recognized by the evaded jurisdiction. Sometimes you find in French literature and court decisions that in cases of ‘fraude à la loi’ the fraudulent activity cannot be attributed to the party victim of the ‘fraude’. Mme Bauffremont-Bibesco (see IV.1(a) above) is supposed to be still married to her husband Prince Bauffremont.
(a) One jurisdiction only involved
(1) Third party not involved
If the evasion does not concern third parties, the evasion case fails and the normal rules apply. If in a commercial contract one party wishes to avoid a specific provision of the lex fori and therefore insists that foreign law should be chosen, such an evasion fails and the lex fori will be applied as a provision of →public policy.
(2) Third party involved
If the evasion may also affect third parties, especially through the creation of companies, the evasion is only disregarded between the parties engaged in the evasion or defrauded by it while for third parties the evading arrangement remains valid.
(b) More than one jurisdiction involved
(1) Foreign acts or decisions
If law is evaded by acts done in foreign counties (eg marriage abroad) or by foreign court decisions, then the foreign acts or decisions are valid according to the law of the foreign country, but the issue arises of whether they are also valid in the local forum state.
Also under these circumstances (foreign act or decision) a distinction should be drawn between the positions of the parties to the evasion or defrauded by it and the effect on third parties not engaged in the evasion.
(aa) Third Party Not Involved
If no one else is interested in the evasion apart from the defrauded person and the persons engaged in the evasion, then the evasion will not be recognized. Accordingly the changes to the Turkish civil register need not be recognized by German authorities and in the De Ferrari case of the Cour de cassation (see IV.1(c) above) the Italian court decision is not equivalent to substituting a French separation decision.
(bb) Third Party Involved
Where, however, third parties are involved, the foreign act or decision may also be valid at home, but can be challenged by the victim of the fraudulent evasion. This may be the case of the →marriage of Mme Bauffremont-Bibesco and Prince Bibesco, which, however, can be challenged by M Bauffremont. In France the Bauffremonts are still married.
3. Principle of evasion stated
The principle of evasion of law can be stated as follows:
(a) Is there an evasion?
If the facts of an international case seem to have been manipulated, the issue arises of whether there is an evasion of law. This kind of manipulation has to be distinguished from a manipulation of facts in simple local cases. In local cases a choice-of-law clause is impermissible (see art 3(3) Rome I Regulation) and other forms of evasion, cheating and fraud are sanctioned by local law.
(b) No evasion
There is no evasion if (i) the law to be applied according the choice-of-law clause can be chosen according to the law of the state where the lawsuit is brought; (ii) the change of a →connecting factor (→nationality, habitual residence (→Domicile, habitual residence and establishment), →flag of ships, location or quality of property, COMI) is permissible and in fact can be achieved and not considered to be manipulated; or (iii) the jurisdiction chosen by the claimant p. 708had jurisdiction according to the law of the state where the lawsuit was initiated and by the law of the state where the decision should be recognized and substituted for a local judgment.
If there is an evasion, it may be disregarded by (i) non-recognition of a chosen standard subordinate to that of the forum law (see art 3(4) Rome I Regulation); (ii) an equivalent substitute for a legal relation or judicial decision required by the law applicable under the lex fori; (iii) as a violation of the →public policy of the forum state; (iv) as an evasion of law where foreign law has been evaded by application of the lex fori. This perhaps is the only set of cases which cannot be solved by some generally known general device of private international law and for which some kind of new general device such as ‘evasion of law’ has to be created. Nevertheless, there seem to be almost no examples in which this device of evasion of law has been used to resolve these cases. One example is the De Ferrari case (see IV.1(c) above), but this problem could be resolved by →substitution and declining to substitute the requirements of art 310 Code civil old version (conversion of contentious separation into divorce) by the Italian separation decision because of consent by the spouses. Other examples are the Tønder – marriages (see IV.1(a)(3) above), in which couples married according to a foreign lex fori and then applied for registration as validly married couples in their home jurisdictions. This problem was resolved by substantive law in that divorced couples can remarry (see now art 13(2) no 3 EGBGB; art 43(3) Swiss PILA). In some jurisdictions this rule may even be ignored because foreign law, even if evaded, only applies if it has been pleaded and confirmed by an expert witness.
Evasion of law is the circumvention of mandatory rules of private international law and procedure. But this raises more questions than answers. As soon as the suspicion arises that artificial arrangements have been made to evade mandatory rules, the question has to be answered whether the parties to these arrangements are guilty of evasion of law or whether these arrangements are valid and acceptable. If there is an evasion of law, the appropriate sanction may constitute a violation of →public policy, or where third parties are involved and should be protected, the evasion may be challenged by the victim of the evasion. The evasion of law should not be codified in a general part of European private international law. The current remedies (public policy of the applicable law and foreign court decisions, no substitution and simply negation of any circumvention) are sufficient to combat evasion of law.
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