The Fake Client: The case that bamboozled the CJEU

Steve Peers

A plucky young lawyer, fighting impossible odds. A big corporation, shamelessly manipulating the system. A vulnerable client, screwed by that same corporation. A slick corporate law firm, smugly carrying out that company’s instructions. And a quirky judge, trying to his or her best to keep order in the courtroom regardless of any shenanigans.

For over twenty years, these have been the core elements of many of John Grisham’s best-selling novels. His characters rarely leave the Southern United States – unless the plot demands a quick, sleazy journey to a Caribbean island. Could they be transplanted to Europe?

Grisham’s book Playing for Pizza is indeed set in Europe. But it’s a sports story, about a disgraced American footballer eating his way through Italy. Instead, we have the recent real life case of ‘Chain’, documented by Irish journalists Liam O’Brien and Frank Shouldice (radio version here; online story here). It contains many of the key elements of a Grisham page-turner – but with some twists worthy of his best books. (Please note that some of the allegations in their story have been disputed).

The story begins with Mr Bogdan Chain, our vulnerable client. In 2009, he began several years’ work for Atlanco Ltd, a Cypriot subsidiary of an Irish recruitment company, Atlanco Rimec – our big corporation. He was posted to several EU countries, as well as Norway, outside the EU but applying EU free movement laws. Working in different EU countries is liable to create complications from the point of view of social security, and there is complex EU legislation intended to address this issue. But it did not apply as intended in Mr. Chain’s case.

His troubles began when the Norwegian government pursued him for unpaid contributions, even though his payslips indicated that those contributions had been deducted from his pay. Then they got worse: he had a heart attack, and became unable to work. He applied to the Polish government for disability pay, which he believed he had qualified for based on his contributions. But like the Norwegians, the Polish authorities said he hadn’t made sufficient contributions – and so denied him benefits.  

So did Mr. Chain go to court to challenge this? Well, he did – and he didn’t. The real Mr. Chain insists that he did not go to court. But a lawsuit against Atlanco Ltd was nonetheless instigated in his name, without his consent or knowledge. Would the case have benefited him, if he had “won” it? It’s hard to know, but in any event it’s not appropriate to bring cases without the “plaintiff’s” consent.

The so-called “Chain” case, concerning the period he worked in Romania, went first to the Cypriot courts, and was then referred to the CJEU. According to the press story, this case was indirectly related to another case then pending in Cyprus, in which Atlanco sued the Cypriot government to let it pay social insurance for its staff in Cyprus, rather than in other EU countries. Companies would prefer to pay social insurance in Cyprus because rates are low. But as a consequence, the contributions into the social security systems in other Member States are reduced; and there’s a risk (manifest in this case) that as a result of such disputes, a company’s employees end up on the hook for contributions which they thought they had made, and are denied benefits which they thought they were entitled to, just when they need them most.  

We don’t have any plucky lawyers in this case, since (according to the press story), documents disclosed to a criminal investigation in Cyprus show that the same law firm was linked to both sides of the “Chain v Atlanco” case (acting for the corporate parent; that law firm denies this). But we do have plucky journalists: O’Brien and Shouldice, who came across the real Mr. Chain when researching the fake case.

That was the first Mr. Chain knew of the case brought in his name. He then informed the CJEU that he had not authorised that legal action. But the quirky judges in the Court went ahead and held a hearing anyway. There was even an Advocate-General’s opinion. By that point, however, the Cypriot authorities, after Mr. Chain had contacted them, had ensured that the case was withdrawn back in Cyprus, and therefore the CJEU too.

Recent Grisham novels have ended ambiguously, with key plot points not resolved. As things stand, that’s the case here too. According to the press story, the Atlanco group of companies has gone bust; the Irish founder of the parent company is counting his money; and the Cypriot government has opened a criminal investigation. To my knowledge, the Belgian authorities have not asked the law firm to clarify its position. And Mr. Chain still has no disability benefits.

Comments

First of all, congratulations to the journalists in this case, for an excellent work of investigative journalism. It’s fortunate that due to their efforts, the dubious nature of these proceedings came to light before the CJEU could give a judgment. But how did this case get so far in the first place?  

My main focus here is the position of the Court of Justice. Was its behaviour in this case appropriate? (I should note that the Court appears to have issued no formal statement. I have asked the press office if it will do so, along with some detailed questions, but so far have had no reply. Suffice it to say that I think it’s a mistake for the Court not to comment when serious questions are raised about the conduct of its proceedings).

In my view, the Court can’t be expected to systematically check the bona fides of the parties in each case referred from national courts. The Court does not have the institutional capacity to do this, and any move to change that would subvert the nature of the preliminary ruling system, which is essentially a national procedure which is temporarily interrupted to ask the CJEU some EU law questions.  It’s the national court’s job to check that proceedings are genuine, and should remain so. Here there was obviously a slip-up in allowing the case to proceed in Cyprus, although it was corrected once the alleged impersonation came to light.

According to the journalists (in private correspondence), the CJEU and the national court had no knowledge of the documents suggesting links between the “opposing” parties in this case, until the criminal proceedings were opened recently. So neither court can be criticised on that score. But should the Court have terminated proceedings once Mr. Chain told them that he didn’t authorise the case to be brought in his name?

In my view, no, for two reasons. First of all, again we have to recall the nature of these proceedings. It’s for the national court to determine whether a case is admissible before it. Mr. Chain was effectively alleging a flaw in the national proceedings, and so the Court was right to refer him to bring a complaint at the national level instead. (The EuObserver story doesn’t mention that the Court suggested he do this, but the journalists have confirmed in private correspondence that it did). 

Secondly, withdrawing the case straight away on the basis of Mr. Chain’s letter would give rise to another type of impersonation risk. To see what I mean by this, take a look at the Philip Morris case pending before the CJEU, in which the big cigarette company is challenging EU legislation on cigarette packaging and composition. An Advocate-General’s opinion in this case is due tomorrow.

It probably wouldn’t take much effort for me to find out the names of the lawyers representing Philip Morris, and to mock up some fake letterhead with a bogus signature at the bottom informing the Court of Justice that “my” client is no longer interested in pursuing this case. Someone might even have tried a stunt like this before. In light of this, it’s quite understandable that the Court would not simply dismiss the case, but wait to hear what the national court had to say.

So was the Court’s response flawless? Not at all. Mr. Chain is clearly not a huge international corporation, with the resources to pay slick corporate law firms who are fully aware of the nuances of the EU judicial system. It’s understandable that he went to the CJEU since the case had been lodged there, and was confused about how to proceed when it referred him to the national court. Keep in mind that this case was not even brought in his own legal system.

Therefore, while the CJEU should not have withdrawn the case immediately after hearing from Mr. Chain, it could have done more than just refer him to the national court. In particular, it should have told the representatives of the parties of his allegations and asked them to comment. Perhaps one or both parties would then have run for the hills, and the Court could have drawn the obvious conclusions from that. The Court of Justice should also have informed the national court of the allegations, since (as I have said already) that court was best placed to examine them, while Mr. Chain was not well placed to contact that court himself. As far as I know, it didn’t do this (this is one of the questions I asked the Court to answer).

Instead, the Court of Justice ploughed full speed ahead with a bogus case, embarrassing itself and wasting time and money. Some might even have darker suspicions about the Court’s integrity. For those reasons, the Court should swiftly issue a public admission and apology, and make the simple reforms I have suggested above.

Unlike the journalists who uncovered this fake case, I wouldn’t say that the Court was ‘complicit’ in this dubious litigation. But I believe the word ‘complacent’ is richly deserved. The EU’s citizens rightly expect better from the Court.

Barnard & Peers: chapter 10

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