Reflexive application of exclusive jurisdictional rules: The High Court in Ferrexpo

In Ferrexpo, the High Court applied a so-called ‘reflexive’ or ‘mirror’ application of the exclusive jurisdictional rules of Article 22 of the Brussels I Regulation. The case was held in April 2012 – it has only recently come to my attention.

Mr Babakov, a Russian, trading through a variety of companies with registered office in England (collectively known as ‘Gilson’), has a long-running litigation against Mr Zhevago, of Ukrainian nationality, equally trading through a variety of companies, with registered office in Switserland (collectively known as ‘Ferrexpo’). At the core of the dispute lies the control over a Ukrainian mining company named OJSC.

In 2005, Babakov files in the Ukraine, with a view to having a number of shareholder resolutions declared void. These were taken in 2002 and had decided that Gilson’s shares in OJSC were invalid and had to be transferred to Ferrexpo. In 2010 a Ukrainian court held that the shareholder resolutions were indeed invalid. Babakov subsequently initiated new proceedings in the Ukraine, with a view to having the Gilson shares in OJSC restored. On 23 November 2011 the Ukrainian court ordered for Ferrexpo to be joined to this proceeding.

Ferrexpo started a procedure against Gilson in England on 22 November 2011, with a view to declaring that the Ferrexpo shares in OJSC were valid. Gilson argued that the English court had no jurisdiction, for a reflexive application of Articles 22(2) and 28 (part of the lis alibi pendens rule) of the Brussels I Regulation required it to desist. Article 22(2) reads

‘The following courts shall have exclusive jurisdiction, regardless of domicile: (…)

2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;’

Ferrexpo argued that 1) the English Courts had jurisdiction on the basis of Article 2 of the Brussels I Regulation, and Gilson’s domicile in the UK; 2) it would not receive a fair trial in the Ukraine, the issue would be resolved fast in an English court, and the English courts enjoy “trust and confidence“.

In Owusu, the Court of Justice famously held that where the (in that case also English) national court had jurisdiction by reason of Article 2 of the Jurisdiction Regulation, it could not decline such jurisdiction on the basis that a Court of another state was a more appropriate forum: forum non conveniens has no place in the Brussels regime. However what Owusu did not resolve, was whether this also applies where the European court wishing to decline jurisdiction, does so because the issue at stake is one of the interests listed in Article 22 of the Regulation (exclusive jurisdictional rules), which just so happens to be located outside of the EU (in the case at issue: shareholder resolutions of a Ukrainian company are the core of the dispute).

The High Court held that Article 22 should so apply: jurisdiction was denied. The decision is problematic, for preparatory works of the Brussels I Regulation indicate quite clearly that the interests that are being protected, are only those located inside the EU (or Lugano States if the application of the Lugano Convention is at stake). The Court could not have been clearer as to the application of Article 2 in Owuso. Granted and as noted, Owusu did not entertain the reflexive application of Article 22, however direction in Owuso is clear. Reference to the ECJ in Ferrexpo would have been merited – although the English courts are reluctant to do so, having burnt their fingers so badly in Owusu.


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