The Brazilian orange juice cartel: successful claimants on among others Article 34 Brussels Ia ‘forum non light’, with lingering doubts on A4 ‘domicile’..

Viegas & Ors v Cutrale & Ors [2021] EWHC 2956 (Comm) (05 November 2021) concerns an alleged cartel between several Brazilian companies which produce orange juice, including Sucocítrico Cutrale: 3rd defendant. The other two defendants, Mr Cutrale Sr and Mr Cutrale Jr,  are natural persons Claimants are orange farmers who are all domiciled in Brazil.  The claim relates to alleged antitrust infringements committed in Brazil and said to have restricted competition in markets in Brazil, causing harm to the Claimants there.

Claimants claim to be entitled to maintain proceedings in England and Wales on the bases that:

i)                   although Sucocítrico Cutrale is a Brazilian company, it has its central administration in London and is therefore domiciled in the UK pursuant to A63(1)(b) Brussels Ia;

ii)                 alternatively, the Claimants were entitled to serve Sucocítrico Cutrale, pursuant to CPR 6.3(c)/6.9(2) at a “place within the jurisdiction where [it] carries on its activities; or any place of business of the company within the jurisdiction”.

iii)               Cutrale Snr is domiciled in England; and

iv)               Cutrale Jnr is domiciled in Switzerland and the claims against him are so closely connected with the claims against Sucocítrico Cutrale and Cutrale Snr that it is expedient to hear and determine them together so as to avoid the risk of irreconcilable judgments, pursuant to Article 6 Lugano Convention.

The Defendants’ position is in outline as follows:

Sucocítrico Cutrale

i)                   Sucocítrico Cutrale has its “central administration” in Brazil and is therefore not domiciled in the UK for the purpose of A63(1)(b) BIa.  There is therefore no right to bring proceedings against the company in England under Article 4(1). The court must apply common law principles to determine jurisdiction.

ii)                 Alternatively, the claims against Sucocítrico Cutrale should be stayed under A33 and/or 34 BIa because of ongoing proceedings in Brazil concerning the alleged cartel.

iii)               The Claimants were not entitled to serve Sucocítrico Cutrale at an address within the jurisdiction, and so the company has not been validly served.

iv)               Alternatively, applying common law forum non conveniens principles, Brazil is the proper place for the claims against Sucocítrico Cutrale and the court should not exercise jurisdiction against it.  The claims against Sucocítrico Cutrale should be stayed even if (contrary to the Defendants’ primary case) Cutrale Snr is domiciled in England. Cutrale Snr has confirmed that he would submit to the jurisdiction of the Brazilian court. The risk of inconsistent judgments in England and Brazil therefore carries little weight because it would be caused by the Claimants’ unnecessary pursuit of litigation in England. In such circumstances, the court may stay the claims against the foreign defendant notwithstanding the presence of a UK domiciled anchor defendant (reference is made to Vedanta Resources plc v Lungowe [2020] AC 1045 . I flagged the ‘submission to foreign jurisdiction’ issue in my review of Vedanta).

Cutrale Snr

v)                  Cutrale Snr is not domiciled in the UK. There is therefore no right to bring proceedings against him under A4(1) BIa.

vi)               Further or alternatively, the court should stay the claims against Cutrale Snr pursuant to A34 BIa because of the ongoing proceedings in Brazil.

vii)             Although Cutrale Snr was served in the jurisdiction, applying common law forum non conveniens principles Brazil is the proper place for the claim.  Accordingly, the court should decline jurisdiction.

Cutrale Jnr

viii)           If neither Sucocítrico Cutrale nor Cutrale Snr is English domiciled there is no basis to assume jurisdiction against Cutrale Jnr.

ix)               If Cutrale Snr is English domiciled but the claims against Sucocítrico Cutrale are to proceed in Brazil, the criteria under A6 Lugano are not met because it would be more expedient for the claims against Cutrale Jnr to be heard in Brazil alongside the claims against Sucocítrico Cutrale.

x)                  Further or alternatively, the court should stay the claims pursuant to a reflexive application of A28 Lugano Convention because of the ongoing proceedings in Brazil.

Henshaw J held that the court lacks jurisdiction over Sucocítrico Cutrale however that it does have jurisdiction over Cutrale Snr and Cutrale Jnr and  that there is no proper basis on which to stay the claims against them.

Domicile of Sucocítrico Cutrale (‘SuCu’)

A63 BIa determines corporate domicile as the place where the corporation has its (a) statutory seat; (b) central administration; or (c) principal place of business. Claimants suggest place of central administration as being in London. Anglo American came to my mind as indeed it did to counsel and judge in current case. At 31 ff a concise look into the travaux is offered as are references to CJEU case-law under freedom of establishment (including Uberseering). I would be cautious however with too much emphasis on those cases, which are judged in quite a different context to the one in a jurisdictional assessment.

SuCu are in in essence a family-run business [55]. This is also emphasised in the witness statement of Cutrale Sr himself. SuCu refer extensively to its internal by-laws and the role in same for the ‘Executive Board’ which is made up of professionals. However there is also a, by-laws sanctioned, Family Board (in which Cutrale Sr until recently had a 99% stake). The Executive Board, by defendant’s own admission [55], runs the company on a day to day basis. The Family Board seemingly meets at various places worldwide, and the role of London in the family Board’s direction is not small, given that Cutrale Sr has secretarial assistance for his business interests there, and that his daughter (who also sits on the Family Board) conducts all her business interests there [57].

In Anglo American, the CA held

 ‘the correct interpretation of “central administration” in Article 60(1)(b)when applied to a company, is that it is the place where the company concerned, through its relevant organs according to its own constitutional provisions, takes the decisions that are essential for that company’s operations. That is, to my mind, the same thing as saying it is the place where the company, through its relevant organs, conducts its entrepreneurial management; for that management must involve making decisions that are essential for that company’s operation’

[75] ff the judge does not see London as that place where the entrepreneurial management takes place. This is to some degree a factual appraisal however I I am minded to see quite strong arguments in favour of London. I do not think for instance that BIa’s DNA of predictability for the defendant knowing where it might be sued, carries too much weight here seeing as the complex structure and the diverse effective location of the Family Board’s meetings is of its own making. By failing clearly to implement one centre of entrepreneurial management, visible to outsiders, the defendant in my view brings the risk of positive conflicts of jurisdiction upon itself.  All the more so in my view in cases where, such as here, the accusation is involvement in a cartel, which is unlikely to have happened with the firm controller of the Family Board having been kept in the dark.

Alternative serving under CPR 6.9.(2) [“Any place within the jurisdiction where the corporation carries on its activities; or any place of business of the company within the jurisdiction.”] is also dismissed: [104] ff.

[112] ff the judge discusses the domicile of Cutrale Sr which, per A62(1) BIa is to be determined under English law. This [129] ff is held to be England.

Cutrale Jr being undisputably domiciled in Switserland, the question arises whether the claim against him may be anchored upon the claim against his father, per A6(2) Lugano. The judge is reminded of his own judgment in PIS v Al Rajaan. Defendants submit that if the claims against Sucocítrico Cutrale must be pursued in Brazil, it is more expedient for the claims against Cutrale Jnr to be pursued in that jurisdiction, even if the Claimants are entitled to sue Cutrale Snr as of right in England. However [142] the judge agrees with Claimants’ point that somewhat different policy considerations arise when considering the risk of inconsistent judgments within the EU (or between Lugano States), compared to the position vis-à-vis so-called ‘third States’, and that the latter context does not involve the same particular impetus to remove obstacles to the single market and observe the principle of ‘mutual trust’ between the courts of different Member States.

Whilst the claims against Cutrale Jnr are of course connected with those against Sucocitrico, they are also bound to involve important issues in common with the claims against Cutrale Snr which (subject to the issue of an A34 stay, see below) are to be pursued in England  [143].

[144] In conclusion the expediency threshold under A6 Lugano is held to have been reached.

Next, a stay of the proceedings against Cutrale Snr under A34 BIa is rejected [147] ff. Much of the A34 authority, all of which I have discussed on the blog, is flagged. The judge observes the tension between Kolomoisky and EuroEco Fuels (Poland) as to whether the power to stay depends on there being a procedural means by which the two actions could, in fact, be tried together. At [163] the judge thankfully notes the important distinction between A33-34 and A29-30, despite citing A29-30 authority with some emphasis:

I would observe, however, in disagreement with the Defendants, that despite the similarity of language it may well make a difference whether a stay is sought (a) under Article 28 as such or (b) under Article 34 or under Article 28 as applied reflexively vis a vis proceedings in a third country (see § 238 below).  The observation quoted above that there might be a presumption in favour of a stay seems considerably easier to justify in a case where the intra-EU internal market considerations referred to in § 142 above apply than where the overseas proceedings are in a non-Member State.  On the contrary, a presumption of a stay in favour of a third country state of proceedings prima facie brought as a right against a defendant in his place of domicile may well be hard to square with the fundamental principles underlying the Brussels and Lugano regimes.

At [221], too, and in an in my view important and marked departure from Justice Turner in Municipio, Henshaw J here holds that

whilst recital 24 indicates that the court should consider all the circumstances of the case, it does not follow that the court can grant a stay pursuant to Article 34 which is in substance no more than a forum non conveniens stay.  It follows that the factors listed in § 213.iv) above are relevant only insofar as they support the granting of a stay based on the Favero and Costa claims as related claims.

This puts the horse back before the cart.

At [164] ff the ‘rival’ Brasil claims are discussed, [197] of which only two predate the current E&W claim against Cutrale Sr and a conclusion [210] that these are related in a broad sense to the present claims, but that degree of relationship would be insufficient to make it expedient to stay the present claims by reference to them.

[213] ff the various arguments that a stay would be in the ‘interest of justice’ are rejected: these include in particular [216] suggestions of consolidation or joint case management, whilst theoretically possible, are unrealistic in practice (reference is made ia to the fact that none of the current Brazilian claims have been consolidated); [217] neither rival claim is likely to reach a conclusion in the reasonably foreseeable future: on the contrary, both have been mired in procedural disputes for many years.

Similar arguments are made obiter when considering an A33-34 stay against Sucocitrico (in the event the A4 analysis, above, were to be wrong): [241] ff.

At 237, the possibility of a stay of the proceedings against Cutrale Jr, under a reflexive application of A28 Lugano is rejected with mere reference to the reasons listed viz the A34 stay. The judge has to follow the Court of Appeal’s finding in Kolomoisky, that reflexive application of A28 Lugano is possible. Clearly, I submit, it is not and this will be an important point to clarify when and if the UK accede to Lugano.

The judge concludes [249] ff by obiter upholding a forum non stay. His arguments here are interesting among others for they lead to a different result than the A33-34 application – which serves to confirm the very different nature of both mechanisms.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 2.2.15.3.

ID v LU. A voluntarily appearing defendant cannot serve as anchor for another under the English residual rules (as indeed under BIa).

In ID v LU & Anor [2021] EWHC 1851 (Comm) Pelling J discusses a challenge to jurisdiction in which each of the parties are Ukrainian nationals. Brussels Ia applies but is only engaged viz one of the defendants. Claimant and second defendant are both domiciled and resident in Ukraine. The first defendant is a Ukrainian national who is and was at all material times domiciled in an otherwise unidentified EU Member State.

Claimant alleges that the second defendant approached him requesting that he move his corporate banking business to the second defendant, a Bank. Following discussions, the claimant agreed to do so and considerable funds  were placed with The Bank. The claimant’s case is that he agreed to do so only after the second defendant agreed that he would undertake personal responsibility for all monies that the companies placed with The Bank. The claimant alleges that it was expressly agreed by the claimant and second defendant that this oral agreement was governed by English law.

There was more tro and fro however I focus here on the jurisdictional challenge. With reference to Article 4 BIa and the most recent authority of Vedanta, the judge holds that in principle the defendant with EU domicile has a right to refuse to be sued other than in his place of domicile. However that defendant acknowledged service, indicating an intention to defend the claim but not to contest jurisdiction. This leads the judge to conclude, after some discussion, that there is A26 BIa submission (aka voluntary appearance).

Next follows an important discussion on the circumstances in which a defendant who voluntarily submits, may serve as an anchor defendant under the English residual rules.  It would certainly not be possible under Brussels Ia. The relevant rule in the practice directions (this is ‘Gateway 3’) reads

“3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where –… 3) A claim is made against a person (‘the defendant’) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and  – a) there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.

Second defendant argues claimant is not entitled to rely on Gateway 3 because the first defendant is not a defendant who is to be treated as being a person on whom the claim form has been or will be served because the court has jurisdiction over the first defendant only because he has voluntarily submitted to the jurisdiction of the English Court. The overall nature of the discussions on this issue essentially discuss the need to avoid abuse. Of note in this respect is the judge finding [41] that there is ‘no evidence that suggests that there was any agreement reached between the claimant and the first defendant by which the first defendant agreed to submit to the jurisdiction of the court prior to the issue of the Claim Form in these proceedings or for that matter afterwards.’

Nevertheless the judge holds that the current authorities in particular the Court of Appeal in the Benarty [1983] 1 Lloyds Rep 361, continue to not permit a claimant to rely on an anchor defendant who has voluntarily submitted to the jurisdiction when he could not otherwise have been served in accordance with the CPR. Obiter he holds that while there is a real issue to be tried against the second defendant, the contract gateway for jurisdiction (which would require English law to be the lex contractus) is not engaged. No clearly demonstrated will exists for English law to be lex voluntatis per Rome I [76] and [80]

There is no plausible evidential basis to submit that that the governing law identified by either Article 4(2), 4(3), or 4(4) [of Rome 1] would be English law. The Tripartite Agreement was, if made: (a) agreed between three Ukrainians who reside (or resided) in Ukraine and/or [The EU Member State]; (b) agreed in, variously, [The EU Member State], Ukraine, and France; (c) premised on a further agreement said to have been agreed in Ukraine, between two Ukrainians, in respect of deposits made by Ukrainians into a Ukrainian bank; (d) to be performed outside England. No party has provided any evidence of any connection between themselves, or the Tripartite Agreement, and England”

Neither does the tort gateway help [83]:

There is no evidence that at any stage any of the contact that took place leading to what the claimant contends to be the inducement of a breach by the first defendant of the Tripartite Agreement took place otherwise than in either Ukraine or The EU Member State.

At [86] ff England is, equally obiter, held to be forum non conveniens.

Lack of jurisdiction against the second defendant is confirmed. One imagines there might be ground of appeal given the change to the practice directions’ formulation after the Benarty and the need to clear up this principled issue.

Geert.

Benkel v East-West German Real Estate Holding. Potential future proceedings should not frustrate anchor jurisdiction.

In Benkel v East-West German Real Estate Holding & Anor [2021] EWHC 188 (Ch), Morgan J was asked to join a party on the basis of Article 8(1) Brussels Ia’s anchor defendant mechanism, and obliged. Mr Dikautschitsch (domiciled in either Spain or Germany) is to be one of a number of defendants. One of the existing defendants, East-West UK, is domiciled in England and Wales.

Casio Computer Co Ltd v Sayo & Ors [2001] EWCA Civ 661 was the authority mostly relied on, as was, via the link with Article 30, Sarrio SA v Kuwait Investment Authority. Expediency to add the second defendant to the proceedings was found to be present given the possibility of conflicting findings of fact [59]. Morgan J rejected [64] a rather novel argument that given the possibility of the E&W courts’ findings of fact clashing with potential future proceedings elsewhere, he should refrain from exercising his discretion to consolidate.

Geert.

European Private International Law, 3rd ed. 2021, Heading 2.2.13.1.

Weco projects: on Yachts lost at sea, anchor jurisdicton (that’s right), lis alibi pendens, carriage, ‘transport’ and choice of court.

In Weco Projects APS v Piana & Ors [2020] EWHC 2150 (Comm),  Hancock J held on a case involving Brussel Ia’s consumer title, including the notion of contract of ‘transport’, Article 25’s choice of court regime, and anchor jurisdiction under Article 8(1) BIa.

The facts of the case are complex if not necessarily complicated. However the presence of a variety of parties in the chain of events led to litigation across the EU. Most suited therefore to be, as WordPress tell me, the 1000th post on the blog.

For the chain of events, reference is best made to the judgment itself. In short, a Yacht booking note, with choice of court and choice of law was made for the Yacht to be carried from Antigua to Genoa. Reference was also made to more or less identical standard terms of a relevant trade association. A clause was later agreed with the identity of the preferred Vessel to carry out the transfer, followed by subcontracting by way of a Waybill.

The Yacht was lost at sea. Various proceedings were started in Milan (seized first), Genoa and England.

At 21, Hancock J first holds obiter that express clauses in the contract have preference over incorporated ones (these referred to the trade association’s model contract), including for choice of court. Readers will probably be aware that  for choice of law, Rome I has a contested provision on ‘incorporation by reference’, although there is no such provision in BIa.

Next comes the issue of lis alibi pendens. Of particular note viz A31(2) [‘Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement’] is the presence of two prima facie valid but competing exclusive choice of court agreements. Hancock J proceeds to discuss the validity of the English choice of court agreement in particular whether the businessman whose interest in sailing initiated the whole event, can be considered a consumer.

The judge begins by discussing whether the contract concerned is one of mere ‘transport’ which by virtue of A17(3) BIa rules out the consumer title all together. At 37 it is concluded that the contract is indeed one of transport and at 37(8) obiter that freight forwarding, too, is ‘transport’. Hancock J notes the limited use of CJEU authority, including Pammer /Alpenhof. In nearly all of the authority, the issue is whether the contracts at issue concerned more than just transport, ‘transport’ itself left largely undiscussed.

Obiter at 75, with reference to CJEU Gruber and Schrems, and also to Baker J in Ramona v Reliantco, Hancock J holds that Mr Piana had failed to show that the business use of the Yacht was merely negligible.

Following this conclusion the discussion turns to the impact of the UK’s implementation of the EU’s unfair terms in consumer contracts regulations, with counsel suggesting that the impact of these is debatable, in light of A25 BIa’s attempt at harmonising validity of choice of court. Readers will be aware that A25’s attempt at harmonisation is incomplete, given its deference to lex fori prorogati). Hancock J does not settle that issue, holding at 111 that in any event the clause is not unfair viz the UK rules.

Next follows the Article 8(1) discussion with reference to CJEU CDC and to the High Court in Media Saturn. Hancock J takes an unintensive approach to the various conditions: they need to be fulfilled without the court at the jurisdictional stage getting too intensively caught up in discussing the merits. At 139 he justifiably dismisses the suggestion that there is a separate criterion of foreseeability in A8(1). On whether the various claims for negative declaratory relief are ‘so closely connected’, he holds they are on the basis of the factuality of each being much the same and therefore best held by one court. Abuse of process, too, is ruled out per Kolomoisky and Vedanta: at 143: there is no abuse of process in bringing proceedings which are arguable for the purposes of founding jurisdiction over other parties.

(The judgment continues with extensive contractual review of parties hoping to rely on various choice of court provisions in the chain).

Quite an interesting set of Brussels Ia issues.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, big chunks of Chapter 2.

 

 

 

Senior Taxi v Agusta Westland. Again on merits review and anchor defendants.

In Senior Taxi Aereo Executivo LTDA & Ors v Agusta Westland S.p.A & Ors [2020] EWHC 1348 (Comm) Waksman J discusses the same issues which I analysed in my review of Sabbagh v Koury (and he refers to that case at 51 ff). Proceedings arise out of the fatal crash of an Agusta Westland AW 139 twin turbine helicopter on 19 August 2011, during a flight from the Petrobras P-65 offshore oil platform in the Atlantic, west of Rio de Janeiro, to Macae Aerodrome in Brazil.

First and third defendant are an Italian company. Second defendant, AgustaWestland Ltd is an English company and the anchor defendant per A8(1) Brussels IA. At 32:

‘Defendants’ contention is that in order for Article 8 (1) to apply at all, the claim against the anchor defendant must at least be a sustainable one. I described this as “the Merits Test”. For present purposes, the requirement of sustainability can be equated with “viability”, “a real prospect of success”, a “serious issue to be tried” or a “good arguable case”. Neither party sought to argue that any fine point of distinction between these various expressions was relevant here.’

Reisch Montage and Freeport of course are CJEU authority referred to. As is Kolassa for the CJEU consideration of ‘merits review’ (particularly there: taking account of both defendant and claimant’s arguments) under A25 and A26 BIA) and CDC for the CJEU’s most recent proper discussion of the issue (at 86 Waksman J suggest CDC is not a ruling on the merits issue).

At 65 ff Waksman J follows the majority in Kabbagh, and not the dissent of Lady Justice Gloster – I as noted was more enclined to agree with her. Having confessed to his preference for there being a merits test, he then seeks to distinguish the CJEU in Reisch by focusing on the CJEU there finding on the basis of a ‘procedural bar’ in the Member State of the anchor defendant. At 83:

‘I do not find the reasoning of the CJEU here persuasive and I consider that the decision should be distinguished if possible. It can be distinguished because it is very clear from the judgments that the focus was on a national rule as to admissibility of the claim. Even allowing for differences of language, the expression “procedural bar” is not apt to include a lack of any substantive merit. Reisch is not therefore an obstacle to deciding that there is a Merits Test.’

And at 85:

‘that the reasoning of the court in Reisch was concerned more with what it simply saw as an illegitimate incursion of a domestic procedural rule (a bankrupt cannot without more be sued in ordinary litigation) into the operation of Article 6 (1). That, in and of itself decided the point. It was a question of form and not substance. But the Merits Test is a matter of substance.

Held: there is a Merits Test which must be satisfied before A8(1) can be invoked. That merits test is not met in casu.

A8(1)’s ‘so closely connected’ test clearly requires some appreciation of the facts and the legal arguments, as well as a certain amount of taking into account the defendant’s arguments. Yet this in my view does not amount to a merits test, and ‘sustainability’, “viability”, “a real prospect of success”, a “serious issue to be tried” or a “good arguable case” may well be synonyms – but there are not the same as an A8(1) merits test.

One to watch upon appeal.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.12.1

Jefferies v Cantor Fitzgerald. The full monty on forum non, case-management etc following team move.

Jefferies International Ltd & Anor v Cantor Fitzgerald & Co & Ors [2020] EWHC 1381 (QB) engages everything including the kitchen sink (but excluding Articles 33-34 Brussels Ia, one assumes because no competing foreign suits were pending when the English courts were seized) in its application for a stay.

The First to Third Claimants [together Jefferies] and the First to Third Defendants [together Cantor] carry on business in the financial services industry internationally, including investment banking and capital markets business and in particular in the international power and renewables sector. The First Defendant is a general partnership organised under the laws of New York. The Second Defendant is an unlimited company registered in England and regulated by the Financial Conduct Authority. The Third Defendant is a limited liability company incorporated in Hong Kong. The action arises out of what has become known as a team move. Jefferies’ case is that on 20 November 2017 twenty-six of its employees each resigned in materially identical terms, almost all of the resignations took place at 11.00 am London time notwithstanding that this was outside the normal working hours of those who worked in New York and Hong Kong, each of the employees in each jurisdiction instructed the same solicitors and each now works for Cantor. Jefferies asserts that Cantor has directed each of the twenty-six employees to refuse to honour repayment obligations in respect of certain “Replacement Awards” and “Bonuses” which were triggered by their resignations and subsequent employment by Cantor.

The following issues were agreed for determination:

i) Are the claims of Jefferies US against Cantor US subject to an arbitration agreement between Jefferies US and Cantor US, and if so should those claims be stayed pursuant to the Arbitration Act 1996 section 9?

ii) Should Jefferies’ claims against Cantor US and Cantor HK be stayed because England is not the proper place for determination of those claims?

iii) Should Jefferies’ claims against Cantor US and Cantor HK be stayed because Jefferies breached its duty of fair presentation on its without notice application for permission to serve out?

iv) Do Jefferies’ claims against Cantor US and Cantor HK, insofar as they relate to repayment agreements governed by New York law, have no reasonable prospects of success, because those repayment agreements are unenforceable as a matter of New York law?

v) Should service of the claim form and particulars of claim on Cantor US and Cantor HK and the Order of Master Thornett granting permission to serve Cantor US and Cantor HK out of the jurisdiction be set aside on any of the above grounds?

vi) Should the proceedings (or any part of them not otherwise stayed on the above grounds) be stayed on case management grounds pending final award in the FINRA arbitration?

vii) Should Jefferies’ claims against the Employee Defendants be stayed as a result of exclusive jurisdiction clauses in relevant repayment agreements favouring the courts of the State of New York?

viii) Should Jefferies’ claims against the Employee Defendants be stayed on case management grounds pending final award in the FINRA arbitration?

Master Cook dismissed all applications for a stay in a surprisingly (given the size of the list) succinct judgment and readers are best referred to the text itself for perusal. Other than Articles 33-34 (see above), only abuse of process I think could have been added to this extensive list of attempted grounds for a stay.

Geert.

 

Nigeria v Shell et al at the High Court. Yet more lis alibi pendens and cutting some corners on case-management.

One does not often see Nigeria sue Shell. Federal Republic of Nigeria v Royal Dutch Shell Plc & Anor [2020] EWHC 1315 (Comm) engages Article 29 Brussels Ia’s lis alibi pendens rule in a period in which (see other posts on the blog) the High Court intensely entertained that section of Brussels Ia. Royal Dutch Shell Plc (RDS) is the anchor defendant for the other EU-domiciled defendants. Quite a few of the defendants are not domiciled in the EU.

The case concerns Nigerian allegations that monies paid by it under an earlier settlement following alleged expropriation, which had led to bilateral investment treaty arbitration under ICSID rules, had been channeled to pay bribes. Nigeria is pursuing the case in the criminal courts in Italy, too.

Nigeria therefore are already pursuing claims in Italy to obtain financial relief against 4 of the defendants including the anchor defendant. Defendants contend that those claims are the same claims as the English ones and that the court should decline jurisdiction in respect of those claims pursuant to A29 BIa. Defendants then further contend that, if the court so declines jurisdiction over the claims against RDS and Eni SpA, the entire proceedings should be dismissed. This is because RDS is the ‘anchor defendant’ under A8(1) BIa in the case of three of the EU-domiciled defendants and under English CPR rules against the other defendants. In the alternative to the application under Article 29, Defendants seek a stay of the proceedings under A30 BIa (related cases) or, in the further alternative as a matter of case management, pending a final determination, including all appeals, of the claim that the FRN has brought in Italy.

Butcher J refers at 41 to the UKSC in The Alexandros, and to Rix J in Glencore International AG v Shell International Trading and Shipping Co Ltd, at 110: ‘broadly speaking, the triple requirement of same parties, same cause and same objet entails that it is only in relatively straightforward situations that art [29] bites, and, it may be said, is intended to bite. After all, art [30] is available, with its more flexible discretionary power to stay, in the case of ‘related proceedings’ which need not involve the triple requirement of art [29]. There is no need, therefore, as it seems to me, to strain to fit a case into art [29].’

Same parties. Per CJEU The Tatry A29 applies to the extent to which the parties before the courts second seised are parties to the action previously commenced. Butcher J correctly holds that the fact that there may be other parties to the second action does not prevent this. Nigeria nevertheless argue that the involvement of the Italian Public Prosecutor in the Italian case, and not in the English case, and its crucial role in the Italian proceedings, means that the proceedings nevertheless are not between the ‘same parties’. Defendants call upon CJEU C-523/14 Aertssen to counter this: there BE and NL proceedings were considered to be caught by A29 even though the BE proceedings concerned criminal proceedings and the Dutch did not.

At 47 Butcher J holds that the prosecutor is not a ‘party’ in the A29 sense and that even it were, it is nevertheless clear from The Tatry that there does not have to be complete identity of the parties to the two proceedings for Article 29 to be applicable. (Ditto Leech J in Awendale v Pixis).

Same cause of action. Nigeria accept that there is no material difference in the facts at issue in the two proceedings, however contends that the legal basis of its claim in England is different.

Butcher J refers to Lord Clarke in The Alexandros, that in order to consider same cause of action, one must look ‘at the basic facts (whether in dispute or not) and the basic claimed rights and obligations of the parties to see if there is coincidence between them in the actions in different countries, making due allowance for the specific form that proceedings may take in one national court with different classifications of rights and obligations from those in a different national court’. Doing that, at 55 he holds that these basic claimed rights in the IT and EN proceedings, which he characterises as being the right not to be adversely affected by conduct of RDS which involves or facilitates the bribery and corruption of the FRN’s ministers and agents, and the right to redress if there is such bribery and corruption’, are the same.

That seems to me an approach which is overly reliant on the similarity of underlying facts. (At 70, obiter, Butcher J splits the claims and suggests he would have held on a narrower similarity of cause of action for some claims and not the others, had he held otherwise on ‘same cause of action’; and at 80 that he would have ordered a stay under Article 30 or on case management grounds on the remainder of the action).

Same object. Nigeria contend that its present proceedings do not have the same objet as the civil claim in the Italian proceedings. It contends that the only claim made in the Italian proceedings is for monetary damages, while in the English action claims are also made of a declaration of entitlement to rescind the April 2011 Agreements, other declaratory relief, an account of profits and tracing remedies.

Butcher J disagrees. Per Lord Clarke in The Alexandros, he holds that to have the same object, the proceedings must have the ‘same end in view’, per CJEU Aertssen at 45 interpreted ‘broadly’. At 61; ‘that ‘end in view’ is to obtain redress for RDS’s alleged responsibility for bribery and corruption…. Further, it is apparent that a key part of the redress claimed in the English proceedings is monetary compensation, which is the (only) relief claimed in the Italian proceedings. On that basis I consider that the two sets of proceedings do have the same objet.’

That the English action also seeks to rescind the original 2011 agreements is immaterial, he finds, for RDS were not even part to those proceedings. Moreover, that aim included in the English action serves to support the argument that if the two sets of proceedings go ahead, (at 64) ‘there would be the possibility of the type of inconsistent decisions which Article 29 is aimed at avoiding’. ‘If the English proceedings were regarded as involving a significantly different claim, namely one relating to rescission, and could go ahead, that would give rise to the possibility of a judgment in one awarding damages on the basis of the validity of the April 2011 Agreements and the other finding that those Agreements were capable of rescission. That would appear to me to be a situation of where there is effectively a ‘mirror image’ of the case in one jurisdiction in the other,..’

At 66 ff Butcher J adopts the to my mind correct view on the application of A29 to proceedings with more than one ‘objet’: one does not look at all claims holistically, one has to adopt a claim by claim approach, in line with CJEU The Tatry. At 68: ‘Difficulties which might otherwise arise from the fragmentation of proceedings can usually be addressed by reference to Article 30..’

At 71 he then concludes that the stay must be granted, and that he has no discretion not to do so once he finds that the conditions of A29 are fulfilled. He also holds that with the case against the anchor defendant stayed, A8(1) falls away. He appreciates at 72 that this may expose Nigeria to limitation issues in the Italian proceedings, however those are of their own making for they were under no obligation to sue in Italy.

 

At 74 ff Article 30 is considered obiter, and Butcher J says he would have stayed under A29. At 77 he notes the continuing debate on the difference at the Court of Appeal between Privatbank and Euroeco. At 75(2) he summarises the distinction rather helpfully as

‘In the Kolomoisky case, it was decided that the word ‘expedient’ in the phrase ‘it is expedient to hear and determine them together’ which appears in Article 28.3 of the Lugano Convention (as it does in Article 30.3 of the Regulation), is more akin to ‘desirable’ that the actions ‘should’ be heard together, than to ‘practicable or possible’ that the actions ‘can’ be heard together: paras. [182]-[192]. In the Euroeco Fuels case, having referred to the Kolomoisky case, the Court of Appeal nevertheless appears to have proceeded on the basis that the court had no discretion to order a stay under Article 30 when there was no real possibility of the two claims being heard together in the same foreign court’

At 75(5) he then without much ado posits that

‘In any event, even if not under Article 30, there should be a stay under the Court’s case management powers, and in particular pursuant to s. 49(3) Senior Courts Act 1981 and CPR 3.1(2)(f). Such a stay would not, in my judgment, be inconsistent with the Regulation, and is required to further the Overriding Objective in the sense of saving expense, ensuring that cases are dealt with expeditiously and fairly, and allotting to any particular case an appropriate share of the Court’s resources. Given that the Italian proceedings are well advanced, and that after the determination of the Italian proceedings English proceedings may well either be unnecessary or curtailed in scope, there appear good grounds to consider that a stay of the English proceedings will result in savings in costs and time, including judicial time.’

Whether such case-management stay under CPR 3.1(2)(f) is at all compatible with the Regulation in claims involving EU domicileds, outside the context of Articles 29-34 is of course contested and, following Owusu, in my view improbable.

Most important lis alibi pendens considerations at the High Court these days.

Geert.

(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 2.2.14.5.

 

Terre Neuve v Yewdale. A Lugano /Brussels I jurisdictional fest.

In Terre Neuve SARL & Ors v Yewdale Ltd & Ors [2020] EWHC 772 (Comm), Bryan J entertains almost the entire jurisdictional chapter of the Handbook.

The proceedings are concerned with the alleged misappropriation of a sum of €10.6 million paid by the First Claimant (“Terre Neuve”) to the First Defendant (“Yewdale”) between July 2009 and September 2012, and thereafter allegedly misapplied with the alleged participation of other Defendants. The sums were paid pursuant to a tax optimisation scheme ultimately for the benefit of the Third Claimant (“Mr. Zahut”), who beneficially owned Terre Neuve and the Second Claimant (“Largely”). The scheme was allegedly created by a Mr. Sasson (now deceased), who gave tax advice through his company, the Third Defendant (“GPF”) and controlled Yewdale (an English company) and the Second Defendant (“REDS”) (a New York company).

In this preliminary judgment, plenty of the defendants challenge jurisdiction, even if as discussed at 11 ff, following judgment by Hancock J in [2019] EWHC 1119 (Comm), confirmed in [2019] EWHC 1847 (Comm), the action is already proceeding in England against Yewdale (which has been found to be a valid anchor defendant per Article 4 Brussels Ia) as well as a number of the overseas defendants: both those domiciled in Switzerland, and elsewhere. Co-defendants in current case were not involved in those earlier hearings.

Firstly, GPF, third defendant, challenges jurisdiction under Article 23 Lugano, more or less but not quite the same as Article 25 BIa. At 22 ff Bryan J cuts too many corners in my view. He extends CJEU precedent on Brussels I and Ia without question to Lugano construction. He unhesitatingly adopts English law (with Fiona Trust in the authority driver’s seat and with reference to the recent Etihad case) as the lex causae for the choice of court agreement. This is as lex fori additi I assume; the actual text of the choice of court agreement is not included in the judgment lest I looked over it however one can deduct the choice points to Switzerland. He is right in holding that the answer to the contractual construction of the choice of court agreement cannot be found in either Lugano or Brussels itself.

At 44 ff he decides that Claimants’ claims do not fall within the scope of any of the jurisdiction clauses in the Written Agreements, pointing away from England.

Next, a group of co-Defendants, who the Claimants allege were involved in and/or benefited from the misappropriation, challenge the jurisdiction of the English Court on various grounds, inter alia: that the claims against them are not sufficiently closely connected to be heard with the claims against the other Defendants in this jurisdiction, pursuant to Article 6(1) Lugano, and should instead be tried in Switzerland pursuant to Article 2 Lugano; that the claims against them would be more conveniently heard in Switzerland; that bringing proceedings against them in England is an abuse of process; that they should be tried in Switzerland pursuant to Article 5 Lugano; that proceedings against them in England are a breach of their rights under Article 6 ECHR; and that various agreements contain jurisdiction clauses which prevent the English Court from hearing the case against them.

In short (note all the authority he employs has been reviewed on this blog, both CJEU (e.g. Melzer) and English) Bryan J finds the cases are clearly related under Article 6 Lugano; forum non conveniens must not be entertained; and there is no abuse of EU law (a popular part of jurisdictional challenge following Vedanta); some of the defendants have submitted; Article 5 Lugano’s forum contractus is irrelevant for it only brings additional, not exclusive jurisdiction; Article 6 ECHR is clearly not breached (practical difficulties of attending, for instance, may be solved by modern means); arbitration in New York first of all does not engage an EU court and secondly of course arbitration is exempt from Lugano.

Finally the one co-defendant domiciled in Israel is nevertheless pulled into the English jurisdictional bath by application of residual English rules (serious issue to be tried; necessary and proper party).

Quite a lot to discuss by way of preliminary jurisdictional issue…

Geert.

 

Petrobas securities class action. Applicable law update: Dutch court holds under Rome II on lex causae in tort for purely economic loss. Place of listing wins the day (and leads to Mozaik).

Thank you Matthias Lehmann for flagging and reviewing the Rotterdam Court’s judgment late in January on applicable law in the Petrobas case. I had earlier reviewed the jurisdictional issues, particularly the application of Brussels Ia’s Article 33-34.

The case relates to a Brazilian criminal investigation into alleged bribery schemes within Petrobras, which took place between 2004 and 2014. The court first, and of less interest for the blog, deals with a representation issue, holding that Portuguese speakers cannot be represented in the class, for the Portuguese version of the relevant dispute settlement provisions, unlike the English translation, was not faulty.

Turning then to applicable law at 5.39 ff. Events occurring on or after 12 January 2009 are subject to the Rome II Regulation. For those before that date, Dutch residual PIL applies which the Court held make Brazilian law lex causae as lex loci delicti commissi: for that is where the alleged fraud, bribery and witholding of information happened.

For the events which are covered by Rome II, the court does not wait for the CJEU finding in VEB v BP and squarely takes inspiration from the CJEU case-law on purely financial damage and jurisdiction: Kronhofer, Kolassa, Universal Music. The court notes that the CJEU in these cases emphasised a more than passing or incidental contact with a State (such as: merely the presence of a bank account) as being required to establish jurisdiction as locus damni. At 5.47 it rejects the place of the investor’s account as relevant (for this may change rapidly and frequently over time and may also be easily manipulated) and it identifies the place of the market where the financial instruments are listed and traded as being such a place with a particular connection to the case: it is the place where the value of the instruments is impacted and manifests itself. It is also a place that meets with the requirements of predictability and legal certainty: neither buyer nor seller will be surprised that that location should provide lex causae.

Conclusion therefore is one of Mozaik: Brasil, Argentina, Germany, Luxembourg are lex causae as indeed may be other places where Petrobas financial instruments are listed. (At 5.49: Article 4(2)’s joint domicile exception may make Dutch law the lex causae depending on who sues whom).

Geert.

(Handbook of) EU private international law, 2nd ed.2016, Chapter 4, Heading 4.4.

 

 

 

 

Sabbagh v Khoury. The jurisdictional gift that keeps on giving. In today’s instalment: the possibility for qualified acknowledgment of service (prorogation) following claimant’s alleged concessions, and amended claim.

Sabbagh v Khoury [2019] EWHC 3004 (Comm) evidently builds upon the High Court and Court of Appeal previous judgments. Pro memoria: claimant established jurisdiction against all the defendants she wished to sue in relation to each element of her claim. Following judgment by the Court of Appeal and the refusal of permission to appeal further by the Supreme Court, the defendants had to decide whether to acknowledge service and accept the jurisdiction of the English Courts or to refuse to acknowledge service.

That jurisdiction should be debated at all was the result of claimant wanting to amend her claim, and having earlier been partially granted such permission. At 13: each defendant decided to acknowledge service and accept the jurisdiction of the English Courts but in each case they purported to qualify the terms on which they acknowledged service, hinging particularly on CPR Part 14: Admissions, and suggesting that a “concession” made on claimant’s behalf that certain Share Sale Agreements relied on by the defendants were “existent, valid and effective“, should have an impact on jurisdiction.

It is interesting to see the qualifications verbatim: at 13: ‘Thus in its letter of 26 March 2018, CMS Cameron McKenna Nabarro Olswang LLP on behalf of the Sabbagh defendants qualified their Acknowledgement of Service as being “… confined to the existing claims set out in the Claim Form, to the limited extent that the Court of Appeal accepted the English court’s jurisdiction over such claims, but subject to the numerous concessions your client has made including but not limited to her explicit abandonment of any claim to be presently entitled to or for delivery up of shares …”. Jones Day, the solicitors then acting for the first defendant similarly qualified his Acknowledgement of Service – see their letter of 26 March 2018. Baker McKenzie qualified the other Khoury defendants’ Acknowledgement of Service as being “… only in respect of the two claims as set out in the Claimant’s Claim Form … and is subject to the numerous concessions the Claimant has made to date …” and added that: “We understand that the Claimant intends to seek to amend her Particulars of Claim and our clients’ position as to whether any such amendment(s), if allowed, impact on the jurisdiction of the court over our clients as regards any claims other than those to which this Acknowledgement of Service is filed is fully reserved, including as to jurisdiction and/or the arbitrability of any such amended claims”. In the circumstances, it is probable that the amendment Baker McKenzie had in mind was one substantially in terms of the draft re-amended Particulars of Claim that had been placed before the Court of Appeal.’

At 21 ff Pelling J discusses the relationship between the amended claim, the earlier findings on jurisdiction, and the ‘concession’, leading at length eventually to hold that there was no impact of the concession on the extent of jurisdiction,

As Pelling J notes at 1 in fine: ‘Even allowing for the value at risk in this litigation all this is obviously disproportionate.’ One assumes the role of various counsel in the alleged concessions made earlier, must have had an impact on the energy with which the issue was advocated.

The case will now proceed to trial, lest there be any other jurisdictional challenges.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.12.1

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