Posts Tagged Article 27
C-523/14 Aertssen is not a corner piece of the Brussels I jigsaw. Rather, a necessary if unexciting piece of the puzzle’s main body. Aertssen NV, of Belgium, had a gripe with VSB Machineverhuur BV and others, of the Netherlands. Aertssen alleged fraud in VSB’s dealings with the company. It employed a well-known feature of Belgian (and French, among others) civil procedure, which is to file complaint with the investigating magistrate. This launches a criminal investigation, to which civil proceedings are attached.
Aertssen’s subsequent action of attachment of VSB’s accounts in The Netherlands, risked being stalled by the Dutch courts’ insistence that the group launch new legal action in The Netherlands. Aertssen obliged pro forma with this initiation of new proceedings, subsequently to aim to torpedo them. Aertssen would rather the Belgian courts continue with their own, criminal investigation and that action in The Netherlands, other than action in attachment, be put on hold, at least until the Belgian proceedings be finalised.
In essence therefore, the case before the CJEU needs to determine whether the Aertssen action in Belgium is of a ‘civil and commercial’ nature, and if it is, whether the actions in Belgium and The Netherlands meet the requirements of the lis alibi pendens rule of Article 27 (old) of the Brussels I-Regulation. The CJEU replied in the affirmative to both.
Precedent for the ‘civil and commercial’ issue, other than the usual suspects, was available per Sonntag, Case C-172/91, where the Court held that civil matters within the meaning of the first sentence of the first paragraph of Article 1 of the Brussels Convention, cover an action for compensation for damage brought before a criminal court. In Aertssen, The CJEU used the term ‘private law relationship’ to describe the legal relationship between the parties concerned. Even though, other than in Sonntag where the criminal proceedings were launched by the State prosecutor, Aertssen itself had triggered the criminal investigation, its ultimate aim is to obtain monetary compensation.
The subsequent question was whether per Article 27, lis pendens exists. Reference is best made to the judgment itself for the application of the The Tatry criteria (Case C-406/92): the two cases pending need to involve the same parties, pursuing the same cause of action (the facts and the rule of law relied on) and with the same object (meaning the end the action has in view). The CJEU held among others that the question whether the parties are the same cannot depend on the position of one or other of the parties in the two proceedings.
The remainder of the judgment deals with the meaning of the term ‘court first seized’ in Article 30 of the Regulation, and the relevance of national rules of civil procedure in same.
It is not often that a party aims to torpedo its own proceedings and the procedural intricacies of the case are rather complex. However the CJEU keeps a level head, with in the end transparent results.
I have reported before on the lis alibi pendens issue in the Alexandros litigation. (The left-over claims as identified in my previous post were, I understand, dropped, and hence the need for ECJ referral subsided – Hill Dickinson have a good summary of the various proceedings here). The Court of Appeal on the 18th of July held on the now (following the Supreme Court’s intervention) remaining issue of declarations, damages and indemnities in respect of the owners’ proceedings in Greece seeking damages from the insurers, despite proceedings for sums due under the relevant insurance policies having been settled in England pursuant to a choice of forum clause. (Apologies for this all being a bit dense – reading my previous post helps). (Greek courts in fact rejected the claims in April).
The left-over issue essentially boils down to the question whether despite the ECJ’s prohibition of anti-suit injunctions for subject-matter falling within the Brussel I-Regulation, Member States courts are free to award damages to the party suing elsewhere in the EU in spite of a choice of court agreement between parties. The Court of Appeal held that they are. It justifiably, in my view, distinguished Turner v Grovit . In Turner v Grovit, the ECJ is concerned with mutual trust and allowing (and indeed trusting) the courts in the other Member States to make their own, proper application of the Regulation. Turner and Grovit does not uphold jurisdiction for the other court: it upholds the opportunity for that other court properly to apply the Regulation, which may or may not lead it to uphold jurisdiction.
The judgment of the Court of Appeal re-enforces the attraction of English courts as a destination of choice: parties wishing to torpedo (a prospect less likely in the Brussels I-bis Regulation) may or may not succeed in convincing alternative courts of their jurisdiction. English courts since Turner cannot issue anti-suit. However they may still hold party liable for having breached the choice of court agreement.
Lis alibi pendens rule does NOT apply (to the court seized second having such jurisdiction) in the event of exclusive jurisdictional rules – The ECJ in Weber v Weber
In C-438/12 Weber v Weber the ECJ gave helpful clarification of the non-application of the strict lis alibi pendens rules of the Jurisdiction Regulation in the event of infringement of the Regulation’s exclusive jurisdictional rules. This to my knowledge at least had not yet been clearly established by the Court.
Ms I. Weber (I’) and Ms M. Weber (‘M’), are co-owners to the extent of 6/10 and 4/10 of a property in Munich. On the basis of a notarised act of 20 December 1971, a right in rem of pre‑emption over the four-tenths share belonging to M was entered in the Land Register in favour of I. By a notorial contract of 28 October 2009, M sold her four-tenths share to Z. GbR, a company incorporated under German law, of which one of the directors is her son, Mr Calmetta, a lawyer established in Milan. According to one of the clauses in that contract, M, as the seller, reserved a right of withdrawal valid until 28 March 2010 and subject to certain conditions.
Being informed by the notary who had drawn up the contract in Munich, I exercised her right of pre-emption by letter of 18 December 2009. On 25 February 2010, by a contract concluded before that notary, I and M once more expressly recognised the effective exercise of the right of pre-emption by I and agreed that the property should be transferred to her for the same price as that agreed in the contract for sale signed between M and Z. GbR. However, the two parties asked the notary not to carry out the procedures for the registration of the transfer of property in the Land Register until M had made a written declaration before the same notary that she had not exercised her right of withdrawal or that she had waived that right arising from the contract concluded with Z. GbR within the period laid down, which expired on 28 March 2010. On 2 March, I paid the agreed purchase price of EUR 4 million.
By letter of 15 March 2010, M declared that she had exercised her right of withdrawal from the contract of 28 October 2009. By an application of 29 March 2010, Z. GbR brought an action against I and M, before the District Court, Milan, seeking a declaration that the exercise of the right of pre-emption by I was ineffective and invalid, and that the contract concluded between M and that company was valid.
On 15 July 2010, I brought proceedings against M before the Landgericht München, seeking an order that M register the transfer of ownership of the four-tenths share with the Land Register.
The Court of Justice first of all had to decide whether an action seeking a declaration that a right in rem in immovable property has not been validly exercised, falls within the category of proceedings which have as their object right in rem in immovable property, within the meaning of Article 22(1) of Regulation No 44/2001. It held that it did, with the required amount of deference to national law: a right of pre-emption, such as that provided for by Paragraph 1094 of the BGB, which attaches to immovable property and which is registered with the Land Register, produces its effects not only with respect to the debtor, but guarantees the right of the holder of that right to transfer the property also vis-à-vis third parties, so that, if a contract for sale is concluded between a third party and the owner of the property burdened, the proper exercise of that right of pre-emption has the consequence that the sale is without effect with respect to the holder of that right, and the sale is deemed to be concluded between the holder of that right and the owner of the property on the same conditions as those agreed between the latter and the third party.
The next core question was whether Article 27’s lis alibi pendens rule applies in the event of the court second seized having exclusive jurisdiction. Here, the ECJ distinguished Gasser, in which it declined freedom for the court second seized to assume priority on the basis of a choice of court agreement. (A particular use of torpedoeing which is now addressed by the Brussels I-bis Regulation). It refers in particular to the positive obligation included in Article 35 of the Jurisdiction Regulation for courts not to recognise earlier judgments which were held in contravention of Article 22’s exclusive jurisdictional rules. Article 23’s choice of court agreements, by contrast, does not feature in Article 35.
The ECJ’s reference to Article 35 in my view means that the Court’s reasoning extends to all jurisdictional rules included in that article, including the protected categories of consumers and insureds (not, strangely, employees. This will change however following the Brussels I recast). There is lingering doubt however over the impact of the judgment on the application of Article 22(4)’s rule on intellectual property. In Weber (at 56) the Court holds that ‘ In those circumstances, the court second seised is no longer entitled to stay its proceedings or to decline jurisdiction, and it must give a ruling on the substance of the action before it in order to comply with the rule on exclusive jurisdiction.‘ In the application of Article 22(4), this continues to raise the question whether ‘the substance of the action before it’ only concerns the validity of the intellectual property, or also the underlying issue of infringement of such property.
Weber v Weber is a crucial further step in clarifying the lis alibi pendens rule. Sadly, family tussles do often advance the state of the law.
In Cartier v Ziegler, Case C-1/13, the Court of Justice held that the application of Article 27’s Lis Albi pendens rule (Brussels I Regulation) does not require a formal decision by the national court first seized (or exhaustion of national remedies against such acceptance of jurisdiction). In a multi-party case involving insurance companies, forwarders and transporters (sub-sub contracted) of a shipment of Cartier goods, the UK High Court was undeniably first seized vis-a-vis at least some of the parties involved in the litigation in France, however the question was how Article 27’s lis alibi pendens rule needs to be applied.
Under Article 27(1) of Regulation 44/2001, where there are parallel proceedings before the courts of different Member States, the court second seised must stay its proceedings of its own motion until the jurisdiction of the court first seised is established. Furthermore, Article 27(2) provides that, where the jurisdiction of the court first seised is established, any court other than the court first seised must decline jurisdiction in favour of that court.
The French Cour de Cassation asked essentially whether Article 27(2) of the Brussels I-Regulation must be interpreted as meaning that it is sufficient, for the jurisdiction of the court first seised to be established within the meaning of that provision, that no party has contested its jurisdiction or whether it is necessary that that court has impliedly or expressly assumed jurisdiction by a judgment which has become final.
The referring court referred to scholarship suggesting that the jurisdiction of the court first seised may be established only by a judgment from that court explicitly rejecting its lack of jurisdiction or by the exhaustion of the remedies that are available against its decision to assume jurisdiction.
The ECJ held ‘Article 27(2) of Council Regulation (EC) No 44/2001 (…) must be interpreted as meaning that, except in the situation where the court second seised has exclusive jurisdiction by virtue of that regulation, the jurisdiction of the court first seised must be regarded as being established, within the meaning of that provision, if that court has not declined jurisdiction of its own motion and none of the parties has contested its jurisdiction prior to or up to the time at which a position is adopted which is regarded in national procedural law as being the first defence on the substance submitted before that court.’
The Court’s finding does of course require the court seized later (or the lawyers appearing before it) to be au fait with the procedural law of the alternative court (such as in France, the possibility to raise objection against jurisdiction verbally only).
The ECJ’s overall consideration here lies with obliging but also enabling the court seized second, not to linger indefinitely with the application of Article 27.
In the case of the Alexandros T, the UK Supreme Court had to consider the impact on UK proceedings, opened in response to proceedings in Greece, in a dispute in which the insurers of the ship were under the impression that things had been settled following earlier proceedings in England.
On 3 May 2006 the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth, with considerable loss of life. Her owners were Starlight Shipping Company (“Starlight”). They made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of the assured, namely Starlight. The insurers also said that Starlight had failed properly to report and repair damage to the vessel. Suits and countersuits followed, in England, on the basis of an exclusive jurisdictional clause in the insurance agreements. On 13 December 2007, the 2006 proceedings had been settled between Starlight and the LMI (as well as various underwriters) for 100% of the claim, but without interest and costs, in full and final satisfaction of the claim.
In April 2011, nine sets of Greek proceedings, in materially identical form, were issued by Starlight and by a range of other interested parties, against the LMI and the underwriters. The claims are for compensation for loss of hire and loss of opportunity by Starlight and for pecuniary compensation due to moral damage. All the claims rely upon breaches of the Greek Civil and Criminal Code, not, as before, on the contractual arrangements. Since the issue of the Greek proceedings, the insurers have taken further steps and brought further proceedings in England. The insurers sought to enforce the settlement agreements. Starlight at al subsequently sought a stay of the English proceedings under Article 27 or 28 of the Brussels I Regulation. The High Court refused. The Court of Appeal granted. The Supreme Court had to untie the knot.
The Brussels I Regulation (the Jurisdiction Regulation or ‘JR’) is quite strict on lis alibi pendens, as has been repeatedly emphasised on this blog. The ECJ, too, insists on a guillotine approach of lis alibi pendens, provided of course the conditions for its application are met. The lis alibi pendens rule of Article 27 JR obliges a Court to stay proceedings if another Member State court has already been seized in the same matter, and to trust the proper application by the latter of the jurisdictional grounds of the Regulation. Article 27 JR has given malevolent parties a means to obstruct proceedings, by seizing a court in a Member State with no or desperate grounds for jurisdiction, banking on the tardiness of its judicial proceedings to gain time and ‘torpedo’ the case of the bona fide party.
1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established.
2. Where the jurisdiction of the court first seized is established, any court other than the court first seized shall decline jurisdiction in favour of that court.
1. Where related actions are pending in the courts of different Member States, any court other than the court first seized may stay its proceedings.
2. Where these actions are pending at first instance, any court other than the court first seized may also, on the application of one of the parties, decline jurisdiction if the court first seized has jurisdiction over the actions in question and its law permits the consolidation thereof.
3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
The rule is (fairly) simple and clear: where the same action, between the same parties is brought before the courts of two Member States, Article 27 obliges the court seized second, to at least freeze its jurisdiction. The conditions for Article 27 to apply are that the case involves the same action, between the same parties. The ECJ has clarified in Gubish Machinenfabrik and in The Tatry what was already clearer in other language versions namely that Article 27 requires three identities: identify of parties; identify of object or ‘subject-matter’; and identity of cause. The English version and the German version mention ‘same parties’ and ‘same cause of action’ only: they do not expressly distinguish between the concepts of “object” and “cause” of action. The ECJ held in Gubish that ‘(T)he “cause of action” comprises the facts and the rule of law relied on as the basis of the action.’ , and added in Gantner Electronic that in this respect account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant.
Article 28, then, applies to actions which do not conform to the Article 27 conditions, e.g. for actions between different parties, however where the actions are so related that separate proceedings would risk irreconcilable judgments. The purpose of that provision is to avoid the risk of conflicting judgments and thus to facilitate the proper administration of justice in the Union – it gives much more flexibility to the courts of the Member States as to whether to apply the provision or not.
In the case of the Alexandros, the application of these two Articles led to extensive to and fro by counsel with Lord Clarke (at 51 ff) stating that the principles of Article 27 JR ‘require a comparison of the claims made in each jurisdiction and, in particular, consideration of whether the different claims have le même objet et la même cause without regard to the defences being advanced (…) As I see it, Article 27 involves a comparison between the causes of action in the different sets of proceedings, not (as in Article 28) the proceedings themselves. (…) the analysis cannot involve a broad comparison between what each party ultimately hopes to achieve. The analysis simply involves a comparison between the claims in order to see whether they have the same cause and the same object.‘ He then suggested that Article 27 has no impact on the proceedings at issue – the English proceedings should not be stayed and in Lord Clarke’s view the matter is acte claire: no reference to the ECJ needed.
Lord Mance disagreed with this approach, essentially suggesting that both actions seek a declaration of non-liability and are therefore at least for some of them, the same action within the meaning of Article 27. Lest parties drop those claims (they have been given two weeks to do so), this question will be referred to the ECJ.
As for the application of Article 28, Lord Clarke suggest that the English Court should not exercise the possibility of a stay, inter alia in light of the exclusive choice of court clause previously agreed between the parties: ‘ I can see no reason why, in exercising that discretion under Article 28, the court second seised should not take into account the fact that the parties had previously agreed (or arguably agreed) an exclusive jurisdiction clause in favour of that court. On the contrary, depending upon the circumstances of the particular case, that seems to me to be likely to be a powerful factor in support of refusal of a stay.’ (at 95) On this, Lord Mance did not disagree, neither did he suggest referral to the ECJ.
The interpretation of Article 27 is therefore quite likely to end up at the ECJ: it is difficult to conceive that parties will drop those claims rather than retain the possibility of the ECJ siding with them.
The judgment to my knowledge is the first to examine Articles 27 and 28 JR at quite such length and with quite such expert counsel.