Posts Tagged Article 28

Be careful what you ask for! Barclays v ENPAM: the High Court again employs Article 27/28 to neutralise Italian torpedo.

Barclays v ENPAM has been travelling in my briefcase for some time – apologies. Reminiscent of the Supreme Court’s decision in the Alexandros, and the High Court in Nomura , Blair J in October 2015 employed national courts’ room under Article 27/28 of the Brussels I Regulation (the lis alibi pendens and related actions rules) to refuse a stay of English proceedings in favour of proceedings in (of course) Italy. Litigation like this will be somewhat less likely now that the Brussels I Recast applies. As readers will be aware, the current version of the Regulation has means to protect choice of court agreements against unwilling partners (see however below).

Claimant, Barclays Bank PLC, is an English bank. The defendant, Ente Nazionale di Previdenza ed Assistenza dei Medici e Degli Odontoiatri (“ENPAM”) is an Italian pension fund. A dispute has arisen between them as to a transaction entered into by way of a Conditional Asset Exchange Letter from ENPAM to Barclays dated 21 September 2007 by which ENPAM exchanged fund assets for securities which were in the form of credit-linked notes called the “Ferras CDO securities”. ENPAM’s claim is that it incurred a major loss in the transaction, and that it is entitled in law to look to Barclays to make that loss good.

On 18 May 2015, Barclays issued a summary judgment application on the basis that there is no defence to its claim that the Milan proceedings fall within contractual provisions giving exclusive jurisdiction to the English courts. ENPAM began proceedings against Barclays and others in Milan on 23 June 2014. Barclays says that this was in breach of provisions in the contractual documentation giving exclusive jurisdiction to the English courts. It issued the proceedings reviewed here seeking a declaration to that effect and other relief on 15 September 2014. On 20 April 2015, ENPAM applied pursuant to Article 27 or Article 28 of the Brussels I Regulation for an order that the English court should not exercise its jurisdiction in these proceedings on the basis that Milan court was first seised.

The High Court refused. Reference is best made to the judgment itself, for it is very well drafted. Read together with e.g. the aforementioned Alexandros and Nomura judgments, it gives one a complete view of the approach of the English courts viz lis pendens under the Regulation. (E.g. Blair J has excellent overview of the principles of Article 27 (Article 29 in the Recast) under para 68).

Discussion of what exactly Barclays could recover from the English cq Italian proceedings, was an important consideration of whether these two proceedings were each other’s mirror image. (see e.g. para 82 ff). This is quite an important consideration for litigators. Statements of claims are an important input in the lis pendens analysis. Be careful therefore what you ask for. Restraint in the statement of claims might well serve you very well when opposed with recalcitrant opposing parties, wishing to torpedo your proceedings. (Let’s face it: the likelihood of such opposition is quite high in a litigious context).

Finally, it is often assumed that precedent value of the case discussed here and other cases with it, has diminished drastically following the Brussels I Recast. It instructs all courts not named in a choice of court agreement, to step back from jurisdiction in favour of the court named (Article 31(2)). Yet what is and what is not caught by a choice of court agreement (starting with the issue of non-contractual liability between the parties) depends very much on its wording and interpretation. Article 31(2) is not the be all and end all of litigation between contracting parties.

Geert.

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The Alexandros resurfaces – Greek proceedings may turn out to be an expensive torpedo!

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.

Geert.

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Exclusive court of choice clause counts against use of court’s room under ‘related actions’

In a case on this point reminiscent of the Supreme Court’s subsequent decision in the Alexandros, the High Court held in Nomura v Banco Monte dei Paschi di Siena (BMPS) against a grant of a stay of the English proceedings in favour of proceedings in Italy. The stay would have been granted on the basis of Article 28’s proviso for ‘related’ actions, in particular Article 28(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.’

A ‘mandate’ agreement exists between parties, which includes a non-exclusive jurisdiction clause in favour of the English courts. The ISDA Master agreement (this is different from the mandate agreement) is subject to English law and as such (see para 16 of the judgment) contains an exclusive choice of court clause. BMPS fired the first shot in litigation, in Italy. The Italian claims are a mixture of contractual liability, liability in tort, and liability ensuing from a criminal offence. BMPS essentially claim that its former senior management colluded with Nomura in covering op losses incurred on financial operations with Nomura. Nomura started proceedings in England with a view to establishing that the agreements at issue are valid and binding. Parties agree that the Italian court was first seized.

As further explained inter alia in my posting on the Alexandros, Article 28 gives the court much more leeway than Article 27’s lis alibi pendens rules. The High Court made full use of this flexibility, inter alia in finding that in reviewing whether actions are ‘related’ within the meaning of Article 28, account must be taken not just of the claims of plaintiff but also the defence raised by defendant. This is in contrast with the ECJ’s position on Article 27 in Gantner Electronic: in deciding identity of action under Article 27, account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant.

Eder J held that the two proceedings were not likely to lead to irreconcilable judgments. Nomura’s claims in England are contractual. BMPS’ claims are based mostly on tort (para 26). It should not be excluded that the findings in one court will influence the other. Proximity or convenience does not plead in favour of Italy. Finally and importantly, the High Court found that ‘the case against the grant of a stay is strongly fortified because of the existence of the exclusive jurisdiction clause in the (  ) Master Agreement. (   ) the Court should, so far as possible, give effect to the parties’ bargain and be very slow indeed to exercise a discretion in a manner the effect of which would be to destroy such bargain‘.

The High Court justifiably did not entertain parties’ arguments on the basis of the new Jurisdiction Regulation, which enters into force in January 2015 and includes a new rule, granting better protection to choice of court agreements (priority for the court assigned to have a first go at establishing its jurisdiction).

Geert.

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The Supreme Court considers ‘sharp practice’ vs torpedoes in The Alexandros

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.

Article 27

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.

Article 28

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.

Geert.

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