Tag: Brussels I Regulation

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Szpunar AG on jurisdiction for trade mark infringement in AMS Neve.

Advocate General Szpunar opined end of March in C‑172/18 AMS Neve. The case concerns in essence, in the AG’s words, whether and, if so, under what circumstances, pursuant to Article 97(5) of Regulation 207/2009 on a Community Trade Mark, the person responsible for an alleged infringement, consisting in the advertising and offer for sale of goods bearing a sign which is identical to an EU trade mark on a website, may be sued in the courts of the Member State on whose territory the traders and consumers targeted by that website are situated.

It is clear from the rules on jurisdiction in Regulation 207/2009 on Community trade marks that the EU legislature decided to derogate in part from the rules on jurisdiction in Brussels Ia (these are fully applicable in the case of actions relating to national trade marks).

CJEU authority is varied (Case C-324/09, L’Oréal, which concerns the territorial scope of the EU’s trademark laws and revolves around websites ‘targeting’ consumers as opposed to merely being accessible to them, is a clear precedent; as is Wintersteiger; Hejduk; Pinckney; Football Dataco) but difficult to apply for all of them are so easily distinguishable: various intellectual property rights are at issue; some of them EU-wide granted, others only local; precedent on online activity generally such as Pammer /Alpenhof, ‘G’ etc. do not have the IPR context,….

The Advocate General does a highly commendable job (in my classes I tend to make things easy for myself on this section by mumbling something like ‘it’s complicated’; ‘you need to know your intellectual property rights’; and ‘there are so many rules in the secondary law on IPR’) in distinguishing and untangling authority, and he focuses his analysis on the issue of ‘targeting’. Those with an interest in IPR litigation had best read the Opinion in full.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Heading 2.2.8.2.5; Heading 2.2.11.2.4 (quoted by the AG in current Opinion).

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Disciplining abuse of anchor defendants in follow-up competition law cases exceedingly difficult. Borgarting Court of Appeal (Norway) applies CDC in Posten /Bring v Volvo.

After the French Cour de Cassation in MJI v Apple Sales, the Brussels Court of Appeal in FIFA/UEFA, and the Court at Amsterdam in Kemira, (as well as other courts undoubtedly, too; and I have highlighted more cases on the blog), Ørjan Salvesen Haukaas has now reported an application of CDC in a decision of December 2018 by a Norwegian Court of appeal, LB-2018-136341 Posten /Bring v Volvo. The court evidently applies Lugano (Article 6), not Brussels Ia, yet the provision  is materially identical.

Norwegian and foreign companies in the Posten/Bring group (mail services) had sued companies in the Volvo group for alleged losses incurred when purchasing trucks from Volvo after certain companies in the Volvo group had been fined for participating in a price-fixing cartel. Posten/Bring also sued a Norwegian company in the Volvo group, which had not been fined for participating in the price-fixing cartel.

Borgarting Court of Appeal held that Norwegian courts have jurisdiction pursuant to Article 6(1) Lugano even if the anchor defendant is sued merely to obtain Norwegian jurisdiction. The court solely had to determine whether the claims were so closely connected that there was a risk of irreconcilable judgments, in the absence of any suggested collusion between the anchor defendant and claimants per CDC.

Geert.

(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.12, Heading 2.2.12.1.

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Kokott AG in Kerr v Postnov(a): How house association meetings turn into a jurisdictional and applicable law potpourri.

Advocate General Kokott opined end of January in C-25/18 Brian Andrew Kerr v Pavlo Postnov and Natalia Postnova (let’s call the case Kerr v Postnov(a)). The case concerns the application of Brussels I Recast’s Articles 24(1) and (2) exclusive jurisdictional rules, cq the application of Article 7(1) jurisdictional rules on contracts, and applicable law consequences of same.

Incidentally, Ms Kokott’s use of ‘Brussels Ia’ instead of the Brussels I Recast Regulation adds to the growing chorus to employ Brussels Ia (lower case, no space between I and a) instead of Brussels I Recast, Brussels bis, or as recently seen at the High Court, BIR (BrusselsIRecast).

The Advocate General’s Opinion is a useful and succinct reminder of CJEU authority, suggesting the issue is acte clair really, except there are one or two specific issues (e.g. the enforcement issue, discussed below) which justify clarification.

The case concerns proceedings concerning claims for payment arising from resolutions made by an association of property owners without legal personality in connection with the management of the property in question. Mr Kerr, appellant in the proceedings before the referring court, is a manager of an association of owners of a property situated in the town of Bansko (Bulgaria). He brought proceedings before the Razlog District Court, Bulgaria against two property owners, Mr Postnov and Ms Postnova, concerning payment of contributions that were owed by them wholly or in part for the maintenance of communal parts of the building on the basis of resolutions made by the general meeting of the property owners in the period from 2013 to 2017. According to the appellant in the main proceedings, an action to secure enforcement of the claim pursued was brought with the application.

Address of the defendants used by the court at first instance is in the Republic of Ireland. (As the AG notes, whether service was properly given is relevant for the recognition of the eventual judgment; this however is not the subject of the current proceedings neither is it detailed in the file.)

Coming to the first issue: Article 24(1) requires strict and autonomous interpretation. The main proceedings have as their object the payment of outstanding contributions purportedly owed by two co-owners for the management and maintenance of the property concerned. At 34: It is thus a matter of obligations — to use the words of the referring court — arising from ownership of shares in the commonhold as rights in rem in immovable property. At 38: to be covered by 24(1) the right in question must have effect erga omnes and that the content or extent of that right is the object of the proceedings (reference ex multi to Schmidt and Komu).

Prima facie this would mean that Article 24(1) must be ruled out: at 39: in the main proceedings, the action brought by the manager is based on claims in personam of the association of owners for payment of contributions for the maintenance of communal areas of the property. The rights in rem of the defendant co-owners of the commonhold — in the form of intangible ownership shares — initially remain unaffected. However, at 40 Ms Kokott signals the enforcement issue: that action could affect the defendants’ rights in rem arising from their ownership shares, for example by restricting their powers of disposal – an assessment subject to the applicable law, which is for the referring court to make. In footnote the Advocate General suggests the potential involvement in that case of Article 8(4)’s combined actio in rem and in personam.

The case therefore illustrates the potential for engineering even in Article 24 cases: firstly, by varying the claim (the content or extent of the rights contained in Article 24 has to be the ‘object’ of the proceedings; claimant can manipulate the claim to that effect); second, the prospect of adding an enforcement claim to an otherwise contractual action. This engineering evidently clashes with the objective and forum-shopping averse interpretation of Article 24, however as I have repeatedly discussed on this blog, abusive forum shopping is a difficult call for the CJEU and indeed national courts to make.

The discussion of Article 24(2) does lead to a clear conclusion: the forum societatis is not engaged. Article 24(2) covers only proceedings which have as their object the legal validity of a decision, not proceedings which have as their object the enforcement of such decisions, like the action at issue seeking payment of contributions based on such a decision (at 44).

As for Article 7(1) forum contractus the usual Handte et al suspects feature in the Opinion as does Case 34/82 Peters Bauunternehmung.  The association is joined through voluntary acquisition of an apartment together with ownership shares of the communal areas of the property (at 54): there is a ‘contract’. [Advocate General Kokott already pre-empts similar discussion in Case C‑421/18, where the Court will have to clarify whether these considerations can also be applied to a case in which a bar association is taking legal action to assert claims for payment of fees against one of its members].

The AG makes a brief outing into Rome I to point out that Rome I has a lex societatis exception. Under the conflict-of-law rules, claims for payment made by a legal association against its members are not to be assessed on the basis of the Rome I Regulation, even though such claims are to be regarded as ‘matters relating to a contract’ within the meaning of Article 7(1) of the Brussels Ia Regulation (at 60).

However for the purposes of Article 7(1), where the CJEU to find that it is engaged, place of performance needs to be decided. If none of the default categories of Article 7(1) apply, the conflicts method kicks in and Rome I’s lex societatis exception is triggered (residual conflict of laws will determine the applicable law which in turn will determine place of obligation; see also at 74 and the reference to the Tessili rule).

Is the management activity itself is carried out for remuneration (as required per Falco Privatstiftung and also Granarolo) or at least an economic value per Cormans-Collins? The facts of the case do not clearly lay out that they are but even if that were the case (appointment of a specialist commercial party to carry out maintenance etc.), the contributions to be paid to the association by the co-owners are intended in no small part to cover taxes and duties, and not therefore to fulfil contractual obligations towards third parties which were entered into on behalf of and for the account of the association of owners (at 71). All in all, the AG opines, the non-uniform nature of these contributions leads to non-application of the service rule of Article 7(1)b and therefore a resurrection of the classic Tessili formula.

Not so acte clair perhaps after all.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6, 2.2.11.1

 

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No VAR needed here. French Supreme Court on choice of court ex-EU in employment contracts. X v AS Monaco.

Update 30 January 2019 many thanks to François Mailhé who contacted me to point out that the reasoning re Article 1412-1 in fact was only made by claimant but not entertained by the Court, who only applied Brussels I Recast. An ‘attendu que’ which was however followed by ‘selon le moyen que’, in my haste overlooked by me. Apologies – and a first correction on any post on the blog since its launch in 2012. I have amended the post to correct this.

Thank you Hélène Péroz for flagging 17-19.935 X v AS Monaco at the French Supreme Court, held December 2018. Claimant is a former physiotherapist employed by AS Monaco. His contract included choice of court ex-EU (not further specified in the judgment but one assumes, Monaco. Monaco is one of those micro-States with a complex arrangement with the EU).

The Supreme court first of all could have addressed the application of France’s jurisdictional rule R. 1412-1 of the Code du Travail. This assigns territorial jurisdiction in principle to the employment courts of the area where the employee habitually carries out the employment, with fall-back options which are similar to yet not quite the same as the provisions of Brussels I Recast:

Art. R. 1412- 1 L’employeur et le salarié portent les différends et litiges devant le conseil de prud’hommes territorialement compétent. Ce conseil est :

1 Soit celui dans le ressort duquel est situé l’établissement où est accompli le travail ;

2 Soit, lorsque le travail est accompli à domicile ou en dehors de toute entreprise ou établissement, celui dans le ressort duquel est situé le domicile du salarié.

Le salarié peut également saisir les conseils de prud’hommes du lieu où l’engagement a été contracté ou celui du lieu où l’employeur est établi. — [ Anc. art. R. 517- 1, al. 1er à 3.]

These provisions cast a slightly wider jurisdictional net than Brussels I Recast. That gap was even wider before Brussels I Recast had extended its jurisdictional reach to parties (the employer, or the business in the case of the consumer title) domiciled ex-EU. It is particularly its existence pre Brussels I Recast for which the provision is ranked among France’s exorbitant jurisdictional rules.

Now, coming to the case at issue. Claimant had suggested the Supreme Court address the nature of the provision as lois de police, in particularly by severely curtailing same in the event of choice of court ex-EU. Claimant argued ‘ce n’est que si le contrat est exécuté dans un établissement situé en France ou en dehors de tout établissement que les dispositions d’ordre public de l’article R. 1412-1 font échec à l’application d’une telle clause.’ : it is argued that only if the contract is performed in an establishment of the employer in France, or entirely outside such establishment (from the employee’s home or ‘on the road’) does Article R.1412-1 trump choice of court ex-EU. The lower court’s judgment had failed to assess these circumstances and therefore, it was suggested, infringes the Article.

The Supreme Court unfortunately does not however dot the i’s and cross the t’s on this issue at all: it only (not unjustifiably, if an expression of judicial economy) looks at Brussels I Recast. Reportedly the application of Brussels I to the issue is not something the Court has properly done in the past.

Article 21 Brussels I Recast requires assessment of the place of habitual carrying out of the work. Claimant worked mostly from the club’s training ground, which is in Turbie, France, and accompanied the club at fixtures. These however by reason of the football calendar clearly took place in Monaco only one out of two games (see the Count of Luxembourg for similar identification of the relevant criteria). Core of the employment therefore is France, notably in the Nice judicial area and therefore the lower court was right to uphold its jurisdiction.

Addressing Article 1412-1 will have to be for future judgment, outside the Brussels I Recast context.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.8.3.

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Liberato: violation of lis alibi pendens rules does not justify refusal of enforcement on grounds of ordre public.

I reviewed Bot AG’s Opinion in C-386/17 Liberato here. The Court confirmed last week. Whether lis alibi pendens applies, entails applying jurisdictional rules (in essence an assessment as to whether parties are the same etc.). Except in the very rare cases of (now) Article 45 1(e) Brussels I Recast, infringement of jurisdictional rules does not feature among the reasons for refusal of recognition. Alleged infringement of the lis alibi pendens rule does not therefore qualify as ordre public.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.16.1.3, 2.2.16.1.4.

 

 

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National Bank of Kazakhstan v Bank of New York Mellon. Branches’ activities, Article 7(5) Brussels I Recast and engagement of Article 30.

Update 22 April 2020 today’s judgment discusses the merits of the case: [2020] EWHC 916 (Comm).

 

Thank you Ali Malek QC who acts for claimants (and who as I have noted, is a busy and efficient bee in international litigation land) for alerting me to a further episode of Kazakhstan v BNYM. This current jurisdictional challenge is part of a long-running saga relating to the enforcement of a Swedish arbitration award dated 19 December 2013 in favour of the “Stati parties”, the Second to Fifth Defendants, and against the Second Claimant, the Republic of Kazakhstan (“RoK”).

Many of the issues are ex-Brussels I Recast and /or Lugano Convention yet I report on them anyway for they reveal interesting issues on the relationship between foreign courts relevant to attachment (and enforcement generally), and courts with jurisdiction on the merits.

In [2017] EWHC 3512 (Comm) National Bank of Kazakhstan v Bank of New York Mellon (BNYM) which I reviewed here, Popplewell J had dismissed claims essentially designed to establish that BNYM is not obliged or entitled to freeze assets of the National Fund by reason of Belgian and Dutch court attachment orders.

Teare J has now held a few weeks back – helpfully in [2018] EWHC 3282 (Comm) also summarising the many proceedings which the blog has not always reported on. Trigger for this latest instalment of proceedings is claimants having sought to challenge a Belgian conservatory attachment before an “Attachment Judge” of the Belgian court. The Attachment Judge upheld the attachment order in a judgment dated 25 May 2018.

RoK seeks a declaration that the debts or assets held by BNYM(London) and said to be subject to the attachment order are in fact held by BNYM(L) solely for the National Bank of Kazakhstan (“NBK”), the First Claimant. They therefore submit that the attachment order has no subject-matter, because there are no assets to attach. The Claimants contend that this question was referred to this court by the Belgian court.

A provision of Belgian law cited by the Attachment Judge, article 1456(2) of the Belgian Judicial Code, provides as follows: “If the third-party debtor disputes the debt claimed by the creditor, the case is brought before the competent trial judge or, as the case may be, the case is referred to the competent trial judge by the enforcement court.” Further proceedings are now pending in Belgium, in which the Stati parties seek to convert the ‘conservatory’ attachment order into an ‘executory’ attachment order. In those proceedings, the Stati parties have raised a number of arguments in support of their contention that the GCA assets are properly held for RoK (rather than merely NBK). These include Belgian-law arguments relating (inter alia) to piercing of legal personality, sham trusts, and “abuse of law”.

The crucial consideration discussed by Teare J in current proceeding is that the Stati parties submit that there is no “serious issue to be tried” (hence no jurisdiction) as between the Claimants and the Second to Fourth Defendants, (i.a.) because “the declarations sought […] will not affect the Belgian Court’s decision” since that Court “faces a number of Belgian law arguments unrelated to the GCA with regard to the ROK debt question”.

There was a dispute between Belgian law experts as to precisely what had been remitted by the Attachment Judge to the High Court and it is worth repeating each assertion in full: at 28-29

‘The evidence of Mr Brijs (the Stati parties’ Belgian law expert [GAVC fellow Leuven Class of 1993] ) is that “a pure question of English contractual law will not resolve the core dispute” because “a Belgian enforcement court would still have to evaluate – amongst other things – the arguments raised by the Stati parties under Belgian attachment law” such as piercing legal personality, sham trusts, and abuse of law. Further, “the Belgian Enforcement court did not decide the arguments – not because the judge “envisaged” that these arguments should be resolved by an English Court or because the Belgian Enforcement Court found that it could not decide them (when in fact it can) – but solely because the Belgian Enforcement Court considered that it did not need to decide them… It is difficult to conceive why an English court should decide on e.g. matters that concern Belgian public policy, or on the question whether there is a sham trust structure to the prejudice of the creditors and what the sanction/effect thereof is on the Belgian attachment.”

The evidence of Mr Nuyts (the Claimants’ Belgian law expert [GAVC colleague and learned friend extraordinaire ) is that “[t]here is nothing in the Belgian judgment to show that the Belgian Court envisaged the English court deciding only some of the issues, and not the arguments raised by the Stati parties such as piercing of legal personality, sham trust, and abuse of law. These arguments had been raised at length by the Stati parties in written submissions in the Belgian proceedings, and the Belgian Court has distinctly decided not to address any of these arguments, leaving them to be decided by the English Court… The Belgian Judgment holds in general that the “challenge” relating to “the debt of the third party” must be referred to the English court… [and] that it is for the English court to decide in general “whether or not a debt exists from BNYM towards Kazakhstan”.”

It is Mr Nuyts’ evidence that convinced Tear J. At 31 ‘In this case, however [GAVC despite Meester Brijs’ correct statement that there are circumstances in which the enforcement court is competent to decide on the merits], the enforcement court has clearly decided that the English court is the competent court to decide the merits.’ At 35 the relevant passages of the Belgian Court are copied:

“The seized-debtor is entitled to challenge the declaration from the garnishee before the attachment judge. However, this challenge relates to the debt of the third party and must be referred to that trial court in the proceedings on the merits, under article 1456, 2nd para. BJC. The competent trial court is, as stated by Kazakhstan itself, the English court who must apply its own national substantive law. […] Both requests relate to the subject-matter of the attachment, notably whether or not a debt exists from BNYM towards Kazakhstan. Kazakhstan disputes the existence of such debt. The attachment judge cannot and may not settle such dispute, but only the judge on the merits. The judge on the merits is, as already mentioned above, the English court who must apply its own national law.”

That finding on the scope of referral to the English courts, also plays a role in the assessment of abuse: at 46: ‘I do not consider that it is an abuse of process for the Claimants to raise in these proceedings issues not argued before Popplewell J or the Court of Appeal in the earlier English proceedings. First, those proceedings served a different purpose, namely, the determination of BNYM(L)’s contractual entitlement to freeze the GCA assets and in particular the scope of clause 16(i). Second, it appears that the Claimants did in fact seek to raise the wider issue, or something like it, before Popplewell J. but were not permitted to because the Stati parties were not before the court. Third, it would be odd, to say the least, for this court to hold that these proceedings were an abuse of process in circumstances where the issues raised by the proceedings had been referred to it by the Belgian court. It cannot, I think, be in the public interest to frustrate the order of the Belgian court. On the contrary, comity and the public interest point to these proceedings serving a legitimate and proper purpose.’

Finally, a cursory look a the forum conveniens issue is warranted: at 58-61:

  1. Mr Sprange, for the Stati parties, submitted that “England is not a proper forum for a claim against the Second to Fourth Defendants, where that claim seeks (on the Claimants’ case) to conclusively determine issues of the validity of a Belgian executory attachment, which are properly the subject of Belgian attachment law for a Belgian attachment judge to decide”.
  2. Mr Malek, for the Claimants, submitted that the real dispute is not about “the validity of a Belgian executory attachment”, but rather “whether there is an obligation owed by BNYM London to RoK capable of forming the subject-matter of a Belgian attachment.” Further, he submitted that the effect of the Belgian Attachment Judge’s decision was to determine that England was the appropriate forum. Mr Malek relied upon this decision as giving rise to “an estoppel of a particular, autonomous, EU kind”; in the alternative, he submitted that it was a strong factor to be weighed in the analysis of the appropriate forum. Finally, Mr Malek submitted that the only realistic alternative to the jurisdiction of the English court would be the Belgian court, and that “the Belgian court is materially worse placed than this Court because it would be investigating matters by reference to an English-law governed contract, the GCA (so far as issues of Kazakh law, or facts in relation to the relationship between NBK and RoK, are concerned, the Belgian court enjoys no advantage over this Court).”
  3. I am unable to accept Mr. Sprange’s submission. This court will not be asked to determine the validity of the conservatory attachment order made in Belgium. Rather, it will be asked to determine what, if any, assets constitute the subject-matter of that order. The Belgian Attachment Judge plainly considered that a dispute concerning the content of the attachment – which, on its terms, constitutes only such assets (if any) as are held by BNYM(L) for RoK under the GCA – is a question for this court.
  4. The fact that the Belgian court has referred the dispute to this court is a cogent reason, indeed a compelling reason, for concluding that this court is a proper forum for determining the dispute. It would not be in accordance with comity to send the dispute back to Belgium. There is no need to consider Mr. Malek’s further submissions.

I quite like Ali Malek QC’s idea of “an estoppel of a particular, autonomous, EU kind”; linked to considerations of mutual trust, one assumes.

Finally, one of the defendants is based in Gribraltar and against it, (now) Article 8(2) Brussels I Recast applies, re third party proceedings. There is little to none CJEU authority. At 68 ‘I consider that the wording of article [8](2) is wide enough to encompass a situation in which a person is a proper party to a dispute between other parties to which he has a “close connection”, so long as that dispute has not been “instituted solely with the object of removing him from the jurisdiction of the court which would be competent in his case” and at 69 ‘This is a case in which “the efficacious conduct of proceedings” demands the presence of Terra Raf in this jurisdiction. I therefore find the requirements of article [8](2) to be satisfied.’

Teare J’s findings on this point also mean he need not consider (now) Article 7(5)’s jurisdiction for activities arising our of branch activity on which as I noted, I also have my doubts.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11, Heading 2.2.14.

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PrivatBank v Kolomoisky and Boholiubov. The High court puts the spotlight on the abuse of the anchor mechanism, on reflexive effect of lis alibi pendens, and on Article 34’s new rule.

In [2018] EWHC 3308 (Ch) PrivatBank v Kolomoisky and Boholiubov et al the High Court has set aside a worldwide freezing order (‘WFO’) granted earlier at the request of Ukraine’s PrivatBank, against Ihor Kolomoisky and Hennadiy Boholiubov – its two former main shareholders.

The case considers a high number of issues to which even a long blog post cannot do justice – I will consider these further in a paper in progress.

The issues to be determined, are

  • First, whether the Bank has a good arguable case (as pleaded in the particulars of claim) that loss of US$1.91 billion plus interest was caused to it by the alleged fraud of the Defendants. For the purposes of these applications, all Defendants do not dispute that there is a good arguable case that US$248 million of loss was caused to the Bank by the pleaded fraud, but they deny any good arguable case of loss in excess of that amount.
  • Second, whether the worldwide freezing orders should be set aside in whole or in part for non-disclosure or misrepresentation, or reduced to or reimposed in a lesser maximum sum than the current maximum sum of US$2.6 billion.
  • Third, whether the Court has jurisdiction over the First and Second Defendants under Article 6.1 Lugano by reason of the claim against the English Defendants as “anchor defendants”. Although the claims as pleaded against the First and Second Defendants and the English Defendants are closely connected, the particular issue is whether the claim against the English Defendants was brought with the sole object of removing the First and Second Defendants from Swiss jurisdiction and so was an abuse of Article 6
  • Fourth, if there is jurisdiction against the First and Second Defendants, whether the claims against them and the English Defendants should be stayed on grounds of lis pendens in Ukraine. This raises separate questions:
    • a) Whether the Court has power to stay proceedings against the First and Second Defendants (where jurisdiction only exists (if at all) under the Lugano Convention) in favour of proceedings in a non-Convention state, namely Ukraine. The First and Second Defendants argue that Article 28 of the Convention, which empowers a Convention State to stay proceedings on grounds of lis pendens in another Convention State, should be applied by analogy (or ‘reflexively’ in favour of proceedings in a non-Convention State.
    • b) Whether the Court should stay proceedings against the English Defendants (who are sued in accordance with Article 4 of the recast Brussels Regulation) in favour of proceedings in Ukraine. The issue here is as to the meaning, effect and application of Article 34 of the Regulation, which as from 10 January 2015 conferred a power on EU States in defined circumstances to stay proceedings in favour of proceedings in a non-Member State (“a third State”).
  • Fifth, to the extent that the Court has power to stay on grounds of lis pendens in Ukraine, whether it should exercise that power given the nature of the proceedings in Ukraine, the degree of connection between the Bank’s claim and Ukraine and the risk of irreconcilable judgments if no stay is granted.
  • Sixth, whether the Court should set aside the permission granted without notice to serve the claim form on the BVI Defendants out of the jurisdiction, or alternatively stay the proceedings against the BVI Defendants on grounds of forum non conveniens.

 

Fancourt J’s judgment implies in essence

First of all, very careful and complete consideration of the Lugano Convention’s anchor defendant mechanism.

(hence also implicating Brussels I Recast case-law, particularly Reisch Montage, Freeport and CDC), but also Sabbagh v Khoury, in which as I noted at the time the Court of Appeal struggles with the precise role for merits review in examining a potential abuse of the anchor defendant mechanism.

One assumes counsel for the defendants did an excellent job in deciphering precedent. This includes Ali Malek QC who is clearly a counsel of choice for international litigation, witness his involvement in other cases, too, this week: on which more soon on the blog.

Kolomoisky and Boholiubov may be sued in England and Wales, despite their Swiss domicile, only if the claims against them and the claims against the English Defendants 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: that is the wording of Article 6.1 of the Lugano Convention, as it is of (now) Article 8(1) Brussels I Recast.

[Note parties, Mr Bogolyubov specifically, earlier in the year in [2018] EWHC 160 (Ch) successfully had applied for a declaration that they were not domiciled in the UK; hence no Article 4 jurisdiction.

As I have pointed out on various occasions (use ‘fraud’ or ‘fraus’ as a search term in the blog’s search box), abuse is not a concept easily caught in statute and given the need for high predictability in the application of the Brussels and Lugano regimes, the CJEU is not finding it easy to provide much instruction.

Justice Fancourt excellently reviews the issues 85 ff and it is best to let those paras speak for their insightful selves. One readers have done so, they will see that at 93, his conclusion is ‘any artificial fulfilment (or apparent fulfilment) of the express requirements of Article 6.1 is impermissible, and this includes a case where the sole object of the claim against the anchor defendant is to remove the foreign defendant from the jurisdiction of domicile. Bringing a hopeless claim is one example of such abuse, but the abuse may be otherwise established by clear evidence. In principle, the fact that there is a good arguable case against the anchor defendant should not prevent a co-defendant from establishing abuse on some other ground, including that the “sole object” of the claim is to provide jurisdiction against a foreign domiciled co-defendant.‘

Onus of proof of abuse lies on the defendant, and it was met here: the English Defendants serving as anchor, are not considered legitimate targets in their own right. Five reasons for same are listed in para 99 ff: it is clear that a single criterion will not be enough to meet the burden of proof, rather a number if indications will contribute to an overall finding of abuse.

 

Having established that the Switzerland-based defendants ought to be sued there or indeed in the Ukraine, the Court turns to the English defendants’ attempt to have it apply Brussels I Recast’s new Article 34 rule on lis alibi pendens in favour of third States. 

At 129, Justice Fancourt reviews the cases which might potentially be said to be ‘related’ to the English proceedings. At the heart of that analysis lies a defamation claim which (at 144) ‘Although the causes of action in the Ukrainian claim of the First Defendant and the claim of the Bank in the current proceedings are quite different, I am satisfied that there is considerable factual overlap between the allegations made against the Defendants in the Bank’s claim and the allegations published by the Ukrainian journal that the First Defendant seeks to challenge as unfounded and defamatory in the Ukrainian proceedings. The general subject-matter is one and the same: a fraudulent scheme to embezzle huge sums of money from the Bank, orchestrated by the First and Second Defendants and making use of a large number of shell companies, including the English and BVI Defendants, to circulate monies and conceal their whereabouts. Key issues that may have to be determined in each claim will be: whether there was a fraudulent scheme; who set it up and operated it; how did it work; what was its purpose; who benefited from the scheme, and how much money was unlawfully removed from the Bank.’

This analysis presumes, in my view correctly, that the term ‘related’ in the Article 34 rule, is to be interpreted in line with (now) Article 30 Brussels I Recast on related intra-EU actions.

At 145: ‘if the appeal in the defamation proceedings were to fail, or the claims be otherwise disposed of on a limited point of law, any stay granted under Article 34 (or by analogy with it) will be lifted.‘

Upon reflection, a stay of proceedings in favour of the Ukranaian case, is granted, for the reasons that

  • (the ultimate condition for applying Article 34) a potential eventual judgment in Ukraine on the defamation case is likely to be recognised and enforced in England; this is the so-called [but not so by the High Court 🙂 ] Anerkennungsprognose;
  •  the claim has a high proximity to the Ukraine: the issues raised in common by the defamation claim and the current proceedings are almost exclusively concerned with events in Ukraine; the majority of witnesses will be Ukrainian, and Ukrainian law will apply to decide both sets of proceedings. By contrast, none of the harmful acts complained of occurred in England; the matters in issue have no connection with England at all, and the existence of three English defendants is of no materiality. The proximity of the claim to Ukraine therefore points strongly in favour of a stay.
  • finally, at 158 ff: The Bank nevertheless argues that a stay would be contrary to the proper administration of justice – a core criterion to Article 34. ‘It contends that the current proceedings cry out for determination by a truly independent tribunal. But the Bank does not contend that the Ukrainian court is unable to resolve the issues or that it cannot obtain justice in Ukraine. There is no evidence on the basis of which this court can conclude that the Ukrainian courts would not provide justice to the parties. Similarly, there is no evidence before the court that would justify a conclusion that the Ukrainian judiciary is not independent. The Bank complains about how the First Defendant obtained an interim injunction against the Bank and Hogan Lovells on 15th December 2017, without proper process taking place; but this order was set aside in Ukraine on appeal, demonstrating that justice can be achieved by the Bank.’

Note that at 161 Justice Fancourt emphasises the relative character of the stay: ‘The argument against a stay would have greater weight if the stay to be granted under Article 34 (or by reference to its principles) were a once and for all decision, but it is clear that it should not be so confined. Under Article 34.2, these proceedings may be continued at any time when it is appropriate to do so, and so potential prejudice to the Bank in granting a stay is thereby limited. If the appeal in Ukraine is dismissed, or if though successful the claim is disposed of without a judgment on the merits, or if the First Defendant does not properly pursue the claim to judgment, the grounds for a continuing stay are likely to fall away’.

 

Fancourt J also adds obiter that had he accepted jurisdiction against the Switzerland-based defendants on the basis of the anchor mechanism, he would have granted a stay in those proceedings, too, applying the lis alibi pendens rule of Lugano reflexively, despite the absence of an Article 34 mechanism in Lugano. Consideration of this issue is at 114 ff, with of course reference to Ferrexpo. (Although even there this particular point may have been made obiter, as Justice Fancourt himself points out at 123). The suggestion is made that in accepting such reflexive, ex-Lugano effect of the Lugano lis alibi pendens rule, the courts should take instruction from the Article 34 Brussels I-Recast conditions. This is not a straightforward proposition by any means and the debate is far from settled.

 

Finally, jurisdiction against the BVI defendants is dismissed at this time on the basis of forum non conveniens: at 172 and necessarily entangled with the other findings: ‘So far as forum conveniens is concerned, the claim against the First and Second Defendants will not proceed in England. The natural forum for a trial of that claim is Ukraine though, as regards Lugano Convention States, the First and Second Defendants are entitled to be sued in Switzerland. The task of the court in exercising its discretion is to identify the forum in which the case can be suitably tried in the interests of all the parties and for the ends of justice: see Altimo Holdings at [88]. The natural forum is Ukraine, in that all the parties are Ukrainian, almost all the events occurred in Ukraine and Ukrainian law is the governing law. There is no suggestion by any party that they cannot have a fair trial in Ukraine. However, the Bank may not be willing to sue the First and Second Defendants in Ukraine: if it cannot sue them in England it may sue them in Switzerland.

************

With PrivatBank v Kolomoisky and Boholiubov we now have a much more reasoned application of Article 34 than the more concise considerations in B.win v Emerald Bay and also interesting additional analysis as compared to Zavarco.

Geert.

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

 

 

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Ergo, and Haras des Coudrettes. Provisional measures under Brussels I Recast and Lugano before the French Supreme Court.

Thank you Nicolas Contis and Leonardo Pinto for reporting  judgments by the French Supreme Court (Cour de Cassation) 16-19-731 Ergo Versicherung v Volker and 16-27.913, Haras des Coudrettes v X, both held on 14 March 2018.

The judgments concern the interpretation of Article 35 Brussels I Recast c.q. Article 31 of the Lugano Convention (the second case concerned a defendant domiciled in Switzerland) on provisional measures.

Please refer to Nicolas and Leonardo for a summary of the facts the judicial proceedings in the case. In neither cases do the French courts have subject-matter jurisdiction: in Ergo, the German courts do by virtue of choice of court; in Haras des Coudrettes, the Swiss courts do by virtue of Article 5(3) Lugano (locus delicti commissi being there; and direct damage also having occurred there hence leaving only indirect, financial damage with the French owner of the horse at issue, even if the exact nature and size of those direct injuries could only be later established in France).

In Ergo, the Supreme Court held that ‘la juridiction française (est) compétente pour ordonner, avant tout procès, une mesure d’expertise devant être exécutée en France et destinée à conserver ou établir la preuve de faits dont pourrait dépendre la solution du litige. Appointing an expert to assess any damages caused to a solar plant, and to explore liabilities for such damage, falls within Article 35 Brussels I Recast. I would agree with such a wide reading as I have discussed before in my review of the Belo Horizonte case. The Supreme Court does not consider relevant to the outcome claimants’ argument, that under Article 2 Brussels I Recast, provisional measures only enjoy free movement under the Regulation when ordered by a court with subject-matter jurisdiction. Indeed in view of the Supreme Court the Court of Appeal need not even consider whether it has such jurisdiction. Given that the form Annexed to the Regulation includes a box requiring exactly that, this may seem odd. One assumes the Court held so given that the forensic measures ordered, can be rolled out entirely in France: no need for any travel at all.

In Haras des Coudrettes, the Supreme Court annulled because the Court of Appeal had established subject-matter jurisdiction for the Swiss courts, and had subsequently not entertained the possibility of provisional measures, even though the object at issue (the mare: ‘la jument’) is in France: ‘Qu’en statuant ainsi, alors qu’elle relevait que la mesure sollicitée avait pour objet notamment d’examiner la jument située en France, la cour d’appel, qui n’a pas tiré les conséquences légales de ses propres constatations, a violé les textes susvisés.‘

and  ‘une mesure d’expertise destinée à conserver ou établir la preuve de faits dont pourrait dépendre la solution du litige, ordonnée en référé avant tout procès sur le fondement du second de ces textes, constitue une mesure provisoire au sens du premier, qui peut être demandée même si, en vertu de cette Convention, une juridiction d’un autre Etat lié par celle-ci est compétente pour connaître du fond’:

expert findings which aim at maintaining or establishing facts upon which the eventual solution of the litigation may depend, fall within the scope of provisional measures and may be ordered even before any entertainment of subject-matter jurisdiction. Again, the fact that for the effective roll-out of the provisional measures no other State need be engaged, must have relevance in this assessment.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.15.

 

 

 

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Bot AG in Liberato: violation of lis alibi pendens rules does not justify refusal of enforcement on grounds of ordre public.

Advocate-General Bot opined on 6 September in C-386/17 Liberato. (Not as yet available in English). The case is slightly complicated by the application of not just former Regulation 44/2001 (Brussels I) but indeed a jurisdictional rule in it (5(2)) on maintenance obligations, which even in Brussels I had been scrapped following the introduction of the Brussels IIa Regulation.

The Opinion is perhaps slightly more lengthy than warranted. Given both the Brussels I and now the Brussels I Recast specific provisions on refusal of recognition and enforcement, it is no surprise that the AG should advise that a wong application by a court of a Member State (here: Romania) of the lis alibi pendens rules, does not justify refusal of recognition by other courts in the EU: the lis alibi pendens rules do not feature in the very limited list of possible reasons for refusal (which at the jurisdictional level lists only the protected categories, and the exclusive jurisdictional rules of Article 24), and it was already clear that misapplication of jurisdictional rules do not qualify for the ordre public exception.

It would not hurt having the CJEU confirm same.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.16.1.3, 2.2.16.1.4.

 

 

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