Posts Tagged C-292/08 German Graphics
Nickel & Goeldner: Not the procedural context but the legal basis of the action determines the insolvency exception.
It is always useful to have the Court of Justice remind us of (some might say: fine-tune) what it has decided in precedent. This is no different in Nickel & Goeldner– Case C-157/13. (Which also deals with Article 71’s rule on the relation between Brussels I and the Convention for the International Carriage of Goods by Road (CMRT)).
This blog has reported earlier on the difficulties in applying the ‘insolvency exception’. (E.g. in Sabena and Enascarco). In Nickel & Goeldner, the insolvency administrator of Kintra applied to the relevant Lithuaian courts for an order that Nickel & Goeldner Spedition, which has its registered office in Germany, pay its debt in respect of services comprising the international carriage of goods provided by Kintra for Nickel & Goeldner Spedition, inter alia in France and in Germany. According to the insolvency administrator of Kintra, the jurisdiction of the Lithuanian courts was based on Article 14(3) of the Lithuanian Law on the insolvency of undertakings. Nickel & Goeldner Spedition disputed that jurisdiction claiming that the dispute fell within the scope of Article 31 of the CMR and of the Brussels I Regulation.
The Courts instructs how its earlier case-law (Gourdain; Seagon; German Graphics; F-Tex) needs to be applied (at 26-27):
It is apparent from that case-law that it is true that, in its assessment, the Court has taken into account the fact that the various types of actions which it heard were brought in connection with insolvency proceedings. However, it has mainly concerned itself with determining on each occasion whether the action at issue derived from insolvency law or from other rules.
It follows that the decisive criterion adopted by the Court to identify the area within which an action falls is not the procedural context of which that action is part, but the legal basis thereof. According to that approach, it must be determined whether the right or the obligation which respects the basis of the action finds its source in the common rules of civil and commercial law or in the derogating rules specific to insolvency proceedings.
The action at issue is an action for the payment of a debt arising out of the provision of services in implementation of a contract for carriage. That action could have been brought by the creditor itself before its divestment by the opening of insolvency proceedings relating to it and, in that situation, the action would have been governed by the rules concerning jurisdiction applicable in civil and commercial matters. The fact that, after the opening of insolvency proceedings against a service provider, the action for payment is taken by the insolvency administrator appointed in the course of those proceedings and that the latter acts in the interest of the creditors does not substantially amend the nature of the debt relied on which continues to be subject, in terms of the substance of the matter, to the rules of law which remain unchanged.
Hence, there is no direct link with the insolvency proceedings and the Brussels-I Regulation continues to apply.
(On the application of Article 71, the Court holds that, in a situation where a dispute falls within the scope of both the regulation and the CMR, a Member State may, in accordance with Article 71(1) of the Regulation, apply the rules concerning jurisdiction laid down in Article 31(1) of the CMR.).
Not the procedural context (in particular, whether the liquidator takes the action) but the legal basis of the action determines the insolvency exception. A useful alternative formulation of the Gourdain et al case-law.
Bevoegdheid, Brussels I, C-133/78 Gourdain, C-292/08 German Graphics, Case C‑157/13, Civil and commercial, CJEU, Court of Justice, ECJ, EEX, EEX Verordening, Gourdain, Insolvency, Insolvency exception, Insolventie, Judgments Regulation, Jurisdiction, Jurisdiction Regulation, Nickel & Goeldner, Nickel & Goeldner Spedition GmbH v “Kintra” UAB, Regulation 1346/2000, Regulation 44/2001, related actions, Scope of application
Insolvency, Brussels I and Lugano: Enasarco v Lehman Brothers upholds strong defence of choice of court
In Enasarco v Lehman Brothers, the High Court was asked to stay English proceedings following jurisdictional issues of a derivative agreement between Enasarco and Lehman Brothers Finance (LBF). Swiss liquidators of LBF had already rejected a claim under the agreement, rejection which is being challenged in the Swiss courts. The derivative agreement is subject to English law and to choice of court exclusively in favour of the English courts.
Are the claims with respect to the derivative agreement so closely connected to the insolvency that they are covered by the insolvency exception to the Lugano Convention (identical to the exception in the Brussels I Regulation) consequently freeing the English courts from that Convention’s strict lis alibi pendens rule? (Similar questions were at issue recently in the Sabena recognition and enforcement issue – albeit evidently not re lis alibi pendens).
Richards J held they were – allowing the contractual issues under the derivative agreement to be settled by the English courts, and the insolvency matters by the Swiss courts.
LBF submitted that the Lugano Convention applies to the present proceedings and also to the proceedings in Switzerland whereby Enasarco challenges the rejection of its claim and, accordingly, that article 27 (lis alibi pendens) required the court to stay the English proceedings in favour of the Swiss proceedings. It was common ground that, if article 27 applies, the Swiss court was the court first seised. Alternatively, LBF submitted that the court should exercise its discretion under article 28 (re related, but not identical actions) to stay the English proceedings. In the further alternative, it submitted that the High Court should have granted a stay, on case management grounds, of the English claim pursuant to section 49(3) of the Senior Courts Act 1981 (SCA 1981). (In other words, were Lugano found not to apply).
‘First, they are proceedings which arise, and can only arise, under Swiss insolvency law. Secondly, they form an integral part of the liquidation proceedings, designed to achieve the primary purpose of such proceedings, which is the distribution of the assets available to the liquidators among those creditors whose claims are admitted. The proceedings must take place in the court dealing with the liquidation. Thirdly, the purpose of the proceedings is not simply to establish whether the claimant has a good contractual or other claim, but to determine the amount and the ranking of the claim for the purposes of the liquidation. The ranking of claims is a matter arising exclusively under the relevant insolvency law. (…). Fourthly, the self-contained and special character of the Swiss proceedings is well illustrated by the fact that it does not give rise to res judicata as between the parties in relation to the underlying contractual dispute.‘
As for the discretionary stay under English civil procedure, Richards J held against it, for the following reasons (at 56 ff):
First, the Derivative Agreement contains an exclusive jurisdiction clause, as regards states which are parties to the Lugano Convention, in favour of the English courts. (Here reference was made to the Supreme Court’s decision in The Alexandros).
Secondly, as noted by the Court of Appeal in the AWB (Geneva) case when refusing a stay of English proceedings in favour of insolvency proceedings in Canada, and also by Rimer J in UBS AG v Omni Holding AG when refusing a stay of English proceedings in favour of insolvency proceedings in Switzerland, it is likely that the Swiss court will be greatly assisted by having the judgment of the English court on the rights and liabilities of the parties under the Derivative Agreement, given that it is governed by English law.
Thirdly, the Swiss proceedings were, practically speaking, not as far advanced as to make concurrent English proceedings nugatory. (Given the governing law of the contract, for instance, the Swiss courts might well be tempted to await the outcome of the English proceedings and take relevant conclusions for their own proceedings).
Fourthly, the merits of having issues arising under the Derivative Agreement determined by the English court have in fact been recognised by the liquidators of LBF in the past.
Finally, Enasarco had not chosen to commence proceedings in Switzerland. The liquidators chose to deal with Enasarco’s claims only in the Swiss insolvency proceedings and not through further proceedings in the English courts. It was the liquidators’ choice in this respect that forced Enasarco to issue the Swiss proceedings.
In summary, where issues are of a mixed nature, to the degree the mix can be undone, that is what must be carried out. The case highlights once again the strong defence raised by the English courts for choice of court clauses.
Bevoegdheid, Brussels I, C-133/78 Gourdain, C-292/08 German Graphics, Choice of court, EEX, EEX Verordening, Enasarco v Lehman brothers, Fondazione Enasarco v Lehman Brothers Finance SA & anr  EWHC 34 (Ch), Forum clause, Gourdain, http://www.bailii.org/ew/cases/EWHC/Ch/2014/34.html, Insolvency, Insolvency exception, Insolventie, Jurisdiction, Jurisdiction Regulation, LAP, Lis alibi pendens, Lugano, Lugano Convention, Recognition and enforcement, Regulation 1346/2000, related actions, stay, stay of proceedings, Switserland,  EWHC 34 (Ch)
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