Mastermelt v Siegfried Evionnaz highlights the continuing torpedo under Lugano, as opposed to the Brussels regime. Suggests cautious application of the Privatbank authority on reflexivity.

In Mastermelt v Siegfried Evionnaz [2020] EWHC 927 (QB), at issue is negative declaratory relief on contractual performance. 

Claimant Mastermelt is an English company specialising in the reclamation of precious metals. The defendant, Siegfried Evionnaz SA (“Siegfried”), is a Swiss company. There is a dispute between the parties over the quality of Mastermelt’s performance. Siegfried’s standard terms and conditions of contract (“STC”) include a clause stating that the governing law is Swiss law and that the Swiss courts have exclusive jurisdiction.

Relevant pending proceedings, are: very shortly after Siegfried had informed Mastermelt that it was going to issue proceedings against Mastermelt in Switzerland, Mastermelt issued the present claim in England on 5 February 2019. It seeks negative declaratory relief against Siegfried. Proceedings were subsequently issued by Siegfried against Mastermelt in the Zurich Commercial Court on 23 July 2019. Meanwhile, on 24 May 2019, Siegfried applied to the High Court in London for a declaration that it had no jurisdiction to try Mastermelt’s claim and so the Claim Form and service should be set aside, alternatively stayed. Further, on 29 January 2020 Mastermelt applied to the Swiss court (1) for a stay of those proceedings pending the UK decision, or (2) for the Swiss proceedings to be limited at that stage to a consideration of the court’s own jurisdiction there and nothing else, or (3) an extension of time for service of a response to Siegfried’s claim. By an order of 4 February 2020, the Swiss court rejected all three applications. On 7 February Mastermelt filed an appeal to the Federal Supreme Court of Switzerland which initially suspended enforcement of the Zurich Commercial Court’s decision pending the appeal. However, on 13 February Siegfried objected to any such suspension. The Supreme Court directed Mastermelt to file any response to that objection by 9 March. As far as the English courts know, that has been done but at the moment the Supreme Court has not given its decision on the suspension issue, let alone any substantive appeal, nor has there been any decision yet on the jurisdiction or otherwise of the Swiss court to hear the claim.

Siegfried argues, and has convinced the Swiss courts, that A27 Lugano needs to be applied ‘in harmony’ with A31(2) Brussels Ia: this now provides that regardless of which court was seised first, the court which was the subject of the putative exclusive jurisdiction clause, must decide the question of its jurisdiction first and the other proceedings must be stayed in the meantime. At 13 Waksman J refers to the Swiss court’s reasoning, where it takes an expansionist view of the Lugano Convention‘s protocol no2, that the Lugano States shall take ‘due account’ of each other’s courts decisions. The Swiss court suggests that in principle it should follow CJEU authority in Gasser (which introduced the torpedo mechanism by giving strict interpretation to the lis alibi pendens rule, even in case of choice of court) but that it has reasonable justification to deviate from Gasser given that the judgment has become ‘obsolete’ following A31(2) BIa.

Waksman J is first invited to accept the Swiss court’s reasoning as res iudicata, per CJEU C-456/11 Gothaer. (I did say at the time the CJEU may find its ruling in Gothaer would come back to haunt it). This he finds is a stretch of that authority but also not applicable given the limited findings of the Swiss court at any rate: ‘here the actual and only decision of the Swiss court thus far is simply to refuse to stay its own proceedings’.

He then discusses how A27 Lugano needs to be applied. A first reference is to the Court of Appeal’s most problematic view in Privatbank, to my mind, of applying Article 28 Lugano reflexively to third States. At 23-24 Waksman J distinguishes Privatbank (clearly he cannot hold it no relevant authority should he think so); then holds correctly that Gasser is not entirely obsolete following BIa; and finally at 30 that the harmonised regime per Lugano’s Protocol does not mean that one should now interpret Article 27 Lugano like 31.2 and (b) i Brussels Ia.

I agree most firmly. Note this has Brexit implications: one of the routes post Brexit, as readers know, is for the UK to become part of Lugano. In doing so it will surrender BIa’s forum non-light regime (Articles 33-34) in favour of Lugano which most definitely does not have a forum non-application – as well as, as is at issue here, re-arming the Italian torpedo. (Update 7 May 2020 Many thanks to Elijah Granet for pointing in the comments section to A6 of the Hague Choice of Court Convention which in future might serve towards disarming the torpedo to some degree: pursuant to Article 6 of that Convention, a court of a Contracting State other than the contractually chosen court must suspend or dismiss proceedings in that court to which an exclusive choice of court applies. There are exceptions however and in my view these could be used quite extensively: asymmetric choice of court, for instance, might well by some jurisdictions be classed as ordre public). (Update 28 May 2020 see also Aygun Mammadzada in the meantime here for similar and further comments re Lugano).

This leaves the issue of the putative choice of court agreement. England is the forum contractus per Article 5(1)a Lugano, hence will have jurisdiction less choice of court stands. Authority is well-known and recently applied in Pan Ocean, referred to here at 85. After much factual consideration it is accepted to a good arguable case standard that the parties contracted on the basis of the STC for the obligations concerned.

In conclusion therefore the action is stayed.

Quite a few relevant issues here. I for one note the cautious approach of the Court, in handling the Court of Appeal’s Privatbankauthority – following SCOR v Barclays.

Geert.

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

 

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.

Toyota v Prolat and the Brussels I arbitration exception. Plus ça change.

In Toyota v Prolat [2014] EWHC 3649 (Comm) the High Court was asked by Toyota to confirm the existence of an agreement between parties to arbitrate. The arbitral panel, already seized by Toyota, agreed that it would be best for the Court preemptively to settle this issue since it suspects any ruling by the tribunal itself will be subject to litigation by Prolat. The agreement (existence of which is disputed by Prolat; it had employed an authorised agent, whose signings on behalf of Prolat are disputed) concerns the delivery of sugar by Toyota to Prolat. Prolat objects to the jurisdiction of the tribunal. It has itself started proceedings in Naples for damages for various alleged wrongdoing by Toyota, whether for breach of contract or tort.

The interest of the case for this blog lies in particular with the concurrent proceedings in Italy and the UK. Should the UK decline? The case is subject to Regulation 44/2001, not to the recast. Cooke J holds that ‘This Court is not being asked to interfere with the functions of the Italian court as no form of anti-suit injunction is being sought against Prolat. This Court is being asked to determine whether or not there is an arbitration agreement and to make a declaration in the light of its conclusion.West Tankers is therefore distinguished.  Would, had it applied, Regulation 1215/2012 made a difference? Cooke J held that it would not: ‘Article 1(2)(d) remains unchanged from the earlier Regulation but is more fully explained in paragraph 12 of the Preamble. I was also referred to Article 73 which states that the Regulation will not affect the application of the New York Convention. (…)‘ (at 16)

He concludes ibidem ‘Although it is not yet in force, it was suggested that some might regard the new Regulation as declaratory of the existing state of the law. . The jury on that, as is well-known, is out.

Cooke J further explores the issue of the applicable law to the contract per its putative law (Article 10(1) Rome I). Firm and justifiable conclusion (at 18) there, is: English law.

Geert.