Posts Tagged Jurisdiction clauses

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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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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Subrogation of choice of court clauses: The ECJ (succinctly) in Refcomp

The ECJ has issued its ruling in Refcomp, Case C-543/10. I reported on Jaaskinen AG’s Opinion here. The Court effectively confirmed the Opinion, albeit within the boundaries of its customary judicial economy.

Like the AG, the Court first of all limits precedent value to a ‘chain of contracts under Community law’: i.e. a succession of contracts transferring ownership which have been concluded between economic operators established in different Member States of the European Union. It subsequently re-affirms the consensual nature of jurisdiction clauses as insisted on by Article 23 of the Jurisdiction Regulation, and the Brussels Convention before it.  ‘It follows that the jurisdiction clause incorporated in a contract may, in principle, produce effects only in the relations between the parties who have given their agreement to the conclusion of that contract. In order for a third party to rely on the clause it is, in principle, necessary that the third party has given his consent to that effect.’

In a chain of contracts transferring ownership, the relationship of succession between the initial buyer and the sub-buyer is not regarded as the transfer of a single contract or the transfer of all the rights and obligations for which it provides – in contrast with bills of lading for which the Court had previously (Case C‑387/98 Coreck) held that a jurisdiction clause incorporated in a bill of lading may be relied on against a third party to that contract if that clause has been adjudged valid between the carrier and the shipper and provided that, by virtue of the relevant national law, the third party, on acquiring the bill of lading, succeeded to the shipper’s rights and obligations.

Basically, under French law and French law (almost) alone, the action by Doumer against Refcomp would, exceptionally, be considered contractual. In the other Member States, it would not. To refer, the court holds, the assessment as to whether the sub-buyer may rely on a jurisdiction clause incorporated in the initial contract between the manufacturer and the first buyer to national law, would give rise to different outcomes among the Member States liable to compromise the aim of unifying the rules of jurisdiction pursued by the Regulation. The concept of ‘jurisdiction clause’ referred to in that provision therefore must be interpreted as an independent concept, guided by the need to give full effect to the principle of freedom of choice on which Article 23(1) of the Regulation is based.

The ECJ therefore holds that

Article 23 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that a jurisdiction clause agreed in the contract concluded between the manufacturer of goods and the buyer thereof cannot be relied on against a sub-buyer who, in the course of a succession of contracts transferring ownership concluded between parties established in different Member States, purchased the goods and wishes to bring an action for damages against the manufacturer, unless it is established that that third party has actually consented to that clause under the conditions laid down in that article.

Geert.

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