Posts Tagged Lis alibi pendens

Lis alibi pendens denied traction in Lotus v Marcassus Sport.

[2019] EWHC 3128 (Comm) Lotus v Marcassus Sport Sarl concerns the application of Articles 29-30 Brussels Ia – the lis alibi pendens rules.

Lotus, an English company, is a well-known manufacturer of cars. By a series of four written contracts entered in 2016, Lotus appointed Marcassus, a French company in the business of distributing sports cars, as a non-exclusive dealer and authorised repairer of Lotus cars in Toulouse and Bordeaux. Each of these contracts was governed by English law and provided for the non-exclusive jurisdiction of the English courts.

In September 2018 Lotus gave notice terminating one of the four agreements. It is common ground that the parties’ overall relationship thereafter terminated. Marcassus then brought proceedings in the Toulouse Commercial Court, claiming loss of profits and bonuses and seeking to enforce contractual penalties. A summons was filed with the Hussier de Justice on 21 December 2018 for onward transmission to the Foreign Process Section of the High Court for service on Lotus, summoning Lotus to appear in Toulouse on 26 March 2019. Marcassus’ claim was filed at the Toulouse Commercial Court on 7 January 2019. Lotus did indeed appear at the hearing on 26 March 2019 and has served a defence disputing the claim, but not claiming in respect of or relying on Marcassus’ non-payment of the 2018 invoices. Lotus offered to undertake not to make such a claim in the Toulouse proceedings hereafter, provided of course that these proceedings were permitted to continue. Meanwhile, on 13 March 2019, Lotus issued these proceedings claiming the amounts due under the 2018 invoices. Marcassus was served with the claim form on 24 April 2019.

Phillips J first of all (at 15 ff ) deals with the issue of which course was ‘seized’ first (compare MB v TB). Lotus contended that Marcassus’ application should fall at the first hurdle because Marcassus has not demonstrated when, if at all, the summons in the Toulouse proceedings was received by the “authority responsible for service” of that summons for the purposes of A32 Brussels Ia, and so cannot establish that the Toulouse court was seised before the English court was seised by the issue of the claim form on 13 March 2019. Marcassus’ case is that the relevant authority is the Hussier de Justice, it being accepted that he received the summons on 21 December 2018. But, in the alternative, if the relevant authority is the Foreign Process Section of the High Court (as Lotus contends), Marcassus invites the inference that it was received by that authority shortly after that date, but in any event before 13 March 2019. Marcassus points to the fact that Lotus appeared before the Toulouse court on 26 March 2019 and has taken no point on service in those proceedings.

Phillips J decides not to hold on this point given that he rejects Article 29 lis alibi pendens anyway – however he indicates he does not find Lotus’ assertion very attractive.

On Article 29, Marcassus accepted that the proceedings, whilst between the same parties, do not presently involve the same “cause of action” however argued that the court could take into account the likely future shape of the proceedings, namely, that Marcassus would seek to set-off and counterclaim the very same claims it has brought in Toulouse. This approach however cannot fly per CJEU C-111/01 Gantner, at 31: in order to determine whether there is lis pendens in relation to two disputes, account cannot be taken of the defence submissions, whatever their nature, and in particular of defence submissions alleging set-off, on which a defendant might subsequently rely when the court is definitively seised in accordance with its national law” and the Article 29 route was duly dismissed.

On Article 30, the claims were found not to be ‘related’ on grounds of Lotus having secured an exclusion of set-off in the contract (Phillips J spent some time debating whether the contract did include such clear exclusion of set-off). This clause effectively keeps the claims on various invoices at arm’s length.

Even had Article 30’s conditions been met, the case would not have been stayed on grounds that the judge (unlike in A29 cases) has discretion whether to do so. Referring to The Alexandros T, at 44: ‘it is obvious that these proceedings should be permitted to continue so that the question of whether clause 29.2 is an effective no set-off clause is determined in this jurisdiction. That issue. (sic) which does not arise in the Toulouse proceedings (limiting the extent of “relatedness”), is an issue of the interpretation of an English law contract (establishing close proximity with this jurisdiction) and can be determined speedily in a summary judgment application (indicating that the stage proceedings have reached is not a factor against this jurisdiction). Further, the parties have expressly agreed to the jurisdiction of the English courts, albeit on a non-exclusive basis.

Application dismissed.

Geert.

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

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Fasten your seatbelts. Etihad v Flöther (Air Berlin) puts limits of EU law in applying Article 25 in the spotlight. On ‘particular legal relationship’ in choice of court, and asymmetric jurisdiction clauses in applications for stay.

[2019] EWHC 3107 (Comm) Etihad v Air Berlin (officially: Etihad Airways v Prof Dr Lucas Flöther, who is the insolvency practitioner for Air Berlin) raises the issues of whether the relevant dispute arises in connection with the “particular legal relationship” between the parties, as required by Article 25 Brussels Ia, and the question whether so-called “asymmetric” jurisdiction clauses fall within Article 31 of Brussels Recast, an issue which I reviewed at the time of Commerzbank v Liquimar. (This in the very week that Michiel Poesen and I received copy of Mary Footer’s edited volume on optional choice of court, with our Chapter on Belgium).

Those reading this post and the judgment had better hold on – for this is more than just a quick safety briefing – the required ‘good arguable case’ standard is responsible for the extensive discussion of the issues, perhaps not entirely in line with the instruction for conciseness per the Supreme Court in Vedanta.

Etihad acquired a 2.99% stake in Air Berlin in August 2011 and, in December 2011, increased its shareholding to 29.21% pursuant to an agreement governed by English law and contained an exclusive jurisdiction clause in favour of the English courts. Between 28 and 30 April 2017, Etihad entered into a number of agreements for the purposes of providing Air Berlin with financial support. One of these was a facility agreement which contains the discussed jurisdiction clause:

33.1 JURISDICTION 

33.1.1 The courts of England have exclusive jurisdiction to settle any disputes arising out of or in connection with this Agreement (including a dispute relating to non-contractual obligations arising from or in connection with this Agreement, or a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute“).

33.2.2 The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

33.1.3 This Clause 33 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

In a letter dated 28 April 2017 from Mr James Hogan, the then President and CEO of Etihad Aviation Group PJSC, to the directors of Air Berlin (the “Comfort Letter”), which provided as follows: 

“For the purposes of the finalisation of the financial statements of Air Berlin plc for the year ended 31 December 2016, having had sight of your forecasts for the two years ending 31 December 2018, we confirm our intention to continue to provide the necessary support to Air Berlin to enable it to meet its financial obligations as they fall due for payment for the foreseeable future and in any event for 18 months from the date of this letter. Our commitment is evidenced by our historic support through loans and obtaining financing for Air Berlin”.

In German proceedings, started first, Air Berlin advances two alternative claims against Etihad under German Law: i) A claim for breach of the Comfort Letter on the basis that the Comfort Letter is legally binding. ii) Alternatively, if the Comfort Letter is not legally binding, a pre contractual claim in culpa in contrahendo, on the basis that Etihad used its negotiating power during the negotiations between the parties to avoid providing a clearly binding statement whilst, at the same time, inspiring the trust of Air Berlin that it would adhere to the commitment in the Comfort Letter.

Clearly Air Berlin considers the comfort letter a separate ‘agreement’ or ‘contract’ to which the widely formulated choice of court and law provisions of the Facility Agreement do not apply.

In the English proceedings, Etihad seeks the following declarations:

a) The claims made and declarations sought in the German Proceedings are subject to the exclusive jurisdiction of the English court within Article 25 of the Judgments Regulation, because, on its true construction, they are within the scope of the exclusive jurisdiction clause contained in the 2017 €350m Facility Agreement (the one with the jurisdiction clause discussed above);

b) The claims made and declarations sought in the German Proceedings are governed by English Law on the true construction of the governing law clause in the Facility Agreement, an implied agreement between the same parties and/or the application of Rome I and/or Rome II;

c) The Claimant is not liable for breach of the Comfort Letter, as alleged in the German Proceedings, because that letter, on its true construction, did not create a legally binding promise to provide financial support to Air Berlin;

d) The Claimant is not liable on the basis of culpa in contrahendo, as alleged in the German Proceedings, because the facts and matters relied on in the German Proceedings do not give rise to a cause of action known to English law; and

e) Further, and in any event, the Claimant is not liable to the Defendant as alleged by the Defendant in the German Proceedings.

On Article 25 the list of authority was of course very long. On Article 31, reference was made for background in particular to Commerzbank AG v Liquimar Tankers Management Inc. in which Cranston J supported as I discussed at the time, the cover of asymmetric choice of court by Article 31.

On Article 25, the

I. first point to discuss

was whether the choice of court agreement in the facilities agreement extended to the comfort letter. Etihad puts forward adopting the broad, purposive and commercial approach to interpreting such clauses which it suggests has been mandated by the English authorities, concluding the dispute arises out of or in connection with that agreement. Air Berlin emphasises that application of the standard of proof must take into account the EU law requirement that an exclusive jurisdiction clause under Article 25 must be “clearly and precisely” demonstrated.

At 56 ff Jacobs J first reiterates the jurisdiction clause relied upon, contained in the Facility Agreement, which is expressly governed by English law. Clause 32 of that agreement provides: “This Agreement and all non-contractual obligations arising from or connected with it are governed by English law”. The question of whether, as a matter of contractual interpretation, the clause conferring jurisdiction extends to claims in respect of the Comfort Letter and the related claims advanced in the German proceedings is to be determined by reference to English law. This may surprise uninitiated readers first reading Article 25 and relevant recitals, however to those with conflicts insight it will be well known that Article 25 merely scratches on the surface of the contractual depth of choice of court. 

At 69 he sums up the principles (with reference to Fiona Trust), discusses them at length, and summarises at 102:

(i) the width of the jurisdiction clause in the Facility Agreement, (ii) the fact that the Comfort Letter was part of the overall support package where all relevant agreements between Etihad and Air Berlin were governed by English law with English jurisdiction clauses, (iii) the close connection between the Comfort Letter and the Facility Agreement in terms of the genesis of the Comfort Letter, (iv) Etihad’s good arguable case that the Comfort Letter did not create contractually binding obligations and was ancillary to the Facility Agreement, (v) the absence of any competing jurisdiction clause in any of the agreements within the support package, and the existence of English law and jurisdiction clauses in the relevant agreements as part of that package, and (vi) the reasonable foreseeability of disputes which required consideration of the Comfort Letter in conjunction with the Facility Agreement – all lead to the conclusion that the parties intended disputes arising in relation to the Comfort Letter to fall within the jurisdiction clause of the Facility Agreement.

Conclusion on this issue, at 109: ‘interpreting the jurisdiction agreement in the Facility Agreement as a matter of English law, there is a good arguable case that (i) the jurisdiction clause in the Facility Agreement is applicable to the Comfort Letter and any non-contractual claim in connection therewith, and (ii) the claim commenced by Air Berlin in Germany falls within the scope of that clause.’

On Article 25, the

I. second point to discuss at 110 ff was the requirement in Article 25 for the dispute to arise “in connection with a particular legal relationship” – a condition which Etihad must meet separately from the above conclusion that as a matter of English law, the claims made in Germany fell within the scope of the jurisdiction agreement in the Facility Agreement. Arguments here to some extent overlap with the strength or otherwise of the connection between the Facility Agreement and the Comfort Letter, discussed above. Reference here clearly was made to Airbus and the CJEU in Powell Duffryn. In the latter the CJEU held ‘”This requirement aims to limit the effect of an agreement conferring jurisdiction to disputes originating from the legal relationship in connection with which the agreement was concluded. It seeks to prevent a party from being surprised by the referral to a specified court of all disputes which arise in the relationships which it has with the other party and which may originate in relationships other than that in connection with which the agreement conferring jurisdiction was concluded”. The principles of Powel Duffryn were also followed in the equally seminal CDC case.

At 134 ff Jacobs J dismisses the argument that the way in which a particular claim is formulated in the foreign proceedings is determinative of the issue of whether the dispute arises in relation to a particular relationship. Rather: ‘it is obviously necessary to look at the nature of the claim made in those foreign proceedings. It is clear that what is then required is for the court to consider the substance of the claim that is made.’ At 136 ff he lists the arguments leading him to the conclusion that there is ‘no doubt that the dispute concerning the Comfort Letter can fairly (and certainly to a good arguable case standard) be said to originate from [the borrower /lender] relationship.’

 

The final issue to consider then was Article 31(2): “2. Without prejudice to Article 26, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement.”

The issue is therefore whether the jurisdiction clause in the present case is a clause which “confers exclusive jurisdiction” within the meaning of Article 31(2). A related question is whether the English court can properly be described as being “seised on the basis of” such exclusive jurisdiction agreement within the meaning of Article 31 (2). Air Berlin says “no” to both questions (on the first, purely on the basis of the clause being asymmetric), and Etihad says “yes”.

Reference is made to Codere, Commerzbank, leading to a firm finding that the clause is exclusive in casu, for it is (in prof Fentimann’s words) ‘exclusive against a counterparty’ and in Louise Mellett’s words (ICLQ, referenced in the judgment)

‘”In an asymmetric agreement, the borrower has promised not to sue anywhere other than the chosen jurisdiction. The question of whether the other party did or did not agree to do the same does not arise when the bank is seeking to enforce the agreement and should be irrelevant. Thus, the point is not so much that “considered as a whole” [asymmetric agreements] are agreements conferring exclusive jurisdiction, as the judge put it in Commerzbank. Rather, each obligation can be considered on its own; the clause includes a promise by the borrower not to sue in any jurisdiction and that promise is capable of being protected by Article 31(2). Each different obligation necessarily falls to be considered separately and the fact that the bank is not under a similar obligation is neither here nor there.”

(Further scholarship discussed includes Dickinson and Lein, and Ahmed; the Hague Convention is also discussed obiter, with reference to Clearlake and update 28 November 2019 as Sarah McKibbin notes Jacobs J suggesting obiter ‘Like Cranston J and Merrett, I consider that there are good arguments that the rules in the Hague Convention are engaged by an asymmetric clause.’ [217].

Reference to the CJEU on the Article 31 issue, requested by Air Berlin, is dismissed, something which may have to be reconsidered by the Court of Appeal. But even on the Article 25 discussion (I am thinking in particular of the relevance or not of the formulation of the claim), more CJEU authority in my view would be welcome.

Geert.

(Handbook of) European Private international law, 2nd ed. 2016, Ch.2, Heading 2.2.9, Heading 2.2.9.4.1, Heading 2.2.9.5.

 

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Skarb Państwa v Stephan Riel (qq insolvency trustee Alpine Bau).

Salzburg-based Alpine Bau had been carrying out a considerable amount of roadwork engineering for the Polish State. The courts at Vienna started insolvency proceedings in 2013, appointing Mr Riel as what is now called the ‘insolvency practitioner’. Austria is the centre of main interests, the Austrian procedure the main proceedings. A little later a secondary proceeding is opened in Poland. Skarb Państwa, the Polish finance ministry or treasury, seeks in those proceedings the payment of debt it claims is outstanding vis-a-vis the Polish State. It also seizes the Austrian courts in a separate proceeding, asking it to confirm the existence of debt owed to it (the amount almost exactly the amount it specified in the Polish secondary proceedings) and at the same time a stay in its pronouncement until the Polish courts have ruled on the fate of the claim in Poland. Essentially therefore the Austrian action is a conservatory action, a hedging of the treasury’s bets.

An interesting angle is that in the Austrian proceedings the Treasury claims application of the Brussels Ia Regulation, particularly its Article 29 lis alibi pendens rule. The Austrian courts reject the existence of the debt and they do not entertain the lis alibi pendens request (the request for a stay).

The first question in C-47/18 (judgment 18 September) was whether Brussels Ia or the Insolvency Regulation are engaged. The CJEU (at 33) emphasises the need for both avoidance of overlap and of non-cover by either (‘doivent être interprétés de façon à éviter tout chevauchement entre les règles de droit que ces textes énoncent et tout vide juridique’), in the relation between the two Regulations: the infamous dovetail which as I have flagged in earlier posts, the Court in my view does not get entirely right. References are to Valach, Wiemer & Trachte, Feniks, Nickel & Goeldner). Here, the Treasury bases its action on Article 110 of the Austrian insolvency act (allowing, and urging first-tier creditors (such as, inevitably, Inland Revenue) to have their claims properly registered so as to ensure the priority in the picking order against the other creditors). The claim therefore is subject to the Insolvency Regulation 1346/2000.

The Court subsequently and unsurprisingly holds that Brussels Ia’s lis alibi pendens rule cannot somehow apply deus ex machina. At 43: insolvency is excluded from the Regulation; this exclusion is all or nothing: if the Regulation does not apply, none of it applies, including its procedural rules. These have, in BIa context, the clear purpose of ruling out as much as possible procedures pending in more than one Member State on the same issue. The Insolvency Regulation, by contrast, allows for concurrent proceedings, albeit primary and secondary ones, and (in Article 31 of the old Regulation; tightened in the current version 2015/848) encourages co-operation and exchange of information to avoid irreconcilable judgments.

(The further question asked refers to debt documentation requirements).

Geert.

Handbook of) EU private international law, 2nd ed. 2016, Chapter 5 Heading 5.4.1. Chapter 2 Heading 2.2.2.10.1

 

 

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Office Depot v Holdham et al. Lis alibi pendens in follow-on cartel damages suit. Delay in the Swedish proceedings crucial factor in High Court’s rejection of a stay

in [2019] EWHC 2115 (Ch) Office Depot BV et al v Holdham SA et al, the High Court in August (I had promised posting soon after the Tweet. That did not quite happen) held on issues of lis alibi pendens (and, alternatively, a stay on case management grounds) in a follow-on cartel damages suit arising from the European Commission’s cartel finding in the envelopes market. That’s right: envelopes. Cartel cases do not always involve sexy markets. But I digress (and I also confess to finding stationary quite exciting).

Sir Geoffrey Vos’ judgment deals with the fate of the Office Depot claimants’ follow-on proceedings in England against certain Bong (of Sweden) corporate defendants, after the Bong parties had commenced Swedish proceedings for negative declarations as to their liability. In March 2019 the relevant Swedish court said in effect that Article 8 Brussel I a was not engaged so that the Swedish Bong proceedings for negative declarations could only proceed against the locally domiciled Office Depot company, which was Office Depot Svenska AB, but not the non-Swedish Office Depot entities. Parties at the time of Sir Geoffrey’s decision (Swedish followers may be able to enlighten us on whether there has been a decision in the meantime; at 23 the expected date is mentioned as ‘the autumn’) were awaiting a certiorari decision by the Swedish Supreme Court.

CJEU C–406/92 The Tatry of course is discussed, as is CDC. Sir Geoffrey also discussed C-129/92 Owens Bank, in particular Lenz AG’s Opinion (the CJEU did not get to the part of the Opinion relevant to current case). Discussion between the parties, at Sir Geoffrey’s request, focused on the issue of the judge’s discretion under lis alibi pendens for related actions, rather than on whether or not the actions are related (it was more or less accepted they are; see ia at 43 ff).

At 46 ff the Court then exercises its discretion and finds against a stay, on the basis in particular of the expected length of the Swedish proceedings: at 54: ‘the grant of a stay would be contrary to justice in that it would delay unreasonably the resolution of proceedings that can only be tried in England and already relate to events many years ago‘, and at 48: ‘The stage in the Swedish proceedings is a long way behind these. It will be between one and two and a half years before jurisdiction is resolved there, two courts already having refused jurisdiction. It will be perhaps between three and five years before the substantive litigation in Sweden is resolved, if it ever gets off the ground.

Swedish courts do not tend to get used for torpedo actions. Yet the swiftness of English court proceedings yet again comes in to save the day (or indeed, scupper the stay).

Geert.

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

 

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Modern Families. UK Supreme Court confirms CSR jurisdiction against mother and daughter in Lungowe v Vedanta and Konkola – yet with one or two important caveats.

Update 10 June 2019 for an update of Canadian case-law developments see here.

Update 30 April 2019 I cannot possibly keep up with all emerging scholarship on the issue yet this review by Penelope Bergkamp most complete and worthwhile.

Update 17 April 2019 Opinio Juris have relevant review here.

Update 16 April 2019 Nick Lees and Tim Pickworth have similar caution for overenthusiastic reaction to the UKSC judgment here.

The SC this morning held in [2019] UKSC 20 Vedanta and Konkola v Lungowe, confirming jurisdiction in England for a human rights /environmental claim against a Zambia-based defendant, Konkola Copper Mines or ‘KCM’, anchored unto an EU-based defendant, Vedanta resources, the ultimate parent company of KCM. Both High Court and Court of Appeal had upheld such jurisdiction (the links lead to my blog post on both).

Of note are:

1. First of all

Lord Briggs’ emphatic rebuke of parties (and courts, one assumes) having disproportionately engaged with the issue of jurisdiction. With reference to ia VTB Capital he underlines that jurisdictional dispute should be settled in summary judgment alone, and should not lead to a mini trial. Reference is made to the size of the bundles etc. A bit of an unfair comment perhaps given that clearly there was a need for SC intervention. At any rate, one imagines that current judgment settles a number of issues and that in future litigation therefore these at least will have to be met with less arguments; lest, as his lordship notes at 14, the Supreme Court’ will find itself in the unenviable position of beating its head against a brick wall.’

2. As noted by Coulson J at 57 in the High Court judgment, neither Vedanta nor KCM pursue an Article 34 Brussels Ia argument of lis alibi pendens with proceedings in Zambia. As I signalled in my succinct review of recent study for the EP yesterday, the A34 defence is likely to be important in future litigation.

3. Applicants’ arguments that pursuing the case against them is an abuse of EU law, were advanced and equally rejected at both the High Court and the Court of Appeal stage. They are pursued again with the SC (at the latter’s express instruction).

  • At 29 Lord Briggs agrees with the HC and the CA and decides that the point that there has been no such abuse of EU law, is acte clair – no reference to the CJEU therefore.
  • At 31 ff he discusses the limited authority (all of it discussed at the HC and the CA) on abuse of Brussels I (a), particularly abuse of the anchor defendant mechanism of (now) Article 8(1), including of course CDC and at 37 raises the interesting issue of remedy: if abuse is found, is it to be disciplined under a European remedy or rather using the common law instrument of forum non conveniens?
  • And at 39: appellants argue that in CSR cases like these, Owusu has the almost inevitable effect that, providing a minimum level of triable issue can be identified against an English incorporated parent, then litigation about environmental harm all around the world can be carried on in England, wherever the immediate cause of the damage arises from the operations of one of that group’s overseas subsidiaries. With the case against the England-based defendant going ahead at any rate, per Owusu, the risk or irreconcilable judgments should jurisdiction against the subsidiaries be vacated, simply becomes to great. Not so hands tied behind the back, appellants argue, but forum non paralysis.
  • At 40 Lord Briggs suggests an adjustment of the English forum non conveniens doctrine for cases like these: namely to instruct claimants of the need to avoid irreconcilable judgments, where the anchor defendant is prepared to submit to the jurisdiction of the domicile of the foreign defendant in a case where, as here, the foreign jurisdiction would plainly be the proper place, leaving aside the risk of irreconcilable judgments

 

4. Despite Owusu, the English courts are still within their rights to reject the case in summary judgment if there is no ‘real issue’ to be tried against the anchor defendant. Here, discussion turned at 42 ff as to whether one should merely apply Chandler v Cape [2012] EWCA Civ 525, or whether this case involves the assertion of a new category of common law negligence liability.

  • This was rejected, like it was by Sales LJ in AAA v Unilever plc [2018] EWCA Civ 1532, which I review here.
  • Lord Briggs 54 concludes that viz the common law of liability there is neither anything special nor conclusive about the parent /subsidiary relationship, and
  • at 53 flags what instantly has become a favourite among commentators on the case: ‘Even where group-wide policies do not of themselves give rise to such a duty of care to third parties, they may do so if the parent does not merely proclaim them, but takes active steps, by training, supervision and enforcement, to see that they are implemented by relevant subsidiaries. Similarly, it seems to me that the parent may incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so. In such circumstances its very omission may constitute the abdication of a responsibility which it has publicly undertaken.’

4bis This part of course inevitably may give parent companies a means to prevent such liability (do not proclaim group-wide policies, let alone train or enforce them – as Gabrielle Holly also immediately noted here). However a variety of mechanisms may prevent this becoming a cheap trick to avoid liability: such compliance programs are often required under competition law, financial law etc., too; are relevant for directors’ liability; and of course may already (such as in the French devoir de vigilance) or in future (as mooted ia by the EC and the EP) be statutorily prescribed.

At 60: in the case at issue, the SC finds that the High Court with sufficient care examined and upheld the essence of the claimants’ case against Vedanta, that it exercised a sufficiently high level of supervision and control of the activities at the Mine, with sufficient knowledge of the propensity of those activities to cause toxic escapes into surrounding watercourses, as to incur a duty of care to the claimants. At 61 Lord Briggs adds obiter that not all the material (particularly services agreements) would have persuaded him as much as they did the HC or the CA, however at 62 he emphasis again that the HC and CA’s judgment on same was not vitiated by any error of law.

5. At 66 ff then follows the final issue to be determined: forum non conveniens and the further advancement of the issue already signalled above: it troubles Lord Briggs at 75 that the trial judges did not focus upon the fact that, in this case, the anchor defendant, Vedanta, had by the time of the hearing offered to submit to the jurisdiction of the Zambian courts, so that the whole case could be tried there. (An argument which was considered by Leggatt J in VTB).

  • Evidently the A4 BruIa case would have had to continue per Owusu, yet the reason why the parallel pursuit of a claim in England against Vedanta and in Zambia against KCM would give rise to a risk of irreconcilable judgments is because the claimants have chosen to exercise that right to continue against Vedanta in England, rather than because Zambia is not an available forum for the pursuit of the claim against both defendants: claimant-inflicted forum non.
  • Why, at 75 in fine, (it may be asked) should the risk of irreconcilable judgments be a decisive factor in the identification of the proper place, when it is a factor which the claimants, having a choice, have brought upon themselves?
  • Lord Briggs’ argument here is complex and I need to cross-refer more to the various authorities cited however the conclusion seems to be that Lord Briggs rejects the argument of Leggatt J in VTB and he finds that ! provided the ex-EU forum is a suitable forum, under English private international law claimants do have to make a choice: either only sue the A4 defendant in the EU but not the ex-EU subsidiaries; or sue all in the forum where they may all be sued (if there is such a forum), here by virtue of submission to the non-EU forum. The alternative would allow claimant to profit from self-inflicted risks of irreconcilable judgments.
  • In the end the rule is of no impact in the case for Zambia was found not to be an appropriate forum, for reasons of ‘substantial justice’: among others because of the absence of Conditional Fee Agreements, and given the unavoidable scale and complexity of this case (wherever litigated), the trial judge was right that it could not be undertaken at all with the limited funding and legal resources which the evidence led him to conclude were available within Zambia.

 

6. By way of my conclusion so far: (update 11 April 2019: in the meantime echoed by Robert McCorquodale’s analysis here; and here; he was counsel for interveners in the case hence was able to refer to insight gained from having seen parties’ submissions)

The group policy direction, enforcement, compliance and communication of same -issue is an important take away from this case. Particularly as it may be expected that holding companies will not find it that straightforward simply to do away with such policies. Of great impact too will be the choice now put upon claimants in the forum non conveniens issue: suing nondom companies by virtue of anchoring unto the A4 mother company in England at least will be less straightforward (many usual suspects among the competing jurisdictions do have CFAs, allow for third party funding  etc.). Yet the two in my view dovetail: the reason for bringing in the ex-EU subsidiaries often is because the substantial case against them tends to serve the case against the mother. With a tighter common law neglicence liability the need to serve the daughter may be less urgent.

Geert.

European private international law, second ed. 2016, Chapter 8, Headings 8.3.1.1., 8.3.2

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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.

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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