Posts Tagged Lis alibi pendens
Asymmetric clauses, exclusivity, torpedoes and lis alibi pendens: The High Court in Commerzbank v Liquimar Tankers.
Many of the issues in  EWHC 161 (Comm) Commerzbank v Liquimar Tankers were also raised in Perella v Codere, albeit there, as I reported, obiter. In current case, they were very much dicta, and they amount to the English courts viewing (properly constructed) asymmetric clauses as being exclusive. As such they fall under the new anti-torpedo provisions of Article 31(2).
Applications of defendants Liquimar Tankers (registered in Liberia but with head office in Athens) are being made in the course of proceedings in London by Commerzbank in two separate actions in relation to the repayment of loans which the Bank extended for the building of a number of ships. There are ongoing proceedings taken by the defendants against the Bank in Piraeus, Greece concerning the same and/or related issues.
The Liquimar guarantee contained a governing law and an asymmetric jurisdiction clause, which was essentially similar in the other loan agreements. It provided:
“16 Law and Jurisdiction
16.1 This Guarantee and Indemnity shall in all respects be governed by and interpreted in accordance with English law.
16.2 For the exclusive benefit of the Lender, the Guarantor irrevocably agrees that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Guarantee and Indemnity and that any proceedings may be brought in those courts.
16.3 Nothing contained in this Clause shall limit the right of the Lender to commence any proceedings against the Guarantor in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Guarantor in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.
16.4 The Guarantor irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any jurisdiction …”.
Article 31(2) of the Brussels I Recast reads:
‘where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seized, any court of another Member State shall stay the proceedings until such time as the court seized on the basis of the agreement declares that it has no jurisdiction under the agreement.’
Cranston J held that the concept of ‘exclusivity’ should be autonomously interpreted under the Brussels I (Recast) regime. He did not however refer for preliminary reference to the CJEU: as such, the High Court’s finding continues to be vulnerable until we have precedent from Luxembourg. The judgment as a whole is worth a read – readers in for concise summary, please refer to Herbert Smith’s analysis.
Summing up is done in para 70, with justifiable emphasis on parties’ and the Regulation’s intentions (but as noted with considerable reference to precedent and principles of statutory interpretation): Thus with the asymmetric jurisdiction clauses in the present case, the defendants agreed to sue only in the courts of one EU Member State, England. Instead, they have enabled another court, the Greek court, to be seized of the matter. It would undermine the agreements of the parties, and foster abusive tactics, if the jurisdiction clauses in these agreements were to be treated not as exclusive, but as non-exclusive.’
Of note is also the discussion on the role of recitals (eg. at 69; also at 77 ff). Justice Cranston’s arguments are supported by reference to a number of recitals. Defendant in my view has a valid point in principle where they argue at 77 that ‘a recital cannot constitute a rule when it is not reflected in the words of Article 31(2).‘ (Although they were wrong on substance).
A subsidiary argument in the case also merits further attention. Defendants argue that Article 25 requires the parties to have designated the courts of a Member State to enable the law applicable to the substantive validity of a jurisdiction clause to be identified and to provide certainty as to the forum in which a putative defendant can expect to be sued. That, they submit, is not achieved by a clause which designates the courts of all other competent states, including those of non-Member States, outside the territorial competence of the EU, which could mean suits in multiple jurisdictions. Although the argument could be phrased more precisely, I do agree with it: in the absence of a nominatim lex contractus for the choice of court clause specifically, the new lex fori prorogati rule in Article 25 Brussels I Recast, combined with recital 20 (yet again the troublesome habit of EU private international law to include substantive rules in recitals only) does create a vacuum in the case of hybrid, asymmetric or even non-exclusive choice of court.
An important case. Not the last we have heard of the issues.
(Handbook of) European Private international law, 2nd ed. 2016, Ch.2, Heading 2.2.9, Heading 184.108.40.206.1, Heading 220.127.116.11.
I have included Article 15 of the Brussels IIa or IIbis Regulation, 2201/2003, in full below. It allows a court to relinquish a case to another court, if that is in the best interest of the child. I once referred to it in an exam, asking students to discuss Zwiefka MEP’s proposal at the time to introduce an Article 15-type exception in what is now the Brussels I Recast Regulation. Those discussions in the meantime have led in particular to Articles 33-34 of the Recast, on lis alibi pendens with courts in third States and the potential for EU courts to relinquish their jurisdiction.
The question I asked students was how they would rate Article 15 (which incidentally does not require the case to be pending in the alternative court to which the case is being deferred) against classic forum non conveniens provisions. The point being that the former puts courts very much in a straightjacket, which the CJEU was bound to have to untangle. That is exactly what is at stake in C-428/15 Child and Family Agency v JD in which Wathelet AG opined Mid June.
Agne Limante has full listing of the AG’s arguments in CJEL, I should like to add that the Irish courts were particularly concerned with forum shopping: at 22:
In that regard, it (the referring court, GAvC) considers that the settling in Ireland of United Kingdom nationals who wish to conceal their children from the competent child protection authorities must not be encouraged and, more broadly, that opportunities for forum shopping must not be created or tolerated. However, it asks to what extent such considerations may be taken into account in the implementation of Article 15 of Regulation No 2201/2003.
Interesting case and ditto Opinion.
Transfer to a court better placed to hear the case
1. By way of exception, the courts of a Member State having jurisdiction as to the substance of the matter may, if they consider that a court of another Member State, with which the child has a particular connection, would be better placed to hear the case, or a specific part thereof, and where this is in the best interests of the child:
(a) stay the case or the part thereof in question and invite the parties to introduce a request before the court of that other Member State in accordance with paragraph 4; or
(b) request a court of another Member State to assume jurisdiction in accordance with paragraph 5.
2. Paragraph 1 shall apply:
(a) upon application from a party; or
(b) of the court’s own motion; or
(c) upon application from a court of another Member State with which the child has a particular connection, in accordance with paragraph 3.
A transfer made of the court’s own motion or by application of a court of another Member State must be accepted by at least one of the parties.
3. The child shall be considered to have a particular connection to a Member State as mentioned in paragraph 1, if that Member State:
(a) has become the habitual residence of the child after the court referred to in paragraph 1 was seised; or
(b) is the former habitual residence of the child; or
(c) is the place of the child’s nationality; or
(d) is the habitual residence of a holder of parental responsibility; or
(e) is the place where property of the child is located and the case concerns measures for the protection of the child relating to the administration, conservation or disposal of this property.
4. The court of the Member State having jurisdiction as to the substance of the matter shall set a time limit by which the courts of that other Member State shall be seised in accordance with paragraph 1.
If the courts are not seised by that time, the court which has been seised shall continue to exercise jurisdiction in accordance with Articles 8 to 14.
5. The courts of that other Member State may, where due to the specific circumstances of the case, this is in the best interests of the child, accept jurisdiction within six weeks of their seisure in accordance with paragraph 1(a) or 1(b). In this case, the court first seised shall decline jurisdiction. Otherwise, the court first seised shall continue to exercise jurisdiction in accordance with Articles 8 to 14.
6. The courts shall cooperate for the purposes of this Article, either directly or through the central authorities designated pursuant to Article 53.
C-523/14 Aertssen is not a corner piece of the Brussels I jigsaw. Rather, a necessary if unexciting piece of the puzzle’s main body. Aertssen NV, of Belgium, had a gripe with VSB Machineverhuur BV and others, of the Netherlands. Aertssen alleged fraud in VSB’s dealings with the company. It employed a well-known feature of Belgian (and French, among others) civil procedure, which is to file complaint with the investigating magistrate. This launches a criminal investigation, to which civil proceedings are attached.
Aertssen’s subsequent action of attachment of VSB’s accounts in The Netherlands, risked being stalled by the Dutch courts’ insistence that the group launch new legal action in The Netherlands. Aertssen obliged pro forma with this initiation of new proceedings, subsequently to aim to torpedo them. Aertssen would rather the Belgian courts continue with their own, criminal investigation and that action in The Netherlands, other than action in attachment, be put on hold, at least until the Belgian proceedings be finalised.
In essence therefore, the case before the CJEU needs to determine whether the Aertssen action in Belgium is of a ‘civil and commercial’ nature, and if it is, whether the actions in Belgium and The Netherlands meet the requirements of the lis alibi pendens rule of Article 27 (old) of the Brussels I-Regulation. The CJEU replied in the affirmative to both.
Precedent for the ‘civil and commercial’ issue, other than the usual suspects, was available per Sonntag, Case C-172/91, where the Court held that civil matters within the meaning of the first sentence of the first paragraph of Article 1 of the Brussels Convention, cover an action for compensation for damage brought before a criminal court. In Aertssen, The CJEU used the term ‘private law relationship’ to describe the legal relationship between the parties concerned. Even though, other than in Sonntag where the criminal proceedings were launched by the State prosecutor, Aertssen itself had triggered the criminal investigation, its ultimate aim is to obtain monetary compensation.
The subsequent question was whether per Article 27, lis pendens exists. Reference is best made to the judgment itself for the application of the The Tatry criteria (Case C-406/92): the two cases pending need to involve the same parties, pursuing the same cause of action (the facts and the rule of law relied on) and with the same object (meaning the end the action has in view). The CJEU held among others that the question whether the parties are the same cannot depend on the position of one or other of the parties in the two proceedings.
The remainder of the judgment deals with the meaning of the term ‘court first seized’ in Article 30 of the Regulation, and the relevance of national rules of civil procedure in same.
It is not often that a party aims to torpedo its own proceedings and the procedural intricacies of the case are rather complex. However the CJEU keeps a level head, with in the end transparent results.
Chinachem: Forum non conveniens, non-exclusive choice of court and concurrent proceedings in Hong Kong and Mainland China.
I reported earlier on the waiver of privilege issues in Chinachem. The Hong Kong High Court has now also ruled on the issue of application of forum non conveniens in the event of concurrent proceedings in Hong Kong and mainland China. In a lengthy judgment (particularly resulting from extensive summary of counsel arguments but also of relevant precedent), Ng J recalls English precedent on forum non conveniens (Spiliada evidently being featured) and the way in which said precedent has been applied in Hong Kong. (Carrie Tai has excellent overview here).
Contract between the parties included choice of court and choice of law as follows: ‘This Agreement shall be governed by the laws of Hong Kong and it shall be construed by the laws of Hong Kong. Both parties agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong.’
Ng J in the end rejects all arguments suggesting a stay in favour of the mainland proceedings. In doing so, she confirmed the tendency of Hong Kong courts (like indeed their English common law counterparts) to only brush aside choice of court in exceptional circumstance. Even if that choice of court is, such as here, non-exclusive. The concurrent proceedings stand.
There is an obvious downside to the European Court of Justice’s judicial economy. The Court often leaves unanswered many questions asked by national courts without an answer to them being strictly necessary for the case at hand. Evidently quite a few of those resurface in later practice. Owusu is a case in point. Many postings on this blog have entertained the unanswered questions left by the ECJ’s seminal rejection of Forum Non Conveniens. UK courts in particular have leapt on the opportunity to distinguish Owusu, effectively now leading to a fairly narrow context in which Owusu is applied. As recently as Jong v HSBC on which I reported last week, the High Court professed sympathy for vacating a case pending in the UK and having it joined to proceedings in Monaco, on ‘case management’ grounds.
In Plaza v The Law Debenture Trust, Proudman J dealt with a UK fallout of longstanding litigation inter alia in Australia, following the insolvency of the Australian Bell group in the 1990s. Curacao is COMI. Secondary or ancillary proceedings were opened in Australia. A variety of litigation mostly concerning priority of claims and timely (or not) execution of securities, led among others to a 2013 Deed of Settlement between parties to the current litigation. The Law Debenture trust (LDTC) is trustee for a number of bonds issued by Bell, some of which are held by Plaza (these bonds contain a non-exclusive choice of court in favour of England). Others are held inter alia by the Insurance Commission of Western Australia (ICWA).
The 2013 Deed contains an exclusive choice of court clause in favour of Western Australia. Plaza, incorporated in Curacao, sues LDTC, domiciled in the UK, in England, basically questioning its suitability as a trustee for the bonds, citing alleged conflicts of interest (LDTC may or may not be acting under instruction of ICWA).
Proudman J essentially had to decide whether Article 23 (now Article 25) of the Jurisdiction Regulation in its original version (the recast does not apply) ought to be applied reflexively (protecting choice of court in favour of non-EU courts); alternatively, whether Article 28 of the same Regulation (the lis alibi pendens rule) may be so applied; and what the impact of the ECJ’s rejection of forum non conveniens is on this all.
Ferrexpo in particular assisted her in holding that reflexive application of Article 23 (now 25) of the Brussels I Regulation is not barred by Owusu. The main argument for this approach lies in the judicial economy which I cite above: the ECJ was asked but did not entertain the question. Moreover Article 23 is a more dominant rule in the Regulation than Article 2 (now 4)’s rule referring to domicile of the defendant: a mandatory exception to the rule of Article 2 rather than, in the words of Proudman J, a discretionary exception such as forum non conveniens.
Subsidiarily, the High Court also suggests Article 28’s lis alibi pendens rule ought to apply reflexively, although it expressly suggests more discussion of that point is needed and the Article need not be laboured in the case at issue, given its finding on Article 23.
To heap further pressure on the Owusu pile, a further potential for undermining finding in Owusu is suggested in the shape of ‘case management powers’, also suggested in Jong and hinted at as potentially introducing forum non conveniens through the back door.
With Plaza v Debenture, application of Owusu by the English courts now is so distinguished, arguably little is left of the ECJ’s original intentions. One assumes: for as I noted above, judicial economy allowed national courts to be creative in their application of the rule. The issue is bound to end up again at the ECJ at some point.