Posts Tagged Lugano Convention
Many thanks, Dr Richard Schmidt for signalling and reviewing the recent Hungarian Supreme Court judgment (in Hungarian) discussing unilateral aka asymmetric aka hybrid choice of court. I do not have Hungarian and happily rely on Richard’s analysis and review.
As Richard reports, the contract was governed by the law of Liechtenstein and provided that any legal disputes would be brought before the court of Vaduz (Liech). However, the claimants had the option of seeking the performance of the contract before the courts of the defendant’s domicile. The defendant failed to pay the service charges and the claimants sued him in Hungary.
Upon appeal it seems the lower courts had held that choice of court ex-EU is not covered by Brussels Ia (compare CJEU Gothaer) and stayed the case in favour of the court at Vaduz. The Supreme Court however in principle would see to have upheld the choice of court provision as exercised by the claimant even if it decided the case ultimately on a finding of submission.
As I said I do not read Hungarian, text search however does not suggest that the SC looked at the issue at all viz Brussels Ia. Which is odd.
Richard justifiably refers to the approaches of both the English (see e.g. here) and the French Courts (contrast Rotschild with Apple). Thankfully there is now also the volume edited by Mary Keyes, looking comparatively at the issue (Michiel Poesen and I contributed the Belgian chapter).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 220.127.116.11, Heading 18.104.22.168 .
In Islandsbanki & Ors v Stanford  EWCA Civ 480, upon appeal from Fancourt J in  EWHC 1818 (Ch), Asplin LJ discussed whether purported execution of a foreign judgment registered in the High Court pursuant to the Lugano Convention, can be execution issued in respect of the judgment debt (for the purposes of section 268(1)(b) of the Insolvency Act 1986), if the execution occurred before the period for appealing the registration of the judgment has expired and, if not, whether the defect can be cured.
An unpaid Icelandic judgment debt from 2013 which together with interest, is now in excess of £1.5 million sterling equivalent. The judgment was given against Mr Stanford in the Reykjanes District Court in Iceland on 26 June 2013. A certificate was issued by the Icelandic court on 16 October 2013, pursuant to Articles 54 – 58 Lugano. IB applied to register the Icelandic judgment in England and Wales on 16 March 2016. A registration order was sealed on 23 March 2016 (the “Registration Order”).
Some of the issues in the Appeal (and before Fancourt J) concern purely English procedural rules however their effect is of course to facilitate, or obstruct, recognition and enforcement under the Lugano Convention. The confusion to a great degree results from the UK, despite Lugano’s direct effect, having implemented the Convention in the CPR rules anyway (at 24). The submission made by appellant (the Bank) before the Court is essentially that a narrow interpretation of the English CPR rules which would not allow remedying an error in the procedure, would run counter Lugano’s objective of facilitating recognition and enforcement (reference is made to the Pocar report and the recitals of Lugano itself).
Asplin LJ at 38 points to the language of Lugano itself: ‘during the time specified for an appeal pursuant to Article 43(5) against the declaration of enforceability and until any such appeal has been determined, no (emphasis in the original) measures of enforcement may be taken other than protective measures against the property of the party against whom enforcement is sought. The ordinary and natural meaning of those provisions is quite clear.’ She also at 37 points to the Convention’s objectives not being restricted to ease of enforcement: ‘the underlying policy of Articles 43(5) and 47(3) is that a fair and proportionate balance must be struck between the interests of the party which applies for a registration order having obtained a judgment in a foreign jurisdiction to which the Convention applies, and the defendant/debtor whose rights of appeal are prescribed by law and should not be undermined by allowing irreversible measures of enforcement.’
Conclusion, at 40: ‘It is for that reason that CPR 74.6(3) provides that a registration order must contain reference to the period in which an appeal against registration can be lodged and that no measures of enforcement can be taken before the end of that period and the reason why that prohibition was repeated in the Registration Order itself at paragraph 2. Accordingly, any attempt to remedy the premature issue and execution under the Writ of Control by means of an exercise of the discretion under CPR r3.10(b) or the use of CPR r3.1(2)(m) or 3.1(7) (or the inherent jurisdiction of the court, for that matter) would fundamentally undermine Article 47(3) and section 4A(3) in a way which is impermissible.’
at 62 ‘The defect in the execution in this case, if it can be called a defect, was fundamental….It was not a mere technicality or a formal defect which might be rectified pursuant to what is now Rule 12.64 of the Insolvency Rules 2016. It went to the heart of the execution process’.
Appeal dismissed following an interesting and clear application of both Lugano’s provisions and its spirit.
PrivatBank v Kolomoisky and Boholiubov. The Court of Appeal reverses the High Court ia on abuse of the anchor mechanism. Further consideration, too, of the reflexive effect of Article 28’s lis alibi pendens, and of Article 34.
Update 18 May 2020 early April the Supreme Court ruled that it would not hear the case – which therefore stands as (complicated) authority.
The Court of Appeal in  EWCA Civ 1708 has reversed  EWHC 3308 (Ch) PrivatBank v Kolomoisky and Boholiubov et al which I reviewed here. When I tweeted the outcome on the day of release I said it would take a little while for a post to appear, which indeed it has. Do please refer to my earlier post for otherwise the comments below will be gobbledygook.
As a reminder: the High Court had set aside a worldwide freezing order (‘WFO’) granted earlier at the request of Ukraine’s PrivatBank, against Ihor Kolomoisky and Hennadiy Boholiubov – its two former main shareholders.
Fancourt J’s judgment implied in essence first of all, the Lugano Convention’s anchor defendant mechanism, concluding that ‘any artificial fulfilment (or apparent fulfilment) of the express requirements of Article 6.1 is impermissible, and this includes a case where the sole object of the claim against the anchor defendant is to remove the foreign defendant from the jurisdiction of domicile. Bringing a hopeless claim is one example of such abuse, but the abuse may be otherwise established by clear evidence. In principle, the fact that there is a good arguable case against the anchor defendant should not prevent a co-defendant from establishing abuse on some other ground, including that the “sole object” of the claim is to provide jurisdiction against a foreign domiciled co-defendant.‘
The English Defendants serving as anchor, were not considered legitimate targets in their own right and hence the ‘sole object’ objection was met.
The Court of Appeal in majority (Lord Newey at 270 ff dissenting) disagreed and puts particular emphasis on the non-acceptance by Parliament and Council at the time of adoption of Brussels I, of an EC proposal verbatim to include a sole object test like was done in Article (then) 6(2) (it also refers to drafters and rapporteur Jenard making a bit of a muddle of the stand-alone nature, or not, of the sole object test). Following extensive consideration of authority it decides there is no stand-alone sole object test in (now) Article 8(1) Brussels I (or rather, its Lugano equivalent) but rather that this test is implied in the Article’s condition of connectivity: at 110: ‘we accept Lord Pannick’s analysis that, as shown by the references to Kalfelis and Réunion,..that the vice in using article 6(1) to remove a foreign defendant from the courts of the state of his domicile was met by a close connection condition.’
Obiter it held at 112 ff that even if the sole object test does exist, it was not met in casu, holding at 147 that the ability to obtain disclosure from the English Defendants provided a real reason for bringing these proceedings against them.
Fancourt J had also added obiter that had he accepted jurisdiction against the Switzerland-based defendants on the basis of the anchor mechanism, he would have granted a stay in those proceedings, applying the lis alibi pendens rule of Lugano reflexively, despite the absence of an Article 34 mechanism in Lugano. The Court of Appeal clearly had to discuss this given that it did accept jurisdiction against the Switserland-based defendants, and held that the High Court was right in deciding in principle for reflexive application, at 178: ‘This approach does not subvert the Convention but, on the contrary, is in line with its purposes, to achieve certainty in relation to jurisdiction and to avoid the risk of inconsistent judgments.’
That is a finding which stretches the mutual trust principle far beyond Brussels /Lugano parties and in my view is far from clear.
However, having accepted lis alibi pendens reflexively in principle, the Court of Appeal nevertheless held it should not do so in casu, at 200 as I also discuss below: ‘the fact that consolidation was not possible was an important factor militating against the grant of a stay, when it came to the exercise of discretion as to whether to do so’.
Finally, stay against the English defendants was granted by the High Court on the basis of A34 BIa, for reasons discussed in my earlier post. On this too, the Court of Appeal disagreed.
Firstly, on the issue of ‘related’ actions: At 183: ‘The Bank argues that the actions are not “related” in the sense that it is expedient to hear and determine them together, because consolidation of the Bank’s claim with Mr Kolomoisky’s claim in the defamation proceedings would not be possible. It is submitted that unless the two actions can be consolidated and actually heard together, it is not “expedient” to hear and determine them together. In other words, the Bank submits that expediency in this context means practicability.’ The Court of Appeal disagreed: At 191: ‘The word “expedient” is more akin to “desirable”, as Rix J put it, that the actions “should” be heard together, than to “practicable” or “possible”, that the actions “can” be heard together. We also consider that there is force in Ms Tolaney’s point that, if what had been intended was that actions would only be “related” if they could be consolidated in one jurisdiction, then the Convention would have made express reference to the requirement of consolidation, as was the case in article 30(2) of the Recast Brussels Regulation.’
Further, on the finding of ‘sound administration of justice’: at 211: ‘the unavailability in the Ukrainian court of consolidation of the Bank’s current claim with Mr Kolomoisky’s defamation claim remains a compelling reason for refusing to grant a stay. In particular, the fact that the Bank’s claim would have to be brought before the Ukrainian commercial court rather than before the Pechersky District Court in which the defamation proceedings are being heard means that if a stay were granted, the risk of inconsistent findings in these different courts would remain. Furthermore, we accept Lord Pannick’s overall submission that, standing back in this case, it would be entirely inappropriate to stay an English fraud claim in favour of Ukrainian defamation claims, in circumstances where the fraud claim involves what the judge found was fraud and money laundering on an “epic scale” ‘
Finally, at 213, ‘that the English claim against Mr Kolomoisky and Mr Bogolyubov and the English Defendants should be allowed to proceed, it inevitably follows that the BVI Defendants are necessary or proper parties to that claim and that the judge was wrong to conclude that the proceedings against the BVI Defendants should be set aside or stayed.’
One or two issues in this appeal deserve to go up to the CJEU. I have further analysis in a forthcoming paper on A34.
(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 22.214.171.124
BVC v EWF. The High Court on personality rights, internet and centre of interests in echoes of Bolagsupplysningen and e-Date. Suggests court with full jurisdiction is required for orders restraining further publication.
In BVC v EWF  EWHC 2506 (QB) claimant applied for summary judgment in a claim for misuse of private information and harassment. The privacy claim arises from internet publication, on a website created by the defendant, of his account of his relationship with claimant. The harassment claim arises from a series of email communications from the defendant to claimant over a period of some two years, and from publication of the website itself.
An ex parte injunction had been granted earlier. The Defendant was restrained from contacting or harassing claimant, from publishing the website or any of its contents to the world at large, and from publishing any of the information set out in a confidential schedule, or any information which was liable to or might identify the claimant as a party to the proceedings or as the subject of the confidential information
In current proceedings defendant (a UK national) submits he is domiciled in Switserland. This triggers the Lugano Convention.
Parkes J clearly had to consider Article 5(3) Lugano’s special jurisdictional rule for tort (the BIa equivalent of course is now Article 7(2), hence also applying e-Date and Bolagsupplysningen. Steyn DJ had earlier rejected defendant’s arguments. At 33: ‘She held, in short, that the Claimant had a good arguable case that this jurisdiction was the state in which he had the centre of his interests, and that in any event a real and substantial tort (namely misuse of private information) had been committed within the jurisdiction. She also ordered that the steps already taken to bring the Claim Form and orders of 27 June and 4 July 2018 to the Defendant’s attention (namely, service by email) constituted good service on him, notwithstanding that he claimed he was domiciled in Switzerland at the date of receipt of the documents, not (as had been believed) in this jurisdiction.’
Defendant (praised nb by Parkes J for his ‘brief but enlightening written submissions’) however continues to challenge the jurisdiction, jumping at the chance to bring it up again when claimant referred to his centre of interests in his PoC (Particulars of Claim), and employing the distinction which the CPR makes between challenges to existence and exercise of jurisdiction (notwithstanding authority (see at 39) that despite the distinction claims viz the two need to be brought concurrently).
He essentially (at 43) posits the court reconsider
‘whether Article 7(2) RJR is ‘to be interpreted as meaning that a natural person who alleges that his personality rights have been infringed by the publication of information concerning him on the internet may have his centre of interests in a Member of State where he is not habitually resident, where he has no ongoing professional connections or employment, no home, no income and no immediate family’. In his letter to the court of 18 June 2019, the Defendant puts it this way: ‘… with no permission to appeal the judgment of Karen Steyn QC, if the court continues to accept the Claimant’s centre of interests is in England and Wales despite very clear evidence to the contrary then it is necessary to refer the question of interpretation to the ECJ pursuant to Article 267 of the TFEU’.
At 44 Parkes J dismisses the suggestion of preliminary review to Luxembourg. That route is ‘not designed to provide a route of appeal against judicial evaluation of evidence of fact.’ In conclusion, re-opening of the discussion on jurisdiction is rejected, referring finally to Lord Green in Kaefer:”it would not be right to adjourn the jurisdiction dispute to the full trial on the merits since this would defeat the purpose of jurisdiction being determined early and definitively to create legal certainty and to avoid the risk that the parties devote time and cost to preparing and fighting the merits only to be told that the court lacked jurisdiction“.
Arguments on submission to the jurisdiction where not entertained: whether service of a defence, and the making of an application to strike out qualify as ‘submission’ becomes otiose when that jurisdiction has already been unsuccessfully challenged.
Then follows extensive discussion of the factual substance of the matter, which is less relevant for the purposes of this blog. Hence fast forward to 150 ff where the issue of jurisdiction to issue an injunction prohibiting re-publication of the material is discussed (in case: re-offering of the website on WordPress or elsewhere). At 158 ff this leads to a re-discussion of Bolagsupplysningen where the Court held that where a claimant seeks an injunction to rectify or remove damaging material from the internet, he can only do so only in a State with full jurisdiction. Parkes J at 160 suggests this is only in the state where the defendant is domiciled (the general rule, as stated by Art 2(1) Lugano and Art 4(1) RJR), or (by virtue of the special jurisdiction: Art 5(3) Lugano and Art 7(2) RJR) in the state where he has his centre of interests, and not before the courts of each member state in which the information is accessible.
I believe Parkes J on that point omits locus delicti commissi. At the time of my review of Bolagsupplysningen I suggested the judgment was bound to create a need for further clarification: Shevill and e-Date confirm full jurisdiction for the courts of the domicile of the defendant, and of the locus delicti commissi, and of the centre of interests of the complainant. These evidently do not necessarily coincide. With more than one court having such full jurisdiction positive conflicts might arise.
Of more importance here is that Parkes J (obiter) at 163 suggests that the requirement of full jurisdiction, also applies to orders restraining any further publication and not just as the Grand Chamber held limited by the facts in Bolagsupplysningen, to orders for rectification and removal. In doing so he follows the in my view correct suggestion made by Dr Tobias Lutzi (‘Shevill is dead, long live Shevill!’, L.Q.R. 2018, 134 (Apr), 208-213) viz divisible cq indivisible remedies – update 28 September 2019 although the issue is not free of discussion. Graham Smith for instance suggests the potential for geo-blocking as a valid argument to grant jurisdiction for restraining further publication on an Article 7(2) locus damni basis.
Note also the cross-reference to Saïd v L’Express on the limitation of Bolagsupplysningen to injunctive relief: for damages, the full mosaic implications remain.
Conclusion: Claimant is entitled to summary judgment for a final injunction to restrain further misuse of his private information
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 126.96.36.199.
Pillar Securitisation v Hildur Arnadottir. Material EU consumer law does not dictate jurisdictional rules.
The CJEU held last week in C-694/17 Pillar Securitisation (v Hildur Arnadottir), on the Lugano Convention’s protected category of consumers. I have review of Szpunar AG’s Opinion here. The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too (see in that respect also C‑467/16 Schlömp).
At stake in Pillar Securitisation is the meaning of ‘outside his trade or profession’ in the consumer title. The CJEU at 22 rephrases the case as meaning ‘in essence, whether Article 15 of the Lugano II Convention must be interpreted as meaning that, for the purposes of ascertaining whether a credit agreement is a credit agreement concluded by a ‘consumer’ within the meaning of Article 15, it must be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) of that directive and whether it is relevant, in that regard, that the national law transposing that directive does not provide for a higher ceiling.’
The CJEU notes that Pillar Securitisation claims that Ms Arnadottir acted for professional purposes and is not covered by the definition of a ‘consumer’. However, the referring court has not referred any question to the Court on the purpose of the credit agreement concluded. On the contrary, as is clear from the wording of the question that it did refer, the referring court asks its question to the Court on the assumption that the contract at issue was concluded for a purpose that can be regarded as being outside Ms Arnadottir’s profession. In addition, in any event, the order for reference does not contain sufficient information in order for the Court to be capable, where relevant, of providing useful indications in that regard (not much help therefore to assist with the interpretation of issues such as in Ang v Reliantco, on which I shall be reporting next).
As I wrote in my review of the AG’s Opinion: the issue is how far does material EU law impact on its private international law rules. I referred in my review to the need to interpret Vapenik restrictively, and to Kainz in which the CJEU itself expressed caution viz the consistent interpretation between jurisdictional and other EU rules, including on applicable law and on substantive law.
I am pleased to note the Court itself makes the same observation, and emphatically so: at 35: ‘the need to ensure consistency between different instruments of EU law cannot, in any event, lead to the provisions of a regulation on jurisdiction being interpreted in a manner that is unconnected to the scheme and objectives pursued by that regulation.’ Subsequently establishing the very diffeent purposes of both sets of law, the CJEU rejects impact on one over the other (and also remarks that Pillar Securitisation’s reference to the Pocar report needs to be taken in context: prof Pocar referred to Directive 2008/48 by way of example only).
Conclusion: for the purposes of ascertaining whether a credit agreement is a credit agreement concluded by a ‘consumer’ within the meaning of Article 15, it must not be determined whether the agreement falls within the scope of Directive 2008/48 in the sense that the total cost of credit in question does not exceed the ceiling set out in Article 2(2)(c) of that directive, and it is irrelevant, in that regard, that the national law transposing that directive does not provide for a higher ceiling.
A good judgment.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 188.8.131.52.
French Supreme Court on cover by Lugano of legal fees in criminal proceedings – and the proper limits of the ordre public test.
The criminal courts at Geneva have condemned claimant, domiciled at France, to pay a criminal fine of 3,600.00 Swiss Francs, a well as 36,000.00 Swiss Francs towards defendant’s legal fees. The latter were incurred given that defendant in current legal proceedings had entered a civil claim in the Swiss criminal proceedings: a claim which the Geneva judge ordered to be settled through the Swiss courts in civil cases.
Upon fighting the request for exequatur, claimant first of all argues that the French courts’ acceptance of exequatur via the Lugano Convention is outside the scope of that Convention. The matter, he argues, is not civil or commercial seeing as the civil claim was not even entertained.
This of course brings one to the discussion on the scope of application of Lugano (and Brussels Ia) and the perennial difficulty of focusing on nature of the claim v nature of the underlying facts and exercised powers. Now, for civil claims brought before criminal courts there is not so much doubt per se, seeing inter alia that Article 7(3) Brussels Ia (Article 5(4) Lugano 2007) has a specific head of jurisdiction for such civil claims. Claimant’s point of argument here evidently is that this should not cover this particular claim seeing as the legal representation at issue turned out to be without purpose. Not being privy to the discussions that took place at the Geneva court, I evidently do not know the extent of discussion having taken place there (there is no trace of it in the Supreme Court judgment) however one assumes that the Geneva proceedings in theory could have dealt with the civil side of the litigation yet for a factual or legal reason eventually did not. Over and above the intensity of discussions being difficult to employ as a decisive criterion, one can also appreciate the difficulty in separating the civil from the criminal side of the argument made by defendant’s lawyers.
Of perhaps more general interest is the Supreme Court’s rebuke of the lower courts’ treatment of ordre public. Exequatur was granted because, the lower courts had held, the judge in the substantial proceedings has the sovereign right to establish costs under the relevant national procedure. This, it was suggested by these lower courts, shields it from ordre public scrutiny – a clear misunderstanding of the ordre public test. Part of the ordre public considerations had also been that the relative slide in the strength of the Swiss Franc v the Euro, and the generally higher costs of living in Switzerland, put the cost award in perspective. Moreover the judges found that there was insufficient information on the length of the proceedings in Switserland, and the complexity of the arguments. That, however, is exactly the kind of data which the judge in an exequatur assessment ough to gauge.
(Handbook of) European Private International Law, 2n ed. 2016, Chapter 2, Heading 184.108.40.206.
Bosworth (Arcadia Petroleum), and Pillar Securitisation v Hildur Arnadottir. Two AGs on protected categories (consumers, employees) in the Lugano Convention- therefore also Brussels I Recast.
Update 11 April 2019. The CJEU held today in Bosworth: no contract for employment. the AG’s Opinion and Gross J’s analysis confirmed.
Update 06 02 2018 I have inserted in the analysis below of Arcadia, a reference to De Bloos, in the context of the forumshopping considerations (I have also tidied up punctuation in that section).
Twice last week did the Lugano Convention’s protected categories title feature at the Court of Justice. On Tuesday, Szpunar AG opined in C-694/17 Pillar Securitisation v Hildur Arnadottir (consumer protection), and on Thursday Saugmansgaard ØE opined in C-603/17 Bosworth (Arcadia Petroleum) (employment contracts).
The issues that are being interpreted are materially very similar as in Brussels I Recast hence both evidently have an impact on the Brussels I Recast Regulation, too.
At stake in Pillar Securitisation (no English version of the Opinion at the time of writing) is the meaning of ‘outside his trade or profession’ in the consumer title. Advocate General Szpunar takes the case as a trigger to fine-tune the exact relationship between private international law such as was the case, he suggests, in Kainz and also in Vapenik.
I wrote in my review of Vapenik at the time: ‘I disagree though with the Court’s reference to substantive European consumer law, in particular the Directive on unfair terms in consumer contracts. Not because it is particularly harmful in the case at issue. Rather because I do not think conflict of laws should be too polluted with substantive law considerations. (See also my approval of Kainz).’
Ms Arnadottir’s case relates to the Kaupting reorganisation. Her personal loan exceeded one million € and therefore is not covered by Directive 2008/48 on credit agreements for consumers (maximum threshold there is 75K). Does that exclude her contract being covered by Lugano’s consumer Title?
The Directive’s core notion is ‘transaction’, as opposed to Lugano’s ‘contract’ (at 30 ff). And the Advocate-General of course has no option but to note the support given by the Court to consistent interpretation, in Vapenik. Yet at 42 ff he suggests a narrow reading of Vapenik, for a variety of reasons, including
- the presence, here, of Lugano States (not just EU Member States);
- the need for consistent interpretation between Lugano and Brussels (which does not support giving too much weight to EU secondary law outside the private international law sphere);
- and, most importantly, Kainz: a judgment, unlike Vapenik, which directly concerns Brussels I (and therefore also the link with Lugano). One of the implications which as I noted a the time I like a lot, is precisely its respect for the design and purpose of private international law rules as opposed to other rules of secondary law; and within PIL, the distinction between jurisdiction and applicable law.
At 52 ff Advocate General Szpunar rejects further arguments invoked by parties to suggest the consumer title of the jurisdictional rules should be aligned with secondary EU consumer law. His line of reasoning is solid, however: autonomous interpretation of EU private international law prevents automatic alignment between consumer law and PIL.
Should the CJEU follow its first Advocate General, which along Kainz I suggest it should, no doubt distinguishing will be suggested given the presence of Lugano parties in Pillar Securitisation – yet the emphasis on autonomous interpretation suggest a wider calling.
C‑603/17 Bosworth v Arcadia then was sent up to Luxembourg by the UK’s Supreme Court [UKSC 2016/0181, upon appeal from  EWCA Civ 818]. It concerns the employment Title of Lugano 2007. (Which only the other week featured at the High Court in Cunico v Daskalakis).
As helpfully summarised by Philip Croall, Samantha Trevan and Abigail Lovell, the issue is whether the English courts have jurisdiction over claims for conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt brought against former employees of certain of the claimant companies now domiciled in Switzerland. In the main proceedings, the referring court must therefore determine whether the courts of England and Wales have jurisdiction to rule on those claims or whether it is the courts of Switzerland, as courts of the domicile of the former directors implicated, that must hear all or part of the claims.
Gross J at the Court of Appeal had applied Holterman and Brogsitter, particularly in fact the Opinion of Jääskinen AG in Brogsitter – albeit with caution, for the AG’s Opinion was not adopted ‘wholesale’ by the CJEU (at 58, Court of Appeal). The mere fact that there is a contract of employment between parties is not sufficient to justify the application of the employment section of (here) the Lugano Convention. Gross J at 67: “do the conspiracy claims relate to the Appellants’ individual contracts of employment? Is there a material nexus between the conduct complained of and those contracts? Can the legal basis of these claims reasonably be regarded as a breach of those contracts so that it is indispensable to consider them in order to resolve the matter in dispute?”. Gross J had answered that whilst not every conspiracy would fall outside the relevant section, and those articles could not be circumvented simply by pleading a claim in conspiracy, in the circumstances of this case, however precisely the test was formulated, the answer was clearly “no”. Key to the alleged fraud lay in his view not in the appellants’ contracts of employment, but in their de facto roles as CEO and CFO of the Arcadia Group.
The facts behind the case are particularly complex, as are the various wrongdoings which the directors are accused of and there is little merit in my rehashing the extensive summary by the AG (the SC’s hearings leading to the referral lasted over a day and a half).
Saugmansgaard ØE essentially confirms Gross J’s analysis.
Company directors who carry out their duties in full autonomy are not bound to the company for which they perform those duties by an ‘individual contract of employment’ within the meaning of the employment section – there is no subordination (at 46). Note that like Szpunar SG, Saugmansgaard ØE too emphasises autonomous interpretation and no automatic colouring of one field of EU law by another: ‘the interpretation which the Court of Justice gives to a concept in one field of EU law cannot automatically be applied in a different field’ (at 49).
In the alternative (should the CJEU accept a relationship of employment), he opines that a claim made between parties to such a ‘contract’ and legally based in tort does fall within the scope of that section where the dispute arose in connection with the employment relationship. Secondly, he argues that an ‘employer’ within the meaning of the provisions of that section is not necessarily solely the person with whom the employee formally concluded a contract of employment (at 109). What the AG has in mind are group relations, where ‘an organic and economic link’ between two companies exists, one of whom sues even if the contract of employment is not directly with that company.
It is in this, subsidiary section, at 66 ff, that the AG revisits for the sake of completeness, the difference between ‘contract’ and ‘tort’ in EU pil. This is a section which among others will delight (and occupy) one of my PhD students, Michiel Poesen, who is writing his PhD on same. Michiel is chewing on the Opinion as we speak and no doubt will soon have relevant analysis of his own.
At 82 ff the AG points to the difficulties of the Brogsitter and other lines of cases. ‘(T)he case-law of the Court is ambiguous, to say the least, in so far as concerns the way in which Article 5(1) and Article 5(3) of the Brussels I Regulation and the Lugano II Convention are to be applied in cases where there are concurrent liabilities. It would be useful for the Court to clarify its position in this regard.’
At 83: it is preferable to adopt the logic resulting from [Kalfelis] and to classify a claim as ‘contractual’ or ‘tortious’ with regard to the substantive legal basis relied on by the applicant. At the very least, the Court in the AG’s view should hold on to a strict reading of the judgment in Brogsitter’: at 79: ‘the Court meant to classify as ‘contractual’ claims of liability in tort the merits of which depend on the content of the contractual duties binding the parties to the dispute.’ This in the view of the AG should be so even if (at 84) this authorises a degree of forum shopping, enabling the applicant to choose jurisdiction, with an eye to the appropriate rules. The AG points out that forum shopping particularly for special jurisdictional rules, is not at all absent from either Regulation or Convention.
Forum shopping considerations in (now) Article 7(1) have been an issue since the seminal case of De Bloos, C-14/76: at 13: ‘for the purposes of determining the place of performance within the meaning of Article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the plaintiff’s action is based.’ Among others Brogsitter may be seen as an attempt by the Court to manage the forum shopping considerations arising from De Bloos. It would be good for the Court to clarify whether De Bloos is still good authority, given the many textual changes and case-law considerations of (now) Article 7(1).
Finally, there is of course an applicable law dimension to the dispute although this does not feature in the reference. The relationships between companies and their directors are governed not by employment law, but by company law (at 52). For an EU judge, the Rome I and Rome II Regulations kicks in. Rome I contains, in Article 8, provisions relating to ‘individual employment contracts’, however it also provides, in Article 1(2)(f), that ‘questions governed by the law of companies’ concerning, inter alia, the ‘internal organisation’ of companies are excluded from its scope (at 55). Rome II likewise has a company law exemption. That puts into perspective the need (or not; readers know that I am weary of this) to apply Rome I and Brussels /Lugano consistently.
One had better sit down for a while when reviewing these Opinions.
Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11, Heading 18.104.22.168, Heading 22.214.171.124.9.
In  EWHC 57 (Comm) Cunico v Daskalakis Baker J applies the employment and choice of court titles of the Lugano Convention 2007. Mr Daskalakis and the second defendant, Mr Mundhra, worked for the Cunico group. The group operated in base metals industries and markets. Defendants’ primary jobs were CEO and CFO respectively of Feni Industries AD (‘Feni’), the main industrial operating subsidiary of the group, incorporated and operating in FYR Macedonia. Feni owned and operated a ferronickel production plant in Kavadarci and the Rzanovo iron and nickel mine 50 km or so south of the city.
It is necessary to give a little bit of factual background to appreciate the jurisdictional issues.
Cunico Resources NV (‘Resources’) was incorporated in the Netherlands, to become the group holding company, in May 2007. Marketing was incorporated in Dubai, UAE, in July 2007, and operated in the Jebel Ali Free Zone as the main market-facing trading entity in the group. Resources had no operating activities. It existed as a holding company for the operating subsidiaries as investment assets, with a single dedicated (full-time) employee. Marketing traded by purchasing ore from other Cunico subsidiaries, and bailing the ore to a ferronickel plant within the group under a ‘tolling agreement’, for conversion by the plant to finished ferronickel. Marketing then sold the finished product to the market. Under the tolling agreement, fees for converting Marketing’s ore into finished ferronickel would be payable by Marketing to the operator of the ferronickel plant (e.g. Feni).
The Cunico group was owned, at the time of the events said to give rise to claims against the defendants, as a joint venture between International Mineral Resources BV (‘IMR’) and BSGR Cooperatief UA (‘BSGR’). Latterly, IMR has effectively all but bought BSGR out, via the intervention of proceedings in the Amsterdam Enterprise Chamber, so that today Resources is owned as to c.80% by Summerside Investments S.a.r.l., IMR’s parent company, with 50% of the remainder owned by each of IMR and BSGR.
Now, crucially (at 6): so-called ‘Advisory Contracts’ were signed as between Marketing and each of the defendants, in 2007 and again in 2010, that contained a jurisdiction provision in these words: “In case of disagreements, they shall be solved in the Court of the United Kingdom“. The claimants say that provision gives this court jurisdiction over their respective claims against the defendants under Article 23 of the Lugano Convention. It is common ground that the defendants were domiciled in Switzerland when proceedings were brought and that the claims brought against them are within the material scope of the Lugano Convention, so indeed it governs the question of jurisdiction in this case. It is also common ground that, in this international business context, the reference in the Advisory Contracts to “the Court of the United Kingdom” should be interpreted to mean the courts of England and Wales.
Marketing claims that defendants received bonus payments from Marketing to which they were not entitled and/or to procure payment of which they acted in breach of contractual and fiduciary duties owed to it.
The principal issue is whether the claims made are matters relating to individual contracts of employment so as to engage Section 5 of the Lugano Convention. Any claims that do engage Section 5 cannot be brought in England.
At 23: For each claim advanced by each claimant against either defendant, the question of jurisdiction gives rise to the following issues in this case:
i) Is that claim a matter relating to the employment of the defendant by that claimant, for the purpose of Section 5 of the Lugano Convention?
ii) If not, is that claim within the scope of the jurisdiction provision in either of the defendant’s Advisory Contracts?
iii) If so, for a claim by Resources or Feni, does that jurisdiction provision confer on the claimant an effective benefit? (This is a question under the Contracts (Rights of Third Parties) Act 1999, as each Advisory Contract was a contract only between the respective defendant and Marketing.)
Baker J decides following lengthy overview of the ’employment’ history of defendants that they were indeed employed across the group, and that Lugano’s employment heading therefore points away from jurisdiction in England. Surprisingly he does not refer at all to any CJEU precedent such as Holterman. The employment argument having succeeded, no assessment is made of Lugano’s choice of court provisions.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 126.96.36.199.
PrivatBank v Kolomoisky and Boholiubov. The High court puts the spotlight on the abuse of the anchor mechanism, on reflexive effect of lis alibi pendens, and on Article 34’s new rule.
In  EWHC 3308 (Ch) PrivatBank v Kolomoisky and Boholiubov et al the High Court has set aside a worldwide freezing order (‘WFO’) granted earlier at the request of Ukraine’s PrivatBank, against Ihor Kolomoisky and Hennadiy Boholiubov – its two former main shareholders.
The case considers a high number of issues to which even a long blog post cannot do justice – I will consider these further in a paper in progress.
The issues to be determined, are
- First, whether the Bank has a good arguable case (as pleaded in the particulars of claim) that loss of US$1.91 billion plus interest was caused to it by the alleged fraud of the Defendants. For the purposes of these applications, all Defendants do not dispute that there is a good arguable case that US$248 million of loss was caused to the Bank by the pleaded fraud, but they deny any good arguable case of loss in excess of that amount.
- Second, whether the worldwide freezing orders should be set aside in whole or in part for non-disclosure or misrepresentation, or reduced to or reimposed in a lesser maximum sum than the current maximum sum of US$2.6 billion.
- Third, whether the Court has jurisdiction over the First and Second Defendants under Article 6.1 Lugano by reason of the claim against the English Defendants as “anchor defendants”. Although the claims as pleaded against the First and Second Defendants and the English Defendants are closely connected, the particular issue is whether the claim against the English Defendants was brought with the sole object of removing the First and Second Defendants from Swiss jurisdiction and so was an abuse of Article 6
- Fourth, if there is jurisdiction against the First and Second Defendants, whether the claims against them and the English Defendants should be stayed on grounds of lis pendens in Ukraine. This raises separate questions:
- a) Whether the Court has power to stay proceedings against the First and Second Defendants (where jurisdiction only exists (if at all) under the Lugano Convention) in favour of proceedings in a non-Convention state, namely Ukraine. The First and Second Defendants argue that Article 28 of the Convention, which empowers a Convention State to stay proceedings on grounds of lis pendens in another Convention State, should be applied by analogy (or ‘reflexively’ in favour of proceedings in a non-Convention State.
- b) Whether the Court should stay proceedings against the English Defendants (who are sued in accordance with Article 4 of the recast Brussels Regulation) in favour of proceedings in Ukraine. The issue here is as to the meaning, effect and application of Article 34 of the Regulation, which as from 10 January 2015 conferred a power on EU States in defined circumstances to stay proceedings in favour of proceedings in a non-Member State (“a third State”).
- Fifth, to the extent that the Court has power to stay on grounds of lis pendens in Ukraine, whether it should exercise that power given the nature of the proceedings in Ukraine, the degree of connection between the Bank’s claim and Ukraine and the risk of irreconcilable judgments if no stay is granted.
- Sixth, whether the Court should set aside the permission granted without notice to serve the claim form on the BVI Defendants out of the jurisdiction, or alternatively stay the proceedings against the BVI Defendants on grounds of forum non conveniens.
Fancourt J’s judgment implies in essence
First of all, very careful and complete consideration of the Lugano Convention’s anchor defendant mechanism.
(hence also implicating Brussels I Recast case-law, particularly Reisch Montage, Freeport and CDC), but also Sabbagh v Khoury, in which as I noted at the time the Court of Appeal struggles with the precise role for merits review in examining a potential abuse of the anchor defendant mechanism.
One assumes counsel for the defendants did an excellent job in deciphering precedent. This includes Ali Malek QC who is clearly a counsel of choice for international litigation, witness his involvement in other cases, too, this week: on which more soon on the blog.
Kolomoisky and Boholiubov may be sued in England and Wales, despite their Swiss domicile, only if the claims against them and the claims against the English Defendants are so closely connected that it is expedient to hear and determine them together, to avoid the risk of irreconcilable judgments resulting from separate proceedings: that is the wording of Article 6.1 of the Lugano Convention, as it is of (now) Article 8(1) Brussels I Recast.
[Note parties, Mr Bogolyubov specifically, earlier in the year in  EWHC 160 (Ch) successfully had applied for a declaration that they were not domiciled in the UK; hence no Article 4 jurisdiction.
As I have pointed out on various occasions (use ‘fraud’ or ‘fraus’ as a search term in the blog’s search box), abuse is not a concept easily caught in statute and given the need for high predictability in the application of the Brussels and Lugano regimes, the CJEU is not finding it easy to provide much instruction.
Justice Fancourt excellently reviews the issues 85 ff and it is best to let those paras speak for their insightful selves. One readers have done so, they will see that at 93, his conclusion is ‘any artificial fulfilment (or apparent fulfilment) of the express requirements of Article 6.1 is impermissible, and this includes a case where the sole object of the claim against the anchor defendant is to remove the foreign defendant from the jurisdiction of domicile. Bringing a hopeless claim is one example of such abuse, but the abuse may be otherwise established by clear evidence. In principle, the fact that there is a good arguable case against the anchor defendant should not prevent a co-defendant from establishing abuse on some other ground, including that the “sole object” of the claim is to provide jurisdiction against a foreign domiciled co-defendant.‘
Onus of proof of abuse lies on the defendant, and it was met here: the English Defendants serving as anchor, are not considered legitimate targets in their own right. Five reasons for same are listed in para 99 ff: it is clear that a single criterion will not be enough to meet the burden of proof, rather a number if indications will contribute to an overall finding of abuse.
Having established that the Switzerland-based defendants ought to be sued there or indeed in the Ukraine, the Court turns to the English defendants’ attempt to have it apply Brussels I Recast’s new Article 34 rule on lis alibi pendens in favour of third States.
At 129, Justice Fancourt reviews the cases which might potentially be said to be ‘related’ to the English proceedings. At the heart of that analysis lies a defamation claim which (at 144) ‘Although the causes of action in the Ukrainian claim of the First Defendant and the claim of the Bank in the current proceedings are quite different, I am satisfied that there is considerable factual overlap between the allegations made against the Defendants in the Bank’s claim and the allegations published by the Ukrainian journal that the First Defendant seeks to challenge as unfounded and defamatory in the Ukrainian proceedings. The general subject-matter is one and the same: a fraudulent scheme to embezzle huge sums of money from the Bank, orchestrated by the First and Second Defendants and making use of a large number of shell companies, including the English and BVI Defendants, to circulate monies and conceal their whereabouts. Key issues that may have to be determined in each claim will be: whether there was a fraudulent scheme; who set it up and operated it; how did it work; what was its purpose; who benefited from the scheme, and how much money was unlawfully removed from the Bank.’
This analysis presumes, in my view correctly, that the term ‘related’ in the Article 34 rule, is to be interpreted in line with (now) Article 30 Brussels I Recast on related intra-EU actions.
At 145: ‘if the appeal in the defamation proceedings were to fail, or the claims be otherwise disposed of on a limited point of law, any stay granted under Article 34 (or by analogy with it) will be lifted.‘
Upon reflection, a stay of proceedings in favour of the Ukranaian case, is granted, for the reasons that
- (the ultimate condition for applying Article 34) a potential eventual judgment in Ukraine on the defamation case is likely to be recognised and enforced in England; this is the so-called [but not so by the High Court 🙂 ] Anerkennungsprognose;
- the claim has a high proximity to the Ukraine: the issues raised in common by the defamation claim and the current proceedings are almost exclusively concerned with events in Ukraine; the majority of witnesses will be Ukrainian, and Ukrainian law will apply to decide both sets of proceedings. By contrast, none of the harmful acts complained of occurred in England; the matters in issue have no connection with England at all, and the existence of three English defendants is of no materiality. The proximity of the claim to Ukraine therefore points strongly in favour of a stay.
- finally, at 158 ff: The Bank nevertheless argues that a stay would be contrary to the proper administration of justice – a core criterion to Article 34. ‘It contends that the current proceedings cry out for determination by a truly independent tribunal. But the Bank does not contend that the Ukrainian court is unable to resolve the issues or that it cannot obtain justice in Ukraine. There is no evidence on the basis of which this court can conclude that the Ukrainian courts would not provide justice to the parties. Similarly, there is no evidence before the court that would justify a conclusion that the Ukrainian judiciary is not independent. The Bank complains about how the First Defendant obtained an interim injunction against the Bank and Hogan Lovells on 15th December 2017, without proper process taking place; but this order was set aside in Ukraine on appeal, demonstrating that justice can be achieved by the Bank.’
Note that at 161 Justice Fancourt emphasises the relative character of the stay: ‘The argument against a stay would have greater weight if the stay to be granted under Article 34 (or by reference to its principles) were a once and for all decision, but it is clear that it should not be so confined. Under Article 34.2, these proceedings may be continued at any time when it is appropriate to do so, and so potential prejudice to the Bank in granting a stay is thereby limited. If the appeal in Ukraine is dismissed, or if though successful the claim is disposed of without a judgment on the merits, or if the First Defendant does not properly pursue the claim to judgment, the grounds for a continuing stay are likely to fall away’.
Fancourt J also adds obiter that had he accepted jurisdiction against the Switzerland-based defendants on the basis of the anchor mechanism, he would have granted a stay in those proceedings, too, applying the lis alibi pendens rule of Lugano reflexively, despite the absence of an Article 34 mechanism in Lugano. Consideration of this issue is at 114 ff, with of course reference to Ferrexpo. (Although even there this particular point may have been made obiter, as Justice Fancourt himself points out at 123). The suggestion is made that in accepting such reflexive, ex-Lugano effect of the Lugano lis alibi pendens rule, the courts should take instruction from the Article 34 Brussels I-Recast conditions. This is not a straightforward proposition by any means and the debate is far from settled.
Finally, jurisdiction against the BVI defendants is dismissed at this time on the basis of forum non conveniens: at 172 and necessarily entangled with the other findings: ‘So far as forum conveniens is concerned, the claim against the First and Second Defendants will not proceed in England. The natural forum for a trial of that claim is Ukraine though, as regards Lugano Convention States, the First and Second Defendants are entitled to be sued in Switzerland. The task of the court in exercising its discretion is to identify the forum in which the case can be suitably tried in the interests of all the parties and for the ends of justice: see Altimo Holdings at . The natural forum is Ukraine, in that all the parties are Ukrainian, almost all the events occurred in Ukraine and Ukrainian law is the governing law. There is no suggestion by any party that they cannot have a fair trial in Ukraine. However, the Bank may not be willing to sue the First and Second Defendants in Ukraine: if it cannot sue them in England it may sue them in Switzerland.
With PrivatBank v Kolomoisky and Boholiubov we now have a much more reasoned application of Article 34 than the more concise considerations in B.win v Emerald Bay and also interesting additional analysis as compared to Zavarco.
(Handbook of) European Private International Law – 2nd ed. 2016, Chapter 2, Heading 188.8.131.52
JSC BTA Bank v Khrapunov. UK Supreme Court confirms the conspiracy itself, not its implementation, as locus delicti commissi under Lugano. Does not entertain locus damni.
The UK Supreme Court held in  UKSC 19 JSC BTA Bank v Khrapunov late March. Defendant is based in Switzerland, hence triggering the Lugano Convention. Addleshaw Goddard have the history of the case and I am happy to refer for those facts. Suffice to say that at the core is a claim in tort of conspiracy, alleging that Mr Khrapunov and his father in-law Mr Ablyazov conspired to injure the Bank by preventing it from enforcing its judgments against Mr Ablyazov’s assets.
First let’s have a look at was not discussed at the SC: domicile and locus damni. As for the former, domicile once held but now fleed from was correctly rejected by Teare J as establishing domicile under Lugano (or indeed Brussels). The argument that jurisdiction should, nevertheless, be taken still to be domiciled in England because defendant was in breach of an obligation under the worldwide freezing order prohibiting him from leaving the jurisdiction, was likewise rejected. An interesting proposition though.
Now, for the location of the locus damni. At 29 the SC refers to the Bank’s argument at the High Court and Court of Appeal stage. The Bank’s argument was that the damage occurred in England. This was based on the contention that its worldwide freezing order and its judgments against Mr Ablyazov were located here and had been reduced in value by the alleged conduct in relation to assets in other jurisdictions. The High Court and Court of Appeal considered that the element of damage proximate to the harmful event was the Bank’s inability or reduced ability to execute against those assets in the places where they were located. Another fine example of the difficult implications of Bier and not one which the CJEU has hitherto had the occasion to review. (But current case will not reach it).
As for locus delicti commissi, the Bank submit that the event giving rise to the damage was the conspiracy itself, which was hatched in England. At the High Court Teare J rejected this submission, because he considered that the cause of the damage was not the conspiracy but its implementation: a suggestion I like in the context of competition law, as readers of the blog will be aware. Teare J was not followed by the Court of Appeal though, which identified the place where the conspiratorial agreement was made as the place of the event which gives rise to and is at the origin of the damage.
The SC refers to CJEU authority to conclude with CDC and at 41 it reiterates the CA’s core reasoning: ‘As Sales LJ explained (at para 76), in entering into the agreement Mr Khrapunov would have encouraged and procured the commission of unlawful acts by agreeing to help Mr Ablyazov to carry the scheme into effect. Thereafter, Mr Khrapunov’s alleged dealing with assets the subject of the freezing and receivership orders would have been undertaken pursuant to and in implementation of that agreement, whether or not he was acting on instructions from Mr Ablyazov.’
The Supreme Court concludes that the making of the agreement in England should be regarded as the harmful event which set the tort in motion.
The judgment keeps open many issues, however. For starters, to have a sole birthplace of conspiratorial agreement is handy in the case at issue however it is likely not often to be so clearly the case (as Dan and Tom point out, particularly not in a digital context). Moreover, for those instances where Mr Khrapunov were not to be acting on instructions from Mr Ablyazov, questions of ultra vires so to speak and hence of a separate tort would arise.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 184.108.40.206