Posts Tagged related actions
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  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  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:
- 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”.
- 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).”
- 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.
- 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 (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 (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.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11, Heading 2.2.14.
1215/2012, 33/78, Article 30, Article 7(5), Article 8(2), Branch, Brussels I, Brussels I recast, Brussels I Regulation, Curia, FNC, http://www.bailii.org/ew/cases/EWHC/Comm/2017/3512.html, https://www.bailii.org/ew/cases/EWHC/Comm/2018/3282.html, Jurisdiction, lex fori, lis, Lis alibi pendens, National Bank of Kazakhstan v Bank of New York Mellon, Recognition, Recognition and enforcement, Regulation 1215/2012, related actions, Somafer, Sovereign immunity, sufficient nexus, the Tatry, third party proceedings,  EWHC 3512 (Comm),  EWHC 3282 (Comm)
National Bank of Kazakhstan v Bank of New York Mellon. Branches’ activities, Article 7(5) Brussels I Recast and engagement of Article 30.
In  EWHC 3512 (Comm) National Bank of Kazakhstan v Bank of New York Mellon, Article 7(5) makes a rarish appearance, as does (less rarely) Article 30. Popplewell J summarises the main facts as follows.
‘The Second Claimant is the Republic of Kazakhstan (“ROK”). The First Claimant is the National Bank of Kazakhstan (“NBK”). The Defendant is a bank incorporated in Belgium with a branch in, amongst other places, London. Through its London branch it provides banking and custody services to NBK in respect of the National Fund of Kazakhstan (“the National Fund”), pursuant to a Global Custody Agreement dated 24th December 2001, (“the GCA”). The National Fund has been the target of proceedings brought by Mr. Anatolie Stati and others, (“the Stati Parties”), who are seeking to enforce a Swedish arbitration award against ROK for a sum, including interest and costs, in excess of US$ 500 million. The Stati Parties obtained attachment orders from the Dutch court and the Belgian court, which were served on the Defendant (“BNYM”). BNYM, after taking legal advice, decided to freeze all the assets comprising the National Fund, which it holds under the GCA, on the basis that it was bound to comply with the Belgian and Dutch orders, breach of which would expose it to the risk of civil liability for the amount of the Stati Parties’ claims and criminal liability in Belgium and the Netherlands.’
Effectively therefore the London Branch of a Belgian domiciled bank, has frozen claimant’s assets which it holds in London (although the exact situs is disputed), on the basis that it wishes to prevent exposure to BE and NL criminal proceedings.
Parties arguments on jurisdiction are included at 41 and 42 of the judgment. Core to the Brussels I Recast jurisdictional discussions is Article 7(5) which provides
“A person domiciled in a Member State may be sued in another Member State: […]
(5) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place where the branch, agency or other establishment is situated;’
Beyond Case 33/78 Somafer, to which the High Court refers, there is little CJEU precedent – C‑27/17 flyLAL is currently underway. Popplewell J at 53 refers to Lord Phillips’ paraphrasing of Somafer in  EWCA Civ 147 as a requirement of ‘sufficient nexus’ between the dispute and the branch as to render it natural to describe the dispute as one which has arisen out of the activities of the branch.
At 54 he holds there is such nexus in the case at issue, particularly given the management of the frozen assets by the London branch, and the very action by that branch to freeze them. This is quite a wide interpretation of Article 7(5) and not one which I believe is necessarily supported by the exceptional nature of Article 7.
As to whether the English and Belgian proceedings are ‘related’, providing an opportunity for the English proceedings to be halted under Article 30 of the Recast (lis alibi pendens), the High Court refers at 57 ff to C-406/95 The Tatry to hold that there is no risk of conflicting decisions in this case: the argument specifically being that even if the issues addressed are the same, they are addressed in the respective (English, Dutch, Belgian) proceedings under different applicable laws (in each case the lex fori on sovereign immunity). I do not find that very convincing. The risk of irreconcilable outcome is the issue; not irreconcilability or not of reasoning. In the same para 60 in fine in fact Popplewell J advances what I think is a stronger argument: that the issue whether the National Fund was used or intended to be used for commercial purposes, requires to be determined or addressed in the English proceedings, with the result that there is no risk of conflict.
Article 30 not being engaged for that reason, obiter then follows an interesting discussion on whether there can be lis alibi pendens if the court originally seized had no jurisdiction under the Regulation: here: because the Belgian and Dutch proceedings are arbitration proceedings.
Does Article 30 apply to Regulation claims where there was a related action in a Member State in which the related action did not itself come within the Regulation? Referring to the new Article 34 lis alibi pendens rule for proceedings pending ex-EU, ex absurdum, would there not be an odd lacuna if Article 34 required a stay where there were related non-Regulation foreign proceedings in a third party State and the position were not to be the same for equivalent foreign proceedings in a Member State? I do not believe there would be such lacuna: the Article 34 rule applies to concurrent proceedings which are in fact in-Regulation, except international comity requires the EU to cede to foreign proceedings with a strong (typically exclusive) jurisdictional call. For intra-EU proceedings, the comity argument holds no sway – mutual trust does.
Like Poplewell J however I reserve final judgment on that issue for another occasion.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.11, Heading 2.2.14.
1215/2012, 33/78, Article 30, Article 34, Article 7(5), Branch, Brussels I, Brussels I recast, Brussels I Regulation, Curia, FNC, Forum non conveniens, http://www.bailii.org/ew/cases/EWHC/Comm/2017/3512.html, Jurisdiction, lex fori, lis, Lis alibi pendens, National Bank of Kazakhstan v Bank of New York Mellon, Recognition, Recognition and enforcement, Regulation 1215/2012, related actions, Somafer, Sovereign immunity, sufficient nexus, the Tatry,  EWHC 3512 (Comm)
Update 7 June 2018 on 31 May the High Court  EWHC 1330 (Comm)] backed up the CA’s finding with an interim anti-suit (in arbitration) injunction.
In line with my previous post (readers unfamiliar with it may want to refer to it; and to very good Hill Dickinson summary of the case), of particular consideration here is the jurisdictional test under (old) Article 6(1) Brussels I, now Article 8(1) in the Recast, in particular the extent of merits review; and whether the subject matter of the claim comes within the succession exception of Article 1(2)(a) of the Brussels I Regulation.
As for the latter, the Court, after reviewing relevant precedent and counsel argument (but not, surprisingly, the very language on this issue in the Jenard report, as I mention in my previous post) holds in my view justifiably that ‘(t)he source of the ownership is irrelevant to the nature of the claim. ..The subject matter of the dispute is not whether Sana is an heir, but whether the defendants have misappropriated her property.‘ (at 161).
With respect to the application of Article 6(1) – now 8(1), the majority held in favour of a far-reaching merits review. Lady Justice Gloster (at 166 ff) has a minority opinion on the issue and I am minded to agree with her. As she notes (at 178) the operation of a merits test within Article 6(1) does give rise to risk of irreconcilable judgments, which can be demonstrated by reference to the present facts. She successfully, in my view, distinguishes the CJEU’s findings in Kolassa and in CDC, and the discussion at any rate one would have thought, merits CJEU review.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168
abuse, Anchor defendant, Anchor defendants, Article 22(2), Bevoegdheid, Brussels I, BVG, C-98/06, Case C-98/06, CJEU, Court of Justice, Curia, ECJ, EEX, EEX Verordening, Exclusive jurisdictional rules, Ferrexpo, Ferrexpo v Gilson, FNC, Forum non conveniens, Freeport, http://www.bailii.org/ew/cases/EWCA/Civ/2017/1120.html, http://www.bailii.org/ew/cases/EWHC/Comm/2014/3233.html, Insolvency, Interpretation, Judgments Regulation, Jurisdiction, Jurisdiction Regulation, merits review, Mirror application, Reflexive application, Regulation 44/2001, Regulation 650/2012, related actions, Roche Nederland, Sabbagh v Koury, Scope of application, Succession regulation, United Kingdom, Wills and succession, Wills and succession exception,  EWHC 3233 (Comm),  EWCA Civ 1120,  EWHC 1330 (Comm)]
Update May 2017. Judgment upheld on appeal.
Thank you David Lewis QC for signalling B.WIN v Emerald Bay at the courts of Gibraltar. The dispute arises between Bwin, the internet gaming company, and various former shareholders of Bwin, domiciled at Gibraltar and England (as well as Israel). The former shareholders had advanced a claim in the New Jersey Courts alleging that Bwin made fraudulent, alternatively negligent misrepresentations in relation to the opportunity for internet gaming in New Jersey, as a result of which they divested their shares for lower value prior to a lucrative take-over of Bwin.
Bwin Gibraltar in the proceedings at issue are seeking an anti-suit injunction in respect of the existing New Jersey proceedings (an earlier EU-wide and Lugano States anti-suit request was wisely dropped, seeing as it runs counter CJEU authority (Owusu).
Jack J, considers not just the issue of dépeçage under Rome I (here: an attempt at distinguishing applicable law for regulatory as opposed to purely contractual issues) but also, albeit briefly the new lis alibi pendens /related actions regime of Articles 33-34 Brussels I Recast. (In a much more succinct way than Zavarco).
At 73 in particular: ‘I am doubtful whether any part of the [FNC] doctrine survives in cases where this Court has jurisdiction under the Brussels I-Recast Regulation. [reference to Owusu]. Instead the extent to which this Court can and should say the current proceedings is likely to be limited by Arts 33 and 34 of Brussels I-Recast.’ This is an interesting reflection on Article 34 Brussels I Recast, despite inevitable parallel particularly experienced by common law courts, not amounting to a forum non conveniens light.
Continued then at 74 ff:
‘However, I do not need to determine that issue. Gibraltar is a perfectly appropriate venue for the determination of the dispute between the parties. The business of Bwin Gibraltar is run from here. All the parties reside here. The misrepresentations relied on were made in Gibraltar or London. Most of the lay witnesses are either in Gibraltar or in Europe.
75. It is true that the New Jersey courts will be more familiar with New Jersey gaming law. However, given that a trial there would be with a civil jury, that may not be such an advantage. In terms of disclosure of documents from the DGE, this is neutral in my
judgment. If the proceedings continue in Gibraltar, the parties can apply in the federal courts of New Jersey…for disclosure of documents…
76. In my judgment, neither Gibraltar nor New Jersey is a forum non conveniens. In exercising my discretion as to whether to grant an anti-suit injunction, I consider that there is nothing substantial to weigh against Bwin Gibraltar’s contractual entitlement not to be sued in New Jersey. Accordingly, I will grant an anti-suit injunction.’
A further, brief, consideration of Article 34.
(Handbook of) European Private International Law – 2nd ed. 2016 , Chapter 2, Heading 22.214.171.124.
2016-Ord-46, A34, Article 34, Brussels I recast, depecage, FNC, Forum non conveniens, http://www.gcs.gov.gi/index.php/court-results/judgments/court-of-appeal/2017/668-emerald-bay-limited-ors-v-bwin-party-digital-entertainment-limited, Lis alibi pendens, Reflexive, related actions
In Winkler v Shamoon  EWHC 2017 Ch Mr Justice Henry Carr broadly follows Mrs Justice Susan Carr in Sabbagh v Khoury (which I have reviewed earlier) on the interpretation of the ‘wills and succession’ exception in the Brussels I Recast (and the Lugano convention). [The Justices themselves, incidentally, are neither related nor married, I understand]. In so doing, Sir Henry follows Dame Susan’s approach vis-a-vis the exclusions in the Brussels I Recast.
Ms Alexandra Shamoon accepts that she is domiciled in the UK for the purposes of the Brussels Regulation. However, she applies for an order on essentially the same basis as that set out above, contending, in particular, that the claim relates to succession and therefore falls outside the scope of the Brussels Regulation. Brick Court have summary of the case and hopefully do not mind me borrowing their heads-up of the facts:
the case concerns the estate of the late Israeli businessman, Sami Shamoon. Mr Shamoon owned and controlled the Yakhin Hakal Group of Israeli companies and was known in his lifetime as one of the wealthiest men in Israel. The claim was brought by Mr Peretz Winkler, formerly the Chief Financial Officer and manager of Yakhin Hakal, against Mrs Angela Shamoon and Ms Alexandra Shamoon, the widow and daughter respectively of Mr Shamoon and the residuary legatees under his will. In his claim Mr Winkler alleged that prior to his death Mr Shamoon had orally promised to transfer to him certain shares worth tens of millions of dollars. On the basis of the alleged promise Mr Winkler claimed declarations against Angela and Alexandra Shamoon as to his entitlement to the shares (which they are due to receive under Mr Shamoon’s will). Angela and Alexandra challenged the jurisdiction of the English Court to hear the claim on the basis that it was a matter relating to “succession” within article 1(2)(a) of the Brussels Regulation and therefore fell outside its scope (and that England was not the natural or appropriate forum for the dispute).
If the claim does fall within the scope of the Regulation, jurisdiction is quite easily established on the basis of the defendant’s domicile – albeit with contestation of such domicile in the UK by Mr Shamoon’s widow and daughter.
Carr J held that the claim was one relating to succession and therefore fell outside of the Brussels I Recast (at 53 ff). While I may concur in the resulting conclusion, I do not believe the route taken is the right one. Sir Henry follows Mrs Justice Carr’s approach in applying the excluded matters of the Brussels I Recast restrictively. I disagree. Exclusions are not the same as exceptions: Article 24’s exclusive rules of jurisdictions are an exception to the main rule of Article 4; hence they need to be applied restrictively. Article 1(2)’s exclusions on the other hand need to be applied solely within the limits as intended. Lead is also taken from Sabbagh v Koury with respect to the role of the EU’s Succession Regulation. Even if the UK is not party to that Regulation, both justices suggest it may still be relevant in particular in assisting with the Brussels I Recast ‘Succession’ exception. If the approach taken in Winkler v Shamoon is followed it leads to a dovetailing of the two Regulations’ respective scope of application. Not a conclusion I think which is necessarily uncontested.
The High Court concludes (at 72) ‘this claim is excluded from the Brussels Regulation and the Lugano II Regulation as its principal subject matter is “succession” within the meaning of Article 1(2)(a). In particular, it is a claim whose object is “succession to the estate of a deceased person” which includes “all forms of transfer of assets, rights and obligations by reason of death”. It is a succession claim which concerns “sharing out of the estate”; and it is a claim within the definition of “succession as a whole” in Article 23 of the Succession Regulation, as a claim whose principal subject matter concerns “the disposable part of the estate, the reserved shares and other restrictions on the disposal of property upon death”: Article 23(h); and an “obligation to …account for gifts, …when determining the shares of the different beneficiaries”: Article 23(i).
Intriguingly, of course, had the UK be bound by the Succession Regulation, and given the dovetailing which the judgment suggest, the next step after rejection of jurisdiction on the basis of the Brussels I Recast, would have been consideration of jurisdiction following the Succesion Regulation. It is ironic therefore to see the Regulation feature as a phantom piece of legislation. Now you see it, now you don’t.
(Handbook EU Private international law, Chapter 2, Heading 126.96.36.199).
Anchor defendant, Anchor defendants, Article 22(2), Bevoegdheid, Brussels I, BVG, C-98/06, Case C-98/06, CJEU, Conflict of laws, Court of Justice, Curia, dovetail, ECJ, EEX, EEX Verordening, geert van calster, http://www.bailii.org/ew/cases/EWHC/Comm/2014/3233.html, Insolvency, Interpretation, Judgments Regulation, Jurisdiction, Jurisdiction Regulation, Mirror application, Private international law, Regulation 44/2001, Regulation 650/2012, related actions, Sabbagh v Koury, Scope of application, Succession regulation, United Kingdom, Wills and succession, Wills and succession exception, Winkler v Shamoon, Winkler v Shamoon  EWHC 2017 Ch,  EWHC 3233 (Comm),  EWHC 2017 Ch
Be careful what you ask for! Barclays v ENPAM: the High Court again employs Article 27/28 to neutralise Italian torpedo.
Barclays v ENPAM has been travelling in my briefcase for some time – apologies. Reminiscent of the Supreme Court’s decision in the Alexandros, and the High Court in Nomura , Blair J in October 2015 employed national courts’ room under Article 27/28 of the Brussels I Regulation (the lis alibi pendens and related actions rules) to refuse a stay of English proceedings in favour of proceedings in (of course) Italy. Litigation like this will be somewhat less likely now that the Brussels I Recast applies. As readers will be aware, the current version of the Regulation has means to protect choice of court agreements against unwilling partners (see however below).
Claimant, Barclays Bank PLC, is an English bank. The defendant, Ente Nazionale di Previdenza ed Assistenza dei Medici e Degli Odontoiatri (“ENPAM”) is an Italian pension fund. A dispute has arisen between them as to a transaction entered into by way of a Conditional Asset Exchange Letter from ENPAM to Barclays dated 21 September 2007 by which ENPAM exchanged fund assets for securities which were in the form of credit-linked notes called the “Ferras CDO securities”. ENPAM’s claim is that it incurred a major loss in the transaction, and that it is entitled in law to look to Barclays to make that loss good.
On 18 May 2015, Barclays issued a summary judgment application on the basis that there is no defence to its claim that the Milan proceedings fall within contractual provisions giving exclusive jurisdiction to the English courts. ENPAM began proceedings against Barclays and others in Milan on 23 June 2014. Barclays says that this was in breach of provisions in the contractual documentation giving exclusive jurisdiction to the English courts. It issued the proceedings reviewed here seeking a declaration to that effect and other relief on 15 September 2014. On 20 April 2015, ENPAM applied pursuant to Article 27 or Article 28 of the Brussels I Regulation for an order that the English court should not exercise its jurisdiction in these proceedings on the basis that Milan court was first seised.
The High Court refused. Reference is best made to the judgment itself, for it is very well drafted. Read together with e.g. the aforementioned Alexandros and Nomura judgments, it gives one a complete view of the approach of the English courts viz lis pendens under the Regulation. (E.g. Blair J has excellent overview of the principles of Article 27 (Article 29 in the Recast) under para 68).
Discussion of what exactly Barclays could recover from the English cq Italian proceedings, was an important consideration of whether these two proceedings were each other’s mirror image. (see e.g. para 82 ff). This is quite an important consideration for litigators. Statements of claims are an important input in the lis pendens analysis. Be careful therefore what you ask for. Restraint in the statement of claims might well serve you very well when opposed with recalcitrant opposing parties, wishing to torpedo your proceedings. (Let’s face it: the likelihood of such opposition is quite high in a litigious context).
Finally, it is often assumed that precedent value of the case discussed here and other cases with it, has diminished drastically following the Brussels I Recast. It instructs all courts not named in a choice of court agreement, to step back from jurisdiction in favour of the court named (Article 31(2)). Yet what is and what is not caught by a choice of court agreement (starting with the issue of non-contractual liability between the parties) depends very much on its wording and interpretation. Article 31(2) is not the be all and end all of litigation between contracting parties.
Article 27, Article 28, Barclays, Barclays v ENPAM, Bevoegdheid, Brussel I Verordening, Brussels I, Brussels I Regulation, Choice of court, Conflicts, EEX Verordening, Forum clause, Forumclausule, High Court, http://www.bailii.org/ew/cases/EWHC/Comm/2013/3187.html, http://www.bailii.org/ew/cases/EWHC/Comm/2015/2857.html, Italian torpedo, Jurisdiction clauses, Lis alibi pendens, Nomura, Nomura v Banco Monte dei Paschi di Siena, Regulation 44/2001, related actions, statement of claims, Torpedo, Verordening 44/2001,  EWHC 2857
Zavarco: Donaldson DJ emphasises difference between Article 34 Brussels I Recast and forum non conveniens. And considers Article 24(2)’s exclusive jurisdictional rule.
Petra Blomqvist v Zavarco PLC  EWHC 1898 (Ch) is to my knowledge the first serious consideration of the new lis alibi pendens and related actions provisions of Articles 33-34 Brussels I Recast.
The defendant company has applied for a stay on the basis of forum non conveniens and/or lis alibi pendens founded on the pendency of the action in Kuala Lumpur.
Donaldson DJ first considers whether claimant’s action falls within Article 24(2)’s exclusive jurisdictional rule for company matters. Article 34 has no application where jurisdiction is assigned by Article 24.
Precedent referred to includes Reichert as well as BVG. The claim founds on the claimant, Mr Blomqvist’s allegation that the company has failed to comply with its obligation under applicable English corporate law to call a meeting at the request of a member registered as the holder of more than 5% of the paid-up shares so as to enable consideration of resolutions to replace the directors, thus entitling him to convene such a meeting himself. The company contests that the court is obliged to focus on the defence that the shares were not paid up, which he suggests is the only real matter in dispute and turns solely on whether the terms of the relevant purchase agreement were complied with, a matter outside Article 24.
At 25: CJEU Case-law and the Jenard report exclude ‘from the reach of Article 24 a contractual claim to which questions of corporate governance were advanced by way of defence. It is however equally important not to remove from its ambit a claim seeking redress for failures of corporate governance on the basis of a defence which is purely contractual.’
Turning then to Article 34. Donaldson DJ suggests at 34 that ‘The clear purpose of Article 34 is to liberate the court from the constraint imposed by the Regulation in earlier versions, exemplified in Owusu , as regards stay in favour of the courts of non-Member States.’ I am not convinced. Articles 33-34 may now allow for a stay in relations with third States. Yet forum non conveniens is one thing – and indeed one ruled out by the CJEU under the Brussels regime. Articles 33-34 are quite another.
Consideration is then made of the rather awkward first condition of Article 34 that a stay requires that ‘it is expedient to hear and determine the related actions together’. At 38: ’it is hard to see how the actions could in practice ever be heard and determined together and hence how such a course could ever be expedient. This result can, as I see it, only be avoided by a purposive construction which treats the words “is expedient” as equivalent to “would have been expedient”. I believe this is right: this condition is likely to have to be interpreted at an abstract level: as in that it would have been expedient to hear the actions together (typically, by use of Article 8(1)’s anchor mechanism), had the considerations involved competition between two (or more) EU courts: seeing as an EU judge is evidently in no position to demand a related action be handed over from a third State court.
The bar for the application of Article 34 is necessarily high – and was arguably applied so in Zavarco: at 41 ff convincing arguments are displayed to that effect.
Finally, at 44 ff Donaldson DJ entirely justifiably, and emphatically, rejects the suggestion that with lis alibi pendens having failed, a stay could be issued on case-management grounds: (the Owusu) prohibition cannot be circumvented by re-labelling the exercise as one of case management so as to “achieve by the back door a result against which the ECJ has locked the front door”(per Lewison J in Skype technologies SA v Joltid Ltd  EWHC 2783 (Ch) ).
This is the first proper consideration of Article 34 of the Recast. No doubt it will not be the last.
(Handbook of) European Private International Law – 2nd ed. 2016 (forthcoming), Chapter 2, Heading 188.8.131.52, Heading 184.108.40.206.
A34, Article 24(2), Article 34, Brussels I recast, case management, exclusive, FNC, Forum non conveniens, https://www.bailii.org/ew/cases/EWHC/Ch/2016/1143.html, Lis alibi pendens, Petra Blomqvist v Zavarco PLC, Reflexive, related actions, Zavarco,  EWHC 1898 (Ch)
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