Tag: related actions

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Winkler v Shamoon. Another High Court look at the ‘wills and succession’ exception.

In Winkler v Shamoon [2016] 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.

Geert.

(Handbook EU Private international law, Chapter 2, Heading 2.2.2.10).

 

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Be careful what you ask for! Barclays v ENPAM: the High Court again employs Article 27/28 to neutralise Italian torpedo.

Barclays v ENPAM has been travelling in my briefcase for some time – apologies. Reminiscent of the Supreme Court’s decision in the Alexandros, and the High Court in Nomura , Blair J in October 2015 employed national courts’ room under Article 27/28 of the Brussels I Regulation (the lis alibi pendens and related actions rules) to refuse a stay of English proceedings in favour of proceedings in (of course) Italy. Litigation like this will be somewhat less likely now that the Brussels I Recast applies. As readers will be aware, the current version of the Regulation has means to protect choice of court agreements against unwilling partners (see however below).

Claimant, Barclays Bank PLC, is an English bank. The defendant, Ente Nazionale di Previdenza ed Assistenza dei Medici e Degli Odontoiatri (“ENPAM”) is an Italian pension fund. A dispute has arisen between them as to a transaction entered into by way of a Conditional Asset Exchange Letter from ENPAM to Barclays dated 21 September 2007 by which ENPAM exchanged fund assets for securities which were in the form of credit-linked notes called the “Ferras CDO securities”. ENPAM’s claim is that it incurred a major loss in the transaction, and that it is entitled in law to look to Barclays to make that loss good.

On 18 May 2015, Barclays issued a summary judgment application on the basis that there is no defence to its claim that the Milan proceedings fall within contractual provisions giving exclusive jurisdiction to the English courts. ENPAM began proceedings against Barclays and others in Milan on 23 June 2014. Barclays says that this was in breach of provisions in the contractual documentation giving exclusive jurisdiction to the English courts. It issued the proceedings reviewed here seeking a declaration to that effect and other relief on 15 September 2014. On 20 April 2015, ENPAM applied pursuant to Article 27 or Article 28 of the Brussels I Regulation for an order that the English court should not exercise its jurisdiction in these proceedings on the basis that Milan court was first seised.

The High Court refused. Reference is best made to the judgment itself, for it is very well drafted. Read together with e.g. the aforementioned Alexandros and Nomura judgments, it gives one a complete view of the approach of the English courts viz lis pendens under the Regulation. (E.g. Blair J has excellent overview of the principles of Article 27 (Article 29 in the Recast) under para 68).

Discussion of what exactly Barclays could recover from the English cq Italian proceedings, was an important consideration of whether these two proceedings were each other’s mirror image. (see e.g. para 82 ff). This is quite an important consideration for litigators. Statements of claims are an important input in the lis pendens analysis. Be careful therefore what you ask for. Restraint in the statement of claims might well serve you very well when opposed with recalcitrant opposing parties, wishing to torpedo your proceedings. (Let’s face it: the likelihood of such opposition is quite high in a litigious context).

Finally, it is often assumed that precedent value of the case discussed here and other cases with it, has diminished drastically following the Brussels I Recast. It instructs all courts not named in a choice of court agreement, to step back from jurisdiction in favour of the court named (Article 31(2)). Yet what is and what is not caught by a choice of court agreement (starting with the issue of non-contractual liability between the parties) depends very much on its wording and interpretation. Article 31(2) is not the be all and end all of litigation between contracting parties.

Geert.

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Zavarco: Donaldson DJ emphasises difference between Article 34 Brussels I Recast and forum non conveniens. And considers Article 24(2)’s exclusive jurisdictional rule.

Update 17 01 2023 my article on Articles 33-34 has now been published: Lis Pendens and third states: the origin, DNA and early case-law on Articles 33 and 34 of the Brussels Ia Regulation and its “forum non conveniens-light” rules, The link in the title should give free access to the first 50 takers, and I assume link to the review for those that come after.

Peter Ola Blomqvist v Zavarco PLC [2015] 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 [2009] EWHC 2783 (Ch) ).

This is the first proper consideration of Article 34 of the Recast. No doubt it will not be the last.

Geert.

(Handbook of) European Private International Law – 2nd ed. 2016 (forthcoming), Chapter 2, Heading 2.2.6.5, Heading 2.2.14.5.

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Sabbagh v Khoury. The High Court considers the ‘wills and succession’ exception, (reflexive application of) the exclusive jurisdictional rule for company matters, and anchor defendants under the Jurisdiction Regulation.

Sabbagh v Khoury is great for oral exam purposes. Hand the student a copy of the case and ipso presto, there is plenty to talk about for at least half an hour.

Sana Sabbagh, who lives in New York, claims that the Defendants have variously, since her father’s stroke, conspired against both him and her to misappropriate his assets (“the asset misappropriation claim”) and, since her father’s death, to work together to deprive her of her entitlement to shares in the group of companies which her father ran (“the share deprivation claim”). Wael, first defendant, is the anchor defendant for jurisdictional purposes. He resides and has at all material times resided in London. The other Defendants live or are based abroad.

Defendants contend in essence  (at 83):

a) that the claims against Wael (as noted, the anchor defendant) are so weak that there is no risk of irreconcilable judgments from separate proceedings and so no basis for joinder under Article 6(1) of the Brussels I Regulation (“the merits issue”);

b) that the claims fall outside the Brussels Regulation because the Regulation does not apply to “wills and succession” within the scope of Article 1(2)(a) (“the succession issue”), or challenges to the validity of CCG’s organs within the scope of Article 22(2) (“the Article 22 issue”), and the natural and appropriate forum for determining them is Lebanon (“the forum issue”);

c) that the claims are subject to an arbitration clause (or several arbitration clauses) such that a stay is required by s. 9(4) of the Arbitration Act 1996 (“the stay issue”). Any disputes against parties not bound by the arbitration clause should be stayed as a matter of discretion.

(Point c falls outside the scope of current posting).

Logically looking at point b) first (the exclusion of ‘wills and succession’, the High Court first of all considered the proposition that exceptions to the scope of application need to be applied restrictively.

To my knowledge this has not as such been held by the ECJ. Carr J expresses sympathy with the view that the findings of the ECJ in C-292/08 German Graphics in particular (that the insolvency exception not be given an interpretation broader than is required by its objective), could be given broader application, for all exceptions. I am more convinced by defendants’ argument that one needs to be careful to extend the reasoning of German Graphics outside the insolvency context, given that its ruling is inevitably influenced by the existence of the Insolvency Regulation.

However Mrs Justice Carr suggested that whether or not restrictive interpretation ought to be followed, is not quite the determinant issue: rather, that the exceptions should be applied in similar fashion as the exclusive jurisdictional rules of Article 22 (Article 24 in the recast).  Those jurisidictional rules, which are an exception to the general rule of Article 2 (4 in the recast), Carr J notes, only apply where the action is ‘principally concerned with’ the legal issue identified in the Article. ‘Have as their object’ is the term used in the Regulation, for 3 out of 5 of the Article 22 exceptions. (For the other two, including those with respect to intellectual property, the term is ‘concerned with’. In fact in other language versions the term is ‘concerned with’ throughout – which has not helped interpretation). ‘Have as their object’ was indeed applied by the ECJ as meaning ‘whose principal subject-matter comprises’ in BVG, viz the Article 22(2) exception. (Not in fact as Carr J notes, ‘principally concerned with’ , which the ECJ only referred to because it is the language used in Article 25’s rule on examination of jurisdiction).

The stronger argument for siding with the High Court’s conclusion lies in my view not in the perceived symmetry between Article 22 (exclusive jurisdictional rules) and Article 1 (scope), but rather in the High Court’s reference in passing to the Jenard report. At C/59/10: ‘matters falling outside the scope of the Convention do so only if they constitute the principal subject-matter of the proceedings. They are thus not excluded when they come before the court as a subsidiary matter either in the main proceedings or in preliminary proceedings.’ Granted, the result is the same, however the interpretative route is neater. Like other things in life (it’s single Malt, not so much general tidiness I am referring to), I like my statutory interpretation neat.

Eventually Carr J held that Ms Sabbagh’s action is principally concerned with assets and share misappropriation, in short, with conspiracy to defraud. If successful, the action will of course impact on Ms Sabbagh’s inheritance. However that does not justify the exclusion of Brussels I to her claim.

[The court was also taken on a short comparative tour of the Succession Regulation, with a view to interpreting the succession exception in Brussels I. Interestingly, Carr J noted that indeed that Regulation may serve as a supplementary means of interpretation of the Jurisdiction Regulation, even though the UK is not bound by the Succession Regulation.]

 

Next came the potential application of Article 22(2). This issue not only raised the question of whether the action would at all fall within the Article 22(2) remit; but also, whether in that case that Article needs to be applied reflexively, given that the companies concerned are incorporated in Lebanon. Here inevitably reference was made to Ferrexpo. The High Court however held that no question of reflexive application arises, under the same reasoning as above, with respect to the succession exception: the challenge to the corporate decisions was not one of ultra vires or other ‘corporate’ validity: rather, one of their proper characterisation or correctness. They are not therefore substantially concerned with the Article 22(2) exceptions.

 

The High Court preceded its application of Article 6(1) (joinders /use of an anchor defendant: first defendant is domiciled in London) with a very thorough review of the merits of each of the cases. (At 5, the Court notes that the other defendants live ‘abroad’, most of them seemingly in Greece. However the relevant companies at least seem to be domiciled in Lebanon. Article 6 can only be used against defendants already domiciled in another Member State. For those outside, national conflicts law decides the possibility of joinder).

Article 6 requires that “the claims 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.”  ECJ Case-law (in particular Roche Nederland, C-539/03) has it that it is not sufficient that there be a divergence in the outcome of the dispute: that divergence must also arise in the context of the same situation of law and fact (Case C‑539/03 Roche Nederland and Others [2006] ECR I‑6535, paragraph 26). In Freeport, Case C-98/09, the ECJ added that It is for the national court to assess whether there is a connection between the different claims brought before it, that is to say, a risk of irreconcilable judgments if those claims were determined separately and, in that regard, to take account of all the necessary factors in the case-file, which may, if appropriate yet without its being necessary for the assessment, lead it to take into consideration the legal bases of the actions brought before that court. (at 41). It added that where claims brought against different defendants are connected when the proceedings are instituted, (which implies that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings), there is no further need to establish separately that the claims were not brought with the sole object of ousting the jurisdiction of the courts of the Member State where one of the defendants is domiciled (Freeport, at 54).

Whether the likelihood of success of an action against a party before the courts of the State where he is domiciled is relevant in the determination of whether there is a risk of irreconcilable judgments for the purposes of Article 6(1), was raised in Freeport but not answered by the ECJ for such answer was eventually not necessary for the preliminary review at issue. In Sabbagh, with reference to precedent in the English courts, the High Court does carry out a rather thorough merits review, effectively to review whether the claim against Wael might not be abusive: ie invented simply to allow him to be used as anchor defendant. Carr J’s extensive merits review hinges on ‘to take account of all the necessary factors in the case-file‘ per Freeport. Whether such detailed review might exceed what is required under Article 6(1) is simply not easily ascertained. (The High Court eventually did decide that Article 6(1) applied on account of one of the pursued claims).

Did I say ‘half an hour’ in the opening line of this posting? An exam using this judgment might take a bit longer…

Geert.

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Nickel & Goeldner: Not the procedural context but the legal basis of the action determines the insolvency exception.

It is always useful to have the Court of Justice remind us of (some might say: fine-tune) what it has decided in precedent. This is no different in Nickel & Goeldner– Case C-157/13. (Which also deals with Article 71’s rule on the relation between Brussels I and the Convention for the International Carriage of Goods by Road (CMRT)).

This blog has reported earlier on the difficulties in applying the ‘insolvency exception’. (E.g. in Sabena and Enascarco). In Nickel & Goeldner, the insolvency administrator of Kintra applied to the relevant Lithuaian courts for an order that Nickel & Goeldner Spedition, which has its registered office in Germany, pay its debt in respect of services comprising the international carriage of goods provided by Kintra for Nickel & Goeldner Spedition, inter alia in France and in Germany. According to the insolvency administrator of Kintra, the jurisdiction of the Lithuanian courts was based on Article 14(3) of the Lithuanian Law on the insolvency of undertakings. Nickel & Goeldner Spedition disputed that jurisdiction claiming that the dispute fell within the scope of Article 31 of the CMR and of the Brussels I Regulation.

The Courts instructs how its earlier case-law (Gourdain; Seagon; German Graphics; F-Tex) needs to be applied (at 26-27):

It is apparent from that case-law that it is true that, in its assessment, the Court has taken into account the fact that the various types of actions which it heard were brought in connection with insolvency proceedings. However, it has mainly concerned itself with determining on each occasion whether the action at issue derived from insolvency law or from other rules.

It follows that the decisive criterion adopted by the Court to identify the area within which an action falls is not the procedural context of which that action is part, but the legal basis thereof. According to that approach, it must be determined whether the right or the obligation which respects the basis of the action finds its source in the common rules of civil and commercial law or in the derogating rules specific to insolvency proceedings.

The action at issue is an action for the payment of a debt arising out of the provision of services in implementation of a contract for carriage. That action could have been brought by the creditor itself before its divestment by the opening of insolvency proceedings relating to it and, in that situation, the action would have been governed by the rules concerning jurisdiction applicable in civil and commercial matters.  The fact that, after the opening of insolvency proceedings against a service provider, the action for payment is taken by the insolvency administrator appointed in the course of those proceedings and that the latter acts in the interest of the creditors does not substantially amend the nature of the debt relied on which continues to be subject, in terms of the substance of the matter, to the rules of law which remain unchanged.

Hence, there is no direct link with the insolvency proceedings and the Brussels-I Regulation continues to apply.

(On the application of Article 71, the Court holds that, in a situation where a dispute falls within the scope of both the regulation and the CMR, a Member State may, in accordance with Article 71(1) of the Regulation, apply the rules concerning jurisdiction laid down in Article 31(1) of the CMR.).

Not the procedural context (in particular, whether the liquidator takes the action) but the legal basis of the action determines the insolvency exception. A useful alternative formulation of the Gourdain et al case-law.

Geert.

 

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Insolvency, Brussels I and Lugano: Enasarco v Lehman Brothers upholds strong defence of choice of court

In Enasarco v Lehman Brothers, the High Court was asked to stay English proceedings following jurisdictional issues of a derivative agreement between Enasarco and Lehman Brothers Finance (LBF). Swiss liquidators of LBF had already rejected a claim under the agreement, rejection which is being challenged in the Swiss courts. The derivative agreement is subject to English law and to choice of court exclusively in favour of the English courts.

Are the claims with respect to the derivative agreement so closely connected to the insolvency that they are covered by the insolvency exception to the Lugano Convention (identical to the exception in the Brussels I Regulation) consequently freeing the English courts from that Convention’s strict lis alibi pendens rule? (Similar questions were at issue recently in the Sabena recognition and enforcement issue – albeit evidently not re lis alibi pendens).

Richards J held they were – allowing the contractual issues under the derivative agreement to be settled by the English courts, and the insolvency matters by the Swiss courts.

LBF submitted that the Lugano Convention applies to the present proceedings and also to the proceedings in Switzerland whereby Enasarco challenges the rejection of its claim and, accordingly, that article 27 (lis alibi pendens) required the court to stay the English proceedings in favour of the Swiss proceedings. It was common ground that, if article 27 applies, the Swiss court was the court first seised. Alternatively, LBF submitted that the court should exercise its discretion under article 28 (re related, but not identical actions) to stay the English proceedings. In the further alternative, it submitted that the High Court should have granted a stay, on case management grounds, of the English claim pursuant to section 49(3) of the Senior Courts Act 1981 (SCA 1981). (In other words, were Lugano found not to apply).

Richards J of course referred to Gourdain and German Graphics, and found that the Swiss proceedings could not exist, nor have any relevance, outside the Swiss litigation: (at 42):

‘First, they are proceedings which arise, and can only arise, under Swiss insolvency law. Secondly, they form an integral part of the liquidation proceedings, designed to achieve the primary purpose of such proceedings, which is the distribution of the assets available to the liquidators among those creditors whose claims are admitted. The proceedings must take place in the court dealing with the liquidation. Thirdly, the purpose of the proceedings is not simply to establish whether the claimant has a good contractual or other claim, but to determine the amount and the ranking of the claim for the purposes of the liquidation. The ranking of claims is a matter arising exclusively under the relevant insolvency law. (…). Fourthly, the self-contained and special character of the Swiss proceedings is well illustrated by the fact that it does not give rise to res judicata as between the parties in relation to the underlying contractual dispute.‘

As for the discretionary stay under English civil procedure, Richards J held against it, for the following reasons (at 56 ff):

First, the Derivative Agreement contains an exclusive jurisdiction clause, as regards states which are parties to the Lugano Convention, in favour of the English courts. (Here reference was made to the Supreme Court’s decision in The Alexandros).

Secondly, as noted by the Court of Appeal in the AWB (Geneva) case when refusing a stay of English proceedings in favour of insolvency proceedings in Canada, and also by Rimer J in UBS AG v Omni Holding AG when refusing a stay of English proceedings in favour of insolvency proceedings in Switzerland, it is likely that the Swiss court will be greatly assisted by having the judgment of the English court on the rights and liabilities of the parties under the Derivative Agreement, given that it is governed by English law.

Thirdly, the Swiss proceedings were, practically speaking, not as far advanced as to make concurrent English proceedings nugatory. (Given the governing law of the contract, for instance, the Swiss courts might well be tempted to await the outcome of the English proceedings and take relevant conclusions for their own proceedings).

Fourthly, the merits of having issues arising under the Derivative Agreement determined by the English court have in fact been recognised by the liquidators of LBF in the past.

Finally, Enasarco had not chosen to commence proceedings in Switzerland. The liquidators chose to deal with Enasarco’s claims only in the Swiss insolvency proceedings and not through further proceedings in the English courts. It was the liquidators’ choice in this respect that forced Enasarco to issue the Swiss proceedings.

 

In summary, where issues are of a mixed nature, to the degree the mix can be undone, that is what must be carried out. The case highlights once again the strong defence raised by the English courts for choice of court clauses.

Geert.

 

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Nomura v Banco Monte dei Paschi di Siena . Exclusive court of choice clause counts against use of court’s room under ‘related actions’

In a case on this point reminiscent of the Supreme Court’s subsequent decision in the Alexandros, the High Court held in Nomura v Banco Monte dei Paschi di Siena (BMPS) [2013] EWHC 3187 (Comm) against a grant of a stay of the English proceedings in favour of proceedings in Italy. The stay would have been granted on the basis of Article 28’s proviso for ‘related’ actions, in particular Article 28(1): ‘where related actions are pending in the courts of different Member States, any court other than the court first seized may stay its proceedings.’

A ‘mandate’ agreement exists between parties, which includes a non-exclusive jurisdiction clause in favour of the English courts. The ISDA Master agreement (this is different from the mandate agreement) is subject to English law and as such (see para 16 of the judgment) contains an exclusive choice of court clause. BMPS fired the first shot in litigation, in Italy. The Italian claims are a mixture of contractual liability, liability in tort, and liability ensuing from a criminal offence. BMPS essentially claim that its former senior management colluded with Nomura in covering op losses incurred on financial operations with Nomura. Nomura started proceedings in England with a view to establishing that the agreements at issue are valid and binding. Parties agree that the Italian court was first seized.

As further explained inter alia in my posting on the Alexandros, Article 28 gives the court much more leeway than Article 27’s lis alibi pendens rules. The High Court made full use of this flexibility, inter alia in finding that in reviewing whether actions are ‘related’ within the meaning of Article 28, account must be taken not just of the claims of plaintiff but also the defence raised by defendant. This is in contrast with the ECJ’s position on Article 27 in C-111/01 Gantner Electronic: in deciding identity of action under Article 27, account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant.

Eder J held that the two proceedings were not likely to lead to irreconcilable judgments. Nomura’s claims in England are contractual. BMPS’ claims are based mostly on tort (para 26). It should not be excluded that the findings in one court will influence the other. Proximity or convenience does not plead in favour of Italy. Finally and importantly, the High Court found that ‘the case against the grant of a stay is strongly fortified because of the existence of the exclusive jurisdiction clause in the (  ) Master Agreement. (   ) the Court should, so far as possible, give effect to the parties’ bargain and be very slow indeed to exercise a discretion in a manner the effect of which would be to destroy such bargain‘.

The High Court justifiably did not entertain parties’ arguments on the basis of the new Jurisdiction Regulation, which enters into force in January 2015 and includes a new rule, granting better protection to choice of court agreements (priority for the court assigned to have a first go at establishing its jurisdiction).

Geert.

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