Tag: UKSC

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Four seasons v Brownlie: establishing jurisdiction on the basis of indirect damage.

Update 6 November 2020 see Carin Hunt’s note on the CA judgment here, also pointing out that permission was granted to yet again go to the Supreme Court. See also Lady Brownlie’s solicitors complaining here about the conduct of the defendant in the case.

Update 20 August 2020 the Court of Appeal at the end of July rejected the appeal, upholding therefore a wider notion of ‘damage’ under residual English rules than under the EU rules (which were discussed at length). See ia Underhill L at 25: ‘I do not consider that the 1987 change to O.11, noted by this court in 1989, was necessarily thought to have reflected an intention that the words of O.11 should simply “parrot” the jurisprudence of the European court from time to time in its decisions on the different wording of the very different jurisdiction regime under the Convention.’

Update 7 October 2019 limitation periods under Rome I and II were further discussed in the follow-up case [2019] EWHC 2533 (QB).

Sometimes I post a little late. Rarely outrageously overdue. Yet Four Seasons Holdings Inc v Brownlie [2017] UKSC 80 needs to be reported on the blog for it is rather important, firstly, with respect to the topical interest in pursuing holding companies for actions (or lack of them) committed by affiliated companies. And secondly, for jurisdiction in tort, to what degree jurisdiction on the basis of injury sustained abroad, can qualify as lasting damage in the UK. Findings on the latter issue were obiter therefore they need to be treated with caution.

All five judges issued a judgment, with a 3 to 2 majority eventually holding (again: obiter) that jurisdiction in tort in England against non-England based defendants, can go ahead on the basis of indirect damage – albeit in such cases it might still falter on forum non conveniens grounds.

Sumption LJ, outvoted on the indirect damage issue, wrote the most lengthy judgment.

I tweeted the ruling mid December. Students of international law will of course appreciate the personal background to the case, particularly if you have ever had the chance to be taught by prof Sir Ian Brownlie – Philippe Sands’ obituary is here.

Sir Ian died in a car ­accident while on holiday with his family in Egypt. His wife was also injured. She brought proceedings seeking: (i) damages for her own personal injuries, (ii) damages under the Law Reform (Miscellaneous Provisions) Act 1934 as Sir Ian’s executrix, and (iii) damages for her bereavement and loss of dependency under the Fatal Accidents Act 1976.

The First Defendant, Four Seasons Holdings Inc (“Holdings”), is the holding company of the Four Seasons hotel group. It is incorporated in British Columbia. The Second Defendant, Nova Park SAE (“Nova Park”) is an Egyptian company which was identified by Lady Brownlie’s solicitors as the owner of the hotel building. The case falls outside the Brussels I Recast Regulation therefore. However reference to Brussels and particularly of course to Rome II is made in the various judgments, for even though the English Courts do not decide jurisdiction on the basis of Brussels, they do have to apply Rome I or II if the suit qualifies as one in contract cq tort.

The Court of Appeal [[2015] EWCA Civ 665] had held that the jurisdictional gateways were not satisfied. There was no contract with Four Seasons Holdings, and given that Holdings was not the owner, there could be no claim in tort for vicarious liability.

David Hart QC has excellent (much more swift) analysis here and I am happy largely to refer. A few points of additional interest.

On the issue of suing holding companies, Sumption LJ writing at 14 ff dismisses service out of jurisdiction for there is no reasonable possibility of a claim succeeding: at 15:

‘there is no realistic prospect that Lady Brownlie will establish that she contracted with Holdings, or that Holdings will be held vicariously liable for the negligence of the driver of the excursion vehicle.’ That is because (at 14) it is entirely clear ‘that Holdings is a nontrading holding company. It neither owns nor operates the Cairo hotel, which has at all material times been owned by Nova Park, a company with no corporate relationship to any Four Seasons company. A Dutch subsidiary of Holdings called Four Seasons Cairo (Nile Plaza) BV entered into an agreement with Nova Park to operate the hotel on behalf of Nova Park, although at the material times the actual operator was an Egyptian subsidiary of Holdings, FS Cairo (Nile Plaza) LLC, which assumed the contractual obligations of the operator by assignment. Other subsidiaries of Holdings supplied advice and specific services such as sales, marketing, central reservations and procurement, and licensed the use by Nova Park of the Four Seasons Trade Mark’.

Judgment in Brownlie preceded the current cases referred to it on the subject of CSR and jurisdiction (see my previous postings on that, most recently Unilever). Yet it is clear that plaintiffs have to show much more than a corporate bloodline between mother companies and affiliated undertakings, for suits to have any chance of success.

The case could have ended here for all five judges agree on this point. Yet aware of the relevance of direction, discussion was continued obiter on the topic of suing in tort. Firstly it was clear that if a claim in tort could be brought in the English courts, it would be subject to Egyptian law per Article 4(1) Rome II. In the Court of Appeal, Arden LJ had taken analogy with that Article (and the whole Regulation)’s rejection of indirect damage as relevant for deciding lex causae. And of course Rome II’s stance on this point is influenced by the CJEU’s case-law going in the same direction, but then for jurisdiction, in Marinari and the like. Sumption J cites Canadian authority (Stephen Pittel has reference to it here) and is critical of too much emphasis put on a connection between jurisdiction and applicable law, for determining jurisdiction.

Big big pat on his back; readers of the blog know (see eg here) I am not at all enthused by too much analogy between jurisdiction and applicable law).

Sumption at 22

It is undoubtedly convenient for the country of the forum to correspond with that of the proper law. It is also true that both jurisdiction and choice of law can broadly be said to depend on how closely the dispute is connected with a particular country. But there is no necessary connection between the two. The Practice Direction contemplates a wide variety of connecting factors, of which the proper law is only one and that one is relevant only to contractual liabilities. For the purpose of identifying the proper law, “damage” is limited to direct damage because article 4 of Rome II says so in terms. It does this because there can be only one proper law, and the formulation of a common rule for all EU member states necessarily requires a more or less mechanical technique for identifying it. By comparison, indirect damage may be suffered in more than one country and jurisdiction in both English and EU law may subsist in more than one country.

Lady Hale is even more to the point at 49: ‘Applicable law and jurisdiction are two different matters. There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable.‘

Yet for the case at hand ultimately Sumption J does curtail the relevance of indirect damage: at 23:

There is, however, a more fundamental reason for concluding that in the present context “damage” means direct damage. It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable for the breach. There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage. Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such. It is in general concerned with non-pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection.

At 29 ff follows Sumption’s engagement with relevant CJEU authority, leading him eventually to reject indirect damage as a basis for jurisdiction. That same authority is also discussed by Lady Hale and more succinctly by the others, however they prefer to take the English law on this point in a different direction, particularly taking the CPR (the relevant English civil procedure rules) use of the word ‘damage’ at face value, meaning including indirect damage: residual English PIL therefore not determined by CJEU authority.

As noted in my introduction, even if jurisdiction can be established on the basis of indirect damage in England, forum non conveniens may still scupper jurisdiction eventually.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 2 Heading 2.2.11.2, Chapter 4, Heading 4.4 .

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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 [2018] 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.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2

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AMT v Marzillier: UK Supreme Court sides with relucant Court of Appeal on inducement to breach choice of court agreement.

I reported on AMT V Marzillier at the High Court, failed to flag its overturn in the Court of Appeal (it’s the Easter period: I am in a confessionary mood), and now report swiftly on the Supreme Court confirming the Court of Appeal’s view early April ([2017] UKSC 13).

MMGR is a company incorporated under the laws of Germany and carries on business as a firm of lawyers in Germany. AMTF alleges that MMGR induced its former clients to issue proceedings against it in Germany and to advance causes of action under German law.  AMTF’s clients were referred to it by ‘introducing brokers’; AMTF in turn is referred to as a non-advisory, “execution only”, derivatives broker. AMTF charged its clients commission for its service and paid commission to the introducing brokers. About 70 former clients, who were dissatisfied with the financial results of their transactions, commenced legal proceedings in Germany against both the introducing brokers and AMTF seeking damages under the German law of delict. The claim against the introducing brokers was that they had given bad investment advice or had failed to warn of the risks of the investments. The claim against AMTF was based on a liability which was accessory to that of the brokers: it was alleged that AMTF had encouraged the brokers to behave as they did by paying them commission from the transaction accounts which it operated for its clients and that it owed and had breached a duty in delict (tort) to the clients to prevent any transactions being undertaken contrary to their interests. AMTF challenged the jurisdiction of the German court. Many of the former clients have recovered damages from AMTF by way of settlement.

AMTF argues that the actions in Germany were in breach of the exclusive jurisdiction and applicable law clauses in their contracts with AMTF. It commenced proceedings in the High Court in London against MMGR, based on the tort, in English law, of inducing breach of contract. It seeks both damages and injunctive relief to restrain MMGR from inducing clients to bring further claims in Germany asserting causes of action under German law. AMTF argues that the English courts have jurisdiction over its claim under article 5.3 of the Brussels I Regulation (Article 7(2) in the Brussels I Recast), which gives jurisdiction in tort claims to the courts for the place in which the harmful event occurred or may occur. MMGR challenges the jurisdiction of the English courts to entertain this action.

Popplewell J in the High Court sided with AMTF – I reviewed his judgment in 2014. He decided that the relevant harm which gives rise to jurisdiction under article 5.3 occurred in England as AMTF had in each case been deprived of the benefit of the exclusive jurisdiction clause, which, he held, created a positive obligation on a former client to bring proceedings in England.

Clarke LJ concluded upon Appeal that the English courts did not have jurisdiction as the relevant harm had occurred in Germany. At 57 he wrote ‘I do not reach this conclusion with any great enthusiasm since there is much to be said for the determination of what is in essence an ancillary claim in tort for inducement of breach of contract to be made in the court which the contract breaker agreed should have exclusive jurisdiction in respect of that contract, rather than in the courts of the country where the inducement and breach occurred. But the governing law of the relationship between the former clients and AMTF (which did not have to be that of England & Wales) is not a determining factor in the allocation of jurisdiction under the Regulation.‘ It is not entirely clear what the German courts’ view is on the matter – the unsettled claims were still pending at the time of the Supreme Court’s judgment.

Lord Hodge, after noting the CA’s reluctance, agrees with its conclusion and does so by once again, concisely yet completely, reviewing the CJEU’s case-law on Article 5(3) [7(2)]. For an even more condensed version, see Jake Hardy. At 24: ‘The task for the court is to identify where the relevant harm occurred. That is relatively straightforward in most circumstances, where there is no need for any special rule such as those which the CJEU has developed when it has not been possible readily to identify one place where that harm occurred. It is straightforward in this case.‘ : namely Germany. ‘It is clear that AMTF did not get the benefit of having any dispute with the former clients determined under English law by English courts. But the former clients were under no positive obligation to sue AMTF, which could have no objection if it was not sued.’ (at 25).

Of note is Lord Hoge’s important emphasis (at 29) that the benefits of connecting factors, which justify the ground of jurisdiction, are not in and of themselves connecting factors. Idem for his instruction at 30 that ‘the inconvenience, which the separation of the resolution of the contractual claims against the former clients from the pursuit of the claims against MMGR entails, (does not) carry much weight when one considers the aims of the Judgments Regulation‘: ‘the CJEU has recognised that the scheme of the Judgments Regulation creates the difficulty that one jurisdiction may not be able to deal with all the related points in a dispute (at 32).

Finally reference to the CJEU was refused on the grounds that the issue is acte claire (at 43, with preceding reference to CJEU precedent).

Delightful.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2, 2.2.11.2.7).

 

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The UKSC in MOD v Iraqi Civilians: Immunity of coalition forces is procedural. Civilians’ claim in tort is time-barred.

Ministry of Defence [MOD] v Iraqi civilians highlights a classic in private international law (statutes of limitation), with an interesting link to State immunity. Procedural issues are considered to be part of the lex fori. Meaning, a court always applies its own procedural rules. For the discussions in the Rome II context, see an earlier posting. However what is less settled is whether statutes of limitation fall under procedure or substantial law. If the former, then they follow the lex fori. If the latter, then they follow lex causae: the law applicable to the substantive matter at issue.

Limitation, which deprives the litigant of a forensic remedy but does not extinguish his right, was traditionally classified by the English courts as procedural. The result was that until the position was altered by statute in 1984, the English courts disregarded foreign limitation law and applied the English statutes of limitation irrespective of the lex causae. This was widely regarded as unsatisfactory, mainly because of the rather technical character of the distinction on which it was based between barring the remedy and extinguishing the right.

The Foreign Limitation Periods Act 1984 changed the position and provided for the English courts, with limited exceptions, to apply the limitation rules of the lex causae. 

Now, in MOD v Iraqi Civilians, on appeal from [2015] EWCA Civ 1241, the civilians claim to have suffered unlawful detention and/or physical maltreatment at the hands of British armed forces in Iraq between 2003 and 2009, for which the MOD is liable in tort. It is agreed between the parties that any liability of the Ministry in tort is governed by Iraqi law. Under article 232 of the Civil Code of Iraq, the standard limitation period applicable to claims of this kind in Iraqi law is three years from the day on which the claimant became aware of the injury and of the person who caused it. The action sub judice was begun more than three years after most of the claimants must have been aware of these matters.

However, Coalition Provisional Authority Order 17, which had and still has the force of law in Iraq, made it impossible for claimants to sue the British government in Iraq. Section 2(1) of the Order provides that coalition forces in Iraq (including British forces) are “immune from Iraqi legal process.” Claimants argue that Order 17 needs to be seen as an ‘impediment’ within the meaning of article 435 of the Iraqi Civil Code, which is one of a number of provisions suspending the running of time in particular cases. It provides:

” Article 435 – (1) The time limit barring the hearing of the case is suspended by a lawful excuse such as where the plaintiff is a minor or interdicted and has no guardian or is absent in a remote foreign country, or where the case is between spouses or ascendants and descendants, or if there is another impediment rendering it impossible for the plaintiff to claim his right.

(2) The period which lapses while the excuse still exists (lasts) shall not be taken into account (for the running of the time limitation).”

Lord Sumption leading, held (at 11) that Order 17 is not a rule of limitation, but a particular form of state immunity, which serves as a limitation on the jurisdiction of the courts. It is therefore necessarily procedural and local in nature. It is not legally relevant, given the claimants have brought proceedings in England, what impediments might have prevented similar proceedings in Iraq [at 13]. Claimants could have always and did eventually sue in the UK. Claimants’ submission, if accepted, would mean that there was no limitation period at all affecting the present proceedings in England, by reason of a consideration (CPA Order 17) which had no relevance to English proceedings because it has no application outside Iraq and has never impeded resort to the English court (at 16).

The Appeal was dismissed. In the wider context of immunity, it is important precedent. Claimants faced with immunity obstacles to litigation in a jurisdiction, must not hesitate to start proceedings elsewhere, where no such obstacles exist. In proceedings before the English courts, any delay in doing so is subject to the ordinary limitation periods of the lex causae.

Geert.

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CMR and the Brussels regime. The UKSC applies Nipponkoa in BAT /Essers.

Confession time: when teaching the general conflicts course I tend to simply say about Article 71 of the Brussels I Regulation (unchanged in the Recast): ‘it’s complicated’. I have also briefly flagged the Article in my posting on Nickel and Goeldner. I suppose I should not be quite so shy in addressing the relationship even in an introductory conflicts class for, essentially, it is not that complicated at least form a hierarchical point of view. Article 71 mirrors Article 351 TFEU which states that any rights or obligations arising prior to the TFEU shall not be affected by it unless the agreements are not compatible with the TFEU. At stake therefore is a review by the courts whether international agreements between the Member States prior to the creation of the EU, are compatible with the TFEU.

In [2015] UKSC 65  BAT Denmark v Kazemier and BAT Switserland v Essers, the United Kingdom Supreme Court had to carry out this exercise vis-a-vis the 1956 CMR Convention –   the Convention on the Contract for the International Carriage of Goods by Road. As Steven Baker notes, Lord Mance kicks off his judgment with the rather delightfully accurate ‘Cigarettes attract smokers, smugglers and thieves’. Tobacco manufactuters are also of course active litigators hence providing us with repeated opportunity to review case-law on a wide variety of contractual and other matters.

In the two appeals, one container load was allegedly hi-jacked in Belgium en route between Switzerland and The Netherlands in September 2011, while another allegedly lost 756 of its original 1386 cartons while parked overnight contrary to express instructions near Copenhagen en route between Hungary and Vallensbaek, Denmark.

The consignors (two of BAT’s corporate vehicles) are claiming against English main contractors who undertook responsibility for the carriage and against sub-contractors in whose hands the cigarettes were when the alleged losses occurred. The carriage was subject to the Convention on the Contract for the International Carriage of Goods by Road 1956 (“CMR”), given the force of law in the United Kingdom by the Carriage of Goods by Road Act 1965.

English law and English jurisdiction are said to offer the advantage that such duty and/or taxes are recoverable in a CMR claim against carriers, which is not the case in some other jurisdictions (at 4).

Citing (and reading in a particular way) CJEU precedent, in particular  Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV (DTC Surhuisterveen BV intervening), C-452/12, the Supreme Court held (at 57) that CMR represents a balanced jurisdictional régime adopted across a wide-range of some 55 states, only half of which are Union member states. It did not regard its tailored balance as impinging on any of the principles of Union law which the CJEU would have it check against.

CMR applies therefore and under relevant English application, neither of the defendants can be sued in England.

Geert.

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Toyota v Prolat and the Brussels I arbitration exception. Plus ça change.

In Toyota v Prolat [2014] EWHC 3649 (Comm) the High Court was asked by Toyota to confirm the existence of an agreement between parties to arbitrate. The arbitral panel, already seized by Toyota, agreed that it would be best for the Court preemptively to settle this issue since it suspects any ruling by the tribunal itself will be subject to litigation by Prolat. The agreement (existence of which is disputed by Prolat; it had employed an authorised agent, whose signings on behalf of Prolat are disputed) concerns the delivery of sugar by Toyota to Prolat. Prolat objects to the jurisdiction of the tribunal. It has itself started proceedings in Naples for damages for various alleged wrongdoing by Toyota, whether for breach of contract or tort.

The interest of the case for this blog lies in particular with the concurrent proceedings in Italy and the UK. Should the UK decline? The case is subject to Regulation 44/2001, not to the recast. Cooke J holds that ‘This Court is not being asked to interfere with the functions of the Italian court as no form of anti-suit injunction is being sought against Prolat. This Court is being asked to determine whether or not there is an arbitration agreement and to make a declaration in the light of its conclusion.‘ West Tankers is therefore distinguished.  Would, had it applied, Regulation 1215/2012 made a difference? Cooke J held that it would not: ‘Article 1(2)(d) remains unchanged from the earlier Regulation but is more fully explained in paragraph 12 of the Preamble. I was also referred to Article 73 which states that the Regulation will not affect the application of the New York Convention. (…)‘ (at 16)

He concludes ibidem ‘Although it is not yet in force, it was suggested that some might regard the new Regulation as declaratory of the existing state of the law. . The jury on that, as is well-known, is out.

Cooke J further explores the issue of the applicable law to the contract per its putative law (Article 10(1) Rome I). Firm and justifiable conclusion (at 18) there, is: English law.

Geert.

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The Alexandros resurfaces – Greek proceedings may turn out to be an expensive torpedo!

Update 19 September 2019  the relevant Greek Court of Appeal has refused to recognise the judgments awarding damages, on account of ordre public. Appeal with the Supreme Court and CJEU reference seem likely.

I have reported before on the lis alibi pendens issue in the Alexandros litigation. (The left-over claims as identified in my previous post were, I understand, dropped, and hence the need for ECJ referral subsided – Hill Dickinson have a good summary of the various proceedings here). The Court of Appeal on the 18th of July held on the now (following the Supreme Court’s intervention) remaining issue of declarations, damages and indemnities in respect of the owners’ proceedings in Greece seeking damages from the insurers, despite proceedings for sums due under the relevant insurance policies having been settled in England pursuant to a choice of forum clause. (Apologies for this all being a bit dense – reading my previous post helps). (Greek courts in fact rejected the claims in April).

The left-over issue essentially boils down to the question whether despite the ECJ’s prohibition of anti-suit injunctions for subject-matter falling within the Brussel I-Regulation, Member States courts are free to award damages to the party suing elsewhere in the EU in spite of a choice of court agreement between parties. The Court of Appeal held that they are. It justifiably, in my view, distinguished Turner v Grovit . In Turner v Grovit, the ECJ is concerned with mutual trust and allowing (and indeed trusting) the courts in the other Member States to make their own, proper application of the Regulation. Turner and Grovit does not uphold jurisdiction for the other court: it upholds the opportunity for that other court properly to apply the Regulation, which may or may not lead it to uphold jurisdiction.

The judgment of the Court of Appeal re-enforces the attraction of English courts as a destination of choice: parties wishing to torpedo (a prospect less likely in the Brussels I-bis Regulation) may or may not succeed in convincing alternative courts of their jurisdiction. English courts since Turner cannot issue anti-suit. However they may still hold party liable for having breached the choice of court agreement.

Geert.

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Supreme Court goes Jules Verne and crosses the HS2 Bridge at high speed. Aarhus, SEA, EIA and supremacy of EU law all fail to make an impact.

In Chapter XXVIII of Jules Verne’s Around the world in Eighty Days, the train driver, egged on by enthusiastic US passengers and despite objections by Passepartout, reverses his train to cross a wobbly bridge (successfully) at high speed. With all passengers on board. It is a favourite chapter of mine and one which comes in handily in risk management classes.

In HS2 Action Alliance v Secretary of State for Transport, the United Kingdom Supreme Court took inspiration from Chapter XXVIII in dismissing all arguments based on the Aarhus Convention, the EIA Directive, the SEA Directive, and supremacy of EU law. These arguments were raised against the UK Government’s  ‘Command paper’, “High Speed Rail: Investing in Britain’s Future – Decisions and Next Steps” . The command papers sets in motion the reality of the development of the HSs high speed rail link between the South of England, the north and Scotland.

Lord Carnwath summarised the legal issues as follows (at 15):

i) SEA whether the DNS in the circumstances of HS2 is a “plan or programme” which “sets the framework for development consent” and was “required by administrative provisions” within the meaning of articles 2-3 of Directive 2001/42/EC (“the SEA Directive”).

ii) Aarhus whether if the interpretation of the majority in the Court of Appeal is correct, article 3(2)(a) of the SEA Directive is inconsistent with article 7 of the Aarhus Convention, and if so with what consequences.

iii) EIA/Hybrid Bill whether the Hybrid Bill procedure as proposed meets the requirements of Directive 2011/92/EU (“the EIA Directive”), taking account in particular that (a) issues of principle will be excluded from the Select Committee stage, and (b) the debate on the Bill at Second and Third Reading will be subject to a Government whip.

iv) Timing whether the court should intervene at this stage, or whether the court should wait until the Parliamentary process is completed;

v) CJEU reference whether any of the above questions raise uncertain issues of European law on which a reference should be made to the European court.

David Hart QC superbly summarises the Court’s findings and much of its reasoning over at the Human Rights blog and I am happy to refer my readers to him to get, well, up to speed on the judgment. I should simply like to point out that the Court’s boldness lies not so much in the merits of its decision, rather in the more or less belligerent wording and indeed telling off aimed at the Court of Justice.

With respect to Strategic Environmental Assessment – SEA [aimed at ensuring that environmental impacts are identified upstream, by ensuring that programs and plans which will lead to EIA-bound projects, are vetted themselves], a command paper formally does not set anything in stone about the ensuing (or not) development of the project which it will lead to. Much can still change and Members of Parliament have every right and prerogative to have the project amended or indeed scrapped altogether. However, clearly this is a project the realisation of which the government will want to ensure. It is in my view not merely ‘policy’, but a proper plan. Whence in reality this is exactly the kind of program which the SEA Directive had in mind when pressing for impact assessment upstream. Like the train carrying Passepartout et al, the adoption of this Command Paper has set in motion developments which will be all but impossible to stop. With one step following logically from the other, the intentions addressed in the Command Paper display a high degree therefore of fait accompli. The intent and purpose of the SEA Directive in my view does require its application in casu. I appreciate however that intent and purpose as interpretative tool is met lukewarmly by the Supreme Court. (I grant moreover that the Supreme Court does justifiably criticise some of the ECJ’s case-law on the EIA Directive, where very clear provisions nevertheless were altered in their meaning by reference to intent and purpose. The ‘claris’ in ‘in claris non fit interpretatio’ clearly lies in the eye of the beholder).

Of particular EU institutional interest is the Supreme Court’s reference to the Bill of Rights (at 206), Parliamentary Sovereignty, and the 2013 Bundesverfassungsgericht’s judgment on  the Counter-Terrorism Database Act. (Translated by the SC in relevant part as as part of a co-operative relationship, a decision of the Court of Justice should not be read by a national court in a way that places in question the identity of the national constitutional order). The SC is right in pointing out the difficulty under the doctrine of separation of powers, of courts second-guessing not the way in which data were put before parliament, but rather how members of that parliament subsequently interpret and apply those data. More generally, though, in suggesting, when criticising the ECJ judgments on that role of the courts, to restrain the ECJ in its interpretative space, the Supreme Court inevitably joins the queue of national supreme courts which are jittery about the positioning of the ECJ (and the ECtHR) on their turf.

This judgment is of very high relevance both for EIA and SEA, and for EU Institutional law. No doubt much more to be chewed on.

Geert.

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The Supreme Court considers ‘sharp practice’ vs torpedoes in The Alexandros

In the case of the Alexandros T, the UK Supreme Court had to consider the impact on UK proceedings, opened in response to proceedings in Greece, in a dispute in which the insurers of the ship were under the impression that things had been settled following earlier proceedings in England.

On 3 May 2006 the vessel Alexandros T sank and became a total loss 300 miles south of Port Elizabeth, with considerable loss of life. Her owners were Starlight Shipping Company (“Starlight”). They made a claim against their insurers, who denied liability on the basis that the vessel was unseaworthy with the privity of the assured, namely Starlight. The insurers also said that Starlight had failed properly to report and repair damage to the vessel. Suits and countersuits followed, in England, on the basis of an exclusive jurisdictional clause in the insurance agreements. On 13 December 2007, the 2006 proceedings had been settled between Starlight and the LMI (as well as various underwriters) for 100% of the claim, but without interest and costs, in full and final satisfaction of the claim.

In April 2011, nine sets of Greek proceedings, in materially identical form, were issued by Starlight and by a range of other interested parties, against the LMI and the underwriters. The claims are for compensation for loss of hire and loss of opportunity by Starlight and for pecuniary compensation due to moral damage. All the claims rely upon breaches of the Greek Civil and Criminal Code, not, as before, on the contractual arrangements. Since the issue of the Greek proceedings, the insurers have taken further steps and brought further proceedings in England. The insurers sought to enforce the settlement agreements. Starlight at al subsequently  sought a stay of the English proceedings under Article 27 or 28 of the Brussels I Regulation. The High Court refused. The Court of Appeal granted. The Supreme Court had to untie the knot.

The Brussels I Regulation (the Jurisdiction Regulation or ‘JR’) is quite strict on lis alibi pendens, as has been repeatedly emphasised on this blog. The ECJ, too, insists on a guillotine approach of lis alibi pendens, provided of course the conditions for its application are met. The lis alibi pendens rule of Article 27 JR obliges a Court to stay proceedings if another Member State court has already been seized in the same matter, and to trust the proper application by the latter of the jurisdictional grounds of the Regulation. Article 27 JR has given malevolent parties a means to obstruct proceedings, by seizing a court in a Member State with no or desperate grounds for jurisdiction, banking on the tardiness of its judicial proceedings to gain time and ‘torpedo’ the case of the bona fide party.

Article 27

1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established.

2. Where the jurisdiction of the court first seized is established, any court other than the court first seized shall decline jurisdiction in favour of that court.

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.

2. Where these actions are pending at first instance, any court other than the court first seized may also, on the application of one of the parties, decline jurisdiction if the court first seized has jurisdiction over the actions in question and its law permits the consolidation thereof.

3. For the purposes of this Article, actions are deemed to be related where they 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.

The rule is (fairly) simple and clear: where the same action, between the same parties is brought before the courts of two Member States, Article 27 obliges the court seized second, to at least freeze its jurisdiction. The conditions for Article 27 to apply are that the case involves the same action, between the same parties. The ECJ has clarified in Gubish Machinenfabrik and in The Tatry what was already clearer in other language versions namely that Article 27 requires three identities: identify of parties; identify of object or ‘subject-matter’; and identity of cause. The English version and the German version mention ‘same parties’ and ‘same cause of action’ only: they do not expressly distinguish between the concepts of “object” and “cause” of action. The ECJ held in Gubish that ‘(T)he “cause of action” comprises the facts and the rule of law relied on as the basis of the action.’ , and added in Gantner Electronic that  in this respect account should be taken only of the claims of the respective applicants, to the exclusion of the defence submissions raised by a defendant.

Article 28, then, applies to actions which do not conform to the Article 27 conditions, e.g. for actions between different parties, however where the actions are so related that separate proceedings would risk irreconcilable judgments. The purpose of that provision is to avoid the risk of conflicting judgments and thus to facilitate the proper administration of justice in the Union – it gives much more flexibility to the courts of the Member States as to whether to apply the provision or not.

In the case of the Alexandros, the application of these two Articles led to extensive to and fro by counsel with Lord Clarke (at 51 ff) stating that the principles of Article 27 JR ‘require a comparison of the claims made in each jurisdiction and, in particular, consideration of whether the different claims have le même objet et la même cause without regard to the defences being advanced (…)  As I see it, Article 27 involves a comparison between the causes of action in the different sets of proceedings, not (as in Article 28) the proceedings themselves. (…) the analysis cannot involve a broad comparison between what each party ultimately hopes to achieve. The analysis simply involves a comparison between the claims in order to see whether they have the same cause and the same object.‘ He then suggested that Article 27 has no impact on the proceedings at issue – the English proceedings should not be stayed and in Lord Clarke’s view the matter is acte claire: no reference to the ECJ needed.

Lord Mance disagreed with this approach, essentially suggesting that both actions seek a declaration of non-liability and are therefore at least for some of them, the same action within the meaning of Article 27. Lest parties drop those claims (they have been given two weeks to do so), this question will be referred to the ECJ.

As for the application of Article 28, Lord Clarke suggest that the English Court should not exercise the possibility of a stay, inter alia in light of the exclusive choice of court clause previously agreed between the parties: ‘ I can see no reason why, in exercising that discretion under Article 28, the court second seised should not take into account the fact that the parties had previously agreed (or arguably agreed) an exclusive jurisdiction clause in favour of that court. On the contrary, depending upon the circumstances of the particular case, that seems to me to be likely to be a powerful factor in support of refusal of a stay.’ (at 95) On this, Lord Mance did not disagree, neither did he suggest referral to the ECJ.

The interpretation of Article 27 is therefore quite likely to end up at the ECJ: it is difficult to conceive that parties will drop those claims rather than retain the possibility of the ECJ siding with them.

The judgment to my knowledge is the first to examine Articles 27 and 28 JR at quite such length and with quite such expert counsel.

Geert.

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‘Establishment’ within the meaning of the Insolvency Regulation: the Court of Appeal in Olympic Airlines

[Update 5 May 2015: the Supreme Court confirmed the Court of Appeal’s findings on 29 April 2015 and declined to refer to the ECJ, (justifiably in my view) citing acte clair].

Under the EU’s Insolvency Regulation, core of the procedure takes place in the Member State with ‘COMI’: the centre of main interests of the company concerned.

‘Secondary’ and ‘territorial’ proceedings may only be opened if the debtor possesses an establishment within the territory of that other Member State, and only vis-a-vis the debtor’s assets in that State. Article 2(h) of the Regulation defines ‘establishment’ as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’,  which the Court of Justice in Interedil has specified in less philosophical terms as  ‘a structure with a minimum level of organisation and a degree of stability for the purpose of pursuing an economic activity‘, basically a combination of pursuit of an economic activity and the presence of human resources. Per Interedil, this has to be determined in the same way as the location of the centre of main interests, namely on the basis of objective factors which are ascertainable by third parties.

In Olympic Airways, the Court of Appeal combined Interedil and ECJ guidance with respect to COMI, as well as extensive reference to the Virgos Schmit Report, to hold that the Regulation’s definition of “establishment” a meaning which requires more to its “economic activity” than the mere process of winding-up. In the words of Sir Bernard Rix (at 33) ‘The definition is clearly intended to lay down a rule that the mere presence of an office or branch, a “place” at which the debtor is located, is not sufficient. It has to be a place “of operations”: human and physical resources have to be involved in those operations; and there has to be “economic activity” involving those resources. ‘ He later emphasises that this economic activity needs to be ‘external’, ie market oriented.

Of note is also the temporal element: per Office Metro, the possibility to open up secondary proceedings requires there to be such establishment at the time of the request for opening of such proceeding.

Geert.

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