Apcoa scheme of arrangement: Convening hearing gives firm but considered go-ahead for English Scheme of Arrangement following change in governing law

Postscript January 2016 in Codere the High Court at an earlier stage had expressed its concern at the ‘extreme forum shopping going on (creating a special purpose vehicle with COMI in England but no prior connection to the territory) however for reasons expertly summarised by Iain White, Newey J eventually sanctioned. (The application was made by Codere Finance (UK) Ltd., an English incorporated subsidiary of Codere SA, a Spanish company. Codere SA is the ultimate parent of a group of companies that carries on business by way of gaming and similar activities in Latin America, Italy and Spain. Codere SA’s shares are listed on a number of Spanish stock exchanges). Update 14 September 2020 forum shopping was again referred to in a 2020 scheme application by Codere ( [2020] EWHC 2441 (Ch)  and sanction in Codere Finance 2 (UK) Ltd, Re Companies Act 2006 [2020] EWHC 2683 (Ch)– and likewise not considered to be too big an obstacle. Jurisdiction was accepted on the basis of domicile in England: A4 BIa grounds, linked to A8, the anchor ‘defendant’ mechanism.

Postscript July 2015 Forum shopping possibilities were further expanded in [2015] EWHC 2151 (Ch) Van Gansewinkel, which had the additional peculiarity that the only territorial link with England was the establishment of (only) one creditor there (full disclosure: I was the expert heard on the Belgian side of recognition and enforcement).

Postcript 8 May 2015 in DTEK, a challenge was made by one disgruntled creditor to the change of governing law from New York law to English law. However reportedly this challenge was withdrawn in the nick of time, leaving this point as far as I am aware at this stage unaddressed by the English courts. (Not that in my view that change ought to be problematic). (Update 11 June: judgment is now available here).

Postscript 25 November 2014. Hildyard J’s judgment in both convening and sanction hearings was released 19 November 2014, [2014] EWHC 3849 (Ch), with leave to appeal granted. (Hearing at the CA is scheduled for December 2014).

The title of this piece is as considered as Hildyard J’s approval of the application for an order to convene scheme meetings for the purpose of considering, and if thought fit approving, schemes of arrangement, nine in all, pursuant to Part 26 of the Companies Act 2006, in a scheme of arrangement relating to the Apcoa group of companies.

At the time of writing Bailii did not yet feature a transcript of the hearing however I have a copy for those interested. Hildyard J aptly lists the potential booby traps given the international context of the case (the Scheme Companies comprise two English incorporated companies, a holding company and another company incorporated in Germany, and five other subsidiaries incorporated elsewhere in Europe): jurisdiction under English private international law (not all companies having COMI in England); related to this, establishment of jurisdiction only following a change on governing law of the initial finance agreements, approved by a majority but not all creditors; and, as a related pre-condition to English approval, the likelihood of recognition and enforcement of the Scheme, once adopted, elsewhere in the EU (full disclosure: I was the expert heard on the Belgian side of recognition and enforcement).

The application to convene hearings was approved, justifiably. Schemes of arrangement are, arguably, excluded from the Insolvency Regulation. Recognition and enforcement much facilitated by the Brussels I Regulation. The one big sticky point in any future challenge is likely to be the change in governing law which enabled English jurisdiction in the first place. This was not sub judice in the current proceedings and the scheme at this stage is not opposed by any of the creditors.

Apcoa is not insolvent; it is being restructured. The case highlights the relevance of the ongoing amendments to the Insolvency Regulation. (At the time of writing waiting for first reading by Council; not likely to appear any time soon, given the European elections). The jury is out (and case-law increasing; see e.g. Zlomrex International) whether it would be better for Schemes of Arrangement to be included in the Annex to the Insolvency Regulation. In my view cover by Brussels I is much preferred.

No doubt to be continued.

Geert.

Lis alibi pendens rule does NOT apply (to the court seized second having such jurisdiction) in the event of exclusive jurisdictional rules – The ECJ in Weber v Weber

In C-438/12 Weber v Weber the ECJ gave helpful clarification of the non-application of the strict lis alibi pendens rules of the Jurisdiction Regulation in the event of infringement of the Regulation’s exclusive jurisdictional rules. This to my knowledge at least had not yet been clearly established by the Court.

Ms I. Weber (I’) and Ms M. Weber (‘M’), are co-owners to the extent of 6/10 and 4/10 of a property in Munich.  On the basis of a notarised act of 20 December 1971, a right in rem of pre‑emption over the four-tenths share belonging to M was entered in the Land Register in favour of I. By a notorial contract of 28 October 2009, M sold her four-tenths share to Z. GbR, a company incorporated under German law, of which one of the directors is her son, Mr Calmetta, a lawyer established in Milan. According to one of the clauses in that contract, M, as the seller, reserved a right of withdrawal valid until 28 March 2010 and subject to certain conditions.

Being informed by the notary who had drawn up the contract in Munich, I exercised her right of pre-emption by letter of 18 December 2009. On 25 February 2010, by a contract concluded before that notary, I and M once more expressly recognised the effective exercise of the right of pre-emption by I and agreed that the property should be transferred to her for the same price as that agreed in the contract for sale signed between M and Z. GbR. However, the two parties asked the notary not to carry out the procedures for the registration of the transfer of property in the Land Register until M had made a written declaration before the same notary that she had not exercised her right of withdrawal or that she had waived that right arising from the contract concluded with Z. GbR within the period laid down, which expired on 28 March 2010. On 2 March, I paid the agreed purchase price of EUR 4 million.

By letter of 15 March 2010, M declared that she had exercised her right of withdrawal from the contract of 28 October 2009. By an application of 29 March 2010, Z. GbR brought an action against I and M, before the District Court, Milan, seeking a declaration that the exercise of the right of pre-emption by I was ineffective and invalid, and that the contract concluded between M and that company was valid.

On 15 July 2010, I brought proceedings against M before the Landgericht München, seeking an order that M register the transfer of ownership of the four-tenths share with the Land Register.

The Court of Justice first of all had to decide whether an action seeking a declaration that a right in rem in immovable property has not been validly exercised, falls within the category of proceedings which have as their object right in rem in immovable property, within the meaning of Article 22(1) of Regulation No 44/2001. It held that it did, with the required amount of deference to national law: a right of pre-emption, such as that provided for by Paragraph 1094 of the BGB, which attaches to immovable property and which is registered with the Land Register, produces its effects not only with respect to the debtor, but guarantees the right of the holder of that right to transfer the property also vis-à-vis third parties, so that, if a contract for sale is concluded between a third party and the owner of the property burdened, the proper exercise of that right of pre-emption has the consequence that the sale is without effect with respect to the holder of that right, and the sale is deemed to be concluded between the holder of that right and the owner of the property on the same conditions as those agreed between the latter and the third party.

The next core question was whether Article 27’s lis alibi pendens rule applies in the event of the court second seized having exclusive jurisdiction. Here, the ECJ distinguished Gasser, in which it declined freedom for the court second seized to assume priority on the basis of a choice of court agreement. (A particular use of torpedoeing which is now addressed by the Brussels I-bis Regulation). It refers in particular to the positive obligation included in Article 35 of the Jurisdiction Regulation for courts not to recognise earlier judgments which were held in contravention of Article 22’s exclusive jurisdictional rules. Article 23’s choice of court agreements, by contrast, does not feature in Article 35.

The ECJ’s reference to Article 35  in my view means that the Court’s reasoning extends to all jurisdictional rules included in that article, including the protected categories of consumers and insureds (not, strangely, employees. This will change however following the Brussels I recast). There is lingering doubt however over the impact of the judgment on the application of Article 22(4)’s rule on intellectual property. In Weber (at 56) the Court holds that ‘ In those circumstances, the court second seised is no longer entitled to stay its proceedings or to decline jurisdiction, and it must give a ruling on the substance of the action before it in order to comply with the rule on exclusive jurisdiction.‘ In the application of Article 22(4), this continues to raise the question whether ‘the substance of the action before it’ only concerns the validity of the intellectual property, or also the underlying issue of infringement of such property.

Weber v Weber is a crucial further step in clarifying the lis alibi pendens rule. Sadly, family tussles do often advance the state of the law.

Geert.

Cartier v Ziegler: No positive action required by court first seized to trigger lis alibi pendens.

In Cartier v Ziegler, Case C-1/13, the Court of Justice held that the application of Article 27’s Lis Albi pendens rule (Brussels I Regulation) does not require a formal decision by the national court first seized (or exhaustion of national remedies against such acceptance of jurisdiction). In a multi-party case involving insurance companies, forwarders and transporters (sub-sub contracted) of a shipment of Cartier goods, the UK High Court was undeniably first seized vis-a-vis at least some of the parties involved in the litigation in France, however the question was how Article 27’s lis alibi pendens rule needs to be applied.

Under Article 27(1) of Regulation 44/2001, where there are parallel proceedings before the courts of different Member States, the court second seised must stay its proceedings of its own motion until the jurisdiction of the court first seised is established. Furthermore, Article 27(2) provides that, where the jurisdiction of the court first seised is established, any court other than the court first seised must decline jurisdiction in favour of that court.

The French Cour de Cassation asked essentially whether Article 27(2) of the Brussels I-Regulation must be interpreted as meaning that it is sufficient, for the jurisdiction of the court first seised to be established within the meaning of that provision, that no party has contested its jurisdiction or whether it is necessary that that court has impliedly or expressly assumed jurisdiction by a judgment which has become final.

The referring court referred to scholarship suggesting that the jurisdiction of the court first seised may be established only by a judgment from that court explicitly rejecting its lack of jurisdiction or by the exhaustion of the remedies that are available against its decision to assume jurisdiction.

The ECJ held ‘Article 27(2) of Council Regulation (EC) No 44/2001 (…)  must be interpreted as meaning that, except in the situation where the court second seised has exclusive jurisdiction by virtue of that regulation, the jurisdiction of the court first seised must be regarded as being established, within the meaning of that provision, if that court has not declined jurisdiction of its own motion and none of the parties has contested its jurisdiction prior to or up to the time at which a position is adopted which is regarded in national procedural law as being the first defence on the substance submitted before that court.’

The Court’s finding does of course require the court seized later (or the lawyers appearing before it) to be au fait with the procedural law of the alternative court (such as in France, the possibility to raise objection against jurisdiction verbally only).

The ECJ’s overall consideration here lies with obliging but also enabling the court seized second, not to linger indefinitely with the application of Article 27.

Geert.

 

Should arbitral anti-suit injunctions follow the West Tankers fate? Lithuanian court challenges the ECJ

In Case C-536/13 Gazprom, the Lithuanian Supreme Court has challenged the ECJ to specify the limits (or not) of its findings in West Tankers – on which I have reported extensively elsewhere. The Court of Justice ruled in February 2009 on the basis of effet utile that the English courts were out of their league in issuing an anti-suit injunction, prohibiting Allianz and Generali from pursuing the case in the Italian courts (on the basis of Article 5(3)’s special jurisdictional rule for tort) and obliging them to take the case to arbitration in London.

In Gazprom, A tribunal rendered an award holding that proceedings by Lithuania in Vilnius partially breached the arbitration clause in the shareholders’ agreement between parties. The arbitral tribunal ordered the Republic of Lithuania to withdraw certain claims filed before the Lithuanian courts and to amend other claims. Gazprom is seeking enforcement of the SCC award in Lithuania. Relevant summaries of the award and of the Lithuanian proceedings are available here. The instruction of restraint contained in the award is effectively an anti-suit injunction, albeit rendered by a tribunal instead of a court. The effect of both is the same: does the West Tankers rationale therefore hold (West Tankers, readers will remember, relied on the effet utile of the Regulation to extend its reach to anti-suit injunctions in support of arbitral proceedings, notwithstanding the latter’s clear exclusion from the Regulation)?

Questions referred:

Where an arbitral tribunal issues an anti-suit injunction and thereby prohibits a party from bringing certain claims before a court of a Member State, which under the rules on jurisdiction in the Brussels I Regulation has jurisdiction to hear the civil case as to the substance, does the court of a Member State have the right to refuse to recognise such an award of the arbitral tribunal because it restricts the court’s right to determine itself whether it has jurisdiction to hear the case under the rules on jurisdiction in the Brussels I Regulation?

Should the first question be answered in the affirmative, does the same also apply where the anti-suit injunction issued by the arbitral tribunal orders a party to the proceedings to limit his claims in a case which is being heard in another Member State and the court of that Member State has jurisdiction to hear that case under the rules on jurisdiction in the Brussels I Regulation?

Can a national court, seeking to safeguard the primacy of European Union law and the full effectiveness of the Brussels I Regulation, refuse to recognise an award of an arbitral tribunal if such an award restricts the right of the national court to decide on its own jurisdiction and powers in a case which falls within the jurisdiction of the Brussels I Regulation?

No chamber has as yet been allocated to the case however I would not be surprised were it to be the Grand Chamber.

Geert.

Christmas crums part II – ÖFAB confirms narrow scope of the insolvency exception and clarifies ‘place where the harmful event occurred’ in case of tort by omission

Ok, I cheat. Judgment of the ECJ in ÖFAB is in fact a left-over of my summer queue. Contractual claims for payment against a Swedish company (Copperhill) had been assigned to Invest, equally domiciled in Sweden. Invest brought an action against a former director and former major shareholder, both domiciled in The Netherlands. Invest sought to have both held liable for the debts of the company, because they had allegedly allowed that company to continue to carry on business even though it was undercapitalised and was forced to go into liquidation.

Firstly the Court had to decide whether the action falls within the ‘insolvency’ exception of Article 1(2)(b) of the Regulation, which provides that it does not to apply to ‘bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings’. The ECJ held that the exception did not apply, for – per previous case-law – it has to be interpreted narrowly. Only actions which derive directly from insolvency proceedings and are closely connected with them are covered by the exception. Here, the actions in the main proceedings do not constitute insolvency proceedings but were brought after Copperhill had been subject to a company reconstruction order (a near-automatic consequence of Swedish company law, I understand, in the event of limited companies having insufficient capital). In any event, the Court held, those actions do not concern the exclusive prerogative of the liquidator to be exercised in the interests of the general body of creditors, but of rights which an individual creditor is free to exercise in its own interests.

Next up was the qualification of the action as one in tort under Article 5(3) of the Brussels-I Regulation, and if so, the determination of the locus delicti commissi. The underlying debt was a result of work carried out under contract, however the action was based on the former company director and shareholder allegedly not properly having carried out their monitoring duties. Consequently the Court held in favour of the application of Article 5(3)’s special jurisdictional rule for tort.

That leaves the determination of the locus delicti commissi. What was at stake, the Court suggested, was not the financial situation or the carrying-on of the business of that company per se, but rather the conclusion to be drawn as regards a possible failure of monitoring by the member of the board of directors and the shareholder.

Turning to the locus delicti commissi, the Court refers to the place where the activities of the company took place: ‘ It is clear from the documents submitted to the Court that, in the period in which the disputed facts took place, Copperhill’s seat was in the municipality of Åre within the jurisdiction of the Östersunds tingsrǎtt, where, in the same period, it carried on its business and built a hotel. In those circumstances, it appears that the activities carried out and the financial situation related to those activities is connected to that place. In any event, the information on the financial situation and activities of that company necessary to fulfill the management obligations by the member of the board of directors and the shareholder should have been available there. The same is true for the information concerning the alleged failure to comply with those obligations. It is for the referring court to ascertain the accuracy of that information.‘ (at 54).

In other words, in a tort caused by omission (rather than by positive action by the alleged tortfeasor), the Court turns to the place where the tortfeasor’s action ought to have taken place, so as to avoid the very omission that led to the action in tort. For it is that place which answers best to the very raison d’être of the special jurisdictional rules of Article 5: ‘In matters of tort, delict or quasi-delict, the courts of the place where the harmful event occurred or may occur are usually the most appropriate for deciding the case, in particular on grounds of proximity and ease of taking evidence‘   (at 50, with reference ex multis to Folien Fischer).

A very useful judgment. Geert.

 

Christmas Crums part I – The ECJ holds on ‘contracts’ in Corman-Collins

One or two interesting developments have been held up in my end of year queue. I shall report on them over the next week and a half or so. First up: judgment of the ECJ in Corman-Collins Case 9/12 – I reported on the Opinion of the AG here. The Court, like the AG, holds in favour of ‘services’: such is the diverse nature of the various obligations in the contractual relationship.

Given its confirmation of the contract falling under Article 5(1)(b), first indent, of the Brussels I-Regulation, the Court did not answer the final, subsidiary, question, which questioned the amount of European harmonisation of ‘place of performance of the obligation in question’ under Article 5(1)(a). As I flagged earlier, the AG had suggested the ECJ confirm its deference to national law on this issue, per Tessili Dunlop.

Geert.

It’s not the grammar, stupid! The High Court in Anchorage on exclusive (or not) choice of court, anti-suit injunctions, Rome, Brussels and much more

In Anchorage (BNP Paribas v Anchorage Capital Europe et al). a bank and a hedge fund are at odds as to whether a handful of instant message communications resulted in a binding contract or contracts and if so, between which parties and on what terms. The issue for decision at the High Court was whether the disputes should be determined in London (home to the London Branch of BNP Paribas and allegedly identified as the exclusive – or not – court of choice in the alleged contracts), New York (home to the hedge fund which however also has a separate LLP domiciled in London) or possibly Luxembourg (home to two funds within Anchorage Group).

For review of the facts reference is best made to the text of the judgment, for there are many framework agreements etc at stake. The High Court’s review of the case though is most interesting for highlighting the limits to what Article 23 of the Brussels I Regulation harmonises. The Article aims to ensure a non-formalistic deference to parties’ agreement to have their disputes adjudicated in a particular court. As Males J notes (and the ECJ acknowledges), one should not be overly formalistic in applying Article 23.

Article 23 though does not harmonise the underlying contractual (or not) issues: with whom were contracts made, especially in an agent /principal context; what law applies to the (alleged) choice of court agreement (an issue more or less resolved in the new Brussels I Regulation). Males J applies English law to the issue of validity of the clause, on the basis it would seem of lex contractus (which arguably will no longer be possible come January 2015, as a result of the new Brussels I Regulation): either because of the express determination of such by the parties, or because the lex contractus of the agreement of which it forms part is English law by virtue of the Rome I Regulation (contract for the sale of goods; I am not sure though whether the underlying contract truly is a sale of a good). Arguments for the alternative (in particular, application of New York law to the choice of court agreement) are dismissed on the basis that they represent the kind of semantic approach to such clauses which English law has left firmly behind. Surely a poster-argument indeed for the use of English law in international commerce and an approach which is to be commended.

Even were the validity of the clause not to be upheld, the High Court outlines other jurisdictional grounds: Article 5(1) of the Jurisdiction Regulation on the basis of the place of performance of the obligation in question; Article 5(5) on the basis of a contractual dispute closely connected to the operation of a branch; Article 6(1) on the basis of the cases being closely connected. (Use of Anchorage London as an anchor defendant (lousy pun intended I fear) against the investment funds).

Forum non conveniens (potentially applicable should none of the jurisdictional grounds be valid and given the possibility of New York proceedings) was dismissed; the anti-suit injunction was granted. Here, Males J reviews the rather grammatical arguments made vis-a-vis the choice of court agreement being used transitively or not: again, the Court takes a non-formalistic approach and (respectfully) dismisses the grammatical argument as being elusive.

This is the kind of case upon which one could build an entire conflicts course. If you happen to be preparing one over the holidays period: good luck and enjoy. To all readers past, current and future: Merry Christmas and /or applicable and appropriate season’s greetings. Geert.

Place of habitual employment and the alternative findings of corporate ‘domicile’- The Employment Appeal Tribunal in Powell

In David Powell v OMV Exploration and production limited, the Employment Appeal Tribunal ruled on the (absence of) jurisdiction for UK courts in the case of a UK domiciled employee, employed originally to work from Yemen but in reality working from Dubai, hired by a Manx incorporated company run from Austria. The employment contract was subject to Manx law and to a choice of court agreement in favour of the courts of the Isle of Man. The Tribunal however ruled that the case was within the scope of the Brussels I Regulation – albeit like the tribunal itself, the Appeal tribunal does not systematically review the three alternative grounds for domicile of Article 60 of the Jurisdiction Regulation.

Domicile was found to be in Austria, for this is the place where the company was effectively managed from. The UK could claim jurisdiction on the basis of Article 19, were the employee found to habitually work in the UK – quod non.

A classic example of the employment chapter of the JR, with a bit of exotic flavouring (Manx) and, even if not altogether tidy, a correct conclusion on Austrian domicile.

Geert.

 

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.

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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