Part B Conflict of Laws and Cross-Border Issues, 6 Jurisdiction and the Resolution of Disputes
Sarah Paterson, Rafal Zakrzewski
Edited By: Sarah Paterson, Rafal Zakrzewski
- Banks and cross-border issues — Exclusion of liability — Remedies for lenders’ breaches — Regulatory liability of lenders — Obligations to advise on transactions
6.1.1 It is an unfortunate fact of life that the parties to a transaction may fall out and find themselves in dispute or, indeed, that a dispute may arise outside the ambit of a transaction, such as one which relates to a non-contractual claim. Unless the opponents can resolve their differences in an informal and amicable way or through a process of alternative dispute resolution (ADR), it is likely that they will have to resort to a court or another tribunal to enforce or defend their respective positions. If the dispute has cross-border elements, that is, where the dispute is not entirely confined within the domestic boundaries of one jurisdiction, it will be necessary to consider which court or other tribunal has the jurisdiction or authority to hear and determine the dispute. It may also be the case that a dispute comes before more than one court or tribunal in different jurisdictions, and so it will be relevant, in addition, to consider how the conflict between the rival or competing proceedings should be resolved.
6.2.1 There are various theoretical bases on which courts in different countries might be willing to assume jurisdiction in a dispute which has cross-border elements. Which ground or grounds are available will depend upon the lex fori, that is, the law that applies in the country concerned (which may itself have been modified by the application of an international treaty or convention or, in the case of an EU Member State, by EC legislation).
6.2.2 The principal grounds on which jurisdiction may be assumed are usually selected from amongst the following. First, jurisdiction may be taken by a court in the country of the defendant’s domicile, which is the basic rule of jurisdiction under the principal EC legislation on the subject. Secondly, jurisdiction may be founded on a geographical or territorial connection between the dispute and the country in which the court is situated, such as where a breach of contract is committed within the country, the contract is governed by the law of that country, or the event comprising a tortious claim takes place there or the loss or damage that flows from such a claim is suffered there. Thirdly, a court may take jurisdiction because the claimant is a national of or is domiciled within that country, which is the basic rule in France. Fourthly, jurisdiction may be founded on some territorial connection between the defendant and the relevant country, such as the defendant’s presence in the country when the proceedings are served on him. Finally, the jurisdiction of the court may be based upon an agreement between the parties that the court should be empowered to determine the dispute which has arisen.
6.2.3 The jurisdiction of the High Court in England is derived in part from EC legislation and international conventions that are to much the same effect. To the extent that it is not inconsistent with such legislation or conventions, the court also derives its authority to hear a case from the English rules of jurisdiction founded on service upon the defendant, either with or, in some cases, without the court’s leave. Those bases of jurisdiction will be addressed in turn.
The relevant EC legislation and international conventions are:
(1) the recast EC Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (in the discussion that follows, called the ‘EC Regulation on jurisdiction and judgments’ or the (p. 330) ‘Regulation’),1 which originally came into force on 1 March 2002 and which applies in its recast form2 from 10 January 2015;
(2) the Brussels Convention of 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters;3 and
(3) the Lugano Convention of 1988 on jurisdiction and the enforcement of judgments in civil and commercial matters.4
184.108.40.206 The Brussels Convention regulated the position as between the Member States of the European Community and the European Union and, save with respect to Denmark (to which the Convention remains relevant),5 was replaced by the Regulation. The Lugano Convention was entered into between certain of the Member States of the European Community and the EFTA countries. The States that are currently party to the Lugano Convention are Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Poland, Spain, Sweden, and the UK (being EU Member States), and Switzerland, Iceland, and Norway (being the remaining EFTA countries). The two Conventions run in parallel and contain much the same provisions. With some modifications, the Regulation is in similar terms to the Conventions and so the case law that was decided concerning the Conventions will remain relevant in considering the Regulation. For convenience, the discussion that follows will concentrate upon the provisions in the Regulation.
The Regulation and the two Conventions apply to disputes which are of a civil or commercial nature6 and that are not purely domestic. Amongst other exclusions, it is expressly stated in Article 1 that the Regulation does not apply to revenue,7 customs, or administrative8 matters, matters concerning the legal capacity of corporations, insolvency proceedings,9 and (p. 331) arbitration.10 It has also been held that the Regulation does not apply so as to override the application of the doctrine of sovereign immunity, but was to be read as being subject to it. Sovereign immunity is based upon the principles of international law, to which the Regulation is subject. EC legislation must respect the principles of international law.11
220.127.116.11 Under the Regulation, the general rule is that jurisdiction should be founded upon the place of domicile of the defendant, where the defendant is domiciled in an EC country (irrespective of the defendant’s nationality). Articles 7, 24, and 25 of the Regulation (amongst other articles) provide for exceptions to the general rule of jurisdiction under the Regulation. Article 7 provides for an additional ground of jurisdiction in cases such as claims based in tort or in breach of contract. Article 24 provides for exclusive jurisdiction in certain cases relating to immovable property, corporate issues, entries in public registers, intellectual property (IP) rights, and enforcement actions. Article 25 provides for jurisdiction by agreement between the parties.
Subject to the effect of Article 29 of the Regulation, a court on which jurisdiction is conferred by the Regulation cannot decline jurisdiction in favour of a court in another Member State which does not have jurisdiction.12 Indeed, the European Court of Justice held in Owusu v Jackson13 that a court which has jurisdiction under the Regulation based upon the defendant’s domicile may not decline to exercise it in favour of a court in a non-Member State on the basis of the doctrine of forum non conveniens. The same principle probably applies where another basis of jurisdiction applies under the Regulation as against the defendant. However, there is some doubt about the position where an English court is faced with a question relating (p. 332) to subject matter of a type that would fall within Article 24 of the Regulation (were the relevant subject matter located in another EU Member State) when it is located in a non-EU Member State (e.g. a question relating to land in such a State or intellectual property registered in that State). The ECJ in Owusu v Jackson declined to answer that question. An English court has decided, however, that it may stay proceedings before it against a defendant domiciled in England if there was an exclusive jurisdiction clause in favour of proceedings taking place before a court in a non-Member State.14
The question arises as to the standard of proof that should be applied in determining whether a claimant has made out a sufficient case that an English court has jurisdiction on one basis or another under the Regulation. In an application before an English court to determine jurisdiction, this is a matter to be determined in accordance with the lex fori.15 The court must be as satisfied as it can be that there is a ‘good arguable case’ that it has jurisdiction, bearing in mind the interlocutory nature of the process of determining jurisdiction.16 Where the issue is contested, so that one party asserts that a different court has jurisdiction under the Regulation, the test is to the effect that one party or the other has the better side of the argument.17 The question is one of ‘relative plausibility’ between the two parties’ cases, and does not impose a balance of probabilities standard.18
The basic rule in the Regulation, contained in Article 4, is that jurisdiction is founded on the domicile of the defendant, if the place of domicile is within a Member State, whether or not the defendant is a national of that State.19 On that basis, the court of the place of domicile has jurisdiction in a claim against the defendant. Those rules are subject to Article 24, under which jurisdiction in certain matters is exclusively conferred on particular courts, regardless of domicile. Article (p. 333) 25 also provides for jurisdiction by agreement, for which domicile is not an essential element. Subject to Articles 24, 25, and 26, if the defendant is not domiciled in an EU Member State, the ordinary domestic rules applicable to a court’s jurisdiction will apply.20
18.104.22.168 Articles 62 and 63 lay down some common rules relating to the ascertainment of a person’s domicile. Article 62 provides that a person’s domicile should be determined in accordance with the law of the alleged place of domicile. Article 63 provides a rule to determine the domicile of a corporation or other similar entity.21 It provides as follows:
1. For the purposes of this Regulation, a company or other legal person or association of natural or legal persons is domiciled at the place where it has its:
(a) statutory seat, or
(b) central administration, or
(c) principal place of business.
2. For the purposes of the United Kingdom, Ireland, and Cyprus ‘statutory seat’ means the registered office or, where there is no such office anywhere, the place of incorporation or, where there is no such place anywhere, the place under the law of which the formation took place.
3. In order to determine whether a trust is domiciled in the Member State whose courts are seised of the matter, the court shall apply its rules of private international law.
22.214.171.124 It is not clear what the position would be if a corporation (or other body) had its statutory seat (e.g. its registered office) in a different country to the place of its central administration or its principal place of business. Presumably, it was not intended that it might have more than one place of domicile at one and the same time.
The Regulation contains alternative bases of jurisdiction to that provided for by Article 4. Those that might be relevant in the context of commercial financing transactions will be found in Articles 7, 8, 24, 25, and 26.22 It will also be relevant at a later stage to examine the rules in the Regulation that deal with cases where proceedings concerning the same dispute may be on foot in more than one Member State.
Article 7 of the Regulation (and Article 5 in each of the Brussels and Lugano Conventions) provides for various instances where a defendant who is domiciled in a Member State may be sued before the courts in another Member State, where that other Member State has a close connection with the case. It is important to note the overriding condition that Article 7 only applies where a defendant is domiciled in a Member State. The situations where Article 7 can apply include the following.
Under Article 7(1), the defendant may be sued in matters relating to a contractual obligation in the courts of the place of performance of the contract. Article 7(1)(b) (which does not appear in either the Brussels or Lugano Conventions) provides rules to determine the place of performance in sale of goods contracts and supply of services contracts, unless otherwise agreed. In the case of a contract for the sale of goods,23 the place of performance should be where the goods were to be delivered under the contract rather than, for instance, the place where payment for the goods was to be made or title was to pass.24 In the case of a contract for the provision of services,25 the place of performance will be where the contract provided for the services to be provided.26 In other situations, it will be necessary to determine the relevant place of performance of the obligation on which the claim is founded, rather than by searching for what might be thought to be an overall characteristic obligation of the contract.27
(p. 335) 126.96.36.199.1 It has been made clear by the European Court of Justice that the interpretation of Article 7(1) is to be achieved in an autonomous fashion as a jurisdictional matter, without recourse to concepts of national law which might confine its application.28 The same approach should be taken to Article 7(2),29 which concerns non-contractual claims for civil wrongs. Accordingly, a court must first determine the question of its jurisdiction in accordance with Article 7 before it chooses and then applies the law that would determine the substance of the claim.
188.8.131.52.2 A number of issues arise in relation to Article 7(1). For instance, it would appear that a claim does not come within Article 7(1) if it relates to an admittedly void contract30 or a contractual obligation that it is common ground never came into existence,31 but the position is different if there is a dispute as to the validity of the contract or the relevant obligation on which the claim is based.32 The claim must relate to a contractual obligation that has been freely entered into by the defendant.33 It appears that the claim may be brought by a third party which relies upon the Contracts (Rights of Third Parties) Act 1999.34 Whilst it is not free from doubt, the same should apply to the right of an assignee to bring a claim, at least where a legal assignment has occurred, so as to put the defendant in a direct relationship with the claimant assignee. A restitutionary claim that relates to an actual or alleged contract would probably come within Article 7(1). In a case that does not fall within Article 7(1)(b), there is a risk that the contract may call for performance of separate obligations in different places or for performance of an obligation in several places. It is not clear which courts would have jurisdiction or, indeed, if several courts may be given jurisdiction in such cases.35
184.108.40.206.1 Article 7(2) provides that in matters relating to ‘tort, delict or quasi-delict’, the courts in the place where the harmful event occurred should have jurisdiction. (p. 336) It has been held that Article 7(2) covers any case which seeks to establish a defendant’s liability which is not related to a contract.36 This appears to recognise a fairly clear demarcation between a dispute which involves or is derived from a contractual obligation, to which Article 7(1) would apply, and a dispute involving a non-contractual liability, to which Article 7(2) would apply. In cases which may be pleaded in both contract and tort, it will be necessary to determine if the substance of the claim is based on a contractual relationship, in which case Article 7(1) will apply, as for instance would be the case of a claim based upon a contractual obligation to exercise due care and skill. It will be more difficult to determine the correct approach where a claim is pleaded exclusively in tort, but is met by a defence based upon a contractual limitation of liability. Subject to those distinctions, the concept of a non-contractual liability would appear to be very broad, although it is still necessary that the claim should be based on an alleged liability of the defendant.37 It might cover non-contractual claims not just in tort but also claims to enforce certain types of equitable obligations and restitutionary claims.38 It has been held that a claim for dishonest assistance in a breach of trust would fall within Article 7(2).39 However, if such claims arise in consequence of, or perhaps in relation to acts and statements made in anticipation of, a contract into which the defendant has entered, they are likely to fall within the ambit of Article 7(1) rather than Article 7(2).
Article 7(2) confers jurisdiction upon the courts in the place where the harmful event occurred. In Handelskwekerij GJ Bier BV v Mines de Potasse d’Alsace SA40 the European Court of Justice held that such a place could be either the place where the damage occurred or the place of the event giving rise to and being the origin of that damage. If they are different, the claimant has the option to choose between them. As there are two alternate limbs, it is necessary to examine each of the limbs separately to discuss their ingredients.
220.127.116.11.2 The first limb is based upon a determination of the place where the damage occurred. This may give rise to a difficulty in a case that involves a claim for consequential damage in addition to any immediate damage that might have been suffered by either the claimant or someone else. It has been held that the relevant damage should be the initial, direct, immediate, or physical damage that first occurred.41 Hence, a holding company’s derivative claim for financial loss will not (p. 337) be for the relevant damage where the claim is derived from harm suffered by its subsidiary company as a result of action taken by the defendant against the subsidiary.42 A claim for consequential financial loss following upon initial damage suffered by the claimant cannot be founded, for jurisdictional purposes, upon the place where the consequential loss was suffered; it must be based upon the place where the initial damage was suffered.43 It has been held in England that in a case for negligent misstatement, the relevant damage is likely to have occurred in the place where the misstatement was received and acted upon, rather than the place where the statement was originally made.44
18.104.22.168.3 The second limb is based upon the place of the event which gave rise to, and was the origin of, the relevant damage. Difficulties may arise if there was a chain of events which took place in more than one country. For instance, this may be the case in a claim in defamation or for misrepresentation, where a false statement was made in one place and received and acted upon in another. It has been held that in such cases, the relevant event will have occurred where the statement was made rather than in the place where it was received.45 The relevant event for these purposes must be an act of the defendant itself, rather than of a third party.46
In a dispute concerning the operations of a branch, agency, or other establishment of a defendant, Article 7(5) confers jurisdiction upon the courts of the place in which the branch, agency or other establishment is situated. In a sense, a form of quasi-domicile is conferred upon the place of the branch with respect to the operations conducted from that place. The relevant body must be a true agency of the defendant in the sense that it should have a fixed and reasonably permanent (as opposed to a transitory) place of business, it should be under the direction and control of the defendant, and it should be able to act on behalf of the defendant and bind (p. 338) it.47 The dispute must arise out of the operations of the branch, although the activity may take place other than in the Member State where the branch is located.48
Article 7(6) provides that a settlor, trustee, or beneficiary of a trust (if such trust arises by operation of statute or by a written instrument or, if created orally, it is evidenced in writing) may be sued in the courts of the Member State where the trust is domiciled. The domicile of the trust should be ascertained in accordance with the conflict of laws rules of the court before whom the claim is brought.49 Jurisdiction under Article 7(6) may be displaced by a conferral of jurisdiction within the trust instrument pursuant to Article 25(4).50
Articles 8(1) to 8(3) of the Regulation provide for jurisdiction to be taken against a person who is domiciled in another Member State by the court in which proceedings in related claims have been brought. It is confined, essentially, to claims against co-defendants, third party proceedings, and counterclaims that are connected with such proceedings.
22.214.171.124 Article 8(4) provides for a contractual claim against a defendant who is domiciled in a Member State to be brought in the courts of another Member State if the contractual claim relates to a claim against the same defendant concerning immovable property in that other State.
Article 24 of the Regulation51 confers exclusive jurisdiction in relation to certain types of claim, regardless of the domicile of the defendant, along the following lines.
126.96.36.199 By Article 24(1), proceedings which have as their object rights in rem in immovable property or certain tenancies in immovable property should be brought in the Member State where the property is situated.52
(p. 339) 188.8.131.52 Article 24(2) provides that certain matters relating to companies and other types of body, such as partnerships and unincorporated associations, should be determined in the Member State where the relevant company or body has its ‘seat’. The proceedings must have as their object matters relating to the validity of the company’s or body’s constitution, or the nullity or dissolution of the company or body, or the validity of the decisions of its organs.53 By contrast with Article 63, the seat for this purpose should be determined in accordance with the conflict of laws rules of the court before which the claim is brought.54
184.108.40.206 Despite Article 29(1) of the Regulation and the ruling of the European Court of Justice in Erich Gasser GmbH v MISAT Srl,55 a court which has exclusive jurisdiction pursuant to Article 24 may proceed to entertain a case, notwithstanding that earlier proceedings had already been commenced before the courts of another Member State.56 The exclusive character of proceedings under Article 24 is reinforced by Article 27 which provides that any other court which is seised of such proceedings must declare of its own motion that it has no jurisdiction, even if the point is not raised by one of the parties. Similarly, a voluntary submission under Article 26 has no effect if another court has exclusive jurisdiction under Article 24.
220.127.116.11 Articles 25(1) to 25(3) of the Regulation provide for the parties to a dispute to agree, either in an agreement entered into before the dispute arose (e.g. in a commercial contract by which they agree to submit any disputes that may arise to a nominated court) or once it has arisen, that the courts of a Member State should (p. 340) have jurisdiction to hear the dispute. The jurisdiction conferred upon a court under Article 25 will prevail over the jurisdiction that would otherwise apply under Articles 4, 7, and 8 of the Regulation.57 It should be noted, however, that by virtue of Article 25(4) such an agreement cannot oust the jurisdiction that would apply in consequence of Articles 15 (insurance matters), 19 (consumer contracts), 23 (employment contracts), or 24 (exclusive jurisdiction). For these purposes, a jurisdiction agreement in a contract is to be treated as agreement independent from the other terms of the contract and the validity of the jurisdiction agreement cannot be contested solely on the ground that the contract is not valid.58 A party may also waive its right to insist upon the jurisdiction of the agreed court by submitting to the jurisdiction of the court of another Member State, pursuant to Article 26.59 An agreement as to jurisdiction under Article 25 will bind an assignee or successor of rights under a contract to which the agreement relates,60 and it is submitted that the same would apply to a third party to the contract relying upon rights in its favour under the contract pursuant to the Contracts (Rights of Third Parties) Act 1999.
Articles 25(1) to 25(2) provide as follows:
1. If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have established between themselves; or
(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.
2. Any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’.
18.104.22.168 Although Article 25(1) contemplates that the agreed court may have exclusive jurisdiction, it was previously the position that, pursuant to Article 29,61 such a court (p. 341) had to stay its proceedings if the court of another Member State is first seised of the claim, so that the other court can determine which court should have jurisdiction under the Regulation to hear the case.62 It was also the case that an English court could not issue an anti-suit injunction to restrain a party from proceeding before the court that was first seised, even if that party is doing so in breach of the agreement as to jurisdiction.63 This was a significant impediment to the effective operation of jurisdiction agreements. Accordingly, the Regulation in its recast form now expressly provides in Article 31(2) that, where a court of a Member State is seised of proceedings pursuant to a jurisdiction agreement within Article 25, then the courts of any other Member State must stay proceedings between the same parties and involving the same cause of action until such time as the court seised on the basis of the jurisdiction agreement has declared that it has no jurisdiction. If, on the other hand, that court has established that it has jurisdiction under the jurisdiction agreement, then the courts of all other Member States must decline jurisdiction in favour of that court.64
22.214.171.124 Unless the parties are agreed that the chosen court does have jurisdiction in accordance with the alleged agreement as to jurisdiction, it will be necessary for the party which asserts that a court has jurisdiction based upon Article 25 to show that there was such an agreement and that the dispute falls within the subject matter of the agreement for jurisdiction, which would be a matter for determination by the court on whom jurisdiction is conferred by the relevant jurisdiction agreement.65 Such a court would have to determine the existence of the alleged agreement (including the fulfilment of the formal requirements that are required to demonstrate the existence of the agreement, such requirements being as referred to in paragraphs (a), (b), or (c) of Article 25(1)66) and matters going to its scope, including its construction and interpretation. The European Court of Justice has held that the formal requirements of Article 25 (and its predecessor in the Conventions) must be strictly construed, so that an alleged agreement as to jurisdiction must be ‘clearly and precisely demonstrated’67 and that the requirements stated in Article (p. 342) 25 are directed to achieving that end.68 It has also been said that it is necessary to show that there was a consensus between the parties as to the agreement as to jurisdiction, so that it would not be sufficient merely to show that it was a clause in a standard form contract, where there is a danger that the jurisdiction clause might have been overlooked by one of the parties.69 However, if the contract that is signed by both parties (or the documents that contain their signatures) expressly refers to the general conditions of one of them, which included a jurisdiction clause, that might be sufficient to satisfy the requirements of Article 25. In such a case, it would not be necessary that the agreement as to jurisdiction should be set out in the signed documents.70 It has been held, nonetheless, that there must be an agreement under which the parties intended to create legal relations, which were to be legally enforceable.71
126.96.36.199 It seems to be clear that purely formal matters should fall to be determined by a simple application of the article itself, so that a language requirement under the lex fori would not be relevant.72 It has also been accepted that Article 25 would still apply where the applicant for jurisdiction is asserting that a contract containing an agreement as to jurisdiction had come to an end, for instance, because of an accepted repudiatory breach.73 However, a party to a dispute cannot rely on such a provision in a contract to which it denies that it was a party and by which it denies that it was bound, so as to obtain a negative declaration concerning the contract from the court nominated in the contract.74
188.8.131.52 The position is more difficult where there is a dispute as to a substantive issue concerning the validity of the agreement for submission, such as where there is an allegation of fraud, non est factum, or common mistake, or as to whether the particular dispute falls within the scope of the agreement, which would go to its interpretation. Under the previous form of the Regulation, the European Court of Justice had favoured the view that such matters should be determined under European law in an autonomous manner as a matter of fact to see if there was consensus and without reference to the substantive law that might govern the agreement in which the alleged submission is contained.75 However, the amendments made to the Regulation when it entered force in its recast version (p. 343) in 2015 included the insertion of the phrase ‘unless the agreement is null and void under the law of that Member State’ into Article 25(1). Article 25(5) also now expressly provides that a jurisdiction agreement is to be treated as an agreement independent of the other terms of the contract, and that the validity of the jurisdiction agreement cannot be contested solely on the ground that the contract is not valid. It appears to follow that the question of the substantive validity of a jurisdiction is now primarily, or perhaps exclusively, a matter for the law of the Member State of the Courts on whom jurisdiction is purportedly conferred by the agreement.
184.108.40.206 An English court would apply the lex fori in establishing, under its standard of proof, that it had jurisdiction by agreement to hear a claim.76 As previously indicated, it would be necessary for the applicant to demonstrate its case that the court had jurisdiction based on Article 25 to the standard of a good arguable case, that is, the better argument on the available material.77 It has also been suggested that an English court would adopt the same approach if it had to decide whether it should decline to hear a case, where otherwise it would have jurisdiction, because of an alleged agreement between the parties that another court should have jurisdiction.78
220.127.116.11 Subject as already stated, Article 25(1) provides that if one or more of the parties is domiciled in a Member State (not necessarily the State upon which jurisdiction is conferred by the agreement), the agreement as to jurisdiction will be exclusive of a court in another Member State having jurisdiction, unless the parties have agreed that the jurisdiction of the nominated court is only to be non-exclusive.79 If it is agreed that the jurisdiction of the nominated court is only to be non-exclusive, then that court would have jurisdiction in addition to the jurisdiction that another court may have under the Regulation.80 If the parties choose more than one court to have jurisdiction then, as against courts that have not been nominated, the nominated courts should each be entitled to assume jurisdiction under Article 25. (p. 344) As between them, the first that is seised will prevail in accordance with Article 31 if they are each stated to have exclusive jurisdiction.81
18.104.22.168 Article 23(3) of the previous version of the Regulation provided that if none of the parties is domiciled in a Member State, then the courts of other Member States would not have jurisdiction unless the chosen court or courts first declined to accept jurisdiction. This provision was removed from the recast version of the Regulation, as it is rendered unnecessary by the new provisions included in Articles 31(2) and (3) which apply generally and give priority to the chosen court or courts in deciding whether or not to accept jurisdiction.
22.214.171.124 It is not clear as at which date the question of domicile of the parties is to be determined for the purposes of Article 25(1). One possibility is that their domicile should be determined at the date that they enter into the agreement as to jurisdiction. Another possibility is that the date should be determined at the time a court is seised of jurisdiction.
Article 25(3) contains no requirement as to the form of the instrument, nor is there any requirement that any of the relevant persons should be domiciled in a Member State. It does not make provision for a purported conferral of non-exclusive jurisdiction.
126.96.36.199 As is the case with Article 25(1), it should be noted that by virtue of Article 25(4) such a purported conferral of jurisdiction cannot oust the jurisdiction that would apply in consequence of Articles 15 (insurance matters), 19 (consumer contracts), 23 (employment contracts), or 24 (exclusive jurisdiction).
Article 26 of the Regulation provides for a court to have jurisdiction where a defendant enters an appearance, provided it was not just to contest jurisdiction or a matter for which exclusive jurisdiction is conferred by Article 24.
(p. 345) 188.8.131.52 By Article 28(1), if a defendant fails to enter an appearance, the court must stay its proceedings if the defendant is domiciled in another EU Member State and jurisdiction is not derived on some other basis under the Regulation.
It is possible that the same or related proceedings might be brought concurrently before courts in different EU Member States. Articles 29 to 32 provide rules to deal with such a situation.
Article 29 of the Regulation82 provides as follows:
1. Without prejudice to Article 31(2), 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 first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.
2. In cases referred to in paragraph 1, upon request by a court seised of the dispute, any other court seised shall without delay inform the former court of the date when it was seised in accordance with Article 32.
184.108.40.206.1 A number of issues are raised in considering Article 29. The first of them concerns the date upon which a court could be said to be seised of a case. It had been held that for the purposes of the Brussels and Lugano Conventions, the lex fori of the national court before which a claim was brought would determine the date that the court was seised of the claim.83 Under English law, that would be the date on which the claim form or other commencing process was served on the defendant.84 The position is different under the Regulation. Article 32 of the Regulation provides a rule for determining when a national court should be considered as seised of a case, which depends upon the method by which proceedings may be commenced in the relevant court. If the proceedings are commenced by lodging the papers with the court and then serving them, as is the case in England, the court will be seised at the time of lodgement, provided that the claimant does not fail to take the requisite steps to effect service on the defendant. If the proceedings are commenced by serving the papers before they are lodged at the court, the court will be seised at the time the papers are delivered to the authority that is responsible for service, provided that the claimant does not fail to take the requisite steps to lodge the papers with the court.85
(p. 346) 220.127.116.11.2 The second issue concerns a determination that the competing proceedings concern the same parties. A problem may arise where the rival proceedings do not involve a precise identity in one of the parties, on one side or the other (or on both sides). It has been held in England that in determining if two persons should really be treated as one for the purposes of the proceedings (which is a substantive matter, rather than a procedural issue) the essential question is whether the interests of the two persons are ‘identical and indissociable from’ each other, which involves a consideration of the issues and the nature of the interests that were involved.86 In admiralty proceedings, where there are claims in rem and in personam, the determination should be based on who are the real parties to the different proceedings.87 In claims involving the insurers of cargo, the owners of the cargo, the insurers of the vessel, the owners of the vessel, and of the cargo, it was held that the parties would be the same if their interests were identical and could not be dissociated from each other.88 A company and its liquidator may be treated as the same person,89 as may an assignor and an assignee of a claim that is the subject of the proceedings.90
18.104.22.168.3 A third issue concerns whether the rival proceedings involve the same cause of action. The phrase ‘the same cause of action’ as used in Article 29(1) has an autonomous meaning and is not to be determined by applying national law;91 it involves two concepts, derived from the text of the Article in French. One (‘la même cause’) comprises the facts and the rule of law relied on as the basis of the action. The other (‘la même objet’) means the end that the action had in view, that is, the essential issue raised in the action. Both concepts have to be fulfilled for the rival proceedings to involve the same cause of action.92 The matter should be assessed by reference to the claims that had been lodged, ignoring any defences that might have been filed. This is because Article 29 is concerned with the causes of action on initiation of the claims.93
(p. 347) 22.214.171.124.4 In accordance with Article 29, it is in general a matter for the court that is first seised to determine which court properly has jurisdiction under the Regulation to hear the case.94 This is, however, now subject to the effect of Articles 31(2) and (3) in a case concerning a jurisdiction agreement. In a case concerning an agreement conferring exclusive jurisdiction on the courts of a Member State it is for that court to decide whether it has jurisdiction, and all other courts, including any court first seised, must stay their proceedings in the meantime. If the court on which exclusive jurisdiction is conferred concludes that it has jurisdiction then the proceedings before the courts of all other Member States must be dismissed. Subject to this, if the court that is first seised decides that it does have jurisdiction to hear the case, the other court must decline to assert jurisdiction altogether. A stay of a claim pursuant to Article 29(1) does not mean that the claim before the later seised court must be dismissed. It is merely stayed pending a determination by the court that is first seised of which court has jurisdiction to hear the claim; the court is only deprived finally of jurisdiction to hear the claim if the court that is first seised determines under Article 29(2) that it has jurisdiction.95
A court in one EU Member State cannot issue an anti-suit injunction to restrain a party from continuing with a case before a court in another EU Member State in a matter that falls within the Regulation; it may not do so even if it believes that it has the primary claim to assert jurisdiction including where such jurisdiction derives from an exclusive jurisdiction agreement.96 Similarly, it was established in West Tankers Inc v Allianz SpA97 that there is no power in the courts of a Member State to grant an injunction to restrain proceedings commenced in another Member State in breach of an arbitration agreement. The Court of Justice in OAO Gazprom98 subsequently affirmed the correctness of the earlier decision in West Tankers, but also confirmed that it is open to an arbitral tribunal to grant an injunction restraining proceedings in a Member State on the footing that arbitration falls outside the scope of the Regulation.99
Article 30 of the Regulation100 concerns related actions that may be pending before courts in more than one EU Member State. Related actions are defined by Article 30(3) to be those which, whilst not involving the same cause of action, are so closely connected that it is expedient that they should be heard and determined together, so as to avoid conflicting judgments. Article 30(1) provides that where related actions are pending before courts in different Member States, a court which is not first seised may stay its proceedings. Article 30(2) further provides that a first instance court which is not the first seised in the related actions may decline jurisdiction if the court which is first seised in one of those actions has jurisdiction and it can consolidate the actions. The language of Article 30 is permissive rather than mandatory. There is no obligation for the proceedings to be stayed or for jurisdiction to be declined. The court has a discretion to decide if it will grant the stay or decline jurisdiction. An English court has held that it would not be expedient for related actions to be tried together where they involved the application of different laws, in one case English contract law and the other matters of German public policy.101 In the same case, it was held that the court should, in any event, refuse to exercise its discretion to grant a stay because the German proceedings had been brought in breach of an exclusive jurisdiction clause in the relevant contract.
Article 31(1) of the Regulation102 provides that where competing actions fall within the exclusive jurisdiction of more than one court, any court other than the first seised should decline jurisdiction. However, as noted above, this is now subject to Articles 31(2) and (3) where exclusive jurisdiction is sought to be conferred on the courts of a Member State pursuant to a jurisdiction agreement.
In addition to Articles 29 and 30 dealing with proceedings before the courts of different Member States, the recast Regulation includes in Articles 33 and 34 provision to deal with the situation where proceedings are at the same time pending before the courts of a Member State and before the courts of a third State. Previously, where the jurisdiction of the court of a Member State was derived from the Regulation there was arguably little discretion in the court to decline to exercise this jurisdiction on the basis that proceedings were pending before the courts of a third State (i.e. a non-Member State).103 However, Article 33 now provides that where the court of a Member State has jurisdiction under Articles 4, 7, 8, or (p. 349) 9 in respect of proceedings involving the same cause of action and parties as proceedings pending before the courts of a third State then the court of the Member State may stay its proceedings if (a) it is expected that the court of the third State will give a judgment capable of recognition and, where applicable, enforcement in that Member State and (b) the court of the Member State is satisfied that a stay is necessary for the proper administration of justice. This is a discretionary power to grant a stay and the factors relevant to the exercise of the discretion will include the connections between the facts of the case and the parties and the third State and whether the third State has exclusive jurisdiction.104 If the proceedings in the third State result in a judgment capable of recognition and, where relevant, enforcement, the proceedings in the Member State must then be dismissed.105 On the other hand, prior to this, the court of the Member State may continue its proceedings if (a) the proceedings in the third State are themselves stayed or continued, (b) it appears that the proceedings in the third State are unlikely to be concluded within a reasonable period of time, or (c) the continuation of the proceedings is required for the proper administration of justice.
126.96.36.199.1 Whilst Article 33 deals with proceedings in a third State involving the same parties and cause of action, Article 34 deals with the situation where proceedings pending in a third State are related to those pending before the court of a Member State. In this scenario, the court of the Member State may stay its proceedings if (a) it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings, (b) it is expected that the court of the third State will give a judgment capable of recognition and, where applicable, enforcement in the Member State, and (c) the court of the Member State is satisfied that a stay is necessary for the proper administration of justice. The stay may be terminated in similar circumstances to those provided for in Article 33(2).106 Similarly, if the proceedings in the third State result in a judgment capable of recognition and, where relevant, enforcement, the proceedings in the Member State must then be dismissed.107
By way of supplementary jurisdiction, Article 35 of the Regulation108 permits a court of an EU Member State that would not have substantive jurisdiction in a claim to grant provisional orders, including protective orders, such as by way of an injunction or a freezing order affecting the defendant’s assets, pending the (p. 350) determination of the claim by the court that has substantive jurisdiction. An English court might be prepared to grant an interim injunction to restrain an alleged breach of contract pending a determination by another court under Article 29 as to which court should hear the claim concerning the breach.109
To the extent that it is not inconsistent with the position that obtains under the EC Regulation on jurisdiction and judgments or the Brussels and Lugano Conventions, the High Court may have jurisdiction in accordance with the Civil Procedure Rules (the CPR)110 to hear a claim.111 The three pre-conditions to such jurisdiction are:
(1) that the claim does not concern a matter over which the English courts will refuse to take jurisdiction;112
(2) that the court is not precluded from hearing a case because there is a valid and binding agreement to submit the dispute to arbitration;113 and
(3) that the process which initiates the claim has been served on the defendant.
188.8.131.52 Such service may take place on a defendant (or its duly appointed solicitor or agent114) that is within the jurisdiction or, where applicable, by a contractually agreed method115 or by service upon the defendant outside the jurisdiction. The last requires the permission of the court in most cases,116 whereas service within the jurisdiction arises as of right, although the court has a discretion to grant a stay of the proceedings, or to strike out or dismiss them, so as to prevent injustice. (p. 351) The presence of the defendant within the jurisdiction at the time of service may be transitory, but that is sufficient.117
184.108.40.206 There are special rules that relate to the manner in which service may be effected on corporations and companies. Corporations incorporated in England and Wales may be served by service through the post to the principal office of the corporation, or any place within the jurisdiction where the corporation carries on its activities and which has a real connection with the claim.118 A company registered in England and Wales may likewise be served at its principal office or any place within the jurisdiction where the corporation carries on its activities and which has a real connection with the claim119 or, where registered under the Companies Act 2006, at its registered office.120 There are also provisions for service upon a foreign company with a place of business in the jurisdiction or which has its particulars registered under the Companies Act as an overseas company.121
CPR Practice Direction 6B paragraph 3.1 contains a list of the heads of claims for which permission to serve out of the jurisdiction may be sought from the court. The claimant must show that122 (a) there is a serious issue to be tried on the merits which equates to showing that the claim has a reasonable prospect of success,123 (b) to the standard of a good arguable case, that the claim falls within one or more of the jurisdictional gateways,124, and (c) England and Wales is the proper place to bring the claim and the court should exercise its discretion to permit service out of the jurisdiction.125 It may not pursue any additional claim that does not fall within one of the heads.126
The granting of permission is discretionary and will depend upon the court deciding that the claim should be heard by it. This is additional to and separate (p. 352) from the need to establish that the claim comes within one of the heads in CPR Practice Direction 6B paragraph 3.1.127 The principles which underlie the decision as to whether the discretion should be exercised in favour of the claimant are, first, that the case is a fit and proper one for service out of the jurisdiction, and, secondly, that the English court is the appropriate or proper place in which the claim should be tried,128 that is, where it could most suitably be tried in the interests of the parties and for the ends of justice.129 The principles are essentially the same as those that should be considered in an application by the defendant for a stay of proceedings on the basis of forum non conveniens, although the burden of proof in an application for permission is on the claimant, whereas it falls on the defendant in an application for a stay.130
220.127.116.11.1 In a permission case, the claimant must convince the court that it is proper to exercise its discretion to grant leave to serve out and the court must be mindful that the granting of leave is in the exercise of an ‘exorbitant’ jurisdiction, in the sense that an English court may not be happy to recognise the reverse situation where a foreign court assumed jurisdiction over an English defendant.131 The relevant considerations in granting permission will vary from one case to another and different emphasis will be placed upon them, depending upon the facts and circumstances of the case. The factors that are relevant are discussed later in relation to applications for a stay, but include the following:
(a) the efficiency, expedition, and economy of bringing the claim;
(b) the presence and availability of witness and other evidence;
(c) the desire to avoid a multiplicity of proceedings involving the same or similar parties or factual evidence;
(d) the availability of legal aid;
(e) the level of damages that might be recovered in other jurisdictions and the availability in another jurisdiction of the remedy that is sought;132
The following are sub-paragraphs of CPR Practice Direction 6B paragraph 3.1 which contain the likely types of claim that would be relevant to disputes concerning financing transactions. The standard of proof that the claim falls within one or more of these (p. 353) paragraphs is that of a ‘good arguable case’, bearing in mind that the issue has to be decided at an early stage and before all the evidence can be heard in a full hearing.133 Where the issue is contested the court will apply a test of who has the better of the argument.134 The question for these purposes is one of ‘relative plausibility’ between the two parties’ cases, and the test does not impose a balance of probabilities standard.135
18.104.22.168.1 Sub-paragraph (1) covers a claim against a defendant who is domiciled within the jurisdiction.136
22.214.171.124.2 Sub-paragraph (6) covers a claim in respect of a contract,137 being (a) a contract that is made within the jurisdiction, (b) a contract that was made by or through an agent trading or residing within the jurisdiction, (c) a contract that is governed by English law, or (d) a contract which contains a provision conferring jurisdiction upon the court. The existence of the contract, its governing law, and its terms should be determined in accordance with the principles of English conflict of laws,138 generally by the application of the Rome I Regulation.
126.96.36.199.3 Sub-paragraph (7) covers a claim that is made in respect of a breach of contract committed within the jurisdiction, whether or not it is a contract falling within the list of contracts referred to in sub-paragraph (6). It may not be entirely clear where the breach took place if the contract called for performance in one place but no performance was made. It may also be arguable that a claim for inducing a breach of contract or for the breach of a fiduciary duty arising from a contract might fall within this sub-paragraph. A similar argument might also apply in considering sub-paragraph (6).
188.8.131.52.5 Sub-paragraph (9) concerns a claim made in tort where (a) the damage was sustained within the jurisdiction, or (b) the damage which was sustained resulted from an act that was committed within the jurisdiction. It is uncertain if this sub-paragraph requires that there has to be a completed cause of action in tort, as understood under English law139 or if it is sufficient for the claim to be characterised (p. 354) as a tortious claim for conflict of laws purposes.140 Paragraphs (a) and (b) reflect the jurisprudence that has developed in the interpretation of Article 5(3) of the EC Regulation on jurisdiction and judgments.141
184.108.40.206.6 Sub-paragraph (11) concerns a claim where the whole subject matter of the claim relates to property located within the jurisdiction. The claim may concern any type of property, whether real or personal. It applies to any claim for relief concerning such property. It also applies to claims concerning the proceeds of sale of such property, although the grant of leave is still discretionary.142
220.127.116.11.7 Sub-paragraph (12) applies to a claim to execute the trusts of a written instrument if they ought to be executed in accordance with English law143 and the defendant is the trustee. It is not necessary that the trust property should be located within the jurisdiction.
18.104.22.168.8 Sub-paragraph (15) concerns a claim that is made against a defendant for a remedy as a constructive trustee where the defendant’s liability arises from acts committed within the jurisdiction. It is not clear if it must be the defendant’s acts which give rise to the liability or if a third party’s acts might suffice,144 and there is also uncertainty as to whether all the relevant acts giving rise to the alleged liability, or just a substantial proportion of them, must have occurred within the jurisdiction.145
6.5 Situations where the High Court may Decline to Hear a Case or may Grant an Anti-suit Injunction to Restrain a Party from Continuing Foreign Proceedings
There are various circumstances where the High Court may decline to hear a case. One such circumstance has already been examined, namely, where it may refuse (p. 355) to grant permission for service of proceedings on a foreign defendant. The other circumstances concern situations where service has been effected on the defendant but the defendant requests the court to stay or dismiss the proceedings. It is also relevant to consider a related topic, namely, the circumstances in which the High Court may grant an injunction (an ‘anti-suit injunction’) to restrain a party from bringing foreign proceedings, with the intention that the case should be heard in the English court.
22.214.171.124 In deciding these various matters, the court is usually dealing with a situation where a case might be heard by two or more courts, of which it is one. It is seeking to determine which court is the natural or clearly the more appropriate forum to hear the case for the interests of all the parties and the ends of justice.146 However, if the court is asked to restrain a party from bringing proceedings, either in England or abroad, in breach of an agreed choice of jurisdiction, the court will generally approach the matter as one of holding a party to its agreement.
126.96.36.199 There are some important caveats to bear in mind when considering these matters. For the reasons that have already been explained, pursuant to the EC Regulation on jurisdiction and judgments and the Brussels and Lugano Conventions, an English court may have no discretion and may be obliged either to hear a case or to stay or decline to hear a case. In addition, it may not issue an anti-suit injunction to prevent a party maintaining or continuing proceedings before a court in another EU Member State in a matter covered by those instruments i.e. civil or commercial matters. For these purposes, it is irrelevant that the basis on which the English court would grant the injunction is a matter which falls outside the scope of the Regulation or the Conventions (e.g. an arbitration agreement) provided that the foreign proceedings are themselves a civil or commercial matter within that scope.147 The essential principle that is for the foreign court to determine is whether it has jurisdiction in relation to any proceedings concerning a civil or commercial matter which have been commenced before it. An English court is obliged to stay its proceedings brought in breach of a valid and binding arbitration agreement at the request of a party to the arbitration agreement.148
(p. 356) 6.5.2 Stays of English proceedings and refusals to grant leave to serve out of the jurisdiction
Some of the factors that may be relevant in considering if a stay should be granted have been referred to above. In more detail, factors that arise in consequence of Spiliada Maritime Corp v Cansulex Ltd149 and which would be relevant to a determination of whether the court should, on the application of the defendant, stay its proceedings in favour of proceedings in a foreign court that is preferred by the defendant, are as follows. First, that England is not the natural or appropriate forum,150 that it is clearly more appropriate that the case should be heard in the foreign court,151 and that the case can be heard in the foreign court.152 Secondly, the existence of concurrent proceedings between the parties in the foreign court is a relevant, but not conclusive, factor.153 Thirdly, that there may be reasons of justice which preclude the granting of a stay, such as that justice will not be done in the foreign jurisdiction. However, a stay will not be refused merely because the claimant will be deprived of some personal advantage if substantial justice will be done in the foreign court.
One particular matter that may be relevant to the grant of a stay or to an application for permission to serve out of the jurisdiction is the presence of an agreement by which the parties have agreed to confer jurisdiction on either the English or a foreign court. The existence of such an agreement will not be conclusive as to whether a stay or permission should be granted, as in principle it will still be a matter for the court to determine in the exercise of its discretion.154 However, in practice, the courts will give effect to a jurisdiction agreement absent strong reasons for departing from it.155
188.8.131.52 The validity and interpretation of, and the scope of the types of claim covered by, such an agreement will fall to be ascertained in accordance with the law which governs it. The rules for determining the governing law of such an agreement are excluded from the ambit of the Rome I Regulation,156 so such (p. 357) matters would fall to be determined in accordance with the proper law of the agreement, to be ascertained under common law conflict of laws principles. In many cases, the agreement as to jurisdiction will be contained within a larger contract, the applicable or governing law of which will be found by the application of the rules of the Rome I Regulation. In theory, there is a risk that the enquiry under the rules at common law, to find the proper law that governs the agreement as to jurisdiction, may not be the same as that to be applied under the Rome I Regulation in relation to the wider contract. In practice, it is likely that much the same result will be reached where there has been the same identity of choice in each instance between the governing law of the contract and the jurisdiction of the court to resolve disputes concerning the contract. Indeed, the existence of an express choice of jurisdiction may be influential in determining if there was an implied choice of law to govern the wider contract.157 It might also be said that, in a practical sense, the parties may have wished that the same law should govern the agreement concerning jurisdiction as governs the wider contract.
184.108.40.206 Difficulties may arise, however, where there has been a conflicting choice of the governing law of the wider contract from the choice of the court to determine disputes. It should also be remembered that there are various circumstances that are provided for in the Rome I Regulation in which the court may refuse to apply the chosen law of the contract and, instead, apply its own mandatory rules. In addition, if there has been no express choice of law to govern the wider contract and it is not possible to imply a choice, the rules of Article 4 of the Rome I Regulation will have to be applied to find the governing law of the contract, which could lead to a different approach in finding the law that governs the wider contract from that to be used at common law in ascertaining the law that governs the agreement as to jurisdiction.
220.127.116.11 A further difficulty could arise in a situation where it is claimed that the wider contract is invalid or unenforceable. It might then be argued that the matters causing the wider contract to be invalid or unenforceable also taint the agreement as to jurisdiction contained within it. It might, for instance, be argued that the wider agreement is void or unenforceable on such grounds as illegality, duress, or mistake. However, in many cases the whole purpose of a jurisdiction agreement will be to select the courts to determine any dispute as to whether a contract is void or unenforceable on such grounds.158 Article 25 of the Judgments Regulation now expressly provides that a jurisdiction agreement is to be treated as an agreement independent of the other terms of the contract, and that the validity of the (p. 358) jurisdiction agreement cannot be contested solely on the ground that the contract is not valid.159
18.104.22.168 The court will apply the governing law of the jurisdiction agreement to ascertain, as a matter of construction and interpretation of the agreement, whether the parties intended to confer jurisdiction exclusively upon a chosen court or whether they only intended it to have non-exclusive jurisdiction; perhaps even intending to nominate more than one court to have the right to assume jurisdiction. Under the Judgments Regulation a jurisdiction agreement is exclusive unless the parties have provided otherwise.160 However, this does not appear to create a presumption that a jurisdiction agreement will be exclusive; rather it is a question in every case of what the parties have agreed. In the absence of explicit wording indicating that the parties intended a single court to have exclusive jurisdiction, an English court would construe the agreement to determine if the agreement operated ‘transitively’, in the sense of imposing on the parties an obligation to refer their disputes exclusively to the nominated court, or ‘intransitively’, in the non-exclusive sense that the parties intended to consent to the jurisdiction of the nominated court should it be invoked by one of the parties.161 It will also be a matter of construction and interpretation of the agreement to ascertain the types of claim which are covered by it; for instance, as to whether equitable or tortious claims that are based upon or connected with the agreement are within the scope of the claims covered by the submission to jurisdiction. It has been said that the practice of the English courts is to give such an agreement a generous interpretation in determining the scope of its application.162
22.214.171.124 In considering the effect of a jurisdiction agreement and the exercise of its discretion, the attitude that the court takes towards an agreement that confers exclusive jurisdiction upon a chosen court is bound to be more robust than its approach towards a non-exclusive choice of jurisdiction. Nonetheless, a chosen court that (p. 359) falls within the latter type of agreement will, at least, be regarded as an available and a suitable forum in which the case may be heard163 within the tests in Spiliada Maritime Corp v Cansulex Ltd.164 An agreement as to non-exclusive jurisdiction may also be construed as meaning that neither party would object to proceedings being taken before the nominated court and that neither of them would attempt to frustrate or prevent the bringing of such proceedings by, for instance, instituting proceedings elsewhere.165 Equally, the effect of a non-exclusive jurisdiction clause may be that, once it has been invoked, it then becomes exclusive precluding proceedings in other jurisdictions.166 On the other hand, sometimes the parties may expressly contemplate that proceedings might be commenced in courts other than that upon which jurisdiction has been agreed, and even that proceedings might be brought in two or more jurisdictions at the same time. In such a situation, an English court may permit proceedings to take place concurrently in more than one jurisdiction.167
6.5.4 Stays of English proceedings when an agreement confers exclusive jurisdiction upon a foreign court
The basis on which an English court will grant a stay of its own proceedings in favour of a dispute being heard in a foreign court, to which exclusive jurisdiction had been granted by agreement between the parties, was set out by Brandon LJ in The ‘El Amria’,168 in which his Lordship adopted what he had said earlier at first instance in The ‘Eleftheria’.169 The approach taken by Brandon J in The ‘Eleftheria’ was approved by Lord Bingham of Cornhill in Donohue v Armco Inc170 (which was a case where the reverse situation applied, that is, where the English court in whose favour there was an exclusive jurisdiction clause was requested to issue an anti-suit injunction directed against the continuance of proceedings in a foreign court). Brandon LJ said that the court had a discretion which it was not bound to exercise, but it should do so unless strong cause (or to use Lord Bingham’s phrase ‘strong reasons’171) was shown against its doing so. The burden was upon the party resisting the application for the stay. The court should take into account all the circumstances of the case, although little weight would be given in favour of the (p. 360) continuance of the foreign proceedings to mere matters of the convenience of witnesses or mere procedural advantages.
126.96.36.199 Brandon LJ then set forth a number of matters to which the court might have regard (which is not a mandatory or comprehensive list172), which may be summarised as follows:
(a) whether the evidence was situated in the place of, or more readily available to, the foreign court and the effect of that on the relative convenience and cost of a trial in, respectively, the foreign or English court;
(b) whether the law of the foreign court would apply to determine the issues in dispute and the extent to which that law differed from English law;
(c) the country to which either party was connected and how closely;
(e) whether the party desiring a trial in England would be prejudiced by having to proceed in the foreign court because of (i) being deprived of security for its claim, (ii) being unable to enforce any judgment it might obtain, (iii) being faced with a time bar that was inapplicable in England, or (iv) being unlikely to obtain a fair trial in the foreign country because of political, racial, religious, or other reasons. Mere matters of convenience as to one forum or the other were largely, if not entirely, irrelevant.173
188.8.131.52 Nonetheless, the court may decline to grant a stay (or to grant an anti-suit injunction) where the interests of other parties (i.e. parties other than those bound by the jurisdiction agreement) were involved or the dispute before the foreign court involved matters that were not covered by the jurisdiction agreement.174
A party that wishes to promote its case before an English court may seek to obtain an injunction from that court to restrain another party from maintaining proceedings before a foreign court (usually referred to as an ‘anti-suit injunction’). In theoretical terms, the injunction is directed to the other party rather than directly at the foreign court.175 In reality, it amounts, in an indirect way, to an attempt at interference with the rights and process of the foreign court. Accordingly, it has (p. 361) been said that caution should be taken in granting such an injunction,176 especially if the injunction is aimed at preventing a party from conducting proceedings in its own jurisdiction.177 As previously mentioned, such an injunction may not be granted in relation to proceedings in the court of another EU or EEA Member State,178 at least in relation to matters that fall within the EC Regulation on jurisdiction and judgments, the Brussels Convention, or the Lugano Convention. The injunction must be required by ‘the ends of justice’ and be necessary to protect the English proceedings and the applicant’s legitimate interest in those proceedings.179 The issuing of such an injunction is discretionary and it also depends upon the in personam jurisdiction of the court, which means that the respondent must be amenable to that jurisdiction.180 The respondent might be so amenable (1) by service upon the respondent within the jurisdiction, (2) by service outside the jurisdiction where it is available as of right,181 (3) if the foreign respondent is already an actively participating party to proceedings before the court,182 (4) if the foreign respondent has submitted to the jurisdiction of a foreign insolvency proceeding (e.g. by lodging a proof of debt in the insolvency),183 or (5) with the permission of the court, by service upon the respondent outside the jurisdiction. In the last case, it will be necessary to find a ground within the paragraphs of CPR Practice Direction 6B paragraph 3.1.184 There is no such ground based simply upon the wish to obtain an anti-suit injunction.
184.108.40.206 In a general sense, the discretion to grant an anti-suit injunction is exercised so as to avoid injustice or in the ends of justice.185 This may be because the commencement (p. 362) of the foreign proceedings is vexatious, such as where there are already proceedings on foot in England, the foreign proceedings have been commenced in an inappropriate forum to decide an issue which could more naturally and conveniently be resolved in England, or because the foreign proceedings are contrary to equity and good conscience.186 Except where the injunction is based upon an agreement between the parties in favour of English jurisdiction,187 it is also necessary for the applicant to show that the English court is the natural or appropriate forum to hear the case,188 so as to provide an efficient and, if possible, an economic resolution of the dispute, and to avoid a multiplicity of proceedings in different countries. Even if the applicant can make out a case for the injunction to be granted, the respondent is entitled to resist it by showing that it had a legitimate substantive or procedural interest in pursuing the foreign proceedings and that it would be prejudiced in pursuing that interest by the injunction,189 provided that those proceedings were being pursued in a natural forum to hear the case.190 This may be supplemented by the giving of an undertaking by the respondent that it will not pursue any remedy in the foreign proceedings that would cause an injustice to the other party.191 Nonetheless, the court may still grant the injunction if the bringing of the foreign proceedings might be considered to be unconscionable in the sense of being an infringement upon the applicant’s equitable rights. It might do this, for instance, where the claim in the foreign proceedings was based upon a cause of action under the law of that forum which was unknown to English law and which involved circumstances that it was alleged had not taken place within the territory of that forum.192
220.127.116.11 One area in which a court may exercise its discretion to grant an anti-suit injunction is where the pursuit of the foreign proceedings would be ‘vexatious and oppressive’ or an interference with the due process of the court. Those are rather nebulous concepts which remain undefined and have been left to be worked out on a case-by-case basis.193 They do not involve the same considerations as those (p. 363) that the court must consider in determining whether to grant a stay or leave to serve out of the jurisdiction on the basis of forum non conveniens, and the court must take account of the injustice to each party of the pursuit of the proceedings in one or other court.194 The following are examples of the types of consideration that would be relevant in determining if the maintenance of foreign proceedings would be considered as being vexatious and oppressive or an interference with the due process of the court: bad faith on the part of the respondent in bringing the foreign proceedings;195 the bringing of foreign proceedings that are bound to fail;196 where the applicant might be subjected to oppressive procedures or circumstances in the foreign jurisdiction;197 extreme inconvenience to the applicant caused by the foreign proceedings;198 where the foreign proceedings were part of a campaign to wear down the applicant through the difficulty and expense of fighting on several fronts;199 the risk of a multiplicity of proceedings which may conflict with each other200 or which may undermine the management and efficiency of the English proceedings,201 especially where the foreign proceedings had been brought to secure a tactical advantage when England provided the appropriate forum to determine the issues;202 and cases which could and should have formed part of an earlier English action and which seek to challenge a matter that has already been decided in that action.203
18.104.22.168 Whilst it is still a discretionary matter,204 the court will more readily grant an anti-suit injunction to restrain the maintenance of foreign proceedings, where such proceedings have been brought in breach of an agreement conferring jurisdiction on the English courts or an agreement not to be sued in that jurisdiction.205 Similarly, an injunction may be granted where the parties have agreed to submit their dispute to arbitration.206 As previously discussed, it may be necessary to establish the (p. 364) validity and scope of the jurisdiction agreement. Assuming that the agreement is valid, it is not necessary to demonstrate that England is the natural forum, nor that the foreign proceedings are vexatious and oppressive.207
22.214.171.124.1 The factors that are relevant to the exercise of the court’s discretion in granting the injunction to uphold the jurisdiction agreement include those described above concerning the grant of a stay of proceedings based upon an agreement conferring jurisdiction on a foreign court. They were set out by Brandon LJ in The ‘El Amria’,208 in which Brandon LJ had adopted what he had said at first instance in The ‘Eleftheria’.209 Lord Bingham of Cornhill approved Brandon LJ’s approach in Donohue v Armco Inc,210 which was a case where the English court in whose favour there was an exclusive jurisdiction clause was requested to issue an anti-suit injunction directed against the continuance of proceedings in a foreign court. In that case, the House of Lords refused to grant an anti-suit injunction against the continuance of proceedings in the USA. This was because the interests of parties other than those bound by the jurisdiction agreement were involved, and the dispute before the foreign court involved matters that were not covered by the jurisdiction agreement.
A related area to that just discussed is where an English court would be prepared to grant an injunction to restrain a party from maintaining foreign proceedings in breach of an agreement to refer the dispute to arbitration. In essence, the court is recognising and protecting the applicant’s contractual right to have the dispute settled by arbitration. This was recognised by Millett LJ in The Angelic Grace,211 who said that the court should not be diffident in granting the injunction. The Supreme Court in AES Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP212 confirmed that where parties had entered into an arbitration agreement that gave rise to a negative obligation not to commence proceedings in any other forum, and the English courts had a long-standing and well recognised jurisdiction to enforce the negative obligation by restraining foreign proceedings brought in violation of the arbitration agreement.
126.96.36.199 As explained above, it was held in West Tankers Inc v Allianz SpA213 that there is no power in the courts of a Member State to grant an injunction to restrain proceedings commenced in another Member State in breach of an arbitration agreement. (p. 365) The principle of comity and mutual respect as between the courts of the EU Member States, as enshrined in the judgments of the European Court of Justice in Erich Gasser GmbH v MISAT 214 and in Turner v Grovit,215 required that it be left for the courts of the Member State where the proceedings had been commenced to determine whether they had jurisdiction. The Court of Justice in OAO Gazprom216 subsequently affirmed the correctness of the earlier decision in West Tankers, but also confirmed that it is open to an arbitral tribunal to grant an injunction restraining proceedings in a Member State on the footing that arbitration falls outside the scope of the Regulation.217
In former times it was unusual for a dispute concerning a finance transaction to be submitted to arbitration for adjudication. The practice has become more common recently. There are a number of reasons for this change of approach, which include the following:
(1) arbitral proceedings may be conducted privately, without the publicity and open hearings that may be involved in court proceedings;
(2) where transactions involve States and State entities or international organisations, it may be more palatable for the State and its entity or such an organisation to submit itself to an independent arbitral tribunal than to the courts of another State;
(3) in some instances, an aggrieved private claimant may be able to institute an arbitration against a State pursuant to a bilateral investment treaty when it would have difficulty commencing proceedings in a neutral forum against the State;218
(4) particularly in disputes involving technical matters, it is possible to have arbitrators who are experts in the field with adequate technical knowledge to understand the matters in dispute;
(5) arbitration may be more flexible and quicker than court proceedings and it may involve less pre-trial skirmishing and procedures. It may also be easier to arrive at a compromise than full-blown court proceedings;
(p. 366) (6) under section 46(1)(b) of the Arbitration Act 1996, the parties can agree that the arbitral tribunal should make its decision concerning the transaction between them by taking into account considerations other than those dictated by the governing law of a particular State, whereas under the Rome I Regulation, a court can only take account of the law of State as the governing law of their transaction;219
(7) there are international treaties that permit action to be taken for the cross-border enforcement of arbitral awards as, for instance, pursuant to the New York Convention 1958, the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 1965, and the Geneva Convention 1927. As a result, it may be possible to enforce such a foreign arbitral award in a country in circumstances where it may not be possible to enforce a foreign judgment in that country.
188.8.131.52 Generally speaking, a dispute can only be submitted to arbitration pursuant to an arbitration agreement between the parties to the dispute and it cannot bind a third party who is not a party to the arbitration agreement. There is no inherent jurisdiction for arbitration. Such an agreement may be entered into at the beginning of a commercial transaction and thus relate to any future dispute that may arise under it, or the parties may agree to submit a matter to arbitration after the dispute has arisen. The exception to the need for an agreement between the parties to the dispute arises where a party can invoke the benefit of a bilateral investment treaty between two States, under which the nationals of one of the States are entitled to refer disputes involving the other State to arbitration. In effect, the State has bound itself by the treaty to agree to the submission of such disputes to arbitration.
184.108.40.206 An arbitral tribunal may consist of one or more arbitrators. It is not uncommon to have three arbitrators, one selected by each party and the third chosen by the two who have been so selected. The third will usually act as the chairman and have a casting vote. It is also possible, usually where there is an even number of arbitrators, to provide for the appointment of an umpire, who is empowered to make the final decision where there is an even split between the views of the arbitrators. These matters, as well as other matters concerning the arbitrators and the various procedural matters involved in an arbitration, may be dealt with in the arbitration agreement or, more probably, under the rules of one of the international arbitral bodies whose rules are incorporated by reference in the arbitration agreement.220 Part I of the Arbitration Act 1996 contains certain fall-back rules concerning the composition of arbitral tribunals and the practice and procedure of arbitral proceedings. It (p. 367) also contains provisions for the court to assist arbitral proceedings and provisions relating to the making of arbitral awards.
The Arbitration Act 1996 provides most of the legal framework under English law concerning the law of arbitrations.221 The Act came into force on 31 January 1997. It is in four parts, the two material parts for the purposes of this chapter being Part I and Part III.222 Part I deals with the English law concerning arbitrations, particularly those whose seat is in England. Part III concerns the recognition and enforcement of foreign arbitral awards pursuant to the New York Convention. It is also possible for foreign awards to be recognised and enforced at common law and under section 66 of the Act. The enforcement of certain foreign awards may also be dealt with under other legislation, such as under the Administration of Justice Act 1920, the Foreign Judgments (Reciprocal Enforcement) Act 1933, Part II of the Arbitration Act 1950, and the Arbitration (International Investment Disputes) Act 1966.
Part I relates to the application of English law to arbitrations that arise pursuant to an ‘arbitration agreement’ and concerns, in the main but with some additional cases, arbitrations whose seat is in England. It deals with the law of arbitration pursuant to such an agreement, the powers and duties of arbitrators and the courts, matters relating to the appointment of arbitrators, matters of practice and procedure relating to arbitration proceedings, the situations where the court may exercise powers in support of arbitral proceedings, and provisions relating to the making and enforcement of arbitral awards.
Section 1 of the Act provides three principles that govern Part I, which are as follows:
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part.
(p. 368) 220.127.116.11. Overall, the effect of section 1 is to honour the agreement that the parties have reached as to the submission of their disputes to arbitration, subject to matters concerning the public interest,223 and to prevent the courts from interfering with that agreement and an arbitration commenced under it, except as specifically provided by the Act. This most probably has the effect of removing any inherent jurisdiction to interfere that the courts might otherwise have been able to assert.224
The seat of an arbitration is the place where it is juridically grounded, rather than the geographic place where hearings may occur, evidence may be taken, or, indeed, where the arbitral award may be signed, despatched, or delivered.225 The law of the seat of the arbitration will govern the arbitral procedure. Furthermore, by choosing England as the seat of an arbitration, the parties are taken to have agreed that proceedings on an award issued by the arbitral tribunal, and any challenge to it, should be governed by, and subject to, the provisions of English law.226