Supreme Court refuses to apply a special jurisdiction rule to the tort of inducing breach of a jurisdiction clause

The Supreme Court has refused to craft a special rule for the tort of inducing a breach of contract where the contractual term which has been breached is an exclusive jurisdiction clause. It held that, where proceedings were commenced in Germany in breach of an English exclusive jurisdiction clause, damage was suffered in Germany, as that was where costs were incurred in contesting the proceedings. The English court therefore had no jurisdiction over a claim against German lawyers alleging that they had induced their clients' breach of contract in bringing the German proceedings: AMT Futures Limited v Marzillier, Dr Meier and Dr Guntner Rechtsanwaltsgesellschaft mbH [2017] UKSC 13.

The refusal to apply a special rule means there may have to be proceedings in more than one member state where it is alleged that a third party has induced the breach of a jurisdiction clause: proceedings against the contractual counterparty must be brought in the jurisdiction agreed in the contract, whereas proceedings against the third party will generally have to be brought either where it is domiciled, or where the offending proceedings were brought.

Factual background

The claimant is an "execution only" derivatives broker which provided services to investors referred to it by introducing brokers, including brokers in Germany. The contracts with the investors provided for English law and exclusive English jurisdiction.

A number of the investors, dissatisfied with how the investments performed, brought proceedings in Germany against the introducing brokers and the claimant. The cost to the claimants in investigating the claims, legal costs and settlement costs were estimated at over £2 million.

The claimant commenced proceedings in England against a number of the investors seeking damages for breach of the jurisdiction clause. The claimant also began English proceedings against the investors' German lawyers, based on the tort of inducing breach of contract.

The High Court held the English courts had jurisdiction over the claim against the lawyers. This was overturned by the Court of Appeal (see our blog post here). The Court of Appeal was not enthusiastic, however, about the conclusion they felt compelled to reach, and permission was obtained for an appeal to the Supreme Court.

Legal background

A defendant domiciled in an EU or EFTA member state can be sued in tort in another member state if the harmful event occurred there. This has been interpreted as meaning both (i) the place where the event giving rise to the damage occurred and (ii) the place where the direct damage occurred.

The place where the harmful event occurred is not always easy to identify. The CJEU has in a number of circumstances given particular guidance where the answer was not evident from a straightforward application of the rules. For example:

  • In the case of damage to goods at sea, the place where the harmful event occurred was to be regarded as the place where the goods were to be delivered (Reunion Europeene SA v Spliethoff's Bevrach tingskantoor BV (Case C-51/97)).
  • In libel cases, where harm was suffered due to the publication of material in several member states, proceedings could be brought where the publisher was established in respect of all the harm suffered, or before each member state where the publication was distributed but only in respect of harm suffered in that state (Shevill v Presse Alliance SA (Case C-68/93).
  • Where publication of information on the internet was concerned, there was an additional option for the allege victim, attributing jurisdiction to where the victim had its centre of interests (eDate Advertising GmbH v X (Cases C-509/09 and C-161/10).

In the present case, the claimant asserted that the relevant harm was being deprived of the benefit of dispute resolution in England, and so England was the place where the direct damage occurred.

In the alternative, the claimant sought to persuade the Supreme Court that this was a further instance in which a particular rule should be adopted, ie that proceedings for the tort of inducing a breach of contract, where the contractual term breached was an exclusive jurisdiction clause, could be brought in the contractually chosen court. It pointed out that the CJEU had been prepared in some circumstances to innovate by locating the relevant harm at the claimant's centre of interests.

As a fallback, the claimant argued that there should be a reference to the CJEU for guidance.

Decision

The Supreme Court (Lord Hodge with whom Lords Neuberger, Mance, Clarke and Sumption agreed), in a relatively short judgment, held that the English courts had no jurisdiction over the claims.

On the facts of the case, there was no difficulty in locating where the relevant harm had occurred. The event causing harm, the commencing of the German proceedings, took place in Germany. Damage also occurred there, as that was where the claimant had to engage in proceedings and settle claims. Any loss in England was merely consequential on the direct harm suffered in Germany. That was sufficient to determine the appeal.

There was no need to craft a special rule in these circumstances. Such rules had been developed when it had not been possible to identify one place where the relevant harm occurred. That was not the case here.

The European case law recognised that the Brussels regime created the difficulty that one jurisdiction may not be able to deal with all the related points in a dispute. This inconvenience was the price paid for achieving legal certainty and foreseeability, which were among the principal aims of the regime.

There was no need for a reference to the CJEU, as there was no complexity in identifying where direct damage occurred. There was therefore nothing which might cause the CJEU to develop a special rule.

This is the latest in a number of recent cases considering the tort jurisdiction rules in the context of economic loss, where the principles are not always easy to apply. See here and here.

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