In a recent decision, the High Court refused to grant an anti-suit injunction to restrain Cypriot court proceedings brought in breach of an arbitration clause, but granted an injunction in respect of Russian proceedings: Nori Holdings Limited et al v PJSC Bank Okritie Financial Corporation  EWHC 1343 (Comm).
The court found that there was nothing in the Recast Brussels Regulation (Council Regulation 1215/2012) to cast doubt on the continuing validity of the decision in West Tankers Inc v Allianz SpA (Case C-185/07)  AC 1138. An anti-suit injunction directed at an EU Member State court’s proceedings, while not itself within the scope of the Regulation, undermines the effectiveness of the Regulation and is, therefore, prohibited.
At the same time, the court found alleged Russian mandatory jurisdictional rules referring an insolvency dispute to the Moscow Arbitrazh Court insufficient to displace the wide and general wording of an arbitration clause, with the result that it granted an anti-suit injunction in relation to the Russian proceedings.
For more information see this post on our Arbitration Notes blog.
On 19 June, the UK and EU negotiators published a joint statement outlining the progress made on the draft Withdrawal Agreement since it was last published in March 2018. The joint statement confirms that agreement has been reached in principle on the provisions relating to jurisdiction and enforcement of judgments, under article 63 of the draft Withdrawal Agreement. This means that, assuming the Withdrawal Agreement is ultimately finalised and put into effect, current rules on both jurisdiction and enforcement will apply where proceedings are commenced before the end of the transition period (31 December 2020).
Disappointingly, however, there is no provision for the current rules on either jurisdiction or enforcement to apply where a jurisdiction agreement was entered into before the end of the transition period, if proceedings are commenced only after that date. Continue reading
The Court of Appeal has considered the proper approach to awarding damages for the loss of a chance where a claimant has been deprived of a claim in litigation because of its lawyers’ negligence. It held that when courts value a lost chance, they should only exceptionally take into account evidence that would not and could not have been available at the notional trial date: Edwards v Hugh James Ford Simey, a Firm  EWCA Civ 1299.
There has been some uncertainty as to the proper approach to this question. Comments in some previous cases arguably suggested that such evidence should ordinarily be taken into account in valuing the lost chance, to ensure that a claimant is not over- or under-compensated (see for example, Dudarec v Andrews  EWCA Civ 256, considered in our blog post here).
In the present case, the Court of Appeal does not seek to establish a precise threshold as to when such evidence may be taken into account, but it clearly considers that a high threshold is needed. This threshold will be met where the original claim was based on fraud, or where there is a “significant or serious scale to the consequences of the supervening event” such that not taking into account that evidence would result in injustice.
Alex Sharples, a senior associate in our disputes team, outlines the decision below. Continue reading
On 13 June, the UK government published a presentation setting out its proposals for continued judicial cooperation once the UK leaves the EU. The presentation is part of a series produced by the UK negotiating team for discussion with the EU.
Overall the paper is long on aspirational statements and short on specifics, but it does indicate that the UK government is keen to reach a new, bespoke agreement with the EU across the full range of civil judicial cooperation, including business and consumer as well as insolvency and family. It notes that the EU has already signalled its willingness to consider a new form of relationship in respect of family law, and the UK wants to see this extended across the sphere of civil judicial cooperation.
The presentation refers to the Lugano Convention, which currently governs issues of jurisdiction and the enforcement of judgments between the EU, Iceland, Norway and Sweden, but says that the UK wants “a broader agreement that reflects our unique starting point”. None of this is surprising. The UK government stated, as long ago as last August, that it would seek to continue to participate in the Lugano Convention as well as seeking an agreement with the EU which closely reflected the principles of judicial cooperation under the current EU framework (see our blog post on the UK’s August 2017 position paper “Providing a cross-border civil judicial cooperation framework”).
The presentation notes that it is in the UK and the EU’s mutual interest to reach such an agreement, in order to provide certainty as to which country’s court will hear a case, which law will be used and that judgments can be enforced in the UK and the EU. We wholeheartedly agree, but would welcome significantly more detail as to the basis on which the UK will seek to reach such an agreement.
On 30 May 2018, Denmark deposited its instrument of accession to the Hague Convention on Choice of Court Agreements, which means that the Convention will apply to all EU member states from 1 September 2018, as well as to Mexico and Singapore.
The Convention provides that courts of member states must respect exclusive jurisdiction clauses in favour of the courts of other member states, and must recognise and enforce judgments of the courts of other member states given pursuant to such clauses (subject to certain limited exceptions).
While currently the Convention only applies as between Mexico and Singapore and the EU member states (apart from Denmark), it will become more significant if ratified by the other countries that have signed the Convention but have yet to ratify it, namely the US, the People’s Republic of China, Ukraine and Montenegro.
From a UK perspective, the Convention may also become more significant after we leave the EU, and any agreed transition period comes to an end, so that the current rules on jurisdiction and enforcement of judgments under the Recast Brussels Regulation no longer apply to the UK. The UK government has indicated its intention that the UK will sign up to the Convention in its own right post-Brexit. Assuming that happens, it means that English court judgments should continue to be enforceable throughout the EU, where the English court had jurisdiction under an exclusive jurisdiction clause – even if no other arrangements on jurisdiction and enforcement are agreed between the UK and the EU (contrary to the UK’s intention to seek a bespoke agreement on these matters and/or an agreement to join the Lugano Convention).
In a recent decision, the High Court found that an auditor was not liable for break costs of some £32.7 million incurred as a result of its negligent advice in relation to the accounting treatment of interest rate swaps, as those costs fell outside the scope of the auditor’s duty of care: Manchester Building Society v Grant Thornton UK LLP  EWHC 963 (Comm).
The court reached this conclusion by applying the SAAMCO principle, derived from the decision of Lord Hoffmann in South Australia Asset Management Corpn v York Montague Ltd  AC 191 and expanded upon more recently by Lord Sumption in Hughes-Holland v BPE Solicitors  2 WLR 1029. In broad summary, the SAAMCO principle provides that, where an adviser has contributed a limited part of the material on which the claimant relied in deciding whether to enter into a transaction, the adviser will not be liable for all losses incurred as a result of the transaction, but only the foreseeable consequences of their information/advice being wrong.
In the present case, the court considered that the defendant had not assumed responsibility for the claimant being “out of the money” on the swaps because the break costs flowed from market forces – even though the claimant’s decision to close out the swaps was taken because the defendant’s advice had been wrong. The court’s conclusion was driven by its view that it would be a “striking conclusion” for an accountant who advised a client as to how certain transactions could be treated in its accounts to have assumed responsibility for the financial consequences of those transactions.
However, this was a finely balanced decision, and the uncertainty in this area of law highlights the importance of clearly defining the scope of an adviser’s duty when agreeing engagement terms. For more information, see our Banking litigation e-bulletin on the decision.
The Court of Appeal has held that a negligence claim against a broker of forward freight agreements was time-barred. The limitation period could not be extended on the basis that the claimant lacked the knowledge required to bring the claim until less than three years before commencing the action (under section 14A of the Limitation Act 1980): Nobu Su v Clarksons Platou Futures Ltd  EWCA Civ 1115.
The judgment emphasises that, to start time running, a claimant need not know for certain that it has a claim for damages, or even that it might have a claim for damages. Applying the decision of the House of Lords in Haward v Fawcetts  UKHL 9 (see our blog post here), it is sufficient that the claimant knew enough to make it reasonable to investigate further.
While this decision does not establish new principles, it will be welcome to defendants as a helpful reminder of the limits of section 14A. From a claimant’s perspective, it illustrates the need to get on and investigate potential claims, when it has information that makes it reasonable to do so, rather than waiting for certainty.
Filed under Limitation, Tort
We are pleased to release the third issue of our periodic publication “Cross-Border Litigation”, designed to highlight legal and practical issues specific to litigation with an international aspect.
Tapping into the expertise of the firm’s leading commercial litigators across the globe, the publication gives readers the benefit of their hands-on experience and flags key developments that should be on commercial parties’ radars.
Topics covered in this issue include:
- A selection of recent developments from across the globe
- Litigation funding on the rise internationally
- Judicial turf wars in Dubai
Is this the end of the “conduit” jurisdiction?
- Multi-jurisdictional litigation: Lessons from cross-border intellectual property enforcement
Our new Milan office and Laura Orlando
- The growing “internationalisation” of China’s courts
- Indonesia-related commercial contracts
Guide to dispute resolution clauses
To download the publication, click here.
To read the previous issues, click here.
In a recent decision, the Commercial Court has considered whether an arbitration claim was settled in without prejudice correspondence between the parties’ solicitors. It concluded that no binding settlement was reached, as the relevant offer was made subject to the conclusion of a formal settlement agreement and subject to board approval: Goodwood Investments Holdings Inc v ThyssenKrupp Industrial Solutions AG  EWHC 1056 (Comm).
The judge (Males J) noted that it is well established that words such as “subject to contract” indicate that parties do not intend to be bound until a formal contract is executed, and said that the same applies to an agreement which is stated to be subject to the board approval of one or both parties. The latter wording indicates that the person concluding the agreement does not have authority, or at any rate is not prepared, to commit the company unless and until approval is given. Further, the judge commented, since the directors are required to exercise independent judgment as to whether the transaction is in the best interests of the company, it is very hard to see how there could in such circumstances be an express or implied promise that approval would be forthcoming or was a mere formality.
The obvious implication is that parties who receive offers made subject to board approval cannot rely on a binding agreement having been reached unless and until approval is given.
It is possible for “subject to contract” type conditions to be dispensed with by necessary implication, but there was no indication of that in the present case. The judge rejected an argument that the parties’ agreement to adjourn the arbitration confirmed that a binding settlement had been reached. The parties had recognised that the arbitration might need to resume, and had asked the arbitrators to maintain their availability for the remainder of the period set aside for the hearing. That was inconsistent with a binding agreement having been reached.
The judge also rejected an argument that the offeror was under an “interim obligation” to seek board approval and not do anything to prevent approval being granted. It may have been reasonable to expect that approval would be given, but that was a risk that the offeree took.
The decision is also of interest as a relatively rare example of an application to the court under section 45 of the Arbitration Act 1996 for a ruling on a preliminary point of law. The arbitrators had given permission for the application to be made, due to the difficulties that would arise if the arbitrators were to consider the without prejudice correspondence only to find that no settlement had been reached. For more information on that aspect, see this post on our Arbitration Notes blog.
In a decision late last year, the Court of Appeal considered the interpretation of a provision which purported to cap the liability of a provider of IT systems for defaults occurring at different stages of the contract. In contrast to the High Court, which had held the clause imposed a single overall cap which varied depending on the point at which the first default occurred, the Court of Appeal held that there were two separate caps for defaults occurring within the two stages: Royal Devon and Exeter NHS Foundation Trust v Atos IT Services UK Ltd  EWCA Civ 2196.
James Farrell and Sophie Jones have published an article in the March/April 2018 edition of the Procurement & Outsourcing Journal in which they explore the lessons to be learned, particularly as to the importance of using clear and precise drafting for provisions limiting liability under a contract. Click here to download a copy.