Reference to CJEU as to whether EU-domiciled defendant has right to be sued in its state of domicile and to restrain non-EU proceedings by anti-suit injunction

The Court of Appeal has made a reference to the CJEU, asking for a preliminary ruling as to whether a defendant domiciled in an EU member state has the right, under the recast Brussels Regulation, to be sued in that state and to obtain an anti-suit injunction restraining proceedings in a non-EU jurisdiction. It further asks whether the availability of the injunction extends to a situation where the cause of action in the non-EU court isn’t available in the state of domicile: Gray v Hurley [2019] EWCA Civ 2222.

Previous Court of Appeal decisions have held that an employee has the right to be sued in their EU domicile and to restrain proceedings in a non-EU court. The court in this case considered, however, that those decisions were restricted to employees. Applying the same reasoning in all domicile cases would lead to extreme results and injunctions would be granted in circumstances where, if the Regulation did not apply, an English court would be unlikely to grant an injunction. It concluded, however, that the position was not sufficiently clear (acte clair) and therefore a reference should be made to the CJEU.

It is unlikely that the CJEU will give judgment before the end of 2020, when the transition period following Brexit is due to come to an end (assuming no extension). However, the withdrawal agreement provides that the CJEU will continue to have jurisdiction to give preliminary rulings in cases referred by the UK courts before the end of the transition period, and that such rulings will be binding in the UK.

Although the question arose in this case in the context of an attempt to restrain non-EU proceedings against an English-domiciled defendant, the question will have obvious implications for proceedings brought in the UK courts against EU-domiciled defendants post-Brexit – in particular if the CJEU decides that the Regulation does confer a right on EU-domiciled defendants to be sued in their home courts, rather than a non-EU court as the English court will be post-Brexit. Continue reading

Court of Appeal holds that UK anchor defendants can be sued for the sole purpose of establishing jurisdiction against foreign co-defendants

The Court of Appeal has held, by a majority, that the jurisdiction rules in the Brussels regime allow a defendant to be sued in a co-defendant’s domicile (rather than their  own domicile) even if the sole object of bringing the proceedings against the “anchor” defendant was to bring the foreign-domiciled defendant within the jurisdiction: JSC Commercial Bank Privatbank v Kolomoisky and Bogolyubov and others [2019] EWCA Civ 1708.

Although the decision was in the context of article 6(1) of the Lugano Convention, the conclusion applies equally to the identical provisions regarding co-defendants in “closely connected” claims in the Brussels Regulation (article 6(1)) and the recast Brussels Regulation (article 8(1)).

Accordingly, provided a claimant has a sustainable claim against an anchor English defendant, which it intends to pursue to judgment, it will be entitled to rely on the relevant EU rules to join a foreign defendant, where the court accepts that the claims are so closely connected that it is expedient to hear them together to avoid the risk of irreconcilable judgments. Jurisdiction will not be refused on the basis that the sole purpose in bringing the action was to sue the foreign defendant in the same proceedings.

The decision is also important for its ruling on the question of whether EU jurisdictional rules can be applied by analogy, or “reflexively”, to circumstances falling outside the rules’ scope. The court held that the Lugano Convention rules as to when a court may stay its proceedings in favour of parallel proceedings in another Convention state (or lis pendens) could be applied by analogy where the foreign proceedings were in a non-Convention state.

The findings regarding reflexive application are of particular interest in the context of a no deal Brexit scenario. In that scenario it is uncertain whether the courts of the remaining EU states will only have a power to stay their proceedings in favour of English proceedings in the circumstances specified in articles 33/34 of the recast Brussels Regulation (ie where the English court was first seised) or whether they will have a residual discretion to do so outside those circumstances, for example where there is an English exclusive jurisdiction clause. Previous High Court authority has taken the view that, given that  articles 33/34 expressly incorporate some degree of reflexive operation, it was not open to find that there is a discretionary power outside of these provisions (Gulf International Bank BSC v Aldwood [2019] EWHC 1666 – see our post).

While the court in this case did not directly consider that question, and the issue is ultimately a matter for the CJEU, the decision may leave open the scope for an argument that there is such a residual discretion. Continue reading

A no-deal Brexit: The implications for disputes

As we approach the deadline of 31 October, it is difficult to predict what will happen. But the prospect of a no-deal Brexit – either then or at some later date – remains a very real possibility. In this blog post we consider the implications of such an outcome for commercial litigation involving the English courts. For these purposes, we assume an exit date of 31 October, but the same issues will arise if there is an extension to the current deadline followed by a no-deal Brexit at a later date.

We have also recorded a webinar which explores the issues in more detail, as part of our series of webinars exploring the implications for business of a no-deal Brexit. The series can be accessed here. Continue reading

High Court finds there is no power to stay English proceedings to give effect to exclusive jurisdiction clause in favour of non-EU court unless proceedings were commenced first in the foreign court

The High Court has held that there is no power under the recast Brussels Regulation to stay English proceedings against an English domiciled defendant in favour of proceedings in a non-EU court commenced pursuant to an exclusive jurisdiction agreement in favour of that court, unless the foreign proceedings were commenced before the English proceedings: Gulf International Bank BSC v Aldwood [2019] EWHC 1666 (QB).

In a number of High Court cases decided under the Brussels I Regulation, which preceded the recast Brussels Regulation, the court held that the English court had a power to stay in favour of a non-EU court in some circumstances, including where there was an exclusive foreign jurisdiction clause in favour of the foreign court (see our posts here and here). This was on the basis that the provisions in the Brussel I Regulation could be applied by analogy, or reflexively. In other words, as an EU court had to stay its proceedings in favour of another EU court where there was an exclusive jurisdiction court in the other court’s favour, the same should apply where the chosen court was in a non-EU country.

The recast Brussels Regulation introduced new express powers in articles 33 and 34 giving an EU court the discretion to stay its proceedings in favour of identical or related proceedings in a non-EU country where the foreign proceedings were first in time. That left open the question what powers, if any, the court had where the foreign proceedings were second in time but there was an exclusive jurisdiction clause in favour of the foreign court.

The High Court has now held that there is no power to stay outside of the express provisions of articles 33 and 34 of the recast Brussels Regulation. The court commented that some aspects of reflexive effect have been incorporated into the recast Regulation; finding that there is a discretionary power outside of these provisions would conflict with the principles underpinning the interpretation of the Regulation, such as legal certainty and predictability.

This is a first instance decision, and it would not have been necessary for the judge to decide the point as he found the jurisdiction clause to be non-exclusive rather than exclusive. However, the decision potentially casts doubt on the effectiveness of English exclusive jurisdiction clauses in the event of a no deal Brexit where proceedings are commenced first in an EU member state court and where the Hague Convention on Choice of Court Agreements 2005 is found not to apply – either because the clause was agreed before the Convention came into force for the UK (whether that is taken to be 1 October 2015, or 1 November 2019 when the UK is due to rejoin the Convention in its own right – see this post) or because of the domicile of the parties (if for example all parties are EU-domiciled, the rules in the recast Brussels Regulation will take precedence over the Convention for jurisdiction purposes). In those circumstances, if the approach taken in the present case is correct, an EU27 court  will only be able to stay proceedings commenced in breach of an English exclusive jurisdiction clause where the English proceedings were commenced first in time.

It is also worth noting that the decision is consistent with the High Court judgment in UCP Plc v Nectrus Ltd [2018] EWHC 380 (Comm) (considered in this post), which similarly found – though in a very different context and without such a detailed analysis of the arguments relating to reflexive effect – that the court’s powers to stay proceedings in favour of a non-EU court under articles 33 and 34 are exhaustive. Continue reading

Upcoming webinar – The Hague Choice of Court Convention 2005 and the Hague Judgments Convention 2019: When and how will they apply?

On Tuesday 23 July 2019 (1-2pm BST), Anna Pertoldi and Jan O’Neill will deliver the latest in our series of webinars for Herbert Smith Freehills clients and contacts spotlighting legal and practical issues relevant to litigating cross-border disputes.

This webinar  will focus mainly on the Hague Convention on Choice of Court Agreements 2005 which applies where there is an exclusive jurisdiction clause. The scope of the 2005 Convention is currently limited, but in the case of a no deal Brexit it will assume increased importance as a potential means of protecting English jurisdiction clauses and enforcing English judgments in the EU. The webinar will examine:

  • The Convention’s scope – what it will and will not cover
  • Its relevance in a Brexit context, including the UK’s accession plans and risks arising over timing
  • How the Convention works in practice – similar to the Brussels regime but with some important differences

It will then consider the new 2019 Hague Judgments Convention (finalised on 2 July 2019) which, when in force, will apply to a wider range of judgments.

This webinar looks in some depth at these important Conventions and the issues they give rise to. It is relevant to you if you are negotiating jurisdiction clauses or may need to enforce a judgment after Brexit in an EU member state.

The webinar is part of our series of HSF webinars, which are designed to update clients and contacts on the latest developments without having to leave their desks. The webinars can be accessed “live”, with a facility to send in questions by e-mail, or the archived version can be accessed after the event. Please contact webinars if you would like to register for a webinar or obtain a link to the archived version.

New Hague Judgments Convention: finally adopted but may be some years before impact is felt

On Tuesday, 2 July 2019, the Hague Conference on Private International Law finalised a new treaty on enforcement of judgments: the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, or the 2019 Hague Judgments Convention.

The new Convention has been a long time in the making. Its origins go back to 1992, when work began on a general convention dealing with jurisdiction and enforcement of judgments. Political consensus could not be reached, initially, and so the Hague Conference decided to focus on the area where consensus was possible – jurisdiction and enforcement of judgments where the relevant court was chosen under an exclusive jurisdiction clause. That resulted in the 2005 Hague Choice of Court Convention.

The new Convention goes much further than the 2005 Convention, in that it is not limited to judgments based on exclusive jurisdiction clauses. And, in contrast to the 2005 Convention, employment and consumer contracts are within scope.

The Hague Conference press release describes the 2019 Convention as “a gamechanger in international dispute resolution”, saying it will be a single global framework, enabling the free circulation of judgments in civil or commercial matters, which will provide “better, more effective, and cheaper justice for individuals and businesses alike”.

The 2019 Convention is welcome, but it will of course only apply between those countries that ratify it and bring it into force. The European Commission announced on Wednesday that it will now start the process of preparing EU accession to the Convention, although the timescale for accession is uncertain. The UK will also be looking closely at accession in its own right in a post-Brexit scenario, subject to any transitional arrangements that may be agreed with the EU. But it is worth noting that the Convention won’t come into force for any state until (approximately) 12 months after ratification, and even then it won’t apply unless the proceedings that led to a judgment were instituted at a time when the Convention was in force for both the state of origin and the state where the judgment is to be enforced. This means that there will be some considerable time before the Convention applies to any judgment, even if the EU and the UK (and other countries) take early steps to accede to it.

Some may hope that the 2019 Convention will provide an alternative route to the easy enforcement of English judgments post-Brexit, when the dynamics for enforcement will become significantly more complex as the recast Brussels Regulation and the Lugano Convention will no longer apply to the UK (as discussed here and here for example). But the 2019 Convention should not be seen as a complete answer, in part because of the likely delay before its impact is felt, and in part because its effect is more limited than the Brussels/Lugano regime (recognition and enforcement can be refused on broader grounds, for example, and it deals only with enforcement rather than jurisdiction – apparently work is underway on a further instrument addressing jurisdiction). So while it is certainly a positive step, it is still hoped that the UK and EU will be able to agree other arrangements more closely replicating the current regime, including an agreement for the UK to join the Lugano Convention.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Jan O'Neill
Jan O'Neill
Professional support lawyer
+44 20 7466 2202

Article published – Exclusive English jurisdiction agreements agreed before no-deal Brexit may not come within Hague Choice of Court Convention

As we have previously reported, guidance recently issued by the European Commission suggests exclusive English jurisdiction agreements entered into between October 2015 and exit day may not, in the case of a no-deal Brexit, come within the Hague Convention on Choice of Court Agreements 2005.

Anna Pertoldi has published a post on Practical Law’s Dispute Resolution which looks in more detail at this worrying development and the practical steps parties should take where they are, or are considering, an exclusive English jurisdiction clause. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

EU guidance on no deal Brexit suggests increased risk Hague Convention on Choice of Court Agreements won’t apply to exclusive English jurisdiction clauses agreed pre-Brexit

As we have previously noted, there is some uncertainty over whether, following a no deal Brexit, EU27 countries will apply the 2005 Hague Convention on Choice of Court Agreements where an exclusive English jurisdiction clause was agreed before exit day. This is sometimes referred to as the change of status risk, and it arises because the Convention applies only to exclusive jurisdiction clauses agreed after the Convention came into force for the chosen state. The UK is currently a party to the Convention by virtue of its EU membership, but that will cease on exit day and the UK will then re-join in its own right. As things currently stand, following the recent delays to Brexit and the UK’s resultant suspension of its accession to the Convention, the UK will re-join with effect from 1 November 2019.

The question therefore is whether EU27 countries will treat the Convention as having been in force for the UK since 1 October 2015, when the Convention came into force for the EU generally, or only from when it re-joins on 1 November. In the latter case, the Convention will not apply to exclusive English jurisdiction clauses agreed before that date, and therefore the recognition of such clauses and the enforcement of resulting English judgments will be a matter for domestic law in each EU27 country. In those circumstances most (but not necessarily all) EU countries are likely to enforce English judgments in many circumstances, but the type of judgment enforced may be more limited and the procedures involved more time-consuming and costly.

The change of status risk appears to have been heightened by recent guidance issued by the European Commission concerning civil justice in the case of a no deal Brexit. The guidance is not entirely clear, but it seems to suggest that the Commission’s view is that the Convention will not apply to exclusive English jurisdiction agreements concluded before exit day. This is not of course conclusive – it could be that national courts in the EU27, and ultimately the CJEU, will adopt a different interpretation. However, it is obviously unhelpful to parties who are entering into exclusive English jurisdiction clauses now, or have done so since 1 October 2015, and would wish to obtain the benefit of the Convention in the event of a no deal Brexit.

We have updated our decision tree on enforcement of English judgments in the EU27 post-Brexit (which was first published on 26 March 2019) to reflect the recent delays to Brexit and the UK’s accession to the Hague Convention. Please click on the image below to access the document.

Article published – Brexit extension until 31 October 2019: what are the key points for disputes?

Now that the UK and the EU have agreed a further extension of Article 50 until 31 October 2019, parties have more time to consider, and in some cases reduce, the potential impact of a no deal Brexit on any court proceedings.

Anna Pertoldi published a post on Practical Law’s Dispute Resolution blog back in January which considered what litigants needed to know if there was a no-deal Brexit on 29 March 2019. She has recently published a further post which looks at where we are now, given the recent extension. Click here to read the latest post (or here for the Practical Law Dispute Resolution blog homepage).

UK suspends accession to Hague Choice of Court Convention

On Friday last week (29 March 2019), the depositary for the 2005 Hague Convention on Choice of Court Agreements issued a notice communicating that the UK’s accession to the Convention is suspended until 13 April or 23 May 2019, depending on the date of the UK’s exit from the EU, following a declaration to that effect received from the UK government last Thursday. The intention is that the accession should take place the day after the UK’s exit from the EU, to achieve continuity in the Convention’s application to the UK following Brexit (when the UK will cease to be a party to Hague by virtue of its EU membership).

The UK deposited its instrument of accession to the Convention in December 2018 (see this post) with the intention that the Convention would come into force for the UK on 1 April 2019 (in accordance with article 31 which provides for the Convention to enter into force on the first day of the month following the expiration of three months after the relevant instrument is deposited). That would have left a short “gap” in the Convention’s application to the UK following the original Brexit date of 29 March. Assuming there are no objections to the recent suspension of the UK’s accession, it seems that such a gap may now be avoided.

However, there remains some uncertainty over whether other contracting states to the Convention will apply Hague rules where an exclusive English jurisdiction clause was agreed before the UK re-joined Hague in its own right, even if the clause was agreed when the UK was party to Hague by virtue of EU membership (referred to as the “change of status” risk).

Click here for our recently published decision tree aimed at helping to determine which rules will apply to enforcement of English judgments in the EU27 post-Brexit – whether the current rules in the recast Brussels Regulation, or the 2005 Hague Convention, or the local rules in each EU27 country. [NOTE: Linked version amended as at 9 April 2019]