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
+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

Court of Appeal finds exclusive jurisdiction clause in settlement agreement with employee ineffective, as it was not entered into after the particular dispute had arisen

The Court of Appeal has held that an exclusive jurisdiction clause in a settlement agreement between an employer and employee was not effective to give jurisdiction to the chosen court. The dispute related to an individual contract of employment and the jurisdiction agreement had not been entered into after the particular dispute had arisen, as there had been no prior communication between the parties concerning the issue: Merinson v Yukos International UK BV [2019] EWCA Civ 830.

Article 22 of the recast Brussels Regulation provides that, in matters relating to individual contracts of employment, an employee may only be sued in the courts of their domicile. A jurisdiction clause cannot therefore be relied on by the employer, unless (under article 23(1)) it was entered into after the dispute had arisen.

In this case the Court of Appeal found that, for a jurisdiction clause to be effective under article 23(1), at the time it is concluded the parties must disagree on a specific point and proceedings between them must be imminent or contemplated. It is not enough that there is merely a potential, rather than an actual, dispute between the parties.

This decision is significant as it means that a jurisdiction clause in a settlement agreement entered into with certain categories of defendants (such as employees, consumers and insurance policy holders) will only be effective in respect of matters actively in dispute at the time the settlement is reached. It will not extend to the release of potential future disputes under wide releases in the agreement, even if those disputes are within the separate contemplation of the parties, if they are matters relating to the employment contract, or consumer contract, or insurance policy. Continue reading

Commercial Court gives guidance on definition of ‘consumer’ under Recast Brussels Regulation in cryptocurrency futures trading case

The Commercial Court has confirmed that an individual investor, with substantial means and more knowledge and experience than the average person, may still be considered a ‘consumer’ for the purposes of Article 17 of the Recast Brussels Regulation (No 1215/2012), even when contracting to trade a specialised product such as cryptocurrency futures: Ramona Ang v Reliantco Investments Limited [2019] EWHC 879 (Comm).

Where article 17 applies, the consumer can only be sued in the courts of their domicile, whereas the consumer has a choice as to whether to bring proceedings in that court or in the courts of the defendant’s domicile. These provisions will trump an exclusive jurisdiction clause in the relevant contract (subject to limited exceptions, such as where the jurisdiction clause is entered into after the dispute has arisen).

The decision provides some clarification as to the test to be applied when considering whether an individual investor is a consumer for these purposes. It emphasises that the key question is the purpose for which the investment was entered into, and whether (as article 17 requires) that purpose can be regarded as being outside the individual’s trade or profession. Each case will turn on its facts.

For more information see our Banking litigation e-bulletin on the decision.

Court of Appeal finds ISDA jurisdiction clause trumps competing clause in related contract

A recent Court of Appeal judgment provides further assurance that jurisdiction clauses within standard form ISDA documentation will not readily be displaced by contrary jurisdiction clauses in related contracts: BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2019] EWCA Civ 768. Upholding the first instance decision, the Court of Appeal gave effect to an English jurisdiction clause in an ISDA Master Agreement over an apparently competing Italian jurisdiction clause in a related financing agreement, despite a provision in the Schedule to the ISDA Master Agreement stating that, in the event of conflict, the financing agreement would prevail.

Key to the Court of Appeal’s decision was its conclusion that there was no conflict between the jurisdiction clauses, which were found to govern different legal relationships and were therefore complementary, rather than conflicting. The Court emphasised that factual overlap, between potential claims under the ISDA Master Agreement and a related financing agreement, did not alter the legal reality that claims under the two agreements related to separate legal relationships.

The Court of Appeal’s decision is not unexpected, as it is in line with the recent Court of Appeal decision in Deutsche Bank AG v Comune Di Savona [2018] EWCA Civ 1740, which expressly approved the first instance decision in the present case. However, it will be welcomed as further evidence of the English court’s emphasis on construing commercial contracts, and in particular standard form ISDA documentation, in order to achieve market certainty and predictability.

Following the recent publication of French and Irish ISDA Master Agreements in light of Brexit, the court’s emphasis on predictability may serve as a timely reminder of the advantages of selecting English jurisdiction for ISDA Master Agreements.

For more information see our Banking litigation e-bulletin on the decision.

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]