High Court finds defendant submitted to the jurisdiction by applying for extension of time to serve defence

The High Court has held that a defendant submitted to the jurisdiction of the English court by applying for an extension of time for service of a defence, in circumstances where it had indicated an intention to defend the proceedings in an acknowledgement of service and had not reserved its rights to challenge jurisdiction: Aelf MSN 242, LLC (a Puerto Rico limited liability company) v De Surinaamse Luchtvaart Maatschappij N.V. D.B.A. Surinam Airways [2021] EWHC 3482 (Comm).

Recent cases have tended to find that there has been no submission, even where defendants have taken part in some way in proceedings (see for example our posts here and here), but this case is a reminder that the court may decide there has been a submission if an unequivocal step has been taken which cannot be interpreted as consistent with a challenge to the jurisdiction, particularly where there has been no reservation of rights.

The decision underlines the importance of reserving the right to challenge jurisdiction and taking no steps in the proceedings whenever a challenge is being considered, whether that challenge will be on the basis that the court has no jurisdiction under conflict of laws rules (or should not exercise any jurisdiction it has) or, as in this case, on the basis that proceedings have not been served correctly. Continue reading

Court of Appeal gives guidance on jurisdiction rules in libel claims

The Court of Appeal has clarified how section 9 of the Defamation Act 2013 should be interpreted, finding that the requirement it introduced for the court to be satisfied that England is the most appropriate place to hear a libel dispute is merely a modification of the usual regime which applies where a claimant needs permission to serve outside of the jurisdiction (or where a defendant who is served in England challenges the court’s jurisdiction). It follows that the usual rules as to burden and standard of proof for such applications also apply. The decision also gives helpful guidance on when evidence of foreign law will be needed and how this can be provided: Soriano v Forensic News LLC [2021] EWCA Civ 1952.

Section 9 was introduced to counter so-called “libel tourism” – libel claims brought in England which have little connection with the jurisdiction. Under section 9, a claim against a foreign defendant can only proceed where the court is satisfied that England is, of all the places in which the statement complained of has been published, clearly the most appropriate place in which to bring the action.

There have only been a handful of cases so far on section 9, so this decision provides useful clarification of a number of important points. It is significant in rejecting an interpretation which would have put onerous obligations on a claimant, although claimants based abroad and those with a global reputation still face a potentially difficult and expensive task in persuading the court that England is clearly the appropriate place for the case to be heard Continue reading

High Court finds submission to jurisdiction no bar to staying English proceedings in favour of Thai proceedings following change in circumstances

The High Court has granted a stay of English proceedings on the basis that the Thai courts were clearly and distinctly the more appropriate forum to determine the dispute. The stay was granted even though the English proceedings had begun five years earlier, and the defendant had unsuccessfully challenged jurisdiction at that time and had subsequently submitted to the jurisdiction by serving a defence: Apollo Ventures Co Ltd v Manchanda [2021] EWHC 3210 (Comm).

The stay was granted in light of a change in circumstances – the defendant, M, was the only remaining defendant in the English action, the claims against other defendants having been struck out when the claimant failed to provide security for costs. This meant that there was no longer a risk of inconsistent judgments against different defendants in different jurisdictions if the claim against M was stayed, a key consideration when jurisdiction was challenged originally. The court also took into account the existence of similar proceedings pending in Thailand, which were commenced by the claimant and its shareholders after the English proceedings began and were much further advanced than the English proceedings.

This case demonstrates that it is possible to apply for a stay of English proceedings a considerable time after the proceedings have begun, even where the defendant has submitted to the jurisdiction. An extension of time is however required and the application should be made promptly, as the court will apply the Denton criteria (outlined here), meaning any delay will be taken into account. The stay will likely only be granted in unusual circumstances, as on the facts of this case. Continue reading

Supreme Court confirms wide interpretation of “damage” for the purposes of the common law jurisdictional gateway for tort claims and clarifies when English law may apply to foreign law claims

The Supreme Court has held in the context of a personal injury claim (Lord Leggatt dissenting) that direct damage in the jurisdiction is not required in order for a claim to come within the tort jurisdictional gateway in the CPR, so that permission can be granted to serve the proceedings on a defendant outside the jurisdiction (subject to also establishing that there is a real issue to be tried and the English court is the appropriate forum): FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45.

It has been unclear for some time whether the common law test was the same as the test under the recast Brussels Regulation (and the Lugano Convention), where direct damage in the jurisdiction is a requirement, so this decision provides clarification.

Outside of the personal injury context, the mere fact there has been some financial loss incurred where the claimant is based may still be insufficient to come within the gateway, but it will be necessary to see how the principles laid down by this decision are applied in future cases.

In all cases a claimant will still have to prove that England is the appropriate forum for the claim, so even where the gateway is passed the court retains the power to prevent unsuitable cases proceeding before the English courts.

The Supreme Court also provided guidance on pleading and proving foreign law. There are two conceptually different rules: the “default rule”; and the “presumption of similarity” rule. The default rule treats English law as applicable when foreign law is not pleaded by any party. The presumption of similarity rule applies where a foreign law is pleaded as being applicable, but no detail is provided as to the content of that law. In those circumstances, the court may (in effect) apply English law if it is reasonable to expect that the foreign law is likely to be materially similar to English law on that issue.

Given the uncertainty over when a court will consider it reasonable to expect that a foreign law is materially similar to English law, the safer course is to obtain foreign law advice and expressly plead the content of that law. Continue reading

High Court finds defendant did not submit to the jurisdiction by applying for strike out at the same time as challenging jurisdiction

The High Court has rejected an argument that a defendant submitted to the jurisdiction by applying to strike out the claim against him at the same time as challenging jurisdiction: PJSC Bank “Finance and Credit” v Zhevago [2021] EWHC 2522 (Ch).

The court considered two tests set out in the authorities to determine whether a defendant has submitted to the jurisdiction: first, whether there has been wholly unequivocal conduct demonstrating an intention to have the case tried in this jurisdiction; and second, whether there has been conduct that is “only necessary or only useful” if the defendant’s objection to the jurisdiction has been waived. The court held that these are not in fact different tests: the former is just a more modern and succinct statement of the latter.

On the facts of this case, the court held that the test was not met. Applying to strike out at the same time as challenging jurisdiction, without expressly stating that the strike out application was without prejudice to the jurisdiction challenge, was “at best equivocal”. It did not amount to the wholly unequivocal conduct required for a submission to the jurisdiction. Nor was the strike out challenge “only necessary or only useful” if the jurisdiction challenge was abandoned.

In practice however, and despite this decision, it is advisable for a defendant intending to challenge jurisdiction to make sure there is no room for doubt as to whether its conduct is consistent with such a challenge. In particular, it may be wise to leave a strike out application until after the jurisdiction challenge has been determined (if the application is still necessary at that point) or – at the very least – state expressly in the application notice that the strike out application (or any similar application) is without prejudice to the jurisdiction challenge.

The decision also acts as a reminder that an individual who is a company director or other officer and has registered a UK address for service under the Companies Act 2006 can be served at that address, even if they are not in fact living in the jurisdiction at the time the proceedings are served. This is consistent with previous authority (see for example this post). Continue reading

High Court rejects jurisdiction challenge on the basis that claim regarding contractual obligation to provide information did not derive from French insolvency proceedings

The High Court has ruled that a claim for a declaration regarding a borrower’s obligations to provide information under a facility agreement was not a claim which itself derived from borrower’s French insolvency proceedings for the purposes of Article 6(1) of the Recast European Insolvency Regulation (EU) 2015/848 (the “Recast Insolvency Regulation”). As a result, the claim could be heard in England pursuant to the exclusive jurisdiction clause contained in the facility agreement: Emerald Pasture Designated Activity Co v Cassini SAS [2021] EWHC 2010 (Ch).

This decision provides useful clarification of the scope of Article 6(1), which will remain relevant (despite Brexit) to cases where insolvency proceedings were commenced in an EU Member State prior to 31 December 2020. In particular, it will provide some comfort to claimants as to the ability to rely on English jurisdiction provisions in agreements, even where the defendant is in insolvency proceedings to which the Recast Insolvency Regulation applies. However, it should be noted that this claim concerned enforcement of the defendant’s contractual obligation to provide information. The position may differ for financial claims.

Further, as a result of the Brexit withdrawal arrangements, insolvency proceedings commenced in an EU member state after 31 December 2020 would not be automatically recognised in the UK (and any recognition would be under the Cross Border Insolvency Regulations 2006 (“CBIR”)). This means a defendant could not rely on Article 6(1) to challenge jurisdiction (albeit the defendant may rely on the automatic stay of English civil proceedings if recognition was obtained under the CBIR). Continue reading

European Commission recommends that EU reject UK bid to join Lugano Convention

The European Commission has today released its anticipated communication to the European Parliament and the Council confirming the Commission’s view that the EU should not consent to the UK’s application to accede to the Lugano Convention. If this position is reflected in the EU’s formal response to the UK’s application, the UK will not be able to accede to the Convention as it requires the unanimous consent of current contracting parties.

The Commission’s stance is not surprising in light of recent press reports suggesting that the Commission was opposed to UK membership of the Convention (as referred in our previous post, here). The Commission justifies its stance by saying that it sees the Convention as a “flanking measure” for the EU’s economic relations with the EFTA/EEA countries via the internal market. In relation to all other third countries, it states, the EU’s “consistent policy” is to promote cooperation within the framework of the multilateral Hague Conventions. It concludes:

“The United Kingdom is a third country without a special link to the internal market. Therefore, there is no reason for the European Union to depart from its general approach in relation to the United Kingdom. Consequently, the Hague Conventions should provide the framework for future cooperation between the European Union and the United Kingdom in the field of civil judicial cooperation.”

At the end of the communication, the Commission states that it “informs the European Parliament and the Council of its assessment, and gives them an opportunity to express their views, before it will inform the Lugano Depositary accordingly”. Our understanding is that the decision will ultimately be for the Council, by qualified majority voting (ie 55% majority, or 15 out of the 27 Member States, representing at least 65% of the EU population).

The Commission’s communication also notes that it is planning to propose that the EU joins the 2019 Hague Judgments Convention “in the near future” – in which case, if the UK also joins that Convention, it would apply to future judicial cooperation between the UK and the EU. That would indeed be a positive step although, as we have previously noted, Hague 2019 will not come into force until (approximately) 12 months after ratification, and even then will only apply as between the UK and the EU where the proceedings that led to a judgment were instituted after the Convention was in force for both the UK and the EU.

Anna Pertoldi
Anna Pertoldi
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Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608

Okpabi v Shell: Supreme Court allows appeal in jurisdictional challenge relating to parent company duty of care

On 12 February, the Supreme Court handed down its judgment in a high profile jurisdictional challenge relating to group claims brought against Royal Dutch Shell Plc and its Nigerian subsidiary in connection with alleged pollution in the Niger Delta.  The decision will be of great interest – and potential concern – to all UK domiciled holding companies, particularly those in the extractive sector and others with businesses entailing environmental risks.

The Supreme Court unanimously allowed the claimants’ appeal, finding that the English court does have jurisdiction over the claims. It held that (1) the Court of Appeal materially erred in law by conducting a mini-trial in relation to the arguability of the claim at the jurisdiction stage, and (2) it was reasonably arguable that the UK domiciled Shell parent company owed a duty of care to the claimants: Okpabi and others v Royal Dutch Shell Plc and Shell Petroleum Development Company of Nigeria Ltd [2021] UKSC 3.

The decision provides further consideration of the circumstances in which a parent company may owe a duty of care to those affected by the acts or omissions of its foreign subsidiary, an issue that the Supreme Court considered in its recent judgment in Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) [2019] UKSC 20 (“Vedanta”) (which was heavily relied upon by the Supreme Court in this case).

The present decision emphasises that, in assessing at a jurisdictional stage whether there is an arguable duty of care owed by the parent company, the judge should not be drawn into a mini-trial to evaluate the factual evidence adduced, but should accept the factual assertions made in support of the claim by the claimants “unless, exceptionally, they are demonstrably untrue or unsupportable”. This will constrain defendants in seeking to challenge the factual basis on which claims are advanced, and many will be concerned that they are more vulnerable to weak and speculative claims being allowed to proceed in the English courts as a result of this judgment.

Further, UK domiciled holding companies will wish to scrutinise carefully the indicia by which it was established that a sufficiently arguable parent company duty of care existed in this case. The Supreme Court held that there was an arguable case that the parent company had: taken over the management or joint management of the relevant activity of the subsidiary; and/or promulgated group wide safety / environmental policies and took active steps to ensure their implementation such that a duty of care could arise.

The Supreme Court also adopted the analysis and conclusions of Sales LJ, who had dissented in the Court of Appeal, and who emphasised the significance of the fact that the Shell group is organised vertically on business and functional lines, rather than simply by corporate status. In the Supreme Court’s view, there was a triable issue as to whether this vertical organisational structure made it a group business that was in management terms a single commercial undertaking, with separate legal personality becoming largely irrelevant.

While UK parent companies will wish to give careful consideration to their own management structures, policies and practices in light of this judgment, significant uncertainty endures as to the precise circumstances in which a parent company duty of care will in fact arise. There is no special or separate legal test applicable to the tortious responsibility of a parent company for the acts of its subsidiary, and each case will need to examined on its own facts. Continue reading

Brexit: key practical implications for disputes and dispute resolution clauses

Despite the UK and EU having finalised a Trade and Cooperation Agreement to govern their trading and security relationship following the end of the Brexit transition period, there remain a number of uncertainties when it comes to commercial dispute resolution in cases involving the UK and the EU. In this post we look at some key practical points for parties to consider, taking into account both what we do know and what remains unclear.

The main source of uncertainty arises from the fact that the EU has not yet indicated whether it will consent to the UK’s accession to the 2007 Lugano Convention. It was hoped that a post-Brexit trade deal would pave the way for a further agreement on the UK’s accession to that Convention, but a month on from agreement being reached on the trade deal we are still waiting for a decision.

The position should become clear by April, since the UK submitted its application for permission to accede on 8 April 2020 and the Convention provides that contracting parties “shall endeavour to give their consent” within a year – though that is not a hard deadline. If consent is given, the Convention will come into force as between the UK and the EU on the first day of the third month following the UK’s deposit of its instrument of accession, and will apply to proceedings commenced after it comes into force.

In the meantime, two things are clear: (i) the recast Brussels Regulation no longer applies to jurisdiction and enforcement of judgments as between the UK and the EU, unless proceedings were commenced in a UK or EU court before the end of 2020; and (ii) the UK re-joined the 2005 Hague Convention on Choice of Court Agreements in its own right from 1 January 2021 (having previously been party to it by virtue of EU membership) so that the 2005 Convention now applies as between the UK and the EU in matters falling within its scope (as explained below).

Against that background, below are some key practical points for parties to consider in matters involving the UK and the EU. Continue reading

Article published – Does the Hague Choice of Court Convention 2005 apply to asymmetric jurisdiction clauses?

With the end of the Brexit transition period on 31 December 2020, and the lack of clarity as to whether the EU will consent to the UK’s accession to the Lugano Convention, attention is focused more than ever on the Hague Convention on Choice of Court Agreements 2005. Hague 2005 is however subject to a number of limitations, not least that it applies only where there is an exclusive jurisdiction clause in favour of the court of a contracting state. The accepted view among most commentators is that “exclusive” for these purposes does not include asymmetric or one-way jurisdiction clauses of the sort often favoured by finance parties, but some recent English decisions have queried whether that is in fact the case.

Anna Pertoldi has published a post on Practical Law’s Dispute Resolution Blog in which she considers the position. Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage). Or for more information on the impact of Brexit more generally on commercial litigation involving the English courts, see this previous post on Litigation Notes.