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.

Court of Appeal gives guidance on how to apply jurisdiction test laid down by Supreme Court

The Court of Appeal has considered how the test for establishing English jurisdiction should be applied where there is a dispute over the facts relevant to jurisdiction: Kaefer Aislamientos SA de CV v AMS Mexico SA de CV [2019] EWCA Civ 10.

Where a claimant needs permission to serve proceedings out of the jurisdiction, the claimant has to establish that a relevant jurisdiction gateway applies, eg on the basis that the defendant has committed a breach of contract within the jurisdiction. The same is true where the claimant asserts an entitlement to serve out of the jurisdiction without the court’s permission under an article of the recast Brussels Regulation, eg on the basis of a jurisdiction clause in favour of the English courts.

The test has in the past been expressed as the need to establish a “good arguable case” as to the application of the relevant gateway/article. This test was intended to be straightforward, but has become, in the Court of Appeal’s words, “befuddled by ‘glosses’, glosses upon glosses, ‘explications’ and ‘reformulations’.”

The Supreme Court, in two cases in 2018, sought to clarify the test. However, how it applies in practice has not been entirely clear. The Court of Appeal in the present case has sought to interpret each limb of the test. It has, in particular, given its view that the court must consider the relative merits of the parties’ arguments, rather than merely requiring the claimant to surmount a set evidential threshold. There remains however plenty of scope for further debate on the Supreme Court’s formulation and how it applies in any particular case. Continue reading

UK deposits instrument of accession to Hague Convention on Choice of Court Agreements

On 28 December 2018, the UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements 2005. The Convention will therefore come into force for the UK on 1 April 2019, in accordance with article 31 of the Convention which provides for it to enter into force on the first day of the month following the expiration of three months after the relevant instrument is deposited.

The government had previously declared its intention to sign up to the Convention with effect from 1 April, in case the draft withdrawal agreement that has been agreed between the UK and the EU is not ultimately entered into. The deposit of the instrument of accession now assures that this will take place.

If the withdrawal agreement is entered into, the UK will withdraw the instrument of accession. In that case, during the transition period provided for in the withdrawal agreement, until the end of December 2020, the UK will be treated as an EU member state for the purposes of the Convention.

For more information on the impact of the UK’s accession to the Hague Convention on jurisdiction and enforcement of judgments post-Brexit, see our post Brexit, deal or no deal: A litigator’s perspective.

Brexit, deal or no deal: a litigator’s perspective

Over the past couple of weeks, the government has published the final text of the draft Withdrawal Agreement setting out the arrangements for the UK’s withdrawal from the EU on 29 March 2019 and the draft Political Declaration on the future relationship between the EU and the UK. This is therefore a good opportunity to consider the impact of Brexit from a litigator’s perspective, whether or not a withdrawal deal is reached. (Although the deal has now been approved by EU leaders, it still faces highly uncertain votes in the UK Parliament.) So, what are the implications for English civil litigation?

With a deal

The draft Political Declaration does not contain anything of particular relevance so far as English civil litigation is concerned, focusing instead on matters such as trade and economic cooperation, law enforcement and criminal justice, foreign policy, and security and defence. This may not be seen as surprising, as the issue of civil judicial cooperation is usually dealt with outside of free trade agreements and we understand that the EU and UK did not discuss its inclusion, but it is nonetheless disappointing not to at least reference a shared objective to maintain cooperation in this area.

The draft Withdrawal Agreement is more significant, from a litigation perspective. It preserves various provisions relating to civil cooperation for the duration of a transition period to be established by the agreement, through to 31 December 2020. In particular:

  • By article 66, current rules on applicable law in contractual and non-contractual matters under the Rome I and Rome II Regulations (Regulations 593/2008 and 864/2007) will apply to contracts concluded, or events giving rise to damage, before the end of the transition period.
  • By article 67, current rules on both jurisdiction and enforcement of judgments under the recast Brussels Regulation (Regulation 1215/2012) will apply where proceedings are commenced before the end of the transition period.
  • By article 68, current provisions relating to service and the taking of evidence (under Regulations 1393/2007 and 1206/20011) will apply where the relevant document for service or request for the taking of evidence was received before the end of the transition period.

After the end of the transition period, how these matters are to be dealt with will depend on what arrangements (if any) are agreed during the transition period. It is to be hoped that, in relation to jurisdiction and enforcement at least, something can be agreed which broadly mirrors the current arrangements under the recast Brussels Regulation or, at a minimum, an agreement can be reached for the UK to participate in the Lugano Convention. The UK government has previously indicated that this is its intention (see here).

Without a deal

If, however, the UK leaves the EU on 29 March without a deal, there clearly will not be time to put in place any such arrangements before the UK’s exit. In those circumstances, the position will be as summarised below. Continue reading

CJEU finds abuse of dominance claims may come within jurisdiction clause

The European Court of Justice (CJEU) has ruled that a jurisdiction clause could apply to claims alleging abuse of a dominant position, contrary to article 102 TFEU, even if the clause did not expressly refer to claims based on competition law: Apple Sales International and others v MJA acting as liquidator of, Case C-595/17.

This decision contrasts with the decision in CDC Hydrogen Peroxide SA (Case C-352/13), a follow-on damages claim relating to a cartel. The CJEU in that case held that a jurisdiction clause would only apply to competition law claims arising out of a cartel if the clause made express reference to such claims.

According to the CJEU, the key in deciding whether competition claims are within a jurisdiction clause (absent express reference) is to consider whether the anticompetitive conduct has a connection with the contractual relationship. While an unlawful cartel is in principle not directly linked to the contractual relationship between a cartel member and a third party affected by it, the abuse of a dominant position may be connected to a contractual relationship, in which case the clause may cover the claim regardless of whether there is an express reference.

Amel Fenghour, an associate in our disputes team, considers the decision further below. Continue reading

Applying the Hague Choice of Court Convention post-Brexit

The government has set out how it plans, in the event of a “no deal” Brexit, to ensure that the UK will continue to apply the Hague Choice of Court Convention, which currently applies to the UK by virtue of its EU membership.

As explained previously, the government has made it clear that, in the event of a no deal, the UK would re-join the Convention in its own right, and that it anticipates the Convention would come into force by 1 April 2019. That would mean that the Convention would govern jurisdiction and enforcement of judgments as between the UK and the EU (as well as the other contracting states of Mexico, Singapore and Montenegro) where there was an exclusive jurisdiction clause in favour of one of those states – unless and until some other arrangement is put in place, such as an agreement for the UK to join the Lugano Convention (which applies more broadly than Hague, including because it is not limited to exclusive jurisdiction agreements) or a bespoke agreement between the UK and the EU on jurisdiction and enforcement of judgments.

The Foreign and Commonwealth Office has now published a command paper and explanatory memorandum in relation to the Hague Convention. This explains that “if still appropriate as part of ‘No Deal’ planning”, the UK intends to deposit the relevant instrument of accession so that, assuming that is done before the end of December, the re-entry date of 1 April 2019 will be achieved (since under the terms of the Convention it enters into force on the first day of the month following three months after deposit of the relevant instrument).

There is however some uncertainty as to the Convention’s continuity of application, given that the UK will cease to be a contracting state when it leaves the EU three days earlier, on 29 March. This is because the Convention applies only where an exclusive jurisdiction clause was agreed after the Convention came into force for the chosen state and proceedings were instituted after the Convention came into force for the state of the proceedings.

In an effort to plug this gap, so far as it can do so unilaterally, the UK government has made a statutory instrument, the Civil Jurisdiction and Judgments (Hague Convention on Choice of Court Agreements 2005) (EU Exit) Regulations 2018. The Regulations aim to ensure that, so far as the UK is concerned, its membership of the Convention will be treated as seamless from when it took effect for EU member states on 1 October 2015. In brief, the intention is that:

  • Where an exclusive jurisdiction clause in favour of a (non-EU) Hague contracting state (ie Mexico, Singapore or Montenegro) was agreed pre-Brexit, the UK courts will continue to respect that jurisdiction clause, and continue to enforce judgments where the relevant court took jurisdiction based on it, in circumstances where the UK courts would do so currently under Hague.
  • Where an exclusive jurisdiction clause in favour of a Hague contracting state (including EU member states) was agreed post-Brexit but before the Convention re-enters into force for the UK (that is, assuming all goes to plan, in the narrow window between 29 March and 1 April), the UK courts will respect that jurisdiction clause, and enforce judgments where the relevant court took jurisdiction based on it – whether the UK courts would do so currently under Hague or under the recast Brussels Regulation.

The government has said that it will publish another statutory instrument dealing with transitional provisions relating to the recast Brussels Regulation. We will have to wait for that before we have a complete picture, in particular as to how the UK courts will, post-Brexit, treat jurisdiction clauses in favour of EU member states which were agreed pre-Brexit.

As the government recognises, the UK cannot legislate for how other Hague contracting states (including EU member states) will treat exclusive jurisdiction clauses in favour of the UK which were agreed before the Hague Convention re-enters into force. Unfortunately, that piece of the puzzle is likely to remain unclear for some time.

High Court finds exclusive jurisdiction provisions in recast Brussels Regulation only apply to EU Domiciled defendants

The High Court has held that article 24(5) of the recast Brussels Regulation, which gives exclusive jurisdiction to the court where a judgment is to be enforced, does not apply where a defendant is domiciled outside of the EU: Integral Petroleum SA v Petrogat FZE [2018] EWHC 2686.

The court considered itself bound to follow the decision in Choudhary v Bhattar [2009] EWCA 1176, a Court of Appeal decision on article 22 of the Brussels I Regulation, the predecessor to article 24(5). Choudhary has been subject to much criticism in subsequent case law, and the wording of the article has since changed. The court considered, however, that the criticisms were obiter and the reasons for the change in the wording of article 24 were not sufficiently clear for the decision to be distinguished.

The present decision is also of interest in calling, once again, for the Civil Procedure Rules Committee to extend the common law gateways for service outside of the jurisdiction to apply to enforcement of orders (not only judgments), so as to encompass committal applications. Continue reading

Brexit “no deal” notice on jurisdiction and enforcement of judgments

As part of its second batch of “no deal” technical notices, the government has today published a guidance notice entitled: Handling civil legal cases that involve EU countries if there’s no Brexit deal.

The notice contains little that was not already obvious. If no deal is agreed, there would be no agreed EU framework for ongoing civil judicial cooperation between the UK and EU countries. The UK would retain the Rome I and Rome II rules on applicable law, which generally do not require reciprocity to operate, but the rules governing jurisdiction and enforcement of judgments between EU member states (under the Recast Brussels Regulation 1215/2012) would no longer apply to the UK. Nor would the Lugano Convention, which currently governs jurisdiction and enforcement between the UK and Iceland, Norway and Switzerland – though, as the notice says, this would not prevent the UK applying to re-join the Lugano Convention in its own right at a later date (and the government has previously indicated that it would seek to do just that).

For rules in these areas, the UK would revert to the existing domestic common law and statutory rules, which currently apply in cross border cases concerning the rest of the world. The guidance adds, not very helpfully:

“Businesses, individuals and legal practitioners would need to consider how these rules interact with the domestic rules of relevant EU countries to determine how jurisdiction in cross-border disputes should be established and whether any judgments should be recognised and enforced. In certain cases, the interaction between these rules may not be clear and certain countries may not recognise judgments from UK courts. Businesses and individuals may wish to take legal advice about how these changes may affect your individual circumstances.”

The paper confirms, as previously announced, that in the event of no deal the UK would take the necessary steps to re-join the 2005 Hague Convention on Choice of Court Agreements in its own right. This Convention currently governs jurisdiction and enforcement of judgments as between the EU, Mexico, Singapore and (as of 1 August 2018) Montenegro, where there is an exclusive jurisdiction clause in favour of one of the contracting states which was concluded after the Convention entered into force for that state. In the event of a no-deal Brexit, it would apply as between the UK and the other contracting states, including all EU member states.

There has however been some uncertainty as to (i) when the Convention would enter into force for the UK, since under its terms it enters into force on the first day of the month following three months after ratification; and (ii) whether the Convention will apply to jurisdiction agreements concluded before it enters into force for the UK in its own right, as opposed to by virtue of EU membership – though the better view would seem to be that it should.

With that in mind, the one piece of helpful information in the guidance notice is that, in the event of no deal, it is anticipated that the Convention would come in to force across the UK by 1 April 2019, though it does not explain how that will be achieved. We presume it would depend on obtaining the EU’s agreement to deposit the UK’s instrument of ratification before it exits the EU, since (as noted above) there is ordinarily a three month period between ratification and entry into force. Nor does the notice venture any guesses as to the implications of the 1 April implementation. It says, simply: “Where appropriate, individuals and businesses would need to consider what this would mean for any existing choice of court agreements made under either the Brussels regime or the 2005 Hague Convention, including the implications of any gap in coverage by the 2005 Hague Convention between 29 March and 1 April 2019.”

One obvious tip – try to avoid agreeing exclusive English jurisdiction clauses on 30 or 31 March.

New podcast – English governing law and jurisdiction clauses after Brexit

On the new Herbert Smith Freehills Podcast channel, Anna Pertoldi, Maura McIntosh and Tom Henderson discuss what businesses need to know about the impact of Brexit on their continued use of English governing law clauses and English jurisdiction clauses in their contracts after Brexit.  As businesses will be entering into new contracts which remain in force after Brexit, looking at the effectiveness of these clauses in the future will be an important part of any new contract negotiation.

Our podcast is available on iTunes and SoundCloud and can be accessed on all devices. You can subscribe and be notified of all future episodes.