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03 December 2013
The Supreme Court in The Alexandros T has delivered an important decision on the application of Articles 27 and 28 of EU Regulation 44/2001 in the English courts. The decision has once again emphasised the importance that the English courts in particular attribute to contractual jurisdiction clauses and their willingness to give them wide effect. While the English courts might be seen by many as being in the vanguard on these issues, their position is in tune with the amendments to the Brussels regime which will be introduced in 2015 under EU Regulation 1215/2012.(1) The Supreme Court's decision also sets down an important procedural marker which defendants to English proceedings must take into account when considering potential objections to jurisdiction under the Brussels regime and the timing of those.
The Alexandros T was a bulk carrier owned by the Starlight Shipping Company (a Greek company). In 2006 the Alexandros T sank off the coast of South Africa with heavy loss of life. Starlight made a claim under its insurance policy. Its insurers denied liability on grounds that:
In turn, Starlight accused its insurers of misconduct, including attempting to tamper with and bribe witnesses, and spreading what it described as false and malicious rumours. Starlight claimed that its insurers had deliberately failed to pay up under the insurance policies, which it claimed had led to Starlight suffering substantial recoverable loss and damage. Starlight then proceeded to sue its insurers in England, as it was obliged to do under exclusive jurisdiction clauses contained in the insurance policies. The litigation was hard fought.
Just before the pre-trial review hearing, Starlight made an application to the court to amend its claim to include a claim for additional damages based on losses which it said it had suffered as a consequence of insurers' failure to pay out under the policy. These additional damages were said to reflect the loss of profit which had flowed from Starlight's inability to purchase a replacement vessel with the funds it claimed should have been paid out under the insurance policy in a timely manner. These sums were said to be substantial – in excess of $45 million.
The day before the application was due to be heard, Starlight settled its claims with its Lloyds market insurers for 100% of the value of its original claim, but without any additional interest or costs. At the hearing on December 14 2007, Judge Tomlinson dismissed the application to amend the claim on the basis that in English law, an insurer owes no duty to pay an insurance claim promptly, and that interest on the sums due in respect of such a claim are deemed in law to be an adequate remedy. Shortly afterwards, Starlight entered into a settlement on the same terms with its company market insurers. In the common way of practice, the English proceedings were stayed under Tomlin orders to allow the proceedings to be revived to enforce the terms of settlement agreement should that be necessary.
Some years then passed. In April 2011 Starlight and associated parties issued nine sets of proceedings in Greece against the insurers and the insurers' solicitors in the English action. These actions were based on alleged breaches of the Greek Civil and Criminal Codes, stemming from the same allegations of fabrication of evidence, bribery of witnesses and the spreading of false and malicious rumours. The damages sought included a claim for loss of profit from (now not one but three) replacement vessels which Starlight claimed it would have purchased. These claims were framed in tort rather than contract. In essence, Starlight claimed that by forming the intention to avoid the policy, the insurers had denied Starlight the opportunity to purchase the vessels, and by spreading false rumours they had also prevented Starlight from insuring and operating the hypothetical vessels.
The insurers and related parties retaliated by reviving the stayed English proceedings to enforce the terms of the settlement agreement, and also by issuing fresh proceedings before the English courts. They sought declarations that the Greek actions were in breach of the releases in the settlement agreement, enforcement of indemnities in those agreements and damages for breach of the exclusive jurisdiction clauses in the settlement agreements and insurance policies.
The insurer parties sought summary judgment on their claims to enforce the terms of the settlement agreements. Starlight sought a stay of the English proceedings under Article 28 of Regulation 44/2001 on the basis that the Greek courts were first seised, and that the English actions were related actions which the English court should exercise its discretion to stay.
At first instance, the judge refused to stay the English proceedings on the grounds that the English court was first seised in the proceedings which had originally been issued in 2006. In the case of the more recent English claims issued in 2011, he found that the defendants had left it too late to seek a stay and had instead submitted to the jurisdiction by serving acknowledgments of service and defences. In any case, the judge concluded that he would not have exercised any discretion to stay the proceedings under Article 28 because Starlight was in breach of the exclusive jurisdiction clauses.
Before the Court of Appeal, Starlight sought to overturn the decision to refuse a stay under Article 28 of Regulation 44/2001. It also sought a stay under Article 27 of Regulation 44/2001, which it had not sought at first instance. Article 27 applies where the two sets of proceedings concern the same cause of action between the same parties. This is a rather higher test than that under Article 28, which requires merely that the actions be related. Reflecting this, Article 27 requires a court second seised to stay the action, rather than merely conferring a discretion to stay as under Article 28. The attraction for Starlight of applying for a stay under Article 27 is obvious. If successful, it would effectively take the decision as to jurisdiction out of the hands of the English courts and their expansive application of contractual jurisdiction clauses, and place that decision in the control of Starlight's home courts in Greece.
In the Court of Appeal, Starlight succeeded in obtaining a stay under Article 28. Lord Justice Longmore, delivering the leading judgment, found that the parties were identical, and that the causes of action in the 2011 proceedings in Greece and in England were mirror images of each other. He found that the 2006 English proceedings were not based on the same cause of action, having been an action based on breach of contract rather than the causes of action in tort/delict which were the subject of the Greek proceedings and the 2011 English countersuits.
Lord Clarke delivered the leading judgment. In relation to Article 27, he found that the English actions concerned contractual claims asserted under the settlement agreements and under the jurisdiction provisions of the insurance policies. These were in contrast to the tort/delict claims which were being asserted in Greece. There was no conflict between the Starlight parties seeking redress for breach of tortious duty in Greece, and the insurer parties seeking separate judgment in England to seek to uphold their contractual rights to an indemnity against the consequences of the Greek proceedings based in tort. The English proceedings might reduce the value of the Greek proceedings, but although rooted in the many of the same facts, they concerned different points and different causes of action.
The one aspect which Clarke found more troublesome (in light of differences in opinion expressed by Lord Mance and Lord Neuberger in their short dissenting judgments on this point) was in relation to declarations which were sought from the English court to the effect that the Greek tort/delict claims fell within the ambit of the release clauses in the settlement agreement. Clarke regarded those as contractual matters, but Mance and Neuberger regarded them as being in essence the same as an application for a declaration of non-liability. In light of those differences, all three encouraged the insurer parties to drop their application for those declarations, failing which they agreed that a reference would have to be made to the European Court of Justice (ECJ) to seek clarification as to whether those particular declarations were based on the same causes of action as the Greek proceedings. Likewise, Clarke found that the reference to the ECJ would have to seek clarification as to whether the English court was first seised in relation to those declarations by virtue of the fact that they were brought under the 2006 English proceedings, albeit by way of an additional claim which was added in 2011 after the Greek proceedings had been commenced.
In relation to Article 28, Clarke upheld the first instance judge's decision to refuse a stay on grounds of discretion. He rejected Starlight's argument that the English court was not permitted to give effect to the contractual jurisdiction clauses when considering whether to stay the action under Article 28. Starlight was attempting to draw on the ECJ's decision in Gasser GmbH v MISAT srl.(2) Gasser established that where Article 27 is concerned, the existence of an exclusive jurisdiction clause in favour of a second seised court does not give that second seised court any grounds not to implement a mandatory stay pending the decision on jurisdiction reached by the court which was first seised. On this point, Clarke endorsed the decision of Judge Cooke in JP Morgan Europe v-Primacom,(3) finding that in contrast to the position under Article 27 since Gasser, the existence of a contractual jurisdiction clause was "a powerful factor in support of refusal of a stay" under Article 28.
The last significant point dealt with in the judgment was whether the Starlight parties had left it too late to make applications for stays under Regulation 44/2001. Part 11 of the Civil Procedure Rules sets out a procedure for objecting to jurisdiction. In accordance with those rules, the acknowledgment of service (a form which defendants to English proceedings are required to file with the court shortly after proceedings are served on them) includes an option to indicate an intention to challenge jurisdiction. The defendant is then required to make the application for a stay within 14 days of acknowledging service. The Starlight parties had not taken these steps and had instead gone on to serve substantive defences - albeit defences which indicated that they objected to the jurisdiction of the English court. Simplifying the issue somewhat, the core question was whether the requirements of Regulation 44/2001 overrode the English rules of procedure, such that the courts are obliged to entertain an application for a stay under Regulation 44/2001 even though it was asserted after the time limit set down under Part 11 of the Civil Procedure Rules for objections to jurisdiction. Clarke found emphatically that "there is no sensible basis upon which it can be said that the time limit under [Part 11(4) of the Civil Procedure Rules], which can in an appropriate case be extended… is contrary to EU law". This is obviously an important procedural point for defendants (and English practitioners) to note. There is no exception to the Part 11 procedure for objections to jurisdiction based on the Brussels regime.
For further information on this topic please contact Tom Hibbert or Jake Hardy at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (email@example.com or jake.hardy:rpc.co.uk). The RPC website can be accessed at www.rpc.co.uk.
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