The Brussels I Recast - some thoughts

Transcription

1 The Brussels I Recast - some thoughts Nicholas Pointon, Barrister, St John s Chambers Published on 11 June 2014 Introduction 1. Those who practise in this area will be very familiar with the existing Brussels I Regulation 1 ( the Old Regulation ), whereas those who do not are often entirely unaware of its existence. Some knowledge of the key rules governing the recognition and enforcement of judgments in Member States of the European Union is increasingly important given the growing tendency for litigation to cross borders in one way or another. The coming into force of the revised Brussels I Regulation 2 ( the New Regulation ) on 10 January 2015 provides a useful opportunity to visit, or revisit, this area. 2. This presentation will address three important changes effected by the New Regulation: 1 2 Council Regulation (EC) No 44/2001. Regulation (EU) No 1215/2012. Page 1 of 10

2 a. the diffusing of Italian torpedoes b. the excision of arbitral proceedings c. the validity of one-sided jurisdiction agreements Coming into force 3. The New Regulation will apply to legal proceedings instituted on or after 10 January That is so regardless of whether the facts concerned, or the contractual relationships being litigated, took place beforehand. Therefore those engaged in advising upon and drafting choice of law, jurisdiction and arbitral agreements must be familiar with the effects of the New Regulation immediately. So too litigators with a cross-border dispute bubbling up as we speak. Italian torpedoes 4. The term Italian torpedo denotes a litigation tactic whereby one party commences proceedings in a Member State whose legal system is notoriously slow in order to frustrate its opponent, usually with a view to strengthening its hand in negotiations. The Old Regulation permitted such practices by OR Article 27, which provided that where the courts of one Member State are seised of the dispute, the courts of all other Member States must decline jurisdiction unless and until the courts of the Member State first seised have resolved the question of their own jurisdiction. This Page 2 of 10

3 was so even if the parties contractual relationship contained an exclusive jurisdiction clause in favour of another Member State. In Italy this process could take years, even if the case for Italian jurisdiction was non-existent. 5. The New Regulation will put an end to this. NR Article 31(2) confers jurisdiction on the court named in an exclusive jurisdiction clause even if proceedings have already been started elsewhere. All other courts must then stay their proceedings once the designated court has established that it has jurisdiction (NR Article 31(3)), or potentially even as soon as the designated court has become seised of the proceedings (NR Recital 22). For example, if Party A commences proceedings before an Italian court in the face of an exclusive jurisdiction agreement in favour of German courts, Party B may then commence proceedings before the German courts thereby forcing the Italian court to stay its proceedings until the German court has resolved the question of its own jurisdiction. Party A s attempt at an Italian torpedo fails. 6. The above example holds true even if neither Party A nor Party B are domiciled in (or have any connection with) a Member State. They need only nominate the courts of a Member State in their exclusive jurisdiction clause. However, if the nominated court is the court of a third state (i.e. not a Page 3 of 10

4 Member State), then the New Regulation is found to be lacking. If Party A and Party B agree to refer disputes to the exclusive jurisdiction of the Hong Kong courts, but Party A issues proceedings first in France (suppose Party B is domiciled there), there is no provision in the New Regulation by which the French court can refuse jurisdiction. If Party B manages to issue proceedings in Hong Kong first then the lis pendens rules of the New Regulation confer a discretion on the French courts second seised to stay their proceedings, but if Party A gets to France first, that discretion does not arise. In effect, the French court may be forced to sanction a breach of a contractual exclusive jurisdiction clause. 7. In effect, the New Regulation changes the Old Regulation by prioritising exclusive jurisdiction agreements over the default first in time rule (lis pendens), provided they select Member State courts. Practitioners should be acutely aware of the limits of this sensible new principle, namely: (1) the jurisdiction clause must be exclusive; and (2) the nominated jurisdiction must be a Member State. Significantly, the parties themselves do not need to be domiciled in (or even affiliated with) a Member State, provided they Page 4 of 10

5 nominate a Member State court. 8. Before leaving the subject of jurisdiction agreements, it should be noted that the New Regulation has removed the occasional difficulty of determining which substantive law will be applied in order to ascertain the validity of an exclusive jurisdiction agreement. Under NR Article 25(1), the law of the chosen forum is to be applied in ascertaining the validity of the clause which chooses it. NR Recital 20 makes clear that this includes both the substantive and conflict of laws rules of the designated Member State. 9. Further, NR Article 25(5) expressly recognizes that jurisdiction agreements are separable, i.e. shall be treated as an agreement independent of the other terms of the contract. The practical effect of this is that the invalidity of the contract will not, of itself, render the jurisdiction clause invalid In summary, the priority afforded to exclusive jurisdiction agreements elevates the importance of negotiating the right one, whilst the harmonised rule as to the governing law of a jurisdiction clause assists parties in assessing the likely validity of their chosen clause at the outset. There is no excuse for overlooking the selection of jurisdiction when negotiating agreements, since the scope for arguing about it later will now be greatly reduced. The excision of arbitration 3 This reflects the English common law position: see Fiona Trust & Holding Corp v Privalov [2007] UKHL 40; Deutsche Bank AG v Asia Pacific Broadband Wireless Communications [2008] EWCA Civ Page 5 of 10

6 11. Arbitral matters have always been technically outside the realm of the Old Regulation, but have caused havoc on the perimeter. The New Regulation strengthens the excision of arbitral matters, but is perhaps not as clear as the arbitral community might have hoped. 12. NR Recital 12 and NR Article 73(2) state that the New York Convention takes priority over the New Regulation on the enforcement of arbitral awards. NR Recital 12 is the key amendment. It seeks to emphasise that the New Regulation does not apply to arbitration and makes clear that a judgment as to the validity or otherwise of an arbitration agreement is not capable of recognition and enforcement under the Regulation Arbitral proceedings clashed with the Old Regulation on several occasions, but never with greater force than in West Tankers. 5 A vessel owned by West Tankers collided with a jetty in Italy. The charterparty provided for disputes to be referred to arbitration in London. Arbitral proceedings were duly commenced but the insurer of the charterer then issued proceedings before the Italian courts. West Tankers sought an anti-suit injunction from the English courts in order to give effect to the arbitral agreement. 4 5 It is curious that the key statements in relation to arbitration should appear in the Recitals rather than in the operative Articles of the New Regulation itself. Initial draft proposals did include a series of Articles designed to define the interface between the New Regulation and arbitration, but these were removed in favour of an enhanced statement in Recital 12 (something which the UK Government supported). Case C-185/07, Allianz SpA v West Tankers Inc, 10 February 2009, [2009] AC Page 6 of 10

7 The Court of Justice decided that the courts of one Member State cannot grant an anti-suit injunction to restrain proceedings in another Member State even if those proceedings are commenced in breach of an arbitration agreement. 14. The New Regulation makes clear that that the Regulation does not apply to any court proceedings ancillary to arbitration (NR Recital 12). The practical effect of this is that if proceedings are commenced in the courts of the Member State in which arbitration is to be seated after proceedings have been commenced elsewhere, the courts of the putative seat do not have to wait and can proceed to decide upon the validity of the arbitration agreement and supply such supporting measures as it deems appropriate. 15. This is good news, but it is not without its own problems. There remains the real possibility of conflicting Member State judgments on whether or not an arbitration agreement is binding. A party faced with an unfavourable decision in one Member State may well shop around for a more favourable outcome in another. Neither court s ruling will take precedence over the other. 16. One can also envisage the awkward situation in which one Member State court decides that the arbitration agreement is invalid but the arbitral Page 7 of 10

8 tribunal disagree, assume jurisdiction and produce an award. Theoretically, under the New Regulation, the New York Convention has priority and the award will be entitled to recognition and enforcement, even before the courts of the Member State who ruled that the arbitration agreement was invalid. 17. Finally, the jury is out on whether the New Regulation effectively overturns the West Tankers decision. The likely answer is that it does not, because the Court of Justice ruled that a Member State court could not issue an anti-suit injunction restraining the bringing of court proceedings in another Member State. Since this technically concerns the jurisdiction of courts, rather than arbitral tribunals, it probably still falls within the New Regulation. The judgment is largely based upon the principle of mutual trust between the courts of Member States, and it would take very clear and decisive wording in the New Regulation to reverse the application of that principle - wording which we do not have. It is only a matter of time before a suitably valuable shipping case warrants taking the point back to the Court of Justice for a new ruling. One-sided jurisdiction agreements 18. One-sided jurisdiction agreements, i.e. agreements in which a choice of jurisdiction binds one party but not the other, are incredibly common in valuable commercial contracts. Yet in September 2012 the French Cour de Page 8 of 10

9 Cassation issued a judgment which decided that a one-sided jurisdiction agreement was not enforceable under the Old Regulation. 6 The case did not reach the Court of Justice, but it came too late in the day for the New Regulation to address this issue. 19. The failure to address this issue is compounded by NR Article 25(1), which removes the need for at least one party to be domiciled in a Member State. Under the New Regulation, an exclusive jurisdiction clause need only nominate the courts of a Member State, even if neither of the parties have any connection to the European Union at all. This renders far more jurisdiction agreements susceptible to the New Regulation and thereby subjects far more one-sided jurisdiction agreements to this unsettling ambiguity. The Swiss problem 20. The Lugano states, Switzerland, Iceland, Norway and Denmark, are not parties to the Old Regulation but are instead signatories to the Lugano Convention, in materially identical terms. Those Member States will not be bound by the New Regulation either 7, and the Lugano Convention is not set to be amended in accordance with the New Regulation at the time of its coming into force. This means that there will be a period of time (likely to be 6 7 X v Rothschild (French Supreme Court, First Civil Chamber, 26 September 2012, No ). NR Article 73(1). Save for Denmark, which has now indicated that it will adopt the New Regulation. Page 9 of 10

10 a year or two) in which the Lugano states will effectively continue to operate under the old rules until the Lugano Convention is amended to bring it in line with the New Regulation. 21. Ironically, in practical terms, this means that litigants remaining torpedoes will all be aimed at Swiss exclusive jurisdiction clauses. NICHOLAS POINTON St John s Chambers, Bristol 3 June 2014 Page 10 of 10