REVISION TO BRUSSELS I CONFERENCE CONTRACT AND TORT Paper by Brian Murray SC 14 th May 2011 INTRODUCTION 1. Obviously, for most practitioners, most of the time, the most important jurisdictional rules are the general principles governing actions in contract and tort. In a simplistic way, the critical significance of the revisions in respect of such causes of action can be expressed as a negative : the proposed changes to Brussels 1 do not alter the core rules of special jurisdiction identified in Article 5-7 of the Regulation in respect of contractually based or delictual claims. Apart from the particular position arising in relation to co-defendants, and the special rules relating to insurance, consumers and employees, the essential inquiry in respect of a proposed Defendant not domiciled within the jurisdiction remains focussed in respect of tort actions, upon the location of commission of the wrong, and in relation to actions in contract, upon the place of performance of the obligation sued upon. Those principles have not changed, nor has their meaning been elucidated by the Commission s suggested proposals. They are, of course, subject to those discrete areas in which exclusive jurisdiction is prescribed by Article 22, and prorogation of jurisdiction as provided for under Article 23. 2. That notwithstanding, the proposals will bring about some fundamental alterations to the overall jurisdictional regime governing contract and tort actions, and to that extent the basic principles governing everyday civil and commercial litigation. THE CONTEXT
3. To put these in context, the Commission Proposal identifies seven elements of the proposed reform 1 - (i) Abolition of Exequator; (ii) Extension of the jurisdiction rules of the Regulation to disputes involving non EU defendants; (iii) The improvement of the efficiency of choice of court agreements; (iv) The improvement of the interface between arbitration and litigation; (v) Better co-ordination of proceedings before the Courts of Member States; (vi) Improvement of access to justice for certain specific disputes; (vii) Protective and provisional measures. 4. Of these the two most significant developments insofar as general civil and commercial litigation in the Courts (as opposed to within Arbitration) will be the radical change to jurisdictional rules affecting non-eu Defendants, and the alterations to rules relating to choice of court agreements. THE PRESENT REGIME AND THE NEW RULES The basic principles : 5. To recap on the present regime : EU defendants can be sued in this jurisdiction if domiciled here, or if the case comes within the special rules as to jurisdiction identified in the Regulation or if a Defendant enters an appearance 2. Article 4 of the Regulation provides for subsidiary jurisdiction, arising in all situations in which a Defendant is not domiciled in a Member State, which jurisdiction is consigned to the law of the Member State. 3 1 COM(2010) 748 Final p.6-7. 2 Article 24. 3 The present position that governs EU and non-eu domiciled Defendants are conveniently summarised in the House of Lords Report on the Commission Green Paper, 21 st Report of Session 2008-2009, 27 July 2009.
6. In Ireland, non-eu defendants can presently be sued here if served in the jurisdiction, 4 or if service is permitted by the Court on foot of an application under Order 11. 7. The rules relating to EU Defendants are subject to the Regulation generally - specifically to the rules as to lis alibi pendens, Article 22 (exclusive jurisdiction), and Article 23 (jurisdiction agreements). In respect of non EU Defendants, Order 11 is subject to the intervening discretion of the Court, and the principles relating to forum non conveniens. Obviously, a non EU Defendant may equally cure any defect in service by entering an appearance to the action. The impact of the Proposals : 8. The impact of the new Regulation in respect of non-eu defendants will be that service within the jurisdiction, and the grounds identified in Order 11 as a basis for jurisdiction will be removed in all cases to which the Brussels Regulation applies that is all civil and commercial matters. This will be achieved by a new Article 4 which will declare that persons not domiciled in any of the member states may be sued in the Courts of a Member State only by virtue of the rules set out in sections 2 to 8 of Chapter II of the Regulation. 9. The regime which replaces the old rules is more complex than merely applying the Brussels Convention to non-eu defendants. The Convention, of course, operates on the theory that primary jurisdiction is defined by the domicile of the Defendant, which functions neatly in a system where all member States apply the same rules. That symmetry does not apply to non-eu defendants. So, there are new grounds of jurisdiction that supplement the special grounds that apply to the present Convention. These are : (i) A Defendant can be sued in a Member State where that Defendant has property provided : 4 Traynor v. Fegan [1985] IR 586.
- No other Member State has jurisdiction under Articles 2-24 of the regulation; and - The value of the Property is not disproportionate to the value of the claim; - The dispute has a sufficient connection with the Member State. 5 (ii) Exceptionally, there is a right to bring proceedings before a Member State court with which the dispute has a sufficient connection if the right to a fair trial or right of access to justice so requires and there is no court of a Member State that has jurisdiction under the Regulation. 6 10. So stated, these rules present potential problems of application. I will return to them shortly. PRACTICAL DIFFERENCES 11. Unless a claim can be brought within those special rules, the impact on delictual and contractual claims is this. 12. First tort : here the changes will be generally limited but in some particular cases, significant. Order 11 Rule 1(f) enables jurisdiction to be exercised when a significant element of a tort is committed here, 7 or where Ireland is the place where the causal event occurred, or where the damage was suffered here. 8 However, the provision is intended to be flexible and to response to the issues in each particular case. The transposition of Article 5(2) of the regulation to non-eu defendants removes both the discretion and the flexibility, and requires that the harmful event occur here : this means either that the damage occurred here, or that Ireland is the place where the event which gave rise to the damage occurred. 9 This imposes what in some cases is the significant constraint that while the State in which a tort was caused can deal 5 Article 25. 6 Article 26. 7 Grehan v. Medical Incorporated [1986] IR 528. 8 Delaney and McGrath Civil Procedure in the Superior Courts (2 nd Ed. 2005) para. 1-17. 9 Bier v. Mines de Potasse [1976] ECR 17735
with the entirety of the claim, a court in the country in which damage is sustained can only deal with that part of the claim that relates to the damage sustained in that State. 10 That rigidity is not present at least as the Irish Courts have interpreted Order 11(1)(f). 13. The change in relation to contract will be more extensive. Order 11 Rule 1(e) enables a very generous contractual jurisdiction, three aspects of which will now be removed. Thus, while it is presently possible to ground jurisdiction in contract where : (a) a contract was made within the jurisdiction or by or through an Agent trading or resident within the jurisdiction; 11 (b) is by its terms or implication to be governed by Irish law 12 or (c) The breach is committed within the jurisdiction these jurisdictional grounds will be abolished when the proposals take effect. In their place the enquiry becomes a single one directed to the identification of the place where the obligation in question in the suit was to be performed, 13 and where a number of obligations are alleged to have been breached, the location of the principal obligation. 14 The fact that a contract was concluded here, was governed by Irish law, or that an action arose from a breach committed here will not in themselves be sufficient although these considerations may assume a significance in the context of the residual grounds of non-eu Defendant jurisdiction, to which I will return. MULTIPLE DEFENDANTS 14. The present position insofar as actions against multiple Defendants some of whom are located outside the EU, is concerned is similarly governed by national law rather than the Regulation. Order 11 Rule 1(h) provides that a Defendant outside the 10 Shevill [1995] ECR 1-415. 11 Order 11 Rule 1(e)(i) 12 Order 11 Rule 1(e)(iii) 13 De Bloos Sprl v. Bouyer [1976] ECR 1497. 14 Medway Packaging v. Meurer Maschinen [1990] 2 Lloyds LR 112.
jurisdiction can be joined where that party would if within the jurisdiction be a proper person to be joined as a Defendant in the extant action. 15. By contrast, Article 6.1 provides in respect of EU Defendants, that they can be sued where they are one of a number of Defendants, where the claims are so closely connected that it is expedient to hear and deal with them together so as to avoid the risk of irreconcilable judgments, and where one of the Defendants is domiciled in a Member State. 16. The amendment to Article 6 still restricts that provision to parties who are domiciled in Member States. So, insofar as non EU defendants are concerned, in order to join them is as Defendants it will be necessary to ground jurisdiction independently either under Article 5 or based upon exceptional jurisdiction. This has been criticised. 15 It becomes impossible to join a non EU Defendant to an action simply on the basis that the action is properly grounded under the Regulation against other parties who are domiciled in Member States, and he is a necessary party unless the Court is prepared to roll this situation into the exceptional facility arising where the interests of justice require jurisdiction which it is not at all clear it can do. 17. There is a second significant effect of this change : because Article 6(1) refers to the joinder of persons domiciled in member states to actions in which there is an EU Defendant, there is no provision for the joinder of an EU domiciled Defendant to proceedings properly brought against a non-eu Defendant unless, again, special rules as to jurisdiction apply. This appears to have been deliberate. 16 The Rules seem to have been designed so as to protect the potential second EU defendant from an unduly wide jurisdiction that could arise from jurisdictional agreements to which he was not a party. 18. All of this means that mult-national litigation will require difficult and fairly careful choices. The present position where a Plaintiff can rely upon jurisdiction being grounded against EU and non-eu defendants based upon a commonality of interest 15 Weber Universal Jurisdiction and Third States in the Reform of the Brussells Regulation Max Planck Private Law Research Paper 11/7 p.8. 16 Weber Universal Jurisdiction and Third States in the Reform of the Brussells Regulation Max Planck Private Law Research Paper 11/7 p.9.
in the litigation will no longer prevail. If a Plaintiff wants to proceed against both EU and non-eu defendants in the same action in the same jurisdiction, he will have to find a location where there is independent jurisdiction against the non EU Defendant, either by reason of being the place for the performance of his obligation or the place the wrongful event occurred and at the same time have jurisdiction independently against the EU Defendant by reason of his domicile or special jurisdiction. What he cannot do is sue a non EU defendant in a place where there is jurisdiction against that Defendant, and rely upon the commonality of the action alone to bring in the EU defendant. SPECIAL RULES FOR JURISDICTION OVER NON EU DEFENDANTS 19. I have referred already to the new subsidiary jurisdiction rules introduced by Articles 25 and 26. These are applicable only to non EU Defendants. The purpose is to balance the fact that those Defendants will by definition not be amenable to the usual principle of jurisdiction based upon domicile, and also upon the fact that as matters presently stand many member states have exorbitant jurisdiction rules in relation to non EU defendants. 20. The critical requirement imposed by Article 25 is property within the jurisdiction that is essentially substantial when viewed in the light of the claim, and the requirement of sufficient connection between the suit and the litigation. One will not be enough without the other. These criteria are vague : the proportionality requirement is borrowed from Austrian law where it is realised by a relationship of 20% between assets and the claim. The notion of connection will inevitably involve State Courts falling back on their own national principles, with issues such as the governing law, the location of breach, the location of parts of a tort being drawn back in to the inquiry. More generally, the focus is likely to be on domicile of the claimant, the conduct by a defendant of business within the state, availability of witnesses, connected litigation and so forth. However, it is important to emphasise that these will only arise in the event that the Defendant has proportionate assets and that is the crucial new element. 21. The second facility introduced by Article 26 forum necessitates - is intended to be truly exceptional and is defined by reference to the right to a fair trial or access to
justice, and specifically related to the impossibility of bringing proceedings in the state with which the dispute is most closely connected. The commentaries on the provision adopt the position that the provision is most likely to be availed of in circumstances where there is a third country chosen by agreement but in which it transpires that proceedings cannot reasonably be brought in that State. This provision may also become important when mandatory EU law particular consumer law or provisions such as the Commercial Agents Directive is in play and in particular cases where no other jurisdiction is available for the proper litigation of a Plaintiff s rights. CHOICE OF COURT The Present Position : 22. Order 11(3) also enables the parties to a contract to specify the Irish Courts as the Courts having jurisdiction in respect of any proceedings concerning that contract, and in that circumstance jurisdiction may arise by direct service out of the jurisdiction, if so specified, or by service out if not. 17 Article 23(1) of the Brussels Regulation envisages a similar but more restrictive facility : unlike the position which presently applies to non EU Defendants, such an agreement must be in writing, or in a form which accords with the practices established between the parties themselves or in applicable international trade and commerce. Presumptively, agreed jurisdiction is exclusive. Article 23 jurisdiction displaces special rules of jurisdiction, and the rule relating to jurisdiction based upon domicile. It does not prevail over exclusive jurisdiction provisions such as Article 22, nor does it prevail in the case of a conflict with provisions dealing with insurance, 18 consumer contracts, 19 or employment contracts. 20 The changes in summary : 17 Order 11 Rule 3(2). 18 Article 13. 19 Article 17. 20 Article 21.
23. Article 23 has been changed in two general respects. First, certain alterations have been introduced so as to enable choice of court operate more effectively. Second, changes have been made to reflect the new position of non-eu defendants. Effective operation of choice of court clauses : 24. The opportunity has been taken to make a number of changes to Article 23 so as to address issues that were perceived as hampering the effective operation of the provision. 25. First, a new proviso is introduced to the effect that such an Agreement shall be given effect to unless the agreement is null and void as to its substance under the law of the chosen member state. This reflects the approach adopted in the Hague Choice of Court Convention, and resolves significant ambiguity arising under the present provision consequent upon the failure to specify the law applicable to the challenging of a jurisdiction agreement on grounds such as mistake, fraud or duress. 21 That ambiguity had led to some member states applying the law of the forum to that issue, and others the law governing the cause, with indeed some suggesting that the Article left no scope for this inquiry at all. 22 It would appear that the law of the member state means the law that the member state s national conflicts rule selects, and the consequence is that formal validity is a matter governed by the Regulation, while substantive validity is determined by that member state law. 26. Second, there was a perception that a number of decisions of the Court of Justice had eroded the protection afforded by the Regulation to exclusive choice of court provisions. As a result of the decision of the Court of Justice in Erich Gasser in 2003 23 that the first seised lis pendens rule in Article 27 of the Convention took precedence over the choice of court rules in Article 23, it became possible to preempt a choice of court clause, by suing first in another EU State. This prevented a second seised Court from exercising jurisdiction until the first seised Court had declined jurisdiction, and if it did not do so, the choice of court clause was inoperative. In Turner the Court confirmed that procedural devices which exist 21 See Briggs and Rees Civil Jurisdiction and Agreements (5 th Ed. 2009) 2..28 et seq.. 22 Hess Pfeiffre, Schlosser; Report to Commission p. 159. 23 Erich Gasser Gmbh v. MISAT Srl Case C-116/02 [2003] ECR 1-14693
under national law and which enforce the effect of choice of court provisions most notably anti suit injunctions were incompatible with the Regulation if they unduly interfered with the determination by the courts of other Member States of their jurisdiction under the Regulation. 27. To that end Article 32.2 introduces a new and important change, by stipulating that generally before any other Court can exercise jurisdiction in a case governed by a choice of Court clause, the Courts designated in the agreement must first decline jurisdiction. Similarly, Article 29 (formerly Article 26) now modifies the lis alibi pendens rule to introduce a proviso where choice of jurisdiction clauses are in issue, which it does by making the provision subject to Article 32.2. 28. There are problems with these changes. They do not say what is to happen where there is a dispute as to whether there was in fact an agreement as to jurisdiction : whether for example there should be an investigation by the Court first seised of whether there is in fact an agreement whether to a prima facie standard or otherwise. 29. Similarly, the provision is silent as to what occurs if there are two separate alleged exclusive jurisdiction clauses : presumably both alleged Courts are properly seized and the matter is effectively resolved by which first determines the matter. Extension to non-eu Defendants : 30. The replacement of the present regime governing non EU defendants gives rise to a number of effects, incidental and consequent upon amendment. These are achieved by the excision from Article 23 of the phrase one or more of whom is domiciled in a Member State, so that the provision now applies once the agreement confers jurisdiction on such a Court. 31. First, and incidentally, the extension of the provision to non EU Defendants removes the facility for jurisdiction based upon oral agreements save in the very limited circumstances identified in Article 23(1)(b) and (c), and extends to non EU Defendants presumptive exclusivity.
32. Second, there is as the law presently stands some considerable uncertainty as to the relationship between Article 23 and third party states following the decision of the Court of Justice in Owusu. The better view seems to be that national law still governs third State jurisdiction agreements. This position is not, unfortunately, clarified by or addressed in, the proposal. TWO FINAL CHANGES 33. There are two other new aspects to the Regulation as proposed of relevance to general tort and contract actions. 34. First, and consequent upon the extension of the Regulation to non-eu Defendants, Article 34 introduces a new discretionary lis pendens which enables a Court of a Member State to exceptionally stay proceedings if a non-eu court was seised first and it is expected to decide within a reasonable time and the decision will be capable of recognition and enforcement in that Member State. The object of this is to avoid parallel proceedings in and outside the EU. The conditions in the new Article 34 are strict : the Courts of the non-eu state must be seised with the claim first in time, they must be expected to deliver a judgment enforceable within the State, within a reasonable period of time, and it must be necessary for the administration of justice for the stay to issue. That latter phrase appears intended to present the same considerations as presently arise in forum non conveniens, availability of witnesses, connection with the third state and so forth 35. Second, the abolition of exequatur achieved by Articles 37 to 46 of the Regulation is intended to eliminate the cumbersome procedure that presently attends enforcement of judgments of other EU Courts and to enable freedom of circulation of judgments within the Union through the abolition of a need for a declaration of enforceability in the State in which it is sought to enforce. However, there are exclusions from this. One is the enforcement of delictual claims for violation of privacy and defamation arising from a concern as to the significant differences between member states in relation to these types of claims, and a second is claims in tort for compensation caused by unlawful business practices where brought by multiple claimants or representatives thereof.
BRIAN MURRAY SC 24 24 Christian Keeling BL and Francis Kernan BL kindly assisted me in identifying materials and issues relevant to this paper.