EU anti-suit injunctions don’t rule — OK?

Confirmation from Males J today in Nori Holdings Ltd & Ors v PJSC Bank Otkritie [2018] EWHC 1343 (Comm)  of what we all suspected: you can’t injunct EU / Lugano proceedings in support of arbitration. The facts aren’t that interesting. Essentially an ailing Russian bank was seeking to undo the effects of a debt restructuring agreement entered into with a number of its borrowers and their sureties, members of the O1 group. To that end it sued in Russia and Cyprus. The present claimants, borrowers and sureties, sought anti-suit injunctions on the basis that the claims were the subject of valid arbitration agreements. It got injunctions in respect of the Russian proceedings; we say no more.

As for the Cypriot proceedings, the bank understandably invoked West Tankers Inc v Allianz SpA (Case C-185/07) [2009] ECR I-00663 and its holding that any intra-EU anti-suit proceedings unacceptably infringed EU full faith and credit under the then Brussels I, not to mention EU courts’ powers to decide on their own jurisdiction. The claimants countered, as might be expected, with the slightly curious remarks of the Advocate-General in the Gazprom OAO case (Case C-536/13) that suggested Recital (12) in Brussels I Recast had cast doubt on the West Tankers holding. Males J subjected the reasoning of the Advocate-General to searching scrutiny at [84]-[99]. His conclusion, though judicious, was pretty blunt: the Advocate-General was simply wrong. There was no room for any inference of an intent to depart from West Tankers.

So now we know. Professors may have lost a useful examination question: but for the rest of us, we know where we stand. And a good thing too.

Jurisdiction in EU multimodal transport cases

Goods are carried multimodally from Finland to England by an English carrier, and stolen in England. If the owner wants to sue the carrier, where is the contract performed within Art.7(1) of Brussels I Recast: England, Finland or both? The Advocate-General has just given an opinion in Zurich Insurance v ALS Ltd (area of freedom, security and justice) [2018] EUECJ C-88/17: it is the place of loading or discharge, at the claimant’s election. Hence the claimant there had the right, whatever the English defendant said, to sue in Finland.

This must be right. It has always been accepted that the place of discharge is competent. In Rehder v Air Baltic Corp (C‑204/08) [2009] E.C.R. I-6073; [2009] I.L.Pr. 44 and flightright GmbH v Air Nostrum (C-274/16) [2018] EUECJ 274/16 this was held to be the position as regards transport of passengers; and understandably the view was expressed that there was no reason to regard the transport of things any differently.

Good, but not surprising, news for cargo owners and insurers. Still, it’s nice to know.

What a waste. The hazards of ship recycling.

 

On 15 March 2018 in the Rotterdam District Court, Seatrade were heavily fined and  two of its executives have been banned from working as a director, commissioner, advisor or employee of a shipping company for one year. The court declined to impose prison sentences on the directors, as requested by the prosecutor. The criminal charges arose out of the sale of four reefer vessels for scrapping which was done in Bangladesh, India and Turkey, in contravention of Regulation (EC) No 1013/2006 of 14 June 2006 on shipments of waste, which implements the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal”. The Regulation prohibits E.U. Member States from exporting hazardous waste to countries outside the OECD. Ships sailing to their final destination will contain large quantities of hazardous substances such as bunker oil, lubricating oil, PCBs and asbestos and, in the case of reefer vessels, HCFCs. The court determined that the four ships were to be categorised as waste as the decision to dismantle them had been made when they sailed from Rotterdam and Hamburg in 2012 and that their sale was in contravention of the Regulation. Seatrade intend to appeal.

In another development relating to the sale of ships for dismantling in Asia, London solicitors Leigh Day announced in December 2017 that they will be bringing a claim in tort for injuries sustained by a metal cutter while dismantling a container ship in Chittagong. The claim is being brought against the ship’s managers, Zodiac Maritime, who had sold the vessel for scrap. Leigh Day maintain that Zodiac knew the methods involved in dismantling vessels in Chittagong, yet it sold the vessel in the full knowledge that it would be broken up in unsafe conditions.

Judgment creditors can celebrate in England — UK Supreme Court.

English courts are not very keen on judgment debtors who spirit assets away out of sight of our enforcement officers. The Supreme Court today showed they meant business when faced with this scenario. They confirmed in JSC BTA Bank v Khrapunov [2018] UKSC 19 that anyone who in England does anything to help a debtor do this can find himself at the receiving end of a civil claim from the judgment creditor.

Mukhtar Ablyazov, a colourful Kazakh politician, dissident and businessman who used to run the biggest bank in Kazakhstan, was successfully sued here by the bank for the moderate sum of US$4.6 billion. The court issued the usual congeries of worldwide freezing orders in aid of enforcement, which were disobeyed. In 2012 Mr Ablyazov, facing the prospect of time inside for contempt, fled England and continued with a large degree of success to move his assets around to make them inaccessible.

The Ablyazov cupboard being bare, the bank then turned to an associate, one Ilyas Khrapunov, who had allegedly agreed in England to help Mr Ablyazov to cause his assets to vanish and later done just that. It sued Mr Khrapunov in tort, alleging that the above acts amounted to an unlawful means conspiracy. Mr Khrapunov applied to strike, arguing that if (as is clear) contempt of court cannot give rise to damages, the bank shouldn’t be allowed to plead conspiracy to get a similar remedy by the back door. He also argued that in any case he was safely tucked up in Switzerland; that the assets were outside England; and that the mere fact that he had conspired in England to make those assets disappear did not take away his right under the Lugano Convention to be sued in his country of domicile.

Mr Khrapunov lost all the way in the Supreme Court. There was no reason why the fact that he had acted in contempt of court should not count as unlawful means for the purposes of conspiracy. Furthermore, the jurisprudence under the Brussels I / Lugano system made it clear that for the purpose of non-contractual liability, where jurisdiction laywas “either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage”, an agreement amounted to an ” event which gives rise to and is at the origin of that damage.”

Good news, in other words, for judgment creditors: bad news for friends of fugitive tycoons.

Mandatory CO2 monitoring and reporting in the EU for big ships starts now.

 

On 1 January 2018 ships over 5000 grt, subject to a few exceptions, became subject to the monitoring and reporting obligations imposed by EU Regulation on monitoring, reporting and verification of carbon dioxide emissions from maritime transport (Regulation (EU) No. 757/2015 as amended) (the MRV Regulation).

The MRV Regulation requires reporting of three items: actual cargo carried onboard; fuel consumed and; CO2 emitted. These obligations apply to all relevant ships, irrespective of their flag, which make voyages that start or finish in an EU Member State port, which, for the purposes of this Regulation includes Iceland and Norway. The obligations include emissions arising from ships at berth or moving within a port. The obligations are imposed on “companies” meaning “a shipowner or any other organisation or person, such as the manager or the bareboat charterer, which has assumed responsibility for the operation of the ship from the shipowner”.

From 2019, by 30 April of each year, companies will have to submit to the Commission and to the authorities of the flag States concerned, an emissions report concerning the CO2 emissions and other relevant information for the entire reporting period for each ship under their responsibility, which has been verified as satisfactory by an independent verifier.

From 2019 by 30 June of the year following the end of a reporting period, ships arriving at, within or departing from a port under the jurisdiction of a Member State, and which have carried out voyages during that reporting period, will have to carry on board a valid document of compliance.

The UK will enforce these obligations through the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) and the Port State Control (Amendment) Regulations 2017 which entered into force on 1 October 2017. The Regulations impose criminal sanctions on companies which fail to comply with their obligations under the MRV Regulation. The Merchant Shipping (Port State Control Regulations) 2011 has been amended to make it a requirement for an inspection carried out on or after 30 June 2019 to check that the ship is carrying a document of compliance.

The IMO’s MRV scheme comes into effect on 1 January 2019.

Parent company liability for subsidiary operations abroad.  

 

An interesting new Court of Appeal decision on transnational litigation in the  English courts concerning alleged torts committed overseas. Lungowe v Vedanta and Konkola Copper Mines [2017] EWCA Civ 1528 involved claims by Zambian citizens against the defendants alleging personal injury, damage to property and loss of income, amenity and enjoyment of land, due to alleged pollution and environmental damage caused by discharges from the Nchanga copper mine since 2005. Konkola Copper Mines (‘KCM’), a Zambian company, owned and operated the mine. Vedanta, a UK company, is a holding company for various metal and mining companies, of which KCM is one.

The claim was served on Vedanta by virtue of its domicile in the UK and permission was granted for the claim form and particulars of claim to be served out of the jurisdiction on KCM. Vedanta and KCM both applied for declarations that the High Court had no jurisdiction to hear the claims. In June 2016 Coulson J dismissed the challenges. The Court of Appeal has now upheld the dismissal.

  1. Vedanta’s position.

Under art. 4 of the Recast Brussels Judgments Regulation 2012 the claimants were entitled to sue Vedanta in the UK by virtue of its domicile. The Court of Appeal held that following the ECJ’s decision in Owusu v Jackson [2005] QB 801, it was clear that there was no scope for staying proceedings on the grounds of forum non conveniens where jurisdiction was established on the grounds of the defendant’s domicile under art. 4. Although in principle it might be possible to argue that invoking the rules in the Recast Regulation amounted to an abuse of EU law, there would have to be sufficient evidence to show that the claimant had conducted itself so as to distort the purpose of that rule of jurisdiction. The present case did not meet the high threshold for an abuse argument to succeed.

  1. KCM’s position

The application to serve KCM out of the jurisdiction in Zambia was based on para 3.1 of Practice Direction 6B on the ground that there was between the claimant and Vedanta a real issue which it was reasonable for the court to try and the claimant wished to serve KCM as a necessary or proper party to that claim. If the claimants could satisfy these conditions, the court still retained a discretion and CPR 6.37(3) provide that: “The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.”

An important issue in this analysis was whether there was a real issue between the claimants and Vedanta. This raised the question of whether a parent company could owe a duty of care to those affected by the operations of a subsidiary. Following the Court of Appeal’s decision in Chandler v Cape such a duty towards the employee of a subsidiary could arise where the parent company (a) has taken direct responsibility for devising a material health and safety policy the adequacy of which is the subject of the claim, or (b) controls the operations which give rise to the claim. The parent must be well placed, because of its knowledge and expertise to protect the employees of the subsidiary. If both parent and subsidiary have similar knowledge and expertise and they jointly take decisions about mine safety, which the subsidiary implements, both companies may (depending on the circumstances) owe a duty of care to those affected by those decisions. This type of duty may also be owed in analogous situations, not only to employees of the subsidiary but to those affected by the operations of the subsidiary. The Judge had decided on the basis of the pleaded case that it was arguable that such Vedanta did owe such a duty of care to those affected by KCM’s operations. The Court of Appeal concluded that the Judge had been entitled to reach that conclusion. There was a serious question to be tried which could not be disposed of summarily, notwithstanding that it went to the Court’s jurisdiction.

The Court of Appeal also upheld the finding that it was reasonable to try the issue between Vedanta and the claimants. Vedanta was sued within the jurisdiction pursuant to a mandatory jurisdictional rule and the claimants had an interest in suing Vedanta other than for enabling them to bring KCM within the jurisdiction. The claimants were suing Vedanta as a company with sufficient funds to meet any judgment of the English court, whereas they had grounds to believe, and evidence to show, that KCM might be unable or unwilling to meet such a judgment. KCM was a necessary and proper party to the Vedanta claim because the claims against the two defendants were based on the same facts and relied on similar legal principles and the Judge was entitled to conclude that Vedanta and KCM could be regarded as broadly equivalent defendants.

As to whether England and Wales was the proper place in which to bring the claim, the Court of Appeal again upheld the Judge’s finding that it was. Although, absent the claim against Vedanta, it would be clear that England would not be the appropriate forum for the claims – that would be Zambia, the position change once the claim against Vedanta was taken into account. It would be inappropriate for the litigation to be conducted in parallel proceedings involving identical or virtually identical facts, witnesses and documents, in circumstances where the claim against Vedanta would in any event continue in England.

The case can be contrasted with the earlier decision of Fraser J in Okpabi and others v. Royal Dutch Shell Plc and Shell Petroleum Development Company of Nigeria Ltd [2017] EWHC 89 (TCC), noted in this blog on 2 February 2017.  Fraser J found that there was no arguable duty of care owed by the parent company Royal Dutch Shell Plc to those affected by the operations of its subsidiary in Nigeria. He declined to follow Coulson J’s decision in the instant case, identifying facts that distinguished the two cases. The decision is under appeal.

EU Member States urged to ratify/accede to 2010 HNS Convention by 6 May 2021.

 

COUNCIL DECISION (EU) 2017/769 of 25.4.2017 authorises Member States to ratify or accede to the 2010 Protocol of the HNS Convention with the exception of the aspects related to judicial cooperation in civil matters. The decision also provides that they “shall endeavour to take the necessary steps to deposit the instruments of ratification of, or accession to, the Protocol of 2010 within a reasonable time and, if possible, by 6 May 2021”.

 

A parallel COUNCIL DECISION (EU) 2017/770 contains a similar authorization in relation to those aspects related to judicial cooperation in civil matters, subject to depositing the standard declaration preserving the effect of the Brussels I (Recast) Regulation, the Lugano Convention, and the 2005 agreement between the EU and Denmark in respect of judgments covered by the 2010 HNS Protocol.

Product liability EU-style: bad news for liability insurers

The ECJ today made life more difficult for insurers covering risks arising under the Product Liability Directive. This Directive, you will remember, says that the victim of a defective product need not prove negligence, but must prove defectiveness and causation. W v Sanofi Pasteur [2017] EUECJ C-621/15 was a vaccine damage case. A couple of years after beginning a course of anti-hepatitis vaccination, W had multiple sclerosis. There being no clear medical evidence as to how the disease came about, a French court was prepared to infer from the proximity between vaccination and disease and the lack of any other explanation that the vaccine had been defective and had caused the injury. It therefore gave judgment for W, a view held justified by the Cour de Cassation. After a few further procedural skirmishes, Sanofi — or, one suspects, its insurers — went to the ECJ, alleging that inferences of this sort were contrary to the explicit requirement in Art.4 that the claimant actually prove these matters, and that strict proof in every particular ought to be required.

The ECJ, as expected, was having none of it. The Directive existed to make life easier for  injured consumers; furthermore, the real complaint related not so much to the burden of proof as to the means of proof, which was a matter of procedure left up to national courts.

Stand by underwriters, as we said, for increased payouts under our home-grown version of the Directive, Part I of the Consumer Protection Act 1987.

Admiralty jurisdiction over torts in the UK’s EEZ.

 

Virgin Media Ltd v Joseph Whelan T/A M and J Fish [2017] EWHC 1380 Admlty is an interesting decision on whether the Admiralty Court has jurisdiction in personam over a tort claim arising in the exclusive economic zone of the United Kingdom.  The claimant alleged that its fibre optic telecommunications cable, which ran across the Irish Sea between Dublin and Lytham St Annes, was damaged by a trawler at a location within the exclusive economic zone of the UK, but outside its territorial waters. The issue before the Admiralty Court was whether the courts of England and Wales had jurisdiction under the 2012 Recast Judgments Regulation. Under art.4 of the Regulation the defendant should be sued in the place of its domicile, the Republic of Ireland, subject to any of the additional grounds of jurisdiction provided for in the Regulation. Here the relevant one was contained in art 7(2) which provides that “A person domiciled in a Member State may be sued in another Member State in matters relating to tort, delict or quasi-delict in the courts for the place where the harmful event occurred or may occur”.

The Admiralty Registrar held that the Admiralty Court had no greater rights over a collision with a fixed structure than it would in respect of any collision between ships which would be none unless the action is brought in rem or falls within one of the exceptions in s.22 of the Senior Courts Act 1981. Any extension of jurisdiction would have to be established by reference to an international convention or treaty. The relevant treaty would be the UN Convention on the Law of the Sea (UNCLOS).

Article 60(2) of UNCLOS provides that the coastal state has exclusive jurisdiction over artificial islands, installations and structures within its EEZ, and this formed the basis for Burton J’s decision in Conocophillips (UK) Ltd v Partnereederei MS Jork [2010] EWHC 1214 (Comm) that the Commercial Court had jurisdiction over a negligence claim against a shipowner in connection with a collision between a vessel and an unmanned oil platform 40 miles off the coast of Norfolk. Where there is a collision between a vessel and a platform which is an effective prolongation of the territory of the United Kingdom, the Court would have jurisdiction. The concept of ‘place’ in the predecessor provision to art 7(2) in the 2001 Judgments Regulation was limited to matters addressed in UNCLOS art. 60.

In contrast, art.58(1) provided that all States, and not just the Coastal State had the freedom to lay submarine cables and pipelines within their EEZ, but did not provide for the coastal state to have jurisdiction. Article 56 of UNCLOS gives an English court jurisdiction over matters with respect to fishing, but did not provide that the coastal state may assume jurisdiction with regard to civil disputes arising out of fishing. Accordingly, the Admiralty Court was not a court for the place where the harmful event occurred under art 7(2) and the Court declared it had no jurisdiction over the claim. The appropriate jurisdiction was in the Courts of the Republic of Ireland under art. 4 of the Recast Regulation.

Arbitration post-Brexit

The Lord Chief Justice a couple of days ago gave a bullish speech in Beijing about London as an arbitration centre post-Brexit. Despite the self-serving nature of the speech, one suspects he may well be right. At least post-Brexit we should with a bit of luck get shot of the ECJ control over jurisdiction; be able to abandon The Front Comor [2009] EUECJ C-185/07, [2009] 1 AC 1138 and go back to issuing anti-suit injunctions against Euro-proceedings that infringe London arbitration agreements; and possibly get rid of tiresome Brussels I provisions that make life difficult for P&I clubs which want to insist on arbitrating here (see, for details, this post). But as usual, to know the details we have to wait and see.