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.

Want to stymie a judgment creditor? It’s not as easy as you think.

English courts aren’t best pleased when they give judgment, only to find someone busily trying to frustrate the claimant’s efforts to collect on it. Last year, in JSC BTA Bank v Ablyazov [2016] EWHC 230 (Comm) (noted here on this blog), Teare J very rightly decided that an elusive judgment debtor’s pal was liable in tort to the judgment creditor when he helped the debtor shuffle his assets around in an elaborate “now you see them, now you don’t” exercise. Yesterday, in Marex Financial Ltd v Garcia [2017] EWHC 918 (Comm), Knowles J carried on the good work. Marex had got judgment in England for some $5 million, plus the usual freezing orders, against a couple of BVI companies controlled by SG, a globetrotting businessman. SG thereafter took care to avoid the UK, instead taking steps to spirit away the English assets of his companies to a web of entities in far-flung jurisdictions where it was difficult, if not impossible, for Marex to track them down. Marex thereupon sought permission to sue SG out of the jurisdiction, alleging a tort committed in England. What tort? In so far as SG might be deemed to have acted with the companies’ consent, inducement of breach of contract (i.e. the implicit contract by the companies to pay the judgment debt); and in so far as the companies hadn’t consented and hence he was in breach of duty to them, causing loss to Marex by unlawful means. Knowles J agreed with both limbs of the argument, swiftly disposed of a forum non conveniens point, and allowed service out, thus giving Marex at least a decent chance of getting paid.

Good news, therefore, to judgment creditors. Moreover, while this was a non-EU service out case, note that so long as any relevant monkey-business took place in England, its reasoning will apply equally to EU and EEA-based defendants under Brussels I and Lugano, because the tort “gateway” has been interpreted similarly in both cases since Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665; [2016] 1 W.L.R. 1814.

So good luck and good hunting.

Exclusive jurisdiction: where is the obligation not to sue to be performed?

A nice point of potential importance in conflict of laws: see AMT Futures Ltd v Marzillier & Ors [2017] UKSC 13 today. If someone in Germany has a contract with you providing for exclusive jurisdiction in England and they nevertheless sue in Germany, do the English courts have jurisdiction under Brussels I to hear your claim for damages? Against the other contracting party, clearly Yes. But what if you want to sue a third party for bankrolling the action and thereby inducing the breach of the obligation? Is the harm suffered by you suffered here within Art.5.3 (Art.7.2 Recast)? No. The relevant obligation is to be construed as an obligation to refrain from suing in Germany, not an obligation to sue in England if you sue at all.

Another interesting point raised in the case was whether entertaining an action for breach of the obligation not to sue in Germany was itself contrary to the full faith and credit ethos lying behind the Brussels regime (as denied in West Tankers v Allianz [2012] EWHC 854 (Comm)). The SC refused to grasp this hot potato: perhaps wisely, since it may well not matter after Brexit.

The proper place to sue: holding companies, etc

Another transnational tort claim against a UK holding company on the lines of Chandler v Cape plc [2012] EWCA Civ 525; [2012] 1 WLR 3111 was dealt with today by Laing J: see AAA v Unilever Plc [2017] EWHC 371 (QB). Employees and others connected with a sub-subsidiary of Unilever in Kenya  suffered political violence at the hands of thugs after the 2007 Kenyan election. They sued not only the Kenyan company involved (essentially the Brooke Bond tea operation), but Unilever, alleging failure by it as holding company to make sure its local operation took care to protect them. Unilever sought to get rid of the action, on the basis of (a) Act of State (since the actions, or rather inactions, of the Kenyan police were in issue); (b) forum non conveniens; and (c) case management grounds. The attempt failed. On (a) it had to founder since Belhaj v Straw [2017] UKSC 3; [2017] 2 WLR 456 and nothing more needs to be said. On (b) her Ladyship was forced by Brussels I Recast, Art.4 and Owusu v Jackson [2005] QB 801 to refuse a stay, even though most of the connections were with Kenya, and indeed there were fairly clear indications that the claimants were only suing Unilever here in order to be able to sue the Kenyan subsidiary in the English rather than the Kenyan High Court. What is more significant is the decision on (c), the case management argument. Unilever relied on a throw-away line of Coulson J in Lungowe v Vedanta Resources Plc [2016] EWHC 975 (TCC) at [84] to argue that there might be a stay if there was no serious issue to be tried between the claimants and Unilever. But even though it was found that there was indeed no serious issue to be tried between the claimants and Unilever, Laing J refused to go down this road, regarding it as an unjustified attempt to sideline Owusu v Jackson in the absence of pending proceedings abroad such as would justify a stay under Brussels I Recast, Art.34. The only way Unilever could get rid of the action was by showing, in the old-fashioned way, that it was bound to fail.

This is an unfortunate result for defendants sued on dubious causes of action in England, if only because it is much more time-consuming and expensive to show that an action must fail than to argue that it is being brought in the wrong place. One suspects that this will add to the pressure on the government to include in its Brexit shopping-list a wholesale revision of the Brussels I provisions on jurisdiction. Indeed, if this were done, one attraction of companies setting up shop here would be precisely the protection against inappropriate lawsuits that the current EU law pointedly fails to give.

Asymmetric jurisdiction clauses and the Brussels Recast Judgments Regulation 2012

 

 

Asymmetric jurisdiction agreements are a long established and practical feature of international financial documentation. Under a typical asymmetric jurisdiction clause X (say a bank) and Y (say a borrower) agree that Y may sue X in the courts of jurisdiction A only but that X may bring proceedings against Y elsewhere. In Commerzbank Akt v Pauline Shipping and Liquimar Tankers [2017] EWHC 161 (Comm) the bank made various loans for ship purchase which were subject to guarantees on similar terms, including the provision of a clause for the benefit of the bank, conferring jurisdiction on the English courts. The borrowers defaulted and the bank exercised its rights to sell one of the vessels, the Adriadni. The guarantors brought proceedings against the bank in Greece, the first seeking orders that the guarantee of the loan was discharged and it was not liable to the bank, the second seeking damages from the bank in tort and under the Greek Civil Code for loss of the use of the Adriadni consequent on the arrest. The bank then brought proceedings in the English Court which the guarantors sought to stay under either art 29 or art 30 of the Recast Judgments Regulation.

 

Cranston J s held that the asymettric jurisdiction clause in the sale and guarantee contracts did confer exclusive jurisdiction on the English courts pursuant to art 31(2) of the Regulation.  Article 25 did not invalidate such clauses. Article 25 required the parties to have designated the courts of a Member State to enable the law applicable to the substantive validity of a jurisdiction clause to be identified and to provide certainty as to the forum in which a putative defendant can expect to be sued.  Article 25 did not require that a valid jurisdiction agreement had to exclude any courts, in particular non EU Courts. Accordingly, the Court refused to stay proceedings under Art. 29.

 

The Court also rejected an application to stay the English proceedings under Art. 30 concerning related proceedings. The agreement to an exclusive jurisdiction clause in favour of the English court was a powerful factor against a stay. In addition, the degree of relatedness between the English and Greek actions was very small and the English court was placed to determine the issue of interpreting and applying the jurisdiction clause.

 

English law and jurisdiction post-Brexit

Evidence has recently been given to the EU justice sub-committee of the House of Lords that Brexit may scare off foreign businessmen from choosing English law and jurisdiction in favour of the Netherlands, Germany or Singapore. Sir Oliver Heald, Justice Minister, has pooh-poohed the idea. We suspect that, even discounting political hype, Sir Oliver may well be correct. Provided that arrangements are made for mutual recognition and enforcement of judgments between the UK and EU – something in all parties’ interests, even if the preservation of the whole of Brussels I is not – it is difficult to see how Brexit will change anything.

EU Passenger Liability Regulation now applies to domestic voyages on Class A vessels.

 

 

The 2009 EU Passenger Liability Regulation applies the 2002 Protocol to the Athens Convention throughout the EU and the EEA, but has wider effect in that it also applies to domestic voyages within the EU and the EEA. This was subject to deferral by nine Member States, including the UK, for four years after the coming into effect of the Regulation for vessels in Class A. From 31.12.2016 the UK will apply the Regulation to domestic voyages within the UK on ships in Class A. The deferral in respect of Class B vessels will expire on 30.12.2018.

Article 50. Supreme Court confirms that Parliament must pull the trigger.

By an 8-3 majority the Supreme Court has just ruled that Parliament must authorise the giving of notice to leave the EU under article 50, so upholding the decision of the divisional court last December.

The Supreme Court also unanimously held  that the UK Government was not legally compelled to consult the devolved legislatures before leaving the EU.

After Article 50, now article 127?

 

 

First there was article 50 and the issue of whether it is for Parliament to authorise the process of leaving the EU – which occupied the Supreme Court last month. Now a similar set of proceedings have been issued arguing that leaving the EU will not automatically mean leaving the European Economic Area and this will have to be done pursuant to s. 127 of the Agreement on the European Economic Area. This provides:

 

Each Contracting Party may withdraw from this Agreement provided it gives at least twelve months’ notice in writing to the other Contracting Parties.

 

However, article 126 applies the agreement to the territories to which the treaty establishing the European Economic Community is applied and under the conditions laid out under that treaty. It is, therefore, likely to be the case that the UK’s membership of the EEA would terminate automatically on leaving the EU.

 

Brexit may mean Brexit, whatever that May mean, but it certainly means good money for lawyers.

 

Government loses Article 50 Challenge. Brexit is for parliament not the Crown.

Ten minutes ago the Divisional Court released its judgment in the judicial review proceedings brought by Gina Miller to determine whether or not the Prime Minister can give notice to leave the EU under Article 50 of the TEU without  the authorisation of Parliament. The Lord Chief Justice has declared that the government does not have the power under the royal prerogative to give notice under article 50. A government spokesman has indicated that the judgment will be appealed in which case it will leapfrog to the Supreme Court where a hearing has been pencilled in for early December.

 

Interesting times.