Piggy back jurisdiction under CMR? The Supreme Court answers ‘No’

Where jurisdiction is established over the first road carrier under the CMR, can proceedings against successive carriers be brought in that forum? In British American Tobacco Switzerland S.A. and Others v Exel Europe Ltd [2013] EWCA Civ 1319, [2014] 1 Lloyd’s Rep. 503, the Court of Appeal said ‘yes’. The Supreme Court has now reversed the decision, [2015] UKSC 65.

The cargo owner entered into a CMR contract of carriage with a carrier, based in England, and agreed exclusive English jurisdiction for disputes arising out of the contract of carriage. The claims arose out of thefts of cigarettes from two cargo containers while in the custody of Dutch sub-contractors, the first in Belgium, the second near Copenhagen. The cargo sued the first carrier and the two Dutch sub-carriers. An advantage of suing in England would be that recovery of customs duty is allowed in full under art. 23(4) CMR by the English courts.

Although it was entitled to bring proceedings in England against the first carrier, this was not the case as regards the successive carriers who did not fall within any of the grounds of jurisdiction in art. 31 of CMR. What about art. 34 which has the effect of joining a successive carrier to the contract of carriage on the terms of the consignment note? The jurisdiction clause did not appear in the consignment note and it would be contrary to principle to hold a party to a choice of court clause of which he had no express notice. Then there is art. 36, under which joint and several liability is imposed on the first, the last, and the guilty carrier. However, this was not to be interpreted to include an additional head of jurisdiction allowing for a defendant domiciled in one member state to be sued in the courts of the place where a co-defendant was domiciled. The 2001 Brussels Judgments Regulation did not provide any other basis for jurisdiction over the two sub-contractors or otherwise act as an aid to the interpretation of the CMR.

Lord Clarke and Lord Sumption both considered that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings. However, they agreed with Lord Mance that the language of the CMR clearly provides otherwise. The only way for a cargo owner to ensure that its claims against all the carriers that are potentially liable under art. 34 is to ensure that the jurisdiction clause in the head contract is expressly referred to in the consignment note.

Latest instalment of the Prestige saga — over to Madrid

Nearly 14 years ago the tanker Prestige sank, grievously sullying the coasts of France and Spain. The vessel’s P & I club (London SS) was understandably concerned. But it had taken care in granting cover to make sure that the contract was governed by English law; that its exposure was clearly restricted to CLC limits; that any dispute as to cover was to be arbitrated in London; and that there was a “pay to be paid” provision. There were good reasons for this. Many civil law courts take an impatient view of the English attitude that insurers’ liability is an aspect of the contract to indemnify, preferring the view that the liability is a direct one to the victim. The club rightly wanted to avoid the prospect of a court in an affected country giving large judgments against it on the basis of this civil law doctrine (accompanied, no doubt, by a disdain for such niceties as arbitration clauses and the small print in the P & I cover, not to mention in certain cases a large degree of national amour propre). The point was, of course, that if these were EEA courts, then however cavalier or misguided those judgments were, they would be enforceable under Brussels I or Lugano.

The club were right, in spades. Criminal Spanish proceedings, carrying with them under Spanish law the possibility of civil-law-style partie civile liability, were started. To forestall the giving of an enforceable judgment against it, the club demanded arbitration, got an arbitration award saying that the Spanish and French governments could only enforce the cover subject to the terms of the contract — including the arbitration clause, of course — and then successfully got that award translated into an English judgment (see London SS Mutual v Kingdom of Spain, etc [2015] EWCA Civ 333; [2015] 2 Lloyd’s Rep. 33). In fact the original criminal proceedings failed. But a few days ago the Spanish supreme court (Tribunal Supremo) reversed that decision and gave judgment against the master of the Prestige (he got two years in clink) and, more importantly, directly against the club as a matter of civil liability. The news report is here; the judgment text (unfortunately only in Spanish) here.

With conflicting judgments from London and Madrid we now have the irresistible force meeting the immovable object. One suspects we haven’t heard the last of this saga.

AT

Applicable law under Rome II Regulation. ‘Damage’ or ‘indirect consequences’.

Article 4(1) of Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II) provides the law applicable to a non-contractual obligation arising out of a tort is “the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur”. On 10 December 2015 in Florin Lazar, (C-350/14), the ECJ has clarified the meaning of this provision as it operated in the context of a road accident with transnational effects.

A traffic accident in Italy resulted in the death of a woman whose close relatives made claims for the loss of a loved person and the loss of a source of maintenance. The claimants were all Romanian. Some were habitually resident in Italy, others in Romania. Under Italian law, the damage resulting from the death of a family member is treated as having been suffered directly by the family member and, in particular, is deemed to amount to an infringement of his personal rights.

The ECJ ruled that their claims could not be characterised as “damage” and constituted an “indirect consequence” of the accident, and that the applicable law was that of Italy where the accident occurred. In reaching this conclusion, the ECJ referred to art. 2 which provides that ‘damage shall cover any consequence arising out of tort/delict’ and to Recital 17 which states that  “in cases of personal injury or damage to property, the country in which the damage occurs should be the country where the injury was sustained or the property was damaged respectively”.

Anti-suit injunctions (or rather anti-enforcement injunctions) again

An international high-net-worth employment case decided last week, Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309 (accessible on the excellent BAILII website), has a good deal of meat for international transaction lawyers too. The CEO of a Togolese bank had a contract of employment governed by English law and with a provision for arbitration of differences in London under the UNCITRAL Rules. In early 2014, following a textbook exercise in corporate character assassination, he was fired. He immediately sued in Togo for wrongful dismissal, and shortly afterwards in the Ivory Coast for defamation, recovering a cool $11 million-odd in the former, and in the latter about $15 million. Both courts held that under their respective laws the arbitration provision could not deprive them of jurisdiction. The employer claimed arbitration, and in April 2015 sought an anti-enforcement injunction in respect of the Togolese and Ivorian proceedings (i.e. an anti-suit injunction for the time after judgment has been obtained). The CA held an anti-enforcement injunction available on principle, but upheld its refusal on the grounds of delay.

Essentially this judgment makes clear a number of points of very general application. First, s.32 of the Civil Jurisdiction and Judgments Act 1982, dealing with the question of the recognition in England of foreign proceedings brought in breach of jurisdiction or arbitration agreements, is likely to precluded recognition of the relevant proceedings. Despite the exception to non-recognition where the jurisdiction / arbitration agreement is “illegal, void or unenforceable or was incapable of being performed”, it is irrelevant that an arbitration agreement is ineffective under the law of the place where the proceedings are brought or the law of the place where the contract was made. What matters is its enforceability under English law. Secondly, if people agree under a contract governed by English law to arbitrate disputes, the English courts will have little compunction where appropriate in granting anti-suit or anti-enforcement relief. Such relief is not as such a breach of the rules of comity: as Christopher Clarke LJ pertinently pointed out, the preservation of overseas judicial amour propre is not a particularly important aim these days. Thirdly, however, delay in seeking relief continues highly relevant, both on general equitable grounds and also because it is undesirable to render fruitless the expenditure of large amounts of curial time and litigants’ cash on ultimately unproductive proceedings abroad. In short, while anti-enforcement injunctions remain possible, in practice they are likely to be rare, as litigants will normally be expected to act earlier in the judicial process.

AT

Don’t be late. Arbitrate.

We are all familiar with the ‘Italian Torpedo’ where a party to a contract containing an arbitration clause commences proceedings in a jurisdiction which will not recognise its effect. The Africa Reefer [2015] EWHC 1950 (Comm), provides a salutary lesson against overconfidence that one’s chosen court will, indeed, determine that arbitration does not apply.

Pears were carried from Argentina to Antwerp under a bill of lading incorporating a charterparty subject to London arbitration. The bill of lading was subject to the Hague-Visby Rules and a one year time limit. The claimants commenced proceedings in Belgium and the parties awaited the final report of the court surveyor. After this was produced the defendant, in November 2012, served a defence objecting to the jurisdiction of the Belgian courts on the grounds that the dispute was subject to London arbitration. The claimants took no steps to commence arbitration, confident that it would succeed on this point under article 96 of the Belgian Private International Code and article 91 of the Belgian Maritime Law. Much to their surprise, in 2014 the Belgian court found for the defendant.

In 2015 the claimants sought an extension of time of three years and eight months for commencing arbitration relying on s.12(3) (b) of the Arbitration Act 1996 which provides for the court to order that an extension be given where: “the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question”. Burton J declined to grant the requested extension. There was no conduct by the defendants upon which the claimants could rely which made it unjust to hold the claimants to the one year time limit. The defendants had been entitled under Belgian law to participate in the Belgian proceedings up until the time when they raised the jurisdiction objection in November 2012, and it was common ground that by doing so the defendants had not waived their right to claim arbitration. Thereafter, the claimants took no steps to commence arbitration until their rude awakening in 2014 when the Belgian court found for the defendant.

Double insurance and contribution, EU-style — where can you sue?

A decision last Friday from a deputy High Court judge which may raise the odd Euro-eyebrow: see XL Insurance Company SE v AXA Corporate Solutions Assurance [2015] EWHC 3431 (Comm) (available on BAILII).

Put simply, in 2008 there was a nasty railroad smash in California involving Connex. Connex’s insurer XL paid up to the victims. They then alleged that AXA, a French insurer, had insured the same risk and claimed contribution from it in London on the basis of double insurance. AXA applied to strike on the basis that, being French-based, it had the right to be sued in France under Brussels I Recast, Art.4. XL countered on the basis that this was a claim “relating to a contract” under Art.7(1), or one “relating to tort, delict or quasi-delict” under Art.7(2); in which case AXA could be sued in the place of performance or the place where the harmful act occurred as the case might be.

HHJ Waksman QC obliged by striking out.

This was not a claim relating to a contract, since although there were a couple of insurance contracts in the background, a claim relating to a contract involved a contractual duty of some sort obliging the defendant to render performance to the claimant: this wasn’t the case here. If anything, one insurer’s liability to contribute to the other’s payment is a claim in unjust enrichment. True, an EU Advocate-General had said exactly the opposite a couple of months earlier in Ergo Insurance v P & C Insurance Cases C-359 and 475/14 (see http://curia.europa.eu/juris/document/document.jsf?text=&docid=168543&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=281090), opining that this was a contract claim, with the place of performance being that of the underlying insurance policies. But the judge did not mince his words: he said that Adv-G Sharpston (incidentally an English ex-academic long since inveigled away by the good life in Brussels) did not understand the matter and was simply wrong.

Nor was this anything “relating to tort, delict or quasi-delict”. Taking the narrow view of this as requiring at least some degree of liability for wrongs (see Reichert v Dresdner Bank [1992] I.LPr. 404), it didn’t embrace contribution: no wrong was committed by one insurer not paying while another insurer did.

This all matters, if only because contribution claims can’t normally be subjected to a jurisdiction agreement. Put shortly it seriously raises the bar for those seeking contribution if their lawyers may potentially have to jurisdiction-hop anywhere in the EU to obtain their money. But the betting is strong that this isn’t the last word. Watch this space.

Get your skates on for an anti-suit injunction

The English courts may be very willing on principle to give you an anti-suit injunction against someone who sues elsewhere while putting up two fingers to a binding London arbitration clause. But you must play your part and act quickly. You can’t lackadaisically ask the foreign court to decline jurisdiction and then seek to injunct the other guy in London several months later when it’s apparent that it won’t. A hapless shipowner found this out on his unlucky Friday 13. For details see Essar Shipping Ltd v Bank of China Ltd [2015] EWHC 3266 (Comm) (13 November 2015), available on BAILII.

AT