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TORPEDOES, ASYMMETRIC JURISDICTION CLAUSES AND THE RECAST BRUSSELS 1 REGULATION

By Grahame Anderson

In Commerzbank Aktiengesellshcaft v Liquimar Tankers Management and another [2017] EWHC 161 (Comm), Cranston J, sitting as a judge of the Commercial Court, has decided that an asymmetrical jurisdiction clause in a commercial contract can be an “exclusive jurisdiction clause” for the purposes of the Recast Brussels Regulation.

That goes against the decisions of the French courts which have held that such clauses are, in some circumstances, invalid.

Torpedo Tactics

Arms race

Practitioners of the dark arts of litigation could have some fun with torpedoes. Article 27(1) of the Brussels 1 Regulation as was (Council Regulation (EC) 44/2012 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) provided that:

“Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seized shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established.”

If the other side was on the cusp of bringing perfectly valid litigation in the correct jurisdiction, there was a way of delaying them: simply bring litigation in the wrong jurisdiction before they got a chance.

The effect of article 27(1) was that the second jurisdiction (i.e., the correct one) would have to wait until the first jurisdiction had determined that (lo and behold) it did not have jurisdiction. You might buy significant time that way.

Non-Proliferation

Torpedo-tactics like the one described above met with a new obstacle in the Recast Brussels 1 Regulation. It provides, at article 31(2), that

“…where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seized, any court of another Member State shall stay the proceedings until such time as the court seized on the basis of the agreement declares that it has no jurisdiction under the agreement.”

The primacy of the jurisdiction first seized gives way to a more sensible deference to commercial certainty. A question that may arise, however, is whether or not the clause in question is, in fact, an “exclusive jurisdiction clause” so as to make validly brought litigation invulnerable to torpedo tactics. 

Asymmetric jurisdiction clauses

The question

It is not uncommon for commercial contracts to give a wider choice, when it comes to dispute resolution, to one party than to the other. For example, one party may have the option of litigating in a range of jurisdictions, while the other may be stuck with arbitration or submitting to the exclusive jurisdiction of a single system of courts. Does such a clause an an agreement “confer[…] exclusive jurisdiction”?

Cranston J sets out the question succinctly at paragraph 2 of his judgment:

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. If such a clause is an exclusive jurisdiction agreement under Brussels 1 Recast, Article 31(2) provides that if Y sues in the courts of jurisdiction B in the above example, those courts must stay proceedings in favour of the courts of jurisdiction A, even if they and not the courts of jurisdiction A were first-seized of the matter. There is no EU jurisprudence on the issue.

The answer

Cranston J started from the position that whether or not a given clause “confers exclusive jurisdiction” is a matter of autonomous interpretation of Brussels 1 Recast, and not a question of English law (even though that was the proper law of the agreement). That, he said, was important for harmonisation across the EU jurisdictions (paragraph 53).

Fixed firmly in the domain of EU law, the judgment relies heavily on C-25/78, Nikolaus Meeth v Glacetal Sarl [1979] CMLR 520, decided under the predecessor to the predecessor of Brussels 1 recast. In that case, the agreement was constructed so that if Meeth sued, the French courts had exclusive jurisdiction; if Glacetal sued, the German courts did. That was held to be a clause conferring exclusive jurisdiction; which exclusive jurisdiction depended on the circumstances.

It is clear that contractual certainty played a significant role in the court’s reasoning and that the court was not impressed by the Defendant’s attempts to torpedo the English litigation by bringing proceedings in Greece.

There are significant uncertainties when it comes to litigating on asymmetric jurisdiction clauses in some jurisdictions, in particular in France (there is considerable debate in the commentary as to the extent to which they are enforceable after the Cour de Cassation’s decision in Apple Sales International v eBizcuss: Cass. 1ere Civ, 7 October 2015, 14-16.898. Whatever the post-Brexit advantages up upping sticks and leaving London for Paris, this is not one of them.

Posted: 22.02.2017 at 12:27
Tags:  Comments  Commercial Law
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