#5045 - Catalyst Investment Group V. Levinsohn - Conflict of Laws BCL

Catalyst Investment Group v. Levinsohn

Facts

Each of three English actions was largely the mirror image of one commenced in the United States of America and involved the same parties, the same claim and the same subject matter. All the parties were domiciled in England, apart from the claimant in the third English action which was a Luxembourg entity. Two of the English actions (“the declaratory proceedings”) arose out of the performance of various written agreements, which were expressly governed by English law and included exclusive jurisdiction clauses in favour of the courts of England and Wales, between one of the claimants and a now defunct American corporation. The other English action (“the noteholder proceedings”), brought against the same defendants as the declaratory proceedings, alleged breaches of duties owed to holders of promissory notes issued by the American corporation under secured loan agreements. The defendants applied under CPR Pt 11 to stay each of the English actions on the ground that the most appropriate forum was the United States court. It was common ground that the English court was properly seised of the declaratory and the noteholder proceedings under article 2 of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 1, which provided that defendants must be sued in the courts of the state in which they were domiciled. However the defendants contended that, where there was a pending action in a non-EU country, the appropriate reflexive application of article 27 of the Regulation, by analogy with article 23, was for the court to apply its national rules on forum conveniens in order to decide whether to stay proceedings in favour of the non-EU court on the basis that the latter was the most appropriate forum for the dispute.

Issue

Whether this court has power to decline jurisdiction or to grant a stay on such grounds in favour of the courts of a non-EU country in respect of proceedings of which this court is admittedly properly seised under article 2 of Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L12 , p 1)

Holding

This question is not covered by Owusu

In the specific case before the ECJ in Owusu there was no lis alibi pendens and the ECJ expressly declined to answer the national court's question as to whether its ruling applied in such a case.

Argument on reflexive effect of Art. 27

Just as, by analogy with article 23 of the Regulation, the English court may stay proceedings otherwise properly founded on article 2 in order to give effect to an exclusive jurisdiction clause in favour of the courts of a non-EU country, so article 27 (which on its face only has effect as between member states) applies by analogy so as to enable the English court to decline jurisdiction or stay its proceedings where the same issues are pending in proceedings between the same parties in a non-EU country, i e, on lis alibi pendens grounds. This was referred to as a “reflexive” application of article 27, and was said not to be precluded by the decision of the ECJ in Owusu v Jackson (Case C-281/02) [2005] QB 801 because that decision did not cover a case where there was a lis pendens in the non-EU country.

Reflexive application leading to application of forum non-conveniens principles

Argument: His primary submission was that where there was a lis pendens in a non-EU country, the appropriate “reflexive” application of article 27 was for this court to apply its national rules on forum conveniens in order to decide whether to stay proceedings in favour of the non-EU court on the basis that the latter was the more appropriate or natural forum for the dispute.

Rejected: This seems to me to be too heavy a weight to place on article 27. It is a bold step to seek to import into the Regulation a wide forum conveniens discretion, which has been held by the ECJ to be inimical to the fundamental aims of the Regulation, and to seek to do so on the back of a mechanistic (timing-based) rule for establishing the hierarchy where different courts, all bound by the Regulation, are seised of the same dispute.

Court relied on the opinion of the Advocate General in Owusu:

… the procedural rule ‘is based clearly and solely on the chronological order in which the courts in question are seised. It does not therefore leave room for any discretion as to whether one of the courts seised is better placed than the other to deal with the substance of the case.

Although Mr Phillips submits that a reflexive use of article 27 so as to import a forum conveniens discretion would be perfectly consistent with the aims of the Regulation, that submission is difficult to maintain in the light of the reasoning relied upon by the ECJ and the Advocate General in Owusu's case [2005] QB 801; [2005] ECR I-1383. It is hard to see how conventional forum conveniens criteria would assume a different character, so as no longer “seriously [to affect] the predictability of the effects of the jurisdiction rules laid down by the Convention”, simply because they had been imported via article 27. It seems to me that the ECJ's reasoning would equally apply to the situation envisaged by Mr Phillips's primary submission, namely where one of the relevant factors in the application of the standard forum conveniens test is the existence of parallel proceedings in the non-Regulation country. If Mr Phillips were right the defendants in Owusu's case could have bypassed the effect of that decision, and activated the court's power to stay on forum conveniens grounds, by the simple expedient of commencing proceedings in Jamaica at any time.

Exclusive Jurisdiction clause for non-member state court

It is true that in Coreck Maritime GmbH v Handelsveem BV (Case C-387/98) [2000] ECR I-9337, para 19 the ECJ confirmed that, when faced with an exclusive jurisdiction clause in favour of the courts of a non-EU state, a member state should “assess the validity of the clause according to the applicable law, including conflict of laws rules, where it sits”…. However, as we have seen, there is no support in the authorities for adopting a similar approach where there is a lis alibi pendens in a non-Regulation country.

Further, in suggesting that enforcement of a jurisdiction clause was permissible in favour of the courts of a non-contracting state, neither the ECJ in the Coreck case [2000] ECR I-9337 nor Professor Schlosser appeared to be relying upon a reflexive or analogous interpretation of the corresponding provision relating to contracting states in the Convention (now article 23 of the Regulation).

In a case where there is a jurisdiction agreement the claimant has commenced proceedings in breach of the agreement to litigate elsewhere. It is a more or less universal principle that people should be held to their compacts, freely entered into. A rule requiring a court to entertain proceedings brought in breach of a valid agreement to sue in a different jurisdiction could be seen as making the court complicit in a breach of contract or even in an abuse of its own procedure. To enable the court to give effect to such an agreement in the case of a non-Regulation state does not compromise the legal certainty and uniform application of the jurisdictional rules, which are at the heart of the Regulation. Rather it enhances legal certainty by holding the parties to their agreement.

Property situated in a non-member state

So, too,...