#5047 - Ferrexpo V. Gilson - Conflict of Laws BCL

Ferrexpo v. Gilson

Facts

The claimant was a Swiss company (Ferrexpo) owned by a public company listed on the London Stock Exchange. The proceedings concerned a Ukrainian company (OJSC) which owned and operated a mine in Ukraine. Ferrexpo claimed to own 98 per cent of the shares in OJSC, and the indirect interest in the mine was the only significant asset of Ferrexpo and its parent. The defendants were English companies which held shares in OJSC and had agreed to sell them in 2002.

The Ukrainian courts held in 2010 that the 2002 share sale agreement was invalid. The defendants in 2011 brought proceedings in Ukraine seeking to restore their shareholders' interests in OJSC to what it was before the 2002 agreement.

Ferrexpo brought English proceedings to resolve the ownership dispute, contending that it would not be treated fairly if the matter was heard in Ukraine. The only connections with the jurisdiction were that the defendants were English companies and were served in England and that Ferrexpo's parent company was English.

The defendants argued that, notwithstanding the decision in Owusu v Jackson , the court had power to decline jurisdiction or to stay the proceedings and should exercise that power. It should apply art. 22 of the Regulation ‘reflexively’ with the result that the Ukrainian court should be regarded as having exclusive jurisdiction over the subject-matter of the dispute; similarly art. 28 should be applied reflexively on the basis that the proceedings were related and the Ukrainian court was the court first seised.

Holding

Power to stay is derived not from the Regulation, but from CPR

The argument that the law does require a reflexive application of these articles of the Brussels Regulation (rather than the law should do so) does not, as I see it, suppose that the Brussels Regulation itself confers on the court the power to decline jurisdiction or stay proceedings. Rather it is that the Regulation allows the court to exercise the powers available to it under its national law: here the CPR(‘CPR’) include a power to ‘stay the whole or part of any proceedings or judgment either generally or until a specific date or event’ (CPR 3.1(2)(f)).

Coreck Maritime – Exception for exclusive jurisdiction clauses

They refer to the decision of the ECJ in Coreck Maritime GmbH v Handelsveem BV (Case C-387/98) [2001] CLC 550, which concerned article 17 of the Brussels Convention , an article about jurisdiction agreements (broadly corresponding to article 23 of the Brussels Regulation ). Although article 17 referred to an agreement that a court or the courts of a contracting state should have exclusive jurisdiction to settle disputes and therefore did not apply to agreements designating a court of a non-contracting state, the ECJ did not consider that therefore the Brussels Convention prevented the courts of contracting states from giving effect to the parties' agreement as to jurisdiction.

This in itself shows that para. 37 of the judgment in Owusu v Jackson, upon which Mr Smouha relied (see para. 119) is not to be understood to prevent the national court declining jurisdiction in all circumstances unless they are expressly recognised by the Brussels Regulation. A basic principle of the Regulation emphasised by the ECJ in Owusu itself is that a well-informed party should be able to predict where he might be sued and where he is entitled to sue, and it would not promote this principle to interpret the Regulation so as to defeat the parties' express agreement for exclusive jurisdiction, an agreement that is generally designed to achieve just such certainty. I cannot accept that in Owusu v Jackson the ECJ intended to overturn its decision in Coreck Maritime.

Same reasoning justifies reflexive application of Art. 22 as well

Once it is recognised that the mandatory effect of article 2 of the Brussels Regulation is subject to the exception of an exclusive jurisdiction clause whereby the parties have chosen to resolve their disputes in the courts of a non-member state, there is no reason to interpret the judgment in Owusu v Jackson as requiring the courts of member states to exercise jurisdiction over matters covered by article 22.

Decision in Catalyst does not apply to cases under Art. 22 or Art. 23

As I shall explain later, while I recognise the force of these points, I cannot agree with the decision in the Catalyst case, even in its application to cases of lis alibi pendens. However, on any view it is no answer to the defendants' argument for a reflexive application of article 22. Barling J did not consider that his decision would mean that the court is obliged to assume jurisdiction in cases covered by the categories of exclusive jurisdiction in article 22. He considered them comparable to cases where the parties have made a jurisdiction agreement.

Reasoning in Owusu does not apply to Art. 22 cases

The reasons that the ECJ in Owusu decided that a defendant could not challenge the jurisdiction of the court of his domicile in favour of the jurisdiction of a non-contracting state do not, to my mind, apply to a case where the subject matter of the jurisdiction [litigation] is within article 22. A reasonable well-informed defendant could, I think, reasonably foresee that he might be sued in relation to such matters in the courts of the non-member state associated with the subject matter of the litigation: see para. 40 of Owusu.

The matters covered by article 22 are defined with distinctly more particularity than the principles about the application of forum non conveniens, and this goes some way to meet the concern about uncertainty.

Reflexive application: Court has discretion to stay

As I have said, there are differing views about whether, if article 22 has a reflexive application at all, that application is mandatory or whether the court has discretion whether or not to apply it. I received only brief submissions about this. Having decided that the article has a reflexive approach to these proceedings, I conclude that it is a matter of discretion whether the court should or should not assume jurisdiction, for three main reasons:

(i) First, there appears to me no reason of principle or policy that the reflexive application of the article should be adopted slavishly and, as stated in Dicey, Morris and Collins (loc cit) at para. 12-022, it is inappropriate to do so.

(ii) Secondly, a mandatory rule would require the court to refuse to assume...