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27 October 2015
In Barclays Bank plc v Ente Nazionale Di Previdenza Ed Assistenza Dei Medici E Degli Odontoiatri ( EWHC 2857 (Comm)) the Commercial Court declined to stay an English action in favour of prior proceedings in Italy, notwithstanding the fact that the dispute pre-dated the application of the recast EU Brussels Regulation. Applying the 2001 Brussels Regulation, the court refused a stay under Articles 27 and 28. Unusually, the court also granted summary judgment at the same hearing.
This case concerned a dispute between Barclays and Ente Nazionale Di Previdenza Ed Assistenza Dei Medici E Degli Odontoiatri (ENPAM), an Italian pension fund. The dispute related to a transaction entered into by way of a conditional asset exchange letter and a professional client agreement (which contained exclusive English jurisdiction clauses). In common with the long line of derivatives litigation concerning Italian local authorities, the dispute arose when ENPAM incurred a major loss through the transaction, which it then alleged Barclays was obliged to make good.
In a further similarity with those cases, ENPAM sought to deploy an 'Italian torpedo', issuing proceedings in the Milan Civil Court in June 2014 claiming breaches of the Italian Civil Code, despite the transaction documentation containing clauses granting exclusive jurisdiction to the English courts.
Barclays applied to the English courts in September 2014 arguing that all of ENPAM's claims in the Milan proceedings arose from, in connection with and/or relating to the asset exchange transaction, and that those claims fell within the scope of the contractual English jurisdiction clauses, such that ENPAM's commencement and pursuit of the Milan proceedings constituted a breach of those clauses. Barclays sought:
As proceedings had been issued before January 10 2015, the court considered this matter under the 2001 Brussels Regulation,(1) specifically Articles 27 and 28.
While proceedings issued after this date benefit from the enhanced protection of parties' contractual choice of law under the recast Brussels Regulation,(2) the consideration of what constitutes "the same cause of action" within Article 27 of the Brussels Regulation, and the application of the Supreme Court's decision in The Alexandros,(3) will be of continued relevance.
It was not disputed that the proceedings in Milan and England were between the same parties. However, it was disputed that such proceedings involve the same cause of action under Article 27.
The court noted the principle under English law(4) allowing a party to a contract to obtain damages from the other contracting party if it brings proceedings in tort in another EU member state in breach of an express jurisdiction clause. The same authority(5) also summarised the correct approach to determine the meaning of the words "same cause of action" in Article 27. The court considered the following factors:
The court also referred to further authority in The Alexandros:(7)
"There is an established line of cases in England to the effect that claims based upon an alleged breach of an exclusive jurisdiction clause or an arbitration clause are different causes of action from claims for substantive relief based on a breach of the underlying contract for the purposes of… art 27 of the Regulation."
The court further noted the well-established principle (in both domestic and European law) that a jurisdiction clause, like an arbitration clause, is an agreement which is separable from the agreement as a whole(8) – a position now reflected in Article 25.5 of the recast Brussels Regulation.
Applying the principles above, the court found that ENPAM's main claim in the Italian proceedings consisted of damages in respect of pre-contractual liability and extra-contractual liability. It was not in dispute that this was to be analysed as a claim for damages in tort as jurisdiction was asserted on the basis of Article 5(3) of the Brussels Regulation.
Accordingly, the court found that there was no claim in contract or challenge to the validity and scope of the English jurisdiction clauses as an integral and essential part of the main Italian proceedings. Applying the separable agreement line of authority, the court further found that while the secondary Italian proceedings did attack the validity of the contractual agreements as a whole, this did not equate to an attack on the separate jurisdiction agreements which were the subject of the English proceedings.
Further, neither the main Italian claim nor the secondary proceedings mirrored the English proceedings; the central dispute in the English proceedings – the scope of the relevant jurisdiction clauses – was not mentioned in ENPAM's requests for relief in the Milan proceedings and the Italian statement of claim made only passing reference to the jurisdiction clauses.
Finally, whereas the object of the English proceedings was the recovery of damages for breach of the jurisdiction clauses, the object of the Italian proceedings was different, seeking damages in tort (the main claim) and restitution on the basis of the nullity of the substantive agreements (the secondary proceedings). Therefore, Article 27 did not apply to this dispute and the court declined to order a stay.
The court did note that while Barclays did not pursue the point in oral submissions, the position as to the indemnity in the contractual documentation was arguably different, as the indemnity provisions – unlike the jurisdiction provisions – did not constitute a separate agreement.
While in The Alexandros the Supreme Court held that English claims for an indemnity did not fall within Article 27, in that case there was no challenge in the parallel Greek proceedings to the validity of the substantive agreements. Barclays sought to argue that the indemnity applied in respect of legal costs incurred in the Milan proceedings, but did not exclude the possibility that the indemnity might extend to substantive recoveries in the Milan proceedings. In those circumstances, the court considered it arguable that the claim for an indemnity in the English proceedings was the "mirror image" of the secondary Italian proceedings, as if it were successful it would require the repayment of sums awarded in the Milan proceedings and thus result in a circularity. The court indicated that had the point been pursued, it would have considered referring the question to the European Court of Justice.
The court also considered ENPAM's alternative case under Article 28. ENPAM submitted that in its discretion the court should stay the English proceedings because of:
It also submitted that as Barclays faced a cross-claim by an Italian defendant, it would be a party to the Italian proceedings in any event and could claim the relief that it was claiming in the English proceedings in the Italian proceedings, which were more advanced.
Notwithstanding these submissions, the court found that the parties' previous agreement on a contractual exclusive jurisdiction clause in favour of the English courts was a powerful factor in support of the refusal of a stay and so did not consider that Barclays should be prevented from pursuing a case for breach of that contract in the parties' chosen forum. A stay under Article 28 was therefore also refused.
The court confirmed that the test to be applied in this circumstance is that set out in Speed.(9) Where a defendant challenges the jurisdiction of the court and the claimant applies for summary judgment, although the court had power to hear the claimant's application before or concurrently with the jurisdictional challenge, the power will be exercised only in rare cases.
The court considered the fact that ENPAM had submitted both evidence and a skeleton argument (albeit under protest) and noted that there should be no prejudice to ENPAM – if there was any prejudice, this would have been decisive. However, ENPAM acknowledged that there was no further evidence to be served and submissions were complete; its objection was said to be a matter of principle.
The court therefore concluded that the facts of the case were unusual, raising questions as to the relationship between proceedings in two jurisdictions in a particular context, and considered that this was one of the rare cases in which it should proceed to hear both applications.
ENPAM submitted the following grounds on which it contended that it had real prospects of successfully defending the breach of contract claim, with the court responding to each in turn.
The proceedings could not be prevented by means of an anti-suit injunction
The court rejected the argument that a judgment for a declaration or damages with respect to an alleged breach of an English jurisdiction clause would infringe EU principles of mutual trust and non-interference with the jurisdiction of other member state courts. This point had been determined by the Court of Appeal in The Alexandros, which specifically rejected the analogy with anti-suit injunctions. The court also noted the current position under the recast Brussels Regulation regarding primacy in determining jurisdiction.
On Barclays' own pleaded case, the relevant jurisdiction clause was not an exclusive jurisdiction clause
The jurisdiction clause in this case, as is frequently agreed for good practical reasons in financing transactions, stipulated that exclusivity in favour of one court did not prevent the financing institution from bringing an action in the courts of any other jurisdiction. There was debate in the parties' skeleton arguments as to whether such a clause could rightly be regarded as exclusive. Barclays submitted(10) that although the clause did not expressly provide that it was exclusive, on its proper construction it was clear that it was exclusive as regards ENPAM. Interestingly, the court indicated that it would accept this interpretation of an asymmetric jurisdiction clause although the issue in this case was narrower.
The issue in this instance was whether ENPAM was right to say that it was not in breach of it by pursuing proceedings in the Milan courts. On the basis that ENPAM was obliged to submit disputes in connection with the contractual documentation to the English courts, the Italian proceedings were clearly a breach of this obligation.
Barclays waived its entitlement to insist on ENPAM suing it in the English courts only
The court noted that Barclays had voluntarily participated in a pre-action mediation in Italy, at ENPAM's request. ENPAM declined to proceed on the day of the mediation, but submitted that Barclays had – by participating and not expressing any written reservation of its position as to jurisdiction – submitted to the jurisdiction of the Italian courts, notwithstanding an oral reservation being made in respect of jurisdictional issues at the mediation.
Each of these three possible defences were found not to have real prospects of success. However, Barclays' application for summary judgment in respect of the indemnity was rejected.
ENPAM had submitted that the court could not be satisfied at this stage that, if ENPAM had claimed against Barclays in the English courts, all of its claims would have failed. During the hearing, it was not evident how wide Barclays contended that the contractual indemnity clause would go. While asserting that it covered legal costs, its position as regards liability was not fully explained.
It was not in dispute that Barclays had the benefit of the indemnity under the contractual documentation. However, ENPAM argued that Barclays should not have summary judgment for a declaration to this effect at this stage of the proceedings. While the court acknowledged that Barclays would be right to say that this would normally follow, the court did not consider it necessary to make such a declaration – not even in relation to legal costs – when the ambit of the indemnity clause was unclear.
While this decision was not made under the recast Brussels Regulation, the court was nonetheless mindful of the parties' choice of jurisdiction, particularly in relation to the position under Article 28. Notably, the approach taken to the 'mirrored claims' requirement under Article 27 – where the separate nature of the jurisdiction agreement between the parties and its peripheral position in the Italian proceedings – was key to defeating the argument for a stay.
The court also made some interesting comments (obiter) regarding the asymmetric jurisdiction clause relied on by Barclays. Whether under the 2001 Brussels Regulation or the recast Brussels Regulation, there is uncertainty as to whether an asymmetric jurisdiction clause falls within the definition of an exclusive jurisdiction clause. Here, the English court indicated that it would accept an argument that it does. Accordingly, a party with the benefit of an asymmetric jurisdiction clause specifying English jurisdiction may be able to benefit from the stronger protection of parties' exclusive choice of law offered under the recast Brussels Regulation.(11) This would be in contrast to other jurisdictions (eg, France), where the courts have declined to enforce such clauses.(12)
Finally, this decision also provides useful guidance as to the circumstances in which applications in respect of jurisdiction and summary judgment may be heard together.
For further information on this topic please contact Laura Martin or Parham Kouchikali at RPC by telephone or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
(1) EU Regulation 44/2001.
(2) EU Regulation 1215/2012, specifically Article 31.2.
(3) Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG ('The Alexandros')  1 All ER 590.
(6) Gubisch Maschinenfabrik KG v Palumbo  ECR 4861 at .
(8) Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc  2 All ER (Comm) 129 at .
(9) Speed Investments Ltd v Formula One Holdings Ltd  1 WLR 1233.
(10) Referring to Continental Bank v Aeakos  1 WLR 588 [at 123-128].
(11) Article 31.2 of the recast Brussels Regulation.
(12) Ms X v Banque Privée Edmond de Rothschild (French Supreme Court, First Civil Chamber, September 26 2012, 11-26.022).
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