Limits of non-exclusive jurisdiction
27 March 2018
A non-exclusive jurisdiction clause in favour of the English courts meant that the English court had no discretion to stay its proceedings or decline jurisdiction pending the outcome of related proceedings in a non-EU Member State court. This ruling shows the limits in the powers of EU Member State courts to stay proceedings under the lis pendens provisions in the Brussels Recast (Reg EU No. 1215/2012). Parties using non-exclusive jurisdiction clauses in favour of Member State courts with counterparties based outside the EU therefore still run the risk of parallel proceedings, which can increase costs and uncertainty: UCP Plc v Nectrus Ltd  EWHC 380 (Comm), 21 February 2018
The claimant, an Isle of Man company, and its subsidiary contracted the defendant, a Cypriot company, under an investment management agreement (the Agreement) to provide real estate investment advisory services. The Agreement was governed by English law and contained a non-exclusive jurisdiction clause in favour of the English courts. The claimant brought a claim before the English court against the defendant for breach of the Agreement. Related proceedings had already been commenced by the defendant in the Isle of Man.
The defendant sought an order that the English court should not exercise its jurisdiction over the claim or that it should stay the English proceedings pending resolution of proceedings in the Isle of Man.
Brussels Recast – no discretion to stay
The case raised issues concerning the interplay between the jurisdiction agreement and lis pendens (pending proceedings) provisions of the Brussels Recast in a situation where pending proceedings are on foot in a non-Member State.
Article 25 of the Brussels Recast provides that a Member State court has jurisdiction where it has been so selected in a jurisdiction agreement between the parties (regardless of where they are domiciled) – this includes non-exclusive jurisdiction agreements. Cockerill J concluded in this case that the English court had jurisdiction under Article 25.
The next question was whether the English court had any discretion to stay its proceedings in favour of the Isle of Man proceedings. The answer was no. The lis pendens rules in Articles 33 and 34 of the Brussels Recast, which give a Member State court the power, in certain circumstances, to stay proceedings in favour of competing proceedings already on foot in a non-Member State court, do not apply where the EU Member State court has jurisdiction under Article 25 (ie under a jurisdiction agreement).
Articles 33 and 34 expressly list the circumstances when a Member State court has a discretion to stay proceedings in favour of a non-Member State court, which arise where, for example, the proceedings are brought in the Member State court on the basis of domicile or under special rules for persons domiciled in EU Member States in relation to eg contract and tort disputes. There is however no discretion to stay in cases (such as this one) where the Member State court (here, the English court) has jurisdiction under an Article 25 jurisdiction agreement.
Accordingly, the defendant’s application failed.
Non-exclusive jurisdiction clauses under common law
The judge made interesting obiter observations on the position at common law (the common law principles are only relevant when the Brussels Recast does not apply). Cockerill J found that the English court had jurisdiction because of the non-exclusive jurisdiction clause. The defendant had not shown very strong reasons for departing from the usual rule that the parties should be held to their contractual choice and it had failed to establish that the Isle of Man was an available alternative forum that was more appropriate than England for resolution of the dispute.
The judge said that, at common law, where there is a non-exclusive jurisdiction in favour of the English courts the “simple” Spiliada jurisdiction test, which requires the court to ask: (i) whether another forum is more appropriate to hear the dispute; and (ii) if so, whether there are any special circumstances requiring the claim to nevertheless be heard in England, was not appropriate. The judge said that although she “would hesitate to say” there is any formal exception to the Spiliada principles when considering non-exclusive jurisdiction clauses, she referred to authorities being “thick on the ground” which justified considering a non-exclusive jurisdiction clause as a strong personal connection on the part of both parties and being a strong factor weighing heavily against declining jurisdiction or staying the proceedings.
The lis pendens powers at Articles 33 and 34 of the Brussels Recast were added in response to uncertainty as to whether or not Member State courts had any discretion to stay proceedings brought before them where, for example, proceedings were already on-going in a non-Member State. Whilst the new powers have been welcomed for helping to clarify the position in certain cases, they have also been criticised for appearing to be too narrow in scope. This case suggests that the new powers are indeed narrow.
Cockerill J’s finding suggests that the rules do not apply where jurisdiction is based on the parties’ agreement (eg a jurisdiction clause in a contract), even if the parties have agreed non-exclusive jurisdiction, and that in this situation a Member State court does not have discretion to stay proceedings brought before it when proceedings are already on foot before a non- Member State court. Parties using non-exclusive jurisdiction clauses in favour of Member State courts with counterparties based outside the EU therefore still run the risk of parallel proceedings, which can increase costs and uncertainty.
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