Lis alibi pendens provisions in Brussels Regulation
05 March 2013
In the case of Starlight Shipping Co (Appellant) v Allianz Marine & Aviation Versicherungs AG & ors (Respondents) & Overseas Marine Enterprise Inc (Third party)  EWCA Civ 1714, 20 December 2012, the Court of Appeal has overturned a decision of the High Court and allowed a defendant, who had already filed an acknowledgment of service and defence, to apply for the stay of English proceedings under Articles 27 and 28 of the Brussels Regulation on the basis of identical or related proceedings already on foot in another Member State (in this case, Greece).
A ship was lost at sea, and the claimant ship-owners (Starlight) sued the defendants (its insurers) in England in respect of that loss. In December 2007 and January 2008 the proceedings were settled by Tomlin orders.
In April 2011 the ship-owners (and various other connected persons) launched proceedings in Greece against the insurers claiming damages in respect of late payment of the sums insured and for the defendant's alleged misconduct in relation to the original claim. In response, in new proceedings brought in the English courts, the insurers argued that the proceedings brought in Greece were compromised by the original settlement. The ship-owners subsequently sought a stay of the English proceedings under Article 28 of the Brussels Regulation.
Article 28 provides that "Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings."
Burton J refused to award the stay under Article 28, and granted summary judgment against the ship-owners, finding that the matters raised in Greece fell within the scope of the original settlement. The shipowners appealed on the Article 28 point, and also, for the first time, sought a stay of the English proceedings under Article 27 of the Brussels Regulation.
Article 27 provides that "Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established."
The insurers argued, inter alia, that the applications under Article 27 and 28 had been made too late, and it is this aspect of the Court of Appeal's judgment which is the focus of this review.
Was the Article 27 application too late?
Longmore LJ held that the provisions of CPR 11 (which govern the rules regarding a challenge to jurisdiction) are not relevant in the context of an application for a stay under the Brussels Regulation. Crucially, an application under Article 27 or 28 is not strictly a challenge to jurisdiction, but simply a request that the court refrain from exercising such jurisdiction as it may have.
Longmore LJ proceeded to consider whether it was a bar to an application under Article 27 that (1) the ship-owners had expressly disavowed any intention to rely on Article 27 in the first instance skeleton argument; (2) the first instance judge had refused a stay under Article 28; and (3) the judge at first instance gave judgment against the ship-owners. Longmore LJ held that because: (a) the appeal court always has a discretion to entertain a new point on appeal if the respondent has suffered no prejudice which cannot be cured by costs; and (b) that if the proceedings involved the same cause of action and the same parties pursuant to Article 27 the court must stay its own proceedings, then once the Article 27 point had been raised the court had a duty to consider it.
Greek court "first seised" of same cause of action?
Longmore LJ was satisfied that the English proceedings involved the same "cause of action" as the Greek proceedings. In the Greek proceedings, the ship-owners were claiming damages arising from the alleged malicious behaviour of the insurers. The insurers' key argument before the English courts was essentially that they were not liable for any damages as such a cause of action had been compromised by the settlement agreements.
Longmore LJ found that the Greek court was first seised of this cause of action and therefore set aside the summary judgment and granted a stay of the English proceedings under Article 27.
Comment: A challenge to the jurisdiction of the English court traditionally needs to happen very early in proceedings, and there are strict rules in CPR Part 11 governing timing and procedure. Normally by the time a defendant has filed a defence it would be too late. This judgment confirms that Articles 27 and 28 of the Brussels Regulation are available to the defendant at any point in the proceedings as they are not viewed as a challenge to jurisdiction in the traditional sense. This could add some uncertainty where there is a chance that a defendant is already litigating in another Member State and (maybe for tactical reasons) will try to argue that the causes of action are identical or related at some later date.
As a matter of course, if a dispute with a nexus to another Member State jurisdiction appears likely, early legal advice should be sought, with a view to making sure that the appropriate or preferred court is first seised, and thereby avoiding the costs and delay of jurisdiction challenges on the basis of the lis pendens provisions in the Brussels Regulation.
By way of reminder, one of the most heavily criticised aspects of the Brussels Regulation relates to the application of its lis pendens rules. The "first in time" rule applies even where a party brings proceedings in breach of a jurisdiction clause for tactical reasons in the "wrong" jurisdiction. This tactic (known to litigators as an "Italian torpedo") can be particularly effective if proceedings are commenced first in a jurisdiction known for being slow-moving or that may not, for example, determine jurisdiction as a preliminary matter.
Happily there are new lis pendens rules (Articles 29 to 34) in the revised Brussels Regulation, which is due to come into force in 2015. They contain provisions that seek to free a contractually chosen court to decide on its jurisdiction and progress the litigation, regardless of whether or not it is first seised.
Where on the Web
For a detailed account of the new recast Brussels Regulation please click here
This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and legislation in commercial dispute resolution.