Supreme Court interprets Articles 27 and 28 of Brussels Regulation, but many issues still require clarification from CJEU

The Supreme Court has refused to stay English proceedings under Article 28 where a related action was commenced in Greece seeking to reopen issues litigated and settled in earlier English proceedings. The court also concluded that a stay was not required under Article 27, subject to the possibility of a limited reference to the Court of Justice of the European Union ("CJEU") if the insurers proceed with certain aspects of the case: In the matter of Alexandros T [2013] UKSC 70.

The judgment contains views on a number of areas of uncertainty concerning the interpretation of Articles 27 and 28 of the Brussels Regulation (Council Regulation (EC) No 44/2001):

• The majority takes a narrow view of when proceedings can be said to be in respect of the "same cause of action" within Article 27.
• The court expresses doubt that a court is seised of proceedings concerning an amendment for the purposes of Article 27 when the amendment is made as opposed to when the case was first commenced.
• Proceedings which have been stayed pursuant to a Tomlin order are still pending for the purposes of Article 28.
• The CPR time limits for disputing the court's jurisdiction apply to challenges under Articles 27 and 28.

There was sufficient uncertainty however over these issues that, if they were necessary for the determination of the appeal, they would need to be referred to the CJEU before a final view was taken. Pending clarification from the CJEU (in this case or a future case):

• Parties who wish to rely on Articles 27 and 28 should wherever possible do so within the CPR time limits for challenging jurisdiction.
• Parties may be in a stronger position to object to proceedings commenced in another member state in breach of an agreement settling English proceedings where that settlement was by means of a Tomlin Order (as those proceedings may still be pending).

Background

In May 2006 the vessel Alexandros T sank with considerable loss of life. Her owners were Starlight Shipping Company ("Starlight"). Starlight made a claim against their insurers who initially denied liability, primarily on the basis that, to Starlight's knowledge, the vessel was unseaworthy. Starlight disputed this allegation and in turn alleged that the insurers had tampered with witnesses, spread false and malicious rumours and deliberately failed to pay up, causing them consequential financial loss.

Starlight commenced Commercial Court proceedings against the insurers in 2006 pursuant to exclusive jurisdiction clauses in the policies (the "2006 proceedings"). Shortly before the trial, the proceedings were settled for 100% of the claim but without interest or costs on the basis of Tomlin Orders which (in the usual way) provided for a stay of the action save for the purposes of carrying into effect the agreed terms. The settlement agreements were expressed to be in full and final settlement of all and any claims under the insurance policies and contained English choice of law and exclusive English jurisdiction clauses. Starlight agreed to indemnify the insurers in respect of any claims which might be made against them in relation to the loss of the vessel or under the policies.

More than three years later, in 2011, Starlight brought proceedings in Greece against the insurers, alleging breaches of the Greek Civil and Criminal Code, relying on the factual allegations concerning witness evidence and loss made in the 2006 proceedings.

In response, the insurers sought to lift the stay of the 2006 proceedings and also commenced fresh proceedings before the English court (the "2011 proceedings"). The insurers sought declarations that the Greek claims fell within the terms of the earlier releases, and that bringing the Greek claims was a breach of the releases in the settlement agreements as well as a breach of the jurisdiction clauses in both the policies and settlement agreements. Claims were also made for an indemnity and damages for breach of the release and jurisdiction clauses.

High Court and Court of Appeal judgments

Burton J in the High Court refused a stay of the 2006 and 2011 proceedings under Article 28 of the Brussels Regulation and granted summary judgment to the insurers. The Court of Appeal overturned his judgment, holding that it was bound to stay the 2006 and 2011 proceedings under Article 27 (an argument raised first on appeal). It made no final determination of the position under Article 28 and declined to consider the issues on summary judgment. It also held that it was not too late for Starlight to rely upon Articles 27 and 28.

Supreme Court judgment

Lord Clarke gave the main judgment of the Supreme Court, Lords Sumption and Hughes agreeing with him. Lords Mance and Neuberger gave short dissenting judgments on one issue.

Did Article 27 apply?

Article 27(1) of the Brussels Regulation provides:

'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.'

In Lord Clarke's view, the claims made in the English proceedings and in the Greek proceedings did not come within Article 27. The applicable principles of EU law were, he thought, clear. The phrase 'same cause of action' has an independent and autonomous meaning under EU law and the test is whether the proceedings have "le meme objet et la meme cause". Identity of "cause" means that the proceedings in each jurisdiction must have the same facts and rules of law relied upon as the basis of the action. Identify of "objet" means that the proceeding in each jurisdiction must have the same end in view. The assessment is to be made by reference only to the claims in each action and not to the defences to those claims. It follows that Article 27 (in contrast to Article 28) is not engaged merely by virtue of the fact that common issues might arise in both sets of proceedings.

In this case the claims in England (in contract) and in Greece (in tort) were not identical and were not mirror images of one another and therefore not legally irreconcilable. The Court of Appeal had treated the question as a broad one focussing on the overall result in each jurisdiction and that was not consistent with the principles laid down by the CJEU.

Lord Mance however came to a different conclusion in respect of the claims for a declaration that the Greek claims fell within the terms of the release in the settlement agreements. In his view those claims were essentially for declarations of non-liability. Lord Neuberger took a similar view. Lord Clarke therefore concluded that unless the insurers abandoned those claims, the court should refer to the CJEU the question whether they involved the same cause of action as the claims in Greece within the meaning of Article 27.

Which court was the court first seised if Article 27 applied?

The insurers argued that the court in which the proceedings were first brought remained the court first seised of the proceedings even where the proceedings were subsequently amended by the addition of new claims or otherwise. Starlight argued that if a new claim is added by amendment, the court is seised of the proceedings so far as that amendment is concerned when the amendment is made and not when the original unamended proceedings were brought. The new claims added to the 2006 proceedings which were founded on the Greek proceedings were therefore, Starlight said, second in time.

The authorities and text books mainly supported Starlight's stance. Lord Clarke however clearly had doubts whether this was correct. He ultimately concluded that in the event that the insurers did not abandon the claims to which Article 27 might apply, a question on this issue should be referred to the CJEU.

Did Article 28 apply?

Article 28(1) provides:

'Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings.'

It was not in dispute that the various proceedings were related proceedings for the purposes of Article 28 and Lord Clarke would have so held in any event.

The next question was whether the 2006 proceedings were pending when the Greek proceedings were commenced and if so whether the English court was the court first seised; if it was, there was no discretion to stay the proceedings under Article 28. Lord Clarke was of the view that the English proceedings were still on foot and therefore pending, having been stayed but not finally concluded. He considered that on the true construction of the Tomlin orders, the actions remained unstayed for the purposes of carrying into effect the terms agreed. It followed that insofar as the insurers were seeking to enforce the provisions of the settlement agreements, the English court was the court first seised.

He was prepared to go further, and find that the parts of the action that were stayed pursuant to the Orders were also still pending. He rejected the argument that even if the proceedings were still live, the claims brought were new claims which should be treated as new proceedings. That approach applied, if at all, only in respect of Article 27; under Article 28 the question was which court was first seised of an action, not a cause of action. However, he could see that there was scope for argument to the contrary and if it had been critical to the decision, it might have been appropriate to refer a question on which court was first seised to the CJEU.  That was however unnecessary because, even if the English court was second seised, he would not have exercised the discretion to grant a stay.

Exercise of discretion under Article 28

As in the recent case of Nomura International Plc v Banca Monte dei Paschi di Siena Spa [2013] EWHC 3187 (Comm) (see post) the court took into account the fact that the parties had agreed in the settlement agreements and policies that the English court would have exclusive jurisdiction. This was a powerful factor in support of the refusal of a grant of a stay and Lord Clarke reached the clear conclusion that there should be no stay.

Timing of applications to stay under Articles 27 and 28

In Lord Clarke's view, the Court of Appeal should have held that it was too late for Starlight to rely upon Article 27, although again, if it was necessary for the determination of the appeal, he would refer the question to the CJEU.

In Lord Clarke's judgment the procedure for challenging the court's jurisdiction under CPR part 11(1)(b) should apply, so that a defendant should acknowledge service indicating that the court should not exercise its jurisdiction and within 14 days (28 days in the Commercial Court) issue an application raising the Article 27 or 28 issue. In this case, where Starlight had made a clear concession at first instance that it did not seek to rely on Article 27, the Court of Appeal should have held that it had a discretion under CPR rule 11(1) to permit an application to be made out of time but should have refused to exercise it. He considered the argument that the Court of Appeal had a duty to consider the application of Article 27 of its own motion whenever the point was taken "extremely improbable". Different considerations applied to Article 28 where an application to rely on it out of time had been made prior to the hearing before Burton J.

Comment

Complex and difficult questions are raised in the case and to a large degree remain unresolved, pending guidance from the CJEU. It is to be hoped that such guidance, whether or not in the context of this case, is forthcoming in the near future.