Court of Appeal upholds award of damages for breach of English jurisdiction agreement

The Court of Appeal has held that it did not infringe EU law to bring a claim for damages for breach of a settlement agreement, and the jurisdiction provisions in that agreement, against a party who had wrongfully commenced proceedings in Greece. The court also gave immediate effect to a contractual indemnity by upholding the setting up of a fund to reimburse costs on an ongoing basis: In the matter of the Alexandros T [2014] EWCA Civ 1010.

The potential abuses of the lis pendens provisions in the Brussels I Regulation are well documented. Where proceedings are commenced in an EU Member State which is not the chosen country under a jurisdiction agreement, no anti-suit injunction restraining those proceedings can be granted (as established by the European Court of Justice decision in Turner v Grovit [2004] 2 Lloyds Rep 169). This is because an injunction is considered an unwarranted interference in the proceedings of the foreign court and contrary to the scheme of the Regulation. Moreover, if the non-chosen court's proceedings were commenced first, the chosen court must stay its own proceedings until the jurisdiction of the first court is established; this is the so-called "Italian torpedo".

The present case confirms that those on the receiving end of a torpedo action can at least claim damages for breach of contract and, if the contract so provides, an indemnity. This may deter to some extent the launching of torpedoes. Proceedings brought in breach of a jurisdiction agreement should in any event become less common when the recast Brussels Regulation comes into effect on 10 January 2015 (see post). Under new article 31(2) the chosen court can take jurisdiction even if proceedings are commenced first in another EU Member State: it is for the other court to stay its proceedings and await the decision of the chosen court as to whether it has jurisdiction.

In the meantime, however, this decision is a welcome confirmation that damages for a breach are available and an indemnity is effective, at least before the English courts.

Background

The facts of the case are set out in more detail in our post on the earlier Supreme Court decision on separate issues (see post). In summary, proceedings by ship owners claiming under insurance policies for the loss of The Alexandros T were settled in 2007/8. The policies and the settlement agreements contained English exclusive jurisdiction clauses. The settlement was expressed to be in full and final settlement of the ship owners' claims and an indemnity was given to underwriters in respect of any claims which might be brought against them in the future.

In 2011, the ship owners commenced proceedings against insurers in the Greek courts based on similar facts to the English proceedings. Insurers sought damages before the English court on the basis that bringing the Greek claims was a breach of both the release in the settlement agreements and the jurisdiction clauses. Claims were also made under the indemnity. At first instance the judge granted summary judgment on the insurers' claims. The ship owners appealed.

Decision

The Court of Appeal dismissed the appeal, finding that the Greek claims fell within the release and the jurisdiction clauses, as well as the indemnity provisions.

As regards EU law, the ship owners argued that the claims for damages infringed EU law as they interfered with the jurisdiction of the Greek courts to determine its own jurisdiction and (if appropriate) the merits of the owners' claims, relying on Turner v Grovit. The court said reliance on the Turner case was misplaced; that authority related to anti-suit injunctions, which interfere with the lis pendens rules in the Regulation. Here there was no question of any interference with the jurisdiction of the Greek court – that court was still free to consider the Greek claims. It would need to consider whether to recognise the English judgment but that was not an interference with its jurisdiction, rather an acknowledgement of it.

As regards the indemnity, the underwriters had incurred and were still incurring considerable expense as a result of the proceedings being wrongly brought in Greece. They should be indemnified in respect of those expenses as and when they occurred and the judge at first instance was right to order a fund to be established.

The indemnity in this case was of course contained in the settlement agreement and related to claims generally in respect of the loss of the ship. It is not unusual however for jurisdiction clauses to contain indemnities and where this is the case there is no reason why similar reasoning should not apply.