When can the court stay proceedings against an English domiciled defendant in favour of proceedings in a non-EU court?

The High Court has held that it had power to stay proceedings against an English domiciled defendant in favour of the courts of Western Australia, as the dispute came within an exclusive jurisdiction clause in favour of those courts: Plaza BV v The Law Debenture Trust Corporation [2015] EWHC 43 (Ch).

When the English court can stay proceedings against an English domiciled defendant in favour of proceedings in a non-EU court is a vexed question under English law.

The ECJ in Owusu v Jackson Case C-281/02 decided that there was no power to stay proceedings in favour of a non-EU court on the grounds that it would be a more appropriate forum (forum conveniens) for the resolution of the dispute (see post). That left open the question whether there was a power to stay other than on forum conveniens grounds, so where for example there is an exclusive jurisdiction agreement in favour of a non-EU court or there are competing proceedings (lis pendens) in a non-EU court.

The current decision adds to the weight of first instance authorities which find that there is such a power, at least where there is an exclusive jurisdiction agreement. The court was also inclined to consider that it had power to stay on the basis that there were ongoing proceedings in Western Australia, but did not reach a decision on that point. It would also have been prepared to order a stay on case management grounds if that had been necessary.

Below we consider the Plaza decision in more detail, as well as the potential impact of the recast Brussels Regulation which applies to proceedings commenced on or after 10 January 2015 and so was not considered in this case.

Background

The facts of the case are complex, and it is unnecessary for present purposes to go into the detail. In summary, the court found that proceedings commenced in England were brought in breach of an exclusive jurisdiction clause in favour of Western Australia. The jurisdiction agreement was contained in a settlement agreement, entered into following protracted and complex litigation in Australia following the collapse of the Bell Group.

The defendant was domiciled in England and the claimant sought to argue that notwithstanding the jurisdiction clause, the decision in Owusu prevented the court from staying its proceedings in favour of the courts of Western Australia.

Decision

The judge (Proudman J) held that Owusu did not prevent the English court from enforcing the exclusive jurisdiction clause. In doing so she  followed the first instance decisions in Konkola Copper Mines Plc v Coramin Limited [2005] EWHC 898 (Comm) and Winnetka Trading Corporation v Julius Baer International Limited [2008] EWHC 3146 (Ch) and the analysis by Andrew Smith J in Ferrexpo v Gilson Investments [2012] EWHC 721.

She observed that the parties' ability to choose the courts of a particular EU jurisdiction was a mandatory exception to the domicile rules and, in her judgment, Owusu did not bar a reflexive application of those rules – ie they could be applied by analogy.

The judge went on to consider, obiter, whether the English court had a discretion to stay its proceedings where a non-EU court was already seised of a dispute which was so closely connected to the proceedings that there was a risk of irreconcilable judgments, thereby giving reflexive effect to article 28 of the original Brussels Regulation. Here there is conflicting authority, but the judge was inclined to favour the more recent decisions which found there was a discretion. Ultimately, however, the judge did not reach a decision on this point.

Finally, the judge observed that she would have exercised the court’s case management powers to stay the proceedings, if she had not ordered a stay by virtue of the exclusive jurisdiction clause. The judge considered that the facts of the case satisfied the test in Reichold Norway SA v Goldman Sachs International [1999] 1 All ER (Comm) 40 that "rare and compelling" circumstances are required before a stay can be ordered on this ground.

Comment

The Plaza case involved interpretation of the original Brussels Regulation (Regulation (EC) 44/2001) which applies to proceedings commenced before 10 January 2015. For proceedings commenced on or after that date, the recast Brussels Regulation (Regulation (EU) 1215/2012) applies. The recast Regulation includes new specific powers (at articles 33 and 34) to stay proceedings in favour of competing proceedings in a non-EU court, where those other proceedings were commenced first.

It is not clear how the recast Regulation will be interpreted, and in particular what the effect of articles 33 and 34 will be. The current position therefore appears to be:

• Where there is an exclusive jurisdiction agreement in favour of the courts of a non-EU member state, there is a body of English case law under the original Brussels Regulation, including the recent Plaza case, to the effect that the English court has power to stay its proceedings in favour of the chosen court. In doing so, the court is applying the rules in the original Brussels Regulation reflexively, ie by analogy. In other words, if the courts of a member state had been chosen this would override jurisdiction based on domicile of the defendant and there is no reason why this should not be the case where the courts of a non-EU member state have been chosen.
• There are no express provisions in the recast Regulation dealing with exclusive jurisdiction agreements in favour of non-EU member states. Given that the recast Regulation could have, but did not, give an express power to stay in these circumstances (but did in the case of lis pendens) a court might be persuaded that it is not permitted to give reflexive effect to the rules in the way it has previously. The contrary argument is that express provision was unnecessary as it was already clear that a stay could be ordered on this basis – see for example the ECJ decision in Coreck Maritime GmbH v Handersveem BV Case C-387/98.
• Where there are identical or related proceedings before the courts of a non-EU member state there are conflicting decisions under the original Brussels Regulation on whether there is a power to stay English proceedings on this basis, ie on the basis of lis pendens. More recent decisions suggest there is such a power and the judge in Plaza was clearly inclined to this view.
• Under the recast Regulation, as noted above, articles 33 and 34 give an express power to stay where there are competing proceedings in a non-EU member state but only where those proceedings are first in time. Previous case law is unlikely to be of assistance in interpreting articles 33 and 34.
• Where the proceedings in the non-EU court concern a subject matter which would be within the exclusive jurisdiction provisions under the Brussels regime (eg title to land), it is  unclear whether there is power under the original Brussels  Regulation to stay English proceedings in favour of those proceedings. In Ferrexpo AG v Gilson Investments ltd [2012] EWHC 721 (Comm) the court considered it did have the power to stay on these grounds (see post).
• Under the recast Regulation, recital 24 states that in exercising the discretion to stay given by article 33 or 34, the court can take into account whether the court of the non-EU member state has exclusive jurisdiction in the particular case in circumstances where a court of a member state would have exclusive jurisdiction. There is therefore an express recognition that the subject matter of the proceedings may make a stay appropriate. Articles 33 and 34 only apply, however, where the proceedings in the non EU member state are first in time, so it is unclear what the position would be if the proceedings in the non EU member state are second in time but involve for example land.
• A stay on case management grounds in "rare and compelling cases" is available notwithstanding the provisions of the original Brussels Regulation and this will presumably remain the case now the recast Brussels Regulation applies.

For a summary of the changes introduced by the recast Brussels Regulation read our post. For a decision tree on when the English court has jurisdiction under the recast Brussels Regulation, click here.