Court of Appeal grants anti-suit injunction restraining US proceedings brought against employee by US parent company under exclusive US jurisdiction agreement

The Court of Appeal has given a wide interpretation to the meaning of 'employer' in the recast Brussels Regulation (No 1215/2012), holding that a company which provides benefits to employees of associated group companies may be regarded as an employer if it provides the benefits to reward and encourage the employees for the benefit of their employer and the group as a whole: James Petter v EMC Europe Limited and EMC Corporation [2015] EWCA Civ 828.

A US parent company providing stock options could therefore be sued as an 'employer' in England by a former employee of its English subsidiary, and it could not rely on an exclusive jurisdiction agreement in favour of the Massachusetts courts. An anti-suit injunction was also granted, prohibiting the parent company continuing US proceedings brought against the employee.

The facts of the case are similar to those in Samengo-Turner v J & H Marsh and McLennan (Services) Ltd [2007 EWCA Civ 723 which has attracted substantial academic debate and criticism over the years. The Court of Appeal in the present case considered itself bound by Samengo-Turner to grant the anti-suit injunction.  Given a free hand, Lord Justices Moore-Bick and Sales would have reached the same conclusion as the court in Samengo-Turner. Lord Justice Vos, however, clearly had doubts over whether the case was correctly decided, so the controversy over that decision continues.

The Petter case is a reminder that the court will look at substance rather than form in deciding who is an employer under the Regulation and that a jurisdiction agreement, whether in favour of an EU or non-EU court, is unlikely to be effective from an employer's perspective. The case also shows that, in order to protect an employee's rights, an anti-suit injunction will ordinarily be granted restraining an employer from bringing or continuing proceedings outside the EU. That injunction may even extend to ordering the employer to withdraw motions filed in the overseas proceedings, at least where there is evidence that it is seeking to pre-empt the English proceedings (as confirmed in the supplementary judgment of the Court of Appeal in this case).

Background

Mr Petter was employed by EMC Europe Ltd (EMC Europe), an English company whose ultimate parent was a Massachusetts company, EMC Corporation (EMC). A significant part of Mr Petter's total remuneration consisted of shares in EMC, awarded by EMC under a share distribution scheme known as a Stock Plan.

When Mr Petter left EMC Europe for a competitor, EMC began proceedings in Massachusetts seeking declarations that it was entitled under the terms of the Stock Plan to rescind the most recent awards of stock to him. In response, Mr Petter began English proceedings claiming, in part, that the relevant provisions in the Stock Plan were unenforceable, and also seeking an anti-suit injunction prohibiting EMC from continuing the US proceedings. EMC challenged the jurisdiction of the English court, seeking to rely on an exclusive jurisdiction clause in the Stock Plan in favour of the Massachusetts courts.

Section 5 of the recast Brussels Regulation governs jurisdiction over individual contracts of employment and provides, so far as relevant:

• Under Article 21, an employer not domiciled in a Member State may be sued in the courts of the Member State where or from where the employee habitually carries out his work (or last did so).
• Under Article 22, an employer may bring proceedings only in the courts of the Member State in which the employee is domiciled.
• Under Article 23, the provisions of Section 5 may be departed from only by an agreement:
  • which is entered into after the dispute has arisen; or
  • which allows the employee to bring proceedings in courts other than those indicated in the section.

Also, under Article 25, agreements conferring jurisdiction have no legal force if they are contrary to Article 23.

Decision

Jurisdiction

The Court of Appeal (Lord Justice Moore-Bick giving the lead judgment) held that the award of shares under the Stock Plan constituted a contract between Mr Petter and EMC. While that did not make EMC Mr Petter's employer in the sense in which that term is generally used in English law, that was not the end of the matter as 'employer' had to be given an autonomous meaning under EU law. As to what that autonomous meaning might be, there was no CJEU authority and very little domestic authority other than the Court of Appeal decision in Samengo-Turner.

The court concluded that the dispute with EMC (as well as EMC Europe) was one that related to Mr Petter's contract of employment within the Regulation and that both EMC and EMC Europe were to be regarded as his employers for the purposes of the Regulation. That meant the English court had jurisdiction under Article 21 as this was where Mr Petter last habitually carried out his work. It also meant EMC could only bring proceedings against Mr Petter in England pursuant to Article 22 as that was where Mr Petter was domiciled. The jurisdiction agreement in favour of the Massachusetts court was of no legal force as a result of Articles 23 and 25.

The Court of Appeal reached its decision on the basis that the underlying policy of Section 5 of the recast Brussels Regulation is to protect employees because they are considered from a socio-economic point of view to be the weaker parties to the contract. It was therefore necessary to look at the substance of the relationship. The stock awards were made available to Mr Petter as an important employee and were intended to act as a reward for past efforts and as an incentive to make efforts in the future. The court therefore considered that in reality and in substance the claim related to his contract of employment.

Anti-suit injunction

As regards the anti-suit injunction, the judge at first instance considered he was not bound by Samengo-Turner to grant an injunction as his decision involved an exercise of discretion. He declined to exercise that discretion in Mr Petter's favour on the grounds of comity.

Lord Justice Moore-Bick disagreed with the judge's reasoning. The principle which emerged from Samengo-Turner was that in a case falling within Section 5 of the Regulation, an anti-suit injunction should ordinarily be granted to restrain an employer from bringing proceedings outside the EU in order to protect the employee's rights.

The fact that it is not permissible for the courts of one EU member state to grant anti-suit injunctions directed at another EU member state was of no significance. Member states had to trust each other to implement the Regulation properly. An anti-suit injunction was therefore unnecessary in that context and involved an interference with the working of the Regulation. In cases where proceedings are threatened or pending in the courts of a state outside the EU, no such inhibition exists. It was also of no relevance that courts in other EU member states did not have the power to grant anti-suit injunctions, as the scope of the powers available to different courts may vary.

Lord Justice Sales agreed with Moore-Bick LJ, considering there were good arguments of principle in favour of the conclusions reached by the court in Samengo-Turner. In contrast, Lord Justice Vos was attracted by the argument that the case for an injunction based on a statutory right is not as strong as the case for an injunction based on an exclusive jurisdiction clause to which the parties have agreed, and in his view the judge's solution of allowing both sets of proceedings to continue had some merit. However, he considered the court was bound by the Samengo-Turner decision to grant the injunction and therefore agreed with the overall decision.

As regards the terms of the anti-suit injunction, the usual form would have restrained EMC from pursuing the US proceedings. There was evidence before the court, however, that after the Court of Appeal hearing but before judgment was given, EMC had sought to pre-empt the decision of the English court by seeking an anti-suit injunction from the Massachussets court against Mr Petter as well as filing a motion for summary judgment in that court. In these circumstances, the Court of Appeal ordered EMC not only to take no further steps in the US proceedings, but also to take such steps as were reasonably open to it to withdraw the motions filed in the US court.

This decision is of particular importance to multi-national companies with employees in a number of different jurisdictions, particularly now that the recast Brussels Regulation applies, in some circumstances, to employers with no EU establishment. Inevitably, the effect of agreements will differ between countries depending upon the local employment laws and remedies available.