UK: Seise The Day

It is common for commercial agreements concluded today to contain an exclusive jurisdiction clause, specifying the governing law and the national courts to whose jurisdiction the parties agree they will submit in the event of disputes subsequently arising. Since the leading decision of Continental Bank v Aeakos [1994] 1 WLR 588, the English Courts have generally been willing to impose "anti-suit" injunctions on any party flouting such a clause by attempting to litigate a dispute elsewhere, if the clause in question bestows exclusive jurisdiction upon the English Courts. The effect of such injunctions is to restrain any party subject to the jurisdiction of the English courts from starting, or continuing with, proceedings in another jurisdiction.

However, two recent European cases, which appear to have tolled the death knell for this peculiarly English judicial invention, have highlighted the incompatibility of the anti-suit injunction with the Brussels Convention ("the Convention"), which dictates the EU’s approach to the allocation of jurisdiction between member states.

The key provision of the Convention is Article 21 (as amended on 1 March 2002 by Article 27 of Regulation 44/2001) which states that if proceedings between the same parties, involving the same cause of action, are brought in the courts of two different member states, the court "first seised" (i.e. the court where proceedings are first commenced) takes priority and the court second seised must stay proceedings until the court first seised has decided whether it is willing to accept jurisdiction. If the court first seised decides that it is willing, then the court second seised will be compelled to decline jurisdiction.

On reading Article 21 alone, it would appear to be absolutely clear that the court first seised will take precedence. However, to cloud the issue, Article 17 of the Convention (as amended by Article 23 of Regulation 44/2001) provides that where the parties have agreed that the courts of one particular member state will have jurisdiction over disputes, the courts of that specified member state will have exclusive jurisdiction. The potential for uncertainty arises when one party commences proceedings in a particular member state, in contravention of an exclusive jurisdiction clause contained within the contract. Will the court first seised retain jurisdiction or should it immediately decline jurisdiction in favour of the member state specified within the exclusive jurisdiction clause? In other words, will Article 17 prevail over Article 21, or vice versa?

In such cases the English Courts have traditionally taken the view that if the parties have selected the English Courts under an exclusive jurisdiction clause, then Article 17 will prevail over Article 21, and the court first seised must surrender jurisdiction. They have been willing to impose anti-suit injunctions to this end. However, the recent decision in Gasser v MISAT (Case C-116/02) and the ongoing developments in Turner v Grovit (Case C-159/ 02) show that the European Court of Justice ("ECJ") has tended to take a different view.

The contract at the heart of this dispute bestowed jurisdiction upon the Austrian courts. However, the Italian courts were first seised and a claim was then issued in Austria.

The ECJ ruled that, in such situations, Article 21 will prevail over Article 17. Thus even if there is an exclusive jurisdiction clause in place, setting out a mutual agreement as to where proceedings will be heard, if one of the parties decides to disregard that agreement and to issue a claim in another member state, then that first claim will take precedence.

Although the decision in Gasser did not concern anti-suit injunctions, as the jurisdiction of the English Courts was not at issue, it clarified that the Court first seised will be permitted to decide whether it has jurisdiction. In coming to this conclusion, the ECJ indirectly limited the power of the English Courts to impose anti-suit injunctions, as English Courts are not entitled to review the jurisdiction of another member state court that is first seised.

In 2001, the House of Lords referred to the ECJ the question as to whether anti-suit injunctions are inconsistent with the Brussels Convention (and consequently the Regulation), where proceedings in another Convention country had been brought in an arguably vexatious attempt to frustrate proceedings in England.

The ECJ has yet to deliver its judgment on this point. However, the Advocate General delivered his Opinion on the case in November 2003. This is not binding on the ECJ but Opinions often provide a useful indication as to the way the wind is blowing in Luxembourg. The Advocate General used this opportunity to "dispel all doubt" as to the validity of anti-suit injunctions.

He concluded that anti-suit injunctions are indeed inconsistent with the basic principles underlying the Brussels Convention, in particular, those of judicial co-operation and mutual trust. It was his view that the Courts of each member state should trust their counterparts’ ability to deal capably with disputes. It would be against the spirit of the Convention to permit the English Courts to inhibit due process in the courts of fellow member states by precluding them from making their own decisions as to whether they should have jurisdiction. To allow the imposition of anti-suit injunctions would be to assert the superiority of the English Courts over their European equals, which the Advocate General was loath to do.

It remains to be seen whether the ECJ will match the Advocate General’s strict approach. If it does, this would not preclude the court first seised from considering an exclusive jurisdiction clause in the light of Article 17 and declining jurisdiction in favour of the court originally nominated by the parties. However, the consequence of such a process would inevitably be increased legal fees and a delay in proceedings. As such, it is advisable to remember that a party may issue a pre-emptive claim in another European court as a tactical strike to delay proceedings being brought against them. Furthermore, if a party wished to bypass the exclusive jurisdiction clause to which it had agreed, Turner provides the opportunity to present arguments to the court first seised as to the validity of that clause.

In the meantime, despite the Advocate General’s Opinion, the English Courts resolutely continue to impose anti-suit injunctions, whilst the opportunity to do so still remains under English Law, as exemplified by Through Transport v India Mutual [2003] EWHC 3155 (Comm), in December 2003.

Gasser, and the eventual decision of the ECJ in Turner, will only affect disputes over jurisdiction between member states. The English Courts will still be able to uphold the validity of exclusive jurisdiction clauses and impose anti-suit injunctions if a party wishes to conduct proceedings in courts outside Europe in contravention of an English exclusive jurisdiction clause. Indeed, the Court of Appeal decided in Sabah Shipyard (Pakistan) Ltd v Islamic Republic of Pakistan [2002] EWCA Civ 1643 that, even though the parties had only agreed to a non-exclusive English jurisdiction clause, the party wishing to rely on this clause could obtain an anti-suit injunction to prevent proceedings taking place in the Pakistani Courts.

In light of these decisions, it pays to be aware that an exclusive English jurisdiction clause may not prevent another party from issuing proceedings elsewhere. It will then be up to the Court first seised to decide whether it has jurisdiction, and the English Courts will most likely not be able to intervene on a party’s behalf by imposing an anti-suit injunction. It may therefore be in one’s interests to make the first move and issue a claim in the English Courts. Jurisdiction could become a game of tactical manoeuvres, with the parties racing to obtain the most desirable jurisdiction for each claim, as and when it arises. Rest assured, however, that if you have contracted with a party outside Europe, the Courts will, in appropriate circumstances, remain willing to impose an anti-suit injunction on any party that attempts to circumvent an exclusive English jurisdiction clause. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.