12/10/2015

A torpedo misses: Barclays Bank plc v Ente Nazionale di Previdenza [2015] EWHC 2857 (Comm)

This Commercial Court decision of 9 October 2015 makes it clear that attempts to circumvent exclusive jurisdiction agreements in favour of the English courts by bringing related actions in other EU member states are unlikely to succeed.  It also demonstrates the court’s willingness to award damages for breach of a jurisdiction clause.

Thus, although the defendant Italian pension fund (ENPAM) had brought antecedent claims in Italy against the claimant bank (Barclays), Blair J declined to stay the English proceedings under either article 27 or 28 of Regulation 44/2001 (Brussels I).  Blair J also gave summary judgment to Barclays on most of its claim for damages for breach of the exclusive jurisdiction clause.

Also of note is Blair J’s reference to Brussels I (Recast) (Regulation 1215/2010) as supporting his decision and his brief discussion of the exclusiveness or otherwise of asymmetric jurisdiction clauses.

The agreements:  The case arose from an asset exchange agreement (the Letter Agreement) by which ENPAM exchanged securities and cash for credit-linked notes and a subsequent client agreement (the PCA).

The Letter Agreement provided that, “The parties hereby agree that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this letter.”  

The PCA contained an asymmetric jurisdiction clause providing that, “… each of the parties irrevocably: (a) agrees … that the courts of England shall have jurisdiction to settle any suit, action or other proceedings relating to this Agreement … and irrevocably submits to the jurisdiction of such courts (provided that this shall not prevent us [Barclays] from bringing an action in the courts of any other jurisdiction)…”

Both agreements also made provision for ENPAM to indemnify Barclays following breach by ENPAM of its obligations under the respective agreements.

The Milan and English proceedings:  In 2014, ENPAM began proceedings in Italy (the Milan proceedings) against Barclays and others.  ENPAM claimed compensation of over EUR 250 million for alleged breaches of Italian law.

In response, as well as disputing the Milan court’s jurisdiction, Barclays brought a claim in England against ENPAM for declaratory relief, damages and an indemnity on the basis that, by the Milan proceedings, ENPAM had breached jurisdiction provisions in the Letter Agreement and the PCA.

Predictably, ENPAM applied to the English court for a stay on the basis of article 27 or 28 of Regulation 44/2001.  In turn, Barclays sought summary judgment on its claim.

At the hearing in September 2015, Blair J was called on to decide: (1) ENPAM’s jurisdiction application; and, if the jurisdiction application failed, (2) whether Barclays was entitled to summary judgment.

In the meantime, the first hearing in Milan had been postponed to November 2015.

Article 27, Regulation 44/2001: Article 27 could only apply to mandate a stay if the Italian and English proceedings, between the same parties, were in relation to “the same cause of action”.  The relevant principles to be applied were those set out by the Supreme Court in The Alexandros T [2013] UKSC 70 (summarised by Blair J at [65] – [71]).   Two points are of particular significance.  First, there is established case law that claims based on an alleged breach of an exclusive jurisdiction or arbitration clause are different causes of action from claims for substantive relief based on a breach of the underlying contract.  Second, like arbitration clauses, jurisdiction clauses are separable from the agreement in which they are found so that it is only if the jurisdiction clause is itself under some specific attack that some question can arise as to whether it is right to invoke the jurisdiction clause. (As Blair J noted, this principle is now express in article 25 of Regulation 1215/2010.)

The main claim brought by ENPAM, for damages of some EUR 96 million, was on the basis of pre-contractual or extra-contractual liability; that is, a claim in tort / delict to which article 5(3) of Regulation 44/2001 could apply so as to give the Italian courts jurisdiction (absent an exclusive jurisdiction clause engaging article 23) as the place where the harmful event had occurred.  Blair J held that the Italian and English proceedings did not, therefore, involve the same cause of action.  Further, he held that ENPAM’s challenge to the jurisdiction clause was not an integral and essential part of these tortious claims.  Accordingly, the main claim alone could not justify a stay under article 27.

ENPAM’s secondary claim in Milan, for restitution of some EUR 165 million, relied on establishing that the contracts were a nullity or should be cancelled.  This was said by ENPAM to be a point which distinguished its case from The Alexandros T.  Blair J rejected this argument and held that the claim in the Milan proceedings was not a specific attack on the separable jurisdiction agreements.  Accordingly, Blair J concluded that the secondary claim could not justify a stay under article 27.

Both conclusions were further supported by Blair J’s findings that: (1) the Milan and English proceedings did not involve claims which were “mirrors”; (2) the “objet” of the proceedings was different (in Milan tortious damages and restitution were sought, in England contractual damages were sought); and (3) Barclays relied on the PCA in addition to the original asset exchange agreement, ENPAM did not.

Finally, Blair J observed that if Barclays had wished to pursue a claim under the Letter Agreement’s express contractual indemnity, since that agreement was in issue in Milan, it was “at least arguable, or to put it another way the contrary is not acte clair” that the claim was a “mirror image” of the Milan proceedings.   That meant that a reference to the CJEU would have required consideration.  Perhaps unsurprisingly, Barclays did not propose to pursue the indemnity claim.

Article 28, Regulation 44/2001:  The parties were agreed that article 28 was engaged on the basis that the Milan proceedings and the English proceedings constituted “related actions”.  The question was whether the court should exercise its discretion to stay the English proceedings.

Blair J declined to stay proceedings.   As the Supreme Court did in The Alexandros T, Blair J regarded the “fact that the parties previously agreed an exclusive jurisdiction clause in favour of the English court [as] … a powerful factor in support of the refusal of a stay”.   It is also worth noting that Blair J gave weight to the likelihood that the matters raised in the English proceedings could be resolved much more quickly than those raised in the Milan proceedings.

Should the summary judgment application be heard with the jurisdiction challenge?  Before Blair J could determine Barclays’ summary judgment application, he had to decide whether it was appropriate to do so at the jurisdiction hearing.

Blair J applied the established test set out in Speed Investments Ltd v Formula One Holdings Ltd [2004] EWHC 1772 (Ch).  That is, the court’s power to hear the claimant’s summary judgment application before or concurrently with the jurisdictional challenge will be exercised “only in rare cases”.  The rationale for this rule is that foreign defendants should have a real opportunity to decide whether to submit to the jurisdiction.

Blair J decided that he should hear Barclays’ application because both parties were prepared to argue the point and, significantly, ENPAM had stated there was no further evidence to be served for it, its submissions were complete.  Further ENPAM had not indicated that it would wish to allow the judgment to go in default.

It should be noted that the parties’ readiness was the result of Flaux J’s order, in July 2015, in response to Barclays’ application that (subject to the trial judge’s directions) both applications be heard together.  It appears that Flaux J’s decision followed from correspondence rather than oral argument.  Blair J’s conclusion suggests that a foreign party who wishes to avoid a similar result must insist on a separate hearing to resolve the issue of whether liability and jurisdiction should be decided together.  The alternative is not to serve arguments and evidence (even under protest as ENPAM did) but this could be a high risk strategy.

Summary judgment on Barclay’s claim for breach of the jurisdiction clauses:  Blair J concluded that ENPAM had no real prospect of successfully defending Barclays’ claims for breach of the jurisdiction clauses and, accordingly, awarded summary judgment on these claims (damages were to be subject to further directions).  Blair J did not grant summary judgment on the indemnity claim pursued principally because the ambit of the clause was unclear.

Two points of interest from a private international law point of view emerge from the reasons for Blair J’s grant of summary judgment.

First, Blair J rejected ENPAM’s argument that granting summary judgment was akin to an anti-suit injunction.  Blair J followed the reasoning of the Court of Appeal in The Alexandros T ([2014] EWCA Civ 1010) and rejected ENPAM’s attempts to distinguish it because its case involved an attack on the validity of the English law and jurisdiction agreements.

Second, Blair J rejected ENPAM’s argument that it was not in breach of the PCA jurisdiction clause because that was not exclusive (but was asymmetric providing, as is common, that Barclays might bring proceedings in the courts of any other jurisdiction).  The ratio for that decision was simply that whatever Barclays was allowed to do, ENPAM was obliged to submit disputes to the English court’s jurisdiction.  Nevertheless, by way of obiter dictum, Blair J indicated that he would accept Barclays’ argument that the PCA jurisdiction clause was by definition “exclusive” as regards ENPAM. This might well encourage those who wish to argue that a party in Barclays’ position is entitled to the benefit of the mandatory stay provisions of article 31(2) of Regulation 1215/2010.