10/11/2017

Interpretation of Article 24(2) Brussels Recast

In its recent decision in Koza Ltd v Akcil [2017] EWCA Civ 1609, the Court of Appeal interpreted the scope of Article 24 (2) Brussels I Recast, which governs exclusive jurisdiction “in proceedings which have as their object the validity of the constitution, the nullity or dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat”.

Factual Background

The dispute concerned the control and management of the First Claimant, Koza Ltd, a company with its seat in England and Wales. The Second Claimant was a director of Koza Ltd. Koza Ltd was a wholly owned subsidiary of Koza Altin Isletmeleri AS. Both were members of the Koza Group. The Koza Group was accused by the Turkish authorities of financing of terrorism, and became embroiled in Turkish criminal proceedings. Koza Altin served notice requisitioning a general meeting of Koza Ltd with a view to passing resolution replacing its directors, including the Second Claimant, with the First, Second and Third Defendants. Koza Ltd would not voluntarily call the general meeting. Statutory procedure was sought to call the general meeting.

Koza Ltd sought relief on two grounds:
(i) the “English law company claim”, which alleged that the resolutions to which the notices related could not be passed without the consent of Mr Ipek, and he did not consent, and
(ii) “the authority claim”, which alleged on a variety of grounds that the Defendants had no authority to serve the notices served.

The Court of Appeal was concerned, not with the substantive dispute, but with jurisdictional issues. It had to determine whether the English court had exclusive jurisdiction pursuant to Article 24(2) Brussels Recast.

As a subsidiary conflict of law issue, the Court had to determine whether the first instance was correct in deciding that the Defendants had submitted to jurisdiction by virtue of filing a counterclaim.

The Decision of the Court

It was common ground between the parties that the Brussels Recast was applicable. The Court gave significant consideration to the parameters of Article 24 (2) Brussels Recast. The Defendants accepted that the “English company law claim” fell within Article 24 (2), but disputed that the English court had exclusive jurisdiction over the authority claim.

The use of the word “object” in Article 24(2) does not refer to the purpose of proceedings. The Court decided that the phrase should be interpreted as “proceedings which are principally concerned with” one of the types of subject matter within the article. In proceedings raising multiple issues, the Court should reach an overall judgment based on overall classification to determine whether the proceedings are principally concerned with one of the matters set out in Article 24 (2). The Court does not have to disentangle all issues individually or assess the time in argument or evidence that will be devoted to each.

Proceedings do not have to relate exclusively to matters of local company law. Rather, the proceedings overall must be looked at, with their connection to local company law and internal corporate decision-making. The test is whether the proceedings relate principally to the validity of decisions of an organ of the company (or one of the other listed categories in Article 24(2) ). Issues of corporate decision-making raised as ancillary issues to a contractual dispute would not qualify to bring the matter within the exclusive jurisdiction.

On this basis, the authority claim also fell within the exclusive jurisdiction of the English court.

As a result of this finding, the Court did not need to rule on the submission to jurisdiction point, but it did so in any event. The Court confirmed that what is necessary is an unequivocal submission to jurisdiction. Therefore, the filing of a counterclaim accompanied by the raising of a jurisdictional challenge lacked the requisite “wholly unequivocal nature” to constitute a submission to jurisdiction.

Conclusion

This case provides helpful guidance as to when a dispute with multiple lines of argument can be brought within the exclusive jurisdiction of a court under Article 24 (2) Brussels Recast. The determinative factor is whether the proceedings are principally concerned with the validity of decisions of a corporate organ, or the validity of the company’s constitution, nullity or dissolution. The dispute needs to be looked at in the round and assessed overall to determine what its principal concern is