17/10/2017

The power of domicile

This post looks at two cases which show the  importance of the Brussels I Regulation’s primary rule of jurisdiction – that defendants should be sued in the jurisdiction of their domicile.  Those cases are Aspen Underwriting v Kairos Shipping [2017] EWHC 1904 (Comm), Bestolov v Povarenkin [2017] EWHC 1968 (Comm).  It is the fifth of our “new term catch up series”.

Aspen Underwriting achieves a potentially unsatisfactory result with some claims being tried in England and others capable of resolution only in the Netherlands (the place of domicile).  On the other hand, in Bestolov v Povarenkin, jurisdiction was established on the basis of domicile under the Brussels Regulation when it would not have been asserted at common law.

Aspen Underwriting v Kairos Shipping – better just to sue in the jurisdiction of domicile?

In Aspen Underwriting v Kairos Shipping, following the sinking of a ship, her insurer (the claimant) had paid her owners and mortgagees pursuant to a settlement agreement.  The insurers then came to believe that the sinking was deliberate and thus sought to recover the sums paid.  The mortgagee (the bank) was domiciled in the Netherlands and argued that, applying Article 2(1) of the Brussels Regulation, the English court did not have jurisdiction over it.

The court largely found in favour of the bank and rejected the insurer’s arguments that the bank was somehow bound by an exclusive jurisdiction clause in either the settlement agreement between the vessel’s owners and the insurers or the policy.

The court did, however, conclude that it had limited jurisdiction.

First it decided that the insurance exception (Article 14 which provides that an insurer may only bring proceedings in the courts of the defendant’s domicile) did not apply.  This was because C-347/08 Voralberger v WGV-Schwabishe finds that the Article 14 protection applies only where the defendant is the “weaker party” and, in this case, the bank was not such a “weaker party”.

Accordingly, Article 7(2) (which provides that a person may be sued “in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.”) could apply.  Article 7(2) gave the court jurisdiction over the insurers’ claim for damages on the basis they had been induced to enter into the settlement agreement by a misrepresentation.  This was because the settlement agreement had been signed in London and/or payment was made into a London bank account and/or because the misrepresentations were made in London.  Article 7(2) did not, however, give the English court jurisdiction over the insurer’s claim for restitution based upon unjust enrichment because (applying Kleinwort Benson v Glasgow) the claim did not depend on a harmful event and so was not within Article 7(2).

The net result with some, but not all, claims being subject to the English court’s jurisdiction has the potential to generate unnecessary costs.  This could have been avoided if the insurer had sued in the Netherlands, the place of the bank’s domicile.  The case thus shows that, even if not all claims have to be decided in the place of the defendant’s domicile, it may be better simply to proceed there, i.e. following the Brussels Regulation’s default position.

Bestolov v Povarenkin – domicile and Brussels give jurisdiction where common law would not

Bestolov v Povarenkin shows an interesting contrast between the common law and EU law regimes for jurisdiction.

Both parties are Russian.  Neither has business interests or assets in England.  Mr Bestolov’s business interests are exclusively in Russia and Mr Povarenkin’s substantially focus on Russia and the CIS.  The claim arose from an agreement between the parties relating to the exploitation of mining projects in the Russian Federation.  Mr Bestolov’s claim is for some USD 7.5 million he says is due to him from Mr Povarenkin.

The defendant had been served, in person, in England.  The claimant asserted, therefore, that there was jurisdiction at common law.  The defendant challenged the English court’s jurisdiction on the basis of forum non conveniens. The court held that Russia was clearly or distinctly the more appropriate forum for the claim  and so would have declined jurisdiction at common law.

However, the claimant was able to establish that the defendant was domiciled in England. As a result, because arguments of forum non conveniens are not available in the EU regime,  the English court was obliged to take jurisdiction under the Brussels I Regulation.

Once again, the powerful effect of domicile under the EU regime is seen in action.