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Article: February 2014 London Litigation Update

February 01, 2014
Business Litigation Reports

Parallel Judicial Proceedings in Europe: “The Alexandros T” [2013] UKSC 70. In a landmark decision, the U.K. Supreme Court has provided parties with a meaningful way to discourage opponents from commencing proceedings in the courts of another EU Member State in breach of an exclusive jurisdiction agreement in favor of the English courts. The Supreme Court held that, in certain circumstances, the wronged party is entitled to seek damages for breach of that jurisdiction agreement and related declarations if its opponent commences proceedings in another Member State. The decision is significant because while the parallel proceedings in the foreign Member State cannot actually be prevented (as EU law prohibits the use of anti-suit injunctions), they can now be rendered commercially pointless as any recovery obtained will automatically be recoverable by way of damages in the English courts.

The background to the dispute is that, following the sinking of the ship ‘Alexandros T’, its owners brought claims against their insurers in the English High Court in 2006. The claims were settled and the proceedings were stayed on the terms of the settlement agreements, which contained exclusive jurisdiction clauses in favor of the English courts (the insurance policies themselves also contained English jurisdiction clauses). In 2011, however, the owners commenced fresh proceedings against the insurers in Greece. The insurers applied to the English courts, seeking (amongst other things) declarations that the Greek claims were in breach of the release provisions in the settlement agreements and the English jurisdiction clauses in both the settlement agreements and the insurance policies. The insurers also sought damages for those breaches, and indemnities in respect of the Greek claims. In response, the owners argued that these claims fell within Articles 27 and/or 28 of Council Regulation (EC) No. 44/2001 (the “Brussels Regulation”) and that the English proceedings had to be stayed pending the decision of the Greek court on its own jurisdiction. Article 27 of the Brussels Regulation is mandatory and requires that where proceedings involving the same cause of action between the same parties are brought in different Member States, any court which is not first seized of the matter must stay its proceedings until the jurisdiction of the court first seized is determined. Article 28 is discretionary and concerns proceedings which are related (rather than identical); it provides that any court which is not first seized of the matter may stay its proceedings.

At first instance, the High Court refused to stay the English proceedings and held that the owners were bound to indemnify the insurers against any costs incurred and any sums that may be awarded against them in the Greek proceedings. The Court of Appeal, however, reversed that decision and held that under Article 27 it was bound to stay the English proceedings in favor of the Greek court (it made no final determination of the position under Article 28).

Reversing the decision of the Court of Appeal, the Supreme Court ruled that Article 27 did not apply as the two proceedings did not concern the same causes of action. The Greek claims were claims in tort, whereas the insurers’ claims were contractual and based on the terms of the settlement agreements and insurance policies; they were therefore not “mirror images” of each other. An analysis under Article 27 only requires consideration of the claims themselves; it does not take into account possible defenses or a broader overall picture of the proceedings in question. The Court of Appeal was therefore wrong to focus on the nature of the settlement agreements as a defense to the Greek claims in tort. As regards to Article 28, the Supreme Court held that the English court was first seized as the original 2006 English proceedings remained “live” to allow for enforcement of the terms of the settlement agreements; an application for enforcement therefore did not constitute a new action. Even if the English court were second seized, however, the Supreme Court held that it would exercise its discretion to refuse a stay on the basis that the English court was the natural court to consider the English law contractual issues raised by the insurers’ claims and that a judgment from the English court on these issues would assist the Greek court. Accordingly, if the owners continue their appeal from the first instance judgment, it will now fall to the Court of Appeal to determine the substantive issues (given that there is no longer any need to wait for the Greek court to rule on its own jurisdiction).

This judgment provides a welcome degree of certainty and finality to parties who have entered into settlement agreements which are subject to English law and jurisdiction. More generally, it means that parties will be less likely to commence proceedings in another EU Member State in breach of an English jurisdiction agreement knowing that the English court will permit the wronged party to bring parallel proceedings to recover by way of damages any recovery that might be obtained in the foreign court.

Defaulting on Procedural Requirements and Deadlines: The New Approach Following Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537. In an appeal relating to the libel claim brought by Andrew Mitchell MP against The Sun regarding the “Plebgate” affair, the Court of Appeal set out guidance as to the new approach to applications for relief from sanctions for breaches of procedural requirements. The Court held that the approach was to be more robust and relief granted more sparingly following the amendments to the wording of CPR 3.9 pursuant to the Jackson reforms.

Mitchell’s solicitors failed to exchange and lodge their costs budget at least seven days before the CMC as was required by CPR PD51D and Master McCloud ruled that they should therefore be treated as having filed a budget comprising only the applicable court fees (and as such in the event that Mitchell won at trial, he would be limited to recovery from the defendant only of such applicable court fees, rather than the usual award that the unsuccessful party pay the successful party’s reasonable legal costs). Mitchell applied under CPR 3.9 for relief from that sanction but Master McCloud dismissed the application on the basis that the Jackson reforms required stricter compliance with rules and orders. On appeal, the Court of Appeal refused to overturn the Master’s ruling on the basis that the new wording of CPR 3.9 was a deliberate shift in emphasis for the need for litigation to be conducted efficiently and at proportionate cost, and to enforce compliance with rules, practice directions and court orders. The Court of Appeal provided the following guidance as to how the new approach should be applied: (i) it would usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or order; (ii) if that could properly be regarded as “trivial,” the court would usually grant relief provided that an application was made promptly; (iii) if not “trivial,” then the burden was on the defaulting party to persuade the court to grant relief.

Lord Dyson MR held that administrative errors, pressures of work, and “well intentioned incompetence” will rarely be good reasons unless the breach is truly trivial. The judgment also cited the example of the solicitors suffering from a debilitating illness or being involved in an accident as what “may” constitute a good reason and went on to state that if departures from rules, practice directions, and court orders were tolerated then the relaxed approach to civil litigation which the reforms were intended to change would continue. Lord Dyson MR acknowledged that the new more robust approach would mean that from now on relief from sanctions should be granted more sparingly than previously and that it was the Court’s hope that its judgment should ensure that the “culture of delay and non-compliance” will not continue for long.

The ruling is a clear message from the Court of Appeal to legal representatives that non-compliance with rules and orders will no longer be tolerated and there should be a major change of culture in this regard. It also emphasised the importance of submitting the required costs budgets in time at risk of serious consequences for the client in terms of costs recovery.