Tactical considerations when facing litigation with EU member businesses
Business within the EU continues to grow and so do the agreements made between companies based in the UK and companies based in other EU member states. A well drafted agreement should contain an exclusive jurisdiction clause which will specify the jurisdiction where disputes relating to the agreement will be heard.
Despite the existence of such clauses, businesses have often issued proceedings in their home court as a tactical advantage. Companies based in the UK found that despite the existence of an exclusive jurisdiction clause in their agreement, the company they had traded with outside the UK issued proceedings in their home court when a dispute arose. The tactical advantage obtained was such that many companies felt that it outweighed the risk of a claim for breach of contract.
Overcoming the advantage gained by the otherside would require time and money. However, at least UK companies had the comfort of knowing that they had the option to apply for an injunction within their own jurisdiction to restrain the other party from commencing or continuing with the proceedings in their own jurisdiction, be it France, Spain or other EU member state. This jurisdiction has been exercised by the courts for nearly two hundred years.
By way of background, it must be remembered that the current position for bringing proceedings against a person or company in another EU member state is that the defendant should be sued in his country of domicile. There are two exceptions to this contained in the Brussels Regulation which governs jurisdictions between member states. The first is Article 23 which allows parties to agree on an exclusive jurisdiction as set out above and the second is Article 27 which states that where the same cause of action between the same parties is litigated in the courts of more than one member state, it is the court “first seized” of the proceedings i.e. the first proceedings, which determines the jurisdiction for the proceedings to be heard in.
Clearly there is a conflict between the two Articles. Until recently the 1993 Court of Appeal decision in Continental Bank NA –v- Aeakos Compania Naviera SA had decided that Article 23 prevailed over Article 27 thus giving authority to the exclusive jurisdiction clauses agreed between the parties. Although proceedings had first begun in Greece (that court being the court ‘first seized’), the Court of Appeal decided that the English court had jurisdiction because of the exclusive jurisdiction clause and granted an injunction against the Greek company from continuing the proceedings in Greece. This decision confirmed the English court’s authority to grant anti-suit injunctions thus restraining proceedings brought in another EU member state.
However, since the recent decision in the case of Gasser GmbH –v- MISAT Srl, which was referred to the European Court by the Austrian courts, the scope for applying for anti-suit injunctions has been severely restricted. This time Article 27 was preferred over Article 23 and the ECJ decided that it was the first proceedings which should decide the ultimate jurisdiction for the conduct of the proceedings. The aim of the decision was to prevent parallel proceedings from continuing in different member states.
The outcome of Gasser means the death of anti-suit injunctions irrespective of whether an exclusive jurisdiction clause exists or not as the first proceedings will have jurisdiction, although the Court first seized should give effect to valid exclusive jurisdiction clauses.
Warning: It is no longer safe to rely solely on exclusive jurisdiction clauses. Companies will need to be alert to the fact that when a dispute is looming they may be faced with proceedings in another EU member state if the other party to the dispute moves quickly so that it is first to issue in their home country even if the agreement says England is the agreed jurisdiction. Depending on the jurisdiction concerned this could take months if not years. To avoid this problem, companies based in the UK should seriously consider issuing proceedings quickly in their own jurisdiction when faced with possible litigation.
Of course, the problem with issuing proceedings too quickly in the UK is that this conflicts with the procedural rules with consequent cost sanctions.
However, any advantage gained by a decision to issue quickly in your own jurisdiction will have to be weighed against the delays often encountered with proceedings in unknown jurisdictions. Conversely, it may be a tactical advantage to commence proceedings in a jurisdiction which is slow and subject to delays which will cause hardship to your opposition.
The decision taken will be different in every case and will depend on the extent of the advantage gained as opposed to the level of risk of not complying with the rules here.
Philip Collins
Solicitor
Lemon & Co Solicitors
This article gives a general view and cannot be relied upon in any particular case. The need for specific legal advice must always be considered. For further information, contact either Nita King by email on nita.king@lemon-co.co.uk, Catherine Green on catherine.green@lemon-co.co.uk, Marianne Johns on marianne.johns@lemon-co.co.uk or Philip Collins on philip.collins@lemon-co.co.uk, or alternatively, please visit our website at www.lemon-co.co.uk for articles on other legal issues or contact us on 01793 527141.
If you would like to receive more information from Lemon&Co and be kept up to date with legal and statutory updates please register here.
Link to this article:
If you wish to link to this article, please paste the follwoing code into your web page:
<p><strong><a href="http://www.lemon-co.co.uk/article_tactical-considerations.php">Tactical considerations when facing litigation with EU member businesses</a></strong><br />
Business within the EU continues to grow and so do the agreements made between companies based in the UK and companies based in other EU member states. A well drafted agreement should contain an exclusive jurisdiction clause which will specify the jurisdiction where disputes relating to the agreement will be heard....</p>