European Union: High Court Finds Exclusive Jurisdiction Provisions In Recast Brussels Regulation Only Apply To EU Domiciled Defendants

Last Updated: 7 November 2018
Article by Herbert Smith Freehills

The High Court has held that article 24(5) of the recast Brussels Regulation, which gives exclusive jurisdiction to the court where a judgment is to be enforced, does not apply where a defendant is domiciled outside of the EU: Integral Petroleum SA v Petrogat FZE [2018] EWHC 2686.

The court considered itself bound to follow the decision in Choudhary v Bhattar [2009] EWCA 1176, a Court of Appeal decision on article 22 of the Brussels I Regulation, the predecessor to article 24(5). Choudhary has been subject to much criticism in subsequent case law, and the wording of the article has since changed. The court considered, however, that the criticisms were obiter and the reasons for the change in the wording of article 24 were not sufficiently clear for the decision to be distinguished.

The present decision is also of interest in calling, once again, for the Civil Procedure Rules Committee to extend the common law gateways for service outside of the jurisdiction to apply to enforcement of orders (not only judgments), so as to encompass committal applications.

Background

The claimant applied to commit a number of individuals for alleged breaches of court orders relating to delivery of a cargo of fuel oil. The orders were directed at two companies and the individuals were alleged to be owners, principals or directors of the companies.

The issues before the court were whether the court had jurisdiction in respect of the committal applications under article 24(5) of the recast Brussels Regulation and, if not, whether the court could grant permission for service out of the jurisdiction under one or other of two common law gateways set out at CPR PD6B 3.1: gateway (3) (necessary or proper party) or gateway (10) (enforcement of judgments).

Decision

Jurisdiction under article 24(5)

Article 24(5) of the recast Brussels Regulation provides that, in proceedings concerned with enforcement of judgments (which, for these purposes, expressly includes an order of a court or tribunal), the court of the Member State where the judgment is to be enforced "shall have exclusive jurisdiction regardless of the domicile of the parties". The predecessor to article 24(5), article 22 of the Brussels I Regulation, was in slightly different terms, providing that the court of the Member State where the judgment is to be enforced "shall have exclusive jurisdiction regardless of domicile."

The judge (Mrs Justice Moulder) held that article 24(5) only applies where a defendant is domiciled in an EU Member State, considering she was bound by the Court of Appeal decision in Choudhary v Bhattar [2009] EWCA 1176.

In that case, Sir John Chadwick held that the words "regardless of domicile" in article 22 merely overrode a claimant's usual right to sue in the defendant's EU domicile or another EU Member State which had jurisdiction based on a connecting factor; it didn't mean that the article applied regardless of where the defendant was domiciled.

That decision has been subject to substantial attack. In Dar Al Arkan Real Estate Development Co v Refai [2014] EWCA Civ 715, Andrew Smith J concluded that, in Choudhary, the court would have reached a different conclusion if the relevant passages in three ECJ judgments, Universal General Insurance v Group Josi Reinsurance (Case C-412/98), Owusu v Jackson (Case C-281/02) and Land Obersoterreich v CEZ  (Case C-343/04), had been cited to the court. He was compelled, however, by the doctrine of precedent to follow it. Lord Justice Beatson in the Court of Appeal (see this post) thought Andrew Smith J's reasoning was compelling, but did not have to decide the point, so his views were obiter.

Teare J in Deutsche Bank AG v Sebastian Holdings Inc (No 2) [2017] EWHC 459 (Comm) did not regard the decision in Choudhary as binding because of the change of wording and he thought the authority of Choudhary was very substantially diminished by the comments in Dar Al Arkan. Gross LJ in the Court of Appeal (Vik v Deutsche Bank AG [2018] EWCA Civ 2011, considered here) said his instinct was that article 24(5) means what it says and applies regardless of domicile. The comments in both cases were however obiter.

In the present case, the judge concluded, after a review of the cases, that she was bound to follow Choudhary unless the case could be distinguished and she was not persuaded that the change in wording in article 24(5) was sufficiently clear to distinguish it. She also considered that the decision was focused on the court's interpretation of the purpose of the provision as much as the actual language.

The judge did consider, however, that article 24(5) applies to committal proceedings, agreeing with the observations of Gross LJ in Vik.

Jurisdiction under common law gateways

Gateway (10) applies where "a claim is made to enforce any judgment or arbitral award". The court held, following the reasoning of Teare J in Deutsche Bank AG v Sebastian Holdings Inc [2016] EWHC 3222 (Comm), that this cannot be interpreted as extending to enforcement of a court order. As noted in the Court of Appeal in Vik, although there is a clear public interest in the existence of such a gateway, this is something which will need to be addressed by the Rules Committee.

Gateway (3) applies where a claimant wishes to serve a claim form on a person who is a necessary or proper party to a claim, where there are already proceedings against another defendant (the anchor defendant) involving a real issue which it is reasonable for the court to try.

The court held that the real issue which it was reasonable for the court to try between the claimant and the companies was whether they had breached the court orders. The individuals would only be liable for contempt if that were the case. The individuals were necessary and proper parties, as they were liable if they were responsible for the acts of the companies as actual or de facto directors. It made no difference that relief was only sought against the individuals and not in addition against the companies.

Accordingly, the claimant had the better of the argument that gateway (3) applied.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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