European Union: Vedanta Resources v Lungowe: Service In EU And Non-EU Jurisdictions

Last Updated: 27 May 2019
Article by Clyde & Co LLP

Most Read Contributor in UK, May 2019

Supreme Court considers issue of serving against English anchor defendant in order to sue non-EU parties here

The Zambian claimants (a large number of Zambian citizens) allege that the negligence of the operator of a local mine (a Zambian company) caused them personal injury and financial loss. They commenced proceedings against the English parent company of the Zambian company in England (based on Article 4 of the recast Regulation 1215/2012): "persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State"), as well as against the Zambian subsidiary. They obtained permission to serve out on the Zambian subsidiary pursuant to PD6B para 3.1: "the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim". The defendants challenged the jurisdiction of the English courts.

Under the recast Regulation, the EU courts now have a discretion to stay their proceedings in favour of a non-EU court if the non-EU court was first seised. However where, as in this case, the English court is first seised of proceedings against a defendant domiciled in England, the position confirmed by the ECJ decision of Owusu v Jackson [2005] is that the English courts have no discretion to stay their proceedings against the English defendant, even if a non-EU jurisdiction is clearly the more appropriate forum.

The appellant in this case sought to argue that it is an abuse of EU law to use Article 4 to bring a claim against an English defendant purely as a vehicle for attracting English jurisdiction against the real target, a non-EU company.

At first instance, the judge had found that it could not be said that the sole purpose of suing the English parent company here was to attract jurisdiction against the Zambian subsidiary. His finding that there was a bona fide claim against the parent company could not be challenged on appeal. The Supreme Court accepted that where there is no genuine intention to seek a remedy against the anchor defendant, the defendant may seek to strike out the claim as an abuse of process or as disclosing no reasonable cause of action (or seek reverse summary judgment on the basis that the claim discloses no triable issue against that defendant). However, this was not such a case.

Accordingly, pursuant to Owusu, the English court "has one hand tied behind its back". Nevertheless, the Supreme Court suggested that a way around the concerns thrown up by Owusu could be for the anchor defendant to agree to submit to the jurisdiction of the non-EU defendant in a case where, as here, the non-EU jurisdiction is clearly the proper place to hear the case. Whilst the claimant would still be free to continue its claim against the English defendant here, if the English court declined jurisdiction over the non-EU defendant, the claimant would then have to choose whether to pursue proceedings both in England and the non-EU country or to have the whole case heard in the non-EU country. As Lord Briggs put it: "In my judgment, there is good reason why the claimants in the present case should have to make that choice, always assuming that substantial justice is available in Zambia (which is a necessary but hypothetical predicate for the whole of the analysis of this issue)". Furthermore, "There is nothing in article 4 which can be interpreted as being intended to confer upon claimants a right to bring proceedings against an EU domiciliary in the member state of its domicile in such a way that avoids incurring the risk of irreconcilable judgments".

However, the Supreme Court went on to find that, on the facts, there was a real risk that substantial justice would not be obtainable in Zambia (due, in part, to funding issues), and so it retained jurisdiction over both the English and the Zambian defendants.

In reaching its decision, the Supreme Court also stressed the need for proportionality when appealing jurisdiction disputes (which should not be factual disputes dressed up as issues of law). In this case, there was criticism that 142 authorities were cited and the electronic bundles ran to almost 9,000 pages when the appeal involved only one difficult point of law: "The fact that it has been necessary, despite frequent judicial pronouncements to the same effect, yet again to emphasise the requirements of proportionality in relation to jurisdiction appeals, suggests that, unless condign costs consequences are made to fall upon litigants, and even their professional advisors, who ignore these requirements, this court will find itself in the unenviable position of beating its head against a brick wall".

COMMENT: Although the Supreme Court did not overrule Owusu in this judgment, it did set up a means for defendants in this type of case to overcome its effect. Since Owusu was concerned only with the issue of a stay against the anchor defendant, and not the non-EU defendants, the English court could either stay its proceedings as against the non-EU defendants or refuse to grant permission to serve on them, provided that all the defendants agree to submit to the courts of the non-EU defendants and there are strong factors indicating that those courts are the most appropriate ones to hear the case. The Supreme Court was unsympathetic to the risk of irreconcilable judgments (and increased costs) should the claimant in those circumstances chose to fight its case in both countries.

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