UK: High Court Considers When Recast Brussels Regulation Continues To Apply In Transitional Cases

The High Court has considered when the rules in the recast Brussels Regulation will continue to apply to English proceedings commenced post-Brexit: Simon v Tache [2022] EWHC 1674 (Comm).

The decision confirms that, pursuant to article 67 of the EU-UK Withdrawal Agreement, the "lis pendens" provisions in the recast Brussels Regulation continue to apply in the UK where proceedings were started in an EU member state before the end of the Brexit transition period (31 December 2020) and the English proceedings were started only after. The court rejected an argument that the English proceedings also had to be commenced before that date.

Under the lis pendens rules, where proceedings are identical, the court second seised must stay its proceedings until the first court determines whether it has jurisdiction (under article 29); where the proceedings are related, the court second seised has a discretion to stay (under article 30). Here, as the English proceedings were found to be second in time and identical to Belgian proceedings commenced in 2020, the English court was obliged to stay its proceedings until the Belgian court determined whether it had jurisdiction.

The court also held, taking the same approach as in an earlier High Court decision, that where English (or EU) proceedings were commenced before the end of 2020 and further claims or defendants are sought to be added now, post-Brexit, the rules in the recast Brussels Regulation continue to apply to determine whether the court has jurisdiction over those claims and defendants.

What remains uncertain from the decision, however, is which jurisdiction rules apply where English proceedings were commenced after 31 December 2020 and there are identical or related proceedings commenced in an EU member state before that date. In other words, whether the English court must apply the common law rules, with the lis pendens rules being considered only if the English court considers it has jurisdiction under the common law rules, or whether all the rules on jurisdiction in the recast Brussels Regulation, not only the lis pendens rules, must be applied. The court will consider this further at a consequentials hearing.

The point turns on the correct interpretation of article 67(1) of the Withdrawal Agreement, which provides as follows:

It may be seen as surprising if the jurisdiction rules in recast Brussels apply to determine not only lis pendens situations but also jurisdiction in UK proceedings commenced post-Brexit, particularly given that (under article 67(2)) the recast Brussels rules on reciprocal enforcement of judgments apply only when proceedings were started before the end of 2020. The wording of article 67 is however open to this interpretation, so we await the court's conclusions following the consequential hearing with interest.

Background

The claim concerned a dispute over commission payable by Dr Simon ("S") to a Belgian company / two Belgian individuals (together "Twig") in respect of the purchase of artworks by S, as well as the price paid in respect of certain artwork.

In October 2020, Twig commenced proceedings in Belgium against S alleging harassment and defamation. S filed a response in the Belgian proceedings on 10 March 2021 and on 30 March 2021 applied for and obtained permission to serve English proceedings out of the jurisdiction. She sought damages for breach of contractual and tortious duties of care in advising her to purchase certain artworks at an alleged overvalue and an account in respect of alleged secret commissions.

On 3 May, before issue of the English claim form on 10 May, Twig filed further submissions in the Belgian proceedings asserting that S's allegations of wrongdoing against them were incorrect and therefore did not justify her alleged acts of harassment and defamation.

S argued that

1. Under article 67, it was necessary for the English and Belgian proceedings to have been related at the end of the transition period, 31 December 2020, in order for the lis pendens rules in recast Brussels to apply.
2. If that was incorrect and the lis pendens rules did apply, the English court became seised of proceedings by the making of the service out application on 30 March 2021 and was therefore the court first seised of the cause of action in those proceedings (as, on Twig's submission, the Belgian court was seised of the equivalent cause of action on 3 May as a result of the submissions filed on that date). If the English court was first seised then it was not able to stay its proceedings.
3. Alternatively, if the English court only became seised of proceedings when they were issued on 10 May 2021, the Belgian court did not become seised of the relevant cause of action until 5 August, when Twig filed further submissions in Belgium seeking a declaration that they were not liable to S. Therefore even on this basis the English court remained the court first seised.

Decision

Lis Pendens

The London Circuit Commercial Court (His Honour Judge Cawson QC) held that the recast Brussels Regulation continued to apply to new claims added post-Brexit to proceedings commenced prior to 31 December 2020 as well as claims against new defendants joined to such proceedings after that date. This approach was consistent with the High Court's decision in Benkel v East-Wst German Real Estate Holding [2021] EWHC 188 (Ch), albeit in that case on the basis of an agreed position as to the law.

It was therefore no objection to the potential application of articles 29 and 30 of the recast Regulation that the Belgian proceedings and English proceedings only became related after 31 December 2020 (the end of transition). The key point was that the Belgian proceedings were commenced prior to 31 December 2020.

The next issue considered was which court was first seised. The court held that the English court became seised of the English proceedings on 10 May 2021 when the claim form was issued, not 30 March 2021 when the service out application was made and the service out order granted. So far as the Belgian proceedings were concerned, the Belgian court became seised of the same cause of action as the English court on the lodging of the 3 May 2021 submissions. The Belgian court was therefore the court first seised and the English court was obliged to stay its proceedings until the jurisdiction of the Belgian court was established (and if it was so established, the English court would then be obliged to decline jurisdiction).

If, contrary to the court's findings, article 30 rather than article 29 applied (on the basis that the claims were not identical but related), the court would still have granted a stay of the English proceedings. This was for a number of reasons, including because the governing law of the contractual relationship between the parties was likely to be Belgian law and it was only in Belgium that the various proceedings could be consolidated, thereby eliminating the risk of inconsistent judgments.

Permission to serve out of the jurisdiction under the common law

The court then went on to consider whether permission to serve outside of the jurisdiction should have been granted, so whether each claim came within one or more gateways in the CPR, there was a serious issue to be tried and England was the appropriate forum.

So far as the gateways were concerned, S had failed to establish that her contractual relationship with Twig was governed by English law as the consumer provisions were found not to apply. This was on the basis that it had not been established to the standard of good arguable case that Twig directed their commercial or professional activities to the UK, nor that S was habitually resident in London at the relevant time. Nor was there a good arguable case that any breach of contract occurred within the jurisdiction. So far as the claims in tort were concerned, there was no sufficient evidence that any of the relevant artworks were paid for out of funds held in England nor that any misrepresentation was made as opposed to received in England. The gateway for claims made under an enactment could not be relied on as the Consumer Rights Act 2015 did not apply on the facts. S however had established, on balance, that her claims related to property within the jurisdiction within the property gateway and that they also related to assets within the jurisdiction within the constructive trustee gateway. That meant reliance could also be placed on the related claims gateway.

So far as serious case to be tried was concerned, this was unsuccessfully challenged on a limited basis by the Twig.

The court considered however that England was not the appropriate forum and that Belgium was overwhelmingly the more appropriate forum for the resolution of the issues. The fact that there were pending related Belgian proceedings carried great weight and the underlying facts were significantly more closely connected to Belgium.

Overall conclusion and further hearing

In its draft judgment the court's view was that, in light of its findings, the correct order was to set aside the claim form and the order for service out of the jurisdiction (given the court's conclusion that it had no jurisdiction over the defendants under the common law). On that basis, it was probably unnecessary to make any order or declaration concerning articles 29 and 30 of the recast Brussels Regulation. If the court was wrong in respect of its conclusion under the common law, it would have ordered a stay of the English proceedings pursuant to article 29 until the Belgian court determined whether it had jurisdiction.

In response to the draft judgment, S raised the argument that the court's findings as to the common law position were obiter, as the court had held that the recast Brussels regime was the relevant regime. In reply, Twig pointed out that the argument before the court had not proceeded on the basis that jurisdiction over the defendants was subject to the rules in the recast Brussels Regulation as opposed to the common law rules.

The judge indicated that he was minded to deal with the matter as originally intended in the draft judgment but he welcomed further submissions at the consequential matters hearing.

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.