STEYN LJ.
This is the judgment of the court. The central question is whether C.l
Bank NA is entitled by virtue of an exclusive jurisdiction agreement to an
injunction restraining a group of borrowers and guarantors from bringing
legal proceedings against the bank in Greece.
C. Bank NA is an American bank. The bank had a branch in Greece. The
first to the fifteenth appellants are one-ship companies registered in
Panama and Liberia. They are managed as a group by A. Shipping Co
Ltd of Athens. By a loan agreement dated 20 May 1981, as subsequently
amended, the bank, through its Athens branch, granted to the first
to fifteenth appellants a secured floating interest rate loan facility of
S56m. As security each borrower granted to the bank an assignment
of freights and other earnings, and a mortgage over the vessel owned
by it. The bank also obtained guarantees dated 3 June 1981 from three
individual members of the P. family, who were beneficially interested
in the corporate borrowers. The guarantors are the sixteenth to the
eighteenth appellants. S29 8m of the facility was used to pay off the
previous mortgagee, the Bank of America, which had a mortgage over
six of the vessels, and the balance was used to refinance the purchase of
vessels by nine other companies.
The borrowers defaulted within a year of the grant of the loan facility.
The last quarterly instalment was paid in December 1981. As early as
mid-1981 there had been a downturn in the shipping cycle. By 1984
freight rates and the price of vessels had dropped markedly. The shipping
cycle had entered a phase of recession. The borrowers were substantially
in arrears. On 24 December 1984 the bank and the borrowers and
guarantors entered into a rescheduling agreement. Pursuant to this
agreement the bank agreed to waive certain amounts of interest, to
reschedule repayment of outstanding principal and to limit the liabilities
of the guarantors. It is the bank's case that conditions precedent of the
rescheduling agreement were never fulfilled, and that it therefore never
became effective. But, the bank argues, this issue is unimportant because
the borrowers failed to repay the second and subsequent rescheduled
payments of principal, and therefore, if the rescheduling agreement
became effective, the bank became restored to its original rights. The
bank contends that it is owed the sum of S32,855,311 and interest.
On 4 October 1991 the bank issued a writ in an English action against
the borrowers and guarantors. But on 20 November 1990 the appellants
had commenced an action against the bank in the First Instance Court
of Athens. The borrowers claimed damages against the bank totalling
about S63m and a declaration that the guarantors have been released.
The cause of action is based on art 919 of the Greek Civil Code, which
provides:
'Whoever intentionally in a manner which violates the commands of
morality, causes damages to another is bound to make reparation to the
other for any damage this caused.'
The thrust of the appellants' claim is that the bank exercised its rights
under the loan agreement contrary to business morality. The judgment
under appeal records that the appellants 'expressly disavowed any
reliance on any breach of contract on the part of the bank'. Miss Dohmann
QC for the appellants told us that the true position is more complex. She
said the claim was principally in tort but it had contractual aspects. So be
it.
In March 1991, and in Chicago, the complaint in the Greek proceedings
was served on the bank. The bank's response was to issue a writ in an
English action on 7 April 1991. In the English action the bank sought
an injunction to restrain the appellants from continuing the Greek
proceedings in breach of various jurisdiction agreements which, in the
bank's submission, conferred exclusive jurisdiction on the English courts
to try the relevant disputes. Clause 21 of the loan agreement of 20 May
1981 provides as follows:
'21.01 This agreement shall be governed by and construed in accordance
with English law. 21.02 Each of the borrowers... hereby irrevocably
submits to the jurisdiction of the English courts and hereby irrevocably
nominates Messrs A. (London) Ltd of …, London SW7, England, to receive
service of proceedings in such courts on its behalf but the bank reserves
the right to proceed under this agreement in the courts of any other
country claiming or having jurisdiction in respect thereof.'
The jurisdiction agreements contained in the amending agreements, the
rescheduling agreement and the guarantees are in somewhat different
terms. It is, however, agreed that it is only necessary for us to consider
the interpretation and effect of cl 21.02.
By a summons dated 3 June 1991 the bank sought a permanent
injunction against the appellants to restrain them from taking further
steps in the Greek proceedings, or, alternatively, the bank sought an
interim injunction to the same effect until trial or further order. The
appellants took out a cross-summons dated 23 July 1991. The appellants
sought an order that the bank's writ and points of claim be struck out
under RSC Ord 18, r 19, or under the court's inherent jurisdiction, or that
the action be stayed under arts 21 or 22 of the Convention on Jurisdiction
and the Enforcement of Judgments in Civil and Commercial Matters
(Brussels, 27 September 1968; EC 46 (1978); Cmnd 7395) (which has
the force of law in the United Kingdom by virtue of s 2(1) of the Civil
Jurisdiction and Judgments Act 1982 and is set out in Sch 1 thereto).
On 30 July 1991 the rival summonses came before Gatehouse J for
hearing. Broadly speaking there were three issues before Gatehouse J.
(1) Were the appellants in breach of contract by suing in Greece? (2) If
so, do arts 21 and 22 of the 1968 convention require the English court to
stay the proceeding? (3) If not, ought the English court nevertheless as
a matter of discretion under English law to stay the English proceedings
or, in any event, to refuse to grant an injunction? In a reserved judgment,
given on 23 August 1991, Gatehouse J decided all three issues in favour
of the bank and granted final injunctions restraining the appellants from
taking any further steps in the Greek proceedings.
On this appeal the issues can conveniently be considered under the three
broad headings which we have identified.
Miss Dohmann challenges the judge's construction of cl 21.02 on two
fronts. First, she submits, the Greek proceedings fall outside the scope
of cl 21.02. Secondly, she submits that even if the Greek proceedings fall
within the scope of cl 21.02, it is not an exclusive jurisdiction clause. If
either submission is right, the appeal must succeed.
Is cl 21.02 wide enough to cover the Greek proceedings?
It is common ground that not only the loan agreement, as amended, but
also the separate jurisdiction agreement are governed by English law.
And the construction of cl 21.02 is, of course, a question of law. Clause
21.02 is undoubtedly elliptical. It simply provides that the borrowers
and guarantors 'submit to the jurisdiction of the English courts'. In our
judgment the clause should be read in a transitive sense: see Austrian
Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB
249, [1900-3] All ER Rep 604. It contemplates the submission of disputes
to the English courts. The correctness of this construction is reinforced
by the fact that the clause contemplates service of proceedings. But what
disputes does it cover? The answer is not to be found in the niceties of
the language of cl 21.02. It is to be found in a common sense view of the
purpose of the clause. We are emboldened to adopt this approach by the
observation of Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna
AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201 that-
'if detailed semantic and syntactical analysis of words in a commercial
contract is going to lead to a conclusion that flouts business common
sense, it must be made to yield to business common sense...'
The only sensible construction of cl 21.02 is that it is a submission of
disputes in connection with the loan facility to the jurisdiction of the
English courts.
Prima facie, therefore, cl 21.02 covers the Greek proceedings. But Miss
Dohmann submits that the clause cannot be construed as extending to
a claim in tort. It seems to us to be useful on this point to consider the
approach adopted nowadays in the closely analogous field of arbitration
clauses. In Empresa Exportadora de Azucar v Industria Azucarera
Nacional SA, The Playa Larga [1983] 2 Lloyd's Rep 171 the arbitration
clause covered 'any dispute arising out of this contract'. The question was
whether it covered only contractual claims or also a claim in conversion.
In giving the judgment of the court Ackner LJ concluded (at 183):
'... the contractual and tortious claims were so closely knitted together
on the facts, that the agreement to arbitrate on one can properly be
construed as covering the other.'
Moreover, if Miss Dohmann is right, it would mean that a claim for
damages for a negligent misrepresentation inducing the contract (a tort)
would be outside cl 21.02 but a claim seeking rescission of the contract
on the ground of the same misrepresentation (a contractual claim) would
be covered by it. If the appellants' contention is accepted, it follows
that the two claims might have to be tried in different jurisdictions. That
would be a forensic nightmare. Again, in the field of the construction of
arbitration clauses the modern approach provides helpful guidance. In
Ashville Investments Ltd v Elmer Contractors Ltd [1988] 2 All ER 577 at
599, [1989] QB 488 at 517 Bingham LJ said:
'I would be very slow to attribute to reasonable parties an intention that
there should in any foreseeable eventuality be two sets of proceedings.'
In the same case Balcombe LJ adopted a similar approach. He said
([1988] 2 All ER 577 at 588, [1989] QB 488 at 503):
'(1) it may be presumed that the parties intended to refer all the disputes
arising out of this particular transaction to arbitration; (2) it may also be
presumed that the parties intended that all disputes should be determined
finally by the same tribunal...'
In Harbour Assurance Co (UK) Ltd v Kansa General International
Assurance Co Ltd [1993] 3 All ER 897 at 916, [1993] QB 701 at 726
Hoffmann LJ adopted the same approach and vividly described it
as 'the presumption in favour of one-stop adjudication'. We are in
respectful agreement with these observations, and there is no conceivable
reason why the same approach should not apply to the construction of
jurisdiction agreements.
The complaint in the Greek proceedings makes clear that the thrust of
the appellants' case is that the bank performed the loan agreement in
a manner which is contrary to business morality. The issue in the Greek
proceedings is inextricably interwoven with the contractual rights and
duties of the parties. In our judgment the judge rightly concluded that all
disputes in connection with the loan facility are covered by the jurisdiction
clause, and, so construed, cl 21.01 is apt to cover the disputes in the
Greek proceedings.
Does cl 21.02 contain an exclusive jurisdiction clause?
Clause 21.02 does not expressly make clear that the jurisdiction
agreement is an exclusive one. Dicey and Morris The Conflict of Laws
(12th edn, 1993) vol 1, p 422, submit that the question is simply whether
on its true construction the clause obliges the parties to resort to the
relevant jurisdiction, irrespective of whether the word 'exclusive' is used.
In Sohio Supply Co Ltd v Gatoil (USA) Inc [1989] 1 Lloyd's Rep 588
at 591 the Court of Appeal approved this submission as contained in
the previous edition of Dicey and Morris. In our judgment it would be
a surrender to formalism to require a jurisdiction clause to provide in
express terms that the chosen court is to be the exclusive forum.
We have already explained why we interpret cl 21.01 in a transitive
sense as involving an agreement by the appellants to submit disputes in
connection with the loan facility to the jurisdiction of the English courts.
That does not necessarily mean that cl 21.02 is an exclusive jurisdiction
agreement. Mr Christopher Clarke QC submits that where there is an
agreement to submit disputes to the jurisdiction of a particular country,
the parties are taken to have intended the chosen court's jurisdiction to
be exclusive unless there are unusual or particular circumstances which
indicate otherwise. He finds some comfort in Austrian Lloyd Steamship
Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249 at 251-252,
[1900-3] All ER Rep 604, Sohio Supply Co Ltd v Gatoil (USA) Inc [1989]
1 Lloyd's Rep 588 and British Aerospace plc v Dee Howard Co [1993]
1 Lloyd's Rep 368. See, however, Cannon Screen Entertainment Ltd
v Handmade Films (Distributors) Ltd (11 July 1989, unreported) per
Hobhouse J. We find it unnecessary to explore this line of authority or
to express any view on Mr Clarke's submission. We say that because cl
21.01 (the only jurisdiction agreement that we are asked to consider)
does not contain a submission to English jurisdiction simpliciter. We
regard the concluding words as significant:
'... but the bank reserves the right to proceed under this agreement in
the courts of any other country claiming or having jurisdiction in respect
thereof.'
The juxtaposition of a submission by the appellants to the jurisdiction of
the English courts and the option reserved in favour of the bank to sue
elsewhere brings into play the expressio unius exclusio alterius canon of
construction. It suggests that a similar option in favour of the appellants
was deliberately omitted. In our judgment the language of cl 21.02
evinces a clear intention that the appellants, but not the bank, would
be obliged to submit disputes in connection with the loan facility to the
English courts.
In view of this conclusion it is unnecessary to consider an alternative
argument which the bank was ready to advance. It is right, however, that
we should identify it. Relying on the judgment of Hoffmann J in Kurz v
Stella Musical Veranstaltungs GmbH [1992] 1 All ER 630 at 637, [1992]
Ch 196 at 203, the bank's case was that, if cl 21.01 was not an exclusive
jurisdiction clause, art 17 of the 1968 convention nevertheless applied
to it. Eminent writers are in disagreement on the correctness of the
decision in Kurz's case: see Cheshire and North Private International Law
(12th edn, 1992) pp 316-317, Dicey and Morris vol 1, p 431 and Richard
Fentiman 'Jurisdiction-when non-exclusive means exclusive' [1992] CLJ
234. Since we heard no argument on the point, we express no view on it.
The appellants submit that the provisions of arts 21 or 22 of the 1968
convention required the judge to refuse to grant an injunction and to
stay the English action. That submission is based on the undoubted fact
that the proceedings in Greece were commenced before the proceedings
in England. Given that we have concluded that an exclusive jurisdiction
agreement obliged the appellants to sue in England, and that the
appellants acted in breach of that agreement, it is necessary to consider
the interaction of art 17 and arts 21 and 22. Article 17, so far as it is
material, provides as follows:
'If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction... Where such an agreement is
concluded by parties, none of whom is domiciled in a Contracting State,
the courts of other Contracting States shall have no jurisdiction over their
disputes unless the court or courts chosen have declined jurisdiction... If
an agreement conferring jurisdiction was concluded for the benefit of only
one of the parties, that party shall retain the right to bring proceedings in
any other court which has jurisdiction by virtue of this Convention.'
Article 21 provides as follows:
'Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States,
any court other than the court first seised shall of its own motion decline
jurisdiction in favour of that court. A court which would be required to
decline jurisdiction may stay its proceedings if the jurisdiction of the other
court is contested.'
Article 22 provides as follows:
'Where related actions are brought in the courts of different Contracting
States, any court other than the court first seised may, while the actions
are pending at first instance, stay its proceedings. A court other than
the court first seised may also, on the application of one of the parties,
decline jurisdiction if the law of that court permits the consolidation
of related actions and the court first seised has jurisdiction over both
actions. For the purposes of this Article, actions are deemed to be related
where they are so closely connected that it is expedient to hear and
determine them together to avoid the risk of irreconcilable judgments
resulting from separate proceedings.'
Miss Dohmann submits that the Athens court was 'the court first seised'
within the meaning of arts 21 and art 22. She further submits 'the
same cause of action' is involved in the Greek and English proceedings.
Accordingly, she submits that the judge was obliged under art 21 to
stay the English action. Alternatively, she submits that one is dealing
with 'related actions' and the judge had a discretion to be exercised in
accordance with art 22, as interpreted in the jurisprudence governing it,
and that he was wrong not to stay the English action.
The judge dealt with this point in commendably succinct terms. He said:
'The defendants rely on arts 21 and/or 22. But in my judgment, the
defendants' action in the Athens court and the plaintiff's action in this
court do not involve the same causes of action for the purposes of art 21,
as interpreted in Gubisch Maschinenfabrik KG v Palumbo Case 144/86
[1987] ECR 4861. Nor are they "related actions" for the purposes of
art 22. The actions are totally different, as appears from the respective
pleadings, and it is not enough that one issue-jurisdiction-could arise
in both actions. In any case, the provisions of art 17 are conclusive.
The corporate defendants are all domiciled in Liberia or Panama; it may
be arguable that they are also domiciled in Greece, where they are all
managed. The individual defendants are either domiciled in Greece or in
England-there is a dispute as to this, but their domicile is undoubtedly
one or the other, so it is immaterial which is correct. The bank, it is
admitted, is domiciled in Illinois. So either the opening sentence of art 17
applies, or alternatively the third sentence. Clause 21.02 thus confirms
the exclusive jurisdiction of the English courts for any action brought
by the defendants against the plaintiff bank. The Brussels Convention,
therefore, does not alter the position and the bank is entitled to the
injunction it seeks.'
We do not propose to consider whether arts 21 or 22 would be applicable
if there were no exclusive jurisdiction clause. The fact is that there is an
exclusive jurisdiction agreement. And it is common ground that art 17
applies to it.
In construing the 1968 convention it is important to put aside
preconceptions based on traditional English rules. The convention is
a radical new regime governing the international legal relationships
of the contracting states. It is intended to eliminate obstacles to the
functioning of the common market and to further the evolution of a
vast single market: Jennard Report (1979) OJ C59, p 19. The genesis
of the convention is the jurisprudence of the civil law rather than the
common law. Since the original states were all civil law countries, and the
United Kingdom played no role in the drafting of the 1968 convention,
this is hardly surprising. Traditionally, English courts assert a discretion
to enjoin a party by injunction from pursuing foreign legal proceedings
in breach of an exclusive jurisdiction clause. The idea that a national
court has discretion in the exercise of its jurisdiction does not generally
exist in civilian systems: Schlosser Report (1979) OJ C59 p 97, para
76. Article 17 follows the civilian approach. Article 17 has mandatory
effect. When art 17 applies it follows that the jurisdiction agreement
prorogates (confers) jurisdiction on the courts of the contracting state
chosen by the parties, and that the jurisdiction agreement deprives the
courts of other contracting states of jurisdiction. Indeed, it is the duty
of the courts of other contracting states of their own motion to consider
whether art 17 applies and to decline jurisdiction if it does: Schlosser
Report, para 22. There is no discretionary power in the convention itself
to override the conclusive effect of an exclusive jurisdiction agreement,
which conforms with the requirements of art 17. It follows that, if art
17 applies, its provisions take precedence over the provisions of arts 21
and 22. The structure and logic of the convention convincingly points to
this conclusion. The reasons supporting this conclusion are, however,
not formalistic. The consequences that would flow from the adoption
of the submission of Miss Dohmann are startling. Article 21 provides
that there shall be a mandatory stay of proceedings in favour of the
court first seised, if courts of different contracting states are seised of
proceedings involving 'the same cause of action'. If Miss Dohmann's
submission is correct, it follows that a party will be able to override an
exclusive jurisdiction agreement, which is governed by art 17, by pre-
emptively suing in the courts of another contracting state. The courts of
the latter state, which ex hypothesi have been deprived of jurisdiction,
would then be 'the court first seised'. The chosen court of the parties
would then be obliged to decline jurisdiction or, if the jurisdiction of the
other court is contested, to stay its proceedings. In this way a party who
is in breach of the contract will be able to set at naught an exclusive
jurisdiction agreement which is the product of the free will of the parties.
The principle of the autonomy of the parties, enshrined in art 17, cannot
countenance such a conclusion.
In coming to the same conclusion in Kloeckner & Co AG v Gatoil Overseas
Inc [1990] 1 Lloyd's Rep 177 at 195-196, Hirst J pointed to the additional
policy factor that in the 1968 convention system the best placed court
to decide questions of exclusive jurisdiction is the court chosen by the
parties in their jurisdiction agreement. It is not altogether surprising that
in Anonima Petroli Italiana SpA v West of England Shipowners Mutual
Insurance Association (London) Ltd (9 April 1990, unreported) Saville J
described an argument similar to the one addressed to us on behalf of the
appellants as entailing 'ludicrous' consequences. With due deference to
the careful arguments of Miss Dohmann, we find ourselves in agreement
with Saville J. See also IP Metal Ltd v Ruote OZ SpA [1993] 2 Lloyd's
Rep 60. The critical point is that there is nothing in the convention which
is inconsistent with a power vesting in the English court to grant an
injunction the objective of which is to secure enforcement of an exclusive
jurisdiction agreement.
For all these reasons we conclude that, since art 17 applies, the question
of a stay under arts 21 and 22 of the convention does not arise.
On the supposition that arts 21 and 22 of the 1968 convention are
inapplicable, the appellants seek to invoke the inherent power of the court
to stay the English proceedings. They argue that the judge should have
granted a stay until the Greek court had decided whether or not it had
jurisdiction. In any event, the appellants submit that, even if a stay was
inappropriate, the judge ought not to have granted an injunction. They
draw attention to the fact that, although a stay involves the regulation
of English legal proceedings, an injunction restraining foreign legal
proceedings involves indirect interference in the procedure of a foreign
court. Accordingly, the appellants submit, a court invited to grant such an
injunction ought to proceed with great caution and ought to grant such an
injunction only if the ends of justice require it: see SNI Aérospatiale v Lee
Kui Jak [1987] 3 All ER 510 at 518-522, [1987] AC 871 at 891-897.
Miss Dohmann emphasised that the Greek court is the court first seised
with the substantive action. She said that it would be wrong for the
English court to decide that the Greek court does not have jurisdiction.
The question whether the Greek court has jurisdiction ought to be left to
the Greek court. The English courts ought to trust the Greek court. The
injunction will operate as an indirect interference with the workings of a
Community court. Such an injunction should only be granted if the pursuit
of the remedy in the foreign court would be vexatious and oppressive.
That test is not satisfied. For these reasons, Miss Dohmann submitted, the
judge erred in not staying the English action, but, in any event, she said,
he plainly erred in exercising his discretion in favour of the granting of an
injunction.
It is necessary to bear in mind that the proper construction of the
jurisdiction agreements is governed by English law. And as a matter of
English law, the jurisdiction agreements apply to the subject matter of the
Greek proceedings, and are exclusive jurisdiction agreements. It follows
that the English courts have exclusive jurisdiction. And by virtue of art 17
the Greek courts have been deprived of jurisdiction.
But Miss Dohmann submits that the English courts ought to defer to the
Greek courts on the interpretation and effect of the exclusive jurisdiction
agreement. She argues that we can safely leave it to the Greek courts
to decide the art 17 issue on its merits. That is not how we understand
the expert evidence on Greek law filed in this case. Mr Soufias, the
bank's Greek lawyer, appears to say that the Greek court will assume
jurisdiction. Mr Stephanakis, the appellants' Greek lawyer, says that the
Greek court will not consider a jurisdictional issue because the bank co-
operated at an early stage in asking for an adjournment. He says that in
Greece that will be regarded as a submission to jurisdiction. It does not
appear that the Greek court will consider the impact on its jurisdiction of
the exclusive jurisdiction agreement and art 17 of the 1968 convention.
But we do not rest our judgment on this point.
Under the Greek rules of civil procedure a defendant is obliged to file a
defence on the merits at the same time as an objection to jurisdiction.
The bank cannot therefore in practice challenge the jurisdiction of
the Greek court without filing a detailed defence on the merits to the
appellants' complaint, which runs to 38 pages, and the bank will in
addition have to lodge at the same time all supporting documentary
evidence. Legal fees will apparently amount to about S120,000. And in
addition the bank would have to serve expert evidence from an English
lawyer on the effect of cl 21.02. Again, we do not rest our judgment on
this point.
In our view the decisive matter is that the bank applied for the injunction
to restrain the appellants' clear breach of contract. In the circumstances,
a claim for damages for breach of contract would be a relatively
ineffective remedy. An injunction is the only effective remedy for the
appellants' breach of contract. If the injunction is set aside, the appellants
will persist in their breach of contract, and the bank's legal rights as
enshrined in the jurisdiction agreements will prove to be valueless.
Given the total absence of special countervailing factors, this is the
paradigm case for the grant of an injunction restraining a party from
acting in breach of an exclusive jurisdiction agreement. In our judgment
the continuance of the Greek proceedings amounts to vexatious and
oppressive conduct on the part of the appellants. The judge exercised his
discretion properly.
Conclusion
It follows that we would reject the submissions of the appellants under
all three headings. It is right to add, however, that in relation to the link
between arts 17 and 21 of the 1968 convention, the appellants applied for
an order referring an appropriate question to the Court of Justice of the
European Communities. It is true that, except for first instance decisions,
there is apparently no authority directly in point. The more obvious the
answer to a question is, the less authority there sometimes is on it. We
entertain no doubt about the answer to the proposed question. We would
reject the application. Somewhat tentatively, the appellants also asked
for an order that the following two questions be referred to the European
Court:
(a) Whether the Greek proceedings and the English proceedings involve
'the same cause of action' for the purposes of art 21 of the Convention.
(b) Whether the Greek proceedings and the English proceedings are
'related actions' for the purposes of art 22 of the convention.
In our judgment there are no relevant questions of 'interpretation' of the
1968 convention which arise in the present case. In our judgment no
reference is necessary. We would also reject this application in both parts.
We would dismiss the appeal.
DISPOSITION:
Appeal dismissed.