1.This is a jurisdiction dispute. By application dated 30 June 2010, the
defendants sought to stay the claimants' action proceeding in this court
(2009-Folio 1503) ("the English Claim") until certain Italian proceedings
("the Italian Proceedings") have been finally determined by the Tribunale
di Genova ("the Genoa Court"), and for an order that this court will not
exercise in the meantime any jurisdiction over the English Claim. The
original basis of the application was that the claim or claims allegedly
pending before the Genoa Court ("the Italian Claim") is or are a "related
action" with the meaning of Article 28 of Council Regulation 44/2001 ("the
Jurisdiction Regulation"), and that it is expedient that the English Claim
should be stayed pending resolution of the Italian Claim before the Genoa
Court.
2.At a hearing before me on 22 October 2010, Mr. Hugh Mercer QC,
counsel on behalf of the defendants, applied to add Article 27 of the
Jurisdiction Regulation as an additional ground for staying the English
Claim, on the basis that the Genoa Court was first seised. The hearing
would not in any event have concluded on that day, and, accordingly, I
granted that application on condition that the claimants were given an
opportunity to adduce evidence in relation to the Article 27 issue, and also
in relation to the ancillary Article 30 issue, namely as to when the Genoa
Court was first seised.
3.The application is supported by the statements of Yasseen Gailani
of Dewey & LeBoeuf, the defendants' London solicitors and, in relation
to issues of Italian law, of Professor Saletti, an Italian advocate who
represents the defendants in the Italian Proceedings.
4.The application is opposed by the claimants. The claimants likewise rely,
in relation to issues of Italian law, on statements by their Italian lawyer,
Avvocato Cristoffanini.
5.It is unnecessary for this Court to resolve many of the points of Italian
procedural law raised in the evidence of the parties' respective Italian
lawyers, neither of whom were cross-examined.
Background Facts
Commercial background
6.The relevant background facts are as follows. The second claimant,
Vasonia Shipping Company Limited ("Vasonia"), is a company
incorporated under the laws of Cyprus. It chartered its chemical tanker,
the vessel "Monte Carmelo", which sailed under the Italian flag, to
Marittima Fluviale SpA ("MF"), a company incorporated under the laws of,
and having its seat in, Italy. The charterparty, dated 16 March 2006, was
on amended Barecon 2001 terms, and was for a minimum period of 60
months, and a maximum period of 63 months. It was governed by English
law and provided for arbitration in London under LMAA terms.
7.Under the terms of the charterparty, MF was required to provide a
demand Guarantee to secure its obligations thereunder. Such a guarantee
("the Guarantee") was issued on 30 May 2006 in favour of Vasonia by the
second defendant, Banca di Roma SpA ("Banca di Roma"), MF's bankers
at the time. The Guarantee is governed by English law. It required Banca
di Roma to pay on Vasonia's first written demand which stated that MF
was in breach of its obligations. Banca di Roma was required to pay on
demand "without set off or counterclaim of any kind" and irrespective of
any amendment or variation to the charterparty. By paragraph 6 Banca di
Roma agreed:
"Any claims or disputes arising out of this Guarantee shall be referred
to the English High Court and we hereby irrevocably submit to the non-
exclusive jurisdiction of the English High Court."
There was no dispute that it was an agreement to which Article 23 of the
Jurisdiction Regulation applies
8.Subsequently, as a result of various mergers and corporate
reconstructions, Banca di Roma's corporate banking obligations were
transferred to the first defendant, Unicredit Corporate Banking SpA
("Unicredit"), in late October/early November 2008. Unicredit has
therefore assumed Banca di Roma's liabilities under the Guarantee. It
is common ground that the claimants' claim in this action lies against
Unicredit. Accordingly, save where necessary to draw the distinction
between the two entities, I shall refer to Banca di Roma and Unicredit
collectively as "Unicredit".
9.In return for Unicredit issuing the Guarantee to Vasonia, MF provided
countersecurity to Unicredit in the form of a deposit of €1m.
10.On 23 September 2009, Vasonia served a notice of assignment on
Unicredit that Vasonia's rights under the Guarantee had been assigned
to the first claimant, Nordea Bank Norge ASA ("Nordea"), a Scandinavian
financial institution which acted as Vasonia's bankers at the relevant
time, but that Unicredit was irrevocably authorised and instructed to
continue to receive instructions from Vasonia, subject to payment of any
sums due under the Guarantee being made to a specified bank account
held at Nordea. Where appropriate, I shall refer to Vasonia and Nordea
collectively as "the claimants".
The English Claim
11.In due course, as a result of MF's non-payment of hire payments,
Vasonia made a demand on Unicredit under the Guarantee, by a letter of
demand dated 21 October 2009, but not received by Unicredit until 23
October 2010. Unicredit did not honour the demand. Vasonia and Nordea
therefore issued proceedings against Unicredit in the Commercial Court
in England ("the English Court"). The English Claim (seeking enforcement
of the Guarantee) was issued at 21.36 on 17 November 2009, but the
claim form was not served on Unicredit in Italy until 11 May 2010. There
is no dispute that, for the purposes of the Jurisdiction Regulation, the
English Court was seised of Vasonia's claim against Unicredit under
the Guarantee, on the date when the claim form was issued, i.e. on 17
November 2009.
12.On 23 October 2010, Unicredit gave informal notice to MF of Vasonia's
demand under the Guarantee and of Unicredit's intention to make
immediate payment to Vasonia and to draw down on the collateral which
MF had provided to Unicredit.
The Italian Proceedings: (i) The Initial Proceedings
13.On 26 October 2009, MF, prompted, it is to be inferred, by notice
of Vasonia's demand under the Guarantee, commenced arbitration
proceedings under the charterparty with Vasonia, by referring the dispute
to LMAA arbitration in London. The thrust of MF's alleged claim was (in
essence) that the hire had not in fact fallen due, because the parties
had negotiated a variation in the charter terms. Vasonia appointed its
arbitrator, and on 16 April 2010 applied for an interim final aware for
sumes due to it from MF. MF's position in the arbitration is that it has been
stayed by the appointment of liquidators.
14.On 29 October 2009, Unicredit formally notified MF that the demand
had been received from Vasonia, and that, unless MF provided proof of
payment of the amount in question within 24 hours, Unicredit would make
a payment to Vasonia under the Guarantee. On 30 October 2009, MF's
lawyers wrote a letter to Unicredit in which they effectively stated that
if any payment was made under the Guarantee pending the arbitration
proceedings, MF would challenge any attempt by Unicredit to look to the
counter-security provided by MF.
15.Unicredit's threat to draw down on the collateral also led to MF to
apply, on 2 November 2009, to the Genoa Court, where the relevant
branch of Unicredit was located, for an order against Unicredit pursuant
to Article 700 of the Italian Civil Procedure Code. The application was
for protective relief in the nature of an ex parte interim injunction
preventing Unicredit from paying out under the Guarantee, pending the
outcome of the LMAA arbitration against Vasonia. I shall refer to this
application as "the Initial Proceedings". Neither Nordea nor Vasonia were
named as respondents to the Initial Proceedings at this stage. The Initial
Proceedings were assigned the action, or docket, number 14507/09.
16.There is no dispute that the Initial Proceedings were brought by MF
in order to protect its position pending the resolution of the issues which
it had referred to arbitration; see the witness statement of Unicredit's
solicitor, Yasseen Gailani at paragraph 31. Article 700 is the provision
of the Italian Civil Procedure Code which permits an Italian court to
grant provisional relief even if there is no substantive jurisdiction. MF's
application also made it clear that, although the Genoa Court did not have
jurisdiction "in this dispute" (i.e. the substantive dispute between Vasonia
and MF, the subject matter of the LMAA arbitration), the Genoa Court
nonetheless had jurisdiction "to grant the emergency provision as per
Article 700 of the Civil Code", effectively because of the Genoa Court's
local jurisdiction to enforce the emergency injunction against Unicredit, as
being the place where MF opened its account with Unicredit.
17.On 2 November 2009, the Genoa Court (Judge Dr. Gazia Casanova)
granted MF an ex parte interim injunction against Unicredit. She ordered
the latter: "… temporarily and as matters stand to suspend payment"
of the sums demanded by Vasonia under the Guarantee. The order was
served on Unicredit on 2 November 2009, and it had a return date of 17
November 2009.
18.At the hearing on 17 November 2009, Unicredit responded by filing a
defence brief with the Genoa Court shortly after the start of the hearing
at noon. Although it bore the date 12 November 2009, it was common
ground that it was not filed with the Genoa Court until 17 November
2009. In that defence brief, Unicredit:
i) drew the Court's
"attention in the first instance to the need to join the following parties …
Vasonia …, Nordea …, and [the latter's parent company] Ross Chemical
AS"
to the Initial Proceedings, so that they, rather than Unicredit, could
contest the continuation of the injunction pending the outcome of the
arbitration;
ii) referred to the fact that the need to join the additional parties was
"naturally the responsibility of the plaintiff [MF]";
iii) sought in its prayer relief that the Genoa Court might
" – subject to an order for [MF] to join Vasonia …, Nordea … and Ross
Chemical AS, in as far as not already present in the proceedings – to rule
in equity on the claim put forward by [MF], the purpose of which is to
prevent the enforcement of the [Guarantee] …, rejecting all other claims,
filed by any other party against Unicredit …".
19.On 25 November 2009, the Genoa Court (Judge Dr Casanova), having
apparently reserved her decision from the hearing on 17 November 2009,
issued an order which inter alia:
i) observed:
"that the joinder of parties should be ordered with sole reference to
Vasonia and not extended to Nordea or Ross Chemical.";
ii) upheld the interim injunction for the time being; and
iii) directed MF to serve Vasonia with a copy of the application for the
interim injunction, the interim injunction dated 2 November 2009 and the
Court's order of 25 November 2009 by 22 December 2009.
The Genoa Court did not order MF to serve Unicredit's defence brief dated
12 November 2009 on Vasonia and it is common ground that it was not
served.
20.On 18 December 2009, pursuant to the Genoa Court's order, a copy of
the application and the interim injunction orders were served on Vasonia.
21.On 21 January 2010, an inter partes interim application in the Initial
Proceedings was heard before the Genoa Court. MF, Unicredit and Vasonia
appeared, the latter under protest as to the Genoa Court's jurisdiction.
There is no dispute that this did not amount to a submission to the
jurisdiction by Vasonia.
22.Having reserved her decision, on 28 January 2010, the judge
confirmed the continuation of the interim injunction granted by her ex
parte on 2 November 2009, preventing Unicredit from paying out to
Vasonia under the Guarantee. When dealing with the question of costs,
the judge expressly stated that she had to give a ruling about costs at
that stage because:
"… the injunction requested against Unicredit is an anticipatory measure
and therefore is not necessarily followed by trial."
23.She dealt with the costs as between MF and Unicredit and then went
on to say that, as to the dealings between MF and Vasonia, and, given
that the arbitration proceedings "… on the merits of the case are already
pending …" the associated costs of the Initial Proceedings should be
dealt with in those proceedings. In coming to her conclusion that "a
presumption … existed regarding MF's claim" she expressed the view that:
"This situation therefore demonstrates that, while the parties were in
the process of renegotiating their respective positions, suddenly, and
entirely unexpectedly, Vasonia put forward their call for enforcement of
the Guarantee, an act open to censure for the purposes of identification of
exceptio doli."
24.It was common ground that, under Italian law, the 28 January ruling,
confirming and continuing the ex parte order made on 2 November 2009
was an interim order which remains in effect (subject to any application to
discharge it) but is not a final order.
The Italian Proceedings; (ii) the Final Proceedings
25.On 12 April 2010, MF issued a writ of summons ("Atto di Citazione")
in the Genoa Court against Unicredit and Vasonia. In these proceedings
("the Final Proceedings") MF sought the substantive determination,
as between MF, Vasonia and Unicredit, of Vasonia's rights under the
Guarantee and of Unicredit's rights in relation to the collateral lodged by
MF. The writ of summons stated that:
"18. By this writ of summons [MF] introduce the proceedings on the
merits in order to preserve the order issued by such Honourable Tribunal
in the procedure number 14507/2009 and, consequently, to obtain a
judgement ascertaining and statement that Unicredit Corporate Banking
is not bound to apply any amount in favour of Vasonia as per the said
Guarantee dated 30/5/2006."
The writ went on to claim that the Genoa Court should:
"… ascertain and state the Unicredit Corporate Banking does not have to
effect any payment in favour of Vasonia Shipping Company Limited as per
the said Guarantee dated 30 May 2006, preliminarily, for substantial lack
of title of Vasonia; alternatively, because such Guarantee is collateral in
respect of the substantial relationship existing between the undersigned
and Vasonia and the undersigned, as secured debtor, is not obliged to
effect payment in favour of the same Vasonia; more alternatively, in
the denied hypothesis of qualification of the concerned Guarantee as
autonomous contract of security, due to the unlawful and fraudulent
character of the request of payment."
26.There is no dispute between the parties that the Final Proceedings
are separate from the Initial Proceedings, i.e. the Article 700 protective
proceedings begun on 2 November 2009. The dispute is focused on
whether the Final Proceedings have been derived from the Initial
Proceedings and, even if so, whether there is any basis under the
Regulation for treating the Genoa Court as having been seised of the
claims in the Final Proceedings on 2 November 2009, when the Initial
Proceedings were issued by MF or on 17 November 2009 when Unicredit
responded by filing its defence brief with the Genoa Court.
27.On 28 April 2010 the writ of summons in the Final Proceedings was
served upon Vasonia in Cyprus.
Liquidation of MF and other relevant or subsequent dates
28.On or about 31 March or 30 April 2010, an application was made to
appoint a liquidator or provisional liquidator of MF. On 6/7 May 2010 MF
was declared bankrupt by the Genoa Bankruptcy Court and entered into
liquidation proceedings.
29.As already stated, on 11 May 2010, the Claimants served the claim
form in the English proceedings on Unicredit. On 1 June 2010 Unicredit,
in its Acknowledgement of Service, indicated that it intended to challenge
the English Court's jurisdiction over the English Claim.
30.On 7 July 2010 Unicredit filed its proof of debt as against MF in the
Genoa Bankruptcy Court. This showed that, in addition to its contingent
claim against MF for €1 million in respect of the counter-indemnity under
the Guarantee, which is secured by the proceeds of a matured certificate
of deposit lodged with Unicredit, the latter is an unsecured creditor of MF
in the sum of €3,321,664.72.
31.Under Italian law a liquidator is required to adopt actions issued by the
subject company before his appointment within three months of the date
of his appointment. It is common ground that the MF liquidator has not
done so and that, on or about 23 September 2010, the deadline for MF's
liquidator to confirm his adoption of MF's writ of summons in the Italian
Final Proceedings expired. Vasonia contends that the Final Proceedings
were automatically extinguished following their interruption by MF's
bankruptcy.
32.On 11 October 2010 Vasonia's Italian lawyers obtained a certificate
from the Genoa Court confirming that, according to the Court records, on
8 October 2010 "there are to date no proceedings brought by [Unicredit]
and/or the bankrupt [MF] against [Vasonia]".
33.On 16 October 2010 Unicredit's lawyers lodged with the Genoa Court
a "Statement of Defence" or defence brief, in the Final Proceedings, which
effectively sought to reinstate the Final Proceedings and to continue the
injunction restraining it from paying the Claimants. Paragraphs 19-21 of
the brief and the prayer, are as follows:
"19. Entering an appearance in the present statement of defence, UCB
can only reiterate their position of entire extraneity with regard to the
dispute between Marittima and Vasonia, a dispute in relation to which
Vasonia considers that the conditions for enforcement of a guarantee
issued in its favour have been fulfilled.
By virtue specifically of their extraneous position vis-à-vis this dispute,
UCB finds itself entirely incapable of assessing the validity of the
complaints put forward by the former and the payment claims put forward
by the parties whose entitlement is under dispute.
As in the precautionary interim proceedings, the applicant Bank can only
throw itself on the Court concerning the acceptance of Marittima's claims,
which seek confirmation of the injunction preventing payment under the
guarantee in question.
20. Nonetheless, UCB has an interest in seeking the establishment, in a
binding judgment – in relation to all parties in the trilateral relationship
created as a result of issue of the guarantee – of the existence or
otherwise of their obligation to make payment under the guarantee, to
enable it to take the necessary action, including claims for redress where
necessary, given the existence of the necessary grounds.
21. It is evident that, due to the Bank's extraneous position vis-à-vis the
substantive dispute, the costs of these proceedings should be awarded
against the losing party, either Marittima or Vasonia, in the substantive
dispute between the latter.
*.*.*.*.*
In the light of the above, Unicredit Corporate Banking SpA, as above
represented and defended, files the following pleadings.
May it please the Court to rule in equity on the claim put forwarded by
Marittima Fluviale de Navigazione SpA, seeking confirmation of the ruling
of 28 January 2010, suspending payment under guarantee no. 3362 (now
460231318529), dismissing all other claims, filed by any party, against
Unicredit corporate Banking SpA.
With the award of costs, fees and disbursements attaching to these
proceedings, including the flat-rate reimbursement of overheads, CAN and
VAT."
34.It is to be noted that there is nothing in Unicredit's defence brief in the
Final Proceedings which advances any positive case to the effect that it
has a defence under the Guarantee to a claim by Vasonia for payment.
35.The precise status of this document is in dispute. Vasonia contends
that, under Italian law, Unicredit had three months from the date when
the latter received notice of MF's bankruptcy (which Vasonia contends
was on or about 19/20 May 2010) to make an application to re-instate
the Final Proceedings and that it failed to do so by the correct procedure
and by 6 October 2010, when the three month plus period expired.
Accordingly Vasonia contends that Unicredit is out of time for doing
so now and that Unicredit's 16 October 2010 defence brief in the Final
Proceedings is incapable of reinstating the Final Proceedings. Unicredit
contends that the three month period had not expired by 16 October 2010
because it had not received formal notice of MF's liquidation.
36.On 18 October 2010 Unicredit obtained a certificate from the Genoa
Court stating that as at 16 October 2010 the Final Proceedings had been
assigned for hearing. On receipt of Unicredit's brief, the Genoa Court also
assigned the Final Proceedings with an action number 11706/2010, i.e. a
different number from the Initial Proceedings.
37.On 4 November 2010 the MF liquidator wrote to Unicredit's lawyers in
the following terms:
"Insolvency of Marittima Fluviale di Navigazione SpA/Unicredit SpA/
Vasonia (Court of Genoa, reg no 11706/2010
Further to our discussion, I am writing to you in connection with the
above proceedings, originally initiated by Marittima Fluviale di Navigazione
SpA in bonis, but not docketed by that company.
Following your information that Unicredit SpA has docketed the case, I
can confirm that the administrators will examine the case ahead of the
first hearing scheduled for 22 February 2011."
It was common ground that this letter did not amount to an adoption of
the proceedings by the liquidator.
38.The first hearing in the Final Proceedings has been fixed to be held
in the Genoa Court on 22 February 2011. Vasonia's Italian lawyer,
Avv. Cristoffanini, is of the opinion that Unicredit's 16 October 2010
defence brief in the Final Proceedings is incapable of reinstating the
Final Proceedings as it was in the incorrect form and because Unicredit
was out of time to reinstate the proceedings, and that accordingly the
judge hearing the matter on 22 February 2011 will determine that they
were automatically extinguished on MF's bankruptcy and have not been
reinstated. Professor Saletti, Unicredit's Italian lawyer disagrees.
Issues
39.The principal issues that arise on this application can be summarised
as follows:
Article 27
i) Is the English Court obliged to stay the English Claim under Article 27
of the Jurisdiction Regulation brought by Vasonia as against Unicredit?
This involves consideration of the following sub-issues as to whether the
pre-conditions for the mandatory stay requirement under Article 27 are
satisfied:
a) was the Genoa Court the court first seised;
b) do the English Claim and the Italian Proceedings involve the "same
cause of action and the same parties"; and
c) are the Italian Proceedings currently pending in the Genoa Court?
Article 28
ii) Does the English Court have power under Article 28 to stay the English
Claim brought by both Vasonia and Nordea? This involves consideration of
the following sub-issues:
a) was the Genoa Court the court first seised;
b) are the English Claim and the Italian Proceedings "related actions" for
the purposes of Article 28; and
c) are the Italian Proceedings currently pending in the Genoa Court?
iii) If the Court does have power to stay the English Claim under Article
28, should it exercise its discretion to do so?
Article 27
40.I deal with the Article 27 issue first as, logically, if I have to exercise
the mandatory jurisdiction under Article 27 to stay the proceedings
brought by Vasonia, not only will there be no need to exercise the
discretionary powers under Article 28 as against Vasonia, but also the
fact that there has been a mandatory stay against that claimant will be a
factor that informs the exercise of my discretionary powers under Article
28 as against Nordea.
41.Article 27 provides as follows:
"1. Where proceedings involving the same cause of action and between
the same parties are brought in the courts of different Member States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
2. Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction."
42.So far as is here material, Article 30 provides as follows:
"For the purposes of this Section, a court shall be deemed to be seised:
1. at the time when the document instituting the proceedings or an
equivalent document is lodged with the court, provided that the plaintiff
has not subsequently failed to take the steps he was required to take to
have service effected on the defendant …."
Unicredit's Article 27 arguments
43.Mr. Mercer, on behalf of Unicredit, argued that the Genoa Court was
seised of proceedings between Vasonia, Unicredit and MF before the
English court was seised of the English Claim. He argued that the correct
moment of seisin of the Italian proceedings with regard to Vasonia was, at
the latest, shortly after noon on 17 November 2009, when Unicredit filed
its brief with the Genoa Court which included a request to the Court to
order MF to join Vasonia to the Initial Proceedings. Vasonia's English Claim
against Unicredit, on the other hand, was only instituted at 21.36 hrs on
17 November 2009. That, he submitted, was the effect of Article 30 of
the Regulation, because all that Article 30(1) required, in the case of the
joinder of Vasonia to the Italian Proceedings, was that the request for an
order for joinder be lodged with the Court. This was the document which
was the equivalent to the document instituting proceedings, because it
was the filing of the application for joinder. He submitted that this was
wholly consistent with the policy apparent from the terms of Article 30,
which was that seisin must be determined by the lodging of the relevant
document. At that point, the claimant has done all he can to ensure that
the court is seised.
44.In the alternative, and as a subsidiary submission, Mr. Mercer
submitted that if (contrary to his primary submission) Italian law was
relevant, then the Genoa Court was first seised on 2 November 2009,
when the Initial Proceedings were issued by MF against Unicredit,
notwithstanding that Vasonia was not party to the proceedings at that
time.
45.He further submitted that the Italian Proceedings and the English
Claim involve the "same cause of action", because at the heart of each
case lay consideration of the issue whether or not to order payment
under the Guarantee; see e.g. Gubisch Maschinefabrik KG v Guilini
Palumbo [1987] ECR 4861 at §15-16. He also argued that, on the basis
of Unicredit's Italian lawyers' evidence, the Initial Proceedings were the
same as the Final Proceedings, and that, in that context, the proceedings
have the same cause of action, it being important to interpret cause of
action in a manner independent of the specific legal rules in each Member
State: see The Tatry [1994] ECR I-5439, §47.
46.He submitted that the "same parties" requirement was satisfied so far
as Vasonia and Unicredit were concerned and that both the Interim and
the Final Proceedings were pending.
47.Accordingly, he sought a mandatory stay of the English Claim
pending the Genoa Court's decision as to whether to continue the Italian
Proceedings, as he accepted that there had been no decision on its part to
date to do so.
The Claimants' Article 27 arguments
48.Mr. John Lockey QC, leading counsel on behalf of the claimants,
submitted that the English Court was the Court first seised. He argued
that the obligation under Article 27 is an obligation on the court second
seised and applies only where there is an identity of parties; the English
court was seised of the substantive dispute between Vasonia and Unicredit
on 17 November 2009, but this was before the Final Proceedings were
issued in Italy. As for the Initial Proceedings in Italy, the Genoa Court was
not seised of any dispute between Vasonia and Unicredit until – at the
earliest – 25 November 2009 when the Genoa Court directed MF to join
Vasonia, or 18 December 2009, when Vasonia was served. In any event,
Vasonia was not on any basis a party to proceedings in Italy until after 17
November 2009.
49.Mr. Lockey further submitted that Unicredit's Article 27 case depends
on the proposition that Unicredit's defence brief filed on 17 November
2009 satisfied the requirements of Article 30(1): i.e. was a document
instituting the proceedings, or an equivalent document; but once one
appreciates that the brief invited the Court to exercise its powers to order
MF to join three new parties, it is impossible to hold that the brief was
itself a document instituting proceedings against one of those parties or
an equivalent document.
50.Second, Mr. Lockey submitted that the stay under Article 27 is only
available where the proceedings involve the same parties and the same
cause of action. He submitted that, in this context, "cause of action" has
an autonomous Jurisdiction Regulation meaning, viz. – "the facts and
the rule of law relied on as the basis of the action", which requires an
examination of the cause of action and its "objet" , and, as per The Tatry
(supra) at paragraphs 39-40, "the end the action has in view".
51.He submitted that, as at 17 November 2009, even if Vasonia was then
joined, the Initial Proceedings remained an application for interim relief
only, with no substantive claim on the merits. It is simply impossible
to assert that the Initial Proceedings, for interim relief, concerned the
same cause and "objet" as the English proceedings, for substantive relief.
Accordingly, the Initial Proceedings cannot be used to satisfy Article 27.
52.Third, Mr. Lockey submitted that Article 27 is only available if the
proceedings involving the same cause of action and same parties, in
the court first seised, are still pending. Here, he submitted that, on any
view, the Initial Proceedings were no longer pending; they had been
determined, with the confirmation of the interim injunction in January
2010; the fact that an interested party could now apply to set aside
or revoke the interim injunction did not alter the fact that the Initial
Proceedings were no longer pending for the purposes of Article 27.
53.He also submitted that the Final Proceedings were no longer pending
because of the liquidator's failure to adopt them within the three month
period following his appointment; and because Unicredit had also lost
the right to reinstate the Final Proceedings because it was out of time.
Moreover, even if, contrary to Vasonia's submission, the Final Proceedings
were still pending, the English Court was first seised before the Final
Proceedings were issued, and so there is no power to stay the English
Claim under Article 27 in favour of the Final Proceedings.
Discussion and determination of the Article 27 issue
54.Accordingly, in order for this Court to grant a mandatory stay under
Article 27, it has to be satisfied:
i) that the Genoa Court was the court first seised; and
ii) that the English Claim and the Italian Proceedings involve the "same
cause of action and the same parties".
55.Moreover, although the word "pending" does not appear in Article
27, it is also, in my judgment, implicit in Article 27 that the proceedings
in both jurisdictions must be "pending" in order for the article to be
engaged. This is obvious not only from the title to the section "Lis
pendens-related actions", but also from the application of common
sense. If, for example, proceedings have been concluded, dismissed or
discontinued in the first-seised jurisdiction, at the time when judgment
on the Article 27 issue came to be given, there would be no lis pendens in
relation to which the article could apply. This was the conclusion reached
by Mance J (as he then was) in Grupo Torras SA v Al Sabah [1995] 1
Lloyd's Rep 374 at page 418 (right column) (albeit a case on the Brussels
Convention, where there was no equivalent to Article 30); see also Dicey,
Morris and Collins, The Conflict of Laws, 14th Edition, paragraph 12-062.
56.I also take the view, which was common ground before me, that
national law is not determinative of the moment of seisin. Article 30
effectively provides an autonomous Jurisdiction Regulation regime as
to when this takes place. It provides that a court is seised when "the
document instituting proceedings or an equivalent document" is lodged
with the court. As Beatson J said Syndicate 980 v SINCO SA [2008] EWHC
1842 (Comm) at paragraph 64:
64. The purpose of Article 30 is to have a uniform interpretation of the
date on which a court is regarded as seised. Recital 11 to the Regulation
states that the rules of jurisdiction must be "highly predictable" and
Recital 15 that there "must be a clear and effective mechanism for
resolving cases of lis pendens". Of particular significance in the present
context is the statement in Recital 15 that:
'for obviating problems flowing from national differences as to the
determination of the time when a case is regarded as pending. For the
purposes of this Regulation that time should be defined autonomously'.
Grupo Torras SA v Al-Sabah shows that, in the context of the Convention
and now the Regulation, including Article 30, any domestic procedural
doctrine of relation back (such as that in CPR 17.3.4) does not apply."
First seised
57.In my judgment, Unicredit's defence brief cannot on any basis be
characterised as "a document instituting proceedings" in the Genoa Court
as against Vasonia or as "an equivalent document", for the purposes of
Article 30. On its terms, it was a responsive defence brief; all it requested
was that MF should be ordered by the Genoa Court to join Vasonia
and the other parties; it was not a summons of the type referred to in
paragraph 22 of Avv. Cristoffanini's first witness statement, whereby, after
leave has been granted by the court, a defendant may issue a summons
to join a third party; it was not even an application for leave for Unicredit
to do so. There is nothing, in my judgment, in either side's Italian law
evidence to support the proposition that the mere lodging of Unicredit's
defence brief on 17 November amounted to the lodging of a document
"instituting proceedings against" Vasonia or "an equivalent document" for
Jurisdiction Regulation purposes, whether by MF or Unicredit. That the
defence brief was not such a document is underlined by the fact that the
Genoa Court did not require MF to serve it on Vasonia.
58.In my judgment the earliest date on which any document "instituting
proceedings against" Vasonia, or "an equivalent document", could possibly
be said to have been lodged with the Genoa Court was on 25 November
2009 when the Genoa Court made its order directing MF to serve Vasonia
so that it could be joined as a party to the Initial Proceedings . However, it
is not necessary for me to decide whether, or not, such order was indeed
a document satisfying Article 30, or to decide precisely when such a
document was lodged. Certainly, whatever may be the position under
Italian domestic law as to the relation back to an earlier date of Vasonia's
joinder to the proceedings, there is no basis under Article 30 for treating
the Genoa Court as first seised on 2 November 2009, when the Initial
Proceedings were issued by MF against Unicredit, as Mr. Mercer sought to
contend in the alternative.
59.Although I have reached the above conclusion independently, to
a large extent based on the terms, function and stated purpose of
Unicredit's defence brief, in the context of the Italian Proceedings, my
conclusion as to the application of Article 30 is supported by the following:
i) The obiter comment of Beatson J in Syndicate 980 v SINCO SA (supra)
at paragraph 61:
"In a case where an amendment can only be made with the permission
of the court, it must be the position under the Regulation that the
proceedings can be seen as pending in relation to the amendment only
once an order allowing it has been made and the claim form reissued."
ii) Dicey, Morris and Collins (supra), The Conflict of Laws paragraph
12-061, which states:
"… where new parties or new claims are to be added by amendment, the
corresponding date is presumably the date of reissue, rather [than] the
date of application for such permission as may be required."
iii) Briggs and Rees, Civil Jurisdiction and Judgments 5th Edition at
paragraph 2.235.
60.Accordingly, I hold that the Genoa Court was not seised of any
proceedings as against Vasonia on 17 November 2009. That being so,
it follows that the English Court was the Court first seised, so far as the
proceedings as between Vasonia and Unicredit are concerned, as it is
common ground that the English Claim was issued in the evening of that
day.
Same cause of action
61.In the light of my decision in relation to the first seised issue, it is
not strictly necessary to decide this issue. However, since I heard full
argument on the point, and in case my conclusion in relation to seisin
were held to be wrong, it is right that I should state my conclusions on
this issue also.
62.There is no dispute, at least so far as Vasonia and Unicredit are
concerned, that the Italian Proceedings involve the same parties as
the English Claim and that, accordingly, if Article 27 were engaged, the
mandatory stay would have to be invoked as between those parties.
It was also common ground that "cause of action" in Article 27 has
an autonomous Jurisdiction Regulation meaning, it being important to
interpret the phrase in a manner independent of the specific legal rules in
each Member State: see The Tatry at §47.
63.It is clear from paragraphs 39 – 41 of The Tatry that, for Regulation
purposes, what is required is an examination of the "cause of action"
– namely "the facts and the rule of law relied on as the basis of the
action", as well as the "objet" or purpose of the proceedings, and "the
end the action has in view". Thus what is involved under Article 27 is a
comparison of claim documents to see whether the causes of action in two
documents are the same: see per Lawrence Collins LJ in Kolden Holdings
v Rodette Commerce Ltd [2008] EWCA Civ 10 at paragraph 93, as cited
in Research in Motion UK Ltd v Viso Corporation [2008] EWCA Civ 153 at
paragraph 36.
64.It is also clear in my judgment that for this purpose one has to look at
the position at the date that the English Claim was issued, namely on 17
November 2009. In my judgment it is impossible to say that, as at that
date, the Italian Proceedings and the English Claim had the same purpose
or end in view, or were based on the same cause of action. For the
purposes of this argument, I assume, contrary to my earlier conclusion,
that the Genoa Court was indeed seised of proceedings against Vasonia
(as a result of the lodging of Unicredit's defence brief) as at this date.
65.As Mr. Lockey submitted, as at 17 November 2009, the Initial
Proceedings were merely protective proceedings, claiming provisional
measures, which (it was common ground) could be brought as ancillary to
MF's claim in the arbitration proceedings. MF had disavowed any intention
at that stage of invoking Italian substantive jurisdiction against Vasonia.
The nature of Unicredit's defence brief to MF's application for interim relief
was effectively an attempt at a neutral interpleader, inviting the Genoa
Court to make an order that MF (and not Unicredit) should join Vasonia
(and others) to the emergency protective proceedings, so that the latter,
rather than Unicredit, should have to argue whether that protective relief
should continue. No direct, or indirect, claim was made by Unicredit in
that brief as against Vasonia to the effect that it was not liable under the
Guarantee, or indeed to any other effect. On the contrary, at no time
did Unicredit ever positively assert that it had any defence to Vasonia's
(or Nordea's) claim under the Guarantee, let alone make any positive
allegation of fraud or doli mali as against either. The Genoa Court itself, in
its rulings dated 25 November 2009 and 28 January 2010 recognised that
the Initial Proceedings were only temporary in nature and might never be
followed by any trial, or by any substantive proceedings on the merits.
In those circumstances, it is in my view impossible to characterise the
Italian Proceedings as at 17 November 2009 as having the same object or
purpose, or same cause of action, as the English Claim started later the
same day. The English Claim sought payment under, and the substantive
enforcement of, the Guarantee as against Unicredit, without any claim as
against MF. At that date (even on the hypothesis that the Genoa Court
was seised of a claim against Vasonia on that date), the only relief that
was effectively being sought in the Italian Proceedings was that MF should
join Vasonia as a party to MF's claim to have the protective injunction
continued.
66.The fact that, subsequently, in April 2010, substantive proceedings
were issued by MF in the Genoa Court seeking a judgment that Unicredit
was not bound to pay any amount in favour of Vasonia under the
Guarantee and the Court's determination, as between MF, Vasonia and
Unicredit, of Vasonia's rights under the Guarantee, and of Unicredit's
rights in relation to the collateral, is, in my judgment, irrelevant to the
issue as to whether, as at 17 November 2009, the Genoa Court was
seised of an action involving the same cause of action as the English
Court. Unicredit accepts that the Final Proceedings are "technically"
separate from the Article 700 protective Initial Proceedings. Even if, as
Unicredit alleges, and Vasonia denies, Italian law treats its jurisdiction
over the Final Proceedings as having been "derived from" the Initial
Proceedings, there is, in my judgment, no basis under the Jurisdiction
Regulation for treating the Genoa Court as having been seised of the
claims in the Final Proceedings on 2 November 2009, when the Initial
Proceedings were commenced by MF, or on 17 November 2009.
67.Accordingly, I determine the "same cause of action" issue against
Unicredit and in favour of Vasonia.
68."Pending": In the light of my conclusions on the above two issues, I do
not consider that, in the circumstances, it is necessary for me to decide
whether the Initial Proceedings or the Final Proceedings are currently
pending in Italy. It seems to me that their "pending" or "non-pending"
status is essentially a matter of Italian procedural law and without cross-
examination of the two Italian lawyers, or, preferably, the assistance of
an independent expert's evidence on the topic, I am reluctant to decide
the point. If this matter were to go further in this jurisdiction, the view of
the Genoa Court, if it considered appropriate to express a view as to the
"pending" issue, might be of assistance.
Article 28
69.Article 28 provides as follows:
"1. Where related actions are pending in the courts of different Member
Sates, any court other than the court first seised may stay its proceedings
2. Where these actions are pending at first instance, any court other than
the court first seised may also, on the application of one of the parties,
decline jurisdiction if the court first seised has jurisdiction over the actions
in question and its law permits the consolidation thereof.
3. 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."
Unicredit's Article 28 arguments
70.In summary, Mr. Mercer, on behalf of Unicredit argued that:
i) The Genoa Court was first seised, either on 2 November or on 17
November on 2009 of "related proceedings", irrespective of the fact that
neither Vasonia, nor Nordea, had been joined as parties at that stage.
ii) The object of Article 28 is to avoid the risk of conflicting judgments. As
the Jenard Report on the Brussels Convention said of the original Article
22:
"... where actions are related, the first duty of the court is to stay its
proceedings."
He also referred to Overseas Union Insurance [1991] ECR I-3317 at §16
and The Tatry [[1994] ECR I-5439 at 52-55, in this context.
iii) In Cooper Tire & Rubber v. Shell [2009] EWHC 2609, (affirmed by
Court of Appeal [2009] EWHC 2609 (Comm)), Teare J recently applied
this principle. He stated that the object of Article 28 is to "avoid the risk
of conflicting judgments", and adopted the approach that the Court should
be
"ready to give generous support to the convention's obvious concern
about the undesirability of irreconcilable judgments".
iv) The approach of Mance J in Sarrio v. KIA [1996] 1 Ll Rep 650 at
660-661 (a decision restored by the House of Lords at [1999] 1 AC 32)
was also instructive. Mance J referred at p.661 col 1 to the
"... caution which must be exercised before concluding that other factors
justify a refusal of the stay towards which satisfaction of the last sentence
of art. 22 will already point".
v) He referred to the principles of Community law, which are applicable
where a court other than the court first seised is deciding whether to stay
its proceedings, as articulated by Advocate General Lenz in Owens Bank
Ltd v Bracco BAILII: [1994] EUECJ C-129/92 (Case C-129/92) QB 509 at
540-542. He submitted that the application of those criteria, (the extent
of the relatedness and the risk of mutually irreconcilable decisions, the
stage reached in each set of proceedings, and the proximity of the courts
to the subject matter of the case), strongly pointed to the grant of a stay
under Article 28 in the present case.
vi) He submitted that the degree of relatedness is very extensive here;
that the scope of the dispute is narrow given the limited arguments
arising in relation to a Guarantee; the same arguments will arise in
both jurisdictions; and that the risk of irreconcilable judgments is
therefore correspondingly high. He submitted that there is and can be
no suggestion that the Genoa Court as the court first seised will stay its
proceedings; in Italy, there will be a decision, binding on MF, Unicredit
and Vasonia, which will determine whether the injunction will prevent
Unicredit paying pursuant to the demand. In England an order to pay
or a declaration of liability to pay would be manifestly irreconcilable.
In particular, he emphasised the evidence of Professor Saletti to the
effect that Unicredit had no locus standi to apply to discharge the interim
injunction in the Initial Proceedings.
Vasonia's Article 28 arguments
71.In summary, Mr. Lockey, on behalf of Unicredit submitted as follows:
i) This Court has no power to stay the English proceedings under Article
28 but, if it is does have such power, it should not exercise its discretion
to stay the English proceedings.
ii) In summary as to jurisdiction, he submitted:
a) The power to stay under Article 28 is only available to the court second
seised, and then only to the extent that there are related proceedings
which are pending.
b) The English Court was the court first seised of any claim on the
merits. At all times up to and including 17 November 2009, when the
English Claim was issued and the English Court became seised, the
Initial Proceedings consisted only of a claim for interim relief, with no
substantive claim.
c) As at 17 November 2009, when the English Court was first seised,
the Initial Proceedings (being a claim for interim relief only) were not
"related". This is doubly so, if Vasonia was not then a party to the
Initial Proceedings. But even if Unicredit is correct that Vasonia became
a party to the Initial Proceedings on 17 November 2009, the Initial
Proceedings remained at that stage a claim for interim relief only, with
no claim for substantive relief. Furthermore, in the context of a claim
on an autonomous payment obligation, there is an insufficient degree of
relatedness between a claim by the customer against the bank, and by
the beneficiary against the bank.
d) The fact that Final Proceedings, introducing a claim on the merits, were
subsequently issued, which bear a different action number and which
are on Unicredit's own evidence"technically separate" from the Initial
Proceedings does not mean that the Initial Proceedings are to be treated
for Jurisdiction Regulation purposes as having always encompassed the
claim for substantive relief introduced for the first time in April 2010, after
the English Court was first seised of the substantive issues.
e) Unicredit's propositions, based on a completely different context in
Italian procedural law (the relationship between the courts in different
cities), involve treating the Final Proceedings as in some way "relating
back" to the date when MF initiated the Initial Proceedings. This can have
no applicability under the Jurisdiction Regulation: see Burton J in the FKI
Engineering Ltd v Stribog Ltd [2010] EWHC 1160, at paragraph 39. The
question of "relatedness" has to be answered as at the time the English
court was seised, i.e. as at 17 November 2009.
f) The Initial Proceedings are no longer pending.
g) The Final Proceedings are no longer pending, as the liquidator of MF
has not adopted the Final Proceedings within time nor (if relevant) has
Unicredit.
iii) As to the principles governing the exercise of the discretion, he
submitted as follows:
a) English courts regularly had regard to what was said by the Advocate
General in Owens Bank Ltd v Bracco supra; see e.g. most recently, the
judgment of the Court of Appeal inCooper Tire (supra) at paragraph 51,
upholding Teare J's decision at first instance to decline to grant a stay
([2009] EWHC 2609 (Comm) at paragraph 113).
b) The burden of proof was considered by Rix J in Centro Internationale
Bank AG v Morgan Grenfell Trade Finance Limited [1997] CLC 870 at
891-2, where he said:
"there is no presumption in favour of a stay" and that "the burden of
proof or persuasion is on the applicant"
where the preconditions for the Article 28 power have been satisfied.
Accordingly, Unicredit bears the burden of persuading the English Court
that it should stay the English Claim.
iv) As to the application of the principles in the present case, he
submitted:
a) Unicredit cannot discharge its burden of showing that a stay of the
English proceedings is appropriate.
b) Applying the three factors identified by Advocate General Lenz:
i) The extent of the relatedness and the risk of mutually irreconcilable
decisions: he submitted that there is no, or no sufficient, relationship
between MF's claim against Unicredit, and Vasonia's claim against
Unicredit, nor any risk of mutually irreconcilable decisions, as MF's claim
against Unicredit relates to the customer/bank relationship and the
circumstances in which MF provided the collateral to the bank. As for MF's
claim against Vasonia, MF has no substantive rights under the demand
Guarantee as a matter of English law and is not a party thereto. Unicredit
does not argue to the contrary.
ii) The stage which the two sets of proceedings have reached: he
submitted that here, even if it could be shown that the Final Proceedings
are still technically pending, the liquidation of MF makes it inherently
unlikely that the Final Proceedings will proceed to be determined.
Furthermore, in circumstances where Unicredit does not assert that it has
any defence to Vasonia's claim, Vasonia will be in a position to obtain, and
will obtain, summary judgment from the English Court before the first
date fixed for the hearing of the Final Proceedings, namely February 2011.
In circumstances where nothing has happened in the Final Proceedings
since they were served, it is highly unlikely that the Final Proceedings
will be resolved in 2011, let alone in February 2011 at the first hearing
which has been fixed. Unicredit's alleged difficulty in seeking to join MF to
the English Claim, raised as a suggestion for the first time in Unicredit's
skeleton argument dated 19 October 2010, is irrelevant, as there is
no basis at all for joining MF to the English proceedings; Vasonia has
a straightforward claim against Unicredit under a Guarantee issued by
Unicredit to which MF is not a party.
iii) The proximity of the courts to the subject matter of the case: here,
the demand Guarantee is plainly governed by English law. The demand
Guarantee also contains the parties' agreement on English jurisdiction;
the fact that Unicredit is domiciled in Italy (if that be the case) is
irrelevant. For what it is worth, English law was also the proper law
of the charterparty. The relationship between Vasonia and Unicredit,
and between Vasonia and MF, has no connection with Italy. The English
Court is plainly in the best position to determine Vasonia's claim against
Unicredit.
v) Mr. Lockey submitted that the Advocate General recognised that there
might be other factors. He submitted that, here, the following further
circumstances also pointed clearly against a stay:
a) First, the English Court was being asked to stay a claim in
circumstances where no defence has been suggested by Unicredit under
the proper law of the Guarantee, whether in its evidence or in its skeleton
argument.
b) Second, the proposed stay would in effect compel Vasonia to litigate
the substance of its claim against Unicredit in Italy, in proceedings
involving both Unicredit and MF, and in breach of the jurisdiction clause in
the Guarantee and of the autonomy principle.
c) Third, the English jurisdiction clause in the Guarantee is material.
Contrary to Unicredit's submission, the clause means that if Vasonia elects
to bring proceedings in England under the Guarantee, Unicredit agrees
to submit to the jurisdiction of the English court. A similar clause ("the
parties hereby submit to the non exclusive jurisdiction of the English
courts") was so construed by Moore-Bick J in Mercury Communications
Ltd and another v Communication Telesystems International [1999] 2 All
ER (Comm) 33 at 40h.
d) Fourth, a judgment of the English Court in favour of Vasonia's claim
will reduce (not increase) the risk of Unicredit being exposed to double
jeopardy. Unicredit will be able to rely on the English Court's judgment
to set aside the interim injunction and/or to defend the claim in the Final
Proceedings.
e) Fifth, if Unicredit remains exposed to the risk of double jeopardy, that
is the result of the conduct of Unicredit's customer, MF, not of Unicredit's
contractual counterpart, Vasonia, and/or the conduct of Unicredit. Any
concerns on Unicredit's part about double jeopardy could have been
avoided by Unicredit stipulating English law and English jurisdiction in
its relationship with MF. In any event, if anyone should suffer prejudice
as a result of MF's forum shopping litigation, it is Unicredit, its bank,
rather than Vasonia, Unicredit's contractual counterpart, who accepted
a guarantee payable on demand in the expectation that Unicredit would
honour it and not seek to hide behind the skirts of the Italian courts.
f) The reality is that Unicredit's concern is not with the risk of
irreconcilable judgments, but with protecting its right to the collateral
security provided by MF. That is not a matter which should in any way
concern Vasonia, who are entitled to judgment without further ado, nor is
it relevant to the issue of jurisdiction over the claim under the Guarantee.
g) The point raised by Unicredit on discretion in relation to the delayed
service of Vasonia's English Claim goes nowhere.
vi) Accordingly, Mr. Lockey submitted that the proper course is for
the English Court to exercise its discretion in such a way as to decline
Unicredit's application and for Vasonia to proceed to obtain judgment on
its claim; that for the English Court to do otherwise would be to deprive
Vasonia of its contractual rights and to permit the frustration of the
commercial utility of demand guarantees.
Discussion and determination of the Article 28 issue
Jurisdiction
72.In my judgment it is clear from the wording of Article 28, and relevant
authority, that this court has no power, or jurisdiction, to exercise any
Article 28 powers to stay the English Claim, unless it is the court second
seised of one of the two related actions. In other words there is no
power or obligation, under Article 28, for the court first seised to stay its
proceedings.
73.I also take the view that, in order to decide which court is first seised,
one has to ask the question "since when, in the particular jurisdiction, has
the court been seised of proceedings which can be described as "related"
proceedings to proceedings previously, or subsequently, issued in the
other jurisdiction". This appears to be the approach adopted by Mance
J in Grupo Torras SA v Al Sabah(supra) at page 418 (right column); by
Burton J FKI Engineering Ltd v Stribog Ltd (supra) at paragraphs 34, 38
and 39; and by Beatson J in Syndicate 980 v SINCO SA (supra) (albeit
in the Article 27 context). In my judgment this approach, linguistically
consistent with the wording of Article 28, best achieves the concepts
of predictability and clarity stipulated for in Recitals 11 and 15 in the
Jurisdiction Regulation as well as best avoiding the risk of conflicting
judgments.
74.Accordingly, I accept Mr. Lockey's submission that, in order to decide
whether the English Court was the court first or second seised, one has
to ask oneself the question whether, as at the time the English Court
was seised on 17 November 2009, the proceedings already started in
the Genoa Court on 2 November 2009 could be described as "related
proceedings" for the purposes of Article 28.
75.It is clear from the decision of the House of Lords in Sarrio SA v Kuwait
Investment Authority [1999] 1 AC 32 at 38H et seq. that the test of
"relatedness" is straightforward in principle and that Article 28.3 applies
an autonomous test. As Lord Saville says at pp 38H and 41F:
"The essential debate between the parties is whether the actions are
related, and the debate is concentrated on whether there is a risk of
irreconcilable judgments relating from the two sets of proceedings".. and
"there should be a broad commonsense approach to the question
whether the actions in question are related …and refraining from an over-
sophisticated analysis of the matter".
76.Further guidance is provided by the Court of Appeal in Research in
Motion UK Limited v Visto Corporation (supra) at paragraphs 36-37,
where the Court said:
"[i]ts effect [i.e. of article 28] is not entirely mechanical. It requires an
assessment of the degree of connection, and then a value judgment as to
the expediency of hearing the two actions together (assuming they could
be so heard) in order to avoid the risk of inconsistent judgments. It does
not say that any possibility of inconsistent judgments means that they
are inevitably related. It seems to us that the Article leaves it open to a
court to acknowledge a connection, or a risk of inconsistent judgments,
but to say that the connection is not sufficiently close or the risk is not
sufficiently great, to make the action related for the purposes of the
Article. Mechanics do not, for once, provide a complete answer."
77.In my judgment, applying the above common-sense, and non-
mechanistic, approach to the question, the Italian Proceedings cannot
be characterised as a "related action", at any time up to and including
17 November 2009, when the English Claim was issued and the English
court became seised. Although, in a very loose sense there was, as at 17
November 2009, a connection in that MF was seeking, on an interim basis
to prevent Unicredit from paying under the Guarantee the beneficiary
of which was Vasonia/Nordea, on the basis of allegations as to dolus
etc. on the part of the latter, the Initial Proceedings consisted only of a
claim by MF against Unicredit for interim protective relief, pending the
determination of the English arbitration, with no substantive claim against
Vasonia or Nordea. Vasonia/Nordea's claim, in the English Proceedings, on
the other hand, was a claim based on an autonomous payment obligation,
on the part of Unicredit, which was contained in a Guarantee to which MF
was not a party. In my judgment, although at that date there was a loose
connection between the two sets of proceedings, there was an insufficient
degree of relatedness between the protective claim by the customer,
MF, against the bank, Unicredit, and by the beneficiary, Vasonia/Nordea
against the bank.
78.Moreover, at that stage the possible risk of inconsistent judgments,
although present, was slight. Prior to the joinder of Vasonia to the Initial
Proceedings on 18 December 2009 (or, arguably, at the earliest on 25
November 2009), there was no question of any irreconcilable judgments.
Even after Vasonia was added, on Unicredit's application, to allow the
case for and against interim relief to be argued, there was no real risk
of irreconcilable judgments. The Initial Proceedings did not ask the
Genoa Court to resolve any substantive issues, whether between MF
and Vasonia, or between Vasonia and Unicredit. If the English Court
were to determine, as between Vasonia and Unicredit, the substantive
issue between the relevant contracting parties, and were to hold that
there is no defence to Vasonia's claim under the Guarantee, there would
be no actual inconsistency with the interim injunction granted by the
Genoa Court. A judgment in the English proceedings would not breach
the interim injunction and would not be inconsistent with it. The interim
injunction was not, and did not purport to be, a decision on the merits. It
was a provisional order, made on provisional findings. It would not,per se,
provide Unicredit with a defence to an English law claim.
79.There would have been, in my judgment, no expediency at that stage
in hearing what were two entirely separate actions, between different
parties, and of a different nature (one a claim for purely protective
measures, the other a substantive claim), together in order to avoid the
risk of inconsistent judgments.
80.On that basis I conclude that, as at 17 November 2009, any
connection between the Italian Proceedings and the English Claim was
not sufficiently close and the risk of irreconcilable judgments was not
sufficiently great, to make the actions related for the purposes of Article
28.
81.Furthermore, I accept Mr. Lockey's submission that the fact that the
Final Proceedings, introducing a claim on the merits, were subsequently
issued, (which, as already stated, bear a different action number and
which are on Unicredit's own evidence "technically separate" from the
Initial Proceedings), does not, in my judgment, mean that the Initial
Proceedings are to be treated for Jurisdiction Regulation purposes as
having always encompassed the claim for substantive relief introduced
for the first time in April 2010, after the English Court was first seised of
the substantive issues. As in the Article 27 context, so too in the Article
28 context, I reject Mr. Mercer's argument, based on the different context
in Italian procedural law, that the Final Proceedings should be treated
as in some way "relating back" to the date when MF began the Initial
Proceedings. For reasons which I have already given, such a doctrine can
have no applicability under the Jurisdiction Regulation.
82.Accordingly I conclude that this Court had no power to exercise any
powers under Article 28 because:
i) At the time the English Proceedings were issued on 17 November 2009,
there were no existing Italian proceedings which satisfied the description
of "related" proceedings.
ii) There were no Italian proceedings which satisfied the description of
"related" proceedings until the issue of the substantive Final Proceedings
in April 2010, or, in the alternative, until, at the earliest, 25 November
2009, when the Genoa Court made an order that Vasonia should be joined
as a party to the Initial Proceedings.
iii) It follows that the English Court was the court first seised for the
purposes of Article 28.
83.For similar reasons as those set out in paragraph 68 above, I do not
consider that it is necessary or appropriate for me to address (in the
context of jurisdiction) the issue whether the related Italian Proceedings
were pending as at the date of this judgment.
Discretion
84.However, even if I were wrong in my conclusion that this Court had no
power to exercise any powers under Article 28 on the grounds that the
English Court was the Court first seised of related proceedings, and the
actual position was that the Genoa Court was indeed the court first seised
of related proceedings, I have concluded that, as a matter of discretion,
it would not be appropriate for this Court to make any order staying the
English Claim.
85.My reasons can be stated as follows.
86.It was common ground that English courts regularly had regard to
what was said by the Advocate General his opinion in Owens Bank Ltd v
Bracco (supra) as to the principles governing the exercise of the discretion
under what is now article 28 of the Jurisdiction Regulation. In paragraphs
75- 79 ibid, he said:
"75. The decision required in the context of article 22 of the Convention is
a discretionary decision. It goes without saying that the circumstances of
each individual case are particularly important here. The national courts
must bear in mind that … the aim of this provision is
'to prevent parallel proceedings before the courts of different contracting
states and to avoid conflicts between decisions which might arise
therefrom.'
It would therefore be appropriate in case of doubt for a national court
to decide to stay its proceedings under article 22: see in this regard
the judgment of the High Court (Ognall J) of 31 January 1990 in Virgin
Aviation Services Ltd v CAD Aviation Services [1991] ILPr 79 in which
the court held that there was a strong presumption in favour of allowing
an application for a stay (see at page 88: "Commentary on the Jenard
Report on article 22 signifies the strong presumption where an application
is made for a stay, lies in favour of the applicant.")
76. Furthermore, there are three factors which may be relevant to the
exercise of the discretion vested in national courts by virtue of article
22, but this does not mean that other considerations may not also be
important. Those three factors are (1) the extent of the relatedness and
the risk of mutually irreconcilable decisions; (2) the stage reached in each
set of proceedings, and (3) the proximity of the courts to the subject
matter of the case.
77. Clearly, the closer the connection between the proceedings in
question, the more necessary it would appear for the court second seised
to stay its proceedings. If other factors are of some relevance to the
proceedings pending before the court first seised, it may be appropriate
for the court second seised not to stay its proceedings …. The more the
proceedings are related, however, and the greater the risk of the courts
arriving at irreconcilable decisions, the more likely it will be that the court
second seised should stay it proceedings in accordance with article 22.
78. … it is also legitimate for the court second seised to have regard,
when reaching its decision regarding a possible stay, to the stage reached
in the parallel proceedings. The proceedings before the court first
seised should of course have reached a more advanced stage than the
proceedings before the court subsequently seised of a related action.
Where this is not the case, however, and where there is no prospect of
a decision in the first set of proceedings, there is nothing to prevent the
court subsequently seised from taking account of this when arriving at its
discretionary decision.
79. Finally, it goes without saying that in the exercise of such discretion
regard may be had to the question of which court is in the best position to
decide a given question …."
87.However, as Rix J stated in Centro Internationale Bank AG v Morgan
Grenfell Trade Finance Limited (supra) at 891-2: "there is no presumption
in favour of a stay" and that "the burden of proof or persuasion is on the
applicant", where the preconditions for the Article 28 power have been
satisfied. Accordingly, I accept Mr. Lockey's submission that Unicredit
bears the burden of persuading the English Court that it should stay the
English Claim.
88.I have taken into account the following factors in reaching my
conclusion that I should not exercise the Court's powers to stay the
English Claim under Article 28:
i) The extent of the relatedness and the risk of mutually irreconcilable
decisions: even if (contrary to my view in the context of jurisdiction)
the Italian Claim and the English Claim are "related" proceedings, the
degree of "relatedness" or the extent of the relationship, is slight. As
Mr. Lockey submitted, as a matter of English law, MF has no substantive
rights under the Guarantee and is not a party thereto. As a matter of
English law (the law which governs the relationship between MF and
Vasonia), MF is not entitled, in the absence of an allegation of fraud, to
argue that Unicredit should not pay up under the Guarantee, because
of an alleged counterclaim or variation to the terms of the charter.
Unicredit does not argue to the contrary. Further, Vasonia's claim against
Unicredit for payment under the Guarantee is a free-standing autonomous
claim – certainly as a matter of English law, the law which governs the
relationship between the two parties.
ii) In reality, on the evidence, there is very little risk of mutually
irreconcilable decisions, as between the Genoa Court and the English
Court. Irrespective of whether he is actually time-barred from continuing
the proceedings, MF's liquidator to date has shown no interest whatsoever
in taking steps to continue the substantive Final Proceedings to restrain
Unicredit on a permanent basis from paying out under the Guarantee,
or seeking the return of its collateral. No substantive pleadings have
been filed by MF in the Italian Final Proceedings beyond the writ. Indeed,
nothing has happened in the Final Proceedings since they were served,
apart from Unicredit's recent filing of its defence brief on 16 October 2010
in an attempt to reinstate the Final Proceedings - a step taken only once
Unicredit appreciated that Vasonia was intending to argue that Unicredit
was time-barred and that the Final Proceedings were no longer pending.
There is no suggestion that the liquidator has rejected or taken issue with
Unicredit's proof of debt or the statements made in that document about
the latter's entitlement to apply the collateral to meet its liability under
the Guarantee. Moreover, so far as the evidence before me is concerned,
no claim has been made to date by MF in the arbitration proceedings
that Vasonia/Nordea should be restrained from seeking payment from
Unicredit under the Guarantee. Moreover, even at this stage, no positive
case is being put forward by Unicredit in the Final Proceedings to the
effect that it should not pay under the Guarantee, or that the injunction
should continue. On the contrary, it purports to maintain its position of
neutrality.
iii) Nor am I persuaded on the evidence that Unicredit would have no
standing to apply to the Genoa Court to set aside the interim injunction in
circumstances where Vasonia/Nordea obtained judgment against it on the
English Claim. In this respect I prefer the evidence of Avv. Cristoffanini
to that of Prof Saletti. It would be wholly contrary to common sense if,
following a judgment of the English Court against Unicredit, it were unable
to apply to set aside the interim injunction in order to pay the judgment,
in circumstances where the interim injunction was originally directed only
at Unicredit, and given that Unicredit is a defendant to the claim in the
Final Proceedings. Unicredit's rights were clearly affected by the interim
injunction, since that suspended its right to apply the collateral provided
by MF in satisfaction of any payment made by it. In those circumstances
I find Unicredit's evidence to the effect that it would not have capacity "in
practice" to apply to revoke the Interim Injunction as unconvincing.
iv) The stage which the two sets of proceedings have reached: even if
the Final Proceedings are still pending, for the reasons stated above, I
accept Mr. Lockey's submission that it inherently unlikely that the Final
Proceedings will proceed to be determined. Even if they were to continue,
I accept Vasonia's contention that, given the circumstances, there is no
prospect of any final judgment the Italian Proceedings in the near future.
Although there have to date been no statements of case in the English
Claim, that is because of the need to determine this application before
statements of case can be served. But the English Claim appears to a
straightforward claim against Unicredit under the Guarantee issued by
Unicredit, to which MF is not a party, and there is no reason why it cannot
be determined expeditiously. Indeed Vasonia/Nordea have indicated
that they intend to apply for summary judgment in the English Claim,
which could be dealt with by the English Court within a short time frame.
Accordingly there is no reason to suppose that any delay will be caused by
a refusal to grant a stay of the English Claim. On the contrary, the issues
as between Unicredit and Vasonia/Nordea are likely to be determined far
more speedily .
v) The proximity of the courts to the subject matter of the case: in terms
of proximity, the subject matter of the case is, in my judgment, clearly
more closely linked to England. The Guarantee is governed by English law
and it is subject to an express agreement to submit to the jurisdiction
of the English High Court. English law was also the proper law of the
charterparty and the arbitration as between MF and Vasonia is taking
place here. The relationships between Vasonia and Unicredit, and between
Vasonia and MF, have no connection with Italy. The English court is in the
best position to determine Vasonia's claim against Unicredit under English
law. I have taken into account the fact that Unicredit is domiciled in Italy,
and so is MF, and that their banking relationship is no doubt governed by
Italian law, but these are not factors which in my view have any serious
weight in the exercise of my discretion, given the other factors referred to
above and below.
vi) Other factors: other factors which have persuaded me to decide not to
order a stay include the following:
a) Unicredit has not suggested (whether in argument or in its evidence)
that it has any defence to Vasonia/Nordea's claim under the proper law
of the Guarantee, English law. The only possible defence referred to is
one said to be available to MF of exceptio doli under Italian law, which, as
formulated in the Italian Proceedings, would afford no defence to a claim
by Vasonia/Nordea as against Unicredit as a matter of English law. But if
there is no defence to the claim in the English Claim under the Guarantee,
it is difficult to see what legitimate purpose there could be for staying the
English Claim.
b) I accept Mr. Lockey's submission that to grant a stay of the English
Claim in such circumstances would be to frustrate the very purpose of
demand guarantees such as the Guarantee, and to undermine their
commercial utility as well-recognised financial instruments widely used
throughout the EU and elsewhere. If proceedings brought against a bank
to enforce a demand guarantee in the forum chosen in the guarantee can
be pre-empted by proceedings brought by the customer against the bank
in another Jurisdiction Regulation territory, requiring the beneficiary to
become embroiled in those proceedings, the efficacy of such instruments
will be emasculated.
c) Moreover, in my view, any proposed stay would in effect compel
Vasonia to litigate the substance of its claim against Unicredit in Italy,
in proceedings involving both Unicredit and MF, and in breach of the
jurisdiction clause in the Guarantee and of the autonomy principle, simply
because MF sought interim protective relief against its bank in Italy,
pending its claim in arbitration, before Vasonia issued proceedings in
England. A stay of the English Claim would not hold the ring: its effect
would be to compel Vasonia to pursue its claim on the Guarantee in Italy
in proceedings involving the customer, even though Vasonia had the
contractual right to require Unicredit to submit to the jurisdiction of the
English Court in relation to its claim under the autonomous obligation
assumed by Unicredit.
d) The English jurisdiction clause in the Guarantee is material to the
exercise of my discretion. Its effect is that, if Vasonia elects to bring
proceedings in England under the Guarantee, Unicredit irrevocably agrees
to submit to the jurisdiction of the English High Court; see, in relation
to a similar clause, per Moore-Bick J in Mercury Communications Ltd
and Another v Communication Telesystems International [1999] 2 All ER
(Comm) 33 at 40h. Thus, once Vasonia had elected to bring proceedings
against Unicredit in the English High Court, Unicredit was in breach of
contract in not submitting to the jurisdiction of the English Court. In this
context I reject Mr. Mercer's submission on this point based on Gubisch
and other cases cited by him. Those cases in my judgment concern the
relationship between Article 27 and exclusive jurisdiction clauses, not
the Article 28 discretion. In relation to Article 28, the English Court is in
my judgment entitled to consider the jurisdiction agreement as one of
the factors to be taken into account as part of the balancing exercise on
discretion.
e) Accordingly, I agree with Mr. Lockey's submission that any proposed
stay would in effect wrongly reward MF for commencing proceedings in
Italy against its bank, notwithstanding that it knew that any claim under
the Guarantee should be pursued in England. The whole basis of MF's
claim in the Final Proceedings runs contrary to the acknowledgements
and representations which MF made when asking Unicredit to issue the
Guarantee to Vasonia[23]. To grant a stay of the English proceedings in
these circumstances inappropriately rewards MF and offends justice: cf
JP Morgan Europe Ltd v Primacom [2005] EWHC 508 (Comm) at 65, per
Cooke J:
"The injustice of giving precedence to proceedings brought in breach of an
exclusive jurisdiction clause where the parties have agreed that England is
the appropriate forum is self-evident. To breach the clause and to gain the
benefit of priority for the [foreign] Courts by such breach offends justice,
where the Court has a discretionary decision to make".
f) I do not consider that a judgment of the English Court in favour of
Vasonia's claim would seriously increase the risk of Unicredit being
exposed to double jeopardy. On the contrary, even if the Italian
Proceedings were to continue, Unicredit would be able to rely on the
English Court's judgment to set aside the interim injunction and/or to
defend the claim in the Final Proceedings.
g) Even if Unicredit were to remain exposed to the risk of double
jeopardy, that would be the result of the conduct of Unicredit's customer,
MF, not of Unicredit's contractual counterpart, Vasonia, and/or because
of Unicredit's decision not to pay under the Guarantee within a few days
of the demand having been made but instead to seek to interplead.
Both MF and Unicredit voluntarily agreed to the autonomous terms of a
demand guarantee and to such a guarantee being provided to Vasonia,
notwithstanding that it provided for resolution of disputes in the English
High Court.
h) I do not consider that Unicredit's point in relation to the delayed
service of Vasonia's English Claim should have any significant weight in
the exercise of my discretion. It was reasonable in my view for Vasonia
to have awaited the outcome of the January 2010 hearing of the interim
injunction because, if the interim injunction had been refused, no further
proceedings in Italy or England would have been necessary. Whilst the
delay in service of the English Claim is a factor to be taken into account, it
does not persuade me that it is appropriate to grant a stay.
89.Accordingly, for all the above reasons, even if the pre-conditions for
the exercise of this Court's powers under Article 28 were satisfied, I would
not, in the exercise of my discretion consider it appropriate to grant a stay
of the English Claim. Unicredit's application for a stay must be refused
under this head also.
Conclusion
90.Unicredit's application for a stay of the English Claim is dismissed.
91.I am grateful to all counsel and solicitors for the assistance which I
have had from the written and oral presentation of the arguments on both
sides.