Lord Justice Tuckey:
1. This is an expedited appeal from David Steel J's refusal to grant the
three claimants an anti-suit injunction to restrain proceedings against
them in New York by the second and third defendants. The claimants are
domiciled in England and are or were employed as reinsurance brokers
by the first defendant (MSL), an English company and part of the well
known Marsh McLennan group (the MM group) of companies of which the
third defendant (MMC) based in New York is the holding company and the
second defendant (GC) forms part.
2. On 2 April 2007 the claimants each gave MSL six months notice to
terminate their contracts of employment and disclosed that they intended
to work for Integro, one of the MM group's competitors. The New York
proceedings started a month later and are founded upon the terms of
an incentive award granted to the claimants under which they assumed
obligations to repay the award if they engaged in detrimental activity and
to provide information to enable "the Company" to determine whether
they had complied with the terms of the award.
3. The claim for an anti-suit injunction is made on the ground that the
New York proceedings are matters relating to the claimants' individual
contracts of employment and have been brought by their employer so
the provisions of section 5 of Council Regulation (EC) 44/2001 of 22
December 2000 on jurisdiction and the recognition and enforcement of
judgments in civil and commercial matters require such proceedings to be
brought only in the courts of their domicile. The judge disagreed and also
rejected an alternative ground to the effect that the New York proceedings
should be restrained because they were unconscionable, vexatious and
oppressive.
4. MSL is the English service company for the MM group. MSL's business
is simply to employ persons whose services are then provided to other
companies within the group in this country. Its contracts of employment
with the claimants are unexceptional. They contain all the usual terms
which one would expect to find in such a contract including eligibility for
an annual cash bonus and non-solicitation provisions after termination.
Under these arrangements the claimants, who live in England, worked in
the London market for GC and its associated English company specialising
in facultative reinsurance.
5. The claimants held senior executive positions and became eligible to
participate in the MMC 2000 Senior Executive Incentive and Stock Award
Plan. The 15 page document which established this plan said that its
purposes were to advance the interests of MMC and its stockholders by
providing a means to attract, retain and motivate its employees and those
of its subsidiaries and affiliates and strengthen the mutuality of interest
between such employees and the company stockholders. The defendants'
evidence is that it makes sense to have one central plan awarding shares
in a group's parent company to senior employees who are employed
by many different companies within the MM group in many different
countries. Awards under the plan were administered by MMC in New York
and decisions were subject to the approval of its board of directors.
6. The November 1 2005 Guy Carpenter Special Long Term Incentive
Grant was made under the auspices of the plan. This award was subject
to the terms and conditions of the plan itself and additional terms and
conditions. The document containing these terms and conditions (which I
shall call the bonus agreement) was signed by each claimant and recited
that:
In recognition of your potential for future contributions to the success
of MMC, this award is intended to strengthen the mutuality of interest
between you and MMC's share holders and to serve as an appropriate
additional incentive to remain with MMC or any of its subsidiaries or
affiliates (collectively, the "Company"). For purposes of this agreement
"MMC" means Marsh & McLennan Companies, Inc…
7. The bonus agreement runs to 16 pages. It was subject to New York
law and exclusive jurisdiction except as provided by schedule II D. The
awards were of cash rather than stock and subject to the employee's
"continued employment". They were to be paid in instalments over a
number of years. But they were subject to cancellation and rescission
if the recipient engaged in detrimental activity. Before termination such
activity is defined to include attempting to recruit or solicit any employee
of the Company to work for any actual or prospective competitor (I C. (1)
(f)) Rescission required repayment to MMC of any instalment paid in the
12 months before the detrimental activity had taken place (I C. (2) (b)).
8. The bonus agreement also contains a number of covenants. These
relate to notice (II A.), non-solicitation (II B.), confidentiality (II C.) and
disclosure (II F.). The co-operation covenant (II E.) says:
You agree that both during and after your employment with the Company,
regardless of the reason for your termination, you will provide to the
Company such information relating to your work for the Company or
your other commercial activities as the Company may from time to time
reasonably request in order for the Company to determine whether you
are in compliance with your obligations under this Agreement.
9. The penultimate covenant (II G.) under the heading Non-Exclusivity of
Rights says:
Neither you nor the Company intends to waive or release the applicability
of any other employment duties or obligation you and the Company
may have or owe to each other, now or hereafter, unless such duties or
obligations conflict with those set forth in this Agreement. In particular
you and the Company acknowledge that any more extensive duties
or obligations you may owe the Company by law or contract now or
hereafter,… shall not be considered to conflict with, or otherwise be
released or waived by, this Agreement.
10. The agreement also provided that:
This award does not give you any right to continue to be employed by the
Company for any specific duration, or restrict in any way, your right or the
right of your employer to terminate your employment, at any time, for
any reason, with or without cause or prior notice. This award is a special
one-time award, which does not form part of your on-going compensation
and is not taken into account in calculating any other compensation or
benefits…
11. Schedule II D. applies to UK employees. For this schedule the
Company is defined as "the company in the group which is your
employer". For UK employees the schedule modifies the definition of
detrimental activity occurring after termination (2) and also the covenants
relating to notice (3) and non-solicitation (4). It also provides for this
schedule to be construed in accordance with English law and the non-
exclusive jurisdiction of the English courts to settle any dispute arising in
connection with it (6).
12. Each of the claimants has received part of his award under the bonus
agreement. The payments were made by MSL in London subject to
deduction of U.K. tax and national insurance under the PAYE scheme.
13. As soon as the claimants gave notice they were put on garden leave.
The defendants allege that 14 of the 32 brokers working in the GC
Facultative business in London were recruited or approached by Integro,
a New York based business with ambitions to establish itself in the
London market. It suspects that the claimants were behind this and have
therefore been acting in breach of their obligation not to recruit or solicit
other employees.
14. On 5 April 2007, Herbert Smith writing on behalf of GC, MSL and
MMC and relying on the co-operation covenant in the bonus agreement,
asked each claimant a series of questions directed to discovering the
circumstances surrounding their resignation and what contact they had
with Integro and other group employees before and since this time.
After an exchange of inconclusive correspondence with the claimants'
English solicitors proceedings were started on 4 May in the United States
District Court for the Southern District of New York. Only GC and MMC,
both Delaware companies, were the plaintiffs. Relying on the terms
of the bonus agreement the claim sought a mandatory injunction to
compel compliance with the co-operation covenant and repayment of
the awards made to the claimants on the ground that they had engaged
in detrimental activity. In a section of the pleading headed "Defendants
Employment with Plaintiffs" GC are alleged to be the employer and the
pleading says that the claimants' employment "was and continues to be
governed by their respective employment agreements with plaintiffs".
However, despite these assertions, no claim was actually made under the
employment agreements.
15. The claim was accompanied by requests for discovery, interrogatories
and depositions. The proceedings have been served on the second
claimant and (as Judge Denise Cote in New York has decided) on the
other two claimants as well. Jurisdiction was contested. But on 18 May
Judge Cote decided that expedited orders should be made despite the
jurisdiction challenge (which she has since rejected). She made the orders
requested and laid down a very tight timetable for compliance.
16. This led the claimants to issue these proceedings for declarations
about jurisdiction and a worldwide anti-suit injunction relying on section 5
of the Regulation. The defendants issued a cross-application for an order
under the provisions of section 25 Civil Judgments and Jurisdiction Act
1982 in aid of the New York proceedings, alternatively (without prejudice
to their case on jurisdiction) for mandatory injunctions to the same effect
as those made in New York. The claimants' application for an interim anti-
suit injunction was heard and dismissed by David Steel J. on 6 June. The
defendants' cross-application was adjourned and has not been pursued
because they prefer to enforce the provisions of the bonus agreement in
New York.
17. The New York claim came back before Judge Cote on 11 and 12 June
when she was told that MSL and not GC was the claimants' employer.
This did not cause her to reconsider her earlier decision. She made
orders which required the second claimant to give discovery and answer
interrogatories without further delay and attend for depositions in London
on 14 June. Both events took place as ordered.
18. Judge Cote also ordered the other two claimants to attend for
depositions in London on 20 and 21 June. This led the claimants to apply
to this court (Rix and Arden L.JJ) on 20 June to restrain the New York
proceedings pending the hearing of this appeal with a view at least to
preventing the depositions due to start that day from taking place. This
application was dismissed on the ground that the balance of convenience
was against the grant of such an injunction. The other two claimants were
then deposed.
19. As well as the present proceedings, on 12 June the claimants issued
further proceedings in the Queen's Bench Division for declarations
that by their conduct of the litigation the defendants had repudiated
their contracts of employment and that the bonus agreements were
unenforceable for a variety of reasons. Particulars of claim have been
served and directions sought for a speedy trial.
20. The defendants contend that the depositions and discovery obtained
from Integro in New York give cause for concern and that they need
to continue the New York proceedings to enforce the co-operation and
repayment provisions in the bonus agreements and discover more about
the claimants' activities. Very recently they have listed items which
they wish to follow up and the claimants have responded with offers of
undertakings, to be given if necessary in the English proceedings, which
meet a number of the defendants' requests.
21. We heard argument on 6 July. One of the questions we had to
consider was whether we should decide simply if there was a serious issue
to be tried as to whether the Regulation was engaged and if so, whether
an interim injunction should be granted on the balance of convenience, or
whether we should decide the point finally. If we had followed the former
course the judge at trial of these proceedings would have to decide the
point finally with the possibility of a further appeal from his decision. So,
with the consent of both parties, we decided to follow the latter course on
the basis that all the material to enable us to do so was before the court.
22. After this brief summary of the background and history of this hard
fought dispute I need first to refer to the relevant provisions of section
5 of the Regulation which have the force of law in the U.K. These are as
follows:
Section 5: Jurisdiction over individual contracts of employment.
Article 18
(1) In matters relating to individual contracts of employment, jurisdiction
shall be determined by this Section…
Article 20.
(1) An employer may bring proceedings only in the courts in the Member
State in which the employee is domiciled…
Article 21.
The provisions of this Section may only be departed from by an
agreement on jurisdiction:
(1) which is entered into after the dispute has arisen; or
(2) which allows the employee to bring proceedings in courts other than
those indicated in this Section.
23. The first issue for the judge to decide was whether these provisions
were engaged. Did the claimants have a right not to be sued in New York
for breach of the bonus agreement? He decided this question against the
claimants because the New York proceedings did not relate to individual
contracts of employment and also because these proceedings had not
been brought by the claimants' employer (MSL) so Article 20 (1) did not
apply. His reasons for the first conclusion were that the bonus agreement
was not a contract of employment because it did not have the hallmarks
of such a contract; it did not contain the mutual obligations to provide and
carry out work in return for appropriate remuneration. Furthermore the
obligations in the bonus agreement were owed to all the companies in the
MM group and not just to the claimants' employer and the public policy
concerned to protect employees did not have much bearing on this case
as it involved very senior executives within the MM group.
24. Mr Dunning Q.C. for the claimants on the appeal submits that the
judge's approach was essentially flawed because he failed to construe
the meaning and effect of section 5 with the objectives of the Regulation
uppermost in his mind. If he had done so he would have been compelled
to reach the opposite conclusion to the one he reached.
25. It is well established that the terms used in an instrument such as
the Regulation have to be given an autonomous (European) meaning
so that each Member State will apply it consistently and not interpret it
in accordance with its own national law. So what are the objectives of
the Regulation? Those which are relevant can be gleaned from recitals
11 – 15. Thus the Regulation is obviously designed to avoid jurisdiction
disputes. To this end it aims to achieve certainty and avoid multiplicity
of proceedings. Jurisdiction is allocated to the court with the closest
connection to the dispute. The general rule is that a party is entitled to
be sued in the courts of his or her own domicile, but there are exceptions
to this rule, for example where the parties have agreed otherwise
(Article 23). In matters relating to contracts of employment however, the
employee can only be sued in the court of his domicile (Article 20) unless
he has agreed to some other jurisdiction after the dispute has arisen
(Article 21 (1)). These special provisions meet one of the objectives of the
Regulation which is to protect employees who are regarded as the weaker
party in the employment relationship from a socio – economic point of
view. So much is common ground between the parties in this case, as is
the principle that if section 5 is engaged the fact that the employer is not
domiciled in a Member State is irrelevant (see General Insurance v Group
Josi [2001] QB 68).
26. So is there any guidance from the European Court of Justice to help
us decide whether the New York proceedings relate to individual contracts
of employment and have been brought by the claimants' employer within
the meaning of Articles 18.1 and 20.1 of Regulation?
27. Mr Dunning relied on Pugliese v Finmeccanica [2004] All ER (EC) 154,
a case in which an employee had contracts of employment with different
employers in different Member States. The ECJ said she might be able to
sue one employer in the Member State where she was working for the
other if the former had an interest in her working for the latter. The court
said that such an interest:
does not have to be strictly verified according to formal and exclusive
criteria but must be determined in an overall manner taking into
consideration all the facts of the case [24].
However beyond showing that the quest is to avoid multiplicity of
proceedings and to ensure adequate protection for the employee and in
doing so not to take an over formalistic approach, I do not think this case
really sheds much light on our case.
28. There are in fact no relevant ECJ cases on section 5. Mr Rosen Q.C.
for the defendants relied on the English case of Swithenbank Foods
Limited v Bowers [2002] EWHC 2257 (QB), where a defendant domiciled
in France was sued here in tort on the basis that he conspired with other
defendants to interfere with the claimants' contractual relationship with
one of its main suppliers and in contract on the basis that he acted in
breach of his duty of fidelity as an employee in joining the conspiracy.
The judge held that section 5 applied to the contract, but not to the
tort claim. In considering the meaning of "matters relating to contracts
of employment" he said that the advantage given by section 5 to an
employee as a member of a class should be confined to cases where his
status as an employee was legally relevant, rather than to the relationship
generally. The fact that the defendant was an employee was not legally
relevant to the conspiracy claim which was not a contractual claim at all.
So the decision in this case is readily understandable, but again I do not
think it sheds any real light on our case.
29. So is the claim made in New York a matter relating to the claimants'
individual contracts of employment? It is obviously a "matter" and the
word "individual" is apparently used to make it clear that section 5
does not apply to collective agreements. The words "relating to" are
used throughout the Regulation. For the purposes of deciding this case
it does not seem to me that they need to be given a wide meaning.
The question is simply whether the claim is based on a contract of
employment. The contract need not be in one document or made at one
time. An agreement varying or adding to the terms of an earlier contract
of employment will obviously become part of that contract even if on its
own it does not contain all the terms one would expect to find in such a
contract.
30. The claim in the New York proceedings is for breach of the bonus
agreement. Did the terms of that agreement become part of the
claimants' contracts of employment? Mr Rosen accepts, as he must, that
the bonus agreements are connected to the claimants' employment by
MSL but submits that they are free-standing and, as such, the judge
was right to find that they do not have the hallmarks of contracts of
employment.
31. I have only summarised the terms of the bonus agreement. But
from those terms which I have quoted or referred to I can demonstrate
why it is that I do not accept Mr Rosen's submissions. The recital
refers to the award as an incentive "to remain with" MMC or any of
its subsidiaries or affiliates. Payment of the award is subject to "your
continued employment". The notice, non-solicitation, confidentiality,
disclosure and co-operation covenants given to "the Company", which
of course included MSL, add to and in some cases differ from the terms
of the claimants' original contracts of employment with MSL. The non-
exclusivity covenant ([9] above) purports to deal with any such conflict.
The modified notice and non-solicitation covenants in schedule II D. for
U.K. employees are given only to MSL as it is the U.K. company in the MM
group employing the claimants. In short I cannot see how it can be said
that the claimants' bonus agreements do not relate to their contracts of
employment. They are part of them. One cannot ascertain the terms upon
which they were employed without looking at both the original contracts
and the bonus agreements.
32. So, given that the claim in New York relates to the claimants'
individual contracts of employment, has it been brought by "an employer"
within the meaning of Article 20? Mr Rosen's submission is simple: it has
not; the employer, MSL, is not a plaintiff in those proceedings. Mr Dunning
submits that this cannot be right. The claimants have assumed obligations
under the bonus agreements to all the companies in the MM group in
matters relating to their contracts of employment. In these circumstances
any company in the group selected to sue should be regarded as the
employer for the purpose of the Regulation, otherwise its objectives will
not be fulfilled. Mr Rosen countered by saying that these arguments put
a strained and unnecessary construction on section 5 and by ignoring
the separate corporate identities of the various companies in the MM
group they involved piercing the corporate veil. His construction achieved
certainty by giving effect to the exclusive New York jurisdiction clause.
The bonus agreements had a close connection with New York because
the plan was administered and subject to regulation there. The claimants
were not employees who needed protection because they were senior
well-paid executives.
33. At first sight Mr Rosen's main submission appears formidable. As a
matter of English law at least, MSL is the claimants' employer and MMC
and JC are not. It is of course possible for an employee to have two or
even more employers but that is not the way the case is put. But on
further consideration I do not think Mr Rosen is right. The question of
whether MMC and GC should be regarded as employers for the purpose
of section 5 has to be considered together with the fact that their claim in
New York is a claim relating to a contract of employment brought against
English employees. It is an employment claim against the employees and
one would expect such a claim to be made by an employer. MMC and GC
have only been able to sue in the right of and as if they were employers
because of the wide definition of "the Company" in the bonus agreement
and so I think they should be regarded as employers for the purpose
of section 5. MSL, who also come within this wide definition, could only
have sued in England to enforce the terms of the claimants' employment.
MMC and GC as companies within the same group have an economic
interest in the contracts containing those terms and their enforcement
and should be subject to the same jurisdictional restraint as MSL. I do not
think that this is a strained construction. It simply recognises the reality
of the situation without adopting an over formalistic approach. A similar
approach to construction was taken by this court in the recently reported
case of Beckett Investment Management Group Ltd. v Hall [2007] EWCA
Civ 613.
34. Nor does this construction pierce the corporate veil in any real way.
The Regulation is only concerned with the allocation of jurisdiction. The
fact that MMC and GC should be treated as employers for such purposes
does not mean that they should be so treated for any other purpose.
35. A construction of section 5 in the way I have indicated gives effect
to the objectives of the Regulation. It achieves certainty and avoids
multiplicity of proceedings by ensuring that all those companies in the MM
group who wish to sue on the terms of the bonus agreement are required
to sue in the courts of the employees' domicile. Otherwise MMC and any
other company in the MM group could sue in New York and MSL would
have to sue in England. The English courts have the closest connection
with the dispute, concerning as it does the claimants' activities during
their employment and receipt of the award in England. The fact that
the plan is administered and regulated in New York is of no relevance
to the present proceedings. This construction also offers the claimants
protection from proceedings in jurisdictions other than that of their
domicile. Section 5 applies to all employees irrespective of any particular
need for protection. But if these claimants are entitled to be sued here
I can well understand why they feel the need to be protected from the
proceedings in New York.
36. There is a further point which can be made about the cooperation
covenant ([8] above) upon which MMC and GC rely in the New York
proceedings. As I read this provision it is intended to confer the right
upon the employing company. If so it would appear that MMC and
GC regard themselves as employers for the purpose of enforcing this
right. This may partly explain GC's mistake in asserting that it was the
employer.
37. For these reasons I conclude that section 5 is engaged in this case. It
follows that we must disregard the exclusive New York jurisdiction clause
in the bonus agreement because it was agreed before the dispute arose.
38. So does it follow that we should grant an anti-suit injunction? Mr
Dunning submits that we should because it is the only way to make the
claimants' statutory right to be sued here effective. Damages would not
be an effective remedy. Mr Rosen accepted that we could grant an anti-
suit injunction if we found that section 5 was engaged but urges us not to
do so as a matter of discretion and judicial restraint and in the interests of
comity.
39. The position we are in is as follows. The New York court has
rejected the challenge to its jurisdiction because of the clear and
unambiguous terms of the exclusive New York jurisdiction clause in the
bonus agreements. Had we not been concerned with the contracts of
employment we should have upheld such a clause as well. But, as it is,
our law says that we cannot give effect to it. The claimants can only be
sued here. What shall we do? The only choice it seems to me is between
an anti-suit injunction or nothing.
40. An anti-suit injunction is not a remedy to be dispensed lightly,
particularly where the defendants sought to be restrained have brought
proceedings in courts of high repute in a friendly foreign state. The
injunction of course is directed at the litigating party and not the court.
The premise for the remedy is that this party should not be litigating in
that court and so the principles of comity are not offended by granting an
injunction which does no more than require that party to comply with his
legal obligations and ensure for the claimant that he does so. Although
this is the correct analysis, one can understand why not everyone would
see the situation in quite this way which is why the court should always be
cautious before granting such relief.
41. We were referred to various English cases which have dealt with these
problems in the context of commercial disputes where injunctions have
been claimed on the basis of an exclusive jurisdiction clause or forum
conveniens. But no case was cited to us where the exclusive jurisdiction
of the English court was mandated by statute. Mr Dunning submitted
that where that was so, the case for an injunction was at least as strong
as a case based on an exclusive jurisdiction clause. I do not necessarily
accept this. In general, if parties agree an exclusive jurisdiction clause
they should be kept to their bargain; if, as here, the exclusive jurisdiction
of the English courts is imposed by statute it can be said that the case for
an injunction is not so strong, particularly where the statute has provided
that an agreed exclusive jurisdiction clause is of no effect.
42. The converse of this problem arose in OT Africa Line v Magic
Sportwear Corp. & others [2005] 2 Lloyd Rep. 170 where a cargo claim
under a bill of lading containing an English law and exclusive jurisdiction
clause was made in Canada relying on Canadian legalisation which
allowed such a claim to be made there in spite of the clause. This court
granted an anti-suit injunction to restrain the Canadian proceedings on
the ground that the parties should be kept to their English law bargain.
This is an illustration of the court giving full effect to party autonomy
which under Article 23 of the Regulation it is required to do, but under
Articles 20 and 21 it cannot. We are in the latter position: we cannot give
effect to the exclusive New York jurisdiction clause.
43. Doing nothing is not an option in my judgment. The New York
court cannot give effect to the Regulation and has already decided
in accordance with New York law on conventional grounds that it has
exclusive jurisdiction. The only way to give effect to the English claimants'
statutory rights is to restrain those proceedings. A multinational business
must expect to be subject to the employment laws applicable to those
they employ in different jurisdictions. Those employed to work in the MM
group in London who are domiciled here are entitled to be sued only in
the English courts and to be protected if that right is not respected. There
is nothing to prevent MMC and GC or any other company in the MM group
from enforcing their rights under the bonus agreements here.
44. For these reasons I think we should allow this appeal and grant an
anti-suit injunction (the terms of which I hope can be agreed) to restrain
the New York proceedings.
Lord Justice Longmore: I agree
Lord Justice Lloyd: I also agree