1) LORD PHILLIPS, MR: This is an appeal by a German company ("the
claimants") from the judgment of Mr N. T. QC, sitting as an additional
judge of the Queen's Bench Division, dated 13 June 2002. The judge
held that the court had no jurisdiction to entertain the claim which the
claimants seek to bring against a Norwegian company ("the defendants").
2) The appeal raises two issues of general importance on which the judge
gave permission to appeal. The first is whether the provisions of Article
5(5) of the 1988 Lugano Convention on Jurisdiction and the Enforcement
of Judgments in Civil and Commercial Matters ("the Convention") confer
jurisdiction on the English court. The second is whether, if the English
court has jurisdiction under Article 5(5), it has jurisdiction to stay the
proceedings under the doctrine known in the jurisprudence of private
international law as "forum non conveniens". The judge gave a negative
answer to the first question. We have to decide whether he was right
to do so. Had he not done so, he indicated he would have stayed the
proceedings on the ground that Panama and not England was the
convenient forum.
3) The claimants would wish to challenge his jurisdiction to stay the
proceedings if they were properly founded under the Convention. They
accept, however, that binding authority precludes them from doing so in
this court. If they win on the first point, they accept that they must lose
on the second, but will seek permission to appeal to the House of Lords.
4) I wish at the outset to pay tribute to the admirable clarity of the
judgment below. I could not improve upon, and will gratefully incorporate,
some of the early passages of the judgment.
The claim
5) The claim which the claimants seek to bring against the defendants
is an action in tort based on the line of authorities, ending with the
Myrto [1977] 1 Lloyd's Rep 243. It is alleged that the defendants, who
were mortgagees of the vessel T. REEFER, wrongly interfered with the
claimants' contracts for the carriage of a cargo of bananas by arresting
the vessel in Panama in or about July 2001. The defendants contend that
the principle set out in the Myrto conflicts with the principle that a secured
creditor is entitled to enforce his security without regard to the effects on
third parties. On that account the Myrto is not to be followed. They rely
on Edwin Hill v First National Plc [1989] 1 WLR 225 and The Nazezhda
Krupskaya [1997] 2 Lloyd's Rep 35. As the judge observed, the merits of
this dispute do not need to be considered at this stage.
The facts
6) By a loan agreement dated 1 December 1997, the defendants, who
are a Norwegian bank with a branch in London, agreed to provide a
loan of US$6 million to three borrowing companies for the purchase or
refinancing of three vessels, S. REEFER, B. REEFER and T. REEFER. The
security for the loan included mortgages on each vessel. The ultimate
beneficial owners of the vessels and the managers of the vessels were
Cuban. The loan was entered into by, and administered from, the London
branch of the defendants. The loan agreement was governed by English
law. The mortgages and the deeds of covenant which regulated them
were subject to the law of Cyprus.
7) Between 10 and 16 July 2001 a cargo or bananas was loaded on
board T. REEFER in Guayaquil and Puerto Bolivar, Ecuador, for shipment
to Europe. The bananas were to be delivered to the claimants who
purchased them for US$1,192,013.
8) On 24 July 2001 T. REEFER was arrested in Panama in an action in rem
against the vessel commenced by the defendants on the instructions of
their London branch, having received approval from head office in Oslo.
The defendants claim that over US$2 million is outstanding on the loan.
9) On 10 December 2001 the claimants considered that the cargo of
bananas was a constructive total loss and on 12 September 2001 it was
discharged overboard at sea. On 16 October 2001 the vessel was sold
by order of the Panamanian court. On 22 November 2001 the claimants
commenced proceedings in rem in Panama against the proceeds of sale
claiming damages for breach of the contract of carriage.
10) On 19 December 2001 the defendants applied in Panama to
commence an action for a declaration that they were not liable to the
claimants. On 20 December 2001 the claimants issued the claim form in
the present action in this court and served it on the London branch of the
defendants. On 20 March 2001 the Panamanian court gave permission to
the defendants to bring their claim for a declaration of non-liability.
The Convention
11) The Convention is incorporated into the domestic law of the United
Kingdom by section 3(A)(1) of the Civil Jurisdiction and Judgments Act
1982, as amended ("the 1982 Act"). The following provisions of the
Convention are relevant:
"Section 1 – General Provisions.
Article 2
Subject to the provisions of this Convention, persons domiciled in a
Contracting State shall, whatever their nationality, be sued in the courts
of that State.
Article 3
Persons domiciled in a Contracting State may be sued in the courts of
another Contracting State only by virtue of the rules set out in Sections 2
to 6 of this Title.
......
Section 2 – Special Jurisdiction
Article 5
A person domiciled in a Contracting State may, in another Contracting
State, be sued:
1 in matters relating to a contract, in the courts for the place of
performance of the obligation in question; in matters relating to individual
contracts of employment, this place is that where the employee habitually
carries out his work, or if the employee does not habitually carry out his
work in any one country, this place shall be the place of business through
which he was engaged;
2 in matters relating to maintenance, in the courts for the place where
the maintenance creditor is domiciled or habitually resident or, if the
matter is ancillary to proceedings concerning the status of a person, in the
court which, according to its own law, has jurisdiction to entertain those
proceedings, unless that jurisdiction is based solely on the nationality of
one of the parties;
3 in matters relating to tort, delict or quasi delict, in the courts for the
place where the harmful event occurred;
4 as regards a civil claim for damages or restitution which is based on
an act giving rise to criminal proceedings, in the court seised of those
proceedings, to the extent that that court has jurisdiction under its own
law to entertain civil proceedings;
5 as regards a dispute arising out of the operations of a branch, agency
or other establishment, in the courts for the place in which the branch,
agency or other establishment is situated."
The approach to the interpretation of Article 5 of the Convention
12) Section 3(B)(2) of the 1982 Act provides that the Report on the
Convention by Mr P Jenard and Mr G Möller shall be given such weight as
is appropriate when interpreting the Convention. The material provisions
of Article 5 of the Convention are, as is most of the Convention, in the
same terms as those of the earlier Brussels Convention. They fall to
be interpreted in the same manner. Thus, decisions of the European
Court of Justice on Article 5 of the Brussels Convention apply, and
reference may be made to the report of Mr Jenard on the Brussels
Convention (see the observations of Lord Hope of Craighead in Agnew v
Lansforsakringsbolagens [2000] 2 WLR 497 at pp 516-7).
13) Jenard and Möller set out a number of fundamental principles
that apply to the two Conventions. The third of these begins with the
statement that a defendant's domicile is the point on which the rules on
jurisdiction hinge. The fourth principle states that the provisions of Article
5 relate to "proceedings which can be considered as having a particularly
close link with the court before which the proceedings are brought". It
describes the provisions of Article 5 as special in that both Conventions
directly specify which court has jurisdiction.
14) Jenard and Möller have a specific commentary on Article 5(5) to which
I shall revert when I outline the submissions made by Mr Parsons on
behalf of the defendants.
15) In his report on the Brussels Convention Jenard remarks of Article 5
that adoption of the special rule of jurisdiction is justified by the fact that
there must be a close connection factor between the dispute and the court
with jurisdiction to resolve it. This proposition is echoed by an observation
of the European Court in Martin Peters Bauunternehmung GmbH v Zuid
Nederlandse Aannemers Vereniging (case 34/82) [1983] 987 at 1001.
In Kleinwort Benson Limited v Glasgow City Council [1999] 1 AC 153 at
page 164, Lord Goff of Chieveley cited the same case in support of the
proposition that:
"...it is clearly recognised that article 5 is in derogation from the basic
principle of domicile in article 2....and as a result the provisions of article
5 are to be construed restrictively (see Kalfelis v Bankhaus Schroder,
Munchmeyer, Hengst and Co (Case 189/87) [1088] ECR 5565, 5585, para
19)."
The judge's findings in relation to Article 5(3)
16) In the court below the claimants argued that they could establish
jurisdiction under Article 5(3) on the ground that England was the place
where the harmful event occurred. The basis of this submission was
that the loan and mortgage were transactions of the London branch of
the defendants and that the decision of the London branch to enforce
the mortgage by arresting the vessel was the event which gave rise
to the damage. The judge gave the following reasons for rejecting this
submission:
"In one sense the decision of the branch of the Defendants in London can
be said to have given rise to and to be the origin of the damage because
the arrest is executed pursuant to that decision. However, it can also be
said that the arrest is the event which gives rise to the damage and is
the origin of the damage because, without the arrest, there would be no
interference with the contracts of carriage. Having regard to the principles
adumbrated in Kleinwort Benson v Glasgow City Council the court should
adopt a restrictive approach to the application of Article 5 bearing in
mind that the defendant can always be sued in his place of domicile. To
conclude that the place where the decision is taken to commit a tort is the
place where the event which gives rise to the damage occurs rather than
the place where the first component of the tort occurs is to adopt a broad
approach to Article 5(3) rather than a restrictive approach. Further, I do
not consider that the place of the decision to arrest can be said to be a
'particularly close connecting factor' between the dispute and the English
court. It is a connecting factor between the dispute and the English court
but in circumstances where the contract of carriage is interrupted in
Panama by an arrest in Panama it is not a particularly close connecting
factor between the dispute and the English court. For those reasons it
seems to me that Panama, rather than London, is the place where the
event which gave rise to the damage occurred."
There is no appeal against this part of the judgment.
The judge's findings in relation to the stay application
17) The following findings of the judge in relation to the stay application
have some relevance to this appeal.
"Where the tort was committed.
The interference with the contracts of carriage occurred in Panama
where the arrest took place and was maintained. The bananas became a
constructive total loss by reason of being detained in Panama. I consider
that the substance of the tort was committed in Panama."
18) Under the Private International Law (Miscellaneous Provisions)
Act 1995 the judge held that the proper law of the tort was the law of
Panama.
19) While some evidence, including evidence as to the state of the loans
secured by the vessel, when it was in default and to what extent, would
emanate from London, this was not, on the judge's analysis, likely to be a
significant factor.
The judge's findings in relation to Article 5(5)
20) It was and is common ground that the defendants' London branch
was "a branch, agency or other establishment" within the meaning of
Article 5(5). The issue was whether the fact that it was a decision taken
by the London branch that led to the arrest of the T. REEFER in Panama
meant that the dispute was one arising out of the operations of the
branch. The judge summarised the claimants' submissions as follows:
"In circumstances where the loan documentation referred to the
Defendants as acting through their branch in London, where the notices
of default were sent out from London, where correspondence concerning
the default was with the branch and its London solicitors, where the
instructions to arrest came from London and where the decision to
maintain the arrest was taken in London, the action plainly arose from the
activities of the Defendants' London branch."
In rejecting the claimants' submissions the judge said:
"In one sense the dispute can fairly and realistically be said to arise out of
the decision to arrest which wish taken by the branch of the Defendants'
in London. However, in another and more restrictive sense the dispute can
be said to arise out of the arrest in Panama rather than out of the decision
to arrest in London because it is the arrest which causes the interference
with the contracts of carriage and hence gives rise to the dispute. Without
that interference there would be no dispute. The Court is required to
give Article 5(5) a restrictive construction. Strictly, it is the arrest which
gives rise to the dispute. The arrest is an 'activity' of the branch but it
is an activity in which the branch is 'engaged' in Panama rather than
in London where the branch is established on behalf of the Defendants
(using the phraseology of Somafer). Furthermore, the connection between
the dispute and London, though real, is not as close as that between the
dispute and the place of arrest. I do not consider that the connection
between the dispute and London can be said to be a 'particularly close
connecting factor'. For these reasons I prefer the submission made on
behalf of the Defendants."
The decision to which the judge referred is Somafer v Saar Fern Gas AG
[1978] ECR 2183.
Submissions made to us
21) For the claimants, Mr M. QC repeated the submissions which had not
found favour before the judge. He submitted, in essence, that the words
of Article 5(5) fell to be given their natural meaning. He accepted that
there had to be a link between the activities carried on by the branch and
a dispute so that it could properly be said that the dispute was one arising
out of the activities of the branch. He submitted, however, that on the
facts of this case this requirement was clearly satisfied. The arrest arose
out of a London branch loan. It was the London branch which decided
to arrest the vessel and it was the London branch which gave power of
attorney to the Panamanian lawyers to enable them to arrest the vessel.
22) For the defendants, Mr Parsons submitted that the judge's analysis
was correct. What had to be demonstrated was a link between the dispute
and the English court, not merely with the English branch of the bank.
To establish such a link, it was necessary that the activities of the branch
should constitute an element in the cause of action. Where a claim was
brought in tort, the activities of the branch had to have produced the
harmful event within the jurisdiction if the link was to be established.
Mr. Parsons. submitted that in the present case there was no link at all
between the dispute and the English court. He relied upon the findings
made by the judge in relation to the place where the tort was committed
and the proper law of the tort to which I have referred.
23) In support of his submissions Mr. Parsons. relied heavily on the
decision in Somafer. He accepted that part of the reasoning in that case
had not survived the subsequent decision of the European Court in Lloyd's
Register of Shipping v Society Campenon Bernard [1995] ECR I-961.
That part, however, related to claims in contract. So far as claims in
tort were concerned, the observations of the court in Somafer remained
authoritative.
24) Counsel's submissions call for a careful analysis of the effect of
Somafer and of the Lloyd's Register case. The issue in Somafer was
whether a company which had its principal place of business in France had
a "branch, agency or other establishment" in Germany within the meaning
of Article 5(5). The questions referred to the European Court related to
the tests to be applied in resolving that issue.
25) The findings of the court appear from the following paragraphs of
their judgment:
"11. Having regard to the fact that the concepts referred to give the right
to derogate from the principle of jurisdiction of Article 2 of the Convention
their interpretation must show without difficulty the special link justifying
such derogation. Such special link comprises in the first place the material
signs enabling the existence of the branch, agency or other establishment
to be easily recognized and in the second place the connexion that there
is between the local entity and the claim directed against the parent body
established in another Contracting State.
12. As regards the first issue, the concept of branch, agency or other
establishment implies a place of business which has the appearance of
permanency, such as the extension of a parent body, has a management
and is materially equipped to negotiate business with third parties so that
the latter, although knowing that there will if necessary be a legal link
with the parent body, the head office of which is abroad, do not have to
deal directly with such parent body but may transact business at the place
of business constituting the extension.
13. As regards the second issue the claim in the action must concern the
operations of the branch, agency or other establishment. This concept
of operations comprises on the one hand actions relating to rights and
contractual or non-contractual obligations concerning the management
properly so-called of the agency, branch or other establishment itself
such as those concerning the situation of the building where such entity is
established or the local engagement of staff to work there. Further it also
comprises those relating to undertakings which have been entered into
at the above-mentioned place of business in the name of the parent body
and which must be performed in the Contracting State where the place
of business is established and also actions concerning non-contractual
obligations arising from the activities in which the branch, agency or
other establishment within the above defined meaning, has engaged
at the place in which it is established on behalf of the parent body. It
is in each case for the court before which the matter comes to find the
facts whereon it may be established that an effective place of business
exists and to determine the legal position by reference to the concept of
'operations' as above defined."
26) Paragraph 13 appears to be addressing the question of what it is
necessary to establish in order to demonstrate the necessary nexus
between the operations of the branch and the claim. The court had not
been asked to provide guidance on this, but may have been influenced by
the opinion of the Advocate General that part of the test of a branch was
whether the branch carried out operations that were independent of its
parent.
27) The observations of the court in paragraph 13 appeared severely to
circumscribe the effect of Article 5(5). It was not enough that the branch
should have entered into an undertaking in favour of the claimant if the
undertaking was not one which had to be performed in the country where
the branch was established. It would seem to follow that, if the claim was
in tort, jurisdiction would not lie under Article 5(5) unless the activities
of the branch constituted or directly brought about the harmful event.
It seems to me that, were the observations in paragraph 13 of Somafer
to represent the law, they would provide unshakeable support for the
conclusion reached by the judge.
28) In the Lloyd's Register case Advocate General Elmer observed that
what the court had to say about "operations" had been the subject of
criticism both in academic writings and in the opinion of the Advocate
General, Sir Gordon Slynn, in SAR Schotte v Parfums Rothschild [1987]
ECR 4905. In that opinion Sir Gordon stated at page 4914:
"For my part, but for paragraph 13 of the judgment, I would have given
'dispute arising out of the operations of a branch' a wider meaning.
Equally, but for that paragraph, I would find it difficult to spell out
of Article 5(5) the limitation that undertakings entered into 'must be
performed in the Contracting State where the place of business is
established'."
29) I turn to the facts of the Lloyd's Register case. Lloyd's Register
of Shipping is an English registered charity established in London. It
maintained a branch in France. Campenon Bernard, a French company,
contacted the French branch in order to arrange for the testing of
concrete reinforcing steel which it was to use in the construction of a
motorway in Kuwait. Following negotiations, in a letter of 3 December
1985, Campenon Bernard placed the order with the French branch of
Lloyd's Register. That letter specified that inspection would take place in
Spain and would be carried out by the Spanish branch of Lloyd's Register.
It also stated that payment would be effected in pesetas. On 9 December
1985 the French branch communicated its acceptance.
30) Although the Spanish branch of Lloyd's Register issued certificates of
compliance, the Kuwait Ministry of Public Works, for whom the concrete
was being produced, refused to accept the concrete reinforcing steel
on the ground that it did not comply with the United States technical
standard.
31) On 2 February 1988 Campenon Bernard paid the invoice issued by
the Spanish branch of Lloyd's Register, having been pressed to do so by
the French branch, but without prejudice to its rights. Alleging that Lloyd's
Register had wrongly stated that the steel complied with the United States
technical standard, it then brought a claim for damages in the Tribunal de
Commerce in Paris. Lloyds Register challenged the jurisdiction.
32) The Cour d'Appel held that the Tribunal had jurisdiction, pursuant to
Article 5(5). The Cour de Cassation referred to the European Court the
question of whether the application of Article 5(5) was restricted to cases
where the dispute concerned obligations to be performed in the state in
which the branch, agency or other establishment was situated. This put in
issue the correctness of paragraph 13 of the judgment in Somafer.
33) In his opinion, Judge Advocate Elmer observed that the geographical
limit imposed by the court in Somafer was in the nature of an obiter
dictum. He went on to express his own view:
"16...decisive importance must be attached to the fact that Article 5(5)
would to all intents and purposes be devoid of independent content if
it were applicable only to disputes regarding obligations which must be
performed in the Contracting State in which the branch, agency or other
establishment is situated. The courts for the place of performance of the
obligation already have jurisdiction under Article 5(1) in matters relating
to a contract and the courts for the place where the harmful event
occurred already have jurisdiction under Article 5(3) in matters relating
to tort, delict or quasi-delict. As emphasized by Campenon Bernard, the
United Kingdom, the Greek Government and the Commission, with such
a limitation of Article 5(5) would actually be reduced to cases of choice
between several jurisdictions within the individual Contracting State.
17...
18 Rather than creating clarity, a geographical limitation such as that at
issue raises a series of problems and thus gives rise to legal uncertainty.
Furthermore, Article 5(5) serves two purposes:
-Partly to make it easier for the plaintiff to take proceedings in cases
in which there is 'a place of business which has the appearance of
permanency, such as the extension of a parent body, has a management
and is materially equipped to negotiate business with third parties so that
the latter, although knowing that there will if necessary be a legal link
with the parent body, the head office of which is abroad, do not have to
deal directly with such parent body but may transact business at the place
of business constituting the extension' (Somafer judgment, paragraph
12); and
-Partly, as mentioned in the United Kingdom's observations, to
approximate the situation just described to the point of departure of
the first paragraph of Article 2 of the Convention regarding general
jurisdiction arising from the domicile of the defendant. For agencies such
as those listed in Article 5(5) – non-legal persons – there is by definition
no such jurisdiction arising from domicile.
Article 5(5) should therefore, in my view be interpreted according to its
clear wording, which entails no geographical limitation."
34) The decision of the court echoed the opinion of the Advocate General:
"16. First, the actual wording of Article 5(5) of the Convention in no
way requires that the undertakings negotiated by a branch should be
performed in the Contracting State in which it is established in order for
them to form part of its operations.
17. Secondly, the interpretation put forward by the appellant in the main
proceedings would render Article 5(5) almost wholly redundant. Since
Article 5(1) already allows the plaintiff to bring an action in contract in the
courts for the place of performance of the obligation in question, Article
5(5) would duplicate that provision if it applied solely to undertakings
entered into by a branch which were to be performed in the Contracting
State in which the branch was established. At the very most it would
create a second head of special jurisdiction where, within the Contracting
State of the branch, the place of performance of the obligation in question
was situated in a judicial area other than that of the branch.
18. Thirdly, it should be noted that an ancillary establishment is a place of
business which the appearance of permanency such as the extension of
a parent body, has a management and is equipped to negotiate business
with third parties so that the latter, although knowing that there will if
necessary be a legal link with the parent body, whose seat is in another
Contracting State, do not have to deal directly with such parent body (see
Somafer, cited above, at paragraph 12).
19. A branch, agency or other ancillary establishment within the meaning
of Article 5(5) is therefore an entity capable of being the principal, or even
exclusive, interlocutor for third parties in the negotiation of contracts.
20. There does not necessarily have to be a close link between the entity
with which a customer conducts negotiations and places an order and
the place where the order will be performed. Accordingly, undertakings
may form part of the operations of an ancillary establishment within the
meaning of Article 5(5) of the Convention even though they are to be
performed outside the Contracting State where it is situated, possibly by
another ancillary establishment.
21. That interpretation is, moreover, in conformity with the objective of
the special rules of jurisdiction. As the Jenard Report (OJ 1979 C 59 at
p22) makes clear, those rules allow the plaintiff to sue the defendant in
courts other than those of his domicile because there is a specially close
connecting factor between the dispute and the court with jurisdiction to
resolve it.
22. In the light of the foregoing considerations, the answer to the
question referred by Cour de Cassation must be that the expression
'dispute arising out of the operations of a branch, agency or other
establishment' in Article 5(5) of the Convention does not presuppose that
the undertakings in question entered into by the branch in the name of
its parent body are to be performed in the Contracting State in which the
branch is established."
35) Mr. Parsonsarsons made the following submissions in relation to these
two cases. First, he drew our attention to certain passages in chapter 6 of
the Jenard and Möller report under the heading "Judgments of the Court
of Justice of the European Communities Concerning the Interpretation
of the Brussels Convention of 27 September 1968". Under the heading
"General" is this paragraph:
"As stated in the comments on Protocol 2 (see points 112 and 116) in the
negotiations on the Lugano Convention it was agreed that the provisions
of the Brussels Convention should be construed as interpreted by the
Court of Justice and that the report would mention the various judgments
handed down by the Court.
This chapter meets the latter stipulation."
36) Mr P- submitted that the effect of this was that the findings in relation
to the Brussels Convention of the European Court, as interpreted in the
report, should be treated as definitive of the meaning of similar provisions
in the Lugano Convention, unless expressly overruled by subsequent
decisions of the European Court.
37) Next, Mr. Parsons. referred us to this commentary of the Report on
Somafer:
"The Court has given an autonomous interpretation to the concepts of
'operations of a branch, agency or other establishment--
(a) the concept of branch, agency or other establishment implies a
place of business which has the appearance of permanency, such as the
extension of a parent body, has a management and is materially equipped
to negotiate business with third parties so that the latter, although
knowing that there will if necessary be a legal link with the parent body,
the head office of which is abroad, do not have to deal directly with
such parent body but may transact business at the place of business
constituting the extension;
(b) the concept of 'operations' comprises-
(1) actions relating to rights and contractual or non-contractual
obligations concerning the management properly so-called of the agency,
branch or other establishment itself such as those concerning the
situation of the building where such entity is established or the local
engagement of staff to work there,
(2) actions relating to undertakings which have been entered into at the
above mentioned place of business in the name of the parent body and
which must be performed in the Contracting State where the place of
business is established,
(3) actions concerning non-contractual obligations in which the branch,
agency or other establishment has engaged at the place in which it is
established on behalf of the parent body."
38) Mr. Parsons. submitted that this passage made it plain that paragraph
13 of Somafer was intended to be the definitive and exclusive definition
of "operations of a branch, agency or other establishment" that were
capable of giving rise to a dispute that fell within the jurisdiction accorded
by Article 5(5). The adverse comment on the geographical limitation in
paragraph 13 made by Advocate General, Sir Gordon Slynn, in Schotte
was made in relation to a contract case. Advocate General Elmer only
described the geographical limit in paragraph 13 as obiter dictum in so
far as it was made in relation to contract disputes in a case concerned
with non-contractual obligations. Somafer remained authority for the
proposition that, in a non-contractual claim, the activities of the branch
had to bring about the harmful event giving rise to the dispute within the
jurisdiction of the court if Article 5(5) were to be engaged.
39) I consider this argument to be over-sophisticated and unsound.
The effect of decisions of the European Court on provisions which are
common to the Brussels and Lugano Conventions should not be artificially
circumscribed in the manner suggested by Mr. Parsons. They must be
given their natural effect.
40) In my judgment, the decision in the Lloyd's Register case robs the
geographical limit in paragraph 13 of Somafer of such authority as it
might otherwise have had, bearing in mind that it was an obiter dictum on
a matter not referred to the court and in respect of which no submissions
had been made to it. This must be true of claims in tort as well as claims
in contract. What the Lloyd's Register case demonstrates is that there
must be such nexus between the branch and the dispute as to render
it natural to describe the dispute as one which has arisen out of the
activities of the branch. Where the claim is in contract, that nexus can be
derived from the negotiations between the claimant and the branch which
gave rise to the contractual obligation, the alleged breach of which is the
subject of the dispute. Where the claim is in tort or delict, there will be no
such nexus.
41) The events which give rise to liability in tort can vary widely –
compare the liability of the publishers of a defamatory book with the
vicarious liability of a company for the negligent driving of an employee
in the course of his employment. In these circumstances, I do not think it
desirable to attempt to formulate any test to determine whether a dispute
has arisen out of the activities of a branch. The answer to that question
must depend on the facts of the individual case. I would, however,
venture some general observations.
42) As Lord Justice Laws observed in the course of argument, paragraph
5 of Article 5 differs from the other paragraphs of that Article. The other
paragraphs address different specific causes of action. Paragraph 5 is of
general application. It would seem designed to cover situations where the
connection of the claim with the activities of the branch, agency or other
establishment is such to make it appropriate in the interests of the due
administration of justice to permit suit to be brought in the State where
the branch, agency or other establishment is situated.
43) I would endorse the conclusions of the Advocate General in the
Lloyd's Register case that one purpose of Article 5(5) is to approximate
the place where a branch carries on business with third parties to
the point of departure of the first paragraph of Article 2. Article 5(5)
provides a quasi defendant's domicile basis for jurisdiction. Once the
existence of an entity which qualifies as a "branch, agency or other
establishment" of the defendant is established in a State, it accords with
the due administration of justice from the view point of the defendant,
the claimant and the court to permit suit to be brought in that State in
relation to disputes which arise out of the activities of the branch, agency
or establishment, regardless of where those activities take effect.
44) I have set out positive reasons for giving Article 5(5) a meaning which
is not subject to the geographical limitation suggested by the court in
Somafer. There are, however, powerful negative reasons which point
in the same direction. In the Lloyd's Register case, which was a case
involving contract, the court observed that the Somafer interpretation
would render Article 5(5) almost wholly redundant having regard to
the provisions of Article 5(1). Advocate General Elmer made a similar
observation in relation to matters relating to tort, delict or quasi-delict,
having regard to the provisions of Article 5(3). The only such claim that
Mr Parsons could suggest in respect of which, on his interpretation, Article
5(5) would make a difference was a claim in restitution.
45) In considering the application of Article 5(5), the judge considered
it pertinent to compare the connection between the dispute and London
with the connection between the dispute and Panama. Mr Neeson
suggested that this was not a helpful comparison. Rather, the judge
should have compared the connection between the dispute and London
with the connection between the dispute and Norway. Had he done so,
he would have reached the conclusion that this was a case in which it
could properly be said that the dispute arose out of the activities of the
defendants' London branch.
46) I think that Mr Neeson is correct. The actions giving rise to the
dispute arose out of London banking business, conducted by the
defendants' London branch. The loan in respect of which the security over
the vessel was taken was negotiated in London. The decision to enforce
the security was taken in London. The London branch gave instructions
to enforce the security and the power of attorney to enable it to be
done. Giving the words of Article 5(5) their natural meaning, the dispute
in this case has arisen out of the activities of the London branch. It is
true that in this case these factors do not point to London as the most
convenient forum. If the jurisdiction to stay is soundly based, the action
will be fought in Panama and not here. It seems to me, however, that if
considerations of, or akin to, domicile are to govern the available forum, it
makes good sense and accords with the due administration of justice that
London should be available to the parties as an alternative to Norway.
47) For these reasons I would allow the first limb of the appeal.
48) That leaves the judge's alternative decision that the decisions should
be stayed in favour of Panama. No attack has been made on that decision
on the merits. It is not open to the claimants to challenge that decision
in this court on the basis it was made without jurisdiction. It is common
ground that we are bound by the decision in Ace Insurance Company v
Zurich Insurance Company [2001] 1 Lloyd's Rep 618, to hold that the
judge had jurisdiction to stay the proceedings.
49) Accordingly, I would replace the judge's order with one staying
the action. If my Lords, or at least one of them, are in agreement, it
will remain to consider the application that I anticipate will follow for
permission to appeal to the House of Lords against the imposition of a
stay.
50) LORD JUSTICE BROOKE: I agree.
51) LORD JUSTICE LAWS: I also agree.
Order: Appeal allowed with costs.
Leave to appeal to the House of Lords granted.