BICK J
I have before me five applications in two actions which form part of the
extensive litigation arising out of the collapse in early 1998 of Metro
Trading International Inc ('Metro'). While it carried on business Metro
provided storage facilities for oil products in vessels stationed off Fujairah
and also acted as an oil trader in its own right. Following its collapse a
number of companies which had delivered products to Metro for storage
have claimed title to the stocks which remained in Metro's possession.
In some cases they have also asserted that oil products which Metro had
sold and delivered to third parties were their property and have made
claims against the buyers in conversion. The applications now before me
are made in two actions which relate to a cargo of heavy fuel oil carried
on board the vessel Vigour from Fujairah to Singapore in February 1998.
Two further actions have been commenced in the Tribunal de Commerce
in Paris by Banque Trad-Crédit Lyonnais ('the Bank') which is seeking
to recover the price due under the contracts of sale under which the
cargo on the Vigour was sold by Metro to two buyers in Singapore, Itochu
Petroleum Co (S) Pte Ltd ('Itochu') and Singapore Petroleum Co Ltd
('SPC'). It is the existence of the concurrent proceedings in England and
France which has given rise to the present applications which all concern,
directly or indirectly, the question whether the issues which they raise
should be determined here or in France.
In order to set the present applications in context it is necessary to
describe briefly the events which have given rise to them. In October
1997 Metro entered into a contract with Itochu for the sale of six cargoes
of bunker fuel, delivery to be made at the rate of one each month from
November 1997 to April 1998 inclusive. On 21 January 1998 Metro
entered into a contract with SPC for the sale of a single parcel of bunker
fuel for delivery in February 1998. The contracts were on very similar
terms: each was subject to English law and included an exclusive English
jurisdiction clause. Each contract also provided for payment to be made
by telegraphic transfer to Metro's nominated bank account against invoice
and shipping documents or letter of indemnity for missing documents and
also obliged the buyers to issue a purchase and payment undertaking to
Metro's nominated bank.
The Vigour loaded at Fujairah towards the end of January 1998. Bills of
lading in respect of the cargo were issued to the order of the Bank which
had been financing Metro's business operations. On 12 February 1998
the Bank's Singapore branch asked Itochu to give an undertaking that
it would pay the invoice price of the goods to the Bank for the account
of Metro in accordance with the terms of the contract. Later that day
Itochu sent a telex to the Bank giving the undertaking requested. At
the Bank's request a similar undertaking had already been given by SPC
on 2 February 1998 in respect of the price due under its contract with
Metro. I shall refer to these as the letters of undertaking. The goods
were delivered in Singapore during the first half of February. Shortly
after, on 27 February 1998, Glencore International AG ('Glencore') began
proceedings in England against Metro and the owners of certain vessels
seeking delivery up of oil products alleged to be in their possession and
damages for conversion and breach of contract. The writ, to which neither
Itochu nor SPC were parties at that time, was served on Metro on 4 March
1998. Meanwhile, on 3 March 1998 an order had been made by Tuckey J
appointing receivers to get in and preserve the property and receivables
of Metro pending the outcome of the proceedings in this country. Steps
were also taken to wind up Metro in Greece where a Mr Grigoriadis was
appointed as liquidator by the First Instance Court of Athens on 26 March
1998.
On 24 March 1998 the Bank, which had been represented before Tuckey
J when the receivership order was made but had not been made a party
to it, commenced two actions in Paris, one against Itochu, Metro and the
owners and operators of the Vigour, and one against SPC, Metro and the
owners and operators of the Vigour. In those actions the Bank sought
to recover from Itochu and SPC or Metro the amounts due under the
contracts of sale relating to the cargoes on the Vigour. The liquidator has
intervened in those proceedings seeking a stay of the actions pending a
decision on the enforcement of the winding up order in France. It is now
accepted that the evidence points irresistibly to the conclusion that the
French courts became seised of those proceedings on 10 June 1998 when
the originating process was lodged at the court following service on the
defendants.
As far as the parties now before the court are concerned, no further
steps of any significance were taken in any of the proceedings until 30
September 1998 when Glencore obtained leave to join Itochu and SPC
as defendants to its action and to serve them out of the jurisdiction.
Shortly after that, on 3 November 1998, SPC applied to join Glencore,
the receivers and the liquidator as third parties to the Bank's action
against it in Paris, and a few days after that, on 12 November 1998,
the receivers themselves issued a writ in this country in the name of
Metro against Itochu seeking payment of the price of the goods due
under the contract. Glencore's amended writ was served on SPC on 9
March 1999 but was not served on Itochu until 28 April 1999. Metro's
proceedings were served on Itochu rather earlier, certainly before the
beginning of March 1999 because on 12 March 1999 Itochu served third
party proceedings on the Bank in Metro's action seeking declaratory relief
as a means of ensuring that the Bank was bound by the court's decision
in those proceedings. That third party notice was subsequently ordered to
stand as third party notice against the Bank in Glencore's action. Unlike
Itochu, SPC has not brought any third party proceedings against the
Bank in this country. Itochu and SPC are protesting the jurisdiction of
the Tribunal de Commerce on the grounds that the Bank is bound by the
exclusive jurisdiction clauses in their contracts with Metro and on the
grounds that the court should decline jurisdiction under art 22 of the
Brussels Convention.
In summary, therefore, the position is this:
A. in England
1. Glencore is suing Itochu and SPC in conversion;
2. The receivers are suing Itochu (but not SPC) in the name of Metro for
the price of the goods;
3. Itochu has made third party claims against the Bank in both actions;
B. in France
1. The Bank has sued Itochu and SPC for the price of the goods;
2. SPC (but not Itochu) has made third party claims against Glencore and
Metro.
It is in these circumstances that the following applications come before
the court:
1. an application by the Bank to stay Itochu's third party proceedings in
the Glencore action to enable the issues between them to be determined
in Paris;
2. a similar application by the Bank to stay Itochu's third party
proceedings in the Metro action;
3. an application by SPC for a stay of Glencore's action against it to
enable the issues between them to be decided in Paris;
4. an application by Itochu, in the event that the Bank succeeds in its
application to stay the third party proceedings, for a stay of the receivers'
action against it pending the outcome of the proceedings in Paris;
5. an application by Itochu, on a similar basis, for a stay of Glencore's
action against it.
All the parties now before the court wish to ensure that there is only one
set of proceedings between them relating to the cargo carried on the
Vigour, but the Bank and SPC want them to be held in France, whereas
Itochu, Glencore and the receivers want them to be determined in
England. This is, therefore, a battle about jurisdiction and it is common
ground that it must be decided in accordance with the rules laid down in
arts 17, 21 and 22 of the Brussels Convention. The claims made by Metro
(by the receivers) and Glencore are essentially quite straightforward:
Metro claims the price of the goods sold to Itochu and SPC; Glencore
claims the value of the goods in conversion, having indicated that it
regards the price at which Metro sold to Itochu and SPC as sufficient
evidence of that value. In one sense, therefore Itochu and SPC are
seeking to adopt the role of interpleaders between these two claimants,
although the position is complicated by the fact that each of them claims
to be entitled to raise a set off against the amount due under its contract
with Metro. The position of the Bank is less straightforward. Mr Andrew
Smith QC who appeared on its behalf on these applications said that
its primary case is that the letters of undertaking gave rise to new
and directly enforceable contracts with the buyers under which they
became bound to pay it the price of the goods due under their contracts.
Alternatively, the Bank says that the terms of the contracts and the letter
of undertaking in each case operated as an assignment to it of the debt
due to Metro. This is something to which I shall have to return at a later
stage in connection with the question whether the Bank's claim is subject
to the exclusive jurisdiction clause in the two sale contracts, but it was
common ground that the issue of title to the cargo carried on the Vigour
lies at the heart of all the claims. It is essential for Glencore to establish
that it had title to the oil in order to support a claim in conversion, and
it was accepted that neither Metro nor the Bank could recover the price
if Metro did not have title to the oil which it sold and delivered to SPC
and Itochu. It was also common ground that if all the proceedings in
France and England are related actions within the meaning of art 22 of
the Convention, this court was first seised of one of those related actions,
namely, Glencore's action in which the writ was served on Metro at the
latest by early March 1998.
The Bank's applications
It is convenient to begin by considering the Bank's applications to stay the
third party proceedings brought by Itochu. These were based on art 21 of
the Convention which provides as follows:
"Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court."
Three questions therefore arise: (a) are the proceedings between the
same parties; (b) if so, do they involve the same cause of action; (c)
if so, were the French courts or the English courts first seized of the
proceedings?
At one time there was some uncertainty as to the precise degree of
coincidence of parties which was necessary in order to bring a case within
art 21, but those doubts have now been resolved by the decision of the
European Court in The Maciej Rataj [1994] ECR 1-5439, [1995] All ER
(EC) 229. The court pointed out in para 32 of its judgment that arts 21
and 22 are intended to prevent parallel proceedings before the courts of
different contracting states so as to avoid conflicting decisions and that
therefore art 21 must be read as applying whenever there is identity of
parties to the two actions. It continued as follows:
"Consequently, where some of the parties are the same as the parties
to an action which has already been started, Article 21 requires the
second court seised to decline jurisdiction only to the extent to which the
parties to the proceedings pending before it are also parties to the action
previously started before the court of another Contracting State; it does
not prevent the proceedings from continuing between the other parties.
Admittedly, that interpretation of Article 21 involves fragmenting the
proceedings. However, Article 22 mitigates that disadvantage. That
article allows the second court seised to stay proceedings or to decline
jurisdiction on the ground that the actions are related, if the conditions
there set out are satisfied."
It follows that the requirement of identity of parties is satisfied to the
extent that the same parties are joined in both actions, whether or not
other parties have been joined in one or both of the actions. In other
words, it is necessary to ask oneself whether the same cause of action
arises between the same two parties in two sets of proceedings. In the
present case it is clear that this aspect of art 21 is satisfied as far as the
Bank and Itochu are concerned since both of them are parties to each of
the English actions as well as one of the Bank's actions in France.
The second question concerns identity of cause of action. The English
text of the Convention in common with the German and Irish texts refers
simply to the same 'cause of action', but other texts refer to two distinct
elements, in the French text, for example, cause and objet. In Gubisch
Maschinenfabrik KG v Giulio Palumbo [1987] ECR 4861 the European
Court held that all language versions must be construed as embracing
both concepts. The concept of cause has not given rise to much difficulty
in this case since it was accepted in the light of the authorities that it
refers to the factual basis of the claim and the rules of law on which
it is based. In other words, this element of art 21 is satisfied if the
proceedings have the same factual basis and turn on the application of
the same rules of law. The precise meaning of objet in this case was more
controversial. Mr Smith drew my attention to the fact that in the English
report of Gubisch the expression 'subject matter' is used to translate the
word objet, thereby suggesting that the court is concerned with content of
the claim, or the petitum as it was put in some of the submissions to the
court. He submitted, therefore, that the expression 'end in view' which is
used in later cases cannot be understood as meaning the general aim of
the parties in bringing the proceedings. However, it is important to note
that the choice of the expression 'subject matter' in that case appears to
have been that of the translator (see the note on page 4863) and that the
Court was not directly concerned with the distinctions which Mr Smith was
seeking to make. The question which arose in Gubisch was whether an
action to enforce a contract for the sale of goods had the same objet as
an action for its rescission or discharge. The Court held that they did. One
action was brought to give effect to the contract, the other to deprive it
of effect. The question whether the contract was binding lay at the heart
of the two actions and so fell to be decided in both (see para 16 of the
judgment).
The Court returned to the question in The Maciej Rataj where the issue
arose in the context of claims by owners of cargo for damage to goods
and claims by the shipowners for declarations of non-liability. In para 41
of its judgment the Court held that:
"The 'object of the action' for the purposes of Article 21 means the end
the action has in view."
Accordingly it held that two actions had the same object when the first
sought a declaration that the plaintiff was not liable for damage as
claimed by the defendants while the second sought to have the plaintiff in
the first action held liable for causing loss and ordered to pay damages.
That was because the issue of liability was again central to both actions
and the fact that the plaintiff in the second action claimed damages did
not alter the principal object of the action. The expression 'end in view'
might be said to be a little different from 'subject matter of the action',
but in the light of some of the parties' submissions in the present case
it is worth noting that the Court in that case referred to the end the
action has in view rather than the end the parties have in view. As far
as I am concerned, however, authoritative guidance on the principles
to be derived from Gubisch and The Maciej Rataj is now to be found
in Haji-Ioannou v Frangos (CA) (CCH New Law Publishing, 31 March
1999) where, having considered the earlier authorities the court held that
actions have the same object if they have the same end in view, adopting
the principle as formulated in The Maciej Rataj. If there is any distinction,
therefore, between the expressions to be found in Gubisch and The Maciej
Rataj (which I doubt) it is clear that 'end in view' is to be preferred.
In Haji-Ioannou v Frangos the claimant alleged that the principal
defendant had embezzled a very large sum of money which had been
entrusted to him for specific purposes. Criminal proceedings were brought
against the defendant in Greece to which the claimant joined a civil claim
to recover a trivial sum by way of 'moral damages' for harm done to the
claimant's reputation by the defendant's action. That claim was directed
against the defendant personally. In his action in England the claimant
asserted a beneficial interest in the funds entrusted to the defendant and
in the assets which those funds had been used to acquire. The Court of
Appeal considered that the same facts and rules of law formed the basis
of both proceedings, even though in England the claimant was asserting
that the same underlying agreement gave rise to different obligations and
different legal remedies. However, unlike the claim in Greece, the claim
in England was not a simple personal claim for the recovery of money,
but involved a proprietary claim against funds and assets in the hands of
the defendant. The actions were therefore held to have different objects
for the purposes of art 21. That did not depend on the end which the
claimant had in view, but upon the nature of the actions themselves.
On the basis of these authorities Mr Smith submitted that in the present
case both the cause and the objet of Itochu's proceedings against
the Bank in England are the same as those of the Bank's proceedings
against Itochu in France. There can be little dispute as far as the cause
is concerned. Although the relief which Itochu seeks against the Bank is
declaratory, the factual basis of its claim is the delivery by Metro of the
cargo on board the Vigour and its commercial arrangements with Metro
and the Bank which culminated in its giving the letter of undertaking.
The legal basis of its claim rests on the rights and liabilities of Metro and
the Bank under the contract of sale and the letter of undertaking. In the
French proceedings the Bank's claim to recover the price is based on the
same facts and depends on the same rules of law. The position is less
clear, however, in relation to the objets of the two sets of proceedings.
In France the purpose of the Bank's action is to recover the price of the
goods from Itochu; in England, it may be said, the purpose of Itochu's
third party proceedings is to bring the Bank, Metro and Glencore into
direct opposition to each other in order to avoid multiplicity of proceedings
and to ensure that they are all bound by the same judgment.
The concept of 'the end the action has in view' is one which is not always
easy to define with precision as the present applications demonstrate.
In one sense the Bank's action to recover the price due under the sale
contract does not have the same end in view as Itochu's third party
proceedings which merely seek to ensure that the Bank is bound by the
decisions made in Glencore's action. However, both actions raise the
same issues of fact and law relating to the ownership of the oil which
is accepted to be the key to Itochu's liability, whether to the Bank or
Glencore. A decision in the present action that Itochu was liable to
Glencore because Metro had no title to the oil would, if binding on the
Bank, necessarily mean that Itochu was not liable to the Bank or to Metro.
Equally, a decision in the French proceedings that Itochu was liable to the
Bank would be inconsistent with any right of Glencore to recover damages
for conversion in these proceedings or, for that matter, any right of Metro
to recover the price, since it was not suggested that Itochu could be liable
to make payment both to the Bank and to Metro.
Much was made in argument of the fact that the third party proceedings
are intended to operate as interpleader proceedings, but that is not
really a true description of their nature. Interpleader proceedings under
Ord 17 of the Rules of the Supreme Court (preserved by CPR Pt 50)
are a creature of statute. They provide a means by which a party who
is faced with competing claims to a debt or other property and who
does not himself claim any interest in the subject matter in dispute can
obtain relief by putting the subject matter at the disposal of the court.
The court determines the issues to be tried between the rival claimants
and the interpleading party takes no further part in the proceedings.
The procedure thus enables the court to create an artificial lis directly
between the claimants in substitution for their respective claims against
the original defendant. In the present case Itochu's third party notices,
although not framed in quite this way, seek to ensure that the Bank is
bound by the court's decision on questions of law arising between Itochu
and Glencore which would affect its right to recover under the letter
of undertaking. This is exactly the kind of relief which was expressly
envisaged by Ord.16, r.1(1)(c) and is now subsumed within CPR Pt
20.2(1)(b). Although it may achieve some of the practical benefits of
interpleader proceedings in that it ensures that the defendant is not
bound by mutually inconsistent judgments, it is intended to result in a
final decision which binds both parties and affects their mutual rights
and obligations. Thus in the present case the object of the proceedings
is to ensure that as between the Bank and Itochu the Bank is bound by a
decision on whether Metro had title to the goods sold and delivered under
the contract which lies at the very heart of the Bank's claim. If that were
to be answered in different ways in different proceedings it would lead to
mutually exclusive judgments. Whatever may have been Itochu's broader
objective in bringing the third party proceedings, therefore, they raise the
question of its liability to the Bank as effectively as does the Bank's own
action in France.
In both Gubisch and The Maciej Rataj the European Court emphasised
that the object of arts 21 and 22 is to prevent parallel proceedings
which might give rise to irreconcilable judgments and this in my view is
the fundamental principle which must be borne in mind when deciding
whether two sets of proceedings have the same end in view in the sense
required by art 21. It cannot be enough that they are both concerned
with the same facts and the same rules of law since both of these are
subsumed in the concept of cause: see Haji-Ioannou v Frangos. However,
the concept of objet relates to the end which the action has in view, not
the object which the claimant had in mind in bringing the proceedings.
In The Maciej Rataj the fact that the issue of liability for damage to cargo
was central to both actions and that the judgments would overlap entirely
in relation to that issue appears to have been a sufficient basis for holding
that the two actions had the same objet. In Haji-Ioannou v Frangos, on
the other hand, the fact that one action was concerned purely with rights
against the defendant personally whereas the other was concerned with
establishing the claimant's rights against property meant that the actions
had different ends in view. In the present case the central issues in both
sets of proceedings are whether Metro or Glencore had title to the cargo
loaded on board the Vigour and which of them is entitled to recover from
Itochu. In each case judgment in the action will determine the rights
and obligations of Itochu, Glencore and Metro as between each other
in a manner which will bind them all. The position is thus much closer
to that which arose in The Maciej Rataj than that which existed in Haji-
Ioannou v Frangos. I am persuaded, therefore, that both sets of third
party proceedings between the Bank and Itochu involve both the same
cause of action and the same object as the proceedings between them in
France.
Finally there is the question of which courts were first seised. The French
courts were seised of proceedings between the Bank and Itochu on 10
June 1998. Under English law the court becomes seised of proceedings
for the purposes of arts 21 and 22 at the time when the writ or other
originating process is served on the defendant: see Dresser UK Ltd v
Falcongate Freight Management Ltd [1992] 1 QB 502, [1992] 2 All ER
450. That rule is easily applied when there is only one defendant, but
what is the position when there are two or more defendants? In Grupo
Torras SA v Sheikh Fahad Mohammed Al-Sabah [1995] 1 Lloyd's Rep 374
at page 419 Mance J held that arts 21 and 22 postulated a single date
of first seisure in relation to each set of proceedings. That answer may
have much to commend it in terms of its practical consequences, but in
the light of the subsequent decision of the European Court in The Maciej
Rataj it is difficult to see that it can be sustained. When Grupo Torras
came before the Court of Appeal some time after the European Court had
given judgment in The Maciej Rataj, the court considered at length how
art 21 operated in the context of proceedings against multiple defendants.
Stuart-Smith LJ delivering the judgment of the court said at page 21,
col.1:
"The appellants argued that art 21, as construed in the Zelger and The
Maciej Rataj judgments, requires the question of definite pendency to
be answered party by party. The subject matter of the article is the
lis between the relevant pairs of parties; when did that lis become
definitively pending? The answer that the question will receive will depend
on which lis one is asking about. The logical force of this submission is
compelling and it is clearly supported by the authorities."
The respondents, in that case had argued for what was described as a
more pragmatic approach leading to the submission that:
"the relevant date for art.21 (and art.22) is the first date upon which it
can be said that any defendant has been served."
After discussing the rival contentions, however, the court decided that it
was unnecessary on the facts of that case to rule on the submission.
Although a pragmatic approach to questions of this kind has its
attractions, it is necessary to bear in mind that the Convention represents
what is intended to be a coherent set of rules for regulating the exercise
of jurisdiction by the courts of the contracting states. Sometimes the rules
work in what might be considered a less than perfect way, as Lord Goff
pointed out in Airbus Industrie GIE v Patel [1999] 1 AC 119, [1998] 2 All
ER 257 at pages 131-132 of the former report, but I do not think that
that provides a very sure basis on which to adopt a pragmatic approach
in preference to one which is consistent with authority and principle.
Moreover, the pragmatic approach to arts 21 and 22 of the kind which was
urged on the court in the Grupo Torras can be very difficult to reconcile
with the language of the Convention. For example, in this case the court
was seised of Glencore's action against Metro in early March 1998 at a
time when Itochu was not a party to the action at all, let alone a party
which had been served with the proceedings. In those circumstances it
would strike me as anomalous to hold that the court was somehow seised
of proceedings against Itochu at a time when it was not a party to the
action in any sense and might never have become one. Whatever the
attractions of such an approach, however, the decision of the European
Court in The Maciej Rataj is authority for the proposition that for the
purposes of art 21 the court must examine the case by reference to the
position of individual defendants, even though that may give rise to some
fragmentation of proceedings. This issue was again raised before the
Court of Appeal in Fox v Taher [1997] ILPr 441, but was not the subject
of decision since the majority (Morritt and Leggatt LJJ) decided the case
on other grounds. However, it was considered by Brooke LJ who held
that it would run counter to the guidance given by the European Court in
The Maciej Rataj to say that the court was seised of the proceedings as a
whole as soon as originating process was served on one of the parties. He
said:
"I would accept the submission made by counsel for the appellants in
the Court of Appeal in the Grupo Torras case: the answer to the question
'when did the relevant lis between the relevant parties become definitively
pending?' will depend upon which lis one is asking about. In the present
case the lis between the plaintiff and the defendants whom Mr Aikens and
Mr Briggs represent would have become definitively pending at the time
their clients were served with the English proceedings and not before."
I would respectfully adopt that reasoning and it follows in my view that
for the purposes of the Bank's application under art 21 it is necessary
to determine which court was first seised of proceedings between the
Bank and Itochu, not of proceedings between other parties. Logically
the principle established in Dresser v Falcongate must also apply to
third parties so that the court is seised of the proceedings between the
defendant and the third party only when the third party notice is served.
In the present case the French courts were seised of proceedings between
the Bank and Itochu in June 1998, well before Itochu served the Bank
with its third party proceedings in this country. That being so, on the face
of it art 21 requires this court to stay the third party proceedings here in
favour of the Tribunal de Commerce in Paris.
Mr Dominic Kendrick QC on behalf of Itochu put forward two answers to
that: first, that the Bank was bound by the exclusive jurisdiction clause
in the contract for the sale of the oil and that therefore on the authority
of Continental Bank NA v Aeakos Compania Naviera SA [1994] 2 All ER
540, [1994] 1 WLR 588 the court must disregard arts 21 and 22 entirely;
alternatively, that all the actions in England and France are related within
the meaning of art 22 and that therefore this court as the court first
seised of one of the related actions should retain jurisdiction pursuant to
art 22, including jurisdiction over the third party proceedings which now
form part of that action.
Before considering whether art 17 applies at all to the Bank's claim
against Itochu it is necessary to turn back again for a moment to art 21.
In its present form that article requires any court other than the court
first seised to stay the proceedings before it of its own motion until such
time as the jurisdiction of the court first seised is established. By its very
terms, therefore, it contemplates the possibility that a challenge may be
made to the jurisdiction of the court first seised and requires the court
seised second to await the outcome of that challenge. No distinction is
made between different grounds of challenge to the jurisdiction of the
court first seised, so on the face of it, even in a case where the claim is
being made to enforce a contract which contains an exclusive jurisdiction
clause in favour of the court seised second, art 21 would seem to require
that court to allow a challenge to the jurisdiction of the court first seised
to be decided by that court before allowing the action to proceed before
it. Similarly, if there is a dispute, as there is in this case, whether the
parties have agreed upon the jurisdiction of the court seised second, art
21 appears to require that issue to be left to the determination of the
court first seised, at any rate where it forms the basis of the challenge
to the jurisdiction of that court. If on the correct view of the matter the
parties have agreed that the court seised second shall have jurisdiction,
and if, as one must assume, the court first seised applies the Convention
correctly, that court will stay the action to enable it to proceed before the
court seised second. That procedure may be somewhat cumbersome and
time-consuming, especially in a case where the existence of an exclusive
jurisdiction clause in favour of the court seised second is reasonably clear.
Sometimes, however, as in this case, there is a real dispute whether the
parties are bound by an exclusive jurisdiction clause, and the process just
described might be said to be the only way of paying proper regard to the
principles laid down by the Convention and of ensuring that jurisdictional
disputes are resolved in an orderly way.
Mr Michael Beloff QC on behalf of SPC, whose submissions on this part
of the application were adopted by Mr Smith, drew my attention to
Overseas Union Insurance Ltd v New Hampshire Insurance Co [1992] 1
QB 434, [1992] 2 All ER 138 in which the European Court had to consider
the operation of art 21 in a case where concurrent proceedings were
brought in England and France under a reinsurance treaty between New
Hampshire as reinsured and various reinsurers. The French court was
first seised of proceedings brought by New Hampshire, but its jurisdiction
was challenged by the reinsurers. The reinsurers brought proceedings
in England, but at first instance New Hampshire obtained a stay of the
action under art 21 pending a decision by the French court on the issue of
its jurisdiction. The reinsurers appealed on the grounds that the English
court could not take that step without first establishing that the French
court had jurisdiction over the proceedings before it, which it contended
was not the case. The Court of Appeal referred a number of questions to
the European Court, one of which was whether in those circumstances
the court could and should investigate the jurisdiction of the French court
when considering whether to grant a stay.
In para 20 of its judgment the European Court observed that there was
nothing in the documents before it to suggest that the main proceedings
fell within an exclusive head of jurisdiction laid down in the Convention, in
particular art 16. It continued as follows:
"21. In the case of a dispute over which it is not claimed that the court
second seised has exclusive jurisdiction, the only exception to the
obligation imposed by article 21 of the Convention on that court to decline
jurisdiction is where it stays proceedings, an option which it may exercise
only if the jurisdiction of the court first seised is contested.
22... the objective of the provision, which is to avoid negative conflicts of
jurisdiction, may be achieved without the court second seised examining
the jurisdiction of another court.
23. Moreover, it should be noted that in no case is the court second seised
in a better position than the court first seised to determine whether the
latter has jurisdiction. Either the jurisdiction of the court first seised is
determined directly by the rules of the Convention, which are common to
both courts and may be interpreted and applied with the same authority
by each of them, or it is derived, by virtue of article 4 of the Convention,
from the law of the state of the court first seised, in which case that court
is undeniably better placed to rule on the question of its own jurisdiction.
...
25... the only other possibility available, as an alternative solution, to the
court second seised which should normally decline jurisdiction, is to stay
the proceedings if the jurisdiction of the court first seised is contested.
However, it cannot itself examine the jurisdiction of the court first seised."
Two points may be made about that decision. The first is that the form of
art 21 then in force gave the court seised second a discretion to stay the
proceedings, but did not make a stay mandatory and did not say in what
circumstances the power could properly be exercised. By its judgment,
therefore, the Court filled that lacuna in the Convention by making it clear
that the court seised second cannot decide the jurisdiction of the court
first seised and should stay the proceedings before it until the court first
seised has decided the question of its jurisdiction. The second is that
the Court expressly refrained from ruling on the case where the main
proceedings fall within an exclusive head of jurisdiction, in particular art
16, and did not give a clear indication whether art 17 should be regarded
as an example of an exclusive head of jurisdiction.
In Continental Bank v Aeakos the defendant brought an action against
the plaintiff bank in Greece under a loan agreement which contained an
English jurisdiction clause. The bank brought proceedings in England
for an injunction to prevent the defendant from pursuing its action in
Greece. The defendant applied to the court in England for, inter alia, an
order staying the bank's action under arts 21 or 22 of the Convention.
Gatehouse J dismissed those applications and granted an injunction to
prevent the defendant from pursuing its action in Greece. The Court of
Appeal held that the jurisdiction clause in the loan agreement obliged
the defendant to submit disputes to the English court and in the light of
that considered the effect of art 17 of the Convention and in particular its
relationship to arts 21 and 22. Gatehouse J had held that the proceedings
did not involve the same causes of action and were not related within
the meaning of art 22, but that in any event art 17 entitled the bank to
succeed. The Court of Appeal did not find it necessary to consider the
effect of arts 21 and 22 because art 17 took precedence. Steyn LJ giving
the judgment of the court said at page 596E ([1994] 1 WLR 588):
"Article 17 has mandatory effect. When article 17 applies it follows
that the jurisdiction agreement prorogates (confers) jurisdiction on
the courts of the contracting state chosen by the parties, and that the
jurisdiction agreement deprives the courts of any other contracting states
of jurisdiction... There is no discretionary power in the Convention itself to
override the conclusive effect of an exclusive jurisdiction agreement which
conforms with the requirements of article 17. It follows that if article 17
applies its provisions take precedence over the provisions of articles 21
and 22." (my emphasis)
Mr Beloff submitted that the decision in Continental Bank v Aeakos could
be distinguished in this case because since that case was decided there
has been a change in the language of Article 21 which makes it clear
that whenever there are concurrent proceedings involving the same
parties and the same cause of action the court seised second must
stay the proceedings if there is a challenge to the jurisdiction of the
court first seised. In France both Itochu and SPC have challenged the
jurisdiction of the court and therefore, he submitted, this court must
stay the proceedings here, at least until that challenge is resolved. Under
those circumstances the court should not embark on the question whether
the Bank is bound by an exclusive jurisdiction clause which is a question
for the French court to decide in the context of determining the challenge
to its jurisdiction. That approach, he submitted is not only dictated by
the language of Article 21 as it now stands, but is consistent with the
approach of the European Court in Overseas Union v New Hampshire. Mr
Kendrick and Mr Southern, on the other hand, submitted that the decision
is binding on this court notwithstanding the subsequent change in the
wording of Article 21. The court must rule on the issue of the exclusive
jurisdiction clause and, if it finds that the Bank is bound by it, refuse to
stay the proceedings here under either Article 21 or 22.
The decision in Continental Bank v Aeakos has been the subject of some
academic criticism, but I am persuaded that it remains binding on me.
It is quite true that there has been a change in the language of Article
21 since that case was decided. As then in force Article 21 simply gave a
court other than the court first seised a discretion to stay the proceedings
if the jurisdiction of the court first seised was contested. However, the
change only serves to clarify the course which the court seised second
should take when there is a challenge to the jurisdiction of the court
first seised. It makes it clear that in the ordinary way that court cannot
determine the jurisdiction of the court first seised, but in my judgment it
goes no further than that. To that extent, therefore, it reflects the decision
of the European Court in Overseas Union v New Hampshire, but it does
not deal with the question of the relationship between Article 21 and
those articles which provide for exclusive jurisdiction which the Court
deliberately left open in that case. It is important to note that Overseas
Union v New Hampshire was cited to the Court of Appeal in Continental
Bank v Aeakos so that the court was well aware of the principles which
the European Court had formulated in relation to the court's duty under
Article 21 which are now reflected in the new form of that article. In my
judgment Mr Kendrick was right in saying that the ratio of Continental
Bank v Aeakos is to be found at page 596G at the end of the passage I
cited earlier. My conclusion on this question is reinforced by a dictum of
Phillips LJ in Toepfer International GmbH v Société Cargill France [1998]
1 Lloyd's Rep 379 at page 386 col 2 that the Court of Appeal itself would
have been bound by the decision in Continental Bank v Aeakos to hold
that Article 17 overrides Articles 21 and 22. In these circumstances
I do not propose to deal with the interesting arguments advanced by
Mr Beloff as to exactly what the European Court had in mind when it
referred in Overseas Union v New Hampshire to 'an exclusive head of
jurisdiction'. I must, however, mention briefly one further point made by
Mr Smith, namely, that an exclusive jurisdiction agreement between two
parties neither of whom is domiciled in a Convention state, and which
therefore falls within the third sentence of Article 17, is not fully effective
to confer exclusive jurisdiction on the chosen court so as to override the
operation of Article 21. This submission, were it well-founded, would
make it necessary to enquire more closely into the domicile of Metro.
This is a matter of some controversy which has not been fully explored
in evidence, but it is unnecessary to say any more about it because I am
satisfied that the argument is not sound. The third sentence of Article 17
is quite clear in its terms: in such a case the courts of other Contracting
States shall have no jurisdiction unless the chosen courts have declined it.
I can see no support, therefore, for the argument that Article 17 operates
in any different way when the court is concerned with an agreement of
that kind.
I turn next, therefore, to consider whether the Bank is bound by the
exclusive jurisdiction clauses in the contracts between Metro and Itochu
and SPC respectively. For this purpose it becomes necessary to look again
at the ways in which the Bank seeks to put its claim. Although it has not
yet formulated its case with any precision, its primary argument is said
to be that it is entitled to sue in each case on an independent contract
with the buyer arising out of the letter of undertaking given pursuant
to its contract with Metro. The Bank's alternative case is that it became
entitled to sue as assignee of Metro. Mr Smith also suggested, somewhat
tentatively, that the Bank might have a claim under the principle applied
in Shamia v Joory [1958] 1 QB 448, [1958] 1 All ER 111.
It is unnecessary and indeed inappropriate at this stage in the
proceedings for the court to make any definitive ruling on issues which
form part of the substantive dispute between the parties. It is sufficient,
therefore, for a claimant who seeks to establish jurisdiction under Article
17 of the Convention to satisfy the court that there is at least a good
arguable case that the dispute between the parties is governed by an
exclusive jurisdiction clause which satisfies the requirements of that
Article: see Canada Trust Co v Stolzenberg (No 2) [1998] 1 All ER 318,
[1998] 1 WLR 547 per Waller LJ at page 559 of the latter report. In a case
such as the present a good arguable case requires less than proof on the
balance of probabilities, but must nonetheless be strong enough to justify
retaining the action here rather than declining jurisdiction in favour of the
court first seised in accordance with Article 21.
The undertaking which Itochu gave to the Bank was in the following
terms:
"We... hereby confirm having entered into a contract with Metro Trading
International Inc for the purchase of the following commodity:
...
We further undertake, to the extent we are obliged to do so under our
contract with Metro Trading International Inc to effect payment of this
cargo in US Dollars by TT exclusively to Banque Trad Credit Lyonnais
(France) SA Paris for account of Metro Trading International Inc value
30 days after B/l date or 15 days after NOR whichever later, (B/l date
or NOR date to be counted as day zero) against presentation of seller's
commercial invoice and full set of original shipping documents made
available at loading port."
It was common ground that this undertaking was given pursuant to the
contract of sale, but two slightly different versions of the sale contract
came into existence, one dated 2 October 1997 and one dated 13 October
1997. The first of these identified the Bank as the payee bank; the
second simply referred to 'sellers' nominated bank'. I do not myself
think that much turns on this difference between the two sets of terms,
but since the point was the subject of debate I think it right to say that
in my view there are three pointers towards the conclusion that the
document dated 13 October 1997 represents the terms on which the
parties ultimately agreed. The first is that there are manuscript notations
on the earlier document which suggest that it may have been subject to
further discussion. The second is the fact that the telex of 13 October is
later in time, which itself suggests that it represents a later stage in the
negotiations. The third is a small change to the payment terms in clause
8 (from 'bill of lading date to count as day one' to 'bill of lading date to
count as day zero') which is reflected in Itochu's letter of undertaking
which itself was clearly intended to reflect the terms of clause 8 of the
sale contract as finally agreed.
It is necessary at this point to return for a moment to the nature of
the dispute between the Bank and Itochu. Mr Kendrick submitted that
the undertaking did not give rise to an independent contract between
Itochu and the Bank but that the contract of sale and the undertaking,
together with the arrangements previously made between the Bank and
Metro, gave rise to an assignment of the price by Metro to the Bank. He
pointed to the fact that the contract of sale required Itochu to give the
undertaking, that payment to the Bank was to be made for the account
of Metro and that payment would be made exclusively to the Bank. That
analysis was certainly consistent with the limited evidence then available
of the commercial arrangements between Metro and the Bank and
avoided the difficulty of identifying the basis on which the Bank, which
had already financed the purchase of the cargo and taken possession
of the bills of lading by the time it sought the undertaking, acquired
enforceable rights against Itochu under a separate contract contained in
the letter of undertaking. Apart from anything else, it was difficult to see
what consideration the Bank could have provided for any such contract.
It is fair to say that these submissions were originally based on rather
flimsy material because at the hearing the evidence of the arrangements
between Metro and the Bank remained rather sketchy. In his first affidavit
sworn on 13 May 1999 Mr Nelson of Wilde Sapte, the Bank's solicitors,
stated that the Bank had financed the procurement of the cargo which
was carried on the Vigour, but said nothing more about the nature of its
relationship with Metro or the precise arrangements by which Metro was
to repay the Bank. M Erik Schmill, the Bank's French lawyer, wrote a letter
dated 4 June 1999 dealing with the question of jurisdiction. In it he said
that the Bank would contend that the letter of undertaking gave rise to an
independent contract between Itochu and the Bank which did not contain
a jurisdiction clause of any kind, but he said very little about the factual
basis of that argument. He did, however, refer in a rather broad way to
financial arrangements between the Bank and Metro under which the
Bank acquired the right to receive an undertaking from the buyer and the
right to receive bills of lading made out to its order.
In his second affidavit which was sworn on 23 June Mr Nelson took the
matter one stage further. He said that the Bank had provided financial
services to Metro under which it agreed to finance purchases of oil
cargoes against Metro's undertaking to ensure that advances would be
repaid through the proceeds of sale of the oil to third parties. One aspect
of the arrangement, none of which, he said, had been reduced to writing,
was that the Bank would receive bills of lading made out to its order
which it would release against payment of the price. At the time that
explanation of the position struck me as a little curious, because if the
Bank's security for the repayment of the advance was to be a right to
receive payment from the buyer, one would have expected it to have
reached some agreement with Metro giving it a legal right to recover the
price due under the sale contract, probably by way of an assignment of
the proceeds of the contract. However, at that stage the Bank's evidence
was clearly directed to showing that it had never been aware of the
jurisdiction clause in the sale contract and Mr Nelson was unable to shed
any more light on that aspect of the relationship.
The Bank's evidence, given through M Schmill, was that it had only
recently become aware that the terms on which Metro sold to its
customers included an English jurisdiction clause. That surprises me. I
should have thought that a Bank which was financing the purchase of
cargoes of oil on a regular basis for a long period of time and which relied
on receiving payment from the buyers to recover the advances it made
to Metro would have taken the trouble to inform itself of the terms on
which Metro was selling to its own customers which might have a direct
bearing on its own right to recover the price. Be that as it may, the Bank
must have known precisely what arrangements it had with Metro, but at
the time of the hearing they still remained largely unexplained. That was
the subject of some criticism by other parties and after the conclusion
of the argument I received from Wilde Sapte, the Bank's solicitors, a
letter enclosing a copy of a letter dated 6 November 1992 written by
Metro Bunkering and Trading Co to the Bank which is said to record the
terms on which the Bank was financing Metro. It includes the following
paragraph:
"2. The proceeds from the resale of oil financed by yourselves as above
shall be assigned in your favour. To this purpose, we shall draw on our
buyers, in your favour, a bill of exchange irrevocably payable at your
offices;
...
We have furthermore duly noted that your financing of our purchases
is expressly subject to the irrevocable assignment in your favour of the
proceeds from oil resales.
...
For the performance of these purchase/sale operations, we hereby
expressly and irrevocably authorise you to collect the proceeds from the
relevant trade operations..."
It is difficult to understand how a document of this importance could have
been overlooked by the Bank once it had decided to give evidence of any
kind, albeit through its lawyers, of the nature of its arrangements with
Metro, and no explanation for the omission was forthcoming. However,
in saying that I wish to make it clear that I am not criticising Mr Nelson
or Wilde Sapte who appear to have taken proper steps to bring this
document to my attention and that of the other parties once it was put
into their hands. I should be surprised if this were the only document in
the Bank's possession which bears on the question, but it is sufficient
in my view to lend strong support to Mr Kendrick's submission that the
arrangements were intended to effect an assignment by Metro to the
Bank of the price due under the sale contract. By contrast there is nothing
in the evidence now before me to suggest that undertakings given by
the buyers were intended to create independent contracts between
themselves and the Bank rather than simply confirm that the buyers
would make the payment in the manner called for under the contract.
A claim founded on the principle applied in Shamia v Joory seems on
this evidence to be equally unlikely. In the light of the evidence which
is now available, therefore, I am satisfied that there is at least a good
arguable case that the only serious dispute between the Bank and Itochu
is whether the Bank is entitled to recover from Itochu as assignee of
Metro.
That being so, it immediately raises the question whether the Bank as
assignee of the price is bound by the exclusive jurisdiction clause in the
contract of sale.
The opening sentence of art 17 reads as follows:
"If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise in
connection with a particular legal relationship, that court or those courts
shall have exclusive jurisdiction."
Mr Kendrick submitted that in the case where the claimant sues as
an assignee art 17 is satisfied if the parties to the original contract
entered into an exclusive jurisdiction agreement in relation to the legal
relationship represented by the obligation the benefit of which has been
assigned to him. Mr Smith, however, submitted that by its very language
art 17 requires that there be actual agreement between the parties to
the dispute before the court and that it is not possible, therefore, for an
exclusive jurisdiction clause to become binding on a party who derives his
claim from one of the original contracting parties, such as an assignee, so
as to satisfy the requirements of art 17 without his informed consent. He
submitted that since the Bank was at all material times unaware of the
existence of the exclusive jurisdiction clause, art 17 is not satisfied in this
case.
I can see much to commend the proposition that an assignee of a debt
or any other chose in action who derives his right from one of the parties
to the agreement should be bound to bring proceedings in the country
agreed upon by the original parties to the contract, but this is not a
question to which art 17 is expressly directed. Not surprisingly, perhaps,
it assumes that the parties to the dispute are the original parties to
the contract. To that extent I would agree with Mr Smith that the word
'parties' in the first sentence of art 17 means the parties to the original
contract, but for the same reason I do not think that it necessarily follows
that an assignee is free to ignore the exclusive jurisdiction clause. That
depends on whether he is someone who can properly be treated as having
agreed to the clause. In Gerling Konzern Speziale Kreditversicherungs-
AG v Amministrazione del Tesoro dello Stato [1983] ECR 2503 the
European Court had to consider whether a third party to a contract of
insurance which was expressed to be made for the benefit of the policy
holder and certain third parties including the claimant could rely on
the exclusive jurisdiction clause in the policy. The Court held that the
requirement that the agreement between the original parties should be
in writing was intended to ensure that their consent to its terms was
clearly demonstrated. It did not, however, require similar formalities on
the part of the third party where the clause was made for his benefit and
he sought to rely on it in proceedings against the insurer. In reaching
that conclusion the court placed reliance on the fact that art 12 of the
Convention contemplates agreements governing the jurisdictions in which
policyholders and beneficiaries can bring actions against insurers and
considered that since the insurer has already given his consent to being
sued in the agreed jurisdictions, to require the beneficiary to sign the
terms to signify his agreement would be a pointless restriction.
The decision in Gerling only goes part of the way, however. The plaintiff
in that case was not suing as an assignee; the Court appears to have
approached the question on the basis that he had an independent right
to claim under the policy. As such, the only question was whether he
could rely on the jurisdiction clause which formed part of that contract
without having signed the policy himself. The problem in the present
case is rather different since the Bank's claim against Itochu derives from
Metro's rights under the contract. A case rather nearer to the present is
Partenreederei MS Tilly Russ and another v Haven & Vervoebedrijf Nova
NV (The 'Tilly Russ') [1985] 1 QB 931, [1985] 3 WLR 179 where the
Court had to consider whether the holder of a bill of lading who was not
an original party to the contract of carriage was bound by the exclusive
jurisdiction clause. The Court emphasised that the requirements of art
17 must be strictly construed since their purpose is to ensure that the
consent of the parties to a derogation from the ordinary rules of the
Convention is clearly and precisely demonstrated. However, in relation to
the position of a third party holder of the bill the Court expressed itself in
this way:
"24. In so far as a jurisdiction clause incorporated in a bill of lading is
valid under article 17 of the Convention as between the shipper and the
carrier, and in so far as a third party, by acquiring the bill of lading, has
succeeded to the shipper's rights and obligations under the relevant
national law, the fact of allowing the third party to remove himself from
the compulsory jurisdiction provided for in the bill of lading on the ground
that he did not signify his consent thereto would be alien to the purpose
of article 17, which is to neutralise the effect of jurisdiction clauses that
might pass unnoticed in contracts.
25. In fact, in the circumstances outlined above, acquisition of the bill
of lading could not confer upon the third party more rights than those
attaching to the shipper under it. The third party holding the bill of lading
thus becomes vested with all the rights, and at the same time becomes
subject to all the obligations, mentioned in the bill of lading, including
those relating to the agreement on jurisdiction."
In my view this goes a long way towards answering the present problem.
The ordinary rule is that an assignee of a chose in action under English
law cannot be better off than the assignor and so takes the chose
assigned to him together with any restrictions attaching to it, including
an exclusive jurisdiction clause. That approach is entirely consistent with
the decision in The Tilly Russ, although that case was concerned with the
transfer of rights and obligations which occurs where a bill of lading is
indorsed to a third party. Moreover, I do not think that to hold that an
assignee is bound by an exclusive jurisdiction clause would undermine
the principles on which the Convention is based including art 17. The
assignee of a debt, as a recipient of rights, but not of obligations, will
always be the claimant in an action between himself and the debtor
and the agreement will not therefore derogate from his right under the
Convention to be sued in the courts of his own country of domicile when
he is a defendant. For his part, the debtor has agreed to be sued in the
chosen jurisdiction and has therefore agreed to any such derogation.
However, it is necessary to mention one more authority to which my
attention was drawn by Mr Smith, namely, Firswood Ltd v Petra Bank (CA,
unreported, 13 December 1995). In that case the defendant was sued
by the plaintiff bank in its capacity as assignee both of a debt and of the
obligation which the defendant owed to the original creditor as guarantor
of that debt under a guarantee which contained a English jurisdiction
clause. The court held that the Convention did not apply to the case
because there was in fact no claim being made under the guarantee, but
it did nonetheless consider the question whether, if there had been such
a claim, the bank as assignee of the creditor's rights would have been
bound by the jurisdiction clause. Schiemann LJ, with whom Waite and
Russell LJJ agreed, considered that the case fell within the principles on
which Gerling and The Tilly Russ were decided because the parties to the
guarantee contemplated assignment, there was no disadvantage to the
guarantor in being sued by the assignee rather than the assignor, and
because there would be nothing unreasonable in holding the assignee
bound by a jurisdiction clause of which he had knowledge and which was
clearly set out in the agreement the benefit of which was assigned to him.
Mr Smith submitted that this last factor was critical. The court was not
saying, he submitted, that the assignee was bound simply because the
agreement giving rise to the chose assigned to him contained an exclusive
jurisdiction clause but because he was actually aware of the existence
of that clause at the time he accepted the assignment. By contrast the
Bank in the present case did not know that the contracts of sale contained
exclusive jurisdiction clauses and so should not be held to have become
bound by them.
In the evidence filed on its behalf the Bank has stated that although it
was aware of the existence and nature of the sale contracts it was not
aware that they contained exclusive jurisdiction clauses in favour of this
country. Mr Kendrick criticised the evidence filed on behalf of the Bank,
and with some justification. Moreover, the emergence at a very late
stage in the circumstances described earlier of the letter setting out the
terms on which the Bank agreed to finance Metro makes me even more
cautious about accepting at face value its assertion that it was completely
unaware of the terms on which, as it now appears, Metro regularly did
business. In my view there is a good arguable case, notwithstanding what
M Schmill says, that the Bank was aware in general terms of the terms
on which Metro did business. However, I do not think it necessary to rest
my decision on that ground because I am unable to accept Mr Smith's
submission that the dicta of Schiemann LJ in Firswood Ltd v Petra Bank
go so far as to hold that an assignee of a debt is bound by an exclusive
jurisdiction clause only if he has actual notice of that clause when he
takes the assignment. It is apparent that the court in that case was
seeking to apply the principles to be found in Gerling and The Tilly Russ
to the facts of the case then before it, but the judgment of the European
Court in The Tilly Russ does not suggest that its decision rested upon
actual knowledge of the jurisdiction clause on the part of the holder of
the bill of lading. Rather, para 25 suggests that he became bound simply
by virtue of becoming the holder of the bill. In my judgment it is open
to this court to hold that provided the agreement of the original parties
to the inclusion of an exclusive jurisdiction clause is clearly established
as required by art 17, an assignee of a debt arising under that contract
is likewise bound by the clause. That in my judgment follows from the
decisions of the European Court to which I have referred and accordingly,
since it was not disputed that the contract between Metro and Itochu
contained such a clause, I am satisfied that there is a good arguable case
that the Bank as assignee of Metro is bound by the exclusive jurisdiction
clause in that contract when seeking to recover the price.
In my judgment, therefore, Itochu is entitled to succeed by virtue of art
17 which in accordance with the decision in Continental Bank v Aeakos
overrides art 21. However, Mr Kendrick had an alternative argument
based on art 22. He submitted that all three actions in which Itochu is
currently involved in this country and in France are related actions within
the meaning of art 22 and that this court as the court first seised should
therefore retain jurisdiction over the whole of the proceedings. It should
do so, he submitted, despite the fact that the subsequent joinder of
Itochu by Glencore and the commencement of third party proceedings by
Itochu against the Bank may have given rise to a lis between the Bank
and Itochu falling within art 21 in respect of which the court in France
was first seised. In effect, he was submitting that in a case of this kind
involving multiple parties and multiple actions art 22 should be construed
as overriding art 21 because the object underlying art 22 is to avoid
fragmentation of proceedings and the risk of irreconcilable judgments
which would be undermined by staying the third party proceedings.
The party by party approach reflected in the judgment of Brooke LJ in
Fox v Taher, could, he submitted, work well enough in simple cases,
but not in multi-party litigation of the kind now before the court. Mr
Kendrick submitted that such an approach would not be inconsistent
with The Maciej Rataj where the Court held that all the claims should be
determined in Rotterdam, even though the English courts were first seised
of claims between the shipowners and one group of claimants.
In the Maciej Rataj there were three groups of claimants: (1) the
Rotterdam cargo interests, (2) Phillip Brothers Ltd ('Phibro'), and
(3) the Hamburg cargo interests. On 18 November 1988 the owners
began proceedings in Rotterdam against groups (1) and (3) seeking a
declaration of non-liability. On 18 September 1989 the owners began
similar proceedings in the Netherlands against group (2). Meanwhile, on
15 September 1989 groups (2) and (3) had each brought an action in
rem against the Maciej Rataj. Groups (2) and (3) also brought actions
against the shipowners in the Netherlands on 29 September and 3
October 1989 respectively. As far as the dispute between the owners and
group (2) (Phibro) was concerned, therefore, the English courts were
first seised by a matter of a few days. The proceedings between Phibro
and the owners were, however, related to the earlier proceedings begun
by the owners against groups (1) and (3). The owners sought to have
the English proceedings stayed so that the dispute could be decided in
the Netherlands. The Advocate General (Mr Tesauro) was of the opinion
that art 22 applied in that case because the same issues of fact arose in
both the English proceedings and the proceedings in the Netherlands. The
Court agreed with that view, holding that the word 'irreconcilable' is used
in different senses in arts 22 and 27(3).
In my judgment the decision in The Maciej Rataj supports Mr Kendrick's
submission to this extent, namely, that an action which involves a dispute
which falls within the scope of art 21 does not as a result cease to be
related to other pending proceedings if the conditions of art 22 are
satisfied. It was not seriously disputed before me that all three actions
with which I am concerned are and have from the outset been related
actions within the meaning of art 22. In my view that must be so. Article
22 is to be construed in a broad common sense manner as applying
whenever there is sufficient similarity of issues to render it expedient for
the actions to be determined together: see Sarrio SA v Kuwait Investment
Authority [1999] AC 32, [1997] 4 All ER 929. From the outset all these
actions raised in one form or another the question of title to the cargo on
board the Vigour. The question then arises of how the court should apply
the two Articles in a case such as the present. The problem arises partly
because of the manner in which the proceedings have developed and the
order in which issues have been joined between the different parties.
The French court was clearly first seised of the lis between the Bank and
Itochu, but the English court was first seised of the action in which the
same lis later arose as a result of the issue of the third party proceedings.
There are two possible courses open to the court in these circumstances:
stay the third party proceedings under art 21 on the grounds that the
French court must decide whether to stay the action before it under art
22 to enable all the issues to be decided together in England; or refuse
a stay on the grounds that it would be a waste of time and money to
grant one since the French court has a duty to stay the action before it
(see the commentary at page 41 of the Jénard Report). Although the
pragmatic approach has its attractions, it is in my view precluded by the
reasoning of the European Court in Overseas Union v New Hampshire and
by the terms of art 21 itself. Unlike art 17, arts 21 and 22 are essentially
procedural in nature and unlike art 21, art 22 merely gives the court
second seised a discretion to stay the proceedings before it; it does not
make the imposition of a stay mandatory. That being so, I think it would
be wrong for me to treat art 22 as if it imposed a binding duty on the
French court to stay the Bank's proceedings and wrong for me to take a
step which appeared to preempt a decision by the French court relating
to the exercise of its own jurisdiction. In my judgment, were it not for
the exclusive jurisdiction clause, the right course would be to stay the
third party proceedings under art 21 pending a decision by the French
court on the matter of its jurisdiction and the desirability of imposing
a stay or declining jurisdiction under art 22. However, for the reasons
given earlier, I consider that I am bound to give effect to the exclusive
jurisdiction clause in the sale contract and that a stay of Itochu's third
party proceedings in the Glencore action must be refused. The third party
proceedings between Itochu and the Bank in the receivers' action raise
the same issues and it follows, therefore, that a stay of those proceedings
must also be refused.
SPC's application
It is possible to deal with SPC's application more shortly in the light
of the conclusions which I have already reached. SPC has applied to
stay the proceedings brought against it by Glencore under art 21 of the
Convention, SPC having previously joined Glencore as a third party to the
action brought against it by the Bank in France. Mr Southern for Glencore
submitted that the two sets of proceedings do not involve the same cause
of action and that in any event the English courts were first seised of what
were from the outset related proceedings and should therefore refuse a
stay.
The first of these submissions is based on the nature of the two sets
of proceedings. In England Glencore is claiming damages for wrongful
interference with its property; in France, Mr Southern submitted, SPC is
making no claim at all. It has merely done what is necessary to ensure
that Glencore is bound by the outcome of the Bank's action without
itself asserting any claim or seeking any other kind of relief. In effect
it is seeking relief of the kind previously provided for by Ord.16, r.1(1)
(c), now CPR Pt 20.2(1)(b). Mr Beloff submitted that that is irrelevant.
He pointed out that art 21 does not require there to be a claim, merely
that there be proceedings between the same parties involving the same
cause of action as that has been defined by the European Court. For the
reasons I have already given, I think that the proceedings in France do
involve the same cause of action because they are intended to lead to
a final decision on Glencore's right to recover against SPC in respect of
wrongful interference with the cargo carried on the Vigour. Accordingly,
art 21 applies to this case and, subject to Mr Southern's alternative
submission, the proceedings must be stayed, at least until the French
court has ruled on the question of its jurisdiction and the desirability of
staying the proceedings before it or declining jurisdiction under art 22.
Since there is no contract of any kind between SPC and Glencore, there is
no question of the application of art 17.
Mr Southern's alternative argument was based on the fact that the English
court was first seised of proceedings in the form of Glencore's action
which are related to the proceedings now pending in France between SPC
and Glencore. He submitted that it would be absurd for the court to stay
the proceedings between Glencore and SPC under art 21 if it were clear,
as he submitted it was, that the French court ought to stay the whole of
the proceedings before it in order to enable the disputes to be determined
in England. He submitted that in order to avoid that difficulty art 21
should be interpreted as simply having no application in a situation of the
kind which arises in this case. This is essentially the same argument as
that which was put forward by Mr Kendrick and undoubtedly has some
attraction from a practical point of view, especially in a case such as this
where the rest of the proceedings will continue in this country. However,
for the reasons I have given I do not think that the course which Mr
Southern urged upon me is one which I am free under the Convention
to adopt. It follows, therefore, that Glencore's proceedings against SPC
must be stayed pending a decision by the French court on the question of
jurisdiction. In those circumstances it is unnecessary for me to consider
other possible bases advanced by Mr Beloff on which the court might
order a stay.
Itochu's applications
At present Itochu is facing three claims in two different jurisdictions. It
is naturally concerned to limit both the risk of inconsistent judgments
and the costs which are liable to be incurred as a result of multiple
proceedings. It has therefore applied for a stay of the receivers' claim in
the event that the proceedings between itself and the Bank continue in
France. In the light of my decisions on the Bank's applications, however,
the third party proceedings will continue here in England and therefore
the basis for this application falls away. Insofar as the proceedings
continue in this jurisdiction I have no doubt that appropriate steps will
be taken to ensure that the issues affecting Itochu, Glencore and the
Bank are decided in a way which ensures that all parties are heard and
bound by the outcome. The position of the receivers is rather different
inasmuch as they have no independent claim to the fund represented
by the proceeds of the sale of the oil. Their task is simply to get in the
receivable which that fund represents and to hold it to the order of the
court. There are no grounds for staying the receivers' action at this stage
and insofar as there are issues between the receivers and Itochu which
have to be resolved that will have to be the subject of further directions.
However, I think they can be considered more effectively on another
occasion in the wider context of the Metro litigation as a whole.
Itochu's application to stay Glencore's action was made to guard against
the possibility that the Bank might persuade the court to stay the third
party proceedings. In those circumstances Itochu would clearly wish to
have the claim against it stayed to avoid fragmentation of proceedings.
However, since I have held that the third party proceedings must be
allowed to continue here, there are no grounds for staying that claim.